Q2 2026 Acadia Realty Trust Earnings Call
Speaker #1: Hey and welcome to the Acadia Reality Trust. Second quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session.
Speaker #1: To ask a question, you will need to press star 11 on your touchstone telephone. As a reminder, this call is being recorded. I would like to turn the conference over to George Horse, summer intern.
Speaker #1: Please go ahead.
Speaker #2: Good morning, and thank you for joining us for the second quarter 2026 Acadia Realty Trust earnings conference call. My name is George Horst, and I'm a summer intern for property management.
Speaker #2: Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the securities and exchange act of 1934, and actual results may differ materially from those indicated by such forward-looking statements.
Speaker #1: Good day. Welcome to the Acadia Realty Trust second-quarter 2026 earnings conference.
Speaker #1: At this time, all participants are on
Speaker #1: a phone mode. After the Q2 2026 Acadia.
Speaker #2: Due to a variety of risks and uncertainties, including those disclosed in the company's most recent form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, July 29, 2026, and the company undertakes no duty to update them.
Speaker #1: speaker's presentation, there'll be a question-and-answer
Speaker #1: Session. To ask a question, you will call.
Speaker #1: need to press 411 on your
Speaker #1: Touch-tone telephone. As a reminder, management.
Speaker #1: This call is being recorded. I would like...
Speaker #1: to turn the conference over to George. Not historical, may be deemed.
Speaker #1: Horst, summer intern. Please go
Speaker #1: ahead. securities and exchange act of
Speaker #2: Good
Speaker #2: morning, and thank you for joining us for the second
Speaker #2: Quarter 2026 Acadia may differ materially from those.
Speaker #2: During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures.
Speaker #2: REALTY TRUST earnings conference indicated by such forward-looking
Speaker #2: call. My name is George Horst, and I'm a summer
Speaker #2: intern for property
Speaker #2: management. Before we begin, please be aware, including those disclosed in the company's
Speaker #2: the statements made during the call
Speaker #2: forward-looking statements within the meaning of the
Speaker #2: securities and exchange act of 1934, and actual results
Speaker #2: Once the call becomes open for questions, we ask that you limit your first round to 2 questions per caller, to give everyone the opportunity to participate.
Speaker #2: may differ materially from those
Speaker #2: indicated by such forward-looking
Speaker #2: statements. Due to a variety of them.
Speaker #2: risks and uncertainties,
Speaker #2: You may ask further questions by reinserting yourself into the queue, and we will answer as time permits. Now it is my pleasure to turn the call over to Ken Bernstein, president and chief executive officer, who will begin today's management remarks.
Speaker #2: most recent form 10-K and
Speaker #2: other periodic filings of the
Speaker #2: SEC, forward-looking
Speaker #2: statements speak only as of the date of this
Speaker #2: Call, July 29, financial measures with the most directly
Speaker #2: 2026, and the company undertakes
Speaker #3: Thank you, George. Great job. Welcome, everyone. As you can see in our press release, we had another strong quarter, driven by continued momentum across both internal as well as external growth initiatives.
Speaker #2: no duty to update them. measures.
Speaker #2: During this call, management may
Speaker #2: refer to certain non-GAAP financial
Speaker #2: measures, including funds from operations, give everyone the opportunity to
Speaker #2: and net operating income.
Speaker #2: Please see ACADIA's earnings press questions by reinserting yourself into
Speaker #2: release posted on its website for the queue, and we will answer as time
Speaker #3: And while geopolitical events have certainly added unwanted uncertainty to the global economy, our results tell a different story. In fact, it's worth pausing at this point for a moment.
Speaker #2: financial measures with the most directly
Speaker #2: comparable GAAP financial measures. Once the call becomes open for
Speaker #2: round to two questions per caller, to
Speaker #2: give everyone the opportunity to
Speaker #2: participate. You may ask further. Our press release—we had another strong
Speaker #3: For instance, the tariffs of liberation day were announced on April 2 of last year, so this is really the natural quarter to compare against to see what's actually happened to our business.
Speaker #2: queue, and we will answer as time
Speaker #2: permits. Now it is my as well as external growth
Speaker #2: Pleasure to turn the call over to Ken. Initiatives.
Speaker #2: ACADIA REALTY TRUST Q2 2026 earnings conference call. At this time, all participants are on a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.
Speaker #2: Bernstein, president and chief executive officer who will begin today's management
Speaker #3: And since then, we delivered earnings growth of 11% year over year. Last quarter, same property NOI came in ahead of our projections, at 8.7%.
Speaker #2: remarks.
Speaker #3: Thank you, George.
Speaker #3: Great job. Results tell a different story. Welcome,
Speaker #3: everyone. As you can see in our
Speaker #3: press release, we had another strong worth pausing at this
Speaker #2: To ask a question, you will need to press *11 on your touchstone telephone. As a reminder, this call is being recorded. I would like to turn the conference over to George Horst, summer intern.
Speaker #3: quarter. Driven by continued momentum
Speaker #3: We produced record leasing activity with rent spreads exceeding 90% this quarter, compared to single digits a year ago. So while the headlines have been relentless, what our retailers are telling us is a very different story.
Speaker #3: well as external growth
Speaker #3: And while announced on April 2 of last year, so
Speaker #3: geopolitical events have certainly
Speaker #2: Please go ahead.
Speaker #2: Please go ahead.
Speaker #3: added unwanted
Speaker #3: Good call.
Speaker #3: uncertainty to the global economy, our what's actually happened to our
Speaker #3: results tell a different story. In
Speaker #3: The U.S. has become increasingly relevant, the consumer has remained resilient, and retailers are doubling down on must-have real estate. That strength shows up across the key drivers of our business.
Speaker #3: fact, it's delivered earnings growth of 11%
Speaker #3: REALTY TRUST earnings conference
Speaker #3: worth pausing at this
Speaker #3: My name is George Horst, and I'm a summer intern for property
Speaker #3: point for a property NOI came in ahead of our
Speaker #3: Before we begin, please be aware that statements made during the call that are
Speaker #3: of liberation day were announced
Speaker #3: ...of Liberation Day were announced on April 2 of last year, so activity, with rent spreads...
Speaker #3: forward-looking statements within the meaning of the
Speaker #3: this is really the natural quarter to exceeding 90% this quarter, compared to
Speaker #3: First, with respect to internal growth, which AJ Levine will discuss in more detail, our operating metrics continue to reflect the strength of our street retail thesis.
Speaker #3: 1934, and actual results
Speaker #3: what's actually happened to our
Speaker #3: business. And since then, we
Speaker #3: statements.
Speaker #3: over year. Last quarter, same
Speaker #3: Property NOI came in ahead of our expectations.
Speaker #3: of risks and uncertainties,
Speaker #3: Second, with respect to external growth, as Reggie Livingston will discuss, we were busy last quarter on the transactional front, with important street retail additions to our REIT portfolio and more to come.
Speaker #3: projections at 8.7%. We
Speaker #3: produced record leasing
Speaker #3: most recent form 10-K
Speaker #3: activity with rent spreads exceeding
Speaker #3: and other periodic filings with the
Speaker #3: SEC, forward-looking statements speak only as of the date of this.
Speaker #3: 90% this quarter compared to estate.
Speaker #3: single digits a year ago, so
Speaker #3: call, July 29, 2026, and the company undertakes
Speaker #3: while the headlines have been
Speaker #3: Simultaneously, we were harvesting profits from several assets in our investment management platform, where we've now disposed of or recapitalized over $500 million year to date, at a nearly 2 times equity multiple.
Speaker #3: Relentless—what our retailers are to internal growth, which
Speaker #3: Telling us is a very different
Speaker #3: no duty to update
Speaker #3: story. The US has become detail, our operating metrics continue
Speaker #3: During this call, management may refer to certain non-GAAP financial measures.
Speaker #3: increasingly relevant to
Speaker #3: measures, including funds from operations and net operating income.
Speaker #3: resilient. And retailers are doubling
Speaker #3: down on must-have real
Speaker #3: Please see ACADIA's earnings press
Speaker #3: estate. That
Speaker #3: release posted on its website for
Speaker #3: And then third, as John Godfrey will discuss, our balance sheet metrics, our right where we want them, with plenty of dry powder, to fuel future growth.
Speaker #3: Strength shows up across the key drivers on the transactional front, with important street...
Speaker #3: reconciliations of these non-GAAP
Speaker #3: our business. First, with respect retail additions to our REIT
Speaker #3: comparable GAAP financial
Speaker #3: Levine will discuss in more
Speaker #3: Once the call becomes open for questions, we ask that you limit your first
Speaker #3: detail, our operating metrics continue to reflect the strength of our street
Speaker #3: But taking a step back, what this quarter really reflects is our street retail thesis being validated in real time. On previous calls, we discussed why tenant demand and tenant performance in street retail is so strong, and those same drivers remain firmly in place.
Speaker #3: Let's round it to two questions per caller.
Speaker #3: retail
Speaker #3: thesis. Second, with respect to external growth, we've recapitalized over $500 million.
Speaker #3: participate. You may ask further
Speaker #3: as Reggie Livingston will discuss, we
Speaker #3: were busy last quarter on the transactional
Speaker #3: permits. Now it is my pleasure to turn the call over to Kenneth
Speaker #3: frame, with important street
Speaker #3: retail additions to our REIT portfolio multiple.
Speaker #3: Bernstein, president and chief executive
Speaker #3: and more to
Speaker #3: officer, who will begin today's management remarks.
Speaker #3: officer, who will begin today's management remarks.
Speaker #3: were harvesting profits from several
Speaker #3: Limited new supply, strong tenant performance driven by the affluent consumers who shop our corridors and then, most significantly, the increasing demand due to the long-term migration of brands away from wholesaler department stores.
Speaker #4: Thank you, questions, we ask that you limit your first George. Great job. Welcome,
Speaker #3: platform, where we've now disposed of
Speaker #4: everyone. As you can see,
Speaker #3: or recapitalized over $500
Speaker #4: quarter, driven by continued momentum across both internal
Speaker #3: million year to date, quarter, really.
Speaker #3: at a nearly two times
Speaker #3: equity thesis being validated in
Speaker #3: equity thesis being validated in multiple. And then third, as John real time.
Speaker #4: And while geopolitical events have certainly
Speaker #3: And towards their own direct-to-consumer stores. This DTC shift has been gaining steam over the past few years, and it appears we're still in the early stages of this important multi-year demand driver.
Speaker #3: Gottfried will discuss, our balance sheet
Speaker #4: added unwanted uncertainty to the global economy. Our
Speaker #3: Metrics are right where we want them.
Speaker #3: them, with plenty of dry powder.
Speaker #3: to fuel future
Speaker #4: In fact, it's
Speaker #3: back, what this quarter
Speaker #4: point for a
Speaker #3: really
Speaker #3: reflects is our street retail thesis being validated in real
Speaker #4: moment. For instance, the tariffs of liberation day were
Speaker #3: It's an important reason why we are seeing the strongest growth coming from the street retail portion of our portfolio. But this increased demand and ensuing market rent growth is only half the story.
Speaker #3: time. Our previous calls we discussed why tenant demand and
Speaker #4: this is really the natural quarter
Speaker #4: to compare against to see
Speaker #3: tenant performance in street retail are so strong. And those same drivers remain firmly in place.
Speaker #4: business. And since then, we
Speaker #3: The other key driver of our results comes from the differentiated structure of our street retail leases that allows us to capture this growth faster than in other formats.
Speaker #4: year over year. Last quarter, same
Speaker #4: projections at 8.7%. We produced record leasing.
Speaker #1: To shop our corridors, and then, most significantly, the increasing demand due to the long-term migration of brands away from wholesale or department stores, and towards their own direct-to-consumer stores.
Speaker #4: single digits a year ago. So while the headlines have been
Speaker #3: First, our street retail leases generate higher contractual rent escalators generally with 3% annual growth. They also require a lighter relative capital on re-tenanting, so more of that top-line growth drops to the bottom line.
Speaker #4: relentless, what our retailers are
Speaker #1: This DTC shift has been gaining steam over the past few years, and it appears we're still in the early stages of this important multi-year demand driver.
Speaker #4: telling us is a very different story. The U.S. has
Speaker #4: become increasingly relevant,
Speaker #4: the consumer has remained
Speaker #4: resilient, and retailers are doubling
Speaker #3: But most importantly, our street retail leases carry fair market value resets. That allow us to have faster and more frequent mark-to-market opportunities. A structural advantage that simply does not exist in other formats.
Speaker #4: down on must-have real
Speaker #1: It's an important reason why we are seeing the strongest growth coming from the street retail portion of our portfolio. But this increased demand and ensuing market rent growth is only half the story.
Speaker #4: That strength shows up across the key
Speaker #4: drivers of our business. First, with respect,
Speaker #4: AJ Levine will discuss in more
Speaker #4: to reflect the strength of our street
Speaker #1: The other key driver of our results comes from the differentiated structure of our street retail leases that allows us to capture this growth faster than in other formats.
Speaker #4: retail
Speaker #3: This means that to the extent that we are now operating in a longer-term inflationary environment, as we have experienced over the past couple of years, these resets provide for inflation protection as well.
Speaker #4: Second, with respect to external growth, as Reginald Livingston will discuss,
Speaker #4: we were busy last quarter on the
Speaker #4: portfolio and more to come. Simultaneously, we
Speaker #1: First, our street retail leases generate higher contractual rent escalators, generally with 3% annual growth. They also require lighter relative capital on re-tenanting, so more of that top-line growth drops to the bottom line.
Speaker #3: The combination of superior contractual growth and more frequent mark-to-market opportunities means our street retail portfolio is positioned to generate 200 to 300 basis points of incremental same-store growth above what we achieve in our suburban portfolio.
Speaker #4: were harvesting profits from
Speaker #4: several assets in our investment management platform, which we've now disposed of.
Speaker #4: million year to
Speaker #4: date, at nearly two times
Speaker #4: equity
Speaker #1: But most importantly, our street retail leases carry fair market value resets. That allow us to have faster and more frequent mark-to-market opportunities. A structural advantage that simply does not exist in other formats.
Speaker #4: And then third, as John Gottfried will discuss, our balance
Speaker #3: In fact, over the last 3 years, we have delivered closer to 400 basis points of superior growth. And given that demand seems to be increasing, we expect this outperformance to continue.
Speaker #4: sheet metrics, our right where we want them, with plenty of dry powder,
Speaker #4: to fuel future growth. But taking a step
Speaker #4: back, what this
Speaker #4: reflects is our street retail
Speaker #1: This means that, to the extent that we are now operating in a longer-term inflationary environment, as we have experienced over the past couple of years, these resets provide for inflation protection as well.
Speaker #3: We're also seeing proof of concept where our performance is being further enhanced when we achieve scale in a given corridor. We have found that once we own about 20%, 25% of the retail on one of our key streets, we can better drive curation, better drive sales performance, market intelligence, and operating efficiencies that results in about a 10% incremental NOI increase for our properties.
Speaker #4: On previous calls, we discussed why tenant demand and...
Speaker #4: tenant performance in street retail is
Speaker #4: so strong, and those same
Speaker #4: drivers remain firmly in place.
Speaker #4: Limited new supply, strong tenant performance driven by the
Speaker #4: affluent consumers who shop our corridors, and
Speaker #4: then most significantly,
Speaker #4: the increasing demand due
Speaker #4: brands away from wholesaler department stores. And towards their own direct-to-consumer stores. This DTC.
Speaker #3: Thus, with these tailwinds and goals in mind, our acquisitions are focused on those deals that both stand on their own from a return perspective but recognize the benefits of scale.
In fact, over the last 3 years, we have delivered closer to 400 basis points of superior growth. And given that demand seems to be increasing
Speaker #3: Since the third quarter of 2024, we have invested approximately $700 million in street retail acquisitions in our REIT portfolio. And with our current pipeline, our goal is to hit $1 billion by year-end, nearly doubling the size of our street retail portfolio.
We expect this outperformance to continue.
We're also seeing proof of concept where our performance is being further, enhanced.
When we achieve scale in a given quarter.
We have found that once we own about 20%, 25% of the retail of 1 of our key streets.
Speaker #3: These investments have already created approximately 3% FFO accretion per share. And an even higher percentage of NAV accretion. Importantly, this focus is bringing us closer to our goal of being the premier owner-operator of street retail in the U.S.
We can better drive curation that drives sales, performance, market intelligence, and operating efficiencies that result in about a 10% improvement.
Incremental noi increase for our properties.
Thus, with these Tailwinds and goals in mind,
our Acquisitions are focused on those deals.
Speaker #3: which is also bringing scale benefits to our platform. Now, to be clear, our discipline here is unchanged. Our investments continue to be accretive to earnings and accretive to net asset value from day one, and continue to deliver on our target of initial accretion of 1 penny of FFO for every 200 million dollars we deploy.
That both stand on their own from a return perspective.
But also position us to further recognize the benefits of scale.
Since the third quarter of 2024, we have invested approximately $700 million in street retail acquisitions in our report portfolio.
Speaker #3: As a result, the benefits of scale that we hope to recognize in the future are additive to what these deals already deliver on their own.
And with our current pipeline, our goal is to hit $1 billion by year-end, nearly doubling the size of our street retail portfolio.
Speaker #3: So in conclusion, the results we are delivering today are a direct reflection of the strategy we have been executing for several years now. Both with respect to our focus on street retail for our REIT portfolio as well as our execution through our investment management platform.
These investments have already created approximately 3% FFO accretion per share.
And an even higher percentage of NAV accretion.
Importantly, this focus is bringing us closer to our goal of being the premier owner-operator of street retail in the U.S.
This is also bringing scale benefits to our platform.
Speaker #3: The internal and external opportunities in front of us give us a clear line of sight into multi-year top-line growth with increasing confidence that this growth will continue to drop to the bottom line.
Now, to be clear.
Our discipline here is unchanged.
Speaker #3: And with that, I'd like to thank the team for their continued hard work, and I will turn the call over to AJ Levine.
Our investments continue to be accretive to earnings and accretive to net asset value from day one and continue to deliver on our target of initial accretion of one penny of FFO for every $100 million we deploy.
Speaker #2: Thanks, Ken. Good morning, everyone. I'll start off with an update on leasing activity and the trends that are driving our results this quarter. Then I'll focus specifically on the rent growth we've seen on our key streets, and how that's translating through to preloose and mark-to-market opportunities in our portfolio.
As a result, the benefits of scale that we hope to recognize in the future are additive.
To what these deals already deliver on their own.
So, in conclusion,
The results we are delivering today are a direct reflection of the strategy we have been executing.
Speaker #2: Starting with leasing activity, during the second quarter, we signed approximately 8.9 million dollars in new leases. Which is the highest volume for any quarter in our company's history.
For several years now.
Both with respect to our focus on street retail for our report portfolio.
As well as our execution through our investment management platform.
Speaker #2: While we continue to see strong fundamentals and leasing momentum from all sides of our portfolio, street, urban, and suburban, it's the performance of our streets that continues to fuel the majority of our growth, approximately 80% of the new ABR signed in the second quarter, is from our street and urban markets.
The internal and external opportunities in front of us give us a clear line of sight into multi-year topline growth.
With increasing confidence that this growth will continue to drop to the bottom line.
Speaker #2: Where we'll see the highest contractual growth at 3% per annum, as well as more frequent opportunities to mark-to-market through FMV resets. And even with the record volumes we've achieved during the second quarter, the pipeline of prospective leases and advanced negotiation remains strong.
AJ, let me
Speaker #2: With over 10 million dollars in additional ABR being actively negotiated. As far as what's driving that demand, there are several factors at play. The first being the current supply-demand dynamic on our streets, with vacancy rates, in markets like Madison Avenue, Green Street, and Soho, North 6th Street and Williamsburg, Armitage Avenue and the Gold Coast in Chicago, and Melrose Place in Los Angeles at historical lows.
Thanks Ken. Good morning everyone. I'll start off with an update on leasing activity and the trends that are driving our results. This quarter then I'll Focus specifically on the rent growth. We've seen on our key streets and how that's translating through to pry loose and Mark to Market opportunities in our portfolio.
Starting with leasing activity. During the second quarter, we signed approximately 8.9 million in new leases which is the highest volume for any quarter in our company's history.
While we continue to see strong fundamentals and leasing momentum from all sides of our portfolio—street, urban, and suburban.
Speaker #2: As far as tenant demand, the decline of traditional wholesale channels, coupled with the recognized benefits of DTC retail, has given rise to the deepest pool of specialty advanced contemporary and luxury tenants that we've seen perhaps ever.
It's the performance of our streets that continues to fuel the majority of our growth, Approximately 80% of the new ABR signed in the second quarter is from our street and urban markets, where we'll see the highest contractual growth at 3% per atom, as well as more frequent opportunities to Mark to Market through FMV resets.
Speaker #2: It's clear from the activity on our streets and from speaking with our tenants that retailer demand continues to meaningfully outpace supply. That is naturally creating heightened competition for space, supported by unmitigated consumer demand.
And even with the record volumes we've achieved during the second quarter, the pipeline of prospective leases in advanced negotiation remains strong, with over $10 million in additional ABR being actively negotiated.
Speaker #2: And that brings us to the second factor, which is tenant sales growth and occupancy costs, especially for those tenants catering to the higher-earning customers that shop our streets.
Speaker #2: The annual sales growth that we've seen from tenants such as Aritzia on M Street Aloyoga on Michigan Avenue, Violet Gray on Melrose Place, Dowan on Bleecker Street, Tocovas on Henderson Avenue, and Zimmerman in Soho, is averaging over 25% year over year.
As far as what's driving, that demand, there are several factors that play the first being the current Supply demand Dynamic on our streets with vacancy rates in markets, like Madison Avenue, Green Street, and SoHo North 6th Street in Williamsburg Armada Avenue in the Gold Coast in Chicago and Melrose Place in Los Angeles at historical lows.
Speaker #2: And the blended health ratio for those tenants is below 9.5%. So unlike the 2015-2016 cycle, when rents ran well ahead of what sales could support and ultimately had to correct, today's tenants remain healthy and four-wall profitable, even before taking into account the halo effect and other benefits of omnichannel retail.
As far as tenant demand, the decline of traditional wholesale channels, coupled with the recognized benefits of DTC retail, has given rise to the deepest pool of specialty, advanced contemporary, and luxury tenants that we've seen—perhaps ever.
it's clear from the activity on our streets and from speaking with our tenants that retailer demand, continues to meaningfully outpace supply
That is naturally creating heightened competition for space supported by unmitigated consumer demand.
Speaker #2: So as we look for additional opportunities for growth, this is where we find it. And what the sales data continues to signal is that despite several years of elevated rent growth on our streets, we still have significant room to run.
And that brings us to the second factor, which is tenant sales growth and occupancy costs, especially for those tenants catering to the higher-earning customers that shop our streets.
Speaker #2: And the third dynamic, which is perhaps the most intentional, is the scale that we are building along these dynamic corridors that is allowing us to curate our streets, positively influence tenant performance, and ultimately capture the outsized rent growth.
The annual sales growth that we've seen from tenants such as Aritzia on M Street, Alo Yoga on Michigan Avenue, Violet Grey on Melrose Place, Dôen on Bleecker Street, Tacovas on Henderson Avenue, and Zimmermann in SoHo is averaging over 25% year-over-year.
And the blended health ratio for those tenants is below 9.5 percent.
Speaker #2: A good example of these dynamics at play would be Armitage Avenue in Chicago, where we control over 30% of the retail on the street, and have spent years thoughtfully curating with brands like Serena & Lily, Jenny Kane, Huckberry, and Levain Bakery.
So unlike the 201520 2016 cycle when rents when ran well ahead of what sales could support and ultimately had to correct.
Speaker #2: Over 65% of our GLA on Armitage has undergone some form of a rent reset since 2019, and over that time, rents on the street have effectively doubled.
Today's tenants remain healthy and 4-wall profitable even before taking into account, the halo effect, and other benefits of omni Channel retail.
Speaker #2: The street has virtually zero vacancy, but that hasn't stopped us from unlocking embedded value, both qualitative and quantitative. Through our preloose strategy and FMV resets, we continue to improve merchandising and drive rents on the street, and our latest example from the second quarter, we released a space on Armitage at a 75% spread.
So as we look for additional opportunities for growth, this is where we find it. And what the sales data continues to signal is that despite several years of elevated rent growth on our streets, we still have significant room to run.
Speaker #2: But when you consider that the prior tenants' initial rent from 2019 was 76 dollars a square foot, and the new rent is 155 dollars a square foot, that means that rents on Armitage have grown over 100% since 2019.
and the third Dynamic, which is perhaps the most intentional, is the scale that we are building along these Dynamic, corridors that is allowing us to curate our streets, positively influenced tenant performance, and ultimately capture the outsized rank growth
A good example of these Dynamics at play would be armed Avenue in Chicago, where we control over 30% of the retail on the street and have spent years thoughtfully curating with Brands, like Serena and Lily, Jenny Kane huckberry and Levain Bakery.
Speaker #2: That's 10.5% annual rent CAGR. And just one year ago, we signed a lease on Armitage at 130 dollars a square foot, which means that rents on the street have increased by 20% year over year, and signals that the market is, in fact, accelerating.
Over 65% of our GLA on Armitage has undergone some form of rent resets since 2019, and over that time, rents on the street have effectively doubled.
Speaker #2: That level of growth doesn't happen by accident. It flows from thoughtful, intentional merchandising, space by space, tenant by tenant. Prying loose and underperforming tenant, and replacing them with the likes of Jenny Kane, who has the ability to generate sales at 2X the previous tenant.
The street has virtually zero vacancy but that hasn't stopped us from unlocking embedded value, both qualitative and quantitative.
Speaker #2: The type of planning and impact that can only come from achieving scale within a market. But while this level of rent growth is fairly unique to our streets, it is not unique to Armitage Avenue.
Through our proactive, loose strategy and FMV resets, we continue to improve merchandising and drive rents on the street. In our latest example from the second quarter, we released a space on Armitage at a 75% spread, but when you consider that the prior tenant’s initial rent from 2019 was $76 a square foot...
Speaker #2: We've seen a similar dynamic on M Street in DC, on North 6th Street in Williamsburg, on Newberry Street in Boston, and on Worth Avenue in Palm Beach.
And the new rent is $155 a square foot. That means that rents on Armitage have grown over 100% since 2019. That's a 10.5% annual rent CAGR.
Speaker #2: On Green Street in Soho, for example, where again, supply is near all-time lows, and competition for space is the strongest it's been in over a decade, this past quarter we signed a new lease with a European luxury retailer, at a 34% spread.
and just 1 year ago, we signed a lease on Armitage at $130, a square foot which means that rents on the street have increased by 20% year-over-year and signals that the market is in fact accelerating
Speaker #2: But when you factor in the 3% contractual increases typical of street retail, the true spread against the previous tenants starting rent from 2022 was closer to 43%.
That level of growth doesn't happen by accident. It flows from thoughtful, intentional merchandising — space by space, tenant by tenant.
Speaker #2: Again, that's close to 10% CAGR over the last four years. On Melrose Place, we re-tenanted a space at a 48% spread. But again, when you compare today's market rent, against the market when the previous tenant last renewed in 2021, the growth over that period is 66%.
Who has the ability to generate sales at 2x the previous tenant?
The type of planning and impact that can only come from achieving scale within a market.
But while this level of rank growth is fairly unique to our streets, it is not unique to Armitage Avenue. We've seen a similar Dynamic on M Street, and DC on North 6th Street in Williamsburg a Newberry Street in Boston and on Worth Avenue in Palm Beach.
Speaker #2: That's 11% CAGR. Those are just a few examples, but overall, spreads for the quarter came in at 91%. Now, let me be clear, we recognize that posting 90% spreads is extraordinary.
Speaker #2: But given the current market dynamics of street retail, the double-digit market rent CAGR over the last several years, and the performance and demand we're seeing from our retailers, we do expect to see consistent double-digit spreads moving forward.
On Green Street in SoHo for example, where again Supply is near all-time lows and competition for space is the strongest. It's been in over a decade this past quarter, we signed a new lease with a European luxury retailer, at a 34% spread,
Speaker #2: Plus the 3% contractual growth that is standard for our streets. The spread is the headline, but the compounding is what really drives returns over time.
But when you factor in the 3%, contractual increases typical of Street retail, the true spread against the previous tenants, starting rent from 2022. Was closer to 43%. Again, that's close to 10% kagar over the last 4 years.
Speaker #2: What makes all of this particularly powerful for our portfolio is that because of FMV resets that are unique to street retail, we are able to capture this rent growth sooner than we can from suburban leases.
At Melrose Place, we re-tenanted that space at a 48% spread. But again, when you compare today's market rent against the market when the previous tenant last renewed in 2021,
The growth over that period is 66%.
That's 11%, kegger.
Speaker #2: And therefore, a meaningful portion of our portfolio will be resetting to current market in the near term, allowing us to seize the momentum in real time.
Those are just a few examples, but overall spreads for the quarter came in at 91%.
Now, let me be clear. We recognize that posting 90 percent spreads is extraordinary.
Speaker #2: Jam will walk you through what that embedded mark-to-market translates to in terms of earnings growth potential. It's also worth noting that the average payback period for the quarter's new conforming street leases was slightly above nine months.
But given the current market dynamics of street retail, the double-digit market rent CAGR over the last several years, and the performance and demand we're seeing from our retailers, we do expect to see consistent double-digit spreads moving forward.
Speaker #2: That's accounting for commissions and capex. Whereas the payback period on a new suburban box is typically five to seven years. That's just one more reason why not all spreads are created equal.
Plus the 3% contractual growth that is standard for our streets.
The spread is the headline, but the compounding is what really drives returns over time.
Speaker #2: So in summation, despite a record quarter of leasing activity, the runway ahead remains significant. Market rents on our core streets have compounded meaningfully since 2019.
Speaker #2: Those rents continue to accelerate, as available supply further contracts. And our lease structure ensures that we can capture that growth on a recurring basis.
What makes all of this particularly powerful for our portfolio is that, because of FMV resets that are unique to Street Retail, we are able to capture this rent growth sooner than we can from suburban leases. Therefore, a meaningful portion of our portfolio will be resetting to current market in the near term, allowing us to seize the momentum in real time.
Speaker #2: As always, I'd like to thank the team for their hard work. And with that, I'll turn the call over to Reggie.
John will walk you through what that embedded mark-to-market translates to in terms of earnings growth potential.
Speaker #3: Thanks, AJ. And good morning, everyone. I'll start my remarks covering our recent transaction activity and current pipeline, which is keeping us on our traditional pace of four to 500 million of street retail acquisitions per year.
Speaker #3: Year to date, we've closed over 228 million in acquisitions for our REIT portfolio, including 149 million in Q2 to date. All while hitting our key metrics: creative to NAV, creative to FFO at a rate of a penny per 200 million, with NOI CAGR in excess of 5%.
It's also worth noting that the average payback period for the quarter's new conforming Street. Leases was slightly above 9 months, that's accounting for commissions and capex. Whereas the payback period on a new Suburban box is typically 5 to 7 years. That's just 1. More reason why not all spreads are created equal.
So, in summation, despite a record quarter of leasing activity, the runway ahead remains significant.
Market rents on our core streets. Have compounded meaningfully since 2019.
Speaker #3: More specifically, our recent activity included four and 28 Newberry Street in Boston, these assets are anchored by Chanel and Cartier, and possess a meaningful value creation opportunity we're actively working to harvest.
Those rents continue to accelerate as available Supply further contracts.
And our lease structure ensures that we can capture that growth on a recurring basis.
As always, I'd like to thank the team for their hard work.
Speaker #3: 8,800 Melrose Avenue in West Hollywood, which is leased to Jock Moose, the acclaimed French retailer. This, too, has value creation opportunities that could drive cash yields to north of 8% in the near term, the redevelopment and re-tenanting.
And with that, I'll turn the call over to Reggie.
Speaker #3: And finally, we added another door in the key Flatiron Union Square market, where we now own five storefronts, and are further realizing the benefits of scale there.
Thanks, AJ, and good morning, everyone. I'll start my remarks covering our recent transaction activity and current pipeline, which is keeping us on our traditional pace of $400 to $500 million of street retail acquisitions per year.
Speaker #3: On top of those acquisitions, we're excited about our pipeline. We've built a platform that routinely closes 100 million a quarter of street retail, and we expect to exceed that pace for 2026, and John has raised all the money needed to do it.
Year to date, we've closed over $228 million in acquisitions for our Reed portfolio, including $149 million in Q2 to date, all while, in our key metrics, accretive to NAV, accretive to FFO at a rate of a penny per $200 million, with no CAGR NEXs of 5%.
More specifically our recent activity included.
Speaker #3: This pipeline has all the Acadia hallmarks, including off-market deals, leveraging the less crowded street retail space in our first call advantage, tenant-driven market intelligence, infusing our underwriting, building more scale on corridors that continue to experience outsized rent growth, and below-market leases that allow us to harvest that growth in a relatively short period of time and stabilize significantly above our growing yield.
4 and 28 Newbury Street in Boston. These assets are anchored by Chanel and Cartier, and possess a meaningful value creation opportunity, which we are actively working to harvest.
8,800 Melrose Avenue in West Hollywood, which is linked to Jacquemus, the acclaimed French retailer.
This too has value creation opportunities that could drive cash yields to north of 8% in the near term—the redevelopment and Rattenni.
Speaker #3: In fact, we've already delivered several examples of converting below-market leases to market rent on our recent acquisitions. On our 2024 Soho portfolio purchase, we've signed leases that will increase NOI by 90%, stabilize into a 6% yield, and a high 60s yield in a few years, through another FMV opportunity.
And finally, we added another door and the Chi flat iron Union Square Market, where we now own 5 store fronts and are further realizing the benefits of scale there.
Speaker #3: All on an asset that would trade below a five cap today. Same with one of our 2024 Williamsburg purchases, where we've more than doubled the NOI, also slated to stabilize to a six yield on an asset that would trade at a low five cap rate today.
On top of those acquisitions, we're excited about our pipeline. We've built the platform that routinely closes $100 million a quarter of street retail, and we expect to exceed that pace for 2026. And John has raised all the money needed to do it.
This pipeline has all the Acadia hallmarks, including:
Speaker #3: In other words, we don't just buy deals with upside, but we're actually executing on our plan to capture that upside. On the IMP side, the increased capital appetite for open-air retail has certainly made competition for this product stiff.
time and stabilize significantly above where yields are going
Speaker #3: But we remain confident we'll secure the right assets at attractive prices, a confidence driven by our history of doing so. On the flip side, we're taking advantage of this increased competition through select dispositions of IMP assets where we've successfully completed our business plan.
In fact, we've already delivered several examples of converting from low market leases to market rent on our recent acquisitions.
Speaker #3: To date, we've sold and recapped north of 500 million, with another 200 million plus of dispositions by year-end. This continues the success of this platform, where we've achieved a nearly 2x equity multiple and mid-teens IRR on these deals this year.
On our 2024 SoHo portfolio purchase, we've signed leases that will increase NOI by 90%. We're stabilizing to a 6% yield, and expecting a high-6s yield in a few years through another FMV opportunity.
All on an asset that would trade below a 5 cap today.
Speaker #3: So in conclusion, the bottom line is we're well on our way to cross a threshold of 1 billion of street retail over the last two years, and we're doing it in a way that's accretive, disciplined, and building scale with a growing pipeline to fuel more growth.
Same with 1 of our 2024 Williamsburg purchases where we've more than doubled the noi. Also slated to stabilize to a 6 shield on an asset that would trade at a low 5's cap rate today.
In other words, we don't just buy deals with upside, but we're actually executing on our plan to capture that upside.
Speaker #3: And with that, I'll turn it over to John.
Speaker #2: Thanks, Reggie, and good morning. I will start off my remarks with comments on our second quarter performance, including building blocks for the balance of the year and into 2027, and then closing with an update on our balance sheet.
On the Imp side, The increased Capital appetite for open are retail has certainly made competition for these products stiff. But we remain confident, we'll secure the right assets at attractive prices, a confidence driven by our history of doing. So,
Speaker #2: As outlined in our release, we delivered 31 cents of FFO. It was another clean quarter that exceeded our expectations. Enabling us to once again raise our full-year earnings guidance.
On the flip side, we're taking advantage of this increased competition. Through select dispositions of imp assets where we've s successfully completed our business plan to date, we've sold and recap. North of 500 million with another 200 million plus of dispositions, by year end.
Speaker #2: And to keep it simple, it was our street retail portfolio that drove the quarter. Contributing nearly 16%, same property growth, equating to nearly 2 cents of incremental FFO versus the prior year quarter.
This continues the success of this platform, where we've achieved a nearly 2x equity multiple and mid-teens IRR on these deals this year.
Speaker #2: The growth was pervasive across our street markets, and in our scaled corridors, the growth was even more pronounced. For example, on M Street in Georgetown and Armitage Avenue in Chicago, we exceeded 20%, same property growth during the quarter.
So in conclusion, the bottom line is we're well on our way to cross a threshold of 1 billion or Street retail over the last 2 years and we're doing it in a way that the creative disciplined and building scale with the growing pipeline to fuel more growth. And with that, I'll turn it over to John.
Thanks Reggie and good morning.
Speaker #2: As a matter of practice, we do not revise our same property guidance during the year. That said, with same property growth of 7.3% through the first six months, and continued strength expected in the second half of the year, our full-year model has us trending above the midpoint of our 5% to 9% range.
I will start off my remarks with comments on our second quarter performance, including building blocks for the balance of the year, and then 2027, and then close with an update on our balance sheet.
As outlined in our release, we delivered $0.31 of FFO. It was another clean quarter that exceeded our expectations.
Speaker #2: And I want to spend a moment on our signed, not open pipeline. As AJ highlighted, through our team's record leasing, our S&O pipeline increased nearly 60% during the second quarter, reaching an all-time high of 16.5 million dollars, or roughly 7% of our pro-rata ABR.
Enabling us to once again, raise our full year earnings guidance.
And to keep it simple, it was our street retail portfolio that drove the quarter, contributing nearly 16% same-property growth, equating to nearly 2 cents of incremental FFO versus the prior-year quarter.
Speaker #2: About half of our pipeline is projected to commence in 2026, and is heavily weighted to the fourth quarter. That's when the growth of TNT and LA Fitness's Club Studios both in our San Francisco redevelopment projects are slated to come online.
The growth was pervasive across our Street Markets, and in our scaled corridors, the growth was even more pronounced.
For example, on M Street in Georgetown and Armitage Avenue in Chicago.
We exceeded 20% same-property growth there in the quarter.
Speaker #2: With the balance of our S&O expected to commence throughout 2027. And when factoring in our estimate of rent commencement dates, let me now translate the anticipated impact of our S&O pipeline on FFO.
As a matter of practice, we do not revise our same property guidance. During the year that said with same property growth of 7.3% through the first 6 months. It continued strength. Expected in the second half of the Year. Our 4-year model. Has us trending above the midpoint of our 5 to 9% range?
Speaker #2: In aggregate, our S&O pipeline represents about 8 cents of incremental FFO, net of roughly 3 cents that we're capitalizing within our development and redevelopment projects.
Speaker #2: Based on estimated commencement dates, we expect to realize a penny or so in the second half of 2026, another 3 to 5 cents in 2027, and the balance in 2028 building to the full 8-cent run rate.
And I want to spend a moment on our signed, not open pipeline, as AJ highlighted. Through our team's record, leasing our SNO pipeline increased nearly 60% during the second quarter, reaching an all-time high of $16.5 million, or roughly 7% of our pro rata ABR.
About half of our pipeline is projected to commence in 2026 and is heavily weighted to the fourth quarter.
Speaker #2: Now, let me turn to a topic AJ touched on, and his remarks involving market rent growth, and the potential earnings upside of below-market leases in our street retail portfolio.
That's when the growth of TNT and LA Fitness is Club Studios. Both in our San Francisco Redevelopment projects are slated to come online.
Speaker #2: We have historically been reluctant to provide specific mark-to-mark data across our streets. But given the high volume of leasing activity that has and continues to occur, we now have enough empirical data that supports our increased conviction in the opportunity ahead.
With the balance of our SNO expected to commence throughout 2027.
And when factoring in our estimate of rent commencement dates, let me now. Translate the anticipated impact of our Sno Pipeline on FFL.
Speaker #2: And just to point out, we have already been capturing this market growth in our streets over the last few years, having increased our street and urban occupancy by over 500 basis points, accelerating mark-to-markets through fair market value resets that are unique to our street retail, and through our pro-loose efforts.
In aggregate our Sno pipeline represents about 8 cents of incremental ffo. Net of roughly 3 cents that were capitalizing within our development and Redevelopment projects.
Speaker #2: All of which have been driving the double-digit rent spread, same property and FFO growth that we have been experiencing. And even after all of that, we still have plenty of room to run.
Based on estimated commencement dates, we expect to realize a penny or so in the second half of 2026, another 3 to 5 cents in 2027, and the balance in 2028, building to the full 8-cent runway.
Speaker #2: We estimate that our high-growth streets are still approximately 25% below market today. And keep in mind, this does not include the additional upside we anticipate from market rental growth over the remaining lease term, which further increases the mark-to-market opportunity.
Now, let me turn to a topic AJ touched on in his remarks involving market rent growth and the potential earnings upside, or below-market leases, in our street retail portfolio.
We have historically been reluctant to provide specific Mark to Mark data Mark to Market data across our streets.
Given the high volume of leasing activity that has occurred and continues to occur.
Speaker #2: But for purposes of walking through the earnings impact, let's just stick with the 25% that we think we capture today. This represents about 20 to 25 million dollars, with some of the largest contributors being Soho in Manhattan, which we estimate to be about 35% below market, Henderson Avenue in Dallas about 60%, Armitage Avenue in Chicago at about 50%, and North 6th Street in Williamsburg at about 25%.
We now have enough empirical data that supports our increased conviction in the opportunity ahead.
And just to point out, we have already been capturing this market growth in our streets over the last few years, having increased our street and urban occupancy by over 500 basis points, accelerating mark-to-markets through fair market value resets that are unique to our street retail, and through our PILUS efforts.
Speaker #2: In terms of timing, between natural lease expirations FMV resets and our pro-loose efforts, our team is highly focused on capturing a meaningful amount of this mark-to-market opportunity within the next five years.
Ffo growth that we have been experiencing.
And even after all of that, we still have plenty of room to run.
Speaker #2: Thus, between several hundred basis points remaining street lease up, 3% embedded contractual growth, the executed leases in our S&O and our below-market street retail portfolio, we are increasingly confident in our ability to continue producing 5-plus percent same property growth and strong earnings growth over the next several years.
We estimate that our high growth streets are still approximately 25% below market today. And keep in mind, this does not include the additional upside we anticipate from Market, rental growth over the remaining lease term, which further increases the mark-to-market opportunity.
But for purposes of walking through the earnings impact, let's just stick with the 25% that they—that we think we captured today.
Speaker #2: Let me now turn to our 2026 guidance. Given the strong operating fundamentals, and increased confidence heading into the second half of the year, together with the accretion from our external growth, we raised our full-year earnings guidance again this quarter.
This represents about 20 to 25 million, with some of the largest contributors being SoHo in Manhattan—which we estimate to be about 35% below market—and Henderson Avenue in Dallas at about 60%.
Armitage Avenue in Chicago at about 50%, and North 66th Street in Williamsburg at about 25%.
Speaker #2: Now targeting approximately 10% year-over-year FFO growth at the midpoint. And it's worth noting that this strength more than offset about a penny or so of positive rent dilution from our investment management business.
In terms of timing between natural lease expirations FMV resets and our pry loose efforts.
Our team is highly focused on capturing a meaningful amount of this mark-to-market opportunity within the next five years.
Speaker #2: Which is the short-term dilution we absorb when we profitably sell investment management assets ahead of redeploying the proceeds, which is a reminder we do not build into our initial guidance.
Thus between several hundred basis points. Remaining Street lease up.
Speaker #2: As you heard from Reggie, we have sold or recapitalized well in excess of a half a billion dollars of investment management assets. At nearly a 2X multiple with more in the pipeline.
Three percent in beta contractual growth. The executed leases in our SoHo and our below-market street retail portfolio—we are increasingly confident in our ability to continue producing 5%+ same-property growth and strong earnings growth over the next several years.
Speaker #2: So while short-term dilutive, it gives us meaningful dry powder to redeploy into future earnings growth as we reinvest that capital. And now I'm moving to our balance sheet.
Speaker #2: And starting with our capital raising activities. Our acquisition goal is to add roughly 4 to 500 million dollars of accretive street retail on balance sheet each year.
Let me now turn to our 2026 guidance. Given the strong operating fundamentals and increased confidence heading into the second half of the year, together with the accretion from our external growth, we raised our FFO earnings guidance again this quarter. We are now targeting approximately 10% year-over-year FFO growth at the midpoint.
Speaker #2: Based on our penny per 200 million dollar target, this translates to over 2 cents of annual FFO accretion. And as you heard from Reggie, with a very busy second and a half of the year ahead of us, we remain on track to achieve that goal again.
and it's worth noting that this strength more than offset about a penny Penny, or so of positive ventilation from our investment management business.
What is the short-term dilution we absorb when we profitably sell Investment Management assets?
Speaker #2: During the second quarter, as this pipeline of accretive external opportunities began to increase, we match-funded it with approximately 200 million dollars of equity. And following this raise, we have all the equity we need to achieve our current external growth goal, along with the funding we need to complete our Henderson development project, which we are continuing to anticipate an 8 to 10 percent yield on our costs.
Ahead of redeploying. The proceeds, which is a reminder we do not build into our initial guidance.
As you heard from Reggie, we have sold or recapitalize, well, in excess of a half, a billion dollars of investment management assets.
At nearly a 2x multiple, with more in the pipeline.
So while short-term dilutive it gives us meaningful dry powder to redeploy into future earnings growth. As we reinvest that capital.
Speaker #2: In terms of our balance sheet, we have virtually no maturities over the next several years, nearly a billion dollars of liquidity and significant dry powder to fund our REIT expansion investment management businesses.
And now, moving to our balance sheet.
Starting with our capital-raising activities.
Our acquisition goal is to add roughly 4 to 500 million of a creative Street retail on balance sheet each year.
Speaker #2: So in summary, we had an outstanding quarter achieved record leasing volumes, better than expected operating metrics, and a balance sheet that has ample capacity to support the disciplined execution of our growth strategy.
Based on a penny per hundred million dollar target, this translates to over $0.02 of annual FFO accretion.
And as you heard from Reggie with a very busy second and a half of the year ahead of us, we remain on track to achieve that goal again.
Speaker #2: And with that, I will turn the call over to questions.
Speaker #1: Thank you. As a reminder, if you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.
During the second quarter, as this pipeline of accretive external opportunities began to increase, we match funded it with approximately $100 million of equity.
And following this raise, we have all the equity we need to achieve our current external growth goal.
Speaker #1: Our first question comes from Craig Mailman, with Citi, your line is open.
Speaker #3: Thanks. It's Nick Joseph here with Craig. Just on the street retail strength that you're seeing, curious number one if the retailers or if you're hearing from any of the retailers on changes in consumer behavior, and then on the rent levels that you're seeing today, if you think these are as sustainable or are they stretching the same store economics at all?
Along with the funding, we need to complete our Henderson development project, which we are continuing to anticipate in the 8% to 10% range.
In terms of our balance sheet, we have virtually no maturities of the next. Several years, nearly a billion dollars of liquidity and significant dry powder to fund our Reed expansion, investment management businesses.
Speaker #2: So let me start, and then AJ chime in. There are some shifts underway that I think are important and we shouldn't lose sight of as it relates to open-air retail in general, discretionary retail specifically, and you need to take into account omnichannel.
So in summary we had an outstanding quarter achieved record, leasing volumes better than expected operating metrics and a balance sheet that has ample capacity to support the discipline discipline execution of our growth strategy.
And with that, I will turn the call over to questions.
Thank you. As a reminder, if you'd like to ask a question, please press star one (＊1).
If your question has been answered and you'd like to remove yourself from the queue, please press star 1 1 again.
Speaker #2: And to be more specific, over the last few years, the move out of wholesale, out of the department stores, as department stores have been reducing the number of doors they have.
Our first question comes from Craig Mailman with Citi. Your line is open.
Speaker #2: Retailers are recognizing that the most profitable channels and the most important ones are them having their own store as opposed to being in department stores.
Speaker #2: Similarly. Omnichannel world, online is still very important to these retailers. But the store is the most profitable channel. So from an overall makeup, what we're seeing is a bunch of retailers that were not historically 5, 10 years ago active users of their own stores showing up.
Thanks, it's Nick Joseph here with Craig. Um just on the street retail strength that you're seeing curious number 1 if uh the retailers or if you're hearing from any of the retailers on changes in consumer behavior and then on the rent levels that you're seeing today. If you think these are um, as sustainable, or they stretching same store economics, at all.
There are some shifts underway that I think are important, and we shouldn't lose sight of them as it relates to...
Speaker #2: So that's the first step. And then AJ, why don't you chime in in terms of health and what our tenants are telling us in terms of the profitability and viability of these stores?
Speaker #4: Yeah. And there's a few things I would point to. First, sales growth, health ratios, sales growth is outpacing market rent growth. So health ratios are actually declining, which is a good indicator of where rents can go.
Overall, retail in general, and especially specialty retail specifically, you need to take into account the channel. To be more specific, over the last few years, there has been a move out of wholesale, out of the department stores, as department stores have been reducing the number of doors they have.
Speaker #4: As Ken mentioned, this is the deepest pool of tenants and the tightest supply that any of us can remember. And some of those are European retailers that are entering the US for the first time, expanding in the US, looking to the US as their main growth driver moving forward.
That the most profitable channels, and the most important ones, are them having their own store as opposed to being in department stores.
Similarly, in an omni Channel World online is still very important to these retailers.
But the store is the most profitable channel.
Speaker #4: Some of these are, again, traditional wholesale players that are pivoting to DTC, and momentum, right? Most of the rent growth that we've seen is actually happened post-2024.
So from an overall makeup, what we're seeing is a bunch of retailers that were not, historically, five or ten years ago, active users of their own stores, showing up.
Speaker #4: So this isn't just a pop that happened coming out of COVID that's now leveling out. It is sustainable. And of course, don't want to discount our ability to actually curate because of the scale that we've achieved in a number of these markets.
Speaker #4: We can actually influence rents by influencing tenant performance through co-tenancy. So we do believe that this is a sustainable trend moving forward.
Speaker #3: Thanks. That's very helpful. And then maybe just on the kind of balance sheet and kind of tying that to the busy acquisition pipeline that you spoke of.
Speaker #3: How do you think about forward equity offerings from here? And how do you think about pricing relative to the returns that you're targeting?
Speaker #2: Yeah. So I think as outlined in our remarks, I think we have the equity we need. We talked about getting to about a half a billion dollars of acquisitions.
Speaker #2: Which we think by the end of the year, we get there. And we have the equity we need, as well as to fund our Henderson project.
So that's the first step and then AJ, why don't you chime in, in terms of health and what our tenants are telling us in terms of the profitability and viability of these stores? Yeah, I mean, there's a few things I would point to, you know, first sales growth Health ratios, you know, sales growth is outpacing Market, rent growth. So Health ratios are actually declining which is a good indicator of where rents can go. Um, as Ken mentioned, you know, this is the deepest pool of tenants, uh, and the tightest Supply that any of us can remember and some of those are European retailers that are entering the US for the first time expanding in the US looking to the us as their main growth driver, moving forward. Some of these are again, traditional wholesale players, that are pivoting to DTC, uh, and momentum, right? Most of the rent growth that we've seen is actually happened, post 2024. So this isn't just a pot that happened coming out of Co that's now leveling out. Um, it is sustainable and, of course, don't want to Discount the our ability to actually curate the
Speaker #2: So not looking to raise any additional equity to what we have currently under our wrap. So in terms of forward equity, I think just giving the timing, if you think about why we like that product, Reggie's out shaking hands on deals, and we would look through the math as to does this hit our metrics.
Because of the scale that we've achieved in a number of these markets, you know we can actually influence rents by influencing tenant performance through co-tenancy. So we do believe that this is a sustainable Trend moving forward.
Speaker #2: NavAccretive FFO accretive growth accretive, etc. And when we lock in that price of capital, and oftentimes through the diligence and closing process, it takes several months to get to that point, I want to make sure Reggie has that capital on hand to fund it.
Thanks, it's very helpful. Let me just on the kind of balance sheet and kind of tying that to the busy acquisition pipeline that you spoke of, you know, how do you think about forward Equity offerings from here. Um you know and how do you think about pricing relative to the returns that you're targeting?
Speaker #2: So I think we do like that element to fund it. And we raise equity when we have conviction that we're going to put that to work.
Speaker #3: Thank you.
Speaker #1: Thank you. Our next question comes from Andrew Real with Bank of America, your line is open.
Speaker #5: Good morning. Thanks for taking my questions. My line's kind of been going in and out, so I apologize if either of these were touched on during the remarks.
Speaker #5: But I guess first, I was wondering if you could just kind of tell us what are the going-in cap rates on acquisitions year to date, and then how should we think about both the timing and the magnitude of yield expansion on those?
I think, as, you know, outlining our remarks, you know, I think we have the equity, we need, we talked about getting to, you know, about a half a billion dollars of Acquisitions, um, which, you know, we think by the, you know, by the end of the year, we we get there and we have the equity we need as well as to, to fund to fund our um, Henderson project. So not looking to, um, to raise any additional Equity to what we have currently under under, uh, under a wrap. So, um, in terms of Ford Equity, I think just giving the timing if you think about why we like that product, you know, Reggie's out shaking hands on deals and we will look through the math as to does this at our metrics.
Speaker #2: Yeah. And while we touched on it briefly, Reg, why don't you explain? Unfortunately, as it relates to street retail, the cap rates are just one of the many components that we get to think about.
Never creative, ffo, creative growth at creative Etc. And when we lock in that price of capital and oftentimes, if the diligence and closing process, it takes several months to get to that point. I want to make sure Reggie has that capital on hand to fund it. So I think we do like that element to to fund it and we raise Equity when we have convictions.
That we're going to put that to to work.
Speaker #4: Yeah. I think, Andrew, here's how I would look at it. The going-in cap rate maybe for suburban retail is a little more relevant. The way we think about it is, think about everything that we've discussed with the expansion of rent growth and various corridors.
Thank you.
Thank you. Our next question comes from Andrew Reel with Bank of America. Your line is open.
Speaker #4: It's really about where do we stabilize to? And how can we use the platform to pull certain levers to stabilize to, call it, six-ish-plus yield in a near timeframe?
Speaker #4: And a lot of that we can actually do because of fair market value resets, the rent growth, and these various corridors, re-tenanting, pry loose, curation, and etc.
Good morning. Thanks for taking my questions. Um, my my Line's kind of been going in and out. So, I apologize if if either of these were touched on, um, during the remarks, but I guess first, I, I was wondering if you could just kind of, tell us, what are the going in cap rates on Acquisitions year to date and then how should we think about both the timing and the magnitude of yield expansion on those?
Speaker #4: So we think about it less from a going-in cap rate standpoint and more about where we stabilize to. And we're often finding opportunities. When we are stabilizing 100, 200 bips above where it would trade today.
Speaker #4: So that's really the difference between a going-in cap rate with meager growth and the opportunities that we're able to harvest.
Speaker #5: Okay. Thank you. And then could you just remind us what share count you're assuming in the FFO guidance, and if that includes settling all forward shares this year?
Speaker #2: Yeah, Andrew. So think of when we bring down the acquisitions, that's when we will draw down on the shares. So I think we're just going to continue match funding as we did this quarter.
Speaker #2: So it's really going to vary with the timing of the closing of the deals.
Yeah, and while we touched on it, briefly, um, re why don't why don't you explain? Unfortunately, as it relates to the street retail, this is the cap rates are just 1 of the many components that we get to think about. Yeah, I think, I think Andrew. Here's our look at it. The the going in cap rate, maybe for Suburban retail is a little more relevant. The way we think about it is think about everything that we've discussed, with the expansion of of, uh, rent growth and various corridors. It's really about where do we stabilize to? And how can we use the platform to pull cert certain levers to stabilize to call it 6 is plus yield in in a near time frame and a lot of that we can actually do because of fair market value. Reset the rent growth in these various corridors retened probably lose curation and Etc. So we think about it
Speaker #5: Okay. Thank you.
Speaker #1: Thank you. Our next question comes from Flores Van Dijkum with Ladenburg Thoman, your line is open.
Speaker #6: Hey, guys. Thanks. Solid underlying results. Interested in your disposition a little bit as well. Maybe diving into that. Obviously, you sold some of your JV assets got pretty decent pricing on that.
Last time, I've gone in cap rate standpoint and more about where we stabilize to, and we're often finding opportunities, but we are stabilizing 100, 200 bps above where it would trade today. So, that's really the difference between a going-in cap rate with meager growth and the opportunities that we're able to harvest.
Can you just remind us what share count you're assuming in the FFO guidance, and if that includes settling all forward shares this year?
Speaker #6: Maybe talk about how you thought about that. And I think the local press is also talked about Clark and Diversity portfolio being for sale in Chicago.
Hey Andrew. So think of when we bring down the acquisition, that's when we will draw down on the share. So I think we're just going to continue match funding as we did this quarter. So it's really going to be very, very tied to the timing of the closing of the deals.
Speaker #6: Maybe you can talk a little bit about what where you think that would have to price that in order for you to put that off the books.
Okay, thank you.
Thank you.
Speaker #2: So let me start, and then Reg chime in with some details. First of all, we don't comment on press articles. That's just a matter of practice.
Our next question comes from floors vendor with laneberg Thalman. Your line is open.
Hey uh guys thanks. Um,
Speaker #2: What we have said before and is the case for our on balance sheet redisposition is while we will entertain them periodically over time, they will not create earnings dilution.
All of the solid underlying results, um,
Interested in, um, your disposition, uh, uh, uh, uh, a little bit as well. Maybe diving into that obviously, you sold. Uh, some of your, um,
Speaker #2: They will not create NAV dilution. We have the balance sheet we need. And so we can be just strategic about any dispositions with respect to that.
Speaker #2: And then Reg, why don't you just touch on the overall disposition market where it feels the most crowded, where we see opportunity?
Speaker #4: Yeah. I think what we've always said historically is that one of the reasons we like street retail on balance sheet, it is a much less crowded field.
Uh, your uh, JV assets, uh, got pretty decent pricing on that. Maybe talk about how you thought about that. And I, I think the local press was also talked about pluck and diversity. Uh, portfolio being for sale in Chicago, maybe you can talk a little bit about what you know, where you think that would have to price that in order for you to uh to to put that off the books.
Speaker #4: And a lot of suburban product, grocery interest in a power centers, it is increasingly become a crowded field as retail is kind of having its day from an institutional investor standpoint.
So let me start, and then I'll re-chime in with some details. First of all, we don't comment on...
Speaker #4: So we are kind of leaning into that. And our Fund 4, Fund 5 dispositions that you've read about, we are getting solid pricing for it.
Press articles—that's just a matter of practice. What we have said before, and is the case for our on-balance sheet, we disposition...
is while we will entertain them periodically over time. They will not
Speaker #4: And a lot of it is because of this increased competition that investors are out there for it. So but only when we have completed our business plan, are we doing it.
Create earnings dilution.
They will not create nav dilution.
Speaker #4: So we're getting maximum value when we take it to market.
Speaker #3: Thanks. Maybe my follow-up I mean, you guys are in a couple of really hot street notes. How would you rank in terms of medium-term upside and also in terms of your ability to invest capital a Soho market versus a Williamsburg versus a M Street and/or a Boston?
Speaker #3: Where do you see some of the opportunities or the greatest opportunities right now?
Speaker #2: Well, let me start and then both AJ and Reg, feel free to add additional color to it. Where we are most excited by far is where we can own enough assets on a given corridor that we can create what we call the benefits of scale.
Um we have the balance sheet we need and so we can be just strategic about any dispositions with respect to that. Um and then reg, why don't you just touch on the overall disposition Market? Where it feels the most crowded where we see opportunity? Yeah, I think we're what we've always said historically is that 1 of the reasons we like Street retail on balance sheet is a much less crowded field and a lot of suburban product, grocery anchor, Center, power centers, it is increasingly become a crowded field as retail is kind of having its day from an Institutional Investor's standpoint, so we are kind of leaning into that. And our fund, for fund 5 disposable, we are getting solid pricing for it. And a lot of it is because of this increased competition, uh, that that investors are out there for. So, we, but only, when we have completed, our business plan, are we doing it? So, we're getting maximum value when we take it to Market.
Speaker #2: And as I said in the prepared remarks, it doesn't mean 100%. Usually, when we get to about 25% of the stores in a given market, because we are a team are active day in, day out, we can have a meaningful impact on that given corridor.
Thanks maybe and my my follow-up. Um I mean you guys are in a couple of really hot Street notes. How would you rank in terms of you know?
Speaker #2: So the ones I'm most excited about are those corridors where our curation can raise the sales of a given corridor, where our curation can help us really drive the rents, and we're at scale in about half of the key streets that we're active in.
medium-term, uh, upside and also, in terms of your ability to invest Capital, uh, a Soho Market versus a Williamsburg versus a, um,
Uh, M Street. And or a, a Boston, uh, where, where do you see? Uh, you know, some of the opportunities, uh, the greatest opportunities right now.
Speaker #2: In terms of which ones in the medium term, are going to have the most growth? Well, to some degree, you're asking us to pick our favorite children.
Let me start. And then both AJ and red. Feel free to add additional color to it. Um, where we are most excited by far.
Speaker #2: But to state the obvious, it's in those that are in the earlier or early-ish stages of stabilization, Henderson Avenue in Texas would be a prime example.
Is where we can own enough assets on a given Corridor that we can create what we call the benefits of scale. And as I said in the prepared remarks, it doesn't mean a 100%. Usually when we get to about 25%,
Speaker #2: But AJ, what else would you add to that?
Speaker #4: Yeah. I mean, the Flatiron, Upper Madison Avenue, still not back to prior peaks. I think they still have a lot of room to run.
Speaker #4: Obviously, available supply is extremely constrained there. Bleecker Street is a market that's really resonating with a lot of these traditional wholesale retailers that are pivoting to DTC.
Speaker #4: And I also think Soho still ranks at the top of the list. There's still a good amount of room to run, just given the demand we're seeing in Soho.
Of the stores in a given Market because we are team are active day in day out. We can have a meaningful impact on that given quarter. So, the ones I'm most excited about are those corridors where our curation can, raise the sails of a given card or where our curation can help us really drive the rents. Um, and we're at scale and about half
Speaker #6: And I think a good amount of room to run to put more capital to work. As well.
Speaker #2: So that's as close as we'll get to talking about our favorite kids.
Speaker #5: Thanks, guys. Appreciate it.
Speaker #1: Thank you. Our next question comes from Todd Thomas with Key Bank Capital Markets, your line is open.
Speaker #7: Hi. Thanks, good morning. First question. John, you mentioned that you do not regularly revise the same store growth forecast during the year, but said that you're trending above the midpoint of the 5 to 9 percent range.
Speaker #7: Does the FFO guidance reflect that view? And has that been sort of adjusted accordingly? And can you clarify that and just discuss the driver of the 2 cent increase at the low end of the range and just talk about what where you sort of de-risked the outlook as far as the year goes?
With a lot of these traditional wholesale retailers that are pivoting to DTC. And I also think Soho uh, you know, still ranks at the top of the list. Um, there's still a good amount of room to run just given the demand we're seeing in SoHo.
And I think there's a good amount of room to run to put more capital to work as well.
So that's as close as we'll get to talking about our favorite kits.
Speaker #4: Yeah. So again, Todd, we just have I think at the beginning of the year. And in hindsight, I put in a way too wide of a range.
Thanks guys. Appreciate it.
Thank you.
Speaker #4: At the 5 to 9 percent. But what we have not done is on a regular basis, update it, rationale, really being for us is I think it indicates an element of precision on a portfolio of our size that we just don't want to articulate on a quarterly basis.
Our next question comes from Todd Thomas with keeping Capital markets, your line is open.
Speaker #4: So going forward, we are going to have a much tighter range. But at least at this point, do not want to update where we are going forward quarterly.
Speaker #4: And then where we look to the components of the we raised the low end of our guidance 2 cents. Really a combination of things.
Speaker #4: One is, as we continue to redeploy the external growth from that we have, have deployed as one piece of it, credit is a second piece of it.
Hi, thanks. Uh, good morning. Uh, first question, John, you, you mentioned that you, um, you know, you do not regularly, uh, revise the same store growth forecast during the year. Um, but said that you're trending above the midpoint of the 5 to 9% range. Does the ffo guidance reflect that view and has that been, you know, sort of adjusted accordingly, and can you clarify, that and just discuss the driver of the 2-cent increase at the low end of the range and just talk about what, where you sort of de-risked. Um, you know, the Outlook is as far as the year goes,
Speaker #4: So I think we had credit built into our credit assumptions built in. We are continuing to see strength in there. We're getting spaces open.
Speaker #4: We have a very significant sign not yet open portfolio. You'll see that not only did we put a bunch of leases online this quarter, we've added more to it.
Speaker #4: And our team is getting those spaces open on time, if not ahead of where we thought those would be. So between really a combination of the accretion from acquisitions, the ability to get stores open, faster, and really just the overall tenant health, that's what drove it.
Speaker #4: And I think in terms of where do we land in the midpoint between our new range, I still half the year left. So I think it's we'll leave the where we trend, but definitely trending on the upward slope of that.
Speaker #3: Okay. That's helpful. And then my second question now that Acadia owns 100% of Fund 2's interests in City Point, effectively 95% of the asset.
Yeah. So so again we just have, you know, I think at the beginning of the year I and in hindsight, put in a way too wide of a range, um, at the 5 to 9%. But what we have not done is on a regular basis update it, rationale really being for us is I think it indicates an element of precision on a portfolio of our size that you know, we just don't want to articulate on a, on a quarterly basis. So going forward, we are going to have a much tighter range, but at least at this point, do not want to update. You know, where we are going going going, going forward with quarterly and then where we look to the components of the, you know, we raise the low end of our guidance to 2 cents. Really a combination of things 1 is as we continue to redeploy, the external growth from that we have have deployed as 1 piece of it. Credit is a second piece of it. So I think we had credit built into our um, credit assumptions built in. We are continuing to see. See strength in there. We're getting spaces. Open. We have a very significant
Speaker #3: Can you just talk in a little bit more detail about the NOI upside opportunity and time frame to realize that the earnings growth from that asset?
Speaker #3: I think leasing has generally been excluded from the S&O pipeline that you've discussed. So can you clarify that a little bit or talk about that a little bit?
Speaker #3: And then can you also just talk about the longer-term ownership of that asset and how it fits into the core portfolio, whether you plan to keep that on balance sheet or whether there's an opportunity to recapitalize that asset or perhaps monetize it in some way or form over time?
Sign that yet open portfolio. You'll see that not only did we put a bunch of leases online this quarter, we've added more to it and our team is getting those spaces open on time. If not ahead of where we would, we thought those would be. So, um, so between really a combination of the accretion from Acquisitions the ability to get stores open faster and really just the overall tenant help. That's what, that's what drove it. Um, you know, and I think, in terms of, you know, where do we land?
In the midpoint, between our, our new Range, you know, I still still have the year left so I think it's, you know, we'll leave the, you know, where where we Trend, but definitely trending on, on the upwards upward slope of that.
Speaker #2: John, why don't you start and then AJ add some leasing update color?
Speaker #4: Yeah. So I think a couple of things. One to point out, the 16.5 million of S&O, that is pro rata across our entire portfolio.
Speaker #4: So that would include City Point. It's not in our because it's in the investment management, it's not in our same store. So it is in our whatever share of leasing we've signed that has not yet open.
Speaker #4: That will be in the 16.5 million. So as you pointed out, as we put into our materials last night, we did acquire the remaining pieces of the partners in Fund 2.
Speaker #4: So just that complexity of the loan and the timing, that's now all behind us. And the upside is in front of us. And I'll start off on some of the leasing, but I think as we look at the asset and the opportunity, we have made incredible progress in terms of what leasing we have done, what we have currently signed or in process of being signed.
Okay, um, that's helpful. And then, um, my second question. Um, now that aad owns 100% of fun twos interests and City Point, um, you know, effectively 95% of the asset, can you just talk in a little bit more detail, um, about the noi upside opportunity and time frame to realize, um, that the, the earnings growth from that asset. Um, you know, I think leasing, um, has generally been excluded, from from the Sno pipeline that you've discussed. Um, so can you clarify that a little bit or talk about that a little bit? And then, can you also, um, just talk about the longer term ownership of that asset and how it fits into the core portfolio? Whether you plan to keep that on balance sheet, or whether there's an opportunity to recapitalize that asset or perhaps monetize it in some way or or form over time.
Speaker #4: And we think the upside to that is we are probably, again, call it in the probably in the 12 to 18 months to really starting to see that lift from the asset.
Speaker #4: And I mean, you've been to the asset multiple times. It's a combination of getting the couple of remaining spaces on the park, those leased, as well as the getting the mark-to-markets that we think are available to us and increasingly playing out where we see the strength of some of the opens of some of the new, the likes of Sephora, getting the mark-to-market on Prince Street within the Soho I'm sorry, Prince Street within City Point, not Soho.
John why don't you start in an ajs some leasing update color? Sure. Yeah. So I think a couple of things 1 to point out the 16.5 million of Sno that is pro rata across our entire portfolio. So that would include City point. It's not in our because it's in the investment management. It's not in our same store so it is in our whatever share of leasing we've signed that has not yet opened that will be in the
Speaker #4: To be confused with Soho. To get those mark-to-markets, which those will be the more of the longer dated ones as we navigate through those.
Speaker #4: But we are seeing a clear visibility. And now that the ownership is where it is, that gives us significant runway to do that. And then the last point on where do we see the ownership of it.
Speaker #4: What I will tell you, we're not going to do is that given the future growth in front of us, we are not going to, given we have the capital balance sheet, we don't need to sell that upside at a discount to somebody else.
Speaker #4: We are going to monetize that and then look to explore whether it makes sense to bring in institutional capital at that point. But not anything near term where we'd be looking to bring in a capital partner.
Speaker #4: So if AJ, you want to give a little more color on leasing.
Speaker #2: Yeah. And as you mentioned, the space that we have left is our most valuable space. And the way that we're going to unlock that value is really just to stay the course, be selective, focus on curation, finding the right tenants, and driving sales.
Speaker #2: This past quarter, we signed Barbie Parker and Lovesac Activate. They'll complement Lululemon, Sephora, Swarovski or Trader Joe's. So we're creating that right ecosystem. We've seen really strong sales growth.
Speaker #2: Continue. We see it show up in the food hall as well as from our retailers. And of course, the spaces that are occupied on the ground floor, those are the spaces that are going to roll the most frequently and we'll be able to, again, capture that upside and rent.
To see that that lift from, from the asset. And if I mean, you've been to the asset multiple times. It's a combination of getting the couple of remaining spaces on the park that those least as well as the getting the mark to markets that we think are are available to us and increasingly playing out where we see the strength of some of the opens of some of the new, the likes of Sephora getting the mark to Market on, on Prince Street within the, the Soho. I'm sorry. Prince Street within City, Point not. So of to be confused with Soho to get those marked to markets which those will be the more of the long longer dated ones as as we we navigate through those. But we are seeing a clear visibility and now that the ownership is is where where it is that gives us specific significant Runway to do that. Then the last point on, you know, where do we see the the ownership of it? What I will tell you we're not going to do is that given the future growth in front of us. We are not going to give and we have the capital balance sheet. We don't need to sell that upside at a discount to to somebody else. We are going.
Speaker #2: So stay the course, focus on curation, and there's a good amount of upside ahead of us.
Speaker #3: Okay. Thank you.
Speaker #1: Thank you. Our next question comes from Anthony Palone with JPMorgan. Your line is open. Anthony, if your telephone's muted, please unmute. Our next question comes from Paulina Rojas Schmidt with Green Street.
Going going to monetize that and then look to look to explore, whether it makes sense to to bring in institutional Capital at that point, but not anything near-term where we'd be looking to bring it at a Capital Partner. So if AJ you want to give a little more teller at least. Yeah. And as you mentioned, you know, the space that we have left is our most valuable space. Um and the way that we're going to unlock that value is really just to stay the course. Be selective focus on curation finding the right tenants and driving sales. You know, this past quarter we signed walkie Parker and
Love Sac activate.
Speaker #1: Your line is open.
Speaker #5: Good morning. Your portfolio lease rate is at 94.7. So three questions related to that. Where do you see the overall lease rates going over the next 12 to 18 months?
They'll complement Lululemon, Sephora, Swarovski, and, of course, Trader Joe's. So we're creating that right ecosystem. We've seen really strong sales growth continue. We see it show up in the food hall as well as from our retailers. And, of course, the spaces that are occupied on the ground floor—those are the spaces that are going to roll the most frequently and will be able to again capture that upside in rent. So, stay the course, focus on curation, and there's a good amount of upside ahead of us.
Okay, thank you.
Speaker #5: And we've seen that where can Chicago realistically get to in that horizon? And then more broadly, outside of Chicago, are there any specific assets to call out as near-term middle movers on the leasing upside front?
Thank you. Our next question comes from Anthony pallone with JP Morgan. Your line is open.
Anthony, if your telephone is muted, please unmute.
Speaker #4: Yeah. So Paulina, let me start with that. So I think the 94.7 and this is just your well of this, but keep in mind that is a blend of our entire re-portfolio, meaning suburban and street and urban.
Our next question comes from Paulina Roha Schmidt, with Green Street, your line is open.
Speaker #4: So if you look at our the street portion of that is lower. Right? So I think that if you look at the street portion of that is a good 100 basis points lower than that.
Good morning.
And your portfolio. This, ready, is at 947.
Speaker #4: And that's our more higher dollar value per ABR space. That's the one thing I want to point out, that still have several 100 basis points of room to run on the street.
So, three questions related to that. Where do you see the overall list rates going over the next 12 to 18 months?
Speaker #4: And you would think full occupancy within the street, we peaked at in the 97% range. But I think we could safely say 95, 96 percent, particularly given the strength that we've talked about today.
Um, and we've seen that. Where can Chicago realistically get to in that horizon?
Um, and then more broadly, outside of Chicago, are there any specific assets?
Speaker #4: From the street, which is a significant upside. And then in terms of suburban, I would say suburban, we're probably pretty full at this point throughout our suburban portfolio.
To call out as near-term needle movers on the listing website prompt.
Speaker #4: So I think in the 95 to 97 percent range on suburban feels about full occupancy there. So on a blended, when you blend our mix of street and urban and suburban, you're going to be in the 95 to 96 percent range because you're always going to have a level of churn.
Speaker #4: And then your question on Chicago. So I think if we look in Chicago, if we look across our markets, really don't not have a lot of vacancy there, with the exception of North Michigan Avenue, which is not in that statistic.
Speaker #4: So that's in our redevelopment pool. So that is 96,000 square feet we have on North Michigan. That is currently a drag tunnel. So very meaningful upside.
Speaker #4: And AJ could give some color that we're starting to see green shoots there. But meaningful opportunity from Chicago. And then Paulina, your last question, can you repeat that piece?
Yeah, so probably let me start with with that. So I think the 947 and this is just uh, you're you're well, this but keep in mind that is a blend of our entire report folio meaning suburban and Street and urban. So if you look at our, the street portion of that is lower, right? So I think that if you look at the street Port, portion of that is, you know, a good 100 basis points, lower than that. And that's our more High higher dollar value per abbr space. That's the 1 thing. I want to point out that still have several room, several hundred basis points of room to run on on on the street and you would think full occupancy within the street we peaked at in the 97% range. But I think you, we could safely, say 95 96%, particularly given the strength that we've talked about today, from the street, which is a significant upside. And in terms of suburban, I would say Suburban were were probably pretty full at this point throughout our Suburban portfolio. So I think in the 95 to 97% range on on Suburban Fields about
Speaker #5: Yeah. Is there any meaningful upside? Because for example, when I look at Soho, West Village, it's at 93% today. That sounds somewhat low given the strength that you're describing in the corridor and relative to the entire industry, but it's 96% leased.
Full occupancy there. So, on a blended basis, when you blend our mix of street, urban, and suburban, you're going to be in the 95% to 96% range, because you're always going to have—
have a level of churn.
Speaker #5: So yeah, any specific things that you would like to call out on the upside?
Speaker #4: Yeah. So I think you're always going to have some level of churn. So I think it's unlikely that we would ever be able to operate the second we get a space back that our team is able to immediately turn it.
shoots there, but meaningful opportunity from, um,
Speaker #4: So there is always going to be a spot. So in terms of upside, Soho, as I pointed out in remarks, they're the upside is we think we're 60% below market.
from from Chicago and then,
Pioneer, last question. Can you repeat that, please?
Speaker #4: There, given just the naturally shorter lease terms, the fair market value resets, and our team's prelude efforts, that's where the upside is, is AJ and his team could get that space back.
Yeah. Is there any other, um, particular assets where you see meaningful upside? Because, for example, when I look at SoHo with Village, it's at 93% today.
Speaker #4: And then where I'd say there's meaningful upside is we go through again, we look at where do we have the greatest opportunity? Henderson and Dallas.
Speaker #4: So there, given the development we're doing there, we're strategically holding space back. So there, meaningful growth in Dallas as well, through lease up. Also, San Francisco.
Speaker #4: So in San Francisco, very big rebound as you are aware, but I think between the we've brought in two large anchors there, between T&T at City Center LA Fitness and Sprouts at 5559, we still have ample room to add to that.
And that sounds somewhat low given the strength that you're describing in the corridor and relative to the entire industry but it's 96% least so yeah. Any any specific uh things that you would like to to clean out on the app side? Yeah. So I think you're always going to have some level of turns. I think it's unlikely that, you know, we would ever be able to operate the second. We get a space back that our team was able to immediately turn it. So there is, you know, there is always going to be be a spot. So in terms of upside Soho, as I pointed out of remarks, they're the upside is, you know, we think we're 60% below Market.
Speaker #4: And again, in the 94.7 occupancy you mentioned, because that's in redevelopment, that's not in that number as well. So meaningful vacancies in San Francisco that is a strengthening market that will that we can lease into.
They're given just a naturally short set of lease terms, the fair market value resets, and our teams probably lose effort. That's where the upside is—AJ and his team could...
Speaker #2: And just to emphasize even further the importance, I would argue that fair market value resets are going to be over the next few years, more important than the important occupancy gains that we had over the last few years.
You know, get that space back, and then where I'd say there's meaningful upside is if we go through again and look at, you know, where do we have the greatest opportunity—Henderson in Dallas?
Speaker #2: Because not only does the natural maturity and fair market value reset when it occurs, create a pop for us, but what AJ and his team have proven now, multiple times, is retailers coming to us years ahead of that FMV reset.
So they're given the development we're doing there, we're strategically holding space back, so they're meaningful growth in in, in Dallas as well, through through, through lease up, also, San Francisco. So in San Francisco, very big rebound. As, as you are, you are aware. But I think between the, we brought in 2, large anchors there between TNT at City Center LA Fitness and Sprouts at, um,
Speaker #2: And negotiating well in advance the increase in rent. Because retailers often are putting significant dollars, their own dollars, into stores and they need to know that they have more than 1, 3, or even 5 years of certainty of rent.
5559, we still have ample room to to add to that and again in the 947 occupancy, you mentioned because that's in Redevelopment, that's not in that, that number as well. So meaningful vacancies in San Francisco. That is a strength of the market that will that we can lease into
and just to,
Emphasize even further the importance.
Speaker #2: So all of that you put together, I feel more excited about the upside embedded in our portfolio today recognizable over the next few years, than I did even when we were in lease up mode a couple of years ago.
Speaker #5: Thank you. A second question is, when you underwrite acquisitions across your different street retail corridors, those that you like, do you find expected returns are broadly similar?
I would argue that fair market value resets are going to be, over the next few years, more important than the important occupancy gains that we had over the last few years, because not only does the natural maturity and fair market value reset, when it occurs, create a pop for us, but what AJ and his team have proven now multiple times is retailers coming to us years ahead of that FMV reset.
Speaker #5: Or do some markets suffer meaningfully more credible upside than others today? Whether because where they are in the recovery cycle, liquidity, or something else?
Speaker #4: It really does depend on the asset. It really is fact-dependent. There are a ton of deals where they whether they're early endings, mature markets, it's all about rent-to-market.
Speaker #4: Can you get to that rent-to-market based on an FMV? So it's less about the market delivering different returns and more about the asset and the business plan and the execution.
And negotiating well in advance the increase in rent, because retailers often are putting significant dollars—their own dollars—into stores, and they need to know that they have more than 1, 3, or even 5 years of certainty of rent. So all of that you put together, I feel more excited about the upside embedded in our portfolio today, recognizable over the next few years, than I did even when we were in lease-up mode a couple of years ago.
Thank you. A second question: is
Speaker #2: Is that being said, I will reiterate again, where you will see us most active is deals that check the box in terms of right price, right unlevered IRRs, right long-term growth, everything we've discussed, but also where we can build scale.
Speaker #2: We thankfully are able to, and we've proven this now, and I think you'll see in our upcoming acquisitions, that we are adding to corridors that we have the highest level of confidence in.
Were you on the right acquisitions? Across your different street retail corridors—things that you like—do you find the expected returns are broadly similar, or do some markets offer meaningfully more credible upside than others today? Whether because of where they are in the recovery cycle, liquidity, or something else?
Speaker #2: They are achieving our returns upfront. And then over time, I think they will surprise to the upside. In fact, a deal we recently acquired over the last year, we underwrote, say, $300 a foot, and now AJ and team are finalizing leases at 30% higher than that.
It really does depend on the asset. It really is fact dependent. There are a ton of deals where, whether they're early endings or mature markets, it's all about rent to market. Can you get to that rent to market based on the FMV? So it's less about the market delivering different returns and more about the asset, the business plan, and the execution.
Speaker #2: That's just one example. Whereby controlling enough stores on a given street, we know the tenants interest, we know who wants to be there, and we can do it promptly and professionally.
Speaker #5: Thank you.
Speaker #1: Thank you. Our next question comes from Michael Mueller with JP Morgan, your line is open.
Speaker #6: Hey. Try it again this time with hopefully the right pin. So sorry about that.
Speaker #2: Yeah. We thought you were bringing Anthony in on us now.
Yushen, that being said, I will reiterate again where you will see us most active is in deals that check the box in terms of right price, right unlevered IRRs, right long-term growth, everything we've discussed, but also where we can build scale. Thankfully, we are able to—and we've proven this now, and I think you'll see in our upcoming acquisitions—that we are adding to corridors that we have the highest level of confidence in. They are achieving our returns upfront.
Speaker #6: Here. Bait and switch. There we go. So I know I missed some stuff, but I did hear the comments about scale in terms of needing to work.
Over the last year.
Speaker #6: But when I look at the street portfolio, you're in six or seven markets. If you include the smaller exposures, so I guess looking over the next three years, five years, where do we think where do you think you're going to see the most investment opportunities?
Speaker #6: Is it more in the larger existing markets like New York? Is it kind of focusing on building out those smaller markets or even adding kind of new markets to the list?
Um, we underwrote, say, $300 a foot, and now AJ and team are finalizing leases at 30% higher than that. That's just one example of whereby controlling enough stores on a given street, we know the tenants' interest, we know who wants to be there, and we can do it promptly and professionally.
Thank you.
Speaker #4: So I think you will see us add a couple new markets to be clear. My guess is when you came up with six, you just lumped all of New York City as one market when I think our retailers view the West Village very different from SoHo, very different from North 6th Street and Williamsburg.
Thank you.
Our next question comes from Michael Muller with JP Morgan. Your line is open.
Hey, uh, try it again, this time with hopefully the right pin. Sorry about that.
Speaker #4: And certainly Northern Madison Avenue. So those are multiple different markets, but all New York. As I said in the beginning, we are continuing to add to our capital acquisitions on Henderson Avenue and Dallas.
You were bringing Anthony in on us now. Payton, switch. There we go. Um, so I know I missed some stuff, but I did hear the comments about scale and terms. I need to work, but when I look at the street portfolio, you're in six or seven markets.
Speaker #4: I think you should expect to see us continue to deploy there given the strong tenant interests, strong results we're having. I think you should expect most of our additions to be in markets that we are currently active.
If you include the smaller exposures. So I guess, you know, looking over the next three years, five years, where do we think—where do you think you're going to see the most investment opportunities? Is it more of the larger existing markets, like New York? Is it kind of, you know, focusing on building out those smaller markets, or even adding new markets to the list?
Speaker #4: Last quarter, we planted seeds in Palm Beach on North Avenue, on Newberry Street, so those are two more markets. If over the next few years we added two more I would tell you we would be in a position where we would be highly relevant to the vast majority of our retailers nationwide.
Speaker #4: New York Boston Chicago San Francisco Los Angeles Dallas Florida Georgetown and DC, all really important markets. And that will enable us to be the premier owner-operators of street retail in the US.
So I think you will see us add a couple new markets. To be clear, I guess when you came up with six, you just lumped all of New York City as one market, when I think our retailers view the West Village very differently from Soho, very differently from North 6th Street in Williamsburg, and certainly Northern Madison Avenue. So those are multiple different markets, but all are in New York.
Speaker #4: Without having to add a couple more. But if you wanted to guess, you could come up with five potential and we'll show up in two.
Speaker #6: Got it. Okay. And for a second question, there was Johnson Lakes color on the mark-to-markets. And I know these spreads are going to be volatile.
As I said in the beginning, we are continuing to add to our capital acquisitions on Henderson Avenue in Dallas. I think you should expect to see us continue to deploy there given the strong tenant interest and strong results we're having. I think you should expect most of our additions to be in markets that we are currently active in.
Speaker #6: But if we're trying to dumb it down and thinking about go forward spreads, is there any reason we can't say, okay, for the street portfolio, we're taking your 25% that you throw out there, blend that with the suburban for 10%.
Last quarter, we planted seeds in Palm Beach on Worth Avenue and on Newbury Street. So those are two more markets. If over the next few years we added two more, I would tell you we would be in a position where we would be highly relevant to the vast majority of our retailers nationwide.
Speaker #6: And as a proxy, for the next few years, outside of market print growth, that should be a good starting point to think about spreads?
Speaker #4: Easy for me just to say yes, Mike, but I think the reality is it's going to be lease dependent. As part of that, right?
Speaker #4: So I think that'd be the only so over I threw out that our target is we want to do this over the foreseeable future.
New York, Boston Chicago, San Francisco, Los Angeles, Dallas, Florida, Georgetown, and D.C all really important markets and that will enable us to be the premier owner operators of Street retail in the US without having to add a couple more but
But if we, if you wanted to guess, you could come up with five potential and we'll show up in two.
Speaker #4: If you were to average those, then yes, that would be 25%. But when we have markets such as SoHo that are 60%, there is going to be volatility just inevitably quarter to quarter to quarter.
Speaker #4: So I would love for you to be able to just say just spread it equally, but I think I would disappoint you if that was if that played out.
Speaker #4: But over that extended period, our goal is to do 25 plus percent just given keep in mind we are not trending rents. The rents are continuing to rise above the contractual growth we're getting.
Got it, okay? And and for a second question uh there was Johnson Lakes color on the mark to Market and I know Lee spreads are going to be volatile but if we're trying to dumb it down and thinking about go forward, spreads is there any reason we can't say, okay, for the street portfolio, we're taking your 25% that you throw out there.
Speaker #6: Got it. Okay. Thank you.
Blend that with the suburban for 10%, and as a proxy for the next few years, you know, outside of market rent growth. That should be a good starting point to think about spreads.
Speaker #1: Thank you. Our next question comes from Ken Billingsley with Compass Pointe Research and Trading, your line is open. Ken Billingsley, if your telephone's muted, please unmute.
Speaker #7: Oh, thank you. Yes, I was talking to myself. I wanted to ask a question on the fair market value resets. I know you've given a lot of color.
Speaker #7: In general, are those resetting every five to eight years? And can you give color on the percentage that's resetting in 27 and 28?
Speaker #2: So the short answer is in general, it's every five years after primary term. Sometimes when we sign an initial lease, it'll have a 10-year primary term, but thereafter it's on every option period and those options tend to run five years.
Easy for me just to say yes Mike but I think the the reality is it's going to be least dependent um as as part of that, right? So I think that would be the only so over, you know, I threw out that, you know, our our Target is we want to do this over the foreseeable future. If you were to average those then yes, that would be 25%. But when we have markets such as Soho, that are 60%, there is going to be volatility just inevitably quarter quarter to quarter. So I, I would love to for you to be able to just say just spread it equally, but I think I would disappoint you if, if that was, um, if that played out, but over that extended period, our goal is to do 25 plus percent just given keep in mind, we are not trending rents. You know that rents are continuing to rise above the contractual growth again.
Got it. Okay, thank you.
Thank you. Our next question comes from Ken Billingsley with Compass for Research and Trading. Your line is open.
Speaker #2: AJ, in terms of the is that a question?
Speaker #4: Yeah. In terms of the number of leases that would be rolling to FMV in the next year. I mean, it's definitely a significant number.
Ken Billingsley, if your telephone is muted, please unmute.
Speaker #4: And then when you add those to the active preluse pipeline, we should be able to meaningfully capture that growth.
Speaker #7: Okay. And the other question I have is within the corridors, as you're curating the corridor themselves, at what percentage of ownership do you tend to start pricing yourself out?
Oh, thank you. Yes, I was talking to myself. Um, I wanted to ask a question on the fair market value resets. I know you've given a lot of color, uh, in general. Are those resetting every 5 to 8 years? And can you give color on the percentage of those—37% in '27 and '28?
Speaker #7: Where do you see that the benefit that's going to the other properties you don't own start to create acquisition problems for that corridor?
Speaker #2: It's tricky. And Reg, feel free to chime in as well. I'd say it's more art than science. And remember, the economy comes into play.
In general, it's every five years after the primary term. Sometimes, when we sign an initial lease, it'll have a 10-year primary term, but thereafter, it's on every option period, and those options tend to run five years. AJ, in terms of...
Speaker #2: So there will be times where we feel like we are priced out of a given market, but then the cyclicality of the economy kicks in and other buyers disappear.
His other question—yeah. In terms of the number of leases that would be rolling to FMD in the next year.
Speaker #2: First and foremost, because when we are active in a given corridor, like Armitage Avenue, we have best market intelligence. As long as we can afford to be patient and we can, you'll see us consistently every year we may add one or two buildings.
I mean it's just it's definitely a significant number and then when you add those to the active pry loose pipeline, you know we should be able to meaningfully capture capture that growth
Speaker #2: And there's not a lot of competition for that. Conversely, in a place like SoHo, when a market really gets moving, yeah, then we may have to step to the sidelines, pause for a bit.
Okay. Um, and the other question I have is within the corridors, as you're curating the corridor themselves, at what percentage of ownership do you tend to start pricing yourself out? Like, where do you see that the benefit starts going to the other properties you don't own?
Start to create acquisition problems.
For that corridor.
Speaker #2: But thankfully, we have enough other markets where we have a unique position that we have been able year in, year out to do three to five hundred million of acquisitions without getting priced out.
Speaker #2: It does irritate us, as you pointed out, though, when we curate a street and make other people rich. So what you'll see down in Henderson Avenue, for instance, is we're continuing to add buildings because we'd rather hold on to that for ourselves.
You know, it's tricky. Um, and Reg, feel free to chime in as well. I'd say it's more art than science, and remember the economy comes into play. So there will be times where we feel like we are priced out of a given market, but then the cyclicality of the economy kicks in and other buyers disappear, first and foremost, because when we are active in a given quarter or, like, armed at a given avenue,
Speaker #7: Great. Understand. Thank you.
Speaker #2: Sure.
Speaker #1: Thank you. Our next question is a follow-up from Paulina Rojas-Schmidt with Green Street, your line is open.
Speaker #8: Thank you. A short follow-up. You talked about the lighter capex as a structural advantage of street retail. Can you help quantify that, whether perhaps a capex run rate as a percentage of NOI or however you find it more most intuitive to frame it?
Speaker #2: Yeah. So Paulina, what I would say right now,
Speaker #4: we're an extraordinary period of lease up. If you were just to look at our capex right now, it's going to run at a higher percentage just because we're bringing so many tenants in.
Um, we have best market intelligence as long as we can afford to be patient and we can, um, you'll see us consistently—you know, every year we may add one or two buildings, and there's not a lot of competition for that. Conversely, in a place like SoHo, when a market really gets moving, yeah, then we may have to step to the sidelines, pause for a bit. But, thankfully, we have enough other markets where we have a unique position, that we have been able year in, year out, to do $300 to $500 million of acquisitions, um, without getting priced out. Um, it does irritate us, as she pointed out, though, when we curate a street and make other people rich. So, what you'll see on down at Henderson Avenue, for instance, is we're continuing to add buildings because we'd rather hold on to that for ourselves.
Speaker #4: So let me talk about upon stabilization. As to upon stabilization, what is between recurring lease up, maintaining the asset, the capex to maintain the asset, and the improvements that we need as part of that.
Great understand. Thank you.
Thank you. Our next question. Is a follow-up from Paulina Roha Schmidt, with Green Street. Your line is open.
Speaker #4: So we'll start with what we see in our portfolio on power centers. So on the power we own, which is primarily in our investment management, that's going to we target in the 15% range of NOI for that full capex load.
Thank you. A short follow-up—you talked about the lighter topics as a structural advantage of street retail. Can you help quantify that, whether perhaps...
Speaker #4: Grocer's going to be lower by a couple hundred basis points. So call that between 10 to 12 percent. And then street, street, we are in the 7 to 10 percent range on street capex.
Capex run rate as a percentage of knee or or however you find it more most intuitive to find it.
Speaker #4: So that's, again, where we like about the street. It's more higher growth, lower capex, which gets us to the higher net effective rental growth.
Speaker #4: And the other thing, the part of the reason the street the dollars may be higher, but your rents are higher, which make that percentage down, which is important to keep in mind.
Speaker #4: So does that answer your question?
Speaker #8: Perfectly. Yes. Thank you so much.
Speaker #1: Thank you. I'm showing up for the questions at this time. I'd like to turn the call back over to Ken Bernstein for closing remarks.
So Paul, and I, what I would say right now we're an extraordinary period of of lease up. If you were just to look at our capex right now, um it's going to run at a at a higher percentage just because we're, you know, we're bringing so many so many tenants in. So let me talk about upon stabilization as to upon stabilization what is between, you know, recurring lease up maintaining the asset, the capex to maintain the asset and, and the improvements that we need as, as part of that. So we'll start with, uh, what we see in our portfolio on power centers. So, on power, on the power we own, which is primarily in our investment management that's going to, you know, we Target in the 15% range of noi for that full capex load.
Speaker #2: Thank you all for taking the time, Anthony Pallone. We miss you, but we look forward to speaking to you all again soon.
Gross margin is going to be lower by a couple hundred basis points—so call that, you know, between 10% to 12%.
And then, for street, we are in the 7% to 10% range on street capex.
So that's again, where we like about the street, it's more higher higher growth, lever CAP Lower capex, which gets us to the higher net effect of rental growth. Um, and the other thing, the part of the reason, the street, the dollars may be higher but your rents are higher, which make that percentage down, which is important to keep in mind.
So, does that answer your question?
Perfectly. Yes.
Thank you so much.
Thank you. I have no further questions at this time. I'd like to turn the call back over to Ken Bernstein for closing remarks.
Thank you all for taking the time. Anthony Pallone, we miss you, but we look forward to speaking to you all again soon.
Thank you for your participation. You may now disconnect. Everyone, have a great day.
