This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
Operator
Welcome to Regency Center's Corporation Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on a telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Kristi McElroy. Thank you and over to you.
Kristi McElroy
Host/Operator
Good morning and welcome to Regency Center's Third Quarter 2024 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer, Mike Moss, Chief Financial Officer, Alan Ross, East Region President and Chief Operating Officer, and Nick Wibbenmeyer, West Region President and Chief Investment Officer. As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings, guidance, and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. It's possible that actual results may differ materially from those suggested by these forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these are not necessarily true. These are just some of the The following data and statements may be included in our presentation today and are described in more detail in our filings at the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Invest Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also apply to these presentation materials. Finally, as a reminder, given the number of participants we have on the call today, we kindly and respectfully ask that you limit your questions to one and then rejoin the queue if you have any additional follow-up questions. This will allow everyone who would like to ask a question an opportunity to do so. Lisa?
Lisa Palmer
President and Chief Executive Officer
Thank you, Kristi. Good morning, everyone. We are proud to report another really great quarter of results driven by the hard work of our team and continued robust operating fundamentals, including sustained strength and tenant demand. This is evident in our strong rent growth, our sizeable leasing pipeline, our same property leased occupancy rate, which we've now pushed to the next level. We've also continued to be very active on the investment side, especially through our development platform. Nick will go into more detail, but we've had another strong year of development and redevelopment starts, and we've already achieved our annual target of $200 to $250 million of project starts for the second consecutive year. This success in sourcing new opportunities is a product of the team's expertise, relationships, and the strong tenant demand we are experiencing across our portfolio, and it is supported by our cost of capital and strength of sheet. As our grocery partners and other tenants look to further expand their footprints, high quality space and top trade areas is hard to come by, creating an opportunity for us to leverage our platform. And as we further grow our ground up development pipeline, it will increasingly be a significant and unequaled differentiator for regency across the peer group, amplifying total NOI growth beyond the impacts of our same property portfolio. In addition to our development pipeline, in 2024 we've deployed nearly $300 million of capital into accretive transactions, including shopping center acquisitions and the repurchase of our own shares. Overall, we had an exceptional quarter, driving both strong organic growth within our current portfolio and creating meaningful value through our investments for the future. Yes, the operating fundamentals are robust in our sector today, but more importantly, our results reflect the talent of our team and quality of our portfolio, positioning regency to thrive in the current environment as well as through economic cycles. Our assets are intentionally located in strong suburban trade areas benefiting from limited new supply. Our grocery anchored neighborhood and community centers represent what we believe is the optimal retail format to serve consumers looking for necessity, service, convenience, and value. And we believe the high quality of our with careful attention to merchandising mix, placemaking, and connecting with our communities provides our centers with superior competitive positioning in the marketplace. In summary, I am so grateful for and proud of the efforts of our team in driving our strong performance and delivering exceptional results quarter after quarter. I really look forward to what we can achieve heading into 2025. Allen?
Alan Ross
East Region President and Chief Operating Officer
Thank you, Lisa, and good morning, everyone. We had a tremendous quarter of operating and leasing results evidenced in our strong base rent and same property NOI growth. This was largely driven by robust leasing activity, accelerated rank commencement timing, higher shop tenant retention, lower credit loss, and favorable impact to expense recoveries due to higher occupancy. With regard to our occupancy, we have seen the growth of our occupancy rate in 2018 within our same property portfolio up another 20 basis points. We achieved yet another new milestone in our shop occupancy rate ending the quarter at a record high of 93.7%. Our ability to move the occupancy needle higher is reflective of continued robust demand from both anchor and shop tenants in a wide range of categories, including grocers, restaurants, health and wellness, off-price, and personal services. Our same property commenced rate was up 40 basis points this quarter as we saw great progress accelerating rent commencement dates for the signed leases in our SNO pipeline with earlier move-ins a credit to the hard work and collaboration between the tenants and our local teams. But even as we've gotten many tenants open and rent commencing, we've further replenished our SNO pipeline through our continued leasing success. It remains substantial today at 340 basis points and nearly $50 million of incremental base rent representing a significant runway to commence occupancy and a tailwind to NOI growth looking ahead. We achieved strong blended cash rent spreads of more than 9% in the third quarter and gap rent spreads exceeding 20%, further demonstrating our ability not only to drive high rent increases when we are marking our leases to market, but also to embed meaningful contractual rent steps. Our retention rate remains above our historical average at over 85% in the quarter, while we also generated above average renewal rent spreads of 9%. These positive renewal trends are reflective of the quality of our and the strong performance that our tenants are experiencing. Due to the great success we've had increasing occupancy, achieving strong rent spreads, embedding annual rent steps and retaining tenants, our same property NOI growth excluding term fees and COVID period reserve collections was ahead of our expectations for the quarter at 4.9%, with the majority of that growth coming from base rent contribution of 2.7%. We also had positive contribution from lower bed debt which is indicative of the strong health and credit position of our tenant base. On the expense side, our team has had success in managing our operating expenses and we've also seen an improvement in our expense recovery rate due primarily to higher shop occupancy and reflective of our ability to maximize the value of our lease contracts. In closing, I am proud of the great work from our team in delivering exceptional results and we are energized for the opportunities to further drive NOI growth in 2025. Nick?
Nick Wibbenmeyer
West Region President and Chief Investment Officer
Thank you, Alan. Good morning, everyone. We have another very active quarter of accrued investment activity. We're building our value creation pipeline, including the start of two ground up development projects, great execution on our in-process projects and additional acquisitions of high quality grocery and shopping centers. We've started more than $220 million of new development and redevelopment projects at blended yields exceeding 10%. For the second consecutive year, we anticipate starting more than $250 million of projects with roughly half of those costs associated with ground up developments in 2024. In the third quarter alone, we started nine projects totaling over $100 million, including two new ground up developments. One of those we discussed on last quarter's call, 160,000 square foot HEB anchored development in Houston called Jordan Ranch, which will serve as the retail component of a new thriving master plan community. The second is an 80,000 square foot Safeway anchored ground up project in the Bay Area called Oakley Shops that we started in August. This project will serve as the primary retail destination in attractive suburban trade area. We've also continued to make great progress executing on our in-process pipeline, which now totals over $600 million. Leasing activity on both development and redevelopment projects remains robust, with the projects currently more than 90% leased on average, with blended returns exceeding 90%. This quarter, we completed the Glenwood Green ground up development in Old Bridge, New Jersey. We've seen strong community reception to this target shop right anchored project, now over 95% leased, with tenants performing extremely well. In fact, we've immediately outperformed our underwriting expectations due to the strong leasing demand, enhancing the IRR and resulting in a 50 basis point increase to our estimated stabilized yield. As Lisa discussed earlier, our ground up development program is a key differentiator for regency across the peer group. We fully expect it to be an increasingly additive component to total NOI growth in coming years, as we bring many of these projects online. The strong momentum and success of our sector leading development program continues to be supported by the macro tailwinds within the shopping center industry, as well as the hard work of regencies experience development team, which I believe to be the best in the business. Our talent and relationships combined with our flexible balance sheet and free cash flow provide us with an unequaled advantage in the shopping center development business today, particularly with ground up opportunities. In addition to our $220 million of project starts and $200 million of share repurchases this year, we've also successfully completed the acquisition of more than $90 million of shopping centers, bringing our year to date investment activity to more than $500 million. In August, we acquired a neighborhood center in a strong suburban trade area in East Greenwich, Rhode Island, anchored by a market leading grocery. Subsequent to quarter in, we acquired an HEB anchored center located in a prime retail node in the Austin suburb of Brown Rock. Our team continues to be actively engaged, sourcing and underwriting additional deals that fit our investment criteria. In closing, our entire investment team is engaged and excited about our opportunity set. We look forward to not only seeing the growing benefits of our larger value creation pipeline, but also continued success sourcing new projects and accreted acquisitions. Mike?
Mike Moss
Chief Financial Officer
Thank you, Nick, and good morning, everyone. We reported strong third quarter results, outpacing our expectations primarily driven by fundamental operating performance. Results include neighborhood FFO of $1.7 per share and core operating earnings of $1.3 per share for the quarter. Same property NOI growth was 4.9%, excluding term fees and total period reserve collections, with the majority of that growth coming from base rents. As a result of this performance and continued higher expectations for the rest of the year, we're raising our current year guidance ranges. I'll refer you to the detail on slides five and six in our earnings presentation while highlighting some key changes. The primary driver to our elevated earnings outlook is an increase in our same property NOI growth by 100 basis points from the prior midpoint, now to 3.5%, excluding term fees and total period reserve collections. We now expect to maintain a higher average commence occupancy rate this year due to a combination of accelerated rent commencement as we deliver our S&O pipeline and higher shop retention rates, reducing downtime impacts. Credit loss is also coming in lower than we had originally planned given favorable uncollectible lease income rates or lower bad debt and positive outcomes. Notably, we now expect a credit loss range of 50 to 75 basis points this year, down from our previous range of 75 to 100 basis points. And lastly, following these higher levels of commence occupancy, same property NOI is also benefiting from higher net expense recoveries. We increased both our NAVRED FFO and core operating earnings ranges by $0.05 per share at the midpoint, primarily driven by the increase to our same property NOI growth outlook I just described. The new midpoint of our core operating earnings range represents nearly 5% -over-year growth. Looking ahead to next year, while we have not yet provided our full suite of earnings guidance, as we will do that in February with our Q4 results, today we want to NOI growth to be very similar to our recently increased expectation for this year, in the .5% area. And for NAVRED FFO, we expect 2025 growth of at least 5%. As for a couple of reminders, in 2025 we will absorb the full year impact from this year's debt refinancing activity, and we also know that this year's merger-related expenses of approximately $7 million will not repeat. Moving to our balance sheet, we completed a $325 million bond issuance in August at a .1% coupon, which was used to pay down the balance of our line of credit. Following this transaction, we remain within our target leverage range of 5 to 5.5 times -debit-da, and we expect to generate free cash flow of more than $160 million this year, fueling the growth of our development pipeline. We continue to be very proud of our balance sheet and liquidity position, providing regencies with a cost of capital advantage and the ability to create value when creative opportunities arise. With that,
Operator
Q&A Operator
we look forward to your questions.
Operator
Operator
Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We request you to limit yourself to one question. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question is from Jeffrey Spector with Bank of America. Please go ahead.
Andrew Rialon
Bank of America
Hi, this is Andrew Rialon for Jeff. Thanks for taking our question. Just on the balance sheet, you received the credit rating upgrade from Moody's this year. No significant refi needs until late 2025. Given you are now at the low end of your target leverage range, just wondering what your appetite is for levering up to fund growth and has the reversal in interest rates changed your financing plans at all?
Mike Moss
Chief Financial Officer
I will take that, Andrew. I appreciate the question. I would characterize our position within our ranges at the midpoint. I think we are very comfortable floating between that 5 and 5.5 times that view of our range. As we have demonstrated this year, we will lean into balance sheet capacity when we have it and when we see compelling opportunities. This year, in fact, we did that through the repurchase of our own stock. I think it is important to remind everyone and consider that as we look at external growth comparisons across the peer group. For us, that was an allocation of our capital on an accreted basis providing about a penny of earnings accretion this year and another penny looking out into the future. To the extent we see compelling opportunities going forward, we will continue to use our leverage free cash flow and balance sheet capacity. If we see something that is accreted to our internal rate of growth and consistent with our quality, we might even take that up to the upper end of our range. We are committed to operating within that 5 to 5.5 times area
Operator
Q&A Operator
and we will continue to do so going forward.
Operator
Operator
Thanks, Andrew.
Operator
Q&A Operator
Thank you. The next question is from Michael Goldsmith
Operator
Operator
with UBS. Please go ahead.
Michael Goldsmith
UBS
Good morning. Thanks a lot for taking my question. You took the same property and a live growth expectation for 24 to 3.5%. You are pointing to a similar number for 2025 and this represents an acceleration from what you experienced in the first half of this year. So, I guess, what has changed? Is it the strength of the leasing environment and the market that is kind of caught up and now you are starting to reap the benefit of that and accelerating the same property and a live? Or are there some other factors that come into play, I guess, to try to understand what has changed that makes you feel more comfortable about this higher level of growth and that it is
Operator
Q&A Operator
sustainable?
Mike Moss
Chief Financial Officer
I can start if the team would like and I will let Alan and Opine on the changes. Just from a numbers and sense perspective, Michael, nothing has really changed from our perspective. We have been pretty loud and confident over the past couple of quarters about our projections for future potential NLI growth and earnings growth following on. We knew coming into the year that we would have a bit of a trough in our average commence occupancy but we are also emboldened by the SNO pipeline that the team continued to build and replenish as we commence rent. One thing that has changed this year, especially in validated through the third quarter, is that we have accelerated rents coming out of that SNO pipeline into productivity that has had a tag along impact from a recovery percentage. And it is really that timing of that kind of launch of our growth profile that we originally thought would be a fourth quarter event going into 2025. We started that process earlier through the third quarter results. Really as a testament to the team's hard work, as a testament to the continued tailwinds we are seeing in the market.
Alan Ross
East Region President and Chief Operating Officer
Yeah, I am happy to jump in, Michael, too. I appreciate the question. As Mike said, we have been at it for a number of quarters now in terms of really focused on the rent commencement date acceleration and creativity is paying off and there are also great partnerships with our tenants. We are proactively whiteboxing spaces where appropriate. We are getting tenants to start plans before leases are signed in many cases, something that was not a norm many, many months ago. Ordering the right equipment in advance and negotiating favorable lease terms. And permitting and supply chain is normalizing now and allowing us to be more aggressive on defaults when tenants are not prosecuting their plans and permits. And collectively, we are starting to see it pay off in terms of acceleration of rent commencement dates.
Lisa Palmer
President and Chief Executive Officer
Let's make it a trifecta. If you don't mind, Michael, I think we began talking about the growth that we expected and how good we felt about 2025 two quarters ago. And as Alan and Mike both said, we are starting to see the fruits of all the hard work and the quality of our portfolio and the quality of the team come through a little bit sooner. And the good thing is the 2025 growth is still there. And I know you are really familiar with our business model as most people are on the we really do believe, again, the quality of our portfolio, the quality of our team, and the redevelopment platform that we have will enable us on a stable occupancy basis to deliver same property on a steady basis. And while we are increasing occupancy, it is going to be higher. And that is what we are seeing. And the team continues to set the bar higher and higher for what we are able to achieve. So we feel really good about our results and I am really proud of the team.
Operator
Q&A Operator
I appreciate all the perspectives. Good luck in the fourth quarter. Thanks, Michael.
Operator
Operator
Thank you. The next question is from Craig Mailman with OVCITY. Please go ahead.
Craig Mailman
OVCITY
Hey, good morning. Maybe on the capital deployment front, you know, you guys are getting the money out there on the redevelopment side and you put the $300 million out to acquisitions share repurchases this year. But as you look at the acquisition market, you feel like there is an opportunity for transactions one off to accelerate above that $90 million as we head into $25 million. Does it make sense from a funding perspective to kind of take the win on the share repurchase? Could that be a source of proceeds going forward to kind of reissue now that you are at or above kind of at least R&D?
Nick Wibbenmeyer
West Region President and Chief Investment Officer
This is Nick. Good morning. Appreciate the question. I will take the first part and then have Mike maybe weigh in on the second part. But as you have indicated, we have really been active across all fronts. And so as we have said in the past, we will continue to prioritize our free cash flow and our capacity to our development and redevelopment program. And as I indicated in our prepared remarks, we have every indication we will end this year north of $250 million in that program, similar to last year. And then as Mike alluded to earlier in the call, we have additional capacity to lean into when we find other opportunities that meet our criteria. And so as we look at one off acquisitions, as we talked about, if we find things that are consistent with our quality and our growth profile, we do have the capacity to lean in, especially when we identify ones that we can fund creatively. And so you can see throughout the year we have found those opportunities. And as we continue to identify those, whether it is in 24 or 25, the great news is we do have the ability and capacity to execute on this.
Mike Moss
Chief Financial Officer
Okay, Craig, let me follow up there. Thank you, Nick. From a capital sourcing perspective, we are going to be disciplined. We are very proud of our capital allocation track record. We have access to many forms of capital. We have been very cognizant around our understanding of the cost of capital when we deploy. And we will use equity when and if that makes sense. But we have the balance sheet capacity. We have access to equity. Let me also throw in the acquisition we closed just after quarter end was with our partnership with Oregon. That is another new form of capital or newly expanded form of capital that we have access to with a reconventment to that -year-old vehicle of another $150 million of equity from Oregon. We have multiple sources of capital. We will use it on a disciplined basis with a mindset of
Operator
Q&A Operator
growing earnings for share going forward.
Operator
Operator
Thanks,
Operator
Q&A Operator
Craig. Thank you.
Operator
Operator
The next question comes from Greg McGinnis with Scotiabank. Please go ahead.
Greg McGinnis
Scotiabank
Hi,
Operator
Q&A Operator
good morning.
Greg McGinnis
Scotiabank
Mike, it's obviously a fairly substantial same-star and a-wine increase this late in the year. Would you be able to maybe rank out in terms of contributing to that increase the items listed? So the higher commenced occupancy and associated recovery, retention rate, or on the bad debt side, and just trying to get an understanding as to which of those factors you think may be kind of long-term contributors in terms of how leasing and business is going or in terms of how you are handling tenants?
Mike Moss
Chief Financial Officer
Yeah. Hey, Greg, I appreciate it. You got the categories right. So higher retention rates, accelerated commencements out of that FNO pipeline, all leading to and translating to higher recoveries. I would say roughly 40% of the increases from credit loss improvement, and that would be both a combination of ULI or fact of expense down from our expectations back in August on the margin. And I'd say they're running, our run rate -to-date is 40 basis points. That's, as we've talked about in the past, that's below our historical averages. Our outlook, our outcomes on bankruptcies is part of that 40% component. The balance is roughly split evenly between accelerated commencements, higher retention, and higher recoveries as a result. So that's how I would compartmentalize the change.
Greg McGinnis
Scotiabank
From a new, slow perspective, it sounds like we're hearing about more retailers under risk or more store closures and especially more restaurant closures. As we're looking forward into 2025, for now at least, not looking for guidance, but is the expectation for a normalization on the bad debt side? Or is there anything in particular about the portfolio or what you're seeing from the consumer maybe making you a bit more bullish on it?
Mike Moss
Chief Financial Officer
Yeah, we're going to be short of offering a full suite of guidance at this point in time, but I do think it's fair to indicate that we would plan for a roughly historical average level of bad debt and credit loss next year. So recall that bad debt expense and bankruptcy outputs, that's basically a 75 to 100 basis point credit loss provision. So I would plan for that level next year. From a color perspective, Alan, is there anything you want to share? Yeah, I mean, Greg,
Alan Ross
East Region President and Chief Operating Officer
I would just say that we're always intensely managing the portfolio. And one comment I made last quarter is I identified some of those bankruptcy filings that you had noted. CONS, we had zero locations. Eastern Mountain Sports, Route 21, and Red Lobster, we had one with all three of them. And so was that an anomaly in Q2? I think as you look at the Q3 filings now, a similar thing has happened. Buca De Beppo is filed, Rotea is filed, Big Lots is filed, and we have one location with all three of those as well. And so I think that's just a testament to really the team staying committed to quality merchandising and really our qualification process. And we feel good about the strength of the sales, as Lisa mentioned, the strength of the portfolio and the markets that we're operating in right now, but we're certainly always keeping a watchful eye on it.
Kristi McElroy
Host/Operator
And just as a reminder, we are limiting to one question. We have a lot of people on the queue. Thanks, Greg.
Operator
Operator
Sorry. Thank you. The next question is from Todd Thomas with KeyBank Capital Markets. Please go ahead.
Todd Thomas
KeyBank Capital Markets
Hi, thanks. Good morning. I just wanted to ask about UBP and, you know, guidance increase this quarter was mostly attributable to the same store, and that's where the majority of the discussion has been. But two questions around that. Can you just remind us when that portfolio will enter the same store pool and how we should think about maybe that impacting 2025 growth? And then can you provide an update on sort of the opportunities for upside that you see within that portfolio as it stands today?
Mike Moss
Chief Financial Officer
Yeah. Hey, Todd. Welcome to the party, by the way. I will take the first and I'll let Alan maybe comment on activity within the portfolio. We will officially move those assets into same property effective with Q1 of next year. So we'll come out of the gates next year with UBP assets as part of our same store portfolio. My comments around growth next year would include those assets. So three and a half percent in the area, three and a half percent growth next year would include performance from UBP. Honestly, we don't see a material difference between the performance of those assets and regencies at this point in time. And that was all consistent with the outlook we had going
Alan Ross
East Region President and Chief Operating Officer
into the market at the beginning. Hey, Todd. This is Alan. I would just say, you know, we are thrilled with the expanded platform, more thrilled with the integration of some really great people. But things are going well. We signed over 200 leases year to date in the portfolio and we've got runway to continue to grow that percent lease. And that is the one thing we've been saying since the acquisition is it's really a hyper focus on lease, lease, lease from a redevelopment perspective, as you asked. We do think there's going to be some opportunity there, but it's in sort of the smaller mindset here on the front end of some pad creations in the parking lots, a couple of renovations and mid to long term we'll evaluate some bigger redevelopments. But, you know, I would use our Danbury Square as a good example at the time of the merger, it was 50% lease and through really great leasing by the team, we're at 96% now. And so that's sort of the mindset within the portfolio and that's where we're focused.
Lisa Palmer
President and Chief Executive Officer
And because you are new to the party, it has performed, as Alan said, as we've expected, if not, you know, slightly above our expectations, exactly what we thought. And at the time when we did announce the merger, we did comment that it was very consistent with our quality, there weren't a ton of redevelopment opportunities, and it was going to be a leasing exercise that perhaps, you know, we under root and anticipate it spending a little bit more capital because of the amount of leasing that we were going to do performing exactly as we expected. And so when we rolled in the same property percent lease, it's still not as well leased as what you have some opportunity there. And that is really what you'll see when we roll it in the same property.
Operator
Operator
Thanks, Todd.
Operator
Q&A Operator
Thank you. The next
Operator
Operator
question is from Juan Sanabria with BMO Capital Markets. Please go ahead.
Juan Sanabria
BMO Capital Markets
Hi, good morning. Just hoping you could talk a little bit about 24 performance, which is obviously better than you'd expected and your early thoughts on 25. Is the earlier than expected rent commencement, is that pulling forward growth that you otherwise would have thought would have come next year? And should we think of the three and a half as kind of the floor on growth next year? I recognize this is a little bit of a sensitive question, just but any color you can give on how we should be thinking about the puts and takes should be helpful. Thank you.
Mike Moss
Chief Financial Officer
Yeah, I appreciate the question, Juan, and you'll appreciate the response. But three and a half percent area is what we're indicating for next year. I think that's enough to share at this point in time. Listen, we're still working on the finer edges of our plan for next year, and we'll put out a full suite of guidance next quarter. And we'll give you as we customarily do a lot of transparency into the support for that. But no, to your first question, I don't feel like it's anticipating the launch point of growth to be late 24 and into 25. And I think we've just launched sooner. Importantly, as you think about our S&O pipeline, you know, it was $50 million last quarter, $50 million again this quarter, roughly. But that doesn't tell the story. We've replenished $14 million of ADR in that portfolio. So we've delivered $14 million a little sooner than we average. But we filled it right back up. And that's what's kind of raising our eye level or kind of the water level for us in 24 and
Operator
Q&A Operator
then compounding that into 25.
Operator
Operator
Thanks, Juan.
Operator
Operator
Thank
Operator
Q&A Operator
you.
Operator
Operator
The next question is from Dory Kestin with Wells Fargo. Please go ahead.
Dory Kestin
Wells Fargo
Thanks. Good morning. It looks like some of the legacy erstat office building sales are pushed into 25 in your disposition guide. Can you just remind us that there's any other non-core, -long-term assets from erstats that remain beyond those?
Mike Moss
Chief Financial Officer
I got, let me talk about the guidance. And Nick, if you'd like to color it up, please do so. Dory, it was just a bit of a change. And as you mentioned, we had three or four erstat-biddle kind of very small office buildings that we would like to move. They're non-core, non-strategic assets. I think in total we're talking 15 million or so of proceeds. We've moved that out of this year and more to come on our disposition guidance next year. We are going to withhold that until next quarter. I want to remind you of what we said at the time of the merger. There is nothing disproportionate about the quality of the erstat-biddle assets as we merged them into regency and they won't result in a disproportionate
Operator
Q&A Operator
kind of disposition program going forward.
Operator
Operator
Thanks, Dory.
Operator
Q&A Operator
Thank you. The next question is from Handel St. Josh with Mizuho Securities. Please go ahead. Maybe request you to unmute your
Operator
Operator
mic and go ahead with your question, please.
Handel St. Josh
Mizuho Securities
Yes, rookie mistake. So I appreciate the color on 25, the initial kind of guidepost. I guess my question is on the debt maturities here. You've got 300 mil or so of debt maturing next year with three handles on them. So I guess I'm curious, what's your plan? What's your thinking there? Perhaps timing it? Is that refinancing kind of embedded within that 5% FFO growth outlook for next year?
Mike Moss
Chief Financial Officer
Thanks. Yeah, the Nehruid FFO head nod would include the impacts from the debt changes both in 24 and in 25. So importantly, the largest impact actually has to do with what we financed this year, which as you know was all affected basically right at the midpoint of the year in June. So we need to capture a full year of that in 25. But we do have a very late 25 maturity that we have incorporated into that head nod. We're going to, you know, it's at a favorable rate as you mentioned. We're going to use that capital and that cost of capital as long as we can. We're going to be very tactical with our window selection as we work in the capital markets next year. And we will refinance that bond into the
Operator
Q&A Operator
public market at the right time.
Operator
Operator
Thanks, Indel.
Operator
Q&A Operator
Thank you. The next
Operator
Operator
question is from the line of Ronald Camden with Morgan Stanley. Please go ahead.
Matt
Representative for Ronald Camden with Morgan Stanley
Hi, this is Matt on Ferron. You guys mentioned that tenant demand was very strong this quarter, and you could see that in the same property shop percent lease number. How should we be thinking about that going forward over the next 12 to 24 months?
Alan Ross
East Region President and Chief Operating Officer
Hey,
Matt
Representative for Ronald Camden with Morgan Stanley
Matt. Thank you
Alan Ross
East Region President and Chief Operating Officer
for the question. This is Alan. Demand is strong. And, you know, I would say we've set a recent record high on shop leasing at 93.7%. But we're not pulling the troops off right now. They're staying focused. You know, we are seeing a lot of tenants still willing to engage not just on vacant spaces but on spaces that are occupied right now. And, you know, Sephora, J. Crew, Everbank, Mendocino Farms, they're all looking at spaces that are occupied, not just signing leases in 25, and I'm just naming a few, but also signing leases in 2026. So we would expect to continue pushing forward. I don't have my sights set on a particular number as part of that process, but we're focused on continuing to drive the shops, and we're focused on our anchor side as well, trying to get that back to our peak levels of, you know, roughly 98.5%. So we believe there's runway, and the team is committed.
Lisa Palmer
President and Chief Executive Officer
I'm disappointed that Alan didn't say it for like the third consecutive quarter. Records are meant to be broken, Lisa. Thank you. I want to say
Operator
Operator
before
Lisa Palmer
President and Chief Executive Officer
you say it, right? Thank you.
Sameer Khanar
Evercore ISI
Matt, thanks for the question. Thank you, guys.
Operator
Operator
Thank you. The next question is from Sameer Khanar with Evercore ISI. Please go ahead.
Sameer Khanar
Evercore ISI
Hey, Mike. On the .5% for next year, you know, I just want to understand, because I think the expectation is for the group and not only Regency but the group to accelerate growth next year. So look, maybe you're being conservative here, but I get the rent and the higher occupancy. Is there something that's sort of putting a lid on better growth next year? I just want to make sure that I'm not missing anything there. Thanks.
Mike Moss
Chief Financial Officer
I don't think you're missing anything, Sameer. And I actually, I mean, as Lisa's point that she was making earlier in the call, this is above trend growth. This is 3.5%, two consecutive years is on a stabilized basis. That would be considered exceptional. We are benefiting from occupancy and we're not seeing any change. I wanted to, you know, from Matt's question and yours, I would encourage people to take a look at page seven in the earnings deck that we put out. And that really frames for everyone the opportunities set to move percent commence. I will share with you that as we, as a supporting element of that .5% head nod in the next year, we are anticipating moving commence by in the area of 75 to 100 basis points north, which if you study the history of that page, you'll see moving commence occupancy by a hundred basis points is about as good as we can, about as fast as we can run. And the teams are pushing the pace on that every single day. And we're very proud of them. But that's a 75 to 100 basis points, a very healthy change in percent commence. So to answer your question directly, you know, what's the headwinds, frankly, it's just time. We've got to, we've got to lease the space, got to build out those spaces, got to deliver that space. And we're doing that as well as we possibly can
Operator
Q&A Operator
right now. I'm very proud of the team.
Operator
Operator
Thank
Operator
Q&A Operator
you.
Operator
Operator
The next question is from Floris Van Ditchcom with Compass Point. Please go ahead.
Floris Van Ditchcom
Compass Point
Hey, morning guys. Thanks for taking my question. You know, you have one of the highest percentages of ABR coming from shop space in the sector, I think at 58%. But as you look at this S&O pipeline and typically, which I think is around 57% shop, but shop rents are double the typical anchor rent. I mean, is there a scenario here over the next, you know, 18 to 24 months where you're going to have more than 60% of your ABR coming from shop space?
Lisa Palmer
President and Chief Executive Officer
I'm not going to get into necessary specifics. I hope that we continue to lease and bring and commence our anchors as well as shop space. But when you think about just our investment strategy, our portfolio quality for as long as I can remember, even at a time when there were some of our competitors that were talking about, you know, accumulating shop space and making them into anchors, we have not been afraid of shop space. We like shop space. Clearly, you just pointed to the fact that the rents are higher. We typically get better contractual rent steps. The growth is better. But at the same time, it's a balance. We also very much appreciate and acknowledge the steadiness, the sustainability of the cash flows that we get from our anchors. Remind you, it's been almost four or five years now, that because of the quality of the cash flow and the NOI stream at our shopping centers, we didn't need to cut our dividend during COVID. And I think that that's really, it's a really important factor and we balance it. But we lean in the shop space. We like shop space. We like the format of our existing portfolio. And we intend to continue to grow in that sector.
Operator
Q&A Operator
Thanks, Lisa.
Kristi McElroy
Host/Operator
Thank you, Flor.
Operator
Operator
Thank you. The next question comes from Linda Tai with Jeffreys. Please go ahead.
Linda Tai
Jeffreys
Hi, thank you. In terms of building and replenishing the S&O pipeline, you said you replenished with $14 million this year. Do you think that stays elevated or compresses next year?
Mike Moss
Chief Financial Officer
Well, it's a blessing and a curse, right? We want to continue to elevate. We want to continue to release more space and absorb and set new records, as Alan indicated, but we're also going to commence rent, right? Linda, I do think from a trajectory perspective, we will commence that S&O pipeline over time and into 2025. As we, because we're just running out of, we're hitting kind of top ends of percent lease. It's less face to face. Yeah, so you should expect us to compress that going forward as our outlook for material move-outs isn't significantly high either. So I do anticipate us compressing that going forward. It won't compress to historical averages in one year. We have, and we're on the same page internally here, we have more than one year of growth ahead of us in a disproportionate manner because of increases in rent payment occupancy.
Operator
Operator
Thank you.
Operator
Operator
Thank you.
Operator
Operator
Thanks, Linda.
Operator
Operator
The next question is from Alex Fagan with BAT. Please go ahead.
Alex Fagan
BAT
Hi, thank you for taking my question. One on the development pipeline, it looks like it's currently at $237 million. I'm curious how big that pipeline can get in the next year.
Nick Wibbenmeyer
West Region President and Chief Investment Officer
Yeah, appreciate the question, Alex. So as you alluded, you know, our total in-process development and redevelopment right now is over $600 million. So the team's just done an exceptional job of continuing to bring projects online, but also continuing to execute on, as I mentioned in prepared remarks, Glenwood Green, the project we just completed, a ground-up project, No Bridge New Jersey, the team did a phenomenal job of bringing that online. And so as we've indicated, we expect to start over $200 million a year. 2023, we started $250 million. This year, we expect to start another $250 million of projects. And we're very bullish on the future pipeline as we move into future years of continuing to start and ultimately deliver over $200 million of projects year in and year out. We love the platform and we're going to continue to lean into it.
Operator
Operator
Thank you. Thank you. Before we take the next question, a reminder to all participants that you may press star and 1 to ask a question. The next question is from Mike Muller with JP Morgan. Please go ahead.
Mike Muller
JP Morgan
Yeah, hi. How does what you're expecting today for new development stabilization timeframes compare to what you saw say between the GFC and COVID?
Nick Wibbenmeyer
West Region President and Chief Investment Officer
Yeah, it's a great question, Mike. I would tell you similar to what Alan's remarks were about what we're doing in terms of the operating portfolio and bringing tenants online aggressively. We're seeing the same thing on the development end. We are starting to see permitting supply chains, bidding processes, I would call it stabilized. And so I would expect our ground up developments from commencement of construction to coming online, be in the two to three year range depending on the size of the project, the scale of the project and the construction timeline. But again, I point to Old Bridge as a really good example of that. The team did a really nice job starting that and bringing it online not only on time, actually a little ahead of schedule and ahead of budget as it relates to NOI. And so we have confidence in our ability right now to start these projects and deliver
Operator
Q&A Operator
them on time and on budget.
Operator
Operator
Thank you, Mike. Thanks.
Operator
Operator
Thank you. The next question is from Keebin Kim with Truest Securities. Please go ahead.
Keebin Kim
Truest Securities
Thanks. That's a couple of follow ups here. What drove other property rental income higher and curious that's a more sustainable level?
Mike Moss
Chief Financial Officer
Hey, Keebin. Yeah, real quick. So as you can see in the disclosure, we differentiate between other lease income and other property income. And just for everyone's benefit, lease related other income items are in the lease line items of think storage signage, ATM, temporary tenants, etc. Other property income is the ancillary income streams that our shopping centers can can generate because of their quality and nature. But they're not contractual, right? So insurance settlements, fees, parking, etc. Items like that. There was a planned higher level of property income in the settlements area and insurance settlements area that did come into fruition in the third quarter. We importantly, it was part of our initial plan comparing to the year. So it is not a contributing factor to our outlook increase for the year. And it is one time in nature, but so is everything within that category. What we know when we zoom out is that we will consistently drive other income in our portfolio because of its location qualities.
Keebin Kim
Truest Securities
Okay, thanks. And just going back to that three and a half percent same store NOI commentary on 25, just trying to better understand some of the detracting elements. Are you at all watching any kind of larger leases that may not renew that might be causing some cushion into that same store NOI number?
Mike Moss
Chief Financial Officer
We're highly, I mean, we're doing a bottom up plan keyed in. We're very aware of the needle mover leases. 24 was a unique set of circumstances. So we, to the extent we had any big pluses or minuses from big anchor leases, those would be captured in that number. I do want to remind everyone credit lost in 24 in the 50 to 75 basis point area as a revised, on a revised basis. And in my comments earlier in the call, we will plan for more of a historical average here next year. So that is a touch of a headwind. And remember historical averages are 75 to 100 basis
Keebin Kim
Truest Securities
points. Okay. Thank you, Mike.
Mike Moss
Chief Financial Officer
Sure.
Operator
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Lisa Palmer for closing remarks.
Lisa Palmer
President and Chief Executive Officer
Thank you all for your time. Appreciate your interest in Regency and we will see hopefully many of you in, I think, just a few weeks. Thank you.
Operator
Operator
Thank you. This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.
Disclaimer