Acadia Realty Trust

Thank you for standing by and welcome to Acadia Realty Trust first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Jose Vilchez. Please go ahead.

Good morning, and thank you for joining us for the first quarter 2024 Acadia Realty Trust Earnings Conference Call. My name is Jose Villegas, and I'm an analyst in our Capital Markets Department. 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 forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent form 10-K and other periodic volumes of the SEC, Forward-looking statements speak only as of the date of this call, April 30th, 2024, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operation and at operating income. Policia Acadia's earnings press release posted on its website for reconciliation for these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller. to give everyone the opportunity to participate. You may ask further questions by answering yourself in 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.

Great job, Jose. Thank you. Welcome, everyone. I'm here with John and Stuart and AJ Levine, and I'll give a few comments, then hand the call over to AJ. Then John will discuss our earnings guidance and our balance sheet metrics, and after that, our team's here to take questions. As you can see in our earnings release, our first quarter performance was strong and continues a multi-year trend of peer leading, top line growth that is reflective of both the cyclical as well as the secular tailwinds that our portfolio is experiencing. I'll let AJ and John discuss the building blocks of our NOI growth going forward and the moving pieces of our earnings in detail, but in short, The strong rebound and continued acceleration of the street retail component of our portfolio continues to drive this performance. As AJ will discuss, the combination of strong contractual growth and favorable recurring mark-to-market opportunities is positioning us for continued strong internal growth going forward. And as John will discuss, the stability of our balance sheet further enhanced with our recent extension and expansion of our bank credit facility, positions us with limited maturities and limited floating rate exposure. All of this supports our goal of creating superior top line growth at the property level and then having that growth translate into bottom lines earnings growth. The positive trends we're seeing in both Supply-demand dynamics and retailer performance means that we are past this being just a cyclical COVID recovery story. Even once we get our portfolio to full economic occupancy, our internal growth still looks strong. And that's because our street retail component should provide long-term growth of a couple hundred basis points higher than our suburban assets. Our goal here is to continue to craft a portfolio driven by street retail that has the highest likelihood of producing superior annual net effective growth in excess of wherever the new normal lands for both inflation and GDP growth. So this brings us to external growth. While the bid-ask spread for transactions is still a bit wide, and the bond market volatility is elongating that reconciliation, the spread is narrowing, and we're beginning to see actionable opportunities for external growth. This is true both as it relates to additions to our core portfolio, as well as opportunities for our investment management platform. First, in terms of balance sheet additions, Here our primary focus will be adding street retail to our core portfolio, both due to what we view as compelling risk-adjusted returns and because we believe our shareholders will be rewarded by our continuing to grow this differentiated strategy in the public markets, where we are the only REIT with this as a major focus. We have several hundred million dollars of deals consistent with this focus in our pipeline, Some are further along than others, and the stars still have to align. So we'll see how many actually come to fruition, but I am more encouraged today than I have been in a long time. In terms of funding, we should be able to do this accretively and on a leverage neutral basis through a variety of different sources, including capital recycling from portions of our core portfolio that might not be as high growth or as mission critical. Along these lines, we have subsequent to quarter end finalized an agreement for the sale and recapitalization of one of our high quality but lower growth suburban assets currently in our core portfolio. Assuming it closes as anticipated this quarter, we will retain a 5% ownership stake plus customary fees for operating the asset with then additional promote potential upside on the eventual resale. The transaction is anticipated to set the table for future acquisition opportunities with this institution. And it will be modestly accretive at closing, but then create more growth as we redeploy the capital. Along with our focus of accretively growing our core portfolio, we're also seeing opportunities through our investment management platform where we can leverage our skills, leverage our deal flow, and match it with our institutional capital relationships. The benefits of this component are it's a profitable business. It enables us to punch above our weight. It makes us better investors. It also enables us to participate in special situations, whether it's transactions like Albertsons or Mervins or distressed debt, where being solely reliant on the public market may not be the right fit. We also have several deals in our pipeline in this category. After quarter end, we put one deal under contract and are in the process of completing our diligence. These deals will likely look similar in structure to our Fund 5 business. And similar to the capital recycling that we're doing in our core, we will fund this activity with the recycling of capital in this platform as well. Now keep in mind, Given our size, it doesn't take much volume to move the needle for us. Even a few acquisitions, whether on balance sheet or in our investment management platform, can have an important impact to earnings. So to conclude, it was another strong quarter for us on multiple fronts. And as we think about the three key drivers of our business, first, maintaining solid internal growth. AJ will walk you through our strong results and continued momentum. Second is maintaining a solid balance sheet, and John will walk through our progress here and the important recasting of our bank facility. And then finally, creating accretive external growth. I discussed that briefly, and I suspect I'll be spending more time discussing this on future calls as well. And so with that, I'd like to thank the team for their hard work. this last quarter and I'll turn the call over to AJ.

Great. Thanks, Ken. So once again, I'm happy to report that from where I sit and from what I'm hearing and seeing from our retailers, the positive trends, both secular and cyclical, that have fueled a strong recovery over the last 36 months continue unabated. That's true for our suburban assets, but even more so on the high growth, higher barrier to entry streets where we operate from Soho to Melrose Place, the Gold Coast to M Street and everywhere in between. We are still seeing more demand than the markets can accommodate. Our tenants are healthy and their sales are significantly above where they were in 2019. There continues to be a shift out of department stores and non-A malls and into open air street retail. And for the vast majority of our retailers, the physical store remains the primary driver of profitability for their businesses. And as time moves along, we're seeing leases getting signed well ahead of where we thought rents were just one quarter prior. Now, Ken mentioned the building blocks of NOI growth in our portfolio. Why will we continue to outperform and provide a higher rate of growth in our peer set? Well, it starts with our S&O pipeline. At the end of the quarter, our S&O pipeline sat at $7.7 million, which represents 5.5% of in-class ABR. That includes the $1.2 million we added in the first quarter, and we've already doubled that number in April, which puts us right on pace with last year. We see no signs of a deceleration and have an additional $6 million of ABR in advanced stages of negotiation. And of course, it's only April, and there are no meaningful expirations on the horizon. It is worth noting that the vast majority of that S&O pipeline originates from our street portfolio, which provides for higher contractual increases, typically 3% per annum, as opposed to the blended 1.5% typical of suburban assets. And of course, there are those FMV resets and outside marked market opportunities that are embedded in our street portfolio. So let's expand on that a bit and use Armitage Avenue in Chicago as a proxy for what's happening across our streets. So the average retail rent on our 12 buildings on Armitage is around $80 per square foot. We are receiving offers to backfill space upwards of $120 a foot. So over the next several quarters, we should have the ability to mark to market a large percentage of that portfolio at close to a 50% spread. In fact, since the end of the quarter, we signed a new lease at 823 West Armitage at a 50% spread. So why is that? Number one, scale. We control 12 buildings on the street. No other single landlord controls more on the four relevant blocks along Armitage than we do. And having scale not only gives us pricing power, but it allows us to curate the street and foster the best ecosystem of tenants to drive traffic and accelerate sales growth. Number two, barriers to entry. Four blocks, that's the entire market. The L train to the west and Halstead to the east continues to serve as a barrier that a certain category of retailer just won't cross. If you're looking for space along Armitage, we are your first and only call. Number three is performance. Armitage is just one example of a street that saw a lift in sales as a result of COVID. People were staying closer to home and shopping local. And even now, with people back to work, those tenants continue to post solid sales growth, and their performance remains well above pre-pandemic levels. And number four, of course, is basic supply demand. No vacancy on the street, a waiting list of tenants that consider Armitage to be a must-have location, and we are able to promote a highly competitive leasing environment where we can drive rents while we continue to curate the street. But this is not unique to Armitage. This is our street retail business, identifying the right markets and the right streets where we can scale meaningfully and do what we do best to drive growth. You can swap out Armitage for Greenwich Avenue, the Gold Coast, Knox Henderson in Dallas, or M Street, and it's largely the same dynamic. We have scale, we have barriers to entry, and we have performance. On Melrose, it's a similar recipe, but in the case of Melrose, you can add luxury to the list of ingredients. And we know that luxury expansion is one of the strongest catalysts for rent growth. We've continuously seen this play out over the last 36 months in Soho, on the Gold Coast in Chicago, on Madison Avenue, and even in Williamsburg. So it's no mystery that luxury tenants are capable of paying strong rents. But it is the ripple effect that luxury has on the overall market that makes the biggest impact. It's the clustering of advanced contemporary and aspirational brands and the competition for space around those luxury tenants that truly drives rent in a market. Clustering is one byproduct of that secular shift of luxury and advanced contemporary tenants pivoting away from walls and department stores and focusing primarily on our high growth streets. This is not a fad. This is the new reality for these dynamic tenants that are focusing their growth on where their customer wants to shop. Now I say this all with the caveat that despite our efforts, we will not get all of our under market space back all at once. But over the next three to five years, we should be able to make a meaningful dent in unlocking that embedded value within our portfolio. Some of that will occur through natural lease up and some will come from those fair market value resets that are relatively unique to street retail. And others, as our team has shown their ability to do, will be accelerated through our pry-loose strategy, where we are constantly looking for opportunities to pry loose leased space and accelerate a positive mark-to-market. Now, not all streets have begun their rebound. In San Francisco and on North Michigan Avenue, those markets are slower to recover, but fall squarely into the bucket of when and not if. In the meantime, we can afford to be patient, and we're using this time to figure out highest and best use for each of our projects. In San Francisco, for example, both of our projects are under serious consideration for the addition of significant residential to meet a city and state push for additional housing. Too early to go into detail, but we are spending this time exploring what would be needed to advance those initiatives. On North Michigan, The interest we're seeing is starting to feel like the early days of recovery on Fifth Avenue and Madison Avenue. Still a ways to go, but there are several retailers that are circling the market. And when they land, they should kickstart that recovery that we always knew was coming. And earlier this year, we were happy to see a luxury tenant like Paul Stewart relocate from the Gold Coast to 822 North Michigan Avenue, just one block south of our asset at 840 North Michigan. Turning to City Point, the wind is firmly at our backs and the pieces continue to fall into place. Scaffolding is down, the park is finished, is scheduled to open this month, and we can finally unlock those valuable spaces facing the park that we've been strategically holding back. Fogo de Chao had their grand opening last month and has already added a new vibrancy and is stretching the hours of operation along Prince Street. And Sephora, who will anchor the opposite end of Prince Street, is in possession of their space and is working to meet an anticipated opening in the summer. Including Sephora and FOGO, we will add nine tenants to CityPoint this year, representing over 40,000 square feet of GLA. With all the pieces continuing to fall into place, we will look back on 2024 as a transformative year for CityPoint and for downtown Brooklyn. So wrapping it all up, strong fundamentals, continued sales growth, healthy tenants, a favorable supply-demand dynamic, and the ability to leverage those factors into better curation and, of course, sustained rent growth on our streets. And with that, I will turn things over to John.

Thanks, AJ, and good morning. We are off to a strong start with our operating results and key metrics coming in ahead of our expectations. We have also made considerable progress on our balance sheet. In addition to improving our debt to EBITDA by over half a turn during the quarter, we also successfully extended the maturity of our $750 million unsecured facility by an additional four years, along with upsizing our borrowing capacity, all while maintaining our existing credit spreads. I will now provide some further color. Starting with our first quarter results, we reported FFO of 33 cents per share, coming in slightly ahead of our expectations with strong tenant credit, along with solid property operating fundamentals. And we are continuing to see encouraging trends within our portfolio. But as we just issued our guidance a few weeks ago, we felt it was a little too premature to make an upward revision at this point. But we remain on track to meet, if not hopefully exceed our expectations, which as a reminder was year-over-year FFO growth of 7.5% after stripping out promote income with this projected earnings growth being driven by an increase of 5 to 6 percent in our same-store NOI. In addition to year-over-year growth, I thought it would be helpful to walk through our sequential growth and how we see that quarterly trajectory contributing to our annual expectations. Sequentially, our first quarter FFO grew by approximately 7 percent, or an increase of about two cents a share after excluding promotes, and the three cents of termination income that we highlighted in our release. And precisely as we had anticipated, it was our core NOI, or more specifically, our differentiated street retail portfolio that drove this growth. But before diving into the numbers, I'm going to pause and do a quick overview of how we report and discuss our results, both those that are newer to the name as well as a refresher for those that know us well. All of these numbers can be easily traced back to our financial statements in supplemental, and we are always available to assist should anyone have any questions. our total NOI defined as our share of net operating income from our core and fund business was $43.4 million for the first quarter. And this sequentially increased by approximately 4% from the 41.8 million that we reported in the fourth quarter of 2023. And in terms of quarterly run rate, prior to factoring in any acquisitions or dispositions, we expect that this $43.4 million we reported this quarter will increase to approximately 45 million dollars by q4 of this year within the 43 million dollars of pro rata noi our share of fund noi was sequentially flat at approximately 7.5 million dollars thus it was our core portfolio that drove our growth sequentially increasing by about five percent or about two cents of incremental ffo to 36 million dollars And to drill down even further, it was the street retail portion of our core portfolio that drove this growth, sequentially increasing by about $2 million or the two cents of FFL. And just to be clear, I am referring to total pro-radical NOI growth, inclusive of redevelopments, not same store, which I'll discuss in a moment. And I want to reiterate a point that I made last call. We remain on track to grow our total core NOI inclusive of redevelopments by 4% in 2024. And the 4% projected growth is even with the 500 basis point drag from our redevelopment projects at North Michigan Avenue in Chicago and 5559th Street in San Francisco. As we had discussed last call, the long discussed impact from these redevelopment projects is now behind us. Our share of NOI from these three assets meaning 664 and 840 North Michigan Avenue in Chicago and 5559 Street in San Francisco, declined from approximately $9 million of NOI in 2023 to less than $2 million in 2024, which we believe demonstrates the resiliency and strength of our portfolio by achieving solid growth in spite of these significant headwinds. Now moving from total NOI to same-store NOI. As outlined in our release, we reported 5.7% same-store growth for the quarter. And again, while early, our model has us trending towards the upper end of our 5% to 6% initial guidance range. It's also worth highlighting that the first quarter of this year faced a headwind of about 100 basis points from the April 2023 bankruptcy of Bed Bath & Beyond. As we've previously discussed, this location in Brandywine, Delaware was profitably released to Dick's House of Sport with an anticipated rent commencement date in the fall of this year. As AJ discussed, we sequentially increased our signed not yet open pipeline by approximately 10% during the quarter to $7.7 million. As a reminder, this $7.7 million is just our core same store signed not yet open pipeline. Approximately $6 million of this amount is coming from street leases. In terms of timing, Approximately 30% of the side not yet open pipeline is expected to commence during the second quarter, with the remaining balance weighted towards September and October of this year. I want to provide a moment giving an update on our growth expectations from our street portfolio over the next several years. AJ gave a great overview of the retail demand and opportunities for mark to markets across our street markets. And it's worth mentioning that while I share AJ's optimism and I am seeing the same trends, our internal models do not, meaning we have built in more conservative estimates in the base case I'm about to discuss. Our base case is projecting growth of $20 million of incremental NOI, or 18 cents of FFO, from our street retail portfolio loan. And just for some further context, the starting point is year end 2023, through year-end 2027. And this is just same store, meaning it excludes the two North Michigan Avenue redevelopments, which is, as we just discussed, is only upside for us going forward should this iconic retail corridor rebound faster than our base case model is anticipating. And as we discussed previously, neither our 2024 guidance or base case multi-year projections factor in any near-term recovery. Getting back to the $20 million, this growth equates to about 10% annual growth, which means our same-store NRI growth should continue trending well above historical norms for the next several years. But keep in mind, we are not anticipating nor do we need 10% annual growth from our streets in perpetuity. While we still have a lot of embedded growth remaining, once we get past this profitable lease-up, our base case model is showing stabilized net effective rental growth of about 4% from our streets, which is double what we are projecting from our suburban portfolio. In terms of building blocks, the $20 million of incremental NOI is being driven by a combination of lease up, mark to markets on expiring leases, and 3% contractual growth. In terms of lease up, as outlined in our supplemental, our street is approximately 84% occupied on March 31st, and we anticipate achieving full occupancy which we define as 95% by late 2025, early 2026, which gives us an incremental $10 million of ABR. And we have made meaningful progress on our lease up goals with more than half or about $6 million of executed street leases included in our signed not yet open pipeline on March 31st. Secondly, mark the markets. We anticipate incremental NOI of about $4 million for marketing-to-market street rents on expiring leases over the next several years. And we are optimistic we have upside here if AJ and his team are successful in the Pry Loose strategy he discussed in his remarks. And lastly, we anticipate another $6 million coming from the 3% escalations that are built into our street leases. I recognize I just threw out a lot of numbers, but given our excitement at these trends we are seeing, We felt this level of granularity was important, so please reach out with any questions should any of these points need clarification. Now moving to our balance sheet. We have had a busy and productive few months on the capital markets front. In addition to extending our $750 million unsecured lending facility by an additional four years, we have also improved our debt to EBITDA by more than half a term, along with clear visibility of a pathway to get us back into the fives by year end. In terms of the extension of our unsecured facility, we are thrilled with the execution and the strong support that we received from our longstanding capital providers. Not only did we have the full support of our bank group to extend our facility at the current pricing, the facility was oversubscribed, enabling us to upsize our borrowing capacity. Now pivoting to interest rates, I wanted to spend a moment to talk about our interest rate exposure, or more importantly, the lack thereof, starting with our core. As outlined in our release, we have no significant debt maturities for the next several years. Secondly, and this is worth highlighting, is I believe we may be an outlier here amongst our peers, but through our use of interest rate swaps, we have locked in base interest rates on all of our floating rate debt, leaving us with virtually no exposure to interest rates until mid-2027, along with significant swap protection extending through 2030. And just to further highlight what I believe is differentiation, our hedging and risk management strategy is to manage interest rates independently from the maturities of our variable rate obligations, meaning we have interest rate swaps that are not coterminous with the maturities of our variable rate debt, the most significant being the $750 million of variable rate debt that we just extended. And just to be clear, we are not in the business of speculating on interest rates. Rather, our risk management strategy is to dollar cost average in our SWOT portfolio, which enables us to manage and mitigate the exact risk that has just played out. As it relates to our fund debt, given the buy, fix, sell nature of this business, we appropriately match fund our assets and liabilities and utilize shorter duration debt. Thus, our prior year earnings have already experienced the impact of the rapid rise in short-term rates. So if and when the Fed starts cutting rates, every 100 basis points is about a penny of upside to our FFO. So in summary, not only does our balance sheet have the necessary flexibility and liquidity to pursue the external opportunities we are seeing, but with limited maturities and being fully hedged against interest rate volatility, we are well positioned to ensure that the continued top line NOI growth from our portfolio will drop to our bottom line. And with that, we will now open up the call for questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you may press star 1 1 again. Please ask one question and one follow-up, then return to the queue. Please stand by while we compile the Q&A roster. Our first question. comes from the line of Jeffrey Spector of B of A Securities. Your question, please, Jeffrey.

Hi, good morning. It's Lizzie Dworkin on for Jeff. Congrats on the quarter. I was hoping to, I guess, get an update on what's new in terms of what you're seeing on transactional activity, especially now that you have some clarity on activity you're hoping to close on with a couple institutional partners. So I guess starting with one, what are the most key opportunities for capital cycling today? And then two, what are you coming closer to in terms of the acquisition side?

Sure. Let me take a crack at both of them. As I mentioned in our prepared remarks, Lizzy, what I said is the bid-ask spread is narrowing, meaning there are buyers and sellers showing up for a variety of open-air retail. And while the volatility of the bond market is elongating that process, we are seeing interest from both buyers and sellers for a variety of products. The most crowded, most focused trade is supermarket anchored. It was very defensive during COVID, necessity-based, and institutions are continuing to focus there. So I would say that's where you're seeing the most opportunity to sell assets and probably the most competition. And then in the other areas of open air retail on the suburban side, the more junior anchor focused or sometimes referred to as power center, buyers and sellers are both showing up and we're seeing deals, albeit sellers who are showing up now are probably motivated for some reason other than profit taking. Bids are still in the higher yield range. And so those sellers are probably showing up because they either are finite life funds, have capital expenditures necessary for that asset or elsewhere, or other redeployment opportunities. And if you can find those type of sellers who are motivated to get out, they can get out at a reasonable price, but we're also seeing buying opportunities. So that's on the suburban side, where we're seeing the best Most compelling risk-adjusted returns is in the street retail side. Now it's going to take a while, but as AJ pointed out, the retailer demand is very strong. So as we think about what kind of deals are we going to buy, part of it is what you're going in yield, what's your purchase price per square foot or otherwise. But the other side of it, because we are focused on value creation, is where might there be re-tenanting opportunities? And so while the bid and ask spread between buyer and seller is still a little wide, the enthusiasm from our retailers, which greatly assists us in underwriting assets, that enthusiasm from the retailers is as strong as I've seen in a while. Final point to this then of what is it taking to put these deals together is Where is the lending community? Now, base rates are problematic, and we are in a higher, longer world. But as it relates to proceeds available and spread, that market is healing as well, especially for companies like Acadia. So there are some borrowers who are finding it incredibly difficult to refinance. But as John outlined, we have great access to capital. So to summarize, we are seeing opportunities both as a buyer and a seller in the suburban side. The sellers that are showing up are motivated for a variety of factors. Bid-ask spread is still wide, but as long as we're being selective in what we're choosing, we do think that there will be good risk-adjusted returns. That being said, the area that we're most excited by, although we still have some work in front of us, is to add street retail to our core portfolio because of the embedded growth that we're seeing there and the fact that the risk-adjusted returns and the going-in yields are enabling us to acquire assets on an accretive basis. Final point on that, just to take a step back. If we are, in fact, in a higher for longer economy, If once the Fed settles through whatever it's going to do and inflation runs hotter, we want to make sure we own a portfolio that has a high likelihood of being able to drive top line and bottom line growth in excess of that higher, longer inflation rate and the street retail component for the reasons that AJ discussed is best situated for that. So we think acquiring those assets will provide our shareholders with compelling upside. I know I threw a lot at you, but hopefully that answered your question.

That's helpful. Thanks for the comments, Ken. And just as a separate follow-up question, going back to AJ's comments on one luxury tenant that relocated from Gold Coast to North Michigan Avenue, Is this a sign of, or maybe are you seeing other signs of luxury showing up in other street retail markets besides Melrose and the others that AJ commented on?

AJ, why don't you cover that? Yeah, I mean, certainly within our portfolio, we've seen luxury show up in markets like Williamsburg, where historically you might not have expected that. And even as we look to some of our growth markets, you've seen luxury show up. Nashville you've seen luxury show up in Austin so you know luxury expansion is very real it's not you know isolated to New York LA Chicago it's something that's happening everywhere and it's some of that secular trend of retailers in general and luxury specifically recognizing

that they want to control their relationship with their retailers and the best way is for them to control their store. So we are seeing that migration and open air retail, especially street retail, is the best channel for those kinds of retailers to step forward. I think you're going to see that trend continue.

Thanks for the time.

Thank you. Our next question. comes from the line of Todd Thomas of KeyBank Capital Markets. Your line is open, Todd.

Hi, thanks. Good morning. First question, I'm just curious, you know, with some of these new relationships that you're sort of entering into, I guess, first, are they new relationships or are some of these or any of these legacy fund investors And then is this, should we think about strategic sort of investments like this in lieu of a Fund 6 vehicle, or should we assume that Fund 6 fundraising is also either ongoing or will begin at some point in addition to these new relationships?

So we think that this format will serve our shareholders better than a one-size-fits-all Fund 6. Again, that could change, Todd, and the investors are similar. There's some overlap, but it's also new institutions. The rationale for this is that while we still believe that that side of our business, the investment fund management business, is an important component of our dual platform for the reasons I outlined before. We're more excited in this current environment where we don't think leverage is going to be as much of a tailwind for buyers as it was during the last couple decades. We think the lower leveraged public vehicle is where we're going to be able to drive more growth first and foremost. Fund five, which thankfully is teeing up to be very successful, but it took us twice as long to deploy that capital, and that elongated investment cycle isn't friendly to our LPs or our shareholders. And so being able to do things on a smaller, more strategic basis seems to make sense. Final point. The fund, fund five, let's say, or any of our funds, are a one-size-fits-all pooled investment, which are great, and having that discretionary capital is something that is very beneficial. However, that high-teens return that is required, especially in a higher interest rate environment, is going to be more difficult, and the one-size-fits-all nature of it A little more difficult going forward. My friends in the private equity side of that business are certainly feeling it. Now, to the extent that they can go do industrial development or single-family rental and all that, there's ways they can pivot. But we want to stay focused in open-air retail. That's our core competency. So what we are doing now is working with different institutions with different leverage desires and different return goals. Some may be more core plus, low teens versus high teens. Some may have other initiatives such as distressed debt and we can thus curate it better that way. You put it all together and it's very likely gonna look similar in terms of cash flows and revenues. So some of you might say it's a distinction without a difference, fine. But I do think this will enable us to be a little more flexible as we focus on our main mandate right now going forward, which is to drive our core portfolio growth both internal and then now as we're getting more confident externally as well.

Okay. Will additional investments with the investor that you're selling a 95% stake in a suburban asset to, you know, will they be, you know, similar going forward with, you know, Acadia having a 5% stake And then are there any additional core suburban assets that might be sold in a similar manner?

Yeah, so let me start with the second part of that, which is throughout our portfolio, we are constantly looking at which assets does it make sense to recycle out of, either because they are lower growth or not mission critical or just not consistent with our growth strategy. And so, yes, there are. We certainly do not need to rush to the exits. So you're not going to see us fire sailing anything. And if we don't do any more of those recycles, we can still grow this company just fine. But there are certainly that opportunity. Then whether it's with this institution or some of the others that Reggie Livingston and the team are working with, some of that will be very dependent, Todd, on the kind of opportunities we see going forward When you and I spoke a year ago, I thought the biggest opportunities would be distressed debt. Now, in fact, as it relates at least to retail, doesn't look like that's gonna be the window of opportunity. There's gonna be other situations. So we'll see, right investor, right assets, and we'll be able to match it that way. And we're feeling pretty good to very good about new institutional interest, because keep in mind, The private institutions, for the most part, have been sidelined out of retail for the last five plus years, and so they need partners like us to execute as they want to pivot out of some of the other asset classes and back into retail.

Okay, that's helpful. And if I could, real quick, one follow-up, one for John. Just, you know, the terminated disposition in the quarter that was three cents, are you still working toward an asset sale? And is there, you know, any additional color you can provide around the impact that asset sale may ultimately have on results in the near term, either, you know, accretion or dilution that's factored into guidance? And maybe talk about that a little bit as it results to... you know, the original guidance.

Yeah, I know, absolutely, Todd. So it's a vacant building at this point that was the terminated contract, and highest and best use for that is not a retail, you know, retail development. So it's really a, you know, sort of a non-ancillary parcel. The go-forward drag is, you know, going to be a nominal amount of interest and taxes in our numbers, and, you know, like Ken just mentioned, we're not going to buy or sell anything but looking for the right time to sell. So this is not a meaningful needle mover in terms of proceeds or otherwise. The amount of that payment we got was just, it was under contract for an extended period of time. So that was what the size was. And we had carrying and opportunity costs as we were holding that for a buyer that ultimately defaulted given where the rates ran and their development plan for the asset. Okay. All right. Thank you. Tom, maybe one last point there. Same store, this was not in our same store pool, either the $3 million or the asset either way. So it's not part of our same store pool. Just want to make sure that was clear as well.

It probably shows up back in our for sale one of these days. And again, it wasn't even that large an asset. It was a meaningful payment, so we did want to segregate it.

Thank you. Question? Our next question comes from the line of Linda Tsai of Jefferies Group. Your question, please, Linda.

Hi, yes. The $20 million of NOI 18 cents from FFO coming online from Street year-end 23 through 27, what does the cadence look like?

Yeah, so Linda, I'd say that if we look at the near term, that's pretty significant in that we have $6 million in our sign not yet open, so that's when we have the most clear visibility to, so about a third of that shows up and will commence during the second quarter and the balance of that in the fall of this year. So, you know, call that a big chunk of that is going to be 25. So it's going to be a very strong 25 as the balance of what we've already executed shows up. So that's the, you know, that's the lease up piece. And then, you know, AJ talked about demand. I think that'll be sprinkled in, but the sign not open is the biggest you know, biggest piece of the $10 million we have from that bucket. Mark-to-markets, I think those are going to come in, you know, sporadically. So, I think that's the $4 million that we spoke about. Those will come in cadence-wise, you know, I think relatively, you know, I don't want to say evenly, but relatively evenly. And then the 3% growth that is contractual, that will come in, you know, each year. So, I don't want to say we're going to be exactly 10% year over year. I think I'll be proven wrong on that. But I do see a relatively smooth trajectory of the 10% the next couple of years as we work through this.

Thanks. And then I'm just confirming if the Fed cuts rates every 100 bps, is that one set benefit on an annual basis? Yes. Great. Last question. The contracts you announced in your press release to sell core suburban asset and then the one you're under contract to buy, could you talk a little bit about the pricing?

We'll talk about that more next quarter when everything hopefully closes. But, well, since that was your third question and since I don't want to answer it, we'll leave it at that.

Thanks.

Sure. It was accretive, so I think we can say that.

Thank you. Our next question comes from the line of Craig Melman of Citi. Your line is open, Craig.

Hey, everyone. So, John, I know you want to be conservative at this point in the year, but I feel like you maybe shadow Ray's guidance here. So I wanted to kind of ask you some of the sensitivities around the The midpoint, I know AJ said he's seeing rents or feels better about rents today than he did even a quarter ago. The deals are slightly accretive that Ken doesn't want to give pricing on. And tenant credit is kind of trending in a positive way. So as we think about the $1.28 versus the range versus some of these moving pieces, what's kind of the... Maybe could you bracket maybe the plus or minus at this point in the year that you could see if all these kind of hit at least of what your view of timing could be?

Yeah, so I think certainly, and again, the decision to raise was literally just focused on weeks ago that we issued our original guidance. So I think that was the primary driver of it. But in terms of where are the sensitivities as to the midpoint of the range, So let's talk with tenant credit as I highlighted in my remarks. Tenant credit, we had a, you know, I think I mentioned on last court of call, we had three cents of, called three cents of FFO built in for tenant credit. We are trending better towards that. So I think we could beat on tenant credit. That's one sensitivity to the upside. That was a positive trend first quarter. Second piece, Craig, which is harder to do because it's sometimes, not sometimes, it is often outside of our control, is we have a big sign not yet open pipeline. And that is purely timing. If we miss by a month, either a bit of positive, that's going to accelerate NOI and income, or vice versa, if we miss by a few weeks. So I think the rent commencement on new leases is another one, just given the volume that's out there, and we have great estimates and a great team that spends day and night focused on that. But that is a variable that could slightly deviate from where we expect it. Other upside is just on the leasing front. So one of the benefits of the street – so if AJ signs a suburban lease today, an anchor, we'll be thrilled with that, but we're not going to see NOI until some point in 2025, just given the build-out process, versus on the street with 84% currently occupied – AJ can sign a lease and get that up and paying this year. So I think we've made conservative projections there. So I think AJ's ability to, and his team, to get leases signed and open, that's a chance for upside. And in terms of the goals for the year, AJ doesn't have to sign another lease to commence this year to achieve our goals. So we've built in appropriate reserves around leasing. We've met our we've met our goals there. So again, acquisitions here, we have no accident. I could keep going on. And some of the points acquisition upside. So pipeline are Monday morning meetings as busy as they've ever been, which is when we go through investments. We haven't closed on anything yet. So I'm certainly not going to rise on, on something we haven't done, but that's another opportunity where we haven't factored that in. Um, so I think I've thrown a bunch of things out of, of upside and there, but I would really focus the lack of a guidance rage on just the, the time that we last spoke to the market as to our expectation.

Okay. No, that's helpful. And I guess as we think about street, that seems like that could be kind of a pretty big swing factor here. Yeah, I guess two questions on that. Anything on fair market value adjustments that you guys see today that could positively impact that, you know, isn't in guidance but is looming out there? And then the second one, I guess, AJ has an easy rest of the year since he already hit his mark. But what's the pipeline look like above and beyond what was in plan at this point that maybe could hit and positively impact kind of 24?

Yeah, I'll jump in. I mean, look, a lot of the, we've talked about the prior strategy, right? And these opportunities for positive marked market that are peppered throughout the portfolio. those are all, for the most part, incremental to what we've put out there. I think Armitage Avenue is a great example of that, right? $80 foot-foot rents, average on the street, $120 a foot market. And that is a market where we are going to have the ability to pry loose a good amount of that space over the coming quarters and years. So I think that's the template, right? But those are, again, peppered throughout the portfolio. You can't have the amount of growth that we've seen over the last few years, and not have those opportunities in bed throughout. So that was the first question.

Yep. Anything in the pipe kind of above and beyond your kind of goal for the year that looks promising?

Yes. That's Ken saying it. Yes, there is. Yeah, I mean, we have... I think the takeaway from all of this, listening to John's answer, because we do not have any interest rate exposure. We do not have any maturities. We don't have any balance sheet concerns. The big plus and minus is just going to be rent commencement dates. And that obviously, when we have this much embedded growth, that can impact either to the positive or the negative. But retailer demand... and the rents we're getting and the spreads we are getting, whether it is through fair market value resets, and we have some of those, or fry loose and re-tenanting, whether it shows up in 24 or 25, we'll do our best to make sure it shows up sooner rather than later, but we're going to work even harder to make sure it shows up at maximum levels because long-term, that's what's going to create the value.

That's helpful. Can I sneak one more in? Yeah. Just how do you balance, Ken, I know you guys want to do all street retail, keep that 100% for yourself, but clearly you guys have a niche there and the potential partners know that. How do you kind of segment that and keep enough for yourself without offending partners?

Critical issue that I should have discussed in detail before. The distinction between being in a fund business where we are fiduciaries and we have to go get waivers, and we've successfully done that. The distinction between that and what we're doing now is there are decision makers on the other side of the table. Some of them who are saying they want to participate in street retail, and if we can unlock portfolios of larger size, they could be great additions. So that's fine. But the others are more focused in our suburban initiatives, which, frankly, I'd rather leverage our institutional relationships and keep in our investment management platform so the conflicts are less. We managed them successfully historically. We'll manage them successfully now. But if anything, it gives us clearer room to run for the initiatives we want to do on balance sheet in our infinite life vehicle because we do believe that that the lower leveraged infinite life vehicle that is the REIT is coming into a period where it will be a strategic advantage as opposed to during the tougher time periods where leverage and thus the private equity model was superior.

Great. Thanks.

Thank you. Our next question. comes from the line of Key, Ben Kim, of Truist. Your question, please, Key.

Thanks. Good morning. On Russian Walton, the lease occupancy rate declined to 59%. I'm just curious if that, you know, what's happening there.

AJ? Yeah, nothing we didn't anticipate. That's a very tight market, basically no supply there, and we're already under LOI to backfill that space. profitably at a higher rent than the previous tenant was taking. And, of course, the tightness of that market is why we're seeing, again, this spillover back onto North Michigan Avenue. We mentioned it with Paul Stewart. So, you know, in a market as tight as that, it's not always the worst thing in the world to be getting back space.

And West Shore Expressway was put into the redevelopment pipeline. I'm not sure if that had any kind of noticeable impact on your seems to know why, but if you can just provide some color on what the plans are for that asset.

Yeah, so Keevan, and I probably should have mentioned the name when I responded to, I believe it was Todd's question, but West Shore Expressway is that asset that was under contract, just to be clear. Okay. So that was the asset we were talking about.

And in terms of some of these assets on the streets where you're getting the fair market value resets, you know, at some point, the thesis for holding that asset becomes much more tied to the individual retailer that might be doing really well versus the real estate. You know, how do you think about that, Ken? Is that something that maybe rises up to maybe a disposition candidate or, you know, is there more, you know, the gift that keeps on giving later on in the future that you might want to hold on to?

Yeah, so, critical issue. the way we think about any given market that we own, any given corridor, whether it's Armitage Avenue, Melrose Place, Soho, supply demand and rent to sales. How are the tenants performing? So if we're in a market that the supply demand is imbalanced. And look, during the so-called retail Armageddon, we went through that in a lot of markets. And as Ajay has mentioned, now it's gone the other direction, and there's more tenants vying for space than there is space. But separate of supply and demand, we have to look at how are tenants performing. And there we will think about that specific tenant, and if retailers in general on a given corridor are doing well, but that tenant is not. then first thing AJ is going to try to do is replace that tenant. That's part of the prelude strategy. If we see broader reasons for concern in a given corridor or we're overexposed to a given tenant who has no interest in departing, then that could be a disposition candidate, and we have periodically done that overall. What we've been pleasantly surprised with so far is tenant performance in general, especially relative In relation to 2019 the tenant performance has been strong so we've not had many of those issues to date, but it is something we certainly would watch closely.

Thank you guys.

Thank you. Our next question. comes from the line of Michael Mueller of JP Morgan, please go ahead, Michael.

Yeah, hi. Ken, I think you mentioned early on that the $50 million disposition was going to be modestly accretive before redeploying the proceeds. I'm just curious how that math works, because it typically kind of usually cuts the other way when I think of dispositions.

Yeah, the joys of an inverted yield curve, Michael, meaning our borrowing costs can be in the fives and sixes, so there's not that immediate dilution.

Did I explain that right, John? Yeah, so plus the fees, Mike. So I think there's an addition to the fact that we do have some pockets there, but also the fees that we'll learn from that as well, offset.

Got it. Okay. And then maybe one follow-up question on the street occupancy and the target of going from 84 to 95% by early, late 20, I think it was late 25, early 26. Can you give us a sense, like a ballpark average rent number, rent per square foot number that we should be thinking of?

Yeah, Mike, I would love to be able to do that, to be honest. But given different markets, there's upper floors, lower floors, it would be difficult to do. That's why we threw in the number, right? So I think I would love to just say, you know, $92 a foot. I think it's the $4 million is the best way to get there. given the range, upper floor, lower floor, and across different markets? AJ, I don't know, or Ken, if you have a different view.

Yeah, I'm going to give a quick rant on and reminder that of all of our different metrics, occupancy is the unfortunately least relevant and least correlative to our peers because of the disparity in our assets. But if we assume John's right, and I do, on the $4 million, and we assume AJ is right in the next couple of years, we get to that number, we probably succeed that way. If one of our suburban boxes goes away, then again, it could be a $2 rent. It could have no economic impact. It could change those metrics. So please don't rely too much on that. Rely on our economic growth. And that, I think, will be the best way to do it, and we feel very good about that economic growth. I feel pretty good about the occupancy as well because, AJ, I don't know why you would hold back on any leasing, but it's not going to work from a square footage basis. We're trying. If we can come up with that economic metric, we certainly will share it.

Okay. Thank you.

Thank you. Our next question comes from the line of Floris Van Ditchcom. of CompassPoint. Please go ahead, Floris.

Thanks.

Good afternoon, guys. Question, maybe if you can give us a little bit more color on what is in your same store pool and how rent spreads can be misleading. I'm particularly referring to the 5.2% average cash rent spreads, but you only did 22 leases, yet obviously your same store was significantly higher. What percentage of your leasing activity is in your same store pool? And maybe talk about some of the non-same store pool, or what do you pull out? For example, splitting spaces or non-comparable, I would imagine CityPoint is probably in your non-comparable pool. Maybe if you can give us a little bit more detail on that.

John, just to set the table, touch on the fact that not all spreads are created equal in terms of duration. Touch on comparable, non-comparable.

Yeah, so let's first start with the exact assets that are not in there. First, it's our core only, so it's just our core portfolio that we print spreads for. Secondly, in terms of the assets that are not in there within our core, if you look on our redevelopment page in the supplemental, we list out the big ones being San Francisco, North Michigan Avenue, those are stripped out. So I think those are the individual assets that are not within our same store. And then in terms of comparable, not comparable, and I'm going to let AJ talk about that piece of it in terms of how we think about carving up space and why that's not going to go in there, which is a good portion of our street lease is are not going to show up because we are accommodating the tenants where we are buying in locations where we have critical mass and we could accommodate to a tenant's need, cutting up space. So that's a good portion of the street that I'm going to let AJ expand on that piece of it. But in terms of the spreads, you threw out the percentage for the quarter. Keep in mind what's in our sign not yet open. Those were the spreads that we signed last quarter that were in the 40%, 50% range. Those are in our sign not yet open that haven't commenced yet, that haven't contributed to our same-store growth yet. So I think it's one that was a timing delay between signing and occupancy, but also a mix that a good portion of the leases that we're signing are not part of that. So that's the one, and I'm going to let AJ hit the piece on how we think about cutting up cutting up space, but getting back to Ken's point on not all spreads are created equal, is keep in mind that on the street, we get a shot to mark to market at least every 10 years, if not five years, depending on the lease duration. So we're marking to market much faster. So internally, we think about the CAGR on the lease, from what is the CAGR we get from the time we sign it to the time we get another crack at resetting it. and the CAGR coming from a street as compared to a suburban, even before you factor in the cost, that effectively is double as part of the growth there. So that's one, just not all lease spaces is created equal, given that a suburban lease, you might not get that back for 30 years versus we've gotten within the street 3% growth and the marked market after 5 or 10 years. So, AJ, why don't you talk a bit about just in terms of the comparable leases that a lot of them aren't going to be there based on what the way that we cut up and carve the space?

Yeah, look, at the end of the day, it's all about maximizing value and accommodating what your tenants are looking for. Sometimes that means combining spaces, sometimes that means demising spaces. I think we're fortunate just because of the scale that we have in these markets that we can accommodate what these tenants are looking for. I mean, you think about Saint Laurent on the Gold Coast, for instance, that was two spaces that we combined, right, because Saint Laurent had the need to expand, right? They were looking for a larger space. So not necessarily a conforming lease, but certainly an important and an impactful lease nonetheless. The number you should be focusing on is total leasing volume, right? And not necessarily the number of conforming leases that we have. And I think it's also important to point out, and the folks at Green Street were kind enough to remind us, that when we are carving up space or combining space, the money that we're spending to do that is much smaller as a percentage of ABR than when we're doing it in our suburbs. So really, again, it comes down to maximizing value, and it comes down to accommodating what the tenant is looking for, and sometimes it doesn't fit into the existing space.

Thanks, Noah. It's helpful, and I think that it can be misleading sometimes for people to focus too much on the spreads. Ultimately, it's about the NOI growth. Maybe if you could... If I could get your comment, Ken, maybe if you had money that you wanted to deploy today, which street retail markets you find right now are the most compelling? Is it New York? Is it D.C.? Is it Chicago? Where do you see the biggest opportunities? I know you have to be somewhat cagey here because you're presumably looking at all of them. But is there much of a difference in the returns available as you look at those markets?

The way to think about it, and I am going to be KEG for us, I'm not going to mention specific markets. There's one or two markets, Chicago for instance, where we see a nice rebound, but we have plenty of exposure there. I'd be reluctant to see us add there, but that's really specific to Acadia, not to where we see necessarily the opportunities. Otherwise, we think about markets in a few different categories. One is kind of early stage pathway of growth. Henderson Avenue in Dallas is an example of that, where we haven't yet added value. We haven't yet brought the retailers. AJ mentioned the ones that we have on Armitage Avenue. or the ones that you'd see on Green Street in Soho. So early pathway to growth, and there are a variety of markets, as long as they are ripe for the kind of retailers we do business with. Then there's those that present opportunity for significant mark to market, but are well established. And M Street in Georgetown is a prime example. It went through a, Retailer cleansing process if you will during kovat and we're seeing significant rental growth already an established market for probably less mature And then the final are the more mature ones Greenwich Avenue in Connecticut got a kovat left We're enjoying strong tenant demand but probably doesn't seem to have that kind of growth and then your pricing should adjust for a all of those different factors established market generally gets lower cap rates but if it has lower growth then we might tap the brakes a bit more on that and then overall what we're trying to provide is a nice blend for our shareholders some early stage some moderate some more mature so that we can have a stable pipeline of growth final points around that is where luxury shows up right now there's a lot of room to draft and so We're certainly keeping in close contact with our retailers to understand where the luxury retailers may want to show up.

Thanks, Ken.

Sure. Thank you. Our next question comes from the line of Paulina Roha Schmidt of Green Street. Your question, please, Paulina.

Good morning. Can you please add more color around the in-place occupancy, which was north of 100 basis points in street retail and suburban assets?

And Polly, what's your question on is the movement in occupancy sequentially from Q4 to Q1? Is that the question?

Yes. But based on what I'm seeing, it wasn't just one category, but a few categories. and a little more than I was expecting due to seasonality.

Yeah, so it was, and we tried to articulate it in our release, but the biggest driver of that was the 70 basis points from a, we identified it was actually a liquor store at one of our suburban assets that moved out, that was 70 basis points. Another 15 basis points was the space that we got back on, on Russian Walton in Chicago. And beyond that, nothing of significance. And again, going back to Ken's remarks and really following up on my remarks is that notwithstanding this occupancy, I'll call it a dip. If you look at the NOI growth, we actually increased because we're replacing, you know, that we're putting in higher, higher dollar rents, which doesn't show up those percentages. So I think, I know it's a metric we need to think about and focus on. But for us, it's really the rent behind those occupancies that's much more impactful than that $10 liquor store that moved out that I believe AJ has already backed all that. Yeah, we've signed a lease for that space right now.

Okay. And we have talked about acquisitions. I'm curious, what is the IRR hurdle that you have for acquisitions?

Okay. So the IRRs, and I won't get into that specific deal. Once they close in the next quarter, we'll talk about. But in general, the IRRs will vary depending on the risk and the cash flows from, call it core plus, which would be on a levered basis, low teens through to high teens for a heavier lift, either redevelopments or more opportunistic and things like that. Keeping in mind that right now, unlevered returns might be the better metric. Investors still talk about it on a levered basis, and who knows where cap rate compression would be. So the pricing I'm thinking about is assuming limited or no cap rate compression.

Okay, but what about street retail? I'm looking at it more from the perspective of what is the minimum return that you expect more so than the actual pricing that you're getting.

So it's still, and that's a very legitimate question, and I'm, again, going to be a little bit cagey because it depends on a variety of factors, but the way to think about it is, that it seems as though the lowest cap rates are for high-quality supermarket anchor. That high-quality supermarket anchor is going to, in general, throw off about 2% growth and seems to be trading in, I'm hearing some below 6 going in yield, some above, but in that range. And that seems to be the lowest cap rate trades that we're seeing. Street retail, as we've been talking about, should be, seems to be throwing off at least twice that level of growth. So if it was 200 basis points for that supermarket anchored, it could be 400 basis points on a stabilized basis for the street retail. So you're getting similar going in yield on a stabilized asset, similar going in yields with twice the growth for street retail. That feels pretty compelling to us. Now add to it that we're talking about value add recapitalizations, a variety of other transactions that may or may not conform to simple going in yields plus growth, but that twice the growth, but the same price feels pretty darn compelling should produce higher IRRs, whether they are low teens or high teens, the devils in the details. And, and I, and I won't get into that yet today as we start getting deals done. will give you much better visibility around that.

Okay. And then if I can, I'm guessing I'm the last one. What's your opinion about digitally native retailers? This was a growing category a few years ago, and now some of them are showing weakness. We have the likes of Bonobos, Outdoor Voices. So what do you think?

Yeah, so, and let's make a distinction between, and yes, you are the last call, so I'm going to explain this. If people want to hang up, feel free to do that. But make a distinction between DTC, direct-to-consumer, and digitally native, because for a while we were blending those two terms. DTC is alive and well. Direct-to-consumer is what luxury retailers are doing. It's what athleisure retailers are doing. They want to control their space. and have a direct connection in an omnichannel world, whether it is online or through the stores, whether it is using social media or their flagship locations to drive that relationship. DTC is alive and well. Digitally native was a transition that a bunch of retailers during the retail Armageddon started online and wanted to transition to stores because they needed the store. It was the only pathway to profitability. Some have made it to the other side successfully and will continue to thrive in an omnichannel world. And then others you've mentioned may not. And that's fine because some of them have been very exciting. They're great for streets and they'll do just fine. Others, as AJ has mentioned, are part of our Pry-Loose strategy. We have two Bonobos or maybe three. And all of them are well below market. So if they don't make it, we'll make money. But the final point is, when I talk to my private equity and venture friends, if they're considering backing a digitally native, the only way they're going to do it is if they have a real estate strategy, because that is the pathway to profitability. So there'll be shakeout. It will not have any material impact to our earnings other than if we can pry loose and it is the natural evolution of retailing.

Well, thank you so much for the caller.

Sure. Thank you. I would now like to turn the conference back to Ken Godfrey for closing remarks. Sir?

The perfect combination of John and Ken. Thank you all for taking the time. We look forward to speaking to you soon.

this concludes today's conference call thank you for participating you may now disconnect