Curbline Properties Corp.

Hello and welcome to the CurbLine Properties Corp fourth quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Stephanie Rausta-Perez, Vice President of Capital Markets. You may begin.

Thank you. Good morning and welcome to CurbLine Properties' fourth quarter 2024 earnings conference call. Joining me today are Chief Executive Officer David Lukes and Chief Financial Officer Connor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at CurbLine.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings of the SEC, including our registration statement on Form 10 and our quarterly report on Form 10Q. In addition, we will be discussing non-GAAP financial measures on today's call. including FFO, operating FFO, and same property net operating income. Descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and welcome to CurbLine Properties' fourth quarter 2024 conference call, our first as a standalone public company. I'd like to start by thanking all of my colleagues at both CurbLine and SiteCenters for their tremendous efforts to get us here today. Their work allowed us to unlock a differentiated growth company capable of generating double-digit earnings and cash flow growth well above the REIT average for a number of years to come. This growth is driven by the economics of the convenience property type, which is our exclusive focus, the large opportunity set in front of us, and our unmatched balance sheet that is aligned with the company's business plan. Given this is our first call, I'll start with an overview of the convenience sector and its unique elements, and then share with you our vision for continuing to dominate this attractive subsector and its substantial addressable market. I'll conclude with some comments on operations, and then Connor will talk about fourth quarter results and outlook for 2025. We began investing in convenience assets now over six years ago. recognizing the strong financial performance of the small format asset class both within the site center's portfolio and the broader retail real estate industry. Tenant retention was high, credit was strong and diversified, and the CapEx load was extremely low on a relative and absolute basis. Importantly, mobile phone geolocation data was also emerging during this period as a sophisticated new tool that we could utilize to identify, underwrite, and provide hard facts around investment opportunities. Their traditional real estate underwriting of boots on the ground market knowledge became supplemented by data analytics that allowed us a window into tenant performance and customer utilization of the small format property sector. Retail and service tenants for their part are also using more sophisticated site selection tools based on consumer location data. These tenants recognize that a significant portion of consumer spending is not only going shopping but also running errands. These quick trips to a local convenience center are highly profitable for the tenants but need to be, in fact, convenient. In other words, tenants are willing to pay higher and higher rents to secure a superior and convenient location that's more profitable and that is driving demand for our simple and flexible spaces. Growing demand for the right locations in our property type has produced two noteworthy financial outcomes. First, the capital efficiency of the business is superior to many other retail formats and is especially important as capital has become more expensive and valuable. Desirable small format space not only has high tenant retention rates, but is also inexpensive to prepare for the next tenant. When compared to larger buildings that require significant adaptations, and longer construction periods, the capital efficiency of our simple business is unique. In other words, less capital is needed to generate the same organic growth as the rest of the retail real estate industry and helps generate compounding cash flow growth for CurbLine. To that point, in the fourth quarter, CapEx as a percentage of NOI for CurbLine was just over 5%, which led to over $25 million of retained cash before distributions despite the fact that NOI was just $26 million. As curb scales, this retained cash flow will increase, providing a durable source of capital that is outsized relative to the company's size and boosting earnings and cash flow growth. Second, the sector has kept up with inflation remarkably well. Lease durations in the curb line portfolio are generally shorter when compared with properties with an anchor. And given the aforementioned tailwinds, and the supply-demand imbalance, it provides an opportunity to drive rent growth. In other words, this is a renewals business where we can capture growing market rents with little landlord capital or downtime as most tenants are renewing leases since there is a shortage of high-quality convenience real estate in suburban communities and steady demand. All of these factors are flowing through into CurbLine's operating metrics with 2024 same-property NOI growth of 5.8%, 26% blended straight line leasing spreads, and our expectation that same property NOI growth will average greater than 3% for the three-year period ending in 2026. Shifting to the investment side, the positive attributes of capital efficiency and strong top line growth that I just described led us to explore the addressable market for convenience properties six or so years ago. We now have years of transaction data under our belts and arguably own the largest high quality portfolio of convenience assets in the United States with over 3 million square feet of inventory. Despite that fact, what we own today represents just over one quarter of 1% of the 950 million square feet of total U.S. inventory, according to ICSE, providing a significant runway to scale and grow CurbLine. In fact, the addressable market is so large that we see a long path of growth that can stay focused on high quality convenience sector without needing to broaden our simple and focused strategy. For context, each week our team is reviewing hundreds of millions of dollars worth of deals. Not every asset will be a fit for CurbLine, but we believe there is a significant opportunity set of properties that do share common characteristics with our existing portfolio, including excellent visibility, access, and compelling economics, highlighted by a broad available tenant universe and limited capital needs. One of the key differentiating aspects of the CurbLine spin-off was matching the balance sheet with the business plan. With over $625 million of cash and over $1 billion of liquidity at year end, we have ample capacity to scale. We are confident that we can close on $500 million of convenience acquisitions per year, which equates to around $125 million per quarter. We've significantly exceeded that pace with 351 million of acquisitions in the last six months. While the pace of closings will not always be evenly spaced, our current pipeline of awarded deals that are working through contract and diligence stands at just under $200 million. Since our spinoff and subsequent marketing efforts, we have seen a large number of brokers and sellers proactively engage with us, a change from the pre-spin environment. This situation allows us to work directly with sellers on a timeline and a structure that works best for both parties and further supports our confidence in meeting or exceeding our annual target of $500 million in external acquisitions of high-quality convenience properties. That was a key driver in the fourth quarter where we acquired 20 properties for just over $206 million with the assets concentrated in the affluent markets that CurbLine currently operates including Atlanta, Houston, Denver, Los Angeles, and Phoenix. We also made acquisitions in wealthy submarkets, such as Kansas City, Memphis, and Minneapolis, which share the key characteristics we seek and where we hope we can scale long-term. Average household incomes for the fourth quarter investments were nearly $140,000, with a weighted average lease rate of over 96%. highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant capex. Ending with operations, not surprisingly, overall demand for space remains strong, driven by a mixture of existing retailers and service tenants expanding into key suburban markets, along with new concepts competing for the same space. Recent new and renewal deals include several first-to-portfolio and recurring national tenants, such as CABA, Panda Express, Chase, the UPS Store, LensCrafters, and Comcast, with notable activity from service tenants, banks, fitness operators, and quick service restaurants. Before turning the call over to Connor, I want to again thank everyone at CurbLine, along with the team at Site Centers, for their work to complete the spinoff of CurbLine properties. It took the work of our entire organization to get here, and I couldn't be more optimistic about the opportunity ahead for CurbLine and our ability to generate compelling stakeholder value. And with that, I'll turn it over to Connor.