Curbline Properties Corp.

Thank you for standing by. My name is Janice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Current Blind Properties Core First Quarter 2025 Earnings Conference Call. Our lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask questions during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Stephanie Rice de Perez, Vice President of Capital Market. Please go ahead.

Thank you. Good morning and welcome to CurbLine Properties' first quarter 2025 earnings conference call. Joining me today are Chief Executive Officer David Rooks 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 some 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 infirmities, 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 annual report on Form 10-K. 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 Lopes.

Good morning, and welcome to CurbLine Properties' first quarter of 2025 conference call. I want to start by thanking our incredible team for not only completing our successful spinoff almost seven months ago, but also for completing our second quarter as a stand-alone public company and achieving results that prove the merits of our unique investment strategy. To that point, we are producing an increasing number of data points that highlight the fact that CurbLine is a differentiated growth company capable of generating double-digits earnings and cash flow growth well above the REIT average for a number of years to come. This growth is underpinned 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. These ingredients clearly position CurbLine to outperform in a variety of macro environments. I'll start the call by walking through the organic and external driver of CurbLine's growth profile and business plan, and then conclude with some comments on operations and the balance sheet before turning it over to Connor to talk more specifically about the quarter and the increase in expectations for our 2025 outlook. We began investing in convenience assets now almost seven years ago, recognizing the strong financial performance of the small format asset class, both within the retail sector and the broader 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. Retail and service tenants recognize that a significant portion of consumer spending is not only shopping, but 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 a premium to secure a superior and convenient location that's more profitable. And that is driving demand for our simple and flexible spaces. Demand for the right locations and a property type has produced two noteworthy and differentiated outcomes. First, the capital efficiency of the business is superior to many other retail formats and is especially important as capital becomes more expensive and valuable. Desirable small format space not only has high tenant retention rates driving high renewal rates, but is also inexpensive to prepare for the next tenant in the event that there's a vacancy. When compared to larger buildings that are generally purpose-built with 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 first quarter, CapEx as a percentage of NOI for CurbLine was under 5%, which led to almost $25 million of retained cash flow before distributions, despite the fact that NOI was just $28 million. As Curb scales, this retained cash flow will increase, providing a durable source of capital that is outsized relative to the company's asset base, boosting earnings and cash flow. The second outcome is that our space is highly liquid due to the fact that the number of tenants that are willing to take a 1 to 2,000 square foot shop unit is significantly higher than for purpose-built large format units. This liquidity allows the property type to keep up with inflation remarkably well, improves tenant diversification, reducing credit risk concentration and fallout, and provides an opportunity to drive rent growth as we seek to maximize rental income given the productivity of the unit size. The liquidity of our units was highlighted by the depth and the breadth of first quarter leasing volume, with almost 120,000 square feet of new leases and renewals signed, including deals with AT&T, Verizon, Orange Theory, Darden, Five Guys, First Watch, and Sherwin-Williams, among others. In other words, this is a business where we can recapture growing market rents with little landlord capital or downtime since there is a shortage of high-quality convenience real estate in suburban communities and steady demand from a wide range of tenants. All of these factors are evident in CurveLine's operating metrics, with our lease rate up 50 basis points sequentially to 96%, among the highest in the sector. 27% 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, which is the second driver of CurbLine's growth, 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 almost seven years ago. We now own the largest high-quality portfolio of convenience assets in the United States with over 3.3 million square feet of inventory. Despite that fact, what we own today represents less than 1% of the 950 million square feet of total U.S. inventory, according to ICSC, providing a significant runway to scale and grow Kirkland. In fact, the addressable market is so large that we see a long path of growth where we can stay focused on high-quality convenience centers without the need to broaden our simple and focused strategy. Not every asset we look at will be a fit for CurbLine. but we believe there is a significant opportunity set of properties that 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. And importantly, that deal flow is less reliant on the health or status of the financing or capital markets given a significant percentage of volume is driven by life events with demonstrated availability and liquidity through past cycles. For context, each week our team is reviewing hundreds of millions of dollars worth of deals. While those weekly volumes may rise and fall, the sheer size of the addressable market gives us confidence that there will always be a steady subset of opportunities that do indeed fit our investment criteria. To that point, our original guidance included $500 million of convenience acquisitions for the year, which equates to around $125 million per quarter. We've significantly exceeded that pace with over $475 million of acquisitions in the last nine months, and based on our current pipeline, this momentum is likely to continue in the near term. Specifically, our pipeline today is just over $500 million. This is on top of assets we have closed year-to-date and includes properties under contract or awarded with an executed LOI. The majority of these assets are expected to close late in the second quarter or early third quarter. The acceleration in activity is a function of our marketing efforts as we have seen a larger number of brokers and individual sellers proactively engage with us, a change from the pre-spend environment. This situation allows us to work directly with sellers on a timeline and a structure that works best for both parties and has increased the visibility of our future pipeline of investments. That was a key driver of the first quarter where we acquired 11 properties for just over $124 million, including our largest portfolio to date, a six-property portfolio in Jacksonville, Florida. Assets continue to be concentrated in the affluent markets that Curbline operates in already including Phoenix, Houston, and Philadelphia. However, like Jacksonville, we continue to make acquisitions in new wealthy submarkets that share the key characteristics we see including our first property in Seattle, which were acquired subsequent to quarter end and where we hope to scale long-term. Average household incomes for the first quarter investments were nearly $110,000, and a weighted average lease rate of over 95%, highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant CapEx. Moving to operations, as I previously mentioned, overall demand for available space remains very strong, driven by a mixture of existing retailers and service tenants, expanding into key suburban markets, along with new concepts competing for that same space. Activity remains wide in terms of tenants seeking to lease space and includes numerous, primarily national service tenants, banks, business operators, and quick service restaurants. We have not seen any changes since the start of April in terms of leasing appetite, but do recognize that changes in macroeconomic scenarios will likely have an impact on the type and the demand for space. However, the value proposition of small format retail with close proximity to wealthy suburban customers remains attractive to a very wide variety of tenants, especially when considering that those businesses pay a relatively small annual occupancy cost due to the small size of the retail suite to have convenient access to those valuable customers. The economics of our business, a high return on leasing capital, and the widest pool of tenants to work with, along with significant national exposure, position CurbLine for absolute and relative success throughout a cycle. Before turning the call over to Connor, I want to highlight one of the key differentiating aspects of the CurbLine spinoff, which is our balance sheet. The net cash position of quarter N matches the business plan with almost $600 million of cash and $1 billion of liquidity quarter N. I couldn't be more optimistic about the opportunity it has for CurbLine and our ability to generate compelling stakeholder value. And with that, I'll turn it over to Connor.