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spk08: business continued to contribute. Specific drivers which deserve mention, overage percentage rent continues to outpace expectations as tenant sales demonstrate strength and resiliency. Parking revenues also saw gains above forecast as customer traffic at our large mixed-use assets continues to drive higher. Small shop occupancy again showed gains, and we saw lower expenses both at the property and corporate level. This was offset modestly by higher collectability impact or bed debt expense than was forecast. Our gap-based comparable POI growth metric was 3.6%, coming in at the upper end of the range of our 2% to 4% initial guidance. On a cash basis, comparable excluding prior period rent term fees is 5.2%. Cash basis, comparable minimum rent grew by 4%. Term fees in the comparable pool this quarter were essentially flat the first quarter 2022 at $1.4 million in each period. Prior period rent this quarter was $1.3 million versus $2.4 million in the first quarter last year. Please note that we have added all of these figures to pages 10 and 11 of our 8K supplemental disclosure. You're welcome, Steve. Year-over-year occupancy results were also solid, with our overall occupied metric growing 140 basis points year-over-year from 91.2% to 92.6%, and our least percentage increasing 50 basis points from 93.7 to 94.2. Sequentially, we took a small but anticipated step backward, given 1Q seasonality and two known anchor departures in January at lease expiration, which were reflected and our guidance. Our sign not occupied spread in the existing portfolio stands at 160 basis points as we continue to show progress in getting tenants open and rent paying. This spread represents roughly $18 million of incremental total rent. Our sign not occupied in our non-comparable pool stands at $18 million as well of total rent, bringing total signs not occupied to 36 million. This effectively brings our S&O percentage to a total of 3%. These executed leases will continue to drive bottom-line results over the next two years, with roughly 65% coming online over the remainder of 2023 and a balance primarily in 2024. When you include new lease deals in our pipeline for currently unoccupied space, this increases the S&O figure even higher. Rollover for the quarter was 11% on a cash basis and 24% on a straight line basis. The second consecutive quarter to have the cash number in double digits and the straight line number up into the low to mid 20s. I highlight the straight line number as it reflects sector-leading contractual annual rent increases embedded in our leases. Both Anchor and Small Shop blended at roughly 2.25% across the portfolio. Year-to-date, small shop rent bumps have averaged about 3%. Now to the balance sheet. We ended the first quarter with $1.3 billion of total available liquidity at quarter end, comprised of $1.2 billion available under our revolver and $100 million of cash. As many of you saw, we successfully accessed the unsecured market subsequent to quarter end with 350 million of a five and three-eighths green bond, and as a result, no maturity since early 24. Also, keep in mind that for our term loan, whose initial maturity is also in 2024, we have two one-year extensions at our option taking that maturity into 2026. With respect to our leverage metrics, our net debt to EBITDA ratio is roughly six times as adjusted We fully expect to be back to our targeted level in the mid-five times in 2024. Additionally, we are targeting free cash flow after dividends and maintenance capital to return to pre-COVID levels by next year. Our in-process pipeline of active redevelopments and expansions now stands at $740 million, with only $250 million remaining to spend against our $1.3 billion of available liquidity.
spk07: Now, on to guidance.
spk08: With initial guidance to start the year showing FFO growth of 2.5% at the midpoint and 4% at the top of the range, and a solid first quarter under our belts, we are affirming guidance for 2023 at 638 to 658 per share. While we continue to see strength and resiliency in our business, With three quarters left for the year, it is rare that we would modify guidance at this point in the year. For the first time in almost two years, we are seeing tenant bankruptcies in retail, as selected businesses struggle to compete in a challenging economic environment of higher interest rates and diminished government subsidies from the pandemic. Despite the bankruptcies to date, where we have very manageable exposure, we still feel comfortable with our initial 100 to 135 basis points of total credit reserve comprised of roughly a 75 basis points general reserve and 25 to 60 basis points of specified bed bath reserve. Now, given where we started May and the expected range of outcomes, this bed bath reserve has now been reduced to 20 to 45 basis points given the cash rents we've already received on eight of our nine anchor boxes that have not yet been rejected. including May rent. That range will depend on the timing of the bankruptcy process and which leases are affirmed and or assumed, if any. From a comparable growth perspective, given a solid first quarter metric, we are affirming the 2% to 4% range for comparable DOI growth, as well as our 3% to 5% range on a cash basis, adjusting for prior period rents and terminates. Page 27 in our 8K provides an updated summary of the key assumptions for our guidance. Now, in addition to the expanded disclosure on term fees and prior period rent that I previously highlighted, we'll also notice several other additions to our 8K relating to revenues, comparable POI growth, debt, occupancy, and leasing metrics, demonstrating our commitment to continuing to expand our disclosure to provide the information we believe is most relevant for investors to analyze our business effectively and efficiently.
spk07: And with that, operator, you can open up the line for questions.
spk11: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. In the interest of time, please limit yourselves to one question. At this time, we will pause momentarily to assemble our roster. Our first question comes from Juan Sanabria with BAMO Capital Markets. Please go ahead.
spk20: Hi. Thank you for the time. Just curious on the renewals. Those popped up in the fourth quarter, if you look relative to the Trailing 12. You also had lower TIs. Is that a mix? Or is that kind of a new norm? I know you mentioned some anchor leasing. Just curious if you can comment on that.
spk08: Thank you. Yeah. It was essentially a mix with regards to just what got done during the quarter. One of them was the grocery renewal that we had up in Dedham, but also just a broader mix. And obviously the TIs, you know, again, a mix of the leases that got done.
spk11: The next question comes from Craig Schmidt with Bank of America. Please go ahead.
spk02: Yeah, thank you. I kind of wanted to talk about mixed use and added resi. I noticed on your future development opportunity page, you've gone from six mixed use projects that could add residential to now we have 14. What I'm wondering is, You know, I've heard you say that a third of your properties are mixed use now. Where do you think you might be in five years' time? And the second is, will mixed use assets grow faster in their rents than strictly retail ones? And what are retailers telling you about mixed use? And what are the resi people telling you about mixed use?
spk09: Boy, Craig, that's pretty funny. I love how, you know, we limit it to one question. You have a whole white paper in that question there. You're the best.
spk02: I apologize up front.
spk09: Don't at all. Don't apologize at all. Let's just have a little fun. Listen, what you see in the 8K is a continuation of what we believe, and that is the ability, wherever we can, to maximize the use of the real estate that we that we own especially when we're talking about successful retail shopping centers with on and you know ours are on bigger pieces of plants and so the ability to to uh add other uses is something that it's just part of our dna and something we'd like to be able to do now i don't i would not you should not expect us to be running and putting shovels into the ground over the next nine, 12 months at those projects because the economics don't make any sense today. I do expect them to make some sense in the future, and that's what that is supposed to convey. Now, with respect to the overall mixed-use properties, the, what we have clearly found, clearly found, is that the demand for lots of uses at both, you know, office and retail, and resi, and hotel, frankly, at a really well-done mixed-use property is a real differentiator. It's where people want to be. It's why in the comments I made, I'm talking about traffic counts that are really enormous. These are a lot of, there's a lot of visits there, a lot of sales. They also seem to have the ability to raise their prices in places like that more than at more value-oriented properties. And I guess you would expect that. Apple in areas, the Lululemons of the world, et cetera, they can raise prices. And as a result, we see the ability to charge higher rents there. Now, if we did that right on the ground floor, then we should also see outsized returns, both in the form of occupancy and the rates that we're getting upstairs in the other uses. That's been our experience, frankly, since COVID.
spk07: I think it's even stronger than it was before COVID.
spk11: The next question comes from Steve Sokwa with Evercore ISI. Please go ahead.
spk17: Yeah, thanks. Don or maybe Wendy, just on the leasing side, I mean, I know the strength is probably surprise to Don. Things have remained healthy. Consumer spending has held up. I'm just wondering what you guys are hearing from tenants. And you mentioned maybe bankruptcies picking up. I'm just wondering how you feel about the 75 basis point general reserve and you know, might you not use all of that as you sit here today, just as you survey the landscape?
spk10: Steve, let me just kind of add some color first before Dan talks about the numbers. But you're right, we're seeing great demand on the retail leasing side, specifically in the small shops. We have not seen a decline of anything considerable as it relates to people's ability to fund projects and make decisions, they're making decisions for the long term, and they're understanding that with these recession discussions that these headwinds that we're facing, that the decisions that they're making are critical to their livelihood, especially for the mom and pops. So there's a flight to quality that continues to happen in our portfolio. I'm feeling very bullish about what I see in our pipeline. Again, honestly, I was expecting it to level off a little bit, and it has not. It is as robust as ever. So I'm very encouraged.
spk09: And I guess, Steve, I would only add to that, yeah, there might be some room in the 75 basis points, but, you know, I read the same things in the newspapers that you do, and it's May 5th or 4th or whatever it is. By the way, Steve, my 25th anniversary, at least, you know, happy anniversary, Dom, right? It makes me laugh, though, because the power of the small shop tenants that Wendy mentioned is something I really want to make sure that you understand a little bit. We don't do kind of first-time mom and pops. We don't have those type of businesses here. They are almost always adding a store or adding a food use from a place that, from strong cash flow at another location, whereby they're expanding into the third or the fourth or the fifth. There is that flight to quality that's a critical component. So if this is anything like whatever happens this year or next year is anything like, you know, prior recessions, this is probably one of the strongest parts of our portfolio and the place that differentiates us.
spk11: The next question comes from Greg McGinnis with Scotiabank. Please go ahead.
spk21: Hey, good evening. Happy 25th, Don. Hey, it's Greg. Yeah, you're welcome. To celebrate, let's talk about office demand. Can you just talk a little bit more about the interest you're seeing in Santana West? Do those feel like serious inquiries? Is it all tech, whole building, or by floor? Sure. So any additional color is helpful there, and then we'd also appreciate updated info on 919 lease up and initial rent contribution expectations. Thanks. Sure.
spk04: Yeah. Hey, Greg, it's Jeff. Let me start off on the West Coast office leasing, and then Dan or Don can jump in on the second part of your question. So the business decision we made late last year to – allow the building to be leased four by four and to start building out the building. So we were a great alternative to the sublease space that's coming on the market that I'm sure you've heard about. It is working out for us. That combined, I think, with a little bit more of a settling at least in the mid-sized tenant market as to what they're going to need in the way of the office space has caused tours to tick up. And we have paper going back and forth with a couple of tenants. So they're not full building tenants, but they're multi-floor tenants. And I don't know whether we'll get any of them done, of course, at this point, but there is activity and I would call the activity very good and really happy we made the decision that we made to start building the building out four by four.
spk09: Yeah. And Greg, just to say the obvious, that is a difference. That is a difference in feeling. I don't think we... have said that uh in fact we didn't say it on the february call or maybe last november so really happy about that decision at this point too hopefully it's a you know it bears fruit uh time will tell and with respect to 919 919 you know it's really it's it's it's it's really interesting not 919 but 915 we haven't done 919 yet on 915 uh we turned the building over the the floors over to choice uh then they are building out their space we will have a contribution from them next starting next year end of the year end of this year uh so dexo also uh which as you know signed the lease we're almost ready to turn the space over to uh to them that is going really well and then so then so that's the 60 some odd percent of the building that is uh is completely leased we have serious back and forth on a number of tenants from most of the rest of the building at this point. So it's pretty interesting at a time when, as you know, there can't be a dirtier word than office in the country. Is it possible that a subcomponent of office is actually undersupplied? And that subcomponent, could that be mixed-use properties where you have a new building in a first-ring suburb, which is obviously all we have? I'm pretty encouraged by what we're seeing here. Pika Row is certainly the same up at Assembly Row.
spk07: And with new activity at Santana West, I hope we have something to tell you.
spk11: The next question comes from Connor Mitchell with Piper Sandler. Please go ahead.
spk05: Hey, thanks for taking my question. So now that you've entered Hoboken and Phoenix and I know you mentioned you're not rushing to start digging anytime soon, but as you deploy more capital, do you see more urban infill or population growth areas? It may be just how you think about these two different market types.
spk09: Yeah, Connor, you know, it certainly wouldn't be areas with big population growth. The problem with big population growth means that there's usually room for a lot more supply to be added. And we want to be in supply-constrained areas. Nothing more supply-constrained than Washington Street and Hoboken. And, you know, love the investment that we've made there. We're just getting into on, you know, the one redevelopment there, whether we can effectively make the numbers work. I'm very encouraged by that fact. I would not, again, expect to see this under construction in the next month or two or something like that. But that project is very likely to pencil and make some sense. To the extent we can find more and have it make sense in markets where we already are like that, we'll look at it all day long. But that's the type of thing that's far more attractive to us than chasing headcount.
spk11: The next question comes from Craig Mailman with Citi. Please go ahead.
spk15: Hi. This is Sasan for Craig. The active mixed use redevelopments all have 6% projected returns. How are you thinking about return thresholds for incremental project starts given the elevated cost of capital?
spk09: Yeah, no, it's a very good question, and I think I've answered this a couple of times before, but think about it this way. We need incremental returns or incremental returns on top of our cost of capital in terms of development of at least 150 basis points. from an IRR's perspective, more like 200 basis points from an IRR perspective. The reason I keep saying IRR perspective is because the stuff that we do in those projects, we won't do unless they grow faster. Our experience has shown us that those projects are, we are able to increase rents faster. The residential component is important, with respect to that. But incrementally, once we get comfortable with what our cost of capital is going to be, I'd like a little more clarity from the Fed. Maybe we're getting there, getting a little bit closer that way on the debt side. On top of that, add 150 to 200, depending on the risk of the particular project from an IRR perspective.
spk07: Hope that's helpful.
spk11: The next question comes from Flores Juan Deacon with Compass Point. Please go ahead.
spk03: Hey, good evening. I guess, could I ask about your shop occupancy at 90% leased? What is the gap between occupied and leased? And how much more will that number, can you drive that over the next two years? And how much more do you think that will increase maybe even this year?
spk08: The occupied percentage of small shop is 88. And we would expect to be able to drive both of those up higher. I think that's a real opportunity. And up towards the occupied percentage above 90 and up towards north of 92 on the lease side. I think there's still more room to run on that in our portfolios.
spk11: The next question comes from Derek Johnson with Deutsche Bank. Please go ahead.
spk13: Hi, good afternoon, everybody. One of the touch on capital recycling, you know, primarily because it's such an important growth tool for REITs. And, you know, really, it's been hampered, as you know, especially this year. But, you know, Don, with the Fed, you know, striking a pause here and, you know, some calling for perhaps a first round of cuts and maybe Q124 or somewhere around that timeframe. Do you think there's visibility in rates and somewhat of a stability in rates can condense or narrow what must be a wide bid-ask spread so you can maybe do some accretive acquisitions and reignite that growth engine later in the year?
spk09: I do, Derek. I mean, you said the word You know, in your question, there has to be some level of stability. There has to be predictability. And without that, as there hasn't been, as you know, it's, sure, the bid ask is very different. That will change. Now, it'll change, you know, over time, and there are other things than just Fed policy that dictate whether, you know, dictate whether there is a acquisition market that makes sense or a disposition market that makes sense. But it's not going to stay the way it is. So, yeah, I mean, you know, we run this business. We've run this business for a long time. We'll continue to do that. And during those cycles, there will be a reversion to some level of stability that allows us to, you know, to get stuff done.
spk07: No question. Thank you.
spk11: The next question comes from Michael Goldsmith with UBS. Please go ahead.
spk00: Good evening. Thanks a lot for taking my question. Dan, you had a slight beat on FFO relative to the consensus. You're not touching guidance because it's still earlier in the year. I guess, what are you looking for over the next three months or when we next speak on an earnings call that would give you more confidence? that you can take the year's expectations higher? And then separately, like, what are you looking for, which would maybe give you a little bit more caution in terms of the outlook for the year? Thanks.
spk08: Look, I think the biggest driver would be continued strong leasing volumes. Our pipeline is as strong and as large in terms of what's been executed to date this quarter and what's in the pipeline of executed LOIs. It's never been higher. And so if that continues and we can see that continue, I think that obviously we'll have some confidence. On the flip side, look, I think the market has got some risk out there, particularly with regards to tenants and whether or not tenants will be able to weather this difficult economic environment, whether or not we see a continued uptick in bankruptcy. And I think that balance, we've done very well balancing that. I think that we've managed to have very little exposure or on a relative basis, certainly, but just in absolute terms, in terms of our exposure to those bankruptcies, we hope that continues.
spk11: The next question comes from Handel St. Jude with Mizuho. Please go ahead.
spk06: Hi, this is Ravi Vedya on the line for Handel. Hope you guys are doing well. I just wanted to comment and ask about the snow spread. You currently are at 160 bps. Would you view this as a long-term steady state for what snow could be?
spk08: Look, we've done an exceptional job, I think, of bringing our SNO metric down from north of 300 basis points in our existing portfolio down to 160 basis points. We'd like to get that tighter. We'd like to get that down to 100 to 125 basis points. One of our differentiators, though, is that we have an S&O in space that has yet to be delivered from our large redevelopment and expansion pipeline that is equal to that size. So we have 18 million in the existing portfolio, 18 million of total rent in our redevelopment and expansion pipeline, and that equates to over 300 basis points. I think that's pretty compelling, and I don't think anybody has redevelopment pipeline that has the releasing that's been done, where it's something that is a real differentiator because we've got scale. And that truly, I think, the equivalent of what's in the existing portfolio and what's in the redevelopment portfolio is effectively 300 basis points or more.
spk11: The next question comes from Hong Zhang with JP Morgan. Please go ahead.
spk18: Hey, guys. Just a quick question on occupancy. I think last quarter you talked about potentially pushing economic occupancy above 93%, maybe in the mid-93s by year end. Just wondering if that's changed given the Bed Bath announcement and your views on your term bankruptcy risk in general.
spk08: Yeah. Now, I think, look, it depends on, you know, so far, our nine you know anchor boxes we've only had one lease rejected we'll see how it plays out you know obviously if there's a full liquidation then we're not going to be at 93 percent unoccupied percentage um you know we'll be probably closer to 92. um but we'll see how that all plays out what gets assumed what gets in terms of you know what leases get purchased in their in their liquidation um and uh from that perspective you know we I would hope to have a clearer sense from that number as the bankruptcy unfolds.
spk11: The next question comes from Paulina Rojas Schmidt with Green Street. Please go ahead.
spk19: Hello. Don, you have talked about how you believe your portfolio would outperform peers in an economic downturn. And you have highlighted how affluency, good demographics, are a key driver behind that. But an area perceived perhaps as vulnerability is your slightly higher exposure to more cyclical categories. Restaurants, a little bit more food price apparel. So could you please provide a little bit of a history lesson on how these segments have performed historically in downturns in your portfolio to have a better understanding of how the overlap between high demographics and cyclical categories perform?
spk09: I can, Paulina. Thanks for asking that. You know, it's kind of why in my prepared remarks I wanted to make a distinction of how those mixed-use properties would generally higher-end tenants, how effectively they do. And what we have found, and look, retail, sorry, real estate is local. So in the specific markets where they are operating, both historically and currently, what we're seeing is increased sales and importantly, very importantly, in a period of inflation, those tenants have the ability to raise prices. When I sit and I think about, and I don't know the answer to this, but I ask you to consider something like this. If you take aspirational tenants, you know, the Lululemons of the world, people like that effectively, and imagine how much they've been able to increase prices over the next last two years of inflation and compare that more to, you know, maybe the big lots of the world or something that is, you know, you know, aiming for a lower demographic, it's harder to press, it's harder to push price increases. That's a really important thing for us in all parts. That includes restaurants, et cetera. Now, I don't know whether I've told you this before or not, I don't remember, but everybody was worried about federal realty going into the 2008 and 2009 great financial crisis because we had more restaurants. because we had more lifestyle, if you will, everybody was worried about federal, and it turned out that those were the best performing categories in the company during that. And when I look today at our company, and I look at the restaurant performance in the mixed-use properties, they are generating over $1,000 a foot of, you know, of sales. And part of that is because they've been able to raise prices. Part of that is because there's a huge amount of volume that goes through there. But that gives them the ability to certainly cover the rents that we are charging them and more. And when you think about that in those type of areas, we would expect that to continue to happen. The conversations we have, and we are very tight, you know, we're a smaller company in terms of number of properties than our competitors. We have very close relationships with our tenants. We understand, you know, what it is that they are doing to be able to work through difficult, more difficult economic times. And so, those things give me confidence because we have been doing this a long time, and there are cycles. And I expect it to behave similar to the way it's behaved historically.
spk07: I hope that's helpful.
spk11: The next question comes from Tayo Okasanya with Credit Suisse. Please go ahead.
spk12: Hi, yes. Good afternoon, everyone. Congrats on the solid quarter. Don, last quarter when you kind of talked about dispositions, it sounded like there was a pipeline of kind of a little bit over $100 million or so you were working on. I think this quarter you kind of announced $13 million of it done. Could you talk about, like, the rest of the pipeline and what's kind of happening there, you know, whether it's kind of taking a little bit longer to close deals because of the shakeout on the debt market? So just give us a sense of maybe what's kind of happening on that front.
spk09: Yeah, we have and continue to have a list of assets that we would recycle as a component of our business plan. And frankly, we have that list. in good times and bad times, you know, in terms of what it is. Those are not a lot of properties, but it's a few that we look at. That's what we talked about last quarter, last year, et cetera. And we got to get comfortable that we're going to get paid well. And so, in going through that process, we couldn't get comfortable on as many of those assets as we thought we could. That doesn't mean they come off the table. That just means pursuant to the question that was asked a little bit earlier, once there's some stability and some understanding of the general market conditions, you'll see a pickup in the disposition side of our business.
spk07: I don't know, Dan or Jeff, did I answer that? I think that's it.
spk11: The next question comes from Linda Silas Jeffries. Please go ahead.
spk01: Hi. I'm not sure if you look at it this way, but I think one of your peers talked about the average rents in their S&O pipeline. I was just wondering if you had a number for that for yours.
spk08: Probably on a total rent basis in the kind of the low to mid-40s and probably in the upper 30s on a you know, mid to upper 30s on a base rent basis. But we can come back to you with more precise numbers.
spk07: I don't have them exactly here.
spk11: Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
spk16: Oh, thank you. Good evening. Don, can you, a number of years ago you guys expanded into the Hispanic centers out in California. And just sort of looking for an update on that. And then also, you know, the Korean, like the H-marks of the world, seems to also be a pretty powerful anchor. And those shopping centers also seem to have that cult-type following. So do you see expanding into, you know, more in the Asian-Hispanic centers? Or, you know, is your experience so far with what you bought a number of years ago maybe not panned out the way you thought it would?
spk09: Yeah, thanks, Alex. Oh, it has panned out the way we thought. In fact, probably better than we thought in terms, given the fact that we didn't consider a global pandemic, and those properties performed exceptionally well during the pandemic. The answer to your question really depends on the right local partner. It really depends on the market, of course, that we need to be comfortable with, and a partner that we would need to be aligned with with respect to our views and the way we we can manage a property prime sewer has been that it's been a very good partnership we've had trouble adding more to it we would have liked to have added more to it but those are individual deal by deal and they've got to make some sense and we didn't find any that that made the sense made sense but those assets perform real well I'll actually be out there on Monday of next week with Prime Store. So that part's worked out really well. In terms of any other, you know, property type with a demographic that we're not as comfortable with, as I say, we need the right partner because these are real estate decisions that have to be operated and have to be leased and have to be grown specific to a market that if we're not familiar with, we'll get hurt.
spk07: So we better have the right partner, and we've not found that at this time.
spk11: This concludes our question and answer session. I would like to turn the conference back over to Leah Brady for any closing remarks.
spk07: We look forward to seeing many of you in the coming weeks. Thanks for joining us today.
spk11: The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.
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