InvenTrust Properties Corp.

Thank you for standing by and welcome to Inventrust's fourth quarter and full year 2025 earnings conference call. My name is Becky and I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded and a replay will be available on the investors section of the company's website at inventrustproperties.com. All lines will be muted throughout the presentation portion of the call with a chance for Q&A at the end. If you did wish to ask a question at any time, please press start followed by one on your telephone keypads. I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is D.J. Bush, President and Chief Executive Officer, Mike Phillips, Chief Financial Officer, Christy David, Chief Operating Officer, and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be open for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release. In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website. With that, I'll turn the call over to D.J.

Thanks, Dan, and good morning, everyone. We appreciate you joining us today. 2025 was an exceptional year for Inventrust, marked by strong operating performance and disciplined execution. Same property NOI grew 5.3%, marking our second straight year above 5% and our fifth consecutive year of growth exceeding 4%. This performance speaks to the quality of our portfolio, the strength of our platform, and the consistent execution of the Inventrust team. Narriot FFO finished the year at the high end of our guidance range of $1.89 per share, representing 6.2% growth year over year. Our balance sheet remains well positioned with sector low net debt to adjusted EBITDA and ample liquidity to support our expansion objectives. From a strategic standpoint, the year was equally transformative. We completed the successful sale of five California assets and efficiently redeployed that capital into higher growth Sunbelt markets. In total, we acquired 10 properties including two in the fourth quarter, representing more than $460 million of gross acquisitions during the year. These investments deepen our geographic concentration and grocery exposure in areas where we see long-term population expansion, limited new supply, and the ability to leverage our operating platform. Christy will walk through our most recent acquisitions in more detail shortly. Institutional and private capital remains active in the open-air retail space, particularly in grocery-anchored assets. While that interest validates positive trends in our sector, it also reinforces the importance of discipline. We remain selective in our acquisition approach, focusing on opportunities that meet our return thresholds, enhance our operational footprint, and offer clear avenues for value creation through leasing and asset management. Our objective is to grow over time in a thoughtful and prudent manner. Beyond acquisitions, we continue to invest internally through targeted redevelopment initiatives designed to maintain the overall quality and competitiveness of our portfolio while driving incremental NOI. These projects focus on re-merchandising, repositioning anchor space, and selectively adding out parcels at existing centers. While redevelopment is not intended to be a focal point of our business model, we expect these efforts to contribute approximately 50 to 100 basis points of incremental NOI growth annually over the next couple of years. The retail landscape continued to demonstrate notable resilience in 2025. While store closures increased year over year, new retail construction stayed at multi-decade lows as development economics remained challenged, creating a constructive backdrop for owners of high-quality, well-located centers. At the same time, retailers are operating with better information as it relates to real estate decision-making, applying clearer return thresholds, and benefiting from more flexible supply chains. These factors favor landlords who can provide the right space in the right trade areas, a dynamic that aligns well with our focus and footprint. According to CoStar, top performing retail markets in 2025 included Charlotte, Tampa, Orlando, and Dallas. Charlotte, where we acquired two properties during the year, stands out for robust population growth, job creation, and suburban development, ranking first among major U.S. markets for retail rent increases. We are seeing similar trends in Phoenix, another area where we continue to expand our presence. Our strong performance in 2025 positions us well heading into 2026. That outlook is reflected in our guidance with core FFO per share growth expected to be in the mid single digit range and net investment activity of approximately $300 million. As always, our strategy remains simple. Continue to expand our Sunbelt focused portfolio and execute at the property level to drive sustainable cash flow growth. With that, I'll turn it over to Mike to walk through the financials in more detail.

Thanks, DJ, and good morning, everyone. For the full year, same property NOI totaled $171 million, representing growth of 5.3%, driven primarily by embedded rent escalations, which contributed approximately 160 basis points. Occupancy gains added about 80 basis points, while positive leasing spreads contributed roughly 90 basis points. Redevelopment activity provided an additional 70 basis points, with percentage and ancillary rents adding around 20 basis points, and net expense reimbursements contributing 130 basis points. These drivers were partially offset by a 20 basis point headwind from bad debt reserves. Same property NOI for the fourth quarter was $44.3 million, up 3% year over year. For the full year, Nereid FFO totaled $147.8 million, or $1.89 per diluted share, reflecting an increase of 6.2% over 2024. Core FFO rose 5.8% to $1.83 per share year-over-year. FFO growth was primarily driven by same-property NOI and net acquisition activity, partially offset by the impact of a higher weighted average share count. In the fourth quarter, Nareed FFO came in at $36.8 million, or $0.47 per diluted share, representing a 4.4% increase compared to the fourth quarter of 2024. Core FFO increased 7% to 46 cents per diluted share for the three months ending December 31st. Our balance sheet remains exceptionally strong, providing Inman Trust with flexibility and liquidity to execute our long-term growth strategy. At year-end, total liquidity stood at $480 million, including $35 million in cash and $445 million available under our revolving credit facility. Our weighted average interest rate is 4%, and our net leverage ratio is 26.3%. That debt to adjusted EBITDA remained at a sector low 4.5 times on a trillion 12-month basis. During the quarter, we completed two acquisitions totaling $109 million, funded with our available liquidity and the assumption of approximately $30 million of secured property-level debt. The Board of Directors approved a 5% increase to Inventrust's annual cash dividend for 2026. The new annualized rate of $1 per share will be reflected in the April dividend payments. Turning to 2026 guidance, we expect full year same property NOI growth in a range of 3.25 to 4.25%. This outlook incorporates a bad debt reserve of approximately 30 to 70 basis points. For Nate Reed FFO, we are providing guidance in a range of $1.97 to $2.03 per share, representing a 5.8% increase at the midpoint compared to 2025. Our core FFO guidance is $1.91 to $1.95 per share, reflecting a 5.5% increase at the midpoint year-over-year. As discussed previously, the interest rate on our $200 million term loan swaps reset from approximately 2.7% to 4.5%, which will create a modest headwind to FFO for the last three months of the year. And with that, I'll turn the call over to Christy to discuss our portfolio activity.

Thanks, Mike. The retail landscape in 2025 was marked by steady execution and improving operating momentum. Our leasing teams performed well, converting renewals at attractive spreads and filling small shop vacancies with high-quality operators that enhance tenant mix, support the long-term performance of our centers. Leasing activity remained positive across the portfolio with grocery, health and wellness, specialty food, and value-oriented concepts showing the strongest demand. Throughout InvenTrust asset base, foot traffic and retail sales have remained durable, while our watch list of at-risk tenants is minimal. One area where execution has been particularly evident is in the performance of our acquisitions. For properties acquired in 2024 and 2025, new and renewal lease spreads have averaged approximately 21%, demonstrating our ability to identify below-market opportunities. This showcases our leasing team's ability to unlock growth even in well-occupied centers. From a tenant health perspective, the story remains resilient. Retail sales are up and announced store openings continue to exceed closures. signaling sustained confidence in physical retail. While turnover is a normal part of the strip center business, our tenant rosters are as strong as they have been at any point. Across our markets, retailers are increasingly focused on optimizing store fleets rather than pulling back, with new concepts actively pursuing space in well-located centers. The strength is evident in our leasing results, with several key metrics reaching their highest levels since our listing in 2021. New leases executed in 2025 achieved a 30.9% spread, while renewals averaged 10.9%, resulting in blended comparable leasing spreads of 13.3%. Small shop lease occupancy also reached a new all-time high of 94%, and annual rent escalators on new and renewal small shop leases executed in 2025 averaged over 3.1%, the highest level since our listings. At year end, total lease occupancy was 96.7%, and our retention rate was 85%, reflecting the planned departure of a single anchor at our Gateway Market Center property in St. Petersburg, Florida, which is currently in the early stages of a transformational redevelopment. Excluding that space, our retention rate would be consistent with previous quarters at approximately 90%, and our lease occupancy rate would have been flat sequentially. Turning to acquisitions, we added two high-quality assets to the portfolio during the quarter. The first is Mesa Shores in Mesa, Arizona, a rare dual grocery anchored center by Trader Joe's and Sprouts Farmers Market. We also expanded our Florida presence with acquisition of Daniel's Marketplace in Fort Myers, anchored by Whole Foods. Both assets align with our Sunbelt necessity-based strategy and feature tenant mixes weighted toward national and regional brands, with upside through small shop leasing and merchandising. As we head into 2026, operating fundamentals for shopping center REITs remain solid and supportive of our platform. The Inventrust portfolio is well positioned for tenants focused on essential uses and services, omnichannel fulfillment, and seeking benefit from long-term demographic growth across the Sunbelt. Operator, we are now ready to open the lines to take questions.

Thank you. If you wish to ask a question, please press start followed by one on your telephone keypads now. If you feel your question has been answered, or for any reason you would like to remove yourself from the queue, please press start followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Andrew Reel from Bank of America. Your line is now open. Please go ahead.

Andrew Reel Good morning, everyone. Thanks for taking my questions. I guess first, I was just wondering if you could maybe talk a little bit more about your funding sources for the 300 million of net acquisition activity. I mean, it sounds like you have some capacity on the balance sheet, might lean into that a bit. So I was wondering kind of what type of debt would you look to issue? What type of pricing would you expect? And then just with the greater interest expense assumption in the guide, what portion of that is from the swaps rolling over and what portion of that would be from incremental debt? Thank you.

Yeah, Andrew, this is Mike. I can start. So, yeah, you hit on the head. We have plenty of room on the balance sheet to fund acquisitions this year. That's kind of the plan going into the forecasting. We have $300 million kind of at the midpoint of that acquisition. What you can see from us this year is using our line of credit probably a little bit more than we have in the past. The two options that are best for us is a private placement market or using some more bank debt. We'd probably prefer to use more permanent long-term financing through the private placement market. And that pricing right now is probably, depending on tenor, anywhere between 125 and 150 basis point spreads. I think you asked about the headwind for the swap spreading off. In 2026, obviously, Those don't burn off until September, so it's probably about a one to one and a half penny headwind going into the year.

Okay, thanks. And then maybe just to follow up on that, could you just help us think about, you know, if you have a new leverage target range and I guess just, you know, how high you'd be willing to take up that leverage in aggregate? Thanks.

Yeah, so the good thing is we can kind of plunge through the balance sheet. to our leveraged targets by the end of the year. So we can do the $300 million this year, and that still puts us on a forward basis at kind of five times net debt to adjusted EBITDA, and we'd be comfortable really not going above five and a half times on a forward basis at any given time.

Yeah, maybe just to add on that, Andrew, I think when we think about the balance sheet, obviously, being one of the lower levered companies, we do have the ability to self-fund our growth through that incremental debt, which is an important avenue for us over the next couple of years. You can see that as it relates to the investment activity that we're trying to accomplish this year. you know, we're very protective of the balance sheet. Obviously we try and keep it very simple. The maturity schedule is extremely manageable. And as Mike said, you know, we're always trying to gear towards that, you know, mid fives on a four basis, you know, but on any given quarter, you know, we're going to be opportunistic while protecting, you know, the balance sheet.

Okay. Thank you.

Thank you. Our next question comes from Linda Sy from Jefferies. Your line is now open. Please go ahead. Hi, good morning.

On Amazon Go and fresh closing stores, does that open any opportunities to open more Whole Foods and increase that 2% as a percentage of ABR in your portfolio?

Well, we don't actually have any of the Amazon Go's or any Amazon brick and mortar, I guess, in our portfolio. We obviously did a site analysis as it relates to our portfolio, specifically as it relates to our Whole Foods locations to make sure that we weren't at any type of risk If and when they decide to start transitioning some of those boxes, the good news is we're very well protected with our Whole Foods. Every Whole Foods in the Inventra portfolio operates exceptionally well. Most of them are looking to add additional square footage if they can, but they're very profitable and have high sales volumes. The more interesting thing is, you know, The Whole Foods banner is obviously one that's done quite well for sometimes it serves a very particular part of the market very well. And I think seeing Amazon lean back into that banner is positive for institutional quality shopping centers.

Thanks. One of your larger peers discussed recently seeing lower CapEx requirements in their portfolio, and you highlighted the characteristics in your own portfolio previously. Are you seeing 26 as largely a renewal business again, and does the percentage of CapEx 20% of NOI continue to come down?

Yeah, so good question. I think that that's a fair statement. We expect, you know, and I think we've talked to you, Linda, and many others about the dynamics going forward as we get closer to kind of frictional vacancy. We see that as a very positive outcome for free cash flow for our business. To the extent, you know, if you think about where our credit quality is, and obviously in our guidance, we've got into a lower credit loss this year versus the previous years. And a lot of that's due with the better credit quality and merchandise mix in the portfolio. So as that merchandise mix has improved, as the bankruptcy risk has been reduced in the Inventrust portfolio, we expect to, and with the success that our retailers are having, we do expect renewables to be a bigger part of our business as we look forward. And what that means is growth with lower CapEx, to your point. So that 20%, which is inclusive of incremental redevelopment opportunities as well. But that 20% should continue to come down in the form of the two major categories being landlord work and tenant capital. So as we see that, we're really optimistic and excited about the ability to just have our current tenants be successful with us for the coming years and growing free cash flow without spending as much capital as we have in the past when we're trying to grow occupancy and fill backfill spaces that perhaps were bankrupt.

Thank you and good luck.

Thank you. Our next question comes from Cooper Clark from Wells Fargo. Your line is now open. Please go ahead.

Great. Thanks for taking the question. I wanted to ask about the 300 million net acquisitions guide. Curious if you could speak to the acquisition pipeline as it stands today in terms of volume and pricing. Curious how much of the acquisition volume within guidance is either under contract or deals where you have some certainty of closing as opposed to more speculative acquisitions?

Yeah.

No, good question, Cooper.

Thanks. So, what I would say is, you know, As we do every year, we come into the year, we look at our pipeline, we evaluate the current opportunity set, and we try to provide a guidepost or a benchmark of what we're trying to accomplish this year. I think with the $300 million net investment activity, what we really are trying to show is that we're expecting to continue to grow our business, leverage our platform, and use the balance sheet, which we haven't done in a material way in the past. while still managing at a very low leverage level. Directly to your point, almost half of that $300 million has either been ordered or is under contract, which we expect to close probably in the early part of this year. So we have really good visibility on about half of it, just under half of that $300 million. As we look further into the pipeline, there's a lot of exciting opportunities It's still a very competitive market, but we've continued to find, you know, assets and opportunities that fit our criteria, which is, you know, going in yield, you know, in the high fives, low sixes with great growth that supplements or complements, I should say, the portfolio quite well and getting into the leveraged returns kind of in that low to mid-sevenths range. And that's what we continue to see. You're going to, you know, as Christie alluded to in her prepared remarks, you know, Phoenix, the Carolinas, smaller secondary markets that are very complementary to our portfolio, all being in the sunbelt, where we're seeing demographic trends that are still very favorable relative to elsewhere in the country. So you're going to see a lot of the same. So if you look at the 10 assets that we acquired in 2025, you should see a very similar kind of opportunity set as we move through 2026.

Great. And then just switching to the disposition cadence, just curious how we should think about dispositions this year within the context of your last property in California and then potentially recycling out of some other lower growth assets.

Yeah, that's a good question. So last year was unique, right, with the California opportunity. That was something where we saw an opportunity to recycle capital in a creative manner. And we decided to jump on that. Obviously, the success of California front-loaded our acquisitions in 2025. That's not the strategy for 2026. What you should see is, you know, we will kind of pull forward and push back dispositions as it relates to the opportunities that we're seeing in our acquisition pipeline. With the exception of California, obviously, we have one asset in California that we've had an identified buyer for for quite some time. We're just going through some administrative and environmental stuff that is unique to California, and we do expect to close that in 2026. Beyond the last California asset that we have, the dispositions will be a source of capital once acquisition opportunities are identified.

Great. Thank you.

Thank you. Our next question is from Michael Gorman from BTIG. Your line is now open. Please go ahead.

Yeah, thanks. Good morning. Mike, if we could just go back to the same store for a second. I apologize if I missed it, but did you mention on the revenue side any potential impact from the signed not open pipeline on the 2026 growth? And then maybe on the expense side, Are there any same-store expense headwinds just from some of the weather that we saw go through the southeast earlier this year?

Yeah, I'll start with that part, Mike. So nothing material on any of the weather events that happened in the south and southeast that we're seeing in our portfolio right now. As far as sign-out open, I don't think I mentioned it. We have, what, about 2% of ABR, which is $5.5 million. We do expect that's mostly revenue recognized this year.

Okay, great. That's helpful. And then maybe switching back to the transaction side, for the Fort Myers acquisition, I'm curious, it's an interesting asset. Obviously, it's grocery anchored, but then a lot of very recognizable high-end discretionary brands. So I'm just wondering maybe how that impacted the competitive set for an asset like that, and then also how the assumable financing played a role in how competitive it got for an asset like that and maybe how that translates into other opportunities that you're seeing where it's assumable financing versus not and where you feel your competitive advantage is in the transactions market there. Thanks.

And like, you know, I'm happy to take that. You know, Daniels was something that we that we identified and we're excited about. Obviously, we have one other or another asset. And it's a market that we're trying to grow in as well. West Florida is something that has been of interest to Inventrust. As you mentioned, it is grocery, but there is, dare I say, a little bit of a lifestyle component with some of the merchandise mix there. It's a great complement to our portfolio. If you think about the construct of the Inventrust portfolio, about two-thirds of it is kind of right down the fairways, grocery-anchored, neighborhood types of centers that are going to be very stable growth, albeit maybe a little bit lower because there's a bigger percentage of the income coming from the grocer itself. And then the other third is it can be bigger box, lifestyle center, unanchored. So what we've built here is a portfolio that has – kind of graphs from all different pieces of the open air shopping center segment all after all you know have different somewhat characteristics and growth profiles but it fits really well you know when you put when you blend it all together so we'll continue to look at assets like daniel's um but um but what you'll see as you'll be looking at 26 uh 2026 you'll see some of those uh neighborhood uh core grocery food centers as well Let me address, from a financing standpoint, we don't let that really change the way we underwrite properties. We look at it as if we look at it on an unlevered basis. We want to make sure that we're getting to the types of returns that make sense for the portfolio and the growth profile that makes sense for the portfolio. Having said that, with the competition, you will see some of these ones that have assumable financing get more competitive than others. That necessarily wasn't the case for Daniels because we were able to get comfortable with the returns that we underwrote, and we're excited about the opportunities that we're already seeing there.

That's helpful. Thanks. And I have to agree, I was up by the Daniels Marketplace about a week ago, and it's a great asset and a great location on a great corner. So congrats on that one. Thanks for the time.

Thank you. Our next question comes from Hong Zhang from JP Morgan. Your line is now open. Please go ahead.

Yeah. Hey, I guess if I look at your redevelopment pipeline, the majority of your projects are expected to complete in the first half of the year. How should we think about your activating future

future projects in the pipeline in the near term especially as relates to gateway gateway market center which i think is a chunkier asset yeah so like i mentioned in the prepared remarks you know the redevelopment pipeline is interesting is you know it's it's really just reinvesting in our centers and improving the merchandise mix you know and like i said some of that will be added jla but a lot of it's not uh you know one of the things that has been the most important tailwind in our business over the past couple years, which has allowed us to grow same store by 5% the last two years and over 4% for the five previous years, is the scarcity of quality space. And having that leverage is really what's been driving the growth across the shopping center sector, but certainly for the higher quality portfolios in markets where there's been really good demographic trends. As it relates to Gateway, that's one of the larger opportunities for us. And it's really, it's going to be the relocation and remodeling of a high quality southeastern brochure. And reimagining the center for the long term. So what we're going to do there is just fortify that asset for the many years to come. And those are the types of opportunities that we're patient. And that one will probably start later this year, but it's going to take a while to stabilize. But once it does, it'll be an asset that that will serve that sub-market in St. Petersburg for decades to come.

Got it. Thank you.

Thank you. Our next question comes from Paulina Rogers from Green Street. The line is now open. Please go ahead.

Good morning. Most peers have highlighted a very competitive market. Do you think pricing has shifted over the past three months, or has the level of competitiveness largely remained consistent?

Good morning, Paulina. I would say it feels consistent, and it really depends on what comes to market. And I think last year... we were very fortunate with some of the opportunities that we were able to run down, whether it be on market or off market. I would expect 2026 to be similar, but I will say it's hard to, it's hard to pay whether, you know, at the, at the 30,000 foot level of pricing has moved in a material way. The competition is still, is still very strong. We're seeing it across different, the different kind of asset types that we've, or property types, I should say that we've, that we've been, that we've been looking at. Fortunately, we've had some repeat opportunities with the same sellers in some cases and off-market opportunities, which we'll continue to vet. Those tend to take a little bit longer. But I will say we always feel when we kind of do a postmortem on the assets that we have bought over the last couple of years, we always feel better six months later. So that's an indication of feeling that we got in at the right time. I think that would suggest that competition is going to continue to be there. Perhaps pricing is going to continue to remain pretty sticky in our space. And there is private capital formations, as I know many of our peers have talked about, that that's a real thing. And many of those folks, whether they're looking for platforms or single assets, there's a lot of excitement and rotation of capital, I think, that could be coming into retail, which should benefit us longer term from a valuation perspective.

Thank you. And my other question is, I feel like we have gotten used to REITs bidding and raising guidance, given the background has been so positive. What would it take for you to exceed your high end of property NOI guidance?

Well, yeah, it's a great question. And, you know, Look, I think one of the things that we tried to do at the beginning of the year is we set guidance to make sure that we're setting expectations appropriately. The reality is, and I think I speak probably for most of the shopping center REITs in the sector, is that bad debt is surprised in a material way to, I guess, downside, less credit loss. and it's it's hard to come to any given year and say look we're not going to have any credit loss but that's almost been the case when you offset it with uh you know some of some of the cash receivables that you get from tenants that you don't expect to pay you and that's been the case for the last couple years it's hard it's hard to start at the beginning of the year and think that that's going to be continuous i think most of us including inventrust expect there to be a more normalized level credit loss because that's just the normal nature of our business it just hasn't been the case but as you guys you saw in our guidance we do we have reduced our credit loss because of the underlying quality of the merchandise mix and how that's improved over the last couple years and the fact that we're going into this year with real no real foreseeable imminent anchor issues at least in the inventress portfolio so that gives us confidence that we the confidence that we needed to to bring in that credit loss a little bit which is reflected obviously um you know that 50 basis points is reflective of the midpoint of our same store guidance to go through the high end it's it's very simple can we get things open and off in red paint earlier and is credit loss going to stay immaterial that makes sense thank you thank you

Thank you. Our next question comes from Floris Van Dichtem from Leidenberg. The line is now open. Please go ahead.

Hey, thanks, guys. People can't get my name right, but that's okay. I'm used to it by now. I had a question, DJ, you know, more philosophical. I mean, look, by the way, so, you know, I don't know if you think back on your time when you started here. that you would have gotten the company in the shape that's in right now. You know, kudos for, you know, for spearheading that. So, as you think about your market penetration and your market exposures, how should, how do you think about that? Do you think about, you know, market size in terms of AVR or in terms of number of properties or percentage of, of NOI or ABR, and where do you see smaller markets like Phoenix, which I guess you just bought an asset, and Mesa, you know, where is that going to grow, just like what you've done with Charleston and some of the other newer markets in your portfolio?

Hey, Forrest. It's a great question, and thank you for those comments. You know, let me start there. When I started here in 2019, and more importantly, when we listed the company in 2021, the company was in great shape. But, you know, I'd be lying by saying I didn't think that this platform could get to where it is today, and I'm more excited about where we're going. And it really is, I think, one of the things that is underappreciated and will continue to prove to our investor base and our tenants is the quality of the people in the platform at AdventRust. It really is something special, and we want to continue to push that year in, year out by growing cash flow and serving the communities the way we have been, and we will continue to commit to do so. As it relates to the portfolio, I think, like I mentioned earlier, we love the opportunity set that we see across the Sunbelt, even though the market is competitive. That's okay. We've been used to finding opportunities that fit our criteria in a competitive way. environment um you know i would say in phoenix it's a obviously it's a larger market um so when we think about that you know we don't mind growing continuing to grow phoenix and then using places like tucson or perhaps flagstaff as you know satellites uh you know maybe having one or two assets in in those smaller markets and operating out of a large market market like phoenix it's really that hub and spoke strategy that you see us do Charlie with Asheville and Charleston at Savannah. Those are the types of things where we can operate at a very efficient level and we don't mind going into some of those smaller complementary markets that have, by the way, really strong growth characteristics based on some of the migration trends just at the state level. As long as we're buying one of the higher quality or the highest quality grocery or or essential services types of center in those markets. And I think that that's what you'll continue to see from us as we look for new markets, as we look to further invest in some of our current markets, and then looking for that spoke strategy as an offshoot to some of those markets where we already have pretty good concentration and exposure.

Thanks. Maybe if I can add a follow-up. By the way, I like your disclosure on your splitting out your anchor and your small shop tenants, your lease economics and your spreads, et cetera. And it gets me to think that your leasing spreads on your shop tenants are equal to your anchor tenants. despite the fact you're probably getting significantly higher fixed rent bumps during the period of the lease as well, highlighting the attractiveness of this particular segment. As you think about unanchored, I know you talked a little bit about acquisitions with grocery anchors. There's a peer of yours that's pursuing this unanchored strategy. I think you have a couple of those kinds of centers in your portfolio. What are your thoughts on that and maybe leaning into your into shop heavy assets in your existing markets?

Oh, of course, it's a great question, and it's always a really interesting conversation and debate, because on one hand, getting income through anchors. or even like we have about, call it 10 to 11% of ground lease income that comes predominantly from anchors on a ground lease. That income is so sticky, but to your point, it is more bond-like. But in certain parts of the cycle, it's nice to lean on anchor rents because they are the highest credit and the most resilient in the different parts of the real estate cycle. um having said that you know to your point we do have uh you know a couple shadowing group centers and i think that's a strategy that works as well i think one of the things that's most important to us is understanding the ownership structure of the anchor itself we have no issue or very little issue with um bankers that are owned by the operator So if a grocer owns its own real estate, that's completely fine. A lot of the control dynamics of the center itself are very similar to whether they lease or own the space from us anyway. So it doesn't really change the conversation from a leasing dynamic or our ability to operate the property. It's very similar. You're just getting income or you're not. So we do look at continued shadow opportunities as long as we're comfortable with the acre structure uh and the like so um i think i know who you're speaking of i think that's a that's a sound strategy it can help from a growth perspective but it does come with a little bit more volatility because you're not sitting on that anchor income so that i think that that would mean that you're not pursuing an unanchored unless it's a shadow anchored uh uh uh grocer or something like that no uh No, that's not necessarily true. We've done some unanchored acquisitions. They tend to be more unanchored, like smaller lifestyle, if you will, as opposed to, let's call it, you know, 10 to 15,000 square foot strip unanchored retail. Those things, you know, those tend to be competitive. They're smaller dollar types of acquisitions, so there is a lot of competition in that market. But if we found one, especially one that was complementary to something that we already own, perhaps across the street or something like that, that's something that would be very interesting to us. So the one thing that we love about the canvas of opportunities that we have in our acquisition pipeline is it kind of runs the gamut from larger scale big box down to unanchored strip and everything in between. The most important thing is it meets the market criteria that has proven to be successful in our portfolio.

Thank you, Jay.

Thank you. We currently have no further questions, so I'll hand back over to DJ Bush for closing remarks.

Thank you, everyone, for your participation and your questions. We look forward to seeing many of you in, I guess, the several conferences that are coming up in the next couple of months. So until then, have a great day.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.