Rithm Property Trust Inc. Common stock

Greetings and welcome to the RPT Realty second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Vin Chow. Thank you, Vin. You may begin.

Good morning and thank you for joining us for RPT's second quarter 2021 earnings conference call. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Additionally, statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks could cause actual results to differ from expectations. Certain of these factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2020, and in our earnings release for the second quarter of 2021. Certain of these statements made on today's call also involve non-GAAP financial measures. Listeners are directed to our second quarter press release and our first quarter press release, which include definitions of those non-GAAP measures and reconciliations to the nearest GAAP measures, and which are available on our website in the Investors section. I would now like to turn the call over to President and CEO Brian Harper and CFO Mike DesMorris for their opening remarks, after which we'll open the call for questions.

Thank you, Ben. Good morning and thank you for joining our second quarter 2021 conference call. I hope you and your families are all well. Although the pandemic has created many challenges, we are seeing a resurgence in open-air shopping center demand as retailers gain a better understanding of the importance of a robust omnichannel distribution platform that includes well-located bricks-and-mortar retail. Similarly, investors have taken notice and have been allocating more capital towards open-air shopping centers. This is leading to compressing cap rates for certain retail segments in the private markets, unlocking M&A opportunities in the public markets, and recently culminated in the shopping sector's first IPO since 2013. At RPT, we spent the last three years thinking strategically and outside the box to reinvent, advance, and differentiate our company. This exercise led to the formation of our grocery anchored R2G joint venture and our groundbreaking net lease platform, RGMZ. Together with our wholly owned portfolio, we have created a powerful engine that will drive our business forward and unleash opportunities across multiple retail channels, which we expect will result in strong and sustainable growth. Within our investments platform, we have always used a rigorous underwriting methodology and acted with discipline and patience. Investments in our buy box must be accretive to portfolio quality, earnings, and the balance sheet, and be in our strategic markets. With these must-haves, RPT transformed on a scale and at a speed that exceeded our own expectations. And we are excited to share the considerable accomplishments of the reinvented RBT. During the depth of the pandemic in 2020, while we were working on RGMZ, we were also cultivating a significant investment pipeline. We took a thoughtful and analytical approach to curate our external growth in markets like Boston, Atlanta, Tampa and Nashville that are flourishing in today's modern landscape. Thankfully, our timing worked out very well. While each of our acquisition markets has its own unique set of economic drivers, we believe they will all experience strong growth over the long term, which should position the portfolio well in the coming years. Boston, for instance, is seeing a wave of demand centered around the life science industry, and our centers have significant adjacency advantages with 186 life science companies within a 10-mile radius of the four Boston properties that will soon be part of the portfolio. Once the remainder of our deals close and net of expected parcel sales, Boston will become our third largest market at just under 8% of ABR. This underscores our size advantage versus peers, as we can quickly reshape our portfolio, which is particularly important in today's rapidly evolving landscape. Let me give you a few highlights on our investments in Boston that will fit in nicely with our previously acquired Wegmans Anchored Northboro Crossings property and collectively boast a robust 148,000 household income within a three-mile radius. Bedford Marketplace in the Boston MSA is situated in a highly affluent suburb right outside the 128 Loop with a three-mile average household income of $193,000. This is a center where Whole Foods is doing over $1,000 per square foot and has a fresh, newly renewed 15-year lease term. Marshalls has been here since 1973 and is also doing extremely well. Shops at Canton. This is $133,000 household income within a three-mile radius. This is a top-volume Shaw's Anchored Center where the small shop demand is robust. The expected NOI CAGR on this asset is about 4%. Lastly, we are in negotiations on a true infill grocery anchored center inside the 128 loop with above average household incomes and population densities versus our portfolio averages with the potential for future densification opportunities given its size and proximity to Boston. In total, since our last call, we closed or are under contract on eight multi-tenant deals and are in advanced contract negotiations on a ninth asset with a gross value of $500 million, covering 2.6 million square feet, which will increase our AUM by over 20%. To put this in context, this level of activity equates to almost 50% of our equity market cap, which is quite remarkable. RPT's pro-rata share of all this activity and after expected parcel sales are complete will be around $285 million. We were only able to execute at this scale because of the power of the platforms that we put together over the last 18 months. As we discussed last quarter, Northboro is a $104 million deal we might not have pursued without RGMZ given the large ticket size. Our partnership with RGMZ also made Northboro a much more attractive use of capital, given the yield enhancement that we expect to generate upon the sale of certain parcels to RGMZ. In the Southeast region, we acquired a $115 million for-property portfolio that was split between all three platforms, RPT, R2G, and RGMZ. Let me give you a breakdown of this portfolio. Let's start with Eastlake in Tampa. This is another grocery anchored center that was added to the R2G portfolio. This center is anchored by a high volume Walmart neighborhood market and over 65% essential or investment grade tenancy. Noonan Pavilion. This is a community center in the Atlanta MSA with a strong lineup of Aldi, Home Depot, and Ross. We are selling the Home Depot and Longhorn to RGMZ, and RPT is left with an Aldi anchored center and an 8.6% yield with almost 80% essential or investment grade tenancy. On balance sheet, we bought Woodstock Square in suburban Atlanta. This center is shadow anchored by one of the highest volume super targets in the Atlanta MSA. The center is in the heart of the rapidly growing northwest corridor of Atlanta, and is adjacent to a luxury rental community owned by Graystar. We see great mark-to-market opportunities on both the small shop and junior boxes at the center. Woodstock has also demonstrated great stability over the years and has retained its original anchor tenants since it was developed in 2001. Another balance sheet deal is Bellevue Place in suburban Nashville. This center sits on incredible real estate, where we have conviction around a small redevelopment with a potential future grocer ad. To put everything we've done into context, R2G and RGMZ provided us with a lower cost of capital than we could have achieved even after the rally in our stock price since November. This lower cost of capital combined with the yield enhancements from fees and multi- to single-tenant arbitrage opportunities allowed us to lock in higher economic spreads on our capital than we could have otherwise have achieved in the public markets, thereby accelerating our earnings growth and our portfolio transformation. In summary, the power of our platforms is allowing us to grow earnings, and to advance our strategic objectives faster than we could do on our own. Given the level of acquisition activity, we put together an additional investor presentation that showcases our recent deals and provides insights into our market strategies. When time permits, please take a look. On the operational front, our second quarter results reflected RPT's reshaped portfolio and platform. We continue to rebound from the COVID-induced downturn with another strong leasing quarter. We signed 58 leases covering 442,000 square feet in the second quarter, which is 59% above the trailing 12-month quarterly average leasing volume we reported last quarter, highlighting the strong demand for our high-quality open-air centers. Demand has been particularly robust from the junior anchor category, and it's as high as I've ever seen in my career. Leasing highlights for the quarter was an REI deal at Town & Country in St. Louis that replaced the majority of a former Steinmart space and a Lululemon deal. Both of these new tenants will significantly improve the vibrancy of the centers, making them more attractive for both customers and retailers alike, while also improving the credit of the portfolio. Reflective of the strength of the off-price category, we signed two new Burlington deals this quarter. The first is at Winchester Center, where we are replacing our last Dymart box, and the second is at Shops at Lakeland, where we were replacing an office supply tenant. Our leasing pipeline is robust, as we are in negotiations with several grocers and wholesale clubs and are eager to announce those soon. Underpinning all of the accomplishments of the quarter is our belief that value creation lies in our ability to improve the quality, sustainability, and growth of our cash flows. Our success in replacing weaker tenants with stronger ones and our increased exposure to Boston and Atlanta speak to the improved quality and sustainability of our cash flows. Our increased guidance and the 60% increase in our quarterly dividend reflects our accelerated growth trajectory. With that, I'll turn the call over to Mike to discuss our financial and operational results and our updated guidance in more details. Mike?