Rithm Property Trust Inc. Common stock

Greetings and welcome to the RPT Realty Third Quarter 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Vin Chow. Senior Vice President of Finance. Thank you. Please go ahead.

Good morning, and thank you for joining us for RPT's third 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 third quarter of 2021. Certain of these statements made on today's call also involve non-GAAP financial measures Listeners are directed to our third quarter 2021 and second quarter 2021 press releases, 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 Fitzmaurice for their opening remarks, after which we will open the call for questions.

Thank you, Ben, and good morning, and thank you for joining our call today. We had another very strong quarter, resulting in another raise in our 2021 operating FFO guidance. We experienced balanced success across all our disciplines as we continue to refresh our portfolio, tenant mix, liquidity, and balance sheet, all of which position us to deliver on future earnings growth. We closed on several high-quality acquisitions across all three of our strategic investment platforms, bringing our gross acquisition volume to $500 million in 2021. We continue to see strong demand for space in our centers and signed a number of key leases with well-capitalized tenants, driving our accelerated sign-not-open balance to almost $4 million. And lastly, We raised or received commitments on $670 million of capital from our equity, debt, and joint venture partners, strengthening our liquidity profile and balance sheet. Starting off with our capital-raising efforts, I'm very pleased with GIC's recent commitment of an additional $500 million to our core grocery-anchored R2G platform, positioning that platform to scale up to $1.7 billion. We believe this is an endorsement of RPT and our ability to create value. We are grateful to be in the company of top-tier REITs like Ventas, Boston Properties, Equinix, and others that have partnered with GIC. The new commitment provides us with the firepower to further accelerate our portfolio transformation while enhancing our management fee income stream. We also recently obtained commitments for $130 million in the debt private placement market and received another $40 million through our ATM, demonstrating our ability to access multiple sources of capital to accretively fund our growth plans. Turning to investments, the size of our portfolio is an advantage as it allows us to rapidly reshape our geographic exposures towards higher growth and more durable markets like Boston. which is now our third largest market. We also increased our exposure to Atlanta and Tampa while reducing our concentrations in Detroit, Cincy, and Chicago. This real-time shift in our mix not only improves our geographic diversification, but also increases our visibility with retailers, brokers, and other stakeholders, which is leading to increased deal flow on both the leasing and acquisition fronts. To support our data-driven investment decisions, we have an in-house data scientist who developed a proprietary asset scoring model that combines advanced data analytics with the collective knowledge and experience of our investments, leasing, property management, and portfolio management teams. With this dynamic tool, we can continually assess our existing and and potential future properties in real time to inform our capital allocation decisions. Our scoring model was a key advantage for us as we underwrote our recent acquisitions and will continue to be used as we assess our future acquisitions and end dispositions through the lens of quality, balance sheet, and earnings accretion. Regarding the acquisition environment, we are currently experiencing a very competitive landscape to acquire high-quality shopping centers, where cap rates for grocery anchorage centers and top U.S. metros are down approximately 50 basis points over the past few months. As a result, we believe the 500 million of acquisitions that we closed on so far could be up as much as 10% relative to our transacted prices. Despite the recent cap rate compression, our three investment platforms provide us a competitive advantage to acquire at higher returns, allowing us to remain active on the acquisition front in our target markets. We continue to work tirelessly, sourcing additional acquisitions, focusing primarily on off-market relationship-driven opportunities, and expect 2022 to be another active year. We continue to see a healthy pipeline of deals for grocery anchored centers, smaller strips and wealthy infill suburbs in our core communities, and larger high quality centers over 70 million where we can allocate the real estate between our platforms. We also see unique opportunities to acquire value add or opportunistic centers where we can utilize our tenant relationships to create significant value after the purchase. For example, we are currently under negotiation to buy an asset in the Southeast that has an empty anchor box related to a recent tenant bankruptcy. We are in lease negotiation with a premier investment grade grocer to take that space, which will drive the occupancy to about 99%, resulting in an estimated stabilized yield on cost of 7% in a five cap rate market. On the other side of the coin, current market demand is also creating opportunities for us to monetize assets at attractive yields in non-core markets. Earlier this week, we closed on the sale of Market Plaza in the Chicago market for $30 million. We received 11 offers and sold the property at a high five buyer's cap rate. Chicago is not a market that we are looking to expand in due to the less than business-friendly political environment. We are also exploring other opportunities to further reduce our exposure to non-strategic markets and take advantage of the current frothiness in the private markets. Now turning to operations, we continue to drive rent and sign leases with high credit essential tenancy. This quarter, we signed a lease with a new investment grade grocer at our Crofton Center in Baltimore, which is replacing a shopper's food warehouse. In October, we signed an expansion lease with Publix at the Crossroads in Palm Beach. This will be a brand new flagship prototype store, demonstrating Publix's commitment to the center and cementing the anchor tenancy for years to come. In both cases, we locked in strong credit anchors, thereby enhancing the durability of the cash flows at these centers. We also signed a new medical tenant, Piedmont Urgent Care, that replaces a sit-down restaurant at Promenade at Pleasant Hill, just outside of Atlanta, swapping a high COVID risk tenant for an essential tenant at a mid-20% spread to the old rent. Not only were we able to reduce tenant risk, but we were able to do so at Attractive Economics. Lastly, we signed a new deal for a Ferguson Gallery showroom at Providence Marketplace in the Nashville market. This will be Ferguson's first showroom in Nashville, which we think will be a premier destination for residents to access the latest concepts in quality home fixtures and appliances. With only five to six Ferguson showroom openings in a typical year, we think this deal is a testament to the strength of our center. For those of you that are not familiar with Ferguson, they are a $34 billion market cap triple B plus rated credit, and the largest U.S. distributor of plumbing and second largest distributor of industrial products. We think there will be an attractive regional draw for the property based on the strong demographic match between the center and the Ferguson customer profile. Looking forward, our leasing team remains active with a solid pipeline of deals lined up for the fourth quarter. Notably, we are seeing strong demand in Florida, Boston, and Detroit, where we are in negotiations on a number of major box deals, ranging from grocer to off-price retail, as well as several national small shop deals. Notably, we have seen a major pickup in demand in Detroit over the past few quarters and are in negotiations on over a half a dozen grocer deals and another eight to 10 box leases with discount apparel, pet, outdoor recreation, and home good retailers. With that, I'll turn the call over to Mike.