Rithm Property Trust Inc. Common stock

and welcome to RPT Reality second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Mr. Vinh Chow, Managing Director of Finance and Investment. Please go ahead.

Good morning, and thank you for joining us for RPT's second quarter 2022 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 that 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, 2021, and in our earnings release for the second quarter of 2022. Certain of these statements made on today's call also involve non-GAAP financial measures. Listeners are directed to our second quarter 2022 and first quarter 2022 press releases, which include definitions of those non-GAAP measures and reconciliations of 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.

Thanks, Vin. Good morning, and thank you for joining our call today. Since joining the company in 2018, our team knew that this would be a turnaround story, one that required upgrading the portfolio, strengthening our cash flows, implementing strong governance, optimizing our operations team to lease, lease, lease, and attracting the best talent out there. Our data-driven investment and operating platforms that we put in place over the last four years allowed us to do just that. This company has been significantly transformed. We have significantly upgraded the portfolio quality and strengthened cash flows, positioning us for exceptional operational results. We had another excellent quarter thanks to our outstanding team. We continue to make meaningful strides towards our strategic vision for the reimagined RPT, highlighted by the accretive generational acquisition of Mary Brickell Village in downtown Miami in July. This is the 13th open-air shopping center that we have acquired in the last year, equating to about $840 million of value. To put this in context and considering our 2022 expected capital recycling activities, almost 50% of our ABR will be in the top growing markets in the Boston and some regions in the country. The transformation of the company has led to our fifth consecutive quarter of year-over-year top and bottom line growth, and we continue to experience wind at our back with operating fundamentals holding steady with a strong backload of rents, and double-digit releasing spreads that we expect to drive growth over the next several years. Lastly, we would like to thank our banking partners for their support. We were significantly oversubscribed on our credit facility recast, which will result in improved duration and stronger liquidity. As we have been saying for some time, a relatively smaller size is an advantage that has allowed us to rapidly reshape our portfolio towards higher demand markets with better population growth, job growth, household income, rent growth, sales performance, and essential tenancy, all of which are important factors in this period of economic uncertainty. In a pandemic shortened last four years and considering our remaining 22 investment goals, we have turned over 30% of the portfolio into markets like Boston, Miami, Tampa, Nashville, and Atlanta. These markets now account for about 40% of our ABR, which has nearly doubled since 2019. And for that same period, markets where we are over indexed, like Detroit and Chicago, are expected to fall about 50% to a blended 14% of our ABR. Overall, our capital recycling efforts were aligned with our buybacks, accreted earnings, leverage, and portfolio quality, which we believe translate into superior cash flow strength. Through this process, we have also been able to improve our tenancy, replacing weaker credit tenants with the likes of Whole Foods, Wegmans, multiple TJ Maxx concepts, BJ's, Ulta, Walmart, Giant Ahold, Nike, and much, much more. By improving the tenancy, we get the ancillary benefit of driving cap rate compression at our centers, particularly in cases where we're adding a grocer to a previously non-grocery anchored center, like at River City Marketplace in Jacksonville, Highland Lakes in Tampa, and Trey Marketplace in Detroit. or significantly improving the existing grocery as we are doing at Crofton Center in Baltimore. We have much more to follow at other centers as well. Including our Sign Not Commence, properties for which we have a grocery component will contribute over 71% of ABR, up from 65% at the end of 2019. These efforts have created a halo effect for our small shop leasing initiatives, which help drive cross-shopping, sales performance, and rent growth. This quarter we signed 26 new small shop leases with strong national tenants like Chase Bank, Fifth Third Bank, Massage Envy at an average ABR per square foot of $31.92, which is 27% above our in-place small shop average. Our small shop lease rate is now at 86.4%, up almost 3% since the end of the second quarter of 2021, the strongest increase we have experienced since pre-COVID. I began my remarks by discussing the progress we've made in transforming our portfolio. The key drivers of this rapid transformation have been our three unique investment platforms. In 2021, we were the top buyer of open-air shopping centers, and have followed up this year with another $375 million of acquisitions, or $223 million at our share. During the second quarter, we closed on more acquisitions in the Boston MSA, including the crossings, and Brookline Village. Both are great additions to the portfolio and continue to build on our scale in Boston, which is now our second largest market based on ABR. In July, we closed on the acquisition of another first ring center through our Grocery Anchor joint venture platform. Mary Brickle Village is an iconic and generational asset, one of the top open air centers in the country. This property is truly reflective of the new RPT brand, offering cash flow stability, visible near-term growth, attractive long-term growth potential, and finally, significant future value creation potential through densification. Miami is a market that we have been actively combing for investment given the gravity of the market, which is becoming of Manhattan in the South, with firms like Citadel, Blackstone, Goldman Sachs, Point72, and Elliott Management all recently setting up shop in Miami and West Palm Beach. With Mary Brickle, our Miami exposure rises to over 7% of our ABR. Mary Brickell is all about the density, which is unmatched within our portfolio, as you can see from the statistics we provided in a separate press release that we posted last night. This is simply a great asset in a great location. In addition to the strength of the location, Mary Brickell is also home to an attractive tenant lineup, anchored by a top-performing Publix that is doing more than two times the Florida average in sales per square foot. Overall, tenants do extremely well here, averaging 1,100 per square foot in sales, with an active 24-hour cadence fueled by a complementary mix of food and beverage, service, and necessity tenants. National and regional tenants account for over 60% of the ABR of this center, with almost six years of remaining term, providing cash flow stability. Placemaking will be a major component for success here, and we have been off to a quick start. While we see a strong and stable lineup today, we also expect above-trend NOI growth at the center, primarily driven by signed leases that have yet to commence. Average rent escalators of about 2.5% and below market rents. Market rents in Brookville have grown by over 40% over the last decade. This is a $45 ABR per square foot center in a market where the last several tenants have signed leases over $100 per square foot. The demand is robust. Coupled with the fact that this behaves as more of an urban street front setting, tenant allowances will be much lower than your typical suburban shopping center. This is a supply-demand imbalance scenario at its finest. Longer term, we believe unlocking the air above certain components of the center is where the most value could be made at the site. It's one of the most sizable donut holes remaining in the area. Today, the center is 200,000 square feet, but a zone for development of up to 80 stories and about 4.1 million square feet of residential, office, or hotel. The strength of the market for each of these property types gives us significant optionality as we consider future plans. Be sure to check out page 44 in our investor deck. The stats for both office and residential are staggering. From a land perspective, we acquired Mary Breckle for $42 million per acre, which compares favorably to a parking lot just a few blocks away that just sold for $145 million per acre. Although we did not acquire the property based on development value, we do see this as a material potential driver of future upside. We believe that good things happen to good real estate, and this is great real estate. As you can clearly see, we can play in multiple different sandboxes within the retail real estate ecosystem. Scaling in our target markets amongst the first ring urban types of real estate, grocery anchored centers, and core power centers continues to be our vision and our strategy. Having detailed market knowledge and large GLA exposure in these markets allows us to optimize our on the ground operations teams, leverage our retail partners, and gain access to greater deal flow on the investment front. We will continue to be highly targeted and data driven with our capital allocation decisions in order to maximize shareholder value. And with that, I'll turn the call over to Mike to discuss our financial performance, acquisition funding details, balance sheet management initiatives, and an updated outlook. Mike?