Rithm Property Trust Inc. Common stock

Greetings and welcome to the RPT Realty third quarter 2022 earnings conference call. At this time all participants are in a listen only mode. Our 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, Craig Bonino, Senior Analyst, Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us for RPT's third 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 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 31st, 2021, and in our earnings release for the third quarter of 2022. Certain of these statements made on today's call also involve non-GAAP financial measures. Listeners are directed to our third quarter 2022 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 investor 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, Craig. Good morning, and thank you for joining our call today. We are happy to report another solid quarter across all elements of our business. Overall, we are operating from a position of strength. Our capital recycling efforts for the year are now complete. We have closed on about 225 million of acquisitions located primarily in Boston and Miami that were funded on a largely leverage and earnings neutral basis with asset sales in Chicago, Detroit, Columbus. The balance sheet is in great shape. Today we have no debt maturing until 2025. Roughly 95% of our debt is fixed. We have a clear pathway to leverage in the low sixes as our sign not open or S&O commences. Our S&O balance jumped 60% since last quarter to a record high of 14 million led by another strong quarter of leasing volume and that pushed our lease rate to 94%. S&O represents about 8% of annualized third quarter NOI, giving us strong visibility on healthy organic growth into 2023 and beyond. In the quarter, we closed on the transformational acquisition of Mary Brickell Village in the heart of downtown Miami. We have been actively integrating this asset into our portfolio through our in-house design studio, as well as with Gensler, a leading architecture firm. We have developed placemaking and modernization plans that will help drive our significant mark-to-market opportunity at MBV. Today, we are thrilled with the tenant demand at this asset and are experiencing unsolicited strong interest from world-class operators. Recent lease comps are over 50% above our underwriting, and we are currently in negotiations with several first-to-market tenants at rents in the $130 per square foot range. As a result, we are being extremely measured in how we strategically curate the ideal mix of tenancy. Our goal is to deliver the best possible customer experience that results in optimal foot traffic, sales productivity, and rents. Longer term, Gensler is also helping us envision the future at Mary Brickle, which will include significant densification. Our site is owned for up to 4.1 million square feet of residential, office, or hotel use, which gives us great optionality for future value creation. Simply put, Mary Brickle is stronger and has significantly more upside than we originally thought. Turning to our value-enhancing, re-merchandising, redevelopment, and outlet expansion pipeline, Today we have roughly 14 active projects totaling $57 million that are expected to generate a weighted average return on costs of about 10%. Due to the demand at our centers and our hands-on asset management approach, this set of opportunities has increased from effectively zero at year-end 2020. Last week, we closed on the contributions of two Midwest assets into the Grocery Anchor joint venture. These sales provided earnings-neutral funding for Mary Brickell after factoring in management fees and signed leases scheduled to open next year. This is on the heels of selling two assets located in Chicago and Detroit during the third quarter. Before turning the call over to Mike, I wanted to provide some additional color on two retailers that have been in the news as of late, as Regal and Bed Bath & Beyond. We have a proven track record of proactively recapturing space and releasing to higher quality tenants at double-digit returns. These opportunities are no different. We are playing offense given the robust demand at our centers, and the leasing team is firing on all cylinders. At the end of the quarter, we had three leases with Regal that are paying us $25 per square foot and account for 2.4% of ABR. All three are freestanding, making them easier to backfill or repurpose if needed. By way of example, during the third quarter, we proactively recaptured a Regal at River City Marketplace in Jacksonville that we released to BJ's Wholesale Club. Not only will this trade significantly improve the credit of the asset when the BJ lease starts in early 2024, but it will also more than double the cash flow we are getting from Regal. Additionally, we expect cap rate compression for the overall center given the upgrade in tenancy. This is a great example of how the pandemic created an opportunity for us as we were able to obtain a recapture rate as part of our deferral negotiations with Regal. Our remaining locations are at Deerfield Town Center in Cincinnati, Providence Marketplace in Nashville, and The Crossings in Boston, with expirations in 26 and 27. Each of our remaining Regals are strong performers that are well situated within their respective markets, and have experienced strong improvements in traffic since 2020 and year over year. In the case of the Crossings, the closest national theater is over 35 miles away. Regarding Bed Bath, we have eight Bed Bath and four Bye Bye Baby stores in the portfolio that account for 2.4% of our ABR. Our stores have a low average ABR per square foot of $1,159, which is about the lowest rent amongst our peers. We believe replacement rents would be in the mid-teens, providing a strong mark-to-market opportunity. We have seen good demand for each of our locations from a wide range of tenant types, including grocers, discount apparel, home furnishings, and sporting goods. Given the overall supply, demand, and balance for high-quality retail real estate in strong markets and our below-average in-place rents, we see this as an opportunity to drive earnings and improve tenant quality over time. With that, I'll turn the call over to Mike.