SITE Centers Corp.

Good morning and welcome to the Site Center's Reports first quarter 2023 operating results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would not like to turn conference over to Stephanie Roosterprez Vice President of Capital Markets. Please go ahead.

Thank you, Operator. Good morning and welcome to Site Center's first quarter 2023 earnings conference call. Joining me today are Chief Executive Officer David Lukes and Chief Financial Officer Connor Fenerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at www.sitecenters.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ material from our forward-looking statements. Additional information may be found in our earnings press release and in our filings of the SEC, including our most recent report on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO, and same-store net operating income. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Thank you, Stephanie. Good morning, and thank you for joining our first quarter earnings call. We had a strong start to the year with results ahead of budget, another productive leasing quarter, which pushed our lease rate to an all-time high of 95.9%, and continued progress on the lease-up, construction, and delivery of our Tactical Redevelopment Pipeline, with deliveries set to ramp into year end. The net result of all this activity is a $19 million signed, not open pipeline, with commencement sent to accelerate over the next few quarters into 2024, which provides a significant tailwind for the next several years. I'll start with some comments on leasing and tenant activity, including bankruptcies, in light of recent macro and capital markets volatility, and then move to transactions before handing it over to Connor to give more details around the quarter and revised 2023 guidance. In terms of leasing, the trends that allowed us to achieve the leasing volume and economics over the last three years remain in place despite significantly more macroeconomic concerns. Supply in our sub markets is extremely low and demand remains strong this quarter from national retailers looking to expand their footprints in the wealthiest suburban markets where we operate. Recent mobile phone data supports the fact that suburban customers are visiting our properties more frequently and more evenly spread through the week than pre-pandemic levels. And we were correct in our belief that this would ignite demand for store locations, offering convenient access to goods and services. Beginning in 2020, we made a number of changes to position our organization to capture this demand and maximize leasing velocity, and it feels like those changes continue to bear fruit. Leasing demand can be highly cyclical and correlated with the overall economy, but to date, we just haven't seen anything material of note that would indicate a slowdown. The one change that we have seen this year, as I noted in February, is the return of chain bankruptcies, including Party City and the widely anticipated filing of Bed Bath & Beyond this past weekend, among others. I'll provide an update on these two identified tenants, as we don't have any real exposure to the other tenants that have filed to date. For Party City, site had 17 locations at quarter end, with total exposure of about 90 basis points of base rent. At this time, we do not expect any of these locations to be rejected or stores to close with no material impact to full-year NOI. This result is a function of the high sales productivity within our portfolio, our asset quality with properties located in the top suburban markets in the U.S., and demand from other credit tenants for space, which provided us with significant leverage as we engaged with Party City. The final outcome is dependent on the company's emergence from bankruptcy, but we are really pleased with the results to date and the implicit stamp of approval on our real estate. Shifting to Bed Bath & Beyond, we have 17 locations, including four buy-by-baby stores, which represent 1.8% of base rent. Now that we finally have clarity on timing and control, we feel extremely well prepared for a focused marketing cycle and are confident that number one, there are single user backfill options for 16 of those locations, given the amount of inbound activity we've seen over the last several months, and two, that the majority of our stores will have executed leases over the next 12 months with rent commencements by year end of 2024. Part of our confidence in demand for these spaces is the fact that our portfolio of assets that contain a bed bath or a buy-buy baby has a current lease rate of 99%. This portfolio has zero junior anchor space available, So the opportunity to access these properties is very attractive to growing national retailers. As you can imagine, we would very much like to recapture space from weak tenants while demand for that space is strong. So our leasing team has been highly focused on replacement tenants in preparation for the chance to upgrade our tenant roster at Materially Better Economics. One such tenant upgrade executed in the first quarter was a new lease for a specialty grocer at our tenant-borne property in Portland. That will replace two legacy junior anchors that we terminated last year. That lease brings the tactical pipeline to over 88% leased, with deliveries expected to ramp into year-end. We made additional progress on a few other key locations in the first few months of 2023.