NASDAQ:ROIC Retail Opportunity Investments Q4 2023 Earnings Report $17.51 +0.02 (+0.11%) Closing price 02/12/2025Extended Trading$17.51 0.00 (0.00%) As of 02/12/2025 04:06 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Retail Opportunity Investments EPS ResultsActual EPS$0.06Consensus EPS $0.27Beat/MissMissed by -$0.21One Year Ago EPS$0.27Retail Opportunity Investments Revenue ResultsActual Revenue$84.60 millionExpected Revenue$81.09 millionBeat/MissBeat by +$3.51 millionYoY Revenue Growth+5.50%Retail Opportunity Investments Announcement DetailsQuarterQ4 2023Date2/15/2024TimeAfter Market ClosesConference Call DateThursday, February 15, 2024Conference Call Time12:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Retail Opportunity Investments Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 15, 2024 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Welcome to Retail Opportunity Investments 2023 4th Quarter and Year End Conference Call. Participants are currently in a listen only mode. Following the company's prepared remarks, the call will be opened up for questions. Now I'd like to introduce Lauren Severa, the company's Chief Accounting Officer. Speaker 100:00:20Thank you. Before we begin, please note that certain matters, which we will discuss on today's call, are forward looking statements within the meaning of federal securities laws. These forward looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward looking statements. Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10 ks to learn more about these risks and other factors. In addition, we will be discussing certain non GAAP financial results on today's call. Speaker 100:01:00Reconciliation of these non GAAP financial results to GAAP results can be found in the company's quarterly supplemental, which is posted on our website. Now, I'll turn the call over to Stuart Tanz, the company's Chief Executive Officer. Stuart? Speaker 200:01:16Thank you, Lauren, and good day, everyone. Here with Lauren and me today is Michael Haines, our Chief Financial Officer and Rick Schoebel, our Chief Operating Officer. Notwithstanding 2023 having been a year of extraordinary challenges for certain commercial real estate asset classes and certain CBD markets across the country, in distinct contrast, the long term core drivers The grocery anchored sector remained fundamentally sound, especially as it relates to our portfolio in a highly protected Sought after West Coast Markets. Capitalizing on the strong fundamentals, we achieved a number of new leasing records and milestones for the company. For the 14th consecutive year, we leased essentially double the amount of space that was originally scheduled to mature. Speaker 200:02:09Specifically, in 2023, we leased over 1,700,000 square feet achieving a new record for the in terms of overall leasing activity. Additionally, we again achieved re leasing rent growth for a record 11th consecutive year, including 11 years in a row of achieving double digit growth on same space new leases. Importantly, we worked at strategically renewing early a number of key valued anchor tenants, including long standing grocer tenants. By doing so, we enhanced the long term strength and stability of ROIC's core anchor income stream well into the future. We also continue to implement our long standing strategy of proactively enhancing the tenant mix across our portfolio through seeking out opportunities to recapture early and re lease select spaces. Speaker 200:03:06Going forward, this will not only serve to enhance the strength of our tenant base and appeal of our properties, it will also serve to grow our income stream having achieved higher releasing rents. In terms of acquisitions, in light of the considerable uncertainty in commercial real estate during 2023, The West Coast acquisition market sat essentially idle through much of the year. While it was sitting idle, we continue to maintain an active dialogue with our long standing off market sources in order to be in a strong position to capitalize on unique opportunities when the market began to pick up again. To that end, during the closing months of 2023, certain private owners started to become more active in seeking to transact. Capitalizing on this, in December, we acquired an excellent neighborhood grocery anchored shopping center that we had our eye on for some time. Speaker 200:04:02The property is located in the Los Angeles market in a densely populated mature diverse community. The center is anchored by a well established supermarket There's a long time national tenant of ours. The seller was a private owner that was in need of a closing before year end. Given our knowledge of the market together with our knowledge of the property and tenant roster, we were in a strong position to facilitate an efficient closing and in return achieved attractive pricing, including a cap rate in the high 6s for what is irreplaceable sought after real estate. Looking ahead, based on what we're currently seeing, market activity for acquisitions could resume on the West Coast in 2024, potentially in earnest. Speaker 200:04:48Turning to our balance sheet. During 2023, we worked diligently to enhance our long term financial strength and profile through implementing a number of strategic capital market initiatives, including reentering the public bond market, balancing our debt maturity schedule, while also reducing our floating rate debt and extending our credit line maturity as well as raising a bit of equity in connection with the acquisition. Now Speaker 300:05:16I'll turn Speaker 200:05:16the call over to Michael Haynes, our CFO, to take you through the details of our balance sheet initiatives as well as our financial results for 2023 and initial guidance for 2024. Mike? Thanks, Stuart. Speaker 300:05:31Starting with our financial results. For the year ended 2023, total revenues reached a new record high of $328,000,000 Offsetting record revenues, interest expense during 2023 increased notably as a result of higher interest rates. In terms of net income, for the year 2023, GAAP net income attributable to common shareholders totaled $35,000,000.27 per diluted share. With respect to funds from operations, FFO for the year 2023 totaled $141,000,000 equating to $1.06 per share. Net operating income for 2023 on the same center comparative cash basis increased by 3.7% over 2022. Speaker 300:06:15Turning to our financing activities, during 2023, we raised in total $363,000,000 of capital, dollars 350,000,000 of which were raised in September through a public offering of unsecured senior notes. As Stuart noted, it was the first time raising capital in the public bond market in nearly a decade. Accordingly, we made a concerted effort to fully engage with the market, having discussions with a broad and diverse mix of investors, a number of which were new to the company. We utilized the proceeds from the offering to retire the $250,000,000 of senior notes that matured in December. Additionally, we retired early $100,000,000 of floating rate debt. Speaker 300:06:56Also in the midst of the Fed's rate tightening, we stopped $150,000,000 in floating rate debt to fixed rate. As such, at year end, Just 9% of our total debt outstanding was effectively floating rate, down significantly from a year ago when our floating rate debt was 28% of our total debt outstanding. Along with proactively lowering our floating rate debt earlier in the year in light of the regional banking turmoil, we proactively extended the maturity of our credit line, sending a maturity date out to 2027 with the ability to extend it for an additional year to 2028. We also have the ability to double the capacity of the credit line from its current capacity of $600,000,000 up to 1,200,000,000 Additionally, in the context of what happened in the regional banking sector this past year, it's important enough that we just had 2 mortgages that together only totaled about 60,000,000 Looking ahead, come April, when one of the 2 loans mature, we were down to only 1 mortgage remaining. In addition to lowering our floating rate and secured debt, During 2023, we continue to work in enhancing the company's financial ratios, including the company's net debt ratio. Speaker 300:08:01We ended the year with a net debt ratio of 6.2 times for the 4th quarter, which is the lowest that our net debt ratio has been dating back to 2014. Looking ahead, our debt maturity schedule is well laddered over the next 5 years with approximately $300,000,000 maturing each year on average. Having now reestablished ROAC in the public bond market, our objective is to be a consistent annual issuer going forward. Looking at 2024, addition to refinancing senior notes that mature at the end of the year, we may also look to refinance our term loan and credit line borrowings with long term fixed rate bonds depending upon market conditions as the year progresses. With respect to equity capital, in light of the acquisition that Stuart discussed, In December, we issued common stock through our ATM raising approximately $13,000,000 In terms of guidance for 2024, we currently expect core portfolio NOI will continue to grow, driven by a combination of contractual rent increases together with expected re leasing rent growth. Speaker 300:08:59Additionally, as Stuart touched on, we are anticipating that the acquisition market will become active and favorable again. Accordingly, we currently to acquire between $100,000,000 to as much as $300,000,000 of shopping centers net of dispositions. To fund acquisitions, our guidance assumes that we will issue equity In step with the acquisition activity, as we move through the year, with the goal of keeping our financial ratios intact as we grow our portfolio. Moderating our expected external internal growth will be interest costs. Based on the bonds that we issued in 2023 Together with our projected acquisition and refinancing activity, we currently expect that the company's interest expense will be in the $78,000,000 to $80,000,000 range for 2024. Speaker 300:09:40Additionally, in terms of bad debt, our guidance assumes a range of $3,000,000 to $5,000,000 although our current expectation is that it would be more towards the lower end based on the overall strength of our tenant base today. Taking into account all of these factors and other various assumptions, we have set our initial FFO guidance range for 2024 at $1.03 to $1.09 per diluted share. Now I'll turn the call over to Rich Schoebel, our COO. Rich? Speaker 400:10:04Thanks, Mike. As Stuart highlighted, 2023 proved to be one of our best years in terms of leasing. Demand for space across our portfolio continues to be consistently strong as a diverse mix of long standing tenants together with new concepts and businesses seeking to expand to the West Coast continue to buy for space. These diverse businesses are predominantly destination type tenants in the wellness, self care restaurant service and entertainment segments. Most important from our perspective is their keen interest in leasing space at select shopping centers that are well located in diverse communities and have an established grocer as the core daily draw, which is exactly what our portfolio offers. Speaker 400:10:49Capitalizing on the demand, as Stuart highlighted, during 2023, we achieved a new record for the company, Leasing over 1,700,000 square feet in total. The bulk of our activity centered around renewing longstanding tenants. Specifically, we renewed approximately 1,300,000 square feet during 2023 and over half of that involve renewing valued anchor tenants including long standing grocers with a number of tenants coming to us early to renew some by as much as over a year in advance of Speaker 300:11:22their lease Speaker 400:11:23maturities. In terms of new leasing activity, given the lack of available space across our portfolio and the modest amount of space that was scheduled to mature during 20 We made a concerted effort to proactively recapture select spaces focusing on sought after anchor and pad spaces, spaces that are well suited for the type of businesses that are leading the demand. In total, We successfully executed upwards of 400,000 square feet of new leases, a good portion of which were with tenants new to our portfolio. In step with our renewal and new leasing activity, we again posted another solid year in terms of releasing rent growth, including a 7% increase on renewals and a 22% increase on same space new leases. With respect to Rite Aid, as we discussed on our last call back in October, out of the 15 leases We have with Rite Aid across our portfolio, 3 of the stores closed in the 4th quarter, which is reflected in our portfolio lease rate, which was 97.7% at year end. Speaker 400:12:34We already have much of the space spoken for with new synergistic tenants that we are excited about And we expect to achieve a notable increase in the average base rent. In terms of the remaining 12 leases with Rite Aid, All the stores continue to perform well and Rite Aid has indicated that they intend to keep operating the stores and plan to implement new merchandising and operational strategies aimed at enhancing their performance going forward. As 2024 is getting underway, demand for space continues to be strong across our portfolio such that we expect to have another solid year. In terms of occupancy, We expect to maintain our overall portfolio lease rate in the 97% to 98% range as we move through the year. In terms of lease rollover, specifically anchor lease maturities, at the start of 2024, We had 7 anchor leases scheduled to mature during the year, totaling 281,000 square feet. Speaker 400:13:333 of the 7 have already renewed their lease We currently expect another 2 will renew as well. As to the remaining 2 anchor leases scheduled to mature, one is with Rite Aid, which is one of the 12 stores that they intend to keep operating. We're currently in the process of amending their lease to extend it for another 5 years. With respect to the other anchor lease, we are in the process of releasing the space and are currently in discussion with several national destination entertainment businesses that will be a terrific added draws to our property. Additionally, we expect to achieve a substantial increase in base rent over the prior tenants rent. Speaker 400:14:11Looking out further at 2025, we currently have 22 anchor leases scheduled to mature. Based on our early proactive discussions with these tenants, we currently expect that 21 of the 22 anchors will renew, The bulk of which we expect will renew early as we move through 2024. The remaining anchor lease is one of the 12 leases with Rite Aid that we are currently in the process of extending the lease term. Lastly, in terms of non anchor space maturing in 2024, At the start of the year, we had 484,000 square feet of shop space scheduled to mature. Similar to our anchor releasing activity, We are already hard at work and having good success at renewing and releasing the space. Speaker 400:14:55Additionally, we are also proactively pursuing recapture opportunities expect to have another productive year as we did in 2023. Now I'll turn the call back over to Stuart. Speaker 200:15:07Thanks, Rich. Our ability to post another strong year of leasing underscores the resiliency and competitive strength of our grocery anchored portfolio and the intrinsic value of our operating platform in Singular West Coast Focus. To echo Rich, Looking ahead, we expect to have another strong and productive year in 2024. In terms of same center net operating income, We fully expect to continue growing our NOI in 2024. However, on a cash basis, the growth rate for this year will be moderated as result of Rite Aid Stores that closed in the 4th quarter and the anchor lease that Rich mentioned. Speaker 200:15:50While we are already close to having new tenants lined up for the spaces at significantly higher rents on average, there will be downtime as we get the new tenants in place, which is reflected in our same center NOI guidance growth rate for 2024. Once the new tenants are in place together with what we expect to be another strong year of leasing in 2024, Looking out further at 2025, we currently expect that same center NOI growth will be in line with our historical growth rate in the 3% to 4% range, if not better. In terms of acquisitions, as 2024 is getting underway, We currently have close to $100,000,000 of off market transactions in our pipeline, all of which is truly irreplaceable real estate in the heart of densely populated sought after communities. While the transactions are not yet finalized, we currently expect that the potential pricing on a blended basis will be comparable to our 4th quarter acquisition. Safe to say, We are excited about these opportunities and look forward to growing our portfolio in 2024 and continuing to build long term value. Speaker 200:17:06Now we will open up the call for your questions. Operator? Operator00:17:11Thank Our first question comes from the line of Jeffrey Spector with Bank of America Securities. Your line is now open. Speaker 200:17:35Good morning, Jeff. Speaker 500:17:38Good morning. This is Lizzie on for Jeff actually, Lizzie Deitken. Hi there. So I guess just starting with going back to the rationale around issuing equity in the quarter and then putting out guidance for the year. Could we just maybe get some more color around expectations of cost and kind of why that range is a bit wider presumably or It looks like that would be dilutive kind of depending on your view of NAV, but just wanted to get Some more color around the plans to issue equity? Speaker 200:18:32Sure. Well, look, terms of the Q4, we issued the stock specifically to finance the acquisition on a balance sheet neutral basis and to maintain our financial ratios. Based on the cash cap rate and the FFO yield on the acquisition, the transaction is accretive with good growth opportunities going forward. Looking forward, obviously, it's going to be a function of cap rates in terms of where we're acquiring any future assets and the price of our stock. Speaker 500:19:08Okay, great. And I guess just a follow-up, where are you seeing cap rates for the centers you're interested in trend today? Have we seen more of a compression there since maybe we last touched on this in October, November? Thanks. Speaker 200:19:25Sure. Look, there's very little activity in the market. So it's a very tough to pin Cap rates in this market, because they could depending on the asset and depending on the growth profile, cap rates continue to sort of move around. But going forward, we're expecting with what we see in our pipeline in terms of the off market opportunities, That cap rate again in the mid-6s or even a bit higher. Speaker 500:19:57Okay, great. And then separately, just wanted to touch on your same store NOI outlook. And can we clarify what the exact step ups are to that 1% to 2% range? Is most of the drag really from the downtime associated with backfilling spaces that were lost, if there's any more color you can add on the building blocks to that range, which implies a deceleration from this year last year's growth, that would be great. Speaker 200:20:46Sure. It's purely a function of the 3 Rite Aid That we mentioned back on our last call and what Rich was good enough to articulate today, along with one other anchor tenant that is vacating or has vacated at the end of January. Those are really the building blocks to our same store NOI. The good news is that we're making some very good momentum in releasing those spaces. And as I said in the closing sort of part of my presentation, we're expecting most of that to be leased in the next, let's call it, Q1, early Q2. Speaker 200:21:26And we'll see the positive impact of that as we move through the balance of the year and into 2025. Speaker 500:21:36Okay. Thank you. Operator00:21:38Thank you. One moment for our next question. Our next question comes from the line of Doreen Kestin with Wells Fargo Securities. Your line is now open. Speaker 600:21:49Good morning. Thanks. Back to the net acquisition guide, I guess I understand that you have $100,000,000 in the pipeline today. What gives you confidence In the $100,000,000 to $300,000,000 are you rather close to having an LOI on the $100,000,000 Speaker 200:22:10Just I think we've been hard at work over the last several quarters in terms of reconnecting with our what I would call our pipeline of sellers and we are seeing some of these sellers come under pressure as it relates to debt coming due. So we're feeling pretty good about really going out and finding very high quality assets at compelling prices. So as we sit here today, look, we do have some exciting Opportunities ahead of us. Obviously, we're still in the due diligence stage in terms of buying these assets, But we still we're feeling very comfortable sitting here today that we'll be able to achieve certainly that lower end of our guidance. Speaker 600:23:03Okay. And I believe on the Q3 call you were talking about Potential acquisitions funded with OP units, are these that you're referring to or were those other ones? Speaker 200:23:16No, these there are those opportunities are at our doorstep as well right now. And obviously that equity, if we end up doing these transactions will be at a much or a higher price than where our stock is currently trading. Speaker 600:23:32Okay. And last question. In your interest expense guide for the year, what assumptions are embedded for refinancing swaps, Speaker 300:23:46Well, the guidance is going to take into account refinancing the 24 bonds later in the year, it's really kind of tied to the forward yield curve. That's the best thing we can use to model that interest cost out. Speaker 200:24:02And in terms of cash flow, Mike, Free cash Speaker 300:24:05flow, you know, for the year, whether we use it to pay down debt or fund acquisitions, it's about $20,000,000 to $30,000,000 depending on actual CapEx costs and interest costs through the year. Operator00:24:16Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is now open. Speaker 700:24:25Hi, good morning. Good morning. Speaker 800:24:27Good morning. Just hoping you could talk a little bit about the builder commenced occupancy and how we should expect that to trend over 2024. I'm not sure if all the Rite Aid stuff is in the base As a starting point for the year or if you expect to see a little dip in the Q1, but if you could just give us a sense of the trend for the year and we should expect the year to end that would be great from a build occupancy perspective? Speaker 400:24:53Well, we're still making very good progress on getting the rents And but as you know, as we're commencing rents, we're adding new uncommenced rents to the bucket. And With the Rite Aid and the other anchor space we spoke of, it will take some time to refit those spaces, but We expect that we will continue to bring on the rent consistent with our historic averages. Speaker 800:25:24Okay. But it sounds like the one anchor the Rite Aid that the couple of closures are in the phase to start the year, thinking about where you ended last year. And then you have one more anchor closure. Is that kind of all The meaningful declines or negative impacts we should be factoring in for the year Absent some kind of random puts and takes here and there? Speaker 900:25:49Yes. Speaker 800:25:53Okay, great. And then just curious, Any update on the assets where you guys are pursuing entitlements and kind of the processes there? And what if anything is assumed in guidance with starts For monetization of that value creation? Speaker 200:26:11Well, in terms of the crossroads, we are to the end in terms of the permitting process. But given the current market environment, we plan to sort of sit tight for the time being in terms of breaking ground. We did during the Q4 finally get full entitlements in Nevada. So both the other two projects are at this point are fully entitled And we are engaged with a series of builders and or buyers in the market right now to potentially sell these assets. However, the multifamily market right now is still in what I would call in a sort of a stalled stage in terms of transacting. Speaker 200:26:53And my personal opinion is that as we move through the year, if we can get some cap rate impression in the multifamily business, then there's a good chance that we'll be able to transact on these properties. Speaker 400:27:08Thank you. Operator00:27:11Thank you. One moment for our next question. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Your line is now open. Speaker 900:27:22Good morning, Todd. Good morning. How are you? A couple of questions. First, The additional anchor vacancy that you mentioned, I'm just curious how much occupancy that might represent, if you can share that, I'm just curious how much lower occupancy may go before bottoming out here, so we can just think about the trajectory of occupancy and maybe help understand the trajectory of same store NOI growth a little bit throughout the year. Speaker 900:27:52And then Rich, can you talk about the potential mark to market on that space and the Rite Aid that you've discussed recapturing and releasing? Speaker 400:28:04Sure. In terms of the occupancy hit, it really won't have a significant impact and we're still comfortable with maintaining the 97% to 98% range It's a very low single digit rent. So we're expecting a big spread there. And then on the Rite Aid, on a blended basis, it's going to be a very nice increase as well. Speaker 900:28:38Okay. Does or is there any additional impact from Rite Aid at all Assumed in the guidance, it didn't sound like it, but just curious as things are still ongoing over there. Just curious if you have any additional assumptions at all embedded in guidance either around space being recaptured or potential lease negotiations? Speaker 200:29:09Well, we're really finished. When I say finished, we are We have gone through and spent a lot of time with Rite Aid over the last several months. And at this point, we're just waiting to have these leases confirmed through the bankruptcy process. Anything can happen as we know as we get through the process, but we feel very comfortable we sit today That if things continue to go well and the Rite Aid comes out of bankruptcy, the extent of what we've articulated today in terms of what we've seen in vacancy will remain where it is. Speaker 900:29:45Okay. And then just Shifting over to the acquisitions and the guidance there, I guess as it pertains to the funding And the equity issuance that's assumed alongside the investments, the range that you've provided, how price sensitive Are you to the stock price, as you kind of look ahead here with the growing pipeline of deals that you're seeing? Speaker 200:30:17Sure. Well, look, we are very sensitive to price. But again, we feel pretty good looking at the pipeline in terms of possible accretion in terms of if we decide to issue equity, will be, I think will again will be The pricing of where we're buying these assets and the price of our stock. But certainly, we'll monitor things as we move along both in terms of timing and in terms of issuing equity if we decide to go that route as it relates to issuing that Speaker 900:30:56Okay. At the midpoint of the guidance, I guess, for acquisitions, for equity issuance, I mean, how much accretion is built into the guidance that you're anticipating from this investment activity and I guess The capital raising activity alongside that on a leverage neutral basis just with where the company's blended cost of capital is today, Equity debt also in the sort of mid to high 6% range. I'm just wondering how much accretion that you're anticipating or what's embedded in the guidance? Speaker 300:31:34Hey, Todd, it's Mike. So looking at the low and the high end, on the low end, if we acquire about $100,000,000 we're expecting that to add about $0.01 and on the high end will be about $3,000,000 So at the midpoint, if you do $200,000,000 it's going to be $0.02 That's just kind of ball parking the use the equity and debt to buy those acquisitions. Speaker 900:31:55Okay. All right. That's helpful. One last one, Mike, On the interest expense question from earlier though, that is tied to the acquisitions, right? And you're assuming about, I guess 40% debt financing or really maybe 30% or 35% assuming you reinvest your free cash flow into acquisition. Speaker 900:32:18So If you do not acquire assets, the interest expense would be below the guidance range, right? Speaker 300:32:25Presumably, yes. That's correct. And then we also have the refinancing activities we have to do and that's going to be depending on where the yield curve is as we move through the year. Obviously, we had a hiccup this year early this week with the CPI, but we'll see where the 10 year treasury goes as we move through the year. Speaker 900:32:41Okay. But the debt portion of the acquisition activity that you'll be funding That you're assuming is being funded on the line? Speaker 400:32:53Correct. Speaker 900:32:55Okay, got it. Thank you. Speaker 200:32:57Thank you. Speaker 700:32:58Thank you. Operator00:32:59One moment for our next question, please. Our next question comes from the line of Paulina Rojas with Green Street. Your line is now open. Speaker 400:33:09Good morning. Speaker 1000:33:11Good morning. Last time we spoke, I think we talked about one of the Rite Aid leases being rejected and the other 2 being in a sale process. So I'm curious why weren't those leases acquired if they had meaningful mark to market. And I wonder if it's because of the term, if they have little term left. Speaker 400:33:42Sure. Those two locations, you're right, were offered for sale by Rite Aid. But the feedback we received from Rite Aid was that they were not willing to pay The dead rent, the administrative rent that's required to be paid on those locations. So if people didn't step up immediately and agree to pay that debt rent even while they were doing due diligence, they were just moving forward with rejecting those leases. So that was sort of their strategy out of the gate. Speaker 400:34:12And those two locations, no one jumped fast enough. However, as we touched on, there is a good mark to market on those leases and we have had very strong interest in the spaces. Speaker 1000:34:31Thank you. My other question is, the Kroger Albertsons merger is It's a risk, right, and it's potentially weighing on your stock as well. So is there anything you can do today proactively to prepare for the consequences of this merger that it could have not immediately, but in the medium term? Or you're really there is not much you can do today, you're putting the topic to rest until there are more news? Speaker 200:35:01Look, I mean, we've been analyzing this transaction internally now for almost 2 years. But Look, we continue to communicate a lot with both Kroger and Albertsons and conduct business as usual, including renewing leases. And their discussions they have ongoing discussions as we all know with the government. So They're not yet in a position to disclose what specific stores will be sold as part of the merger. And we haven't spoken to CNS as well. Speaker 200:35:35So there's not much more I can sort of tell you as it relates to your question. I mean, we're all waiting at this point. And We do think the outcome of this will not have much impact in terms of ROIC. Speaker 1000:35:54How do you assess the appetite for other grocers for the space? Speaker 200:36:01Very strong, extremely strong. We've had a series of LOIs already come in for a number not a number, but Some locations, on the assumption that CNS may take 1 or 2 of these locations. But again, there's nothing we can do at this point until there's more clarity. Operator00:36:22Thank you. Thank you. One moment for our next question please. Our next question comes from the line of Michael Mueller with JPMorgan. Your line is now open. Speaker 700:36:35Good morning, Mike. Hi. Hey, hello there. A lot of stuff has been answered, but maybe one thing and I apologize if this was addressed, I missed the 1st part of the call. But what's the biggest thing that you would say that has changed as it relates to acquisitions since where you're coming off of 2023, but now you have pretty good expectations for 2024. Speaker 700:36:57When you're talking to sellers, I mean, what do they point to? It gives you better confidence. Speaker 200:37:04I think what's changed out there, Mike, is that a lot of Sellers were on the sidelines in 2023, but as mortgages are coming due, as redemptions are coming in from Community, we seem to be making very good headway in terms of these conversations. And more importantly, Sort of finding what I would call very high quality assets at compelling prices. So it's really the market is beginning to change in terms of some of these sellers coming to the realization that they've got to do something now rather than wait 3 months, 6 months, 9 months as it relates to either debt coming due or to potentially move equity or to redeem some of the what's in queue in terms of cash as you might say. But that's what we're sort of seeing out there. There's a bit of A change occurring and for us, we are certainly in some very productive conversations in terms of meeting the goals that we've set out to shareholders. Speaker 700:38:15Got it. And then maybe take a shot at Juan's question a different way here. If we're looking at the year end build occupancy, it sounds like you're going to have a move out on the anchor side that will pull it down a little bit. Where in 2024 or when in 2024 do you get to the point where build occupancy inflects and starts to kind of move back up? Speaker 400:38:43I think it's going to be closer to the end of the year as we work through these leases And then we also get commenced on all these leases that are currently in the pipeline. Speaker 700:38:54Okay. Okay. Thank you. Speaker 200:38:57Yes. Operator00:38:57Thank you. One moment for our next question. Our next question comes from the line of Wesley Golladay with Baird. Your line is now open. Speaker 900:39:07Good morning, Wes. Speaker 400:39:08Hey, good Speaker 1100:39:10morning, Stuart. Just another follow-up on that one anchor lease that you mentioned. I mean, it looks like you have clear runway outside of that one lease all the way to 2026. But for that anchor, what percentage of the ABR do they represent? And how soon do you think you'll re sign leases for that space? Speaker 1100:39:26And when do you think the tenants will open for that? Speaker 400:39:33Rich? It's a very little bit of our ABR. I don't have the exact percentage here in front of me. And really, where we're at now is we're trying to Pick the best tenant for the space. We have a lot of demand from a lot of different tenants. Speaker 400:39:49And One of the factors we're taking into account is obviously the cost of getting them in and the time of getting the rent commenced. We want to make sure we pick the right tenant. And look, we see a lot of demand for the space and expect to have a very nice spread in the rents. Speaker 200:40:10Yes, the mark to market on that particular space is going to be quite good depending on what we end up doing. But tenants currently paying a modified triple net lease at about $6 a square foot. Speaker 1100:40:24Okay, fantastic. You did mention entertainment. You mentioned it would be an entertainment concept. Should we expect an uptick in tenant improvements there? Speaker 400:40:35Yes. And that's what we're taking into account as we speak is, yes, some of these entertainment uses will cost a little bit more to refit the space, converting it from retail, but they're also the highest rent payers. So we're balancing all of those factors. Speaker 1100:40:51Yes, fair point. And then lastly, just on the acquisitions, the stocks sitting at $13 a share today, a little north of a 7 cap, Depending on whose numbers you're using, how sensitive are you at these levels to pursue this external growth? Speaker 200:41:11We are sensitive. I mean, when I say that, obviously, we realize where our cost of capital is and we want to be Smart in terms of buying and concurring with buying assets, raising equity in terms of our balance sheet. So We're watching obviously the price and like everyone else. But we feel pretty good in terms of where these Assets are going to end up in terms of cap rates and our FFO yield on these assets. So we'll see how things progress as we move through the year. Speaker 1100:41:46And then on a quality perspective, where would you rank these assets if you were to acquire them within the work portfolio? Speaker 200:41:55These will be some of the highest quality assets that we have acquired in the last 10 to 13 years. Speaker 1100:42:03Got it. Thank you. Speaker 900:42:05Yes. Operator00:42:06Thank you. One moment for our next question. And our next question comes from the line of Craig Mailman with Citi. Your line is now open. Speaker 1200:42:17Hey, guys. Good morning. Good morning. A couple of quick ones and then more of a big picture one. But just Notice the your amortization below and above market leases kind of ticked up here relative to last year. Speaker 1200:42:33What's driving that? Speaker 300:42:37Are you talking about the actual for 2023 or for 2024's guidance? Speaker 1200:42:41The $24,000,000 was the $14,000,000 I'm just trying to see, is there anything sort of one time in there for? Speaker 300:42:49Yes, that's going to occur in the Q1. It's related to the lease that Rich was referring to. When you do the original FAS 141 price allocation, they assume that option periods are going to be exercised and in this case they weren't. So that below market lease liability is going to be one time Additive event in Q1. Speaker 1200:43:10Okay. But how much of the $14,000,000 is going to be in 1Q? Speaker 300:43:14I I don't have the exact number in front of me. I want to say it's around $4,000,000 Speaker 1200:43:20So there's nothing Related to Rite Aid in that, that's solely the anchor of income. Speaker 300:43:25No, that's just that the rest of it's all the other leases are just regularly amortizing down over time. Speaker 1200:43:31Perfect. And then on bad debt, is there anything specific related to Rite Aid or is that Just your general kind of placeholder for this point in the year on the initial outlook? Speaker 300:43:44It's just a general placeholder. Yes, the bad debt in $24,000,000 the $3,000,000 to $5,000,000 range is just our standard. Yes, and if there's anything relative right, it would be well within our budget. Speaker 1200:43:57Okay. And then circling back to acquisitions, more big picture here. Stuart, I think you just said, If you can acquire some of these assets, it'd be the highest quality you bought in the last 10 to 13 years. And you guys are Kind of targeting high 6s. I'm just trying to get a sense, I have you guys trading in the low 7s Depending on where you guys think NAV is today, I mean, are these private market trades just really indicative of where The market should be and I know you guys have talked a lot about your stock being a little bit undervalued here, but Does your ability to kind of break some of these loose and sellers getting more willing to transact at these levels change your view at all of Kind of your discount to NAV and again I know it's been brought up a lot on this call your sensitivity to kind of issuing equity here to buy these. Speaker 1200:44:52I'm just trying to get a sense What's the real accretion here to NAV, even though maybe you're getting a little bit of accretion here to earnings out of the gate? Speaker 200:45:04Well, undervalued is an understatement in my humble opinion in terms of where the stock is trading. But Yes. I mean, look, we will this is not a market indication in in terms of where the market is or the market is going. These are transactions that are done, principle to principle. And there's again, there's typically a reason why we're getting better pricing, whether it's timing or other moving pieces, that's really what's driving the transactions from our perspective. Speaker 200:45:45So again, this is not sort of a mark this isn't a mark in the market. It's just The ability this is what we do best as a management team. I mean, we've been doing this for 30 years. We have acquired A number of assets on the West Coast and we have a pretty good idea what we're buying and the accretion we can get These assets, I mean not only do we think we will be buying them hopefully accretively as we close these transactions, but it's What comes afterwards that's more important in terms of growth. So, we're excited and we'll see how things go as we move through the year. Speaker 1200:46:27What do you think the growth profile of some of these assets is relative to your legacy portfolio? Speaker 200:46:35These what we're looking at is probably going to deliver probably a 3% Internal growth, maybe a bit better. It just depends on how we manage and how we lease. I mean, the one thing that we do well is we stay ahead of this tenant base and we as you have seen and heard many years, we were very proactive in terms Speaker 700:46:59of capturing what I would call the mark Speaker 200:47:00to market on the assets we own and we training what I would call the mark to market on the assets we own and we buy. Speaker 1200:47:06And not to belabor the point because I know it's been addressed, but just As you guys think about the appropriate investment spread relative to your cost of capital, at least what the minimum accretion you need is kind of where are you thinking these days? Is it 50 basis points? Is it 100 basis points? Kind of where is the minimum also taking into account sort of that maybe longer term growth or other opportunities within the asset that you can unlock going forward? Speaker 200:47:37Yes. Look, it's just a function of looking at the underlying leases and what we're getting from those leases as it relates to roll over or what we can potentially terminate and get a much higher mark to market on. So That internal growth is very important from our perspective and every situation is different. I don't know if you want to add anything to that, Rich. Speaker 1200:48:13Great. Thank you. Speaker 300:48:15Thank you. Operator00:48:16Thank you. And our final question comes from the line of Linda Tsai with Jefferies. Your line is now Speaker 700:48:25Hi, thank you. Speaker 1300:48:28Good morning. In 2023 bad debt was $3,400,000 and you have a 3,000,000 to 5,000,000 Bad debt expectation for 2024. Can you just remind us how this compares to history? Speaker 200:48:40I think I would take COVID out of that in terms of Speaker 300:48:46I think we got probably initially a little bit conservatively. Our normal bad debt budget is 1.5% of total So we put some goalposts around that for guidance. 2023 might have been a little bit higher than our normal, but that's $3,000,000 to $5,000,000 just kind of a general range to see what happens at the Tennepase over the year. Speaker 1300:49:07Got it. And then your occupancy is weighed down a little bit by Rite Aid, but presumably still pretty high on an absolute basis. Just generally, like how are you feeling about the overall retailer environment as it relates to retailer demand versus store closures? Speaker 400:49:24Yes. Retail demand continues to be very strong. As We've touched on it a few times during the call. When we do get a space back, there's typically multiple LOIs, multiple offers on the spaces. And we see the tenant base on the West Coast buying for the product that we have, the grocery anchored product, still a very high demand. Speaker 200:49:48I mean, the numbers this morning were very strong as it relates to the resiliency of our tenant base, Linda, pharmacy was up almost 7%, grocery was up 3%, restaurants were up 6%. I mean, these are very, very strong numbers in terms of What we're seeing so far in 2024. So we think certainly the grocery anchored segment of retail is going to hold up quite well. Operator00:50:14Great. Thank you. Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back over to Mr. Operator00:50:22Stuart Tanz for closing remarks. Speaker 200:50:25Great. In closing, thank you all for joining us Today, as always, we appreciate your interest in ROIC. If you have any additional questions, please contact Lauren, Mike, Rich or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10 ks. Thanks again and have a great day everyone. Operator00:50:48This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRetail Opportunity Investments Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Retail Opportunity Investments Earnings HeadlinesRetail Opportunity Investments (ROIC) Projected to Post Earnings on MondayApril 19, 2025 | americanbankingnews.comNewmark Advises Blackstone in $4B Privatization of Retail Opportunity Investments Corp.February 14, 2025 | investing.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 25, 2025 | Porter & Company (Ad)Acushnet Holdings stock rises on inclusion in S&P SmallCap 600February 11, 2025 | msn.comAcushnet Holdings to replace Retail Opportunity in S&P 600 at open on 2/13February 11, 2025 | markets.businessinsider.comRetail Opportunity Investments Corp (ROIC) to Exit S&P SmallCap 600 Following Acquisition ...February 10, 2025 | gurufocus.comSee More Retail Opportunity Investments Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Retail Opportunity Investments? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Retail Opportunity Investments and other key companies, straight to your email. Email Address About Retail Opportunity InvestmentsRetail Opportunity Investments (NASDAQ:ROIC) (Nasdaq: ROIC), is a fully integrated, self-managed real estate investment trust (REIT) that specializes in the acquisition, ownership and management of grocery-anchored shopping centers located in densely populated, metropolitan markets across the West Coast. As of December 31, 2023, ROIC owned 94 shopping centers encompassing approximately 10.6 million square feet. ROIC is the largest publicly-traded, grocery-anchored shopping center REIT focused exclusively on the West Coast. ROIC is a member of the S&P SmallCap 600 Index and has investment-grade corporate debt ratings from Moody's Investor Services, S&P Global Ratings and Fitch Ratings, Inc.View Retail Opportunity Investments ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 14 speakers on the call. Operator00:00:00Welcome to Retail Opportunity Investments 2023 4th Quarter and Year End Conference Call. Participants are currently in a listen only mode. Following the company's prepared remarks, the call will be opened up for questions. Now I'd like to introduce Lauren Severa, the company's Chief Accounting Officer. Speaker 100:00:20Thank you. Before we begin, please note that certain matters, which we will discuss on today's call, are forward looking statements within the meaning of federal securities laws. These forward looking statements involve risks and other factors, which can cause actual results to differ significantly from future results that are expressed or implied by such forward looking statements. Participants should refer to the company's filings with the SEC, including our most recent annual report on Form 10 ks to learn more about these risks and other factors. In addition, we will be discussing certain non GAAP financial results on today's call. Speaker 100:01:00Reconciliation of these non GAAP financial results to GAAP results can be found in the company's quarterly supplemental, which is posted on our website. Now, I'll turn the call over to Stuart Tanz, the company's Chief Executive Officer. Stuart? Speaker 200:01:16Thank you, Lauren, and good day, everyone. Here with Lauren and me today is Michael Haines, our Chief Financial Officer and Rick Schoebel, our Chief Operating Officer. Notwithstanding 2023 having been a year of extraordinary challenges for certain commercial real estate asset classes and certain CBD markets across the country, in distinct contrast, the long term core drivers The grocery anchored sector remained fundamentally sound, especially as it relates to our portfolio in a highly protected Sought after West Coast Markets. Capitalizing on the strong fundamentals, we achieved a number of new leasing records and milestones for the company. For the 14th consecutive year, we leased essentially double the amount of space that was originally scheduled to mature. Speaker 200:02:09Specifically, in 2023, we leased over 1,700,000 square feet achieving a new record for the in terms of overall leasing activity. Additionally, we again achieved re leasing rent growth for a record 11th consecutive year, including 11 years in a row of achieving double digit growth on same space new leases. Importantly, we worked at strategically renewing early a number of key valued anchor tenants, including long standing grocer tenants. By doing so, we enhanced the long term strength and stability of ROIC's core anchor income stream well into the future. We also continue to implement our long standing strategy of proactively enhancing the tenant mix across our portfolio through seeking out opportunities to recapture early and re lease select spaces. Speaker 200:03:06Going forward, this will not only serve to enhance the strength of our tenant base and appeal of our properties, it will also serve to grow our income stream having achieved higher releasing rents. In terms of acquisitions, in light of the considerable uncertainty in commercial real estate during 2023, The West Coast acquisition market sat essentially idle through much of the year. While it was sitting idle, we continue to maintain an active dialogue with our long standing off market sources in order to be in a strong position to capitalize on unique opportunities when the market began to pick up again. To that end, during the closing months of 2023, certain private owners started to become more active in seeking to transact. Capitalizing on this, in December, we acquired an excellent neighborhood grocery anchored shopping center that we had our eye on for some time. Speaker 200:04:02The property is located in the Los Angeles market in a densely populated mature diverse community. The center is anchored by a well established supermarket There's a long time national tenant of ours. The seller was a private owner that was in need of a closing before year end. Given our knowledge of the market together with our knowledge of the property and tenant roster, we were in a strong position to facilitate an efficient closing and in return achieved attractive pricing, including a cap rate in the high 6s for what is irreplaceable sought after real estate. Looking ahead, based on what we're currently seeing, market activity for acquisitions could resume on the West Coast in 2024, potentially in earnest. Speaker 200:04:48Turning to our balance sheet. During 2023, we worked diligently to enhance our long term financial strength and profile through implementing a number of strategic capital market initiatives, including reentering the public bond market, balancing our debt maturity schedule, while also reducing our floating rate debt and extending our credit line maturity as well as raising a bit of equity in connection with the acquisition. Now Speaker 300:05:16I'll turn Speaker 200:05:16the call over to Michael Haynes, our CFO, to take you through the details of our balance sheet initiatives as well as our financial results for 2023 and initial guidance for 2024. Mike? Thanks, Stuart. Speaker 300:05:31Starting with our financial results. For the year ended 2023, total revenues reached a new record high of $328,000,000 Offsetting record revenues, interest expense during 2023 increased notably as a result of higher interest rates. In terms of net income, for the year 2023, GAAP net income attributable to common shareholders totaled $35,000,000.27 per diluted share. With respect to funds from operations, FFO for the year 2023 totaled $141,000,000 equating to $1.06 per share. Net operating income for 2023 on the same center comparative cash basis increased by 3.7% over 2022. Speaker 300:06:15Turning to our financing activities, during 2023, we raised in total $363,000,000 of capital, dollars 350,000,000 of which were raised in September through a public offering of unsecured senior notes. As Stuart noted, it was the first time raising capital in the public bond market in nearly a decade. Accordingly, we made a concerted effort to fully engage with the market, having discussions with a broad and diverse mix of investors, a number of which were new to the company. We utilized the proceeds from the offering to retire the $250,000,000 of senior notes that matured in December. Additionally, we retired early $100,000,000 of floating rate debt. Speaker 300:06:56Also in the midst of the Fed's rate tightening, we stopped $150,000,000 in floating rate debt to fixed rate. As such, at year end, Just 9% of our total debt outstanding was effectively floating rate, down significantly from a year ago when our floating rate debt was 28% of our total debt outstanding. Along with proactively lowering our floating rate debt earlier in the year in light of the regional banking turmoil, we proactively extended the maturity of our credit line, sending a maturity date out to 2027 with the ability to extend it for an additional year to 2028. We also have the ability to double the capacity of the credit line from its current capacity of $600,000,000 up to 1,200,000,000 Additionally, in the context of what happened in the regional banking sector this past year, it's important enough that we just had 2 mortgages that together only totaled about 60,000,000 Looking ahead, come April, when one of the 2 loans mature, we were down to only 1 mortgage remaining. In addition to lowering our floating rate and secured debt, During 2023, we continue to work in enhancing the company's financial ratios, including the company's net debt ratio. Speaker 300:08:01We ended the year with a net debt ratio of 6.2 times for the 4th quarter, which is the lowest that our net debt ratio has been dating back to 2014. Looking ahead, our debt maturity schedule is well laddered over the next 5 years with approximately $300,000,000 maturing each year on average. Having now reestablished ROAC in the public bond market, our objective is to be a consistent annual issuer going forward. Looking at 2024, addition to refinancing senior notes that mature at the end of the year, we may also look to refinance our term loan and credit line borrowings with long term fixed rate bonds depending upon market conditions as the year progresses. With respect to equity capital, in light of the acquisition that Stuart discussed, In December, we issued common stock through our ATM raising approximately $13,000,000 In terms of guidance for 2024, we currently expect core portfolio NOI will continue to grow, driven by a combination of contractual rent increases together with expected re leasing rent growth. Speaker 300:08:59Additionally, as Stuart touched on, we are anticipating that the acquisition market will become active and favorable again. Accordingly, we currently to acquire between $100,000,000 to as much as $300,000,000 of shopping centers net of dispositions. To fund acquisitions, our guidance assumes that we will issue equity In step with the acquisition activity, as we move through the year, with the goal of keeping our financial ratios intact as we grow our portfolio. Moderating our expected external internal growth will be interest costs. Based on the bonds that we issued in 2023 Together with our projected acquisition and refinancing activity, we currently expect that the company's interest expense will be in the $78,000,000 to $80,000,000 range for 2024. Speaker 300:09:40Additionally, in terms of bad debt, our guidance assumes a range of $3,000,000 to $5,000,000 although our current expectation is that it would be more towards the lower end based on the overall strength of our tenant base today. Taking into account all of these factors and other various assumptions, we have set our initial FFO guidance range for 2024 at $1.03 to $1.09 per diluted share. Now I'll turn the call over to Rich Schoebel, our COO. Rich? Speaker 400:10:04Thanks, Mike. As Stuart highlighted, 2023 proved to be one of our best years in terms of leasing. Demand for space across our portfolio continues to be consistently strong as a diverse mix of long standing tenants together with new concepts and businesses seeking to expand to the West Coast continue to buy for space. These diverse businesses are predominantly destination type tenants in the wellness, self care restaurant service and entertainment segments. Most important from our perspective is their keen interest in leasing space at select shopping centers that are well located in diverse communities and have an established grocer as the core daily draw, which is exactly what our portfolio offers. Speaker 400:10:49Capitalizing on the demand, as Stuart highlighted, during 2023, we achieved a new record for the company, Leasing over 1,700,000 square feet in total. The bulk of our activity centered around renewing longstanding tenants. Specifically, we renewed approximately 1,300,000 square feet during 2023 and over half of that involve renewing valued anchor tenants including long standing grocers with a number of tenants coming to us early to renew some by as much as over a year in advance of Speaker 300:11:22their lease Speaker 400:11:23maturities. In terms of new leasing activity, given the lack of available space across our portfolio and the modest amount of space that was scheduled to mature during 20 We made a concerted effort to proactively recapture select spaces focusing on sought after anchor and pad spaces, spaces that are well suited for the type of businesses that are leading the demand. In total, We successfully executed upwards of 400,000 square feet of new leases, a good portion of which were with tenants new to our portfolio. In step with our renewal and new leasing activity, we again posted another solid year in terms of releasing rent growth, including a 7% increase on renewals and a 22% increase on same space new leases. With respect to Rite Aid, as we discussed on our last call back in October, out of the 15 leases We have with Rite Aid across our portfolio, 3 of the stores closed in the 4th quarter, which is reflected in our portfolio lease rate, which was 97.7% at year end. Speaker 400:12:34We already have much of the space spoken for with new synergistic tenants that we are excited about And we expect to achieve a notable increase in the average base rent. In terms of the remaining 12 leases with Rite Aid, All the stores continue to perform well and Rite Aid has indicated that they intend to keep operating the stores and plan to implement new merchandising and operational strategies aimed at enhancing their performance going forward. As 2024 is getting underway, demand for space continues to be strong across our portfolio such that we expect to have another solid year. In terms of occupancy, We expect to maintain our overall portfolio lease rate in the 97% to 98% range as we move through the year. In terms of lease rollover, specifically anchor lease maturities, at the start of 2024, We had 7 anchor leases scheduled to mature during the year, totaling 281,000 square feet. Speaker 400:13:333 of the 7 have already renewed their lease We currently expect another 2 will renew as well. As to the remaining 2 anchor leases scheduled to mature, one is with Rite Aid, which is one of the 12 stores that they intend to keep operating. We're currently in the process of amending their lease to extend it for another 5 years. With respect to the other anchor lease, we are in the process of releasing the space and are currently in discussion with several national destination entertainment businesses that will be a terrific added draws to our property. Additionally, we expect to achieve a substantial increase in base rent over the prior tenants rent. Speaker 400:14:11Looking out further at 2025, we currently have 22 anchor leases scheduled to mature. Based on our early proactive discussions with these tenants, we currently expect that 21 of the 22 anchors will renew, The bulk of which we expect will renew early as we move through 2024. The remaining anchor lease is one of the 12 leases with Rite Aid that we are currently in the process of extending the lease term. Lastly, in terms of non anchor space maturing in 2024, At the start of the year, we had 484,000 square feet of shop space scheduled to mature. Similar to our anchor releasing activity, We are already hard at work and having good success at renewing and releasing the space. Speaker 400:14:55Additionally, we are also proactively pursuing recapture opportunities expect to have another productive year as we did in 2023. Now I'll turn the call back over to Stuart. Speaker 200:15:07Thanks, Rich. Our ability to post another strong year of leasing underscores the resiliency and competitive strength of our grocery anchored portfolio and the intrinsic value of our operating platform in Singular West Coast Focus. To echo Rich, Looking ahead, we expect to have another strong and productive year in 2024. In terms of same center net operating income, We fully expect to continue growing our NOI in 2024. However, on a cash basis, the growth rate for this year will be moderated as result of Rite Aid Stores that closed in the 4th quarter and the anchor lease that Rich mentioned. Speaker 200:15:50While we are already close to having new tenants lined up for the spaces at significantly higher rents on average, there will be downtime as we get the new tenants in place, which is reflected in our same center NOI guidance growth rate for 2024. Once the new tenants are in place together with what we expect to be another strong year of leasing in 2024, Looking out further at 2025, we currently expect that same center NOI growth will be in line with our historical growth rate in the 3% to 4% range, if not better. In terms of acquisitions, as 2024 is getting underway, We currently have close to $100,000,000 of off market transactions in our pipeline, all of which is truly irreplaceable real estate in the heart of densely populated sought after communities. While the transactions are not yet finalized, we currently expect that the potential pricing on a blended basis will be comparable to our 4th quarter acquisition. Safe to say, We are excited about these opportunities and look forward to growing our portfolio in 2024 and continuing to build long term value. Speaker 200:17:06Now we will open up the call for your questions. Operator? Operator00:17:11Thank Our first question comes from the line of Jeffrey Spector with Bank of America Securities. Your line is now open. Speaker 200:17:35Good morning, Jeff. Speaker 500:17:38Good morning. This is Lizzie on for Jeff actually, Lizzie Deitken. Hi there. So I guess just starting with going back to the rationale around issuing equity in the quarter and then putting out guidance for the year. Could we just maybe get some more color around expectations of cost and kind of why that range is a bit wider presumably or It looks like that would be dilutive kind of depending on your view of NAV, but just wanted to get Some more color around the plans to issue equity? Speaker 200:18:32Sure. Well, look, terms of the Q4, we issued the stock specifically to finance the acquisition on a balance sheet neutral basis and to maintain our financial ratios. Based on the cash cap rate and the FFO yield on the acquisition, the transaction is accretive with good growth opportunities going forward. Looking forward, obviously, it's going to be a function of cap rates in terms of where we're acquiring any future assets and the price of our stock. Speaker 500:19:08Okay, great. And I guess just a follow-up, where are you seeing cap rates for the centers you're interested in trend today? Have we seen more of a compression there since maybe we last touched on this in October, November? Thanks. Speaker 200:19:25Sure. Look, there's very little activity in the market. So it's a very tough to pin Cap rates in this market, because they could depending on the asset and depending on the growth profile, cap rates continue to sort of move around. But going forward, we're expecting with what we see in our pipeline in terms of the off market opportunities, That cap rate again in the mid-6s or even a bit higher. Speaker 500:19:57Okay, great. And then separately, just wanted to touch on your same store NOI outlook. And can we clarify what the exact step ups are to that 1% to 2% range? Is most of the drag really from the downtime associated with backfilling spaces that were lost, if there's any more color you can add on the building blocks to that range, which implies a deceleration from this year last year's growth, that would be great. Speaker 200:20:46Sure. It's purely a function of the 3 Rite Aid That we mentioned back on our last call and what Rich was good enough to articulate today, along with one other anchor tenant that is vacating or has vacated at the end of January. Those are really the building blocks to our same store NOI. The good news is that we're making some very good momentum in releasing those spaces. And as I said in the closing sort of part of my presentation, we're expecting most of that to be leased in the next, let's call it, Q1, early Q2. Speaker 200:21:26And we'll see the positive impact of that as we move through the balance of the year and into 2025. Speaker 500:21:36Okay. Thank you. Operator00:21:38Thank you. One moment for our next question. Our next question comes from the line of Doreen Kestin with Wells Fargo Securities. Your line is now open. Speaker 600:21:49Good morning. Thanks. Back to the net acquisition guide, I guess I understand that you have $100,000,000 in the pipeline today. What gives you confidence In the $100,000,000 to $300,000,000 are you rather close to having an LOI on the $100,000,000 Speaker 200:22:10Just I think we've been hard at work over the last several quarters in terms of reconnecting with our what I would call our pipeline of sellers and we are seeing some of these sellers come under pressure as it relates to debt coming due. So we're feeling pretty good about really going out and finding very high quality assets at compelling prices. So as we sit here today, look, we do have some exciting Opportunities ahead of us. Obviously, we're still in the due diligence stage in terms of buying these assets, But we still we're feeling very comfortable sitting here today that we'll be able to achieve certainly that lower end of our guidance. Speaker 600:23:03Okay. And I believe on the Q3 call you were talking about Potential acquisitions funded with OP units, are these that you're referring to or were those other ones? Speaker 200:23:16No, these there are those opportunities are at our doorstep as well right now. And obviously that equity, if we end up doing these transactions will be at a much or a higher price than where our stock is currently trading. Speaker 600:23:32Okay. And last question. In your interest expense guide for the year, what assumptions are embedded for refinancing swaps, Speaker 300:23:46Well, the guidance is going to take into account refinancing the 24 bonds later in the year, it's really kind of tied to the forward yield curve. That's the best thing we can use to model that interest cost out. Speaker 200:24:02And in terms of cash flow, Mike, Free cash Speaker 300:24:05flow, you know, for the year, whether we use it to pay down debt or fund acquisitions, it's about $20,000,000 to $30,000,000 depending on actual CapEx costs and interest costs through the year. Operator00:24:16Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is now open. Speaker 700:24:25Hi, good morning. Good morning. Speaker 800:24:27Good morning. Just hoping you could talk a little bit about the builder commenced occupancy and how we should expect that to trend over 2024. I'm not sure if all the Rite Aid stuff is in the base As a starting point for the year or if you expect to see a little dip in the Q1, but if you could just give us a sense of the trend for the year and we should expect the year to end that would be great from a build occupancy perspective? Speaker 400:24:53Well, we're still making very good progress on getting the rents And but as you know, as we're commencing rents, we're adding new uncommenced rents to the bucket. And With the Rite Aid and the other anchor space we spoke of, it will take some time to refit those spaces, but We expect that we will continue to bring on the rent consistent with our historic averages. Speaker 800:25:24Okay. But it sounds like the one anchor the Rite Aid that the couple of closures are in the phase to start the year, thinking about where you ended last year. And then you have one more anchor closure. Is that kind of all The meaningful declines or negative impacts we should be factoring in for the year Absent some kind of random puts and takes here and there? Speaker 900:25:49Yes. Speaker 800:25:53Okay, great. And then just curious, Any update on the assets where you guys are pursuing entitlements and kind of the processes there? And what if anything is assumed in guidance with starts For monetization of that value creation? Speaker 200:26:11Well, in terms of the crossroads, we are to the end in terms of the permitting process. But given the current market environment, we plan to sort of sit tight for the time being in terms of breaking ground. We did during the Q4 finally get full entitlements in Nevada. So both the other two projects are at this point are fully entitled And we are engaged with a series of builders and or buyers in the market right now to potentially sell these assets. However, the multifamily market right now is still in what I would call in a sort of a stalled stage in terms of transacting. Speaker 200:26:53And my personal opinion is that as we move through the year, if we can get some cap rate impression in the multifamily business, then there's a good chance that we'll be able to transact on these properties. Speaker 400:27:08Thank you. Operator00:27:11Thank you. One moment for our next question. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Your line is now open. Speaker 900:27:22Good morning, Todd. Good morning. How are you? A couple of questions. First, The additional anchor vacancy that you mentioned, I'm just curious how much occupancy that might represent, if you can share that, I'm just curious how much lower occupancy may go before bottoming out here, so we can just think about the trajectory of occupancy and maybe help understand the trajectory of same store NOI growth a little bit throughout the year. Speaker 900:27:52And then Rich, can you talk about the potential mark to market on that space and the Rite Aid that you've discussed recapturing and releasing? Speaker 400:28:04Sure. In terms of the occupancy hit, it really won't have a significant impact and we're still comfortable with maintaining the 97% to 98% range It's a very low single digit rent. So we're expecting a big spread there. And then on the Rite Aid, on a blended basis, it's going to be a very nice increase as well. Speaker 900:28:38Okay. Does or is there any additional impact from Rite Aid at all Assumed in the guidance, it didn't sound like it, but just curious as things are still ongoing over there. Just curious if you have any additional assumptions at all embedded in guidance either around space being recaptured or potential lease negotiations? Speaker 200:29:09Well, we're really finished. When I say finished, we are We have gone through and spent a lot of time with Rite Aid over the last several months. And at this point, we're just waiting to have these leases confirmed through the bankruptcy process. Anything can happen as we know as we get through the process, but we feel very comfortable we sit today That if things continue to go well and the Rite Aid comes out of bankruptcy, the extent of what we've articulated today in terms of what we've seen in vacancy will remain where it is. Speaker 900:29:45Okay. And then just Shifting over to the acquisitions and the guidance there, I guess as it pertains to the funding And the equity issuance that's assumed alongside the investments, the range that you've provided, how price sensitive Are you to the stock price, as you kind of look ahead here with the growing pipeline of deals that you're seeing? Speaker 200:30:17Sure. Well, look, we are very sensitive to price. But again, we feel pretty good looking at the pipeline in terms of possible accretion in terms of if we decide to issue equity, will be, I think will again will be The pricing of where we're buying these assets and the price of our stock. But certainly, we'll monitor things as we move along both in terms of timing and in terms of issuing equity if we decide to go that route as it relates to issuing that Speaker 900:30:56Okay. At the midpoint of the guidance, I guess, for acquisitions, for equity issuance, I mean, how much accretion is built into the guidance that you're anticipating from this investment activity and I guess The capital raising activity alongside that on a leverage neutral basis just with where the company's blended cost of capital is today, Equity debt also in the sort of mid to high 6% range. I'm just wondering how much accretion that you're anticipating or what's embedded in the guidance? Speaker 300:31:34Hey, Todd, it's Mike. So looking at the low and the high end, on the low end, if we acquire about $100,000,000 we're expecting that to add about $0.01 and on the high end will be about $3,000,000 So at the midpoint, if you do $200,000,000 it's going to be $0.02 That's just kind of ball parking the use the equity and debt to buy those acquisitions. Speaker 900:31:55Okay. All right. That's helpful. One last one, Mike, On the interest expense question from earlier though, that is tied to the acquisitions, right? And you're assuming about, I guess 40% debt financing or really maybe 30% or 35% assuming you reinvest your free cash flow into acquisition. Speaker 900:32:18So If you do not acquire assets, the interest expense would be below the guidance range, right? Speaker 300:32:25Presumably, yes. That's correct. And then we also have the refinancing activities we have to do and that's going to be depending on where the yield curve is as we move through the year. Obviously, we had a hiccup this year early this week with the CPI, but we'll see where the 10 year treasury goes as we move through the year. Speaker 900:32:41Okay. But the debt portion of the acquisition activity that you'll be funding That you're assuming is being funded on the line? Speaker 400:32:53Correct. Speaker 900:32:55Okay, got it. Thank you. Speaker 200:32:57Thank you. Speaker 700:32:58Thank you. Operator00:32:59One moment for our next question, please. Our next question comes from the line of Paulina Rojas with Green Street. Your line is now open. Speaker 400:33:09Good morning. Speaker 1000:33:11Good morning. Last time we spoke, I think we talked about one of the Rite Aid leases being rejected and the other 2 being in a sale process. So I'm curious why weren't those leases acquired if they had meaningful mark to market. And I wonder if it's because of the term, if they have little term left. Speaker 400:33:42Sure. Those two locations, you're right, were offered for sale by Rite Aid. But the feedback we received from Rite Aid was that they were not willing to pay The dead rent, the administrative rent that's required to be paid on those locations. So if people didn't step up immediately and agree to pay that debt rent even while they were doing due diligence, they were just moving forward with rejecting those leases. So that was sort of their strategy out of the gate. Speaker 400:34:12And those two locations, no one jumped fast enough. However, as we touched on, there is a good mark to market on those leases and we have had very strong interest in the spaces. Speaker 1000:34:31Thank you. My other question is, the Kroger Albertsons merger is It's a risk, right, and it's potentially weighing on your stock as well. So is there anything you can do today proactively to prepare for the consequences of this merger that it could have not immediately, but in the medium term? Or you're really there is not much you can do today, you're putting the topic to rest until there are more news? Speaker 200:35:01Look, I mean, we've been analyzing this transaction internally now for almost 2 years. But Look, we continue to communicate a lot with both Kroger and Albertsons and conduct business as usual, including renewing leases. And their discussions they have ongoing discussions as we all know with the government. So They're not yet in a position to disclose what specific stores will be sold as part of the merger. And we haven't spoken to CNS as well. Speaker 200:35:35So there's not much more I can sort of tell you as it relates to your question. I mean, we're all waiting at this point. And We do think the outcome of this will not have much impact in terms of ROIC. Speaker 1000:35:54How do you assess the appetite for other grocers for the space? Speaker 200:36:01Very strong, extremely strong. We've had a series of LOIs already come in for a number not a number, but Some locations, on the assumption that CNS may take 1 or 2 of these locations. But again, there's nothing we can do at this point until there's more clarity. Operator00:36:22Thank you. Thank you. One moment for our next question please. Our next question comes from the line of Michael Mueller with JPMorgan. Your line is now open. Speaker 700:36:35Good morning, Mike. Hi. Hey, hello there. A lot of stuff has been answered, but maybe one thing and I apologize if this was addressed, I missed the 1st part of the call. But what's the biggest thing that you would say that has changed as it relates to acquisitions since where you're coming off of 2023, but now you have pretty good expectations for 2024. Speaker 700:36:57When you're talking to sellers, I mean, what do they point to? It gives you better confidence. Speaker 200:37:04I think what's changed out there, Mike, is that a lot of Sellers were on the sidelines in 2023, but as mortgages are coming due, as redemptions are coming in from Community, we seem to be making very good headway in terms of these conversations. And more importantly, Sort of finding what I would call very high quality assets at compelling prices. So it's really the market is beginning to change in terms of some of these sellers coming to the realization that they've got to do something now rather than wait 3 months, 6 months, 9 months as it relates to either debt coming due or to potentially move equity or to redeem some of the what's in queue in terms of cash as you might say. But that's what we're sort of seeing out there. There's a bit of A change occurring and for us, we are certainly in some very productive conversations in terms of meeting the goals that we've set out to shareholders. Speaker 700:38:15Got it. And then maybe take a shot at Juan's question a different way here. If we're looking at the year end build occupancy, it sounds like you're going to have a move out on the anchor side that will pull it down a little bit. Where in 2024 or when in 2024 do you get to the point where build occupancy inflects and starts to kind of move back up? Speaker 400:38:43I think it's going to be closer to the end of the year as we work through these leases And then we also get commenced on all these leases that are currently in the pipeline. Speaker 700:38:54Okay. Okay. Thank you. Speaker 200:38:57Yes. Operator00:38:57Thank you. One moment for our next question. Our next question comes from the line of Wesley Golladay with Baird. Your line is now open. Speaker 900:39:07Good morning, Wes. Speaker 400:39:08Hey, good Speaker 1100:39:10morning, Stuart. Just another follow-up on that one anchor lease that you mentioned. I mean, it looks like you have clear runway outside of that one lease all the way to 2026. But for that anchor, what percentage of the ABR do they represent? And how soon do you think you'll re sign leases for that space? Speaker 1100:39:26And when do you think the tenants will open for that? Speaker 400:39:33Rich? It's a very little bit of our ABR. I don't have the exact percentage here in front of me. And really, where we're at now is we're trying to Pick the best tenant for the space. We have a lot of demand from a lot of different tenants. Speaker 400:39:49And One of the factors we're taking into account is obviously the cost of getting them in and the time of getting the rent commenced. We want to make sure we pick the right tenant. And look, we see a lot of demand for the space and expect to have a very nice spread in the rents. Speaker 200:40:10Yes, the mark to market on that particular space is going to be quite good depending on what we end up doing. But tenants currently paying a modified triple net lease at about $6 a square foot. Speaker 1100:40:24Okay, fantastic. You did mention entertainment. You mentioned it would be an entertainment concept. Should we expect an uptick in tenant improvements there? Speaker 400:40:35Yes. And that's what we're taking into account as we speak is, yes, some of these entertainment uses will cost a little bit more to refit the space, converting it from retail, but they're also the highest rent payers. So we're balancing all of those factors. Speaker 1100:40:51Yes, fair point. And then lastly, just on the acquisitions, the stocks sitting at $13 a share today, a little north of a 7 cap, Depending on whose numbers you're using, how sensitive are you at these levels to pursue this external growth? Speaker 200:41:11We are sensitive. I mean, when I say that, obviously, we realize where our cost of capital is and we want to be Smart in terms of buying and concurring with buying assets, raising equity in terms of our balance sheet. So We're watching obviously the price and like everyone else. But we feel pretty good in terms of where these Assets are going to end up in terms of cap rates and our FFO yield on these assets. So we'll see how things progress as we move through the year. Speaker 1100:41:46And then on a quality perspective, where would you rank these assets if you were to acquire them within the work portfolio? Speaker 200:41:55These will be some of the highest quality assets that we have acquired in the last 10 to 13 years. Speaker 1100:42:03Got it. Thank you. Speaker 900:42:05Yes. Operator00:42:06Thank you. One moment for our next question. And our next question comes from the line of Craig Mailman with Citi. Your line is now open. Speaker 1200:42:17Hey, guys. Good morning. Good morning. A couple of quick ones and then more of a big picture one. But just Notice the your amortization below and above market leases kind of ticked up here relative to last year. Speaker 1200:42:33What's driving that? Speaker 300:42:37Are you talking about the actual for 2023 or for 2024's guidance? Speaker 1200:42:41The $24,000,000 was the $14,000,000 I'm just trying to see, is there anything sort of one time in there for? Speaker 300:42:49Yes, that's going to occur in the Q1. It's related to the lease that Rich was referring to. When you do the original FAS 141 price allocation, they assume that option periods are going to be exercised and in this case they weren't. So that below market lease liability is going to be one time Additive event in Q1. Speaker 1200:43:10Okay. But how much of the $14,000,000 is going to be in 1Q? Speaker 300:43:14I I don't have the exact number in front of me. I want to say it's around $4,000,000 Speaker 1200:43:20So there's nothing Related to Rite Aid in that, that's solely the anchor of income. Speaker 300:43:25No, that's just that the rest of it's all the other leases are just regularly amortizing down over time. Speaker 1200:43:31Perfect. And then on bad debt, is there anything specific related to Rite Aid or is that Just your general kind of placeholder for this point in the year on the initial outlook? Speaker 300:43:44It's just a general placeholder. Yes, the bad debt in $24,000,000 the $3,000,000 to $5,000,000 range is just our standard. Yes, and if there's anything relative right, it would be well within our budget. Speaker 1200:43:57Okay. And then circling back to acquisitions, more big picture here. Stuart, I think you just said, If you can acquire some of these assets, it'd be the highest quality you bought in the last 10 to 13 years. And you guys are Kind of targeting high 6s. I'm just trying to get a sense, I have you guys trading in the low 7s Depending on where you guys think NAV is today, I mean, are these private market trades just really indicative of where The market should be and I know you guys have talked a lot about your stock being a little bit undervalued here, but Does your ability to kind of break some of these loose and sellers getting more willing to transact at these levels change your view at all of Kind of your discount to NAV and again I know it's been brought up a lot on this call your sensitivity to kind of issuing equity here to buy these. Speaker 1200:44:52I'm just trying to get a sense What's the real accretion here to NAV, even though maybe you're getting a little bit of accretion here to earnings out of the gate? Speaker 200:45:04Well, undervalued is an understatement in my humble opinion in terms of where the stock is trading. But Yes. I mean, look, we will this is not a market indication in in terms of where the market is or the market is going. These are transactions that are done, principle to principle. And there's again, there's typically a reason why we're getting better pricing, whether it's timing or other moving pieces, that's really what's driving the transactions from our perspective. Speaker 200:45:45So again, this is not sort of a mark this isn't a mark in the market. It's just The ability this is what we do best as a management team. I mean, we've been doing this for 30 years. We have acquired A number of assets on the West Coast and we have a pretty good idea what we're buying and the accretion we can get These assets, I mean not only do we think we will be buying them hopefully accretively as we close these transactions, but it's What comes afterwards that's more important in terms of growth. So, we're excited and we'll see how things go as we move through the year. Speaker 1200:46:27What do you think the growth profile of some of these assets is relative to your legacy portfolio? Speaker 200:46:35These what we're looking at is probably going to deliver probably a 3% Internal growth, maybe a bit better. It just depends on how we manage and how we lease. I mean, the one thing that we do well is we stay ahead of this tenant base and we as you have seen and heard many years, we were very proactive in terms Speaker 700:46:59of capturing what I would call the mark Speaker 200:47:00to market on the assets we own and we training what I would call the mark to market on the assets we own and we buy. Speaker 1200:47:06And not to belabor the point because I know it's been addressed, but just As you guys think about the appropriate investment spread relative to your cost of capital, at least what the minimum accretion you need is kind of where are you thinking these days? Is it 50 basis points? Is it 100 basis points? Kind of where is the minimum also taking into account sort of that maybe longer term growth or other opportunities within the asset that you can unlock going forward? Speaker 200:47:37Yes. Look, it's just a function of looking at the underlying leases and what we're getting from those leases as it relates to roll over or what we can potentially terminate and get a much higher mark to market on. So That internal growth is very important from our perspective and every situation is different. I don't know if you want to add anything to that, Rich. Speaker 1200:48:13Great. Thank you. Speaker 300:48:15Thank you. Operator00:48:16Thank you. And our final question comes from the line of Linda Tsai with Jefferies. Your line is now Speaker 700:48:25Hi, thank you. Speaker 1300:48:28Good morning. In 2023 bad debt was $3,400,000 and you have a 3,000,000 to 5,000,000 Bad debt expectation for 2024. Can you just remind us how this compares to history? Speaker 200:48:40I think I would take COVID out of that in terms of Speaker 300:48:46I think we got probably initially a little bit conservatively. Our normal bad debt budget is 1.5% of total So we put some goalposts around that for guidance. 2023 might have been a little bit higher than our normal, but that's $3,000,000 to $5,000,000 just kind of a general range to see what happens at the Tennepase over the year. Speaker 1300:49:07Got it. And then your occupancy is weighed down a little bit by Rite Aid, but presumably still pretty high on an absolute basis. Just generally, like how are you feeling about the overall retailer environment as it relates to retailer demand versus store closures? Speaker 400:49:24Yes. Retail demand continues to be very strong. As We've touched on it a few times during the call. When we do get a space back, there's typically multiple LOIs, multiple offers on the spaces. And we see the tenant base on the West Coast buying for the product that we have, the grocery anchored product, still a very high demand. Speaker 200:49:48I mean, the numbers this morning were very strong as it relates to the resiliency of our tenant base, Linda, pharmacy was up almost 7%, grocery was up 3%, restaurants were up 6%. I mean, these are very, very strong numbers in terms of What we're seeing so far in 2024. So we think certainly the grocery anchored segment of retail is going to hold up quite well. Operator00:50:14Great. Thank you. Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back over to Mr. Operator00:50:22Stuart Tanz for closing remarks. Speaker 200:50:25Great. In closing, thank you all for joining us Today, as always, we appreciate your interest in ROIC. If you have any additional questions, please contact Lauren, Mike, Rich or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website as well as our 10 ks. Thanks again and have a great day everyone. Operator00:50:48This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by