Good day. Thank you for standing by. Welcome to the Kite Realty Group Trust Q1 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bryan McCarthy. Please go ahead. Thank you, and good afternoon, everyone. Welcome to Kite Realty Group's Q1 earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group, our Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Tom McGowan; Executive Vice President and Chief Financial Officer, Heath Fear; Senior Vice President and Chief Accounting Officer, Dave Buell; and Senior Vice President, Capital Markets, and Investor Relations, Tyler Henshaw. I will now turn the call over to John. Thanks, Bryan, good morning, everyone. KRG's strategy for 2023 is a straightforward plan anchored in our best-in-class platform. We intend to lease space at attractive risk-adjusted returns, operate our high-quality portfolio at sector leading margins, and maintain a rock-solid balance sheet. This plan focuses on our key strengths with the ultimate goal of delivering sustainable value for all stakeholders. I'm pleased to report that KRG's Q1 results exceed our 2023 plan, and our streak of outperformance continues. We generated FFO per share of $0.51, beating consensus estimates by $0.04 per share and representing an 11% increase over the comparable period last year. Our same property NOI growth for the quarter was 6.5% as compared to the same period in 2022. Heath will provide more details around the components of each metric. KRG signed 144 leases representing over 830,000 sq ft, producing 13% blended cash spreads on comparable new and renewal leases. Excluding the impact of option renewals, our blended cash spreads on comparable leases was 21%. More importantly, KRG earned a 42% return on capital for comparable new leases, which translates into an average payback period of only 2.4 years. The retention ratio in the quarter was nearly 90%, which is well above historical norms. Based on our ability to drive pricing, produce strong returns, and retain existing tenants, it should come as no surprise that we're experiencing strong demand for our Bed Bath & Beyond boxes. Our current guidance assumes that we will recapture all of our Bed Bath locations and that we that we will not be paid any rent beyond what we have already collected to date. Open air retail will always be Darwinian, and tenants that are slow to adapt will be nudged aside by more agile competitors. It's what makes our business so dynamic and interesting. We've been through this exercise before, and as it relates to Bed Bath or any struggling tenant, we'll gladly trade any temporary disruption for the long-term value creation associated with reletting these spaces to vibrant and traffic-generating tenants. The good news is that Bed Bath boxes are attractively sized and located in prime spots within our centers, which we expect will translate into healthy re-leasing spreads and strong returns on capital. Currently, we have significant interest in our locations from a variety of categories, including specialty grocery, discount, sporting goods, and home furnishing. We have persistently maintained that leasing existing space offers the best risk-adjusted use of our capital, and we're poised to swiftly address the backfill potential for these boxes. The past two and a half years serve as a great example. We've executed 58 anchors representing over 1.4 million sq ft at 18% comparable cash leasing spreads and 20% returns on capital. You've often heard us say that the only permanency in our business is the underlying land. Everything on top of it can change. When asked which open air format we are most likely to invest in, our answer is always, "We invest in great real estate." We're starting to see the same philosophy implemented by our retailers. Retailers are focused less on the type of center and more on the underlying quality of the real estate. This growing trend is supported not only by the increasing body of data available to our tenants. Also by the post-COVID realization that brick-and-mortar stores are the primary distribution point along a supply chain that requires convenience, speed, and healthy profit margins. As a result, we focus on the underlying quality of the real estate across a variety of product types. Our portfolio is well-balanced among the open-air retail categories, thereby offering a wide array of options to our retailers. Furthermore, our product is pliable enough to reconfigure if the real estate dictates a different use. These trends, together with the lack of meaningful new supply in the open-air retail space, have created an extremely favorable supply-demand dynamic for KRG. The culmination of all these great things I've just mentioned is allowing KRG to increase its NAREIT FFO guidance by $0.03 per share, moving the midpoint from $1.92- $1.95. We're also increasing the midpoint of our same-property NOI growth assumption by 25 basis points, moving the midpoint from 2.5%- 2.75%. I'll now turn the call over to Heath to provide additional details. Good afternoon, and thank you for joining us today. I'm pleased to report that KRG has kicked off 2023 with another quarter of outperformance. For the Q1, KRG generated $0.51 of NAREIT FFO per share, which was 11% higher than the comparable period in 2022. This year-over-year increase was primarily driven by higher same-property NOI, which grew by 6.5% in the Q1. Increased occupancy was a primary driver of our same-property NOI growth, with a 440 basis point increase in minimum rent, a 120 basis point increase in net recoveries, and a 90 basis point increase in overage rent. As John alluded to earlier, we are raising our NAREIT FFO guidance to $1.92-$1.98 per share, representing a $0.03 increase at the midpoint. A $0.01 is attributable to the 25 basis point increase in the same-property NOI growth assumption due to lower than anticipated bad debt and higher than anticipated overage rent and tenant retention. Another $0.01 is attributable to a short-term lease we entered into with the Regal Cinemas for the location in the Los Angeles MSA. The final $0.01 is a result of higher non-cash items related to a reversal of certain below-market lease intangibles. Our revised full-year guidance range relies on the following additional assumptions at the midpoint: same-property NOI growth of 2.75%, neutral transaction activity, full-year bad debt of 115 basis points of revenues, and an additional 75 basis point reserve specific to Party City and Bed Bath & Beyond. It appears that Party City will emerge from bankruptcy in the near term, and we will not be losing any locations. Our assumption is that Bed Bath is in liquidation mode and that we will not collect any additional rent going forward. It's important to note that of the total 75 basis points of potential disruption, only 5 basis points was experienced in the Q1 as Bed Bath continued paying rent on the vast majority of its locations. For this reason and others, we caution against annualizing our Q1 results. Specifically, the Q1 benefited from items that are not budgeted to repeat themselves during 2023. As it relates to the same-property NOI for the balance of the year, we are assuming no additional rent from Bed Bath, an elevated bad debt run rate, and lower overage rent. Consistent with last quarter and based on comparable 2022 periods, we anticipated very strong Q1 same-property NOI growth that moderates over the course of the year. Outside of the same-property NOI, the Q1 benefited from lower interest expense related to retired mortgage debt and the previously referenced non-cash contribution. As we demonstrated last year, it's early, and a lot can happen between now and the end of 2023. We are extremely confident with respect to the things we can control. Prudence dictates that we remain conservative with respect to the things that we cannot control. On the balance sheet front, we retired $162 million in mortgages using our revolving line of credit and cash on hand. Over 96% of our NOI is now unencumbered. Subsequent to the end of the Q1, we closed a $93 million mortgage at KRG Share, secured by our One Loudoun residential joint venture project at a fixed interest rate of 5.36%. KRG is a 90% owner of the 378 multifamily units at One Loudoun, which are currently 96% leased and continue to outperform our initial underwriting. The proceeds in the mortgage were used to pay down our $1.1 billion revolving line of credit, which currently has a balance of $68.5 million. We are a battle-tested management team that has navigated a variety of challenging cycles, but never with a balance sheet of this caliber. Net debt to EBITDA of 5.3x. Debt service coverage ratio, 5.2x. Over $1 billion of liquidity. Minimal floating rate debt. A well-staggered maturity schedule. Deep banking relationships. A huge unencumbered asset pool and multiple capital sources. These formidable attributes inspire a calm confidence across the entire organization and allow us to remain intently focused on operational excellence. Thank you for joining the call today. Operator, this concludes our prepared remarks. Please open the line for questions. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one. On your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Craig Mailman from Citi. Your line is now open. Hey, guys. I just wanna clarify. Heath, you said Bed Bath was current in Q1. You guys are assuming zero rent for the balance of the year. Did they reject all the leases in that first motion or, you know, have they paid anything in April? Kinda curious, why you're assuming nothing from end of Q1 through the balance of the year. Yeah, Craig. We've had a total of four locations have been rejected to date. They did pay a handful of locations for April rent. Just as a matter of conservatism, we're just assuming that from this point on, we're not gonna see any rent. I mean, in reality, they did get a $254 million DIP, we're likely to see some form of rent in terms of post-petition. Again, for the purposes of our guidance, we just assume that we're not gonna see another dollar from this point forward. Okay. Could you just give some sense of where you guys are in the backfill process, how many you guys have gotten back and where you are in kind of the process? Sure. I mean, I'll talk about it a little bit and Tom McGowan can chip in too. I mean, bottom line is we have no different than everyone else. There is a strong desire by retailers to have a chance to lease these spaces. You know, our objective right now is to make really good decisions around which retailers. To be honest with you, we're less focused on how fast it happens and more focused on the quality of the tenants that we put in. One of the uniquenesses of Bed Bath & Beyond is this was a tenant that at one time, was one of the premier tenants in the business. You know, of the 22 locations we have, 19 of them are 100% leased in the anchors, right? This is a great opportunity for a great tenant to have a shot at this space. I think another one of them is a ground lease, and the other two actually have both Bed Bath and buybuy BABY. I mean, my focus macro is that we're taking our time making great decisions with capital and getting in great retailers. The fact of the matter is all of our spaces were actively in discussions, but Tom, you wanna add to it? Yeah, I think one of the keys is the fact that we're in an environment of, you know, there's a lack of supply, and we have been utilizing that to our benefit. One of the keys for our company is that we be ready for all of this. We have our development teams, our construction teams going through drawings, understanding rooftop units, panels, et cetera, so we can move through the estimating process and construction as quickly as possible. As John said, it's ultimately, this is a great opportunity. It's about getting the right tenancy in for the long term and pushing spreads and strong returns. I know you guys don't have 100% visibility, but if you assume they're all non-rent paying going forward, kind of what do you think the commencement timing is on backfill, just given the visibility you have on the demand? Sure. I mean, I think it's not that different from what it usually is, Craig. I mean, these anchor deals, generally speaking, when you actually get possession back. By the way, we're also kind of gotta remember that some of these leases may actually, you know, get bought. There's certain things outside of our control. Of course, if a lease was bought, then, you know, the rent commences very quickly. I think what we're doing is we're just making very conservative assumptions within our guidance. Let's start there. Secondly, you know, assuming we take the space back, you know, generally speaking, it's 12- 18 months. That's the way it's always been in, you know, anchor leasing. As Tom said very well, you know, we're not on the clock, you know. We don't think that way. We're on the value creation clock. That's why you're not gonna get me to say how many, you know, exact deals, you know, we have lease negotiations, LOIs, et cetera. That doesn't really matter. What matters is, you know, we will have. This is a once in a long time opportunity to be able to bring in tenants that are gonna really make a difference to the particular property. We have multiple interest parties on multiple spaces. Bottom line is, you know, it probably hasn't changed. It's the normal timelines, but again, that depends on whether we're building a space out or someone's just, you know, bought the lease and just starts paying us rent. Great. Thank you. Thank you. One moment as I prepare the next question. Our next question comes from Todd Thomas of KeyBanc. Your line is now open. Hi, thanks. Good afternoon. I guess just following up on that line of questioning, you know, you did very well with the Stein Mart vacancy and backfills over the last couple of years now. Can you talk about the spreads that you anticipate on Bed Bath backfills? You know, John, you just characterized it as sort of a once in a lifetime opportunity. Does that mean, you know, that there will be some, you know, balance between, you know, sort of rents and rent growth and maybe credit quality as you move forward? Also, can you talk about the outcome participating between, you know, single tenant backfills versus box splits within the 22 locations you have? Yeah, Todd, I don't think it's too different than what we've been experiencing, you know, over the last couple years. We said in our prepared remarks, I mean, if you look at the last two and a half years, we did 58 anchor deals, 18% rent spreads, and 20% return on capital. I think we wanna make sure you understand that it's not a one-dimensional exercise. You've gotta get both. I mean, we want a healthy spread, we also are much probably more focused on, you know, making sure that the capital that we're putting into these deals is we're getting a significant return and the credit quality. It's all these things put together. You know, we've said publicly already that, you know, we're likely to get 15%-20% rent spreads. More importantly, we wanna continue to get those strong double-digit returns on capital. I think there's no reason to think that we wouldn't. I mean, you've heard me say it before, if this was gonna happen, this is a very good time for it to happen, in terms of what's going on in open-air retail. Todd, just a couple other things. One is diversification. We've been talking about diversification quite a bit and making sure that our reach throughout the tenant universe is very strong and instead of just taking, you know, the first inbound call. That's a priority. You also asked about the probability of potential splits. I mean, one way to look at it is we did 58 box deals in the last two and a half years and split only one of those. That's a pretty remarkable ratio. There's a possibility that we have splits, but really looking at our prospect list and where we are in the process of all these deals, I think we're gonna see, you know, a very positive ratio once again in terms of avoiding splits. Only other thing, just another thing to add to that, Todd, is that we may pursue a split because we wanna do that for the benefit of the center. I mean, there might be opportunity to bring in, let's say, a smaller specialty grocer and, you know, put someone in conjunction with them, and we think that's the right thing to do for the center, we'll do it. I really believe that, you know, the leverage is on our side in terms of making these determinations because of the supply-demand kind of characteristics that we outlined. Certainly, we think it'll probably most of the deals will be with individual users, but there may be a few where we say we'd prefer to split it. Okay. In terms of investments, Do you see opportunities beginning to surface from maybe private owners with Bed Bath space, maybe some other vacancy that might not have the capital to reinvest in their centers? Is that not likely to result in much deal flow? How big is your appetite here to find new investment opportunities? I think, I think the investment market is pretty volatile right now. Obviously, there's disruption in the capital markets. I would say that right now, you're probably not gonna see a lot of that. I still kind of believe that perhaps in the H2 or maybe even more towards the Q4 of this year, there would be more opportunities. Again, you know, we're gonna be very selective. We have a very, very strong portfolio, and we wanna continue to own the best real estate. I made mention of the fact that when we make investments, we make investments in the land, that is permanent. We think we're pretty good at making real estate decisions. Probably, Todd, some opportunities will arise, but right now it's a little slow on that front, just, you know, obviously with the disruption in the market. Okay. Heath, real quick on the guidance. The $0.02 that were included in the revision, so $0.01 related to the theater negotiation, $0.01 of non-cash rent. Were both of those fully realized in the Q1, or is that, you know, was that partially recognized in the Q1 and something that's going to continue, you know, in the run rate throughout the balance of the year? The non-cash event was realized in the Q1, Todd. You may see some other non-cash related to some of the Bed Bath closures as those happen. The Regal rent, that's something that we'll realize over the course of the, of the year. That, that's a, you know, they're just paying on a short-term deal. Okay. That deal, the short-term deal is expected to end at or prior to the end of 2023 or is there additional term? You know, it will, it will actually terminate in January of 2025. They would have an option to go back to their standard deal. We set it up to give us optionality both on that situation as well as potentially maximizing the value of the land. Okay. All right. Thank you. Thanks. One moment, please. Our next question comes from Floris van Dijkum from Compass Point. Your line is now open. Great. Hey guys. Thanks for taking my question. Morning. Hey, I wanted to delve into something regarding your small shop occupancy. Obviously, it ticked up. It's at 98.8%, I think. What was your peak? If you could touch on maybe a little bit of the, you know, of the, you know, what you think is going to happen there over the next two years. Particularly, how much more upside do you see in that as well as your anchor? Because one of the things that your small shop typically would have, where your rents are double your anchor rents, and I think you're actually getting more small shop rent today than anchor rents. Your fixed rent bumps on your small shop should be higher. Maybe if you can touch on a couple of those elements in your portfolio. Hey, Floris. Just to be clear, on the small shops, the lease percentage is just a little over 89. I think it's 89.5%. So you just. Wow. I think you just got those backwards. Yeah. 89.8%. Yeah, yeah. But I'll, I'm gonna have Tom dive into it. Actually, if you just look at our quarter that we just had, you know, we did 144 comparable deals. You know, the majority of those deals were small shop deals, right? 121 of them were shop deals. The shop business is extremely active, but I'll have Tom dig into it a little more. To get to your point, the high level mark for shops was 92.5%. Right now we're at 89.8%, so there's about a 270 basis point spread there. There's no question, we know that we can get back to that number. It will take time, the bottom line is there's a tremendous amount of growth ahead of us. You know, we did fall back 20 basis points, that was really kind of more of a seasonal scenario. We expect to pursue that growth and continue on our path that we have, particularly through all of 2022. One other point you mentioned, Floris, is that the spreads are better, and John mentioned, and there's no question that should buoy growth as well as we work through that spread differential of 270 basis points. The other important part there, Floris, and I've said this a lot, but on the shop side, obviously the rent commencement is much quicker than it would be on the box side. To the extent that we continue our pattern of leasing, that can help, you know, buffer some of the NOI lost, you know, assuming the Bed Bath situation is the way we project it. One more thing, Floris. That 92.5%, that was something we achieved at the end of 2019. It's important to note we didn't view that as a ceiling. Yes, that was at 92.5. That was the highest in the company's history, but we were planning on growing that from, you know, in 2019 and beyond. Is it correct to assume that your fixed rent bumps on your shop space are somewhere in the neighborhood of 250 basis points on average versus your anchor space, probably closer to, like, 100 basis points? It's correct to assume that, you know, generally in that range, but we are extremely focused on that particular part of our business right now, Floris. You know, we're actually, I think, probably maybe more focused on it than most because it's very important that we take this opportunity in this point in time in the cycle to generate higher annual bumps than $2.50. I think that this is, you know, one of the, one of the primary legs that we're focused on this year, and we're doing quite well. Each deal that we do now, it's a, it's a major point of discussion, I think the retailers understand in the environment that we're in, especially when it relates to supply-demand characteristic, they're gonna have to pay more than 2.5% a year on the small shop side. Would it be fair to say that, you know, new leases are done around 300 basis points and fixed CAM is probably 4%, somewhere in that range? You gotta make your own assumptions on that, Floris. You're, you know, we can't give you exact right now. Got it. Okay. Let me my other question had to do with the Regal lease. I know that they're paying rent but obviously I, you know, we've written and I think, you know, other people have speculated that land is more valuable as something else besides a theater. Where do you stand in your negotiations with the authorities in terms of getting that rezoned for either apartments or industrial? In particular, I would imagine apartments, gotta, you know, be more looked at more favorably by the local government. If you can give us some update and maybe sort of, you know, what the pricing is for apartment land in that area. You know, Floris, from a timing standpoint, our team has been out there, two to three times already meeting with Ontario. The positives is that from a comp plan perspective, they very much would like to see this property redeveloped. I think we're working with a group that understands this is a great opportunity not only for this piece of land, but for the community as a whole. The apartment land appears to be the best approach, but we're keeping our eyes open, and we'll likely take looks at various suitors for the property as well as assess it ourselves. We're in the site planning phase with staff right now, and we are moving nicely. That's why the deal out to 2025 was really a perfect scenario for Kite. That gives us the opportunity to get these things accomplished, within that time frame. Great. Thanks, guys. Thanks. Thanks, Floris. Thank you. One moment for our next question. Our next question comes from Alex Goldfarb of Piper Sandler. Your line is now open. Hey, morning out there. Good morning, afternoon. Just crazy earnings. Sorry. Yep. Thanks, John. A few questions here. First, property insurance, favorite topic of apartments this season. You guys have, you know, meaningful amount of Sun Belt exposure. What are you guys seeing for property, you know, insurance increases? Really thinking of the pass-through to your tenants, especially the smaller mom and pops. Can all of those tenants stomach the increase in premiums that we're hearing about? Hi, Alex. It's Heath. First of all, good news is it's a very recoverable item. To your point, yes, I mean, premiums have increased. Our renewal date is 12 January, so we already went through that last year. You know, based on the hurricane season last year, as you can imagine, especially in Florida, we did see some significant increases in property insurance. Good news is that we do have a captive insurance program, so we were able to kind of get creative with that to really diversify our risk and try to minimize the increase to the tenants. Sure, it's, you know, it's a real issue, and it's something that we deal with. You know, we do the best that we can. We spend a lot of time with our insurance providers. We travel, we meet with them like we meet with investors to give them some conviction, you know, around, you know, insuring Kite. You know, one thing I think that made a lot of difference to them this year was, listen, we took a hurricane, a category four hurricane right there in Naples, and not one of our properties was wiped out. You know, it's a very site-specific exercise. Yeah, there were some increases this year and, you know, we hope to see the market soften some coming for our next renewal in December. Alex- Hey, Alex, just let me add real quick that I actually think this is one of our strengths, that in the open air platform, you know, our total cost to operate is very, very affordable when you look at CAM taxes and insurance, you know, because of the simplicity of the buildings, right? I think it's actually, you know, it's creating even a better kind of look-through when retailers, as we mentioned, as they become less agnostic, around, you know, a particular use, and they're gonna look at the real estate, and they look and see that the cost to operate in our real estate is well below what it might be somewhere else. This is just another thing that's really, you know, inuring to our advantage right now. what you're saying, John, is you guys haven't seen any impact of smaller tenants who said, "Hey, you know, I can't stomach that. No. Okay. No, no, not at all. Not at all, Alex. Next question is on the Bed Bath, it sounds like we won't know for some time how many of these Bed Baths are bought in auction versus collectively, you know, the REITs get back. It sounds like there's healthy, you know, 20%, 30% type rent marks. On the ones, just in general, what's the average lease term remaining on the Bed Bath boxes? I'm assuming that for these tenants that really want into certain centers, they don't care if there's only two years left. They'd rather get in the space and try to hope that they can renew rather than, you know, pass by. Just wanna, you know, maybe some of your game day theory on sort of, one, you know, the types of leases that the auction that would be popular at the auction? Two, collectively, how much average term is left so that even if somebody does buy a. I'll let you go. sorry. Yeah, I don't have that in front of me right now, Alex, the bottom line is, you know, whether the primary term there's, you know, I have to guess right now, five or six years, probably, more importantly, you know, they have options, right? If someone buys the lease, they're buying more than the primary term. I think that's why we made mention that that is a possibility, we were just being conservative in the way that we were underwriting the balance of the year in terms of earnings. Certainly, the, you know, tenants will be looking at, you know, length of term, you know, primary options, also the rent and the market, right? Is this rent viewed as a below market rent? Is it not? There's a lot that goes into that. Remember, we also would have the ability to be in the process of buying a lease if we felt like we wanted to control that or protect that. There's a lot to play out, which is why I think the way we did guidance was the right way to do it. Just take it off the table and let's see what happens. Alex, I think you'll also see a hybrid of what we're all talking about, and that's a situation where a retailer will contact us directly, which has occurred, and say, "Hey, look, we could go out and purchase these. We'd rather enter into a new lease." They, of course, would pursue tenant improvement dollars. We'll be seeing a lot of different scenarios as this begins to unfold. Which is another reason that we said this is not a game about how fast you can get there. It's a game about how good a deal you can do. Yes. Okay. Thank you. Thanks, buddy. Thank you. One minute as I prepare the next question. Our next question is from Michael Mueller of JP Morgan, your line is now open. Yeah, hi. Heath, and I know you talked about a couple of moving parts with some of the Bed Bath boxes, can you tell us what, in one Q, what was the total revenue, including recoveries ballpark, that was in Q1 that we should assume is, you know, heading out in Q2 first? The second question is, looking at some of the future redevelopment opportunities, what are some of the triggers that you look for to start to activate some of those projects? I think we're gonna answer the second part of that question first, which is what are the some of the attributes we're looking for in terms of redevelopment? I'll turn that over to Tom. From a redevelopment standpoint, you know, we're gonna be looking at quite a few different factors. You know, we've been doing this a long time, decades and decades, so really the sky's the limit in terms of the optionality. That will, of course, be one of the key things that we study as part of this. Once again, we get back to the fact that this takes time, and we're gonna make sure that we do it right and end up with the best configurations as we go forward. On the first part of the question, Mike, the answer is it was about a penny of FFO, so a little over $2 million is what we collected from Bed Bath in the Q1, which is why the disruption for the last three quarters is around $0.03. Mike, it's John. It actually gives me an opportunity to say that if you stop and think about it for a minute, you know, Bed Bath was our eighth-largest tenant, 1.4% of revenue, right? You're talking about what is that? A little over $8 million. We're saying we got paid for one quarter. We're assuming they're out for three quarters. Even with that hit, you know, we just raised guidance a couple cents over what it was, you know, last year, what we did last year. I think it kind of shows the resiliency of the business right now, and the ability to kind of make things up along the way in terms of other leases that are coming online with signed not open, et cetera. It's a good opportunity to highlight the strength of the business. Got it. Thanks for the color. Thank you. Thank you. Thank you. Thank you. One moment as I prepare the next question. Our next question comes from Anthony Powell of Barclays. Your line is now open. Hi, good afternoon. A question on small shops and regional banks? Everyone's worried about regional banks today and recently, given all the failures. Are you concerned about the ability of small shop tenants to either access credit or to expand, maybe not now, but later this year or next year, given kind of the anticipated tightness on the lending standards from regional banks? I mean, I think obviously it's hard to know where this goes right now, Anthony. To date, there has been no indication of any slowdown in business formation and expansion of franchises. You know, remember, a lot of our small shop deals are national deals, with large, you know, credit-worthy companies. The actual mom and pop piece of it is pretty small. I think it's around 10% maybe, of the shops. We just aren't seeing it. As it relates to, you know, regional banks, we'll see how that plays out. I mean, I think there's so much going on right now that to try to draw long-term conclusions is probably a fool's errand, but so far so good. Look, as we said earlier, we have opportunity in the shops, and we're seeing tremendous volume right now, so we actually feel pretty good about it. Thanks. One more. Sorry if I missed this, what drove the 10 basis points decline in the bad debt assumption guidance, and what are you seeing from tenants in terms of either bad debt or discussions beyond kind of Bed Bath & Beyond and Party City? Anthony, the 10 basis point decline is really a feature of taking the actual bad debt that we experienced in the Q1 and then assuming the same 125 basis points for the balance of the year. When those blend together, that puts you at 115 basis points of bad debt on a go-forward basis. Got it. Have any other retailers popped into the watch list or just any commentary on tenant health, or would be great? No, I think the list is generally pretty much what it's been for a while, Anthony. You know, we've been talking about Bed Bath and Party City for a long time. These things take a long time to play out. The current environment is still very healthy for retail. Our centers are very busy, and we made mention of kind of the shifts that have happened post-COVID. All these things that have happened post-COVID have been very fundamentally good for open-air retail, and I think there's even more of that to come in the future. Right now, we aren't seeing a tremendous change there. We also mentioned it's a Darwinian business. There's going to be retailers that don't innovate enough, and they will be moved aside by the ones that do. The great thing is we're the landlord, you know. We're not running those businesses. We're running our operating, you know, property platform, and we're gonna put in the best retailers. They need to do strong sales or we'll find ones that can. All right. Thank you. Thank you. Thank you. At this time, I would like to remind you that if you'd like to ask a question, you will need to press star one one on your telephone. One moment as I prepare for the next question. It seems the last question has withdrawn. Oh, nope, there they go. They are back. Our next question comes from Lizzy Doykan of Bank of America. Your line is now open. Hi, good afternoon. I was hoping to ask about the leasing volumes and activity this quarter, which, 144 leases, 831 sq ft. It seems a bit lower from last quarter. It looks like that was a function of fewer renewals. I just wanted to see if, you know, is that really if you're seeing moderation just from levels of outsized demand or maybe if you could characterize the activity recorded versus what you expected and, you know, what would be assumed as more normal going forward. Yeah. This is Heath. I'll let Tom talk about sort of the type of tenants that we're talking to, but the small shop demand is still extremely so strong. You're right, the lower volume is really a function of renewals, and that's really timing. As you notice, we still have 90% retention ratio. Just with the way that the renewals are sort of shaking out over the course of the year, they're more back-end loaded. I wouldn't read too far into the actual square footage volume in terms of what it means for tenant demand. Tom, you wanna tell us about who's been talking to us? From another component of that is that we did a tremendous amount of boxes last year, and now we're kind of back at a level of 20 boxes still available. Before, you know, we were up at, you know, a number as high as 58. We have really brought that down, and it's also a function of our lease percentages, you know, moving forward and being in the right places. You know, from a, from an overall perspective, we're really focusing on specialty grocery. That is a huge component. John mentioned about it, and those come in in a lot of different sizes and different layouts. You know, the sports industry, as you've seen us, we've been productive on that. The furniture home store business, and then, of course, the all-powerful discount users are very active as well. If you look at some of the deals that we've done as of late, you know, you have Aldi, Fresh Market, Total Wine, DICK'S, HomeGoods, it kind of falls into that category of, there's really quite a few tenants that we have the ability to draw from, and these are people that we have very close relationships. These interactions are constant and ongoing. We feel good about the pool that we're drawing upon. Those volumes will ebb and flow similar to what he said. I think the big factor is, of course, the timing of the renewals and the fact that our box inventory has drawn down from a very high level previously. Okay. Makes sense. Thanks. I was wondering if how much of the improvement in your same-store NOI guidance bump could have been attributed to the better expense growth we saw in Q1. I'm wondering if that's just an easier comp that we saw year-over-year, or how much of that is a function of the initiatives you've taken to reduce costs or, you know, even cost synergies coming from the RPAI merger. Thanks. I think honestly, the increase in the same store guidance is really a function of it's an increase in your base rents and increase of your overage. Those are the main drivers of why the same store is going up. A lot of that is obviously, you know, as our occupancy improves, et cetera, it's higher retention ratio than we originally budgeted. It's all these really good high quality items that are causing that same store, NOI assumption to go up by 25 basis points. Okay, thanks. Just to confirm, I guess, on expenses, year-over-year, I guess that was almost flat. Is there anything to comment on with regards to specific line items? No, I don't think there's anything specific in the line items to comment on the expenses. Okay, great. Just 1 last one from me. I noticed, I know, recovery on insurance was touched on a bit earlier, it looks like the recovery ratio ticked up just a little bit on retail properties, this still seems low from last quarter. Is that mostly a function of the reserves for Bed Bath & Beyond? You know, what might be driving a better expense recovery for the whole portfolio? I think that's occupancy, right? That's gonna drive higher expense recovery ratios. Again, we're also doing a great job of with our new leases, and we're seeing the benefits of our fixed CAM initiative really flowing through as well. As we get more and more tenants signed up for fixed CAM and more and more tenants come online with fixed CAM in their leases, you're gonna see that recovery ratio continue to be very, very high. I mean, I would also point out, I mean, when you look at the NOI margin, I mean our NOI margin is 74%. I think the peer group is high 60s on average. That's an area where that's more about cost control, more about fixed CAM and obviously as you get lease up too. You do have on the NOI margin, that's where you have the opportunity to have your platform kind of differentiate itself, which we do. Great. Thank you. Thank you. Thank you. Thank you. At this time, I would now like to turn it back to John Kite for closing remarks. I just wanna say thank you for joining us today and look forward to seeing you soon. Bye. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.