Good day and welcome to Phillips Edison & Company First Quarter 2024 earnings call. Please note this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin. Thank you, Operator. I'm joined on this call by our Chairman and Chief Executive Officer Jeff Edison, President Bob Myers, and Chief Financial Officer John Caulfield. Once we conclude our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings, specifically in our most recent Form 10-K and 10-Q. Our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet, which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison, our Chief Executive Officer. Jeff? Thank you, Kim, and thank you everyone for joining us today. The PECO team delivered another solid quarter of growth, with Same-Center NOI increasing by 3.7%, Nareit FFO increased 4.9%, and Core FFO increased 4.5%. The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning grocery-anchored neighborhood shopping centers anchored by the number one or two grocer by sales in the market, the PECO team's ability to drive results at the property level, and the many advantages of the suburban markets where we operate our centers. The continued strong performance of our portfolio has allowed us to affirm our 2024 Core FFO guidance range. The midpoint represents year-over-year growth of 3%. Despite significant interest expense headwinds of nearly $0.10 per share, we believe we can continue to deliver positive earnings growth despite interest expense headwinds. Today, we see a continued strong operating environment and a transaction market that is increasingly more active. The consumer remains resilient, and our grocers continue to drive strong, recurring foot traffic to our centers. Occupancy remains high at 97% leased, which gives us pricing power. Leasing demand continues to be elevated for our inline spaces, and we have limited exposure to big-box retailers. Retention remains strong, and the PECO team continues to be proactive in getting spaces back and driving significantly higher rents. This is reflected in our continued strong new rent spreads. In addition, PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive strong neighbor demand. We have a great balance sheet, and we are well-positioned for creative acquisitions and growth. During the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million. We remain confident in our ability to acquire high-quality centers at attractive returns as the transaction market opens up further. While it's early in the year, we continue to successfully find attractive acquisition opportunities. Activity in the second quarter remains strong. Given the current environment, we are reaffirming our guidance of $200 million-$300 million of net acquisitions for the year. We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize. We continue to target unlevered IRRs of 9% or greater for our acquisitions. As a reminder, the acquisitions that we completed in the second half of 2023 underwrote to over 9.5% unlevered IRR. We will maintain our disciplined approach and focus on accretively growing our portfolio. We're hopeful that buy-ins will continue to increase throughout the year. Looking beyond 2024 and assuming a more stable interest rate environment and acquisitions market, we continue to believe our portfolio can deliver mid- to high single-digit Core FFO per share growth on a long-term basis. This will be driven by both internal and external growth. We remain committed to successfully executing our growth strategy. Our high-quality portfolio, anchored by top grocers in favorable suburban markets, supported by one of the best balance sheets in the sector, provides a long-term, steady earnings growth profile. PECO generates more alpha with less beta, given our focused and differentiated strategy. As previously announced by Kroger and Albertsons, the estimated closing date for the proposed merger was pushed back to later this year. Also, this week, Kroger added 166 stores to the disposition list to C&S. We remain cautiously optimistic about the impact of this merger on PECO. We continue to believe it is ultimately a positive for PECO, for our centers, and for the communities that our centers serve. The market still gives the merger a low probability of occurring. But should the merger close and 579 stores now on the list are sold to C&S, we believe the impact on PECO is a net positive. Our Albertsons stores will be operated by Kroger, which reinvests regularly in their stores and produces higher sales volumes. If the merger does not occur, our Albertsons-anchored centers will continue the strong performance that they have produced to date. I will now turn the call over to Bob to provide more color on the operating environment. Bob? Thank you, Jeff, and good afternoon, everyone, and thank you for joining us. We had another quarter of strong operating results and leasing momentum. We continue to see high retailer demand with no current signs of slowing down. PECO's leasing team continues to convert retailer demand into high occupancy with higher rents at our centers. Portfolio occupancy remained high and ended the quarter at 97.2% leased. Anchor occupancy remained high at 98.4%. And during the quarter, we executed 5 anchor leases, including Ulta Beauty at Hilltop Plaza, Five Below at Bear Creek Plaza, Crunch Fitness at Kirkwood Marketplace, and two MedTail uses, RISE Center at Ocean Breeze Plaza and a medical center at Colonial Promenade. In the first quarter, we received 6 anchored boxes back. We currently have just 15 vacant anchored spaces in our portfolio. Importantly, we are able to drive significantly higher rents on these units. For reference, these 6 spaces had an average ABR of $8.06, and the 5 we executed this quarter had an average ABR of $18.37, a 128% average increase. Activity for anchor leases currently out for signature is extremely positive, and we are currently experiencing the strongest anchor demand we've seen in over 20 years. Inline occupancy ended the quarter at 94.8%, an increase of 50 basis points year-over-year, and a sequential increase of 10 basis points in the fourth quarter. New neighbors added in the first quarter included quick-service restaurants such as Nashville Hot Chicken, The Great Greek, Starbucks, and Wingstop, several MedTail uses, health and beauty retailers such as Hand & Stone, Sola Salon Studios, and other necessity-based goods and services. Our acquisitions in the first quarter were 96% leased at closing. Buying centers with some vacancy will continue to allow us to drive growth. Given PECO's unique external growth strategy, we have added new disclosures for Same-Center leased and economic occupancy, which you can find in our supplemental information packet. We continue to believe that we can push Same-Center in-line occupancy another 100-150 basis points, given the continued strong retailer demand. In terms of new lease activity, we continue to have success in driving higher rents. Comparable new rent spreads for the first quarter were 29.1%. Our in-line new rent spreads were a record high 37.4% in the first quarter, which compares to our trailing 12-month average of 27.7%. We continue to capitalize on strong renewal demand and are making the most of the opportunity to improve lease language at renewal and drive rents higher. In the first quarter, we achieved a 16.9% increase in comparable renewal rent spreads. Our inline renewal spreads remained high at 19.2% in the first quarter, which compares to our trailing 12-month average of 18.2%. These increases in spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Progress continues in terms of neighbor retention, and while growing rents at attractive rates, PECO's retention rate remained strong in the first quarter. Our inline retention rate is 83%, well ahead of the historical five-year average of 78%. Higher retention means less downtime and lower TI spend. In the first quarter, we spent only $0.54 per sq ft on tenant improvements for renewals. We also remained successful at driving higher contractual rent increases. Our new and renewal inline leases executed in the first quarter had average annual contractual rent bumps of 2% and 3%, respectively, another important contributor to our long-term growth. The leasing spreads that we are achieving and the strength of our leasing pipeline are clear evidence of the continued high demand for space in our grocery-anchored neighborhood shopping centers. PECO's pricing power is a reflection of the strength of our focused strategy and the quality of our portfolio. PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive robust neighbor demand. These trends include a resilient consumer, hybrid work, migration to the Sunbelt, population shifts that favor suburban neighborhoods, and the importance of physical locations and last-mile delivery. The impact of these demand factors is further amplified due to limited new supply over the last 10 years, and going forward, given that current economic returns do not justify new construction. A healthy mix of national, regional, and local retailers adds many benefits to our grocery-anchored portfolio. 70% of our rents come from neighbors offering necessity-based goods and services, and our top grocers continue to drive strong, recurring foot traffic to our centers. PECO's three-mile trade area demographics include an average population of 67,000 people and an average median household income of 87,000, which is 12% higher than the U.S. median. These demographics are in line with the store demographics of Kroger and Publix, which are PECO's top two neighbors. Our centers are situated in trade areas where our top grocers are profitable and our neighbors are successful. We also enjoy a well-diversified neighbor base. Our top neighbor list is comprised of the best grocers in the country. Our largest non-grocer neighbor makes up only 1.2% of our rents, and that neighbor is T.J. Maxx. All other non-grocer neighbors are below 1% of ABR. To put a finer point on neighbor mix, PECO has no exposure to luxury retail and very limited exposure to distressed retailers. Our top 10 neighbors currently on our watch list represent just 2% of ABR, with no one retailer representing more than 40 basis points of ABR. While our bad debt was slightly elevated in the first quarter, we actively monitor the health of our neighbors. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. To note, this is not attributed to national bankruptcies, as we don't have any meaningful concentrations. From an operations standpoint, we have always taken an aggressive stance to get spaces back, and in today's environment, the PECO team is taking an even more aggressive stance on opportunities where we can get higher spreads. We are seeing 40% inline rent spreads on the units we are getting back. 27% of our ABR is derived from local neighbors. The majority of our local neighbor rents come from retailers offering necessity-based goods and services. Our local neighbors are successful businesses run by hardworking entrepreneurs. They have healthy credit and are less susceptible to corporate bankruptcy caused by weaker performing locations. Local neighbors offer favorable economic returns. A typical local retailer receives less capital at the beginning of their lease, accepts more PECO-friendly lease terms, and has high retention rates. PECO retained 85% of local neighbors in the first quarter. For inline local neighbors, renewal rent spreads remain strong at 20.2%. Importantly, local retailers meaningfully differentiate the merchandise mix that our neighborhood centers offer our customers. Our inline local neighbors are resilient and have been in our shopping centers for 9.7 years on average. In addition to our strong rental growth trends, we continue to expand our pipeline of ground-up out-parcel development and repositioning projects. During the first quarter, we stabilized four projects and delivered over 180,000 sq ft of space to our neighbors. These four projects add incremental NOI of approximately $2.3 million annually. They provide superior risk-adjusted returns and have a meaningful impact in our long-term NOI growth. We continue to expect to invest $40 million-$50 million annually in ground-up development and repositioning opportunities, with weighted average cash-on-cash yields between 9%-12%. This activity remains a great use of free cash flow and produces attractive returns with less risk. Our team continues to stay focused on growing this pipeline as the returns are accreted to the portfolio. In summary, the PECO team remains optimistic given the current strong operating environment and the continued positive momentum we are experiencing across leasing, redevelopment, and development. Our healthy neighbor mix and grocery-anchored strategy positions PECO well for continued growth. The overall demand environment, the stability of our centers, the strength of our grocers, and the capabilities of our team give us great confidence in our ability to continue to deliver solid operating results. I will now turn the call over to John. John? Thank you, Bob, and good morning and good afternoon, everyone. I'll start by addressing first-quarter results, then provide an update on the balance sheet, and finally speak to our affirmed 2024 guidance. First quarter 2024 Nareit FFO increased 4.9% to $80.1 million, or 59 cents per diluted share, driven by an increase in rental income from our strong property operations. Results were partially impacted by higher year-over-year interest expense. First quarter Core FFO increased 4.5% to $81.7 million, or 60 cents per diluted share, driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads, partially offset by the aforementioned higher interest expense. Our Same-Center NOI growth in the quarter was 3.7%, driven by minimum rent growth of 4.2% year-over-year. Regarding acquisitions during the first quarter, we acquired two shopping centers and one land parcel for a total of $56 million. We had no dispositions during the quarter. Turning to the balance sheet, we have approximately $570 million of liquidity to support our acquisition plans and no meaningful maturities until November 2025. Our net debt to Adjusted EBITDA remained at 5.1x. Our debt had a weighted average interest rate of 4.3% and a weighted average maturity of 3.8 years when including all extension options. During the quarter, we entered into an interest rate swap agreement totaling $150 million. The new instrument swaps SOFR to approximately 3.45% effective September 25th, 2024, and matures on December 31st, 2025. This swap helps us manage our floating-rate exposure, as we have swaps that expire in September and October of 2024. We ended the quarter at 76% fixed-rate debt with 24% floating. We continue to monitor the debt market and will look to access it opportunistically. While the recent move in long-term treasuries has not been favorable, credit spreads have improved from year-end. We are continually looking at opportunities to enhance our liquidity and extend our debt maturity profile. Our lack of near-term maturities provides us with flexibility to be patient. Between the significant free cash flow generated by our portfolio this year and the capacity available on our revolver, we can be strategic in our timing to access the debt market. Turning to our guidance for 2024, we have updated the net income per share range to $0.51-$0.55. We have affirmed our guidance for Nareit and Core FFO, which reflects a 6% and 3% growth over 2023 at the midpoints, respectively. In addition, we have affirmed our range for Same-Center NOI growth of 3.25%-4.25%, given the continued strong operating environment. Included in our guidance is the negative impact of uncollectible reserves. We are affirming the range previously provided given the continued strong health of our neighbors. However, we will likely be at the high end of the range for the year, but it's still early, and this is being influenced by our team taking an aggressive stance on getting spaces back to drive higher rent spreads, as Bob mentioned earlier. We currently have several acquisitions in our pipeline, either under contract or in contract negotiation. This activity provides a strong start for the year. As Jeff mentioned, it is still early, so we are affirming our acquisition guidance and expect net volume to be in a range of $200 million-$300 million. If the transaction and capital markets improve, we have the capacity to meaningfully increase this number, but we are comfortable with this guidance range in the current environment. Looking beyond 2024, we believe our internal and external growth opportunities give us a long-term growth outlook in the mid to high single digits for Core FFO per share growth. We expect a comparable or faster growth rate for AFFO because there should be less tenant improvement dollars invested as we continue to increase Same-Center occupancy. In the near term, we continue to be impacted by interest rate increases, as all borrowers are, which impacts our earnings growth. That said, we are pleased to guide to positive per share growth. For 2024, we are updating the range of interest rate expense to $98 million-$106 million. We estimate that higher interest rates could be a headwind of $0.07-$0.11 for the year. If we added back the per share impact of interest rate increases to our updated 2024 guidance, this would be 7% core FFO growth, the midpoint. 2024 is continuing to present challenges with high inflation, volatile and rising interest rates, and global conflict. However, the strength of our integrated operating platform positions PECO well for long-term, steady earnings growth. We're excited for the additional growth opportunities ahead this year, both internal and through acquisitions. With that, we will open the line for questions. Operator? Thank you. To ask a question, press star 1 on your telephone keypad. If your question has been answered and you'd like to remove yourself from the queue, press star 1. Your first question is from the line of Caitlin Burrows with Goldman Sachs. Hi, everyone. I guess good afternoon. Maybe just following up, John, on that last point on the bad debt headwind. So I know the guidance was 60-80 basis points, and you mentioned now it could come in at the high end, granted. It's still early in the year. It sounds like your neighbors are performing generally very well, so just wondering what's driving the updated view and the Q1 results, and if anything is kind of PECO-driven. Can you go through that nuance? Well, hi, Caitlin, it's Jeff. Thanks for the question. As we look at the operating environment, when we get to levels of occupancy that we're at right now, we're taking a very aggressive stance on getting back neighbors who are not paying. That has some impact on what we're talking about here, but we're generally going to continue to be really aggressive at getting spaces back on a go-forward basis, and that will have an impact. But we are not seeing anything sectorally that's happening that is changing those numbers, and we do think they will more normalize over as the year goes through. John, did you have any additions to that? No, I think that captures it. I mean, Caitlin, we look at it. It is still early in the year, and it can move from quarter to quarter, but as we look at it, as Jeff said, we're not seeing anything that is pervasive. I mean, this is not driven by national bankruptcies or things, and so we are taking an aggressive stance on getting the space back and taking the steps that Bob's team has talked about. We do expect that at this time we'll be at the higher end of the range, but it's still early to tell. Ultimately, the important thing for us is that we were able to reaffirm our Same-Center NOI guidance for the year, so we feel very strong about that. I guess maybe then just go on, Jeff, or someone. No, I'm sorry. It's Bob. I'm just going to add to that. In light of what we're seeing on the operations platform and the demand that we're seeing for the space, even in the spaces that we receive back, we were able to get over 40% new leasing spreads. So as long as we continue to see the demand there, it is a space-by-space decision and how hard we push, but it is a strategy that we're seeing some benefit from. So I'm encouraged by the demand and the spreads we're seeing. Got it. And then maybe just on the point of the Same-Center NOI guidance being reaffirmed and the FFO target being reaffirmed despite higher interest expense, I guess can you guys go through some of the offsets of what might be performing better than expected? John, you want to take that one? Sure, I'll take that. So yes, so ultimately, the leasing spread and the leasing activity that Bob is talking about is at the operating level allowing us to do that. We are actually also having better and this goes to the FFO. We are having and forecasting better expense experience than we had anticipated. I mean, our NOI margin increased a little this quarter, but still we're seeing the things like G&A as well as some of our property-level expenses are helping offsetting. So the increase in interest is something, but we're able to manage that and feel good about our guidance ranges. Got it. Okay. Thank you. Thanks, Caitlin. Your next question is from the line of Lizzy Doykan with Bank of America. Hi, everyone. I was just hoping if you guys could talk a little bit more about the two centers acquired in the first quarter. Both seemed pretty well leased at the point of acquisition, so just wondering on the opportunity set that you see at each of those centers, and then just wondering on plans for the land parcel that was acquired. Thanks. Why don't I? I'll cover the two properties, Bob. You can talk through the land parcel that we purchased. The first project we bought, Lake Mary, was a center that we have actually been looked at for a long time. It is a Publix-anchored center. It's one of the best Publixes in its trade area. We really like that particular market outside of Orlando, and so we and we did find that there was some very good mark-to-market opportunities there. I think our underwriting was sort of in between 9 and 9.5 on an unlevered IRR basis, so we felt pretty good about that acquisition. Our second acquisition was a very, I guess, in our mind, a very opportunistic purchase. It was a property that we had seen for a long time in a market that we were very familiar with and very active in. It was in a higher-end market with density, with a dominant grocer not in the center, but within a short distance from the center. So it was in a major, in our mind, corridor for the suburban shopper, and that was one where we were getting a very strong IRR well north of 9.5 and in a market that we knew really well, and we thought it was an opportunity to take advantage of. And those were the two acquisitions I would say going into second quarter. I would say that we have a good pipeline. We've seen almost in terms of investment committee, we put almost twice as many projects through investment committee this year through the first quarter as we did last year. Obviously, last year was a pretty tough first and second quarter for product coming on. So we are encouraged by that, that we may see a little bit better opportunities this year than we did in the difficult market from last year. Bob, do you want to go through the outlot that we purchased as well? Yeah, absolutely. So it's called Golsby Point, and it's in Tampa, Florida. And this is one that we've had our eyes on, and it's about a three-acre parcel. We paid right around $2 million for it, and our national account team has really been marketing this actually for the last six months. So we currently are thinking about separating the three acres into three one-acre parcels, and we already have strong interest from national retailers and the Chase Bank and the Dutch Bros and the Tropical Smoothie and Urgent Care. So again, you're going to continue to see demand for these opportunities in the MedTail and the fast casual space. So as we can find these opportunities and generate the 9%-12% returns that we're focused on, they're great complements to our existing assets. So we want to stay opportunistic and continue to look for land. Okay. That's good color. Thank you. And just to follow up to that, how did you fund first-quarter acquisitions, and is there any change in thinking around the match funding strategy you guys have been employing to fund the rest of this throughout the year, or if you could just give your updated thoughts on funding acquisitions? Thanks. Yeah. I would say, Lizzy, we have reaffirmed our pace, so we anticipate that we will be in that $200 million-$300 million range for the acquisitions. And from a pricing standpoint, the market actually continues to have quite a bit of volatility in terms of buyers and sellers and expectations, and that's not generally a real positive for volume. But it's harder because that match funding that you're talking about is changing in this environment almost daily. And so you are it's a difficult time to sort of figure that out. But I think we're staying very disciplined in terms of where we see the returns that we've got to get to make them accretive to our model. And so that's sort of how we're doing it. In terms of the match funding, last year we did tap the ATM on the equity side and extended all of our debt maturities as well. So we've got our line that we will be using for these acquisitions, and then we will be looking to tie in longer-term fixed-rate debt as we tie in those acquisitions. John, did you have anything additional on that? No, I think that hits it. I mean, we have $570 million of liquidity, and we're looking to maintain our flexibility as we are looking to get to our long-term target of 10% floating, but ultimately feel good about the assets that we're buying and the opportunities in front of us. Yeah. Thank you. Lizzy, does that answer your question? Yeah, that was great. Thank you. Okay. Great. Your next question is from the line of Ronald Kamdem with Morgan Stanley. Hey, just my first quick one was I remember back at the Investor Day, you talked about sort of asset management partnerships and so forth. Just wondering, was there any update on that and what the thinking was? We are making progress there, and I think in the second quarter, we should be at a point where we will be more openly discussing, giving a lot more detail on what they are. Our goal here is we want to have projects bought into these bonds before we make any public announcements. We continue to progress, and we hopefully will have more news for you in the second quarter. Great. Then my second question was just going to be back to the acquisition pipeline and so forth. I think you talked about seeing a lot more volumes sort of this year versus last year. Has it all been just because of the environment, or are you guys doing anything to source differently or to be more creative to look at deals? I think it's general volume. I mean, we have a system that we've put in place and refined over probably 25 years being in this acquiring the grocery-anchored shopping center. So we have, but we're obviously updating technology and those things. But in terms of our core strategy of focusing on 5,800 centers that we want to own and making sure that we're in front of both the owners and the brokers to make sure we see those when they come available, that part really has stayed pretty consistent. Great. That's it for me. Thank you. Okay. Thanks, Ron. Your next question is from the line of Haendel St. Juste with Mizuho. Hi there. This is Robbie Vade on the line for Haendel. Hope you guys are doing well. Just curious, if you were to issue 10-year money today, what would it cost? And I guess, what is your interest in doing any alternative financing arrangements, maybe a convertible debt deal or short-term debt? Just what's your appetite for these different options? Great question. We are looking at all of them, and our primary focus at this point is to get into the longer-term public debt markets. And so the alternatives, though interesting and something that could work for us. We have not sort of actively pursued those yet, but we are reviewing them because there are some pretty attractive options there that we're continuing to look at. But John, any additions to that? Sure. So we are looking at everything. I would say that our long-term cost currently, if we were to issue, would be, let's say, 6%-6.25%. The important thing for us is building a track record in the unsecured bond market. We've made great progress with investors and speaking with them and building that, but we've been waiting for the right opportunity. As I mentioned in the prepared remarks, the spreads were a little wide at the beginning of the year, and now they've improved, but the base rate has expanded. So it is something that we are actively monitoring, but because we have built this time in our maturity calendar, we have the ability to be patient. And so we're just wanting to make sure we're accessing it and building that reputation and track record in the market that has the most liquidity and availability. That said, depending on the market timing and things like that, we do evaluate all strategies. If you look at our current balance sheet funding, we use them all. We have bank debt. We have secured debt. We have unsecured bonds. It's something that we're watching, and we're looking forward to accessing and getting more capital to buy more assets. Thank you. That's helpful. Just one more here. Regarding cap rates, this quarter's acquisition cap rate was a bit higher than last year's. From a modeling perspective, can we kind of assume that this year's acquisitions would hang around in the 6.8-7 range? Is that what you're seeing based on what's in your pipeline right now? I would stay at the 6.5. There were specific stories on these two acquisitions where we got pretty favorable pricing, but we haven't really come off of that guidance of 6.3-6.7 kind of a range. So that's how we're thinking about the year. And again, we'll see how it progresses. 2 marks don't make the year, but we don't think there's that much movement from the 6.5 kind of midpoint at this point. Got it. Thanks so much, guys. Yep. Your next question is from the line of Michael Mueller with J.P. Morgan. Yeah. Hi. Just a quick occupancy question. I guess, where do you see Anchor and overall economic or physical occupancy ending up the year? Bob, do you want to take that? Bob, we're missing you. Sorry, Jeff. Looking at our anchor pipeline and the demand we're seeing, I definitely believe that our inline and our anchor occupancy will be elevated. It's hard to exactly know what that is, but I would certainly think that we would be at the higher range of the 98.8 or 99 on the anchor and in the inline. I certainly think that we'll be north of the 94.8 that we're seeing today given the demand. At this point, I would say it'll certainly be elevated, but it's really hard for me to pinpoint exactly what it'll be. Got it. Okay. That was it. Thank you. Thanks, Michael. Your next question is from the line of Juan Sanabria with BMO Capital Markets. Good afternoon. Just hoping you could give a little bit more color on the bad debt. It sounds like it's not driven by national tenants. Is it being driven more by some of the smaller mom-and-pop inlines? And just curious if you could break it out, how much of the bad debt was related to just tenant closures or bankruptcies versus you guys being proactive and trying to get higher leases upon renewal or releasing of that space? John, do you want to take that one? Sure. Good afternoon, Juan. So as we look at the bad debt, it is not, when I say it's not related to national, I would say it could be disputes as well, though. So I was saying it's not national bankruptcies. So when you're looking at those names that are going, that's not impacting. There was contribution to the bad debt from national, from regional, and from local neighbors. As we look at it, I would say the majority of it was just kind of a few neighbors that might have had larger balances. But I would say the portion that we influenced was probably close to half, maybe a little bit less than that in terms of that. But when we take those actions, it takes us to a more conservative place, which is why it becomes outsized. The leasing momentum that we've got is enough that we are taking action more quickly, which does kind of trigger our internal processes to take them to full reserve more. It's specific instances, which is why we're not seeing anything trend-wise or saying that we've got any concerns on a broad basis. As we look ahead, we're quite opportunistic, or else we would have made other adjustments. I think it's complemented by the rent growth that you're seeing, the leasing activity, and the spreads that we're seeing. We continue to be bullish. Maybe if I could just push back, I guess what changed to where you felt that you needed to take reserves around those disparate group of tenants with demand still strong and you guys feeling good about the neighbors in general? John, in terms of why we took those things, I mean, I think that when you move your sort of strategy thinking to, "Look, we want to get the spaces back as quickly as we can and mark them to market," that is, in this environment where you have the level of demand from the retailers, we're taking; that is a natural sort of strategic movement. I mean, it's not like we haven't always done that. It's just that we're; there's an increased impetus to do that when you're getting 40% rent spreads. And that is going to; that will accelerate the process of putting someone who is on the right on the edge of how you're going to do it; you're going to want to go; you're going to want to be more aggressive about that. And you're going to be more aggressive in terms of the retention on those rents. And that is, I mean, that is—I think you're going to see among a number of our peers as they get closer to a high level of occupancy like where we are at. And for us, we see it as a huge opportunity for us, and we're going to pursue it aggressively. And it will have—I think it will—you will see some bumps up and down in bad debt. But with the opportunity we have, we're going to do that. And we think we'll see outsized growth on the top line, not in this line, but that will weigh more than outweigh any negative sort of accounting impacts you have from reserves. Does that answer? It does. Yeah. I'm not sure if John wanted to add anything. If not, just on the. No, I was going to say. Sorry, John. No, I was going to say you're good. Go ahead. Sorry. And then just on the acquisition side, I'm a little bit surprised that you guys are as bullish but with similar cap rates given changes in the cost of capital, not so much on the debt side with the push and pull of rates and spreads, but just on the equity side. I mean, how do you think about weighing your implied cap rate that's gone up as the equity markets have broadly sold off and the need to maybe require a higher return on the cap rate or IRR? And you guys have been very acquisitive, but your cost of capital changes every day and is deteriorating here a little bit. So how do you guys just broadly think about that? So as you recall, when we first came out of the IPO, our targeted unlevered IRR was 8. As the market has moved, we moved that to 9. The product that we are seeing is underwriting north of 9 and some of it well north of 9. To us, those are accretive opportunities at where things are today. One of the advantages of being in the market on a regular basis is you will take advantages, and there will be times where you won't hit the cycle perfectly. But you will, I mean, you look at what we bought last year, I mean, that underwrote to north of well north of 9.5. We feel good on a long-term basis that that will more than be that will be significantly accretive to the company. So that's how we think about it. And we get more aggressive and less aggressive based upon that spread between where we can invest the money and what our cost of capital is. And you'll see that throughout sort of the history of the company, that that's been a very successful strategy for us. And so are we going to be as aggressive this year if we don't get the kind of pricing? Well, our cost of capital is more, so the answer is no. But we will be in the market, and we will, I mean, I'm comfortable we'll find opportunities that will be highly accretive for what we do. Juan, does that answer your question? Yeah. Thanks, Jeff. I appreciate it. Yeah. Yeah. Your next question is from the line of Dori Kesten with Wells Fargo. Thanks. Good morning. Can you comment on your intentions with the swaps maturing later this year? And then just generally, what floating rate exposure are you most comfortable with over the next few years? Dori, thanks for the question. John, do you want to sort of walk through that? Sure. So we are 24% floating today. We do have swaps that mature later this year. We did opportunistically execute a swap agreement for $150 million in the first quarter. At that point in time, it was, we believed it was going to be higher for longer. And ultimately, there were 6 rate cuts at the time. So we moved opportunistically. But on a long-term basis, our plan to get to our long-term fixed-rate target of 90%, we would like to do that through incremental financing with fixed-rate instruments, primarily in the unsecured bond market. So as we move forward, we are at an elevated rate with regards to our floating rate debt exposure. But as we look at it also, I mean, even though it is higher for longer, there is stability there. We view that there's more likelihood that rates will come down than go up from here. So we are choosing to maintain that flexibility. As we look at swaps, swaps are useful as you have the floating rate debt instrument underneath it. So as we are moving towards and choosing to exercise in the unsecured bond market, which we would certainly hope to do in the next 6-12 months, that will help move us up. But in the near term, we are having a higher rate higher percentage floating. But we are also positive because our overall earnings growth is allowing us to deliver positive FFO growth. So we're just waiting for that right opportunity to lock in rates and begin extending our durations. Okay. Dori, I just was going to say, as Jeff, one of our strategies, as we've talked about, is make sure we're matched funding when we can. And our view is that a 6-month or 1-year swap is not matched funding. And that's why we're being patient and waiting till we have where we can get duration at rates that we find favorable. And we'll continue to do that. I mean, we've set our balance sheet up to be able to do that. And it's one of the advantages of having one of the better balance sheets in the space is that we can be opportunistic and enter these markets. But our strategy over time will be to actually match fund on a longer-term basis, not doing 2-year swaps or 18-month swaps. Those will be part of the thing. But they're very, I mean, in my mind, they have a very minimal impact on the true sort of risk of the company, where our longer-term debt is where we're focused on getting the balance sheet. Okay. And then what category of retailers have you found it's been easier to push escalators higher for, and which do you continue to have more difficult conversations with? Bob, do you want to cover that? Yeah. Sure. Great question. So where we continue to see a lot of the demand is still in our restaurants and our quick-service restaurants, health and beauty, MedTail, a little bit from some entertainment, like fitness uses, as an example. As we mentioned earlier, over 70% of our rent is from necessity-based goods and services. So from a merchandising standpoint, that's where we continue to see the positive leasing spreads of the 29% and the renewal spreads. You saw it at 16.9%. And then we've had a lot of success with escalators with our local neighbors. So 27% of our inline are local neighbors. And even when I believe the number was 19% on renewal spreads for the first quarter with our local neighbors, and you'll find typically with that type of merchandising play that you can generate higher escalators. We are seeing between 2.5%-3% renewal escalators in addition to the year one 16.9% overall, or our inlines at 19%. So we continue to see opportunities in these segments that are service-based, necessity-based. So I'm not seeing any cracks in terms of I'm seeing consistency across the portfolio in terms of retention and then our merchandising strategies. So it's working. Yeah. Okay. Thank you. Your next question is from the line of Omotayo Okusanya with Deutsche Bank. Yes. Good afternoon. Most of my questions have been asked, but I just had a quick one. It's not PECO-specific, but just shopping centers in general. Everyone's kind of talking about really strong demand at this point. Everyone has very good NOI. The environment feels very strong. The stocks, in general, I think, again, are having a bit of a rough ride this year just because of everyone's general 2024 FFO per share growth profile. So the question is, if fundamentals are so strong, stocks themselves, cost of capital is somewhat challenging, is there a viewpoint that maybe we start to see private equity get more involved in this space again? The answer is yes. I don't think Blackstone is sort of said that they're going to do anything of significance on the retail side. But there is significant private equity interest out there. Some of it's mispriced, so probably not really a threat in the business or an opportunity to be a buyer in this market. But there is, we're seeing a number of firms that are, they're circling. And they're seeing that these underlying fundamentals are going to create long-term growth. And it can be bumpy for a little while, but when they look out three to five years, they're saying, "Look, I can get those mid-teen levered returns, maybe not 20, but I can get mid-teens in an environment like this." And they will pull the trigger on that. So our belief is that they are going to become more and more a part of the retail market that they've been out of pretty significantly for a significant period of time. And it's all my read is it's all based on the fundamentals. I mean, they're looking at the lack of new demand. There are some costs in refitting some of the big boxes of some of our peers that some of our peers facing. And that is a that is a cost. But when you get through that period of time, there's some pretty significant opportunity. And you can see it in our rent spreads. I mean, those are not I mean, those are not normal rent spreads. Those are rent spreads of a really strong operating environment. And so I think you're going to I think you'll see them entering where and how will be interesting. We'll see how that plays out. Thank you for that, Colin. Your next question is from Todd Thomas with KeyBank Capital. Yeah. Hi. Thanks. I just wanted to go back to investment activity a little bit. And the comments about the current pipeline, they sound encouraging in terms of what you're underwriting, what's in the pipeline. And John, you mentioned that there are some properties tied up. Does what's under contract get you to the $200 million-$300 million range in guidance such that you have the range sort of accounted for at this point in the year and the volumes slow down a bit more in the second half? Hey, Todd, thanks for the call. We do not have. I mean, we have a this year would, if we were to guess, will be a more stabilized year than last year in terms of more gradual increases. We don't have a full commitment on our guidance yet, but we anticipate that happening over the year. I don't think it will be like last year that was very fourth quarter-oriented. I think we've got a more consistent flow this year. But again, it's early in the year, and stuff can happen. And we'll see how that plays out. But we would assume it will be pretty consistent on a quarter-by-quarter basis at this point. Okay. Does that make sense, Todd? I thought both. Yeah. Sure. Absolutely. And then can you talk a little bit about the quality of the product that you're underwriting, how that looks compared to what you've seen more recently? And is everything that you're buying predominantly smaller format, grocery-anchored product, similar product to what you own today? Yeah. So I would say the quality is pretty consistent. When you look at that sort of targeted 5,800 centers we've got, it's a pretty consistent group of projects. I do think there are some select opportunities that don't fit perfectly in the box but are really great opportunities that we're willing to take advantage of. Some shadow-anchored stuff where we can get really strong growth and returns, some stuff that has a small amount of T.J. Maxx exposure or that kind of thing we would look at. But as a whole, it's going to be that I mean, it's going to be what you expect from us, 115,000 sq ft, number one or two grocer. And we are seeing enough of that to where we obviously, we feel good with our guidance. And no drop-off. I wouldn't see any drop-off or anything in terms of quality that we're seeing. It's pretty consistent with what we have seen on an ongoing basis. Just there's more volume, and that makes us feel a little bit better. Okay. And then just one more, if I could here. I think you've said previously that you have capacity to acquire about $200 million on a leverage-neutral basis with free cash flow, with, I guess, amounts above that being on the line. Sounds like from your comments that you're comfortable taking up leverage a little bit here and utilizing the line in the near term. And it's been a fairly volatile capital markets environment and sort of interest rate outlook, which has continued to change. John, you mentioned you expect rates to come down. But just curious if that's sort of the right strategy and what gives you confidence that that's the right strategy. So we are not projecting any kind of significant change in our leverage. So we'll be in somewhere between 5 and 5 to 5 if we execute our strategy as we anticipated this year. So I don't think there will be any real movement in that part of it. But the opportunity is going to one of the reasons we hate giving guidance on acquisitions is that we're not really disciplined in terms of what we buy. And so if it's not there, it's not there. But if it's there and it's going to get sold and we can get it at our kind of pricing, we're going to be a buyer for it because we know what we can do there and what that can generate growth-wise in the business over not just 6 months, but over a sustained 5-7-year period of time that we're doing our underwriting in. And that's, we think, that's the right strategy. And we don't, but again, this is not a lever-up model that we're trying. I mean, we are committed to keeping a very strong balance sheet and not getting out over our skis in that regard. Hey, I'll just add to that. I mean, as Jeff said, our long-term leverage target is in the 5.25-5.5 range. When we talk about being leverage-neutral and the growth that we have, leverage-neutral in acquisitions does mean that you are adding debt. You're just maintaining your debt to EBITDA as that cash flow grows. With regards to the comment that I made about interest rates, I mean, because of the growth that Jeff just spoke to in the assets that we're buying, I will say this: our acquisitions are not being made on a basis dependent for rates to go down. I don't mean to imply that at all. I think what we're saying is that we are floating temporarily as we look to execute that long-term match strategy. So we've got positive leverage today and going forward. It is something that we are going to be opportunistic about, but managing our leverage cautiously. Yeah. Todd, I think on that, I mean, I think the way we look at it is if we I wouldn't say that we're anticipating a decline in rates. But I would say that we think that there's more down if you're looking at it from a pure risk standpoint, we think that it is more likely that they would go down over the next couple of years than they would go up. They're probably pretty range-bound, which we're really waiting to see if they stay range-bound. And we're really talking about the 10-year because that's really what our focus is on, is that getting that longer duration capital. But we are not economists. But because we're in this business, we are making bets on where we think interest rates are going to go in terms of what we how you lay out your interest rate exposure. That's what we are, that's what we're doing. We'll continue to manage it that way. This concludes the question-and-answer session. I will now turn the conference back over to Jeff Edison for some closing remarks. Great. Well, thanks, everybody, for being on the call. Thank you, operator. In closing, we're proud of what the PECO accomplished in the first quarter. Our differentiated and focused strategy and our talented team combined to create a market leader in the shopping center business. We continue to enjoy a strong operating environment, as we've talked about. Our neighbors remain healthy, and we don't see any cracks. We're confident that the PECO team will continue to deliver market-leading results. We have one of the lowest leveraged balance sheets in the shopping center space. And with our fortress balance sheet and ample liquidity, we do remain prepared for opportunities as they arise. PECO is well-positioned to continue to successfully grow as we look forward. We believe we provide our investors with more alpha and less beta. On behalf of the management team, I'd like to thank our shareholders, PECO associates, and our neighbors for their continued support. Thanks for your time today, and everyone, have a great weekend. This concludes today's conference. You may now disconnect.