Greetings, welcome to the Regency Centers Corporation First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christy McElroy, Senior Vice President of Capital Markets. Thank you, Christy. You may begin. Good morning and welcome to Regency Centers' First Quarter 2023 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer, Mike Mas, Chief Financial Officer, Alan Roth, EVP, National Property Operations and East Region President, and Nick Wibbenmeyer, EVP and West Region President. As a reminder, today's discussion may contain forward-looking statements about the company's views 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. It's possible that actual results may differ materially from those suggested by these forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and Form 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our investor relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. Lisa? Thank you, Christy. Good morning, everyone, thank you for joining us today. We're pleased to report another solid quarter with positive results. Yes, we acknowledge there is uncertainty in the economic outlook, especially given the recent bank turmoil, we do continue to look for signs of softening in our business, to date, we haven't seen it. Operational trends remain positive, this is consistent with our update a quarter ago. In fact, with three more months in the book, we have even more conviction in our outlook for this year. Tenant demand for space in our centers remains strong, sustaining the momentum in our leasing pipelines and also in our ability to drive base rent growth. This is the case across our entire operating portfolio as well as within our development and redevelopment program. We've seen continuing outperformance in tenant sales as well, which have resulted in higher percentage rents, especially in restaurant and grocery. We believe this reflects strength in those categories, as well as an ability of consumers in our trade areas to absorb elevated inflationary impacts. As we discussed in our last call, we are seeing more activity related to tenant bankruptcies. M ost recently with a widely anticipated filing from Bed Bath & Beyond nearly two weeks ago. None of this activity has been a surprise to us, as these re-retailers have been on our watch list for some time. As Alan Roth will discuss, our teams have been proactive, and we're seeing strong demand from tenants to backfill the space. Regency's relatively limited exposure to these bankruptcies is not by accident or luck. It is the result of proactive asset and portfolio management over a long period of time, as the quality of our assets and locations gives us the advantage and the ability to be selective in the merchandising of our centers. We believe that our in-place tenant roster today is as strong as it's ever been. One change that we have seen since our update last quarter is in regard to the transaction markets. You may recall that I commented that we were starting to see increased activity in competitive bidding situations returning, but that was pretty short-lived, as within weeks after that, the transaction market was again impacted by uncertainty and instability in the financing markets. I was hoping that today we'd have more concrete data points to share with you, but transaction volumes remain very thin. That said, we remain on our front foot from an investment perspective. As Nick will discuss in a few minutes, the team is hard at work finding new opportunities to invest our free cash flow and grow our development and redevelopment pipelines. This has long been a core competency of Regency, as many of you on this call are aware, and I'm proud of our industry-leading team and long track record of successful execution. In summary, we believe that given the positive structural trends supporting continued tenant demand in suburban trade areas, we and the shopping center sector as a whole are in an enviable position with greater resistance to potential adverse economic and capital markets impacts. Further, we also believe Regency benefits from competitive advantages, including the exceptional quality of our assets and our people, our liquidity, access to capital, and balance sheet strength that uniquely positions us to be opportunistic while still delivering quality results. Alan? Thank you, Lisa. Good morning, everyone. The positive leasing and retail environment we experienced last year has continued, as evidenced by another quarter of strong operational trends. Leasing activity remains robust, with new leasing volume 20% above our historical Q1 average. Activity was led by continued strength in shop leasing, where occupancy was up another 20 basis points in the quarter on top of a 200 basis point increase during 2022. Cash rent spreads remain healthy. Importantly, our GAAP and net effective rent spreads were both in the mid-teens in Q1 and on a trailing twelve-month basis. The GAAP and net effective rent spread metrics are the most reflective of our ability to drive base rent growth while prudently managing our capital investment and maximizing our return. We believe these mid-teen spreads are reflective of the quality of our shopping centers and locations, which gives us leverage in lease negotiations and allows us to limit leasing capital spend. To that end, I would encourage you to review our new net effective rent disclosure on page 20 of our supplemental. Embedded rent escalators are a huge driver of our rent growth, we continue to have success driving these steps. Nearly 90% of all leasing activity and 93% of shop leases in the Q1 had embedded rent steps, which is our highest percentage on record for shops. Not only are we pushing the rate of contractual increases higher, but we're getting them in more leases. These positive operating results and activity contributed to another solid quarter of base rent and Same Property NOI growth. Most importantly, it provides further conviction in our forward growth trajectory. Leasing activity remains strong and our signed but not occupied pipeline is flat quarter-over-quarter at 230 basis points, representing $32 million of annual incremental base rent. The leases that we are commencing each quarter, we are replenishing the pipeline with new leases signed. Notably, our new disclosure on page 20 also includes enhanced information on our signed but not occupied pipeline. Today, we also have nearly 1 million sq ft of leases under LOI or lease negotiation, further reflective of the strength and demand that we continue to see. This activity includes square footage associated with recent tenant bankruptcies for which we've seen strong interest. The most notable of these is the recent filing of Bed Bath & Beyond, of which we have 10 locations comprising only 50 basis points of AB R. Five of these locations were included on last week's rejection list, which we had expected. Our teams have been proactively engaged on all of our Bed Bath locations with potential backfill tenants in anticipation of the opportunity to recapture and remerchandise the stores. Demand is coming from several categories, including grocers, off-price retailers, home decor, sporting goods, and medical uses. We anticipate average mark-to-market of approximately 20%. In addition to Bed Bath, we continue to actively manage all of our at-risk tenant exposure. We own great real estate in some of the best suburban trade areas around the country. Leasing demand remains strong. We are not afraid to get spaces back in an environment of limited new supply growth and a surplus of great retailers that are actively looking to expand. In summary, our team feels really good about the continued positive momentum we are seeing in the retail operating environment. Nick? Thank you, Alan. Good morning, everyone. We continue to make great progress executing on our development and redevelopment strategy, ending the quarter with $300 million of in-process projects. Leasing activity remains strong and our team has done an excellent job of keeping our projects on schedule and within budget. As we have discussed on prior calls, Regency is uniquely positioned to grow our investment pipeline by utilizing our three development cornerstones, our capabilities, our capital, and our contacts are an equal combination of development expertise. Our access to capital, given our extensive free cash flow and fortress balance sheet, in conjunction with our expansive and deep industry contacts and relationships across our 22 offices, give us an unparalleled advantage to source and execute on attractive opportunities throughout the country. For instance, we are nearing the finish line on the purchase of a development project in the New York metro area. This nearly $90 million investment will be anchored by a best-in-class specialty grocer and located in an extremely high barrier to entry market. Additionally, this week we also closed on the first phase of a retail development in a thriving 10,000 Acre master- planned community in Metro Houston. Although the first phase is smaller in scale at approximately $10 million, we do anticipate being able to grow the project in future years. We look forward to sharing more details on both of these projects when we add them to our in-process pipeline. Beyond ground-up developments, our investment team continues to execute on opportunities to create value within our current portfolio. Subsequent to quarter end, we started phase III of our redevelopment at Serramonte Center in Daly City. This $37 million project includes the redevelopment of the former JCPenney and the addition of two small shop buildings adjacent to Macy's. We have executed a lease with best-in-class South Korean food market and grocery operator for the former JCPenney space, and we're excited to bring their new concept to the Bay Area. This phase of the project sits at the highly visible front door of the shopping center and will bring the center to 97% leased. In summary, we remain encouraged by the opportunities we are seeing to drive future value creation and reinvest our free cash flow and are focused on continuing to build our development and redevelopment pipelines to north of $200 million of annual starts. Mike? Thanks, Nick. Good morning, everyone. I'll start with some highlights from our Q1 results, then walk through a couple of changes to our full year earnings guidance and assumptions. Excluding COVID period reserve collections, we delivered Same Property NOI growth of 6.3% in the Q1. The largest driver was base rent, contributing a strong 430 basis points in the quarter. Base rent growth is the most important indicator of our portfolio strength. We continue to see positive impacts from embedded rent escalators, positive spreads on releasing space, and higher occupancy year-over-year. We also saw meaningful outperformance on percentage rents in the quarter, contributing 100 basis points to Same Property NOI growth despite tougher year-over-year comps. Driven by continued strength in grocery and restaurant sales. Notably, percentage rents tend to be seasonal, with the majority of sales-based billings occurring in the Q1 of the year. The other meaningful driver to Q1 Same Property NOI was a 130 basis point positive contribution from uncollectible lease income. We continue to isolate the collection of COVID period reserves from 2020 and 2021 to provide a better picture of normalized results. The realities of cash basis tenancy can create some variability in the bad debt line item from quarter to quarter. To that end, and due to the better than expected collection rates on cash basis tenants, we experienced a positive contribution to uncollectible lease income this quarter as we collected on rents originally billed and reserved in 2022. The increase in collection rates and decline in receivable and reserve balances demonstrate the health and resiliency of our tenant base. Turning to 2023 guidance, I'd like to point you to the helpful detail on slides 5 through 7 in our investor presentation. We've increased both our NAREIT FFO and Core Operating Earnings guidance ranges, each by $0.04 per share, driven largely by the outperformance in percentage rents and uncollectible lease income in the Q1. Collectively, these items also drove the 50 basis point upward revision in our Same Property NOI growth guidance to a new range of 2.5%-3.5%, excluding COVID period reserve collections. I also want to spend a minute on our credit loss assumption, which we revised to a lower range of 60 to 90 basis points for the full year, from 75 to 100 basis points previously. Notably, the midpoint of our new Same Property NOI and earnings per share ranges now capture the potential for a full liquidation of Bed Bath & Beyond by mid-year. This scenario was previously contemplated in the low end of those ranges. This change was offset by Q1 outperformance in bad debt that I discussed earlier, which positively impacted our full year credit loss assumption. On the capital side, in late March, we repurchased roughly 350,000 shares for $20 million at an average price just over $57 per share. This repurchase was executed to hedge the planned issuance of a like-kind amount in OP units to the seller of the development project in New York that Nick mentioned earlier. I'll end as I typically do, highlighting the strength and afforded opportunity of Regency's balance sheet, the importance of which is never more evident than in times of capital markets turmoil. Leverage remains at the low end of our targeted range of 5-5.5 times debt to EBITDA. We are generating significant free cash flow, projected to be north of $140 million this year, funding our investments pipeline. We have access to significant liquidity with our $1.25 billion line of credit, and there are no significant debt maturities for over a year. This position of strength allows us to be patient and opportunistic in this evolving environment. With that, we look forward to taking your questions. Thank you. We'll now be conducting a Q&A session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question is from Michael Goldsmith with UBS. Please proceed with your question. Good morning. Thanks a lot for taking my question. My first question is on the sustainability of the leasing demand. You know, what have you seen? Have you seen any change in the leasing volumes post Silicon Valley Bank and some of the disruption that was experienced in March? Just, you know, has that sustained in April? If you have seen anyone express any sort of resistance or slowdown in leasing, what are the reasons they're talking about? Just trying to get a sense of the long-term sustainability of this recent trend. Yeah, Michael, this is Alan. Appreciate the question. We are still seeing very strong demand across many categories in all of our regions. You know, as we mentioned, we've got over 1 million sq ft of new activity in the pipeline. When we look back and we think about the bumpy road of the kind of bank announcements that you had mentioned in March, our March new activity actually exceeded both January and February. Then, of course, post-closing of Q1, we actually, you know, obviously have visibility to April activity as well. April new activity has exceeded January, February, and March independently. I think collectively, we would tell you that we still feel really good. Again, head's not in the sand, but it's quality retailers. It's a deep pipeline. The activities are coming across the finish line. We've got plenty that still remains in the queue as we look forward. Got it. Thanks for that. My follow-up question is for Mike Mas. It seems like, you know, half of the upside to the 23 guidance and the outperformance was driven by base rent, which we kind of talked about. The rest was kind of driven by percentage rent and maybe some upside or near-term upside in the lease termination fees. I guess the, you know, the question here is just the sustainability of that or is that sort of one-time items that shouldn't recur through the rest of the year? Hey, Michael. It 's a combination of both. I mean, we won't... Clearly, we had some one-time impacts to the Q1 that beat our estimates internally, and those are flowing through to full year results. There is a little bit of tailwind remaining in our guide. You know, we've become slightly more conservative, I would say, on the with the added visibility to the ongoing Bed Bath & Beyond filing. A lot of that's been covered up by those Q1 floating back into our guidance range from the Q1. There's some headwind in the, in the top end from base rent as we lose the Bed Bath locations. Our outlook on an ongoing basis with uncollectible lease income remains, I would call it, historically average, maybe to a little bit slightly better from what we had coming into the year. The best story that I see is tagging on to Alan's point on our leasing pipeline. The shop demand continues to be there, and we're commencing rents. The $32 million of ABR that's in the pipeline, we will deliver that this year. 80% of that, in fact, will come in this year. That's just a great driving factor of our renewed outlook on same property growth. Thank you very much. Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question. Hey, good morning. Just to kind of touch on some of those headwinds, tailwinds, thinking about, you know, where we might end up at the end of the year. I think on the last call, you talked about kind of flattish occupancy through year-end, potentially. Given this kind of healthy Q1 leasing, maybe a little bit of an offset from the Bed Bath & Beyond bankruptcy, how are you thinking about year-end occupancy expectations at this time? Hey, Greg. Still flattish. You know, you know, the bankruptcy is turning out how we envisioned it would a quarter ago. Our outlook remains the same that depending on how the auction proceedings end up, we're gonna be flat to slightly down potentially by year-end. Again, from a revenue perspective, remember that we have this tailwind of delivering that occupancy that we have already contracted. That and that shop space demand that will come through, all of which is, the word I would use is overwhelming, what we may lose through the bankruptcy proceedings. Great. Thanks. As a follow-up, just want to touch on the tenant watch list. you know, I think regional banks have obviously been in the news a lot based on our look. You don't have any exposure to the ones that have been called out yet. It's more like 50 basis points, maybe-ish around there, I think. We'd love to have you confirm on other regional bank exposure. Curious on potential backfills to those kinds of spaces, especially on the out parcels and what level of demand you might be seeing there. you know, looking at maybe like Kohl's, Rite Aid, Michaels, where we see some more risk, and I think limited to 1.9% of GLA, or even discussions on some of those spaces as well. Greg, I'll just generically answer the question in terms of overall tenant watch list. We are always proactively evaluating who's on the list, both those that come off it, those get added. Our teams out in the field are constantly and aggressively looking at those spaces in terms of sales volumes, in terms of foot traffic, in terms of lease expirations, upside, downside. If there's an opportunity where we think we, you know, we wanna proactively take it back, we're getting out in front of it. If we have concern they're gonna vacate, you know, we're out in front of that. I think that's just really an overall comment, for the totality of the watch list to include, you know, some that you might have mentioned and others that you didn't. I'll just if Alan doesn't mind, I'll come over top for the bank branch. I think your observation is correct. Our exposure to the bank branches are... I mean, I think on our significant tenant list, you've got JP Morgan, Wells, and Bank of America. Any of the regional bank branches that we have would be really immaterial. Great. Thank you. Thank you. Our next question is from Craig Mailman with Citi. Please proceed with your question. Good morning. Just wanted to circle back to the leasing environment. You guys are pushing through escalators on a lot more of your leases and rent spreads remain healthy. I mean, what kind of pushback are you guys getting from tenants on rent increases, adding escalators to this, and kind of where are these OCRs coming in given these rent resets? Craig, good question. Thank you. You know, look, I think it's widely accepted that, you know, inflation is impacting all of us to include us, and therefore, we're able to pass through a lot of these higher escalators. As you saw and heard on our, you know, 90% of all deals had embedded rent steps, and 93% of our shops had those. We're having success not only getting them in our deals, but we're having success at getting them at higher values. You know, I'm not seeing a tremendous amount of pushback there. Occupancy costs, frankly, are going in the inverse direction because I think sales are generally going up for most of our retailers. Will that provide an ability to push further? I think in some categories it will, Craig, and in others, maybe it doesn't. They all seem to be operating in pretty healthy, reasonable levels that give us the ability to, I think, really, reasonably push those going forward. Thanks. It's Nick Joseph here with Craig. Just maybe on capital allocation. Obviously, it was quiet in the Q1, but you did repurchase some shares. I guess number one, what are you seeing on the transaction market? Are things starting to thaw at all there? Then, you know, the second part, how are you thinking about additional share repurchases from here? Well, I'll quarterback. I'm gonna have Mike answer the share repurchase, then we'll toss it to Nick for the overall transaction market. Hey, Nick, good question. First on the share repurchase, let me say that that was largely tactical this quarter, and we outlined it in my prepared remarks, tied to a great development opportunity that we have. We wanna be able to be as flexible as possible to be competitive in that marketplace, and I think this was a point at which we can differentiate. We are obviously very keenly aware of our NAV and our perspective of value. At the same time, when units are necessary to make a deal, we found this opportunity to hedge that transaction. You know, we're not big back patters, but we will pat ourselves on the back. I think we did pretty nicely from an arbitrage perspective as well. Time will tell, but t hat was what that transaction was designed to do, simply to hedge the unit issuance of that, of that development pursuit, which we're excited about. Thank you, Nick. In regards to the transactions market, as Lisa alluded to in our opening remarks, that is a little surprising of how few data points there were in Q1. It has been very, very quiet out there. As we've said in the past, we're always focused on opportunities that are accretive to earnings and that are equal or accretive to the quality and the growth of our current portfolio. We're very focused on it and hopeful that in the near future, some more opportunities will pop up that we can take advantage of. Thanks. Then just on the development site, has pricing changed at all there relative to where it was before? On the margin. I mean, look, we're eyes wide open regarding what's going on in the market, but we're, again, highly focused on making sure it's accretive to us and what is our cost of capital and how do we best use that cost of capital. Depending on the risk profile of any transaction, we evaluate that, we decide how we're going to fund it and make sure that there's an appropriate spread there. We're very comfortable that the opportunities we're working on right now are accretive to the company long term. It's a great opportunity for me to remind you of our significant free cash flow that we generate. The best use of that cash flow is into what I believe, you know, the leading development program in the sector. Thank you very much. Thank you. Our next question is from Samir Khanal with Evercore ISI. Please proceed with your question. Hey, good morning, everyone. Hey, Mike Mas, on the FFO guidance, you know, you did the $1.08 narrowed FFO in the quarter, I know there were some one-time items. I mean, we were looking at some of the term fees, maybe it was a $0.02 impact. Even if we use $1.06 sort of for the run rate, you're still getting to like $4.20 for the year. You know, I look at your guidance and, you know, I'm just thinking, are you being overly conservative here given the macro, or is there something we need to think about that's sort of impacting growth? Thanks. Hey, Samir, thanks. you know, I'll go back to some earlier comments. Let's first identify what is timing related in the Q1 and what is uniquely, one time. Clearly, the pursuit income that we recognize is a one-time event. you know, kudos to the team for being very careful with our pursuit efforts there in monetizing that value. The balance, the higher percentage rent, that's a timing related impact. It will recur over time and through the years, but within the year, percentage rent is largely an earlier, you know, Q1 event. We have to factor that in. Our outlook for uncollectible lease income, if you think about the Q1 being positive this quarter, we are not anticipating that we will replicate that through the balance of the year. As I mentioned previously, we think we'll float back down to our historical averages of ULI, which is in the 50 basis point area of billed rents. Term fees, again. More of it.. We did guide on that element. We knew that we were gonna have a significant term fee in 2023. The $4 million payment was received in the Q1. Clearly, we'll have to adjust for that. Some comments on term fees. We basically, looking over our shoulders, get five cents a foot, year in, year out, as a semi-recurring part of the business. That's about a run rate of a couple million dollars if you think about going forward. Those are some of the elements there, Samir. I think. Then we have the bankruptcy and the impact that losing our Bed Bath & Beyond will have on our forward growth. That's going back to us floating from Q1 through Same Property NOI as well as core earnings back down into the guided levels that we offered. Thanks for that. My second question is around leasing spreads. You know, when you provided the commentary, certainly very positive around leasing. You know, when I look at the spreads, and again, it's, you know, still pretty good here, mid-single digits growth. If you look at the last few quarters, they've sort of decelerated, right? I know it's volatile month to month. I get that, but maybe just provide a bit of color on kind of, you know, those sort of leasing spreads we're seeing. Yeah, Samir, I appreciate the question, and thanks for acknowledging the lumpiness that can happen certainly quarter to quarter with that. You know, as we look at the last quarter, we did not have any significant new anchor transaction that was in the quarter. We did over 100,000 square feet of anchor activity in Q1, but only 1 deal that represented 11,000 square feet was a comparable anchor deal that's included in that. When you look at our cash rent spreads for Q1, it's predominantly all shop leasing, which is generally, you know, lower than anchor leasing that gets the big pops. I'd bring you back to the 12-month trailing cash spreads of 11%, you know, on new activity, and, you know, importantly, our keen focus and success with the embedded rent steps and prudent capital spend. On that new disclosure page, you know, net effective rent as a percent of base rent has been in the mid to high 80% range over the past five quarters. You know, we're pretty proud of this metric, as it's a testament to our team's efforts of, you know, achieving those contractual rent steps while prudently managing our capital spend. Thank you. Thank you. Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question. Hi. Maybe just circling up a little bit, maybe from a different perspective or asking it differently than Samir did for the guidance. You assume that occupancy is kinda maybe flat to slightly down by year-end, but does it dip between now and then as a result of Bed Bath before you capture the S&O pipeline? How should we think about the quantum of that decline to maybe piece together these various pieces we've talked about on the call? I mean, simply, I'll get into some details, Juan, but simply, I'd say use our guide on same property growth. I think, if you think about it, if you're trying to sequence it from quarter-over-quarter, we know when we're losing Bed Bath. They've rejected half of our locations. Coming into the year, our exposure was in the $5 million range to that tenant. Half of that is losing it at the beginning of Q2. As you think about delivering the $32 million of contracted S&O, that'll come on, as I said, about 80% of it by year-end. I would sequence that pretty ratably through the year. You know, we're gonna float down from a 6.3% Q1 post on same property growth to a midpoint of 3% by year-end. There is a unique Q4 item that we all talked about last quarter from a recovery standpoint in our numbers. The Q4 comp is a little more difficult. I hope that helps you. If you need anything else, we'd be happy to connect offline. No, thank you. That's helpful. super helpful. Then just a quick question on the reversal of cash to GAAP. It had a bit of a benefit in the Q1. How is that captured in the guidance, if I look at kind of page six, and what bucket does that fall under? Is there anything else assumed in terms of reversals back to GAAP for the balance of the year? Yeah. The majority of those reversals will come through in our non-cash guide, and as you can see, we didn't change that guide, so our outlook hasn't... It's $2.5 million roughly of impact embedded within there. This is a good opportunity to indicate that we are at 7% on a cash basis, and that has not changed from Q4. I would offer that given the Q1 results and the good collection rate that we're seeing out of our cash basis tenancy, our outlook remains the same, that we will continue to convert tenants to accrual through the year. As we said last quarter, we anticipate that we should be in the ±5% area by year-end. We haven't come off of that expectation either. There is a little bit of AR that could, as you convert tenants, that could come through as well. It's de minimis, Juan. I would just focus on that non-cash guidance that we've provided. Great. Thank you. Thank you. Our next question is from Anthony Powell with Barclays. Please proceed with your question. Hi, good morning. There are some press recently on some of the traditional anchors in malls like Macy's and Nordstrom's expanding their, smaller format, shops. Are you seeing some of that activity in your leasing pipeline? Anthony, thank you for the question. The short answer is yes. Macy's is doing Market by Macy's. They've got their sister company, Bloomingdale Outlet. Nordstrom, you referenced, is really expanding their Nordstrom Rack concept, one that we just signed down here in Jacksonville. They're out there. They're aggressively doing it, and I think that entire really off-price category is rocking and rolling right now. Okay, thanks. Maybe one more on percentage rents. I get that they'll be lower this year. There's a big kinda year-over-year increase. How should we be modeling percentage rents, just going forward, say, next year, either on a, as a% of base rent or year-over-year growth? Yeah. I'll give you some big picture items that'll help you. Number one is it's up year-over-year. We've actually increased our percentage rent in two consecutive first quarters by over 40%. It's a small number. We get about 1% of our total revenues out of percentage rent, and I would think about that in your longer term modeling. We should keep that level pretty consistent. It is front-end loaded, the majority of what we recognize in percentage rent income will occur in the Q1. We will have more percentage rent through the balance of the year, the majority is in the Q1. All right. Thank you. Thank you. Our next question is from Lizzy Doykan with Bank of America. Please proceed with your question. Good morning. I just was curious about the G&A line item that was revised up by $1 million for full year. It, you know, not too meaningful, but just wanted to see what drove the increase in expectations there and if anything could be noted as recurring or if we should expect more variability to that as we get through the year. thanks, Lizzy. Really, just a lot of odds and ends in the non-salary line items as we look out for the balance of the year and kinda tightened up our reforecast, is what it is. We're just kinda refining that estimate for everybody looking forward. There's I wouldn't identify any trends any way or the other. It's really just a refined outlook. Got it. Thank you. I was hoping to get more details on a couple of the projects you had discussed at the opening, just on the development in the New York Metro area and the master planned community in Metro Houston. Understand if, you know, you are waiting to share more details once you're able to add it to the pipeline. Just seeing if there's anything unique to each of those projects that you think you could find in other opportunities in the near future and, you know, what particularly drew you in about the markets for these specific projects. Absolutely. Thank you for the question, Lizzy, good morning. Yeah, as it relates to the New York asset, at this point, we can't disclose more. As I mentioned in my opening remarks, we're excited about the opportunity and looking forward to, in the not too distant future, being able to give more details. As it relates to the Houston opportunity, we did close on that earlier this week and are very excited about that project. Although again, relatively small, approximately $10 million. It is located within a very thriving master planned community. To be one of the only retail components servicing that community is really a blessing. Those are the type of opportunities we're looking for, where we know we have a very captive audience. As I referenced, we do plan on expanding that opportunity in the future. We do think there'll be future phases to grow that opportunity as demand continues to increase in that sub-market. Excited to bring that on board and again, share even more details next quarter when it comes into our end process. Just generally speaking, as I said, you know, development is never easy, and we're well aware of some of the headwinds that are out there facing development and how challenging it is. As I said, we have the three cornerstones that are critical, especially in this environment, to execute, which is the right expertise, the right capital, and the right relationships. Grocers are continuing to expand. They've had very good years. We have great relationships with other grocers across the country, and we continue to evaluate really coast to coast those opportunities one by one. The team is doing a great job of figuring out which ones we think we can help with, which ones we think we want to own long term, and therefore deploy our human and financial capital. Lizzy, our overall development strategy just follows our investment strategy. We want to invest in shopping centers that have a long-term, sustainable, competitive advantage, where we're gonna be able to grow NOI over the long term. These two developments, New York and in Houston, fit that criteria. Great. Thank you. Thank you. Our next question is from Wes Golladay with Baird. Please proceed with your question. Hey. Good morning, everyone. I just wanna stick with Bed Bath & Beyond. I think you said you had 5 of the 10 rejected and you're not gonna get any rent from those assets at the beginning of this quarter. Wouldn't you get rent during a liquidation, while they liquidate the inventory, or have they been doing that, I guess, behind the scenes? Yeah, you would. Yeah, so, pre-petition rent, you obviously would lose and we plan to. We estimate that to be about half a million dollars less, given what they were paid current through Q1 and what we will lose, into the filing date. Then post-petition for the five that have not yet been rejected, we would continue to collect rent through the event that may or may not happen, which could be an assumption of the lease in the bankruptcy itself or a future rejection. As we indicated, we've at the midpoint of our guidance, we've accommodated for the worst case scenario, which would be a full liquidation of the chain. We think we have some pretty. We know we have some pretty good locations. The ones that have not yet been rejected, we like all of our opportunities, we really like those. Which also tells us there's a chance that they could be picked up in auction. We'll be paying very close attention to the proceedings there. That's hopefully, that helps you think about the financial impact of Bed Bath. Yeah, it does. Then sometimes I remember Sears had kind of unlocked some bigger projects for you, some larger scale redevelopments. Anything, any of that potential here with Bed Bath? What is your hurdle now with today's capital markets for some bigger projects? I'll start with the Bed Bath and let Lisa or Mike answer the capital question. The short answer, Wes, appreciate you asking that. There's 1 Bed Bath that we are evaluating the merits of whether or not we want to entertain redevelopment. Generally speaking, this really is just a re-leasing exercise for us, is all it is. With regards to redevelopments, that follows and flows directly with our development strategy. We look at those in the same manner. If we can use and invest our cash accretively, and if we are improving and enhancing an existing center and fortifying that future NOI growth while getting a really attractive investment return, we'll do as much of that as we can. Got it. Thanks for the time, everyone. Thank you. Our next question is from Floris van Dijkum with Compass Point. Please proceed with your question. Morning. Thanks for taking my question. Your shop space is the most valuable portion of your portfolio, as I think, Lisa, you've alluded to in the past as well. The beauty is you know, you have over 50% of your ABR comes from the shop space. And a big two-thirds of your SNO pipeline is shop space. Could you remind us again what your peak shop occupancy was, and where do you think that could go over the next, you know, two and a half years or so? Yeah. Peak, I'll do the reminder, and I'll let Alan color up what he thinks about our guide, our glide path to achieving it. We peaked over 93% from a shop occupancy perspective. That was at a point in time when I think we would all look at each other and agree that our portfolio is better today than it was then. I think even the supply and demand characteristics of today are better. I'm not promising you that we will significantly exceed those peaks because those are pretty high levels of occupancy. 93.3, I think was in that area was our peak. Yeah, as you know, we're at 92.1% right now, and I would just go back to the pipeline of really great deals that are following up. I'd put on top of that, our upcoming Vegas ICSC show that's here at the end of May. The amount of meetings the teams already have scheduled and the attendance that we anticipate from the retail community is really strong. We have the runway, and we're planning to continue to set our sights high. I appreciate you, Floris, remembering that we say that. I think what's really important when you think about where we sit today versus that peak occupancy, you've heard us say this, really coming out of COVID, we feel really good about the health of our in-place shop tenants. We believe that it's as strong as ever. What makes shop space so valuable is the fact that there's changes as it happens in our business. We say that all the time. There's always going to be some tenant failures. What makes that so valuable is that we're able to replace it relatively quickly versus an anchor box, with a lot less capital. The rents are higher. That's what makes that space so much more valuable, and we're able to continue to get really good annual contractual rent steps in the shop space in addition to leasing spreads upon new leasing. That's what makes that space so valuable to us. We are not afraid of shop space. That's what you've heard me say over and over again. No, I appreciate that. Maybe if you can. You've talked about the rent bumps, and to me, that's one of the most underrated aspects of the business and sort of the cruising speed that produces. You mentioned that almost all of your shop space has fixed rent bumps. Are you getting 3% rent bumps? How do you see that, you know, your cruising speed evolve as you sign new leases? Floris, I appreciate that question. Yes, we are having more success at higher rent bumps. You know, I would tell you historically, if you were to rewind the clock pre-COVID, I would say our teams were probably asking for anywhere between 2.5% and 3% in the shop leasing sector. Now we're starting at 3%-4%, depending on the circumstances or even in some cases higher. It has evolved. I do think it's become a bit more of a commonplace of where we are. You know, for the foreseeable future, I certainly expect us to continue down that path. Thanks. Maybe last but not least, I hear Wegmans might be coming to Connecticut. Any chance that you guys might be involved in that? I'm looking at Alan. We are not involved in that, Floris. Sorry, I didn't know who was gonna answer that, whether it was Nick or myself. We're hearing the same rumors. That'll be great for the Connecticut community if they end up making that happen. Thanks. That's for me. Thank you. Our next question is from Michael Mueller with JP Morgan. Please proceed with your question. Thanks. For the two questions, the first one, what are the characteristics of the 7%-10% of leases where you're not getting the rent escalators? I think you talked about 90% or 93% before. You know, the ones where you're not getting it. As we look at your development, redevelopment pipeline, I think it's like $50 million new, $250 million redevelopment. If we're thinking about the shadow pipeline, what's the mix going forward in the shadow pipeline? Does it have a healthy component of new development opportunities as well? Hey, Mike, this is Alan. I'll answer the first part. It's pretty simple. It's simply options that are getting exercised that don't have embedded rent steps. That's the 7%-10% you mentioned. I'll kick it to Nick. Got it. Mike, as it relates to the second part of your question, I appreciate it, and you're absolutely right. I mean, as we continue to push forward, we're always pruning our portfolio and looking for opportunities to reinvest in it. We've given you some visibility to some of those opportunities in our investor deck as it relates to those future redevelopments. Clearly can't disclose, sort of the same level of detail on potential ground-up developments that we don't yet own. I'll tell you, our shadow pipeline is very focused on that mix, including ground-up developments. Okay. Thank you. Bye. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed with your question. Great. Just a couple quick ones. Just trying to understand over the sort of the recent events with the banking system, if there's been sort of any ripple effects of the business, and I'm thinking of it in two t o three different ways. One is, as you guys are thinking about this future redevelopment pipeline opportunities, the $115- $150 million I see in the presentation, does anything change about your timing or conviction in to getting those done? The other piece of it is, you know, you know, obviously on the acquisition front, have you seen sort of more activity? You guys are in a great liquidity position. Does that create opportunity? I'd love to hear from the tenant perspective. Clearly, the bad debt's feeling pretty good. It went down in the guidance, are tenants sort of talking about it, feeling it? Just trying to understand if there's any ripple effects we should be thinking about. Thanks. Ron, I'll start, and Alan can hit the tenant piece, and Nick may add some color. Generally speaking, we have not seen any impacts yet from whichever word you wanna use to describe what's happening in the banking market right now, crisis, turmoil, certainly some challenges. I'll remind you from our own personal perspective, we're using free cash flow to fund that, and we, knock on wood, do not have any challenges or issues with access to capital beyond that. It becomes how are we thinking about and underwriting the new leasing that's associated with our developments. I think, as you know, we are very disciplined with our development program. We don't do speculative development, and we're not gonna start a new development until we have real visibility to signed leases. We're, you know, as we talked about, we continue to try to look around the corner and see if there are signs of softening or impacts to the business, and we have not seen it yet. Development is not something you just flip the switch on or off. They take it's a cycle. It takes some time. It's an important part of our, of our growth profile, and we have developed through cycles in the past successfully, and we expect that we will continue to do the same. We're just a little bit more cautious as we think about our underwriting, I think that that's appropriate and prudent. Ron, from a tenant perspective, the short answer is no. We're just simply not hearing that at the property and portfolio level. That said, you know, our team is utilizing currently on a proactive basis and enhancing programs that we started during COVID to support our tenants. We've got a tenant mentorship program. We do webinars for them. We've got this proprietary merchant success toolkit. We're prepared to not only proactively deal with that, but should that tide turn, have the resources there for our retailers to partner with them and help them through that process. I'll jump back in. I apologize. I missed your acquisition question. We've been saying it. We are on our front feet. We believe that we are really well positioned to take advantage of any dislocation in the market and compelling opportunities. As we've discussed, we haven't seen a lot come to market, but we're ready if they do. We have the capital, and as Nick said, when he answered the earlier question, as long as we are able to invest that and acquire accretively, and it's equal or accretive to our quality and our growth rate, we're poised to act. Great. Just my last one, just any quick updated thoughts on the Kroger-Albertsons situation and views for the company. Thanks. I think if you were to go back and probably read my answer from the last quarter, it would say the exact same thing I'm gonna say right now. That is we don't have any information that you don't have. We have really good relationships with both of them. It just continues to unfold. Either way it goes, I think is something that will be good for us. If for some reason the merger doesn't go through, we have two really good grocers, and really good locations, and it will be business as usual. If the merger does go through, you'll have a larger operator with greater scale, greater ability to invest back into their business. We feel really good about our locations and our real estate for those that may be part of their divesture plan. Sorry, one more. Sorry, I had in my notes, I missed it. We've been hearing about sort of the insurance costs and premiums on property in, you know, Florida, other markets and so forth. You know, clearly, you guys, you know, you charge some of that back to the tenant. How are you guys thinking about that at all? Has that come up? What's the thinking there? Hey, Ron, it's Mike. Yes, absolutely thinking about it. You know, with the recent renewal behind us, the team did an extraordinary job renewing our policy, but not without a little bit of pain. The markets are very difficult. They're challenging. We have, you know, from a results perspective, we're expecting about a 15%-20% increase in that line item. More on that in a second. Our access to insurance, I think, is better than most given our scale, our quality, our loss track record, the way we maintain and think about our properties. That is a kudos to the team 'cause access at a small scale level is challenging today, not just about price, but about access. With respect to that 15%-20% increase in the line item, it is a relatively small component of a tenant's rent. When you think about the bleed or the pass-through, we can pass it through. It is through our lease contracts. We will pass that through. It's in the neighborhood of $0.10 a foot to a tenant. Again, it's a pretty small component. So we feel like we've mitigated that risk or challenge to our forward growth. And again, I think time will tell when and if the insurance markets soften. Today it's challenging. Thanks so much. Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question. Sorry, it was muted. Just wanted to talk about the transactions and potential development pipeline again, just for a couple points of clarification. Is the $90 million cited for the New York Metro area development inclusive of acquisition and development costs? Similar question for Houston and whether you need additional land acquisitions for future development phases there, or if you're securing that with that first investment. Sure. Speaking to New York, yeah, that's all-encompassing all costs. That would be the acquisition cost of the property as well as future investment to build it out in its entirety. That's all encompassing the future investment for that opportunity. The second part, I just wanna make sure I understand it. I believe you were asking about the Houston opportunity and are we comfortable with the current phase if the future phase don't happen? We are. We would never purchase an opportunity if we weren't comfortable ultimately just owning it as is, where is. That being said, given its small scale, we are hopeful, and we do have an expectation that future phases will be added. If they don't, we're very comfortable owning what we purchase and building it and have tremendous demand already for the retail space we anticipate building. Yeah, sorry. I was also saying for the Houston, whether you'll need to acquire additional land for future phases, or if you're securing that with the $10 million. Great question. Yes, we have control over adjacent property. As part of this acquisition, it also gave us extended control over adjoining property that we're focused on for future phases. This acquisition is just for the portion of property we're gonna build phase 1 on. We do have definitive control over the adjacent property for future phases. Okay, great. What are the targeted returns on these development projects that make the additional risk worthwhile maybe versus something like redevelopment? I mean, I know Lisa, you said that you're not taking, you know, risky investments here. Inherently with development, there's gonna be a little bit more than where you already have the cash flow. Just curious what expected returns might be. Yeah, no, great question. As I said before, we really look opportunity by opportunity. Each one of these developments we're analyzing, we are definitely looking at what we believe the future value of that asset is to make sure we're comfortable with the ongoing yield. To give you an example, that Houston asset will be developed at approximately an 8% return. That gives you one data point, of where our eyesight was as it relates to that transaction. Okay, great. Just final one from me. Are these investments the type that Lisa was previously referring to, I think it was the Q3 call, at least initially on the Q3 call, regarding smaller developers about access to capital? Does that feel like a growing opportunity as bank lending becomes potentially even more scarce going forward? Great question. I mean, I would say exactly that. The inverse of the banking challenges out there are it is creating opportunities for us, continued opportunities. As Lisa has mentioned multiple times, we have available capital, and we have a desire to play offense. There's some quality developers out there that are very capable. They have great relationships and contacts, especially locally, but right now capital is their issue, no question. If there's any place that capital is most restricted, as we all know right now, it's construction lending. We have the ability to step in and not only bring capital, but bring relationships and expertise to help some of these deals figure out a way to get over the goal line. Many times it takes more than just capital. It does take expertise to dig in with them, figure out where we can be cost-effective regarding budgeting, pricing, et cetera, as well as deal with the retailers as it relates to relationship, potentially restructuring transactions. We are very engaged with local developers to help fill in wherever the holes may be on these projects that have challenges at the moment. I just I wanna reiterate that 'cause I think that's a really important point that Nick just said. Our relationships with the retailers are especially the grocery anchors that are driving a lot of our developments, shouldn't be underestimated because they know we can perform. In times like this, that is extremely important. That is also helping us to drive that development pipeline and build it further. Okay, thank you. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Lisa Palmer for any closing comments. thank you all. Appreciate your interest in being with us today. everyone have a nice weekend. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.