Welcome to Citi's 2024 Global Property CEO Conference. I'm Nick Joseph here with Craig Mailman with Citi Research, and we're pleased to have with us Regency's CEO Lisa Palmer. This session is for Citi clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast and at the AV desk. For those in the room or the webcast, you can go to live Q&A and enter code GPC24 to submit any questions. Lisa, we'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q&A. Great. Thank you, Nick. Thank you, Craig. Thank you for having us. Always one of the best conferences of the year. We appreciate all the attendance of all the investors. So with me today are Mike Mas, our CFO. I think everybody knows Christy McElroy pretty well, who sat on the other side of the table for many years. Christy's our SVP of Capital Markets, and Catherine McKee to my far right, for those of you in the room, Director of Investor Relations. First, I'll address the three reasons for an investor to buy our stock today so that I then can talk about each one maybe a little bit more. So one, I think as we all know that follow the sector, the open-air shopping center environment, and particularly grocery-anchored shopping centers, really is thriving. And Regency has a really high-quality, well-located portfolio of mostly grocery-anchored neighborhood shopping centers. And then specific to Regency, number two, our sector-leading development program. We really are creating real value for our shareholders from the ground up. And then three, our sector-leading balance sheet and liquidity position, which provides us with a cost-of-capital advantage to act and invest opportunistically, including number two, funding the sector-leading development program. So please allow me to just talk about those a little bit further in my opening remarks. So as I said, the open-air business, shopping center business, truly is thriving, and especially for operators of high-quality grocery-anchored neighborhood and community centers like those that we own. We continue to experience really strong operating fundamentals, including robust tenant demand across our national portfolio of 480 centers. We ended 2023 close to 96% leased, with record shop occupancy of 93.4% leased. So then moving to the development program. We continue to see great success in our development program, and that truly is a key differentiator for Regency. Many of you have heard me say that certainly more than once. We started more than $250 million of new development and redevelopment projects last year, and we have nearly $470 million of projects currently in process. Our team continues to work really hard and successfully to further build our pipeline as we look to achieve our strategic objective of starting more than $1 billion of projects over the next five years. Our ability to successfully execute on high-quality ground-up shopping center development projects is a differentiator. It is a competitive advantage. We are differentiated with our longstanding relationships with high-performing grocers, our access to capital, consistent free cash flow, and the best-in-the-business experienced talented development team located in our offices across the country. We're also proud, reason number three, of our sector-leading balance sheet and liquidity position, as that provides us the ability to pursue these value-creating investments. And in January, we fortified our balance sheet even further. We took advantage of an attractive debt capital markets window to pre-fund our 2024 debt maturities. We issued $400 million of senior unsecured notes priced with a coupon of 5.25%, which looks really good today. We also closed on the recast of our revolving credit facility, which we upsized to $1.5 billion and tightened our borrowing spread by 15 basis points. We have nearly full borrowing capacity on that today. For those of you that have been following Regency for a long time, and I see a couple familiar faces in the room that I know that's true, you know the team has been working diligently over many years to firmly establish this balance sheet strength and track record of low leverage, which is why we are especially proud and gratified by Moody's upgrade of Regency to an A3 credit rating just last week. We are currently the only A-rated open-air shopping center REIT and one of only 10 REITs in the entire sector, a truly great accomplishment and a testament to our disciplined financial strategy. So as we look ahead and we look into 2024 and beyond, we believe the macroeconomic backdrop remains supportive of the continued positive trends in the environment for our high-quality neighborhood and community shopping centers. The quality of our portfolio, the health of our tenants, the pipeline of developments and redevelopments, the strength of our balance sheet, and the experience and dedication of our team truly position Regency well to drive long-term earnings and dividend growth and create value for our shareholders. With that, we look forward to taking your questions. Perfect. So the 4Q call, I think a lot of us were coming at it from a bunch of different ways to try to get at once you get through 2024, maybe what is the opportunity for Regency and Strips in 2025 once some of the downtime from Bed Bath & Beyond for some peers are kind of in the rearview? And I think you guys teased out maybe some views on that, Mike, on same-store and AFFO, but maybe go into that a little bit more, your level of excitement on the flywheel and the opportunity for the company. I'll start, and I'm going to try really hard not to throw any future guidance because I'll get kicked under the table beyond 2024. All webcast, Lisa. Let me just speak very high level and something I think that we're all familiar with, and we have it in our investor presentation, our Same Property NOI growth model. We believe the quality of our shopping center, the consistency, the ability to drive market rent growth, rent spreads, and with stable occupancy, we should be able to deliver 2.5%-3% of Same Property NOI growth on a long-term basis. We feel really good about that. We do know what our guidance is for 2024. It's below that target. The fundamentals of the business are really healthy and haven't changed. I don't believe this is providing guidance, and it's consistent with what we said on our call. That means that 2025 should be outsized as we pick up because our percent leased, you heard me just say in the opening remarks, 96% leased we end the year and 93.4% shop percent leased. So the business is healthy. We do have some downtime that we're dealing with anchors in 2024, but we are releasing those, and that rent will commence either later 2024 or 2025, which would lead to outsized Same Property NOI growth in 2025. Maybe just to dive in, just a little bit of color on 2024 in particular. There are some circumstantial anchor moveouts that are carrying a heavy weight from an NOI perspective. We had two leases in particular in our Manhattan, very small Manhattan portfolio, disproportionate base rents causing some of that decrease in, in fact, having a 30 basis point negative impact to our Same Property growth this year. I would also remind everyone, we have not yet included the portfolio acquired from Urstadt Biddle into our Same Property portfolio. That would have had an offsetting 25 basis point impact, positive impact. And we are, by the way, in that portfolio, we are very much looking forward to continuing to drive occupancy growth. Early days are very positive, confirming of our underwriting. There was about a 200 basis points differential between that portfolio's percent leased and Regency's, and we look forward to closing that gap over time. The leasing environment, you guys have done a nice job on shop occupancy. Anchors are well leased as well. You had mentioned 2.5%-3% on sort of a stabilized portfolio. What does stabilized mean from a shop occupancy perspective? Where do you think you can get that? And until you get there, how much growth could we see embedded in the portfolio? So again, from a shop occupancy percentage, 93.4% leased at the end of the year is a record high. But I will quote Alan Roth, our Chief Operating Officer, "Records are made to be broken." And we really do believe that with the health of the environment and the sector generally, that we can continue to push that. And I'm not going to put what I believe is it's difficult to say what frictional I don't want to call it structural occupancy, but frictional occupancy is in shop percent leased. We have some proactive moveouts when we're trying to strategically upgrade the merchandising or if we're working on a redevelopment, but we can go higher. I know you guys don't have much JOANN's exposure, but could you walk through that as sort of walk through how much of that would have been embedded in your guidance specifically versus maybe just an umbrella kind of assumption for bad debt? I'll do the best I can, Craig. We have eight locations in the JOANN portfolio. It's only 20 basis points of our total ABR. Let me take the question through a credit loss discussion. We have 75-100 basis points of credit loss embedded in our plan for 2024. Importantly, this is coming from two areas in particular, right? We have bankruptcy-related moveouts that'll impact the top line from a base rent perspective. And then we have traditional ULI bad debt expense that'll come through as an expense line item or a contra-revenue line item through the P&L. I like to think of the ULI percentage as more of a shop space bad debt expense. And then that bankruptcy-driven provision is really for these targeted, specifically identified potential negative impacts. News is that a reorganization is in play. Regency does very well when reorganizations happen. We typically have the better-performing stores within these portfolios, and we typically retain tenants. However, what we will do, Craig, is go through specifically one by one and assess the likelihood, probability of that space coming back to us, whether it's performance at the store level, whether it's the rent that they're currently paying, and whether it's the tenor of their lease as well. We'll make an assumption, and those assumptions are what's comprising that 75-100 basis points credit loss provision. Yeah. So I mean, just to clarify, while the news of the reorg is current this week, it was not a surprise to us. JOANN is one that's been on our watchlist and taken into consideration when getting to all of the numbers that Mike just walked through. That's helpful. We have a question coming in. Just what's the mark-to-market in small shop portfolio and anchor portfolio today? So in 2023, we had the highest rent spreads since 2016. So we are definitely seeing really again, this goes back to the demand for the space and also the% leased rising. It's a supply demand. I was an economics major in college, and it's basic economics. And we expect that we're going to continue to see that for those reasons because of the fact of the limited space available and healthy demand in the shopping center. Double digits, again, would be great. I think we can probably get to your development shortly, but just to your economics comment, at what point do you think kind of the positive leasing environment and the high occupancy spurs supply broadly? That's not the limiting factor today. I think the limiting factor goes to reason number 3, right, the cost of capital in the balance sheet. And because there is demand for new space, for stores, we had several Regency team members at the ICSC Open Air conference last week, and there's many retailers that attend that as well. And just hearing their it's anecdotal, but just hearing their continued demand and need for new stores and limited supply, it's the developers that are not able to access capital, at least at the cost that would make it make sense. And that is, again, where we have the advantage. So I don't believe it's demand that's limiting the supply. It's the access to cost of capital advantage make it work. How does that play into your development opportunities, given your cost of capital? As Mike said several times yesterday, we hope that this environment continues because we're able to develop and take advantage of that and use our low cost of capital, use our relationships, and started $250 million of quality developments and redevelopments last year and have visibility to continuing that momentum this year. Can you walk through some of the economics there versus the acquisition market and the developer profit that you can get? So we're targeting 8% returns on average. There are some that will be below, some that will be above. And the transactional market today is still pretty thin. But for the quality properties that we would want to own and we have bid on some and have lost, we are still seeing some trade at sub-6 cap rates. So even if we are on the low if we're the ±75-100 basis points from the 8, so even take it down to the low end of a 7, we are still north of 100 basis points spread from an acquisition cap rate today, and so creating real value. And how we approach development, the risk is really removed. We don't take we generally never say never, but we generally don't take entitlement risk. We have our anchor lease executed. So the risk is when you put a shovel in the ground, but that's such a small percentage in terms of the site work of the actual total costs. So historically, over the last, gosh, 10 years, when we were developing, those spreads were north of 300 basis points. So they have compressed, and we would like to see that at a minimum of 150 basis points. But development is not something you turn on and off. You have to continually work it, especially with the relationships. And again, we have the best team in the business. And while we're north of 100, at least 100 basis points spread today, expect that we're going to be able to continue to push that back to the target. Just to add on a little bit there, we do still believe, though, that Regency can be a very successful developer and meet our strategic objectives while the general industry still has pretty muted supply growth. So I think that setup can both ends of that equation can exist. And in fact, that's what we would like to see continue, is this continued suppression of overall growth, but Regency finding those needles in a haystack and those pockets of opportunity to meet our needs from a strategic perspective. Maybe talk a little about how you guys think of cost of capital, given the cash, free cash flow that you throw off, now your A-rated balance sheet, what that does for kind of the pricing matrix relative to these development returns that also give you a little bit of comfort here with your low-levered balance sheet. Sure. So given the priority of development, we've kind of structured our balance sheet to afford us an opportunity to maximize free cash flow. So we're going to generate about $160 million of free cash flow in 2024. The priority from an investment perspective will continue to be our development and redevelopment program. On a leverage-neutral basis, that $160 million should translate into about $300 million of capital available to invest, which when compared to the comments Lisa made about our strategic objectives, that's more capital than we need to satisfy what we think we can do on the development front. Anything excess there can be used to either acquire shopping centers. We can park it on our balance sheet and continue to build more capacity for future investment, buying back stock. We have done that in the past. It is an option in our toolkit. We have the balance sheet that's prepared for that activity. It's not our highest priority line item, but when we see an opportunity, we won't hesitate to act on that. And then beyond that, Craig, it's about to the extent we're investing more than $300 million in a year, is it accretive to our quality? Is the opportunity accretive to our growth rate? And can we fund it accretively with new capital, both debt and equity, on a leverage-neutral basis? We keep it really simple. That formula has worked for us for many years. We'll continue to apply that. I think our track record speaks for itself. And the opportunity is that while limited on the acquisition front, we're prepared for it to grow. And we have the access to the lowest cost of capital to take advantage of that. Maybe one last one on development. SunVet's one of your bigger projects going on right now. What's the leasing progress look like out there? Again, from the very beginning, right, we had the anchor executed even prior to closing. And it is a I think for those that are in the room are familiar with it, we say ground up. It's a redevelopment of an old retail site. So the demand and the neighborhood for retail is already really healthy there, and we continue to make progress. It's really early in the development stages. Shopping center developments, just like multifamily or other office, the small shop spaces generally, you like to hold off a little bit until you get further along in the progress of the development because as the tenants can actually visualize and see it and touch the space, you tend to get better rents. Perfect. And maybe we're getting some questions in here just about the general leasing environment, which has been very good. Just a couple of questions on how traffic has kind of progressed here year to date. But also the back and forth, I think some of the perception is because supply is so tight and vacancies are so tight that rent should just be pushed even harder. Can you talk about kind of the dance between occupancy cost ratios, maybe other economic considerations within a center from getting rid of encumbrances of cotenancy and other issues to unlock some value, kind of how you see that whole value equation kind of play out on top of just kind of the traffic? I'll start if anyone wants to add any color. So from an actual kind of lease terms favorability, I think given our size and our scale and our relationships, we have good leases. And yes, we may acquire properties that perhaps we inherit leases. And in fact, during COVID, when tenants were asking for a little bit of help in deferrals, it's one of the first things we did in terms of excluding and removing some of those non-landlord-favorable terms that may have been in leases that we inherited or acquired. So generally speaking, I feel really good about our lease and what we have with our tenants. With regards to the ability to push tenants' rents, we recently did some work and looked at tenant sales, inflation, and rent spreads. And not surprisingly, they track pretty well, which is what you would expect. So our merchants, our retailers, rent expense is a line item in their financials. And it really is driven by how much they are producing in sales. And so to the extent that we have tenants that are productive, have high sales, continue to keep up with inflation, margins are still healthy, we can continue to push rents with inflation. Inflation certainly plays a role, but so does the supply demand. And what we are hearing also anecdotally from tenants is they're willing to pay a little bit more to, one, stay in productive centers or be in productive centers, knowing that they're going to be able to drive more foot traffic and therefore drive more sales. So that equation is in our favor today. But there is a limit. We can't push rents to the sky if they're not growing their top-line sales. From a volume perspective, how is that kind of, I know, volumes were very good in 2023? How is that translating into early 2024 kind of activity? I would just say no changes to our expectations for the year, Craig. The portfolio continues to see high-quality demand. As Lisa mentioned, the consumer is healthy. The tenants are trying to build out their footprints. The tenants appreciate the quality of our locations. And I would just comment back to the rent growth equation. If you just look at our track record and map rent spreads versus occupancy rates, they're tracking along with each other. And as that continues to compress and our vacancy continues to become more scarce, we believe that we'll continue to have the pricing pressure to allow us to continue to grow rents beyond that. So that's leaning into renewals. There's no other quality locations for a tenant to relocate to. The cost of moving is as high as it's ever been. We realize that. The tenants appreciate that. We will find the right rent to make sure that we're meeting our objectives as well. Maybe on the other side of rent is the expense side, right? Inflation's obviously been a pressure point there. One of the questions is, what percentage of leases use fixed CAM charges? And have you always used this method? We are not a fixed CAM company. We have studied it. We continue to study it on a periodic basis. We believe in complete pass-throughs of all of our operating expenses. We think it aligns our interests with the tenants. We very, very strongly believe in maintaining a very high standard of quality within our shopping centers. And the disincentive from a fixed CAM perspective, in that regard, we have put in the con column as we evaluate pros and cons of the approach. But not to say we won't move in that direction at some point. Again, we just continue to look at that. And it hasn't impeded our ability in the marketplace to attract tenants. Can you talk about some of the bigger pressures, whether it's insurance, taxes? Walk through it. I mean, in a higher inflationary environment, we've seen pressure throughout, but we've been able to push that through given the contract terms that we have. Insurance has been the highest-growing line item over the past 2-3 years. It is a smaller component of our overall cost structure to a tenant. And we are largely recapturing that through rebills to our tenants. And as vacancy lessens, that recapture rate continues to grow. I think it was worth about $0.01 per share of bleed last year given the vacancy we had in the portfolio. So that increase of insurance costs was being non-recoverable because of vacancy. We anticipate a better renewal year this year. That doesn't mean that we think insurance rates are going to go down, but we don't think the increases of the past several years will recur in 2024. Sure. We have another question coming in. What% of your portfolio is discretionary? One example was apparel. Very limited. I'm going to let Christy give the exact percentage. But Mike whispered 5. I'm not sure the exact percentage. But most of our it's grocery-anchored, value, necessity, convenience, service. Mike was right. It's 5%. But it is and let's history lesson, right? Let's go back to 2018, 2019. If you were listening to the Regency calls or any other of our peer investor calls, there was a lot of concern, right? It was the retail apocalypse. And retail physical locations were basically all going to die off. And it was because it was the threat of e-commerce and Amazon. Walmart really was already in there. But then COVID hit. And there really through those years and challenges that we all experienced as consumers and the retailers experienced with their businesses became a renewed appreciation for the physical location. So consumers like to shop. They like to go out. They like the social interaction. The retailers realized it's really expensive to deliver to the home. The best and most profitable means of delivering not literally, but getting their goods to the customer is to have the customer walk in the store. Retailers invested in their in-store experiences, invested in fulfilling online orders from their stores. Really today, gosh, we feel even so much better about the physical locations bricks and mortar than we did five years ago. The environment is really healthy. The neighborhood community shopping centers close to the home are critical to the entire retail ecosystem. You guys mentioned Urstadt now you've had under your belt for several months. As you guys are really digging into kind of lease structures, lease terms of some of those legacy leases versus what a Regency typical lease structure would look like, are you finding any lower-hanging fruit than maybe you even thought going in regarding terms, bumps, anything there that would add to your accretion relative to what you originally underwrote? Largely, my answer would be no. Urstadt Biddle management team did a wonderful job of managing the portfolio, the professional leasing and management. We're going to bring a little bit of amplification to that. And I think where that comes from is a little bit broader reach from a tenant perspective. There being so hyper-local and hyper-focused on that region, I think our perspective of bringing tenants who maybe are new to the marketplace and we know their success within the portfolio, we can introduce them to these assets, one. The contractual rent bumps in that portfolio are slightly less than ours. We believe that we will continue to bring that we've been doing this for 15 years now, pushing contractual increases. So that discipline within the leasing team will continue to grow within that portfolio. I just come back to the real opportunity here is heads down, increase the leased occupancy and the commenced occupancy rate, close that 200 basis points gap. These are very high-quality shopping centers that largely fit our strategy and look like Regency assets from a trade area DNA perspective. The team's excited to get their hands on them. Early days, I wouldn't say there's no negative surprises. There's no positive surprises. We're getting what we thought we were buying, and we're really proud of that. Yeah. I would just reiterate. Great company, great culture, great properties. Size and scale does make a difference in our business. Had the management team that was in place at Urstadt Biddle had our size and scale, there probably would be less of a gap between the two. But the reality is we have a lot more data. Access to data, as Mike said, is as a result of having over 9,000 tenants across the country. And that access to data allows us to analyze it and then therefore invest in processes and systems that we can actually capitalize on how best to optimize leased terms, as we talked about, leased structures. Speed of processes even matters because you invest in systems. So all of that, as Mike said, that's the amplification that we can add to a really good portfolio brought over 29 really excellent team members that are fitting in well. And it is providing exactly what we thought was, which was 2024 accretion. Obviously, it's a very fragmented industry. But to your point, what's the consolidation opportunity from here, either private or even on the public side? We have the capital. We have the balance sheet to invest. It is one of the advantages. So we're constantly looking. But as Mike said, so I do believe that scale matters. But we are of a size that we don't need to grow to capitalize on scale. We've kind of crossed the threshold. So we're not going to grow just for growth's sake. We're going to remain very disciplined. So checking the boxes that Mike articulated later. So as we're looking, whether it's a single property acquisition, a portfolio of properties, or a company, is it accretive or at least equal to the quality of our portfolio? Is it accretive or at least equal to our current growth rate? And can we finance it and fund it accretively? So is it accretive to earnings while remaining within our balance sheet targets? Those opportunities are limited. But it doesn't mean that they're zero. We continue to really, really, really mine all of them. Maybe to follow up to a comment you made a few minutes ago just about the portfolio and exposure to apparel. But I think the question is specific to consumers moving more towards experiences versus goods and how that plays into your centers. So we're primarily grocery-anchored neighborhood community centers. We're primarily grocery anchors, services, convenience, fitness. We don't have a lot of experiential tenants. It doesn't mean we have zero. But generally speaking, the close to the neighborhoods aren't going to have the large again. It doesn't mean we don't have zero, like the Pinstacks and the pickleballs. So we'll look to add it where it makes sense. We like to think of our shopping centers. We have to create an environment that people want to come and do want to gather, be together. We have our strategy. We call it the next third place. You have your home, and whether it's your home office or your office office, and then your local neighborhood shopping center. Maybe we'll move on to rapid fire. So what's same-store NOI going to be in 2025 for the shopping center space? 3%. Will Strips have fewer, more of the same number of public companies this time next year? Same. Best real estate decision: buy, sell, build, redevelop, or repurchase stock? I'm going to say develop, redevelop is the same for us. So develop, redevelop. Perfect. Thank you so much. Thank you.