Welcome to Retail Opportunity Investments' 2021 third quarter conference call. Participants are currently in a listen-only mode. Following the company's prepared comments, the call will be opened up for questions. Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations. Information regarding such risks and factors is described in the company's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. Participants are encouraged to refer to the company's filings with the SEC regarding such risks and factors, as well as for more information regarding the company's financial and operational results. The company's filings can be found on its website. Now I would like to introduce our moderator, Stuart Tanz, the company's Chief Executive Officer. Thank you. Good morning, everyone. Here with me today is Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer. Building on the strong momentum that we generated during the second quarter as the West Coast fully reopened again, we continue to steadily advance our business as we progress through the third quarter. Capitalizing on the strong demand for space, we increased our portfolio lease rate to over 97% again, where it had been for six consecutive years prior to the pandemic. Additionally, during the third quarter, we again achieved solid rent growth, extending our consecutive streak to 39 quarters in a row of achieving positive re-leasing rent spreads on both new and renewed leases. Worth highlighting is the fact that we successfully achieved rent growth every quarter during the pandemic, which speaks to the strength of our grocery anchored portfolio and our diverse tenant base, as well as the acumen of our team. Along with continuing to achieve solid leasing results, we are also enhancing our portfolio through our investment program. We are again pursuing acquisition opportunities and are pleased to report that we have already lined up thus far four terrific grocery anchored shopping center acquisitions, which together total about $123 million. Specifically, during the third quarter, we acquired an excellent grocery anchored shopping center located in Silicon Valley. The property is ideally situated at the entrance to a highly desirable, affluent master plan residential community with an average household income of over $237,000. The shopping center is anchored by New Seasons Market, which is a strong regional operator akin to Whole Foods and is a perfect fit for the surrounding community. Additionally, at the start of the fourth quarter, we acquired another well-established grocery anchored shopping center located in Southern California, just north of San Diego. The center is anchored by Albertsons and CVS. Beyond these two acquisitions, we also have two additional grocery anchored shopping centers currently under contract in separate transactions that together total about $62 million. Both properties are located in the Seattle market, and both feature strong national supermarket operators. What's important to note is that all of these new acquisitions fit and complement our existing portfolio extremely well. All four shopping centers are in our core markets where we have a strong, well-established presence. Like our existing portfolio, these new acquisitions feature very strong supermarket operators. All of which are longtime tenants of ours, and all have performed exceptionally well throughout the pandemic. In terms of pricing, the overall blended yield on the $123 million of acquisitions is approximately 6% going in, with the opportunity to increase that yield notably during the next 12-24 months. Safe to say that we are excited about these new acquisitions as they will undoubtedly enhance our presence within our key core markets, as well as provide compelling new growth opportunities going forward. Lastly, turning to dispositions, we are pleased to report that during the third quarter we completed our exit of the Sacramento market, selling our last two properties for approximately $44 million in total, generating a gain of about $13 million. Taking into account our second quarter disposition, we have sold $70 million of properties in total this year. Now I'll turn the call over to Michael Haines, our CFO, to take you through the details. Mike? Thanks, Stuart. For the three months ended September 30, 2021, the company had total revenues of $71.4 million, as compared to $69.8 million in total revenues from a year ago. The increase was largely attributable to our rent collection rate returning to being in line with our historical pre-pandemic norms, resulting in lower bad debt, which was less than 1% of total revenues in the third quarter. Again, in line with our historical run rate. With respect to net income, for the third quarter of 2021, GAAP net income attributable to common shareholders was $21.1 million, equating to $0.17 per diluted share. For the first nine months of 2021, GAAP net income was $45 million or $0.38 per diluted share. Included in net income is the gain on sale from property dispositions. As Stuart noted, with selling the two remaining Sacramento properties, the company reported a $12.9 million gain in the third quarter. For the first nine months, we reported a total of $22.3 million in gains, which includes the property sale that we completed in the second quarter. In terms of funds from operations, for the third quarter of 2021, FFO increased to $32.6 million, equating to $0.25 per diluted share, which brings our FFO for the first nine months to $0.74 per diluted share. Same center net operating income for the third quarter increased 4% on a cash basis as compared to a year ago. For the first nine months of 2021, same center NOI increased by 2.2%. With respect to capital raising initiatives, in addition to the $70 million raised through property dispositions, thus far in 2021, we have raised just over $46 million of equity through our ATM program, which includes $11.2 million that we raised at the beginning of the third quarter. Between the ATM issuance and the property sales, we raised approximately $116 million of equity proceeds in total year to date. We are utilizing the majority of these proceeds together with cash flow from operations to fund our shopping center acquisitions. Turning to our balance sheet, we continue to have nothing outstanding on our $600 million unsecured credit facility. Looking ahead, we expect our credit line balance will remain minimal, if not zero, for the remainder of 2021. With our credit line at zero, the company's outstanding debt today is entirely fixed rate. In terms of debt maturities, nothing is maturing this year. In 2022, we only have two small mortgages maturing, totaling about $23 million. Our goal is to pay these mortgages off with cash flow from operations and possibly some additional equity issuance proceeds, depending upon market conditions. With respect to our financial ratios, interest coverage for the third quarter was a solid 3.3 times. Additionally, the company's net debt to EBITDA ratio was 6.6 times for the third quarter. In terms of FFO guidance, we continue to expect FFO for the full year of 2021 to be between $0.98 and $1.02 per diluted share. The key factors that will drive where we finish the year in that range are the timing of closing the pending acquisitions, as well as the timing of new lease commencements, possibly offset by raising additional equity through our ATM, again, depending upon market conditions. Our goal is to be well positioned in terms of our balance sheet as we look towards 2022. Now I'll turn the call over to Schoebel, our COO. Rich? Thanks, Michael. Starting with our portfolio lease rate, as Stuart highlighted, during the third quarter, we increased our portfolio lease rate to over 97% again. Specifically, our portfolio lease increased to 97.4% as of September 30. Breaking our lease rate down between anchor and non-anchor space, our anchor space continues to hold firm at 100% leased where it has been throughout the pandemic. In fact, our anchor space has been 100% leased for 19 consecutive quarters now, approaching five years in a row. In terms of non-anchor space, our lease rate increased to 94.3% during the third quarter, which is approaching a record high that we achieved in the fourth quarter of 2019, just before the pandemic began. Driving our lease rate higher is the demand for space, which continues to be impressively strong across our portfolio and core markets. This demand is coming from a wide range of necessity-based service and destination tenants, especially those seeking inline space. We're also seeing a growing number of anchor tenants now pursuing new, more cost-effective, smaller prototype formats tailored to focus on their most popular offering and their omni-channel initiatives. From our perspective, we continue to capitalize on the demand to enhance our tenant base at every opportunity, including recapturing inline space early, proactively replacing shop tenants that have struggled coming out of the pandemic with much stronger new tenants. Additionally, our strong performance throughout the pandemic, where we worked hand in hand helping existing tenants adapt and thrive, is now serving to draw new tenants to our shopping centers away from competing properties that did not have the management acumen nor the wherewithal to work with tenants during the pandemic. In fact, during the third quarter, we signed several new tenants that were forthcoming in telling us that they were coming to our centers specifically because of our performance over the past year and their interest in building a long-term relationship with ROIC. In terms of our specific leasing activity during the third quarter, we had another strong active quarter leasing 375,000 sq ft of space in total, including signing 49 new tenants, all of which being inline space. We renewed 72 tenants, 69 of which were inline space renewals and 3 that were anchor renewals. Two of those anchors being longtime supermarket tenants and one being a longtime pharmacy tenant. With respect to re-leasing spreads, same space comparative rents on new leases increased by 10.9%, and renewal rents increased by 5.2% during the third quarter. These spreads are on a cash basis, so they don't capture future contractual rent steps during the lease term. As we've commented before, during the past year, a number of tenants have requested keeping their initial rent at the same level as the expiring rent, and then having greater rent steps in the future years. In addition to getting higher rent steps in the future, our tenant improvement commitment is notably lower. Looking ahead at the remainder of 2021, we have no anchor leases scheduled to expire, and we only have 154,000 sq ft of inline space expiring between now and year-end. While that would suggest a fairly quiet fourth quarter in terms of leasing, we continue to work very hard to capitalize on the demand for space across our portfolio, creatively recapturing and relocating existing tenants. Accordingly, we expect to have another active, successful quarter in terms of leasing. Additionally, we are also highly focused on getting new tenants open as quickly and efficiently as possible. As you may recall, the economic spread between leased and build space at the beginning of the third quarter, the spread stood at 4.5%, representing $10.4 million in additional incremental annual rent on a cash basis. We're pleased to report that during the third quarter, tenants representing $1.9 million opened their stores and started paying rent. As it stands now, we are on track to get open more than double the amount of incremental rent that we achieved last year, taking the $1.9 million into account, together with our leasing activity during the third quarter, which totaled $1.5 million in new incremental rent. As of September 30, approximately $10 million of incremental cash base rent had not yet commenced. As it's shaping up so far, we currently expect to have a strong fourth quarter in terms of getting new tenants open and operating. Now I'll turn the call back over to Stuart. Thanks, Rich. Just to underscore Rich's comments regarding leasing, our biggest priority coming out of the pandemic is bringing the right best new tenants to our centers. Tenants that will complement our existing tenancies and will serve to grow customer frequency as well as enhance the appeal and long-term value of our properties. As Rich indicated, demand for space continues to be strong across our portfolio. There are a number of important fundamental factors that are driving the ongoing demand for space across our portfolio. Three of which I would like to highlight. First is the location of our shopping centers. Our properties are well situated in the heart of densely populated communities. Communities that are sought after, given their demographic profile by a growing and diverse number of necessity-based service and destination tenants. The second driver of the demand for space at our centers is the fact that our properties are anchored by strong, well-established supermarkets that have a long history of drawing very consistent, reliable daily traffic to our shopping centers, daily traffic that benefits all of our tenants. The third driver that is often overlooked is that our shopping centers are located in sought-after mature markets that are among the most highly protected markets in the country, with significant barriers to entry, which in turn has greatly limited new supply in our core West Coast markets over the years. Looking ahead, given that civic leaders and city planners are very focused today on addressing the growing housing shortage on the West Coast, prioritizing new housing development, we expect that our shopping centers will continue to be highly protected going forward. Lastly, in terms of acquisitions, beyond the properties that we currently have under contract, we are continuing to work hard at sourcing additional acquisitions, focusing primarily on off-market, relationship-driven opportunities to acquire irreplaceable properties. While these types of opportunities can be a bit unpredictable in terms of deal flow and timing, we are optimistic based on our ongoing discussions and the current level of interest of potentially having an active, robust year in 2022 of growing our portfolio again. In summary, with all of this in mind, from potential acquisition opportunities to the strong demand for space and the underlying fundamental drivers, we continue to be excited about ROIC's future prospects, and we are confident in our ability to continue building long-term value. Now we will open up the call for your questions. Operator? Your first question comes to the line of Katy McConnell from Citi. Your line is now open. Good morning, Katie. Morning, everyone. First for the $10 million leasing pipeline, at what point would you expect that pool to be fully online? And do you anticipate any meaningful rent commencement delays resulting from supply chain disruptions or labor shortages in your markets? You know, it's always hard to predict. You know, we currently expect that by year-end, tenants representing around $2 million or maybe as much as $3 million of the $10 million spread will open their doors and commence paying rent. You know, I think as you touch on, you know, there could be some impacts from the supply chain. So far, we haven't seen a meaningful impact. It could going forward temporarily delay some tenants from getting open, as they wait to get their fixtures and others inventory. Just hard to predict. Okay, got it. Could you discuss the pricing of the acquisitions that you've secured to date? How much of a spread are you seeing generally between marketed and off-market deals that you're looking at today? Well, deals that are widely marketed in you know very good locations are trading right now in the 5, I would say sub-5 cap rate range on the West Coast. For us, it's a matter of you know these relationships that we have and the ability to execute you know with sellers that know us well and you know we have the ability to execute pretty quickly or probably quicker than most sellers. Because of our depth of experience in operating for close to 30 years, we have a pretty good understanding of the issues that other potential buyers do not or have trouble getting their hands around. Okay, great. Thanks. Thank you. Thank you. Your next question comes in the line of Wes Golladay from Baird. Your line is now open. Hey. Yeah, good morning, everyone. Morning, Wes. Hey. Hey, Stuart. I wanna go back to that comment about a robust 2022. Could you maybe put that in context to what ROIC was doing between 2011, 2017? Is the pipeline somewhat comparable to that or maybe in between what you've been doing the last few years? Well, of course, during the pandemic, we really didn't do much. Yeah. Going back before the pandemic in the earlier years and mid years of the company, we were acquiring close to $200 million-$300 million a year in assets. The pipeline for 2022 is looking as robust as it was back then right now. Okay, fantastic. I guess you did mention on the call planned recaptures. Is that gonna be meaningful or will it be just mainly shops, or will there be any anchors in that? I think, you know, again, another one that's hard to predict. It's obviously driven by, you know, our ability to recapture. There will probably be a mix of, you know, combining some shop space to accommodate, you know, larger format tenants, along with, you know, potentially rightsizing some anchors, as well, which we've done, you know, throughout the years. Okay. Was there any meaningful changes to any of the drivers of the guidance? I think you reaffirmed it for the FFO share. You mentioned maybe some ATM issuance may drive your acquisitions. I guess looking at the core same store NOI and bad debt, is that all tracking what you expected? Yeah, I would say, excuse me, Wes. I would say so, yeah. We kept it. We just reaffirmed it basically. The biggest wild card for it, the rest of the year is getting the tenants open. As Rich mentioned, we currently expect to have a strong quarter getting those tenants in the fourth quarter open. Assuming that happens, we could be towards the higher end. That could potentially be offset, or if we were to raise a little bit more equity during the quarter, and the timing of that and amount of that equity when we raise it. Great. Thanks, everyone. Thank you. Your next question comes in the line of RJ Milligan from Raymond James. Your line is now open. Good morning, RJ. Hey, good morning. I guess my first question is for Rich. The $10 million gap between economic and leased occupancy, can you talk about the cadence of that $10 million coming online? When do you expect that to be fully in the numbers? You know, again, I think, you know, we're hopeful during the fourth quarter we could get as much as, you know, 3 million to, you know, upwards of 3 million commenced. Obviously we'll be also adding to that number during the quarter. You know, we would expect that of the existing 10 million, the majority of that will be done by, you know, the second quarter or online by the second quarter of 2022. Again, we'll be adding to that number throughout that period of time. Okay. You guys, in your prepared remarks, mentioned the backfilling of some of the COVID fallout with stronger tenants. I'm just curious which types of tenants are still on the watch list. You know, given sort of the recovery that we've seen post-COVID, do you expect fallout to be long or short or less than your long-term average over the next, say, year or two, given the fact that you have been successful in backfilling the vacancy that you've had? Yeah, I mean, I think the one, you know, the tenants that have, you know, really struggled through COVID included the, you know, the dry cleaners, some of the more, you know, boutiquey type of fitness tenants, and some of the personal services, you know, nail salons, threading and things like that. Most of those tenants are back open and operating and doing quite well at this point. But, you know, there probably will still be, you know, some fallout of tenants that got overextended during the pandemic. Okay. One last question, which is more bigger picture for Stuart. Stuart, you and a lot of your peers seem to be ramping up acquisitions. We've obviously seen two big mergers in the sector. Do you think we're at the start of an acquisition cycle, or do you think this is just a smaller window where buyers see upside and NOIs due to COVID disruption? I guess maybe you could put that also in the context of record low cap rates for the sector and, you know, where there is opportunity to increase those going-in yields. Well, obviously the global picture will drive a lot of this, whether it's interest rates or anything that could happen in terms of the coming out of the pandemic, if something were to happen. When you look on the ground today, the pipeline of deals is extremely strong. There seemed to be a lull there during the pandemic where sellers pulled back. Now that, you know, money is available both from a financing and a capital perspective, it certainly has, you know, accelerated in the minds of a number of owners to bring their properties to market. I think that's gonna continue for a while. I think that from the sector's perspective, I think it will certainly play well into, you know, REITs growing their portfolio during the next certainly six months to a year, depending on what happens, of course, with interest rates and other things that we cannot control. Okay, great. Thanks, guys. Thank you. Your next question comes in the line of Juan Sanabria from BMO Capital Markets. Your line is now open. Hi. Good morning. Thanks for the time. Good morning. Just hoping you could, going back to, I think it was, Wes's question on guidance. For same store NOI, any color on where you expect to be given the year to date, I think is 2.2% relative to the previously communicated range of 2.4% and what the drivers are. Is it just the lease commencement between the high and low end of whatever the range is today? Well, I guess, Juan, I would say, you know, each quarter bounces around a little bit, but it largely depends on the timing of getting new tenants open in the fourth quarter. As it stands now, we think same center NOI for the year should still be in the 3% range. Okay. On the rent bumps that you talked about, negotiating with tenants to have a similar new rate on the new lease, but getting bigger bumps. Can you just describe or quantify how much rent bumps have moved and what the split is between kind of fixed and floating and what collars there may be in place given inflation is a bit higher than we all anticipated a year ago? Sure. I mean, I think in terms of renewals, some of those flat rents are, you know, per the terms of the lease. You know, that particularly you would see with an anchor tenant. In terms of, you know, the shop tenants, they just don't wanna see a big spike in the rent right away up front. Keeping that rent flat helps them, you know, come out of the pandemic. Then, you know, we're getting higher rent steps on the back end. On average, you know, for a shop lease, you're gonna see a 3, you know, maybe a 3.5% annual increase for that extended term. Okay, great. Thank you very much. You're welcome. Thank you. Your next question comes in the line of Craig Schmidt from Bank of America. Your line is now open. Great, thanks. Good morning, Craig. Good morning. I'm wondering if the funding of new acquisitions in 2022 will include additional asset sales. The answer is we are currently finishing up the budgeting process right now. It will be done shortly, and then we will begin analyzing 2022 in terms of asset sales. The answer to your question is probably yes, depending on, obviously market conditions. Yeah, we will continue to look at churning some of our capital and as it relates to growing our portfolio in 2022. Great. Are you able to give a sense of what the disposition cap rates was for the $70 million you've sold year to date? Yes. The blended cap rate, Craig, was about 7%, in Sacramento. Great. You're pretty much approaching your high occupancy. Do you still think you can take it higher by the end of the year? Or, you know, given the 97.9% previous peak, your 97% floor may not move. Well, you know, look, I think if the demand continues to stay at the current levels that we've seen, I do think we're gonna get back to the pre-pandemic occupancy levels a lot quicker than most. Whether that's, you know, the fourth quarter or the first quarter of next year, I do think that we will get to that number pretty quickly. We may go beyond it at this point, given how strong the demand is from that we're seeing out there in terms of filling primarily our inline space. I'm excited looking ahead in terms of where things are going. The demand has been extremely strong. To think that we could pick up 50 basis points in just one quarter alone is quite an achievement, not only for our team, but also showing you how strong the market is out west. Great. Thanks a lot. Thank you. Your next question comes to the line of Todd Thomas from KeyBanc Capital. Your line's now open. Good morning, Todd. Hi, good morning. I wanted to follow up on your comments around the acquisition pipeline moving forward. It sounds like you're seeing potential to deploy capital in that $200 million-$300 million range, similar to where the company was during much of the last decade. Is the appetite for investments there? You know, would you look to do that sort of volume if there was an opportunity? We continue to hear about cap rate compression and more competition for retail properties. Do you think that you can still achieve the 6%, you know, going in yield as you move forward? Well, you know, it's obviously a tough question to answer given, you know, that you're asking me to look forward. But Right. In terms of what we see in our pipeline right now, I think we can certainly be buying around that number. Maybe probably a bit less given the cap rate compression. More importantly, what we're buying has juice. That's what's really important. The ABR on these assets are low, gives us the ability to do what we've done in the past in terms of getting very strong increases going forward, and more importantly, delivering that yield, you know, that 100-150 basis points spread after buying these assets, given the acumen from our management skills and leasing. I'm very positive looking at where we sit right now, as we move into 2022. I do think that, given our cost of capital today, that we'll be able to achieve those results, you know, given, you know, hopefully given market conditions stay the way they are. Okay. That's helpful. Yeah, maybe Rich, in terms of the, you know, ABR for the portfolio today, the ABR for some of the acquisitions, you know, we've seen retail sales on a national basis, you know, sort of pick up and reset at a higher level. You know, is there any way to sort of, you know, characterize the portfolio's, you know, health ratio or occupancy cost ratio today, relative to where it was, you know, maybe pre-pandemic, just given some of the increases in sales that we've seen, across the board? Yeah. Well, I think as you're touching on, you know, we are seeing, you know, across the board, for the tenants that report sales, you know, strong growth in those sales numbers. You know, we don't in our business get sales from all the tenants, so some of those are a bit hard to nail down exactly what the increase is. But from anecdotal, you know, conversations with the tenant base, many of them have had very strong sales and, you know, obviously that's improving their, you know, their occupancy costs. Okay. I know historically you don't collect a lot of, you know, percentage rent or overage rent. Do you anticipate, you know, seeing an increase in that in the near term? Yes. I mean, I think, you know, again, you know, depending on the use, there have been some very strong sales. Some have pushed tenants into percentage rent and, you know, whether, you know, that's offset by other tenants that have decreased in their sales, you know, what that net's gonna be, we really won't know until probably the first quarter, 'cause some of these sales are done on an annual basis, calendar year. I, you know, would expect that it will be a bit stronger than, you know, last year. Okay. Just back to the acquisitions real quick, you know. How should we think about, you know, funding acquisitions if you do get back to sort of the level that you're talking about, you know, sort of in the $200 million range or maybe more? You know, you've been active on the ATM. You continue to be efficient through the ATM at the current level or pace. You know, would you anticipate needing to raise capital through, you know, maybe an offering if you return to that $200 million-$300 million level or more? Are you comfortable with that, you know, where the stock's trading today? Mike. Well, on the acquisition front, funding, you know, we would likely utilize our credit line, at least initially, and we'll also look to raise equity, you know, in step with closing those transactions. You know, obviously the goal, one of the goals being to keep our current financial ratios intact. As far as, you know, the market conditions, it's very, you know, kind of subjective to us about where the stock price is, but we'll see how it plays out over the next, you know, 3-6 months. Yeah, I mean, it's a combination of free cash flow, which is very strong right now, given our payout ratio. It's a combination of hitting the market when we think it's the right time to hit, and it's a combination of turning our capital in terms of asset sales. It's those three that will help fund this pipeline going forward, Todd. Okay, got it. What's free cash flow? What was free cash flow in the third quarter, roughly? It's probably about $12.5 million. It's about $40 million or so for the year. It's a big number. Because of the reset of the dividends, yeah. Okay, great. All right, thank you. Thanks, Todd. Your next question comes to the line of Michael Mueller from JPMorgan. Your line is now open. Yeah, hi. Good morning, Michael. Hey, good morning. Just a quick follow-up to Craig's question. If you look at this portfolio or maybe even back to Pan, what's the highest physical occupancy level that you've generally run at? You know, if you go all the way back to the Pan Pacific days, the management team today, which is the same management team at Pan Pacific, we ran as high as I believe it was in the low 98% range. That's where we were during the Pan Pacific days, which is basically 100% occupied because you're always gonna have a tenant that is going to, you know, either through a divorce or partnership breakup or other things, you know, not extend the term of their lease or not renew. So you always have some fractional vacancy. At that level, you're basically pretty well leased. That helps us drive rents at that point. I mean, that's the secret of getting these high rents that we've reported year after year, both at PNP and at ROIC. It's that occupancy. We certainly see us heading in that same direction right now. Okay. At 98% leased, that would translate into about what on the physical side, on the build side? I mean, it's hard, again, you know, it's hard to predict because, you know, we don't know when that's gonna come online, but it's probably a, you know, a 2%-3% spread in terms of build versus leased at that point, I would guess. Got it. Okay. I think our gap right now is a little into the five right now. Yeah. Well, it's 'cause of the pandemic. Right. You know, the other thing, again, Todd, and I think you know this, not Todd, but Mike, I think you know that well, is that, you know, the company leases double what rolls over in the portfolio year after year. So that's being sort of active, very active versus being proactive. I think that continues to, you know, look like it's where we're heading right now in terms of the velocity of our tenant base and achieving strong re-leasing spreads. Got it. I appreciate it. Thank you. Yep. Your next question comes from the line of Caitlin Burrows from Goldman Sachs. Your line is now open. Great. It's Michael here. Good morning. Good morning. Hey, Michael. How are you? Very good, Stuart. Hey, Mike. So I just had a couple of questions. You know, as you outlined sort of the capital sources, free cash flow, ATM, asset sales, how are you thinking about monetizing any of the entitlements on one side to generate capital and advance those projects, but also thinking about raising institutional capital either in a JV or fund format or in other ways in terms of another sort of tool in the toolkit to be able to fund, you know, these great acquisitions that you're being able to source given your long-term presence in the market? In terms of entitlements or in terms of our, you know, our densification, that is going well, and we are looking at potentially selling off, two of the three projects right now, and those should be fully entitled. Bellevue's already entitled, and into construction drawings for permitting. Pinole and Novato is very close to being entitled, and the goal there is probably to sell those assets. That could generate another $30 million-$40 million of proceeds. In terms of JVs, I mean, as you probably know- Yep. I think you've known us now for almost three decades. You know, we're Yeah, the full story, and I get all that. Right. I know going through the pandemic, you looked at other things, and I would assume other people are calling you that wanna get into the market and whether you wanna. Yeah. take that capital or not Right. You know, at the risk of complicating the story and things like that. I know you've been open to it. I just didn't know where your current mindset was and whether the institutional investors are more aggressively calling you to deploy that capital. Yeah. Look, they are aggressively calling us. We are looking at, as we always do, we have an open mind to, you know, for everything. It's gotta be a, you know, the perfect deal, as you would say, for us to even consider that. Certainly, at the present time, we're not considering going off balance sheet. It's just from experience, we've always learned, decade after decade, you know, market after market, as markets go, you know, turn, you know, back and forth, that having a clean structure is what investors really want. They want a straightforward, transparent structure that in the, you know, in the end really delivers, you know, what I would call very transparent results. Okay. Then Bellevue was supposed to, I think, originally start in the first quarter. I assume that that's not the case right now. Is there sort of an updated timing as we think about the growth potential in these projects? Yeah. I mean, look, the project's going well, just in terms of trying to get to the finish line and getting a permit. However, there is so much activity in Bellevue, in the city of Bellevue right now, that the city just can't handle the amount of permitting, whether it's Amazon or others. We anticipate now this project really starting in the third or fourth quarter of next year. It's just because there's so much demand out there. I mean, every time we get on the phone with our, you know, our construction people and our project manager. Although we are moving through the process, we just keep hearing that the city just keeps getting backlogged and more backlogged. Yeah. Right now it does look like it's gonna be the third or fourth quarter of next year before that project could break ground. Okay, great. Just last one that we had was just sort of reconciling a little bit on the guidance into Q4 and thinking about the run rate and variables for 2022. You know, I know right now you've maintained guidance, which would imply a $0.24-$0.28 range for the fourth quarter. $0.04 is- Mm-hmm. A pretty wide range, especially given the fact you did $0.25 in the third quarter, which would seem the base. I recognize you have the asset sale that happened late in the quarter. I recognize the acquisitions could be later. It just seems like even if the acquisitions are later, even if they happen at the beginning of the quarter, it's probably only $0.01, if that, just given the yield and a one quarter contribution. We're already in November. Just help us. Yeah. Sort of push, like what gets you to 28, and what in the world would ever get you to 24? It just seems like your guidance really should be more 25-26, rather than this wider range. Well, I think as Rich touched on, I mean, a lot of this, you know, is getting these tenants opened and paying rent. We are that is moving along at a pretty good pace, but there's so much uncertainty out there in terms of either supply, or, you know, the fact that, you know, retailers are still having a hard time getting good employees, that. It's just being, you know, somewhat conservative but really, you know, erring on, you know, the side of being conservative that you still have the pandemic out there. Although it's, we're getting out of this pandemic, you just don't know what can happen. We as a management team just tend to be more conservative. No, I get that. I just didn't know if there was something. I mean, you're talking about every penny is $1.3 million. I didn't know if there was something that takes you to the high end, which $0.28 seems like a pretty big ramp from $0.25. By the same token, Stuart, like, I don't see why you should step back in FFO heading to the fourth quarter. I understand all the conservatism, but that's your range, right? I'm just trying to understand if there's variables that we don't know about that would drive it one way or the other. Because as we think about 2022, really understanding what the 4Q is in the run rate, you know, your consensus numbers currently are at like $1.07, $1.08, $0.26-$0.27 a quarter. you know, where you're coming out of and what the drivers are for next year are very important. That's why I was just trying to get a little bit more sort of meat on the bones to understand that. Well, the only thing that's out there, Mike, that, you know, that could move the needle a bit is we are litigating with a couple of very large tenants due to them shutting down. They actually didn't shut down during the pandemic. They just didn't pay rent. We've reserved most of that. You know, if that gets resolved during the fourth quarter, that could move the needle. Aside from that, there's nothing else. That's one time in nature. I'm really thinking about That is correct. Right. That is correct. Is that embedded in the 24-28, or that's in addition to whatever you would get? No, it is not. Okay. No, it is not. That could move the needle. But again, we're erring on the side of being conservative. Rich, I don't know if there's anything else from a, just from a tenant perspective that you see. No, I think you hit it. Yeah. Well, I'm just wondering, like, what takes you up to $0.28? Like, if you're doing $0.25 in the third quarter, moving up 3 cents is a big thing. If you're at $0.28 in the fourth quarter, you know, then the numbers are too low for next year. That's I... It's just an awfully wide range. I can understand the conservatism at $0.24, $0.25 cents. I'm just trying to understand how you get to $0.27, $0.28. Well, I mean, again, it could be just the fact that we get a lot more tenants open and paying rent. That, that's really what could drive that number. Again, we're erring a bit on the conservative side, but that's really what, in my view, could drive that number up. If it doesn't happen in the fourth quarter, it should happen in the first quarter. As we think about 1Q, you should be getting up to that higher end level pending, you know, any aggressive dispositions or aggressive equity rates, right? That's correct. Like, if you That's correct. Right. That has an upward bias as we think about next year and rolling in, that if you only do 25, 26 in the fourth quarter, you get those tenants open later, you know, you're rolling in at 27, 28 as we start the year. Yep. Okay. All right. Thank you so much. Thank you. Your next question comes from the line of Linda Tsai from Jefferies. Your line is now open. Good morning. Good morning, Linda. Good morning. In terms of the dividend, is the view that you'd continue to maintain the current rate in order to allocate that cash towards acquisitions and delevering? In terms of the dividend, you know, we intend to continue conserving as much cash flow as possible. That's really our top priority in terms of the dividend. With that in mind, we intend to continue to maintain a dividend that's in line with the minimum amount required for REITs. Got it. Just in terms of your longer term growth expectations, you've discussed getting 2.5%-3.5% on a blended basis from contractual rent increases across the portfolio. You know, how much do you think external growth contributes, you know, in 2022 or 2023? Well, again, hard to predict in terms of, you know, how much we're going to acquire at this point. If we certainly meet some of the goals that we think we can set for the year, I think that will have a A positive benefit in terms of earnings growth. It just depends on, you know, how much we acquire and how fast we acquire it, in terms of that earnings growth. We're looking you know, things are looking pretty positive sitting here today as we look into next year. Thanks. Your next question comes from the line of Chris Lucas from Capital One Securities. Your line is now open. Good morning, Chris. Good morning. How are you guys doing? We're doing well. How about yourself? Good. Hey, just a couple of follow-ups, Stuart. Maybe if I could, for Mike, on your balance sheet, can you remind us what your guardrails are as it relates to leverage from a net debt to EBITDA basis? You're sort of in the mid-sixes, I think, roughly right now. You rarely get down to 6.6. Obviously, mid- to low 6s is really kind of the goal. Okay. Then on the kind of going back to some of the other questions, as it relates to just sort of the cadence of rent commencing. So Rich, you'd mentioned $2 million-$3 million in the fourth quarter. We're 1 month in. I'm assuming that there's a point in December which nothing really gets delivered, so we've kind of got maybe 4 or 5 weeks that we're really looking at that is the variance here. Is there a single tenant, or is it just a variety of a number of tenants that is sort of the delta here in terms of openings? It's a variety of tenants. I mean, you know, there are some larger tenants in there as well, and you know, that are working through permitting processes which are, you know, a bit more drawn out, you know, given how busy the cities are, as Stuart touched on. You know. Go ahead. I was just gonna say, is permitting the biggest wildcard for you? It's not your materials, it's not getting the work done, it's getting the final permits out? Yeah, I would say that's probably the biggest driver is the permitting process. I mean, we do have, you know, a couple of tenants that have experienced, you know, some delays in getting, you know, their fixtures, their FF&E, in and installed. We have a couple of tenants that are fully built out but have had some challenges finding employees. In some of those cases, their rent is gonna commence, regardless of their ability to find an employee. Okay. Sort of the total signed but not opened bucket, the $10 million, is there any anchor leases in that bucket, or is it all shop space? There is an anchor lease in that bucket. Yep. -that we're working through the permitting process, right now. You still expect to have everything, all of that $10 million, essentially in place and paying, by the middle of next year? Yes. Okay. I think the last question I just had to deal with the mix of sort of tenants that are in your portfolio as it relates to national versus regional versus, you know, the local. Has that mix shifted at all in any meaningful way from one bucket to the other pre-COVID to now? I don't think so. I mean, I think, again, it always depends on the space that you have available that would, you know, fit a particular user's needs. You know, I think that there may be fewer of the local tenants, you know, out there today, but there are still local tenants out there. We are seeing, you know, very strong demand from the regional operators as well as the nationals. Mike, my last question is for you. It relates to just the sort of second quarter you had sort of reversals to bad debt that was a positive for GAAP income. This quarter, the number was negative again. Was there any positive reversals, so the net number was negative? Or can you give me a little more detail as to what was in that negative $548? Sure. Yeah. The $548,000 you're referring to is that, yeah, during the third quarter, you know, as we always do a careful tenant-by-tenant analysis, we reversed $932,000 of previous bad debt reserves. That was offset by approximately $1.5 million of new bad debt booked in the third quarter, and that's what resulted in the $548,000. That equates to the $548,000 is less than 1% of our total revenue, which is kind of our inline historical norm. Okay. Thank you. That's all I had. Yep. Thanks. Thank you. Your next question comes in the line of Tammi Fique from Wells Fargo. Your line is now open. Good morning, Tammi. Good morning. Thank you for taking my call. Just wondering, it looks like the year-to-date leases signed have a shorter term versus what you were signing in 2019. I guess I'm just wondering if there are specific reasons that either ROIC or the tenants are looking to sign shorter term leases today, or if it's just kind of the mix. It's always a mix. You know, there have been a few tenants that have, you know, wanted shorter term, which, you know, to be honest, I think works to our advantage. But because, you know, in 3 years' time, if someone was to sign a 3-year lease, I think we're gonna be in a, you know, more of a landlord market at that point. But you know, again, it really depends. I mean, some tenants are coming to us and looking to lock in 10 years of term. We've had several tenants this quarter who are exercising a 5-year option but asking for more committed term. Right now, I think, we see it a lot with the restaurant tenants. I think, they wanna, you know, secure those locations, for the long term. We don't like to hand out options. We'd rather get committed term. It's, you know, it is a bit of a mixed bag. Okay, thanks. Then Rich, maybe just one more question for you. You spoke about some, you know, potential additional pandemic-related fallout from some of the smaller shop tenants that are overextended. I guess I'm just wondering if that fallout is still greater today than you've seen historically, or if you feel like the environment for move-outs is, you know, fairly normal at this point. I think it's really fairly normal. You know, there's always a churn as Stuart touched on, and, you know, I don't think we're not seeing a lot of distress in the tenant base right now. It's a handful of tenants that, you know, struggled through the pandemic. Okay, great. Maybe just one last one for Stuart. The couple of acquisitions you closed on in the third quarter, you know, they have pretty high occupancy in place. I guess I'm just wondering if you could talk about the specifics of the two assets that you acquired, you know, that can drive sort of that upside 100 and 150 basis points that you referenced, and then maybe, you know, give us a sense for how long it will take to capture that upside. Thank you. Well, the upside is really coming through the efficiency of management in terms of on the margin. It's coming through leasing up to our historical norms, which is 100%. We have made some really nice strides since closing the transactions to hit those goals. It's really to reposition a couple of the vacancies of some tenants that are coming up for renewal that we know won't renew. It's a combination of all of those. That's progressing very well. You know, I'm sitting here today, and I'm probably gonna tell you that the yields are gonna move pretty quickly in terms of heading, you know, getting towards the thresholds that we like to move these yields to after buying these assets. Very, very high-quality assets with very good tenants. We're excited about these acquisitions. You know, a couple of these deals happened, you know, before we came out of the pandemic in terms of the relationships and getting them tied up. We have the advantage of obviously striking, you know, to really drive some nice value for shareholders, in a very short period of time. Okay, great. Thank you for your time. Thank you. Thanks. I am showing no further questions at this time. I would now like to turn the conference back to Mr. Stuart Tanz. In closing, I'd like to thank all of you for joining us today. As always, we appreciate your interest in ROIC. If you have any additional questions, please contact Mike, Rich, or me directly. Also, you can find additional information in the company's quarterly supplemental package, which is posted on our website, as well as our 10-Q. Lastly, for those of you that are planning to participate in Nareit's virtual conference in a few weeks from now, we look forward to connecting with you then. Thanks again, and have a great day. This concludes today's conference call. Thank you all for your participation. You may now disconnect.