Welcome to Retail Opportunity Investments 2022 First Quarter Conference Call. Participants are currently in a listen-only mode. Following the company's prepared remarks, the call will be opened up for questions. Now, I would like to introduce Laurie Sneve, the company's Chief Accounting Officer. Thank you. Before we begin, 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 as 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'll turn the call over to Stuart Tanz, the company's Chief Executive Officer. Stuart? Thanks Laurie and good morning everyone. Here with Laurie and me today is Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer. We are pleased to report that we are off to a terrific start thus far in 2022. Demand for space continues to propel our business forward. Capitalizing on the demand during the first quarter, we leased over 416,000 sq ft, which is the second most active quarter on record for the company in terms of first quarter leasing activity. Additionally, we are capitalizing on the tenant demand to drive rents higher. We achieved double-digit rent growth on same space new leases signed during the first quarter. In terms of renewals, we also achieved solid increases in rent. With respect to acquisitions, we are off to a solid start as well. We recently acquired two grocery-anchored shopping centers, both located in the Pacific Northwest, totaling $36 million. The private seller had debt on the properties that was maturing soon, so they were seeking a buyer who could underwrite and commit quickly with no financing contingencies. Given that we knew both shopping centers extremely well, having owned them back in our Pan Pacific days, we were in a terrific position to respond to the seller's needs and capitalize on a great opportunity to acquire two terrific shopping centers. One of the properties is located in the Portland market. Specifically, the shopping center is well-situated in the heart of an affluent, densely populated community. The center is anchored by Walmart Neighborhood Market. Additionally, the seller is in the process of developing a freestanding drive-through pad at the shopping center. Once completed, we expect to purchase the pad. The second shopping center is located in the Seattle market. It, too, is well situated in an affluent, densely populated community. The shopping center is anchored by Albertsons. In addition to these two acquisitions, we also have another grocery anchored shopping center currently under contract for $24 million, located in the San Francisco market, specifically in the East Bay area, in a very densely populated community. The property has been owned by the same family for 30 years. They actually built the center, so it's never been on the market, which is exactly the type of off-market transactions we seek out, rare opportunities to acquire generational, irreplaceable real estate. Importantly, instrumental in our ability to get this deal, the family is personally close to individuals that we had purchased a number of properties from previously, who confirmed our long-standing track record and reputation in the marketplace as a knowledgeable and reliable acquirer. Together, these three acquisitions total $16 million, with a blended going-in yield just north of 6%. Looking ahead, there are a number of re-leasing and repositioning opportunities which we intend to capitalize on that should enhance the underlying value going forward. Importantly, all three of these shopping centers are within strategic proximity to a number of our existing shopping centers in each of these markets, which will enhance our ability and flexibility in terms of maneuvering tenants and continuing to fully capitalize on the strong demand for space. Now I'll turn the call over to Michael Haines, our CFO. Mike. Thanks, Stuart. For the three months ended March 31st, 2022, the company had $76.5 million in total revenues and $26.7 million in GAAP operating income, as compared to $69.2 million in total revenues and $22.5 million in GAAP operating income for the first quarter of 2021. GAAP net income attributable to common shareholders for the first quarter of 2022 was $11.6 million, equating to $0.09 per diluted share, as compared to GAAP net income of $7.4 million or $0.06 per diluted share for the first quarter of 2021. Same-center net operating income on a cash basis for the first quarter of 2022 was $49.5 million, as compared to same-center NOI of $46 million for the first quarter of 2021, representing a 7.5% increase. In terms of funds from operations, for the first quarter of 2022, FFO totaled $36.2 million, equating to $0.28 per diluted share, as compared to FFO of $31 million or $0.24 per diluted share for the first quarter of 2021. There are three items worth noting that helped drive our first quarter results. First, GAAP base rent during the first quarter came in about $2 million higher than our budget. Second, other income for the first quarter totaled $1.4 million, the bulk of which being associated with one tenant where we recaptured their space early and released it to a new tenant at a higher rent. The third item was lower than expected bad debt. We had budgeted bad debt to continue being a bit elevated during the H1 of 2022, and then returning back down to around our historical average in the H2 of the year. In actuality, for the first quarter, bad debt totaled $628,000, which is fully in line with our bad debt before the pandemic, if not a touch lower than our historical average. Turning to the company's balance sheet and financing activity, during the first quarter, we retired early with no penalty, two mortgages totaling $23.5 million. With paying off the two mortgages, our unencumbered GLA as a percent of our total GLA increased to a new record high of 96.5% as of March 31st. Taking into account the three shopping center acquisitions, all of which are debt-free, our unencumbered GLA will increase further. Additionally, today we have just two properties out of the entire portfolio with mortgage debt totaling less than $62 million, which equated to only 4.6% of our total debt outstanding as of March 31st. In terms of equity, year to date, we have raised $23.4 million through our ATM, issuing in total approximately 1.2 million shares, including issuing about 700,000 shares during the first quarter and approximately 500,000 shares early in the second quarter. Going forward, our goal is to continue raising equity generally in step with our acquisition activity, depending upon market conditions. On March 31st, the company's total market capitalization was approximately $3.9 billion, and with approximately $1.3 billion of debt outstanding, equating to a 34% debt to total market cap ratio. Of the $1.3 billion of debt, 95.4% is unsecured, the vast majority being fixed rate, with a well-laddered maturity schedule, including nothing maturing for the next year and a half. In terms of our credit facility, we continue to maintain a limited balance. Specifically, at March 31st, only $10 million was outstanding on our $600 million unsecured line. Lastly, our financial ratios continue to move steadily towards returning to our historical pre-pandemic levels. For the first quarter, interest coverage was 3.6 x, up from 3.2 x a year ago. Additionally, net debt to annualized EBITDA was 6.4 x for the first quarter as compared to 7.3 x a year ago. Now I'll turn the call over to Rich Schoebel, our COO. Rich. Thanks, Mike. Echoing Stuart and Mike's comments, leasing activity during the first quarter exceeded our expectations. While leasing during the first quarter following the holiday season traditionally takes a bit of time to ramp up, that was not the case this year. As Stuart indicated, our leasing activity in the first quarter proved to be the second most active on record for the company. In fact, we were just shy of surpassing the record that we achieved four years ago in the first quarter of 2018. The demand for space across our portfolio continues to be broad-based, ranging from supermarkets and other necessity-based and off-price anchor tenants looking to expand and increasingly becoming more and more proactive in seeking out prime locations Many of which are tenants that already have a considerable presence in the market and are now seeking to enhance their dominance. In terms of inline space, healthcare, wellness, boutique fitness and restaurant tenants, especially quick serve restaurants, continue to lead the charge. Additionally, among national tenants, we are seeing a growing trend of long-time traditional brick-and-mortar tenants that in recent years had reduced their number of stores now returning with completely new, more tailored merchandising strategies and looking to expand their presence in key markets as they roll out their new concepts. We continue to work hard to make the most of the strong demand to enhance the competitive strength and underlying value of our portfolio. To take you through our first quarter results, as of March 31st, our portfolio lease rate stood at a very strong 97.2% leased, up from 96.9% a year ago. Breaking that down between anchor and non-anchor space, we continue to maintain our anchor space at 100% leased. In terms of non-anchor space, we ended the first quarter at a solid 93.9% leased. As Stuart noted, during the first quarter, we leased a total of 416,000 sq ft. The bulk of our activity centered around tenant renewals, specifically renewing anchor tenants. At the start of the year, we had seven anchor leases scheduled to expire during all of 2022. During the first quarter, utilizing our long-standing proactive hands-on approach, we successfully renewed five of the seven anchor leases. With respect to the remaining two, one has indicated that they intend to renew, and the other anchor space that was scheduled to expire later this year, we've already re-leased at a higher rent to the adjacent long-time grocer who is seeking to expand their store. In terms of non-anchor space renewals, we also had an active, successful first quarter, renewing 61 non-anchor leases in total. An interesting and positive trend that is starting to take shape with a growing number of existing tenants is that they are looking to extend their leases with longer terms beyond what their renewal options typically call for and longer than what tenants have typically sought historically. This is especially the case with our key grocer tenants. We're capitalizing on this to drive renewal rents higher and to achieve stronger, more advantageous lease terms overall. During the pandemic, the uncertainty in the marketplace temporarily translated into renewal rent increases that were below our historical average. Today, with the pandemic uncertainty now largely behind us, we are quickly returning to achieving renewal rent increases in line with our historical rent growth. In fact, for the first quarter, renewal rents increased by over 7% on average. In terms of new leases, we also had a solid first quarter, leasing over 94,000 sq ft of space, achieving a 15.8% increase in same space base rent. Lastly, with respect to leased versus billed, at the start of the year, the spread stood at 4.7%, equating to $10.6 million of rent from new leases where the new tenants had not yet taken occupancy and commenced paying rent. During the first quarter, we were successful in getting over $2 million of the $10.6 million open and operating, which is the largest dollar amount to commence during any quarter dating back to 2019. We view this as another important and positive trend that we hope to build on. Taking into account new leases signed during the first quarter, at March 31st, the spread stood at 4.6%, representing $9.6 million of rent that has not yet commenced. We currently expect the bulk of the $9.6 million will steadily come online as we move through the year. Looking ahead, based on our first quarter leasing activity and the favorable trends that are taking shape, all being driven by the ongoing demand for space, we believe that 2022 has the potential to be a strong year in terms of leasing. Now I'll turn the call back over to Stuart. Thanks, Rich. Just to briefly expand on Rich's comment regarding looking ahead, in addition to continuing to capitalize on the strong leasing trends to drive our business going forward, we are also working hard to grow our portfolio, capitalizing on our long-standing relationships. While the acquisition market is highly competitive today, perhaps more so now than ever before in our nearly 30 years experience, as more and more investors continue to aggressively pursue grocery-anchored shopping centers on the open market, our pipeline of potential off-market acquisitions continues to steadily build. We currently have several compelling deals in the works to acquire truly irreplaceable grocery-anchored real estate that have a wealth of opportunities to enhance value going forward. We have had our eye on these properties and have been patiently yet persistently pursuing the sellers for a long time, and we are now hopefully moving towards finally bringing them to fruition. In short, we are excited about the various ongoing opportunities and look forward to making the most of them in the coming months and continue to build value. Finally, in light of our first quarter performance, together with what we have in the works on the leasing and acquisition fronts, we have raised our FFO guidance range for 2022 to between $1.04 and $1.10 per share. Now we will open up your call for questions. Operator? Thank you. And participants, as a reminder, to ask a question, you will need to press star one on your telephone keypad. Again, that's star, then the number one on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from the line of Craig Schmidt. Your line is now open. Good morning, Craig. Good morning. I just wondered, I mean, listening to your comments, and I know already you're on a pace to fall within your guidance range of acquisitions, do you think that the acquisitions in 2022 might be back-end loaded? Looking at the pipeline currently as it stands today, I think the acquisitions will come as we have sort of modeled, on a sort of pretty straightforward measurement of, you know, depending on what that number might be, but it should be mostly back-end load-loaded quarter after quarter to the end of the year. Great. I wonder if you could give us an update on your densification initiatives? Sure. You know, we continue to make steady progress with each of the projects, Craig, including continue to be on track to break ground on Crossroads later this year. Great. Thank you. Thank you. Your next question comes from the line of Michael Mueller. Your line is now open. Good morning, Mike. Good morning, guys. Stuart, just on sort of the acquisition side, you know, you talk about irreplaceable assets, and my mind hears expensive. Now, I recognize your relationships and structuring, whether it be with units or other mechanisms, allows you to be competitive relative to market cap rates. Can you talk a little bit about sort of pricing levels on this pipeline and whether, you know, you would be eager to sell more, right? Your guidance, you know, of $30 million-$50 million of dispos relative to, call it, $100 million-$300 million of acquisitions obviously means you're gonna be raising more capital through equity. I think you were able to tap the market extraordinarily well, given where your stock price was during the first and early part of the second quarter at $19.50. Just sort of help me walk through some of those comments. Sure. Well, from a pricing perspective, we've modeled about a 5.5 cap rate, 5.75 cap rate on acquisitions throughout the year. You know, depending on the individual deal, those cap rates may be a bit higher or a bit lower. For us, as you probably know, the most important thing is what can we do in terms of creating value when we buy these assets. In terms of selling assets, we have geared up, and we'll be taking to the market shortly about $25-$30 million in shopping centers. We are also looking at another $30 million behind that, primarily the two densification projects in Novato and in Pinole. Subject to the strength of this pipeline in terms of how it builds and obviously our stock price, we will continue looking at other opportunities to generate capital, which means potentially selling more assets. As we continue along building the pipeline, and it's really gonna be a combination of both. It's gonna be a combination of looking at the pipeline and the size of that pipeline, definitely moving a number of assets to market, probably totaling about $50 million-$60 million, and at the same time, depending on our stock price, we'll tap the ATM. Then as you think about, you made the comment about rebuying some Pan Pacific assets. Remind me, Stuart, out of the 90 or so you have today, how many are old Pan Pacific assets? I guess how many more could you get your hands on, if you were able to? Currently, we own four Pan Pacific assets that we've bought very recently. Very excited to have these assets back in our hands. We lived with them for many years. You know, when we sold P&P, as you probably know, Mike, we had 241 assets. You know, we are constantly looking at the opportunities of acquiring more. But at the same time, a number of assets back in the P&P days were in, you know, more in secondary markets, whereas the assets today that we own are in the metro market. We're focused on what's out there from what we owned and operated under P&P, but we're still very selective in terms of what we're buying. More importantly, if we're buying, rebuying, and re-owning these assets, they've got to have, you know, some juices, you might say, or the ability to create value. Okay. Then just finally, Stuart, just as we think about sort of, funding, the balance of the acquisitions, should we assume then the plug is just, common equity to keep leverage in check at these levels? Or are you willing to take leverage up, in order to round out the acquisition volumes? No, we will continue to be focused on leverage. Obviously, with net debt-EBITDA being one of the bigger metrics. We're, you know, we've done a very good job in churning that metric down. Depending on how the pipeline goes, as well as the sale of the assets, we'll continue to move that number down to give us the firepower to keep doing what we do best, and that is grow this company smartly. Create a lot more value for shareholders. Thanks, Stuart. Thank you. Your next question comes from the line of Todd Thomas. Your line is now open. Good morning, Todd. Hi, good morning. Stuart, just following up quickly on your comments there around dispositions. You know, are you contemplating more dispositions, I guess, beyond what's in the guidance for 2022? As we look ahead over the next couple of years, you know, is there more pruning to be done, or are you really thinking about dispositions primarily to fund future investments, where you know, that might be more attractive or have you know, favorable growth profile? We will continue to look at pruning, where the opportunity arises and mostly focused on internal growth, obviously, in these assets and, you know, making sure that if internal growth is moving down, that we will take advantage of the current market conditions. It's a combination of looking at really, you know, finally realizing the value on the densification projects, as well as, churning, assets that don't have much internal growth. The answer to your question is yes, we will continue to look at funding this pipeline. We may increase our target as we continue to get through the year, depending on the other side of that equation in terms of growing the company. Okay. I think you said that for the year, you know, as it pertains to guidance, you modeled about a 5.5%-5.75% cap rate on investments. I think in your prepared remarks, you said that you achieved 6% cap rates on acquisitions completed in the first quarter. Just curious, you know, if you could talk a little bit about pricing trends, whether or not you're seeing any changes at all to pricing, just given the increase in borrowing costs and, you know, whether that's having an impact at all in your markets as you look ahead for, you know, future investments. Sure. Well, I mean, you know, the current environment is competitive. There's a ton of capital and buyers looking to acquire this segment of retail. It's certainly the most sought-after segment today. Cap rates on the West Coast, depending on whether you're looking at one-off assets or portfolios, are certainly, you know, some of the lowest cap rates we've seen in a long time. You know, I'm not gonna quote deals, but I think, Todd, you're aware of what's in the market or what's been announced more recently. You know, we're seeing these assets trade sub fives. You know, we as a team, with the relationships that we've got on the ground, we've been very successful in finding properties that are accretive the day we buy them, given our cost of capital, then more importantly, have a nice runway in terms of building growth. It's hard to predict where the market's gonna go at this point, but what I can tell you is that we've not seen any movement in the market from a cap rate perspective on transactions that have been widely marketed. Cap rates are still at the levels they were, and what we've seen over the last several months. Okay. Any indication at all from investors or from brokers that you might talk to that you know pricing for you know for deals though or for larger portfolios perhaps you know institutions might be you know demanding or commanding you know kinda higher yields going forward? Is the sub 5% cap rate that we've you know been maybe you know hearing about or you know talking about a little bit, is that still you know achievable today in the market if you know there's a high quality collection of assets that comes to market? Yeah, cap rates have not moved. They really have been at the same place they've been over the last, you know, six, nine months. I will tell you, we are seeing a bit of an opportunity out there in terms of some of the private buyers pulling back given the interest rate environment, and that's providing a sort of a window of opportunity from our perspective. The good news is that our pipeline continues to build, and pricing for widely marketed deals for the quality of assets that we own and we buy have not moved. Okay. All right. Thank you. Your next question comes from the line of Juan Sanabria. Your line is now open. Good morning. Good morning. Just wanted to follow up on Todd's line of questioning, but maybe from a different perspective. I was hoping you guys could comment on your own cost of funding and how that's changed over the last six months or year to date, and kind of how that impacts your ability to pay kinda mid five cap rates for assets and what the spread to your funding costs are and how that's evolved. Well, I mean, in terms of our cost of capital, or cost of funding, on the equity side, obviously that has gotten better for us. That has provided a nice runway in terms of executing our plan. On the debt side, Mike, I don't think really anything has moved there either. Nothing material. I mean, we're still looking at a revolver, very low cost of debt capital. Yeah. More importantly, the credit agencies have certainly endorsed our business plan and have endorsed management's focus on delevering the balance sheet. That's certainly kept our cost of debt capital in a very good place. Well, what if you guys had to go out and raise new 10-year kind of permanent financing instead of doing it on the line, I guess, is where I'm trying to get to. Yeah. Well, the good news is we don't have anything maturing in the near term. The next thing is not until the end of next year, but obviously, we're keeping a close eye on the industry environment and seeing where that's going. There's a lot of different variables out there that can impact that between now and next year. It's hard to say where you could price something today, but it's hard to say. Then I was just hoping on the guidance front, I saw straight-line rents and amortization of above and below market rents inched up. How much more opportunity is there to move rents from cash to GAAP to maybe further boost FFO? And kind of where are you in that process of reassessing that? What if anything flowed through the first quarter numbers that you kind of hinted at? GAAP net income, I think Michael, in your prepared remarks were stronger than base rents than you'd expected. Well, one, it's kind of difficult to project. When we set out with initial guidance at the beginning of the year, it's based on our property level budgets. FAS 141, now that we're back into acquisition mode, that's gonna be a contributor to GAAP rent, as well as straight-line rent based on the leasing velocity. Until you actually cut the deals or buy an asset and go through the purchase price valuation exercise, it's really hard to know what that number's gonna be. We're gonna have to revisit that likely every quarter going forward as we continue the acquisition pace and with the strength of leasing demand. One just last quick one for me. You mentioned kind of other income, a $1 million benefit. Was that just a lease termination fee that you were able to capture? I just wasn't clear on what that was. Yeah. Essentially, yes. I mean, if you look at our other income line item on an annual basis going back, we're generally between $3 million-$4 million a year for those, you know, odd one-off kind of things. We always have that level of income. This quarter happened to be a little bit heavier than normal. That's what that is. Got it. Thank you very much. Thanks a lot. Your next question comes from the line of RJ Milligan. Your line is now open. Good morning, RJ. Hey. Good morning, guys. I just wanna follow up on maybe Craig and Todd's questions just in terms of the market. I was just curious, Stuart, and I know that you guys sort of look at acquisitions that are off market and don't really fit in sort of the general market conditions, but I'm curious if there's any expectation to see a pause in transactions in sort of the normal way out on the West Coast, just given the change in interest rates. No. Right now, I guess there's a couple of things. I mean, first of all, we have ICSC coming up, and typically, what you do see with ICSC is a number of sellers bring their assets to market on a widely marketed basis, because they're anticipating getting a much bigger investor base looking at these assets at the conference. Leading up to ICSC, you always get some pickup in activity. In general, we're not seeing much of a pause in the market right now. We're seeing a bit of acceleration on the anticipation that interest rates are going up and what impact that might have from a seller's perspective. Right now, the pipeline is very robust, and we're optimistic that we'll certainly meet the goals that we've laid out in guidance. Okay. Excellent. My second question is, you know, obviously there was a decent amount of leasing done in the first quarter, sort of, I guess it was the second best quarter or first quarter on record. Just curious though, that sort of implies that there was your typical fallout, right? Because the gap between signed but not rent paying didn't move all that much. I'm just curious, maybe Rich can give some color as to where that fallout was, maybe specific categories or sectors. Sure. I mean, I think it's, you know, the typical fallout that you see the beginning of every year after the holidays. There wasn't any one particular category that was impacted. You know, there's probably a few tenants that, you know, struggled through COVID and, you know, left the centers given the opportunity. The leasing team has never been busier. The inquiries for space, you know, multiple LOIs on spaces. We see very strong demand going forward. Okay. Thanks, guys. Yep. Your next question comes from the line of Wes Golladay. Your line is now open. Good morning, Wes. Morning, Wes. Hey. Good morning, guys. Just sticking with the tenant question. Have you guys cycled through all the tenants that have been impacted by COVID, including those that can pay that have elected not to pay? I mean, we have a couple of lingering, you know, tenants that we're, you know, going round and round with, but it's really, you know, basically inconsequential. It's sort of similar to the normal, you know, back and forth with tenants, pre-COVID. Yeah, there's a couple tenants that have not been fully resolved, but we expect to have those resolved, you know, here going forward, you know, now that the courts are fully open and, you know, we're able to, you know, enforce our rights. Got it. I guess, can you provide an update now on the densification efforts for the Northern California parcels? Do you plan to sell anything this year? I guess in total for the two that you're working on, what is the gross proceeds you expect? Sure. Well, I mean, the two in Northern California, one is in front of the planning commission or city council within the next 30-45 days for final approval. The other project is probably another 90-120 days away from final approval. Both of those assets are going to hit the market for sale shortly. We're expecting anywhere from $25 million-$30 million of cash for the sale of those assets. We maybe get lucky and get a bit more than that. From that perspective, we're gonna be delivering to a potential builder a fully entitled project, which again has given us the ability to build that value over the last several years. These are in two very strong markets. We're anticipating a lot of demand for these assets for the land. Again, no impact to NOI in terms of selling this. Got it. Going to the acquisition market, and I guess, can you give us a sense of how many buyers rely on high leverage to buy assets on the West Coast? Well, the private buy, obviously, the private sector relies on leverage more than anything else. Institutional capital, REITs don't rely on leverage as the private side does. Certainly a lot of the assets in the range that we buy in, being one-off transactions, there's a lot of private buyers out there that are buying these type of deals. That's where we're beginning to see a bit of an impact as it relates to interest rates. Got it. Mike, one for you. You have a few swaps, about $300 million of swaps expiring later this year. When do you plan to address those? Well, right now, they, yeah, they mature at the end of August. We're currently exploring, you know, several different strategies, taking into account a number of different variables, including the interest rate environment, obviously. At this point, we have not yet made the decision what to do with those. Okay. Got it. Thanks, everyone. Thanks. Your next question comes from the line of Paulina Rojas. Your line is now open. Good morning. Hi, good morning. Hello. I think you mentioned in your prepared remarks that base rent in the quarter came in higher than the budget. What surprised you positively there? I'm sorry. Can you say the last part? Yeah. Base rent on the GAAP basis is. Can you hear me? Yeah, no, we can. I was gonna say, the base rent came in stronger than what we had originally budgeted, and well, the contributing parts of that too was straight-line rent and FAS 141 on top of regular cash base rent. Combination of all of those. Oh, I see. Okay, thank you. Your real estate is tilted toward essential services rather than discretionary spending categories, of course. Are you concerned that higher inflation and lower real incomes could cause a decline in consumer spending in the coming months? No, most of our assets are located in very affluent, dense communities. We haven't really seen much impact at all as it relates to the inflationary issues or the interest rate issues. We don't think it's going to impact the markets we're in, certainly as much as it could impact other markets that have less density and weaker income profiles. Okay. Thank you very much. Thank you. Your next question comes from the line of Chris Lucas. Your line is now open. Hey, Chris. Good morning, everybody. Just Rich, maybe start with you. On the strength of the commencements during the quarter, was the bulk or the significant bulk of that shop space? Just kind of curious if tenants are sticking to their targeted windows of openings and/or whether there's more flexibility there. Sure. Yeah. I think the majority was shop tenants. You know, as you know, with the portfolio 100% leased for the anchor spaces, there's not a ton that are in there. There are a few. Yes, I think that you know, the permitting process and you know, the construction process has gone back to more normal time frames. You know, some of the lag that probably occurred during COVID has you know, started to come online. We see you know, going forward that this should steadily be coming online, the remaining throughout the year. Okay. Thank you for that. Michael, on the non-cash rent that was above. The transactions that you closed after the quarter, so they shouldn't have made the impact. Was all of that sort of excess non-cash income related to you know the leases the anchor leases that you did or you know the renewals? Or what drove that number above your expectations? Well, are you referring to FAS 141 or straight-line or both? I mean I think FAS 141. Oh. Just the combination of non-cash rents. Yeah, just the combination. Yeah. Straight-line is really a function of the leasing activity. In the FAS 141, you know, it's quite a process. When you acquire an asset, you have to go through a full valuation for GAAP purposes. Until you have all the purchase price allocated to hard assets and tangible assets and liabilities, you don't really know what that number is till each lease is valued. So that's what, when we first set our guidance at the beginning of the year, that was based on what we knew at the time. Then there was a couple of assets that were going through that process that we acquired late in the fourth quarter that were finalized in Q1, which then changed the number going forward. That's why we adjusted the guidance on that range. It'll probably adjust again based on the current acquisitions, because they're now gonna be going through the process as well, that'll show up later this year. Yeah, Chris, the most recent acquisitions are not in the current number. Correct. Obviously, just to clarify that. Correct. I mean, it's really coming out of the fourth quarter more than anything else. Right. Right. Okay. That's really helpful. Stuart, for you, just in terms of the opportunity set, how important is the changing rate environment to basically getting some owners to really look at sales versus refis at this point? You know, we're seeing a bit of movement in the market because of rising interest rates. You know, pricing again continues to be at record levels, and deal flow continues to be very active. We are seeing a bit of a window that has opened up primarily through our relationships more than anything else, where sellers who have known us many years are beginning to get worried from a refinancing perspective. They've reached out to us, off market, anticipating that, you know, they can do a transaction that's gonna be seamless and quick, and not have their rent rolls sort of advertised all over the market. Great. Thank you for that. That's all I had this morning. Appreciate it. Thanks, Chris. Thanks, Chris. Your next question comes from the line of Michael Gorman. Your line is now open. Hi, Mike. Hey, Mike. Hey, good morning. Couple of quick questions here. I know we've covered a lot of ground. Stuart, just sticking with the acquisitions, we've talked a lot about the increased demand and kind of the competitiveness for marketed deals. Have you seen anything, especially coming out of the volatility of COVID and then the recovery, what are you seeing in terms of the underwriting criteria that's out there in the marketplace? How does it compare to maybe the last time things got too toppy in the strip center sector? You know, is the underwriting getting stretched in addition to the pricing, or is it mostly just on the pricing side here? It's primarily on the pricing side. You know, obviously, as we've been through ups and downs over the last 30 years, we have seen buyers enter the market, who spent very little time underwriting. However, today's market, the buyer profile is more suited to underwriting, where they're really looking at risk, you know, in a good way, and they're taking into consideration, rents that aren't, you know, going to, you know, that are more normal in nature versus rents that, you know, that could be a lot higher in terms of their underwriting. We continue to be conservative in our own underwriting given what we've been through with COVID. We think that's very important in terms of what we're buying and how we're guiding, you know, the street in terms of our numbers. All in all, the current environment is still showing some very strong discipline. Okay, great. That's helpful. Then maybe just one more for you, Stuart and Mike. You know, I apologize if I missed it, but could you provide any update on how the board is thinking about the dividend or kind of where the dividend sits right now relative to taxable income? Obviously things have strengthened. You increased the guidance. Things are definitely more stable. The balance sheet leverage ratio looks great. So how should we think about the quarterly payout going forward? Well, obviously this is decided at the board level, not at our level. The good news is that our payout ratio is still among the lowest in the sector. As we look through the balance of the year, if things continue to go as well as they're going, then we will be raising our dividend. Okay, great. Thanks so much for the time. Thank you. Thank you. Your next question comes from the line of Tammi Fique. Your line is now open. Good morning. Good morning. You mentioned that long-term brick-and-mortar tenants that were previously reducing store counts are now returning to key markets with new concepts. I guess I'm just wondering if you can talk in more detail about those tenants and what the open divides are and what their criteria are for opening new stores. Thank you. Sure. I mean, I think in many cases what we've seen is, they're coming back with a slightly smaller footprint. You know, and as we touched on in the prepared remarks, you know, with a more fine-tuned, you know, product offering. But we have been, you know, impressed, that, you know, we've had some shopping centers where, you know, tenants had left the party at the end of their term, you know, several years ago, and now they're back, leasing at the exact same property, with their, you know, fine-tuned, concept. So, you know, we just see this as, you know, a demonstration of the strength of the properties, and that people wanna, you know, you know, tap into the demographics that we're able to offer. The grocer obviously is a big part of this as well. We've also found that these tenants, you know, when we start communicating with them, you know, having that grocery anchor component is critical in terms of their overall merchandising plans. Okay, great. Thank you. Maybe, following up on an earlier question, given the gap between leased and billed occupancy, can you tell us what your tenant retention rates are today and how that compares with historical levels? Yeah. Our tenant retention rate, you know, is typically in the high 80% range. You know, that has really not changed. I think as you see from our overall occupancy, you know, that is supported by the renewal of existing tenants. In fact, in some cases, you know, we'd love to get some of these spaces back because you have below-market rents and, you know, our leasing team is usually chomping at the bit to get some of these spaces back. Okay, thank you. Last one. Previously, you know, dispositions were focused, you know, more on exiting a specific market. I'm just curious if there's anything specific characterizing the properties you are looking to sell, either in terms of geography, changing demographics, or if it is really just based solely on, like, the individual growth profiles of the assets. Yeah. It's based on the individual assets and the profile from those assets more than anything else, with obviously the two densification projects on top because we're just not in the business of developing shopping centers or anything else. That's the focus. It's you know, non-income producing or value-creating land in terms of densification, and it is assets that don't have internal growth in terms of looking at the next you know, two to three years. Okay, great. Thank you. Yep. Thanks, Tammi Fique. Your next question comes from the line of Todd Thomas. Your line is now open. Hey, Todd. Hey, Todd. Hi. Thanks for letting me jump back in here real quick. I just wanted to go back to the $300 million of swaps that expire at the end of August. Mike, what. You know, it sounds like there hasn't been a decision made yet as to what will happen there, how you plan to address that. But can you just talk about, I guess, first, what sort of embedded in guidance and, you know, kind of what your expectation is today, you know, when the swaps burn off, just and where the sort of term loan is, as you kind of look ahead, what pricing looks like, for your various options? Sure. Well, right now, embedded in guidance, you know, as you know, the swaps burn off, and so the term loan itself is LIBOR-based with a margin. Our models simply take the forward curve of the LIBOR and build that into the forward interest expense through the balance of the year. Assuming we didn't do anything, just let it revert to floating, which is actually one of the possibilities. You know, we have very highly fixed-rate debt, and in today's environment, it may not be necessarily a bad thing to have a little bit of floating-rate debt out there. That's one of the possibilities. If we were to go out and try to do, you know, if we're gonna be growing the company and adding a little bit to the line, maybe we add that to the term loan and term that out for 10 years. What that rate looks like, hard to say. Low fours perhaps, certainly less than where our inaugural bond deal was. It's just hard to say. Right now the guidance has it simply reverting to floating rate based on the LIBOR curve going forward. Okay, got it. For the H2 of the year, you're picking up about 150 or 200 basis points of interest expense savings on $300 million related to the swaps. Right. for the term loan. Right. Got it. Right. Okay. Exactly. All right. Great. That's all. Thank you. Bye. Your next question comes from the line of Linda Tsai. Your line is now open. Morning, Linda. Hi. Good morning. Can you just give us an update on how expense recoveries are trending and what your expectation is as you go through the rest of 2022? You know, the recovery rate is, you know, consistent with our historical, you know, averages. You know, the leases we sign are, you know, primarily 99% triple net. You know, those rates stay pretty steady. Yeah. It moves around a little bit quarter-to-quarter just on timing of expenses and, you know, leveling off the recoveries based on those expenses as they're incurred. Generally speaking, we're in the high 80s, 90% recovery rate. As the tenants who are in that gap between bill versus lease, as they take possession, your recovery rate is gonna go up even higher because they'll start contributing. Exactly. It's gonna get a bit better because of that gap closing. As it narrows, right? Yeah. As it narrows. Thanks. Just in terms of the competitive environment, in terms of the different buyers you're seeing coming into the markets that you're concentrated in, are there certain areas where you're seeing more competition than others? No. It's across the primary markets across the whole West Coast. Obviously, grocery-anchored centers, again, is the most sought-after segment of the retail market. I think as we've learned going through the pandemic, this particular, you know, defensive posture is something that investors are much more focused on today than they were some years ago. The good news is that, you know, the market has been quite robust just in terms of the opportunities for us. It's across all markets. It's not one market in particular. It will move around. I mean, you know, we did a lot in the Pacific Northwest. Now things are shifting back to California for us. Again, it's just gonna move around quarter to quarter, year to year, depending on sellers and their expectations. Great. That's it for me. Thank you. Speaker, we don't have any questions over the phone. I would like to turn it back to Mr. Stuart. Well, thank you. In closing, I would like to thank all of you for joining us today. If you have any additional questions, please call Mike, Rich, Lori, 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 in our 10-Q. Lastly, for those of you attending ICSC convention in Las Vegas next month, after a two-year hiatus, please stop by our booth, which will be in the South Hall, specifically booth number 9184. Again, that's 9184. Hope to see you all there. Thanks again, and have a great day, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.