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RPT Realty (RPT) Q4 2022 Earnings Call Transcript

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RPT Realty (NYSE:RPT) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Craig Benigno - Senior Analyst, Investor Relations

Brian Harper - President and CEO

Mike Fitzmaurice - CFO

Conference Call Participants

Todd Thomas - KeyBanc Capital Markets

Wes Golladay - Baird

Conor Peaks - Deutsche Bank

R.J. Milligan - Raymond James

Hong Zhang - JPMorgan

Floris Van Dijkum - Compass Point

Linda Tsai - Jefferies

Lizzy Doykan - Bank of America

Operator

[Starts Abruptly] Fourth Quarter 2022 Earnings Conference Call. At this clip each participants’ are successful a listen-only mode. A little question-and-answer convention will travel nan general presentation. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Craig Benigno, Senior Analyst, Investor Relations. Thank you, sir. You whitethorn begin.

Craig Benigno

Good greeting and convey you for joining america for RPT's 4th fourth 2022 net convention call. At this time, guidance would for illustration maine to pass you that definite statements made during this convention call, which are not historical, whitethorn beryllium deemed forward-looking statements wrong nan meaning of nan Private Securities Litigation Reform Act of 1995.

Additionally, statements made during nan telephone are made arsenic of nan day of this call. Listeners to immoderate replay should understand that nan transition of clip by itself will diminish nan value of nan statements made. Although we judge that nan expectations reflected successful immoderate forward-looking statements are based connected reasonable assumptions, factors and risks could origin existent results to disagree from expectations. Certain of these factors are described arsenic consequence factors successful our yearly study connected Form 10-K for nan fiscal twelvemonth ended December 31, 2022, that will beryllium revenge later coming and successful our net merchandise for nan 4th fourth 2022.

Certain of these statements made connected today's telephone besides impact non-GAAP financial measures. Listeners are directed to our 4th fourth 2022 property release, which includes definitions of those non-GAAP measures and reconciliations to nan nearest GAAP measures and which are disposable connected our website successful nan Investors section.

I would now for illustration to move the telephone complete to President and CEO, Brian Harper; and CFO, Mike Fitzmaurice, for their opening remarks, aft which, we will unfastened nan telephone for questions.

Brian Harper

Thank you, Craig. Good greeting and convey you for joining our telephone today. The commencement of 2022, uncertainty astir nan economical environment, specifically inflation, began to return shape. It was only a matter of clip earlier ostentation took complete nan headlines. As I opportunity often to nan team: power nan controllables, enactment pinch urgency and move consequence into opportunity. Simply put, play offense.

We leaned into our playbook and focused connected 5 areas: lease, lease, lease; fortify and diversify our rate flows done our 3 differentiated finance platforms; summation our assets nether management; adhd long to nan equilibrium sheet; and lastly, trim short and semipermanent floating complaint risk. Our squad quickly became aligned, starring america to execute pinch excellence crossed each business units.

We vanished nan twelvemonth connected a awesome statement pinch apical and bottom-line maturation successful summation to different dividend raise. 2022 same-property NOI maturation was 4.3%, and operating FFO per stock maturation was 9.5%. Given nan precocious level of visibility into our maturation trajectory complete nan adjacent fewer years, we raised our first 4th dividend by 8%.

Over nan past 2 years, we person knowledgeable not only an acceleration of our portfolio translator into able and increasing markets, specified arsenic Boston and Miami, but we person besides seen a re-acceleration of request from retailers owed to a very low-supply situation coupled pinch our well-located and able open-air shopping halfway locations.

We had different banner twelvemonth crossed each operational metrics. Our leasing squad remained locked successful arsenic we ended nan twelvemonth signing 69 leases covering 500,000 quadrate feet during nan 4th quarter, culminating successful full-year activity of 2.2 cardinal quadrate feet, nan highest yearly leasing measurement achieved since 2014. This activity pushed our leased complaint to 93.8%, up 70 ground points year-over-year and putting america adjacent our pre-pandemic levels. Embedded successful our lease complaint is astir 390 ground points of occupancy growth, 1 of nan highest levels successful our adjacent set, which translates to complete $11 cardinal of rent and betterment income that has yet to travel online.

We besides proceed to thrust rent, summation yearly escalators and clasp our tenant base. Over nan trailing 12-months, we produced a caller comparable releasing dispersed of 43% and yearly escalators of astir 200 ground points for nan caller leases signed during nan year. Retention was 88% successful 2022 arsenic we are seeing retailers salary a premium to stay wrong our revamped portfolio, which is predominantly located successful nan apical 40 MSAs arsenic they look constricted caller proviso and accrued move-out costs.

A important information of our leasing activity is related to our value-enhancing remerchandising, redevelopment and outlook description pipeline, wherever we person built a way grounds of replacing struggling retailers pinch much creditworthy tenants astatine double-digit returns. In nan 4th quarter, we delivered 3 projects totaling $11 cardinal and an mean return connected costs of 11%. Today, our progressive value-enhancing pipeline totals $45 cardinal astatine blended returns of 9% to 11% pinch top-tier retailers, including Publix, Marshalls, HomeGoods, Ulta, BJ's Wholesale, Baptist Health and Sephora.

Regarding our redevelopment pipeline, we expect to stock much specifications later this twelvemonth successful relationship pinch projects astatine Hunter Square plus successful Oakland County, Michigan and Marketplace astatine Delray successful nan Miami market. We are successful discussions pinch high-credit nationalist and basal tenants for some sites.

As we look ahead, request crossed nan portfolio remains very beardown from nationalist retailers looking to grow their footprints successful high-quality locations. We proceed to spot nan astir request from discount apparel, nine stores, grocers, restaurants, wellness and aesculapian tenants. Given this demand, our caller leasing pipeline remains robust, totaling complete $7 million. This activity will beryllium a cardinal driver of occupancy maturation arsenic we stabilize our portfolio to our targeted occupancy level of 95%-plus complete nan long-term.

In fact, we expect to eclipse astir 2 cardinal quadrate feet of lease commencements successful 2023 for nan 2nd twelvemonth successful a row. And while bankruptcies person been successful nan headlines of late, tenant fallout is simply a earthy portion of nan unit situation and thing caller for knowledgeable landlords specified arsenic us. Our expertise to recapture abstraction provides america pinch nan opportunity to showcase nan value of our portfolio and our operating level arsenic we expect re-leasing these spaces pinch importantly amended tenant in installments connected an earnings-accretive basis.

At nan extremity of nan year, we had 8 Bed Bath concepts and 4 buybuy BABYs. While their business remains fluid, it is not a surprise. We person been preparing for nan business internally for respective years and person put a strategy successful mobility to create meaningful worth done nan remerchandising of these sites. Our leasing squad has been cultivating a pipeline of replacement tenants, and our very debased embedded rents of astir $11.50 per quadrate ft supply america pinch an opportunity to thrust rents into nan mid-teens range, favorably positioning america to aggressively recapture our location. While we already had important liking connected each Bed Bath and buybuy locations, we are successful precocious negotiations connected 4 of them, which we support power of.

We are astatine lease pinch a starring off-price retailer to backfill 1 astatine a 40% re-leasing dispersed pinch nan location group to unfastened successful nan 4th fourth of this year. For nan 3 remaining locations, we are retired for lease pinch apical nationalist retailers astatine Winchester Center and Hunter Square successful Oakland County, Michigan and are successful negotiations for a lease for another. Average rents for these locations were $10.50 pinch caller rents being discussed successful nan $15 to $16 scope pinch minimal expected downtime of 12 months connected these 4 deals.

Of nan remaining locations, it's important to statement that 4 are buybuy concepts. However, if we were to get nan opportunity to recapture each of them, we would expect downtime to scope betwixt 12 to 18 months astatine re-leasing spreads of 20%. We person aggregate backfill options for these locations that are successful various stages of negotiations pinch categories including discount, grocer, medical, wellness and beauty and liquor stores, to sanction a few.

Regarding Regal, we person 3 locations successful nan portfolio, and nary are connected nan closure database and each is existent connected rent payments. At this point, we judge each 3 locations will beryllium assumed by nan surviving entity based connected precocious negotiations. We had different beardown twelvemonth connected nan finance front. We vanished wrong nan apical quartile of U.S. open-air shopping halfway buyers successful 2022, completing $375 cardinal of acquisitions crossed each 3 finance platforms, bringing our two-year acquisition measurement to $921 million.

At year-end, our AUM was $3.6 billion, up 57% since 2018. During nan 4th quarter, we closed connected nan contributions of 2 halfway stabilized Midwest assets, Shops astatine Lane successful Columbus and Troy Marketplace successful Detroit. These were contributed to our grocery-anchored associated task platform, which provided nan backing for our stock of nan acquisition of Mary Brickell Village. Although we curtailed our finance activities successful nan 2nd half of nan twelvemonth arsenic we hold for markets to set to nan caller complaint environment, we proceed to actively scour our target markets for imaginable acquisitions.

The bully news is that we person fantabulous liquidity betwixt rate and revolver readiness and nary indebtedness maturities for nan adjacent 2 years, which puts america successful a awesome position to quickly respond to changing marketplace conditions. Also, our associated ventures stay a competitory advantage that provides america pinch semipermanent superior and allows america to make above-market returns while besides expanding nan breadth of opportunities that we tin pursue.

Let's touch connected Mary Brickell. The plus continues to transcend our expectations. Today, occupancy is 83%, up 5% since we closed connected nan plus past summer, and we expect it to transcend 90% by nan extremity of 2023. Street-level rents are presently successful nan $150 to $200 scope versus our in-place mean rent per quadrate ft successful nan mid-40s. We person aggregate opportunities to recapture leases connected some nan eastbound and westbound broadside of Miami Avenue that will thief america present a best-in-class, iconic spot and seizure nan increasing mark-to-market opportunity complete nan adjacent fewer years.

Beyond this, we proceed to measure semipermanent densification plans that will perchance unlock tremendous worth for shareholders arsenic we capitalize connected nan elastic zoning astatine nan tract that allows for up to 4.1 cardinal quadrate feet of residential, agency aliases edifice usage successful nan bosom of Miami's Brickell neighborhood.

Finally, we initiated operating FFO per diluted stock guidance of $0.97 to $1.01, which includes our anticipation of same-property NOI maturation of 1.5% to 3.25%. Included successful our outlook is simply a prudent level of bad indebtedness considering nan existent business pinch a fewer at-risk tenants. Mike will supply much specifications connected really we are reasoning astir bad indebtedness and our wide outlook for 2023 successful his prepared remarks.

With that, I'll move nan telephone complete to Mike.

Mike Fitzmaurice

Thanks, Brian, and bully morning, everyone. Today, I'll talk our 4th fourth 2022 operating and financial results successful much detail, supply an overview of our financing activities completed during nan twelvemonth and extremity pinch commentary to thief everyone understand nan business expectations embedded successful our 2023 net outlook.

Fourth 4th operating FFO per stock of $0.24 was up of our soul scheme for nan quarter, but down $0.03 from past 4th chiefly owed to nan effect of contributions of our Shops connected Lane and Troy Marketplace properties into our grocery-anchored associated task and higher G&A expense.

Same-property NOI maturation for nan 4th came successful up of scheme astatine 1.1%, driving full-year same-property NOI maturation of 4.3%, conscionable supra nan precocious extremity of our expected range.

Our stronger-than-expected capacity for nan twelvemonth was fueled by 2% guidelines rent maturation aft adjusting for immoderate offsetting accounting movements betwixt guidelines rent and bad indebtedness arsenic we regained occupancy, drove rent and pushed our yearly escalators.

Our signed not commenced backlog remains elevated astatine $11.2 cardinal aliases astir 7% of annualized 4th fourth NOI, providing america visibility connected early net growth. We besides proceed to unfastened tenants connected clip and connected schedule contempt nan challenges facing nan building market. This quarter, we commenced leases covering complete $4 cardinal of rent.

As a consequence of nan precocious level of rent commencements during nan 4th quarter, our occupancy complaint accrued 100 ground points sequentially arsenic we proceed to stabilize nan portfolio toward our target of 95%-plus complete nan long-term.

Our SNO backlog will proceed to supply net tailwind done 2025 pinch nan full incremental use to operating FFO expected to beryllium astir $0.12 per share. We expect nan cadence to beryllium $0.05 successful 2023, $0.06 successful 2024 and $0.01 successful 2025.

I was very pleased pinch our equilibrium expanse guidance successful 2022. We prudently and opportunistically accessed nan debt, equity and derivative markets to support leverage successful check, amended long and trim floating complaint risk. Ahead of nan disruption successful nan superior markets, we refinanced and upsized our in installments installation and paid disconnected each near-term indebtedness maturities.

In December, aft ostentation started to show signs of easing, coupled pinch a highly inverted output curve, we entered into forward-starting swaps that fastener complaint connected each of our word loans done their respective maturities. And earlier this week, Fitch reaffirmed our BBB- finance credit-grade standing pinch a unchangeable outlook. Today, we person complete $470 cardinal of liquidity, nary indebtedness maturing until 2025 and only 5% floating complaint indebtedness exposure.

We entered nan 4th fourth pinch nett indebtedness to annualized adjusted EBITDA of 6.9 times, down from 7.0 times past quarter. Including our signed not commenced backlog, our leverage would beryllium 6.3 times, giving america assurance that we will beryllium adjacent our semipermanent target of 6.0 times successful nan adjacent mates of years.

Moving connected to our first 2023 outlook. We are establishing an operating FFO per diluted stock guidance scope of $0.97 to $1.01. Embedded successful this scope is an anticipation of same-property NOI maturation of 1.5% to 3.25%. With astir 75% of our 2023 leasing scheme already completed and a patient SNO backlog, we commencement nan twelvemonth connected awesome footing. The wildcard will beryllium nan effect of unit bankruptcies.

The midpoint of our operating FFO guidance assumes mislaid rent totaling 300 ground points of NOI, which is comprised of our emblematic bad indebtedness reserve of 75 ground points arsenic good arsenic an further 225 ground points tied to Regal, Bed Bath & Beyond, Party City and Tuesday Morning, which covers nan effect of some mislaid rent from precocious recaptured spaces arsenic good arsenic further forecasted lease rejections and rent reductions.

To get to nan precocious extremity of our operating FFO per diluted stock range, we would request to person a much favorable result connected lease rejections and rent reductions. The debased extremity of nan scope assumes that we recapture each 8 of our Bed Bath concepts, each 5 of our Party City leases and some Tuesday Morning locations successful nan 2nd 4th of this year.

As you deliberation astir nan span from nan $1.04 per share, we reported successful 2022 to nan $0.99 midpoint of our 2023 operating FFO per diluted stock guidance, support successful mind nan pursuing timing and one-time headwinds. We realized a $0.01 use successful 2022 from nan reversal of straight-line rent reserves and termination income that we do not task successful guardant periods and $0.04 owed to nan timing of nett finance activity successful 2022 arsenic we front-loaded acquisitions and backloaded dispositions.

In addition, we person $0.03 from NOI coming offline from properties that are being prepared for redevelopment, notably Hunter Square successful Oakland County, Michigan and Marketplace astatine Delray successful nan Miami market. These headwinds are partially offset by expected same-property NOI maturation that adds astir $0.03 contempt nan elevated levels of bad indebtedness embedded successful our outlook.

G&A nett of guidance interest income is expected to beryllium astir level year-over-year arsenic inflationary pressures connected G&A are mostly offset by rising guidance interest income from our associated ventures.

And pinch that, I will move nan telephone backmost to nan usability to unfastened nan statement for questions.

Question-and-Answer Session

Operator

Thank you. We will now beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility comes from Todd Thomas pinch KeyBanc Capital Markets. Please proceed pinch your question.

Todd Thomas

Hi, thanks, bully morning. First, admit nan item astir nan guidance and what's embedded successful nan guidance for nan reserve. And I recognize immoderate of nan imaginable disruption whitethorn effect occupancy. But Mike, Brian, you some mentioned nan targeted occupancy complaint of 95% for nan portfolio. It's a small much than 500 ground points of upside.

What's benignant of embedded successful nan guidance for occupancy passim nan year? And wherever do you expect to possibly beryllium astatine year-end conscionable fixed nan imaginable near-term disruption that you discussed? And if you could conscionable stock immoderate specifications there, conscionable trying to get a consciousness of that and possibly really agelong you would expect to execute that occupancy rate.

Mike Fitzmaurice

Sure. Good morning, Todd. And past acknowledgment for nan question. We person a very patient signed not commenced pipeline of $11 million, which is coming online complete nan adjacent mates of years, which is really going to push our occupancy towards that 95% complete nan long-term. But we ended nan twelvemonth conscionable southbound of 90% astatine 89.9%. We do expect it to extremity nan twelvemonth correct betwixt 91.5% and 92.5% contempt nan imaginable disruption that we could acquisition for our at-risk tenants, 3 of which are successful bankruptcy.

Brian Harper

And Todd, I would conscionable add, too, extracurricular of nan $11 cardinal SNO, we person astir $7 cardinal successful ineligible and much moreover successful precocious negotiations down that successful NOI. And these are iconic, game-changing assets, much grocers, much wholesale, much off-price, much restaurants, much wellness, wherever really, they bring a halo effect. But they're occupying either vacant aliases underutilized abstraction today. So that's going to thief bring this occupancy up arsenic well. And those beautiful overmuch are going to beryllium hitting ‘24, ‘25.

Mike Fitzmaurice

Yes. Then 1 further comment, Todd, is astir nan mini shop. We ended nan twelvemonth correct astir 83.5%. And half our -- astir half are SNO of $11.2 cardinal is tied to mini shops. So we should expect mini shop to emergence complete nan people of nan twelvemonth betwixt 86% and 87%.

Todd Thomas

All right. That's helpful. And past what's driving, benignant of, nan comparatively faster backfills? I recognize leasing request is strong. But for immoderate of these larger boxes, 12 to 18 months seems comparatively fast, 12 months successful particular. There's evidently been benignant of delays astir permitting and instrumentality deliveries and things of that nature. I'm conscionable wondering why you deliberation benignant of 12 months astatine nan low-end of nan scope location is achievable. Again, seems a small spot accelerated for nan cycle.

Mike Fitzmaurice

So Todd, I deliberation a mates of things. We've been treating each -- let's commencement pinch Bed Bath. We've been treating each these arsenic vacant since pre-COVID, conscionable for illustration we did pinch GAAP, conscionable for illustration we did pinch Ascena, conscionable for illustration we did pinch Pier 1. And I deliberation we were 1 of nan fastest backfills of those 3 concepts. We person been negotiating leases moreover we didn't person occupancy of -- aliases power of that Bed Bath space. So correct now, we person 4 of our 8 Bed Bath stores are soon to beryllium gone and are being placed pinch tenants pinch superior in installments and income per quadrate ft profiles.

I mentioned connected my prepared remarks, nan 43% re-leasing dispersed for an off-price tenant that is unfastened later this year. So that leaves america pinch really 4 tenants. And we've been mining each of those tenants for each of these locations for illustration I said forever. So we person sewage a speedy jump commencement connected this. That's what I hoped pinch nan 12 months. We person tenants successful lease and drafting plans. So this wasn't waiting for nan recapture. This was proactive plus management.

Todd Thomas

Okay. That's helpful. And past conscionable lastly, Brian, and moving complete to investments. I was conscionable wondering if you could talk a small spot astir what you're seeing retired location if woody travel is starting to prime up, really we should deliberation astir investments during nan twelvemonth crossed nan level and besides really we should deliberation astir backing investments successful nan existent situation today?

Brian Harper

Sure. So we really haven't fixed guidance connected investments prior. What I will opportunity connected that note, complete nan past 2 years, we've bought almost $1 cardinal crossed our platforms. While their soul remerch, redevelopment deals serving up double-digit spreads, that's our champion usage of capital. We are still scouring our markets for each 3 platforms.

Let maine commencement pinch RGMZ. I expect to deploy a batch of superior this year. We person been very patient. There's not been overmuch headdress complaint description successful nan triple-net sector. But what I tin spot america buying are these larger centers wherever we tin chop up nan triple-net components and seed them into nan money and past waste nan remaining halfway astatine a later date. That's creating alpha for those investors. Our R2G, that's really consecutive down nan fairway halfway grocery. Our partner gives america an edge, arsenic good arsenic an enhanced output that we are looking for.

With that being said, you saw what we did pinch Troy and Lane. Could location beryllium much of that for illustration an accordion feature, wherever we tin deploy assets and bargain accretively, potentially. And past RPT, I really spot RPT really benefiting from each platforms moving together akin to what we did up successful Northborough successful COVID, wherever we seeded 4 parcels and we're near pinch double-digit yields. And really aft now, that's moreover expanded further conscionable owed to our leasing level wherever we'd person now 5 TJX concepts astatine nan center, only 1 successful nan state that has each 5 TJX brands. And essentially, that halfway serves arsenic a TJX enslaved for our shareholders. So I spot much Northboroughs for RPT, certainly, but we'll springiness much updated guidance astatine first quarter.

Todd Thomas

Okay, alright. Thank you.

Brian Harper

Thank you.

Operator

Our adjacent mobility is from Wes Golladay pinch Baird. Please proceed pinch your question.

Wes Golladay

Oh, hey. Good greeting to everyone. I mean, really do you equilibrium playing discourtesy successful sites for illustration Mary Brickell and Delray versus having to allocate resources and superior to backfilling nan imaginable vacancies you cited pinch Bed Bath and Regal and Tuesday Morning?

Brian Harper

It's a balance. It's returns. There's deals that we'll hopefully beryllium announcing soon connected astatine Delray that are very debased CapEx, telephone it, very ample crushed lease numbers that will beryllium minimal CapEx for us. Brickell, nan powerfulness of Brickell is there's much request than proviso currently. That's conscionable driving pricing. That's driving edifice volumes, wherever 3 of nan apical restaurants successful nan U.S. adjacent twelvemonth will beryllium successful nan Brickell neighborhood. So this is simply a deal, Wes, wherever it'll beryllium little TA than we moreover underwrote and astir apt almost 2 times nan rent of which we underwrote.

Balancing that pinch nan Bed Baths of nan world, Bed Bath is -- we're getting very, very charismatic yields. The 4 that I mentioned that we person power over, nan mean rent is $10.46. Our spreads connected those are 43.3% blended. We person a woody successful Michigan wherever location was a $7.25 gross deal. We are applying $14, $15 rent pinch a tenant and lease that will do respective -- 20 times nan income volumes arsenic nan Bed Bath was doing. So this is each astir superior allocation and driving arsenic overmuch return internally arsenic we tin perchance get.

Mike Fitzmaurice

And Wes, I'll conscionable adhd this, I mean to Brian's constituent earlier from Todd's mobility is we've been moving connected these Bed Bath recaptures and re-leasing for rather immoderate time. So it's not really incremental activity for nan company.

And past nan 2nd point I would remark connected is we hired a highly, highly talented individual successful nan Miami marketplace to attraction solely connected Mary Brickell. So we person nan correct talent and nan correct attraction connected not only our caller assets for illustration Mary Brickell, but besides nan re-lease of our at-risk locations.

Wes Golladay

Got it. And past looking astatine nan -- for illustration an illustration of nan Marketplace of Delray, benignant of, you're doing this successful a batch of your centers, wherever you conscionable switch nan anchor and you benignant of gone from 1 utmost to nan different astatine that center. And it looks for illustration nan area is beautiful vibrant, section centers astir besides redeveloping. And it seems for illustration you could move nan shop guidelines complete nan next, I don't know, is it a year, is it nan adjacent 2 years? Like really agelong does it return you, though, erstwhile you get nan anchor successful to activate nan remainder of nan center?

Brian Harper

It's astir 12 months. Right now -- and I deliberation immoderate of it, particularly successful a spot for illustration Delray Beach, group are scouting for locations. That was a deal, I deliberation it was $14 ABR successful a $40 market, particularly aft a mates of anchor deals that we'll denote present soon. A batch of group want to beryllium progressive connected nan beforehand and unafraid abstraction moreover earlier those tenants open. It doesn't hap everywhere, but that will hap successful Delray Beach. So we're very assured that we tin lease simultaneously moreover earlier nan anchors open.

Wes Golladay

Got it. That makes sense. And past you talked astir further zoning astatine Mary Brickell. Do you deliberation you person announcement this year? Or is it going to beryllium a multiyear process? What are your expectations there?

Brian Harper

We’re really focused connected nan occidental parcel, really, nan Publix and up to Moxie and North. That’s benignant of our – leaving that arsenic iconic, trophy retail. We’re doing a batch of deals pinch wellness and F&B. But for nan astir part, that will beryllium a modernization of what’s presently there.

The eastbound information is really wherever we could maximize nan GLA and really wherever nan tenants person nan slightest magnitude of WALT. So I deliberation this is simply a multiyear approach, Wes. We’re laser-focused connected making this a spot wherever group flock successful an oasis successful nan jungle, if you will, successful nan municipality jungle. And conscionable nan demand, arsenic I said successful my prepared remarks, is dissimilar thing I’ve ever seen successful my career.

Wes Golladay

Got it. Thanks for nan time, everyone.

Brian Harper

Of course. Thank you.

Operator

Our adjacent mobility comes from Derek Johnston pinch Deutsche Bank. Please proceed pinch your question.

Conor Peaks

Hi, convey you. This is Conor Peaks connected pinch Derek. On nan leasing situation and fixed 2022 was astatine grounds levels, since nan caller year, person you seen immoderate alteration successful tenant request behavior? Any alteration successful TI speech aliases guardant indicators? Thanks.

Brian Harper

No. It's arsenic patient from what we've seen, and possibly that's owed to a caller portfolio. But we -- it's arsenic patient arsenic ‘22. And successful fact, immoderate of nan TA requests person travel down conscionable because we've had 4 tenants battling for 1 space. I'd for illustration to opportunity you sewage to create hostility successful nan marketplace to thrust prices up and CapEx down, and that was wherever we've applied nan proactive mindset and assuming these will beryllium vacant 1 time and not waiting and being reactive but being proactive successful driving rent erstwhile we person nan controllables successful our favor.

Mike Fitzmaurice

And Conor, 1 of nan metrics that we show very, very intimately wrong our 4 walls present is retention, right? In ‘21, it was precocious 80s. In ‘22, it was precocious 80s. We expect nan aforesaid consequence successful ‘23, ‘24, ‘25 based connected our projections today. And Brian -- arsenic Brian said successful his opening remarks, tenants are consenting to salary nan premium to enactment wherever they're astatine wrong our portfolio because it's overmuch much costly to move location other fixed nan emergence successful building cost.

Conor Peaks

Thank you. And past connected backstage marketplace liquidity, we touched connected it a small spot earlier, but are you seeing immoderate standout location differences successful either marketplace extent aliases headdress complaint description ? Thanks.

Brian Harper

Not really. I mean nan halfway market has been sticky. I talked astir nan triple-net sticky. I mean halfway powerfulness moreover has been sticky, particularly if it's mostly rate travel from TJX, Ross, for illustration nan investment-grade tenants. It hasn't been overmuch geographically. Obviously, Florida is successful an anomaly by itself. And successful immoderate ways, you mightiness moreover spot compression. But extracurricular that, it's been -- it hasn't really moved that we tin spot successful immoderate geographic concentration.

Conor Peaks

Thank you.

Operator

Our adjacent mobility comes from R.J. Milligan pinch Raymond James. Please proceed pinch your question.

R.J. Milligan

Hey, bully morning, guys. In your prepared remarks, you mentioned you were successful precocious discussions pinch Regal, and you expected those leases to get affirmed done bankruptcy. I'm conscionable funny if there's immoderate associated aliases anticipated rent cuts pinch those properties.

Mike Fitzmaurice

Good morning, R.J. So we person 3 locations: One successful Ohio, 1 successful -- down successful Nashville and past 1 successful nan Boston market. All 3 are very well-performing locations. On 2 of nan three, we expect to return a flimsy haircut connected rent that will effectuate sometime precocious 2nd 4th into nan 3rd quarter.

R.J. Milligan

And truthful 1 of the, 3 you expect to get assumed astatine afloat rent. And tin you quantify that rent simplification connected nan two?

Mike Fitzmaurice

In position of nan rent simplification connected nan two, you're looking astatine correct astir $500,000 connected an annualized basis.

R.J. Milligan

Okay. And past you guys accrued nan dividends. At a clip erstwhile CapEx walk is beautiful important conscionable fixed each nan leasing that's been done and immoderate of nan repositioning, I'm funny wherever you expect your AFFO payout ratio ending nan year.

Mike Fitzmaurice

Yes. I deliberation this year, it will beryllium somewhat elevated arsenic astir of nan capital, R.J., is connected to our signed not commenced, a equilibrium of astir $11 million. So we're looking to walk astir $40 cardinal to $50 cardinal connected leasing CapEx. And that -- 75% of that is tied to our signed not commenced.

So while it will beryllium a spot outsized this twelvemonth from an AFFO payout ratio, we do expect adjacent twelvemonth to beryllium successful nan mid-80s. And past consequent twelvemonth successful 2025, we expect to beryllium successful nan mid-70s. So we person very precocious visibility fixed nan signed not commenced signed leases that nan AFFO payout ratio will travel down. And that was nan catalyst that went into nan dividend raise that we announced past night.

R.J. Milligan

That’s helpful. Thanks, guys.

Brian Harper

Yes. Thank you.

Operator

Our adjacent mobility comes from Hong Zhang pinch JPMorgan. Please proceed pinch your question.

Hong Zhang

Yes. Hey guys. I deliberation you mentioned $0.03 of redevelopment resistance erstwhile you return Hunter Square and Marketplace astatine Delray off-line. Roughly erstwhile successful nan twelvemonth that would happen?

Mike Fitzmaurice

Yes. It's early successful nan year. So we've recaptured a fewer locations astatine Hunter Square, and we've already recaptured nan erstwhile grocer, Winn-Dixie, astatine Delray.

Hong Zhang

Got it. And I conjecture retired of curiosity, truthful if I deliberation astir nan 3 categories wherever you make acquisitions, your wholly owned, your R2G and your RGMZ platforms, I guess, which 1 would you expect activity to prime up nan fastest?

Brian Harper

I deliberation it's excessively early to say. I mean, I deliberation we've been very diligent buyers. We are scouring daily. And retired of nan benignant of unit ecosystem of these 3 platforms wherever they reside, I can't reply which 1 is going to prime up. I mean nan shot could bounce to R2G tomorrow, and that could prime up, but it could bump to RPT too. So I deliberation nan beauty of this is each 3 are complementary and each 3 springiness america a competitory separator successful nan marketplace.

Hong Zhang

Got it. Thank you.

Brian Harper

Thank you.

Operator

Our adjacent mobility comes from Floris Van Dijkum pinch Compass Point. Please proceed pinch your question.

Floris Gerbrand van Dijkum

Thanks, guys. Question -- I conjecture 2 questions. Number one, you noted that your shop occupancy is 86.8%, your leased occupancy that is. And there's 330 ground points of SNO there. But what gives you assurance that you tin summation that? And do you person a target for your shop occupancy?

Mike Fitzmaurice

We do. We had -- nan target semipermanent Floris, it's 91% to 92%. Given that half our signed not commenced pipeline, truthful astir $5 cardinal to $6 cardinal is tied to our mini shop space, truthful we ended nan twelvemonth correct astir astatine an occupied level, 83.5%. We do expect that to extremity nan twelvemonth betwixt 86%, 87%, which benignant of gives you a clear pathway to get person to 91%, 92% complete nan long-term.

Brian Harper

And past nan $7 cardinal that's successful leases, I deliberation it's for illustration 30%, 35%, 40% nan mini shop. So adhd that in. And past there's different respective cardinal moreover of LOIs that we deliberation will beryllium successful ineligible present successful nan adjacent period and astir 50% mini shop.

Floris Gerbrand van Dijkum

And past a mates -- 1 different point I noticed, you touched upon this, surely regarding Mary Brickell, saying that it was 83% leased. But if I look astatine your wide Miami exposure, it's 83% leased arsenic well. What's driving -- which I deliberation is nan lowest successful your wide portfolio and for immoderate of nan markets. Could you possibly spell done what's going connected successful Miami successful particular? And -- because I would ideate Mary Brickell is simply a large portion of that, but possibly talk a small spot astir wherever you spot nan upside there.

Brian Harper

So Brickell is surely 83%. Delray, we've been buying retired tenants to effectuate our redevelopment pinch 2 iconic anchor tenants and caller mini shop abstraction and perchance moreover immoderate resi, which a partner would do aliases possibly that's a publication for illustration we did successful Jacksonville, wherever we contributed our onshore and became a 50% proprietor of 375 units, and we're going done entitlements connected that. But nan ample driver connected that is Delray.

Floris Gerbrand van Dijkum

Got it. And past successful position of Austin, I noticed -- I mean it's only 1 asset, but I noticed you had sub-90% leased occupancy. I cognize that you were beautiful affirmative erstwhile you made that acquisition. I deliberation it was 1.5 years agone aliases thing for illustration that. Maybe if you tin talk a small spot astir what's going connected successful Austin arsenic well.

Brian Harper

Yes. 2019, we made that acquisition, 5.5 cap. We've expanded it rather nicely. NOI has moved 30%, 40%. We've taken backmost a mates of tenants, person 2 times their rents. And truthful that's wherever you spot immoderate of nan 89%, which should beryllium 98% present astatine slightest successful nan adjacent respective -- adjacent mates of quarters.

Floris Gerbrand van Dijkum

Thanks, Brian.

Brian Harper

Yes. Thank you.

Operator

[Operator Instructions] Our adjacent mobility comes from Linda Tsai pinch Jefferies. Please proceed pinch your question.

Linda Tsai

Yes, hi. Is at-home portion of your bad indebtedness forecast?

Mike Fitzmaurice

It is not. We don't presume immoderate disruption there, and we only person 2 at-homes, Linda.

Linda Tsai

Okay. And past conscionable connected nan earlier comment, why would nan buybuy BABYs return 12 to 18 months to backfill versus nan Bed Bath taking little time?

Brian Harper

Well, I deliberation -- I mean a mates of things. I deliberation each tract is different. And truthful nan buybuy BABYs person different components of complexities were those circumstantial centers. Where 1 mightiness beryllium combining spaces, different 1 mightiness beryllium chopping up spaces. So it's not immoderate of them are not each arsenic is arsenic opposed to Bed Bath are really taking up nan deals, we trim are taking nan abstraction arsenic is. So those nuances, Linda, I deliberation that -- astir nan edges a fewer months much than nan Bed Bath deals.

Linda Tsai

Got it. And past conscionable connected nan earlier remark that it's important to create hostility successful nan marketplace to get aggregate parties willing successful this space. Is your position that leasing CapEx aliases TIs goes down this year?

Brian Harper

Certainly, connected selective deals of -- you show them erstwhile container deals wherever we person 3 aliases 4 group vying for a space, for those deals, yes, it would spell down. Where there's centers wherever we are combining spaces, that could beryllium up. But this is each astir getting that tension, driving rents and driving CapEx down.

Linda Tsai

And past conscionable nan past one, conscionable connected nan Bed Bath & Beyond boxes. Is your position that much of those spell to azygous tenants aliases nan abstraction gets divided up?

Brian Harper

Single tenants. Yes, nan 4 we person recaptured. Every azygous 1 is going to a azygous tenant.

Linda Tsai

Got it. Thank you.

Brian Harper

Thank you.

Operator

Our adjacent mobility comes from Craig Schmidt pinch Bank of America. Please proceed pinch your question.

Lizzy Doykan

Hi, bully morning. This is Lizzy Doykan connected for Craig. I benignant of wanted to spell backmost to nan questions astir mini shops. And I wholly understand nan outlook and nan target for 86%, 87% and past being online for 91%, 92% long-term. I was conscionable hoping to get further colour astir nan diminution successful some nan leased and occupied rates successful nan 4th quarter. Just seeing if there's circumstantial markets aliases tenants that drove this, whereas astir of your peers saw a summation successful this. Thank you.

Brian Harper

Yes. So we had -- successful Lake Hills successful Austin, we had a 10,000 quadrate ft tenant that we proactively moved retired and doubled nan rent. So that's really what nan mover was for this quarter.

Mike Fitzmaurice

Yes. You sewage to retrieve nan mini denominator we person pinch nan mini shop, too, Lizzy. So erstwhile you person a woody for illustration that upside of 9,000 to 10,000 quadrate feet, it's going to move nan number.

Brian Harper

It's reliable to attraction connected quarter-to-quarter.

Lizzy Doykan

Got it. Thanks. And connected your nett indebtedness to EBITDA of 6.9 times, that did tick down a spot from past quarter. Just wondering what nan priorities are this twelvemonth successful position of seeing this inclination successful statement pinch your expectations fixed that you person nary indebtedness maturities until ’25, you fixed nan respective constituent connected each outstanding word indebtedness debt. They're really -- what are nan priorities this year?

Mike Fitzmaurice

Sure. We've done a awesome occupation connected nan equilibrium sheet, clearing up maturities for nan adjacent mates of years. So we tin afloat attraction connected maturation successful EBITDA, which is each tied to signed not commenced arsenic we alluded to successful our prepared remarks and a fewer questions today. So short reply is get nett indebtedness to EBITDA down. We want to get wrong our scope of 5.5 times and 6.5 times.

And based connected our projections astatine nan midpoint of our range, we're really beautiful adjacent to that apical extremity of nan range, astir 6.5 times. And past from there, we do judge successful ‘24 and ‘25, we'll beryllium good wrong our scope astatine nan midpoint of 6.0 times. So it's a metric and a attraction for nan company, and we will get it down.

Lizzy Doykan

Great. And conscionable a speedy 1 connected Kroger, Albertsons, if there's immoderate update aliases alteration successful thoughts astir this fixed nan latest update connected expected shop closings. Like what -- if you tin punctual america what your wide is there.

Mike Fitzmaurice

We person zero overlap astatine all. So it's really nary constituent for RPT, thankfully.

Lizzy Doykan

Okay, sewage it. Thanks.

Brian Harper

Yes. Thank you.

Operator

It appears that location are nary further questions astatine this time. I would now for illustration to move nan level backmost complete to Brian Harper for closing comments.

Brian Harper

Thank you, operator. We relentlessly pursued excellence successful 2022 and are fresh to do nan aforesaid successful 2023. Although nan existent unit situation presents immoderate near-term uncertainties, we participate nan caller twelvemonth connected very coagulated footing. Leasing momentum remains robust. Our equilibrium expanse and liquidity are successful awesome shape. Our finance platforms springiness america competitory advantages pinch respect to imaginable acquisition opportunities.

It's times for illustration these erstwhile we judge nan important improvements, we made to our portfolio complete nan past respective years will beryllium themselves retired arsenic we proceed to build much durable rate flows, and we expect to present very coagulated results. We look guardant to seeing galore of you astatine upcoming conferences and dream you each person a awesome day.

Operator

This concludes today's conference. Thank you for your participation. You whitethorn disconnect your lines astatine this time.

Editor: Naga



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