Q4 2024 Earnings Call Transcript

And with that, I will turn the call over to Don Wood to begin our discussion of our fourth quarter results.

Thank you, Lee, and good afternoon, everyone. Lots of records were shattered in both the fourth quarter and 2024 that bode well for 2025 and beyond. That starts with leasing. A hundred comparable deals in the quarter for 649,000 square feet at 10% more cash rent, 21% more straight-line rent than the previous lease.

Nearly 2.4 million square feet of comparable space in calendar 2024 at 11% more cash rent, 22% more straight-line rent than the previous lease. Both the quarter and the full year set all-time records for us and not by a little bit. Volume in the fourth quarter and total year beat the previous high watermark set in COVID-boosted 2021 by 9% and 14% respectively. Occupancy touched 96.2% on a lease basis and 94.1% on an occupied basis at year-end, the strongest in nearly a decade.

Dividends per share were raised to $4.40 per share for the record-setting 57th consecutive year. Total revenues surpassed $300 million in the quarter and $1.2 billion for the year for the first time ever and grew at 7% and 6% over their respective prior periods. And FFO per share at $1.73 in the quarter, and $6.77 for the year set all-time records even with a one-time four-cent charge for Jeff Berkes leaving the company. Without it, FFO per share of $1.77 in the quarter, and $6.81 for the year grew at 7.9% and 4% respectively. 2024 was a very good year.

The retail real estate market remained strong, driven by favorable supply-demand dynamics and continued consumer spending. Our diverse portfolio spanning various property types and anchored by strong resilient operators positions us well for sustaining success. The struggling retailers making headlines today have minimal impact on our portfolio. Nowhere is the quality of this portfolio more evident than in the continued improvement in occupancy that you see in the fourth quarter over the third quarter and the expectation for even higher occupancy by the end of next year.

While a new administration in Washington is certainly shaking things up on so many fronts across the broader economy, our outlook remains positive. The bottom line is that we expect to grow faster at both the comparable property level and the bottom line earnings level in 2025 than we did in 2024. Our product is very much in demand, and that includes the office component of our mixed-use communities in San Jose, Boston, and Bethesda. After years of uncertainty on the part of employers as to their future office space requirements, the back-to-office movement in the country is real and it's fully underway.

Recognition on the part of many employers that they need more and better space, coupled with our Class A offering of modern and fully amenitized, and I do mean fully amenitized, office environment, it's no surprise that we're seeing a significant uptick in interest in tours and LOIs and in executed leases. We're especially seeing it at Santana West and 915 Meeting Street at Pike & Rose, where nearly 150,000 square feet of deals have been executed or put under heavily negotiated LOIs in the last 90 days. Santana West and 915 Meeting Street are currently 82% and 91% committed under such arrangements at this point, respectively.

And we're optimistic that both buildings will be nearly fully leased in this calendar year. It's really good news, and while the 2025 P&L won't be the beneficiary, since rent hasn't commenced from the majority of those tenants, that's just timing. It should provide a nice bump to 2026 and 2027. On the development front, things are picking up too. Not only is our $90 million residential over retail project at Bala Cynwyd Shopping Center firing along on budget and a bit ahead of schedule, but we've approved two other developments that you can see in our Form 8-K this quarter.

The first is the new build of 45 residential units atop 10,000 feet of ground floor retail in Hoboken, New Jersey. 301 Washington Street, Hoboken's main commercial thoroughfare, houses a vacant Capital One bank pad and commensurate service. The opportunity to densify this amazing piece of corner real estate works economically to a 6% to 7% unlevered yield on $45 million and a 9% IRR, extra more favorable construction pricing, strong retail rents, and growing residential rents in this densely populated New York City suburb. Expect to break ground in a few months. Secondly, Andorra Shopping Center in Philadelphia is gearing up for a transformational redevelopment that will include a state-of-the-art Giant supermarket, along with a fully renovated LA Fitness health club, new shop space with upgraded service and restaurant tenants, greatly improved placemaking and parking.

This $32 million investment will kick off this spring and yield an incremental 7% to 8% unlevered yield. More to come on the development front later this year too. We remain very active on the acquisition front. The prospects being studied and negotiated in both our existing markets along with a few new ones.

And we expect to close on a great shopping center in Northern California in a few weeks. That $123.5 million purchase with a very productive Whole Foods anchor and a cadre of lifestyle-oriented tenants will complement our West Coast portfolio beautifully and will be managed from our San Antonio headquarters. We expect to be able to talk more about that one by the end of the month. I also wanted to use the opportunity to introduce three newly promoted vice presidents to our executive ranks, underscoring our focus on continually developing a deep bench of professionals all of whom are expected to play a key strategic role in our long-term future.

Congratulations to Sarah Ford Rogers, as VP of Development working out of our Assembly Row office, to Bob Frond, as VP of Acquisitions representing our West Coast and Arizona territories, and to Vanessa Mendoza, as VP of Leasing working out of our headquarters in North Bethesda. Congratulations also to Mr. Porter Baloo, who's been promoted to Senior Vice President of our Information Technology group. Each of these executives has been highly respected members of our team for years, and it brings me great pleasure to be able to recognize the real estate talents with promotions that expand their influence and responsibility within our organization.

I love being able to do that. That's all I wanted to cover in prepared remarks this afternoon, and so I'll turn it over to Dan to provide more granularity before opening it up to your questions.

Thank you, Don, and hello, everyone. Our reported NAREIT FFO per share of $6.77 for the year and $1.73 for the fourth quarter reflect the $0.04 one-time charge for Jeff's departure. Excluding the charge, our FFO growth was 4% and roughly 8% for the full year and fourth quarter respectively. POI was up 5.4% for the full year and 6.8% for the fourth quarter.

We finished 2024 with momentum. Primary drivers for the solid performance in 2024: First, POI growth. Our comparable portfolio's primary catalyst being occupancy increases from continued strength in tenant demand as both leased and occupied metrics increased 200 and 191 basis points respectively over year-end 2023 levels, as well as solid rollover of 11% on a cash basis sector leading contractual rent bumps of roughly 2.5% blended anchor, and Small Shop. Second, contributions from our redevelopment and expansion pipeline with Huntington, Darien Commons, 915 Meeting Street, and Lawrence Park approaching stabilization over the year, driving an incremental $12 million of POI.

The upper end of our range. And strong performance by the $1.4 billion of gross assets we've acquired since mid-2022. Performance almost across the board has exceeded underwriting, but in particular, at the shops at Pembroke Gardens in Florida, and Kingstown Town Center in Virginia. This was primarily offset by upward pressure on property level expense margins and higher interest expense relative to 2023. Comparable POI growth excluding prior period rent and term fees came in at 4.2% during the fourth quarter, an average of 3.4% for the year. Comparable min rents grew 4% in the fourth quarter and 3.4% for the year.

Our residential portfolio was a source of strength in 2024. Same-store residential POI growth was 5%, and when including Darien Commons, which continues to outperform, was 7%. The value proposition providing a premium residential offer on top of an attractive retail amenity base is driving outperformance across our targeted residential portfolio. Additionally, in 2024, we opportunistically acquired almost $300 million in high-quality retail assets during the year. Blended initial yields in the low to mid-7s and unlevered IRRs in the mid to high 8s.

When you include the asset that we put under contract during the fourth quarter, that's over $400 million. Hopefully, more to discuss as the year progresses. We continue to seek new under-managed and under-capitalized properties to add to the portfolio. On the development, redevelopment, and expansion front with the stabilization of a number of redevelopment projects to close out the year, including Darien Commons in Connecticut and Lawrence Park in Philly, our in-process pipeline now stands at approximately $785 million with just $230 million remaining to spend.

With the addition of a residential over retail project in Hoboken, and the retail redevelopment in Andorra in Philly, we continue to mine opportunities across our portfolio and deploy capital accretively on an external basis to drive future FFO growth. Additional opportunities are under consideration which likely will be added to the pipeline over the course of 2025 into 2026. Down to the balance sheet, and an update on our liquidity position. Our financial flexibility continues to expand as improvement in our leverage metrics accelerated over the course of 2024. Leaning on opportunistic equity issuance on our ATM program to fund creative acquisitions, targeted asset sales, and a growing free cash flow component which has allowed us to improve our leverage metrics meaningfully.

Fourth quarter annualized adjusted net debt to EBITDA stands at 5.5 times down from 6 times as reported on this call last year. At that time, we forecasted this metric to hit our targeted level of 5.5 times in 2025, we've been able to get it done in 2024. Fixed charge coverage now stands at 3.8 up from 3.5 times at this time last year. We expect this metric to continue to improve toward our 4 times target over the course of the balance over the course of 2025. Our liquidity stood north of $1.4 billion at year-end, with an undrawn $1.25 billion unsecured credit facility and $178 million combined cash and undrawn forward equity.

Plus, we have no material debt maturities this year. Now onto guidance. For 2025, we are introducing an FFO per share forecast of $7.10 to $7.22 per share. This represents about 5.8% growth at the midpoint of $7.16 and roughly 5% and 7% at the low and high ends of the range.

This is driven by comparable POI growth of 3% to 4%, 3.5% at the midpoint. Add an additional 40 basis points to that range when you exclude COVID-19 or prior period rents and term fees. This assumes occupancy levels continue to grow from the current level of 94.1% at 12/31, up towards 95% by year-end 2025. Although expect a step back in the first quarter due to the typical seasonality pullback post-holidays. We'll have a net drag of roughly $0.10 to $0.11 from One Santana West as we cease capitalization of interest expense at the property in the second quarter.

This is simply a timing delay. The full benefit of $0.12 to $0.14 from this currently 82% committed building is expected to flow directly to the bottom line, but not meaningfully until 2026, as we begin to then recognize rents. Having said that, we do expect $0.14 to $0.15 of benefit from revenues earned through new market tax credits associated with our Freedom Plaza shopping set. The combination of these tax credit revenues at plus $0.14 to $0.15 with net timing drag in 2025 from Santana West of minus $0.10 to $0.11 and the lying down of COVID-era prior period rents of minus $0.03 to $0.04 fully offset each other, which normalizes our 2025 NAREIT defined FFO growth and we expect positive FFO growth off this base into 2026. Other assumptions to our 2025 guidance include one, incremental POI contributions from our development and expansion pipeline of $3.5 to $5 million.

And capitalized interest for 2025 estimated at $12 to $14 million down from $20 million in 2024. Both of these two assumptions reflect the aforementioned timing impact from Santana West. We forecast $175 to $225 million of spend this year on redevelopment and expansions at our existing properties. G&A is forecast in the $45 million to $48 million range for the year. Term fees will be $4 million to $5 million largely in line with 2024. The aforementioned $3 million of lower prior period collections as we expect a de minimis amount in 2025. We have assumed a total credit reserve of roughly 75 to 100 basis points in 2025 given limited exposure to bankrupt tenants, but more in line with historical averages and a normalized cycle of tenant risk in the retailing sector.

As is our custom, this guidance does not reflect any acquisitions or dispositions in 2025 except a $123.5 million Northern California acquisition under contract which we expect to close later this month. We will adjust likely upwards for all other acquisitions and dispositions as we go. Please see a summary of this detailed guidance in our 8-K on page 27 of our supplement. With respect to quarterly FFO cadence for 2025, the first quarter will start with a range of $1.67 to $1.70. Second quarter, $1.71 to $1.74. Third quarter, $1.90 to $1.93. And the fourth quarter at $1.82 to $1.85. Cadence for comparable growth will start slow in the first quarter.

In the mid-twos.

And improved sequentially over the course of the year. With that, operator, please open the line for questions. Thank you.

We will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble a roster. The first question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.

Hi. Good morning or good afternoon. Sorry. Just hoping you could talk a little bit about the tax credits the first time. At least I remember hearing about it. And I guess why include it in FFO? I think the 10-K mentions offsetting incremental cost of $1.6 million. Is that being incorporated?

In the net number you talked about in the sub on the guidance page? Just hoping for a little bit more color in general around that.

Yeah. That's fine. Yeah. No. That reflects the net number. And so the net number that we report nets out those expenses. You know, the tax credits historically, you know, the federal government has had programs to incentivize development.

And up-and-coming gentrifying communities.

And Freedom Plaza, formerly known as Jordan Downs, but Freedom Plaza in East LA was one of those developments. That development qualified and we earned those tax credits. We monetize those credits to the sales of a bank. We earned the, you know, the revenues associated with that project a series of, you know, extremely complex transactions.

And we expect to, yep, guess fulfill all the required contingencies associated with them. And be able to recognize the earned revenues later this year. And, you know, now that's the approach we take. More detail on that is on page F-31. You wanna see it? It's been disclosed previously, but on F-31 and our 10-K.

The next question comes from Dori Kesten with Wells Fargo. Please go ahead.

Thanks. Good evening. You've talked about the acceleration in transaction volume, expected for the last few quarters. Are you seeing that up?

In what you're underwriting today? And can you give us some current thoughts on funding for acquisitions near term just outside of the undrawn Ford equity?

Sure. Me a favor, Dan. Start with how to fund it. And let's go to Yan after that with some market conversation. Sure. Sure. Look, if we position the balance sheet, it's.

As good as it's been in the last six or seven years. Pre-COVID. With, you know, significant financial flexibility and capacity on our balance sheet. The undrawn line of credit plus access to the whole breadth of capital markets that we've availed ourselves to over our history. And you know, I think that we're really, really well positioned to take on.

The opportunities we're seeing out there.

And, you know, we'll use all the tools in our toolbox and arrows in our quiver in terms of, you know, allowing us to opportunistically and accretively finance the opportunities we see in the market.

Yeah. Can you pick it up? Yeah. You bet. Hi, Dory. John.

Look, we've never been busier looking at underwriting acquisitions. And in fact, as soon as we get off this call, we'll be talking about some other ones. It's just it has been so busy. There's a lot of product on the marketplace at this point at this time, on the one hand.

On the other hand, competition's gotten a little stiffer. There are more people looking at the larger type of assets that we've been pursuing. And again, you know, we try to go after, you know, great locations, of course, but larger assets that matter, you know, in their markets and matter to us in terms of being sizable enough where we, you know, we can really create some value with leasing, merchandising, and if applicable, enhancing, you know, the sense of place. Which we think the asset that Don has mentioned earlier in Northern California is a perfect example of that.

So, you know, we think there's a lot of activity that we're gonna see. We're gonna be bidding on all kinds of assets, but obviously, we don't know, you know, what price it's gonna take and does it match our return hurdles and our ability to grow the earnings on the asset. And so we'll see. We would expect it to be a pretty active year.

The next question comes from Steve Sakwa with Evercore. Please go ahead.

Yeah. Thanks. Good afternoon. Don, I guess with the portfolio over 96% leased, I'm just curious how the leasing discussions are changing kinda both internally and externally with the retailers and.

Know, how are you thinking about kinda pricing space as you move forward?

No. Steve, it's.

It's a good time to be in this business, man.

And there's no doubt that for the property, you know, the spaces that are very desirable, it's very common to have more than one real opportunity or real tenant in there. We try to get it not only in the rent, which we obviously always do. We try to get it in the bumps, which is really important, and most important is in control. And so when you come down to those we've talked about in the past, you're always it's always that fight for control of the shopping center effectively in terms of redevelopment opportunities, what we are able to do in terms of other uses, in terms of, you know, the lack of sales kick-outs and things like that so that we have more control.

We are having more success with that. And so, you know, and you and I have talked about this for years, I guess, well, I always think that our that these leases are contracts. Are among the strongest in the space, and I have no way to determine that for sure. But I know we fight hard for not just the rent, but also those control provisions.

And those are having more and more success with that. Because we are 96% leased. Now having said that,

The.

I don't believe, yeah, 100% leased in a portfolio is something that is attainable nor do I believe it's something that should be attainable because the extent you're doing that that you're probably leaving money on the table and all space is not created equal. Some that's better than some that's worse. But I still think and Dan kinda put it to a pretty well before that at 94.1 on the occupied basis, I think it's pretty darn likely we're gonna be able to get up toward 95. Can always happen, obviously. But that can continue to go and, you know, the same with the 96 for a bit more.

But, you know, me, in this company is about using all those arrows in the quiver.

So as important as that is,

so is redevelopment, so is development, so is acquisitions,

All parts of

you know, parts of the business. So

you should see

in short, you should see strong contracts, stronger contracts as we go through this period of the cycle.

The next question comes from Jeff Berkus with Bank of America. Please go ahead.

Great. Thank you. If I can ask a follow-up on acquisitions. Yan, you talked about seeing more assets. And, Don, when we saw you in November, and Erie, you talked about, you know, your strategy, and I think you said possibly looking at more markets. So

I'm just curious. Is it you're seeing more

more opportunities because you are looking at more markets? And, for example, I mean, an asset traded

In Cleveland, Ohio today, is that I'm just curious. Is that something that you even looked at? Like, is that

You know, is that does that fit the new strategy? Thank you.

Yeah. Go ahead.

Yeah. Yeah. So, Jeff, I think it's twofold. I think overall, there are simply more assets available on the marketplace today than there were six or nine months ago.

And, you know, I think with debt cost, being higher for longer, I think there's just, you know, certain sellers capitulated and just can't wait any longer. And certainly, we're looking at some assets where, you know, loans are now due in October or November and people need to transact. And so, overall, I just think there's simply a lot more available. And then you put on top of that, yeah, there are certain assets that we would certain markets that we haven't gone to before and so therefore we're looking at assets in those as well.

So between the two, it's just been really, really, really busy. And to answer your question on Cleveland, yeah, we looked at that, and a set of reasons, it just didn't quite fit what we were looking for. But that would be a market that we wouldn't have looked at going to before, but we would now.

Yeah. I don't have anything to add to that, you know, and that's what I would have said.

The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

Good afternoon, down there. Don, you mentioned and you were pretty forceful in your comments about, you know, the credit quality of the portfolio and a lot of the retail bankruptcies haven't impacted you guys. Just sort of curious, your overall watch list and, you know, your confidence that your tenancy is in a good credit position. I know you have that range out there.

I don't know if that range is just a generic range or if there's some problem children, if you will, that that range is there to solve or to be there for this year.

Yeah. Good question, Alex. What the near-term concerns that are in the market, the Joanne's, the Party Cities, the Big Lots, so forth. We just don't have much exposure to.

We have no Big Lots, one Party City, two Joanne's, soon they'll leave. That's reflected in our forecast. Container Store, they affirmed every single one of their leases stayed in place for very little concession. Look, most of the stuff we're concerned about is maybe longer-term, more medium-term.

And look, things can get accelerated. So I think given the volatility of the economy and the environment, I think just having a normalized 75 to 100 basis point credit reserve is appropriate. We have nothing specific there.

And nothing that I can really kinda use to build up

To get to. With regards to but I think it's a prudent level for us to have given the volatility that we see in the economy today.

The next question comes from Craig Mailman with Citi. Please go ahead.

Hey, everyone. There's some bigger, you know, mixed-use deals in the March market. Just kinda curious what the appetite or capacity is to do, you know, several hundred million dollar deal. And is now the right time to

potentially look to JV, you know, some of the bigger high-profile assets that you guys own.

Yeah. That's a good question, Craig. And let me do the easy part first. We do have the appetite, and we do have the capacity.

For, you know, it's not necessarily that these are big or bigger mixed-use assets. The question just like a small asset, comes down to what's the IRR and what can you get to. And so there's really not a difference from my perspective at least in, you know, liking a particular format over and above the other as long as it's a retail-based asset. Because it really comes down to how is that previous owner managed it?

How is he or she gotten to the rents? How much capital has been deferred, and how much does it need all the same things you look at in every project.

I like them. And

you know, there's, you know, the couple that are in the market today. They're going for numbers that still have to make sense to us. And so we run through that underwriting process. If there's a big mixed-use asset out can be sure we're looking at it.

Because we like that property type, but it still comes down to the individual property type with reserved individual asset rather. So with respect to joint venture partners, yeah. On a big one, that could make some sense to be able to do that way.

Always like to

as you would expect from us, take a balanced approach to, you know, how we manage that balance sheet. And there certainly seems to be joint venture money that's available out there to partner up. And that is so that's certainly a possibility on the bigger stuff. But the bigger thing is do the numbers work overall? On that particular property that we're looking at?

At.

The next question comes from Haendel St. Juste with Mizuho.

Hey, guys. Wanted to ask about just talk about tariffs. I'm just curious how

your conversations potentially with some of your tenants might be going. Thoughts on your upper-end consumer seemingly a bit more insulated here, but just curious on the comment of tariffs and what you might be hearing from your tenants. Thanks.

Yeah. And I'm gonna start with Wendy. I know you and I have talked about it. So maybe add on if I miss anything on this. But the common, you know, it's really interesting. The biggest thing from a tenant perspective

that's different than

necessarily, you would think

Haendel or I would think,

is that they're more nonplussed by this. Generally.

Than the news. Because

they've been dealing with the notion of tariffs

where it's gone, certainly in the first Trump administration, certainly in limited respects during COVID, etcetera, lots of retailers have diversified their sources of where they source goods from. So

you know, it's interesting. I don't

maybe with respect to, you know, tenants that kinda serve the less affluent consumer buying stuff from China and are unable to pass it on. Maybe, you know, the dollars concepts that could possibly be something that it's harder because it always at the end of the day, it's a tax. And so when you sit and think about it,

who pays the tax? And

better real estate, in the better areas, that tax to the extent it's there. Gets is more likely to be able to be absorbed. By the consumer. That's harder to do just like we've been talking about for the past couple of years.

With, you know, lower-income properties and portfolios. You know, aside from that, every single business has their own way to operate and to prepare and protect themselves. And the conversations we've been having, they certainly seem to be doing that. Wendy, am I missing anything here?

No. I think you hit all the major points. I would also say that

since COVID, you know, the retailers that are savvy have been really working

to increase their margins.

And they've been doing a good job of it. And as Don said, tariffs are not new to them, and they've figured out how to continue to navigate this, and I haven't heard and I've had several one-on-one conversations haven't heard anybody say that it was anything other than another challenge. With their business at times.

The next question comes from Michael Goldsmith with UBS. Please go ahead.

Good afternoon. Thanks for taking my question. Then comp POI in 2024 of 3.4%. You're guiding to 2025 of 3% to 4% with a headwind of

40 basis points from the collection of private equity loans. So it points to a fundamental acceleration though. Am I thinking about that right? And what's driving that acceleration that you're expecting in the upcoming year? Thanks.

Yes. I appreciate that. Good question, Michael. Yeah. So the 3% to 4% is after the headwind of prior period rent. So you could think about it as 3.4% to 4.4%. So, yes, there is some acceleration and it's really driven by largely by occupancy. And the strength of the occupancy we experienced over this year,

twenty-two past year and twenty-four.

Where we see occupancy, where we see the puck going,

in 2025, I think that that's really the biggest driver of continued acceleration

in our comparable portfolio.

The next question comes from Mike Mueller with JP Morgan. Please go ahead.

Yeah. Hi. I guess with the two new development announcements,

should we see this as a bit of a pivot at the margin back toward development compared to where the focus seemed to be last year?

You know,

I don't know if it's time yet to say there's a pivot. I would say

that

you know, as I've talked about in past calls, the ability to make numbers work certainly is enhanced in, you know, places where we, you know, already own the land. And so the notion of having land that has little or no cost like the Bala Cynwyd asset that we're under construction with. I mean, that helps a ton. Land cost is 15%, 20%, 23% or so of a total project.

That's a heck of a head start. The other thing clearly is, at least at this point in time in the markets we're looking at, most contractors, certainly GCs and subs, are willing to take less of profit margins. And that's because there isn't as much business out there.

Now

to the extent that changes, that changes. But right now, we're able to make a couple of these projects work. I think we're pretty close to a couple more of them. That hopefully we get to later in the year.

But it's not yet equilibrium, if you will. Acquisitions versus development. But while, you know, a year or two ago, it was all acquisition anything, and no development at all. Certainly, there is a start, if you will, to the potential development cycle.

The next question comes from Greg McGinniss with Scotiabank. Please go ahead.

Hey. Good afternoon. I just wanted to clarify the commentary on Santana West. That $0.12 to $0.14

contribution is net of the capitalized interest burn-off. Correct? Correct. And it assumes a fully stabilized asset?

Yes. Look, it's a little bit of what we're taking the hit in 2025 from shutting off capitalized interest and then getting the benefit of all the rent starts. So it's a missed timing. So, yes, it will be net of the capitalized interest that we see, in 2025 having been burned off and then flows right to the bottom line, the $0.12 to $0.14 that we mentioned.

Primarily in 2026.

The next question comes from Ki Bin Kim with Truist. Please go ahead.

Thank you. Good afternoon. How far in advance do you

try to lock up construction costs like lumber, steel,

And although the pair of situations isn't finalized yet, I was just curious how might impact development yields and what kind of compression you might see. Going forward.

Thank you.

Thank you, Ben. The, you know, as soon as we are able to fully design a project. We certainly start with respect to

moving toward a GMP. And

certainly, that takes time. We are basically there on the Hoboken project we just announced, by the way, that's a concrete building. Don't expect any issues with respect to the cost there. We've got some other things coming up that'll be more lumber for as the primary cost.

You can't get it locked down until you have a completely designed project. And we're not effectively warehousing materials in order to lock down money early. So as you know, you're asking one of the questions that's tied to the whole last three weeks, if you will, of the Trump presidency and where that's gonna lead. There's a lot of unknowns.

As to whether that's actually gonna be impacting construction cost, deal cost, and big tariff related. As the year goes on, as the years go on,

Today,

we're taking no risk, if you will, on the projects that we are starting that we've already announced with respect to cost though. Because they are locked out.

The next question comes from Floris van Dijkum with Compass Point. Please go ahead.

Hey. Thanks. Good evening.

Don, you've built federal into the sort of the preeminent mixed-use owner, developer in the shopping center sector. I think, you know, based on our numbers, you own the three most valuable mixed-use projects in the strip sector.

I'm curious as to

you know, you talked a little bit about being on the war path. Capital allocation, would you prefer to

buy another Assembly Row, for example, or would you rather buy five Virginia Gateways, which would be similar kind of NOI contribution?

If the returns are the same, or, you know, how do you think about that? How do you think about portfolio construction

in three years' time? How many more of these dominant assets do you expect to have in the portfolio? I love the question actually, Floris, but I don't fall in love with properties. At the end of the day, it comes down to the IRR.

It comes down with our belief. Now because we've got very good experience with mixed-use, I think we can underwrite them probably better than most because we have, as you say, a lot of experience that way. That does, in our view, reduce the risk. It also, though, means there's just a certain amount that we're willing to pay to get it.

And so you're not gonna see us in order to have all the mixed-use big projects in the country. You're not gonna see us stepping out of our shoes because the numbers don't work. And at the end of the day, we are allocating capital here as best we can to provide the greatest risk-adjusted return.

So

when you sit and you think about that, the theoretical part of your question is theoretical. If there were five of Virginia gateways versus one Assembly Row, but there never are. Because that's not that's a false choice. It comes down to trying to work on the assets that are on our hit list to be able to get the sellers to transact and then underwrite them with the best knowledge.

The biggest advantage I think we have is that we underwrite well. On that type of project because of our experience that way, and then the reputation of having being federal allows us, I think, to outperform on those type of assets. Because we deal with those tenants, we deal with that type of operation. We're good at it.

So I hope that helps. It's not an either-or. It is a best risk-adjusted capital allocation strategy. That will lead federal wherever federal is.

In the next three to five years.

The next question comes from Linda Tsai with Jefferies. Please go ahead.

Yes. Hi. Maybe just a follow-up on the transaction environment. As you look across

the different formats, are there certain regions or certain retail format types where you see better opportunities in your underwriting?

It's not really. Yan, what do you think about that question?

Linda has.

Yeah. It's a good question and a little hard to answer, Linda, don't know. I, you know, we like again, we like larger centers in, you know, generally, the yields have been pretty good across the board on those centers. I don't know if there's a particular type that is, you know, providing a better or worse yield.

It really probably is case by case. On the asset where it sits in the marketplace and what marketplace it's in. So I think that that's it's hard to answer that one.

Yeah. Not the answer is really not really, but yeah. In terms of preference.

The next question comes from Omotayo Okusanya with Deutsche Bank. Please go ahead.

Yes. Good afternoon, everyone.

Okay.

Quick question on the leases. Again, clearly at 96%

percent occupancy, you guys are driving rent. Pretty nicely. But wanted to talk a little bit about kind of on a qualitative perspective, other things we're doing with lease terms versus retailers to kind of, you know, help you guys build your business. If we just kinda talk a little bit about some of these initiatives and kind of results from them,

Sure. Let me this is Wendy. I'll jump in here. You know, with our knees straight up so high, it really gives us the opportunity to continue to strategically focus on merchandising and growing sales.

We've had a good history of if we can grow that quality of merchants together from a sales perspective, we can drive the rents better. As Don mentioned before, we are we've always been very diligent, I should say, on our contracts and making sure that we have the amount of opportunities and control that we need in those contracts. I would say we're even more focused on sales volumes where we've had the opportunity to say, hey. We're only gonna give you so much term, and if we give you an option on top of that, you need to have a certain sales performance before you can even exercise that option.

So that'll give you some examples of how we're able to kind of work and kind of fine-tune the overall production of our shopping centers.

We have a follow-up question from Juan Sanabria with BMO Capital Markets. Please go ahead.

Oh, hi. Thanks for

allowing me to follow-up. I guess I have a two-parter. One would be just on the guidance page, the $5 million of disposed properties from 2024 POI.

Is that just

the drag residual drag from what assets you sold last year? And I guess what would be the offsetting acquisition benefit? I'm just a little confused about how I should interpret or use that information.

That's the POI. That's no longer that we recognize in 2024. That's no longer in our portfolio. 2025. So, you know, we sold assets last year, Santa Ana I mean, Santa Monica, that reflects, you know, that and others reflects the income that we saw in 2024 that's not in our 2025 guidance. It is me asking about acquisitions too.

What was the second part of the question? Yeah. I guess what

what would be the offset on the acquisition side just to have both sides of the coin?

Well, they're pretty straightforward. We acquired I don't have that off the top of my head, but Virginia Gateway it was acquired let me follow-up with you offline there. It's not something I owe the I need to do some calculations. Can't do it in my head right now.

Sounds good. Thank you.

Yeah. They'll follow question from Alexander Goldfarb with Piper Sandler. Please go ahead.

Hey. Thanks for taking the follow-up. Just going back to Jeff Spector's question on the Cleveland asset. That you guys said that you, you know, you took a look at and, you know, was sort of a market that you would have thought about before, but, you know, it broadens your view.

As you guys think consider new markets, just sort of curious if you're sort of rethinking your traditional type scenarios like high affluent, you know, infill yeah. Not infill, but infill suburban. Or if the way that communities have changed, there's a new way that you're thinking about it. And the second part of that is everyone wants to have, you know, meaningful concentration to allow a platform I assume that's actually difficult to foresee given the limited deal flow.

To, like, see a path to acquiring enough assets. Or you can actually see that even the limited deal flow that we have right now. Boy, you got a lot packed in there, buddy. And I love the question.

It's gonna be a little hard to just do that with one or two cents. Let me try. First of all, a couple of great assumptions in there. The notion of whether federal will go down quality.

In those other assets the answer is

No.

We won't do that. Now because the market some of the markets we're talking about are smaller than the big coastal cities, there are to your other point, fewer great centers. And all we're gonna be looking at

is the best couple of centers in

cities that are still large cities, but not as big as the coast. So, yes, it does become

more

more difficult, if you will,

to own

six or seven or five, you know, in within a particular market, but it does it is not difficult for us to get our heads around the best center or best two centers in a particular market and run them as run them separately, if you will, with a new organization that's aiming for that. So your

your assumptions are generally really good.

There are places that we have not looked at historically that we are comfortable that with the best asset or two in those large cities, but not as large as the coast. That we could take what we do for a living which is merchandised well, to the best retailers, retailers that will be we'll wanna go. Where we're talking to, and we're spending an awful lot of time with those retailers make sure we know where they wanna go so that we can effect change there. That's the kind of stuff that we'll be going for.

They will be the best one or two assets in the market, there will be affluence. There will be population debts.

We have a follow-up question from Steve Sakwa with Evercore. Please go ahead.

Yeah. Thanks. Dan, could you maybe just provide a little more color? I think when you gave those ranges by quarter, it kind of implies, you know, a drop sequentially from 4Q to 1Q and, you know, maybe there's a slower build in the 2Q.

I realized the tax credit might pop in all in the third quarter, but maybe just help us bridge kind of the weaker first half and, you know, obviously, the stronger second half. Yeah. Sure. Sure.

Good question. The guidance $1.67 to $1.70 is roughly down 2.5% from the fourth quarter FFO reported a big chunk of that

is really

a number of seasonality-related numbers. One is occupancy. First quarter, typically, we see tenant move-outs. We are, and I highlighted this, we will see a step down in occupancy into the mid to upper 93% range.

By, you know, by quarter end. You know, just we see that typically every year. Expenses like snow are seasonal. It's been a rough first 40 some odd days in the northeast.

From a snow perspective. So we'd expect that to weigh on us. Hotel income, it's small. But it adds a seasonality component.

You know, parking and percentage rent. You've got cold weather impact on customer traffic. As well as tenants hitting break points.

The speaker line is back on.

Yeah. They're dialing back in now.

Operator, can you hear us?

Yes.

We live in the line?

Yes. You are.

K.

I tick through most of the seasonality impact. That's a big impact. COVID era deferrals, they go away? Versus the fourth quarter?

To the first quarter about a penny? We did issue shares at the end of the year. And that is a couple pennies. And those are really the big drivers that offset the obviously, the charge that we had.

So, you know, that's really likely to be the big driver. And then just ramping back up of occupancy in the second quarter. Shows the improvement of the trend. And, you know, so similarly for, you know, our comparable growth.

Also steady improvement

from the first quarter through the second and peak out in the fourth quarter.

We have a follow-up question from Floris van Dijkum with Compass Point. Please go ahead.

Hey, Dan. A follow-up for you. I wanted to talk about a different kind of snow. Your S and O pipeline of 210 basis points. Can you quantify the rental impact of that?

Yeah. Total rent associated with our comparable snow, which is just what's in the comparable pool, is a little over $25 million. We also have leases signed in the non-comparable pool that take us up towards $42 million, called $41-$42 million. We would expect that of the $41-$42, 80% of that will be in 2025 with the balance in 2026. And that will be weighted more heavily towards the second half of the year.

We have 55% of scheduled starts in the second half of the year. And 25 basis, you know, 25 points of the 80 points being in the first half.

This concludes our question and answer session. I would like to turn the conference back over to Leah Brady for any closing remarks. Please go ahead.

Look forward to seeing everybody in the next few weeks. Thanks for joining us today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.