Brixmor Property Group Inc. (NYSE:BRX) Q1 2024 Earnings Call Transcript

Brixmor Property Group Inc. (NYSE:BRX) Q1 2024 Earnings Call Transcript April 30, 2024

Brixmor Property Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Brixmor Property Group Incorporated. First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacy Slater, Senior Vice President, Investor Relations. Thank you. You may begin.

Stacy Slater: Thank you, operator, and thank you all for joining Brixmor’s first quarter conference call. With me on the call today are Brian Finnegan, Interim CEO and President; and Steven Gallagher, Interim Chief Financial Officer. Mark Horgan, Executive Vice President and Chief Investment Officer, will also be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures.

Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website. Before turning the call to Brian, please note that out of respect for Jim’s privacy, we will not be addressing any questions regarding his temporary medical leave and look forward to his return in the near future. We do ask that he join our Brixmor family in wishing Jim good health. As always, please limit your questions to one or two and re-queue for any follow up. At this time, it’s my pleasure to introduce Brian Finnegan.

Brian Finnegan: Thanks, Stacy, and good morning, everyone. I’m pleased to report another quarter of outstanding execution by the Brixmor team as we continue to capitalize not only on the positive trends in open-air retail, but on the work our team has done in transforming this portfolio. That transformation is evident in every observable metric, including same-property NOI growth during the first quarter of 5.9%, and our improved same-property NOI and NAREIT FFO outlook for 2024, as Steve will provide additional detail on shortly. And in conjunction with the tailwinds from the record $68 million of annual base rent and our signed but not commenced pool. And our highly accretive, low-risk reinvestment pipeline, we continue to position this portfolio for long-term sustainable growth.

That growth starts with leasing and we delivered another quarter of excellent results, executing 294 new and renewal leases totaling 1.3 million square feet, including 700,000 square feet of new leases with tenants across a wide range of categories in the open air space. We added another three grocers during the quarter and now derive 80% of our base rent from grocery-anchored centers, while again adding thriving retailers to the portfolio such as Ulta Beauty, Ross Dress for Less, Chipotle, Chick-fil-A and JD Sports. We achieved several noteworthy records this quarter, including for overall anchor and small shop occupancy of 95.1%, 97.3% and 90.5%, respectively, with a sequential small shop gain for the 13th consecutive quarter. We also hit a high watermark in new small shop rents at over $30 per square foot as the improvements we have made at our centers along with a high demand, low supply, retail leasing environment is allowing our team to drive rate across the portfolio.

That ability to drive rate and capture the upside embedded in our below market rents was also apparent in our new and renewal spreads of 20% and our new leasing spreads of 40%. We’re also encouraged by our move-out trends, which were the lowest first quarter result this portfolio has had and led to record retention at over 89% of GLA. In addition, tenant disruption has so far this year remained muted which is a significant factor in our improved outlook for the year, as Steve will highlight further. But to be clear, the positive trends we continue to see in move-outs and retention are not simply a result of the environment we are witnessing in open-air retail but indicative of the transformation of this portfolio and the durability of our underlying tenant base.

The cumulative effect of robust leasing, record portfolio retention, low move-out activity and a stable tenant base, are also reflected in our improved same-property NOI outlook for the year of 3.5% to 4.25%. As the team remains laser-focused on accelerating rent commencements across the portfolio including from space we recaptured last year. Moving to reinvestments. Our team stabilized $11.6 million of projects at an incremental 12% return and now has an active pipeline of over $400 million of projects and an incremental 9% return, of which we expect to stabilize approximately $200 million of this year. This includes some of the company’s most high-profile projects like Roosevelt Mall and Plymouth Square in the Philadelphia market and the first phase of Pointe Orlando across from one of the busiest convention centers in the country in Orlando, Florida.

On the external growth front, as Mark can touch on in Q&A, we are beginning to see transaction activity increase and more opportunities to put our platform to work. Particularly following the $69 million of attractive capital that Mark and team raised in the first quarter through dispositions. We took advantage of one of those opportunities last week in Long Island, New York, where we purchased a grocery-anchored asset adjacent to a center we already own, consistent with the clustering strategy we have deployed with great success over the last few years in places like Southwest Florida, Southern California, Houston, Atlanta, Philadelphia and Chicago. And while we expect to see more opportunities in the transaction market in the balance of the year, we will remain disciplined as a higher interest rate environment persists, and our self-funded internal growth strategy allows us to be patient on the external growth front.

Before handing it over to Steve for a more detailed review of our financial results, I would like to thank all of you that have reached out with your thoughts and well wishes for Jim. The outpouring of support has been overwhelming, but not surprising, given both the person that he is and the impact that he has had on this industry. As Stacy noted out of respect for Jim and his family, we won’t be answering any questions outside of what was in the release. but do look forward to his return in the near future. With that, I’ll hand the call over to Steve for a more detailed review of our financial results. Steve?

Steven Gallagher: Thanks, Brian. I’m pleased to report on a very robust start to 2024 as we continue to capitalize on the strength of the current leasing environment and the momentum generated by our portfolio transformation initiatives. NAREIT FFO was $0.54 per share in the first quarter, driven by same-property NOI growth of 5.9%. Base rent growth contributed 380 basis points of same-property NOI growth this quarter, reflecting continued strong leasing spreads growth in build occupancy and a historically low level of first quarter move-outs. In addition, net expense reimbursements contributed 90 basis points driven by the growth in build occupancy. Revenues seemed uncollectible, was slightly positive in the quarter and contributed 60 basis points of same property NOI growth due to the lower tenant disruption and the timing of annual real estate tax reconciliations collected from cash basis tenants.

Also of note, as indicated in our initial guidance for 2024, first quarter FFO benefited from $0.01 of savings associated with the CFO transition, including the reversal of stock compensation expense. As Brian noted, we are very pleased to have achieved portfolio records for our total, anchor, and small shop lease rates, reflecting the demand from retailers to locate in our centers and the substantial progress we have made in leasing space we captured in bankruptcy last year. As such, we ended the first quarter with a 450 basis point spread between lease and build occupancy and our signed but not yet commenced pool totaled a record $68 million, which includes $60 million of net new rent. The size of the pool continues to grow despite commencing approximately $12 million of annualized base rents since the end of the year.

In addition, the blended annualized base rent per square foot on the signed but not yet commenced pool is $21.11, approximately 23% above our portfolio average, reflecting the below-market rent basis in our centers that our team continues to capture the upside on. We expect approximately $41 million or 61% of ABR in the signed but not commenced pool to commence in the remainder of 2024. From a balance sheet perspective, we continue to hold the proceeds from our $400 million January bond offering in stable, high-yield accounts in advance of repaying $300 million of our 3.65% bonds when they mature in June. At March 31, we had a total liquidity of $1.7 billion, and our debt-to-EBITDA on a trailing 12-month basis was 5.9 times, leaving us well positioned to execute on our business plan and with the flexibility to opportunistically access the capital markets.

And since last quarter’s call, our credit rating has been placed on a positive outlook by Moody’s, recognizing the improvements that have been made to the balance sheet over the past several years. In terms of our forward outlook, given the continued strength in the leasing environment, we have increased our same-property NOI growth to a range of 3.5% to 4.25% and comprised of a 425 to 475 basis point contribution from base rent, which includes approximately 40 basis points of top line drag at the midpoint from national tenant disruption. As we have better visibility at this point in the year. With respect to revenue deemed uncollectible, a significant portion of the outperformance in first quarter, as I indicated earlier, was timing related.

As such, we still expect revenues being on uncollectible to end the year within our historical run rate of 75 to 110 basis points of total revenues. But the signs we are seeing in our tenant base are encouraging with strong payment trends illustrating the improvements in the credit quality of our tenants. In conjunction with the increase in our same-property NOI expectation, we have raised our guidance for 2024 NAREIT FFO to a range of $2.8 to $2.11 per share. In summary, we are grateful for the continued execution by the Brixmor team as we continue to create value for our stakeholders. And with that, I turn the call over to the operator for Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question is from Samir Khanal with Evercore. Please proceed.

Samir Khanal: Hey. Good morning, everyone. I guess maybe help us unpack the same-store NOI guidance, the revised one, what you’re assuming sort of this time around for bad debt assumptions? Thanks.

Brian Finnegan: Why don’t I take that first, Samir, and then I’ll hand it to Steve. So when we spoke on the last call, our guidance provided for a fairly wide range of tenant disruption. And we felt as though and talked about it, we had the ability to outperform. And as you look at the start of the year, tenant disruption has effectively been nonexistent, right, with the Joanne Fil filing quickly going through the process, no downtime in rent and no store closures. And then if you look at all we’ve done across the portfolio to improve the tenant base, you see record low move out, you see record retention there. So we feel like at the start of the year has been pretty strong from that regard. Now we’re still watching certain categories and certain tenants. But we feel pretty encouraged in terms of what we’re seeing on the bad debt front. And then maybe I’ll hand it to Steve in terms of how that flows through the guidance.

Steven Gallagher: Yes. I mean from a guidance perspective, if you remember going back to our initial guidance, we had about 100 basis points of drag in same-property NOI for this tenant disruption on — and we — as I said in my prepared remarks, that’s sort of down at 40 basis points of same-property NOI drag. And then while we’re seeing great trends in the revenue seems uncollectible, we still think we’ll end up the year because it’s mainly timely timing related in the 75 to 110 basis points of total revenue. So hopefully, that helps.

Samir Khanal: Okay. And then just shifting over to the transaction market, given what rates have done, maybe talk around kind of what you’re seeing out there on buyer appetite? And how do we think about your strategy? The strategy this year? I mean, should we expect you to be net acquirers this year?

Brian Finnegan: I’ll just take it quickly, and then I’ll hand it to Mark, Samir. We have talked on the last several calls, you’ve heard Jim talk about it about being patient, being prudent and the market starting to come our way a little bit as it relates to seller expectations. And as I pointed out in my opening remarks, we started to see that in the deal we closed last week. But let me let Mark touch on the overall transaction market and what he’s seeing.

Mark Horgan: Thanks, Brian. Well, one of the things we mentioned on the first quarter call that we think we’ve got the ability to source some well-priced asset level capital out of our portfolio. So if you look at those sales in Q1, the blended cap rate was a mid-four cap. And in part driven by the sale of Mall at 163rd, which we do think is a really good example of our capital allocation discipline. When we sold that asset, we kind of looked at the value creation we thought would be available in redevelopment and where we transacted, we thought we were having that value today, which we do think provides really well-priced capital to push the growth plans forward in the market. With respect to acquisitions and the overall market, as we’ve highlighted, we were pretty cautious on the market, but we’re definitely seeing more attractive opportunities today as sellers that come to the market are much more realistic in terms of pricing given some of the capital market changes that you’ve referenced.

We will say we’re really pleased with the close of West Center last week. We bought that at a low seven cap in a very affluent part of Long Island next to a center we call three villages. And we see really strong mark-to-market at West Center, but ultimately, as we continue to cluster investments as we have in the past, we see the ability to drive value across both centers on Long Island. So we think we’ll be a bit more constructive on acquisitions going forward. We’re not going to give guidance as we don’t with respect to volume here, but you should expect us certainly disciplined but we are seeing a building pipeline today.

Brian Finnegan: And that last point, Samir, is important. I’d just end with that is we are going to remain patient. We — with our self-funded business plan with the growth, and you’re seeing the growth come through in our operations, the growth that we’re delivering quarter after quarter. It’s not that we have to go the external growth front from an acquisition standpoint, but we’re encouraged by what we’re seeing in the transaction market overall.

Samir Khanal: Thank you.

Operator: The next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed.

Todd Thomas: Hi. Thanks. Good morning. I just first wanted to touch on the leasing environment, which has continued to be strong. In other sectors, we’ve heard about capital markets volatility and the higher interest rate environment having an impact on tenant demand, longer decision-making also having an impact on expansion plans. It doesn’t sound like you’re seeing that across your portfolio based on your comments around leasing demand. Is that the right read? And why is tenant demand in retail not necessarily being impacted to the same degree?

Brian Finnegan: Well, I think on the first part, Todd, we remain incredibly encouraged by what we’re seeing on the leasing front. If you look at the volume during the quarter of $700,000. It’s in line with the volume that we did first quarter of last year. And that’s after we grew occupancy 110 basis points. We talked about coming out of New York ICSC tenants there, we’re looking at plans for stores in 2025 and 2026. That’s still the conversations we’re having as we have a full schedule heading into ICSC Vegas this year. And I think in terms of why you’re seeing it, it’s really a couple of reasons. First, the supply environment remains incredibly constricted. There’s just not a lot out there in terms of vacancy. And then you just look at the uses that continue to thrive in this environment, and it’s everybody who we’re doing business with, whether that’s specialty grocery, whether that’s health and wellness, whether that’s QSR, restaurants, whether that’s value apparel, these businesses continue to perform well.

They’re very intentional with their store opening plans. They know the markets that they want to be in. And they want to get ahead of space that you could potentially get back. Our team is not just talking to them about our vacancies, of which we have a lot less today. They’re talking about the spaces that we could ultimately get back like during the quarter where we took back a big lot that was expiring next year, and we backfilled that with an Aldi at a 50% rent uptick. So these are the types of tenants that are expanding, and we remain incredibly encouraged. And look forward to the ICSC show here in a couple of weeks to continue to push things forward.

Todd Thomas: Okay. And then, Steve, you mentioned that revenues deemed uncollectible at 75 basis points to 110 basis points of total revenue. That’s the historical level for the portfolio. You maintained that here for the year. But with the one — first quarter sort of favorable result, that would imply an above-average level of revenues deemed uncollectible in the remaining quarters. Can you just reconcile that against the sort of the positive comments here about tenant health and the lack of tenant disruption so far to date?

Steven Gallagher: Sure. As we’ve discussed in the past, cash basis accounting can lead to volatility in revenues deemed uncollectible from quarter-to-quarter. As I mentioned in my prepared remarks, we recognized $2 million net in the quarter related to collections of real estate tax reconciliation from cash basis tenant. And we expect this to reverse as we move through the year. And it’s typically, the seasonality on these nonrecurring collections is focused in the first half of the year versus the second half of the year. And Todd, look, this is kind of a first normalized year where we’re not seeing as much on the out-of-period collection front. So as we came into the year, we felt like we were appropriately conservative in terms of that line item.

And we’re seeing some good trends and we’re certainly encouraged. There are categories and tenants who were keeping an eye on. But to your point, and as I pointed out in my opening remarks, all the work the team has done across the portfolio has positioned us for a stronger underlying tenant base. But we felt it was prudent as we are in kind of a normal course year for the first full operating year since pre-pandemic to really get some further trends on that number as we balance through the year.

Todd Thomas: Okay. All right. Thank you.

Operator: Thank you. The next question comes from Alexander Goldfarb with Piper Sandler. Please proceed. Alexander, your line is live.

Alexander Goldfarb: Sorry about that. Yes, yes, I’m here. Sorry, I had the mute on. Good morning down there. Just first, obviously, wishing Jim speedy recovery and Brian and Steve, testament to you guys for such a strong quarter despite your coach, sidelines. So obviously, speaks to the team and culture that Jim has built. Let me ask you this first question, Brian. You know that I’ve asked a lot about ways that you guys have improved your leverage with tenants to drive NOI, et cetera. But specifically on the leases themselves, not the CapEx, not the commissions or anything like that but on the actual leases, are you guys finding ways to increase the actual cash margin on the leases? Or the way the lease structures are, which I’m assuming are mostly triple net, there’s really not any leverage that you have in there to have — to expand your — the cash that you drive out of the leases themselves, whether it’s recoveries or billbacks or whatever?

Just trying to think along those lines.

Brian Finnegan: Well, appreciate the kind words about Jim. We certainly miss him. And I think the results speak to really the confidence in the broader team in terms of the team’s ability to continue to deliver. And we’re really excited by it and the work that they did at the start of the year. One of the things that’s been encouraging to us is not just what you see in rate. It’s not just what you see in rent increases, which across the portfolio this quarter, our new rent funds were about 2.5%. That’s versus in place of 1.5%. We continue to make a lot of progress there. Small shops were closer to 3%. But to your point about what are some of the other things we’re doing, we are absolutely looking at CAM language and softening that up, looking at carve-outs and space — carve-outs in certain leases to ensure that the investments that we’re making in our centers we’re getting paid back for.

We’ve been extremely focused on eliminating noncumulative caps across the portfolio, really eliminating caps in general. And then we have been laser-focused in terms of where we are deploying fixed CAM. We’ve done that with a lot of local tenants. It’s about 22% of our ABR. We’re growing those fixed CAM rates at over 4% today. And when we’re setting those rates, we have really good visibility in terms of the OpEx spend. So there are other things in the lease in terms of how we’re driving income. The other thing that we’re doing, particularly with restaurants in this environment is being much more aggressive on the percentage rent front, right. Really understanding what their sales projection is at the shopping center, really understanding. So we’re setting those breakpoints appropriately so we cannot just drive a very high rate initially like you saw with the small shop rents at $30 a square foot during the quarter, but that we can also recognize some upside if they perform well.

So all these things, I think, does speak to the environment. But it’s not just the environment, right? It’s all the stuff that we’ve done in our shopping centers here over the past few years in terms of the tenants that we brought in, the traffic that we’re generating. It’s allowing us to drive these things with really great tenants.

Alexander Goldfarb: Okay. The second question is, and maybe this is just sort of urban myth or social media legend. But you hear Ozempic and all these weight loss drugs is deterring people to cut down on what they eat, although try — go into a Chick-fil-A or in and out and you wait in line forever. So is all this weight loss stuff, the Internet legend, is this just sort of myth? Or are you actually seeing or hearing anywhere food tenants actually talk about this?

Brian Finnegan: Well, I think Internet and Myth aside, wellness has become more essential. And what I mean by that is, if you think about how people are thinking about their overall health and fitness expansion and medtail expansion, and the quality of better operators in the QSR space. There was an article out in the journal, I think, last week related to how people are willing to pay more at Chipotle than they are at McDonald’s because it’s a healthier proposition, right? They feel like they’re getting healthier food. So I think this does tie into overall wellness. And generally, when we’re seeing that folks get in shape, they want to stay in shape. And so there we’re seeing a better quality of gym operator. We’re seeing a better quality of medical service use at our shopping centers.

And then you are seeing a better quality in terms of those higher end healthier options like Sweetgreen and Cava that are really focused on expanding their suburban footprint. So again, whether it’s Ozempic or something else, what we are seeing is that people are much more focused on their health and their well-being and we’re seeing that come through in the deals that we sign in our centers.

Alexander Goldfarb: Okay, thanks.

Operator: The next question comes from Juan Sanabria with BMO Capital. Please proceed.

Juan Sanabria: Hi. Good morning. Hoping for speedy recovery for Jim as well. I just wanted to piggyback on Alex’s question there, the story this morning out of Walmart shuttering it’s health centers. I mean again, just Internet myth or anecdotal, it does seem like there’s been a huge proliferation of urgent cares and understandably so with just the ease of meeting the customers where they are. But just curious on how you’re feeling about your exposure to some of this medtail or urgent care, specifically in the credit risk there? Or is that trend kind of past its peak? Just curious on your general thoughts to that.

Brian Finnegan: I think medtail has become an important part of our shopping centers. I mean, back to Alex’s question just in terms of our lease structures, right, our lease structures today allow for more fitness. They allow for more medical, they allow for restaurants that are closer to their shopping center to their stores. They allow for pads that are closer to their stores because these retailers use anchors, they recognize the traffic, they recognize their customer that’s going to these places. Medtail has been a good component of our tenant mix in terms of urgent care operators, in terms of dentists, in terms of some of the medical service operators. We’ve even done some things with kind of pet hospitals, too. The interesting thing about these uses, Juan, is that they’re incredibly well capitalized.

Because they are more capital intensive. They’re more expensive build-outs, but they’re generally the highest rent payers in the shopping center because they want some of the most high-profile spaces. So we think it’s a good component of our shopping centers. And just as it relates to — since you bring up credit underwriting, I think it does go back to some of the trends that we’re seeing in retention and move-outs. We put a very robust credit underwriting process and coming out of COVID, and you’re seeing that pay dividends in terms of the underlying credit base, the collection trends that we’re seeing, as well as what’s coming through in those move-outs and retention. So that’s something, even with those uses, we’re laser-focused when we are putting some capital to work in terms of what the underlying credit base is.

And so far, we feel pretty good about the operators who we’re bringing to our centers and the strength of those signatures.

Juan Sanabria: And then for my follow-up. Just hoping you could expand a little bit on clustering and where really the opportunity lies? Is it just to be more efficient with internal cost of running those assets that are close by maybe using man-hours or FTEs for both centers versus having to double up if they were further apart. And/or is it related to being able to more efficiently put retailers where they are best placed. So just curious if you could expand on the importance of clustering for you?

Brian Finnegan: Why don’t I have Mark take that.

Mark Horgan: Yes, it’s a number of the items you hit on. We have got a very strong platform here, and we find and we put assets in front of the platform, we perform better. We performed better because of some of the issues you’re talking about. We can be much more efficient with operations. When you’re a large landlord in a market, you can be very efficient with the contracts you get for cleaning and things like that. Ultimately, when you’re a larger landlord in a market, you know where retailers want to be. You’ve got the leasing folks who are laser-focused on signing where retailers want to move to and that helps us both with the assets we run today. It also helps us find opportunities to buy something and know where we can drive value.

So we’re not really guessing where the value can be driven on acquisitions. We have a real clear business plan as to where retailers want to be what the center is missing, what’s needed to do to get the center up to speed. And ultimately, one of the things we see is we can be more efficient than many small landlords in these markets. So we see that flow through the NOI almost day one on these acquisitions.

Brian Finnegan: Yes. And Juan, Mark, highlighted most of the points, I would just add to the point of understanding the market or you think about Philadelphia Plymouth meeting, where our office is down there, we own two assets, one of the best intersections in that submarket. If you’re a small shop tenants coming into that market, you’re coming to us, right? And that’s the same thing in San Diego. That’s the same thing in Houston. It’s the same thing in the center that we just bought in Long Island. So it does allow us, both from a merchandising standpoint to really see some of the best operators that are coming into those markets. And certainly, when you control both sides of the street or you’re close by, it allows us those efficiencies that Mark was talking about, but also improves our ability to drive rate.

Juan Sanabria: Thank you.

Operator: Thank you. The next question comes from Craig Mailman with Citi. Please proceed.

Craig Mailman: Hey. Good morning. Brian, I just want to go back to your commentary on the — kind of lower churn, higher retention here. I fully understand it’s always better to keep a tenant lower CapEx. But as you guys are trying to remerchandise centers and kind of bring ABRs up over time. How much of kind of a toggle do you guys have versus having that retention high versus making sure you’re not renewing tenants that maybe don’t fit the five to 10-year strategic vision for that center?

Brian Finnegan: Yes, it’s a great question and just say that we’ve never managed this portfolio for occupancy. Occupancy gains are the results of all the good things that we’ve been doing across the portfolio. And we’re going to continue to be opportunistic and very intentional in terms of proactively taking space back. If you look at our anchor deals over the last year, about one-fourth of them were space we took back proactively, right? So when we see the opportunity to drive rents or to put a better tenant in. And to do it accretively, we’re going to do it. The interesting thing is really why we’re highlighting the retention and the move out just because we have significantly improved the tenant base of this portfolio. Those tenants are staying with us, they’re investing in their businesses, and they’re renewing at among the highest rates that we’ve ever had in the portfolio.

So it’s really been a good mix. I do feel like an occupancy at these levels, it allows us to be much more opportunistic in terms of ultimately when we do take space back. But particularly in this environment, as I mentioned, the discussions we’re going to be having, we’re having them now, but we’re certainly going to be having them in a couple of weeks at ICSE, are going to be about, Hey, what’s coming back next year? And what’s coming back in 2026? So that tenants can get ahead of that. So I really appreciate the question. It’s still a very important part of what we do but we were encouraged, though, by the retention trends and the low move-outs as well to start the year. I just think it speaks to the overall health of the portfolio.

Craig Mailman: And as you guys are renewing some of the tenants that are seeing the value and the work you guys have done. I mean, are you seeing a noticeable uptick in some of those renewal escalators or I know, Alex, on some of the terms and things. But are the negotiations easier to push through some of these things that may be pre-renovations were kind of a steeper hill?

Brian Finnegan: Yes. I think look, that’s coming through in our renewal growth. And I think we’re now nine consecutive quarters over 10%, renewal growth across the portfolio. It’s coming in those escalators and with small shops during the quarter, we were pushing close to 3%. In some parts of the country, we’re doing 3% to 4%. I mentioned we are converting folks to fix CAM in some cases, particularly local tenants where we know we can set that rate. We feel good about it for the next several years, and we’re getting strong growth rates of 4% to 5% in that. So yes, that’s certainly a component of what we’ve been doing, and it is a big reason to that or the primary driver of that is all the work that we’ve done in our centers, but it’s also really expensive to move a business today and the environment in terms of supply environment and availability is pretty tight, too. So that’s helping us as well.

Craig Mailman: If I could sneak one more in for Steve. The 61% of ABR to commence the remainder of the year, is that 61% of the annualized? Or is that on a kind of — what’s going to actually impact 2024?

Steven Gallagher: Yes. I mean the amounts commencing during the year, I think it’s also listed in the supplemental is about 41%, but we do expect it to sort of come in ratably throughout the year.