Brian Finnegan: Yes, Greg, it’s a great question. And it really speaks to what Jim highlighted in terms of the credit quality of our small shop tenants. So it’s great QSR operators, whether those are national public companies or multi-unit franchisees, it’s tenants in the wellness category, whether that’s boutique, fitness or medtail which we’re doing a lot of business with. And there’s some really cool new concepts that we’ve been able to take from different parts of the country. You look at Dave’s Hot Chicken that started off at a truck in Los Angeles, that’s now expanding nationwide towards cheese tacos out of Austin, Texas. So we’re bringing a lot of cool concepts into the portfolio. The Tatte Bakery that we added this quarter is another one.
And I think it really speaks to just the asset class and how great restaurant tenants and great operators are looking at open-air retail. We signed a lease with the Capital Grille that will open later this year in a former Pier 1 space at one of our redevelopments. So the depth of that small shop tenancy continues to be very strong. The credit quality continues to be incredibly strong, and they’re driving a ton of traffic to our centers. So we remain really pleased with what we’re seeing.
Greg McGinniss: Are you possibly able to quantify the credit quality upgrade versus, I don’t know, 2019, 2018, some timeframe?
Brian Finnegan: Yes. I’d say local tenancy represents about 18% of our portfolio today. That’s down from where we were pre-pandemic. I can get the exact number, but it’s going to be down from where we were. I would just say broadly and we talked about it on prior calls, we instituted some things coming out of the pandemic in terms of our credit underwriting of our business. Our leasing team, partnering with our financial asset management group, really getting an understanding of small shop tenant business plans, really getting an understanding of the capital that we’re putting to work. And then the competition for space has really allowed us to be selective with the best operators to come in. So in terms of the overall local tenancy, as I mentioned, it’s in the high teens, but we continue to see that improve and we see it improve in terms of what’s coming into the leasing committee every week.
Jim Taylor: We also see it in terms of collections and overall performance. And as Brian alluded to, we’ve really raised the bar across the portfolio in terms of credit underwriting and security and so forth. So we’re really encouraged by how this portfolio is positioned to weather any type of economic cycle.
Operator: Our next question comes from the line of Craig Mailman with Citigroup.
Craig Mailman: I just want to go back to the acquisition topic here and just to get a sense of kind of what the spread differential on acquisition cap rates or yields versus where you guys are redeveloping? Kind of how you think about the appropriate spread on sort of a risk-adjusted basis? And maybe a time, maybe basis to mix in some acquisitions here versus the redevelopment program?
Jim Taylor: Well, I think as you’re alluding to what acquisitions that we’re focused on provide is good current income, but also importantly, good growth in ROI as we think about ways to reinvest, reposition and densify those assets. So we’re more of a value-add type investor. So as we think about acquisition opportunities, they’ve got to underwrite those higher hurdle rates, driven really by the growth in ROI that we see through below-market rents, pad sites, redev, et cetera. And that’s how we think about it. Obviously, the best marginal use of our capital is in the reinvestment pipeline where we’re getting very attractive incremental returns. And we think about our capital in that order. First, to the reinvestment and redevelopment then to external growth.
Craig Mailman: That’s helpful. And then maybe a follow-up here separately, and I appreciate the fact that you guys just gave ’24 guidance. So I get that with this question. But a lot of the commentary this quarter on the strips have been sort of looking to ’25, given some of the drag from Bed Bath and some other tenant issues that happened in ’23 that create some downside. I guess, as you guys kind of look at the time related commencement of the SNO pipeline, maybe the burn off of some drag related to backfilling some of those tenancies, what could be sort of the pickup in ’25 relative to ’24 from just that, the commencement of things that are already kind of done and known relative to some of the headwind burning off on timing?
Brian Finnegan: Craig, this is Brian. I think without giving ’25 guidance because we just gave ’24. I think as you look at what we talked about in terms of the Bed Bath space coming online late 2024, the backfill is late 2024 into 2025. As we continue just to capitalize on the demand environment, we think about New York ICSC, we were talking to tenants about store opening plans for 2025. If you think about national tenant plants today, they’re mostly baked for 2024. So it’s really accelerating what we’re doing across the portfolio from an execution standpoint, getting those tenants open and quickly addressing the space that we took back last year and may potentially take back this year.
Operator: Our next question comes from the line of Jeff Spector with Bank of America.
Jeff Spector: First question, just to put the 100 bps top line impact into context. How does that compare to ’23 actual? And how does that compare to what you would normally put into guidance at the onset of each year?
