Operator: The next question is from Dori Kesten with Wells Fargo. Please go ahead.
Dori Kesten: Thanks. Good evening. You started the call with the expectation of 100 basis points of small shop occupancy and 250, I believe, for anchor to be gained over the next 18 months to two years. Would you expect your leasing spreads to remain comparable to what you’ve seen of late also for that period?
Donald Wood: Yes. I think I would, Dori. It’s a good question. We talk about it a lot in the notion of how to lease up, what tenants, the appropriate level of merchandising, what they will do to the rest of the shopping center. I mean, we are picky in terms of how we do that. And so the — frankly, I think if you lease up too fast, you’re probably leaving money on the table. And so the notion of being able to get the right tenant and get paid for that, that’s something that’s really important to us. And combine that with the credit, the type of credit of those small shop tenants, the guarantees that we get, the — we very rarely do something with a first-time retailer. It’s almost always with a regional player or someone that’s got a number of stores.
We get the entire organization most of the time on the lease from a credit perspective. So for me, that’s the key part of where we create the most value in the company. It is that small shop stuff that works off of the anchors. And on the anchor leases, I can’t empirically say this, but I believe the terms of the anchor deals that we get, including the bumps that are in those leases and the strength of those leases, I think they’re superior. I think they’re some of the strongest leases that those tenants do. So it’s not just about occupancy. It’s about profitability. And that balance is something we take really seriously.
Operator: The next question comes from Jeff Spector with Bank of America. Please go ahead.
Jeffrey Spector: Great. Thank you. Can you provide an update on any office lease progress at One Santana, including there was some news that maybe PwC is looking for space there? Thank you.
Donald Wood: Jeff, no, I cannot name a tenant. Where are my comments? By the way, you just cost me $10 with Melissa. I said if I made the comments that I made in here, which are real clear with respect to where we are, the deals we have, how close we’re getting, et cetera, but we don’t have signed leases yet, I said if I made those comments in there, there wouldn’t be a question about the same thing. But you are and you cost me $10. I’m going to bill you on that, if you don’t mind. That’s really all I can say about that. You should be optimistic because we sure are in terms of the ability to keep moving forward. But no, I cannot name a tenant.
Operator: The next question is from Hongliang Zhang with JPMorgan. Please go ahead.
Hongliang Zhang: Yeah, I guess a follow-up to the prior question. If we were to think about leasing at Santana West, if you were to get a tenant in, would you fully — would the capitalized interest fully burn off there? Or would it be a proportional amount. Thanks so much.
Donald Wood: We expect to continue to capitalize interest on the balance of the year 2024 to deliver space to tenants. We would expect that we would be able to match up the reduction in capitalized interest with the rent starts. So that should be expected.
Dan Guglielmone: Consistent with what we’ve discussed in the past, there’s no changes in our expectation with regards to that and that policy.
Operator: The next question is from Haendel St. Juste with Mizuho. Please go ahead.
Ravi Vaidya: Hi, there. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well? What’s your early read for ’24 same-store NOI? Some of your peers have particularly expect next year’s same-store to be above average again. Can you talk about that a bit and the levers that you could possibly pull to achieve above-average same-store level for next year?
Dan Guglielmone: Look, I think, as I said in my statement, we are going to give guidance for 2024 in detail on our call in February, okay? With regard to same store, we will be growing POI next year. We said that before, I’ll confirm that here. But that’s about what I’m prepared to say at this point.
Operator: The next question is from Anthony Powell with Barclays. Please go ahead.
Anthony Powell: Hi. Good evening. I guess a question on the residential piece of the business. Obviously, the multifamily REITs had a pretty tough earnings season. So what are you seeing there in terms of rent renewal rates or whatnot? And how should that perform in the next few quarters?
Donald Wood: Yes, you should be very positive about that. If you think about where our residential is, it’s only in four places, four or five places and they’re all at the mixed-use properties that have high rents on — in general because of where they are and the right growth is generally better because of where they are. We’re seeing that particularly true at Assembly in — just outside of Boston. We’re seeing that equally true in Silicon Valley. And so when you kind of think about the particular markets that we’re in and you think of the cost of home prices and home — and mortgages that effectively go there, renting at fully amenitized, great locations looks awfully good. And that’s our business model. So I can’t really talk generally about the residential world because I don’t know it outside of these mixed-use environments in our four big projects. I hope that’s helpful. Be positive about it.
Operator: The next question comes from Linda Tsai with Jefferies. Please go ahead.
Linda Tsai: Hi. It looks like your weighted average lease term moves around each quarter, but stays pretty consistent in the 6.5 to 7.5 years. I just wonder if there’s any desire to drive lower lease terms to capture more upside, given the low retail supply.
Donald Wood: The only thing I would say to that is it depends on the deal. And so when you’re sitting there and not only you get a strong starting rent, but you can get strong bumps in there, we’ll lock that in. And that’s a key part of what it is that we do. In terms of the 8.8 years this time versus 6.5 or 7.5, that’s simply a matter of mix. Now there are certainly certain locations where certain things are happening with redevelopment or whatever else, where we’re purposely trying to keep it tighter and shorter period of time, and we do stuff like that. But overall, portfolio-wide, I really do, Linda, I’d really love you to understand those and look hard at those contractual bumps because they’re a real differentiator over the term of the lease.
Operator: The next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey, thank you. Don, as we think about the sort of the traditional items and tenant leases that they like, optionality on renewals, co-tenancy, use restrictions, are you starting to see the tenants give on some of those as availability dwindles and they need, yes, there’s less space especially at the anchor level? And if you have, can you give some tangible examples of where you’ve seen tenants make deals today, like the big sort of tough negotiating tenants where they’ve made deals today that they wouldn’t have made a few years ago because of the dwindling availability.
Donald Wood: Good question, Alex. It really is. I’m going to turn it over to Wendy to make sure that you get the specifics.
Wendy Seher: Alex, so I would say the answer is yes overall. We are seeing with the really, especially from the better specialty brands, they are not able to find the kind of product that they’re looking for. And so there is a big demand for some of our Bethesda Row and the growth, for example. I was just talking to the leasing people for Bethesda Row, and we have a waiting list of 10 to 12 tenants that are trying to get into Bethesda Row in the right format they’d like to join us. So when I’m hearing about waiting list, yes, we’re able to drive those terms a little bit better than we had before. We just — it’s pretty exciting. We just signed a deal with Bloomingdale’s department store to go into The Grove and just over 21,000 square feet, a great opportunity.
I can’t obviously get into the specifics of that deal. But I will tell you from the time we started the lease until we signed it, it was 40 days. So it was a clear desire on their part to get that deal done in a geographic area that we feel pretty strong will not only benefit them but will benefit our shopping center.
