And we think that it is something that existing shareholders can appreciate. Again, nobody looks for a dividend cut, I understand that. But it’s also a great entry point for new shareholders as they look at this 2024 plan.
Operator: Our next question comes from Michael Gorman from BTIG. Please go ahead with your question.
Michael Gorman: If I could go back to kind of Todd’s initial question, can you just talk a little bit more about the expectations for some of the baseline portfolio in the 2024 guidance and the NOI run rate? Just looking through the presentations, it looks like there was about a 240 basis point tick down in occupancy in the multi-tenant portfolio quarter-over-quarter. Maybe kind of what drove that? And then how do you see that NOI trending over the course of 2024 — like what’s baked into that number?
Mike Weil: Yes. So first of all, Michael, thanks for the question. The biggest driver of that multi-tenant was just timing. And what I mean by that, in the third quarter, we had an uptick of short term as we do every year and as most retail operators do from seasonal short-term leasing. Some of the backfill leasing that we are involved in is just a little bit of a timing, whether it’s fourth quarter or first quarter. So I don’t see it as any indication of any trend. The pipeline activity has been strong. Our relationships with our national anchor tenants is expanding. The occupancy at the centers is very stable and increasing, which drives the more regional backfill or in-line tenants in the portfolio. So things are very positive on the multi-tenant front, and you’ll continue to see that fill and grow.
And what I’d like to just keep in mind is multi-tenant is only about 22% of the overall portfolio. The overall portfolio at 96%, very stable. You saw the renewal spreads averaged 6%. So again, the real estate is desirable and tenants are paying to stay, paying to renew, which is always a very positive sign, and we will continue to expect to see those results as well.
Michael Gorman: So you’re seeing positive momentum above and beyond kind of that lease plus pipeline number that’s in the presentation for the multi-tenant?
Mike Weil: Yes. As the multi-tenant portfolio is structured, we have 4 regional asset managers that are engaged completely. There’s about 110 properties in the multi-tenant portfolio. So they all have roughly 30 properties that they’re responsible for. They’re talking about renewals, typically 18 to 24 months early. They’re in the market. They’re expanding their national relationships with great companies like Burlington, T.J. Maxx, Dick’s Sporting Goods, et cetera. Now what we’ve published in our pipeline is are deals that are pretty far along, but not yet executed. So there’s a pretty much a fully negotiated term sheet and it’s moved to NOI. So we’re very comfortable putting it in our pipeline numbers. But yes, there are more leases behind that, and we will continue to drive that 22% slice of the portfolio and the overall 96% up higher.
Michael Gorman: And then obviously, a lot of focus on the asset sales. Can you give a little bit more color on maybe kind of the noncore that you went through the analysis and kind of how that breaks down among the different property types and maybe how the management team thought about it? Obviously, the shorter lease term makes sense or maybe some debt maturities make sense. Was there any consideration for certain asset types in the portfolio where you think there’s a meaningful disconnect between how the public is valuing it and where you think you could sell those assets? And then that $400 million to $600 million, is that all of the noncore? Or would there be potential additional proceeds above and beyond?
Mike Weil: Well, first, Michael, I want to respect the fact that this is the first time that we’ve given full year guidance. And in that full year guidance, we’ve identified $400 million to $600 million of dispositions. So I don’t want to day 1, start talking about, oh, and there’s more. Because we’re going to execute on this plan. We’re going to achieve what we said we’re going to achieve. We’re going to drive the AFFO full year, et cetera. But this is a big company and there’s life beyond 2024, and we will always continue to evaluate the portfolio and take advantage of buy-sell arbitrage that’s in our benefit. One thing that I’ll point out, it’s relatively small, but it’s meaningful. So far in this 2024 disposition strategy, we sold $35 million of Truist bank branches from the portfolio.
And we sold them at an average 6.5% cash cap rate. Those are the types of things that the buyers are typically individuals, local buyers. We’ve got local brokers working these assets for us. We are taking advantage of that desire that individuals have to own that type of real estate in their local market. And that’s how we’re going to really take advantage of those spreads. I think 6.5% cap rates on an average remaining lease term that’s about 6 years really speaks to the value of those bank branches. There are other things that we’re not quite ready to talk about yet, but we’re very excited about what we’re anticipating to be disposition cap rates on certain assets. And we will continue to disclose. But we don’t want to over disclose now because of it just makes it harder to dispose of in the market if we put out too much public information.
My last point is we’ve been very focused on disposing from the retail and primarily office part of the portfolio. The industrial continues to really be a bellwether, but we did also look at some assets that we may have had early conversations with the tenant about their long-term plans for the asset and made decisions that this is a good time to dispose of such assets.
