Craig Mailman: Okay, great. Thank you.
Operator: Thank you. Our next question comes from Alex Goldfarb with Piper Sandler. Your line is open.
Alex Goldfarb: Hey, good afternoon out there. So two questions. First, the rating agencies. Looking at your metrics on Page 9 in the disclosures, you’re well within – well under all the different thresholds. So clearly, Bricks finally got the rating agencies to upgrade them. So is your view that rating agencies are still thinking like death of retail, Amazon is going to kill everyone? Or is this just slow pace, the glacial pace, they move out? Or what’s the feedback they’re giving you for why, otherwise, your balance sheet improvements. I mean, John, you’ve been focused on cash flow growth for since before COVID, like what’s the holdup that’s keeping them where they are right now?
Heath Fear: I don’t think it’s 1 size fits all, Alex. So going through on S&P, for example, it was just about them being slow. We finally convince them to give us an improvement in our outlook. It’s very rare for them to just go ahead and skip an entire grade. So they told us so long as we stick to our business plan over the next 12 months to 18 months that should mature into a full upgrade. That’s around the same time it took for Bricks more to mature from the upgrading their outlook to a full upgrade in the rating. So again, we expect in about 12 months from now that, that should be – that should change. Moody’s had some staff changes. So they had someone there name was Phil Kibble [ph] he worked there for a very long time.
He left. We had sort of a temporary person in between and now we’ve got a new person, and we’re very optimistic based on recent discussions that will ultimately move them as well. Again, something we can’t promise. But to your point, when you look at our ratings outlook and you compare it to some of our peers and you look at their ratings grid, it really doesn’t make any sense, right? And yes, they’re probably a little slow to drop the narrative against retail, but I think we’ve gotten in there. So again, this is – this whole thing is – it’s not a destination, it’s a consistent journey. So we’re constantly going to be talking to them. And once we get everyone at that BBB/Ba2 range, we’re going to start pushing them for the next rating grades up because honestly, if you look at our metrics, I think we’re solidly in the BBB+ area.
Alex Goldfarb: Okay.
John Kite: Yes. The only thing I’d add to that – the only thing I’d, Alex is, I mean, clearly, the fixed income community knew that, saw that. In some ways, we’re the beneficiary of that in the sense that the spread that we printed was a good spread, but not all the way where it should have been, but that’s why we were 10 times oversubscribed. And so it’s a process. But I think the most important thing that happened when we did the deal, was that there are a lot of people talking about the market, talking about opportunities, but our capital markets activities over the last three years have been spot on. Each deal we’ve done, each time we’ve made the decision have been absolutely 100% great. And that is not by accident.
This is something we talk about all the time. We do a ton of research, we’re well versed in the capital markets, and we took advantage at that point in time and others didn’t, right? And here we are in a volatile world again. So, I think the team deserves a lot of credit for its forward thinking when it comes to capital markets and when it comes to capital deployment, very important as well.
Alex Goldfarb: And I’m sure that they will use that at Comp Committee this coming year, John. Second question is…
John Kite: I hope they do, Alex.
Alex Goldfarb: I suspect that your Comp Committee is not a pushover. Second question just goes to the same-store guidance. For FFO, you guys came in, hit the street the FFO was spot in despite normalization of bad debt despite this – the White Plains movie theater, et cetera, but the same-store is on the light side. So there definitely seems to be a disconnect. And it seems like the same-store is not representative of what your portfolio is growing. And in fact, given the normalization of credit and the movie theater, your FFO guidance looks better than where it is. So what’s going on with same-store and why the disconnect between same-store and what your portfolio is actually delivering?
Heath Fear: Alex, I can tell you there’s not a disconnect in where we set our same-store hangs together where we set our FFO range. But as I explained in my opening remarks, or certain discrete things that happened, that’s putting undue pressure on our same-store. Probably the biggest one is it’s bad debt. We only had 40 basis points of bad debt last year of total revenues. That’s an all-time low for the company. Now, with our guidance, we’re setting it at 100 basis points at the midpoint. That’s a 90 basis point drag on same-store. We would have been at 2.4% at the midpoint, had we had a normalized bad debt last year. So again, and plus, we had pressure from theater and we had pressure from Bed Bath & Beyond. So I think there should have been some expectation, especially in those numbers that we set forth past November.
A lot of those line items were same-store pressures as well. So again, where our FFO is established and where our same-store is established those track. And our goal is this year, like we did last year. Last year we beat FFO by $0.11. Our goal this year is to do everything we can in our power. It’s early, it’s February. We’re going to do whatever we can to exceed both on the same-store line and on the FFO line. So it’s early. And this is where our guidance is set. That’s where our same-store is set, but we’re optimistic.
