Jeff Edison: Well, let me take a first step then, Bob, you can jump in as well. Lizzie, as you know, we have a very differentiated strategy in terms of what we do. And the way I look at it is there continues to be really strong demand for our properties. If that were to change, that would be the biggest risk. We don’t think it’s going to change in any kind of a shorter time frame with regard to new development where there’s a lot of excess supply, that just is not happening, and we don’t see that happening for some extended period of time. And I think what the advantage of being necessity-based and close to people’s homes is the retailers are –they see that as the place they want to be. And if you come into a market that we’re in, and you’re a national tenant or a regional or local, and you want to be where the activity of necessity retail is, you’re going to want to be near the number one or two grocer, and with that property, we are the preferred location for a lot of the necessity-based retailers.
And because of that, this demand that is driving our results and our occupancy seems to be — to have legs and we don’t see it slowing down. And we do have pretty good visibility into the next six months of leasing and it continues to be strong. Bob, any other add-ons there for Lizzy?
Bob Myers: No. I think the biggest part of our strategy is by having the number one or two grocer in the market. Average footprint of our shopping centers are around 115,000 square feet. Our average inline space is 2,500 square feet. We just don’t have the box exposure. Occupancy is at all-time highs. And to Jeff’s point earlier, staying focused on a disciplined merchandising strategy, where 70% of your neighbors are necessity-based is key. As Jeff mentioned, demand is there. We still see a resilient consumer. If we were going to see signs of something happen, you would see it in your retention and your spreads. And our retention is the highest it’s been in the history of the company. Our spreads are still in the mid to upper teens. We’re just not seeing any slowdown in that, and we’re in a very, very healthy operational environment today.
Lizzy Doykan: That’s helpful. Thank you.
Jeff Edison: Thanks, Lizzy.
Operator: Our next question is from the line of Todd Thomas with KeyBanc. Please go ahead.
Todd Thomas: Hi. Thanks. Good morning. John, just wanted to follow up on the guidance and the adjustments there. The $0.04 offset to the interest expense savings that you mentioned, does that include future equity issuance throughout the year? I guess — I’m not sure I’m following on the $0.04 specifically, just given where the company’s cost of equity is relative to where pricing was on the revolver and the balance that you paid down and also the cap rates that you’re transacting at.
John Caulfield: Sure. So the $0.04, really when you look at the equity that we issued in the fourth quarter, it did tend to be weighted more toward the issuance was higher later in the quarter, but that does not have an assumption with regards to any additional equity issuance in 2024. And so it’s not so much that it was dilution, it was more of an offset. So again, we kept leverage low. I should point out again that we’re 5.1 times levered. We have the opportunity to buy a lot and we think the key part of our strategy that we’re trying to do is match it with our acquisitions and the acquisitions that we closed on and those that we’re looking at is accretive at those levels of equity issuance. But when you look at it, so rather than thinking about it’s a headwind, but it really was replacing interest expense.
And so ultimately, it’s the $0.02 that is — the $0.02 that’s left. We’ve increased guidance by a penny, and then you kind of get into rounding on the last penny, but we wanted to open the year in a position that we’ve got opportunity for growth in the future.
Todd Thomas: Okay. And then, within the $200 million to $300 million of net investment guidance that you maintained, it sounds like you have better visibility early in the year relative to what the back half of the year might look like, I’m just curious on the disposition side, how we should think about dispositions and how they sort of factor into the mix and that sort of 13% or I think 14% of the port portfolio that’s not currently anchored by a number one or number two gross in the market?
Jeff Edison: Yes. Todd, we have our plan to do that and we will put product on the market. The $200 million to $300 million is a net number. So we will be balancing dispositions with acquisitions to get to that number. And we continue to look at the market and if we have the opportunity to get pricing that we find favorable and we’re disciplined — as we’ve said, we’re as disciplined on the disposal side as we are on the acquisition side and that creates a balancing act between pricing returns and what pace we go with the disposition plan. So, we — I think, John — we disclosed what we anticipate being the dispo amount for this year or not?
John Caulfield: We haven’t because of the flexibility that you’re looking for there. I mean, ultimately, we’re looking to solve for a total and we’re feeling very confident about the portfolio that we have. And we look at things strategically, and so that’s where — if we’re looking at it, it’ll be opportunistic. We look at risk management, but we only sold $6 million last year, and if we felt that there was a greater need, we would have done more. So we’re just guiding to kind of a net total number.
Todd Thomas: Okay. All right, thank you.
Jeff Edison: Thanks, Todd.
Operator: Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Please go ahead.
Adam Kramer: Thanks for your time here.
Jeff Edison: Hi, Ronald. Yes, please go ahead.
Adam Kramer: Kramer here on for Ron. Just want to ask an apology, one more about the guide. So if I just look at kind of the full year core FFO number for 2023, I think it was $2.34, makes it a $0.07 increase to the midpoint or to the new midpoint of the guide. Maybe just if you could walk us through how much of that $0.07 is from kind of the same-store NOI and the same-store portfolio versus how much of it is, I guess, from other stuff, right? And I really want to kind of understand — you did kind of a good amount of acquisitions very late in the year, presumably it’s not in your kind of $2.34 run rate, so just trying to think through if there’s any upside for maybe the kind of late in the year acquisition activity, any upside to kind of 2024 numbers.
Jeff Edison: John, do you want to take that?
John Caulfield: Sure. Adam, thanks for the question. So we got into 3.25% to 4.25% on the same-store, which is adding growth to the portfolio on an FFO basis, and our acquisitions while accretive, again, the market was in a position where the spread of — where the cost of capital it certainly improved in the latter half of the year and even relative to ’22. But the private market cap rates didn’t move to the same extent that the public market cost of capital, whether that be on the debt side or the equity side, moved. So the spread between that cost and those acquisitions is closer than it would historically be. So we do have benefit and accretion, but it’s going to — we needed to deliver the growth in these assets and so there is some, but it is not as much.
And again, on those acquisitions, one, we look at them and we’re buying assets that are accretive out of the gate, but also to the point that Jeff has made, we’re focusing on a 9% unlevered return and the continued growth in the portfolio. So that’s another piece. I will say that going against that in the other direction is that, I spoke to the interest rate headwind that persists. So ultimately, even though right around our Investment Community Day and kind of forward, there has been an improvement in the debt cost of capital. It’s still the rate piece. It’s still a $0.07 headwind at the midpoint of what we’re estimating in that. So it’s a combination of those pieces. I think the acquisitions will continue to deliver and position us very well to deliver growth and support our growth progress for the future, but they add less early.
Adam Kramer: Just maybe switching gears, I wanted to ask a little bit about kind of small shop, local tenants health, but also kind of demand for those types of formats, kind of given some of the credit card data, some of the other kind of economic data that we’ve seen of late, so maybe just kind of walk us through just kind of the kind of demand for those types of businesses right now.
Jeff Edison: Sure. Bob, you want to take that?
Bob Myers: Yes, for sure. So appreciate the question. Right now, when we look at our portfolio and specific to our inline spaces, 27% of our ABR comes from local tenants. We think local tenants are great. One, they’re strong, they have good credit. Two, they’re economically friendly for the landlord, doesn’t cost us as much money to put in. They’re sticky. They’re honestly true entrepreneurs. You think about your chiropractor, your dentist office, your local hair salon as examples, their average tenure has been 9.4 years in our portfolio. Again, I want a direct correlation to our overall merchandising strategy about being around necessity-based goods and services. So I’m very focused on not only the grocery store but also quick service restaurants, health and beauty, Medtail, and service providers.
And I mean, our healthy neighbor Bix has never been stronger. And there’s a lot of demand for our size shopping centers and having the grocer there that drives the foot traffic, they’re just getting the benefit of that, and it’s very, very strong. I think our local renewal spreads in the fourth quarter were 17.2%. So again, very, very healthy, very, very strong, so very important piece to our overall merchandising.
