Regency Centers Corporation (NASDAQ:REG) Q1 2024 Earnings Call Transcript May 3, 2024
Regency Centers Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings. And welcome to the Regency Centers Corporation First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christy McElroy, Senior Vice President, Capital Markets. Thank you. You may begin.
Christy McElroy: Good morning. And welcome to Regency Centers first quarter 2024 earnings conference call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer. As a reminder, today’s discussion may contain forward-looking statements about the company’s views of future business and financial performance, including forward earnings guidance and future market conditions. They are based on management’s current beliefs and expectations and are subject to various risks and uncertainties. It’s possible that actual results may differ materially from those suggested by these forward-looking statements we may make.
Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter’s earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. Lisa?
Lisa Palmer: Thank you, Christy, and good morning, everyone. We had another really solid quarter in line with our expectations and driven by a continuation of very healthy leasing fundamentals. Robust tenant demand is driving significant leasing activity across all of our shopping centers and this is evident in an even higher percent lease rate and strong rent growth. With this robust demand and activity, we are poised to accelerate growth into 2025. As you will hear more from Alan, we are having great success quickly re-leasing space, and I will note some of which we’ve intentionally recaptured, with upgraded merchandising of leading operators and at higher rents. As a result, our pipeline of executed leases is larger than it’s ever been and we look forward to these tenants coming online, propelling our future growth.
I’m also really excited about the progress our team has made executing on our value creation pipeline. Sustained development activity over the long-term, which creates value and enhances growth, is an important part of our business and is a differentiator for Regency in our sector today. The strength of our platform provides us an unequaled strategic advantage. Our talented and experienced national development team, our relationships with top grocers and retailers, and ready access to capital, all are enabling strong execution on an impressive lineup of great in-process projects and continued growth in our pipeline of opportunities. As you’ll hear from Nick, following our impressive execution in 2023, with over $250 million of development and redevelopment starts, we expect to drive a similar level of success this year.
The benefits from this ramp-up in activity will continue to grow as NOI comes online in 2025 and beyond. Importantly, the strength of our balance sheet and our liquidity position is what provides Regency with the ability to sustain a meaningful value creation pipeline through cycles, to remain opportunistic in our capital allocation strategy and to consistently grow our dividend. And we are really gratified to see this position of strength acknowledged by Moody’s with a credit rating upgrade to A3, which occurred in February. We are currently the only REIT in the open-air shopping center sector with an A rating, and we are already seeing the benefits in our relative bond market pricing, further supporting our cost of capital advantage. This is a big accomplishment and a direct result of our team’s consistent track record of operational excellence and balance sheet strength over the long-term.
It’s a reflection of what I speak to often, which is what we believe to be Regency’s unique and unparalleled combination of strategic advantages that differentiates us from our peers and allows us to drive above-average earnings per share, dividend and free cash flow growth. It’s the favorable attributes of our portfolio, including quality tenants and merchandising mix, format and trade area demographics, driving rent growth and durability of occupancy. It’s the expertise of our people and the strength of our operating platform. It’s our ability to create value through development and redevelopment consistently over time. It’s the strength of our balance sheet. And it’s our commitment to corporate responsibility and stakeholder stewardship.
High quality suburban shopping centers, especially with the particular strength of our portfolio and the trade areas in which we operate, will continue to benefit from structural tailwinds that support continued excellent performance and long-term growth of our business. Alan?
Alan Roth: Thank you, Lisa, and good morning, everyone. We had another great quarter of leasing activity in Q1, as tenant demand for our centers remained very strong. The tremendous appetite for space that we saw in 2023 has continued unabated, enabling our team to achieve both higher rents and push our lease rate to even higher levels. We are executing leases with high-quality tenants, further improving upon the strength of our merchandising and creating value at our centers. Our same property percent lease rate increased by another 20 basis points this quarter to 95.8%. This is especially impressive given the significant anchor move-outs that I discussed on last quarter’s call, which I’ll come back to in a moment, coupled with the seasonality of higher move-outs we historically experienced in the first quarter.
Our shop lease rate was up 10 basis points sequentially in the first quarter, reaching yet another new record high for shops of 93.5%. Base rent growth in 2024 is benefiting from shop commencement activity, given our record year of lease-up in 2023. You’ll recall that a quarter ago we discussed an expected decline in our commenced occupancy rate in the first quarter, driven by anchor move-outs. Consistent with our plan, while our lease rate has moved even higher, our same property commence rate ended the first quarter down 70 basis points from year-end. Roughly half of this decline was attributable to the intentional recapture of a Walmart store in Norwalk, Connecticut. Some of you were with us on a recent tour of the property, seeing firsthand this great opportunity to create value from an anchor tenant lease expiration in an exceptional location.
We will experience some downtime impact while the space is built out and the center undergoes a transformative redevelopment, but the new lease with Target has already been executed with significant accretion. This is just one example of similar scenarios within the portfolio. On the surface, this disconnect between lease occupancy and rent-paying occupancy would appear counterintuitive, but the strength in the leasing environment, coupled with our deliberate approach to asset management, is enabling us to take advantage of these accretive opportunities quickly, and in many cases, before the tenant vacates. We are re-merchandising with upgraded stores and at higher rents, improving and growing the long-term value of our centers, and we look forward to getting these new anchors open for business in the coming months.
As we’ve replenished this vacating space with new leases, our pipeline of executed leases has grown. We stand today with a 370-basis-point delta between our same property leased and commenced occupancy rates, which is an all-time high for us, reflecting an incremental $50 million of annual base rent that will be very rewarding as these leases commence within our operating portfolio. Beyond what’s already baked, we have another 1.4 million square feet of space under letter of intent or in negotiation, with consistent demand across the portfolio from a wide variety of categories, including grocers, restaurants, health and wellness, off-price, and personal services. Cash re-leasing spreads in the first quarter were more than 8% on a blended basis, including the highest spread for renewals that we’ve seen since 2019, an indication of our ability to increase rents further as occupancy rises and available space is limited, a reflection of the strong demand in today’s environment.
Both GAAP and net effect of rent spreads were in the mid-teens this quarter, given strength in contractual rent steps in the majority of our leases and our prudent use of leasing capital. Our team across the country is energized by the unwavering strength in leasing activity we are seeing, supported by a limited supply of high quality retail space available and a surplus of great retailers actively looking to expand. We look forward to harvesting the benefits of our record-high SNO pipeline, getting those tenants open and operating, and continuing to move the occupancy needle higher in the months ahead. Nick?
Nick Wibbenmeyer: Thank you, Alan. Good morning, everyone. Motivated by our tremendous success in 2023, including the start of more than $250 million of new projects, our team remains very active, both executing and growing our development and redevelopment pipelines. Among our first quarter starts was the shop at Stone Bridge in Cheshire, Connecticut. This $67 million ground-up development will be anchored by Whole Foods as well as TJ Maxx, and while we just broke ground last month, we are already seeing significant leasing demand. The project serves as the retail component of a new master plan community, a format with which we’ve had great success over the years. We recognize the mutual benefits and value that these relationships with master plan developers can provide for our shopping centers, as well as the communities they serve.
In addition to new starts, we continue to make great progress executing on our in-process pipeline and bringing NOI online. In total, we now have more than a $0.5 billion in process, which is nearly 90% leased with blended returns of 9%, and in 2024, we plan to complete over $200 million of these projects. Some examples of this tremendous progress are several exciting recent anchor openings that are worthy of highlighting. At our Glenwood Green ground-up development in Old Bridge, New Jersey, both Target and ShopRite celebrated successful grand openings last month and the project is now nearly 95% leased. Exciting shop tenants opening soon include Honeygrow, Duck Donuts, and Playa Bowls. At Westbard Square in Bethesda, the new giant grocery store opened in January, and rent will start commencing from the shop space over the coming months, including tenants such as Tate, Stretch Zone, Silver & Sons Barbecue, and Oak Barrel & Dine.
Turning to the private transactions market, although data points and deal volumes remain below historical norms, we are seeing increased activity in deeper bidding pools in the marketplace and cap rates remain low. The implications of the recent move in treasuries remains to be seen, but our team is actively underwriting acquisition opportunities that fit within our portfolio quality, growth and earning decrease in requirements. This includes a great asset that we are buying in Westport, CT, immediately adjacent to one of our existing centers, adding to our already strong portfolio in that region. As we look ahead, our team is focused on sourcing accretive investment opportunities across our national platform. We expect to execute on acquisitions opportunistically and we have great visibility on development and redevelopment activity as we continue to grow our pipelines.
We are planning for another year of project starts north of $200 million and remain on track to meet our strategic objective of completing more than $1 billion of projects over the next five years. We are partnering with leading grocers looking to grow their footprints in high-quality centers within our attractive trade areas and our recent project successes are also driving additional opportunities to further grow our pipeline. The strong momentum within our program is supported by macro tailwinds within the shopping center business, but more importantly, by Regency’s sourcing and execution capabilities. As you hear me repeatedly say, we have the best development team in the business, which combined with our free cash flow and balance sheet give us an unequaled ability to fund and drive significant value creation within our investments program.
Mike?
Mike Mas: Thank you, Nick, and good morning, everyone. I’ll start with some highlights from our first quarter results and then walk through updates to our 2024 guidance and forward expectations before ending with comments on our balance sheet position. We reported NAREIT FFO of $1.08 per share and core operating earnings of $1.04 per share for the first quarter. Same property NOI growth, excluding term fees and COVID period reserve collections, was 2.1%. It’s worth a reminder that while bad debt this quarter trended closer to our historical averages, we are comping against a year ago bad debt number that was net positive, which we know is unusual. This anomaly impacted our first quarter growth rate by 60 basis points. At 2.7%, base rent was the largest contributor to same property NOI growth and continues to be the best indicator of portfolio performance.
This was largely driven by our team driving rent growth through embedded rent steps and re-leasing spreads, as well as executing on our redevelopment pipeline. Our same property leased occupancy rate is 95.8%, up another 20 basis points in the quarter, reflecting the continued strong leasing environment. First quarter earnings results benefited from a penny of timing-related items outside of the same property pool, as well as a penny of straight-line rent, which you can see in our increased full year non-cash guidance. Additionally, recall that we typically recognize more than half of our annual percentage rents in the first quarter, benefiting Q1 by about $0.3 compared to the implied run rate for the balance of the year. I also would like to point out our new AFFO disclosure on Page 9 of our supplemental, which highlights what, in our view, is one of the most important performance metrics reflecting a REIT’s ability to grow dividends and to invest back into its business in order to grow earnings.
This added disclosure also provides transparency around the level of capital used to drive same property NOI growth and allows for greater apples-to-apples comparison across the peer group. Turning to our guidance updates, as always, I’ll refer you to the helpful detail on Slides 5 through 6 in our earnings presentation. We raised our NAREIT FFO outlook by a penny at the midpoint, which corresponds to the increase in our guidance for non-cash items. Our guidance for same property NOI growth remains unchanged at 2% to 2.5%, excluding term fees and COVID period reserve collections. We also adjusted our full year transactions outlook. As Nick referenced earlier, the asset we are buying in Westport is now included in our acquisition guidance and we modestly increased our dispositions guidance to include the potential sale of a few smaller, non-core, lower growth assets.
Notably, our core operating earnings guidance — earnings per share guidance, excluding COVID period reserve collections, implies growth of more than 3% at the midpoint, despite higher interest rates and the impact of our debt refinancing this year. As we look beyond the calendar year, we wanted to highlight some tailwinds we see impacting our growth, especially as it relates to items where we have greater visibility. We’ve discussed the meaningful growth coming from our pipeline of executed leases, where outsized commencement activity will begin as we approach year-end and move into 2025. As Alan mentioned, our SNO pipeline sits at an historical high of more than $50 million of annual base rent, of which about 65% is scheduled to commence by the end of this year.
In fact, we expect our spot commence occupancy rate to end this year roughly 50 basis points higher as compared to year-end 2023. As these lease commencements are weighted to the second half of the year, the NOI and earnings impact will largely occur in 2025. And as Nick discussed, we’ve continued to ramp up our in-process development redevelopment activity and look forward to completing these projects, delivering space and commencing rent. We expect same property NOI to benefit from this redevelopment activity and for growth to accelerate into 2025. The positive contribution to same property NOI is likely to exceed 100 basis points next year, leading to above-trend overall growth. And total NOI growth will also benefit from the continued momentum of our ground-up development program, which will also start to bear more fruit as we head into next year.
Finally, turning to our balance sheet, the recent credit rating upgrade from Moody’s to A3 further validates Regency’s balance sheet strategy and liquidity position. We are relatively insulated from the current volatility in the debt capital markets as our balance sheet is in phenomenal shape. The majority of this year’s maturities have been pre-funded following our bond issuance in January, which we are gratified to price at a 10-year treasury yield, meaningfully below where it fits today and our next unsecured bond maturity is not until November 2025. Nearly all of our debt is fixed, our weighted average maturity is close to seven years and we remain near the low end of our targeted leverage range of 5 times to 5.5 times net debt preferred to EBITDA.
We have approximately $1.7 billion of liquidity today, including nearly full capacity on our revolver and we remain on track to generate free cash flow of more than $160 million this year. With that, we are happy to take your questions.
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Q&A Session
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Operator: Thank you. [Operator Instructions] The first question comes from the line of Jeff Spector with Bank of America. Please proceed with your question.
Lizzy Doykan: Hi. It’s Lizzy Doykan on for Jeff. I like to ask about sort of maybe like the benefits.
Lisa Palmer: We cannot hear the question. I don’t know if it’s us or if it’s…
Christy McElroy: Lizzy you’re breaking up a bit.
Lisa Palmer: Lizzy.
Lizzy Doykan: Hello? Can you hear me now?
Lisa Palmer: Yes.
Lizzy Doykan: Okay. Sorry. So I was asking about the B and if any of the benefits sustained for flowed through in the first quarter. Just seeing if maybe any upside or additional sorts of accretion might have exceeded your expectations as we’re through the early part of the year?
Mike Mas: I think, Lizzy, you’re still breaking up a little bit in the early parts, but I think I understand the gist of your question. Maybe cadence on earnings given the B in the first quarter versus the run rate for the balance of the year. I think that’s what I heard you ask. Let me just kind of go back to some of the comments I made in the remarks and maybe color some of that up a little bit for you. Let me start by saying at a very high level we thought we delivered a really solid quarter. We were very happy with our performance. We met our plan. Our confidence in our outlook was simply confirmed as you can see through our limited guidance changes. There was some timing in the first quarter that I — as I outlined on the call — on he remarks that do impact our forward run rate, right?
So, percentage rent is the biggest one. That is a seasonal issue. It’s 50% or more of that rent is collected in the first quarter. That does lead to about a $0.03 kind of deceleration from an earnings impact perspective going forward on our run rate. And then there was some timing, little timing issues coming out of the Mount same property portfolio, which, again, as a reminder, is a little larger than it customarily is because we have our entire Urstadt Biddle merged portfolio designated as non-same for 2024. But what — but those timing issues didn’t change our outlook for the year, right? So those aren’t going to flow through in any kind of additive way. So at this point, we continue to have a lot of confidence in the guide that we shared last quarter.
We did raise NAREIT FFO by a penny. That is incremental to the plan that’s coming from non-cash revenue and specifically straight-line rents coming out of — improved straight-line rents coming out of the development pipeline. We also had a mark-to-market adjustment following a mortgage paydown that we executed on this quarter. So those — that led to the $2 million that we increased our non-cash guidance and that’s what you’re seeing flow through from a NAREIT FFO perspective. Let me just end with this. From a same property growth, we didn’t modify the range. We have a lot of conviction in that range. We — the fall out in percent commence that we anticipated and communicated last quarter happened as we planned. And the best part of that is we’ve re-leased as much space as we’ve gotten back and then some.
Done a remarkable job there. And our outlook for the balance of the year and commencing that rent going into end of 2024 and end of 2025, we feel really good about.
Lizzy Doykan: Okay. Thanks for that walkthrough. That’s helpful. And I apologize for the connection issues. Just as a follow-up, I know you all said that you’re viewing external growth opportunities opportunistically, and there’s a lot to go on the development-redevelopment front. But just curious on maybe what kind of opportunities would look the most interesting to you today maybe what you’re seeing out in the market? More color on that would be helpful.
Lisa Palmer: I’ll take that and allow Nick to come over top of me if he wants to add a little more detail. Really unchanged. Our investment strategy, whether it’s for acquisitions, which we’ve had recent success with or whether it’s for development is aligning with our operating portfolio. So above-average quality with regards to merchandising mix, the tenants and to the extent that we can add our expertise to make that happen, we’re looking for those opportunities as well. Grocery-anchored primarily and also in great trade areas with above-average demographics. We’ve had success from both the acquisition and the development strategy in doing that and remaining disciplined and we continue to find opportunities. I really want to reiterate because I know that we continue to get questions about our development pipeline.
Remember, we’re generating ample free cash flow and the best use of that free cash flow is into our developments and redevelopments, and we have had a really impressive track record with that, especially of late. 2023 was an exceptional year, and as I said in my prepared remarks, we expect that to continue into 2024. And I’m not saying that it’s easy, but when you take what we have, which is a talented, experienced development team across the country, when you have access to capital with the strength of our balance sheet and when you have the relationships that we have with top grocers, top retailers, master plan community developers, it’s equaling success and we’re really proud of that.
Lizzy Doykan: Thank you.
Operator: Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Michael Goldsmith: Good morning. Thanks a lot for taking my question. Same property NOI growth of 2.1% in the quarter. Mike, you called out a tough, bad debt comparison of 60 basis points with base rent contribution at 2.7%, so looking forward, can you remind us of maybe any other moving pieces in the comparisons and that if we should use that 2.7%, the high 2% range as the rate base rent growth as the forward trajectory, and did you say that next year should be about 100 basis points above trend? Thanks.
Mike Mas: Thanks, Michael. As we look into the balance of 2024, 2% to 2.5% guide range, we still have a lot of confidence in that expectation. It’s going to hover around. It’s going to hover within that range quarter-over-quarter and really pretty consistent, I would say, as we look through the balance, and I appreciate you highlighting the fact that Q1 did have a unique anomaly in the prior year basis. I did say plus 100. Let’s make sure we understand what that means. That’s the positive contribution coming from redevelopment deliveries to our same property growth rate. We are really excited about and have growing conviction in that pipeline and that delivery of projects, and you can see it on our redevelopment disclosure page, by the way, and get really comfortable yourself with thinking about when that income will be delivered.
Remember, and we spent a lot of time kind of talking about our steady state growth rate. Generally, redevelopments are going to provide about a plus or minus 50-basis-point positive contribution to our growth, plus 100 basis points in our outlet for 2025 is materially better than that, and again, I would just come back to the conviction we have over that given the projects that we see, the leasing that the team has executed on and really it’s just a matter of executing on deliveries and commencing those rents, which you’ll start to see happen in earnest towards the end of this year and into 2025.
Lisa Palmer: I’ll just add and I promise, Mike, I won’t give guidance for 2025, but what I would like, Michael, if you just go back and you look at long-term growth rates, same property NOI growth, AFFO growth rate, I picked five years, you will see that Regency is at the top of the sector with that and that is a result of our strategy. It’s all of the things, right? It’s our unequaled strategic advantages that I talked about in my prepared remarks, and with that, given 2024 is a temporary dip from those long-term expectations, we would expect 2025 would kind of make up for that and that with the growth of 2025, that we expect all else being equal with regards to the economy, we will still — we will rise to the top of the sector.
Michael Goldsmith: Thanks for that. And my follow-up is on the SNO pipeline. It took a step up here, now currently sitting at 370 basis points or $50 million. With the SNO pipeline, what’s the elevated — what is the trajectory from here? Should we expect that to be worked down through 2024 and 2025 or should it kind of still remain elevated and choppy? Just try to understand better around how quickly you can monetize this elevated pipeline? Thanks.
Mike Mas: Listen, I hope — for the right reasons, I hope it grows, and I’m looking at Alan when I say that. He’d say the same thing. I think we have a lot of conviction in our leasing team’s ability. We know our properties and how well they are desired by the tenant community and we have a lot of conviction in continuing to lease at a high rate. So, I wouldn’t be — honestly, I’d like to see that number increase, but from an economic impact perspective, our commenced — it’s about our commenced occupancy rate is the essence of your question and we do think — as we look at our plans, we do think that we’ve troughed on a spot basis from a commenced perspective. All planned. We knew these move-outs were going to occur in the first quarter of this year and now it’s about moving and delivering space, moving that commenced rate up.
Let me give you something to help you with your question. A little bit over $50 million of SNO pipeline from an ABR perspective. 65% of those leases will commence by year end, but that’s not rent, right? So $14 million plus or minus, I’m going to be in the area, we should recognize into earnings in 2024. So that’s only a quarter of that pipeline. So that tells you, that adds to that conviction we have in 2025 that the balance of that ABR is going to come online as we deliver units into 2025.
Michael Goldsmith: Thank you very much.
Operator: Our next question comes from Juan Sanabria with BMO Capital Markets. Please receive your question.
Juan Sanabria: Hi. Good morning. Thanks for the time. Just curious on the decisions in some cases to be proactive in trying to increase the or improve their merchandise mix and increase rents. And if that, how are you making that decision and it seems like that’s obviously a product of a stronger market here. Could you do more of that in 2025 that could temporarily offset growth? Just trying to play devil’s advocate here.
Alan Roth: Juan, this is Alan. Thank you for the question. We’ve always taken the long-term view of intense asset management. And so to answer your question, we’re absolutely all about what is the right long-term decision for the asset, for the portfolio and for the future success of Regency. It’s interesting, I said last quarter that, we moved three office supply stores out of our portfolio. I’m not so sure that I actually identified who’s replacing them, but to take those units and replace those with Sprouts in one location, HomeSense in another location and a Baptist Health Medical facility in a third location. I think it’s just really good examples of how we look at enhancing the merchandising, providing durability to our occupancy through better tenant credit and to your point, getting significant rent growth.
So it’s certainly the mindset of how we’re trained. It’s certainly the mindset of how we think about managing our portfolio and I would expect that to continue.
Juan Sanabria: Great. Thanks. And then just curious on how Urstadt is performing, if that would have been, if included in the same-store number as additive and presumably there’s more lease-up opportunities there. Does that maybe then create a tough comp issue next year that’s folded into the same store pool?
Nick Wibbenmeyer: Let me take it first, and then I’d like Alan to give some color on what he’s seen in the portfolio. But from my perspective, the Urstadt portfolio is performing right on plan. And we had high expectations for the portfolio and the team’s doing a remarkable job of delivering on those expectations. So just to reiterate that, we called for about a 0.5 worth of accretion. We’re going to deliver that and that we haven’t come off, plus or minus that expectation. And there was a little bit of timing noise from a cadence perspective, as I indicated in the first quarter, and that’ll level off by year end. It is additive, it would have been additive had we called it same property by about the same amount that I mentioned last quarter, which we said we’re up to about a quarter of a point. So I’ll leave it at that. And if Alan has any comments.
Alan Roth: Yeah. Juan, the only thing I would add is we continue to be thrilled with the expanded platform, but I am personally probably more thrilled with the great people that have come into the organization as a result of it. And we did have another productive quarter. We signed about 50 transactions in that portfolio. And as I said, the last few quarters, there’s runway there. We are going to grow that 93% formally leased portfolio and leverage the platform certainly that we have and that is the hyper focus of the company right now relative to that acquisition. Redevelopments are something that are more medium- to long-term, but we’re doing some small little pad deals out in the parking lot, maybe evaluating a couple of multi-tenant deals, but largely it’s a hyper focus on leasing and the team is doing well.
Juan Sanabria: Thank you very much.
Operator: Our next question comes in line of Greg McGinnis with Scotiabank. Please proceed with your question.
Viktor Fediv: Hello. This is Viktor Fediv on with Greg McGinnis. So we’ve noticed that your new leases, tenant allowances and landlocked work as a percentage of new base rent have increased both on quarter-to-quarter and year-to-year basis. I’m just curious, was it something unique this quarter or it’s a current market environment so you need to provide higher TAs and landlord work to get new leases done?