Alan Roth: Viktor, this is Alan. Thank you for the question. The short answer is we’re not seeing any material shift at all, although there is a slight elevation this quarter. I’ll start on the renewal front. The elevation you see there is one tenant that we did a turnkey relocation to make way for a larger junior box. If you take that one out, our capitals are absolutely in line with historic levels. Again, I think that ties back to the intense asset management mindset of what’s right for the asset. On the new leasing front, I would just tell you it’s largely elevated by anchor leasing and we had four anchor transactions. Notably, one of them was a space that was vacant for over seven years. And so, again, I think, there’s some mix issue in terms of just anchor transactions that’s driving that, but we’re not seeing any market shifts as a result.
Lisa Palmer: I think it’s important to just reiterate that our strategy and our approach hasn’t changed. We’re very judicious with our leasing capitals and do believe that that clearly leads to, again, ample free cash flow growth, but also helps drive our AFFO growth, which if you were to look at long-term AFFO growth, we do lead the sector.
Viktor Fediv: Got it. Got it. Thank you. And then as a follow-up, could you please provide some additional color on the remaining $75 million of dispositions? So far, both dispositions in 2024 were in Florida. And apart from properties being non-core, was it also driven by just relatively more attractive pricing and transaction market in Florida now and should we expect other dispositions be within the same sub-market or there are no other non-core assets in that sub-market?
Nick Wibbenmeyer: Viktor, this is Nick. I appreciate the question. Good morning. No. As you referenced, I mean, you answered part of the question in your question, which is we are always looking to fortify our growth profile and we’re always looking to potentially sell non-core, non-strategic assets at attractive cap rates. And so as we look into the future, as you see in our guidance now, we do expect to continue to sell assets at attractive cap rates, recycle that capital into more creative opportunities that we may see. And so it just so happens these two are in Florida, but I would not tell you strategically we are trying to exit Florida. As you know, we have a tremendous portfolio in Florida. And so these are really case-by-case decisions, asset-by-asset, trade-by-trade area. And so I would not expect these additional assets to necessarily be in Florida.
Viktor Fediv: Wonderful. Thank you.
Operator: Our next question comes from Ronald Kamdem with Morgan Stanley. Please proceed with your question.
Ronald Kamdem: Hey. Just two quick ones. So just on the acquisition front, obviously the $46 million added in the guidance. Maybe can you talk about just how that came about and has sort of opportunities sprung up or changed given sort of the moving rates? Has that sort of slowed activity?
Nick Wibbenmeyer: Good morning, Ronald. This is Nick again. I appreciate the question. So let me talk first — to the first part of your question, which is about the acquisition we’ve now guided to and so that asset we’re very excited about. It’s a 76,000-square-foot shopping center in Westport, Connecticut at CVS Anchored. And for those of you recently on our tour in the Northeast, you’ll be familiar with it since it’s the center directly across the street from our Trader Joe’s asset that we own at the corner of Coppola Road and Post Road. And so just a tremendous opportunity to bring a great asset into a region that we already are really, really familiar with and excited about, again, adding to that great portfolio.
And so that asset was fully marketed and so we competed in an on-market process. And I think given our reputation and our presence in the market definitely helped us as it related to that competition. And so excited to get that closed here very, very soon, maybe even as soon as today. And so beyond that, we continue to be, again, opportunistic, as Lisa indicated earlier, which is looking across the country for opportunities that we believe we can create and add value to shopping centers. And so there is definitely more opportunities on the market over the last quarter than there were the quarter before. But as we all know, Treasuries have moved here in the last couple of weeks. And so it’s TBD of does that slow transaction volume or not. But from the chatter we’re hearing, we do expect transaction volume to stay pretty darn steady and we’re going to take advantage of any opportunity we see that we think we can add value to.
Christy McElroy: Does that complete your question?
Ronald Kamdem: Yeah. My second question was just on the same-store. Look, I’m getting the theme of the call, which seems to be Acceleration 2025 on the same-store. I guess the question is, is the conviction coming from sort of the fact that you have sort of the sign-not-lease pipeline and you have visibility or is it more that the sort of the tenant health, there’s no sort of larger move-out to bankruptcy that that could be a headwind next year or both, right? Just trying to figure out where the conviction is coming.
Lisa Palmer: I’ll answer that just very high level and to the extent that my partners here want to add any more specific color. But it is both. I’m glad that you added that at the end. I mean, I think, you can see with our leasing success and results, the health in the portfolio and where we can see some records are meant to be broken and we continue to drive our percent leased higher and higher and that SNO pipeline is real. And so that does create real visibility to rent that will commence. And we also have been really successful with our redevelopment pipeline. And Mike talked about those in the prepared remarks and in one of the questions. And we have real visibility to that also being additive in 2025. So it’s all of the above.
Ronald Kamdem: Great. Thanks so much.
Operator: Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question.
Ravi Vaidya: Hi. Good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. We’ve heard from you and your peers that, the leasing environment is very strong and robust. But I just wanted to ask, particularly around MedPay [ph] and urgent care centers and things along that line, we’ve started to hear some softness in demand from some of the operators there, notably Walmart. And just wanted to hear your thoughts on what you’re seeing from a leasing demand perspective. Thanks.
Alan Roth: Yeah. Ravi, good morning. It’s Alan. So our current medical exposure is about 7% of ABR and that has grown from 5% where we were pre-COVID. We are very comfortable not only with where it is, but certainly comfortable if it were to continue to grow. Interestingly, we signed nearly 20 new medical leases in the first quarter and that was our second highest category for new leasing from a square footage perspective. And it was largely dentists, optometrists, physical therapy, primary care and it included a new ground lease that we also did with the largest primary care operator in Houston, where they’re going to build a new medical building where Regency didn’t even invest any capital in that. But overall we’re comfortable certainly with that category.
From an urgent care specifically to answer that question, it’s just not a significant piece of our medical exposure. It’s less than 1% of our ABR. We, interestingly, also of all the medical transactions we did in the first quarter, none of our new leasing activity this quarter was in the urgent care facility arena. But, I would just take us back to the strict vetting process that we do for all of our operators, whether medical, personal services, restaurants, et cetera. And I think the team does a really nice job to make sure we’re aligning with the right operators.
Ravi Vaidya: Got it. Thank you. That’s helpful. Just one more here. Where do you think CapEx goes as a percent of a — as percentage of NOI goes from here for you, and I guess, broadly for the sector? As we’re seeing occupancies are more leases or renewals than new ones, how do you think this could impact AFFO growth maybe over the next couple of years and are we approaching an inflection point, I guess, is the crux of the question?
Mike Mas: Hey, Ravi. It’s Mike. Maybe I’ll give you a boring answer, but we don’t see any change. I have been pretty — we’ve been pretty consistent on this topic for some time. 11% area is kind of our run rate and that’s all CapEx, right? So that’s maintenance and leasing capital and we don’t see that changing on balance on average over the long run. You’re going to have periods of time where, as you’re adding to commenced occupancy, as we are now, where that could increase over that line, that average line, again, because of the volume of activity you’re doing. But the team does an incredible job of ensuring that we’re investing the right amount of money into the operator’s business and we’re getting a market-leading rent in most cases and market-leading terms and they’re just very judicious with our capital spend, and I think that’s appropriate.
Capital is precious. We’re going to generate as much free cash flow as we can so that we can reinvest that, to Lisa’s point, back into our development and redevelopment business. And when we have available capital outside of that, buy properties like the great asset we’re going to add to the portfolio in Westport. So I don’t see that 11% area changing over the long run.
Lisa Palmer: And I do just want to — I want to reiterate, because it is an intentional strategy to maximize rent while limiting leasing capital, staying within our parameters of our expectations and it’s the strength of our asset quality in our shopping centers that allows us to do that. And we are successful in doing so and it is a reason that it does drive our FFO growth.
Ravi Vaidya: Got it. Thank you.
Operator: Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question.
Craig Mailman: Hey, everyone. Just want to follow up. I know you guys increased dispositions a little bit here to partly pay for the Westport acquisition, but just from a need of capital, $125 million with the free cash flow you guys throw off, is this just a placeholder because you think you could get more acquisitions or is this necessary to fund the redevelopment? We’re starting to get at that accelerated pace of dispos just given the spending you guys have.
Nick Wibbenmeyer: Yeah. I think this will help you, Craig. We don’t need to sell the properties to afford or pay for the Westport acquisition. That is — we have the free cash flow in position. We have the balance sheet capacity. We have on a leverage neutral basis, if you take our free cash flow expectations, we have over $300 million of investment capacity, at our fingertips, so to speak. Honestly, the $25 million add was simply identifying some non-core — small non-core assets in our portfolio where we have received indications of interest that show pretty low cap rates. And when we think about that trade of exiting a non-core asset on a creative basis into either our developments or redevelopments, an acquisition, some of these assets you could argue you could pay down debt and it’s a creative.
So when we see that trade opportunity, we’re going to take it and that’s all we’re doing here is just a little bit of pruning. Why? I think kind of smartly and over time, that’s going to lead to a more durable income stream and earnings growth as well.
Craig Mailman: And the remaining $95 million that you guys have kind of dialed in, how much of that do you have visibility out at this point? And then maybe what do you think timing could be on some of these sales?
Nick Wibbenmeyer: I think, I mean, the $25 million that we’ve added, we have visibility on all of it and it’s on the market. It’s actively being discussed. The $25 million it’s going to be back end weighted. And I think I still have a lot of confidence that we’re going to execute on that plan. The other transactions are known. They’re going to occur. These aren’t speculative disposition assumptions. These are actionable dispose that we have a lot of confidence in.
Craig Mailman: Okay. So I guess I was getting at you guys have done $30 million, $25 million is incrementally kind of think, but then the other $70 million is kind of known. What’s the timing on those?
Nick Wibbenmeyer: Timing. I’m going to look to the team to help me out. Q3 — end of Q3 estimate on the $70 million roughly is how I would think about it.
Lisa Palmer: Yeah.
Mike Mas: Yeah.
Nick Wibbenmeyer: I think about it at the end of third quarter.
Lisa Palmer: And Craig, we also announced that we did another addition in the second quarter. It was Tamarack and we disclosed that in the press release. It’s just not in the transactions list yet.
Nick Wibbenmeyer: Yeah.
Craig Mailman: Okay. Perfect. Thanks.
Operator: Our next question comes from a line of Ki Bin Kim with Truist. Please proceed with your question.
