Ki Bin Kim: Thank you. Good morning. So there’s been a couple of retailers in the media like Starbucks, McDonald’s, and I think grocers has been talking about smaller basket sizes and certain consumers being stretched for some time. I was just curious if you’ve noticed any of that conversation in your dialogue with tenants today. And I know both things can coexist where demand could be good for a while, even though there might be some challenges, just curious what you’re seeing on the ground?
Lisa Palmer: Let me just take it generally first, and then I’ll let Alan talk about the actual discussions with tenants. I mean, the future is always uncertain, right? And in today’s world, the macroeconomic, I don’t know that any of us can predict what is going to happen. But what we do know is that we have high quality centers and our trade areas have been to this point. And we expect to be able to — and we expect to continue, especially given the types of uses within our centers, right? It’s value convenience service that we would expect that our shopping centers, the trade areas, the consumers in our trade areas are going to be capable of absorbing the macro pressures that we’re seeing today. We are generally seeing that through the results in our shopping centers.
I want — you also made a comment about stress for time, which I think is really important, because this even goes to the medical that we spoke about. It’s a real structural tailwind that there is, and you’ve heard us say this, a renewed appreciation for a physical presence of the shopping centers near and close to people’s homes to service their needs and to buy goods, because they are stretched for time. And it is why that we really do have this tailwind, the suburban shopping centers for all the types of uses that we are offering at our shopping centers and I think that that is — we don’t see that softening today.
Ki Bin Kim: Okay. Great. And…
Lisa Palmer: Alan’s giving me hand signals that he thinks I hit it, so he’s not going to add.
Ki Bin Kim: Okay. And on development, I don’t think you guys have a large land bank and but you guys have been very successful in starting some projects at high yields. I was just curious about the second round of development that you might be pursuing. How might that be different in terms of yields versus the current pipeline, especially given your kind of land bank position?
Nick Wibbenmeyer: Sure. Ki Bin, this is Nick. Appreciate the question. You’re absolutely right. We do not land bank as a strategy for our development program and so we are very, very thoughtful about derisking these projects as part of our diligence while we control the real estate prior to closing. And so our process is we make sure we have control of the real estate. We make sure we have really high quality tenants committed to the projects, especially our grocer tenants. We work through the entitlement process. We work through the pricing exercise. And as we’ve talked about in previous quarters, it is a challenging environment to bring all of those pieces of the puzzle together. But it is a core competency of ours and our teams continue to do a really, really tremendous job of finding those opportunities across our platform, across the country.
And as we’ve said on multiple occasions, we feel really bullish about the future of our development program. We continue to lean into it and our teams are continuing to find more than our fair share of those opportunities. And as you — in terms of your questions of yield, as you can see in our end process, our yields range between 7% and 9% on our development or redevelopment program and that’s where we’re still targeting and we expect to have additional success in that range.
Ki Bin Kim: Okay. Thank you.
Operator: Our next question comes from the line of Floris Van Dijkum with Compass Point. Please proceed with your question.
Floris Van Dijkum: Thanks guys. I guess it’s more of a follow-up question in terms of the development versus redevelopment. One of Regency’s core competencies has always been the development I think Lisa. You guys have — you’re somewhat unique, as I think most, most of your peers are saying that rent probably need to rise by anyway, over 25% in order to justify new development on a national basis. But obviously there’s always unique opportunities and I suspect Cheshire is one of those. But how much of an advantage or how much of your development future development pipeline do you think is going to come from your existing portfolio versus brand new opportunities like Cheshire? And also what’s the difference in return on those kinds of opportunities in your view?
Lisa Palmer: I’ll start and then I’ll let Nick finish. I think you’ve been following us and so you do, you have seen that the percentages were more weighted towards redevelopment in the recent past, but we have created a ton — we’ve generated a ton of momentum in the ground upside. And again, this goes back to the renewed appreciation for the — for bricks and mortar and for being close to customers’ homes and for the retailers to be able to service their customers through all channels. And one is for the customer to walk through the front door and also to buy online and pick up in store all of the — all tailwinds for our business. And you’re correct and I appreciate the acknowledgement that development has been a differentiator for us and a competitive edge for as long as I’ve been at the company and I’ve been here almost 28 years.
And we have a, an extremely successful track record in that regard. And that matters because we have an experienced, talented, national team with these relationships that, that is helping us find and Nick and the team reminds me all the time and I’m not saying that, it’s not easy, but that’s what makes us so good. And so that — I would expect that we’re going to continue to see more momentum on the ground upside. Redevelopments will also continue to happen as Alan talked about. We’ve intensely managed our existing portfolio and it’s an important part of fortifying our future NOI growth. But I do expect that you’re going to see ground up grow over the next few years.
Nick Wibbenmeyer: And all I would add to that Floris is we — as Mike alluded to earlier and we continue to be very vocal about, the great news is for us, it’s not an either or process. We are an enviable position with our capital that we are going to take advantage of opportunities that we see in our existing portfolio and as you see in our end process, the team has found a lot of opportunities that very creative and attractive returns to invest new capital and to our existing portfolio. But we also are going to continue to take advantage of every opportunity we see in a ground up basis that we know we can derisk and we can put a shovel on the ground and an attractive return there. And we have the capability. We have the team that’s across the country focused on that, and we have the capital. And so we are blessed to be in a position of not choosing between the two. We’re going to do both.
Floris Van Dijkum: And maybe in terms of the return thresholds, I guess, maybe if you can talk about like, I would imagine that some of the redevelopment opportunities are going to have higher returns, but how does that compare to buying, for example, something today in the market like a West border or other things that you’re looking at? How much higher does the return need to be in order for you to pull the trigger on opportunities?
Nick Wibbenmeyer: Yeah. Just…
Lisa Palmer: I will just reiterate — sorry, I was just going to reiterate Nick, what you already said earlier, and that was the 7% to 9% is the target threshold hasn’t changed for developments and acquisitions are going to, it’s going to vary, it’s going to depend on the total return. If you will, what’s the future growth, right? We acquired Nohl Plaza, which had a tremendous amount of upside and a much lower cap rate for example. We did our Chicago acquisition, higher cap rate, not as much, there was not as much leasing upside or redevelopment upside. So that’s acquisitions are going to really vary depending upon the actual individual opportunity development 7% to 9%. Historically we have always, we’ve tried to target a minimum of 150 basis points spread over what that shopping center upon completion would sell in the market and I think we’re being pretty — we’re still pretty successful with that.
Floris Van Dijkum: Thanks Lisa.
Operator: Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.
Linda Tsai: Yes. Hi. For the 39 anchors that have signed, but not yet commenced, just wondering who some of those anchor tenants are like, how many of those are grocers? And then I guess just my second question is, do you think their grocer penetration, if it’s plus 80% right now could get much higher?
Alan Roth: Linda, this is Alan. I don’t have the actual number of what percent were grocers, but there certainly were a number of transactions that are in there. The target that we had mentioned in Norwalk, we are very excited about the first Whole Foods daily shop. I think that was announced here a few months ago in Manhattan, which will be opening likely in the fourth quarter of this year. And if you haven’t heard about that concept, that’s their new quick and convenient shopping experience for that urban customer. We’ve got a couple of Publix deals that are under redevelopment right now. So I would tell you there’s a pretty significant amount of grocer activity that is within that number. We’re excited to get both of those Kroger deals, excuse me, Publix deals open, which are down in Atlanta. And so it’s a significant part of it. Second part of your question. I’m having a moment with it. Sorry.
Mike Mas: We’re not — grocery penetrating, we are 80% grocery anchored and I don’t think we see that number materially changing from this point forward. The bias here is around grocery and we’ll continue to pursue grocery anchored shopping centers as a rule. But I don’t think you’re going to see that go materially or change materially from here.
Linda Tsai: Thanks.
Operator: Our next question comes from line of Mike Mueller with JPMorgan. Please receive your question.
Mike Mueller: Yeah. Hi. So for the Stone Bridge development, that’s part of a master plan community, how mature or early stages the community and just being part of a project like that changed the risk profile or economics compared to a development, not one of those communities?
Nick Wibbenmeyer: Mike, I appreciate the question. This is Nick and I’m glad you actually pointed out that it is part of the master plan community, because to us, these partnering and working with master plan developers is a real competitive advantage of ours. And so if you put yourselves in the shoe of a master plan developer, one of the most important things you can have to make sure that you continue to sell high quality homes to high quality purchasers is retail amenities and grocer being a really important part of that. And so in the communities that we’re servicing, these are wealthy areas with expected high purchase prices for the homes and so they want high quality grocers. We have the relationships with the high quality grocers.
We have the expertise to design those assets at a really high level. They know we have the capital to build them and they know we anticipate owning those. And so we’re making every decision along the way from a long-term ownership perspective. And so when you put seat — when you put yourself in the seat of a master plan developer, we’re really one of the best partners that you could hope for to execute on that important amenity. And therefore that’s why we’ve had a lot of success in that. And so, as you mentioned, Cheshire is an example of that our Baybrook development, our ATB development down in Houston is an example of that. Our Sienna project is an example of that. And we continue to work with a lot of large master plan developers around the country and that’s part of our pipeline.
But I’ll just add to that. These are, these are not greenfield areas. These are not tertiary markets. These are infill master plan communities that have been underway for, in some cases, decades. And so that’s where the sort of perfect formula is coming together where there is demand at high enough rents to make our deals pencil and that’s the sweet spot we’re working in and continue to focus on.
Mike Mueller: Got it. Okay. Thank you.
Operator: Our next question comes from the line of Tayo Okusanya with Deutsche Bank. Please proceed with your question.
Tayo Okusanya: Hi. Yes. Good afternoon, everyone. Yeah. Based on all the commentary on the call, everything seems to be going really, really well at the company. So I guess just going back to guidance, again, I’m trying to understand the solid beat in 1Q, understanding all the items, why that doesn’t kind of translate to a bigger increase in guidance and kind of what trying to connect those two dots of what am I missing?
