But to the extent that we have excess cash flow, not allocated to that, we have the ability to be opportunistic. And that’s what you’re seeing us do. And that’s what we did with the Chicago asset as well as Nohl Plaza. So I’ll pass it to Nick for Nohl.
Nicholas Wibbenmeyer : Great question regarding Nohl, very different profiles in old town. And so Nohl was owned by a tick that had owned it for decades, ultimately got to the point where the tick wanted to divest. And take their money and move it elsewhere. And so given it was owned by a tick as most tick situation, not a lot of capital invested over those years. And so a great opportunity for us to use our platform in Southern California come in. We love the real estate. We love the fundamentals of it, but it definitely needs a reinvestment, and that’s an opportunity for us. And so we — although you see the cap rate there when you do the math is lower than a standard acquisition. Given the redevelopment we expect to do near term and the investment we expect to make, we do expect the IRR to be north of 10%. And so we’re really excited about using our redevelopment expertise to shine that asset up and put into the operating portfolio for a long time to come.
Lizzy Doykan: Great. That’s helpful. And second, just looking at your page on net effective rents from the supplement, it looks like the composition of new leases signed for small shop trended down quarter-to-quarter, closer in line with anchor leases signed. I guess, first, is that a function of moderating demand from small shop, what may be more of a fair composition to think about in signing new leases. And then second, what’s more realistic as to how much further you can push on the small shop lease rate, given it’s reached a near record high?
Alan Roth : Liz, this is Alan. Thank you for the follow-up question. So no, it is not indicative of any market noise whatsoever. It can be a bit lumpy quarter-over-quarter, as you know. And you said it, yes, there were more anchor transactions in Q3 than we had in prior quarter. And so that certainly is what drove that. Regarding shop lease rate, I was laughing, but dead serious when we were having a conversation amongst the company records are meant to be broken. And so I really believe in the team we have, the portfolio that we’ve got. And so we are certainly focused on the shop side, although at the 93% mark right now, being able to do our best to continue to drive that. So excited to watch and see what the team can do.
Lisa Palmer : The environment, as you’ve heard us say, and you’ve heard all of our peers is really healthy today and the demand in our sector is really strong. And we’ve reiterated the structural tailwinds we have, they’re still there. The post-pandemic, hybrid work, limited new supply and just the renewed appreciation from both the customers, the shoppers themselves and the retailers on the physical presence. And we are still benefiting from those tailwinds. So I do believe that this record is there to be broken.
Operator: Next question is coming from Greg McGinniss from Scotiabank.
Viktor Fediv : This is Victor Fediv on for Greg McGinnis. And so now that you started integration of UBP portfolio and given your scale and relationship with current tenants, I assume you already had some conversations regarding expansion into newly acquired properties. So do you have a vision of what would be, let’s call it, the agency impact on UBPs portfolio occupancy within the next, say, 6 or 12 months? And how it translates into the combined occupancy impact?
Michael Mas : I’m happy to take that one, and Alan can provide some color on the integration momentum and what you’ve seen within the portfolio in particular. The thesis of the merger is the same as well, this is a leasing exercise for us with a portfolio of very high-quality shopping centers in very high-quality trade areas. That look very similar to what Regency invested in for the last 60 years of our company’s existence. We saw an opportunity of a 200 basis points plus or minus differential in percent lease between the 2 portfolios at the time of the merger announcement. And our eyes are set on closing that gap. We don’t see any inherent reason with the assets themselves or the trade areas within their — that they exist.
That gap should exist. We think that the portfolio should slowly and over the next several years come to the same lease rate as the legacy Regency portfolio. And to your point on when, this isn’t going to be an overnight impact on absorbing that 200 basis points of differential. But we do — we’ve gotten off to a really good start. We really appreciate the integration efforts that are ongoing within the team to Lisa’s comments earlier. And Alan will take it from here, but I think we’re pretty excited about the prospects.
Alan Roth : Yes. I think Mike articulated it quite well. Our #1 goal is a very intentional approach to leasing. But we’re also thinking about how can some redevelopments in the future be unlocked. And the near term, we recently executed a Dunkin ground lease where we’re going to create a pad out in one of the parking locks of our shopping centers. So there are certainly opportunities like that the team is focused on. But in sort of the medium to long term, I think there’s also the opportunity to evaluate some redevelopment opportunities. But we had some interesting spaces that right around the closing of the merger were there. David’s Bridal was in bankruptcy and the team has already executed to replace that space. We had a large vacant former Barnes & Noble, and we brought in a phenomenal local multi-store operator of illicit brewing a craft beer concept that the community is super excited about.
Again, we’ve gotten that solved. And so the team is really hyper focused on the shop leasing side. And as Lisa mentioned, I am most excited about the great people that have been integrated, but the platform, I think, really will pay dividends long term as well.
Viktor Fediv : And probably as a quick follow-up. You already mentioned that there are probably some attractive redevelopment opportunities within that portfolio. So given where interest rates are now what would be our kind of target IRR and for redevelopments and acquisitions in developers you mentioned, if you have an ex capital that you can deploy?
Lisa Palmer : For those of you that remember records, I’m always going to sound like a broken record because yes, we acknowledge, obviously, our cost of capital, we acknowledge that our cost of capital has increased. But again, free cash flow and the best development platform in the business, and we have proven our ability to execute and create value through cycles. And the only thing I would reiterate that Nick already said once, and this is where the broken record comes in, to the extent that we can invest capital that is going to be in shopping centers that are at least neutral but accretive to our quality, accretive to our future growth rate and accretive to our earnings, we’re going to do it. And I believe that, that is a competitive advantage for us, and it is something that we’re going to — again, from my prepared remarks, we’re going to continue to play offense and be opportunistic and do that when we can.
