Operator: Next question is coming from Linda Tsai from Jefferies.
Linda Tsai : I know you don’t normally disclose retention ratios, but just wondering if you’re running at peak or have even exceeded peak retention?
Michael Mas : We’re basically at slightly above average retention rates. I think we’re in the 80% area. Is that right? And that’s a little bit of a tick up on top of what our historical average is.
Linda Tsai : And then in terms of the purchase accounting impact, that you outlined on Page 8, noncash revenues and noncash expenses fully offsetting each other next year. In 2025 and beyond, how would those impacts flow through?
Michael Mas : Interesting. It’s going to — for ’25, I would fair to say it’s going to continue to balance each other out. It’s interesting. The weighted average life of that debt mark-to-market is significantly shorter than the weighted average life of the lease mark-to-market, Linda. So there is a point in time when that the debt mark will burn off prior to the leases, but it’s not in the next 2 years.
Operator: Next question is coming from Mike Mueller from JPMorgan.
Michael Mueller : Two questions. First, the small shops, 93.2% leased. I’m curious, where is that on a commenced basis? And then a second question. I know you haven’t had [indiscernible] long, but how is the leasing of the smaller centers in the buildings going from an efficiency standpoint compared to what you thought heading into the transaction?
Alan Roth : I’ll start on the second question. Mike, this is Alan. So it’s working well. And I think a lot of that is back to Lisa’s comment of not just the integration of the portfolio, but the integration of a lot of great people — so their people had intimate knowledge of some of the smaller assets that you’re referencing. And just across the board, we’ve felt really great about the activity that’s going on. and the integration process. And so we’re not seeing any differentiation of challenges or successes based on the asset at all, just in general, I think it’s the rising tide with what you’re hearing across the totality of the portfolio.
Michael Mas : And just in from the stats department, 89.5% on the commenced shop rate at the end of the quarter.
Operator: [Operator Instructions] Our next question is coming from Paulina Rojas from Green Street.
Paulina Rojas: As you highlighted you have a muted exposure to Ride Aid, but pharmacies are a material tenant of yours as a group, especially the — well, the industry has been shrinking for a while. And to my knowledge, confirming some writing about, you haven’t been impacted by closures — significant closures thus far. But what is your strategy looking forward for the industry as a whole? And given the size what tenant categories come to minus best backfield for the space?
Lisa Palmer : I’ll start, and then I’ll let Alan finish it up especially addressing the latter part of that question. But just generally speaking, when we think about pharmacy exposure, and I know some of you have heard me say this in prior meetings, and there’s probably many of you that are on this call that didn’t live through this. But I was with Regency when all drug stores were in line, and we had a lot of them and they moved out of line and moved out to outparcels, and we were able to replace them, and we were able to replace them at better rents. Now that they’re mostly on outparcels, it’s some of the best real estate in our shopping centers. And while, again, I believe that we have some of the highest quality real estate in the country, and we tend to have lesser locations or fewer locations when retailers do closed stores.
But even when we do, it’s an opportunity for us to re-lease. And as one of the questions earlier, address those anchor — even junior anchor rents tend to have longer leases. And the rents will move and when we are not able to get access to them, that gives us access to the opportunity to market to market. And given the location and the quality of the real estate, even within our shopping centers, we will replace it with really good tenants.
Alan Roth : Yes. And Paulina, I would add to that. So we have locations. And as you mentioned, one was on the rejection list that we’re aware of and one more was on the going out of business list. But I think just to speak to the quality of the real estate and how the team thinks and I tip my hat to our West Coast team, we’re not sitting back waiting for these spaces to come back. We do have one deal that naturally expires in May. We haven’t heard yet whether Rite Aid wants to reject it or not. But we have executed a lease already at a triple-digit rent spread. We love those low single-digit rents. And so that happens to be with a hardware store. So as you think about retailers that are willing to go in there, it’s hardware, so the home improvement, cosmetics, grocers, we may have a few that could make sense if we get access to them where we would split them and do some multi-tenant deals.
But I think there’s various different ways we can go. And as Lisa mentioned, these are some really good end caps or prominent locations. Some of them have drive-throughs. So there’s a lot of different tools in the playbook based on the unit itself.
Paulina Rojas: Very detailed answer. And then on the transaction market, I know you have said there is no real deal flow. But given the rise of interest rates, I’m trying to put together the few transactions that have closed. How do you think the bid for strips has changed since last quarter at the margin? And we don’t want to provide a numerical answer qualitatively. How has the dynamic changed? So has the market reacted to higher rates?
Lisa Palmer : Yes. I don’t know that it’s changed much at all since last quarter. It’s changed, I think, from the — in the beginning of the year, if you were to go back and read our transcripts, we were starting to feel better and thought that there was more clarity to the stabilization of interest rates, which would then reduce. There’s still a bid ask spread because there’s really — there’s — I think it’s clear that there’s a disconnect between public market pricing and private market pricing. And that is going to continue as long as that we have the volatility that we have with interest rates and borrowing costs, which is why I’m really proud of the total return needles in the haystack that we were able to find this quarter. I don’t think the dynamic has changed at all. It’s still just a drip.
Operator: We reached the end of our question-and-answer session. I’d like to turn the floor back over to Lisa for any further or closing comments.
Lisa Palmer : Kevin, appreciate that. Thank you. Thank you all for your interest. Have a good weekend, and enjoy your extra hour of sleep or however you intend to use it. Thanks all.
Operator: Thank you. That does conclude today’s teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
