Nick Wibbenmeyer: Sure. This is Nick. Appreciate the question, Jeff. I’ll start with just your question related to the cap rate and valuation. And again, we talk about needles in the haystack and using every tool we have in our tool belt. And this is one of those opportunities where the seller approached us. They were looking for a units transaction. And as you can appreciate a units transaction, they care about the currency they’re getting, and therefore they wanted Regency currency. They were a fan of ours from afar, and so for planning purposes, they were ready to transact. They’d own the assets for decades. And so we were excited about the opportunity. And as you can see, from a valuation standpoint, this thing is plus or minus 8% going in yield. So very attractive from a yield standpoint as well as quality standpoint. And so we’re excited about the future of that opportunity.
Jeffrey Spector: Thank you.
Lisa Palmer: Thanks, Jeff.
Operator: Our next question is from Craig Mailman with Citi. Please proceed with your question.
Craig Mailman: Hey, thanks. Maybe I just want to follow up. I know it seems like the call has been kind of focused on what the longer term earnings power is, given just how good fundamentals are. And I guess, I maybe want to come at it from a different way. Lisa, you’ve seen kind of the perfect storm of minimal supply, good demand, and that’s helped push market-led growth. But inflation has also been a big piece of that the last couple of years as kind of top line for a lot of your tenants has taken off. As inflation starts to moderate back to more normalized levels, I mean, are you seeing any pushback on the market rent growth kind of being able to be sustained into ’25? You know it’s too early for ’26, particularly with some cost pressures, maybe in the labor side, that’s hitting some of the fast casual, fast food guys that may hit some other type of tenancy?
Lisa Palmer: I know you addressed me with that question, Craig, but I think it’s best to allow Alan to handle that.
Alan Roth: Yeah, Craig. I appreciate the question. As I’ve said in our opening remarks, 10% is our highest total annual rent growth in seven years. But we prefer to emphasize the GAAP growth as a better measure and we have some impressive spread this quarter, 20% total over 50% on new deals. But to your question from an inflation perspective, we’re approaching peak occupancy. So I think when we get there or even when we’re near that as we are now, I still think that pricing power is there and expectation is that the teams can continue to push on both the spreads and the steps as we go-forward. We are getting more steps. And we’re getting steps in more deals now and we’re getting higher steps. Approximately 95% of our new deals had steps and 70% of those had 3% or higher. So again I think the focus is there and I believe that given where occupancy is that trend can continue, Craig?
Lisa Palmer: And again, I would just come on top. When you think about our business model and our value proposition to our investors. It is the sustainability and the safety of that growing cash-flow stream, which translates to our core operating earnings growth and then dividend growth. And I know that we’re getting far removed from the 2020-year, but I think it’s really important to remember that we went through, I mean a time, the entire world went through a time that none of us had ever experienced before. And we did not cut our dividend. And I think that, that’s really important when you again, you think about the value proposition for our investors. It’s core operating earnings growth plus dividend growth to get to total shareholder returns in the 8% to 10% range.
Craig Mailman: No, that’s helpful. And I don’t know, maybe this one’s for Mike or I don’t want to direct it to any one person, but interest expense headwinds have been an issue. You guys have successfully sourced some acquisitions and you have potentially a billion of redevelopment ongoing over the next five years. I’m just trying to get at when you see coming to the numbers, the snow pipeline really kicking in, average occupancy, the timing of some of these anchor box backfills kind of normalizing out, when maybe the headwinds moderate enough that you start to see kind of the leverage multiplier on same store kind of flow through the earnings. Is that in the next couple of years, or do you really have to get through the kind of the continued repricing of the debt stack?
Mike Mas: Another power packed question. And I appreciate it, Craig. We do have some headwinds to our growth rate this year and we kind of — we just ran through them and clicked through them and I think we understand those in ’24, and again, happy to dig into any of those that you’d like to. But I do see the power of our existing free-cash flow. And the ability for us to put that capital directly into our growing and exciting — excitingly growing, development, redevelopment pipeline, which will add to our growth rate going forward. Beyond — and we actually have from a leverage perspective, given our balance sheet position at the low-end of our targeted leverage range, we actually have on a leverage-neutral basis even more capital driven again by that free-cash flow to put into our acquisition intents.
And Nick did a nice job of explaining how we think about acquisition activity going forward, which will add to our core operating earnings growth rate. But then you kind of put all that together combined with a normalization and continued growing of our commenced occupancy through ’24 towards the end unfortunately, into ’25, I think those elements will reflect themselves in a core operating earnings growth rate, that is at least meeting the objectives that Lisa outlined of being 4% on core operating earnings with a commensurate increase in dividend growth. And if we can do better on the margin in all elements of our business, rent growth, maybe even push those occupancy records even a little bit higher. All of those should result in maybe a slightly even more amplified vision of growth.
Craig Mailman: No, that’s helpful. Appreciate the color. Thanks.
Operator: Thank you. Our next question is from Samir Khanal with Evercore ISI. Please proceed with your question.
Samir Khanal: Hey, Mike. Good morning. I guess one on the integration with Urstadt Biddle. I know you’ve talked about 1.5% accretion for a while now. But as you’ve had time to digest this portfolio, and what potential further upside are you seeing maybe from an internal growth standpoint on the occupancy side. And also, what about the opportunities to unlock some of the redevelopment opportunities there?
Mike Mas: Hey Sameer. Yeah, I’ll reiterate the — from the beginning, we’ve articulated the strategy behind this merger as being a portfolio that looks like Regency’s assets. And on a long-term basis, we see a growth rate that looks like Regency’s growth rate. But in the near-term one element that we liked about the opportunity was this ability to bring that rent-paying occupancy higher than it has — than it currently exists and I just articulated. In fact, this year we are seeing an additive growth rate from a same-property perspective because of that movement in commenced occupancy. So there’s not — that doesn’t, what you didn’t hear me say is, there’s a big redevelopment, heavier component of this merger in the near-term.
But I’m not — we’re not dismissing that either. We do see — we are — we know it’s a leasing exercise right now. But as we’re leasing up this portfolio we have an eye towards the future, as we do in our — across all of our assets. And we are constantly looking to find value-add accretive redevelopment opportunities for really well-located pieces of commercial real-estate, and that’s what we bought. And so we’re pretty excited about the long-term prospects there.
Samir Khanal: Okay and then, I guess my question — second question is around the health of the consumer and the local shop segment. I mean, I appreciate the comments on the consumer being resilient and you’re not seeing impact to the business yet. When you look at credit card debt, it’s at record levels. You see delinquencies that are up, I guess what are you seeing not just on the Shop segment, but kind of the local side of that? Thanks.
Lisa Palmer: I’ll take it. If Alan like to add, please feel free, Alan. But generally speaking, again, think about our portfolio and the types of shopping centers we own, neighborhood community shopping centers tend to be more convenience, value, necessity, service. So the consumer — and in the trade areas that we do mostly operate in, there’s not been a lot of job losses. So people are — they still have their — they still have their jobs, and they are still earning wages. And therefore they’re still spending. And when people do cut back, they tend to not necessarily cut back at their neighborhood and community shopping centers first, they may trade down, which sometimes also will benefit us. So we’re not going to say that we’ll never — that we won’t feel any pressure from consumer spending declining.
But again, we have long-term leases. And we can absorb, and our tenants, because they are high quality, good operators, can also absorb some decline in sales. Sales do not need to grow every year for a tenant to be able to pay their rent. Our tenants are great operators. And it has been, in my experience, we have gone through many cycles at Regency, and there have been more moderate recessions. So even if we were to enter into a recession, there have been more moderate recessions where we really didn’t feel any pain as a result of that. And then there are ones that are much more significant, like the GFC and COVID, and we did feel that pain. But I don’t see that in — I don’t have any visibility to a recession of that type or that type of decline in 2024, so don’t expect to feel much pressure.
Mike Mas: And Samir, I would just add, just from an operator’s perspective, we’re going to look first to our AR balances, they’re healthy. We’re going to look next to sales reports, they remained strong. We’re going to then look at are we seeing elevated levels of assignments? We’re not. And so, I think sort of all of those things also dovetail into the consumers reaction, at least within our portfolio right now.
