Samir Khanal: Thank you.
Operator: Thank you. Our next question is from Greg McGinnis with Scotiabank. Please proceed with your question.
Greg McGinnis: Hey, good afternoon. We’ve spoken about finding ground up developers maybe lacked the capital to get construction started. Do you still see that as an opportunity for investment this year, or are there other non-traditional, opportunistic investment opportunities, it’s a lot of opportunities that you’re looking to pursue this year.
Nick Wibbenmeyer: Greg, this is Nick. I greatly appreciate the question. Yeah, I mean I’ll just say it this way, again, we have the benefit of every tool in the toolbox available to us when it comes to sourcing, development, acquisition, investment opportunities overall. And so, there’s no doubt construction loans are definitely still hard for people to get. So we are continuing to be engaged with smaller developers, but many times they need more than just debt capital, they need expertise, they need relationships to fix their cash-on-cash returns. And so, debt and equity is in play in those conversations. So we continue to have dialog related to that. And more times than not, those conversations turn into some sort of equity participation given we can bring more tools to the overall deals than just debt.
That being said, when appropriate, we will lean in to deals that we want to own long-term. We recently closed a transaction where we are just providing senior and mezz debt on a potential future acquisition. And it may have future development opportunities as well. And so again, we go into these conversations with every tool in the tool belt and bring them out and we’re excited about the future potential.
Greg McGinnis: Great, thanks, for a second question here. It’s a bit of a different type of asset from your shopping center bread-and-butter, but what’s your confidence in re-leasing those Manhattan vacancies that you talked about and is 101 7th Ave potentially address this year as well.
Alan Roth: Greg. Yes, thank you for that question, so I think, as Mike mentioned in his opening remarks or maybe it was in the early parts of the Q&A, you know those rents as you know are very high in Manhattan, and we did lose two key tenants, a former food importer in middle of last year and then a CVS that vacated just last month. We get it back, we lease it. And I think that speaks to the strength of the real-estate, we do have signed transactions to solve the Third Avenue premises that unfortunately sort of ties into that story down rent paying occupancy in ’24, where it’s not going to come back online until the fourth quarter likely of this year. And as to Second Avenue, we’re negotiating a lease there as well. So the real estate certainly is strong enough for us to find those replacement users, feel very good about that.
But it is impacting us in ’24. As to Barneys, we continue to pursue all avenues leasing it, demising it redeveloping it or evaluating the sale and so for us, we’re going to act upon what makes the most best financial sense. And it’s certainly a top priority for us.
Greg McGinnis: Thank you.
Operator: Our next question is from Ron Kamdem with Morgan Stanley. Please proceed with your question.
Ronald Kamdem: Hey, two quick ones. So I’m looking at the supplement, I see Avenida Biscayne Cambridge Square was added, maybe can you provide an update on Westbard Square, that looked like $450 million, is that still coming on in the next sort of 12 months to 18 months. And even beyond that, how are you guys thinking about potential sort of new starts and development given the strength of the balance sheet?
Mike Mas: Ron, greatly appreciate the question. So start with Westbard, really happy to announce that redevelopment continues to progress very well. Giant, which is the grocer that we relocated and built new flagship for them just opened in the last couple of weeks, and it’s doing tremendously well. So if anyone’s in the DC area, I would highly recommend you all checking out that asset as we’re very proud about the continued redevelopment potential as the team is doing a nice job keeping us on-time and on-budget. And then as you sort of zoom out and look at the wider scope, we feel really good about our development and redevelopment pipeline. As we mentioned in our prepared remarks, we started over $250 million in 2023, which was the highest amount of starts in quite some time.
But we’re not done. We still see a very strong pipeline as we look into 2024 and beyond. And it’s all aspects of the business, it’s redeveloping our existing portfolio. Sometimes it’s tear down rebuilds of grocers as you’ve seen with Cambridge as you mentioned. Other times, it is putting these junior boxes back in production in one way or another. Alan and I alluded to in our prepared remarks. And then last but not least, it is ground-up net new ground-up opportunities that are extremely difficult to pencil. There’s no question about that. These are difficult transactions to pull together, but as you saw us execute in 2023, we are doing it and we’re excited about the potential to continue with several projects, some sooner rather than later.
We hope to announce one here in the next couple of weeks in the Northeast, that would be phenomenal ground-up opportunity our team is rounding home base right now. So excited that pipeline we expect to grow and hit as we’ve articulated, our $1 billion dollars of starts plus or minus in the next five years.
Lisa Palmer: It’s — so many of you know, I played softball and my favorite softball team actually opened the season today. And this is a softball. Give me another opportunity to say the best team in the business, the best platform in the business, our leverage free cash flow funds it. That is a competitive advantage for us, and it’s something we’re really proud of. And I expect, and I’m confident that we will continue to execute and perform. Thanks for the question. That was great.
Ronald Kamdem: Right. Just if I could sneak in my second one. Just closing the thought on the same-store NOI. One specifically, I think you talked about 80 basis points dip in 1Q. What’s bad debt that’s factored into the same-store NOI guidance and how that compares to sort of historical? And then just a bigger-picture is the messaging that because this was sort of an odd year, as you sort of flip the calendar, we should be thinking more about sort of the same-store NOI, translating to core earnings growth in sort of the mid singles digits and so forth, just making sure that’s still the messaging. Thanks.
Mike Mas: Yeah, appreciate it, Ron. So from a credit loss perspective, and I think is how I’ll take your question. We are planning for 75 basis points to 100 basis points of — and that’s, by the way that’s a metric on build revenues, but we are planning for 75 basis points to 100 basis points of credit loss. That is very similar to what we planned for. In fact, we kind of ended the year towards the lower end of that range in ’23. Roughly half of that credit loss provision is, I’d call, bankruptcy related and the balance roughly to traditional bad debt expense. I think to extend your question beyond kind of as we deal with the drop in commence occupancy in ’24. And Alan alluded to some of the reasons for that, but as we solve them pretty actively throughout the course of the year, yeah, we’re going to — it’s about driving that commenced occupancy rate, closing that gap on that SNO pipeline. That is what’s going to translate to top line earnings growth on a core basis.
Ronald Kamdem: Thanks so much.
Operator: Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Juan Sanabria: Hi, just maybe a softball here, Lisa given your recent comments. But just curious on why do you think you guys are able to find a decent amount of development start opportunities when if we listen to some of your peers, they’re saying market rents have to grow 40% to 50% for new developments to pencil. Where is the disconnect, I guess in those two comments?
Lisa Palmer: I’ve never seen Nick play softball, so I’m a little afraid of this answer, but I’ll let him answer.
Nick Wibbenmeyer: Thank you, Juan. I appreciate the question. With that, setup, now I’m nervous what my answer is going to be. No, I’m kidding. No, it is a great question, Juan, and both are true. And so, I just want to keep stressing that it is very, very difficult to find land that is priced appropriately, tenants that want to pay enough rent to make sense for that land cost and that construction cost. And so, it is extremely difficult and I want to stress that. And it is finding needles in a haystack. But because it’s so hard, and because you have to have all of those tools in your tool belt, is why I am so excited. Because as Lisa has said time and time again, and I couldn’t agree more, we have the best team in the business.
We have 23 offices waking up every day, working with our critical grocery partners, helping them grow their business, and they want to grow their business. And so, they are sitting at the table with us, shoulder to shoulder with the land sellers, with the contractors, helping us collectively all figure out how do we make these deals pencil so that they can get net new stores opened. And so, although there are very few opportunities where that calculus comes together to make financial sense, it’s not zero. And we continue to get more than our fair share. And so, it’s because it’s so hard to find those opportunities that excites me because we can execute on, and we will continue to.
Juan Sanabria: And where do you think we should think of yields for new starts that you may find in ’24?
Nick Wibbenmeyer: Another great question. As you’ve seen our in process pipeline, as you can see is in that 8% plus range, on a blended basis. I would expect that to be the continued blended rate. That’s not to say some opportunities that we want to lean into that we think are really compelling that we won’t see the numbers, start with the seven from an initial yield standpoint. And so, I’d say that’s where our eyesight is, is seven on the low-end of the range for really compelling risk-adjusted returns. But on a blended basis, we’d expect to see us continue to push north of 8%. And I’ll just stress again on the development side. I do not expect we’re going to wake up tomorrow and see a bunch of new supply coming on market because of how difficult it is first and foremost.
And then number two, I just want to stress how much we do derisk these opportunities before we close and put a shovel in the ground. And so we have entitlements in hand before we close. We are substantially pre-leased, especially with our grocers and other anchors as you’ve seen in our pipeline. And so, that pre-leasing is really critical to high quality anchor tenants. And then last but not least, our construction drawings and bids are in hand. And so again, those are the key pieces of the puzzle to have in hand to give us the confidence that these yields do make sense. These projects can move forward and as you’ve seen, our teams have done a tremendous job, and I appreciate the daily efforts of once we start making sure we bring them online, on-time and on-budget.
