So everyone in ’24 is really dealing with the same issue in terms of all our balance sheets. And we feel very good, very comfortable given the strength of where our balance sheet sits today that we’ll be able to get through this and hopefully lock in, debt at an attractive rate. And Mike, I don’t know if you want to add to that.
Michael Haines: I agree with what you’re saying. I think, there’s no shortage of opinions out there in the marketplace of what’s happening in the overall economy and where rates might go. So, we just have to be patient, wait and see how it kind of evolves and just work with the market as we see it. The good news is, with the ’23, we’ve already refinanced the ’24s. We’ve got full capacity on the credit line. So we’ve got some flexibility there on the timing of that as well.
Paulina Rojas Schmidt: Thank you. And then my other question is, when I look at your implied cap rate, it is significantly higher than some of your grocery and court peers, which is unusual from at least a historical perspective. What do you think the market is getting wrong or is the market putting too much weight into Rite Aid? And what is your interpretation of the current event?
Stuart Tanz: Yes, I mean, look, I think the challenges for ROIC in ’23 have been the debt maturity which has now been resolved and the noise around right aid. And right now it just looks like it’s noise from our perspective. We feel very comfortable sitting here today that we will come out of this, with potentially some very strong rent growth. Remember, we have not had an anchor space available in this portfolio in five years. And more importantly, when we look at the market today on the West Coast, there’s nothing available. There’s nothing to lease from an anchor perspective. So, the demand, again, has been a bit overwhelming since we finally had an anchor space come available. We’ve got a series of LOIs from incredible grocery anchor tenants as well as others.
So, again, we feel pretty comfortable today with where we sit, and more importantly at some point the noise is going to go away. We think we’ll be able to show the market pretty quickly that there’s a lot of mark-to-market value that’s going to be created through this process.
Paulina Rojas Schmidt: I think you mentioned you have seen demand from grocers, right, for the state. Can you provide some color on what type of grocers have approached you?
Stuart Tanz: We’ve had the regional grocers, local grocers, and national grocers at the table all at one time.
Richard Schoebel: Approach is rich. I don’t feel like getting specific on names. It’s a variety of all those types of products.
Stuart Tanz: Very strong tenants.
Paulina Rojas Schmidt: Okay, and the last one. Are you thinking about single tenant users for the space, or do you think it’s likely that if you were to receive more space back, you would have to subdivide the space into smaller stores?
Stuart Tanz: Most of our righted spaces have already been right-sized, where we’ve taken back space and downsized them already. So our goal would be to re-tenant them with a single tenant, but we also would look at splitting them, which we’ve done in other circumstances. It really all depends on the users, the economics, and all the factors that we would consider when we lease the space.
Paulina Rojas Schmidt: Thank you.
Stuart Tanz: Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from Todd Thomas of KeyBanc Capital Markets. Please proceed.
Stuart Tanz: Hey, Todd.
Michael Haines: Hey Todd.
Todd Thomas: Hi, good morning. A couple of follow-ups. First, I was wondering if you could tell us, with regard to Rite Aid, how much term is left on average across the 14 leases in the portfolio, excluding the one that’s been rejected, and can you talk about your interest or appetite in buying leases at auction, whether that’s an option that you’re contemplating?
Stuart Tanz: The answer is yes, in terms of buying the leases, especially if we see the pipeline of LOIs and grow, as we’re seeing right now, the answer is yes, we are currently looking at buying these leases as we’re having this discussion, Richard in terms of term?
Richard Schoebel: Yes. I don’t have the average term here, Todd, but we’ve been renewing right-aids throughout the year, and they range, the next expiration is not until 2026, and then we go all the way out to 2029 and as far out as 2030. So there’s a bit of term on many of these leases, and then, of course, options.
Todd Thomas: Okay, and then just circling back to the dispositions. So I’m curious if you can just talk a little bit more about the strategic rationale, just behind those planned asset sales, what you’re hoping to accomplish with the dispositions, and whether the cap rate spread on dispositions relative to some of the acquisition yields that you’re starting to see or underwrite today would be a creative, or is it really more about the rate of NOI growth between the buys and sells?
Stuart Tanz: It’s combination of the NOI growth, combination of the arbitrage in terms of cap rates. We believe that on some of these assets we may get into the fives, and then, obviously, buying on the other side of that equation in the mid-sixes or low-sevenths. So it’s a combination, really, of those two things. And we have seen on the West Coast a couple of transactions with 1031 buyers where they have been paying up to buy these type of assets quite aggressively. So hopefully with a bit of luck and a bit of focus in terms of timing here, and more importantly, the fact that there’s such little product on the market, I think will help drive this program of potentially accelerating selling some of these assets.
Todd Thomas: Okay, and then I think I heard you mention joint ventures earlier, but I think that was specifically around some of the land sales that you were maybe discussing. But in thinking about acquisitions, you own everything really on balance sheet today, no joint ventures, nothing complicated. Is everything that you’re considering moving forward in terms of acquisitions also on balance sheet, or would you consider bringing in a partner or looking to do something a little bit more creative, perhaps to make the deals pencil and be in a position to take greater advantage of opportunities that might surface?
Stuart Tanz: The focus, as you know, Todd of this management team for the last 30 years is to stay on balance sheet. We have been approached quite aggressively over the last six months by some of the biggest players in the business in terms of going off balance sheet. Nothing is in front of us today that would get us excited. However, I’ll never say never if someone does walk in and gives us something that could be highly accretive to shareholders with a plan of what I would call getting these assets back on the balance sheet over time. But again, the focus continues to be on balance sheet [Technical Difficulty] in terms of growth as we look into the balance of this year and next year.
