Laura Clark: Yes, John. I think a couple of things that I would note. Remember, this is only a three year period. So it doesn’t capture us marking the entire portfolio to market. So I think that’s probably the most significant piece of it. And then the other side of it is, we continue to, every day, mark the portfolio to market. So the baseline annualized NOI growth that you see there from fourth quarter includes leases that we mark to market in the fourth quarter and obviously impacts the future mark-to-market. So — but I think the most important component here is that, that’s only a three year look the growth from mark-to-market. And obviously, as the portfolio continues to roll, we’ll have additional mark-to-market to realize. The other thing I want to note about the bridge that you mentioned is that this includes no future rent growth. So this assumes that over the next three years, rents are where they are today.
John Kim: That mark-to-market over the entire portfolio. The last quarter presentation had at $350 million. And I know you took it out, but is that right on the ballpark of where you sit today?
Laura Clark: We’re — yes, we haven’t provided that number. We’re going to continue to provide the essential components that allow you to incorporate that allow you to be able to calculate and see that full mark-to-market within the portfolio.
John Kim: My last question is on your FFO growth guidance. At midpoint, it’s 4.3%. Your GAAP NOI guidance is at 4.5% midpoint. The dividend growth that you announced was at 10%. So I’m just wondering how you came up with the 10% versus your FFO guidance. I thought that would have correlated a little bit stronger.
Laura Clark: Yes. In terms of our dividend growth, and we’ve communicated this in the past, dividend growth is going to be pretty similar to what we’re seeing in terms of earnings growth. Our earnings growth this past year in 2023 was 12%. Our dividend growth, we announced dividend growth of 10%. So those are pretty much in line, as we’re retaining the capital that we can. So you should see those growth rates continue to mirror each other as a track forward.
Operator: Our next question comes from the line of Nate Crossett with BNP Paribas.
Nate Crossett: I was wondering if you could just talk about the Tire Co lease expiration in January of next year. How should we be thinking about that in terms of probability of renewal and what spreads could be like — and then my second question is, how should we think about leverage levels for the balance of this year? I think you’re well below your kind of guided range of 4% and 4.5%. So what is your kind of tolerance for more leverage right now?
Laura Clark: Thanks so much for joining us today. In regards to the Tireco lease, just to get everybody the background Tireco. The Tireco lease expires in January of 2025. They have a fixed rate renewal option that 4%. The update that we can provide you on is that we are in constant discussions with Tireco. And based on our most very recent discussions, they have no intentions on vacating the space. So as is our practice, we’ll provide you with an update upon lease execution around the Tireco lease. In terms of leverage, from a leverage perspective, we are very focused on maintaining a low leverage balance sheet. And when we have those target leverage levels out there at 4x to 4.5x, it doesn’t mean that we may not be below them for periods of times because maintaining a low leverage balance sheet really allows us to be opportunistic, no matter where we’re at in the capital cycle.
And so we look to really leverage the balance sheet that allows us to be opportunistic and take advantage of opportunities to drive accretion and shareholder value. When we think about leverage, we’re really comfortable about where we sit today and really puts us in a great position for the year and moving forward.
Operator: Our next question comes from the line of Craig Mailman with Citi.
Craig Mailman: Just want to go back. I know you guys had got the disclosure around the mark-to-market in the quarterly, but I just had a question as it pertained to the $0.34 that you guys had expected to come in through the net effective mark-to-market as of the last presentation. I think $0.05 of that had expected to come in ’23. So an incremental $0.29 was expected to come in ’24. And I saw in the same-store, you guys are getting $0.11 basically from that. Just — could you kind of give us a bridge from that incremental $0.29 or the $0.11? And what else would be embedded in guidance that would have been comparable to that the incremental upside that was in the last presentation.
Laura Clark: Yes, Craig, I think I’ve provided the components of guidance of our same property guidance. And then we also provide a roll forward of those components. And so I think what I can kind of walk you through what’s helpful is the components of that same property NOI guidance that we put out on a cash basis. I know I gave you the components on a GAAP basis but on a cash basis and how we generate that 7.5%. So in terms of the 7.5% midpoint of our cash same property NOI guidance, 900 basis points of that is from base rent growth that’s associated with the market of our expiring leases within the same property pool with an average 50% leasing spread. Included in that is another 300 basis points of rent steps, the embedded rent steps in our portfolio that averaged 3.6% on the total portfolio.
That’s offset by concessions of about 350 basis points. We’re projecting concessions this year of about 1.5-months. That’s in line with pre-COVID averages. In terms of average occupancy decline of 25 basis points, that has another 30 basis point impact a bit higher bad debt assumptions given where we’re at in the year has about a 20 basis point impact and then higher expenses net of recoveries have another 50 basis point impact. So these components together bring you to our 7.5% cash same property guidance.
Craig Mailman: No, no. I was getting more at the FFO impact of — and maybe this goes back to John’s question about the $350 million versus the $95 million this quarter. But if you just said looked at the old kind of disclosure you guys had in there that you guys called the near-term conversion of mark-to-market to FFO, assuming no incremental rent growth, right? It was $0.34 cumulative from 3Q ’23 to the end of ’24. And embedded in that $0.34 was $0.05 that would hit in ’23. So that implicitly released $0.29 in ’24. And I’m just kind of figuring out where in the bridge to your FFO guidance, I see $0.11 coming in from same-store GAAP into it, but I’m not seeing maybe where that incremental $0.18 would come into play and if there is a change in timing or if that’s related to what you talked about, I don’t know if there was a pull forward of retention in that previous number.
I’m just kind of trying to bridge that $0.34 in the last presentation. I know you guys will provide any more. Is that still $0.34 for year-end ’24? Or is that number changed for what should come through FFO just from the net effective mark-to-market?
Laura Clark: No. There’s a lot of different components, right, that are going to impact that. Some of that is that we’ve already converted some of that mark-to-market in Q3 and Q4 of 2023. Some of that could be how we pulled the additional properties that we pulled into repositioning redevelopment and we talked about that $0.06 impact from the NOI that’s coming offline in 2023. And some of that is associated with additional share impacts as well from additional share count — share issuance and so higher share count. So there is a number of different components that go into that. And I think we’ve provided a very thorough bridge. They get — they watched you through the reconciliation in the rollward of our prior FFO same property guidance and then to our current FFO.
Craig Mailman: Okay. So part of it is just dilution from equity into the share count from the $0.34. So you’re saying the nominal cumulative number for year-end ’24 adjusting for kind of redevelopment coming in and out should be roughly the same. I don’t want put words in your mouth, I just want to trying to bridge.
Laura Clark: Yes. I think I was really clear about what the components are and that we’ve provided that we provided a really transparent look in terms of the components of guidance as we’re seeing it today.
Craig Mailman: Okay. And then just 1 quick one. What’s the updated cash mark-to-market? You guys gave the net effect of 51 what’s on a cash basis?
