Ronald Kamdem: Great. And then if I could just ask one just following up on the comments on CapEx, which was actually my second question as we’re sort of thinking about Curb, how is the sort of CapEx profile in terms of in terms of numbers versus what site was doing. For example in 1Q, you’ve got $1 million in $2 million of maintenance, $12 million of TIs, $2 million of leasing commissions. Just trying to figure out what that’s going to look like on October 2nd.
Conor Fennerty: Sure, Ron. It’s Conor. We talked about this in prior presentations. It’s kind of to David’s point the fulcrum point or what are the most exciting aspects of the of theses. So for the industry in general, CapEx versus NOI including redevelopment has been running kind of 20% to 30%. Our view of Curb would be at sub-10%. So it’s a dramatic difference versus the industry at large. And again, that’s really one of the most compelling parts of theses. Obviously, when you think about as a public entity, if we’re a pure play that leads to fairly significant free cash flow relative to enterprise, which obviously compounds over time. So again, it’s a great question. It’s a huge focus point of ours. And to David’s point, there’s just a lot less obsolescence risk around the site plans and we lose a tenant you’re not necessarily changing walls and roofs or it’s a fairly straightforward process.
So again, it’s kind of the full competes are the most exciting aspect of the thesis and it’s less than half on our numbers of the industry overall.
Ronald Kamdem: Thanks so much.
Operator: Thank you. And the next question comes from Floris Van Dijkum with Compass Point.
Floris Van Dijkum: Hey, good morning guys. Obviously, some, some really good progress on the dispositions. Just a couple of a couple of questions. Maybe following up on the – what the Board of Curb is going to look like. Are you going to keep – is the same board going to stay the same board? Or is that going to transfer over to Curb line? And can you give us any more specifics on that at this point?
David Lukes: Sure, Floris. I can give you – I can give you some but not all. I would say that if you look back at RVI, the Board made a decision that both companies needed some consistent stewardship from the shareholder representation standpoint. And therefore, there was a couple of board members that moved from one company to the other to provide that leadership. We have not decided nor announced which directors are taking on which roles, but I think it’s fair to assume that on you would see at least one director at a minimum take the helm of SITE Centers, while the majority of the directors would likely move to Curb line since that’s the growth entity.
Floris Van Dijkum: Great. And maybe another follow-up question on credit quality. I know that your largest tenants and I think your largest tenant for curved line will be a Starbucks, but you also have Darden triple-play and McDonalds in there which typically have a lot of franchisees who do you have as your – yeah, who’s underwriting the credit of that of that lease is the franchisee or is it the parent company in that case?
Conor Fennerty: Yes, for us and I’ve checked I believe 100% of our garden Harrison portfolio our corporate I can’t recall any that are franchisee or if either one of those organizations go down that path. So you’re right there are other tenants on our top 25 list that do have some franchise exposure on beyond oftentimes just corporate sometimes just franchise. I would just point you to the fact that I think back to the GFC and the shopping center industry and the issues that I had been a pretty significant transition from this kind of “mom-and-pop” to either franchise or corporate exposure and in particular some of the franchisees own hundreds of units across different brands and concepts. So just because something is a franchisee doesn’t mean it’s inferior credit quality.
There are there are certain situations where it’s a pretty impressive organization. And I would say as you know there’s some corporate or assuming some public examples of those franchise — franchisee. So it’s dependent on the entity. You’re right as part of our underwriting. We’re looking at who the franchisee is a corporate as a franchise. It obviously has an impact on values and the expected rent growth. But I would just point you away from that kind of mom-and-pop local franchisee kind of GSE mentality and can point you to number examples where the franchisees today are pretty significant and well-capitalized.
Floris Van Dijkum: Thanks, Conor.
Operator: Thank you. And the next question comes from Samir Khanal with Evercore ISI.
Samir Khanal: Hey, good morning, all. Conor, I just had one question here. When I look at curb line and then look at the same-store NOI growth to 3.5% to 5.5% which remained unchanged. But I’m just trying to understand like what why the why that range is still pretty wide considering that you’re pretty much in May and I know the tenant environment has been pretty muted at least from the disruption side. So I guess what’s driving.
Conor Fennerty: Yeah. I mean, Samir as you know based on our conversations on December 30, we still might have a pretty wide range based off my general — I would call it prudent forecasting. There’s a couple of things. One it’s a really small denominator right? So a couple hundred thousand dollars can move that range or move the reported number pretty significantly. And that would be point one. Point two, I would take the other side of the coin say it’s only May as opposed to it is already May. That’s really the biggest piece. But you’re right we really have had no credit issues in either portfolio year-to-date I think we had $1.99 the JV portfolio we had we have no real exposure across entire entity. So I would say it really is a function of the fact that it’s a small denominator on but you had no credit issues on our portfolio year-to-date.
Samir Khanal: Okay, thanks.
Samir Khanal: Of course.
Operator: Thank you. And the next question comes from Michael Mueller with JPMorgan.
Michael Mueller: Yes, hi. Just a quick one on some operating stats for the sequential leased and occupancy changes on the anchor side on the inland side, would that or would you say organic in terms of Q4 to Q1? Or was there any notable mix impact from asset sales on there?
David Lukes: Yeah, Mike that we didn’t call out any anything related transactions this quarter because it was immaterial. As you know in prior quarters we sold I think the average lease rate was 99% and it did have a — an outsized impact. This one was organic. And as I think David alluded to in his comments and what we call in our slides there are certain situations where we’re holding space off line for dispositions meaning the buyer would prefer to have the space vacant as opposed to whatever lease we’re working on. That’s been a driver quarter over quarter. But otherwise there was no material impact from transactions this quarter.
Michael Mueller: Got it. Okay. Thank you.
David Lukes: You’re welcome.
Operator: Thank you. And the next question come from Paulina Rojas with Green Street.
Paulina Rojas: Hello. Only one question my prior question was just asked, but you mentioned market rents have continued to rise and in a way compensated the higher going-in cap rate. When thinking about IRRs, can you put some numbers behind that comment about brands pricing?
David Lukes: Good morning, Paulina. Hard to put a lot of meat behind that statistically. I can give a lot of anecdotes, but rolling it all up is a little bit more difficult. I would say that when we’re budgeting in the fall for leasing in the first couple of quarters, we’ve consistently seen rents, particularly for small shops, be higher than we anticipated six months ago, and that’s been the same thing for the last four years. Is it a dramatic rise of 50%? No. But it seems like it’s a pretty consistent beat on the shop rents. Now what comes with that is a little bit higher cost as well. But I think in any environment where you’ve just got so little vacancy in almost any unit size, there’s just more competition for space. And so I think the landlords are generally choosing between the highest rent possible or the best rent with a credit tenant.
And we’ve been selecting the best rent we can get with a credit tenant. And in that case, we’re still seeing the rents outpacing what we underwrote six months ago. Is it dramatic? No, I would say it’s not dramatic, but it certainly has been consistent and consistently higher than we would have thought.
Paulina Rojas : Thank you.
David Lukes : Thanks, Paulina.
Operator: Thank you. And the next question comes from Linda Tsai with Jefferies.
Linda Tsai : Hi. Two quick ones. What was the SITE’s credit rating when you spin off the CURB. Does the credit rating transfer the CURB? And if not, what do the rating agencies want to see to assign an investment-grade rating?
Conor Fennerty : Hey, Linda, good morning, it’s Conor. So as we work through the course of the year, prior to spin we would close the mortgage commitment and then use the proceeds to pay off all of our unsecured bonds. At that time, we would withdraw our credit rating. So for curb, it would be a new entity. Should we go down the investment-grade path? We would then need to go through the process of getting a rating from whatever agencies we wanted to. So we would not transfer it over and we’d expect to withdraw that rating prior to the spin effective date.
Linda Tsai : And what would the rating agencies want to see?
Conor Fennerty : It depends on what path you’re going private versus public. There’s a number of tests, some qualitative, some quantitative. Scale is the biggest one. You think about index eligibility on bond sizing, $300-plus million for a $2 billion company is probably a number that’s too big for one issuance. And so you could go a number of different paths. You could go to private placement path and obviously, that’s a much smaller issuance size. But the biggest thing for the public side is scale. Now what’s exciting about CURB is we’ve got the expectation for $2 billion-plus of assets at the time of the spin, but that’s before any leverage capacity, right? So I would say we have all the ingredients to be a public issuer or public IG issuer. It’s not our expectation to be on day one, but we’ve got all the ingredients in place and which I think is an important kind of arrow to have in our quiver.
Linda Tsai : Thanks for that. And then on Page 16, you show your math, how does the mark-to-market on rents vary across the regions in which you’re concentrated?
Conor Fennerty : Yes. I mean it’s really, you’re talking about the ABR per region, Linda?
Linda Tsai : Yes. Yes.
Conor Fennerty : Yes. I would say, it’s generally pretty consistent around the country. The biggest mark-to-market we’re seeing is recapture of we’ll call it seasoned pads meaning kind of the 1990s restaurant pads that we’re getting back and replacing it with a modern QSR. The other place we see pretty significant mark-to-market is on drive-throughs or any unit with a drive-through. So I would say, it’s less around ABR per region and more around unit type and/or kind of the seasoning or vintage of that. What’s interesting is if you look back on our portfolio kind of SITE and CURB and look at the two, you could argue today, the mark-to-market is greater on SITE versus CURB. But CURB, we actually think we can get out the mark-to-market, which again is one of the compelling points of the thesis or as per SITE, and this is an issue kind of the industry at large, the mark-to-market is in units that you generally are not going to recapture.
It’s large format spaces that are held by an investment-grade tenant that are going to hold them in perpetuity. So, again I would say it’s less of a regional mark-to-market and much more on kind of seasoning and unit type.
Linda Tsai : Thanks.
Conor Fennerty : You’re welcome.
Operator: Thank you. And the next question comes from Ki Bin Kim with Truist.
Ki Bin Kim: Hey, good morning. What percent of CURB’s portfolio today are basically kind of carved out a lot from the holder or preexisting site portfolio?
Conor Fennerty : Yes. Ki Bin, I don’t have the exact number on hand. I think it’s just over 30%. That number would come down over time as we invest the cash on hand. I would just say, we don’t look at those assets any differently. And as you think about, I think we brought this point out previously, when we went through the process to decide what pieces to carve out or not, we wanted to make sure that every component of the carve-out was consistent with the asset we were buying, meaning access site plan, visibility mark-to-market credit quality on limited reliance or no reliance on adjacent retail if there is any. And so I would just tell you, we feel as good about those units or properties as we do as other ones we bought from third parties or the last five-plus years.
