Samir Khanal: Got it. And then last one for me. Michael, is the expense recovery ratio, I know that moves around a lot and I think it was much higher this quarter. What’s kind of the right number to think about for the long term for the business?
Michael Bilerman: So we think about this year in totality, probably be in the mid-80s maybe up a little bit from that level. The first quarter did benefit from the expense refunds that I talked about which reduced our OpEx. So that the recovery rate is going to show higher because the operating expense number was down a little bit. The other factor is, it is heavily seasonal because we’ve moved largely to a fixed CAM structure, our recoveries are generally flattish during the year absent our spreads, but the operating expenses are highly variable both from controllable as well as uncontrollable expenses. As we talked about the last few quarters, just from a cadence during the year, you should expect the recovery rate to be higher in the first half of the year and lower in the second half of the year as there typically is additional spend in the third and fourth quarters relative to the flat reimbursement level.
We are trying to drive as part of our strategy which has been the last number of years drive total rent which is increasing both base rent and that base rent line and higher reimbursements from the tenants which shows up in the reimbursement line and that’s why we continue to talk about total net growth which all drops to NOI. Is that helpful?
Samir Khanal: Yes. Yes it is. Thank you.
Operator: Thank you. Our next questions come from the line of Vince Tibone with Green Street. Please proceed with your questions.
Vince Tibone: Hi, good morning. Renewal spreads turned positive during ‘22 while the average lease term was about three years, but sales are currently down versus ‘22. I’m just trying to get a sense as these leases start rolling in ’24, excuse me ‘25 and ‘26. It feels like renewal spreads could be a little pressured and much lower than current levels unless sales really pick up. Am I thinking about this the right way or is there any color you can share on how we should think about renewal spreads after this year once you begin anniversarying the first renewal, the current team signed with the tenant?
Doug McDonald: Sure, Vince. This is Doug. When we look at 9.3% portfolio average and you’re right, there’s different vintage and market discrepancies, but we still feel that there is room throughout our portfolio for additional rental increases. And we are going to continue to pursue those and in situations where we feel that there aren’t as many rent growth opportunities if the tenant is somewhat maxing out of its productivity level. Those are some of the opportunities that we are looking for the remerchandising opportunities bringing in the new tenants creating that sense of vibrancy, additional traffic drivers, all those elements that Steve has discussed for the last few quarters.
Vince Tibone: Okay. That’s fair. But just to maybe follow-up, I’m just trying to think about kind of some of the basic OCR math. So let’s say, sales are up 5% over three years, contractual bumps are probably more than that, cumulatively. So I guess, like, do you think you’ll be able to push OCRs further on a lot of these tenants? Because imagine when the new team came in place who already accomplished that. I’m just trying to figure out the lever like do you think you can continue to push OCRs to get better spread or can kind of keep spreads positive and attractive or is it I guess that I’m struggling to put the pieces together on how renewal spreads at least could keep stay at the current levels? Because I totally agree on the new leases, there’s a great remerchandising opportunity. But on the renewal side is, where I guess, I’m trying to figure out what lever you guys could pull to keep those robust at the current levels for the next few years?
Stephen Yalof: Well, [indiscernible] we’ve now shown our retailers that those tenants that have expiring leases, they need to be productive in order to stay in the center. So if a store is not productive, we’re either going to ask them to reposition, downsize, right-size or we’re going to replace them. So if you’re — the key lever for growing rents for tenants that are renewing is the competition from the new productive retailers that are coming into the shopping center.
Vince Tibone: No, that’s fair. Makes sense. And then maybe one last one for me. Just how do you — how much do you think retailer inventory strategies impact demand for the outlet space? Like, it seems like everyone’s maybe a little tighter on inventory strategies today, but that obviously could change, we could loosen up. Like, how does that matter at all for trends in new store opening or yes, just curious to get your comments and thoughts there?
Stephen Yalof: Yeah. Look, I think a lot of brands are using outlet as a strategy to do a number of different things. It’s from clear excess inventory and look if you have an immediate excess inventory issue, you’re not going to do a 10 year lease in an outlet center to clear what might be a year’s worth of excess. Hence, we have a pop up strategy to allow a lot of our retailers to come in and sell through that inventory. And that’s give them an opportunity to have a taste of what the outlet center business is. We’ve done that with the member brands, direct to consumer brands that it becomes some of the faster growing brands within our portfolio. We also have other retailers that are always going to look at outlet because there’s an aspirational customer that shops our platform that may not shop those particular brands in any other channel.
So it’s the first point of entry for a retailer to engage a new consumer and then ultimately trade them up through their ecosystem. So we could talk chapter and verse about that dozens of different reasons why brands use outlet as a strategy, but those are sort of two strategies on either end of that spectrum.
