Alexander Goldfarb

Alexander Goldfarb of Piper Sandler & Co. asked how the economics of a recent major lease deal in the market compare to Vornado's requirements for its PENN 15 project. He also inquired about the company's apartment development strategy in light of new state legislation. In a follow-up, he sought clarification on the PENN 1 ground lease litigation and arbitration process.

Answer

Chairman and CEO Steven Roth explained that Vornado remains patient and will not proceed with a development deal that doesn't meet its high financial return standards, highlighting the company's debt-free position on key PENN assets. He confirmed Vornado will develop some apartments in the PENN District but will remain principally an office company. Roth also clarified the PENN 1 ground lease arbitration, stating the panel set a rent of $15 million, which would increase to $20 million only if Vornado loses a separate, pending litigation, providing a defined outcome either way.

In a follow-up, Alexander Goldfarb of Piper Sandler asked for the net FFO impact over the next two years, considering FFO losses from asset sales and refinancings against FFO gains from new leasing.

Answer

Michael Franco, President and CFO, explained that the impact of capitalized interest from Penn 2 rolling off is already reflected in consensus estimates. He noted the 350 Park redevelopment will not have a major impact due to capitalized interest. He reiterated that leasing success will begin to flow through in the current year, more materially next year, and 'dramatically' in 2027, providing a clear trajectory for FFO growth.

Alexander Goldfarb of Piper Sandler asked why Vornado doesn't merge with its affiliate Alexander's, Inc. to simplify the structure and capture synergies, and also inquired about the net FFO impact from upcoming asset sales and lease-up over the next two years.

Answer

Chairman and CEO Steven Roth stated that merging with Alexander's is not a current consideration, citing the difficulty in pricing such a transaction to satisfy both sets of shareholders. President and CFO Michael Franco explained that the FFO impact from leasing up PENN and other vacancies will begin to flow through in the current year, become more material in 2026, and be dramatic in 2027.

Alexander Goldfarb questioned why Vornado doesn't merge with its affiliate Alexander's (ALX) to capture synergies and asked for an estimate of net FFO impact over the next two years from asset sales versus new leasing income.

Answer

Chairman and CEO Steven Roth dismissed the idea of a merger, arguing that a streamlined, standalone Alexander's could achieve a higher market valuation. President and CFO Michael Franco addressed the FFO question by reiterating that the positive impact from new leasing will begin this year, become more material in 2026, and be "dramatic" in 2027, offsetting impacts from dispositions and changes in capitalized interest.

Alexander Goldfarb of Piper Sandler questioned the rationale for acquiring a B-note at par given its default status. He also asked if Vornado's future investment focus would shift back to traditional submarkets like Park Avenue, which are currently outperforming newer frontiers like the West Side.

Answer

Chairman and CEO Steven Roth defended the B-note purchase, stating Vornado paid par because it saw value and a strategic position in the asset. Roth and President/CFO Michael Franco asserted that the West Side is now an established, booming market, not a 'new frontier.' They emphasized that market demand has broadened, with strong activity across all of Vornado's submarkets, including high-rent areas like Chelsea.

Alexander Goldfarb of Piper Sandler sought precise clarification on the rent structure of the Bloomberg lease renewal and asked for the reason behind the increased 2024 earnings drag guidance. He also inquired about the potential for office-to-residential conversions.

Answer

Chairman and CEO Steven Roth clarified the Bloomberg lease rent will be set by a 2029 appraisal with a +/- 10% collar around a $98/sq ft net rent baseline. President and CFO Michael Franco explained the earnings guidance wasn't a change, but rather the first time they quantified the previously mentioned vacancy impact. Roth also confirmed they are 'aggressively' exploring office-to-residential conversions, noting the economics target distressed B and C buildings.

Alexander Goldfarb asked about the economic loss on $585 million in Q3 asset sales and how AvalonBay's development pipeline strategy has evolved to focus on specific sub-markets.

Answer

Chief Investment Officer Matt Birenbaum explained that the $585 million in sales included both developed and acquired assets, with material losses driven by two specific underperforming assets: Brooklyn Bay and an Archstone asset in NoMa. He noted the overall 2025 dispositions have an unlevered IRR in the mid-8%. CEO and President Ben Schall added that these sales represent pruning low performers to redeploy capital. Matt Birenbaum further detailed that the development strategy has long focused on best risk-adjusted returns, demanding higher yields in weaker sub-markets, and concentrating on areas like Northern Virginia, San Diego, Orange County, and the Seattle East Side, with no LA County development in 5-6 years. Ben Schall emphasized that the current environment allows them to move on the best real estate with less competition.

Alexander Goldfarb asked about the economic loss on the $585 million in Q3 asset sales, specifically if it was driven by particular projects, and how AvalonBay's development pipeline and land options have evolved given increased market nuancing.

Answer

Matt Birenbaum, Chief Investment Officer, explained that the economic loss on Q3 sales was primarily due to two specific communities: Brooklyn Bay (a developed asset in an unusual sub-market) and a NoMa asset (from the Hearthstone acquisition, in a uniquely challenging sub-market). He noted that the overall unlevered IRR for 2025 dispositions remains in the mid-8%. Sean Breslin, Chief Operating Officer, added that these were underperforming assets being pruned to redeploy capital into higher-growth opportunities. Matt Birenbaum also stated that AvalonBay has been strategically focusing its development pipeline on sub-markets with the best risk-adjusted returns and long-term performance, citing examples like Northern Virginia, San Diego, and the East Side of Seattle, and has not started development in Los Angeles County for several years.

Alexander Goldfarb of Piper Sandler asked if the return-to-office trend has had any negative effects on AvalonBay's suburban portfolio. He also questioned the appropriateness of the company's capitalized development overhead and interest given the industry's risk profile.

Answer

COO Sean Breslin noted minor negative impacts from some migration but stressed that many of AvalonBay's suburban locations are major job centers themselves. CIO Matthew Birenbaum and CFO Kevin O'Shea defended the capitalized costs, stating they are factored into project bases, are covered by deal profitability, and reflect a highly efficient platform managing a ~$7 billion business book.

Alexander Goldfarb asked for the specific drivers of the seasonal operating expense increase in the second quarter and questioned whether resident concerns about the economy are a reliable leading indicator of a downturn.

Answer

COO Sean Breslin explained the Q2 OpEx increase is due to the reversal of a Q1 property tax benefit, higher turn costs, and seasonal maintenance projects. Regarding resident concerns, he characterized it as 'chatter' that has not yet impacted data, noting there is typically a 6-8 month lag before any behavioral changes occur, with an initial tendency for residents to 'hunker down'.

Alexander Goldfarb asked whether ancillary fee income is truly additive or if residents simply view it as part of an all-in rent price, limiting total revenue growth. He also inquired if Maryland, specifically rent-controlled Montgomery County, is a market AvalonBay would look to scale back from, similar to its exit from Connecticut.

Answer

COO Sean Breslin responded that it depends on the fee; services that offer clear value at a discount, like bulk internet, are viewed favorably, while outlier fees could face resistance. CIO Matthew Birenbaum and CEO Benjamin Schall addressed the portfolio question, stating that while regulatory risk is a key factor in their strategy and the investment bar is higher in such areas, they are not planning a specific, immediate scale-back in Montgomery County, where their presence is already modest.

Alexander Goldfarb from Piper Sandler questioned whether 2025 is expected to mark a return to a "normal" seasonal leasing market after several years of anomalies. He also asked if the company's site selection criteria have changed in response to increased flooding risks in certain regions.

Answer

COO Sean Breslin responded that while traditional seasonal demand patterns are expected to hold, factors like return-to-office trends and the affordability gap between renting and owning could provide unique support for demand. CIO Matthew Birenbaum stated that for the last 6-7 years, AvalonBay has used a formal, third-party resiliency risk model for every potential site, which assesses risks including flooding, indicating their process has long been mindful of these factors.

Alexander Goldfarb questioned the frequency of Kimco's retailer-backed investments, such as the recent Family Dollar deal, and whether these types of opportunities are becoming more common or remain infrequent.

Answer

Ross Cooper, President and Chief Investment Officer, and Conor Flynn, CEO, emphasized that retailer investments are part of Kimco's long-standing strategy, focusing on opportunities collateralized by significant real estate. They explained that these deals are opportunity-driven and hard to predict but Kimco maintains active conversations with retailers.

Alexander Goldfarb questioned the frequency of Kimco's retailer-backed investments, such as the recent Family Dollar deal, and whether these types of opportunities are becoming more common or remain infrequent.

Answer

Ross Cooper, President and Chief Investment Officer, and Conor Flynn, CEO, emphasized that retailer investments are part of Kimco's long-standing strategy, focusing on opportunities collateralized by significant real estate. They explained that these deals are opportunity-driven and hard to predict but Kimco maintains active conversations with retailers.

Alexander Goldfarb of Piper Sandler & Co. inquired about the structured finance program, asking if guidance includes expected repayments and if the business is sustainable or opportunistic.

Answer

President & CIO Ross Cooper confirmed guidance incorporates repayments and new investments, viewing the business as viable long-term. CEO Conor Flynn added that the program provides a 'paid to wait' strategy, securing a right of first refusal on a future acquisition pipeline of desirable assets.

Alexander Goldfarb from Piper Sandler questioned what gave Kimco the confidence to raise its full-year guidance amid a challenging macro environment, a move many peers have avoided.

Answer

Conor Flynn, CEO, pointed to strong hard data, including positive foot traffic and robust leasing demand that continued into April. He highlighted the large signed-but-not-open (SNO) pipeline as a 'wide moat' of future cash flow. Glenn Cohen, CFO, added that Q1 results beat budget due to better-than-expected rent from Party City, strong operating metrics, lower costs, and the accretive impact of the stock buyback.

Alexander Goldfarb of Piper Sandler questioned the recent stagnation in small shop occupancy, asking if it has hit a frictional cap despite robust overall leasing demand.

Answer

COO David Jamieson explained that the flat year-over-year small shop occupancy was weighed down by the absorption of the RPT portfolio, which had significantly lower occupancy. He noted that the legacy RPT small shop portfolio grew 50 basis points and that the team is laser-focused on breaking through the current perceived ceiling, with incentives in place to drive small shop leasing.

Alexander Goldfarb asked for a quantification of the outperformance from the RPT and Weingarten acquisitions compared to original underwriting and inquired about plans for 2025 debt maturities.

Answer

CEO Conor Flynn confirmed that both the RPT and Weingarten transactions exceeded underwriting expectations for synergies and NOI, highlighting RPT's 10.3% same-site NOI growth this quarter as evidence of enhancing Kimco's growth profile. CFO Glenn Cohen added that for 2025, the company will address $290 million in remaining maturities, including a Weingarten bond, and has ample liquidity and multiple options to do so.

Alexander Goldfarb of Piper Sandler asked for a quantification of the outperformance from the RPT and Weingarten acquisitions versus original underwriting and later followed up with a question about Kimco's strategy for its 2025 debt maturities.

Answer

CEO Conor Flynn confirmed the RPT portfolio is outperforming on both synergies and NOI assumptions, citing its 10.3% same-site NOI growth for the quarter. CFO Glenn Cohen addressed the debt maturity question, detailing the remaining $290 million for 2025 and stating the company has ample liquidity and multiple options to address it, including its $2 billion revolver.

Alexander Goldfarb asked about the potential for Equity Residential to re-enter the convert market, given some mid-3% debt coming due next year and recent REIT convert issuances. He also questioned the impact of AI on job creation or elimination in key AI markets like New York and San Francisco.

Answer

Mark Parrell (President and CEO) stated that converts are an interesting tool, used opportunistically in the past for asset matching, but noted it's awkward to buy back stock and issue converts simultaneously. Michael Manelis (COO) cited migration data showing increased move-ins from outside the MSA/state in San Francisco and New York, indicating excitement and benefits from tech shifts. Mark Parrell added that while AI's long-term impact on white-collar jobs is unknown, he believes the market will adapt, and highly educated, digital-native residents will learn to use AI effectively.

Alexander Goldfarb asked about Equity Residential's potential interest in re-entering the convertible debt market, given upcoming debt maturities and recent market receptiveness to converts. He also questioned the impact of AI on job growth in key markets like New York and San Francisco, specifically whether it's a net job creator or eliminator, and if ripple effects are observed in related industries.

Answer

Mark Parrell, President and CEO, discussed the historical context of convertible debt issuance, viewing it as an interesting tool for specific, material investment efforts, but noted the current awkwardness of issuing converts while buying back stock. Michael Manelis, Chief Operating Officer, highlighted positive in-migration and retention trends in San Francisco and New York, attributing it to tech and startup excitement. Mark Parrell added that while AI will change the job market, he believes highly educated, digitally native residents will adapt, and does not foresee a widespread job elimination scenario.

Alexander Goldfarb of Piper Sandler inquired about the potential impact of New York City's political climate, asking if rent freezes could be a net positive for market-rate rents, offsetting quality-of-life concerns. He also asked about trends in foreign student demand in Boston.

Answer

President & CEO Mark Parrell addressed the NYC question by noting that many rent control powers reside at the state level and that EQR is actively engaging with policymakers to highlight the importance of private capital in housing supply. EVP & COO Michael Manelis commented on Boston, stating that while inbound student activity appears slightly below normal, the numbers are small and it's early in the season.

Alexander Goldfarb of Piper Sandler asked about the net impact of potential quality-of-life issues versus rent freezes on regulated units in New York City. He also inquired about any changes in demand from foreign students in the Boston market.

Answer

President & CEO Mark Parrell addressed the New York question by noting that much power on rent control rests with the state, not the city, and that EQR has limited exposure. He expressed hope that quality of life remains a priority. EVP & COO Michael Manelis stated that while foreign student move-ins in Boston are tracking slightly below normal for July, the numbers are small and it's too early to draw conclusions for the full student leasing season.

Alexander Goldfarb of Piper Sandler challenged the idea of apartments being a lagging indicator, given their forward leasing activity, and asked for an opinion on California's legislative efforts to streamline housing development by reforming CEQA.

Answer

CEO Mark Parrell acknowledged that forward leasing provides some insight but maintained that housing is a non-discretionary need driven by life events, making it less of a clear leading indicator than other sectors. Regarding California, he expressed optimism, viewing the CEQA reform efforts as a positive 'sea change' in policymakers' attitudes toward encouraging new housing supply, even if the specific bill's passage is uncertain.

Alexander Goldfarb asked about any shift in the federal government's regulatory stance on the real estate industry and whether pricing differences are emerging between coastal and Sunbelt markets that reflect regulatory risk.

Answer

CEO Mark Parrell noted that while the new administration's focus on supply is positive, most key regulatory issues remain at the local level, though potential changes to the GSEs are a federal issue to watch. CIO Alec Brackenridge and CEO Mark Parrell observed that broad investor interest keeps pricing tight across markets, with a recent return of interest to coastal cities like San Francisco, suggesting it's more about which markets are 'open for business' than a clear risk-based pricing spread.

Alexander Goldfarb asked for clarification on the strategic differences between using the commercial paper program versus unsecured debt. He also questioned what gives the team confidence that the current return-to-office mandates in Seattle and San Francisco will succeed, unlike previous attempts.

Answer

CFO Bob Garechana described commercial paper as a cheaper, short-term tool for managing transaction-related working capital, distinct from long-term unsecured debt used for the overall capital structure. COO Michael Manelis cited tangible evidence like changing migration patterns, on-the-ground feedback, and increased job postings as reasons for optimism in the West Coast markets.

Alexander David Goldfarb asked about how BXP's investment criteria have tightened since Investor Day, specifically regarding higher yield thresholds for development and acquisitions, and how this new discipline impacts deal evaluation and selection.

Answer

Owen Thomas (CEO, BXP Inc) reiterated that BXP's threshold yield for developments is 8% or higher, a 100-200 basis point increase from pre-interest rate hike levels, requiring significantly higher rents. He emphasized that BXP will be a more selective office developer, focusing on high-quality opportunities. Douglas Linde (President, BXP Inc) added that the appetite for acquiring buildings at 6% NOI yields with lower cash flow and near-term rollover is less enticing than current development opportunities, making BXP highly selective for acquisitions.

Alexander David Goldfarb asked how BXP's investment criteria have tightened since Investor Day, specifically regarding development yield thresholds, and how many deals were rejected due to these new, higher thresholds.

Answer

CEO Owen Thomas stated that BXP's development yield threshold is now 8% or higher, an increase of 100-200 basis points from pre-interest rate hike levels (6-7%), requiring significantly higher rents due to increased construction costs. This makes BXP a more selective office developer. President Douglas Linde added that BXP is executing on $2.6 billion in developments (343 Madison, 725 12th Street, and a potential new build-to-suit), which represents significant external growth, and acquisitions at a 6% NOI yield are less appealing compared to these development opportunities.

Alexander Goldfarb of Piper Sandler Companies inquired about the potential annualized FFO impact from the planned $600 million in asset sales, particularly from the income-producing properties.

Answer

Michael LaBelle, EVP, CFO & Treasurer, stated that the combination of income-producing and non-income-producing (land) asset sales is not expected to be dilutive to FFO, as the proceeds would be used to reduce company borrowings, offsetting the lost income.

Alexander Goldfarb of Piper Sandler questioned if the previously guided 'steep FFO ramp' in the second half of 2025 is still expected, or if tenant occupancy timing might push that ramp into 2026.

Answer

CFO Michael LaBelle reaffirmed that a significant FFO ramp-up is still expected in the back half of 2025. He pointed to the midpoint of the annual guidance, which implies FFO per share will need to average significantly higher in Q3 and Q4. This growth is driven by revenue commencing from leases already signed or currently in negotiation, which will primarily boost same-store NOI.

Alexander Goldfarb asked about potential risks or offsets, such as dilutive acquisitions or taking buildings out of service, that could hinder the expected FFO acceleration in late 2025 and into 2026-2027.

Answer

President Douglas Linde affirmed his expectation for meaningful NOI growth from the portfolio in 2026 and 2027. CFO Michael LaBelle identified the primary potential offsets as uncertainty around future short-term and long-term interest rates, which would impact refinancing costs and expenses on the company's floating-rate debt.

Alexander Goldfarb inquired about the Washington D.C. market, asking about the directional trend for rent changes on lease rollovers and whether tenants are willing to pay for new development.

Answer

President Douglas Linde stated that due to long lease terms with annual escalations, it's nearly impossible for rents to roll up on a like-for-like basis. However, EVP Jake Stroman added that there is demand from the legal industry for new, high-quality, amenitized product, which could command rents 15-20% higher than existing trophy assets, creating a development opportunity.

Alexander Goldfarb asked about cap rates in the acquisition world, whether Brixmor has a minimum yield threshold for deals to be accretive from day one, and how they balance this given increased competition for assets.

Answer

Mark Horgan, EVP and CIO, stated that Brixmor's focus is on growing earnings and driving high unlevered IRRs, typically in the 9.5%-10.5% range. He noted a willingness to acquire assets with lower going-in yields, like Britain Plaza, if they offer significant value-add opportunities. Brian Finnegan, Interim CEO and COO, added that acquisitions are funded through capital recycling of low-growth assets and land parcels, providing well-priced capital for compelling opportunities.

Alexander Goldfarb of Piper Sandler asked about cap rates in the acquisition market, specifically if Brixmor has a minimum yield threshold for acquisitions to ensure day-one accretion, and how this is balanced with increased competition for assets.

Answer

Mark Horgan, EVP and CIO, stated that Brixmor's focus is on growing earnings and driving high unlevered IRRs, typically in the 9.5% to 10.5% range. He noted that while they won't pass up compelling value-add opportunities with lower initial yields (like Britain Plaza), current pipeline assets have attractive going-in yields and growth. Brian Finnegan, Interim CEO and COO, added that acquisitions are funded through capital recycling from low-growth assets, and they also mine land parcels for well-priced capital.

Alexander Goldfarb of Piper Sandler Companies asked for potential offsets that would prevent a significant acceleration in growth in the second half of 2026, given the strong signed-but-not-commenced (SNO) pipeline and resolved tenant issues.

Answer

CEO James M. Taylor responded that while the company is not providing 2026 guidance, they are very encouraged by the portfolio's positioning for outperformance due to the stacked rent pipeline. He mentioned that the primary potential offset would be any future, unforeseen tenant disruption, but emphasized that the portfolio's credit profile is strong.

Alexander Goldfarb asked for confirmation on the expected cadence of FFO for the year, suggesting that Q2 might be flat to slightly down from Q1, followed by a strong ramp in the second half driven by the timing of rent commencements from the SNO pipeline.

Answer

CEO Jim Taylor affirmed that this was a fair assessment, stating that most of the growth from the signed-but-not-commenced pipeline is indeed back-half weighted. President and COO Brian Finnegan added a reminder about normal seasonality in items like percentage rent, which can also affect the quarterly FFO distribution.

Alexander Goldfarb sought clarification on the 200 basis point bad debt headwind and later asked if future rent growth will be driven more by marking-to-market old leases or by tenant store productivity.

Answer

COO Brian Finnegan explained the 200 bp headwind was a tough year-over-year comp, and that bad debt remains at historically low levels. On rent growth, he stated it's driven by both factors: capitalizing on a low in-place rent basis and strong tenant performance from grocers, off-price retailers, and QSRs. CEO Jim Taylor added that recent bankruptcies have proven to be value-add opportunities.

Alexander Goldfarb requested clarification on the bad debt figures, specifically the 200 basis point headwind to same-store NOI, and whether a return to historical bad debt levels is truly expected.

Answer

President & COO Brian Finnegan explained that the 200 bps headwind was a year-over-year comparability issue due to prior-period cash collections in the previous year. He noted that bad debt as a percentage of revenue is currently low at ~60 basis points. CEO James Taylor added that the portfolio's credit quality is fundamentally improving and recent bankruptcies are viewed as value-creation opportunities.

Alexander Goldfarb asked if Curbline Properties sees opportunities to drive rent increases by upgrading credit or addressing vacancy issues in convenience shopping centers, similar to larger open-air centers. He also questioned whether the company will always maintain a positive spread to its implied cap rate to achieve double-digit earnings growth, or if it could buy inside its implied cap rate and achieve accretion through rent growth.

Answer

CEO David Lukes clarified that while credit upgrade opportunities exist, Curbline is less aggressive on re-tenanting for traffic drivers in convenience centers due to minimal crossover traffic. The focus is on raising rents at renewals, leveraging shorter WALT and fewer options. CFO Conor Fennerty explained that their business plan targets $0.5 billion/year investment over five years with no additional equity, aiming for double-digit growth and a 100 basis point debt spread. He confirmed the ultimate focus is on FFO growth, noting that other levers like organic growth and scaling G&A can drive growth even if investment spreads compress.

Alexander Goldfarb questioned Curbline Properties Corp.'s approach to acquiring centers with potential credit or vacancy issues to drive rent increases, and whether convenience centers offer the same re-tenanting potential as larger open-air centers. He also asked if the company prioritizes maintaining a positive spread to its implied cap rate for double-digit earnings growth or if it would buy inside the implied cap rate, relying on rent growth for accretion.

Answer

David Lukes, CEO, stated that while opportunities to upgrade credit exist, the company's focus is on raising rents at renewals rather than aggressive re-tenanting, as convenience center tenants are less interdependent. Conor Fennerty, CFO, clarified that the business plan aims for double-digit FFO growth over five years with no additional equity, targeting a 100 basis point debt spread. He emphasized that while investment spread is impactful, organic growth, free cash flow generation, and G&A scaling are also powerful drivers of FFO growth, which is the primary focus.

Alexander Goldfarb from Piper Sandler asked for context on acquiring assets in smaller, tertiary markets and why cap rates appear similarly tight compared to primary markets. He also questioned the potential P&L impact on Curbline if its sister company, Site Centers, accelerates its wind-down.

Answer

CEO David Lukes explained that for convenience retail, property-level attributes like traffic count are more critical than MSA size, making high-quality assets in secondary markets attractive. Regarding Site Centers, he stated the shared service agreement is working well and has a defined termination clause, so an accelerated wind-down would not have a material negative impact. CFO Conor Fennerty added that an early termination would trigger a fee payable to Curbline, offsetting any potential increase in standalone expenses.

Alexander Goldfarb of Piper Sandler & Co. questioned management's confidence in its acquisition pipeline amidst market volatility and asked how they reconcile their 'affluent portfolio' strategy with reports of a broader consumer spending pullback.

Answer

CEO David Lukes attributed their confidence to a steady deal flow of small, 'life event'-driven sales that are less sensitive to market timing. He clarified that the focus on high-income areas is primarily a zoning strategy, as these areas have high barriers to new supply, creating scarcity value and making it easier to re-lease space. CFO Conor Fennerty added that their restaurant exposure is to QSR, not fine dining.

Alexander Goldfarb of Piper Sandler questioned management's confidence in maintaining deal flow and closing its pipeline given capital market volatility and potential widening of bid-ask spreads. He also challenged the 'bulletproof' nature of Curbline's affluent suburban portfolio, asking how it reconciles with national data showing consumer spending pullbacks even among higher-income households.

Answer

CEO David Lukes attributed his confidence to the nature of their deal flow, which consists of smaller, non-institutional transactions driven by personal life events, making sellers less sensitive to market timing. He noted that fundamentals remain strong, preventing a wide bid-ask spread for now. Regarding the affluent consumer, Lukes explained that the focus on high household income is less about spending power and more about restrictive local zoning in these areas, which creates a scarcity of retail space, leading to faster and cheaper re-leasing when vacancies occur. CFO Conor Fennerty added that their restaurant exposure is primarily QSR like Five Guys, not fine dining.

Alexander Goldfarb inquired about the size of the total acquisition pipeline relative to the annual target and questioned why same-store NOI growth isn't higher given the asset type's faster rent escalations.

Answer

CEO David Lukes estimated the deal pipeline they review is about 10 times what they ultimately buy. Regarding same-store growth, CFO Conor Fennerty and CEO David Lukes clarified that while new leases have strong bumps, the portfolio's average in-place bump is just under 3%. With the same-store pool already highly occupied at 95.1%, the 3% growth guidance is strong on an occupancy-neutral basis, with further upside coming from marking rents to market on renewals.

Alexander Goldfarb questioned whether the casino experience was a one-off anomaly or indicative of a change in the city's approach to public-private partnerships, and if market tightening is leading to faster lease escalations.

Answer

Marc Holliday, Chairman and CEO, viewed the casino outcome as an anomaly, expressing continued faith in working with city and state leaders on future public-private projects, which are typically win-win situations. Steve M. Durels, EVP and Director of Leasing and Real Property, explained that while base rent increases mid-term are typical, market recoveries lead to rapid rent appreciation (7%-10% annually), which is currently observed across Park Avenue, 6th Avenue, 5th Avenue, Madison Avenue, and 3rd Avenue due to strong demand and limited supply.

Alexander Goldfarb of Piper Sandler Companies posed two questions: whether tenant discussions have been impacted by the NYC mayoral primary, and about the timeline for when current aggressive leasing will translate into meaningful occupancy and NOI growth.

Answer

Chairman & CEO Marc Holliday and EVP Steven Durels confirmed the mayoral race has not been a factor in tenant negotiations. CFO Matthew Diliberto explained that the economic benefits of new leases typically commence within 12 months, meaning 2024's leasing volume should increasingly impact NOI through 2025 and be fully apparent in 2026.

Alexander Goldfarb inquired about the role of prebuilt spaces in attracting tenants and their economic potential. He also asked about the potential lag effect of stock market selloffs on leasing activity and how to gauge the duration of market disruption.

Answer

Executive Steven Durels explained that prebuilts are almost mandatory for smaller tenants (under 10,000 sq ft) as they remove cost uncertainty and accelerate move-in timelines, with SL Green's in-house expertise serving as a competitive advantage. Regarding market disruption, Durels stated that their leasing pipeline has actually grown in recent weeks, with no slowdown or pullback observed yet.

Alexander Goldfarb of Piper Sandler asked about the drivers of strong leasing activity in a typically slow period and the strategy behind successfully repurchasing debt at a discount.

Answer

Steven Durels, an executive, attributed the leasing momentum to maturing deals and new requirements, particularly from new tenants. An executive identified as Harry cited strong lender relationships for the debt paydowns, and Matthew Diliberto, an executive, confirmed that guidance includes an assumption for more such gains in 2025.

Alexander Goldfarb of Piper Sandler asked for details on the income potential from SL Green's growing mortgage servicing business. He also inquired how the company will decide which investments go into its on-balance-sheet DPE portfolio versus its new joint venture debt fund.

Answer

Executive Matthew Diliberto explained the servicing business generates substantial fee income, including a modest monthly fee and a more sizable fee upon resolution. Executive Harrison Sitomer added that the business has grown to $5 billion in active assignments with another $6.8 billion named, and is highly scalable with revenues going almost entirely to the bottom line. Regarding the debt fund, Sitomer clarified that the fund will be the primary vehicle for all new DPE investments until its capital, targeted at $1 billion, is fully deployed.

Alexander Goldfarb of Piper Sandler Companies inquired about the specific drivers of underperformance in the Savannah market, the portfolio's total exposure to government spending cuts, the outlook for different demand segments reflected in the updated guidance, future capital-raising plans including asset sales, and the persistent challenges in the hotel mortgage market.

Answer

CEO David Folsom and EVP & COO Scott Kucinski addressed the questions, attributing Savannah's weakness to a peak in leisure travel and indirect impacts from government spending cuts on association groups. Kucinski noted that while direct government business is in the high-single-digits, the indirect impact is harder to track. He clarified the revised guidance anticipates a rebound in group bookings in the second half of the year, with government and leisure demand expected to stabilize at current levels. Folsom confirmed the company is exploring various capital options, including tapping hotel equity or other asset sales, but prefers not to sell hotels. He explained the difficult mortgage market is due to high debt yields and strict lender underwriting, but noted conditions are beginning to improve for borrowers.

The analyst inquired about the specific reasons for underperformance in the Savannah market, the portfolio's exposure to government-related business, the assumptions behind the revised guidance, potential future asset sales for capital, and the persistent challenges in the hotel mortgage market.

Answer

Management explained that Savannah's weakness was due to both a crest in leisure demand and indirect impacts from government spending cuts on association groups. They noted that direct government business is in the high single digits, but the indirect impact is harder to track. The revised guidance assumes the current level of demand holds, with an expected rebound in group bookings in the second half of the year. They are considering various options for capital, including other ancillary asset sales or refinancing. The hotel mortgage market remains tough due to high debt yields and strict lender covenants, but conditions are slowly improving.

Alexander Goldfarb of Piper Sandler inquired about the projected decline in 2025 FFO despite higher revenue and EBITDA guidance, the strategy for addressing the NASDAQ stock price deficiency, the impact of insurance recoveries on guidance, and the potential for asset sales to manage debt during upcoming refinancings.

Answer

Executive Anthony Domalski attributed the FFO decline to rising interest costs from refinancing legacy debt at higher rates. CEO David Folsom confirmed the company has 180 days to regain NASDAQ compliance, likely via a reverse stock split or a natural price increase. Executive Scott Kucinski clarified that 2025 guidance represents a normal run-rate, with insurance proceeds only making the company whole, not artificially enhancing results. Regarding asset sales, Folsom stated the current strategy focuses on refinancing maturing loans rather than selling properties to deleverage.

Alexander Goldfarb asked Alan Gold what has changed at IQHQ since he stepped away from the company. He also questioned if the right of first offer (ROFO) implies IIP is preparing to operate these assets and if IQHQ has enough capital for tenant improvements and lease-up. Finally, he asked if the commentary on global cartels in the cannabis market signals a fundamental shift away from cannabis investing.

Answer

Executive Chairman Alan Gold stated that IQHQ has since made significant positive changes to its board, governance, and management, and that the ROFO is a protective measure, though an accretive asset purchase would be considered. President & CEO Paul Smithers affirmed IIP's commitment to the cannabis industry, characterizing the IQHQ deal as a prudent use of capital during a period of limited cannabis opportunities, not a strategic pivot away from its core business.

Alexander Goldfarb of Piper Sandler Companies asked what has changed at IQHQ since Alan Gold's departure, whether IIP is underwriting the potential to operate the assets given the ROFO, and if the move away from cannabis represents a long-term strategic shift.

Answer

Executive Chairman Alan Gold stated that IQHQ has since made significant positive changes to its board, governance, and management. He clarified the ROFO is a protective measure, but they would evaluate acquiring a high-quality asset if an attractive opportunity arose. President & CEO Paul Smithers reiterated IIP's commitment to cannabis, framing the IQHQ deal as a prudent use of capital while cannabis investment opportunities are limited. Gold added that they will re-evaluate after resolving current tenant issues.

Alexander Goldfarb of Piper Sandler Companies inquired about the changes at IQHQ since Alan Gold's prior involvement, whether the ROFO implies IIPR might operate assets, and if this signals a strategic shift away from cannabis.

Answer

Executive Chairman Alan Gold noted IQHQ has since made significant positive changes to its board, governance, and management. He clarified the ROFO is a protective measure, but IIPR would consider acquiring a high-yielding asset if an attractive opportunity arose. President and CEO Paul Smithers reiterated IIPR's commitment to cannabis, framing the IQHQ deal as an accretive use of capital while cannabis opportunities are limited, not a permanent pivot.

Alexander Goldfarb questioned why IIP's investment pace has declined despite significant industry growth and state-level legalization, asking when a turnaround might occur. He also challenged whether MSO status is still a reliable credit metric given recent tenant issues and asked if the company is reassessing its tenant credit evaluations.

Answer

Executive Chairman Alan Gold attributed the investment lag to industry headwinds, particularly from the illicit market and the lack of federal banking reform, which restricts capital flow. Regarding credit, Mr. Gold defended the focus on MSOs, citing their diversified operations and ability to raise capital as key strengths, but stressed that the ultimate focus is on the operator's expertise. He confirmed that the company is continuously performing 'deep dives' into the creditworthiness of every single tenant in the portfolio.

Alexander Goldfarb of Piper Sandler asked for more detail on tenant credit, specifically questioning the additional investment in ForeFront given its subsequent default and whether recent issues signal a recurring problem. He also questioned the implications of three recent cannabis ballot defeats on the broader legalization trend.

Answer

Executive Chairman Alan Gold stated that tenant issues are a normal part of the real estate cycle for which the company is compensated with high returns. Chief Investment Officer Ben Regin clarified the ForeFront investment was crucial for a large Illinois facility whose potential justifies the risk despite construction delays. President & CEO Paul Smithers framed the ballot losses as expected challenges in difficult states, not a reversal of momentum, and expressed strong optimism for federal reform like SAFE Banking under the new administration.

Alexander Goldfarb asked about the resilience of the Master-Planned Community (MPC) business amid macro headwinds and the strategic shift from building an insurance entity to acquiring one, including the expected timeline for accretion.

Answer

CEO David O'Reilly explained that MPC resilience stems from a "flight to quality," with strong demand across all price points insulating their communities from broader market softening. Executive Chairman William Ackman stated that acquiring an insurance operation provides a "running start" and is expected to become a material part of the business in the intermediate term, shifting the focus to long-term intrinsic value growth rather than quarterly earnings.

Alexander Goldfarb of Piper Sandler inquired about the financial benefits of the Seaport spin-off, the drivers of the 2025 cash flow forecast, the reasons for the sharp rise in Summerlin's land value, and the strength of homebuilder demand.

Answer

CEO David O'Reilly highlighted that the Seaport spin-off frees up significant capital previously used to cover losses ($170 million in 2024), enabling higher-return investments. CFO Carlos Olea noted that disciplined capital deployment would maintain a stable cash position despite lower condo profits in 2025. O'Reilly attributed Summerlin's land price appreciation primarily to high demand for super pads from production homebuilders, driven by the community's superior quality and amenities, which ensures resilient home sales.

Alexander Goldfarb asked for a recap of Howard Hughes' land and home inventory statistics versus national averages, questioned the drivers of strong performance amid high mortgage rates, sought guidance on modeling 2025 results, and inquired about the rationale for the MUDs sale given the company's strong liquidity.

Answer

CEO David O'Reilly highlighted that HHH's MPCs have significantly lower new home supply (1 month vs. 2 nationally) and vacant developed lots, driven by a resilient new home construction market. While not providing 2025 guidance, he expressed continued optimism. CFO Carlos Olea explained the MUDs sale was a strategic move to monetize a long-term, illiquid asset for immediate cash, which was used to deleverage and expand their credit facility, enhancing financial flexibility.

Alexander Goldfarb of Piper Sandler Companies questioned the new power generation deal, asking about its potential ties to Five Point's PowerBridge platform and whether it was for a specific data center. He also sought clarity on the lead time between project announcements and EBITDA contribution, particularly for the Devon and Speedway projects, to better model future growth.

Answer

CFO Scott McNeely clarified the power deal is directly between LandBridge and the IPP, though Five Point's PowerBridge could potentially step in if needed. CEO Jason Long added the IPP sees a broad need for power in the region beyond just data centers. On project timing, McNeely explained that lead times vary; water infrastructure can be quick, while power projects are longer. He noted the Devon deal's 2027 start is driven by the customer's long-term planning. He estimated the Speedway project could generate roughly $30 million in cash flow when fully operational.

Alexander Goldfarb of Piper Sandler questioned how LandBridge balances funding long-term projects like data centers with nearer-term cash flow opportunities, inquired about future capital raising plans, and asked if brackish water can be used for data center cooling.

Answer

Executive Jason Long described an 'all of the above' strategy, focusing on near-term growth from core infrastructure while viewing data centers as a long-term additive opportunity. He stated that while they would consider raising equity for the right deal, maintaining a healthy balance sheet is a priority. Executive Scott McNeely confirmed that both brackish and produced water can be treated for cooling, with the cost borne by the developer, not LandBridge.

Alexander Goldfarb questioned the company's growth trajectory relative to its stock valuation, asking for a timeline on when commercial projects like the data center will contribute meaningfully to NOI. He also asked about the company's exposure to windmills given potential changes in tax incentives.

Answer

Jason Long (executive) acknowledged the long-term nature of large projects but emphasized that commercial traction is strong and the company expects to generate meaningful double-digit growth. Scott McNeely (executive) clarified that cash flow from projects like the data center begins before full operation, citing the $8 million deposit and construction-phase rent. Regarding windmills, Jason Long stated the company has no revenue from them currently and sees the new administration's stance as constructive for their core business.

Alexander Goldfarb from Piper Sandler Companies asked for the rationale behind Federal Realty's strategic expansion into new markets like Kansas City, questioning if it was driven by a lack of development opportunities or a fundamental change in view on non-coastal markets.

Answer

President, CEO & Director Donald Wood explained the shift is a post-COVID, retailer-led initiative. He noted that key tenants encouraged Federal Realty to enter markets with strong demographics but fewer high-quality retail options, where the company's expertise can generate outsized growth.

Alexander Goldfarb inquired about the tenant credit watch list and whether the guidance for credit loss was a generic provision or tied to specific concerns. He later followed up on the strategy for entering new, smaller markets and the feasibility of achieving meaningful concentration there.

Answer

EVP & CFO Daniel Guglielmone stated that near-term bankruptcy concerns (Jo-Ann, Party City) have minimal portfolio exposure and the 75-100 bps credit reserve is a prudent, normalized provision for general economic volatility, not for specific tenants. CEO Donald Wood added that in new markets, the strategy is to acquire the top one or two assets, not to go down in quality, and that they can run these assets effectively without needing a large local portfolio.

Alexander Goldfarb from Piper Sandler & Co. asked how Federal Realty balances the strategic choice between pursuing new development projects versus acquisitions for external growth.

Answer

CEO Donald Wood explained that the company leverages all its growth avenues—development, redevelopment, and acquisitions—and that they all compete for capital. He noted that new development is likely to be skewed towards residential projects at existing high-quality shopping centers, as construction costs stabilize and rent growth outlooks improve. The final decision on capital allocation is a judgment call based on a risk-adjusted return analysis for each opportunity.

Alexander Goldfarb from Piper Sandler Companies asked for a big-picture view on the LA economy, contrasting other REITs' weak commentary with DEI's strong results, and questioned if LA's tech scene would see an AI-driven boom similar to San Francisco.

Answer

CEO Jordan Kaplan attributed their strong residential performance to their high-end product in tight Westside submarkets, which differs from broader LA portfolios. Regarding tech, he explained that LA's tech scene is driven by entertainment, not pure AI research. He sees more future growth from local medical research and quantum computing investments by UCLA.

Alexander Goldfarb of Piper Sandler Companies inquired about the on-the-ground likelihood of proposed rent freezes or eviction moratoriums in Los Angeles. He also asked for clarification on how to reconcile optimistic commentary about positive absorption with 2025 occupancy guidance that appears relatively flat.

Answer

President and CEO Jordan Kaplan expressed hope that rent freezes would not be implemented, noting the city wants to fast-track reconstruction. He explained that the optimistic absorption outlook reflects new leasing activity, which has a natural lag before it translates into physical occupancy. A widening spread between leased and occupied rates is a positive sign of future occupancy gains.

Alexander Goldfarb of Piper Sandler & Co. questioned how the company could raise full-year guidance despite the known fourth-quarter occupancy drop from the Warner Bros. vacancy. He also asked for an outlook on leasing momentum and the company's internal return-to-office policy.

Answer

President and CEO Jordan Kaplan attributed the guidance raise to strong performance across the board, including robust leasing, expense control, and G&A improvements, which offset the long-planned Warner Bros. move-out. He noted that while the leasing pipeline is strong, particularly for tenants over 10,000 sq. ft., future quarters can be choppy. Kaplan also confirmed the company has been in-office five days a week since summer 2020 and adopted a suit-and-tie policy to reinforce a focused work culture.

Alexander Goldfarb of Piper Sandler Companies questioned why Lineage reiterated guidance at NAREIT in early June, only to reduce it shortly after, asking what materially changed in that brief period.

Answer

Greg Lehmkuhl, President & CEO, explained that at the time of NAREIT, occupancy was tracking in line with normal seasonality. However, late in the second quarter, the expected seasonal inventory build was delayed and more muted than anticipated. This delayed occupancy uplift, combined with tariff uncertainty and high inventory carrying costs, necessitated the revised, lower outlook.

Alexander Goldfarb asked for an explanation for the large occupancy drop in the non-same-store pool. He also questioned why the normalization of inventory levels seems to be taking longer in this cycle compared to historical patterns.

Answer

CEO W. Lehmkuhl attributed the non-same-store occupancy decline primarily to the impact of a fire at a large Canadian facility last year. Regarding inventory normalization, CFO Rob Crisci and CEO W. Lehmkuhl clarified that Q1 occupancy was in line with their internal expectations and that normal seasonal patterns resumed in Q3 2024 after the destocking concluded, which is reflected in their current results.

Alexander Goldfarb asked about Lineage's confidence in the cold storage market's stabilization, given ongoing inflationary pressures, tariff discussions, and potential consumer weakness.

Answer

CEO W. Lehmkuhl explained that while inventory levels have fluctuated, actual food throughput in their core holdings has remained stable, changing less than 1% annually. He noted that inventory levels settled in Q3 2024 and have since followed normal seasonal patterns from a historically low base. The company's guidance conservatively assumes no market improvement, meaning any increase in customer promotional activity to drive volume would represent potential upside.

Alexander Goldfarb inquired about the current M&A pipeline, whether there was a slowdown during the IPO process, and the outlook for future acquisition volumes.

Answer

CEO W. Lehmkuhl confirmed they intentionally paused M&A activity leading up to the IPO but have now 'fired back up' the acquisition engine with a substantial global pipeline. He emphasized a disciplined investment process focused on deals that are most accretive to AFFO per share.

Alexander Goldfarb of Piper Sandler Companies asked about the potential EBITDA recovery for the studio business, whether the recent capital raise is sufficient for all leasing capital expenditures over the next 36 months, and the intended use of the credit facility.

Answer

President Mark Lammas stated the near-term goal for the studio business is to reach $30-40 million of NOI, rather than targeting the pre-strike peak. Chairman & CEO Victor Coleman explained that while the company has a plan to access capital if needed and will continue to prune the portfolio, the immediate pressure has eased. He added that the credit facility will be used as needed, but there is no immediate plan to draw on it due to the strong cash position.

Alexander Goldfarb asked about Hudson Pacific's strategy for handling its significant 2025 and 2026 debt maturities, questioning if they would be refinanced dollar-for-dollar. He also asked if the Q4 FFO guidance of $0.11 per share should be considered a stable run rate for 2025.

Answer

CEO and Chairman Victor Coleman affirmed the company's intent to refinance its upcoming debt maturities, stating they have received a positive response from the market and are confident in executing well before the due dates. He explicitly stated that the Q4 guidance of $0.11 should not be seen as a run rate for 2025, as he expects a material positive impact from the recovery in the entertainment business and will provide full-year guidance next quarter.

Alexander Goldfarb of Piper Sandler Companies asked a two-part question regarding the return threshold for external acquisitions versus internal redevelopment and whether a major mall transaction wave is imminent.

Answer

Chairman, CEO & President David Simon explained that it's not an "either/or" choice, as Simon has the capacity for both. The key metric for both is creating net asset value, emphasizing that "purchase price matters." He expressed skepticism about a "huge wave" of mall transactions but anticipates more trades of 'B' quality properties due to their stability and potential for arbitrage.

Alexander Goldfarb from Piper Sandler Companies asked about the return threshold for external acquisitions versus internal reinvestment and whether the market is on the cusp of a major wave of mall transactions.

Answer

Chairman, CEO & President David Simon explained that Simon has the financial capacity to pursue both internal redevelopments and external acquisitions simultaneously, with both evaluated on their ability to create net asset value. He emphasized that "purchase price matters" and stated he does not foresee a "huge wave" of A-mall transactions, though more B-mall trades are likely.

Alexander Goldfarb sought to clarify if inventory levels are the primary wildcard for earnings, implying the consumer is otherwise fine, and asked if this dynamic also applies to Simon's international portfolios.

Answer

CEO David Simon clarified that the main concern is 'all around sales,' which includes consumer sentiment in addition to inventory levels. He characterized the U.S. consumer as 'fine' but 'cautious,' also noting a potential flattening in tourism. In contrast, he described the European and Asian portfolios as 'all very good,' with performance stable and not subject to the same tariff-related uncertainties.

Alexander Goldfarb of Piper Sandler & Co. asked if the strong 2025 FFO guidance signals a return to pre-pandemic internal growth dynamics or if it's primarily driven by the removal of drags from Other Platform Investments (OPI).

Answer

Chairman and CEO David Simon confirmed the strong outlook is driven by core portfolio growth, guided at 'at least 3%,' and is not reliant on OPI. He clarified the $12.40 to $12.65 FFO guidance excludes the Catalyst venture. The growth stems from fundamental drivers like leasing, operational efficiencies, and redevelopment, reflecting a continuation of recent strong performance.

Alexander Goldfarb asked if the current competitive retail environment and lack of new supply are creating new investment opportunities within Simon's 'bottom 20%' of malls, which were previously managed primarily for cash flow.

Answer

David Simon, Chairman, CEO, and President, affirmed this is a significant opportunity. He explained that because there is no new supply in many of these markets and Simon is often the 'only game in town,' reinvesting in these properties can yield substantial improvements. He confirmed that enhancing the performance of this bottom tier of assets is a major focus for 2025.

Alexander Goldfarb of Piper Sandler Companies asked about the risk of private credit fueling excess real estate development and later inquired if the weaker Q4 guidance was due to dispositions or rent trends.

Answer

Chairman & CEO Ric Campo dismissed concerns about private credit, stating that its high cost (10-13% for mezz loans) acts as a brake on new development. Later, President & CFO Alex Jessett confirmed that the implied Q4 guidance is lower "absolutely as a function of dispositions," which create short-term FFO dilution as older assets are recycled into newer ones.

Alexander Goldfarb of Piper Sandler asked about the new commercial paper program's cost advantages and reception by the unsecured debt community. He also followed up on the impact of oil price drops in Houston and Hollywood's recovery on L.A. assets.

Answer

President and CFO Alex Jessett detailed that the commercial paper program offers a significant 50 basis point pricing advantage over their credit line and will be used prudently as a substitute, not an addition, to short-term borrowings. On market specifics, Chairman and CEO Ric Campo expressed confidence in Houston's diversified economy, citing corporate relocations and tech growth. An executive added that L.A. properties are performing well with 96% occupancy.

Alexander Goldfarb asked for management's confidence level in capitalizing on forced sales from merchant developers, noting that these developers often seem to find lifelines.

Answer

Chairman and CEO Richard Campo clarified that he anticipates more transaction volume rather than deeply distressed deals on high-quality assets. He explained that merchant builders are motivated to sell to realize profits before their preferred returns erode their gains. While banks extended loans in 2023-2024, a significant amount of debt is coming due in 2025-2026, which will force transactions. Campo concluded that a 'massive wall of capital' looking to enter multifamily will support pricing and prevent a widespread distressed scenario.

Alexander Goldfarb of Piper Sandler Companies inquired about the long-term outlook for technology spending as a part of the business and asked about the go-forward strategy for the debt-for-equity (DPE) program, including asset targets and FFO contribution.

Answer

President & CIO Joseph Fisher and Chairman & CEO Thomas Toomey described technology as a crucial offensive and defensive investment in data and customer service that drives NOI and cash flow. On DPE, Fisher stated that while they prefer deals they could potentially own, the shift to recap deals may reduce that. He confirmed the goal is to keep the DPE program's net contribution modest, around 2-2.5% of FFOA, viewing it as an additive but not central part of the business.

Alexander Goldfarb of Piper Sandler asked for UDR's perspective on the transaction market amid interest rate volatility. He also questioned the rationale for starting a development in Riverside, California (Inland Empire) versus other potential markets.

Answer

Senior Officer Andrew Cantor stated that the transaction market is very asset- and market-specific. He noted that active buyers are focusing on 2026-2027 fundamentals post-supply wave and on attractive acquisition basis relative to replacement cost, rather than short-term rate volatility. On the Riverside development, CFO Joe Fisher explained that the project, which has been in the works since 2019, was the first in their land pipeline to hit their yield threshold of approximately 6%. He highlighted its good location and basis as key factors for moving forward.

Alexander Goldfarb asked if other income initiatives cannibalize rent growth by raising a resident's total cost. He also asked about lessons learned from the Philadelphia DPE investment and any resulting changes to underwriting.

Answer

CFO & CIO Joe Fisher addressed the cannibalization question by highlighting UDR's transparent, all-in pricing model, which he believes residents appreciate. COO Mike Lacy added that many initiatives are 'win-wins' for residents. Regarding the DPE program, Fisher outlined several lessons learned, including pivoting to more cash-paying deals, targeting lower loan-to-cost, using internal analytics to assess supply risk, and running more robust stress-test scenarios.

Alexander Goldfarb of Piper Sandler questioned the rationale for reducing the coupon on a Queens project instead of accepting a full payoff and asked if the impact from short-term leases was unusual this year.

Answer

Senior Officer Andrew Cantor and CFO Joe Fisher clarified the Queens deal was a strategic choice, not a workout. The partner injected $42M in fresh equity, de-risking UDR's position, making it an attractive, lower-risk investment to remain in. Regarding leases, SVP Mike Lacy and CEO Tom Toomey explained the short-term lease dynamic was slightly more pronounced than usual and its impact was amplified by the current peak supply environment, prompting the detailed explanation for transparency.

Alexander Goldfarb of Piper Sandler Companies asked why tariffs seemed to be a non-issue for retailers' leasing activity. He also requested clarification on the non-cash burn-off from purchase price accounting (RPI) that should be expected for 2026.

Answer

CEO John Kite attributed the resilience to retailers' long-term planning horizons, diversified supply chains post-COVID, and the fundamental lack of available high-quality retail space. CFO Heath Fear clarified that the non-cash burn-off from '25 into '26 is expected to be about half of the previous year's $0.05 impact, split between debt and lease marks.

Alexander Goldfarb of Piper Sandler Companies asked why recent tariff announcements appeared to have no negative impact on retailer leasing demand and requested clarification on the projected non-cash burn-off for 2026.

Answer

CEO John Kite attributed retailer resilience to long-term strategic planning, diversified supply chains developed post-COVID, and the persistent lack of new retail supply. CFO Heath Fear clarified that the non-cash burn-off from 2025 to 2026 is expected to be approximately $0.025 per share, about half the impact seen from 2024 to 2025.

Alexander Goldfarb of Piper Sandler Companies asked why recent tariff discussions appeared to have no impact on retailer leasing demand. He also requested a reminder on the projected non-cash burn-off related to purchase accounting for 2026.

Answer

CEO John Kite attributed retailer resilience to their long-term planning, diversified supply chains, and the fundamental lack of high-quality retail supply. CFO Heath Fear clarified that the non-cash burn-off from 2025 to 2026 is projected to be about half of the previous year's $0.05 impact, or approximately $0.025 per share, split between debt and lease marks.

Alexander Goldfarb asked whether strong retail leasing is driven more by lack of supply or economic strength, and questioned the logic of a special dividend versus retaining cash.

Answer

CEO John Kite attributed strong leasing to a combination of scarce supply and the effectiveness of retailers' physical store strategies. Regarding the dividend, CFO Heath Fear explained that while they are exploring tax-sheltering options, a 1031 exchange is not feasible for this JV transaction. He positioned a potential special dividend as a positive result, returning cash to shareholders while completing a highly accretive deal.

Alexander Goldfarb questioned the rationale for introducing a Core FFO metric alongside the standard NAREIT FFO. He also asked whether the recent bankruptcy impact was due to bad luck or if a larger watchlist of at-risk tenants exists.

Answer

Chairman and CEO John Kite clarified that Core FFO is being added, not replacing NAREIT FFO, to provide a clearer view of cash-driven operational performance by removing non-cash items like merger accounting. On bankruptcies, he suggested the impact appears larger due to KRG's conservative assumptions on lease resolutions compared to peers, as part of a broader strategy to actively improve portfolio quality and reduce exposure to certain retail boxes.

Alexander Goldfarb asked how Kite Realty balances the potential use of increased leverage for acquisitions against its long-term strategy of maintaining a low-leverage balance sheet, especially given the stock's current valuation. He also questioned the extent of multifamily development potential across the portfolio beyond One Loudoun and if this is an active investment priority.

Answer

CEO John Kite explained that the company's sub-5x leverage provides significant runway to its long-term target in the low-to-mid 5s, affording it the optionality to pursue accretive deals. He emphasized that if no compelling opportunities arise, the company will naturally continue to delever through free cash flow. Regarding multifamily, Kite noted that while there is potential for several thousand more units, KRG is not chasing a specific target and prefers to use partners to manage capital and share risk, as it is doing at One Loudoun.

Alexander Goldfarb of Piper Sandler Companies asked if 'rent fatigue' was contributing to weak new lease rates and questioned how much of 2025's supply deliveries might slip into 2026.

Answer

President and CEO A. Bradley Hill stated there are no signs of rent fatigue, pointing to strong wage growth and declining rent-to-income ratios. EVP Timothy Argo added that he does not expect a material amount of supply to slip into next year, attributing slower leasing velocity to market uncertainty rather than construction delays.

Alexander Goldfarb asked when MAA might know if competitive supply will be delayed into next year and whether leasing is a leading or lagging indicator of economic shifts.

Answer

EVP & COO Tim Argo stated that the supply picture is moderating as expected, with a significant drop in deliveries anticipated for 2026. He believes leasing is now a better leading indicator due to improved data transparency, with new lease rates, collections, and move-out reasons providing real-time market insights. Currently, none of these indicators are showing signs of concern.

Alexander Goldfarb asked about the capital markets environment, questioning how long buyers will tolerate negative leverage where debt costs exceed cap rates. He also inquired about the contribution of ancillary income, like WiFi, to the underwriting yields of new projects.

Answer

Brad Hill, President and CEO, acknowledged that the current period of negative leverage has been unusually long. He observed that buyers are coping by either buying down interest rates or underwriting aggressive rent growth recovery in 2026 and beyond. On ancillary income, he stated it is not a primary driver of underwriting yields, though property-wide WiFi is becoming a more significant component due to strong resident demand and its support for operational initiatives.

Alexander Goldfarb from Piper Sandler sought clarification on whether only Atlanta and Austin were markets of concern for supply and asked about MAA's strategy for mitigating hurricane damage.

Answer

Tim Argo, EVP and COO, clarified that while Austin and Atlanta are the most challenged, most of MAA's markets face elevated supply. Eric Bolton, CEO, emphasized that 10 of their 15 largest markets saw new lease pricing improve in Q3. Robert DelPriore, EVP and General Counsel, explained that hurricane damage is minimized through a combination of site selection, ongoing maintenance like new roofs, and pre-storm preparation.

Alexander Goldfarb from Piper Sandler Companies asked about the persistent softness in Los Angeles and the rationale for scaling back the successful mezzanine lending platform.

Answer

President & CEO Angela Kleiman explained that LA's recovery is slow due to the soft macro economy and the prolonged three-year eviction moratorium, but noted future potential from infrastructure spending. EVP & CFO Barb Pak stated the mezzanine book is being reduced from 9% to ~3% of FFO to decrease earnings volatility and reallocate capital to stabilized assets. This move creates a $0.06 FFO headwind in Q4. Ms. Kleiman added that the strategy shift reflects the superior returns currently available in fee-simple acquisitions.

Alexander Goldfarb asked whether Essex participates in or has control over data published by third-party providers and sought the company's perspective on potential CEQA reform in California and its impact on development.

Answer

Executive Angela Kleiman stated that Essex has no control over and does not participate in the data generation for third-party providers. Regarding CEQA reform, she views the legislative discussions as a positive step in the right direction but cautioned that it will take time to see results. She added that legislators seem to be recognizing that regulation has not solved the housing crisis.

Alexander Goldfarb of Piper Sandler sought to reconcile the narrative of a tech-led rebound in San Francisco and Seattle with ongoing quality-of-life issues. He also asked if there were discussions about reforming entities like CEQA to accelerate post-wildfire construction in L.A.

Answer

Executive Angela Kleiman clarified that while political talk on urban improvement is positive, implementation is a multi-year process. She noted that recent tech leasing has been concentrated in the suburbs, not downtowns. Regarding L.A. construction, she acknowledged the complexity of dealing with multiple agencies and stated that while there's a desire for efficiency, the process will take time to play out, though she remains optimistic about L.A.'s long-term growth catalysts.

Alexander Goldfarb from Piper Sandler questioned the supply outlook for Seattle and San Jose and asked about the potential FFO dilution from recycling capital out of the structured finance book into direct property ownership.

Answer

Executive Angela Kleiman stated that the supply impact in San Jose should be short-lived (Q4-Q1) and quickly absorbed, while Seattle's higher supply is typically met with strong demand. Executive Barb Pak quantified the capital recycling impact, noting they are trading a ~10% yield on preferred equity for a ~5% yield on assets. This will cause the structured finance book's FFO contribution to fall from 5.5% in 2024 to the low-4% range in 2025.

Alexander Goldfarb from Piper Sandler asked for clarification on Newmark's data center strategy, questioning if it's viewed as a temporary boom like life sciences, and sought to understand the drivers behind the significant leasing growth in San Francisco.

Answer

CEO Barry Gosin positioned Newmark's data center business as a center of excellence with a long runway, driven by the early stages of AI, unlike the more mature and oversupplied life science market. CFO Michael Rispoli added that there are also significant untapped opportunities in data center management services. Regarding San Francisco, Mr. Gosin attributed the leasing boom to broad-based activity from AI and other tech companies, highlighting the dynamic and resilient ecosystem of the Bay Area.

Alexander Goldfarb inquired about client sentiment amid macroeconomic uncertainty, asking if there were any signs of leasing or transaction deal pullbacks. He also questioned the company's comfort level with executing stock buybacks given the economic environment.

Answer

CEO Barry Gosin responded that deals are still proceeding and he has not seen a firm change in decision-making, though the CMBS market has slowed. He added that it's too early to tell the full impact of market uncertainty. CFO Michael Rispoli affirmed he is "really comfortable" with buying back stock, citing the company's clean balance sheet and low net leverage, and indicated a pivot towards buybacks in the second quarter.

Alexander Goldfarb of Piper Sandler inquired about the financial impact of Howard Lutnick's departure on G&A and D&O premiums, and sought perspective on the data center market's growth prospects versus potential hype.

Answer

CFO Michael Rispoli confirmed that Mr. Lutnick's departure and any related insurance premium changes are already incorporated into the 2025 guidance. CEO Barry Gosin expressed strong confidence in the data center sector, citing nearly $17 billion in 2024 transactions and fundamental drivers like AI, reshoring, and the CHIPS Act, dismissing the notion of it being a bubble.

Alexander Goldfarb challenged the exclusion of the $20 million Sam's Club TI from AFFO, questioned why improved same-store guidance didn't fully flow through to CRE FFO guidance, and asked about the economic impact of declining foreign tourism.

Answer

CFO Clayton Chun defended the TI exclusion as non-recurring due to its link to a long-term extension, though CEO Lance Parker acknowledged the counter-argument. Chun explained the FFO guidance gap was due to a non-cash straight-line rent adjustment. Parker noted that strong US tourism has more than offset the decline in Japanese and Canadian visitors, keeping overall tourism numbers positive.

Alexander Goldfarb questioned if tariff concerns were having a practical impact on tenant leasing decisions or were just theoretical. He also challenged the FFO guidance as overly conservative, given the size of the Q1 beat, and sought clarification on a tenant contingency related to a significant new industrial lease.

Answer

Executive Lance Parker distinguished between 'soft data' (talk and concern) and 'hard data' (leasing activity), stating they see no real-time negative impact on leasing. He defended the guidance, explaining the FFO raise was driven by a land operations beat while core CRE guidance was maintained due to macro uncertainty. Executive Kit Millan clarified the contingency is on a 60,000 sq ft lease at Kaka'ako Commerce Center, where the tenant is already building out the space, giving them confidence the capital obligations will be resolved.

Alexander Goldfarb asked about tenant credit health in Hawaii compared to the mainland, the potential for further reductions in legacy overhead from the land business, and the current buyer appetite for the company's remaining land holdings.

Answer

SVP of Asset Management Kit Millan noted that collections and tenant sales remain strong, with Hawaii retailers like Longs (CFO) showing resilience. CFO Clayton Chun explained that while land operations carrying costs have been significantly reduced, some costs associated with core holdings like Maui Business Park will remain. CEO Lance Parker stated that buyer interest for land is high, but the company is now more strategically focused on developing its core land at Maui Business Park for its own portfolio rather than selling it.

Alexander Goldfarb questioned the strategy for the ATM program given the company's strong balance sheet and also sought clarity on the FFO baseline for 2025, particularly regarding contributions from the Land Operations segment.

Answer

CFO Clayton Chun described the ATM program as a flexible 'tool in our capital allocation toolkit' to be used opportunistically based on market conditions and stock price, not for recent refinancing needs. Regarding 2025, Chun and CEO Lance Parker declined to give specific guidance but confirmed the Land Operations segment will continue into next year, implying potential for FFO contributions. Parker affirmed that monetizing land to reduce costs and fund growth remains a key priority.

Alexander Goldfarb of Piper Sandler Companies inquired about the outlook for re-leasing spreads over the next 12 to 24 months and whether a significant slowdown is anticipated.

Answer

President and CEO Marshall Loeb expressed an optimistic long-term view. He noted that while the company is still realizing embedded rent growth from prior years, he anticipates another period of strong rent growth in the next 12-24 months. This is due to historically low construction starts and very low vacancy (around 4%) in EastGroup's shallow-bay segment, which should allow demand to outpace supply once economic uncertainty subsides.

Alexander Goldfarb from Piper Sandler Companies inquired about the outlook for re-leasing spreads over the next 12 to 24 months, asking if the current high spreads are sustainable or if a dramatic slowdown is expected.

Answer

President and CEO Marshall Loeb expressed optimism, citing two factors. First, there is still significant embedded rent growth from the COVID-era run-up left to capture as leases roll. Second, he anticipates another period of strong rent growth in the next 12-24 months as demand stabilizes against a backdrop of historically low new supply in the shallow bay sector. He believes demand will pick up much more quickly than supply can respond, creating a favorable environment for landlords.

Alexander Goldfarb questioned the decision to reduce development starts given the healthy leasing environment outside of Los Angeles and reduced competition from merchant builders, asking what was truly driving the pullback.

Answer

Executive Marshall Loeb explained the reduction was based on 'expectations' and heightened economic uncertainty from tariff talks, rather than a current, factual slowdown in demand. He characterized it as a precautionary measure, acknowledging a higher probability that some projects might be delayed. He affirmed that the company will ultimately follow market demand and hopes the revised $250 million forecast proves to be conservative.

Alexander Goldfarb of Piper Sandler sought clarification on the company's development strategy, questioning the plan to ramp up development starts given that development leasing had been slower, and asked if this was based on current or anticipated demand.

Answer

Executive Marshall Loeb explained that the development plan is driven by the combination of a multi-year low in new supply and continued low vacancy in their shallow bay sector. He stated that with prospect activity increasing, they anticipate the market will tighten, making the second half of 2025 an opportune time to increase development starts to meet expected future demand.

Alexander Goldfarb sought to confirm that bad debt is a contained issue rather than systemic, and that the primary challenge is a lack of tenant confidence for expansion, not widespread credit problems.

Answer

CFO Brent Wood agreed that bad debt is not widespread but emphasized it remains an issue, contained to a handful of tenants primarily in California. President and CEO Marshall Loeb concurred, stating that portfolio fundamentals are strong and they have strategically pivoted from slower development leasing to more attractive acquisition opportunities while awaiting a recovery in tenant demand.

Alexander Goldfarb of Piper Sandler & Co. asked for clarification on several first-quarter financial items, including legal income and lease termination fees, and inquired about the expected impact of land sales on FFO for the rest of the year.

Answer

Doug Healey, SVP of Leasing, clarified the $6 million legal income was a one-time settlement and the $5 million in lease termination fees was primarily from one tenant. He noted the company has sold or has under contract $77 million in land and outparcels against its 2025 target and expects a couple more million in lease termination fees for the balance of the year.

Alexander Goldfarb inquired about the company's minimum comfortable cash balance and how it balances holding cash versus paying down debt. He also asked for a framework to model the near-term FFO and NOI impact from dispositions and tenant repositioning.

Answer

CFO Daniel Swanstrom stated the current cash level is a comfortable operating range, with near-term cash flow funding development and the potential to use the credit line for timing. President and CEO Jackson Hsieh explained it's difficult to provide a precise near-term FFO impact, reiterating that same-store NOI will be 'roughly flat' for a couple of years before accelerating, and advised focusing on long-term goals over near-term fluctuations.

Alexander Goldfarb asked about the company's minimum comfortable cash balance while executing its plan and requested a framework for understanding the near-term FFO and NOI impact from the portfolio transition, including dispositions and re-tenanting.

Answer

CFO Daniel Swanstrom indicated the current cash balance is at a comfortable operating level and that near-term funding needs will be met by free cash flow, the line of credit, or refinancing proceeds. President and CEO Jackson Hsieh stated that providing a precise near-term FFO impact is difficult due to many moving parts, but guided that same-store NOI should be expected to be 'roughly flat' for the next couple of years before dramatically increasing as the plan matures.

Alexander Goldfarb of Piper Sandler sought clarification on the financial impact of the Pacific Premier Retail Trust (PPRT) buyout, asking if the $0.07 accretion was net of the debt mark-to-market dilution. He also asked if more malls were being identified as 'Eddy' assets for disposition beyond the initial plan.

Answer

Senior Executive Vice President and CFO Scott Kingsmore clarified that the $0.07 FFO accretion from the PPRT deal is a baseline measure that excludes the temporary, non-cash debt mark-to-market dilution, which he detailed on a year-by-year basis. President and CEO Jackson Hsieh responded that there might be one or two more malls 'on the cusp' of being classified as Eddy assets, but the current $2 billion debt reduction target already includes the remaining known Eddy properties.

Alexander Goldfarb from Piper Sandler asked about the economic impact of agriculture on Centerspace's smaller Midwest markets, particularly in the context of trade tariffs. He also questioned why the company's resident retention rates appear to be trending below peers, seeking reasons beyond previously mentioned factors.

Answer

President and CEO Anne Olson explained that local economies like Bismarck are driven more by healthcare and education than agriculture, making the impact secondary. On retention, she clarified that the lower rate was significantly influenced by supply pressures in Denver, where Q1 retention was in the mid-40s, and noted that overall housing affordability dynamics are similar to other regions.

Alexander Goldfarb of Piper Sandler & Co. asked why Vornado doesn't merge with its affiliate Alexander's (ALX) to simplify the structure. He also inquired about the net FFO impact over the next two years from asset sales, the 350 Park vacancy, and new leasing.

Answer

Chairman and CEO Steven Roth dismissed the idea of a merger, stating it's not a current focus and that unlocking value within Alexander's as a separate entity is the preferred path. President and CFO Michael Franco explained that the FFO impact from 350 Park would be minimal due to capitalized interest and that positive FFO from new leasing would begin flowing through more materially in 2026 and 'dramatically' in 2027.

Sought detailed clarification on the Bloomberg lease's rent structure, the components of the 2024 earnings drag, and whether the company is considering office-to-residential conversions given new incentives.

Answer

The Bloomberg rent is not discounted; it resets in 2029 to a net rent of $98/sqft, with a market appraisal collared at +/- 10%. The increased earnings drag guidance was a more precise quantification of previously known factors, not a new negative development. The company is aggressively looking at office-to-residential conversions, which would target distressed B/C buildings and have a marginal impact on the Class A office market.

Questioned the rationale and timing of the new compensation plan for the 350 Park development, especially while earnings are guided down and the dividend policy is pending. Also asked about the reason for changing brokers at PENN 2.

Answer

The compensation plan is a small, performance-based incentive for retention and to motivate bringing in third-party capital, though they admit they should have socialized it better. Regarding PENN 2, they did not switch brokers; they added the Cushman & Wakefield team to their in-house team to ensure maximum market coverage, describing it as an additive measure.

Alexander Goldfarb inquired about quantifying the platform efficiency of Curbline versus SITE Centers and asked for a comparison of the buyer competition for Convenience assets versus the traditional assets being sold.

Answer

CFO Conor Fennerty explained that Curbline should run a much more efficient platform once fully invested, benefiting from a 'startup-type mentality.' CEO David Lukes clarified that while the buyer pool for Convenience assets is different, often comprising local private wealth, it is still 'definitely competitive,' and SITE Centers has an advantage due to its scale, unlevered balance sheet, and ability to close quickly.

Alexander Goldfarb of Piper Sandler & Co. questioned the post-spin leadership and operational structure for both SITE Centers and Curbline Properties, and also asked about credit trends observed across different tenant types in the convenience portfolio.

Answer

CEO David Lukes explained that specific leadership roles will be announced closer to the spin date, with some executives likely holding dual roles initially, and that details will be in the Form 10 filing. Regarding credit, Mr. Lukes noted Curbline is heavily tilted towards credit tenants but may add more local tenants with strong track records to capture higher mark-to-market opportunities. CFO Conor Fennerty highlighted the portfolio's tenant diversification as a key strength.

Questioned the strategic rationale for splitting the company into two separate entities instead of keeping them together, and asked for clarity on the management structure, compensation, and focus between SITE Centers and the new Curbline entity.

Answer

The split allows Curbline to be a pure-play on the unique convenience asset class and enables SITE Centers to realize its net asset value, given the gap between private and public market pricing. The spin is different from the RVI wind-down, as SITE Centers has strong fundamentals. The executive team's future involvement with SITE Centers will be determined by the board based on the companies' eventual size and strategy. Details on executive compensation have not yet been finalized.