Haendel St. Juste

Haendel St. Juste of Mizuho Financial Group asked how AMH achieved better-than-expected results from its development pipeline despite cost concerns and inquired about the property tax outlook for states beyond Texas.

Answer

CEO Bryan Smith credited strong operational execution, including pre-leasing initiatives and cost management, for the development success, noting vertical construction costs are flat year-over-year. CFO Christopher Lau stated the property tax guidance update was driven by favorable news from Texas. For other states, he noted it's still early but there is some optimism for assessed values to trend better than expected.

Haendel St. Juste asked how AMH improved its development outlook and yields amid cost concerns, and also inquired about property tax expectations for key states like Florida and Georgia and the long-term tax growth rate.

Answer

CEO Bryan Smith credited the improved development outlook to strong operational execution, successful pre-leasing initiatives, and effective cost management, noting that vertical construction costs are flat year-over-year. CFO Christopher Lau stated that the property tax guidance update was driven by favorable news from Texas. While it's early for other states, he indicated a long-term property tax growth expectation of 4-5%.

Haendel St. Juste asked how AMH improved its development yields despite cost pressures and inquired about property tax expectations for key states and the long-term tax growth rate.

Answer

CEO & Trustee Bryan Smith credited improved development outcomes to strong operational execution, pre-leasing initiatives, and effective cost management, noting vertical construction costs are flat year-over-year. SEVP & CFO Christopher Lau stated the property tax guidance revision was driven by favorable news from Texas. He noted the long-term property tax growth rate is typically 4-5%, and moderating home price appreciation could be a favorable future tailwind.

Haendel St. Juste of Mizuho Securities asked for the labor-to-materials cost breakdown in home development and questioned the drivers behind the first-quarter uptick in turnover, seeking clarity on its duration.

Answer

CEO Bryan Smith estimated that vertical construction costs are roughly a 50/50 split between labor and materials. He clarified that the Q1 increase in turnover was almost entirely due to a strategic lease expiration management initiative designed to shift expirations to high-demand seasons and that resident retention rates remain unchanged.

Haendel St. Juste from Mizuho Securities questioned if the 4% renewal growth guidance for 2025 was conservative compared to recent years and asked if the company was observing any signs of pricing fatigue or increased turnover from residents.

Answer

CEO Bryan Smith expressed satisfaction with past renewal results and noted that resident retention remains very strong, with positive signs continuing into the new year. He credited investments in the Resident 360 platform for improving communication and contributing to high retention. He confirmed a 4.5% renewal rate in January and stated that the 4% full-year forecast is a solid expectation, considering market rent growth and loss-to-lease factors.

Haendel St. Juste inquired about the drivers of the reduced property tax guidance, asking if it was due to millage rates or assessed values, and sought an early read on 2025. He also asked about the portfolio acquisition's stabilization timeline and the seller's motivation.

Answer

CFO Chris Lau explained the improved property tax outlook was due to better-than-expected assessment outcomes in states like Florida, Georgia, and Texas, while noting rates are not yet published. For 2025, he expects continued cooling but is watching the expiration of Texas tax reform and revaluations in certain states. Regarding the acquisition, he projected stabilization over the course of 2025. COO Bryan Smith added that AMH's platform provided a seamless exit for the seller and noted an uptick in bulk portfolio opportunities.

Haendel St. Juste from Mizuho Securities asked about the average yield for redevelopment projects ticking down sequentially to 9% from 10%, inquiring if it was a mix issue, an impact of tariffs or higher costs, or a new expected level, and also about minimum yield hurdles in light of lower debt costs.

Answer

Brian Finnegan, Interim CEO and COO, clarified that the yield fluctuation was due to the mix of projects stabilizing during the quarter, reiterating that Brixmor consistently delivers high single-digit to low double-digit returns. He noted that while some cost increases have occurred, they are offset by higher rents, and the company continues to invest accretively. He confirmed that thresholds are not changing, and for larger projects, a higher pre-lease threshold is maintained to limit risk, with strong visibility on costs.

Haendel St. Juste inquired about the average yield for redevelopment projects ticking down sequentially to 9% from 10%, asking if it was a mix issue, an impact of tariffs or higher costs, a new expected level, or if minimum yield hurdles were changing due to lower debt costs.

Answer

Brian Finnegan, Interim CEO and COO, clarified that the yield remains within the historical high single-digit, low double-digit range, attributing the sequential dip to the mix of projects stabilizing in the quarter. He confirmed that while some cost increases have occurred, they are offset by higher rents, and Brixmor is not changing its thresholds, maintaining a higher pre-lease threshold for larger projects to limit risk.

Haendel St. Juste of Mizuho Securities questioned why Brixmor's valuation multiple remains below its peer set despite strong operational performance and what management is doing to address this gap.

Answer

CEO James M. Taylor acknowledged the valuation gap and stated that the company's strategy is to continue delivering outperforming growth to close it. He emphasized that Brixmor's 'all-weather' business plan is based on internally funded, accretive growth rather than external factors, which he believes presents a compelling total return opportunity for investors and will ultimately be reflected in the multiple.

Haendel St. Juste inquired about the capital expenditure required to re-tenant the recently recaptured Big Lots, Party City, and JOANN boxes, and whether there were any plans to subdivide these spaces.

Answer

President and COO Brian Finnegan stated that backfills have primarily been single-tenant users, with costs averaging around $50 per square foot, in line with past projects. He noted that payback periods are at a seven-year low, helped by retailers' increasing ability to utilize existing conditions, which controls costs and accelerates opening timelines. CEO Jim Taylor added that the box sizes are in high demand.

Haendel St. Juste's representative asked about the recent reduction in the redevelopment pipeline's size, the potential to grow it back towards $500 million, and the company's strategy for managing higher construction costs.

Answer

CEO James Taylor noted that while the pipeline is now smaller after delivering over $205 million in projects, he is confident that strong rent growth will more than offset any cost inflation. He anticipates a sustainable pace of $150 million to $200 million in annual reinvestment, fueled by new acquisitions and future phases at existing assets.

On behalf of Haendel St-Juste of Mizuho Securities, a question was asked about the recent reduction in the redevelopment pipeline's size and the opportunity to grow it again amid rising construction costs.

Answer

CEO James Taylor noted that after delivering over $205 million of projects in 2024, the company sees a clear path to $150-$200 million in annual reinvestment going forward. He expressed confidence that strong rent growth will more than offset any cost inflation, with the pipeline being fueled by new acquisitions like Britain Plaza and future phases at existing assets.

Haendel St. Juste asked if the core portfolio's growth potential is peaking, citing moderating leasing volumes and a declining SNO pipeline, and also asked if the >4% NOI growth for 2025 is a base case.

Answer

CEO Jim Taylor asserted that the business continues to fire on all cylinders and that growth is not peaking. He explained that leasing volumes naturally moderate at high occupancy, but the key growth driver is now rate, not just occupancy. He emphasized the compounding effect of rent commencements provides tremendous visibility. COO Brian Finnegan added that the legal pipeline (leases out for signature) is at a one-year high, suggesting future leasing activity will remain robust.

Haendel St. Juste asked if core growth potential is peaking, citing moderating leasing volumes and a declining SNO pipeline alongside record-high occupancy, and questioned if the >4% growth outlook for next year is a base case.

Answer

CEO James Taylor stated that >4% is not formal guidance and they expect to perform better. He emphasized that future growth is increasingly driven by higher rental rates, not just occupancy gains. The compounding effect of rent commencements provides tremendous visibility. President & COO Brian Finnegan added that the 'legal pipeline' of leases out for signature is at a one-year high, suggesting new lease volume will actually increase.

Haendel St. Juste asked about the expectation for lower cap rates, specifically if increased competition is a factor, and the impact on Essential Properties Realty Trust's ability to source sale-leasebacks. He also inquired about the acquisition of new industrial assets, their high rent coverage, and the potential for more such asset types in the future.

Answer

Peter Mavoides, President and CEO, explained that lower and more stable interest rates, with the 10-year yield materially down, are the primary drivers of cap rate compression, not increased competition. He affirmed the company's strong pipeline and ability to compete. Regarding industrial assets, Mr. Mavoides noted that Essential Properties Realty Trust has a history of investing in granular, fungible industrial outdoor storage sites for service-based companies, and while this will continue, he doesn't expect it to become a disproportionate part of the portfolio.

Haendel St. Juste asked about the expectation for lower cap rates, inquiring if this is solely due to lower cost of debt or also increased competition, and if new competition might impact Essential Properties Realty Trust's ability to source sale-leasebacks. He also asked about the acquisition of new industrial assets with high rent coverage and if more of this asset type is expected.

Answer

President and CEO Peter Mavoides explained that lower 10-year yields and a more stable interest rate environment contribute to lower cap rates. He affirmed the company's ability to compete effectively and maintain an ample pipeline of sale-leaseback opportunities. Regarding industrial assets, Mr. Mavoides clarified that Essential Properties Realty Trust has a history of investing in industrial outdoor storage sites with service-based companies, focusing on fungible real estate, and expects this to continue as part of their business, but not disproportionately.

Haendel St. Juste from Mizuho Financial Group asked for the rationale behind the Whistle car wash portfolio acquisition, which pushed car wash exposure near its 15% ceiling, and inquired about the strategies of new competitors.

Answer

CEO Pete Mavoides explained that the company deliberately reduced car wash exposure in prior quarters to create capacity for the Whistle deal. CIO AJ Peil added that the deal involved an existing tenant and high-quality assets. Regarding competition, Mavoides noted that new entrants often compete on cost of capital in brokered deals, whereas EPRT leverages proprietary data and relationships.

Haendel St. Juste of Mizuho requested more specific details on the Dave & Buster's lease, including coverage and rent bumps. He also asked for color on the broader transaction environment, competition, and the potential for cap rate compression, and whether this might lead to more front-loaded investment activity for the year.

Answer

CEO Peter Mavoides declined to give tenant-specific coverage but confirmed it was north of 2x with lease terms of 15-20 years and 2%+ bumps. COO Max Jenkins described the current market as having diminished competition due to volatility but noted it persists for larger deals. He expects cap rates to compress once markets normalize. Mavoides added that the current environment is favorable, as evidenced by the record Q1 volume and strong 9.4% GAAP yield, and they are actively capitalizing on it.

Haendel St. Juste inquired about tenant credit, focusing on the Zips Car Wash bankruptcy, the company's comfort with its 15% carwash industry exposure, and whether Zips had paid recent rent. He also asked about the nature and impact of increased competition on investment cap rates.

Answer

CEO Peter Mavoides stated it was too early to discuss the Zips bankruptcy specifics but noted the company's exposure is minimal at 20 basis points of ABR, down from a peak of over 5%. He affirmed strong conviction in the carwash space, citing deep industry expertise and proactive asset management. He hinted that rent collections were at 100%. An unnamed executive, Max Jenkins, added that while competition has led to modest cap rate compression, the transaction environment remains favorable due to their relationship-driven model. Peter Mavoides concluded that he expects investment cap rates in the mid-to-high 7% range for the upcoming year.

Haendel St. Juste inquired about the rationale for providing 2025 acquisition guidance for the first time, the sustainability of the implied AFFO growth, and the credit loss assumptions embedded in the outlook.

Answer

CEO Peter Mavoides explained that issuing acquisition guidance is a natural step in the company's maturation, reflecting a more predictable pipeline and stable cost of capital. While declining to project beyond 2025, he noted that guidance is built on conservative assumptions, including credit loss provisions historically aligned with their 30 basis point average experience, and that the watchlist remains minimal.

Haendel St. Juste asked for Dallas Tanner's perspective on the sustainable long-term same-store revenue run rate and whether 2025 could represent a trough year, given that new lease pricing may be nearing a low point while renewal pricing remains sticky.

Answer

Chief Executive Officer Dallas Tanner stated the company is taking a measured approach for the year due to supply headwinds flagged previously. He noted that historically, renewal rates have been sticky around 4-5%, while new lease rates are more subject to supply dynamics. While data suggests deliveries will decline, he remains watchful of new starts. Tanner reaffirmed his long-term conviction in Sun Belt and Southeast fundamentals, suggesting the current soft pricing environment could be an opportunity to extend the company's scale and density.

Haendel St. Juste of Mizuho Financial Group asked for details on the new developer lending program, including the potential size of the opportunity and near-term capital deployment expectations.

Answer

EVP & CIO Scott Eisen described the program as being in its 'early days,' having closed its first loan in June. He explained the strategy is to target build-to-rent communities in markets where INVH has an operational presence, with the ideal goal of eventually owning the assets. He stated it was too early to provide a specific volume number but confirmed the team is actively building relationships and has term sheets out.

Haendel St. Juste of Mizuho inquired about the new developer lending program, asking about the scale of the opportunity and the potential for capital deployment in this area.

Answer

CIO Scott Eisen described the program as being in its 'early days,' having just closed its first loan in June. He explained the strategy is to build relationships with developers and brokers to target build-to-rent communities in markets where Invitation Homes has an operational presence, with the ideal goal of eventually owning the properties. He stated it was too early to put a number on potential volume but confirmed they are actively pursuing opportunities.

Haendel St. Juste from Mizuho Securities asked about the drivers behind the persistently low resident turnover and whether this could create upside to FFO guidance.

Answer

CEO Dallas Tanner pointed to the inherent stickiness of SFR residents and the current mortgage rate environment, which has suppressed move-outs for home purchases. President Charles Young added that resident satisfaction is a key factor. CFO Jonathan Olsen clarified that while turnover is lower than expected, it is too early to declare upside to guidance, as this must be considered alongside days-to-re-resident, which is expected to be slightly higher.

Haendel St. Juste of Mizuho asked about the light growth in other income this quarter, the financial contribution from third-party management, and the expected annualized run-rate for that fee income going forward.

Answer

CFO Jon Olsen clarified that of the $19 million in total fee income, about $15 million was from third-party management, and he considers that a decent quarterly run-rate going forward, with some potential upside. Regarding other income, he noted that while areas like bundled internet services are growing strongly, the slight dip in overall occupancy flows through and impacts the total growth of that line item.

Haendel St. Juste from Mizuho Financial Group inquired about the balance sheet's health and liquidity, and asked for an update on the private fund platform, including its timeline and ability to acquire deals.

Answer

CFO Jonathan Pong affirmed the balance sheet's strength, citing a successful Eurobond offering, ample credit facility capacity, and significant unsettled forward equity. He noted substantial progress on the private fund, which will target deals with long-term IRR profiles that may not meet the REIT's year-one accretion requirements, potentially absorbing some of the $3.7 billion in recently passed-on transactions.

Haendel St. Juste from Mizuho inquired about the company's funding strategy for its full-year acquisition guidance and asked for details on a 10% yielding loan for a development project.

Answer

CFO Jonathan Pong detailed the funding plan, outlining the use of forward equity, free cash flow, and new debt, suggesting a modest new public equity raise might be required. CEO Sumit Roy added that the loan was an opportunistic investment in a Virginia data center park being developed for a large, investment-grade hyperscaler, with the hope that it provides a path to eventual ownership.

Haendel St. Juste of Mizuho asked about the private fund's long-term potential to drive AFFO growth without requiring large equity raises and how it might be seeded. He also inquired about Q4 cap rate expectations and if the Q4 volume represents a new run rate.

Answer

CEO Sumit Roy agreed that a key long-term benefit of the fund is creating a complementary source of equity to monetize the platform and sustain growth momentum as the company scales, mitigating future reliance on public markets. He confirmed the fund would be seeded with a portfolio similar to Realty Income's. Regarding Q4, Roy declined to give a specific cap rate but assured the investment spread would remain healthy and north of historical averages, adding that the $1.3 billion in Q4 volume is already pre-funded.

Haendel St. Juste of Mizuho Financial Group followed up on the Brickell acquisition, asking if its high cap rate reflects a broader market mispricing of top-quality malls compared to other retail assets.

Answer

Chairman, CEO & President David Simon stated that Simon is adept at finding opportunities outside of competitive auctions. He asserted that the market "unequivocally misprices big enclosed shopping centers," which creates opportunities for Simon to acquire high-quality assets like Brickell at advantageous prices.

Haendel St. Juste of Mizuho Financial Group asked if the favorable cap rate on the Brickell acquisition was a unique situation or if it signals a broader market mispricing of high-quality malls compared to other retail assets.

Answer

Chairman, CEO & President David Simon stated that the market "unequivocally misprices big enclosed shopping centers." He believes this dynamic is advantageous for Simon, allowing them to acquire high-quality assets like Brickell at prices below what they might fetch in a more efficient market, thereby creating value.

Haendel St. Juste of Mizuho Securities asked for clarification on the high (~12%) returns projected for 'B' mall investments, questioning if this was the norm and what drives such returns.

Answer

Chairman and CEO David Simon explained that high incremental returns are often achievable when investing in empty boxes or spaces with no existing income to offset, which enhances the return calculation. He stressed that the primary driver is ensuring investments are NAV-accretive, meaning the return must exceed the asset's underlying cap rate to create value.

Haendel St. Juste of Mizuho Financial Group requested a deeper analysis of the Washington D.C. and Los Angeles portfolio performance, seeking to understand why the D.C. market has been a positive outlier.

Answer

President & CFO Alex Jessett highlighted Washington D.C.'s exceptional performance, citing it had the portfolio's highest Q2 occupancy (97.3%) and blended rate growth (5.8%). He attributed this to strong positioning, particularly in Northern Virginia, and suggested that broader market concerns for the district may be overstated. He also noted that Los Angeles posted the highest quarter-over-quarter revenue growth.

Haendel St. Juste from Mizuho questioned the implied FFO deceleration in the second half of 2025, given positive operational trends. He also asked for the drivers behind the expected ramp in blended lease growth in the back half of the year.

Answer

President and CFO Alex Jessett explained the second-half FFO moderation is due to the negative spread from selling older, higher-yielding assets and acquiring newer, lower-yielding ones. He noted this is dilutive on an FFO basis but not an AFFO basis, with the dilution expected to reverse in 2026. For lease growth, he pointed to the expiration of 16-month leases signed at lower promotional rates in early 2024, which creates a favorable comparison basis in the latter half of 2025.

Haendel St. Juste asked for more detail on the fourth quarter's resilient new lease rate performance and whether recent stability might allow for more aggressive rent increases sooner than previously expected, including what is embedded in Q1 guidance.

Answer

Executive Vice Chairman D. Keith Oden noted that Q4 performance was stronger than anticipated due to high, stable occupancy across the portfolio. While January started strong, he remained cautious, recalling a slowdown in February of the prior year. Oden expressed confidence in a constructive second half of 2025 and a strong outlook for 2026 and 2027 as new supply diminishes.

Haendel St. Juste requested building blocks for the 2025 outlook, specifically the estimated earnings earn-in, bad debt targets, and commentary on the Atlanta and Los Angeles markets.

Answer

President and CFO Alexander Jessett projected a flat to slightly positive earn-in for 2025 and expects bad debt to return to a normal 50 basis points by year-end 2025 as issues in Atlanta and L.A. are resolved. Executive Vice Chairman D. Keith Oden added that the primary challenge in both markets is the lengthy processing time for delinquencies and evictions, though progress is being made. Chairman and CEO Richard Campo noted L.A. suffers from a demand problem, citing job losses since 2020 compared to strong growth in markets like Houston.

Haendel St. Juste of Mizuho Financial Group asked for July operating statistics and for an update on real-time trends and the back-half outlook for the Boston market.

Answer

SVP & COO Michael Lacy declined to provide specific July stats but stated the company is on track with its second-half guidance. For Boston, he described it as a strong performer with ~97% Q2 occupancy, zero concessions, and ~4% blended rent growth. He noted a recent seasonal dip in occupancy to 96.5% and blends to ~3.5%, with some supply pressure on the North Shore, but confirmed the market remains one of UDR's top performers.

Haendel St. Juste from Mizuho inquired about the current environment for mezzanine lending, including the volume of inbound requests and its potential as a capital deployment source. He also asked for an update on the CFO search.

Answer

Senior Officer Andrew Cantor explained that inbound requests for development deals are declining, but opportunities to recapitalize existing operating assets are increasing, though still below historical averages. Regarding the CFO search, CEO Tom Toomey reported a "very robust response" with a deep pool of candidates and that face-to-face interviews are underway. He emphasized the focus is on finding the right long-term fit for the team and strategy, not on a specific timeline.

Haendel St. Juste asked how development yield targets account for potential cost inflation and how many projects in the future pipeline are shovel-ready.

Answer

CFO & CIO Joe Fisher stated that underwriting for the high 5% to 6% yield targets includes inflationary pressures. While costs for near-term starts are being locked in, he noted that potential tariff impacts could be balanced by greater labor availability from fewer overall industry starts. He confirmed that 4 to 5 of the 8 projects in the future pipeline could be shovel-ready within the next 12 months.

Haendel St. Juste of Mizuho Financial Group asked about the duration of the low-supply environment in the Sunbelt and how much leverage MAA would use to fund acquisitions.

Answer

President and CEO A. Bradley Hill indicated the low-supply environment will persist for the next few quarters to years, citing challenging developer returns and a lack of equity capital. EVP and CFO A. Clay Holder stated the company is comfortable increasing leverage from 4.0x to a 4.5x-5.0x range, providing over $1 billion of capacity.

Haendel St. Juste asked for the absolute dollar rent change needed for new lease rates to turn positive. He also questioned the flat turnover outlook, suggesting that a push for higher rents might naturally lead to increased resident move-outs.

Answer

Tim Argo, EVP and Chief Strategy Officer, quantified the current year-over-year gap in absolute new lease rents at approximately -$25, which needs to close for rates to become positive. Regarding turnover, he argued that macro factors, particularly the high cost and difficulty of buying a home, are currently a more powerful retention driver than lease pricing. He noted that turnover has remained low despite a highly competitive rental market with numerous options for residents.

Haendel St. Juste from Mizuho Securities asked about the transaction market, the characteristics of compelling acquisition opportunities, and the potential size of the development pipeline.

Answer

Brad Hill, EVP and President, explained that compelling opportunities are typically brand-new, off-market properties in lease-up, where MAA can leverage its all-cash closing ability and operating platform to achieve high stabilized yields like the 5.9% average this year. He added that the goal is to maintain the development pipeline at the $1 billion to $1.2 billion level, which equates to 3-4 starts per year.

Haendel St. Juste of Mizuho Financial Group requested a detailed update on the backfills for Joann and Party City boxes, including leasing status, rents, and spreads.

Answer

EVP & COO David Jamieson provided specifics: for Joann, 6 executed leases and 14 LOIs; for Party City, 36 executed with the rest at LOI. He reported mark-to-market rent spreads of approximately 20% for Joann and 15% for Party City, with a goal to resolve all by year-end.

Haendel St. Juste from Mizuho requested details on the expected capital required to backfill bankrupt tenant boxes, the timeline to cash flow, and whether these boxes would be subdivided.

Answer

David Jamieson, COO, stated that a majority of the Party City and JOANN spaces are already in some form of resolution. He estimated backfill capital at $40-$50 per square foot, with a priority on single-tenant users. He expects a minimal cash flow impact in late 2025, with the full financial benefit to be realized in 2026 as the new tenants open and begin paying rent.

Haendel St. Juste of Mizuho asked for details on the drivers behind the $4 million reduction in G&A guidance and inquired about the potential swing factors that could move results to the high or low end of the FFO guidance range.

Answer

CFO Glenn Cohen attributed the G&A reduction primarily to the board leadership transition, noting the overall budget is otherwise flat due to a focus on cost control. CEO Conor Flynn identified the outcome of tenant bankruptcy proceedings as the main variable that would determine whether FFO results land at the high or low end of the guidance range for the year.

Haendel St. Juste from Mizuho Financial Group asked for the expected earnings cadence from the structured finance book and for commentary on the recent CEQA reform in California.

Answer

EVP & CFO Barb Pak detailed the structured finance book's expected decline from $550M at Q2-end to ~$400M by year-end 2025, and $200-250M by year-end 2026, with redemptions being front-loaded in H1 2026. Regarding CEQA, President & CEO Angela Kleiman viewed it as a net positive, while EVP & CIO Rylan Burns expects limited near-term impact on supply, as unfavorable project economics remain the primary constraint on development.

Haendel St. Juste requested details on an Oakland asset from the mezzanine book where Essex took control, the appetite for further capital recycling into Northern markets, and an update on loss-to-lease and concession activity.

Answer

Executive Barb Pak explained the Oakland asset was taken back to prevent a sponsor default and is valued at a significant discount to replacement cost, with its yield expected to rise to ~5% as concessions burn off. Executive Rylan Burns confirmed a desire to increase exposure to northern markets if accretive deals arise. Executive Angela Kleiman reported that concessions improved significantly from Q4 to Q1 and that the loss-to-lease figure in April was 40 basis points better than the prior year.

Haendel St. Juste from Mizuho Securities asked about the company's first development start in several years, inquiring about the opportunity, target yields, and appetite for future development. He also asked about the outlook for concessions, noting that recent improvements are not reflected in the 2025 guidance.

Answer

Executive Rylan Burns explained the development start was driven by a unique opportunity with a low land basis and costs down from 2022 peaks, targeting a mid-to-high 5% yield on cost. Executive Angela Kleiman addressed concessions, stating that while they improved to less than half a week, the full-year forecast remains flat year-over-year as improvement in Northern California is expected to be offset by supply-driven concessions in Seattle.

Haendel St. Juste from Mizuho Securities inquired about current renewal rates, October new lease rates, and the potential for a reacceleration in blended rates given easier comps. He also asked if positive migration and tech job growth are translating into stronger demand.

Answer

Executive Angela Kleiman confirmed renewals are being sent in the mid-4s and landing in the high-3s. She stated a reacceleration in blended rates is possible due to easier year-over-year comps. On demand, she noted that while in-migration is strong and near pre-COVID levels, most of the return-to-office benefit was likely realized in 2024, making future demand more dependent on broad job growth.

Haendel St. Juste from Mizuho Financial Group, Inc. inquired about the intended use of the $100 million in remaining forward equity scheduled to be settled in the second half of the year.

Answer

EVP & CFO Mike Mas stated that the capital is fungible and provides additional capacity for funding the development pipeline and pursuing accretive acquisitions. He also highlighted a potential near-term use for the capital could be executing 'roll up' transactions of smaller joint ventures where Regency can acquire the unowned portions of the assets.

Haendel St. Juste from Mizuho Securities inquired about the intended use for the $100 million in remaining forward equity and the company's appetite for more acquisitions.

Answer

CFO Mike Moss confirmed the forward equity will be settled in the second half of the year. He described the capital as fungible, providing added capacity for both the development pipeline and accretive acquisitions. Moss specifically highlighted growing momentum for 'roll up' transactions, where Regency acquires the remaining interest in existing joint ventures.

Haendel St. Juste requested more color on the transaction market, questioned why acquisition guidance wasn't raised after a strong first half, and asked about the company's strategy for its variable-rate debt as swaps expire.

Answer

Chairman & CEO Jeffrey Edison explained that while the market is active, the company remains disciplined and cautious about the second half, leading them to maintain guidance. CFO John Caulfield noted that the company is 95% fixed-rate and will manage its variable exposure opportunistically through new debt issuance to maintain its long-term target of ~90% fixed.

Haendel St. Juste asked about the company's strategy for managing its variable-rate debt exposure, which is set to increase with upcoming swap expirations. He also inquired about the current transaction market, asking if deals are taking longer to close, if there have been any changes in cap rates, and what the expected mix of on-balance sheet versus joint venture acquisitions will be for the year.

Answer

CFO John Caulfield explained that the company plans to manage its variable rate exposure by being a repeat issuer in the unsecured bond market to replace expiring term loans, aiming for a long-term target of 90% fixed-rate debt. CEO Jeffrey Edison addressed the transaction market, stating that Q1 was healthy. While acknowledging that future uncertainty could slow the market, he noted that some buyers stepping back could create better opportunities for PECO. He emphasized their focus on achieving a 9%+ unlevered IRR rather than on fluctuating quarterly cap rates.

Haendel St. Juste inquired about the potential role of dispositions in funding the acquisition ramp, the rationale for the bad debt reserve, and feedback from tenants regarding tariffs and labor costs.

Answer

CEO Jeffrey Edison explained that dispositions are a potential source of capital, weighed against debt and equity, depending on market pricing. CFO John Caulfield noted that the 2024 bad debt experience was around 75 basis points and the wider 2025 guidance range is intentional to account for uncertainty, with minimal exposure to known bankruptcies. Mr. Edison added that grocers are monitoring tariffs but feel they can pass costs to a strong consumer.

Haendel St. Juste from Mizuho asked for a breakdown of the remaining $338 million in capital deployment for 2025 and questioned why the Bally's Chicago lease lacks a parent guarantee given the development risk.

Answer

CFO & Treasurer Desiree Burke confirmed the majority of the remaining funding is for the Bally's Chicago project. President & COO Brandon Moore explained the Chicago project is in Bally's unrestricted credit group, which prevents a parent guarantee, but there is a path to add one upon completion. He emphasized that GLPI underwrote the project to be viable on a standalone basis, confident that other tenants would be interested if necessary.

Haendel St. Juste inquired about the impact of Netstreit's improved weighted average cost of capital (WACC) on its capital deployment strategy, questioning why the updated acquisition guidance remains somewhat conservative despite favorable investment spreads.

Answer

President & CEO Mark Manheimer explained that while the company could easily deploy more capital, its approach remains fluid and dependent on the cost of capital. He noted that Q2's high 7.8% cash yield was an outlier due to unique opportunities and expects future yields to normalize around 7.4% to 7.5%. He also confirmed that dispositions of assets like Walgreens and dollar stores are proceeding well, enabling accretive capital recycling.

Haendel St. Juste inquired about the impact of NetStreet's improved cost of capital on its investment strategy, the potential for higher acquisition volumes, the mix of investment-grade properties, and the market for dispositions like Walgreens and Dollar Stores.

Answer

CEO Mark Manheimer explained that while the improved cost of capital allows for more acquisitions, they will remain disciplined. He noted Q2's high 7.8% acquisition yield was an outlier, with 7.4-7.5% being more typical going forward, partly due to a mix including more investment-grade tenants. He also confirmed strong demand for their dispositions, particularly dollar stores, which allows for accretive capital recycling.

Haendel St. Juste asked about the impact of NetStreet's improved cost of capital on its investment strategy, the potential for increased acquisition volume, and the expected mix of investment-grade deals. He also inquired about the disposition progress for Walgreens and Dollar Store assets, including market demand and cap rates.

Answer

President & CEO Mark Manheimer explained that while the improved cost of capital allows for more acquisitions, the record 7.8% cash yield in Q2 was an outlier due to unique C-store deals, with 7.4%-7.5% being more typical going forward. He noted strong demand for dollar store dispositions and that the company is nearly finished with its planned Walgreens sales, highlighting a recent CVS disposition at a 5.5% cap rate.

Haendel St. Juste inquired about how NetStreet's improved cost of capital and investment spreads are influencing its capital deployment strategy, noting the updated guidance still appears conservative. He also asked about the expected mix of investment-grade tenants and the drivers behind anticipated lower acquisition yields, as well as the market demand and cap rates for Walgreens and Dollar Store dispositions.

Answer

CEO Mark Manheimer explained that while capital deployment remains fluid, the record 7.8% cash yield in Q2 was an outlier due to unique convenience store opportunities, and a 7.4% to 7.5% yield is more realistic going forward. He confirmed that accretive capital recycling continues, driven by strong demand for assets like dollar stores, though the pace may not be as dramatic as in Q2. He also noted that the ability to deploy significant capital, such as $350 million net, is contingent on maintaining a favorable cost of capital.

Haendel St. Juste inquired about the market appetite and pricing for NETSTREIT's pharmacy and dollar store dispositions, the timeline for reducing key tenant concentrations, and the progress toward achieving an investment-grade credit rating.

Answer

CEO Mark Manheimer confirmed the goal to reduce top tenant concentrations below 5% by year-end, noting robust buyer interest for dollar stores. CFO Daniel Donlan added that they are preparing for discussions with rating agencies in the latter half of the year, anticipating at least a 30-basis-point reduction in borrowing costs upon securing an investment-grade rating.

Haendel St. Juste of Mizuho Securities inquired about the impact of tariffs on asset sale conversations, specifically regarding pricing and demand for the Lakewood property, and asked if the mid-2026 inflection point represents the trough for cash flow and earnings.

Answer

Jackson Hsieh, President and CEO, stated that financing for quality assets remains available and that demand for outparcels is strong, with cap rates likely to be better than initial estimates. Doug Healey, SVP of Leasing, confirmed that mid-2026 is a fair characterization for when earnings might trough before inflecting positively as development NOI ramps up.

Haendel St. Juste asked how strong leasing demand is affecting negotiations on terms and bumps, what tenants are saying about potential tariffs, and for an update on the tenant watch list and bad debt reserves.

Answer

SVP of Leasing, Doug Healey, said rising occupancy naturally helps the revenue structure and that the tenant watch list is significantly smaller than pre-COVID. CEO Jackson Hsieh added they are pushing for longer renewal terms and that retailers' guidance does not seem to incorporate major tariff impacts. CFO Daniel Swanstrom noted bad debt reserves are budgeted at 75-100 basis points.

Haendel St. Juste inquired how strong leasing demand is translating into negotiations regarding lease terms and rent bumps, what management is hearing from tenants about potential tariff impacts, and asked for an update on the tenant watch list and bad debt reserves.

Answer

SVP of Leasing Doug Healey noted that rising occupancy naturally improves the revenue structure, while President and CEO Jackson Hsieh added they are pushing for longer terms on renewals. Hsieh also mentioned that retailers' guidance does not seem to incorporate major tariff impacts yet. Healey confirmed the tenant watch list is significantly smaller than pre-COVID levels, and CFO Daniel Swanstrom quantified the bad debt reserve assumption at 75 to 100 basis points.

Haendel St. Juste of Mizuho noted that Macerich appears to be moving faster than its previously outlined four-year plan and asked if the timeline to reach the $1.80 FFO target could be shorter. He also asked when the company might resume providing annual FFO guidance.

Answer

President and CEO Jackson Hsieh acknowledged the rapid progress but indicated that some structural items, like asset givebacks, will take the next 1-2 years to fully resolve in the financials. He suggested FFO guidance might resume the year after next. Senior Executive Vice President and CFO Scott Kingsmore reiterated that the four-year vision was deliberate due to the difficulty in predicting the timing of various moving parts, such as dispositions and JV acquisitions. However, he confirmed they are ahead of pace on refinancings and on target with disposition pricing, providing some latitude within the plan.

Haendel St. Juste of Mizuho Securities sought confirmation on the property type mix within the LOI pipeline, asked about the company's appetite for sourcing new institutional joint venture partners, and inquired how deal structures are adapting to market volatility from interest rates and tariffs.

Answer

Chief Investment Officer Timothy Doherty confirmed the pipeline is majority multifamily with one hotel deal. Chairman and CEO Jay Sugarman stated that while JVs are an option, the current focus is on keeping deals for Safehold's own balance sheet given deal scarcity. Regarding volatility, Timothy Doherty noted that a tightening range in rates is helping sponsors make decisions, and Jay Sugarman added that a new trend is customers asking to lock rates early for certainty.

On behalf of Haendel St. Juste, Ravi Vaidya asked how management weighs share buybacks against new originations and whether there is an appetite for a larger buyback if the stock price remains low. He also requested more details on the plan to open Caret to more investors, including potential timing and structure.

Answer

Chairman and CEO Jay Sugarman emphasized that scaling the business remains the primary long-term goal, but the current share price dislocation makes the $50 million buyback a compelling, value-creating option. Regarding Caret, Mr. Sugarman noted that after receiving investor feedback focused on liquidity and growth, the company is actively working with its advisory board on strategies to enhance long-term liquidity, making progress a key goal for 2025.

Haendel St. Juste asked if the recent JV buyout signals a pullback in capital deployment from their partner and inquired about any ongoing obligations to show them deals. He also asked about the scope and pricing of the leasehold loan originated during the quarter.

Answer

Chairman and CEO Jay Sugarman stated that the partner's exclusive look-in period has ended, so deal-sharing is now at Safehold's discretion, but the partner remains engaged on large transactions. Chief Investment Officer Timothy Doherty addressed the leasehold loan, describing it as a market-priced opportunity that provided a one-stop-shop solution for the client and served as an attractive tool to facilitate the ground lease transaction.

Haendel St. Juste asked for expectations for the slower markets of Los Angeles and Boston and inquired about the drivers behind the implied ramp in FFO in the second half of the year, beyond development contributions.

Answer

COO Sean Breslin noted L.A. performance is hampered by weak job growth, while Boston saw a significant pickup in asking rents in March and April after a slow start. CFO Kevin O'Shea explained the back-half FFO ramp is a normal seasonal pattern, driven by sequential same-store revenue growth, typical OpEx seasonality, and accumulating development NOI, consistent with prior years.

Haendel St. Juste of Mizuho Securities asked for commentary on the year-to-date performance of East Coast versus West Coast markets relative to initial expectations and the outlook for each. He also inquired about the drivers of the strong growth in "other income" and the associated costs.

Answer

COO Sean Breslin noted that Boston, New York/New Jersey, the Mid-Atlantic, and Seattle have performed better than initially expected in 2024. He provided earn-in figures for 2025, with the East at ~1.3% and the West just under 1.0%. Regarding other income, Breslin explained that the primary driver of its ~15% growth is the AvalonConnect offering. He expects this growth to decelerate in 2025 as the program will be ~90% deployed by year-end 2024.

Haendel St. Juste of Mizuho Financial Group asked if the Red Rock deal indicates a broader appetite for construction lending and if any ROFO opportunities exist with current partners.

Answer

CEO Edward Pitoniak clarified that VICI's strategy is driven by relationship development, not a general move into construction finance, though they will consider it to initiate a partnership. Regarding existing partners, he reiterated the core strategy of growing with their current high-quality tenants and expressed hope for future opportunities, which is fundamental to VICI's business model.

Haendel St. Juste of Mizuho sought clarification on the San Francisco market, where high occupancy and rising rents coexist with prevalent concessions, and also inquired about performance in Boston.

Answer

COO Michael Manelis clarified that in San Francisco, net effective prices are up over 6% year-to-date. While concessions are still used, they are declining, and the company is focused on the overall net effective price. Regarding Boston, he noted it felt weaker in Q1 but is a highly seasonal market that is now showing stable performance and momentum heading into the peak leasing season, though they are monitoring risks from the life science sector.

Haendel St. Juste requested more color on blended rent expectations by region, current concession levels in San Francisco and Seattle, and a detailed buildup of the same-store expense guidance.

Answer

COO Michael Manelis expects improving blends on the West Coast, continued strength on the East Coast, and stabilization in expansion markets. He noted concessions remain elevated in SF and Seattle but are expected to moderate in 2025. CFO Bob Garechana detailed the expense guide, highlighting pressure from utilities and payroll normalization, alongside planned connectivity expenses. CEO Mark Parrell added optimism that the property insurance renewal could be close to flat.

Haendel St. Juste requested a walkthrough of portfolio performance during Q3, focusing on the drop in new lease rates and the outlook for Q4. He also asked about the company's appetite for using more leverage to fund acquisitions and the underwritten IRR for the recent Blackstone portfolio transaction.

Answer

COO Michael Manelis attributed the Q3 new lease rate softness to a strategic decision to prioritize occupancy in Los Angeles and expansion markets. CFO Bob Garechana confirmed the company has an underlevered balance sheet and will use its debt capacity for attractive opportunities. CIO Alex Brackenridge revealed the Blackstone portfolio was underwritten to an 8% unleveraged IRR.

Haendel St. Juste asked about the potential impact of new tariffs on tenants and what management is hearing in their conversations.

Answer

CEO Donald Wood noted that tenants are generally nonplussed as they have experience dealing with tariffs and many have diversified their sourcing. He suggested the impact is a tax that is more easily absorbed by consumers in better real estate locations. EVP Wendy Seher added that savvy retailers have been working to increase margins since COVID and view tariffs as just another business challenge.

Haendel St. Juste from Mizuho asked how management balances using dispositions of lower-growth assets versus issuing new equity as a source of capital for funding new opportunities.

Answer

CEO Donald Wood described this as a continuous evaluation process. He explained that the company constantly weighs the growth profile of its lower-tier assets against their potential sale price and the depth of the market for those assets. He affirmed that capital recycling is a core part of their long-term strategy, with the volume of sales varying each year based on market conditions and the relative attractiveness of other capital uses like acquisitions and development.

Haendel St. Juste of Mizuho requested more detail on the credit loss reserve, including exposure to specific at-risk tenants, and asked about the potential impact of tariffs.

Answer

CEO Joey Agree specified the credit reserve primarily accounts for the Big Lots situation and that the portfolio has minimal exposure to other troubled names. On tariffs, he noted that while costs ultimately flow to consumers, Agree's large, national tenants are well-positioned to manage the impact and gain share from smaller rivals.

Haendel St. Juste from Mizuho requested more detail on exposure to at-risk tenants covered by the credit reserve and asked about the potential impact of tariffs on key tenant categories like home improvement and auto parts.

Answer

CEO Joey Agree identified the ongoing Big Lots bankruptcy as the primary situation covered by the reserve, stating the rest of the portfolio is in a "great place." Regarding tariffs, he noted that while costs ultimately flow to the consumer, large national retailers have diversified their sourcing and possess the balance sheet strength to absorb margin pressure and gain market share from smaller competitors.

Haendel St. Juste asked about the strategic rationale for selling the Del Monte Center, the types of multifamily assets being targeted, and the decision to raise the dividend amidst a reduction in FFO guidance. He also requested color on the drivers behind the $0.05 per share credit reserve for 2025.

Answer

Executive Adam Wyll explained the Del Monte sale was driven by a strategy to focus on markets with greater operational efficiencies. Executive Ernest Rady added that the token dividend increase signals the board's long-term confidence in the portfolio. Executive Robert Barton clarified the dividend payout ratio remains below 100%. Regarding the credit reserve, Adam Wyll noted it pertains to two office tenants and monitoring certain national retailers like Petco and Michaels, all of whom are currently paying rent.

Haendel St. Juste from Mizuho Securities inquired about the strategy of funding investments with dispositions over equity, sought clarification on the 50% IRR increase for the D.C. acquisition, and asked about AIR's ability to control costs in an inflationary environment.

Answer

CEO Terry Considine explained that dispositions were used to fulfill a commitment to delever the company and to capitalize on attractive asset pricing. He confirmed the 50% increase in the free cash flow IRR on the D.C. assets is driven by operational improvements. President of Property Operations Keith Kimmel added that AIR's track record of cost control is proven, and future efficiencies will come from enhancing team member jobs, which reduces staff and resident turnover, thereby lowering costs.

Haendel St. Juste from Mizuho questioned the $50 million investment in life sciences developer IQHQ amid a push for simplification and asked for details on a recent Miami acquisition, including pricing and market competition.

Answer

Chairman and CEO Terry Considine clarified the IQHQ investment is for the future development-focused entity (new Aimco), not the simplified AIR. EVP of Redevelopment Wes Powell detailed the Miami deal, noting it was initiated in late 2019 and provides redevelopment and ground-up development optionality. He mentioned the price was 10-15% below initial talks, but attributed this to seller-specific circumstances rather than a broad market repricing.

Haendel St. Juste of Mizuho asked about the large spread in same-store revenue between top and bottom performing markets, the drivers of Seattle's outperformance, and if Aimco discloses collections by asset class. He also requested an update on the strategic plan for the Brickell property.

Answer

EVP Keith Kimmel noted that Aimco's Seattle portfolio is small, making its growth contribution minor, and declined to predict future market spreads. CFO Paul Beldin stated that collection data is not broken out by asset class but that challenges are concentrated where local regulations are most permissive. Chairman and CEO Terry Considine confirmed there were no new updates regarding the Brickell property.

Haendel St. Juste from Mizuho asked for details on the $22.7 million reduction to the litigation reserve, specifically which portion of the settlement fund it affected. He also inquired about the range of rent reductions for Forever 21 and the potential impact on 2020 same-store NOI.

Answer

EVP & CFO Farzana Mitchell clarified that the reduction was related to past tenants who did not file claims, reducing the liability from the $60 million tenant credit portion of the settlement. Regarding Forever 21, CEO Stephen Lebovitz stated that rent reductions vary by store and it was too early to give a specific amount, but the company is optimistic about the retailer's emergence from bankruptcy.

Haendel St. Juste from Mizuho sought clarification on the $22.7 million reduction in the litigation reserve, asking which part of the fund was affected. He also asked about the range of rent reductions for Forever 21 and its potential impact on 2020 same-store NOI.

Answer

EVP & CFO Farzana Mitchell clarified that the $22.7 million reduction was from the 'past tenant' portion of the settlement, as those tenants did not file claims in time. EVP & CIO Kathryn Reinsmidt confirmed this reduced the $60 million tenant credit portion. Regarding Forever 21, CEO Stephen Lebovitz stated he could not give a specific rent reduction amount as it varies by store, but noted the company started with 19 stores representing $9.5 million in annual rent.