Juan Sanabria

Juan Sanabria asked for more color on move-in rate trends throughout Q4 2025 and into January 2026, as well as how the quantum and cadence of ECRI (Existing Customer Rate Increase) programs have changed year-over-year. He also inquired about any changes in the average size or number of square feet being leased by customers.

Answer

David Cramer, President and CEO, explained that move-in rates narrowed their year-over-year spread in Q4 2025 and are expected to be negative for the first 4-5 months of 2026 due to tougher comps from 2024/2025 rate resets, before turning neutral to positive from June/July. He noted that while the ECRI cadence hasn't changed, the magnitude of rate increases has grown year-over-year due to increased confidence in customer acquisition. Mr. Cramer also confirmed that the previous 5-6 square foot per rental 'roll down' has been closed, with current rentals being at or slightly above previous square footage levels, stabilizing occupancy since September 2025.

Juan Sanabria inquired about the move-in rate trends throughout Q4 2025 and into January 2026, as well as how the quantum and cadence of ECRI (Existing Customer Rate Increase) programs have changed year-over-year. He also asked if the size or number of square feet being leased per unit has changed recently.

Answer

President and CEO David Cramer stated that move-in rates narrowed their year-over-year spread in Q4 2025 and are expected to be negative for the first four to five months of 2026 due to tougher comps from 2025. He confirmed that the ECRI cadence hasn't changed, but the magnitude of rate increases has grown year-over-year due to increased confidence in customer acquisition. Mr. Cramer also noted that the previous trend of a 5-6 square foot per rental roll-down has reversed, with rentals now at similar or slightly larger square footage since September 2025.

Robin Haneland, on behalf of Juan Sanabria from BMO Capital Markets, asked about the occupancy assumptions baked into guidance, whether any markets show signs of a housing recovery, and for quantification of the operating expense savings from the PRO internalization.

Answer

CFO Brandon Togashi reiterated that guidance assumes a moderately better leasing season than last year, with occupancy gains greater than the 140 basis points seen previously. He also noted that G&A savings from the PRO internalization are on track, with about $2.5 million realized in H2 2024 and the other half expected in H1 2025, alongside benefits from tenant insurance and optimized property-level personnel costs.

Juan Sanabria sought clarification on whether the guidance midpoint assumes an improving or steady housing market. He also asked about the 'low-hanging fruit' from the PRO internalization, including the occupancy gap, and requested January/February performance indicators.

Answer

CFO Brandon Togashi clarified the midpoint assumes modest improvement in demand, necessary for the guided occupancy growth. He noted the former PRO stores, representing nearly 50% of same-store NOI, still have a significant occupancy gap to close. He highlighted that full control over the ECRI program for these stores is a key driver. He confirmed that the negative 2.5% in-place rate from Q4 has started to improve in early 2025 but did not provide specific figures.

Juan Sanabria asked for clarification on the implied Q4 FFO guidance, which suggests a sequential decline, and requested an update on the performance of the newly internalized PRO stores.

Answer

CFO Brandon Togashi confirmed the implied Q4 FFO decline, attributing it to one-time Q3 benefits from JV acquisition fees and property taxes, a tougher Q4 OpEx comp, and seasonality. CEO Dave Cramer added that the PRO store transition is ahead of schedule, with early markets like Phoenix and Las Vegas showing 50-80 bps higher occupancy gains than the portfolio average in Q3. He noted that the full benefits of the transition are expected in 2025.

Juan Sanabria asked about SmartStop Self Storage REIT's joint venture strategy, focusing on opportunities in the U.S. or Canada, whether on-balance sheet assets would be contributed, and current market cap rates. He also followed up on the strategy for expanding the Argus third-party management business into Canada, including the necessary groundwork and potential for business and earnings growth.

Answer

Michael Schwartz, Founder, Chairman, and CEO, highlighted a 'tremendous amount of opportunity' in the current acquisition environment, comparing it to the Great Recession, with high-quality deals emerging from assets acquired at peak times with variable debt. He stated SmartStop is seeking an institutional joint venture partner in the U.S. for acquisitions to complement their platform and provide accretive returns, noting that muted development activity creates a favorable acquisition environment. Regarding Canada, Michael Schwartz confirmed that expanding the Argus strategy into Canada is a key focus, emphasizing the successful assimilation of the acquisition and recent owner meetings that have generated new conversations. He sees 'solid growth opportunities' for Argus property management over the next two years, adapting to diverse owner needs. James Barry, CFO and Treasurer, added that the owners conference has also generated a pipeline for bridge lending opportunities, which is reflected in their guidance.

Juan Sanabria asked about SmartStop Self Storage REIT's joint venture strategy, focusing on opportunities in the U.S. or Canada, potential contributions of on-balance sheet assets, and current market cap rates. He also followed up on the Argus third-party management business, asking about expansion into Canada and its implications for business and earnings growth.

Answer

Michael Schwartz, Founder, Chairman, and CEO, highlighted significant acquisition opportunities, particularly for high-quality assets acquired during the COVID-19 peak. He mentioned seeking an institutional U.S. JV partner for larger portfolios and noted the strong acquisition environment due to muted development. Regarding Argus, he confirmed the strategy to expand into Canada, emphasizing the successful integration and tailored management services. James Barry, CFO and Treasurer, added that the owners conference is generating bridge lending opportunities, reflected in their guidance.

Juan Sanabria asked about Chiron's competitive positioning in seniors housing, the specific product types and market focus for seniors investments, the expected yield and timing for the $250 million in planned dispositions, and the current status of first-quarter rent payments and financial impact from the White Rock bankruptcy.

Answer

CEO Mark Decker explained that Chiron will compete by delivering value, leveraging its unsecured balance sheet, $100 million EBITDA, and strong team. The focus for seniors housing will be on independent, assisted, and some memory care, avoiding skilled nursing, with an emphasis on operator and real estate quality. For dispositions, a JV for inpatient rehab is being sought for Q2/Q3, and an LOI for a medical office building sale is expected within 60 days, closing by Q3. Regarding White Rock, Mark Decker confirmed Q1 rents have been paid, and the company is working collaboratively with the operator to resolve their financial capacity issues stemming from seller financing.

Juan Sanabria inquired about Chiron Real Estate's competitive advantage and product type focus in seniors housing, criteria for operator selection, the expected yield targets and timing for $250 million in asset dispositions, the status of Q1 rent payments from White Rock following its bankruptcy, and any other assets on the company's watch list. He also asked about the active adult development strategy, specifically regarding preferred returns, and an update on the Steward bankruptcy's impact on vacancy and reletting opportunities.

Answer

CEO Mark Decker explained that Chiron will compete in seniors housing by delivering value, leveraging its balance sheet and team, focusing on independent, assisted, and some memory care, and partnering with regional operators of newer assets. For dispositions, he detailed plans for a JV in inpatient rehab (Q2/Q3) and an MOB sale (LOI in 60 days, closing by Q3), noting the MOB's strong contribution. Regarding White Rock, he confirmed Q1 rents were paid and the operator is current, expressing support for their bankruptcy strategy to free up financial capacity. He stated no other significant watch list items exist. For active adult, he clarified no preferred return on the initial Minneapolis project but aims for it in future deals. He also updated that the Steward issue is largely resolved, with the Prospect (East Orange) asset still being worked out and showing negative NOI, representing future upside.

Juan Sanabria from BMO Capital Markets questioned the company's medium-term leverage targets, specifically asking if the target includes preferred stock. He also asked for the outlook on portfolio occupancy and the specific Q3 financial impact from the newly leased Beaumont facility.

Answer

CEO Mark Decker stated a preference for leverage to be sub-six times, clarifying this target excludes preferred stock, which he views as more equity-like. COO Danica Holley projected year-end occupancy to be above 95%, acknowledging potential for episodic bumps but expecting overall consistency. CFO Robert Kiernan explained that the Beaumont facility was fully occupied in mid-May, so Q3 will see a modest run-rate increase from Q2, an impact already included in guidance.

Juan Sanabria questioned the company's dividend policy and its sustainability in light of CapEx needs and high leverage, particularly in the context of the ongoing CEO search. He also asked for reasons behind the lower Q1 lease retention rate and any known future move-outs.

Answer

CEO Jeffrey Busch responded that discussions around the dividend and broader strategy are being deferred until the new CEO is in place. Chief Financial Officer Bob Kiernan explained that Q1's lower retention was an outlier and that 80% of the non-renewed space is progressing toward re-leasing. Kiernan projected some occupancy volatility in Q2 and Q3, expecting it to fall into the 94-95% range before recovering to over 95% by year-end, which is factored into guidance.

Juan Sanabria inquired about the new Heitman joint venture's strategy, including its target size, leverage, and asset types. He also asked about the CEO transition, the reasons for the change, and if a broader strategic review is being considered. Finally, he sought clarification on the financial impact from tenants Prospect and Steward in Q4 and within the 2025 guidance.

Answer

CIO Alfonzo Leon detailed that the Heitman JV is a core-plus fund targeting assets in the 7% cap rate range with an initial $50 million in equity to deploy, with the goal of growing through external acquisitions. CEO Jeff Busch added that he prefers acquiring external assets for the JV and that GMRE has a future option to repurchase the portfolio. Regarding his transition, Mr. Busch cited his age and desire to reduce his role, while remaining as Chairman. He confirmed the board seeks a successor with capital markets experience and is continuously conducting strategic reviews. CFO Bob Kiernan clarified that the largest Prospect property has been on a cash basis since late 2023 and the remaining exposure is minimal and factored into guidance.

Juan Sanabria asked about the investment pipeline, year-one yields for SHOP acquisitions, disposition yields for SNFs, the long-term exposure to ALG, and the financing strategy for incremental acquisitions, particularly at the high end of guidance.

Answer

Dave Boitano, Executive Vice President and CIO, LTC Properties, noted $160 million under LOI, targeting year-one SHOP yields around 7% by leveraging smaller transactions. Gibson Satterwhite, Executive Vice President of Asset Management, LTC Properties, explained SNF dispositions (excluding the Prestige loan) are at an 8.2% cap rate, allowing recycling into newer seniors housing. Dave Boitano indicated ALG's purchase options are interest rate sensitive, likely a 2027 event. Pam Kessler, Co-President and Co-CEO, LTC Properties, stated that deleveraging occurs naturally through EBITDA growth, and they would also over-equitize acquisitions if pricing is favorable.

Juan Sanabria asked about the pipeline of investments, the year-one yields for SHOP acquisitions, and the disposition yields for the SNF properties being sold. He also inquired about the longer-term outlook for ALG exposure and the incremental financing strategy if acquisition guidance hits the high end, specifically regarding leverage reduction through EBITDA growth or over-equitization.

Answer

Executive Vice President and CIO Dave Boitano stated that year-one yields for SHOP acquisitions are generally around 7%, benefiting from LTC's ability to target smaller transactions. Executive Vice President of Asset Management Gibson Satterwhite noted that SNF dispositions, excluding the Prestige loan, are at about an 8.2% cap rate. Dave Boitano mentioned that ALG's purchase options are interest rate sensitive, likely a 2027 event, with a small portfolio possibly trading late this year. Co-President and Co-CEO Pam Kessler confirmed that deleveraging would occur naturally through EBITDA growth, and they would also look to over-equitize acquisitions if pricing is right.

Juan Sanabria inquired about the assumptions in guidance regarding ALG's purchase option, the rationale for the $6.5 million lease termination payment to New Perspective, and the outlook for future triple-net to SHOP conversions versus external growth.

Answer

Pamela Shelley-Kessler, co-CEO, stated that current guidance assumes ALG does not complete its refinancing and purchase this year due to the interest rate environment. Clint B. Malin, Executive VP, explained the New Perspective payment rewards them for value creation and establishes a growth partnership. He clarified that the investment pipeline is 50% RIDEA opportunities and future SHOP growth will be primarily external, not from large-scale internal conversions.

Speaking on behalf of Juan Sanabria of BMO Capital Markets, an analyst asked for an update on the market traction for LTC's new RIDEA platform, the composition of the current $100 million pipeline, and the potential risk to the Prestige lease portfolio from any future Medicaid cuts.

Answer

Co-CEO Clint B. Malin described RIDEA discussions with operators as 'very robust,' noting the $100 million pipeline is roughly 50% RIDEA and 50% loans, primarily in private pay assets. Co-CEO Pamela Shelley-Kessler highlighted RIDEA's superior long-term growth outlook. Regarding Prestige, Malin pointed to its strong 740 basis point year-over-year occupancy growth as a positive indicator of its operational health.

Juan Sanabria asked about leasing trends, specifically the comparable spreads decreasing in 2025 vs. 2024, while CapEx for leasing was good and lease terms increased. He questioned if longer terms are a proactive strategy or retailer-driven due to limited market supply. He also sought statistics on increasing customer visit length and the impact of food, beverage, and entertainment additions.

Answer

Stephen Yalof, President, CEO, and Director, Tanger, explained that retenanting is more profitable than renewing leases, leading to a lower renewal rate (80% vs. historical 95%) to pursue growth by diversifying properties with new brands, entertainment, and restaurants. He noted Tanger is in the 'early innings' of measuring dwell time and creating a baseline, but anecdotally, restaurants increase dwell time and later business, driving more spending.

Juan Sanabria inquired about Tanger's leasing trends, specifically the comparable rent spreads, CapEx spend for leasing, and the increase in lease terms, asking if longer terms are a proactive strategy or retailer-driven. He also requested statistics on customer visit length and dwell time improvements from food, beverage, and entertainment additions.

Answer

Stephen Yalof (President, CEO, and Director, Tanger) explained that re-tenanting is more profitable than renewals, noting a shift from 95% to 80% renewal rates to pursue growth opportunities. He emphasized that all decisions serve long-term growth by diversifying property mix with new brands, entertainment, and restaurants. Regarding dwell time, Stephen Yalof mentioned being in 'early innings' of measurement, but anecdotally, restaurants increase visit duration and evening traffic, leading to higher spending.

Juan Sanabria requested more details on the Forever 21 exposure, including box size and backfill experience, and asked for the key puts and takes driving the 2025 same-center NOI growth guidance of 2% to 4%.

Answer

Executive Justin Stein stated that the nine Forever 21 boxes range from 6,000-12,000 sq. ft. and that Tanger is proactively working on backfilling them. CFO & CIO Michael Bilerman explained the NOI guidance range reflects various assumptions at the start of the year, including leasing spreads, downtime, and credit outcomes, while noting a tougher Q1 comp on expenses.

Juan Sanabria followed up on the RCA loan, asking for an update on the tenant's financial health and positioning. He also inquired about Sabra's CapEx expectations for 2026, specifically for maintenance and non-maintenance CapEx within the SHOP portfolio, referencing prior disclosures.

Answer

Richard K. Matros (CEO, President and Chair, Sabra Health Care REIT) reiterated that the RCA tenant is servicing their debt and is a strong operational team, with no further comments. Michael Costa (CFO, Sabra Health Care REIT) estimated 2026 maintenance CapEx to be at similar levels to prior quarters and non-maintenance CapEx for the SHOP portfolio to be in the $20 million-$30 million range.

Juan Sanabria followed up on the RCA loan, asking for an update on the tenant's financial health and positioning. He also inquired about Sabra's CapEx expectations for 2026, specifically for maintenance CapEx and non-maintenance (non-recurring) CapEx within the SHOP portfolio.

Answer

CEO Richard K. Matros reiterated that the RCA tenant is servicing their debt, indicating their health, and is a strong operational team, with no further comments. CFO Michael Costa projected maintenance CapEx to be at similar levels to prior quarters and non-maintenance CapEx for 2026 to be in the $20-$30 million range.

Juan Sanabria from BMO Capital Markets asked for an update on Sabra's remaining Genesis exposure, including NOI, lease structure, and rent payment status. He also inquired about the expected revenue-generating CapEx for the SHOP portfolio in 2025.

Answer

CEO Rick Matros explained that Sabra subleased its remaining 8 Genesis assets to a trusted operator, with Genesis guaranteeing a small rent stub. He confirmed payments are current and the impact on NOI is negligible. Regarding CapEx, CFO Michael Costa noted maintenance CapEx runs $1.5-$2.0 million per quarter, and larger project spending will be significantly lower than the $30+ million spent in 2024, as many deferred projects are now complete and new assets are of a newer vintage.

Juan Sanabria of BMO Capital Markets questioned Sabra's platform investments given flat G&A guidance, and asked about the disposition outlook for 2025.

Answer

CFO Michael Costa noted the existing SHOP platform is scalable with only incremental costs for growth. CEO Rick Matros highlighted ongoing system upgrades, including AI. Matros also guided to ordinary course dispositions of $50-$100 million annually, plus a specific $50 million SNF portfolio sale currently in process.

Juan Sanabria from BMO Capital Markets asked for early insights into 2025 REVPOR trends for the SHOP business. He also inquired about the slight sequential occupancy dip in the triple-net senior housing portfolio and the drivers behind the percentage rents being collected.

Answer

EVP & CIO Talya Nevo-Hacohen suggested mid-single digits is the right way to think about REVPOR growth. CFO Michael Costa noted the triple-net occupancy dip was not meaningful, moving from 90% to 89.6%. Regarding percentage rent, Costa explained it stems from a specific lease (Avamere) that is performing well and has a window opening in 2025 to potentially reset to a fixed rent.

Juan Sanabria inquired about CareTrust REIT's potential expansion into UK SHOP or similar transactions, and whether the company would consider seniors housing development, acknowledging its larger size and potential to absorb initial dilution. He also asked for details on the new operating partner in the Mid-Atlantic and any relation to the Integra transaction.

Answer

Dave Sedgwick, President and CEO, stated that current UK operator relationships are keen on triple net growth, but applying the SHOP platform to the UK is a likely future opportunity. Regarding development, he indicated that while it generally doesn't pencil out significantly in the US currently, CareTrust would consider limited development for the right operator and location. James Callister, Chief Investment Officer, identified the new Mid-Atlantic operator as Larry H. Miller Group and confirmed they are not affiliated with the Integra transaction or Sabre.

Juan Sanabria asked about CareTrust REIT's potential interest in UK SHOP or development opportunities in seniors housing, and sought details on a new operating partner in the Mid-Atlantic region.

Answer

Dave Sedgwick, President and CEO, stated that while current UK operators prefer triple net, UK SHOP is likely in future years. He added that development in the US generally doesn't pencil out, but limited opportunities for the right operator/location would be considered. James Callister, Chief Investment Officer, identified the new Mid-Atlantic operating partner as Larry H. Miller Group, confirming no affiliation with the Integra transaction.

Juan Sanabria asked about the status of the tenant watch list, the performance of transitioning tenants like Links and Champion Care, and details about the new term loan, including its currency and cost.

Answer

President and CEO Dave Sedgwick expressed confidence in the portfolio's strength and stated that both Links and Champion Care are performing on or ahead of schedule. CFO Bill Wagner clarified the new $500 million term loan will be in US dollars as an amendment to the existing credit facility, with pricing just inside the revolver's rate.

Juan Sanabria asked for more details on the seniors housing pipeline, including appetite for SHOP structures, and questioned how a potential pullback in Medicaid expansion might affect skilled nursing.

Answer

President and CEO David Sedgwick reiterated interest in seniors housing and SHOP structures, contingent on finding the right entry point. He opined that a rollback of Medicaid expansion would likely not be a serious concern for skilled nursing, as it primarily covered a different demographic.

Juan Sanabria asked why CareTrust was involved in the Tennessee deal given Ensign's captive REIT, whether the deal is in guidance, if other large portfolios are being evaluated, and about rent collection on recent dispositions.

Answer

President and CEO David Sedgwick explained that CareTrust sourced and controlled the deal, bringing it to the operators, which is why Ensign participated with them. He confirmed the deal is not in current guidance but is expected to lead to double-digit FFO per share growth starting in 2025. He also noted the public $700 million pipeline figure is conservative and excludes other large portfolios under evaluation. Regarding dispositions, he stated no rent was being collected on the assets sold or those remaining for sale.

Juan Sanabria asked for a general sense of Public Storage's expected same-store revenue run rate for Q4 2026, given the forecast for improving trends throughout the year, and inquired about the company's view on supply re-acceleration, specifically referencing a Yardi report.

Answer

Joe Fisher, President and CFO, indicated that while specific quarterly guidance isn't provided, coastal and Midwest markets are expected to see approximately 2% revenue growth, lifting in Q4 2026. Supply-challenged Sun Belt markets are projected to be down a couple of percent but also lifting in Q4 due to easier comparisons and dissipating supply. Joe Russell, President and CEO, disagreed with the notion of supply re-acceleration, stating that Public Storage's internal data shows continued year-by-year decelerated deliveries, citing ongoing complexities in the development business.

Juan Sanabria asked Public Storage for a general sense of the expected Q4 2026 same-store revenue run rate, given the forecast for improving trends throughout the year, particularly after Joe Fisher's allusion to year-end improvement. He also followed up on supply trends.

Answer

Joe Fisher, President and CFO, explained that while specific quarter-by-quarter guidance isn't provided, coastal and Midwest markets are expected to see around +2% revenue growth, potentially lifting in Q4 2026. Supply-challenged Sun Belt markets are projected to be down a couple of percent but should also lift by Q4 2026 due to easier comps and dissipating supply. Tom Boyle, CFO and CIO, reiterated confidence in the long-term decelerating trend of new supply, despite external tracking data suggesting re-acceleration.

Juan Sanabria of BMO Capital Markets inquired about the cap rates for recent acquisitions and the drivers of strong performance in ancillary businesses like tenant insurance.

Answer

SVP & CFO Thomas Boyle stated that recent acquisitions have going-in yields in the 5s, stabilizing in the 6s, with the year-to-date portfolio averaging around a 5.25% going-in yield. He attributed the strength in ancillary income to the tenant insurance program, which is seeing higher adoption rates and increased premiums.

Juan Sanabria asked a theoretical question about whether a housing market recovery would be a net positive for demand. He also inquired about the demand for and success of the third-party management business.

Answer

H. Boyle opined that a housing recovery would be a net positive for demand, even if some 'decluttering' customers were lost. He also stated that the third-party management business is growing in line with expectations, aided by the tougher operating environment, and strategically enhances PSA's scale, brand, and owner relationships.

Juan Sanabria requested a breakdown of 2025 expense assumptions, including potential risks from immigration policy or changes to solar initiatives, and asked about the interplay between promotions and achieved rates for new customers.

Answer

Executive H. Boyle identified property taxes as the biggest expense driver, offset by payroll efficiencies and solar savings. He affirmed the solar program's strong returns (10-15% unlevered IRRs) and long-term opportunity. Boyle also explained that promotions, advertising, and move-in rates are all levers used to manage a competitive environment, noting that marketing and promotion expenses as a percentage of revenue remain stable and below historical averages.

Juan Sanabria asked for an update on acquisition cap rate expectations and whether the target for 6%+ stabilized yields has changed. He also inquired about the strategic thinking behind the recent hiring of a new Chief Operating Officer (COO).

Answer

Executive H. Boyle stated that their underwriting targets remain consistent, aiming for stabilized yields in the 6% range, which typically means acquiring assets with initial yields in the 5s. CEO Joseph Russell explained the new COO, Chris Sambar, brings extensive experience from AT&T in technology, infrastructure, and leading large teams, which will be critical for advancing Public Storage's digital transformation and operational scale.

Juan Sanabria inquired about Healthcare Realty's 2026 same-store NOI guidance, specifically the implied deceleration from 2025 and the underlying assumptions for occupancy, retention, and other key drivers. He also asked for guardrails regarding FAD relative to the normalized FFO expectation for 2026.

Answer

President and CEO Pete Scott detailed the four main drivers of same-store growth (escalators, retention, absorption, cash leasing spreads), noting 3%+ average escalators and mid-80s retention. He also stated that FAD is expected to be flat with FFO, around $1.26 per share, aligning with the maintenance capital numbers provided in the guidance.

Juan Sanabria asked about Healthcare Realty Trust's 2026 same-store NOI guidance, inquiring about the implied deceleration from 2025's strong performance and the underlying assumptions for occupancy, retention, and cash leasing spreads. He also asked for guardrails on FAD relative to normalized FFO expectations for 2026.

Answer

President and CEO Peter Scott explained that 2025's 4.8% same-store NOI included a significant 100+ basis points absorption benefit. For 2026's 3.5%-4.5% guidance, he detailed drivers: escalators (3%+), retention (mid-low 80s), positive absorption (though less than 2025), and improved cash leasing spreads reflecting strong demand. Regarding FAD, Peter Scott indicated that if FFO is flat, FAD is also expected to be flat, around $1.26 per share, with maintenance capital details available in the guidance.

Juan Sanabria of BMO Capital Markets asked about the FFO exit run rate for the year given the back-half loaded dispositions and inquired about the next phase of cost-cutting. He also requested a breakdown of the capital spend for the lease-up portfolio and how it would be classified for FAD purposes.

Answer

President & CEO Peter Scott indicated future cost savings would likely come from the property level, but the main driver of FFO growth will be lease-up and revenue growth. EVP & CFO Austen Helfrich clarified that the full $0.06 of disposition dilution should be factored into 2026 models. Helfrich also stated that the vast majority of the $300M in lease-up capital spend (RTO and redevelopment) will be classified as first-generation capital and thus not included in maintenance capital for FAD calculations.

Juan Sanabria questioned whether the current 2025 guidance has the new CEO's full approval and asked for clarity on the dividend outlook for 2026, considering potential disposition-related dilution.

Answer

CEO Peter Scott confirmed his comfort with the reaffirmed 2025 guidance, noting that any increased asset sales would be back-end weighted, with the primary earnings impact in 2026. He emphasized that the dividend will be an 'output' of the strategic plan, not an 'input,' and that a decision will be made once there is more clarity on the future earnings profile.

Juan Sanabria inquired about Funds Available for Distribution (FAD) expectations, the status of the dividend, the sources and uses of capital for 2025, and the potential for share buybacks or margin improvement.

Answer

Interim CEO Constance Moore expressed confidence in growing into the dividend by late 2025 or early 2026, making it the current strategy. CFO Austen Helfrich stated the 2025 priority for disposition proceeds is funding leasing capital first, then proactively repaying debt to lower leverage to a 6.0x-6.25x target, prioritizing this over buybacks. COO Robert Hull added that margins are expected to improve with rising occupancy.

Juan Sanabria asked for clarification on why the multi-tenant same-store NOI guidance was lowered and questioned the drivers behind the decrease in G&A expenses, seeking insight into the run-rate for 2025.

Answer

Executive Todd Meredith attributed the guidance adjustment to the timing lag of new lease commencements, which occurred late in Q3. Interim CFO Austen Helfrich added that free rent on new leases also impacts cash NOI in the near term. Regarding G&A, Helfrich stated the reduction was due to management's cost control actions and that the current run rate is a reasonable base for 2025, subject to normal inflation.

Juan Sanabria inquired about the drivers of anchor movement, asking if it was proactive by Federal Realty or due to other factors, and requested quantification of the non-cash charge related to Saks.

Answer

Donald Wood, CEO, explained that anchor movement is primarily due to timing, with expirations on West Coast assets in particular. He noted that these spaces are being re-leased, often as part of redevelopments like Grossmont or for new tenants like Life Time at Santana Row, leading to a temporary occupancy hit but ultimately strong growth.

Juan Sanabria asked about the drivers behind anchor movement within Federal Realty's portfolio, whether it's proactive management or other factors, and requested quantification of the non-cash charge related to Saks.

Answer

Donald Wood, Chief Executive Officer, explained that anchor movement is primarily due to lease expiration timing, particularly on West Coast assets, leading to proactive efforts to secure new tenants or redevelop. Daniel Guglielmone, Chief Financial Officer, quantified the non-cash Saks charge as approximately $0.03 per share, related to writing off straight-line rent.

Juan Sanabria from BMO Capital Markets asked for an update on the operating environment in Washington D.C., seeking details on foot traffic, sales trends, and the performance of restaurant tenants.

Answer

EVP, Eastern Region President & COO Wendy Seher stated that restaurants in their D.C. area properties remain resilient due to high local incomes. She reported that foot traffic was up in April and May, down in June, but remained solid overall for the quarter and into July.

Juan Sanabria of BMO Capital Markets requested more detail on the performance of the Washington, D.C. portfolio, asking about sales trends and restaurant performance beyond the positive foot traffic data.

Answer

CEO Donald Wood stated that while sales data lags, he expects it to reflect the strong traffic trends. He made a broader point advising not to underestimate the D.C. market, highlighting its long-term resilience, diverse economy beyond government, and strong fundamentals, which make it a dynamic marketplace.

Juan Sanabria asked for details on the new tax credits, their inclusion in FFO, and the netting of associated costs. He later followed up for clarification on the guidance for POI from 2024 property disposals and the corresponding offset from acquisitions.

Answer

EVP & CFO Daniel Guglielmone explained the tax credits are from a federal program for the Freedom Plaza development, with earned revenues recognized net of expenses. For the follow-up, he clarified that the $5 million figure represents POI from assets sold in 2024 that will not recur in 2025, and offered to provide the offsetting acquisition benefit calculation offline.

Juan Sanabria of BMO Capital Markets inquired about the potential acquisitions mentioned for late in the year, asking for details on asset type, transaction size, and recent cap rate trends.

Answer

CEO Donald Wood confirmed that Federal Realty is in negotiations for a couple of market-dominant, larger assets, each exceeding $100 million. He indicated these deals are in the mid-6% to 7% cap rate range, which he believes is slightly inside where they might have traded earlier in the year. Wood stressed that the key metric is achieving IRRs in the high 8% to 9% range, which makes the opportunities attractive relative to their cost of capital.

Juan Sanabria inquired about Kimco Realty's realignment to a national leadership structure for asset management, asking what drove this change, how it impacts day-to-day leasing decisions and streamlining, and the expected G&A savings.

Answer

Chief Operating Officer Dave Jamieson explained that the shift from a regional to a functional operating model (national leasing and asset management) aims to enhance efficiency, accelerate workflows, and leverage scale. He cited successful 'package deals' as an example of streamlined execution. SVP of Strategic Operations Will Teichman added that the Office of Innovation and Transformation is guiding these efforts, focusing on automation, data visualization, and an internal natural language chatbot to drive efficiencies, initially impacting G&A and reducing reliance on professional services vendors.

Juan Sanabria asked about Kimco Realty's realignment to a national leadership structure for asset management, inquiring about the drivers, day-to-day changes in leasing decisions, streamlining procedures, and expected G&A savings.

Answer

Dave Jamieson, COO, explained the shift from a regional to a functionally aligned operating model (national leasing and asset management) to enhance efficiency, consistency, and speed, citing package deals as an example of accelerated execution. Will Teichman, SVP of Strategic Operations, added that the Office of Innovation and Transformation is guiding digital transformation efforts, including automation, data visualization, and an internal natural language chatbot, which are expected to drive G&A efficiencies through vendor consolidation and reduced reliance on professional services.

Juan Sanabria asked for more details on the potential upside for small shop occupancy beyond current record levels, specifically how redevelopment projects contribute to a 'halo effect' on small shop lease rates.

Answer

Dave Jamieson, COO, and Conor Flynn, CEO, noted that redevelopments, especially with new grocers, can lead to small shop rent lifts in the teens to low 20s. They attributed continued small shop occupancy growth to evolving demand drivers (more services), limited new supply (0.3% under construction), and the scarcity of high-quality real estate.

Juan Sanabria asked for more details on the potential upside for small shop occupancy beyond current record levels, specifically how redevelopment projects contribute to a 'halo effect' on small shop lease rates.

Answer

Dave Jamieson, COO, and Conor Flynn, CEO, noted that redevelopments, especially with new grocers, can lead to small shop rent lifts in the teens to low 20s. They attributed continued small shop occupancy growth to evolving demand drivers (more services), limited new supply (0.3% under construction), and the scarcity of high-quality real estate.

Juan Sanabria from BMO Capital Markets asked about plans for Kimco's residential entitlements and how they fit into the broader capital recycling strategy.

Answer

CEO Conor Flynn explained they evaluate each project individually, with options to monetize entitlements, contribute land to a JV, or pursue capital-light ground leases. The goal is to unlock value in the fastest way possible, and they are actively assessing the pipeline for near-term opportunities.

Juan Sanabria from BMO Capital Markets noted a change in the same-store pool count and asked for the same-store occupancy change both with and without that pool adjustment.

Answer

Kathleen Thayer, an executive, explained the change was to provide a more consistent year-over-year performance measure and noted the difference was a minimal 30 basis points. David Bujnicki, an executive, added that properties excluded for redevelopment are clearly flagged in the supplemental filings, and the company continues to disclose same-site NOI both with and without the redevelopment impact.

Juan Sanabria of BMO Capital Markets asked for more color on the credit loss reserve, questioning how the 75-100 basis point guidance aligns with the 1.1% of ABR exposure from Party City and Jo-Ann's, and inquired about the timing of the impact.

Answer

CFO Glenn Cohen explained that the timing of rent payments from bankrupt tenants mitigates the full-year impact. He noted that tenants like Jo-Ann's will continue paying rent well into the second quarter, and the final outcome depends on potential going-concern buyers and auctions. This variability is why management feels comfortable with the provided guidance range.

Juan Sanabria asked for more details on the structured investments program, including the rights of first offer or refusal, and the potential scale of future fee simple acquisitions from this pipeline.

Answer

President & CIO Ross Cooper explained that the structured investment program offers attractive returns while securing rights of first offer or refusal, creating a future ownership pipeline. He noted that one such investment is currently being evaluated for conversion to fee ownership in early 2025. The program has approximately $470 million outstanding, representing a substantial potential source of future acquisitions.

Juan Sanabria of BMO Capital Markets asked for more details on Kimco's structured investments program, including the rights of first offer and the potential size of the fee simple acquisition pipeline it represents.

Answer

President & CIO Ross Cooper explained the program provides attractive returns while creating a future ownership pipeline. He noted that some deals are maturing, with one asset being evaluated for conversion to fee ownership in early 2025. The program has about $470 million outstanding, representing a significant potential pipeline.

Juan Sanabria inquired about Welltower's CapEx strategy for senior housing, specifically regarding recurring and other CapEx, how assets are being future-proofed, and the capital allocation given the generally newer assets being acquired.

Answer

A Welltower representative explained that while acquiring younger assets, some still require capital due to prior underinvestment, and Welltower is reinventing lifecycle cost management to lower long-term run rates. Shankh Mitra (CEO, Welltower) added that two large portfolios, Holiday and HC-One, require significant investment, but were acquired at very low bases, making the total investment still a meaningful discount to current market values.

Juan Sanabria asked about Welltower's CapEx for senior housing, specifically regarding recurring and other CapEx, and how they are future-proofing assets or allocating capital given the generally newer assets they are acquiring.

Answer

Welltower executive John explained that while newer assets are acquired, some still require capital due to prior underinvestment. Welltower is reinventing CapEx with a lifecycle cost approach to enhance customer experience and lower long-term run rates, even if it means higher upfront costs. CEO Shankh Mitra added that Holiday (nearing the end of its investment cycle) and HC-One (just beginning significant investment) are two large portfolios influencing CapEx, with HC-One requiring substantial investment but still acquired at a meaningful discount.

Juan Sanabria inquired about Welltower's perspective on investment opportunities in single-family and manufactured housing sectors, comparing them to the company's focus on seniors and active adult housing.

Answer

CEO Shankh Mitra stated that he remains within his circle of competence and does not comment on sectors like manufactured housing, about which he has no knowledge, emphasizing Welltower's focus on its core areas of expertise.

Juan Sanabria of BMO Capital Markets asked about the competitive landscape for investments, the runway for acquiring newer assets, and the broader financing environment for senior housing.

Answer

Co-President & CIO Nikhil Chaudhri stated there is 'no shortage of opportunity' to acquire assets where Welltower can improve cash flow, given the industry's fragmentation. CEO Shankh Mitra added that making money at scale depends on what an asset is worth 'in your own hands,' highlighting the value created by Welltower's data and operating platforms, which is a necessary condition beyond just capital allocation acumen.

Juan Sanabria requested details on the ~$1.2 billion in skilled nursing investments made in the quarter, asking about the structure (fee simple vs. loan) and portfolio coverage.

Answer

CEO Shankh Mitra explained the investment was primarily a large, broken transaction where Welltower secured a favorable price and brought in a trusted operator, Aspire. He noted the portfolio has strong in-place cash flow to cover rent despite mid-60s occupancy, and the deal is further supported by significant credit enhancements and guarantees.

Juan Sanabria from BMO Capital Markets asked for more detail on the period of 'elevated CapEx' and how to benchmark long-term capital expenditures once they normalize.

Answer

COO John Burkart explained that the company is correcting past inefficiencies and that the long-term CapEx run rate should ultimately be similar to that of multifamily residential REITs. He distinguished this from value-add CapEx, which is treated as a discretionary investment with specific unlevered IRR hurdles.

Juan Sanabria asked for more color on the discussions with eight private peers, specifically whether these involve larger-scale transactions or smaller 'singles and doubles'.

Answer

Nikhil Chaudhri (EVP & Chief Investment Officer) indicated that the outcomes of these discussions will vary widely. He explained that some conversations might not lead to any acquisitions, while others could result in significant transactions, making it difficult to generalize.

Juan Sanabria asked about the term fees recognized in the fourth quarter, the change in the pace of non-cash rents, the drivers behind these term fees, expectations for 2026, and any impact on non-cash revenues.

Answer

CEO Brian Finnegan explained that the Q4 term fee was an 'outsized' opportunistic event in the East Bay, related to taking back Kohl's and Party City space, which was unique and not expected to recur at that scale. He noted normal annual term fees are typically $4 million-$6 million. CFO Steve Gallagher clarified that the non-cash rents were an acceleration of 141 associated with bankruptcies, also not expected to recur.

Juan Sanabria inquired about the drivers behind the fourth-quarter term fees and the change in non-cash rents, seeking expectations for 2026 term fees and their impact on non-cash revenues for modeling purposes.

Answer

CEO Brian Finnegan explained that the Q4 term fees were opportunistic, stemming from a unique situation in the East Bay area involving a Kohl's and Party City recapture, which offered significant optionality. He noted that normal annual term fees are typically $4 million-$6 million. CFO Steve Gallagher clarified that the non-cash rent acceleration was related to 141 bankruptcies throughout the year and is not expected to recur.

Juan Sanabria asked about Brixmor's relationship with Publix, future opportunities, and the potential for greenfield developments.

Answer

Brian Finnegan, Interim CEO and COO, highlighted the South Region team's longstanding relationship with Publix, resulting in double-digit in-place redevelopments and two new projects announced this quarter in Southeast Florida and Hilton Head, with another in St. Pete. He noted a long pipeline and strong partnership, but reiterated that Brixmor's focus remains on redevelopment, not new greenfield development, given several years of runway in the future reinvestment pipeline.

Juan Sanabria of BMO Capital Markets asked about Brixmor's relationship with Publix, future opportunities, and the potential for greenfield developments.

Answer

Brian Finnegan, Interim CEO and COO, highlighted the South Region team's longstanding relationship with Publix, noting double-digit in-place redevelopments and recently announced new projects in Southeast Florida, Hilton Head, and St. Pete. He mentioned a long pipeline and strong partnership, with Publix reinvesting in their stores. While acknowledging great relationships with grocers, he stated that Brixmor's primary focus remains on redevelopment, with several years of runway, rather than greenfield development.

Juan Sanabria from BMO Capital Markets asked about the impact of securing more favorable Common Area Maintenance (CAM) provisions in new leases on the company's future margins.

Answer

President & COO Brian Finnegan explained that improving lease terms, such as removing CAM caps and strategically using fixed CAM, has been a long-standing focus. He noted that the positive impact is already visible in the recovery rate, which is ahead of billed occupancy, and expects this focus to drive further margin improvement. CEO James M. Taylor added that this reflects the company's disciplined operational approach.

Juan Sanabria requested more color on the JOANN situation, asking about the expected impact on occupancy in the second quarter and the status of re-leasing efforts.

Answer

President and COO Brian Finnegan reported that the remaining 17 JOANN boxes are expected back in May. He expressed pleasure with the initial progress, stating that roughly two-thirds of the space is already resolved at lease or LOI with compelling rent spreads of 30-40%. While some occupancy pressure is expected in Q2, its level will depend on the timing of final lease executions.

Juan Sanabria inquired about the forward outlook for common area maintenance (CAM) recoveries and the potential for that rate to increase from its current level.

Answer

President and COO Brian Finnegan stated that intentional lease improvements, such as removing caps and carve-outs, helped drive the CAM recovery rate to a record 92%. While a temporary dip is possible due to recent space recaptures, he expects the rate to trend back into the low 90s.

Juan Sanabria from BMO Capital Markets asked for the forward outlook on Common Area Maintenance (CAM) recovery rates and their potential trajectory.

Answer

President & COO Brian Finnegan explained that the record 92% recovery rate was driven by improved lease clauses and strategic use of fixed CAM structures. While a temporary dip is possible due to near-term space recaptures, he expects the rate to trend back into the low 90s as a result of the team's sustained efforts.

Juan Sanabria inquired about the investment market and the rationale for using the At-The-Market (ATM) equity program, questioning if it signals an increase in acquisition opportunities.

Answer

CEO Jim Taylor confirmed an improving outlook for external growth, noting approximately $250 million of assets are under control. CIO Mark Horgan added that the open-air retail market is healthy with growing institutional interest. Taylor concluded that the company sees accretive opportunities that leverage its platform, justifying the use of the ATM program.

Juan Sanabria inquired about the investment market and the rationale for raising equity via the ATM program for the first time since 2022, asking if it signals an increase in acquisition opportunities.

Answer

CEO James Taylor confirmed an improving outlook for external growth, highlighting approximately $250 million in accretive assets under control that align with the company's clustering strategy. EVP & CIO Mark Horgan added that the open-air retail market is healthy with growing institutional interest, and the investments leverage Brixmor's platform to drive outperformance, justifying the ATM issuance.

Juan Sanabria inquired about the specifics of rent bumps contributing to record GAAP leasing spreads and the assumptions embedded in guidance regarding commenced occupancy flow throughout the year.

Answer

Alan Roth, East Region President and Chief Operating Officer, stated that 96% of new and renewal deals included rent steps, with 85% of shop steps at 3% or higher and 30% at 4% or higher. Mike Mas, Chief Financial Officer, explained that 2025 saw a 150 basis point increase in commenced occupancy. For 2026, the guidance assumes continued, but more modest, increases in commenced occupancy by compressing the SNO pipeline (currently 240 basis points, targeting 185 basis points).

Juan Sanabria asked for details on the rent bumps contributing to Regency Centers' record gap leasing spreads and for color on the build occupancy assumptions embedded in the guidance for the year.

Answer

Alan Roth, East Region President and Chief Operating Officer, stated that 96% of new and negotiated renewal deals included rent steps, with 85% of shop deals having 3% or higher steps, and 30% at 4% or higher, significantly contributing to future growth. Mike Mas, Chief Financial Officer, explained that after a 150 basis point increase in commenced occupancy in 2025, the 2026 guidance assumes continued, but more modest, increases by compressing the SNO pipeline.

Juan Sanabria asked for historical context on the 1 million square feet of leases in negotiation and if it's skewed by anchor opportunities, and inquired about any unusual bad debt contribution in Q3 and 2026 assumptions.

Answer

Alan Roth, East Region President and Chief Operating Officer, stated that the 1 million square feet in negotiation is consistent with prior quarters and not disproportionately skewed by anchors, emphasizing the quality of retailers. Mike Mas, Chief Financial Officer, explained that Q3's positive bad debt anomaly was due to higher collections from cash-basis tenants, including previously written-off receivables, and expects lower-than-historical bad debt to continue in 2026.

Juan Sanabria inquired about the historical context of Regency's 1 million sq ft leasing pipeline in negotiation and whether it's skewed by anchor opportunities. He also asked if there were any unusual bad debt contributions to growth this quarter and if similar low bad debt levels are assumed for 2026.

Answer

Alan Roth, East Region President and COO, stated that the 1 million sq ft pipeline is consistent with prior quarters, not disproportionately skewed by anchors, and filled with high-quality retailers. Mike Mas, EVP and CFO, explained that the positive anomaly in uncollectible lease income this quarter was due to higher collections, including from previously written-off receivables. He confirmed expectations for continued historically low uncollectible lease income in 2026, reflecting a healthy tenant base.

Inquired about the health of small shop tenants, the reasons for low turnover, and their sentiment regarding potential tariffs.

Answer

Small shop tenant health is very strong, evidenced by positive foot traffic, low A/R, and strong sales. Low turnover is attributed to supply constraints and store productivity. Tenants are viewed as resilient and are expected to manage potential tariffs through various operational levers. The portfolio's focus on necessity retail provides an additional layer of stability.

Juan Sanabria from BMO Capital Markets asked about the health of small shop tenants, the reasons for lower-than-expected turnover, and their perceived ability to manage potential tariffs.

Answer

COO Alan Roth described tenant health as 'very strong,' citing positive foot traffic, historically low accounts receivable, and strong sales. He attributed the high 77% retention rate to supply constraints and high store productivity. He expressed confidence that these experienced operators can manage tariffs through various levers. CEO Lisa Palmer added that Regency's necessity-focused portfolio in strong suburban markets provides inherent resilience.

Juan Sanabria from BMO Capital Markets questioned the health of small shop tenants, the reasons for low turnover, and their potential resilience to tariffs.

Answer

COO Alan Roth described tenant health as 'very strong,' citing positive foot traffic and historically low accounts receivable. He attributed the high 77% retention rate to supply constraints and strong store productivity. CEO Lisa Palmer added that the portfolio's focus on necessity, service, and value in strong suburban markets provides resilience against economic pressures like tariffs.

Juan Sanabria asked for an overview of the current transaction market, including the impact of higher interest rates, the number of active buyers, cap rate trends, and any changes in foreign investor appetite.

Answer

Nicholas Wibbenmeyer, West Region President and CIO, described the market as being in its 'early innings' of reacting to volatility. He stated that cap rates for high-quality, grocery-anchored centers remain in the 5% to 6% range. Anecdotally, he has observed a pullback from public and international buyers, but strong interest from private capital continues to keep pricing aggressive.

Asked about the current state of the transaction market, including the impact of higher interest rates, the number of active buyers, cap rate trends, and any changes in foreign investor interest.

Answer

While it's still early to see the full effects of recent volatility, cap rates for high-quality, grocery-anchored assets remain in the 5% to 6% range. There appears to be a slight pullback from public and international buyers, but strong interest from private capital continues to keep pricing aggressive for desirable assets.

Juan Sanabria from BMO Capital Markets asked about the expected gain in economic occupancy in 2025 and sought clarification on a comment that a certain 'growth rate was topping out,' questioning if it related to capitalized interest offsetting G&A.

Answer

CFO Michael Mas projected a rent-paying occupancy gain of 75 basis points or more on an average basis in 2025, with redevelopments contributing over 100 basis points to same-property growth. He clarified that the 'topping out' referred to the growth rate of capitalized overhead (a credit to G&A), which will now stabilize as the development pipeline hits a sustainable, higher level. CEO Lisa Palmer added that its future growth should mirror the overall G&A growth rate.

Juan C. Sanabria inquired about the progress and ultimate goals of dynamic pricing within the Ventas OI platform, and asked for a reminder on how flow-through margins are expected to trend as occupancy increases, particularly beyond the 90% threshold.

Answer

J. Justin Hutchens, EVP of Senior Housing and Chief Investment Officer, stated that dynamic pricing, like all Ventas OI initiatives, has been evolving since 2022, with improving technical proficiency and field execution, driven by high operator adoption. He considers it to be in early stages with continuous improvement as the goal. He explained that incremental margins are expected in the 50s around low 90s occupancy, increasing to around 70% as occupancy approaches 100%, due to strong operating leverage.

Juan C. Sanabria inquired about the progress and ultimate goals of Ventas's dynamic pricing initiatives within Ventas OI, and how flow-through margins are expected to trend with increasing occupancy.

Answer

J. Justin Hutchens, EVP of Senior Housing and Chief Investment Officer, stated that dynamic pricing, part of the evolving Ventas OI platform, has been a focus since 2022, with improving technical proficiency and field execution. He noted that flow-through margins improve with higher occupancy, expecting incremental margins in the 50s for 2026, and potentially around 70% as occupancy approaches 100% due to strong operating leverage.

Juan Sanabria requested the specific year-over-year SHOP same-store occupancy change for the month of June to better track progress against full-year guidance. He also asked about the impact of recent Research & Innovation development completions on capitalized interest.

Answer

Robert Probst, EVP & CFO, did not provide a specific June figure but pointed to the 240 basis point year-over-year growth for the full second quarter and reiterated the full-year guidance of 270 basis points, noting improvement into Q3. He also stated that capitalized interest from development completions is 'de minimis' and not a material factor for modeling.

Juan Sanabria of BMO Capital Markets asked about the pacing of acquisitions, given the incremental guidance is back-half loaded, and requested the specific March 31 year-over-year occupancy figure for the SHOP portfolio to calibrate for the noted move-outs.

Answer

EVP & Chief Investment Officer J. Hutchens explained that investment activity can be lumpy and the pipeline remains robust. EVP & CFO Robert Probst declined to give a spot occupancy number, reiterating the focus on trends and the upcoming key selling season. He noted that the full-year occupancy growth guidance of 270 bps versus the Q1 result of 290 bps provides a reasonable approximation of the starting point.

Juan Sanabria asked about the potential risk to the Research & Innovation (R&I) business from changes in NIH funding and inquired about the strategy for the planned $200 million in capital recycling, particularly regarding skilled nursing facility dispositions.

Answer

CEO Debra A. Cafaro minimized the NIH funding risk, highlighting that the R&I portfolio is only 8% of NOI and that proposed funding changes are small and currently halted. She confirmed the capital recycling plan involves selling skilled nursing facilities, with $150 million pending, to fund senior housing investments.

Juan Sanabria from BMO Capital Markets requested October leading indicators for the SHOP portfolio, commentary on 2025 rent increases, and details on the mechanics of the 'zero vacant days' initiative.

Answer

J. Hutchens confirmed that leads and tours remained strong year-over-year in October but declined to provide 2025 rent guidance. He explained that the 'zero vacant days' initiative is achievable due to resident notice periods and the simplicity of turning over small senior living units, which minimizes vacancy.

Juan Sanabria from BMO Capital Markets inquired about the initial yields on Omega Healthcare Investors' SHOP investments in Q4 2025 and year-to-date, CapEx assumptions, and the expected delta between FAD and adjusted FFO for the full year 2026 guidance. He also asked for a comparison of the Canadian long-term care market to the U.S. skilled nursing market and the potential opportunity this new market represents.

Answer

Taylor Pickett, CEO of Omega Healthcare Investors, stated that initial SHOP yields are not disclosed due to their variability, emphasizing a focus on long-term IRRs and conservative underwriting. Matthew Gourmand, President, added that CapEx is priced into expectations, with yields sustainable after initial and recurring CapEx. Vikas Gupta, CIO, and Matthew Gourmand indicated that the FAD to AFFO ratio is not expected to change meaningfully in 2026. Gourmand described the Canadian market as closer to the UK care home market (socialized medicine, longer-term residents) and expressed excitement about the idiosyncratic investment with a proven developer/operator, though not expecting significant general growth due to typically uncompelling yields.

Juan Sanabria asked about the initial yields and return modeling for Omega Healthcare Investors' SHOP investments from Q4 2025 and year-to-date, CapEx assumptions, and the relationship between FAD and Adjusted FFO in the full-year guidance.

Answer

CEO Taylor Pickett stated that initial yields for SHOP investments are varied and not being disclosed, as Omega focuses on long-term IRRs with conservative underwriting. President Matthew Gourmand added that CapEx is priced into expectations, with yields quoted being sustainable after CapEx assumptions. CIO Vikas Gupta and President Matthew Gourmand indicated that the ratio between AFFO and FAD is not expected to meaningfully change in 2026, similar to previous years. Juan Sanabria also requested an overview of the Canadian long-term care market, its comparison to U.S. skilled nursing, and the opportunity for Omega's new investment sleeve. President Matthew Gourmand likened the Canadian market more to the UK care home market due to its socialized medicine system and longer-term residents. He described Omega's initial $64 million commitment as an idiosyncratic investment with a high-quality developer, not indicative of significant general growth in the Canadian senior housing market due to traditionally uncompelling yields, but open to further growth with this specific operator.

Juan Sanabria of BMO Capital Markets questioned why portfolio rent coverage remained flat despite an increase in occupancy. He also asked for more detail on the mechanics and likelihood of the potential Medicare rate cut mentioned in the prepared remarks.

Answer

CEO C. Taylor Pickett clarified that trailing-twelve-month metrics can have timing lags, but based on recent monthly data, he expects coverage to increase next quarter. Megan Kroll, SVP of Operations, explained the potential 4% Medicare cut is a statutory mechanism tied to the deficit, which has historically been waived by Congress and would be partially offset by a separate rate increase.

Juan Sanabria of BMO Capital Markets asked about the Genesis loan, specifically the amount of non-cash or PIK interest. He also questioned the state of competition for US skilled nursing facility acquisitions, referencing a peer's recent large transaction, and inquired about any changes to HUD lending availability due to government cuts. He later followed up on the meaning of Genesis's "aging collateral" and the cap rates on Q1 dispositions.

Answer

CFO Bob Stephenson stated that $2.4 million in PIK interest was booked for the Genesis loan in the quarter, which is permissible due to adequate collateral. CEO Taylor Pickett noted that Omega does not often compete with the large-cap peer mentioned and that the specific deal was a private, non-marketed transaction. He also stated there have been no heard changes to HUD lending. Regarding the collateral, Pickett explained it was related to an aging pool of assets but did not have further specifics. CIO Vikas Gupta clarified that disposition yields were difficult to calculate precisely but were effectively accretive, with one opportunistic sale yielding around 7%, allowing capital to be redeployed at 10%.

Juan Sanabria inquired about the amount of equity issuance assumed in the 2025 guidance to handle maturing debt, the expected conversion of loans to fee simple assets in 2025, and the impact of any other maturing loans or rents on the financial model.

Answer

CFO Bob Stephenson explained that the guidance assumes raising enough equity to cover the $600 million 2026 maturity, with the exact share count depending on the stock price at the time of issuance. CIO Vikas Gupta stated that $124 million in loans are planned to convert to fee simple real estate in 2025 at roughly the same rate, so no pickup is modeled. Bob Stephenson added that the $28 million in loan repayments will add to cash on the balance sheet.

Robin Haneland from BMO Capital Markets inquired about occupancy trends at Maplewood's assets, rent potential from the DC development, Omega's appetite for larger portfolio deals, Guardian's rent payments, and which markets still face staffing difficulties.

Answer

CEO C. Pickett stated the Inspir facility is 72% occupied and climbing slowly, the DC development will be meaningfully accretive, and Omega has passed on some large deals due to disciplined underwriting. He also confirmed Guardian hit its higher rent tier for 2024. SVP Megan Krull identified Florida, Texas, and other rural areas as markets still facing staffing challenges.

Juan Sanabria sought clarification on the NOI bridge from Q4 2025 to Q1 2026 for the lab segment, asking about any one-time benefits in Q4 and the pro forma NOI. He also inquired about the CapEx expectations and potential deferred CapEx for the Senior Housing portfolio previously held in the Sovereign Wealth JV, following its transition.

Answer

CFO Kelvin Moses explained that the shift in lab NOI will be more pronounced in Q1 2026 due to the 375 basis point sequential decline in occupancy to 77%. He indicated that Q1 FFO is expected to be around $0.43, down from Q4's $0.47, as Q4 benefits not related to vacates (like free rent burn-offs) are realized. President and CEO Scott Brinker stated that for the Senior Housing JV assets, while there will be normal transition-related CapEx, there isn't a massive revitalization plan. He expects the underperforming assets to see significant operational improvement and 50%+ NOI growth potential over the next 2-3 years under new management.

Juan Sanabria sought clarification on the NOI bridge from Q4 2025 to Q1 2026, asking about any one-time benefits in Q4 and the pro forma lab NOI for 2026 modeling. He also inquired about the expected CapEx and potential deferred CapEx for the former Sovereign Well JV senior housing portfolio, given upcoming operator transitions.

Answer

CFO Kelvin Moses explained that the shift in NOI from the sequential occupancy decline would be more pronounced in Q1 2026, aligning with the -5% to -10% lab same-store NOI guidance. He indicated that Q1 and Q4 FFO would likely be slightly higher than Q2 and Q3. President and CEO Scott Brinker stated that the former Sovereign Well JV assets, primarily in Houston and Denver, underperformed operationally rather than due to capital. He noted that while some normal transition-related CapEx would be needed, there isn't a massive revitalization plan, with significant operational upside expected over 2-3 years.

Juan Sanabria asked about the company's willingness to accept dilution from recycling $1 billion in outpatient medical proceeds into lab opportunities, and how it plans to balance this with buybacks or other investments to manage earnings.

Answer

President and CEO Scott Brinker clarified that the primary objective is value creation, not earnings management. He referenced the successful Physicians Realty Trust merger as a precedent for strategic capital allocation and expressed optimism about investing in life science during a recovery phase. He does not anticipate meaningful dilution given the company's large asset base.

Juan Sanabria asked about Healthpeak's willingness to accept dilution from $1 billion in MOB dispositions if plowed into lab opportunities, and how the company plans to balance this with buybacks or other opportunities, specifically if there's an intention to manage earnings. He also sought clarification on the potential for further occupancy slippage for the balance of the year and into Q1, the risk to the trough, and the components contributing to it, given the expected earnings benefit from occupancy recovery in the second half of 2026.

Answer

Scott Brinker, President and CEO, clarified that the company is focused on creating value, not managing earnings, drawing parallels to the successful MOB merger. He sees an opportune window to invest in life science, emphasizing focus on basis, submarket, price, and return, and does not expect meaningful dilution given the company's $25 billion denominator. Kelvin Moses, CFO, indicated that lab occupancy could trend down to the high 70% range over the next few months or quarters before recovering. He noted 300,000 sq ft of expirations in Q4, with 186,000 sq ft going into redevelopment, largely offset by new commencements, but also acknowledged potential for additional reductions from early terminations or proactive downsizings.

Juan Sanabria of BMO Capital Markets asked about the loss of pre-leases in the development pipeline at Directors' Science Park and Point Grand, and how capitalized interest is expected to trend. He also questioned the reason for the sequential dip in same-store occupancy for the CCRC portfolio.

Answer

CFO Kelvin Moses explained the Directors' Place pre-lease was lost because a long-term tenant was unsuccessful in raising capital. Chief Development Officer Scott Bohn noted the Point Grand change was due to delivering two fully leased assets. Regarding capitalized interest, Mr. Moses said it will trend down as projects come online. CEO Scott Brinker attributed the CCRC occupancy dip to typical seasonality in the skilled nursing component, highlighting that independent living census was actually up.

Juan Sanabria of BMO Capital Markets asked about lost pre-leases in the development pipeline, the future trend of capitalized interest, and the reason for the sequential dip in CCRC same-store occupancy.

Answer

CFO Kelvin Moses explained a pre-lease was lost due to a tenant's inability to raise capital. He also stated capitalized interest will trend down as projects are completed. CEO Scott Brinker attributed the CCRC occupancy dip to typical seasonality in the skilled nursing component, emphasizing that the core independent living census actually increased and the business remains strong.

Juan Sanabria followed up on the 15% leasing pipeline growth, asking if it was an apples-to-apples comparison, and then inquired about potential capital investments for Saks and Neiman anchor boxes and their most likely uses across the portfolio.

Answer

Chairman, CEO, and President David Simon confirmed the 15% pipeline growth was like-for-like. Regarding anchor boxes, he stated that Simon Property Group is highly capable of reimagining the real estate, citing examples like converting former department store spaces into mixed-use, entertainment, or new retail concepts, similar to the Southdale redevelopment spurred by Herberger's departure.

Juan Sanabria asked for clarification on whether the 15% leasing pipeline growth was like-for-like. He also inquired about the potential capital investments for Saks and Neiman's anchor boxes as they return to Simon Property Group, and the top five most likely uses for these spaces across the portfolio.

Answer

David Simon, Chairman, Chief Executive Officer, and President, confirmed that the 15% pipeline growth is like-for-like. For anchor boxes, he stated that Simon Property Group is highly capable of reimagining the real estate, citing the Southdale Center redevelopment (Herberger's/JCPenney to Life Time) as an example. Potential uses include Life Time, House of Sport, mixed-use developments, and outdoor additions, indicating a broad spectrum of possibilities.

Juan Sanabria from BMO Capital Markets questioned the status of the 5% of leases that are month-to-month and asked for the year-end signed-not-opened (SNO) pipeline figure.

Answer

CFO Brian McDade reported that the signed-not-opened pipeline stood at approximately 250 basis points at year-end. He explained that the month-to-month lease category is a temporary classification for leases undergoing the renewal process and is expected to decrease. CEO David Simon added that renewal signings are slightly ahead of the prior year's pace.

Juan Sanabria asked for management's perspective on the potential positive or negative impacts of the upcoming election and specifically questioned the effect of tariffs on Simon's business.

Answer

David Simon, Chairman, CEO, and President, stated his view that CEOs should avoid influencing politics. He emphasized that the company's role is to be prepared for all potential election outcomes and to lobby on specific issues that affect the business, such as the de minimis rule, after the fact. He acknowledged the current political climate creates uncertainty but declined to speculate on specific impacts.

Juan Sanabria from BMO Capital Markets asked about the strategy behind aggressive discounting in rent-restricted areas like Los Angeles, why the gross versus net new customer rate delta narrowed in October, for feedback on pricing for the disposition assets, and the year-over-year occupancy delta for October.

Answer

CEO Joseph Margolis explained that discounting in rent-restricted areas is an effort to maximize long-term revenue while complying with laws, and the approach evolves with learning. He declined to share specific pricing feedback on dispositions until closing but noted the company consistently disposes of assets to improve the portfolio. CFO Jeff Norman stated the year-over-year occupancy delta for October was about negative 40 basis points, primarily due to a strong comp from October 2024 when Life Storage assets were unified and aggressively priced.

Juan Sanabria from BMO Capital Markets asked about the strategy behind aggressive discounting in rent-restricted areas like Los Angeles and why the gross versus net delta for customer rates narrowed in October. He also sought feedback on market pricing for the 25 disposition assets, including 22 former Life Storage properties, and the year-over-year delta for October occupancy.

Answer

CEO Joseph Margolis stated that discounting in rent-restricted areas aims to maximize long-term revenue while complying with local laws, and the strategy evolves with learning, contributing to the narrowing delta in October. He deferred detailed disposition pricing until closing but emphasized the goal of portfolio improvement. CFO Jeff Norman reported October occupancy was 93.4%, with a year-over-year delta of approximately -40 basis points, largely due to a strong prior-year comparable from the Life Storage integration.

Juan Sanabria inquired about the preferred equity and loan book, including any expectations for repayments. He also asked about the company's disposition strategy, particularly concerning the legacy Life Storage portfolio.

Answer

CEO Joseph Margolis noted continued strong demand for their bridge loan product and mentioned a recent prepayment from SmartStop, with no other imminent paybacks expected. He confirmed they are actively marketing a 22-store portfolio of former LSI properties to optimize the portfolio under 1031 exchange rules.

Juan Sanabria of BMO Capital Markets asked where results would likely fall within the guidance range if street rates remained flat year-over-year. He also inquired about any moderation in the size or frequency of Existing Customer Rate Increases (ECRIs).

Answer

CFO P. Scott Stubbs clarified that the company guides on revenue dollars, not directly on rates, making a direct correlation difficult. CEO Joseph Margolis explained that ECRI strategy is linked to street rates; if street rates are not growing, it provides less opportunity for larger ECRIs. He stated there has been no broad change to the ECRI program.

Juan Sanabria asked about pricing dynamics, questioning why the move-in versus move-out rate spread hasn't compressed despite improving new customer rates. He also asked about the 50 basis point revenue benefit from including the Life Storage portfolio in the same-store pool.

Answer

Executive P. Stubbs attributed the current move-in/move-out spread to typical seasonality, expecting it to tighten during the summer leasing season. He confirmed the 50 bps benefit from the pool change is larger than normal due to the significant size of the LSI portfolio being added and its expected, though conservatively modeled, outperformance.

Juan Sanabria asked for the new customer move-in rate for October and sought to reconcile the cut in LSI guidance with commentary about better-than-normal seasonality.

Answer

Executive P. Stubbs reported that the average new customer rate for the EXR pool was negative 8% year-over-year in October. CEO Joseph Margolis clarified that the LSI revenue guidance was reduced due to a weaker overall market, underperformance in LSI-heavy markets like Florida, and the dual-brand strategy not delivering the expected lift.

Juan Sanabria asked about the impact of the lease expiration strategy shift on third-quarter occupancy and new lease trends, and how seasonality for new lease and blended rate growth might compare to last year as the company moves through the fourth quarter.

Answer

Lincoln Palmer, Chief Operating Officer, explained that the lease expiration management program is playing out well, with the lowest number of expirations expected in November, which should help build occupancy into year-end and position the portfolio for 2026. Chris Lau, Chief Financial Officer, added that the turnover rate was down 60 basis points year-over-year in the quarter, and repair and maintenance (R&M) grew just over 2%.

Juan Sanabria of BMO Capital Markets inquired about the expected changes to leasing seasonality in the second half of 2025 compared to the prior year and asked for an update on the acquisition environment, particularly regarding bid-ask spreads with homebuilders.

Answer

CFO Christopher Lau explained that due to a lease expiration management initiative, the seasonal leasing curve is expected to be much flatter in H2 2025, with new lease spread deceleration projected at only 150 basis points versus 600 in 2024. CEO Bryan Smith added that some national homebuilders are showing an increased willingness to negotiate on price, creating optimism for acquisitions in the latter half of the year.

Juan Sanabria inquired about the expected changes to leasing seasonality in the second half of 2025 compared to 2024, and also asked for an update on the acquisition environment, particularly regarding bid-ask spreads with homebuilders.

Answer

SEVP & CFO Christopher Lau explained that due to a lease expiration management initiative, the seasonal leasing curve will be much flatter in H2 2025, with new lease spread deceleration expected to be only 150 basis points, compared to over 600 bps in H2 2024. CEO & Trustee Bryan Smith added that they are seeing an encouraging change in the acquisition market, with some large national homebuilders showing an increased willingness to negotiate on price, especially in markets with more supply.

Juan Sanabria inquired about the expected changes to seasonal leasing patterns in the second half of 2025 and their impact on rental rates, and also asked for an update on the acquisition environment, particularly regarding bid-ask spreads with homebuilders.

Answer

CFO Christopher Lau explained that due to a lease expiration management initiative, the company anticipates a flatter seasonal curve, with new lease spreads decelerating by only about 150 basis points, compared to 600 basis points in 2024. CEO Bryan Smith added that they are seeing an increased willingness from some national homebuilders to negotiate on price, especially in non-development markets, which is an encouraging sign for acquisitions.

Juan Sanabria of BMO Capital Markets asked about the expected development yields for 2025, the potential impact of Canadian lumber tariffs, and the company's perspective on housing supply dynamics.

Answer

CEO Bryan Smith explained that 2025 development yields are projected to average in the mid-5% range, with an expected acceleration during the spring leasing season. He noted that over half of the 2025 deliveries already have costs for vertical construction and labor contracted, providing a buffer against potential tariff impacts. Regarding supply, Smith observed that while some markets like those in the Southwest have faced pressure, they are now showing positive signs, such as an occupancy pickup in Phoenix, and the company's diversified portfolio helps mitigate overall risk.

Juan Sanabria inquired about the pricing dynamics for new leases, the outlook for new lease rate growth for the remainder of 2024 and into 2025, and the current trend in bad debt.

Answer

COO Bryan Smith noted that while demand remains strong, temporary factors like recent storms moderated new lease rates into October. He expects new lease growth in the low 1% range for the balance of Q4, with a focus on occupancy ahead of 2025. CFO Chris Lau added that bad debt is tracking as expected, running in the low 1% range for Q3 and anticipated to moderate slightly in Q4, aligning with full-year guidance.

Juan Sanabria asked for the expected G&A run rate for 2025, given the step-ups from the 3PM business, and for color on CapEx per home expectations, noting its recent flatness and potential impact from tariffs.

Answer

Chief Financial Officer Jonathan Olsen projected that the combined PME and G&A quarterly run rate would be around $51-52 million, slightly lower than Q4, as efficiencies are realized. Regarding CapEx, he explained that the flatness is partly due to the focus on acquiring new homes, which have lower maintenance costs. He also highlighted the company's ability to manage capital needs by selectively disposing of higher-cost older assets and recycling the proceeds into newer homes.

Juan Sanabria of BMO Capital Markets noted that INVH appears to be running ahead of its expense guidance, particularly on taxes and insurance, and asked why the full-year guidance was not revised.

Answer

EVP & CFO Jonathan Olsen agreed the year is unfolding slightly ahead of expectations but cited conservatism as the reason for not revising guidance. He pointed to the challenging new lease environment and the fact that key property tax information for Florida and Georgia is still pending over the next 60 days, making it prudent to wait for more clarity.

Juan Sanabria of BMO Capital Markets noted that expense performance appeared to be ahead of plan and asked if the decision to maintain guidance was due to tougher second-half comps or conservatism.

Answer

CFO Jonathan Olsen agreed the year is unfolding slightly ahead of expectations but cited conservatism as the reason for maintaining guidance. He highlighted the challenging new lease environment and the fact that they are awaiting final property tax assessments from Florida and Georgia. He concluded that it made sense to wait for more clarity in the next 60 days before considering a guidance revision.

Juan Sanabria of BMO Capital Markets asked about the potential impact of proposed tariffs on HVAC costs and replacements during the upcoming peak leasing season.

Answer

President Charles Young stated that while they are monitoring the fluid situation, the company is well-positioned to mitigate impacts due to its scale, procurement programs, and dual national partnerships for HVAC and appliances. He also noted that materials are a smaller component of their overall turn and R&M cost structure compared to labor, which should buffer any potential price increases.

Juan Sanabria from BMO Capital Markets questioned the strategy of maintaining significant exposure to Florida given climate change risks and asked why recurring hurricane costs should be normalized out of financial results.

Answer

CEO Dallas Tanner affirmed the company's bullish long-term view on Florida's growth profile, while noting they actively manage the portfolio to mitigate risk, such as selling homes in flood plains. CFO Jon Olsen added that while storms are a part of life, the company is well-insured, has a favorable loss history, and uses a detailed underwriting approach to minimize risk. He emphasized that this allows them to pursue what they believe are compelling risk-adjusted returns in those markets.

Juan Sanabria from BMO Capital Markets asked for the primary driver of the expected deceleration in same-store revenue growth for Q3 and inquired about churn within the third-party management business, including visibility for the second half of the year.

Answer

President & CEO Christopher Marr reiterated that the Q3 outlook is shaped by the timing of how positive trends flow through revenue, tough comps from 2024 fee adjustments, and the cadence of existing customer rate increases. Regarding third-party management, he explained that churn from asset sales is a normal part of the business, which they aim to offset by onboarding new properties.

Juan Sanabria asked for the primary driver of the expected deceleration in same-store revenue growth from Q2 to Q3. He also questioned the outlook for the third-party management business, noting recent churn.

Answer

CEO Christopher Marr reiterated that the Q3 revenue outlook is influenced by a combination of factors, including tough comps from 2024 fee adjustments, the timing of how rate increases flow through revenue, and the slow but steady impact of improving fundamentals due to low monthly churn. On the third-party platform, Marr acknowledged that an uptick in property sales is causing some churn, which is a normal part of the business cycle, while noting the company continues to successfully onboard new stores.

Juan Sanabria asked for more detail on the confidence that same-store revenue declines are bottoming, noting that in-place rate declines seemed to widen in Q4. He also inquired about the assumptions behind the third-party property management fee income growth guidance, given the loss of fees from the JV buyout.

Answer

President and CEO Christopher Marr explained that while rate softening lasted about a month longer than expected in Q4, trends began to firm up in December and have continued for nearly 90 days, providing confidence. CFO Tim Martin added that the fee income guidance nets the addition of new stores against the expected loss of fees from the JV buyout and other potential platform departures.

Juan Sanabria of BMO Capital Markets inquired about any observed changes in customer quality or behavior based on promotional activity and sought clarity on the confidence level within the unchanged same-store guidance ranges.

Answer

President and CEO Christopher Marr stated that data shows customers acquired through deep discounts are of lower quality, exhibiting shorter stays and higher credit issues. CFO Timothy Martin and Marr expressed comfort with the current guidance ranges, highlighting the business's resilience despite a weaker-than-expected housing market, and noted the low end of the initial annual guidance now seems unlikely.

Juan Sanabria asked for clarification on whether the implied second-half same-store NOI slowdown was related to expense timing and requested the dollar value of dispositions assumed in the company's guidance.

Answer

CFO John Caulfield attributed the comparison to unusual expense timing in Q4 2024, confirming that sequential NOI dollar growth is expected through 2025. Chairman & CEO Jeffrey Edison stated there is no formal disposition guidance but considers $50-$100 million for the year to be a reasonable 'fairway' estimate.

Juan Sanabria asked for clarification on tenant retention plans for 2025 and how the elevated signed-but-not-occupied (SNO) pipeline is expected to evolve.

Answer

CFO John Caulfield clarified that while 2024 retention (89%) was slightly below 2023 (94%), he expects it to remain in a consistent range and not drop significantly. He projected that the SNO spread, currently elevated due to a few anchor box leases, will normalize back to its historical level of around 50 basis points by the end of 2025, as these larger spaces are not a major component of PECO's portfolio.

Juan Sanabria asked how PECO's fixed-to-floating debt ratio would remain stable while funding Q4 acquisitions, whether the company had issued equity post-quarter, and for details on the 2025 earnings growth outlook.

Answer

CFO John Caulfield confirmed no equity was issued post-quarter and stated the company has ample liquidity ($750M) and comfortable leverage (5.1x) to fund acquisitions. CEO Jeffrey Edison deferred detailed 2025 guidance to the upcoming December investor call but expressed general optimism based on strong fundamentals like leasing demand and acquisition opportunities.

Juan Sanabria of BMO Capital Markets asked about the operational and financial implications of transitioning Discovery properties to a RIDEA structure, the rationale for continuing a SHOP relationship with Discovery, the meaning of the Q1 NHC percentage rent, and the drivers for achieving the reiterated SHOP NOI growth guidance.

Answer

CIO Kevin Pascoe acknowledged potential 'noise' in the Discovery transition but noted it's accounted for in projections and that the SHOP relationship continues where it has performed well. CFO John Spaid added that credit enhancements are in place and no FAD disruption is expected. Pascoe stated the NHC percentage rent was largely factored into guidance and that SHOP growth will be driven by rolling off incentives and maintaining high occupancy.

Juan Sanabria of BMO Capital Markets asked for the drivers behind the 12-15% SHOP NOI growth guidance, the reasons for recent occupancy softness at Bickford, the potential for transformative SHOP acquisitions, and the rationale for tenants to agree to triple-net to SHOP conversions.

Answer

CIO Kevin Pascoe attributed SHOP growth to RevPOR increases from burning off incentives and explained Bickford's occupancy dip was due to early rate increases and seasonality. CEO Eric Mendelsohn clarified NHI's focus is on smaller portfolio deals, not a single transformative one, and that tenants might agree to SHOP conversions to gain relief from personal guarantees. CFO John Spaid noted that additional repositioning CapEx of nearly $10 million is being deployed in the SHOP portfolio.

Asked about the status of a Big Lots store on a closure list, the potential financial impact, and the health of their restaurant tenants given California's minimum wage increase and recent industry news.

Answer

The potential Big Lots closure is viewed as an opportunity due to below-market rent and existing interest from new tenants. The lease has 4 years remaining. Restaurant tenant demand remains strong despite wage pressures, and the company has minimal exposure to troubled chains like MOD Pizza.

Asked for an update on the Rite Aid situation, the potential NOI impact from vacant anchor spaces, and whether any expense comps positively skewed same-store NOI.

Answer

The company has reached agreements on its remaining Rite Aid locations but is prepared to re-lease the spaces quickly due to strong demand if the plan falls through. No NOI was modeled for the three returned Rite Aid spaces in 2024. There were no unusual expense comp issues affecting same-store NOI, apart from some snow removal costs in the prior year.

Inquired about the expected trend for build-to-commenced occupancy in 2024, confirmation of the key negative impacts for the year, and an update on the status of assets undergoing the entitlement process.

Answer

The company expects to make good progress on commencing rent, consistent with historical averages, despite new vacancies from Rite Aid and another anchor. These vacancies are the main negative impacts factored in for the year. Regarding entitlement projects, one is nearing the end of permitting but on hold, while two others are fully entitled and could be sold later in the year if the multifamily market improves.