Michael Gorman

Michael Gorman asked for clarification on the puts and takes influencing the 2026 guidance, noting that the Q4 run rate annualized higher than the guidance midpoint, even after adjusting for the McLaren sale. He also inquired about any potential vacant asset sales targeted for 2026 that could provide acquisition funding and benefit the debt-to-EBITDA ratio.

Answer

A Company Representative clarified that Q4 2025 included a little over $0.01 in AFFO from year-end tax benefits, which skewed the run rate. CEO Michael Weil stated that the majority of vacant assets had been addressed in 2025, but a few important assets are still being considered for disposition in 2026, which would generate free cash for deployment. He noted that the guidance is conservative at the beginning of the year, anticipating potential market opportunities later in the year, possibly influenced by Fed pricing.

Michael Gorman sought clarification on the 2026 guidance, noting that the Q4 run rate annualized higher than the $0.82 midpoint, and asked about any potential headwinds. He also inquired if GNL is targeting any vacant asset sales in 2026 to fund acquisitions and improve the debt-to-EBITDA ratio.

Answer

CFO Chris Masterson clarified that Q4 included a tax benefit of over $0.01 in AFFO, which impacted the run rate. CEO Michael Weil stated that most vacant asset components were addressed in 2025, but a few important assets are still being considered for disposition, which would provide free cash for deployment. He noted that the guidance is conservative as it's early in the year, with potential market opportunities expected later in 2026.

Michael Gorman of BTIG asked about the strategic balance between share repurchases and deleveraging as the company's debt-to-EBITDA ratio improves. He also sought clarity on what management meant by 'future initiatives' and requested the remaining amount on the share repurchase authorization.

Answer

CEO, President & Director Michael Weil responded that the company will prudently balance both goals, using proceeds from asset sales to continue deleveraging towards an investment grade rating while also capitalizing on the value of share buybacks. Regarding 'future initiatives,' Weil was intentionally vague but stressed that 'all things are on the table' to close the valuation gap with peers. He confirmed that approximately $220 million remains on the share repurchase authorization.

Michael Gorman of BTIG questioned GNL's capital allocation strategy, specifically how the company balances share repurchases with deleveraging as its debt-to-EBITDA ratio improves. He also sought clarity on the scale and timing of "future initiatives" mentioned by management and asked for the remaining amount on the share repurchase authorization.

Answer

CEO Michael Weil explained that the company can responsibly pursue both deleveraging and share repurchases by using proceeds from strategic asset sales, emphasizing that achieving an investment grade rating remains a top goal. Regarding future initiatives, Weil was intentionally vague, stating that "all things are on the table" to close the stock's valuation gap. He confirmed that approximately $220 million remains on the share repurchase authorization.

Michael Gorman of BTIG inquired about how Global Net Lease balances share repurchases with deleveraging as its debt-to-EBITDA ratio declines, the potential scale of future strategic initiatives, and the remaining capacity on the share repurchase authorization.

Answer

CEO Michael Weil explained that the company will prudently balance both goals, using proceeds from future asset sales to fund both debt reduction and share repurchases, with an investment-grade rating remaining a top priority. Regarding future initiatives, Weil was intentionally vague but stated that "all things are on the table" to close the valuation gap with peers. He also confirmed that approximately $220 million remains on the share repurchase authorization.

Michael Gorman of BTIG inquired about GNL's capital allocation strategy, specifically how the company balances share repurchases with deleveraging as its debt-to-EBITDA ratio improves. He also asked about the potential scale and cadence of future strategic initiatives and the remaining capacity on the share repurchase authorization.

Answer

CEO Michael Weil explained that the company will prudently balance both goals, viewing asset dispositions as a valuable tool to fund both deleveraging and accretive share buybacks. Regarding future initiatives, he was intentionally vague, stating that 'everything is on the table' to close the valuation gap with peers. He also confirmed that approximately $220 million remains on the share repurchase authorization.

Michael Gorman asked for clarification on whether the vacant tenant, Contractor Steel, paid rent in Q1; the AFFO run-rate for the second half of 2025; and whether the current vacant asset sales represent the bulk of the company's vacancy.

Answer

CFO Chris Masterson confirmed that Contractor Steel did not pay rent in Q1 and pointed out that the income statement already reflects the Multi-tenant Portfolio sale in discontinued operations. CEO Edward Weil added that after the current sales, portfolio occupancy will be approximately 98%, representing the vast majority of the company's vacancy, with typical net-lease REIT occupancy levels expected going forward.

Michael Gorman from BTG Pactual pressed for clarity on the factors determining the high versus low end of the 2024 AFFO guidance, the expected ratio of asset sales to leverage reduction, and whether joint ventures are a future option. He also asked if the KPN asset was in the disposition pipeline.

Answer

CEO Michael Weil acknowledged that hitting the high end of the AFFO range is unlikely given the high volume of asset sales, but reiterated confidence in landing within the $1.30-$1.40 range. He explained there isn't a simple correlation between sales volume and leverage reduction and confirmed the KPN asset is not yet in the pipeline. Regarding JVs, Weil stated they are not a current focus, preferring the current disposition strategy.

Michael Gorman asked about Project Triborough, specifically the incremental value added by current site work versus selling raw land to hyperscalers. He also inquired about how Broadstone Net Lease considers rising political headwinds around data center development and concerns about AI CapEx in their underwriting and timeline into 2027.

Answer

President and COO Ryan Albano explained that significant value creation is observed at various milestones, from raw land to powered land, reflected in unsolicited offers substantially higher than invested capital. He noted that hyperscalers are highly competitive and already circling the site. Despite headlines, he has not seen a slowdown in investment for high-power data center sites. Regarding political headwinds, Ryan Albano stated that the site's strategic location (off-highway, away from residential) has even garnered positive commentary from local activist groups, mitigating concerns.

Michael Gorman (BTIG, LLC) sought further understanding of Project Triboro, specifically the incremental value added by current site work compared to marketing it as raw land to hyperscalers. He also asked about Broadstone Net Lease's consideration of rising political headwinds around data center development and concerns about AI CapEx into the future, and how these factors play into their underwriting and timeline into 2027.

Answer

President and COO Ryan Albano explained that site work and progress on power delivery create significant value, as evidenced by unsolicited offers reflecting valuations higher than invested capital, even at the powered land stage. He noted that hyperscalers are actively pursuing such sites. Regarding political headwinds and AI CapEx, he stated that Broadstone Net Lease has not seen a slowdown in demand for large-scale power sites, and local activist groups have even commented positively on Triboro's suitable location, mitigating political challenges.

Michael Gorman asked about the rent coverage for the Zips Car Wash master lease, the competitive landscape for build-to-suit projects, the typical tenant investment in these facilities, and the company's appetite for transitional capital investments.

Answer

CEO John Moragne stated the Zips rent coverage was close to 2.0x before the bankruptcy. He described the build-to-suit market as competitive but less so than regular-way industrial deals, noting BNL's ability to take on large projects limits the competitor pool. Tenant investment varies significantly by facility type. Moragne added that BNL is open to transitional capital, especially to help existing relationship tenants, but would otherwise prioritize less complex regular-way or build-to-suit deals.

Asked about Zips Car Wash lease coverage, competition in the build-to-suit market, tenant investment in new facilities, and appetite for transitional capital.

Answer

Zips' master lease coverage was ~2x pre-bankruptcy. The build-to-suit market is competitive but less so than the regular-way market, and BNL's focus on large deals limits the competition. Tenant investment varies significantly by facility type. They are open to transitional capital, primarily for existing relationships.

Michael Gorman asked about the rent coverage for the Zips Car Wash master lease and the competitive landscape for build-to-suit projects. He also inquired about the typical level of tenant investment in these new facilities and BNL's appetite for transitional capital deals in 2025.

Answer

CEO John Moragne stated the Zips rent coverage was near 2.0x pre-bankruptcy. He described the build-to-suit market as competitive but less so than regular-way deals, with BNL's ability to handle large industrial projects limiting the competitor pool. He noted tenant investment varies widely by project and that BNL is open to transitional capital, primarily to support existing relationships.

Michael Gorman asked about the appropriate range for maintenance CapEx as a percentage of NOI for Healthcare Realty Trust's stabilized portfolio, specifically if 15%-16% is the right going-forward number after all the recent improvements.

Answer

President and CEO Peter Scott suggested a slightly wider range of 15%-20% of NOI for maintenance CapEx, noting it could potentially decrease with higher retention rates. He emphasized the company's deliberate strategy to reinvest capital into the portfolio, particularly through redevelopments, which he views as the highest and best use of capital currently. He clarified that the quoted CapEx was purely for maintenance, with additional investments being made in redevelopments.

Michael Gorman asked about the appropriate range for maintenance CapEx as a percentage of NOI for Healthcare Realty's stabilized portfolio going forward. He also questioned whether the improvements in asset management and redevelopment success would expand the scope of acquisition opportunities, either through JV structures or on-balance sheet.

Answer

President and CEO Pete Scott suggested a 15%-20% range of NOI for maintenance CapEx as a good run rate, noting it could decrease with higher retention, and emphasized reinvesting retained earnings into redevelopment. He explained that external growth would primarily occur through JVs with existing partners, targeting yields greater than the implied cap rate, as the current cost of capital limits direct core/core-plus acquisitions on the balance sheet.

Michael Gorman of BTIG asked about the opportunity to maximize lease economics, such as escalators and spreads, in the core stabilized portfolio under the new structure. He also inquired about the buyer profile for the dispositions, particularly their sensitivity to leverage.

Answer

President & CEO Peter Scott noted that the company is now achieving 3% or better lease escalators, a significant improvement from the past, and is focused on high retention and pushing cash leasing spreads in the 95% occupied core portfolio. EVP & CIO Ryan Crowley described the buyer pool as deep and competitive, with more equity available than assets for sale. He noted that financing is accretive, with all-in rates below typical acquisition cap rates, and observed a significant increase in health systems buying assets for strategic control.

Michael Gorman asked if dispositions of assets in smaller markets are expected to drive NOI margin improvement and inquired about the role of retained cash flow for funding future CapEx and redevelopment.

Answer

An executive confirmed that NOI margin potential was a key factor in selecting assets for disposition, and exiting markets without scale should improve overall margins. CEO Peter Scott stated that the highest priority for retained cash flow would be reinvesting in high-return redevelopment projects within the existing portfolio to upgrade assets and drive higher rental rates.

Michael Gorman asked if the 2025 disposition plan involves a new definition of 'non-core' assets and questioned the capital allocation trade-off between debt paydown and share repurchases given rising disposition cap rates.

Answer

CFO Austen Helfrich described the 2025 plan as a 'more aggressive' continuation of portfolio refinement, including full market exits. He reiterated that strengthening the balance sheet via debt reduction is the primary focus for 2025, viewing it as the correct long-term strategy despite modest near-term earnings dilution. He noted core asset pricing remains stable.

Michael Gorman asked CFO Dan Donlan about the roadmap for raising long-term debt, specifically if NETSTREIT would target the unsecured listed market by mid-2027 or explore other options.

Answer

CFO Dan Donlan explained that accessing the private placement market is currently feasible, and for 2027, it could be either a private placement or an unsecured bond, depending on company growth and the lowest cost of capital, especially if a second or third rating is obtained.

Michael Gorman asked about NETSTREIT's roadmap for long-term debt, specifically if they would look to the unsecured listed market or private placement market around mid-2027.

Answer

Dan Donlan (CFO, NETSTREIT Corp.) explained that accessing the private placement market is currently feasible, even without an investment-grade rating, though it's preferred. For 2027, he stated it could be either a private placement or an unsecured bond, depending on the company's growth and where the lowest cost of capital lies, especially if a second or third rating is obtained.

Michael Gorman asked about the competitive landscape, specifically whether Netstreit is encountering new, non-traditional net lease investors or seeing more competition from user-bidders and owner-occupants in the current market.

Answer

President & CEO Mark Manheimer responded that the company has not run into new market entrants, as its strategy focuses on smaller, relationship-driven deals rather than broadly marketed assets where bidding wars occur. He also noted that they have not yet seen a significant increase in competition from owner-occupants or user-bidders.

Michael Gorman inquired about competition in the deal market, specifically from new, non-traditional net lease investors, and whether NetStreet is encountering them. He also asked if competition from owner-occupants is increasing due to tight retail supply.

Answer

President & CEO Mark Manheimer responded that they have not significantly encountered new entrants, as NetStreet's focus on smaller, relationship-driven deals avoids the bidding wars where new capital is often deployed. He added that they have not yet seen increased competition from user-bidders or owner-occupants in their target markets.

Michael Gorman asked about the competitive landscape, specifically whether NetStreet is encountering new, non-traditional buyers in the net lease market. He also inquired if they are seeing more competition from owner-occupants given the current retail supply-demand dynamics.

Answer

CEO Mark Manheimer responded that they have not run into new entrants frequently, as NetStreet's focus on smaller, relationship-based deals differs from the strategies of these new players who often target larger, marketed transactions. He also noted they have not yet seen a significant increase in competition from user-bidders or owner-occupants.

Michael Gorman asked about the competitive landscape, specifically whether NetStreet is encountering new, non-traditional investors in the net lease market. He also inquired if there has been an increase in competition from user-bidders or owner-occupants for assets, given the current supply-demand dynamics in retail.

Answer

CEO Mark Manheimer stated that NetStreet has not run into these new entrants, as the company's strategy focuses on smaller, relationship-driven deals rather than participating in bidding wars for widely marketed properties. He believes their strategy does not align with that of the new market participants. He also noted that they have not yet seen a significant increase in competition from user-bidders.

Michael Gorman inquired about the primary factors NETSTREIT is solving for when selecting investments—such as diversification, yield, or credit—and asked about the strategy for its large unsettled forward equity balance.

Answer

CEO Mark Manheimer explained they are focused on achieving the best risk-adjusted returns and are somewhat agnostic on formal credit ratings, prioritizing strong corporate and unit-level cash flow. CFO Daniel Donlan noted they have a 120 basis point positive investment spread but are being patient, with the ability to extend the forward equity for another 6-12 months if needed.

Michael Gorman of BTIG asked if any Dollar General loans receivable would mature in 2025 to help reduce concentration, inquired about the portfolio's overall rent coverage ratio, and questioned how the company balances its underwriting expertise with negative market sentiment toward certain tenants.

Answer

CEO Mark Manheimer confirmed that about 170 basis points of loans could roll off in the year, reducing Dollar General exposure, with the remainder addressed by dispositions. He estimated the portfolio's overall rent coverage is very healthy, around 4x. Manheimer acknowledged the challenge of market sentiment and stated the strategy is to continue their rigorous underwriting while keeping individual tenant concentrations lower to mitigate headline risk.

Michael Gorman asked about the potential impact of the signed-not-open pipeline on InvenTrust's 2026 same-store NOI growth and any expense headwinds from recent weather events in the Southeast. He also inquired about the Fort Myers acquisition (Daniel's Marketplace), specifically how its high-end discretionary brands affected the competitive landscape and the role of assumable financing in its competitiveness and other transaction opportunities.

Answer

CFO Mike Phillips reported no material impact from recent weather events on the portfolio. He noted that approximately 2% of ABR ($5.5 million) from the signed-not-open pipeline, predominantly small shop, is expected to come online in 2026, with about 50% of that revenue recognized this year. President and CEO DJ Busch expressed enthusiasm for Daniel's Marketplace, highlighting its grocery anchor and 'lifestyle component' as a strong portfolio complement. He stated that InvenTrust underwrites properties on an unlevered basis, not letting financing dictate underwriting, but acknowledged that assumable financing can increase competitiveness for certain assets.

Michael Gorman asked about the potential impact of the signed-not-open pipeline on InvenTrust's 2026 same-store NOI growth and any expense headwinds from recent weather events in the Southeast. He also inquired about the Fort Myers acquisition (Daniel's Marketplace), specifically how its high-end discretionary brands affected the competitive landscape and the role of assumable financing in its competitiveness compared to other transaction opportunities.

Answer

CFO Mike Phillips confirmed no material impact from recent weather events. He stated that the signed-not-open pipeline represents about 2% of ABR ($5.5 million), with 80% being small shop leases. Approximately 95% of this is expected to come online in 2026, with about 50% of that revenue recognized this year. President and CEO DJ Busch described Daniel's Marketplace as a great complement to their portfolio, blending grocery-anchored stability with lifestyle components. He noted that while they underwrite on an unlevered basis, assumable financing can increase competitiveness for certain assets, though they were comfortable with the returns for Daniel's.

Michael Gorman asked about the continued compression of the lease-to-economic occupancy spread and where it is expected to stabilize in 2026 and beyond, given strong leasing and retention. He also questioned the balance between the strong grocer sector and increasing consumer spend on eating out, and how these two sectors might adapt if the economic environment softens.

Answer

DJ Busch, President and CEO, attributed the spread compression primarily to timing, suggesting a normal run rate of 150-200 basis points, with $5 million in signed but not open pipeline expected to be captured next year. He noted that within InvenTrust's portfolio, grocers and quick-service restaurants have acted as complements rather than substitutes, both performing well due to strong Sun Belt markets, in-migration, and high-quality grocer operators investing in their stores.

Michael Gorman asked about the compression of the lease-to-economic occupancy spread and whether it could fall below 2021 levels, or where it might stabilize into 2026 and beyond, given strong leasing and retention. He also questioned the balance between the strong grocer sector and increasing consumer spend on eating out, asking if both can continue to grow or how the consumer adapts if the economic environment softens.

Answer

DJ Busch, President and CEO, explained that the occupancy spread is largely timing-dependent, with a normal run rate of 150-200 basis points, and noted a $5 million signed but not open pipeline expected to contribute significantly to NOI next year. Regarding grocers and dining out, Mr. Busch observed that in InvenTrust's portfolio, these categories have acted as complements rather than substitutes, with both performing well. He attributed this to strong in-migration in their markets and the quality of their grocer tenants like Publix and H-E-B, who have invested in stores and achieved ID sales growth.

Michael Gorman of BTIG asked about the timing of acquisitions, questioning if any could slip into the next year and create a special dividend risk. He also requested more detail on the Carmel Village acquisition strategy and asked if there was a difference in recent conversations with large versus small tenants.

Answer

CEO Daniel Busch addressed the timing risk, stating that the company has spent significant time on its tax strategy to mitigate the risk of a special dividend and feels confident in its plan. Regarding Carmel Village, Busch explained that while unanchored, it's in a high-growth Charlotte submarket and fits their strategy. COO Christy David added that the center has necessity-based tenants, offers an opportunity to upgrade the mix and raise rents, and benefits from a new Publix across the street. David also noted there has been no new bifurcation in tenant conversations; they continue to monitor the same tenants they were already watching.

Michael Gorman inquired about the impact of Q4 2025 snow removal costs on same-store NOI and what was provisioned for 2026 winter storms, as well as opportunities to accelerate new redevelopment projects given the challenging acquisition market.

Answer

Mark Langer, Chief Financial Officer, confirmed that the 2026 guidance accounts for estimated January snow removal costs, noting a lack of additional snowfall in February. Jeffrey Mooallem, Chief Operating Officer, outlined two types of redevelopment: consistent double-digit yield projects (retenanting anchors, adding pads) and larger, more complex undertakings like Sunrise Mall or Bruckner, which involve longer entitlement work and significant growth.

Michael Gorman inquired about the impact of snow removal costs on Q4 2025 NOI and what provisions for winter storms were included in the 2026 guidance. He also sought information on additional opportunities to accelerate new redevelopment projects within the existing portfolio, especially given challenges in the acquisition market.

Answer

Mark Langer, Chief Financial Officer, confirmed that the 2026 guidance accounts for estimated January snow removal costs, noting no significant additional snowfall in February. Jeff Mooallem, Chief Operating Officer, outlined two categories of redevelopment: consistent double-digit yield projects and larger, more complex undertakings like Sunrise Mall and Bruckner, emphasizing that they do not plan to acquire vacant land for ground-up development. Jeff Olson, Chairman and Chief Executive Officer, added that Bruckner's NOI is expected to increase significantly.

Michael Gorman from BTG Pactual asked if non-traditional, value-add shopping center acquisitions like Brighton Mills face the same institutional competition as traditional assets, or if they represent a niche for sophisticated operators. He also inquired about balancing demand for restaurant and grocery tenants and any shifts in investment or tenant demand in the D.C. metro area.

Answer

Chairman and CEO Jeff Olson noted that while Brighton Mills attracted many bidders, their value-add platform differentiates them, helping on the margin. COO Jeff Mooallem stated that while they are sensitive to 'over-fooding' properties with QSRs, demand from grocers remains strong across the spectrum. He confirmed no shift in tenant demand in the D.C. metro area, with properties performing well, and observed that institutional buyer interest in D.C. assets is frothy, though less intense than in Boston or New York.

Michael Gorman asked if there is the same level of institutional competition for 'nontraditional' shopping center assets (like covered land plays or redevelopment opportunities) compared to traditional assets. He also inquired about the balance between demand from the restaurant sector and grocers, and if there's an end to the demand for food concepts. Finally, he asked if there has been any shift in tone, demand, or preference around the D.C. metro area from institutional capital or tenants, given recent volatility.

Answer

Jeff Olson (Chairman and CEO) stated that Brighton Mills, being easy to understand, attracted many bidders, but their platform seeking value-add opportunities differentiates them. Jeff Mooallem (COO) discussed being sensitive to 'over-fooding' properties, citing an example at Bergentown Center. He noted continued expansion mode for grocers (Trader Joe's, Wegmans, Walmart, Sprouts, Aldi) and that while QSR growth might slow, they are still comfortable doing deals. Regarding the D.C. metro area, Jeff Mooallem (COO) reported no shift from the tenant side, with D.C. centers performing well, and noted that Boston and New York traditionally generate higher institutional interest than Philly or D.C., which is not necessarily tied to the political cycle.

Michael Gorman inquired about Regency's capital allocation strategy, specifically the absence of assumed dispositions for the year, programmatic capital recycling, and how this fits into funding the 2026 development program.

Answer

Alan Roth, East Region President and Chief Operating Officer, stated that the disposition strategy remains consistent, focusing on non-strategic, non-core, or properties with inconsistent future growth. He views dispositions as key to fortifying future portfolio growth, not primarily as a funding source for the development program, which is self-funded by free cash flow. Dispositions can also fund accretive acquisitions.

Michael Gorman asked for an update on Regency Centers' programmatic capital recycling strategy, particularly since the year started with no assumed dispositions, and how this fits into funding the 2026 development program.

Answer

Alan Roth, East Region President and Chief Operating Officer, reiterated that dispositions remain a consistent part of the strategy, used for non-strategic or non-core assets, or those with inconsistent future growth. He emphasized that dispositions are not viewed as a primary funding source for the development program, which is self-funded by free cash flow, but rather as a means to fortify the portfolio's future growth rate.

Inquired about the assets included in the $75 million disposition guidance and the strategy behind the sales.

Answer

The dispositions primarily consist of one lower-growth, grocery-anchored center being sold at a full price (5.5% cap rate), along with some smaller, non-strategic assets. The company opportunistically sells assets with below-average growth prospects to reinvest the capital more accretively.

Michael Gorman of BTIG, LLC asked for details on the $75 million disposition guidance, specifically the characteristics of the assets being sold.

Answer

EVP & CFO Mike Mas explained that the guidance primarily consists of one asset with a lower growth profile than the portfolio average, which is being sold at a favorable 5.5% cap rate. The remainder includes smaller, non-strategic assets, such as office buildings acquired in a prior portfolio transaction. CEO Lisa Palmer reiterated that while they don't need to sell, they will opportunistically prune the portfolio to fortify future NOI growth.

Michael Gorman of BTIG inquired about the disposition guidance, asking about the characteristics of the assets being sold.

Answer

CFO Mike Moss explained the $75 million guidance primarily consists of one asset with a lower growth profile than the portfolio average, for which they are receiving a favorable 5.5% cap rate. The remainder includes smaller, non-strategic properties. CEO Lisa Palmer added that while they don't need to sell, they use dispositions opportunistically to recycle capital into higher-growth investments and fortify future NOI.

Michael Gorman asked for details on the grocery-anchored asset under contract in the JV platform, including why it was placed in a JV versus being wholly owned, and about the current appetite of institutional capital for the space.

Answer

Nicholas Wibbenmeyer, West Region President and CIO, described the asset as a 'phenomenal' grocery-anchored center in the Northeast. He explained that the JV structure was utilized as part of a rotational program with a long-term institutional partner who remains very bullish on the shopping center sector and chose to participate in this opportunity.

Asked for details on the grocery-anchored asset under contract in the joint venture, including why it was placed in the JV, and about the current appetite of institutional capital for the retail real estate space.

Answer

The asset is a high-quality, grocery-anchored center. It was placed in the joint venture as part of a program rotation with a long-term institutional partner who remains very bullish on the sector. The partner has a high hit rate of participating when offered opportunities.

Michael Gorman from BTIG asked about the competitive landscape for development, questioning if moderating costs and new institutional capital were leading to a resurgence in merchant developer activity.

Answer

Nicholas Wibbenmeyer, West Region President and CIO, acknowledged that local developers are more active but face significant hurdles in securing relationships, expertise, and capital. He asserted that Regency's platform provides a competitive advantage. CEO Lisa Palmer added that the sector's fragmented nature allows Regency's national scale to be a key differentiator in both operations and development.

Michael Gorman questioned whether the disparity between Equity Residential's transaction market views and private buyers' perspectives is solely due to cost of capital, or if private buyers are employing different underwriting assumptions, such as more aggressive growth or value-add potential.

Answer

Bob Garechana, Chief Investment Officer, suggested it's likely a combination of both, noting anecdotal evidence of private buyers underwriting significant growth rates and trading at low cap rates in certain markets. He highlighted the difference in objectives, with Equity Residential being a long-term holder focused on IRR, while private buyers may have shorter time horizons. Mark Parrell, President and CEO, added that private buyers' focus on apartments, industrial, and data centers supports private market values, but can make underwriting difficult for Equity Residential, as private investors may 'solve backwards' to justify acquisitions, leading EQR to allocate less capital to acquisitions and development.

Michael Gorman of BTIG, LLC inquired about the potential upper limit for small shop occupancy and the extent to which this is driving higher rent escalators in new leases.

Answer

CEO Conor Flynn stated there is 'a lot more room to run' beyond the current record occupancy, confirming that new small shop leases have stronger economics with 3-5% annual escalators. COO David Jamieson added that high tenant retention of over 90% is also a critical factor in this success.

Michael Gorman from BTIG asked if recent tariff discussions have caused any shift in tenant requests for CapEx or build-out allowances due to potential supply chain pressures.

Answer

David Jamieson, COO, stated that there has been no material change in tenant requests related to CapEx. He explained that many retailers have been preparing for such events for years by diversifying their supply chains, so the recent news has not had a material impact on leasing negotiations or tenant improvement costs.

Michael Gorman of BTIG asked about the match-funding strategy, specifically if proceeds from ground lease or entitlement sales would fund structured investments, and the rationale for selling fee positions to fund these investments.

Answer

President & CIO Ross Cooper confirmed that proceeds from these sales are a source for all investments, including structured deals. He explained that the structured program, with its smaller check sizes, diversifies risk and that capital is also recycled within the program as prior investments are repaid. He emphasized the program will grow at a slow, methodical pace, currently representing about 2% of enterprise value.

Michael Gorman asked about the current state of the competitive cycle for express tunnel car washes and whether there is a significant difference in cap rates or competition across Getty's investment verticals.

Answer

President & CEO Christopher Constant noted that the car wash sector has seen some consolidation and a slowdown in new builds, which he views as a positive for operator profitability. He stated there is not a significant stratification in cap rates, which vary within a 50-basis-point range. EVP & COO Mark Olear added that the competitive landscape is consistent across all their target verticals.

Michael Gorman of BTIG asked about the current stage of the competitive cycle for express tunnel car washes and whether there is a significant difference in cap rates or competition across Getty's investment verticals.

Answer

President & CEO Christopher Constant noted that some consolidation has occurred in the car wash space and that Getty focuses on larger, established operators. He stated there is not a significant stratification in cap rates, which fall within a 50-basis-point range. EVP & COO Mark Olear added that the competitive landscape is consistent across their verticals.

Michael Gorman from BTIG asked how the Zips recovery outcome compares to the company's underwriting assumptions for new car wash investments and whether this event has altered their underwriting process. He also questioned if Zips was offered the sites at the new, lower rent before they were leased to new operators.

Answer

CEO Christopher Constant and COO Mark Olear stated that the outcome validates their underwriting, as the sites will continue as car washes. CFO Brian Dickman added that while they continuously refine their model and now underwrite car washes to higher coverage, this change predated the Zips issue. Mr. Dickman clarified the resolution was a holistic negotiation that began after Zips initially rejected seven sites, resulting in a blended outcome across the portfolio.

Michael Gorman sought clarification on the 2025 AFFO guidance, asking about offsets to the strong internal and external growth, and questioned how PSTL's platform adds value compared to privately-owned postal facilities.

Answer

Robert Klein, Chief Financial Officer, identified rising cash G&A, recurring CapEx, and the timing of acquisitions as the primary offsets. Andrew Spodek, Chief Executive Officer, added that the PSTL platform creates value through economies of scale, operational administration, and superior lease negotiation and execution.

Michael Gorman from BTIG inquired if recent retailer bankruptcies are creating acquisition opportunities from smaller landlords who may not want to handle re-tenanting. He also asked if any of the letters of intent for vacant spaces involved adding a grocery anchor to an existing center.

Answer

Executive John Albright responded that they are not seeing such opportunities and, in fact, are observing the opposite, with more institutional and sovereign capital entering the shopping center space. He confirmed that the current LOIs are for non-grocer tenants, explaining that a potential grocer deal had a development timeline that was too long for the company's preference.

Michael Gorman of BTIG asked about potential catalysts to close the bid-ask spread in the acquisition market and whether pricing would move toward the bid or the ask. He also questioned if the reasons for deals falling out of the pipeline have changed.

Answer

SVP Grant Campbell identified reduced interest rate volatility as the key catalyst for closing the bid-ask spread. CEO Anne Olson added that a more constructive outlook on future rent growth could also push pricing toward the ask. She confirmed that pricing remains the primary reason deals fail, which has shifted the company's focus toward more strategic, off-market opportunities like portfolio and OP unit transactions.

Michael Gorman from BTIG requested a breakdown of the expected yield improvement for the Denver acquisition and sought to reconcile the commentary about passing peak supply with the ongoing revenue softening, asking if there were signs of tenant stress.

Answer

SVP Grant Campbell explained the yield improvement is driven by a mix of operational initiatives, tax appeals, and conservative underwriting on rent growth, rather than a single factor. President and CEO Anne Olson clarified that while peak deliveries are past, markets are still absorbing the existing new supply, which causes rent softening. She stated there are no other signs of tenant stress, citing healthy rent-to-income levels and stable bad debt.

Michael Gorman sought clarification on whether acquisition cap rates for lease-up properties are going-in or stabilized, and asked if competition for value-add assets has increased.

Answer

Executive Scott Schaeffer clarified that the mid-5% cap rates are 'going-in' but on properties late in the lease-up process, with expectations for higher yields upon stabilization. He stated that competition for value-add assets has actually decreased compared to a few years ago when low interest rates fueled demand.

Michael Gorman inquired about the expected timing of acquisitions in 2025 and asked what level of bad debt or delinquency is factored into the full-year guidance.

Answer

Brad Hill, President and CEO, projected that the transaction market would likely remain slow in the first half of the year, with acquisition volume picking up in the third quarter. Clay Holder, CFO, added that the 2025 guidance incorporates an assumption for delinquencies of approximately 35 basis points, which is consistent with the prior year's experience.

Michael Gorman asked about the outlook for new lease growth in Atlanta for 2025, specifically when it might turn positive given the supply dynamics. He also inquired about capital allocation, asking what pricing and cap rates management is seeing in potential expansion markets.

Answer

COO Tiffany Butcher stated that despite improving supply dynamics, it will take time for market rents in Atlanta to recover, and new lease rate growth will likely remain negative through 2024. She indicated that 2025 NOI improvement will be driven more by occupancy and bad debt improvements than by new lease growth. CEO Paul T. McDermott noted that transaction pricing remains aggressive, with buyers underwriting recoveries in years 3-5. He cited current cap rates as 4.5-5% for core, 4.75-5.25% for core-plus, and 5.5% and up for value-add assets.

Michael Gorman of BTIG questioned whether the recent FTC settlement could create a headwind for NOI margins or other income growth heading into 2025.

Answer

CFO Jon Olsen stated clearly that the company does not believe the FTC settlement will have any ongoing impact on business operations or the other income line. He explained the settlement's stipulations are more related to reporting and training. Olsen attributed margin expansion since pre-COVID to higher occupancy, strong rent growth, and operational efficiencies, and expressed cautious optimism about moderating property tax expense, which could benefit future NOI margins.

Michael Gorman of BTIG, LLC asked for more color on the strategy of holding space offline during a disposition to maximize value, questioning if it was related to alternate use or unrecoverable TI costs.

Answer

CEO David Lukes explained the strategy is common and allows buyers to 'choose their own adventure' with the last available space, which is particularly valuable in the current market. It is not about alternative use, but about giving the buyer flexibility to select a tenant that fits their strategy—for example, choosing between a higher-rent, lower-credit tenant or a lower-rent, higher-credit one. This flexibility can drive a higher sale price and better cap rate.