Mike Mueller

Mike Mueller inquired about the most economically favorable types of potential dispositions, specifically asking if higher and better use land sales or user sales offered better economics than traditional industrial sales.

Answer

Peter Baccile (CEO) confirmed higher and better use (e.g., data center) offers significant value pickups. For everyday industrial sales, users and 1031 buyers typically pay more. He also noted opportunities with institutional capital.

Mike Mueller inquired about the best economic opportunities for potential dispositions, asking if they are primarily in higher and better use land sales (e.g., data centers) or user sales, as opposed to traditional industrial sales with potentially lower growth prospects.

Answer

Peter Baccile, Chief Executive Officer, confirmed that higher and better use opportunities, such as data center conversions, offer significant value pickups and are actively pursued. For everyday industrial sales, he identified users and 1031 buyers as target markets due to their willingness to pay more, while also acknowledging potential opportunities with institutional capital.

Mike Mueller inquired about the specific operational aspects EastGroup expects to improve as a result of its recently expanded management structure.

Answer

CEO Marshall Loeb explained that the restructuring, the first in over 20 years, addresses the company's growth and increased complexity. He anticipates greater operating efficiencies, improved strategic thinking, and faster execution on opportunities. COO Brent Wood added that the expanded roles aim to better support the field team, enhance communication between corporate and the field, and provide more analytical review of the portfolio and market trends, positioning EastGroup to operate more efficiently.

Mike Mueller asked how the expanded management structure, including new roles for Reid Dunbar, Staci Tyler, and Brent Wood, is expected to improve EastGroup's operations.

Answer

CEO Marshall Loeb explained that the restructured team is a response to the company's growth and increased complexity over 20 years. The new structure aims to improve operating efficiencies, strategic thinking, long-term planning, and communication, positioning EastGroup to move more quickly and capitalize on market opportunities.

Mike Mueller asked for the embedded guidance for AFFO CapEx and capitalized interest for 2026, and how the CapEx is split between Healthpeak's segments.

Answer

CFO Kelvin Moses stated that the 2026 guidance includes just over $500 million in CapEx, encompassing redevelopment, non-recurring, and development capital, which is lighter than the $600 million spent in 2025. President and CEO Scott Brinker added that there is no material change in AFFO CapEx for 2026 compared to 2025, and the supplemental disclosure provides a good run rate for all three business segments. Kelvin Moses also confirmed that capitalized interest is expected to remain flat.

Mike Mueller asked about the embedded AFFO CapEx and capitalized interest in the 2026 guidance, as well as the CapEx split across Healthpeak's segments.

Answer

CFO Kelvin Moses stated that the 2026 plan includes just over $500 million in CapEx, which is lighter than the $600 million spent in 2025, covering redevelopment, non-recurring, and development capital. President and CEO Scott Brinker clarified that there is no material change in AFFO CapEx for 2026 compared to 2025, and the supplemental disclosures provide a good run rate for all three business segments. Mr. Moses added that capitalized interest is expected to remain flat.

Mike Mueller posed a hypothetical question: if the company's implied cap rate were significantly lower, would it still pursue monetizing parts of its outpatient medical portfolio today?

Answer

President and CEO Scott Brinker stated that the company would still sell non-core assets or those with non-strategic health system relationships at favorable pricing. However, he indicated that recaps of core real estate, where the company retains a significant economic interest, would likely not occur if the stock price were more favorable.

Mike Mueller posed a hypothetical question: if Healthpeak's implied cap rate were significantly lower (e.g., 100-150 basis points), would the company still pursue monetizing parts of its outpatient medical portfolio? He also asked for specific attributes of the properties Healthpeak is looking to sell.

Answer

Scott Brinker, President and CEO, responded that the company would still sell assets in non-core markets or those with non-core health system relationships at attractive pricing, even with a lower implied cap rate. However, he noted that recaps of core real estate, where Healthpeak retains a meaningful economic interest, would not be pursued if the stock price were more favorable. Mr. Brinker explained that the properties being sold are primarily defined by their market profile, typically in areas where Healthpeak lacks critical mass or strong health system relationships, contrasting with their focus on 10-12 core markets like Dallas, Denver, and Nashville.

Mike Mueller (JPMorgan Chase & Co.) asked whether Prologis' 2026 fund contribution expectations solely reflect ongoing warehouse development or if they also factor in contributions for new vehicles, specifically the Agility Fund.

Answer

CFO Tim Arndt clarified that the 2026 contribution guidance includes the Agility Fund, which is expected to receive contributions of land from Prologis, marked up to fair value, prior to commencing its development activities.

Mike Mueller asked if Prologis' fund contribution expectations for 2026 solely reflect ongoing warehouse development activities or if they also factor in contributions for new vehicles.

Answer

CFO Tim Arndt clarified that the contribution guidance for 2026 includes the Agility Fund, which will take contributions of land from Prologis, marked up to fair value, before undertaking its development activities.

Mike Mueller asked about the current pace of spec development leasing and if there has been notable improvement recently.

Answer

CFO Tim Arndt confirmed that spec development leasing is improving. He noted that the typical lease-up time of seven to eight months had extended by a month to a month and a half over 2023-2024 but is now slowly returning to its historical norm.

Mike Mueller from JPMorgan Chase & Co. asked about the typical increase in going-in yield achieved by placing acquired assets onto the company's management platform and realizing expense efficiencies.

Answer

CEO Joseph Margolis explained that the increase varies widely; if an asset is already on their management platform, NOI is largely optimized. However, for assets managed by third-party operators, it's not uncommon to see a 150 basis points or more increase in NOI once integrated onto their platform.

Mike Mueller from JPMorgan Chase & Co. asked how much the going-in yield on acquisitions, whether stabilized or not, could typically be raised by integrating them onto the Extra Space Storage platform and achieving expense efficiencies.

Answer

CEO Joseph Margolis explained that the yield enhancement varies significantly. For assets already on their management platform, it's a core purchase. However, for assets managed by a third-party operator, it's not uncommon to see an increase of 150 basis points or more in Net Operating Income (NOI) once the asset is integrated onto the Extra Space platform due to optimization.

Mike Mueller asked about Kimco's total expected development dollars for 2026 and 2027, and whether future development would be largely residential.

Answer

Dave Jamieson, COO, and Conor Flynn, CEO, clarified that ground-up retail development remains small, controlled, and opportunistic, with a primary focus on reinvestment and repositioning existing assets. Multifamily development will continue with a capital-light, preferred equity structure, utilizing land and entitlement costs as Kimco's capital contribution to maximize returns.

Mike Mueller asked about Kimco's total expected development dollars for 2026 and 2027, and whether future development would be largely residential.

Answer

Dave Jamieson, COO, and Conor Flynn, CEO, clarified that ground-up retail development remains small, controlled, and opportunistic, with a primary focus on reinvestment and repositioning existing assets. Multifamily development will continue with a capital-light, preferred equity structure, utilizing land and entitlement costs as Kimco's capital contribution to maximize returns.

Mike Mueller questioned the rationale behind providing early 2026 guidance, asking if it was due to concerns about existing estimates or to manage expectations for the 3-3.5% same-property NOI growth after a strong 2025.

Answer

Mike Mas, Chief Financial Officer, clarified that providing an early outlook in the fourth quarter is consistent with Regency Centers' historical practice of offering forward transparency, excluding the COVID period, and is not driven by specific concerns about estimates or managing expectations.

Mike Muller questioned the rationale behind providing an early 2026 outlook, asking if it was due to discrepancies with current estimates or an attempt to manage expectations after a strong 2025.

Answer

Mike Mas, EVP and CFO, clarified that providing an early outlook for the next year is a consistent practice for Regency, excluding the COVID period, and is intended to offer transparency to investors.

Mike Mueller from JPMorgan Chase & Co. inquired about the future mix between ground-up development and redevelopment projects in the investment pipeline.

Answer

CIO Nick Wibenmeyer stated that while redevelopment remains a core activity, he anticipates that the majority of future project starts in the $250 million-plus annual range will come from ground-up developments. This shift is driven by the success of the ground-up program and the high occupancy across the existing portfolio, which limits large-scale redevelopment opportunities.

Mike Mueller inquired whether the remaining budgeted bad debt expense for the year is mostly visible or still largely an assumption for the fourth quarter. He also asked about the potential ceiling for small shop occupancy, currently under 92%, and if that level could be reached in the next few years despite any near-term fluctuations.

Answer

Mike Phillips, CFO, stated that within the 55-75 basis point forecast range for bad debt, visibility extends to the bottom end (55 bps), with the higher end reserved for unforeseen fallout. DJ Busch, President and CEO, expressed confidence in continuing to increase small shop occupancy, noting that mid-90s represents frictional vacancy. He highlighted strategies for less desirable spaces and emphasized that maintaining occupancy, achieving embedded escalators, and double-digit renewal spreads with high retention drives NOI growth and stronger free cash flow, supported by a superior tenant base.

Mike Mueller inquired about the visibility of the remaining budgeted bad debt expense for Q4, asking if it's mostly visible or still an assumption. He also asked about the potential ceiling for small shop occupancy, currently under 92%, and if the current market backdrop supports reaching that ceiling in the next few years, despite near-term fluctuations.

Answer

Mike Phillips, CFO, stated that visibility exists for the lower end of the bad debt range (55 basis points), with the higher end (75 basis points) reserved for unforeseen fallout. DJ Busch, President and CEO, expressed confidence that small shop occupancy can continue to march higher, acknowledging that mid-90s occupancy represents frictional vacancy. He emphasized that sustained occupancy, embedded escalators, double-digit renewal spreads, and high retention drive NOI growth and stronger free cash flow.

Mike Mueller asked for the overall initial blended yield on the $14 billion of announced investments and the range of yields across the different components, noting that IRRs had already been discussed.

Answer

CIO Nikhil Chaudhri stated that Welltower does not typically disclose yields until transactions close and appear in the SOP. He added that, in general, the activity is not dissimilar to the company's investment activity over the last couple of years.

Mike Mueller asked about the changing mix of institutional competition for Curbline Properties' acquisitions over the past few quarters. He also inquired about the sensitivity of this competition to changes in interest rates, specifically mentioning the 10-year dipping below 4%.

Answer

CEO David Lukes noted that about half of Curbline's inventory is sourced off-market through relationships, and while there is competition, he wouldn't say it has significantly increased over the past year, as they focus on the top quartile. He believes competition, largely composed of levered buyers, is highly impacted by interest rates, making Curbline a desirable counterparty due to its ability to act as a cash buyer.

Mike Mueller asked about the potential for selling off assets within the redevelopment pipeline and the optimal level of projects to have under construction or in process at any given time.

Answer

Howard Schwimmer, Co-Chief Executive Officer, stated that the company continuously assesses its portfolio for disposition opportunities to enhance quality and growth, noting $160 million under contract/LOI and $180 million sold year-to-date. Laura Clark, Chief Operating Officer, added that they evaluate multiple paths for each asset, including reinvestment, leasing as-is, or selling. Mike Fitzmaurice, Chief Financial Officer, specified a comfort zone of 5% to 7.5% of square footage in redevelopment or repositioning, with the current level at 5.5%-6%.

Mike Mueller questioned how indicative the ColdPoint acquisition's pricing is of the broader market and how much Lineage can improve the asset's EBITDA.

Answer

CEO W. Lehmkuhl stated the deal was sourced at an approximate 14x multiple. He affirmed that, consistent with their strategy for all acquisitions, Lineage expects to improve the asset's performance over time, with all improvements benefiting shareholders.

Mike Mueller asked whether lenders would have any influence over the dividend policy after the new lease is in place, if the Texas Ten portfolio's EBITDA is expected to recover to original underwriting levels, and for details on the lease's renewal options.

Answer

Chairman and CEO John McRoberts and Executive VP and CFO Jeff Walraven confirmed that once the new lease restores cash flow, lenders will have no say on the dividend beyond standard covenants. McRoberts stated they are not forecasting a full recovery to original EBITDA but expect improvement from the new operator. Walraven clarified the renewal option is not a market-rate reset but a continuation of the existing 2% annual rent escalators.

Mike Muller from JPMorgan Chase & Co. sought clarification on the 0.9x fixed charge coverage for the Texas portfolio, asking if it was at the tenant level. He also asked if, in hindsight, any red flags from the original underwriting process would stand out today.

Answer

CEO John McRoberts confirmed the coverage was at the tenant level, specific to the ten facilities they own. Reflecting on the underwriting, McRoberts noted the main issue was that the management company was slow to recognize and address the operational problems. He emphasized it was a fixable management issue, not a systemic market problem. CFO Jeffery Walraven added that the original underwriting expected a quicker ramp-up to 1.5x coverage from the initial 1.3x, which has not yet been achieved.