Paulina Rojas

Paulina Rojas questioned Federal Realty's acquisition strategy, asking if the company would cap its exposure to new secondary or tertiary markets or if it maintains a fully market-agnostic approach, assuming property quality standards are met.

Answer

Donald Wood, Chief Executive Officer, affirmed a market-agnostic approach, emphasizing that while the company has a 'buy box' for new markets (e.g., 1 million people, affluent), opportunities are pursued wherever they arise, whether in new markets or adjacent to existing assets. The focus remains on sub-market quality and effective pricing.

Paulina Rojas asked if market pricing has shifted over the past three months or if the level of competitiveness has largely remained consistent. She also inquired about what factors would enable InvenTrust to exceed the high-end of its Same Property NOI guidance, given past positive surprises.

Answer

President and CEO DJ Busch indicated that market pricing feels consistent, with strong competition across asset types. He noted that pricing remains sticky, and the rotation of private capital into retail should benefit valuations long-term. Regarding exceeding Same Property NOI guidance, DJ Busch explained that guidance is set to manage expectations appropriately. He highlighted that historically, bad debt has surprised to the downside (less credit loss), which is difficult to predict. For 2026, they've reduced credit loss expectations due to improved merchandise mix and no foreseeable anchor issues. Exceeding guidance would depend on earlier rent commencement and credit loss remaining immaterial.

Paulina Rojas asked if pricing in the competitive market had shifted over the past three months or largely remained consistent. She also inquired about the factors that would enable InvenTrust to exceed the high end of its Same Property NOI guidance, given its history of positive surprises.

Answer

President and CEO DJ Busch indicated that pricing feels consistent, depending on market opportunities, and noted strong competition across asset types. He observed that InvenTrust often feels better about its acquisitions six months post-purchase, suggesting sticky pricing, and mentioned private capital interest potentially benefiting valuations. Regarding exceeding Same Property NOI guidance, Busch explained that it would depend on getting new leases open and rent-paying earlier, and if credit loss remains immaterial, though he cautioned that a more normalized level of credit loss is generally expected. He added that reduced credit loss assumptions in the current guidance reflect improved merchandise mix and the absence of imminent anchor issues.

Paulina Rojas observed that recent acquisitions have skewed towards secondary and tertiary markets and asked if InvenTrust Properties Corp. would be comfortable with these markets representing a much larger portion of their portfolio. She also inquired about potential cap rate differences in markets less pursued by institutional investors but with strong local demographics, and if this represents a market inefficiency.

Answer

DJ Busch, President and CEO, stated that InvenTrust focuses on '18-hour cities' and doesn't strictly adhere to primary/secondary/tertiary labels. He noted that while Charlotte is a core market, it enables investment in areas like Asheville. Mr. Busch emphasized that in smaller markets, the quality of the asset must be exceptionally high. He confirmed that cap rates do vary, with InvenTrust targeting initial yields in the high fives to high sixes for risk-adjusted returns in the sevens. He acknowledged that exiting California, a highly liquid market, allowed InvenTrust to leverage a form of 'arbitrage' by focusing on sustainable free cash flow growth in other regions.

Paulina Rojas observed that InvenTrust's recent acquisitions have skewed towards secondary and tertiary markets and asked about the company's comfort with these markets representing a larger portfolio share. She also inquired if cap rates in less pursued markets, despite strong local demographics, reflect a market inefficiency rather than higher risk.

Answer

DJ Busch, President and CEO, stated that InvenTrust focuses on '18-hour cities' and doesn't strictly categorize markets, but acknowledged that in secondary/tertiary markets, the quality of assets must be higher (best or second-best in market). He noted that initial yields typically range from high fives to high sixes, leading to risk-adjusted returns in the sevens. He suggested that exiting California, a highly liquid market, allows InvenTrust to find arbitrage opportunities in other regions where demand dynamics differ.

Paulina Rojas requested rough numerical guidelines on how CapEx differs between Phillips Edison & Company's everyday retail and typical grocery-anchored centers, ideally expressed as a percentage of NOI.

Answer

CFO John Caulfield and Chairman and CEO Jeff Edison explained that for everyday retail, PECO targets over 10% unlevered IRRs, often exceeding this by 100 basis points. Currently, CapEx as a percentage of NOI for everyday retail looks similar to grocery-anchored centers due to the growth being generated. They anticipate these assets will become very efficient from a CapEx perspective once stabilized, as the focus shifts from initial remerchandising and re-leasing to simply pushing rents. Jeff Edison added that significant upfront capital is often programmed into the underwriting for everyday retail acquisitions to redo centers and bring in desired merchandising, with the expectation of lower stabilized costs later.

Paulina Rojas requested rough numerical guidelines on how CapEx has differed between Phillips Edison & Company's everyday retail and typical grocery-anchored centers, ideally as a percentage of NOI.

Answer

CFO John Caulfield stated that for everyday retail, PECO targets over 10% unlevered IRRs, and currently, CapEx as a percentage of NOI looks similar to grocery-anchored centers due to the growth being generated. He anticipates greater capital efficiency as these assets stabilize. Chairman and CEO Jeff Edison added that significant upfront capital is often invested in everyday retail acquisitions to redevelop centers and optimize merchandising, with lower costs expected on a stabilized basis.

Paulina Rojas asked what factors would need to materialize for Regency Centers to exceed the upper end of its 3.75% same-property NOI guidance for the year, identifying where the biggest positive surprises could come from.

Answer

Mike Mas, Chief Financial Officer, explained that outperformance would primarily stem from greater-than-expected changes in commenced occupancy, stronger renewal rates, or lower uncollectible lease income (ULI) than the historically average year planned. He also noted that speculative acquisitions, if executed accretively, could be additive to the earnings outlook.

Paulina Rojas of Green Street Advisors questioned the strategy behind increasing exposure to California and asked about plans for exposure in other U.S. markets.

Answer

CEO Lisa Palmer stated that the company is comfortable with its national diversification and has no outsized exposure to any single MSA. She explained that they will continue to invest incrementally in their preferred markets, like the recent acquisition in Nashville, whenever compelling opportunities arise that are accretive to earnings, growth, and quality, rather than following a rigid geographic allocation target.

Paulina Rojas from Green Street asked what factors retailers are observing that could sustain high industry occupancy levels, preventing an inevitable slowdown. She also inquired if specific anchor tenants are leading expansion in the Northeast and about Urban Edge Properties' projected same property NOI growth on an occupancy-neutral basis beyond the current signed-not-open pipeline.

Answer

COO Jeff Mooallem attributed sustained high occupancy to favorable supply and demand dynamics, with significantly reduced new retail construction. Chairman and CEO Jeff Olson noted that while expansion is dispersed, Ross and TJX concepts are actively growing in the Northeast, driven by high population density and limited high-quality space. He projected that Urban Edge Properties aims for sustainable 3% plus same property NOI growth, supported by the signed-not-open pipeline and strategic capital recycling.

Paulina Rojas asked about retailers' perspectives on sustaining high occupancy levels in the highly leased industry, rather than an inevitable slowdown. She also inquired if specific anchors are leading expansion in the Northeast or if it's too dispersed to highlight a few names. Lastly, she asked about Urban Edge Properties' same property NOI growth on an occupancy neutral basis, looking beyond the signed-not-open pipeline.

Answer

Jeff Mooallem (COO) attributed sustained high occupancy to favorable supply and demand metrics, with significantly less new retail construction compared to historical levels, emphasizing this as the 'greatest tailwind' for the industry. Jeff Olson (Chairman and CEO) noted that while expansion is dispersed, Ross is a new entrant being flexible with rent, and all TJX concepts are expanding widely in the Northeast due to dense population and supply constraints. Jeff Olson (Chairman and CEO) also mentioned the signed-not-open pipeline represents 7% of NOI and provides tailwind for a few years, stating a goal of generating sustainable 3%+ same property NOI growth, supported by capital recycling.

Paulina Rojas asked which tenant categories Brixmor sees as most vulnerable to long-term margin pressure resulting from potential tariffs and changes in immigration policy.

Answer

COO Brian Finnegan responded that while they are monitoring the situation, they have not seen an impact on leasing decisions and that traffic at specialty grocers remains stable. He identified restaurants as a category to watch but expressed confidence in their high-quality, national tenant base. CEO Jim Taylor added that their core tenants in grocery and off-price apparel are historically resilient through economic cycles.