Paulina Rojas Schmidt

Paulina Rojas-Schmidt of Green Street Advisors, LLC inquired about the strategy behind increasing exposure to California and whether there are plans to alter exposure in other U.S. markets.

Answer

President & CEO Lisa Palmer stated that the company is very comfortable with its current national diversification and market exposures. She explained that they will continue to invest in markets they like, such as the recent Nashville acquisition, when opportunities meet their strict criteria for accretion to earnings, growth, and quality. She affirmed they do not have outsized exposure to any single MSA.

Paulina Rojas Schmidt asked how Regency navigates cap rate uncertainty when targeting development spreads, and what patterns are emerging in new projects and the competitive developer landscape.

Answer

Nicholas Wibbenmeyer, West Region President and CIO, clarified that the development spread is a measure of risk-adjusted return, not a precursor to a sale, and development remains the best use of capital. He noted most new projects are with expanding grocery partners. CEO Lisa Palmer added that Regency's success is built on decades of experience, strong retailer relationships, and a low cost of capital, which allows them to develop through cycles.

Asked about the development strategy, inquiring how the company navigates cap rate uncertainty when targeting a yield spread, and what patterns they are seeing in new project types and competing developers.

Answer

The company targets a yield spread over value to ensure an appropriate risk-adjusted return, noting development is their best use of capital. They de-risk projects extensively before starting. The vast majority of new development is with their grocery partners, who continue to expand their physical store footprints. Development is a core, long-term competency for the company, giving them a competitive advantage.

Paulina Rojas Schmidt of Green Street posed a big-picture question about the sensitivity of Regency's business to potential changes in U.S. immigration and tariff policies, asking which variables are most important to monitor.

Answer

President and CEO Lisa Palmer stated that she does not anticipate a material impact due to the portfolio's strong positioning. She highlighted the resilient consumer in their trade areas and a necessity-focused tenant mix in high-quality centers. She noted that while challenges like rising construction costs could occur, the company has a proven track record of managing them effectively and expects to continue doing so.

Paulina Rojas Schmidt of Green Street Advisors inquired about the competitiveness of the bidding process for properties in the new geographies Federal Realty is evaluating, asking if there is lighter competition than in traditional institutional markets.

Answer

EVP, Chief Investment Officer Jan Sweetnam confirmed that competition is lighter for these large assets in new markets. He noted they are competing with fewer bidders compared to a highly sought-after asset in a core coastal market, as the bid list is not as deep.

Paulina Rojas Schmidt of Green Street asked what pricing insights and cap rate implications could be drawn from the recent transaction of Legacy West for valuing Federal Realty's own flagship mixed-use assets.

Answer

CEO Donald Wood viewed the Legacy West deal positively, stating it confirms that sophisticated buyers recognize the value created by integrating different property uses. He believes this supports his view that Federal Realty's own mixed-use assets are undervalued in the public markets relative to their private market value, though he did not comment on a specific cap rate.

Paulina Rojas Schmidt of Green Street asked if the strong cash-releasing spreads are expected to continue into 2025 and requested commentary on portfolio-wide occupancy cost ratios (OCR).

Answer

CEO Donald Wood noted that quarterly spreads can be volatile due to the specific mix of deals, but the underlying ability to push rents remains strong. He estimated the portfolio's OCR is around 9%, which he believes suggests there is still room for rent growth. He also pointed to the significant positive gap between new lease rates and the in-place portfolio average as another indicator of continued upside potential.

Paulina Rojas-Schmidt of Green Street sought more confidence in the forecast for declining CapEx, questioning why it wouldn't remain elevated given that tenant churn, which often triggers redevelopment spending, is a constant in the retail industry.

Answer

Chairman & CEO Jeffrey Olson explained that CapEx is expected to decrease because they have replaced long-struggling tenants with high-quality, durable retailers. EVP & COO Jeffrey Mooallem added that most heavy-lifting maintenance CapEx (roofs, parking lots) is complete and leasing CapEx is lower due to better negotiating power. EVP & CFO Mark Langer provided specifics, noting maintenance CapEx is projected to fall from $36 million in 2022 to around $15 million as remaining projects are completed.

Paulina Rojas Schmidt from Green Street asked for numerical context on accelerating rent growth and whether recent bankruptcies impacted landlord negotiating leverage. She also asked how Urban Edge's portfolio would perform in a downturn compared to smaller grocery-anchored centers.

Answer

COO Jeff Mooallem cited a 10-15% increase in market rent in a recent deal and stated that recent bankruptcies are not viewed as systemic. He argued that Urban Edge's portfolio, with its focus on well-capitalized anchors, is more 'bulletproof' and insulated from a recession than many shop-heavy grocery-anchored centers, which could be more susceptible to a slowdown.

Paulina Rojas Schmidt from Green Street Advisors requested more characterization of the high-quality assets that are trading at sub-6% cap rates. She also asked a broader question about how management views the company's cost of equity and if issuing equity would be considered as a funding source for acquisitions.

Answer

Chief Operating Officer Jeff Mooallem described sub-6% cap rate assets as typically featuring a strong grocery anchor with good sales, at least 7-10 years of lease term, and additional growth opportunities like shop space or pad sites. He noted these assets are scarce and attract a frenzy of capital, pushing prices up. Chairman and CEO Jeffrey Olson added that while selling low-growth, low-cap-rate assets is the preferred funding source, a modest amount of equity issuance could be considered for the right acquisition deal.

Paulina Rojas Schmidt from Green Street questioned the magnitude of recent cap rate compression, the strategy for selling single-tenant assets without disrupting integrated centers, and the potential for more outparcel development.

Answer

CEO Jeffrey Olson estimated that cap rates have compressed by 50 to 75 basis points over the last 6 to 9 months. He and COO Jeffrey Mooallem clarified that their disposition strategy targets freestanding, separately subdivided assets (like the Home Depot just sold) or entire shopping centers that trade like credit tenants, not anchors within an integrated center. Mooallem also confirmed they are actively pursuing accretive outparcel developments, such as ground leases and build-to-suits, noting several are already in the pipeline.

Paulina Rojas-Schmidt of Green Street Advisors, LLC sought clarification on the timing of cap rate compression for grocery-anchored centers, asking if it was a very recent trend.

Answer

An executive, likely EVP & CIO Mark Horgan, confirmed that the trend is happening in real-time. He specified that deals launched in the spring have seen very high demand from private capital, leading to noticeable cap rate compression over the last three to four months.

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

Answer

President and COO Brian Finnegan stated they have not seen an impact on leasing from immigration policy and noted continued strength in the restaurant category. CEO Jim Taylor added that the portfolio is well-positioned against broad economic pressures due to its focus on economically resilient tenants in the grocery, specialty grocery, and off-price apparel sectors, which tend to perform well through cycles.

Paulina Rojas Schmidt asked for an elaboration on the sources of reduced maintenance CapEx and whether these savings are permanent or a result of project prioritization.

Answer

CEO James Taylor clarified that the savings are a permanent benefit harvested from the company's extensive reinvestment program, which has made the portfolio more efficient and addressed deferred maintenance. He emphasized that this discipline is accelerating free cash flow growth, not cutting corners. President and COO Brian Finnegan added that the centers' presentation is the best it has ever been.

Paulina Rojas Schmidt from Green Street asked for the sources of savings from reduced maintenance CapEx and whether these savings are permanent.

Answer

CEO James Taylor explained that the savings are a permanent benefit harvested from years of significant reinvestment in the portfolio, which has improved efficiency and addressed deferred maintenance, thereby accelerating free cash flow growth. President & COO Brian Finnegan added that the centers are in their best condition ever despite the lower spend.

Paulina Rojas Schmidt inquired about which markets Brixmor is looking to increase its exposure to and whether there is a common theme in areas seeing the most retailer demand.

Answer

CEO Jim Taylor stated that retailer demand is strong across nearly all of the company's markets. He explained that the investment strategy focuses on acquiring under-rented and under-invested assets in strong locations where Brixmor's platform can drive value. He identified Florida, the coastal Carolinas, the upper Northeast, California, and Texas as key markets for future acquisitions.

Paulina Rojas Schmidt asked which markets Brixmor is targeting for increased exposure and whether there is a common theme to the areas experiencing the most retailer demand.

Answer

CEO James Taylor responded that retailer demand is strong across nearly all of their markets. The company's investment strategy is to find under-rented and under-invested assets in strong locations where its platform can add value. He identified Florida, the coastal Carolinas, the upper Northeast, California, and Texas as key markets for future acquisitions.

Paulina Rojas-Schmidt of Green Street Advisors asked if Curbline uses occupancy cost ratios (OCRs) as a key metric for managing rents and if they have a benchmark. She also inquired about the company's view on expanding its presence in the Midwest.

Answer

CEO David Lukes explained that obtaining OCRs is difficult for their portfolio, as over 70% of tenants are national credits that do not share store-level data; instead, Curbline focuses on the corporate guarantee and credit quality. Regarding the Midwest, he stated that they are open to acquisitions in any region, including the Midwest, as long as the properties meet their strict underwriting criteria for financial returns, demographics, and traffic, rather than focusing on a specific geography.

Paulina Rojas Schmidt from Green Street asked how Curbline's portfolio would perform in a recession relative to other retail formats and whether there were any early signs of tenant business deterioration or caution.

Answer

CEO David Lukes highlighted the portfolio's defensive nature, citing a rapid payback period on leasing capital (5.5 months) due to small, fungible spaces. CFO Conor Fennerty added that high tenant diversification mitigates credit risk. Regarding tenant health, Lukes noted it was too early to see broad weakness, and any slowdown from goods-based retailers has been offset by continued demand from service tenants.

Paulina Rojas Schmidt of Green Street asked for elaboration on how Curbline's portfolio would perform during a recession or slow-growth period compared to other strip center formats. She also inquired if the company has seen any early signs of tenants' businesses deteriorating or tenants adopting a more cautious growth stance.

Answer

CEO David Lukes pointed to the capital efficiency of the business, highlighting a rapid 5.5-month payback period on total leasing capital. He argued that even in a recession with higher vacancy, the low cost and speed of re-tenanting small, fungible spaces would lead to superior performance compared to large-format retail. CFO Conor Fennerty added that tenant diversification, with few tenants over 1% of ABR, mitigates risk. Regarding tenant health, Lukes stated that it has only been a matter of weeks since macroeconomic concerns intensified, and they have not yet seen any significant anecdotal evidence of a slowdown or increased caution from their service-oriented tenants.

Paulina Rojas Schmidt asked why the $500 million annual acquisition guidance seems conservative given the recent strong pace and whether the company uses hard benchmarks for metrics like household income or traffic counts.

Answer

CEO David Lukes explained that while the recent pace was strong, the company has only been public for 120 days, making the $500 million target a confident and achievable goal that ensures discipline. He stated that while there are no 'hard yes or no' benchmarks, household income and daily traffic counts are two of the most critical factors they evaluate, focusing on overall consumer health in a submarket and visibility on high-traffic intersections.

Paulina Rojas-Schmidt inquired about consumer behavior in PECO's centers amid mixed economic sentiment, the portfolio impact from Kroger's announced store closures, and which grocers are most actively expanding in their markets.

Answer

Chairman & CEO Jeffrey Edison noted that despite negative sentiment, strong employment in their markets is driving robust foot traffic. President Robert Myers confirmed only one portfolio store is on Kroger's closure list and is already slated for a grocer backfill. He listed Sprouts, Publix, Whole Foods, and others as actively expanding.

Paulina Rojas Schmidt inquired about the drivers behind the increase in acquisition cap rates during Q4 and requested the cap rate for a recent disposition.

Answer

CEO Jeffrey Edison explained that quarterly cap rate fluctuations are asset-specific and not indicative of a broader market trend, noting that competition is actually compressing cap rates. The Q4 average was influenced by the specific mix of assets acquired, which had varying growth profiles. CFO John Caulfield disclosed that the cap rate on the San Matteo property disposition was between 7.5% and 8%.

Paulina Rojas Schmidt asked why small-scale pad developments are economically viable when larger centers are not, and questioned the potential impact of rising consumer credit card delinquencies on PECO's business.

Answer

CEO Jeffrey Edison explained that pad developments work because a select group of high-demand tenants like Starbucks and Chipotle will pay 2-3 times in-line rent for prime visibility and drive-thru access, a cost prohibitive for most retailers. Regarding delinquencies, Mr. Edison acknowledged the trend as a leading indicator but stated that strong employment has historically been the more critical driver of spending for their necessity-based centers, mitigating the immediate risk.

Paulina Rojas Schmidt from Green Street asked for more details on two ground-up development projects, North Towne Plaza and Gordon Plaza, and whether more similar projects are anticipated.

Answer

David Jamieson, COO, detailed the projects. North Towne Plaza involves adding a Sprouts to anchor a legacy Weingarten site. Gordon Plaza involves demolishing an obsolete center to make way for new ground leases with Home Depot, Aldi, and Chase Bank. He confirmed these projects align with their strategy of identifying the highest and best use for existing land in a risk-adjusted manner.

Paulina Rojas Schmidt of Green Street asked if the recent significant tenant bankruptcies are expected to materially impact market rents for new anchor leases, even if mark-to-markets remain strong.

Answer

CEO Conor Flynn argued that market dynamics and pricing power will not shift materially. He explained that there is very little overlap of vacancies within the same submarket, meaning a newly available box is often the only option for retailers in that trade area. This scarcity, combined with record-low vacancy rates, should maintain the competitive tension that drives rents.

Paulina Rojas Schmidt contrasted Kimco's historical 2-2.5% NOI growth with current strength, asking how sustainable these fundamentals are and if the company can materially beat its historical growth rate over the next five years.

Answer

CEO Conor Flynn described the current environment as the 'very early innings' of a retail revival, driven by a prolonged lack of new supply. He anticipates an inflection point where lower capex and tenant turnover will fuel a stronger growth rate. Given the diverse demand and muted supply outlook, he expressed optimism for an improved growth trajectory.

Paulina Rojas Schmidt of Green Street asked how likely Kimco is to materially beat its historical 2-2.5% same-property NOI CAGR over the next five years, given the current strong fundamentals.

Answer

CEO Conor Flynn stated he believes the industry is in the 'very early innings' of a retail revival driven by a lack of new supply. He anticipates that as retention rates remain high and CapEx needs decrease, the company should see a stronger growth rate going forward, supported by diverse and sustained tenant demand.

Paulina Rojas Schmidt inquired about the significance of international tourism for Acadia's tenants and how the company balances achieving scale versus diversification with its increasing exposure to New York City.

Answer

President & CEO Kenneth Bernstein explained that a broad return of international tourist shoppers has not yet occurred, so recent travel fluctuations have not impacted tenant sales; it remains a future tailwind. On portfolio strategy, he stated that while there is an eventual limit to NYC exposure, the company is not there yet and will continue adding scale in key corridors. He emphasized that they could double or triple holdings in existing corridors while also growing in other markets to ensure portfolio balance.

Paulina Rojas Schmidt of Green Street asked if going-in yields for street retail are now lower than for grocery-anchored centers and how their respective market rent growth prospects compare. She also questioned the reasons for the wide range of development costs for the Henderson project and whether office space remains part of the plan.

Answer

CEO Kenneth Bernstein explained that going-in yields for best-in-class street retail and grocery-anchored centers are now similar. However, he projects street retail's long-term growth rate to be roughly double that of grocery-anchored centers, driven by stronger contractual rent bumps and fair market value resets. For the Henderson project, the wide cost range reflects a phased development approach. He confirmed it will have a mixed-use component, but the project is viable even without the office space, and the expansion will lift the value of the entire Henderson portfolio.

Paulina Rojas-Schmidt asked about the possibility of negotiating recapture rights based on tenant sales performance, why more below-market leases from bankrupt tenants aren't being assumed, and which anchor box size is the most challenging to backfill.

Answer

Chairman and CEO John Kite explained that while they have sales-based recapture rights in option periods at top properties, it's difficult to secure them in a primary lease term. He reiterated that the low assumption number for bankrupt leases is a strategic choice to maintain control over tenant quality. He identified boxes over 40,000 sq. ft. as most challenging, noting the current vacancies are in more flexible, smaller sizes.

Paulina Rojas Schmidt from Green Street asked about the pricing, risk profile, and growth prospects of an unanchored lifestyle center like the recently acquired Nexton Square, comparing it to traditional grocery-anchored assets.

Answer

President and CEO Daniel Busch acknowledged Nexton Square is a lifestyle center without a traditional grocer anchor. He explained its attractiveness stems from its location in a high-growth market and its strong mix of dining and local retail. He described it as a market-driven strategy, complementing their core grocery-anchored portfolio. In terms of pricing, he positioned its risk-adjusted return profile as falling somewhere between a core grocery-anchored center and a power center, noting its smaller size was also an attractive factor.

Asked about the size of the portfolio targeted for recycling, the new tenants in former Rite Aid spaces, and the credit mix of their restaurant tenants.

Answer

The company has identified 5-6 assets for potential sale. Former Rite Aid spaces were leased to a diverse mix of tenants including Dollar Tree, a grocer, and service users. The restaurant portfolio has a mix of local and national credit (estimated around 15% local), with strong sales and minimal exposure to troubled chains.

Inquired about the reasons for low reported rents on new anchor leases, compared rent growth between shop and anchor space, asked for details on landlord rights in the Kroger/Albertsons divestiture, and questioned the current cap rate premium for California assets.

Answer

Low anchor rents are due to existing options or ground lease structures. Shop space rent growth is typically stronger due to more frequent lease turnovers. The company has recapture rights on some older leases involved in the divestiture, but the situation is fluid. California assets continue to command premium pricing and low cap rates comparable to other hot markets.

Asked for color on buyer behavior in the shopping center market, especially from institutional investors, and about the company's strategy regarding its short average debt maturity.

Answer

Buyer activity paused as interest rates rose. Institutional buyers are not yet back in the market in a big way, but there has been a shift of some buyers from other sectors like industrial and multifamily to retail. The company plans to issue 10-year fixed-rate bonds when it refinances later this year, which will extend the average debt maturity.

Questioned why certain Rite Aid leases with meaningful mark-to-market potential were rejected instead of acquired, asked about the company's proactive strategy regarding the Kroger-Albertsons merger, and inquired about the appetite of other grocers for their space.

Answer

The Rite Aid leases were rejected because potential buyers were unwilling to pay the required administrative rent during due diligence. Regarding the Kroger-Albertsons merger, the company is monitoring the situation but does not expect a significant impact on its portfolio. They assess the appetite from other grocers for their locations as "extremely strong," having already received letters of intent for some spaces contingent on the merger's outcome.

Paulina Rojas Schmidt asked about Curbline's year-to-date same-property NOI growth relative to its guidance, the drivers for the wide guidance range, the components of the long-term 3%+ growth forecast, and the potential for further occupancy gains.

Answer

CFO Conor Fennerty stated that performance is tracking toward the midpoint to high end of the 3.5% to 5.5% range, with the wide range attributed to the small denominator of the growing portfolio. He broke down the long-term 3%+ growth into lease bumps, mark-to-market gains, and some credit loss. He also confirmed there is occupancy upside, as the portfolio can run between 95-98% leased and is currently at the lower end of that range.

Paulina Rojas Schmidt of Green Street asked for quantification of the market rent growth that management mentioned was helping to offset the impact of higher cap rates on IRRs.

Answer

CEO David Lukes responded that while it's difficult to provide a precise statistic, the company has consistently seen rents, particularly for small shops, come in higher than budgeted over the last four years. He described the rise as not dramatic but consistent, driven by low vacancy and high competition for space, allowing landlords to choose between the highest rent or the best credit.