Q3 2024 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +6% YoY [$303.6 million [7] ] | The increase primarily reflects acquisitions completed in the prior year, higher occupancy in key developments, and improved rental rates, partially offset by property sales. Continued consumer demand in retail properties supports forward growth. |
Rental Income | +6% YoY [$303.4 million [13] ] | Driven by higher base rents and tenant recoveries at both comparable and non-comparable properties, along with new lease signings. Geographic diversification and ongoing redevelopments further bolstered rental income. |
Operating Income | +6% YoY [$105.8 million [7] ] | Reflects increased revenue streams from leasing activities and cost discipline. The trust’s strategic focus on expanding profitable assets while divesting underperforming properties contributed to a stronger bottom line. |
Net Income | +7% YoY [$63.5 million [7] ] | Benefited from higher operating income, partially offset by increased interest expense in rising rate environments. Looking ahead, ongoing development completions and stabilized projects are expected to support further net income growth. |
SG&A | -18% YoY [$10.8 million [7] ] | Lower personnel-related costs and operating efficiencies reduced corporate overhead. These measures, combined with increased allocations to property-level operations, drove the decrease in SG&A. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
FFO | FY 2024 | $6.70 - $6.88 (midpoint $6.79) | $6.76 - $6.86 (midpoint $6.81) | raised |
Term Fees | FY 2024 | $4 million to $6 million | $4 million to $5 million | lowered |
Capitalized Interest Expense | FY 2024 | no prior guidance | $19 million to $21 million | no prior guidance |
Credit Reserve | FY 2024 | 70 to 90 bps | 70 to 90 bps | no change |
FFO per share | Q4 2024 | no prior guidance | $1.72 - $1.82 | no prior guidance |
Comparable Growth | Q4 2024 | no prior guidance | ~4% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong leasing activity and occupancy gains | Highlighted in Q2 2024 (594K sq. ft.) , Q1 2024 (567K sq. ft.) , and Q4 2023 (100 deals, 12% cash rollover). | Achieved 126 leases for 581K sq. ft.; portfolio leased occupancy at 95.9% and physical occupancy at 94%. | Consistently strong |
Rent growth and favorable leasing spreads | Q2 2024: 23% straight-line increase. Q1 2024: 9% higher cash basis (20% straight-line). Q4 2023: ~12% cash basis rollover. | 14% higher new lease rents (26% on a straight-line basis); 2.4% contractual bumps. | Remains robust |
Focus on acquisitions/external growth | Q2 2024: Completed ~$275M of acquisitions (VA Gateway, Panola Vista). Q1 2024: Shifted strategy to favor acquisitions. Q4 2023: Expected more opportunities in 2024. | Two >$100M deals in advanced discussions; targeting upper 8-9% IRRs. | Ongoing priority |
Balance sheet metrics (net debt to EBITDA, fixed-charge coverage) | Q2 2024: 5.8x net debt/EBITDA, 3.6x coverage. Q1 2024: ~6x net debt/EBITDA. Q4 2023: 5.9x net debt/EBITDA. | Net debt/EBITDA at 5.5x (improved sooner than expected); fixed-charge coverage at 3.7x. | Continues improving |
Same-store NOI or property-level profit growth | Q2 2024: Mid- to high 3% second-half guidance. Q1 2024: 3.8% growth (excluding term fees). Q4 2023: ~4% GAAP same-store NOI. | One-time expenses lowered Q3 guidance; weighted occupancy below quarter-end figure; optimistic for Q4. 2.9% GAAP, 3.4% cash. | Slight caution but positive |
Life sciences expansion feasibility | Last addressed in Q1 2024: “Math doesn’t work today” for expansion (blue-chip areas oversupplied). | No mention in Q3 2024. | No longer mentioned |
Term fees as a revenue source | Q2 2024: Adjusted from $4M–$7M to $4M–$6M. Q1 2024: Noted lighter term fees than forecast. Q4 2023: Projected $4M–$7M for 2024. | Revised downward to $4M–$5M; expected to remain light into 2025. | De-emphasized |
Specific tenant credit risks (bluebird bio, buybuy BABY) | No prior mention in Q2 2024, Q1 2024, or Q4 2023. | Newly discussed: bluebird bio on watch but secure until 2026; buybuy BABY stores to be recaptured soon. | Newly emerged |
Pipeline of $100 million-plus accretive acquisitions | No mention in Q2 2024, Q1 2024, or Q4 2023. | Executives cited active deals between $100M–$200M, small bidding pool, expected day-one accretion. | Newly emerged |
Leasing volumes declined in Q4 2023 but rebounded strongly later | Q4 2023: ~25% drop but attributed to timing, not a negative trend. | No specific mention of a Q4 2023 decline or rebound in Q3 2024. | Not explicitly addressed |
Rising caution around same-store NOI guidance despite high occupancy | Not specifically addressed in Q2 2024, Q1 2024, or Q4 2023. | Daniel Guglielmone cited timing and expenses reducing Q3 guidance; still expects a strong Q4 finish. | Cautious tone |
Higher interest rates’ effect on earnings | Q2 2024: Minimal 2024 impact, more likely in 2025. Q1 2024: ~$0.02–0.03 headwind. Q4 2023: $600M floating-rate debt exposure. | No new discussion specific to floating-rate debt in Q3 2024. | Ongoing concern |
Redevelopment opportunities with improved construction costs | Q2 2024: Construction cost pressures easing. Q4 2023: Bala Cynwyd project benefiting from lower labor costs. | Donald Wood noted stable/lower costs driving feasibility; expects potential additions soon. | Growing opportunity |
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Acquisition Opportunities
Q: Discuss upcoming acquisitions and cap rates?
A: Management is exploring larger acquisitions, each in excess of $100 million. They see opportunities with cap rates in the mid-6% to around 7% range, aiming for IRRs in the upper 8% to 9%, which they find attractive. -
Company Valuation and NAV
Q: Do you believe your stock trades near NAV?
A: Management disagrees with the notion that their stock is trading near NAV. They believe the portfolio has significant unrecognized value, particularly due to development opportunities and intensification potential. -
Development vs. Acquisitions
Q: How are you balancing development and acquisitions?
A: They value having multiple options for capital deployment. New developments are likely skewed towards residential, adding apartments to high-quality shopping centers to create a mix of uses. Acquisitions are also pursued, with both strategies competing for capital. -
Guidance Range and Same-Store NOI
Q: Why is the guidance range wider this year?
A: The wider guidance range reflects expected variability heading into the final quarter. There's nothing significant to read into it. Same-store NOI guidance is conservative due to timing of occupancy gains and some temporary expenses. -
Office Portfolio and Tenant Credit Risk
Q: Any concerns about bluebird bio or other tenants?
A: Bluebird bio is on their watch list but has enough runway into 2026. Outside of bluebird, they are comfortable with the credit quality of their office portfolio tenants. -
Leasing Spreads and Rent Growth
Q: Can leasing spreads improve further in 2025?
A: Leasing spreads may remain strong, often in the high single digits or low double digits on a cash basis. Occupancy cost ratios are around 9%, suggesting room for rent growth. -
Pricing Environment
Q: Are you able to push rents with retailers?
A: Demand is exceeding supply, allowing them to push rents and achieve greater bumps in contracts. They're also limiting tenant lease controls, improving lease terms. -
Capital Recycling vs. Equity Issuance
Q: How do you balance dispositions versus new equity?
A: They continually evaluate selling lower-growth assets versus raising equity. Decisions are based on competition for capital and long-term management. -
Occupancy and Lease Rate Drivers
Q: What drove the increase in occupancy and lease rates?
A: Strong tenant demand allows them to push rents and improve lease terms. They've also shortened the time between lease signing and rent commencement. -
Development's Earnings Contribution
Q: How will development contribute to next year's earnings?
A: Several projects will contribute, such as Huntington and Darien. There may be some drag as spaces are delivered and capitalized interest decreases, but overall growth is expected.