American Assets Trust, Inc. Q3 FY2024 Earnings Call

Welcome to American Assets Trust Inc.'s Third Quarter 2024 Earnings Call. As a reminder, today's conference is being recorded. Please note that statements made on this conference call include forward-looking statements, based on current expectations that are subject to risks and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, as actual events could cause the company's results to differ materially from these forward-looking statements. Yesterday afternoon, American Assets Trust earnings release and supplemental information were furnished to the SEC on Form 8-K. Both are now available on the Investors section of the website americanassetstrust.com. It is now my pleasure to turn the conference over to Ernest Rady, Chairman and CEO of American Assets Trust. Please go ahead, sir.

Good morning, everyone, and thank you again for joining us today. At American Assets Trust, we've always emphasized that our strength lies in our diversified high-quality portfolio, top-tier operating platform, disciplined financial strategy, and our highly experienced and capable management team. These factors position us well to navigate any economic environment. Along those lines, throughout the year, we've been closely monitoring the debt markets. In September, we made the strategic decision to approach the investment grade bond market for our latest issuance. The strong demand led us to upsize the offering after it was initially more than four times oversubscribed. In the end, we issued a 10-year, $525 million bond at a 6.15% coupon. We were fortunate to lock in favorable rates, taking advantage of a market rally leading up to our issuance. This bond strengthens our liquidity and flexibility, addressing all of our debt maturities into early 2027. I'm sure you're all familiar with the saying, better to be lucky than smart. Fortunately, we have checked both boxes as rates quickly surged following our offering, with a 10-year yield climbing over 55 basis points since our issuance. We were able to capture a favorable window in the market. Shortly, my colleagues Adam, Bob, and Steve will walk you through the performance of our various asset segments, as well as Abigail who will cover our financial results and updated guidance. But before we get to that, I'm pleased to announce that our Board of Directors has declared a quarterly dividend of $0.335 per share for the fourth quarter. This dividend reflects not only our solid financial performance but also the Board's continued confidence in the company's future prospects. The dividend will be paid on December 16 to shareholders of record as of December 5. I'd like to take a moment to sincerely thank you all for your continued trust and support. We remain committed to delivering value as we guide the company forward. Now I'll turn the call over to Adam to review our quarterly results and discuss our outlook. Adam, please.

Thanks, Ernest, and I echo your sentiments regarding the success of our recent bond offering. This achievement would not have been possible without the hard work and dedication of our teams across the organization. Their commitment is critical to our overall success, and we’re incredibly fortunate to have such a talented group of employees. I'd also like to highlight the value of our face-to-face meetings with fixed income investors where we have the opportunity to update them on our credit profile and overall strategy. The broad distribution of this offering to high-quality institutional accounts not only positions us well for future issuances but also enhances the liquidity of our outstanding bonds, as we remain focused on maintaining financial flexibility while driving value through active portfolio management. Our portfolio continues to perform well across each of our asset classes, underpinned by our presence in high barrier-to-entry markets. You'll note from our supplemental that nearly 50% of our cash NOI was generated from Southern California, with San Diego being a very important market for us. As we've emphasized before, San Diego's well-diversified economy is growing stronger, driven by the relatively recent influx of the world's major tech and pharmaceutical companies, its military and defense presence, prestigious universities, leading service providers, and the third largest life science cluster in the country. On the operations front, we continue to see gradual but steady improvement in office usage across our portfolio. Recent mandates from companies like Amazon, Dell, Boeing, Goldman Sachs, and UBS, as well as some of our larger tenants, are moving toward a 5-day a week in-office requirement. The rationale behind these mandates is clear: collaboration, innovation, culture, and learning. We believe the quality of our office buildings, prime locations, and top-tier amenities set us apart, contributing to higher utilization and stronger leasing activity compared to our competitors. But the reality is these return to office policies will only move the needle if the organizations actually enforce them. We're hopeful on that. Steve will provide an update shortly on the leasing momentum across our markets in our office portfolio, where despite the broader market challenges, demand for high-quality, well-located office spaces remains encouraging. Our retail segment continues to perform quite well. We've renewed virtually all of our lease expirations this year and have less than 7% expiring in 2025, the majority of which are larger format retailers that we are confident in renewing. Meanwhile, retail leasing spreads have been trending positively for the past several years, with a 4.4% increase on a cash basis and an 18.7% increase on a straight-line basis for Q3 transactions, which was a relatively active quarter for our retail leasing. In fact, our retail portfolio achieved its highest average base rent per square foot in Q3 since our IPO, placing us with the second highest average among our best-in-class peers that we track. Foot traffic and tenant sales have trended positively, as we continue to work with our tenants to ensure long-term success as they adapt to evolving consumer behaviors. On the consumer spending side and in regard to the tenants from whom we receive sales reports, we saw a 5% increase in gross sales at our properties in 2023 compared to 2022. And through mid-2024, tenant sales are up another 5%, further reinforcing the strength and quality of our retail portfolio. While we're aware of potential headwinds in the broader economy, we believe that consumer spending in the densely populated affluent areas surrounding our centers will remain resilient. Turning to our multifamily portfolio, ongoing demand for well-located, quality housing continues to drive stable performance across our multifamily properties, especially in markets where supply remains constrained. We ended Q3 in San Diego with a 93% occupancy rate and a 94% leased rate. In San Diego, leases for vacant units were signed at approximately 3% lower than prior rents, while renewed leases saw an average increase of 6%, resulting in a blended average increase of 3% with minimal concessions offered. In Q3, our Hassalo on Eighth multifamily community in Portland saw leases for vacant units signed at an average 2% increase, with renewed units up by 3%. This resulted in a blended increase of 3%, while our leasing percentage remained strong at 95%, with minimal concessions. Net effective rents at Hassalo were up 4% in Q3 compared to the same period in 2023. Overall, our multifamily portfolio achieved its highest ever average base rent in Q3. Additionally, we saw our same-store multifamily NOI increase by over 4% year-over-year for Q3, and year-to-date NOI is up 6% compared to 2023, with strong collections across the portfolio in Q3. Looking ahead, we remain focused on five key drivers of future growth: first, capitalizing on embedded rent escalations and bringing below-market leases to market; second, leasing up and stabilizing our new office developments and redevelopments, which you'll hear updates on from Steve in just a moment; third, benefiting from the anticipated return of Asian tourism to Oahu; fourth, densifying our existing assets with a focus on unlocking multifamily development opportunities; and fifth, pursuing accretive acquisitions when market conditions align with our strategic goals. With that, I'll turn the call over to Bob to discuss financial results and updated guidance in more detail.

Thanks, Adam. Good morning, everyone. Last night, we reported third quarter 2024 FFO of $0.71 per share. Third quarter 2024 net income attributable to common stockholders was $0.28 per share. Third quarter 2024 FFO increased by approximately $0.11 to $0.71 per FFO share compared to the second quarter of 2024, primarily due to three things. First, as you may recall, we received an $11 million lease termination fee from a tenant at our Torrey Reserve office project in San Diego, increasing the FFO by approximately $0.15 per FFO share in the third quarter. This fee essentially covers four of the remaining five years of base rent under the lease agreement. The space is in turnkey condition, and we are optimistic that we can lease it within the next few years, potentially even sooner. Second, an increase in interest expense reduced FFO by approximately $0.03 per FFO share in Q3 2024 that was not previously included in our prior guidance. The newly issued $525 million public bond in Q3 2024 increased interest expense by approximately $0.025 per FFO share, and capitalized interest was lower by approximately $0.005 of FFO. Third, higher operating expenses at our multifamily properties reduced FFO by approximately $0.01 in Q3 2024. These three items taken together increased the FFO from $0.60 per FFO share in Q2 to $0.71 per FFO share in Q3. Same-store cash NOI for all sectors combined increased by 15.8% year-over-year for the third quarter. Absent the $11 million termination fee, the combined same-store cash NOI would have been flat. Breaking it out by segment and each compared to Q3 2023 is as follows: our same-store office portfolio's NOI increased by 27.6% in Q3, primarily due to the $11 million lease termination fee mentioned earlier. Excluding the lease termination fee, our same-store office cash NOI would have decreased by approximately 3% in Q3, primarily due to known move-outs and rent abatements to new tenants. Our same-store retail portfolio's NOI increased by 7% in Q3, primarily due to higher base rents at our Carmel Mountain Plaza and Solana Beach Towne Centre in San Diego. Our same-store multifamily portfolio's NOI increased by 4% in Q3, primarily due to higher-than-expected revenue at our San Diego multifamily properties, particularly Loma Palisades and Pacific Ridge. Our mixed-use portfolio's NOI decreased by 7% in Q3, primarily due to lower occupancy and higher expenses at our Embassy Suites, Waikiki. Revenue was lower by approximately 4% and expenses were up by approximately 1.5%, specifically in Q3 2024. Paid occupancy was approximately 84% compared to 89% in Q3 2023. RevPAR was $337 compared to $350 in Q3 2023. ADR was $402 compared to $392 in Q3 2023. NOI was approximately $3.6 million compared to $4.3 million in Q3 2023. Let's talk about liquidity. At the end of the third quarter, we had liquidity of approximately $933 million, comprised of approximately $533 million in cash and cash equivalents and $400 million of availability on our revolving line of credit. As of the end of the third quarter, our leverage, which we measure in terms of net debt to EBITDA, was 5.6 times on a quarter annualized basis and 6.0 times on a trailing 12-month basis. Our objective is to achieve and maintain a net debt to EBITDA of 5.5 times or below. Our interest coverage and fixed charge coverage ratios were 3.8 for the quarter and 3.7 on a trailing 12-month basis. Let's switch over to 2024 guidance. We are increasing our 2024 FFO per share guidance range to a range of $2.51 to $2.55 per FFO share, with a midpoint of $2.53 per FFO share, an approximately 1% increase from our previously updated guidance that had a range of $2.48 to $2.54 with a $2.51 midpoint. Most of this increase in our 2024 guidance relates to our retail properties, which have contributed an additional $0.02 per FFO share since last quarter from our lower bad debt and operating expenses and higher percentage rents. Please note that excluding one-time litigation settlement income and lease termination fees collected so far in 2024 that have totaled over $22 million in aggregate, our forecasted 2024 FFO would be approximately $0.20 lower or $2.24 per share at the adjusted guidance midpoint. Additionally, though we will provide formal 2025 guidance in February, for those modeling out next year, please keep in mind that the increased net interest expense from the newly issued $525 million bond will reduce FFO by approximately $0.04 in 2025 as compared to this year, net of paying off the upcoming $425 million of maturities that come due over the ensuing few months. Additionally, we are forecasting approximately $7 million of interest income from invested cash in 2024 or $0.10 of FFO per share that will be meaningfully reduced next year as virtually all of the capital from the bond offering will be used to refinance debt. On a positive note, the potential FFO upside is that we have over $450 million of invested capital between La Jolla Commons Tower III, which was completed in Q2 of this year and is just under 20% leased, but with several active prospects. One Beach Street, which was a total renovation completed in Q4 of last year, has seen an uptick in tour activity, and our three office projects in suburban Bellevue, which we expect the significant renovations to be completed by the end of Q1 2025. All of these buildings are or will be highly amenitized with destination restaurants, cafes, fitness centers, outdoor spaces, and/or conference centers. These buildings, when stabilized at 93% occupancy, are expected to produce over $0.03 per share of FFO. Of course, the lease-up of these properties will also have a positive impact on continuing to reduce our net debt to EBITDA to our target of 5.5 times or less. We'd expect stabilization on these properties in 2026, give or take a year, pending market conditions. While we believe the 2024 guidance is our best estimate as of the date of this earnings call, we do believe that it is also possible that we could perform towards the upper end of this guidance range, primarily if the tenants we reserve for continue to pay their rents and our multifamily properties continue to outperform. As always, our guidance, our NOI bridge, and these prepared remarks exclude any impact from future acquisitions, dispositions, equity issuances or repurchases, future debt refinancings or repayments, other than what we have already discussed. We will continue our best to be as transparent as possible and share with you our analysis and interpretations of our quarterly numbers. I also want to briefly note that any non-GAAP financial measures that we've discussed, like NOI, are reconciled to our GAAP financial results in our earnings release and supplemental information. I'll now turn the call over to Steve Center, our Senior Vice President of Office Properties, for a brief update on our segment.

Thanks, Bob. At the end of the third quarter, our office portfolio was 87% leased, an increase of 40 basis points over the prior quarter. While we continue to experience some rightsizing of existing tenants and a few small office closings, they were more than offset by Q3 leasing activity as follows. In the third quarter, we executed 14 leases totaling approximately 106,000 rentable square feet, comprised of three comparable new leases for approximately 17,000 rentable square feet, with rent increases of 18% on a cash basis and 16% on a straight-line basis, including a 10,000 rentable square foot lease at City Center Bellevue. Seven comparable renewal leases for approximately 41,000 rentable square feet, with rent increases of 4% on a cash basis and 17% on a straight-line basis, including two medical office leases totaling 16,000 rentable square feet at the Coastal Collection Torrey Reserve in San Diego. And four non-comparable leases totaling approximately 4,800 rentable square feet, including a 20,000 rentable square foot lease at La Jolla Commons Tower 3 in San Diego, and a 20,000 rentable square foot lease at 14 acres, previously known as Eastgate Office Park in suburban Bellevue. The leasing momentum has continued into Q4 as follows. We've executed five leases to date in Q4 totaling approximately 27,000 rentable square feet, including a new approximately 4,000 rentable square foot lease at La Jolla Commons Tower 3. We have 10 deals in lease documentation totaling approximately 64,000 rentable square feet. Through the first three quarters of 2024, approximately 60% of the rentable square feet was new leasing, which is the first time since 2019 that new leasing has outpaced renewals on a rentable square foot basis. Our lease expiration exposure is modest through 2025. We're down to just over 2% rolling in 2024 based on year-to-date office portfolio activity, with the average deal size of the remainder being approximately 6,000 rentable square feet. We have approximately 8,000 or 8% of the portfolio rolling in 2025 with the average deal size of approximately 7,000 rentable square feet. Concluding with some insights on our new development La Jolla Commons III in the UTC submarket of San Diego, as noted earlier, we signed a lease for approximately 20,000 rentable square feet on the third floor in Q3, and the lease for approximately 4,000 rentable square feet on the second floor earlier this month. We actually had two tenants vying for the same suite. We received a request for proposal for approximately 16,000 rentable square feet and responded to that two days ago and have a former Tower One full floor law firm tenant that we expect to reengage with in 2025 for approximately 7,000 rentable square feet. We have continued tour activity and interest from numerous less-than-full-floor prospects. In response to this smaller tenant demand, we are currently designing additional spec suites on the fourth floor. Regarding La Jolla Commons amenities, the Tower 3 Fitness Center, which will serve the entire campus, is nearing completion with a grand opening in Q1 of 2025. The Tower 3 restaurant is in the city for permit and is expected to open in the summer of 2025. The Tower 1 café, which will also serve the entire campus, will be under construction in Q1 and will open in Q2 of 2025. Planning and pricing for the new campus conference center are complete and will be submitted to the city shortly. It is also expected to open in the summer of 2025. Lastly, regarding One Beach in San Francisco, as Bob mentioned, there's been an uptick in tour activity and interest lately, but it is a slowly evolving process with nothing substantive to update you on at this time. However, we are encouraged by our prospects for success not only at La Jolla Commons 3 but in One Beach and throughout our entire office portfolio. I'll now turn the call back over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. Today's first question comes from Haendel St. Juste with Mizuho. Go ahead.

Good morning, Haendel.

Hi. Good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. Wanted to ask about the office leasing. I saw a large proportion of the leasing this quarter was outside of the comparable pool. Can you offer any additional color there, something unique about the backfills, the TI spend, or the re-leasing spreads or deals that made them fall outside of the comparable pool?

They were vacant longer than six months. So if it's a vacancy that's been there for longer than six months, there's no rent to compare it to. One of those deals was a new lease on the third floor of La Jolla Commons III, which is brand new. The other was a full-floor deal at 14 acres or Eastgate Office Park in suburban Bellevue. Both were long-term deals. TIs are in line with new long-term deals at about $10 to $15 per square foot per year of term. It's that simple. They're new leases with no backup.

Got it. That's helpful. And I guess you've made steady progress on the office leasing. It seems that interest is rising, and growing activity is also rising. Can you offer a near-term outlook there within the office portfolio, maybe a forward occupancy marker by or target by year-end 2025 or 2026?

I think it's premature to give you that figure. You touched on it. We look back 2023, 2024, and we have looked into 2025. We've talked about the headwinds we faced. With the attrition through COVID, companies closing their doors or rightsizing, we've managed to turn the corner. We're now generating positive net absorption. I mentioned that 60% of our leases are new leases versus renewals. So we're optimistic moving forward. We do have some known move-outs, including the MEI move-out that we had talked about for 45,000 feet, which is about 1% of the portfolio. We also know at First & Main, we're going to get back space from CLEAResult. We've been unfortunate there. We've already backfilled one floor of CLEAResult, five floors, and we're in negotiations on a partial backfill of another floor. We have two prospects for about 15,000 feet each looking at that CLEAResult space. So we're optimistic there. This is a long-winded way of saying our leasing activity, tour activity, and proposal activity are up. It's dominated by new leasing versus renewal leasing, and we have net absorption we're working on right now in proposals and leases in documentation. I suspect 2025 is going to be a much better year than 2024.

Hey Ravi, this is Bob. Just to add to Steve's comments, in the fourth quarter we just don't know what's going to happen in terms of leasing successes. Steve is doing a great job. We will give a very detailed forecast in the fourth quarter for 2025.

It’s Ernest. As Bob pointed out, Steve is doing a good job. We have properties that are amenitized well in good locations, and we have the financial capacity to do the TIs to get our tenants in and keep them satisfied, not satisfied, leased. That's a big factor in today's market.

I'd give you an example of that. We earned proposals with a tenant for a space at Eastgate 14 acres. Prior to the CEO's recent tour about a week ago, after that tour and seeing the renovations, he dropped all of the other potential move opportunities and it's now just between us and a renewal. That's a case in point of our renovations starting to really pay off in that asset.

Got it. That's great color. Thanks for that. Just one more here. A number of your peers, particularly within shopping centers, have been more involved with transactions recently. What's your level of interest in acquisitions? Is there a particular segment that's attractive to you? And how would you potentially fund it?

We have a number of options available: first of all, to manage our debt; second of all, to make an acquisition; third of all, there's not much we're interested in disposing of. We have all those factors, and that's what management is for, and we continue to look at all those options and weigh them. So I'd like to tell you that this is what we're going to do, but it depends on how the opportunities present themselves and what the opportunities are. Our first focus is staying in the markets we're in because we know them. As this unfolds, you'll be amongst the first to know because we don't know yet ourselves, but we keep looking.

Got it. Thank you so much, guys.

Thank you. Thank you for your interest, sir.

And our next question today comes from Reny Pire with Green Street Advisors. Please go ahead.

Hey. Good morning, everyone. Thanks for taking the question. So, thinking about the performance of your multifamily and retail assets year-to-date, which have shown continuous outperformance. What are your expectations for Q4? And then maybe, if there's any insight into 2025 performance? I know it's a little early. Any color would be helpful. Thanks.

There's so much uncertainty in the world we live in. I would hate to make a projection. On the other hand, I can tell you that all of our assets are in first-class shape, and we'll do as well as anybody and hopefully better. We've used this time to upgrade several of our multifamily properties, and of course, our retail is always monitored and kept in first-class shape for our tenants. I've never seen so much uncertainty in the world we live: interest rates first, devices second, elections third, retail fourth, the economy fifth. As soon as we know where we're going, we'll know— as soon as we know where the country is going a little better, we will determine our own path. I can assure you we will do as well as anybody and hopefully better than most.

Yeah, great. Thanks for the color.

Okay. Thank you. Thanks for the color or the lack of color; we did the best we can but you know what we're going through.

And our next question today comes from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

Hi, thanks. Good morning. I just wanted to zoom out a little bit. Bob, Steve, you mentioned the $0.30 of FFO upside from La Jolla Phase 3, One Beach, and the three assets in Bellevue. Approximately how much of that is attributable to the stabilization at the three Bellevue office assets? And with the renovations expected to be completed at the end of the first quarter next year, I think you said, and with Amazon and others calling employees back to the office, what's the timeline to get those projects stabilized?

From the $0.30, we have about $0.20 that relates to La Jolla Commons. It's actually about $0.18 for La Jolla Commons, $0.02 to $0.03 for One Beach. The balance is really the suburban office market that we're finishing up in Q1 2025. It's too early right now to give you a forecast on that, Todd. We'll provide a very detailed forecast and how we see it for 2025.

Do you expect leasing to pick up once the renovations are complete? Should we assume or anticipate a quicker ramp in leasing once the renovations are completed after the first quarter, or do you think it could still take some time for leasing to come to fruition?

Todd, I think Steve has answered that question. I'd just like to add an element of uncertainty. The only certain thing that I'm sure of is that we will do as well as anybody and you will be pleased with the outcome given the circumstances we're operating in because there is so much uncertainty. But they're great properties. We're positioning them well, and Steve is doing a great job.

Todd, you're correct. Completion of renovations and amenities accelerates leasing. There's no question. It's tough for people who aren't in real estate to envision what it will be. Until they can experience it firsthand, and again I mentioned a CEO that just toured Eastgate, it’s near completion, and he was blown away by it. He said this is fantastic. He eliminated the competition except for the renewal. La Jolla Commons III, I went into detail about the various amenities there. Once those are in, it creates a different level of activity at the asset, and leasing accelerates. That being said, activity is picking up there as well. I also mentioned that one of the suburban assets, Corporate Campus East III, now called Timber Ridge, we have two pending deals there that if we're successful will bring us to 97.5% leased. Then I've got Bel-Spring, which is relatively small—it's now Timber Springs. It's 93,000 square feet, and we're in preliminary discussions with a local hospital that's paying medical office premium rents for administrative office space. We've got a full floor plus available. If that were to come to fruition, that would stabilize that asset as well. Then it leaves you the heavy lift at Eastgate, which is a major renovation that's near completion and it's showing beautifully now. We even mentioned One Beach, where tour activity is up, and we've got a couple of prospects we're talking to. So, I'm encouraged going into 2025.

The location of each of these properties is as good as it gets. Eastgate 3 is just off the freeway and it's in the middle of a park, so that has all the amenities. La Jolla Commons III is now effectively in the commercial center of San Diego. We have the location, the properties, excellent management, and opportunities to take advantage of.

Okay. And for La Jolla Phase III, Steve, what's the percent leased today? It sounded like another deal was signed in October after the quarter ended. You talked about the pipeline a little bit. What's leased? And when will we start to see cash rent commence at that asset?

We're currently 21% leased. The PTC has already commenced. The 4,000-footer I mentioned will commence early next year. The third-floor tenant commences probably in August or September at the latest. We just responded to the RFP I mentioned for 16,000 feet. That would commence as soon as possible. There's really a desire to accelerate that. So that could commence as early as June or July next year if we can get through the city. That deal is solely focused on us; it's just a matter of putting it together. With the RFP we just responded to, we'd be up to 28.5%. Numerous 15,000-footers are touring or have toured. I mentioned that it's predominantly a less-than-full-floor tenant market right now. We are proactively designing additional spec suites on the fourth floor. These will range from 3,500 to 7,000 square feet in four suites. There's good traction in that segment.

Okay, that's helpful. Lastly, Bob, you walked us back to $2.24 per share from the revised 2024 midpoint excluding the one-timers this year. You talked about some of the interest expense headwinds and other moving pieces, some of the move-outs. Does the $0.30 of upside begin to have an impact? Do you expect to be able to grow off the $2.24? Could 2025 be lower with a sharper ramp-up in 2026 and 2027 from all of this upside materializing a little bit later on?

Yes, I wish — it's just too early to give you the other insight on that. A few months from now, we'll give you that guidance in 2025. There are still things happening—positive but there are numbers going up and down and I'd prefer to just give you the guidance all at once for 2025 in Q4, if that's all right.

And our next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead.

Good morning.

Hi, guys. This is Matt Lichtman on for Ron. Thanks for taking the time this morning. I was just wondering if you guys could talk through the dynamics at play regarding the comparable cash blended leasing spreads, particularly in office and retail for this quarter. Also, how should we be thinking about that as we go into 2025? Thanks.

You want to handle that Bob? You want to hit this Steve?

It's interesting. I saw some comment about reading a trend into this quarter versus last in terms of spreads. It varies—if you look back at the last four quarters, it varies quarter by quarter. Every deal impacts it differently. The best news is it continues to be positive. We're not going backwards; at this point, we haven't. We continue to move ahead. But I see continued movement along the same lines as we have been in the last four quarters, which is positive. You saw one quarter it was 22%, another quarter it was 4%, another it was 8%. It just depends on the deals we're talking about.

And Matt, on the retail side, we've been trending positively since coming out of COVID on a cash and GAAP basis for those retail leasing spreads. We would assume and expect those to continue to trend positively going forward. Obviously, we got to see what's going on in the economy and post-election, but everything seems to be trending well because our portfolio is so well leased on the retail side. We're not anticipating any negative movement, particularly with inflation driving costs up and rents up—we would imagine that being a tailwind to us moving forward in all of our new lease deals. Yes. The differential between the cash and the GAAP, as you well know, would be the abatement on the front end of a retail. That all gets spread out. It's actually one of the drivers we see in the differential between the cash and the office. That's why the office has continued to outperform throughout the last several quarters.

Got it. Thank you, guys.

Thank you.

I think to sum it up, we have very good locations, we don't leave money on the table—we deliver everything we say we're going to deliver. I think that the tenant world and the leasing world take that into account.

Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.