Ladies and gentlemen, thank you for standing by. And welcome to the Q1 2022 Acadia Realty Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to turn the call over to your host, Rielle Green. You may begin.

Good afternoon. And thank you for joining us for the first quarter 2022 Acadia Realty Trust earnings conference call. My name is Rielle Green, and I am the Director of ESG at Acadia. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934. And actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company’s most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, May 3, 2022 and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia’s earnings press release posted on its website for reconciliations of those non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue and we will answer as time permits. Now, it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today’s management remarks.

Great job, Rielle. Thank you. Welcome everyone. Good morning. We had another solid quarter both in terms of our internal growth, as well as our external investment activities. And while, over the past quarter, there has been significant volatility in the capital markets and legitimate concerns around inflation and economic growth. When we look at the fundamentals of our business, driven by tenant performance and tenant demand, the momentum that began a few quarters ago continues to exceed our expectations. Then when we couple this internal growth with external growth, either despite capital markets volatility or more likely, as a result of it, our leasing traction plus our investment activity are positioning us for solid long-term growth. In terms of leasing and tenant performance, as we noted last quarter, the reopening that began in early 2021 resulted in our second half NOI last year increasing by over 5%. And this above-average growth is continuing to play out this year as well. Over the last quarter, we saw an improvement in our collections, and our leasing activity. And most importantly, tenant demand and market rents continue to exceed our earlier predictions. Now this is not to suggest that inflation, supply chain or recessionary issues are not relevant. But let's not lose sight of the strength of the job market and the strength of the consumer either. And as we think about which segments of our portfolio are likely to be the most resilient in this current environment, ultimately, it's going to come down to where consumer spending will remain strong which retailers have pricing power to hold on to their top-line and their margins or have wider margins to absorb supply shocks. And then most importantly, where can we as landlords capture that growth? And from that perspective, while I think most segments of our portfolio should be in good shape, the street portion of our portfolio seems to be particularly well positioned to absorb the speed bump of inflation. And then the affluence of the consumers that our retailers serve will likely insulate our retailers in the event of a recession. In terms of inflationary pressures, a few things to keep in mind. First, our street leases generally have stronger contractual growth and more fair market value rent resets than in our suburban assets. Second, tenant improvements as well as operating expenses are a much lower percentage of occupancy cost for our street-based retailers thus less impactful on net effect of rent growth. Third, rents at many of our streets are at cyclical lows. And retailer sales, they're already rebounding rapidly. This means that many retailers are already doing sales well in excess of their pre-COVID volume. While rents are still in the early stages of recovery. Now sales performance both top-line and bottom line is obviously a critical driver of rent. But the other key driver, the supply demand ratio after several tough years, the supply demand dynamic is finally turning in our favor. For instance, on Green Street and Soho, a year ago, there were 14 vacancies on this corridor, today there's one. Similarly for M Street and George Town, which got hit hard even before COVID. But because we and our partners control enough of the street, it has been rejuvenated in the last year by recent arrivals, including Everlane, and last quarter we added Glossier and Gloss Lab. So our forecasts for a multi-year rebound in our portfolio is playing out nicely. Now I appreciate that after several years of powerful headwinds, hitting our retailers and hitting our portfolio, there remains an understandable fog around the rebound in physical store retail especially in the urban corridors. But whether it's luxury in Soho, digitally native on M Street, or advanced contemporary and Melrose Place, the recovery is happening faster and stronger than we expected. And as you have been reading in the papers and hearing from a wide variety of retailers, customer acquisition costs, halo effect profit margins, they're all converting bricks and mortar skeptics into long-term tenants. Then turn into the new investment side. Over the last couple of quarters, we're also seeing nice growth in investment opportunities, both for our core portfolio as well as for our fund. On the core side, our focus has been on acquiring assets in high barrier to entry markets where tenant performance and demand are likely to drive market rents materially higher over the next several years. What we're focused on there is picking the right retail corridors, where our retailers will want to cluster for a vibrant shopping experience and then making sure that there are adequate barriers to entry such that the retailers are reluctant to move off the block. And some of the markets we have successfully done this include Armitage Avenue, Chicago, Melrose Place in Los Angeles, Green Street in Soho, Greenwich Avenue in Connecticut. Now, the markets I just mentioned, we're not immune to the headwinds of COVID. But they are rebounding quickly, and many are already performing better than pre-COVID. Our goal for core investments is to have a combination of accretive going in yield and strong embedded long-term growth. This growth will come from contractual growth, or rebound in market rents, as well as value add components. For instance, in January, we closed on a $100 million portfolio in Williamsburg, Brooklyn. The portfolio is on Bedford Avenue wrapping third and fourth streets. Our portfolio is adjacent to the Apple store with our tenants ranging from Sephora to Sweetgreen, but also 23 residential units and a supermarket that's significantly below market. Thus we have accretive going in, strong contractual growth, and then long-term value add opportunities as well. We made this investment through a recapitalization from the existing owner borrowers and lenders, all whom we knew well, and this enabled us to complete the transaction before it went to market. We also acquired one of the great corners in Soho on the Corner of Spring and Green with Bang & Olufsen as our tenant here market rents are rebounding quickly. And this key corner has strong contractual growth plus is poised for long-term upside. Then in West Hollywood and Los Angeles we added to our presence there with an acquisition on Beverly Boulevard again, strong contractual growth and long-term upside from potential redevelopment down the road. Finally in Dallas, we closed on a portfolio on Henderson Avenue, which is part of the Knox-Henderson corridor. We have been studying the Dallas market in general and Henderson Avenue specifically for many years. The positive demographic shifts over the last several years have turned Dallas into a must-have market for many of our retailers. And Henderson, given the popularity of Knox-Henderson from a live-work-play perspective, will be an ideal entry point for many of our retailers. As I mentioned before, we're always looking for corridors with tenant demand, and tenant performance that's similar to our entry in Armitage Avenue in Chicago or Melrose Place in Los Angeles. Additionally, we look for locations where the barriers to entry from a supply-demand perspective are favorable, where the current market rents are competitive, and where the tenant performance enables long-term rental growth potential. Henderson checks all these boxes. Because of the significant growth in the residential market, in Dallas in general and Henderson market specifically, the retail rejuvenation of this corridor is the next logical step. Henderson has long been an important corridor for great restaurants and a variety of local tenants. And then, more recently, the digitally native retailers began showing up. Several years ago, it became clear that Henderson was ready to be taken to the next level. And prior ownership was successful in obtaining the zoning approvals for some key redevelopment, a process that took several years and was quite comprehensive. But before the plans can be implemented, COVID hit. We're now in a position to execute on those plans. The shorter-term value add for us includes some releasing that's already in the works, then adding some important new retail and parking in the midpoint of the street that will further connect the dots. And then further down the road, the Sprouts Supermarket parcel will be a great redevelopment opportunity, which can add further densification and further upside. The size of this portfolio gives us a good initial starting point with additional investment opportunities down the road. From a pricing perspective for all of our acquisitions this quarter, while going in yields will vary, we are making sure that our acquisitions are both accretive and have the kind of long-term growth that complements our existing portfolio. We see contractual growth from these acquisitions being about 3%, then incorporating growth from tenant roll and mark-to-market should take us to about 5% compounded annual growth. And then with the addition of value add redevelopment components, the growth and accretion is going to be even higher. Turning to the fund side, and I'll let Amy discuss this in detail. Last quarter, we closed on $130 million of deals that were previously under contract. Two deals are consistent with our Fund V strategy. And our fund investing remains very complementary to our platform and very profitable. Even with the rise in interest rates, we are still finding plenty of deals that pencil out. So in short, our internal growth driven by strong leasing and our external growth driven by our core and fund investments puts us in a good position to continue to create the growth that we saw last quarter and we see going forward. I want to thank our entire team for their hard work last quarter. And now I will turn the call to John.

Thanks, Ken. Good morning. We are off to a strong start with our first quarter results and full-year 2022 earnings guidance exceeding our expectations. Our quarterly results reflected strong internal growth of nearly 10% along with the accretion from nearly $380 million of core and fund investments. Our core balance sheet remains in great shape. We have ample liquidity with no meaningful upcoming core maturities. And as I'll walk through shortly, substantially all of our core debt is effectively fixed for the next several years, thus mitigating our earnings volatility within our core portfolio should interest rates rise as anticipated. Now dive into the details, starting with our quarterly results. Our first-quarter earnings of $0.33 a share came in ahead of our expectations driven by four key factors. First, profitable rent commencements on new leases, driven by the sequential occupancy growth of 100 basis points this quarter and our street and urban portfolio. Second, we are continuing to see strengthening tenant credit with improvements in both our current period reserves as well as cash collections on past due accounts. Core collections exceeded 98% for the quarter coming in above our expectations. Additionally, and aligned with the assumptions outlined in our initial guidance, we recognized the benefit of approximately $1.3 million, or a penny a share of FFO from prior period cash collections. We had assumed $0.03 to $0.07 of cash recoveries from prior collections within our initial full-year 2022 guidance. And we are on track to land within that range with an expectation that the majority of these amounts will show up in the first half of the year. Third, we are off to a strong start against our investment goals, closing on approximately $380 million of accretive core and fund deals. Fourth and finally profits from our fund business, with a gain of approximately $1.5 million, were over a penny a share of FFO for the monetization of a Fund III investment that Amon will provide additional color. In terms of our 2022 earnings guidance, we conservatively increased our full-year guidance, which at the midpoint represents year-over-year FFO growth in excess of 13%. And I am optimistic that we have further earnings upside should we see this positive momentum continuing. Now moving on to our first-quarter same-store NOI. We also saw strength in our same-store NOI with growth of 9.7%. The growth over the comparable period was driven by three items. First, improved credit conditions with significant improvements in credit losses and abatements. Second, occupancy increases, including sequential improvements in our street and urban portfolio of 70 basis points this quarter. Third, positive cash spreads on leases that commenced during the quarter, including growth in excess of 15% on street leases that took occupancy during the quarter. Now, it's also worth pointing out that our 9.7% same-store growth this quarter is inclusive of the headwinds from cash recoveries that were included in our comparable prior results. As reflected in our numbers, we are on track to achieve our occupancy goals, but more importantly, and as Ken mentioned, we are feeling increasingly confident that we should be able to beat our rent expectations. Thus, we remain optimistic on both our 2022 same-store growth, but more importantly with our continued expectation of 5% to 10% internal growth for the next several years. And this optimism is being fueled by the continued leasing velocity, along with improving rental rates that we are seeing within our core portfolio. In addition to a 50 basis point improvement in our physical occupancy this quarter, we further increased our leased occupancy by an additional 90 basis points to 94.1% on March 31. At a lease rate of 94.1%, the spread between our signed but not yet open space remains at an all-time high of 360 basis points. This represents approximately $7.5 million of pro-rata ABR or more than 5% of our annualized first-quarter base rents. Over 90% of the signed but not yet open leases are scheduled to commence during 2022, predominantly in the second half of the year. It's also worth pointing out that consistent with what we saw on our same-store growth this quarter, not only are we seeing growth from lease ups, we're also seeing meaningful growth in rental rates, with embedded rental growth in excess of 15% on these signed but not yet opened leases as compared to the prior rents on the same spaces. While we are seeing solid growth across our suburban, urban, and street portfolios, it's worth pointing out that our current multi-year model has our street and urban portfolio outperforming our suburban assets by approximately 300 basis points. During the quarter, we recognized GAAP and cash spreads of approximately 11% and 8% respectively, on executed new and renewed leases. As we've said in the past, it's worth a reminder that not all these spreads are created equal. For example, with our own portfolio, assuming a 10-year lease term, we need to print a cash spread in excess of 25% on a suburban lease to achieve the equivalent economics of a 10% spread on a street lease. This is driven by the fact that we generally receive 3% contractual growth on the street leases compared to 1.5% growth from suburban. Lastly, I wanted to touch on a few items on our balance sheet. Starting with our strategy of managing our earnings exposure to interest rate volatility within our core portfolio. It's important to keep in mind that our overall core leverage is pretty modest with a debt to GAV ratio in the low-30% range. Our strategy is to utilize the interest rate swap market to hedge substantially all of our core long-term variable rate exposure. Thus, our core floating rate exposure, which ranges between 10% to 20% of our core debt obligations is generally limited to the short-term borrowings we use to fund our very profitable structured finance book. Furthermore, in addition to locking in substantially all of our core variable rate exposure through the swap market, we have virtually no upcoming fixed rate maturities within our core portfolio for the next several years. The final point on interest rates is our fund business. Amy will provide a fund debt update. But as you would expect, given the transitional nature of our fund investments, and the need for flexibility, we have a higher percentage of variable rate debt. But given our pro-rata ownership of approximately 20% in our funds, the earnings impact is minimal with forward-looking interest rate expectations already reflected in our guidance. Now moving on to acquisition funding, we have funded substantially all of our acquisitions, issuing approximately $125 million of equity year-to-date, inclusive of the roughly $95 million that we had announced on our prior call. The equity was sold under our ATM program at a gross issuance price of approximately $22.50. As a reminder, we have various avenues to access capital to fuel external growth, whether it's from the promotes embedded in our fund business, repayments from our structured finance book, monetizing our ownership interest in Albertsons, or retained cash flow. Our core balance sheet is in great shape with no meaningful core debt maturities, along with ample liquidity on our corporate facilities. In summary, we had a very strong start to the year with increased optimism not only on our 2022 earnings, but also on our expectations of multi-year internal and external growth. I will now turn the call over to Amy to discuss our fund business.

Thanks, John. Today, I'd like to provide a brief update on our fund platform, beginning with Fund V. First, we are continuing to selectively add to our high yield shopping center portfolio, which now totals approximately $1 billion. During the first quarter and as detailed in our press release, we acquired two properties in Texas for a total of $130 million, both in partnership with DLC Management. Our blended cost base for these two is approximately $170 per square foot, which represents a substantial discount to replacement cost. La Frontera Village in the Austin MSA is a 535,000 square foot open air shopping center anchored by Kohl’s, Burlington, Marshalls and Old Navy. The population within a 5-mile radius exceeds 250,000, making it the second most dense market in our Fund V portfolio. Since acquisition, we have already executed a lease with Groupon for 21,000 square feet, increasing the lease rate from 90% to 94%. Next, Wood Ridge Plaza in The Woodlands is a 210,000 square foot retail property comprised of three retail centers located along the highway traffic interstate 45, which sees nearly 240,000 vehicles per day. The property is currently 88% occupied. Key tenants include Kirkland's and Sketchers with an opportunity for some value-add leasing. Including these recent acquisitions, we've now allocated approximately 85% of our $520 million of Fund V capital commitments. As previously discussed, our Fund VI investor discussions are progressing. In the meantime, we still have approximately $200 million of gross buying power in Fund V, which we expect to deploy before the end of the fund’s investment period in August. While we haven't yet seen a material shift in cap rates, due to the bumpiness in the capital markets, we are seeing that certainty of execution matters more to our sellers and sponsorship not only matters more to our lenders, but also seems to be having a material impact on borrowing spreads. Overall, we like how we're positioned on both fronts. Turning to dispositions this year, we remain active sellers across our fund platform. For example, in Fund III, as previously discussed in February, we completed the $66 million sale of Cortlandt Crossing, a supermarket-anchor property in Westchester County, New York. Additionally, recall that Fund III previously owned a portfolio of 11 self-storage properties under the Storage Post banner. This portfolio was sold in 2012, but fund three retained its 50% interest in Storage Post's operating company. During the first quarter, this remaining OPCO interest was monetized for $6 million, of which the REIT's share was $1.5 million. As a result of these recent dispositions, we are now within striking distance of our embedded promote in this fund. Additionally, during the first quarter, we completed sales of the last two properties in Fund IV’s Northeast Grocery portfolio for a total of $45 million. Turning to the balance sheet. As of the first quarter, we have $365 million of fund debt that is expiring in 2022 without extension options. This excludes our two capital commitment-backed subscription facilities. Of this amount, about 30% or $108 million is spread over four loans and is expected to be refinanced or extended in the normal course of business. The balance or $257 million pertains to City Point, our mixed-use property in downtown Brooklyn, which is anchored by Target, Trader Joe's, and Alamo Drafthouse. The City Point debt matures during the third quarter, and we are well underway on a refinancing. While we have had to navigate this property through a few different challenges, among them, the global financial crisis and the COVID-19 pandemic, we believe that City Point is well positioned to thrive in the years ahead. For example, over the past decade, the population within a 10-minute walk at City Point has grown 52%. At the property level, momentum continues to increase. Since August of last year, we've executed six new leases. The largest of these is Primark, an exciting addition to our anchor lineup. We continue to position City Point as a must-visit destination for necessities, as well as specialty shops, food, and entertainment. So in conclusion, our fund platform remains well positioned with a successful capital allocation strategy and a portfolio of existing investments that continue to march towards stabilization. At this time, we will open the call to your questions.

Our first question comes from Todd Thomas with KeyBanc Capital.

Hi, thanks. Good morning. First question around investments, pretty strong start to the year in terms of capital deployment. Is there any change in the updated guidance for core and fund investment activity relative to the $300 million to $500 million range that was included in the initial guidance? And then can you comment a little bit more broadly around the investment pipeline, and whether you're changing investment hurdles for either the core and or the funds where you would tend to utilize a little bit more leverage?

Yes, Todd, regarding your first point. We did not revise any of the specific detailed assumptions we provided at year-end. Now, I'll hand it over to Ken for an update on our pipeline and our current thoughts on that.

Yeah. So, Todd, I think it's fair to assume that our acquisition team is not going on vacation, and especially because our fund business is not dependent on the public capital markets. We have much more latitude on that side. So you should expect to see us revise that or certainly update on a quarterly basis. We've always struggled with two months ago putting out our annual guidance and then having to update each component of it. But since we have met our yearly goals already, I think that would be a fair assumption to expect us to be busy. As it relates to pricing in the capital markets. I do think especially for the Fund V suburban shopping center acquisition. I do think we will be able to be somewhat more opportunistic, because the selling community while trying to digest the movement in rates is perhaps moving on pricing or perhaps not. What I will tell you already is that certainty of execution, having buyers sponsors who have a proven track record of closing has all the capital everything that our fund business stands for proves that. That proven track record and certainty of execution is of increasing importance already. We're also seeing that on the borrowing side where the spread for first tier borrowers versus the general population of buyers has shifted and that should also work to our benefit. Final pieces, I'm not sure exactly what it means around specific going in yields, but I believe we can continue to buy high-quality fund assets at a discount to replacement costs where our going in yield represents the majority of the growth, but tenant interest remains stronger than we expected three months ago, six months ago, and twelve months ago. There may be more value-add upside in some of the deals that counterbalance some of the concerns around interest rates. Now on the core side, I do think again, because of certain corridors that are ready to be, we see long-term growth dependent on our capital recycling opportunities, dependent on our cost of capital in the public markets. There it’s less about interest rates we don’t use a lot of debt. And although it doesn’t move in pieces. But I do think there are going to be continued interesting accretive buying opportunities once we get through the current speed bumps that we're all facing.

Okay, that's helpful. And then if we could just shift to the investment in Dallas, in the quarter along the Knox-Henderson corridor there. Can you talk about what kind of development and sort of redevelopment spend, you're contemplating as you look ahead and what the expected timeframe and yield expectation on any incremental spend might look like?

We will focus on investing additional funds only where the returns justify it. If the project resembles more of a redevelopment rather than simply re-leasing space, we would expect to see unlevered yields in the sevens, eights, and higher. Currently, we believe there is sufficient tenant demand to support this. However, we will only proceed if it significantly adds value. So far, everything is on track. As I noted earlier, the previous ownership managed to navigate a lengthy and complex approval process quite well, though they faced delays due to COVID. We are positioned to advance this corridor, continuing the vision of the prior team, with hopes that some members from that team will remain involved due to their belief in the project. Our goal is to transition from a food and beverage-centric development to a mixed-use environment that includes a variety of retailers, which our current tenants say they are eager for, and the local population appears ready to embrace. We anticipate this growth will occur over the next 24 months to five years. We plan to invest an initial $85 million, with a commitment of $100 million regardless, and potentially increasing that investment further if the conditions are favorable. We aim to strategically position ourselves to maximize our efforts in this turnaround, recognizing it as a valuable opportunity for profitable capital deployment in a market distinct from Soho but complementary to numerous projects you’ve seen with us, like Armitage Avenue in Chicago, M Street, and Melrose Place in LA, among others. This aligns well with demographic trends and strengthens our role as a leading player in street retail.

Okay, that's helpful. Just to clarify, are you saying that the investment along that corridor could double or triple over that timeframe? That would mean a total investment opportunity of around $200 million to $300 million in that corridor.

And let me explain that. So what we've learned over the years, is while we may want to take a small investment in a marketplace and see if we can grow it, what always works best for us is where we can make a meaningful enough investment day one. But then also through additional acquisitions, additional redevelopment, really dominate that given marketplace. This has all of those attributes for us, including having a spine where retailers are going to want to congregate and not move down the road because supply and demand barriers to entry for our retailers matter.

Our next question comes from Linda Tsai with Jefferies.

Yes, hi, good morning. What is competition like for buyers of street retail assets? I think previously, you said you were seeing less competition. And if this is still the case, who's dropped out?

So let's be clear in our world, everything's retail. So we think, oh, my gosh, there's competition everywhere. But retail, even open-air retail is still in institutional disfavor. So it's just a smaller group overall. Most of the capital, as we all know, that has re-entered has been around the defensive, COVID-friendly supermarket-anchored and a variety of those types of investments. The street retail investors have prior cycles; it's not that they necessarily dropped out. But if you think about even within the public markets, there were two or three primarily office REITs that have or had strong retail presence. They're not active. There was GGP, which had a very active presence, and I preferred not to compete with them, given the deals they had, obviously moved on through their privatization and focus elsewhere. And in the private markets, there are good competition. There's one or two funds out there that are very smart and very good. We have to work hard to stay one step ahead of them. There are two or three other institutions. But compared, Linda, to prior cycles, where we're seeing the kind of rental recovery, not only in Soho but in a variety of other markets. In other cycles, there has been much more competition. And thankfully, that's not there right now. It's still a tough business made that much more difficult by the volatility in the marketplace. But there's just less today. Same business.

Thanks. And then it seems like there are barriers to the urban recovery thesis. What are your street retail tenants telling you as it relates to traffic and sales in terms of how they're trending relative to expectations?

Yeah, so the first thing. And this caught us off guard, climbing out of COVID. We thought in a live-work-play environment that work was going to be the critical piece. Thus return to office activation was going to be the critical leading indicator. Turned out we were wrong. Return to the apartment was the leading indicator. And for any of you trying to rent an apartment in Manhattan, good luck. For those of you who rented a year ago and think you're going to renew a few percentage points, good luck. Because that market has bounced back. And what we saw is with the residential rebound, our retailer sales rebounded commensurately. So it's not been a return to work, which was the old urban narrative. It's really about a different dynamic. Now, that's not true everywhere. Some markets are still lagging. And certainly, those markets that really are 18-hour urban office markets, or Midtown Manhattan, if you own a salad bar, yeah, you're going to feel it. Thankfully, that's not our business. While there are some areas that we look forward to the rebound, but the vast majority of what I've been talking about, our retailers are telling us they are not only comping positively to the dark days, they're comping positively in their sales compared to their pre-COVID sales. That's because while we can be negative about a whole bunch of different issues in the economy, we can't lose sight of the fact that physical retail real estate has been re-embraced by so many tenants because it's being backed by the shopper. They want to get out. Thus, those sales are showing up already.

That's helpful. Thank you. Just last one, when you look at the core acquisitions year-to-date, how do you compare the different growth profiles between the Henderson assets, West Hollywood, and Spring Street?

So a lot of it depends on what are going to be the key drivers of above contractual growth. If it is simply top-line and then bottom-line sales growth, then some of them just through roll on a Spring Street might be really strong. My hunch is that while we will see above contractual growth across the board for everything you mentioned, my hunch is that some of the more significant value-add redevelopment densification can occur to almost all of the deals we talked about. Because in most of them, we own the ground level street retail and above that the redevelopments overtime will then provide that next layer of significant profit as it should, because there we're going to have to roll up our sleeves and add more value. So we'll see over the next several years what I like though. Day one if you have 3% contractual growth, and almost without exception we do. And if day one, it looks like tenant sales and thus tenant demand and thus our rents are going to grow in excess of that 3%, we feel like we're in a pretty good position to complement our existing strong internal growth. Then down the road, as some of these other events occur, it can be that much more accretive. Thank you.

Our next question comes from Michael Bilerman with Citi.

Hey, it's Michael. Ken, I'm curious about your acquisition pipeline, which has clearly been growing over the past year. I understand you started looking for opportunities even before COVID. You mentioned that the environment has shifted significantly in the last 30 to 60 days, particularly regarding interest rates. How are you evaluating your pipeline? How are discussions with your partners and retailers progressing? Specifically, are recent factors like inflation, interest rates, and the war affecting how you underwrite and approach transactions?

Yeah. And, Michael, the challenge with you is I'm always trying to find a song for me. So this and I'm struggling, but I may have to chime in later, when I can think of it. But let's touch on a few different pieces because there is just no doubt that there has been so much change over the last 30-60-90 days. For us to stick our heads in the sand would be inconsistent with who we are as a company. Let's start on the retailer side; I spoke to a friend of mine, who's the CEO of a major retailer this morning, just to double-check. Are you seeing any signs of the consumer tapping out in your different businesses? The answer was not really. Now, let's just keep in mind what this means. First of all, the shift from the COVID spend, the pull forward for that kind of retail versus what you're seeing now, that shift is still playing out. Secondly, the consumers are in strong shape. They feel very good about their jobs, especially again for the type of retailers, Michael, that we are primarily doing business with. We do business with dollar stores. We do business with a variety of other retailers ranging from Target to supermarkets. But on the discretionary side, that’s the one that I'd say we need to watch the most closely given all these uncertainties. The consumer is showing up in the stores because they want to get out and because they have dollars in their pocket and because they feel good about their jobs and if they've owned a house for the last couple of years. They feel good about that. The retailers climbed out of this feeling very good about bricks and mortar as part of omnichannel. So in terms of demand, so far it's holding up. We're being more cautious in terms of watching it more carefully thinking about their balance sheet, thinking about the structure of leases, certainly considering inflation. Then in terms of the capital markets. The negative is borrowing costs are up. The positive around this is there were many sellers. You and I discussed this during the dark days of COVID. If you wanted high-quality retail real estate, you froze. For the most part, we didn't see a lot of good trades around that stuff. They started coming back, they started saying, you know what, we'll sell to the highest bidder because there's so much capital. Now they're saying, I need certainty, execution. I need to know this is getting done. That endures to our benefit. So I can't tell you what this means in terms of pricing, or what it means in terms of opportunities. But it's not all bad. Although a lot of the headaches that our economy has to go through are unfortunate, they are also probably inevitable. And we get through this.

Are you adjusting pricing on the deals to reflect the current environment? I understand you have a significant number of loans coming due this year, mainly fund-focused. Therefore, you probably have a clear idea of how you can finance these deals. I'm trying to understand if there's been any change in your cost of capital and what you are willing to invest.

Right. So we are not immune to rising base rates. Thankfully, we have a strong lending pool. So we get good execution. Our underwriting has taken this into account. So you shouldn't expect assuming that everyone's kind of bearish case about interest rates, you should assume that's in our numbers in terms of refinancing of existing assets. John walked through we’re very well hedged on the core side. Now in terms of pricing for new deals, absolutely, that has to come into play. Counterbalancing it is maybe deals that we previously weren't winning the bid on; maybe we win now. Let's not lose sight of strong tenant demand. I would tell you I am incrementally bullish on retailer demand based on everything we're seeing. I am obviously concerned about interest rates; we think about when we buy something well, what is the total return over the next five years. We will take the new interest rate environment into account, but also the growth that comes with it.

And just lastly on new markets. You talked a little bit about the Texas acquisition. Is there anything in pipeline where you have other new markets that you're looking at that we should expect you to close on?

So I expect this to close on maybe, maybe not. But, Michael, because way back when we all toured our assets in Miami. Thankfully, we sold those at the right time, Florida is certainly an additional market that's gotten a nice lift. We've played well in that. There are other markets as well. I'm not going to predict the specific markets, but you should assume every year, every multiple years, we're saying where within our core competencies do our tenants want to be? Would they prefer to be with us than the next folks? And can we make those investments accretively? Another way of saying that is I do believe our relatively small platform remains very scalable within our core competencies in forever markets. The definition of forever markets has evolved, and there's no reason we can't evolve with it.

Our next question comes from Craig Schmidt with Bank of America.

Great, thank you. It appears that your small shop occupancy has improved over the pre-COVID levels, but your total occupancy still falls below. I'm wondering what drove the huge gain in small shop occupancy this last quarter? And then when may overall occupancy return to pre-COVID levels?

Yeah. And hey, Craig. I will always give a caveat that our occupancy given just the range of rents is usually not the best proxy given the difference between the street rent and suburban rents. It’s always start with that, that every basis point of occupancy is not created equal. I think on the street and small shop space, we did see and as we talked to COVID, and we walked through our pipeline, a lot of activity in our street and urban spaces, which tend to fall into that category. So there was an outsized growth and lease up in that effort. In terms of timing, I would say we are still, and we're at 94% leased today. As we've talked about that velocity is continuing; I would say we get to what we view as full economic occupancy. The next 12 to 18 months, I think is still our target.

Let me add to that, Craig. These are observations that I think we all know, but we sometimes forget. Dating back to the global financial crisis, our small tenants and satellite tenants were severely impacted because they lost all their financing. From around 2010 to 2014, they were just getting back on their feet. From 2014 until COVID hit, we saw consistent strength in that area. COVID affected some of them, but thanks to the Paycheck Protection Program and various other interventions, our shop spaces remained much healthier during the recent COVID recession compared to the global financial crisis. This resilience continues to show. My main concern going forward is whether these tenants are well-positioned to adapt to shifts in consumer behavior amid inflation, supply chain issues, and the potential for recession, but so far, things look promising. Rents are currently at decade-long peaks, and we aim to maintain that by ensuring we have the right satellite tenants who can handle any upcoming challenges. On the other hand, street retail was hit hard before and during COVID. Its recovery lies ahead, moving up from significant lows rather than decade highs. That’s why I believe we will see considerable gains in that sector.

Great. And then just one other. Did your due diligence on the Henderson Avenue portfolio include checking with your retailers to have an appetite for this location?

Craig, they are our first call. We don’t pretend to know what they want. We simply listen when they tell us what they want.

Next question comes from Mike Mueller with JPMorgan.

Yeah. Hi. Maybe sticking with Henderson for a second, can you talk about the potential to double or triple that investment? How much of that is tied to visible development or redevelopment, as opposed to incremental acquisitions?

Half and Half very roughly, Michael. I guarantee you I'm wrong on that estimate, because we'll see. There are additional parcels we could buy over time. But the stars have to align to that. What I hate is creating a lot of value and then letting other folks just ride the coattails, but we've got 15 parcels now. Our acquisition team is busy in conversations. So we will see based on the amount of retailer demand timing, and everything else out there. I mentioned that at one end of the avenue, we have a freestanding Sprouts Supermarket with a very large parking in front of it. That is right for redevelopment someday. Someday because there's a thriving retailer there who would like to be part of a densification or redevelopment but they have a seat at the table that we have to be respectful of. That’s why I couldn’t predict when that redevelopment occurs. There are other land parcels that we can activate much sooner and put dollars to work over the next couple of years. I can’t predict exactly which component hits when. What I can tell you is assuming things play out the way I think they will, and the way we've seen in other markets we’ve been involved with, I think the right combination of densification, redevelopment, and acquisition. If I have to guess today, I’ll stick to half and half of the triple. I promise you we will update you periodically; maybe not every quarter, but periodically as that capital gets deployed.

Got it. I may have missed, and I apologize. But when I heard you talking about cap rates, you started heading that path, you were talking about cap rates for 1Q acquisition. What was the cap rate on the year-to-date including Henderson core acquisitions and the year-to-date fund investments?

On the fund side, I would estimate about 100 basis points more or less in either direction, depending on what the year two or year three net operating income looks like. We don’t make investments solely based on initial considerations. For Fund V, Amy and I believe it has been around a seven or in the low sevens, give or take 50 basis points. Additionally, considering the numerous factors involved, it is important to remember that the recapitalization in Williamsburg was quite complex. Some assets might be around a five, with stabilized trading in the low fours. We need to get them to stabilization, while others are likely in the fives.

Got it. That was it. Thank you.

Our next question comes from Paulina Rojas with Green Street.

Good morning. My apologies if I missed this. But are you confirming your prior same-property NOI growth guidance of between 4% and 6%? I didn't see any explicit mention of it?

Hi, Paulina. We did not update any of our individual assumptions within our guidance. But I think in my prepared remarks sort of indicated, we are feeling pretty good about the year given the strong start. So haven't updated it, but feeling very optimistic based upon our lease pipeline, and what happened in the first quarter.

Should I interpret that comment to mean you're likely expecting to be closer to the high end of your previous guidance, or how should I understand it?

That would be an appropriate way to think about it. But not giving specific guidance, that would be the way we're thinking about it, particularly as the first quarter came in and our pipeline and leasing velocities playing out. That's certainly how we're trending.

Okay, and then regarding bad debt, it seems that the quarter and reserves for the current periods were materially better than expected. I wonder if that's changing your perspective for the entire year? Or if there's any nuance there?

No, I think that was one of the things we highlighted that it did come in stronger than we expected. Some of the very few tenants that weren't paying us were in the office-dependent location. So a pretty nominal amount; we're seeing return to the office come back and those tenants up and functioning. So no pulling a fingers crossed. We think that's trending also in a positive direction.

And I'm not showing any further questions at this time. I'd like to turn the call to Ken Bernstein for any closing remarks.

Great. Well, thank you, everybody for joining us. We'll speak to you next quarter and keep you updated on all of the progress that we continue to make.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.