Acadia Realty Trust Q4 FY2025 Earnings Call

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Acadia Realty Trust Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Will Delts. Please go ahead.

Good afternoon. Thank you for joining us for the fourth quarter 2025 Acadia Realty Trust earnings conference call. My name is Will Delts, and I'm an analyst in our asset management. Before we begin, please be aware that statements made during the call are not historical and may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934. 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-Ks and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call, February 11, 2026. 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 these 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 and give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue. We'll answer as time permits. Now it's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, Will. Great job. Welcome, everyone. Our strong fourth quarter results added to an overall strong year with both solid internal and external growth. And this momentum is continuing as we head into 2026. AJ, Reggie, and John will discuss our performance last quarter and our outlook going forward. But before diving into the details, I'd like to take a step back and discuss the key initiatives we put in place over the past few years, and how they have positioned us for not only strong current performance but also for strong long-term growth. A few years ago, after the very painful multiyear headwinds, first from the retail Armageddon, then from COVID and related issues, it became clear that the strong rebound in our portfolio performance was likely more than just a COVID rebound and was setting up for a longer-term positive fundamental shift for retail real estate. As we've discussed on prior calls, these tailwinds benefited most open-air retail, but they have been especially beneficial for the street retail component of our portfolio. For several reasons. First, the lack of new development of retail real estate for almost a decade has caused the rebalancing of supply and demand and has been a powerful tailwind for all open-air retail. More importantly, the additional shift by retailers away from a heavy reliance on selling through wholesale and department stores and their recognizing the need for their own physical stores has been an additional important driver of demand. This increased demand has applied much more to discretionary retail, especially in key must-have corridors. Second, while the consumer has generally been more resilient than anticipated, the so-called K-shaped economy has meant that tenant demand and tenant performance by discretionary retailers who serve the upper segment of the economy has continued unabated. Thus, the general bias in the equity markets last year to pivot to necessity-based retail following liberation day appears overdone as the street retail portion of our portfolio continued to outperform our other segments. Third, the structure of street retail leases enables us to capture higher rental growth sooner than in our suburban assets. As we've seen, all retail real estate will benefit from increases in market rents. We just prefer the sooner, rather than later. So as we saw these trends unfolding, we positioned ourselves to capture this growth. As we stated, our goal has been to deliver multiyear NOI growth of 5% and for this growth to hit the bottom line, both in terms of earnings growth and net asset value growth. Consistent with this goal, we have now delivered four consecutive years of same property NOI growth in excess of 5%. And we want to ensure that we are not only producing strong current results but are positioned to do so for the foreseeable future. We are delivering on this growth goal through several different initiatives or levers. First and foremost, leasing up vacancy. Over the past four years, we have increased our economic shop occupancy from approximately 81% at the end of 2021 to over 90% today. And at 90%, we still have room to run. Beyond this lease-up, another lever is our ability to capture rental growth on our streets from both our PryLoose strategy and our fair market value resets. AJ Levine will discuss the opportunities we're seeing here. A third lever will come from the meaningful growth coming out of our redevelopment pipeline, most immediately from our two assets in San Francisco as well as our development on Henderson Avenue in Dallas. John and AJ will also give further color on these needle movers as well. Finally, to supplement this internal growth and to better ensure that we can continue to deliver on our long-term growth goals, we have been focused on our external growth initiatives. For our on-balance sheet REIT acquisitions, our focus here has been primarily on street retail investments where we can benefit from building operating scale on must-have streets. We have found the benefits of scale on the suburban side of our business to be somewhat elusive, but we are seeing the benefits more clearly through owning multiple stores on key streets where we are able to better curate a street and drive incremental growth. We saw this playing out on several of our existing corridors such as Armitage Avenue in Chicago and M Street in Georgetown. This gave us the conviction to focus our future street retail investments on those corridors where we can own enough concentration to create benefits of scale. So we doubled our ownership stake in Georgetown, DC, now controlling nearly 50% of the street retail in this key corridor and delivered in excess of 10% NOI growth last year. We also doubled down in Williamsburg, Brooklyn, investing approximately $160 million by adding 10 storefronts on North 6th Street. Additionally, we doubled down on Green Street and Soho, investing over $80 million. We also expanded into newer corridors such as Bleecker Street in the West Village, and just this quarter, Upper Madison Avenue in New York City. All told, over the past twenty-four months, between our street acquisitions and planned investments into Henderson Avenue, we have invested about $700 million, all with the view of further recognizing the benefits of scale and extending our long-term growth goals well into the future. While the benefits of scale are important on a corridor-by-corridor basis, they also benefit us overall as we are well on our way to becoming the premier owner-operator of street retail in the United States. Complementing the street retail side of our business is our investment management platform. For as long as Acadia has been in business, we have leveraged our institutional capital relationships to pursue alternative and complementary investment opportunities. More recently, our investment management model has shifted from running single traditional closed-end funds into multiple JV channels, and as Reggie Livingston will describe, including our most recent activity, we have successfully executed over $800 million in JV acquisitions over the past twenty-four months. Big picture, we have been deploying our capital using a barbell approach. On one side, our on-balance sheet activity has been focused on high-growth street retail, well-suited to long-term ownership. On the other side, for our investment management platform, we are focusing on the buy-fix-sell side of our business on opportunistic and higher-yielding investments. In conclusion, the internal and external opportunities we see provide a clear line of sight into delivering multi-year top-line growth of 5% and having that growth drop to the bottom line. With ample balance sheet capacity, we are positioned to capitalize on the exciting opportunities that we have before us. I want to thank the team for their hard work last quarter and last year, and I'll hand the call over to AJ Levine.

Great. Thanks, Ken. Good morning, everyone. Before I dive into the quarter, I'd like to take a minute to highlight another record year of leasing for us in 2025. Driven largely by the trends that Ken mentioned, most notably retailers' increased focus on DTC and the remarkable strength of the high-end consumer, our tenants invested in both new and existing stores with confidence and at an accelerated pace. That momentum remained consistent throughout the year and shows no signs of slowing as we look ahead to the balance of 2026 and beyond. Over the course of 2025, with a focus on PryLoose opportunities and thoughtful curation, we leaned into our growing scale to add several new and exciting brands while also expanding relationships with some of our most dynamic and highest-performing tenants. Notable additions included TNT Grocery and LA Fitness Club Studio in San Francisco, Google and Swarovski on M Street in DC, Richemont's Watchfinder and Veronica Beard in Soho, Rag and Bone on Henderson Avenue in Dallas, UGG on North 6th Street in Williamsburg, and most recently, an expansion and extension of The Row on Melrose Place in Los Angeles. In addition to curation, 2025 was also a year of unlocking the outsized rent growth we've seen across our streets over the last several years. Through a combination of lease-up, PryLoose, and fair market resets, the team consistently delivered spreads in excess of 50% on our streets. 2025 is also a banner year for tenant performance and sales growth across our aspirational and specialty street tenants. Year-over-year sales on our streets ranged from 10% to as high as 30% to 40% in some markets. As we've stated, tenant performance remains the most important indicator of future rent growth. Where sales grow, rents invariably follow. We expect that the outsized sales growth on our streets will continue to translate into outsized mark-to-markets in the coming years. However, even if that growth were to moderate, our tenants and markets would remain healthy given where occupancy cost ratios are on our streets today. Now turning to the quarter. In Q4, we signed another $3.5 million of ABR, with nearly 75% coming from high-growth markets, including Melrose Place, Williamsburg, Newberry Street, and Henderson Avenue in Dallas. Highlights included the addition of UGG and one of our more recent acquisitions on North 6th Street in Williamsburg, replacing Lululemon, which we successfully relocated and expanded elsewhere on the street. Because of our scale on North 6th, we added UGG at an unreported 72% spread, while also retaining an important tenant in Lululemon. While that spread was not included in our release, it's another strong data point indicative of what we're observing across the Street portfolio. Similarly, during the quarter, we signed a new lease on Newbury Street at a 58% spread and on Melrose Place at a 60% spread. As is typical for street leases, all these deals included the added benefits of 3% annual contractual growth and fair market resets. Beyond signing new leases, we continued to create value through our PryLoose and mark-to-market strategies. As a byproduct of the sales growth we've highlighted, tenants are increasingly reinvesting in existing stores, particularly in must-have markets like Soho, Gold Coast Chicago, and Melrose Place. In many cases, tenants approach us several years ahead of lease expiration for an extended term, allowing us to secure these tenants long-term, recasting those leases to market. For instance, in January, a tenant of ours in Soho was planning significant reinvestment in their store but had just two years of term remaining. By extending the lease today, we promptly reset the rent to market, effectively pulling forward mark-to-market by two years, achieving a 51% spread. This transaction alone contributed close to half a cent of FFO. However, the PryLoose and Blend and Extend strategy is not merely about accelerating mark-to-market; it is also a critical component of portfolio maintenance and risk management. It allows us to upgrade credit merchandising and helps lock in credit long-term, minimizing any potential short-term market volatility. In that sense, the strategy is both proactive and defensive. Looking ahead, we've identified additional PryLoose and early extension opportunities across Soho, M Street, Armitage Avenue, Henderson Avenue, Bleecker Street, and Williamsburg. While we still have a healthy amount of lease-up ahead of us on our streets, we also expect to continue mining the portfolio and capturing outsized rent growth while positioning the portfolio for long-term success. As we look forward to 2026 and beyond, tenant demand appears to be accelerating. Our pipeline of leases in advanced negotiation currently exceeds $9 million, roughly $1 million from last quarter, with the majority of that growth coming from our streets. In terms of markets in the earlier stages of recovery, we remain encouraged by the interest and activity we're observing in San Francisco. John will address the economic impact of our progress in the city, but over the past year, we've signed 90,000 square feet of leases at 555 9th Street and City Center that are currently in our S and O pipeline. At both assets, we saw the elimination of formula retail restrictions, which will help these retailers and future tenants open faster and with fewer obstacles. With the wind at our backs and a pro-business administration in office, we expect continued progress in San Francisco, and we are actively negotiating several more high-impact deals that we look forward to discussing in the coming months. Overall, we remain very encouraged by the trends and performance we've seen over the past year, and as we look forward, we see clear indications that this momentum will continue. I want to thank the entire team for their hard work and focus throughout the year. With that, I turn things over to Reggie.

Thanks, AJ. Good morning, everyone. As noted in our earnings release, our Q4 and to-date acquisition volumes stand at nearly $500 million. To provide context for our recent growth, over the last twenty-four months, we've closed in excess of $1.3 billion in acquisitions, including over $500 million in street retail for our REIT portfolio and over $800 million in value-add deals for our investment management platform. That volume is a significant mover for a company of our size, but it isn't volume for the sake of volume. As Ken mentioned, our street retail acquisitions have doubled down in dynamic growth markets and expanded into new markets with those same growth characteristics. For our investment management platform, we executed more volume than any comparable period during our commingle fund business. By design, our dual platform approach has found ways to profitably grow as our REIT portfolio and our IMP deliver the accretion consistent with our goals of a penny per $200 million. We're excited about our growth, and we see no signs on the horizon that should slow us down. Delving into specifics of our most recent activity and potential for 2026, last month, we bought five retail storefronts at 1045 and 1165 Madison Avenue in Manhattan, with tenants such as Le Labo and Todd Snyder. These assets sit within the Upper Madison retail district, attracting a new generation of contemporary brands. This influx is driving a rent growth surge, placing the current rents in these assets below market. Further, if we can identify accretive opportunities, we plan to add more assets in this corridor to leverage the benefits of scale we've enjoyed in other submarkets. Looking ahead in our street retail business, we see prime opportunities and currently have north of $150 million in deals under agreement that could close in Q1. This pipeline is driven by sellers coming off the sidelines and our priority position as the first call for many of those sellers. Our reputation as a team that knows how to underwrite and consummate these transactions is well known throughout our target markets, serving as a competitive advantage. While that positive reputation has underpinned our street retail growth, it contributes to executing the other side of our barbell investment approach, producing value-add and opportunistic deals for our IMP. Recently, we closed on shops at Skyview for approximately $425 million. This asset is a 550,000 square foot center in Queens, New York, with national tenants including Marshalls, Burlington, Uniqlo, and BJ's, among others. The investment yields comparable returns to recent IMP deals, but the population density and trade area spending power is substantially higher. The asset attracts nearly 12 million annual visitors and is poised to increase with the recently improved Hard Rock Hotel and Casino, an $8 billion mixed-use development located a short walk from the asset. Our business plan will continue to drive value through remerchandising and harvesting mark-to-market rents. We are also in advanced stages of recapitalizing Pinewood Square and Avenue at West Cobb with first-class institutional investors, showcasing yet another strategic opportunity. Utilizing our balance sheet to close quickly on IMP assets, we pair these investments with the right partner thoughtfully. These transactions and others we're currently preparing for should result in an active Q1 for the investment management side, so stay tuned. Looking forward, we anticipate this side of our business will continue to find attractive value-add deals this year, even as the surge of investment interest in retail has made finding such deals more challenging. In summary, we closed nearly $1 billion in 2025 and to date acquisitions, which includes around $400 million in REIT portfolio transactions. This resulted in an attractive gap yield in the mid-sixties and a five-year CAGR exceeding 5%. Most importantly, these cross-platform deals have delivered accretion exceeding our target of a penny per $200 million, while also fueling excitement for our 2026 pipeline. Although my aim isn't to make predictions about John's numbers, I'm confident we can achieve volume consistent with our run rate over the past two years. It will also deliver the earnings and NAV accretion aligned with our mandate, in addition to strong CAGR to complement our internal growth. I want to thank the team for their hard work this quarter, and with that, I turn it over to John.

Thanks, Reggie, and good morning. My remarks today will focus on our quarterly results, our 2026 outlook, and then I'll close with an update on our balance sheet. Our message is clear. We are continues with strength across our dual platforms, and with multiple avenues of growth, our team is laser-focused on driving earnings and NAV growth. Starting with our fourth quarter results, we reported same property NOI growth of 6.3% for the quarter and 5.7% for the year, coming in at the upper end of our guidance with our street and urban portfolio driving our growth. This top-line growth is hitting our bottom-line earnings, as we reported $0.34 a share for the fourth quarter, which included $0.03 of gains from our final sale of Albertsons shares. To clarify our run rate, once we back out the 3 cents of Albertsons gains and the one-time penny of net real estate tax savings highlighted in our release, we're at 30 cents for the quarter, which is sequentially up an incremental penny from the 29 cents, also net of the gains and promotes reported in Q3. Additionally, in line with our goals, we increased the REIT's economic occupancy another 30 basis points to 93.9%. It's worth highlighting that our street and urban economic occupancies sequentially increased an additional 80 basis points during Q4 and 370 basis points over the course of 2025. However, not all occupancy is created equal. With street and urban occupancy approximately 90%, compared to prior peak levels exceeding 95%, we continue to see meaningful embedded NOI and earnings growth. I'd like to highlight a few items from our signed, not open pipeline. First, our pipeline of $8.9 million at December 31 remains elevated, with ABR at our share of around 4% of in-place rents. Given the incremental leasing opportunities that AJ discussed, we should maintain the potential to exceed our current pipeline, setting us up for continued growth into 2027 and beyond. Substantially, of our $8.9 million pipeline is expected to commence in 2026, with approximately 25% commencing in each Q1 and Q2, and the remaining portion heavily weighted toward the fourth quarter. Based on this timing, we expect approximately $4 million of ABR to be reflected in NOI in 2026, with the incremental $4.9 million in 2027. Secondly, regarding the portion of our pipeline related to our same-store pool, we executed $1.5 million of new same-store leases fully replacing the $1.5 million of leases that commenced during the quarter. This means our ongoing same property growth trajectory remains intact. Thirdly, as a reminder, our pipeline reflects only incremental ABR and excludes leases on occupied space. We have over $1 million of executed leases on currently occupied spaces, which is in addition to the $8.9 million in our pipeline. Now moving on to our guidance. As outlined in our release, we have simplified our reporting starting with our 2026 guidance. We want to thank both the buy side and sell side for their input and strong support in making this important change. Our new metric, FFO as adjusted, excludes gains from our investment management business along with any material, non-comparable items that we believe are not reflective of our core operating results. Per our release, we anticipate 2026 FFO as adjusted between $1.21 and $1.25 and project same property NOI growth of 5% to 9%, excluding redevelopments. Our street is anticipated to deliver about 400 basis points outperformance compared to our suburban portfolio. I want to share a few thoughts on our guidance ranges and what factors will ultimately determine our position within those ranges. Notably, $1.4 million currently represents about a penny of FFO and a 100 basis points of annual same property NOI growth. Three key factors will affect where we land within these ranges. First, our assumptions regarding rent commencement dates on executed leases. With 4% of our ABR anticipated to commence in 2026, any acceleration or delay relative to our initial projection equates to approximately $750,000. Secondly, credit loss. At the midpoint of our guidance, we've assumed approximately 115 basis points against minimum rents in addition to known or specific reserves for known tenant issues. For context, 150 basis points appears conservative relative to the roughly 50 basis points averaged over the past two years. Lastly, the PryLoose strategy that AJ discussed may be the most impactful, even though it's not factored into our base case. Our active management and leasing teams are trimming our portfolio to fast-track these opportunities. Greater success in these efforts may affect our short-term results, yet it will accelerate our long-term growth and value creation. I want to highlight a few other items related to our 2026 assumptions. Alongside our projected 5% to 9% same property NOI growth, we expect total pro rata NOI, including redevelopments and investment management, to increase approximately 15% to roughly $230 million at the midpoint compared to the approximate $200 million reported in 2025. Our earnings guidance, including the numbers mentioned for NOI, does not account for any acquisitions or dispositions other than those outlined in our release. As noted from both Ken and Reggie, we typically deliver over $500 million of annual transaction volume and continue to target a penny of FFO accretion per $200 million acquired, whether for the REIT or the investment management business. Finally, I'll provide an update on our balance sheet. Our pro-rata debt to EBITDA stands around five times, alongside meaningful liquidity on our credit facilities. With anticipated capital repayment from our investment management and structured finance businesses, we have fully funded our Henderson development project and have several hundred million dollars of available capacity for strategic offense. Furthermore, we don't face any significant debt maturities in 2026 and are well-hedged against interest rate volatility. With a weighted average borrowing cost of 4.5% and five-year unsecured funding availability at similar pricing, we don't foresee any major interest expense pressures as our debt maturities roll. Throughout 2026, we plan to continue engaging our capital partners for strategic and accretive refinancing and extensions across our portfolio, given the favorable debt market conditions. In summary, we project robust earnings and NOI growth in 2026. Our multiyear goal is to position our portfolio for sustained 5% growth. As we look beyond 2026, we have multiple identifiable drivers poised to achieve this target. These include street lease-up and mark-to-market opportunities, with roughly 500 basis points of embedded street occupancy upside, alongside meaningful mark-to-market on expiring leases. Combined with a 3% contractual rent growth in our existing street leases, this presents an opportunity for further hundred basis points of incremental growth. Redevelopments are another factor, or we already have $3.5 million of executed leases in our redevelopment pipeline expected to come online in late 2026, largely from our two redevelopment projects in San Francisco. As mentioned by AJ, leasing momentum in San Francisco continues to build as tenant interest returns. Once stabilized, including our S&O pipeline, we estimate these projects could generate an additional $7 to $9 million of NOI beyond the amounts included for 2026, translating to roughly 3 to 5 cents of incremental FFO net of capitalized interest and retenanting costs. Another area is Henderson Avenue, tracking to stabilize in 2027 and 2028, where we predict a high single-digit yield based on costs. Stabilization will yield 3 to 5 cents of incremental FFO, not counting future site additions on Henderson Avenue, which we expect to perform well as a top street retail corridor. Lastly, our external growth strategy, with our balance sheet prepared for activity and several hundred million dollars of available capacity, leads us to be disciplined yet active on investment fronts. These drivers, among others, instill confidence for sustained 5% growth, with upside potential covering items not fully addressed today, including City Point in Brooklyn, leveraging a lease-up at 840 North Michigan Avenue in Chicago, utility reduction efforts across our street portfolio, and many accretive redevelopment opportunities embedded in our holdings. With that said, I'll stop and turn the call back to the operator for your questions.

Thank you. Ladies and gentlemen, to ask to be announced. To withdraw your question, simply press 11 again. As a reminder, please limit yourself to two questions per person. If you have any additional questions, you may reenter the queue if time permits. Please stand by while we compile the candidate roster. Our first question is coming from the line of Samir Khanal with Bank of America Securities. Your line is now open.

Good afternoon, everybody. I guess, Ken or John, I mean, you gave a lot of good details on the acquisition environment, the advanced stages of negotiations you're in. Maybe expand a little bit on kind of the markets and what you're seeing from a pricing perspective.

Sure. I'll start it off, and then, Reggie, perhaps you'll add some more color to it. Generally speaking, the markets we are currently active in—where you’ve seen the acquisitions over the last couple of years—ranging from New York, Soho, Williamsburg down to DC—remain very exciting for us. There are probably a half dozen other markets that we’ve either been active in or will continue to be. In terms of pricing, it's tricky to discuss going in cap rates because rents have shifted. AJ mentioned the mark to market in Soho of 50%. If a cap rate is substantially lower on a lease that has near-term increases compared to one that is at market, I'm hesitant to provide going in yields. However, we are still aiming for our overall goal of acquiring assets that can generate a 5% CAGR over the next five years based on contractual growth and fair market value resets. We see that happening in the markets we are active in, with retailers directing us to other markets fitting the same profile. Reggie, is there anything additional you'd like to add?

Yeah. I would just say that we undergo a rigorous process of evaluating potential new markets to ensure they share the same growth characteristics of our existing markets, including tight supply and strong tenant performance. We work extensively with AJ and his team, as Ken mentioned, to understand where tenants want to be and how we can find the right entry points in those markets. There are indeed new markets on the horizon.

Thank you for that. And then, John, on the assumption for same-store NOI growth, I know that 5% to 9%—you mentioned some of the swing factors there. I just want to clarify whether rent commencement and credit loss assumptions are the main factors influencing the high and low ends, or if there are other elements at play?

Yes. I believe it's a combination of three, Samir, but I would say the primary focus should be on the portion of below-market leases in our portfolio. To the extent we could expedite those, it will create short-term downtime. We haven't accounted for that yet, but we're actively aiming to do so. Other factors could shift by 100 basis points here or there, but if we can successfully accelerate mark-to-markets, the transient downtime we might experience from that is a price worth paying for long-term growth. Therefore, I would say that’s likely the most impactful in determining our placement within that range. We will provide updates throughout the quarters regarding our progress.

Under any circumstances, we're still looking at a robust 5% to 9%. Barring significant credit loss or other issues, that appears to be quite promising.

Our next question is coming from the line of Craig Mailman with Citi. Your line is now open.

Hey. Good morning, guys. It seems from reading between the lines that there are numerous factors indicating that guidance could be conservative. I'm trying to ascertain how much lower probability upside you might have that you haven't accounted for in your guidance versus your capabilities over recent periods to exceed those initial projections.

Our guidance philosophy has consistently been to set realistic goals and meet those as opposed to building in overly soft assumptions for potential quarterly jump outs. I acknowledge that our situation has changed; therefore, we’re not going to factor in variables that are outside our control into our guidance. I do believe our credit assumptions are conservative; we have considered more than double the past two years. Items known beforehand or specific issues are excluded from our guidance. Given the significant forward equity we have, we will continue to target our activity successfully next year. The upside potential lies significantly in those external growth drivers for 2026, further boosting growth beyond the current year.

To reinforce that point, whether it’s PryLoose or fair market value resets, the impacts will likely be less noticeable in 2026 but will better position us for 2027 and 2028, which aligns with our long-term strategy.

Our next question is coming from the line of Michael Mueller with JPMorgan. Your line is now open.

Yes, first of all, I think you mentioned wanting to reach 95% street occupancy within the next eighteen months. Is that a lease number or an occupied number? Also, how should we think about the ballpark blended rent per square foot for that 500 basis points?

When we mention 'lease', we're aiming for that to be effectively occupied and generating income. To achieve 95%, I can say that the results will greatly depend upon which locations get leased up. For instance, a single prominent location in Soho will have a considerable impact on NOI, a relatively small effect on occupancy percentages. Hence, putting a flat number on every 100 basis points can prove difficult, as it's quite specific to the cases. However, achieving several hundred basis points of NOI growth could yield several cents of bottom-line FFO growth.

Regarding your investment in Madison Avenue, is there a cap on a single store investment you would make? What should we be considering in that range?

Typically, for the streets we focus on, the limitation is more about how small an add-on deal we are willing to undertake. You’ll periodically observe us executing small bolt-on deals along Armitage Avenue. With larger assets, due to potential volatility, we’ve been cautious about proceeding with large single tenant acquisitions, especially on 5th Avenue. For a company of our size, we worry more about doing too many small deals compared to one large chunky acquisition. Nonetheless, we’re still eager to acquire multiple storefronts in a corridor.

Thank you. Our next question is coming from the line of Floris van Dijkum with Ladenburg Thalmann. Your line is now open.

Thank you! I’d like to revisit the acquisition pipeline briefly. I believe, Reggie, you mentioned $150 million in transactions under agreement. Can you share the breakdown of New York versus other markets?

Without getting ahead of myself, I would say that most of those represent other markets.

So to clarify, the $150 million you mentioned would primarily be outside of New York?

Correct. The majority of the $150 million falls under the other markets category.

I was curious about the increased competition in SOHO, particularly with retailers like Ralph Lauren and IKEA acquiring their stores. Are you noticing competitive bidding from retailers themselves or have they expressed an interest in purchasing from your portfolio?

So far, it's rare to have retailers competing with us during transactions, aside from one or two instances. Retailers have their specific focus, which tends to be selective. We don't frequently find ourselves bidding against retailers, but it does highlight the commitment they have to these corridors. Overall, this trend is encouraging. However, if we find ourselves in competitive bidding against them and lose, that would be frustrating. So, stay tuned.

Thank you. I don’t see any further questions in the queue at this time. I'll now turn the call back over to Mr. Bernstein for any closing remarks.

Great. Thank you all for your time, and we look forward to speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.