Good day, and thank you for standing by. Welcome to the Acadia Realty Trust First Quarter 2026 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. To ask a question during the session, you will need to press star 1. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Lynelle Ray, Lease Administration and Due Diligence Analyst. Please go ahead.

Good morning, and thank you for joining us for the first quarter 2026 Acadia Realty Trust earnings conference call. My name is Lynelle Ray, and I am a lease administration and due diligence analyst. 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-Ks and other periodic filings of the SEC. Forward-looking statements speak only as of the date of this call, 04/29/2026, 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 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 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 Kenneth F. Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, Lynelle. Great job. Welcome, everyone. As you can see in our press release, we had another strong quarter in what is shaping up to be a very solid year both with respect to our internal as well as our external growth initiatives. And while geopolitical events have certainly added unwanted uncertainty to the global economy, thankfully, due to the tailwinds for open-air retail in general, and then even more so for street retail, we are seeing continued strong results driven by strong tenant demand, strong tenant performance, and attractive investment opportunities. As the team will discuss in more detail, we delivered 11% year-over-year earnings growth driven by nearly 6% same-store growth. And even with heightened uncertainty in the capital markets, we completed over $2.5 billion of transactional activity, comprised of $600 million of new investments, over $500 million of recapitalizations within our investment management platform, and a new $1.4 billion corporate borrowing facility. Now since I have discussed in detail the key drivers of the tailwinds in open-air retail on our previous calls, I will limit my explanation a bit. But in short, our continued strong performance is being driven most significantly by our street retail portfolio and more specifically by five key factors. First, limited supply, that continues to shrink. Second, and probably more importantly, increasing demand due to the ongoing focus by retailers to having their own physical locations rather than being so heavily reliant on either wholesale or digital channels. Third, strong tenant performance due to a resilient consumer, especially the upper-end shoppers at our street locations. Fourth, lighter relative CapEx in our re-tenanting of street locations. And finally, stronger annual income growth in our street locations, due to both higher contractual growth and then more frequent mark-to-market opportunities. These continued tailwinds are enabling us to deliver solid internal top-line growth and having that growth hit the bottom line both in terms of earnings growth as well as net asset value growth. Alexander J. Levine will discuss our progress last quarter and why we are poised to continue to deliver superior growth for the foreseeable future. And then supplementing this internal growth, and ensuring that we can continue to deliver this steady growth well into the future is our external growth initiatives. Reginald Livingston will discuss our acquisition activity over the last quarter where we continue to deliver on our goals, both with respect to our on-balance sheet acquisitions of street retail and our execution through our investment management platform. But let me give a few observations. As we have seen more investor interest in retail over the past year, competition has increased for most formats of open-air retail. But so has the volume of deals coming to market. So even with increased competition, we expect to be able to meet our acquisition goals. And while we welcome the company, it has been a bit more difficult to simply buy existing yield to make our targeted returns. So as it relates to street retail investment opportunities, while competitive, it is still a less crowded field than in other formats with fewer capable buyers. So we are still seeing enough attractive investments that are accretive day one both to earnings and net asset value. And we are most focused on investments where there are near-term value creation opportunities where we can use our skill set and relationships to unlock that value. We are still finding deals that get us to a 6% plus yield in the near term, but require a few more moving pieces. And since our team has never been hesitant to use its value-add skills and relationships, this shift is welcomed. Same is true for our investment management platform. The ability to achieve opportunistic returns by simply buying stable assets as we successfully did during our Fund V investment period a few years ago is becoming increasingly difficult, thus our recent investments over the past year have been much more value-add focused and we expect that focus to continue. And as it relates to our investment management activity, we can actually team up with the increasing pool of institutional capital and harness that increased interest. So we do not have to just beat them; we can join them as well. And to be clear, with respect to both our REIT and investment management acquisitions, our goal continues to be to make sure our investments are accretive to earnings, and to net asset value day one, and to achieve a penny of FFO for every $200 million of assets acquired. Reggie will walk through how our most recent activity is meeting our goals both in terms of volume and accretion, and then equally importantly, how we are planting seeds for continued superior growth down the road. Then finally, John Gottfried will walk through our balance sheet metrics and how we are positioned to continue to drive both internal and external growth with plenty of dry powder and diverse sources of capital. So to conclude, our street retail investment thesis is working. The internal and external opportunities we see provide clear line of sight into providing solid multi-year top-line growth and then having that growth drop to the bottom line. Then with ample balance sheet capacity, we are in a position to capitalize on the exciting opportunities that we have in front of us. I would like to thank the team for their continued hard work and with that, I will hand the call over to AJ.

Thanks, Ken. Good morning, everyone. So I would like to start out with an update on internal growth with a focus on trends and performance on our high-growth streets. Then I will touch on some of our slower-to-recover markets with significant upside, namely San Francisco and North Michigan Avenue, and I will finish with an update on Henderson Avenue in Dallas. Overall, another strong quarter of leasing across the board—street, suburban—both within the REIT portfolio as well as our investment management platform. Total volume of signed leases in Q1 was an additional $3.5 million at our share. We have grown our pipeline of new leases in advanced negotiation to $11.5 million, which is a net increase of nearly $2.5 million above the previous quarter. As we sign leases, we are quickly reloading the pipeline and then some. As Ken articulated, because of the historically strong supply-demand dynamic, and the resilient high-income consumer that shops our streets, all signs indicate that we will be able to deliver similar results through the remainder of this year and beyond. In addition to an accelerating leasing velocity, we are also seeing a steady rise in market rents on our high-growth streets. We are currently negotiating new leases, fair market renewals, and pry-loose mark-to-markets along several of our streets, including SoHo, Upper Madison Avenue, M Street, Armitage Avenue, and Melrose Place. These are all markets that have experienced several years of double-digit rent growth and if we are successful in signing these new deals, it will result in a weighted average spread of just over 40%. Now remember, street leases have 3% contractual growth. So a 40% spread after five years of 3% growth means that rents have grown closer to 60% over that time period. This is what we mean when we say that not all spreads are created equal. Now incremental to the sector-leading growth that we are seeing on our streets, we are also continuing to build conviction around historically strong markets that are in the earlier stages of recovery, like San Francisco and North Michigan Avenue in Chicago. At our last update, we reported that since the start of 2025, we had signed about 90,000 square feet of new leases across our two assets with LA Fitness Club Studio and T&T Supermarkets. Since our last update and following the end of the first quarter, we have added another 25,000 square feet by signing Sprouts Farmers Market, who will be joining Trader Joe's and Club Studio at 555 9th Street. And like T&T and Club Studio, this will be their first store in San Francisco. What has become clear is that tenants are strengthening their conviction around the recovery of San Francisco, and with another 70,000 square feet of space remaining to lease, in addition to some accretive pry-loose opportunities, we are gaining increased confidence that we can continue to unlock the meaningful remaining embedded value within our two San Francisco centers. Now right behind San Francisco is North Michigan Avenue, which continues to see steady improvement and has certainly moved beyond the green shoots phase of recovery. We still have a ways to go, but foot traffic has returned to pre-2019 levels, and since the start of this year, there has been a noticeable increase in tenant demand. Over the last year, we have seen new store openings and new lease signings from top brands like Mango, Aritzia, Uniqlo, and American Eagle, and most recently, the 60,000-square-foot Candy Hall of Fame at 830 North Michigan Avenue. Even so, rents are still 50% below where they were at prior peak. North Michigan Avenue is an iconic, irreplaceable street, and we are confident that the recovery will continue to accelerate, and when it does, we will be well positioned to capture that upside. And finally, I will end with an update on Henderson Avenue in Dallas. As a reminder, the vision on Henderson is to create a vibrant, walkable street curated with a mix of today's most sought-after retailers, and supplemented with dynamic and recognizable F&B—mixing the best of what has worked on streets like Armitage Avenue in Chicago, Bleecker Street in New York, Melrose Place in LA, and M Street in DC. In short, Dallas' first and only true street retail shopping experience. The street is already off to a great start with tenants like Tecovas and Warby Parker producing sales that could already justify rents doubling. And with 80% of our retail on the street now spoken for, our new leases are doing just that. I cannot reveal the names of all of the brands that have committed, but to give you a flavor, the project will consist of a healthy mix of nationally recognized tenants like Rag & Bone, who is relocating from Highland Park Village, along with a collection of younger brands that have had success on some of our other high-growth streets like Gizio, Cami, and Margaux. And we are saving around 10% of our space for brands that are more local and authentic to Texas. Add in some fun high-volume F&B like Prince Street Pizza, Papa Bagels, and Salt N' Stir ice cream, and you have the makings of a well-curated, walkable street. So in summation, the key takeaway is that despite consistently high levels of leasing activity over the past several quarters, we continue to see meaningful runway ahead, both in terms of mark-to-market opportunity and ongoing lease-up of our high-growth streets, as well as tapping into markets that have more recently begun to show the signs of a strong recovery. As always, I would like to thank the team for their hard work, and with that, I will turn things over to Reggie.

Thanks, AJ, and good morning, everyone. I will cover two things—our transaction activity for Q1 and through April, and then I will share some perspective on what we are seeing in the market. On the transaction front, we have been incredibly busy year to date. We have closed over $1 billion in acquisitions and recapitalizations, gained footholds on two of the country's premier luxury retail corridors, all while achieving our accretion and growth thresholds and building a pipeline that should maintain a high level of activity for the balance of the year. So let us walk through some details. Starting with the acquisitions not previously announced, at the end of the quarter, within our REIT portfolio, we made our inaugural investment on Worth Avenue in Palm Beach, with the acquisition of 225 Worth for $43 million. This street is one of the most irreplaceable luxury retail corridors in the country, and it has all the ingredients for continued rent growth, including strong-performing tenancy, a high-end customer base, and limited supply. The asset contains Gucci, Jay McArthur, and G4, and possesses a meaningful mark-to-market opportunity that we will harvest in the near future. Our conviction on Worth goes beyond this single asset. We have an active pipeline in that corridor, and our strategy there mirrors what we have executed in other markets: acquire a foundational position, build scale, and activate the benefits of concentration to drive returns over time. Subsequent to quarter end, also in our REIT portfolio, we closed on 4 and 28 Newbury for $109 million. These assets are anchored by Chanel and Cartier, two of the most sought-after luxury tenants in the world. These buildings are between Arlington and Berkeley Streets on Newbury, one of the best concentrations of luxury retail on the East Coast. And most importantly, this asset has a meaningful value-creation opportunity that we expect to harvest soon. The same scale thesis applies here—understand the Newbury Street market, and have relationships to create a path to building a greater presence on the corridor. For both Palm Beach and Boston, it is important to note they adhere to our metrics—being accretive to NAV, hitting our FFO accretion target of a penny per $200 million, with CAGR in excess of 5%. On the investment management side, Q1 was defined by executing on recapitalizations. We formed a joint venture with TPG Real Estate that encompassed the recap of Avenue at West Cobb and six Fund V assets, a $440 million transaction. The scale of this recap is a meaningful validation of our platform, our assets, and our relationships. We also completed the recap of Pinewood Square in Palm Beach County with private funds managed by Cohen & Steers, a $68 million transaction. This is our second recap with Cohen & Steers, a highly regarded investor; their involvement reflects both the quality of the asset and the credibility of our business plan. These transactions in part demonstrate our incubated recap model at work and in total, free up capital that we can accretively redeploy. Turning to what we are seeing in the market, the retail investment landscape remains active even as the macro backdrop has grown more complex. Supply remains constrained, new development is sparse, and institutional capital flows into quality retail continue to grow. And none of the current macro noise has changed those underlying dynamics. What that environment rewards, though, is exactly what we have built. Recall, in the street retail world, the majority of our acquisitions are off-market, and that sourcing advantage does not diminish in periods of volatility. If anything, it improves, as motivated sellers gravitate towards certainty of execution. And this rewards us disproportionately because there are fewer players in the street retail segment, and our pipeline reflects that reality. We have a number of opportunities in advanced stages of negotiation and we will continue to underwrite to the same disciplined thresholds that have defined our recent activity. On the investment management side, while the institutional appetite remains elevated, so are the number of owners looking to monetize. Owners without the capital, patience, or platform to unlock value in their assets are looking for an exit, and that is creating a compelling opportunity for a platform like ours that has all three. Our pipeline on this side is as active as it has been. So to close, as I said, we have been busy—find the right assets, on the right corridors with the right growth profile, while continuing to accretively build the investment management business. We expect this activity to continue as we are on track to deliver transaction volume for the balance of the year consistent with our past activity. Thank the team for their hard work this quarter. And with that, I turn it over to John.

Thanks, Reggie, and good morning. Our first quarter results are clear. Our internal growth is accelerating, and we are achieving our external growth goals on both accretion and volume. And these accomplishments are driving our bottom-line earnings. Our year-over-year earnings are up 11%, and with the acquisitions completed to date, we raised our full-year 2026 earnings guidance. I will start my remarks by laying out the building blocks for the remainder of the year, followed by an update on 2027, and then closing with the balance sheet. For those of you that know our approach towards earnings expectations, we set robust targets for ourselves, and thus it makes it unlikely to raise our guidance, particularly so early in the year. However, given the strength in our operations and the accretive acquisitions we have completed to date, we raised both the high and low of our guidance to $1.22 to $1.26, representing 9% growth at the midpoint over the $1.14 of FFO we reported in 2025. And with the simplified reporting that we rolled out last year, you can clearly see what is driving that growth. Based on our latest model, here is how that $0.10 of projected year-over-year growth breaks down. We expect that our internal NOI growth inclusive of redevelopments should contribute about $0.07 to $0.09 of FFO. External growth is projected to add $0.04 to $0.05, driven by the full-year impact of 2025 deals and those closed year to date in 2026. And a continued expansion and scaling of our investment management program should add another $0.01 to $0.02. And as we have previously discussed, partially offsetting our projected growth is approximately $0.04 that is embedded in our guidance from the anticipated conversion of the CityPoint loan in the second quarter. Again, while dilutive in the near term, it will ultimately be accretive as the asset stabilizes. And the earnings growth that we expect to deliver in 2026 provides us with a road map for what we aim to achieve in 2027 and beyond. Before moving to same-store NOI, I want to give a few updates on our earnings model and anticipated quarterly FFO cadence for the balance of 2026. We anticipate our quarterly run rate will be in the $0.30 to $0.32 range for the balance of the year which, consistent with our past practice, does not factor in additional acquisition accretion notwithstanding the active pipeline our acquisition team is underwriting. Secondly, and as I will discuss shortly, rent commencements from our signed-not-open portfolio are weighted to the back half of the year, positioning us for strong embedded growth heading into 2027. Now I want to give an update on occupancy, internal growth, and same property NOI. At quarter end, our REIT economic occupancy increased to 94%. But as we have said repeatedly, not all occupancy is created equal. Our street and urban portfolio, our most valuable space, sequentially increased 140 basis points and 570 basis points from Q1 of last year. And we still have several hundred basis points of embedded upside with the portfolio 91.7% occupied as of March 31. As outlined in our release, we ended the quarter with $10.5 million, or approximately 5% of RABR, in our signed-not-open pipeline. We grew our pipeline by approximately 18% during the quarter, and that is even after nearly 25% of our pipeline commenced in Q1. And as AJ discussed, our leasing pipeline remains robust, and we anticipate that our SNO should continue to build over the next couple of quarters. I will now spend a moment to highlight a few key items on our $10.5 million pipeline for those updating models. We anticipate that approximately 80% of our SNO, representing $79 million of ABR, will commence during 2026 with the remaining balance targeted for 2027. I want to highlight that over $4 million of this $7 to $9 million is projected to commence in the fourth quarter of this year, primarily from the anticipated openings of T&T Supermarket and LA Fitness's Club Studio at our San Francisco redevelopment projects. And when incorporating the timing of commencement, we expect approximately $2 to $3 million of incremental ABR to be recognized in 2026, with the vast majority of that being in our same-store pool, which leaves us with $7 to $8 million of embedded incremental ABR growth heading into 2027. And lastly, on earnings flow-through, with nearly half of our SNO coming from our REIT redevelopment portfolio, we are capitalizing certain costs—primarily interest and real estate taxes—so not all of that incremental ABR flows to the bottom line. Of the $5.3 million of ABR in our SNO redevelopment pool, we expect to capitalize between $3 to $4 million of cost on a full-year run-rate basis. Moving on to an update on our 2026 same-store expectations, we remain on track to land at the midpoint of our guidance, or 7%. I will likely regret providing this level of granularity, given it only takes a few hundred thousand dollars to move us 100 basis points in either direction, but based on our current model, we see same-store growth trending 6% to 8% in Q2, 7% to 9% in Q3, and 5% to 7% in Q4, with our street and urban portfolio anticipated to outperform suburban by 400 to 500 basis points. And now moving on to our balance sheet. So far in 2026, and it is still early, we have acquired over $600 million of REIT and investment management deals, and we did so without issuing any equity. And with the available capacity on our revolver, unsettled forward equity, and anticipated proceeds from our structured finance and investment management businesses, we have all the accretive capital we need to fund our acquisition pipeline. As highlighted in our release, we completed the refinancing of our unsecured corporate credit facility, entering into a $1.4 billion agreement. As part of this refinancing, we tightened pricing, extended maturities, and increased our total borrowing capacity by $250 million to support our growth. The new facility was significantly oversubscribed, and we strategically added two new banks to our incredible and long-standing lineup of capital partners. Following the completion of this facility, we have very manageable maturities and swap expirations over the next couple of years, which means our top-line earnings will largely drop to the bottom line. So in summary, we had an incredibly busy and productive start to the year. Our multi-year expectations of strong internal growth are intact, and we have a balance sheet that has ample capacity to support our expansion goals. We will now open the call for questions.

Follow up and rejoin the queue for any further questions. Our first question comes from Craig Mailman with Citi.

Hey, guys. So, John, that was helpful going through the guidance detail there. Just kind of curious, between AJ and Reggie, I know there is not a lot incrementally for acquisitions. Maybe just to start there, Reggie, I think you said that activity for the balance of the year could be similar to what we have seen recently. In terms of magnitude on gross, so then maybe pro rata share, goalpost what you guys are looking at, what could conceivably close this year, and maybe what the earnings impact of that could be?

Sure. I will focus on what I think could close this year. I guess taking a step back, run-rate retail on the REIT portfolio side is kind of about $400 million or so the last year plus. We have done about $200 million of that so far this year. So I think we could pencil in doing basically the same volume that we have done last year from a REIT portfolio side. On the investment management side, where we have averaged about $250 million plus or so the last two and a half, three years per year, I think we can do that as well. That is, by definition, a little lumpier because we are focused more on value-add opportunities, but I think that is how we think about it from a goalpost standpoint for volume.

And then on the earnings side, Craig, I think the one thing that we pointed out is that our target, which is unchanged, is a penny of accretion. And that is both REIT—so on $200 million worth of REIT acquisitions, our target is day-one earnings accretion of a penny per $200 million. And that same math, even though our pro rata share is much less of the equity, when you factor in the fees, $200 million of investment management is also a penny. So in terms of earnings impact, you would just prorate that throughout the year. But those targets are unchanged.

Okay. That is helpful. And, John, you are breaking up a little bit. I do not know if it is my line or yours, but just a heads up. And then similarly on the leasing side, AJ, you said you guys are working on a fair bit of fair market value adjustments and some other deals. How much of those are already embedded in guidance versus could be incremental upside as we head into 2026 into early 2027?

Craig, are you referring to what is in the pipeline or what could be in the pipeline and converted to show up in rents? Is that the question?

Yeah. Like, what is actually considered in some of the metrics you guys talked about versus could be additive to that—you guys do not want to put it in there yet because the predictability of it is not great.

Got it. So I think any leasing that we need to happen has already happened to hit the midpoint of our guidance both on same-store and earnings. So whatever AJ—if he gets something signed that is in his pipeline, we get them open and operating—that would be additive to that, which in the street is possible.

Yeah. We are typically fairly conservative with FMV assumptions. And it is typically upside for us.

Our next question comes from Andrew Reale with Bank of America.

Good morning. Thanks for taking my questions. Maybe if you could talk about your new corridors—Palm Beach and prime Newbury. First, what is the timeline for realizing the mark-to-market opportunities there that Reggie mentioned? And then are there any additional assets in the pipeline in either of those markets today? And how scalable do you think those markets could ultimately be?

Sure. I will start with the second one, Andrew. For us to identify a market, it is never just about one deal. We think: how can we amass $100, $200 million plus over time, so that we can enjoy the benefits of that scale that we have talked about—being the first call for sellers, the first call for tenants, etc. So we have an active pipeline that we feel pretty good about. We are always going to stay disciplined in our underwriting, as I have said before, but we think those markets we can scale. Before we even talk about scaling, though, we ask whether those markets have the same rent growth drivers and demand that we have in SoHo, in Georgetown, and our other corridors. And I think these corridors do. There is tight supply, the tenant demand is very high, the sales volume is there—not only to justify the rent run-up from previous years, but to continue rent growth in the future years. So we think both Worth Avenue in Palm Beach and that block of Newbury, and some of Newbury generally, have those. We feel good about the opportunities that make sense there and that we will be able to scale. To your first question, I do not want to get into too many specifics, but big picture, the opportunities for us to harvest mark-to-market opportunities and harvest 6% plus yields are really fact dependent. The framework and the way to think about this is there are a lot of things happening in these markets—from rent growth, from F&B resets. A bunch of retailers are actually reaching out to us even before their leases expire and saying, "Hey, I want to invest in my space, so let us do an early renewal now." All those things inure to the benefit of us being able to achieve the yields in the near term instead of long term.

And just to add on to that, from a modeling perspective, two thoughts. When we look at—and, again, you should assume that in these instances, the in-place lease would be below market—so when we think of that in the conservative bookkeeping we do, we are conservative as to where we think the market is on day one. And just a rough rule of thumb that we think about is, ideally, we want to get to the 6%s cash that Reggie referred to. Our target is two years, but we will tolerate up to three or four years for the right deal where we have the level of conviction. That is in terms of timeline and what we do initially to establish the gap yield from that below-market impact.

Okay. That is helpful. Thanks. And then, John, I think it was last quarter, you said pry-loose could potentially be the most impactful variable within the 5% to 9% same-store range, with the real benefit from that maybe accruing in 2027 or 2028. If you were to maximize the pry-loose opportunity in the 7%—

Andrew, so I think that was one—we gave a wide range, and I will start with historical practice, and maybe I need to not be so stubborn. We could change our historical practice, but we have not updated same-store guidance once we have given that, which is why we are not doing it this quarter. But I would say assume we are targeting the 7%, and the pry-loose is very real, very actionable, but it is not going to deviate from the 7% target.

Good luck getting John to count his chickens before they hatch.

Fair enough. Thank you.

Our next question comes from Floris van Dijkum with Ladenburg Thalmann.

Thanks. Good morning, guys. Question that does not seem to get a lot of attention these days, but your Henderson Avenue development—it is about $200 million. Should investors expect something like a 9% or 10% return on that, and is that what you have indicated the remaining ATM, the forward ATM, is going to be used to fund? Maybe also talk a little bit about the timing of that development, what kind of rents you are getting, and how much of that is pre-leased.

Let me start with the yields and timing, and then I will turn it over to AJ on the leasing specifics. We put out there—and we are on, if not ahead of, target—that we think the development is going to stabilize to an 8%–10% yield, so very consistent with what you shared. Another point, Floris, is that is the 8% to 10% on the dollars we are spending incrementally. What that is not factoring in is that we have a whole other portfolio of assets where what AJ is about to share with you is that the entire portfolio of assets is proving out to be very below market. We are not factoring in the lift from the balance of the portfolio that the development is going to add to that. In terms of timeline, we will be through our part of construction back half of this year, begin delivering space, stabilizing in 2027 and up and running in 2028. AJ will talk about where we are in leasing and status there. In terms of what we laid out as expectations, we are on track, if not ahead.

Yeah. I would say the interest and excitement on Henderson has been far beyond what we even initially imagined. And I think what you have to remember—and we have said it before—is that existing sales on the street are already in excess of the sales we are seeing even in markets like Armitage Avenue, and rents on Henderson are half of what we have currently on Armitage Avenue. So, as I mentioned in my prepared remarks, there is already justification for rents doubling on the street, and some of the more recent leases that we are signing are actually doing just that. Rag & Bone, obviously having a lot of success over at Highland Park Village, is deciding to shift to merchandising that is a little bit more in line with what they prefer from a co-tenancy standpoint. Some of the younger brands like Margaux and Gizio—I am anxious to give you more names. I have shared what I can at this point, but we are off to a great start.

Great. And maybe as a follow-up question, I wanted to touch base on Chicago. I know you talked a little bit about the momentum, and I think TPG has bought into your JV, if I am not mistaken, at 717. What is the appetite to perhaps take advantage of some of the opportunistic investment opportunities that could be achievable in that market? And maybe talk about where is the upside, or is there only— all we hear about typically when we talk to people is Chicago is terrible. What has changed, and why is it not a bad place to be?

Let me start with—of course, the recap with TPG was Fund V, nothing to do with Fund IV. Everything we own at 717 is in Fund IV and still held by Fund IV. Just to clarify there, there has been no transaction.

And I just want to correct one thing. Chicago is not terrible. It has never been a bad place to be. Certainly in our neighborhoods, we have had many years of success there. The issue with North Michigan Avenue has never been an issue of fundamentals. Footfalls are back in excess of 2019 volumes. The sales are seeing very real growth over the last few years. It has really always just been a challenge of difficult spaces—multi-level retail, historically those flagship locations that have been more difficult to backfill—but those spaces are filling in. I mentioned some names—Uniqlo, H&M coming back to the street, American Eagle, Aritzia—large format spaces. As those fill in, we are going to continue to see increases in activity. Then, of course, the challenge of having three underperforming malls on the street has not done us any favors. As those pieces start to get figured out, we are just going to see more and more momentum on the street.

Our next question comes from Todd Michael Thomas with KeyBanc Capital Markets.

Thanks. Good morning. First, I just wanted to ask if there are any more markets or partners that you are evaluating today. Should we expect some additional inaugural investments in the quarters ahead as we contemplate some additional investment activity? And then, Ken, a bigger-picture question for you or Reggie—you talked about the increased competition for open-air centers. I think you referenced that in context of speaking about Fund V assets, for example, but you indicated that you are still finding opportunities on the street and urban segment, a little less crowded. Why do you think it is less crowded? Why is the competition lower and the acquisition environment seems more favorable, where there are strong IRR and risk-adjusted opportunities, good rent growth—you talked about the escalators. Just curious to get your thoughts there.

Sure. On additional markets, we spend a fair amount of time—AJ and I especially—talking to our retailers about which markets are ones you might want to be in, and which ones are going from "nice to have" to "need to have." In the case of Palm Beach, it is transitioning from a seasonal market and, for a variety of reasons that we all read about, it is now becoming a must-have market. In those instances where we see fragmented ownership and our retailers are saying, "We would welcome institutional high-quality ownership like Acadia or others," that is where we spend the majority of our time and attention. In some markets, Dallas was no place to buy, so there we are building and creating that street retail environment. But for Palm Beach, Worth Avenue clearly checks that box. As does Newbury in Boston. There are probably a half-dozen, perhaps a dozen, additional markets that would fit into that spectrum that we are constantly spending time on. And then what we are saying is—and Reg touched on this—is there enough assets for us to acquire over a realistic period of time that we can build adequate scale? Is there a spine? Are there barriers to entry on a given corridor so that it does not just keep on wandering up and down, left and right? And when it does, in the case of Worth Avenue and Newbury, and as I said about a half-dozen others, you should expect over time that we will focus on those. We do not have to add new markets in order for us to achieve our goals of being the premier owner-operator of street retail in the United States, but it would be nice to have a few more. And from our retailers’ perspective, they would welcome that. Now in terms of competition, street retail has the longer learning curve. It is pretty easy to underwrite some formats of open-air retail and that is why you saw capital move first and foremost back to supermarket-anchored. You still need to underwrite thoughtfully and carefully your supermarket, but all of the things we talked about in terms of our tenants, you do not really hear in terms of the satellites—that dry cleaner, that coffee shop, and otherwise. We do not get into that same level of underwriting. So there are just lower barriers to entry. For street retail, you have to understand the market, you have to understand the tenants, you have to understand the local laws, and it has taken us well over a decade to get to the point where we are right now. And for a lot of institutional owners, gearing up is just too difficult. They would rather partner with us. And so we certainly like our positioning in the street retail format. That being said, as Reggie has pointed out, the team has been very active in other formats of open-air retail. Thankfully, volume is coming back. So we will achieve our volume goals notwithstanding it being more competitive. We just have to work a little harder on it, and so far, so good.

Okay. That is helpful. And then, John, just real quick—appreciate the update on CityPoint as it pertains to the guidance. What is the ABR upside opportunity there today? You are at a little over $21 million of ABR. Where does that stabilize? And what is the current thinking around the stabilization time frame?

In terms of stabilization, Todd, it is one we have always thought of in two distinct phases. The first phase—in the next 18 to 24 months—where we should be able to add 10% to 20% of current ABR. That is our goal, our strategy, and our leasing plan to add that over the next year or two. Secondly, after that—again, the neighborhood is still filling in—proof of concept, we have some leases that we have signed that will be rolling. Second stabilization, we think we add another 30% to 40% off of that once we get to that level of stabilization, after we get through this first one.

For sure. The last 18 months have been pivotal at CityPoint. Between Sephora and Swarovski, most recently Warby Parker, Van Leeuwen—really it is starting to get that Armitage/M Street feel. So, at this point, it is just about finding the right retailers and completing that right mix of merchandising. Yes, there is a lot of runway ahead there as well.

How we look at it to give us conviction is the sales that are being generated. We do not want to give individual tenant sales, but you could take a guess as to who they are. They are doing increasing volumes that are attracting the attention of retailers, and that is what is giving us the conviction that it is a matter of when, not if.

Okay. That is helpful. Thank you.

Our next question comes from Michael William Mueller with JPMorgan.

Yes, hi. First, you mentioned 8% to 10% returns for the Henderson expansion. What are some of the moving parts that pull you to an 8% versus a 10%? Is there that much variability in the rents being discussed?

Yeah, Mike, some would be cost, some would be timing of opening and when we declare we are at stabilization. And if you really looked at the math, when you are doing a full lease-up like this, 200 basis points of variability feels normal. Maybe it is a little wide so that we are being a little conservative, but it is not appropriate to say we are getting to 9% right now. Give us a little latitude. Hopefully the tenant sales performance that we have seen so far and the tenant enthusiasm that we are seeing continue. A lot of it is just logistics—how long does it take to get the various tenants open? A few months’ delay could change those numbers 10–20 basis points one direction or another.

Okay. And I guess second question: you now have three buildings on Newbury and the one in Palm Beach, and I know the goal is to scale that. But could you operate those buildings efficiently over the longer term if you could not find additional acquisitions, or do you really need to have five or ten assets in a market to have it work over the long term?

We could absolutely operate them. When I refer to—and when we have referred to—benefits of scale, it is very different than G&A as a percentage of assets in a given corridor. While there are benefits to scale like that, and that is how we traditionally in our industry think about it, what we are seeing is very different. What we are seeing is when we can control enough buildings on a given corridor—as we have on Armitage Avenue, as we have on M Street, as you will see us continue to do on Greene Street in New York and elsewhere—we can then pull other levers that enable us to get higher rents more efficiently with less downtime. So AJ and team are constantly shuffling tenants. We just had a meeting this morning on this where some tenants want to be larger, others are ready to leave, and by having enough choices on a given corridor, and being a trusted landlord for these retailers, the benefits of scale that we are referring to are not cost-related; it is really the ability to drive rents and NOI over time. And that requires more than just a couple of buildings on any corridor. So in order for those benefits of scale to show up, I look forward to Reggie and team adding to both of these corridors over time.

Thank you. That concludes today's question-and-answer session. I would like to turn the call back to Kenneth F. Bernstein for closing remarks.

Great. Thank you, everyone. We look forward to speaking with you next quarter. This concludes today's conference call.

Thank you for participating. You may now disconnect.