Greetings, and welcome to the Brixmor Property Group's Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the call over to Stacy Slater. Thank you. You may begin.

Thank you, operator, and thank you all for joining Brixmor's fourth quarter conference call. With me on the call today are Jim Taylor, Chief Executive Officer and President; Angela Aman, Executive Vice President and Chief Financial Officer; Mark Horgan, Executive Vice President and Chief Investment Officer; and Brian Finnegan, Executive Vice President, Chief Revenue Officer, who will be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures. Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website. At this time, it's my pleasure to introduce Jim Taylor.

Thanks, Stacy, and good morning, everyone. I'll be brief in my opening remarks as I believe our results this quarter and this year truly speak for themselves. As you review them, please dig in and consider how across every metric, these results demonstrate our accelerating outperformance as we execute our value-add plan, how they set us up for and provide visibility on continued outperformance in 2022 and beyond, and importantly how they underscore the portfolio transformation that has occurred at Brixmor. As always, our outperformance begins with leasing, where for the year we signed 3.1 million feet of new leases at average cash spreads of over 27%. That volume included nearly a million feet of new leases in the fourth quarter, signed at a record ABR of over $20 a foot in an average spread of 42%. In addition, for the full year, we achieved an all time record new lease ABR of $18.66 a foot as we leveraged strong demand from growing retailers to be in our centers. We remain disciplined with capital, achieving another all time record net effective rent of $17.82 a foot. We also achieved an all time high for small shop occupancy at 86.7%, but have left more room to run as we benefit from the improvements we've made at our centers. And we drove our average in place ABR to $15.42, another all time record for the company that also underscores the additional mark-to-market we have yet to harvest, as we capitalize on our attractive rent basis. Looking ahead, our visibility on growth remains as strong as ever, as demonstrated by the record $13 million in ABR we commenced during the fourth quarter, the over $50 million of signed, but not commenced rent that will commence over the coming quarters and the additional $45 million of ABR in our forward leasing pipeline. Under Brian, David and the regional leasing teams, we continue to grow market share with our core tenants, while also bringing new concepts to the portfolio, including several mall-native retailers seeking the competitive traffic of our well-located open air centers. We also were successful in signing 14 grocery leases. That will catalyze accretive reinvestment activity at the centers impacted and grows our pro forma mix of grocery-anchored centers to nearly 80% of our portfolio. Speaking of reinvestments, we delivered another $68 million of projects in the fourth quarter, bringing our total for the year to $168 million at an average incremental return of 11%. As we often highlight, that is the equivalent value creation of nearly $840 million of ground development delivered this year, but at much, much lower risk. And that reinvestment has a flywheel effect, both in terms of follow-on leasing, which we've demonstrated amply throughout the year, but also compression in applied cap rate as we improve those centers. At the end of the year, we have an additional $374 million of reinvestment underway at an expected incremental return of 9%. And we continue to grow our forward pipeline, which now stands at over $900 million, including some very exciting opportunities at our recent acquisitions that I'll cover in a moment. Under Haig's leadership, our operations team continued to ramp our service levels at the properties while minimizing leakage. We were also able to compress timeframes between lease execution and rent commencement by nearly 20%, despite the headwinds of supply chain disruption as our construction and tenant coordination teams work with tenants to find practical solutions to get stores open sooner. Perhaps most importantly, I'm very pleased with how the improved operations and appearance at our centers is driving great follow-on leasing activity. Looking forward, our execution in leasing, reinvestments and operations drives the top line outlook for 2022 of 4% to 5%, which I believe will lead the sector. That expected outperformance is particularly impressive when you stack it with our historical outperformance, both through and emerging from the pandemic, as well as when you look at our prospects beyond this year as we execute our plan. In addition to delivering robust internal growth under Mark's leadership, we are executing upon exciting external growth opportunities through acquisitions of assets like Bonita Springs and Granada Shoppes in Southwest Florida; Brea Gateway in Orange County, California; Arboretum in Dallas, Texas; and King's Market and ConneXion both in Atlanta, Georgia. Since the beginning of last year through today, we've closed on over $390 million of acquisitions that further cluster our investments and markets where we perform well and in centers that provide further upside through leasing, reinvestment and operations. Stay tuned in the coming quarters as we announce additional opportunities and also as we launch accretive reinvestment at recently acquired centers. In fact, we're already at least on two new anchor repositions at rents well above the underwritten rents for the acquisitions. Our tenants and communities are very excited about the changes we'll be bringing to these centers. Before turning the call over to Angela for a more detailed discussion of our results and outlook, I'd like to close by observing how pleased I am with how this team continues to deliver under the plan we laid out several years ago, how that performance is accelerating as we've transformed the portfolio, and importantly, how we continue to advance towards our purpose of creating and owning centers that are truly the center of the communities we serve. Angela?

Thanks, Jim, and good morning. I am pleased to report another strong quarter of execution by our team as we continue to deliver on our value-added strategy and capitalize on the strength of the current retail environment. Nareit FFO was $0.46 per share in the fourth quarter and $1.75 per share for the full year. Same property NOI growth was 9.7% in the fourth quarter or 8.9% for the full year. Same property NOI growth was driven most significantly by revenues deemed uncollectible. During the fourth quarter, we collected $8 million of previously reserved base rent and expense reimbursement income, representing approximately 440 basis points of same property NOI growth during the period. Importantly, base rent, ancillary and other revenues and percentage rents were also positive contributors of growth this quarter. The contribution from base rent meaningfully accelerated in Q4, as weighted average occupancy grew on a year-over-year basis and the portfolio continued to benefit from the impact of positive releasing spreads recognized over the last two years. Net expense reimbursements were a detractor from growth this quarter and were impacted by an increase in operating costs as service levels have continued to normalize across the portfolio, following proactive temporary cost reductions during 2020 and as we work to improve the look and feel of our centers to drive traffic and follow-on leasing activity. But we have experienced continued improvements in operational metrics throughout the course of 2021. Momentum clearly accelerated during the fourth quarter, with a 50 basis point sequential improvement in both build and leased occupancy, driven in large part by significant small shop activity. Notably, the small shop lease rate was up 100 basis points quarter-over-quarter, following a 90 basis point sequential improvement in Q3. As Jim highlighted, new lease spreads accelerated to 41.7% and net effective rent climbed to $18.59 per square foot for the quarter, 20% above the prior fourth quarter average on a pool more heavily weighted towards anchor space. The signed, but not commenced pool increased to $50.3 million of annualized base rent, up from $43.5 million last quarter driven by an additional 170,000 square feet of leases in the pool and an 8% improvement in average rate across the entire pool. Importantly, approximately 80% of the signed, but not commenced ABR is expected to come online during 2022, weighted to the first half of the year. These metrics taken together underscore the strength of Brixmor's platform, the significant benefits of the portfolio transformation that has occurred over the last five years and the degree to which this company is uniquely positioned to capitalize on the strength of the current environment. As a result, we have introduced 2022 same property NOI growth guidance, with a range of 2% to 4% driven by a 400 to 500 basis point contribution from base rent and a 50 basis point contribution from net reimbursement income, percentage rents and ancillary and other revenues. Revenues deemed uncollectible, however, is expected to be a headwind in 2022 due to the significant amount of revenue recognized during 2021 related to the prior period. This $26 million of incremental 2021 revenue by itself creates a 340 basis point headwind to same property NOI growth in 2022. That said, our guidance calls for detraction from revenues deemed uncollectible of only 150 to 250 basis points, reflecting changes in the composition of the tenant base, the improvement in cash basis collections rates experienced throughout 2021, additional improvements expected during 2022 and at the high end of the range, some modest collections of amounts previously reserved. Our assumptions for revenues deemed uncollectible translate into a net reserve of 160 basis points of total revenues at the low end of the range or 90 basis points at the high end of the range versus our historical run rate of 75 to 100 basis points. I would also note that revenues deemed uncollectible will result in higher than usual volatility in reported same property NOI growth as we move through the year. We have introduced Nareit FFO guidance for 2022, with a range of $1.86 to $1.94 per share. Consistent with our prior methodology our FFO guidance reflects our assumptions for capital recycling activity during 2022, but does not contemplate the conversion of any tenants to, or from cash basis accounting, which could result in significant volatility in GAAP straight-line rental income. And with that, I'll turn the call over to the operator for Q&A.

Thank you. We'll now be conducting a question-and-answer session. Our first question is coming from the line of Craig Schmidt with Bank of America. Please proceed with your questions.

Thank you. I was wondering if you could tell us how rising construction costs and rising labor costs are impacting your redevelopment efforts.

It's a great question, Craig. As I alluded to in my remarks, we really are aligned with our tenants in terms of getting new openings on time. And as such, we've been working with them to accept current conditions, accept current HVAC equipment and other measures, which not only reduce the cost, but accelerate the time of getting the store open. And in that way, we've managed to hold our returns. The other thing I'd comment on is I think tenants are aware of those increased costs and we're driving higher rent, of course, through generating more competition for space. So, we feel pretty good about, not only what we have underway, which is largely pre-bid, but also what's in that $900 million future pipeline in terms of incremental returns.

Great. And then, looking at the progress in the small shop occupancy, where do you think you can take this to in a couple of years' time?

It's perhaps one of the best indicators of the execution of the strategy that I talked about and we fully expect as we continue to reinvest in the portfolio to drive follow-on leasing in the small shops, which is what we've been doing coming out of the pandemic in a really strong way. We're a little below 87%. And as I've mentioned on other calls, we expect that to go into the high 80s, even the low 90s over time, as we continue to execute this plan. And it's not just occupancy, Craig, it's rate. And that's the other thing you should really take note of in our results is how we're continuing to set consecutive records in terms of rate that we're realizing on new leasing, again, a great reflection of the strategy that we're executing. Because we actually believe that the best way to make money in this business is not building new shopping centers, but rather making existing shopping centers better.

Thank you.

Thank you. Our next question is coming from the line of Todd Thomas with KeyBanc. Please proceed with your questions.

Hi. Thanks. Good morning. Jim, just a question on rents. You highlighted the net effective rents on new leasing and talked a little bit about small shop leasing and discussed the future leasing pipeline, which continues to grow. Can you speak to the current mark-to-market opportunity today across the portfolio and whether you feel that mark-to-market opportunity is greater today than you did before the pandemic? And then based on the future leasing pipeline and visibility that you have, do you see leasing spreads increasing further from here?

I think these are strong spreads and I'd hate to promise even higher spread as we continue to realize the benefit of our plan. But we feel really good about the rents that we're seeing. In fact, we're at a record rent in that forward pipeline of over $53 million that Angela referred to. So, we're really utilizing this moment in time to drive competition amongst tenants to drive rate and not just rate, but the other terms of the leases.

Todd, I'd just add, the team's done a fantastic job capitalizing on the operational improvements that we've made at our shopping centers, the investments that we continue to make at our centers. And you add that to the environment and look at our portfolio, we've got rents expiring on anchors the next three years at $9.50 and we signed those leases last year at over $14. So, we've got good visibility on the mark-to-market opportunity in the portfolio. And as Jim mentioned, you may see some fluctuations here or there, but long-term, we feel really confident about our ability to harness that upside.

Okay. Angela, the 400 to 500 basis point increase in base rent growth that's forecasted in 2022. You ended 2021 with the contribution in the fourth quarter about 200 basis points. It was 10 basis points on average throughout the year. Can you just talk about the expected cadence of that growth throughout 2022 and how we should think about that carrying into 2023?

Thanks, Todd. That's a good question. As I mentioned in my prepared remarks, you did see a really healthy inflection point in the fourth quarter in the contribution from base rent, because you started to see weighted average occupancy on a year-over-year basis grow, and you're seeing the full flow-through effect of the positive spreads we signed over the last several years. I do think you'll continue to see that grow in terms of the contribution over the course of the year. I did also mention that the signed, but not commenced pool is first-half weighted, which is definitely good news. You also tend to see more move-outs in the first half of the year than the second half of the year. So, on balance, I would expect that you'll continue to see that grow kind of programmatically over the course of the year.

Okay. All right. Thank you.

Thank you.

Thank you. Our next question is coming from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your questions.

Good morning. Thank you for the time. I was just wondering if you could help us frame how you think market rent growth should improve or trend over the course of 2022. I think previously you noted that rents were kind of 14% higher than pre-COVID levels. If you have any kind of mark-to-market there. And maybe think about how rent growth is trending relative to inflation or cost growth to Craig's previous question about redevelopment.

We're very encouraged by the breadth and depth of demand that we're seeing from tenants. That is driving a significant amount of the ABR performance that we're realizing in the portfolio. So we feel good. To Craig's question about reinvestment returns, we have seen inflation in cost, but importantly, we've been seeing nice inflation in rents. When you lay that over our strategy, which in a market-neutral environment still outperforms because of our low average rent basis and the improvements in reinvestments that we're making in our centers, that inflation in rents is just really an additional tailwind to our plan. But Brian really highlighted it. Look at what's expiring over the next couple of years, and then look at where we're signing rents today. I highlighted it as well in my remarks, and you can see a very healthy spread that gives us this visibility line, not just on 2022, but 2023 and beyond. A lot of the activity that we're working on today is 18 months out plus.

Okay. And maybe a question for Angela. Can you help us frame how much has not been collected that could present upside to guidance, and remind us of what's assumed in guidance and apologies if I missed that in your prepared remarks.

Sure. We do, in the supplemental package, in our additional COVID disclosures, try to really frame up the total amount over the course of the pandemic that has been accrued for, but not collected and of that amount, how much has been reserved. And it's really that amount that's been reserved that has the ability to be good news going forward to the extent it's collected. That amount is about just a little over $44 million. About $18 million of that relates to tenants who have exited the portfolio at this point. We will continue to aggressively pursue those amounts, but admittedly they're lower likelihood and they might take us longer to recover. About $16 million of the total, so 35% to 40% of the total, relates to tenants that are active in the portfolio and we're not in dispute with. And then there's another $11 million of tenants who are active in the portfolio, but we are in litigation or otherwise actively working to get those amounts repaid. So that frames up the different buckets within the number. It's about $16 million that is from active tenants in the portfolio, that's probably the highest likelihood to be received over some time period. Some of that may be received in 2022. Some of that might extend into 2023 or even 2024. And so, the timing of that remains to be seen. As I talked about revenues deemed uncollectible, it's fair to say that at the low end of our same property NOI range, we're not forecasting a significant improvement in ongoing collections from cash-basis tenants, and we're not really forecasting any significant amount of prior period collections. As you move into the higher end of the range, you may see some modest amount of out-of-period collections. The range on bad debt in terms of total dollars between the low end and the high end of the range is $8 million, but it could come from both an improvement in the ongoing collections rate and some out-of-period collections.

That was great. Thanks Angela.

Thank you.

Thank you. Our next question is coming from the line of Floris van Dijkum with Compass Point. Please proceed with your questions.

Thanks for taking my question. Jim and Angela and Brian, maybe I'd love to get your comments. You're delivering solid underlying NOI growth, lease spreads continue to stay strong. You're reinvesting capital allocation, selling assets, deploying into redeveloping and making your current portfolio higher growth. One thing is the share price; while your stock has been the best performing retail stapled this year, you're still trading at arguably a significant discount to NAV. We might be slightly out of consensus on cap rates, but theoretically, the higher your underlying NOI growth, the lower your cap rate. Maybe what can you give the market to make people feel more comfortable that cap rates for your portfolio have, in fact, come down? You mentioned a little bit in your opening comments, but maybe talk about transactions in your markets. I know you have a lot of different markets, so it's harder to capture this, but what can you provide the investment community to get them more comfortable that asset values in your portfolio have gone up?

I appreciate the question Floris and your underlying point is correct. Cap rates continue to compress across all of our markets and really have been doing that for the last 18 months. There have been some notable transactions that I'll have Mark comment on, but that's clearly a trend. The reason is reflected in the performance of platforms like ours, where you see open air centers driving rate, you see great leasing demand, and really a great breadth of demand to be in our centers. And you think about the relative returns in this asset class relative to industrial, data centers, multifamily, and it's clearly becoming a very attractive asset class for institutional investors, which is bringing a lot of capital into this space and driving cap rates.

I think that's right, Jim. In terms of what we've seen across markets, we've seen assets price well into floors in real time markets in Texas and California and Florida. We've seen strong pricing around the New York City region. We've seen strong pricing in the Mid-Atlantic as well. The strong pricing has been pretty broad based from a cap rate perspective. Real time, we're actually seeing very strong demand and pricing for what folks might consider tertiary assets and we've been able to exit some of those assets pricing well above what we could have three or four years ago. So, we're seeing a very strong market in terms of cap rates out. And part of it's being driven by the demand from institutional investors who are really seeing the results Brian and team are driving and they want to be a part of it.

And if I were to ask, do you see that as your growth — your top-line growth is actually accelerating this year — shouldn't that have the effect of reducing the cap rates even more going forward as well?

Yeah. It's Matt. As you point out and again, it's a pretty visible stream of growth that we think is driving that performance. So, the answer is yes, both generally and then more specifically with what we're doing with our assets, particularly as we invest at high single to low double-digit incremental returns in these assets, we're not only driving rate ROI, which you're seeing in our top line, but we're also creating a great follow-on effect in terms of the cap rate that would be applied to those assets market-neutral. Then when you layer on top of that the improving trends that we see in the market, we're creating even more value. So, we're very pleased with what we're seeing.

Thanks guys.

Thank you.

Thank you. Our next question is coming from the line of Katy McConnell with Citi. Please proceed with your questions.

Great. Thanks. Good morning, everyone. So given we saw an increase in leasing volumes again this quarter, can you discuss what this could mean for total commenced occupancy upside this year? And then, do you think you've reached a peak at this point in terms of quarterly new leasing volumes or is demand still accelerating?

In terms of where we think occupancy might trend over the course of the year, I think likely by the end of next year we will be up from a build occupancy perspective somewhere in the neighborhood of 100 to 200 basis points. The weighted average impact of that over the course of the year is obviously going to be lower than that, but I do think we'll see some pretty healthy build occupancy growth as we get into 2022 and continue to see that ramp up over the course of the year.

Katy, from a volume perspective, it's robust now. If you look at last year, we signed more leases last year than we have in any year since 2016 at the highest rent we've ever signed as a company. Fourth quarter in particular was more GLA than we signed in the last two and a half years. And despite all of that activity, the pipeline is up 20% versus what it was at the end of 2020. So, we see great leasing demand from our core tenants. As Jim mentioned in his opening remarks, mall-native tenants are accelerating their open-air store openings. And we're also seeing new concepts as well, both in the small shop and anchor space. So, we've been really encouraged by the depth of demand. And as we continue to reinvest in our centers and make operational improvements, we expect to continue to attract a good deal of that demand that's out there.

These volumes are great and I think really show how we're driving the business and leveraging the platform. From an expectation standpoint, we expect it to continue to be robust, Katy, as we move forward, but these are incredible levels and we are just really pleased with what we're able to execute.

I would underscore Brian's point that given where we're signing new leases today relative to the portfolio average, every 100 basis points of occupancy growth is having a disproportionate impact on NOI growth, just given how significant that improvement in rate really is across the signed, but not commenced pool and across the forward pipeline as well.

Okay. Great. And then on the flip side, can you just provide some color on what the store closure environment has been like so far this year and any notable closures or watchlist tenants to be aware of in 1Q?

It's been a very healthy environment. We really haven't seen significant store closures or move-outs in the portfolio. We're encouraged by that. And I think it's reflective of the environment where retailers continue to invest in their stores and seek to grow their pipeline.

It's a continuation of the trend we saw in 2021. Our move-outs were down 30% versus 2020 and down 20% from 2019. Our tenant base is stronger today than it was during the pandemic. We continue to see great performance from our core retailers. So that's leading to fewer move-outs in addition to all the improvements that we've made across the portfolio. As we look out, we really don't see a tremendous number of trouble tenants into the year. So, it's been a pretty muted bankruptcy environment, and it's something we've been really encouraged by.

Okay. Great. Thanks everyone.

Thank you.

Thank you. Our next question is coming from the line of Greg McGinniss with Scotiabank. Please proceed with your questions.

Hey, good morning. Jim, you've mentioned the benefit of getting tenants into space. Are you seeing a measurable decrease in the time for tenants to take over space and start paying rent? Or is this more about maintaining the status quo in a period with maybe supply chain and labor headwinds?

It's always an opportunity. A day that the tenant isn't in the space is a day of lost rent. As I highlighted in my commentary, we are really focused on compressing timeframes between execution of the lease and rent commencement. Part of the way we've been doing that is working with tenants on existing conditions, scope letters, et cetera. And we found that they're very much aligned with us because a day that they're not open is a day of lost sales. So, we continue to work to compress that timeframe in an environment that does have some supply chain disruptions, but we're fighting that and doing all that we can to continue to execute and deliver. I'm really pleased with what the team has done in compressing that timeframe.

And you mentioned getting tenants to accept existing HVAC equipment. Does that mean they'll take it for the whole lease or does that mean there's additional work to do while the tenant is in place?

What's been encouraging is because each space is different tenants have recognized they have to work within some of the existing confines of the space. So tenants have taken on existing HVAC units, worked with existing facades, partnered with us in delivery where we may be doing work at the same time. There's a big appetite to get stores open this year, so they're recognizing challenges in the environment. Our team's done a good job from a leasing, operating and legal perspective partnering with tenants, getting ahead of things once leases are approved so we're ready to start work right away. It's helping condense those timeframes despite the challenges.

Okay. Thank you. And looking at that final block of tenant categories, slightly weaker in collections — entertainment, fitness, maybe some restaurants and services — what's driving inability to collect rent at this point? And at what point do you think about taking back that space from the tenant?

From an entertainment perspective, it's a very low percentage of our ABR overall, less than 2%. We have worked with some tenants within that space. We've been proactive in taking space back when eviction moratoriums are lifted. When those moratoriums were lifted during the pandemic, we had tenants come to the table; we saw that in the fourth quarter. Some have been lifted recently, and we expect that to continue. From a fitness perspective, particularly low-cost providers, we've seen more demand and a return of boutique fitness operations. So overall, these categories are in a much better position as we head into 2022; there's still a few tenants with challenges, but net-net we feel much better.

It is a tenant-by-tenant process. We're making those judgments given the health of their business, the length of time they were forced to close, traffic levels, et cetera. We're making the best business decisions we can.

Great. Thank you.

You bet.

Thank you. Our next question is coming from the line of Anthony Powell with Barclays. Please proceed with your questions.

Hi. Good morning. Maybe follow-up on that question. In terms of the revenues deemed uncollectible, what's the cadence we should expect throughout the year? Should we expect that to be higher in the first quarter or maybe get a bit lower as we get through the year and as you work out these tenant issues, or is it more evenly spread throughout the year?

It's likely to be volatile over the course of the year because of potential collections of prior period amounts. Putting that aside, the reserve we expect for current period billings, I would expect to continue to improve as we move through the year. So higher in the first quarter and then continue to move the reserve lower as we move through the year. The cadence depends on the timing of prior period collections, which might be lumpy and create some volatility.

Right. So should we be modeling closer to your historical norm by fourth quarter and 2023 or is that too optimistic?

It's a range. Even at the high end of the range for the full year, it's still in line with where we've been historically. If you look at the supplemental, page 11 gives additional detail on what we reserved specifically for fourth quarter billings; it's higher than the 160 basis point number in the low end of the range. So I would assume we start the first quarter at a higher level and continue to improve. Where we end up between 160 and 90 basis points will depend on the cadence of improvement in current period collections and prior period collections.

Got it. And maybe on cap rates, you mentioned you're continuing to compress. How do you view rising interest rates as a driver of that? Do you see cap rates for your segment maybe being impacted as rates go up, or given the higher yield you present relative to other asset classes can cap rates actually be driven further down this year and beyond?

I do think the biggest driver is the relative spread between this asset class, which has proven its durability and resilience, and other asset classes like multifamily, industrial and data centers. Interest rates matter, and where the risk-free rate is located will impact where cap rates go, but given the weight of capital getting invested in the space, particularly core assets and assets with reinvestment potential, that's where we're seeing cap rates get most aggressive as Mark alluded to. We're seeing cap rates well into the fours in many places.

All right. Thank you.

You bet.

Thank you. Our next question is coming from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your questions.

Hey, good morning.

Good morning.

Two questions. First, on the small shop, you spoke of being 87% now, trying to get to the upper 80s, maybe low 90s. Is there something structural about small shop where you can never be north of 92%-93%, or is there something else at work? Given no new supply for probably over 15 years and credit-challenged tenants flushed out, I'd think you'd push that number into 93%-94%. Trying to see if there's something structural at work.

It's a great question. I think we are moving into an environment with increasing tenant demand without a lot of new supply. There is an element of turnover that happens with small shop tenants that's generally greater than what you see at the anchor level; that consistent turnover generally results in occupancy levels for small shops that trail anchor occupancy. It's just part of the business. Where we settle out we'll see, but we're encouraged by the health of tenants, the strength of demand and visibility that we have on continuing to improve that as we reinvest in centers, bring in more vibrant anchors and grocery uses. For many reinvestment projects we're actually holding onto additional vacancy as anchors deliver and we have follow-on leasing. I like where we're going and, as Angela highlighted, it's not just occupancy, it's rate and we're very encouraged.

Okay. Second question for Brian: given headlines about thefts and crime and drug stores closing in certain markets, what are you seeing across the portfolio as fallout? Any changes in leasing dynamics, more tenant interest in your properties, or any markets where it's tougher to do leasing? Curious about practical impact.

Alex, it's something we've discussed at length with our tenants. Our operating teams have done a fantastic job across the portfolio of making our properties safe. Whether that's additional facility managers at redevelopment assets or security measures like theft monitoring, we haven't seen an uptick in crime at our properties overall. We have been working with tenants on security measures at some centers and they may reimburse for those. It's a concern for some tenants, but our teams have managed through it in places where we may have seen some uptick and we had very little of that even during the social unrest in early 2020.

We're seeing an underlying benefit in increased focus by tenants on more suburban locations. Fortunately, we're not seeing the security issues that occur in more urban locations. As Brian mentioned, we've been partnering well with tenants to ensure our centers are safe and well operated.

You haven't seen any leasing benefit or negative impact?

Not materially. We see shifting demand favoring our types of centers, which is a positive overall.

Okay. Thank you.

You bet.

Thank you. Our next question is coming from the line of Samir Khanal with Evercore. Please proceed with your questions.

Hi, good morning everybody. Angela, when I look at your bridge from 2021 to 2022, you're baking in some dilution from transactions. Is that the thought to take advantage of some of the pricing out there? You talked about strong cap rate compression. How should we think about your portfolio strategy — portfolio recycling plans over the next 12 to 24 months?

We're excited by what we're seeing on both sides of the equation. The transaction activity we executed in the fourth quarter and early first quarter speaks to our ability to continue the strategy of value-add investing at returns that work for us. Mark highlighted compression in cap rates in more secondary and tertiary markets, which is an opportunity for us. You'll continue to see us active on both acquisition and disposition sides and continue to underwrite thoughtfully to drive overall portfolio growth over time.

My question is around net effective rents. It was up quite a bit from the prior period, but you also signed more anchors, which usually requires more leasing CapEx. Were there any anchor tenants that drove this net effective rent? Trying to get a little more color.

There were quite a few anchor tenants that drove that result higher. It wasn't one or two deals but across the pool there were some really strong transactions in the quarter.

If you look, it was our best anchor quarter since before the pandemic and we signed some great grocery leases including two Sprouts that are kicking off redevelopments in Philadelphia and Los Angeles, and a Whole Foods kicking off redevelopment outside Philadelphia. The rest of the anchors are active open-air players like Burlington, Ross and TJX. There's not much being built so when we get space back, multiple players compete for it. We were encouraged with anchor acceleration in the fourth quarter and the rates.

Thanks very much.

Thank you.

Thank you. Our next question is coming from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your questions.

Hi, good morning. First a quick follow-up on an earlier question. Angela, you mentioned build occupancy could be up 100 basis points to 200 basis points by the end of next year. I just wanted to clarify, did you mean by the end of 2022?

No, I meant by the end of 2022. Weighted average occupancy would be up by a much lower number, call it 50 to 100 basis points, which would be closer to the impact on NOI. But from 12/31 to 12/31 you could be up in build occupancy by 100 to 200 basis points.

Got it. And then bigger picture, Jim, you talked about great growth prospects and we've covered many. But when we look at FFO growth rate in 2022, excluding items that impact comparability, it is still low single-digit. Is 2022 a transition year because of COVID items or are there so many moving pieces that growth ends up offset by other items? Angela, I know you mentioned revenues deemed uncollectible. Can you give more detail on achieving the growth rate discussed?

You're right, the biggest driver that detracts from the optical growth rate is revenues deemed uncollectible. I mentioned that $26 million of 2020 rent effectively came through in 2021, about $0.09 a share, which materially impacts how growth looks between 2021 and 2022 despite strong contribution from base rent and what's going on with the portfolio. On the transaction side, we've got two years of activity embedded and you're looking at maybe a penny of dilution at the midpoint. So the biggest detractor is the out-of-period collections in 2021.

Got it. Thanks.

Thank you. Our next question is coming from the line of Mike Mueller with JP Morgan. Please proceed with your questions.

Thanks. Hi. Angela, was the sequential pickup in G&A just because of equity comp and what sort of G&A run rate should we be thinking about?

There were some true-ups tied to stock-based compensation based on performance during 2021. So the fourth quarter does not represent the run rate going forward. If you look at our recurring G&A adjusted for litigation and non-routine legal, I would expect growth in the 3% range as we get into 2022, reflecting normalization of T&E, conferences and return-to-office costs.

Got it. And then can we get a range of cap rates for your fourth quarter and year-to-date acquisitions and how should we think about disposition volumes this year for the base case?

In terms of cap rates on acquisitions during the quarter, they were consistent with our expectations. Last quarter it was in the low to mid 5% range in place with some great near-term value-add opportunities. On the disposition side, the full year disposition cap rate was in the mid 7% range. The fourth quarter was a little higher as we exited some secondary and tertiary markets, but as we move into 2022 and the quality of the disposition pool improves, I think you'll see us do better than that mid-7% full year level.

Got it. Thank you.

Thank you, Mike.

Thank you. Our next question is coming from the line of Ki Bin Kim with Truist. Please proceed with your questions.

Thanks. Just to clarify on your capital deployment. In 2022, how should we think about the dollar values in acquisitions, dispositions, and development?

Ki Bin, it's a great question. We've always been reluctant to provide volume guidance for acquisitions because we want to remain disciplined. We're excited by the opportunity set and expect volume levels to continue to increase as you saw in the second half of 2021. We'll focus on acquisitions that have upside and are located in markets where we already own assets, so we're not guessing about upside. Expect us to execute on additional opportunities similar to what we've announced if they remain attractive. If not, we'll remain disciplined. Reinvestment is an additional lever for growth funded by free cash flow and leasing spreads, capturing mark-to-market embedded in our leases.

In terms of the value-enhancing reinvestment pipeline, I would expect levels of spend in 2022 to be a little above the long-term average of $150 million to $200 million. That reflects some delays we proactively took in 2020 and bringing projects back online and some exciting opportunities coming forward given the strength of the leasing environment. I'd expect us to be kind of $200 million to $225 million in the total value-enhancing bucket in 2022.

Okay. Great. You had a great year-end quarter on leasing volume. When you look at the total addressable group of new leases you're negotiating today, how does that volume look compared to a couple quarters ago? How does the quality of the tenant look versus a couple quarters ago? Given macro factors and possible pull-forward of retail spending, how does that all work into the forward look?

As Brian mentioned, the forward pipeline is growing in volume, rate and quality of tenants. We're encouraged by what we have signed, not commenced, and what we're in legal negotiating today. Some of that activity triggers accretive reinvestments in the properties. We're already seeing that in recent acquisitions with anchor repositions lined up for centers we've closed in the last couple of months. Great execution by Brian and the leasing team and Mark on integrations.

Okay. Thank you.

You bet.

Thank you. Our next question is coming from the line of Linda Tsai with Jefferies. Please proceed with your questions.

Hi. Thanks for taking my question. In terms of the expected 100 basis point increase in year-over-year occupancy, what would the lease retention rate translate to at year-end 2022? I realized it was understated this year around 72%.

I don't have a specific retention rate number, but our move-outs have been very low throughout 2021 and that trend has continued into early 2022. We've had an exceptionally light bankruptcy season. The overall health of the watchlist and tenant base is very strong right now. I would expect an improvement over where we've been over the last several years.

From a GLA perspective at year-end, over 82% was ahead of where we were at the end of 2019. The trends we're seeing from a move-out perspective continue to be encouraging. The improvements we continue to make at our centers — operational and reinvestment — are helping both attract and retain better tenants at higher rent.

Thanks for the color. On the revenues previously deemed uncollectible and now paying, can you give color on tenant types? Should we assume they're mostly local and experiential?

The collections page in the supplemental gives good color. Most categories have returned to pre-pandemic levels. Four categories still lag somewhat: entertainment most significantly, restaurants, a bit on fitness and other services. When you look at the supplemental it may look like a step down between Q3 and Q4, but that's not what's going on. Q3 numbers now reflect dramatic improvement, and some categories are paying but it takes longer. We're seeing continued improvement through the fourth quarter into January and February. Those are the categories we continue to work on most closely and trends over the last several months have been encouraging.

Thanks.

Thank you.

Thank you. Our next question is coming from the line of Paulina Rojas with Green Street. Please proceed with your questions.

Hello.

Hi.

We have seen a modest decline in strip center traffic since the last half of January, likely driven by increasing Omicron cases. What is the retailers' reaction to this? Do they perceive this as a new normal or are they still worried?

Traffic levels are down roughly 3% year-over-year, so very modest, and on a two-year basis they're up 11%. We're monitoring it closely but encouraged by the lack of impact from Omicron and how little it has disrupted consumer patterns at the shopping centers. That's reflected in modest year-over-year movement and the more significant increase over the last two years.

Thank you. On the expense side, what are you modeling for expenses net of reimbursements? Should these be a tailwind for same property NOI growth in 2022 given higher occupancy and reimbursements, or a drag due to higher overall costs?

The same property detail in the press release suggests net reimbursement income, percentage rents and ancillary will be a 50 basis point contribution to same property NOI growth in 2022. I would say the bulk of that 50 basis points likely comes from net reimbursement income, because we're in an environment where we believe we'll continue to improve occupancy over the course of the year.

Great. Thank you.

Thank you.

Thank you. Our next question is coming from the line of Haendel St. Juste with Mizuho. Please proceed with your questions.

Hey, thanks for taking my question. Good morning. First on leasing, are you at a point now where you're willing to take back some space from certain tenants and hold vacancy to re-lease that space at higher rates and to better tenants?

We're doing that all the time. It's part of the reinvestment pipeline. A lot of that $374 million underway has been set up by recapturing space either at term end or earlier. In some cases we'll collect termination revenue and improve merchandising of the center. We focus on driving long-term growth and value at the center, not simply occupancy. That's core to the value creation engine.

Appreciate that color, Jim. I know you've been adding grocers to the portfolio. I'm curious about interest in more big-box oriented assets. We've seen improved demand and yields. If there's a big-box portfolio in Northern California, what's your level of interest there?

We are seeing improved pricing for big-box portfolios. As Mark will comment, for acquisitions it's about the opportunity to bring in better tenants at better rents in a way that's accretive. Typically our assets are a mix of anchors, junior anchors and small shops. You're probably not going to see us pursue pure big-box centers because often the upside isn't there.

We're seeing compression in cap rates for big-box assets. We'll take advantage where we can maximize value. On the acquisition side, it's about looking at the center and whether there's a big rent mark-to-market available and big incremental return from redevelopment, and whether we can add a grocer to press the cap rate. We don't have a strategy of simply acquiring power centers at market.

Got it. Thanks and one quick follow-up. Angela, the $250 million of notes that matured, what was the plan there and where could you issue unsecured debt today?

The $250 million actually matured at the beginning of February and was repaid with cash on hand and available liquidity. We evaluate the fixed income market all the time. Our next potential unsecured issuance would probably be liability management on our 2024 debt. There's no other need to be active in the capital markets outside of that. We'll continue to evaluate market volatility and whether it makes sense to execute.

Got it. Thank you all.

Thank you, Haendel.

Thank you. There are no further questions at this time. I would now like to turn the call back over to Stacy Slater for any closing comments.

Thanks everyone. We look forward to speaking to many of you over the next few weeks.

Thank you.

This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.