Hello, and welcome to the Curbline Properties Corp. Second Quarter 2025 Earnings Conference Call. I would now like to turn the conference over to Stephanie Ruys de Perez, Vice President of Capital Markets. You may begin.

Thank you. Good evening, and welcome to Curbline Properties Second Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed earlier, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Forms 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO, and same-property net operating income. Descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good evening, and welcome to Curbline Properties second quarter conference call. The last four months have been an incredibly active period for the company that highlights the significant growth potential embedded in Curbline. Specifically, we acquired $415 million of properties in the second quarter and third quarter to date, reported our highest quarterly new leasing volume since we began tracking, and have raised or are in the process of raising $300 million of debt capital. And importantly, in terms of investments, our team on the ground is creatively sourcing and reviewing a larger pool of opportunities than ever before, including both marketed and off-market deals. In many cases, we are working directly with owners where we can come to an agreement on assets that are consistent with our portfolio characteristics. More on that later. I'd like to start by thanking our incredible team for achieving the results that we reported tonight that support our differentiated investment strategy, capable of generating double-digit earnings and cash flow growth well above the REIT average for a number of years to come. This growth is underpinned by the economics of the convenience property type, which is our exclusive focus, the large addressable market in front of us, and our unmatched balance sheet that is aligned with the company's business plan. These ingredients clearly position Curbline to outperform in a variety of macro environments. I'll walk through operations first and then conclude with more details on acquisitions before turning it over to Conor to talk more specifically about the quarter, the increase in expectations for the 2025 outlook, and our balance sheet. We began investing in convenience properties almost seven years ago, recognizing the strong financial performance of the small format asset class, both within the retail sector and the broader real estate industry. Demand for the right locations in our property type has produced two noteworthy and differentiated outcomes. First, the capital efficiency of the business is superior to many other retail formats. Desirable small format space not only has high tenant renewal rates, but is also inexpensive to prepare for the next tenant in the event of vacancy. When compared to larger buildings that are generally purpose-built with longer construction periods, the capital efficiency of our simple business is unique. In other words, less capital is needed to generate the same organic growth rate as the rest of the retail real estate industry and helps generate compounding cash flow growth for Curbline. To that point, in the second quarter, CapEx as a percentage of NOI for Curbline was just over 7%, which led to almost $25 million of retained cash before distributions. As Curbline scales, this retained cash flow will increase, providing a durable source of capital that's outsized relative to the company's asset base, boosting earnings and cash flow. The second outcome is that our space is highly liquid because of the number of tenants that are willing to take a 1,000 to 2,000 square foot shop unit, which is significantly higher than for purpose-built large-format units. This liquidity allows the property type to keep up with inflation remarkably well, improves tenant diversification, reduces credit risk concentration, and provides an opportunity to drive rent growth as we seek to maximize rental income given the productivity of the unit size. The strength in demand for our units was highlighted by the depth and breadth of second quarter leasing volume with almost 50,000 square feet of new leases signed, which is our highest level since we began tracking operating metrics for the Curbline portfolio. New deals included leases with Chick-fil-A, Just Salad, Chase, Club Champion, and a variety of other service users. Activity remains wide in terms of tenants seeking to lease space and includes primarily national service tenants, banks, medical and wellness operators, and quick service restaurants. Net leasing volume pushed the company's lease rate up to 96.1% sequentially, among the highest in the sector, and drove 22% blended straight-line leasing spreads for the trailing 12-month period. The economics of our business, a high return on leasing capital, and the widest pool of tenants to work with, along with significant national exposure, position Curbline for absolute and relative success throughout a cycle. Shifting to the investment side, which is the second driver of Curbline's growth, part of the thesis behind the Curbline spin-off was the large addressable yet fragmented market that had not been institutionalized. Not every asset is a fit for the company, but we believe there is a significant opportunity set of properties that do share common characteristics with our existing portfolio, including excellent visibility, access, and compelling economics highlighted by a broad available tenant universe and limited capital needs. To that point, since the company's spin-off, Curbline has acquired over $750 million of assets and demonstrated now for five straight quarters, the depth and liquidity of the asset class with acquisition volume of over $100 million per quarter. Our original 2025 guidance range included $500 million of convenience acquisitions for the year, which equates to around $125 million per quarter. We've obviously significantly exceeded that pace with the acceleration in activity, a function of our marketing efforts as we've seen a larger number of brokers and individual sellers proactively engage with us. This is a distinct change from the pre-spin environment. The situation also allows us to work directly with sellers on a timeline and a process that works best for both parties and has increased the visibility and the volume of our pipeline of investments. To this point, just this past week, we closed on a 23-property portfolio for $159 million. Over the last several years, we developed a relationship with the principals of one of the larger and sophisticated convenience center owners in the country. That relationship led to a joint effort to structure a transaction of individually selected properties that work for both sides. The assets acquired have characteristics consistent with our portfolio and our investment thesis and are located primarily throughout the Southeastern United States in markets that we know well. While portfolios remain unique and difficult to find in the convenience space, our ability to source and structure these unique opportunities further differentiates Curbline as the trusted partner for owners of high-quality assets seeking liquidity. For the second quarter, Curbline acquired 19 properties for $155 million via 17 separate transactions. Investments continue to be concentrated in the affluent markets that Curbline currently operates in already, including Houston, Chicago, Phoenix, and Atlanta. However, we continue to make acquisitions in new submarkets that share the key characteristics we seek, including our first properties in Dallas and the New York Metro area, where we hope to scale long term. Average household incomes for the second quarter investments were nearly $137,000 with a weighted average lease rate of over 96%, highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant CapEx. Before turning the call over to Conor, I do want to highlight one of the key differentiating aspects of the Curbline spin-off, which is our balance sheet. The net cash position at quarter end matches the business plan with almost $430 million of cash and over $1 billion of liquidity, including financings expected to close in the third quarter. I could not be more opportunistic about the opportunity ahead of us. And with that, I'll turn it over to Conor.

Thanks, David. I'll start with second quarter earnings and operations before shifting to the company's 2025 guidance raise and then concluding with the balance sheet. Second quarter results were ahead of budget, largely due to higher-than-forecast NOI, driven by stronger base rent, recoveries, and other income. NOI was up over 8% sequentially, driven by organic growth along with acquisitions. Outside of the quarterly operational outperformance and some upside from lower G&A and higher interest income, there are no other material call-outs for the quarter, highlighting the simplicity of the Curbline income statement and business plan. In terms of operating metrics, as David noted, leasing volume in the second quarter was extremely strong, even after adjusting for the growth in the portfolio. And given the current pipeline, we expect another strong quarter in terms of volume and spreads in the third quarter. However, as we've noted each quarter since the spin-off, with this small but growing denominator, operating metrics will remain volatile and be heavily impacted by acquisitions. That said, overall leasing activity remains elevated, and we remain encouraged by the depth of demand for space, which we expect to translate into trailing 12-month spreads over the course of the year, consistent with 2024. It is important to note that Curb's leasing spreads include all units, including those that have been vacant for more than 12 months, with the only exclusions related to first-generation space and units vacant at the time of acquisition. Same-property NOI was up 6.2% for the quarter and 4.4% year-to-date, driven in part by the aforementioned operational outperformance. Importantly, this growth was generated by limited capital expenditures with second quarter CapEx as a percentage of NOI of just over 7%. For the full year, we continue to expect CapEx as a percentage of NOI to remain below 10%, though the third quarter is expected to be higher than year-to-date levels due to the timing of rent commencements and resulting tenant allowances. Moving to our outlook for 2025, we are raising OFFO guidance to a range between $1 and $1.03 per share. The increase is driven by better-than-projected operations, along with the pacing and visibility on acquisitions that David mentioned. Underpinning the midpoint of the range is: one, approximately $700 million of full year investments funded roughly 50-50 with debt and cash on hand; two, a 4% return on cash with interest income declining over the course of the year as cash is invested; and three, G&A of roughly $32 million, which includes fees paid to SITE Centers as part of the shared service agreement. You will note that in the second quarter, we recorded a gross-up of $625,000 of noncash G&A expense, which was offset by $625,000 of noncash other income. This gross-up, which is a function of the shared service agreement and nets to 0 net income, will continue as long as the agreement is in place and is excluded from the aforementioned G&A target. In terms of same-property NOI, we continue to forecast growth of approximately 2.8% at the midpoint in 2025, but there are a few important things to call out. Similar to our leasing spreads, the same-property pool is growing but small and is comping off of 2024's outperformance. And it includes only assets owned for at least 12 months as of December 31, 2024, resulting in a larger non-same-property pool that is growing at a faster rate on an annual basis, driven by an expected increase in occupancy. Additionally, uncollectible revenue was a source of income in both the third and fourth quarters of 2024. So while base rent growth is expected to accelerate into the third quarter from the second quarter, uncollectible revenue will be a significant year-over-year headwind despite limited year-to-date bad debt activity. In terms of moving pieces between the second and third quarter, due to the timing of acquisitions and debt capital raised, interest expense is set to increase to about $4 million in the third quarter, and interest income is forecast to decline also to about $4 million. Those two factors total roughly a $0.04 per share headwind. Additional details on 2025 guidance and expectations can be found on Page 12 of the earnings slides. Ending on the balance sheet, Curbline was spun off with a unique capital structure that positions the company to execute on its business plan. It differentiates Curb from the largely private buyer universe acquiring convenience properties. In the second quarter, the company received its inaugural investment-grade credit rating from Fitch, further separating itself from other bidders. The rating, in addition to resulting in lower credit facility borrowing costs, allowed the company to tap the private placement market in June with $150 million closed and expected to fund into September. On top of that, in July, the company raised an additional $150 million via a new term loan. The $300 million of expected aggregate proceeds have a weighted average coupon of 5.1% and 5.7 years of duration, immediately laddering Curbline's maturity ladder and funding second half acquisitions according to plan. The net result is that the company is expected to end the year with over $300 million of cash on hand, assuming $700 million of acquisitions and a debt-to-EBITDA ratio less than 1x, providing substantial dry powder and liquidity to continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess of the REIT average. With that, I'll turn it back to David.

Thank you, Conor. Operator, we are ready to take questions.

Your first question comes from Ronald Kamden with Morgan Stanley.

Just on the acquisitions pace and pipeline, obviously, a pretty large portfolio in there. I'd just love if you, one, can comment just a little bit on sort of cap rate trends. And it does seem like there's more portfolios that you guys are looking at, maybe even more than the business plan anticipated. I just wonder if you could comment on that as well and how you're building out those relationships.

Sure. The cap rates, I would say, have not changed dramatically. If you look at our year-to-date, we're blending to about a 6% cap on forward 12-month NOI. A lot of that depends on the pool that you're measuring as we go through the year. Even of the assets that we bought, we've ranged from low 5s to high 6s, and a lot of that really just depends on whether there's vacancy. So I would say the cap rate trends are still fairly sticky. In terms of finding more product, there's a tremendous amount that we've downloaded and worked on with the brokerage market. But I would say, as the year goes on, we've definitely had more and more off-market buyers. I would say right now, about half of our pipeline is marketed and the other half is off-market. So I agree with you. One of our jobs going forward is to continue to build relationships with people that have been in this business for a long time and have built some pretty enviable portfolios.

Great. And then my second question was just it seemed like gain occupancy sequentially as well. Just any commentary on tariff impact, what you're hearing sort of from tenants, it doesn't seem like it's having an impact, but I did see the leasing spreads, new lease was down a little bit this quarter. Just any comments on that.

I'm happy to start on the leasing spreads. As I said in my prepared remarks, we continue to expect leasing spreads for 2025 to be consistent with 2024. So I would just point to the fact that probably a pool shift, we've got a small denominator across the board, not to sound like a broken record. So we should just see more volatility in our quarterly operating metrics than you would, some of our larger peers. But there's been no change in either the tone of conversations surrounding tariffs and no resulting impact to leasing economics or volume.

The next question comes from Craig Mailman with Citigroup.

Just on the portfolios, are you guys I guess could you just comment on kind of the process here? Are these ones that you can cherry-pick and kind of put together the portfolio you want? Or should we expect if portfolio acquisitions ramp a bit to see some dispositions as you guys get rid of some assets that really just don't fit the criteria, but you had to take as part of the deal.

Let me start with the punchline so that I can reverse into this. We do not have a disposition pipeline. We do not expect to be doing capital recycling, and we're not buying anything that we don't want to own over the long term. Most of what we're buying, if you look on the up and you kind of look through what our acquisitions have been, they're mostly individual acquisitions. There are some owners throughout the country that have a similar thesis to us and have bought things that are very similar to what we want to buy. And in some cases, they're willing to sell some or all of them to us. So far, we've done three portfolios. This is certainly the largest one, but we had a six-pack and a three-pack previously. In all of those cases, they were individually selected and did not represent 100% of what that seller owned.

Okay. Appreciate that. And then just as you guys continue to build out the portfolio, I mean you have some markets that are still kind of single asset markets. What's the current thought process on how much critical mass that you would look for to enter a market.

It's a really good question, Craig. From an operating perspective, we really don't have a challenge with operating in a market where we're kind of starting with one and slowly growing. It has more to do with how much we think we could get into that market. So said differently, we're a little light right now in the Northeast and the Pacific Northwest. We would like to be bigger. So you may see us buy one property in a dominant city with the understanding and belief that we're going to continue to do that. And that's what you've seen in New York and in Dallas. Those are markets that we expect to be able to be competitive and grow the portfolio. But in terms of operating, remember, these properties don't have a lot of touch from a property management standpoint. And from an even leasing standpoint, it's really a renewals business. So I would say that the operating leverage of having scale is not quite as important as it is learning the market and understanding it and wanting to find the right properties.

The next question comes from Todd Thomas of KeyBanc Capital Markets.

First, I just wanted to follow up on the acquisitions in the quarter and the year-to-date activity, the portfolio deal in July. I think, David, you said year-to-date, the cap rates are blending to about 6%. I think that's down a little bit from last quarter around 6.25%. And I'm just curious if there's any outsized embedded mark-to-market opportunities versus the balance of the CB portfolio on these acquisitions? And is there any expected change at all in the CapEx investment required across these deals that's different than the CapEx profile of the current portfolio as it pertains to sort of a little bit of redevelopment or some leasing capital?

Yes, Todd. You are correct. In the previous two quarters, we've highlighted that our closings to date averaged 6.25%. We're saying that year-to-date, it's a 6%. So that obviously means that the pool has changed a little bit, but we bought quite a bit in the last one and a half quarters as well. So the cap rate difference has everything to do with whether there's vacancy. Anything that we can find that has a tenant that's expiring in a number of cases, we've actually asked the seller to not lease that space and let the tenant expire. That's primarily because there is a pretty big mark-to-market right now with vintage older assets and tenants that are losing term. So where a seller might want to tie up that tenant, thinking they're going to get better value for long term, we have a lot of tenant relationships. You look at our top 25 tenants, those are people we're calling all the time and showing them what we're buying. So in many cases, we'd like to have a little bit of vacancy that we can work with and make sure that we've got the credit and the long-term tenant roster that we want to see. So in certain quarters, if you see the cap rate go down, it's not necessarily due to market factors as much as it is vacancy. And I think that's probably more consistent with this past quarter. That's not to say that cap rates might go down. I think that has a lot more to do with how much competition we see in the bidding that probably has a lot to do with rates. But at this point, I think it's primarily mark-to-market and vacancy opportunities that are making that gap.

And Todd, regarding our capital needs, there are no plans for redevelopment or expansion of our construction efforts. Concerning CapEx as a percentage of NOI, there is no change to our long-term goal of keeping it below 10%. A major reason for this is the absence of redevelopment, but another reason is the inherent nature of our business, where our payback period on leasing activity is about one year. It's challenging to exceed that 10% figure when spending on a 1,200 or 1,300 square foot suite. Therefore, there is no change to the capital needs of the business, which is a crucial element of the overall strategy, as David stated in his prepared remarks.

Okay. Did you disclose what the occupancy rate or lease rate is on the acquisition volume completed in the quarter and in July?

In the second quarter, Todd, it was roughly in line, just about 96%, so right in line with the portfolio. For the third quarter to date, and obviously, we're still acquiring and still have a pretty decent pipeline, it's a little bit lower. It's low 90s. So to David's point, that cap rate is lower because we bought some vacancy that we obviously think we can lease up to portfolio average. So a little bit lower lease and occupancy rate for what we bought in the third quarter to date. But again, once we know the total numbers for the third quarter, we can give an update on where we are for that.

The next question comes from Alexander Goldfarb with Piper Sandler.

David, first, I have two questions. First question is, you guys are buying not only in the major MSAs, but also some of the smaller markets, Mobile, Alabama and other parts of Alabama, deep in Tennessee, and elsewhere. And -- but you mentioned overall, the cap rates seem to be pretty tight. So my question is, we often think of the major metros, the institutional markets trading tighter than sort of the tertiary, but it doesn't sound like that's your experience, plus you're obviously going for cash flow, which says that the cash flow is pretty attractive, again, whether you're in a major metro or tertiary. So can you just give a little context in how you're looking at where you're acquiring and just some more comparison of sort of the Alabama's of the world versus the Atlantas, and I'm using those sort of just as a generic for describing the different markets.

Sure. Happy to. I mean one thing, I guess I could go back on is normally, when you're thinking primary markets, you would be coming at it, at least in my background, you'd be coming at it from a purchasing power standpoint of how many people live in the area and how many people will go to your destination to go shopping. What's different about this asset class is these assets are so small, the most important feature is whether they're convenient for people not going shopping, but running errands. And running errands is a pretty significant part of kind of the daily suburban life. I certainly think it's probably increased with a lot of the flexible work environment. And when you get into markets that have a significant amount of people, but it's not primary, there's still a lot of traffic. For us, traffic count, the right intersection, the right side of the road, and the right format and visibility for the building drives a lot of tenant demand. And so our confidence level after the last seven years of underwriting these properties, our confidence level in primary and secondary market knowledge is pretty high. So we're open-minded to buying assets that we do think have long-term growth profiles, particularly if they are older properties that have vintage leases that are pretty far below market. So that, I guess, is the answer to the first question. The cap rate question, I think you're right. The cap rate spread on high-quality assets with a strong mark-to-market are not substantially different between primary and secondary. Where you get a big cap rate expansion in this asset class is when you're off the main road, you have a very low traffic count. It might be more of a neighborhood center, and there's just not enough traffic to make it convenient for running errands. So that type of higher cap rate property is available in the unanchored strip category, but I don't think it's convenient, and therefore, it doesn't really deserve to be in an institutional portfolio.

The only thing I'd add, if you look at Page 9 of our supplement, our top five markets, which are Miami, Atlanta, Phoenix, Orlando, and Houston, represent 44% of ABR. So to David's point, the secondary markets that we're in share the common characteristics, excuse me, of the rest of the portfolio. But the foundation of the portfolio and the vast majority still remains concentrated in the largest primary markets throughout the United States. It feels like the secondary assets we're adding on are just additive to that investment pipeline.

That's helpful perspective. The second question is, and I'm asking this from KR perspective, not a SITE perspective. But your sister company presumably is in wind-down mode, selling assets that just paid a special dividend. From Curb's perspective, is there any impact to expenses or the P&L if they accelerate plans, if they finish whatever they're going to do sooner than expected versus later? Just trying to understand as we think about -- I know, Conor, you're not giving '26 guidance. But as we think out over the next year or two, is there -- are there any additional expenses? If you could just remind us that we should be thinking about or Curb as is unaffected whatever pace site chooses to do, whatever it's going to do?

Let me start with that, and I'll pass it over to Conor, who probably has some specifics he wants to share. But I'll just remind you that the shared service agreement with the two companies, the purpose of that was to allow one company to grow and one company to shrink while sharing certain expenses that would have been difficult to manage if you were on your own. That has been working very well because we have a lot of departments that serve both companies under the shared service agreement. So I think the basis of your question is, over time, will something change if there was an acceleration in SITE Centers. The only thing that's contractual that you can look at is if you look in the Form 10 and you look at the shared service agreement that was published at the time of the spin-off, there is a defined capability for a termination of that shared service agreement at year two as opposed to year three. But the impact of that happening has to do with the payment from one company to the other. So at the end, I guess, of the speech, I would say that there's really nothing noteworthy because SITE happens to be going faster or slower. I don't think that pace is going to have much of an impact on Curb.

Yes. And I would just say, I mean, there's definitely not specifics we'd like to provide this time to your point, Alex. But the immediate term is as Curb scales, as you know, we pay 2% of gross revenue to SITE. So that's the only immediate change. And then to David's point, in the event that there was an early termination, there would be a significant fee paid by SITE to Curb, which would offset any potential expense increase. But in the meantime, you'll just see G&A slowly move higher as CURB scales just given that fee relationship.

The next question comes from Floris Van Dyke with Ladenburg Thalmann.

A quick question here for me. As you think about these portfolio transactions, have you had entered into discussion Yes, it doesn't seem like you've done an OP transaction yet, but would you consider doing that? And would that facilitate some of the tax issues that the sellers might have? And how strategic do you expect that could be going forward?

Floris, it's David. It is certainly an arrow in the quiver that would be nice to use. We have certainly expressed that opinion to a lot of sellers, particularly ones that have a basis issue and a tax obligation. OP units is a very elegant way to structure something that helps both the seller and the buyer. So we're certainly using it as an option. I would say that the relative success of getting those done has been a little bit low. But again, our company is only, what, nine months old now. So I would say there's still time. But I would expect that to be something that we could use in the future.

Can I ask a follow-up? I imagine part of your value add, besides discovering and institutionalizing this space, is your ability to manage the portfolio more effectively. Can you remind us about the new acquisitions in the third quarter that had lower vacancy rates? Looking at the average vacancy in the properties you've acquired and where you've increased occupancy levels to today, how much of an improvement have you typically seen over the short history of the company?

I was going to say that what's funny is that the amount of occupancy up or down is so minimal so far that it's not really a measurable impact. I mean the vast majority of the growth in cash flow for each asset is renewals. When you can find vacancy, it can be very attractive. And there are certain times recently where we have been forcing vacancy because we think that there's a better credit tenant that can pay more rent and do more business. In my prepared remarks, I mentioned the productivity of the space. There are some tenants that are simply more profitable out of the same square footage, and they can pay more. So market rent is less relevant than the profitability of that tenant. So I would say that the rental increases on renewals far outpace the occupancy gains right now. It just so happens if we can find something with some vacancy, it's definitely attractive to us.

Yes, Floris. In terms of specifics, we're 96.1% leased as of the second quarter. If you look back, obviously, we were mid-95s at year-end. So to David's point, the vast majority of what we bought has been 95%, 96% leased. There have been some assets we bought that were high 80s, low 90s, and we've driven that up. But there's been very little, I would say, dispersion in terms of the lease rate really across the portfolio.

The next question comes from Michael Mueller with JPMorgan.

Two quick ones here. I guess first, for the $150 million of notes closing in September, do you know when in September at the beginning of the month, end of the month? And then for the second question, on the portfolio acquisition, you mentioned you picked 23 assets out of curiosity, were there still a substantial number of assets left that you didn't pick that could be interesting for you down the road at some point.

I can't disclose the specific number of assets that the seller owns, but I can say that they are a very sophisticated group with a strong track record of property acquisition over many years. We would be fortunate if they consider doing business with us in the future. The assets we selected for this portfolio align well with our mandate, submarkets, and current underwriting criteria. We are very proud and excited to have successfully completed this deal.

Mike, in terms of the private placement, the first week of September. So early September to your first question.

The next question comes from Paulina Rojas with Green Street.

Hello. Are you using occupancy costs as a key metric to monitor rents across your portfolio? And if so, where do you estimate OCR stands today? And do you have a benchmark you're using to manage and optimize your portfolio performance?

Paulina, it's David. There are some cases, and I would say it's minimal where we have information where we can manage occupancy cost. I would say that's mostly on tenants that are willing to share that information, which most likely are local or regional tenants. So OCRs are very important if we're underwriting someone who is maybe expanding a business, they have 2 or 3 units and they want to do a fourth, and we want to understand how much they can afford to pay. Given that over 70% of the portfolio is national credit, we don't have a lot of visibility other than nationally published information, particularly from public companies. So if you look at our top 25 list on Page 15 of our supp and you look through those tenants, we don't really have an OCR capability when it comes to all of those tenants, but we certainly have the ability to underwrite their credit, and we're demanding credit to be signed from the guarantor being the corporate entity. So I would say credit on one side, the OCR underwriting has much more to do with smaller businesses that are growing, and those are relatively few.

My second question, circling back to the market distribution. We have seen some REITs buy assets in the Midwest. And what's your view on that region specifically? Would you consider establishing a more meaningful presence there? I know you have some assets, but would you consider growing there if the right opportunities emerge in terms of fundamentals? Or you would prefer to avoid that from a brand or marketing perspective?

I think our acquisitions right now, Paulina, are purely based on the financial returns from the asset that we think we can derive over the long term. There are many cities in the top 20 or 30 MSAs that we would be happy to be in. We certainly have bought a couple of properties in the Midwest. I would see us continuing to do so. But they have to match the criteria that we want for that particular property, which generally falls into demographics, scarcity of use, high traffic count, easy layout of the building, ubiquitous small shop spaces, and kind of proven tenure of existing tenants. And those are available in a number of cities. So I think our activity in the Midwest has been active, and it will continue to be. But I wouldn't say it's a driving force as much as it is. The whole country, I think, is open to us as long as it's in a market that we understand and believe in.

The next question comes from Ken Billingsley with Compass Point.

One of my questions is about the information on Page 13 of the supplement. It appears that around 30% of the new leases being signed are new agreements, but the terms seem to be nearly double. I'd like to understand whether the occupancy levels have remained stable since your acquisition, if you're attracting more national tenants with these new leases, or if you could provide more details about the situation with these new leases and the longer terms associated with them.

Sure, Ken. It's Conor. So I would just say traditionally, a national lease is a 10-year initial term, which is why our new leases are right around 10.5 years, and we're 70-plus percent national. So that's what's driving that. On renewals, remember, it's a mix of negotiated renewals and options. Typically, an option, particularly with the national, is a 5-year term. So that's driving that. And in general, we are, just given the rent growth we're seeing in this market, pretty focused on keeping our WALT at a manageable level. So I would say that's driving the other piece of that. So I would be surprised if our new leases deviated dramatically from 10 years. I'd be surprised if our renewals moved dramatically from 5 years. I think it feels like a pretty standard duration in terms of years.

Can you provide more details on your approach to swapping leases? You mentioned your intention to lease some of the acquisitions for vacant space. Are you finding it easier to replace leases with national players, or are you seeing a larger portion coming from local ones?

Yes. I would just say we are acutely focused on credit. So if there's a jump ball between a local and a national tenant, nine times out of ten we will go with that national tenant. It's not necessarily a thesis of what we're buying kind of swapping out local or national tenants. Generally, if we're buying great real estate, the nationals are already there. So again, if there's a vacancy and we see an opportunity to put a national tenant in, great. But the thesis on this property type is not about kind of upgrading tenant roster. To David's point, it's really about pushing rents of who's there. And again, if we buy the right real estate, nine times out of ten, the nationals are already there.

This concludes the question-and-answer session. I will now turn the call to David Lukes for closing remarks.

Thank you all for joining our call, and we'll talk to you next quarter.

This concludes today's conference call. Thank you for joining. You may now disconnect.