Thank you for standing by and welcome to InvenTrust's Fourth Quarter 2022 Earnings Conference Call. My name is Emily and I'll be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded, and a replay will be available on the Investors section of the company's website at inventrustproperties.com. I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. In the room with me today is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, we will open up the lines and answer questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release. In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. With that, it is my pleasure to turn the call over to DJ.

Thanks, Dan. Good morning, everyone, and thank you for joining us. The InvenTrust team had a productive 2022, our first full year as a publicly traded company. The simple and focused Sun Belt portfolio and investment strategy is proving out in all aspects of our business. The operations team continues to capitalize on solid leasing demand while also carefully managing expenses and build-out costs associated with a robust leasing pipeline. By year-end, we successfully rotated capital out of Colorado, selling all three properties in the state leading to further investment in our Sun Belt markets. Lastly, we maintained our disciplined approach to balance sheet management while diversifying our capital sources through the execution of our inaugural private placement. As discussed on previous calls, InvenTrust continues to benefit from structural and macroeconomic trends, creating positive tailwinds for the retail sector and specifically our portfolio. These include the continued migration of people and jobs to the Sun Belt, bringing higher household income consumers to our markets. The continued investment by retailers in brick-and-mortar locations to support evolving omnichannel business strategies. And the limited to no new supply of institutional quality grocery-anchored centers. For these reasons, InvenTrust’s high-quality properties remain extremely desirable to new and existing retailers. We finished 2022 at an all-time high leased occupancy rate of 96.1%, grew same property net operating income by 4.6% for the full year, and delivered double-digit core FFO growth compared to the previous year. All of these results were ahead of our initial forecast. We remain diligent in our search for opportunities for external growth. In the fourth quarter, we acquired two assets, a grocery-anchored center outside of Charlotte and one of our joint venture assets in San Antonio, which is shadow-anchored by the dominant regional grocer HEB. We also started 2023 by acquiring the remaining stake in our company's joint venture. It is well-documented that this portfolio was a component of our acquisition strategy. We are pleased with the execution of this transaction. PGGM has been an outstanding partner over the past 10 years and is supportive of our Sun Belt grocery-anchored strategy and ESG initiatives. With this transaction, the InvenTrust portfolio is now 100% wholly owned and further simplifies our investment story. Including this JV transaction, InvenTrust's net investment activity totals over $200 million since our listing, in line with our expectations. While we continue to actively look for acquisition opportunities, we've recognized the pricing uncertainty in the current environment and are being prudent as we see borrowing costs increase and cap rates expand. Growing the portfolio is important to our long-term strategic plan, but we will remain disciplined when deploying our capital. Looking ahead into 2023, a degree of uncertainty exists in the economy, inflationary impacts on consumers combined with higher interest rates and potential tenant store closures could dampen some of the positive trends the retail sector has benefited from over the past few years. However, we continue to be optimistic about our business. This confidence comes from the positive performance of our Sun Belt portfolio during the pandemic, the resilient nature of our grocery-anchored and necessity-based tenants, and our investment-grade balance sheet. Our initial 2023 guidance, which builds upon strong 2022 results continues to show the strength of our simple and focused strategy. With that, I'm going to turn it over to Mike Phillips to provide more color on our financials and guidance.

Thanks, DJ, and thank you everyone for joining us. I'll start with a recap of 2022. InvenTrust finished the year on a strong note. Yesterday, we reported full year core FFO of $105.9 million or $1.57 per share. This represents 12% growth over 2021. The increase was largely driven by $0.09 per share from pro rata same property NOI and $0.04 from 2022 acquisitions. Additionally, we realized G&A savings of $0.07 and a positive $0.08 impact from our $100 million share repurchase in Q4 of 2021. These gains were offset by $0.11 due to higher net interest expense from the private placement that was funded in Q3 of 2022 and increased borrowing costs. Full year pro rata same property NOI finished at $141 million, growing 4.6% over last year. The increase was primarily driven by contractual rent increases, occupancy gains, reduction of abatements in the current year, and offset by net out-of-period rent collected and one-time and pre-leasing expenses designed to meet the demand we are seeing, some of which were not fully recoverable. Excluding out-of-period rent collected, our pro rata same property NOI grew by 6% over 2021. Moving to the balance sheet, as of December 31, our net leverage ratio was 25% and net debt-to-adjusted EBITDA is 4.8 times. Our pro rata weighted average interest rate is 4% with a weighted average maturity of five years. At year-end, we had approximately $514 million of total liquidity, including a full $350 million of borrowing capacity available on our credit facility with no near-term maturities. Finally, as you saw in our press release yesterday, the Board announced a 5% increase in our dividend, beginning with our April 2023 payment. This brings our annualized dividend to $0.86 per share. Moving onto 2023 full-year guidance, we expect core FFO to be between $1.59 and $1.64 per share, which is an increase in the range of 1.3% to 4.5% over 2022. Our same property NOI growth is expected to increase by 3.5% to 5% for the full year, which contemplates a bad debt reserve of 50 basis points to 150 basis points of total revenue. For both same property NOI and core FFO, we anticipate a lower run rate in the first half of the year due to out-of-period rent collected in the first half of 2022 and increased interest expense from our private placement. In the back half of the year, we expect these comparisons to ease as the expected open pipeline begins to materialize. Our full-year guidance assumptions are provided in our supplemental disclosure filed yesterday. With that, I'm going to turn the call over to Christy to discuss our portfolio activity.

Good morning, everyone. As DJ highlighted, demand for space across our portfolio continues to be strong. With limited to no new supply coming online in our markets, available space and premier centers is scarce. This provides InvenTrust with significant pricing and negotiating leverage in new and renewal lease negotiations. To that end, we leased over 461,000 square feet of space during the quarter, bringing our total leasing activity for 2022 to 1.3 million square feet. We ended 2022 at 96.1% leased occupancy, which is a 220 basis point increase from the end of last year, as well as an all-time high. Our anchor space leased occupancy increased to 98.7% and our small shop increased to 91.3%, both all-time highs. As of December 31, InvenTrust pro rata same property ABR was $19.22, an increase of 3.3% compared to December 31 of 2021. Anchor Tenant ABR was $12.43 with Small Shop ABR hitting $32.12, both increases on a sequential and year-over-year basis. Our retention rate for the quarter was above 90% and blended lease spreads for the full year were 8.4% for comparable new and renewal leases. A key benefit of our concentrated and clustered portfolio is the intelligence and market data generated by our local underground operations team. This information allows us to move quickly and take action as it pertains to distressed tenants well ahead of any store closure announcements. With that said, none of our Bed, Bath & Beyond, Party City or Regal Theater locations are currently targeted for closure, which we feel validates the strength and quality of our centers. In this environment, vacant retail space is becoming scarce and is viewed as a premium. We view recapturing space now in an orderly manner as a positive opportunity embedded in our portfolio and one we are ready to capitalize on. Finally, I wanted to conclude my remarks by adding some additional thoughts on our acquisition of the PGGM JV portfolio. These assets, as well as the Stone Ridge property we acquired at the end of 2022, are all centers my team has been operating and leasing as if they were wholly owned for the past decade, allowing for a natural and seamless transition. There are several interesting leasing opportunities that we are currently working on to further drive growth at these centers. Now I will turn the call over to DJ for some final remarks.

Thanks, Christy. InvenTrust accomplished a lot in its first year as a publicly traded company and we're even more excited for the future. InvenTrust's thesis is simple, focused and provides a unique and specialized investment alternative for investors on an exclusive Sun Belt, predominantly grocery-anchored portfolio that is expected to deliver long-term value for our shareholders. Operator, this concludes our prepared remarks, please open the line for any questions.

Thank you. The first question today comes from Floris van Dijkum with Compass Point. Floris, please go ahead.

Great. Thank you. Hey, DJ, I wanted to see if you could give us maybe a little bit more information on the PGGM transaction in terms of pricing, and also what the impact of that transaction will be on your leverage ratio going forward, presumably you funded your portion of the equity for that transaction with cash. And so, if you can give us a little bit more detail? And is that indicative of where you think cap rates are for the markets and what do you expect is going to happen in your markets in terms of cap rates?

Thank you for the question. While I won't go into specifics on pricing, I can say that our partnership has been excellent. Everyone here was involved in the original joint venture. I joined about three years ago, and I believe PGGM has been a fantastic partner. We would be open to future collaborations if it aligns with our strategic goals. We are optimistic about the potential growth of these assets. Some are among our largest, located in Houston and San Antonio, with prominent grocers like HEB and Kroger involved, which aligns well with InvenTrust's core strategy. As for returns, while I won’t specify a cap rate, the unlevered returns from these properties are promising, and our partner is pleased with our execution. Regarding our balance sheet, our leverage will increase slightly but will remain well within our acceptable range, finishing below five times. We still have plenty of capacity, and as we mentioned in our release, this transaction accounts for about $100 million of the planned $150 million investment activity for this year. We will be cautious and prudent in capital allocation since our cost of capital, like many in our industry, is high, and we are still navigating the transaction market, which may see more activity later in the year. We will keep looking for unique opportunities, potentially in the $50 million range or more.

Great. And if I can also maybe ask about your guidance, your same-store NOI of 3.5% to 5% is probably somewhat higher than some of your peers who've made explicit reserves for bad debt around some of the troubled retailers. Maybe if you can comment a little bit on your exposure there and what sort of assumptions you've made in terms of potential reserves for the year?

Yeah. No, it's a great question and I think there's many of the folks in our sector have provided really good transparency around this. I would say one of the unique benefits of having a smaller portfolio is we obviously have very good insight on our selective properties that have exposure to these tenants. So as it relates to Bed, Bath & Beyond, we have four Bed, Bath banners, one buybuy BABY, but from our perspective and from our operations team's insights as well as conversation with the retailer itself, we feel confident in our ability, either to negotiate if that's the strategy that we undertake or are prepared to take that back and not unlike many of our peers. We've then had many discussions with several retailers that are dying to get more space on the potential of or the opportunities to enter some of our properties if that opportunity were to arise. To give you a little bit of the goalpost at the low end of the 50 basis points that Mike Phillips alluded to, that's really if we really don't get much back maybe, call it, one or two boxes and it probably comes towards the latter end of the year, plus a little bit of unforeseen fallout from small shop tenants. So that would be the low end of that 50 to 150. On the flip side, the 150 would be if we were to get most of those spaces back in short order, as well as maybe some other unforeseen boxes or from other smaller shop bankruptcies, that's kind of the range. What we're expecting and what, frankly, what we're hoping is that we do get some of those spaces back because of the opportunities releasing opportunities that we do see at some of these assets to really upgrade the merchandising mix and bring in higher rent.

Do you have an idea of what sort of rent spreads that you could achieve? I mean, some of your peers have talked about up to 60% rent spreads that they've actually achieved already. Should we expect some sort of big jump in base rents if you were to re-lease some of that?

No, 60% seems high to me; I think those instances are more the exception than the rule. When we assess our portfolio practically, we feel confident in our ability to adjust current rents. For instance, looking at Party City and Tuesday Morning, which are typically around 10,000 to 12,000 square feet, we have minimal exposure to either tenant. If we were to regain any of those spaces, we could likely increase the rents by about 10% to 20%. Regarding Bed, Bath & Beyond, for larger spaces, we believe that an increase of approximately 5% to 15% is reasonable.

Maybe my last question. Regarding your shop occupancy, which is nearly full at 98.7% leased for the anchor occupancy, your shop occupancy is at 91.3%. What is the physical occupancy there? Also, do you believe this segment of your portfolio will contribute significantly to your growth moving forward?

It's a great question. Our small shop economic occupancy is 88.8%. The spread there is slightly wider than on the anchor side, which is 98% leased with 96.8% economic occupancy. I believe the small shop segment is where our next growth will come from. We currently have three anchor vacancies in our portfolio, so there isn't much opportunity there unless we manage to regain some spaces. We're really focusing on the small shop segment. As I mentioned last quarter and noted in the fourth quarter, some of our operating expenses have been higher due to our pre-leasing efforts to improve spaces that haven't been leased for a long time, making our assets better suited for today’s demand. The demand is strong right now, but it won’t last forever. We need to position ourselves to take advantage of new opportunities, many of which will come from the small shop segment. Closing the spread in this area offers significant potential because of the types of rents we can set for those spaces.

Thanks, DJ.

Thanks, Floris.

The next question comes from Craig Schmidt with Bank of America. Craig, please go ahead.

Good morning. This is Lucy on for Craig. Thanks for taking my question. I was wondering if you could provide a bit more detail on the Colorado assets that sold during the quarter and kind of remind us again of how this fits into your strategy of rotating capital out of Colorado and then increasing your concentration in the Sun Belt, and how that might fit in just within the plan, the $150 million of net investments within guidance? Thanks.

No, thank you for the question. I'll start and then pass it over to Dave Heimberger. We've been quite open about the opportunities to recycle capital. If we can find ways to utilize that capital in our existing markets, Colorado is a good example of that as we exited three properties we owned there. It’s a strong market and a core location for most real estate investment trusts, but it didn’t align with our focused strategy of concentrating in the Sun Belt. This capital recycling is effective because it allows us to allocate our resources further south in a value-adding manner. Another market that aligns with this strategy is the assets we have in the Virginia and Maryland area, around the greater DC region. We have three excellent properties there that are not currently being marketed, but in the long term, they could be a source of capital if we identify other opportunities beyond the $50 million we are already planning to invest this year, provided we find the right assets and opportunities. Dave, do you have anything to add?

No. Nothing really to add other than we like the idea of sort of match-funding the PGGM strategy that we had in place, getting closer to our operational presence in our offices in the Sun Belt is obviously important to us and Colorado just was a market that was difficult to grow in. And again, just trying to make it more simple and focused.

Thanks. And could you provide any color on just the cap rates around those sales?

Yeah. So we don't typically disclose cap rates on dispositions, mainly to protect the buyers. I would say these are a little box here on a couple of them. So probably skewed towards the higher end of the cap rate range of things you're seeing out there. So hopefully that's enough color.

Thanks for the clarification. For my second question, could you provide an update on the 220 basis points lease to economic spread? What does the timing of delivery look like now? Is it still on track according to your expectations? Have there been any changes in discussions with tenants?

We expect that nearly all of the anticipated spread will become active sometime this year. Specifically, the 220 basis points could translate to approximately $4.8 million in potential annualized ABR. This typically leans towards the second half of the year, but we anticipate reaching about half of that amount this year, assuming we remain on schedule, and we feel quite confident about that at this point.

Okay. Great. Thank you.

This concludes the Q&A session on today's call, and I will now hand back to DJ for concluding remarks.

Thank you everyone for joining us today. If you have any follow-up questions, please feel free to reach out to Dan Lombardo. Otherwise, enjoy the rest of your day.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.