Thank you for standing by and welcome to InvenTrust's First Quarter 2023 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 today. 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 for 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. InvenTrust opened 2023 with another strong quarter of operating results. In the face of some economic uncertainty and a challenging capital markets backdrop, our Sun Belt grocery and necessity-based portfolio continues to perform well. We maintained our record high occupancy rate of 96.1% for the second quarter in a row, and our same-property net operating income grew at 3.2% over the first quarter of 2022. Both our NAREIT and core FFO grew sequentially by over 17% compared to the fourth quarter of 2022. Our results are a testament to the dependability, consistency, and strength of our portfolio and markets. Necessity-based retail continues to show signs of strength and has proven to perform well during challenging economic times despite persistent inflation. The InvenTrust portfolio consists of high-quality essential retail tenants, with approximately 60% of our ABR coming from either grocery, discount, or necessity-based retailers. Fine-tuning our merchandise mix across our properties to serve each community's needs accordingly has been and will continue to be a key component of our long-term strategy and ultimate success. A notable tailwind in this space is the continued lack of new retail supply. Development for new strip center properties has been well below historical averages for the better part of a decade, and we expect this trend to continue as inflated construction costs and elongated delivery times persist. Lack of premier space factors into the demand and the pricing power we are currently experiencing at the time of lease negotiations and renewals. Next, retailers, particularly grocers, continue to evolve and extract value out of their local brick-and-mortar locations. In our portfolio, we continue to see the expansion of our online order execution and fulfillment directly from our store locations. Additionally, and arguably the most important and unique attribute of our portfolio is the continued benefit from the well-documented migration to the Sun Belt, with 95% of InvenTrust NOI coming from Sun Belt markets. Demographics in our markets continue to grow, and we expect these market dynamics will create advantages for our portfolio and performance for the years to come. A secondary point regarding migration is the suburbanization movement accelerated by the hybrid work model that is seemingly the new normal. Clearly, the structural shift places consumers closer to our centers for longer periods during traditional working hours, bringing additional activity and, in turn, demand to our properties. Our simple and focused portfolio is well-positioned to produce strong sector-leading internal growth, and with our balance sheet capacity, we have the ability to grow through acquisitions without the immediate need for external funding should capital markets remain in flux. This gives us the flexibility to capture acquisition opportunities as they present themselves. On the acquisition front, as we discussed last quarter, we started the year by executing on the roughly $100 million purchase of the remaining stake in our joint venture. This transaction has been a part of our investment strategy since entering the public market. In terms of private market transactions with lower deal volume, the attractiveness of competition for quality centers remains high, and we will continue to remain disciplined and patient in our capital allocation plan. Before I turn it over to Mike Phillips, I want to reiterate that we have started the year in an outstanding position and believe we are set to produce impressive sector-leading internal growth in 2023, delivering at a high level within a competitive space is a testament to how this team and this portfolio will continue to create value for our shareholders. Mike will now walk everyone through our financials and guidance for the quarter.

Thanks, DJ. InvenTrust started 2023 on a positive note. First quarter same-property NOI finished at $35.8 million, growing 3.2% over the first quarter of last year. The increase was primarily driven by contractual rent increases, occupancy gains, and rent spreads. We reported first quarter NAREIT FFO of $28 million or $0.41 per share and core FFO of $27.4 million or $0.40 per share. This anticipated decline over the first quarter of 2022 is primarily due to higher interest rate expense and our strategic exit from Colorado in 2022. As DJ mentioned, on a sequential basis, both our FFO results increased over 17% as compared to the fourth quarter of 2022. Moving to the balance sheet. As of March 31, our net leverage ratio is 28%, and net debt to adjusted EBITDA is 5.5 times on a trailing 12-month basis. Our weighted average interest rate is 4%, with a weighted average maturity of 4.6 years. And when contemplating extension options available to us, we only have $60 million of maturities through 2024, which is 2% of our debt stack. At quarter end, we had approximately $436 million of total liquidity, including a full $350 million of borrowing capacity available on our revolving line of credit. Effective April 3, we were able to swap $100 million of floating rate debt on a portion of one of our term loans to a fixed rate of 3.69% with an all-in rate of 4.99%. This further reduced our exposure to a volatile interest rate environment, and with the swap in place, our fixed rate debt now totals 98%. Finally, we declared a dividend payment for the second quarter of $0.215 per share, which is a 5% increase over last year. Turning to guidance, we are reaffirming our 2023 core FFO guidance of $1.59 to $1.64 per share as well as our NAREIT FFO guidance of $1.64 to $1.69 per share. We are also reaffirming our 2023 same-property NOI guidance of 3.5% to 5%. These ranges are the same as the 50 basis points to 150 basis points of bad debt that we provided in our call last quarter. The bankruptcy scenarios and potential disruption of rent collection from struggling businesses is playing out how we anticipated it in our initial forecast, which gives us the confidence to reaffirm our guidance. And one final note, as discussed in our previous call and as implied in our guidance, we expect our growth to accelerate throughout the second half of the year. 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. InvenTrust continues to experience strong leasing momentum. We are observing demand across the board from both national anchor tenants and local small businesses looking to expand their footprint. Demand is also broad-based from a full array of retail categories, such as fast casual restaurants, wellness and beauty tenants, and discount retailers. Lack of new supply has made premier, well-located retail space more valuable. This dynamic is allowing landlords like InvenTrust to push rents and fill vacancies across their portfolios. Separately, despite the potential headwinds around struggling businesses like Bed Bath & Beyond, Party City, David's Bridal, and Tuesday Morning, there is a bit of a silver lining if a space becomes available. For example, in the past, Bed Bath was a brand-name tenant and for the most part, their stores were located in prime locations at high-quality centers. These boxes are attractive to a variety of tenants, which reduces marketing time to fill the vacancy. We have already had constructive conversations with a variety of tenants for every one of our five Bed Bath locations. We continue to believe our market-dominant essential retail centers are exactly where retailers want to be, and they are waiting anxiously for this space to become available. Despite some long-telegraphed bankruptcies, there are multiple retail concepts with announced store openings. Along with retail categories mentioned earlier, our team is also seeing demand for medical users. Medical tenants have been active, and we are excited to include them in our centers. From a tenant mix perspective, medical complements our fitness and wellness operators, and with our occupancy rate at an all-time high, the willingness to fill traditionally hard-to-lease space continues to grow. Retail is and always will be an evolution of concepts and new ideas. Regardless of all of the negative headlines, we are not seeing a softening of retail fundamentals, but rather a return to a normal retail environment, where some tenants may fail. Names on the marquee may change over time, but that is what keeps our properties fresh and vibrant. This is a normal retail cycle. This environment allows the InvenTrust team to focus on ensuring our properties have an attractive tenant mix, with tenants that are going to drive traffic and improve the financial performance of our centers. Let me conclude my remarks by reviewing our leasing results for the quarter. We leased 254,000 square feet of space during the quarter, with a multitude of additional leasing activity at various stages in the process. We ended the quarter at 96.1% leased occupancy, which is a 170 basis point increase over the first quarter of 2022. Our anchor space leased occupancy increased to 98.8%, and our small shop increased to 91.4%, both all-time highs. As of March 31, InvenTrust's same-property portfolio ABR was $19.12, an increase of 2.6% compared to March 31, 2022. The blended lease spreads for the quarter were 7%, and our retention rate for the quarter was above 95%. These solid results continue to validate our portfolio's ability to drive leasing demand. Operator, this concludes our prepared remarks. Please open the line for any questions.

Thank you. Our first question today comes from the line of Lucy Jacobsen with Bank of America. Lucy, please go ahead. Your line is open.

Hi, good morning. Thanks for taking my question. I was hoping I could ask about if you could provide a bit more color on the stages of discussions you're currently in on the four Bed Bath, one buybuy, one buybuy BABY store that you're in conversations with on backfilling those spaces? Maybe if you could just characterize what any kind of wait list or just provide a bit more color on that. And then also, what really is leading to the assumptions of getting to that low and high end of the range that you've reaffirmed on credit loss. Thanks.

Hi, Liz, this is Christy. I'll take the first part of that question. With respect to our Bed Bath, you are correct, there are four Bed Bath and one buybuy BABY. And we have various levels of interest on all of those boxes. I will say that we are expecting an LOI on a couple of them still between this week and next week and others, we have multiple different users coming in making offers to take that space. And at this point in time, the good news on all of those is that they are single-tenant users, which helps get them in quicker and minimizes our cost in terms of putting them in. And then, Mike, do you want to take the second part?

Yeah. Hey, Liz, good morning. I'll take the second part on the bad debt. So as we said in our prepared remarks, kind of at the midpoint of the bad debt we planned this quarter and last quarter for Bed Bath to pay probably through June. And that's looking at how it's going to play out, which takes a big portion of it.

Yeah. Additionally, I would like to mention that some other companies have pointed out the opportunities related to Bed Bath & Beyond and some other struggling retailers. We share a similar perspective. We feel confident about the current rents and the potential to adjust them to market rates. Our leasing team estimates that there could be about 15% to 20% upside if we can update those rates and bring in new tenants.

Thanks. And I guess for my second question, is there any change in the timing of delivery on seeing stores on the stores you're seeing anticipating to come online throughout the year. I noticed just the spread on snow came down about 10 basis points this quarter. If you could just comment on any kind of delays you're seeing or if you're on schedule as planned.

No, it's a good. So actually, the side but on open did come down 10 basis points; it's really just timing. The pipeline remains really strong, even despite, obviously, the headwinds that we discussed in the prepared remarks and that is well documented. But the pipeline, both from an anchor standpoint and a small shop standpoint, we still feel really good about not only what's in the side but not open, but really in the pipeline behind that, whether it's in the legal or LOI process.

And if I can just add a little more detail. We do take account in our bad debt range a little bit of that, but we haven't seen much Liz so far through the year.

Great. Thanks. I was wondering if you could talk about any new opportunities, maybe you're probably not seeing as a lot of your peers have commented on seeing the transactions market is still limited. But maybe if you could talk about opportunities you're hoping for as acquisitions is still largely the focus or if really you're kind of happy with where you are in having recently consolidated the assets from your JV. Just kind of if you could give more color on the strategy there for this year and then in 2024?

Yeah. No, sure. So, obviously, this year, we're hoping to deploy $150 million of net investment activity. The joint venture obviously solved for about $100 million of that. So, we're hoping to obviously put out another $50 million. But to your point, the transaction market is thin. And if you think about obviously the markets where we're trying to buy, it's even tighter. There is still a pretty wide gap on the bid-ask, especially in our markets where, not too long ago, pricing was very aggressive. So we're just being patient. And we're also very mindful, even though we can buy on our current balance sheet due to our leverage, which is obviously a big benefit for us. We're still mindful of our cost of capital as it relates to our discount in the public market. So we're just being very mindful and patient. But that's not to say that we don't have, we're always looking at opportunities. There are things out there that are coming to market. It's just not as robust as it was, call it, 12 months ago.

Great. Thanks. If I could just add one more quick question. On the same-store NOI growth this quarter, 3.2%, does that exclude out-of-period rents? And if not, what would that growth be when excluding that?

Yes, it does. It would be 4.2% if we included it.

Our next question comes from Floris van Dijkum with Compass Point. Floris, please go ahead.

Thank you. Morning, guys. I guess I had a question regarding maybe the balance sheet. Obviously, you took out a $100 million swap. I think that essentially fixed all of your debt, it looks like. Maybe if you can walk through that in greater detail and also talk about your plans for addressing the three cross-collateralized mortgages that are coming due at the end of this year and why would you not simply pay them off with your cash at hand?

I can start, and if Mike has anything to add, he can jump in. Floris, you're absolutely correct, and I appreciated how Connor discussed debt during the site center's call, as our perspective aligns with that. We're focused on mitigating any interest rate risk. By swapping the $100 million, we effectively have almost all fixed-rate debt except for around $17 million, which is still at an attractive price. We'll continue seeking similar opportunities. As you pointed out, in November, the cross-collateralized loan will have its swap come off, so our fixed versus variable debt will likely shift to roughly 90% and 10%. We're considering several options for that situation, including paying it off, refinancing, or using an alternative instrument. We also have two one-year extension options available. Ultimately, our approach will depend on market conditions and advice from our advisors and bankers to determine the best course. Discussions on this have just begun, but we'll definitely delve deeper into them over the summer.

The swaps on those notes are relatively low, correct? It seems the extension options would be executed at market rates, which would result in an increase in interest. Is that an accurate interpretation?

Think of it this way. The swap we recently put in place brings our weighted average interest rate down to about 3.8%, from the 4% stated in our supplemental. If the current curve holds, our weighted average rate might increase by roughly 40 basis points. Depending on where rates go, we will assess our ability to lock in those rates. That should clarify things.

Yeah. No, that helps. You guys have a pretty minimal redevelopment pipeline, DJ. And part of it is you guys have also more, newer assets probably than some of your peers. But I would imagine there are some untapped outparcel opportunities still remaining. And as the acquisition markets are essentially shut right now, are you looking more closely at trying to unlock some of the other value-add opportunities within your existing holdings? And how much can that grow over time?

No. It's a good question. I think you hit it on the head. Look, our assets tend to be on the smaller side. I mean, we do have some bigger power centers and community centers, but I think our average size, give or take is 130,000 square feet. So obviously, that doesn't give us a ton of additional opportunity. Now, we do have plenty of outparcel opportunities, and we're going to continue to explore those. Right now, frankly, it's really hard to make the math work, even though the returns tend to be pretty strong; construction costs are still high. We don't want to burden any of those tenants, especially if you're doing a multi-tenant outparcel with high rent where they're putting in a position to fail just to make our return hurdles. But we're going to continue to look at those. We do have a couple of bigger redevelopment opportunities, but it's more of an overall remerchandising endeavor that gets us a really good incremental return. We have one asset in particular, down in Tampa, Florida, that is a fantastic asset, has a target and a public that has really interesting opportunities that we're continuing to explore. But it's more of those, as opposed to looking for adding out parcels just at out parcels and then either burdening new tenants with high rent or making your in-line space less competitive. So we're trying to balance all of that. But I will tell you, our redevelopment pipeline is one that's going to be slightly complementary to the overall portfolio. It's going to make our assets better. It's going to grow our NOI over time. But I wouldn't expect us to spend any more time than this because it is going to continue to be a smaller part of our overall growth strategy.

Thanks. Given that the acquisition markets are still closed and the lending markets are still challenging, at what point do you start considering stock buybacks since your stock is trading at a discount to NAV? This situation is not unique to your company but is similar to others in the sector. When do you think it might be time to use that capital for stock repurchase?

That's a great question, and it's something we consider frequently, as does our Board. We initiated share buybacks to support our stock price when we went public in late 2021. There are several factors involved in our decision-making. First, we do not intend to sell assets when considering share repurchases. Personally, and as a management team, we believe such actions should be linked to selling part of our portfolio to capitalize on any price differences. Currently, we are not actively in the market to dispose of many assets, if any. Additionally, we need to be mindful of our size since we are on the smaller side. Our goal is to ensure that our platform operates as efficiently as possible. If our relative valuation strays from other strip centers, especially as they are trading at significant discounts, we will have to assess the situation. We do not have a clear idea of where private market pricing will stabilize, but it often ends up somewhere in between public market valuations and what settles in the private markets. Keeping all of this in mind, along with considerations of our size, efficiency, and scale, share buybacks remain a tool we've used in the past. However, the criteria for making such decisions are quite stringent, and we need to see compelling reasons before we decide to further reduce the company's size.

Thanks for the question. Looking at your lease expiration schedule for next year, it’s clear that a significant portion of your growth will hinge on re-leasing at higher rates, especially given the current market dynamics that favor your pricing power. However, I've noticed that your small shop expirations are higher than your average small shop rents per square foot. Could you elaborate on your strategy for managing these expirations moving forward? What potential upside do you foresee, considering the sustained demand from retailers amidst a limited supply?

No, it's a good question. We view the lease expiration schedule as an important part of our disclosure, though it can sometimes be misleading because it depends on the mix of what is coming due. It is difficult to interpret the rent you mentioned. We are confident in our ability to maintain positive spreads and increase rents due to our pricing power. Additionally, we are working to enhance our escalators to achieve 3% and 4% increases over time, ensuring that we not only have a positive cash spread at the start of the lease but also incorporate substantial escalators. This allows us to grow alongside our tenants without placing a heavy burden on them initially, benefiting both parties throughout the lease term. We remain optimistic, especially with occupancy at an all-time high. Most of our growth is currently driven by our pricing power, which is evident. As we've discussed before, some of our best-performing assets are at full occupancy due to this pricing power and the annual escalators we've implemented. Thanks. Thanks so much, Floris.

We have no further questions. I'll turn the call back to the management team for any closing remarks.

Yes, thanks. Maybe I'll just close by echoing some of our key comments. Look, we talked a lot about our internal and external growth opportunities. I think it's driven by our simple and focused portfolio. We're expecting to deliver sector-leading cash flow growth. Our investment-grade balance sheet provides us additional flexibility to be both patient and opportunistic when we're looking to grow the business without the immediate need to access the capital markets in this environment. So for folks and investors looking to invest in a geocentric portfolio in markets with fantastic demographic trends, and the security of grocery and necessity-based tenants, I think InvenTrust is obviously a natural option for that criteria. We look forward to seeing everyone over the next several weeks in ICSC RE Las Vegas and out in New York for REITWeek. As always, if you have any additional questions, please feel free to reach out. Otherwise, everyone have a fantastic weekend.

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