Kite Realty Group Trust Q2 FY2025 Earnings Call

Thank you, and good morning, everyone. Welcome to Kite Realty Group's Second Quarter Earnings Call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group are Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Tom McGowan; Executive Vice President and Chief Financial Officer, Heath Fear; and Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. I'll now turn the call over to John.

Thanks, Bryan, and thanks, everyone, for joining today. The KRG team delivered another strong quarter, highlighted by our sound operational performance and excellent execution on the transactional front. Demand for space in our high-quality centers remains healthy, evidenced by our consistently solid leasing results. Blended cash leasing spreads in the second quarter were 17%, which is our highest quarterly blended spread in the past 5 years. Our ability to grow rents organically demonstrates the mark-to-market potential embedded within our portfolio. Leasing spreads for non-option renewals were almost 20% in the second quarter and 16% over the last 12 months. New leasing volume more than doubled sequentially, largely driven by 11 new anchor leases executed in the second quarter. Our anchor leasing activity included 2 new grocery leases with Whole Foods and Trader Joe's, alongside new leases with apparel, home furnishing and fitness tenants. While our lease rate declined sequentially due to the impact from recent bankruptcies, based on the depth of demand in our leasing pipeline, we will gladly trade the short-term earnings disruption for the opportunity to upgrade our tenancy and bolster the durability of our cash flows. We continue to make great progress in backfilling space with well-capitalized retailers, and to date, over 80% of the boxes that we recaptured as a result of the recent bankruptcies are leased or in active negotiations. Our small shop lease rate increased 30 basis points sequentially and 80 basis points year-over-year. In addition to pushing occupancy, we continue to have success elevating our long-term growth profile. Embedded escalators on our new and non-option renewal small shop leases were 3.4% for the first half of 2025. Activity this quarter included leases with Alo Yoga, Lilly Pulitzer, Buck Mason, Sweetgreen and Shake Shack. The consistent gains in our small shop lease rate are a result of our team's disciplined approach that prioritizes credit quality, strong starting rents and higher embedded escalators and most importantly, a compelling merchandising mix. At the midpoint, we are increasing our NAREIT and core FFO per share guidance by $0.01 and our same-store NOI assumption by 25 basis points. Our core FFO per share guidance now implies a 2.5% year-over-year growth despite the temporary disruption from anchor bankruptcies. At the midpoint of our 2025 guidance, our post-merger core FFO CAGR since 2022 stands at 4.1%. Our business is strong and will continue to improve as we lease space at attractive returns and enhance our long-term embedded growth profile. In recent quarters, we've alluded to an uptick in our capital recycling efforts to reshape the composition of our portfolio and reduce exposure to at-risk tenants. Through the first half of 2025, we've taken significant steps in executing our long-term portfolio vision. In a joint venture with GIC, we acquired Legacy West, an iconic asset that further solidifies our position as a prominent owner of lifestyle and mixed-use assets and expands our relationship with high-caliber retail brands. Subsequently, we expanded our strategic partnership with GIC by contributing 3 assets to a second joint venture, which includes 3 larger format community and power centers in Port St. Lucie, Florida and the Dallas MSA. Our strategic partnerships with GIC now comprise over $1 billion of gross asset value with the potential to grow the relationship as additional opportunities arise. In addition to the JVs, we've sold 3 noncore assets year-to-date. Stoney Creek Commons in the Indianapolis MSA and L.A. Fitness anchored center, Fullerton Metrocenter in the Los Angeles MSA, an asset that presented an opportunity to monetize our limited exposure to California at attractive pricing and relocate the proceeds into target markets and Humblewood Shopping Center in the Houston MSA, where the adjacent owner made an unsolicited offer and the sale reduced our exposure to at-risk tenants. These transactions immediately improve the quality of our portfolio, are accretive to earnings and have a modest impact on our net debt to EBITDA. As we move forward, we will remain active in refining our portfolio by reducing exposure to at-risk tenants while increasing our focus on smaller format grocery-anchored centers and select lifestyle and mixed-use assets. Our second quarter results, inclusive of the highest blended spreads in 5 years, growing our strategic partnership with GIC to over $1 billion, 3 noncore asset sales and an opportunistic bond issuance are the product of a dedicated team focused on executing our strategic initiatives. As always, we strive to produce strong results and deliver long-term value for all our stakeholders. Before turning the call to Heath, I wanted to thank our tenants and team members at Eastgate Crossing in Chapel Hill, North Carolina, for their continued partnership as we work toward quickly reopening the shopping center. Eastgate suffered flooding as a result of historic amount of rainfall caused by tropical storm Chantal. Fortunately, the company has comprehensive flood insurance with coverages well in excess of estimated damages. So now I'll turn the call over to Heath to discuss Q2 results.

Thank you, and good morning. I want to commend the KRG team on an incredibly productive quarter. I'm encouraged by the significant leasing momentum against the backdrop of a portfolio that has tremendous occupancy upside. I'm equally encouraged by the sheer velocity of transactional activity that showcases our allocation acumen and ability to seamlessly execute across our capital stack. Turning to our results. KRG earned $0.51 of NAREIT FFO per share and $0.50 of core FFO per share. Same-property NOI grew 3.3%, driven by a 250 basis point contribution from higher minimum rents, a 50 basis point improvement in net recoveries and a 30 basis point improvement in overage rent. We are increasing the midpoint of our 2025 NAREIT and core FFO per share guidance by $0.01 each. This $0.01 increase is primarily attributable to lower-than-anticipated bad debt and higher-than-anticipated overage rent. Accordingly, we are increasing the midpoint of our same-property NOI assumption by 25 basis points and lowering our full year credit disruption to 185 basis points of total revenues with 95 basis points reserved for the general bad debt bucket and 90 basis points earmarked for the credit disruption associated with recent tenant bankruptcies. The 95 basis point general reserve is a function of combining the 84 basis points of actual bad debt we experienced for the first half of the year with a continuing bad debt assumption of 100 basis points for the balance of this year. As for the 90 basis point bankrupt anchor reserve, it's important to note that we realized 30 basis points in the first half of the year and expect to experience the remaining 60 basis points in the back half of 2025. This back half weighted disruption, together with the extremely strong same-store results in the third and fourth quarters of 2024 are responsible for the same-store deceleration in the back half of 2025. Finally, the sequential increase in our net interest expense assumption is driven by transactional timing, causing the balances on our revolver to remain longer than anticipated. Our investments and capital markets teams have been tireless. We sold 3 noncore assets and completed 2 joint ventures involving 4 assets with a world-class institutional partner. That represents over $1 billion of gross transactional activity. With investment-grade credit spreads at historic lows, we opportunistically returned to the public debt market by issuing a 7-year $300 million bond at a coupon of 5.2%. We also reduced the credit spread on our $1.1 billion revolver and 2 term loans representing $550 million. When all the dust settles, our net debt-to-EBITDA stands at 5.1x, which is among the lowest in our peer set. As John mentioned, we have consistently telegraphed our desire to accelerate the transformation of the portfolio within the confines of prudent balance sheet management. This past quarter is an excellent blueprint for what lies ahead. We are laser-focused on delivering strong results, exceeding expectations and creating long-term value. Again, thank you to our team, and we look forward to seeing many of you over the next couple of weeks. Operator, this concludes our prepared remarks. Please open the line for questions.

And our first question will come from the line of Craig Mailman with Citi.

It's Nick Joseph here with Craig. I guess just on the leasing side, have you seen any meaningful changes in lease gestation periods? Has there been an increase in willingness from tenants to sign leases just as we get more clarity around tariffs?

No, I don't think we have. In fact, if you see the activity we had in the second quarter, you would say it's picked up substantially. So perhaps in the beginning of the year, maybe there was a little more indecisiveness. But at this point in time, it feels as though there's significant demand, and it's really all across the board. We mentioned how much we did in the anchor business, but we also improved our shop occupancy with a very diverse, high-quality group of tenants. So from my personal perspective, it's quite strong right now. Tom, do you want to add anything?

Yes. I think both sides are really trying to work together to find ways to improve scheduling, how to get drawings done earlier, how to sort out permits collectively to make sure they're done properly. So I'm actually seeing more cooperation between the 2 sides to open stores as quickly as possible.

That's very helpful. And then just on the actual negotiations, I mean what's the take for higher embedded escalators? What are you hearing from prospective tenants as you look to do that?

Well, I think the proof is in the pudding when you look at our results, it's clearly been successful in our ability to generate higher growth. Certainly, it's still a challenge at times with the anchor tenants, but we're quite a bit better than we were a few years ago. When you look at our anchor tenants, I think the average is like 1.5%, and it used to be like right around 1% a couple of years ago. So we've made strong strides there and with 3.4% embedded growth in the overall portfolio in the first half of the year, I'd say we're leading the pack in that regard.

One moment for our next question. And that will come from the line of Todd Thomas with KeyBanc Capital Markets.

I just wanted to stick with leasing and new lease volume in particular, which John, you highlighted, Heath too. I wanted to ask about the forward leasing pipeline, if you can comment on July activity and your visibility to get additional anchor lease deals signed in the near term with some of the inventory that you recaptured? And also if you have any insight on re-tenanting spreads as you move ahead relative to this quarter?

Yes. Todd, I think we feel very good about the way it's picked up in the last couple of months. And I would say that where we sit here today, if anything, it's continuing to accelerate. We have a very good portfolio of opportunities for retailers, and there's a limited number of those spaces in good locations. So generally speaking, when we're looking at one of these deals, we have a couple of different opportunities per available space. And that was part of the point we wanted to make is that we're very focused on not how fast it happens, but rather how good the outcome is. And it's probably why the first quarter, we only did a couple of deals. In the second quarter, we did 11, right, in the anchor side. So I think the demand is strong. It's really more about us making smart decisions about what's the right merchandising mix, who has the best credit in terms of the tenants that we're looking at. And then also the growth that we talked about, we're very focused on that. But overall, it's strong. Tom, do you want to add some color?

Yes. I would. Todd, I just look at the 11 boxes that we've executed in the quarter. Cash spreads were 36.6%. You have returns close to 25%. So when you include the first and second quarter, say you're at 13%, we're going to see that volume of new box inventory getting signed increase significantly. And we're in the process of making sure that happens. But we know we have the inventory out there to transact on. Now we just got to hit our key points that John talked about, making sure that the credit is there, the quality, the merchandising. And I think we're going to be successful with that.

That's helpful. You mentioned, John, that you would gladly trade the short-term disruption for the mark-to-market and all the tenant merchandising decisions that you're making. And Tom, it sounded like in response to an earlier question, the permitting and planning processes are getting a little bit more efficient. But does the anchor demand give you negotiating power over shortening that rent commencement time frame and that disruption seems to be a little bit of a challenge in how the cash flow and NOI growth trends? Is there anything that is under consideration or anything that you can do to sort of shorten that rent commencement period in general?

Yes. I mean, I think, Todd, the biggest thing we can do is work with the tenant, get their layouts done and then get drawing started. And we're not afraid to get drawings started early. We'll work out a reasonable arrangement in terms of a reimbursement if the deal doesn't move forward. But if we can get those drawings started, we can get the permitting started early, you start putting yourself in a positive 90-day position in terms of a normal delivery. And then we're also putting tremendous pressure on the tenant saying, look, if you want this deal, here are the terms and the parameters you need to work with us in to get open as quickly as possible. And that then gives you a leg up on other tenants that we're talking to. So we're trying to pull as many levers as possible, Todd.

One moment for our next question. And that will come from the line of Andrew Reale with Bank of America.

First, what's the latest on the sale of City Center?

We are still marketing City Center for sale. Recently, we identified a buyer who is no longer able to proceed, so we continue to look for buyers. On a positive note, there has been some good new leasing activity at the property, which is beneficial, but we remain focused on the sale.

Okay. Does the Humblewood sale satisfy the asset sale proceeds to fund Legacy West? Or is there still more dispositions if City Center is delayed?

Yes. Let me, listen, all cash is fungible, right? So to the extent that Humblewood is a replacement for City Center, I'd tell you that Humble traded at a better cap rate than we anticipate City Center will trade. So to the extent we're using Humblewood and a potential other sale to sort of complete that circle we had last quarter, it's only going to make the accretion more.

Okay. And I guess just one more. If I can just think long term, what's a realistic ceiling for small shop occupancy?

It's hard to say. We don't set a limit on it. Our occupancy in 2019 was 92.5%, and we're getting closer to that. I believe we can exceed that, and I know we can exceed it. The goal is to keep pushing forward. We always aim for the best outcome rather than the fastest one. Right now, we have a lot of momentum, so we're optimistic about continuing to grow.

One moment for our next question. And that will come from the line of Paulina Rojas with Green Street.

You mentioned the efforts to reduce exposure to at-risk tenants and progress on that front already. But more broadly, how are you seeing investor interest in these larger, I assume, community centers or more power center-like type of assets? And are there any particular retailers that the market is showing more hesitation to absorb sharing your concerns?

In response to the first part of your question, I believe the demand in that category, particularly for larger formats, is quite strong. When examining the yield differences among various property types, it can present a very appealing opportunity for investors, especially given the available leverage. Our recent transaction in the second joint venture with GIC is a clear sign of sophisticated investors’ interest in this product type, which likely applies to many other assets we consider. Regarding your second inquiry about investors having concerns with certain retailers, I would suggest that when acquiring a center, especially larger format centers, the impact of one or two tenants is minimal on the perceived value. What matters more to us over time is how we can adjust our cash flow makeup, making it less about the opinions of other investors concerning a specific property.

And then my other question is, so you're starting from a lower occupancy than your peers impacted by these recent bankruptcies. To what degree do you believe that sets the stage for above-peer group growth in '26 and '27? And is this dynamic something we should expect this outperformance? And to what degree do you feel comfortable being held accountable for an expectation like that?

That's a multi-part question. However, I want to emphasize that we are optimistic about the lease percentage improving significantly over the next 3 to 4 quarters, given our current lease and occupancy rates and the activity we generated in the second quarter. As Tom mentioned, the disruption primarily affects the anchor space, and it takes time to turn on rent for those areas. Typically, it takes about 12 to 18 months from lease execution to commence rent, which leads us to expect that leases signed in Q3 may start generating rent by late '26, while those signed in Q4 would begin in '27. On the positive side, we are actively working to speed up this process, and this year, we have signed several leases that will have 3 or 4 tenants opening as early as this calendar year. This shows that progress is achievable, and it’s a key focus for Tom and his team. Looking at growth for the next couple of years, we feel extremely well-positioned, although I don’t think this is accurately represented in our stock price. Whether you currently own the stock or are considering an investment, I believe the opportunity will be sold at a much higher price in the coming years. We see significant upside ahead, and we remain comfortable managing current pressures. We did face challenges from recent bankruptcies, which led to greater exposure for us during that time. Part of our strategy is to distance ourselves from those issues and enhance our cash growth. Overall, I think this is an excellent time for us and a great moment to consider investing in the stock.

One moment for our next question. And that will come from the line of Alexander Goldfarb with Piper Sandler.

John, I like that money-back guarantee on where the stock will be in a few years. So gives Tom and the team a bunch to work on. So 2 questions here. The first one is on tariffs. Based on what you guys have reported and your peers, it doesn't seem like there was any impact in leasing activity, demand, anything from the retailers. So in your view, were the tariffs sort of a nonissue from a retailer perspective, either because, one, all the weaker tenants were sorted out a few years ago or two, lack of supply? Or why do you think that there was just no consequence despite the stock market turmoil, the talking-head turmoil, but it doesn't sound like from a retailer perspective, there was any slowdown at all?

There is a significant difference between the stock market, which trades continuously and is influenced by constantly changing headlines, and retailers who have a longer-term outlook, particularly national retailers that sign 10-year leases. Many retailers adapted during COVID by diversifying their distribution and supply channels. While it would be incorrect to say these factors are irrelevant, they do contribute to a sense of stability, and we have seen increased stability with the recent announcements of new deals. There are still a few major partnerships that need to be finalized, but it’s clear we are moving towards greater stability. Ultimately, it ties back to the supply-demand equation we frequently discuss. There is very limited supply in our market, so when retailers have the chance to expand, they tend to seize that opportunity. Although we experienced some disruptions in recent months due to bankruptcies and market uncertainties, we now find ourselves in a much more favorable position.

Yes, it's interesting. I mean it shows the resilience of their supply chains that they can pivot, adjust to price accordingly. Second question, Heath, can you just remind us on RPAI, I know you're not '26 guidance, but still on RPAI specifically, what is the noncash burn-off that we should be thinking about as we're updating our '26?

Sure. So going in from '24 into '25, you will recall it was about $0.05. Good news is it's about half of that going in from '25 into '26. And that will be split between marks on the debt and marks on the leases.

Okay. So about $0.025.

About $0.025, correct.

One moment for our next question. And that will come from the line of Michael Goldsmith with UBS.

Given your strategic transformation and capital recycling, you likely have unique insights into the increased buyer interest in the retail real estate market. What have you learned about the buyers? What specific features are they looking for in the centers? How are they approaching cap rates? Additionally, considering that a buyer backed out of City Center, do you anticipate this happening more frequently due to the growing interest from buyers?

To address the last part, I believe that situation is an exception related to a specific group, which can occur. This is why we have a pool to draw from. Overall, I see very strong institutional demand for open-air retail. This type of product has not attracted many investors over the past five years or so. However, as conditions have improved and returns have strengthened, many investors are entering the market. I think it presents a compelling risk-adjusted return for investors compared to other types of real estate, particularly in terms of initial cap rates and more crucially, internal rates of return. It appears to be a catching-up period, with investors who previously overlooked this space now actively rebalancing their portfolios. Typically, institutional investors may have had an overemphasis on office properties and are now shifting towards other sectors, including retail. When we consider the potential internal rates of return, I would argue that this sector remains undervalued and this is likely to change. It is important to note that different product types within retail complicate the assessment of cap rates. However, demand remains strong, and I believe we will continue to engage in transactions from both perspectives.

I would say that we're seeing some themes in product type, Michael. Obviously, core grocery, that demand has remained steady. You're seeing a pickup in demand for larger format. That's a lot due to just the capital formation that's happening and the return hurdles that these guys need to make. So you're seeing, again, a better bid for larger format because of the ingoing yield. And you're also seeing sort of the lifestyle mixed-use also increase in the buyer pool, also the sellers as well. Legacy West, for example, Scottsdale Quarter, Birkdale Village, you're starting to see more of these sort of generational lifestyle assets trading and pricing accordingly. So it's been really interesting. We're seeing broad demand across the entire spectrum of the asset class.

That's really helpful. As a follow-up, you mentioned earlier that over 80% of the boxes you recaptured due to recent bankruptcies are either leased or in active negotiations. For the remaining 20%, are those in less desirable locations that may be harder to lease? Or is it more a matter of timing and competition? It seems like the first 80% came together quite quickly. Does the last 20% take longer to finalize because they aren't as sought after?

I don't think it's accurate to generalize about the 20% of vacant spaces. If you look back, we had around 98% occupancy at one point. There will always be some spaces that are harder to lease for different reasons. Our approach focuses on negotiation and long-term goals. It’s important to emphasize that we’re not rushing to fill spaces. Our priority is to create long-term value for our stakeholders instead of seeking quick results. If our aim was just to fill spaces quickly, we would have accepted deals that do not benefit the long-term value of the shopping center. Everything will align over time, and we are not just focused on quarterly results; we're looking at the next several years.

One moment for our next question. And that will come from the line of Cooper Clark with Wells Fargo.

I wanted to ask about the JVs with GIC and comments earlier on continuing to grow the relationship. Could you provide any color on the current pipeline of deals you're underwriting with them on the acquisition side? And how we should think about the JV portfolio at GIC growing longer term as you execute on some of the strategic goals?

Yes. I mean, look, in terms of our relationship with GIC, of course, we couldn't be more happy to partner with one of the world's most active and sophisticated investors. I don't think we want to comment on specifics on underwriting with them. But bottom line is, as Heath mentioned, there are more and more opportunities for larger scale deals that we could look to joint venture. We both have an understanding of what each other is interested in. So we will go about that one at a time. But yes, we're super happy with the relationship, and we want to go do a great job for them as a partner.

Yes. I would just mention that neither party has a specific mandate. We don't have to or exclusive with each other. To the extent that we're looking at something that they find interesting, that's where the opportunities will arise. So we don't have to partner with them in the future, nor do they have to partner with us. So again, it's been a great partnership, over $1 billion in value, and certainly, it's repeatable.

Let's just say it went from 0 to $1 billion pretty quickly.

One moment for our next question. And that will come from the line of Floris Van Dijkum with Ladenburg.

Going back to legacy and returns, you mentioned a 6.5% return from that investment. How does this compare to the recent Power Center deal you sold? Also, could you explain the purchase accounting since your previous 6.5% cap was based on cash yield? How does the GAAP yield differ? Additionally, what is the retail market rent at? Please provide more details.

Sure. So I'll first start with the yield, Floris, and you're correct and you're remembering correctly, which I think is a really elegant part of this joint venture transaction is that our effective yield, taking into account the management fees on Legacy West is right around 6.5%. Conversely, the 48% that we contributed into the partnership, the sell yield on that is also 6.5%. So in essence, what we're doing is, we took portions from our power centers and we used it to buy a portion of Legacy West at the same exact yield, which we think, again, is extremely elegant. In terms of the purchase price accounting for us, it is going to be on a noncash basis, minimally accretive. So basically, we're saying is that the mark-to-market on the below-market leases is greater than the mark-to-market on the below-market debt. So again, slightly accretive, nothing material, but net-net positive.

Great. And then I guess my follow-up, more, I guess, maybe for Tom or John, but your recovery ratio, I believe, is the highest in the sector, around 92% and it went up even though your occupancy went down this past quarter. I'm curious, what are the initiatives that you are doing to keep improving that recovery ratio? And how much higher can that go? Is there a ceiling there?

First of all, as you mentioned, we have one of the highest recovery ratios in the industry. It's important to note that we have likely the most fixed CAM in our portfolio compared to our peers, which has taken years to establish. You can't just initiate this and expect significant results in a year. We've been working on converting to fixed CAM for about seven years now. Approximately 94% or maybe even 95% of the deals we've executed this year have been fixed CAM, so we have solid experience in that area. Transitioning to this model requires a deep understanding of managing these portfolios to meet budgeting goals. We are very proactive in our operations, as you've seen firsthand, and this focus on efficiency permeates throughout the entire organization. We are committed to delivering a top-quality product. Additionally, we emphasize overall expense management at both the property level and in terms of pass-through expenses. It’s not simply about one solution; it’s a comprehensive approach to how we operate. Tom, would you like to add anything?

Yes. I mean this is really where the team earns their keep, and this is where the grinding occurs in terms of making sure we're bidding out these contracts every year, getting efficiencies, doing the things that we need to do while keeping the balance that John said of delivering a first-class center. But I think we're even more proud of not just the components of fixed CAM, but that below the belt just really digging into the numbers, and we'll continue to do that.

One moment for our next question. And that will come from the line of Hongliang Zhang with JPMorgan.

Two questions. I guess the first question, with the fact that you have 2 JVs with GIC, could you provide some guidepost to how we should think about how the equity and JV line should trend for the rest of the year?

You mean from an accounting perspective?

Yes, within the income statement.

On the balance sheet, you will find all items netted out in unconsolidated subsidiaries. Additionally, the NOI, depreciation, and interest expense will also be netted out in the income statement under the unconsolidated line. However, in the new supplemental presentation, we have consolidated everything and provided each piece individually for all of our unconsolidated joint ventures. Please refer to the supplemental materials to see this information.

Got it. And I guess my second question, your noncash rents bounced around a little bit so far this year. I was just wondering if there's anything onetime in the current quarter's numbers tied to the bankruptcies.

I don't believe there's anything significant to note. There's just some natural variability at times. Aside from the onetime acceleration we experienced with the Big Lots bankruptcy, it shouldn't fluctuate too much.

One moment for our next question. And that will come from the line of Alec Feygin with Baird.

I guess one for me is what is the appetite for share buybacks today?

I think, as we always mention, we currently have a buyback plan and an ATM plan in place. We aim to approach this from an opportunistic perspective. We're also clear that we are investing a significant amount of capital right now and achieving very high returns from backfilling the space. Our dividend is still growing, and we continue to generate free cash flow. Ultimately, we are always considering these factors. As we progress over the next several quarters, and keep backfilling while generating new cash flow, there could be more opportunities to explore. However, we remain vigilant in analyzing the best investment options.

One moment for our next question. And that will come from the line of Ken Billingsley with Compass Point Research.

I wanted to follow up on the anchors you mentioned in the press release regarding the new anchor cash lease spread of 36%. Looking at the supplement, it seems that constituted about 40% of anchor signings in the quarter. What was the outcome for the other segment?

I'm not sure we understand. Can you clarify the difference between comparable and non-comparable?

Ken, are you trying to ask what's the comparable versus the non-comparable anchors? Or what's...

The new anchor leases looks like it was 207,000 feet, but it looks like you did 557,000. So I was just curious what you were getting on the other 350,000. What was the lease spread on those anchors?

Yes, I believe those are probably close to 25%.

And as we look into the remainder of the year, the expiring ABR, I think it was $20.11 that jumped up. It's a very small sample, so less than 200,000 square feet. Is there any reason that that's significantly higher? Is there something unique about those tenants? Or are we likely to still see over 20% cash lease spreads through the remainder of this year, even on that group?

Yes, I would say that the composition of that pool is more shop heavy, which is why you're seeing a higher number. So there's nothing really happening there other than just the mix of leases that are left to get done.

And that will come from the line of Zachary Light with BTIG.

This is Zach Light on for Mike Gorman. Can you expand more on the strategic gateway market exposure, specifically Seattle and the other non-Sunbelt markets in the wake of Fullerton sale? Mainly asking, are you seeing any differentiation in performance? And are there additional opportunities to maybe rotate out of some of those markets and back into the Sunbelt as the transaction market starts to loosen?

No, I think when we assess our performance across various markets, it's quite uniform in terms of how they are performing. We are satisfied with the composition of our portfolio. We have made it clear that our presence in California was too limited for us to remain interested in continuing there. The reality is that doing business there poses some challenges. Currently, we have three properties in California; we have sold one, another is undergoing rezoning and will subsequently be sold, and the third is likely also a candidate for sale. As for markets like Seattle, New York, and Chicago, which we view as gateway markets, we are confident about our positions there. That said, we are consistently evaluating our operations to determine the best locations for generating the highest returns. We analyze margins and consider demand in the pipeline, and currently, demand remains strong across the board. We are actively engaging in deals in all the mentioned markets. We will monitor how things progress, but we are pleased with our current status. Additionally, 40% of our revenue is derived from Texas and Florida, which we believe is a smart strategy, and the remaining balance in the Southeast is also performing well. We will continue to keep a close watch on everything, but we are satisfied with where we stand.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. John Kite for any closing remarks.

Well, I just want to say again, thank you all for taking the time to be on the call with us today, and we look forward to seeing you soon.

This concludes today's program. Thank you all for participating. You may now disconnect.