Good day, and welcome to Phillips Edison & Company First Quarter 2024 Earnings Call. Please note, this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin.

Thank you, operator. I'm joined on this call by our Chairman and Chief Executive Officer, Jeff Edison; President, Bob Myers; and Chief Financial Officer, John Caulfield. Once we conclude our prepared remarks, we will open the call to Q&A. After today's call, an archived version will be published on our website. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings, specifically in our most recent Form 10-K and 10-Q. Our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet, which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison, our Chief Executive Officer. Jeff?

Thank you, Kim, and thank you, everyone, for joining us today. The PECO team delivered another solid quarter of growth, with same-center NOI increasing by 3.7%. NAREIT FFO increased 4.9% and core FFO increased 4.5%. The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning grocery-anchored neighborhood shopping centers anchored by the #1 or #2 grocer by sales in the market. The PECO team's ability to drive results at the property level and the many advantages of the suburban markets where we operate our centers. The continued strong performance of our portfolio has allowed us to affirm our 2024 core FFO guidance range. The midpoint represents year-over-year growth of 3%. Despite significant interest expense headwinds of nearly $0.10 per share, we believe we can continue to deliver positive earnings growth. Today, we see a continued strong operating environment and a transaction market that is increasingly more active. The consumer remains resilient, and our grocers continue to drive strong recurring foot traffic to our centers. Occupancy remains high at 97% leased, which gives us pricing power. Leasing demand continues to be elevated for our inline spaces, and we have limited exposure to big-box retailers. Retention remains strong, and the PECO team continues to be proactive in getting spaces back and driving significantly higher rents. This is reflected in our continued strong new rent spreads. In addition, PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive strong neighborhood demand. We have a great balance sheet, and we are well positioned for accretive acquisitions and growth. During the first quarter, we acquired 2 shopping centers and 1 land parcel for a total of $56 million. We remain confident in our ability to acquire high-quality centers at attractive returns as the transaction market opens up further. While it's early in the year, we continue to successfully find attractive acquisition opportunities. Activity in the second quarter remained strong. Given the current environment, we are reaffirming our guidance of $200 million to $300 million of net acquisitions for the year. We have the capabilities and leverage capacity to acquire much more if attractive opportunities materialize. We continue to target unlevered IRRs of 9% or greater for our acquisitions. As a reminder, the acquisitions that we completed in the second half of 2023 underwrote to over 9.5% unlevered IRR. We will maintain our disciplined approach and focus on accretively growing our portfolio. We're hopeful that volumes will continue to increase throughout the year. Looking beyond 2024 and assuming a more stable interest rate environment and acquisitions market, we continue to believe our portfolio can deliver mid- to high single-digit core FFO per share growth on a long-term basis. This will be driven by both internal and external growth. We remain committed to successfully executing our growth strategy. Our high-quality portfolio anchored by top grocers in favorable suburban markets, supported by one of the best balance sheets in the sector provides a long-term steady earnings growth profile. PECO generates more alpha with less data given our focused and differentiated strategy. As previously announced by Kroger and Albertsons, the estimated closing date for the proposed merger was pushed back to later this year. Also this week, Kroger added 166 stores to the disposition list to CNS. We remain cautiously optimistic about the impact of this merger on PECO. We continue to believe it is ultimately a positive for PECO, for our centers, and for the communities that our centers serve. The market still views the merger as having a low probability of occurring. But should the merger close and 579 stores now on the list are sold to CNS, we believe the impact on PECO would be a net positive. Our Albertsons stores will be operated by Kroger, which we invest regularly in their stores and this leads to higher sales volumes. If the merger does not occur, our Albertsons anchored centers will continue the strong performance that they have produced to date. I will now turn the call over to Bob to provide more details on the operating environment. Bob?

Thank you, Jeff, and good afternoon, everyone, and thank you for joining us. We had another quarter of strong operating results and leasing momentum. We continue to see high retailer demand with no current signs of slowing down. PECO's leasing team continues to convert retailer demand into high occupancy with higher rents at our centers. Portfolio occupancy remained high and ended the quarter at 97.2% leased. Anchor occupancy remained high at 98.4%. During the quarter, we executed 5 anchor leases, including Ulta Beauty at Hilfiger Shopping Center, Five Below at Bear Creek Plaza, Crunch Fitness at Kirkwood Marketplace and 2 Med tail uses, Rise Center and Ocean Breeze Plaza, as well as a medical center at Colonial Promenade. In the first quarter, we received 6 anchor boxes back. We currently have just 15 vacant anchor spaces in our portfolio. Importantly, we are able to drive significantly higher rents on these units. For reference, these 6 spaces had an average ABR of $8.06 and the 5 we executed this quarter had an average ABR of $18.37, a 128% average increase. Activity for anchor leases currently out for signature is extremely positive, and we are currently experiencing the strongest anchor demand we've seen in over 20 years. Inline occupancy ended the quarter at 94.8%, an increase of 50 basis points year-over-year and a sequential increase of 10 basis points from the fourth quarter. New tenants added in the first quarter included quick-service restaurants, such as Nashville Hot Chicken, The Great Greek, Starbucks, and Wingstop, alongside several medical uses, health and beauty retailers such as Hand in Stone, and other necessity-based goods and services. Our acquisitions in the first quarter were 96% leased at closing, and buying centers with some vacancies will continue to allow us to drive growth. Given PECO's unique external growth strategy, we have added new disclosures for same-center leased and economic occupancy, which you can find in our supplemental information packet. We continue to believe that we can push same-center inline occupancy another 100 to 150 basis points given the continued strong retailer demand. In terms of new lease activity, we continue to have success in driving higher rents. Comparable new rent spreads for the first quarter were 29.1%. Our inline new rent spreads were a record high 37.4% in the first quarter, which compares to our trailing 12-month average of 27.7%. We continue to capitalize on strong renewal demand and are making the most of the opportunity to improve lease terms at renewal and drive rents higher. In the first quarter, we achieved a 16.9% increase in comparable renewal rent spreads. Our inline renewal spreads remained high at 19.2% in the first quarter, which compares to our trailing 12-month average of 18.2%. These increases and spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Progress continues in terms of retention and while growing rents at attractive rates. PECO's retention rate remained strong in the first quarter. Our inline retention rate is 83%, well ahead of the historical 5-year average of 78%. Higher retention means less downtime and lower tenant improvement spend. In the first quarter, we spent only $0.54 per square foot of tenant improvements for renewals. We also remain successful at driving higher contractual rent increases. Our new and renewal inline leases executed in the first quarter had average annual contractual rent bumps of 2% and 3%, respectively, another important contributor to our long-term growth. The leasing spreads that we are achieving and the strength of our leasing pipeline are clear evidence of the continued high demand for space in our grocery-anchored neighborhood shopping centers. PECO's pricing power is a reflection of the strength of our focused strategy and the quality of our portfolio. PECO continues to benefit from a number of positive macroeconomic trends that create strong tailwinds and drive robust neighborhood demand. These trends include a resilient consumer, hybrid work migration to the Sunbelt, population shifts favoring suburban neighborhoods, and the importance of physical locations and last-mile delivery. The impact of these demand factors is further amplified due to limited new supply over the last 10 years and going forward, given that current economic returns do not justify new construction. A healthy mix of national, regional, and local retailers adds many benefits to our grocery-anchored portfolio. 70% of our rents come from neighbors offering necessity-based goods and services, and our top grocers continue to drive strong recurring foot traffic to our centers. PECO's 3-mile trade area demographics include an average population of 67,000 people and an average median household income of $87,000, which is 12% higher than the U.S. median. These demographics align with the store demographics of Kroger and Publix, which are PECO's top 2 neighbors. Our centers are situated in trade areas where our top grocers are profitable and our neighbors are successful. We also enjoy a well-diversified neighbor base. Our top neighbor list is comprised of the best grocers in the country. Our largest non-grocer neighbor makes up only 1.2% of our rents, and that neighbor is T.J. Maxx. All other nongrocery neighbors are below 1% of ABR. To put a finer point on neighbor mix, PECO has no exposure to luxury retail and very limited exposure to distressed retailers. Our top 10 neighbors currently on our watch list represent just 2% of ABR, with no one retailer representing more than 40 basis points of ABR. While our bad debt was slightly elevated in the first quarter, we actively monitor the health of our neighbors. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. To note, this is not attributed to national bankruptcies as we don't have any meaningful concentrations. From an operations standpoint, we have always taken an aggressive stance to get spaces back. And in today's environment, the PECO team is taking an even more aggressive stance on opportunities where we can get higher spreads. We are setting 40% inline rent spreads on the units we are getting back. 27% of our ABR is derived from local neighbors. The majority of our local neighbor rents come from retailers offering necessity-based goods and services. Our local neighbors are successful businesses run by hardworking entrepreneurs; they have healthy credit and are less susceptible to corporate bankruptcy caused by weaker performing locations. Local neighbors offer favorable economic returns. A typical local retailer receives less capital at the beginning of their lease, accepts more PECO-friendly lease terms, and has high retention rates. PECO retained 85% of local neighbors in the first quarter. For inline local neighbors, renewal rent spreads remained strong at 20.2%. Importantly, local retailers meaningfully differentiate the merchandise mix that our neighborhood centers offer our customers. Our inline local neighbors are resilient and have been in our shopping centers for 9.7 years on average. In addition to our strong rental growth trends, we continue to expand our pipeline of ground-up outparcel developments and repositioning projects. During the first quarter, we stabilized 4 projects and delivered over 180,000 square feet of space to our neighbors. These 4 projects add incremental NOI of approximately $2.3 million annually. They provide superior risk-adjusted returns and have a meaningful impact on our long-term NOI growth. We continue to expect to invest $40 million to $50 million annually in ground-up development and repositioning opportunities with weighted average cash-on-cash yields between 9% and 12%. This activity remains a great use of free cash flow and produces attractive returns with less risk. Our team continues to stay focused on growing this pipeline as the returns are accretive to the portfolio. In summary, the PECO team remains optimistic given the current strong operating environment and the continued positive momentum we are experiencing across leasing, redevelopment, and development. Our healthy neighbor mix and grocery-anchored strategy positions PECO well for continued growth. The overall demand environment, the stability of our centers, the strength of our grocers, and the capabilities of our team give us great confidence in our ability to continue to deliver solid operating results. I will now turn the call over to John.

Thank you, Bob, and good morning, and good afternoon, everyone. I'll start by addressing the first quarter results, then provide an update on the balance sheet and finally speak to our affirmed 2024 guidance. First quarter 2024 NAREIT FFO increased 4.9% to $80.1 million or $0.59 per diluted share, driven by an increase in rental income from our strong property operations. Results were partially impacted by higher year-over-year interest expense. First quarter core FFO increased 4.5% to $81.7 million or $0.60 per diluted share, driven by increased revenue at our properties from higher occupancy levels and strong leasing spreads, partially offset by the aforementioned higher interest expense. Our same-center NOI growth in the quarter was 3.7%, driven by minimum rent growth of 4.2% year-over-year. Regarding acquisitions during the first quarter, we acquired 2 shopping centers and 1 land parcel for a total of $56 million. We had no dispositions during the quarter. Turning to the balance sheet, we have approximately $570 million of liquidity to support our acquisition plan and no meaningful maturities until November 2025. Our net debt to adjusted EBITDA remained at 5.1x. Our debt had a weighted average interest rate of 4.3% and a weighted average maturity of 3.8 years when including all extension options. During the quarter, we entered into an interest rate swap agreement totaling $150 million. The new instrument swapped SOFR to approximately 3.45% effective September 26, 2024, and matures on December 31, 2025. This swap helps us manage our floating rate exposure as we have swaps that expire in September and October of 2024. We ended the quarter with 76% fixed rate debt and 24% floating. We continue to monitor the debt market and we look to access it opportunistically. While the recent move in long-term treasuries has not been favorable, credit spreads have improved from year-end. We are continually looking at opportunities to enhance our liquidity and extend our debt maturity profile. Our lack of near-term maturities provides us with the flexibility to be patient. Between the significant free cash flow generated by our portfolio this year and the capacity available on our revolver, we can be strategic in our timing to access the debt market. Turning to our guidance for 2024, we have updated the net income per share range to $0.51 to $0.55. And we've affirmed our guidance for NAREIT and core FFO, which reflects a 6% and 3% growth over 2023 at the midpoints, respectively. In addition, we have affirmed our range for same-center NOI growth of 3.25% to 4.25%, given the continued strong operating environment. Included in our guidance is the negative impact of uncollectible reserves. We are affirming the range previously provided, given the continued strong health of our neighbors. However, we will likely be at the high end of the range for the year, but it's still early, and this is being influenced by our team taking an aggressive stance on getting spaces back to drive higher rent spreads, as Bob mentioned earlier. We currently have several acquisitions in our pipeline, either under contract or in contract negotiation. This activity provides a strong start for the year. As Jeff mentioned, it is still early, so we are affirming our acquisition guidance and expect net volume to be in the range of $200 million to $300 million. As the transaction and capital markets improve, we have the capacity to meaningfully increase this number, but we are comfortable with this guidance range in the current environment. Looking beyond 2024, we believe our internal and external growth opportunities give us a long-term growth outlook in the mid- to high single digits for core FFO per share growth. We expect a comparable or faster growth rate for AFFO because there should be less tenant improvement dollars invested as we continue to increase same-center occupancy. In the near term, we continue to be impacted by interest rate increases as all borrowers are, which impacts our earnings growth. That said, we are pleased to guide to positive per share growth. For 2024, we are updating the range of interest rate expense to $98 million to $106 million. We estimate that higher interest rates could be a headwind of $0.07 to $0.11 for the year. If we added back the per share impact of interest rate increases to our updated 2024 guidance, this would reflect 7% core FFO growth at the midpoint. 2024 is continuing to present challenges with high inflation, volatile and rising interest rates, and global conflict. However, the strength of our integrated operating platform positions PECO well for long-term steady earnings growth. We're excited for additional growth opportunities ahead this year, both internally and through acquisitions. With that, we will open the line for questions. Operator?

Your first question is from Caitlin Burrows with Goldman Sachs.

Maybe just following up, John, on that last point on the bad debt headwind. So I know the guidance was 60 to 80 basis points, and you mentioned now it could come in at the high end. Granted, it's still early in the year. It sounds like your neighbors are performing generally very well. So just wondering what's driving the updated view on the 1Q results? And if anything is kind of PECO driven, can you go through that nuance?

Well, Kate, it's Jeff. Thanks for the question. As we look at the operating environment when we get to levels of occupancy that we're at right now, we're taking a very aggressive stance on getting properties back from neighbors who are not paying. That has some impact on what we're talking about here. But we're generally going to continue to be really aggressive at getting spaces back on a go-forward basis, and that will have an impact. However, we are not seeing anything secularly that is occurring that is changing those numbers, and we do think they will more normalize over the year.

No, I think that captures it. I mean, Kate, when we look at it, it is still early in the year and it can move from quarter to quarter. But as we look at it, as Jeff said, we're not seeing anything that is pervasive. I mean, this is not driven by national bankruptcies or other issues.

I guess maybe then just go on, Jeff, or someone.

No, I'm sorry, it's Bob. I'm just going to add to that. In light of what we're seeing on the operations platform and the demand we’re experiencing for the space, even in the spaces that we received back, we were able to achieve over 40% new leasing spreads. So as long as we continue to see the demand there, it is a space-by-space decision and how hard we push, but it is a strategy that we're seeing some benefit from. So I'm encouraged by the demand and the spreads we're seeing.

Got it. And then maybe just on the point of the same-store NOI guidance being reaffirmed and the FFO target being reaffirmed despite higher interest expense. I guess can you guys go through some of the offsets of what might be performing better than expected?

John, do you want to take that one?

Sure, I'll take that. Yes, ultimately, the leasing spread and the leasing activity that Bob discussed, from the operating level allows us to do that. We are actually seeing better results than we had anticipated. I mean, our NOI margin increased a little this quarter, but we continue to see aspects like G&A expenses as well as some of our property-level expenses helping to offset. So the increase in interest is something, but we were able to manage that and feel good about our guidance ranges.

Your next question is from the line of Liz Doykan with Bank of America.

I was just hoping if you could talk a little bit more about the 2 centers acquired in the first quarter. Both seemed pretty well leased at the point of acquisition. So just wondering on the opportunity set that you see at each of those centers. And I'm just wondering about plans for the land parcel that was acquired.

I'll cover the 2 properties, Bob, you can talk through the land parcel that we purchased. The first project we bought was a center that we had actually looked at for a long time. It is a publicly anchored center, one of the best publics in its trade area. We really like that particular market outside of Orlando. We found that there are some very good mark-to-market opportunities there. I think our underwriting was sort of between 9% and 9.5% on an unlevered IRR basis. So we felt pretty good about that acquisition. Our second acquisition was a very opportunistic purchase. It was a property that we had seen for a long time in a market that we are very familiar with, and it was in a higher-end market with density with a dominant grocer not in the center but within short distance. So it was in a major corridor for the suburban shopper. We thought it was an opportunity to take advantage of, and we had a strong IRR well north of 9.5%. So we felt good about that. Those were the 2 acquisitions that, going into the second quarter, we feel we have a good pipeline. We've seen almost twice as many projects go through the investment committee this year through the first quarter compared to last year.

Yes, absolutely. The second project is called Golsby Point, and it's in Tampa, Florida. We had our eyes on it, and it's about a 3-acre parcel. We paid around $2 million for it. Our national account team has been marketing this for the last 6 months. We are currently thinking about separating the 3 acres into 3 one-acre parcels, and we already have strong interest from national retailers such as Chase Bank, Dutch Brothers, Tropical Smoothie, and urgent care facilities. There will continue to be demand for these opportunities in the Medtail and fast-casual spaces. So again, we want to stay opportunistic and look for land.

Okay. That's good color. And just a follow-up to that. How did you fund first-quarter acquisitions? And is there any change in thinking around the match funding strategy you guys have been employing to fund the rest of this throughout the year? Or could you just give your updated thoughts on funding acquisitions?

We have reaffirmed our pace. We anticipate that we will be in the $200 million to $300 million range for acquisitions. From a pricing standpoint, the market continues to have quite a bit of volatility, which is not generally a positive for volume but makes it harder to figure things out. We're staying disciplined regarding where we see the returns needed to make them accretive to our model. Last year, we tapped the ATM on the equity side and extended all our debt maturities as well. We've got our line that we will be using for these acquisitions, and we will be looking to add longer-term fixed-rate debt as we tie in those acquisitions.

No, I think that hits it. We have $570 million of liquidity, and we're looking to maintain our flexibility as we work towards our long-term target of 10% floating. We feel good about the assets we're buying and the opportunities ahead.

Lizy, does that answer your question?

Your next question is from the line of Ronald Kamdem with Morgan Stanley.

Just my first quick one was I remember back at the Investor Day, you talked about asset management partnerships and so forth. Just wondering if there is any update on that and what the thinking was?

We have made progress in that area. By the second quarter, we should be able to discuss it more openly and provide more details on what we are working on. Our goal is to bring projects into these funds before making any public announcements.

Great. And then my second question was just going to be back to the acquisition pipeline, I think you talked about seeing a lot more volumes for this year. Is that all due to the environment, or are you guys doing anything differently to source or be more creative in looking at deals?

I think it's general volume. We have a system that we've refined over 25 years in acquiring grocery-anchored shopping centers. We're updating our technology, but the core strategy of focusing on 5,800 centers that we want to own and making sure we're in contact with both the owners and the brokers remains consistent.

Your next question is from the line of Haendel St. Juste with Mizuho.

This is Ravi Vaidya on the line for Haendel. I hope you guys are doing well. Just curious, if you were to issue 10-year money today, what would it cost? And what is your interest in doing any alternative financing such as convertible debt deals or short-term debt? What is your appetite for these options?

Great question. We are looking at all of them. Our primary focus at this point is to get into the public long-term debt markets. The alternatives, while interesting, are not actively pursued yet, but we are reviewing them as there are some attractive options that we will consider. But, John, do you have anything to add?

Sure. Our long-term cost, if we were to issue today, would be around 6% to 6.25%. The important thing for us is building a track record in the unsecured bond market. We've made great progress with investors, and we want to wait for the right opportunity. We've been waiting for conditions to align.

Just one more here. Regarding cap rates, this year's acquisition cap rate was a bit higher than last year's. Can we assume that this year's acquisitions would stay around in the 6% to 7% range?

I would stay at the 6.5%. There were specific stories on these 2 acquisitions where we got favorable pricing. But we haven't really changed our guidance of a cap rate in the range of 6.3 to 6.7%. That's how we're thinking about the year. Again, we'll see how it progresses, but we don't expect much movement from the 6.5% midpoint.

Your next question is from the line of Michael Mueller with JPMorgan.

Just a quick occupancy question. Jeff, where do you see anchor and overall economic or fiscal occupancy at the end of the year?

Bob, do you want to take that?

Looking at our anchor pipeline and the demand we're seeing, I definitely believe that our inline and anchor occupancy will remain elevated. It's hard to predict exactly what that is, but I would think we would be at the higher range of 98.9% on the anchor and definitely north of the 94.8% that we're seeing today. At this point, I would say they will certainly be elevated, but it's hard for me to pinpoint exactly what it will be.

Your next question is from the line of Juan Sanabria with BMO Capital Markets.

Just hoping you could give a bit more color on the bad debt. It sounds like it's not driven by national tenants. Is it more by the smaller mom-and-pop inline neighbors? And could you break it out by how much of the bad debt was related to closures or bankruptcies versus you guys being proactive in trying to get higher leases upon renewal?

Regarding the bad debt, it is not primarily from national tenants but can have contributions from regional and local neighbors. While a few neighbors might have larger balances contributing to the bad debt, we are actively monitoring and taking required actions. We are not seeing any significant trends developing that would cause concern across the board.

If I could push back, what changed to where you felt the need to take reserves around tenants who seem to be performing well overall with strong demand?

When you adjust your strategy to prioritize quickly reclaiming spaces and re-leasing them at market rates, it naturally prompts us to be more aggressive in taking actions to reserve. The demand from retailers is strong, so we see that as an opportunity and will pursue it aggressively.

On the acquisition side, I am surprised you're so bullish given the similar cap rates with changes in capital costs. How do you weigh your implied cap rate against your equity costs?

When we first came out at the IPO, our targeted unlevered IRR was set at 8%. We have since moved that to 9%. The product we are currently seeing is underwriting to north of 9% and makes for solid opportunities. Being active in the market allows us to seize these accretive opportunities over time.

Your next question is from the line of Dori Kesten with Wells Fargo.

Can you comment on your intentions with the swaps maturing later this year? And what floating rate exposure are you most comfortable with over the next few years?

Dori, thanks for the question. John, do you want to walk through that?

We are currently 24% floating today. We have swaps that mature later this year. We executed a $150 million swap agreement for $150 million in the first quarter. Our long-term plan to achieve our long-term fixed-rate target of 90% is to do that through incremental financing with fixed-rate instruments, primarily in the unsecured bond market.

One of our strategies has been to focus on matched funding when possible. A 6-month or 1-year swap does not align with that strategy, and that’s why we’re being patient to secure favorable longer-term rates.

What category of retailers is it easier to push escalators higher for, and which do you continue to have more difficult conversations with?

Where we continue to see a lot of the demand is still in restaurants, quick-service establishments, health and beauty, and Medtail. Over 70% of our rent is from necessity-based goods and services. On the other hand, we are seeing opportunity with local neighbors who usually accept higher escalators.

Your next question is from the line of Tayo Okusanya with Deutsche Bank.

Most of my questions have been asked, but I just have a quick one. With strong demand being noted and favorable conditions, the profitability of stocks appears to be having a rough ride this year due to the 2024 FFO growth profile. If fundamentals are strong, do you see private equity getting more pulls in this space again?

The answer is yes. There is significant private equity interest out there. Some of it is mispriced, but there are several private firms looking into the retail market, recognizing that underlying fundamentals will create long-term growth.

Your next question is from Todd Thomas with KeyBanc Capital.

I just wanted to revisit the investment activity a little bit. Your current pipeline sounds encouraging in terms of underwriting. Does what's under contract get you to the $200 million to $300 million range in guidance such that you have this range sort of accounted for?

This year would likely be more stable than the previous year in terms of gradual increases. We do not have a full commitment on our guidance yet, but we anticipate that to occur over the year. We don’t expect the fourth quarter to dominate like last year; rather, we'll see consistent flow throughout the year.

Can you discuss the quality of the product you're underwriting, and whether it remains consistent compared to what you've seen recently?

The quality remains consistent. We are focused on that targeted 5,800 centers, and while there are select opportunities that may not fit perfectly, we are seeing ample volume and feel good about our guidance.

It sounds like you're comfortable taking on additional leverage a bit and utilizing the line in the near term. What gives you confidence that this is the right strategy?

We plan to remain between 5 and 5.5 in our leverage, and we do not expect significant changes in that regard. While we will focus on opportunities aligned with our pricing, our strategy is to maintain a solid balance sheet without overextending.

As Jeff said, our long-term leverage target is in the range of 5.25% to 5.5%. While acquisitions may add debt to our balance sheet, our cash flow growth will keep us within our desired leverage range.

So we are not projecting significant changes in our leverage, but we are open to acquiring assets that provide good value. We additionally will maintain discipline in our operations as we pursue acquisition opportunities.

This concludes the question-and-answer session. I will now turn the conference back over to Jeff Edison for some closing remarks.

Great. Well, thanks, everybody, for being on the call. We are proud of what the PECO accomplished in the first quarter. Our differentiated and focused strategy, combined with our talented team, has created a market leader in the shopping center business. We continue to enjoy a strong operating environment, with healthy neighbors. We don’t see any cracks. We're confident that the PECO team will continue to deliver market-leading results. We have one of the lowest leveraged balance sheets in the shopping center space. With our fortress balance sheet and ample liquidity, we remain prepared for opportunities as they arise. PECO is well positioned for continued growth as we look forward. We believe we provide our investors with more alpha and less beta. On behalf of the management team, I'd like to thank our shareholders, PECO associates, and our neighbors for their continued support. Thank you for your time today. Everyone, have a great weekend.

This concludes today's conference. You may now disconnect.