Greetings and welcome to the Regency Centers Corporation First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Christy McElroy, Senior Vice President of Capital Markets. Thank you, Christy. You may begin.

Good morning and welcome to Regency Centers' first quarter 2023 earnings conference call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, EVP, National Property Operations and East Region President; and Nick Wibbenmeyer, EVP and West Region President. As a reminder, today's discussion may contain forward-looking statements about the company's views 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. It's possible that actual results may differ materially from those suggested by the forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, 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. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. Lisa?

Thank you, Christy. Good morning, everyone and thank you for joining us today. We are pleased to report another solid quarter with positive results. Yes, we acknowledge there is uncertainty in the economic outlook, especially given the recent bank turmoil. So we do continue to look for signs of softening in our business. But to date, we haven't seen it. Operational trends remain positive and this is consistent with our update a quarter ago. In fact, with three more months in the books, we have even more conviction in our outlook for this year. Tenant demand for space in our centers remains strong, sustaining the momentum in our leasing pipelines and also in our ability to drive base rent growth. This is the case across our entire operating portfolio as well as within our development and redevelopment program. We've seen continuing outperformance in tenant sales as well, which have resulted in higher percentage rents, especially in restaurants and groceries. We believe this reflects strength in those categories, as well as the ability of consumers in our trade areas to absorb elevated inflationary impacts. As we discussed in our last call, we are seeing more activity related to tenant bankruptcies, most recently with a widely anticipated filing from Bed Bath & Beyond nearly two weeks ago. But none of this activity has been a surprise to us, as these retailers have been on our watch list for some time. Our teams have been proactive and we're seeing strong demand from tenants to backfill the space. Regency's relatively limited exposure to these bankruptcies is not by accident or luck; it is the result of proactive asset and portfolio management over a long period of time, as the quality of our assets and locations gives us the advantage and the ability to be selective in the merchandising of our centers. We believe that our in-place tenant roster today is as strong as it's ever been. One change that we have seen since our update last quarter is in regard to the transaction markets. You may recall that I commented that we were starting to see increased activity and competitive bidding situations returning. However, that was pretty short-lived, as within weeks after that, the transaction market was again impacted by uncertainty and instability in the financing markets. I was hoping that today we'd have more concrete data points to share with you, but transaction volumes remain very thin. That said, we remain proactive from an investment perspective. As Nick will discuss in a few minutes, the team is hard at work finding new opportunities to invest our free cash flow and grow our development and redevelopment pipelines. This has long been a core competency of Regency, as many of you on this call are aware. And I'm proud of our industry-leading team and a long track record of successful execution. In summary, we believe that, given the positive structural trends supporting continued tenant demand in suburban trade areas, we and the shopping center sector as a whole are in an enviable position with greater resistance to potential adverse economic and capital markets impacts. Further, we also believe Regency benefits from competitive advantages including the exceptional quality of our assets and our people, our liquidity, access to capital, and balance sheet strength that uniquely positions us to be opportunistic while still delivering quality results. Alan?

Thank you, Lisa, and good morning, everyone. The positive leasing and retail environment we experienced last year has continued, as evidenced by another quarter of strong operational trends. Leasing activity remains robust with new leasing volume 20% above our historical first quarter average. Activity was led by continued strength in shop leasing, where occupancy was up another 20 basis points in the quarter, on top of a 200-basis point increase during 2022. Cash rent spreads remain healthy. And importantly, our GAAP and net effective rent spreads were both in the mid-teens in Q1 and on a trailing 12-month basis. The GAAP and net effective rent spread metrics are the most reflective of our ability to drive base rent growth while prudently managing our capital investment and maximizing our return. We believe that these mid-teen spreads are reflective of the quality of our shopping centers and locations, which gives us leverage in lease negotiations and allows us to limit leasing capital spend. To that end, I would encourage you to review our new net effective rent disclosure on page 20 of our supplemental. Embedded rent escalators are a huge driver of our rent growth and we continue to have success driving these steps. Nearly 90% of all leasing activity and 93% of shop leases in the first quarter had embedded rent steps, which is our highest percentage on record for shops. So not only are we pushing the rate of contractual increases higher, but we're getting them in more leases. These positive operating results and activity contributed to another solid quarter of base rent and same-property NOI growth. Most importantly, it provides further conviction in our forward growth trajectory. Leasing activity remains strong and our signed, but not occupied pipeline is flat quarter-over-quarter at 230 basis points, representing $32 million of annual incremental base rent. Notably, our new disclosure on page 20 also includes enhanced information on our signed, but not occupied pipeline. Today, we also have nearly one million square feet of leases under LOI or lease negotiation, further reflective of the strength and demand that we continue to see. This activity includes square footage associated with recent tenant bankruptcies for which we've seen strong interest. The most notable of these is the recent filing of Bed Bath & Beyond, of which we have 10 locations comprising only 50 basis points of ABR. Five of these locations were included on last week's rejection list, which we had expected. Our teams have been proactively engaged on all of our Bed Bath locations with potential backfill tenants, anticipating the opportunity to recapture and remerchandise the stores. Demand is coming from several categories, including grocers, off-price retailers, home décor, sporting goods, and medical uses. This is resulting in multiple retailers vying for many of these spaces, and we anticipate an average mark-to-market of approximately 20%. In addition to Bed Bath, we continue to actively manage all of our at-risk tenant exposure. We own great real estate in some of the best suburban trade areas around the country, and leasing demand remains strong. We are not afraid to take back spaces in an environment of limited new supply growth and a surplus of great retailers that are actively looking to expand. In summary, our team feels really good about the continued positive momentum we are seeing in the retail operating environment. Nick?

Thank you, Alan. Good morning, everyone. We continue to make great progress executing on our development and redevelopment strategy, ending the quarter with $300 million of in-process projects. Leasing activity remains strong, and our team has done an excellent job of keeping our projects on schedule and within budget. As we have discussed on prior calls, Regency is uniquely positioned to grow our investment pipeline by utilizing our three development cornerstones. Our capabilities, our capital, and our contacts are an equal combination of development expertise, our access to capital given our extensive free cash flow and fortress balance sheet, in conjunction with our expansive and deep industry contacts and relationships across our 22 offices, give us an unparalleled advantage to source and execute on attractive opportunities throughout the country. For instance, we are nearing the finish line on the purchase of a development project in the New York Metro area. This nearly $90 million investment will be anchored by a best-in-class specialty grocer and located in an extremely high barrier-to-entry market. Additionally, this week we also closed on the first phase of a retail development in a thriving 10,000-acre master-planned community in Metro Houston. Although the first phase is smaller in scale at approximately $10 million, we do anticipate being able to grow the project in future years. We look forward to sharing more details on both of these projects when we add them to our in-process pipeline. Beyond ground-up developments, our investment team continues to execute on opportunities to create value within our current portfolio. Subsequent to quarter-end, we started Phase III of our redevelopment at Serramonte Center in Daly City. This $37 million project includes the redevelopment of the former JCPenney and the addition of two small shop buildings adjacent to Macy's. We have executed a lease with a best-in-class South Korean food market and grocery operator for the former JCPenney space, and we're excited to bring their new concept to the Bay Area. This phase of the project sits at the highly visible front door of the shopping center and will bring the center to 97% leased. In summary, we remain encouraged by the opportunities we are seeing to drive future value creation and reinvest our free cash flow, and we are focused on continuing to build our development and redevelopment pipelines to north of $200 million of annual starts. Mike?

Thanks, Nick, and good morning, everyone. I'll start with some highlights from our first quarter results then walk through a couple of changes to our full year earnings guidance and assumptions. Excluding COVID period reserve collections, we delivered same-property NOI growth of 6.3% in the first quarter. The largest driver was base rent, contributing a strong 430 basis points in the quarter. Base rent growth is the most important indicator of our portfolio strength, and we continue to see positive impacts from embedded rent escalators, positive spreads on re-leasing space, and higher occupancy year-over-year. We also saw meaningful outperformance on percentage rents in the quarter, contributing 100 basis points to same-property NOI growth, despite tougher year-over-year comps driven by continued strength in grocery and restaurant sales. Notably, percentage rents tend to be seasonal with the majority of sales-based billings occurring in the first quarter of the year. The other meaningful driver to first quarter same-property NOI was a 130-basis point positive contribution from uncollectible lease income. We continue to isolate the collection of COVID period reserves from 2020 and 2021 to provide a better picture of normalized results. But the realities of cash-basis tenancy can create some variability in the bad debt line item from quarter to quarter. To that end, and due to the better-than-expected collection rates on cash-basis tenants, we experienced a positive contribution to uncollectible lease income this quarter as we collected on rents originally billed and reserved in 2022. The increasing collection rates and decline in receivable and reserve balances demonstrate the health and resiliency of our tenant base. Turning to 2023 guidance, I'd like to point you to the helpful detail on Slides 5 through 7 in our investor presentation. We've increased both our NAREIT FFO and core operating earnings guidance ranges each by $0.04 per share, driven largely by the outperformance in percentage rents and uncollectible lease income in the first quarter. Collectively, these items also drove the 50-basis point upward revision in our same-property NOI growth guidance to a new range of 2.5% to 3.5%, excluding COVID period reserve collections. I also want to spend a minute on our credit loss assumption, which we revised to a lower range of 60 to 90 basis points for the full year from 75 to 100 basis points previously. Notably, the midpoint of our new same-property NOI and earnings per share ranges now capture the potential for a full liquidation of Bed Bath & Beyond by mid-year. This scenario was previously contemplated in the low end of those ranges. However, this change was offset by first quarter outperformance and bad debt that I discussed earlier, which positively impacted our full year credit loss assumption. On the capital side, in late March, we repurchased roughly 350,000 shares for $20 million at an average price just over $57 per share. This repurchase was executed to hedge the planned issuance of like-kind Mountain OP units to the seller of the development project in New York that Nick mentioned earlier. I'll end as I typically do, highlighting the strength and afforded opportunity of Regency's balance sheet, the importance of which is never more evident than in times of capital markets' turmoil. Leverage remains at the low end of our targeted range of five to 5.5 times debt to EBITDA; we are generating significant free cash flow projected to be north of $140 million this year funding our investments pipeline. We have access to significant liquidity with our $1.25 billion line of credit. And there are no significant debt maturities for over a year. This position of strength allows us to be patient and opportunistic in this evolving environment. With that, we look forward to taking your questions.

Thank you. We'll now begin the question-and-answer session. Our first question is from Michael Goldsmith with UBS. Please go ahead with your question.

Good morning. Thank you for taking my question. My first question is about the sustainability of leasing demand. Have you noticed any changes in leasing volumes after the disruptions from Silicon Valley Bank in March? Has that continued into April? If there has been any resistance or slowdown in leasing, what reasons have been mentioned? I'm trying to understand the long-term sustainability of this trend.

Yeah. Michael, this is Alan. I appreciate the question. We are still seeing very strong demand across many categories in all of our regions. And as we mentioned, we've got over one million square feet of new activity in the pipeline. And when we look back and we think about the bumpy road of the kind of bank announcements that you had mentioned in March, our March new activity actually exceeded both January and February. And then, of course, post-closing of the first quarter, we actually obviously have visibility to April activity as well. April new activity has exceeded January, February, and March independently. So I think collectively, we would tell you that we still feel really good. Again, we are not ignoring the situation. But it's quality retailers. It's a deep pipeline. The activities are coming across the finish line, and we've got plenty that still remains in the queue as we look forward.

Got it. Thanks for that. And my follow-up question is for Mike. It seems like half of the upside to the 2023 guidance and the outperformance was driven by base rent, which we kind of talked about. But then, the rest was driven by percentage rent and maybe some upside or near-term upside in the lease termination fees. So I guess, the question here is just the sustainability of that. Or is that sort of a one-time item that shouldn't recur through the rest of the year?

Hey, Michael, it's a combination of both. I mean, clearly, we had some one-time impacts to the first quarter that beat our internal estimates, and those are flowing through to full year results. But there is a little bit of tailwind remaining in our guidance. We've become slightly more conservative I would say with the added visibility to the ongoing Bed Bath & Beyond filing. A lot of that has been covered up by those first quarter impacts as well as our outlook for the balance of the year. So we do see ourselves floating back into our guidance range from the first quarter. There's some headwind in the top-end from base rent, as we lose the Bed Bath locations. Our outlook on an ongoing basis with uncollectible lease income remains around historical averages, maybe slightly better from what we had coming into the year. And the best story that I see is, tagging onto Alan's point on our leasing pipeline, the shop demand continues to be there, and we're commencing rents. The $32 million of ABR that's in the pipeline, we will deliver that this year. 80% of that in fact will come in this year. And that's just a great driving factor of the renewed outlook on same-property growth.

Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question.

Hey, good morning. Just to kind of touch on some of those headwinds/tailwinds, thinking about where we might end up at the end of the year. I think on the last call, you talked about kind of flattish occupancy through year-end potentially. But given this kind of healthy Q1 leasing, maybe a little bit of an offset from the Bed Bath & Beyond bankruptcy. How are you thinking about year-end occupancy expectations at this time?

Hey Greg, we are still seeing a flat trend. The bankruptcy is unfolding as we expected it would a quarter ago. Therefore, we maintain our outlook that depending on the results of the auction proceedings, we might end up flat to slightly down by year-end. However, it's important to keep in mind that we have a strong tailwind from the occupancy we have already contracted and the demand for retail space that will come in, which together will likely outweigh any losses from the bankruptcy proceedings.

Great. Thanks. And as a follow-up, I just wanted to touch on the tenant watch list. I think regional banks have obviously been in the news a lot based on our look. You don't have any exposure to the ones that have been called out yet. It's more like 50 basis points maybe-ish around there I think. We'd love to have you confirm. On other regional bank exposure, curious on potential backfills for those kinds of spaces especially on the outparcels and what level of demand you might be seeing there. And then looking at maybe like Kohl's, Rite Aid, Michaels, we see some more risk than I think limited to 1.9% of GLA. Are you in discussions on some of those spaces as well?

Greg, I'll just generically answer the question in terms of the overall tenant watch list. We are always proactively evaluating who's on the list both those that come off it and those that get added. Our teams out in the field are constantly and aggressively looking at those spaces in terms of sales volumes, foot traffic, lease expirations, upside, and downside. If there's an opportunity where we think we want to proactively take it back, we're getting out in front of it. If we have concern they're going to vacate, we're out in front of that. I think that's just really an overall comment for the totality of the watch list, including some that you might have mentioned and others that you didn't.

I’ll add to what Alan mentioned regarding the bank branches. Your observation is accurate. Our exposure to bank branches is quite limited, and among our significant tenants, we have JPMorgan, Wells, and Bank of America. Any regional bank branches we have are quite insignificant.

Great. Thank you.

Thank you. Our next question is from Craig Mailman with Citi. Please proceed with your question.

Good morning. I just wanted to circle back to the leasing environment. You guys are pushing through escalators in a lot more leases and rent spreads remain healthy. I mean what kind of pushback are you guys getting from tenants on rent increases adding escalators to this? And kind of where are these occupancy cost ratios coming in, given these rent resets?

So, Craig, good question. Thank you. Look I think it's widely accepted that inflation is impacting all of us to include us, and therefore we're able to pass through a lot of these higher escalators as you saw and heard. 90% of all deals had embedded rent steps and 93% of our shops had those. We're having success not only getting them in our deals, but we're having success in getting them at higher values. I'm not seeing a tremendous amount of pushback there. Occupancy costs frankly are going in the inverse direction because I think sales are generally going up for most of our retailers. So, will that provide an ability to push further? I think in some categories it will, Craig, and in others maybe it doesn't. But they all seem to be operating at pretty healthy reasonable levels that give us the ability to really reasonably push those going forward.

Thanks. It's Nick Joseph here with Craig. Just maybe on capital allocation. Obviously, it was quiet in the first quarter, but you did purchase some shares. So, I guess number one what are you seeing on the transaction market? Are things starting to show at all there? And then the second part how are you thinking about additional share repurchases from here?

Well, I'll quarterback. I'm going to have Mike answer the share repurchase. Then we'll toss it to Nick for the overall transaction market.

Hey, Nick, good question. So first on the share repurchase. Let me say that that was largely tactical this quarter. We outlined it in my prepared remarks tied to a great development opportunity that we have. We want to be able to be as flexible as possible to be competitive in that marketplace. I think this was a point at which we can differentiate. We are obviously very keenly aware of our NAV and our perspective of value. At the same time, when units are necessary to make a deal, we found this opportunity to hedge that transaction. We are not big back patterns, but we will pat ourselves on the back. I think we did pretty nicely from an arbitrage perspective. Time will tell, but that was what that transaction was designed to do, simply to hedge the unit issuance of that development pursuit, which we're excited about.

And thank you, Nick. In regards to the transaction market, as Lisa alluded to in our opening remarks, it is a little surprising how few data points there were in Q1. It has been very, very quiet out there. However, as we've said in the past, we're always focused on opportunities that are accretive to earnings and that are equal or accretive to the quality and the growth of our current portfolio. We have the capacity and the desire to act on those opportunities that meet that criteria. We're very focused on it and hopeful that in the near future, some more opportunities will pop up that we can take advantage of.

Thanks. And then just on the development side, has pricing changed at all there relative to where it was before?

On the margin, I mean, look we're eyes wide open regarding what's going on in the market. But we're again highly focused on making sure it's accretive to us and what is our cost of capital and how do we best use that cost of capital. Depending on the risk profile of any transaction we evaluate that we decide how we're going to fund it, and make sure that there's an appropriate spread there. We're very comfortable that the opportunities we're working on right now are accretive to the company long term.

It's a great opportunity for me to remind you of our significant free cash flow that we generate. The best use of that cash flow is into what I believe is the leading development program in the sector.

Hey, good morning, everyone. Mike on the FFO guidance, you did the $108 NAREIT FFO in the quarter and I know there were some one-time items. I mean we were looking at some of the term fees maybe it was a $0.02 impact, but even if we use 106 sort of for the run rate you're still getting to like $420 for the year. And I look at your guidance and I'm just thinking are you being overly conservative here given the macro or is there something we need to think about that is impacting growth?

Hey, Samir, thanks. I'll go back to some earlier comments. Let's first identify what is timing-related in the first quarter and what is uniquely one-time. So clearly, the pursuit income that we recognize is a one-time of that. Kudos to the team for being very careful with our pursuit efforts there and monetizing that value. The balance — the higher percentage rent that's a timing-related impact. It will recur over time and through the years, but within the year, percentage rent is largely an earlier Q1 event, so we have to factor that in. Our outlook for uncollectible leasing income, if you think about the Q1 being positive this quarter, we are not anticipating that we will replicate that through the balance of the year. As I mentioned previously, we think we will float back down to our historical averages of uncollectible lease income, which is around the 50-basis point area of build rents. Term fees, again more of a — we did guide on that element. We knew that we were going to have a significant term fee in 2023; the $4 million payment was received in the first quarter. Clearly, we'll have to adjust for that. Some comments on term fees, I would just say we basically look over our shoulders to get $0.05 a foot year in, year out, which is a semi-recurring part of the business. So that's about a run rate of a couple of million dollars if you think about going forward. Those are some of the elements there, Samir. I think it’s — and then we have the bankruptcy and the impact that losing our Bed Bath & Beyond will have on our forward growth.

Thanks for that. And then my second question is around leasing spreads. When you provided the commentary certainly very positive around leasing. But when I look at the spreads and again it's still pretty good or mid-single-digit growth. But if you look at the last few quarters, they've decelerated, right? And look I know it's volatile month-to-month. I get that, but maybe just provide a bit of color on those leasing spreads we're seeing?

Yeah, Samir, I appreciate the question and thanks for acknowledging the lumpiness that can happen certainly quarter-to-quarter with that. As we look at last quarter, we did not have any significant new anchor transaction in the quarter. We did over 100,000 square feet of anchor activity in Q1, but only one deal that represented 11,000 square feet was a comparable anchor deal that’s included in that. So when you look at our cash rent spreads for Q1, it's predominantly all shop leasing, which is generally lower than anchor leasing that gets the big pop. I'd bring you back to the 12-month trailing cash spreads of 11% on new activity. Importantly, our keen focus and success with the embedded rent steps and prudent capital spend. And so on that new disclosure page, net effective rent as a percent of base rent has been in the mid to high 80% range over the past five quarters. We’re pretty proud of this metric as it's a testament to our team's efforts of achieving those contractual rent steps while prudently managing our capital spend.

Hi. So maybe just circling up a little bit from a different perspective or asking it differently than Samir did. For the guidance, you assume that occupancy is maybe flat to slightly down by year-end, but does it dip between now and then as a result of Bed Bath before you capture the SNL pipeline? How should we think about the quantum of that decline to maybe piece together these various pieces you've talked about on the call?

I mean simply — I'll give into some details on, but simply I'd say use our guide on same-property growth. If you think about it — if you're trying to sequence it from quarter-over-quarter, we know when we're losing Bed Bath. They've rejected half of our locations. Coming into the year, our exposure was in the $5 million range to that tenant. So half of that is losing it at the beginning of Q2. As you think about delivering the $32 million of contracted SNL that will come on, as I said, about 80% of it by year-end. I would sequence that pretty ratably through the year. We're going to float down from a 6.3% Q1 post on same-property growth to a midpoint of 3% by year-end. There is a unique Q4 item that we all talked about last quarter from a recovery standpoint in our numbers, so the fourth quarter comp is a little more difficult. But I hope that helps you and if you need anything else we'd be happy to connect offline.

No, thank you. That's helpful. Super helpful. And then just a quick question on the reversal of cash to GAAP had a bit of a benefit in the first quarter. How is that captured in the guidance to look at page 6 and what bucket does that fall under? And is there anything else assumed in terms of reversals back to GAAP for the balance of the year?

The majority of the reversals will reflect in our non-cash guidance, and as you can see, we did not alter that guidance. Our outlook remains the same, with a rough impact of $2.5 million included. It's a good chance to note that we are at 7% on a cash basis, which has stayed consistent since the fourth quarter. Given the first quarter results and the positive collection rates we are observing from our cash-based tenants, we maintain that we will continue to transition tenants to accrual throughout the year. As mentioned last quarter, we expect to be within the plus or minus 5% range by year-end, which remains unchanged. There is a small amount of accounts receivable that could also arise as tenants are converted, but it's minimal. I would suggest focusing on the non-cash guidance that we provided.

Hi. Good morning. There are some press recently on some of the traditional anchors in malls like Macy's and Nordstrom expanding their smaller format shops. Are you seeing some of that activity in your leasing pipeline?

Anthony, thank you for the question. The short answer is yes. So Macy's is doing Market by Macy's. They've got their sister company Bloomingdale Outlet. Nordstrom you referenced is really expanding their Nordstrom Rack concept, one that we just signed down here in Jacksonville. So they're out there. They're aggressively doing it. I think that entire off-price category is rocking and rolling right now.

Thanks. And maybe one more on percentage rents. I get that it will be lower this year, but there was a big kind of year-over-year increase. How should we be modeling percentage rents just going forward say next year, either as a percent of base rent or year-over-year growth?

I'll give you some big picture items that will help you. Number one, it's up year-over-year. We've actually increased our percentage rent in two consecutive first quarters by over 40%. However, it's a small number. We only get about 1% of our total revenues out of percentage rent. I would think about that in your longer-term modeling that we should keep that level pretty consistent. It is front-end loaded, so the majority of what we recognize in percentage rent income will occur in the first quarter. We will have more percentage rent through the balance of the year, but the majority is in the first quarter.

Good morning. I just was curious about the G&A line item that was revised up by $1 million for the full year. And not too meaningful, but just wanted to see what drove the increase in expectations there and if anything could be noted as recurring or if we should expect more variability to that as we get through the year?

Thanks, Lizzy. Really just a lot of odds and ends in the non-salary line items as we look out for the balance of the year, and kind of tightened up our reforecast. It is what it is. We just kind of refined that estimate for everybody looking forward. There's — I wouldn't identify any trends anyway or the other. It's really just a refined outlook.

Got it. Thank you. And I was hoping to get more details on a couple of the projects you had discussed at the opening just on the development in the New York metro area and the master-planned community in Metro Houston. I understand if you are waiting to share more details once you're able to add it to the pipeline, but just seeing if there's anything unique to each of those projects that you think you could find in other opportunities in the near future? And what particularly drew you in about the markets for these specific projects?

Absolutely. Thank you for the question, Lizzy, and good morning. Yes, as it relates to the New York asset, at this point, we can't disclose more. We have not yet closed. But as I mentioned in my opening remarks, we're excited about the opportunity and looking forward to in the not-too-distant future being able to give more details. As it relates to the Houston opportunity, we did close on that earlier this week and are very excited about that project although again relatively small at approximately $10 million. It is located within a very thriving master-planned community. To be one of the only retail components servicing that community is really a blessing. Those are the types of opportunities we're looking for, where we know we have a very captive audience. As I referenced, we do plan on expanding that opportunity in the future. We do think there will be future phases to grow that opportunity as demand continues to increase in that submarket. So excited to bring that on board and again share even more details next quarter when it comes into our in-process. Generally speaking, as I said, development is never easy. We're well aware of some of the headwinds that are out there facing development and how challenging it is. But as I said, we have the three cornerstones that are critical, especially in this environment to execute, which is the right expertise, the right capital, and the right relationships. Grocers are continuing to expand. They've had very good years. We have great relationships with the grocers across the country, and we continue to evaluate really coast-to-coast. Those opportunities one-by-one and the team is doing a great job of figuring out, which ones we think we can help with, which ones we think we want to own long-term, and therefore deploy our human and financial capital.

And Lizzy, our overall development strategy just follows our investment strategy. We want to invest in shopping centers that have a long-term sustainable competitive advantage, where we're going to be able to grow NOI over the long term. These two developments in New York and in Houston fit that criteria.

Hey, guys. Good morning everyone. I just want to stick with Bed Bath & Beyond. I think you said you have five of the 10 rejected and you're not going to get any rent from those assets at the beginning of this quarter. But once you get rent during a liquidation, why are they liquidating the inventory, or have they been doing that I guess behind the scenes?

Yes, so we would lose rent; we and we estimate that to be about $0.5 million less given what they were paying current through the first quarter and what we will lose into the filing date. Then, post-petition for the five that have not yet been rejected, we would continue to collect rent through their — through the event that may or may not happen, which could be an assumption of the lease in the bankruptcy itself or a future rejection. As we indicated, we've accommodated for the worst-case scenario, which would be a full liquidation of the chain. We know we have some really good locations. The ones that have not yet been rejected we really like, which also tells us there's a chance that they could be picked up in option. So, we'll be paying very close attention to the proceedings there. Hopefully that helps you think about the financial impact of Bed Bath.

Yes, it does. And then sometimes I remember at Sears it kind of unlocked some bigger projects for you, some larger-scale redevelopments. Any of that potential here with Bed Bath? And what is your hurdle now with today's capital markets for some bigger projects?

I'll start with Bed Bath, and let Lisa or Mike answer the capital question. The short answer Wes, I appreciate you asking that. There's one Bed Bath that we are evaluating the merits of whether or not we want to entertain redevelopment, but generally speaking this really is just a re-leasing exercise for us as all it is.

With regards to redevelopments, I mean that follows and flows directly with our development strategy. We look at those in the same manner. If we can use and invest our cash accretively and if we are improving and enhancing an existing center and fortifying that future NOI growth while getting a really attractive investment return, we'll do as much of that as we can.

Hey, good morning. Thanks for taking my question. Your shop space is the most valuable portion of your portfolio was I think, Lisa, you've alluded to in the past as well. And the beauty is you have over 50% of your ABR comes from the shop space and a big trend two-thirds of your SNO pipeline in the shop space. Could you remind us again what your peak shop occupancy was? And where do you think that could go over the next two, 2.5 years or so?

Hey, I'll handle the reminder and then let Alan share his thoughts on our approach to achieving it. We reached a peak occupancy of over 93%. At that time, I believe we can all agree our portfolio has improved since then. I also think the current demand-supply dynamics are more favorable. I’m not suggesting that we will significantly surpass those peak levels, as those are quite high, but I believe 93.3% was around our peak.

Yes. And as you know, we're at 92.1% right now. I would just go back to the pipeline of really great deals that are falling up. I’d put on top of that, our upcoming Vegas ICSC show that's here at the end of May, the amount of meetings the teams already have scheduled and the attendance that we anticipate from the retail community is really strong. We have the runway and we're planning to continue to set our sights high.

I appreciate you remembering that we say that. I think what's really important when you think about where we sit today versus that peak occupancy. You've heard us say this really coming out of COVID. We feel really good about the health of our in-place shop tenants. We believe that it's as strong as ever. What makes shop space so valuable is that there's change as it happens in our business. We say that all the time. There are always going to be some tenant failures. But what makes that so valuable is that we're able to replace it relatively quickly versus an anchor box, with a lot less capital, and the rents are higher. We are able to continue to get really good annual contractual rent steps, in the shop space in addition to leasing spreads upon new leasing. That's what makes that space so valuable to us. We are not afraid of shop space. That's what you've heard me say, over and over again.

No, I appreciate that. Maybe if you can — you've talked about the rent bumps. To me that's one of the most underrated aspects of the business, and sort of the cruising speed that that produces. You mentioned that almost all of your shop space has fixed rent bumps. Are you getting 3% rent bumps? And how do you see that your cruising speed evolve, as you sign new leases?

Yes, Floris, I appreciate that question. Yes, we are having more success at higher rent bumps. I would tell you historically, if you were to rewind the clock pre-COVID, I would say our teams were probably asking for anywhere between 2.5% and 3%, in the shop leasing sector. Now we're starting at 3% to 4% depending on the circumstances or even in some cases higher. It has evolved over time, and for the foreseeable future, I certainly expect us to continue down that path.

Thanks. Maybe last but not least, just I hear Wegmans might be coming to Connecticut. Any chance that you guys might be involved in that?

We are not involved in that, Floris. I'm looking at Alan. We're hearing the same rumors. They'd be great for the Connecticut community if they end up making that happen.

Thanks. So for the two questions. The first one, what are the characteristics of the 7% to 10% of leases where you're not getting the rent escalators? I think you talked about 90% or 93% before. So, the ones where you're not getting it. And then, as we look at your development redevelopment pipeline, I think it's like $50 million new and $250 million redevelopment. We're thinking about the shadow pipeline, what's the mix going forward in the shadow pipeline? Is it — does it have a healthy component about new development opportunities as well?

Hi, Mike. This is Alan. I'll answer the first part. It's pretty simple. It's simply options that are getting exercised that don't have embedded rent steps. That's the 7% to 10% you mentioned. I'll take it to Nick.

Mike, as it relates to the second part of your question, I appreciate it. You're absolutely right. As we continue to push forward, we're always pruning our portfolio and looking for opportunities to reinvest in it. We've given you some visibility on some of the opportunities in our investor deck, as it relates to those future redevelopments. But clearly, I can't disclose sort of the same level of detail on potential ground-up developments that we don't yet own. Our shadow pipeline is very focused on that mix, including ground-up developments.

Great. Just a couple of quick ones. Just trying to understand over the recent events with the banking system, if there's been sort of any ripple effects of the business? I'm thinking of it in 2 or 3 different ways. One is as you guys are thinking about this future redevelopment pipeline opportunities of $115 million to $150 million I see in the presentation; does anything change about your timing or conviction to getting those done? The other piece of it is obviously on the acquisition front; have you seen sort of more activity? You guys are in a great liquidity position; does that create opportunity? Lastly, I'd love to hear from a tenant perspective. Clearly, the bad debt is feeling pretty good. It went down in the guidance but are tenants sort of talking about it feeling it? Just trying to understand if there are any ripple effects we should be thinking about? Thanks.

Look Ron, I'll start and Alan can hit the tenant piece and Nick may add some color. But generally speaking, we have not seen any impacts yet from whichever word you want to use to describe what's happening in the banking market right now, whether it's a crisis or turmoil — certainly some challenges. I'll remind you from our own personal perspective, we're using free cash flow to fund that. Knock on wood, we do not have any challenges or issues with access to capital beyond that. So then it becomes how are we thinking about underwriting the new leasing that's associated with our developments. We are very disciplined with our development program; we don't do speculative development and we're not going to start a new development until we have real visibility to signed leases. We're as we talked about we continue to try to look around the corner and see if there are signs of softening or impacts to the business, and we have not seen it yet. Development is not something you just flip the switch on or off. They take time, and it's an important part of our growth profile. We've developed through cycles in the past successfully and we expect that we will continue to do the same. We're just a little bit more cautious as we think about our underwriting, and I think that that's appropriate and prudent.

And Ron, from a tenant perspective, the short answer is no. We're just simply not hearing that at the property and portfolio level. That said, our team is utilizing currently on a proactive basis and enhancing programs that we started during COVID to support our tenants. We've got a tenant mentorship program. We do webinars for them. We've got this proprietary merchant success toolkit. We're prepared to not only proactively deal with that, but should that tide turn, have the resources there for our retailers to partner with them and help them through that process.

I'll jump back and I apologize I missed your acquisition question. We've been saying it, we are on our front feet. We believe that we are really well positioned to take advantage of any dislocation in the market and compelling opportunities. As we've discussed, we haven't seen a lot come to market, but we're ready if they do. We have the capital. As Nick said, when he answered the earlier question as long as we are able to invest that, and acquire accretively, and it's equal or accretive to our quality and our growth rate, we're poised to act.

Great. And then just my last one. Just any quick updated thoughts on the Kroger-Albertsons situation and views for the company. Thank you.

I think if you were to go back and probably read my answer from the last quarter, it would say the exact same thing I'm going to say right now, and that is we don't have any information that you don't have. We have really good relationships with both of them, and it just continues to unfold. Either way it goes, I think it will be good for us. For some reason, if the merger doesn't go through, we have two really good grocers in really good locations and it will be business as usual. If the merger does go through, you'll have a larger operator, with greater scale and greater ability to invest back into their business. We feel really good about our locations and our real estate for those that may be part of their divestiture plan.

All right. One more sorry; I had in my notes I missed it. But we've been hearing about sort of the insurance costs and premiums on property in Florida, other markets and so forth. Clearly, you guys charge some of that back to the tenant. But are you guys — how are you guys thinking about that at all? Has that come up? What's the thinking there?

Hey Ron, it's Mike. Yes, absolutely thinking about it. With the recent renewal behind us, the team did an extraordinary job renewing our policy, but not without a little bit of pain. The markets are very difficult. They're challenging. We have, from a results perspective, we're planning — we're expecting about a 15% to 20% increase in that line item. More on that in a second. Our access to insurance I think is better than most given our scale, our quality, our missed track record, and the way we maintain and think about our properties. We'll give a kudos to the team because it's been challenging getting access at a small scale level today, not just about price but about access. With respect to that 15% to 20% increase in the line item, it is a relatively small component of the tenant's rent. When you think about the bleed or the pass-through, we can pass it through. It is through our lease contracts; we will pass that through. It's in the neighborhood of $0.10 a foot to a tenant. So again, it's a pretty small component. We feel like we've mitigated that risk or challenge to our forward growth, and again, time will tell when and if the insurance markets soften. But today, it's challenging.

Thank you. Our next question is from Greg McGinniss with Scotiabank. Please proceed with your question. Sorry. I was muted. Just wanted to talk about the transactions and potential development pipeline, again just for a couple of points of clarification. Is the $90 million cited from the New York Metro area development inclusive of acquisition and development costs? Similar question for Houston, and whether you need additional land acquisitions for future development phases there if you're securing that with that first investment?

Sure. So, speaking to New York, yes, that's inclusive of all costs. That would be the acquisition cost of the property as well as future investment to build it out entirely. So that's all-encompassing for that opportunity. As for the Houston opportunity, are we comfortable with the current phase if the future phases don't happen? We are. We would never purchase an opportunity if we weren't comfortable ultimately owning it as is, where is. But that being said, given its small scale, we are hopeful and we do have an expectation that future phases will be added. If they don't, we're very comfortable owning what we purchased and building it. We have tremendous demand already for the retail space we anticipate building.

Yes. Sorry, I was also saying for the Houston whether you'll need to acquire additional land for future phases or if you still carry that with the $10 million.

Great question. Yes, we have control over adjacent property. As part of this acquisition, it also gave us extended control over adjoining property that we're focused on for future phases. So, this acquisition is just for the portion of property we're going to build Phase I on. We do have definitive control over the adjacent property for future phases.

Okay. Great. And then what are the targeted returns on these development projects that make the additional risk worthwhile maybe versus something like redevelopment? I know you've – Lisa, you said that you're not taking risky investments here, but inherently with development there's got to be a little bit more than where you already have the cash flow. So just curious what expected returns might be.

Yes. No, great question. As I said before, we really look at opportunity by opportunity. Each one of these developments we're analyzing, we are definitely looking at what we believe the future value of that asset is to make sure we're comfortable with the ingoing yield. For example, that Houston asset will be developed at approximately an 8% return. So that gives you one data point of where our focus was regarding that transaction.

Okay. Great. And just final one for me. Are these investments the type that Lisa was previously referring to? I think it was the Q3 call, at least initially on the Q3 call regarding smaller developers about access to capital. Does that feel like a growing opportunity as bank lending becomes potentially even more scarce going forward?

Great question. Yes, I would say that the inverse of the banking challenges out there is creating opportunities for us — continued opportunities. As Lisa has mentioned multiple times, we have available capital and we have a desire to play offense. There are some quality developers out there that are very capable. They have great relationships and contacts, especially locally. But right now, capital is their issue, no question. If there's any place that capital is most restricted as we all know right now it's in construction lending. We have the ability to step in and not only bring capital but also bring relationships and expertise to help some of these deals figure out waiting over the goal line. Many times it takes more than just capital; it does take expertise to dig in with them, and figure out how we can be cost-effective regarding budgeting, pricing, etc., as well as deal with the retailers in relation to potentially restructuring transactions. We are very engaged with local developers to help fill in wherever the hold may be on these projects that have challenges at the moment.

And I just want to reiterate that because I think that's a really important point that Nick just made. Our relationships with the retailers, especially the grocery anchors that are driving a lot of our developments, shouldn't be underestimated, because they know we can perform. In times like this, that is extremely important, and that is also helping us to drive that development pipeline and build it further.

Okay. Thank you.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Lisa Palmer for any closing comments.

Thank you all. I appreciate your interest in being with us today. And everyone have a nice weekend.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.