Greetings, and welcome to Regency Center Corporation's Second Quarter 2024 Earnings Conference Call. At this time all participants are in listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Christy McElroy. Thank you. You may begin.

Good morning, and welcome to Regency Centers' Second Quarter 2024 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer. 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 these 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. Finally, given the number of participants we have on the call today, we kindly and respectfully ask that you limit your questions to one and then rejoin the queue if you have any additional follow-up questions. This will allow everyone who'd like to ask a question an opportunity to do so. Lisa?

Thank you, Christy, and good morning, everyone. We had another great quarter driven by continued strong operating fundamentals and active and prudent capital allocation. While we recognize that the macro environment remains uncertain with mixed economic signals and inflationary pressures on consumers, our business continues to show strength. Consumers may be shopping with a new level of price awareness, but that can be a benefit to our high-quality centers and our high-quality tenants given a focus on necessity, service, convenience, and value. Sales and traffic trends remained steady, and leasing demand continues to be strong. We are taking advantage of the solid and consistent tenant demand to drive rent growth and leasing activity with strong new and existing tenants. This is evidenced in our record shop lease rate and our sizable SNO pipeline. This will provide momentum and lease commencement into 2025. Our continued leasing success is a testament to the strength of Regency's high-quality grocery-anchored centers and strong suburban trade areas with limited new and available supply. Our value creation pipeline, also supported by the strong tenant demand and focus on high-quality assets in demographically compelling areas, is one of the most exciting aspects of our business today and one that truly sets Regency apart. Our team continues to make meaningful progress sourcing new projects with another $250 million of expected starts in 2024 as well as executing on and delivering our existing pipeline. The strength of Regency's platform and ability to self-fund our program with free cash flow have enabled our long track record of success. We also continue to acquire shopping centers when able to that are accretive to our quality growth and earnings. As previously disclosed, we acquired Compo Shopping Center in Westport, Connecticut in May, and we are currently under contract to purchase an additional asset in the Northeast. I can't stress enough the importance of our balance sheet strength and liquidity position, which provides us with the ability to be opportunistic across the spectrum of capital allocation strategies. This is why, in addition to sourcing select high-quality, high-growth acquisition opportunities at upper single-digit IRRs, we were also able to take advantage of a meaningful disconnect in public and private market values this past quarter with the execution of a $200 million share repurchase. As many of you are well aware, along with our standards of quality and balance sheet strength, corporate responsibility is also a foundational strategy for Regency. This past quarter, we published our annual corporate responsibility report, highlighting our 2023 achievements as well as our future goals and strategy. Our best-in-class program is evident in the progress we've made toward our goals but also in the recognition we receive from third parties, including ranking sixth overall and first in the real estate industry for Newsweek's most responsible companies list and our continued recognition by GRESB for sustainability and disclosure leadership in our sector. I appreciate the efforts of all Regency team members in helping us achieve these important accomplishments. In closing, now that we are more than halfway through the year, with the strength in leasing activity and results that we've seen thus far, we are raising our eye level and our full year guidance range. Mike will go into more detail, but we've been able to move the needle on several fronts, including same property NOI, development activity, and accretive capital allocation. I want to reiterate the importance of Regency's strategic competitive advantages, which position us favorably to continue to outperform over the long term as we have historically. These advantages include our high-quality assets and strong trade areas with favorable demographics, the strength of our operating platform, the experience and talent of our people, a value-creation pipeline that gives us more leverage to drive growth, and the balance sheet strength that allows us to opportunistically allocate capital, which we did very strategically in the second quarter.

Thank you, Lisa, and good morning, everyone. We continue to have great leasing and operating success, reflecting the positive tenant demand environment for high-quality shopping centers in strong trade areas. We're seeing this robust demand from both new and existing tenants in a wide array of categories, including grocers, restaurants, health and wellness, off-price, and personal services. Our success is evident in the continued depth and momentum in our leasing pipeline as well as in our ability to drive rents and occupancy higher and improve our expense recovery rate while still maintaining judicious capital spend. During the quarter, we held our same-property percent leased at 95.8%, while increasing our same-property percent commenced by 10 basis points to 92.3%. Our SNO pipeline sits at 350 basis points and represents approximately $49 million of incremental base rent. As we've discussed previously, the timing and commencement of this pipeline will largely impact the fourth quarter of 2024 and into 2025. Notably, beyond our signed pipeline of exciting retailers, we have another 1.3 million square feet of leases in negotiation. In the quarter, we were also able to drive strong blended cash rent spreads of more than 9%. GAAP and net effective rent spreads were in the upper teens, demonstrating our ability not only to drive strong mark-to-market increases but also continued success in negotiating embedded contractual rent steps in nearly 100% of our leases. Our average rent steps on all leasing activity in the quarter was 2%. But importantly, we achieved a record high of 2.7% rent steps in new lease transactions. Collectively, these efforts drove same-property NOI growth of 3.3% in the second quarter, excluding term fees and COVID period reserve collections, while our base rent growth contribution remained very healthy at 2.9%. Before turning the call over to Nick, I wanted to address the recent Kroger and Albertsons announcement regarding the 579 stores they intend to divest to C&S Wholesale Grocers if a merger occurs. Regency has 11 owned locations on the C&S list out of the 104 combined Kroger and Albertsons locations in our portfolio. Further detail will be provided as we learn more, but regardless of the outcome of the proposed merger, we are very comfortable with the underlying lease obligations and we continue to feel great about the quality of our real estate for all of these locations. In closing, as our portfolio occupancy approaches prior peak levels, combined with limited new high-quality supply and the strong trade areas in which we operate, our space is becoming more valuable. The strength in our leasing pipeline remains unabated, driven by continued appetite from retailers to expand. Our leasing and operating teams are firing on all cylinders, leveraging the current environment to deliver what we believe will be long-term sustainable performance in the years ahead.

Thank you, Alan. Good morning, everyone. We remain very active growing and executing on our value creation pipeline, starting $40 million of new redevelopment projects in the second quarter with yields exceeding 10%. Additionally, subsequent to quarter end, we started an exciting new ground-up development project in Houston called the Jordan Ranch. This 160,000 square foot HEB-anchored center will serve as the retail component with that thriving master plan community. We are developing the center in a joint venture with the master plan developer, with Regency's investments being approximately $23 million, bringing our year-to-date starts to more than $140 million. As we've discussed on prior calls, master plan developers continue to appreciate the value and benefits of bringing Regency, an experienced developer, owner, and operator of high-quality retail centers into their project. At the same time, we and our tenants recognize the benefits of developing our groceries and shopping centers directly adjacent to new, high-quality suburban residential communities. We also continue to make great progress executing on our in-process pipeline, which now totals nearly $580 million. Leasing activity remains robust with projects currently more than 90% leased at blended returns exceeding 9%. Turning to transactions. We have seen a recent pickup in activity in the private markets and deeper bidding pools. Our teams are actively underwriting opportunities that fit our investment strategy as well as return, growth, and accretion requirements. In May, we closed on the purchase of Compo Shopping Center in Westport, Connecticut, which is adjacent to our Trader Joe's anchored Compo Acres Center. We also currently have a grocery-anchored center in the Northeast region under contract, which you'll note we've included in our updated acquisition guidance and on which we look forward to sharing more details post-closing. While cap rates have remained relatively low for high-quality centers, compelling opportunities at high single-digit IRRs are a limited opportunity set in today's market. We have been able to source these select assets where we believe we can drive accretion both to earnings as well as to our long-term growth rate. Looking ahead, our teams remain focused on continuing to source high-quality incremental investment opportunities, including accretive acquisitions like these as well as further building our value creation pipeline. It's true that it is difficult to find and execute new ground-up development opportunities at accretive returns, but this is where we believe our ability to create value is a meaningful differentiator for Regency. Our national platform and deep relationships, combined with our low cost of capital, liquidity, and balance sheet strength enable us to be one of the only developers right now who can fund projects and execute at scale. You've heard us talk about our objective of starting more than $1 billion of development and redevelopment projects over the next five years. With $250 million of projects started in 2023, and another $250 million planned to start in 2024, we are confident in our visibility to achieving this goal.

Thank you, Nick, and good morning, everyone. For the second quarter, we reported NAREIT FFO of $1.06 per share, core operating earnings of $1.02 per share, and same-property NOI growth, excluding term fees and COVID period reserve collections of 3.3%. During the quarter, recognizing the meaningful disconnect between public and private market pricing, we executed on the opportunity to repurchase approximately 3.3 million shares for $200 million, representing an average price of just over $60 per share. We bought our shares at an implied cap rate of roughly 7% compared to where we are seeing private market values today for high-quality grocery-anchored centers in the 5.5% to 6.5% range, sometimes even in the low 5s. This opportunistic investment was accretive to earnings and was afforded to us by our strong balance sheet and liquidity position. Importantly, we remain well within our strategic leverage range with an expectation to end the year around the midpoint of our 5 to 5.5 times net debt and preferred to EBITDA target. We also maintain flexibility to continue sourcing new accretive investment opportunities, including redevelopments, new ground-up developments, and acquisitions. Turning to our forward guidance. I'll refer you to the details on Slides 5 through 6 in our earnings presentation and highlight some key changes. We increased our core operating earnings midpoint by $0.03 per share, which now implies close to 4% growth this year at the midpoint, excluding the COVID period reserve collections in 2023. As we show on Slide 6 in the presentation, this increase is driven in effectively equal parts by a 25 basis point increase in our same-property NOI growth range, now at 2.25% to 2.75% an increase in expectations of non-same-property NOI, largely related to accelerated contributions from ground-up developments and the positive impact of capital allocation activity, net of financing including the share repurchases I've discussed previously. We also increased our NAREIT FFO range by $0.05 per share at the midpoint or an incremental $0.02 above our core operating earnings revision, matching the increase in our guidance for non-cash items. As a reminder, for modeling purposes, as you think about the mechanics of our interest expense and interest income for the balance of the year, recall that much of the proceeds from our January bond offering were parked in similar yielding deposit accounts as we awaited the $250 million June maturity date. Therefore, the impact of refinancing this debt at a higher rate will come through earnings in the second half of this year. Looking beyond year-end, we continue to point to the embedded growth elements we see over the next 18 to 24 months, coming from our leasing and redevelopment progress. As Alan mentioned, our SNO pipeline sits at 350 basis points, representing approximately $49 million of annual base rent, of which about 65% is scheduled to commence by the end of this year. As these lease commencements are weighted to the fourth quarter, the resulting NOI growth will largely occur next year. And part of this commencement is within our redevelopment pipeline, where we continue to expect an outsized benefit to same-property NOI growth in 2025 from delivering completed projects with the positive contribution likely to exceed 100 basis points, which is double what we would have experienced in past normal years. Finally, we continue to be very proud of our sector-leading balance sheet and liquidity position, which provides Regency with the cost of capital advantage and the ability to invest opportunistically. Our debt is nearly all fixed rate. Our weighted average maturity is close to seven years. We remain within our targeted leverage range of 5 to 5.5 times net debt and preferred to EBITDA, and we expect to continue generating free cash flow of more than $160 million annually. Supported by our financial position, we often reference the available options within our capital allocation toolbox that we utilize for various reasons and at different times. And in the second quarter, we had a unique opportunity to purposely employ nearly all of these tools successfully and accretively from leasing to operations to investments to capital allocation and balance sheet management. Wrapped together with an increased outlook on current year earnings, Regency's strategic advantages were on full display. With that, we look forward to taking your questions.

Good morning. Thanks all for taking my question. From a capital allocation perspective, you kind of did it all in the past quarter. You bought, you sold, you repurchased stock, and you started ground-up development. So can you talk a little bit about your capital allocation priorities? And maybe just touch about what the cap rates are in the acquisition market for Regency type centers versus kind of how you are looking at the implied cap rate of where your stock was trading and caused you to buy back shares?

Thank you, Michael, for the question. I appreciate your acknowledgment of our comprehensive approach to capital allocation. Our primary goal is to create value for our shareholders, and we firmly believe that the optimal use of our capital is through our development and redevelopment initiatives. We confidently positioned ourselves this quarter with the necessary capacity, balance sheet strength, and liquidity to pursue all our objectives. We have consistently communicated our offensive strategy, and we were able to execute it effectively. As mentioned in our prepared remarks, in my experience with the company, all factors aligned for us to successfully implement a share repurchase program, which we did at an implied cap rate of 7%. The gap between public and private market pricing has proven to be more sustained than we initially anticipated, allowing us to leverage our balance sheet strength. While we remain active in the acquisition market, with Nick providing further insights on current cap rates, we've been engaging in transactions as well. We are identifying assets like shopping centers and grocery-anchored properties of the quality we desire in the range of 5.5% to, on fortunate occasions, a rare 6.5%. However, many more deals are occurring at mid-5 cap rates, validating our decision to focus on share repurchase for capital allocation. I'd like to have Nick elaborate on the transaction market and the trends we are observing.

Absolutely. Thank you, Lisa. I appreciate the question, Michael. As Lisa alluded to, we're seeing the bid pools are much deeper than they were a quarter ago. So things that are on market now have very deep bidding pools. And we're staying very disciplined to what we've always articulated, which is the opportunities that we're going to pull the trigger on have to be more accretive to our quality and our growth profile, and we have to fund accretively. And so the opportunities that we've disclosed so far this year, you can see those ingoing yields are in the mid-6s. We're very comfortable; they check all those boxes, but there have been a lot of opportunities in the market that have traded that are well below that cap rate and did not check all those boxes, and we stay disciplined to making sure we are ultimately driving accretion. And so we've seen things trade in the low 5s even.

Great, thank you. I do have a question on markets, but I know it's one question. Can I just confirm on the repurchase program to clarify the $250 million? That's still left?

No, Jeff. We typically have an open repurchase program authorized by the Board at around $250 million. Our activities in the quarter used up the previous authorization, so we have renewed it for another two years at a capacity of $250 million.

Hi, good morning. And thanks for the time. I noticed the small shop occupancy ticked down a little bit sequentially. Just curious for some color behind that. Is there any signs of stress that you're seeing on the small shop side, in particular, with the local mom-and-pops? Or is that still relatively healthy?

Juan, good morning. Let’s say, good afternoon. It's Alan. I appreciate the question. The short answer is no. There is no concern over the underlying fundamentals. We feel great about where we are in terms of the health of those regions, both national and local mom-and-pops. I would point you to how we're thinking about foot traffic being up 6% year-over-year, year-to-date. Sales are remaining healthy, again, both at the national and local level. Retention rates are also above 80%, which is slightly above what our historical trends have been. So as we put all of that together, we feel very comfortable with where we sit today. The portfolio is certainly healthy. And I think that's largely a testament to how our teams go through a very rigorous qualification process for durability of occupancy.

It's interesting to consider that when we're in a strong position, we feel much more at ease reclaiming space because we can re-lease it at higher rates and with improved merchandising. Therefore, when a lease is up for renewal, if the tenant isn't offering what we desire, we are willing to move on.

This is Viktor Fediv on for Greg McGinniss. I just wanted to ask on the credit side. So we have now $300 million on the revolver. Are you on the market now for new decisions to cover that? Because we've seen a 20 bps decline today and more than 50 bps decline within the last month. So just curious what's your thoughts on that?

I appreciate the question. First, I want to emphasize that we are comfortable with our liquidity at this time. We have recently adjusted our revolver to provide $1.5 billion in capacity, with $300 million currently drawn. This is primarily due to our active investments made in the second quarter, as well as our repurchases. We are keeping an eye on the capital markets, as you would naturally expect us to do. We prefer public unsecured financing on a long-term basis at a fixed rate, and we will continue to watch those markets closely. Recently, the markets have been somewhat volatile, with a significant rally in base treasury rates. Typically, such movements can lead to some weakness in credit spreads. We will remain vigilant and aware of market trends, and we will convert that facility when we believe the timing is right.

Hey apologies, if someone asked this. I got dropped of the call. But just on the development side, you guys have been in a pretty good position here, having liquidity to start projects and clearly, higher interest rates made it difficult for peers. But given kind of the pullback in the 10-year here and potentially lower rates going forward, do you feel like it gets harder for you guys to source or at least a more competitive environment as maybe construction financing becomes an option for others going forward?

Craig, this is Nick. I appreciate the question. Yes, look, as we've talked about a lot, there's a lot that goes in defining these development opportunities and executing on them. And you've heard me say time and time again, capital is one of those key components. And so if capital does become available, that does open up some opportunities for others. But let's not forget the other two needed ingredients, which are relationships and expertise to find and execute on these opportunities. And so we continue to have the best relationships in the business with not only the key tenants that are expanding, but also the brokers and landowners in those markets that we're looking to expand into. And clearly, our team has the expertise coast to coast. And so regardless of capital markets, we feel really good about our ability to get more than our fair share of these opportunities as we look forward. Our shadow pipeline continues to grow as we're getting arms around these opportunities.

Good morning, everyone. Mike or Lisa, could you elaborate on the opportunities available in the shop space? I'm trying to understand how much further you can increase occupancy, especially considering you'll have one of the strongest growth performances in the strip sector next year. I'm looking for insight into potential incremental growth compared to what you've already projected for 2025 at this stage.

I think the team might be petrified if I answer this question because I'll just keep pushing and pushing and pushing. So I'll let Mike answer it.

Let me start, and Alan, you can cover my comments up. But just kind of fundamentally, Samir, Page seven in our quarterly investor materials is really helpful. And I think that's what gets us so excited about our near-term prospects for growth. And I would point you to the percent commenced bullet on that line. What we're indicating is that compared to our historical prior peak, we have 220 basis points of commenced occupancy opportunity. That dovetails very nicely with the $50 million of SNO pipeline that the team has built, and that we know we're going to deliver starting in the fourth quarter of this year and largely into 2025. And there's runway beyond that. As I look at that chart and think about the post-GE recovery period, you can see significant increases and percent commenced achieved over about a two to three-year period. And all else being equal, as I think about the quality of our portfolio, the quality of our leasing team, and the demand we're seeing, we don't see that there is any reason why we can't replicate that process going forward over the near term.

Thanks, good morning. Your tenant watch list exposure is quite low versus peers. Can you hit on the highlights of the process you go through in evaluating tenant credit pre-signing and just any refinements you've added to the process over the last year?

Dori, yes, this is Alan. I appreciate the question. It's very rigorous. We do not just lease for occupancy. We're very thoughtful and deliberate in our approach to how we think about our retailers. I would say that our watch list is comprised of roughly 150 basis points of ABR. But if you think about what the industry has experienced this quarter, with firms filing for bankruptcy, we have 0. Eastern Mountain Sports, we had 1. Rue21, we had 1. Big lots announced store closures, although not yet filed for bankruptcy, again, we have 1. And so I sort of look at that and go, this is exactly what we have asked of our leasing teams on how to think about not just doing transactions, but being very thoughtful in aligning with the right retailers, and I feel great about where we stand on that front.

I go back to how I think I started the first question answer that our objective in every part of the business is to create value for our shareholders. And we can also create value by applying those principles and concepts to our leasing program and ensuring that we are merchandising to the long term, not just for the short term.

Hi, good morning. This is Ravi Vaidya on the line for Haendel. Just wanted to touch on the CapEx and the TI. For new leases this quarter, a little bit elevated versus previous quarters. Is there anything onetime in there? And how do you expect this to trend going forward?

Ravi, I appreciate that question. The answer is we feel very good about the approach of how we are prudently managing capital. I would just bring us back to net effective rent as a percent of GAAP rent. And we're in that 80% to 85% range that we're very comfortable with. I would also say when you look at total comparable capital for the quarter, it is lower than our trailing 12 months. So the team is prudently managing it. We're growing rents appropriately. We're focused not just on rent spreads, but the embedded rent steps as well. And I don't see any shift in underlying fundamentals or trends to your question.

Thank you, good morning. It appears that you are positioned for strong growth in 2025. Considering the snow pipeline indicating a 5% upside, along with an additional 140 basis points from contractual rent step-ups and lease spreads, the potential for significant growth is evident. However, not all tenants renew their leases. Could you discuss some factors that might reduce these positive growth projections? Also, do you anticipate any large tenant move-outs in the near future? Thank you.

Ki Bin, number one, I appreciate you articulating our wheel of growth very well. We spent a lot of time communicating that. So thank you. We have spoken to the plus 100 basis points of same property growth attributed to the activation of our redevelopment pipeline that we anticipate next year, which is about double what we would expect in a historical average year. We are set up for growth. I talked a lot about the SNO pipeline. I talked about where we stand from a percent commenced perspective. I appreciate the direction that you're indicating. I'm going to stop short of providing any guidance for next year, but some headwinds, there's always going to be move-outs. You're not retaining everybody. I think we do an awesome job of selecting who we want. Bankruptcies are always going to play a role. Historically speaking, that could range anywhere from 30 to 60 basis points on a look-back basis depending on who files and timing. But I don't anticipate our credit loss provision being wildly different than what we're experiencing now. More to come is where I'll end it. But we are looking at 2025 the same way we did last quarter. We had a lot of positive momentum building into next year.

Just a quick two-parter. Just on, obviously, this earnings season, we've seen a lot of institutional capital since you're looking at the open shopping center space. Just if you could comment on either on the acquisition front or just in general if you're seeing institutional capital, private equity and so on and so forth coming to more into the space. And then Mike, the second part is, I had sort of a follow-up on that occupancy gain slides on the peak commence where you have 220 basis points. Any way to double-click whether it's market or assets? Can we get a second layer of where that upside is really concentrated in?

That was a sneaky way to ask two questions. I think Nick really did already address the, I believe, the transactions market that maybe as Nick just touched because you mentioned that the pools were deeper. So just maybe, Nick, the composition of the kind of the bids that we're seeing if it's any different if it's changed at all?

Absolutely. Ron, appreciate the question. No question. The bidding pools are much deeper for assets that we're pursuing and looking at and evaluating. And so where maybe before there were 3 to 5 bids, now there's 15 to 20 bids on assets. And so we're definitely watching funds flow into our asset class for all the reasons we're bullish on that Mike just articulated. As you would appreciate, a lot of those bidders are institutional, whether it be pension funds, whether it be private equity-backed, et cetera. And so no question seeing a lot of institutional capital pursuing assets right now.

Ron. Take a look at Page 8 of our investor presentation for the quarter, and I think you'll get some good composition with respect to our existing SNO pipeline. And there, you'll see that it's roughly 60% shops, 40% anchors. And from a timing perspective, we also have detail that only about 15% of that income is going to be recognized in '24, up to 90% of that income will be recognized next year, sticking to our bullish posture on '25. I would say, though, that as we think about moving the needle on occupancy, we have some room to run on the anchor front, and we've got some really exciting opportunities that the team is working on.

I mean, I guess, Ron, the only thing I would add to that, to put definitive occupancy to it is we're at 97.2% and our historic peaks are 98.5%. So there is certainly runway there. There have been a couple of, I'll call them, stubborn deals that have been out there that are really right at the goal line right now. So I feel great about the trajectory of where we are. I look at that SNO pipeline, and I would say the top 6 that are sitting there are grocery stores that we're really excited to get online, and that will also provide for some ancillary center of gravity and synergistic merchandising to go with it. So the future is looking great there.

Lisa, I wanted to pose a broader question to you, as I believe you are in a unique position to address it. With the news about Blackstone considering one of your competitors, the ongoing private formations, and the anticipation of decreasing interest rates in September, I am curious about your thoughts on the shopping center sector. When you previously mentioned implied cap rates at 7% during your stock buyback, it’s clear that your stock price has increased over 10% since then, indicating a slight decline. What is your perspective on the direction of cap rates in this sector? Do you believe we might see some reversal in cap rate expansion in the next 12 to 18 months as capital flows in and interest rates decline, especially considering the attractive growth and internal rate of return from these assets?

Thank you for the question, Floris. I want to emphasize our strong belief regarding the significant discount to private market values. Our decision to execute the share repurchase reflects this. I don't anticipate that cap rates will increase in the future. If financing costs decrease, I believe our product type—grocery-anchored, high-quality shopping centers—will remain resilient. Even during what we expected to be a period of rising cap rates, they remained stable. This stability is due to the sustainability and reliability of cash flows that our product type provides. Therefore, we are confident that cap rates will remain steady. Furthermore, if more capital flows into the sector, it suggests that cap rates are more likely to decrease rather than increase.

On the 100 basis points of positive contribution from redevelopments coming online in 2025 being 2x the average. Could you just expand on some of the underlying drivers? Does it have to do with underwriting higher-than-expected rents?

No, Linda. It's really project specific. Going back a little bit in time, recall, our development and redevelopment pipeline, which we talk about in totality, over the last several years has been more balanced to redevelopments. And if you go back several years, that's us kind of working through much of the opportunity that we acquired in the Equity One merger frankly. So these projects are now largely well on their way. They've been constructive. They've been leased, and we're delivering that income into the same property pool. So it's more a function of the quantum of the projects than it is the rates on the rents which, by the way, adds to our transparency and visibility. We feel really good about delivering new centers.

Congrats on the quarter. In regards to commenced occupancy, curious if you could help us think about what that could look like going into 2025. Again, occupancy is already pretty high. You have a very large new pipeline, but you're also going through very strong leasing as well. So just kind of curious where you think that can end up going over the course of the next 12 months and what snow could look like over the next 12 months?

I appreciate the question, and I assure you that we will provide much more detailed visibility in 2025 when the time is right. I would direct you to Page 7, which notes 220 basis points. Historically, we have seen changes in commenced occupancy, and in particularly strong years, we can adjust that number by about 100 basis points. It's in our investor materials that every 10 basis points increase in commenced occupancy can lead to up to 15 basis points of same property growth. This is why we feel confident in stating that an increase in redevelopment, which can adjust commenced occupancy by 100 basis points, could provide about 150 basis points of potential growth, taking the 15 basis points into account. Timing is important, so I don't want to delve too deeply into 2025 just yet, but I hope this gives you a better understanding of the opportunities ahead of us. I encourage you to look closely at Page 7 in our investor materials.

Hi, good morning. And thanks for taking my question. Kind of curious about the competition that Regency is seeing in the Northeast. And is there anything specific to the region to explain what's driving the increased activity there?

I'm not sure we understand the question. Are you referring to the increase in transaction activity?

Yes. I would just tell you a couple, and this is Nick. Appreciate the question, Al. So a couple of things. Obviously, the acquisition of UBP has got our team up there very, very active and increased our presence throughout that market. But a lot of it is also just timing. And so although this quarter, we were very active in the Northeast and very happy with the opportunities that have been presented. We're seeing a lot of activity across the country. And so as we move into future quarters, I think you'll see that activity be geographically dispersed more than it was this past quarter. So continued opportunities are presenting themselves in each of our markets at this point.

I guess, between Erstad, the Westport acquisition and the Northeast center you have under contract, it seems like you put a lot of capital to work up here recently. When you're looking at the broader pipeline that you see today, are the opportunities more geographically diverse or still kind of concentrated?

Mike, yes, we're definitely seeing opportunities coast to coast. And so it is just timing related this quarter as it relates to the Northeast. And our team up there is doing a great job continuing to find opportunities. But I know the Southeast region, the West region, the Central region is anxiously waiting for some announcements and opportunities they're working on as well. And so we feel good about the opportunities we're seeing all around the country at the moment.

Our first question comes from Michael Goldsmith with UBS. Please go ahead with your question. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.