Good day, and welcome to SITE Centers' First Quarter 2024 Operating Results Conference Call. Please note, this event is being recorded. I'd now like to turn the conference over to your host today, Stephanie Ruys, Vice President of Capital Markets. Please go ahead, ma'am.

Thank you. Good morning, and welcome to SITE Centers' First Quarter 2024 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at www.sitecenters.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings with the SEC including our most recent report on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-store net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and thank you for joining our quarterly earnings call. The first quarter was highlighted by additional progress on the announced planned spin-off of the convenience portfolio from within SITE Centers into a new and unique focused growth company called Curbline Properties. This announcement, along with over $1 billion of completed dispositions and over $100 million of new acquisitions since the third quarter of 2023, has put us on a dual path of growing our Curbline portfolio through acquisitions and maximizing the value of the SITE Centers' portfolio through certain dispositions along with continued leasing and asset management. I'll start with an update on Curbline, shift next to transactions, then conclude with an update on the quarter and operations before turning it over to Conor to talk about the first quarter results, the outlook for the rest of the year and the balance sheet. Starting with Curbline, we began investing in Convenience assets over five years ago. And after several years of investments, reviewing data analytics and financial and tenant analysis, we are more convinced than ever that the Convenience sector is a differentiated, unique growth opportunity. As announced, to seize this opportunity, we are creating Curbline Properties as a first mover REIT that is unlike other retail REITs and has what we believe to be the highest organic cash flow growth potential driven by annual bumps, the ability to recapture and mark-to-market units, a high-quality and diversified tenant roster with minimal concentration risk and limited CapEx needs compared to other property types. Same-store NOI for the current Curbline portfolio is expected to grow 4.5% in 2024 and average greater than 3% for the next three years when factoring in all of these attributes. As of quarter end, the Curbline portfolio included 67 wholly-owned convenience properties expected to generate about $79 million of NOI in 2024 and after adjusting for first quarter results and acquisitions. These assets share common characteristics, including excellent visibility, access, and what we believe are compelling economics highlighted by limited CapEx needs. Arguably, what we own today represents the largest, highest-quality convenience portfolio in the U.S. yet is only a fraction of the addressable market for this type of asset. Convenience properties, which primarily cater to customer daily needs, are an integral part of the suburban lifestyle, which has only become more entrenched with increased suburban migration and the adoption of hybrid work. And combined with a balance sheet that is expected to have no outstanding debt, Curbline Properties is expected to generate compelling and elevated relative growth and returns for stakeholders. As of today, we expect the spinoff to be completed on or around October 1 of this year. With CURB capitalized with $600 million of liquidity in the form of cash and a preferred investment in SITE Centers. Additionally, consistent with our commentary last quarter, should we continue to make progress on the disposition front, it is likely that CURB would not retain a preferred investment in SITE and would be capitalized simply with no debt and $600 million of cash. On that point, moving to transactions, we have closed $170 million of wholly-owned property sales year-to-date with total closed transactions since July 1 of just under $1.1 billion at a blended cap rate of under 7%. The volume of disposition activity has increased since our call last quarter, resulting in over $1 billion of real estate currently either under contract, in contract negotiation or with executed nonbinding LOIs at a blended cap rate of roughly 7%. The bulk of this inventory is primarily submarket dominant power centers. Closings are expected to pick up over the middle of the year, consistent with the timeline that we discussed last quarter, for the assets launched around year-end. The participants in this bidding process have been a wide variety of private and institutional investors. This deep pool of interest is clearly showing an active and liquid market for our well-located and high-quality portfolio of open-air shopping centers. Leasing momentum remains strong, market rents are growing and replacement costs continue to escalate; factors we believe that are supporting strong buyer interest. These buyers are sophisticated, committed to the open-air retail format and often have been unlevered acquirers. There has certainly been capital markets volatility in recent weeks and no asset sales are certain until closing, but the elevated level of demand for the assets on the market speaks to the quality of the SITE Centers' portfolio and the opportunity that we identified with the spin-off announcement. In terms of acquisitions, we acquired two Convenience properties in the first quarter for $19 million in Houston and Phoenix and have over $100 million of additional Convenience assets awarded or under contract, subject to standard closing and diligence provisions. Average household income for the first quarter investments was over $113,000 with a weighted average lease rate of almost 100%, highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant CapEx. Going forward, we remain encouraged by the unique opportunity in the convenience subsector, including the size of the opportunity itself. The addressable market for convenience assets according to ICSC is 950 million square feet. Curbline's current portfolio comprising 2.2 million square feet represents 0.25% of total U.S. inventory, meaning we have plenty of room to grow. That said, while we expect to remain active acquirers prior to the spin, we continue to prioritize dispositions to take advantage of demand for SITE's assets, which will likely result in significantly more dispositions as compared to acquisitions in 2024. Ending with the quarter and operations, first quarter results were ahead of expectations on lower G&A, higher occupancy, and higher lease termination fees. Overall quarterly leasing volume was up sequentially but remains down from 2023 levels which is a function of a smaller portfolio and certainly less availability. Leasing demand continues to be very strong for both existing retailers and service tenants expanding into key suburban markets, along with new concepts competing for the same space. Despite the strength of execution from our leasing team, our lease rate was down 30 basis points sequentially, in part as we held space offline to maximize proceeds as part of the sale process. Looking forward, we have over 350,000 square feet in lease negotiations, which we expect to be completed over the next two quarters at similar spreads and economics to the trailing 12-month figures reporting today. We continue to expect the commencement of executed leases to be the material driver of our same property NOI growth over the course of 2024. Before turning the call over to Conor, I want to again thank everyone at SITE Centers for their work these past few quarters, which has been nothing short of incredible. The spin-off of Curbline Properties is possible due to the work of the entire organization, and we believe the transaction unlocks a compelling opportunity to create significant value for the company's stakeholders. And with that, I'll turn it over to Conor.

Thank you, David. I'll start with first quarter earnings and operations before concluding with updates to our 2024 outlook and balance sheet. As David noted, first quarter results were ahead of budget due to better-than-expected operations, including higher than forecast occupancy and lease termination fees and lower G&A expenses. Outside of these items, there were no other material call-outs in the quarter. Moving to operations, first quarter leasing volume was sequentially higher but remains lower than the 2022 and 2023 run rate, as David highlighted, due to disposition activity. With this smaller denominator, operating metrics remain volatile; though based on the leasing pipeline at quarter end, we expect spreads to be consistent with trailing 12-month levels. Overall leasing activity and economics remain elevated, and we remain confident on the backfill of the remaining vacancies, highlighting the quality of the portfolio and depth of demand for space. Moving to our outlook for 2024. As David noted, we are extremely excited to form and scale the first publicly traded REIT focused exclusively on convenience assets. And based on the mortgage commitment announced in October, along with recent transaction and other financing activity, we have positioned both SITE and Curbline with the balance sheets that they need to execute on their business plans. As a result of the planned spin-off and significant expected asset sales, we did not provide a formal 2024 FFO guidance range with year-end results. We did provide projections though, for total portfolio NOI and for the SITE and CURB assets that have been updated to reflect first quarter 2024 acquisitions and dispositions. And as we move forward over the course of the year, we expect to continue to update the projection ranges for future transaction activity. For the CURB portfolio, total NOI is now expected to be roughly $79 million, up from $76 million at the midpoint of the projected range before any additional acquisitions, and same-store NOI growth is expected to be between 3.5% and 5.5% for 2024. For the SITE portfolio, total NOI is now expected to be $257 million, down from $265 million at the midpoint of the projected range before any additional dispositions. Details on the assumptions underpinning these ranges are in our press release and earnings slides. In terms of other line items, we continue to expect JV fees to average around $1.25 million per quarter and G&A to average around $12 million per quarter prior to the planned spinoff. Given the significant cash balance on hand, interest income remains elevated at over $7 million for the quarter; though that figure will obviously depend on short-term rates and debt repayment activity. On that point, in the first quarter, we repurchased just under $62 million of unsecured bonds at a discount, resulting in a gain of approximately $800,000. Finally, transaction volume, particularly the timing of asset sales, is expected to be the largest driver of quarterly FFO. And in the first quarter, we included $937,000 of NOI from assets sold in the quarter as detailed in the income statement. Moving to the balance sheet. In terms of leverage at quarter end, debt to EBITDA was just over 4x with a net debt yield north of 20%. Prior to the effectiveness of the spin-off, we expect leverage to continue to decline with debt-to-EBITDA below 4x. Before drawing on the $1 billion mortgage commitment, we also expect to maintain a significant primarily unencumbered asset base, providing additional scale and collateral for SITE stakeholders. As I mentioned, we repurchased $62 million of 2025 and 2026 notes in the first quarter and expect to retire the majority of outstanding consolidated debt prior to the spin with proceeds from the mortgage commitment. This mortgage will be secured by 38 properties that are expected to be part of SITE Centers post-spin, and funding is expected to occur prior to the spin-off, subject to the satisfaction of closing conditions. For Curbline Properties, the company at the time of the spin is expected to have no debt, $300 million of cash, and a $300 million preferred investment in SITE Centers. This highly liquid balance sheet will allow Curbline to focus on scaling its platform while providing the capital to differentiate itself from the largely private buyer universe acquiring convenience properties. Additionally, as David noted, depending on the level of asset sales completed prior to the spin, we may look to fund CURB entirely with cash and no preferred investment in SITE. Details on sources and uses and projected capital structures can be found on Pages 11 and 12 of the earnings slides. Lastly, as previously announced, SITE Centers paid in January 2024 a special dividend of $0.16 per share. The dividend was funded with cash on hand. And with that, I'll turn it back to David.

Thank you, Conor. Operator, we're now ready for questions.

And today's first question comes from Dori Kesten with Wells Fargo.

You noted a blended cap rate for $1 billion under contract or negotiation of just under 7%, I believe. Is that in line with your initial expectations for these assets? Or has interest been better than expected?

I think you're merging two comments. We've sold and closed on over $1 billion just below a 7% cap rate. The $1 billion we've awarded under negotiating LOIs or negotiating contracts is approximately a 7% cap rate. I would say, in general, the pricing has been a little stronger than we expected six months ago.

Okay. And how should we think of pacing of dispositions ahead of October 1?

It's a really good question. I would say that with $1 billion awarded to buyers in various stages, some of those may close, some of those may not close. As you know, they are contingent on a number of factors, but our confidence level in the buyers is pretty high. We've taken a lot of time to interview buyers and understand where their equity is coming from, their need for debt and so forth. So our confidence level of a lot of closings occurring in the next couple of months is pretty high. Having said that, anything that's not awarded as of today is unlikely to close in the next couple of months. So I think you probably can guesstimate a pretty decent pipeline for the next few months, but having an increase substantially would be unlikely.

Okay. And I think last quarter, you mentioned there'll likely be a slowing in the pace of convenience acquisitions, just as you focus on sales. So you did complete a few in the quarter. Should we assume a few per quarter heading up to the spin? Or is there more likely to be a greater acceleration in acquisitions ahead of it?

I mean, I'll let Conor give some specifics. But in general, the time that we're allocating towards dispositions is a lot more than the time for acquisitions, and that's just a function of demand. There's been more demand to buy assets from us than we would have thought six months ago. So a lot of that time is spent on the dispositions pipeline. As far as acquisitions go, we do have $100 million that's been awarded to us, that's a number of deals. And so I think you can assume that a couple per quarter leading into the spin is probably appropriate. But post spin, I think we're going to reverse pretty quickly on spending a lot more time on acquisitions.

Yes, Dori, I mean just consistent with what David just outlined, we've kind of highlighted $25 million to $50 million of acquisitions per quarter. Obviously, we're on the lighter end of that this quarter, but it probably means to be the higher end of that range in the next quarter.

And the next question comes from Craig Mailman with Citi.

David, I just want to go back to your comment around capital markets volatility here. Clearly, we've seen the 10-year jump around and macro expectations changing here. Have you seen or had any shift in conversations with people who you thought you were going to get under contract or under LOI? Is anyone kind of slow rolling you given any issues in the debt markets? Or has that largely been not an issue at this point so far?

Yes, Craig, it's a really good question. I mean, certainly, if all-in rates are going up, you would expect that to have a commensurate reaction in cap rates are going in yield. On the other hand, there's been a lot more capital formation around the equity side of buying open-air properties. And the rents keep rising. And so I guess what we've really seen and kind of if you're looking at our pipeline of awarded deals at a 7 cap over $1 billion, that kind of shows you that the market has been factoring in both the debt side of the equation and the potential growth of the revenue stream from this type of property. So to date, I wouldn't say it's had much of an impact on cap rates. I can't say that's always going to be the case, but to date, we just haven't seen it. We've just had a significant amount of demand. And to your point about buyers and those conversations, when John and his team are interviewing potential buyers, one of the first questions is, where does your equity come from? And the second question is, are you using debt or not? And we've been tilting towards buyers that are either unlevered or have a very low attachment point. So I think the impact to date has been pretty muted.

There's a couple of other factors I'd point you, Craig. One is just the yields or cap rates of our sector versus other sectors. We never got down in the retail sector to the 3s and 4s that you saw in some other property types like industrial multifamily. So the sensitivity around the capital markets is definitely a little bit lower as a result of that. The second thing I would say, you're right to point out, obviously, benchmark rates are higher than they are today. One of the important factors as we think about just capital markets health is just debt availability. And in that regard, I would say things are materially better than they were six months ago. And so yes, underlying rate is important, but underlying structure is as important. And I would just say that we've seen pretty significant improvements in kind of underlying structure for borrowers over the last six months, which is a very important factor as you think through underwriting.

That's helpful. And maybe another way to come at it. Of the $1 billion that's kind of in some form of negotiations, what percentage of that has kind of money at risk from the buyer?

Off the top of my head, Craig, I don't know.

Okay. And then just flipping around the $100 million of convenience assets in the pipeline seems to be a good pace. I'm just kind of curious, you guys have always said your team is focused on acquisitions today. If you had 100% focus on dispositions, you're 100% focused on acquisitions, given the pool of opportunities out there and the willingness of sellers to part with assets what do you think would be sort of a good quarterly pace to think of deals that could be getting done at this point if that was kind of your main focus?

On the acquisition front, and what we've said before, we spent a lot of time in the last couple of years building spreadsheets of inventory across the country, building relationships with the local brokerage community, understanding which families or private owners might own small to midsized portfolios. So I think even at the time of the spin announcement back in October, we said that our confidence level of acquiring $500 million a year is pretty high at a minimum. So that's kind of our baseline target.

And the next question comes from Alexander Goldfarb with Piper Sandler.

So just a few questions. First, David, you guys are on track, full steam ahead for the October 1 spin out. But can you just give us a sense for on October 2, what will SITE look like and who will be running SITE and what will CURB look like and who’s running CURB, just to get a sense because it sounds like SITE will still have assets. Conor is doing a great job cleaning up the balance sheet. But just want to get a sense of what we’re going to look at on October 2.

Certainly, Alex. I think what you are going to see on October 2 is some executives having a dedicated role and some having a dual role. I think the specifics around who has a dual and who has a singular role will be a subject that we can talk more freely about over the next couple of quarters. The Board of Directors is heavily involved in making sure that both companies have the stewardship both from the Board and the executive front, that align with those individual company interests. And then, of course, there's a shared service agreement where the bulk of the company is really servicing both for some period of time as the business plans emerge. So I wouldn't say now is a great time to have specifics, but I would say that you could expect prior to the spin, we would have more specific announcements on specific leadership.

Alex, that will be detailed in the Form 10. As we detailed in our announcement, the timing of that is closer to kind of end of summer for effective date. So we're still five months out to David's point, but all that detail will be laid out in the Form 10.

Okay. Okay. And then the next question is just given on one hand, great retail environment and certainly, credit seems to be very good in retail land. On the other hand, personal credit lines are expensive and we sort of have the stagflation environment. So as you guys now have more experience running convenience assets, are there any differences that you're discerning whether it's a corporately run retailer, a franchisee retailer versus a truly independent mom-and-pop sort of like either small local chain or one-off? Just trying to understand the credit trends you've seen across those three types of ownership as you gain more experience running convenience retail?

Sure, Alex. Well, I mean, remember that the tenant roster that we have is pretty consistent throughout anchored and unanchored assets. I think from a convenience perspective, when one is purchasing convenience properties, you do have a choice as to whether you're tilting towards more credit or more local. There's benefits to both. You'll note from our tenant roster on Curbline today that we're heavily tilted towards credit. I would expect that to remain tilted to our credit but probably a little bit less so. And the reason is that if you can find assets that have some local tenants that may be in business for 10 or 15 years, the retention rates are pretty high and the ability to mark-to-market on growing market rents is much higher. So I think the balance between credit and non-credit is important over the long term. But we are always going to be a company that's focused on credit simply because I think in a downturn, the performance is just better over time.

Yes, Alex, on that point, we've got an updated top 25 list for CURB in the earnings slides. As David mentioned, we feel really good about that top 25. The other point is it's a differentiated and highly fragmented tenant concentration level, especially versus the peer group. So you think about our exposure to any one tenant is very limited on a relative and absolute basis. And to us, that's a really compelling part of the thesis in the sense that you've got essentially this very low risk of one tenant having an outsized impact on whether NOI, earnings or whatever it may be, that's a really compelling part of the thesis that we think on an absolute and relative basis.

And the next question comes from Todd Thomas with KeyBanc Capital Markets.

Just first question. Look, there's been a lot of talk about new capital coming into the open-air shopping center space. And I'm just curious in your discussions with buyers and what you're seeing if you could comment on whether you see a shift at all in the interest level for retail centers from new private equity and institutional investors, just give us a sense of what you're seeing in terms of capital formation in recent months for the space?

Yes, Todd, I would say, I think I said this on our 4Q call, I've been very surprised at the depth of demand starting really at the beginning of the year, which tells me that a lot of folks must have made allocation decisions towards the end of the year, and they're ready to act on that. From an institutional perspective, there has been an increase in institutions in the bidding for various assets. There's also been a fairly large component of value-add folks. It's just that the pricing, I think, has gotten away from a lot of the value-add buyers because there is a deeper pool of institutions. And then lastly, Todd, I have been very surprised at how much private wealth is active in open-air shopping centers right now. And we've sold a tremendous amount of properties to local buyers and those local buyers in many cases have been unlevered wealthy family offices. They tend to know the properties pretty well. I think John gets a lot of inbound calls from local and regional families. So as much as we all talk about the institutional capital, the private side has been pretty surprising.

Okay. And then of the $1 billion pipeline that you're talking about, it looks like about $152 million is under contract. Is that right? And then based on the asset sales that you're seeing here in the pipeline and the level of activity that you're anticipating, do you see potential for CURB to be in a net cash position at spin?

Yes, I would say that's the base case. And to both David and my comments, we think there's a very good chance that CURB has no preferred investment in SITE and it's all cash with no debt. So I would tell you, our confidence in CURB being in a net cash position is very high. To your point, what's under contract, which referred to on Page 11, it's a greater percentage or a greater dollar amount. What we're trying to show here is just what's needed the minimum threshold to meet our business plan. I think to David's point, on the $1 billion plus of assets under contract are awarded, we feel really good about a very large percentage of that. And so the odds of us kind of having a significantly higher disposition proceeds number from Page 11 on the slides is very high. And in that environment, or in that case, you would have a significant amount of cash at CURB, $600 million plus, and you'd have a much lower leverage profile for SITE. So there's a pretty significant flow through. Again, I think to David's point, where our expectation is just given the timeline we laid out in the last earnings call, you'll start to see some of those dispositions pick up in the next couple of months. And then I think you'll see us update Pages 11 and 12 and see the flow through to the respective balance sheets of the two entities.

Which is a nice way to circle back to why are we tilting so much of our time on dispositions because the disposition pipeline is increasing the future value of Curbline because it will have so much liquidity. And it's also derisking SITE Centers in terms of its overall leverage and size. So I think our confidence level that what you're seeing on Page 11 is the base case and Conor's point that it will likely become better is pretty good.

And the next question comes from Roland Kamdem with Morgan Stanley.

Two quick ones. Just going back to acquisitions on sort of CURB. Maybe can you talk to what the cap rates look like and what IRRs you're thinking and importantly, has that sort of changed or shifted at all as sort of rates have moved?

Ron, on the acquisitions, I can barely hear you. You're saying what's the return expectation for the acquisitions?

Yes, yes, exactly. On the acquisitions, cap rates, return on expectations. And has that shifted as rates have moved?

Yes. I mean I'll say a similar comment on the dispositions and what impact rates have had. When we're buying Convenience properties, the going in cap rate is pretty consistent with high-quality retail in other formats, meaning today, it's kind of been in the low to mid-6s. What's unique, I think, is that you're getting a very similar top line growth or NOI growth, absent changes in occupancy, but the CapEx required to generate that growth is significantly lower. So while the going in cap rate, I think, is consistent with other high-quality retail formats, the unlevered IRR, I think, is higher. And although I think we thought that rates changing might have had some impact on that going in cap rate number, the reality is shop rents have been growing. And so the offset to raising rates is raising rents and therefore the unlevered IRR is still moving in a positive direction.

Great. And then if I could just ask, just following up on the comments on CapEx, which was actually my second question. As we're sort of thinking about CURB, how is the CapEx profile in terms of numbers versus what SITE was doing? So for example, in 1Q, you've got $1 million to $2 million of maintenance, $12 million of TIs, $2 million leasing commissions. Just trying to figure out what that's going to look like on October 2?

Sure. Ron, it's Conor. We've talked about this in prior presentations. It's kind of to David's point, the full pointer or one of the most exciting aspects of the thesis. So for the industry, in general, CapEx percent of NOI, including redevelopment, has been running 20% to 30%. Our view of CURB would be at sub-10%. So it's a dramatic difference versus the industry at large. And again, that's really one of the most compelling parts of the thesis. Obviously, when you think about it as a public entity or a pure play, that leads to a fairly significant free cash flow relative to the enterprise, which obviously compounds over time. So again, it's a great question. It's a huge focus point of ours and to David's point, there's just a lot less obsolescence risk around the SITE plans. And when you lose a tenant, you're not necessarily changing walls or roofs or it's a fairly straightforward process. So again, it's kind of the fulcrum piece or the most exciting aspect of the thesis, and it's less than half on our numbers of the industry overall.

And the next question comes from Floris Van Dijkum with Compass Point.

There has been significant progress on the dispositions. I have a couple of questions. Can you provide an update on what the Board of CURB will look like? Will the SITE Board remain as it is, or will it transfer to Curbline? Also, can you share any more details on that at this time?

Sure, Floris. I can give you some, but not all. I would say that if you look back at RVI, the Board made a decision that both companies needed consistent stewardship from a shareholder representation standpoint. And therefore, there were a couple of Board members that moved from one company to the other to provide that leadership. We have not decided nor announced which directors are taking on which roles, but I think it's fair to assume that you would see at least one director at a minimum take the helm of SITE Centers while the majority of the directors would likely move to Curbline since that's the growth entity.

Great. I have a follow-up question about credit quality. I know your largest tenant for Curbline will be Starbucks, and you also have Darden, Chipotle, and McDonald's, which usually have many franchisees. Who is underwriting the credit of those leases? Is it the franchisee or the parent company?

Yes, Floris, I have checked, but I believe 100% of our Darden, 100% of Chipotle are corporate. I can't recall any of our franchisee or either one of those organizations going down that path. So you're right, there are other tenants on our top 25 lists that do have some franchise exposure. Oftentimes, it's corporate, sometimes it's franchise. I would just point you to the fact that I think back to the GSE and the shopping center industry and the issues it had, there's been a pretty significant transition from this kind of 'mom-and-pop' to either franchise or corporate exposure. And in particular, some of the franchisees own hundreds of units across different brands and concepts. So just because something is a franchisee, it doesn't mean it's inferior credit quality. There are certain situations where it's a pretty impressive organization. And I would say, as you know, there's some corporate or some public examples of those franchisees. So it's dependent on the entity. You're right, as part of our underwriting. We're looking at who the franchisee is. Is it corporate as a franchise? It obviously has an impact on values and expected rent growth. But I would just point you away from that kind of mom-and-pop local franchisee kind of GSE mentality, and I can point you to a number of examples where the franchisees today are pretty significant and well capitalized.

And the next question comes from Samir Khanal with Evercore ISI.

Conor, I just had one question here. When I look at Curbline and then look at the same-store NOI growth, the 3.5% to 5.5%, which remain unchanged, but I'm just trying to understand like why the range is still pretty wide, considering that you're pretty much in May. And I know the tenant environment has been pretty muted at least from the disruption side. So I guess what's driving that?

Yes. I mean, Samir, as you know, based on our conversations on December 30, we still might have a pretty wide range based off my general, I would call it prudent forecasting. There's a couple of things. One, it's a really small denominator, right? So a couple of hundred thousand dollars could move that range or move the reported number pretty significantly. That would be point one. Point two, I would take the other side of the coin and say, it's only May as opposed to it is already May. That's really the biggest piece. But you're right, we really have had no credit issues in either portfolio year-to-date; I think we had $1.99 in the JV portfolio. We have no Rite Aid exposure across the entire entity. So I would say it really is a function of the fact that it's a small denominator, but we've had no credit issues on either portfolio year-to-date.

And the next question comes from Mike Mueller with JPMorgan.

Just a quick question regarding some operating statistics. For the sequential changes in leased and occupancy on the anchor side and the in-line side, would you consider that all organic from Q4 to Q1? Or was there a significant impact from asset sales?

Yes, Mike, we didn't call out anything related to transactions this quarter because it was immaterial. As you know, in prior quarters, we've sold. I think the average lease rate was 99%, and it did have an outsized impact. This one was organic. And as I think David alluded to in his comments and was called on our slides, there are certain situations where we're holding space offline for dispositions, meaning the buyer would prefer to have the space vacant as opposed to whatever lease we're working on. That's been the driver quarter-over-quarter, but otherwise, there was no material impact from transactions this quarter.

And the next question comes from Paulina Rojas with Green Street.

Hello. Only one question. My prior question was just asked. But you mentioned market rents have continued to rise, and in a way, compensated the higher going cap rate when thinking about IRR. Can you put some numbers behind that comment about rents rising?

Hard to put a lot of meat behind that statistically. I can give a lot of anecdotes, but rolling it all up is a little bit more difficult. I would say that when we're budgeting in the fall for leasing in the first couple of quarters, we've consistently seen rents, particularly for small shops, be higher than we anticipated six months ago, and that's been the same thing for the last four years. Is it a dramatic rise of 50%? No. But it seems like it's a pretty consistent beat on the shop rents. Now what comes with that is a little bit higher cost as well. But I think in any environment where you've just got so little vacancy in almost any unit size, there's just more competition for space. And so I think the landlords are generally choosing between the highest rent possible or the best rent with a credit tenant. And we've been selecting the best rent we can get with a credit tenant. And in that case, we're still seeing the rents outpacing what we underwrote six months ago. Is it dramatic? No, I would say it's not dramatic, but it certainly has been consistent and consistently higher than we would have thought.

And the next question comes from Linda Tsai with Jefferies.

Two quick ones. What was the SITE's credit rating when you spin off the CURB? Does the credit rating transfer to CURB? And if not, what do the rating agencies want to see to assign an investment-grade rating?

Linda, it's Conor. So as we work through the course of the year, prior to spin we would close the mortgage commitment and then use the proceeds to pay off all of our unsecured bonds. At that time, we would withdraw our credit rating. So for CURB, it would be a new entity. Should we go down the investment-grade path, we would then need to go through the process of getting a rating from whatever agencies we wanted to. So we would not transfer it over and we'd expect to withdraw that rating prior to the spin effective date.

And what would the rating agencies want to see?

It depends on what path you're going private versus public. There's a number of tests, some qualitative, some quantitative. Scale is the biggest one. You think about index eligibility on bond sizing, $300-plus million for a $2 billion company is probably a number that's too big for one issuance. And so you could go a number of different paths. You could go to the private placement path and obviously, that's a much smaller issuance size. But the biggest thing for the public side is scale. Now what's exciting about CURB is we've got the expectation for $2 billion-plus of assets at the time of the spin, but that's before any leverage capacity, right? So I would say we have all the ingredients to be a public issuer or public IG issuer. It's not our expectation to be on day one, but we've got all the ingredients in place, which I think is an important kind of arrow to have in our quiver.

And then on Page 16, you show your math, how does the mark-to-market on rents vary across the regions in which you're concentrated?

Yes. I mean it's really, you're talking about the ABR per region, Linda?

Yes. Yes.

Yes. I would say it's generally pretty consistent around the country. The biggest mark-to-market we're seeing is recapture of we'll call it seasoned pads, meaning kind of the 1990s restaurant pads that we're getting back and replacing it with a modern QSR. The other place we see pretty significant mark-to-market is on drive-throughs or any unit with a drive-through. So I would say it's less around ABR per region and more around unit type and/or the seasoning or vintage of that. What's interesting is if you look back on our portfolio kind of SITE and CURB and look at the two, you could argue today, the mark-to-market is greater on SITE versus CURB. But CURB, we actually think we can get out the mark-to-market, which again is one of the compelling points of the thesis or as per SITE, and this is an issue the industry at large, the mark-to-market is in units that you generally are not going to recapture. It's large format spaces that are held by an investment-grade tenant that are going to hold them in perpetuity. So, I would say it's less of a regional mark-to-market and much more on kind of seasoning and unit type.

And the next question comes from Ki Bin Kim with Truist.

What percent of CURB's portfolio today are basically kind of carved out a lot from the holder or preexisting site portfolio?

Yes. Ki Bin, I don't have the exact number on hand. I think it's just over 30%. That number would come down over time as we invest the cash on hand. I would just say we don't look at those assets any differently. And as you think about, I think we brought this point out previously, when we went through the process to decide what pieces to carve out or not, we wanted to make sure that every component of the carve-out was consistent with the assets we've been buying, meaning access, site plan, visibility, mark-to-market, credit quality, limited reliance or no reliance on adjacent retail, if there is any. And so I would just tell you, we feel as good about those units or properties as we do as other ones we bought from third parties over the last five-plus years.

And for that 30%, are there leasing restrictions from the anchors and the portions of the retail center that you don't own?

No. And that's exactly to my point. One of the important things we look through. So there were parcels and pads and effectively properties we really liked. But if they have those issues or restrictions or are reliant on the adjacent retail, they're not part of CURB. I mean the whole thesis of CURB is that what drives the traffic and the sales to that SITE is that SITE plan, visibility, and access. And so if there's anything that effectively impaired the value or quality of that SITE, it was not included in CURB. So as a result, there are some great real estate that we wanted or has pieces that are consistent with the CURB thesis. But if it didn't check every box, we didn't carve it out.

And on G&A, you mentioned $12 million per quarter. But after the spin-off, do you have a sense of what that G&A could look like?

Yes. So I would put that Ki Bin in the bucket of some of the Board comments, management questions, a piece that as we transition from a sum-of-the-parts story to an earnings story over the course of the summer, that's likely a piece that we provide for CURB. It's fair to assume, I think consistent with our comments in prior quarters though, we believe, based off, I would tell you, extensive analysis over the last couple of quarters and months that we can operate CURB as efficiently, if not more efficiently than SITE. It's a huge focus of ours. Obviously, if you think about all of our comments around CapEx, free cash flow efficiency making sure we've got the rightsized G&A load for CURB is really important to us. And so we'll provide more ingredients on that over the course of the year. But again, I would just point you to our prior comments that we think we can operate CURB as efficiently, if not more efficiently than SITE today.

And the next question comes from Michael Gorman with BTIG.

David, I just wanted to go back to your comment about some of the dispositions and holding some of the space offline to maximize value. Can you just provide a little bit more color there? Is that a function of potential alternate use at these sites? Or is it a function of kind of TI and CapEx packages in this market not being fully recouped in the sale process if you did go ahead with re-leasing the space?

Sure, Michael, happy to. It's pretty common in the length of time it takes to sell a large property, there you end up in a conversation with the buyer as to what they desire and what they're willing to pay for. And in some markets, particularly when you have levered buyers, they're looking for stability and a very high occupancy. In other markets like we have today, there are some buyers that would prefer to choose their own adventure on the last space that's available. And we do have a number of properties that have a recent vacancy such as a Bed Bath space, and there's choices to make because there's competing tenants that want that space. I wouldn't say it's alternative use. I'd say all those competitive forces are still in retail. But a buyer may want to go with less credit and more TI and a higher rent or they might want to go with more credit, less TI and a lower rent. But the proceeds that we can achieve from selling one of those assets is sometimes dependent on which adventure that buyer is selecting. And therefore, we sometimes will show them current activity with tenants, but we won't execute those leases. We'll simply hand over the contract and let them select which path they want to go down. That's been a way that we've been able to drive, I think, pretty good cap rates and pretty high value by allowing some flexibility to the buyers.

And this does conclude the question-and-answer session. I would like to return the floor to management for any closing comments.

Thank you for joining our call. We look forward to speaking with you next quarter.

Thank you. Thank you for attending today's presentation. You may now disconnect your phone lines.