Urban Edge Properties Q4 FY2021 Earnings Call

Greetings and welcome to Urban Edge Properties Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A 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, Jennifer Holmes, Chief Accounting Officer. Thank you. You may begin.

Good morning and welcome to Urban Edge Properties fourth quarter earnings conference call. Joining me today are Jeff Olson, Chairman and Chief Executive Officer; Mark Langer, Chief Financial Officer; Chris Weilminster, Chief Operating Officer; Danielle De Vita, EVP of Development; Herb Eilberg, Chief Investment Officer; and Rob Milton, General Counsel. Please note, today’s discussion may contain forward-looking statements about the Company’s views of future events and financial performance, which are subject to numerous assumptions, risks, and uncertainties and which the Company does not undertake to update. Our actual future results, financial condition and business may differ materially. Please refer to our filings with the SEC, which are also available on our website for more information about the Company. In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and supplemental disclosure package in the Investors section of our website. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeff Olson.

Great. Thank you, Jen, and good morning, everyone. We are pleased with our fourth quarter results. FFO as adjusted increased to $0.27 a share, up 15% compared to the prior year, driven by a 16% increase in same-property NOI, including redevelopment. We also announced a 7% increase to our quarterly dividend to $0.16 per share, based on our expected performance in 2022. The open-air retail sector continues its upward trajectory, especially throughout our portfolio of well-located properties in markets with high population density. We executed record leasing volumes in 2021 with 678,000 square feet of new leases, any 10% cash rent spread. We increased property leased occupancy to 94%, up 250 basis points compared to the prior year and up 120 basis points compared to the third quarter. The gap between our leased versus physical occupancy in our same-property pool is now 380 basis points. Getting these new tenants open is a top priority and will be a significant contributor to NOI growth. In total, we have $22 million of future gross revenue coming from executed leases not yet rent commenced, which represents approximately 10% of our current NOI. Our leasing pipeline is robust, with over 1 million square feet of space under negotiation, putting us on track to achieve same-property leased occupancy of 96% by the end of 2022. Recall, our occupancy averaged 98% from 2015 to 2018, and we expect to reach that level again. Our fourth quarter leasing activity includes two exciting future additions to Bergen Town Center, Kohl’s and Hackensack Meridian Health. Kohl’s is relocating one of its top-performing stores to open a flagship location at Bergen. Hackensack Meridian Health, the largest healthcare organization in New Jersey, executed an 80,000 square foot lease for a new medical office building to be built on a vacant land parcel. We are advancing our redevelopment pipeline, with $219 million of active projects, up $81 million since last quarter, expected to generate an 8% unleveraged yield. Further upside is expected from leasing surrounding vacant space, securing higher rents from adjacent tenants, and from achieving cap rate compression. Our redevelopment projects are relatively straightforward, lower risk, anchor repositioning investments having an average cost of $10 million and where we have executed leases on nearly 90% of the incremental NOI. Our development team is doing a great job opening projects on time and within budget considering the inflationary pressures and supply chain challenges we are all facing. Once we complete our redevelopments underway, nearly 60% of our portfolio value will have undergone a substantial repositioning since we spun from Vornado. The durability of our rent roll and cash flows is much stronger today than it was seven years ago. Spaces previously occupied by Kmart, Toys “R” Us, National Wholesale Liquidators, Century 21, and other vacancies have now been replaced with tenants such as ShopRite, Amazon Fresh, Uncle Giuseppe’s, Aldi, Marshalls, Burlington, Kohl’s, and the conversion of a large retail box into industrial. The strength of these anchors provides the catalyst for shop leasing, as evidenced by the 240 basis-point increase in our shop occupancy over the past year to 83%, which we believe can be meaningfully higher as we execute our leasing plan. Transforming assets at this scale takes a deep bench of talent in the balance sheet to support it. We are proud that we have both. A key component of our growth strategy includes acquiring high-quality infill real estate with attractive in-place cash flow and future growth potential. In December, we acquired Woodmore Towne Centre, a 712,000 square-foot open-air center in Glenarden, Maryland, for $193 million, providing a leveraged return of approximately 11%. The property is 97% leased and features a strong tenant lineup, including Wegmans, Costco, and Best Buy. This asset is an integral part of the surrounding community, and we believe we can improve merchandising and operations over time to enhance tenant sales and grow rental revenue. Overall, we feel great about the current state of retail, the leasing and development progress that is underway, and our ability to grow our platform through quality acquisitions. I am proud of our team who has demonstrated resilience during challenging times while working cohesively to execute our strategic plan. We are excited to welcome our newest Board member, Norman Jenkins. Norm brings over 25 years of experience in the real estate industry and currently serves as the President and CEO of Capstone Development. Finally, as part of our continued effort to increase communication with the investment community, we plan to host quarterly earnings calls going forward. I will now turn it over to Chris Weilminster, our Chief Operating Officer. Chris?

Thank you, Jeff, and good morning, everyone. I am proud of the record leasing volume the team achieved in 2021 as we leverage strong demand and the quality of our real estate to execute transactions with best-in-class retailers. Our leasing success in 2021 has set the stage for a strong 2022 as the momentum of retail remains robust. Our current active deal pipeline consists of more than 100 deals on over 1.3 million square feet at spreads exceeding 20%. We continue to see strong interest from retailers across categories including grocers, soft goods retailers, general merchandise retailers, wholesale clubs, home improvement, health and beauty retailers, medical, restaurants, and fitness operators. The leasing team has done a fantastic job leveraging our relationships with these expanding retailers to complete transactions with an acute focus on choosing operators that will improve the overall merchandising mix at our properties. We are pleased to see that our customer traffic throughout the portfolio is back stronger than ever with an increase of 19% compared to 2020, and 4% over 2019. We recently analyzed geofencing data for our top 25 tenants to gauge the frequency of visits at our properties. The quality of our locations was evident. Our retailers within our properties ranked in the 74th percentile compared to their national portfolio locations based on 2021 visitation per credit intel. This confirms the strength of our portfolio, reflecting a dense, active population base around our properties. In the fourth quarter, we completed transformational deals at Bergen Town Center, the Shops at Bruckner, and Briarcliff Commons. At Bergen Town Center, Kohl’s will backfill 134,000 square feet of the space formerly occupied by Century 21. Kohl’s will carry a full assortment of merchandise, complementing the dynamic anchor and specialty soft goods mix already existing at the property. Hackensack Meridian Health, the largest healthcare network in New Jersey, has signed a lease to occupy a new 80,000 square-foot medical office building that will be constructed along Route 4. Hackensack Meridian will offer a complete range of medical services, innovative research, and life-enhancing care at this facility. We are also working for approvals for a standalone residential project for approximately 500 units, which we are considering monetizing through a sale or a joint venture. At the Shops at Bruckner, Aldi will occupy 22,000 square feet, further strengthening the property’s existing mix of Marshalls, Old Navy, GAP, and Five Below with a desirable grocer that will attract consistent daily customer shopping trips. At Briarcliff Commons, Uncle Giuseppe’s held its grand opening to much fanfare and long lines in January. Uncle Giuseppe’s occupies 42,000 square feet and brings its specialty Italian marketplace to the Morris Plains community. The addition of Uncle Giuseppe’s to Briarcliff Commons has been a catalyst to secure retailers such as First Watch, Skechers, Chop’t, CityMD, and Crumbl Cookies. We also have redevelopment projects underway on grocer anchors at Huntington Commons, Hudson Mall, and Broomall Commons. These grocer projects will enhance the value of these properties and will stimulate leasing activity for vacant space and drive rents higher for our renewals. Once completed, along with grocers in negotiation, nearly 70% of our portfolio by value will have a grocery component. The status of Kmart and Sears leaseholds we acquired in October '21 are as follows: At Bruckner Commons, we continue to pursue two options. We are negotiating proposals with highly relevant national credit retailers that will backfill the existing 180,000 square-foot Kmart box, and we continue to study the feasibility of other uses. At Montehiedra, we are actively negotiating leases with three tenants to backfill the 108,000 square-foot space. 60,000 square feet will be leased to a local multi-store grocery operator, 28,000 square feet to a nationally recognized soft goods discount retailer expanding on the island, and 18,000 square feet to a state-of-the-art medical service provider. We anticipate executing these leases in the second and third quarter of 2022. The 200,000 square-foot Sears box at Sunrise Mall is not being marketed as the space will be part of the mall’s redevelopment. Turning to consumer behavior and new shopping habits in a post-COVID world, our retailing partners continue to stress the importance of open-air centers and physical locations as a necessary part of their operating ecosystem. We continue to work with retailers to facilitate convenient customer pickup areas for delivery of goods and for in-store fulfillment operations. Retailers are in the early stages of figuring out how to maximize the operating efficiency of their physical space, and Urban Edge is focused on providing property-level flexibility to embrace these ideas. As mentioned, the Urban Edge team is extremely focused on driving portfolio occupancy to 96% this year and higher thereafter.

Thank you, Chris. Good morning. I will focus my comments today on three areas: First, highlighting our results for the fourth quarter; second, providing data points that will be helpful to gauge future NOI and FFO; and third, discussing our balance sheet and liquidity. First, in terms of our earnings, we reported FFO as adjusted of $0.27 a share. Same-property NOI growth was 14% for the full year, including properties in redevelopment and increased by 15% in the fourth quarter compared to the fourth quarter of the prior year. Fourth quarter base rent collections were 99%, up from 98% reported during the third quarter. In addition, we have collected 98% of all deferral payments we are due, pursuant to agreements made with tenants during the pandemic. These collection levels are a testament to the strength of our tenancy and the outstanding work our collections team has done to ensure we are carefully pursuing both current and past due balances. We have provided a detailed summary of collections on pages 32 and 33 of our supplement, where we note that approximately 7% of our ADR remains on a cash basis, down from 11% in the third quarter, based on the collection trends over the past 12 months. In terms of items impacting future NOI and earnings growth, I think it is helpful to note the following. The biggest driver of growth comes from our leased, but not commenced pipeline that Jeff highlighted, which currently consists of $22 million of future annual gross rent. We added a table in our supplement which highlights that approximately $6 million of this revenue is expected to be recognized this year, primarily weighted to the back half of the year. An additional $10 million of annual gross rents will commence during 2023. Other tailwinds include occupancy gains, contractual rent bumps, and renewals that are expected at higher rents. Headwinds pertain to the expected year-over-year change in bad debt levels net of reversals. In 2021, our same-property bad debt was actually a net credit of $200,000 due to collections on amounts previously reserved. Our internal forecast for 2022 assumes that bad debt reverts closer to pre-COVID levels of 75 to 100 basis points of gross revenues. Let me add some context to the range of potential bad debt reversals we may recognize this year. First, we disclosed having $3 million of remaining COVID-related deferrals for tenants that are on a cash basis at year-end, which have a future payback of about 30 months. If our collection rate continues at 98%, this should provide $1 million of benefit this year when received. In addition, we have gone through our remaining accounts receivable reserves, with a focus on those pertaining to COVID to assess the actionable pool of likely collections and reversals, and think there could be an additional $1.5 million to $3.5 million of upside this year. The actual level and timing is difficult to predict, and given the nature and complexity of litigation that many of these are in, we are currently budgeting the lower end of that range. In terms of lease roll in 2022, we feel very good about the renewal and options that will be taken on the vast majority of space. There are four tenants greater than 10,000 square feet that contribute about $4.7 million of annual gross revenue that we expect to vacate, which will create a $3 million drag on NOI in 2022 based on the expected timing of their departures. In addition, determination of the Kmart leases that were executed at Bruckner and Montehiedra in October will create an additional $4.5 million to $5 million NOI drag in 2022 compared to the prior year. All-in, considering both the headwinds and tailwinds I have described, and accounting for more insignificant changes related to recoveries and operating expenses, our expectation is that same-property NOI growth will be positive in 2022. In terms of our balance sheet and liquidity, we ended the quarter with total cash of $220 million and have no amounts drawn on our $600 million line of credit. We are currently in the process of refinancing our two mortgages coming due during the year, which aggregate only $82 million. We intend to use our cash to fund our development pipeline and to deploy for acquisitions. Given the year-end timing of our Woodmore acquisition, which we funded with $77 million of cash and a new $117 million 10-year non-recourse mortgage at 3.39%, our annualized fourth quarter net debt to EBITDA was elevated. Pro forma for the income from this acquisition and the future income coming online from leases signed but not open, we expect net debt to EBITDA to get back in the 6.5 to 7-time range. We are comfortable with this range given the nature of our debt structure, which consists of 100% single asset non-recourse mortgages. In closing, I think it is fair to say, we feel very good about our growth prospects. The strength and quality of our cash flow has been dramatically improved over the past couple of years, as bankrupt tenants have been replaced with strong credit operators, consisting of both leading national and regional brands. Our top 15 tenants today have a weighted average S&P credit rating of BBB plus. The repositioning and redevelopment work Jeff and Chris have described combined with a record level of activity in our leasing pipeline gives us great confidence that the intrinsic value of our real estate will be reflected in meaningful NOI, FFO, and cash flow growth in the years ahead. I will now turn the call over to the operator for questions.

Thank you. Our first question comes from the line of Rich Hill with Morgan Stanley.

Hey. Good morning, everyone. I’ve mentioned this before, but I want to reiterate that your transition to rental revenue is truly outstanding. Thank you for that. Mark, I genuinely appreciate your efforts in reviewing the bad debt figures. It’s been a lengthy earnings season, and while I've been keeping up, I need to delve into it a bit more. If I’m understanding correctly, the same-store NOI, including bad debt, will be positive. Many of your competitors have also shared same-store NOI figures excluding bad debt, which helps us grasp the direction of the core business without the distractions from COVID. Could you share any insights on that?

Sure, Rich. When I presented the gross bad debt we expect to add, there's potential for about $2 million to $3 million in reversals. Excluding those reversals, we still believe our core business is demonstrating positive growth. While we’re not providing exact figures, if you analyze the year-over-year changes and adjust for bad debt in both years, we would see an even slightly more optimistic outlook.

Okay. That’s helpful. And I’m sure we can just follow up offline on that. I did recognize that there was a lot of lease termination income recognized in the quarter. And I think it was excluded from same-store NOI. But, can you confirm that?

I don’t think you’re talking about lease termination income, Rich. I think you’re referring to the significant amount of below market amortization that we recorded. If you look at our supplement, we actually break down lease term fees and bankruptcy on page six. Are you asking about the quarter or the year?

For the quarter.

Yes. The biggest adjustment on the FFO was for the accelerated amortization of below market leases, the $33 million. That might be what you’re referring to. Yes. That’s not termination income. That’s the accelerated amortization for the write-offs related to the Sears and Kmart below markets.

Okay. I think that makes sense. Thank you for that. I think that’s all the questions that I have for right now. I’ll jump back in the queue if I have anything else. But, thanks again, guys.

Thanks, Rich.

Our next question comes from Samir Khanal with Evercore. Please proceed with your question.

Hi. Good morning, everybody. Maybe, Jeff, just talk around the Woodmore Towne Centre acquisition. I mean, it’s a fairly large asset. Maybe it’s still a bit early, but just trying to get some initial thoughts and kind of what the long-term plans may be on that asset.

Yes. I mean, we’re very excited about the opportunity there. As I said on the call, coming out of the gate, the cash returns were quite high, especially relative to the financing we were able to get, which was 10-year financing IO at about 3.4%. So, the property will yield about 11%, year one. And we think the stability behind the cash flows, namely coming from tenants like Wegmans and Costco and Best Buy will be resilient. But, maybe Chris, you can spend a minute just from your perspective from a leasing side and then also refer to the vacant land that we have and some of the opportunities we might be able to pursue there.

Sure. Good morning, Samir. Very excited about Woodmore Towne Centre and that acquisition. It sits with several thousand feet of linear visibility to I-95, 495, just south of the Route 50 exit on the Washington Beltway. It’s got over 240,000 cars per day going by the site on 95 and another 70,000-plus off the 202 coming to the property. And as Jeff mentioned, the mix that we have there on an anchor side and the cash flow security, that cash flow is very strong. The demographics are fantastic. We’ve got high incomes, we’ve got high education. And the center was built to become the town center for the Glenarden community and the broader Prince George’s County community, and it’s certainly done that. Wegmans and Costco act as a huge beacon for that draw. As far as the existing tenant mix, we see tremendous upside in improving the tenant mix over time. I think that prior ownership was not able to invest capital into improving the tenant mix there. And we certainly have seen with our relationships with the tenants and by putting some capital into those deals that we’re going to be able to really grow our average base rent base here with that property and improve the mix. There were 22 acres that we picked up, which we ascribed her basically no value to on the 22 acres. We think we can harvest, and Danielle needs to dig into this a little bit more, somewhere between 12 to 14 acres for buildable area. We are out talking right now to multiple retailers on that site. It was slated at one point in time to be part of the FBI relocation out of Washington D.C. that all came to a halt years ago. So, it's zoned for close to 1 million square feet today of office. We think that there’s a real bridge to transition that into retail if and when we find the right opportunity, so really excited. This is going to be a great long-term investment for Urban Edge and one that we look forward to monetizing in ways that we still have yet to explore over the coming years.

And Samir, the only final point, I mean, it is a very solid asset today. I mean, out of all of the open-air centers in the state of Maryland, this one ranks number two in terms of number of visits to the center annually. So, it’s already a dominant retail node, the second most dominant retail center in the state of Maryland.

Got it. And then, I guess, my second question is on the Kmart boxes that came back last year. There were three; you highlighted, kind of what the plans are. But Montehiedra, do you think there’s an opportunity where you start to see the income come back in later this year or is that more of a ‘23 story at this point?

It’s more of a ‘23 story. But you should see the executed leases on that space soon.

Yes. Chris gave an indication, the active status that those deals should be executed maybe as soon as Q2 or worst-case Q3. So, when you get the build-out, the income will hit in the following year.

Our next question comes from the line of Chris Lucas with Capital One.

So, I just want to check on Sunrise. The decrease in the leased percentage, is that all related to Sears, or are there other things that are falling out at that asset?

No, there are other tenants that are falling out as well, intentionally.

Understood. Is that asset providing any contribution at all to the bottom line at this point?

No, in fact, we footnoted, Chris, I know this question has come up. Sunrise, given the decline and our intention with the asset for the year, we noted on page six that there was a $3 million loss related to Sunrise, which now will increase if you just take Sears alone; it’ll add another $1 million in 2022. So, given the vacate plan, which we intentionally have executed, we’ve provided that disclosure.

Okay. And then, just overall, I guess, how would you guys feel about tenant retention today versus pre-pandemic? Is it about the same, better, or worse? What’s your general sense?

I’d say it’s stronger at the moment. Because for the tenants that are remaining, they’re doing really good volumes, and they want to stay, and their credit is better than it was before. Chris talked about this geofencing data earlier where our retailers are now sort of in the top 75th percentile within their chains. So generally, they want to stay at these centers, and they are willing to pay the freight in order to stay.

Okay. For my last question, regarding the cash basis and the tenants that have dropped, could you remind us where that stood before the pandemic and what your expectations are for reaching that number in terms of timing?

Before the pandemic, we did not differentiate between cash and accrual. This distinction emerged during the pandemic. If you look at our historical collection rates, they were around 99% for most years. Of course, we experienced some volatility when we began facing bankruptcies. Generally speaking, we are modeling and budgeting for a bad debt level that brings us back to pre-pandemic norms. I mentioned a range of 75 to 100 basis points of gross revenue, which aligns with our previous figures. Therefore, we believe that maintaining the 99% collection level is achievable.

Our next question comes from the line of Paulina Rojas with Green Street.

Good morning. Could you please remind us what drove the negative re-leasing spread and cash re-leasing spreads during the quarter? Was that the core Century 21 deal?

Yes. We only had a very small group of leases in that same-property pool, totaling 46,000 square feet. Specifically, there was one lease in East Hanover for Forever 21 that we backfilled after it had been vacant for a couple of years. That was the key factor. As Chris mentioned in his opening remarks, the most relevant point is that within our pipeline of 1.3 million square feet of leases under negotiation, the rent spread is approximately 20%. I think that puts it in context, Paulina?

Her line is still connected. We might have lost her though.

All right. Let’s go to the next question, and she can dial back in.

Okay, not a problem. Our next one comes from the line of Floris van Dijkum with Compass Point.

Good morning, everyone. Jeff and Chris, could you share your thoughts on the perception that urban markets are struggling and that many people are leaving, particularly in New York? It would be helpful to hear your perspective not only on the current market spreads but also on rental growth. Chris, could you specifically discuss your views on how market rents in the New York Metro area have changed over the past 6 to 12 months and where you see them heading in the next year?

Yes. Floris, let me just start, and I’ll turn it over to Chris. But, I hear that narrative in the investment community; we do not hear that narrative in the retail community. Retailers are not saying flee from the Northeast and go into the Sunbelt. If anything, the retailers that we work with want more locations throughout the New York Metro area. And they’re finding much less supply of vacant space because it’s being absorbed. And my prediction, I mean, you’ve seen our occupancy go up so much in the last year and a half, and soon, I mean, and I said in our comments, we averaged 98% from the period of 2015 to 2018, and we expect to get there again. So, my sense is that as these boxes fill up throughout the market, you’re going to start to see an increase in rental rates just because of the limited supply. And that should be more pronounced here than probably anywhere else in the country just because you have so many people around our properties and just a few boxes of the size that our portfolio has. Chris?

Yes. Jeff, you mentioned it earlier; regarding our pipeline and the significant rent growth we anticipate on a cash basis from the deals we’re negotiating, along with letters of intent and various lease transactions, we expect to see growth. To answer that question, we are experiencing actual rent growth. As Jeff pointed out, with limited new supply entering the market and a tendency for clients to prefer higher-quality options, there is increased competition among our retailers for available space. As we approach our centers with limited availability, we are finding that multiple tenants are competing for the same space. Furthermore, on a larger scale, we have several grocers in negotiations for some of our larger retail spaces, and at Bruckner, multiple nationally-recognized tenants are expressing interest in the old Kmart location. This will certainly contribute to driving rental rates. Additionally, given the current inflationary market, we’re observing some inflation reflected in our rents, not only in our starting rents but also in the rent increases. We are consistently achieving annual increases in our smaller shop spaces. Overall, the trend looks very positive, not just for 2022, but we anticipate this continuing into 2023 as well. We are committed to maximizing the top rents for our opportunities.

And Floris, one more thing. The retailers aren’t just competing against one another for our boxes that are remaining. They’re also competing against an alternative opportunity that we have to convert that retail land into residential or industrial. And so, there are several opportunities out there, including at Bruckner, including at Yonkers, including at Bergen, where they’re competing against an alternative use that may create more value.

Chris brought up an interesting point. I wanted to follow up on the fixed rent increases you mentioned, Chris. You're noticing a greater willingness to accept higher fixed increases due to the inflationary environment. What kind of impact does that have? Is it around 3% for fixed increases, or how should people perceive that?

I believe the expected increase for small shop tenants will be between 2% to 3%. Occasionally, it can go slightly above 3%. The larger anchor deals are expected to increase by about 10% every five years. Before the pandemic, the retail sector was starting to establish a clear approach, aiming to secure fixed rents for five years along with periodic increases every five years for small shops. As we analyze our internal growth patterns, we are pleased to see more annual increases contributing to the growth of our net operating income each year. This is a key focus for us, and we are successfully incorporating these terms into our small shop agreements, even rejecting deals that do not have these stipulations in place.

And if I can have one follow-up, if you guys don’t mind. And obviously with higher rents, greater occupancy, higher NOI, and solid NOI growth, that would imply that cap rates should be going down. And Jeff, maybe if you could comment on cap rates in the New York Metro market? I know that there are a couple of high-profile transactions that occurred either in the Sunbelt or in California. But what do you think has happened to cap rates, particularly in the New York Metro markets? And what kind of impacts do you think that has on Urban Edge’s side?

Yes, there haven't been many trades, but we are seeing some activity in the market. I will ask Herb to elaborate on this shortly, particularly regarding some portfolios of grocery-anchored assets that are pricing below 5%. I believe there are enough trades that have either taken place or are in progress to show that there is no cap rate difference between here and the Sunbelt markets and California, where there have been billions of dollars in transactions at around the 4% cap rate range. Herb?

Yes. Thanks, Jeff. I think that’s right. There are a couple of portfolios out there, which I think will substantiate sort of that 5%/sub-5% cap rate pricing for high quality, grocery-anchored assets. Additionally, I think what we’re seeing is even for power centers now, there’s a renewed bid for those assets. And we’re seeing the cap rate compression there as well. I think everybody is now viewing retail, sort of the way we are which is in weather the storm. The cash flow is durable. And as a result, particularly relative to some of the other sectors out there, retail looks really good. So, we are seeing the institutional bid come back into the market, and that’s driving cap rates down.

There are no further questions in the queue. I’d like to hand the call back to management for closing remarks.

Okay, great. Well, we look forward to talking to everyone next quarter. And if you have any questions, please don’t hesitate to reach out to any of us. Thank you very much.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.