Federal Realty Investment Trust. (FRT) — Q4 2022 Transcript

Good afternoon. Thank you for joining us today for Federal Realty's Fourth Quarter 2022 Earnings Conference Call. Joining me on the call are Don Wood, Dan G., Jeff Berkes, Wendy Seher, Jan Sweetnam and Melissa Solis. They will be available to take your questions at the conclusion of our prepared remarks. A reminder that certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance. Although Federal Realty believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may materially differ from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained. The earnings release and supplemental reporting package that we issued this afternoon, our annual report on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial conditions and results of operations. Our conference call tonight will be limited to 60 minutes. And with that, I will turn the call over to Don Wood to begin our discussion of our fourth quarter results.

Thank you, Leah, and good afternoon, everyone. We finished 2022 on a robust note, reporting FFO per share of $1.58 for the quarter and $6.32 for the full year, surpassing both our internal and external consensus expectations. This performance sets the stage for strong guidance, supported by excellent real estate and leading demographic trends. We are over a year ahead of our recovery expectations from the depths of the pandemic in terms of leasing, occupancy, and bottom line earnings. In 2022, we executed a record 497 leases totaling over 2 million square feet of retail space, with comparable deals signed at 6% higher rent on a cash basis and 15% more on a straight-line basis compared to expiring leases. We also raised our inherent contractual rent increases to over 2.25% annually. Looking ahead to 2023, while I do not anticipate matching the 497 leases, I expect a higher lease rollover percentage as strong demand and inflationary pressures continue to aid negotiations. We increased our portfolio occupancy to 94.5% at year-end, up from 93.6% the previous year, with additional room for growth in 2023. Our focused strategy to close the gap between leased and occupied percentages is proving effective, as evidenced by our leased percentage rising by 90 basis points and our occupied percentage increasing by 170 basis points in 2022. This indicates some of the fastest transitions from lease signing to rent payments in our history, which is impressive given the supply chain challenges experienced over the past two years. Consequently, our 2022 FFO per share was $6.32, reflecting a 13.5% increase over the previous year and aligning with our pre-pandemic records. Demographics play a crucial role, particularly in challenging economic times. Historical trends show that families need disposable income for retail real estate cash flow to grow. There are 68,000 households with annual incomes between $150,000 and $1 million within a 3-mile radius of our federal centers, generating $10.2 billion in family income. More than half of these individuals hold a bachelor's degree or higher, which is unique for a retail portfolio of this scale. This is translating into various outcomes, including a broad mix of tenants who exceeded the threshold for percentage rent in the fourth quarter. Though not a significant figure since our aim is to have strong fixed rent, the broad percentage rent contribution in the quarter—especially from our restaurants and soft goods tenants—added an extra $0.02 per share compared to last year's fourth quarter, continuing a trend observed throughout the year. As economic activity slows and rising interest rates impact everything from auto loans to mortgages to deal underwriting, we anticipate some pullback in consumer spending which could deter retailers and slow down leasing. However, we haven’t seen that effect yet. While leasing trends may change, our business remains solid. Historical patterns suggest that Federal Realty will continue to outperform, thanks to strong demographics and a diverse rental portfolio, with no single tenant accounting for more than 2.8% of our rental income, the largest of which is TJX. When considering struggling tenants like Bed Bath & Beyond, Party City, Rite Aid, Tuesday Morning, and Regal Cinemas, which we have no exposure to, they collectively make up less than 1% of our 2023 rental forecast. Our average in-place base rent at our 9 Bed Bath & Beyond and Buybuy Baby locations is $15 per square foot, and we believe we can replace that rent as we manage the bankruptcy process. We are also actively divesting non-core and slower-growing assets. In the fourth quarter, along with some sales in the third quarter, we sold three smaller properties in Maryland for around $135 million at a 5% cap rate: a legacy residential community, a newly developed residential building, and one of our earliest small retail developments. These proceeds were reinvested in more promising assets like Kingstown and Pembroke Gardens, which offer better yields and growth potential. The ability to sell non-core assets profitably is one of our key strategies for navigating economic cycles. Additionally, our year-end balance sheet shows over $600 million in construction in progress, representing a substantial source of future income that has not yet been reflected in our results. That's it for my prepared comments this afternoon. Before passing the call to Dan, I want to emphasize that the recent rise in interest rates will indeed impact earnings to some extent in the coming years, starting in 2023. Dan will detail the anticipated effects shortly. However, it’s worth noting that Federal Realty has been operational since 1962 and has increased its dividend every year since 1967. Our business plan does not rely on low-cost capital to succeed, as demonstrated by our track record. As we look to 2023, we expect significant rent increases from existing contracts, especially where demand is strong at our mixed-use properties, along with a full year's contribution from our acquisitions made in 2022, which will more than offset increased interest costs and lead Federal to what we believe will be a record earnings year in 2023 with industry-leading growth.

Thank you, Don, and hello, everyone. Our reported FFO per share of $1.58 for the fourth quarter and $6.32 for the year were up 7.5% and 13.5%, respectively, versus 2021. For both periods, we're at the top of our previously increased guidance range. Primary drivers of the outperformance: acceleration in occupancy up to 92.8%, a gain of 70 basis points for the quarter and 170 basis points for the year. Other drivers: higher percentage rent, which more than doubled in 2022 versus the previous year; and continued strength in consumer traffic at our mixed-use assets, driving marketing revenues higher. This was offset by higher property operating expenses and higher interest expense. Comparable growth, our GAAP-based metric for same-store in the fourth quarter and the full year came in at 5.4% and 7.7%, respectively, strong metrics despite the negative net impact of prior period rents and terms. On a same-store cash basis, we came in at what we believe to be a sector-leading 5.5% for the quarter and 8.5% for the year. Excluding the negative impacts of prior period rents and term fees, cash same-store growth was 7.8% and 10.8% for the fourth quarter and full year, respectively. For those analysts and investors to keep track, we had $1.1 million term fees for the fourth quarter against a 4Q '21 level of $1.7 million. Prior period rent contributions related to COVID-impacted negotiated yields were $2 million this fourth quarter versus $4 million in the fourth quarter of '21. Please note that in our investor presentation on our website, there are updated slides plus an appendix which provide all of these figures. Don already highlighted continued strength in leasing, but let me point out a few more statistics of note. The 94.5% and 92.8% in leased and occupied metrics represented growth of 90 basis points and 170 basis points, respectively, over 2021, and 20 and 70 basis points of sequential growth over the third quarter. We continue to see strength in our small shop leasing, which now stands at 90%, a level not seen since 2017, but still short of our targeted and historical peak levels. The 80 basis points of relative pickup in our signed and not open spread over the course of 2022 demonstrates our ability to get tenants open and rent-paying. More upside to come in 2023 as we target a signed and not open spread at more typical levels of 100 to 125 basis points long term. I mentioned leasing activity has been strong to start 2023, and our pipeline of deals executed to date in the first quarter and those under executed LOI are in line so far with 2022's strong leasing volumes. Additionally, we remain optimistic so we can continue to drive favorable lease terms in 2023, including both strong lease rollover growth and sector-leading contractual rent forms. A big driver of our growth in 2022 was the continued stabilization of a large portion of our redevelopment and expansion pipeline. We expect that to be the case in 2023 as well. Having placed $800 million of projects into service in 2021 and 2022 at Assembly Row, Pike & Rose and CocoWalk, we saw a $24 million of incremental POI in 2022. We expect another roughly $12 million of incremental POI in 2023, just from those three projects alone. The balance of our development pipeline now stands at roughly $730 million which will deliver incremental POI starting this year and continue for the next few years but is less than $300 million remaining to spend. Now to the balance sheet, a quick update on our liquidity position. We ended the year with $86 million of cash available and an undrawn $1.25 billion credit facility for a total liquidity in excess of $1.3 billion. Our leverage metrics continue to be strong. Fourth quarter annualized net debt to EBITDA is roughly six times. That metric is forecasted to improve over the course of 2023 as development POI comes online and occupancy drives higher. Again, our targeted level is in the low to mid-five times range. Fixed charge coverage was 3.7 times for the fourth quarter and four times for the full year. Now on to guidance. For 2023, we are introducing FFO guidance of $6.38 to $6.58 per share. This represents 2.5% growth at the midpoint $6.48 and 4% at the high end of the range. Despite the challenging capital markets environment and embedded headwinds, as promised, Federal will grow in 2023. This is driven by a comparable growth forecast of 2% to 4%. This assumes occupancy levels will increase from 92.8% at 12/31, up above 93% and by year-end 2023, although that progression will not be linear throughout the year. Additional contributions from our redevelopment and expansion pipeline will total $15 million to $18 million. For those modeling, let me direct you to our 8-K on Page 16 and 17 where we provide our forecast of stabilized POI and the timing by projects. Accretion from our 2022 acquisitions being online for a full year will also contribute. Those $500-plus million 2022 acquisitions are expected to outperform our original underwriting by at least 50 basis points. This will be offset by lower prior period collections with a net 2022 level of $9 million that's expected to fall to a range of $4 million to $6 million in '23. And lower net term fees, we had $9.5 million in 2022 and forecast $5 million to $6 million in 2023, more in line with our historical averages. Despite over 100 basis points of headwinds, our comparable growth forecast is 2% to 4% for 2023. It would be 3% to 5% without the headwinds from prior period rents and term fees. Quarterly FFO cadence. We'll have one quarter being the weakest with sequential growth thereafter. Other assumptions include $175 million to $200 million of spend on redevelopment and expansions at our existing properties; $175 million to $225 million of common equity issued throughout the year, refinancing our $275 million of unsecured notes, which mature in June in the mid-five% range; G&A in the $52 million to $56 million range for the year; and capitalized interest for 2023 is estimated at $20 million to $22 million which includes the continued capitalization of interest at Santana West. Given our change in leasing strategy from a single-tenant leasing approach to a multi-tenant building as we build out tenant floors and add tenant amenities. Dispositions completed in 2022 contributed roughly $5 million of POI during the year. That POI will not be there in 2023. We've assumed a credit reserve, excluding the impact of Bed Bath & Beyond of roughly 75 basis points. With respect to Bed Bath, we are adding another 25 to 60 basis points of reserve depending on the uncertain outcome with respect to this tenant. Please note, in 2023 and moving forward, we have less than 70 basis points of exposure at our Wynnewood location which had a natural expiration in January 2023 and has not been on our 2023 forecast since mid-last year. As is our custom, this guidance does not reflect any acquisitions or dispositions in 2023, except what has already been announced. We will adjust for those as we go given our opportunistic approach to both. This guidance also does not assume any tenants moving from a cash basis to accrual basis revenue recognition. Please note the expanded disclosure in our 8-K on Page 30 provides a detailed summary of this guidance. And before we go to Q&A, let me take a minute to highlight the strength of the outperformance that our signature mixed-use retail assets demonstrated in 2022. The big four of Santana Row, Assembly Row, Pike & Rose and Bethesda Row, took a disproportionate hit during COVID, because of government shutdowns in their respective markets, but they finished 2022 at 99% leased. Reported retail sales were 15% to 20% higher than the prior year and are back up above pre-COVID levels. Consumer traffic was up 20% versus the prior year and 7% above pre-COVID levels. Comparable retail POI at these assets were up 30% versus 2021 and over 6% above pre-COVID levels. Plus, we are forecasting comparable growth in retail POI for 2023 of 6% to 8% for these four assets given continued strength in leasing demand. The retail components of our mixed-use assets are unique and have driven and should continue to drive POI growth materially above that of a typical open-air shopping center, providing an additional point of differentiation between Federal and its peers. Further, our operational mixed-use capabilities in design, construction, leasing, and operations are unrivaled and a unique competitive advantage moving forward in the continued evolution of open-air retail, capabilities that are applicable across our entire retail portfolio and a big reason why we expect that sector-leading retail growth for years to come.

Good afternoon, and thanks for the time. Just curious on the total portfolio to one of your later comments in your prepared remarks where NOI sits relative to 2019 levels and when do you expect to get back to that. You kind of made the comment for the big four, but just curious on the broader sample set?

We're back. Yes, we're, in fact, well above 2019 levels. So I know one that what Dan was just talking about was specifically with respect to the four mixed-use assets and for obvious reasons there. But the whole portfolio is on overall back above 2019. It's the higher interest expense that effectively brings us back down to about the same FFO but certainly, operationally, significantly above.

Thank you. I just wondered if you could just give us what the drag will be on the increased interest expense of '23 versus '22?

Roughly $0.30 per share, plus, minus any above where we end up.

Okay. And then just real quick. Small shop was relatively flat sequentially, do you still see that as a major opportunity for growth on your POI?

Yes. And Wendy, I don't know if you want to add to this or not, but I'm very, very positive about our small shop occupancy. And I think we're sitting there at 90% or so now, which is back to a place that we haven't been for quite some time, and we're not done. We've got some more room to grow there.

And I would add to that, there's a real sense of urgency on the leasing side overall, especially on the small shops. Through COVID, the weaker guys, as we know, have gone away and our small shops are thriving right now. Obviously, we're heading into maybe some headwinds, but some of the technologies and so forth that have come post-COVID are really driving sales for a lot of the retailers, including the restaurants.

Hey, good evening. Dan, I was hoping you can just touch on what would be driving you to either the bottom or top end of guidance this year?

Look, I think a big variable is what happens to the Bed Bath bankruptcy. I think that probably at the top of the range, we'll expect to have a more normalized Chapter 11 where we expect to get a few boxes back whereas, if it's a liquidation, that will push us towards the bottom of the range. I think that's probably one of the bigger drivers that takes us either up or down.

Thanks for the question. Maybe you can touch upon the transaction market and kind of what you're seeing from pricing or cap rates today. I don't know if there's a way to bifurcate between sort of your suburban open-air centers versus any color you can provide in lifestyle centers. That would be great.

Yes. Hey, Samir, it's Jeff. Not a lot of color because there's not a lot of transactions. We're always in the market looking for stuff regardless of what's going on, but there's just not a lot out there right now. I mean, if you want a data point, back in the day when the market was active for the best grocery-anchored centers or maybe a 100 to 150 basis point spread cap rate over the 10-year treasury. But we haven't seen many trades, and I don't expect to see a ton of trends this year. So kind of anybody's guess at this point.

Good evening. Thanks a lot for taking my question. My question is on the comparable property growth guidance. Can you help reconcile kind of the moving pieces that generate your guidance of 2% to 4% growth in ex prior period; in terms of fees, 3% to 5% this year relative to last year. I see curious, you’re expecting a little bit less occupancy growth and maybe walk through some of the other pieces. And then on capital interest, does that go from a potential headwind to tailwind this year? What are the implications for '24?

Okay. Look, I think the building blocks that kind of are comparable is kind of a combination of things that get us there. I think we would expect I think contractual bumps, which continue to be kind of sector-leading, kind of north of 2.25% and include kind of some of the office. I think occupancy growth relative to where things were last year will add, I think, a good chunk of rollover because what's interesting is ours is a GAAP number, so the contractual rent bumps don't contribute as much. What really does is the rollover to rollover growth, which is the straight-line rollover, which captures those rent bumps. And so that should be a big driver because of the progress we've made. And you've got residential. I think we'll continue to see percentage rent and parking. And then we mentioned the probably 100 to 130 basis points of credit reserve, then also about 100 basis points of term fee headwind and prior period rent headwind that gets us kind of to that midpoint of that metric.

I wanted to follow up on the interest capitalization question. Dan, I have two questions: First, what guidance do you have regarding any burning or cessation of capitalization on Santana West? From a timing perspective, even if there was no leasing, when would you have to completely stop capitalizing there? Secondly, regarding the strategy shift to multi-tenant, what kind of demand are you observing, if any, in those smaller spaces? Are you planning to build out suites or simply dividing the space?

No, that's a good question. It became pretty clear that we worked hard to secure a full building user at Santana West. We shifted our strategy to focus on building out individual floors instead. The accounting for that involves capitalizing and continuing to capitalize. The reason for this shift is that we see more demand for users in the 50,000 to 100,000 square foot range. We are giving tours now, and given the current situation with tech in Silicon Valley, I don't have much positive news about demonstrative progress. However, that building is attracting a lot of interest. We are hopeful that targeting 100,000 square foot tenants instead of the full 350,000 to 375,000 will be successful. From an accounting perspective, we have $250 million invested in the building, with roughly 5% in annual carrying costs. This will continue to remain on the balance sheet for now and will eventually impact the profit and loss statement, but you can calculate that as needed.

Good evening out there. So Don, I was intrigued by your comments on the Federal rent bumps and the superior long-term core growth profile of the portfolio. I remember while back you provided a buildup of what you thought the portfolio could do over a longer-term basis in terms of that core internally generated growth, I think it was like 3% to 4%, which included some of the bump spreads redevs. So I guess I was curious if you could give us an updated sense of what do you think the long-term core growth profile looks like now or could look like now with the improved bumps you're referencing as well as maybe factoring some of the various deal rent tailwinds coming online here…

That's fair, Haendel. The business, including the shopping center sector, enables the portfolio to expand with a typical shopping center occupancy growth of 1.5% to 1.25%. We've managed to achieve long-term growth of around 3% to 3.5% on an occupancy-neutral basis, which I feel optimistic about. Regarding my earlier comment on rent increases, a moderate level of inflation is beneficial for our business, although excessive inflation is not. If we reach a normalized inflation level, it will allow us to enhance our offerings. Wendy and her team are successfully improving the economics of long-term deals, as inflation is a reality that everyone recognizes. Therefore, I am confident in a long-term growth rate of 3% to 3.5%.

Thank you. I appreciate you providing guidance that is bolder than some of your retail partners. If you could elaborate a bit, not all spaces are equal. You've mentioned this before, Don. One aspect of your portfolio that I find particularly interesting, and where there may be underestimation of growth potential, especially in your small shop space, is that your rents are double those of your anchor tenants. You've discussed your lease percentage; how much is currently occupied and what additional lease growth do you expect in 2023? Also, if we could go through the components of your growth for 2023, Dan, you mentioned the 2.25% fixed bumps and some leases signed in 2023 that will contribute with a partial year. You also have your SNO and spreads. If I crunch the numbers, it appears that you might achieve significant NOI growth, if I'm calculating it correctly.

Yes. Thank you for the question, Floris. If you consider all those factors, it indeed exceeds 4%, but when you factor in a credit reserve, there are some challenges to take into account. We believe that our estimate of 2% to 4% net comparable growth is on the conservative side. We are optimistic that the strong rollover we anticipate in 2023, along with ongoing contractual rent increases and efforts to improve occupancy, will support robust core portfolio growth this year. However, we are aware of existing challenges, which is why the projected growth is set at 2% to 4%.

Everyone, good afternoon. Yes, so you mentioned earlier and obviously it's widely understood, with debt cost of capital elevated, what about tapping the equity markets as valuation here as the year recovers. I think there's $200 million issuance at the midpoint. But really, guys, it seems to match development spend. So I guess how do you view greater equity activity as a financing tool given the state of capital markets and as values recover? Thanks.

Yes, Derek, let me start, and Dan will add to this. Look, there's a couple of principles involved here. So one is I never want to surprise our own so I never want a whole bunch of equity out there at any one time. I'd like to do it in conservative amounts as we go through a year. We opportunistically then obviously can turn that dial up or back based on where we believe value lies and what the uses are. The most important thing is what is the use for that money. And at the end of the day, to the extent we are very comfortable that we can use shareholder or debtholder proceeds to be able to create incremental value, that's what we will do. That's the driver always because we don't have to, to the extent we don't have those uses, and even the development pipeline that you know, it's far lower than it was, only a couple of hundred million dollars left to spend at this point. So lots of flexibility. And that's what I always want to maintain with respect to the balance sheet here is the ability to kind of take advantage opportunistically of what's going on in the marketplace to create value. And I look at debt and equity similarly.

Hi, good afternoon. It's a question on lease spreads. Good to see the acceleration in the fourth quarter. How are you balancing higher lease spreads versus maybe higher bumps? And are you seeing any tenant pushback in those conversations or are tenants just saying we need the space and like the space, so we're going to accept the higher prices?

Yes. There is a combination of various deals. In any given quarter, you may notice some deals with higher rollover, while others may be more focused on anchor tenants versus smaller shops. It’s a diverse mix. I don’t want you to interpret a slowdown in leasing spreads in the fourth quarter as a trend. Instead, you should anticipate higher rollovers in 2023 based on our current pipeline. This is a strategic opportunity to assess which spaces are becoming available and where demand for that space lies. We are actively pursuing significant contractual bumps associated with these leases. Overall, the economic contribution is larger than just the lease rollover spread. It’s important to view it as a whole, including all contractual bumps.

And I think because demand is strong and continues to be strong, we found success in being able to push on both of those levers, particularly in the last couple of quarters.

Hi, thank you. Good evening. I have a question about Santana West, as it appears to be the difference compared to what analysts expected. Initially, you guided for a $0.20 difference when you stopped capitalizing the project. It's encouraging to hear about the work being done and the demand, but do you think you may have been too cautious in your decision to cease capitalization? I understand the project has paused, but given the changing leasing market, do you believe it might have been better to keep it as a capitalized project? I'm curious since all your other activities are impressive, but that capitalized interest seems to be the gap between your 2023 forecast and analyst expectations, so I’m trying to grasp the overall picture.

So, Alex, in response to your question, I don't believe we were too conservative on that. Your underlying assumption seems to suggest that accounting influences business decisions, but it’s actually the reverse. Business decisions and strategies regarding development drive the accounting decisions. We weren’t even fully aware of the accounting aspects when we initially determined our target tenant base after losing a few significant building users. So, I don't agree with that perspective. Regarding capitalized interest in relation to '23, here's where the misunderstanding lies. What we're presenting for '23 does not reflect any effects from Santana West. Instead, it illustrates the overall impact of the rest of the company, which is why we are seeing operational growth and a positive bottom line. As we proceed, I expect that rental income from Santana West will exceed the interest expenses. However, we won't see any benefits from that in '23; Santana West has no effect on '23 at all. So fundamentally, I think you're approaching it from the wrong angle.

Hi. Good evening. Last time we spoke, I think office traffic at Santana Row was still down materially versus pre-pandemic. I don't remember the exact figures, but maybe in the neighborhood of 30% down. Has that changed at all? And at this point, what is your view of how those traffic patterns will look like in the midterm?

Yes. Paulina, it's Jeff. And I think I understand your question. I think you're talking about the number of people that come to work every day, Monday through Friday, at the office buildings at Santana Row. I'll tell you two things about that. One, that's a small part of the traffic at Santana Row. Santana Row generates a ton of traffic over the year. And the primary reason people are coming there is to shop, eat and enjoy the property. The weekday traffic is building as well as return to office is ramping up in Silicon Valley. So, we do see that coming back and coming back strongly. But overall, that's a relatively small component. And like Dan said in his prepared remarks, traffic today at Santana Row is above what it was in 2019. So, we're in pretty good shape there, and I appreciate the question.

Hi. Looking at the future phases at Assembly, Pike & Rose, and Santana, what do you think the time frame will be to reactivate those various phases in the project?

That's a great question, Mike. There's an important underlying assumption here. We value the development aspect of our business. There are certainly times, like now, when we decide to pause and aren't ready to start construction. However, don't let that give you the impression that the capacity and the work we do with our team, which remains intact during downturns, isn't ready to move quickly. Our goal is to activate faster than our competitors. We focus on staying closely connected with our contractors, managing pricing, and securing entitlements for future phases at places like Assembly. This is always a priority for us. Whatever happens in the market, I don't have exact predictions for 2023, 2024, or 2025, but I am confident that we will be able to resume operations quicker than most, which is a key competitive advantage for us.

Thanks. Something I believe we’re at a point on Santana West. But from a business standpoint, I'm actually curious if you go multi-tenant. And I would guess that maybe prolongs the lease-up time frame. So even though you're capitalizing costs for longer, shouldn't the all-in cost expectation go up, therefore, the yield come down incrementally? I'm not sure if there's probably other variables to consider, but I was just curious if you can provide some color around that.

Yes, it’s a fair question. I’m not certain it will take longer because we are developing the individual floors ahead of time, which effectively accounts for a year’s worth of work. So regarding timing, I feel quite optimistic. As for the additional costs, I do anticipate them to be slightly higher, but we have various advantages related to our base building that are helping to reduce the overall expenses of Santana West. It's important to note that this building represents only 1.5% of the company’s asset base. When we evaluate our complete office portfolio, excluding Santana West and factoring in other buildings currently under construction, we are at 92% leased. If we also consider the project at Pike & Rose, which isn't finished yet, we reach 97% leased. From a real estate perspective, the overall product is solidly positioned, and it differs when connected to Santana Row, Assembly Row, and Pike & Rose.

Great. And just one, I wanted to congratulate Jan Sweetnam on his new role of Chief Investment Officer.

Thank you, Craig.

Thanks, Craig.

Are you staying West Coast base? Or will you be moving to East?

Still West Coast-based but spending some more time on the East Coast, Craig.

Okay. And then just maybe what are some of the opportunities you most want to pursue in your new role?

That's a good question, Craig. It seems there will be some increase in products available, and we're excited about exploring new options. Expanding our presence in Phoenix will be a major focus for us. I'm optimistic that we'll have access to some quality products that we can acquire beneficially. While nothing is finalized yet, we're prepared to move forward and see where it leads us.

So just a couple of follow-up questions. One is on the disposition pipeline. I think you noted $350 million on the last call. Just curious if you're still pursuing the remainder of those transactions.

Yes. Essentially, we got done, the one Rolling Wood, which was $68 million. We're still in process on about $130 million of additional acquisitions. We'll see if we get them over. And then I would say the balance, we determined that it didn't meet the timing parameters we needed or the pricing parameters, and we stayed disciplined and decided not to move forward. But there's a possibility. You bring those back later in the year when there's a more receptive capital markets environment.

No. That's just timing a little bit. We're pushing hard on rate. And so, as turnouts come, we don't want to leave money on the table. So that balance between rate and occupancy is always part of the formula. And we push on just a bunch charter on rate. You'll see that come back in '23.

Hi. Just curious if we should expect any action on the balance sheet in terms of your '24 expirations given you've got a couple of chunky pieces of debt coming due and kind of how you guys are maybe thinking about getting ahead of that?

Yes. We plan to be opportunistic as we usually are. We have created significant capacity that allows us flexibility, and being completely undrawn on $1.25 billion will provide us with timing flexibility. However, we anticipate entering the bond markets throughout 2023 to manage our upcoming maturities, including those due in June and January 2024.

Thank you for your continued support. The lease occupied spread has decreased by 50 basis points to 170 basis points. On one hand, you're effectively monetizing your leasing efforts, but on the other hand, there may be slightly reduced benefits anticipated going forward. How do you perceive this situation? You have seemed optimistic about the ability to monetize it sooner; I would like to hear your thoughts on both aspects of this argument.

Well, Michael, I want to make sure we agree on the premise. The lease percentage continues to get better, get higher. The primary thing there is that we continue to lease up the portfolio. We feel very good about that. Now that's a job of that leasing team, and that's working out pretty darn well. But the job of the tenant coordinators, the job of the construction people, the job is to get those tenants open. And frankly, that has just been as amazing as leasing is and leasing have record years. Tenant coordinators and that part of the construction of those spaces to get them open is just stellar. And so, I hope when you look through what's important about leased versus occupied that, if you're in the middle of COVID, it's great to have a whole bunch of leasing done and not a bunch of sub open as it come back up. But to get to normalized operations, you want that as tight as you possibly can to be able to turn a contract into rent. So, I love where we are, in fact, because we're doing both increasing that lease and more than increasing that amount by occupancy.

Yes. And just to add another thing that's not in that 170 basis points of signed and not open SNO is our non-comparable pool where we have an equivalent amount of POI that's expected to come on from what we're delivering stuff, buildings that are not yet placed into service, where we have leasing done, contracts leases that are done. And it's the equivalent of that same 170 basis point spread. So that's an added differentiator and an advantage that none of our peers have because they don't have the scale of that non-comparable pool.

Thank you, everyone, and we look forward to seeing many of you at the Citi Conference.