Regency Centers Corporation (NASDAQ:REG), a preeminent national owner, operator, and developer of shopping centers, announced a strong finish to 2023, with significant growth in tenant demand and shop occupancy. The company reported a successful fourth quarter, highlighted by the completion of strategic acquisitions, robust lease execution, and a solidified financial position through bond issuances and credit recasting. Regency Centers also provided initial guidance for 2024, projecting continued earnings growth despite facing headwinds from higher rates and debt refinancing.
Key Takeaways
- Regency Centers experienced a record shop occupancy and robust tenant demand in the fourth quarter of 2023.
- The company started over $250 million in new projects in 2023 and plans to initiate projects worth $1 billion or more over the next five years.
- Regency Centers completed the integration of the Urstadt Biddle acquisition and executed a $400 million bond issuance and credit line recast in January.
- The company reported Nareit FFO of $4.15 per share and core operating earnings of $3.95 per share in 2023, with nearly 6% year-over-year growth in core operating earnings per share.
- Initial guidance for 2024 reflects core operating earnings growth of over 3% and same-property NOI growth of 2% to 2.5%.
- The company's in-process pipeline for development and redevelopment projects grew to $468 million, with an average prelease rate of 89%.
Company Outlook
- Regency Centers forecasts core operating earnings growth of more than 3% for 2024.
- The company expects to achieve long-term same-property NOI growth of 2.5% to 3% annually.
- Regency Centers plans $100 million in dispositions in 2024 at a 5.5% cap rate for non-strategic assets.
Bearish Highlights
- Higher rates and debt refinancing activity present headwinds for the company.
- Anchor space recapture is expected to impact the commenced occupancy rate in the short term.
Bullish Highlights
- The company achieved 3.6% same-property NOI growth in 2023.
- Regency Centers ranked 6th on Newsweek's Most Responsible Companies List.
- The UBP merger and ground-up developments are expected to contribute positively.
Misses
- The company acknowledges the challenges in finding development opportunities that are financially viable.
Q&A Highlights
- Executives discussed the acquisition strategy and the health of the consumer, emphasizing the resilience of their shopping centers.
- Regency Centers is engaged with smaller developers for potential growth opportunities and remains confident in re-leasing Manhattan vacancies.
- The company is targeting a leverage range of 5 times to 5.5 times net debt to EBITDA.
- They expect to generate free cash flow of over $160 million in 2024.
Regency Centers' robust performance in the fourth quarter of 2023, combined with its strategic initiatives and financial maneuvers, positions the company for continued growth in the face of economic uncertainties. The company's focus on driving rents higher, redeveloping properties, and maintaining a strong pipeline for future projects underscores its commitment to long-term value creation for its shareholders. Despite potential economic headwinds, Regency Centers' leadership remains optimistic about the company's ability to navigate the market and deliver on its promises.
InvestingPro Insights
Regency Centers Corporation (REG) has demonstrated a commitment to shareholder returns, as evidenced by its history of raising its dividend for 10 consecutive years and maintaining dividend payments for 31 consecutive years. This consistency is a strong indicator of the company's financial stability and dedication to providing value to its shareholders. For investors interested in dividend reliability and growth, these are key considerations.
The company's financial metrics further illuminate its market position. With a market capitalization of $11.36 billion and a P/E ratio standing at 30.08, Regency Centers trades at a premium relative to earnings. This high earnings multiple suggests that the market has high expectations for the company's future performance, despite analysts revising their earnings downwards for the upcoming period. Additionally, the company's revenue growth in the last twelve months as of Q4 2023 was 8.02%, indicating a healthy expansion in its business operations.
Investors should note that Regency Centers' short-term obligations exceed its liquid assets, which could present liquidity challenges in the near term. However, the company's profitability over the last twelve months and analysts' predictions of continued profitability this year offer a counterbalance to this concern.
For those seeking more in-depth analysis and additional "InvestingPro Tips," there are 6 more tips available for Regency Centers on InvestingPro. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which can provide valuable insights for informed investment decisions.
Full transcript - Regency Centers Corp (REG) Q4 2023:
Operator: Greetings and welcome to the Regency Centers Corporation Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christy McElroy, Senior Vice President, Capital Markets. Thank you, Christy. You may begin.
Christy McElroy: Good morning, and welcome to Regency Centers' fourth quarter 2023 earnings conference call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer. As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance including forward earnings guidance and future market conditions, either based on management's current beliefs and expectations and are subject to various risks and uncertainties. It's possible that actual results may differ materially from those suggested by these forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. Lisa?
Lisa Palmer: Thank you, Christy, and good morning, everyone. We had another strong quarter in Q4, finishing off an exceptional year for Regency. I'm so proud of the success and what we were able to accomplish, a direct result of the hard work of our dedicated and talented team. Tenant demand across our shopping centers remains robust and this is most evident in our record shop occupancy and in the strength of our leasing pipeline. As we look ahead, we believe the current macroeconomic backdrop supports the continuation of positive trends for neighborhood and community shopping centers. This favorable retail demand environment has also served as a great foundation for driving success in creating value through our sector leading development program. In 2023, we started more than $250 million of new projects with a healthy pipeline of future projects that the team continues to build. We are on track to start $1 billion or more of projects over the next five years. My hat is off to all involved on our team. You have heard me say it before, I believe we have the best development platform in the sector. Our experienced team and ability to create value through this platform and the ability to self-fund with levered free cash flow are unique competitive advantages for Regency. It was also a big year on the transactional side, highlighted by the closing of the Urstadt Biddle acquisition in August. The integration into Regency is now essentially complete. Kudos to all involved for effecting such a smooth and seamless transition. Our ability to grow through developments and transactions is also a testament to the strength and stability of our balance sheet, which in turn enabled us to successfully execute on our $400 million bond issuance and revolving credit line recast in January. Our ability to access low-cost capital is reflective of the quality of our portfolio, our track record and the strength of our lending relationships. Most of you on this call also know that I'm very proud of Regency's best-in-class corporate responsibility, reputation and practices. I'm also grateful when the efforts of our team are recognized, such as in Newsweek's most recent Americas Most Responsible Companies List, where Regency ranked 6th overall in the United States and first in the real estate and housing category. Our company has been included in this list for all five years of its existence and this is the highest ranking any real estate company has ever achieved. For the benefit of our shareholders and all stakeholders, we are committed to adhering to our corporate responsibility principles in all areas of our business. Before turning it over to Alan, I do want to reiterate that we believe the strength in leasing demand over the past 24 months or so is showing no signs of abating. Consistent job growth and moderating inflation are driving consumer resiliency in our trade areas. We also continue to experience tailwinds favoring brick and mortar retail in strong suburban markets, supporting a positive retail environment ahead. Alan?
Alan Roth: Thank you, Lisa, and good morning, everyone. We had another quarter with great operating results and leasing momentum capping off a very active 2023. Our teams are taking full advantage of the healthy retail environment that has continued into 2024. Our success was evident in same-property NOI growth of 3.6% in 2023, excluding COVID period reserve collections and termination fees, with base rent growth being the most significant driver, a function primarily of driving rents higher, commencing shop occupancy and bringing redevelopment projects online. In the fourth quarter, we executed nearly 2.5 million square feet of leases with activity from categories including grocers, restaurants, health and wellness, off-price and personal services. Our leasing pipelines continued to be robust, representing another 1 million square feet of potential new leases in LOI and lease negotiation. We achieved cash rent spreads of 12% on a blended basis in Q4, including 35% spreads on new leasing. Full year 2023 cash rent spreads of 10% was our highest annual level since 2016. GAAP and net effective rent spreads were above 20% in the quarter, demonstrating our ability to obtain contractual rent steps in our leases while also being judicious on CapEx spend. Our same-property percent lease rate was up another 30 basis points in Q4, ending the year at 95.7%, and our prelease spread widened further to 280 basis points as a result of our leasing success in the quarter. This pipeline of executed deals now reflects more than $40 million of base rent for leases yet to commence. I've said in the past that records are made to be broken and the team drove our shop leased rate to yet another new record high of 93.4% in the fourth quarter. That represents an impressive 150 basis point increase in shop leasing year-over-year, reflective of nearly 1.4 million square feet of shop space leased, our highest shop volume in more than a decade. Our anchor lease rate also ticked higher in the quarter and ended the year up 10 basis points over 2022 despite the impact from bankruptcy related closures. Our teams have made great progress remerchandising this space with exceptional retailers and at higher rents. And in some cases, our ability to recapture this space has acted as a catalyst for long awaited redevelopment projects. As I look towards 2024, it will take some time to see the benefit of this re-tenanting activity given the 12 to 24 month average downtime associated with anchor re-leasing and lead times on redevelopment projects. For example, some of the Bed Bath spaces that we've released will not rent commence until the fourth quarter of this year. So even with our substantial leasing progress, our anchor commenced occupancy rate ended 2023 lower by 60 basis points, and as a result, we will feel the impact of these vacancies in 2024. That said, the work we've done to date means that we have meaningful visibility into our anchor commencement trajectory. We expect to move our portfolio lease rate even higher in 2024 as demand for space in our high quality centers continues unabated. This will ultimately drive an elevated level of anchor commencement in late 2024 and into 2025. In closing, I am really proud of the tremendous work and success of our team over the last year and I am excited for another great year of leasing activity as the current retail environment is enabling us to create meaningful long-term value at our shopping centers. Nick?
Nick Wibbenmeyer: Thank you, Alan. Good morning, everyone. We continue to experience strong momentum in our development and redevelopment program as our investment teams were active in the fourth quarter. With additional projects breaking ground in Q4, we ended 2023 with just over $250 million in starts. This is the highest level of starts in a single year for Regency in nearly two decades and demonstrates the incredible work and progress our team has made in sourcing new projects and ramping up our pipeline to achieve our goals. Among our fourth quarter starts is the $23 million redevelopment of Avenida Biscayne. With this project, we are excited to bring additional shop space to one of the best pieces of commercial real estate in South Florida, adjacent to our existing Aventura Square (NYSE:SQ) shopping center. In the quarter, we also began the redevelopment of Cambridge Square Atlanta. This $15 million project will bring in new Publix as well as extensive improvements to the center. As of year-end, our in-process pipeline has grown to $468 million and overall our execution remains on time and on budget with expected blended returns of more than 8%. Our in-process projects are 89% preleased on average, reflecting the tremendous work of our team and continued strong demand from high quality retailers. I'll reiterate Alan's comments about anchor recapture, as it can often be a catalyst to unlock creative redevelopment opportunities and bring exciting new merchandising to reinvigorate a center. We have several examples of those within our in-process redevelopment pipeline today, including Baptist Health at Mandarin Landing, Sprouts at Circle Marina Center, REI at Walker Center and Publix at Buckhead Landing. Moving to acquisitions, private transaction activity remains light, but our teams were still able to close two compelling transactions in the fourth quarter. As disclosed previously, we closed on the acquisition of Nohl Plaza in Orange County, California in October, and as a reminder, we bought this center as a future redevelopment pipeline project. And in December, we acquired The Longmeadow Shops in Massachusetts. This 100,000 square foot neighborhood center is fully leased to a strong national merchandising mix of tenants and serves as the premier shopping and dining destination within its trade area. Looking ahead to 2024 and beyond, our team is focused on further building our value creation pipelines and achieving our goal of starting more than $1 billion of development and redevelopment projects over the next five years. While it is difficult to get developments to pencil, we continue to be uniquely suited and remain optimistic about finding and executing attractive opportunities. Demand continues to be strong among best-in-class grocers, as well as other retailers and service providers looking to grow their footprints in our high quality centers and within our trade areas. As Lisa just said, Regency has the best development team in the business and our free cash flow and balance sheet give us the capability to fund projects and continue the success we enjoyed in 2023. Mike?
Mike Mas: Thank you, Nick, and good morning, everyone. I'll start with some highlights from our full year results, walk through details related to our initial 2024 guidance range and finish by discussing recent balance sheet activity. We reported Nareit FFO of $4.15 per share and core operating earnings of $3.95 per share in 2023. Year-over-year growth in core operating earnings per share was nearly 6%, excluding the timing impact of COVID period reserve collections, driven in large part by same-property NOI growth of 3.6%. Base rent, following significant gains in rent paying occupancy remained the largest contributor to our NOI growth rate at 360 basis points. Turning to our initial guidance for 2024, I'll first refer you to the helpful detail on Slides 5 through 7 in our earnings presentation. Excluding the timing impact of COVID period reserve collections last year, the midpoint of our 2024 range reflects core operating earnings growth of more than 3%. The largest contributor to growth continues to be same-property NOI, for which our guidance assumes a range of 2% to 2.5%. Base rent growth this year will continue to be driven by embedded rent steps, positive re-leasing spreads, additional rent commencement of shop leases and deliveries of redevelopment projects. However, anchor space recapture is expected to impact our commenced occupancy rate in the near term, primarily a result of bankruptcy related moveouts and some junior anchor moveouts following lease expiration. Given the longer lead time to open new anchor tenants, we expect our average commenced occupancy rate to be down by about 50 basis points year-over-year in 2024, impacting same-property NOI growth in the short-term. But more importantly, due to robust tenant demand, we have been re-leasing this anchor space just about as quickly as we are recapturing it and we expect our overall portfolio lease rate will trend higher throughout the year. We will begin to benefit from this outsized anchor rent commencement activity beginning in late 2024. In addition to same-property NOI growth, our earnings range also reflects previously discussed accretion from the UBP merger as well as positive contributions from recently completed ground-up developments. As we discussed last quarter, the impact of higher rates and debt refinancing activity remains a headwind to core operating earnings growth this year. That said, we are very pleased to gain greater visibility on this impact as we took advantage of an attractive debt capital markets window in early January to prefund our 2024 maturities with a new $400 million bond priced at 5.25%. Notably, as you consider our guidance range for interest expense and preferred dividends, please know that it is showing net of expected interest income. January proved to be a busy month as we also closed on the recast of our revolving credit facility, which was upsized by $250 million to a $1.5 billion total commitment, which included a tightening of our borrowing spread by 15 basis points. In an environment where access to capital is even more precious and banks are being incrementally more discriminating, we are proud of this result, a reflection of Regency's performance track record, portfolio quality and balance sheet position, as well as the strength of our long-standing banking partnerships. Our recent activity has further fortified our sector-leading balance sheet and liquidity position. We remain at the low end of our targeted leverage range of 5 times to 5.5 times net debt to EBITDA. And following the prefunding of our '24 maturities, our next unsecured bond maturity is not until November of 2025. We have ample capacity on our newly upsized revolver and expect to generate free cash flow north of $160 million this year. This liquidity, balance sheet capacity and differentiated access to capital allows us to further grow our development and redevelopment pipelines as both Lisa and Nick discussed, and remain opportunistic as we look for incremental avenues to drive growth and value. With that, we are happy to take your questions. Thank you.
Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Michael Goldsmith with UBS. Please proceed with your question.
Michael Goldsmith: Good morning. Thanks a lot for taking my question. As we look at the algorithm for 2024, is it that same property NOI growth is solid? And then there's some puts and takes related to the merger and debt refinancing and a normalization of some factors that just may limit the flow-through. So I guess my question is what gets you to the low and the high-end of the range this year? And then thinking about anchor leasing coming online at the end of 2024 and into 2025 and potentially more normalized comparisons kind of going forward, should that algorithm look better going forward? Thank you.
Mike Mas: Hey, Michael, you pack a punch with one question. There is a lot in there. So let me unpack some of that. And if I don't get to it all, I'm certain that others will have similar questions. So just to recap what you said there from a core earnings perspective, big moving parts, and you've got it largely correct. Same-property NOI growth is the largest and has been the largest contributor to our earnings growth rate. So at the midpoint, we're looking at a core growth rate of just over 3%, same-property growth, as you can see, 2% to 2.5%, largest contributor there. Very proud to deliver the UBP merger accretion estimate of 1.5% to our growth rate, and that's been consistent, as you know, since we announced the transaction back in May. We continue to deliver upon that underwriting. The headwinds, of course, and you alluded to some of them, but let me just click through them for the benefit of everyone. No further COVID collections of about $4 million, that's $0.02 a share. By the way, we're extraordinarily happy for that headwind to be behind us. And kudos to the team for collecting on that rent. Lower termination fees is about $0.02, and of course, the results of our recent debt financing, which we're also extraordinarily pleased with, is another $0.02 of headwind to earnings growth. To your follow-up question, just let me start here. The puts and takes of outperformance -- underperformance relative to the midpoint, listen, it's going to come through the NOI plan, and specifically within the NOI plan, it's going to come through move-outs as it typically does, occupancy and our assumptions around that. We've really -- we've put together this occupancy plan, this leasing plan, and later in the call, I'm sure Alan will jump in and give us some color. But we feel really good about the direction of our percent lease. When you look at the top line kind of surface level, we're going to move percent leased up towards our 96% target by about 20 basis points this year. And on the surface, that looks like we're moving in the exact right direction, consistent with the dynamics we're seeing in the marketplace, which we spent some time on the prepared remarks describing. But it's what's happening beneath the surface, uniquely in 2024, which is causing some of that drag. And we are going to see in the first quarter of this year, a decline in commenced occupancy of about 80 basis points. Much of that, the vast majority of that, we can see it. It's bankruptcy filings, it's moveouts from Rite Aid (NYSE:US90274J5618=UBSS), it's the moveouts from Bed Bath & Beyond. We have a couple of high rent paying leases in Manhattan that are expiring, and we've got great activity on the re-lease of those spaces. But we're going to feel that occupancy decline early in the year. And then to finish it up on your impactful question, as I said in the remarks, we're re-leasing this space as about as quickly as we can get it. By year-end, our commenced occupancy rate should be north of where we started. We should be up by about 20 basis points on that rate, on a spot basis again. But it's that downtime, it's that average, it's that impact of timing that's going to weigh on our 2% to 2.5% growth rate. So lastly, '25 is looking -- from an algorithm perspective, '25 is looking like a disproportionate year to our standard 2.5% to 3% run rate. If all -- again, there's a lot to say here. I'm not giving '25 guidance, but if all can kind of hold together here, '25, we should see the benefit of that commenced occupancy rate coming back online and moving our growth forward.
Michael Goldsmith: Mike, thank you so much for the thorough response.
Lisa Palmer: Michael, if I may just one second, just to come back to what we did say in our prepared remarks, because the takeaway, there's a lot of words because it was a lot of -- it was a big question. The health of our business is really good. The demand is really strong. And we said that in all the prepared remarks. And the downtime that's associated with these anchor moveouts is very short-term in nature. This is not something that is permanent. Certainly nothing that we're seeing right now. As I've said in my remarks, as Alan did, we're not seeing any signs of the healthy demand for our space abating whatsoever. And I think that's a really important thing to remember.
Michael Goldsmith: Thanks for that. And maybe --
Lisa Palmer: You can ask your second question, Michael.
Michael Goldsmith: Maybe I'll keep it very short. You're looking for NOI growth of 2% to 2.5% for the core portfolio. How are you thinking about growth in the UBP portfolio? Is that growing a little bit faster than the core?
Mike Mas: It is. Just looking at '24 on a standalone basis, the growth rate in that portfolio is north of the 2% to 2.5%. It would be accretive if we have included it in the same-property portfolio. It would have been additive, I should say, by about 25 basis points to that 2% to 2.5% range. We like -- and it's consistent. What we saw in that portfolio was a leasing opportunity. That portfolio was about and is about 200 basis points shy of our lease rate. And the team has assimilated the assets into the Regency platform. They are making great progress and we're excited about the prospects there. But that growth rate is slightly additive.
Michael Goldsmith: Thank you so much for the thorough responses.
Lisa Palmer: Thanks, Michael.
Mike Mas: Appreciate it, Michael.
Operator: Our next question is from Dori Kesten with Wells Fargo (NYSE:WFC). Please proceed with your question.
Dori Kesten: Thanks. Good morning. I know your acquisition guide currently sits at zero, but can you talk about the volume of centers you described as of interest to Regency out there today? And would you be surprised if you ended the year as a net acquirer?
Nick Wibbenmeyer: I appreciate the question. Yeah, I'll just give you a little color to what we're seeing in the market. We're definitely seeing a little pickup. As you heard us say time and time again in 2023, there was definitely a lot less opportunities out in the market. We were happy with the needles in the haystack. We did find, as you know, in 2023. But as we've turned the page now into 2024, we are seeing more activity out there. I'd say, it's still below historical norms, but definitely a pickup from '23. And as always, we're very active in underwriting and understanding those opportunities and goes back to what we always say, when we find opportunities that are equal or accretive to our quality and our growth rate and accretive to earnings, we're going to pounce. And so we are hopeful to continue to find needles in the haystack as we move through '24. But as you know, we do not guide to those and so we do not have clear visibility.
Dori Kesten: Got it. Thank you.
Operator: Our next question is from Jeff Spector with Bank of America (NYSE:BAC). Please proceed with your question.
Jeffrey Spector: Great, thank you. And thanks for the comments on '24. I know there's a lot to get done, but comments into '25, right, because I think investors, the market, is kind of trying to look past, let's say, some of these headwinds in '24 in terms of a higher longer-term growth rate for that same-store NOI. Can you remind me, like, do you have a company goal target for that same-store NOI? And second would be what other key initiatives are you working on, whether it's portfolio composition, technology, et cetera, to, again drive that higher same-store NOI, let's say, into '25 and beyond?
Lisa Palmer: Thanks, Jeff, for the question. We do provide, and have really always provided kind of our same-property NOI growth model, if you will, as we affectionately call it, it's in our materials. And we do target over the long-term to grow same-property NOI by 2.5% to 3% annually. And the primary component of that is going to be contractual rent steps and cash re-leasing spreads. Occupancy, whether -- and in this case, we have percent commenced occupancy in 2024 coming down. Occupancy is one that will move that up or down. And then also we have had a really successful track record of adding to that same-property NOI growth through our investment and redevelopment dollars. So that is our long-term goal. And I know -- most of you know this, I've been with the company a long time. I do believe that throughout the years, we have continued to evolve and leverage all tools, technology to get better and to continue to improve processes and also continue to ensure that we are sustaining that long-term NOI growth, which is, as Mike commented, the largest contributor to core operating earnings growth.
Jeffrey Spector: Thank you. And then a more detailed question. Can you talk a little bit more about The Longmeadow Shops, the acquisition in December? Can you discuss anything around the cap rate, seller motivation, value-add opportunity? Any color on that asset would be helpful. Thank you.
Nick Wibbenmeyer: Sure. This is Nick. Appreciate the question, Jeff. I'll start with just your question related to the cap rate and valuation. And again, we talk about needles in the haystack and using every tool we have in our tool belt. And this is one of those opportunities where the seller approached us. They were looking for a units transaction. And as you can appreciate a units transaction, they care about the currency they're getting, and therefore they wanted Regency currency. They were a fan of ours from afar, and so for planning purposes, they were ready to transact. They'd own the assets for decades. And so we were excited about the opportunity. And as you can see, from a valuation standpoint, this thing is plus or minus 8% going in yield. So very attractive from a yield standpoint as well as quality standpoint. And so we're excited about the future of that opportunity.
Jeffrey Spector: Thank you.
Lisa Palmer: Thanks, Jeff.
Operator: Our next question is from Craig Mailman with Citi. Please proceed with your question.
Craig Mailman: Hey, thanks. Maybe I just want to follow up. I know it seems like the call has been kind of focused on what the longer term earnings power is, given just how good fundamentals are. And I guess, I maybe want to come at it from a different way. Lisa, you've seen kind of the perfect storm of minimal supply, good demand, and that's helped push market-led growth. But inflation has also been a big piece of that the last couple of years as kind of top line for a lot of your tenants has taken off. As inflation starts to moderate back to more normalized levels, I mean, are you seeing any pushback on the market rent growth kind of being able to be sustained into '25? You know it's too early for '26, particularly with some cost pressures, maybe in the labor side, that's hitting some of the fast casual, fast food guys that may hit some other type of tenancy?
Lisa Palmer: I know you addressed me with that question, Craig, but I think it's best to allow Alan to handle that.
Alan Roth: Yeah, Craig. I appreciate the question. As I've said in our opening remarks, 10% is our highest total annual rent growth in seven years. But we prefer to emphasize the GAAP growth as a better measure and we have some impressive spread this quarter, 20% total over 50% on new deals. But to your question from an inflation perspective, we're approaching peak occupancy. So I think when we get there or even when we're near that as we are now, I still think that pricing power is there and expectation is that the teams can continue to push on both the spreads and the steps as we go-forward. We are getting more steps. And we're getting steps in more deals now and we're getting higher steps. Approximately 95% of our new deals had steps and 70% of those had 3% or higher. So again I think the focus is there and I believe that given where occupancy is that trend can continue, Craig?
Lisa Palmer: And again, I would just come on top. When you think about our business model and our value proposition to our investors. It is the sustainability and the safety of that growing cash-flow stream, which translates to our core operating earnings growth and then dividend growth. And I know that we're getting far removed from the 2020-year, but I think it's really important to remember that we went through, I mean a time, the entire world went through a time that none of us had ever experienced before. And we did not cut our dividend. And I think that, that's really important when you again, you think about the value proposition for our investors. It's core operating earnings growth plus dividend growth to get to total shareholder returns in the 8% to 10% range.
Craig Mailman: No, that's helpful. And I don't know, maybe this one's for Mike or I don't want to direct it to any one person, but interest expense headwinds have been an issue. You guys have successfully sourced some acquisitions and you have potentially a billion of redevelopment ongoing over the next five years. I'm just trying to get at when you see coming to the numbers, the snow pipeline really kicking in, average occupancy, the timing of some of these anchor box backfills kind of normalizing out, when maybe the headwinds moderate enough that you start to see kind of the leverage multiplier on same store kind of flow through the earnings. Is that in the next couple of years, or do you really have to get through the kind of the continued repricing of the debt stack?
Mike Mas: Another power packed question. And I appreciate it, Craig. We do have some headwinds to our growth rate this year and we kind of -- we just ran through them and clicked through them and I think we understand those in '24, and again, happy to dig into any of those that you'd like to. But I do see the power of our existing free-cash flow. And the ability for us to put that capital directly into our growing and exciting -- excitingly growing, development, redevelopment pipeline, which will add to our growth rate going forward. Beyond -- and we actually have from a leverage perspective, given our balance sheet position at the low-end of our targeted leverage range, we actually have on a leverage-neutral basis even more capital driven again by that free-cash flow to put into our acquisition intents. And Nick did a nice job of explaining how we think about acquisition activity going forward, which will add to our core operating earnings growth rate. But then you kind of put all that together combined with a normalization and continued growing of our commenced occupancy through '24 towards the end unfortunately, into '25, I think those elements will reflect themselves in a core operating earnings growth rate, that is at least meeting the objectives that Lisa outlined of being 4% on core operating earnings with a commensurate increase in dividend growth. And if we can do better on the margin in all elements of our business, rent growth, maybe even push those occupancy records even a little bit higher. All of those should result in maybe a slightly even more amplified vision of growth.
Craig Mailman: No, that's helpful. Appreciate the color. Thanks.
Operator: Thank you. Our next question is from Samir Khanal with Evercore ISI. Please proceed with your question.
Samir Khanal: Hey, Mike. Good morning. I guess one on the integration with Urstadt Biddle. I know you've talked about 1.5% accretion for a while now. But as you've had time to digest this portfolio, and what potential further upside are you seeing maybe from an internal growth standpoint on the occupancy side. And also, what about the opportunities to unlock some of the redevelopment opportunities there?
Mike Mas: Hey Sameer. Yeah, I'll reiterate the -- from the beginning, we've articulated the strategy behind this merger as being a portfolio that looks like Regency's assets. And on a long-term basis, we see a growth rate that looks like Regency's growth rate. But in the near-term one element that we liked about the opportunity was this ability to bring that rent-paying occupancy higher than it has -- than it currently exists and I just articulated. In fact, this year we are seeing an additive growth rate from a same-property perspective because of that movement in commenced occupancy. So there's not -- that doesn't, what you didn't hear me say is, there's a big redevelopment, heavier component of this merger in the near-term. But I'm not -- we're not dismissing that either. We do see -- we are -- we know it's a leasing exercise right now. But as we're leasing up this portfolio we have an eye towards the future, as we do in our -- across all of our assets. And we are constantly looking to find value-add accretive redevelopment opportunities for really well-located pieces of commercial real-estate, and that's what we bought. And so we're pretty excited about the long-term prospects there.
Samir Khanal: Okay and then, I guess my question -- second question is around the health of the consumer and the local shop segment. I mean, I appreciate the comments on the consumer being resilient and you're not seeing impact to the business yet. When you look at credit card debt, it's at record levels. You see delinquencies that are up, I guess what are you seeing not just on the Shop segment, but kind of the local side of that? Thanks.
Lisa Palmer: I'll take it. If Alan like to add, please feel free, Alan. But generally speaking, again, think about our portfolio and the types of shopping centers we own, neighborhood community shopping centers tend to be more convenience, value, necessity, service. So the consumer -- and in the trade areas that we do mostly operate in, there's not been a lot of job losses. So people are -- they still have their -- they still have their jobs, and they are still earning wages. And therefore they're still spending. And when people do cut back, they tend to not necessarily cut back at their neighborhood and community shopping centers first, they may trade down, which sometimes also will benefit us. So we're not going to say that we'll never -- that we won't feel any pressure from consumer spending declining. But again, we have long-term leases. And we can absorb, and our tenants, because they are high quality, good operators, can also absorb some decline in sales. Sales do not need to grow every year for a tenant to be able to pay their rent. Our tenants are great operators. And it has been, in my experience, we have gone through many cycles at Regency, and there have been more moderate recessions. So even if we were to enter into a recession, there have been more moderate recessions where we really didn't feel any pain as a result of that. And then there are ones that are much more significant, like the GFC and COVID, and we did feel that pain. But I don't see that in -- I don't have any visibility to a recession of that type or that type of decline in 2024, so don't expect to feel much pressure.
Mike Mas: And Samir, I would just add, just from an operator's perspective, we're going to look first to our AR balances, they're healthy. We're going to look next to sales reports, they remained strong. We're going to then look at are we seeing elevated levels of assignments? We're not. And so, I think sort of all of those things also dovetail into the consumers reaction, at least within our portfolio right now.
Samir Khanal: Thank you.
Operator: Thank you. Our next question is from Greg McGinnis with Scotiabank. Please proceed with your question.
Greg McGinnis: Hey, good afternoon. We've spoken about finding ground up developers maybe lacked the capital to get construction started. Do you still see that as an opportunity for investment this year, or are there other non-traditional, opportunistic investment opportunities, it's a lot of opportunities that you're looking to pursue this year.
Nick Wibbenmeyer: Greg, this is Nick. I greatly appreciate the question. Yeah, I mean I'll just say it this way, again, we have the benefit of every tool in the toolbox available to us when it comes to sourcing, development, acquisition, investment opportunities overall. And so, there's no doubt construction loans are definitely still hard for people to get. So we are continuing to be engaged with smaller developers, but many times they need more than just debt capital, they need expertise, they need relationships to fix their cash-on-cash returns. And so, debt and equity is in play in those conversations. So we continue to have dialog related to that. And more times than not, those conversations turn into some sort of equity participation given we can bring more tools to the overall deals than just debt. That being said, when appropriate, we will lean in to deals that we want to own long-term. We recently closed a transaction where we are just providing senior and mezz debt on a potential future acquisition. And it may have future development opportunities as well. And so again, we go into these conversations with every tool in the tool belt and bring them out and we're excited about the future potential.
Greg McGinnis: Great, thanks, for a second question here. It's a bit of a different type of asset from your shopping center bread-and-butter, but what's your confidence in re-leasing those Manhattan vacancies that you talked about and is 101 7th Ave potentially address this year as well.
Alan Roth: Greg. Yes, thank you for that question, so I think, as Mike mentioned in his opening remarks or maybe it was in the early parts of the Q&A, you know those rents as you know are very high in Manhattan, and we did lose two key tenants, a former food importer in middle of last year and then a CVS that vacated just last month. We get it back, we lease it. And I think that speaks to the strength of the real-estate, we do have signed transactions to solve the Third Avenue premises that unfortunately sort of ties into that story down rent paying occupancy in '24, where it's not going to come back online until the fourth quarter likely of this year. And as to Second Avenue, we're negotiating a lease there as well. So the real estate certainly is strong enough for us to find those replacement users, feel very good about that. But it is impacting us in '24. As to Barneys, we continue to pursue all avenues leasing it, demising it redeveloping it or evaluating the sale and so for us, we're going to act upon what makes the most best financial sense. And it's certainly a top priority for us.
Greg McGinnis: Thank you.
Operator: Our next question is from Ron Kamdem with Morgan Stanley (NYSE:MS). Please proceed with your question.
Ronald Kamdem: Hey, two quick ones. So I'm looking at the supplement, I see Avenida Biscayne Cambridge Square was added, maybe can you provide an update on Westbard Square, that looked like $450 million, is that still coming on in the next sort of 12 months to 18 months. And even beyond that, how are you guys thinking about potential sort of new starts and development given the strength of the balance sheet?
Mike Mas: Ron, greatly appreciate the question. So start with Westbard, really happy to announce that redevelopment continues to progress very well. Giant, which is the grocer that we relocated and built new flagship for them just opened in the last couple of weeks, and it's doing tremendously well. So if anyone's in the DC area, I would highly recommend you all checking out that asset as we're very proud about the continued redevelopment potential as the team is doing a nice job keeping us on-time and on-budget. And then as you sort of zoom out and look at the wider scope, we feel really good about our development and redevelopment pipeline. As we mentioned in our prepared remarks, we started over $250 million in 2023, which was the highest amount of starts in quite some time. But we're not done. We still see a very strong pipeline as we look into 2024 and beyond. And it's all aspects of the business, it's redeveloping our existing portfolio. Sometimes it's tear down rebuilds of grocers as you've seen with Cambridge as you mentioned. Other times, it is putting these junior boxes back in production in one way or another. Alan and I alluded to in our prepared remarks. And then last but not least, it is ground-up net new ground-up opportunities that are extremely difficult to pencil. There's no question about that. These are difficult transactions to pull together, but as you saw us execute in 2023, we are doing it and we're excited about the potential to continue with several projects, some sooner rather than later. We hope to announce one here in the next couple of weeks in the Northeast, that would be phenomenal ground-up opportunity our team is rounding home base right now. So excited that pipeline we expect to grow and hit as we've articulated, our $1 billion dollars of starts plus or minus in the next five years.
Lisa Palmer: It's -- so many of you know, I played softball and my favorite softball team actually opened the season today. And this is a softball. Give me another opportunity to say the best team in the business, the best platform in the business, our leverage free cash flow funds it. That is a competitive advantage for us, and it's something we're really proud of. And I expect, and I'm confident that we will continue to execute and perform. Thanks for the question. That was great.
Ronald Kamdem: Right. Just if I could sneak in my second one. Just closing the thought on the same-store NOI. One specifically, I think you talked about 80 basis points dip in 1Q. What's bad debt that's factored into the same-store NOI guidance and how that compares to sort of historical? And then just a bigger-picture is the messaging that because this was sort of an odd year, as you sort of flip the calendar, we should be thinking more about sort of the same-store NOI, translating to core earnings growth in sort of the mid singles digits and so forth, just making sure that's still the messaging. Thanks.
Mike Mas: Yeah, appreciate it, Ron. So from a credit loss perspective, and I think is how I'll take your question. We are planning for 75 basis points to 100 basis points of -- and that's, by the way that's a metric on build revenues, but we are planning for 75 basis points to 100 basis points of credit loss. That is very similar to what we planned for. In fact, we kind of ended the year towards the lower end of that range in '23. Roughly half of that credit loss provision is, I'd call, bankruptcy related and the balance roughly to traditional bad debt expense. I think to extend your question beyond kind of as we deal with the drop in commence occupancy in '24. And Alan alluded to some of the reasons for that, but as we solve them pretty actively throughout the course of the year, yeah, we're going to -- it's about driving that commenced occupancy rate, closing that gap on that SNO pipeline. That is what's going to translate to top line earnings growth on a core basis.
Ronald Kamdem: Thanks so much.
Operator: Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Juan Sanabria: Hi, just maybe a softball here, Lisa given your recent comments. But just curious on why do you think you guys are able to find a decent amount of development start opportunities when if we listen to some of your peers, they're saying market rents have to grow 40% to 50% for new developments to pencil. Where is the disconnect, I guess in those two comments?
Lisa Palmer: I've never seen Nick play softball, so I'm a little afraid of this answer, but I'll let him answer.
Nick Wibbenmeyer: Thank you, Juan. I appreciate the question. With that, setup, now I'm nervous what my answer is going to be. No, I'm kidding. No, it is a great question, Juan, and both are true. And so, I just want to keep stressing that it is very, very difficult to find land that is priced appropriately, tenants that want to pay enough rent to make sense for that land cost and that construction cost. And so, it is extremely difficult and I want to stress that. And it is finding needles in a haystack. But because it's so hard, and because you have to have all of those tools in your tool belt, is why I am so excited. Because as Lisa has said time and time again, and I couldn't agree more, we have the best team in the business. We have 23 offices waking up every day, working with our critical grocery partners, helping them grow their business, and they want to grow their business. And so, they are sitting at the table with us, shoulder to shoulder with the land sellers, with the contractors, helping us collectively all figure out how do we make these deals pencil so that they can get net new stores opened. And so, although there are very few opportunities where that calculus comes together to make financial sense, it's not zero. And we continue to get more than our fair share. And so, it's because it's so hard to find those opportunities that excites me because we can execute on, and we will continue to.
Juan Sanabria: And where do you think we should think of yields for new starts that you may find in '24?
Nick Wibbenmeyer: Another great question. As you've seen our in process pipeline, as you can see is in that 8% plus range, on a blended basis. I would expect that to be the continued blended rate. That's not to say some opportunities that we want to lean into that we think are really compelling that we won't see the numbers, start with the seven from an initial yield standpoint. And so, I'd say that's where our eyesight is, is seven on the low-end of the range for really compelling risk-adjusted returns. But on a blended basis, we'd expect to see us continue to push north of 8%. And I'll just stress again on the development side. I do not expect we're going to wake up tomorrow and see a bunch of new supply coming on market because of how difficult it is first and foremost. And then number two, I just want to stress how much we do derisk these opportunities before we close and put a shovel in the ground. And so we have entitlements in hand before we close. We are substantially pre-leased, especially with our grocers and other anchors as you've seen in our pipeline. And so, that pre-leasing is really critical to high quality anchor tenants. And then last but not least, our construction drawings and bids are in hand. And so again, those are the key pieces of the puzzle to have in hand to give us the confidence that these yields do make sense. These projects can move forward and as you've seen, our teams have done a tremendous job, and I appreciate the daily efforts of once we start making sure we bring them online, on-time and on-budget. And as Lisa has alluded to, we have a very strong track record of doing that given that history.
Juan Sanabria: And one more follow-up, if you don't mind, anything unusual in the fourth quarter on the OpEx side, flowing through the same store, that kind of impacted the growth rate for the quarter that we should be aware of thinking forward?
Mike Mas: Yes and no. So on a full-year basis in '23, I think our growth rate was about 7% on OpEx. You know insurance is a big part of the story, Juan. And I think you're pretty well versed in what the property insurance market feel like today, and we are not immune from that impact. Inflation has been an impact as well, as you know we're largely triple net, so we're able to pass through successfully the vast majority of any increases including those in insurance to our tenant base. And you can see that in our recovery rate, which has held its own. We did have a unique item in the fourth quarter on real estate taxes where we had kind of a burn-off of a brownfield credit in a real estate tax line item. I don't know if you're picking that up in your analysis. But that was one unique item in the fourth quarter, that won't -- so that credit won't recur going forward.
Juan Sanabria: Thank you.
Operator: Our next question is from Anthony Powell with Barclays (LON:BARC). Please proceed with your question.
Anthony Powell: Hi, good morning. I guess a clarification question on the junior anchor comments. The ones that moved out at least aspiration, were these all Manhattan and other in a watch list tenants or are there other groups of tenants in that bucket? And if so, why did they move or why did they, I guess vacate?
Alan Roth: Anthony, this is Alan. I appreciate the questions. So it was, Manhattan and bankruptcies, but on top of that, there was many intentional move-outs. As part of our intense asset management approach, and so I would give a few examples. I know a number of you live in or around Connecticut and Norwalk by way of example, we've got a retailer that's going to stop paying rent here next month, and we're going to be down the entire year. And we are bringing target into that project, it's not going to open until likely Q2, Q3 of 2025, phenomenal merchandiser great and highly accretive transaction and something that was absolutely the right long-term decision for us yet impacting 2024. I would also take a couple of office supply examples. We have three of them in fact that we intentionally made the decision to replace them. One was Sprouts, one with Homesense, one with a Baptist Health medical facility that I think Nick had mentioned in his remarks. And again, this is just an opportunity to enhance merchandising, provide durable occupancy with enhanced tenant credit and get really significant rent growth. And so that is our proactive way of really thinking through this and just from the sort of that uneven climb comment, it's coming offline here in '24 from a rent-paying perspective and filtering its way back in year end and into '25.
Anthony Powell: Okay. If I get to my next question. So you look at '25 and '26, you have like 7% of your anchors, I guess, lease operations in those two years. Are you going to keep doing this and maybe pushing tenants out for higher rent, or is this kind of the peak of this activity in '24?
Mike Mas: I mean, look, I would just say from a practical perspective, we are constantly looking at our entire portfolio for opportunities to appropriately remerchandise, drive accretive returns, focus on redevelopment opportunities. That's always been part of our mantra. And we're going to certainly continue to do that.
Alan Roth: And I would just -- I'd just add that over the long-term, we'd come back to our components of same-property NOI growth, and would still expect to be in that 2.5% to 3% range.
Anthony Powell: Okay, thank you.
Operator: Our next question is from Ki Bin Kim with Truist Securities. Please proceed with your question.
Ki Bin Kim: Thanks. Just wanted to go back to Juan's question about OpEx expenses. I guess, just high-level, I know you explained some of the causes of it, but I guess how concerning is the increase in expenses as it pertains to your business and ability to push rent. And does that actually start to impact the way you think about where you want to own properties, whether that be local politics or how these local governments are run?
Mike Mas: I appreciate the question Ki Bin. Listen from on a go-forward basis, the directionality of our OpEx and the growth rate in that line item hasn't changed our capital allocation thoughts at all. We continue to want to grow our portfolio across the entirety of our regions, in fact, in particularly Phoenix, we'd like to dive into and add to the extent we can find some opportunities in that region, and add that to the Regency portfolio. But kind of no change from a capital allocation perspective as a result of the increases. I'll let Alan comment on the pressure that may or may not exist on rent growth.
Alan Roth: Yeah, I would say, Ki Bin, generally speaking, we're not seeing the pressure to rent growth. Does it play a small part? Sure. I mean at the end of the day our retailers certainly look at their overall occupancy costs. And so, when you kind of layer all of that in, again on the margin, I think that could certainly have a small little impact. But it's just not material enough at this point to really change I think the realities of where we are.
Ki Bin Kim: Okay. And then, quick follow-up here. The 50 basis points drag from the commenced occupancy, is that roughly equivalent to the NOI drag?
Mike Mas: Let me break down the NOI drag a little differently, which I think will help you out. So same-property NOI growth, let me go through the puts and takes to everyone's benefit, 2% to 2.5% again base rent is going to be the largest positive contributor to that growth rate, in, in fact about the same range. And that's rent steps, lease spreads, and the commencement of shop occupancy helping support that growth. Redevelopment contributions are going to be 50 basis points to 75 basis points to the positive. And then here's your question on the offsets. It's really coming from two primary areas, bankruptcies. It's about 50 basis points of drag in that area. And that's both actual announced, known bankruptcies, as well as the potential for bankruptcies in 2024. And then the Manhattan assets that we've spoken about today at length is dragging us by about 30 basis points. So that 80 bps Ki Bin that I just summarized for you, that's essentially tied to that commenced occupancy drag in the first quarter.
Ki Bin Kim: Okay. Thank you.
Operator: Our next question is from Linda Tsai with Jefferies. Please proceed with your question.
Linda Tsai: Thanks. Not sure if you've answered this with the previous line of questioning, but you said 2025 is setting up based on lease timing to be disproportionate year of growth in NOI. So does that mean '24 should be disproportionately above your long-term 3% target?
Lisa Palmer: I think you meant to say 2025 in your question, not 2024.
Mike Mas: Yeah, we're not meeting our objectives in 2024 that we articulate on a long-term basis. And that we -- frankly, hold us -- we're pretty serious about holding ourselves accountable to. And in '25, yes, to the extent, and again, we're not giving '25 guidance, Linda. But to the extent we -- the portfolio delivers what we see it delivering at the end of this year, going into '25 and compressing that commenced rate, bringing that -- growing SNO pipeline back online, yeah, that should translate into above average core operating earnings growth, all else being equal, and I stress, all else being equal. We're going to have a bond to refinance again in '25. I mean, there are other elements to the plan that certainly incorporate, that will impact that result. But I think the idea and the direction that you have in mind is correct.
Lisa Palmer: Yeah, and the other big part of all else being equal is, we can't control any geopolitical or economic uncertainty. But all else being equal, absolutely agree. That's why I'd come back to over the long term, two years isn't a long term, but it's an average. We would expect to be in that 2.5% to 3% average same-property NOI growth.
Linda Tsai: That's very helpful. Thank you. And my second question is, on the Rite Aid's and Bed Bath & Beyond that contribute to the economic anchor occupancy decline. Can you just give us an update on where you are in various stages of signed leases versus working on backfill still?
Alan Roth: Yeah, Linda, happy to answer that question. This is Alan. So the team has made really great progress. I'll start with Bed Bath & Beyond, 9 of our 12 are executed. And again, so a number of those won't be coming online until later in this year, but really great retailers REI, RH (NYSE:RH) outlet, LL Bean, Fresh Market, TJ Maxx. I mean, there's some just great users that are backfilling these, and we've experienced rent spreads that actually exceeded what we anticipated, north of 40%, while also keeping our capital levels as I mentioned in my remarks at a very I think judicious level for those. So the remaining three are all in negotiation right now. So we are beyond the point of prospecting. We hope to wrap those up in relative short order and really have all of those back open and rent paying. With respect to Rite Aid, we had we had at the time of filing 22 locations, including those that came through the UBP merger, six of those have been rejected, five are closed. One is in the closing process. And again, I think a testament to how our team proactively gets out in front of these, two of those six locations are already leased. One to a hardware store, one to fitness operator. And so, we're actually pursuing the remaining four. And we're going to stay on our front foot relative to the balance of that portfolio as you know, Rite Aid continues to go through that process as they haven't officially exited bankruptcy.
Linda Tsai: And how do we think about those rents for Rite Aid, are they sort of all over the map. Are they above or below market?
Alan Roth: Yeah, interestingly enough, I like the way you just phrased that. They are all over the map. However, I will tell you that we are double-digit certainly from a mark-to-market. I'd say, generally speaking 15% to 20%, but there is some really massive ones that can be in there, there are some flat ones. So -- but generally I feel really good about certainly the upside depending on those that we get back.
Linda Tsai: Thank you.
Operator: [Operator Instructions] Our next question is from Mike Mueller with JPMorgan (NYSE:JPM). Please proceed with your question.
Michael Mueller: Yeah, hi, just a really quick one here. Your 93.4% small-shop leased rate, what's the commenced level that goes along with that and where do you think that commenced level can grind higher to, if at all?
Mike Mas: Let's see here, we are at a 89.9 commenced shop occupancy. Our -- the SNO on the shops is 350 basis points at year end. How much higher -- what record are you going to set, Alan?
Alan Roth: North, so we're going to continue to take it north, Mike. I would -- I mean --
Mike Mas: We're getting pretty close. Let me help out. We're getting pretty close to. I mean we're in thin air. As I've used the words to describe the level of leased rate that we have in our shop space, I like to think we can continue to grind it higher. We have great centers with really good spaces that are still available and a great leasing team. And we'll keep pushing. The commence is just going to follow, right. So we are going to deliver on these leases. On balance, all in, that spread on a normal basis, including anchor, should be 175 basis points between leased and commenced.
Michael Mueller: Okay, so that spread applies to small shops too.
Mike Mas: The small shops spread will be wider. The anchor spread will be narrower. We'll get back to you, Mike, on what kind of a long-term shop spread is.
Michael Mueller: Okay, okay. Appreciate it. Thank you.
Operator: Our next question is from Floris van Dijkum with Compass Point. Please proceed with your question.
Kenneth Billingsley: Hey, good afternoon. This is Ken Billingsley for Floris. Quick question on your guidance for '24. Given the same economic conditions that are supporting your core business, you're guiding to a 100 million in dispositions at approximately 5.5% cap rate. Can you provide some color as to why you're seeing that given your confidence in this cap rate?
Nick Wibbenmeyer: Ken, this is Nick. I appreciate that question. As you know, our guidance on disposition is when we have clear visibility to that. And so, as we've stated over the last several years, now we feel really good about our portfolio, and don't have the need to sell assets that have risk. But we still have non-strategic assets that we will prioritize for sale. And so, those assets and the guidance we do have visibility to that pricing. They're non-strategic, and for instance a couple of them are single-tenant. And so, we feel good about that guidance, and we feel good about that cap rate given those the assets have been selected to be disposed off.
Kenneth Billingsley: Great. Thank you.
Operator: Thank you. There are no further questions at this time. I'd like to hand the floor over to Lisa Palmer for any closing comments.
Lisa Palmer: Thank you all for your interest in Regency. And hope everyone has a great weekend. Thank you.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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