Financial Data and Key Metrics Changes - Same center NOI increased by 4.2% and core FFO per share increased by 8.5% in Q2 2025 [4][22] - NAREIT FFO increased to $86 million or $0.62 per diluted share, reflecting year-over-year per share growth of 8.8% [22] - Core FFO increased to $88.2 million or $0.64 per diluted share, reflecting year-over-year per share growth of 8.5% [22] - The company raised its full-year 2025 earnings guidance for same center NOI, core FFO per share, and NAREIT FFO per share [4][25] Business Line Data and Key Metrics Changes - The company reported strong leasing momentum with comparable renewal rent spreads of 19.1% and new leasing rent spreads of 34.6% in Q2 [15][16] - Portfolio occupancy remained high at 97.4% leased, with anchor occupancy at 98.9% [16][17] - Bad debt increased from a year ago but remained within guidance range, indicating strong retailer demand [18] Market Data and Key Metrics Changes - Approximately 70% of the company's ABR comes from necessity-based goods and services, providing predictable cash flows [8] - The average population in the three-mile trade area is 68,000 with a median household income of $92,000, which is 15% above the US median [19] - The company has limited exposure to distressed retailers, with the top 10 neighbors on the watch list representing about 2% of ABR [20] Company Strategy and Development Direction - The company focuses on a grocery-anchored portfolio and necessity-based retail, which has created a resilient portfolio [5][6] - The acquisition strategy is disciplined, targeting high-quality centers below replacement costs with strong growth profiles [12][26] - The company aims for mid to high single-digit core FFO per share growth annually on a long-term basis [7][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the consumer and the company's ability to outperform as retailer demand remains strong [13] - The company anticipates continued strong leasing demand and a healthy development pipeline [10] - Management noted that while tariffs are a concern, approximately 85% of neighbors based on ABR will experience limited impact [8][68] Other Important Information - The company has approximately $972 million of liquidity to support acquisition plans and no meaningful maturities until 2027 [23] - The weighted average interest rate of the company's debt is 4.4%, with 95% of total debt being fixed rate [24] - The company completed $133 million in asset purchases during the quarter, bringing year-to-date gross acquisitions to $287 million [12] Q&A Session Summary Question: What has allowed PICO to win transactions in a competitive market? - Management attributed success to a disciplined acquisition strategy and active participation in multiple markets [29][30] Question: When will tenant replacement headwinds be resolved? - Management indicated that backfilling efforts are ongoing, with strong demand for junior boxes and inline spaces [32][35] Question: What is the outlook for same store NOI growth in the second half? - Management projected consistent growth for the remainder of the year, with expectations for sequential improvement [40][41] Question: How is the transaction market currently? - Management noted that while there is more product on the market, they remain disciplined in their acquisition strategy [49][50] Question: What is the company's stance on variable rate debt? - Management confirmed that 95% of debt is fixed and they will manage variable rate exposure opportunistically [51][54] Question: How does the company view consumer behavior amidst economic uncertainty? - Management observed strong foot traffic and sales growth despite negative consumer sentiment, attributing this to low unemployment rates [94][96] Question: Are there any impacts from Kroger's store closures? - Management confirmed one Kroger location on the closure list but noted a replacement grocer is already secured for that site [102][103]

Financial Data and Key Metrics Changes - The company reported a core FFO per share of $0.27 for Q1 2025, flat compared to the prior year, reflecting the impact of portfolio optimization and deleveraging strategy completed last year [14] - Same store NOI grew by 2.7%, driven by a 2.3% increase in same store revenue and a 1.6% increase in operating expenses year-over-year [14][19] - The average occupancy increased by 100 basis points year-over-year, contributing to the same store NOI growth [6][14] Business Line Data and Key Metrics Changes - The company completed value-add renovations on 275 units with a weighted average return on investment of 16.2% [6] - The company has 28 communities with over 4,600 units in the ongoing value-add program, expecting to complete between 505,000 units this year [6] - The company sold its final asset in Birmingham, Alabama for $111 million, completing its exit from that market [7] Market Data and Key Metrics Changes - In 2020, approximately 79,000 new apartment units were delivered across the company's submarkets, representing 6.1% of existing supply [10] - The company expects only 32,000 new deliveries in 2025 and 24,000 units in 2026, representing a 60% annual decrease in 2025 and an additional 24% decrease in 2026 [10] - The company forecasts positive net absorption of 8.5% in its submarkets for 2025, significantly higher than the national average of 1.5% [11][65] Company Strategy and Development Direction - The company is focused on a long-term investment strategy, capitalizing on strong population and employment growth in its communities [5][12] - The company aims to maintain pricing power and expects ongoing rental rate gains without sacrificing occupancy [12][19] - The acquisition pipeline remains strong, with ample liquidity to fund accretive investments [8][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties but remains confident in supply and demand fundamentals driving operations [12][19] - The company expects to enter 2026 with solid earnings momentum and growth opportunities [20] - Management noted that demand for Class B communities has proven resilient, with stable occupancy rates and positive blended rent growth [11][52] Other Important Information - The company ended the quarter with a net debt to adjusted EBITDA ratio of 6.3 times, with plans to achieve a mid-five ratio by year-end 2025 [17] - The company has nearly $750 million of liquidity available for investments [18] Q&A Session Summary Question: Can you walk through the leasing spreads for the first quarter? - New leases were down 4.6%, while renewals were up 4.8%. The company did not experience the same level of decline in rental rates as some peers due to its Class B portfolio [23][24] Question: Have you seen any evidence of stress from tariffs or macro uncertainty? - The company has not felt significant effects from tariffs or deportations and has seen a decrease in bad debt by 50 basis points year-over-year [25][27] Question: Can you speak to trends in leasing traffic and conversion? - Demand is up 25% compared to the same time last year, with conversion rates remaining stable [31] Question: What are your expectations for new lease rates and renewals? - The company anticipates positive trends in blended rental rates, with improvements noted month-to-month [36][38] Question: How are you thinking about the revenue guidance for the full year? - The company expects continued strong demand and significant declines in new supply, maintaining its revenue guidance [19][65] Question: Can you discuss the impact of insurance renewals on expenses? - The company expects a net decrease in insurance premiums despite initially assuming a 10% increase [72][75] Question: Are there any other markets you expect to exit by year-end? - Currently, there are no expected changes to the company's market dispositions [81] Question: How do you expect the performance between Class A and Class B to trend? - Class B properties are showing better rental rate growth compared to Class A properties, which are facing more competition from new supply [88][89]