Core Insights - The company reported its best leasing quarter ever, achieving 727,000 square feet of comparable space leased at an average cash rent of $35.71, which is 28% higher than the previous tenant's rent [1] - Two-thirds of the leased space was for renewals, indicating strong tenant retention, while over half of the new leases were for currently occupied spaces, showcasing the attractiveness of the shopping centers [1][12] - The company experienced a strong comparable operating income growth of 4.4% for the quarter, leading to a Funds From Operations (FFO) per share of $1.77, despite some negative impacts from capitalized interest and operating costs [5][19] Leasing Performance - The company recorded a record 123 comparable deals with impressive rent spreads of 28% over prior rents, reflecting strong demand for its properties [12] - The occupancy rate in the comparable pool increased by 40 basis points quarter-over-quarter and 20 basis points year-over-year, reaching 94% [12] - The overall occupancy rate across all shopping centers stands at 93.8%, with a healthy leased rate of 95.7% expected to grow further due to a strong pipeline of new leases [13][14] Development and Acquisitions - The company is progressing well with residential construction projects in Hoboken, New Jersey, and Balakinwood, Pennsylvania, with a total capital commitment of approximately $280 million [6] - The acquisition of Annapolis Town Center for $187 million is expected to enhance surrounding merchandising and increase rental income, supported by strong existing anchors like Whole Foods and Target [10][17] - The company is actively pursuing additional acquisitions, with another large center expected to close in the fourth quarter, further expanding its portfolio in affluent markets [10][24] Financial Position - The company maintains significant liquidity of approximately $1.3 billion, with a strong balance sheet reflected in a net debt to EBITDA ratio of 5.6 times [20] - The company is executing a capital recycling program, with $400 million in assets at various stages of sale, and expects to close approximately $200 million by year-end [20][22] - Guidance for FFO per share for 2025 has been raised to a range of $7.20 to $7.26, representing a growth of 6.8% at the midpoint over 2024 [23] Market Outlook - The company anticipates continued strong demand for its retail portfolio, with expectations for comparable occupied levels to be in the low 94% range by year-end [24] - The leasing environment remains robust, with a significant portion of new leases being signed for currently occupied spaces, indicating a healthy market dynamic [14][70] - The company is focused on enhancing internal and external growth, leveraging its experienced team to drive leasing performance and operational efficiency [11][62]

Financial Data and Key Metrics Changes - Revenue increased by 2.7% compared to 2024, while FFO decreased to $0.37 per share and AFFO decreased to $54,500,000 [14] - Same property cash NOI was down 1.1%, primarily due to a tough comparison with the previous year which included a large property tax refund [14] - G&A expenses remained low at approximately 4.9% of revenue relative to the benchmark group [14] - Guidance for 2025 net income per common share diluted is expected to be between $0.07 and $0.11, with FFO per fully diluted share narrowed to between $1.43 and $1.47 [15] Business Line Data and Key Metrics Changes - The office portfolio leased 973,000 square feet, including over 300,000 square feet of new leases, achieving positive absorption for three of the last four quarters [5][12] - The multifamily portfolio maintained full occupancy with cash NOI growth exceeding 10% [6] - Office rental rates remained steady with low concessions [5] Market Data and Key Metrics Changes - The overall straight-line value of new leases signed increased by 2.4%, while cash spreads decreased by 13.3% [12] - The residential portfolio remained nearly fully leased at 99.3% [13] Company Strategy and Development Direction - The company is focused on four key growth strategies: leasing up the office portfolio, redeveloping the Brentwood apartment property, re-tenanting Studio Plaza, and augmenting the portfolio with high-quality properties [6] - Plans to convert a recently acquired 10,900 square foot office property into 320 apartments in the Westwood submarket were announced, aiming to enhance property value and reduce office vacancy [6][9] Management's Comments on Operating Environment and Future Outlook - Management noted no impact on leasing from macroeconomic concerns, with strong results in both office and residential portfolios [5] - The leasing pipeline is robust, with remaining office expirations in 2025 and 2026 below historical averages [12] - Management expressed optimism about leasing activity despite challenges, indicating a strong pipeline and a focus on larger deals [20][25] Other Important Information - The company has addressed all 2025 debt maturities and is refinancing 2026 debt maturities at competitive rates [7] - The total project cost for the conversion of 10900 Wilshire is expected to be approximately $200 million to $250 million [9] Q&A Session Summary Question: Leasing activity versus occupancy and lease rate - Management acknowledged a significant gap between leased and occupied space, indicating strong leasing activity but longer timelines for larger deals [19][20] Question: Lease rate and timing of NOI contributions from Studio Plaza - Management did not disclose specific leasing stats but confirmed positive velocity in leasing and anticipated NOI contributions over time [30] Question: Overall view of LA's economy and demand for real estate - Management noted that while residential rents are high, their specific market segment remains strong, and they expect to meet their performance expectations for the year [44][48] Question: Impact of California's tax credits on demand - Management indicated limited visibility into the impact of tax credits on demand, as they primarily deal with administrative offices rather than studios [75] Question: Timeline and NOI drag from 10900 Wilshire conversion - Management confirmed that there will be a lag between tenant move-outs and new tenant move-ins, but they expect stable NOI contributions from the building [34][90] Question: Decision to convert 10900 Wilshire to residential - Management explained that the decision was based on unique building characteristics and market conditions, making conversion a cost-effective option [88][90]

Financial Data and Key Metrics Changes - The company announced a strategic transaction with Sixth Street, enhancing borrowing capacity and securing up to $500 million for acquisitions [6][7] - The same store portfolio has been reset to 168 buildings, representing 89% of the total in-place portfolio, with Q4 2024 occupancy at approximately 92% [20][48] - The company anticipates a 380 basis points occupancy improvement, equating to over 1 million square feet lease-up [20] Business Line Data and Key Metrics Changes - The Cincinnati acquisitions totaled approximately 762,000 square feet for $61.3 million, contributing to capital deployment efforts [10] - The company has a pipeline exceeding 11 million square feet and $1 billion in potential acquisitions, primarily in existing markets [11] Market Data and Key Metrics Changes - Market conditions remain favorable for buildings under 250,000 square feet, with over 95% of leases concentrated in this segment [9] - The rental growth rate in the company's markets is normalized between 3% and 4%, with mid-teens to low 20% growth expected on rent spreads for small to midsize spaces [32] Company Strategy and Development Direction - The focus for 2025 will be on leasing opportunities and capital deployment, with a strategic emphasis on expanding scale [7][11] - The company is positioned to execute on leasing and capital deployment strategies, leveraging the capital secured from the Sixth Street transaction [11][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tenant challenges and leasing remaining spaces, with strong momentum anticipated for 2025 [8][9] - The company is optimistic about the leasing environment, with significant leasing activity noted towards the end of January and into February [27] Other Important Information - The company has made solid progress on capital deployment and is strategically positioned to expand its scale in existing markets [11] - Management highlighted the importance of value-add acquisitions and the capability to handle multiple projects simultaneously [78] Q&A Session Summary Question: What is the potential for acquisitions and their timing? - The company assumes $360 million of acquisitions at the midpoint, with about $70 million already banked, and expects to deploy the remainder evenly over the coming quarters [17] Question: Can you provide details on the leasing environment and remaining vacancies? - All carryover vacant space has already commenced leasing, with occupancy increasing from 92.5% to 94.3% this year, indicating strong leasing activity [26][27] Question: What are the expectations for the St. Louis lease and tenant renewals? - The tenant has expressed interest in expanding and continuing the lease, despite a reduction in square footage [38] Question: How does the company view the Sixth Street transaction and stock performance? - Management believes the transaction is transformative and is focused on deploying capital effectively, with a buyback strategy in place if stock performance does not improve [56][57] Question: What are the pricing trends in the market? - The company is experiencing negative leverage in the marketplace, with significant competition for acquisitions, indicating a challenging environment for pricing [69][74] Question: Are there any impacts from tariffs or reshoring initiatives? - There is a significant increase in demand for bulk storage requirements due to tariffs, with companies rushing to secure warehouse space [90][91]