Rithm Property Trust Inc (RPT) 2021 Q4 法說會逐字稿

Greetings, and welcome to the RPT Realty Fourth Quarter 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Vin Chao, Managing Director of Finance and Investments. Please proceed.

Good morning and thank you for joining us for RPT's Fourth Quarter 2021 Earnings Conference Call.

At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Additionally, statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.

Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks could cause actual results to differ from expectations. Certain of these risk factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2021, that will be filed later today, and in our earnings release for the fourth quarter 2021.

Certain of these statements made on today's call also involve non-GAAP financial measures. Listeners are directed to our fourth quarter 2021 and third quarter 2021 press releases, which include definitions of those non-GAAP measures and reconciliations to the nearest GAAP measures and which are available on our website in the Investors section.

I'd like to now turn the call over to President and CEO, Brian Harper; and CFO, Mike Fitzmaurice, for their opening remarks, after which, we will open the call for questions.

Thanks, Vin. Good morning, and thank you for joining our call today. 2021 was a transformational year for RPT across all areas of our business, and we are in better position today than we ever have been in RPT's history to grow earnings and create value for our shareholders.

Compared to 2020, we expect to grow 2022 operating FFO by a robust 32%, primarily driven by strong operating performance, accretive acquisitions and fee income. We created another growth lever in our fund business with the formation of our net lease platform to take advantage of dislocations between multi-tenant and single-tenant valuations and to enhance our management fee income stream.

Through our data-driven approach, we were the top buyer of open-air shopping centers in 2021 with Boston becoming our third largest market in less than a year, vastly improving our geographic footprint and portfolio quality. We leased more space than we have in any year since 2016, and we reported our fourth consecutive year of new lease spreads of 20% or more. We significantly upgraded our tenancy by replacing weaker credits with top investment grade-rated tenants in many cases, while our signed not commenced backlog continues to accelerate.

We assessed all types of capital, including equity, debt and joint venture capital totaling $1.1 billion, while addressing a significant amount of our debt maturities through 2024. As was the case since our current senior management team joined RPT over 3 years ago, our actions in '21 were done through the lens of setting up RPT for bottom line earnings growth and NAV growth over the next few years that we believe will lead the sector.

Starting with investments. Through our strategic investment platforms, we got an early start on the acquisition front and were able to successfully close on almost $550 million of gross multi-tenant acquisitions in 2021. The timing of our acquisitions could not have been better as we used the COVID-induced downturn to curate a portfolio of 10 high-quality assets in strong markets at attractive cap rates. Based on today's market comps and our performance against underwriting, we think these assets would trade about 70 basis points tighter than where we bought them, highlighting the opportunistic timing of buying in a short window before cap rates compress considerably.

In addition, we believe we have a competitive advantage that our data science approach provides us when evaluating acquisitions. Over the past several months, we have invested in talent and technology to assess risks, analyze evolving trends and to better project the future success of a property. In the long run, this data-driven approach will optimize our capital allocation decision-making. Clearly, it happened in '21.

Let me put the benefits of our '21 acquisitions into perspective. In just 1 year, we increased our exposure to the vibrant and growing markets of Boston, Atlanta, Tampa and Nashville by 12%, while reducing our exposure to Chicago, Detroit and Cincinnati by 8%. And keep in mind, this was done on an earnings accretive basis with our net acquisition activities, including joint venture fees and preferred income, contributing about $0.08 of operating FFO growth in '21.

Our '21 acquisitions were also high quality, featuring strong grocery-anchored tenants, such as Wegmans and Whole Foods, with sales performance of $775 per square foot. We expect these acquisitions to generate well above trend annual NOI growth of approximately 6% over the next 3 years, primarily driven by leases signed or in advanced negotiation that have yet to commence, totaling $1.6 million in ABR and estimated recovery income.

During the fourth quarter, we closed on the acquisition of Highland Lakes in Tampa for $15 million. The current occupancy is just 51%. But during underwriting, we were able to secure a new lease with a premier AA-rated grocer to replace the former Stein Mart box, which will increase occupancy to over 95% upon commencement of the new lease. This is a great example of the kind of value creation opportunities that we are looking for when we can buy vacancy and utilize our strong leasing platform to generate a 150-basis point spread between the stabilized yield of the center and current market cap rates.

We also closed on the Dedham shopping center in Boston through our grocery-focused joint venture platform. This is a great infill property that sits inside the Boston 128 loop and is anchored by a high-volume Stop & Shop that ranked amongst the top 2% of U.S. shopping centers for traffic in 2020. TJX and DICK'S also do extremely well here. The center features strong demographics with 3-mile household income of $136,000 and population density of 109,000 and is a great addition to our Boston portfolio. We already have a signed lease with a 25,000 square foot marquee retailer that we look forward to announcing soon.

Looking forward, we expect to remain active on the investment front. Our industry-leading acquisition volume in '21 has led to increased deal flow. And although cap rates have compressed, our 3 investment platforms provide us with a competitive advantage through enhanced yields.

We have a deep acquisition pipeline with a variety of opportunities ranging from portfolio deals where we can allocate properties across our platforms, to larger centers where we can enhance returns by selling parcels to our net lease joint venture.

We are also looking at smaller grocery-anchored centers and more granular opportunities in high-income infill suburbs or existing metros where we already have scale. For instance, we are looking at some smaller opportunities outside Cambridge, Massachusetts, where we could curate a portfolio over time with well above portfolio average incomes and densities. These properties are currently owned by mom and pops, where we could realize significant NOI growth. We're also looking at a high barrier-to-entry center north of Boston that has 2 high-performing grocers with tenant sales that would be in the top 5% of our portfolio and where we could enhance our yield by selling out parcels to the net lease joint venture.

In our net lease platform, we closed on $191 million of single-tenant net lease properties in '21. We now see opportunities to acquire multi-tenant centers outside of RPT's target markets, like we did with our Mountain Valley acquisition. The inclusion of multi-tenant properties increases the platform's pipeline, while preserving the ability to realize multi- to single-tenant arbitrage opportunities. We expect Tyler and his team to be very busy this year.

As we discussed last quarter, the froth we are seeing is also allowing us to revisit potential asset recycling opportunities, where we can redeploy proceeds from slower growth markets into higher and better uses, like we did with our Market Plaza and Webster Place sales in Chicago, which is a weaker market in our scoring model.

Regarding Webster, after evaluating a multitude of densification and leasing scenarios, we concluded that we could realize the vast majority of the expected value without any development or leasing risk by selling it and deploying the proceeds into higher risk-adjusted return opportunities. On Market Plaza, we simply felt that we had harvested the NOI upside in the asset, and selling it at a 5.6% cap rate was the best interest of our shareholders. In both cases, the data and our expected IRRs governed our decisions, and we are pleased with the execution.

Given the disconnect between public and private market values, dispositions are an attractive source of capital that also allows us to further reshape and improve our portfolio quality. As Mike will detail later, we have embedded about $100 million of dispositions in non-core markets in our 2022 outlook, which will be match-funded with about $125 million of projected acquisitions.

Turning to leasing. While no one wishes COVID to happen, the pandemic has reinforced the importance of brick-and-mortar to the overall retail distribution channel and has fueled a renaissance of tenant demand. We are currently in the midst of the strongest leasing environment that I have ever seen in my career. Demand is broad-based across all property types, geographies and tenant categories.

During the quarter, we signed 385,000 square feet at nearly $20 per square foot, representing a 25% increase over our portfolio average. For the year, we signed 1.7 million square feet of leases, which is the highest annual level since 2016 and validates our high-quality, in-demand portfolio. We continue to unlock the embedded growth potential in the portfolio as evidenced by the robust 33% new lease and 9% blended spread we achieved.

Our strong leasing performance during the year and in the fourth quarter drove our signed not opened backlog to $6.9 million. In addition to our growing SNO pool, we are also in advanced negotiations with grocers, exciting fast casual concepts, boutique fitness, wholesale clubs and more on leases totaling $3.3 million in incremental ABR and estimated recovery income.

Equally important to locking in attractive economics are the quality improvements we were able to achieve by replacing weaker credit tenants for stronger ones. We're also able to increase our ABR from centers with a grocer to 71% from 65% in 2019.

Overall, our tenancy continues to get stronger. We are turning AirTime Trampoline & Game Park, Shoppers Food Warehouse, Lane Bryant and Stein Mart into a AA-rated grocer, Giant/Ahold, REI, Sephora, Burlington and Ferguson. As you can see on Page 17 of our investor deck on our website, the rent for these new tenants is about double what they are replacing, and cap rate compression for these assets is about 50 to 75 basis points, both metrics representing significant value creation.

As leases come online, you'll see that our top tenancy will begin to change more materially as signed leases commence. Including signed leases and one in advanced negotiation, the previously mentioned premier investment-grade grocer is expected to become a top 5 tenant upon rent commencement. We also continue to think creatively about the highest and best use of our properties to maximize value.

We recently executed an agreement with DeBartolo Development. Upon completion of certain closing conditions, including obtaining entitlements, we will enter into a joint venture with them to build a roughly 300-unit multifamily property on undeveloped land next to our Parkway Shops in Jacksonville, Florida. We will contribute the land and $500,000 for a 50% equity stake in the venture.

Sticking with development. We're working on an exciting redevelopment plan at Marketplace of Delray, which sits in the highly desirable Delray Beach submarket of Miami. We are seeing robust tenant demand here, given the quality of the real estate and the strength of the market.

We are also set to break ground in a few weeks at our Crossroads property in the Miami market. Here, we are demolishing the existing Publix store and building them a new larger prototype to better serve their customers. Total cost is $4.4 million with expected return on cost of 6% to 8%. Please see Page 21 of our supplemental for further detail.

Finally, we have also identified an opportunity at our Hunter's Square asset in Oakland County, Michigan, where we expect to redevelop the north side of the center. We have strong interest from a major investment grade-rated grocer to anchor the project for us. We expect to share more details on the scope, cost, yields and timing over the next quarter or 2.

As we look forward in 2022, we will be very active on all capital allocation fronts, acquisitions across all 3 of our investment platforms, opportunistic dispositions and continued investment in leasing and development, all of which will drive future earnings and NAV growth.

And with that, I'll turn the call over to Mike to review our quarterly results and provide color on our 2022 outlook.

Thanks, Brian, and good morning, everyone. Today, I will discuss our fourth quarter 2021 operating and financial results in more detail, recap our financing activities for the year and end with commentary to help everyone understand the growth drivers for our 2022 earnings outlook.

Fourth quarter operating FFO per share of $0.25 was down $0.02 from last quarter, primarily due to higher-than-expected G&A, due to our above-target performance against our short-term incentive plan, partially offset by NOI from acquisitions. For the year, we reported operating FFO per share of $0.95, a 22% increase over 2020's results and about $0.01 above the high end of our guidance range, primarily driven by higher same-property NOI.

Collections continue to improve with 99% of fourth quarter rent collected, up from 98% of third quarter rent collected as reported on our third quarter call. And collection of deferrals continues to exceed our expectations. Today, all material tenants are in compliance with their rent relief agreements. And we only have about $2.5 million of deferred rent net of reserves yet to be collected.

As Brian mentioned, we had a strong finish to the year as operating fundamentals for our portfolio continued to strengthen. We signed 44 comparable leases, totaling 230,000 square feet at a blended re-leasing spread of 13%, including a 73% new lease spread and a 7% renewal spread. Our new lease spread is at its highest quarterly level since the second quarter of 2018, while renewal spreads have steadily increased for the seventh consecutive quarter.

As we look ahead in 2022, we expect our new leasing spreads to continue to be in the double digits, demonstrating the continued mark-to-market opportunity in our portfolio. Our lease rate ended the quarter at 93.1%, up about 60 basis points from last quarter. Our small shop lease percentage is up to 85%, a 100 basis point sequential increase in the quarter, demonstrating progress to our long-term goal of 91% to 92%. Key categories of demand include boutique fitness, fast casual and service.

We ended the year with a signed not opened backlog, including leases in advanced lease negotiations, of $10.2 million or $0.11 per share of operating FFO. In terms of cadence, the annual incremental benefit is $0.04 per share in 2022, $0.05 in 2023 and $0.02 in 2024. Clearly, this is providing a visible tailwind to earnings, setting us up for strong growth over the next few years. And this, of course, is absent any incremental growth from our external investment platforms.

Turning to the balance sheet and liquidity. It was a very busy quarter on the capital markets front. As one of our core tenets to our balance sheet strategy, we continue to proactively and opportunistically address near-term debt maturities. During the quarter and prior to the jump in interest rates, we raised $130 million in 9- and 10-year private placement bonds at a blended rate of 3.75% to repay 2023 and 2024 debt maturities, adding about a year of duration to our balance sheet and leaving only about 20% of maturing debt through 2024 with no maturities in 2022.

In addition, we closed on $80 million of mortgage debt within our grocery-anchored joint venture with GIC. We are very pleased with the weighted average tenor of 9 years and an interest rate of under 3%. On the disposition front, we sold 2 non-core assets in the Chicago market for just under $60 million at a weighted average cap rate of under 4%. As a result, we ended the year with $14 million of cash and nearly full availability on our revolver, leaving us with total liquidity of approximately $329 million.

We continue to manage leverage very carefully. We ended the fourth quarter with net debt to annualized adjusted EBITDA of 6.8x, flat from last quarter. However, including our signed not commenced backlog of $10.2 million that I referenced earlier, our leverage would be 6.3x. We continue to expect our leverage to fall towards our target range of 5.5 to 6.5x as we drive occupancy towards a stabilized 95% occupancy level and continue to capture our embedded mark-to-market opportunity. And we will also look for opportunities to accelerate this trajectory through various capital allocation options.

Moving on to our initial 2022 outlook. We are establishing our guidance range of $1 to $1.05 per share, representing 8% growth at the midpoint and 11% growth at the high end. Let's begin with the internal drivers. Same-property NOI growth is expected to be 3% to 5%, which excludes net impact of bad debt reversals in 2021 related to prior periods. This growth is primarily driven by occupancy, which we expect to increase to approximately 91.5% to 92% by the end of the year. Our same-property NOI outlook in 2022 embeds about 100 basis points of bad debt as a percentage of same-property NOI.

Regarding G&A expense, and as I mentioned last quarter, we expect it to be plus or minus $34 million or $8.5 million per quarter. It's important to note that we do not forecast [spec] termination revenue or future reversals of prior period reserves, which in total contributed $0.03 per share in 2021.

Let's now move to the external drivers. External assumptions underpinning our 2022 operating FFO guidance range are comprised of acquisitions, fee income and dispositions. We are assuming plus or minus $125 million of acquisitions that we expect to close during the second and third quarters of this year. In terms of dispositions, we have embedded about plus or minus $100 million, which is expected to close ratably over the course of 2022. Fee and preferred income related to our joint venture platforms is expected to be up approximately $0.02 over 2021 due to the annualization of acquisitions in our grocery-anchored and net lease investment platforms.

As we look out over the coming years, we expect to generate an additional $0.05 of FFO annually upon full deployment of committed capital between our joint venture platforms. As for the shape of operating FFO, we expect it to decelerate in the first half of the year and reaccelerate in the second half of the year. The deceleration is a result of the planned remerchandising of a handful of anchored spaces that already have signed backfills in addition to disposition timing. The reacceleration in the second half is a result of the signed not commenced coming online in addition to acquisition timing.

And with that, I will turn the call back to the operator to open the line for questions.

(Operator Instructions) Our first question comes from Derek Johnston with Deutsche Bank.

Brian, can you discuss the net acquisition and dispo guide? I mean, last year, it was very active with over $500 million between on balance sheet, R2G, RGMZ and then RGMZ also had some meaningful contributions. But I was hoping you could expand on the net acquisition guide for '22 both on balance sheet and with partners, especially since the initial guide is lower than last year's pace.

Sure. I wouldn't read anything into our acquisitions guidance. This is something we typically don't guide to. We didn't last year, and you saw those results. The $125 million represents just really what we have visibility on or basically what's in contract or awarded to us at this time.

What can I tell you is the following. We are extremely focused on investments. We are as much an investment company as we are a leasing operations company. We have 2 investment deal pipeline meetings a week. We have 3 platforms to deploy: balance sheet; grocer JV, which we recently got a $500 million upsize; and our fund business, which we have $1.1 billion to deploy. And as I said earlier, we are looking at all product types now from grocer to last-mile/power, credit centers, shadow anchor and even infill street retail into our core markets.

It's definitely competitive out there. But as we've shown with our decentralized approach, we are uncovering a lot of unique off-market opportunities where we can immediately add value, similar to the Highland Lakes deal, where we signed the AA investment-grade grocer simultaneously to close. I could say, too, obviously, cap rates are compressing in all product types. But with our 3 platforms that we set up and spent a lot of time setting these up, we are seeing ways to create outsized yields with the moat we've created with those platforms.

We are also seeing higher unlevered IRRs into the high single digits because of our ability to apply instant value creation with our deep Rolodex of tenants. Investments, Derek, is something where I'm personally focused on and energized on all fronts and -- especially coming off a large year of capital deployment.

No, Brian, that's very helpful and insightful. All right. I guess, the second question, I was hoping you can expand on the contribution and development agreement for the 300-unit multifamily at Parkway. I mean, first off, it seems like a good basis for a 50% equity in the JV. And is this a new growth avenue RPT is now tapping or more of a one-off deal? How do you view this opportunity set, given your portfolio?

Yes. No, I mean, especially in Southeast and the Northeast markets and even some in the Midwest, it is potentially a growth avenue with the selective partners. As I said, we are a retail company. We're not going to be a residential company. We have a tremendous relationship with DeBartolo. They're based in Tampa and have done a number of deals throughout the country. And really, this was land that was raw and going through the entitlement process as we are doing now, we saw this as a very unique and the highest way to drive the highest IRR possible.

And to kind of give you a framework on that, we're expecting high 20s, maybe even [30] levered IRR upon exit on this. And that's even conservatively, especially in the cap rate compressing markets of multifamily. So we're excited. We're flattered with the partnership and expect to grow with them and others, maybe even the public REITs on some unused land in our -- next to our centers.

Our next question comes from Todd Thomas with KeyBanc Capital.

First question, I just wanted to follow up, I guess, on the investment outlook. It sounds like there's a lot of opportunity out there across the spectrum of products that you're seeing. You have the additional $500 million commitment from GIC. But can you talk about the importance of RPT's equity cost of capital to the investment formula here? You issued stock -- equity at about $14 a share -- a little under $14 a share. How sensitive are you to the stock price, which today is a little under $13? What does that mean for deal flow, particularly as cap rates in the private market have compressed?

No. Sure, Todd. Appreciate the question. First, I think from our own portfolio, we have high-quality assets that sit in our non-core markets that we can monetize. We were active late last year on that front with 2 assets in our Chicago market, where we sold together at a sub-4% cap rate, where we can absolutely redeploy accretively into acquisitions. And we're taking the same page in that playbook this year with a few assets in non-core markets, where we can get very attractive yields and be able to redeploy into these better markets that Brian has described time and time again.

From an equity standpoint, look, we're going to be opportunistic. You saw us access the equity markets last year through our ATM program at pretty healthy prices. And it really comes down to use for us. I mean, Brian has talked about it over and over again. I have talked about it over and over again. With the power of the platforms, we're able really to enhance our yields through the arbitrage opportunities that we have with reparcelization between the platforms and management fee. That's upward to almost 250 basis points of enhanced yield, so giving us the opportunity to raise equity at prices that make sense for us. So we'll continue to be opportunistic on that front.

Okay. Is there any capital raising activity embedded in the guidance? .

No.

Okay. And then Mike, you talked about a deceleration in OFFO in the first half of the year related to some of the move-outs that it sounds like there's executed leases in place for. I think you previously talked about it, I think, $600,000 or $700,000 of quarterly NOI that's coming offline. Where are we in that process? Is any of that NOI offline yet? Or will that impact begin in '22?

That, in fact, really will begin in earnest in '22. You're going to see -- the best way to probably explain this, Todd, is give you the cadence for our occupancy. You're going to see it decelerate in the first quarter near the 90% level and then reaccelerate from there up to the 91.5% to 92% that we should end the year at. Because we're taking a pretty significant box back in the first quarter at our Baltimore asset, where we took back a Shoppers World. That was in occupancy at the end of last year and took it out. It's already terminated in the first quarter of this year.

And that's where we're bringing in the Giant grocer to replace that, obviously a much better grocer than Shoppers. And then from there, it's going to ratably go up throughout the year. As the signed not commenced comes online, as I mentioned in my prepared remarks, it's about a $0.04 benefit from signed not commenced in '22. But the bigger benefit, which hopeful that people are paying attention to, is in '23 of about a $0.05 benefit. So a really, really nice tailwind going into '24 and '25.

Okay. And just the last question maybe for Brian. The -- on the leasing schedule, the new leasing was obviously very strong. The weighted average lease term, 16 years, stood out a little bit. And it looks like lease terms has been increasing a little bit. Are you having discussions with tenants that are interested in longer leases and locking in leases at this point? Is that something that you're starting to see a little bit more and more kind of discussed?

Absolutely. I mean, we do look at WALTs both obviously on the triple-net side but on the multi-tenant as well. And I think, too, what you're seeing with the longer WALTs are the grocery deal -- the abundance of the grocery deals that we're doing, the Publix deal at Crossroads that really led the elevated leasing cost. Without that deal, roughly TA would have been $40.

But that deal got Publix. We're demoing the box, building them a new flagship prototype 20-year lease, a very, very healthy yield between 6% to 8%. And obviously, some big favorable cap rate compressions of 80 bps, conservatively. And we saw where the Jamestown deal traded. And I would say this stacks right up there. So we're excited about that as well. But I would say the WALTs of what you're seeing are really our grocery deals, which have been averaging around 20 years.

Our next question comes from Craig Schmidt with Bank of America. .

I wonder what your expectations for leasing volumes are in '22, given your 1.7 million in '21 and, Brian, your observation that this is one of the strongest leasing markets you've ever seen.

Craig, I expect it to be up there. I mean, just based on the pipeline and based on the deals we have visibility on, I expect it to be near or maybe even higher than last year. I mean, if you look at last year, I mean, the number of tenants of which we signed, but more importantly, the former tenants of what we replaced, I mean, we took out an AirTime Trampoline Park at Troy Marketplace outside of -- in Troy, Michigan, replaced it with a AA-rated grocer. Crofton Centre, replaced Shoppers World to Giant/Ahold. Town & Country, Stein Mart replaced it with REI, and we're finalizing a lease with Sephora.

Winchester Center, Stein Mart to Burlington. Highland Lakes in Tampa, Stein Mart to the AA-rated grocer again. Front Range Village, Charming Charlie to Nike; Woodbury, Charming Charlie to lululemon. Providence, Lane Bryant to Ferguson. And the beauty of this is it's double the rent of the former tenants at a much higher investment-grade credit. So we have a number of deals that will be signed even subsequent to this call today that are both large in size and of the same formats of which I talked about.

Yes. Just to echo Brian's thoughts around the enhanced or increased volumes that we do expect in '22, just as a reminder, we did execute about 1.6 million square feet in '21. We do expect that to increase, to Brian's point, about 2 million square feet. So it's going to be up considerably. And just to level set the percentage of the plan that's done so far for '22, Craig, so if you look at our new leasing plan and our renewal leasing plan, it's about 80% done. So we're feeling pretty convicted on those volumes.

Great. And then concerning the compression of cap rates, how would you compare the large community center and power center compression to the grocery-anchored compression?

It's dropping considerably. I mean, we've been seeing trades in the larger formats in the 5s now. I just saw one at a 6 handle in the Midwest. I think people are finally realizing great real estate is great real estate and the cash flows on top of it are important. But especially with these larger format, the investment grade credit you get on these is finally kind of flowing through to certainly private buyers but institutional now as well. So we're seeing considerable cap rate compression in all format types.

Our next question comes from Floris Van Dijkum with Compass Point.

Just wanted to get a sense of your -- the midpoint of your guidance is about 3% same-store growth. What is your bad debt reserve assumption in that?

Floris, the bad debt assumption is about 100 basis points of same-property NOI, which equates to about $1.3 million, $1.4 million. To put that in context, the pre-COVID levels for a different portfolio that we owned back in '19 was about $800,000 per year. So we're being a bit conservative on that front, just given where we're at in the year. So we feel it's a pretty good assumption at this point.

And maybe if you can also -- I mean, clearly, you guys are -- you've signaled very clearly to the market that you're growing in certain markets and reducing your exposure to some of your historical markets. As you look at the dispos as well, would you -- the existing assets you have and you continue to own in particular, in Detroit and in Cincinnati, would they be suitable for some of your JV platforms? And could they go in there in some ways? Or would you be looking to source new acquisitions for those platforms?

They could be both, Floris. I mean, we're looking at both angles. I mean, we have the levers to pull on both. We're seeing actually a pretty good -- very good froth from investment appetite in Detroit right now. I think there -- it's been cooling in the state of Illinois and has kind of gone up to Detroit, and we're seeing good things in Minneapolis and even Cincinnati as well. So we'll look at both angles. And what we need to come up with is obviously the best cap rate for the shareholders. So we've got to run both parallel. But it's something we're exploring on both sides.

Our next question comes from Haendel St. Juste with Mizuho.

I guess, first question. I don't know if I missed it or not, but did you mention -- you mentioned $125 million that you have under contract. Did you discuss the cap rate -- or maybe can you discuss the cap rate and type of assets that you have in that $125 million?

Yes. I'm not going to get into the cap rate until we close. But I'll give you, one is north of Boston, I said in my prepared remarks, where it's a dual-anchor, very high-volume -- dual-anchored grocery center, extremely high volumes, would be the top 5% of our current tenant sales across the country. Some others that we're looking are in our more infill kind of Boston street, mom-and-pop owners, where we can just drive tremendous unlevered IRRs. But we're looking at like high single-digit IRRs unlevered. So it's pretty compelling and off-market, I should say, too. So we're excited on that. And that $120 million is just really what we have the visibility and what has been awarded, but expect more.

Got it. Fair enough. A question on the signed but not yet opened rents. I think you mentioned the $6.9 million that's signed, $3.3 million in discussion. I guess, I'm, first, curious on if you're seeing any impact or concern on timelines for opening, given supply chain, labor constraints. And then also, I guess, I'm curious why some of this is taking so long. I think you mentioned a couple pennies into 2024. So some color on what you're kind of seeing in the timing of -- and the pace.

Yes. Thankfully, the pace -- let me just start back with -- if there's any worries for the tenants. I always worried about, first, their business. But there hasn't been any delays as of yet at all on any of these openings or rent commencement dates slipping back. The delays are -- we're repositioning a lot of the portfolio with top-rated, best-of-the-best investment-grade tenants. A lot of these are grocers. We've driven our grocery percentage from 65% of grocery -- of ABR in 2019 to 71%. It's pretty impressive, but some of that takes time. And some of these tenants are opening late '23, which will hit '24.

So really, it's just moving tenants around and moving boxes around and demising that and getting them open in time for that. So I would say most of this impact is going to be '23 and late into '22 with a little bit of that, as Mike displayed, into '24.

Yes. I mean, there's only one lease tied to the '24 upside, and that's the lease that we just signed in the fourth quarter at the new acquisition that we acquired down in Tampa, Highland Lakes, where we're bringing in a AA investment-grade grocer to replace the Stein Mart there. So that's the one that's taken a bit of time to come online, and it's only one deal.

Got it. Appreciate the color. And if I could, Brian, one more. I guess, as you kind of think about the stock price, the multiple here, I guess, I'm curious what's at the top of your priorities this year to help close that gap, which remains fairly wide despite the pickup in acquisitions last year, the JVs and the favorable wind at your back from leasing demand and cap rates.

Yes. Look, I can take some of the -- part of the question here. But really, the key drivers to getting our cost of capital down is really continue to put wins on the board, right? I think operationally, last year, we had a really, really good year. I think this year is going to be even better. I think the signed not commenced is very indicative of the leasing volumes that we expect over the next few years. I think we're experiencing one of the better same-property NOI growth rates this year. We think that will have some nice tailwinds into '24 and '25. And we'll continue to be very, very busy on the acquisition front. So Brian, do you want to add?

Yes. So Haendel, I mean, this is all about getting back to 2019 levels. We're sector-leading. And it's finally nice to be in an environment where we can actually compare apples-to-apples on NOI, compare apples-to-apples on occupancy, compare apples-to-apples on FFO growth without all this deferral stuff. So we're on an equal platform now, where we are very expectant for great things. I think the number of -- when I said that AA investment-grade grocer being a top 5 tenant, that's a significant -- an outlier for our peers.

When we say these grocery initiatives going into power centers, I mean, we're seeing 250 basis points cap rate compression on stuff. There is massive value creation happening across the board and in new geographies, too. We've reshaped the portfolio, Boston, #3; Tampa has moved up; Atlanta has moved up. And you've seen the CAGRs in our investment deck that we posted last night. So I am about as excited as I've been in my career. The team is focused, the team is energized and we're hitting on all cylinders.

Our next question is from Tayo Okusanya with Credit Suisse.

The $125 million of acquisitions in guidance so far, could you just discuss, is that all happening at the funds business? Is any of that on balance sheet?

No, that's balance sheet. That's balance sheet. So that's not without the fund at all. It's going to be measured off, I would say, of that, a little bit of spinoff on the arbitrage of the deal in North Boston. But for the most part, that's balance sheet. And we're excited about the grocer JV. We have $500 million of recent upsize and $1.1 billion on the fund platform for the triple nets. But that $125 million is mostly balance sheet.

Our next question is from Linda Tsai with Jefferies.

In terms of $0.03 of prior period reserves, and I know it's a category that's not included in your FY '22 guidance, what's the potential pool to draw from the extent that there are more reversals in '22?

At this point, Linda, we really don't expect a surprise on the favorable side or the unfavorable side as we look out to 2022. Our reserve -- our receivable right now stands at around $14 million, of which $12 million is reserved. And we have about $2.5 million or so that is yet to be collected. So at this point, I think most of that reserve is tied to riskier cash flows for tenants that I don't think there's going to be upside there or really downside at this point.

Got it. And then just on the strength of the new leasing, I saw there were 6 leases. TIs were a little high, but the leasing spread was also 73%. Could you talk about that?

Yes. I mean, really the outlier was the Publix deal, a 20-year lease in Palm Beach. Without that deal, Linda, it would have been $40, so -- and that was a $6 deal going to low 20s. So again, that is another favorable item for the company, where we just have very, very good mark-to-market opportunities. I mean, really since the second quarter of '18, our new lease comparable re-leasing spreads have averaged 30%, right? So I think everybody just needs to understand that this mark-to-market is going to happen and will continue to happen, and we'll extract a lot of value from that as well.

Just one final question, just on the transaction environment, given increased competition and cap rate compression, are private owners less inclined to sell because of compression? Or are you seeing them put more assets on the market?

I think it depends on who it's [brought.] I mean, we're -- it's competitive. It's very competitive. We have people knocking on doors, boots on the ground, having calls with all the named institutional owners as well. But it's absolutely competitive. I think some private owners are looking to divest some of their retail. I think some private owners love the business and want to hold it. So it's a little bit of everything.

Our next question is from Mike Mueller with JPMorgan.

Mike, just to clarify, when you talked about $0.04 of signed but not opened coming on in '22 and $0.05 in '23, should we think of those as calendar year impacts or run rates coming on at some point during those years?

Yes, those are calendar year impacts, Mike. .

Got it. Okay. And then as it relates to the resi development sites, how many do you see in the portfolio today that you think could be actionable over the next few years?

I mean, we have quite a bit. I mean, I don't want to price a number, but it's several. And we're looking at even some in Columbus, Ohio at our Shops at Lane (sic) [Shops on Lane] project, where there's just huge demand. That's a Whole Foods-anchored center right in Upper Arlington with tremendous demographics right next to Ohio State. So I don't want to put a number out there, but it's a business that we've been really focused on since I've got here. COVID put kind of more of a halt on that side, but we've kickstarted it back up with this Jacksonville deal and see a larger runway for that.

Ladies and gentlemen, we've reached the end of the question-and-answer session. And I would like to turn the call back over to Brian Harper for closing remarks.

Thank you, everybody. Really appreciate everybody's time. 2021 was a year of tremendous accomplishment for RPT. Our portfolio is stronger. Our cash flows are more sustainable. Our acquisition pipeline is full. And our balance sheet gives us the flexibility to adjust to changing market conditions. Our success in 2021 would not have been possible without the strong foundation that was laid in 2018. And I could not be happier with the progress we have made as a company over the past 4 years.

We expect '22 to be another year of growth, execution and innovative thinking that will no doubt set us up for continued success in the years to come. Have a wonderful day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.