Phillips Edison & Co boosts full-year guidance with 6.8% growth in NAREIT FFO amid strong leasing demand and strategic acquisitions.

OPERATOR - (00:01:22)

Good day and welcome to Phillips Edison & Co's third quarter 2025 earnings call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin. Thank you. I'm joined today by our Chairman and Chief Executive Officer Jeff Edison, President Bob Myers and Chief Financial Officer John Caulfield. Following our prepared remarks, we will open the call to Q and A. After today's call, an archived version will be published on our Investor Relations website. Today's discussion may contain forward looking statements about the Company's view of future business and financial performance including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings specifically in our Most recent form 10K and 10Q and our discussion today will reference certain non GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet which have been posted on our website. Please note we have also posted a presentation with additional information. Our caution on forward looking statements also applies to these materials. Now I'd like to turn the call over to Jeff Edison.

Jeff Edison - Chairman and Chief Executive Officer - (00:02:47)

Jeff thank you Kim and thank you everyone for joining us today. The PECO team is pleased to deliver another quarter of solid growth. Given the continued strength of our business. We are pleased to increase our guidance for Nareit and core FFO per share. The midpoints of our increased full year 2025 Nareit and core FFO per share guidance represent a 6.8% growth and a 6.6% growth respectively. I'd like to thank our PECO Associates for their hard work in maintaining our unique competitive advantages and driving value at the property level. The market continues to focus on tariffs and US economic stability as it relates. To PECO's grocers and neighbors. We continue to feel very good about our portfolio. PPECO has the highest ownership percentage of grocery anchored neighborhood shopping centers within our peer group. 70% of our annualized base rent (ABR) comes with necessity based goods and services. This provides predictable high quality cash flows and downside protection quarter after quarter. This also limits our exposure to discretionary goods which we believe are at risk of greater impact from tariffs. PECO continues to deliver strong internal growth. Our neighbors benefit from their location in the neighborhood where our top grocers drive strong foot traffic to our centers. We have high retention and strong leasing demand from retailers wanting to be located at our neighborhood centers and we continue to see a healthy pipeline for development and redevelopment. In addition, the PPECO team continues to find smart accretive acquisitions that add long term value to our portfolio when you include assets and land acquired subsequent to quarter end. This brings our year to date gross acquisitions at PPECO's share to $376 million. A few shout outs for the quarter the operating environment and PPECO's ability to deliver growth continues as it has for the past several years. Our leasing activity and occupancy remain very strong. We continue to operate from a position of strength and stability moving to the transactions market activity for grocery anchored shopping centers remains competitive. The strength of our activity in the first half of the year allowed us to be more selective in the second half. We remain committed to our unlevered return targets and we remain confident about our ability to deliver on our full year acquisition guidance including acquisitions closed after the quarter end. We acquired $96 million of assets at PPECO's share since June 30th. This activity includes two unanchored centers. These centers offer reliable fundamentals similar to our core gross anchored properties with a stronger long term growth profile. They're located in the same trade areas as our grocery anchored centers. Growing suburban markets with strong demographics with a focus on everyday retail neighbors located at these centers are delivering necessity based goods and services within their respective communities. We will share more details on why we believe these everyday retail centers are a natural complement to PPECO's long term growth strategy during our upcoming Virtual Business Update. This webcast is planned for December 17th. We also continue to make great progress with our joint ventures. During the third quarter our JV with Lafayette Square and Northwestern Mutual acquired the Village at Sand Hill. This is a grocer anchored shopping center located in a Columbia, South Carolina suburb. Our pipeline for the fourth quarter and 2026 also includes additional assets for our JVs. Lastly, we are actively expanding our development and redevelopment pipeline. We build in our parking lots and acquire adjacent land to our centers and this quarter we acquired 34 acres of land in Ocala, Florida. While it's too early to share details of this project, we are working with partners to build a grocery anchored retail development. As you know, these take a long time. We will share more details on this project as we are able to update you. We are very pleased with our results for the quarter and our outlook for the balance of 2025 and we are actively growing our leasing and transaction pipelines for 2026. We believe we are the most aggressive operator in the shopping center space. The Pico team is continuously looking for opportunities to grow our business better. We look forward to updating you on our long term growth plans during our December 17 business update. I will now turn the call over to Bob.

Bob Myers - President - (00:07:49)

Bob thank you Jeff and thank you for joining us. PECO continues to deliver strong leasing activity driven by our grocery anchored neighborhood centers and necessity based neighbor mix. This momentum is clear in our operating results again this quarter. Our neighbor retention remained high at 94% in the third quarter while growing rents at attractive rates. High retention rates result in better economics with less downtime and dramatically lower tenant improvement costs. Pico delivered record high comparable renewal rent spreads of 23.2% in the third quarter. Comparable new leasing rent spreads for the quarter remained strong at 24.5%. Our continued strong leasing spreads reflect the strength of the retail environment. We expect new and renewal spreads to continue to be strong to the balance of this year and into the foreseeable future. Leasing deals we executed during the third quarter, both new and renewal achieved average annual rent bumps of 2.6%. This is another important contributor to our long term growth portfolio. Occupancy remained high and ended the quarter at 97.6%. Leased anchor occupancy remained strong at 99.2% and same store inline occupancy ended the quarter at 95%, a sequential increase of 20 basis points. Given our robust leasing pipeline, we expect inline occupancy to remain high to throughout the remainder of the year which is very positive as it relates to bad debt in the third quarter. We actively monitor the health of our neighbors. Bad debt remains well within our guidance range. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. We continue to have a highly diversified neighbor mix with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment, Pico has 22 projects under active construction. Our total investment in these projects is estimated to be 75.9 million with average estimated yields between 9 and 12% year to date. 14 projects were stabilized through September 30th. This represents over 222,000 square feet of space delivered to our neighbors and incremental net operating income (NOI) of of approximately 4.3 million annually. As Jeff mentioned, we continue to grow our pipeline of development and redevelopment projects. This activity remains an important driver of our growth. I will now turn the call over to John.

John Caulfield - Chief Financial Officer - (00:10:37)

John thank you Bob and good morning and good afternoon everyone. Our third quarter results demonstrate what we've built at Pico, a high performing grocery anchored and necessity based portfolio that generates reliable high quality cash flows. As Jeff said, the PICO team continues to operate from a position of strength and stability. Third quarter Nareit funds from operations (FFO) increased to $89.3 million or $0.64 per diluted share which reflects year over year per share growth of 6.7%. Third quarter core funds from operations (FFO) increased to $90.6 million or $0.65 per diluted share which reflects year over year per share growth of 4.8%. Turning to the balance sheet, we have approximately $977 million of liquidity to support our acquisition plans. We have no meaningful maturities until 2027. Our net debt to trailing twelve month annualized adjusted earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) was 5.3 times as of September 30, 2025. This was 5.1 times on the last quarter annualized basis. As Jeff mentioned, we are pleased to update our 2025 guidance. We are reaffirming our guidance range for 2025 same center NOI growth. This reflects solid full year growth of 3.35% at the midpoint. As we have said previously, the timing of our same center NOI growth in 2024 for presents difficult comparisons to the fourth quarter of 2025. Specifically, the recoveries in 2024 were weighted to the fourth quarter, whereas they are more even quarter to quarter in 2025. Our current forecast for the fourth quarter of 2025 reflect same Center NOI growth between 1 and 2%. We estimate this growth rate would have been closer to 3% if the recoveries in 2024 were more evenly distributed. While we are not providing 2026 guidance at this time, I will remind everyone that we believe this portfolio can deliver same center NOI growth between 3% and 4% annually on a long term basis. As Jeff mentioned, our increased guidance for 2025 Nareit funds from operations (FFO) per share reflects a 6.8% increase over 2024 at the midpoint and our increased guidance for 2025 core funds from operations (FFO) per share referring to represents 6.6% year over year growth at the midpoint. Our guidance for the remainder of 2025 does not assume any equity issuance. Importantly, our funds from operations (FFO) per share growth is a function of both internal and external growth. PICO is not dependent on access to the equity capital markets to drive our strong growth as it relates to dispositions. The PICO team plans to sell 50 to $100 million of assets in 2025 year to date including activities subsequent to quarter end. We've sold $44 million of assets at Pico Share the Private markets are more appropriately valuing grocery anchored shopping centers than the public markets. This gives us an opportunity to lean into portfolio recycling. We have an active pipeline for the fourth quarter and we have plans to do even more in 2026. We plan to share more details during our December 17th business update. Long Term the Pico team is focused on recycling lower IRR properties into higher IRR properties to help drive strong earnings growth. We believe that performance over time and consistent earnings growth should be rewarded in the capital markets. We also reaffirmed our 2025 full year gross acquisitions guidance. We believe our low leverage gives us the financial capacity to meet our growth targets. We have diverse sources of capital that we can use to grow and match fund our investment activity. Match Funding our capital sources with our investments is an important component of our investment strategy. We continue to believe the Pico platform is well positioned to deliver mid to high single digit core funds from operations (FFO) per share growth on an annual basis. We also believe that our long term Afunds from operations (FFO) growth can be higher as more of our leasing mix is weighted towards renewal activity. We believe our targets for growth in core funds from operations (FFO) and Afunds from operations (FFO) will allow Pico to outperform the growth of our shopping center peers on a long term basis. We look forward to updating you on our long term growth plans during our December 17 business update. In addition to what Jeff mentioned, we plan to share preliminary 2026 guidance. We also plan to share new analysis and insights related to our unanchored investments or everyday retail centers. We look forward to updating you on our internal and external growth plans. With that we will open the line for questions. Operator.

OPERATOR - (00:15:35)

Thank you. To ask a question, please press *1 on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question again, press *1. We also ask that you limit yourself to one question and one follow up. For any additional questions please re queue and your first question comes from the line of Andrew Riel with Bank of America. Please go ahead.

Andrew Riel - Equity Analyst - (00:16:01)

Good afternoon. Thanks for taking my questions first, Can you just share more on your. Thinking around acquiring development land at this point in the cycle? Why is right now the right time. To pursue opportunities like this? And are you evaluating other ground up. Development sites at this this point in time?

Jeff Edison - Chairman and Chief Executive Officer - (00:16:21)

Well Andrew, thank you for the question. Bob, you want to talk a little bit about this specific project?

Bob Myers - President - (00:16:30)

Yeah, absolutely. Thanks Jeff and Andrew, thank you for the question. We're really excited about this opportunity. We had a nice partnership with a national grocer that was interested in the growth Aspects of Southern Ocala. 10,000 new homes and residential opportunities coming into the market over the next five years. A lot of positive growth. It's going to be a 34 acre site and we'll end up selling part of it to the grocer and then we'll have seven out parcels available for us to continue to do what we do year over year. I mean We've developed 51 out parcels in our portfolio over the last five years and we'll either do ground leases or build the suit. So this is kind of a one off scenario. Will we continue to look for sites in the future? Yes, if it makes sense. In this particular asset, we're going to deliver about a 10 and a half percent unlevered return. So we feel really good about, you know, not only being some of the landlords largest, some of the retailers largest landlords, but this is a great opportunity for us to step in in the right market.

Andrew Riel - Equity Analyst - (00:17:41)

Okay, thank you, that's helpful. Color. And then if I could just ask. A follow up, could you maybe just. Provide more detail on the makeup of. Your current acquisition pipeline and just how. Much more incremental volume could you potentially close before year end? I know Jeff, you'd mentioned you're being. A little more selective in the second half now. So just curious on where we might shake out relative to the acquisition range. Thank you.

Jeff Edison - Chairman and Chief Executive Officer - (00:18:08)

Yeah, I'll give you and Bob, follow up as well. The, the way we're looking at it, we, we kind of have given you guidance. We're pretty comfortable we're going to meet the bottom end since we're already about $25 million above the bottom end of the range that we've given. And you know, we, we continue to see good product, you know, and we're continuing to see, you know, a volume of product that we feel comfortable will be, you know, will be in good shape. Ability to buy as you know it, you know, going quarter by quarter is a little bit difficult because stuff moves, you know, month or two and it, you know that that's just the closing process. So you know, it's, it's always a little bumpy. We feel really good about the products we bought. We, we had a, you know, a really great first half. The, you know, it's a little slower but I would, you know, tell you that we feel good about what we're getting and you know, you know, we bought 4 to million. The midpoint's about 400 million. This year was 300 last year. Pretty good. That's a pretty good increase. And we see that, you know, continuing to happen. So Bob, any, anything else on the.

Bob Myers - President - (00:19:20)

Yes, I would like to add that, you know, we've, we've acquired 18 assets this year for 376 million and we do have deals that have been awarded and under contract to close before year end. So we feel really good about, we're going to be well within the range. The other thing I would mention is just we're delivering unlevered returns above a 9 in all these categories. So we feel real good about the acquisitions. The other thing I would mention is, you know, these blend to like a 91.5, 92% occupancy going in. And when you look at Our portfolio at 97.7, this continues to give us internal growth in the future for same center, net operating income (NOI) growth. So it is, you know, it's a dual path in terms of growing earnings and noi. So we're really excited about what we've acquired so far and early indications would suggest that we're operating them extremely well and we're getting continued leasing momentum.

Andrew Riel - Equity Analyst - (00:20:20)

Okay, thank you very much.

Jeff Edison - Chairman and Chief Executive Officer - (00:20:22)

Thanks, Andrew.

Caitlin Burrows - Equity Analyst - (00:20:24)

Your next question comes from the line of Caitlin Burrows with Goldman Sachs. Please go ahead. Hi everyone. Maybe sticking on the acquisition side. So looking at leverage now, it's at 5.1 times, which I'd say is totally reasonable, but I guess it sounds like going forward you might be interested or willing to increase leverage. So wondering if you could discuss for a little bit what the kind of upper level is on leverage and how you think about that as a funding source.

Jeff Edison - Chairman and Chief Executive Officer - (00:20:51)

Yeah, Caitlin, I'll give you. John, follow up as well. I, I, you know, what we, we said and continue to believe is, you know, we, we want to be in that five, five or below range debt dividend on a long term basis. And we are, you know, we, we'd be willing to move around that if we had a clear vision of, of bringing it back down into that, you know, sort of mid to the mid fives to lower fives. And we're very happy with where we are. We've got good capacity to continue to grow our acquisition program. And so it's nice to be where we are right now and if the opportunities come, you know, as you know, we're prepared to take advantage of them if we can. Anything else, John?

John Caulfield - Chief Financial Officer - (00:21:41)

Nope, I think that's good.

Caitlin Burrows - Equity Analyst - (00:21:44)

And then just as the other kind of source of funds, it sounds like you might lean more into dispositions. And so if we look at the dispositions you guys have done historically, you do give great disclosure on the cap rates of the acquisitions versus dispositions. Historically, the dispos have been at higher cap rates. So I was wondering, going forward, are there assets that you would be, I don't know, maybe newly looking to sell that would make that process accretive or how are you thinking about that acquisition versus disposition cap rate and kind of the types of, of properties you'd be looking to sell and who the buyers are and what they're willing to pay for them.

Jeff Edison - Chairman and Chief Executive Officer - (00:22:19)

Yeah. John, you want to talk about that?

John Caulfield - Chief Financial Officer - (00:22:23)

Sure. Thanks, Caitlin. So I think the dilution or accretion on the recycling of assets is going to depend on the mix of assets sold and acquired. I mean, ultimately, you know, as you know, we are IRR buyers and sellers, so we believe that recycling will be beneficial to our earnings per share over time. And as owners of about 8% of the company, that's really important to us. So I think as we look at it in terms of, we are achieving victory on a lot of these. We've already sold some properties this year and we're going to look to do that. But ultimately, I'm going to repeat, we believe we can do mid to high single digit FSO per share growth. And although we're not giving guidance until December, I think that is going to be true in 2026 as well. So not exactly answering your question because it's going to depend upon the mix of the timing of the closings. But we're managing that very closely and the relationship you're describing has been true historically. I think it's going to tighten and improve as we forward, but it, again, it depends upon the mix.

Caitlin Burrows - Equity Analyst - (00:23:18)

Thanks.

Jeff Edison - Chairman and Chief Executive Officer - (00:23:18)

Yeah. And Caitlin, I would just add, I mean, I think the way we think about it is we're, we're going to be trading out of lower growth for higher growth properties. And that is the strategy of the disposition program. There is some de risking in that, but mostly it's going to be trading to areas where we can get more growth.

Caitlin Burrows - Equity Analyst - (00:23:41)

Thanks.

OPERATOR - (00:23:43)

Your next question comes from the line of Handel Saint Just with Mizuho. Please go ahead.

Ravi Vaidyan - (00:23:51)

Hi there, this is Ravi Vaidyan, the line for Handel. Hope you guys are doing well. I wanted to ask about redevelopment here and the broader redevelopment pipeline. What's your target size for this to be and how should we consider funding? Is this going to be primarily through. Free cash flow or through further dispositions? Thanks.

Jeff Edison - Chairman and Chief Executive Officer - (00:24:10)

Great. Robbie, when you're, when you're talking about that, are you talking about all of our redevelopment, including the outlawed stuff that we're doing or Is that what you're, what you're focused on there?

Ravi Vaidyan - (00:24:23)

Yeah, both ground up new development and redevelopment of existing pads or any outlaw kind of work. Great.

Jeff Edison - Chairman and Chief Executive Officer - (00:24:32)

Okay, Bob, you want to take that?

Bob Myers - President - (00:24:35)

Yeah, no, absolutely. I appreciate the question. So over the last three or four years, we've generated between 40 and 55 million in our ground up redevelopment bucket. And those years we were solving for between a 9 and 12%. We find that this is a wonderful complement to our same center NOI growth. And we are hopeful to get, you know, 100 to 125 basis points towards it through this pipeline. We have a nice pipeline out for the next three years that would be consistent of approximately 50 to 60 million a year to contribute to that. So we don't see anything slowing down on the development side or redevelopment side. And we've seen a lot of success with generating solid returns.

Ravi Vaidyan - (00:25:23)

Got it. That's helpful. And maybe this one. On the bad debt, would you say that this quarter's bad debt expense in the current tenant credit landscape, is that appropriate to consider as a run rate. Going forward into fourth quarter and into 26?

Jeff Edison - Chairman and Chief Executive Officer - (00:25:40)

Thanks, John, you want to take that?

John Caulfield - Chief Financial Officer - (00:25:45)

Sure. Thanks, Ravi. So I would say that yes, I think that when you look at it, whether it be on the same store total portfolio, we've been between, let's say, 75 and 80 basis points. I do know that the midpoint of our guidance range is 90 basis points. And it's more just giving ourselves a little bit of elbow room. I will say for Q4 2025 and for 2026, we don't actually see the environment materially changing. So we think that, you know, this 70 to 80 basis points in the range that we have is pretty reasonable. I do think that, you know, again, when you look at PECO's demographics, at $92,000, we are 15% above the US median and our retailers continue to be very, very successful. So our watch list is lower than anyone else's and very consistent with historical around 2%. And so we feel really good about it. But I think, you know, this is a good run rate as we look forward.

Ravi Vaidyan - (00:26:41)

Thank you so much.

OPERATOR - (00:26:44)

Your next question comes from the line of Ronald Camden with Morgan Stanley. Please go ahead.

Ronald Camden - Equity Analyst - (00:26:50)

Hey, thanks so much. Just going back to sort of the. Occupancy and more of the inline occupancy here. You're getting good retention rates, you're pushing rents. Just, just remind us what the message. Is to the team. How much more occupancy upside you sort. Of think that is there Is there? And, and just strategically, how are you guys messaging sort of, you know, pushing rents here at the expense of retention rates? Thanks.

Jeff Edison - Chairman and Chief Executive Officer - (00:27:18)

Sure. Bob, you want to. You want to grab that one?

Bob Myers - President - (00:27:21)

Yeah, absolutely. So thank you for the question. So currently we're at like 94.7%, and we believe that we can generate another 125 to 150 basis points of inline occupancy. The demand and the retailer interest that we're seeing and all the meetings in our national account team shows very good momentum. The visibility I have out for the next six months, seven months with our pipeline would suggest that we should move in that direction. So feel, you know, feel very good about moving the needle on inline occupancy. I think in terms of growing rents, on the renewal question in particular, at 94% retention, that's a very solid retention number. And I think last quarter we spent 60 cents a foot in tenant improvements, and this quarter we spent a dollar to generate 23.3% renewal spread. So we feel very good about, you know, the retention at 94% and the current spreads we're seeing. So, again, I don't see any new supply coming online to compete with that. And I think, you know, we'll just keep our neighbors profitable and healthy and look, look towards the future. I don't see anything slowing down.

Ronald Camden - Equity Analyst - (00:28:39)

Great. Evan, if I could ask, a quick. Follow up just on the unanchored centers. You know, we talked about it last quarter, but as you're sort of looking at more of the opportunities, just what's the update in terms of the opportunity set and for the conviction in that strategy?

Jeff Edison - Chairman and Chief Executive Officer - (00:28:53)

Thanks. Great. Bob, you want to. You want to grab that one? Yeah.

Bob Myers - President - (00:28:59)

Another great question. I'm really excited about the Strategy. We've acquired eight properties in this category for about $155 million, and we've seen very positive momentum operationally, I believe our centers currently, from what we paid, we're about 300, $305 a foot. We are seeing unlevered returns between 10 and a half and 12%. Early indications, we're seeing new leasing spreads above 45% and renewal spreads above 30%. So again, we're going to continue to define the criteria. You'll hear more about this in our December update. But early indications, this is going to be a great complement to, you know, growing our same center noi in the future. So we're really excited about it.

Jeff Edison - Chairman and Chief Executive Officer - (00:29:49)

Thank you, Ron. Yeah, it's a great question. And one thing, I mean, we have built a phenomenal team at leasing this, we kind of look at this as just having more neighbors. We have a way of bringing this, you know, finding more neighbors that we can put the machine to work on and get these kind of returns that Bob was talking about. So we're excited about. Again, it's, as, you know, it's a small, very small piece of the overall portfolio, and it's, but it's very consistent with our focus on, you know, necessity, retail and giving the consumer what they want and being locally smart at the property level. So all those pieces are encouraging to us, as well as the results Bob talked about in terms of investment in that product.

Ronald Camden - Equity Analyst - (00:30:38)

Really helpful. Thank you.

OPERATOR - (00:30:41)

Your next question comes from the line of Michael Goldsmith with ubs. Please go ahead.

Michael Goldsmith - (00:30:48)

Good afternoon. Thanks a lot for taking my question. My first question, Jeff, is when you said in the prepared remarks about being. More selective in the second half, you know, what do you mean by more selective? Are you looking more on price? Is it more on location? Is it more on shopping center format?

Jeff Edison - Chairman and Chief Executive Officer - (00:31:06)

Just trying to get a sense of where that selectivity is leading you. I think it's, it's, it's tougher underwriting. It's, it's not, it's not, you know, a difference in terms of what we like, what we, what we do. But in terms of underwriting, you know, with the, the potential risks of the stability of the economy, I think we took a tougher. We were tighter on some of our rent spreads. We were tighter on some of our pace of leasing. That's really what I'm saying in terms of buy them. And that translates into us offering lower prices than we would at other times to get to that nine unlevered irr. And so I think that's what slowed down some of our pace a bit. It's important to know that, I mean, at the Midpoint, we're buying $400 million of assets on an individual basis. That's the most, I think, in the space on an individual basis by, by far. And we think that that is, you know, we, that that's, you know, 100 million more than we bought last year. We're, we're, we're, we're, we're taking our share of the market. And I think it, I think we've had it. It kind of shows the discipline that we've had, you know, for 30 years in this business. You got to be disciplined, and you got to make sure that you, you're not getting ahead of yourself or too aggressive or not aggressive enough in the market. And I think that's what we kind of bring to the market on that. Thanks for that.

Michael Goldsmith - (00:32:49)

And my follow up is right on the competition. You said it remains competitive. Has it gotten any more incrementally competitive. In the last quarter? And just if you can provide some color on deals that you don't win. Who are you losing to? Is it new? Yeah. Is it new entrants or is it.

Jeff Edison - Chairman and Chief Executive Officer - (00:33:10)

Kind of the same folks that are still. Yeah, I don't, Yeah, I don't think it's gotten more competitive. I think it's, it, but it's, it's fairly stabilized. I mean there is, there is good demand out there and it is, it's the full gamut. I mean it's, it's some of the REIT peers, it's some of the, some institutional players and, as well as some private players. So you, you have a, a pretty wide range of people looking in the space. So, so the, our feeling is that it's kind of, it's, it's stabilized at where it is and really has been for the last couple of quarters. And we think that that's kind of going to be, is more normalized and probably what we're going to see for, you know, the next quarter and certainly, or maybe the next few quarters as the, and you know, the beauty is we, with what we've done, we have, we look broadly at the, at the country and we're looking for that number one or two grocer to buy. And that breadth gives us the ability to find product consistently over, you know, year after year after year. And so we feel comfortable we'll have another good year next year. We're not that, that's not a concern. It's just, it's a little harder shopping to buy than when, when, you know, a lot of others have gotten into the space that, you know, We've been in 30, for 30 years.

Michael Goldsmith - (00:34:45)

Thank you very much. Good luck in the fourth quarter.

Jeff Edison - Chairman and Chief Executive Officer - (00:34:47)

Thanks.

OPERATOR - (00:34:49)

Your next question comes from the line of Omoteo Akusana with Deutsche Bank. Please go ahead.

Omoteo Akusana - (00:34:58)

Yes, Good afternoon, everyone. I was wondering if you could just. Give a view on the outlook for grocers in general. I think again, your, your, your, your. Sales are going up, but I just, but again, just kind of hear a. Lot of conflicting noise around, you know, more selective consumer. You know, inflation is kind of causing volumes or trips to grocers to kind of slow down. If you just kind of give us an update in general, kind of what. You'Re seeing and how you think that space is evolving would appreciate that Yeah.

Jeff Edison - Chairman and Chief Executive Officer - (00:35:35)

I, I want to take a shot, Bob, to join in as well. From our conversations with the grocers, they continue to see a very resilient customer and where we're not hearing any sort of pullback, any kind of like dramatic concerns. It, it's kind of business as usual. And in some, for some of our grocers, they're, you know, they, they see it as really, really positive. I mean you, when you, when you talk to Publix and H E B and some of the, you know, and the Trader Joe's, I mean they are, they are actively, you know, growing. And so they're, they, they see things very positively. And so I, I would say our feedback overall is that the grocers are thinking long term, they very positive about what the environment is today and their ability to pass on increases in cost to the consumer. And they're always going to be nervous because they're nervous all the time and they should be because it's a tough, it's a really tough business, but they're really good at it and they, they're great partners for us and in the shopping centers that we have.

Omoteo Akusana - (00:36:53)

And then how do you think about. When we kind of think about sources and uses of capital. How does potential stock buybacks kind of fit into the equation at kind of current stock prices?

Jeff Edison - Chairman and Chief Executive Officer - (00:37:08)

You know, we, the way we look at it, it's a tool just like selling properties, just like raising public equity. And it's a tool to be used at the right time when you, when it's the best investment and the best use of your, your free cash flow. So that's the way we think about it. We, we. So it's, it's one of the tools and we wouldn't be hesitant to use it at the right time and, but we're not also eager to use it if, you know, we particularly environment where we are today, where we have really good uses of our capital that we think we can grow significantly. So that, that's, that's, it's a great question and it is one that, you know, is part of our sort of regular conversation about where we should be depending on where the stock price is.

Omoteo Akusana - (00:38:01)

Gotcha. And one quick last one for me. How do we think about acquisitions? Again, you're already at 376 million year to date. Guidance is 350 to 450. I'm just kind of curious whether, you know, there's some conservatism in that number or the way 4Q is shaking up. There may not be a lot of Deal activity.

Jeff Edison - Chairman and Chief Executive Officer - (00:38:23)

I would say, you know, $100 million a quarter is pretty decent activity and you know we'll, we, that, that, that gets us to 400 for the year. We feel, which is the midpoint of the guidance. We feel, we feel good about that. And you know I would, we, I wouldn't be overly feel more, a lot more aggressive than that or we would, you know, we change guidance and we, but we don't feel, you know, that we won't meet that either. So we're, we think the guidance is pretty, is a pretty good place to be looking at.

Omoteo Akusana - (00:39:01)

Thank you very much.

OPERATOR - (00:39:03)

Your next question comes from the line of Todd Thomas with KeyBanc. Please go ahead.

Todd Thomas - (00:39:11)

Hi, thanks. First question, just regarding dispositions you commented it sounds like next year will be higher than this year's, you know, 50. To $100 million target. Is is there a segment of the portfolio or kind of a larger portion. Of the asset base that you ideally would like to recycle out of? Is there any insight around how much you might look to sell over time and also whether the plan is to sell assets on a one off basis or if there could be some larger. Transactions perhaps just given the increased competition that you're saying.

Jeff Edison - Chairman and Chief Executive Officer - (00:39:46)

Yeah, John, do you want to take that one?

John Caulfield - Chief Financial Officer - (00:39:50)

Sure. And then Bob, you can follow up after that. So Todd, I would say that we're looking at multiple options because I think we do think that as there is great competition for grocery anchor shopping centers in the market, there are a lot of them that we've taken to a stabilized place and there are buyers out there that are just interested in more of a completely solved button up solution. So that is something you're going to see. I think you will see us sell more next year. It's hard to say because again similar to the acquisition timing, it can move quarter to or things like that. I wouldn't say, and this is where Bob will come in, I wouldn't say we're looking at anything specific on an individual region or things. It's more the IRRs. It's that if we look at forward and realize that we've taken most of the or achieved most of the growth in the asset that we would look to sell that and I think we look to sell it individually or as a portfolio. Bob, anything more?

Bob Myers - President - (00:40:48)

Yeah, I'll just add that I, I think we'll end up selling between 100 and 200 million next year and I believe that it'll all be done on, you know, one off basis. So I don't see A portfolio there because we do want to be very surgical as being active portfolio managers. So Jeff touched. Jeff and John touched on it. But certainly 100% stabilized assets that when I look at our forward IRS would generate six and a half, 7% returns. We think we can, you know, replace those assets with these nine, nine and a half, ten unlevered return deals and pick up 200 basis points in spread over the long term. So that's what we're focused on and that'll be our strategy.

Todd Thomas - (00:41:35)

Okay, got it. So. So it sounds like a little more of an ongoing portfolio sort of asset. Management process just to, you know, you. Know, the plan is to remain net acquirers, just sort of prune the portfolio. Over time by selling lower growth assets and upgrading quality and, and improving growth.

Jeff Edison - Chairman and Chief Executive Officer - (00:41:50)

Yeah, it is.

Todd Thomas - (00:41:51)

I think that makes a lot of sense. Yeah. Okay. And then my last, just for John, real quick, can you just talk about. The drivers behind the interest expense decrease. Underlying the updated guidance and are there. Any updates on the swap expirations in November and December?

John Caulfield - Chief Financial Officer - (00:42:10)

Sure. So the, with regards to the guidance and interest rates, I mean, I think part of it was conservatism for us and then the timing of the acquisitions relative to the guide. I don't think there's anything, you know, much, much farther than that. With regards to the swaps, you know, we're 5% floating today. If those burn off and nothing changes, we'd be about 15% floating today. We do have a long term target of about 90%. Ultimately those, if they went based on where today's rates are and no further cuts, they'd be kind of around 5.3%. We can issue in the long term debt markets around 5%. But I think we are in a position now where interest rates are coming down. At least that is the perspective of the market. And so we were going to do what we do, which is we are looking opportunistically at extending our balance sheet. We do like the idea of being a repeat issuer in the long term bond market and that's where there'll be capacity. So I think we're comfortable right now with if those expire and we remain floating with that floating rate. But, you know, we will be looking to access the bond market. I would point out we don't have any meaningful maturities until 2027 and we, our actions will be consistent with what we've done in the past.

OPERATOR - (00:43:30)

Your next question comes from the line of Cooper Clark with Wells Fargo. Please go ahead. Great.

Cooper Clark - (00:43:38)

Thanks for taking the question. Just given the supply backdrop and current. Strength in the leasing environment. Curious how we should think about long term upside to noi growth on an occupancy neutral basis as you capture upside on spreads, improve escalators and other lease structures. John, do you want to break. I think that's probably best broken down in terms of what we see as the pillars of that growth.

Jeff Edison - Chairman and Chief Executive Officer - (00:44:07)

Super. I think the pieces for us is we're going to look to deliver 3 to 4% on a long term basis. You know, our rent bumps are approximately 110 basis points and I'll point out that that's up, I think 50 basis points over the last couple of years. So we think that we've got good continued growth there and our leasing spreads continue to be very strong on both renewal and new leasing basis. So I think as we look at it, there's a combination of the new leasing, the rent bumps, you know, the development that we're able to do, you know, on the outparcels that are already a part of our existing properties to really drive that towards that, you know, keeping us in that 3 to 4%. I think that we will continue to buy assets that Bob referenced earlier with occupancy availability that will allow us to kind of continue that momentum and move up from there. Bob, I don't know if you have anything you want to add.

John Caulfield - Chief Financial Officer - (00:44:59)

I don't have anything to add, John. Great. And then you noted that you expect.

Cooper Clark - (00:45:07)

Between 100 and 200 million of dispositions next year. Curious how we should think about additional. Funding sources in your current cost of. Capital with respect to the 350 to. 450 million annual long term acquisitions target.

Jeff Edison - Chairman and Chief Executive Officer - (00:45:24)

John, do you want, you want to just give the latter on that?

John Caulfield - Chief Financial Officer - (00:45:27)

Sure. As we had said on the call, I would say our funding sources are going to be over $100 million of free cash flow that we generate and retain after the dividend, which I would also highlight, we just raised almost 6% this quarter. So we have the cash flow that we generate, we have the growth in the base. We're levered at, you know, 5.1 times on the last quarter annualized. And this disposition is going to allow us to recycle using asset management strategies like Todd just talked about that is going to be able to drive us and propel us forward in executing our growth plans.

Cooper Clark - (00:46:04)

Great, thank you. Thanks. Cooper.

OPERATOR - (00:46:08)

Your next question comes from the line of Floris Van Dykem with Ladenburg. Please go ahead.

Floris Van Dykem - (00:46:16)

Hey guys, I've got two questions, by the way. So you guys had, I think was. It 23 for almost 23% renewal spreads. But if you look at your overall spread, there were only, you know, 13% because I think 46% of your leasing activities were options. Can you. And obviously, what would the growth have. Been if you didn't have those options? What would the growth have been if you had in your same store noi? And what are you doing in terms of your, you know, new leases? Where are you limiting, you know, options, etc. So that you can, you know, mark to market more rapidly?

Jeff Edison - Chairman and Chief Executive Officer - (00:47:00)

So, Bob, you want to talk about the options? John, do you want to talk about the. What Flores is, by the way? Hello, Flores. Good. Good to hear your voice and the. On the options. And then John, if you can just kind of walk through what that impact would have been without the options. So the growth without. Without options.

Bob Myers - President - (00:47:23)

Sure. Flores, good to hear from you. And great question on the options. This is absolutely an area that we're very focused on on structuring any new renewal or any new lease. This is something that we've approved over time. I know directionally for our team, I give direction that we don't want to give any tenants an option unless there's a 25% increase in the option period. The challenge with it is, you know, national retailers are making a large investment in this space. So they do want to have options, usually three five year options, as an example, and they certainly want to negotiate that number. But as a foundation to our strategy, you know, we're always starting with no options. And, you know, there's a lot of reasons why we say that, because the landlord has nothing to gain from it. So we want to push back hard on that as we negotiate options.

John Caulfield - Chief Financial Officer - (00:48:28)

And with regards to the math, I would say that, you know, it's tough because the options, the biggest portions coming from our grocers is as part of the strategy. As we look back at the combined leasing bread of all of it, it was 16% last quarter, it's 13% now. I think, as Bob said, we have strategies to do that. But I do think this is where the compliments come in of more neighbors in other ways. But the new leases was almost 30% over the last 12 months and 21% on renewals or less. So the volume of footage is about the same. So you'd have had 25% net growth instead of the 13% net growth adding to your NOI. So it's very strong. But I do think the options are something we try to mitigate but are still part of the portfolio.

Floris Van Dykem - (00:49:15)

Thanks, guys. John, I appreciate that. My follow up question is regarding maybe I get your view on cap rates. I mean, we hear that cap rates for grocery anchors are very low relative to other retail types. You've been able to acquire an average 6.7% cap rate. Jeff, what is your view on what's going to happen to grocery anchored cap rates? Are they going to go up? Are they going to go down? And then also what is your appetite. For, you know, if there is such. Strong institutional appetites, maybe, maybe doing a larger JV with part of your portfolio to where you benefit from, you know, getting management fees, maybe not for your lowest growing assets, but you know, to free up some more capital and to prove to the market that, you know.

Jeff Edison - Chairman and Chief Executive Officer - (00:50:12)

Your stock is undervalued. All right, that that flourish. You asked like four questions there. So let me, let me start with the, you know, the supply demand dynamic right now is, it's fairly stabilized. So we don't, we don't see a major compression in cap rates from where we are right now. It will be by segment. And again, you know, when we generalize about cap rates, it's a broad brush you're painting with because it really as, you know, it's a market by market event and you, you know, it's going to be very different in, you know, the Midwest than it's going to be in Florida. And, and you, you got a lot, a lot of, a lot of variety to talk about there. But I mean, I think generally we would say that the, the supply demand dynamic is fairly stabilized and the, the, the amount of product coming on the market is taking care of the increase in demand from, from some of the primarily institutional players that, that have sort of come in the market and added additional capital into the market. So that, that would be the, our answer on that in terms of JVs. I mean, you know, we, we do have two active JVs that we're growing. We do see that as a way of having growth and getting, you know, better returns, as you point out, through the fee structure and you know, owning less of the overall equity. So that that is a opportunity. You know, it's not, it's not a major part of our business, but it is, you know, an opportunity to continue to find places to put the pico machine to work and, and create value. And that's, you know, that's what we do. And that I think that will be, continue to be something that we look at and, and we'll look at our disposition program too, because are there ways to, to take assets that are slower growth, but that would be, we'd like to own a long term basis and maybe take a little less equity in those. So those are all things that we're looking at as opportunities, you know, in a market where, where the, you know, the, the, the values are compressed in our space. So we, you know, we, we've got a lot of options and we'll continue to use those.

Floris Van Dykem - (00:52:51)

Thanks, Jeff.

Jeff Edison - Chairman and Chief Executive Officer - (00:52:52)

Yep, thanks Worth.

OPERATOR - (00:52:54)

Your next question comes from the line of Hong Zhang with JP Morgan. Please go ahead. Hong. Your line is open.

Hong Zhang - (00:53:10)

Hi, can you hear me? Yep. Yeah, we got you. Oh, cool. Thanks. I guess just, just a question on funding your acquisition pipeline for next year. You've traditionally funded your acquisitions through with, with majority debt. I, I guess what is the thinking. Around changing that composition to be more with dispositions next year, especially with rates falling where they are because correct me. If I'm wrong, but once you get. More of a spread, if you were. To fund, fund your acquisitions on debt currently. Well, I'll, I'll take the first thing, John, probably you can, you can answer as a question. You know, we, we are, you know, we always have been and will continue to be focused on keeping a really good balance sheet so that we can take care about, you know, we can take advantage of opportunities as, as they arise. That, that doesn't really change based upon, you know, where, exactly where the rates are. We're really focused on making sure that we have the right depth of Cassidy. Right now we have capacity in terms of our target of, you know, of 5.5. But that's going to be used when we have great opportunity. And you know that that's, we, we are very protective of our balance sheet. So John, do you want to go on to talk a little bit about dispos and how we can use that? Yeah.

Jeff Edison - Chairman and Chief Executive Officer - (00:54:31)

Hong, the piece that I would say that at 5.1 times in the last quarter annualized and a long term target of five and a half times, we do think we have capacity there in addition to the 100 million of cash flow that we retain. The other piece I would say is that we believe that on a leverage neutral basis, we can buy 250 to $300 million of assets a year. So leaning into dispositions gets to what Jeff was saying, which is that in a market where we believe there are great acquisition opportunities and an opportunity to recycle assets that we have achieved and stabilized the growth plans that we have, that that's something we're going to do. So when we talk about the disposition, it is balanced. Based on the acquisition opportunity, we have a very solid portfolio and nothing that we're, you know, that's melting, that we're looking to get rid of quickly. So we're going to be thoughtful and prudent, but it's ultimately so that we can recycle into better irrs and that kind of balanced, balanced plan.

John Caulfield - Chief Financial Officer - (00:55:26)

Got it.

Hong Zhang - (00:55:27)

And then I guess just on thinking about the cap rate on your potential dispositions, I mean, you've talked about selling, I guess, stabilized centers, I guess. Could you, could you give a general range of what cap rate those centers would trade at today?

John Caulfield - Chief Financial Officer - (00:55:47)

I'll take that one. So based on some of the assets that we currently have in the market, we believe that the assets will trade anywhere between a6.3 and a 6.8.

Hong Zhang - (00:56:02)

Got it. Thank you.

OPERATOR - (00:56:06)

Your next question comes from the line of Paulina Rojas with Green Street. Please go ahead. Good morning. Among your dispositions, you had the sale of Point Loomis, which to my knowledge included a Kroger store that recently closed. I understand the buyer is a small grocery operator. When you consider the sale price of that property, how do you think the store's closure impacted its value, if at all, compared to what it might have been had Kroger not closed?

Paulina Rojas - (00:56:52)

Well, Paulina, thank you for the question. Bob, do you want to talk about Point Loomis? It's a great story, actually. Well, it is a good story. I mean, it's an asset that we've owned now for I believe around eight years. And we ended up doing some redevelopment in the parking lot and built a little small Outparcel development. We had a really nice bank, Chase Bank. We had Kohl's as an anchor and then we had Pick and Save. We knew that Pick and Save was struggling for the last, I would say five to seven years. So we had worked with them on two year renewals and then finally came to a point when they announced that they were going to close those 60 stores, that this would be on the list. So it wasn't a surprise. The good news is that we did have another grocer lined up who was an owner operated operator that, that purchased it that we recently closed. So it was time for us to move on from the asset and we did well with it. And I think specifically, you know, and Jeff may have a different answer than I do on this, but I think when you lose a grocer like a Kroger, it could certainly impact your cap rate, you know, 100 to 250 basis points.

Jeff Edison - Chairman and Chief Executive Officer - (00:58:12)

Yeah. The only Thing I'd add there, Bob, is once you know that the grocer's in trouble, which we've known for seven years, the cap rate's already changed. So you're not, you're not gonna, you're not gonna see a 200 basis point change in that cap rate. The day that, you know, that they close, it will have already happened. And that's what happened here. That's when we bought the property. We bought it at a cap rate that was very high. And so it was, we were, we knew we were taking on that risk from, from the very beginning. And that, that's why we've made a lot of money on that property, even though it didn't, you know, did. It's not very pretty, but it, but we made a lot of money on it. So that, that is how we, you know, the, you know, we think about it. And that's why you've got to be very, you got to be thinking really long term because the moment there is question about the grocer, that's when the cap rate hits.

Bob Myers - President - (00:59:11)

Yeah, that makes sense and somehow related a little bit. But regarding the new development that you mentioned, I think I heard an IRR of around. Expected IRR around 10%. And I also believe you mentioned that you plan to sell a portion to the grocer. So I presume you will focus on small shops mostly in that center. And my question is how much would your IRR differ if you retained ownership of the grocery store rather than selling it to the, to the retailer?

Jeff Edison - Chairman and Chief Executive Officer - (00:59:53)

All right, so we are going to answer that question December 17th for you. We, we really, we can't really answer that. I, I don't, I don't think we really want to answer that right now. It's early and we want to make sure that we're, you know, far off, but far off long. But your, your, your point's well taken. If we had to grow, if we kept the grocer, the IRR would be less. But, but we'll talk more about that in December. So if that's okay.

OPERATOR - (01:00:29)

Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Please go ahead.

Juan Sanabria - (01:00:38)

Hi. Thanks for the time. I'm just curious if the plan for 26 may include moving the acquisition volume or focus more towards that unanchored, given presumably higher yields or if that's not necessarily the case. And as part of that, do the unanchored centers that you're interested in buying also have that previously mentioned occupancy upside or is that not part of that particular story. Yeah, Bob, you want to take that one? No. Yes, that's a great question. And to answer the question, we're going to speak more in December in terms of our guidance next year. But early indications would suggest that we'd be in the same zip code of where we are at this year in terms of the unanchored strategy. We are going to look more aggressively in that category next year. We are already seeing great results from it and better returns. So I can't tell you specifically if we'll buy 100 million or 200 million of the product next year, but we are finding, you know, there's 65,000 opportunities in the market in that category. And given our operating expertise, we feel like this is something that we can step into. So we'll be, we'll be highly selective. We'll be solving for above 10% unlevered returns in the strategy. But again, I just think it's a very solid complement to what we're doing. Okay. And then just the last one for. Me, GNA went up. The guidance there. If we could just provide a little color as to why and how we should think about growth in 26. Is that more in line with inflation? Is there any sort of other type of investment opportunities you're looking at that may see increase it higher but relative. To history next year? John, you want to take that?

John Caulfield - Chief Financial Officer - (01:02:37)

Sure. It's primarily related to performance based incentive compensation. Ultimately, last year our growth was lower and therefore, you know, we have an environment that we incentivize for results. And so you're seeing improvement in that as well as investments, as we talked about in technology and resources that are going to allow us to scale as we look forward to. So when I think about going forward, I would think we would be in this range here. I still think that we are quite efficient when we look at it on a variety of metrics. But the key piece for us is going to be driving that mid to high single digit FFO per share growth going forward.

OPERATOR - (01:03:19)

Your next question comes from the line of Richard Hightower with Barclays. Please go ahead.

Richard Hightower - (01:03:26)

Hey, good afternoon, guys. Thanks for squeezing me. And I think just one for me. But maybe to put a different twist on Juan's question, you know, you guys have mentioned it a couple of times on the call, so it strikes me as something that's fair game. But when you, when you acquire assets with, you know, fairly significant occupancy upside, you know, does that represent sort of a material component to the long term, 3 to 4%, same store, NOI Target. And then, you know, is just, just so I understand it, is there any sort of qualitative element about the asset in particular or, or even in general, you know, where you have sort of. Low occupancy going in? Is, is there anything to read into the quality of the asset or the location, you know, when that circumstance occurs? Thanks. I don't know, Bob, you want to take the sort of the qualitative part and then John, maybe you can talk about the impact on the, of the lease up. Yeah, I definitely believe that the strategy is to find assets and if you look at what we've acquired, the eight so far, we've been anywhere from 82% occupied, about 100%. So it's all over the map. But there's, so there's so much criteria that goes in the decision based on our 30 years of experience and then the growth in the market and the criteria around foot traffic configuration and upside. So we certainly think right now we're at like a 6.7, 6.8 cap rate on what we've acquired and we're in the mid 10s on the unlevered return and certainly our average around 92% occupied on a blended basis will help us get to those returns. I wouldn't say that there's any quality creep or actually the markets that we've acquired in have stronger demographics than our core portfolio. So we are staying very disciplined in terms of what we're buying and we feel really good about it.

Bob Myers - President - (01:05:33)

I think as it gets to the NOI growth, one of the pieces that I would highlight is a lot of times that asset class doesn't have the exclusives or option restrictions that some of the larger ones do. But ultimately, as we look to our forward NOI growth, I think this gets a little bit to why we don't often try to talk about cap rates and we're IRR buyers because there's a direct tie between the going in cap rate and ultimately where what the growth in that asset is. And I think the other piece that I would say from a quality standpoint is true on all the assets that we acquire where we're looking at inefficiencies in the market ultimately for under managed assets, where an experienced operator with the capital to invest in the asset and the platform that has the leasing expertise and the legal expertise to really maximize the value there, that is what is really driving the IRR growth that we have. And so I think these are those and all of the grocery anchored assets that we acquire are really just kind of pushing through that Pico way of delivering on the growth and that's where we excel.

John Caulfield - Chief Financial Officer - (01:06:39)

Okay, great. Thanks for the color.

Richard Hightower - (01:06:42)

This concludes our question and answer session. I will now turn the conference back to Jeff Ederson for some closing remarks.

OPERATOR - (01:06:51)

Thank you, operator. So, in closing, the Pico team continued our solid performance in the third quarter and we're pleased to increase our full year 2025 earnings. Guidance for NAREIT, FFO and Core FFO per Share. Because of our gross ranker neighborhood shopping center format and our unique competitive advantages, we believe Pico is able to deliver mid to high single digit core FFO per share growth annually on a long term basis. The Pico team remains focused on delivering on this expectation and driving value at the property level. Given our demonstrated track record through various cycles, we believe an investment in Pico provides shareholders with a favorable balance of quality cash flows, mitigation of downside risk and strong internal and external growth. In summary, we believe the quality of our cash flows reduces our beta and the strength of our growth increases our alpha. Less beta, more alpha. On behalf of the management team, I'd like to thank our shareholders, Pico Associates and our neighbors for their continued support. Thank you all for your time today. Have a great weekend.

Jeff Edison - Chairman and Chief Executive Officer - (01:08:03)

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.