RPT - NYSE

Greetings, and welcome to the RPT Realty First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Benigno, Senior Analyst, Investor Relations. Thank you, sir. You may begin.

Good morning, and thank you for joining us for RPT's First Quarter 2023 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 factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2022, and in our earnings release for the first quarter 2023. Certain of these statements made on today's call also involve non-GAAP financial measures. Listeners are directed to our first quarter 2023 press release, which includes definitions of these non-GAAP financial measures and reconciliations to the nearest GAAP measures and which are available on our website in the Investors section. Lastly, this quarter, we are introducing our earnings presentation, which we will reference throughout the call to highlight key messages for the quarter. You can find the first quarter 2023 earnings presentation on our website in the Investors section. I would 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, Craig. Good morning, and thank you for joining our call today. We continue to experience strength in the leasing environment, highlighted by our third consecutive quarter of over 500,000 square feet of signed activity, compelling new re-leasing spreads of about 25%, and substantial progress on backfilling our Bed Bath concepts where we have strong demand and activity on all locations. As mentioned on the prior earnings call, we have been treating our Bed Bath boxes as vacant for some time as we worked on re-leasing plans well ahead of their bankruptcy filing. In some ways, our industry, like the hospitality sector, needs to have hands-on, active, day-to-day management to drive alpha and operational results. Given our proactive approach, we believe we can create significant value with top-tier tenants that better credit, higher rent, stronger sales and more relevance with our consumer. We have engaged with several retailers across the country about these locations, giving us a substantial head start on backfills with single user tenants, which limits CapEx and downtime. Our in-place rents for Bed Bath are near the lowest in our industry at about $11.50 per square foot, which we expect to grow by 30% to 40%. At the end of 2022, we had 8 Bed Bath & Beyond leases and 4 buybuy BABY. Since then, we have released 3 of our Bed Bath & Beyond locations to strong national tenants, capturing a mark-to-market spread of nearly 50%, highlighted by our HomeGoods lease at River City Marketplace in Florida. While the 50% spread is sizable and akin to industrial spreads, it is not surprising given the mark-to-market story we have been communicating and executing on for the last several years. Expected downtime on these deals is minimal with rent expected to commence on the HomeGoods deal in the fourth quarter 2023 and on the other 2 deals in the second quarter of 2024. Additionally, we are negotiating leases or LOIs on 5 other locations at a weighted average rent spread between 30% to 40% and are in active tenant discussions on our remaining 4 exposures, 2 of which are being considered as part of a larger redevelopment plan. The lack of quality new supply is driving broad-based demand that includes grocers, off-price, general merchandise, home improvement, health and beauty, medical and sporting goods tenants. Given this demand, we expect to have signed leases in the next few months for all remaining Bed Bath and buybuy locations. In the event we get the spaces back. Please see Slide 10 in our earnings presentation for additional details about our Bed Bath exposure. In March, we were happy to announce the appointment of Amy Sands as Executive Vice President and Head of Investments based in our New York City office. Amy is well known and well respected within the real estate community and brings over 20 years of transactions experience, having last served as Senior Managing Director, Co-Head of the Chicago office at JLL Capital Markets. Amy brings a deep network and a proven track record and will be a great cultural fit at RBT. With $1.7 billion of committed capital to deploy between our 2 joint venture platforms, we are excited to see the efficiencies of our now consolidated investments team under her leadership. I would like to take a moment to highlight Miami, which represents 8% of our ABR and is now our fourth largest market. We have been actively expanding our presence in Miami due to the incredible growth the area is experiencing. Our leased to occupied spread of 630 basis points in the market provides a clear path to further expansion. It's one of the largest Miami shopping center owners in the public REIT space. And at just 83% leased, we have a unique opportunity to capitalize on one of the fastest-growing markets in the country, where rents are up 25% over the past 5 years, including an 8% increase in 2022. Over the last 2 years, we have been replacing older leases in our Miami portfolio that were paying little to no rent. At Mission Bay Plaza in Boca Raton, we replaced a former Office Depot with Baptist Health, a AA- rated credit health care facility, which we highlight on Slide 16 of our earnings presentation. Additionally, we are finalizing a lease with a market dominant grocer to replace a Save A Lot that was paying $6 per square foot in rent. We are also in lease negotiations with a leading retailer to replace a Winn-Dixie that had been in the portfolio for over 25 years and was paying $6.50 per square foot. On the small shop side and to put it into context the mark-to-market opportunity in our Miami portfolio, we are replacing an older restaurant concept with a nationally recognized restaurant at close to a 70% spread, which equates to an ABR of $60 per square foot. Miami and the rest of Florida will be a meaningful driver to our internal growth for 2024 and beyond. See Slides 14 and 15 in our earnings presentation for more details on why we are so bullish about this market and the near-term opportunity there. The crown jewel of our Miami portfolio is Mary Brickell Village. Our investment thesis was simple: buy great real estate at great value in a market we know well. Our plans to unlock this value are beginning to take shape in the form of a phased redevelopment of the Western parcel that we will realize the embedded mark-to-market opportunity in the near term. Today, the center is 94% occupied, up from 78% when we bought the asset last summer. Sales are over $1,500 per square foot, up nearly 63% since 2019, which equates to a low 4% cost of occupancy, reflective of the significant future mark-to-market upside at MBV. The challenge here is not filling vacancy. It's curating the optimal mix of tenants that will generate the highest level of sales and allow us to maximize rents. We are targeting best-in-class wellness, food and beverage, services and soft good retailers, including top international restaurant groups. We are in active negotiations with new and existing tenants at rents in the $120 to $150 per square foot range, which compares to our blended in-place rent of $47 per square foot and our initial underwriting rents in the $75 range. Fundamentals are clearly exceeding our expectations. And we now expect to drive unlevered IRRs that are several hundred basis points better than we initially underwrote. Longer term, our plans include a mixed-use vertical densification of the Eastern parcel. We continue to evaluate our densification options and have been working with a top-tier architect on our vision to unlock the air above the site. While the timing of this specific opportunity is a few years away, we are spending time now to understand and evaluate our options to maximize value for our shareholders with an eye on creating an unlevered IRR well into the double digits. See Slides 17 and 18 of the earnings presentation for additional color on our plans at MBV. With that, I'll turn the call over to Mike.

Thanks, Brian, and good morning, everyone. Recent tenant bankruptcy filings, the elevated rate environment, and concerns of a potential recession serve as reminders of the importance of disciplined balance sheet management. On this front, we continue to be proactive and control the controllables. Our investment-grade rated balance sheet is in a position of strength with no debt maturing until 2025, about $470 million of liquidity, only 5% of our debt tied to floating rates, and the leverage continue to tick down towards our target level of 6x net debt to adjusted EBITDA. Turning to first quarter results. Operating FFO per share of $0.25 was slightly ahead of our internal plan for the quarter and up $0.01 versus last quarter primarily due to lower G&A. Same-property NOI growth for the quarter came in ahead of plan as well at 3.8%, fueled by 3% base rent growth after adjusting for some offsetting accounting movements between base rent and rental income not probable of collection highlighted on Slide 20 in our earnings presentation. In the first quarter, we signed leases covering approximately 506,000 square feet, resulting in a signed not commenced balance of $9.6 million, which equates to about 6% of first quarter NOI. Our SNO pipeline was down slightly versus last quarter as we opened almost $3 million of gross rent on schedule, partially offset by $1.2 million of new leasing activity. The pipeline is largely comprised of high-quality grocer and discount tenants that we expect will add an incremental benefit of $0.10 per share of annualized operating FFO by 2025. Please see Slide 7 of our earnings presentation for additional details on the trajectory of our SNO upside. Our leasing pipeline continues to be robust with $10 million plus in lease or LOI negotiation. We ended the quarter with a strong 95.3% same-property leased rate, up 150 basis points year-over-year. I encourage you to focus on our same-property lease rate as you assess the quality of our portfolio. We are tactically recapturing substantial space at 3 properties that are in active redevelopment or being prepared for one, which is temporarily impacting our leased and occupancy rates for our aggregate portfolio. At Crossroads in the Miami market, we demolished a smaller, older Publix last year, representing 42,000 square feet or 30% of the property GLA and are set to open a brand-new Publix flagship store later this year that we expect to drive incremental sales and rent growth. Additionally, at our Delray Beach asset, Florida, we proactively recaptured 53,000 square feet mid last year or 25% of the center GLA that was previously leased to a below-average grocer and are in active discussions with an investment-grade rated national tenant as they backfill. In Oakland County, Michigan, at our Hunter's Square asset, we purposely recaptured about 100,000 square feet during the first quarter this year or 30% of the center GLA to be redeveloped. We are in active discussions with a top-tier grocer and 2 Class A national retailers. We look forward to sharing more details on our Hunter's and Delray projects in the coming quarters. During the quarter, we also continue to realize the benefits of our below-market rents, achieving a 39% and 23% rent spread on new leases over the trailing 12 months and during the quarter, respectively. Renewal spreads improved to 7% in the first quarter and were also up 7% on a trailing 12-month basis. Since mid-2018, our rent spread on new leases has averaged 31%, and we see no near-term slowdown, particularly in light of the Bed Bath opportunity. We also continue to drive contractual rent growth with escalators on new leases averaging 2% over the last 12 months as we realize the benefits of our high-quality portfolio. These escalators will contribute to a rising and sustainable NOI growth profile over time. Given our outperformance during the first quarter and with the bankruptcy environment playing out roughly as expected, we are maintaining our operating FFO per diluted share guidance range of $0.97 to $1.01 per diluted share and our expectation of same property NOI growth of 1.5% to 3.25%. The midpoint of our operating FFO guidance continues to assume lost rent totaling 300 basis points of NOI, which is comprised of our typical bad debt reserve of 75 basis points as well as an additional 225 basis points tied to bankruptcies, primarily for Regal and Bed Bath & Beyond. Our operating FFO and same-property NOI range contemplates that we recapture all our remaining Bed Bath & Beyond and buybuy BABY locations by the end of July. We do expect our operating FFO and same-property NOI to decelerate in the second quarter as we recapture space from Bed Bath & Beyond but to reaccelerate in the back half as our signed not commenced tenants begin to open and pay rent. 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 the line of Derek Johnston with Deutsche Bank.

Brian, how are the other 5 Bed Bath & Beyond backfills progressing? I know you touched on it briefly in the opening remarks, but any additional details here since it's obviously a point of concern would be helpful.

Sure. Thanks, Derek. So those other five, let me start with those. We have leases out on the majority of those, call it, 80% at significant spreads, as I said, 30% to 40% higher rent. This is a very rare opportunity to get under-market leases back in a really supply constrained limited vacancy environment. I'm more than pleased with the leasing team's execution and our proactive approach. This resulted in really HomeGoods only having 7 months downtime, much earlier RCDs, we highlighted second quarter openings. Those could very well move to first quarter of 2024, which is less than -- well less than 12 months. In some cases, too, this approach allowed us to see five to six LOIs for one box. We literally have no vacant boxes at many of these centers. So as I said, the majority of these are single users, which means less downtime and less CapEx. I think two -- I talked about the five in leases. But the other two where we're really exploring non-single users, the first is at Shops on Lane. It's a two-anchor shopping center. Whole Foods is there doing $1,200 a square foot. Small shop rents here command $45 triple net. So we could divide that and have significant value creation. And we have enormous demand coming from athleisure, F&B and service-orientated retailers. And the second, which could be part of a larger development, is in Bellevue in Nashville. We bought this asset in '21, as you recall, for less than the land was worth. This has always been a covered land play, and Bed Bath here controls the largest box. So should we get that back. Residential demand is through the roof, and we are exploring opportunities on adjacent land for that.

That's very helpful, actually. And I just wanted to switch gears, and you guys have been active in the private markets historically. And I'm thinking it's been so slow, but with the likely Fed pause, do you see maybe a tightening of the pretty wide bid-ask spread? And are we close to seeing volumes pick up and anything that's a this year event? Or how are you looking at private markets? And what are you seeing on the ground?

Yes, I think with the Fed yesterday and hinting at a pause, and I do think with more of a certainty around Bed Bath, we're not going to be selling any vacancies. We see enormous growth from those boxes in '24 and beyond. But I do see back half of the year, if I were to guess now, a much more higher volume acquisition market at large. I would say for RPT for our capital allocation, we're really focused on lease, lease, lease. We can't get any near these double-digit yields really anywhere else. They all hit -- mostly '24 will be a major beneficiary. And we have an under-market portfolio where our single highest best use right now is putting capital towards that. Second is we still have a large amount of money with RGM

Our next question comes from the line of Todd Thomas with KeyBanc.

I just wanted to circle back to some of the comments that you made around Bed Bath. And I think last quarter, Brian, you characterized the mark-to-market on re-leasing the Bed Bath boxes at around 20%. Now you're projecting 30% to 40%. Is demand and sort of the replacement rents that you're anticipating, are they actually improving now that Bed Bath filed and, I guess, the timeline to sign leases and retailers getting in, has that changed at all?

Yes. I mean, let me -- the pricing has changed. The rent's higher. There's more demand. With certainty, retailers now are spending time on and money on design and legal costs to put their resources to use. Let me talk about time. That really is the way we started it really starting this process of treating a vacancy -- like vacant for the last year. That's going to really greatly impact '24. If we didn't do that, you're really not getting tenants opening until mid to late '24 without that proactive approach. So rent is much higher than we projected, and the timeline is same as last quarter just based on our proactive asset management approach.

Okay. And are you seeing competitions for these boxes? I guess how much competition or can you characterize the competition that you're seeing? Are they mostly -- you're talking about and we're hearing a lot about single-tenant backfills, single-user backfills. Is it sort of a very surgical process where there's one interested retailer? Or are you starting to see some competition really butt up for these spaces?

How do you get higher rent? It's getting tension in the market. And as I say to the leasing team all the time, it's bidding to the highest bidder. And obviously, we're focused on credit, too. This is not just the highest rent, credit, sales performance, the merchandising with the rest of the center. But in the cases of -- I can give you some specific examples. Midwest Center, you had 6 LOIs, 6 for one box, the only vacancy, only box vacancy within that center, 6 LOIs for that. But then in Florida, you had 4. And River City had enormous amount of interest and still asking about that box. So this is coming not just 1 or 2 users, multiple users for this box. And I think as we're allowed to say these names given permission by the retailers of which we've signed leases already, they're household names, many are investment grade. And they'll do a lot higher sales performance than obviously Bed Bath.

Okay. And then just last one on Bed Bath. The -- so the leases that you signed after the quarter end and some of the activity there, today we see your exposure as of March 31 has there been any change subsequent to the end of the quarter in terms of additional space or boxes that you've recaptured since then?

Yes. The quick answer, Todd, it's lower, but I'll bring it back to last year and bridge it so where we are at as we sit here today. So at the end of '22, we had 12 locations, 8 were Bed Bath concept, 4 were buybuys. It equates to about 2.3% of our rents. And then during the first quarter, we captured two Bed Baths. One is part of the larger redevelopment that Brian alluded to, and the other one we've already re-leased to a national retailer. Subsequent to the quarter end in April, we've captured an additional location that has already been re-leased to the HomeGoods that we highlighted in the release last night. So today, we have nine locations, four of them are buybuys. We do expect to recapture two more locations, one part of the large redevelopment, the other one that Brian mentioned and then one that is already signed to another national tenant. So as we sit here today, we'll be left with 7 locations and only about 1.3% of ABR.

All right. Great. That's helpful. And then in terms of Hunter's Square and Marketplace of Delray, how much incremental dilution are you anticipating beyond what's in the run rate today? And can you talk a little bit more around the time frame for those redevelopments and also discuss the cost and scope for those projects and what you're anticipating?

Sure. I'll start, Todd. All the dilution occurred. So we had it all. We captured the old Winn-Dixie at Delray last year, and then we recaptured about 100,000 square feet at Hunter's during the first quarter. So you should expect no more dilution from those two projects as we move forward. It will be all incrementally positive as we get signed leases and redevelop both those centers.

And I want to say like especially with Delray, since I've just got here, I've been trying to buy many of those tenants out. And so this is all proactive on both parts here. So Delray and Hunter's, we'll give you project costs coming up soon in the next supplemental. Yields are good. The demand is good. At Hunter's, you have grocery, off-price, national retail credit type, call it, 120,000 square feet of lease and LOI negotiating and then a pretty marquee lease with a tenant in Delray with another tenant, a large tenant in LOI. So we're really excited about the value creation and incremental NOI at both assets, considering that one asset was really 40 years old in Delray, and that's sitting in a $45 ABR market. And Hunter's was really converted mall into a power center. And now it's the time to replace and remerchandise that into retailers that are thriving in today's environment. So we'll get back to you on cost and yields at a later date, provide that with clear numbers in our sub.

Our next question comes from the line of Haendel St. Juste with Mizuho.

This is Ravi Vaidya on the line for Haendel. I just wanted to follow up one more here on Bed Bath. Can you comment on the CapEx requirements and the TI spend required to re-lease the boxes, particularly when you look at a single backfill or more broader redevelopment where you're cutting it up?

Yes. I mean, you're really going from a very minimal CapEx to, call it, $100. And that varies between the single users and cutting it up. And the cutting it up, I really focus on -- really the only way we're looking to do this is Shops on Lane. You have 150,000 square feet of interest for not a lot for 30,000 square feet of real estate. So if we proceed to go down that route at Lane and divide the boxes, the box, that will be significant yield or if not, there are a number of single users that would take the box as is. So really I would think of this as $0 to $100, depending on the box and tenant.

Got it. That's helpful. More than 90% of your leases this quarter were renewals. Can you comment on the broader supply-demand dynamics within your markets? And can we expect this as a run rate going forward, where they're proportionate renewals for total leases?

Let me -- thanks for asking this question. It's an important one. Leasing pipeline is robust. Obviously, we have a significant on the higher end of SNO in our peer set. We have approximately $13 million in the pipeline with $10 million of that already in legal. Square footage of that new leases is 681,000 square feet, which is really sizable for a portfolio size of ours. The spreads are similar to what we've been printing, and they're extremely high-quality nature of tenants, most being national and majority investment grade. Categories run the gamut from grocery, off-price, home improvement and F&B. So it's a robust pipeline. Our foot's on the gas. Legal and leasing are extremely focused, 7 days a week, producing and knowing that this is a window where wind is at our back in this environment.

And Ravi, as we look forward to your question around the percentage of renewals as a percentage of our total leases. Look, we're not a quarter-to-quarter business. So it's going to be choppy at certain times. But what I will tell you is that absent some of the Bed Bath recaptures that we expect this year, we're going to be well north of 90% on the retention ratio, which is very consistent to how we performed last year. And we expect that to continue, given the supply constraint environment that we're currently in plus the portfolio quality that we have today given the transformation over the last 3 years. So we fully expect that 90% potentially then grow as we get out into '24, '25.

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

Well, it's -- not much to comment here on the balance sheet because you got no debt maturing for the next two years. So that's a nice change relative to some of the other companies. Wanted to delve into the new leasing costs a little bit. I noticed your new leasing costs were up $100 to [$117] a square foot. Presumably that was impacted by the Bed Bath retenanting. Most of your leases is retention. So again, lower cost, but obviously, how should we think about new lease capital going forward? And could that come down as the portfolio occupancy increases?

Yes. And really, that $100 or -- didn't change, I should say, it was HomeGoods at River City. T.J. Maxx has their deals. Obviously, I think they're probably the best retailer in our ecosystem. That's a deal where we greatly improved the credit quality of the sales per square foot. And that's a use that we didn't have at River City, which is a dominant asset in Jacksonville. I do think costs could come down over time. And it's going to be that wide range of 0 to 100 on the Bed Bath backfills, but the spreads are, as you saw this quarter, 50%. So I think the small shop, I think some of the more mid-tier boxes at 10,000 square feet or so will moderate. And I can tell you, even at like Brickell, this is one where there's just not -- there's no space. And so when the space comes up and when we're curating the space, it's not only a rent discussion, which are well in the $100 a square foot. It's a TA discussion. So there, the costs for underwriting have come down substantially as well.

Yes. I mean, most of our CapEx spend this year, Floris, and next year is tied to the SNO. So it's going to be a bit heightened, but we fully expect to have that come down in '25. And you got to spend money to make money here. We're making really, really nice returns on a lot of these Bed Bath deals, but also other opportunities within the portfolio, which really can lead to better growth in '24 and '25. We had [$0.06] coming online from our signed not commenced next year. I mean, if you just look at the same-property NOI growth profile over the next couple of years, it should be rerated. I mean, what we're looking at least 4% coming from same-property NOI, and then you have [construction] increased to 200 basis points re-leasing spreads. So we're -- to use your words, our true speed is coming up.

And that's too without -- I'll add in. That $0.06 is without the $10 million in legal, which is robust with 681,000 square feet of new deals, which is extremely sizable.

Maybe as a follow-up question, I was [encouraged] by the information you guys put out there on Mary Brickell and some more details. Obviously, tenant sales are very strong. Curious to see what those tenant sales would be without the Publix. But if rents -- I mean, if your small shop rents go to $120, I mean, based on our math, I mean, it looks like that yield on investment goes from, call it, a low to mid-4% to an 8% purely based on the -- on that space and then obviously, the upside from redevelopment as some of the other stuff. Is that the right way to think about it?

Yes, absolutely. I would look at this as well into the double digits unlevered return without any densification. In Phase 1, Phase 2, not a lot of cost -- capital. If you look at nice intent, this is reprogramming nice intent . Elevating, hiding storefronts, bringing in the best brands, redoing the courtyard, bringing in a marquee flagship opportunity facing Miami Avenue, we'll provide the cost and the yields on just that direct cost for Phase 1 and 2 in a future supplemental. But it's great. I mean, it's much higher than we thought when underwriting, obviously, at $78 a square foot. And really just the migration of people and businesses to the submarket, it's thriving. I mean, when you look at the sales productivity from -- and this includes Publix from 2019 at mid-900s a square foot to 1,500 and change today, that's enormous. And you take Publix out, you're $1,000, $1,100 a square foot. You have restaurant comps year-over-year at 30%, 40% higher. So this is more people, more bodies, more businesses, massive tailwind behind in the Brickell submarket. And I think too, one thing to put in, Floris, which is not in any of the numbers I put out there is because you really can't underwrite. This is the place-making and ancillary income and marketing events and digital signage that will be a part of Phase 1 and Phase 2. If you kind of construct and data, we had a luxury car company pay us $50,000 over 48 hours. It's more rent than some of our small shop tenants paying a year. So we see a lot of that ancillary income and marketing events and digital signage as -- that's a great payback return. That's a high-margin business, and that will just push those yields even higher.

If I can follow up on that, just presumably, I know that some communities, in particular, in California are very difficult about granting zoning rights for those kinds of digital boards. Las Vegas clearly has less of an issue with that. But how does Miami look at that? And how much can you add in terms of -- because presumably, you have a fair amount of -- a city block of frontage, street frontage.

Yes.

Only probably two of the four sites or maybe three, but probably only two are suitable for the zone. How much could you add there?

It could be significant. I don't want to get into specifics, and we'll come into specifics at a later date. But Miami is a market that is commanding a lot of brand awareness where digital is a huge driver. I mean, the billboards throughout Miami are commanding some of the highest rents in North America today. We are getting very much up to speed and by no means I'm an expert in this space. But we'll come back to you with the exact square footage and digital opportunity at a later date, but it's -- I threw it out there, it's -- we're not underwriting it. It's still an unknown. We are in conversations with the city. The Department of Transportation has -- will have a lot to do with this. There will be allowable use for this. The question is how much. So without getting into specifics, I'll come back to you with that.

Our next question comes from the line of Lizzy Doykan with Bank of America.

I wanted to go back to your comments on seeing redevelopment opportunities in more of the attractive markets like Bellevue and Nashville and the opportunity for a covered land play. How many more opportunities do you see with monetizing peripheral land like that? Or is this more so a unique situation you're seeing recently?

It's not unique. And as you see -- as you saw in Jacksonville, we had land we contributed with the DeBartolo Group for 50% of roughly 378 units that will stabilize in late -- or early '25. And we threw in $0.5 million for 50% interest there. So we are in conversations with a number of leading resi people throughout the country. I would say it's broad-based. There's interest from certainly all throughout Florida, Austin, Texas at our great asset down there all the way up to Boston but in the Cincinnatis and even Detroits of the world. So we are not gun shy of doing what's highest and best use to produce outside yields. And we'll provide more clarity on the puts and takes of exactly what opportunities specifically for resi there are in the future.

Right. And I had a question on the $0 amount that you recorded for TAs and [LC] cost just in the first quarter on renewals. Can you kind of just provide more color on that or what that really was a function of?

Just the renewals, we just did -- there was no TA provided to any renewals. So that was just a quarter with no contributions.

Okay. And just with the announcement on Amy Sands becoming the head of this newly consolidated investment platform, can you remind us again of the cost savings you have been targeting for the full year this year and then maybe over the longer period of time you're anticipating the consolidation to take place.

This year, it's about $2 million in savings, which is embedded within our guidance range. And going into next year, it will grow on an annualized basis about $2.5 million.

Our next question comes from the line of Hong

Two quick ones for me. I guess the first one is what was the run rate of your bad debt expense in the first quarter in relation to the 300 basis points of guidance?

It was low, Hong. We'd be outperformed on the bad debt. We had about $425,000 or so, which is -- which equates to about 100 basis points of NOI, so 200 basis points shy of the 300 that we had estimated for the full year and continue for the full year. But to give you a breakdown of the $425,000 I think it's very important to understand is $400,000 of that was related to our reserve for Bed Bath, Party City and a little bit of Tuesday Morning. Only $25,000 was related to the rest of the portfolio, which is a great data point to look at, again, when assessing the quality of the portfolio and the strength of the cash flows being such a low amount. And as we think about the rest of the year, it will accelerate as we take back Bed Bath embedded in our guidance as we take back all remaining locations, including our buybuys in July. So you will see that number accelerate. But again, I think it's important to note that the majority of this quarter was related to at-risk tenants, those 3 that are in bankruptcy and the very little amount to the rest of the portfolio.

Got it. And then, I guess, as it relates to the 225 basis points tied to bankruptcies, if I do my math right, I think that, that's closing in July would account for 1/3 of that. Can you talk about -- a little bit about your assumptions for Regal and the other tenants in that bucket?

Yes, yes. We have -- we do believe and we fully expect based on advanced lease negotiations that leasing is currently working through to assume our 3 Regal locations. We will have slight rent concessions there that are embedded in the 300 -- or 225 basis points. Also, we're taking back one of our five Party Cities. And then also, we have Tuesday Morning too that we're taking back a few locations. So that really closes the bridge up to your 225 basis points.

Our next question comes from the line of Tayo Okusanya with Credit Suisse.

In regards to the acquisition outlook, could you just give us a sense of across all your 3 platforms where you're most likely to kind of put capital to work? And specifically just around some of the JV platforms just given again, they tend to be higher leveraged entities how you kind of think about putting capital to work on those platforms.

Tayo, I just want to, again, just reemphasize, we're leasing, leasing, leasing. So that's a lot where our capital is going to be going. Now let's go to your direct question on acquisitions. Really, RGM

Our next question comes from the line of Alec Feygin with Baird.

You guys highlighted the Miami market is seeing strong demand. But I'm curious if there are any other regions or specific shopping center types that are also seeing high tenant demand.

It's really broad-based. I was looking at just traffic data last night, and it is broad. I mean, obviously, in Miami, but Lakeland Park in Lakeland, Florida, up 32% year-over-year. Providence Marketplace in Nashville, 22% up year-over-year. Dedham in Boston, up 20% year-over-year. And it goes hand-in-hand with just the demand of tenants in those markets. So there is massive demand, and you'll see some announcements in the Detroits of the world. There's massive demands in the Cincinnatis of the world. Obviously, Florida and Boston, which we absolutely love, the demand from both small shop and boxes is ripping up here. So it's not -- it's kind of geography agnostic, and just the demand is really broad-brush. And I think that's really how we set up the portfolio. I'm a believer in top 40 MSAs. The retailers where you have most pricing power is by density. And where you can look at that as we compare to secondary markets, I think the top 40 markets will outpace those secondary markets for rent growth. And I think that's what we've sold since 2018, all that secondary market stuff. And we've really left with 98%, 99% top 40 MSAs.

Okay. And I guess on the second part is, what's your visibility on specific site-level reporting for the portfolio? How well do you guys know the tenants? And what are some other tenants that are on your watch list now that Bed Bath has gone?

Yes. I mean, we have a very -- we were active hands-on asset managers. We have a very robust kind of system that the local managers speak with the managers of the national tenants, the local tenants and speak on sales, speak on renovations, provide data is where I'm going. There's a very data analytic approach to buy -- how we look at tenants. The small shop tenants we'd like to have as much visibility. How do you have visibility? You have to have a conversation, and you can't have a conversation managing a portfolio out of New York. So we have an on-the-ground, hands-on asset team that provides feedback to us. The second question on that from watch list. I mean, listen, we're looking at everything from entertainment. And thankfully, we don't have any AMCs. Thankfully, we don't have any 24-Hour Fitnesses. Those are what I've just been hearing from people in the credit markets of their concerns. But I think outside of the Party City's and the Tuesday Mornings, there's things around the edges. Thankfully, we don't have a lot of exposure to that. But where there's lower sales volumes with near-term expirations is really where we're focused as well, and we are well ahead of any of those.

We have no further questions at this time. Mr. Harper, I would now like to turn the floor back over to you for closing comments.

Thank you, operator. So despite the uncertain macro environment, return of select national retailer bankruptcies, we believe RPT has the balance sheet and internal growth levers to strengthen our cash flows. Continued robust leasing demand and our track record of quickly backfilling spaces vacated by troubled tenants at superior economics gives us great confidence that 2023 will be another year of solid performance for the company. Looking forward to seeing many of you at, ICSC and NAREIT. Have a great day.