Federal Realty Investment Trust Stock

Good morning, and welcome to the Federal Realty Investment Trust Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Jill Sawyer, Senior Vice President, Investor Relations. Please go ahead.

Thanks, [ Rako. ] Good morning. Thank you for joining us today for Federal Realty's Third Quarter 2026 Earnings Conference Call. Joining me on the call are Don Wood, Federal's Chief Executive Officer; Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and Jan Sweetnam, Chief Investment Officer; as well as other members of our executive team that are available to take your questions at the conclusion of our prepared remarks.

A reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be obtained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results.

Given the number of participants on the call, we kindly ask you limit yourselves to one question during the Q&A portion. If you have additional questions, please requeue.

And with that, I'll turn the call over to Don Wood.

Thank you, Jill. Good morning, everybody. Really nice operating quarter for us with recorded $1.87 per share, beating our internal expectations and up nearly 6% from last year's quarter. Leasing remains strong. Occupancy grew, same-store cash POI growth was 4%. Just solid operating results topped the bottom, we're confident that we'll close out the year on a similarly positive note. And accordingly, we've tightened and raised our guidance. What we're most excited about has been our ability to build out a formidable central region just 18 months, most recently highlighted by our acquisition of the Summit Birmingham, which closed on October 1. And I'm excited to help investors and analysts fully understand the economic upside, this truly generational purchase of an 870,000 square foot 100-acre open-air retail asset that dominates the retail landscape for nearly 100 miles. The first time this asset has ever changed. I suspect that the real estate investor and each of you will be blown away. Basically, if you like Kansas City, Leawood, we're going to love the summit. Press release and related information that we put out earlier this month covers a lot of facts about the summit, but $508 million put to work contractually in the low 6s or 7% on a GAAP basis with projected POI growth averaging more than 5% annually over the next 5 years, supported by strong tenant sales productivity, attractive occupancy cost ratios and significant mark-to-market leasing upside means that we've added a material foundational asset to the fast-growing central region.

When you include our properties in Chicago, along with Kansas City, Omaha now Birmingham, we've created a portfolio of nearly 2.7 million square feet of best-in-market dominant assets with household annual income of $188,000 and on average, attract 4.7 million annual visits per center. These are really important and dominant aspects. A big part of our success in this geographic expansion comes from the retail tenancy of our properties like Santana Row, the Grove at Shrewsbury and Bethesda Row, among others. Strongly desiring similarly merchandised and operated assets in these dominant locations, tenants like Free People Movement, Dori, Cooper's Hawk, Alo, others.

We've also had -- we have had great success in our best properties on the coast are coming with us to these central region properties. The opposite is also true, whereby tenants new to us in the center of the country are interested in our well-known and proven coastal properties. So win-win given the quality of our portfolio now stretching from coast to coast and in between. This thesis is while embarked on a carefully chosen expanded geography. It's working even better than we had expected. Leawood and Omaha are leading away with foot traffic up 8% year-to-date, and we expect them to keep out running our original plan. More on that shortly.

Previously closed asset sales fast-growing EBITDA and free cash flow, along with timely debt refinances earlier this year, put us in a position to act on the Summit and other accretive initiatives. Additional asset sales expected to close in the coming months will further strengthen our position. In addition, and given the weakness in our share price over the past 3 months, we saw another great investment at the same time we were acquiring the Summit and repurchased nearly 870,000 shares at an average price of less than $109 in September and October at an accretive yield. Just like the Summit, we believe that buying our own shares at these levels is 1 of the best uses of our capital, that, of course, we do in balance. And we're in a position of strength to do it with a strong balance sheet, significant liquidity and a large pool of identified potential dispositions.

We're well positioned to take advantage of any dislocations in the market caused by higher rates. We feel great about our business when despite a higher interest rate environment. In terms of overall leasing and operations in our coastal markets, all I can say is consumer resilience is inspiring. Higher fuel and other costs appear to be here to stay and while not perfect, are best hedged by good paying jobs. If history is any indication, I believe it is in real estate. High-quality dominant assets in affluent suburbs are the likeliest to continue to support the resilient consumers' mindset.

On the retailer side, demand remains strong, the supply remains limited and supports our pricing power in future growth.

Let me turn it over to Wendy to provide more color on that.

Thanks, Don. We closed the quarter with strong leasing momentum with a 14% cash rent spread on comparable deals. This represents 117 leases with an incremental $2.6 million of revenue. These deals pushed our lease rate to 96.5%, up 40 basis points from last quarter and up 110 basis points over last quarter. Equally encouraging is the composition of this quarter's deal was led by the new leases over renewals, a clear signal of the demand for our centers. Anchor leasing, as we projected, continues to drive our lease rate growth of 60 basis points quarter-over-quarter, and we should continue to see that increase into the fourth quarter. Our overall lease rate is the highest we've seen since 2007, and that includes our small shop lease rate, which sits at 94.1%, up 20 basis points from last quarter and were not done.

Physical occupancy stands at 93.8%, which means roughly 270 basis points of signed not occupied leases are still to commence. As those stores open and start paying rent, they're built in growth that bodes well for 2027. Looking ahead, our leasing pipeline remains robust with over 130 deals representing roughly 1.3 million square feet of leasing, driving future growth with rollover expected to be in the double-digit range. The biggest highlight since we last spoke, by far was our acquisition of the Summit adding 870,000 square feet of new raw material and 116 tenants to our portfolio. To give you a sense of the demand for this center, -- during underwriting, we connected with 40 retailers that told us that they wanted to be there.

Since we closed, 35 additional retailers have called us directly inbound calls expressing strong interest in the property, and it's only been 30 days since we closed. Several of those retailers are new to our platform, which provides us kind of a unique opportunity to grow our network of retailer relationships to benefit the rest of our shopping centers. Retailers who recently opened and our opening in short order include such names as Brandy Melville, Reformation, LoveShackFancy and Garage as well as Boden, Free People and [indiscernible]. This center represents a true example of best-in-class retailers with a long list of demand behind the current lineup. With roughly 30% of our leases rolling over the next 5 years at the Summit, we have the opportunity to capture mark-to-market leasing spreads in the mid- to high-teen range. Very exciting.

As Don mentioned, our recent acquisitions in Leawood, Kansas and Omaha continue to provide strong opportunities as well. The longer we own and operate these centers, the more confident we are. We now project our initial 5-year CAGR at more than 5% at Leawood, which is up 50 basis points from our underwriting and more than 6% in Omaha, up roughly 200 basis points. As you might imagine, we're excited to apply these the same playbook at the Summit that we are currently forecast we're currently forecasting over 5% CAGR.

Stepping back for a moment. We know that the headlines from higher gas prices and inflation have people questioning the strength of the consumer. What we see in our centers is different. Traffic is up 3% year-over-year. Our consumer is more affluent than most Americans with a median household income in our submarkets nearly 50% above the U.S. media. That gives them more room to absorb higher costs and they remain resilient. Retailers follow that consumer, and that's what's driving the demand we're seeing for our centers. From the long list of retailers lining up behind the summit, to the depth of our pipeline across the portfolio, durable real estate matters.

And now let me turn it over to Dan to dive into the numbers. .

Thank you, Wendy, and hello, everyone. Our FFO per share of $1.87 for the third quarter reflects roughly 6% growth versus last year and highlights another solid quarter operationally. This result exceeded the upper end of our guidance range coming in $0.03 above the midpoint, highlighting the earnings power and diversity of our multifaceted business plan. Drivers for the outperformance include $0.02 from higher rental income and recoveries and $0.01 from better parking revenues and incremental income initiatives and $0.01 due to timing. These drivers were partially offset by $0.01 from the write-off of straight-line rent. Adjusted comparable POI growth, our cash basis comparable growth metric was 4%, 4.5% if you exclude term fees. This cash basis comparable figure stands at 4.4% year-to-date. Our GAAP metric was 2.5% for 3Q modestly outperforming our low 2% expectations.

Cash basis minimum rent increased 3.3% for the quarter. The OPUS component of our mixed-use portfolio continues to shine with a lease rate of 99% and with significant mark-to-market opportunities at both CocoWalk and Santana Row. Our residential portfolio continues to demonstrate resilience with year-over-year POI growth at roughly 3.5% for the third quarter as our Northern California, Metro New York and Metro Boston assets drive positive results for a very targeted portfolio.

Now let's turn to the balance sheet. Our next debt maturity will not occur until mid 2027. At third quarter end, our annualized net debt to EBITDA stood at 5.5x and our fixed charge coverage was 3.9x. During the third quarter, we issued $460 million of 3.5% exchangeable notes with a maturity in 2031 and a GAAP interest cost of 4%. This compares to the 5.25% GAAP cost of a 5-year unsecured note at that time. We are very pleased with the execution and the timing given where interest rates have trended in the last 75 days. The transaction provided significant liquidity and compelling pricing and positioned us to not only purchase the Summit in Birmingham, a dominant generational retail asset, but also allowed us to be opportunistic in repurchasing our stock inside of $109 per share at over a 7% FFO yield and an implied 6.8% cap rate.

Liquidity at quarter end was in excess of $1.5 billion with a fully available $1.4 billion revolver and over $100 million of cash. We sit today post Summit acquisition and share buybacks with nearly $1 billion of liquidity after the $600-plus million of opportunistic capital allocation decisions. With respect to asset sales, we are currently active with over $600 million of transactions in process targeted pricing is in the mid to upper 5% range or roughly 25 to 50 basis points wider than our expectations make but still a meaningful spread to our targeted acquisition returns.

No residential product is part of this current pool. Now on to guidance. As a result of another solid FFO beat for 3Q on the heels of our robust first half of the year, we are raising guidance for both NAREIT and core FFO to $7.54 to $7.58 per share. At the midpoint, this 4% -- $0.04 increase represents 7.1% growth for core FFO when compared to 2025 with the range being 6.8% and 7.4% at the low and high end, respectively. We are increasing our outlook for adjusted comparable growth, our cash metrics by 25 basis points to 4.38% to 4.58% or 4.5% midpoint while we are keeping our GAAP comparable midpoint unchanged at 3.5% with a tightened range of 3.38% to 3.58%.

Drivers for the increase in guidance for FFO and cash comparable included $0.03 of permanent outperformance in the third quarter, roughly $0.03 of contribution in the fourth quarter from the Summit acquisition. But please note this accretion is inflated this quarter as we benefit short term from temporarily higher leverage in advance of completing our asset sales. More on that shortly. Plus, we had roughly $0.0067 of accretion from the $95 million of share repurchases we executed. These increases are offset by $0.01 of timing and $1.5 million increase in our forecasted G&A as we continue to invest in business development initiatives with strong ROIs.

None of our other guidance assumptions summarized on Page 27 of our 8-K, changes in any material fashion. While this updated guidance reflects the Summit acquisition and the repurchase of our common shares, it does not reflect the $600 million plus of targeted dispositions, which will not likely occur until 2027. Please keep in mind that on a long-term basis, we are funding the Summit acquisition through capital recycling. We are targeting blended yields on dispositions in the mid to upper 5% range. For modeling purposes, I would use 5.5% to 5.7% of sales versus a 6.9% GAAP yield for the Summit. So a spread of 120 to 140 basis points or $0.07 to $0.08 on a long-term annualized basis.

As discussed on prior calls, our long forecasted fourth quarter spike in our overall occupied rate is still expected as we see the 93.8% quarter-end level move into the mid-94% range to close out '26, powered by already signed leases that are scheduled to commence this quarter, many of which already have. With respect to our guide for FFO in the fourth quarter of '26, we expect a range of $1.92 to $1.96.

Now taking a look back at Federal's 2026 year-to-date FFO as we entered November, we have seen meaningful performance from where we started the year and on February 1 with roughly 130 basis points of outperformance and FFO growth at the midpoint of guidance which positions us to achieve over 7% FFO growth for the year.

With that, operator, please open the line for questions.

[Operator Instructions]

And today's first question comes from Michael Griffin at Evercore ISI.

Just curious if you could give a little bit more color on the going in yield as it relates to Summit acquisition. If I think back to Kansas City last October. I think that was at 6.7%. This 1 was at about 6.2% and it seems like the funding costs have gone up. So I'm just curious, are you seeing more increased competition for these kind of deals and that's decreasing kind of the relative accretion spread? And any other color there would be certainly helpful. .

Thanks, Griffin. I appreciate that. This is a real -- I know how special Kansas City was is effectively as a dominant asset. Birmingham is at a different level. This is 100 acres. This serves literally 100 miles. This is the only product of its type within that market. So it's not just a city. It really is a region. We wanted this 1 really badly. The notion of where the underwriting came in on this has more to do with the size of the mark-to-market here than it does the going-in cap rate. The growth that we're looking at from this asset, which is -- it's totally set up to outperform for a significant period of time. And so when we looked at that mark-to-market, and it's why you see it in the IRR that we're talking about, it's why you see it in the CAGR, which, by the way, if we were underwriting this asset today, we would probably have underwrite higher rents than we did on purchase based on what we've seen. I think Wendy talked about it a little bit.

So more than a macro comment about of going in cap rates. I think this has a lot more to do with the specific powerful power of this asset and the mark-to-market of the cash flow that should exceed pretty much anything we've seen so far.

Our next question comes from Michael Goldsmith at UBS. .

Maybe just to broaden out the capital allocation discussion a bit. You provided a multiyear outlook at the Santana Row Investor Day earlier this year. given just what we've seen in the changes in both the transaction market and interest rates since then, how is your view of the longer-term earnings algorithm changed, if at all? And if yes, just has the components change maybe related to capital allocation and then also the financing .

Yes, good question. Obviously, an obvious one. We're in the very early stages of our budgeting process. So that was a a way to get me to kind of divulge some outlook on guidance for '27. Let me just a value there. But I would say that the framework broadly that we outlined back in May is it still holds up given the fundamental strength in our underlying business, albeit with the kind of the 2 areas that you mentioned. This is a very, very different interest rate outlook that we're dealing with here, 5 to 6 months later. The refinancing headwinds likely in terms of that framework, those outlook assumptions should move probably about 50 basis points at least on the wide end. And then I think that from a capital recycling perspective, maybe we're a little bit tighter, 25 to 50 basis points from that perspective.

However, acquisition volumes feel like that we've seen recently, we're optimistic we should be able to keep that overall outlook in line. So we bought $2.8 billion worth of assets in 23 separate transactions since COVID. And in just the last 20 months, $1.35 billion. And in the mid-6s cash yield, GAAP yields in the low 7s. You could see us lean in even further towards capital recycling heading into 2027.

And our next question today comes from Alexander Goldfarb at Piper Sandler. .

Don, you talked a lot about the -- getting these larger regional dominant assets and the rents are even better, the tenant perception is even better. But just curious on the ancillary income, you guys have made an effort with expanding partnership income using technology on parking, paid parking. So just sort of curious, as you've operated these larger regional centers, how is the ancillary income grown relative to what you guys originally underwrote as far as being adding additional revenue to these outside of just the NOI and rents? .

Yes. No, I love the question, Alex. And you haven't seen it yet because of the timing of which we made these purchases in the last 12 or 15 months obviously a month from Summit, you're not seeing a lot of that impact yet at this point. The opportunity is huge. And the opportunity is huge because of how we've leaned in on those things that you mentioned on our existing portfolio. And so what has happened at Santana Row, what has happened at Assembly, what has happened at Pike & Rose is certainly transferable to these type of assets that we're buying. It's 1 of the assets like this. It's 1 of the reasons that we talk about visits.

When you talk about 4.7 million visits a year to on average to the stuff that we bought just in the central region that -- if you think about it, those eyeballs give you opportunities that a typical grocery anchored shopping center obviously does not get with respect to ancillary income. So you should expect that to continue to grow. I think Wendy's given some numbers or somebody has with respect to the progress that we've made company-wide -- but everything that we're buying, Alex, is brand-new raw material to be able to keep that going and expand upon the success we've had on the coasts.

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

This is Ravi Vaidya the line for Haendel. I hope you guys are doing well. Can you talk about your decision to buy back stock here? Is this something that was initially contemplated in your guide for the year? And how should we think about this as a capital deployment tool as part of your other acquisition priorities? .

Thank you, Ravi. Thanks for the question. I mean, look, the quickness by which this stock dropped and everybody's stock drop from -- in the 90 days made it very clear to us that there was an opportunity there that we were oversold and seeing that and coupled with the way we had set up the balance sheet, knowing we were going to do the Summit also, we considered whether this was the appropriate time to effectively make the investment in our own shares. It was hard to ignore it. And accordingly, we jumped. We will always use that tool in balance. It's about every capital allocation decision, Ravi, that we make has to have an ROI that's in excess of our cost of capital significantly, obviously.

And so when you're down at where we were trading that quickly, it seemed like a prudent thing to do for about $100 million or so. We will always have that tool. It will be balanced against what the other opportunities are to be able to acquire assets, which is always our preference. Our preference is to grow our business plan, always #1. That's what we tried. That's why we're in business. But there are times when it makes sense to use this other tool and we execute .

Yes. And Ravi, just to highlight 1 piece of your question. That was not in our original guide, and that was probably a $0.005 or $0.006 of the drive in our midpoint guide from $7.52 to $7.56.

Our next question today comes from Floris Van Dijkum with Ladenburg. .

Just -- I love the capital allocation here as well, the spread investing. But if you can talk a little bit about -- I know the Central region is getting a lot of hype here, rightly so, I guess, you're allocating $508 million to the Summit, which is a high-growth asset. And you talked about Leawood underwriting exceeding your original underwriting significantly. Maybe touch upon some of the acquisitions you've done in California in the past as well. And I'm thinking particularly of Grossmont and Del Monte. How have those investments panned out relative to your original underwriting? And how is NOI growth trended there relative to what you originally thought when you bought those assets. .

Floris, it's Don. And we have Jeff Kreshek on the line, right? Just going to want him to answer this specifically. But I love the question in that California represents 25% of the company or something like that. It has been our fastest-growing region in 2026 not only with the acquisitions that Jeff will talk about in a second, I hope -- but also just generally, when you look at Santana Row and you look at what's happened with the residential income stream which we're building more out there. When you look at all of the capital that we've spent in California, the returns have been spectacular, frankly, '26, '27, '28 with our expectations. Specifically with respect to those 2 assets, Jeff? Or anything else you want to add about California?

Yes, happy to, Don. Floris. So as Don mentioned, I mean, we're seeing really, really strong growth coming out of the California market. And really broad-based. I mean it's across virtually every asset, and I'll get to the recent acquisitions in a second, but it's across every asset. And really, that supply-demand dynamic from leasing is really manifesting itself in both leasing volumes and spreads, which have been extremely strong. You look at something like Del Monte, which was really more of a remerchandising play as opposed to redevelopment, our 5-year CAGR there should be about 11%. We're ahead of plan on executing the remerchandising, feeling really, really good about the retailer demand that we're seeing and -- it goes back to some of the comments that Don and Wendy made about Birmingham, when we buy an asset, we really start to see retailers come out of the woodworks and say, well, the Federal is not that. That's something we want to pay attention to.

Then you go to something like Grossmont, which is really much more of a redevelopment play, certainly being done over a couple of phases, but strong anchor growth there in the Walmart and Target deals, strong additions there. and a 5-year CAGR that's going to be around 10%. But it's interesting. It's not just the recent acquisitions or redevelopment projects. Even we're seeing this in some of our legacy assets. So take something like a Westgate that you -- many of you toured when we were out for Investor Day in May, I mean, we've owned that asset for nearly 2 decades. We're still mining growth out of that project with a 5-year CAGR of around 13% and some really exciting things happening there.

So a lot to do on this portfolio still in a lot of runway. And yes, these projects take capital. But even on the capital we're deploying, we're seeing a double-digit return on cost on those. So a lot of reasons to be really, really bullish about California right now.

Our next question today comes from Samir Khanal with Bank of America.

I guess, Dan, 1 line that stood out was the higher recoveries in the quarter. I guess, how should we think about expense recoveries heading into '27? It sounds like there's more room to go on occupancy. But are there any other factors that could provide some upside to recovery ratios here? .

Yes. Look, the biggest driver there is just we continue to see growth in occupancy. And I think that's probably the the resiliency of our occupancy and the momentum that we're likely to see there would be the biggest driver. It's also a little bit of timing and timing of kind of recovery payments from tenants, particularly anchored tenants and so forth. Real estate taxes coming in, in a particular quarter. So it's a quarter -- I wouldn't look at it on a quarter-over-quarter basis. It's really over the course of the year. But we're seeing kind of our ability to kind of generate stronger recoveries as we're driving occupancy upwards is logical.

Our next question today comes from Juan Sanabria with BMO Markets. .

Two-part question, I guess. First, maybe, Don, could you speak a little bit about the densification opportunities at the Summit? And then just the second question on the funding. Could you just give a little bit more feel for the $600 million of assets that are up for sale for funding and kind of just the number of bidders and any price sensitivity that those bidders or buyers have expressed given the interest rate environment, if you could just expand on that, that would be helpful. .

You bet, Juan. First of all, with respect to densification opportunities, nothing is underwritten. Everything that you've seen is really a remerchandising and mark-to-market opportunity. Having said that, you're looking at 100 acres. And the notion of something to add to that over time, I'd even call it probable particularly when you look and you understand what the zoning is there at that specific asset. But again, I've got nothing for you, certainly at this point that way.

One thing you should think about, if you know the asset or have looked at the as I understand what it is that we bought there. You know there's a vacant snacks box on the 1 component of the shopping center. We're in the process of acquiring that box and should be able to have that under our control a little bit too. So that may provide other opportunities. It's likely to be a remerchandising with respect to that box. But again, what that opens up for that part of the shopping center is nothing that's been underwritten, all good stuff. And financing, Dan, do you want to take .

Yes. Yes. Look, we're in process with over $600 million. It's across a number of assets. So far, the demand has been strong, really has not been meaningfully impacted at all. I think we're happy with the direction we're going there. Most of that won't close until 2027. So there'll be a little bit of -- from a timing perspective, I would factor that in probably models end of the first quarter, probably the best approach. But in the mid- to upper 5s, initial forgone yields, IRRs, we still expect to be kind of inside a 7% unlevered 10-year and 5-year IRRs, there's no resi as part of that pool.

And I think that we'll -- we feel as though the -- that pool is holding up very, very well with regards to kind of the more challenging interest rate backdrop. I know you didn't specifically ask it, but maybe because there has to be always questions, there should be questions on the ability for us to monetize the assets that we're trying to do so on says we feel good about that. But let's just go to [indiscernible] Jan for a minute and let Jan talk about the disposition portfolio first than the overall acquisition portfolio. .

Yes. Thanks, Dan. And let me sort of start with what we're seeing in the transaction market, and I'll duck into our disposition pool and a little bit how we see 2027 going forward. But -- the good news, as we look at what's happened in the market in September and October, some 90% of the transactions have been moving forward. And -- there have been some hiccups in repricing and assets, but they're really assets that have little or no growth or the buyer pool really is a high loan-to-value capital stack, if you will. And -- in terms of assets, whether it's ours or other ones that are out in the marketplace that are calling for offers today. I think the hiccups are gone. But there's some repricing still on those flatter assets and higher LTV capital assets.

And so as we think about our portfolio and we're trying to be opportunistic on what we're selling, we're trying to sell into the core market for core buyers. So we're trying to provide something that someone can buy in into the 5s. It's got some growth to it. They can't make a mistake. That continues to be our focus in terms of how we think about our dispositions there. And so we feel like we're really out of some of that disruption there.

As we think about our business plan, and we've talked about it on several calls. We've had a lot of discussion on our May Investor Day. We still see a material cap rate spread on these large dominant assets compared to what we can do in a Birmingham or a Leawood or some other markets that we're looking out compared to our coastal markets. I mean, something with the CAGR, the growth profile and the dominance that Summit has would probably trade in the low 5s, maybe even the high 4s in California or the East Coast or something. So it just -- we still see that as a has some legs to it in our business plan.

We'll have to see what happens in the retail transaction market over the next several months. Don talked about a little bit. There's dislocation in the market. And any time there's dislocation in the market. you might see more motivated sellers coming to the market. And so is that going to happen, we'll have to see. Similarly, when cap rates stop going down and they've been going down, they've been going on for a while, but it looks like now they've stopped going down. So with that dynamic, you'll probably also see some more motivated sellers coming to the market. So I think Dan is right, we've got some reason to be optimistic that there's going to be some opportunities for us in 2027.

Our next question today comes from Greg McGinniss at Scotiabank.

Thanks for all the color on the transaction environment. But given this higher rate environment that we're in and the dispositions that are looking to fund acquisitions and buybacks now as well, which is great. How is that impacting how is the rate environment impacting your potential development pipeline underwriting? Are some of those longer-term opportunities becoming even more long term at this point, is multifamily development, still pencil Obviously, a lot is going to be rolling off in the development pipeline over the next year. So just curious how you're thinking about new projects that could be added. .

Yes, that's a great question, Greg. It's -- first of all, everything that we're talking about with respect to the change in rates and the environment, it's -- as you know, amazingly fast. It's been 90 days with respect to where we are. What I look at is, okay, let's say we've got a 5% or 5.25% tenure going forward as we look at it. We have an advantage, certainly in the fact that we don't have significant land cost, and we do get a premium there is it squeezed because of the higher debt -- of course, it is. And does that make it harder to effectively put new -- get new developments, the residential developments, particularly to pencil, -- of course, it does. The question comes, where -- what has happened with respect to inflation where will inflation stop and how will that impact the rents over the next few years.

So it really is going to come down to the underwriting. I can tell you, as you know, we've got a lunch underway right now that will provide that additional income stream over the next few years. We've got Hoboken, that will start early next year. We'll have a lot 12 in Santana Row, which is a big one. that will go later in the year. We've got Will Grove that has just started. So there is a pipeline here if you -- and so as you look at the 90 day you say, okay, is it going to be harder if everything stays the way it is or worsens from here. Sure, if you take that point in time, of course, it will.

But what won't stay the same as rents. And so the notion of what will those rents be? We'll keep a close eye. And as we get into early '27 and later into the year of '27, I think I can give you a much more wholesome answer as to whether we'll be able to make any [ pencil ] going forward. .

Our next question today comes from Jamie Feldman at Wells Fargo. .

Great. Maybe just shifting gears to the balance sheet. Can you just talk through the '27 maturities, kind of what your latest thoughts are on refinancing though? I know you did the convert in August. Is that something that you're still thinking about this round and just kind of talk us through that $800 million or so? And maybe if there's a way to handicap the impact on earnings in '27.

Yes. Good question, Jamie. For 1 thing, we do have about $680 million that matures got it right in the middle of the year in June, July, August, September. You'll probably see us come to the bond market and look to extend duration, something at the longer up towards 7, 10 years is the most likely approach from that perspective. We're likely -- we're in process of extending the [ Vesta ] mortgage loan and we should get greater duration there and keep pricing kind of where it is or you actually even improve it, we're hopeful. So I think that we'll rely upon -- we have a really good standing in the unsecured market. We need to kind of issue there more frequently. I think we'll be -- hopefully, that will be well received. But you can see 2027 should be the year of going to the unsecured bond market to refinance that.

Our next question today comes from Craig Mailman with Citi. .

Maybe just going to Wendy's commentary or Don, your commentary on the Summit and the level of calls you're getting from retailers and maybe underestimate of where rents could be. I mean could you just talk a little bit about the nature of the tenants that are calling it? Are these apparel? Or are these kind of food? Are they EVs, -- like what are the tenants that are super active that want to be in this market that you guys hadn't thought about or are willing to pay rents well in excess of what you had underwritten? I'm just trying to get a sense of -- you guys have been doing this for a long time how this is kind of that much better than what you guys have been underwriting? .

Yes. Craig, it's a good -- really good question. Here's the way first, and I'm going to turn it over to Wendy in a second. But think about it this way. You know that I don't know, 15, 18 of our assets are very well known. You know the Big 4. You don't know things necessarily like The Grove at Shrewsbury or even Barracks Road in Charlottesville or some of the other assets that we had that really aim for an aspirational retailer effectively and that customer. And those tenants generally, and we said this over over and over, outperform their other stores in our places on those costs in those 15 to 18 great assets.

What we've done by doing -- we underestimate the power of that on those costs to to retailers and Wendy go through them who want to be in other parts of the country that we were not at. Now they don't want to just be anywhere, and they have to be in selected places. And so hence, the the tight buy box that effectively that we have that got us Omaha, got us Kansas City, got us Birmingham. But the notion of being able to finally be in a market, get into a market that they were either underrepresented or likely not represented in with the landlord that day that they have had great experience with in these types of properties, aspirational properties, if you will, on the coast exceeded our expectations. That's what's effectively happening.

And by the way, vice versa, from tenants at the Summit, I could name a couple that effectively we're now going to put in Santana Row or Bethesda Row or The Grove at Shrewsbury because of the relationship that's being built by them. So it's really reciprocal and as I said in the comments, a win-win,

Wendy, the type of tenants that effectively we're talking about here go through. .

It's really -- these tenants that we're seeing in the Summit, as Don mentioned, we can aggregate the conversations between a Santana Row, Bethesda Row, The Grove, The Summit. We are going to see much more opportunity to grow. As I had mentioned in my remarks, our relationships with retailers. So for example, I'm just making this up. If you're a group kitchen, right, you're -- which we have not done business with before, unless it's been on a pop up, and you want to be in the state of Alabama, you are only going to want to be in the summit. There is 1 opportunity, 1 major opportunity for a brand like that to be in the state of Alabama, and that's the summit. So when we can aggregate these converted stations, they're going to go both ways. And I think that's what we're most excited about to have 30 people calling us. It's different apparel food service that want to be in the Summit. That is huge raw material for the rest of our conversations throughout our portfolio. .

Craig, it is broad-based. So and Wendy went through a list of names in our comments, and I did a few of them, too. So it is certainly some lifestyle based, but it's more than that. It's also grocery stores. It's also service providers. It's also health and fitness. It is a broad-based -- the certain big assets and go ahead. .

I just want to -- just 1 other conversation that we've had before that I want to maybe repeat again is when we were going into Kansas City, there was 2 tenants that wanted to be in Kansas City, but only in the [indiscernible] , and that was Vuori and Alo. They've just opened in the Town Center Plaza right next to each other on both NCAP. So that conversation of I want to be in that market, I'm not ready to be in this particular location that you want me to be in, but now that Federal owns it, I'm more interested, and I know what federal is going to do and invest in these shopping centers and merchandise these shopping centers. And now we've had 2 just open. So that's an example of how those conversations have evolved.

Our next question today comes from Sydnie Rohme with Barclays.

I was wondering if you could give a little more color on the lease and occupied spread with the lease rate now at 96.5% and occupancy at 93.8%. How should we think about the timing of that 270 basis point gap converting into occupancy and rent commencement? And how much of a tailwind could that be into 2027? .

Good question. Good question. Look, we're expecting kind of that -- we've got a nice gap out from 230 basis points to 270 basis points. That should shrink pretty quickly just given the occupancy growth that we'll see in terms of our occupied rate moving up into the mid-94% range. So you'll see probably of the SNO, which in total is about including kind of what's in the not delivered pipeline is probably about $42 million in total. You'll probably see about 30% of that number commence in the fourth quarter with about probably 50% in '27, commencing and then the balance in 2028. And so you'll see some good it's probably '27 it's kind of more in the middle of the year in terms of commencement. But directionally, that's kind of, I think, as you could see that roll on. And it's a longer-term momentum that we'll see.

Our next question today comes from Mike Mueller at JPMorgan.

Dan, in thinking about your CPOI outlook, what's the high level on how retail is performing in there versus resi and versus office within that overall outlook? .

Repeat the question, I didn't quite understand kind of what was the .

Yes. If we're looking at your CPOI outlook, the growth outlook, how is retail driving that versus office versus resi in terms of the relative components? .

Yes. Look, it's really retail driven. I mean 80% of our portfolio is retail with, call it, 10% in the office and residential. But retail is going to be the primary driver there. I don't have the specific contribution to those components. Residential has been resilient, continues to see strong growth. POI growth in the third quarter was 3.5%. So it's contributing maybe a little -- not as much as the retail, but it's largely, largely retail-driven with office and residential contributing, but the retail is -- we're a retail company, and that's going to be the primary driver.

And our next question today comes from Paulina Rojas with Green Street. .

Good morning. at a prior conference, I think, in September, CEOs were asked about 2027 same-store NOI expectations for the sector in general. And you were the only 1 I can remember pointing to a deceleration. So understanding that this was in the context of a rapid fire around something of that sort. Can you share more about your perspective? And are you seeing evidence not necessarily in your own portfolio but in the industry that a pullback is already taking place. Or is this more of a long-term view anchored on the cycle and expected volatility or cyclicality really that we haven't had in recent years.

Yes. Paulina, good question. Look, we kind of look at those rapid fire questions, and we kind of answer them a little bit maybe more flippantly than we'd like to I think the comment there was that maybe the growth would be slower, but not for us, which was the comment. I don't think it was meant to be a broad comment in terms of the direction of the sector. We do expect our comparable growth to be strong in 2027, consistent with what we talked about in May, particularly on a cash basis, as our cash comparable numbers should exceed and will exceed as we convert straight-line rent, cash rent not only in the development pool but in the rest of the portfolio. So we're feeling good about that heading into 2027. It was more of a flippant remark as opposed to a commentary on the direction of the cycle. .

And that concludes our question-and-answer session. I'd like to turn the conference back over to Jill Sawyer for any closing remarks.

Thanks for joining us today. We'll see many of you at NAREIT soon. .

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Everybody, why don't we get started here? This is the Federal Realty Roundtable. Very happy to have the full management team up here, Don Wood, CEO from the company. Don, maybe, there's a lot of people here, introduce your team, maybe provide some opening remarks.

Sure. Well, first of all, it's great to give us the opportunity to speak today. This is Dan Guglielmone, and he is the CFO of the company. He's been the CFO for the past 10-plus years. He reminds me that often. To my left is Stu Biel. Stu is here as basically the Head of Leasing for the East Coast, most of the company, East and Central region, which is what -- where we've been embarking lately. And so retailer questions, Q&A, this guy's a great guy to tap, whether it's in this meeting or afterwards. I think you know Jill Sawyer, our Head of Investor Relations. And the way we go.

So I was looking at the questions that Sameer and BofA sends ahead of time. And there's a lot of generic stuff in there. There's a lot of stuff in those questions, how is the consumer, what is tenant demand like, all the stuff that, as I was thinking about and what I'll answer for you, all is going to sound just like every other shopping center company. Demand is -- continues to be very strong. We don't see signs of a weakening consumer. All of the stuff that you would expect to hear in one of these meetings. And I don't like that.

I would prefer to do things that kind of differentiate us from what is happening, the general. What it is that we think makes this something that's compelling for you guys to dig in a little bit deeper. I see in this room people that I've known for many years, frankly, and some that I don't know at all. So I'm dealing with a -- Jamie, so I'm dealing with an audience here and on the webcast that is both.

I do want to refer everybody here to a new product that we put out from a communication standpoint. It's our second quarter investor deck that, on my way up on the train a couple of days ago, my final review for -- in preparation for all the meetings of each of those things. And I found myself sitting there saying, man, this is a really good company. And this is a company that is different.

And this is a company that -- not only are the general demand and supply characteristics of the retail business good. But I think we're in a unique position and to be able to be better than good. And I, kind of, wanted to give you some of the reasons why. And a lot of this is post-COVID, the status of retail, status of geography to some extent, something that I thought you might find interesting.

So Federal has been around for a very long time, and we've always been a very high-quality company and high quality defined really by income. And income is, from my perspective, the most important thing in the success of a shopping company -- shopping center company. I never want to be in a business where the best way I'm selling you a product, whatever that product is, is by saying, hey, I'm the cheapest and I can beat you on price and -- because that's the commodity stuff.

I want you to pay more for me. I want you to pay more rent if you're a tenant, I want you to pay more for the earnings multiple if you're an investor because I want you to think that it's worth it. And the way that I get there is not only with higher quality assets, but the ability to have as many arrows in the quiver as possible to create additional value on these pieces of land.

We have historically been a coastal company from Boston down through Washington, D.C., then Florida, Northern and Southern California. What has -- what we have decided and what we did because we own our assets and have held our assets on average 20-plus years. So over a 20-year period of time, we've built them up. We've leased them better. We created better environments effectively to create higher earnings growth, which we believe we can continue.

But post-COVID, we said, it feels like we ought to be able to do that in other markets. Work habits have changed, geographic migration has changed. And there are other markets. The first one that we entered was last year, Kansas City, and not Kansas City, Missouri, but the Kansas side, where we thought that we could take what we do as a business on the coast and effectively provide a better product if we owned the most dominant assets in the market.

So we bought and it was the WPG sale, which was Oklahoma City, Kansas City and an asset in Phoenix that we looked hard at all of them. Really looked at Kansas City, Kansas and those assets and said, we can create -- there's a big mark-to-market here to the extent we could bring in our tenants from some of the coastal relationships that we have into the center of the town and the centers themselves. And it's made a big difference.

We followed up with Omaha. And while it's not completely done yet, and I can't give you all the details, there's now a large acquisition that we expect to close over the next 60 or 90 days or so in a central time zone marketplace that really will have created a big one, nearly $0.5 billion in investment size that will really create a central region for us that is expected in total to be about 3 million square feet of retail space and grow at better than 5% NOI annually for the next 5 years. And we still acquire on the coasts in key markets. We fund these with sales of assets that we have created a lot of value in over the past 15 or 20 years.

And the ability, if you think about it, the ability to really be able to be at a competitive advantage in this business of ours is twofold. One, you want to have the best cost of capital. There's nothing more important in our business in retail -- anywhere in real estate than cost of capital, as you know. If the common stock is not trading at a place that you can effectively feel comfortable using it, what are your other choices? So you'll hear there being more joint venture use in the world of shopping centers and some other things.

But what's better than that is if you can tax efficiently sell off assets that you have created a lot of value in, but for which have limited future upside to at cap rates that are inside what you're investing in to the tune of 150 to 200 basis points. So we are funding, if you will, this expansion into not only the center of the country, but into faster-growing assets with the sale of other assets, and, here's the most important thing, in a nondilutive way.

And that's a differentiator from anybody, the ability to sell because of what our business plan has been because of the quality of the asset, because of the growth that they've created, the ability to sell in the low 5s and reinvest in the high 6s overall makes an awful lot of sense to us. And it's a competitive advantage because we have the ability to do that non-dilutively.

It's not like we're saying, hey, we're going to sell stuff we should have never owned in the first place. It's going to be dilutive for the next few years, but don't worry, we're going to produce great income. It's not that at all. It is harvesting really good stuff and reinvesting in new raw material that people like that and throughout the company can use our relationships, our magic effectively, what we do well to be able to create outsized growth. That's what we're trying to do on the external front.

On the internal front, in a couple of ways, we also have a full-blown residential development team effectively in-house that we've employed for the last 25 years because we do mixed use. And that mixed-use stuff that we do, some of our best assets, some of the best relationships, but can also greatly benefit the average shopping center. And when I say average shopping center, the ones that you're thinking of that are going to be in better markets with the ability to have unutilized parking lots to be able to go north on. Again, this investor deck shows all of this goes through this in detail.

But when you think about the ability to harvest assets at a lower cost of capital, a development group that can intensify existing assets with low basis land and a team that's got relationships on the coasts and some of the best-known assets in America, Santana Row on the West Coast, Assembly Row, Pike & Rose, Bethesda Row on the East Coast, imagine there's not a retailer in America that doesn't know those assets, know them extremely well and want. And because of the performance of those, want to expand relationships into places that we haven't necessarily been before.

We're not going everywhere. It's got to be in a metro area of at least 1 million people. It's got to be a big asset. I've said this to everybody as many times they can. The average shopping center in America is 125,000 square feet. It's got a grocer, it's got a drug store, it's got a dry cleaner. You know it well wherever you are. Nothing wrong with that business, terrific. We would prefer to do bigger things. Our average assets are more than double the size of that. The reason we like that is that there are more opportunities that you can do on that land over time. And that's proven to be a very good fact for us.

Sorry for being so wordy on the introductory question, but I wanted to set up what the really investment thesis is in a shopping center company that often gets kind of lumped into shopping center companies. And I'll stop there.

On the external growth and acquisition, that pipeline, clearly, there's a lot of competition out there today, right? So you bought a few of these bigger assets in the past, and you, kind of, -- you're looking at the one that closed in 60 to 90 days. Talk about pricing given what are you seeing in terms of cap rate and pricing?

Sure. Listen, there is no question that -- I don't mean to sound arrogant about this. It's just factual. When a company like Federal goes in and starts looking at new things, others -- it brings more competition, brings others to come and look. And so when you -- 1.5 years ago, when we started this, there is no doubt that cap rates have come in 50, 75 potentially basis points inside where they were 18 months ago. Now we happen to be funding it with asset sales, which, guess what, have also come in 50 basis points from effectively where they are. So that's, kind of, the beauty of that, too, right, thinking about how you match the growth of the company. So yes, it's tighter today.

Now what I would also say is when you're talking about larger assets, Kansas City was $300 million effectively for us. When you're talking about that and what we're buying is larger than that, there are obviously far fewer buyers than for a $40 million grocery-anchored shopping center, obviously. And in a rising interest rate environment, it makes it harder for the leverage buyers to be able to make the numbers work.

But when you -- so when you talk about the real competition for assets like that, it's often private people that, kind of, do what we do on a bigger scale. I mean our largest competitor, frankly, is a private developer out of Boston named WS Development. It's a great company. And they are -- we run into them often on these type of deals. They do a great job. But again, there are fewer of them.

So I sit and I say, well, okay, what kind of competitive advantage do we have to be able to get our more than fair share of assets like that, and there are 2. But one is what I've already said, competitive advantage in cost of capital by funding it effectively with 5% asset sales, clearly an advantage. Number two, we can underwrite better results for where we can take that asset because of Santana Row, because of Bethesda Row, because of the relationships that we have that have been brought in. We have completed 40 deals, 40 new deals in the last 13 months on the assets that we purchased in Omaha and Kansas City, far ahead of where we thought we were going to be because of the momentum of doing the first couple and then having those other tenants follow because of what we own on the coast. It's really a pretty interesting business model. We're on to something here. So I think we can be pretty darn competitive in places like that.

All of this talk about acquisitions, I don't want you to miss how strong the core portfolio of the company is. Because it is. And by very definition, if you look at the demographics of our properties, where the affluence is, where the population centers are, we're pretty much off the charts. Does that always matter, particularly in a post-COVID environment in the early years? No, it did. Does it matter more and more as the economy gets a little -- you get a little unnerved by what's happening and there's more uncertainty? You bet it does.

It's why that if you looked at our company over its long history, other than closing down the country in our markets and particularly for COVID, we've outperformed during every down cycle. I would expect that to happen again should that happen again in time.

With Kansas City and Omaha, which you mentioned, talk about kind of the things you've done there, remerchandising -- what are the things you've done at the centers to create value?

Go Tiger.

Yes. I mean Don touched on the deals. I mean that's really where we're doing it. And I think where we've been really successful is getting started in the diligence period. And so because of the relationships Don is talking about, and there's another stat. We have 36 relationships we've created through the 4 assets he mentioned on the coast that have turned into 155 deals, not just in the central properties, but also in our peripheral shopping centers, grocery anchored and otherwise.

So we're meeting these tenants really early in their gestation period, getting really deep relationships with them. And so we're able to vet these and get deals started way ahead of even closing, which is happening on the new acquisition as well. So it's really not even physical stuff on the property yet. It is just truly digging into these relationships, getting people who were excited about these markets, knew this was the right center, but didn't have the right owner and are ready to now jump in.

And in the case of Kansas specifically ready to jump in, there were 2 sides of that center. So the side that had been sort of less well maintained and had a big rent spread down, and we're seeing that -- our thesis was we could quickly bring that up to the same levels as the other side, and we've been able to do that very quickly, quicker than we thought.

On the dispositions, what is the growth profile? Like what's the -- where is the line and then that's what you're willing to sell?

So it's a complicated answer because it's not all one type of disposition. When we look throughout the company, there's a few buckets. Bucket #1 is at our mixed-use properties, peripheral residential. Residential, as you know, that Santana Row, for example, we've been building for 25 years. It's crazy. It's that amount of time now. But that -- therefore, there's the Main Street and the retail and residential over that, that doesn't get touched, but we've gone into Block 2, Block 3, Block 4. That -- 2 of those assets were sold. The same thing at Pike & Rose at sub-5 cap rates. Pike & Rose is 5.25%. On the West Coast, it was mid-4s, incredible. There's still some of that to go. Not right now. I think it's the greatest time to do that right now, but that's a bucket of money that can be monetized and accessed at very favorable cap rates.

The second is more of what you would think of. Assets that we have done the best we can with have -- the markets have changed and they don't fit any longer. There are assets that have no or -- little or no growth profile at all. Those assets get sold like Hollywood, California, where we own stuff on the street and the place is just not where you want to be anymore. We sold to a local owner.

The same thing at Santa Monica, California where we were -- we made a lot of money over a lot of years. But the condition of the competition in Santa Monica and other things said, get paid and get out. We did. So improving the company's growth profile by selling those.

The third level of -- the third bucket, if you will, of sales, are the more mature assets, good assets that are stable, they're lower growth. They're still in great markets, if you will. Some of those -- my best example of that is a recent sale of an asset called Barcroft Plaza, nice grocery-anchored shopping center in Northern Virginia, great market, fine center, little growth going forward, get paid really well because of the disconnect. To me, grocery-anchored trading at numbers that are pretty darn strong relative to their growth profile, if you will.

So those are the 3 buckets. The notion is always to effectively take that capital and deploy it into higher IRRs. When we look at IRRs, we don't mess around with exit cap rates. We don't lie to ourselves or anybody else about what those unlevered IRRs are. We look to be in 8.5% to 9%, 9.5% unlevered IRRs. That means you need to grow if you're buying in at a 6% or 6.5%, something like that. You have to grow pretty darn significantly to get there. And we like that over the first 5 years. It's a 5-year IRR and a 10-year that we run, but I want the growth early.

The stuff he's talking about, what we love about the most is there was a way to get at a larger part of the income stream sooner than you would necessarily be able to get to. So those are the buckets in total, the timing and the ability to sell ties very much to the timing and the ability to buy. The asset that we're buying will be a 100% fee-owned asset, which gives us a lot of 1031 tax-efficient ability to sell assets and move the tax basis effect.

But, kind of, further along, the -- what we're selling is probably at a growth rate, which is 200 to 300 basis points less than typically what we're buying in terms of a 5-year CAGR -- in terms of NOI CAGR over that [indiscernible].

I have a question in terms of tenant relationships, are there any implications from the sales on tenant relationships? If there are, how do you manage that?

Yes, it's a good question, but no. So the notion of retailers and where their business plans are and what they're trying to do is really at the forefront of our business strategy. So to the extent tenants are looking much beyond the current interest rate environment, these are longer-term decisions that they're making. They're -- by the way, they're making them at -- in our properties, kind of special properties so that -- if there's an opportunity to get in, they can't just say or they don't say, now, we'll wait until the next. You got an opportunity to get in, you get in on the sale. It's, as I said, kind of relationships that are -- are fine, but we've done all we can with respect to the asset. They fully understand that and on we go.

Is there a maximum percent that you've determined in terms of the dispositions and acquisitions, meaning as you transform the portfolio from those historical Federal markets to the new markets?

It's not -- first of all, Jeff, I got to say it a couple of ways. First, I don't want this to be a transformation from the existing Federal markets to new markets because that's not what's happening. This is simply an expansion. I mean the acquisitions we made have largely been in our existing markets, recent acquisitions, Monterey, California with Del Monte, Annapolis Town Center in Maryland. So there's a balance.

So this is an expansion and not a transfer. I think that's really important because if you short the coast, you -- good luck with that. I think you're making a mistake. And again, that's a big generic comment. The real estate is local. You got to be in the right places. You got to do the right deals in those places. There are plenty of those opportunities remaining on the coast.

But we were saying, why are we limiting ourselves to that, particularly post-COVID? That's what I'm most excited about because it is fresh, new raw material that I can stick the dogs on and create some money, create some real value. Now practically speaking, in terms of what the limitations would be or, it's likely to be as much as $700 million or $800 million a year or as little as $200 million a year. And the marketplace determines that. We're not buying generic volume-oriented stuff. So it's harder for investors to get their arms around because it's lumpy.

When something like Kansas City comes up, grab it because you're not going to get another chance to grab it. It's not like if you're looking for a kind of a typical grocery-anchored center, I'm real comfortable with the market today. I'm going to wait 6 months, they'll be another one, which they will. It's not that. So when we have a chance for the most dominant center in a marketplace, existing or new, we're going to grab it best we can. So just practically speaking, because of the size of those assets, it's lumpy, to 7 or 8. I'm sorry, for the range, but that's, kind of, practically how it works.

But your investment in, say, the central time zone assets and what -- is the opportunity here to buy an undermanaged, underperforming asset but you're going to give up on the long run effectively give up some of the demographics that you might see come from the coast, as you mentioned, in terms of earnings, income growth and population growth and whatnot? Like how do you...

I don't see it that way. The -- I don't -- I think traditionally, you would have said, my god, there's a trade-off, okay? I don't see the trade-off. And I guess what I'm saying is, so if you've got a chance to buy the dominant asset in a marketplace that is at least 1 million people big. I'm not talking about small markets here. Kansas City has 2.2 million people in it. But if you've got an opportunity to do that and you look at what is happening in the marketplace with jobs, you look at what's happening in the marketplace with overall business moving. I mean, the Kansas City Chiefs moved out of Missouri and into Kansas. That's not a flash in the pan. That's a 50-year investment that's being made there.

When you can start it out with a mark-to-market like we've talked about and get that immediate -- by the way, immediate is -- it will take 5, 6 years to effectively get there the way we're doing it, but that's fast when you're creating that kind of growth. With that initially and the overall macro trends of good, steady growth throughout the place, I don't think you're trading anything off. [indiscernible] I don't.

And the demographics of the markets that we're buying in, in terms of household income, median household income is higher than the rest of our portfolio.

I want to talk about that for a second because where you're probably going, yes, but where is the population. And -- this industry uses a 3-mile convention. Why did they use the 3? What are demographics for income? What are demographics for population within 3 miles? You know why that's the case? Because that's right for a grocery-anchored shopping center of 125,000 square feet. If you want to be in 3 miles of your grocer or something like that, that's cool and it makes a little sense in the world.

What we're talking about here, the Kansas City asset pulls from 25 miles. The Omaha asset pulls from 15 miles. The asset we're talking about pulls from 100 miles. And so the affluent piece of it is critically important because that's the neighborhood that it's in. Think about it if you're the retail. But if we're buying an asset of 500,000 square feet or 900,000 square feet big stuff there, you're not going to make their money by pulling from a 3-mile radius. You got way too much to make a living based on people that live within 3 miles. You have a true regional operation and you look deeper of people that come into an area that feels really good because it's really -- because there is [indiscernible] a great neighborhood, great ability around them. That's, kind of, the secret sauce.

How are you thinking about using JV partners potentially for some of these larger $500 million asset?

It's a real question, and it's a question that I fight myself with in a number of ways. Part of the thing with me and Federal has always been because we have all these arrows in the quiver, because we have a full integrated asset plan, I felt that as a public company, the simpler the capital, simpler the right side of the balance sheet was, the better it would always be for transparency. And I still believe that. I would love it if there was no need for JV capital because either through asset sales or through the sale of common stock, you had an advantageous cost of capital.

What is becoming clear is with the lack of appreciation for NAV versus the way it used to be and other changes, there's a place for JV capital. There's a place for it. Now do I want 6 JVs and 6 new hands in the till, if you will, for how we run the company? No. But I could see 1 or 2. And I could see 1 or 2 at the larger assets where we don't lose control of the asset, I'm kind of a control freak, I apologize, where we don't lose control, but do monetize 30%, 40% of what it is that we've created over the last 20, 25 years at a cost of capital that is far advantageous than what would be available otherwise.

So I've switched a bit in my thinking. Used to be a little bit more work done and understanding the marketplace and the opportunity. Devil is in the details, what does the JV agreement say and how exit basis and all the things that need to be understood, but I'm more open than I've ever been.

And just how about on street retail? Obviously, you're not big there, but you have some presence there. How has it been for the company, looking back retrospectively, in terms of returns versus the other parts of your portfolio? And then obviously, you've been doing a lot of big -- I won't call it, but elephant hunting, if you will, bigger assets and whatnot. Is that something street retail that you would consider at this point in time?

When you say street retail, are you talking about...

Hoboken and that kind of stuff.

Yes. We don't do much of it. And there's a reason we don't do much of it. We're a pretty big company. I don't want to do anything that doesn't move the needle, man. And it's hard to get an accumulation that is large enough for it to matter. I don't want to do $15 million deals and $20 million deal. It doesn't -- takes as much work as a big deal and doesn't move the needle. Hoboken was the case where we were able to get 40 assets and truly be the dominant retail landlord on Washington Street in Hoboken. I would love that deal. And to the extent those type of things happen? Sure, I would love them.

The premise of your question, though, is an interesting one. It's very asset specific. It's very hard to say that street retail grows better than this. So it depends. And all I would say is in a smaller grocery-anchored portfolio, of which we have a bunch, great stability, wonderful tenant, good stuff. But it's hard to grow those things to the extent you can grow a 300,000, 500,000 square foot asset with 300,000 square feet of small shop, all of whom want to be there. I mean just -- if you've got the skill set to be able to exploit that type of tenancy, man, use it and lean in, make some money. It's just hard to do on a 9-acre piece of land with a grocer who is flat for 30 years and [indiscernible]. Nothing wrong with that on -- from a credit perspective, particularly, it's harder to grow. I love the balance, man. I love the balance.

Let me ask about the balance sheet, just given where rates are today and talk about kind of the refinancing maybe if you kind of [indiscernible].

Yes. We're actually in, I think, in a really good spot. We've got $1.4 billion undrawn -- completely undrawn and available credit facility, and we're sitting on a couple of hundred million dollars of cash very well. And we have nothing really -- no material maturities until the middle of next year. The next bond that comes due is in July of next year. So I think we do have the luxury of being able, I think, to be a little bit more opportunistic, be a little bit more patient with regards to accessing the markets. I think we want to extend duration as a goal. I think we went to the convertible market in our most recent transaction because I think it afforded us the best opportunity to be opportunistic in that moment, given where the rate environment is and so forth.

I think that we have -- it was always part of our capital plan. I think we just moved it up to the front of the line. And you'll see us in the unsecured bond market at some point in the future, but we've got the ability to be patient given the significant flexibility that we have. We are generating free cash flow north of $100 million is the expectation this year. That should grow to $150 million by 2028. That's meaningful and very attractive source of capital.

We're also creating significant leverage-neutral debt capacity. In terms of growing EBITDA at the clip that we're growing it is significant in the hundreds of millions of dollars with regards to kind of providing an additional source of capital.

We have multiple arrows in the quiver in addition to the extent the stock, if it does trade, not at $1.14, but if it trades at a level that's more attractive, we will look to access the market appropriately, but we have multiple arrows that allow us to not have to go to the market when the stock is not trading where we'd like it.

And anything -- I mean, I know you put out a -- at your Investor Day, you sort of a growth plan. Any shifts? I mean it's early, right? But given what interest rates have done, I mean, are you thinking a little bit differently?

Look, I think that we are doing well, the core portfolio, building blocks feel as though kind of the 3% to 4% is the range for -- and that should transfer to contribution to FFO growth of 4% to feel as though we're on track with regards to our redevelopment and how that's coming along on time, on budget, actually ahead of pace in many situations. And I think that getting this most recent large acquisition over the finish line, I think we're continuing to find opportunities to recycle capital. I got the one place is, look, the higher interest rate environment, we'll probably be on the wider end for the -- in terms of kind of the refinance headwind that I alluded to in our building blocks for growth from our Investor Day. So that's kind of the framework.

Okay. So I know we're out of time, rapid fire questions here. We've got 3. So one, long-term rates stay higher for longer, which has the biggest impact on your sector? Is it higher refinancing costs, lower transaction activity or less new supply?

Higher refinancing cost.

The second one is, over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance capital, yes or no?

Yes.

Third is for your sector, will next year's 2027 same-store NOI growth be higher, the same or lower versus this year?

Sector, lower.

All right. Thanks, everybody.

Thank you, Jeff.

Good day, and welcome to the Federal Realty Investment Trust Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jill Sawyer, Senior Vice President of Investor Relations.

Thanks, Debbie. Good morning. Thank you for joining us today for Federal Realty's Second Quarter 2026 Earnings Conference Call. Joining me on the call are Don Wood, Federal's Chief Executive Officer; Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and Jan Sweetnam, Chief Investment Officer; as well as other members of our executive team that are available to take your questions at the conclusion of our prepared remarks.

A reminder that certain matters discussed on this call may be seemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions. Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial conditions and operational results. Given the number of participants on the call, we kindly ask you limit yourself to 1 question during the Q&A portion. If you have additional questions, please requeue.

And with that, I'll turn the call over to Don Wood.

Thank you, Jill, and good morning, everybody. Strong quarter, $1.88 a share, 7% year-over-year growth, 96% occupancy, record leasing volume, 59th year consecutive dividend raises another beaten raise, all validating the optimism for the rest of the year and next, and I'll get into the specifics for modeling purposes.

After roughly 4 exceptionally strong leasing years. This quarter set records. Again, early on the second quarter of 2026 and are reporting 124 comparable deals were staggering 819,000 square feet and an average first year cash rent of $33.68, which is 15% higher cash rent than the prior year and 28% higher on a straight-line basis. That sort of volume is record setting and while contribution to it came from all of our markets.

Southern California and Virginia were instrumental in signing a few anchor deals that will be transformational to the properties that were done in. The first affects the market-dominant 860,000 square foot Grossmont shopping center in suburban San Diego, where remerchandising this 2021 acquisition is now seriously underway. We've signed our first deal ever with hugely successful outdoor retailer as pro shops to a 20-year deal for 161,000 square feet, replacing an underperforming Macy's and adjacent small shop tenants with a national draw unlike most others. We also signed a new 53,000 square foot deal with AMC at Grossmont for a new state of the art theater, where a shuttered smaller theater operator once was.

With an anchor system comprised of Bass Pro, AMC, Walmart and Target and 350,000 square feet of other space to feed off that system. Grossmont will be among the most productive assets in Federal's portfolio once a significant redevelopment has been completed. We're looking at a $56 million comprehensive redevelopment and an incremental 10% cash on cash yield.

The second affects the market-dominant 500,000 square foot Barracks Road shopping center in Charlottesville, Virginia, home in the University of Virginia, where we signed a 79,000 square foot deal with Harris Teeter for an expanded flagship grocery store and where additional important merchandising improvements that will be announced shortly will further solidify Barrick's road as the preeminent shopping center in the market as it has been since we bought it some 40 years ago.

As we've talked about before, these large market-leading dominant retail centers, not unlike most of the acquisitions we've made over the past few years are our property type of choice in every major market we're in. They tend to provide opportunities for both continued cash flow growth and value enhancement for decades. They tuned for more in the quarters ahead.

Opportunities for additional accretive acquisitions net of dispositions continue to be a laser-like focus on the team and are expected to continue to improve our overall growth. We're getting close on a couple of very important deals though a bit too soon to announce on this call. They tuned in the weeks ahead.

On the development side, let me give you a quick update on the status of our residential pipeline that, as you may remember, is only undertaken on the excess land at our existing shopping centers. With little to no incremental land costs and higher rents because of the proximity to our shopping center amenities, the math works in the right locations.

Currently, we've allocated a total of $400 million for the residential development of the Blair at [indiscernible] which is already 2/3 leased and well ahead of projections for both timing and rate. By the way, that fast lease-up pace has reduced the earnings dilution that normally comes at this stage of resi development. 301 Washington Street in Hoboken, which is on time and on budget, preparing for a 1Q 2027 [indiscernible] Lease-up begins later this year, early renting inquiries spurred on by the construction progress have been far in excess of our expectations.

Lot 12 at Santana Row is well under construction on time and on budget for a late 2027 delivery, as many of you saw at our June Investor Day. Hope you found the work that we're doing there to be as impressive as we did and an incremental 261 units at Willow Grove Shopping Center outside of Philadelphia, for which the site has been prepared and cleared and is now fully [indiscernible]

Together, the densification of our shopping center assets will add nearly 800 units and $27 million of new operating income to the portfolio once stabilized over the next few years. Our experience with residential development at our retail-centric properties is a skill set developed over 25 years and is certainly a unique differentiator of our business plan.

Incremental income in the form of parking revenues, sponsorship opportunities, timed revenues are also benefiting by the high traffic counts at our large properties, including not only our mixed-use assets, but also the broader portfolio, more upside to come here too. We're firing on all cylinders. Leasing operations, including a comprehensive technology-based efficiency program, we'll introduce you to our Senior Vice President of Digital Innovation at some point in the future. A hunt for special acquisitions and a modestly sized but impactful development and redevelopment program are all working. Enhanced internal and external growth using all the tools at our disposal is the name of the game.

Quarters like this increased my confidence in our ability to do so. And sincere and grateful thank you to all of you that gave us your time and your attention at our Investor Day at Santana Row either live or on the webcast. We're a proud and talented group of real estate execs who love to share our story. We hope you enjoyed it and found it useful and believe these second quarter results help validate you a focused path that we're on.

Let me now turn it over to Wendy and then to Dan provide some additional color. Wendy?

Thank you, Don. This quarter, our leasing platform once again delivered record volumes, signing 819,000 square feet the most comparable square footage in a single quarter in company history. Rent spreads for these deals were 15% over prior in-place rents, and that 15% is not a 1-quarter story.

In fact, the trailing 12-month comparable rollover 17%, the highest in any 12-month period in more than 10 years. This tells you everything you need to know about the desirability for our high-quality shopping centers. What I'm most proud of this quarter is occupancy. Despite the timing of expected anchor transition, the strength of our small shop leasing held occupancy neutral to last quarter. We delivered over 100,000 square feet of net small shop occupancy this quarter, increasing our occupied rate by 100 basis points in just 3 months.

Our small shop portfolio is now 93.9% leased and 92.3% occupied levels we haven't seen since 2007. Put that alongside a record leasing quarter and you get a clear picture. The demand for our centers is not slowing down. The natural question is how much upside is left and I would say more, much more. At these occupancy levels, we can drive small shop rents in the double-digit range on average something we've done consistently for the past 3 years.

Our current pipeline, which is always a good indicator of future leasing momentum remains strong with over 1.5 million square feet of space in lease negotiations. In addition, our pipeline -- to our pipeline, we have fully executed leases that will contribute an additional $31 million in revenue, delivering over the next 18 months. Just as important, our high lease rate led us pre-lease well in advance of vacancy.

This translates to less downtime from 1 tenant to the next, a metric we're focused on quarter after quarter with clear progress being made as highlighted by our 100 basis point jump in small shop occupancy this quarter. Foot traffic across the portfolio is up, reinforcing the health of our consumer and the collections remain strong across the portfolio.

Our retail redevelopment pipeline is delivering the same story. In Philadelphia, Giant just opened a brand-new prototypical 45,000 square foot grocery store in our Andorra shopping center with small shop leasing rents coming in 16% over underwriting. And Andorra is not -- is just 1 example. We have another half a dozen centers in various stages of reinvestment with many more in the pipeline. Historically, these reinvestments have produced 10%-plus returns on average with a single objective, drive productivity and rents at our centers, making our existing portfolio, a continuous source of multiyear growth.

And finally, our business development platform that we highlighted at Investor Day had a standout quarter with our incremental income initiatives on track to be up 20% for the year over the prior year comparable pool. That is extraordinary given the fact that our occupancy continues to decline and it proves this program is much more than leasing temporary space. It is a sustainable source of revenue unique to our property set of large dominant and/or mixed 2 assets.

Parking revenue alone, which is very unique to our portfolio, is expected to be up almost $3 million year-over-year, driven by higher rates, events, activations and partnerships. The true line across all of it is the same, dominant, durable, high-quality real estate creates value. And in this K-shaped economy, our centers are thriving.

Now let me turn it over to Dan to dive into the numbers.

Thank you, Wendy, and hello, everyone. Our FFO per share of $1.88 for the second quarter reflects 7% growth versus last year and highlights another exceptionally strong quarter operationally. This result came in $0.03 above the midpoint of our guidance range, highlighting a business plan that's delivering across all of its components.

Drivers for the outperformance this quarter include $0.03 from higher rental income and recoveries, $0.02 from stronger percentage rent, parking remedies and the incremental income initiatives, Wendy just referenced, almost $0.01 from better term fees than we had forecast as well as another $0.005 further benefit from our capital recycling activity. This was essentially offset by $0.015 from a onetime investment write-off, $0.01 from straight-line write-offs and $0.01 higher G&A than we had originally forecasted.

Net-net, a $0.03 beat on the shoulders of $0.05 of better-than-expected rent recoveries and incremental income. Adjusted comparable growth, our cash basis comparable growth metric was 4.2% for the quarter and stands at 4.6% year-to-date. Our GAAP metric was 2.8% for 2Q and 3.7% year-to-date, both outperforming the expectations we set out on our call in May. Also the result of the drivers that we just highlighted.

Gas basis revenues increased 3.6% for the quarter. And all of these metrics, all these variations of same-store metrics were ahead of our expectations highlighting the solid first half of the year.

Now let's turn to our balance sheet. With the exception of $30 million maturing in August at a 7.5% interest rate, we currently have no debt maturing until mid-2027 while sitting with $1.2 billion of liquidity at quarter end. We continue to see strong free cash flow after dividends and maintenance capital forecasting over $100 million for this year, with that figure heading towards $150 million by 2028 as we convert straight-line rent to cash paying rent. If you'll recall, we outlined these figures at our Investor Day in May. This will also have a positive impact on AFFO through 2028 and beyond.

During the second quarter, we closed on another $66 million of retail asset sales bringing the year-to-date 26 total to $225 million at a blended 5% cap rate. When combining 2025 and year-to-date 2026 asset sales, our total stands at $540 million at a blended initial cash yield of 5.4%. And note that the estimated or gone unleveraged IRRs on this pool blends to an average of less than 7% with no assumed terminal cap rate compression.

All metrics which reflect a very, very attractively priced source of capital. Through this active and disciplined asset recycling program, our debt metrics remain solid. Second quarter annualized net debt to EBITDA has improved to 5.4x, and fixed charge coverage stands solid at 3.9x.

Now on to guidance. As a result of another solid FFO beat for 2Q on the heels of a robust first quarter along with an encouraging outlook for the balance of the year, we are raising guidance for both NAREIT and core FFO to $7.48 to $7.56 per share. At the $7.52 midpoint, this increase represents growth for core FFO when compared to 2025, with the range being roughly 6% and 7% at the low and high end of the range, respectively.

Drivers for the guidance increase include: our comparable GAAP-based POI growth outlook improving to 3.25 to 3.75 from the previous 3.8 to 3.5 days. Our cash comparable growth or adjusted comparable for our disclosure is expected to be 75 basis points higher to a range of roughly 4% to 4.5%. That's a 35 to 40 basis point. Small shop momentum helped us maintain our occupied rate during the second quarter, and we continue to forecast a spike in our overall occupied rate to the mid to upper 94% range by the end of the year, powered by leases that have already been signed. We continue to see stronger-than-expected contribution from the $750 million of dominant high-quality properties acquired in 2025. And our outlook on term fees also moved higher to $10 million to $11 million as the second quarter fees were roughly $600,000 to $700,000 higher than our forecast with better visibility into the second half of the year.

This roughly $2 million increase is offset by a $2 million rise in our forecasted G&A as we make investments in our digital innovation and business development teams. Incremental development POI is up $500,000 to $14.5 million to $15.5 million as we deliver space to tenants ahead of forecast. We're keeping our credit reserve as is at 60 to 85 basis points of rental income as we effectively run near the midpoint year-to-date. And lastly, we have adjusted our interest rate outlook to reflect more conservative current market expectations.

Additional guidance assumptions remain unchanged and are outlined on Page 27 of the 8-K. This updated guidance also reflects the $66 million of asset sales completed during the quarter with the foregone yields in the mid- to upper 5% range. Please also note that we issued $61 million of equity during the quarter for our ATM program, further enhancing our capital base. We continue to be active on capital recycling, with additional acquisition and disposition opportunities targeted for the second half of the year, and we will adjust guidance for those likely upwards as we go.

To summarize, our guidance increase is driven by the following puts and takes, $0.03 of forecasted operational outperformance, driven by parking, percentage rents and incremental income and stronger occupancy than we forecast, plus $0.02 from term fees, offset by $0.02 of higher G&A in the aforementioned investments in digital innovation, business development and $0.01 to $0.02 from a more conservative interest rate outlook.

With respect to our expectations for quarterly FFO cadence over the remainder of 2026, we've set the third quarter at $1.82 to $1.86 per share in the fourth quarter at $1.91 to $1.95 per share, primarily driven by the aforementioned contractual occupancy growth. As a result of the strong year-to-date and our bullish outlook Federal will continue to lead the REIT sector as its only dividend [indiscernible] , a distinction of 50-plus consecutive years of annual dividend growth as we once again increased our dividend for consecutive year to $1.16 per share per quarter or $4.64 annually.

You've heard me say since I joined the company a decade ago. For every year I've been alive, Federal Realty has increased its annual dividend. Think about that, since 1967 and roughly a 6.5% cap, that's a record, the Federal team continues to be tremendously proud.

With that, operator, please open the line for questions.

[Operator Instructions] The first question is from Michael Goldsmith with UBS.

You had previously spoken about NOI growth accelerating in the back half of the year after the lower second quarter results. Is that still the case? And then can you provide some color on what's driving that? Is that occupancy growth? Is it increasing rent growth or any other factors?

Yes. I think consistent with what we shared kind of on the May call, the second and third quarter, we'll continue to have some occupancy churn in the third quarter. So that will keep a lid on until an acceleration in the fourth quarter, which we really won't see the benefit of probably until next year as those tenants get open and operating and rent paying. But yes, it's consistent with kind of, I think, what we shared with you at Investor Day and on the make hall.

Yes, Michael, I'd just add to that. Think about the anchor progress that we've been making and the timing of the openings of those stores very heavily weighted to 4Q, which should bring occupancy of the anchor side up into the 98-plus percent range after that.

The next question is from Alexander Goldfarb with Piper Sandler.

Don, the robustness of the leasing and obviously, against the economy and everything else that we that's in the macro, do you get a sense that all the tenants are leasing on full offense? Or do you feel like increasingly tenants are leasing because they have to because there's not enough space left and therefore, they feel more compelled to lease. So I'm just trying to understand the robustness, if it's all 100% offense for growth or some of the tenants are increasingly feeling like they need to take the space because if they don't, there won't be anything left for them out as space windows.

Yes, I think that's a great question, Alex. And as usual, the answer is a balance of both. And it's hard to paint this big broad brush of the reason people lease what they're trying to do.

Clearly, in large measure, business plans are long term in nature, expansion plans are long term in nature and accordingly, the offensive nature of growing your portfolio is the driver. Having said that, it's no secret to anybody, that because there's been no new supply that's been added over the last 15 or 20 years at this point that making sure that retailers are in the places they need to be, and that does include any time a great piece of real estate comes available, there is always ample demand for that space.

And so I don't know if you define that as defensive or you define that as part of the offensive strategy of the company. I personally don't care -- it's about making sure great space is that the demand for that space exists and exceeds the supply. That is the case -- it's been the case and everything we see suggests that should continue to be the case. So offense is the real answer to the question.

The next question is from Haendel St. Juste with Mizuho.

I wanted to ask you about acquisitions. You guys obviously have been more active the last couple of years. There's a lot more that we're hearing on the market today for various reasons. So I guess I'm curious if you could add some color on your -- broadly your appetite here kind of maybe what inning are we in kind of the sort of portfolio moves you've been making in recycling some assets. Are you seeing more deals that are passing your screening? And maybe some color on target returns and is equity could play a role here?

Yes, it's a great -- it's a great question, and I'd love to turn that over to on Sweetnam to make sure that you get a fulsome answer to that question. Jan, you're there.

That's a loaded question. So I'll do my best to try to get through it. And let me just sort of start with what are we seeing and how big the pipeline is. And so in Investor Day, we were looking at about $1.4 billion of assets that we thought were interesting and provided some of the large centers that we're looking for, the returns and all that and kind of as we go through it in terms of what sort of come out of that pipeline because it just didn't fit for us, couple of assets that we're working on.

Don referenced a little bit earlier and kind of what's come in, the pipeline is still pretty robust. In fact, it's probably a little bit bigger than $1.4 billion today. So I think the deal flow is looking and feeling really good for us as we progress through the balance of the year. And so our appetite is still very strong to acquire assets. But look, it's gotten a little bit more competitive out there. Cap rates have come down a little bit in particular, for the best of the best properties. But look, this cuts both ways as we're recycling capital and lower cap rates make our acquisitions more expensive, but they make our dispositions more valuable. But turning to acquisitions, yes, it's more competitive. And I'll give an example where there are a couple of properties that we like. They're really good properties with good mark-to-market on the in-place rents. But they're set to trade at cap rates lower than 5%, breathtaking really, and a steep climb to get to 8% unlevered IRR. And we just couldn't get there.

It's competitive, but we remain optimistic that there are properties where we can deliver our returns. We'll look at opportunities in the 6s, 6 cap rates and maybe even a little bit less than a 6% cap rate, if the growth is really good 4% to 5% CAGR over the first 5 years should get us to better than 8% tenured unlevered IRRs. But as Don said just a little bit earlier, it's about is there a material unmet demand and the ability to push rents and get spaces in a reasonable time frame. That's what's going to drive those CAGRs. And that's how we drive revenue. And as we look at opportunities, Wendy our team are laser-focused on understanding demand and our ability to drive rent or not.

Yes, Jan, I'll just jump in here. It's really, as you said, it's all about revenue growth and getting comfortable with our mark-to-market underwriting assumptions. And so when we go through this due diligence process, it's not calling a couple of tenants. We go very deep -- as you know, we are format agnostic, and we have various different properties that we own.

So we have a really wide lens of retailers that we do business with. But really, the secret sauce of our due diligence is those relationships and the tenants who are not in that particular shopping center and getting that unfiltered honest in-depth feedback that helps us with not only underwriting, but what's working at the property, what's not working is the property on their list for expansion. Why is it not on their list? Is it lower on the list if we owned it, would it be higher on the list. And we saw that example in Kansas City. I mean we've just -- well, we just bought that property a year ago. We've already done over 20 deals, and we were making [indiscernible] tenant before we even bought the property. So that's why all just opened and Viewer is under construction. So -- and Haendel, you're getting a long answer on this one. But lastly, I I think it's important to mention our operating platform. We know how to operate properties efficiently. We know how to scale management and local operators along with that. And when you're setting up in a situation that might have fixed CAM like Kansas City and Annapolis, that goes straight to our bottom line, very productive.

The next question is from Greg McGinniss with Scotiabank.

So you finished acquiring the entire Kingsdown assemblage. It's not in the redevelopment pipeline. So is this a simple lease-up strategy and doing more in the same space? Or is there a different long-term plan there? And then not to get you too far over your skis, but on the potential 2 deals that you talked about, Don, are those considered kind of market-dominant center into new markets or more of a clustering opportunity?

Thanks, Greg. A couple of things to talk about. First, we expect that Kingston. That's just good -- that's just good real estate acquisition. That is a piece of land in the middle of our 2 shopping centers that are effectively there that are certainly better off in our hands than anybody else to hands. It is a state-of-art strategy effectively for the near term.

But because of where they are and some of the due diligence that we did with respect to alternatives, should there be an issue with the current tenancy, we got a good plan. So in some respects, it's defensive to fill out the nice square of the 2 shopping centers there, but also offensive because of what we think we're -- we've got going on there.

Look, on the properties we're looking at, I can't talk to you about it until we're all done with respect to those. I will tell you that I think we've been pretty darn clear over the last year that we'd like to be in 3 to 5 new markets. We've also been pretty darn clear that filling in existing markets remains a priority. It's a combination of both of those things. While I won't comment on 2 particular properties that are referenced, that's the business plan of the company. That's what we're doing and trying to continue that program, frankly, having more success than even at the beginning of the year that I thought we'd have. So things have changed. I'd like Jan's answer on the fulsome nature of all of that stuff that's available. And I hope to provide better news even or more complete news, if you will, as the rest of the year continues.

The next question is from Andrew Reale with Bank of America.

Maybe just to hit on the guidance. Could you provide maybe just a little more color on some of the tenants driving the term fee higher this year? And then on the higher G&A, Dan, I know you mentioned there might be some investments in digital initiatives. So maybe you could just speak a bit more about those.

Thanks, Andrew. Let me tell you about 1 particular term fee issues that I really kind of wanted to get this out there and why it's so important to us. I can't give you the specifics, obviously, for the -- in terms of the tenancy -- but imagine you've got a really strong lease at a good shopping center, where that tenant is obligated. They do a go dark, right, that they can go dark. They have an obligation to pay rent forever. And it's a very important component, obviously, to the long-term lease. They are paying rent and continue to pay rent regularly. However, when you have a really good shopping center, you should be able to back to and backfill hopefully, with a better tenant, a tenant that does more for the shopping center that pays at least that amount of rent and hopefully more -- and so while we were accepting the ongoing rent of this particular tenant, the ability to re-lease it, we're there.

So we've got a new tenant coming in, a new tenant paying a better rent a new tenant that will be better for the shopping center. And by the way, the old tenant is paying us 7 years of rent. The math works all day long. So the notion of -- and that's $3 million, that was a $3 million term. That's why that the change in the assumption for the year. I'll take that all day long and hope that somehow that's included in the understanding of what our business is and the strength of our leases. Dan, you may have more in guidance. But Andrew, thanks for asking that because I really do want you to understand the math and the reason of before doing deals with high credit tenants, that have the ability to either continue to pay or because the lease is really strong, when we have another tenant to be able to backfill cutting a deal right then and now so that we can double it. That's what we're doing double digit.

Yes. I'll just add a little bit of color. I mean the anchor tenant was not leaving for credit issues. It is a strong investment-grade backed tenant who made a strategic decision to exit a particular market, okay? And this was, as I said, not a credit issue. In fact, of our $8.6 million of term fees year-to-date, over 2/3 of it were from investment-grade rated or investment-grade back tenants. And so with regards to guidance, we increased the guide for the year, driven by call it $600,000 to $700,000 of beat in the second quarter plus we have greater visibility into the second half of the year, and that implies roughly $1 million per quarter on average in Q3 and Q4. So you have that color for the balance of the year.

And then lastly, G&A. Yes. Look, we are making investments with regards to guidance. We are making those investments. We expect to get strong returns. I think we will get returns immediately on some of the business development stuff, which we're really, really excited about. And with regards to the digital innovation side, I think that's a little bit longer term an investment, but -- we've got a really strong group of professionals who have joined us, and we feel really good about making these investments, and that will obviously impact the G&A line item in the second half of the year.

The next question is from Juan Sanabria with BMO Capital Markets.

Just maybe a question for Dan. Same-store NOI implies a bit of a decel from the first half into the second half. So just curious on what's driving that, if that's how we should think about it? And maybe how the builder in-place occupancy should trend for the balance of the year as a subset of that.

Yes. Just with regards to -- we had indicated, I think, previously, some obviously, lower numbers in the second and third quarter and a stronger first quarter, which you saw in a stronger fourth quarter.

So you should expect in the low 2s on our GAAP-based metric for comparable and probably in kind of the low 4 ex range, so blended in the low 3s, and that gets us into kind of the low 3s in the second half of the year. That's what it implies. Hopefully, we can do better than that. And then the second piece was same thing. I mean that's really -- occupancy is driving a lot of that and getting tenants open and we'll see kind of a nice resurgence in the fourth quarter on that comparable metric. I feel good about the comparable metric entering 2027.

The next question is from Jamie Feldman with Wells Fargo.

You've got Connor on with Jamie. Can you talk about where yields are today on your entitled multifamily pipeline? How we should think about potential start activity over the next 12 to 24 months and which locations are closest to penciling?

Yes, Jamie, I can do that a little bit. So we've got -- what we'd love to be able to do is on a cash-on-cash basis, be in the mid 6s to 7 or so on the residential stuff that we do. I don't -- if it doesn't pencil if it's below a 6 or somewhere like that, we're just not going to do it.

So when you look at where we are, what we've got opportunities for, we've got things like pembro in Florida, which I would -- we're getting close on seeing if we can make that 1 work. There's also an opportunity to potentially at assembly for one of the sites that we have. And so those 2, I would say, are the closest to be in the next stage, if you will, after we'll grow. Now what you should remember is we've got something squared away now for '26 for '27 or '28 and effectively what will hit '29. So the notion would be in the next 12 months or so, getting that next project or 2 or 3 [indiscernible] Those are our best guesses at the moment.

The next question is from Michael Griffin with Evercore.

Jan, I want to go back to your comments around cap rate compression and just as it relates to some of the opportunities in the expansion markets. I mean I think if I recall correctly, both Town Center and Village point were in the high 6s. So if you're talking about deals that you're finding now in the low 6s, that feels like a decent amount of cap rate compression over the past year.

I guess, number one, is it increased competition that you're seeing for some of these more operationally complex assets? Or is it just a mix of kind of the more postal core markets that you highlighted at the Investor Day that you're targeting versus the potential expansion markets?

Yes, Michael, good question. I think one of the overall factors is there's just so much more capital chasing retail right now. And so that's just created more competition for the supply of product that's out there, and that just push the yields down. And a lot of that capital is focused on some of the best properties that are available in the marketplace. And so I just -- overall, whether it's in California or whether it's in Kansas City, there's probably more competition today than there used to be.

So that's on the one hand. On the other hand, what we've seen by owning Kansas City by owning Village Point in Omaha, and really spending the time -- so much more time and energy over the last couple of years, in the last 12 months in the last 6 months, underwriting these assets and really talking to these retailers and seeing the performance that we have delivered and we can deliver, it feels like even though the yields are a little bit lower going in, we can still drive the 8% or better IRRs. We can drive the growth out there. So from sort of our perspective, even though the yields are lower, it feels sort of neutral in our ability to execute if that makes sense.

Griff, let me just add a couple of things to that because as I'm listening to the conversation and listening to your question, one of the things that comes to mind here is the type of stuff we look for is really unique. And it is a really asset-by-asset kind of thing. I know you'd like to say all grocery-anchored shopping centers trade at a blank in all lifestyle-type centers trade at a blank, but it really doesn't work like that.

And so when you go back to the conversation that John and Wendy had before, it really does depend on our ability to underwrite IRR. Now there's a limit to going in cap rate. And as Jan said, we're not going to be down in a place where it's dilutive to us to get started. That's each tenet of what it is that we do. But when you get 1 of these larger properties, that truly has been undermanaged and truly has significant lease-up that you can get to, important that you can get to over the next 5 years, I got to tell you, man, when it comes to a [indiscernible] IRR, the going in cap rate is less important.

Now not unimportant, it's got to be accretive. But these are specialty assets. These are the biggest, best assets in the communities that we're talking about there. And it's an important distinction. So the notion of saying, well, it's 50 basis points tighter or 75 or 25 or whatever it is, it's a broad comment and not necessarily untrue, but it's on a very small sample size of the type of assets. And those type of assets are very much dependent upon what the underwriting is going to look like over the next 5 years. I hope that's helpful kind of putting that in perspective. These aren't generally $20 million, $30 million 100,000 square foot shopping centers that are pretty generic.

The next question is from Floris Van Dijkum with Ladenburg.

I note you has the $200 million mortgage coming due on [indiscernible] Row, I think next year, you have an option to extend that. Is that also potentially an asset you could sell a JV interest in? And can you maybe talk about your thought process potentially of partially monetizing an asset like that, that has less expansion possibilities? Or is there enough growth in your view that you want to keep 100% interest in assets like that?

Thanks, Floris. It's a great question. When we look at how we fund our business plan, it's pretty cool to have a lot of different options and frankly, more options than most other companies have. One of those things, as you just pointed out, are assets that are very important to the company, where we've done some pretty darn good work over a lot of years for which we do not want to lose control.

Importantly, on that, but could be a source of a very low cost of capital, we need to look at that. And while the notion of wholesale joint ventures on the big stuff and [indiscernible] that's not going to happen. Sharpshooting as part of the overall capital structure and capital plan, that's pretty cool. It's a pretty cool opportunity. So yes, we will be looking at that in the coming months and years as an incremental tool to be able to expand the business.

The next question is from Craig Mailman with Citi.

Just want to go back to just bigger picture on the acquisition side of things. I mean, institutional capital just continues to push cap rates down in a space where rent growth has or the ability to push tenants has been a little bit more elusive given fragmented ownership and the importance of some of the anchors. I mean when you're talking to brokers and they're underwriting some of these newer capital sources, are these compressing cap rates in a pretty sticky interest rate environment, indicative of just a view that rent growth is going to accelerate across the space? Or is it hedge on inflation or just a byproduct of more accessible capital markets on the debt side. Just trying to get a sense of how anyone to make any numbers [indiscernible] on an IRR basis unless they're just accepting lower returns in this environment? And just maybe some thoughts on that.

Yes. You just asked a macro question to which my answer, I can't help myself. I tend to get to the micro. I get to the particular asset particular opportunities to grow the income stream in the asset, which I talked about. It is why that on a macro basis, to the extent, I think a number of things that you just said, are really important.

You remember, Craig, that really up until the last year or so, the -- it was all about the grocery actor shopping center and that center in a quite sized $40 million, $50 million kind of purchase price, that served as a wonderful hedge. Again, it's not only inflation, but again, it was a risk-off boot. And it makes all the sense in [indiscernible] We love those centers, that's great. There is no doubt that with more focus and money on the bigger stuff that there is, in my view, a bit of a realization that larger assets that are privately held, do require capital, that capital is often not spent by the ownership, whether that's institutional ownership or local ownership in some form that a company like ours or others out there can't provide outsized group with credit, you put money into a shopping center, all money is not equal. You put money into a shopping center with better credit tenants with better opportunity for growth in highly affluent areas, that's pretty good use of capital in there. It's always considered in the underwriting. And so it's a combination of everything that you kind of said, but there is a realization that retail real estate is more than triple net leases or grocery anchor shopping centers, that there are core and opportunistic opportunities that are there, that people are more comfortable that there are a few operators that can really extract that value. We certainly want [indiscernible]

The next question is from Rich Hightower with Barclays.

I guess maybe a bit of a similar line of questioning, but obviously, you guys have a pretty deep menu of redevelopment projects going on in the portfolio. And I'm wondering, just kind of given the strength in underlying trends that we've talked about on the call, does that sort of open up or maybe allow other assets in the portfolio to sort of pass the hurdle to spend that capital maybe in a way that you weren't considering 6 months ago, a year ago? Does it change the math on that sort of expenditure as well?

I think it does, Rich. I think that's a great question. It's a great observation. The 1 thing about portfolios, particularly portfolios that have been held for a long period of time. There are periods when you -- when things work better -- and there are periods of real estate when the math just doesn't work. Your observation is really good. And 1 of the things that is worth saying here is, while inflation generally doesn't make it easier to go buy groceries and all the stuff that's read in the newspaper every day. It's sure and bad for retail. And if all is controlled and the ability to effectively push rents the ability to effectively in a supply-constrained marketplace, which this is and has been does open up other opportunities. We're looking hard at stuff that we haven't looked at. because the math hasn't worked in the past. And I would be bullish, if you will, on some of those opportunities, finding their way into the business plan over the next 12 months.

The next question is from Michael Mueller with JPMorgan.

So I guess following up on the redevelopment question. How do you think the annual spend is going to trend over the next 3 to 5 years compared to where you are this year? Do you think we're closer to a material pivot to the upside?

We could. We could. This is Dan. Good question. We've been kind of analyzing and looking at what the pipeline looks like and what we could add and what things are ready to move forward and where they're penciling. And so I think over the next, call it, 6, 12, 24 months, you could see us continue to add more and more projects whether they be resi over retail projects that Don alluded to earlier or whether they're commercial retail-oriented projects redevelopments that we could add to it is probably in the neighborhood in terms of the next 12 to 24 months that we would consider of $400 million to $500 million of projects that could get started. But we're going to be disciplined, and we're only going to pull the trigger if they make sense from a return perspective.

Don, anything more?

No, as all of these questions are about how do we accelerate growth. That's right. That's the basis of all these questions. And the 1 question that hasn't been asked about are our operating margins. And the notion of effectively what digital innovation, what business processes, what is available over the next few years? How to get income rent started earlier -- all of these notions, I do believe that technology will make us more profitable also. So just to add that to the list of things about how and why there should be good growth going forward to our business.

The next question is from Paulina Rojas with Green Street.

You have talked about targeting properties with really specific characteristics, really high standards -- what tends to be the hardest characteristic to meet, the one that makes a good essential good but not really quite good enough to meet your bar. And I ask because sometimes I see properties transact in affluent pockets that have materially higher cap rates that you have quoted. So I wonder what the breaking point tends to be in your case? Is it perhaps that the market is not large enough or the lack of flexibility for densification or something else?

[indiscernible] Wendy, you probably want to add to this. It's about the details in the leases for the property. And so when you have a property that has been fully exploited, if you will, even if it's in an affluent area, it works as a wonderful hedge, and that's terrific from a bond perspective, but if there's not the growth available by remerchandising that or by adding a redevelopment component. If there is not, then it's going to trade at a higher cap rate. And that higher cap rate, if you look at just broadly, can be confusing.

Well, why in the [indiscernible] area is this property trading at this? Well, because there's no growth. And at the end of the day, that's the single biggest thing is where are the leases, and that's determined in that marketplace as to what the future of that marketplace looks and how that marketplace is creating jobs, how that marketplace is creating the ability to create growth and better merchandising. And so it's hard to put this big wide paint brush on the issues that way because it is a local business. That's the single biggest driver is what are the in-place rents and what are the opportunities for changing that cash flow stream?

The position of that asset within that market. We target the best assets in those markets. And sometimes you may be looking at cap rates for an asset that is positioned as the third or fourth best asset in that market that is not going to command the demand from tenants that we really, really look to make sure it's there and that we can underwrite. And so you'll see us pass sometimes on assets like that, that we just don't see long term there being the opportunity, and that's reflected, obviously, in the higher cap rate.

This concludes our question-and-answer session. I would like to turn the conference back over to Jill Sawyer for any closing remarks.

Thanks for joining us today, and have a great rest of the summer.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to Federal Realty's 2026 Investor Day. Thank you so much for joining us. We're really excited to have you here and to spend the day showcasing our company, our properties and our team.

Before we get going, I'd like to point you to the forward-looking statements and safe harbor language on the slide. Please take a moment to review that as it applies to everything you'll hear today.

Here's a quick look at our agenda for the day. We tailored this webcast experience specifically for our virtual audience. Those joining us in person are touring 3 of our properties, and we wanted to give you all a similar experience, so we put together short videos in the same order the in-person group is touring.

You'll first tour virtually Westgate Center in San Jose, then Old Town Los Gatos and then Santana Row. Shortly after these video tours, our CEO, Don Wood, will come on and officially take us off.

We'll have a live Q&A at the end of the program, and you can submit your questions virtually through the Open Exchange site. We'll do our best to get to as many as we can live, or at the very least, follow up with you.

One quick heads up before we begin. In our in-person programming, we are also running breakout sessions with case studies that dig into how we lease, how we continue to drive productivity, which, as Don will touch on shortly, is what allows us to keep raising rents, and how we meticulously manage our assets and approach development. Those breakouts will not be carried on the webcast, but all of the materials will be posted on our Investor Day Open Exchange site. I'm flagging this now because you'll likely hear our speakers reference these sections throughout their presentations.

So with that, thanks again for tuning in. We hope you enjoy the day we put together for you.

[Presentation]

Located at the corner of Saratoga and Campbell Avenues in San Jose, Westgate Center is 650,000 square feet anchored on all sides in one of the most supply-constrained retail corridors in the Bay Area. Federal acquired this property in 2004 for $97 million. What you're looking at today is the product of over 2 decades of uninterrupted ownership and a growth trajectory that is accelerating. For most of those 20 years, Westgate compounded steadily. The center was remerchandised in deliberate steps. The building is screened and modernized, the tenant mix continuously refined.

Sales per square foot grew at roughly 5% CAGR from 2022 to 2025. Federal's deep understanding of this market build the foundation for what's happening now.

Several significant transactions are converging at once. Target is renewing at a nearly sixfold rent increase, reflecting the gap between prior contracted rents and today's market rent. TNT Supermarket is opening here, one of the first U.S. locations for Canada's largest Asian grocery chain. TNT is a destination tenant in the truest sense, customers drive past closer alternatives, visit frequently and lift the entire center around them. With TNT and Target, Westgate becomes one of the only dual grocer-anchored centers in the Bay Area.

Meanwhile, we're planning to convert the interior mall space from food court to an anchor box, meeting leasing demand, reducing operating expenses. The result is a projected 14% NOI CAGR from 2025 to 2030. The path to approximately $17 million in NOI in 2030 reflects transactions already executed and plans already underway. This isn't a projection built on assumptions. The work is largely done.

Just across Saratoga Avenue, new density, new [ roof docks ], a stronger customer base are arriving. Within Westgate's own site, our leases will allow us to pursue residential entitlements if it makes sense, future optionality that requires no near-term capital. Additional pad opportunities are in active negotiation, none of which is reflected in our current projections.

Westgate has been a consistent performer for 20 years. What's different now is the convergence of catalysts. Anchors renewed at market, a transformative new grocer, operational simplification and a surrounding market that continues to build around us. 20 years of ownership gave us the knowledge to make the right calls. The calls are now paying off, and there's more ahead.

Old Town Center sits on University Avenue just to the east of Downtown Los Gatos, one of the most affluent submarkets in Northern California with a high-income residential base and a growing concentration of corporate presence in the surrounding area, including Netflix, Sephora, RH, Teleferic Barcelona, Blue Bottle, Free People Movement, Warby Parker, Our House. The quality of what's here is evident. These tenants don't land in markets that can't support them.

What's less visible is how the transformation happened and what it took to get here. 8 years ago, the rent roll was significantly underperforming the market. With sales hovering around $300 per foot and health ratios in the mid-20% range, the operating profile was not sustainable. The energy in Downtown Los Gatos was on the competing street. Old Town's merchandising hadn't kept pace with what this trade area had become.

Our decision wasn't to compete with The Street. It was to create a new center of gravity, to build a distinct retail environment serving the same affluent customer. What made that possible was a structural advantage, Federal's critical mass on University Avenue. This allowed us to make the commitment to tenants that a single-building landlord never could, that if they came, we would build the right environment around them.

What followed was instructive. Sephora opened, and Anthropologie, a tenant we had here for years, nearly doubled their sales. That performance improvement translated directly into a meaningfully higher rent, which strengthened our position for the next leasing conversation and the next.

RH ultimately chose to relocate from the competing Street, further validating Federal's ability to change the center of gravity. Each deal raised the floor for everything that came after it.

The NOI growth is expected to be approximately 14% CAGR from 2025 to 2030. The growth here is not dependent on new capital. It is embedded in the existing leases, and the market continues to move in Federal's direction.

Santana Row sits at the center of one of the most dynamic markets in the world, minutes from downtown San Jose, surrounded by the headquarters of the companies that define the global technology industry. When your trade area includes the highest concentration of wealth and innovation in the world, you build accordingly. Santana Row is what that looks like.

With Valley Fair located across the street, the 2 centers make up the dominant retail node in the market, drawing a combined 27 million visits annually, that complement each other, driving 1.7 million cross-shopping visits annually.

Over 100 retailers and restaurants call Santana Row home, from Tesla to Blue Bottle, from Vintage Wine Bar to Vuori, the tenant lineup here isn't your typical shopping center roster. Santana Row's retail mix is deliberately curated to ensure there's always a reason to come and always a reason to stay longer.

Living at Santana Row means the best dining, shopping and energy in San Jose are right outside your front door. It's an experience that has been in demand since we first built residential in the early 2000s.

Misora and Levare, which were recently sold at a blended 4.4% buyer's cap rate, are a testament to this demand. In 2025, we broke ground on Lot 12. Located on the east side of Santana Row, the new development will have 258 new apartment units and is expected to be completed in 2028. Office space is everywhere. An office at Santana Row is something else, a place where Silicon Valley's top firms can recruit, retain and inspire talent in a mixed-use environment no suburban office campus can replicate.

What makes Santana Row impossible to replicate isn't any single use. It's a life between them. Placemaking contributes to the energy that keeps tenant sales strong, apartments full and office leases renewed.

It doesn't happen by accident. It's been almost 30 years in the making. Federal's business development platform harnesses Santana's unique energy and cache, creating a diversified revenue engine that turns every square foot and every visitor into an income opportunity.

Santana Row is a place where retail thrives, residents put down roots and where every office user wants to be. We're almost 30 years of intentional building and produce something the real estate industry talks about but rarely achieves, a destination that is genuinely irreplaceable. Santana Row is the blueprint for the broader portfolio with the same principles learned being applied across Federal's assets to drive stronger performance and long-term value creation. This is where Federal learned what great looks like.

[Break]

Well, good afternoon, everybody, and thank you so much for tuning in. I'm Don Wood, CEO and President of Federal Realty.

I was very sorry that you're not able to join us in person. It is a beautiful day out in the middle of Silicon Valley at Santana Row. And I understand that you've just seen some videos of Westgate Mall -- or Westgate Shopping Center, you've seen Old Town Los Gatos, and you're seeing videos of Santana Row, which is our flagship.

What you've actually just seen is $13 million of NOI from Westgate, you've seen $4 million Old Town Los Gatos, you've seen $100 million, which is where we are these days at Santana Row. So together, you're looking at about $2.3 billion worth of real estate.

And there's more than effectively that we do here. Let's talk about not only these shopping centers, but what's to come.

This is an asset also that is in San Ramon, California, some miles from where we stand, on the East Bay, called Crow Canyon. It's been an asset that we've owned for about 20 years or so now. We've created something like $40 million of value here. It is a Sprouts anchored shopping center in a very affluent area, about $225,000 of household incomes here, nearly fully leased. It's a great property that adds to what's happening here.

And a lot of you have heard about our acquisitions, and 1 of those acquisitions is Del Monte. Del Monte in Monterey, California. Got a little video, one more video for you to see. And let me turn to that right now, if I can.

[Presentation]

Del Monte Shopping Center sits on Highway 1 in Monterey, a central commercial corridor of the California coast. From Ventura County north to the Bay Area on Highway 1, the center is the only grocery-anchored lifestyle center of its kind. It is within 15 minutes of Carmel and Pebble Beach, broadening the customer base well beyond the local trade area.

Del Monte has the kind of market position federal looks for: dominant, supply constrained, affluent and underserved by high-quality retail. Along the western side of Del Monte, the quality of the tenant base is clear. The center is anchored by one of the highest-volume [indiscernible] in the region, alongside it Apple, lululemon, Williams Sonoma, Anthropologie, Sephora. These tenants are here because the market and the asset justified it.

Over time, much of Del Monte's tenant mix lost its thread. Service and convenience concepts moved in alongside stronger lifestyle brands, filling space without reinforcing identity. Two vacant anchor boxes and a failing Rite-Aid left the center telling 2 very different stories depending on which half you were standing at.

Federal acquired the asset at 83% leased. The opportunity wasn't to rebuild, but to extend what the western half had already established. When we looked at Del Monte, our approach was to identify the first leasing moves that would most change the trajectory of the asset. It was leasing discipline in practice, deciding not just who belongs here but which moves to make first and in what order thereafter.

The early results reflect that momentum. We are currently in active negotiations to backfill a tenant that exercised its sales termination right along with a percent rent only tenant, creating meaningful mark-to-market opportunity across both locations. In parallel, we're investing in targeted common area improvements, landscaping, gathering areas and play spaces designed around Monterey coastal character.

When the property improvements complete later this year, we'll announce the new tenant and launch a new name, Shops at Del Monte, as a coordinated signal that the center is in a new chapter.

The financial picture reflects this coordination. NOI is projected to grow about 60% from our 2025 acquisition to 2030, and we expect to create about $75 million of value from the work we're doing.

Our next focus is an 8,000 square foot box at the east end of the property, the most significant remaining opportunity at the center. Beyond the near-term leasing plan, the site carries the optionality for longer-term densification potential, adding another layer of future value. The first moves are executing ahead of plan. Transformation isn't yet fully visible, but the path is well established.

We are very excited about Del Monte. I think it's going to turn out to be one of the best shopping center acquisitions that we've made. There's an awful lot to do there. And so when you look at our Northern California portfolio, you're seeing about $2.6 billion worth of real estate in our company. And as you know, our total market cap of the company -- total enterprise value of the company as valued is, in the marketplace, is $15 billion. I think we're worth more than that.

So you're seeing a big portion of Federal Realty here today. And you'll notice, I'm sure, that everything that we're showing you is very different. So what can be the same? We're talking about grocery-anchored shopping centers, power centers, mixed-use properties, lifestyle centers with grocers. A very, very different mix of assets. So why in the world would one company have -- who has long been format agnostic in terms of what it is that we do, why would a company benefit by having all of these things together?

And so we look for a way to talk about what that is. And effectively, what we're talking about is the red thread, the commonality, the thing that makes all of these the same from the standpoint of one big word, and that's productivity. This is -- these shopping centers, because we own all different types of formats, are more productive in a number of ways than they would be had we not owned all of them together.

A couple of different ways. This is an interesting chart that I'm going to show you that comes -- that will be coming up throughout the day and throughout this presentation. Let's talk about this for a few minutes.

Certainly, these assets have higher visits per location than what they would if we didn't own them all. And we're going to talk -- put some numbers behind that later. Higher dwell times. Being able to stay longer in a shopping center is critically important to the productivity of that shopping center, and our dwell times are longer. Tenant sales, the name of the game here. And you're going to say, will be able to put some meat behind that? Higher tenant sales than other shopping centers.

Higher rents, certainly. But not only higher rents, but higher rents because they are more productive. And therefore, with more rooms, with very comfortable occupancy cost ratios, higher rents that are able to continue to move in the coming months and years. We'll talk about that too.

Because of these properties and how they look, how they perform, how well known they are, this gives us more and better acquisition opportunities. We have the chance and the opportunity. We don't miss anything that is coming to market, on the market or, even more importantly, able to be convinced -- to convince sellers that this is the time to sell and be part of what it is that we do, and that benefit is huge.

Same thing on the development side. We are a company that also develops. We have skill sets that we've shown for many years, we've got the ability now and are putting several hundred million dollars to work on residential assets that are infilling on our existing shopping centers because there is no cost of incremental land and higher rents, these things can work in a period in time. That's very difficult to develop. Again, you'll hear about that later on.

All of this wouldn't matter if it didn't result stronger growth for the company and for the assets. You'll be hearing about that. That is a key tenet to what's going on. So in a way, this slide that is up in front of you now is the red thread for the rest of the presentation that you'll hear today. We'll be coming back to it and adding some meat to each of those pieces.

This group was not at dinner last night. We had a live dinner last night at Old Town Los Gatos, where approximately 65 investors and sell siders were there with us. And one of the questions I asked as we sat and thought about it there today was, if we had not built Santana Row, if we did not go through what we've gone through over the last 20-plus years, would Old Town Los Gatos be as good, or would it not? Effectively, would our rents be low? Would it feel different? Would there be a different tenant basis?

And [indiscernible] it was obvious that because we've done Santana Row, that the beneficiary of that are the rest of our properties, in this particular case, Old Town Los Gatos. What we call something like the flagship, something like Santana Row, it is the flywheel behind every Federal Realty property. Effectively, we have, because of things like Santana, Assembly, Pike & Rose, we've got retail relationships that are deeper, that are stronger, that allow us to be able to have more opportunity.

And when you really think about our business, our business is one where we cannot predict the economy. We don't know what's going to happen up or down. But we do know that what we strive for, and it comes in and you'll see in a number of ways and certainly in retailer relationships, to have the most flexibility and the widest funnel by which to create value.

Placemaking is really interesting. Lots of people look at Federal properties and say, yes, they're pretty. Isn't that great that they're pretty? They know how to placemake. It is so much more. That is such a disservice to what effectively happens with placemaking. What we do is economic placemaking. And that is not just spending money for the sake of making something pretty. It is smart investment, whether you're talking about landscaping, whether you're talking about construction, whether you're talking about layout, that can be done in an efficient way that adds to the property's value without adding to the cost. We've gotten really good at this. Got a few examples that you'll hear throughout the day in terms of how that works, but economic placemaking, not just placemaking.

There's something to brand equity. And there's no question about it that when you say Federal Realty and you say Santana Row or Assembly Row or Pike & Rose, then it transforms those properties, goes through those properties to our other 105-or-so shopping centers. That brand equity is a critical advantage of what it is that we get by having a flagship like this one.

And certainly, in a world where everybody wants to be extremely narrow in what has happened, we don't go that way. We've got the nonretail advantage. It's important in real estate, we believe, to have many arrows and equipment. We've become very accomplished residential builders, office builders, [ hotel view ] people. And so when you look at the ability to do those things, that's able to be transformed, not just from Santana Row, but through the rest of our properties, as exemplified by several hundred million dollars of residential development that we'll be talking about later in the day. It's the flagship effect and it's real.

I've got one other big point before I get off, that I want to make sure you guys have. Why are we doing this Investor Day now? In the middle of May of 2026, why now? And I can tell you, this is an important question because it's a really important period of time. It seems to us that there are numerous important factors that seem to be coming together at this point in time that suggests that we are ready for a run of several years of outsized growth. And I want to go through some detail as to tell you why we believe that.

This is a hard slide to read, I understand, and it's got 24 years, if you will, of information on it. That just happens to coincide with the first year I took over Federal in 2002. But very simply, the year, the FFO per share and the growth rate. And I want to take through this history because I think it's illustrative of where we're about to go over the next few years.

Certainly, in the original period of time that the team took over, it was really about eliminating dilutive things, not doing dilutive things, focusing on the core, running the core better, new management team. And that resulted in a 7% plus FFO growth rate for a period of 5 years, right up to the GFC. This was a critically important period of time. It, frankly, sounds a lot like what some of the other companies are doing these days, make themselves better companies, better operations, not doing the things that diluted them in the past. Really important period of time for us when that was the key part of the business plan.

Ironically, in GFC, the Great Financial Crisis, ironically, our reputation was solidified, got stronger and value reflected it. What happened during that period of time is we had set up, before the GFC, a much stronger balance sheet. We effectively used that period of time not to stop planning for developments. And accordingly, when the next -- as the GFC impacts subsided, we were looking at the next very strong period of returns for Federal. 2012 through 2016, we were hitting on all cylinders. Again, better than 7% annual growth over that period of time, again, with a development component, a redevelopment component of very strong core and some acquisitions. A really strong period to understand what the capability of the portfolio is.

As now we get a little bit more recent, most people remember those years of 2017 up through the full pandemic. And that was retail armageddon. That's the period of time when nobody was going to need a shopping center, everything was going to be delivered to your door in a brown box. And I like to call that purgatory.

We've bounced along. It was 4% growth during that period of time. And we'll never know, but my conjecture here is that were it not for the global pandemic, we would have been entering another period of dramatic growth, stronger outperformance during that 2020, 2021 period of time. Obviously, the global pandemic and its aftermath hurt us. And for the first time, hurt Federal Realty more than it hurt competitors. For 2 big reasons.

Reason number one was clear. We are basically in the Blue states on the coast. COVID was treated very differently there. Those markets closed down stores, did not allow shopping, had COVID impacts that lasted far longer than others. So we couldn't do much about that.

And the second is well documented, we had over $1 billion or so of development underway that hit exactly on March 15, 2020 in the case of of Santana West that at least that was supposed to be signed. And that has taken us years to build out to grow out of.

Here's the news. All of that's gone. So as I sit here, and I'll give you a few reasons why it's very hard for me to not see the tailwinds that effectively should last over the next 5 years, some period like that, similar to the former too that worked out that way of outsized growth. Again, the slide -- Dan will be back later in the day, Dan G., to be able to put some more meat on this slide. But I'd like to tell you why I believe this in addition to the history.

Check this out. Letting the core shine, that 2004 and 2008 period of time, 7.4% annual growth over that period of time, 180% return to Federal. 177 basis points better than the S&P, 161 better than the RMZ. That's what happened in '04 to '08. In '12 to '16, '16, the hitting on all cylinders period of time, 7.2% annual FFO growth over that period of time, 115% return for Federal, 37 basis points better than S&P, 85 basis points better than RMZ.

I ask you, where do you think we're going? This is what we've started with the end of the dilutive effects, with what we started talking about middle of last year. We've been talking about we'll do over 6% growth this year, very much expect to do that and a great market reaction to that so far.

Important stuff. Here's the reasons I'm very comfortable in at least looking at the factors that should result in this. The post-pandemic are actually gone. Talked about it. The ability to lease up Santana West, the ability to lease up 915, meeting in Pike & Rose and other projects along the way are not dilutive any longer. They're gone. Really important.

Macro point coming due next. Demand exceeds supply. It's well documented, and there's no question that this is -- that it's very, very difficult to imagine in the next few years being strong from a standpoint of new supply coming on. Construction costs, rents do not -- they don't pencil in. You'll see some but nothing that should change that overall macro dynamic of demand exceeding supply.

By the way, that is a benefit that did not help us in the '04 to '08 period of time or in the 2012 to 2016 period of time. In both of those periods times, it was widely accepted that supply exceeded demand. That's not the case. So that's a really good, important part of the next 5 years in terms of what you should see, in addition to number one.

That's not all. The ability -- let's see. There we go. The ability to, as you started seeing this year, capital recycle, not selling things that we should have never bought in the first place, but rather reaping the strong gains and strong value that we've created over the last 20 years through the sale of things like Levare, Misora, I think you will see another sale announced over the next few weeks in the company of a shopping center.

This gives us a capital cost of capital advantage that is unmatched. This stuff is great stuff that has created that value and can be redeployed into faster-growing assets. I think you saw that with respect to what happened out in Kansas City, in Omaha. I think you'll see better and better news coming out of places like that. Del Monte, which I've just announced or talked about a minute ago, hit the same -- is doing the same thing. So huge advantage to us going forward to turbocharge growth.

And here was the last piece of it. I talked last night about a dinner about AI and our AI initiatives there. That will result in faster collection of money. That will result in other efficiencies throughout the organization, in addition to a development pipeline that includes several hundred million dollars of residential development at shopping centers that will incrementally add.

In addition to that, you'll see ancillary income. You'll see sponsorships and other things that places like Santana Row, we haven't exploited to the fullest.

When you take these 4 things together, I think, and you look at the history of the company, it's a pretty good argument that suggests that outsized growth should be what you see from Federal going forward. It is the red thread that makes us [indiscernible] company. It is that common productivity superiority that goes through each of these property types that works.

Two points I'd love to make sure you know before I leave. We are format agnostic, and that is a real advantage of this company. And I very much believe that we're on the cusp of the next 5-year wave.

Hope that's helpful to you. Enjoy the rest of the presentation.

[Break]

Hello, everyone. I think we're going to start in a minute. If everyone can sit down. Okay.

Hi, everybody. testing. Can you hear me? So the people on the webcast, welcome. And for those of you here in person with us today, hopefully, you enjoyed the great breakout sessions that we just had, whether you were talking to Mark and Kari and looking at that ginormous trophy for the Philadelphia region and hearing about how we approached development and handled densification, or whether you had the retailers that I listened to a couple of those conversations, really good with Stu and our retailers. And then lastly, Vanessa and Liz and Michael talking about what we really -- what really drives revenue, how we approach it and how our different property types help with that.

So we're going to zoom out, Stu and I, for a little bit and talk about just the different levers that we have to grow revenue across the company. And hopefully, the goal is so that when we get to Dan at the end and he puts up the projections that we expect for the next 3 years, you're going to have as much confidence in those numbers as Stu and I do.

So when I think about our business model, right, it's really about creating that durable income stream that continually has ability to grow over time. And it's really kind of a simple formula. I kind of put it in 3 little buckets. It's wealth in density, so money and people, combined with great locations that we have, and various different format types. And that's really important on the format side. And that is really the engine that drives the productivity that you're hearing about all today and you'll continue to hear through the next couple of programs that drives our growth for the company.

So let's dive into demos a bit. Certainly, the foundation of our business all starts with the people that live around our centers. This is a map showing aggregate household income per square mile, a heat map, the darkest shade being the highest. When you overlay our properties in blue, it's probably not a surprise that they line up with those dark pockets. We truly operate at the intersection of income and density.

So a lot of discussion last night today in all the panels about the K-shaped economy. We wanted to focus on the top of that K., so those households earning $200,000 and above. If you look within 3 miles of our centers, we have twice as many of those homes as our peer set.

Not only are those affluent customers spending more, they are also spending faster. So if you look at that same 200,000 cohort in real growth and then the average household income both growing in a similar pattern. This is really critical. You heard this from our retailers. These are the customers that they are interested in. They are risk mitigants. They are places where you can push price increases, and they drive higher sales forecast, which is really important, and we'll touch on shortly.

So I think we skipped -- oh, here we are. Sorry. You've seen this before. So I think Don brought this up in the beginning. It's really our different format types and it's broken out with by NOI contributing to the overall revenue of the company. So it's everything from the center of universe here at Santana Row, mixed-use project, to some of our smaller grocery-anchored shopping centers and basically everything in between. So let's talk about how some of our properties compare to our peers.

Generally, our properties are 80% larger than our peers, which gives us a wider breadth of retailers that we're in front of all the time. It also gives us opportunities to get at the real estate, which we harvest again over time. And on average, 53% higher visits than our peers. So strong visits, large properties and people hang out more. They dwell longer, about 20% more.

So when you were talking to Vanessa and Liz, they were talking about the different relationships we have with the retailers and how we transfer those relationships from one property to another. And I know because I've had several of you talk to me about, I go to these events, I hear the earnings calls, and everybody, all your peers say they have great relationships. And we do. They do. And we do. Frankly, it's the best part of the business.

The advantage that we have is that deeper, broader group of retailers that we are constantly in front of and that history and performance and, importantly, partnership with the retailers, that they want to know us. So for all the leasing department in Federal Realty that's listening today, and they say it's all about my relationships for the retailers. It is. I don't want to take that away. But it always gets it back to the location and the great real estate that we own.

So let's -- we talked a lot about Placer.ai and visits. And we've -- I've heard in several of your groups visits translates to higher sales, visits and dwell time. So let's take a look at some Placer.ai data that tracks our -- some of our retailers and how that -- those number of visits on average compare to our peer set.

So Chipotle, everybody likes Chipotle, they're in everywhere, 23% higher visits in a Federal Realty property than on average in our peer set. J.Crew, we heard from James earlier today, and J.Crew and their different formats because they have Madewell, J.Crew, J.Crew Factory, their properties 67% higher traffic in our shopping centers than our peers. Trader Joe's. It's a cult following. They do very well in our centers, frankly, everywhere, 12% higher. And lastly, our Sephoras are off the charts in terms of production, 77% higher visits in our centers than others.

All right. So we've got these great demos. We've got bigger centers with bigger dwell times, more traffic. Why does this matter?

It matters because higher sales forecast equal higher rent. So hear me, I know this is an oversimplified chart. But just quickly, speculative 2,500 square foot tenant on the left column, let's assume that's their average volume at $1.25 million. If we can get them to underwrite, they're going to do 20% higher sales with us, at neutral [ occupancy ] cost, they're dropping $87,000 to the bottom line for other fixed costs and ultimately profit. So we get 20% higher rent, it's great, but it can be a lot better.

What if we double the rent? Take that $25 rent to $50. Now we're at an 8% occupancy cost versus a 5%. It's got to be worse for the tenant, right? No. They're still making $37,000 more in this dropping to the bottom line.

I think you heard it, I promise I didn't plan those earlier. Retailers approved deals based on ROI, not occupancy cost. And the things that are driving those sales forecasts are demos, traffic and the sales of the other tenants in the shopping center.

So let's touch on some different ways that we have to grow. So we've always had -- I love this -- there's 2 more categories that I love the most. Strategically investing in our properties that we own is a great way to grow revenue. These are typically smaller investments. They're somewhere between $3 million and $15 million. They drive occupancy, they drive sales, so they drive rents.

And I heard this come up in a couple of different areas. It's not just about making that center pretty. It is about is it a proactive strategic investment that's often triggered by maybe there's a shift in the anchor? Maybe there's a shift that we want in merchandising. Maybe there's some type of functionality between ingress and egress that's not working, or maybe the common areas are not up to par with what the consumer wants. And frankly, they're not producing enough for what the retailers want oftentimes in order to -- whether it's additional sales or additional seating.

So the results are -- and we have 19 of these, that this is where the results came from on the average. So for example, that incremental investment that we've made, we're earning a 10% on average on that investment. Our rent rollover from our shopping centers that we invested in right then to our set that we had not invested in, that rollover is 17% better.

Higher occupancy, of course, 280 basis points. And when you look at the growth trajectory of the shopping centers that we invest in, it's 300 basis points more than what it was prior.

Another lever, raw material. So when we can find under managed centers that have the same core features we've talked about, the demos, the dominance of size, the existing traffic, we can supercharge their growth. These are an example for these combined projected 5-year CAGR of 7%, Grossmont 10%; Del Monte 9.5%; Village Point Omaha, 4.6%; Annapolis Town Center 5.3%.

So looking at the 9 assets that we've acquired over the last several years, they equate to $1.7 billion in investment, 6% NOI growth projected through 2030, and an 8% to 10% IRR.

This is the second bucket that I'm really excited about. We've had a really solid traditional, what I would call, traditional specialty leasing department and team. And they've done a great job. You might think of it as ancillary revenue. And that's leasing temporary space that we have in line. It might be some sporadic EV charging. It might be storage.

We also, with our properties like Santana Row and others, we have a great opportunity to take advantage of paid parking. That's another really nice income stream for us. When you put that program today all together, it's about a $30 million program.

Now, and Don touched on this a little bit in the beginning, we are starting to lean into our leveraging of some of our bigger assets and leveraging and on brands and companies that want to get in front of the kind of demographics that our properties bring to the table. And they're willing to pay for it in a meaningful way.

So we did a deal -- a global deal with Mercedes for 60 -- over 60 of our assets. You may have seen on the top trolley tour maybe, the Lexus pop-up that's going to be an activation that's going to happen. I know we've done it with BMW. And we even have a pop-up of Dolce & Gabbana coming to Leawood, Kansas.

And so this -- I think we're just getting started on what this platform can produce. We've hired some new talent, both on the sponsorship side and somebody to drive our business development department. So I am very excited about where this can go over time.

And basically, we haven't even begun to scratch the surface on technology. So when you're thinking about autonomous vehicles and drones, and we're out right now with an RFP on a digital media program that I think is going to be meaningful, we expect this $30 million program today to go to $50 million by 2030.

So in closing, when you have the best real estate with the highest retailer productivity, it gives you multiple sources of growth, and that compounds for decades. So we get to fill in the first 4 buckets of the thread: higher visits equates to 3.9 million on average; higher dwell times, 44 minutes on average, those produced higher tenant sales since 2019 growing at 5% a year; and yes, higher rents. Thank you.

Thank you, everybody.

Perfect. Afternoon. I'm Jan Sweetnam, Chief Investment Officer of Federal, for those who I haven't met yet. I'm joined up here on the stage with Bob Franz, our Vice President of Acquisitions, who does transactions for us here in the West and the middle of the country; and Patrick McMahon, our Senior Vice President of Development, whom you met earlier today at Lot 12.

We're going to talk about capital allocation. I'm going to start with just going through capital allocation, our capital recycling, some of our targeted returns. And I'll turn it over to Bob to talk about acquisitions in terms of how we source transactions, what we're seeing in our pipeline today. And as fresh off of ICSC, what the new Intel is. And then Patrick will bring us through development, our development team and what our development pipeline looks like going forward.

So before I get started in terms of going over capital allocation, I just wanted to give a little bit of context on what we're seeing in the capital markets. I think it will be helpful for the discussion. And on the last earnings call, I mentioned that it's not new news that there's a lot of capital coming into retail right now. It's very competitive out there on the acquisition side, with the relative returns in some of the other sectors such as multifamily and industrial and with the performance of retail with the occupancy, NOI growth and that retailer health, we've talked about it last night too, a lot of capital has and is pouring into retail right now.

And notably, core capital is back in retail for the first time in a long time. It's a really important piece for us that we'll spend a little bit of time as we go through this.

So let's get started with our targeted returns. These are the 4 big buckets that we allocate capital to as we think about it, whether we're buying, selling or developing. These are our targeted returns, both in terms of what we're looking for in terms of a cap rate and the 10-year IRR. So when we're selling an asset, we're typically targeting returns 5% to 6% cap rates, 6% to 7% IRRs. We're looking to sell assets at or below our cost of capital. This is a source of capital fuel for us.

And when we say the 6% to 7% foregone IRR, that's just simply saying, here's today's market price, we sold it for this. And just -- but we really held it, this is the IRR that we would not be getting for selling it. And we'll talk a little bit of that in a moment.

And then the second is if we're acquiring assets, we're acquiring assets clearly above our cost of capital. We're acquiring them also to a premium above what we're selling assets for. And so one of the things is the capital markets today, it is more competitive out there, which is a double-edged sword for us because our acquisitions are more expensive. But at the same time, our dispositions are more valuable. And so what the key is what is the spread between the two. That's the important piece.

And then development, we're really talking about residential development, residential over retail, what are the returns that we're looking for. And we're really targeting returns above the cap rates in the marketplace today, the cap rates are in the mid, high 4s, low 5s, depending on what -- where we're building, where the asset is and the type of product. And we're targeting returns on cost of 6% to 7% and IRRs of 10% to 12%.

And you heard about some of the redevelopments that we're doing here. One of Wendy's favorite part is adding value by way of example to our shopping centers. That's where we get some of our fattest returns. We're targeting 8% to 10% stabilized returns on cost and 12% to 14% IRRs. A big source of growth for the type of assets that we own.

Hopefully, today, you're taking that we love to create value. That's our business. We enjoy it. We enjoy the process. We deliver the outcomes, which is the most important part. And I thought I'd just go through the hierarchy of our IRRs that we're targeting for the different types of investment that we do because that's an important piece of what we do. As capital allocators, our job is to invest and earn an appropriate risk-adjusted return and use a lower cost of capital to pay for. And that's just -- that is a key piece.

So if we're selling assets at 6% to 7%, we're looking to reinvest it in acquisitions at 9% to -- 8% to 9.5% or more, 150 or 200 basis points spread over what we're selling assets for. And that's kind of the key spread that's important as we think about capital recycling.

We're developing assets, we're taking that type of a risk. We're targeting returns 300, 400, 500 basis points higher than our 10-year cost of capital of around 7%. That's the discipline we use to allocate capital, key pieces.

Next is capital recycling. Capital recycling has to start with unlocking the value that we have created, and that we're just not getting paid for right now in the market. We've identified a pool of assets of about $1.5 billion that they're ready. We think the market is going to pay a premium price for them. And as we sell those assets, it will deliver a low cost of capital to be redeployed in accretive acquisitions.

These assets generally are assets that we've owned for a long time, we've created a lot of value. The rent roll, the leasing is rock solid. There's very little risk for the buyer seeking to allocate capital and core capital into retail and/or residential as the case may be.

So the strategy really is we've got to harvest the value that we've created, redeploy it. We need to buy assets that have a lot of elbow room that we can create the value over time. And then repeat that again, again and again. I mean that's kind of the key. It's as simple as we are trying to sell core returns and buy value-add returns and earn that spread. And we have the type of assets that both the market wants today from a -- as they're acquiring the assets. And as we are looking at assets in the marketplace, there's assets out there for us to require -- to create value to.

All right. So on the acquisition side, as you know, we don't give guidance in terms of how much acquisitions we can do. The chart over here really gives an example as to why we can't do that. The market is just too lumpy. You just don't know when it's going to be open and when it's going to be closed. Coming out of COVID, the market opened up and there's a lot of volume in '21 and '22. And then the interest rates go up, the market goes into a freeze, the thaw starts in '24, '25, the market reopens again, a lot of product that comes to the marketplace. But it's just -- it's too lumpy. We don't -- we can't predict what we're going to acquire, and we're just not going to buy anything to fill it in. Really we want what we want and we just have to be patient about it.

On average, over the last 5 years, we've acquired about $440 million per year. I'd be disappointed if we don't do better than that over the next several years. But look, we don't make the market. We have to see what we can get accomplished out there.

All right. So I just wanted to turn to the buy box real quick. I know we've all seen it, but I think it's important to what we're still doing today. This is still where we're looking to allocate our capital to. Top metro areas with good jobs, good job growth, large, dominant centers that serve an affluent community, and retailers that do well. And most importantly, also that known, identified demand exceeds supply, right?

So when we go in and we're looking for an asset, we talk to a lot of retailers understanding, if we buy this, would we go there? That's a key piece. And most importantly, the center has to be big enough and it has to have enough GLA that we can get to for us to make a difference. It's great if it's big, but if it's all locked up, we can't get to it, it really doesn't make sense for us.

And this buy box is still a guiding light in terms of our acquisition strategy. You heard a little -- Stu and Wendy put it up there just for a minute or 2. And the reason is the performance has been so good. So we've purchased $2.2 billion of assets over the last 5 years. Nine of those assets -- or $1.7 billion of those assets are in 9 shopping centers that fit directly to the buy box.

And the performance has been incredible. And as we get in there and we work it and we remerchandise it and we lease it and we really understand it, the forward-looking CAGR is just unbelievable. And so that just gives us continued conviction that those are the type of assets that we want to continue to buy because we can create value, we can harvest it and we can do it all over again, and rinse and repeat.

All right. So we saw this map. Stu put it up here. So we -- our plan is to invest in 3 to 5 new markets. We have 2 of them done so far in Omaha and Leawood. Still in sight here, plenty of product for us to look at. We've got the dark magenta metro areas are areas where there's a lot of affluence, a lot of money, there's a lot of people there. There are a lot of cities for us to look at that have the type of centers that we're pursuing.

So I assure you the plan is still in sight. We've plenty of places to mine and hopefully more to talk about from that standpoint in the future.

So let me turn it over to Bob just to talk about acquisitions and what we're seeing.

Thanks, Jan. So how do we source these acquisitions, right? We talked about retail is competitive. Again, there's a lot of capital chasing it.

Number one, we know real estate. We drive these markets. We drive these trade areas, we drive the neighborhoods. We want to understand the customer. We want to understand the consumer. We just spend a lot of time there. It's funny, Don, he came to Phoenix on Sunday before ICSC, and as always, I go pick up Don and I told him, "Hey, we're going to go drive shopping centers today, so we can look at opportunities that are out there. I want to show you what we're looking at, what we're thinking about, et cetera.

Number two, existing broker relationships, both locally and the capital markets. We spend years building these relationships with these brokers, get to know them, understanding what's happening in the market, on a leasing front, on a capital markets front, knowing what opportunities are out there, knowing what opportunities are going to come. We do not miss deals kind of between those 2 things.

Third is owner relationships, in existing markets that we're in and the new markets that we've been talking about, given all this work that we've done, boots on the ground, knowing shopping centers, we know exactly what we want to buy. So we spend time trying to get to know these owners, build relationships, educate them about Federal, who we are, what we do, why we'd be a good steward of the asset, et cetera. So all important.

And then maybe mostly important, tenant relationships. We've talked about it a little bit today. Tenants trust us. They kind of understand our vision. They know that we can execute. Where do they want to go? Both in markets that they're already in and new markets, kind of similar to what we're doing on our new growth strategy.

So active pipeline. This is before ICSC even. We've got $1.4 billion in our current pipeline that we're currently working on that fits our buy box that Jan just laid out. 30% of these are off market. We use kind of proprietary sourcing to mine these opportunities, which typically has less pricing pressure. We have the unique ability to structure deals. And then some owners, private or families, they want to pick the next steward of their asset that maybe their family has owned forever. So again, kind of educating who Federal is gives us a unique advantage to have those conversations in these off-market opportunities.

70% of this dollar amount are being marketed right now. They do fit our buy box. We look to selectively bid deals that are going to have a much thinner buyer pool though, not because the real estate is not good or anything like that. We like larger deals that are more complex. They're operationally, are more leasing intensive, and we think that that gives us a competitive advantage where we can create real value using our platform and our expertise on all the items that you've heard about today, whether that's leasing, development, remerchandising, redevelopment, et cetera. So we really like to get into those types of assets and create real value at the property level.

Of that whole spectrum, 54% of those are in new markets, which would include Kansas City and Omaha. Now that we're there, we do think that we can add additional assets in those markets. And then 46% of the $1.4 billion is in existing markets that we're already in.

And then just to kind of round out how we think about this. There is more competitive capital chasing retail today. A lot of that's core grocery anchored, right? So how do we differentiate ourselves? We want to focus on the more operationally and leasing intensive assets that are not only less competitive, but gives us the biggest opportunity to create real value at the properties.

We have conviction in those assets. We have conviction in our buy box. And we believe that we can execute and deliver outsized accretive returns on all those assets. And then lastly, obviously, there's the pipeline that we currently have. There's a strong pipeline. Meeting with ICSC, we believe that there's more to come. And hopefully, we can prune some of this in the second half of the year.

Great. Thanks a lot, Bob. Jan. Let's go back. There we go. I want to walk you through why our development why our development platform enables us to realize premium risk-adjusted returns today. We'll start first with one of our core differentiators, our development team, the team and -- as well as our development approach.

We live in the markets in which we develop. We know those markets, we know the market drivers, we know the economic drivers there. We know the neighborhoods, we know the contractors, we know the brokers, we know the architects. We are the local developer.

We also, when we develop, we manage the entirety of the development process, the full life cycle, entitlements, design, construction all the way through stabilization. The team that underwrites the deal is the team that delivers the deal. That continuity over the life cycle of development process is the single biggest contributing factor to why our underwriting holds up at stabilization.

Our team living in these markets, working in these markets, we work for a very long time to cultivate strong, long-lasting relationships with municipal officials as well as elected leaders. We earn their trust. That trust is a primary major derisking factor on every entitlement. Over the past 15 years, our development team has put in place nearly 2 million square feet of office space, 1.3 million square feet of retail space and over 2,700 residential units. That experience, that execution capability sets us apart among our peers.

A couple of other real true structural advantages. We build on land that we already own. Often that land is on our balance sheet at a low basis, sometimes at no basis. That changes the math dramatically. And it's one reason why our development pencils when others does not. We're not buying land at today's valuations and building at today's costs.

Another reason why our development pencil sometimes when others does not, at our mixed-use assets, our residential and our office realize rent premiums in their immediate submarkets because of the amenity that we're delivering. The #1 office amenity, the #1 in residential amenity isn't found within the 4 walls of the building. It's a dynamic, thriving fully amenitized street, a complete neighborhood. And a complete neighborhood is something that is not easily replicated.

And you can see here on the screen, those [ squigglies ] mean approximate, not less, those are your rent premiums on office and residential at Santana Row, at Assembly and at Pike & Rose as compared to their direct submarkets.

These are structural advantages. I say structural because these are advantages that are not characteristic to 1 or even a couple of our developments. These are advantages that are characteristic to a development approach. It's how we do it.

Talk a little bit about what we're delivering right now. You heard already from Mark, 217 units, 19,000 square feet at Bala Cynwyd delivered earlier this year. Just up the street in Hoboken, New Jersey, we've got 45 units, over 10,000 square feet of retail space under construction, right along Washington Street. It's a couple of blocks from the Hoboken ferry. That will deliver early next year.

You passed Lot 12 this morning, 258 residential units. That too will deliver later in 2027. And finally, earlier this year, we broke ground on Willow Grove. 261 units, 52,000 square feet at Willow Grove Shopping Center in Willow Grove, Pennsylvania. That's going to deliver in 28.

I'm showing -- we're showing you this slide not just because we want to show you what we're doing right now. This slide also gives you a glimpse into our disciplined execution strategy. Our target cadence is 1 to 2 deliveries per year that's in addition to our shopping center redevelopment as well, in parallel to that.

That's not a swing for the fences development approach. Our pipeline is large enough to matter but small enough to never put the company at risk. And even in a stress scenario, our pipeline exposure is contained relative to our market cap. If we've got $0.5 billion, I missed a 0 there, if we got $0.5 billion at work right now, we do, against our market cap, that's approximate 3%. No single project is going to move our balance sheet.

What you're also looking at on this slide is the pipeline that we're currently working on. We've got over 2,400 residential units entitled. And our development team right now is working on entitling another 4,000. That's what we're doing for our near-term growth.

I want to talk a little bit about unlocking long-term growth, in the next couple of years, 5 years, 10 years. I'll give you a couple of examples. First, Grossmont Center. We've got 866,000 square feet in East County, San Diego, on 64 acres, it's 95% leased. It's irreplaceable real estate, irreplaceable real estate that have been underinvested in for decades when we bought it back in 2021.

We've got a multiphase approach underway right now, with the first phase to position this asset for the next cycle. As I said, phase one is already underway. It's an $18 million physical reconfiguration of the north side of the site. Phase two will set up a long-term pad lease deal. Phase three is going to set up a ground lease deal to replace the Macy's with an anchor that we're very excited about. And phase four will undertake retail construction on the south side of the site.

That will set this asset up not only for the next cycle, but we're going to realize near-term growth. As Stu just showed you, we're projecting a 10% CAGR over the next 5 years, '25 to 2030, at this asset.

Here at Santana Row, Don already hit 2 Santana West today on the trolley tour. So I'm not going to go long on this. However, I think you made he point very passionate and very well, we've got 375,000 square feet sitting on that parking lot where you're trolley pulled in. It's fully entitled.

Does it makes sense right now? No. However, for the very first time in a very long time, there are several large build-to-suit tenants in the marketplace. As I said, that's a trend that we haven't seen in a very long time. There are precious few build -- large build-to-suit opportunities in all of Silicon Valley. And of those opportunities, only one is connected to a place like Santana Row, and it's here.

Finally, at Assembly, next to our 3.5 million square feet at Assembly Row is the asset that got us to Sommerville in the first place. We've got a 331,000 square foot dominant regional power center that's fully leased on 12 acres. We just spent the past 2 years master-planning those 12 acres with the City of Sommerville as well as the surrounding community, in preparation for a formalized zoning process that will commence this summer. That zoning process is intended to upzone this property, so that ultimately in the future, we can realize redevelopment there of upwards of 3.5 million to even 4 million square feet.

And that's it.

That's it. Thank you.

[Break]

More and better acquisition opportunities, $1.4 billion pipeline, 3 to 5 new markets, 8% to 10% targeted returns, and then more and better development opportunities. $500 million active pipeline, 6% to 7% forecasted ROI on those residential. Premium risk-adjusted returns. Did I handle that? There we go.

Let me get to [indiscernible] building blocks of durable growth, kind of my version of the red thread from a financial perspective. I view it as building blocks as being more appropriate.

What I'm trying to do in the next 20 minutes is, it may go 25, I apologize, is to give you kind of a framework to how to think about growth and our growth model kind of going forward. We've given you guidance for 2026, but how do you think about '27? How do you think about '28?

Looking to simplify the approach in terms of how to look at it. We're complicated, maybe a little bit more complicated because we grow in a diversity of ways, whether it be within our comparable portfolio, whether it be through development and redevelopment, through capital recycling, not as easy to model. So I want to try and simplify that approach and kind of give you a framework for the next 2 to 3 years.

I'm going to touch upon those building blocks of comparable growth, of incremental POI coming from our development, redevelopment, growth coming from our capital recycling, as well as really what the impact of our balance sheet looks like and how that impacts kind of growth going forward.

I also want to touch upon kind of a little bit at the end to give you -- I'm not going to give an NAV. But I do want to give you the components of NAV that maybe are not readily visible from our disclosure, and we're going to work to improve that, to give you maybe a way to get to an implicit cap rate given where we trade.

And then last and probably the most important is free cash flow for us is expected to grow significantly, as is AFFO. Free cash flow starting this year, AFFO starting next year. I'm going to touch upon that because I know that's an important lever that I think is certainly something that I think is a differentiator for us going forward.

Here, this is the growth algorithm. And what are the primary drivers? I just touched upon it: comparable growth, incremental redevelopment, POI, capital recycling, financing impacts and then other, which G&A probably is one item that can move from year-to-year. And I want to put it in the context of 2026 as guidance, okay, to kind of give you a sense of how we got from 2025 of $7.06 per share of 2025 core FFO and got down to our guidance right now, which is kind of 7.50% to 7.51% or 6.3% growth.

And really comparable growth, if you look at our 3-1/8% to 3-5/8% current guidance on a comparable basis in 2025 of $790 million, that roughly gives you about $0.28 to $0.33 at the high -- the low and the high end of that, okay? That $0.28 to $0.33 drives 4.3% FFO growth.

Incremental redevelopment POI, we talk about, we've given guidance. $14 million to $15 million of incremental POI coming from incrementally this year versus 2025. That $0.16 to $0.17 of incremental redevelopment POI translates to about 2.4% of FFO growth. Subtotal that, it's 6.7%.

Add in capital recycling, obviously, we bought a lot last year, we're off to a reasonably good start this year with the $92 million we have acquired, $753 million last year -- some of the benefit last year was from what we bought. But the incremental benefit is $0.12 to $0.13 or 1.8%. So that gets us into the mid-8s before you get to the headwinds of refinancing and capitalized interest, which between refinancing of 1.25% bonds and the move-in guidance from $13 million to $11 million to $12 million on capitalized interest, gets us to a headwind of roughly 1.9%, a little bit higher G&A on the margin due to investments in personnel and in technology, in ancillary income, sponsorships, we get to the 7.46% to 7.55% guidance range and gets us to the 6.3% current guidance. That's how I'm going to set up talking about '27 and '28.

First thing, comparable growth. Now this was a much more complicated slide. I took out some of the detailed numbers there to try and simplify it. But focus on the bottom. We report both GAAP comparable growth, and that's been our history of reporting it on a GAAP basis. Our approach has been -- because FFO is tied to GAAP, okay? So it seems as though if you want to know what our comparable growth is and how it impacts FFO, comparable GAAP -- same-store or comparable is the way to go.

We've also expanded our disclosure to make it easier for folks to understand what our cash NOI growth is. And over the next 2 years, I'll jump to the punch line, we're expecting 3% to 4% on a GAAP basis over those in each of the 2 years, in that range, and 3.5% to 4.5% on a cash basis, okay? 75% of that or, call it, 2.5% on a GAAP basis, 3% on a cash basis, is really driven by the primary drivers, kind of really what are the -- and it's contractual increases, rollover, occupancy. People don't talk about downtime and other things that kind of can offset that. Those are the primary drivers. That's where most of the growth comes from. But because of our business, we've got other ways to grow.

Residential rents. Wendy talked about a big growth from $30 million to $50 million in parking and ancillary income. Term fees. Term fees are part of our business, okay? We include them. We don't exclude them. Yes, they're lumpy. They are recurring, maybe not forecastable with precision, but they are part of our business because we have great real estate, we have better contracts, we're able to extract additional income when retailers want to not honor their contracts as they move forward.

Expenses and credit reserve can move from -- but these are all the things. That's what makes it a little bit difficult for folks to maybe model comparable growth. Use this as a check. I know you're going to get -- go down into the weeds in your models, but use this as a real check to make sure that you're in line in terms of your model outputs.

One of the things also the primary drivers up top, they are going to be different between a GAAP and a cash basis. Contractual increases on a cash basis are in that 2% to 2.5% range. On a GAAP basis, it will only refer to, we'll only really see that growth on our cash basis tenants because with our -- on a GAAP basis, rollover is where we catch the majority of our GAAP increases in rollover. Our GAAP rollovers, straight-line rollovers are in the mid-20s. Our cash rollovers are in the low to mid-teens. So that's where you're going to see some of those differences. That's why we report it the way that we do.

So with those numbers at the bottom, cash of 3.5% to 4.5%, comparable growth of [ 3.4% ] on a GAAP basis, with operating leverage, our G&A, and interest expense, our financial leverage translates to about 4% to 5% of FFO growth coming from the comparable pool, '27 and '28.

If you look at in '26, we have 3-5/8%, translated to 4.3%. So you see kind of how that operating leverage works.

Now let's focus on -- this is a busy slide, and I apologize, but I wanted to combine a couple of concepts. What we have is kind of the top of the page looks a lot like Page 16, our development schedule in our 8-K, where we disclose a lot of the detail of kind of the returns we're going to get, the projected costs and so forth. We also -- the bottom of the page kind of heightens or is focused primarily on the bottom of Page 27, our guidance page, in terms of how much incremental POI will come online from the development pipeline, okay?

We've also added in, trying not to bog you down with too much detail, but there's a Gantt chart in there that shows how much on a go-forward basis or just in what years you'll see some contributions from the individual projects, which include Huntington, which is done but was not done in 2025; one Santana West; 915 [ Meeting ], you see them all there. And then what's in process and not contributing yet is Bala, Hoboken and the other projects that we talked about.

So you see on the bottom, in years '27 and '28, you see about $10 million roughly of incremental POI coming online. That's a roughly $0.11 to $0.12 of incremental FFO or 1.5% at the midpoint. So call it, 1.25% to 1.75%. That brings the 4% to 5% plus roughly 150 basis points of incremental FFO growth coming from incremental -- from development.

We're at 5.25% -- roughly 5% to 7%, 5.25% to 6.75% more precisely based upon these building blocks, okay? And that's 5% to 7% before we even get into capital recycling.

Now let me start with capital recycling. Here, we've got, I think, a similar slide to I think what -- I won't spend too much time on the detail. But $1.5 billion, 3 different buckets, mature, low-risk retail, peripheral residential, as well as strategic and other -- nonstrategic and other, probably lower-quality assets in our portfolio that we probably shouldn't own kind of over the longer term.

This $1.5 billion is a huge, huge advantage for Federal Realty. Jan highlighted it previously. The details, 5.5% to 6% is what we've been achieving, sub-7% blended unlevered IRR range. Now that $1.5 billion is not going to be done all in 1 year. It's really probably a 3 to 4-year source of capital based upon the $400 million to $450 million that we do on an average basis.

I think that the biggest -- if you look here, the key considerations that we'll be focusing on, timing will be dictated by acquisition velocity, okay? We really like to match up acquisitions with dispositions. So acquisitions will lead, dispositions will be shortly behind.

Under a longer-term consideration beyond this $1.5 billion, I would say we have another couple of billion dollars of assets that we would consider for sale on a longer-term basis. Now most of this also in terms of the $1.5 billion and potentially the longer term, we would consider primarily selling 100% of the assets. We'd also consider selling joint venture interest, passive joint venture interest in some of these assets, if that's the right way for us to move forward. Some of the assets that we own, people want us to be staying in.

The last thing, tax planning is paramount. We've created a huge, huge amount of value over time with a lot of the assets we have. A lot of times, a lot of these assets that are here are assets where it's just now time for us to harvest. We've done as much as we can do. They're still really good assets, but they don't show the growth profile relative to what we think we can redeploy into new acquisitions. So I think people talk about acquisitions, we've got it in scale and I think we've demonstrated over the course of the last -- certainly 18 months, but even beyond that.

Here is a kind of a detailed slide. We've averaged -- it's really a sensitivity table that gives you a sense of, from this capital recycling, how can you model or how can you kind of give an approach with respect to how much acquisition and what is the initial yield spread between what we're buying and what we're selling? And the spread is what is the foregone yield on the dispositions and how much higher is the initial GAAP yield on the acquisitions. The last 18 months, over $800 million of acquisitions were acquired, and initial GAAP yields in the low to mid-7s. And the foregone yield on our over $0.5 billion of dispositions are in the low to mid-5s. So 200 basis points.

Here, we've set it up at 150 to 200 basis points conservatively, okay? 150 is roughly our low end of the range over the last 5 years, 2023, high end, the last year, 750 that midpoint in kind of the 350 to 550 range gives you a nice range, 80 basis points to 170 basis points, let's tighten that in, 1% to 1.5%, or 1.25%. That gives these 3 buckets -- these 3 building blocks of comparable development and capital recycling, gets us to 6.25% to 8.25% FFO growth from those buckets.

This brings me to the balance sheet. Now I'm going to take a little commercial before I get into kind of maybe what the headwind might be. Let me talk about the strength of our balance sheet.

It's $15 billion public, it's actually higher today, but $15 billion enterprise value. $5 billion debt portfolio. High BBB rated, BBB+ from S&P, Stable; Baa1 for Moody's. Metrics are improving. We are forecasted over the course of the next 2 years to head from the mid-5s down to the low 5s on a net debt to EBITDA, increase above 4x on a net debt -- fixed charge coverage, as well as unencumbered EBITDA will continue to grow as we pay off mortgage debt over the course of the next couple of years and replace it in our unencumbered pool.

The biggest thing to focus on here is in the red in the lower right corner. What is the interest rate on our maturing debt? We've got $50 million for the remainder of the year at about over 6%. Next year is a big year. Blended rate there is $350 million in 2028. The blended rate on all of that debt is about 4.5%. I would say that a composite today of where we could achieve 5, 7, 10-year debt, maybe substitute in a convert on the 5-year level, probably brings us inside of 5, high 4s. So there will be, in terms of refinancing, over the course of the year, probably a little bit of headwind there. Add in some modest drag in terms of capitalized interest. Don't know exactly what that will be. But our forecast with regards to the range of headwind is probably 75 basis points to 125 basis points of headwind, which brings FFO, our FFO growth range, now it's a wide range, 5% to 7.5%, by just looking to build up with these 4 major building blocks with regards to what contributes to FFO.

I would say that that's not necessarily guidance. It's not guidance. It's a framework for what is the algorithm in terms of these building blocks and how much can you guys get around in terms of -- I think it's a good range. I think guidance would probably be tightened in, maybe it's 5.25% to 7.25%, maybe it's 5.5% to 7%, so forth. But that's a range of what we potentially could achieve given kind of the business and how we sit today.

Remember, as Jan said, we do not include speculative acquisitions in our guidance. So when we do give guidance, it will be in and around this range, in '27 and '28 when we give it in February. So I am not giving guidance until February of 2027 and not giving guidance on '28 until February of '28. So let's be clear.

But guidance probably will be a little towards the lower end of where we -- because it won't include those speculative acquisitions. And we'll increase guidance as we make those acquisitions or dispositions, because we do that accretively.

Going back to Don's chart, which I've looked at for every Board meeting for the last 10 years, that's 40 Board meetings. Actually, it's 41 probably. I attended the -- but it's really quite impressive in terms of going through, letting the core shine.

We saw a really strong outperformance from us as well, hitting on all cylinders. I kind of feel like the next wave is something that -- not going to go out to 2030, I'm not going to give you 5 years, but I think we can feel like a 5% to 7.5%, it's at least a 3-year range, that we feel like we're getting back, 6.3% this year, hopefully going higher. And the midpoint of this algorithm range, in the 6.25%, hopefully, we do better. My objective and my hope is that we're -- hopefully, 7%. Hopefully, we can hit on all cylinders like we did back in the mid-teens where everything was hitting, comparable was hitting at a strong number. Redevelopment and development was hitting at a strong number. You've got capital recycling and acquisitions contributing. So hopefully, this kind of gives you a sense of kind of how confident we feel kind of heading into kind of this next kind of 2 to 3 years.

Next thing I want to talk about is to give -- I've got a lot of requests to kind of say, what is the value of your non-income-producing assets? Now this is a busy slide, and I apologize. There was more on it. I pulled stuff off. It's hard for me to read here, so I'm going to -- but we've got, long story short, between top of the page, big 3 existing entitlements, what we have here at Assembly Row, Pike & Rose, both residential and commercial. Future entitlements in process at Assembly Row or really Assembly Square that Patrick alluded to earlier. Santana Row, where we are, looking to do on a long-term basis enhance and add additional density.

And then resi over retail entitlements, which is at our shopping centers. 1,800 units are entitled or very close to being entitled. So it's a little bit more than what Patrick alluded to, and then to be entitled, which are a little bit longer term, you've got in total residential units, about 8,600 potential residential units, over 6 million square feet of commercial FAR, 14.6 in total okay?

You've got on a rough blend basis $50 in FAR, you're about $0.75 billion of entitlements.

So here is not my NAV. This is my -- it's supposed to give you some components to get to an NAV, but I reversed it and I said, "Hey, look, what's the implicit cap rate based upon where we're trading today?" So $15 illustratively, roughly a $10 billion equity market capitalization. Our pro rata share of outstanding debt includes debt that -- on our unconsolidated entities, deferred stock, less cash gets you roughly a $15 billion enterprise value.

The value of our in-process development, which is the project cost to date of everything that's not producing income, okay? Most of it is on that development. So $642 million. It ignores the profits. It ignores, maybe if you want a mark-to-market, kind of it's just at projected -- at existing cost.

And then the value of the entitlements at $757 million, that's $1.4 billion is management's estimate of the development and process as well as our entitlements.

Adjust for net other liabilities and assets, you get down to roughly almost $13.7 billion, is the implicit value of our operating portfolio, trading at $115. This is an important piece of information. Our estimate of the next 12 months, cash, next 12 months, NOI, $870 million. Implies a cap rate at $115 at 6.4%.

Sensitivity on the left, you can match up with share price, red and red. We're very clever here to try and make it easy. Black, which you can't really see, is the in-process development value and the value of the entitlements across the top. And you get to 6.4%.

Free cash flow, growing. 2025 we had about $80 million of free cash flow. That's growing to this year. Our estimate is $100 million. We're going to see that almost double by 2028, over 2025 to $150 million. And that's really the drivers there are primarily, one, POI is growing pretty significantly. But the biggest reason is we're converting straight-line rent to cash rent, and that will happen over the next couple of years. Plus we're also seeing moderating capital costs, tenant improvement, landlord work, leasing costs, maintenance capital, so forth.

2026 AFFO, roughly in line with this year to 6% with FFO. So AFFO at around 6%, FFO a little bit higher. The next 2 years, we would expect AFFO, because of some of the things we're seeing, the acceleration into '27 and '28 of the cash-producing nature of the business, FFO should grow 200 to 300 basis points higher than FFO in '27 and '28 on average in each of those years.

Brings us to the last building block, AFFO growth range of 7% to 10% by our algorithmic model in terms of the building blocks of growth.

So here I get to fill out the last one, stronger growth going forward. We're seeing strong growth this year. At this point in the year, 6.3%, hopefully goes higher. Upper end of the range is closer to 7% in terms of our guidance. 5% to 7.5% is '27, '28 on an FFO basis and 7% to 10% on an AFFO basis in both '27 over '26 and '28 over '27.

And how could I avoid a presentation and not talk about the fact that we are the only dividend king in the entire REIT sector. Nobody is even really close. Given the growth we have, it is the Board's decision of whether or not we increase dividends. But I would say, given the dividend -- the FFO growth, the AFFO growth, I think you can assume that we'll be in the 60s over the course of the next few years.

And here we are. Q&A.

Sergio?

[indiscernible]

Look, there were different things that really drove some of that growth. And I think we tried to name kind of what that -- some of that stuff was. Don, if you want to come up and -- because this -- conservatism. I think we're about to hit on all cylinders again. But I think we're being a little conservative. Look, it's a volatile environment, right now out there with regards to the capital markets, with regards to the geopolitical landscape, with regards to interest rates and where they're heading. Look, I think the 5% to 7.5%, I'm hopeful that that midpoint, 6.25%, is something we can count on and hopefully do better. Just like this year, we're roughly at 6.3%, 6.25%. Hopefully, we'll do better.

I think it's kind of a similar type time frame. We've got development that pencils for us just as it did, because we had a low cost of capital in the mid-teens. And I think that we're seeing the opportunity to deploy capital and recycle capital very, very effectively.

I think the comparable portfolio is set up to grow. I think cash growth over the next 2 years of 4% at the midpoint feels pretty good, cash POI growth. So I think our ability to kind of find more opportunities to develop and our ability to find more opportunities to recycle capital, I think is -- kind of positions us, hopefully, to get back into that 7% plus range. But look, it's tough to forecast, '27 and '28 today.

That's the CFO, and that's the appropriate thing. I hope you like that presentation. I think it's actually -- it's certainly more detailed and more thoughtful and informative than we've ever done before. Dan, I thought that was amazing, frankly.

But it is just that. It is the building blocks. Your question, Serge, is exactly right. I mean I look at a period of time when this company was able to exceed 7% of your growth. And you can be assured that the people who are running the place are sure as heck going to be trying to do exactly that or better. That's different than trying to lay out building blocks for the investor world. So I hope you can understand that difference.

What else? What do you guys want to know? I want Wendy here also on the operating side, Jan, on the capital allocation side. What are you guys worried about? Sure.

I guess on the topic of just the other category, G&A, AI, could you just give us some context about just what the upside, downside is and how I think about that?

Sure. And you may want to quantify this buddy, but the question is in the other category of G&A, AI, et cetera, what kind of numbers and what kind of stuff could that be. There is no doubt that as this world changes and as there are more technology tools that are available to us, I want to make sure that this company includes the type of human capital that complements what is here today.

I don't want to be looking at things from a 2005 or 2015 world in 2030. And so we talked about it at dinner a little bit last night. There will be resources that are added, business resources that are added, important point, business resources with a technology bent, to be able to help that. And absolutely, with respect to the ancillary income that -- and sponsorship, et cetera, that Wendy went through, there's a big push there, and there's a number there.

Now you saw kind of a range of that, but it's that type of thing. Hard to sit here on May 21 and forecast quantify, but you can be sure that there will be a benefit from those initiatives. I just don't know how big at this point.

Greg, you were next, right?

Yes, Don. I just wanted to talk on the capital recycling side. The sensitivity table you provided, it seems like it's more of a starting point on initial acquisitions versus where the dispositions are priced at. So I'm curious, when you're going into these acquisitions, obviously, immediately accretive. But what are you looking for long term? How are you achieving that, right? And what's kind of the ultimate goal with the assets you're buying?

Yes. Great point. And I'm going to start, and you want to add in. It's, financially, it's very simple. It's that IRR. Business wise, what is behind IRR requires us to -- in order to get numbers like that, you have to be in places which are clearly underserving that consumer base, clearly. And the evidence that suggests an underserved consumer includes taking that affluence, what choices do those people have, what have they used in other markets and where are the holes in that retail base. That's really important from my perspective. Because what I want to be able to do always at this company is intensify the land. I always want -- I want there to be more GLA, more income stream, et cetera. The easiest way to get it is on the -- from higher rent from better retailers, really important. So that's the foundational important piece that I'm trying to get to.

But I also love opportunities that I cannot underwrite upon the initial underwriting, like you're seeing at Pembroke. We're not there yet on the residential piece. We didn't underwrite one incremental residential unit, and it's very likely that you're going to see hundreds of incremental units on that site. So it's a combination, and that stuff tends to happen in bigger properties rather than 8 and 10-acre smaller properties.

Don or Jan, on the expansion markets, I know there's still more to come there, but would you want to build out more of a presence in finding opportunities in either Kansas City or Omaha? Or are you confident if you can get a dominant center in suburban Atlanta or Dallas that you can just go kind of asset by asset and then build up the scale from there?

Griffiths, yes and yes. So first of all -- and we've talked about this before. I mean we're looking at a couple of smaller assets now, for example, in Omaha. I would have never started by going to Omaha, Nebraska with a smaller asset. But by starting with Village Point and seeing what it is that we're able to do there and understanding that marketplace more with local folks, et cetera, it's very clear that there are 2 or 3 other assets in that marketplace that are smaller, but I would love to supplement what's there. Same thing for Kansas City.

Now having said that, Yes. Let's get that big, dominant asset. Let's see what happens later on the year with Avalon and the other stuff that will come to market as they go in Atlanta and other places like that. Yes, we'll be at the table. But we're not going to do it to the extent we can't see and figure out what Greg asked. And that is that true ability to be able to transform and make a better retail tenant base there to be able to create places like this. Not that it's going to be Santana Row, but these pieces of what happens here is what we are looking for when we go to market.

I guess, Dan, can you talk about -- you talked about 4% NOI growth over the next sort of 2 years. Talk about the breakdown of that. How do you think about occupancy, the rent bumps, I mean, given that occupancy is sort of at a high level for the industry now, help us think through that?

Yes. Look, I think that it's a combination of all of those things. I mean that was on a cash basis, the 4% or 3.5% to 4.5%. It's going to be a cash basis, something in the 2s on a blended basis, kind of mid to upper 1s and north of 3, in and around 3 for everything up to 10,000 square feet on a small shop basis. These things, everybody is talking about 3% and 4% and 5% kind of bumps are on small shop, not 8,000 square foot small shop, okay?

You'll see rollover. I think we're going to have good solid, solid rollover in the low to mid-teens. I think over the next 2 years, occupancy probably grows a little bit more aggressively in the next -- in '27. And then maybe I'm probably forecasting kind of a settling out but still some more runway in '28, but really seeing the growth over '26 in terms of a weighted average occupancy in each, '27 over '26.

And I'm hoping to see some real contributions from ancillary income, and maybe it doesn't happen in '27, but certainly, longer term, taking kind of our parking income, our ancillary income, which has multiple components from marketing and sponsorship and so forth, specialty leasing, getting up and having that be a nice contributor as well. And so those will be the, I think, the bigger movers of building blocks of that average, that range of 3.5% to 4.5%.

Maybe just a 2-parter on the FFO growth rate here. Dan, the 10-year has been moving pretty quickly the last couple of weeks. So just in terms of the drag that you're seeing or inputting here, kind of what assumptions were you using? I know you said maybe you could price all-in below 5%. Like could you just talk about what that assumes on the convert versus just a straight-up...

I think it's a composite of 7-year, 10-year and a 5-year convert. I've got $1.2 billion, $1.3 billion to refinance over the next 3 years. Very little to do this year. But at a pretty attractive refinancing rate, 6% in place on what's maturing.

I think that that composite is just an indication of what we could do today, okay? If it goes wider, look, we did a 75 basis point headwind to 125 basis point headwind. I think I'm -- hopefully, I'm conservative there, but that also includes a little bit of an expectation that capitalized interest may continue to burn off. So that's the combination of those 2.

So interest rates are going up, and that's why having a wider range in terms of the building blocks is prudent. And that's also why I think we're -- maybe we are a little bit more on the conservative side.

What we tried to do with this whole presentation was there's a reason there's a bunch of matrix boxes there. And if that -- and you used the word a lot of times, this is really what -- has some general assumptions in terms of how to build what the algorithms are to be able to build to back where -- what this real estate can and should be able to do.

Every one of you will make your own assumptions with respect to interest rates. Samir, you'll make your own assumptions with respect to vacancy, so what's going on in the world. And so what we tried to do is to give you enough of a tool here to not take the midpoint of a range and put it in a place, but to take these tools, make your own assumptions as to where you think you can go. But to make sure you know that to the extent the world stays reasonable, as defined by you, whatever you think that means, that this is going to be a strong next period of time. Obviously, things can drop it off. But the algorithms of how we are putting this thing together and where we see the combination of tailwinds, macro points and the overall portfolio. it certainly looks better than it looked coming out of COVID for the last few years for us. That's really the main point.

And I guess the other part of the question is, I guess it dovetails a little bit with rates, but on the acquisition side, you guys have a pretty good pipeline, the 1.4%. At ICSC, we heard you guys kind of pique people's interest in going into the Midwest now and so you may start to see more competition from pension funds and others. Just the potential disruption in transaction volumes with rates resetting and people figuring out where you can price the debt, how that impacts your ability to close on that $1.4 billion and even the $1.5 billion, where there's a good amount of resi there at sub-5, how that could impact that pace here? In other words, just your thoughts on that in the near term?

So just a couple of thoughts on that. So first of all, we haven't heard any friction on deals that are pricing right now as a result of the run-up in the treasury. And if we're continuing to go up from 4.65 to 4.85, I think there would be. But across the board, we just have not seen that friction yet from a pricing standpoint.

And from our standpoint, we are going to match acquisitions with dispositions. So if we're paying a higher price and getting a lower yield on the acquisition, we're going to be pretty confident that we're going to be able to sell something to match it after the fact or concurrently to get that spread that we're looking for, that 150 or 200 basis point spread between what we're buying and what we're selling.

So to us, that's a consistent part. Again, that pool of $1.5 billion, it's ready. I mean those assets are ready to go. Again, not all at once because you got to match it, but we can go to the market with what is appropriate at that time pretty quickly to make that match.

Dan, a question for you on your FFO, I won't call it guidance because you didn't call it guidance, but the FFO framework makes sense. The AFFO does not. So if you think about free rent, there's always free rent because every year you guys are leasing, you're restocking the free rent kitty. So it sort of never burns off holistically because you're always restocking the kitty. So can you just talk a little bit more about why you think free rent will go away when you guys are actively leasing every year, you're always adding new free rent, so that's sort of always a constant?

It is, except we're not refilling the kitty at the moment of 375,000 square foot office buildings and 275 square foot office building at Santana West and at Pike & Rose. And so converting a lot of that cash rent, that straight-line rent to cash rent is really what the driver is over the course of '27 and '28.

And yes, you're restocking the kitty, but we expect more renewals and less new leasing is also a driver, okay, which will reduce straight-line rent and free -- caused by free rent periods. And then also, we expect lower capital costs, one because we've been able to keep new leasing capital costs lower, we've reduced them over the course of the last several years. Hopefully, we'll continue to exert the negotiating leverage to kind of keep those down and hopefully continue to drive them down. But also as we are approaching stronger occupancy levels, again, we'll be doing more renewals and have less new leases, which will reduce kind of straight-line rent from free rent periods.

But in fairness, as Don mentioned, [indiscernible] to Santana West, you guys are looking at more office development potential, assuming pre-lease anchor. So yes, it may burn off, but then it's going to come back as you guys do what you do, which is add incremental components to your...

It's just a bubble, Alex, is all we're saying. There's a bubble. There's 2 big giant buildings that have just been completely leased up that will convert to cash rents over the next couple of years. It's a bubble.

So you will see the higher cash coming in incrementally period-over-period, it makes perfect sense. To the extent there is a new building because there's a build-to-suit, nothing spec over there, just to be clear on that, then yes, there'll be economics of that at a point, and we'll talk about that when there's something to talk about.

But as he's forecast, clearly, the conversion of straight-line rents to cash rents, is happening and will continue to happen bigger numbers over the next 6, 9, 12 months.

Speaking of bubble, you mentioned you'd tell us about the theater potential.

Yes. This -- so some of you have noticed there is the ugliest building on that piece of land over there, that was an old Century Theater, which has been marked historic, correct? And so technically, that building has to be approved in terms of whatever it's going to be used for. That, by the way, is not on the lot of the other 275,000 feet. That's an incremental thing. And by the way, we've got some ideas for that, that get into the ancillary income piece that could be interesting. But that's in none of the numbers you've seen.

And by the way, just to clarify, at Westgate, we talked about potential long term for residential entitlement there. That has nothing to do with the entitlements that I talked about here. That's so far out in the future and so forth. So just so there's some clarity from that perspective. .

What else?

I think the team has done a fantastic job. And not to be the bad guy, but Don, just curious on how you and we should be thinking about succession. You obviously have a very talented team.

Yes. No, I appreciate that. Yes, I'm not going to be doing this at Federal Realty for the rest of my life. And this -- how's that for clarity? Is that clear?

But I got to tell you this, man, the period that we're in right now and this entire Investor Day and what it is that we are pushing for, to be able to create and harvest the value that we are -- that we have created and the ability to reinvest it is one of the most exciting periods in my 25 years here, 28 years or whatever it's been.

I want to get through this a bit. I really like this. And I'd love to be able to see some of the stuff that we talked about today actually coming to fruition. I really believe that there's a good chance to have that.

Having said that, there will be a process starting in the not-too-distant future. And I don't want to put a time frame on that, but not too distant future where we'll hire a recruiter and we'll start looking for a replacement for me.

And when you look at our team, this is what I've been doing just nonstop for the last 2 and 2.5, 3 years, is to make sure we're not just a bunch of old guys and women who've been around here forever, but that we are bringing in new talent, that we're combining the best of the experience. Let's use experience buddy, right? The experienced people, all of us up here, with new and the best talent.

What we have found, which I do think is a critical important thing, this company has an amazing reputation with retailers, with other owners of shopping centers, with vendors that do the work for us and look for prospective employment. And so I don't think it's going to be -- it hasn't been very hard to attract great talent into this company, in a period of time that macro isn't an easy time to attract great talent. But we've been able to do that because of this reputation. I couldn't be more proud. I couldn't be more proud of the team you see. And I hope today that what you saw were truly the best in the field in each of their ways.

I was blown away by Patrick McMahon here, talking specifically about the development pipeline. I was worried about that for you guys, in terms of how that was going to come across, how do you view residential development within. It's impossible -- it was -- I think it's impossible for a real estate person to sit and listen to him talk that through and not say that's really cool. And that's a real distinguishing difference.

So the whole notion of succession and building a great company and keeping the company great, I just want to make sure you guys know is first and foremost in my mind with respect to this entire team, including the ability to make the case that this company is worth more than it is currently trading for.

I was hoping that was a mic drop. No, we're good.

We needed some space to breathe after that.

We just spent the last 24 hours seeing and hearing about the strength of your portfolio. And then, Dan, you provided this context around the implicit cap rate of where the shares are trading at, at 6.4%. And then at the same time, a lot of people were at ICSC and hearing about the competitiveness of the acquisition market. So can you just talk about how that large pipeline compares to the opportunity of buying back your own stock at just given where the current valuation is and just given all the great things that we've seen over the last...

Michael, I love that you just said that. Because the one thing that was missing from that slide, and you would expect it to be missing from the Chief Investment Officer, is the buyback of stock. Because he doesn't want to buy back stock, he wants to buy stuff and grow the company. And by the way, so do I. That is the mission of why we're there.

That does not mean though that, to the extent the best investment is not our own equity, that you will not see that happening. You will. Because to the extent -- and you bet, we are trying to match dispositions with acquisitions. Of course, we are, for tax reasons and other reasons. But sometimes, there is a way to effectively create a disposition capital in a way that suggests we want to do it now. And if we don't have the right acquisitions to do, you'll see stock buybacks. Because there is complete conviction in the ability of a non-NAV slide that Dan put up there.

So that is an investment option. It clearly is. Yes, we're making progress in conveying our message and in the stock base and all of that. But sometimes, those things are fleeting and all kinds of things happen. Don't believe for a minute that we won't buy back this equity to the extent we don't find better opportunities to buy, and we have great disposition opportunities.

Can you talk a little bit more about the ancillary? Because you're basically talking about doubling it from 30 to 50. Is it going to be very broad based? Is it going to be very chunky items at, say, Santana? And then just as a quick clarification follow-up. On the $1.5 billion dispositions, I know there's a little note that said potentially $2 billion long term. Is that an extra $500 million or $2 billion more on top of that?

It's an extra, on top of the $1.5 billion -- there's the potential for monetization of an incremental $2 billion.

Okay. So it's not $1.5 billion plus $500 million?

No. No, it's $1.5 billion plus $2 billion.

I'm glad you asked the question on additional sources of revenue. I think over years, we've had a little bit of a change here at Federal Realty. We always had, like I said, a traditional program that was pretty robust, and we approached it in a simplistic way. And now what we're -- and we never want to -- just to your point, we never want to jump up our properties or not do something that supports our overall brand for the company.

But with 25 to 50-acre sites attracting the kind of demographics that we've been talking about all day, we are really finding that there is some pent-up demand for how to brand ourselves in collaboration with other companies and do it in a way that can activate the shopping center that will complement the people that are coming here. And we've seen a huge, over this past year, a huge opportunity, and we haven't fully gotten our arms around it yet, but we're working on it. And I'm really excited about it.

And parking. I mean, we are finding ways to really take advantage of the parking that we have, which is part of that component. Parking and ancillary.

Placer data has changed things. Being able over -- at least to me. So really, over the past few years, really understanding Placer.ai and understanding traffic and getting a better view of the number of eyeballs that are effectively coming and going, the dwell time, all of the stuff that you saw today suggested to us that we are not fully exploiting all of those eyeballs and what is happening at these properties, combined with a maturation process where, when you talk about these big places, whether it's Santana, Assembly, these are not development sites. They have development capabilities on them. These are the most stable, best-performing assets in the portfolio. These things kill it.

And so the notion of really having more data to exploit and use with potential other people that care about that has been really enhanced with Placer and other technological improvements.

So we're just very positive about it. Yes, it may be lumpy, sure, Michael. But it will be incremental. And we'll see where we go. But more on that as we get some progress along their way.

I have heard today a few examples of fair market rent renewals. So my question is, how prevalent are these type of lease structures? And given the solid backdrop in terms of fundamentals, is there an intentional goal to increase this? And how much can you meaningfully move their importance for the portfolio?

So fair market renewal options, first of all, we don't love options of any kind because they're always at the tenant's option and never at our option. But yes, we do, do options. And so one of the ways that we can mitigate if we have to give an option is make it a fair market value option. In that way -- and we typically always put a floor in that, so the rent is never going to go below, but it gives us the ability.

Because what we found over time is the more opportunities we can get back to the real estate, we can drive the rent higher. So if we have a fair market value, we're getting to the real estate, say, in year 6, maybe it's in year 11, it gives us an opportunity to provide a true mark-to-market versus just whatever was negotiated 5 or 6 years ago. So we encourage that all the way across the portfolio. Can't get enough of them.

It feels like you want to go home. That's the feeling I'm getting over here. Any last questions, any last things to talk about, Samir?

Don, yesterday, you spoke about the AI initiatives at dinner. How much of that like do we start to see flow through into kind of all this you're bringing up here with the...

Yes. I don't think -- that's a great question. I don't think they're -- you're seeing any of it in the numbers and stuff that you see. This is very interesting. So everybody's got an AI initiative of all different, as we talked about at dinner last night, specific applications. And they have had -- so have we, whether you're talking about sourcing of the tenants, whether you're talking about lease abstracts, whether you're talking about tenant improvements, tenant coordination, estimating, all of that.

But if you were to ask me how much of that is finding its way into Dan's algorithmic model, I will tell you 0. And it's not going to be 0. And when you approach it the holistic way that I talked about last night, from a business perspective of reducing time and the other ways we've talked about, it is going to have a benefit.

So in my way -- in my -- in answer to the first question of, how about the other [indiscernible] and ancillary and everything? That's in there in my head, that effectively there will be measurable improvements in time to rent, time to lease to rent start, that will, by nature, whether Dan puts them in his algorithmic model or not, will come through in the actual results. One of the things I'm most excited about.

Guys, thank you so, so much for being part of this. I hope this was informative to you. Have a safe trip back. It is raining like crazy on the West Coast -- on the East Coast, which means all flights are going to be a mess or whatever. So if you want to hang out another day at Santana Row in this place, and drink, please do so. Man, we'd love to have you. So enjoy. If not, have a safe trip back. Thanks for coming.

Hello, and welcome to the 2026 Federal Realty Investment Trust Annual Meeting of Shareholders. Please note that this meeting is being recorded. [Operator Instructions]

Good morning, and welcome to the Federal Realty Investment Trust's 2026 Annual Shareholders Meeting. I'm David Faeder, the Chairman of the Board. All of the members of our Board of Trustees, along with the representatives of Grant Thornton, our independent auditor; and Pillsbury Winthrop Shaw Pittman, our Corporate Counsel, are in attendance.

I'd like to ask that the meeting come to order. If you have any questions on the proposals being voted on today, please go ahead and submit them via the web portal and indicate what proposal your question relates to. If you are participating in today's meeting as a guest, you will not be able to submit any questions. If you have any questions that are not related to today's proposal, please submit them to [email protected] so that we can follow up outside of this meeting.

Dawn Becker is serving as the Inspector of Elections for the annual meeting. And at this time, I would like to turn it over to Dawn.

Thanks, Dave. The notice of this meeting was properly given to all shareholders of record as of the close of business on the record date of March 18, 2026. A quorum is present at this meeting for purposes of conducting business.

We have three company proposals to be voted on today. Proposal #1 is for the election of 8 trustees to serve until our 2027 Annual Meeting of Shareholders. Proposal #2 is an advisory vote to approve our executive compensation of our named executive officers as described in the proxy statement. Proposal #3 is the ratification of our appointment of Grant Thornton LLP as our independent registered public accounting firm for 2026.

The polls are now open.

[Voting]

Any shareholder who has not yet voted or wishes to change their vote may do so by following the instructions on the web portal. Shareholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote do not need to take any further action.

As I'm looking, I do not see any questions submitted, and we have had the opportunity to vote, so I declare that the polls are closed. The preliminary results show that proposals -- all proposals have passed. The voting results for all proposals will be filed as required by SEC rules.

This annual meeting is hereby adjourned, and thank you very much for joining us today.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, and welcome to the Federal Realty Investment Trust First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded.

I would now like to turn the conference over to Jill Sawyer, Senior Vice President, Investor Relations. Please go ahead.

Thanks, Rocco, and good morning, everyone. Thank you for joining us today for Federal Realty's First Quarter 2026 Earnings Conference Call. Joining me on the call are Donald Wood, Federal's Chief Executive Officer; Daniel Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and January Sweetnam, Chief Investment Officer as well as other members of our executive team are available to take your questions at the conclusion of our prepared remarks.

A reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance.

Although Federal Realty believes expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-K and our other financial disclosure documents provide a more incept discussion of risk factors that may affect our financial condition and operational results. Given the number of participants on the call, we kindly ask that you limit yourself to 1 question during the Q&A portion. If you have additional questions, please requeue.

And with that, I will turn the call over to Don Wood.

Well, thanks, Jill, and good morning, everybody. The combination of stepped-up capital recycling portfolio-wide the strong incremental cash flow, the result of near record leasing in terms of both volume and rate over the past 18 months and the beginnings of meaningful incremental contributions from previous year's development spend are showing up on bottom line results with FFO per share of $1.88, vesting a year ago's quarter by 10.6%, setting the stage for this quarter's earnings beat, enabling us to raise guidance for the balance of the year.

More details from Dan in a few minutes. Lease termination fees, direct results, strong landlord-oriented leases and an important part of our business were higher this quarter compared to a year ago by $2.8 million. though higher snow removal and related energy expenses net of recoveries caused by the season's unusually rough winter were also higher this quarter by over $2 million.

Of course, we still grew at 9%, even if you eliminate just the termination fee impact. Capital recycling this quarter saw us close on the sales of Misora apartments at Santana Row and Courthouse Shopping Center in Rockville, Maryland, or combined proceeds of $159 million at a combined cap rate well inside 5%.

Subsequently, we closed on the acquisition of Congressional North Shopping Center directly adjacent to our long-held A-rated rational Plaza in Rockville, for $72 million at a 7% stabilized yield. Opportunities for additional accretive acquisitions net of dispositions continue to be a laser-like focus of this team and are expected to continue to improve our overall growth. Activity in the form of additional interesting centers coming to market that are worth looking at, has clearly picked up as we come into the spring season. Business is good with strong demand for our assets in both our historical locations as well as the newer markets.

We ended the quarter with the overall portfolio 96.1% leased and 93.8% occupied and about 40 basis points higher, excluding newly acquired centers. With the continued strength in new leasing that I'll talk about in a minute, these good times that we're seeing are expected to continue. Specifically, the anchor box leasing and repositioning that has been done and will continue to get done, particularly on the West Coast for us, should provide strong income contributions in '27 and '28.

Now I know there hasn't been a lot of obvious evidence over the past few years that great demographics, particularly an affluent customer base, make a demonstrable business difference in the performance of a retail property. And there are a lot of reasons for that including shifting population trends, government subsidies and a favorable supply and demand dynamics, and some of those macro trends will likely continue. But today's economic realities are different. And the divergent day-to-day purchasing decisions of consumers in this K-shaped economy are very real. Periods like this where everyday costs from gas to groceries are elevated and the consumer is more selective, quality demographics matter more -- they matter a lot. Wendy will talk through what we're seeing on the ground specifically.

Now it's no surprise that leasing drives these and future results. With over 100 leases and 649,000 feet of comparable deals done in the quarter at 13% cash rollover 23% on a straight-line basis. This was more volume than we've ever leased in any first quarter and the third best ever in any that includes 13 anchored deals for nearly 400,000 square feet at 13% rollover, 21% on a straight-line basis. This is really strong leasing and it looks to be continuing.

As we've talked about over the last several quarters, we're also finding opportunities to intensify our properties with developments, usually residential product that's complementary to our shopping centers. With little or no incremental land costs, the math to work in the right locations. 2025 has sought us anything about value is that high-quality appointments adjacent to great shopping environments in strong suburban locations create a more desirable living environment. That translates to higher residential rents higher and stronger growth and ultimately lower cap rates upon sale. 2025-'26 sales of Misora at Santana Row and Palace at Pike & Rose unlocked an unmatched cost of capital for us to reinvest, sub-5% overall.

We've also previously disclosed the allocation of a total of $400 million for residential development of the Blair at Bala Kinet, which had 34% leased already. It is well ahead of projections for both timing and rate. 301 Washington Street in Hoboken, which is under construction and will begin lease up in about 9 months. Lot 12 at Santana Row, which is well under construction and will be seen by many of you, if you're coming to our Investor Day in a couple of weeks. And an incremental 261 units at Willow Grove Shopping Center outside of Philadelphia for which demolition part of the adjacent shopping center is happening this week.

Together with this densification of our shopping center assets, will add nearly 800 units and $27 million of new operating income to the portfolio once stabilized in the next few years. Our experience with residential development at our retail-centric properties is a skill set developed over 25 years and is certainly a unique differentiator of our business plan.

Now with the signing of a lease with PNC Bank a couple of weeks ago for the last remaining 11,000 square feet, Santana West is officially 100% leased. In fact, all of Santana Row's office space is 100% leased. This is particularly impressive given that just a few miles away, Downtown San Jose, California Class A office vacancy stands at 36%. But that thinking for a minute. And it's not an anomaly. Pike & Rose office stands at 100% leased. [indiscernible] office stands at 100% leased, [indiscernible] Row office stands at 97% leased. And Assembly Row office stands at 94% leased. Whole office portfolio, 99% overall leased.

Now our office income stream and our nationally recognized mixed-use communities is an extremely high demand and is stable, is solid and is growing. We'll showcase our plan through a comprehensive Investor Day at Santana Row on May 21. It looks like we'll have a great turnover and would love to add a few more, really looking forward to seeing most of you there. Enhanced internal and external growth using all the tools at our disposal is the name of the game. Quarters like this first one, increased my confidence in our ability to do so.

Let me now turn it over to Wendy and then Dan to provide additional color. Wen?

Thank you, Don. This was a strong quarter across the board. Every key operating metric delivered continuing the momentum from prior quarters and validating the broad-based demand on our high-quality real estate across all of our formats. As Don mentioned, we had record leasing this quarter with rent rollover at 16% on a trailing 12-month basis keeping in mind that the rollover statistics represents 96% of our reported deals. Comparable POI growth was strong for the quarter at 4.7%, particularly impressive given the challenging winter conditions we faced in the Northeast. I couldn't be more pleased with the results.

Our lease rate held firm at 96.1%, a direct reflection of our proactive leasing approach. Foot traffic was up 3% for the quarter and more importantly, 4% in April. Executed but not yet occupied deals will contribute an incremental $36 million of rent over the balance of the year and into 2027. On the small shop side, we're at 93.8% leased with room to push rents further, given the demand we continue to see across our submarkets. The pipeline remains robust at over 1.7 million square feet of space under lease negotiations, providing embedded growth over the next 2 years.

Last quarter, I highlighted several of our recent acquisitions, walking you through the early leasing momentum and outsized performance we're seeing relative to our underwriting. What's now coming into focus more clearly is the financial opportunity we're seeing on the operating side. We are operating these properties at a higher level, not only meeting our internal standards but doing so more efficiently and at a lower cost. As we all know, it's not how much you spend, it's how you spend it. Through a combination of internal scaling, vendor management and scope alignment, we expect to continue creating value through more efficient operations.

Lastly, there's a great deal of conversation right now about the K-shaped economy and its impact on commercial real estate. When I match that narrative up against what we are actually experiencing across the portfolio, there is no doubt that we are benefiting from the upper end of that K. Traffic is up, sales are up. And not with just value-based retailers as you would expect, but at all price and aspirational concepts like Crate & Barrel, [ Anthropologie Madewell, Aritzia, ] all of which continue to outperform in our centers. Discretionary spending in restaurants is another topic that's getting a lot of air time, so I wanted to share some numbers with you. Our full-service restaurants averaged $723 per square foot in sales, our fast casual restaurants averaged $873 per square foot. Both represent healthy performance, more than double the national averages and both our operating and occupancy cost ratios in the 9% range, leaving meaningful cushion to absorb either consumer fluctuations or a broader economic cycle, durable real estate matters.

And with that, I'll turn it over to Dan.

Thank you, Wendy, and hello, everyone. Our FFO per share of $1.88 for the first quarter reflects almost 11% growth versus last year. and highlights an exceptionally strong quarter operationally. This result came in $0.06 plus, or 3.6% above the midpoint of our guidance range a result which reflects a business plan firing on all cylinders.

Drivers for the outperformance include $0.02 from higher revenues through better occupancy, parking revenues and ancillary income $0.01 from expense savings, including efficiencies from our 2025 acquisition pool, as Wendy just highlighted, $0.01 from higher-than-forecast term fees and $0.02 attributed to timing pulling forward some items that were expected later in the year.

Comparable POI growth, a GAAP metric was 4.7% for 1Q. Cash basis comparable growth was 5.1% for the quarter. Excluding term fees, the result was still roughly 4%. Cash basis min rent increased 3.6% for the quarter. All variations of this metric were ahead of our expectations, highlighting the strong start to the year.

Look to our 8-K for expanded disclosure in this area. Now let's turn to the balance sheet. Subsequent to first quarter end, we closed on a recast our revolving credit facility where we increased the size of the facility to $1.4 billion, extended the initial term to April 2030 with extension options into 2031 and reduced the spread over SOFR by 5 basis points to 72.5%. We repaid our 1.25% notes due in February and now have only $50 million of remaining loan maturities through the balance of 2026. We continue to forecast strong free cash flow after dividends and maintenance capital and expect to exceed $100 million in 2026 and had higher in '27 and '28 as we convert straight-line rent to cash paying rent.

During the first quarter, we closed on asset sales of $159 million combined at a blended mid-4s cap rate. We also have an additional $66 million of sales in process with expected closings by quarter end with cap rates targeted in the mid- to upper 5% range. 2025 and expected year-to-date 2026 asset sales will stand at a total of $540 million with a blended cash yield in the low to mid-5% range, a very attractive cost of capital. Through this active and disciplined asset recycling program, which has effectively been executed on a leverage-neutral basis. Our debt metrics remain solid. First quarter annualized net debt to EBITDA is 5.5x and should improve over the course of the year. Fixed charge coverage is 3.9x and and should eclipse our target metric of 4x over the balance of 2026.

And with that, I will now move on to guidance. As a result of a robust first quarter and more encouraging outlook given the continued resiliency in our portfolio, we are raising guidance for both NAREIT and core FFO to $7.46 to $7.55 per share. At the midpoint, this $0.03 to $0.04 increase represents 6.3% growth for core FFO when compared to 2025. Drivers for the increase in guidance include our comparable POI growth outlook improving to 3.8 to 3.5 from the previous range of 3% to 3.5%. We still expect the trajectory of occupancy in the first 3 quarters of 2026 to be in the mid- to upper 93% range before climbing higher to the mid- to upper 94% range by year-end, powered by leases that have already been signed.

Our improved guidance reflects stronger-than-expected contribution from the $750 million of dominant high-quality properties acquired in 2025 driven by expense savings and greater leasing velocity at these dominant assets. We increased our expected incremental POI for redevelopment to $14 million to $15 million as we get tenants open and operating sooner than forecast, and our outlook on term fees also improved to $8 million to $9 million as our strong leasing contracts allow us to leverage underperforming tenants. We refinanced our 1.25% unsecured notes with a combination of a new term loan and availability on our upsized credit facility to assume roughly 4.5% of the effective interest rate reset on those notes in line with prior expectations.

Please note that this represents roughly 175 basis points of refinancing headwinds, without which our midpoint core FFO guidance would eclipse 8% growth. Even it's early in the year, we are keeping our credit reserve flat at 60 to 85 basis points of rental income. And additional guidance assumptions will remain unchanged and are outlined on Page 27 of the 8-K. This updated guidance also reflects the $92 million of acquisitions completed to date in '26 as well as the Misora and Courthouse Center asset sales.

We continue to be active on recycling with additional acquisition and disposition opportunities targeted for the second half of the year, and we'll adjust our guidance for those likely upwards as we go. To summarize, our $0.03 to $0.04 increase in guidance is driven by better than $0.01 of operational outperformance, $0.01 from acquisitions in total, $0.01 from term fees, primarily in our non-comp pool and roughly from incremental redevelopment POI. All areas of our business plan are exceeding forecast. With respect to our expectations for quarterly FFO cadence over the remainder of 2026, the second quarter is $1.83 to $1.86. The third quarter is $1.84 to $1.87 million with the fourth quarter in the low to mid-$1.90s per share, primarily driven by contractual occupancy growth.

And with that, operator, please open the line for questions.

[Operator Instructions] And today's first question comes from Samir Khanal with Bank of America.

I guess, Don, maybe a high level to start off. You talked about the K-shaped economy. So if this backdrop continues and given your sort of high-income trade areas, your strategy and tenant mix, I guess how does that all translate into relative strength or outperformance versus your peers?

Thanks, Sameer. There's a lot of time tacking that in that. I think the best way to try to say it. I mean, look, we are a real estate company, high-quality stuff that's not about eliminating things that change in the economy. We expect things to change in the economy. What it is about is limiting effectively the negative impacts on us. And we do that by the type of real estate that we own. We used to give out a metric. I think we're going to dig up again, frankly, based on this question.

And it's about purchasing power. What purchasing power is, if you take our household income of $167,000 overall, and you multiply that by the number of households within the 3-mile is the easiest thing to look at. You're talking about $11 billion per shopping center of purchasing at. Now when you think about that, it becomes less about the type of product and more about the real estate and who shops in that real estate. And the -- that's really where we're in the right spot. If you've looked over the past, I don't know, a few weeks ago, I saw a series of articles in the Wall Street Journal, it was all about a growing upper middle class. It was all about where that discretionary income comes from and how it's being spent by consumers. That's the center of our business plan.

And it's always been the center of our business plan. It's why during some periods, it doesn't matter as much. You are asking me to look at a crystal ball that's when it matters. So I think I think it's real, the K-shaped economy. I think it's real that we operate in the top part of the K. And I think it's real that the affluents and the number of people effectively combined that are around our shopping centers provides a level of cushion that is really hard to replicate.

And our next question today comes from Michael Goldsmith at UBS.

You continue to make progress on the capital recycling and not to spoil what I'm sure will be an excellent Investor Day. But what inning do you think you are in here? And is there any way to quantify how this capital recycling has benefited the current POI this quarter and maybe where that contribution could go over time?

Thanks, Michael. I want to make a couple of points and then -- and I don't know if I can quantify -- I know I can't what Mike's asking. But there's a couple of things to think about this. It's not about what inning it's because what this is all about is continuously forever being able to recycle assets that we have created a ton of value into things and raw material that give us an opportunity for us to do that again.

In certain times, in the marketplace, that will be a boon and there'll be lots. And other times, there'll be less, but it's a continuous laser-like focus. And that's to me the most important thing. You should always expect us to buy and build, make a lot of money, recycle into stuff that we could do it all over again, year in, year out. And we'll talk about that with more specificity at the Investor Day, but that's the concept in what you buy when you're buying [indiscernible].

Yes. And just to add to that, I mean, just to kind of give a little bit of color on the growth in FFO 6.3%. More than half of it is driven by growth in the core portfolio, so at 50% to 60%. And then acquisitions and redevelopment are the other 2 big drivers are in the 20% to 25% of growth, I would expect, going forward, growth in our core portfolio will be a little bit higher. And so the pressure on acquisitions and redevelopment will actually come down a little bit. But 20% to 25% of the overall FFO growth this year was driven by acquisitions.

And our next question today comes from Juan Sanabria with BMO Capital Markets.

Just hoping you could talk a little bit about the same-store NOI trajectory and cadence we should expect an occupancy as part of that FFO build in the quarterly run rate you gave Dan, again just given some of the noise both in the quarter and with weather and closures, bankruptcies, et cetera?

Good question. With regards to -- we mentioned the occupancy which will stay a little bit at this lower level in the mid- to high , that will impact kind of the cadence of comparable growth. And then we'll kind of shoot up in the fourth quarter because we have a lot of rent commencing in kind of late third quarter, early fourth quarter that will really kind of drive and those are with leases that are already signed. So that will dictate. We'll see a little bit of a dip in the second and third quarters from a comparable growth perspective into the 2s, closer to 2 and then a resurgence back up in the fourth quarter up into kind of the 3.5% to 4% range on a comparable GAAP basis. It will be probably about 40 to 50 basis points higher on a cash basis.

Cash will be higher this year than kind of our reported GAAP. So that's a little bit of the color there with regards to. And we should see kind of momentum heading into 2027 on that.

And our next question today comes from Cooper Clark at Wells Fargo.

Could you provide us with an update on the multifamily dispo pipeline today and how much product you may consider bringing to the market over the course of the year if you're continuing to find attractive opportunities on the acquisition front? And if we should continue to expect strong pricing in the high 4% to low 5% cap rate range.

Over, let me cover that in a couple of different ways. I don't have any particular residential property on the market as we stand here today. However, the -- what we are looking at doing and thinking about doing is monetizing not only that, but other parts in the form of a joint venture. As we talked about in the past as one potential way. But the notion of being able to do that will be tied certainly with what it is that we're able to find on the acquisition side because there's an important matching that is critical there because, as you know, we've created a lot of value. And so we have big tax gains that we'd like to be able to shelter to the extent we could with 1031.

So I can't give you a number that way. It will be largely driven by the by the acquisition pipeline, which Jan can talk about here in a moment. But I do want you to know the reason we sell is because we have created a ton of value and see places where we can reinvest greater with creating greater value going forward. So that's the theory. Jan, what do you see it on the ground?

Well, here's a couple of things. So it's not new news that it's more competitive now than it was a year ago. But the good news is we're seeing a lot more opportunities today than we were just 3 months ago. So when we look at what we're underwriting, both on market and off market, we are as busy as heck right now.

And notwithstanding all the competition out there, properties where we compete best really are just the more complicated probably have more leasing opportunities to them. And more good news really is that larger, more leasing and more complicated assets are still thinning out the crowd. And our ability to compete for those really fits right into our skill set, right, identifying where tenant demand exceeds supply, remerchandising and if applicable place making, where we can lift sales and rents, we've seen it in recent acquisitions. We're seeing it in opportunities looking forward. So it's hard to say what's going to happen, what the volume is going to be, but we like our ability to compete and we've been busier than we've been in a long time. So still pretty optimistic on the second half of the year.

And our next question today comes from Michael Griffin at Evercore ISI. .

Maybe following up on the event of acquisitions, Don or Jan, I'm curious if you can give any color on the 2 deals announced year-to-date, the one at Kingstown and Congressional. It seems like the tenant roster there could see some remerchandising as a benefit there. So maybe kind of talk about the opportunity set with those 2? And then maybe on just expanding a bit on your acquisition pipeline comments just a minute ago, would you say more of the deals you're looking at in the hopper are towards a Congressional kind of standard larger open-air retail format versus maybe a town center or a village point that you closed last year? Just kind of talk about the interplay of those 2 as well.

Sure, Greg. Thanks so much for the question. A couple of things to say. First of all, the last part of your question, it's a wide band. It's a wide swath that we -- a type of things that we look at. And with Congressional North Shopping Center, I mean, stand-alone, that is a power center with a vacant Bed bath and beyond that historically we wouldn't be all that adjusted.

Now let's talk about what's around it. And basically, it's on Rocco, one of the most critical retail nodes in D.C., certainly the most critical on the Maryland side. And we control Congressional Plaza, the one we've owned forever, Federal Plaza, Pike & Rose, [ Mid-Pike Plaza, WildwoShopping Center ] all within a few months. This Congressional North was the last center of any kind of size where a box tenant had the opportunity to go.

So the notion of being able to buy that and better control, frankly, was a no-brainer. And the reason those type of things do have vacancy is because often private ownership, particularly smaller private ownership, families, stuff don't want to put money in necessary to create the -- to create the return that you can get on the asset. So that's what we were doing there.

Similarly, at Kingson, we're simply closing the loop and controlling the entire very big shopping center by taking a hole in the donut and moving that over to our side for a very nominal capital outlay, frankly. So putting that stuff together, we'll always try to do those things. Those are strategic to where it is that we -- where we go.

In terms of our love, frankly, for Kansas City and for Omaha. And for Annapolis, you bet we're trying to do more of that stuff. And Jan's point a few minutes ago, we're very active in looking through those and other markets to be able to make sure nothing slips through. Those markets could also be supplemented with smaller centers, grocery anchored, et cetera, that will complement the big assets that that we've already purchased. So those are some of the things that we're working on. I don't know if there's anything to add to that? .

I would add that there's a good blend between -- I kind of consider Congressional in Kingston. They're both opportunistic acquisitions and strategic at the same time. And when we look at the yields of those it doesn't really count in the leverage that we get in the existing properties, whether it's next door on the Pica or in Kingston itself. So I think we've got a really good mix of opportunistic transactions that we're looking at in our existing markets, maybe with some smaller assets, both in markets we've been in a long time as well as our new markets. And there are a lot of larger assets that we think dominate trade areas that we're not in yet that we're looking at right now. So it's a pretty good mix. .

And our next question today comes from Greg McGinniss at Scotiabank.

Don, as you mentioned, Santana is now 100% leased on the office side. But you're also entitled to do more there and more broadly across the portfolio, office lease rate is healthy. Are you willing to start more ground-up office development today?

Greg, yes, I still have scar tissue in case that's really your question. The notion of starting another office building at Santana would not happen on a spec basis. It would only happen to the extent we have a build-to-suit. But by the way, with what's going on out there and the -- I mean, when you juxtapose Santana Row with Downtown San Jose, it is it's incredible, right? And I do want you to -- I really want you to see this because these things are 3 miles away and one is clearly the winner in this situation. And so there may be more opportunities, but I'm not going to.

And our next question today comes from Craig Mailman at Citi.

Dan, maybe for you, just helpful that you went through kind of some of the benefits to earnings in the first quarter and giving us the quarterly cadence for the next couple of quarters here. But could you just bridge the $1.88 to get to sort of the $1.845 next quarter? And $1.855 in 3Q? Like how much of the $0.02 to the benefit of earlier timing is nonrecurring? I know the lease term fees are lumpy, but can you just kind of walk through what was more nonrecurring this quarter versus recurring to get the sale before the pickup in the back half of the year, especially as you guys are talking more about potential acquisitions ramping up.

Yes, yes. Again, we have probably some seasonality that is a positive going from the first quarter to the second quarter with less weather-related issues and so forth. There is some -- probably the biggest drag heading into the second quarter and third quarter are -- obviously, we refinanced the refinancing headwind, which is kind of at least $0.01 or so of drag. We are leasing up the Blair, which in the second quarter early lease-up of a residential product is something that will be a drag initially before it turns positive later in the year as we hit the breakeven occupancy levels.

I think just some other timing-related things that just happened to be forecasted for later in the year, and we're able to move them forward into the first quarter, lock them in. So there's greater certainty there, but they won't happen a little bit later in the year. So those are kind of the main drivers of a little bit of the cadence there. And then the big kind of spike in performance in terms of FFO is driven by just leases that have already been signed, that have rent commencement dates, that are surprising amount of October 1 rent commencement dates that we feel really, really good about will occur, and that's what drives us up into the $1.90. So that's a little bit of the color on the cadence there.

And our next question today comes from Haendel St. Juste with Mizuho.

Don, I can hear the clear excitement in your voice about the the earnings growth set up the momentum that seems to be improving with the leasing tailwinds and capital rotation. It looks like better maybe mid, upper single-digit growth the next couple of years, [indiscernible] So maybe -- what can you share with us about the earnings trajectory that you think you're setting up here? How sustainable it is? And then remind us what the long-term plan for the green bond refinancing here is, I think it's on the revolver at the moment.

And I hope -- I think you're on the list. I know you're playing golf when you come out on May 20 or so with Jay. But that is the purpose. I don't want to steal the thunder for the Investor Day. Look, we're going to talk about earnings trajectory. We're going to talk about those opportunities on those 2 days. So I'm going to leave it at that, if you don't mind.

Yes. And with regards to the -- the second part of your question with regards to the 1.25% bond. We put longer term, $250 million on a 5-year , 5-plus-year term loan that gets us into 2031. The balance is on the line. And we will be opportunistic in either hitting the bond market or the convert market as we see the opportunity, we have the capacity to look to do this at the most opportune moment, and that's when we'll do it. I'd love to do a bond and do a long-term bond. And so stay tuned on that front. .

And our next question today comes from Alexander Goldfarb at Piper Sandler.

Don, just a question on the new governor in Virginia. Certainly, you guys are used to operating in some other very deep blue states, but Virginia has taken a noticeable shift. That said, you have more defense spending, cyber investment, et cetera. But as you look at what's going on in the Mid-Atlantic and your 2 Maryland and Virginia markets, do you -- are you concerned at all that Virginia could sort of mirror Maryland and become sort of anti-development or enact policies that sort of slow down what has otherwise been a very good path? Or your view is whatever the governor is talking about and the change in politics not much of it you see interfering with your shopping centers and the customer base and the reason why businesses want to locate in Northern Virginia?

Yes, Alex, it's the latter. I mean you're -- take a look at federal and understand the markets that we operate in, understand not only the incomes that I talked about here, but we don't talk about, it's the wealth, the wealth of those families and how that continues the spending throughout ups and downs and all kinds of changes in the political atmosphere. I get worried about the political atmosphere. I'm effectively not running my company as well. And the diversity of these marketplaces are really important.

Now on the Virginia side, which happens to be where I live. Have you seen the defense budget that's being proposed. And I don't know if $1.5 trillion is going to happen or not. But boy I know who the beneficiary is going to be to the extent it does, and it's going to be a lot of the consumers around our properties. Do I think that will be a measurable difference? Probably not.

But overall, when you buy into this company, you're buying a diversified group of geographies and types of assets or massive assets, tenant based, et cetera, with an awful lot of room effectively in its occupancy cost ratios to be able to continue and continue the path that we're on. That's my focus.

And our next question today comes from Omotayo Okusanya with Deutsche Bank.

Congrats on the results. Clearly, momentum is on your side. Then just quick comments around the the occupancy rates again in 1Q for the comparable occupancy 94.1%, and I think we're all kind of expecting something in the mid-80s clearly, again, better leasing. But also curious if there was kind of like leases you were expecting to fall out that didn't that maybe we kind of see in 2Q and 3Q, which kind of explains some of the momentum for the rest of the year?

Yes. Look, I think that we're kind of -- we did better from an occupancy perspective that we had talked about. I mean we had expected the overall occupancy rate to dip down into the low to mid 93%. I think first quarter, we held in the occupancy better than we expected, and we're at 93.8%. It should stay fairly constant at that level with some timing and puts and takes of tenants coming in and so forth and leaving and then seeing that spike in the fourth quarter up into the mid- to upper 94% range. .

That's consistent with what we talked about, although it will be a little bit higher in the second and third quarter than I think we had originally had forecasted because we did so well maintaining occupancy in the first quarter. Hopefully, that answers your question.

And our next question today comes from Floris Van Dijkum with[indiscernible]

We talked a little bit about San Jose. We've talked a lot about some of your acquisitions, Congressional, which looks very good. I haven't really talked about Boston and Assembly Row much. Could you guys give us a little bit an update on what's happening there? And what your plans are for that asset going forward in terms of the -- particularly the row aspect of that property?

You bet, Floris. And it's actually -- it's a very good question from the standpoint of understanding that big asset. So first of all, clearly, Assembly Row has become the center of that not only a media area, but larger area from the standpoint of shopping and entertainment and food and all of that. .

Clearly, the residential product that we've built. They're adjacent to the Avalon stuff. We've got our own 1,000 units that does extremely well and continues to do extremely well. The notion of building out the rest of Assemble is it clearly took a back seat when life science imploded. I'm very proud of the fact that we didn't move forward on that, but it does not change the fact that there is great opportunity for the existing remaining 3 lots that are there. We don't fully entitled can't get them to pencil yet at this point. But while we're doing that, we're also entitling the entire Assembly Square marketplace, which is the power center that is adjacent to it a very, very powerful power center at that, but we're in the process of getting entitled, $3 million, $4 million square feet. In other words, the notion of continuing that the Assembly Row property through the power center at some point, well into the future.

But we're going to have that entitled this year we expected. And if that's entitled this year, even if the numbers don't work effectively at this point, think about the future value of that entire 50-acre piece of land. And so when you look at Assembly, you ought to be thinking about value banking there that I don't expect to be paid for in stock price today. But certainly, anybody that looks at that property will see the long-term value to be created. In the meantime, income keeps rising, rents keep going up, residential keeps staying filled, really, really powerful property of Federal.

And our next question today comes from Mike Mueller at JPMorgan.

I know it was a small sale at just $10 million, but can you talk about selling Courthouse Center in Rockville considering it's part of critical mass and scale that you kind of built up over decades there? And would you have sold a more consequential center there?

Yes, Mike. It's not part of the critical staff at all. Basically, you may remember, a couple of years ago, we sold Rockville Town Square. This is an adjacent kind of small unanchored strip next to it, that really had nothing to do with the rest of our properties at all. If we could have, we would have simply sold it at the same time we sold Rockville Town Square, but there was the local buyer here that stepped up to pay us a number that there's no way we're saying no to. So that's all that is. That really is not -- I don't want a map, it looks close to the rest of our properties on Rockville site, but it's a different world away. So no, it's not at all important.

[Operator Instructions] Our next question is the follow-up from Samir Khanal at Bank of America.

Dan, I'm sorry if I missed this, but you mentioned there were some items that were pulled forward in the quarter. Was that term fees or something else? Maybe just some clarification.

Yes. Look, there was some 141 benefits that we were expecting kind of later in the year and second and third quarter that was in our budget that we pulled forward into the first quarter. That was the primary driver of that. So yes, it's something that -- yes, it's good we got it locked in, in the first quarter, but it's in just the timing. .

And our next question is a follow-up from Omotayo Okusanya with Deutsche Bank.

Just a very quick one on cost reimbursement rates. It felt a little elevated in 1Q '26. I'm curious if anything kind of pulled forward? Is there a timing thing that kind of happened? And how do we think about that for the rest of the year?

Yes. Look, there was a huge amount of weather impacts in the Northeast, particularly anywhere from our D.C. Metro all the way up to Boston. So snow removal and utility expense was highly elevated for the quarter. And obviously, our cost reimbursements are elevated as a result from that perspective. That's all that was in terms of -- that was well above kind of our initial expectations and then ended up working out as we expected in terms of -- but that's the driver there.

And our next question for today is a follow-up from Alexander Goldfarb at Piper Sandler.

Dan, I think in your opening comments, you made a reference that you expect some positive revision to guidance later this year but I didn't -- I want to make sure one I heard that correctly into what were the factors? I think you said there were some things that could happen that would cause that. And I just wanted to understand more about that.

Looking at my prepared -- I don't recall in my prepared remarks, making that comment. I am optimistic with regards to the balance of the year. And I am optimistic with how we're being set up for 2027. So I feel good about kind of our positioning. We're only here in the first quarter. But yes, I don't think I referred to a positive -- forecasting a positive revision going forward.

Thank you. That concludes our question-and-answer session for today. I'd like to turn the conference back over to Jill Sawyer for any closing remarks.

Thanks for joining us today. We look forward to seeing many of you at our upcoming Investor Day in a few weeks. Thanks.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Craig Mailman with Citi Research. We're pleased to have with us Federal Realty and CEO, Don Wood. This session is for Citi clients only and disclosures have been made available at the corporate access desk.

[Operator Instructions]

Don, I'm going to turn it over to you to introduce your company and team provide any opening remarks, tell the audience for the top reasons and investors should buy your stock today, and then we'll get into some Q&A.

Well, thank you very much. [Audio Gap]

Don, hit the button on your microphone. There you go.

Is that on?

Now we're good. We're good.

So none of that was recorded, right? I'm going to start all over again. Time to invest in hard assets. And when you think about why Federal Realty in terms of investing in hard assets, you know we've been around a real long time. There's this notion of paying a dividend that is less important to investors today. But what is critically important is that dividend has been paid in an increasing amount for 58 years. That's kind of ridiculous. If you think about a business that is cyclical, the notion that a dividend has increased every year since 1967, and through 2026 is kind of unheard of, and it is unheard of. It's the only REIT that can say that.

And so when you think about that level of quality in the asset, when you think about that level of safety in the asset, frankly, the only thing that knocked us off our perch was COVID. And that's because our markets were closed that way. So when you think about how that happens, the quality of this portfolio and particularly the -- what we've been doing lately over the last year to recycle capital at an extremely low cap rate, it's selling some residential in the 4s, selling some more stable retail product in the 5s, and redeploying that accretively into 7% yielding assets. I'm not sure who else has that built-in level of that cost of capital to be able to redeploy that way. I think that's really important. What that's creating is sector-leading growth at the bottom line for '26.

Everything that we see suggests that, that will continue into 2027. So you're getting sector-leading growth. You're getting all of that with the highest quality portfolio out there in a hard asset category that is based on the notion of continuing to increase that cash flow in a self-sustaining way. I think that's pretty unique. We've also opened up our markets to be able to take what it is that we've done historically really well on the coast and brought that to the center of the country in the form of Kansas City on the Kansas side, Leawood and Omaha, which we are finding undermanaged assets dominant that we can create incremental IRRs in excess of 9%.

And that is the same thing we've been doing for a long time. But being able to fund that with such a low cost of capital is really unique to what we're doing. Look hard at us these days. It's a little different than it was a year ago or 2 years ago. And I think we're communicating that better also. Take a look at what's happening with us today. It's a good time to think about us.

Great. That was short versus history.

Greg, you're going to ask another question, and I'm going to go on for 35 minutes. So take that opportunity to bring it on.

Now all jokes aside. You highlighted the capital recycling, which has been a bit of a differentiator for you guys versus others, given your -- some lower cap rate retail, the apartments. At the same time, you're talking about starting new apartments, right, Hoboken, Bala Cynwyd, right? How should we think about the incremental unit growth? Is that going to be the merchant building model where you guys are building it, realizing it, selling it? Or is there a part of it that you need to keep for the mixed-use component where you want to control it?

So one of the core competencies of this company that has not changed in the 30 years that I've been there, is the notion of how to intensify real estate. And that doesn't mean that public companies that are primarily developing companies are very easy to run. So we're not primarily development companies. But we do incrementally add to the intensity of our projects. And if you look today, with a development team that is very well experienced and has frankly not failed one time with respect to the products that we built, to the extent you can see what works in development, it's hard to build retail today. It's hard to make retail pencil. It's hard to make anything pencil with respect to building new products except for an exception.

And that is Federal Realty's properties are generally larger than the average shopping center. Therefore, they have excess parking lots, et cetera, on them. What we've been able to do is to incrementally without land cost, huge advantage, incrementally add units with our team, our capital, 100%, to be able to add units that, on average, the consumer or the person living in that apartment will pay roughly $200 a month more. To be in an environment that is fully amenitized than they would in that same box in the sky, 4 blocks away without those amenities. That's been proven by us time and time again. It certainly started to your point, Craig, with the mixed-use properties, but can also and does also apply to Darien, Connecticut to Bala Cynwyd, Pennsylvania, to what new projects starting in Willow Grove, Pennsylvania. Hoboken, New Jersey, et cetera.

If you look at our new investor package, there's some new stuff in there, and it gives you more clarity with respect to that. Now to your point, what is different is I am willing to monetize those assets, not in a merchant building model, please make that go away. We're a REIT. We don't do that. But the notion of building and taking that income in for a period of time. And then at that time, considering overall cost of capital and the opportunities as to how to redeploy that capital, there's a willingness to monetize and sell those assets. And we've done that a few times this year at Santana Row, at Pike & Rose, Mid-4 caps, Santana Row, Low 5 caps at Pike & Rose, pretty important stuff. The tax gains associated with those are large, as you would imagine, to be able to tax efficiently, 1031 into assets that we find White Kansas City, like Annapolis, Maryland, like Omaha that have higher growth projections.

Why? Because they've been under managed for a long time. Because the tenants that we can bring to those properties with retailers who want to be there, but have not found the landlord and the property that they're comfortable with is where we're making great pride, great strides. So that bit of recycling will continue, Craig, and today, if you look at the income stream of Federal, 80% of it is retail and the reason 80% of it is retail is because that's where we are. That's what we do and bringing those communities together and creating higher sales for higher rents. But while we have those pieces of land and a capacity and core competency, if you will, to be able to add residential product to that makes all the sense of the world. It's very hard for us to not do that. So 10% of our income stream is from residential, 10% is from office. Only on the large mixed-use properties that we have and some of our better shopping centers. So that should continue. That's how you should think about it with a couple of hundred million dollars put to work each year in a repeatable income stream where in '26, for example, our Bala Cynwyd residential project next to the Bala Cynwyd shopping center has just been completed.

We're just starting to lease now that will start contributing in the second half of '26, certainly into '27. There'll be another -- you'll see Hoboken in '27. You'll see Santana, where we sold those 2 assets. We're building another 260-some-odd units on the third periphery, the third block of Santana Row that will be contributing '27 and '28. So and there's been -- we just announced Willow Grove, Pennsylvania, which will be '28 and '29. So you'll see each year, the repeatable notion of incremental resi added to really great shopping centers. You can't do that everywhere because you need $3 a foot rents. You need marketplaces. You can't build if the rental rates are $1,400 a month. Just can't do it. But at $2,700 a month, $2,800 a month, you can. That's the incremental value that we're exploiting by owning great shopping centers in marketplaces that will support incremental intensification.

And just to clarify, so think about like at least a 2-year hold period to get through a safe harbor post development and then you guys decide what to do with the resi?

I'm sorry, say it again.

Simplistically, you're not going to be a merchant builder. You said you hold on to it a while. I'm assuming to get through the safe harbor, so you can 1031 and do all that. So like a 2-year plus hold period of that new...

Yes, I think that's a fair way to look at it. And then even at that point, there's always capital allocation decisions. Is that the best cost of capital? What's the marketplace happening at that time? Is that a good time to monetize? Should it be held because there's new supply in the area? All the typical considerations, I guess I really want to make sure that this audience understands that our #1 priority is smart capital allocation. That's on the buy, that's on the sale. That's on the tenant coordination money, that's on salaries, that's on everything. How we use your money is the most important thing and the most set of decisions that we make.

And so it's why I sound sometimes like, no, I'm not going to give you this is not exactly what we're doing because it does depend. It depends on the market at that time and you want it to depend on the market at that time where we can be very opportunistic.

And on the other side of it, you guys have entered Omaha, Leawood, as you said. You clearly -- I assume you have an acquisition pipeline behind it. From a strategic perspective, how quickly should we see you enter new markets versus try to scale at least in the markets that you've more recently entered, right? Like what's the strategic to not spread yourselves too thin and get scale to make it worthwhile to go to some of these locations?

Yes, obviously, it depends on the art of the possible, what's available, what makes sense at the time. But there are a few things I want to talk about with respect to this initiative. So some of the people in this room, a couple at least, have came to our Property Tour Plus late last year at Leawood, in Kansas. And the reason we had that and the reason we wanted -- I guess we had 35 investors or so sell side there. The reason we wanted to do that is to have you leave with 2 things clearly in your minds.

Number one, that federal was not going down quality and chasing FFO for the sake of chasing FFO. And I think it became really clear to everybody that was there, and we took them downtown Kansas City through the neighborhoods, to the property, met with the mayor, showed a lot of numbers in terms of what it is that we were effectively doing there. And I think everybody left with the notion, yes, these guys aren't going down quality. This is an under-managed asset that is in a marketplace that feels a whole lot like what they do in other parts of their business. And the second thing we wanted everybody to come away with is the understanding that this is not a new business plan. This is what we do and same plan, different dirt. So entering -- and we also said, and it's important to understand you shouldn't think of Federal as having dots all over the United States of America now with all kinds of new markets, 3 to 5, 3 to 5, Kansas City is one, Omaha is a second.

I'd love to add a third this year. I'm not close enough on anything to be able to talk about that today. I can tell you that we've got nearly $100 million close to being able to get something done in our existing markets, more strategic stuff that you should see in the first half of this year. And hopefully, as we go through the year, the continuation of that. Now when we enter a new market, Craig, to your point, it's with a large dominant asset. There could be a great 125,000 square foot grocery-anchored shopping center, but I'm not going to enter a new market with 125,000 square foot grocery-anchored shopping center. We're not -- doesn't -- first of all, it's not big enough to spread costs over to be efficient in terms of that. But more important than that doesn't make you a player.

When you own the best shopping center on the Kansas side of Kansas City, you're a big deal, and we're already seeing that. So the notion of [Audio Gap] map of where we want to go. If you guys are there, we'll give it a shot. And we see that over and over again because if you think about it, same at Pembroke, it's the same kind of notion. If you think about it, if you're a retailer, and it cost you millions of dollars to open a store of any size, hundreds of thousands if you're small. Before you, why would you invest money in a place where you don't know if your landlord is going to make it a safe place that's built out well, that's got the right neighboring tenants. Why would you hang yourself out? Why would they hang you out dry? Why would you do that deal? With a track record that we have, what you're seeing at these places, Pembroke, Kansas City, Virginia Gateway, Del Monte in California, et cetera. What you're seeing is that willingness. It's not a fluke that there is increased demand for the properties at much higher rents because the track record says the sales are going to be higher. It all comes down to sales.

Anything to add on that, Buddy?

No, I think we have done enough of these now that we're able to do such good due diligence that we're finding we can hit the ground running really fast too. So I think the 2 dozen deals, I think, even exceeded our expectations and we would and certainly getting some of the tenants like Alo and Vuori to step up when they stepped up is ahead of schedule. And a lot of that is just the groundwork we're able to do when we're under diligence because we have such good relationships across now such a big geography.

Give a preview of what they'll see at Pembroke tomorrow.

I mean I -- since we've owned Pembroke, we bought that in '22. We've signed -- you'll see under construction, Pottery Barn, West Elm, Williams-Sonoma, you'll see an open Anthropologie, Lululemon, Kendra Scott, Lovesac, I don't want to steal all of our thunder, Coach just opened, Ares under construction. And so again, it's just this momentum that starts to feed off of itself as the tenants come in and start doing sales and you start to kind of get your aperture opens further and further, who will consider it. And so I think you'll see that's now ahead, obviously of Leawood, but it's a pretty good example. The same direction we're going there as well.

And maybe just one thing to say on that, too, when we underwrote Pembroke last year. We underwrote it based on everything Stu just said. What we found when we got there, in addition to the positive surprises on the retail side, was a parking lot in the back of the shopping center that is completely unencumbered by tenant leases. That's unusual. Usually, there's negotiations that have to happen with tenants if you're going to try to build something or expand or intensify, no such encumbrances. And so what we've done over the last 15, 18 months is get 300-plus residential units fully entitled and approved for Pembroke. That was not in the original underwriting.

That type of stuff happens on larger pieces of land that are regionally driven, where you can create a great retail place and have people participate in that retail by living there. And I don't know whether the numbers at work on that residential project or not. We're darn close and we're working it, turning it up, et cetera. But that's the kind of thing that creates growth that is not in the underwriting, it's not paid for upfront. What tends to happen as long as you've got the core competency to make it happen.

Yes. And the returns when we underwrote Pembroke back in 2022 was a targeted unlevered IRR just north of 8%. Re-underwriting it because it was so under managed and because we've exceeded kind of our expectations in that underwriting, we're now reforecasted that to be north of 10%. And that does not even include the incremental returns we potentially could get from the residential, that would be taken even further. So just -- we're really excited to have everybody come visit tomorrow and look forward to it and looking forward to having you host us.

Yes. No, we're excited. And I'm kind of curious, you brought up 28 leases you did that in Kansas City already. I mean how many of those are new relationships that had reached out to you and said, "Oh, you're going there. take me with you versus how many more are on that list of potential, they didn't want to be the first mover, but they still want to be in the submarket. And so the upside to that center over time could continue.

Other than a handful of the best-in-class local tenants we found and done, all the other tenants we were talking to all the way through diligence, which is how we were able to get them done so fast. What would have 7, 8 months ago we closed. So that, I think, is why we had such conviction going into it because we had talked to 50, 60 tenants that we knew. I think we've gotten them to commit to signing a lease a little bit faster than we thought. And then it just -- they build on each other. So that momentum has built.

So LEGO and Coach and Solid Core and Alo.Now you start to stack those names together. You're building a bigger, bigger list of others that will consider it. But most of them, if not all, we had talked to in the lead up to closing.

I don't want to mix apples and oranges just because the IRR was on Pembroke, so maybe we'll focus on that. But I'm curious, when you underwrite that 10% unlevered IRR, like what's your exit cap? Are you assuming -- so the point I'm getting at is like if you improve the center this much, is that even being captured in potential cap rate compression in that 10%?

Yes. No, we don't kind of compress the cap rates on the terminal side. It's either at or higher in terms of what the terminal cap rate will be going in. So it will be a wider cap rate than what we did going in or flat depending upon where we are in the capital market cycle.

It's a great question, Craig. Because, look, you talk IRRs, anybody can say whatever they want. What you can't do is fool yourself. And so the deal that our standards for doing it is we do not ever assume in the underwriting of an asset cap rate compression to make the numbers work. If it doesn't work at the same cap rate that we went in or higher depending on what the situation is then we don't do the deal. And to your point, that is the biggest piece of cushion that our underwriting effectively has. Because if you do it right, you are absolutely compressing the cap rate. Even in an interest rate stable environment. That cap rate should come in. I mean, we bought Kansas City at would we buy that?

6, 7...

So we bought it at 6, 7 with what we're doing in 5 years from now, let's assume everything stays the same with interest rates just for fun to take that variable out of it. In 5 years, that income stream will be significantly higher. And what I believe is that cap rate will be 50 basis points or more inside of it. So the combination is really where you create your value. It's why honestly, it's why on all of our dispositions, we have huge gains that have to be tax shelter to make the most sense. It's why this whole capital recycling program is so unique.

And just -- I don't want just to come off antagonistic. No, no. The story you guys are laying out shows the value of the platform over time, right? You find in a piece of land behind Pembroke, you didn't even know you can have, right? These are all long-term value plays, and it takes a couple of years to remerchandise and effectuate the plans on some of these assets as to get to your levered IRR. In the world of public REITs, investors have gotten a little bit -- time frames of seeing that value materialize have compressed, right?

And so you do see the numbers from an earnings perspective when developments come on and you do see that uplift. But a lot of the value is still in the dirt over time that isn't realized in FFO. So I'm just kind of curious, as you guys continue to evolve the platform, how you bridge those 2 realities?

The word is bridge or balance or however you want to look at it. I know that I can't run this company 12 months at a time. It's real estate. And the beauty of the investor base is to have that liquidity to get in and out, whenever you want to get in now. And that's our deal. But on our side, the ability to keep this going ties back to this notion, how did the dividend go up every year for 58 years. You have to be able to balance it.

So for us to be able to provide you with 6% plus growth and create that value that suggests that, that will continue long after 2026 or 2027, et cetera, is the name of the game.

And that is both the benefit to being public and the hit to being public is all summarized with that balance between owners and operators. And I think we've got that balance really, really good right here now.

Any questions, by the way? Can you just hit the button?

This is an Australian question. In Australia, our kind of mall owners are reluctant to do resi because of permitting problems. And the concern is that subsequent developments might be impinged by the rights of the resi people who have bought in the neighborhood or bought your development. Can you just expand on that?

Well, with regards to kind of getting it permitted to talk about it. Yes.

So what would happen would be say you do, I think you said something like 212 at Santana or something like that. And then apartments, so you do a bunch of apartments need more and then those owners have sort of rights or

We negotiate.

They become a potential source of aggravation as it were if you were trying to expand your mall.

Look, that's one of the things that we do and sometimes permitting problems in the markets that we're in, we welcome them in certain cases because we're establishing those markets with good relationships with the surrounding neighborhoods and so forth. We're able to get those permits done and the entitlements over the finish line, and it's difficult. It's not easy. And so we're able to accomplish that. And so that is, I think, a competitive advantage we have in the markets that we're in to be able to understand that entitlement process, to be able to deal with the aggravation of neighbors, to be able to negotiate with the neighboring -- to be able to figure out how high we can build the residential buildings that we're in and so forth.

Some of those negotiations go into -- there's a whole host of things. But that's a competitive advantage and the extent that we can get those entitlements done and approved by the neighborhood as well as the is something that is a skill set we have that allows us to create value at these opportunities.

It's also one thing to think about here. And there are times when it makes all the sense in the world to put a shovel on the ground and go -- there are other times when it makes no sense in the world to do that. But what always makes sense is to work with those communities, with those neighbors, with those city council people and county council people to create the ability to do that when the time is right.

So for those of you who are in Boston, for example. To me, one of the best assets that this company has is Assembly Row. And what is great about Assembly Row is it is such a dominant destination that what we're working on now is the ability to entitle nearly 3 million square feet more on the power center section of the property, which would continue the community, if you will, all the way through.

Those numbers don't work today. And there isn't a public investor that will value that. However, a private investor would look at that and say, you've been working for 3 years on the entitlements. The entitlements will cost us over $1 million to effectively get. They don't have value in terms of putting a shovel in the ground today. Yet the value of that asset, I would never be able to take the NOI divided by 0.05 or whatever and sell that asset today because I would be leaving tons of private value on the table.

So this is part of the balance part that Craig is talking about. You're right. You don't get paid for that in the public markets. But there is a time that all of that aggravation and all of that work, that's why Assembly Rows there in the first place, tons of aggravation, and it's turned out to be one of the best things we have. They're generally worth it to Dan's point to go through it.

Well, that's same-store NOI for next year?

Mid-3s.

Same, more or fewer companies?

Fewer.

Thank you guys so much. Appreciate it.

Good day, and welcome to the Federal Realty Investment Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jill Sawyer, Senior Vice President, Investor Relations. Please go ahead.

Thank you, [ Ayisha ] Good evening, everyone. Thank you for joining us today for Federal Realty's Fourth Quarter 2025 Earnings Conference Call. Joining me on the call are Don Wood, Federal's Chief Executive Officer; Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and Jan Sweetnam, Chief Investment Officer; as well as other members of our executive team are available to take your questions at the conclusion of our prepared remarks.

A reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance.

Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained.

The earnings release and supplemental reporting package that we issued tonight, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results. Given the number of participants on the call, we kindly ask you to limit to just one question during the Q&A portion. If you have additional questions, please requeue. With that I will turn the call over to Don Wood.

Thank you, Jill, and good afternoon, everybody. Strong quarter, strong year, strong 2026 guidance, 6.4% bottom line FFO growth in the quarter, 4.3% for the year and guidance close to 6% at the midpoint for 2026.

All those numbers, of course, eliminate the impact of the onetime new market tax credit last year as reflected in our new Core FFO metric. More to come on that from [ Dan]. Business is good with strong demand for our assets in both our historical locations as well as the newer markets.

We ended the year with the overall portfolio 96.1% (sic) [ 96.6% ] leased, 94.1% occupied (sic) [ 94.5%]. About 50 basis points higher than that, excluding newly acquired centers.

No surprise that leasing drives these and future results. With 601,000 feet of comparable deals done in the quarter at 12% rollover and 2.3 million feet of comparable deals done for the year at 15% rollover, an incremental $11 million of new rent is under contract.

Starting rent on the new 2025 leases was $37.98 compared with ending rent on those same spaces after years of contractual bumps, by the way, of $33.12. We also did 20 noncomparable deals in 2025 at an average rate of $48.18, resulting in an incremental $6.3 million of new rent under contract and the deal pipeline continues to look strong. Wendy will talk more about that in a little bit.

Leases signed in the fourth quarter included weighted average contractual rent bumps of 2.6%. A strong as operations were, transaction activity was equally robust in the fourth quarter and thus far into 2026. We closed the Annapolis Town Center in Maryland and Village Pointe in Omaha, adding nearly 1 million square feet to the portfolio for $340 million at an initial cash-on-cash yield in the low 7% range. Remerchandising and rents commensurate with the strong sales of these locations are the focal points of these 2 A- quality assets over the next 5 years with targeted unlevered IRRs approaching 9%. Both have started out as we've underwritten.

Acquisitions completed early in the year -- earlier in the year, including Del Monte Center and 2 Leawood, Kansas properties are looking like excellent additions, particularly in Leawood, where tenant demand and expected rents are exceeding our underwriting.

On the disposition side, we closed on the sale of Bristol Plaza in Connecticut and Pallas, the peripheral residential building at Pike & Rose in the quarter for a combined sales price of $169 million. Just last week, we closed on Misora, the peripheral residential building at Santana Row for proceeds of nearly $150 million, along with another small asset sale for [ 10 ].

The overall combined cap rate of these dispositions was in the low 5s. As we've talked about over the last several quarters, we're also finding opportunities to intensify our properties with development, usually residential product that is complementary to our shopping centers with little to no incremental land cost, the math works in the right locations.

If 2025 has taught us anything about value, it's that high-quality apartments adjacent to great shopping environments in strong suburban locations create a more desirable living environment. That translates into higher residential rents, stronger growth and ultimately lower cap rates on sale.

The 2025 and 2026 sales of Levare and Misora at Santana Row and Pallas at Pike & Rose, unlocked an unmatched cost of capital for us to reinvest in material amounts at sub-5% overall.

We've previously disclosed the allocation of a total of $280 million for new residential development of the Blayr at Bala Cynwyd, which is nearly complete and ready for lease-up beginning this quarter, 301 Washington Street, Hoboken and Lot 12 at Santana Row, which together will add more than 500 units to the portfolio. And just this quarter, we've added another residential project to our development schedule that you can see in the 8-K. Willow Grove Shopping Center in suburban Philadelphia will be completely redeveloped and include an additional 261 apartments to complement a modernized and remerchandised shopping center.

Our experience with residential development at our retail-centric properties is a skill set developed over 25 years and is certainly a unique differentiator of our business plan. After enjoying the 6.5% to 7% or higher income contribution from each of these residential additions for a period of time, we have the optionality to take advantage of cap rates well inside those yields and reinvest them tax efficiently, just as we've done so effectively last year and this.

2025 is a very special year for the Trust, and 2026 and 2027 look to capitalize on that. First of all, core leasing was exceptionally strong and looks to remain that way in 2026. Our expanded geographical reach is proving particularly fruitful with strong retailer demand anxious to be part of our property improvement effort. Lastly, the COVID era office leasing effort has been largely completed with meaningful rent starting in '26 and '27. In fact, at the mixed-use properties, we should have 0 office product available for lease, and that means 100% leased within the next 30 to 45 days.

Our asset recycling effort is validating the long-term value creation that our business plan has created. And all of this is wrapped in a relatively stable interest rate environment that could result in lower rates as the year progresses. We'll see.

The refinancing of our 1.25% bonds, up 1.25% this month represents the last major component of our debt portfolio with such a large market rate adjustment likely. And even through that, we're guiding to near 6% growth. Later this spring, we'll showcase our plan through an Investor Day at Santana Row.

Jill has the details, and I think to save the dates have been sent out. Really looking forward to seeing most of you there. Enhanced internal and external growth using all the tools at our disposal, the name of the game. Quarters like this fourth and in fact, all of 2025 increase my confidence of our ability to do so. Let me now turn it over to Wendy and then to Dan to provide additional color. Wendy?

Thank you, Don. In 2025, our leasing platform achieved record-breaking volume, delivering the highest annual square footage leased in company history, alongside the strongest comparable rent spreads achieved in over a decade. As we head into 2026 with over lease -- with an overall lease rate of 96.1% (sic) [ 96.6% ] our strategic focus will continue to be all about driving rent growth, disciplined expense management and capitalizing on our quality real estate to provide continuous opportunities for multiple year growth.

For the quarter, we signed 105 comparable deals achieving 12% rollover, 15 anchor leases and 90 small shop deals drove a 90 basis points increased in our total comparable lease rate sequentially. Looking ahead, the breadth and durability of demand across all categories remains strong, reinforcing my confidence in our outlook for the year ahead. Increased leased and occupied rates in Q4 drove our signed not occupied spread to 200 basis points, representing a contribution of an additional 27 million to our in-place portfolio.

Robust anchor demand, particularly in California, is fueling momentum. While we anticipate seasonal occupancy shifts in the first half of 2026, while anchors transition, most of these deals are already executed at higher rents, positioning us for improved occupancy levels by the end of the year.

Mall shops remain a highlight at 93.8% leased, up 50 basis points, providing mark-to-market opportunities to drive rent growth while continuing to Prune and Tweak a premium merchandising mix.

Leasing production from our expanded acquisition initiatives over the last few years continues to exceed expectations. In 2025, we executed 49 deals nearly 200,000 square feet at 34% increase from prior rents.

Over the next 24 months, we are targeting accretive capital allocations to better align these centers with our core operating standards and the high income profile of the respective submarkets. Top-tier addition to these centers since acquisitions includes names such as Solid Core, Alo, Design Within Reach, Lovesac, Free People Movement and State and Liberty. More to come in 2026.

Turning to our suburban portfolio in the Greater Washington, D.C. area, we continue to see -- we are continuing to be encouraged by the resilience across our Maryland and Virginia assets. Foot traffic momentum remains strong with quarterly traffic increasing 3% and up overall for the year.

Annual sales moved higher year-over-year, while the fourth quarter sales remained stable from a strong prior quarter comp. What is especially encouraging to me is the outperformance of the hard goods category. We saw robust demand in furniture and home furnishings from premium brands such as Serena & Lily, West Elm, Sur La Table. We view this as a strong indicator of the underlying health of our consumer base.

Given that home furnishings are highly discretionary, our core customer in this regions -- in this region continues to invest in their home, signaling confidence in their personal financial position. Now let me turn it over to Dan to dive into the numbers.

Thank you, Wendy, and hello, everyone. Our FFO per share of $1.84 for the fourth quarter reflects 6.4% growth versus last year and highlights a really strong underlying quarter operationally. This result came in slightly below the midpoint of our guidance range, solely due to a noncash charge related to Saks filing for bankruptcy post year-end.

Comparable POI growth, excluding prior period rent and term fees, averaged 3.8% for the year and 3.1% for the fourth quarter. On a cash basis, this metric was 3.6% and 4.3% for the full year and fourth quarter, respectively. Now let me move quickly to the balance sheet. Liquidity at year-end stood at $1.3 billion under our available bank facilities and cash on hand.

During the fourth quarter, we closed on an additional $250 million delayed draw term loan, providing us with enhanced financial flexibility. The facility has a 5-year maturity into 2031 and an interest rate of SOFR plus 85 bps. With respect to our $400 million bond maturity next week, we will utilize this term loan and available capacity on our revolving credit facility to refinance it on a near-term basis.

A possible unsecured note or convertible bond offering remained under consideration for later in 2026. As lease-up of the larger commercial components of our redevelopment pipeline nears completion with Huntington Shopping Center fully stabilized, 915 Meeting Street a 100% leased and One Santana 100% committed, our free cash flow after dividends and maintenance capital is expected to exceed $100 million in 2026 and head higher in '27 as we convert straight-line rent to cash paying rent. With these $600 million of projects behind us and essentially complete, our ongoing redevelopment pipeline moving forward stands at about $500 million.

This pipeline includes 780 residential units, all at existing retail properties. During the fourth quarter, we closed our asset sales of $169 million and added another $159 million subsequent to year-end at a combined blended low 5% cap rate.

We also have an additional $170 million of sales in process with expected closings in the first half of 2026 with cap rates targeted in the low 5% range. While we have been active over 2025 deploying capital externally through our disciplined asset recycling program, we continue to maintain strong leverage metrics.

Fourth quarter annualized adjusted net debt to EBITDA stood at 5.7x at year-end but is now inside 5.6x pro forma for the most recent asset sales and should trend further to the low to mid-5x range over the course of the year. Fixed charge coverage now stands at 3.9x and should eclipse our target metric of 4x over the course of the year. Now on to a discussion of our new Core FFO metric and guidance.

After much discussion with the analyst and investor community over the course of 2025 regarding recurring FFO and significant one-timers, on a go-forward basis, we will be reporting both Nareit FFO and Core FFO.

Core FFO is defined in our 8-K financial supplement on Page 10. It is also outlined in the table on the fourth page of the press release. It will be GAAP-based and simply adjust our Nareit FFO for nonrecurring onetime items in order to provide an enhanced comparability across periods for Federal's underlying operating results.

Such onetime items include new market tax credit transaction income, executive transition costs, collection of COVID era prior period deferred rent and other items such as gain or loss on early extinguishment of debt.

As we look forward to 2026, our guidance for both Nareit and Core FFO is $7.42 to $7.52 per share with no onetime adjustments in the forecast. At the midpoint of $7.47 per share, this represents about 5.8% growth for Core when compared to 2025 and 3.5% for Nareit defined.

2025 Core FFO is $7.06 per share and Nareit FFO is $7.22 per share with the material difference being the $0.15 of new market tax credit income. Guidance drivers to 2026 include comparable POI growth forecasted at 3% to 3.5%. This assumes the trajectory of occupancy in the first half of 2026 moves into the mid-93% range before returning above the current 94% level and up into the mid and upper 94% range by year-end 2026.

As a result, we are set up well for a strong 2027 on a comparable basis. Comparable lease rollovers are forecast in the low to mid-teens. Incremental POI contributions from our development and expansion pipeline is forecast in the $13 million to $15 million range.

Please see some additional disclosure that we've added in our 8-K at the bottom of Page 29 with respect to the quarterly cadence of POI for 2026 from the development pipeline. And guidance reflects a full year's contribution from the $750 million of dominant high-quality assets acquired in 2025 at roughly a 7% blended cash cap rate and a 7.5% GAAP cap rate.

We are assuming our 1.25% unsecured notes are refinanced at a 4.25% to 4.5% interest rate under our available bank facilities. Please note that this represents a 170 to 180 basis point financing headwind, without which our midpoint Core FFO for 2026 would be growing at roughly 7.5%.

We've assumed a total credit reserve of roughly 60 to 85 basis points of rental income in 2026, given our limited exposure to credit issues and additional guidance assumptions that we usually talk about here are outlined for capitalized interest, redevelopment spend, G&A and term fees on Page 29 of our 8-K supplement.

This guidance does not include any acquisitions in 2026. None are probable enough at the moment. With respect to asset sales, it assumes only the dispositions announced last week, Misora and Courthouse Center.

For all other acquisitions and dispositions, we will adjust our guidance likely upwards as we go. With respect to quarterly cadence of FFO in 2026, the first quarter will start with a range of $1.80 to $1.83 with the normal 1Q seasonality and asset recycling activity impacting sequential cadence from 4Q.

The second and third quarter will be in the mid-180s and the fourth quarter in the mid $1.90s per share. And with that, operator, please open the line for questions.

[Operator Instructions] The first question comes from Michael Griffin with Evercore ISI.

Maybe just turning to the investment pipeline. Don or maybe Jan, can you give us a sense of what deals in the hopper are looking like today? I realize you're not guiding to anything this year, but is this more of what we've seen at Town Center in Kansas City or at the Village Pointe in Omaha? Is it stuff in kind of your core coastal markets? What are you really targeting, I guess? And do you have a feeling that we could see some deals close at some point this year?

Michael, you're well. Thanks for the question. Look, we're still targeting large dominant shopping centers. We're focused on new markets in the middle of the country. We're still also trying to acquire in the coast in our existing markets. So right now, there's a couple of acquisitions that we're working on.

We expect to see a lot more opportunities coming in the next several months, larger transactions. So some real reason to be optimistic. It's a little too early to kind of forecast how much we'll be able to buy this year. But based on where we are today and similar to last year, I would expect that the bulk of our activity will occur in the second half of this year. So from my perspective, reasons to be optimistic.

The next question comes from Cooper Clark with Wells Fargo.

I wanted to talk about the multifamily development and also ongoing recycling plan. Curious how much more peripheral multifamily you could potentially market for sale this year if you're able to source attractive opportunities on the acquisition side and also where yields stand today on the entitled multifamily development pipeline?

Sure, Michael. Let me start on that -- or Cooper rather, sorry. Let me start on that. It's such a kind of unique thing that we have here by having that value in there. There is -- there are still opportunities for us to monetize some residential product. And I'm not going to go into the specific ones right now, but you could probably guess. Again, they are peripheral to our primary mixed-use assets and our shopping center assets.

But that stuff is at 5% or lower in terms of those cap rates. And that's just -- it's just a real advantage. Now in total, there's probably another $400 million or $500 million to be able to do of that ilk. Not sure that we will do that. We don't have them in the marketplace yet.

But I'm pushing hard, frankly, to start doing that come the second quarter or third quarter and fourth quarter of this year to the extent we find the assets that Jan was just talking about a minute ago. You have one other -- you had a follow-up -- you had a backup question, I don't remember what it was. Anyway?

Yields on development pipeline.

What's that?

Yields on residential development pipeline.

And on the -- basically, we're able to underwrite the new development pipeline is somewhere between 6.5% and 7% on most of them. The reality is those are low 5s cap rate assets today. If what happens as what I think will happen is while we enter into it 6.5% and 7%, you'll see strong growth in those assets.

The one thing that is crystal clear is at fully amenitized shopping centers, those rents are higher. They tend to have more retention and they tend to grow faster. So I'm just really encouraged about this program, which I don't think anybody got the expertise than we do on the shopping center side to be able to do this kind of stuff. We've been doing it for a long time. I think you should look hard at that portfolio, and we'll be talking to you more about that in the quarters to come.

The next question comes from Andrew Reale with Bank of America.

Wendy, you highlighted that 2025 delivered the strongest rent spreads and I believe, over a decade. I'm just wondering, is that pricing power being driven by any specific property types or regions? Or is that really truly broad-based? And do you view these levels of pricing power across the portfolio as sustainable throughout 2026?

Thank you for the question, Andrew. I do consider them broad-based. It's a good time to be in a COO position with this high demand that we're having across the board and limited supply and the kind of premier properties that we own. So it doesn't get me better than right now. I will say that what you're seeing on being able to drive rents, if you look at our last 3 years, we are consistently overall driving rents higher and higher percentage-wise every year for the last 3 years.

So I'm really thrilled with that. And then when you look at the demand on the anchor side, you're going to see that our occupancy is going to be kind of driving up as we head into the latter part of the year. So yes, all metrics are good right now. And I do think -- although Dan is going to look at me, I do think given what I know of today and we look at our rollover for next year, we should be able to be equal to where we are today.

The next question comes from Greg McGinniss with Scotiabank.

Dan, I was just hoping that you could kind of give us the breakdown on the same-store NOI growth and then the primary pieces that are kind of adding on top of that to get to the 6% growth, that would be appreciated. And if there's anything in the term fee, which is bigger this year than last year, that's like known and in particular, it'd be appreciated.

Yes. No, with regards to kind of getting to the 6% FFO growth, roughly, and I have been talking to folks, the 3% to 3.5% that I've been talking to folks about over the course of 2025, roughly about $0.30 of growth there represents probably a good -- more than half of the growth in FFO drivers there.

And then with probably net from acquisitions and net from redevelopment, you've got about $0.12 each there. So very, very consistent with kind of the guidance we have been giving. The refi headwind is kind of roughly $0.12 in terms of refinancing the 1.25% bonds, the way we're planning them out, that gets you to kind of almost that 6% FFO drive. And our comparable growth is pretty broad-based. It's rent bumps. It is rollover, it is parking. It is across the spectrum of kind of what we create in terms of a comprehensive shopping center growth profile. Nothing stands out there.

And with regards to term fees, it's slightly higher than last year. We're just under $6 million. We're guiding to $7 million to $8 million. And we kind of feel like there's some things that are identified. We'll see how that comes out. That's an estimate, and that's why we give a range.

But kind of in line, our 20-year history is probably in and around $7 million or $8 million. The last 10 years, probably more in the $5 million to $6 million. So you are kind of right in line with historical levels on term fees.

The next question comes from Craig Mailman with Citi.

Just curious, Don, as you guys ramp up the sales here and acquisitions take a little bit longer or more back-end weighted in a given year. Just from a timing perspective, do you have enough cushion in the dividend to either 1031 at least from a timing perspective or absorb some of the gains? Or could there be a bit of a special potential here as we move on later through the year?

I think, Craig, that you can count on us managing tax efficiently through the dividend and sales of gains and 1031. All of those tools are available to us to manage our taxable income and our dividend in line with what we've been doing for a bunch of years. That's what you should expect, not a special dividend.

Our next question comes from Alexander Goldfarb Piper Sandler.

Don, you were among the standouts sticking with the Nareit FFO not going to Core. Real estate has a lot of -- there's a lot of cost, there's a lot of benefits, right? Sometimes you win on revenue, sometimes there's added costs from various things. But as you run the company and look at your team, you don't judge them and say, "Oh, we'll take out these items, take out those items, I'll give you -- I'll let you hit your number."

You judge your team based on how they perform. So when you switch to the Core, I get it that there's volatility, but at the same time, isn't the whole point to judge the company based on the results they deliver as sort of the ball lies, not where you'd like it to be?

Alex, the -- adding on a Core FFO metric is truly simply a tool that's aimed not having anything to do with this team at all, but everything to do with being able to better analyze the financial results of the company, making it easier for you to see kind of missing some of the step -- missteps that we've had with -- in the past with simply using Nareit FFO. And so that is completely what this is all about.

What is important in our view is that this is not used as a nickel-and-diming, if you will, of the Nareit FFO result, but rather big items, consequential items that just plain old distort the operating results of the company. That's all that's about. This team is judged on their performance based on what they do day in and day out and changing to a Core FFO metric will have no impact on that whatsoever.

The next question comes from Michael Goldsmith with UBS.

Comparable POI growth in 2025 of 3.8% initial guidance for 2026 of 3% to 3.5%. So just a couple of questions on this. Can you bridge the gap from '25 to 2026? Any headwinds that would drive a deceleration? And then is that 3% to 3.5%, is that the right way to think about the steady-state run rate of the business? Or as you continue to reposition the portfolio to higher growth assets, can it accelerate from here?

Yes. The big driver in terms of the deceleration is just we will be turning over, as Wendy alluded to, in her comments, a significant amount of anchor space that's already leased at much higher rents, but there will be downtime as leases end and we position the spaces to give to the incoming tenants at higher rent. That's about a 75 basis point drag of comparable POI.

So the 3% to 3.5% is [ Scott ] 75 basis points of drag from that temporary disruption in occupancy. And so we'll see a spike in SNO as a result over the course of the year. So we're at 200 basis points. It's been increasing as both metrics increase occupied and leased.

So we expect that to balloon a bit in the middle of the year and then come back down by the end of the year as occupancy levels get up into the -- back up into the 94%, mid-94s, upper 94s from the 94% level today. That's probably the biggest driver.

The second question? Steady state, yes, I would say, look, I think historically, when you look back, we're in the 3% to 4% range. I think with some of the acquisitions, $2 billion of acquisitions, and we're seeing that we're operating these assets, I think, better than we had expected and with growth rates that are higher than the kind of 3% to 4% that we've historically seen in our portfolio.

I would hope that, that would move up into the upper end of kind of the 3% to 4% range. And I think next year, 2027, we're well positioned to kind of be in and around that 4% level from where we sit today.

The next question comes from Ravi Vaidya with Mizuho.

I wanted to ask about tenant credit. Seems like the reserves are a bit conservative. Can you provide a bit more color here? What was the amount realized in full year '25? And are there any tenants or categories on your watch list? Can you add color on the mark-to-market opportunity for some of the recent bankruptcies, Container Store.

There were too many questions in there. So let me just start here with regards to the tenant credit. 60 to 85 is lower than we were at the start of the year last year at 75 to 100. We were about 80-ish finishing up the year, kind of in that ballpark. It's not very a precise number. But yes, that's kind of where we end up kind of 80 to 85 in 2025.

The 60 to 85 we don't have a lot of exposure to tenant credit issues. We just don't. We do have Saks, Saks has got 2 exceptionally strong locations. One, we're getting back or expect to get back or it's closed for going out of business sales, and fifth at Assembly Row, which is a great box facing the power center right on a corner.

It's probably got a 100% roll-up in rent from its current rent to where market rent is. So it's a huge opportunity. And the other location is a Saks Fifth Avenue store, a flagship location on Greenwich Avenue, hugely productive in the over affluent submarket of Greenwich, Connecticut, arguably one of the best pieces of real estate in the portfolio.

So we'll see how that all plays out, but really, really great real estate with respect to that. The other thing that we keep an eye on is -- and we've talked about it is Container Store, both -- all 5 locations paying rent. All 5 locations, we feel good about. I think that, that's kind of the color we can give there. We'll see how this all plays out. I think we're well covered in the 60 to 85 basis point range that we've given.

The next question comes from Rich Hightower with Barclays.

I want to go back to one of the comments Wendy made in the prepared commentary about California being especially robust, I guess, enough to make it into the comments. So just tell us what's going on there. I guess we're hearing that from other property types as well. So perhaps it's all sort of singing the same cord, but I'd like to hear what you guys are seeing.

Can we tee up Jeff Kreshek to answer that, Jeff, I'd love you -- Jeff runs our West Coast operations as our President. Jeff, I'd love you to talk about that.

Yes, sure. Rich, thanks for the question. Simply put, California is going to be our largest source of growth for the next few years given the backlog of leasing and development activity and the strategic capital recycling we're seeing out of Santana Row and Grossmont. So California is going to be a big, big contributor going forward for a number of years.

Next question comes from Linda Tsai with Jefferies.

Just a question on timing. In terms of the $13 million to $15 million for the development expansion pipeline, what's the timing of that?

Yes. We've given some additional disclosure that hopefully will make it easy for everybody to understand at the bottom of Page 29 in the -- our 8-K supplement at the bottom of the guidance page, there is sequential quarterly cadence of the increase over the course of the year. It will be pretty pro rata. It will be pretty close each quarter. And you'll see the ramp-up from the $17 million coming from the properties in the development pipeline up to roughly a midpoint range that gets you to kind of $30 million to $32 million or $31 million midpoint.

And so that $14 million, the cadence is outlined there. Anybody have any questions with regards to this additional disclosure that I think would be welcomed by most of you. Feel free to give me a Jill a call. We'll walk you through it.

The next question comes from Floris Van Dijkum with Ladenburg.

So it seems like some people, based on the questions you've had, the comp NOI growth perhaps is understating the true growth that you expect to get from this portfolio and from this portfolio in '26. maybe -- and I know that in the past, your comp NOI as a percentage of overall NOI was actually pretty robust and pretty high. What percentage of your NOI is being captured in your comp pool today? And how does that impact the SNO pipeline as well?

Yes. I would estimate that kind of what's in the comparable pool is probably 85%, 90%. We can kind of refine that, but that feels about right. With regards to SNO, yes, sorry. With regards to SNO, our SNO within the existing pipeline is growing and significantly growing with the commencement of the PwC lease and beginning to recognize that in the fourth quarter, what's coming from the development portfolio is not going to be as high as it was in the past year.

So SNO is probably around $27 million in the existing portfolio and another $5 million or $6 million in the development portfolio.

And so the cadence, about 75% of that will come on next year, so roughly, call it, about $25 million and roughly kind of $10 million to $11 million in the first half of the year and call it, $14 million to $15 million in the second half of the year and then the balance in '27.

The next question comes from Juan Sanabria with BMO Capital Markets.

Just hoping you could talk a little bit about the anchor movement, kind of what's driving that? Is that proactive by you? Or is that something else that's going on? And then you kind of mentioned a onetime hit that otherwise you would have hit your expectations related to Saks. If you could just quantify that dollar amount, that would be helpful.

Yes. Juan, first of all, on the anchors, simply timing. The way the expirations were working, particularly on the West Coast assets, there was -- there were expirations that were coming due a lot of last year and in the first half of this year, et cetera. So we've been on top of that to try to make sure that we've got either new tenants coming in Grossmont is basically a redevelopment of the entire asset there that's happening.

Best Buy at Santana Row, which you may remember going out after an extremely productive period of time for a new lifetime deal there. It's simply the timing that we've got all leased up, but there'll be a hit in the meantime, but we're plowing right through that, and it's still going to grow, hopefully at 6% next year.

So that's what's going on with respect to the anchors, nothing more than timing. The tax charge was a noncash charge writing off straight-line rent at roughly around $0.03 a share.

The next question comes from Paulina Rojas with Green Stat.

My question is about acquisitions. So while acquisitions are shaped really by what comes to market, if you had full discretion, would you cap your exposure to new secondary or tertiary markets? Or are you truly taking a fully market-agnostic approach, assuming property quality meets your standards?

First of all, Paulina, I love that you started this off with. Of course, it depends on how much supply is available because that's a really important point. The acquisitions get lumpy. We are so completely committed to the plan that we talked about last year, which is a combination of the new markets that we talked about.

And I think you've seen our buy box of what markets effectively apply to that. And it's 1 million people in a marketplace and very affluent, all of the stuff that we've talked about.

But yes, I would be agnostic to whether we find those assets in those places or in our existing markets that we have because real estate is local, and it really comes down to the submarket. And so to the extent we find those opportunities in places that we know inside now, and we're looking at some right now, frankly, that are adjacent to our existing assets, love that kind of stuff.

In addition to the new markets that fit the buy box, yes, we're agnostic as to which of those opportunities come to fruition. I hope that helps.

[Operator Instructions] The next question comes from Mike Mueller with JPMorgan.

I think you mentioned you had another $400 million to $500 million of non-peripheral residential left that you could sell to fund acquisitions. And it seems like the acquisition opportunity is greater than that. So what's next on the pecking order after those remaining resi assets?

No question. And it's not even next. It's in conjunction with, Michael. It would be those assets, retail assets where we've done all we can. And to the extent we've done all we can and we can get a strong price, for those retail assets.

We'll use those to recycle into better growth opportunities. So having the opportunity to have both resi and strong assets, strong retail assets that have limited growth opportunities, all of those things are considered.

So it's not which one is -- it's not using up the resi and then moving to those. It's a combination based on market conditions and what it is that we -- where we think we can effectively get paid best for. So you should see a combination of both as we move forward.

This concludes our question-and-answer session. I would like to turn the conference back over to Jill Sawyer for any closing remarks. Please go ahead.

Thanks for joining us today. We look forward to seeing many of you in Florida in a few weeks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Federal Realty Investment Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Jill Sawyer, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Megan. Good morning. Thank you for joining us today for Federal Realty's Third Quarter 2025 Earnings Conference Call. Before we get started, a reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including items. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements and we can give no assurance that these expectations can be attained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results. Before we begin our prepared remarks, I want to note that Don Wood, our Chief Executive Officer, is temporarily away due to a recent loss of an immediate family member. Our thoughts are with Don and his family during this very difficult time. In his absence, our Chief Investment Officer, Jan Sweetnam, will be reading Don's prepared remarks. In addition to Jan, joining me on the call today are Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; as well as other members of our executive and senior leadership team, including Dawn Becker, Jeff Kreshek and Melissa Solis that are available to take your questions at the conclusion of our prepared remarks. And with that, I will turn the call over to Jan Sweetnam. Jan, please begin.

Thanks, Jill, and good morning, everybody. Following our Don's prepared remarks, best leasing quarter we've ever had, ever and that's saying something given the leasing strength over the past few years. 727,000 feet of comparable space written at $35.71 28% annual cash rent than the previous tenant. 2/3 of that space was for renewals with de minimis capital required. Of the remaining 1/3 related to new tenants over half related to space that is currently occupied but for which a more productive tenant executed a lease a year or 2 or even 3 early in order to lock it up. .

There's no better evidence of the attractiveness of a shopping center to retailers than that, and it's one of the best ways in our business to assure an increasing stream of cash flows well into the future. Wendy will talk about core leasing a bit more in a few minutes. Strong comparable operating income growth of 4.4% in the quarter was equally encouraging and led to FFO per share of $1.77, despite the absence of capitalized interest and operating costs at Santana West that negatively impacted FFO per share by $0.04. That drag will begin to dissipate in this fourth quarter and in 2026 and 2027 as tenants in the 90% leased, soon to be 95% leased, building continue to occupy and work through free rent periods.

Operationally, this was a really strong quarter. And based on what we see thus far in October, should allow us to close out 2025 strong. In terms of development and redevelopment, residential construction in Hoboken, New Jersey and Bala Cynwyd, Pennsylvania are moving along nicely on or under budget and on time with leasing to begin in early 2026 at Bala Cynwyd. During the third quarter, we broke ground on 258 new residential units on the last surface parking lot at Santana Row of committing capital of roughly $145 million. Those 3 projects, Hoboken, Bala and Santana will require roughly $280 million of capital, all in fully amenitized and proven environments and should yield 6.5% to 7% unlevered. There's more to come in this component of our business in 2026.

Current conditions suggest market value should be 150 to 200 basis points inside those returns. We're committed to realizing that value over time as we've demonstrated with the sale of Lavare at Santana Row earlier this year, Palace at Pike & Rose, which is currently under contract for sale and should close right around year-end and the current marketing of Misora at Santana Row. On the acquisition front, I really want to thank those of you that made the trip to Kansas City to join us for our investor tour of Town Center Crossing and Plaza in Leawood earlier this month, we're off to a great start there from a cash flow and value-enhancing perspective.

And I just want to reemphasize the 2 points that I think became apparent to investors and analysts on that trip. First, that we are not sacrificing quality by expanding our geographical footprint. The growth prospects for these investments exceed both the retail and residential assets we're selling, and it is highly likely that the exit cap rates for the shopping centers we're pursuing will tighten considerably based upon our retenanting and redevelopment. And second, that this is not a change in strategy for federal. Our deep and experienced team is doing what it has always done. Lease it better, both from a merchandising and strength of lease contract standpoint, create a more inviting physical space that link in stay times and increases spend and intensify the land with more retail or residential GLA, where and whenever economically feasible. Same business plan and strategy just on different land with the same characteristics.

The affluent consumer is underserved, the centers are big and dominant and existing relevant tenants have proven that it's the place in the submarket to be. You might have also seen that we closed on the acquisition of Annapolis Town Center in the A+ location off State Route 50, which heads into DC and Interstate 97, which takes you to Baltimore in Annapolis, Maryland. We bought the property for $187 million at a 7% unlevered return with an anchor and shadow anchor foundation grounded by very successful retailers, Whole Foods, Lifetime Fitness and target we expect to be able to enhance the surrounding merchandising with better and more productive tenancy enabling higher rents.

We're very excited about this addition in our core market. Next up is another large and dominant center and a growing Midwestern submarket that we expect to close in this fourth quarter. More to come on that one soon. So that's about it from my prepared remarks. Enhanced internal and external growth using all the tools at our disposal is the name of the game. Quarters like this sort of 2025 increased my confidence in doing so. Let me now turn it over to Wendy to expand on the leasing environment.

Thank you, Jan, and good morning, everybody. Exceptional performance for the quarter, highlighted by record leasing volumes that build significant forward momentum as we conclude the year and look ahead to 2026. As reflected in Don's comments, we successfully recorded a record 123 comparable deals at impressive rent spreads of 28% over in-place prior rents. Our operational metrics are in top form, evidenced by strong occupancy, healthy margins and reduced controllable expenses all underscoring a solid financial performance. Outstanding results overall for the quarter. .

Occupancy in the comparable pool continues to show momentum as our occupied rate climbed 40 basis points last quarter and 20 basis points year-over-year to 94%. On an overall occupancy basis, including all of our shopping centers, we stand at 93.8% today. Keep in mind, our 2 recent acquisitions, Leawood and Annapolis were roughly 91% and 85% occupied at closing, therefore, impacting total overall occupancy as we head into the fourth quarter. We encourage investors to focus on our comparable occupancy metrics, which more accurately reflects the continued strength and momentum across the core portfolio. Turning to our lease rate. Our comparable lease rate stands at a very healthy 95.7%. We expect the figure to grow and show positive momentum into year-end driven by a strong pipeline, including over 175,000 square feet of new leases currently in process for vacant space.

This represents roughly 70 basis points of incremental lease rate opportunity. While the third quarter saw record leasing volume, a significant portion of this activity was for space, which currently was occupied. This is a testament to the durability of the centers and reinforces future stability in our occupancy metrics, providing embedded growth even if it doesn't immediately lift the recorded rate. By pre-leasing space, we effectively reduced downtime, we smooth out quarter-to-quarter revenue and strengthen occupancy over time. This proactive approach is a major focus across our operating teams. We continue to see broad-based demand for our quality real estate with a variety of best-in-class names and categories such as Chopped, allow Burlington, RHouse and Ross to name a few, and we continue to upgrade our retail lineup, including within our more recent acquisitions, Virginia Gateway, Pembrook and Leawood to be specific which with names such as Coach and LEGO, Warby Parker and Blueberry.

We were able to drive rents and earn a return on our capital at. Merchandising and retail sales performance is our focus. LoveShackFancy just had their grand opening this past weekend at the Grove at Shrewsbury attracted by the addition of our small-format Bloomie's concept, LoveShackFancy opened to a line out the door and had their best opening ever of their 25 locations. Merchandising matters in non-commodity centers. Our acquisition of Minneapolis Town Center this quarter is a prime example of our disciplined acquisition strategy. 479,000 square foot mixed-use retail properties confirms our focus on acquiring high-quality dominant centers in affluent markets.

With an 85% current occupancy rate, we expect the addition of Annapolis to provide meaningful growth with strong existing anchors like Whole Foods, Target and lifetime and featuring popular retail brands such as Sephora, RH, Pottery Barn and Anthropology, a perfect addition to our Maryland portfolio. Expect us to provide a number of tenant announcements for Annapolis on our next call. And with that, I'll turn it over to Dan.

Thank you, Wendy, and hello, everyone. Our reported FFO per share for the third quarter of $1.77 above consensus and at the top end of our guidance range of $172 million to $177 million. Comparable POI growth for the quarter was 4.4% on a GAAP basis and 3.7% on a cash basis. Both metrics outperformed our expectations, primarily due to higher-than-forecasted revenues in retail, residential and parking. As a result, we will increase guidance for both 2025 FFO per share and comparable POI growth.

More to come on that later in my prepared remarks. But first, an update on the balance sheet. We continue to have significant liquidity of approximately $1.3 billion at quarter end, comprised of availability on our $1.25 billion unsecured credit facility and over $100 million of cash at quarter end, committed active capital allocation program, our balance sheet remains strong. Third quarter annualized net debt-to-EBITDA is solid and stands at 5.6x, reflecting the purchase of the Leawood assets and our fixed charge coverage stood at 3.9x. We continue to look to execute on our capital recycling program. With $400 million of assets at various stages in the asset sale process, with roughly $200 million expected to close by year-end or shortly thereafter, and another $200-plus million forecasted to close in the first half of 2026.

Behind that, we have a pool of over $1 billion of noncore assets under consideration to be brought to market in 2026 and beyond. Of that total, roughly $1.5 billion pool, about 1/3 is peripherally located residential with the other 2/3 being noncore retail. With estimated blended yields targeted in the mid- to upper 5% cap rate range and blended unlevered IRRs inside of 7, very attractively priced capital. While leverage may fluctuate modestly from quarter-to-quarter, given the inherent timing differences between acquisition and sale transactions, we expect to maintain a long-term net debt-to-EBITDA ratio in the low to mid-5x range. From a flexibility perspective, with leverage metrics where they are and over $1.5 billion of asset sales in process and under consideration, we are very well positioned to continue to be on offense with respect to capital deployment.

Now on to guidance. As mentioned earlier, with a third consecutive beat and raise, we are raising our forecasted range -- FFO per share, excluding the new market tax credit work into a recurring FFO to $7.05 to $7.11. This represents about 4.6% growth on this recurring basis at the midpoint over 2024 and roughly 4% to 5% at the low and high end of range, respectively. Including the onetime new market tax credits in these figures, our near redefined FFO range increases to $7.20 to $7.26, which represents 6.8% growth at the midpoint over 2024. This increase is driven by $0.01 of net operating outperformance during the quarter and roughly $0.01 accretion from the Annapolis acquisition for the quarter, which translates to $0.03 to $0.04 on an annualized basis.

Given another strong result for 3Q, we are increasing our forecast for 2025 comparable POI growth to 3.5% to 4% or 3.75% at the midpoint. And that's 4% when excluding prior period rent and term fees. We expect comparable occupied levels to be in the low 94s by year-end, given the deals signed to date the continued robust pipeline of leasing activity, which continues to have momentum even after a record third quarter volumes. Retail tenant demand for our portfolio is showing no signs of abating to date. We do have 1 other acquisition that we have under contract that should close before year-end of roughly $150 million. Although given the expected closing late in the quarter, we do not expect it to materially add to 2025 FFO.

One thing to keep in mind, the acquisitions we have completed so far this year, including the 1 currently under contract will total over $750 million have a blended initial cash yield of roughly 7%, a GAAP yield north of 7% and initial blended occupied rate of just 88%. These are high-quality assets with clear leasing upside, which will enhance growth in 2026, '27 and beyond. Implied FFO guidance for fourth quarter 2025 is $1.82 to $1.88 and represents 7% growth year-over-year at the midpoint. While we won't be providing formal 2026 guidance until our fourth quarter call in February, we do expect a strong year operationally. We're executing from a position of strength, we're investing strategically maintaining balance sheet discipline and setting ourselves up for another year of meaningful growth ahead.

Before I hand the call back to the operator, given the number of participants on the call, we kindly ask that you limit yourself to 1 question during this segment of the call. And please, no multipart questions. You have additional questions, please requeue. And given the really tough news that Jill shared earlier, we completely understand that many of you may want to send a message of support to Don and his family. However, we respectfully ask that you refrain from expressing condolences on this call. So we can focus on the discussion on Federal Realty and its third quarter results and keep the Q&A segment of the call as efficient as possible. Thank you. And with that, operator, please open the line for questions.

[Operator Instructions] The first question comes from Juan Sanabria with BMO Capital Markets.

Great. For the team, I guess, Dan, you talked about the dispositions in processing at kind of a blended cap rate. But just curious if you can give any color on how the 2 main buckets, retail versus resi compare given kind of early feedback on what may be kind of out there in the marketplace to test pricing.

Sure, sure. Look, we've got, as we mentioned, $400 million in the market now that's probably a little bit more skewed towards residential. Overall, the $1.5 billion the 1/3 of the peripheral residential, 2/3 noncore retail pricing is going to be kind of in and around $5 million, sub $5 million for what we're selling on the residential, and it will be in and around 6 -- yes, low 6s, 6, sometimes high 5s on a blended basis on the retail. And so blended, we should be in the mid to upper 5s overall. So I think a nice positive spread to where we're deploying the capital in and around the high 6s, low 7s on a cash basis and GAAP yields above that. .

The next question comes from Michael Goldsmith with UBS.

Dan, you mentioned you're not going to issue formal 2026 guidance, but you did talk about some of the factors, right, like Annapolis and the benefit that you'll see next year as well as the capitalized interest in salon or when you join to pace. So can you outline kind of any sort of onetime or other topics that you've already talked about for 2026, just so we can get a sense of where the puck is going. What's the trajectory of the company and what the earnings growth next year could look like based on what you've already said?

Yes, good question. Thank you, Michael. With respect to one-timers, obviously, the big 1 timer really is what's occurred in 2025 with the new market tax credit. We would encourage folks that they want to understand kind of the true operational growth underlying the business is to exclude that onetimer in 2025 and focus on the $7.08 of kind of more of a recurring number. And in terms of looking forward, we don't have anything or expect to have any onetimers. Onetimers, we consider recurring numbers, term fees. We think that's recurring. It's a part of the business. It's unforecastable, but we do not expect any kind of material differences from our current guidance, which we increased a little bit this quarter in the $5 million, $5 million to $6 million range. So it should be consistent with that.

With regards to capitalized interest, you brought up -- we had about $13.5 million or expecting in the $13 million to $14 million range this year. We're not done. We don't have a precise number, but I think as a placeholder using kind of a $10 million to $11 million kind of level for capitalized interest is something you can use for now. We'll provide more precision on that in February. With regards to growth, we don't have a precise number, but right now, our current guidance 2025 the recurring number is in the mid-4s, 4.6%. I would expect that, that feels like it should be somewhat consistent with where we'd expect things to be next year as well on a recurring basis. Keep in mind, that's with about 150 to 200 basis points of headwind from the refinancing of our bonds in February that we're expecting. And so that's, call it, 5.5% to 7% underlying growth in the core business, which I think is -- we feel really, really good about and so that's kind of, I think, the big numbers I would point you to.

We do expect we only have $3 million to $5 million of incremental development POI contribution this year. that will be up higher next year into the double digits. We'll have a more precise number for you in terms of the 2026 incremental contribution on the following February.

Our next question comes from Samir Khanal with Bank of America.

I guess, Jan or Wendy, the spreads in the quarter were impressive, right, 28% cash spreads. I guess if you take a step back, how much of that is sort of true market rent growth that you're seeing in your portfolio versus maybe just sort of mix or tenant upgrades. Trying to understand if these spreads are sustainable. And if there is a sort of this inflection of market rents that are taking place for your type of assets.

So there's no question that the 28% is a strong number from us. As you kind of -- the way I kind of look at it is more over a 12-month period, which is more we're seeing kind of in the mid-teens. So -- and continue to be aggressive, and it makes sense, right, because our leased and occupied rate continue to increase, so we're able to drive rent at that rate. I think that it can be lumpy. So not every quarter will be 28%, but I think that we are definitely seeing some ability to drive rents. And like I said, that trailing 12 months should provide us in that mid-teens as the results will play out in the fourth quarter and into the first quarter. .

Our next question comes from Alexander Goldfarb with Piper Sandler.

Dan, on out of Santana West, you had that office tenant that whenever it didn't take the space this year, whatever the take space, making it ready that got delayed, is that tenant looking to be on track for '26 meeting? Like should we expect sort of early in '26 that, that revenue would start flowing? Or is that -- could that be further delayed from a revenue recognition standpoint?

Yes. Our expectation is in line with our revised guidance earlier in the year that this fourth quarter, we will begin recognizing straight-line rent. And so they'll be -- we'll be recognizing on PwC, which is roughly the 40% anchor tenant in the building will be recognizing straight-line rent. And that's why -- that's 1 of the drivers of kind of the incremental POI that we'll see from our development pipeline, our development portfolio in 2026. So in line with our expectations and will be a driver of growth next year. .

Our next question comes from Michael Griffin with Evercore ISI.

Maybe 1 for Jan, just as it relates to sort of the investment pipeline in look. I know in Kansas City, you talked about the upside opportunity in some of these larger open air centers similar to Town Center versus maybe the premium the market is putting on more grocery anchor. So can you just talk about your thoughts on maybe the disconnect between those 2 types of properties? I mean is it expectations for higher foot traffic at grocery anchor center that's maybe driving down that cap rate? Or is there just a broader disconnect versus the types of assets like a town center or in Annapolis that you all are targeting?

Yes. Thanks, Michael. Good question. Interesting time in the market. There has historically been for at least the last 10 years, strong demand for grocery-anchored centers and cap rates have gotten bid down to relatively low levels. It sort of feels like they've flattened out a little bit. And there just has not been as much capital on the market. In fact, really recently, there's been very little capital in the market for larger transactions. And so the few transactions that came to the market, there was good bidding for it, but the yields were higher because just -- there wasn't that much competition for it.

And so this last -- in the second half of this year, I think what we've seen is there's a lot of large centers that have come to the market. There's a lot of -- there's more capital in the market chasing those. It still feels like there's a good supply demand equilibrium there. But it's just that -- we still see that spread happening here simply because the larger centers are that they can be more complicated to execute because there's a lot more leasing that needs to be done there. And I just think we are -- 1 of the reasons we're really interested in it is we think we get a great risk-adjusted yield in buying these assets that are a little bit more complicated. They're larger, they're harder to operate because we've just got a great leasing team.

We've got such great relationships with the merchants, and we get so much intel on these things. before we actually start bidding on them -- put them under contract. And so we still think that spread is going to be there, it has not disappeared.

Our next question comes from Cindy Rome with Barclays.

I was wondering if you could elaborate a bit on the debt maturity schedule and particularly the $200 million that does to row mortgage was during in December, I saw there's to 1-year extension options there. So I was just wondering what the plan is.

Yes. With regard specifically the tester and I'll talk a little bit more broadly about our maturity schedule going forward. But we will be extending that for another year, exercising the first of those 2 options will take us to the end of 2026. We have the flexibility to push it out to the end of 2027. It's a low leverage. It surely is imminently financeable at the end as well. So really no concerns there. We did refinance our -- alone, which has a maturity of tomorrow. And so that's been refinanced at very attractive rates in the kind of on a swap-to-fixed basis it will end up in kind of the below 4s.

And then with regards to the maturity we have in February of our $400 million of bonds with the 1.25%, we've got options, and it's good to have options. Whether it be in the bond market, whether it be in the bank term loan market, whether it be in the convertible market to have those options is really kind of what being federal and having our high investment-grade rating kind of allows us to do to be able to be opportunistic and nimble with regard to how we plan to refinance that, and we'll look to optimize it. And so more to come on that. Obviously, in February, there will be more color on exactly how we executed.

Our next question comes from Floris Van Dijkum with Ladenburg.

A question on your physical occupancy. I note you're still about 160 basis points, I believe, below peak levels. And maybe, Wendy, if you can give some sort of update on how quickly you see that trending? And is there a chance that we could surpass that level over the next 18 months or so.

Floris, I think what we're seeing is in terms of our ability to drive that occupancy rate up, I'm feeling good about the anchor side of it, I think, is where we have more room to push that number. And I think you're going to see that, as I mentioned in my comments, was that 175,000 square feet of space that we have really finalizing and signing leases in the next quarter for spaces that are currently vacant. So you're going to see that push up towards the end of the quarter. And I think on the small shop side, we're over 93% leased right now. So I think we're going to use that as an opportunity to continue to drive rents. It could go up a little bit, but we're going to -- we like a little bit of that frictional vacancy, as I call it, that we can drive rents. But I think you're going to see it more increase on the anchor side, which will overall increase our occupancy. .

Next question comes from Cooper Clark with Wells Fargo.

Great. Curious how Annapolis is funded and how that ties into the $0.01 accretion for 4Q and $0.03 to $0.04 for the full year. Wondering if that $0.01 accretion is combined with the $200 million of sales to fund or just trying to figure out how that $0.01 is inclusive of sales to close by year-end or not?

Yes. Look, it's somewhat fungible. And look, we have a big balance sheet that allows us the flexibility to fund. Ultimately, we've got capacity on our credit facilities and our term loans. Temporarily, we fund it on that basis, cash on hand. Ultimately, on a long-term basis, it will be on a permanent basis, be funded with the asset sales. So the $0.01 accretion is really the spread between kind of the long term, basically yield or the initial yield day 1 and the next 12 months relative to -- we're selling stuff in the initial yields in the mid- to high 5s. And we're in the -- on a GAAP basis in the 7s that's how you get to the $0.01 accretion on a quarterly basis for the fourth quarter and $0.03 to $0.04 on an annualized basis for the full year. Hopefully, that answers your question. It's a good one, Cooper. But hopefully, that answers it. .

Our next question comes from Greg McGinniss with Scotiabank.

This is Victor -- with Greg McGinniss. As you are now in an active external growth model. Could you share some details on current competition for the assets you target and how it is impacting cap rates overall, just trying to understand whether the pool of assets that check all the boxes for federal are shrinking or not.

Jan, do you want to take that one? .

Yes, I'm not sure I totally heard the full question. Is the question in terms of what does the pool of future potential acquisitions look like? Was that the question? .

Yes. Yes, as a result of curing dynamic and competition for the assets just trying to understand the size of the pool, yes. .

Yes, yes. Got it. So the -- sort of -- it sort of feels like we're in continued equilibrium. And what I mean by that is, go back 12 months or 9 months ago, there weren't a lot of large transactions that we're interested in that we're on the market. And there weren't a lot of people chasing those type of assets. And so it felt like it sort of was an equilibrium. And today, there was a lot of large transactions that came on the market in April, May, June that were also matched by more capital coming in looking at those acquisitions and those possibilities.

And so it feels like we're sort of -- while there's more competition out there, I think it's more work for the sellers trying to understand who's real in the -- and are the ones that are real, who are the ones that really stand out as being able to work through issues and be at the closing at the end. And as we think through, we think we compete very well on that basis. So just from a competitive standpoint, it feels like we're sort of in the same position from an equilibrium standpoint. We'll have to see what happens in '26 and beyond that. But we would expect to continue to see more large transactions coming to the market later this year, beginning of next year, and we think we're in a pretty good competitive position to make a play for.

Yes. And look, I think that another thing that is not kind of, I think, fully appreciated. And yes is the skill set that we have the Federal Realty, whether it be in our leasing capability, our relationships with tenants, our ability to -- place making and other things that enhance the operations and productivity of the assets that we buy. A lot of these assets are under managed. And they're not -- it's not easy. It's not low-hanging fruit. You need a really, really good operator to drive those kind of results. And I think that's a competitive advantage we have over much of the capital that we're competing with. And we can do things that others can't in terms of driving POI upside and NOI upside at these potential acquisitions. .

Our next question comes from Craig Mailman with Citi...

Okay. We'll go to the next question. .

The next question is from Ravi Vaidya with Mizuho.

Can we discuss the snow pipeline -- how much do we have in total rent that's embedded in that pipeline? And what's the projected time line for this to come online? Do you think it will compress from here on out? And -- or is there room for this to expand further as occupancy growth?

Great question, Ravi. And Craig, requeue, we'll get to your question for whatever the technical difficulty. We didn't hear you, but please requeue so we can -- we want to hear from you. Ravi, great question. SNO is going to be about $20 million in the comparable portfolio and another $18 million in kind of the to-be-delivered portfolio. So $38 million in total. In terms of about 1/4 of that will come online or on an annualized basis, begin and commence in the fourth quarter, about, call it, 60% should be in 2026, and the remaining 15% should occur, call it, in 2027, the most part.

The probably of the 60% next year, roughly probably 3/4 of it is going to be, call it, 70% to 75% should be in the first half of the year. Obviously, SNO has become a -- it's helpful for you guys from a modeling perspective. It only tells half the story. I mean when you look at SNO, you have to look at the other side of that's filling the top of the bucket, SNO. What is the leak in the bottom of the bucket, what is your credit reserve? What's the credit profile of your tenancy, I think that, that needs to be looked at in tandem. So I would encourage you guys to the extent that now is important to you that you look at both sides of that. With regards to RSNO, given what Wendy had indicated, we expect our lease rate to grow into the fourth quarter and into the beginning of 2026.

That should grow our spread between our leased rate occupied rate, both of them should trend upwards, which is what you want. I think that's more important, the direction of your occupancy metrics than necessarily what the spread is between the 2. We will look to -- it may increase up towards 200 basis points, but our objective is to tighten that as much as we can and get into kind of historical levels in the low hundreds 100 to 150 basis points, that's obviously kind of where we'd like to be because that shows efficiency in getting tenants open. And it was also an indication about credit quality of your tenancy, if you kind of can maintain a very, very tight SNO as everyone likes to say.

Our next question comes from Craig Mailman with Citi.

This is Sydney on for Craig. I think you're having some technical difficulties. So Wendy, you mentioned that tenants are buying for currently occupied space, 2 to 3 quarters and years ahead of expirations now? Is this a significant trend that you're seeing? Or is this more anecdotal? And how much of this activity actually drive the cash spreads on new leases during the quarter?

Yes. Thank you for the question, Sydney. When I look at what we've been doing over the last several quarters, you can see that our rate of new deals that are being basically signed up for space that's already occupied has continued to tick up. So maybe it's more in the -- if you look kind of coming out of COVID, we were leasing -- we had more vacancy. We were leasing space that was occupied in the 30%, 40% range. Now we're up to 50%, 60% and this quarter was 70% of what we're leasing is already for occupied space. So I think that will continue as our occupancy and lease rates go up, and I think it's showing a healthy ability to reduce downtime and to level out our revenues quarter-to-quarter, and that's really what we're focused on. .

Our next question comes from Hongliang Zhang with JPMorgan.

I guess a quick question for clarification. I think you talked about growth being kind of in the mid-4s on a recurring basis going forward. Is that just for the current portfolio? Or does that also layer on potential future acquisition and disposition activity too.

Yes. No, that's just kind of with what's in place for the most part. It reflects kind of expectations with Annapolis but it does not assume any incremental acquisitions in or speculative acquisitions in 2026. That would be additive given our objective of doing acquisitions that are accretive from day 1, obviously, that is -- the mid-4s is kind of the baseline, and acquisitions will enhance that figure kind of going forward. And so there's no embedded assumptions on speculative acquisitions or dispositions in that number. .

Our next question comes from Omotayo Okusanya with Deutsche Bank.

Could you talk a little bit about the $150 million acquisition that cement happen by year-end? If you could just kind of give us a general sense of kind of what it is, where it is.

Yes. I know, Jan, you can add on. I'll just get it look. We'll announce that when we close on it. We are expecting, we're under contract. It's roughly $150 million as Don alluded to, it's kind of a, it's a -- will be a similar market to a Leawood, Kansas type of location. We'll announce that when it closes as is our policy and kind of what we do on a normal basis. Jan, I don't know with regards to returns, it's going to be consistent with the returns that we've been achieving on the assets to date, John, I don't know if there's any other color, but I think that's what we're probably prepared to give you today.

Yes. No, I think you nailed it, Dan. I think the only thing I would just add or reemphasize is, it will -- it's going to be -- it's a great cities rate MSA. It is unbelievably well in the affluent submarket and the affluent customer there is underserved, and there's pent-up demand in the marketplace. And I think that will be able to demonstrate that and talk about it once we close it. So that's what I would add to.

Yes. And I'd add another thing that this is an off-market transaction, something that was sourced off market. And it fits perfectly within kind of the new federal playbook in terms of top metros with a dynamic employment dominant assets with a meaningful size and significant trade area, affluence, unmet retail demand and proven hits and checks all of those boxes. So we're excited about it and stay tuned. .

Our next question comes from Linda Tsai with Jefferies.

It sounds like including what you have under contract to sell 200 closing by year-end and another 200 closing in 2026. You can be selling up to the $1.5 billion you've identified. Is it feasible to replenish with another $1.5 billion and recycle that as well? Just wondering about the length of runway for unlocking of value creation?

Yes. Look, look, it's a great question, Linda, and thanks. I think that gives us runway probably into '27 in the existing $1 billion gives us a runway, these are identified. We think that they'll attract interest from the market and so forth. Do we have more behind that? Is there Yes. I mean we could kind of delve in. I think this is the near term next 18, 24, 36-month pool that we're considering. And is there more behind it? Yes, yes. We need to be thoughtful. A lot of what we are -- we own in our portfolio has significant gains because we've created significant amounts of value in these assets. And so we need got it to be thoughtful with regards to managing that. Ideally, we'd like to do that through 1031 exchanges. So that also is kind of a governor but to the extent we need to accelerate because we see more opportunities in the market to deploy capital on the acquisition front or in redevelopments and so forth.

We have that ability to accelerate and move up some of the pool to the forefront of activity in our asset sale process.

Our next question comes from Kenneth Billingsley with Compass Point.

I just want to follow up. I think you made some comments on the leasing side, but net renewal rates of up 29%. And GLA was the highest in the last 12 months. Can you maybe just discuss there a lot of TIs in there. Could you just maybe discuss what formulated such a high increase on a renewal basis?

Look, we were able to push rents on renewal Look, timing of renewals, it ebbs and flows. We happen to have a significant kind of opportunity this quarter and those deals got done -- there were some -- some really strong renewal rates that we were able to achieve. And in terms of the volume of renewals, that happens, that will ebb and flow over time. I think there were a number of deals that we're able to get renewals at rates that were kind of above average. I would not expect us to maintain, continue to be driving renewal rates. I would look also on a trailing 12-month basis, maybe a little bit lower just because renewals tend to be a little bit lower. But I would look at kind of a more normalized number is looking at the trailing 12, which is in our supplement on the leasing page there. .

Our next question comes from Paulina Rojas-Schmidt with Green Street.

Good morning. This is a more big picture question. You have highlighted that the recently acquired centers have a very clear significant operational upside. Do you think these acquisitions, along with the broader market focus are turning points for the company in terms of expected growth or you are more maintaining at trajectory, essentially replacing more mature centers for others and will drive the next stage of growth. And yes, I hope my question is clear.

Yes, I think I understand. And it's a good question, Paulina. Look, we are seeing kind of the opportunity to buy assets that are more raw material to kind of put into our kind of the federal business model where we can really drive merchandising, leasing, rents, invest capital on a disciplined basis to really drive and enhance returns for those assets. I think that, that is something that is additive. It's no different. Look, we are able to do that on our existing portfolio as well. But I think we see the opportunity to sell some of the assets that maybe have done a really, really good job of harvesting the opportunity in the near term and see that as an attractive source of capital to redeploy into assets that can enhance our growth rate.

But I don't see it as a turning point. I think it's more a continuation of what we do well. I think we're seeing an opportunity to harvest gains in our portfolio and redeploy them into -- and really to enhance our growth rate but it's really just a continuation and an expansion of what Federal has always done.

[Operator Instructions] We have a follow up question from Alexander Goldfarb with Piper Sandler.

As you guys look at some of the expansion markets, that you're obviously Leawood and then whatever the next city is, do you see that perhaps retailers or rents haven't been pushed as much as they have in those markets. I'm just trying to understand like, obviously, everyone knows like the infill markets like Philly area or New York Metro or D.C. Metro and retailers know that, hey, you have to pay big rents, there's big incomes. But just wondering, as you go to some of these next -- some of the Midwest markets and made just different legacy of ownership. Do you find that the rents have been pushed in the same way?

Or is there -- is that part of the opportunity? I'm just trying to understand if it's more just a new area for growth, versus actually the way the markets have worked, they maybe haven't been as efficient because just different types of ownership that may have existed there versus in the coastal markets.

Yes. I'm going to let Stu Biel answer that one. You guys all -- to on our Leawood trip. Stu, you're probably at the forefront of that, sir.

Yes. Alex, thanks for the question. I think the short answer is there is a lot of runway on the rents here. They have not been pushed as hard. The properties haven't been invested in the right way to push them as hard -- at the end of the day, this is all a fraction of the function of the volume the tenants believe they can do here. I think we showed you guys when we were in leave with the volumes that were coming out of that property before they had been kind of run in the way that we would run them. And so I do think that's a big part of this push is there is a lot of runway to continue to upgrade the merchandising push the sales invest in the properties and push those rents to get closer to what they're used to pay in other places in the country. .

This concludes our question-and-answer session. I would like to turn the conference back over to Jill Sawyer for any closing remarks.

Thank you for joining us today. Have a nice weekend, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.