Regency Centers Stock

Everybody. Why don't we get started? Welcome to the Regency Roundtable. Very happy to have Lisa Palmer with us today, CEO of the company; Christine McElroy, Head of Capital Markets. Lisa, why don't I turn it over to you for some opening remarks.

Thank you, Samir. Good afternoon, everyone. Just because I'm joined with Christine McElroy. So I actually...

So you can correct in front of [indiscernible].

That's our SVP of Capital Markets. I actually played softball when I was a teenager with Nina McElroy. So I also want to call...

Everyone calls me McElroy, so.

It's also Elroy, right? Is it Elroy for those of you that are golfries. Thank you again. Appreciate you having us. Great conference. and we had a nice room upstairs with windows versus where we are right now. Regency is having an exceptional year. Hopefully, you all have had the opportunity to follow us along. Strong NOI and earnings growth, which is supported by really strong operating robust fundamentals and importantly, disciplined capital allocation. Tenant demand across our grocery-anchored shopping centers remains broad-based.

And I think you also know the availability of high-quality space remains very limited. So again, playing into our favor. That combination continues to give our leasing team meaningful negotiating leverage, and that's allowing us to drive contractual rent growth and cash re-leasing spreads above our historical averages quarter after quarter. If again, if you follow us along, you always hear Alan say, records are meant to be broken.

So we're moving our occupancy beyond prior highs. Reflecting that momentum as well as improved visibility into the balance of the year, we did raise our 2026 earnings guidance with our second quarter results, including our same-property NOI growth, Nareit FFO and core operating earnings ranges. Our development program continues to be a highlight of our capital allocation strategy and an important differentiator for Regency.

Today, we have nearly $700 million of development and redevelopment projects in process at blended yields of approximately 9%. And importantly, our pipeline of future opportunities continues to expand. The success of the platform the track record. That's what continues to create additional opportunities for us to source great projects. And as a result, we continue to increase our annual pace of development and redevelopment starts, which we now expect to approach $400 million this year. Again, against the backdrop of very limited new retail supply, our ability to consistently source and execute high-quality projects anchored by leading grocers at attractive returns represents a durable competitive advantage for us.

We are also delivering these centers at substantial spreads to market cap rates of at least 150 basis points. That's generating meaningful NAV creation in addition to earnings accretion. At the same time, we're still active in the acquisition market. But because development is our primary external growth driver, we have the ability to remain selective and patient in what continues to be even today in a highly competitive transaction environment.

And that discipline is supported by our sector-leading balance sheet, our A ratings from S&P and Moody's, growing free cash flow and nearly full availability on our $1.5 billion credit facility provide us with significant financial flexibility. That strength gives us efficient access to low-cost capital and the ability to fund our investment pipeline without relying on equity or dispositions and still retaining capacity to pursue additional opportunities as they arise.

So in summary, I'm really excited and energized by Regency's position and the opportunities ahead of us, high-quality real estate and compelling suburban trade areas. A differentiated national development platform, a sector-leading balance sheet and the best team in the business really do collectively set Regency apart. And with that, we're happy to take questions.

Before I talk about macro and the consumer, that $400 million of annual development spend, is there -- is there a sort of balance sheet capacity to even expand that at this point, given that unique advantage you have?

So we're generating approximately $190 million of free cash flow. And with the growth in EBITDA and with our low leverage of the existing balance sheet, the answer would be yes, without significantly impacting that. With remaining leverage neutral, we get to $400 million. So we have the ability to do even more. And today, our development -- while our starts are $400 million, the development spend is still a little bit less than that. So we still have capacity to execute on opportunities as they arise.

Taking the costs in that regard, development costs, construction costs.

Construction costs have generally remained relatively stable since the big increases that we saw during the COVID years. While there's different line items that are moving maybe in different directions, the overall cost is just natural increases. So fuel prices are certainly driving increased line item costs. At the same time, it's being offset by other...

Both the tariffs and [indiscernible].

We really didn't see much from that at all.

I mean, you talked about your development -- ground-up development program. I mean, that's really unique in the space compared to peers. Why haven't your peers been able to replicate something like that?

It's a really difficult business. And one -- so I've been with the company 30 years this week, and development has been a core competency and really something that we're just really good at for as long as I've been here. And even during kind of the thin times, right? So on page -- we do have our investor presentation out there on Page 23 of our investor presentation, you will see from 2012 through 2019, the amount of starts was definitely compressed relative to where we are today. And there's a variety of things happening. We're coming out of the GFC.

And there was also the pressure from e-commerce and what is going to happen to physical stores. And retailers were entrenching and spending more internally than they were in expansion plans. But during that period of time, we were still developing. We kept the muscle of the company. So I just -- I said this earlier today, we have 3 MDs of investments, one in California, one that's responsible for Southwest, one that sits in the Southeast that's responsible for Southeast, Midwest and one that sits in Washington, D.C. for Mid-Atlantic Northeast.

They've all been with us for that whole time. So the ability -- so then when the pandemic hit and COVID hit, there are several structural changes that we're still benefiting from today. That is retailers were forced to get their goods to their consumers through other means. And what that did is it made -- it gave them a renewed appreciation for their physical footprint because the most profitable way for them to get their goods to a consumer is to have the consumer walk in the door, pack their own goods in the cart and check out. The next most profitable way is to service that customer from the store, whether it was an order online, pickup in the store or order online, pick up in the parking lot.

And as a result of that, coming out of it, and you can again, it really does correlate very well with our success, they put their foot on the gas pedal for expansion plans. And so there is now more demand from the retailers. At the same time, you had the consumers who during a period of time, I've always said, you can buy anything you want sitting in your house. During those years, consumers also developed a renewed appreciation for shopping.

And not everyone loves to shop, but a lot of people like to shop. And so the combination of the 2, along with some other shifts in terms of out migration from inner urban to suburbs, all were structural tailwinds for our business and allowing us to kind of really build the momentum in that business and then relationships with our tenants, relationships with master planned community developers, that same team that I just talked to you about that was already in place that already had the expertise and the track record and our cost of capital. And those 4 together really the success is beget success, and we continue to build on that momentum.

Are you seeing signs of ground up anywhere nationally besides Texas? I mean, we've kind of heard about that anywhere else?

We're active in -- I mean, I think we have several in California that are in process. We have got several in the...

Competition.

There's -- yes. So the market is still pretty fragmented. And we've taken inventory of every shopping center that's been developed with the grocers that we would like to do business with in markets in which we would like to develop. And we're still -- we are the largest at scale nationally, but still less than 20% probably of the full market share of all new shopping center developments of our investable centers, not even talking about the total. So there's competition. It just tends to be more private regional developers with access to private capital.

What would be the split of -- in terms of how you source these development opportunities? You mentioned local master community developers and whatnot. But how much would be just from land that you've had on your balance sheet or options on your land versus is it all coming from local family to bringing on a deal, a local developer. Just like how should we think about the difference?

Yes. So approximately 2/3 is ground-up development. So land -- we have -- we don't land bank for large new ground-up developments. Do we have some land that is part of or adjacent to an operating shopping center? Yes, it's minimal. That would be in a redevelopment bucket. It would be added to there. And about 60% of our in process is from master planned community relationships and developers.

And call it about 2/3 of our pipeline is master plan.

So what does that mean from a pre-leasing standpoint before you kick off, like how much of it did you with the grocer?

You have to have the anchor lease. And if it's more than one, typically, all -- like we have a couple of junior anchors to have the anchor lease execution before we'll take down the land. And then depending upon the start, every opportunity is different and unique. Mike Mas, our CFO, loves to call their Snowflakes.

So it does depend. It depends on the market. It depends on how much space you're building. But we can be pre-leased anywhere. Sometimes it's good to keep -- what I'm saying, sometimes it's good to keep it off the market because you'll generate a lot more excitement once the other retailers start to see a Whole Foods coming to life in a beautiful new center. But it can range anywhere from -- I mean, I don't know that we have any minimums, but it's going to range anywhere from -- it does we feel really good about our pipeline in terms of what percent pre-leased we are. And the success in the last couple of years, I think, is evident if you just go look at what we've delivered. We've delivered them very close to 100% leased at completion.

So the $400 million pipeline, that's ground-up development and redevelopment. Correct? So what is the split within that pipeline between the 2? How do returns compare? And maybe if you could, I guess, just talk about the redevelopment densification opportunity, anything on that front?

So there's $400 million -- that's $400 million of starts -- nearly $400 million of starts that we expect in 2026. Right now, our in-process pipeline is nearly $700 million. So that's going to be, call it, right now, ground-up is about $400 million of that. So $400 million, $300 million is about the split. As you think about our new starts, it's going to be about 2/3 ground-up development, 1/3 redevelopment in terms of volume.

And we're targeting -- our target for ground-up development is to be at least 150 basis points above market cap rates. And generally, for the type of product that we are developing and acquiring, that's going to be 7% plus for ground-up and redevelopments, that really varies. And again, if you look at what's in process, we're at a blended 9. So that tells you that some of our redevelopments came in at much higher returns than others. But they're going to be slightly higher. You typically, right, it's -- there's often not land basis involved. There may not -- it may be all 100% incremental NOI that there wasn't anything before. So it's difficult to compare the 2.

Maybe shifting a little bit to the consumer and the macro. I mean your portfolio skews to the higher income areas, right? Like are you seeing a sort of a difference in performance between the highest income centers and the rest of the portfolio?

We are not seeing really any significant differences across any markets or trade areas or kind of neighborhoods, if you will. And our product type really lends itself to perform well in all economic cycles. And especially even if you think about -- we are in compelling trade areas. And if you look at it on a relative basis, what you're saying, what would be on the lower end of the spectrum for us are still good compelling demographics, population density with average household income. It's the combination of the purchasing power.

And if Peter Linneman is on our Board of Directors, I will quote him if he's listening. I want to make sure that he knows that I'm attributing this to him. If he'll do -- he does a quarterly webinar. And I love to listen to his insights. And the K-shaped economy is talked about often as it should be. And as he has always made sure that people really fully understand is when you think of [ K ], it sounds like it's a declining spending. But even the pressures that the moderate to lower-end consumers are feeling, they're still spending and their spending is still growing, just not at the rate of the upper part of the K. And if you think about, again, the product type where we are, it's necessity, convenience and value, we're still capturing the purchasing power of those consumers. We're really well positioned in all the neighborhoods in which we operate.

How do you think about sort of the consolidation in the grocery space? And as you think about how does that change landscape for you, both in terms of tenant risk and opportunities to sort of strengthen your portfolio?

The grocery business, it is certainly where our focus is. We're primarily grocery-anchored. So it is something that we have always studied, evaluated, monitored and understood as best as we possibly can. And again, for as long as I've been at the company, it's always been one of the areas where we focus. And I'll go back to the '90s. And I remember for those of you that may have been at all involved in any part of retail or retail real estate, there was a W there everybody was talking about was Webvan. And everyone was petrified that Webvan was going to put all the grocers out of business.

And Hap Stein, our then CEO, and I remember being in meetings with him sitting here like Christy sitting here with me, and he would say, there is another W that we should all be talking about. It's not Webvan, it's Walmart because Walmart actually in 1999, I think, is when they really began to enter the grocery business. So again, it has been a competitive business for as long as it has been in existence even before I joined Regency.

So our strategy is what we focus on and remain very disciplined, ensure that we're leasing to owning shopping centers that have the better operators. Back in those days, it was -- it had to be #1 or #2 market share in the trade area. We're probably more to the #1 with specialty grocer today. So it creates a little bit more of a competitive moat for the grocers. And ensure that for the assets in which we are investing, whether, again, it's acquiring, holding -- every day we hold a shopping center, we're making a capital allocation decision or building a new one, is it one of the better performing stores within that grocery chain.

And there's also then the -- is it just really great real estate. And we are very proactive in our asset management. We -- again, every day that we hold a shopping center, we're making a decision, and we know that, and it's how we approach the business. So we feel really good about the strength and quality of our grocery anchors. And for those that may not be the best performing or highest productivity, they're sitting on really good land that we would be happy to get back.

Up there if there's any questions. So stocks have pulled back, right, the retail stocks in second quarter earnings. I don't know if it's macro pressures, the 10-year 5 or oil prices, but there was a quote from the CoStar Director of Real Estate Analytics [indiscernible] came out simultaneously started to see a sell. It say this is the reason why, but I was wondering if you could push back on this, while retail fundamentals remain healthy by historical standards, softer consumer spending growth, elevated interest rates and greater tenant cost pressures, reduced landlord's ability to push rents at the aggressive pace. Are you seeing any kind of slowdown in any way, shape or form?

We are not yet. I assume everyone that's listening could hear the question. The question was really, are we seeing any type of slowdown or softening in our ability to kind of push and to drive rents? And the answer is no, we're not. If anything, we continue to see that strengthening. We continue to increase our percent leased -- and we're getting, as I said even in my prepared remarks, our ability to drive contractual rent growth, so the rent steps within leases and the cash releasing spreads, it's better than historical average each quarter.

I never say never, and we say it all the time, we know we are not 100% immune to economic cycles. And if there is a pullback, and we're really well positioned. I think we're more resistant than the rest of the retail sector because of the quality of our portfolio and because of the property type in which we own and operate.

Can you tell us about your watch list today?

I'll let Christy take that.

So our watch list is about at its historical average, about 2% of ABR, which is where we've seen it the last few years. As we do guide to uncollectible lease income, so bad debt as a percentage of NOI as a percentage of revenues, and that is about -- we've guided to below 50 basis points.

Year-to-date, we're running in the kind of low to mid-30s. So we're doing really well on credit loss right now. We started the year with a couple of uncertainties from a tenant perspective as far as bankruptcies, and we've outperformed that. And you've seen -- we've had some really good resolutions on that, and you've seen us raise guidance partially as a result of that. So right now, our watch list looks good and...

And who's on it?

Who is on our watchlist?

Yes.

Without giving names, I think it's largely from a tenant category perspective, it's going to be the bigger box junior anchors that you would imagine. Some of the names that largely one in particular that was on our watchlist earlier this year that sort of resolved is still on our watchlist. And we're continuing to watch those tenants that have continued to show signs of potential credit issues in addition to those that have recently emerged from bankruptcy.

About gyms?

Fitness is on our kind of secondary watchlist. There are some fitness providers that are on our watchlist .

We're doing well today.

Yes. I mean we're watching credit risk tenants. We're also watching those that are downsizing and those that may close stores at lease expiration. So we're watching our tenants on all fronts on many levels. And we're considering that in our leasing as well as in our forecast.

What about external acquisitions? It's been tricky in grocery-anchored shopping centers as cap rates have kind of compressed and stayed low. Do you have any thoughts on how interest rate trends may ultimately impact the cap rates for transactions? And does that -- is there any potential window that could open up for you to be more acquisitive as we move forward?

I won't go into my detailed history lesson because Christy would probably kick me under the table. But you really can find all that data, right, with regards to interest rates versus inflation versus cap rates. And from the '80s on, it's kind of all over the Board with cap rates, except for one short period of time, are typically going to be above the 10-year treasury rate. I know that's not a shock to anybody.

But the spread between the 2 has really varied over the last 50 years. And I think, obviously, a lot of it has to do with what our expectations. And right now, even with the 10-year at 5%, you're absolutely right, cap rates have compressed and the quality of the property at which we would buy is in the low to mid-5s. So very small spread over the 10-year treasury. Is that going to sustain? And is it going to stay there? I think I don't have the answers to that. I do know what's important to us when we are allocating capital, we have to make sure that we can fund it accretively.

So that's number one. And if we can't, then we will step away. If we can fund it accretively, then we look at the merits of the actual investment opportunity itself. Is it accretive to our growth rate? Is it accretive to the quality of the portfolio. If we -- if you believe that interest rates are going to stay at 5% and go higher for an extended period of time, I think you'd have to expect that cap rates are going to move with it. But I don't know -- I don't have a crystal ball to know if that will happen or when. And if they come back down, I feel pretty confident to say that I think cap rates will stay where they are.

But to date, we've not.

We haven't seen any change. We're still seeing -- and right, acquisitions -- development is even longer term. So those returns take even longer to move. Acquisitions, the only way you're going to say are the ones that are going to go under contract from this day forward. Those that are under contract and closing today aren't necessarily a good proxy for that because they went under contract when interest rates were at a different level.

But I do -- if they stay -- if it stays 5 or north over a period of time, you might see some movement, but I don't think you're going to see like significant movement because they're still -- for all the same reasons I just talked about, it's a hard asset with sustainable, steady cash flow growth with relatively knock on wood, low risk. And so the risk reward for investing in neighborhood grocery-anchored shopping centers is still attracting a lot of capital.

The only other thing I would add is that if we do start to see some movement in cap rates, you're probably going to see it where more of the levered buyers are playing, which is the larger assets.

I guess given where pricing is today, how do you think about pruning assets and potentially redeploying disposition proceeds?

We always evaluate every kind of tool in the toolbox. We like our portfolio. We do believe that growth is better for delivering and creating value for our shareholders than shrinking. We can grow more efficiently than we can shrink efficiently. And therefore, that is certainly our focus. But to the extent that there is big dislocations, we would absolutely look at it and have in the past.

I heard a statement from one of the industry peers that wasn't in shopping centers today. They were asking about M&A and apartments is bigger and better. And his comment was no better is better, which was insightful. So you're big. Can you talk about growing like growing what -- so why do I care that you're bigger if you can grow your cash flow when your NAV by doing what this gentleman suggests?

We agree with whoever that was. We actually say bigger is better, but better is best. And we -- that's what's so great about our position today. We are not -- we don't have to grow. But when we're generating $190 million of free cash flow that we can invest in developments that are at least 150 basis point return wider than what the market cap rate is, we're creating value as we develop those.

That's a good business, and it's one we're going to continue to focus on. There are real -- there are efficiency benefits to the size that we are. I do believe we're at a threshold size where we are gaining those. And if you were to pick, say, we put together a portfolio of $250 million to sell to buy back shares, we would actually go backwards in efficiency. So whereas as we're adding shopping centers, we're not adding people every time we develop a new shopping center. So we're gaining efficiencies with that. So bigger is better, better is best.

Maybe on the balance sheet, I know you've got about $500 million coming due. How should we think about the timing and structure of the refi?

Sure. As you mentioned, we do have a $525 million bond coming due on February 1. We also have some mortgages, some consolidated mortgages that we'll look to finance with corporate debt as well as funding our growth pipeline, funding our growth capital with the acquisitions we're doing, but more notably with our development and redevelopment pipeline.

So we've got some work to do over the next, call it, 9 to 12 months from a debt financing perspective. As we're looking at our options, we are looking at all alternatives. We're looking at the bond market, and we'll look for attractive windows to the extent that we choose to go that avenue. We are looking at the term loan market. We are looking at the convert market. And we have seen a lot of REITs access the convert market.

We have looked at that. We like to think about it in terms of if we look at it from a debt instrument perspective to refinance our debt, we need to look at it as a bond instrument, as a debt instrument. And with that, we would put -- we would issue a cap call with that to increase the conversion premium to make sure that it makes sense. The effective rate on something like that, given Regency's volatility, given Regency's dividend, yield and dividend growth, the effective rate ends up being higher, and it is comparable to where we can issue 5-year debt.

So on that basis, given the risk reward, it doesn't necessarily make sense for Regency given the -- given our access to low-cost debt capital. And if we look at it purely on an equity instrument perspective, then it doesn't make sense for us today either. So -- but we are looking at all avenues, and we have some -- the good news is we've got some great options and great access to capital.

What would 5 year unsecured [indiscernible] these days.

So 5-year, where is the 5-year? I've been more on the 10 years.

It is definitely [indiscernible].

So 10 year, we're at about 85 basis points over.

85 with the 10 year.

Yes. So if we're looking at 5 years, call it, 60 or 65 basis points over.

I know one of the questions we get, I know it's early to talk about '27. I know there's no guidance. We always building blocks to growth into the next year. So help us kind of walk us through. Mike was here, I'd ask.

There is absolutely zero chance I'm giving you 2027. But I mean the building blocks are...

Similar to this year, but nowhere...

No. I mean the building blocks are similar to -- as they've been in years past, right? When you think about same-property NOI growth, and we've been talking a lot about this today, the primary driver of our same-property growth is our ability to push rent.

And when you think about what goes into that, it's -- yes, it's cash re-leasing spread. It's the mark-to-market that we're getting on our leases when we roll them, but it's also the contractual rent steps that we're embedding within our leases. And I think that's really important when you think about a company like Regency, given the amount of shop space that we have because we are getting 3% plus on more than 80% of our leases.

And so we're getting 3%, 4%, 5% annual bumps in these shop spaces where -- and we are doing better on anchor as well. And I know that, that's been a big question. So we're getting, call it, 1% to 1.5% average annual increases on our anchor space. But on that shop space, because those rents are growing year after year, we are closer to market, right, when you get the expiration of that lease, which which is always going to put us in the middle of the pack from a cash re-leasing spread perspective.

A lot of people ask us what's the most misunderstood thing. I think the focus on cash re-leasing spreads is one of the most misunderstood things. We will always be in the middle of the pack, but we will always be ahead of the pack on GAAP re-leasing spreads, right? We're generating 20% plus GAAP re-leasing spreads, and that's what's driving the majority of our same-property NOI growth, more than 250 basis points plus.

On top of that, we're investing capital in redevelopment. We spent a lot of time talking about ground-up development as well as redevelopment. Redevelopment is a great contributor for us for same-property NOI growth. On top of that, we do have occupancy is -- we've been -- we've had great success growing occupancy. And we still have some runway there. If you think about where we are relative to historical averages, we've exceeded our peak on our lease rate.

If we get back to our peak levels on anchor space because we've exceeded on shop space, we get back to our peak levels on anchor space, we can get another -- at least under 20 basis points on our lease rate. From a commenced perspective, which is really what's driving same-property NOI growth, right now, we're at about a 240 basis point spread.

If we can track that back to historical levels of 180 basis points, that's another 60 basis points of runway on top of that, another 20 basis points potentially if we get back to peak levels on lease rate. Lisa is kicking the under the table calling it peak, but we've shown that we can move beyond peak. Beyond that, so that's same-property NOI growth. The building blocks beyond that, we -- again, we spent a lot of time talking about ground-up development. And ground-up development is going to add another 100, call it, 125 basis points, especially as we get closer to those stabilized levels if we can continue to generate $350 million, $400 million of starts and spend. So those are the building blocks.

The debt refinancing is obviously a little bit of a headwind right now. But factoring all of those pieces in, that's -- those are the building blocks that we have the most visibility. On top of that, to the extent that we're able to invest capital to raise capital and invest that capital accretively because we can do all of this without issuing any equity. If we can issue equity and invest that capital accretively through acquisitions, that's additional growth on top of that. And we've shown the ability to do that.

And that earnings growth will translate to dividend growth. Right, the dividend growth will follow and match earnings growth.

Got it. Okay. Rapid fire questions. We've got 3. So one, if long-term rates stay higher for longer, which has the biggest impact on your sector, sector earnings? Higher refinancing costs, lower transaction activity or less new supply.

Higher financing costs .

Yes. Okay. Number two, over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance sheet capital yes or no.

No.

Number three, next year's same-store NOI growth for this sector higher, the same or lower.

The same.

Thank you so much.

Thank you.

Greetings, and welcome to the Regency Centers Corporation Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Christy McElroy. Please go ahead.

Good morning, and welcome to Regency Centers' Second Quarter 2026 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer.

As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on the current beliefs and expectations of management and are subject to various risks and uncertainties. It is possible that actual results may differ materially from those suggested by these forward-looking statements we may make.

Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings.

In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials.

As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one. Please rejoin the queue if you have additional follow-up questions. Lisa?

Thank you, Christy. Good morning, everyone, and thank you for joining us. Our team delivered another excellent quarter, extending the positive momentum we've built over the past several years. We generated strong NOI and earnings growth, driven by sustained operating fundamentals and a disciplined capital allocation strategy. These results reflect the quality of our portfolio, the strength of our platform and most importantly, the remarkable execution of our team.

Across our portfolio, leasing demand trends remain robust, supported by the strength of our tenant base and their continued expansion plans. Our grocery-anchored neighborhood and community centers continue to benefit from a durable tenant mix of necessity, service, convenience and value retailers, while the resilience of our consumer base is supported by the compelling demographic profile of the suburban trade areas we serve. We believe this positions us well to perform consistently through shorter-term periods of macro uncertainty as well as longer term across all economic cycles.

We also continue to execute on our capital allocation strategy with momentum across our entire investments platform, including development, redevelopment and acquisitions. Our national ground-up development program is one of Regency's most important differentiators. In an environment of continued low new supply and scarcity of high-quality available space, our ability to source, execute and deliver successful projects across our target markets is not only a driver of meaningful NOI growth, it also creates value in ways that no one else in our sector is replicating.

Rather than relying solely on acquiring centers at market prices to drive external growth, we are building premier shopping centers at yields that represent substantial spreads to market cap rates. This platform and our ability to consistently drive value above our cost to build allows us to generate earnings accretion while also growing NAV. Mike will go into more detail, but our favorable year-to-date performance and enhanced visibility into the second half of the year gives us the confidence to raise our full year forecast for same property and total NOI growth, and we now expect core operating earnings per share growth to exceed 5%.

Before I close, I'd also like to briefly mention our recently released corporate responsibility report, which highlights meaningful progress across our priorities. Corporate responsibility has long been a foundational strategy for our company. Its principles are deeply ingrained in our culture and day-to-day operations, and the initiatives continue to generate real cost savings and ancillary revenue growth.

In summary, I'm energized by our business today and the opportunities ahead. Our high-quality portfolio located in the strongest suburban trade areas, our leading national development platform, our fortress balance sheet and most importantly, again, the best team in the business, all set us apart. I'm confident in our ability to deliver durable, sustainable growth and long-term value for our shareholders. Alan?

Thank you, Lisa, and good morning, everyone. We delivered another outstanding operating quarter, driving overall leased and shop occupancy to new highs while maintaining robust rent growth, reflective of the fundamental strength across our portfolio. These positive results collectively contributed to same-property NOI growth of 3.8% in the quarter, with base rent growth serving as the primary driver.

Our same-property lease rate is now nearly 97% as we are pushing both anchor and shop leasing higher, supported by continued strong tenant demand and a retention rate of 84%. This is a direct reflection of the favorable leasing environment, coupled with limited availability of high-quality space. Commenced occupancy was also up 20 basis points in the quarter as we continue to successfully convert our SNO pipeline into rent-paying tenants.

Our pipeline of newly executed leases provides us with visibility of further upside in commenced occupancy, which will remain an important component of future same-property NOI growth. Leasing is active and broad-based across nearly every category and region in which we operate. Grocers, health and wellness concepts, restaurants, personal services and value-oriented retailers continue to expand. At the same time, quality space is in short supply, both within our portfolio and throughout our markets, providing our team significant leverage in lease negotiations, and they are doing an excellent job capturing that opportunity.

This is translating into strong rent growth with cash rent spreads above 10% in the quarter and GAAP spreads of nearly 20%. We also continue to successfully embed annual rent escalators into nearly all of our newly executed leases, one of the primary drivers of sustainable base rent growth well into the future. This fundamental backdrop is also supporting our ability to boost expense recoveries. We are seeing our recovery rates benefit significantly from higher commenced occupancy as well as improved lease terms.

We saw the power of this in the second quarter as we completed our expense reconciliations for the prior year with market conditions and the quality of our leases driving success. Building on some of Lisa's comments, our centers benefit from both trade up and trade down behavior, sitting at the intersection of convenience, offering value and everyday essentials. Tenant sales growth is widespread throughout the portfolio. Foot traffic is showing steady increases and accounts receivables remain below historical averages, confirming a very healthy tenant base.

Our team remains focused on capitalizing on strong tenant demand and favorable supply dynamics, creating opportunities to drive NOI higher while further strengthening the merchandising quality in our portfolio. That combination of strong fundamentals and disciplined execution gives us confidence in our ability to continue driving NOI growth.

With that, I'll hand it over to Nick.

Thank you, Alan, and good morning, everyone. During the second quarter, we continued to build on the success of our investments platform, further extending our external growth trajectory. We made meaningful progress across development, redevelopment and acquisition activity in addition to identifying future opportunities.

Our new project pipelines remain particularly strong, providing a clear path to future growth. As a result, we've raised our eye level on new development and redevelopment projects and now expect starts in 2026 to approach $400 million. This truly is a unique story to Regency. We have a visible external growth pipeline that results in real value creation on top of earnings accretion. It also allows us to approach acquisitions as opportunistic and strategic rather than as a required deployment of capital. This is especially valuable in environments like today with transaction markets that are extremely competitive and continue to compress cap rates.

Year-to-date, we've started more than $140 million in new projects, one of the highlights of which was the start of the Berkeley at Durbin Park during the second quarter. This $55 million ground-up project will be anchored by Whole Foods and T.J. Maxx, located within a vibrant master planned community in a strong suburb of Jacksonville. We're also making great progress executing on our $680 million in-process pipeline, for which we continue to expect blended returns of 9%.

Leasing momentum for these projects has been outstanding with in-process developments nearly 80% leased. Beyond accelerated leasing, our team continues to partner with anchors to efficiently get stores open ahead of schedule and accelerate rent commencements. This includes the recent early openings of Trader Joe's at Golden Hills in Central California and Kroger at West Chester Plaza in Cincinnati. These are just a few great examples of the success and positive trends across our pipeline.

In closing, our ability to increasingly source new and exciting projects is a testament to the flywheel effect I've referred to in the past. We are excited about the opportunities in front of us as our recent successes, retailer relationships, development expertise and access to capital allow us to continue to be confident in our ability to drive sustainable and attractive external growth, creating significant value for our shareholders. Mike?

Thank you, Nick, and good morning, everyone. As you've heard from the team, Regency delivered impressive financial results in the second quarter, supported by execution across our operating and investment platforms. We now have enhanced visibility into the second half of the year. And as you heard from Nick, we continue to grow our investment opportunity set and in-process development pipeline. All of this speaks to the power and durability of Regency's growth algorithm. We combine the strong, stable organic performance of our high-quality portfolio with accelerating contribution from accretive capital allocation, focused on successful development and redevelopment projects and operating property acquisitions.

As a result, we are raising our full year outlook. We've increased same-property NOI growth by 40 basis points at the midpoint, primarily due to higher commenced occupancy expectations supported by greater clarity around tenant activity in the second half, in addition to higher expense recoveries following the completion of our annual reconciliation process.

Our revised outlook now reflects total NOI growth in the mid-6% area as well as core operating earnings per share growth exceeding 5%. I also want to highlight a few atypical items within Nareit FFO, which are largely offsetting each other within our guidance ranges. These include a singular lease termination fee that will contribute to a higher level of term fees in the third quarter as well as a reduction to our noncash revenue outlook, largely related to lower below-market rent amortization and higher straight-line rent reserves.

Our A-rated balance sheet remains a competitive advantage with leverage comfortably within our target range of 5 to 5.5x, along with strong and growing free cash flow and nearly full availability on our $1.5 billion revolving credit facility. This flexible financial and liquidity position provides us with attractive access to low-cost capital and supports our ability to fully fund our investment pipelines and pursue additional growth opportunities.

Stepping back, everything that drives value for Regency is working in concert. Strong leasing fundamentals, consistent embedded rent growth and unmatched development-led external growth strategy, a healthy balance sheet and disciplined value-creating capital allocation position us for durable and attractive growth ahead.

With that, we welcome your questions.

[Operator Instructions] And our first question will come from Michael Goldsmith with UBS.

Can you provide a little bit more clarity on the term fees? It looks like you're now expecting a larger one in the back half. So can you provide some more details around that? How is that impacting your revised outlook? And then is that included or excluded from your same-property NOI guidance?

Michael, it's Alan Roth. I'll let Mike answer the guidance side of it. Let me just start with one of our major EV operators decided that they were not going to open 11 of our locations as part of the package deal. Great operator, financially sound. They're going to continue to operate about 15 units within our portfolio. And importantly, we are collecting rent through the end of this year. We got a termination fee of 4 years of rent out of that, and we are already engaged on 8 of those 11 locations for a backfill. So it was overall an exceptional transaction in terms of what's impacting the numbers. Guidance, I'll let.

Sure. Michael, it's a good opportunity to highlight the excellent disclosure on the reconciliation. If you look at Page 6 of our slides, where we -- where you can see lease termination fees is not part of Regency same-property NOI metric. So that healthy $0.015 guide raise in the same-property NOI line is excluding the positive deal that Alan just described. So the $0.015 is incorporated into our core operating earnings raise and FFO raise for the quarter.

But what I would like to highlight is that the raise in same-property growth of 40 basis points at the midpoint, raising both the low and high end is really the material driver to our enhanced outlook. Great leasing activity, enhanced visibility into average commenced occupancy going north from this point forward. And we had a great recovery season in the second quarter, and we think that, that expense recovery ratio will hold for the balance of the year.

Our next question will come from Jamie Feldman with Wells Fargo.

So you walked through a wide range of capital options to fund new investment. You're comfortably in your target range for leverage. Can you just talk about how you do think about the different sources of capital, including OP units as we've seen some of your peers start to use a little bit more? And especially as you find larger deals or if you want to find larger deals, how you think about the mix of capital sources?

I got you, Jamie. So everything here starts with free cash flow. And we're very consistent with how we think about sources and uses. Free cash flow is in the area of $180 million, $190 million this year. We will leverage that neutral to our balance sheet. I appreciate you noting where we are. We are at the lower end of our targeted range, 5 to 5.5x. So we have some capacity there. And that levered free cash flow is the fundamental source for our -- driving our development business. So we can go confidently into that business and make commitments and deliver upon those commitments.

We do have excess levered free cash flow that we can deploy into acquisitions. And to the extent we find bigger transactions beyond that or to the extent we grow our development platform, we will consider other sources of capital. We are very fortunate to have access to all types. That can be JV capital, which we've deployed, and you can see in our results. That can be more debt capital.

Again, I said we're at the low end of our leverage range, and that could be equity. And we've raised equity in the past, and we will raise equity wisely going forward. Rest assured, what you'll see us acquire will be accretive to consistent growth, accretive to consistent quality and most importantly, accretive to our -- whatever source of capital we deploy at that point in time.

Our next question will come from Andrew Reale with Bank of America.

I guess just to go back to the FFO reconciliation, you moved a small number of leases to cash basis in the first half. Just any color on what type of tenants those were and maybe if you're anticipating any more cash basis conversions in the back half?

Sure. Thanks, Andrew. Yes, so the noncash line item, we did revise down this quarter, and there's really a couple of things going on there. As you mentioned, we -- this is a normal part of the business. Tenants will move from accrual accounting to cash accounting. As we know, what happens when that occurs is whatever straight-line rent you've accrued to that point in time gets reversed. And that is what is occurring in this quarter.

To highlight that there is one lease in particular that had an outsized impact on that outcome this quarter, and that's what we're -- that's really what's kind of driving our revised outlook for the year. By the way, just as an aside, that lease that did convert to cash is current on their cash payments. So we're not losing any cash flow in our core operating earnings guidance.

The second element that's going on in the noncash line item is accelerated below-market rent. So pardon me for getting technical. But the good news of retaining more tenants that were on our watch list that we had provisioned for them departing or moving out is not occurring. What that also means is the below market rent that you would have accelerated in the income is also not occurring. So that is revised out of our noncash outlook this quarter.

What does that really mean when you zoom out, cash earnings are growing at Regency. We are retaining more tenants. Average commenced occupancy continues to increase. That is also translating and amplifying through recovery income. And that is what's driving our core operating earnings guide increase of $0.03 at the midpoint. All of those indications are very positive for our outlook. The noncash items are in FFO. And unfortunately, they have moved in the wrong direction on us. But those, again, are not impacting that free cash flow number I mentioned earlier.

Moving next to Ronald Kamdem with Morgan Stanley.

Staying on the presentation, the 94.5% sort of commenced occupancy, I think we've talked about sort of further upside from here. Just can you just tell us in terms of how high you think occupancy can go, specifically in-line occupancy and how you guys are sort of incentivizing the team to sort of keep driving that higher?

Ronald, it's Alan. I appreciate the question. I've had the luxury of saying records are meant to be broken for many quarters. So I've stopped saying that and really not guiding to any -- how far that runway can go. Our teams are focused on great operators, on quality merchandising, and they're going to continue to keep that pedal down.

When I look back at the last quarter of deals that were completed, there's a number of just great users out there that the power of the platform has come into fruition. Sourdough & Co., we signed 4 deals with them in Oregon, Colorado, Georgia, sort of around the country where our teams are banning together on a great use there.

Everbowl, a couple of deals in North Carolina and California. That great concept that I'd say is new, maybe it's not that new is PopUp Bagels, again, multiple deals with them. And then if you transition into like the fitness sector, you've got Solid Core, who's been a strong staple for us and Pilates Addiction owned by the Sequel Brands. There's just some great retailers that the teams are executing on multiple deals around the country, leveraging the platform. So they're going to continue to press forward on great users without any expectation of where ultimately it can go.

From a commenced occupancy to answer that question, we're at roughly 240 basis point SNO spread today. And if you just look back at that historic sort of stabilized number, it's 180 basis points-ish. So that gives a little bit of context in terms of where we think that can go in terms of future runway, which we certainly have.

And Greg McGinniss with Scotiabank has our next question.

I was hoping if you could give us some maybe a little bit of color on the acquisition environment, the availability of shopping centers that kind of fit your underwriting criteria, cap rate trends and then your use of JVs to acquire those? Is there dry capital in the structures or mandates to spend where we could see you continue to invest there?

Greg, this is Nick. We'll start first with just what we're seeing in the market. The market is very active in the transaction world, and we continue to see, especially private capital allocate towards grocery-anchored shopping centers for the same reason we're attracted to them. And so as I said in my opening remarks, that is continuing to quarter-over-quarter compress cap rates.

And so I believe when we talked about this last quarter, I was talking mid-5s plus or minus, and we're now seeing some things trade starting with a 4. And so very aggressive capital from a core acquisition standpoint. The blessing that we have given our business plan, as Mike already talked about is, first and foremost, we're focused on growing our development and redevelopment platform, given the yields you can see that we're accomplishing there and feel really confident in our visibility to continuing to execute the in-process ones and continuing to grow that pipeline.

But then as Mike also said, we do have excess capital, as you alluded to, one part of that is our JV capital. And so very proud of our long-term partnership with State of Oregon. They have re-upped, so to speak, that capital commitment. And so there is quite a bit of availability still within that partnership. And we still have capacity on our balance sheet, as Mike talked to.

And so -- as you can see this quarter, we're still active in the transaction market, but we're going to be picky. We're going to make sure that they check all the boxes Mike spoke about earlier, which is we can fund them accretively, whether that's on balance sheet or with our partnerships and make sure that we like the quality of the asset from quality of the trade area, quality of the tenants and importantly, the quality of the future growth. And so when we see those opportunities, and again, we're very active in that world, we're just very particular to only count on those to check that box, and we're doing that very, very effectively.

And could you just touch on the difference in kind of acquisition cap rate?

Sorry, requeue for a second question.

And moving on to Todd Thomas with KeyBanc Capital Markets.

I wanted to ask about the Kroger, Ahold Delhaize merger. I was wondering, first, can you just discuss whether there's any geographic overlap across the banners there? And if any potential formats, I guess, could be at risk longer term? And then second, a combination there would create a new top tenant for the company, almost 150 basis points more rent exposure than Publix. Just any considerations around that larger concentration and whether that creates any asset management sort of needs or opportunities?

Todd, it's Lisa. I think that you might be confusing Ahold with Giant Eagle. The merger is actually Kroger with Giant Eagle. And I'll let Alan touch on that.

Yes, Todd, Giant Eagle is Pittsburgh based, and that is the announcement with Kroger, of which we don't own any Giant Eagles in our portfolio. And when you think about the 500 assets, the only overlap for us from a market perspective would be Columbus, Ohio. And again, so it's super de minimis. I think there's maybe 3 Kroger centers that have sort of some trade area overlap there, but you're not the first. There's a lot of people that see Giant and assume the Giant that's in Maryland, which is the Ahold, as you mentioned, versus the Giant Eagle out of Pittsburgh. So again, I don't think it's not much of a material thing for Regency.

We'll go next to Michael Griffin with Evercore ISI.

Maybe sticking on that vein of grocers. One of your larger tenants had some cautious commentary in their recent earnings report around consumer sentiment. And I think it's maybe the lower-end consumers getting squeezed. Maybe that's not applicable within your footprint in Regency's portfolio. But do you have a sense has either grocer health or the outlook changed at all? Are occupancy costs stable? And if you could just give us any insights there, that would be helpful.

This is Lisa, obviously. I appreciate the question. I know you've heard me say this before. I've been in the business a really long time, and the grocery business has always been extremely competitive through decades of my experience, and it continues to be so and even more so today. And the best physical locations with the better operators are going to continue to be critical to the entire grocery sector. And you see that through all of their expansion plans, which both Alan and Nick talked about. We're seeing it in our development pipeline with those expansion plans.

I'll remind you that there was even more concern pre-COVID and then coming through COVID, a renewed appreciation for that physical location. And the grocers understand that they need to invest in every aspect of the business from an omnichannel standpoint, and we're seeing that happen. We -- so from our perspective, specifically, we haven't seen anything in our portfolio or in our close relationships and conversations with our grocers that would give us any pause or change our view of grocery whatsoever. We are in active dialogue. And while it is a really, really competitive environment, we believe that operating with -- owning the best real estate, operating with the best grocer banners in those markets is a winning long-term strategy.

Our next question will come from Floris Van Dijkum with Ladenburg Thalmann.

Congrats, solid -- solid quarter again. Maybe if you could talk -- you mentioned your fixed rent bumps that you're getting. I would imagine all your shop tenants have 3% or greater. Maybe talk a little bit about what you're seeing on the anchor side. How successful are you in getting annual rent bumps for your anchor tenants? And are even grocers now willing to contemplate those leases? Obviously, those don't come up very often. But maybe if you can talk a little bit about your -- what's happening also on the anchor front in terms of pushing in -- pushing those escalators through to your tenants?

Floris, I appreciate the question. So yes, you're right, more than 80% of our new shop leases do have 3% or more and importantly, because we're leaning into the or more component for the quarter. Things have also certainly improved, to your point, on the anchor side. Is it having success on the annual escalators that we would all like to? No, I don't think the anchor side has transitioned as much as the -- certainly as the shop world has.

However, what we are experiencing is larger rent spreads than we were seeing before. And then there's many anchor tenants that may have had 10-year, even up to 20-year term flat rents. And in today's environment, you're getting those escalators in maybe 5-year increments. So there's certainly improvement. We are leaning in where we can appropriately lean in, but also being mindful of we want the best operator that is going to be right for our asset, right for the community and right for further merchandising.

Moving on to Craig Mailman with Citigroup.

Lisa, I know you spent a lot of time discussing the differentiator that the development platform has been for Regency, and you guys are upping the starts this year to $400 million. I'm just kind of curious what the potential sustainability or acceleration is even from here to put capital to work and continue to drive the value. And just kind of curious also with cap rates falling to below 5% in some instances, how does that change the replacement cost rent math for you guys or your risk appetite there? And does that free up more projects that may have been a little bit harder to pencil now that the kind of the exit value may be even better?

Craig, I appreciate the question. I'll just reiterate something that you even mentioned that I've said before, and I'll just -- and I will say it again, we have the best national development platform in the business. And I know you've heard Nick say and other members of our team, it's not an easy business. The reason for our success is the experience that we have of the team, the relationships that we have with locally as well as nationally and simply just the ability to execute.

And we have confidence that we're able to sustain, if not grow the levels at which we've been starting projects and deliveries that have come to the future for the past several years. And there's no question we continue to hear others have a difficult time making it pencil, but it's all of those things, cost of capital, relationships, experience that are enabling us to be successful. And I have 100% confidence that, that's going to continue into the foreseeable future.

Our next question comes from Mike Mueller with JPMorgan.

Just out of curiosity on the Berkeley development in your backyard. Is that something you've been pursuing for a while and get planned before? Or is it just more of a recent opportunity?

Yes, Mike, I appreciate the question. We've been working on that project now for several years. So that's why, as Lisa alluded to, these projects are not easy. They are complicated. They don't just sort of fall out of the sky like sometimes some acquisitions do. These are blood, sweat and tears over an extended period of time. But similar to the story we've talked about in the past, it's a great master planned community. It's the entrance into this master planned community. We've been working with that owner for several years to come up with a site plan that works for us and works for them. And obviously, bringing another Whole Foods to Jacksonville, bringing T.J. Maxx to St. Thomas County, we're just really excited about it.

So -- but again, a several year process. And I'd say that to just reinforce what Lisa just said on the last question, which is just why we're bullish about our ability to continue to deliver. We have a pipeline of projects we are currently working on that is very healthy. And we're not going to bat 1,000, but we feel really good about, similar to this one, ultimately bringing those things online in terms of starting them and then more importantly, delivering them as we've done time and time again. And so really excited about that project and excited about ones to come in the near future.

Thank you for asking the question. It gives me an opportunity to come over time and just reiterate because that project is a great example of each one of the things that I said. One, fantastic team locally that is working on that project. Two, it wouldn't have happened without the relationships that we have in this market. And three, it wouldn't have happened without the relationship with Whole Foods. And it's going to be an incredibly -- it's going to be a great center and one that we will own for a very long time.

Moving next to Juan Sanabria with BMO Capital Markets.

Just curious on the acquisition front, if you guys have studied or thinking about expanding the breadth of opportunities to maybe include non-anchored strips or maybe larger lifestyle or power centers just given the compression in grocery anchor. I suspect I know the answer, but curious on the thoughts and the rationale, just given the strength of the asset management team to take advantage of opportunities in those other kind of subcategories.

Yes. Appreciate the question, Juan. As you can appreciate, yes, we're constantly looking at all opportunities across the spectrum of retail real estate. But we continue, as Mike said earlier and I said earlier, to really be particular. We like our formats. We like grocery-anchored neighborhood shopping centers. We like best-in-class community shopping centers for the durability, for the merchandising and for what we believe is the long-term ability to grow rents in those shopping centers. And so that is our primary focus, as you've seen time and time again.

But we are looking at whether it be adding on to our existing centers as you saw us do here with Berkshire, a little strip center. And so we have bought those. We continue to look at those. And when they match our strategy and we can fund them accretively, we will move on those. As it relates to power centers, as we've talked about, the box business is a different business. And so I don't think you're going to see us unless it's something very, very unusual moving into the power center business.

[Operator Instructions] We'll go next to Paulina Rojas with Green Street.

This is a follow-up on JVs. Some of your JV deals maybe wonder how you think about the trade-offs of growing your JV partnership more aggressively, benefiting from the fee income to boost yields versus the complexities in general around partial ownership. And I ask because we have seen other players in our space and also in other real estate industries scale this arm in an environment where, in general, acquisition yields are hard to find.

I'll start and Mike can color up if I miss anything. Paulina, as we've often said, when we think about JVs, we think about employing them for 3 reasons: access to capital, access to opportunity, access to expertise. So that probably -- that comes when it's a different use perhaps. The other 2, we don't -- we're not in a position to say where we need access to capital, never say never. We do appreciate the partners that we have, and we'll continue to invest in those partnerships, maintain those relationships. If there ever is a need for access to capital, access to opportunity. And as we've been acquiring with Oregon, it does help us execute on these acquisitions on an accretive basis for the reasons that you mentioned.

And Oregon is a 20-plus year partner. We do still have capacity, and we will still continue to invest that capital that we have with them. To the extent of scaling further, that's something that we would always evaluate. And again, if it checks one of those boxes, if it gives us access to opportunity, and that opportunity is going to check all the boxes that Nick and Mike mentioned. Is it accretive to earnings, is it accretive to future growth rate and accretive or equal to the quality of what we already own. That's how we think about it.

Moving on to Michael Gorman with [ BTG Pactual ].

Lisa, you mentioned the corporate responsibility report. And obviously, Regency has seen significant growth in kind of renewable energy out of the portfolio in recent years. But maybe with the kind of the national conversation and local level pretty active around power generation and electricity bills. I'm just curious what kind of the go-forward opportunity is to expand the solar program at Regency and how you think about that, not just from a corporate responsibility, but from an investment perspective, whether it's on the expense side of Regency or services you can provide to the tenants and the communities. Maybe just some color there on where that could go in the coming years.

I think I'll probably -- I'll let Alan hit those tactics, but I'll just reiterate that corporate responsibility is just, again, ingrained in our culture. You look at our values on our website, we live those, connecting to our communities, being responsible, striving for excellence, all fits our priorities as we think about corporate responsibility in which renewable energy and solar is part of that. The opportunity for that, though, I'm going to let Alan.

Yes, Mike, I would just expand upon, obviously, the corporate responsibility being certainly step one. A lot of our developments, we're incorporating that into right out of the ground, whether some municipalities requiring it or others that are not. And then also thinking about it from an ancillary income perspective and not just solar, but there's a various amount of things that we're thinking about. It's not a small part of our business. I mean it's nearly $35 million a year of ancillary income, and it is growing. And it's beyond just the solar, it's the EV revenues, it's fees, it's temp deals, it's different various marketing events. And so I think it's checking a lot of boxes and something that we remain keenly focused on.

And I'll just add, we do continue to invest in our solar program. You see that in the growth that's within our corporate responsibility report. We are adding new projects this year. We're underwriting new projects for future years. We're having the most success in states like Connecticut and Massachusetts and California. So we continue to grow that program.

And we have a follow-up question from Floris Van Dijkum with Ladenburg Thalmann.

Thanks for taking my added question. More on the capital allocation front and development is really what your unique sauce in some ways, I would say, about Regency. And I think, Lisa, you mentioned a couple of times on the call as well. Maybe talk about -- you don't have -- you don't seem to have a big land pipeline. How do you tie up land? Because when you do development, land presumably is one of the biggest swing factors in whether a project pencils or not. Can you maybe talk about your strategy regarding getting access to land? And how do you look at that as you build your future pipeline going forward?

Floris, I'm going to -- I will let Nick answer the question, but I just love that you open the door for me to just say it one more time. It really is a differentiator because we are allocating and investing our free cash flow in shopping centers that you would otherwise need to buy at market cap rates, and we're developing them at returns that are substantial spread to that. So it is -- it really provides us that visibility to future growth as we deliver these. So I appreciate you recognizing it and giving me another opportunity to say it.

Yes. And I'll just add to that, Floris. Specifically to your question, I appreciate you focused on that because if you do look at our land held, it's actually shrunk over the last couple of years as we've grown our development program. And that's really because we brought some land in that we had legacy land into production, and we haven't had to speculatively purchase land to grow the program.

And so specifically, we're being very, very efficient in our ability to more times than not, not close until the project from our perspective is very effectively derisked. And so that means entitlements in hand. That means pre-leasing with our anchor, especially and even shops in many cases, hard bids in hand. And so that we feel really, really good, not only about our going-in yield, as Lisa alluded, and you can see our ground-ups are 7% plus, but also delivering them at those yields.

So it's one thing to plan about those yields. It's another thing to bring them online, which we're doing very effectively. And so to your point, we have to work with the seller and control the real estate through contracts. And so that's how we continue to work with master plan developers and other sellers. We explain it in the process, and they share in some of that risk, so to speak, to maximize their land value and put it into production. So -- really proud of the team. And again, it goes back to Lisa reiterated, just those relationships. The success we have in the market, the relationships we have with the grocers, when we sit down with the seller, we're transparent. We tell them what's ahead of us collectively, and our track record speaks for itself.

We have another follow-up question from Jamie Feldman with Wells Fargo.

Great. Along those lines, just thinking about some of the other construction costs, can you just give us the state of affairs of what construction costs are doing across your markets for the major pieces of your projects? And then if you don't mind, medical and fitness has been growing in the portfolio. What are your thoughts on how large that could get in terms of total ABR and the credit quality of those types of tenants?

Thank you, Jamie. We'll sneak in 2 questions. I'll take the first and then have Alan take the second. So the first in terms of cost, as you've alluded to, look, it's volatile. There's no question. Fuel prices today are very volatile. At the time we've been on this call, I haven't checked, but for all I know they've gone up or down 10%. But the really good news about our team, and as I just talked about in the previous question, our derisking of these projects is, look, we've been doing this for a very long time, forget about even decades, just look over the last 5 or 6 years, and we've dealt with major supply chain issues as we were building shopping centers coming out of COVID.

Then came the tariff impact and the potential impact of that on our projects. And now here we are dealing with fuel price volatility. And so it's not a fun part of the construction business, but it is just the reality of the construction business that volatility is always part of it. And so -- our teams do an excellent job of, again, bidding the majority of these costs before we even start to try to derisk it.

But then hearing appropriate contingencies and cost escalation to deal with the unknowns. They always happen. We don't know what they are. That's why they are unknowns, but we have appropriately underwritten contingencies, which is why you've seen the vast majority of our projects come in on time and on budget. And we're not going to bat 1,000. So every now and then, there's a little bit of an impact. But if you look at a blended basis, we're winning more than we're losing in terms of our underwriting and why we continue to feel confident as much as it's not fun dealing with volatility that even through volatility, we can perform at the numbers we're showing you all.

Jamie, on your medical and fitness question, we are at about 12% of ABR, and that is up 200 basis points over the last roughly 5 years. So we certainly are leaning in more. I would tell you the medical tenants certainly tend to be stickier -- and it's something that has become a bigger part of the open-air shopping center arena. From a fitness standpoint, look, healthy living is a very real mindset in today's environment. And so again, we feel really comfortable and really confident in having fitness as something that the consumer and our communities want. And it's just really about aligning with the right operators. So again, I don't have a specific target, but it is something that we are clearly leaning a bit more into.

And our next question will come from Tayo Okusanya with Deutsche Bank.

Lisa, while I recognize that the focus from an external growth perspective is on the development side. Curious how you're thinking on the acquisition front. It's been a while since you've done a large deal. Curious how you're thinking about further consolidation amongst the public names in the space or if the strategy there is really more to be selective finding kind of onesies and twosies where they kind of fit your bill.

I appreciate the question, Tayo. We are always active. And I will remind you that last year, it wasn't a merger, but we did acquire a large portfolio in Southern California, which was funded very accretively. So we are constantly evaluating the entire market whether -- and it's just that we approach it the same way, and we have always said that, whether it's a single asset, a portfolio of assets like we acquired last year or whether we're looking at a company. And we have the balance sheet to act, and we have the team to capitalize on those opportunities. When they are presented, we will be aggressive and we will act offensively.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Lisa Palmer for closing comments.

Thank you all for your time today and happy Thursday.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Welcome, everybody. For those of you who don't know me, my name is Michael Griffin. I'm a senior REIT analyst for Evercore ISI covering the retail REITs. I'm pleased to be joined by senior management from large-cap shopping center Regency Centers. And I'll turn it over right now to President and CEO, Lisa Palmer, for some quick remarks. I've got some questions here, and there are mics up here, so feel free to jump in during the Q&A.

So Lisa and team, thank you very much.

Thank you, Griff. Good afternoon, everyone. I will keep these short because I'm certain that Griff's questions are going to be better than anything I may say to you. Joining me today, I have Mike Mas, our CFO; and Alan Roth, our Chief Operating Officer, East Region President.

Consistent with our most recent earnings call, we are off to another really strong start in 2026. We delivered meaningful growth in both same-property NOI and earnings in the first quarter, and that's driven by healthy operating fundamentals and disciplined accretive capital allocation.

These results really are a reflection of the disciplined strategy that we pursued over many years. We own high-quality centers in some of the country's most attractive suburban trade areas, anchored by leading grocers and other retailers that importantly serve consumers' daily needs. Those characteristics continue to support strong tenant demand, healthy leasing activity and meaningful rent growth across the portfolio. And really importantly, very little new retail supply is being added across the country. And so we believe the outlook for well-located neighborhood shopping centers like ours remains really compelling.

We're also extremely excited about the opportunities within our investments platform. Development continues to be one of Regency's key differentiators and an important driver of our long-term growth. Our ability to source, execute and deliver high-quality projects, again, in supply-constrained markets and environment is creating value today and positioning us for future earnings growth. As we look ahead, we remain confident in both the operating environment and Regency's competitive position. Again, the combination of a high-quality portfolio, a leading development platform, a strong balance sheet and an exceptional team continues to position us well to create long-term value for our shareholders.

And with that, Griff, we're happy to take your questions and questions from the audience.

Well, Lisa, thank you very much for the prepared remarks. Maybe we can just start on the topic of leasing. I think as you've mentioned on previous calls and seems to be a throughput for Regency, you continue to benefit from both strong leasing spreads and high occupancy. Just given everything that's been going on in the macro right now, whether it's worries about inflation, elevated gas prices may be impacting consumer sales and traffic. I mean how confident are you that the current leasing and pricing momentum can be sustained?

Michael, I'll go ahead and take that. Great question. And I will tell you, this is probably one of the best leasing environments in my nearly 30-year career that we've been in. And you're absolutely right. If you look at our trajectory of both rent spreads and our embedded annual rent steps or GAAP spreads, that trajectory has been going in the right direction for quite some time. We are focused on the now. We're focused on the present, and we're going to continue to lean in, in this environment for as long as it will have us.

That said, I think what's important is we are always very diligent in how we think about qualifying our operators, ensuring that it is the right merchandising for our assets and that durability does, in fact, matter. We are partners with our retailers, they are our customers. We're going to push in an environment like we have today, and we are pushing. But we're also going to be in a position where we will ensure we all thrive as we move forward.

And Alan, maybe on that pushing that you sort of highlighted the negotiations with the tenants just given the favorable supply/demand dynamic and backdrop that Lisa alluded to earlier, I mean, how does that benefit Regency from a leverage perspective in terms of working through either new or renewal lease negotiation? Just maybe kind of lay that out for us in terms of the pricing dynamic and the leverage that it feels like landlords have right now given the more favorable backdrop in terms of supply.

Yes. It's interesting. I would probably start with our ability to get great retailers to sign leases 2 to 3 years out. 6, 7, 8 years ago, we may not have had that. And it's an environment right now where retailers are locking in space because they know that, that lack of supply is there. They have the desire to continue to grow. And when we find that right retailer, we're signing deals on occupied space.

And so let's put economics aside for a moment, we're getting the retailer that we want and the retailer is getting the asset that they want, and they're willing to sign a deal today that perhaps may not open until 2028, 2029. Using sort of the anchor front as an example, we've got a signed Nordstrom Rack lease and a signed Arhaus Furniture lease for 2 spaces that are currently occupied, where we proactively went out to re-lease space that we thought a tenant who was on our watch list was going to file bankruptcy. And ultimately, that tenant got acquired but that lease is out of term. And so it's an opportunity for us to enhance merchandising and these retailers are willing to wait for that.

Beyond that, certainly, there is opportunities for a lot of levers to pull, right? And it may be a complex landlord work letter that is now a fixed tenant allowance contribution, again, speeding up the process to rent commencement dates. It might be outside rent commencement dates. It's nonmonetary provisions in our leases that we're leaning into from a leverage perspective right now. No exclusive or limited exclusive, no cotenancy or limited co-tenancy, again, giving us the ability to unlock revenue. So it depends on the asset. It depends on the tenant. But generally speaking, it's a really good environment to lean in where appropriate, but continue to do that in partnership with great retailers.

Obviously, a key value-add proposition and driver for Regency's business success has been being a dominant landlord for the top grocers in a given MSA area. I guess how important maybe is that relationship with key grocers in the market? And then how is that an incremental traffic driver to the center? And maybe you can benefit more on kind of the small shop leasing side there. Maybe talk about the grocery dynamics in the portfolio for a bit?

It's an important -- so the strength of the grocer and the amount of traffic that the lead anchor, which is the grocer in most of our shopping centers is critical to the success of the shopping center. And I've been at the company for several decades now. And it has -- we have remained disciplined with that in terms of partnering with and ensuring that we are leasing to and operating our shopping centers with the leading grocers for those markets. So it is critical.

And importantly, so not only -- because the grocery business is a competitive, challenging business. It is important to be sure that we are working with and have relationships with we develop for, we own shopping centers with the leading grocers across the country, and it's going to be different in different markets, some specialty grocers, some traditional grocers.

But importantly, we also have their most productive stores within our portfolio. So the quality of our real estate, the quality of our trade areas enables them to have highly productive stores within our shopping centers. Those highly productive stores generating that amount of sales clearly benefits the other merchants, the other retailers within our shopping centers because it's driving traffic which then translates to higher tenant sales, translates to the ability to pay higher rents, translates to the ability to have higher escalators within -- for annual rent steps. And it all ends with the ability to drive and sustain steady, same-property NOI growth.

How important is it being in an area within an MSA with the right demos, right? I think about Buckhead in Atlanta or Highland Park in Dallas, as an example, where you have big presences in your portfolio? Like how important are the demos to then driving, I think, profitability and sales for the tenants that then ultimately benefit from as the landlord?

The trade areas -- we have -- we track a lot of information. We have a lot of data sources that we use. The purchasing power within a trade area. So the combination of population densities and household incomes clearly are what enables the customer to spend money at your shopping center. But it goes a little beyond that. So you need -- you certainly need income growth. If there's income growth within the trade area, the customer's disposable income will grow and will enable them to spend more money, which will then translate to higher tenant sales.

But it's also -- it's everything that Alan talked about in terms of -- and I say this all the time, consumers have choices. They do not need to come to your shopping center, our shopping center. They -- consumers can essentially get what they need without leaving their house for many things. And so we need to create a place, a thriving place, an environment that attracts the shopper, they want to come, they want to shop there, and they will spend time there and they will spend their dollars there. And that's placemaking, it is merchandising. It's a mix of merchandising. It's making sure that we do have the right grocer and in addition to the right grocer, the right mix of other retailers and service providers.

It's -- there's no specific recipe that I could sit here and tell you that this is what it looks like in order to make it successful. But it's something that we have a tremendous amount of experience and a great track record, disciplined investments, so making sure that we are investing in the right shopping centers, we continue to own those and we operate them with the best team in the business.

Griff, let me just add to the supply dynamics. To the trade area dynamics, supply is also a key factor. So we measure not only household densities and average household incomes, but we're looking at GLA per capita with and without grocery stores. And it's important to us to have high barriers to entry protecting the value of our assets and driving the best tenants to the same locations.

So Mike, maybe a segue to that on supply. First, I'd be curious to get your thoughts on number one, why high-quality shopping centers have been so supply constrained for so long? And then number two, I think a big differentiator for Regency is the ability to do ground-up development, why is that the case that Regency can execute where others can't?

Sure. We've seen a significant downshift in supply growth post GFC. So it's been 15-plus years of limited new supply. Some of the headwinds that tenants are considering as they look to expand their portfolios and us as a developer, construction costs are meaningfully higher. Land prices are meaningfully higher and best uses and the competition for land is different. Not every parcel of land can or needs to be a shopping center. We've had e-commerce penetration as well. All of these headwinds have produced this environment where we will, we believe we have and we'll continue to have lower new supply, which is helping support the valuations of our shopping centers and our assets.

At the same time, we have been a developer for our entire company's existence. It is a competitive advantage. I believe -- we believe that even with the supply -- new supply constrained environment, our development business is even more valuable. Why is that? It's relationships with landowners, its relationships with master plan community homebuilders, tenant relationships, certainty of execution, which we've earned over decades of time.

What does that lead to? It leads to deals and success begetting new deals and more success. Tenants pointing us to new opportunities. Landowners coming to Regency to execute. And you wrap all that around this balance sheet and this free cash flow in this funding vehicle where we can make commitments that are not dependent on financing. We have free cash -- levered free cash flow to support it. So we find ourselves in this period where we're going to continue to lean in on development and create real value for our shareholders at a time when there will be limited new supply, further supporting the value we're creating.

And it is that lack of meaningful new supply that's the great backdrop for our operating portfolio.

And I know we didn't touch on just now, but the redevelopment opportunity within the portfolio, it seems like that is a high-quality use of capital in terms of the returns that you're generating there. So maybe you can walk the audience through the opportunity set there, whether it's -- you're upgrading the tenant quality at a center, you're bringing in a higher, more productive tenant that's paying a more meaningful rent. Just maybe if you could talk about the redevelopment initiatives going on at a high level, that would be helpful.

Yes, I'm happy to answer that. Go ahead.

We will fight over this one. So we have always been very proactive asset managers. And it's an important part of growing same property NOI. And with a portfolio of 500 -- approximately 500 shopping centers, there will be opportunities annually for us to be able to invest capital back into our properties. And we're fortunate that we then have the ability that we are not necessarily just focusing on maximizing occupancy at any single point in time, but maximizing the long-term value creation and long-term NOI growth. And as trade areas evolve, as retailers evolve, there will be those opportunities. And again, we do proactively manage it. Oftentimes, you do need a triggering event to kick that off. But it has been a meaningful part of our long-term growth and our sustainable NOI growth for -- again, similar to development as for as long as we've been a company, and we'll continue to be.

Let me put some numbers around it, if you don't mind. So we have communicated about we see an opportunity of about $1 billion over the next 3 years in development and redevelopment. You can think of that as about 1/3 coming from redev and 2/3 is coming from ground up, just to give a little bit of flavor to our forward profile and that internal redevelopment, it will be additive to our same property growth rate over time.

And Mike, can you remind the audience what your expectations for same property NOI growth are this year?

We're in the mid-3% area as a midpoint.

Sticking just on the external growth vein, you have had some acquisitions over the past year or so at, I think, relatively attractive cap rates just given how much of a bid there is for high-quality grocery-anchored centers. As you look at the competitive landscape and the strong private market bid out there for grocery anchored, how does Regency set itself apart in terms of growing externally through acquisitions? Is now a time to lean into that? Or is it more competitive and making it harder for acquisitions to pencil right now?

Acquisitions are really challenging and not the question you asked, but I will reiterate the best use of our free cash flow is to our development program and redevelopments, and that will be the highest priority to the extent in which we do then have further capacity to invest and to grow externally. We are active in the acquisition market, but there is a lot of capital pursuing high-quality grocery-anchored shopping centers. And again, it's what makes our development such a differentiator because these high-quality grocery-anchored shopping centers in the acquisition market are trading at cap rates, say, in the mid-5s, and we are able to develop shopping centers similar of quality, similar characteristics with a 7 in front of it. So we're creating real value with that.

It doesn't mean we're not active. We are active. I appreciate you recognizing last year, we acquired a portfolio of shopping centers in Southern California at a very attractive cap rate. I think that may have been the one you were referring to. And that was off market. It was not marketed, and we were able to use units and the seller recognized and appreciated what Regency could offer by taking Regency currency essentially.

So similar to development relationships, having those relationships within the markets, having a track record of success certainly will play into our ability to be successful in the acquisition market. For marketed deals, they're competitive and we will win some and we will lose more than we win in the marketed deals. Our cost of capital is an advantage.

I think a big topic in the market just broadly today is around AI and the initiatives that companies are undertaking to leverage AI within their enterprise. So maybe you can give us some examples, whether it's on the leasing side or development of ways Regency has been able to integrate AI into its work processes to make it more efficient.

Let me go first and then -- I saw Mike and Alan both lean in.

Chopping at the bit.

I'll let them talk more specifics because I like to talk -- AI to me is just a subset of what we are focusing on and what we should be focusing on. Enterprise intelligence is what we call it internally, it's a foundational strategy, but that incorporates data analytics, all technology applications as well as artificial intelligence. And how I think about it is using those -- that enterprise intelligence really 4 objectives, if you will, as we apply those technologies and use data analytics, incremental revenue drivers, cost savings, better decisions. So can it help you make better decisions and make those decisions time to insight quicker. And that's -- those are the objectives in utilizing technology and artificial intelligence, and that is how we think about it. And we do have specific examples. And I think that the company has made tremendous strides over recent years in utilizing and leveraging analytics and technology.

You or me, Mike?

Go ahead.

Yes. No, I would just start, I am really excited. But we are -- we're in the early stages. I think we all need to acknowledge certainly that there's a lot more to come on this front, not just at Regency or the retail sector, but just in the overall macro environment. But a few things that we're seeing is certainly the opportunity to enhance operational efficiencies, speed to getting information to us. And just a few examples, GC.ai is a tool that we're implementing right now. And if you think about the old school ways of I'd like to do a coffee shop, but does Panera Bread have a coffee exclusive. Just by way of example, right, it's an opportunity to not have to reach out necessarily to the paralegal to abstract and just boom, you've got access to lease abstracts pretty quickly.

When you're unlocking a redevelopment, and again, are there a whole lot of changes of common areas that we need different consents, how do you take 25, 30 shopping center leases to then quickly be able to abstract things and get answers faster to make things more efficient. So excited about that, leaning on tools from the project management perspective as well so that we can have access to better information faster, how can we slice and dice the dollars that we're spending in renovations and just property operations CapEx and slice it by region.

And again, be able to lean on that as we think about forecasting as we think about projects that we want to do, again, I think it's an opportunity to do things faster. So there's a lot of different projects that are in process right now, and I'm excited about what's in play currently. But frankly, I'm more excited about what's -- what is ahead and what's to come.

I think one question that's worth just keeping in mind that maybe not as applicable to Regency as others in the retail space more broadly is just tenant credit and tenant health. So again, maybe not as applicable, but for maybe your portfolio, Lisa or Alan, how has tenant health or bad debt been trending? And I guess, are there any worries that if inflation picks up and there are some cracks in the consumer that it could worsen? Or maybe if you could speak about that a bit, that would be helpful.

I know you directed that there -- I'm going to take it. So our portfolio health is -- has been at an extraordinarily high level for some period of time. We're below 2% from on an ABR basis with respect to what we would call a watch list tenant that is below trend. Bad debt expense or ULI is trending below historical averages. An interesting phenomenon over the last 3 years is from my seat is the velocity at which bankrupt space is reabsorbed by the tenant community and that we're seeing more -- a higher frequency of leases being acquired in bankruptcy court, which is new over 15, 20 years. So it just speaks to the overall health of the environment and the lack of new supply that we were speaking about earlier.

And tenants -- I mean we're even seeing filings of reorganizations where they're not turning back any space at all, which is, again, unusual, historically speaking. So there's this appreciation for the brick-and-mortar presence that tenants and even failing brands are trying to hold for as long as they can.

And Mike do you -- Sorry, go ahead.

I was just going to add because how you led into that question, may not be as applicable to Regency. It's intentional that -- it is the strategy that we've employed. It is the merchandising strategy, it's the leasing strategy that our tenant health is so strong. So it is very applicable. And the fact that when we do have bankruptcy events, that we fare really well on a relative basis versus the rest of the sector in terms of the -- because of our strong tenant health. And because of the -- and again, I'll go back to because of the individual stores, even within the chains tend to be the higher productivity stores within those chains, which then translates to better success and lower bad debt and lower failures.

I know we've got about 5 minutes left. Any questions in the audience? It doesn't look like it.

Okay. Just wanted to ask one on the trade-off between occupancy and long-term NOI growth. I know Regency for a long time, has emphasized optimizing long-term NOI versus near-term occupancy which could include opportunities such as remerchandising or redevelopment. How do you weigh the cost benefit of, say, trying to renew a tenant at a lower renewal rate versus maybe recapturing that box and then ultimately being able to release it at a higher rate though it might put some near-term pressure on occupancies.

That is a great question. It's a complicated question. It is an art, not a science, I would say that. But look, there's a lot of things that we think through. And generally speaking, how can we create the most value at the asset level that's right for that community that delivers the most accretive returns. And so we may sit there and say, we just had a conversation actually earlier today about a tenant that we're confident. Do we keep them? Do we not keep them? So it is case-by-case, but long-term NOI growth is certainly the most important thing for us. These embedded rent steps are critically important to us for sustainable long-term growth, having the right durable tenant is very important to us.

We don't -- I think one of the things I'm most proud of our team, we don't just lease to anybody. We have merchandising plans that we thoughtfully think about all of our assets, who should be in our shopping centers, what is our operating experience, what is their credit like? How will that benefit the rest of our asset and we are getting out in front of watch list tenants. We're getting out in front of emerging tenants that we want to be part of our portfolio. Every asset is unique, every market is unique. And it's a very thoughtful approach to how we execute.

I'm going to correct, Alan. It is both art and science because it is a -- it clearly is -- there's math involved as to what you believe is going to be the best investment and the best decision. The art is in the assumptions that are -- that are made based on experience, track record, and that is where having the platform, the team that I think we have a portfolio and a country full of wonderful artists that are feeding the assumptions into the science.

Really well said. I'm going to actually use that.

That's a great line. I know we've got a few minutes left here. So maybe, Lisa, just some parting thoughts for our audience. You look at the value proposition opportunity that Regency offers as a whole to use maybe a line I've used in the past, give your top reasons why you think investors should look at buying Regency stock today?

Our long-term growth outlook with the development platform that we have will and should, I'm confident, put us at the top of the sector in terms of earnings growth going forward. We have the best team in the business, and we have the balance sheet to fuel it.

Well, guys, if there's nothing else, thank you so much for your time. Thank you to Lisa, Mike and Alan, and enjoy the rest of your conference.

Greetings, and welcome to the Regency Centers Corporation First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Christy McElroy. Please go ahead.

Good morning, and welcome to Regency Centers' First Quarter 2026 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer.

As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on the current beliefs and expectations of management and are subject to various risks and uncertainties. It is possible that actual results may differ materially from those suggested by these forward-looking statements we may make. Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings.

In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials.

As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one. Please rejoin the queue if you have additional follow-up questions. Lisa?

Thank you, Christy. Good morning, everyone, and thank you for joining us.

We are off to an outstanding start to the year, building on the positive momentum from last year. In the first quarter, we delivered strong Same Property NOI and earnings growth driven by robust operating fundamentals and accretive capital allocation. Our results demonstrate the durability of our portfolio, the strength of our platform, and the execution of our team.

Our tenants are performing well in our centers, supported by the resiliency and spending power of consumers in our strong suburban trade areas, as well as our focus on essential retail anchored by top-performing grocers. It is this combination of high-quality trade areas and our concentration of necessity-based, value-oriented, and convenience retail that positions our portfolio to perform consistently, even in uncertain macroeconomic environments.

We also continue to see significant momentum across our investments platform. Our track record of success in ground-up development is one of Regency's greatest differentiators and is a key driver of our external growth strategy. In an environment with very little new retail supply, our ability to source, execute and deliver high-quality developments across the country really sets Regency apart. Our project deliveries will translate into meaningful NOI contribution in 2026 and beyond, boosting total NOI growth, and driving earnings and NAV accretion.

As we look ahead, I'm really energized by our strong start to the year and by the opportunities in front of us. I want to reiterate just how distinct Regency's growth story is. Our portfolio of high-quality, grocery-anchored neighborhood and community centers located in some of the strongest trade areas in the country, has consistently delivered durable cash flows across economic cycles. Our leading national development platform is creating meaningful value for shareholders at a time when few others can compete with our expertise, relationships and proven results. Our strong balance sheet gives us flexibility and the capacity to be opportunistic with low cost and substantial access to capital. And most importantly, we have the best team in the business.

With this foundation, Regency is exceptionally well positioned to continue delivering strong and sustainable growth for our shareholders. Alan?

Thank you, Lisa, and good morning, everyone. We delivered another excellent quarter to start the year, following what was a record-breaking year for us in 2025. The fundamentals across our portfolio remain strong, and I couldn't be more proud of our team's execution. Tenant demand continues to be robust across nearly all categories and regions, spanning both anchor and shop space. Grocers, restaurants, health and wellness concepts, and off-price retailers are among the most active, but the breadth of engagement across our portfolio is really impressive. The availability of high-quality space is increasingly scarce, both at our centers and in our trade areas, and that dynamic is working in our favor.

Our Same Property percent leased, which is approaching 97%, was up 10 basis points over the fourth quarter. A sequential uptick in Q1 is seasonally unusual, and it really speaks to the strength of the demand we're experiencing and to the durability of our occupancy. Leased occupancy is now close to our prior peak, though I am confident further upside is achievable, particularly in anchor leasing, where we continue to have meaningful engagement with leading national retailers. What is especially encouraging is the nature of our activity today. We continue having success proactively leasing occupied space, upgrading merchandising, bringing in new and vibrant concepts, and replacing outdated or underperforming uses.

Our Same Property commenced rate also increased 20 basis points in the quarter as we made meaningful progress commencing tenants within our SNO pipeline. The pipeline continues to be a significant tailwind to future NOI growth, representing approximately $42 million of incremental base rent. We achieved robust cash re-leasing spreads in the first quarter and GAAP spreads were near a record high. These results reflect our ability to achieve compelling mark-to-market rent increases in addition to embedding meaningful contractual rent steps into our leases. That success is the basis for our ability to drive strong, sustainable rent growth within our portfolio over the long term.

Same Property NOI growth of 4.4% in the first quarter was reflective of these strong operating trends, along with the substantial progress we've made raising occupancy and completing redevelopment projects.

In closing, the trend we are seeing in leasing activity, tenant sales, collections and foot traffic remain very favorable. We are positioned for success and continued growth ahead and I'm excited about what our team will accomplish.

With that, I'll hand it over to Nick.

Thank you, Alan, and good morning, everyone. We continue to have significant momentum within our investments platform, evident in an active first quarter of accretive investment activity. Our team is successfully executing on and delivering projects within our in-process pipeline, and we continue to source attractive new ground-up projects.

During the first quarter, we completed $42 million of projects, including Oakley Shops at Laurel Fields, a Safeway-anchored neighborhood center we developed ground-up in the Bay Area. Our team did an exceptional job bringing this project to fruition in less than 18 months, one of the quickest ground-up deliveries that I can recall.

We also started another $73 million of new projects this quarter, including Crystal Brook Corner, a redevelopment on Long Island. We acquired this underutilized piece of real estate and are transforming it into a Whole Foods anchored neighborhood center. This project demonstrates our ability to look at acquisition opportunities through a differentiated lens, leveraging Regency's platform, our relationships and our development expertise to drive near-term value creation.

Our in-process pipeline now exceeds $600 million, with exceptional leasing momentum and blended returns above 9%. The team has been executing these projects on time and on budget, which, I want to emphasize, is a direct result of the substantial risk mitigation we undertake before we break ground.

Within our ground-up development platform, we continue to see remarkable results. An example includes Ellis Village in Northern California, which we started in the second half of 2025. The project is already 100% leased with an anticipated anchor opening later this year.

Our SunVet and Stone Bridge ground-up projects in the Northeast each celebrated Whole Foods openings during the first quarter, both with strong community reception. As Lisa discussed, ground-up development remains a substantial differentiator for Regency, and our brand as a developer has never been stronger. We are the only national developer of high-quality grocery-anchored shopping centers at scale in an environment of otherwise limited new supply.

Our teams are actively sourcing new projects, and we continue to have visibility to a potential of more than $1 billion of project starts over the next 3 years. Leading grocers across the country remain engaged and eager to expand with us and shop tenants are excited to be part of our projects. Landowners trust us to deliver given our proven track record and the strength of our grocer relationships, particularly among master plan developers, where our retail projects are providing a significant amenity and value to their communities.

This positive momentum continues to enhance our success, strategically positioning us to capitalize on additional opportunities. We are creating real value for shareholders at meaningful spreads to market cap rates, and we are excited about the opportunities for continued growth in our investment platform. Mike?

Thank you, Nick. Good morning, everyone. Regency delivered another strong quarter to start the year, a testament to our team's continued execution on our strategy and the favorable conditions of our markets. Same Property NOI growth was 4.4% in the first quarter including 3.5% of base rent growth. Recall last quarter, we discussed that Q1 would be above and that Q2 would fall below our full year guidance range. With this quarter driven by the uneven nature of other income, and next quarter driven by a tough comp relative to last year's favorable expense reconciliation performance. Most importantly, base rent continues to grow at very healthy levels, benefiting from increasing rents, commencing our SNO pipeline and delivering on our accretive redevelopment projects.

Looking through the variables in first and second quarters, we are maintaining guidance for full year Same Property NOI growth of 3.25% to 3.75% as well as for growth in core operating earnings and Nareit FFO per share each at 4.5% at the midpoint. We continue to expect total NOI growth north of 6%, reflecting meaningful contributions from ground-up development deliveries and the substantial acquisitions we completed last year.

We did make a few minor assumption changes within our outlook. We modestly increased development and redevelopment spend as a result of increased starts expectations as well as our acquisitions guidance to now include known transactions. These changes reflect continued strong investment activity and support positive momentum in external growth and value creation.

The strength of our balance sheet is an important element of this ability to accretively allocate capital. We have worked strategically over time to position the company with low leverage, strong liquidity and dependable access to attractively priced capital. In February, we issued $450 million of 7-year unsecured notes at a 4.5% coupon, achieving the lowest credit spread in Regency's history. This execution represents one of the most favorable cost of debt capital in the REIT sector and is a direct reflection of our A credit ratings from both Moody's and S&P.

Leverage remains near the low end of our target range of 5 to 5.5x, and we have nearly full availability on our credit facility and our strong free cash flow generation allows us to fund our development pipeline with no current need to raise equity or sell properties.

In closing, we are gratified by another strong quarter and look forward to continued success as our teams execute our differentiated strategy through the balance of the year. With that, we welcome your questions.

[Operator Instructions] And our first question will come from Cooper Clark with Wells Fargo.

Okay. With that, moving on to Michael Goldsmith with UBS.

Mike, can you walk us through the moving pieces of the non-cash revenue. You guided to $51 million, so prorated that would have [indiscernible] for the quarter? So can you just kind of recognize...

Michael, before you finish, for some reason, you're breaking up. If we can -- if you could start from the beginning, that would be great.

Lisa, sorry about that. Is this any better?

It's better. It's much better.

Great. Yes. So I wanted to walk through the noncash revenue component, you guided to $51 million for the year. So prorated that would have been -- if you split it by 4 probably would have been at $12.75 million for the first quarter. You came in at like $9.7-ish million. So can you kind of walk through what drives the difference there from the kind of like the prorated number, the lumpiness that is natural with the non-cash revenues and how you expect the rest of the year to play out?

Sure. Thank you, Michael. I appreciate the question. As you just said, non-cash can be uneven by its nature and a little straight-lining of our guidance range would have led to a little bit of a higher expectation for Q1. Had a couple of things going on, one, we did make an adjustment to a single tenant, one lease where we moved that lease to a cash basis. So that, in effect, results in a reserve on straight-line rent that's booked in the quarter. And that's probably the largest component that you're seeing drive that variance today. We haven't taken our eyesight off full year guidance. obviously, at $51 million.

And I'd also say last year, just as a reminder, you can get fits and starts with tenant move-outs and the acceleration of below-market rents. That can also be a driver of changes to the cadence of non-cash. So just to make sure you keep a look out for that going forward.

Well, quickly, I'd say, another commercial for why we use core operating earnings to really tell the story of how we grow cash and cash flow at Regency, we eliminate non-cash, we eliminate nonrecurring. I think that core operating earnings number is really valuable as we think about the earnings potential of the company.

And our next question comes from Samir Khanal with Bank of America.

Maybe to start kind of high level, grocers are stable. I mean, I guess, maybe provide color on kind of small shop tenant health, given the macro and higher prices. Talk about occupancy costs? And have you seen any differences among categories amongst the shop tenants, the discretionary retail or restaurants, given higher prices in the macro?

Thanks, Samir. I'll start, and then I'll have Alan color it up with specific to our portfolio. But as you've heard us say many, many times, and we are really well positioned to perform throughout economic cycles, because of the format of our shopping centers, necessity, value, convenience in even tougher times. We're well aware of the pressures on consumers with the rise in gas prices. Then -- but there's even a trade-down effect oftentimes, and Alan can color that up with our foot traffic. So we start to see even more traffic at our centers as a result of that. And then on top of that, layer in the trade areas in which we operate. And our consumers are more resilient and more able to withstand these price increases and pressures. So our tenants are healthy. We're seeing that in every metric within the portfolio.

And I'll let Alan color that up a little bit more.

Samir, so talking about the tenants being healthy that Lisa just said. I think the first place I'm going to look is at their sales, and they do remain healthy within our portfolio. The next spot I'm going to look is at our collections, and we're continue to be near record lows there. And then as Lisa mentioned, foot traffic.

Record lows on bad debt.

On bad debt, thank you. Foot traffic, it's very resilient. When we look at the Q1 results, we are up 2.3%. But to your point of the recent sort of macro environment and higher fuel prices, what does April look like? And when we look at the portfolio in April, foot traffic is actually up 3%, more than it was in Q1 during this time period of increased fuel prices.

So look, we continue to feel good, and I would bring that back to Lisa's comment of the consumers and the trade areas in which we are operating. But we're going to continue to keep a watchful eye on things, but things remain certainly positive from all metrics that we have access to.

Moving on to Craig Mailman with Citi.

You guys have bumped the increased start expectations a bit here. Can you talk about which projects are now slated to start this year? And just the overall kind of leasing activity, and maybe anything else on the horizon that wasn't included in these new starts, but maybe could potentially start later this year? Kind of just talk about the overall environment of your different projects.

Craig, I appreciate the question. Let me start and I'm going to give it to Nick real quick because I want to just clear up something. We guide on development spend. But we are highlighting that. We have some added visibility to added starts that will drive that spend this year. But I want that to be clear that it's a spend guidance, not starts guidance. And then Nick will take it from there.

Yes, Craig. I appreciate the question. As we said in our opening remarks, we feel really good about our ground-up development program. And so as you've seen over the last 3 years, we've started just over $800 million. And as we look forward, we expect our investment platform to invest over $1 billion over the next 3 years. And so you can just see continued upward momentum as our team does a tremendous job uncovering these opportunities around the country. And so we continue to be bullish about that opportunity set. Therefore, we are raising our eyesight regarding what that spend will be based on an expectation of higher starts than previously anticipated.

We'll go next to Juan Sanabria with BMO Capital Markets.

Just piggybacking off of Craig's question. Just on the greenfield new starts, you mentioned master plan communities being a good source of opportunities for you. But just curious if with the uncertainty on the single-family build for rent with the ROAD to Housing Act, if that's creating any temporary pausing by some of the developers for homes? And has that any changes to the prospects of like that line of business going forward for Regency's future development pipeline?

Yes. Greatly appreciate the question. And that's a really insightful question. The reality is our program to date has not been heavily involved in the build-to-rent type communities. And so the master plan developers we are working with and continue to work with around the country are single-family for sale communities and/or they have other aspects of townhomes or apartment buildings. And so we haven't seen any impact to the master plan communities we're working on in terms of their appetite and desire to continue to push forward to build retail within their communities at this point.

And Todd Thomas with KeyBanc Capital Markets has our next question.

I guess sticking with that a little bit in terms of the ground-up development. Can you talk about the cadence of starts, how that looks during the balance of the year and also discuss how yields are trending on new projects -- new ground-up projects that you're underwriting relative to the yields and whether or not future master plan starts would sort of look similar or potentially have a different yield profile?

I appreciate the question, Todd. In terms of your first question on timing, if you want to talk about lumpy development is where it gets the lumpiest in terms of timing. And that's because our focus is not hitting some time line. Our focus is absolutely making sure we derisk these opportunities before we close. And so we want to make sure we're fully through entitlements. We want to make sure we have pre-leasing done with our anchors. We want to make sure we have drawings done and bids in hand. We want to make sure we have visibility to executing on these projects. And as you can appreciate, that's an extremely complicated process. And we always laugh, you're always one phone call away from a delay from any different outside input on that process.

And so we're excited about that program. It is building, but it will always be lumpy. But that being said, we continue to have good visibility to an increased amount of starts this year, and that's why we did increase our projected spend because although lumpy and a little back-end weighted likely this year, we still feel really confident in the overall trajectory of that.

And let me just come back in there because I want to double down on Craig's question, too. That guidance of spend, I would consider that to be ratable throughout the year from a spend standpoint. And then to Nick's point, we do think starts are growing and they'll probably be more back-end loaded, which is setting us up great for deliveries in '27 and beyond...

And we're not -- Go ahead, Nick. I was going to -- yes, the second half of the question on yields. I'll let you take it.

Yes. And then on the yields, Todd, we're not changing our eyesight. And so as you've seen, our development yields are currently in that 7% plus range, and that's where our eyesight continues to be. And so we feel really good about achieving those returns.

We'll go next to Michael Griffin with Evercore ISI.

Alan, I appreciated your comment on the leasing pipeline and it looks like it's another strong year ahead with high, both Same Property leased as well as commenced occupancy. Your comment on the rent bumps that you're embedding. I realize that's probably more on the small shop side. But has anything been able to change in terms of the leverage that you have when it comes to those anchor leases? I realize that a lot of these grocers will be effectively flat leases with multiple option periods. So whether it's being able to take back control of the site earlier through shorter options, whether it's embedding greater escalators throughout the lease. Can you talk about maybe the leverage on the negotiating side as it relates to particularly the anchor boxes and where you're able to push rents there?

Yes, Griff, thank you for the question. And you're right. The shops in fact, just to give you the stat on that, I know you didn't ask for it, 90% of our new shop leasing did, in fact, have 3% or greater embedded rent steps and about 1/4 of them had 4% or greater. So you're absolutely right, we're leaning in there.

In terms of leverage, what I would tell you is we're not seeing a dramatic shift in terms of the embedded steps on the anchor front. But there is still pricing power there and whether that's having better control over work letters, lower TIs whether it's getting more rent upfront, there are levers there for sure. Not seeing much in the way of options being less.

Look, I think for us, we're willing to align as long as it's the right quality anchor retailer that can be sustainable for our project. And the pipeline is strong. We signed a Publix deal for a redevelopment in the first quarter. We signed a PGA Superstore. We are bringing our first TESO LIFE to a Virginia project, that they're on rapid expansion throughout. And then a lot of the obvious names that you hear about: Ross, TJX, Burlington, Ulta, et cetera. So it's robust. I feel really good about where those anchor transactions are. And as I said in my opening remarks, that's where the real opportunity, I think, lies for us to get back to those peak levels, which we're not at in terms of driving continued occupancy.

And I do believe it's that last statement. It's supply/demand. And when we are able to reach that peak occupancy and there's no space available for anchors. We already have pricing power and more leverage than in times when there's even more vacancy out there. Right now, there's not a lot. As that continues to move in our favor, we incrementally will have more pricing power and incrementally have more leverage to push a little harder. But as long as they have other options and alternatives, and it also needs to be a win-win. We have to look at their businesses, their margins. I also believe as these tenants and our retailers get more efficient, and they are learning operational efficiencies through technology through artificial intelligence, that's going to enable them to pay more rent. And I'm really optimistic about that.

We'll go next to Haendel St. Juste with Mizuho Securities.

This is Ravi Vaidya on the line for Haendel. I hope you guys are doing well. Can you identify the tenant that was moved to a cash basis? Was that a bankruptcy? And how should we think about the current bad debt range, especially since you've utilized only less than 10 bps so far of the current reserve?

Sure. I'm not going to name the tenant by name. It's one lease in over -- well over 9,000 leases where we made a judgment call on their ability to meet the terms of their future lease obligations. Remember, they're still current, they're paying rent in the near term. Core operating earnings is unimpacted. This is an accounting treatment of future rent increases.

From a ULI perspective, listen, we had a really good quarter. We largely met our expectations. We're operating at below historical averages. We plan to operate at around to slightly below historical averages, and we're meeting that expectation today. So eyes are still pretty high, and we still feel really confident about the health of our tenancy. I feel good about the prospects for ULI going forward, which is a different comment from bankruptcies.

Bankruptcies are move-outs. We are -- still find ourselves in the middle of some ongoing bankruptcy filings. Breadcrumbs are out there that would indicate potentially we have some good opportunities to come out of those okay, but we're not done with those. And bankruptcies are an uncertain process, and we just need a little bit more time to have some more clarity there than the normal part of our business.

Moving on to Floris Van Dijkum with Ladenburg Thalmann.

Lisa, great to hear your voice. You guys are -- you've obviously built over the last decade, a track record as being sort of best-in-class shopping center developer out there. It really differentiates your platform, as I think you alluded to. How should we think about -- as I recall, you also don't have a big land bank. So how do you protect yourself from rising land values, which is a big input in your developments? And maybe talk about your option strategy versus -- and how long in advance do you have to work on getting a hold of land or getting land under option before you start to activate developments typically?

Floris, thank you. Let me -- I'd like to set it up before I pass it over to Nick to speak more specifically and to say thank you for acknowledging what I know is the best development platform in the business nationally. And a lot of what Nick is going -- how Nick will answer the question has a lot to do with why we are the best. It's the team, it's the relationships, and it's the experience and track record, all matter and all make a difference in our success. It is a virtuous cycle. So with that, I will pass it over to Nick. And again, thank you, really appreciate the comments.

Absolutely, Floris. And I also appreciate you noticing we're doing this very efficiently, meaning we are not driving a large land bank that we're sitting on in order to drive this development program. We are definitively working with the land sellers, optioning their property and working through the process. As I articulated earlier, derisking that process before we close. And a really, really, really hard part of our job is sitting down with landowners and having conversations about the value of their land and educating them. And that is what we do every day.

And it is the most difficult part of, I would say, the development business is sitting down with landowners, you may have one value in mind and educating them on the realities of the market. But that's what our teams do every day. And given our track record, given our access to information, given our retailer relationships, we win more than our fair share of those conversations and jump balls with landowners for exactly that reason. And I expect it to continue, but it's never easy. It's always a challenge.

Moving on to Ronald Kamdem with Morgan Stanley.

I was just wondering, you guys bought back the slide in the presentation about sort of the run rate for occupancy upside, which I thought was interesting because it shows that your leased occupancy is already at peak or has already exceeded sort of the previous peak, but the commenced hasn't. So my question is, do you think commenced occupancy can get to a new sort of peak this year? And maybe some commentary about what kind of tailwind that does for same-store NOI going forward?

Well, I appreciate you noticing our great disclosure, Ron. And yes, I think we feel really optimistic about the prospects for this portfolio in this current environment that we see. We have set new records on percent leased. We have room to run on percent commenced. Our plan and expectation for the year is that we will continue to shrink that gap between leased and commenced. We will continue to drive outsized base rent growth as a result, and there will be some amplifying factor through recoveries as well. And we think that will run through the balance of this year.

Where we go from there is to be determined. I mean, I think we're also an active asset manager. We really aspire to invest into our own portfolio through redevelopment. Sometimes that means managing some vacancy and taking on some vacancies. So we're not -- Alan would say this, we're not leasing for occupancy, we're leasing to maximize NOI over the long run. And so that's the approach we're going to take from here.

And Ron, the only thing I would double down on is we executed 1.5 million square feet in Q1, and our teams are full speed ahead. They hit the ground running. I'm really proud of what they accomplished. It's more GLA than we executed in Q1 of '25, despite being at these peak levels. So they're going to continue to grind and find opportunities not just for vacant space, but to continue to lean into better operators and upgraded merchandising where we're leasing occupied space. Appreciate the question, Ron.

We'll go next to Hong Zhang with JPMorgan.

I guess can you just touch on how you're viewing potentially tap -- sorry, potentially tapping the equity market today, given that your stock price is higher than when you tapped it last year?

I was going to say, we've also grown NOI since that time. We always take an opportunistic view of issuing equity. And currently, we have more than enough balance sheet capacity, free cash flow to meet our needs. And if we were to have an opportunity that was visible to us that we could fund accretively with equity, we would take advantage of that. And I think we have a pretty good track record of issuing equity judiciously and accretively. So certainly, it is a tool in our toolbox and one that we will access when the opportunity presents itself.

[Operator Instructions] We'll hear next from Omotayo Okusanya from Deutsche Bank.

Yes. I hope this is a fair question, but I think the -- sometimes the curse of doing very well over a long period of time is that people always tend to expect more and more and more. And I think, again, you're kind of having a great quarter, solid outlook, but the stock is down today. So I guess when people are kind of looking overall at your name as of a stock that they should be owning in their portfolio relative to their peers, they may be seeing the premium valuation, which is warranted, but again, a really good operating backdrop for the entire industry.

So in that world, I guess, the question I have is, how do you guys really kind of think about still being able to kind of outperform versus peers in that environment? What are investors possibly underestimating about your story that you can provide evidence of that we should still give investors confidence that, again, you can put up superior earnings growth, which validates the premium valuation.

I learned from my predecessor who often quoted a very wise investor that in the short term, the market is a weighing machine -- voting machine, but in the long term, it's a weighing machine. And when you take the combination of what we refer to as our strategic advantages because they are. So the quality of our portfolio, the development platform, the balance sheet and our team. The combination of those is truly unique. And over the long term, I have 100% confidence that we will be at or near the very top of the sector in Same Property NOI growth. And I think if you were to look back at 5, 10 years, you're going to see that that's the case.

And that's using less capital than the rest of the sector to get that growth. And then if you look back and look at investments and the accretion from investment and use of whether it be equity, new debt growth, just new incremental capital, again, the returns on that are at or very near the top of the sector. So I do believe that because of those 4 things, quality of the portfolio, which is going to generate very strong Same Property NOI growth, a development platform that is unequaled that is going to continue to create meaningful value for our shareholders over the long term. The balance sheet to fund it and the people to execute it.

So that's how -- I believe that it's the right strategy and one that will deliver and has delivered over the long term.

And we'll hear next from Cooper Clark with Wells Fargo.

I was hoping you could talk about the portfolio trends you've seen historically during periods of higher oil prices and the impact that has on traffic levels and consumer spending trends.

The last time we had gas prices this high was probably when it was in the middle of COVID. So it was a little bit different. So I don't think that that's necessarily a relevant historical point to look to. But generally, I would again speak to -- and I've been with the company for 30 years and in the modern era of Regency, we have seen a decline in Same Property NOI really twice, once was the global financial crisis and the other was during COVID.

Our property type, the format of our shopping centers, neighborhood community, centers really are defensive and they produce consistent, durable, steady cash flows through all cycles. And again, and I'm certain Hap is probably listening, he's going to love that I've actually referred to him twice. I do remember that when I was much, much early in my career, the '98 mini recession, the '01 tech bubble, he kept saying, we choose not to participate, because we really -- we grew right through it.

And so again, when you think about the quality of the portfolio, the format of the shopping centers, the trade areas in which we operate, we're able to grow right through it, and that's the expectation.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Lisa Palmer for closing comments.

Thank you all. Appreciate your time, and thank you to the team as well. Have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

[Audio Gap] Regency and CEO, Lisa Palmer. This session is for Citi clients only and disclosures have been made available at the corporate access desk. [Operator Instructions].

So Lisa, we'll turn it over to you to introduce your company and team, provide any opening remarks, tell the audience to top reasons investors should buy your stock today, and then we can jump into Q&A.

[indiscernible] Thank you -- from the -- what I believe to be the best team in the business, and most importantly, a truly differentiated development platform that is providing visibility to earnings growth and, again, really importantly, true value creation. We're coming off another outstanding year in which we delivered solid NOI earnings and dividend growth, driven by healthy tenant demand and accretive capital allocation, supported by continued strength, as you all know, in tenant sales and foot traffic in the sector and specifically across our centers.

Leasing remains a true highlight. Demand is strong across both anchors and shops and limited new retail supply continues to support rent growth. We're seeing high-quality tenants expanding within our portfolio, allowing us to grow occupancy while further enhancing merchandising across our centers. And as I just opened, importantly, development continues to be a key differentiator and our primary external growth engine. Over the past year, we advanced our pipeline through both starts and completions, positioning us for meaningful NOI contribution in 2026 and beyond.

In today's truly supply-constrained environment, our ability to execute, ground-up development at the attractive returns that we are able to achieve really does reinforce our competitive advantage and the differentiation. Our balance sheet remains a significant strength with A-level credit ratings, low leverage, strong liquidity. We have the flexibility to fund this development internally while also remaining opportunistic on acquisitions, which both will then -- and the NOI sustainable study, same property NOI growth, supporting a reliable and growing dividend. As we look ahead, we see continued momentum. Our leasing pipeline is active. Executed leases are supporting future growth and development deliveries will contribute meaningfully to earnings. So taken together, our portfolio quality, the value creation platform, balance sheet strength, an experienced team position us to deliver durable growth through any and all cycles.

And with that, we're happy to take your questions.

That was great. And Lisa, you mentioned the leasing environment being strong, a number of times. As you look, though, across your tenant base, are there any segments to call out as being significantly stronger maybe surprisingly strong durability of that. Any segments that you're seeing more recently, maybe tail off a little bit? Just any trends that you're discerning as we go from '25 into kind of almost through the first quarter of '26 at this point?

So our sector or property type, mostly grocery-anchored, service, convenience, value doesn't change that rapidly. But over time, you do see evolution. So you've heard us say this before. One, we have and continue to see an increase in health and wellness and even ancillary uses related to that. It could be food and beverage that are more focused on health and wellness or specifically primary care. The consumer wants to stay close to their home and close to their neighborhood and to the extent that they're able to service all of their needs within 10 to 15 minutes, that's a benefit. So we're seeing a lot of those medical uses come into neighborhood shopping centers. We continue to see -- and again, this is going to sound like a broken record to many of you that have followed us for a very long time, new concepts in food and beverage. And food and beverage restaurants are our second largest use combined versus grocery. And every year, the most failures and the most move-outs fall in the restaurant category and the most new leasing and new concepts fall in the rest category. And that is just -- it is the nature of the business. I believe our team does a fantastic job in truly vetting the operators and that our track record is better than most. But beyond that, there's nothing -- there's, again, more health, more entertainment. But for our use, it's pretty concentrated on grocery, service, convenience value.

It feels like every quarter, you guys are putting the press release record highs again in shop occupancy and the lease rate there. The one thing we always talk about is the backdrop of strong demand, coupled with minimal new supply. And I get the question a lot, I'm sure you guys do as well of why aren't market rents and spreads even higher, right? And so maybe talk about, number one, how much higher the shop occupancy could actually trend? How much -- I don't want to call it structural vacancy, but just a limit to how much you could have occupied at once. And then just also, as you guys have these discussions with tenants, right? And you're looking at the algorithm of OCRs and nonmonetary concessions and all the things that go into negotiation. What really the limiter is on you guys being able to continue to push rent even more aggressively as you get to that mid-90s and above potentially on shop?

There's a lot to unpack in that question.

I gave you a few questions at once.

So first, let me start with peak occupancy, if you will. I wish Alan was here because he would love to say, records are made to be broken, and I agree with him. And each quarter, I think he's had the opportunity to say that. And we do continue to push that shop percent leased and growing the percent commenced with it. And there -- but there is some frictional vacancy. I don't know that you can -- especially on both shops and anchor side. I don't know that we can just come up with a quantitative answer because it's going to depend on -- so approximately, a really good retention rate, which you all know, so I'll use round numbers, would be 80%, which means one out of every 5 tenants are going to move out at the expiration of their lease. And that's not a bad thing all the time, right, in order for us to be able to upgrade our merchandising, put a better operator into the space. Then we also often need to take space down for redevelopments. Which for long-term value creation are accretive and do create value for our shareholders. So I'm not saying that we've reached our peak on shop space. I believe we still -- can still push it. but we're probably approaching it. And then with regards to anchors, we definitely have more -- we have some room there and have some runway to continue to push that. We are not at historic peaks anchor percent leased and percent commenced and do have room there. I anticipate that we'll continue to have success in new leasing. That's one. Two, in terms of why can't rent basic, why is there no -- why is there a ceiling, if you will, it feels on rents. We -- it has to be win-win. We succeed when our tenants are able to produce and generate good sales from their locations. And they are limited by what they can afford. And the tenants have been squeezed in operating margins with inflation. They passed a lot on to the consumer. Our trade areas are able to absorb that more, which is a positive. But at the same time, you've heard retailers speak publicly that they're reaching their limits as to what they believe that they can continue to pass on. And so as a result, it starts to squeeze their margins more. I personally believe, and I imagine we may get to this later in the discussion that with technology with artificial intelligence, that tenant's business models will change and evolve. And perhaps what used to be typical occupancy ratios or health ratios for tenants can begin to rise. And rent becomes a larger percentage of their cost structure because they're able to generate cost savings in other parts of their business. That's what I believe. And I think that the dynamics of our sector with the supply/demand in the landlord's favor today, will help support that. But that -- again, I started with our business doesn't change that rapidly. It evolves over time. And I would expect over time, we'll probably begin to see this. And you are seeing that, right, with Regency's success in rent growth in double digits as well as throughout the sector.

Can I -- I'm going to add a little bit to that on the lease spread question. we did have a phenomenal 2025, 11% cash on cash lease spreads. But importantly, what we like to look at our GAAP rent spreads and those are 21% on the year. And I think that's a better reflection of the way we're attacking our leasing activity where we're embedding really healthy annual contractual increases into our leases. So using that midpoint over midpoint comparison, we believe, is a better reflection of the pricing power we have in today's market.

That was a good. You hit all the questions. I think that was a 20 parter.

You are testing my listening skills.

Yes. And Mike, last night was joking how I can pivot to the AI topic, but Lisa open the door. So it's smooth for this one. But you guys have a little bit of a different portfolio makeup tenant-wise, agent to commerce is one of the big topics and does that create winners in the e-commerce space and impact physical retail needs going forward. Kind of as you guys look, I know you have the personal views about technology and how it could help margins of tenants, but do you also have views about how it could impact tenant behaviors and how you guys are positioned if there are kind of pivots towards how consumers continue to shop, given the ease that may be agentic commerce can make for them. And the companies that have that investment capability tend to be the larger either omnichannel with like a Walmart versus a pure Amazon.

While there's no question that this is coming and coming pretty fast, I don't believe it's any different than what we've been experiencing with regards to the ability for a consumer to literally sit at home and order buy, have delivered anything they want, essentially, right? Only services can't. But you can also have somebody come to your house, I guess, to cut your hair, if you want it. But generally speaking, it's only the services that they have to leave their house for. And so this makes it easier, but they're still the -- one, the consumers -- and this was validated throughout the period of time when they were forced to stay home. They like to shop. And online and delivery and whether it's agentic or whether it's just how we -- how a lot are ordering today, will continue to grow and gain market share. We believe that. But at the same time, the physical store is just as important for the retailers, for the tenants to service the customer in and -- you use the word omnichannel, in an omnichannel fashion. And again, the consumer likes to leave their home, it's social, it's interactive. And it's -- the retailers and the tenants, the merchants, as we like to call them, are the ones that are going to continue to invest in their business to make it a desirable visit for their consumer to incentivize them to come into the store. And why that's important is it also remains incredibly expensive to get any goods or services delivered to someone's home. And again, the merchants, the tenants, the retailers also realize that, recognize that and are incentivized to bring consumers into the store. And that's going to continue to change, and it will evolve. Our -- we have wonderful tenant relationships, and we continue to have dialogue with them. So for us to understand what their needs are, we have a portfolio of over 500 shopping centers across the country. We can help -- we can work with them if there are physical design changes that will help us generate more traffic in the shopping -- into the shopping center, which will help them generate more sales. So we're prepared, and we're constantly looking and monitoring and it will evolve.

And maybe for Regency specifically, like what are you guys looking at internally in the use cases of AI, kind of what's the -- how quickly do you want to move forward? Or are you going to be sort of a -- let's -- let other people be the first movers and we'll kind of come after them. Where do you sit in that debate as you guys look and maybe where are the -- either for Mike or Lisa, like as you're looking at the business, right, where are the efficiencies where there's really a return on that investment, at least in your eyes today?

Let me start. Again, I'm going to move it back a little bit even beyond just AI and just in data and technology and analytics. So there's no question that we have a focus internally. In fact, we have a foundational strategy, enterprise intelligence. I know Mike likes to say fast follower. But if we say fast, I want to literally be on the heels. We know what our core competency is and it's not writing code for artificial intelligence. But what we do have is we have scale, which is important because, one, we have cash flow and the ability to invest and to experiment. Two, we're large enough that the people that are -- that is their core competency will talk with us, and we're able to try and test different things. And that is absolutely happening. There's no question that the culture within Regency, and again, it starts with data analytics technology. I -- You've seen it happen over the last 5 years that we are leveraging the tools that we have, some that we have built, they're not AI, but just tools internally from an analytics standpoint. Leveraging those tools to make faster, better decisions. And so while it may be really difficult to have an absolute return on investment, it's just time is your -- our most precious resource. And to the extent that our leasing agents, our revenue generators that we're able to get a lease, to rent commenced sooner as a result of leveraging technology and in the future, perhaps artificial intelligence, that's going to have a true return on investment. So there's no question, our focus has been on back office that supports that revenue generation and expect that that's where we're going to see the first real cases how we're able to implement. But again, it is going to evolve. And I expect that we will not be a leader, we will not necessarily be writing the code and developing our own. But we have the ability to truly be like right on the heels of that.

Yes. I would just add, 100% agree with what Lisa said. The front end of the business is B2B, right? So it's not a B2C strategy for the company. So our focus has been internally and finding efficiencies. The focus of the company over the last 24 months has been preparedness. So making sure our data is prepared and warehouse for this future and then also process standardization because what we have learned is, without those two elements, you're not going to be able to take advantage of the technologies that are available to us. So our primary focus has been there. And then along the way, experimentation, finding opportunities to see success, and we are having those opportunities. We'll we will largely partner with those who are on the forefront. If it -- there are simple solutions that we can implement ourselves, we will do that on our own.

Who are the primary partners you guys are leaning on today? Is there one another or...

I'm not going to call out the winners in that space, but the big technology providers in the space that the vast majority of even large companies outside of REITs, corporates are using are on the forefront of helping companies become more efficient.

And so -- and maybe this is a self-preservation comment, but it feels like real estate is always going to be a people business. And so there's -- should be some longevity in people with relationships. But as you guys look at the corporate structure, like is there room to make it leaner from a head count perspective? Or is this, as you had mentioned, really just a productivity enhancement to free up your leasing folks or finance teams to focus on higher-level strategy and not focus so much on the paperwork aspect.

I think the real advantage is the ability to continue to scale more efficiently. And that's I -- what we're prepared we're not looking to reduce in place. We're looking to prepare us to scale efficiently as we grow.

And I think that's pretty consistent across -- when I speak to peers, not necessarily in the real estate industry, but in the Jacksonville market or in the Southeast, you hear that pretty consistently. That's -- the expectation is we're going to be able to continue to grow the business, not with reducing headcount, but not necessarily adding as much as maybe you would add it 10 years ago. And that is the benefit. It is productivity gains and efficiency.

Anyone in the audience have a question? So I had mentioned the constant question about the rent piece. The other question I get and you guys get is in a backdrop of very difficult development environment, you guys just always seem to find new projects. And so maybe talk a little about what you guys have brewing. I know you talked about on the fourth quarter call, but more in depth about the pipeline for maybe '26, '27 and what you guys are doing to backfill the pipeline as we get beyond '27 today? And how hard it is or maybe easy for you guys to find these opportunities.

It is definitely not easy. And I don't remember if it was the last call, if you'll listened to our earnings call or the call before, when Nick answered a question, and he said, there is no secret sauce. And I jumped on top of them and said, there is a secret sauce. And the secret sauce is the combination of what we have at Regency. And it starts with our people and the experience and the talent and the track record of the team that we have on the ground, you can't build that overnight. And you can't turn it on or off. It is something that Regency has been committed to. I've been at the company, it will be 30 years in September, and we've been committed to it for as long as I've been there and before. So with that, you also then have really strong tenant relationships, and the one -- the tenants that are driving the growth and then really strong relationships with master plan developers. Again, a lot of what is driving the growth. There is limited new supply in our sector, and we have had tremendous success in that environment as a result of all of that plus our balance sheet and the cost of capital advantage that we do have. And so I do expect that we're going to continue to get more than our fair share of what may be limited new supply as a result of that combination of the differentiated factors that we do have.

Looking into 2026, we do have a pretty -- we have visibility into being able to start a number similar to what we've done in the past 2, 3 years. And importantly, and I said it in my opening remarks, we're starting to see those come online and deliver NOI that is contributing to our total NOI growth also. And that also will continue because of the success of $825 million over the last 3 years that is now going to begin to be delivered. And so it's a lot of what a lot of what we've done in the past and it's spread across the country. I think you all have probably read about one of the largest one that we're going to start 2020, but we just had our groundbreaking a couple of weeks ago, which is in Jacksonville. It's a master planned community, it's public-anchored shopping center, and it's going to be a fantastic project.

And as you guys look at -- I know you guys are -- you have different geographies in the portfolio. You have California, you have New York. I'm just kind of curious, the political environment, the tax environment, on some of these places and New York City at least wants to pass proper tax increases or maybe a business tax increase to fund spending. I just -- I'm curious, you have a Jacksonville, Florida is a much more business-friendly place to operate than California or New York. Like how much does that go into the calculus of, oh, there could be a great project in California or I don't want to keep hitting on New York, but more politically [ oppressive ] tax regimes, put it that way. What -- is the hurdle that much higher for that versus like doing something in Florida or a Sunbelt state where it's just they want businesses and people to come in versus feels like pushing people out.

So a reminder that we're a trade area business, which is extremely important. The major metro markets, demographics trends and then also the regulatory environment. They matter. Our jobs are to underwrite risk when we are allocating capital. And so there's no question that, yes, that's -- again, that's something that we need to talk about and that we address. But it's in the underwriting of the properties that won't necessarily you just saw -- I mean, last year, we acquired the port -- Southern California portfolio, so we added to our California exposure. If the investment meets all of our criteria, which starts with trade areas. So quality of the actual shopping center itself and then finally being what can we fund it accretively. And if it checks all the boxes, accretive to quality, accretive to growth, we can fund it accretively. And we're able to believe have visibility to underwriting the risk, we'll move forward. And that's how we think about it. I don't see -- since you kept hitting New York, I don't see the population of New York going to 0. So I think they're still going to be a really strong trade areas where we own shopping centers that are continued to perform exceptionally well.

No. And that's fair. I didn't mean to pick on New York. I live there, right? So maybe that's why I'm a little bit more sensitive to the talk of it. But I guess you guys are more trade area focused. But as maybe there's movement even within those trade areas of income levels, which sometimes takes a little bit longer to see in the data, like how much variability in your trade market over the last -- as you look at cycles, how quickly does some of that move as taxes change. And today, money is more mobile because of digital, the ability to log in remotely to a job, right? And you're seeing that movement. I guess I'm just curious, is the risk on trade area is higher today and harder to underwrite in some of these places than it has been in the past? Or is it just the same old and the headline news is noise sometimes that we all get kind of focused on.

I believe with our focused and disciplined strategy and in the trade areas in which we operate, I don't want to say that we're immune to that. But if you think, we own 500 shopping centers, there's 30,000 shopping centers in the U.S. Maybe more, right? So I mean, if you -- so if you think about that, I mean, we have we have the best of the best. And as a result of that, we're certainly a lot more resistant to those major changes, and they would happen a little bit more slowly. And speaking about my experience, I'm not saying it's perfect and trade areas never change. But when you think about how we're structured and the fact that we have 24 offices across the country, we've got local people on the ground. They know these neighborhoods, these trade areas extremely well. And we are typically able to get ahead of it because it doesn't move that fast. And we are -- as for those that have followed us for a very long time, we're not afraid to dispose of properties if we believe that it's going to fortify our future NOI growth. It's something that we've remained committed to for -- again, for the history of the company. So yes, we track it, we watch it. I believe we're really well positioned in the trade areas in which we operate.

Not to get off of development in case because we don't want to get off. It's an exciting part of the strategy, but maybe to bring in some acquisitions to this conversation, which I think is relevant. And you asked the question, is your hurdle different depending on the geography. We're seeing extraordinarily low cap rates in markets like Boston, in the Northeast, in California, in Seattle, in these markets, as you described, that may be a little more headwind to them from a headline perspective. But we're not seeing evidence of that on the ground, as Lisa suggested. And we will continue as a result to -- when we find development opportunities in those markets, taking advantage of creating real value over that spread to cap rates, we're developing at north of 7%, 7% are better yields ground up in an environment where cap rates are in the low 5s for high-quality grocery-anchored shopping centers and, importantly, as Lisa suggested, high-quality neighborhoods. And that -- the difference around the country, we're not really seeing any evidence of that.

We got a couple of questions that came in. I'm going to bring you back to development for a second. I know you want to pivot. But how much market rent growth are you underwriting in development starting today?

We're underwriting market rent growth consistent with our portfolio. So there's -- it's really a yield on [ cost ].Our calculus for doing the development is a yield on cost of 7% or better, and which is also at least 150 basis points spread to cap rates in the market. So using those 2 metrics is how we're thinking about allocating capital.

And then the other one Lisa, you mentioned there's a ceiling on rents driven by what tenants can afford. Where are occupancy cost ratios today for Regency's grocery, anchor, shop, tenants?

I mean there's no specific -- there's a range in groceries and grocers operate in our portfolio at the thinnest margin. So I think I can say that accurately. And they're going to be -- depending on the age of the lease because they tend to be flat for a period of time, depending on the age of the lease and their sales, it's going to be anywhere from -- they could be like 1.5 to up to 5 would be on the very high end. And then you move into your junior anchors and junior anchors are going to be 5 to 10, maybe 15 on the high end, if we're pushing hard enough. And then small shops, again, will depend on the business, but 15 to 20. And that has remained relatively steady because our tenant sales have been really strong and have continued to grow along with us pushing rents. I want to throw away the occupancy kind of ratio, health ratio calculus, and we need to look at it differently in my mind because there is limited supply. There is very little space for tenants to expand their businesses, and they still have growth plans. So at some point, it may break and we may be able to push through. But it has to be a win-win. We don't succeed if our tenants fail. That is -- bankruptcies are one of the -- you haven't asked about that yet. Bankruptcies tend to be one of the most challenging things that we -- it's a headwind that we face. And so to push a tenant towards bankruptcy isn't in anybody's best interest.

[ We said you'd ] bring it up. How is the watch list look? You stepped right into it.

The watch list is consistently low as it has been for some time, and we...

Just why I didn't mind bringing it up.

Yes, I think we do a remarkable job. The team does a remarkable job, as Lisa suggested, vetting tenant quality, ensuring that we're ahead of any pain that may evidence itself. So we're inside of 2 percentage points easily from a watch list perspective, which is historically kind of the same. It is that retail's evolutionary tenants will tend to fade. And our outlook for '26 is to have uncollectible lease income inside of 50 basis points, which is -- that's about our historical average, and that's what we're suggesting is our outlook for '26. 2025 was significantly below that. We were closer to 20 basis points from a bad debt expense perspective. So we find ourselves in a nice, healthy -- our tenant base, I think we can say, has never been as healthy as it is right now. You combine that with great trade areas within which they can operate, and we feel pretty good about that side, that risk element of our story.

And just moving over to the capital side. You guys just did the $450 million bond deal. Could you just talk about kind of sources and uses from here, are you good on the capital raise to pay off what you need to pay off for this year? Or are you looking at other things even to pay off for next year?

Sure. You're always refinancing your balance sheet. So that was -- for this year, that was our first phase of our annual refinancing activity, and we are very pleased with the execution. I appreciate you bringing it up. Lowest credit spread in the company's history and really putting that A-rated balance sheet to work. We will continue to have refinance work to do. We do have a tower in early '27 that will have to be refinanced and that's just regular course of business. From a funding of our growth perspective, it's free cash flow -- levered free cash flow is what we're using to fund this development pipeline that we have. And we have plenty of levered free cash flow to meet the needs of our development business. And then we'll raise that incremental capital to the extent we see opportunities, whether that be maybe hopefully an expanded development pipeline, maybe that is some acquisition opportunities. And well -- to Lisa's point, that third element, can we allocate that capital accretively? If so, and if the quality and the growth is there, we'll raise that incremental capital and move forward.

Right. Just enough time for the rapid fires left. So same-store NOI growth for the retail group in 2027.

3%.

And then our M&A question, in your property type, more, fewer or the same amount of companies this time next year.

Same.

Perfect. Well, thank you guys so much, and enjoy the rest of the conference, everybody.

Thank you.

Greetings, and welcome to Regency Centers Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Christy McElroy. Thank you. You may begin.

Good morning, and welcome to Regency Centers' Fourth Quarter 2025 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer.

As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on the current beliefs and expectations of management and are subject to various risks and uncertainties. It is possible that actual results may differ materially from those suggested by these forward-looking statements we may make.

Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings. In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website.

Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance. Our caution on forward-looking statements also applies to these presentation materials. As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one. Please rejoin the queue if you have any additional follow-up questions. Lisa?

Thank you, Christy. Good morning, everyone, and thank you for joining us today. I'm proud to close out another outstanding year for Regency. Our success in 2025 reflects the quality of our grocery-anchored shopping centers in strong suburban trade areas, the strength of our best-in-class operating and investments platforms and the hard work of our exceptional team.

We delivered strong same-property NOI, earnings and dividend growth, driven by robust operating fundamentals and disciplined accretive capital allocation. Across our portfolio, we continue to see healthy demand for our space, historically low bad debt and continued growth in tenant sales and foot traffic, reinforcing the durability of our portfolio and the essential nature of the real estate we own.

On the investments front, 2025 was another very active year for Regency, highlighted by accretive acquisitions and strong execution across our development and redevelopment programs. We had another excellent year growing our development pipeline with more than $300 million of new project starts. Over the past 3 years, we started more than $800 million of new projects.

And importantly, that pipeline is now translating into deliveries that will contribute meaningfully to total NOI growth in 2026 and beyond, providing strong visibility into our forward growth. Regency's ground-up development platform continues to be a primary driver of our external growth and a key differentiator for the company. New retail development remains really difficult across the industry, and this is evidenced by historically low supply growth over the past 15 years.

In that environment, Regency is uniquely positioned, leveraging our expertise, long track record, access to low-cost capital and long-standing tenant relationships to source and execute on opportunities to build high-quality shopping centers at meaningful spreads to market value. This allows us to create long-term shareholder value while amplifying our NOI growth profile.

In closing, the broader backdrop remains favorable. Physical retail, particularly well-located grocery-anchored real estate like we own, continues to benefit from this limited new supply and a renewed appreciation among retailers for the role of stores. Strong tenant demand is driving rents and occupancy higher, and our substantial free cash flow and fortress balance sheet provide the foundation to continue investing capital accretively through the cycle.

Our portfolio, development platform, balance sheet and team together are unequaled and give us an advantaged position. I'm very proud of the results our team delivered in 2025, and we are carrying that momentum into 2026 and beyond. With that, I'll turn it over to Alan.

Thank you, Lisa, and good morning, everyone. 2025 was one of the strongest operational years we've ever experienced as a company. We achieved remarkable same-property NOI growth of 5.3%, supported by substantial base rent contribution, including meaningful occupancy commencement and redevelopment impact.

Impressively, our average percent commenced rate for the portfolio increased 150 basis points year-over-year, a testament to our team's ability to accelerate the rent commencement of tenants within our SNO pipeline and to successfully deliver redevelopment projects. Tenant demand remains exceptionally strong in nearly every category and across our portfolio, spanning both anchor and shop space.

Shop momentum was especially impressive in the fourth quarter as we leased our largest percentage of vacant shop GLA in more than 5 years and increased same-property shop occupancy by 40 basis points, reaching yet another new record for us of 94.2% leased at year-end. Our grocery leasing activity in the quarter was significant, signing leases with Whole Foods, Sprouts and Trader Joe's, among others.

Beyond grocers, we're continuing to see meaningful engagement and momentum from other anchor tenants such as TJX, Nordstrom Rack, Ulta, Ross, Burlington and Williams-Sonoma to name a few. Anchor leasing is one of our greatest opportunities to drive our portfolio occupancy beyond prior peak levels, and we are encouraged by the quantity and quality of the prospects for our high-quality anchor space. Our SNO pipeline at year-end was approximately $45 million of incremental base rent.

We made substantial progress commencing tenants in Q4, while simultaneously backfilling the pipeline with strong new deals. In addition, we are also seeing a continued trend of tenants inquiring about and signing leases on currently occupied space. This is a testament to the desirability of our centers and the lack of available quality retail supply in our markets. Our rent growth also continues to benefit as high-quality retail space has become more limited.

We achieved impressive cash rent spreads of 12% in Q4, including renewal spreads at a record 13% in the quarter. GAAP rent spreads of 25% in Q4 also marked an all-time high, underscoring the depth of embedded mark-to-market in our portfolio, combined with the benefit of annual rent escalators. Notably, more than 95% of negotiated leasing activity in 2025 included annual steps, further strengthening future rent growth.

In closing, we are excited about the significant momentum we see into 2026. Demand for our space is robust with operating fundamentals as strong as they've ever been. Our leasing team remains very active, and our tenants are having tremendous success, empowering us to remain aggressive on rent growth and to drive occupancy higher. With that, I'll hand it over to Nick.

Thank you, Alan, and good morning, everyone. 2025 was a tremendous year for our investment's platform, both in terms of volume and quality. We deployed more than $825 million into accretive investments, including more than $500 million of high-quality acquisitions and $300 million in development and redevelopment projects in top markets around the country.

In 2025, we started 24 development and redevelopment projects across 16 markets, with the majority of invested capital into ground-up developments. These projects are creating real value for our shareholders with ground-up development returns north of 7% at meaningful spreads to market cap rates. In the fourth quarter alone, we started more than $90 million of ground-up projects, including Oak Valley Village in Southern California, anchored by Target and Sprouts and Lone Tree Village, a King Soopers-anchored center in Denver.

Importantly, our team is also delivering and bringing these projects online, including the completion of 13 development and redevelopment projects in the fourth quarter, totaling more than $160 million at attractive 9% blended returns. These projects are more than 98% leased and with many delivered ahead of schedule and several anchors opening early. Even with the high volume of completions, we are also backfilling our future pipeline.

Our team continues to have great success sourcing and starting new projects, and our in-process pipeline remains strong at nearly $600 million. This includes several on track to reach 100% leased before the anchor even opens. Looking ahead, we believe we have good visibility into project starts of nearly $1 billion over the next 3 years.

Our success has led to even greater momentum and our opportunity set has only grown with projects in the works across the country with top grocers in strong suburban communities. Our development platform is a distinct advantage for Regency, fueling our external growth engine.

Our deep tenant relationships, access to capital and experienced team around the country enable us to execute on projects at a time when few others can. In closing, I'm incredibly proud of our team's execution and accomplishments in 2025. It has been extremely gratifying to see our hard work come to fruition, along with excitement from our local communities and tenants as these projects come online.

Our success spans across the country from recent groundbreakings in Denver, Jacksonville and Southern California, the grand openings of H-E-B in Houston, Whole Foods in Connecticut, Publix in Atlanta and Safeway in the Bay Area, among others. As we look ahead, our investments team is energized by compelling opportunities to allocate capital accretively, and we continue to raise our eye level on how much we can grow our project pipeline. Mike?

Thank you, Nick. Again, Regency delivered exceptional results in both the fourth quarter and for the full year. We achieved Nareit FFO per share growth of close to 8% and core operating earnings per share growth of nearly 7% for the full year, driven by continued strong operating fundamentals and substantial external growth from accretive high-quality acquisitions and development projects.

Same-property NOI growth finished north of 5% and was largely driven by our success growing commenced occupancy, pushing rents and recoveries higher and experiencing historically low levels of uncollectible lease income. Turning to 2026. Our guidance is consistent with the expectations we outlined on our October call, reflecting continued strong momentum across all facets of our business.

I'll refer you to Pages 5 and 6 in our quarterly earnings presentation for a summary of our assumptions and the primary drivers of our forward growth outlook. We expect same-property NOI growth in a range of 3.25% to 3.75%, which we anticipate to largely be driven by rent spreads and steps and redevelopment deliveries as well as additional contribution from the commencement of our SNO pipeline.

We are also planning for another year of uncollectible lease income falling below our historical average of 50 basis points of revenues. While the cadence of same-property NOI growth should be largely consistent between the first and second halves of the year, we do expect our Q1 growth rate to be above our full year guidance range, driven by a higher expense recovery rate this year versus last and an anticipated impact to other income, which can be uneven by its nature.

Our Q2 growth rate is expected to be below our full year guidance range, largely due to a tough comparison related to our annual CAM reconciliation process that we discussed last year. Beyond same-property NOI, total NOI growth will benefit significantly from strong external growth this year, including the substantial progress we've made delivering ground-up development projects and sourcing accretive acquisitions.

Our forecast for earnings also includes a 100 to 150 basis point anticipated impact from debt refinancing activity, again as discussed in October, excluding which the midpoint of our guidance would be in the mid-5% to 6% area, reflecting a continued strong fundamental backdrop. As a reminder and consistent with past practices, we do not include speculative acquisitions in our guidance, but our team is active in the market sourcing opportunities that meet our quality and accretion requirements.

We will keep you updated as transactions are contracted and closed. As Lisa and Nick described today, ground-up development remains the prioritized and most visible driver of our external growth, and our near-term deliveries and growing pipelines are evidence of our strong position in the marketplace as a developer of choice.

Importantly, our balance sheet and liquidity position remain a source of competitive strength, enabling us to remain opportunistic and execute on our development pursuits, acquire properties and achieve favorable debt and refinancing terms. We have A3, A- credit ratings from both Moody's and S&P. Leverage is within our targeted range of 5 to 5.5x.

Free cash flow generation is strong with no need to raise equity or sell properties to fund our investment pipeline, and we have nearly full availability on our $1.5 billion credit facility. In closing, we are looking at a future from a position of significant strength operationally, financially and strategically. With that, we now welcome your questions.

[Operator Instructions] Our first question comes from Samir Khanal with Bank of America.

I guess, Mike, just following up on acquisitions and dispositions. I know you don't guide to those sorts of targets there. But curious, given where pricing is, right, for grocery-anchored today, I mean, how do you think -- sort of what are you seeing out there in the market opportunities? I mean you had a pretty active year for acquisitions. So I just would love kind of your thoughts on kind of how the year could play out.

Yes, Samir, this is Nick. I'll take the question and appreciate the question. Look, the reality is we are seeing demand in our sector continue to grow for a lot of good reasons. There's a lot of investors looking to invest in grocery-anchored real estate at the moment. And so we are seeing a broad range of opportunities in the 5% to 6% cap range is the range I would give you.

But as we've always said, and I appreciate you reminding everyone, we don't guide the acquisitions because we don't have to do them in our fundamental business plan. And so we will lean in when we can find opportunities that are equal to our quality, our growth profile and very importantly, that we can fund accretively.

And so those are the ones we're focused on. As you alluded to, we were very successful in that in 2025, finding over $0.5 billion of those. And our team is actively pursuing opportunities around the country right now. We do not have anything under contract currently or we would guide to that, as you're aware. And I do expect we will find some needles in the haystack out there as we continue to look throughout the country.

But as we've continued to talk about, we're going to continue to focus our capital on the development program where we're getting development yields north of 7%, and we're very excited about that opportunity set as well. And so I feel really good about the development program and also confident we will find some acquisitions that meet our thresholds in 2026.

If I may, I just want to really -- sorry, Christy was ready to move on to the next question. It's not an either/or either. I think that's important, and that's what it has meant. There's no question that development is -- that is the priority for us, and we will do as much as we can. When we acquire centers, it's incremental to that. It's an end. It's not an either/or. And I think that, that's really important because it goes with what Nick said. We're only going to pursue those acquisitions that will be accretive to earnings, growth, quality, and we've been really successful in doing so.

Our next question comes from Michael Goldsmith with UBS.

Amazon is now -- they're closing their Amazon Fresh grocery stores. It looks like you have 4 of them. So I guess, maybe big picture, what do you think that means for the grocery sector as a whole? And then related to those boxes, have you gotten any indication that those would be converted to Whole Foods? Or have you received interest? Just trying to understand the underlying real estate of your Amazon Fresh locations as well.

Michael, I'll start with the bigger picture and then toss it to Alan for specific Regency impacts. Short answer is Amazon still owns Whole Foods, and we are really encouraged that with this announcement that they're leaning in even more into expanding Whole Foods, one of our best customers. This is certainly not a pullback from a physical store location. It's just a rebranding of where they do have stores.

So we're really encouraged by that. The grocery business has always been tough. We know that. It's why our strategy is to ensure that we're investing with the top brands and then also the banners within those brands and then also the top sales productivity of those chains themselves. It's been a winning strategy for us, and we expect that will continue.

Yes, Michael. And I would layer on top of that, you're absolutely right. They announced their closure of their entire fleet. We do have 4 of them. All 4 of ours did, in fact, close. But the grocery sector is strong in terms of their expansion right now. And a few things could happen. You're absolutely right. Some of our stores could become Whole Foods in terms of conversion, but there's plenty of active grocers out there that are also very interesting. And the amount of inbounds we got immediately when that announcement came out, again, speaks to, I think, the strength of the real estate and the desire to fill it.

Importantly, I would add there is significant term remaining on those leases. It is Amazon credit. And we're going to be patient, and we're going to make the right decision from a merchandising standpoint and something that is accretive to the portfolio and is right for the community. So more to come on that front for sure, but I am personally very comfortable given the existing makeup of those assets and directionally where we're going to take them.

Our next question comes from Cooper Clark with Wells Fargo.

I wanted to ask about the $325 million development and redevelopment spend guidance as you continue to lean more into ground-up development. Could you provide color on how we should think about the mix between ground-up development spend and redevelopment within the $325 million guide? Also, any color on the current pipeline for additional ground-up starts in 2026 following the fourth quarter activity would be helpful as well.

Let me start real quick, Cooper, and then I'm going to hand it over to Nick. Just fundamentally on the numbers, $325 million of spend is roughly 2/3 ground-up, 1/3 redev. So just to frame the conversation. And then Nick is going to take it from here and talk about the mix of starts in '25 and then what he thinks the direction is going forward.

Yes, absolutely. Appreciate it, Cooper. And so as Mike alluded to, strong starts in 2025 with over $300 million, and those continue to lean more into ground-up development. So as we look at 2025, 75% of those starts were ground-up development. And as we look forward into '26 and beyond, as I articulated in our prepared remarks, we believe we can be on a run rate here as we look at our shadow pipeline of $1 billion over the next 3 years of new investment.

And I would think that approximately 75% of those being ground-up developments is a good placeholder in your mind. And so that's why we continue to be excited about not only the projects we've started, but this future pipeline that we have very good visibility to.

Our next question is from Craig Mailman with Citi.

Just wanted to follow up on the shop side of things. How much more room do you guys think you have kind of to push there given the demand? And also just kind of curious, Alan, you had mentioned that there's -- you're seeing people kind of line up for spaces that are already occupied. I'm just kind of curious how that translates into, are these upgraded tenants potentially where you could charge more rent?

Are these kind of stalking horses on pushing renewals? Just kind of curious how that ultimately plays out. And then to slip in a follow-up on Michael's question. Should we expect any lease term fees on the Amazon goes? Or is that just they're going to pay out the rest of their term?

Craig, thank you for the question. I appreciate you pointing out the shop occupancy. It's one thing that I take pride in smiling about the success that the team has had. We are at peak. We did break another record, but I've had the good fortune of saying we broke a record again. So I am absolutely not putting a ceiling on that. And despite that peak occupancy, it did grow 70 basis points year-over-year. The demand is still there.

And the lack of supply is real, the million square feet that we have in negotiations across all regions. And our teams are, as you pointed out, proactively leasing space. It was really all of the above of what you defined. And generally speaking, look, merchandising is really important to us, qualifying for the right operators and driving accretive returns is certainly the goal. So we are, in many instances, driving higher rents.

But to the extent that it makes more sense after getting into that negotiation to keep a tenant in place, we will certainly do that as well. So I would say it's rarely a stalking horse situation. We will typically commit to who we think is right for the asset, right for the community and right for Regency. But I remain really encouraged in terms of where we are on the shop front. The term fee, actually, I'll even answer that.

I think that was your third question, really well done, kind of getting them all in, Craig. TBD, again, it will depend on the circumstances of where we are. If there's significant term that remains and there's an opportunity to negotiate something that is favorable for all of us, we will evaluate all of those on a case-by-case basis. But there are certainly plenty of instances of lease termination negotiations where appropriate.

And just to be clear, there is no term fee from Amazon in any of our outlook guided items.

Our next question comes from Greg McGinniss with Scotiabank.

So based on some recent retailer earnings and commentary, it appears we might be seeing some early signs of softening consumer resilience. Now obviously, spreads were good this quarter and development leasing seems to be going really well. But have you noticed any changes in store openings or closure discussions with tenants or the types of tenants looking to open and close? Are there any updates to your tenant watch list?

Greg, thanks for that question. Look, I guess I would first start, so tenant health, our ARs are below our historic norms. Our sales continue to trend up. Our foot traffic continues to trend up. So as we kind of look at it from a look backwards basis, I'm really comfortable with where we are. On a go-forward basis, I'm going to look at my pipeline, right? And I'm going to look at where are we at currently in terms of flow of inbound deals and also look to of those inbound deals and recently executed transactions that are coming through, how successful are we on growth.

And again, you heard my opening remarks, we're having tremendous success with GAAP rent spreads by really focusing not just on that initial spread, but on the annual embedded rent steps. So as I sort of convert that back to the consumer resilience in our assets in our trade area, I'm not going to say it doesn't exist anywhere, but we feel really comfortable and really confident with the data that we have, both on a look backwards and a near-term look forward and where we stand.

It's important to remember the type of retail real estate that we do own and operate. As Alan said, we're not immune to consumer pressures and to downturns, but we're certainly much more insulated and really well positioned because of the essential nature of the -- our merchants essentially service providers, the convenience factor and close to the neighborhoods and the value that our centers provide. And on top of that, the neighborhoods in which we operate. So much more insulated and really well positioned.

Our next question is from Todd Thomas with KeyBanc Capital Markets.

I wanted to ask about development, and you talked about the favorable backdrop for development and for Regency, how it's a key differentiator in what's been a low supply growth environment in general. And historically, developers seek favorable risk/reward opportunities and the narrative around low supply growth seems broadly understood.

And you talked about the strength in demand from grocers and shop tenants. So is development activity poised to increase? Do you see the competitive landscape changing at all for new development starts more broadly as you look out over the sort of next couple of years? Do you think that development activity in the open-air space starts to accelerate a little bit?

Todd, this is Nick. I appreciate the question. The answer is yes, but with an asterisk. And so there's no question we're seeing tremendous demand, as Alan just articulated, and as we're seeing in our development pipeline in terms of not only the velocity of new starts, but the velocity of the lease-up of those projects matching and/or and sometimes marginally beating our underwriting.

And so I feel really confident in what we're working on and the underlying demand. And do I think there's going to be continued growth in the developments? Yes, but coming off a very low number. And so we are doing a large portion of the development around the country. But when you compare that amount of supply compared to the existing supply, it's a very, very small amount in the grand scheme of things.

So yes, I think we're going to see more opportunities. Yes, we're excited about the developments we're working on. Yes, we are starting to see more competition for those opportunities. So I do think there's upward trajectory, but it's still going to be a very limited amount compared to the overall supply in the industry.

Our next question comes from Michael Griffin with Evercore ISI.

Alan, I wanted to go back to some of your comments during the prepared remarks, particularly around kind of occupancy and to be able to drive that on the anchor leasing side. It clearly seems like from a landlord perspective, just given the favorable supply-demand backdrop, you've probably got some decent leverage.

So not asking you to give away the secret sauce, but could this maybe translate into whether it's shorter options that you're negotiating, maybe embedding some rent escalators? I know some of those grocery anchor leases can be flat for a pretty long period. Just give us a sense maybe of how you're able to leverage sort of the demand environment you're in to build that occupancy, particularly as it relates to the anchor leases.

Yes, Michael, thank you for that question. So a few questions ago, we talked about shop occupancy being at peak levels. We do see runway on the anchor front. We've got about 50 basis points of spread to get us back to that peak level. And so I'm really encouraged, and you heard in those opening remarks the comments of Whole Foods, Trader, Sprouts, grocers that are being executed for that space.

But I would say, first and foremost, its quality, and that's where we have kind of the leverage of being able to choose who do we want to really interact with. And I look at our pipeline of anchors that are in negotiation, PGA Superstore, Arhaus, Pottery Barn, Total Wine. I mean I'm going non-grocery now, and that list continues on. And so I feel really comfortable about that. There is an opportunity certainly to lean more into the rent spread nature of it.

Capital is also another lever that we can certainly pull in an environment like this in terms of how we're going to address a work letter and/or our contribution, which may be a bit more muted. But overall, there's a lot of users out there. I think you would hear from them. They've got bold growth plans and just the lack of supply is putting them in a position where there is more competition on their front.

Our next question comes from Juan Sanabria with BMO Capital.

Maybe just a 2-parter, if I can try to be a little greedy here. You've talked about rent bumps and record GAAP leasing spreads. So curious on what you may be able to articulate on those bumps that you are achieving leading to the higher GAAP numbers? And then secondly, just curious on any color you could provide on build occupancy and the assumptions embedded in guidance as to how that will flow through the year.

Juan, I'll start with the first question, and I'll let Mike handle the second one. So 96% of our new and negotiated renewal deals had steps. I'll start with that. From a shop perspective, 85% were 3% or higher and 30% were 4% or higher. So I think you get the sense that it is a key focus for us in terms of leaning in. And that is clearly a big contributor of this kind of future long-term sustainable growth. And it is equally, if not more important than the initial spreads that we've been going after. Mike, I'll let you answer the...

Sure. From a commenced occupancy rate, let's first go back and just think about the material movement we made in 2025. So we moved commenced occupancy by 150 basis points on average over the course of the year. That's what contributed to that outsized same-property growth, namely coming from base rent and recoveries, all driven by that material increase in occupancy.

As Alan has talked about today, we're approaching kind of peak occupancies, certainly in shop space, got some room to run in anchors, and we like to think we can continue to move that needle. When I think about the guide in the mid-3 area, I would characterize it as us continuing to kind of grind out commenced occupancy increases by compressing that SNO pipeline that we've built.

It's currently standing at 240 basis points. Our average on a stabilized basis should be closer to 185 area. And we're certainly not planning for another 150 basis points of commenced increases on average. It's just -- I think that would take us beyond any kind of sense of reality. So a continued positive tailwind of commenced growth on the margin kind of moving up from where we stand today.

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

By the way, I don't think anybody has mentioned it, and I might be off, but I believe this is the first year that you guys achieved over $1 billion of EBITDA as a public company. So pretty meaningful signpost, I think. My question is on the capital allocation front and redevelopment versus development.

Obviously, your returns on redevelopment are about 200 basis points higher than on developments, which makes sense because you own the land. Have you identified how much potential redevelopment could you do, or would you like to do? And what's the impediment to doing more redevelopments over the next 2 years?

Sure. Appreciate the comments, Floris, and I appreciate the question as always. So you're absolutely right. Look, and going back to kind of Lisa's comment earlier, we're in the great position to not be either/or. And so the reality is every time we can find an opportunity to invest in our existing portfolio creatively, we're going to take advantage of that. And our teams are motivated and focused on doing that every day.

And so we continue to -- as I alluded to earlier, we continue to have our eyesight at $1 billion over the next 3 years. And of that, I think assuming about 25% of that is in the redevelopment bucket is the right place to think in terms of just generally where we expect that capital to be spent. But again, our teams are looking every day at those opportunities and what prevents them is, quite frankly, just getting access back to some of that real estate.

And so we don't have full control over when we can bring those redevelopments online, but the teams are working to get back a hold of real estate that we think there's a tremendous value to invest some capital and reimagine. And so that's what we wake up doing every day.

The growth in percentage of ground-up versus redev isn't a function of us not being focused on the redevelopment. It's a function of us really growing our ground-up development pipeline.

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

This is Ravi Vaidya on the line for Haendel. I wanted to ask about your leasing spreads. I saw that this quarter that your renewal spreads exceeded your new spreads along with having lower TIs. Can you discuss some of the puts and takes and what drove this?

Yes, Ravi, thank you for that. So again, I guess I'll start supply and demand, right? I mean that's really a large part of where things are, but it can also be lumpy quarter-over-quarter. Generally speaking, our new transactions will lean in a bit more, but we just had the opportunity of some well below market leases that were expiring in the quarter, and we marked them to market.

And so our teams are going to capitalize on that when the opportunity presents itself. Will it happen this upcoming quarter? Maybe, maybe not. But again, I feel really good about that nearly 13% in renewal spreads as our supply continues to dwindle down.

Our next question comes from Ronald Kamdem with Morgan Stanley.

Just I had a quick one on the -- if you could just talk about acquisition cap rates and where you're seeing it and how that ties back to the development yields. Obviously, I see it's been holding, but do you sort of anticipate some pressure on there? And then my follow-up, if I may, is just I saw the commenced occupancy slide was taken out of the presentation. Just any comments on that would be helpful.

Ronald, I'll start with the first question and then let Mike fill in on the second. And so you're absolutely right. I mean the good news of where we sit right now is from a value creation perspective, we are seeing cap rates continue to get pushed down for core grocery-anchored assets. And those are exactly the assets that we're coming out of the ground with and completing. But our eyesight continues to be at 150 basis point plus spread in terms of what we think our going-in yield on development should be compared to a core acquisition.

And these developments take years to put together and start and come online. And so we are not moving our eyesight daily on a development like we are in the acquisition world, which is a little more fluid. And so I would expect our development starts for the foreseeable future to continue to be in that 7% plus range, which, again, we feel really, really good about given where we're seeing those assets trade out in the private market right now.

Ron, on the commenced occupancy slide that we did remove from the investor presentation, really that, I think, served the purpose in a post-COVID world of us compressing and returning to historical averages and highs on the occupancy front, and we've largely achieved that. So I think that's the reason we pulled the slide is it's really just about the narrative that's changed to forward growth from here.

And Alan has spoken a lot today about the continued opportunity for us to grow our percent leased. I've spoken a little bit about our more limited opportunity in '26, but still opportunity to increase our percent commenced going forward. But we are back to where I think the portfolio needs to be and deserves to be given its quality.

Our next question comes from Sydnie Rohme with Barclays Bank.

I was wondering if you could elaborate a bit on the construction cost assumptions embedded in the 9% stabilized development yield and whether you're underwriting any cost relief or increased pressure there?

Yes, Sydnie, great question. The really good news right now is we feel really confident in our assumption on construction costs. So we obviously lived through a period of extreme volatility a couple of years ago regarding construction costs and really proud of our team's ability even in that volatile time to project construction costs appropriately.

And so now as we sit here looking over our shoulder over the last 12 to 18 months and then also looking forward over the next 12 to 18 months, we feel really good that construction costs are stable. We have good visibility, and we are confident in our underwriting.

Our next question comes from Alec Feygin with Baird.

So can you provide some more color on the development pursuit costs and what led to the increase in the quarter? Is there anything structural that now the development platform is getting bigger that this line item will continue to increase?

Alex, I'll take that one. I wouldn't look into much there. I think that is -- we did have a slightly elevated fourth quarter. I think that is consistent with our pursuits. I mean we are working on a lot of projects. The pipelines that the teams have in process are deep. And as part of our annual kind of cleanup process as we go through each of those rosters, we're going to decide whether or not those projects are worth continued pursuit and will make a write-off decision.

So I don't think there's anything to look into there. I would anticipate, though, that going forward, the teams are going to continue to cast wide nets. We're looking for opportunities across the platform. And I think if you think about the efficiency of our program and the lack of development pursuit cost expenses that we've recorded historically, I think you'll find it's a very efficient development platform.

Our next question comes from Michael Gorman with BTIG.

Just wanted to stick with capital allocation. I think it's been quite a while since Regency started a year with no assumed dispositions. So I was wondering if you could just kind of update us on your thoughts on the more programmatic capital recycling out of the existing portfolio and maybe how any changes in that viewpoint fits into the funding for the development program in 2026?

Yes, I'll take it. Our strategy has not changed over the many years that I've been here. Dispositions can and will be part of every year. We view it as a way when we're deciding on whether to sell a property, is it something that's either nonstrategic that we acquired through a portfolio, something that's non-core or perhaps something that we don't believe -- that we believe that the future growth isn't consistent with our expectations for our portfolio. And that's how we look at it.

We believe it is key to fortifying the future growth rate of the entire portfolio as a whole. There are some years where we have more, some years we have less. Don't necessarily view it as a source of funding for our development program because our free cash flow does that. And again, we've said that multiple times on this call, development, redevelopment, our highest priority, and we do have the capacity to fund that self-funding with our free cash flow and we're not spending at all.

We still have some more capacity to do so. And that's really how we think about it. When we do sell properties, we may sell a property as a source of funds for an acquisition. We think about it that way as we did with [indiscernible] pairing it with the asset that we bought in Nashville. And again, we look at it, can we source it and fund it accretively. And that's how the decisions are made.

Our next question is from Mike Mueller with JPMorgan.

The Crystal Brook acquisition going right into redevelopment is interesting. Can you talk a little bit about what's the scope of that project? And is this just a one-off opportunity? Or is it something that's going to be more of a focus on going forward?

I will -- let me start with why we handled it the way we did it in our materials, and then Nick will color up the actual investment. But it's a unique opportunity, and it's not quite an acquisition and it's not quite a ground-up development. It's very classically a redevelopment, but it's an acquired redev. We're starting the project day 1. We're going to reach stabilization in what I would call a normal time frame for a ground-up development project.

And so given that the cash flows kind of resembled an investment of a development, we're going to put it right into that pipeline from day 1. It won't be the same property. It won't impact same-property growth until well past stabilization. We just felt like that was the best bucket for it, nor does its acquisition cap rate really match what you would consider a market cap rate. So putting in it as an acquisition didn't feel right to us as well. And then Nick can speak more about the investment itself.

Yes, Mike, we're really excited about the investment. I mean when you just step back and again, think about our platform, we have a lot of tools in our tool belt. And so as you've heard us articulate about 30 times today, ground-up development is one of them. We can go source our own ground and build an entire shopping center, which we're very active in doing. And on the flip side, we can acquire a core asset, but then we can do everything in between. And this one is exactly in between.

We found a very underutilized piece of real estate on Long Island, and we've now acquired it. But as Mike alluded, it's very much in our mind, similar to a development where before we close, we've locked up an anchor tenant that will be anchored by Whole Foods. We've fully entitled it. We've got drawings in hand, and we're starting construction right away. And so although we acquired it for $30 million, we do anticipate investing about the same amount of capital over the next couple of years, bringing Whole Foods and other exciting tenants online.

And we expect that project to stabilize similar to our ground-up developments north of a 7% return. And so just a really phenomenal opportunity to, again, lean into Long Island. Our Holbrook redevelopment that many of you are familiar with, ground-up development that Whole Foods is opening here shortly. And so just again, success throughout the country is driving additional opportunities, and this is one we're excited about, and we'll talk more about in the future.

[Operator Instructions] Our next question is from Omotayo Okusanya with Deutsche Bank.

Just curious what commentary you're hearing from your tenants just about the ongoing situation with tariffs. Again, just curious how they're factoring that into their plans going forward in terms of kind of open to buys, whether, again, some of the near-term confusion with the Supreme Court and what happens next, if that's kind of giving them any near-term trepidation about store openings? Or just kind of curious what kind of feedback you're hearing from them and how it's kind of impacting how they're thinking about their store strategies going forward?

Thank you for that question. So I'll start with what Lisa had previously mentioned in terms of just the portfolio being essential retail, right? And so we do believe it's a bit more insulated given our tenant base. And look, I'm really proud that we have a whole lot of time-tested operators that really know how to operate and that are very agile through what could be some uncertain times with tariffs. But are we immune to it? No, we're not. But I think many of our retailers that do have -- could have exposure have been diversifying their supply chain for quite some time.

And so we're hearing very little, if any, in the way of any tariff impacts within our portfolio. One example I can give is we had a great restaurant operator that said, I used to have imported wines and specialty food on my menu, and I'm just going to switch to local wine, and I'm going to change to more local food for better cost control. So we're going to continue to monitor it for sure, but there's no read-through and no feedback from our retailers that the tariffs are impacting their business at any way.

Our next question is from Paulina Rojas with Green Street.

Historically, you have tended to outperform the midpoint and even the high end of same property guidance by a significant margin actually. What would need to happen to exceed this 3.75% upper end this year? Where could the biggest surprise -- positive surprise upside come from?

Paulina, it's Mike. I appreciate the question. You're right. In our recent history, we have had a track record of more material outperformance. And I think it goes back to my comments on the more material changes that are occurring in the portfolio from a commenced occupancy rate. At the end of the day, that's going to be the biggest lever from an internal growth perspective is how -- what changes in commenced occupancy.

We talked a little bit about our base case outlook for the year being flat to slightly positive on that front. So I think my comment would be the opportunity set within internal growth is a little -- is less than it has been. We're going to keep leaning on renewal rates. As I said, we're going to move commenced occupancy up. Where we fall on ULI, it would be another factor.

We are planning for a more of a historically average year, slightly below historical averages when, in fact, '25 was materially below historical averages. If we extend that to earnings, the factors that could move us to the upper end and potentially beyond would include capital allocation. And we talked a little bit about today. We don't guide on speculative acquisitions. To the extent we find those opportunities and we find high-quality properties that are accretive to our cost of capital, we'll take advantage of them, and that would be additive to our outlook for the year.

We have reached the end of the question-and-answer session. I'd like to turn the call back to Lisa Palmer for closing comments.

Thank you, Rob. Appreciate that. First, I want to just one last shout out to every Regency team member that's listening for a fantastic year. Really grateful. And then secondly, thank you all for your time and interest in Regency, and we'll see you all soon. Have a great weekend.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Regency Centers Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Christy McElroy. Thank you. You may begin.

Good morning, and welcome to Regency Centers' Third Quarter 2025 Earnings Conference Call. Joining me today are Lisa Palmer, President and Chief Executive Officer; Mike Mas, Chief Financial Officer; Alan Roth, East Region President and Chief Operating Officer; and Nick Wibbenmeyer, West Region President and Chief Investment Officer.

As a reminder, today's discussion may contain forward-looking statements about the company's views of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. It's possible that actual results may differ materially from those suggested by these forward-looking statements we may make.

Factors and risks that could cause actual results to differ materially from these statements may be included in our presentation today and are described in more detail in our filings with the SEC, specifically in our most recent Form 10-K and 10-Q filings.

In our discussion today, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. Please note that we have also posted a presentation on our website with additional information, including disclosures related to forward earnings guidance.

Our caution on forward-looking statements also applies to these presentation materials. As a reminder, given the number of participants we have on the call today, we respectfully ask that you limit your questions to one and then rejoin the queue with any additional follow-up questions. Lisa?

Thank you, Christy. Good morning, everyone. We're proud to share another quarter of outstanding results, highlighted by strong same-property NOI growth and earnings growth. These results reflect the continued success of our team in leasing space, commencing our SNO pipeline and driving rents higher amid robust operating fundamentals and strong demand at our shopping centers. Our tenants remain healthy, which is evident in sustained sales strength and historically low bad debt. Our earnings growth is further amplified by the successful execution of our capital allocation strategy this year.

Our investments team has accretively deployed more than $750 million of capital into high-quality opportunities, including acquisitions, ground-up development and redevelopment. By year-end, we expect to have started around $300 million of projects, bringing total starts to an impressive $800 million over the past 3 years. I am so proud of our team for this accomplishment.

I'll let Nick talk in just a few minutes about the specific development projects we started in the third quarter, but I want to emphasize again how ground-up development is truly a key differentiator for Regency. We are the only national developer of grocery-anchored shopping centers at scale in an environment of otherwise limited new supply. We are building the types of assets that we would acquire, and we're doing so accretively and with manageable risk, creating meaningful net asset value with yields well ahead of market cap rates.

Given our exceptional results and a continued strong fundamental backdrop, we are raising our full year earnings growth outlook and reflecting that strong performance, increasing our dividend by more than 7%. Our strong and consistent track record of dividend increases over time is very important to us in driving total shareholder returns while also maintaining a substantial level of free cash flow.

Before turning it over to Alan, I want to say again how proud I am of our team's performance this year. And as we look ahead, we believe our competitive advantages position us well to drive sustainable cash flow growth from our essential grocery-anchored shopping centers in suburban trade areas with strong demographics to our leading national development platform, strong balance sheet and the best team in the business. Alan?

Thank you, Lisa, and good morning, everyone. Our team did an incredible job producing another quarter of outstanding results, growing same-property NOI by nearly 5% with strong base rent growth as the primary contributor at 4.7%. This outperformance is a culmination of a record amount of new leasing in recent years and accelerating rent commencement from our SNO pipeline, combined with favorable bankruptcy outcomes and historically low levels of bad debt.

Our tenant base is healthy. And across our portfolio, we continue to experience significant demand from nearly all retailer categories and for both anchor and shop spaces. Our same-property percent leased rate sits at 96.4%, and we remain confident that we can exceed prior peak levels in this favorable retail environment with limited new supply and sustained strong demand for our high-quality space. Looking ahead, our leasing pipeline is robust, fueled by interest from vibrant restaurants, leading health and wellness brands, off-price retailers and, of course, our best-in-class grocers. In fact, we signed 3 new grocer leases in the third quarter alone, unlocking exceptional redevelopments that will drive enhanced merchandising and better foot traffic to these assets, all at highly accretive returns.

Our same-property commenced rate increased by 40 basis points in the quarter to 94.4%, with 8 anchors rent commencing, including several key openings at redevelopment projects. At our hub at Norwalk asset located in Fairfield County, Connecticut, the long-awaited Target opened in the quarter to strong crowds. We also opened a brand-new Publix at our Cambridge Square asset in Atlanta and a Nordstrom Rack at our Pine Ridge Square Center in South Florida. All of these retailers reported exceptional openings, and we couldn't be more pleased with the upgraded merchandising and success we've seen at each of these projects.

While we've made meaningful progress converting our SNO pipeline into lease commencements, we are also actively backfilling our pipeline with newly executed leases. Our 200 basis points of pre-leasing now represents approximately $36 million of signed incremental base rent. Additionally, we have another 1 million square feet of leases in negotiation, representing visibility to continued strong leasing activity.

We also continue to have great success driving higher rent growth. Cash re-leasing spreads were strong at 13% in Q3, while GAAP rent spreads were near record high levels at 23%, demonstrating our ability to achieve strong mark-to-market rent growth while also embedding meaningful annual rent steps into our leases. Importantly, we are also being prudent with our leasing capital investment.

In closing, I am so proud of our team's great work. Strength in retailer demand, leasing fundamentals and tenant health indicators remain favorable, and we have great visibility into continued above-trend same-property NOI growth in 2026. Nick?

Thank you, Alan, and good morning, everyone. As Lisa mentioned, this was another very active quarter for accretive investment activity. We're seeing great momentum in starting new development and redevelopment projects, executing on our in-process pipeline as planned and continuing to successfully source acquisition opportunities. Since our last update a quarter ago, our most significant progress has been in growing our development and redevelopment pipeline. We started over $170 million of projects during the third quarter, bringing our year-to-date total to more than $220 million.

Our starts in the quarter included 2 exciting new ground-up projects. Ellis Village will be a 50,000 square foot Sprouts anchored center located in the Bay Area at the front door of a thriving master plan community The Village at 7 Pines will be a 240,000 square foot public-anchored center in the heart of Jacksonville's well-established retail node. The property will serve as the commercial hub of an iconic master plan community that will also include over 1,600 homes.

Given our success in bringing projects to fruition, we now expect approximately $300 million of starts in 2025. As the only active national developer of high-quality neighborhood shopping centers, leading grocers remain engaged with us on new projects across our platform. Our team continues to execute well on our in-process development and redevelopment projects, which now totals more than $650 million, with strong leasing activity and blended returns exceeding 9%.

On the transaction side, we had another active quarter as well. As mentioned on our last call, we acquired the 5-property $350 million RMB portfolio in South Orange County at the beginning of the quarter. As a reminder, this was an off-market OP unit deal, with the value proposition of owning Regency stock playing a meaningful role in sell their motivation. We've already fully integrated these centers into our platform and are seeing them perform very well.

We also purchased our JV partner's interest in 3 grocery-anchored centers during the quarter, including 2 in Houston and 1 in Northern New Jersey. We welcome these opportunities to convert to full ownership of high-performing centers and strong markets.

In closing, our team is actively working to source attractive opportunities and further build our future investment pipeline. While the opportunity set for new development projects remains limited, our flywheel effect is real and our ongoing success uniquely positioned us to take advantage of future opportunities to create value. Mike?

Thank you, Nick. As you've heard this morning, the Regency team delivered another outstanding quarter of results, driven largely by the strength of our leasing efforts, the health of our tenant base and the value we're creating from capital allocation. This is reflected in earnings and same property NOI growth that again exceeded our expectations.

As a result, we now anticipate same-property NOI growth of 5.25% to 5.5% and with the increase driven by lower credit loss and higher recommencement from our SNO pipeline. Notably, within that expectation, we have decreased our credit loss guidance range to 50 to 75 basis points. This higher organic growth is driving our increased full year outlook for earnings per share with our new ranges now calling for growth of mid-7% for NAREIT FFO and mid-6% for core operating earnings. And as Lisa mentioned, we also raised our dividend by more than 7% this quarter.

Our balance sheet remains strong with leverage squarely within our target range of 5x to 5.5x. We are generating significant free cash flow to continue funding external growth, and we have nearly full availability on our $1.5 billion credit facility. You'll recall that late last year, we issued $100 million of forward equity. To update you on timing, please note that we settled $50 million in August and will settle the balance by the end of October.

Looking ahead to 2026, we plan to provide detailed guidance when we report Q4 results in February, but I want to offer some early thoughts on our current expectations for growth as we work to finalize our plan. We expect same-property NOI growth in the mid-3% area including a credit loss environment similar to 2025. We expect total NOI growth in the mid-6% area which includes our expectation of delivering approximately $10 million of incremental NOI from ground-up development projects currently in process.

As Lisa and Nick discussed, Development is an important differentiator for Regency as you consider our external growth prospects, and we are gratified to realize a more significant impact from these successful projects as they lease towards stabilization. NAREIT FFO growth is expected to be in the mid-4% area, representing continued solid growth after taking into account the impact of current year and planned 2026 debt refinancing activity which collectively is expected to have an impact on growth of approximately 100 to 150 basis points.

Organic same-property NOI growth of 5.25% to 5.5%. And an internally funded and growing development and redevelopment pipeline, evidencing Regency's unique competitive advantage, an A-rated balance sheet prepared to weather all seasons and an outlook for continued growth even through the realities of today's higher rate environment. It's clear that Regency's best-in-class team is operating on all cylinders.

We are happy to take your questions.

[Operator Instructions] Our first question comes from Greg McGinniss with Scotiabank.

This is Viktor Fediv on for Greg McGuinness. Can you provide some color on this 11 acid distribution transaction with your JV partner? What options do this transaction open actually for Regency?

Sure. Absolutely. This is Nick. Appreciate the question. Regarding GRI, I would start with the fact that they've been a very, very good and long-term partner of ours, and our interests have been aligned for many, many years. And that portfolio aligns completely with our strategy, and we like every asset we own with them. The only challenge sometimes with these long-term partnerships is there's not a perfect way to capital recycle.

And so this allowed us to do a mini DIK in order for them to own 6 assets. They now have full control over and we now own 5 assets at 100% that we are excited about owning and anticipate owning long-term and excited about the partnership on a go-forward basis, again, because they've been great partners. We expect them to continue to be aligned with our interest on the portfolio we continue to own together.

Our next question comes from Michael Goldsmith with UBS.

Mike, I appreciate the early parameters for 2026, if you will, you pointed to the same property NOI growth in the mid- what's changing from the environment that you're seeing there? Or can you help bridge to get there? And then also, you mentioned you expected credit loss environment similar to 2025. Does that mean like your expectations at the start of 2025 or this historically a little bad debt that Lisa mentioned at the beginning of the call, is that applied for next year?

Sure, Michael. Let me start with the second, and I'll just clear that before I move to the first on the bridge. We're expecting next year's credit loss provision to look a lot like '25 ended. So we're -- I would call that a continuation of really on both fronts, whether it's bankruptcy losses or on flexible lease income, better than historical averages. So our tenant -- the roster of our tenants is as healthy as it's ever been.

With respect to the bridge, I think you have to start with an understanding of 2025 before you can appreciate that our outlook as we sit here today, and by the way, as we continue to refine our plans, we feel pretty proud with. But I think if you really think about '25 and think about the components of this year's growth, which are culminating in today's targeted area of 5.25% to 5.5%. A large -- this is about as much commenced occupancy as we have absorbed in this company in our history. And kudos to the team for building that SNO pipeline through 2024, kudos to the team for delivering that SNO pipeline into 2025, and they've continued [indiscernible] expectations of that delivery.

And we are quickly -- we've quickly absorbed space, and we're approaching levels of NOI that are levels of occupancy that are what we would call peak levels. Together with that, we have benefited from an extreme uptick in our recovery rate. All of that recovery rate benefit in 2025 is about 100 basis points. So if you -- reflecting on 2025, as I think about a mid-3% area same-property growth next year, all of which -- nearly all of which is coming from base rent, I think that's pretty darn good growth on top of really good growth in 2025. So we still feel really confident with our outlook.

Yes. And I would just like to emphasize that. I think Mike said it really well. But mid-3% same property NOI growth a year after what we're doing this year. And then adding on top of that, the contributions that we're getting from development was a 6% NOI growth we feel really good about how well positioned we are for our future growth.

Our next question comes from Cooper Clark with Wells Fargo.

I appreciate the early '26 thoughts, I guess how should we be thinking about the potential on development and redevelopment starts into next year considering an increasingly competitive transaction market and strong leasing. And then I would also appreciate any color on the mix between ground-up and redevelopment as you think about starts moving forward?

Yes, Cooper. I appreciate the question. This is Nick. So I think there's a couple of pieces to that. So let me just actually step back for your benefit and others. It wasn't that many years ago, we were talking about starting between our development and redevelopment program, $1 billion over the next 5 years. And now fast forward, and as we look over our shoulder here as we round third base in 2025, we will have started $800 million just in the last 3 years. And so as we've been articulating, we continue to feel really good about finding more than our fair share of investment opportunities in our development and redevelopment program.

And so I would say, as we look forward, we would expect to continue to find more than our fair share in that run rate, we feel good about as we move into 2026 and the team is working every day to find even more opportunities and where we find those, we'll take advantage of those.

And then in terms of the divide between development and redevelopment, look, wherever we can invest our capital accretively, we're going to lean into. But because of the success we've been having on the development program. As you can see, the split is starting to lean into the ground-up development. And so I expect that to continue. If you look at our in process today, this is the first quarter in quite some time are in process developments out number from an investment standpoint or redevelopments. And so we have now flipped the script where the developments are outweighing redevelopments. And as I look more near term into 2026, I would expect that to be the case as well.

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

Mike, just looking at your net effective rent page. When I looked at the new leases, just curious, there seems to be a little bit more leasing being done on -- the new leasing being done on the anchor side. versus shops, which you go back the last several quarters, it's been -- the mix has been primarily shop space. So just can you provide a bit more color? Was there something like did you get boxes back? Is this related to some of the development side? Just trying to understand why the mix has gone up for anchors here?

Samir, this is Alan. I appreciate the question. So no, it's just an anomaly for the quarter. We happen to do more anchor transactions. It's not development-driven per se in the quarter. And again, I'd say 10 anchor transactions came in. That's what's also skewing, I think, with the lower rent that you're seeing. But importantly, that I'd slide you over and go look at the cash rent spreads and the GAAP rent spreads that happened for the quarter. So nothing more than coincidental timing that a lot of anchor transactions happen to come through the Q in quarter 3.

Our next question comes from Ronald Kamdem with Morgan Stanley.

I just want to touch on acquisitions because we definitely appreciate the early '26 thoughts on same-store. But on the acquisition front, just number one, just on just cap rates or IRRs, just what are you guys seeing in the market and how that's trended? And we also noticed a lot of the JV transactions in the quarter, I guess, you still have over 100 assets in those JVs. Is there more incremental willingness to sort of sell or buy those assets out?

Appreciate the question, Ronald. Let me start with your second question first, which is the joint venture side. The short answer is yes. I mean the assets we own, whether we have 100% or we on with partners, we're excited about owning them. And so where there's an opportunity with our partners to buy out their interest, we're constantly having those conversations and where the stars align, we plan on taking advantage of that. We are obviously set up to transact quickly, and we're having those conversations on a very regular basis. So excited about the ones we were able to execute on last quarter. We can't perfectly predict when our partners want to exit the future.

But again, we expect that to continue to be a pipeline on a go-forward basis. And then in terms of cap rates, I'll just reiterate the good news for us, given the development program we just spoke about based on Cooper's question is, I would just reiterate, we don't have to acquire assets to grow. But where we can find the opportunities to lean in, where they match our quality, match our future growth profile, and we could fund accretively, we're leaning in. And as you can see, that's led to over $0.5 billion of acquisitions this year. But that's becoming more difficult in this environment because there is capital flowing into our sector, no question about that.

And so I would have told you last quarter, we'd probably be talking cap rates 5.5% to 6% on most core assets. Now from what we're seeing in the market, I would say it's more of the minus side on 5.5%. There's a lot of capital chasing these opportunities. And so we're going to continue to be true to our business plan, make sure we're investing our capital wisely but also excited to see so many people finally waking up to understand how defensive and quality our NOI streams are.

Really quickly, I would just like to add, I'm going to reiterate, I think with Nick's answer to one of the first questions. We really value our long-term partners and continue to do that. And it was not that long ago that Oregon committed even additional capital to us, and you've seen us continue to acquire assets with them into that partnership. So that's one that we're growing, for example.

So again, we value long-term partnership -- our long-term partners, and we often are the best buyer if there's a reason that the partner wants to exit, and that's when we have those opportunities.

Our next question comes from Sydney Rome with Barclays Bank.

I was wondering if you could give a little bit of color on what your expectations are for rent spreads and if you expect them to continue to be around this percentage or...

Sydney, thank you for the question. Look, I'm really proud of the trajectory we have been on and how committed the team is to ensuring not just these elevated levels of rent spreads, but even more importantly, the gap spreads that we always talk about and the continued embedded rent steps.

So I don't necessarily have a target on it per se. But what I would say is I look back at Q3 new shop leasing, 85% of our shop transactions had 3% or higher in terms of embedded rent steps. And 25% of our new shops had 4% or higher. So the teams are really embracing that long-term sustainable approach with these embedded rent steps, while on top of that, getting that 13% rent spread that you have seen. I will take as much as they are willing to give and I just believe in this sort of supply constrained environment, we have an opportunity to continue to lean in.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

I just wanted to revisit the mid-3% same property NOI comments. You said that that's the base rent component primarily. So contractual rent steps and cash releasing spreads. Do you expect a further contribution from the SNO pipeline in 2026? And can you also speak to what sort of contribution you might anticipate from redevelopment in 2016? Is that going to be sort of a neutral impact year-over-year? Or do you still expect there to be some additional growth on top of that from redevelopment?

Sure. Thanks, Todd. And I'm happy to dig in a little bit deeper here. But I'm going to leave some of that detail to our full plan, which we'll provide to everybody in February. Yes. So to get to mid-3s, it's going to take some occupancy climb. And we still see an opportunity and we have some slides in our investor materials that articulate that, there remains opportunity in our commenced occupancy percentage to close that gap. We're sitting at 200 basis points wide right now. The historical average is in the 175, 180 area. And we are confident that we will continue to make headway towards closing that gap into '26, which will drive some of that base rent growth that I articulated.

We do -- that includes delivering on redevelopments. So in 2025, we had a year where we contributed to growth from redevelopments north of 100 basis points. I actually think that, that's going to repeat itself into 2026. Those are overlapping concepts in some way. It's really about absorbing space and driving commenced occupancy. And then the balance is going to come from rent growth. And I thought Alan did a really nice job of articulating our position in that marketplace, both driving contractual steps as well as cash releasing spreads. I hope that helps. And again, we'll give some more color on this outlook in February.

Our next question comes from Craig Malman with Citi.

Maybe just a 2-parter here. As we think about the bread problems you laid out for next year for same-store and implicitly total NOI growth and maybe even FFO. Just looking at your same-store occupancy, you guys kind of ticked a little lower than where you peaked out at. Is there room to push that lease rate higher? Or are we going to close the gap to the historical spread by just commencing and you kind of are the frictional level for that leased occupancy.

And then just the second piece for Mike, I know you said 100 to 150 basis point drag from refinancing. Are you guys giving any consideration to putting some term loan debt in the stack, which is, from what I'm hearing from some of your peers pricing the mid-4s, which would kind of compress that headwind a bit.

Craig, it's Alan. I'll take the first part and let Mike color up the second part. I do believe that we can pierce through the occupancy of where we are. That 20 basis point drop this quarter really was attributable to the Rite Aid bankruptcy and us getting 10 Rite Aid spaces back in the quarter. But as we look at, again, as I think I said on one of the prior questions, strong demand, limited supply. I think there's certainly upside there. And I think we'll probably see that come from largely is on the anchor front.

We're at 98% leased. And as we look back at peak levels there and I look at the pipeline of deals that is in process right now for those anchor transactions, there's real opportunity there. And with this even further encouraging to me is when we look at kind of who those tenants are and Five Below, Barnes & Noble, Home Goods, J. Crew also, there's just a whole lot of them that are out there that are materially engaged and just great operators that will be really fantastic adds to our portfolio.

So hard to the balance sheet, and I appreciate the question. Yes. We consider all forms of capital as we think about refinancing our obligations. And the 150 basis point impact on refinancing is pretty wide range that we're sharing today largely because we're still considering what options we may take for 2026. The 2025 financing activity has already been executed. So we know what that impact is next year that the balance of our expectation will be driven on the solution we choose, term loans, converts the [indiscernible] offerings, all of those are always considered by Regency. We will make the best decision at that point in time depending on the market conditions.

Let me lastly say that with the credit position that we're in from an A-rated balance sheet and the extreme pricing we can achieve on just the [indiscernible] bond offering with a 10-year term, I do think you squeeze out a lot of that potential opportunity that others may have as they consider their alternatives.

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

I guess a 2-part question. One, you mentioned $1 million -- or 1 million square foot pipeline in your prepared remarks. So just curious if you could contextualize that historically is that being skewed by some of these anchor opportunities you've kind of noted.

And then the second part would just be anything unusual on bad debt this quarter that was actually a contributor to growth and is there any of that assumed seemingly in 2026, given you expect bad debt to kind of be similar next year versus this year?

Juan, I appreciate that question. That 1 million square feet is pretty consistent with multiple prior quarters, again, I think speaking to the strength of the environment that we're in right now. It is -- there is no disproportion of anchors versus shops on a relative basis in terms of how we look back. And again, it's a full of great retailers. And I rattled off a few junior box players that we're engaged with, but we're also doing multiple transactions in that pipeline as [indiscernible] with the Warby Parkers and the Jersey Mikes and the Mendocino Farms and the Joe and the Juice and just a whole host of great operators that were sprinkling in across the country.

So again, we always say qualify the right operators and merchandising is very important to us. We don't just lease to anybody. And so while I'm proud of the 1 million square feet in terms of the numbers that are in there in the pipeline, equally, if not more proud of the quality of those retailers that are here.

On the bad debt question, and I think you're referencing our uncollectible lease income line item. Interesting this quarter -- so again, this is a line item that is reflecting the collection rate on our cash basis tenants, right? So that pool of property -- we just had higher collections from that pool of property, the pool of tenants, I should say, this quarter. In fact, interestingly, we've been collecting this quarter on some receivables from tenants who had previously moved out, and we had long written off ago. And kudos to the team, they both operations and legal for continuing to pursue those owed receivables, and we've collected on those this quarter. So that's what drove the positive anomaly.

On a year-to-date basis, we're running in the 20 to 25 basis point area on ULI, that's as a percent of total revenues. You've heard us talk about our historical averages before, which are in the 40 to 50 basis point area. So for a couple of years now, we've been operating at historical lows. Again, the tenant base that we have today is extraordinarily healthy, doing very well. And that comment I'm making at the end, we believe will continue into next year. So we are anticipating that we'll continue to be lower than our long-term historical averages on lease income in 2026.

Our next question comes from Michael Griffin with Evercore.

On the developments, I'm curious if you can give us a sense of where you're underwriting rents both for anchor and small shop versus where current rents are in the market? And then maybe stepping back more broadly, we've heard about this dearth of new supply in strip land. And clearly, Regency is a differentiator on the development side. I mean, I realize you don't want to give away all the secrets, but how are you all able to make the math pencil? Is it the land basis? Is it the proximity to population areas like these master planned communities. It just seems like you're able to make this work, whereas others out there in the market aren't able to.

Appreciate the question, Michael. This is Nick. I'll start with your second part, which is, yes, there's no secret sauce. I'll tell you that. It's a lot of really, really hard work over years and years that build up to put us in the position we're in. And it comes back to, again, starting with the relationships. We have the best relationships across the country with the best grocers. If you look at our end process. I mean we're building for Whole Foods. We're building for HEB, Safeway Public, Sprouts doing a major redevelopment with Kroger. And so those relationships have been forged over decades of work.

Capital, there's no question. We have the capital. It's where we're allocating it as we keep talking about. And so we are blessed to be in a position with our free cash flow and our balance sheet to be able to lean in and take advantage of these opportunities. And that really matters to a seller to know that we are committed and we have the capital ready to go.

And then last but not least, it's just expertise, really, really hard work to grind into every aspect of our pro forma. And again, years of experience, the best professionals in the business, no doubt working on our construction costs, working on our underwriting and sharpening every aspect of that pro forma to make these things pencil.

And so again, no secret sauce, but we're really, really proud about what we've done here recently and what the future looks like for us. But it's not 0 competition. There's -- we are the only active one nationally, but we're competing with local developers in these markets. And there's some quality local developers that are forcing us to up our game and sharpen our pencil every day. And so we're excited about the ones that we're winning for the reasons I just articulated and continue to believe we'll get more than our fair share.

And in terms of rents, you're absolutely right. I mean 2 aspects to every pro forma, what's the cost, which we're really smart about and understand really well, which is why you've seen our in process perform the way they have. But the other side is the income. Given the operating portfolio we have, the platform we have there as well as our leasing agents on the ground looking at our ground-up developments, really proud of the team's ability to forecast the income side of these developments and redevelopments as well.

And so if you were on our internal calls, you'd hear us say, we don't want to underperform, but we also don't expect to outperform. We expect our teams to really understand both sides of the pro forma, and you'll see on the margin, we're outperforming more than underperforming based on the team's great work.

I really appreciate Nick's answer, but I'm going to -- because he's so more intimately involved I think he just described the secret sauce. And I wouldn't underestimate what that is because it's our team and it's the decades of experience and track record that have built those relationships. And Nick is a part of that. So it's not something that's easily replicated.

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

I'm Ravi Vaidya on the line for Handel today. I wanted to ask about capital recycling. Can you offer more commentary on the decision to sell the asset in Miami. What was the competitive process like? Are there a number of bids? And was there anything in particular about the asset or the market itself that led to this decision?

I appreciate the question. I'll start again, just high level. Again, given where we're at from a capital standpoint, we don't have to sell anything, and we really like our portfolio. So I always start answering disposition questions with that. Now that being said, we're always looking at assets that we believe are nonstrategic. And they may be nonstrategic from a format perspective, which you've seen some of these smaller assets we sell at or nonstrategic from a future IRR perspective. We obviously have a future view of capital and income on these assets.

And so the Miami asset would fit into that second bucket where our view of the future IRR didn't align from a strategic standpoint. Based on what we believe the market would pay for that asset because that market is in such high demand. And so yes, there was a deep pool of bidders that did allow us to drive pricing we thought was appropriate to transact and recycle that capital.

And then I would just say, again, when you look at high level, we're selling just over $100 million of assets this year, just over a 5.5% cap rate. but we're buying over $500 million at a 6%. And so our capital recycling right now is accretive, not dilutive, and we're proud about that because we own such a great portfolio, we can take advantage where we feel like those stars align to exit an asset that we're not in love with from a future IRR and reinvest that capital in assets we think have high single-digit, if not double-digit IRRs.

Our next question comes from Wes Golladay with Baird.

I just want to go back to the development. You're doing a lot more like this quarter with master plan communities or next to master planned communities. Are the grocers leading you there? Or are you putting more emphasis on being next to those projects? And then for development start, are you still targeting around a 50% prelease level?

Appreciate the questions, Wes. So all of the above. And so we are targeting master plan communities, our grocers are targeting master plan communities. And to be quite frank, master plan developers are reaching out to us. And it really goes back to the question I answered before, which is if you're a master plan developer, the most -- one of the most important aspects of many of these projects is having a great community grocery acre shopping center to be an amenity to your project. And not only is it important that you can count on your retail partner to build a world-class project, but you also want to know that they're going to own it and operate it and put [indiscernible].

And so we love the opportunity to sit down with master plan developers to create a really, really win-win partnership on both sides. And you've seen, in many cases, we've done multiple transactions with the same master plan developer. And so for all of those reasons, I think that will continue when you look at our go-forward pipeline, as you've indicated, led to success this quarter.

And so -- I forgot the second part of the question.

[indiscernible] the prelease.

The prelease. Absolutely. Again, and when you talk about derisking, that's what we're also excited about in our development program is we really do derisk these assets. And so they're fully entitled. They're designed their bid. We have a real understanding of the visibility on the cost side. And to your point, they're tremendously pre-leased. And so the anchor is always in place. And so depending on the size of the anchor compared to the overall project, it's not always right at 50%, but it's a large portion of that NOI is guaranteed.

But again, if you look at our in-process pipeline, the team is just doing a phenomenal job. I'll point to 2 projects where our anchors aren't even open, shops at Donebridge, our Whole Foods-anchored project in Connecticut and Jordan Ranch, our HEB-anchored project in Houston. Neither of those anchors are open yet and both of those projects are already over 90% leased. And so it just gives you, again, the sense of the demand in the market for these new projects we're building.

Next question comes from Linda Tsai with Jefferies.

A 2-parter regarding your snow pipeline. The 1 million square feet of leases in negotiation, any initial thoughts on how much that could further contribute to your snow pipeline. And then with your snow pipeline having compressed in 3Q is the expectation that it continues to compress in '26.

I'm happy to take it for Alan, you can color up the pipeline. I would -- so we're sitting at 200 basis points spread today. For my comments earlier, I do think we are -- we have to set up to continue to compress that snow pipeline into '26. That being said, and the comments that Alan has shared about our prospects for setting new levels of percent lease. There is a scenario during -- at which we also -- we maintain or potentially expand that snow pipeline.

So I hope that's helpful, Linda. I think as we normalize or stabilize our occupancy, I think your -- I think the comments around snow pipelines will start to dissipate and this will just become regular leasing activity, where we're replacing a lot of the GLA every year just from natural attrition, some of which is decided by the tenants themselves, a lot of which is decided by our leasing teams who are looking to upgrade the tenancy in our shopping centers.

Our next question comes from Mike Mueller with JPMorgan.

I guess, Mike, what's prompting you to talk about '26 this early? Is it something looks off with the '26 estimates that are out there where you just want people to have sticker shock with the 3% to 3.5% same-store number after this year's great print? Or is it something else?

Mike, maybe a little bit surprised by the question. I feel like we've had a track record of sharing an outlook at this point in time, every year. And you got to take the COVID area out of it. Maybe that's what's some of our memories are missing is during COVID, all the rules were off. But we're prideful in our ability to provide some transparency on a forward basis sometime in this period -- in this quarter, in the fourth quarter of the year.

Long time ago and the way back machine we used to do December Investor Days, and we would put out forward-looking guidance. Today, we're doing that together with Q3 results. And we've done that for a year or 2 at this point. So nothing more than that practice. I hope it's helpful. I know we want more details behind the headlines that we've provided. We look forward to providing those details later. And I'll just leave it at that.

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

My question is sort of related to the occupancy. Obviously, you're 10 basis points off your peak in both leased and commenced. You've got a big pipeline coming up, there's not a whole lot more you can push in terms of your anchors. I mean, you did allude to the fact that 98% and your peak is probably closer to 99%. My question is partly related to your most valuable space, your shop space, how much more can you push occupancy in your shop? And maybe also talk about your renewal percentage today? And where do you see that trending going forward? It sounds like you think there might be more churn going forward as you keep raising rents. But curious to hear your comments.

Floris, thank you for the 2-part question. I don't know maybe it's a trend here for us to always answer the second one first, just from a memory perspective. But the renewal retention, we've always hovered around 75-ish percent. And I am very comfortable with that number. It's an opportunity to retain exceptional retailers, and it's an opportunity to also use additional higher-quality merchandising and higher rents into the portfolio.

So on the edges, sometimes it's 70%, sometimes it's 85%. But typically, we're in that 75%, and I'm really, really comfortable with that in terms of active and engaging leasing. And so you'll also find that from a new leasing perspective, we are leasing occupied space. We have a few tenants on our watch list that for some time, we've been thinking we are getting space back. We have leases sitting there executed waiting to get some of those spaces back. And so again, that's the proactive mindset.

I'm not going to guide to a percentage per se in terms of where we ultimately can go but we're going to continue to be creative. And one example I would give you is the fact that we are invoking some relocation provisions and leases to relocate a successful tenant that the community knows is there that's doing really well, such that they can occupy a perhaps more challenging space to us to lease on the market which then unlocks the ability to lease their space, right?

And so the team is out there, I think, really creatively doing everything they can to continue to still grow occupancy and pierce through that. And again, in this environment, I feel really comfortable and confident, coupled with the quality of our assets to continue to be able to do that.

[Operator Instructions] Our next question comes from Paulina Rojas with Green Street Advisors.

So as it has been mentioned a few times, your commence occupancy is near peak levels. When I look at your presentation, the last time your occupancy levels were this high was around 2014, 2018. When commenced occupancy actually stayed elevated for a long period. So I'm curious how does retailer sentiment today compared to that period. what similarities or difference are you seeing between then and now?

I believe I heard the consumer sentiment, is that -- the retailer sentiment. I think that, Paulina, the way I would address that is there's a lot has kind of changed over that period of time in that retail is always evolving. We've seen that. So coming out of the GSE, there was a lot of demand for new store growth and then we saw a little bit of a dip when we all saw the headlines of this retail apocalypse and how is e-commerce going to affect our business. And then COVID hit.

And when -- what the pandemic did, and we've said this a lot, is it really generated a renewed appreciation from our retailers for the importance of a physical location. So while they may have been dialing back in that '17, '18, '19 time frame of new store expansion coming out of the pandemic they realize the importance of having that location, the last mile close to their consumer. At the same time, renewed appreciation from the consumer for shopping for not just buying online, but actually enjoying what we at Regency offer with regards to our fresh load connecting placemaking and having a curation of great merchants at our shopping centers.

Over that period of time from 2014 to today, there's been really limited supply. So we've had the tailwinds coming out of the pandemic. We've had the retailers understanding and really appreciating the need for and importance of a physical location. And we are -- again, it gives me another opportunity to say, we have been the only national development platform at scale for a period of time. So with that limited supply, it's -- the supply demand is in our favor. So as Alan has said repeatedly today, he believes that we will have the ability to push that percent commenced for all of those reasons. And I have the utmost confidence in the team to be able to do that.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to your host, Lisa Palmer.

Thank you all for your time with us today. And once again, I just want to give a shout out to the Regency team. Really proud of our results year-to-date. Thank you all.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Welcome to the Regency Round Table. From management. To my left, we've got Mike Mas, who's the CFO; Christy McElroy, the Senior VP of Capital Markets. Mike, I'll turn it over to you for some opening remarks.

I appreciate it, Samir. And again, thanks for having us. The event is really well attended, and we've had a really good day today. Just let me get some setting up remarks here, and then we're happy to take your questions and any from the room. Good to see some friendly faces, by the way. As we discussed on the recent earnings call, we're having an outstanding year. I don't think there's any better way to describe it, driven by continued positive fundamentals, robust leasing activity into our high-quality portfolio and more recently, some accretive capital allocation. We're generating record-high same-property growth, including a growth rate exceeding 7% last quarter, driven by strong leasing activity and robust contractual rent growth.

We continue to commence tenants and replenish leases within our SNO pipeline, and we're driving commenced occupancy rates higher. Following that impressive first half performance, along with our strong outlook for the year, we raised current year earnings guidance. We -- that includes same-property NOI, NAREIT FFO and core operating earnings ranges. We also continue to maintain a strong pace of investment activity. We have over $600 million of accretive capital deployment so far this year. This includes the 5 asset RMV portfolio that I alluded to earlier, which we purchased earlier this quarter for north of $350 million. That 600,000 square feet of high-quality retail in one of Southern California's most sought-after submarkets and the transaction is accretive to our growth rate, accretive to earnings and accretive, we believe, to our overall portfolio quality. And oh, by the way, we financed it leverage neutral to the balance sheet. So really happy with that transaction. Not only did we assume below-market debt with the transaction, but we used OP units to finance it permanently, creating both flexibility for seller and Regency. We have more than $500 million of development and redevelopment projects in process at blended yields of 9%, and we anticipate starting more than $250 million of projects for the third consecutive year this year in 2025.

That includes several ground-up development projects that we expect to announce and start later this month. Our national platform, our expertise, our relationships, our low cost of capital, our balance sheet strength, all of these ingredients enable us to be one of the only national developers who can successfully execute on ground-up projects of high-quality grocery-anchored shopping centers. Lastly, on the balance sheet, and we do take great pride in our sector-leading position. We're currently the only shopping center REIT with an A credit rating from both Moody's and S&P. We remain within our targeted 5 to 5.5x area on net debt to preferred -- net debt and preferred to EBITDA, and we have ample liquidity on our credit facility. So we're set up for a great 2025, and I think we have the ingredients in position to continue that momentum into 2026.

Thank you for that. So it sounds like leasing is still pretty strong. I know it feels like every quarter is a record and that continues to take place. I guess the one news that did come out was sort of the Amazon rollout, right, of same-day delivery for fresh items. Like how are you -- what's your reaction to that? And what does that change, if any?

It's a great question. That news is pretty current. Our reaction is kind of business as usual. And I think it's important to appreciate what actions we're seeing on the ground rather than what headlines we're reading in the newspapers. And what we're seeing on the ground is a continued expansion of high-quality grocery operators of their respective footprints. And we're seeing that across through all operators really, whether it's Publix in the Southeast, Wegmans continuing to grow their footprint. Kroger and Albertsons now in a post-merger, Top World continue to grow as well. Whole Foods, an Amazon brand, also very active in growing its bricks-and-mortar footprint. So I think H-E-B in Texas, I think this is just kind of more of the same. And I do think the grocers -- we believe the grocers will continue to deliver to their customers a great experience, great product at great prices, some of which will be delivered, some of which will come through e-commerce, but still the largest percentage of their business is coming through their cash registers and in their stores.

Some other continued behaviors that we're seeing that confirm our view is we're seeing tenants become larger, not smaller, grocery anchors. And they're doing that, I think, to accommodate much of this demand and also to bifurcate that experience for their consumer to give their customer the best in-store experience they can give and then also to try to -- to the best of their ability, control and manage costs on the e-commerce side of the equation. So I mean, the news is out there. I think it's not to be dismissed, but I also think it's largely confirming the behaviors that we're seeing, which is continued expansion.

In your opening remarks, you talked about this year being a good -- very strong year for growth. You talked about the ingredients for growth into '26. You look at the space today, everybody is sort of 95-ish sort of occupancy levels, right? And help us frame out that growth over the next several years, sort of an occupancy-neutral basis. How do you generate strong NOI growth, earnings growth in this sector?

And just to be clear for us, it's 96-ish.

96.

We're north of 96% and an all-time highs from a percent lease perspective. Percent commence though, importantly, has not hit that all-time high watermark yet. So we still have room to run, and we've benefited from that in a meaningful way in 2025. In fact, we've moved our average commenced occupancy by north of 100 basis points this year, big primary driver of our growth rate. And that's a lot of leasing, that's a lot of commencement. Fundamentally, we do and we have a great page in our book that I encourage you to take a look at. But our kind of same-property wheel of growth fundamentally it's going to come from good old-fashioned rent growth, right, rent spreads and contractual embedded increases. On average, to your point on building blocks, we should be delivering 2% to 2.5% year in and year out on rent growth. Where we can expand that growth rate is coming from 2 different areas.

One, occupancy gains. And again, to reiterate, we still have room to run on commenced occupancy to get to our historical highs. And then lastly would be redevelopment and our wherewithal and ability to continue to invest into our shopping centers, adding GLA, densifying some of our sites, changing the physical plan itself to drive rents. We estimate on an average annual basis, we can deliver $50 million to $100 million worth of projects, which should add around 75 basis points or so, plus or minus to same-property NOI growth. Our strategic objectives are to deliver 3% or better in an occupancy-neutral environment. Clearly, we're doing much better than that in 2025. But we think that the portfolio is primed to deliver that over time.

And then how much line of sight do you have into sustaining that sort of $250 million of starts .

On the development front? Yes. So it's a good question. So firstly, that is a combination of ground-up development and redevelopment. This year, and I said in my remarks, I think we'll deliver -- we'll start $250 million of projects. That should be about a 70% allocation to ground-up development versus redev. So we are seeing the business start to shift over to ground-up development versus redevelopment.

I'd say that ratio was inverted 3, 4 years ago. So the line of sight and visibility to the pipeline -- that's a tougher one. It's not an SNO pipeline where you know that you have contractual rights to that rent commencing. This is confidence in our team's ability. This is confidence in the -- I'd like to say we have a lot of lines in the water, and we have good prospects on those sites. We have great demand from the tenants. The work and the magic occurs in your ability to get the zoning to get the entitlements and to get that land cost and rent to the equation that works for our cost of capital. I would speak to our track record. I think we're -- I know we're the best in the business on national scale in developing and open-air shopping centers, a lot of confidence in the team. They know exactly what we're trying to do and the incentives are in the right place. So we're as confident as we can be that, that momentum will continue at that level going forward.

And that ramp-up in ground-up development is important, and we've talked about this a lot in terms of what's happening outside of our same property pool, right, in terms of what's driving because ground-up development and redevelopment overall, but ground-up development is a huge driver of our external growth, right? We do acquisitions, but we're prioritizing our capital on the ground-up development. And that's where we're seeing incremental impact this year in 2025, but even more impact in 2026. And so that's -- as we think about building blocks to our overall earnings growth rate, that's a really important driver as we think about going into next year and beyond.

I mean you're 1 of the very few that's doing ground up, right? I feel like what are you seeing that maybe others aren't at this point when you think about.

I think it's -- I'd like to say development is in the soul of Regency's business. We've been doing it for 60 years of this company's existence, not all of which has been as a public company. I think it's the -- I think it's the commitment to the business. If you're in and out of the development business, we like to say, then you're out.

I mean it's -- this is a long-cycle business that you have to deep -- these are deep tenant relationships, deep land relationships with landowners. And then our track record starts to speak for itself and become this self-fulfilling kind of flywheel effect where we show -- we talk a lot about master planned communities. A well-thought-out master planned community with housing that's being delivered needs retail amenities, and we show really well to those landowners and those developers in that we're going to construct a best-in-class product. We're going to bring best-in-class tenants merchants. And we're going to be committed to owning that shopping center for the next several decades. And that formula is what they like to see in a partner as they execute on those projects. So I just -- to your point, one of the few, I think we might be the only in the public space that's doing ground-up development. And I think a large part of that is success begets success. We're pretty good at it, and we're proud of that.

But in terms of even the relationships, I mean, talk about the economics, right? It feels like others are not doing it because the costs are up, maybe you're not getting the rents to justify ground.

You've got to find those pieces of land where you can make that formula work. And I keep coming back to the master planned community example. When you need to have that retail amenity for your master plan development, which includes single-family homes, multifamily projects, you might be willing to take a land price that helps you make that equation work for our cost of capital, right? So we're going to come into these with entitled zone projects. We're going to have an understanding with the tenant on what the rent side of the equation is. It's that land cost that's going to help you kind of finish out that math to exceed the threshold that we have for our cost of capital, which today, we're targeting 7% to 7.5% area for ground-up projects. Again, a rule of thumb for Regency is we'd like to deliver in the 150 basis points or better versus cap rates. So ROI of the development versus in-place cap rates. We think that is more than compensating us for the risk we're taking and helping us create real value.

And in terms of leasing, are these pre-leased or like what stage are we?

No spec development. We actually very rarely land bank. So these are -- you're going to have the anchor lease in your pocket and you're probably going to have more than that committed from an LOI and potentially even leased perspective. And then the balance of that project is going to be filled in with shop space, which we'll have a high degree of conviction over the over our ability to lease that. So I don't want to say it's risk-free, but we do a wonderful job of derisking these projects before we put a shovel in the ground.

Is it the majority of your gold that [indiscernible] master plan.

The majority of the ground-up projects are in master plan.

[indiscernible].

I don't want to say I want to be that definitive. It's hard. Generally speaking. And I'll say at the same time, supply growth coming into the market just generally will continue to be muted. We believe that. We won't. And that's going in to the benefit of our existing portfolio as well. So I think it's a little bit of the best of both worlds. We'll have a supply-constrained environment, new supply-constrained environment. But within that supply growth, Regency will win more than its fair share of projects and leveraging that expertise we have.

I guess just amid the macro headwinds and volatility and everything this year, are you seeing any pressures on development costs or processes or any projects where you've had to revisit underwriting?

It's a continuous process in revisiting underwriting. You have to be -- you're on top of that side of the equation continuously. You're being very transparent with your landowner, you're being very transparent with your tenants as you're negotiating rent. But before you put that shovel in the ground, you have your construction costs understood and locked in. Zooming out over a 3- to 5-year period, they're higher. Again, you have to find those needles in the haystack where that formula, that formula of land cost, construction cost, rent can make sense in a world where construction costs are higher. Within the line items, just specifically, we are seeing some pressure on some of the line items, but we're also seeing some relief.

We have seen some relief on the labor side of the equation. We've seen some relief from an energy perspective and fuel, which is a pervasive line item throughout the underwriting. So on balance, we've been doing a really wonderful job kind of keeping our arms around that growth rate and being communicative with the landowner and the tenant as well.

Sorry, each debt more [indiscernible] Are you talking about international builders [indiscernible] smaller regional players.

All the between national builders and smaller regional players, delivering community -- new communities within the markets that we operate in. .

Is there a rough breakdown between those two?

National and regional. I don't have that. I have to follow up with you on that bias to the regional developers. Good example is a project we just recently announced locally in our -- where we're headquartered in Jacksonville. Great project in a new community that's being developed near the Town Center area, which is kind of the center point of the market, immediately across street from our local university, University of North Florida.

New community, new homebuilders being delivered. There's no grocery store on the site. We will be that retail amenity. And that project was just announced this quarter as well. So it's a perfect example of this playbook that we're operating throughout the country in pockets. We have a similar project going up in the Bay Area of California. We have a similar project going up in Connecticut. And it's having that development expertise embedded in our offices throughout our organization where we're finding those opportunities.

Maybe sticking to external growth. You've been very busy on the investment side. You did the Orange County deal. you acquired recently. I mean, talk to us on kind of what does that opportunity set look like in terms of acquisitions out there? Talk about the transaction market, maybe pricing, what you're seeing?

Sure. We'll start with activity. This is commonly an active part of the year. You come out of Labor Day and you see a lot of packaging. It just feels like we're always pretty busy underwriting opportunities. So I can't tell you that we felt a spike in opportunities, but we're busy. We're looking. Cap rates, I'd say, are ranging from the low 5s to the low 6s. And my answer -- that answer has been the same for several years now. I think there's been really good quality competition and demand for high-quality grocery-anchored real estate. Regency as we execute on that front of our business. And again, the priority for us is development. That's where I think we have a competitive advantage. But we'll be acquisitive, but we're going to have to be creative and find those opportunities that kind of fall out of the mainstream. The RMB portfolio is a wonderful example. That's a relationship we've been building for 18, 24 months and largely been building that relationship from a development perspective. And they admired what we've built from a portfolio standpoint.

They appreciate the type of real estate that we operate, and they saw their own assets playing a role in that portfolio, and they like the currency. They were attracted to our currency on the other side of the equation. So that true one-off off-market transaction, it's hard to say that we can replicate that going forward. Those are very difficult deals to pull together. I'm very proud of it. But we're going to have to be creative otherwise. if it's a core grocery-anchored center with standard growth rate, I don't know that Regency is going to be the best buyer for that. You're buying at NAV, I don't know how much value you're creating. If we can find a project that has some mix -- some redevelopment potential, we can bring our core competence to that, and we really like those opportunities. We're a great buyer. If we can maybe look at some trade areas that are otherwise less popular today, there is somewhat of a Sunbelt slant in the marketplace. If we can find opportunities as we have in our recent past in Chicago, in Rhode Island, we will look for those opportunities where we believe in the ingredients of the trade area.

We're trade area focused investors, not necessarily market focused. And if we can find those trade areas that we think maybe are a little bit underhunted, so to speak, we can find an opportunity to buy Lastly, I should say we have another pocket of capital in the state of Oregon, almost a 25-year relationship with this capital provider. And they are looking to expand their portfolio as well, and we will partner with them.

And we've bought properties with Oregon in most recently in the Austin market. So a lot of arrows in our capital quiver, a lot of opportunities for us to continue to be acquisitive. And I'll just end with the priority being development and then our track record would tell you, we'll get creative and find some acquisitions.

Just in terms of the acquisition you did, that portfolio in Southern California, it felt like it was pretty well leased. It is, right? So I mean talk about the upside. Maybe there was one asset where it was like low 80%.

There are -- the near-term upside would be in the form of there are 2 pharmacy vacancies that are available to us right now. One will likely be a redevelopment to a new multi-use building out in the outparcel. The other one will likely be more of an opportunity to re-lease in place at an accretive return. But they are well -- I mean, again, we're looking for high-quality grocery-anchored retail. Most of that stuff is pretty well occupied. They are very well occupied and there'll be a leasing exercise beyond that, raising rents as tenants have success.

When you talked a little bit about -- it feels like people want to -- want to go into the Sunbelt. I mean is that an area that you feel like where there are opportunities right now? I mean I know years ago, it was the Northeast with Equity One and all that. So...

I think there's opportunities throughout our footprint. I mean we're in 2 dozen markets from an office perspective, we have great relationships in each of those. we'll find the deals where we find the deal. We're looking in all of the markets within which we operate. And again, I go back to our focus. We are hyper focused on the trade areas. And if we find those the right ingredients of supply and demand within those trade areas, we'll execute on those transactions.

And Brentwood is a great example of that. This is an asset that we bought in the second quarter for $120 million, mid-5s cap rate, but very high growth rate and below market debt that we assumed long-term below-market debt. So we are finding some of these opportunities and Nashville was a market that we had identified that we'd want to grow in.

And anything on -- maybe on the internal growth a little bit, like is there anything on watch list in the next year that we need to sort of think through...

Our watch list is very much in line with historical averages, about 2% of ABR. You saw as we worked through some of the bankruptcies this year, we had on the low end of the peer group in terms of exposure. In terms of our watch list today, it's very manageable and very much in line with historical. You saw our credit loss guidance this year. We lowered it a little bit. Our historical average is 75 to 100. We lowered it to 75 to 85. So on the low end of that range. But today, we -- bankruptcies are a normal part of our business. So there's nothing outsized today in terms of concern.

Just a quick follow-up on that. What would be stabilized -- you said high growth, when you stabilize sort of b[indiscernible] on that. Is it the growth because this is something you were doing or because [indiscernible] comparative properties? What's driving that higher review?

Well, in terms of a stabilized yield, I bring back to the IRR, right? We look at things from a 10-year IRR basis. So we underwrote that in the high single-digit IRRs. From a growth rate perspective, it's leasing of the asset, just normal course growth. I think there's an anchor opportunity.

There are 2 vacancies at the time of acquisition that we had high prospects to fill, and we will fill those nearly immediately. And then it is currently not a grocery-anchored shopping center with Kroger subletting its space. And we see a longer-term opportunity for us to -- when that lease burns off for us to then take that rent to market. So that sublet rent, which is currently going to the -- to Kroger will then come to us as operator. So that's what's driving the higher growth rate. Not so much densification on this site. And again, from a strategic perspective, Regency's strategy is largely more just simple grocery-anchored neighborhood and community shopping centers where densification with mixed use is typically not part of the playbook.

Like anything on that shop space, the shop tenancy given the macro and some of the tariff news. Like is there anything -- what's the health of the shop?

All I can point to is record low open accounts receivable, record high percent leased and soon to be percent occupied as we deliver that space. Low rates of bad debt as a result, as Christy alluded to, Foot traffic levels continue to be very high and growing. sales as reported, although not pervasively reported within the shop space community, but sales growth has been pretty healthy. And then the most -- one of the most important pieces of information that we get given our footprint is anecdotal information from our property management team, and they continue to report just very healthy operations. The pipeline -- and the leasing forward leasing pipeline continues to be dominated with shop demand. So we feel really good about that exposure. We feel really good about the offering we had. Again, we're benefiting from that lack of new supply in these high barrier markets. We'll see -- and retention rates continue to be north of our historical averages.

There's been some negativity around QSRs and fast casual as of late. Any changes to the leasing there? Anything you're hearing from those guys?

Not really. We've talked about that at this conference, in fact, about that negativity, maybe some of the trade-down effect. And I think as you think about our approach to trade area, our strategy, what trade areas do we identify and want to invest in, it's high degrees of disposable income. It's matched with lower price point offerings, which is the QSR. It's a high-quality offering at a lower price point. And I think you kind of hover within that trade-down effect. So as many people may be trading out of a QSR offering and maybe preparing their food at home, which, by the way, we have the grocery store to do that. Others are trading into that QSR from the top end, maybe they're dining out at a white table clock offering fewer times. So I just feel like the strategy that we employ high disposable incomes, combined with a necessity value type of tenancy is what gives you that shock absorber, so to speak, and kind of float within that trade down.

So it feels like you can still push occupancy in shops, right? I mean...

On our call, we alluded to the fact that there is headroom technically because we're not 100% leased on shops, but we are at historical highs. We feel bullish about our ability to continue to command a good healthy demand for that space. But at some point, you're going to have frictional vacancy where you're actively remerchandising your shopping centers, you're keeping it fresh with good operators. You're actively redeveloping your shopping centers, which is going to command some vacancy as well. So Yes. I mean I think we feel bullish about our shop exposure and our ability to continue to grow and maybe set some new records that we haven't seen before, but we'll see how that plays out.

Anything on expense recoveries because that was up in the quarter, right? It felt like it was a bit more outsized. Is that sustainable as we think through.

The second quarter was outsized due to our annual reconciliation process. It resulted in higher prior year collection -- collections of prior year rents or recoveries. As we think about a run rate on a go-forward basis, it will be higher than the more normal quarters, the first quarter, fourth quarter last year. It will be higher because our occupancy levels are higher, but second quarter was outsized on a onetime basis.

Is there anything else to think through kind of in the second half of the year?

Obviously, the implied guidance from same property does imply a slowdown or deceleration in growth rate, but that's more a function of a very tough comp from a bad debt expense perspective last year versus an expectation that we will have a normal rate of bad debt expense in 2025. Rite Aid was in occupancy at the end of the second quarter. They will have vacated and completed that process in the third. So that's -- that would be a consideration. Outside of that, Samir, I don't think there's anything else to add.

There was some lumpiness in other property income in the second quarter that won't recur in the second half. Other than that, that's [indiscernible].

What about the balance sheet side? I know you have some maturities, right, I think in...

I'll let Christy take that 1 as well.

So we had -- we did a bond transaction in May, a 7-year transaction that basically prefunded our November maturity. So we're taking care of for 2025. As we look into 2026, we've got $200 million of unsecured maturities that we'll start to look at windows going into 2026 for refinancing. But other than that, we're in really, really good shape on the balance sheet from a maturity perspective. We're sitting right in the middle of our target range of 5 to 5.5x. One of the strongest balance sheets in the sector. We are the only shopping center REIT that is A rated by S&P and Moody's, and we are -- we benefit from a very good strong cost of capital.

Maybe to get to where you think debt would price today.

So 10-year debt, our indicators are telling us about 85 to 90 basis points over the 10-year in the unsecured bond market.

$100 million -- I think there's some forward, right?

Yes. We issued $100 million on the ATM late last year. A real quick update. We have taken down half of that. We have settled half of that this month or actually we're in September last month. And we anticipate settling the balance before it's -- the contract maturities, which would be before early December.

And the use of that would be towards what?

Capacity on the balance sheet. You can continued funding of everything we're doing, whether it's pursuit of acquisitions or development, et cetera. So it's just continued capacity, keeping that leverage ratio in the targeted range.

As we think about next year, right, and we -- I've asked this question before, but what are major swing factors we need to consider as we think about growth into next year. Is there anything -- we talked about expense recoveries where -- again, that's probably not sustain in the second half. As we think about next year, is there any -- what are big swing factors that we think about growth, same-store earnings?

It's going to be the basic building blocks. You're going to start with same-property NOI and pretty robust growth in 2025 at 4.5% to 5%. The headroom on commenced occupancy, as we've talked about today, is decreasing, right, because we're reaching peak levels. We moved -- I think I'm repeating myself, we moved average commenced occupancy this year by over 100 basis points, which is, historically speaking, a significant amount of growth. From an FFO perspective, this year, we're comping off still some merger-related items from last year. So that comp issue will go away. the debt we just talked about, the debt refinance, the mark-to-market of the '25 maturities, we will feel the impact of that into '26. So we want to make sure that we're modeling that, although there are very little, as Christy articulated, very few debt maturities next year from a headwind perspective.

The biggest contributing factor and one that we've been most vocal about is using our disclosure and encouraging everyone to take a look at that at the development page and really thinking about the contribution of that -- of those developments. So now we're in year 3 of starting $250 million. Well, that means year 1 is commencing and they're starting to commence this year. It's going to commence even more meaningfully into next.

We've shared on previous calls a number of about $10 million of incremental rent and NOI coming from the commencement of new ground-up development projects. That will be a 2026 growth factor for you to consider. But the ingredients are kind of there. The other swing factors would be retention rates and move-outs, and there's a lot to be better understood as we put our plan together for next year. But the ingredients are kind of set up there for continued momentum and what I have continued to articulate as above-trend opportunities for growth above historical trend opportunities.

I know we've got a couple of minutes left. Any questions?

Yes. Property where this program sublines [indiscernible]. anchor. It's subletting. Was that [indiscernible] their ability to new extensions better?

It depends on the lease. In this particular case, it does not. But every lease, as I like to say, there's 10,000 leases. We have 10,000 snowflakes, each of them with its own agreement. So not in this case.

A couple of rapid fire questions here like we normally do. So number one, when the Fed starts to cut rates at the short end, do you expect the long-term -- the 10-year yield to decline, stay flat or potentially rise?

Gosh, I think as we all understand, those 2 functions are disconnected, and I think they move in different directions for different reasons, the long end and the short. My personal opinion is I think that the 10-year is probably hovering around the same area as it is right now.

Okay. Second question, last year, the majority of companies stated they are ramping up spending on AI initiatives. How would you characterize your plans over the next year, higher, flat or lower?

Flat, and that's not to mean we're not investing. We are investing incrementally and on a small basis and really encouraging our -- it's really a back-office type of opportunity, we believe flat.

Okay. Third one, this is for the sector, shopping center. Do you believe same-store NOI growth for your sector will be higher, lower or same next year?

For the sector. I will say the same.

Okay. Thank you very much.

Thank you.

Thank you.