Curbline Properties Aktie

Thank you for joining us, and welcome to Curbline Properties Corp.'s Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Stephanie Ruys de Perez, Vice President of Capital Markets. Stephanie, please go ahead.

Thank you. Good morning, and welcome to Curbline Properties third quarter 2026 earnings conference call.

Joining me today are Chief Executive Officer, David Lukes, and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call.

Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Form 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-property net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and welcome to Curbline Properties third quarter conference call. Third quarter results highlight a continuation of trends from the first half of the year with more than $300 million of investments and fundraising, providing ample liquidity and capital to drive significant growth into the fourth quarter and 2027.

Given that our company celebrated its 2-year anniversary just a few weeks ago, I wanted to start with some details on what we've accomplished to date before pivoting to what we are seeing in the market and some operational highlights. I'll then turn it over to Conor to walk through quarterly results and our guidance increase.

As many of you know, Curbline was spun off from our predecessor on October 1, 2024, with a simple and focused strategy as the only pure-play REIT dedicated to convenience real estate, which we believe offers sustainable capital-efficient growth in excess of the retail real estate industry.

Our clear first-mover advantage has allowed us to construct an unmatched portfolio in this unique sector and scale the fragmented but liquid convenience marketplace.

In the 2-year period since spinoff, we have acquired just over $1.7 billion of convenience centers, almost entirely on an individual basis. We funded these acquisitions with $800 million of cash on hand at the time of the spinoff, plus an additional $1.6 billion of capital raised, including almost $1 billion of common equity.

This net investment activity, along with greater than 3% same-property growth in 2024 and 2025 and retained cash flow stemming from the capital-light nature of this sector has led to significant per share earnings growth on both an absolute and relative basis.

Specifically, annualized OFFO growth has grown from $0.91 per share in the fourth quarter of 2024 to $1.28 per share if you annualize the third quarter of 2026, which is an increase of over 41%. It has also led to compelling total return for shareholders with shares outperforming the REIT index by over 30% and the shopping center peers by a similar amount.

We are all obviously incredibly proud of our accomplishments to date, but what's most encouraging in our view is that we are still in the early stages of our company's growth plan, and we are highly focused on the large addressable market in front of us within this unique and capital-efficient business.

Putting Curbline in context, at the end of the third quarter, we owned 239 convenience centers as compared to ICSC's estimate of over 68,000 convenience shopping centers in the country. Not every property will fit our mandate, but it's clear to us that there is a meaningful stream of opportunities available to us that are consistent with the assets we own or want to own, and we are making sure that we are positioned with the right team in the right place to win.

For the current year, we've acquired just over $800 million of assets through last Friday and now expect to exceed our prior expectation of $1 billion of total investments with visibility on our pipeline through the early part of next year. What's interesting to note is that the addition to the themes I've called out previously, including our marketing efforts, our extensive brokerage network, and the generational tailwinds as owners look to monetize their assets for their families or heirs.

You will notice this past quarter that we acquired 4 properties that are immediately adjacent to or part of our existing centers. And if I look at our pipeline, we have a handful of additional acquisitions of adjacent properties, extending another potential path for Curbline's growth.

We expect this theme or trend to continue going forward with our boots on the ground driving this effort. In each case, we continue to filter our acquisition opportunities by the factors most accretive to long-term cash flow growth, primary vehicular corridors, strong demographics, high traffic counts and creditworthy tenants.

Simple, flexible buildings with a straightforward row of shops support an extremely wide range of tenants and the result is a growing Curbline portfolio of highly diversified credit tenants with limited capital needs over time.

Moving to operations. We continue to see the elevated demand for space and signed just under 170,000 square feet of new leases and renewals this quarter. Trailing 12-month spreads remain consistent with our 5-year averages as the shortage of space in the affluent markets where we operate continues to lead the attractive leasing economics.

And importantly, as I noted last quarter, commencement of our SNO pipeline started to pick up at the tail end of the third quarter with the majority of our almost $8 million SNO pipeline expected to commence by March of next year.

This operational tailwind, along with the aforementioned investment activity is driving significant earnings growth with our raised guidance representing over 18% growth, which is among the highest in the entire REIT sector.

In terms of same-property growth, third quarter growth of 3.4% accelerated as we expected, with Conor providing more details on this later. Our capital expenditures also remain well below 10% of NOI, placing us among the most capital-efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class and a differentiator in a rising rate environment.

In summary, we remain incredibly optimistic about the opportunity ahead for Curbline as we exclusively focus on the fragmented convenience real estate sector in an effort to deliver compelling relative and absolute growth for stakeholders.

I'd like to thank everyone at Curbline for their contributions that have positioned us and the company for outperformance. And with that, I'll turn it over to Conor.

Thanks, David. I'll start with third quarter earnings and operating metrics before shifting to the company's revised 2026 guidance, and then conclude with the balance sheet. Third quarter NOI was ahead of plan, driven in part by higher year-over-year occupancy and recoveries.

Total NOI was up 11% sequentially and over 50% year-over-year, driven by acquisitions along with organic growth. Outside of the quarterly operational outperformance, there are no other material variances for the quarter, highlighting the simplicity of the Curbline income statement and business plan.

In the third quarter, we recorded a gross-up of $1.8 million of noncash G&A expense, which is offset by $1.8 million of noncash other income. This gross-up, which is a product of the shared services agreement and nets to 0 net income, is expected to continue through the third quarter of 2027 and is excluded from any G&A figures or targets.

In terms of operating metrics, the lease rate was effectively unchanged sequentially, down 10 basis points to 96.4%. Occupancy was up 20 basis points sequentially and 60 basis points year-over-year as we begin to see the impact of rent commencements.

Trailing 12-month leasing volume continues to grind higher on elevated activity and portfolio growth, though quarterly volumes and figures remain volatile given the lack of available space in the portfolio.

As David noted, we remain encouraged by the amount of activity and depth of demand for available space. As expected, same-property NOI accelerated in the third quarter to 3.4% with base rent growth of 2.8% and an easier comparison as compared to the second quarter on recoveries. Importantly, this growth was generated by limited capital expenditures with trailing 12-month CapEx of less than 8% of NOI.

Moving to our outlook for 2026. We are increasing OFFO guidance to a range between $1.25 and $1.27 per share, which at the midpoint represents just over 18% growth. We believe this level of growth will be the highest, certainly in the retail space and among the highest in the entire REIT sector.

Underpinning the midpoint of the range is: one, just over $1 billion of full year investments; two, CapEx as a percentage of NOI of less than 10%; and three, G&A of roughly $32 million, which includes fees paid to SITE Centers as part of the shared services agreement. Those fees totaled $1.4 million in the third quarter.

In terms of same-property NOI, we are now forecasting growth of 2.5% to 4% in 2026, following 3.3% in 2025 and 5.8% in 2024. As I've noted previously, the same-property pool is growing, but small, and it includes only assets owned for at least 12 months as of December 31, 2025, resulting in a large non-same-property pool, which we expect to grow at a similar rate to the same-property pool over the course of the year.

That said, we continue to expect an acceleration into the fourth quarter and 2027, driven by lease commencements with almost 75% of the SNO pipeline expected to commence by March 31 of next year and over 98% expected to commence by the end of the third quarter. The speed of the deliveries speak to the simplicity of the buildings that we buy and operate and differentiates Curbline from other purpose-built retail formats.

For moving pieces between the third and the fourth quarters, as a result of the timing of equity settlements in the third quarter, the quarter end share count was higher than the weighted average. Assuming no additional settlement activity, the fourth quarter share count would average about 121 million shares, which is a good starting point to layer on additional share settlement, which will be the primary funding source for fourth quarter acquisitions. Additionally, noncash revenue is expected to decline sequentially by about $300,000.

Finally, G&A is expected to total just under $9 million in the fourth quarter. Additional details on 2026 guidance and the moving pieces that I just outlined can be found on Page 10 of the earnings slides.

Ending on the balance sheet and some thoughts on growth in 2027. Curbline was spun off with a unique capital structure aligned with the company's business plan.

In the third quarter and fourth quarter to date, Curbline sold just over 3.6 million shares on a forward basis with roughly $102 million of expected gross proceeds, which we expect to use to fund acquisitions.

Including cash and deposits at quarter end of $133 million, total unsettled equity proceeds of $612 million and expected proceeds of $150 million from a term loan expected to close in the fourth quarter, Curbline has $895 million of immediate liquidity before taking into account operating cash flow or any additional capital.

In addition, we expect to end the year with a net debt-to-EBITDA ratio of under 2.5x, providing substantial additional dry powder and leverage capacity, continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess of the REIT average. And with that, I'll turn it back to David.

Thanks, Conor. Operator, we are now ready to take questions.

[Operator Instructions] Your first question comes from the line of Ronald Kamdem with Morgan Stanley.

Can we just start with sort of the acquisitions? Obviously, looking forward to do over $1 billion this year, which is great. The interest rate environment has obviously changed over the past couple of months. But just love to hear your thoughts on what you're seeing today and how this could play out in terms of acquisition opportunities, cap rates, and then expected IRRs.

Sure, Ron. It's David. I think one thing we've learned over at least the last 5 or 6 years in the sector is that the liquidity of the subsector primarily result of the fact that most of this is owned by private families, and I think life events dictate a lot of need and desire to sell.

We've seen a pretty consistent stream of assets every week that come from what is effectively a very, very large subsector. And every time there's been any capital markets disruption or interest rate movements or geopolitical events, we just haven't really seen a change in the total volume of deals that are hitting the market.

You add to that the unlisted assets where we're getting phone calls from sellers at least half the time for assets that we're buying. I think our confidence level that the deal volumes remain high is also very high.

So in terms of deal volumes, I think our expectations are we're continuing to see a whole lot of real estate. A small portion of that is real estate that fits our buy box. And so, if I tie that back to your question about cap rates and pricing, I think you just have to remember that given the borrowing rates have gone up and on the margin, I would say, so have cap rates, I think it warrants some commentary about the fact that this subsector does contain numerous assets that are lower quality, lower growth, lower credit, and not a lot of spread between market rents and in-place.

And those types of assets, I think, are traditionally bought by levered buyers that are private, and I suspect that those cap rates have already moved up substantially.

On the other hand, there is a portion of this subsector which we're very intrigued and interested in. It fits our buy box, and it generally has strong credit, strong traffic, and a lot of mark-to-market on the rents. Given how those market rents keep growing with inflation, I would suspect that the cap rate movement is going to be a little bit stickier for growth-type assets.

Great. That's helpful. And then just my second quick one on the same-store NOI, good acceleration sort of in the quarter. As you're sort of thinking about the renewals business at 96% sort of in-line tenants, what are the prospects of sort of further acceleration from here, and how we should think about it?

Sure, Ron. It's Conor. I would say there's 2 pieces to that question. As we talked about last quarter and this quarter, we are expecting acceleration in same property from the third to the fourth quarter and into 2027. That is largely occupancy-driven as we called out. It's really a function of our SNO pipeline.

To your point on pricing power and to David's commentary, tying that all together, we still have what we think is a pretty significant supply/demand imbalance in the markets we operate in, which is a huge benefit for us.

And I think our biggest asset management question with each renewal is, do we renew the existing tenant with 3% annual bumps, or do we potentially upgrade the tenant in terms of credit and mark-to-market? So again, it doesn't feel like a material change in terms of the operating environment. I would say it's stable given the supply/demand imbalance.

All that said, I wouldn't expect a dramatic change in renewal rates or renewal spreads or new leasing spreads. We've kind of hovered right around 20% on new leasing spreads, and renewals we've been in this, call it, 6% to 8% range.

So again, I don't expect a material change in that, but the same-property NOI acceleration really is a function of occupancy as opposed to pushing rents harder.

Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

David, I appreciate the commentary there about the stickier yields and IRRs, I guess, on the higher-quality product that you are targeting. But has Curb's return requirements changed at all as you think about future deployment and just deploying capital and your current dry powder today? How are you thinking about that?

I think absolutely they have. Our cost of capital has gone up both on the equity and the debt side. And so our unlevered IRR expectations have also increased.

I'll just remind you that it depends on the risk level to generate that IRR, but there's no question they've gone up. I'm sure Conor has some commentary as well with respect to how we look at returns relative to our 5-year plan.

Sure. I mean, Todd, as we've discussed on a number of occasions, we look at everything from a 5-year cash flow accretion model in addition to the kind of other traditional REIT metrics. And so if it was accretive to acquire a property today under that calculus, and we thought it was additive to the company, we'd consider it.

To David's point, I would just point out 3 things. We've never adjusted our buy box or characteristics of properties regardless of our share price was higher or lower. And then the second piece is the source and the use are the critical part of the analysis.

So you're right, cost of capital has gone up. But I think just looking at either cost of debt or cost of equity alone, this is out, and the other important piece of the equation, which is what's the going in yield or to David's point, what's the growth profile.

And the last point I would make is, as I mentioned in my comments, we've got over $900 million of immediate liquidity on hand. And so if we were just to invest the remainder of that capital over the course of '26 and '27, we're still in a position to generate well into double-digit growth next year, which is pretty encouraging and speaks to our earlier comments about being flexible and maintaining optionality, which has been our kind of core principle or guiding principle since we completed the spinoff 2 years ago.

Okay. And then just thinking about sort of acquisition pace, I guess, and the shared service agreement, does the expiration of the shared service agreement at all play into the desire to achieve greater scale and perhaps some discipline around acquisition activity?

If acquisition pricing doesn't adjust enough to today's cost of capital, would you be comfortable slowing investment activity even if that means entering the standalone structure at maybe a slightly smaller scale than you previously anticipated, just given the current pace of investments that you've been achieving?

So Todd, if you think back to our spin-off timing, we initially put out kind of guidance or a target of $500 million per year, right? And so you think about that would imply about $1.5 billion of total investments from the time of the spinoff to the end of the SSA in October of next year.

We bought $1.7 billion in the first 2 years. So from a scale perspective, we're well past what we expected to be or where we expect it to be, excuse me.

And if you recall, since our spinoff, we've updated our kind of G&A bogey of saying, hey, we thought we could be as efficient as SITE to, we think we could be more efficient in SITE. So whether or not we buy a single property from here, we feel really good about our scale, our positioning, our G&A leverage, et cetera.

In terms of the combat discipline, I would just say, again, we bought $1.7 billion. I think it's only 2 investments have been greater than $50 million, i.e., 2 portfolios greater than $50 million.

So I would just say we've been incredibly disciplined, incredibly focused on making sure we've been buying the right real estate over that period. It might look like a significant number of dollars, but it's all underwritten on an individual basis, which I think is really important.

So again, it kind of dovetails back my response to your first question to David's response to Ron. We've been incredibly disciplined from the start in terms of how we invest capital. I don't expect a higher return hurdle to change that. It just means that we're looking through a different lens.

So -- and then lastly, I think to your question about how we think about the pace of deployment, et cetera, we've got a pipeline that really goes out for the next 2 quarters, and that's been consistent really over the last year plus.

So our visibility on investments and the spread, et cetera, for the initial spread, I should say, for the first -- for the fourth quarter and the first quarter next year is incredibly high. And I think that helps give us a lot of confidence in terms of our growth for next year and deploying capital over the course of 2027.

Your next question comes from the line of Craig Mailman with Citi.

I don't want to beat a dead horse here on the yield expectations on new acquisitions. But I'm just kind of curious, your commentary on the stickiness of cap rates, I mean, how deep is the buyer pool beyond you guys from sort of a cash buyer perspective that you wouldn't have a little bit more negotiating power to either re-trade your going-in yields higher or be a little bit firmer in setting kind of pricing expectations in a rising rate environment?

It's David. I think that the buyer pool out there for this asset class has been very large for a very long period of time. I mean, there are a significant number of private buyers that are active in the space.

We infrequently run into the same people in bidding tents across the country because there's so few regional, and we're the only national operator, but there's a number of regional operators. But I would say the frequency of running into the same names is pretty low.

And given that we're only buying a certain small percentage of the overall sector, I think you can appreciate that there are a lot of buyers. So whether we behave or act in an aggressive or a conciliatory manner, I think the pricing of the entire sector at large is being priced through by the numerous other transactions where we're not involved.

I think my commentary earlier was that I will freely admit that I think a lot of this subsector is bought by levered local buyers, and therefore, that going-in spread is really important. But there's a pretty substantial group of buyers that are indeed looking at how growthy this property type is.

And because of that, I think unlevered IRR expectations on the one hand, you would expect the math to make cap rates go up substantially with borrowing costs. On the other hand, the reason borrowing costs are going up is because of inflation, and inflation rolls right through to the retailers and how they raise their prices on goods and services, and it affects market rents because replacement cost goes up.

So I'll give you an example. If you look on Page 16 of our stock, you'll see the number of assets that we bought this quarter, and I'll just kind of highlight 2. There's a large group of assets we bought in Los Angeles called Candlewood Shops.

And if you look at the entire rent roll of that property, which is a pretty large group of assets, the average tenure of all those tenants in place is 18 years. Same thing with Lexington Station in Minneapolis. The average tenure is 11 years.

So when you have national credit tenants that have been in a property for 10 or 20 years, the mark-to-market is really substantial. And I think a lot of buyers are less concerned about going-in cap rate, and they're more concerned about the lack of CapEx to generate pretty substantial same-store growth over the next 5 or 10 years.

That's why I think the cap rates are likely to be stickier. But again, it's only been a couple of months since we've been in this environment. And I think we'll see what happens over the next couple of quarters.

No, that's helpful. And I guess just from a capital raising perspective, I mean, that doesn't make sense here, most likely. Just from a strategic standpoint of not fatiguing the market or becoming predictable, I guess, just any thoughts on avoiding those 2 kind of pitfalls here as you guys look to keep the pace of deals kind of consistent in '27 and beyond?

Sure, Craig. So as I mentioned in my prepared remarks, we have just under $900 million of liquidity on hand, and that includes a $150 million term loan that we expect to close in the fourth quarter. That's before retaining cash flow, which is pretty significant relative to our asset base.

On top of that, our entire asset base is unencumbered. We have no maturities until 2029. We expect to end the year with a debt-to-EBITDA ratio call it 2.1, 2.2. So we can be incredibly tactical and look at a variety of funding sources over the course of the year.

Not all of those are available to our peers; not all of those are available to private investors. So I would just tell you, we feel really good about this environment. This is almost tailormade for our platform in terms of how much liquidity we have on hand.

And you're right, we like to be tactical and turn things on and off, whether that's debt, equity, et cetera. But I would just tell you, with $900 million-plus liquidity -- immediate liquidity on hand, I feel like we're in a really good spot on a relative and absolute basis.

I would also come back to my response, I think it's to Todd. Even if we just invested just the cash on hand, we're well into the double digits for next year in terms of earnings growth. And that's before, which I think doesn't get a lot of airtime, the operational growth that David was referring to a moment ago with assets like Candlewood.

So again, just to tie all that together, with that much liquidity relative to our asset base before free cash flow, we feel like we're in a really good spot, particularly given what we think is a pretty steady stream of investment opportunities in front of us.

What do you think is the range of borrowing costs for you guys, depending on where you are in the term structure or kind of product type between secured and unsecured?

Yes. So we're about to close, as I mentioned a couple of times, a $150 million term loan in the fourth quarter. If we weren't to swap that, our all-in rate would be about 4.9. We've obviously swapped $100 million of that $150 million and call it the low 5s. So let's just call that product 5.1, 5.2.

I haven't checked the 5-year treasury today, but private placement market, we're about 130 over. So depending on the hour of day we're looking at that, we're anywhere in the high 5s, low 6s.

And that's just 2 options. Again, as I mentioned, again, just a moment ago, we're 100% unencumbered. We have no joint ventures. We've -- I mean, we've just got incredible optionality, which has been our focus and our focus are to maintain since our spinoff.

So again, those are 2 markets just going off the top of my head, but very different types of markets at very different rates. But again, as you've -- kind of your question has alluded to and as David responded to, we're 4 months into a pretty dynamic time, and we'll see how things flesh out over the next, call it, 9 to 12 months.

Your next question comes from the line of Alexander Goldfarb with Piper Sandler.

Two questions. First, maybe just picking up that point there. You guys are blessed with a pretty good cost of equity, but you're also kind of talking about debt.

And clearly, debt is what is concerning folks today in the market just given the volatility. So as you think about your capital, are you -- I know that you're closing on a term loan, presumably that was in the works for some time.

But as you think about your capital structure going forward, are you thinking about adding more debt? Or given where interest rates are, your view is just primarily remain heavy on the equity funding, but have debt sort of as an availability, sort of as an undrawn resource, but not really something that you're planning to use?

I would say, Alex, we love optionality, not to beat a dead horse here. But if you think back to our spinoff in our initial business plan, it was to invest the cash and raise some debt over the 5-year period.

And that was what led to double-digit FFO growth and invest $500 million a year. Things have obviously dramatically been different in a positive way since then. We've obviously raised just under $1 billion of equity. We bought over $1.7 billion. We've pivoted because of a different cost of capital.

So I would just tell you, every morning, we wake up, we look at our screens, we look at our menu of options. We look at new options, and we say, at that point in time, based off our uses, what is the best path for us to consider?

And so I know it sounds like an evasive answer, but that will be our kind of our job tomorrow morning is to wake up, look at our screens, see what the best available source is and then compare it to the use, which is critical.

So I wouldn't imply that we'll be more equity-focused or debt focused going forward. I would just tell you, we will pivot based off what the market is -- has available to us based off our uses.

Okay. And then, David, you mentioned adjacent properties. Obviously, you guys have a huge pipeline, and I don't know how big these adjacent properties are as far as percentage of deal flow.

But I'm just curious, are these like owned by the same -- are you finding that these are owned by the same sellers, meaning they additionally were monetizing part of their portfolio and now they're monetizing more? Or these are sort of friends that are nearby, and they see that their buddy sold and now they're going to sell?

And I would imagine that as you sort of cluster, the operational synergies go up as far as pricing and rent and being able to optimize tenancy.

So maybe if you could just expand on, one, if this is just a little talking point, or if you see this as a material growth avenue, these adjacent properties? And then two, your thoughts on just given the high retention rates, if there is sort of operational upside or because most tenants renew, it's not like you're going to get that many operational synergies the way we would think at like a shopping center or a mall, et cetera?

Sure, Alex. So I would say that 6 months ago, it was a talking point. Now it's becoming a bit more material, meaning it's a trend that's picked up. The more dense we are in a certain market, we do have tended to just get more opportunities from friends of friends. "We heard you sold to Curbline. Can you give us a number? We'll give them a ring. We're thinking about selling." I mean, that is happening more and more, just word of mouth.

There are also situations where we bought a property from someone and got a right to purchase, basically a first right to purchase, if they ever sold another property nearby, and we've exercised those rights sometimes.

And the third situation would be that someone has a family interest that controls adjacent parcels. One side of the family wants to sell today, the next side of the family may decide to sell 6 months or a year later.

So it's been a variety of reasons, but I would say that as John and I and Conor have been looking at the pipeline and kind of witnessing the dealmakers and what activity they're doing, we've seen this to be a bit more of a trend than it had been last year, and it makes us just remember that having the amount of allocated personnel sourcing deals out in the field is reaping other benefits other than just waiting for a property to hit the market.

So I think that's kind of the important piece is that it's not a -- on its own, it's not meaningful. But when you add it to all of these other arrows in our quiver, we just feel like sourcing deals is becoming easier and easier. And so our confidence level that the volumes can stay high for opportunities is pretty strong.

Your next question comes from the line of Floris Van Dijkum with Ladenburg.

Congrats on another good quarter. Just wanted to maybe get around to the higher IRR expectation question maybe in a slightly different way.

Obviously, rates have gone up. Cap rates seem to be sticky. That would suggest, if you're buying assets still around the high 5s or low 6 cap rates, that your IRR expectations have increased on some of the properties.

Maybe talk about your early acquisitions. So you've been doing this for a couple of years now. If you look at your first year and look at the returns that you have achieved and the NOI growth you've achieved relative to your early expectations, how has that panned out? And how does that give you confidence as you look forward in additional acquisitions?

It's David. All right. So what's interesting is that we seem to come back frequently to talk about going-in cap rates. But I know that we've discussed many times that there are other important factors to unlevered IRR other than just going-in cap rate.

The going-in cap rates for this asset class have always been from the low 5s to, I would say, the low 7s. I mean, there's a very wide range of going-in cap rates for unanchored strips just depending on the credit quality, the mark-to-market available, kind of the demographics, the shape of the building, the re-leasability of it.

I mean, all these things factor into whether it's a growth asset or whether it's kind of a risky asset. So going-in cap rate is just -- it's very difficult to quantify for an entire sector.

And so I tend to focus more on what we're interested in, and we're interested in growth assets. So to your point, if we look back at the year leading into the spin and the first year after the spin, what happened to our underwriting versus actual?

And I would say we were fairly consistently wrong on mark-to-market in the fact that we were just too conservative. You could either say that we didn't fully appreciate the mark-to-market at the time or it could be that market rents have continued to grow, but we've generally outpaced the renewal spreads and the new leasing spreads from our original budgets. And so I think what you've seen is the unlevered IRRs have been higher than our hurdles were.

The second component is that CapEx has been a little bit less than we had expected. We mentioned that at the spin, we were targeting a less than 10% CapEx load for the entire sector. We're running about 8% over the last few years.

And when you run that 3-year model, a little bit more aggressive on mark-to-market, a little bit better renewal spreads and maybe a 20% reduction in total CapEx, the unlevered IRRs have been really healthy.

And so I do think that our expectations need to increase and reflect the signals we're getting from the market, both on equity and debt. But there are other levers within each underwriting that we can look at pretty carefully and still feel confident that we're making the good long-term decision.

Maybe the next question, and I look at your largest market being Atlanta, you got 30 properties, call it, $21 million of ABR. By the way, that's 1/5 of what Simon's Lenox Mall has.

But how much more expansion do you have in your largest market, Atlanta? And then I also noticed, are you also -- I saw the first time some assets in Madison. Are you expanding and selectively picking up some assets in other markets simply because the opportunities are bigger there or because you need to deploy the capital and you feel like you can scale in some of those smaller markets as well?

Yes. I mean, I think we've said in the past that if we could snap our fingers, we would be equal-weighted in the top 30 markets in the U.S. But the reason we say that is primarily from a diversification standpoint.

Specific targets by each submarket don't really exist for us in practice because we're simply underwriting each asset across the country that comes available, and we're a little bit more agnostic as to how that MSA starts to rank up.

Atlanta specifically has just had a lot of growth, a lot of strength, and it's also had a lot of assets that have been available to us. And so we've been a lot more active in Atlanta.

It's also a ring city. And as you know, a ring city tends to have lots of pockets all the way around the city center. And those pockets each are different factors that are available. You can't say that about some other cities that are a bit more linear.

South Florida is different, right? And so you've got just less geography to work with than some of the larger cities. I just lost the second half of your question. Yes, it was...

Moving to Madison.

Yes, I mean, moving into other cities that we see strong demographics and we see opportunities to come available, we're open-minded to it.

Your next question comes from the line of Mike Mueller with JPMorgan.

Two operating questions. First, I guess, given the heightened focus on the consumer these days, can you talk a little bit about how you're viewing tenant health and kind of bad debt going forward?

And the second question is with the commentary about SNO coming online. Outside of like acquisition mix impact, where do you think the 94.5% economic occupancy could go to by the end of '27?

Sure. It's Conor. On credit, we haven't seen over the course of the year change. It hasn't come up in a lot of our calls, but I think -- I don't think -- our placeholder for the year has been about 60 basis points of uncollected revenue, and we've been running just under that.

There has been an uptick in national bankruptcies you've seen with Sleep Number and Leslie's Pool Supplies and a couple on the anchor side as well. And you've seen a little bit of pain on the entertainment side of late in the credit markets.

But for us, we have not seen a material change in AR, aged AR or renewal rates. So as I mentioned at the start of my answer, 60 basis points has been a placeholder, and there isn't a change in that going into the fourth quarter.

In terms of the SNO pipeline and the gap between the kind of lease-occupied spread, and we said a couple of times before, if we're 96.5% leased, it feels like, Mike, 150 basis points or 100 basis points is probably a good spread in terms of that lease-occupied gap just given it's a shorter timeline to sign a lease and get it commenced, unlike some of the more purpose-built retail formats.

So from a percentage lease perspective, I would look at that way. The challenge is percent of lease and dollars won't line up. And so I do think using the SNO dollars as a ramp as opposed to lease-occupied gap is a better way to kind of model it out over the next 3 quarters.

Your next question comes from the line of Linda Tsai with Truist.

Do you have a sense of how bifurcated the market is in terms of buyers, whether they're levered or all cash? And maybe if you don't, just in terms of what you've seen in the deals that you've done?

It's David. I really don't have a statistically good and accurate response. I mean, we get imperfect information. But as you know, we've looked at a lot of deals, and we bought a pretty large number of deals.

So we do get some anecdotal information. I would say the traditional mortgage borrower is a lot more focused on kind of flatter assets with a higher yield. And so we tend to not bump into them very frequently.

On the higher quality unanchored, it is a lot more common for folks to use debt if they're private. But I would say a lot of times that debt appears to be sourced through private wealth networks and other types of financings, not a traditional mortgage.

So I think their all-in borrowing rates tend to be lower than if they did a nonrecourse debt piece.

And I'm sorry...

I certainly think we're the only -- Linda, I certainly think we're the only effectively unlevered or all-cash buyer, but there are other ones that have a similar appearance.

And then sorry if I missed this earlier. What is the retention rate in your portfolio? And is there a view of what this could grow to?

We don't report on a quarterly basis, Linda. I don't have the number off the top of my head. My guess is I think I want to say for our nationals, it's the low 90s over the last 5 years. And to my response to Mike a moment ago about credit, we really haven't seen a change in that retention rate, albeit there has been an uptick from a very low base of bankruptcies, as I mentioned a moment ago.

On the uptick in bankruptcies, do you view it as seasonal? Or is it kind of growing into '27? Does it have to relate -- does it relate to higher interest rates at all?

No, it's a good question. I mean, it feels like if you rewind back to 2017, '18, there was a little more seasonality to bankruptcies there was, I would say, call it, 10-plus years ago. It feels like it's a little less seasonal today, but there haven't been that many.

And by me saying there's been an uptick in bankruptcies, I'm not saying in our portfolio, I'm just saying in the kind of national retail space. It does feel like it's the kind of COVID winners who then became losers, i.e., pool, entertainment-focused that are the kind of recent headlines of sorts. We really have had no exposure. But again, it does feel like an uptick, albeit from a very, very low base.

As we look into 2027, I would imagine, yes, the credit markets will -- if they remain tighter, will definitely have an impact. Again, there's no one on our watch list that is of scale and that's purposeful, right, that we've got on our list that we're worried about in '27.

But I would have to think if GDP growth slows and/or the credit markets continue to tighten, that would have an impact on the retail environment overall for us.

Just given our payback period on our leasing, our diversification of credit, again, it feels like it's a real relative win for us. But there's nothing on our radar that's jumping out to us. It's just an observation based off economic growth in the credit markets.

There are no further questions at this time. I will now turn the call back to David Lukes for closing remarks.

Thank you all for joining our call, and we'll speak to you next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Curbline Properties' Second Quarter 2026 Call. [Operator Instructions]

I will now hand the conference over to Stephanie Ruys de Perez, VP of Capital Markets. Stephanie, please go ahead.

Thank you. Good morning, and welcome to Curbline Properties' Second Quarter 2026 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call.

Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Forms 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, OFFO and same-property net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Thank you, Stephanie. Good morning, and welcome to Curbline Properties' second quarter conference call. Second quarter results highlight the strength of the platform that we have constructed in less than 2 years since our spin-off. We acquired $374 million of properties in the second quarter alone, and we have now acquired $564 million year-to-date. We raised almost $550 million of equity, including $350 million in our June offering. And importantly, we continue to see elevated demand for space with the vast majority of our SNO pipeline expected to commence over the next 3 quarters.

These factors in aggregate are driving significant earnings growth with our raised guidance representing over 17% growth, which is among the highest in the sector. I'd like to thank everybody at Curbline for their contributions that have positioned the company for outperformance. We continue to lead in this unique capital-efficient sector with a clear first-mover advantage as the only public company exclusively focused on acquiring top-tier convenience real estate assets across the United States.

I'll start with an overview of investment activity and shift to operational highlights before handing it off to Conor to walk through quarterly results, the 2026 guidance increase and the balance sheet in greater detail. Beginning with investments, as I mentioned, we've acquired over $560 million of real estate year-to-date and are raising our full year investment target to $1 billion of acquisitions from $850 million. I've spent no shortage of time previously discussing the drivers behind the acceleration in acquisition opportunities, and there's really no change as to what we are seeing today.

First, it's a fragmented industry, and we have the largest team with an incredible network of relationships across the major metros of the country. Second, our reputation and track record are real assets as we look to expand our portfolio to almost 6 million square feet of convenience real estate. And third, the platform and scale that we've constructed allow us to be simply more efficient than local competition, and we continue to fine-tune our processes to underwrite better and close faster. And finally, fourth, opportunities continue to be boosted by what we believe to be the long-term tailwinds driven by a transfer of wealth and real estate to the next generation of owners, many of which who are seeking liquidity. The net result of each of these 4 factors is an increase in opportunities that meet our criteria: primary vehicular corridors, strong demographics, high traffic counts and creditworthy tenants, and importantly, are additive to our future growth rate. And it highlights the unique and significant addressable convenience market that provides an opportunity for us to scale our Curbline business.

Moving to operations. We signed over 167,000 square feet of new leases and renewals this quarter. Trailing 12-month spreads remain consistent with our 5-year averages as the shortage of space in the affluent markets where we operate continue to lead to attractive leasing economics. We invest in simple, flexible buildings that are at the nexus of consumer behavior. These straightforward rows of shops can support a wide variety of uses, and this flexibility drives tenant demand from an extremely wide pool of tenants. The result for our portfolio is a highly diversified tenant base with only 7 tenants contributing more than 1% of base rent and only 1 tenant of more than 2%.

We now have over 1,300 unique tenants in the portfolio, including over 500 unique national tenants, which represents approximately 70% of our base rent. To this point, all 15 of our new leases this quarter were with different tenants, including FedEx Office, Tropical Smoothie and a variety of other health and service users with a similar national mix as the overall portfolio.

In terms of same-property growth, year-to-date growth of 2%, decelerated as we expected, with Conor providing more details on this later. But our capital expenditures also remain well below 10% of NOI, placing us among the most capital-efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class.

In summary, we remain incredibly optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience real estate sector in an effort to deliver compelling, relative and absolute growth for stakeholders. And with that, I'll turn it over to Conor.

Thank you, David. I'll start with second quarter earnings and operating metrics before shifting to the company's revised 2026 guidance and then conclude with the balance sheet.

Second quarter results were ahead of budget, largely due to higher NOI, driven in part by higher-than-forecasted occupancy and recoveries, along with higher-than-forecasted acquisition volume. NOI was up 12% sequentially and over 50% year-over-year, driven by acquisitions along with organic growth. Outside of the quarterly operational outperformance, there were no other material variances for the quarter, highlighting the simplicity of the Curbline income statement and business plan.

You will note that in the second quarter, we recorded a gross up of $1.8 million of non-cash G&A expense, which was offset by $1.8 million of non-cash other income. This gross up, which is a product of the shared services agreement and nets to 0 net income, will continue as long as the agreement is in place and is excluded from any G&A figures or targets.

In terms of operating metrics, the lease rate was up 20 basis points sequentially to 96.5% despite an almost 20 basis point headwind from acquisitions. Occupancy was also up sequentially to 94.3%, which represents the highest level for the portfolio since the spin-off. Leasing volume in the second quarter accelerated from the first quarter, driven by an uptick in renewals, though quarterly volumes and figures remain volatile given the lack of available space in the portfolio.

As David noted, we remain encouraged by the amount of activity and depth of demand for available space. As expected, same-property NOI decelerated in the second quarter due to lower forecasted recovery revenue, which acted as a 260 basis point headwind. The second quarter also included $370,000 of expense related to storm damage at a property in North Carolina, which is an additional 100 basis point headwind. Pro forma for these same-property NOI growth would have been 3.1%. Yet despite these headwinds, same-property NOI was ahead of budget and base rent growth was up over 2.3%. Importantly, this growth was generated by limited capital expenditures with trailing 12-month CapEx of 8% of NOI.

Moving to our outlook for 2026. We are increasing OFFO guidance to a range between $1.24 and $1.26 per share, which at the midpoint represents just over 17% growth. We believe that this level of growth will be the highest certainly in the retail space and among the highest in the entire REIT sector. Underpinning the midpoint of the range is $1 billion of full year investments, a roughly 3.5% return on cash with interest income declining over the course of the year as cash is invested, CapEx as a percentage of NOI of less than 10% and G&A of roughly $32 million, which includes fees paid to SITE Centers as part of the shared service agreement. Those fees totaled $1.2 million in the second quarter.

In terms of same-property NOI, we continue to forecast growth of 3% at the midpoint in 2026, following 3.3% in 2025 and 5.8% in 2024. As I've noted previously, the same-property pool is growing but small, and it includes only assets owned for at least 12 months as of December 31, 2025, resulting in a large non-same-property pool, which we expect to grow at a similar rate to the same-property pool over the course of the year. That said, we expect a meaningful acceleration in base rent into the fourth quarter, driven by lease commencements with almost 90% of the SNO pipeline expected to commence by March 31 of next year and the entire pipeline to commence by the end of third quarter.

The speed of the deliveries speaks to the simplicity of the buildings that we buy and operate and differentiates Curbline from other purpose-built retail formats. For moving pieces between the second and the third quarters, as a result of the timing of equity settlements in the second quarter, the quarter end share count was higher than the weighted average. Assuming no additional settlement activity, the third quarter share count would average about 114 million shares, which is a good starting point to layer on additional share settlements, which will be the primary funding source for second half acquisitions.

Additionally, below-market revenue is expected to decline sequentially by about $300,000 due to the write-off of below-market leases in the second quarter. Finally, G&A is expected to total about $8 million in the third quarter and $32 million for the full year. Additional details on 2026 guidance and the moving pieces that I just outlined can be found on Page 10 of the earnings slides. Ending on the balance sheet, Curbline was spun off with a unique capital structure aligned with the company's business plan.

In the second quarter and including the issue from the June offering, Curbline sold 18.1 million shares on a forward basis with $541 million of expected gross proceeds, which we expect to use to fund acquisitions. Including cash on hand at quarter end of $155 million, along with total unsettled equity proceeds of $696 million, Curbline has over $800 million of immediate liquidity available to fund the roughly $500 million of remaining investments included in guidance.

The net result of the capital markets activity since formation as the company ended the quarter with a leverage ratio of approximately 20%, providing substantial dry powder and liquidity, continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess of the REIT average. With that, I'll turn it back to David.

Thank you, Conor. Operator, we are now ready to take questions.

[Operator Instructions] Your first question is from Ronald Kamdem with Morgan Stanley.

Just starting with some of the KPIs. I think the occupancy, obviously, you gained occupancy despite sort of the drag from the acquisitions you mentioned. I'd just love to hear what you think, how much more upside of occupancy there is? And then on the same-store front, I'm just wondering if the deceleration was maybe a little bit greater than anticipated? And is this sort of 3% the right run rate we should think about going forward?

Sure, Ron. It's Conor. I'll go in reverse order. So our budget for the quarter was for a 100 basis point decline in same property. And so we outperformed that. And so in a worst-case scenario, it was in line with our expectations. But to my comments, we were better than expected. We've talked about this ad nauseam. Our same-property pool is larger than it was last year, but still pretty small relative to the asset base. So it's going to lead to a lot of volatility in operating metrics, which I called out on a number of occasions. So we reported 4.8% growth in the first quarter. Obviously, to your point, a deceleration in the second quarter. And then we're expecting a pretty large acceleration in the back half of the year, just given the SNO pipeline that both David and I mentioned and the timing of commencements into the back half of the year.

So as I mentioned, the 2 other call-outs, the same property pool is only about 56% of NOI in the second quarter. So you have a significant piece of the company that's not captured. And then the second piece is CapEx percentage NOI remains well below 10%. So the capital needed to generate that 3% plus growth over the course of the year is about 1/3 of other retail companies. We've said again on other calls that we think this is a 2.5% to 4% business. Just given the supply-demand imbalance today, it's probably closer to 4%. And again, there's no change to our expectations for growth over the course of the year. And then just help me, remind me on the first question, excuse me.

Just on the occupancy upside in the portfolio.

Ron, it's David. I would say part of the challenge of that question is that it really depends on what we're acquiring. Sometimes we're acquiring with vacancy and that would have a negative impact as it did this quarter. In other cases, we're acquiring assets where we might want to replace a tenant. I would say that I would point you to Page 13 of our supplemental, you'll note that the relationship between new leases versus renewals is 4:1. So there's 4x as many renewals as there are new leases. And this is generally renewals business. So I would say as long as the economy is strong, I would expect that occupancy is going to stay at the higher end over the course of time, which I would put as a traditional 97% or so. But it really depends on when we select to replace tenants as opposed to renew them.

If I could just sneak in my -- a follow-up. Just on the acquisitions, obviously, pretty impressive volumes here. Would just love to hear what you guys are seeing in terms of cap rate and return expectations for this vintage of acquisitions versus maybe 12 to 24 months ago.

Well, as of where we sit today with the pipeline of $1 billion expected to purchase this year, the cap rates are still hanging in the low 6s. As I've said on previous calls, just bear in mind that the assets that we're buying are somewhat small, which means that the internal growth rate of those assets can have a pretty big impact on going in cap rates. So we bought assets in the low 5s, and we bought assets in the high 6s, and it really depends on occupancy levels, mark-to-market. I would say the better way to look at this asset class is unlevered IRR, which are around an 8. And I think for us, that's a pretty attractive trade for that type of unlevered IRR given the fact that most of that IRR is coming from cash flow simply because of the low CapEx profile.

Your next question is from the line of Craig Mailman with Citigroup.

Can you hear me, guys?

Yes, thanks, Craig. Good morning.

Sorry, the operator keeps throwing me off. Following up a little bit on Ron's question and maybe asking it in a different way. I know you guys don't give quarterly guidance, but just given the ramp in 2Q acquisitions and a little bit of the drag you saw in occupancy from this crop and you kind of bought 1/3 of it towards the end of the quarter. I know you guys don't give quarterly guidance, but could you help us think a little bit about the net benefit that should accrue to 3Q sequentially from these acquisitions kind of offset by, Conor, your commentary on where the share count could be just to give us, I know that we always talk about low 6 caps, but there is that range in there. I don't know if there's some kind of goalpost you can give to help us out.

Craig, it's Conor. Just a couple of things. I don't want to make a mountain out of a molehill about the lease rate and the occupancy of what we acquired. Our portfolio is 96.5% leased and the assets we bought had a lease rate in the 95s. So it's not like we're buying stuff in the 70s or 60%. There's a huge lease-up. It just happened to be modestly dilutive to our overall portfolio lease rate. We give the timing of each acquisition to kind of the genesis of your question in the sup to help with the cadence. But if you use effectively a low 6 cap rate on that -- on those assets that were acquired in the second quarter, you'll get to a really good run rate for the third quarter in terms of kind of an apples-and-apples comparison.

And then as you think about the cadence over the course of the year for remaining acquisitions, there's about $0.5 billion left to hit our target. If you assume roughly a 50-50 split over the course of those 2 quarters and with a similar level of funding or settlement timing, you should get to a really good spot in terms of the guidance range and how we're thinking about the business for the course of the year.

And then as we just think about the opportunity set, I mean, you guys are now at almost double what you initially thought you could do when you spun off from an annual acquisition pace this year. Just -- can you just talk about what you -- if this level is sustainable, for how long you think it's sustainable before you get institutional competition and how you guys are now staffed to either handle this or how much more you could kind of do in a year without having to hire more people?

Sure, Craig. It's David. I'll give that a shot. As you know, our initial expectations when we spun out was to do $500 million of acquisitions in the first year. We ended up the first year way above that in the kind of $780 million range. I would note that there were 3 kind of small- to medium-sized portfolios within that first year. Portfolios in this business tend to be episodic. I don't think that they're something that can be counted on in kind of like a normal quarterly run. So if you look at that first year, our acquisitions of one-off assets were around $550 million. As we sit here today in the second year, we've got a target of $1 billion, and that is exclusively one-off acquisitions.

So what's happening, I think there are a couple of factors. #1, there is definitely a transitioning of generational real estate to the next buyers. And that either happens through resolving estates or as we've seen in the last 6 months, and I think I mentioned on the last call, we've seen a lot more sellers that are seeking liquidity to plan for their estates. And to us, that's a very good sign that deal activity seems more likely to increase than decrease over the next decade. In terms of the total addressable market, even where we stand today, having effectively doubled the size of the portfolio, we're still about 60 basis points of the total U.S. inventory of this asset class. So I do feel like there's a very credible long-term runway.

The second component that I would say is unique, and I've mentioned this in the prepared remarks a number of times is that we have been trying to find every avenue and sleeve we can to unlock more inventory in this country. If you've got a business you like and you're only 60 basis points, it's our job to figure out how to attack those sleeves. We've done that from cold calling from mass mailers, from wealth advisers, from accounting firms and law firms. We've driven up and down streets and knock on doors. At this point today, John has a team that is working on acquisitions in some form, whether it's diligence, sourcing or legal. We've got a 26-person department. That size of a transactions team is far larger than any other institution or non-institution in this country. So I think we're just able to get at more of the deal flow. And I personally have a pretty high confidence that that will continue for years to come.

And in terms of G&A, Craig, we talked about at the time of the spin-off that we thought we could be as efficient as SITE Centers. And if you recall SITE, the way we look at it, SITE's G&A as a percentage of GAV was about 1.1%. We have since updated that framework to say we think Curb can be materially more efficient. And that's despite David's point -- to David's point, adding some folks and adding some more headcount, but we're just starting to scale our G&A load, and that's obviously starting to fall to the bottom line and leading to pretty significant FFO growth. So on the G&A front, you're right, we are adding some more folks. But in terms of the, I would say, significant fixed expense items, those are already in place, which again is allowing us to really scale our G&A, drive free cash flow and drive pretty significant earnings growth.

If I could slip a third in. Are you guys -- how do you guys think about as your 500 of your 1,300 tenants are national? Are you guys close to or going to think about this as an avenue of kind of like a national accounts group now that you have, I would assume, one of the biggest, if not the biggest, non-anchored strip portfolios in the country? Like how are you guys thinking about organizing to maximize the benefits from having the scale to drive up rents or occupancy or improve tenancy?

It's a really interesting point, Craig. I really think it's prescient given, you're right, we're suddenly on the map for a lot of tenants that we weren't on the map a year ago. In fact, I'm not sure the sector was really on the map a year or 2 ago. But this first started to come up in Vegas this year at the ICSC conference. A lot of the tenants are looking for growth. And if we're buying assets that have a 2/3 to 1/3 national to local, the nationals can generate more 4-wall EBITDA from this real estate than the locals. And therefore, I think a lot of the nationals are seeing an opportunity to replace local tenants with national tenants.

And so they started to get a lot more aggressive at Vegas with approaching us about how they can work with us on a portfolio basis. So I do agree with you that that's an interesting avenue, especially given the fact that we're targeting high-traffic intersections and high-end demographics, which is where a lot of the national chains want to be. So I would say it's an open question. It's a really, really good point. And you'll probably get a lot more commentary on us over the course of the year as we develop those relationships and figure out how it's best to serve those tenants.

Your next question is from the line of Todd Thomas with KeyBanc Capital Markets.

First, I just wanted to follow up on the discussion around cap rates and IRRs. I was just wondering, I guess, first is, it doesn't sound like it necessarily, but is the recent rise in the 10-year treasury having any impact on more recent price discussions that you're having? And then is Curb changing its underwriting hurdles at all in the current environment, just given the improvement in the company's cost of capital? Or has anything changed at all for the company's investment efforts as a result?

Yes, I wish I could say that the industry reacts very quickly to borrowing costs. It just seems like unlevered IRRs are probably the more dominant approach from even the competition that we have locally, even though a lot of them use debt. So I don't really think the cap rates have changed in the last couple of months. We're still seeing the same range. The averages have been about the same. In terms of our own underwriting, I would say that given the fact that we're looking at unlevered IRRs, a lot of that IRR is dependent on the mark-to-market and what we think market rents are growing at. And I think we're pretty conservative on both factors. And so I just don't think we've seen the need yet to kind of reconsider our underwriting assumptions.

And then Conor, in terms of scaling the platform and some of the commentary around G&A, can you just provide an update on the shared service agreement with SITE Centers, just given where we are in the year today, late July, what the latest is with regard to the agreement? And also the impact that we should be considering for G&A after taking into account the gross-ups, which you've talked about the net out, but also the fees paid to SITE Center and how we should start to think about that as we focus on 2027?

Sure. So Todd, SITE, as you know, had the onetime option to terminate the SSA by June 30, and they did not exercise that option. So as a result, absent the negotiation between the 2 parties, the SSA would remain in place through the full length of the agreement, which is October 1 of next year. If you recall, our budget for this year assumes status quo. So there's no impact to our budget or G&A this year.

As it relates to 2027, obviously, as we get closer and provide guidance, we can give some more updates there. But we do have the pieces for you in our stuff and in our slides in terms of the breakout between the fee paid to SITE, which is $1.2 million this quarter and what I will call our core or other G&A, which is obviously just expenses related to Curbline. So as we grow, that fee paid to SITE will grow. But if you recall, the structure of the SSA was that and the fees paid were meant to mirror the cost of the folks that -- the services that SITE are providing. So in layman's terms or just to put it bluntly, we're not expecting material change to G&A once the SSA expires, whether that's today or whether that's over a year from now. So status quo for this year. But again, just given how we structured the agreement, there's no expected material change to G&A when that agreement does expire.

Your next question is from the line of Floris Van Dijkum with Ladenburg.

I love the simplicity of your business, which I suspect a lot of the investors on the call probably do as well. I had a couple of questions. The Sunbelt clearly is the biggest part of your portfolio with over 70% of your ABR coming from those markets. How do you think about growing in other key markets going forward? And I think I looked briefly at your slide, I think you have only like 2 or 3 assets in the New York Metro area, one in New Jersey, one in Long Island as far as I could tell. Do you not see the opportunity to acquire there? Or are cap rates lower? Or is there more competition? And if you can maybe talk a little bit about, did you -- obviously, you have a huge amount of assets in Atlanta. Is it just easier to acquire in markets like that because you already have a big presence? Maybe if you can talk a little bit about your acquisition strategy and how do you expand into other key markets across the country, please?

Sure. Floris, it's David. I would say that we spent a lot of time together over the past number of years. I think you know that when we spun out Curbline, it certainly had a base portfolio that did have quite a few assets in the Southeast as well as the Southwest. So if that was our departure point, we came with a concentration in those 2 markets, and we also came with a number of relationships that were long-standing in those areas. As we've grown over the past 18 or 20 months, we certainly have started to develop more relationships and get more deals done in the mountain states, Denver, in particular, the Pacific Northwest and the Midwest. So I think it's less of a desire to be concentrated. I think our desire is the opposite. We like to be as distributed as we can amongst the top 30 MSAs as long as it meets our hurdles of traffic and primary corridors and strong demographics.

The laggards have definitely been the Northeast corridor. Part of that is just because this real estate is generationally owned. A lot of people have a very low basis, and it's just going to take time to start to penetrate some of these older markets. I would say the same thing about the Pacific Northwest. That's also been an area that's been a little bit more difficult to ramp up. But if you fast forward a number of years, I think we've proven that we're willing to allocate resources to build those relationships. We're starting to make a dent. And once we get into a market, I do think that buying deals in markets prompts a lot more deals to come. So I would expect that that math is going to look a lot different in the next couple of years.

And maybe my follow-up, David, as you think about OP units, do you expect that those will become more prevalent, particularly as you talk about these generational and tax issues going forward? I note that one of your peers who's been public for quite a while, used -- did its first OP unit deal recently in Long Island. Do you think you're going to be more prevalent in using those to source and complete acquisitions going forward?

Well, that certainly is an open question. I mean, given how little the entire industry has used of OP units in the last decade or so, I think there's a reason for that. We certainly understand that from our perspective and from the seller's perspective, the math is better on an after-tax basis for using OP units. But it doesn't necessarily mean that the seller ends up wanting that type of tax-deferred structure. In many cases, you're talking about resolving an estate where there's a couple of different heirs. There's other methods such as 1031 when people are planning. So we certainly love the structure. We think it makes sense for both parties, but it's not easy to get them across the finish line. I would expect it will be more than 0, but I don't really anticipate it to be a dramatic change from what you've been seeing in the last decade.

Your next question is from the line of Alexander Goldfarb with Piper Sandler.

David, just 2 follow-up questions. The first, just going back to the size and scale of the platform, the G&A comments that Conor mentioned on efficiency, could you argue that perhaps you need more people if you're knocking sort of at every country club, every dentist office, every wealth management, et cetera, across the country, would that require more people sort of like a sales force that has to be out there pounding the pavement for each individual deal? I'm just trying to understand how the platform can be more efficient if the deals individually are a lot smaller and you have to tease them out sort of one at a time.

Well, you're right. Alex, you certainly could make the argument that more people generates more deal flow. I think where we believe that's true, we have added people. Where we believe it's not true, we've tried other methods to unlock inventory. So I mean, I guess if I just look back on the fact that we initially expected $500 million a year, and now we're at $1 billion this year, I don't want to be too negative on the fact that the team has grown and the team has produced pretty well. So we're being careful with our G&A, but we certainly recognize we're willing to allocate G&A towards growing the business where we see an opportunity to do so.

And Alex, to your point, does more people necessitate a higher G&A run rate? And the answer is, in certain departments, yes, as David alluded to, transactions. But to Floris' point, this business is so simple in all the other facets that we are more efficient on that front or in those departments. So again, you're running a little bit higher headcount to your point on sourcing deals. But everywhere else, we don't have a captive. We don't have all the other kind of bells and whistles, which we think are administrative burden and a G&A burden. And so we prefer to operate pretty simply in our departments, which is a huge benefit to G&A.

And then the second question is on tenant diversity. I hear your point that your portfolio is on the radar of more national tenants. But isn't there an argument that sort of local tenants or small regional tenants provide that sort of pizzazz that makes people want to go to your center versus the one across the street. And therefore, there's sort of a mix that will always bias perhaps more local tenants relative to how many nationals that you could put in? I'm just thinking, especially when you have like new concepts that are on the rise, those often start out as local or small regionals. And I would just think that that's what creates a differentiating standpoint as you think about your 2/3, 1/3 mix.

Yes. Certain pieces of that, I would agree with, but there's other -- I guess there's other pieces of what we were talking about, which are more of a choice, an asset management choice. So let's unpack it a little bit. The industry, I think, is fairly consistently 70-30, in that range. Is it 65? Is it 75? I think that level of change over time is the question mark. I don't think it's ever going to get to 90-10. And part of the reason, you're right, is that there are in every local community, certain tenants that are long-standing, can generate enough revenue to support rents and are worthy of being in our property. So I don't ever think we're going to be at a point where we're trying to force 100% nationals.

We do spend a significant amount of time on creditworthiness. So our local tenants go through a pretty robust analysis on their credit and their ability to pay and their business history. And there are a lot of small businesses in the country that have that high credit and high probability of retention over time. So I'd agree with you, the local tenants are important. I guess I would diverge a little bit about the comment of unique tenants that draw customers who want to be at your property. That to me, is a philosophy that's more aligned with lifestyle, where you have a destination property and you're trying to get unique and differentiated tenants to kind of attract tenants to come to your properties.

Our asset class and what we've been trying to buy are very simple rows of shops on vehicular corridors where it's more running errands. I mean we know that the customers on average spend less than 7 minutes on our asset. They're not coming to cross shop and they're not necessarily coming because of a unique tenant. They're coming because it's convenient. And so our job as asset managers is to generate as much rent as we can from the best credit for people that want that access to those many, many customers traveling, 40,000 cars a day along that road.

Your next question is from the line of Mike Mueller with JPMorgan.

Conor, you clearly have a lot of unsettled equity to tap today. But on a go-forward basis, how are you thinking about the equity debt mix for acquisition funding?

Mike, it's a great question. So to your point, we have just under $900 million of either cash, unsettled equity, free cash flow over the course of the year, and that's offset by use to satisfy the rest of our pipeline of about $500 million. So we expect to end the year with, call it, round numbers, $350 million, $375 million of cash, assuming no changes in the investment cadence. So it does feel like, Mike, for the next 6-plus months, we've got all the equity needed on hand or cash needed on hand. And from there, I think it's likely -- you'll likely see us look to the private placement market. We obviously were pretty active on the equity front and operate with a lower debt-to-equity mix of call it kind of low 20s. But just going forward, if you think back to our original base case, we had assumed 100% debt, and we retain that capacity depending on the best pricing at the time. So it's a long-winded circuitous way of saying TBD and when we get to next year, but we've got significant leverage capacity if for whatever reason we decide to go down that path.

And then what are you seeing today for acquisition pricing if we're looking at just one-off transactions versus buying a larger pool of comparable properties? I mean is there a significant portfolio premium or is it actually smaller here because of how intensive the product is?

I can start and just the rest of our pipeline, which is 100% spoken for, we've got $1 billion over the course of the year. Those are all one-offs, Mike. So when we're speaking about this low 6 cap rate, that is what we're referring to on an individual basis, and I'll defer to David on the portfolio.

Yes. I think, Mike, the portfolios we're talking about in this asset class tend to be not that large. In many cases, if we find an owner that has a number of properties, we might only want a portion of them. So I think, honestly, the portfolios that we have bought in the past were simply the sum of each individual asset's value. I don't think there's really a premium or a discount for the larger portfolio size.

We have reached the end of the Q&A session. I will now turn the call back to David Lukes, CEO, for closing remarks. David, please go ahead.

Thank you all for your time, and we look forward to speaking to you next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Curbline Properties Corp. First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Stephanie Ruys de Perez, Vice President of Capital Markets. Please go ahead.

Thank you. Good morning, and welcome to Curbline Properties First Quarter 2026 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty.

In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-property net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and welcome to Curbline Properties first quarter conference call. We had an incredibly productive and active start to the year as investment opportunities have remained elevated, leasing demand has remained strong, and we've tapped new markets, increasing our liquidity and access to capital. This activity is falling directly to the bottom line, leading to an increase in our OFFO guidance range. This is, of course, a result of dedication and hard work from our team, and I'd like to thank everyone at Curbline for their contributions that have positioned the company for outperformance. We continue to lead this unique capital-efficient sector with a clear first-mover advantage as the only public company exclusively focused on acquiring top-tier convenience retail assets across the United States.

I'll start with an overview of investment activity and shift to operational highlights before handing it off to Conor to walk through quarterly results, the 2026 guidance increase and the balance sheet in greater detail.

Beginning with investments. In the third quarter of 2025, we began to see an acceleration in acquisition opportunities that were consistent with the existing portfolio and our convenience thesis. This elevated level of activity has continued putting us in a position to raise our 2026 investment target to $850 million from $750 million. We believe the increase is primarily attributable to 4 factors, each of which are unique to Curbline. First, the convenience business is a fragmented but liquid local business with over 90% of transaction activity between private buyers and sellers. We recognized this when we started buying properties before the pandemic and have structured our investment, leasing and property management teams to be in the markets where we want to own properties. This has allowed the team to build personal relationships with the owners of the highest quality real estate and the brokers that dominate each individual market. For the marketed deals we acquired post spin-off, we've worked with 29 different brokerage companies, which highlights not only the fragmented structure of the market, but also the importance of the national network of relationships that Curbline has built.

Second, Curbline now has been publicly listed for roughly 18 months, has a proven track record of closing on convenience properties, and we believe owns the largest high-quality portfolio of convenience properties in the U.S., totaling over 5 million square feet. This reputation and scale, along with our access to capital and investment-grade rating is leading to more inbound calls from the aforementioned private owners and brokers that we received before we went public. This brand awareness assisted by local and regional market events has made Curbline the first call and the trusted buyer for high-quality convenience properties and is providing greater visibility and transparency on our deal flow. Specifically, of the $1.2 billion of assets acquired since our spin-off, 22% have been off-market, highlighting the growing importance of inbound calls from sellers.

Third, the convenience property type is very different than the grocery and power center business in terms of operations and management. As a result, we've taken the strong accounting, legal and IT infrastructure from our predecessor and layered down the findings from our over $1 billion of acquisitions to refine our investment approach and focus only on actionable deals that we think have a path to success and meet our return hurdles. With a finite number of hours in the day for our deal teams, this has allowed us to increase efficiency and productivity by avoiding deals with unworkable issues that simply aren't worth our time.

And fourth, according to the Federal Reserve, over 50% of nonresidential real estate in the country is privately held by individuals over 65 years old. It is becoming clear to us that these owners are seeking liquidity today more than ever, which is adding another potential multiyear tailwind to our deal flow. We are continuing to tailor our team and our network to tap into this growing opportunity set and believe it will lead to a steady pipeline of future deal flow. The net result of these 4 factors is an increase in opportunities that meet our criteria of primary corridors, strong demographics, high traffic counts and creditworthy tenants and importantly, are additive to our future growth rates. And it highlights the unique and significant addressable investment convenience market that provides an opportunity to scale the business.

Moving to operations. We've signed over 145,000 square feet of new leases and renewals this quarter. Trailing 12-month spreads remain consistent with our 5-year averages as the shortage of space in affluent markets where we operate continues to lead to attractive leasing economics. We invest in simple, flexible buildings that are at the nexus of consumer behavior. These straightforward rows of shops can support a wide variety of uses, and this flexibility drives tenant demand from an extremely wide pool of tenants. The result of our portfolio is a highly diversified tenant base with only 8 tenants contributing more than 1% of base rent and only 1 tenant more than 2%. All 62 of our new and renewal leases this quarter were with different tenants and 71% were national credit operators. Both of these data points highlight the incredibly deep market for leasing to a wide variety of credit users.

In terms of same-property growth, we generated almost 5% growth in the quarter, and our capital expenditures were just 6.3% of quarterly NOI, placing us among the most capital-efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class.

In summary, I could not be more optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience real estate sector in an effort to deliver compelling relative and absolute growth for stakeholders.

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

Thanks, David. I'll start with first quarter earnings and operating metrics before shifting to the company's revised 2026 guidance and then conclude with the balance sheet.

First quarter results were ahead of budget, largely due to higher NOI, driven in part by higher-than-forecast occupancy and resulting recoveries, along with lower G&A expenses. NOI was up 3% sequentially and over 50% year-over-year, driven by acquisitions, along with organic growth. Outside of the quarterly operational outperformance, there were no other material variances for the quarter, highlighting the simplicity of the Curbline income statement and business plan. You will note that in the first quarter, we recorded a gross up of $1.8 million of noncash G&A expense, which was offset by $1.8 million of noncash other income. This gross up, which is a product of the shared services agreement, and that's the 0 net income, will continue as long as the agreement is in place and is excluded from any G&A figures or targets.

In terms of operating metrics, the lease rate was up 30 basis points year-over-year to 96.3%, with occupancy up 60 basis points. Leasing volume in the first quarter accelerated from the fourth quarter, driven by an uptick in renewals, though quarterly volumes and figures remain volatile given the lack of available space in the portfolio and the company's denominator.

As David noted, we remain encouraged by the amount of activity and depth of demand for space. Same-property NOI was up 4.8% for the first quarter, driven by a 3.5% base rent growth and lower uncollectible revenue year-over-year. Importantly, this growth was generated by limited capital expenditures with first quarter CapEx as a percentage of NOI of 6.3% and trailing 12-month CapEx of 7.3% of NOI.

Moving to our outlook for 2026. We are increasing OFFO guidance to a range between $1.20 and $1.23 per share, which at the midpoint represents 14% growth. We believe that this level of growth will be the highest certainly in the retail space and amongst the highest in the entire REIT sector. Underpinning the midpoint of the range is: One, roughly $850 million of full year investments; two, a 3.25% return on cash with interest income declining over the course of the year as cash is invested; three, CapEx as a percentage of NOI of less than 10%; and four, G&A of roughly $32 million, which includes fees paid to SITE centers as part of the shared services agreement. Those fees totaled $1.1 million in the first quarter.

In terms of same-property NOI, we continue to forecast growth of 3% at the midpoint in 2026, which follows 3.3% in 2025 and 5.8% in 2024. As I have noted previously, the same property pool is growing but small, and it includes assets owned for at least 12 months as of December 31, 2025, resulting in a large non-same-property pool which we expect to grow at a similar rate to the same property pool over the course of the year. That said, in the second quarter, the timing of 2025 CapEx spending and a difficult uncollectible revenue comparison will act as an almost 300 basis point headwind to same-property NOI growth. As a result, we expect a meaningful deceleration in same-property growth in the second quarter before accelerating into year-end with second half base rent growth expected to average over 4%. For moving pieces between the first and the second quarter, interest expense is set to increase to about $8.5 million as a result of the funding of the private placement offering in late January. Additionally, noncash revenue is expected to decline sequentially by about $500,000 due to the write-off of below-market leases in the first quarter. And lastly, G&A is expected to remain roughly flat quarter-over-quarter.

Finally, included in the first quarter share count are just under 1 million shares related to the unsettled forward offerings completed to date. We expect dilution from the forward offerings to be an approximately $0.01 per share headwind to 2026 OFFO, which is included in our revised guidance. Additional details on 2026 guidance and the moving pieces that I just outlined can be found on Page 11 of the earnings slides.

Ending on the balance sheet, Curbline was spun off with a unique capital structure aligned with the company's business plan. In the first quarter, Curbline closed on the remaining of the previously announced $200 million private placement offering. Additionally, in the first quarter and the second quarter to date, the company sold 11.8 million shares on a forward basis with $296 million of expected gross proceeds, which we expect to settle in 2026, including cash on hand at quarter end of $306 million, along with total unsettled equity proceeds of $371 million, Curbline has over $700 million of immediate liquidity available to fund the remaining investments included in guidance after taking into account retained cash flow. Curbline now proven access to a variety of capital sources is a key differentiator from the largely private buyer universe acquiring convenience properties. The net result of the capital markets activities since formation is at the company ended the quarter with a leverage ratio of approximately 20%, providing substantial dry powder and liquidity to continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess the average.

And with that, I'll turn it back to David.

Thank you, Conor. Operator, we are now ready to take questions.

[Operator Instructions] Your first question comes from the line of Ronald Kamdem of [ Curbline Properties ].

Just 2 quick ones. Just starting with the acquisition guidance raise to $850 million. Maybe just a little bit more color. Is this still sort of pretty granular? Is there any sort of larger deals in that pipeline? And what are you anticipating in terms of the cap rates and IRR [ specs ]?

Yes, the pipeline at this point is exclusively individual properties. There's no portfolios of note. And I would say that generally, the deeper we get into these markets and the more deal makers we have in regions where we're looking to buy properties, the vast majority of the inventory remains to me individual properties.

On cap rate returns, no real change there from last quarter to the prior quarter, Ron, we're in the low 6s, which is an unlevered IRR in the 7% to 9% depending on the property.

Okay. Got it. That's helpful. And then just on the same-store NOI guidance. I appreciate the color on the decel in 2Q and then the next on to the end of the year. But as you sort of step back, maybe can you just give us some thoughts on just what you think the long-term sort of same-store growth for the portfolio is? Is that 3% plus number the right sort of way to go about it as the portfolio sort of scales?

Ron, again, it's Conor. We -- when we announced the spin-off put out a target of an average growth of 3% for 2024 to 2026. As I mentioned in my prepared remarks, we did 5.8% in 2024, we did 3.3% in 2025. So we're, I'd say, running a little bit ahead of that average number of 3%. And I feel like -- I think we've said this publicly, this is a 2.5% to 4% business in periods of time where there is a supply-demand imbalance, which we happen to be in right now, we're probably in the high end of that range, but that feels like a pretty good bogey for this portfolio over time.

Your next question comes from the line of Craig Mailman from Citi.

It doesn't seem to have impacted consumer spending so far, but just with things with Iran, as they continue to drag out you guys -- the portfolio is a little bit restaurant heavy here just given the nature of it. Just kind of curious what you guys have seen on foot traffic? And if there's been any changes so far? And just your thoughts if this drags out and oil does start to be sort of a drag on consumer spending going forward. Like how should we think about the cushion you guys have in coverages on some of these leases and maybe the appetite of some of these franchises to continue to grow if there's a little bit of pause in the economy?

Craig, it's David. I would say 2 comments on that. One is that foot traffic through geolocation data is very useful for us to figure out the desirability of a property. We use it a lot in acquisitions. We use it a lot to understand what types of tenants we can put in properties and how we can generate leads to make sure that our leasing stays relevant. It's not a great proxy that we use to find out tenant profitability because basket size is difficult to find. Specifically, the majority of our tenants don't hold inventory. They're service-oriented. And so I think we're real estate first, and we're more tenant second. By being real estate first, what that means is we like to own rows of small shops that are simple and ubiquitous, and therefore, the shape and the size of those units can be used by a wide variety of users. I do think that over time, we will always have an exposure to QSRs, the small format QSR business fits into a pretty small, simple rectangular building. That building can be used by lots of other types of tenants. And so avoiding the purpose-built sit-down restaurants is a key differentiator, I think, for this type of real estate. So I think when you're kind of talking about a general slowdown in the economy, I wouldn't really see us as being able to forecast whether that is happening or not, I think we're very squarely in the running Aaron's type of consumer behavior. So if you look at the types of tenants we're putting in our properties and we're buying into, they tend to be those tenants that drive a lot of traffic from running Aaron's. And I think that they're not luxury oriented and they're not destination trips. So I would say that the insulation for us is probably more to do with consumer behavior and a little bit less so on the economy.

Okay. That's helpful. And then just switching gears, maybe cap rates and IRRs and you guys have really ramped the volume here of deals you're doing, and I'm assuming that some competitors are trying to come into the space, and you guys are the first mover. Just kind of curious with the inbounds that you're getting, the 22% off market, what's the prospect of continuing to be able to kind of keep cap rates in that low 6 or maybe even get better deals as you guys can solve solutions for people looking for maybe some either surety of close or deadlines on close or tax issues as they're kind of selling some of these assets. Could you just talk about the difference in returns that you're getting on these off-market where you're getting the inbounds versus a fully marketed deal? And where the market is trending just given how much capital you guys have put out the door lately and some of the attention that might be coming into these assets?

Sure. Sure. Well, I mean, I'd say, first of all, there's definitely growing interest in the sector. I think most of that is simply because the financial returns are so heavily focused in cash flow. It's such a low CapEx business. I think that's desirable from a lot of institutions who can generate more of their IRR from cash flow and less on future appreciation. And so there has been growth in interest. We've heard a lot about institutions becoming intrigued by the property type. I think there's 2 things to note on that, though. One is that the market is so fragmented. It is actually quite difficult to put out large pools of capital in a short period of time. You really have to build relationships over a long period of time and be willing to close on a very large number of small transactions. So the granular nature makes it very difficult for someone to push a button and get into the sector. Secondly, if a competitor did want to get into the sector at scale, I think that they would most likely have to team up with a local operator. And when you add fees and carried interest on to that, it almost puts a floor on the going-in cap rate that an institution will be willing to pay to generate the same IRR that they require. And so I do think that has helped put a little bit of a floor on cap rates. I'd just remind you that the going-in cap rate for this asset class can be low 5s to high 6s. It's just that we're doing enough volume that we're blending to around 6. It feels fairly sticky. And part of the reason I feel sticky is that the market rent spread is still generating an unlevered IRR between 7% and 9%. And I don't really see that moving in the near term.

The next question comes from the line of Floris Van Dijkum of Ladenburg Thalmann.

Nice -- another nice quarter here. You guys are really proving your concepts. I wanted to question -- some people have referred to your business almost as a net lease business. You have 98% recovery ratio. Maybe talk a little bit about the management value add? And what are you bringing besides acquisitions, what are you bringing to the table?

Floris, It does have some characteristics that are similar to that lease, but I think the largest difference is that we're buying real estate first. And we're buying a real estate first because when we get a vacancy, we are more likely to release it at a higher spread, and therefore, it is growth. And the growth aspect of this business is very different than that lease. We enjoy a shorter WALT, we enjoy a mark-to-market that we can actually capture. And so I think the management value add is not so much in repositioning or redevelopment as much as it is making sure that the tenants are paying a rent that keeps up with market, and we're always aware of what another tenant will be willing to pay for that same nonpurpose-built simple building format. And I would say our leasing team is very, very aware that the number of deals we're doing is so wide with a wide variety of users. I mean it's pretty shocking that every single lease signed during the quarter was with a different tenant, and that's unusual for a destination type property where it tends to be concentrated on a handful or a dozen national operators. This is a very, very wide pool of leasing. So I think the management value add has everything to do with trying to figure out who can pay the most rent and who's willing to pay that rent to be along the kerb line of a very high-traffic intersection.

Maybe a follow-up question, if I may. Maybe talk a little bit about the difference between your GAAP cap rates and your cash GAAP rates. How much of a difference is there? And is that meaningful? Because presumably, the assets you're buying have quite a bit of below-market rents in place.

Floris, it's Conor. You are spot on. So our average differential between GAAP and cash, I think since we went public is about 35 basis points. That's a pretty wide range, similar to our cap rates where there's -- somewhere it's 0, and there's others where it's 100-plus basis points. So Again, average is kind of like that low 30s on the GAAP versus cash. All the numbers that we've referenced have always been cash. We don't quote or budget GAAP cap rates.

Your next question comes from the line of Thomas Todd of KeyBanc.

David, I just wanted to ask your comments about the ownership held by population that's 65-plus. You indicated you feel that's an important consideration as you think about the years ahead and the company's investment opportunity set. Do you see potential to transact using OP equity a little bit more as you look ahead? And then Also, what do you do to sort of better tapped into the segment of owners? Is the strategy generally consistent with your acquisition strategy currently? Or is there anything that you can do to more quickly or sort of more efficiently tap into that seller cohort?

Yes, it's a really interesting subject because I think over time, when we've looked at the profile of the sellers, it was so heavily tilted towards life events or life planning. And when you look at the ownership of this asset class across the country, and remember, we're a very, very small component of the overall addressable market. So it is an important aspect of what we need to understand is who are the sellers and why are they selling? Well, if they're live events, and if you think about the volume of assets owned across the country of a certain generation, I think we're getting growing confidence that the pipeline of available deals that fit our buy box is growing and will likely grow quite a bit in the next 10 to 15 years as that, that generation starts to move real estate out of their estates either before or after a life event. So to your point, we have definitely started to shift our deal teams to not only be building relationships with brokers, but also estate planning attorneys, wealth management offices, private banks because accessing the data and trying to find out who owns the best real estate in every one of these markets is really important because the likelihood that there's going to be a transaction in the next 10 years is pretty high.

Okay. That's helpful. And then I just wanted to follow up. Obviously, you increased the -- your acquisition guidance, but just curious, last quarter, you said you had visibility on around half of the pipeline that you were discussing. And I'm wondering how much visibility you have today on that increased pipeline? And are you seeing any changes at all in the market in terms of the pace or sort of motivation around seller activity just given some of the turbulence in the credit markets. Does that -- has that caused any sort of broader fallout at all that might put Curb in a little bit of a better position? Or is that not having an impact at all?

Todd, it's Conor. I'll start with the second part of your question, and David can cover things differently. I would say, in short, no. I mean it seems like this market generally is less correlated to the CMBS market, the IG market, whatever it might be. And that probably is a function of the fact that those markets aren't used to finance these assets. To David's point, it generally is private wealth or brokerage houses that are funding these and/or there is no mortgage. So the short answer on the second part of your question is, no, we haven't seen a material impact or change in deal flow because of geopolitical events or macro shocks. To the first question on the pipeline. So at this point, we have closed, we have under contract or have been awarded about 90% of that $850 million bogey. So we've got really good visibility on closings for, call it, the next 2 quarters. And then I would say there's a chance we exceed that figure for the full year. The only thing I'd flag though is that pipeline has some risk to it until we're through due diligence on all the assets. So to David's point, it doesn't include any portfolios of size. So that risk is mitigated by the number of properties, but we've got some more to get those closed. And again, we're optimistic based off what we're seeing that we can hopefully find more over the course of the year, but that's a TBD, and we need to work through the existing pipeline first.

Okay. Got it. That's helpful. Conor, you said closed under contract or awarded about 90% of the $850 million. Is that right?

Yes. So call it $750 million of the $850 million.

Your next question comes from the line of Alexander Goldfarb of Piper Sandler.

So actually, maybe just following up on that question, and maybe I missed it in the release, you guys were clearly very active on the ATM and cash with over, call it, roughly $600 million on hand. So Conor, as we think about the pacing of acquisitions for the balance of the year, is -- are you saying -- is 2Q going to be a real heavy quarter? I mean it doesn't seem like it's so far, we're already 1/3 of the way in. But I just want to understand the cadence just given the amount of cash that you have on hand versus clearly, what's a burgeoning acquisition environment.

Yes. So as I mentioned in my prepared remarks, Alex, we have enough cash and unsettled equity on hand to fund the entirety of the remaining $850 million, so call it the $700 million outstanding as of April 1. You're right to -- it's hard to assume those closings will be concentrated in the second and third quarter. There are obviously some that will spill in the fourth quarter, but we are expecting a pretty active middle of the year in terms of closing time line. So we don't expect the forward activity outstanding for a point past the end of the year, I would say.

Okay. And then the next question goes back to something that we discussed or talked to you guys about, I don't know, a few quarters ago. Your acquisition pool regionally is expensive. It's a lot of markets that may not be traditionally the prime REIT markets. But as you get into these different geographies, are you finding that there are either more opportunities within existing markets where you already are? Or are you finding that there are more opportunities in markets that you hadn't considered. I'm just trying to understand as you build these local relationships, whether it's leading you deeper into existing or whether it's leading to a broadening of markets that you originally never conceived of?

Alex, it's David. Well, I guess -- first of all, when I read your note this morning and you mentioned nooks and crannies. I think that was a very good way of putting it. It feels like markets where we've developed a lot of firsthand knowledge through buying and owning and operating, we're finding more intersections through our research that fit our buy box. And so we're really targeting some of those nooks and crannies within existing markets where the traffic count and the wealth and kind of the Aaron's running and the geolocation data is all telling us that we should be going deeper into a specific submarket. And you've seen that on our acquisition pipeline, where we continue to invest in markets where we already are in. On the other hand, there is a growing knowledge base that we're getting on other markets where it may not be a large MSA, but it has a pocket with a lot of concentrated traffic in wealth and a limited amount of supply, and that's a pretty encouraging algebra to good IRR. So when you see us go into some of these smaller markets, it's simply because there's a lack of supply and there's a kind of an extreme concentration of traffic into a couple of intersections. So whereas, I guess, in summary, it started with going deeper into existing markets and it's moving a little bit into being open-minded to finding other markets that have great properties to buy.

Your next question comes from the line of Mike Mueller with JPMorgan.

Kind of a quick follow-up on the prior question. So as it relates to some of these newer markets, are you seeing any kind of geographical biases when it comes to pricing or underwriting? Or is it really just based on whether it's a convenience center or not? I guess, are the cap rates that you're seeing in like Wisconsin and Minneapolis very different for a comparable product than you'd see in Georgia or Florida?

I think that the historical spread between submarkets still exist in this property type as well. I would say the irony is that I'm not sure that really flows through to the IRR as much as it has to do with -- there are simply more private buyers with more investable capital in areas like Florida and California. And so the competition is a little bit less in some of the other states. I think the trick for us is finding those pockets where we can generate a similar or better IRR, and we probably have a little bit less competition.

Your next question comes from the line of Paulina Rojas of Green Street.

The Whitestone transaction was an interesting data point for the sector and the portfolio shares some characteristics with your portfolio, mainly that is largely an anchored, but it also has a lot of meaningful differences. Do you see any relevant read-through from that deal for Curbline? Anything that you would flag as pertinent to your portfolio?

Yes, Paulina, it's a good question. I want to be careful about not opining on transaction. I would just say there are probably more differences than similarities in our view. And I think average asset size, some of the things you pointed out, market mix, whether or not there's a shadow anchor are pretty big differences versus what we're targeting. I would also just say to David's commentary, we are seeing plenty of real compelling individual transactions or one-off transactions in the markets we want to operate, and so we're focused focusing there. But I would just say at the risk of opining directly on transaction, there are more differences than there are similarities.

Okay. And then markets have been volatile and at various points, we have been a risk of attitude given the geopolitical concerns and what that could mean for inflation rate growth, et cetera. So as you think about that backdrop and what it means, where do you think Curbline sits in terms of vulnerability relative to other service center peers? And I mean that not just operationally, but in the context of your heavy growth-focused strategy.

What was the last part? Sorry, Paulina.

I said that I mean it, not just from operations, what that could mean for the operations of the business, same property NOI and such, but also from a capital markets perspective and the fact that you're in a very heavy growth focused cycle [indiscernible] cycle.

Paulina, it's Conor. I guess a couple of things. I would say our balance sheet and our relative balance sheet to us affords us a lot of cushion for whatever might happen in the macro environment or geopolitical environment to the genesis of your question, whether that's duration, whether that's leverage, whatever it might be. We also, I think, in putting the macro side, if you're in a growth vehicle, feel like you need to be prudently financing your business. And so avoiding a situation where you're trying to match fund or scramble to put financing in place, I think, is one of the ways to mitigate the risk that you're alluding to. From an operational perspective, I think this comes back to, I think, maybe Craig's question on consumer spending. Our service and restaurant-based tenants aren't destination type tenants. They're not sit-down restaurants, they are white tablecloth. I don't know if I would argue the're necessity or all necessity-based, but there is a margin of safety in terms of where they sit and kind of consumer behavior, as David mentioned, as opposed to consumer spending that I think also makes our cash flow stream a little durable.

The last thing I would just say from a tenant or diversification perspective, we do focus on credits. We're 70-plus percent national and a decent chunk of those are public or IG rated, which, again, with no tenant or only 8 tenants greater than 1%, also helps partially mitigate. So I don't know if I were directly answering your question, but it feels like we're trying to do a lot of little things in addition to having a business plan that helps mitigate against potential risk. But again, I'm not sure if that's directly answering your question.

And Paulina, it's David. You certainly tell us if we're answering directly. But I guess what piqued my interest is when you said risk off environment. To me, risk is very much correlated to the size of the bet that one makes and the concentration of where you're willing to concentrate capital. And this business is so granular. We're buying buildings that have a handful of small tenants. And so I think that the diversification aspect not only of the tenant roster, but also regionally and then lastly, by just the sheer amount of capital going into each deal is so small. It feels like a risk mitigator that probably is less correlated to kind of the red light, green light of the overall capital markets because these transactions are happening in local markets with local buyers, whether we're involved or not. And I feel like that diversification is a pretty big differentiator.

Sorry for not being clear, but somehow you got it. And maybe a last one, it's a clarification. I'm not sure I understand. You flagged a headwind for same property NOI related to the timing of bad debt and CapEx spending. Could you help me understand the mechanics of the CapEx component specifically. How does its timing translating to NOI headwind, whether it's really a space that was taken offline or something else?

No. So just over the course of the year, we have capital projects which are recoverable by tenants or a piece can be recovered by tenants. Generally, that's pretty spread out over the course of the year. It happened to be quite concentrated in 2025 and just the second quarter. And given our small denominator, Paulina, it happens to be just a big headwind for this 1 quarter. So similar to lifestyle centers, power centers, grocery, there are capital projects which are recoverable. And for us, again, we just had a concentration in the second quarter.

There are no further questions at this time. And with that, I will now turn the call back to David Lukes for closing remarks. Please go ahead.

Thank you all very much for joining our call, and we look forward to speaking to you in the next quarter.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.

Thank you for standing by, and welcome to the Curbline Properties Fourth Quarter 2025 Conference Call. [Operator Instructions]

I'd now like to turn the call over to Stephanie Ruys de Perez, Vice President of Capital Markets. You may begin.

Thank you. Good morning, and welcome to Curbline Properties Fourth Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty.

In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Forms 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-property net operating income. Descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and welcome to Curbline Properties' fourth quarter conference call. The fourth quarter capped an incredible first year as a public company for Curbline, and I couldn't be more pleased with our results.

Let me start by thanking the entire team for their tireless efforts to position the company for outperformance. We continue to lead in this unique capital-efficient sector with a clear first-mover advantage as the only public company exclusively focused on acquiring top-tier convenience retail assets across the United States. Before Conor walks through the quarterly results and our 2026 guidance in detail, I'd like to take a moment to reflect on our first year as a public company, along with our expectations going forward.

In 2025, we acquired just under $800 million of assets through a combination of individual acquisitions and portfolio deals. We signed over 400,000 square feet of new leases and renewals with new lease spreads averaging 20% and our renewal spreads just under 10%. We generated over 3% same-property growth on top of 5.8% growth the prior year. And importantly, our capital expenditures were just 7% of NOI, placing us among the most capital efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class. We believe that these results are not just reflective of a single year, but a representative of the asset class and the opportunities in front of us and help explain our confidence in delivering superior risk-adjusted returns.

Specifically, one, we believe that there remains a significant addressable investment market that provides an opportunity to scale this business. Two, we believe that the convenience sector with simple and flexible buildings is aligned with consumer behavior. And three, we believe that we have the team and the balance sheet to support our growth and drive compelling returns.

In a little more detail. First, our investment. We believe we currently own the largest high-quality portfolio of convenience properties in the U.S., totaling almost 5 million square feet. The total U.S. market for this asset class is 950 million square feet. 190x larger than our current footprint. Not all of that inventory meets our standards, but our criteria are clear. Primary corridors, strong demographics, high traffic counts and creditworthy tenants. And our track record demonstrates the liquidity of assets that match those metrics, allowing us to grow via a mixture of one-off deals and portfolios while maintaining our industry leadership by acquiring only the best real estate.

Even the top quartile of the convenience sector itself is 50x larger than our current portfolio, providing a very long runway to grow. To achieve this growth in a highly fragmented sector, the company must build a significant network of relationships with sellers and brokers across our target markets. We've built that organization over the past 7 years and the results are showing.

As an example, of the $1 billion of acquisitions we've completed since the spin-off of Curbline, 27% of those deals were direct and off-market with sellers and 73% were marketed through the brokerage community. Even within those marketed deals, there were 24 different brokerage companies involved in the listing of individual properties, which highlights not only the highly fractured market, but the importance of a national network of relationships that Curbline has built.

Second, we invest in simple, flexible buildings that are the nexus of consumer behavior. Our strategy is clear. Provide convenient access to customers running errands woven into their daily lives and leased to tenants with strong credit who are willing to pay top rent to access those customers. Unlike traditional shopping centers built for destination retailers, our properties serve customers running daily errands.

According to third-party geolocation data, 2/3 of our visitors stay less than 7 minutes on our properties, often returning multiple times a day. As a result, rather than purpose-built structures, we favor straightforward rows of shops that support a wide variety of uses. This flexibility drives tenant demand from an extremely wide pool of tenants, rising rents and minimal capital outlay.

On Page 13 of our supplemental, you'll notice that we completed a total of 67 new leases over the course of 2025. 64 of those leases were with unique tenants and 70% were national credit operators, both of which highlight the incredibly deep market for leasing to a wide variety of uses in our simple buildings and the credit tenants are seeking high traffic intersections. The result for our portfolio is a highly diversified tenant base, with only 9 tenants contributing more than 1% of base rent and only one tenant more than 2%.

Third, our team and our balance sheet are built to support our growth and structure to scale. Curbline has all of the pieces on hand to generate double-digit cash flow growth for a number of years to come. Based on our 2026 FFO guidance, we're forecasting 12% year-over-year FFO growth, which is well above the REIT sector average, and is driven not just by external growth, but by the capital efficiency of the business, allowing us to reinvest retained cash flow into additional investments.

In summary, I couldn't be more optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience marketplace and delivering compelling, relative and absolute growth for stakeholders.

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

Thanks, David. I'll start with fourth quarter earnings and operating metrics before shifting to the company's 2026 guidance and then concluding with the balance sheet.

Fourth quarter results were ahead of budget, largely due to higher than forecasted NOI, driven in part by rent commencement timing, along with higher acquisition volume and lease termination fees, partially offset by G&A. NOI was up 16% sequentially and almost 60% year-over-year, driven by acquisitions, along with organic growth. Outside of the quarterly operational outperformance, there are no other material variances for the quarter, highlighting the simplicity of the Curbline income statement and business plan.

You will note that in the fourth quarter, we recorded a gross up of $1 million of noncash G&A expense, which was offset by $1 million of noncash other income. This grows up, which is a function of the shared services agreement, and that's to zero net income will continue as long as the agreement is in place, and is excluded from any G&A figures or targets. In terms of other operating metrics, the lease rate was unchanged from the third quarter at 96.7% with occupancy up 20 basis points. Leasing volume in the fourth quarter decelerated from the third quarter, but that is simply a function of less available space as overall leasing activity remains elevated.

We remain encouraged by the depth of demand and the economics for available space, which we believe is a differentiator for Curbline as compared to other property types. Same property NOI was up 3.3% for the full year and 1.5% for the fourth quarter despite a 50 basis point headwind from uncollectible revenue. Importantly, this growth was generated by limited capital expenditures with fourth quarter CapEx as a percentage of NOI of 8.9% and full year CapEx as a percentage of NOI of just under 7%.

Moving to our outlook for 2026. We are introducing FFO guidance in a range between $1.17 and $1.21 per share, which at the midpoint, represents 12% growth. We believe that this level of growth will be the highest certainly in the retail space and amongst the highest in the entire REIT sector. Underpinning the midpoint of the range is, one, roughly $700 million of full year investments. Two, a 3.25% return on cash with interest income declining over the course of the year as cash is invested. Three, CapEx as a percentage of NOI of less than 10%, and four, G&A of roughly $32 million, which includes fees paid to SITE centers as part of the shared services agreement. Those fees totaled $970,000 in the fourth quarter.

In terms of same-property NOI, we are forecasting growth of 3% at the midpoint in 2026. As I have noted previously, the same property pool is growing but small. And it includes only assets owned for at least 12 months as of November -- December 31, 2025, resulting in a large non-same-property pool. That said, we don't expect as large of a gap in terms of relative growth between the two pools in 2026, though uncollectible revenue will remain a year-over-year headwind to the same property pool despite limited forecast bad debt activity.

For moving pieces between the fourth quarter of 2025 and the first quarter of 2026, as a result of the funding of the private placement offering in January, interest expense is set to increase to about $8 million in the first quarter Additionally, we do not expect the $1.3 million of lease termination fees recorded in the fourth quarter to reoccur in the first quarter. G&A is also expected to remain roughly flat quarter-over-quarter.

Details on 2026 guidance and expectations can be found on Page 11 of the earnings slides. Ending on the balance sheet, Curbline was spun off with a unique capital structure aligned with the company's business plan. In the fourth quarter, Curbline closed on the first tranche of a $200 million private placement offering with the balanced funding in January. The offering brings total debt capital raised since formation to $600 million, a weighted average rate of roughly 5%.

Additionally, in the fourth quarter and first quarter to date, the company sold 5.2 million shares on a forward basis with $120 million of expected gross proceeds which we expect to settle in 2026. Including cash on hand at year-end of $290 million, along with the debt and equity proceeds, Curbline had $582 million of immediate liquidity available to fund investments leaving a balance of less than $100 million to fund the investments included in guidance after taking account retained cash flow.

Curbline's proven access to unsecured fixed rate debt and now the ATM is a key differentiator from the largely private buyer universe acquiring convenience properties. The net result of the capital markets activity since formation is that the company ended the year with a leverage ratio of less than 20% providing substantial dry powder and liquidity to continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in access to the REIT average.

With that, I'll turn it back to David.

Thank you, Conor. Operator, we are now ready to take questions.

[Operator Instructions] Your first question today comes from the line of Ronald Kamdem from Morgan Stanley.

Can you talk about the acquisition pipeline how it's building. And I know you mentioned $700 million in the guidance. What sort of cap rate is assumed into that? And how has that been trending?

Ron, it's David. I'll let Conor talk about the pipeline. But I would say, cap rates have remained averaging just north of 6% as they have the last couple of quarters. I'll remind you, as we've said in previous quarters that the range can actually be quite wide between mid-5s to high. That really depends a lot on occupancy, the rent roll, mark-to-market and so forth. But when you blend all these deals together, we're still in the low 6s.

And Ron, just on the pipeline. So as you know, our initial expectations prior to the spin-off were to acquire about $500 million of assets on an annual basis. Obviously, we've ramped that up quite a bit to $700 million this year. And at this point, for what we've either closed under contract or have been awarded, it's about half or we have visibility about half of that pipeline today.

So there's quite a bit of visibility on closings for 2026 already. The only thing I would just caveat is there's risk to that, right, until we get through diligence on each of those assets. But again, I just would frame it versus either -- even a year ago, we have a much higher level of visibility on the pipeline today than we did at any point.

Great. My second question was just, I think the same-store NOI had a tough comp, and it looks like leasing spreads decelerated a little bit. Maybe can you -- just talk a little bit more about what happened in the quarter. And then looking forward on the 3% same-store NOI guidance, presumably, that's all sort of based on renewals and no occupancy gains, but any sort of other details what's baked into that in terms of bad debt and so forth?

Sure. It's Conor again, Ron. So on the leasing spreads first, as I always caveat, I encourage folks to look at trailing 12 months, just given how small denominator is. And if we look at the pipeline for leasing activity in the first quarter and the second quarter of this year, we would expect our new lease spreads to be right back in the low 20s, which was where they were for the full year. And I would say a similar comment on renewals, look at TTM as opposed to just one quarter.

For same property, similar response, very small pool. We've got 50% of the assets are in the non-same-store pool. So a couple of shops moving out can create some volatility. It's clear that if you look at our lease rate, it's up year-over-year, and it's effectively unchanged quarter-over-quarter. So the fewer spaces we got back in the fourth quarter, we have already leased, and we expect to rent commence in the second and third quarter for 2026.

The only other thing I would just say on 2026 same-property NOI, it's a pretty wide range for all the reasons I just laid out of 2% to 4%. We do expect a pretty big acceleration over the course of the year because of the leased occupied gap compressing. And again, that speaks to the fact that these are leases just signed over the last couple of months. It doesn't take a lot of -- it's a tighter time line than a larger format center to get those leases rent paying, which speaks to the property type, which is one of the reasons we love it.

And bad debt, sorry.

Yes, of course, sorry. Bad debt, we've got about a 60 basis point bogey for the midpoint of guidance for the year. To put that in contrast or compare it to 2025, we had about 30 basis points of bad debt in 2025 to the same-property pool. So we are expecting a normalization. We're not seeing anything that would cause us to expect year-over-year uptick, but it feels just a prudent base case for now, and we'll update that, obviously, course over the course of the year.

Your next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann.

My question is, maybe if you can talk a little bit about the operations. Your portfolio is big enough now where you've got some scale. Are you guys seeing any operating synergies by having multiple properties in single markets? I know you're big in Atlanta and Miami, for example. Maybe you talk a little bit about how -- if there's any additional synergies that you can squeeze out of having more assets in single markets.

Floris, thanks for the question. I would say that the synergies, I would put them in two buckets. One is G&A and the expense to run a property. And the second is the more you have in a certain market, the more it allows you to have a little bit of a tighter can pool. In both of those cases, there is some truth that scaling in certain markets does give you a little bit of leverage on both of those costs. But I will say that the recovery rate on this asset class is so high that it doesn't really flow through to same-store NOI or total property performance as much. So I would say that the synergies are nice to have, but they're not a must to have with how this property type operates.

Yes. It feels like the synergies are much more corporate focused in the sense that you're leveraging public company costs, and you're seeing that already as you look at just G&A as a percentage of GAV or G&A as a percentage of revenue.

Maybe my follow-up in terms of capital allocation. Have you considered going -- I guess maybe there hasn't been a need to, but going into more value-add assets with higher vacancies or -- are you sticking to your knitting because frankly, the market is telling you go ahead and keep acquiring.

It's a great question, Floris. I'll probably back up by saying that it is interesting to see in the entire unanchored strip category that there are different strategies that are emerging. Some folks focus on value-add, other folks focus on secondary markets, some people like short walls, no credit. I think you see that in other property types like student housing as a part of multifamily. There's lots of examples you can point to.

For us, if you think about where we are in the real estate cycle right now for retail, leasing demand is high, occupancy is high and rents are growing. And so when we look at our strategy of scaling convenience, I think the 3 risks that we really don't want to take are execution risk, credit risk and capital risk. And if you add those 3 together, it just tells you that the returns we can get on an unlevered IRR basis for buying high-quality real estate that's very well leased with high credit tenants. It doesn't feel worth the risk to take in order to generate slightly higher IRRs.

And so that strategy for us is allowing us to be very specific about which pieces of real estate we buy. And said differently, if you're buying high-quality real estate, that's most likely to outperform in a recession, that's probably a strategy that I think investors would want to see us pursue.

Your next question comes from the line of Craig Mailman from Citigroup.

I guess just the first one, on the $1.3 million of lease term fees, could you just talk about that? And just in general, kind of how much we should think about lease term fees in a given year, just given you guys have kind of smaller spaces and good credit at this point?

It's really hard to hear you. Can you try that one more time?

Sorry, can you hear me now?

It's marginally better. I think it was about term fees, Craig, and stop me if you wouldn't mind repeating the question now.

Yes. Just on term fees, could you just tell us what drove the $1.3 million in the quarter? And how we should think about kind of your lease term fees on a recurring basis, just given it's a little bit of a smaller portfolio and just in general, our sense is you guys have better credit, like was this driven by you guys? Or was this a tenant-driven move?

Craig, okay, I'll take a stab and just let me know if I answer the questions. So if you look at the last 2 years, we had just over $2 million in 2025 and just over $4 million in 2024. It does feel like -- and again, if you look back in 2023 from our SEC filings pre-spin-off, that there have been some quarters where we've had chunky term fees. Some of those have been on tenant driving the entirety of the fee.

Other times, they've been more fragmented. It does feel like it's a pretty -- I don't want to say a recurring part of the business because of how chunky they are. But it does -- we do expect there to be kind of a normal level of term fees over the course of any particular year. And I would expect that number to grow as the portfolio grows. To what's driving those, it could be a function of a number of different things.

One, a tenant just deciding a space or a market doesn't work for them. Others where they go dark and paying and we come to agreement. The best thing about it, though, is, to David's point, just given the economics of our business, more often than not, we wouldn't consider a term fee until it pays for the CapEx, the downtime.

And more often than not, we're actually making money when we get those spaces back. And then the only thing I'd add is unlike a larger format or purpose of building where we've got to tear that down or spend a year repurposing that space, we generally can get a tenant back in between 3 and 9 months.

So for us, we think of it as almost like gravy. But again, it's -- there's generally just a pretty wide range of reasons that drive them. It doesn't feel like it's one specific reason or one specific tenant that drives the boat. Let me know if I answered your question, though, again, just challenging to hear you.

No, that's helpful. Is this better? I switched microphones.

Yes.

Okay. Perfect. Sorry about that. But you did answer my question. I guess on the second question, just on -- kind of sources of capital, you guys are sitting on a good amount of cushion here. And net debt-to-EBITDA even without the forward is around 1x. Could you just talk about going forward, the thought process on incremental equity issuance versus kind of building out your ladder, becoming a more seasoned issuer or potentially setting yourself up to become a more seasoned issuer to lower your cost of debt here?

And just the decision to use the forward, I guess, versus spot, that's -- it's always good in hindsight, but the stock is close to 8%, 9% higher than where you guys issued the forward earlier this quarter. So just thoughts in general on that. I know you guys are issuing at least above my EV, so it's hard to complain, but it feels like speculating on the stock here, you left a little bit on the table.

Sure, Craig. A lot there to unpack. So I would just say, starting with liquidity on hand. We have about $580 million of cash and unsettled equity versus our target of $700 million of investment. So to my comments from the transcript or from the opening remarks, excuse me, we only have about $100 million funding gap for the remainder of the year, which is pretty insignificant when we think about the enterprise value and the fact that we've got an undrawn line of credit behind that.

So the question is, how do we think about sources and uses to kind of fill that gap? To your point, we now are a seasoned private placement issuer. We've got access to the bank market. We have a 0% secured debt ratio, and we now have access on the AGM. It's a pretty wide range or pretty broad menu we now have of options as we think through. And I would just tell you, the way we think about it is consistent with the way we thought about it at SITE Centers and the way we thought about it last year plus, where if equity at one point in time was accretive to the business plan, we would consider it.

But we also like, to your point, to start to build up a market and build up a nice ladder on the private placement market, which we're already seeing a compression in spreads as we continue to tap that market. So I would just tell you, it's a really wide range of menus of options, which is a fantastic spot to be. And over the course of the year, we'll decide what's the best path. But we just have, I would just say, dramatic optionality just given where we are from a leverage perspective, which is fantastic.

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

I wanted to go back to acquisitions and some of the comments that you made about having visibility on around half of the $700 million factored into guidance. Are these all single-off deals? Or are you seeing any portfolios included in the pipeline? And then, is there a limit on the amount of volume that you can do in any given year? Are there any constraints either around your appetite or the amount that you might be able to achieve in terms of acquisitions?

Todd, it's David. I would say that the -- the first part of your question is that to date, our pipeline is almost exclusively -- actually is exclusively single asset acquisitions. So I would say this is the one at a time baseline.

And I think, as you know, when we went public, we did have a question mark as to how much of our deal flow is going to be portfolios versus individual assets. I think what we found is the more of our G&A that we've allocated towards the transaction side of the business and the more people we've been able to move into the field and build relationships, the more deal flow has come to us. And I would say every quarter that goes by, we're starting to see more inventory that fits our criteria as opposed to simply sifting through all of the inventory that's on the market. It is a very, very large asset class.

And the addressable market for us even if you look at the top quartile, it's still a significant amount of deal volume. So I would say our confidence that we can achieve a baseline of our budget, simply doing one-off deals is pretty high. If portfolios do come up, I think it's great. I would say that so far, portfolios have been episodic as opposed to kind of a normal quarterly run rate. And given the fact that there's so much inventory on the one-offs that fit all of our filters in terms of quality, I think we're less aggressive with having the stretch for portfolios that might have assets in them that we don't want. So I think that probably answers your question.

But our confidence is really high that the individual brokerage community and the sellers are starting to approach us with deals that we really find attractive.

Okay. That's helpful. And then I wanted to just ask, it looked like there was perhaps a disposition in the quarter, perhaps something small. Just curious if you can discuss that. And it seems like there would not be really much in the way of dispositions just given your sort of designing and constructing the portfolio from scratch in some sense, but any sort of dispositions or kind of asset management sort of associated activity that you're sort of anticipating in '26?

Yes, Tom, it's David again. As we've said prior, one of the benefits of building a portfolio one at a time is that you don't really have a need to recycle. We don't have in our budget any dispositions planned. Our business plan is not about recycling. We're purely based on buying things that we want to own over the long term. Every now and then from an asset management perspective, something might come up where it simply is better to sell it. In particular, the asset this last quarter, which was very small, happened to be adjacent to a property that SITE centers owned.

They offered us a price to buy that asset that we thought was attractive because the cost to change out a tenant and do some work on it with such that we felt it was better to exit and sell to SITE centers. SITE centers on the other hand, felt like they got more liquidity from owning an adjacent parcel with the property that they're trying to sell. Again, it was quite small. It went to both boards for approval, which are separate boards, as you know, but I don't expect this to be a recurring issue.

Todd, just to expand on that, it was a vacant piece of land. So to David's point, it was sub-$2 million. And there's nothing into the 2026 budget for further dispositions

Your next question comes from the line of Hong Zhang from JPMorgan.

I guess I was wondering if you could talk a little bit about your expectations for the cadence of lease commencements this year.

Sure, Hong. I guess I would respond by kind of giving the framework of same-property NOI because they should go hand in hand. We do expect an acceleration in the first quarter from the fourth quarter on same property and then a modest deceleration in the second quarter, which is a comp on uncollectible revenue and just on some CapEx recovery items.

And then to my response, I think it was to Floris earlier, we do expect a pretty big pickup in the back half of the year from commencements of the spaces recapture in the fourth quarter. So I would expect that gap to compress on the same property to accelerate in the third and the fourth quarter.

Your next question comes from the line of Alexander Goldfarb from Piper Sandler.

So just following up on the capital question. David, you've been speaking for some time about the growth profile, the double-digit growth profile over a number of years. Your acquisition pace has been tremendous. And as Conor pointed out, there's no slowdown in deal flow.

Does your like trajectory as you think about debt normalization, has that accelerated, meaning that instead previously, if you thought -- I think maybe you had 5 years of runway before you get to debt normalization, maybe that sooner, in which case that double-digit growth profile that you guys outlined may actually truncate or the way you see it, you still are fine for the next -- I think you talked about 5 years where you can grow sort of in this double-digit way without capital events slowing that down?

Alex, it's David. I can turn it over to Conor for the long-term business plan, but I think the short story is accurate. And that when we went public, we had a 5-year business plan, and we had a $500 million a year guidance what we thought we could do in the first year, and we obviously exceeded that last year, and I think our budget for this year is certainly higher as well. So I think by definition, that 5-year business plan has compressed.

On the other hand, I feel like the addressable market has also revealed itself to be surprisingly strong. And I think our reliance on portfolio deals has certainly gone down in our own minds. So the confidence that, that cadence will continue is equally as high, but there's no question that the business plan has been pulled forward a little bit.

Yes, Alex, just expanding on that. I would say the 2 other significant variances would be, one, we've outperformed dramatically on operations versus our initial expectations. That obviously has driven a higher level of EBITDA, more retained cash flow, which extends the time line.

To David's point, we bought more quickly, which compresses it. And then the second thing is we've already issued some equity. And just given how small our denominator is, that equity issuance expands the pipeline. So whether the 5-year business plan is now 4.5% or 4.25%, I'm not sure. But there are other factors that have limited our near-term needs for equity. And again, we just have so much optionality with the balance sheet, that runway is still pretty long today.

Okay. And then the second question, Conor. It seems like SITE is -- could well end up coming to an end, I guess, this year. Just that's our math. I don't want to put words in their company's face or name. But your '26 guidance, does that contemplate sort of a complete wind-down separation payment settlement, whatever, resolution from SITE? Or if something happens there, there would be some update to your guidance?

Yes, it's a good question, Alex. So we have assumed the status quo and guidance with no changes to the shared service agreement in 2026. Now as you know, though, if it's terminated by SITE on the 2-year anniversary, which will be October 1, 2026, there would be a pretty significant fee paid by SITE to Curb, which would more than offset, in our view, any expenses associated with the transition. So it would be a good guy of sorts if it did occur in 2026. Given that, to your point, it's a decision by the independent Board of SITE and Curb to terminate it, we didn't feel it's appropriate to put in our budget, but it would be a good guy in any scenario.

Okay. And just if I could just follow up that. I know you're not giving '27 guidance, but as we think about our '27, is there something that you would tell us to think about as we model '27 or you would just say, "Hey, leave everything status quo right now and we'll deal with that a year from now in the February call?

It would be the latter, in my opinion.

Your next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann.

A quick follow-up question if you don't mind. I was just -- the sites prompted something about your G&A. And maybe if you can talk a little bit about what you think your G&A is going to be on a going-forward basis once the agreement is settled down and what needs to happen internally to make sure you're properly aligned?

Sure, Floris, it's Conor. So we mentioned prior to the spin-off that we felt that Curb could be as, if not more efficient than SITE as it relates to G&A as a percentage of GMV, which is how we look at expenses. That was about 1.1% or 1% of GAV.

To Alex's question from a moment ago, what are some factors or things that have changed? And I would just tell you, one is operational outperformance. Two, we realized we could run this business more efficiently. And so as I mentioned in my prepared remarks, we're paying about $1 million per quarter to SITE.

Effectively, what we've said to folks is that fee would essentially just be replaced by the cost that would come over from SITE once that agreement is terminated. So it's a long inelegant way of saying, we feel like we've got great visibility. We spent an inordinate amount of time on the expense structure of Curb.

And I would just tell you, if we look back versus 2 years ago, it is extremely -- it's more efficient. Our expectation is it will be more efficient today than it was pre-spin-off. Other than that, to Alex's point, once we have clarity on the exact timing of the resolution and termination of the SSA, we'll provide the specifics. But I would just tell you, we expect to run really efficiently pro forma for the termination.

So -- but 1% to 1.5% of GAV is sort of a good benchmark?

No. What I said was 1% to 1.1% of GAV. And what we're saying is Curb, we expect to be more efficient than that. That was just after we deployed the $2.5 billion initial business plan. Once you get through that, then you really start to scale the expense coming back to your first question from the start of the call, then you really start to scale the corporate expenses, and that's where you start to generate pretty significant EBITDA growth.

We have reached the end of our question-and-answer session. I will now turn the call back over to David Lukes for closing remarks.

Thank you all very much for joining our call, and we look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Curbline Properties Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Stephanie Ruys Perez, Vice President of Capital Markets. You may begin.

Thank you. Good morning, and welcome to Curbline Properties Third Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.

Additional information may be found in our earnings press release and in our filings with the SEC, including our most recent reports on Forms 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-property net operating income. Descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning, and welcome to Curbline Properties third quarter conference call. Let me begin by expressing my gratitude to the entire Curb team, not only for delivering another strong quarter but also for marking our 1-year anniversary as the only public company exclusively focused on acquiring top-tier convenience retail assets across the United States. We continue to lead this unique capital-efficient sector with a clear first-mover advantage. Before Conor walks through the quarterly results, I'd like to take a moment to reflect on what we've accomplished in our first 4 quarters since the spin-off of Curbline Properties. We've acquired $850 million in assets through a combination of individual acquisitions and portfolio deals. We signed nearly 400,000 square feet of new leases and renewals with new lease spreads averaging over 20% and our renewal spreads just under 10%. Importantly, our capital expenditures have averaged just 6% of NOI, placing us among the most capital efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class.

It's hard to overstate the strength of this business model, but 3 key attributes help explain why we're confident in our ability to deliver superior risk-adjusted returns. First, our investments align with real consumer behavior. Unlike traditional shopping centers built for destination retailers, our properties serve customers running daily errands. According to third-party geolocation data, 2/3 of our visitors stay less than 7 minutes on our properties, often returning multiple times a day. These properties serve large and elongated trade areas along major traffic corridors, not just local neighborhoods. In fact, 88% of our customers live more than a mile away and nearly half live more than 5 miles away. This is not a local business. That's why 70% of our tenants are national chains, eager to capture a share of the 40,000 cars that pass by our properties daily. In high-income markets, supply is limited and tenants are willing to pay a premium for access to this valuable traffic.

Second, we invest in simple, flexible buildings. Rather than purpose-built structures, we favor straightforward rows of shops that support a wide variety of uses. This flexibility drives strong tenant demand, rising rents and minimal capital outlay. We don't do loss leader deals, we don't overinvest in tenant improvements, and we don't rely on one tenant to drive traffic to another. Our strategy is clear: provide convenient access to customers running errands woven into their daily lives and leased to tenants with strong credit who are willing to pay top rent to access those customers. The result is a highly diversified tenant base, with only 9 tenants contributing more than 1% of base rent and only 1 tenant more than 2%. Strong tenants drive strong sales which leads to high retention and rent growth with little or no landlord investment. This is the essence of capital efficiency and a key driver of our growing free cash flow.

Third, our balance sheet is built to support our growth. We believe we currently own the largest high-quality portfolio on convenience centers in the United States, totaling 4.5 million square feet. The total U.S. market for this asset class is 950 million square feet, 190x larger than our current footprint. While not all of that inventory meets our standards, but our criteria are clear, primary corridors, strong demographics, high traffic counts and creditworthy tenants. Under John Cattonar's leadership, our investment team is underwriting hundreds of opportunities each month. We have the luxury of choice, the discipline to grow 1 asset at a time and the responsibility to maintain our leadership by acquiring only the best. Even in the top quartile of the convenience sector, it's 50x larger than our current portfolio and we've structured our team, our balance sheet and our operations to scale.

Curbline has all of the pieces on hand to generate double-digit free cash flow growth for a number of years to come. And based on our implied fourth quarter 2025 OFFO guidance, we're forecasting 20% year-over-year FFO growth, which is well above the REIT sector average.

In summary, Curbline has quickly built a track record that highlights the depth and liquidity of the convenience asset class. Our original 2025 guidance range included $500 million of convenience acquisitions. We've obviously significantly exceeded that pace and now expect 2025 investment activity of around $750 million, with potential for additional upside. I couldn't be more optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience marketplace and delivering compelling relative and absolute growth for stakeholders.

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

Thanks, David. I'll start with third quarter earnings and operating metrics before shifting to the company's 2025 guidance raise and then concluding with the balance sheet.

Third quarter results were ahead of budget, largely due to higher than forecast NOI driven in part by rent commencement timing along with acquisition volume. NOI was up 17% sequentially, driven by organic growth, along with acquisitions. Outside of the quarterly operational outperformance and some upside from lower G&A. There are no other material callouts for the quarter, highlighting the simplicity of the Curbline income statement and business plan. In terms of operating metrics, leasing volume in the third quarter hit record levels even after adjusting for the growth in the portfolio. Overall leasing activity remains elevated and we remain encouraged by the depth of demand for space, which we expect to translate into full year 2025 spreads consistent with 2024. In terms of the lease rate, the strong aforementioned volumes resulted in a 60 basis point increase sequentially to 96.7%, which is among the highest in the retail REIT sector regardless of format.

To put some context around that, in February of this year, we acquired a 6-property 211,000 square foot portfolio for $86 million. Since acquisition, just 7 months ago, in that subset of properties alone, we signed 28,000 square feet of new and renewal leases, taking the lease rate up to over 96% from 94% at the time of acquisition. This leasing velocity speaks to the level of demand for high-quality convenience properties and the speed at which leasing can occur given the simple format of the property type. Same-property NOI was up 3.7% year-to-date and 2.6% for the third quarter despite a 40 basis point headwind from uncollectible revenue. Importantly, this growth was generated by limited capital expenditures with third quarter CapEx as a percentage of NOI of just under 7% and year-to-date CapEx as a percentage of NOI of just over 6%. For the full year, we continue to expect CapEx as a percentage of NOI to remain below 10%.

Moving to our outlook for 2025. We are raising OFFO guidance to a range between $1.04 and $1.05 per share. The increase is driven by better-than-projected operations, along with the pacing and visibility on acquisitions that David mentioned. Underpinning the midpoint of the range is, #1, approximately $750 million of full year investments with fourth quarter investments funded with cash on hand. Number two, a 3.75% return on cash with interest income declining over the course of the quarter as cash is invested. And #3, G&A of roughly $31 million which includes fees paid to SITE Centers as part of the shared service agreement. You will note that in the third quarter, we recorded a gross up of $731,000 of noncash G&A expense which was offset by $731,000 of noncash other income. This gross up, which is a function of the shared services agreement and that's to 0 net income will continue as long as the agreement is in place and is excluded from the aforementioned G&A target.

In terms of same-property NOI, we are now forecasting growth of approximately 3.25% at the midpoint in 2025, but there are a few important things to call out. Similar to our leasing spreads, the same property pool is growing but small and is comping off of 2024s outperformance. And it includes only assets owned for at least 12 months as of December 31, 2024, resulting in a larger non-same-property pool that is growing at a faster rate on an annual basis driven by an expected increase in occupancy. Additionally, uncollectible revenue was a source of income in both the third and the fourth quarter of 2024. As a result, uncollectible revenue will remain a year-over-year headwind particularly in the fourth quarter despite limited year-to-date bad debt activity and very strong operations.

For moving pieces between the third and the fourth quarter as a result of the funding of the private placement offering in September, interest expense is set to increase to about $6 million in the fourth quarter. Interest income is forecast to decline to about $3 million, and G&A is expected to increase to just over $8 million. Additional details on 2025 guidance and expectations can be found on Page 11 of the earnings slides.

Ending on the balance sheet, Curbline was spun off as a unique capital structure aligned with the company's business plan. In the third quarter, Curbline closed a $150 million term loan and funded a previously announced $150 million private placement bond offering, bringing total debt capital raised since formation to $400 million at a weighted average rate of 5%. Additionally, the company expects to fund an additional $200 million of private placement proceeds on or around year-end at a blended 5.25% rate. Curbline's now proven access to unsecured fixed rate debt is a key differentiator from the largely private buyer universe acquiring convenience properties.

The net result of the capital markets activities information is that the company is expected to end the year with over $250 million of cash on hand and a net debt-to-EBITDA ratio less than 1x, providing substantial dry powder and liquidity to continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess of the REIT average.

With that, I'll turn it back to David.

Thank you, Conor. Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Craig Mailman with Citi.

It's actually Nick Joseph here with Craig. Maybe just starting on kind of your last point, Conor. Obviously, the balance sheet is in a very good position, but you did institute the ATM program or put one in place. So how are you thinking about equity from here, recognizing the balance sheet is in a good spot, but just given where the stock trades at least relative to NAV and where you're seeing acquisition cap rates?

Sure, Nick. So to your point, we put in an ATM on October 1. We also put in a share buyback on October 1. And if you recall from our press release, we simply stated that like all other public companies, we should have all the tools available to us at our disposal for equity at the risk of sounding like a broken record, for us, we look at the source and the use. And so if we had a use of capital that we thought was accretive to fund with equity, we would consider it similar to other public REITs. But outside of that, we're sitting on a significant liquidity position. We've got pretty significant embedded growth. There's a high bar there. So again, to repeat my point, we look at the source and the use at this point. We haven't issued anything to date, but that could be -- that could change depending on what we see from an investment perspective.

And then what's the stabilized yield on the recent lease-up acquisitions? And how does that compare to the in-place cap rates at acquisition?

Nick, I would say that our acquisitions this quarter, the going-in cap rate was a bit higher than last quarter. I would say, if you look at over the course of the year, we're still blending to the low 6s, which is a pretty good reflection of where the top quartile of the sector is trading. The stabilized yield, if you look out a couple of years, it's really dependent upon market rents, which appear to be continuing to grow. And you can see that in our spreads. So I hate to even put a number on what I think stabilized looks like in the next 2 to 3 years, but it sort of feels like the indications are that mark-to-markets are growing.

And your next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

I just wanted to talk about the acquisition activity in the pipeline heading into '26. You talked about $750 million for the year. That's up from around $500 million. So an incremental $100 million or so here in the fourth quarter. How should we think about the pipeline beyond 4Q, how the pace of acquisitions may trend into '26 and whether you're seeing more product come to market as the company continues to be active in the space?

Todd, it's David. The amount of inventory we're underwriting is definitely increasing every quarter. I think John's team has built relationships nationwide where we're starting to see things that we might not have seen in the past. I would say we're being highly selective on exactly what we want to transact with and what we don't. And if you think about the prepared remarks, I know you said the guidance was originally $500 million so far year-to-date, we're at $644 million, and we would expect that the full year is around $750 million, but there's potential for upside on that. And I think the pipeline going forward is really going to be more of a result of not only increased visibility and deal flow, but also the episodic nature of some of the portfolio deals that we've done. They're harder to project. They are out there, and we're building the relationships so that we feel like we're going to have the ability to take a peek at those when they come to market.

Okay. So it sounds like maybe around $500 million is kind of the right target to think about on sort of a recurring basis. And then when you layer in some larger transactions, perhaps that could be kind of the needle mover moving forward?

I don't think that's what I was implying. What I said is we feel confident that 2025 is going to be $750 million with potential for upside, and we'll see what happens next year, but we're pretty confident that we're seeing an awful lot of inventory that we like.

Yes. And Todd, to David's point, I mean, I think we've kind of built a machine now where we've got visibility on the fourth quarter and the first quarter of next year. And to David's point, it's -- our visibility is a lot higher than where it was when we set our initial bogey. So once we get to 2026 and talk about guidance, we'll provide more of a framework around how we should think about investment volume. But to David's point, I mean, we kind of have visibility now on the next call it, 5 or 6 months, which is a very different perspective than we had at the time to spin-off.

Okay. And then as we think about '26 and sort of the growth algorithm for the same-store, which I realize is rapidly changing. You have blended leasing spreads have been in the low double-digit cash spread range. Can you just remind us what the portfolios blended annual escalator looks like? And then are there any other sort of considerations that we should think about moving forward?

No, it's a good question, Todd. And to kind of the genesis of the question, there is a significant pool change from 2025 to 2026. The good news is the net result is, to David's point, we're buying assets that have very similar characteristics. So there's no material differentiator in terms of structural growth or bumps between the 2025 pool and 2026. If you recall, at the time of spin-off, we said we felt our 2024, 2025, 2026 growth at average north of 3%. And you think about 2024 was 5.8%. 2025, our midpoint of our range is 3.25%, which imply that we would have pretty steady growth over the course of 2026 comparable to 2025. So there's no material considerations to your point on the growth algorithm. This is a really simple company with a really simple income statement. There's nothing for us to call out. There will be headwinds to next year, redevelopment opportunities, though headwinds, nothing like that.

So I don't want to make it sound formulaic. There's obviously a lot of work to get there, to your point in terms of leasing and volume, et cetera. But it should be a growth level that's pretty steady on an occupancy neutral basis compared to any portfolio we're looking at in terms of same-store pools. Let me hope I answer your question there.

Your next question comes from the line of Ronald Kamdem with Morgan Stanley.

I just want to go back to sort of the cap rate conversation. Obviously, you guys are thinking about IRRs here which I appreciate that. But maybe if you could just double click, I think you said low 6s. Just wondering sort of what are the ranges of those and any difference between sort of larger deal and portfolio deals. And more importantly, as you're sort of a year in and more people are finding out about this business, how should we be thinking about the potential for cap rate compression as you're thinking about the next 12, 24, 36 months?

Ron, it's David. I mean, cap rates, as you are aware and you alluded to, we underwrite for IRR, but of course, the result is a going-in cap rate. When the assets are quite small, the cap rate on year 1 can be pretty wildly different most importantly, if there's a vacancy. One of the things we noted last quarter was we had some assets that we bought that had 1 or 2 vacant units, but in a small format strip center, that means that the cap rate can be quite low to make up for that vacant space and the growth opportunity. On the other hand, there could be fully stabilized assets with strong credit that has a little bit less growth opportunity, but it's also a stable growing asset with not a lot of CapEx. So the net result is the cap rate range can be quite wide in this sector. I mean it can be low 5s to high 6s, even for the top quartile. If you're buying assets with worse demographics, pretty low traffic counts and kind of tertiary markets, you could end up closer to a 7%.

But those aren't the assets that we've been interested in. And that's why I've kind of averaged it down to say that we're blending to a low 6%, but I'd say there could be a 100 basis point swing on 1 asset to the next just given the fundamentals of that rent roll.

Yes. To David's prepared remarks, Ron, so we were just over 6% in the third quarter to David's comments on buying some vacancy. Our fourth quarter blended to 6.25%. So again, that's pretty consistent we've been buying over the course of the year to David's point, vacancy could swing that 20 basis points on a blended basis, but it's been pretty steady. To your point on where they could go. I mean, it feels like that's a macro question as opposed to a sector question. There's a lot of interest in retail in general. I don't think that's unique to convenience assets. But I think it's going to be much more dependent on rates more than anything.

Great. I think that's really helpful. And just going back to the same-store conversation. Look, occupancy has been building this year. So presumably, that's a tailwind for next year. But when you sort of look at the lease rate, where do you guys sort of think is the structural sort of cap that you can sort of get on that?

Ron, it's a really good question. So if you look for the total portfolio, we're at 96.7%, the same property pool is 97.1%. It feels like low 97s is probably the peak here. It doesn't mean there's not occupancy upside, though, because we've got a little bit wider lease occupied spread than we historically had run out over the last, call it, 7, 8 years that we've been tracking this for the portfolio. But David, I don't know if you feel differently. It feels like a couple of hundred basis points of structural vacancy is probably the right spread, and that's just churn of a tenant moving out and the time line to put someone back in.

Yes. I think the only thing I would add to that is that the SNO pipeline and the amount of occupancy upside, you would typically see in a retail portfolio kind of gives the high watermark for growth. The difference with the portfolio where we're specifically buying a shorter WALT with a higher mark-to-market means that most of our growth going forward is going to come through renewals, not necessarily through occupancy.

Your next question comes from the line of Alexander Goldfarb with Piper Sandler.

So 2 questions. I guess, David, let me just go to that comment that you just made about the types of centers you're going for. Increasingly, it seems that just given the dearth of product, people are sort of eager to buy credit or vacancy issues to be able to get at availability to put tenants in. As you guys look at your target convenience centers in the deal flow, are you seeing a lot of opportunities where there is some potential credit or vacancy issues that would allow you to really drive rent increases by taking out a less productive tenant replacing it or convenience centers aren't really -- don't really offer that same potential that you've seen in a normal open-air shopping center.

Alex, there's always going to be opportunities to upgrade credit. But I will say that in a larger format retail environment, you might be especially proactive because the benefits of upgrading tenant also have a strong traffic driver and you need that traffic driver to feed your other tenants. What's unique about this business is that there's really not much crossover traffic between the even adjacent tenants. The tenants are leasing space because they want to be near the customers on their errand runnings. So our desire to re-tenant buildings is pretty low. What's most important is that we have tenants that are able to generate enough profit to afford the rents that we want to charge. So I would say we're not going to be very aggressive on retrofitting and merchandising properties. What we are going to be aggressive on is raising rents at renewals. And that's part of the reason why I like the convenience center because you tend to have leases that don't have nearly as many options as a larger format tenant, so we can actually get to the market rents, which are continuing to grow.

Okay. And then the second question is you talk a lot about sort of the consistency of your earnings growth. And obviously, you're doing that with the balance sheet the way you're mutually funding using debt and cash. But as we think about the spreads to your implied cap rate, is it your view that you will always maintain a positive spread in order to be able to drive the sort of double-digit earnings growth that you aspire to? Or your view is that you could buy inside of your implied cap rate, but through rent outgrow and have that asset be accretive?

Alex, it's Conor. I'm going to attempt to answer and let me know if I address this. Our view, our kind of business plan, when we complete the spin-off was to invest over a 5-year period, it's $0.5 billion per year, and that led to double-digit growth, and that required no additional equity. If equity over the course of that 5-year plan was accretive, we would consider it, and that would extend that time line or add to that growth profile. Our view in terms of how we structure that growth algorithm to Todd's point was to say that we could buy at a call it, 100 basis point debt spread over the course of that 5-year period, which is consistent with the last 30 years and kind of the debt spread for high-quality assets. If that spread compressed, it obviously would impact that, but there's other levers we have to pull. And one of the unique and exciting things to David's point to Ron's question was, we can generate pretty compelling occupancy-neutral same-property growth and generate significant free cash flow relative to the enterprise.

Those 2 pieces are pretty powerful growth drivers that lead us to, in our view, have the ability to generate better than average versus peers or the REIT sector occupancy neutral growth or leverage neutral growth kind of the genesis of your question. So if spreads compressed, it could impact things, obviously, in terms of relative growth, but we have some other levers that help. The last piece is on G&A, we are still scaling our G&A load over the back half of the 5-year business plan, we start to scale that G&A load, which is pretty impactful as well. So it's a really complicated question. Let me know if I'm addressing it, but there's a lot of levers we have to pull. But there's no doubt that investment spread is impactful to us as it is to other companies that are extremely growing.

But ultimately, Conor, what I hear you saying is your focus is on FFO growth, not same-store. The focus is on delivering double-digit FFO. Okay. Just want to make sure.

Yes, for sure. I mean look, I mean, they should be correlated and our same-property growth, remember, our whole pool is in there. There's no redevelopment pipeline. There's nothing an ebb or flow to growth. So of course, it's important to us, it's important to David's point, for us to express how powerful the organic growth profile is. But for the majority of the business plan, what drives the most -- the biggest proportion of FFO growth is external growth and scaling our expense load. So we're focused on it. It's important to us. But until we are a couple of years in this business plan, it is we're less reliant on organic growth.

Your next question comes from the line of Floris Van Dijkum with Ladenburg.

Question on your options. I can't actually see what percentage of your leasing activity this past quarter was option renewals and what is that typically? And how do you think about that going forward in terms of limiting that ability for your tenants?

I would say that, in general, the option rents for large national chains that do have options are consistent with the rest of the industry, which is 10% every 5. The difference is that they typically don't have as many options as part of the original term and so if a landlord does a 5-year deal with a 5-year option or a 10-year deal with 2 5-year options, by the time we buy the asset, if you look at our WALT, we're buying into that first option or even second option. And so we tend to be able to capture a lot more growth than if you had 5 or 6 options, which is fairly common for a much larger store.

Yes. And the only thing to just expand on that, Floris, so the reason the question might be why your spread is less than 10%. Remember, we're getting fixed bumps on an annual basis, which is different than an anchor tenant where you're just flat for a significant period of time, and then you get a big pop after 20, 30, 40 years. And so that's why we disclosed straight-line rents as well. And you can see we're closer to 20 there on renewals. So we're today its point, realizing some of the mark-to-market over the course of the lease. But then we got another bite at the apple earlier than you would from a lease that you signed and sit on it for 20 years.

Just -- so I think your peers are somewhere around 40% of all leasing activity each quarter is options. Is that something similar with your portfolio today? Or is that a little bit lower already? And do you expect that to trend even lower going forward?

Floris, I don't have the exact number off the top of my head. I mean we do skew towards the nationals. So I bet you, we're modestly lower, but I don't have the number available at my fingertips right now.

Conor. My second question, I noticed you had a couple of larger assets in your acquisitions. I think Mockingbird Central, which is like 80,000 square feet, and you had 1 Springs Ranch at 44,000 square feet. Could you talk maybe about the rationale behind those acquisitions? And are they different assets than the rest of your portfolio?

Floris, it's David. The size of the asset in many cases is simply to do with what someone was able to get zoned in a certain submarket. So I think in general, you're looking at assets that we typically buy are significantly smaller. But there are locations, Boca Raton is another one, we have a large asset we bought a couple of years ago. If you're in a market that's highly supply constrained, a lot of the local kind of running errand and shop business is concentrated in certain zoned areas. So you do get larger properties in some of these higher-density markets. And honestly, the big difference for us is when we look at those types of properties, we're just very careful to understand why the consumer is coming there, what their trip generation is looking like and we want properties that have very little control from larger tenants. And so even if the property is larger, it's generally made up of smaller tenants.

So you're not concerned that you got too much shop space that you have to lease partly because of the supply constraints or...

Yes, it's more like if you think of a major thoroughfare through the United States, take Roosevelt Road in Chicago or think of in Phoenix, you're kind of up and down a long thoroughfare. A lot of the supply is just strung out along a long corridor. But in certain older markets where the zoning was different. Instead of being linear zoning, it's more like concentrated pocket zoning. You end up with having the same amount of inventory, but it's just concentrated at an intersection as opposed to an elongated thoroughfare.

And your next question comes from the line of Mike Mueller with JPMorgan.

I guess as the mix of institutional competition that you're up against for acquisitions, has it been changing materially, I guess, over the past few quarters?

And then just for a second question. How sensitive is the competition to changes in interest rates, say, like the 10-year dipping below 4% again?

Mike, I'll start with the second first. I think the competition tends to be very impacted by rates. Most of the competition that we're bidding against are levered buyers, and that's either small families, local investors, but it also could be private equity funds or even institutions that are using an adviser or an operator. The debt component is important. So I do think that they're more impacted than we are because we still remain to be one of the only cash buyers out there. And so I think on the acquisitions front, we're able to be pretty desirable as a counterparty, simply because we don't rely on rates.

As far as competition goes, there's definitely competition in the space. I mean these assets are well attended when they come to market. I think I said last quarter, about half of our inventory is off market. And that's really coming through relationships where we have a chance to acquire asset before it's broadly marketed. That, I think, is an earned position if you've got a reputation for abiding by your word and closing. So I think the kind of premarketed or off-market deals are pretty important source of inventory for us. But we are seeing competition, whether it's significantly more than a year ago, I'd hate to say that. There's a lot of assets out there in the market. We tend to be focused on the top quartile in terms of quality. There are others that are focused on the middle or the bottom quartile.

So the sector does get a lot of demand, but I wouldn't say there's been an amazing difference in the last 12 months with competition.

And there are no further questions at this time. David, Lukes, I'll turn it back over to you.

Thank you all very much for joining, and we'll talk to you next quarter.

Thank you. This does conclude today's presentation. You may now disconnect.