InvenTrust Properties Aktie

Well, thank you, everybody. On to the next panel, we got InvenTrust here with us. Happy to have DJ Busch with us, who is the CEO of the company. Why don't you introduce your team? -- you have some opening remarks to start off.

Yes. Thanks so much, Samir. Thank you, guys, for having us, Andrew. With me today is Christy David, our Chief Operating Officer and General Counsel; and Dave Heimberger, our Chief Investment Officer. I think most of the faces here certainly look familiar. Thanks for joining us and your interest. Just a quick background, InvenTrust Properties, 78 properties, open-air, essential retail, exclusively in Sun Belt markets. So 2/3 of our portfolio is, kind of, core neighborhood grocery-anchored centers, the balance being power centers. But the sole focus and mandate for our company is to own and operate essential retail, open-air centers in markets that we feel that are exhibiting better growth characteristics than what you see in the balance of the country, in which case -- and that shows up through our ability to push rents and grow cash flow faster than some of the other -- most -- certainly, our goal is to grow it faster than the sector average or what else is available in the public market.

We've been a public company for almost 5 years. It will be 5 years on October 13 (sic) [October 12]. Over that 5-year period, we've grown NOI by over 20%, FFO per share by over 25%, grown the asset base by over $0.5 billion with the expectation that we can continue to do that for the foreseeable future. We have plenty of capacity on our balance sheet to continue to grow our business without having to access the equity capital markets and continue to grow and accelerate free cash flow, both through internal prospects and our external growth prospects.

Obviously, in the current market, it's become a little bit more challenging for 2 reasons. First one, obviously, being retail is back in vogue from a private market perspective. It has been a much more competitive environment, especially in the markets where we're looking to acquire and expand our business and our presence. But equally as important, our cost of capital has obviously changed over the past several quarters with rising debt costs impacting our incremental -- our ability to get incremental debt at a level that's attractive compared to the use of proceeds. So we're monitoring that. We've been very fortunate this year. We've closed on to date, including the one we closed subsequent to the quarter, $290 million of acquisitions in current and new markets.

So this year, we've closed a couple of deals in Charlotte, our deal in Nashville, our first deal in Knoxville, Tennessee, as well. And then subsequent to the quarter, we did close a grocery-anchored center in Greensboro, North Carolina. So core markets and then finding really exciting opportunities in some of these complementary emerging Sun Belt markets that exhibit the same characteristics that we do see in some of our core markets like in Austin or Charlotte or West Florida or the like.

But I'll start there and then go in any direction you want, Samir.

Yes. Maybe just on macro. You talked about the Sun Belt, kind of, where you've been focused, clearly, a big beneficiary of the migration that we saw over the last several years. Are you seeing any, sort of, changes in, sort of, household formation there? -- population growth that, kind of, maybe going the other way now?

No. So what we have seen is we've seen the migration trends continue, especially in the Carolinas, in Florida and in our markets in Texas. We've seen that continue. What has changed is the cost of living in some of our core markets has gotten harder, meaning home prices have certainly increased, other pricing has increased, which has availed new opportunities in some of those secondary emerging markets where, obviously, Nashville has become over the last 15 years has completely transformed.

We see similar characteristics, certainly not to the same extent, but similar characteristics in Knoxville, which is -- continues to be a lower cost of living, but has some great growth drivers as well. So same thing in Greensboro versus what we're seeing in Charlotte or Asheville. So using those, kind of, that hub-and-spoke strategy to support it.

Now what I will say is the most -- the great thing about our business is and specifically retail is the lack of new supply. So even in the markets that -- where the cost of living and rent prices and home values have gone up, new supply has actually alleviated some of that, specifically in the Sun Belt. So if you think about this, if this was multifamily, and I was -- we had a Sun Belt strategy, I'd be a little bit more worried because there's been a lot of new supply that's put -- that's tempered or even reduced our rental rates.

That's great for our business. It makes our -- it gives our customer an ability -- more wallet share to come to our centers. And our centers certainly are still not having -- are not impacted by any new supply. So a relief in home prices and rental rates at multifamily is helpful for our retail centers.

And then when you talk about new supply, I mean, which are the markets again? I mean it's...

So new supply, I was talking about new housing.

New housing...

Supports retail. From a retail perspective, we're still not seeing any new...

Maybe in Texas or Houston, right, [indiscernible].

Yes. Exactly.

Okay. And let's talk about the leasing pipeline today, maybe compare that to this time last year. what's changed as you think about the depth in demand, the quality of prospects?

Yes. Well, Christy, do you want to touch on that?

I think that our leasing pipeline is still very healthy. We have signed our signed but not open pipeline, which is about $5.6 million. We have another 170 basis points of deals sitting in our leasing pipeline. And that means that they're either at lease or LOI or in the legal stages so that they're in the fruition, but they haven't made it to the signed stage.

And the quality is exactly what you'd expect of, kind of, what we've been doing, Samir. It's a good mix of either fitness. We're still seeing service-oriented. We're seeing food uses and the like. And so I think it's a continuation of what we've been producing, and you've seen us sign and open in our centers.

And I think that, that pipeline continues to just be robust. And we're actually -- compared to where we were at last year, we were at about 110 basis points this time last year. So seeing a little bit of increase there.

One of the things we had an economics panel this morning and our economist was talking about, obviously, higher gas prices and what that could mean for, sort of, consumer discretionary, right, spending. And I know you've talked about your restaurant exposure. I want to say it's close to 20%, right? I think -- I mean, what are you seeing on that end? And as we think about restaurant credit and, sort of, expansion plans?

Yes, it's a good question. So I would say restaurants tend -- it's a fickle business. It's a tough business. It's certainly harder to succeed than fail, it seems like. But it's an important merchandise mix for us. Especially if you think about the structural change in our centers and the traffic patterns that we have post COVID and the adoption, certainly in some of our markets, the much more widespread adoption of hybrid work environments.

There's just more frequency, more daytime frequency at our centers, which lends itself well to services and specifically food uses. So I think we're right around 20%, just over 20% today. That's a great, kind of, a -- that's a great mix for us. A great additional complementary has been like health services, which has just surpassed, I think, 10%, maybe close to 12% of our merchandise mix. Those uses would have probably been a lot lower pre-pandemic as they should have been because you're not getting the same frequency that we're getting today in our suburban shopping centers.

So I think we'll continue to curate our food uses. Credit is supremely important. Even if they don't succeed, you need to make sure that you're protected. But the reality is the trends in foodservice move quickly. And we just -- it's an important part of our merchandise mix, but it also -- it probably has one of the higher levels of risk from a category perspective. The good news is every restauranteur we lose, we get a more optimistic restaurant tour to come in.

This isn't mine either.

Quick question, DJ. 20% restaurant-related one that -- how do you think about and manage the CapEx spend that goes with that? Because a lot of -- historically, if you have a bad restaurant, you pump a lot of money into.

Great question. So what is the average restaurant survival? The average restaurant survives how many years, 3 or 4 years? We do 10-year leases, right? Luckily, most of our centers are of high quality. Most of -- our level of success is obviously certainly higher than that. But it does come with -- it's one of our most capital-intensive tenants. So the credit backing is supremely important.

Make sure that they're putting in enough capital and they're committing to the site just as much as the landlord is, if not more. And depending on what their credit looks like, Christy and her team will be asking for different things from that tenant. The good news is once you do have a real good restaurant build-out, you can tend to use that over and over again if it's in reasonably good shape.

But it's certainly -- from a due diligence perspective, it's probably the things that we spend -- that Christy and her team spend the most time on, save for big anchor transactions.

But it sounds like as we think -- when we talk about restaurants, you're not seeing really an impact today.

No, no. It's a healthy part of our business. What I would say any fallout that we've had is almost entirely operationally driven, and it's not an indication of like a soft -- the general softness at our centers or our markets.

Got it. And then in terms of, just, kind of, expanding that pie a little bit, the local mom-and-pop tenants, they continue to perform well?

They do. We're always we have good insight with our mom-and-pop tenants. We get a decent amount of sales and productivity numbers from them. But over half of them, we have really good insight. The other half, Christy's team is speaking with them. I mean, we have 1,900 tenants. There's not many -- I'll say this a lot, but there's not many good things about being a small company.

But one is we do have a really good understanding of our -- the health of our small shop tenants across the portfolio. We've lost a handful this year, but they were ones that have been on our watch list for several years and just they weren't able to make it work, which is fine. And we have suitable replacements. Mom-and-pops are always -- they're an important part of our business. I think what Dave, like 10% of our -- 10% of the portfolio is local mom-and-pop -- true mom-and-pop tenants like single-store operators. And they're important to those communities.

And some of them are going to make it and some of them aren't, but it's important for us to continue to invest and try and find those opportunities because it's important to the communities they serve. They tend to be less capital intensive. But to your point, Samir, like in an environment where gas prices are up and there's other inflationary pressures, it's much more difficult for small shop tenants like that to absorb those costs relative to some of the larger operators.

And maybe on the external growth side, you've been active on acquisitions, right? And you're, sort of, at a point where you've, kind of, reached -- you're approaching your, sort of, your net investment goals for the year. Like, I guess, maybe, just to expand that a little bit, like, what are you seeing in the transaction market? I mean, we were with Brixmor earlier.

Obviously, there are certain cap rates here that we've seen compression in cap rates, especially in power centers as well now. So talk about, kind of, the overall market and, kind of, how we should think about your net investment goals for the year.

Yes, Dave, do you want to touch on that?

Yes. So I think overall market, it was Brixmor, I'm sure Mark touched on just the amount of interest in retail. None of that's new. I think what we've seen over the past year is just whether it's a rotation within existing portfolios, movement from funds from multifamily assets into retail, whatever it is, the allocation, everyone's underweight retail. It's obviously driving pricing up, cap rates down. And for us, again, we're fortunate through the first half of the year to get close to our goal. That allows us to be really patient.

So as we feel pricing get a little frothy, we can take a pause or we can move on to whether it's a different format, different market. That's why you've seen us, kind of, move into some of these emerging markets. There's a little bit of a pricing delta, although it's all catching up. So every time we make a move, what we think is 2 steps forward, the capital just, kind of, cast a wider net because the amount of people that are losing deals is still pretty significant. We're okay taking a pause.

I think that allows us to think about our dispositions. We have a couple in market. Those are just, sort of, rotational opportunities that we'd like to take advantage of. Obviously, sellers are in a great position to sell assets into a market like this. That could free up some capital for us to rotate back through, kind of, reset a growth profile on an asset-by-asset basis. But I think the new thing for the back half of this year is really just more institutional capital, whether that's pensions coming in, wanting to be back into retail, some operator partnerships forming to help run that capital in retail.

So just continue like a continuation of the competitive environment. At some point, as rates continue to run, maybe that could slow it down a little bit, but we haven't seen that just yet.

Yes. Just the only thing that I would add simply is, obviously, InvenTrust, we have a compelling internal growth story, but equally it's a compelling external growth story using the balance sheet. Having said that, we're not going to simply acquire things just to grow the business. They have to make sense, they have to make economic sense and they got to be accretive to cash flow at some point in the foreseeable future.

That's the only way we can grow this business responsibly. So as Dave said, well, we can, kind of, turn off our activity very slowly off and on, while keeping a very robust pipeline, and we're always looking at things. And some are going to make sense and some won't. And we've had more cases recently with the amount of competition that haven't made sense from a pricing perspective, but that can change quickly and the market can move quickly, and we'll be ready to do that when the time comes.

And did you say you have 2 properties in the market right now for sale? Is that right?

Yes.

Okay. I was just curious, like, obviously, you lighten the load in California. What's, sort of, the disposition strategy at this point? Is it geographic? Is it individual internal growth considerations?

It's a little -- it's a little bit of both, right? Both are the considerations.

One thing that we don't do is we're not looking at something that's going to generate growth or not generate growth next year and be shortsighted. We're looking at the long-term trajectory of the asset. Is it going to be competitive in 10 years' time? Is the grocer going to be competitive in 10 years' time within the market that it's supporting in certain markets?

So we -- just under 50% of our assets come from Texas or our NOI comes from Texas. You could probably -- it's probably reasonable to think that that's going to shrink both through additional investment in other Southeast states and markets and maybe a little bit by divesting strategically out of some assets in Texas based mostly on grocer performance as opposed to any structural problem or with the market itself.

And then in terms of the $290 million of acquisitions you've done year-to-date, what do you think enabled you to win those bids? I mean everyone's cash is as green as everybody else is, but what did you see in those opportunities that others perhaps didn't?

It's a good question. Dave will answer this better than I do. But there's a lot of different nuances that come along. Some of it is we can get to a better number. And maybe it's because we have more optimistic embedded rent underwriting estimates because we're already in those markets. Some of them have been first-mover advantage in some of these new markets that we've gone to and like a Knoxville or Greensboro.

And others simply are because we've been repeat buyers from the same seller, and we ran a great process. And that matters a lot in our business, especially in a volatile market where there can be some sort of retrading going on. That's never been InvenTrust's strategy. Obviously, there's a shock to the system, you're allowed to take a pause.

But we've always been very fair as with our counterparty, and that matters and execution is probably just as important, if not more important than price in some cases. I don't know, Dave, if you have anything you want to add?

I echo all those comments. I think, like, as you saw us move in secondary markets, there was a point in time when we were 1 of maybe 2 institutions versus family office money that was competing on these deals. That is changing. So I think that led to early success in the year.

For these markets you're going into, it's Charleston and some of these, sort of, newer markets, what's the going-in yield versus the core markets which you were sort of...

Well, it seems like it's changing quickly. We've gotten -- some of these new markets we're very fortunate that we started a little while ago because it has gotten more competitive to Dave's point, it seems like they've institutionalized almost overnight.

I will say, on balance, like-for-like, we have found that the initial yield can be 25 to 50 basis points better than some of our like traditional core Sun Belt markets, which is a great spread relative to the growth profiles that we -- similar or even sometimes better growth profiles that we're seeing in some of these newer markets.

So when you enter these new markets, is the goal always to build meaningful scale over time? Are you able to go into a new market and maybe say, own 1 or 2 assets within the area?

It's a great question. We never go to -- the goal is to build some sort of scale, but we don't have to. And sometimes it's not appropriate. I don't know if there are 5 assets in Knoxville that would fit InvenTrust criteria. But there could be 2, and we can operate it very efficiently with -- through either Nashville or Atlanta or Charlotte, like that works.

Would we -- and would we go to -- and I'm using -- so Phoenix, and if we go back to our -- when we endeavored into building a Phoenix portfolio, that one it was important, one, it's one of the largest MSAs in the country. But two, it was far enough from the rest of our operating platform that it was important for us to have some, sort of, scale or at least visibility to some scale in the future to make that work for our business.

Picking these little pockets of growth in the Southeast, I think that will be 1 or 2, maybe in some cases, 3, and we can operate those just as efficiently. When you, kind of, move out, let's use California example, one of the reasons -- one of the many reasons we decided to exit California is it was harder for us to operate. And we didn't really have scale there because we were, kind of -- we went from Northern San Diego all the way up to North L.A. County.

And as a native Southern Californian, and that could take 25 hours and sometimes it seems like. So we do -- we weren't able to operate that as efficiently as we wanted to. We're already finding much more efficiencies in the corridors that we've built in the Phoenix MSA. But we have one asset in Nashville, we have one in Knoxville, we'd be very happy with those, but we're continuously canvassing for the next opportunity there as well.

Is there any kind of risk to redevelopment in terms of, like, the competitive set? Like greenfield development economics don't make sense at all. You still -- replacement costs are way higher than what market rents are. Is there -- given the rise of rents and the compression in cap rates, is there markets that are vulnerable to that?

Vulnerable as far as.

You have some crappy center down the...

Competing stock that could put redevelopment dollars to work. It could be. That math is even hard to make work in some cases. And cynically or skeptically, I should say, if a center at this point in the retail cycle, which has been quite strong for the better part of 6 years now coming out of COVID, if it still is under-leased, there's probably something more structurally wrong with it.

Not to say that one of our competitors, well-capitalized competitors could come in and use one of their grocery relationships. That's always a risk. I think it's a lower -- I think it's a risk that we don't worry about that much because of the competitive positioning that some of our assets have in the market. And not forgot, we spend a decent amount of capital. It's a capital-intensive business. Retail always is. It's an operationally intensive business.

Our assets tend to look really, really, really good. I mean we put a lot of capital to make sure our assets are great. It serves the customer very well, and the tenants are happy to where we can continue to raise rents and they can enjoy strong sales.

And then just a question on capital allocation. Like you guys were trading right around a 6 cap, plus or minus 10 bps a couple of months ago. What was the rationale to not do a forward or do a convert at that pricing or something like that? [ It's a ] lock in?

It's a great question. I think for a company of our size, it's very, very important for -- we want to make sure that when we decide to tap the equity markets, if we have the opportunity to do so, it's going to be value-accretive for current investors as well as prospective new investors. At that point in time, now, one, there's a lot of nuances. There's a lot of blackout periods and stuff.

And one of the things is that we don't want to do is issue equity at a peak and then have the stock underperform and no one makes money. We want to see a stable level in the stock price where we have a good understanding of what our current cost of capital is at any point in time because there wasn't quite a dramatic run-up and then obviously, it would come down quite a bit.

But the reality is it comes down to use of proceeds. Do we have a good use of proceeds? And we had already closed $290 million. 2 or 3 -- in 2024 when we issued equity, we had a clear and identified use of proceeds that were going to be accretive. That to me was a compelling story as opposed to doing a forward and not having identified use of proceeds and making a call more or less on the stock price.

I think that was -- I said a lot there, but that was, kind of, the rationale. We're trying to be very, very, very protective and careful with our capital. And it happened quick right now down -- there's obviously been a runoff. And we're -- there's certainly no regrets. We still have the balance sheet to support our business. And we want to make sure that our investors feel good about the trajectory of our business and the stock price when we do issue equity.

Where do you think you could issue unsecured right now?

Great question. It'd probably be on an all-in rate, 50 basis points higher than where we did it in April on a blended basis. So like think about the tenor. I don't think so -- let me put it this way. We're at, what, 5% or so on a 10-year. I don't think spreads have changed that much.

They may have contracted a tad because there still is demand for debt capital. But with the movement, I would just say whatever the treasuries have moved over the last -- so all-in coupon between tenor we'd be 6% to 6.5%...

And I mean that -- if we have this kind of environment for the next whatever few quarters, I presume that any kind of acquisition activity will be funded through asset sales.

It would be through asset sales or selective -- using the balance sheet selectively, but we're always assessing our incremental debt capital, Dennis, to your point, on permanent financing.

So the net debt-to-EBITDA ticked up, right, I think, in the quarter? And so how are you thinking -- I guess, a similar question, how do you think about the mix of debt, dispositions, and equity to grow here?

Yes. So we're -- we can fully fund our strategy for the next 5 years and grow NOI by close to $100 million by putting another $0.5 billion or $0.5 billion or so of incremental debt on the balance sheet and still be well within our range. There was an uptick this quarter because we closed a lot of the assets at the end of the quarter, and it's quarterly annualized.

So that will come down when we report third quarter earnings. It will look like a more normalized run rate. We're expecting to end the year sub-5 from a net debt-to-EBITDA standpoint. So still comfortably with a lot of capacity to continue to grow the business.

One topic that comes up is cost and, sort of, CapEx and construction costs is up. Like how should we think about, sort of, CapEx as a percentage of NOI?

Yes. So funny, it's a great question. I think it's actually in our business, -- and if you think about -- we have 6 anchor vacancies across our portfolio, 3 of them are at a redevelopment site in [Tampa, AP]indiscernible] . So those are held for redevelopment. That will be something that -- it will be a multiyear redevelopment where we're relocating a grocer and bringing in some backfill junior anchors and refortifying the property for the next 30 years.

The other 3 ones that the asset held for -- I shouldn't say that, the asset that we are planning to sell are the last asset in California. So that one is a nonissue. One was -- one more is in Richmond, Virginia, where we had a Painted Tree. Obviously, there was a bankruptcy earlier in the year. We have already re-leased that to Nordstrom Rack. So a fantastic outcome there.

And then the last one was our last remaining Party City vacancy in Dallas -- in the Flower Mound market of Dallas. We're hopefully before, if not by the end of the third quarter, certainly by the end of the year, we'll have an exciting announcement on that last vacancy. So I say that because once those anchor vacancies are addressed, there is an environment where retention rate remains high. Small shop attrition is, kind of, normal, but retention stays above 90%.

Right now, I think our run rate is -- for the year is right around 15% in NOI. I think that, that could be tick lower if you put aside those -- the major redevelopment I just spoke about, that could tick lower because tenant retention is the best thing for our business. We can grow rents. We don't have to put out new capital, and we can accelerate free cash flow growth.

We just haven't had an environment where the anchors have -- you haven't had a whole lot of anchor turnover, and that's the real cost of the -- any type of tenant turnover, but the anchors certainly are the most arduous from a CapEx standpoint.

Just in terms of your growth in your same store, I mean, you reported same-store was around 4% in the quarter, but you reaffirmed your guidance, right? I mean talk about, kind of, what keeps you from...

Yes. So year-to-date, so we're a little bit lower than the first quarter. So I think year-to-date through the first half, I think we're closer to 3.3%. So still trending, still have an opportunity to accelerate. I will say that I think in the third quarter, we do have some expenses that we'll be undertaking. So it will still be a little bit uneven, but with real acceleration in the fourth quarter to completely get to our guidance targets.

Look, I think from a building block standpoint, the great thing about our business and many of our peers the same is we've been able to continuously build in recurring escalators, something that we haven't been able to do in the past. And every lease that we get our hands on, we're able to put in these escalators, whether it's on the base rent side or on the expense side. They're both important because what that is doing is it's taking this business that used to be a 2% business to something closer to a 3% to 4% business on a year-in, year-out basis.

And if you can -- if that 3% to 4% business can also be met with lower CapEx profiles than what we've had in the past, now we have an FFO income stream that's compelling relative to other property types. So I think that's what we haven't had in the previous cycles that there is an opportunity for certainly the highest quality retail REITs to enjoy.

I was just going to ask, over the years at the same time, have you seen tenants become more willing to pick up capital costs just to build off the questions from earlier. So this -- your capital efficiency is improving.

Yes. So yes and no. So grocers are great operating partners as it relates to capital contributions because they have a very long-term view, especially the private operators. So speaking specifically about the South -- like the powerhouse in the Southeast with Publix and H-E-B in Texas, like they tend to put in a significant amount of their own capital, which makes you feel good, and it's also great because it helps our returns or we have some capped contributions. Restaurants is very similar as it relates to what -- if it's a new concept that's unproven, we're going to expect them to pay a heavy level of that contribution. So we don't want to take on any undue risk. If it's a well-established restaurant, we'll certainly participate much more so.

So it ebbs and flows, Dennis, but I think the one thing that hasn't changed is like anchor -- junior anchor repositioning and remerchandising is expensive. So the key for us is to make sure that we're partnering with the right junior anchors to where they can not only succeed through their initial lease term, but several options. And the longer they survive, the lower that CapEx burden becomes, right? There isn't one of the analyses that's impossible to do in our business is comparing CapEx across format and box size. So it's easy to come to the conclusion that anchors are more expensive.

They are the moment that you're building them out. But the turnover in small shop tends to be higher. So how long does an anchor have to make it versus how long a small shop tenant has to make it before those capital costs have like some sort of breakeven point or cross. And I would say, in the next couple of years, we feel much more confident about our anchor lineup than we have in the past.

All right. A couple of rapid-fire questions for you. So the first one, if long-term rates stay higher for longer, which has the biggest impact on your sector? Higher refinancing costs, lower transaction activity or less new supply?

The biggest impact on our sector?

I guess sector earnings.

It will be refinancing costs.

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

Yes.

Number three, for your sector, will 2027 next year same-store NOI growth be higher, same or lower?

Same.

Thank you.

Thanks.

Thank you for standing by, and welcome to InvenTrust's Second Quarter 2026 Earnings Conference Call. My name is Ellen, and I will be your conference call operator today.

Before we begin, I would like to remind listeners that today's presentation is being recorded, and a replay will be available on the Investors section of the company's website at inventrustproperties.com. [Operator Instructions]

I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be open for questions.

As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website.

With that, I'll turn the call over to DJ.

Good morning, everyone, and thank you for joining us. InvenTrust delivered another solid quarter, supported by continued strength of our portfolio and the consistency of our operating platform. Cash flow is growing, leasing activity and tenant retention remains strong, and our signed but not open pipeline continues to convert into occupancy and cash flow. Same-property net operating income growth accelerated to 4.1% in the second quarter, while year-to-date NAREIT FFO per share increased 11% and core FFO per share increased approximately 9%. Retailer demand remains concentrated in well-located open-air necessity-based centers and limited new supply continues to provide a favorable backdrop for long-term rent growth.

Our first half results, combined with the visibility we have from contractual rent growth, lease commencements and redevelopment activity continue to support our full year outlook. Mike will walk through our financial results in more detail in a few moments.

We made strong progress executing our external growth strategy during the first half of 2026. To date, we have acquired 6 properties and 1 outparcel at an existing center for approximately $290 million. A key part of that activity has been expanding into emerging Sun Belt markets such as Charleston, Greensboro and Knoxville. Importantly, we're finding opportunities, not only in our existing markets, but also in adjacent complementary markets where our operating model and retail relationships give us confidence that we can create long-term value. These markets offer many characteristics we value, including population growth, household formation, relative affordability and strong retailer demand. For us, they are a natural extension of our strategy, allowing us to expand while remaining disciplined and focused on the fundamentals that have driven our success thus far. This activity represents strong progress toward our full year net investment guidance.

Our acquisition pipeline remains active, and our balance sheet provides the flexibility to pursue additional investments where risk-adjusted returns are compelling. As we continue to grow, we expect to pair future acquisitions with selective one-off asset sales, recycling capital from assets that are less aligned with our long-term growth strategy into opportunities with stronger growth characteristics.

As our portfolio expands, we remain focused on scaling the organization efficiently. Technology, including artificial intelligence, will help us streamline workflows, enhance reporting and evaluate investment opportunities more effectively. While local market expertise, tenant relationships and disciplined decision-making will always remain at the center of our business, these tools will help us operate more efficiently and support our long-term growth.

In closing, our priorities remain clear: continue owning high-quality necessity-based retail centers; thoughtfully expand across our core and complementary emerging Sun Belt markets; maintain a disciplined balance sheet and leverage the strength of our platform to drive sustainable growth in cash flow, net asset value per share and long-term shareholder value.

With that, I'll turn the call over to Mike.

Thanks, DJ, and good morning, everyone. For the quarter, same-property NOI was $48.5 million, up 4.1% compared with the second quarter of 2025. Growth was led by base rent increases of 320 basis points, including approximately 180 basis points from contractual rent bumps, along with contributions from leasing spreads, redevelopment activity, percentage rent, specialty income and net expense reimbursement. These gains were partially offset by a 50 basis point expected temporary occupancy impact and 20 basis points of bad debt. Year-to-date, same-property NOI totaled $97.2 million, up 3.3% compared with the first 6 months of 2025.

On our quarterly cadence, we expect same-property NOI growth to be somewhat uneven for the remainder of the year. The third quarter reflects timing of operating expenses associated with scheduled projects. From there, we expect the fourth quarter to reaccelerate as leases commence and signed not open leases continue converting into rent-paying occupancy.

NAREIT FFO for the quarter totaled $39.8 million or $0.50 per diluted share, reflecting an 11.1% increase from the second quarter of 2025. Core FFO rose 9.1% to $0.48 per share year-over-year. FFO growth was driven primarily by higher same-property NOI and net acquisition activity, partially offset by interest expense. For the first 6 months of the year, NAREIT FFO was $81.1 million or $1.03 per diluted share, reflecting a 10.8% year-over-year increase, while core FFO was $0.98 per diluted share, up 8.9% compared to 2025.

In June, our $250 million private placement of senior notes funded, and we used the proceeds to partially pay down our line of credit. At quarter end, total liquidity stood at $489 million, including $64 million of cash and $425 million available on our revolving credit facility. Our weighted average interest rate was 4.36% with a weighted average term to maturity of 4.3 years.

Net leverage finished the quarter at 31.9% and net debt-to-adjusted EBITDA was 5.3x on a quarterly annualized basis. Our balance sheet remains strong and provides the flexibility and liquidity to continue executing on our long-term strategy.

Finally, we declared a quarterly dividend payment of $0.25 per share, a 5% increase over last year.

Turning to guidance. We are reaffirming our full year same-property NOI growth guidance range of 3.25% to 4.25%. We're also maintaining our core FFO guidance range of $1.92 to $1.96 per share. For NAREIT FFO, we are raising our full year guidance range to $2.01 to $2.07 per share, which reflects a noncash revenue increase from our recent acquisitions. Additional details on our guidance assumptions are available in our supplemental disclosure.

And with that, I'll turn the call over to Christy to discuss our portfolio activity.

Thanks, Mike. From an operating standpoint, leasing activity remained healthy during the quarter, and retailer feedback has been consistent. National tenants continue to have multiyear expansion plans, but their biggest challenge remains finding quality space in the right trade areas. In response to tight supply, some retailers are becoming more flexible on format and box size while remaining disciplined on build-out costs and store level economics. This reinforces the depth of demand while also showing that retailers are focused on opening locations that will perform well over the long term.

During the quarter, we executed 76 leases covering approximately 464,000 square feet, and our retention rate was 88% year-to-date. Comparable blended lease spreads were 8.5% with new lease spreads of 18.7% and renewal spreads of 7.9%. Annualized base rent per square foot increased 3.8% year-over-year to $20.94.

Leased occupancy ended the quarter at 96.2%, down 20 basis points sequentially, primarily due to the former Painted Tree anchor space. We already have a letter of intent from a prominent national retailer and expect to provide an update on this space in the near term.

Importantly, large-format availability remains limited and manageable. We ended the quarter with only 6 vacant big box spaces, 4 are tied to redevelopment or disposition activity. One is the former Painted Tree space just mentioned, and the remaining space is a former Party City at one of our Dallas properties.

Small shop lease occupancy increased 30 basis points to 93.2%, while anchor lease occupancy ended at 98.1%, down 40 basis points from first quarter.

Retention remains a key driver of internal growth. Excluding tenant exercise options, renewal spreads were 14.4%, which underscores the value we continue to capture through renewals. When we can retain a productive tenant, achieve a solid rent increase and do so with limited incremental capital, the all-in economics can often be more attractive than pursuing a higher headline spread that requires downtime, tenant improvements and leasing costs. Our goal is to build partnerships that support tenant success while creating durable cash flow growth for InvenTrust. Given the quality of our portfolio and the strength of the current retail backdrop, we are well positioned to capture these mark-to-market opportunities.

A significant lease signing during the quarter was with Publix at our Plantation Grove property in the Orlando MSA. This lease is an important first step toward a future redevelopment of the center where we are replacing the existing store with Publix's new prototype. We have worked with Publix on similar projects before, and we are excited about the value this type of investment can bring to the center. We expect the project to break ground in 2026.

At quarter end, the lease economic occupancy spread was 160 basis points, representing approximately $5.6 million of annualized base rent. We expect 77% of ABR to commence by the end of the year and over $1 million expected to be recognized in 2026.

Turning to acquisitions. We continue to build on the momentum DJ outlined earlier. During the quarter, we closed on 3 properties and 1 asset subsequent to quarter end. Together, these 4 assets represent more than $165 million of investment, showcasing our ability to acquire in a competitive transaction environment. Our acquisition pipeline is strong, and we will continue to target well-located centers in attractive trade areas, supported by necessity-based uses and clear opportunities to create value as we integrate the assets into the InvenTrust operating platform.

The first acquisition was 3609 South in Charlotte, North Carolina. This property is 100% leased unanchored strip center located in Charlotte's South and submarket with favorable surrounding demographics and visible rent upside. While unanchored assets are not a large portion of our portfolio, we will pursue them selectively when the location fits within an existing market where we already have operating knowledge and relationships. We also closed on Western Plaza in Knoxville, Tennessee, an approximately 162,000 square foot community center anchored by The Fresh Market and Crunch Fitness. Knoxville is an example of the type of emerging Sun Belt market where we are seeing attractive long-term fundamentals and healthy retailer interest. Western Plaza provides us with a position in an established retail node with grocery and fitness anchors that drive consistent traffic.

In the Charleston MSA, we acquired Sweetgrass Corner, an approximately 95,000 square foot community center anchored by Trader Joe's, Homesense and Golf Galaxy. This high-quality asset marks our fourth acquisition in Charleston in less than 2 years.

On July 1, we closed on New Garden Crossing in Greensboro, North Carolina. This property is 100% leased, 169,000 square foot community center, anchored by Lowes Foods, Marshalls, HomeGoods and Office Depot. We like the combination of grocery, off-price and service-oriented tenancy, and we view Greensboro as another attractive emerging Sun Belt market that is complementary to our existing regional footprint.

Tenant interest reinforces where we are investing. National and regional retailers are increasingly looking to emerging Sun Belt markets for expansion opportunities. Charleston, Greensboro and Knoxville are places where retailers want to grow, where consumers are moving and where owning high-quality assets fits our strategy.

Operator, that concludes our prepared remarks, and we are ready to open the line for questions.

[Operator Instructions] Your first question comes from the line of Andrew Reale with Bank of America.

I guess just to go back to the occupancy. Obviously, your small shop occupancy improved sequentially, but anchor slipped. Can you just remind us what drove the anchor decline? And then how should we think about the trajectory of both anchor and shop occupancy into year-end?

Sure, Andrew. This is Christy. Thanks for the question. The primary driver, as you noted, was the Painted Tree, which we lost. It was not in our numbers last quarter, but we noted it on the call. That was at our West Park asset in Glen Allen, Virginia. So that's the primary driver of why the anchor vacancy went down. And as I noted, we only have 6 vacant anchors, of which we expect to hopefully bring 3 of those into execution by the end of the year. And as for the trajectory of where we think occupancy can go, we think we should be approaching leased occupancy all-time highs by the end of first quarter 2027 with economic occupancy about third quarter 2027.

Okay. And then just on the net debt-to-EBITDA, that's moved to 5.5x from about 4.5x at year-end. Are you comfortable running at this leverage level? And then how should we think about equity or dispositions entering the funding mix going forward?

Andrew, yes, so interestingly enough, some of the assets that we closed were late in the quarter, and that's an annualized number. So that's going to come down materially. But the way we look at it on a forward basis, we'll probably still end the year based on our net investment expectations still under 5x. And as we've said, our range where we're comfortable is 5 to 6x on a forward basis. So we still have plenty of capacity on the current balance sheet. Obviously, there's been volatility in the equity markets. We want to be very careful and patient with our equity capital. But we still can self-fund this business and continue to grow cash flow for the next several years if need be.

Your next question comes from the line of Jamie Feldman with Wells Fargo.

So you clearly had success on some of the Sun Belt expansion markets. How big is the buy box of what you're looking at? And how quickly could you ramp it up if you really wanted to? I would imagine the transaction market is getting more competitive. It just seems like everyone seems to be finding opportunities to sell. So maybe just a big picture of what the next couple of years could look like and how many more Sun Belt markets you think you might be in, and what's out there?

Yes. No, it's a great question, Jamie. Thanks. It's interesting. So our pipeline ebbs and flows. It always remains kind of the canvas that we're looking at, both in current and new expanding markets is right around $2 billion, give or take. There is a seasonality to the pipeline. It's always a little bit quieter midyear. We're seeing some interesting opportunities just pop up now. We've been very fortunate that some of these new expanding markets we've gone into, I wouldn't say we were a first mover, but they are tighter markets. So when you say the buy box, the opportunities in something like a Greensboro or a Knoxville or a Savannah are going to be fewer than what it would be, obviously, in an Orlando or some of our Texas markets. But we're looking at all of it.

And as you've seen, we'll do unanchored if it makes sense for the portfolio or the market that we're operating in or we'll do some bigger box opportunities like we did in Nashville, if it makes sense, and that's a great asset for us to get into the Nashville market. So we feel very confident. Obviously, we're off to a great start this year with $290 million closed. We have a couple of really interesting opportunities that we're looking at. But like you said, it is a competitive market. We've been very lucky on a blended basis, we're hitting our goals from a net investment activity, which continues to be kind of in the low 6s on an initial yield perspective and getting to an IRR on an unlevered basis somewhere in the low to mid-7s. And that recipe has continued for the last couple of years, and it's something that we still feel comfortable given what we're seeing in the pipeline today. But nonetheless, it is a competitive market, specifically in some of our larger core markets.

Okay. And then 21% exposure to the restaurant business. Can you just talk about some of the trends you're seeing? Any kind of weakness? I know the lettuce scare has probably been top of mind for people. But what are you just seeing on whether it's the lower end or the higher end restaurant credit trends or sales trends?

Yes. It's funny. We don't have a ton of, obviously, white linen or anything high end from a restaurant basis. I think it's about half full service, half fast casual or fast food. Restaurants are always a tricky business. We tend to have the highest turnover in that category. We've always ran kind of close to 20%. I think we moved up a little bit, obviously, post-COVID, given the amount of traffic, given the hybrid work environment, all the stuff that we've talked about previously. It will always be a higher turnover category. However, there's no significant trends as it relates to types of food category. It's really either undercapitalized or poor performing operator with several options as backfills. So like I said, it is a turnover business, but there's a tremendous amount of demand behind some of those struggling restaurants, at least what we've seen in our portfolio.

Okay. I mean, do you have a pipeline of potential closures you know about or you just monitor?

No, no, no. There's always a handful that we're watching for different reasons. Sometimes it's as simple as it's taken them longer to get open than what we expected. So we always have a handful of restaurants that we're watching. And then if we're watching them, we're already talking to potential backfills if necessary.

[Operator Instructions] Your next question comes from the line of Todd Thomas with KeyBanc.

DJ, you mentioned you're closing in on the net investment guidance for the year. It sounds like the appetite is there for additional acquisitions. And as we think about additional investments, you've also talked a little bit about maybe pruning the portfolio, perhaps reducing exposure in some markets such as Houston. Can you just provide an update on efforts there, whether anything on the disposition side is in the works?

Yes. No, thanks, Todd. That's exactly right. As we've always said about our net investment expectations, it's really at a point in time what we're seeing. If we see buying opportunities in the back half of the year that are attractive to us that can help us accelerate, not only into the back half of this year, but more importantly into 2027, we'll absolutely go through that $300 million.

To your point, we do have a handful of assets that we can pull forward. There's 2 in the market right now that we're hopeful that we will get done in the second half of this year. And like you said, the strong properties that just don't fit the growth profile that we're looking for as we move forward, but still very solid properties. And we'll continue to look through the portfolio for those. But we're fortunate that the portfolio kind of top to bottom is increasing in quality. So the disposition activity will be kind of de minimis after from what you saw last year with California.

Okay. Got it. And then can you -- how should we think about from a pricing standpoint, maybe you can -- if you can bookend the pricing on dispositions, how we should think about disposition pricing as it compares to the initial yields on what you're buying in the low 6% range?

It's actually very similar. So on an initial yield, it's going to be basically neutral from an accretion dilution perspective. But obviously, the difference being the growth profile that we're trading up for. The bookends on the buy side that we've been at and like we talked about, the pricing is getting competitive. We always look at it as the entire net investment activity, but that ranges from 5.5% up to 7%, and we'll look at everything from both sides of the spectrum. And as you know, like it's going to be core grocery core market is going to be on the low end and then maybe some of the boxer stuff and maybe some of the secondary markets will be on the high end. But everything is compressing. So we're being very careful and selective on the opportunities that we're going after.

Okay. And just to clarify, I guess, from a timing standpoint, it sounds like as you sort of approach or exceed the $300 million acquisition amount, that would drive or be a catalyst for dispositions or are you -- you mentioned you're in the market with 2 assets. I mean, should we anticipate that there could be some asset sales in advance of incremental acquisitions?

They're going to usually be on the back end. That's kind of the cadence that we're hoping to kind of stick with. Obviously, California was more opportunistic. We're trying to match fund the capital recycling a little bit more carefully as we look forward. But there could be -- we do have select assets after the 2 that I mentioned that we will pull forward if the acquisition opportunities are there. However, we do have plenty of capacity on the balance sheet to continue to use leverage in our favor, but obviously, in a very conservative manner to continue to grow the business. We've got a bunch of different levers without having to go to the equity markets to continue to grow the portfolio and grow cash flow.

Your next question comes from the line of Daniel Purpura with Green Street.

You've acquired a range of property types this year. You mentioned the unanchored center in this quarter and then there's a power center last quarter. Can you talk about the different return profiles that you underwrite across these property formats?

Yes. I mean, Daniel, thanks for the question. I mean, obviously, when you have the boxer centers tend to have a slightly higher unlevered return. But on a risk-adjusted basis, it all kind of comes back to the same spot, you know what I mean. So unanchored centers core grocery, they're going to be a lower initial yield than what you do for larger format community or power. And a lot of times, it's price point, a lot of times it's GLA size or market. There's a lot of different pieces of it. But if I'm going to use a generalization, usually core grocery is going to be the most sought-after product. With the unanchored strips, you can get a little bit better growth. So the initial yield may be a little bit tighter, but you can get the growth on the back end. So it's a tough question to answer, but that's the way that kind of we think about it.

But like I said, InvenTrust, our portfolio, we're portfolio agnostic to an extent that unanchored can be just as attractive to us as larger format, but it's got to fit the criteria. It's got to be in a market that we trust, that we know we can grow in, that we already have had success in, and it has to fit the essential retail nature of the centers that we own.

Got it. So you aren't underwriting like a different IRR depending on the property type?

No, not necessarily. I mean, like I said, the unlevered IRRs that we're getting to are anywhere from the low 7s to the high 7s. And it's all what the risk tolerance is. We need a little bit of more unlevered return if we think that the asset is inherently more risky for whatever reasons and a lot of things I just mentioned, GLA size, the amount of boxes that it may have, whether it has a grocery anchor or not, if it's in a core market or core retail node or if it's in a developing market or a secondary submarket within a market. So all those things considered. But we look at it, like I said, when we're looking at our $300 million that we're trying to put out on a blended basis, we want to get to an initial yield that we're comfortable with, a growth profile that's going to be complementary and additive to the current portfolio and an IRR where we know we can make money and then in turn, grow cash flow.

Got it. And if I could ask one more. Do you see a market concern about expanding into more of the secondary and tertiary markets is the ability to grow rents long term to match that of some of the larger markets? So how do you get comfortable thinking that you'll be able to grow rents in these markets similar to how you would grow in some of your larger markets?

So Daniel, it's a great question. And the reason for that is what we've studied the markets that we've currently been talking about, we've been looking at for a long time. And the most important thing is, and it really is a Sun Belt kind of story that continues, by the way. It's probably not as accelerated as it was just coming out of COVID. But the migration trends from population, the amount of income and business formation that's going into the Sun Belt, it's bleeding out into some of these other markets like a Knoxville, like a Greensboro, certainly like a Charleston. So those markets are seeing the types of movements, and I'm going to use this just as an example, like perhaps Nashville did 15 years ago. So continuing to get population growth and that should serve it for the next several years, not just a point in time.

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

Thank you, everyone, for your interest in InvenTrust. Thank you for the questions, and we look forward to seeing many of you as we kick back into some of the conference season. Enjoy the rest of the day.

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

Thank you for standing by, and welcome to InvenTrust's First Quarter 2026 Earnings Conference Call. My name is Christine Lyn, and I will be your conference call operator today.

Before we begin, I would like to remind our listeners that today's presentation is being recorded, and a replay will be available on the Investors section of the company's website at inventrustproperties.com. [Operator Instructions]

I would like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer. Following the team's prepared remarks, the lines will be open for questions.

As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties. Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release.

In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website.

With that, I'll turn the call over to DJ.

Thanks, Dan. Good morning, everyone. Our first quarter results reflected steady operating performance across the portfolio. Same-property NOI grew 2.6%, while core FFO and NAREIT FFO per share increased 6.5% and 10.4%, respectively, from the first quarter of 2025.

We continue to enjoy meaningful embedded growth from annual escalators, healthy cash-on-cash leasing spreads and our sign not open pipeline provides further confidence regarding revenue conversion. Taken together, this supports our expectation for same-property NOI growth to build in the back half of the year. Christy will provide additional details on leasing demand and backfill opportunities for our available spaces in her remarks. Given this visibility, coupled with increased confidence around our acquisition pipeline, we were able to increase FFO per share guidance for 2026.

Our nearly 100% Sun Belt footprint is roughly 89% grocery-anchored and centered on essentials, goods and services in trade areas with strong long-term demographic tailwinds. The backdrop across the region remains highly favorable with many of the country's fastest-growing cities and suburban communities concentrated in the Sun Belt. Recent migration data also underscores the appeal of our markets with Florida, Texas, the Carolinas, Arizona and Tennessee among the leading beneficiaries of wealth inflows. These states continue to attract new residents due to job growth, lower taxes and lifestyle appeal.

We will continue to invest in our core markets while expanding our corridor strategy into complementary secondary Sun Belt cities. That approach broadens our acquisition sourcing efforts and expands the opportunity set for capital deployment. Within that framework, we remain disciplined, active and selective in a competitive transaction environment. During the quarter, we completed $123 million towards our $300 million net investment guidance for the year, and we have another $167 million of additional deals awarded or under contract with other opportunities still in the pipeline.

In February, we entered the Nashville market with the acquisition of Nashville West. It adds a high-quality property to our portfolio and follows the same playbook we've used successfully elsewhere, which is enter areas where demographics, retailer demand and long-term fundamentals align to support durable growth and then build from that initial foothold over time.

Selective small-scale redevelopment continues to provide another avenue for incremental NOI growth within the existing asset base. We are focused on projects that reposition anchors, remerchandise space and add small shop or outparcel space where demand is strong and additional GLA is warranted. In 2026, we expect this pipeline to contribute approximately 90 to 100 basis points of same-property NOI growth.

With visible internal growth and disciplined capital investment across redevelopment and acquisitions, we believe InvenTrust remains well positioned to create long-term shareholder value in an environment where necessity-based retail continues to outperform.

With that, I'll turn it over to Mike.

Thanks, DJ, and good morning, everyone. Turning to our financial results. Same-property NOI for the quarter totaled $48.7 million, an increase of 2.6% over the first quarter of 2025. Growth was driven primarily by embedded rent escalations, which contributed approximately 170 basis points. Positive leasing spreads added roughly 90 basis points, redevelopment activity provided an additional 70 basis points and percentage rents and specialty income added 50 basis points. These gains were partially offset by a 40 basis point headwind from bad debt and 60 basis points from an expected temporary impact in occupancy.

NAREIT FFO for the quarter totaled $41.3 million or $0.53 per diluted share, reflecting a 10.4% increase from the first quarter of 2025. Core FFO rose 6.5% to $0.49 per share year-over-year. FFO growth was driven primarily by higher same-property NOI and net acquisition activity, partially offset by interest expense. We also recognized approximately $800,000 of lease termination fee income during the quarter, which was anticipated and incorporated into our initial guidance.

Our balance sheet remains strong and gives us the flexibility and liquidity to continue executing on our long-term growth strategy. At quarter end, total liquidity stood at $346 million, including $27 million of cash and $319 million available on our revolving credit facility. Our weighted average interest rate was 4.1% with a weighted average term to maturity of 4 years. Net leverage finished the quarter at 29.7% and net debt to adjusted EBITDA was 5.2x on a trailing 12-month basis.

Subsequent to quarter end in April, we signed a definitive note purchase agreement for a $250 million private placement of senior unsecured notes. The financing is structured in 3 tranches: $50 million due in 2029, $100 million due in 2031 and $100 million due in 2033. On a combined basis, the notes provide us with a weighted average tenor of approximately 5.4 years and a weighted average fixed interest rate of 5.4% over the term. Funding is expected on June 29, 2026, subject to customary closing conditions. Finally, we declared a quarterly dividend of $0.25 per share, a 5% increase over last year.

Turning to guidance. We are reaffirming our full year same-property NOI growth guidance range of 3.25% to 4.25%. For NAREIT FFO, we are increasing our full year guidance range to $2 to $2.06 per share, which represents a 7.4% growth at the midpoint versus 2025. This increase is primarily driven by mark-to-market lease adjustments related to our recent acquisitions. Our core FFO guidance is increasing to $1.92 to $1.96 per share, up 6% at the midpoint from last year. Additional details on our guidance assumptions are available in our supplemental disclosure.

And with that, I'll turn the call over to Christy to discuss our portfolio activity.

Thanks, Mike. From an operating standpoint, leasing activity remained healthy during the quarter. We executed 64 leases covering approximately 329,000 square feet and comparable blended spreads were 10.5%, with new leases at 19.8% and renewals at 9.9%. Annualized base rent per occupied square foot increased 2.1% year-over-year to $20.63. At quarter end, lease occupancy stood at 96.4% with anchor lease occupancy at 98.5% and small shop lease occupancy at 92.9%.

The anticipated short-term change in occupancy was driven primarily by 7 larger format small shop spaces, and we already have 6 of those 7 spaces either signed or under LOI. For the new opportunities and spaces coming back to us, prospective rents are running approximately 15% to 20% higher. With occupancy levels at or near all-time highs for the last several quarters, the aforementioned opportunities are a welcomed event, allowing us to maintain strong occupancy while proactively recapturing and retenanting space to improve the merchandise mix, retailer credit and rent growth profile.

We currently have 5 acre vacancies, including 3 tied to our redevelopment project at Gateway Market Center in Florida, 1 in our California asset that is in our disposition pipeline and 1 space in Texas, which has an LOI currently being negotiated. More recently, Painted Tree Marketplace closed stores across the U.S., including our one location in Glen Allen, Virginia, representing approximately 30,000 square feet or about 20 basis points of ABR. We are well positioned to backfill this space.

As we look to the balance of the year, we continue to have good visibility into future growth. The lease to economic occupancy spread ended the quarter at 130 basis points, with 80% attributable to small shop space that is yet to commence, giving us a clear line of sight into revenue conversion and reinforcing the embedded growth in the portfolio. Our lease economic spread matched our fourth quarter level, reflecting our team's execution in getting tenants open and paying rent. The first quarter of 2026 was one of our highest quarters of new rent commencement since our listing.

The consumer environment also continues to support our platform. Shoppers remain value conscious with spending on convenience, necessity and everyday services holding up well. This is translating into tenant demand across categories such as food service, medical retail and other service-oriented uses. Off-price is a good example of that dynamic. It remains a dependable traffic-driving category in open-air retail and resonates in a consumer environment where value matters.

Together with grocery and other essential anchors, these tenants help create a merchandising mix that aligns well with consumer needs and positions our centers for long-term performance. Our exposure to higher-risk discretionary categories also remains limited. And while we always maintain a watch list, the overall risk profile remains manageable.

Turning to acquisitions. The opportunity set within our pipeline, while competitive, remains robust as we look to add properties in both current markets as well as adjacent or corridor markets that are complementary to the existing portfolio.

During the quarter, we added 2 properties: Marketplace at Hudson Station in Phoenix, Arizona, a neighborhood center anchored by EO Fitness and shadow-anchored by a Fries marketplace in a growing part of the Phoenix MSA. The acquisition deepens our presence in an existing growth market and reinforces our approach to building scale in regions where we already have conviction.

And as DJ mentioned, we also purchased Nashville West, a high-performing open-air power center located roughly 15 minutes from downtown Nashville, shadow anchored by Target, Costco and Publix. The asset benefits from strong traffic, attractive surrounding demographics and a location in one of the fastest-growing parts of the country. We believe Nashville West gives us a solid entry into an attractive new Sun Belt market.

Operator, that concludes our prepared remarks, and we are now ready to open the lines to take questions.

[Operator Instructions] Your first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

First, I just wanted to ask about acquisitions, the $167 million of acquisitions that are under contract or that have been awarded, which gets you to the $300 million target for the year. Are those expected to close by roughly the end of the second quarter?

And then it sounds like there's appetite to be more active beyond that as you move further into the year. Can you just talk about the future pipeline and remind us on sort of the initial yields and IRRs that you're achieving and whether that's moving around a little bit as you work through some additional deals?

Yes. Thanks, Todd. Obviously, we're very happy on how the year started as it relates to our acquisition pipeline. I think if you remember last year, we actually -- we sold in the beginning part of the year with our recycling out of California and then much of our acquisition activity end up being backloaded. This year, we got off to a good start, obviously, as Christy alluded to with Nashville West and Hudson Station.

The things that we have awarded or under contract, to answer your question directly, I think we're hoping that most of those will close at some point in the second quarter. It's hard to predict when they will close, but you can expect around that time frame, maybe leaking a little bit into the third quarter.

And to your point, we have, on a gross basis, $290 million of deals kind of either closed under contract or awarded. But we do have a really strong pipeline that we're going to continue to pursue behind that. I know we've discussed there will be a little bit of capital recycling or asset sales on a very select basis, but only if we feel like we have an acquisition pipeline that continues to be actionable. And that will be -- continue to be the strategy throughout the year.

I think one of the things that we were excited about coming into this year and then obviously, Mike alluded to the private placement that we just completed, we have a lot of dry powder. We have a lot of balance sheet capacity in a market that continues to be competitive, but we've continued to find deals at initial yields that continue to be in that low 6 range or even mid-6s that are giving us healthy IRRs in comfortably in the 7s. And that's been kind of the recipe for success for us.

Our guidance obviously indicates that our -- the cadence at which our acquisitions are coming in a little bit better than expected, which is why we were able to raise FFO per share for the year. And we'll continue to be active as long as we find deals that we like and that are going to continue to be accretive to the portfolio.

Okay. That's helpful. And then yes, in terms of funding, I guess, so yes, you have some dry powder, leverage is below your longer-term leverage target of 5 to 5.5x. You mentioned some dispositions. But how should we think about equity capital sort of fitting into the equation a little bit as you kind of look at where your equity cost of capital is today as well?

Yes. No, it's a very good question. I think if you look back when we issued equity in 2024, it was kind of a similar situation really. The stock was trading kind of at an all-time high at that point. But more importantly, based on that equity cost of capital or weighted average cost of capital across the different pockets of capital that we had at the time, we had an attractive pipeline that was actionable, and we knew we could grow cash flow accretively.

As we sit here today, I think we're a couple of days off of another all-time high. I know there's a little more pressure today. But we feel pretty good about our multiple. We feel good about where the stock is at. But having said that, it all is predicated on the opportunity set. And if the opportunity set is one where we can continue to grow cash flow accretively, we'll look at all different avenues.

Okay. Have you seen changes in seller expectations at all, I guess, either with more capital coming into the space, but on the other side, have you -- are you hearing any sort of pockets of capital that are pulling back or having a difficult time accessing capital just given some of the turbulence in the credit markets?

Not really, to be frank. It continues -- like we're continuing to find really good opportunities, but there hasn't been a whole lot of distress on the seller side. It's really -- every situation seems to be a little bit unique. We've -- most of our -- almost the entirety of our acquisitions that we've done is in some sort of -- in the private market, usually smaller operators that are selling for one reason or another. We've done a couple of large ones where they're rotating out of funds. So it kind of runs the gamut, but I wouldn't say that we're seeing any distress related to some of the credit tightening.

Our next question comes from the line of Andrew Reale with Bank of America.

First on the acquisitions, Nashville West, that's a single asset entry into a new market. I guess maybe talk a bit more about what made this the right time to enter. Do you have any additional Nashville assets in the pipeline currently? And how much scale would you aim to achieve there? And then the 2 acquisitions in the quarter are basically fully occupied. So can you just talk about any upside you see at those assets just in terms of rent mark-to-markets or other value add?

Thanks, Andrew, for the question. I'll take that. This is Christy. Specifically with Nashville West, we found that to be a really unique opportunity to go into the market and exciting because it is a dominant power center with really healthy and competitive shadow anchors with, as we previously mentioned, Costco, Publix and Target.

And I think the one thing that was unique to us is as we see with this property is that there is ability to raise rents here. So we do see this as -- and I know you said it's pretty much occupied at this point. That's true, but we see the long-term value in being able to raise rents at this property. And there's a little bit of remerchandising that we think we can get done as well.

Holistically, the national market is an exciting opportunity. We do have a few other assets in the pipeline. Nothing currently under LOI or near execution, but the things that we have our eye on that we've been working with various parties and things that we kind of have long-term conversations about. So I do hope that over time, we're able to get a presence, one that would allow us to have 3 or 4 assets in the market and operate there efficiently, but we are able to utilize our other boots on the ground in surrounding markets to help us service that asset and operate effectively.

And then as for your question about Hudson Station, I think the thing that we see on both of these assets is while they are fully occupied, they're both in markets where we see that over time, we're able to put on the InvenTrust model. We're able to grow rents. We're able to put in the annual escalators to get them on fixed CAM, all of which will help us produce our cash flow growth.

Okay. And I think it was last quarter, there was a comment that acquisitions from 2024 and '25 were generating blended spreads in the low 20% range. I guess how much below market rent is left in that acquired pool? And over what time frame does it get mark-to-market?

So the great news about that, Andrew, is there's a ton of opportunity because we only get access to a certain amount of leases every year. And more importantly, if you look at all the acquisitions that we've made since 2021 or even 2024, the average annual escalator within those tenants or at those properties is, call it, half of what we can get from -- or what we have been getting in the remainder of the portfolio. So over 3% annual escalators on every new deal that we're doing now. The in-place escalators is, call it, 1.5%.

So a tremendous amount of opportunity, not only at the initial cash spread, which to your point, has been, call it, 20-plus percent on those. So finding real good below-market rent opportunities, but being able to put in annual escalators, as Christy mentioned, to really service the continual NOI and cash flow growth that we're trying to achieve here and year out.

Our next question comes from the line of Cooper Clark with Wells Fargo.

I wanted to ask about the same-property NOI acceleration in the back half of the year. In the press release, you noted the acceleration is driven by contractual rent and also a strong pipeline of lease commencements over the balance of the year. I was hoping you could provide a little bit more color here on the contribution coming from the lease commencements, just within the context of the SNO pipeline declining quarter-over-quarter in terms of the $4.6 million ABR contribution and how lease commencements compares to some of the other core items driving the acceleration in the back half?

Yes, Cooper, this is Mike. I can start with that. So yes, you mentioned the SNO pipeline. Most of that is small shop, 80% of that is small shop. We do expect 90% of that to be coming online by the end of the year. And it is weighted very much in the back half of the year in Q3 and Q4 is when you'll see most of that come online.

Yes. The only thing I would add is when you think about the NOI cadence, I think not to -- we don't guide to quarterly cadence, but I think it's important in this case just because of the acceleration. The second quarter, we're expecting it to be kind of very similar to the first quarter that you'll really see the acceleration in the third, but mostly in the fourth quarter.

And you could expect the same thing from an occupancy standpoint. I think it's always hard to gauge lease versus economic occupancy, but we can expect is us comfortably accelerating the back in that SNO pipeline actually increasing as we get to the back half of the year, which is going to serve us extremely well going into '27.

Great. And then moving towards the acquisition market. Just curious if you could talk about the buyer profile you're finding yourself competing against for assets in the market today. And then just curious, as we see the transaction market remain highly competitive, where do you think competitors are reflecting a higher risk tolerance for the asset classes, whether it's lower exit cap rates or higher rent growth?

That's a great question. It's hard for me to opine on how other people are looking at deals, but it has been and will continue to be competitive. I think where we found our sweet spot with InvenTrust is we don't do a whole lot of the deals, call it, under $10 million or $15 million. That tends to be very competitive from a -- in the private market, certainly.

And then we -- obviously, because of our size and not wanting any undue risk at any one asset, no matter how good that asset may be, we don't have anything, call it, over $200 million, where many of the larger funds or even some of the public REITs have been acquiring over the past couple of years. So -- and then along with our cluster to corridor strategy as it relates to some of these secondary markets that are very complementary to our core markets, we've kind of found a niche where we've been able to get phenomenal properties with really strong embedded growth at a good initial return, but most importantly, a good growth profile and unlevered return over time. And that's something that we'll continue to do.

I think there has been a lot more competition in some of the gateway markets where there's probably a liquidity premium, especially because of the amount of activity from some of the private funds. But that's not something that where we've been focusing. And I think you'll see once we're able to announce -- or hopefully, you'll get these deals that have been awarded or under contract, get those closed, you'll see much of the same introduction to new markets that are very complementary to the core markets that we're already in.

Our next question comes from the line of Michael Gorman with BTIG.

Christy, I'm sorry if I missed it, but for those 7 larger format small shop tenants, was there anything thematic in there? Were they all the same operator? Or it just happened to come in a cluster in the first quarter?

Thanks for the question. Yes, there's nothing systematic or thematic about what departed in that area. As you mentioned, there are 7. They're holistically around 5,000 square feet, if you were to take on a blended basis. And they're just spaces that we've had our eye on for, frankly, a long time with operators that may have been looking a long time to make it. So there's no single use related to these. They're kind of all over the board, and they're all over our markets. So again, not even market specific.

And as I mentioned, we have 6 of them already identified with either LOIs or executed leases with 15% to 20% spread. So we're actually excited to get our hands on some of these finally to be able to get the lift. It's been a long time since we've been able to take some of these opportunities.

Yes. The only thing I would add there, and it's a great question is, look, our small shop occupancy and retention rate has continued to climb higher and higher and higher, which is always a great problem to have, right? But at an all-time high occupancy in the fourth quarter, small shop occupancy, I should say, in the fourth quarter, we found this to be the perfect time to transition -- have some planned tenant transitions in otherwise fully or highly occupied portfolio still drive solid growth, but this is going to set us up exceptionally well once we get these things re-leased and open in the back half of this year and going into 2027.

Yes, that definitely makes sense. And then maybe one more on the acquisition side. The outparcel in Atlanta, was that just an opportunistic purchase? Or is there a potential redevelopment of the center that outparcel was critical for? And maybe just bigger picture, can you just remind us of your view on outparcel and outparcel strategy for the properties that you own, whether it's controlling or potential sort of how you think about that longer term?

Sure. I'll be happy to take that. That particular outparcel, we've actually had our eye on for some time. It does kind of fit at the entryway to that asset. So the way InvenTrust thinks about our properties is that the more actually that we can control, especially the front door of the property, the better off we are. And so we have got an opportunity. It's not a redevelopment play in and of itself of this particular asset in that it is -- currently has a new lease on it with an urgent care, which very much complements our current uses at the center. But it does provide us opportunities to work with that tenant and give us an ability to add an additional outparcel there in the future if the demand is warranted. So there were a couple of reasons as to why that was exciting and worked well for that particular space.

I will say that across our portfolio, we do consistently look at where we may have outparcel opportunities to purchase or whether they be relevant for redevelopment or give us an ability for better control of our assets. Again, most of these are tied to additional OEAs and REA. So owning everything helps us have better control of our property.

Our next question comes from the line of Hong Zhang with JPMorgan.

I was wondering if you could talk about how we should think about the size of your active redevelopment pipeline for the remainder of the year, given the fact that you completed a number of projects in the first quarter.

Yes. So did you say-- so I think the first part is back to how we think about the acquisition and the redevelopment pipeline?

Or the redevelopment pipeline specifically. I think it's only 3 projects currently.

Yes. Yes. So we -- obviously, we completed a couple of projects early, which is obviously, as I mentioned, driving a nice little piece of building block of our NOI growth for this year. As you see in the supplemental package, we have a ton of things that we're working on at any given time, a ton relative to InventTrust, of course. But those projects are at different stages, whether it be waiting for entitlements, actually putting shovels in the ground. But the cadence is going to be consistent.

I think one of the things that's exciting over the next couple of years is we do have some larger redevelopment properties, again, relative to InvenTrust size, mostly related around grocery rebuilds or relocations within the same center. Those are the best bang for our buck. It's the best thing for the center for -- on a long-term basis, and we'll continue to do some of those.

But the one you're alluding to was an exciting opportunity to do some remerchandising down in Florida to get those open and operate really strong and upgraded merchandise mix, and we'll continue to look for those select opportunities as well as, as Christy mentioned, one of the most important things about our -- I don't know if I'll call it outparcel acquisition strategy, but it's really just controlling as much of the properties we can. So if and when we do get an opportunity to get an outparcel back, we have full control of what we want to do and the future of that path.

Our last question comes from the line of Paulina Rojas from Green Street.

I tried to remove myself from the queue. My question was asked. But given that I have -- you mentioned the market has remained competitive, have you seen any shift in terms of cap rates? Or you see it truly as a continuation of the trends that have been in place for a while now?

Yes, Paulina, it's a good question. It's always hard to pinpoint because every asset has its own unique story. So it's really hard to find a trend. I will tell you this, and I think we've shared this with you in the past, is it has remained competitive. Obviously, there's been a lot of activity and interest in the open-air multi-tenant retail space, which obviously would allude to stronger private market pricing. And we've seen that in certain markets, obviously, that was an opportunity for us in California.

We've seen strong pricing in the larger markets in Texas. That's why we found unique opportunities on a one-off basis to go to. And I hate to call them secondary markets, but they're complementary markets to our core markets where we're seeing just as good of growth or probably a less liquid market, which can be reflected in the cap rate and the unlevered return.

One of the things I know we've shared with you is everything that we bought, we feel a little bit better about 6 months later and whether that's -- and that's both from a pricing perspective and a performance perspective. So not only we feel good about our initial yield on things we've bought, but we like the activity and the demand that we were hopeful for when we were underwriting the property initially. So I think it's much of the same as opposed to any material difference from maybe last quarter or even a couple of quarters ago.

And perhaps going back to the occupancy loss, but again, it is not very -- it's similar to what some of your peers experience. But I'm thinking how do you think about distinguishing what's normal seasonality from something that perhaps underneath is more worth monitoring?

Well, it's a great point. The reason we can tell is because we -- our portfolio is the size of which where we have really good intel and conversation with every one of our tenants. So I know Christy alluded to the 7 tenants that really were the predominant needle movers at the top this quarter. I think almost all 7 of them we've had our eyes on and have had discussions with for some time, and they've kind of went along for a long period of time, longer than probably they would have otherwise done had it not been for such a strong underlying fundamental market or in the space.

Frankly, 2 or 3 of those spaces, we very proactively went after because we needed the space back either for expansion of existing concepts or we had someone that we had to get into the property, so they wouldn't go elsewhere in the market or the submarket. And then the other ones we kind of had just been waiting on, and that's why we already have kind of 6 of the 7 already earmarked either with a deal underway or in some form of LOI or legal.

So I think for us, it's kind of easy. If we didn't have the demand right behind those, perhaps I would tell you that there would be some softness, but that's absolutely not the case. It's much more transitory in nature. And for us to take an opportunity to move some larger small shop spaces while increasing guidance is and then setting up for success for the next couple of years is a really good position for us to be in.

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

Thank you, everyone, who joined us. We appreciate you taking time and your interest in InvenTrust, and we look forward to seeing many of you in the coming months, either at ICSC or several conferences that will be over the summer and then early fall. Thank you.

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

Welcome to Citi's 2026 Global Property CEO Conference. I'm Craig Mailman with Citi Research, and we are pleased to have with us InvenTrust and CEO, DJ Busch. This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit questions.

DJ, we're going to turn it over to you to introduce your company and team, provide any opening remarks, tell the audience the top reasons that investors should buy your stock today, and then we can get into Q&A.

Sounds great. Thanks so much, Craig, for having us, and thanks for joining us. With me today is our Chief Financial Officer, Mike Phillips; and our Chief Investment Officer, Dave Heimberger. If you're not familiar with InvenTrust, we are an open-air retail REIT, 75 properties, almost exclusively in the Sun Belt. So Craig, to answer your question, why you would invest in InvenTrust, we are really -- the only way to get full concentration into the markets that are growing the fastest in the U.S.

Just to give you a little bit of a background on the portfolio, about 85% or 90% of our portfolio is grocery-anchored. 2/3 of the portfolio is your traditional neighborhood or community centers. And then the remaining 1/3 is a little bit larger format, but almost all of those also have a grocery component. So we do really lean into the essential nature of retail, essential goods and services. But going back to my first point, the most important piece of our story is we are investing in the markets that are growing the fastest, that have the demographic tailwinds, and we're -- and you're seeing that in the results that we've been putting out.

Just to give you a background, since we listed the company in late '21, we've delivered same-store NOI growth of north of 4% every year. The last 2 years, we've been trending above 5%, but equally as important or more important, that's generating FFO per share of north of 5% on an annual basis. And the visibility that we have going forward with the underlying credit quality of our tenant base and in the markets that we're in, we feel like that's a cadence that we can continue going forward. We are one of the lowest levered companies in the open-air sector. We're at about just under 4x on a forward basis. So along with our internal growth prospects, we have some exciting external growth opportunities as well. And that was evident last year when we acquired nearly $465 million of assets, which is not nothing for a company right around, call it, just over $3 billion enterprise value. So ability to move the needle internally, certainly, the ability and balance sheet capacity to move the needle externally as well.

Great. Thanks for the overview. You mentioned the Sun Belt strategy there. Can you talk a little bit about the exit from California, the redeployment of those proceeds and really the kind of the targeted investment or redeployment this year?

Yes, absolutely. So obviously, 2025 was a transformational year from a capital recycling standpoint. We identified an opportunity a couple of years ago related to our California portfolio, which at the time was about 12% of our NOI, so a pretty significant portion. And really, the returns that we were forecasting in California relative to the returns that we've been enjoying elsewhere in the portfolio, particularly in the Southeast, they were superior in the Southeast. So we decided to take advantage of what we saw was a unique situation with our portfolio. And the reason that it was so successful is that California is obviously a very -- one of the most, if not the most liquid real estate market. The returns and initial yields are very competitive.

We were able to take advantage of a very tight market in Southern California, in particular, and reinvest those proceeds in markets that we like the growth prospects, frankly, better. And some of those examples are buying Whole Foods and Publix-anchored centers in Asheville, Charleston and Savannah, just by way of example. So perhaps a little bit smaller markets, but with either the best or one of the best retail assets in those smaller markets that are still enjoying some of those really strong demographic trends that we've been seeing elsewhere in the portfolio.

And you guys have been really pursuing that secondary market strategy, right? And you have also just announced a new market. So I don't know if you want to kind of talk about where you're focusing those deployment dollars, how you're targeting those markets to deploy there then a little bit about the new market you have.

Yes. It's -- one of the -- when you think about our portfolio, I think, especially at our size being one of the smaller companies, one of the things that we've found a tremendous advantage for us is using that clustered hub-and-spoke strategy, if you will. So really leaning into our core markets, whether that be one of the major markets in Texas or Charlotte or here in Florida, but then finding complementary markets that we can still operate at a very high level. So a really good example is we have a core portfolio in Charlotte. I mean, Charlotte has had some of the best demographic demand drivers in the Southeast. But then adding something like an Asheville where we can operate it very efficiently, and we see very similar trends, albeit being in a smaller market. So you can -- you're going to see a lot of the similar strategies going forward.

We've done something very similar in the Southwest with our Phoenix expansion. Two years ago, we had one asset in Phoenix. Today, we have about -- we -- we're about to have 5 between Phoenix and Tucson, and that's a market that we really like the growth trajectory as well. You alluded to our recent acquisition, we just planted our first flag in Nashville. Nashville is obviously one of the fast -- has been one of the fastest-growing markets in the Sun Belt. It's something that we've been looking at for quite some time. It's a tight market. There's not a whole lot of things that trade often, and this is an asset we've had our eyes on for a long time. It's a little bit larger format, which InvenTrust is not new to. Like I mentioned earlier, we do have a few larger format assets, but they tend to be one of the strongest assets in the submarket that they're in.

So most of our power center exposure is in Nashville, Austin, Texas, the Buckhead area in Atlanta and the like. In Nashville, the thing that was so interesting to us is that it's shadow anchored by 3 different grocers: a Costco, a Publix and a Target. So really, really strong traffic drivers, and we believe that we're going to be able to push rents and enhance that asset over time. Equally as important, what we've seen in Phoenix is once we do get that first asset, it does start to unlock other opportunities. So we're very hopeful that we'll be able to see some other opportunities in the Nashville area over time.

And so as you go through your buy box, like what are the attributes of either the trade area, the market that are the most important aspect, especially as you guys cast a wider net into some power center assets within some of your markets?

Yes. It's -- we like -- we tend to say that we're a little bit more format agnostic, but we do lean into the essential retail portion of the business. That is the stickiest part of our business for sure. And the way we kind of -- in very simple terms, half of our capital allocation is going to be neighborhood grocery-anchored centers that are kind of right down the fairway, if you will. And then there's going to be a smaller portion where we will allocate capital to larger format centers if the growth and risk-adjusted returns make sense for us, in which case, Nashville did.

On the other spectrum, we have done smaller format or unanchored centers as well, and those tend to be complementary to some of the assets that we already own in the market, whether they be in the similar retail node as one of our other centers or we've bought small lifestyle centers, and an example is we're in the north side of Charleston with a small lifestyle center that just fits the market perfectly, has explosive types of population growth with master-planned communities coming, and it's a de facto downtown for that submarket. So we can do a lot of different things, Craig. I think the most important thing that investors should feel comfortable with is that we're going to continue to exclusively invest in these Sun Belt markets.

And just looking at the portfolio, I mean, you guys are very well leased. I think, 94% in shop and 90 -- close to 97% overall. Is the external growth going to be the main driver of earnings growth for the next couple of years? Or is there more -- talk about the upside you think embedded still internally through unlocking mark-to-markets and remerchandising and curating assets?

Yes, it's a good question. Our external growth profile is very complementary to the internal growth. And there's a couple of ways, I'll walk you through that. So most importantly, the portfolio that we have and that we're very fortunate to have, it's very homogenous in nature. It's very high quality. So we don't have a whole lot of capital recycling that we have to do. We can be opportunistic like we were with California. And it's very unique to have a situation where you can reallocate capital and fine-tune the portfolio and you can do it on an accretive basis. And that's something that I think we -- besides California, there's a couple of other unique opportunities within the portfolio where we can do that as well. But this is a growth vehicle. We're not -- I think last year was probably the most capital recycling you'll see InvenTrust do for some time, but there will always be one-off basis where we plan to sell out of an asset to redeploy those proceeds in something that's more interesting to us.

On the internal growth side, one of the -- it's obvious in our guidance this year was same-property NOI growth at the midpoint being in the high 3s. That is, if you will, a deceleration from the last couple of years, but that's simply because this portfolio is becoming more and more stabilized, which means we're at a situation -- we're in a great situation to where we're almost fully occupied from an anchor standpoint. We have 5 anchor vacancies across the portfolio, 3 of those are at the same center, which is going to be under redevelopment this year. We're going to reimagine and relocate a grocer and do some other remerchandise activities to fortify that asset for the future.

The reason I bring that up is because of what we've been able to do, and many of our peers, by the way, with building in annual escalators, building in embedded rent that we haven't had in the past, what we should enjoy over the next several years, and this particularly relates to InvenTrust is a situation where we're re-leasing space to high credit tenants, doing select remerchandising, keeping retention rate quite high, which means even if same-property NOI is perceived to be decelerating, which it is or it could be, free cash flow could accelerate because less tenant capital is needed to continue to grow cash flow, which is a unique situation that we're in, in this part of the cycle. And that's something that will only further accelerate our ability to grow the business with external opportunities.

And you mentioned you guys are among the lowest levered in the retail space. So that gives you excess capacity to your 5 or 6x long-term debt-to-EBITDA target. I'm just kind of curious, in your former life, you may have been at a shop that's a little dogmatic on their views of leverage. But in a property sector like retail that's more stable, you're going in cap rates are a bit higher. So even at a 5 to 6x debt-to-EBITDA, your LTVs are not as high as it would be in resi or some other property types. Just your views on where the optimal leverage target may be? Is it always going to be 5 to 6x? Could it be closer to 6x as you try to compete with private guys who utilize a lot more leverage, which gives them a little bit of a different view on underwriting and what they need to achieve to get to their IRRs?

Yes. I mean it's a great question. And coming out of the pandemic, I think it's warranted for everyone to ask themselves if we could operate at a higher leverage. I think, obviously, it's extremely competitive on the private side. We're seeing that in the transaction market every day. Look, I think one of the -- employing a low leverage model to us just -- it makes good sense even though our cash flows have proven to be even more resilient than what we previously thought. We have plenty of capacity. And just to give you kind of rough numbers at just under 4x on a forward basis, that gives us close to $600 million, $700 million, not including free cash flow to grow over the next couple of years. So plenty of capacity before we get to that, call it, mid-5s types on a forward basis.

I think the most important thing when it comes to leverage, especially for a company of our size who has aspirations certainly to grow over time, is to never bump up to the high end of that leverage. You never want to feel like you're stuck, right? So as long as we -- as long as we're thoughtfully growing the portfolio and leaving a little bit of room on the balance sheet at different points where the capital markets could be less accommodative, we can still -- we still have avenues of growth. I think that's the most important thing for InvenTrust. But I think it's a fair question on whether that 5.5x in our business with the duration of our leases, with the stickiness of our cash flow, especially for InvenTrust that has 25%, 30% coming from grocery rent and 12% are coming from ground leases, we feel very, very good about the durable part of our cash flow stream.

And part of this question, too, is the evolution of the REIT investor and the metrics that are relied upon, right? When I started my career, it was very NAV focused. And so you were looking at that value creation over time. Today, it's trending more towards FFO growth. And that's what I think has weighed a little bit on the public market valuations for retail. And so I guess my question comes from a standpoint of, if the group needs to kind of get out of the mud a little bit and excess leverage in the near term is the push that gets you there. And then as you demonstrate your ability to grow and your cost of equity comes down a bit, you don't necessarily need to recap in a large way, just the next incremental deal you could do much more equity driven rather than debt, right? And so it's iterated over time.

And I'm just trying to get a sense from you and your peers, right? Everyone is scarred from the GFC and the rating agencies and everyone is so focused on keeping and getting that investment-grade rating. It just feels like -- and I don't want to speak for the unsecured borrowers, if there's any in the room, feel free to chime in. But the pricing matrix of a little bit down on the unsecured rating relative to being an A, might, it's just that historic gap that you had in the real estate space or the public side has narrowed, it feels like.

Yes. So there's a couple of great points there. First one being on how we think about trying to create value for shareholders, whether that be anchoring towards something closer to an analysis on net asset value versus growing through earnings. And I think it's a little bit of both. I think NAV can always be a useful tool on understanding where perhaps your cost of capital is based comparing private market valuations versus where the equities are trading today in the public market. But really, that it's a helpful data point. I think there's -- like most REIT sectors, I certainly feel this way. I think there's really, really strong operators in the open-air space across the open-air sector.

Having said that, we haven't admittedly done as good a job growing earnings or cash flow year in, year out. And that is in part due to some costly refinancings at different points in times that can be dilutive. And in some cases, it's dilutive asset sales because a portion of the portfolio, whether it's market-driven or format-driven, tends to start underperforming and you kind of have to recycle parts of the portfolio, which certainly can be a dilutive endeavor as well.

I think the most important thing in our sector at this point in the cycle and how good most of us feel about the business prospects going forward is to show how we can grow free cash flow on a recurring basis. I think that will probably be the next leg up from a valuation perspective because it's being proven, there's certainly no shortage of demand coming in from private market participants. I think on the public side, it's just important for us to -- we have strong KPIs across the board. We have strong credit quality across the board. How does that translate into earnings and cash flow.

To your point on the ratings agencies, I think, look, there is a cost of debt advantage by being of size and scale in this business. There's -- it's unquestioned. Our larger competitors or peers obviously can issue in the public market at spreads that are tighter than where we can issue today. The one thing that we have going in our favor is we can shrink that gap in different parts of the debt capital markets because of the quality of the portfolio. So even though we are of subscale, which is -- the intention is not to be that way for a long period of time, we can be more competitive in the capital markets because of the quality that we've created over time.

And as you think about cash flow, right, growth organically, talk a little bit about maybe your watch list, talk a little bit about CapEx needs and trends on a percent of NOI or however you guys kind of look at it internally of your portfolio maybe relative to peers?

Yes. So I think one of the things that may have gone maybe slightly unnoticed is we did decrease our forecast related to bad debt reserves for 2026. And I think that was important. I think over the last couple of years, we've -- we being InvenTrust and many of our peers have been reserving the same amount of credit loss year in, year out and been surprised to the upside, which has been great. Obviously, that has not been the case in previous cycles, certainly pre-pandemic when the bankruptcy environment was obviously much more active, unfortunately.

But as we look at our business today, going back to my commentary on our anchors, we've never felt probably more confident even with the softness in pockets of the consumer, undoubtedly, but we've never felt more confident on the underlying credit of our anchor base. There is no real foreseeable at least in the InvenTrust portfolio, anchor -- imminent anchor risk as we look through 2026 and really even into 2027. That's a difference even in the last couple of years, there's always been 1 or 2 anchors that have filed for bankruptcy or have been distressed or where you've gotten space back. Even if it was modest space, it is income that you lose.

So that's the biggest difference on why we felt so confident slightly reducing that credit reserve. And really, it all comes down to the health of our small shop tenants. Small shop continues to be extremely resilient even at the local level, but there are certain pockets of softness. Foodservice continues to be hypercompetitive with the trade down in the consumer, we have seen some softness in some of the areas of QSR or quick service restaurants, which is stating the obvious. But we still feel very good about how we're looking at and forecasting our credit reserves for the year and the underlying quality of the tenants. And that goes back to my point on keeping a high retention rate with the merchandise mix that we feel very confident in, which should continue to generate better free cash flow.

Any questions from the audience? The other piece I wanted to hit, you guys are underway with a repositioning at Gateway.

Yes.

Just kind of walk through maybe the opportunity there, timing.

Yes. So that's a project that we anticipate starting towards the end of this year. It's a little bit complicated because we're relocating a grocer within the center. So we've de-leased adjacent space. We will be building out in concert with our grocery partner, their new space right next to it. And then they'll close one day and open the next in their new prototype. And then obviously, we'll then backfill a couple of box spaces next to it while adding a little bit of GLA in some outparcel opportunities that are unique. This is something that we've done in the past. We've done these anchor rebuilds. -- fantastic return for both parties. It fortifies the grocer for the foreseeable future in a new prototype. We partnership with them, and we're allowed -- and we're able to put additional capital into the remaining part of the center. So it all gets brought up to a new standard and really at a great return relative to what we can get elsewhere.

Shifting gears a little bit. We're trying to incorporate some discussion about AI into the conference. It's kind of a dual question given retail. I'm kind of first curious about agentic commerce, you guys know there's a lot of talk about what that could do to physical retail. It's you guys are less discretionary spend in your assets maybe than some other formats. But just your views there before we kind of delve into how InvenTrust is incorporating it internally.

Yes. It's a great question. I think it's -- I'm probably -- I don't know how many of you have had, I'm probably the 15th person to say it's probably still too early to tell. But the reality is it's moving so quickly. There's a lot of ways that we've contemplated and ones that we're not even thinking about yet on how agentic AI can change marketing behaviors, consumer behavior and the like. You mentioned, I think based on our merchandise mix with essential retail goods and services, grocery, I think we're probably a little bit more immune than others, but that doesn't mean that we're not paying very close attention as it relates to our business.

We think about it in 2 phases, really. The first one is, I think in the near term, it's going to allow -- and this is very important for InvenTrust. It's going to allow us to scale our business faster without adding a lot of overhead. One of the most proud metrics that we discussed with investors is if you go back to 2019, we've -- to today, we've grown net operating income over $40 million, but G&A on a nominal basis is basically the same. AI may unlock that next iteration of us to continue to scale our platform in the same manner.

So efficiencies and expense management is probably Phase 1. Revenue opportunities is probably Phase 2, and there's a lot of things in between. It's already changing the way and at speed at which we can underwrite properties. It will probably do the same with leasing opportunities as well. And one of the things that was important to us is champion AI internally. So our third-party software systems, whether it be Salesforce, ARGUS, JD Edwards and the like, all of them are spending so much time and energy trying to understand how their business models are going to change. And we feel very comfortable and confident with the partnerships that we have with them that we can enjoy the benefits of that as they discover new opportunities.

And so in this space, it sounds like you're going the buy route or using existing partners and leveraging their spend to implement your kind of AI initiatives?

Yes. Yes, absolutely. But as I mentioned, every employee and team member at InvenTrust has access to either Copilot or OpenAI, ChatGPT. And we want people to find ways to break the system, especially at our size, I think it can move the needle for us quicker than maybe some others, finding ways and efficiencies in our business in many different avenues, whether it's on the accounting side, legal side, financial reporting, financial analysis, certainly on underwriting and corporate finance. So there's a lot of opportunities out there that we haven't yet even tapped into.

You noted it's making underwriting a bit faster. I've heard mixed reviews of popping kind of deal details into a model and having it spin something out. I'm just kind of curious what your experiences have been with that and also how you navigate not having that next generation of deal people that if you guys do lose someone, right? And it's great to keep headcount, but context and judgment at some point does play a role in go or no-go decisions. So kind of curious there, too.

Do you want to touch on that?

Yes. I mean it is a new product, so I think everyone is exploring. So I think as you kind of dump data into a system, there does need to be a quality control element. It isn't perfect. The speed is what DJ spoke to is really just you can get to your first review faster. That could go from a lease document. That could be an initial ARGUS run. I still think there needs to be someone at the driver's seat to kind of guide and make adjustments that fit our company and the way we view these assets. It's not going to just take over and do the thinking for us.

I think it's really it functionally looks like an additional person, like an assistant or maybe an analyst that could just help you get there faster. So I think the speed, it unlocks opportunity to do the deeper thinking that's more important through a due diligence process. You could possibly underwrite more assets just by using the speed you're gaining through the tools we have. But it is still very new. So I think it's not going to underwrite and close the deal for us any faster than the people we have, but I think it is additive.

And I don't want to beat a dead horse here, but I'm also curious from the financial standpoint, right, there's been some skeptics who said you're kind of -- the AI companies are getting get hooked a little bit now on maybe a discounted rate and then down the road when you really get integrated, you're going to pay the full freight for either energy or tokenization. And so the economics you thought you were getting on the technology actually changes. So I'm kind of curious how you guys measure internally the return on this and the -- or the cost savings relative to other initiatives or existing processes.

Yes. It's a good point. Are we reallocating full resources? The answer is no because we can't afford to, right? But we're watching it extremely closely. And going back, we have a subset of people that are using it on a daily basis. I know Mike has no intention of having it take over our financial reporting at any time soon. And it will -- and it's a good question on how quickly that return will start to materialize. I think we're very comfortable the way that we're thinking about it today. It's certainly been more and more discussion within the boardroom, because it's obviously important for our Board members for us to think strategically as it relates to where this business can go. And how are there going to be different ways we can scale this business that we weren't thinking of even just a year ago.

Any questions in the audience? All right. I may jump to rapid fires and get us to lunch 3 minutes early. Yes, go ahead, [ Chris ]. Just hit the button.

Maybe you could just talk about across your portfolio, like the in-place rents versus market and kind of where you stand now and what the opportunity is to bring them up to market?

Yes, it's a good question. There's one anecdote, and I call it back because it's a smaller subset that I always point to, because one of the frustrations, and it's only frustrating now because we've been at such a good point in the cycle. One of the frustrations is we can only get access to about 10% or 12% of our leases in any given year. So unquestionably, we've seen this not only in our acquisition pipeline or the underwriting that we've done with our new opportunities, and then certainly the core portfolio is there's undoubtedly a lot of mark-to-market rent opportunities throughout the portfolio.

And the anecdote I was going to share is we've had about, call it, 2 dozen or so leases over the past 18 months that had an option that wasn't executed by the tenant. That increase would have been closer to, call it, 7%, which is kind of a normal option increase, because we were able to renegotiate those given the missed option period, we were able to get closer to 30% on those leases on a cash basis, which speaks to the kind of embedded rent opportunities in the portfolio.

I think one of the most important things that we are careful of is there's a recipe for success in this business, and it's not buying up rent or charging too much rent to where the tenant can't succeed. So the introduction of higher escalators and you can enjoy rent growth in concert with your retail tenant, whether it be services or retail, their business can succeed, we can succeed. And then if you do get that space back at a certain point in time, you're not sitting on an above-market rent and then additional capital having to go into that to retenant it.

So making sure our partners feel good about the rent increases, and then we will take 3% to 4% sustainable internal growth, supplement that with external growth, deliver mid-single digits free cash flow growth. And that -- you put that all together, it's a total return that I think is acceptable for our investors.

Great. So rapid fires for retail. Same-store NOI growth in 2027?

For the sector?

For the overall sector.

For the overall sector, I would say 3.75% to 4%.

And then this time next year, will there be more, fewer or the same amount of companies in your space?

Probably fewer.

Great. Well, thank you guys so much.

Thank you for standing by, and welcome to InvenTrust Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Becky, and I will be your conference call operator today.

Before we begin, I would like to remind our listeners that today's presentation is being recorded, and a replay will be available on the Investors section of the company's website at inventrustproperties.com. [Operator Instructions] I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer.

Following the team's prepared remarks, the lines will be open for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties.

Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release. In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website.

With that, I'll turn the call over to DJ.

Thanks, Dan, and good morning, everyone. We appreciate you joining us today. 2025 was an exceptional year for InvenTrust marked by strong operating performance and disciplined execution. Same-property NOI grew 5.3%, marking our second straight year above 5% and our fifth consecutive year of growth exceeding 4%. This performance speaks to the quality of our portfolio, the strength of our platform and the consistent execution of the InvenTrust team.

NAREIT FFO finished the year at the high end of our guidance range of $1.89 per share, representing 6.2% growth year-over-year. Our balance sheet remains well positioned with sector low net debt to adjusted EBITDA and ample liquidity to support our expansion objectives. From a strategic standpoint, the year was equally transformative, we completed the successful sale of 5 California assets and efficiently redeployed that capital into higher-growth Sun Belt markets.

In total, we acquired 10 properties including 2 in the fourth quarter, representing more than $460 million of gross acquisitions during the year. These investments deepen our geographic concentration and grocery exposure in areas where we see long-term population expansion limited new supply and the ability to leverage our operating platform. Christy will walk through our most recent acquisitions in more detail shortly.

Institutional and private capital remains active in the open-air retail space, particularly in grocery-anchored assets. While that interest validates positive trends in our sector, it also reinforces the importance of discipline. We remain selective in our acquisition approach, focusing on opportunities that meet our return thresholds, enhance our operational footprint and offer clear avenues for value creation through leasing and asset management. Our objective is to grow over time in a thoughtful and prudent manner.

Beyond acquisitions, we continue to invest internally through targeted redevelopment initiatives designed to maintain the overall quality and competitiveness of our portfolio while driving incremental NOI. These projects focus on remerchandising, repositioning anchor space and selectively adding [ outparcels ] at existing centers. While redevelopment is not intended to be a full point of our business model, we expect these efforts to contribute approximately 50 to 100 basis points of incremental NOI growth annually over the next couple of years.

The retail landscape continued to demonstrate notable resilience in 2025. While store closures increased year-over-year, new retail construction stayed at multi-decade lows as development economics remain challenged, creating a constructive backdrop for owners of high-quality, well-located centers. At the same time, retailers are operating with better information as it relates to real estate decision-making, applying clear return thresholds and benefiting from more flexible supply chains. These factors favor landlords who can provide the right space in the right trade areas, a dynamic that aligns well with our focus and footprint.

According to CoStar, top-performing retail markets in 2025 included Charlotte, Tampa, Orlando and Dallas. Charlotte, where we acquired 2 properties during the year stands out for robust population growth, job creation, and suburban development, ranking first among major U.S. markets for retail rent increases. We are seeing similar trends in Phoenix, another area where we continue to expand our presence.

Our strong performance in 2025 positions us well heading into 2026. That outlook is reflected in our guidance with core FFO per share growth expected to be in the mid-single-digit range and net investment activity of approximately $300 million. As always, our strategy remains simple: continue to expand our Sun Belt focus portfolio and execute at the property level to drive sustainable cash flow growth.

With that, I'll turn it over to Mike to walk through the financials in more detail.

Thanks, DJ, and good morning, everyone. For the full year, same-property NOI totaled $171 million representing growth of 5.3%, driven primarily by embedded in escalations, which contributed approximately 160 basis points. Occupancy gains added about 80 basis points, while positive leasing spreads contributed roughly 90 basis points. Redevelopment activity provided an additional 70 basis points with percentage and ancillary rents adding around 20 basis points and net expense reimbursements contributing 130 basis points. These drivers were partially offset by a 20 basis point headwind from bad debt reserves.

Same-property NOI for the fourth quarter was $44.3 million, up 3% year-over-year. For the full year, NAREIT FFO totaled $147.8 million or $1.89 per diluted share, reflecting an increase of 6.2% over 2024. Core FFO rose 5.8% to $1.83 per share year-over-year. FFO growth was primarily driven by same-property NOI and net acquisition activity, partially offset by the impact of a higher weighted average share count.

In the fourth quarter, NAREIT FFO came in at $36.8 million or $0.47 per diluted share, representing a 4.4% increase compared to the fourth quarter of 2024. Core FFO increased 7% to $0.46 per diluted share for the 3 months ending December 31. Our balance sheet remains exceptionally strong, providing InvenTrust with flexibility and liquidity to execute our long-term growth strategy. At year-end, total liquidity stood at $480 million, including $35 million in cash and $445 million available under our revolving credit facility. Our weighted average interest rate is 4%, and our net leverage ratio was 26.3%.

Net debt to adjusted EBITDA remained at a sector low of 4.5x on a trailing 12-month basis. During the quarter, we completed 2 acquisitions totaling $109 million funded with our available liquidity and the assumption of approximately $30 million of secured property-level debt. The Board of Directors approved a 5% increase to InvenTrust annual cash dividend for 2026. The new annualized rate of $1 per share will be reflected in the April dividend payment.

Turning to 2026 guidance. We expect full year same-property NOI growth in a range of 3.25% to 4.25%. This outlook incorporates a bad debt reserve of approximately 30 to 70 basis points. For NAREIT FFO, we are providing guidance in the range of $1.97 to $2.03 per share, representing a 5.8% increase at the midpoint compared to 2025. Our core FFO guidance is $1.91 to $1.95 per share reflecting a 5.5% increase at the midpoint year-over-year. As discussed previously, the interest rate on our $200 million term loan swaps reset from approximately 2.7% to 4.5%, which will create a modest headwind to FFO for the last 3 months of the year.

And with that, I'll turn the call over to Christy to discuss our portfolio activity.

Thanks, Mike. The retail landscape in 2025 was marked by steady execution and improving operating momentum. Our leasing teams performed well, converting renewals at attractive spreads and filling small shop vacancies with high-quality operators that enhance tenant mix support the long-term performance of our centers.

Leasing activity remained positive across the portfolio with grocery, health and wellness, specialty food and value-oriented concept showing the strongest demand throughout InvenTrust asset base, Foot traffic and retail sales have remained durable while our watch list of at-risk tenants is minimal. One area where execution has been particularly evident is in the performance of our acquisitions.

For properties acquired in 2024 and 2025, new and renewal lease spreads have averaged approximately 21%, demonstrating our ability to identify the low market opportunities. This showcases our leasing team's ability to unlock growth even in well occupied centers. From a tenant health perspective, the story remains resilient. Retail sales are up and announced store openings continue to exceed closures, signaling sustained confidence in physical retail. While turnover is a normal part of the strip center business, our tenant rosters are as strong as they have been at any point.

Across our markets, retailers are increasingly focused on optimizing store fleets rather than pulling back with new concepts actively pursuing space and well-located centers. The strength is evident in our leasing results with several key metrics reaching their highest levels since our listing in 2021. New leases executed in 2025 achieved a 30.9% spread. While renewals averaged 10.9%, resulting in blended comparable leasing spreads at 13.3%. Small shop lease occupancy also reached a new all-time high of 94% and annual rent escalators on new and renewal small shop leases executed in 2025 averaged over 3.1%, the highest level since our listing.

At year-end, total leased occupancy was 96.7% and our retention rate was 85%, reflecting the planned departure of a single anchor at our Gateway Market Center property in St. Petersburg, Florida, which is currently in the early stages of a transformational redevelopment. Excluding that space, our retention rate would be consistent with previous quarters at approximately 90%, and our lease occupancy rate would have been flat sequentially.

Turning to acquisitions. We added 2 high-quality assets to the portfolio during the quarter. The first is Mesa shores in MSA, Arizona, a rare dual grocery-anchored center by Trader Joe's and Sprouts Farmers Market. We also expanded our Florida presence with the acquisition of Daniel's Marketplace in Fort Myers, anchored by Whole Foods. Both assets aligned with our Sun Belt necessity-based strategy and future tenant mixes weighted toward national and regional brands with upside through small shop leasing and merchandising.

As we head into 2026, operating fundamentals for shopping center REITs remain solid and supportive of our platform. The InvenTrust portfolio is well positioned for tenants to focus on essential uses and services, omnichannel fulfillment and seeking benefit from long-term demographic growth across the Sunbelt.

Operator, we are now ready to open the lines to take questions.

[Operator Instructions] Our first question comes from Andrew Reale from Bank of America.

I guess, first, I was just wondering if you could maybe talk a little bit more about your funding sources for the $300 million of net acquisition activity. I mean it sounds like you have some capacity on the balance sheet might lean into that a bit. So I was wondering kind of what type of debt would you look to issue what type of pricing would you expect? And then just with the greater interest expense assumption in the guide, what portion of that is from the swaps rolling over? And what portion of that would be from incremental debt?

Yes. Andrew, this is Mike. I can start. So yes, you hit on the head, we have [ money room ] on the balance sheet to fund acquisitions this year. That's kind of the plan going into the forecasting. We have $300 million kind of at the midpoint of net acquisitions. What you can see from us this year is using our line of credit, probably a little bit more than we have in the past and then opportunistically hitting the market probably the 2 options that are best for us in the private placement market or using some more bank debt, we'd probably prefer to use more permanent long-term financing through the private waste market.

And that pricing right now is probably depending on tenor anywhere between 125 and 150 basis point spreads. I think you asked about the headwind for the swap spreading off in 2026, obviously, to us don't burn off until September. So it's probably about a [ $0.05 ] headwind going into the year.

Okay. And then maybe just a follow-up on that. Could you just help us think about if you have a new leverage target range? And I guess, just how high you'd be willing to take up that leverage in aggregate?

Yes. So the good thing is we can kind of fund to the balance sheet and not really come up to our leverage targets by the end of the year. So we can do the $300 million this year, and that still puts us on a forward basis at kind of 5x net debt to adjusted EBITDA, and we'd be comfortable really not going above 5.5x on a forward basis at any given time.

Yes. Maybe just to add on that, Andrew. I think when we think about the balance sheet, obviously, we're being one of the lower levered companies, we do have the ability to self-fund [ our ] through that incremental debt, which is an important avenue for us over the next couple of years.

And you can see that as it relates to the net investment activity that we're trying to accomplish this year. we're very protective of the balance sheet. Obviously, we try to keep it very simple and maturity schedule is extremely manageable. And as Mike said, we're always trying to gear towards that mid-5s on a forward basis. But on any given quarter, we're going to be opportunistic while protecting the balance sheet.

Our next question comes from Linda Tsai from Jefferies.

On the [ Amazon Go and Fresh ] closing stores, does that open any opportunities to open more Whole Foods increase that 2% as a percentage of ABR in your portfolio?

Well, we don't actually have any of the Amazon goes or any Amazon brick-and-mortar, I guess, in our portfolio, we obviously did a site analysis as it relates to our portfolio, specifically as it relates to our Whole Foods locations to make sure that we weren't at any type of risk. If and when they decide to start transitioning some of those boxes.

The good news is we're very well protected with our very Whole Foods in the InvenTrust portfolio. operates exceptionally well. Most of them are looking to add additional square footage if they can, but they're very profitable and have high sales volumes. The more interesting thing is the Whole Foods banner is obviously one that done quite well for sometimes it serves a very particular part of the market very well. And I think seeing Amazon lean back into that to that banner is positive for institutional quality shopping centers.

And then one of your larger peers discussed recently seeing lower CapEx requirements in their portfolio, and you highlighted this characteristics in your own portfolio previously. Are you seeing '26 as largely a renewal business again and [indiscernible] the percentage of CapEx, 20% NOI continue to come down?

Yes. So good question. I think that's a fair statement. We expect -- and I think we've talked to you, Linda and many others about the dynamics going forward as we get closer to kind of frictional vacancy. We see that as a very positive outcome for free cash flow for our business. To the extent, if you think about where our credit quality is, and obviously, in our guidance, we've guided to a lower credit loss this year versus the previous years.

And a lot of that do with the better credit quality and merchandise mix in the portfolio. So as that merchandise mix has improved as the bankruptcy risk has been reduced in the InvenTrust portfolio we expect to, and with the success that our retailers are having, we do expect renewals to be a bigger part of our business as we look forward.

And what that means is growth with lower CapEx to your point. So which is inclusive of incremental redevelopment opportunities as well, but that 20% should continue to come down in the form of the 2 major categories being landlord work and tenant capital. So as we see that, you should -- we're really optimistic and excited about the ability to just have our tenant -- our current tenants be successful with us for the coming years. And growing free cash flow without spending as much capital as we have in the past when we're trying to grow occupancy and fill -- backfill space is that perhaps we're bankruptcy.

Our next question comes from Cooper Clark from Wells Fargo.

I wanted to ask about the $300 million net acquisitions, guys. Curious if you could speak to the acquisition pipeline as it stands today in terms of volume and pricing. Curious how much of the acquisition volume within guidance is either under contract or deals where you have some certainty of closing as opposed to more speculative acquisitions?

Yes. No, good question, Cooper. So what I would say is, as we do every year, we come into the year, we look at our pipeline, we evaluate the current opportunity set, and we try to provide a guidepost or a benchmark of what we're trying to accomplish this year. I think with the $300 million net investment activity, what we really are trying to show is that we're expecting to continue to grow our business, leverage our platform and use the balance sheet, which we haven't done immaterial way in the past. While still managing at a very low leverage level.

Directly to your point, almost half of that $300 million is either has either been ordered or is under contract. Which we expect to close probably in the early part of this year. So we have really good visibility on half of it, just under half of that $300 million. As we look further into the pipeline, there's a lot of exciting opportunities, it's still a very competitive market, but we've continued to find assets and opportunities that fit our criteria, which is a going in yield in the high 5s, low 6s with great growth that supplements our complements, I should say, the portfolio quite well. And getting into the unlevered returns kind of in that low to mid-7s range.

And that's what we continue to see. You're going to -- as Christy alluded to in her prepared remarks, Phoenix, the Carolinas, smaller secondary markets that are very complementary to our portfolio being in the when we're seeing demographic trends that are still very favorable relative to elsewhere in the country. So you're going to see a lot of the same when you look at the 10 assets that we acquired in 2025 you should see a very similar kind of opportunity set as we move through 2026.

Great. And then just switching to the disposition cadence. Just curious how we should think about dispositions this year within the context of our last property in California and then potentially recycling out of some other lower growth assets.

Yes, it's a good question. So last year was unique, right, with the California opportunity. That was something where we saw an opportunity to recycle capital in an accretive manner. And we decided to jump on that, obviously, the success of California front-loaded our acquisitions in 2025.

That's not the strategy for 2026. What you should see is we'll kind of pull forward and push back dispositions as it relates to the opportunities that we're seeing in our acquisition pipeline. With the exception of California, obviously, we have one asset in California that we've had an identified buyer for quite some time. We're just going through some administrative and environmental stuff that is unique to California, and we do expect to close that in 2026. Beyond the one -- the last California asset that we have, you'll see the dispositions will be a source of capital once acquisition opportunities are identified.

Our next question is from Michael Gorman from BTIG.

Mike, if we could just go back to the same store for a second, I apologize if I missed it, but did you mention on the revenue side, any potential impact from the sign-on open pipeline on the 2026 growth? And then maybe on the expense side, are there any same-store expense headwinds just from some of the weather that we saw go through the Southeast earlier this year?

Yes, I'll start with that part, Mike. So nothing material on any of the weather events that happened in the South and Southeast that we're seeing in our portfolio right now. As far as IoT open, I don't think I mentioned that we have what about 2% of ABR just $5.5 million we do expect that's mostly small shops. So it's like 80% of that is small shop. So we expect most of that to come online this year about 95%, but I think importantly, of that 95%, above 50% of that will actually be revenue recognized this year.

Okay. Great. That's helpful. And then maybe switching back to the transaction side. For the Fort Myers acquisition. I'm curious, it's an interesting asset. Obviously, it's grocery anchored, but then a lot of very recognizable high-end discretionary brands. So I'm just wondering maybe how that impacted the competitive set for an asset like that?

And then also how the assumable financing played a role in how competitive it got for an asset like that and maybe how that translates into other opportunities. that you're seeing where it's assumable financing versus not? And where you feel your competitive advantage is in the transactions market there?

Mike, No, I'm happy to take that. Daniels was something that we identified and we're excited about, obviously, one other or another asset, and it's a market that we're trying to grow in as well. West Florida is something that is -- it has been of interest to InvenTrust.

As you mentioned, it is it is grocery, but there is a little bit of a lifestyle component with some of the merchandise mix there. It's a great complement to our portfolio. If you think about the construct of the InvenTrust portfolio, about 2/3 of it is kind of right down the fairway grocery-anchored neighborhood types of centers that are going to be very stable growth, albeit maybe a little bit lower because there is a bigger percentage of fee income coming from the grocer itself.

And then the other 1/3 is it can be bigger box, lifestyle center, unanchored. So there's -- what we've built here is a portfolio that has kind of perhaps from all different pieces the open-ender shopping center segment, all have different somewhat characteristics and growth profiles, but it fits really well when you blend it all together. So we'll continue to look at assets like Daniel's. But what you'll see as we 2026, we'll see some of those neighborhood core grocery on centers as well.

Let me address. From a financing standpoint, we don't let that really change the way we certainly change the way we underwrite properties. We look at it as if we look at it on an unlevered basis. We want to make sure that we're getting to the types of returns that make sense for the portfolio and the growth profile that makes sense for the portfolio.

Having said that, with the competition, you will see some of these ones that have assumable financing get more competitive than others that necessarily what we chase for Daniels because we were able to get comfortable with the returns that we were underwrote, and we're excited about the opportunities that we're already seeing there.

That's helpful. And agree, I was up by the Daniel's marketplace about a week ago, and it's a great asset and a great location on a great corner. So congrats on that one.

Thank you. Our next question comes from Hong Zhang from JPMorgan.

I guess if I look at your redevelopment pipeline, the majority of our projects are expected to complete in the first half of the year. How should we think about your activating future projects in the pipeline in the near term, especially as it relates to gateway market center, which I think is a [ choker ] asset.

Yes. So like I mentioned in the prepared remarks, the redevelopment pipeline is interesting is it's really just reinvesting in our centers and improving the merchandise mix like I said, some of that will be an [ L ], but a lot of it is not. One of the things that has been the most important tailwind in our business over the past couple of years, which has allowed us to grow same-store by 5% the last 2 years and 4% -- over 4% for the 5 previous years is the scarcity of quality space.

And that -- having that leverage is really what's been driving the growth across the shopping center sector, but certainly for the higher quality portfolios in markets where there's been really good demographic trends. As it relates to Gateway, that's one of the larger opportunities for us. And it's really -- it's going to be the relocation and remodel at the of high-quality Southeastern grocer.

And we're imagining the center approved long term. So what we're going to do there is just fortify that asset for the many years to come and those are the types of opportunities that we were patient. And now one will probably start later this year, but it's going to take a while to stabilize. But once it does, it will be an asset that will serve that submarket. It tempers were for decades to come.

Our next question comes from Paulina Rojas from Green Street.

Most peers have highlighted a very competitive market. Do you think pricing has shifted over the past 3 months? Or has the level of competitive largely remained consistent?

I would say it feels consistent. It really depends on what comes to market. And I think last year, we were very fortunate with some of the opportunities that we were able to run down, whether it be on market or off market. I would expect 2026 to be similar, but I will say, it's hard to pay whether at the 30,000-foot level of pricing has moved in a material way.

The competition is still very strong. We're seeing it across the different kind of asset types that we -- or property types, I should say, that we've been looking at. Fortunately, we've had some repeat opportunities with the same sellers, in some cases, and off-market opportunities, which will continue to be those tend to take a little bit longer. But I will say we always feel when we kind of do a close mortem on the assets that we have bought over the last couple of years, we always sell better 6 months later.

So if that's an indication of feeling that we got in at the right time. I think that would suggest that competition is going to continue to be there perhaps pricing is going to be -- continue to remain pretty sticky in our space. And there is private capital formation, as I know many of our peers have talked about, but that's a real thing. And many of those folks are -- what they're looking for platforms or single assets there's a lot of excitement and rotation of capital I think that could be coming into retail, which should benefit us longer term from a valuation perspective.

And my other question is, like we have got used to [indiscernible] leading and raising guidance. given the background has been so positive, what would take for you to exceed your high end of property NOI guidance?

Well, yes, it's a great question. And look, I think 1 of the things we were trying to do at the beginning of the year is we want to be we set guidance to make sure that we're setting expectations appropriately. The reality is, and I think I speak probably for the most of the shopping center REITs in the sector is that bad debt is surprised in a material way to, I guess, downside less credit loss.

And it's hard to come in to any given here and say, look, we're not going to have any credit loss. But that's almost been the case when you offset it with some of the cash receivables that you get for tenants that you don't expect to pay you. And that's been the case for the last couple of years. It's hard to start at the beginning of the year and I think that that's going to be continuous.

I think most of us, including InvenTrust expect there to be a more normalized level of credit loss because that's just the normal nature of our business. It just hasn't been the case. But as you saw in our guidance, we do, we have reduced our credit loss because of the underlying quality of the merchandise mix and how that's improved over the last couple of years and the fact that we're going into this year with real -- no real or seeable imminent anchor issues at least in the InvenTrust portfolio. So that gives us confidence that we the confidence that we needed to bring in that credit loss in a moment, which is reflected obviously that 50 basis points is reflective of the midpoint of our same-store guidance.

To go through the high end, it's very simple. Can we get things open and rent paying earlier? And is credit loss going to stay immaterial.

Our next question comes from Floris Van Dijkum from Ladenburg.

People can't get my name right, but that's okay. I'm used to it by now. I had a question, DJ, more philosophical -- I mean, look, by the way, so I don't know if you think back on your time when you started here that you would have gotten the company in the shape that's in right now, kudos for spearheading that.

So as you think about your market penetration and your market exposures, how should -- how do you think about that? Do you think about market size in terms of ABR or in terms of number of properties or percentage of NOI or ABR? And where do you see smaller markets like Phoenix, which I guess you just bought an asset in Mesa, where is that going to grow just like what you've done with Charleston and some of the other newer markets in your portfolio?

Floris, it's a great question, and thank you for those comments. Let me start there. I think when we started -- when I started here in 2019 and more importantly, when we listed the company in 2021, the company was in great shape. I would be lying by saying I didn't think that this platform could get to where it is today, and I'm more excited about where we're going.

And it really is, I think one of the things that is underappreciated and we will continue to prove to our investor base and our tenants is the quality of the people and the platform at InvenTrust. It really is something special and we want to continue to improve that year in, year out by growing cash flow and serving the communities the way we have been, and we will continue to commit to do so.

As it relates to the portfolio, I think, like I mentioned earlier, we love the opportunity set that we see across the Sun Belt, even though the market is competitive. That's okay. We've been used to finding opportunities that fit our criteria in a competitive environment. I would say in Phoenix, obviously, it's a larger market.

So when we think about that, we don't mind growing, continuing to grow fees and then using places like [ Tucson or perhaps ] flakes satellites, maybe having 1 or 2 assets in those smaller markets and to operating out of a large market like Phoenix. It's really that hub-and-spoke strategy that you've seen us do in Charlotte with Asheville and with Charleston and Savannah.

Those are the types of things where we can operate at a very efficient level, and we don't mind going into some of those smaller complementary markets that have, by the way, really strong growth characteristics based on some of the migration trends just at the state level. As long as we're buying 1 of the higher quality or the highest quality grocery or essential services types of center in those markets. And I think that, that's what you'll continue to see from us as we look for new markets, as we look to further invest in some of our current markets and then looking for those kind of -- that spoke strategy as an offshoot to some of those markets where we already have pretty good concentration in exposure.

Maybe if I can add a follow-up, by the way, I like your disclosure on your -- splitting out your anchor and your small shop tenants, your lease economics and your spreads, et cetera. And it gets me to think that your leasing spreads on your shop tenants are equal to your anchor tenants despite the fact you're probably getting significantly higher fixed rent bumps during the period of the lease as well, highlighting the attractiveness of this particular segment.

As you think about unanchored, I know you talked a lot -- a little bit about acquisitions with grocery anchored. There's a peer of yours that's pursuing this unanchored strategy. I think you have a couple of those kinds of centers in your portfolio. What are your thoughts on that and maybe leading into your shop heavy assets in your existing markets?

Floris, it's a great question. And it's always a really interesting conversation and debate because on one hand, getting income through bankers or even like we have about call it, 10% to 11% of ground lease income that comes predominantly from anchors on a ground base. That income is so sticky. But to your point, it is more for like but in certain report to the cycle, it's nice to be on anchor rents because they are the highest credit in the most recently in the different parts of the real estate cycle.

Having said that, to your point, we do have couple of shadowing [ whose ] centers. And I think that's the strategy that works as well. I think one of the things that's most important to us is understanding the ownership structure of the anchor itself. We have no issue or very little issue with bankers that are owned by the operator. So if a grocer owns its own real estate, that's completely fine. A lot of the control dynamics of the center itself are very similar to whether they lease or own the space from us anyway. So it doesn't really change conversation from a leasing dynamic or our ability to operate the property. It's very similar to what you're just getting income or you're not. So we do look at continued shadow opportunities as long as we're comfortable with the acre structure and the like.

So I think I know who you're speaking of. I think that's a sound strategy. It can't help from a growth perspective, but it does come with a little bit more volatility because you're not sitting on that [ anchor inco ].

So that -- I think that, that would mean that you're not pursuing an unanchored unless it's a shadow anchor grocer or something like that?

No, that's not necessarily true. We've done some unanchored acquisitions. They tend to be more unanchored like smaller lifestyle, if you will, as opposed to let's call it, 10,000 to 15,000 square foot strip on anchored retail. Those things -- those tend to be competitive. They're smaller dollar types of acquisition. So there is a lot of competition in that market. But if we found one, especially 1 that was complementary to something that we already own, perhaps across the street or something like that, that's something that would be very interesting to us.

So the one thing that we love about the canvas of opportunities that we have in our acquisition pipeline if it kind of runs the gamut from larger scale big box down to unanchored strip and everything in between. The most important thing is it meets the market criteria that is going to be successful in our portfolio.

We currently have no further questions. So I'll hand back over to DJ Busch for closing remarks.

Thank you, everyone, for your participation and your questions. We look forward to seeing many of you in I guess the several conferences that are coming up in the next couple of months. So until then, have a great day.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.

Thank you for standing by, and welcome to Invest Trust's Third Quarter 2025 Earnings Conference Call. My name is Becky, and I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded, and a replay will be available on the Investors section of the company's website at inventrustproperties.com. [Operator Instructions] I would now like to turn the call over to Mr. Dan Lombardo, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us today. On the call from the InvenTrust team is DJ Busch, President and Chief Executive Officer; Mike Phillips, Chief Financial Officer; Christy David, Chief Operating Officer; and Dave Heimberger, Chief Investment Officer.

Following the team's prepared remarks, the lines will be open for questions. As a reminder, some of today's comments may contain forward-looking statements about the company's views on the future of our business and financial performance, including forward-looking earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties.

Any forward-looking statements speak only as of today's date, and we assume no obligation to update any forward-looking statements made on today's call or that are in the quarterly financial supplemental or press release. In addition, we will also reference certain non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, which are posted on our Investor Relations website. With that, I'll turn the call over to DJ.

Thanks, Dan, and good morning, everyone. I'm pleased to report another strong quarter for InvenTrust, one that reflects the consistency of our execution and strength of our strategy. Since our public listing 4 years ago, we've increased FFO per share by nearly 30%. That track record is a direct result of a deliberate and disciplined approach that has remained consistent. Our success stems from a proven playbook, maintaining high occupancy, embedding contractual rent escalators, attaining strong tenant retention, achieving healthy renewal spreads and pursuing selective accretive acquisitions.

This quarter, those fundamentals once again delivered tangible results as same-property NOI grew over 6%. Rent spreads remained healthy and leasing activity was positive across both anchors and small shops. We've built a scalable, high-performing platform that allows us to operate efficiently and grow strategically. Our hub-and-spoke operating model enables us to manage a broad network of top-tier assets across Sunbelt markets with minimal incremental G&A impact.

As we expand our portfolio, our structure provides both operating leverage and flexibility, positioning us to continue scaling efficiently while maintaining the hands-on oversight that defines our approach. Turning to the macro environment. We continue to see encouraging fundamentals in the Sunbelt consumer base. While national data presents a mixed picture, we view the region's underlying dynamics as a net positive. Census data shows retail sales are up year-over-year and industry research points to sustained strength in suburban centers across the Sunbelt, where foot traffic and occupancy remain well above national averages.

Hiring momentum in major Sunbelt MSAs remains healthy, and CoStar recently noted that 9 of the top 10 U.S. retail metros are in the Sunbelt, the same markets where we are most heavily concentrated. That said, we're not ignoring the data points that signal caution. Household debt levels are edging higher and consumer confidence has weakened. While sentiment has softened, day-to-day consumer behavior in our centers remains resilient, underscoring the essential nature of our tenants and the stability of our asset base.

Another competitive advantage we see is the limited level of new open-air retail development. The economics for new strip center construction remains challenging, rising costs, tight capital markets and restrictive zoning have kept new supply muted. Meanwhile, obsolete retail inventory continues to exit the market. Strategic capital deployment has been an important part of our success this year. During the quarter, we completed the full redeployment of proceeds from the sale of our California portfolio into higher-growth Sunbelt markets, a rare and highly accretive rotation of capital.

Two of our newest assets located in Asheville and Charlotte, North Carolina, which Christy will discuss shortly, are perfect examples of what we seek, strong grocery anchors, exceptional demographics and embedded rent growth potential. In addition to these recent acquisitions, we have been awarded 2 properties totaling over $100 million. Our capital allocation strategy remains measured and disciplined. We continue to target opportunities that align with our strict return thresholds and enhance the overall quality of our assets. Roughly 70% of our portfolio is comprised of neighborhood and community centers, with the remaining balance consisting of power and lifestyle properties that share similar market dynamics and demographic profiles. This balanced approach provides diversification while maintaining focus on the formats where we have the greatest operational advantage.

Looking ahead, strip center fundamentals appear to remain favorable, supported by low vacancies, limited new development and steady leasing demand. With a focused Sunbelt footprint, high-quality tenant base and financial flexibility, we are confident in our ability to deliver solid total returns for our shareholders. With that, I'm going to turn it over to Mike to review our financial results.

Thanks, DJ, and good morning, everyone. Same-property NOI for the quarter was $44.3 million, representing a 6.4% increase compared to the same period last year. The growth was driven by embedded rent escalations, which contributed 160 basis points, along with occupancy gains and positive rent spreads, each adding 100 basis points. Further contributions of 60 basis points from redevelopment activity, 60 basis points of percentage and ancillary rents and a 220 basis point lift from net expense reimbursements.

These gains were offset by a 60 basis point impact from the bad debt reserve. Year-to-date, same-property NOI totaled $128.3 million, a 5.9% increase over the first 9 months of 2024. For the third quarter, NAREIT FFO came in at $38.4 million or $0.49 per diluted share, representing an 8.9% increase compared to the third quarter of last year. Core FFO also increased 6.8% to $0.47 per diluted share for the 3 months ending September 30.

Components of core FFO growth per share for the quarter were primarily driven by same-property NOI and net acquisition activity and partially offset by the impact of an increased share count. For the first 9 months of the year, NAREIT FFO was $111.1 million or $1.42 per diluted share, reflecting a 6% year-over-year increase, while core FFO was $1.37 per diluted share, up 5.4% compared to 2024. Turning to the balance sheet. We continue to strengthen our financial position during the quarter by executing on an extension of our existing term loans. This recast moved the maturity dates on the 2 $200 million tranches to August 2030 and February 2031, increasing our weighted average maturity to 4.7 years.

We entered into 4 starting interest rate swaps that locked in fixed rates of 4.5% and 4.58%, respectively, and will take effect upon the expiration of the in-place swaps in 2026 and 2027. As of September 30, total liquidity stood at $571 million, including $71 million in cash and the full $500 million available under our revolving credit facility. Our weighted average interest rate is 3.98%, and our net leverage ratio is 24%. Net debt to adjusted EBITDA remained at a sector low 4x on a trailing 12-month basis. With a long-term debt policy targeting a leverage range of 5x to 6x, we have ample capacity to execute our capital plan while maintaining balance sheet strength.

We also declared an annualized dividend of $0.95 per share. During the quarter, we completed 4 acquisitions totaling $250 million. These transactions were funded primarily with cash on hand and 1 secured mortgage that we assumed with the transaction. Turning to guidance. Based on the year-to-date results and current visibility, we are raising our full year same-property NOI growth guidance to a range of 4.75% to 5.25%, while reducing our bad debt reserve to 55 to 75 basis points of total revenue.

We're also increasing the midpoint of our NAREIT FFO guidance to $1.87 per share and raising the low end of our core FFO guidance to a range of $1.80 to $1.83. As reflected in our guidance, we expect some deceleration in the fourth quarter, primarily due to property operating expenses being more backloaded in the fourth quarter and our remaining bad debt reserve. Finally, we have revised our net investment guidance from $100 million to a range of $49.6 million to $158.6 million. Further details on our guidance assumptions are available in our supplemental disclosure. And with that, I'll turn the call over to Christy to discuss our portfolio activity.

Thanks, Mike. Operationally, we continue to see strong tenant engagement and healthy leasing momentum across our portfolio. Our focus on necessity-based convenience-oriented retail continues to pay dividends. Anchor tenants are renewing at solid rates and small shop demand has been steady. Our proactive asset management approach emphasizes relationship building and real-time market awareness. By staying close to our tenants, we're able to anticipate needs, identify early renewal opportunities and support them in ways that enhance retention and portfolio stability.

The result is consistent occupancy and strong rent collections across the platform. We also continue to manage expenses effectively, supported by active oversight and strong vendor partnerships. At the same time, we are investing selectively in property enhancements that improve curb appeal, energy efficiency and tenant and consumer experiences. These targeted upgrades help sustain the long-term competitiveness of our centers while supporting both rent growth and retention.

A key area to highlight this quarter continues to be the consumer preference for dining out. Quick service restaurants and convenience-driven dining concepts remain a significant catalyst for retail demand. Restaurants, bars and coffee shops represent a meaningful share of new leasing activity, reflecting the public's sustained appetite for experiential and on-the-go dining.

These macro trends have translated into meaningful small shop demand. New leases for the third quarter achieved a 25.6% spread, while renewals averaged 10.4%, producing a blended leasing spread of 11.5%. Notably, more than 90% of our renewal leases include annual rent escalators of 3% or more. These built-in mechanisms, while straightforward, are a powerful driver for sustainable NOI growth over time.

Our retention rate year-to-date is 82%, reflecting the impact of a single anchor space at our Gateway property in St. Petersburg, Florida, which will be going through a transformational redevelopment. Excluding that space, our retention rate was 89%, consistent with previous quarters. On the tenant health side, our exposure to bankruptcies or at-risk tenants remains minimal with a modest and actively monitored watch list. When an occasional vacancy does occur, our operations team is well positioned to mitigate downtime and secure high-quality replacements.

At quarter end, total lease occupancy was 97.2%. Small shop lease occupancy maintained its portfolio high of 93.8% and anchor space finished at 99.3%. Equally important for our cash flow visibility is that approximately 90% of 2026 leasing is already executed. As DJ mentioned, since our last call, we added 2 high-quality assets in North Carolina, Asheville Market in Asheville, anchored by Whole Foods and Ray Farms in Charlotte, anchored by Harris Teeter.

Asheville offers a strong health care and education foundation, a vibrant tourism economy and population growth projected to exceed the national average over the next 5 years. Charlotte, one of the fastest-growing large metros in the U.S. continues to see in-migration, job expansion in financial services and technology and above-average household income.

These transactions demonstrate our acquisition strategy in action, investing in high-growth markets and premier properties that fit our operating model. Looking ahead, we remain encouraged by the leasing pipeline as we move into the final quarter of the year. Renewal discussions are active and small shop inquiries remain strong across the portfolio. With that, I'll turn the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from Andrew Reale from Bank of America.

DJ, I appreciate some of your comments at the beginning just on the Sunbelt consumer overall. And obviously, bad debt has been trending favorably. But I'd just be curious if you could talk a bit more about tenants in some of your more discretionary categories, including restaurants. And I know, Christy, you mentioned that consumer preference for dining out remains strong, but obviously, there have been some negative headlines in recent months just around quick service restaurants and dining out. So would just be curious to hear your thoughts on some of those categories and how you're thinking about renewals if we do see a pullback on discretionary spend?

Yes, Andrew, thanks so much. To your point, I mean, I think from our perspective, and Christy said it in her prepared remarks, we still see a lot of demand from quick service, both fast casual and sit-down dining. I think we -- in our portfolio, we're fortunate to where we can kind of go through on a tenant-by-tenant basis and kind of identify whether there's an overarching theme related to some of the tenant disruption or if it's really an operator -- an operating issue. And in our case, it's mostly been the latter.

There's certainly a tremendous amount more restaurants doing quite well in our portfolio versus the ones that we're seeing that are struggling. And there's a lot of different reasons for that, whether it's concept, operations or whatnot. But generally speaking, we still see a lot of demand. We will have a couple of restaurants turn over going into the end of this year. But we already have solid demand. And frankly, some of those have already been leased to another food use.

Okay. And if I could just ask a follow-up. I guess, broadly, just within the acquisition pipeline, what percentage is core grocery versus more power and lifestyle? And then just any color around the size of the pipeline and the latest on what you're seeing on pricing?

Yes. Yes, it's a good question. I think our pipeline still remains pretty robust. I would say, at any given time, we're looking at over $1 billion of assets. And to your point, it kind of runs across the spectrum of open-air retail. Obviously, most of the stuff we look at has some sort of grocery component or essential nature to the merchandise mix.

The 2 assets that I alluded to and that Christy mentioned that we've been awarded, both are grocery anchored as well, in some cases, multiple grocers. But the mix that we look at is really just the -- when you look at our pipeline and what you should expect us to continue to transact on is very similar to the makeup of the current portfolio. We really like the idea of having the predominant or the majority of our assets having that core grocery component, whether it be a smaller neighborhood center or community center with grocery.

But we also do like having a small mix of power centers as long as they fit our strategy and are in markets that we truly believe in, and we're certainly looking at some of those opportunities as well as some of the smaller lifestyle deals that you've seen us do in the past. So as I mentioned, over 70% has some sort of core grocery component. And then we have a small mix of other open-air assets that fit our strategy within our markets. I think that, that's a fair kind of mix within the portfolio that you can expect us to look at going forward.

Our next question comes from Linda Tsai from Jefferies.

Occupancy over 97%, how are you thinking about the trajectory over the next couple of quarters?

Yes. Good question, Linda. Obviously, we had a high watermark this quarter again in small shop. We do expect the small shop to decline a tad going into the end of the year and into the first quarter with the reacceleration in '26. And at some point in '26, hopefully hitting yet another high watermark. That just speaks to the demand that we're seeing on the small shop side, even with a small amount of fallout, which is nothing out of the ordinary. As a matter of fact, we don't expect to hit or exhaust our bad debt as has been the case in the years past.

And then on the anchor side, I think we have about -- I think we have 4 anchor vacancies today. By the end of the year, I think we'll have 5. 3 of those are at a redevelopment opportunity in West Florida. So we've strategically kind of deleased those spaces with the expectation that we're going to do a redevelopment and a rebuild with a grocer. And then the other 2, one is in Southern California.

Obviously, our last asset there, we're expecting to sell and another really good opportunity in Dallas. So it's always nice when you can fire off the amount of vacancies in a -- quickly. That just speaks to kind of the demand that we're seeing there. But there will be a little bit of cadence change going into the year, but we expect it to reaccelerate, like I said, in '26.

That's helpful. And then from where you sit today, how are you thinking about CapEx for leasing and TIs in '26 versus '25?

Yes. So in '25, I think it's been a similar kind of spend. We do have some redevelopment opportunities that are more value-add going in, like I said, some of these grocery opportunities, we have a couple of those coming up. Those tend -- those do cost a decent amount of money. We get a tremendous amount of return out of those opportunities. And I know we've spoke about this in the past. I think now that we have a lot of our anchor leasing and build-outs done, especially as we look into the mid-2026, our expectation is that our CapEx burden will come down just due to where the occupancy is in the portfolio, which should lead to greater free cash flow as we look into '26 and beyond.

That's really helpful. Just one quick one for Mike. I think earlier, you mentioned that there are more back-end loaded expenses in 4Q. Can you just give us some context there?

Yes. Just the last couple of years, we've had in the fourth quarter, just our normal operating cycle, we've had higher property operating expenses in the back half of the year. This year, that will show up in Q4. And then on top of that, our corporate expenses typically in Q4 just tend to run a little bit higher.

Our next question comes from Cooper Clark from Wells Fargo.

I was curious if you could walk through the puts and takes as we think about the current net investment range with respect to the last California disposition and the acquisition pipeline. Just thinking about some of the moving pieces into the end of the year that get us to the high or the low end of the range from a timing perspective?

Yes. No problem. Basically, the reason we changed the range is we do have 2 deals that have been awarded to us, and it's going to be really close on whether they close in 2025 or not. So really, it's just a timing issue. The low end of the range is things that we've already transacted on. The high end of the range is things that we are hopeful that we can get across the finish line before the end of the year. But if not, those will show up in early 2026.

On the disposition side, as you mentioned, in California, really that one, we're expecting to sell probably early in '26 or at some point in '26. We're just dealing with some administrative issues with that asset based around environmental. But it's a great asset in -- or the last asset in Southern California, and we do expect to transact on that one as well, but it probably won't be this year.

Okay. That's helpful. And then could you just talk about the confidence level to grow accretively from here on acquisitions as we move into '26? I appreciate the positive spread on the California dispositions year-to-date, but curious on growth from here as you shift towards funding acquisitions with balance sheet capacity?

Yes. Obviously, we look at our -- and it's a great point. We look at our different pockets, our sources of capital differently. Obviously, the California rotation gave us an opportunity that's unique. We were able to, from our perspective, upgrade the portfolio materially in markets where we've seen really good growth and that we're excited about. And we're able to do that on a positive spread day 1, with even better growth over time.

Now obviously, when we're looking at growing on our balance sheet, that cost of capital is a little bit different. And we've already kind of made that shift as we go through investment committee and we're looking for those new opportunities because it is important. I mean, at the end of the day, this platform is scalable, but we got to do it in a responsible way, and we got to do it on an accretive manner for our shareholders, and that's kind of where we're at today.

So that comes -- when we think about our overall transaction opportunity set, it really is as a response I mentioned earlier, we're looking at a lot of different formats, a lot of different property types. And we can get to accretive cash flow in many different ways because of the opportunity sets that we see in our markets.

Our next question comes from Mike Mueller from JPMorgan.

First, when it comes to the remaining budgeted bad debt expense for the year, does most of what's being assumed for the fourth quarter fall into the -- it's visible or more into the -- it's still an assumption bucket?

Yes. I think -- I can take that. This is Mike. I think it's a little bit of both. So in our forecast, our range is 55 to 75 basis points right now in our forecast, we have visibility probably into the bottom of that range at 55 basis points. And then to get the top of the range is kind of reserve for unforeseen fallout that might not be right in front of us.

Got it. Okay. And then going back to occupancy for a second. The small shops are a little under 92% occupied. What do you see as being a ceiling for that metric? And do you think the current backdrop is one where you can ultimately get to it sometime over the next few years? And I understand the comment about near term, we may see a little drop off though.

Yes, Mike, from what we see in the pipeline and the demand that we continue to see, I think we expect that we can continue to kind of march higher. Obviously, once you get into the mid-90s from an occupied standpoint, you're really only talking about frictional vacancy, and it's hard to push that further and further just because some space is just always going to be a little bit more structurally challenging to lease.

We do have a full strategy around that, whether it be lower rents, percentage rent deals, giving tenants an opportunity to succeed in areas that have probably been vacant for quite some time, which is an issue across the industry. There's always space that's a little bit less desirable no matter how high of quality your center is. So we'll continue to do that. But at the end of the day, if we can hold occupancy where we're at, and continue to get the escalators that we have been getting, and that continues to deliver real NOI growth on a year-over-year basis.

And then we get our double-digit spreads that we've gotten 8 quarters in a row on a renewal basis. All that with a very high retention, it's just a tremendous opportunity for us to accelerate free cash flow growth because we're not churning our tenants as much as we have in the past. Now there will be churn, there always is in retail. But from when we look at -- and I think I've heard some of our peers mentioned this on their calls as well, the quality of our tenant base is just so much -- it's far superior than it has been in the years past.

The credit quality, the merchandising of our tenants, we just don't have the large tenants that, specifically anchor tenants, that are struggling right now. And whether that changes over the next couple of years, we'll see. But right now, we feel very confident in our anchors. We feel very confident in our national and regional small shops. And then obviously, the local flavor of our small shops have been doing phenomenal for quite some time.

Our next question comes from Michael Gorman from BTIG.

Just wanted to ask a question on the lease to economic occupancy spread continued to compress in the quarter. And I'm just curious, given the strength of the leasing in the pipeline, strength of demand, the strong retention rate, can that compress below the 2021 levels? Or where should we expect that to stabilize as you move into 2026 and beyond?

Yes, Michael, it's a good question. When we look at our -- when we look at the spread, a lot of that just comes down to timing. And I kind of mentioned it like depending on when we're signing new deals versus when we're expecting a tenant to vacate and then obviously, when we're expecting to -- that tenant -- the new tenant to take ownership or occupancy. So a lot of the spread comes down to timing. I think from our perspective, anywhere between 150 to 200 basis points is probably the normal run rate, and that's going to ebb and flow.

The way we think about that spread is more just what's in the pipeline. We have $5 million in our signed but not open pipeline. And we're expecting about 80% of that to be captured next year. So a substantial portion getting open and occupied and paying rent in the first quarter. And then driving substantial new NOI in the next -- in the upcoming year. But that spread will always kind of ebb and flow. But you're right, it did contract a little bit this quarter.

Great. That's helpful. And then, DJ, you talked about some of the macro signals that you were looking at but not seeing in your portfolio yet. One of the things that we've been trying to understand a little bit more is, obviously, the grocer sector continues to be pretty strong. But at the same time, you're seeing a climbing percentage of spend on eating out and takeaway food and QSRs and everything. How do you think about that balance going forward? Can both of those sectors continue to grow and be strong here? Or how does the consumer adapt if it continues to show some weakness and the economic environment continues to soften? Like how do those 2 balance out?

Yes. it's a great question. And I don't have a great overarching answer. But I will tell you, within our portfolio, it's been interesting because we haven't seen those 2 categories, whether it be our grocers versus our quick service or eat away from home, as you said, being as substitutes. They've been more complements. We've had our quick serve -- our restaurants across the different formats have continued to do quite well.

Also, our groceries have been doing very well. Some of that is inflationary driven, certainly, but our grocers continue to march forward. I think it speaks to, one, the markets that we're in, we've just seen a lot of in-migration growth kind of -- which rises -- the tide rises all boats in that case. and the types of grocers that we're dealing with, obviously, one of our top tenants is Publix.

I know in the Southeast, they're a formidable grocer, a phenomenal operator, HEB in Texas, obviously, Kroger and Albertson's are at the top of our Top 10 list as well. So the types of grocers that we're dealing with, I think, have been more or less been investing in their stores, we've been able to grow [ ID ] sales. And it's been an interesting dynamic over the past couple of years where food at home and food away from home have been able to grow.

Our next question comes from Paulina Rojas from Green Street.

Looking at your recent acquisitions, I see that they have skewed towards secondary and tertiary markets. And I'm curious, would you be comfortable if tertiary Sunbelt markets grew to represent a materially larger portion of your portfolio and perhaps doubling their current share? How do you think about that?

Yes, it's a good question, Pauli. And look, it's a good observation. I we tend to not get caught up in gateway secondary, primary, secondary, tertiary. I think the predominantly -- obviously, the vast majority of our portfolio are in cities that we like to call 18-hour cities, obviously, big CBDs perhaps considered primary or secondary markets. But I mean, I would argue that Charlotte is one of the fastest-growing markets, albeit it has traditionally been called a secondary market. Certainly, the dynamics on the ground in a market like Charlotte are quite different.

And what we found in it for our ability to grow our portfolio, I mentioned it in my prepared remarks, we really, really like the hub-and-spoke model. So Charlotte is a core market for InvenTrust. From that market, we can also invest in markets like Asheville, which has seen tremendous amount of migration. It's gone from something that's been more of a secondary residence area to a primary residence area. Now obviously, Asheville has its own tragedy in not-too-distant past, but we feel very confident that, that market is going to rebound in a big way.

Now having said that, when you mentioned secondary and tertiary markets, our quality -- the level of quality has to be higher. If we're going to be in that secondary market, we got to make sure that we're going to own and operate the best asset in that market or the second -- the best asset in the market where certainly in larger gateway markets or primary markets, you certainly can own a lot more because there's certainly just a lot more population and density to accommodate that.

Do you think cap rates change if you go to markets that are less by typical institutional investors where local trade area demographics are equally strong. Do you see the cap rate different?

Sure. Well, it all comes down to what's the risk-adjusted return that you're trying to get. And that's why I mentioned the quality is very important. We got -- you have to make sure that you're at the high end of the quality spectrum when you do go into a smaller market. I wouldn't call it a tertiary market. Certainly, some of them are tertiary. We've tended to stay away from markets that are very thin in population unless there is green shoots of impressive growth coming in the future.

But there -- what we tend to look at, Pauli, is anywhere from, call it, high 5s to high 6s from an initial yield standpoint. And that tends to get us to our risk-adjusted returns that are comfortably in the 7s. I know people quote IRRs quite differently, but from the way we look at the world, we can make that accretive to our business. But certainly, there are cap rate nuances, not only from market to market, but property type to property type and depending on your merchandise mix.

Yes. I guess what I was getting to is something that is more an opportunity, more a market inefficiency because fewer investors are looking at those markets and where perhaps the return that you were able to get it is not really explained by higher risk and that it's really a function of that demand.

No, that could be the case. I mean, look, I think one of the interesting dynamics, obviously, our decision to move -- to exit out of California was a strategic one for InvenTrust. It's a core market for almost every other private or public operator. And California trades differently than most any other state or the markets in California trade differently than any other markets in the country. And to your point, it's because of the demand and the liquidity that it offers.

Now we're as a public REIT, as a perpetual vehicle, that's really not as important to us. What's important to us is to create sustainable free cash flow growth over a long period of time for our shareholders. And we can do that in other areas outside of California, which allows us to take advantage of for lack of a better term, some sort of arbitrage.

Our next question comes from Cooper Clark from Wells Fargo.

You spoke to operating leverage in your prepared remarks and margins look to be up about 100 basis points year-over-year. I was curious if this is mostly timing related as you noted some backloaded expenses earlier on the call. And if you could provide color on the potential for further upside to margins as additional occupancy comes online.

Yes. So like, obviously, we get operating leverage as our occupancy climbs higher, as you mentioned. We do expect to continue to get marginal operating leverage as we continue to grow the portfolio. That's one of the best things about having the platform that we have is we can continue to scale it, and there should be real tangible benefits not only at the operating margin level, but also at the EBITDA margin level. And that's just going to come as we continue to grow the asset base. The piece that you're probably alluding to this quarter is our recovery rates continue to get stronger as we continue to transition to a more fixed CAM model.

Our next question comes from Hong Zhang from JPMorgan.

I guess if I think about same-store growth, you've managed to sustain mid-single-digit same-store growth historically. But just reading between the lines of your comments about occupancy, do you expect that to be sustainable going forward? Or do you think occupancy is going to be a little bit of a headwind to same-store growth in the near term?

Thanks for the question. I wouldn't call it a headwind. And this goes back to my comments on CapEx. As we move forward, obviously, you do get a decent amount of same-store growth out of occupancy gains, no doubt. But with those occupancy gains as you're doing new leases comes with real costs, especially in the retail business. So we look at it as an opportunity even if our same-store NOI growth would slow down from what's been a real nice run of, I think, 5% for several years running now.

Even if that were to moderate a little bit, it would only be due to a higher retention rate across the portfolio. So we'd be doing more renewals. We'll get our embedded escalators, a little bit of redevelopment. And then with that should be stronger free cash flow growth.

We currently have no further questions. So I'll hand back to Mr. DJ Busch for closing remarks.

Thank you, everyone, for taking the time. Thank you for your interest in InvenTrust. We're excited about finishing the end of the year strong, and we're even more optimistic as we move into 2026. Looking forward to seeing you guys at many of the conferences coming up later this winter and into next year. Have a great day.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.

So this is the InvenTrust Roundtable. Happy to have DJ with us here who's the CEO of the company. Do you want to maybe introduce your team?

Yes, sure. Thank you, Sameer. With me today from InvenTrust is Christy David, our Chief Operating Officer; and Mike Phillips, our Chief Financial Officer. I guess I'd kick it off with a couple of minutes.

Sure, yes, some opening remarks...

So if you're not familiar with InvenTrust, we are about a $3 billion enterprise value, high-quality open-air shopping center REIT, predominantly -- almost exclusively in the Sun Belt region. So we have 71 properties, just over 10 million square feet, predominantly grocery anchored, about 85% of our shopping centers do have some sort of grocery component and our tenancy anchors towards essential goods and services.

We listed the company in 2021. And since then, we've grown FFO per share roughly 30% over that time period. And at the same time, lowering leverage. And our goal is to continue to both grow internally and externally through more acquisitions. We have the platform that can service and hold a lot more properties than 71, and we're looking forward to taking advantage of those opportunities as they come to fruition.

And I guess maybe as an update sort of post earnings, as you kind of talk about kind of what you're seeing on the ground as it relates to leasing, that environment, what are you hearing from retailers given there's uncertainty out there still, like, help us frame out that.

Yes, I'm happy to. So obviously, there has been some softness in the consumer in the early parts of 2025. The good news within our portfolio, we're not seeing much -- any type of distress or any type of slowdown, really any deceleration. We continue to surprise ourselves with lower bad debt than typically has been the case in the past. We were immune to any of the larger discount retail bankruptcies that happened earlier this year. So we have no exposure to the likes of Big Lots at home and some of the other companies that did file earlier in the year. So from a -- on the ground, we continue to have extremely strong leasing demand.

We are just over 97% leased, over 95% economic occupancy with more avenues for growth, which is surprising that we continue to hit a high watermark from an occupancy standpoint, but we do feel like we can continue to march that ever so slightly higher. But even more exciting is as we get closer to frictional vacancy, our -- the demand for our space and our ability to push rents just continues to increase. Our retention rate continues to go higher. We're just over 90% from a retention, which means we're signing -- we're doing a lot of renewals with high-quality tenants without a lot of capital out the door, which for us, that just obviously goes straight to the bottom line and accelerates our ability to grow free cash flow.

So you mentioned the 97% occupancy, right? And you think about on a neutral occupancy basis, I mean, help us think through the -- you talked about some of the drivers, but talk about your business, how to generate sort of 3% same-store NOI growth more in your sense?

Yes, I'll let Mike walk through some of the building blocks. As I mentioned in the onset, we've been fortunate enough to be able to really grow this portfolio since listing the company in 2021. We've averaged about 5% same-property NOI growth since then. Candidly, obviously, 5% in our business is probably not sustainable, but 3% to 4% is. And Mike, why don't you walk through some of those building blocks?

Yes. The way we kind of think about our model is the two main drivers on a year-on-year out basis is contractual rent bumps. We get about 150 to 200 basis points of contribution to NOI just from contractual rent bumps every year. Then if we're staying at 90% retention rate, which is the goal, and we're getting low double-digit rent spreads on new and renewal leases, that's another 100 basis points of growth. So those are the two main drivers.

And then we get some benefit from just kind of recurring CapEx and redevelopment in our portfolio, call it, 25 to 55 basis points a year as our snow pipeline comes online, goes from lease to economic occupancy, that's another 25 to 50 basis points. And then we get a benefit on our fixed CAM growth, which is about 4% to 5% for the tenants on fixed CAM growth, and that has typically been about 50 basis points of a benefit to NOI.

And as I mentioned, as great as 5% same-property NOI changes, I'll take 3% same-property NOI growth with less capital any day of the week. So although same-property NOI will probably normalize at some point over the next couple of years, we're hopeful and expect that AFFO per share will accelerate.

Is there anything with the Amazon news, the rollout of sort of same-day fresh grocery delivery, does that help us think about how that impacts the business or it does not at this point?

It's a good question. And obviously, Christy and her team have spent a lot of time with Whole Foods, and that team is running the Amazon Fresh initiative as well. One of the things that we've been very focused on over the last couple of years is making sure not only are we investing in grocery, but we're investing in centers where the grocers are providing a level of experience. There's plenty of grocers out there that offer convenience and value.

We tend to anchor towards ones that are providing some sort of customer experience that makes them more or less a little bit more immune to perhaps that same-day delivery competition. And a good example is some of our most recent acquisitions, obviously, Publix is a big anchor for us in Florida. They do a fantastic job from a consumer experience standpoint. We've had -- we've recently acquired two Wegmans in the Richmond MSA.

Obviously, if you're not familiar with Wegmans, it's a very large format grocer that does an exceptional job on prepared foods and the like. And then obviously, we have plenty of Whole Foods and Trader Joe's in the portfolio as well. We do expect, obviously, the same-day delivery and as those -- as the logistics continue to improve, I do expect it to continue to grow, but we don't see that as competition. It's more of a complementary service to our four walls at our shopping centers.

By the way, I want to keep this interactive. So if you guys have any questions, please?

Just curious how is -- how we did sales earlier in the year. Just wondering how do we...

Yes. Thank you. So yes, a big initiative for this year was our decision to recycle capital outside of our California. So we own six properties in Southern California, both in Northern San Diego, L.A. and the Inland Empire. We made the decision probably going back 1.5 years or 2 years to exit out of California, use that cost of capital accretively and reinvest in markets and assets where the growth profile was higher, and we had more conviction in the fundamentals over time.

That's what we've seen in the Carolinas and Georgia and Florida specifically. So we successfully sold a 5-property portfolio. We do have one asset left in California that we're expecting to sell at the end of the year, brought in proceeds just north of $300 million, and we've effectively rotated almost all of it. Dennis, we're about $350 million or so gross asset acquisitions this year with the expectation to dig in a couple more across the finish line before the end of the year.

So maybe on the California exit, just talk kind of decision to exit, what led to that?

Yes. It was a difficult decision. If you go back 5 years, InvenTrust was trying to grow our presence in Southern California and just couldn't find the right opportunities at the right price and to get it to a return that was acceptable for our business. We also -- candidly, I'm a native Southern Californian, so I have an affinity to it. But California compared to what we're seeing in our core Sun Belt markets, it's been a little bit more difficult to do business.

There has been inflationary pressures, inflation specifically. And we've found better opportunities at better returns, and we decided that now was the right time to take advantage of that arbitrage and move into -- so we sold, I think, two Albertson's, two Kroger banners of Ralphs and then one Sprouts. And like I mentioned, we bought a Wegmans, Whole Foods and a couple of Publix. So upgraded our grocer anchor, upgraded from a market standpoint and has -- and bought assets that have a similar growth profile to what we're seeing in the rest of the portfolio.

And in terms of the accretion, remind us what -- again, I'm sorry, what was the share of rate?

What we've been guiding to is the cap rate on the California sale is probably somewhere in the mid 5s and we've been able to redeploy those -- that capital somewhere closer to 6 or just above that. So a nice spread -- initial spread, but more exciting is the growth profile underlying of the new assets versus the one that we cycled out.

Can you maybe just talk a little bit more about the upside of those new properties and the NOI lift?

Sure. Yes. So obviously, each asset is different. And one of the things that -- at InvenTrust, it's probably a little bit differentiated to some of our peers is we don't tend to buy value-add properties. We tend to buy fully stabilized assets. We will buy some vacancy, but more -- the majority of the assets that we purchased over the last 2 years have effectively been 100% leased. So what we're really going in and expecting is little capital outside of the initial acquisition and waiting for -- waiting to roll leases and mark those leases to market.

And we like that strategy because almost in every case, going back to 2022, call it, we've surpassed our underwriting standards as it relates to where in-place rents are and where market rents are going. So that has been the strategy. And I would tell you that the growth profile more or less mimics what we're seeing in the core portfolio.

And in terms of the markets you're getting into now, I mean, how competitive is that market in terms of bids coming in...

It has gotten increasingly competitive. I will say California tends to still be the -- one of the most competitive markets, which was one of the reasons we decided to be a seller instead of an investor in the state. California does and as it should, gets a liquidity premium unlike anywhere else because it's very -- the assets are very liquid. It's very easy to buy and sell in California and which is why the pricing remains very, very competitive and very tight. We have seen increased competition, mostly from private operators in some of our core markets, which is why more recently, you've seen us kind of employ a more hub-and-spoke strategy, use one of our core markets, and I'll use Charlotte as an example.

Charlotte is one of our favorite markets, incredible underlying fundamentals, a lot of businesses coming in, which is supporting a lot of really nice rent growth. But then we just recently bought an asset, a Whole Foods anchored asset, one of the nicer -- nicest assets in [ Asheville. ] So we can operate it out from our Charlotte hub. And you'll continue to see us do that on a selective basis where we can operate maybe in a secondary market, but one of the premier assets in that secondary market and which obviously always tends to be grocery anchored.

Are there any other markets we need to consider? I know you talked about the exit of California, but are they kind of recycling? I mean how -- is there more to do?

It's probably more of the same of what you've seen recently. Well, a couple of the markets, obviously, we don't have a presence in [ Nashville. ] It's a market that we would love to get in, but it's priced very competitively. So we've been very patient in waiting to get into [ Nashville. ] We obviously are in the four major markets in Texas. We may add there sparingly. We do have a significant investment in Texas already at close to 50%. Austin is our largest market. We would add selectively there -- continue to add selectively there. But I think we've been spending a lot of our time in Central and West Florida and in the Carolinas.

Any questions here?

Maybe in terms of your acquisition pipeline and what you're looking at considering? Is it just neighborhood grocery center? Or would you look at like power, lifestyle?

Yes, it's a great question. Our strategy is -- the most important piece and the biggest differentiator for InvenTrust is we're exclusively in the Sun Belt. That won't change. We are a little bit more probably format agnostic than maybe some of our peers. We tend -- we're predominantly grocery-anchored, but we will buy unanchored centers. We will buy the right power center if it's in the right market.

But if you were to think of the mix, it's probably 2/3 core grocery-anchored neighborhood shopping centers and then 1/3 other types of formats, whether that be power center, we own a couple of small unanchored lifestyle centers and then everything in between. We won't -- the larger the deal size or the larger the asset is, the more core it has to be to our strategy.

It feels like there's a lot more acquisitions of lifestyle centers these days, right? I mean like is that just a function of what's in the market like WPG has been selling a lot? Or is that like that's the format which sort of works now?

I would say it's a little bit of both. I think lifestyle centers, if they're the right size because there are some extremely large lifestyle centers and some of those have actually have transacted recently to your point as well. I do think there's been more inventory coming to market in that type of format. We're very careful that it has to be of right size and scale for InvenTrust. So there are lifestyle centers that we've bought, have been between $20 million and $50 million, call it, 150,000 square feet or so. So much smaller than some of the 750,000 square foot centers. We just won't take that type of risk due to the size of our company at this point in time.

Is there anything next year we need to consider about or anything -- I mean when you guys don't have a lot of exposure to some of these watch list sort of tenant fallout, distress type tenants. But having said that, is there anything we need to -- whether it's shop tenants, the health of the shop tenants, is there anything to consider next year?

Maybe, Christy, why don't you talk about where we're at from a leasing standpoint looking into next year and perhaps on the watch list?

Sure. I think we have great visibility into our -- we have a very healthy current pipeline and great visibility into our next year in terms of leasing and having leasing completed. Most of our expirations actually have renewal options. So we feel very comfortable from that perspective. I'd say when you're talking about watch list, as DJ said, we had very minimal exposure to bankrupt tenants this year. We had one Jo-Ann, which was actually purchased at auction. So we had no downtime and no disruption from that perspective. And we had two party cities that we honestly already have an LOI on one to backfill and the other one is being held open for further redevelopment.

So as you consider our watch list going forward, it's -- there's -- we have three DSWs, which are all located in Texas, two in Austin and one in Dallas. And we continue to monitor the pet stores and that concept, but don't see any real disruption coming in the immediate future. We have two movie theaters that we keep an eye on. One is located in our Houston market and does very well. And the other one is in our Southeast Florida in Pembroke Pines. It's a Regal concept that's actually putting money into the asset in order to develop it into Bistro concept.

So we think both of our theaters are well situated. So we do think that our disruption should be minimal in terms of our tenant watch list. And as far as the small shop spaces, what we're seeing currently and what we envision, we talk to our tenants regularly is that we will continue to see just sort of that normal small shop churn that happens from time to time. No major disruption, no single type of use that we're concerned about on the small shop side.

Yes. And the only thing I would add, thanks, Christy, is one of the challenges that we've gotten from investors, which I think is fair, and I'm sure our peers have gotten the same question is, is, call it, 75 to 100 basis points an appropriate run rate going forward from a bad debt perspective? We always challenge ourselves because our portfolio continues to increase in quality.

And we're a much different company and a much different portfolio than we were even 4 or 5 years ago. So what used to be 100 basis points may not be appropriate anymore. So -- and I think we've seen over the last several years, I think most of the open-air shopping center REITs have been lower -- have had a materially lower bad debt reserve, absent of any bankruptcies than has historically been the case. I think we're all a little bit gun-shy waiting for it to normalize again, but that's something that we'll continue to assess and think about as it relates to what -- how should we be forecasting our bad debt going forward.

I mean how much of a concern is DSW? You feel like that's -- and then remind us where -- I feel like a lot of the bankruptcies we got the space back felt like those rents were lower than where market is. Is DSW more market or is there even a rent roll down at them?

I can speak for our portfolio. DSW tends to have a lower rent. They actually did -- they were one of the companies, and I think this isn't unique to InvenTrust and we did work with them a little bit through COVID. We got favorable terms in our favor, some economics and noneconomic and provided them probably with some lower rent, I believe.

We have three spaces, as Christy mentioned, all in high-quality centers. The box is very re-leasable, should I say, about 18,000 to 20,000 square feet. So it's a much more plug. You can plug in a new concept quite much easier than you can in some of the other junior anchor boxes. So obviously, they've been in the news for some of their struggles. But we're not concerned. I don't -- certainly not for this year, probably not for next, but it's something that we'll keep an eye on and make sure we're being proactive as it relates to bringing in a new opportunity.

I mean you guys are in a good spot, but if you look throughout the industry in terms of do they pay -- I always thought that in some cases, they pay a lot higher rent and maybe that was the concern, but maybe...

I can't answer that. I'm not sure...

On the others. Okay. Anything on the balance sheet here?

No. Look, I think we're in a very fortunate spot, obviously, investment-grade rated. Our -- I think we have the lowest leverage in the entire shopping center space at just around 3x on a forward basis. Obviously, that's how we're going to keep the balance sheet. We're going to grow into it over time, use the balance sheet to our advantage to continue to grow externally and use free cash flow as well. So we got a lot of runway, call it, $350 million to $400 million on an annual basis for the next couple of years before we actually get anywhere close to our stabilized level from a balance sheet perspective. So we're in a great shape. Mike, do you want to talk about the recent refinancing?

Yes, yes, a couple of weeks ago, we closed on the refinancing of our term loans, the recast of our term loans. They were set to mature in late '26, early '27. We worked with the bank group and pushed those out. We got a nice maturity ladder now. So those are 5.5 years. So it will be 2030 and 2031 when they mature. We have our current swaps in place right now through the initial maturity late '26, early '27. And then after that, we've already forward swapped them at 4.5%.

So from a balance sheet perspective, we have no significant maturities until 2029. So in a really, really strong position from a balance sheet perspective.

Anything -- when I was looking at your numbers for the second quarter, I think percentage rents were up, right?

Yes.

How do we think about percent -- I mean it's --...

So percentage rents is a little tricky because it just depends on when -- either when we get information and when the tenant wants to pay us. So it's very volatile. So it's very hard to do it from a run rate perspective. Our percentage rent will go down because we have converted some of that percentage rent to real base rent, specifically with one of our largest grocers. Is that fair?

Yes.

Yes, the reason the first 3 quarters of this year look a little bit higher just for that reason, we converted them from percentage rent that we received in the fourth quarter every year to fixed rent that we'll receive. It's still technically percentage rent, but we'll receive it throughout the year now.

And that will normalize in '26?

Yes.

And help us think through, again, not asking for guidance here, but just kind of the building blocks to growth specifically for '26 as you think about...

Yes, without getting too ahead of ourselves, look, we're expecting 2026 to be another solid year from an internal and external growth perspective. Obviously, with our swaps still in place, no real interest rate headwinds, maybe -- and it's not as much of a headwind as we once thought it would be, but that's really not until 2027.

And it comes down to what does the retail landscape look like when we're assessing the portfolio come January and February as we try and understand what our bad debt reserve should be. The biggest headwind to our business and everyone else's is the fact that we've had no bad debt. So at some point, that's going to reverse itself a little bit, and that will be a small headwind to same-property NOI at some point in time.

Okay. So that's kind of it, so what you think about swing factors in the next year?

So even if 75 basis points is the run rate, but we've been running at 0, even if we're at 40 basis points, which is -- we're still a really strong year from a bad debt perspective, that is a headwind to same-property NOI.

Are there any questions?

[indiscernible] you said 97% leased spread [indiscernible] what do you think is the long-term lease rate frictional [indiscernible] leasing environment like, I know it's still healthy, but if you have a DSW box become vacant, how many bidders would you have on such a box? And what does that lease spreads? I'm just trying to get a sense of what the next couple of years, if we're in this kind of -- on the same kind of current environment, what it might look like? We just don't lose them but I think you said it should be decent next year...

No, it's a good question. And look, I think we continue to surprise ourselves because I think for a long time, we thought 95% was probably frictional occupancy or full occupancy. What Christy and our operations team has done a fantastic job is finding different uses for space that used to be very difficult to lease, whether it had bad visibility, bad access to parking or both. There's always those problematic spaces, no matter what, in any quality center, there's going to be space that's a little bit less desirable.

And our team has done a great job either finding a unique use for that space or pricing the rent accordingly. We're not afraid to take a lower rent, even a percentage of it perhaps to see if we can make somebody successful in a space that's predominantly been vacant. So that's how we've continued to march that higher. But [ Dennis, ] to answer your question directly, we're at 97.3% today. We do have about 100 basis points of visibility beyond that, that's in the pipeline, not the snow pipeline, but beyond that, that's in some sort of negotiation.

So we do think we can march higher, but we are getting closer and closer to that ceiling. And that's okay. Going back to my initial point, we're not banking on occupancy gains and the capital that comes with it to grow our business. Now that we have a portfolio that we're satisfied with and a tenant roster that we're very satisfied with, the goal is to keep those tenants healthy and their businesses healthy, and we can continue to grow rents in a very methodical manner over time without -- with less capital than we've had to use in the past, which takes our free cash flow from something that used to be $30 million to something north of $50 million and even $60 million in the future.

And just like potential barriers, impact on spreads...

Yes, of course. So the good news on that is in the past, we've had one bidder and they get to set the rent. Now we've had many cases and the auction process is probably the best examples, not just for InvenTrust but at some of our peers is we've had multiple bidders through those auction process. So you can see that there's real demand for these 15,000, 20,000 square foot spaces.

There's just not -- there's no new supply, as we know. And it's very, very expensive to even build out a new space within an existing center. So these tenants are -- they're desperate for -- to hit their own growth plans, and that's been a very good dynamic for us in the markets that we're in. And then obviously, the quality of the centers certainly helps as well.

Maybe on that investment side, talk about kind of the costs, how much costs have gone up?

Yes. It's hard, not including land. I mean construction costs have been anywhere between, let's call it, $250 and $350 a foot. So if you're talking about greenfield development, it's something much, much higher than that. So the reason that we've been successful and been so -- one, we're not a developer. We don't do ground-up development, but we've been buying below replacement cost for a long time, and it's going to -- it looks like it's going to stay that way for the foreseeable future. So the cost of construction kind of cuts two ways.

One, it's expensive for us to re-lease space to new tenants. but it's also keeping the demand in our favor as well. So it's kind of like it's -- we have to balance how much we're willing to invest in the space versus how much rent we want to charge because the worst thing that we can do, especially in a nice part of the cycle like we're in now, it's not going to last forever.

And the last thing we want to do is spend too much capital, put in too high of a gross rent and then God forbid, the cycle turns or the economy gets even softer and you get space back and you have to put more capital into it, but now you have an above-market rent that you're trying to care for.

So in terms of capital allocation, where is the focus today primarily?

Yes. So now that we've done the recycling out of California, we'll have probably one or two assets in any given year that will probably exit out of, but most of it is going to become on balance sheet. We didn't -- we were fortunate enough to do an equity deal last fall. We felt that the cost of capital was in a spot, but most importantly, the opportunity set and the potential uses of those proceeds were going to be accretive to our business, and we're going to be able to grow.

That bar has gotten higher as private market pricing has continued to be competitive. So we have plenty of capacity on the balance sheet, but we will be opportunistic with our cost of equity if we can, but we're -- the bar is certainly higher than it used to be.

In terms of power centers today, I mean, what are you seeing there? I feel like -- I mean everybody is sort of after grocery anchored. It's very competitive. Are you seeing more interest in power?

To an extent, the same -- going back to your comments on lifestyle center, there has been more power center inventory that's come to market as well and that some of the pricing has been rather competitive. I would call it anywhere between low 6s to mid-7s depending on the quality of the center in the market. The types of power centers we like, very similar to my comments with lifestyle is ones where maybe they're about -- they're, call it, 200,000 to 250,000 square feet, not 600,000 square feet.

I think it's important for us just having lived -- having had more exposure to power centers in the past. The larger of those centers are just the options become limited because you tend to have every category in your center already. So if that's the case, if you think about a power center that has 6 boxes and maybe 1 large anchor versus some of those larger ones that may have 12 boxes with 2 anchors, 12 boxes, there's not that many categories to go around.

It's just -- the ability to backfill is just a lot thinner. So like I said, we will do some power centers. We did buy a nice power center down in Fort Myers last year. It's a shadow anchor by Home Depot and Target, a fantastic market, a market that we've been looking to grow in. But those transactions are going to be very pinpointed and more few and far between than some of the core grocery stuff that we've been doing.

Okay. We got a couple of rapid fire questions, I know we -- so the first one is when the Fed does start to cut rates, you expect long-term yields to decline, stay flat or potentially rise?

I would say stay flat, stay the same.

Okay. AI initiatives, how would you characterize your plans over the next year higher, flat or lower?

Higher.

And finally, same-store NOI growth for your sector will be higher, lower or same next year?

Well, where is the run rate right now? I know where we're at. I will go -- I will say...

It's been -- people have said either flat. Mainly it's been flat to yes, slightly higher.

All right. I'll go with flat.

Okay. All right. Thanks a lot, everybody.

Thank you. Appreciate it.