Acadia Realty Trust (AKR) Q4 FY2025 Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Acadia Realty Trust Fourth Quarter 2025 Earnings Conference Call [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Will Delves. Please go ahead.

Good afternoon, and thank you for joining us for the Fourth Quarter 2025 Acadia Realty Trust Earnings Conference Call. My name is Will Delves, and I'm an analyst in our asset management department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, February 11, 2026, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to 2 questions per caller to give everyone the opportunity to participate. [Operator Instructions] Now it's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, Will. Great job. Welcome, everyone. Our strong fourth quarter results added to an overall strong year with both solid internal and external growth. and this momentum is continuing as we head into 2026. A.J., Reggie and John will discuss our performance last quarter and our outlook going forward. But before diving into the details, I'd like to take a step back and discuss the key initiatives we put in place over the past few years and how they have positioned us for not only strong current performance, but also for strong long-term growth. A few years ago, after the very painful multiyear headwinds, first from the retail armageddon, then from COVID and related issues, it became clear that the strong rebound in our portfolio performance was likely more than just a COVID rebound and was setting up for a longer-term positive fundamental shift for retail real estate. As we've discussed on prior calls, these tailwinds benefited most open-air retail, but they have been especially beneficial for the street retail component of our portfolio and for several reasons. First, the lack of new development of retail real estate for almost a decade has caused a rebalancing of supply and demand and has been a powerful tailwind for all open-air retail. But more importantly, the additional shift by retailers away from a heavy reliance on selling through wholesale and department stores. And they're recognizing the need for their own physical stores has been an additional important driver of demand. And this increased demand has applied much more to discretionary retail, especially in key must-have corridors. Then second, while the consumer has generally been more resilient than anticipated, the so-called K-shaped economy has meant that tenant demand and tenant performance by discretionary retailers who serve the upper segment of the economy has continued unabated. Thus, the general bias in the equity markets last year to pivot to necessity-based retail following Liberation Day appears overdone as the street retail portion of our portfolio continued to outperform our other segments. Then third, the structure of street retail leases enables us to capture higher rental growth sooner than in our suburban assets. While increasing market rents are good for all real estate, it is most beneficial for those properties like street retail that have a combination of stronger contractual growth, fair market value rent resets and lighter relative CapEx on re-tenanting. Sooner or later, all retail real estate will benefit from increases in market rents, we just prefer sooner. So as we saw these trends unfolding, we positioned ourselves to capture this growth. As we stated, our goal has been to deliver multiyear NOI growth of 5% and for this growth to hit the bottom line, both in terms of earnings growth and net asset value growth. Consistent with this goal, we have now delivered 4 consecutive years of same-property NOI in excess of 5%. And we want to make sure that we are not only producing strong current results, but are positioned to do so for the foreseeable future. We are delivering on this growth goal through several different initiatives or levers. First and foremost is leasing up a vacancy. Over the past 4 years, we have increased our economic shop occupancy from approximately 81% at the end of 2021 to over 90% today. And at 90%, we still have room to run. Then beyond this lease-up, a second lever is our ability to capture rental growth on our streets from both our PryLoose strategy and our fair market value resets. And A.J. Levine will discuss the opportunities we're seeing here. Then a third lever will come from the meaningful growth coming out of our redevelopment pipeline, most immediately from our 2 assets in San Francisco as well as our development on Henderson Avenue in Dallas. John and A.J. will also give further color on these needle movers as well. And then finally, to supplement this internal growth and to better ensure that we can continue to deliver our long-term growth goals has been our external growth initiatives. For our on-balance sheet REIT acquisitions, our focus here has been primarily on street retail investments where we can benefit from building operating scale, on must-have streets. While we have found the benefits of scale on the suburban side of our business to be somewhat elusive, we are seeing the benefits more clearly through owning multiple stores on given key streets where we are able to better both curate a street and then drive incremental growth. We saw this playing out on several of our existing corridors such as Armitage Avenue in Chicago and M Street in Georgetown, and this gave us the conviction to focus our future street retail investments on those corridors where we can own enough concentration to create benefits of scale. So we doubled our ownership stake in Georgetown and D.C. and now control nearly 50% of the street retail in this key corridor. And last year, we delivered in excess of 10% NOI growth. We also doubled down in Williamsburg, Brooklyn, investing approximately $160 million by adding 10 storefronts on North Sixth Street. We also doubled down on Green Street and SoHo, investing over $80 million. And we more than doubled down in Henderson Avenue in Dallas, where we will be increasing our investment there by almost $200 million by adding additional assets and commencing our 170,000 square foot development there. We also expanded into new corridors such as Bleecker Street in the West Village and just this quarter, Upper Madison Avenue in New York City. All told, over the past 24 months, between our street acquisitions and planned investments into Henderson Avenue, we have invested about $700 million. And all of these investments are with a view towards further recognizing the benefits of scale and is extending our long-term growth goals well into the future. And while the benefits of scale are important on a corridor-by-corridor basis, they also benefit our overall platform as we are well on our way to being the premier owner-operator of street retail in the United States. Then complementing the street retail side of our business is our investment management platform. For as long as Acadia has been in business, we have leveraged our institutional capital relationships to pursue alternative and complementary investment opportunities. More recently, our investment management model has shifted from running single traditional closed-end funds into multiple JV channels. And as Reggie Livingston will walk through, including our most recent activity, we have successfully executed over $800 million in JV acquisitions over the past 24 months. Big picture, we have been deploying our capital using a barbell approach on one side. Our on-balance sheet activity has been focused on high-growth street retail, well suited to long-term ownership. And then for our investment management platform, we are focusing on opportunistic and higher-yielding investments for this buy, fix, sell side of our business. So to conclude, the internal and external opportunities we see provide a clear line of sight into providing multiyear top line growth of 5% and having that growth drop to the bottom line. Then with ample balance sheet capacity, we're in a position to capitalize on the exciting opportunities that we have in front of us. With that, I'd like to thank the team for their hard work last quarter and last year, and I'll hand the call over to A.J. Levine.

Great. Thanks, Ken. Good morning, everyone. So before I dive into the quarter, I'd like to take a minute to highlight another record year of leasing for us in 2025. Driven largely by the trends that Ken mentioned, most notably retailers increased focus on DTC and the remarkable strength of the high-end consumer, our tenants invested in both new and existing stores with confidence and at an accelerated pace. That momentum remained consistent throughout the year and shows no signs of slowing as we look ahead to the balance of 2026 and beyond. Over the course of 2025, with a focus on pry loose opportunities and thoughtful curation, we leaned into our growing scale to add several new and exciting brands while also expanding relationships with some of our most dynamic, highest-performing tenants. Notable additions would include T&T Grocery and LA Fitness Club Studio in San Francisco, Google and Swarovski on M Street in D.C., Richemont's Watchfinder and Veronica Beard in SoHo, Rag & Bone on Henderson Avenue in Dallas, UGG on North Sixth Street in Williamsburg and most recently, an expansion and extension of the Row on Melrose Place in Los Angeles. In addition to curation, 2025 was also a year of unlocking the outsized rent growth we've seen across our streets over the last several years. Through a combination of lease-up, pry loose and fair market resets, the team consistently delivered spreads in excess of 50% on our streets. 2025 was also a banner year for tenant performance and sales growth across our advanced contemporary, aspirational and specialty street tenants. Year-over-year sales on our streets ranged from 10% to as high as 30% to 40% in some markets. As we've said, tenant performance remains the most important indicator of future rent growth and where sales go, rents inevitably follow. And we expect that the last several years of outsized sales growth on our streets will continue to translate through to outsized mark-to-markets in the coming years. But given where occupancy cost ratios are on our streets today, even if that growth were to moderate, our tenants and our markets would remain healthy. Now turning to the quarter. In Q4, we signed another $3.5 million of ABR with nearly 75% coming from high-growth markets, including Melrose Place, Williamsburg, Newbury Street and Henderson Avenue in Dallas. Highlights included the addition of UGG at one of our more recent acquisitions on North Sixth Street in Williamsburg, replacing lululemon, which we successfully relocated and expanded elsewhere on the street. Because of our scale on North Sixth, we were able to add UGG at an unreported 72% spread while also retaining an important tenant in lululemon. While that spread was not included in our release, it's another strong data point and indicative of what we're seeing across the street portfolio. Similarly, during the quarter, we signed a new lease on Newbury Street at a 58% spread and on Melrose Place at a 60% spread. And as is typical for street leases, all of these deals included the added benefits of 3% annual contractual growth and fair market resets. Beyond signing new leases, we continue to create value through our pry loose and mark-to-market strategy. As a byproduct of the sales growth we've highlighted, tenants are increasingly reinvesting in existing stores, especially in must-have A markets like SoHo, Gold Coast Chicago and Melrose Place. In many cases, tenants are approaching us several years ahead of lease expiration for additional term, which allows us to secure these tenants long term and recast those leases to market. For example, in January, a tenant of ours in SoHo was planning a substantial reinvestment in their store, but had just 2 years of term remaining. In exchange for extending the lease today, we were able to immediately reset the rent to market, effectively pulling forward mark-to-market by 2 years and achieving a 51% spread. This transaction alone contributed close to $0.005 of FFO. But the pry loose and blend and extend strategy is not just about accelerating mark-to-market. It is also a critical component of portfolio maintenance and risk management. In many cases, it allows us to upgrade credit merchandising. While in other cases, including this one in SoHo, it allows us to lock in credit long term, helping mitigate any potential short-term market volatility. In that sense, the strategy is both proactive and defensive. Looking ahead, we've identified additional pry loose and early extension opportunities across SoHo, M Street, Armitage Avenue, Henderson Avenue, Bleecker Street and Williamsburg. While we still have a healthy amount of lease-up ahead of us on our streets, we also expect to continue mining the portfolio and capturing outsized rent growth while setting the portfolio up for long-term success. Now looking ahead to 2026 and beyond, tenant demand appears to be accelerating, and our pipeline of leases in advanced negotiation currently exceeds $9 million, up roughly $1 million from last quarter with the majority of that future growth coming from our streets. And finally, in terms of markets in the earlier stages of recovery, we continue to be encouraged by the interest and the activity we're seeing in San Francisco. John will walk through the economic impact of our progress in the city, but over the past year, we've signed 90,000 square feet of leases at 555 Ninth Street and City Center that currently sit in our SNO pipeline. At both assets, we saw the elimination of formula retail restrictions, which will help these retailers and future tenants get open faster and with fewer obstacles. So with the winds in our backs picking up and a pro-business administration in office, we expect continued progress in San Francisco, and we are in active negotiations on several more high-impact deals that we look forward to discussing in the coming months. So overall, we remain very encouraged by the trends and the performance we've seen over the past year. And as we look forward, we see clear indications that this momentum will continue. I want to thank the entire team for their hard work and focus throughout the year. And with that, I'll turn things over to Reggie.

Thanks, A.J. Good morning, everyone. As noted in our earnings release, our Q4 and to-date acquisition volume stands at nearly $500 million. And to give our recent growth further context, over the last 24 months, we've closed in excess of $1.3 billion of acquisitions, including over $500 million in street retail for our REIT portfolio and over $800 million in value-add deals for our investment management platform. That volume is certainly a needle mover for a company of our size, but it isn't volume for volume's sake. As Ken mentioned, in our street retail acquisitions, we doubled down in dynamic growth markets and expanded into new markets with those same growth characteristics. And for our investment management platform, we did more volume than any comparable period during our commingled fund business as we continue to find great assets with strong upside and capitalize them with top-tier institutional partners. By design, our dual platform approach has continued to find ways to profitably grow as our REIT portfolio and our IMP deliver the accretion consistent with our goals of $0.01 per $200 million. We're excited by how much we've grown, and we see nothing on the horizon that should slow us down. Now diving into specifics of our most recent activity and some 2026 visibility. Last month, we purchased 5 retail storefronts at 1045 and 1165 Madison Avenue in Manhattan with tenants such as Le Labo and Todd Snyder. These assets sit within the Upper Madison retail district, which is attracting a new generation of contemporary brands. This influx is driving a rent growth surge that places the current rents in these assets below market. And further, if we can find accretive opportunities, we plan to add more assets in this corridor to generate the benefits of scale that we've enjoyed in other submarkets. Looking ahead in our street retail business, we continue to see prime opportunities and currently have north of $150 million of deals under agreement that could close in Q1. This pipeline is being driven by sellers who continue to come off the sidelines and our priority position as the first call for many of those sellers. Our reputation as a group that knows how to underwrite and close these transactions is well known throughout our target markets and continues to serve as a competitive advantage. And while that positive reputation has underpinned our street retail growth, it also contributes to us executing the other side of our barbell investment approach, that is finding value-add and opportunistic deals for our IMP. In that platform, alongside our partners at TPG Real Estate, we closed on Shops at Sky View for approximately $425 million. The asset is a 550,000 square foot center in Queens, New York with national tenants, including Marshalls, Burlington, Uniqlo, and BJ's among others. The investment delivers similar yields to other recent IMP deals, but the population density and trade area spending power is substantially higher here. The asset attracts nearly 12 million annual visitors, which is only poised to increase with the recently approved Hard Rock Hotel & Casino, an $8 billion mixed-use development located a short walk from the asset. Our business plan will continue to drive value through accretive remerchandising and harvesting mark-to-market rents. We're also in advanced stages of recapitalizing Pinewood Square and Avenue at West Cobb with first-class institutional investors. Again, demonstrating another arrow in our quiver, using our balance sheet to close quickly on IMP assets while being thoughtful about matching the investment with the right partner. These transactions, along with others we have currently teed up, should make for an active Q1 for the investment management side, so stay tuned. Looking ahead, we anticipate this side of our business will continue to find attractive value-add deals this year even as the surge of investment interest in retail has made finding such deals, frankly, harder. But in those competitive environments, our platform has a history of being able to profitably source, analyze and harvest outsized returns. So in summary, we closed nearly $1 billion of 2025 and to-date acquisitions. That amount includes nearly $400 million of REIT portfolio transactions that resulted in an attractive GAAP yield in the mid-6s and 5-year CAGR in excess of 5%. And most importantly, these deals across platforms delivered accretion in excess of our $0.01 per $200 million target. And further, we're excited about our 2026 pipeline. And while my goal isn't in John's numbers, I'm confident we should be able to deliver volume consistent with our run rate in the past 2 years, and it will deliver the earnings and NAV accretion consistent with our mandate, not to mention strong CAGR to complement our internal growth. I want to thank the team for their hard work this quarter. And with that, I'll turn it over to John.

Thanks, Reggie, and good morning. My remarks today will focus on our quarterly results, our 2026 outlook and then closing with an update on our balance sheet. And our message is clear. We are continuing to see strength across our dual platforms. And with multiple avenues of growth, our team is laser-focused on driving earnings and NAV growth. Starting with our fourth quarter results. We reported same-property NOI growth of 6.3% for the quarter and 5.7% for the year, coming in at the upper end of our guidance with our street and urban portfolio once again driving our growth. And this top line growth is hitting our bottom line earnings. We reported $0.34 a share for the fourth quarter, which included $0.03 of gains from our final sale of Albertsons shares. And just to lay out a clean run rate, once we back out the $0.03 of Albertsons gains and the onetime $0.01 of net real estate tax savings highlighted in our release, we're at $0.30 for the quarter, which is sequentially up an incremental $0.01 from the $0.29, also net of the gains and promotes that we reported in Q3. Additionally, and in line with our goals, we increased the REIT's economic occupancy another 30 basis points to 93.9%. It's also worth highlighting that our street and urban economic occupancy sequentially increased an additional 80 basis points during the fourth quarter and 370 basis points over the course of 2025. But as we've said before, not all occupancy is created equal, with street and urban occupancy at approximately 90% versus prior peak levels that were in excess of 95%, we continue to see meaningful embedded NOI and earnings growth. I'd now like to highlight a few items from our signed not open pipeline. First, our pipeline of $8.9 million at December 31 remains elevated with ABR at our share of approximately 4% of in-place rents. And with the incremental leasing opportunities that A.J. discussed, we should be able to maintain with an opportunity to exceed our current pipeline, setting us up for continued growth heading into 2027 and beyond. Substantially all of our $8.9 million pipeline is expected to commence in 2026, with roughly 25% commencing in each of Q1 and Q2 and the remaining portion commencing in the second half of the year, heavily weighted towards the fourth quarter. And based on this timing, we expect approximately $4 million of ABR to be reflected in NOI in 2026 with the incremental $4.9 million in 2027. Secondly, in terms of the portion of our pipeline related to our same-store pool, we executed $1.5 million of new same-store leases, fully replacing the $1.5 million of leases that commenced during the quarter, meaning our ongoing same-property growth trajectory remains intact. Third, and as a reminder, our pipeline reflects only incremental ABR and excludes leases on occupied space, and we have over $1 million of executed leases on spaces currently occupied, which is incremental to the $8.9 million in our pipeline. Now moving on to our guidance. As a reminder and outlined in our release, we have simplified our reporting beginning with our 2026 guidance. And we want to thank both the buy side and sell side for their input and their strong support in making this important change. Our new metric, FFO as adjusted, excludes gains from our investment management business, along with any material noncomparable items that we believe are not reflective of our core operating results. As outlined in our release, we are anticipating 2026 FFO as adjusted between $1.21 and $1.25 and projecting same-property NOI growth of 5% to 9%, excluding redevelopments, with our street anticipated to deliver about 400 basis points of outperformance as compared to our suburban portfolio. I want to start with a few thoughts on our guidance ranges and what factors will determine where we ultimately land, keeping in mind that $1.4 million currently represents about $0.01 of FFO and 100 basis points of annual same-property NOI growth. And 3 key factors will determine where we land within these ranges. First, our assumptions regarding rent commencement dates on executed leases with 4% of our ABR anticipated to commence in 2026, each month of an acceleration or delay as compared to our initial projection equates to approximately $750,000. Second is credit loss. At the midpoint of our guidance, we've assumed approximately 115 basis points against minimum rents, which is in addition to known or to specific reserves we have factored in for known tenant issues. And for context, the 150 basis points feels fairly conservative relative to the roughly 50 basis points we have averaged over the prior 2 years. And lastly and potentially most impactful is the pry loose strategy that A.J. discussed. And while it's not factored into our base case, our active management and leasing teams are actively pruning our portfolio to accelerate these opportunities. And while greater success in these efforts may impact our short-term results, it accelerates our long-term growth and value creation. I also want to hit on a few other items as it relates to our 2026 assumptions. First, alongside our projected 5% to 9% same-property NOI growth, we expect total pro rata NOI, including redevelopments and investment management to increase approximately 15% to roughly $230 million at the midpoint compared with the approximately $200 million that we reported in 2025. Secondly, and as outlined in our release, our earnings guidance, including the numbers -- the NOI numbers I just mentioned do not factor in any acquisitions or dispositions other than those that we reported in our release. And as you've heard from Ken and Reggie, we have consistently delivered in excess of $500 million of annual transaction volume, and we continue to target $0.01 of FFO accretion for every $200 million of incremental gross asset value acquired, whether it's for the REIT or our IM business. And finally, I'll close with an update on our balance sheet. With our pro rata debt to EBITDA at about 5x, meaningful liquidity on our credit facilities, along with anticipated capital coming back from our investment management and structured finance businesses, not only have we fully funded our Henderson development project, our balance sheet has several hundred million dollars of dry powder on call to play offense. Additionally, we do not have any material debt maturities in 2026 and are well hedged against interest rate volatility. And with our weighted average borrowing cost of 4.5% and 5-year unsecured funding available to us today at similar pricing, we do not expect any material interest expense pressure as our debt maturities roll. And over the course of 2026, we intend to continue working with our capital partners to strategically and accretively refinance and extend duration across our portfolio. The debt markets remain wide open to us with both the availability of credit and spreads at record lows. So in summary, not only are we projecting strong earnings and NOI growth in 2026, our multiyear goal is to position our portfolio to deliver sustained 5% growth. And as we look beyond 2026, we have multiple clearly identifiable drivers that position us to achieve just that. And as Ken laid out in his remarks, those drivers include street lease-up and mark-to-market opportunities. We have roughly 500 basis points of embedded street occupancy upside, along with meaningful mark-to-market on expiring leases. And when combined with the 3% contractual rent growth in our existing street leases, this adds an opportunity for several hundred basis points of incremental growth. Second is our redevelopments. We already have $3.5 million of executed leases in our redevelopment pipeline that we anticipate will come online in late 2026, with the vast majority of it coming from our 2 redevelopment projects in San Francisco. And as A.J. mentioned, leasing momentum in San Francisco continues to build as tenant demand returns. And upon stabilization and inclusive of our SNO pipeline, we estimate these 2 projects alone will contribute an additional $7 million to $9 million of NOI beyond those amounts included in 2026, translating to approximately $0.03 to $0.05 of incremental FFO, net of the capitalized interest and re-tenanting costs. Third is Henderson Avenue. As we've discussed on past calls, Henderson is tracking to stabilize in 2027 and 2028, and we continue to anticipate a high single-digit yield on our cost. which means that upon stabilization, the project is poised to deliver $0.03 to $0.05 of incremental FFO. And keep in mind, that's just Phase 1 of the project. We already have and will continue to add sites on Henderson Avenue, which we anticipate will quickly become one of our top-performing street retail corridors. And lastly is external growth. With the balance sheet positioned for offense and several hundred million dollars of available capacity, we will remain disciplined, but anticipate being highly active on the investment front. And these are just a few of the key drivers that give us confidence of achieving sustained 5% growth with opportunity for additional upside on items I haven't even touched on, whether it's City Point in Brooklyn, lease-up of 840 North Michigan Avenue in Chicago, the pry loose opportunities on our street or the numerous and accretive redevelopment opportunities embedded throughout our portfolio. At the sake of getting to your questions, I will stop here and turn the call over to the operator for questions.

[Operator Instructions] Our first question coming from the line of Samir Khanal with Bank of America Securities.

I guess, Ken or John, I mean, you gave a lot of good details on kind of the acquisition environment, the advanced stages of negotiations you're in. Maybe expand a little bit on kind of the markets and then kind of what you're seeing from a pricing perspective.

Sure. I'll start it off and then, Reggie, perhaps you'll add some more color to it. In general, the markets that we are currently active in and that you've seen the acquisitions over the last couple of years, ranging from New York, SoHo, Williamsburg, down to D.C. continue to be very exciting for us. There are probably half a dozen other markets that we either have been active in and we'll continue to add and some new markets. In terms of pricing, it gets very tricky to talk about going in cap rates because rents have moved. A.J. mentioned the mark-to-market in SoHo of 50%. So a cap rate would be substantially lower on a lease that you know you have near-term 50% increase than one that is at market. So I'm hesitant to give going in yields other than to say we are still shooting for our overall goal of acquiring assets that through contractual growth and periodic fair market value resets mark-to-market can throw off a 5% CAGR over the next 5 years. And we're seeing that in the markets we're currently active in and our retailers are showing us other markets that makes sense in that same profile as well. Reggie, I don't know if there's anything additional you want to add.

Yes. I would just say that we go through a rigorous process, Samir, of looking at potential new markets, just making sure they have those same growth characteristics of our existing markets, the tight supply, the tenant performance and work extensively with A.J. and his team, as Ken said, to understand well, where do tenants want to be and how can we find the right entry point in those markets. And then is there an opportunity to scale in those markets as we've often talked about the benefits of that scale. So we go through a rigorous process with that, and we think there are new markets on the horizon.

And then, John, on the assumption for same-store NOI growth, I know that 5% to 9%, you talked about sort of the swing factors there. I just want to make sure, is rent commencement and sort of credit loss assumption sort of the main factors to kind of get you the high end and the low end there? Or are you kind of missing on something else?

Yes. I mean I think it's a combination of the 3, Samir, but I would say it's really the pry loose piece that I wanted to highlight that I think as we've been posting and talking about, there's a lot of below-market leases in our portfolio. And to the extent we could get those leases out, that's going to create short-term downtime, which we haven't built in into that, but one we are actively hoping to do it. So I'd say the other ones could move 100 basis points here or there. But I think if we do our job and we could accelerate mark-to-markets on this, the short-term quarterly downtime that we could get from that, we're going to take that to get the long-term growth. So I would say that's probably the most impactful of where we land within that range. And we'll update throughout the quarters as to our progress on that.

And then under any circumstance, we're still looking at a robust 5% to 9% barring significant credit loss or other things, which feels pretty darn good.

Our next question is coming from the line of Craig Mailman with Citi.

I don't want to put words in your mouth, but John, maybe it feels like reading between the lines, there's plenty of variables that could make guidance here a little bit conservative. I'm just trying to figure out some of the things that A.J. talked about on the kind of blend and extend and the pry loose. Like how do you guys go about figuring out what to include in guidance versus what's lower probability? Or maybe another way of asking that is like how much of low probability kind of upside could there be that you didn't include in guidance, but maybe relative to the past couple of years, you guys have been able to capture above and beyond that initial projection?

Yes, correct. So I think if you've known the way that we put out our guidance, we tend to set realistic goals and we achieve those versus putting in super soft assumptions that we would miraculously beat the next quarter. So I'll just start with that, that, that philosophy is unchanged. What I would say has changed is the environment that we're in. So in terms of we are not going to -- as much as I trust A.J., if he tells me he's going to get a 50% spread and open that lease in 2 weeks, I am absolutely not going to put that in our guidance. So I think if there's things that are not within our control, we're not going to layer that assumption in there. I do think our credit is conservative, as I put in my remarks. It's double what we needed in the prior 2 years. And we've also pulled out known specific issues. I think to the extent we had a tenant struggling, so think we have a single container store. You should assume that is not included in our guidance. So I think there is a bit of conservatism there. But I think where we -- I will say we have a lot of conservatism is on the active -- on the investment side, several hundred million dollars of forward equity. Reggie talked about the pipeline, and we're going to be busy there. So I think that's where the upside is. The other things can add $0.01 or $0.02 here or there, but I think it's really our upside is going to be from the external growth in '26. Some of the drivers for '27 and beyond, there's a lot of upside in those, which I tried to articulate with that setup going beyond the current year.

And just to reinforce that, whether it's pry loose, fair market value resets or other drivers, it will probably have less of a needle-moving impact this year in '26 and more set us up for stronger '27 and '28, which is how we're really thinking about this. We like how our numbers are stacking up for the foreseeable future. We want to make sure we're continuing to extend that.

That makes sense. That's helpful. And I apologize, my line was breaking in and out. Reggie, was the -- did I hear you say $500 million of kind of the near-term deal pipeline? And is that correct?

I would say there's $150 million under agreement, but we feel confident we can always do the run rate that we've done in the past 2 years with half of it IMP and half of it Street. And that's where the $500 million would come in.

So is it another -- sorry to belabor. But you guys already did the $425 million through Sky View, like do you view that as your 20%?

So the $150 million that Reggie is referring to is on balance sheet, 100% owned street retail assets.

New and not discussed until right now.

Okay. And what do you think timing on that could be?

Q1, but stay tuned.

Our next question coming from the line of Linda Tsai with Jefferies.

Any thoughts on where the 90% street occupancy could end by year-end?

Yes. I think, Linda, again, what I would say is that I look more in terms of NOI than on occupancy. So we have a single location in SoHo. That's going to have a far greater impact than a location that we have elsewhere in our portfolio. So the percentage, I will say, is less relevant. But what I would say our goal continues to be is that we want to get to that 95%, call that within 18 months.

And just one question for Ken. Any high-level color on how tariffs might have shown up in retailer results in '25, either from a sales or margin perspective and how this might change in '26?

So I've had a variety of those conversations with as many of the retailers that we have in our portfolio that we meet with regularly. And the first answer is it's somewhat varied retailer by retailer. The general takeaway would be most of our retailers believe that they have navigated through the toughest parts of that storm. Now obviously, things seem to change every day, and we would all welcome more predictability, but it feels, first and foremost, that the most difficult parts of that are in the rearview mirror. Secondly, and probably the most important to us on the street retail side. This is a little different on our mass merchant side, but for our street retailers, they've been able to adequately navigate around tariffs and hold on to margins defined from our perspective such that the traditional rent-to-sales ratios that we have always talked about, whether it's 8% for a restaurant or 12% for certain advanced contemporary and 18% for others. Those ratios are holding. And thus, and this is important, as sales increase, whether it's due to slightly stronger inflation, or strong consumer, consistent consumer demand, as you see top line sales grow, you should expect retailers' ability to pay that increased rent has remained very similar today to where it was 5, 10 years ago. There's not been that shift of margin pressure resulting in any kind of pushback in terms of our rent requests. Our retailers are opening these stores. They are profitable. And while they always want to pay less rent, they are not looking to or blaming the noise around tariffs as the gating issue.

Our next question coming from the line of Todd Thomas with KeyBanc Capital Markets.

I wanted to just go back to the acquisitions and the pipeline, I guess, really the $150 million that the company has been awarded and maybe perhaps a little bit more broadly as you think about investments during the year, you've been active in New York more recently. And Ken, you mentioned there could be some new markets. But is the opportunity set that you're seeing in New York on a risk-adjusted basis, just most favorable today? How should we think about future investment activity in the markets that you're sort of focusing on or readying to deploy capital on more near term here?

Yes. So let me start and Reggie then chime in. New York is probably a more competitive market. So where we can find deals often they are more often than not off market and in New York, we'll continue to do those. But you should expect to see us go into other established markets, established, meaning obvious that our retailers are there and want to be there as long as we can have a view that there can be follow-on deals such that we can build scale. And we have built a nice portfolio in New York, continue to plan on adding to it, but my expectation is other markets will kick in as well. Reggie, anything you want to add to that?

Yes, I would just say with the competition you alluded to, there's certainly more competition. But I would say not too long ago, the issue was bringing sellers for street retail, bringing them off the sidelines to decide whether they wanted to sell or not. A lot of them because of the retail fundamentals, they've decided to sell. And so now we're just in competition with others, and I'd like that fact pattern for us because it usually goes to those who have the reputation, have the capitalization and have the experience, and we feel we do well in that environment.

Okay. And then Ken, you didn't mention Chicago when you were discussing markets that remain exciting. I know you just listed a couple, but how are you thinking about Chicago today in terms of both capital deployment for newer deals and also as a potential opportunity to maybe recycle capital out of?

Yes. So let's first start with fundamentals because I think Chicago has until recently been getting a bum rap. And if you look at our metrics, if you look at our rental growth, especially on our major markets, whether it's the Gold Coast or Armitage Avenue, one of our tenants is paying percentage rent on State Street. That's fantastic, and it puts that store in one of the top of their chain. So in general, the fundamentals have recovered pretty darn strong, and that's good and encouraging to us. That being said, we still have too much ownership in Chicago relative to the rest of our portfolio, and it would make sense over the next year or 2 as we lease up assets, if they are not part of our scale strategy on a given corridor, it would make sense for us to prune. A goal of ours, we'll see if we can get there is over the next 2 to 3 years to get Chicago to that right balance, which would mean even though we do periodically see some good acquisition opportunities and even though we have seen some really strong rental growth, we don't intend to add and we probably will subtract in Chicago in due course. But thank goodness, we did not fire our sales stuff because the rent spreads and new tenant demand, the deals we've done, whether it would be Mango or [indiscernible], thank goodness, we didn't exit before those, but we recognize the rebalancing.

Our next question coming from the line of Michael Mueller with JPMorgan.

I guess, first of all, I think you made a comment you'd like to be at 95% street occupancy in the next 18 months. Is that a leased number or an occupied number? And how should we think about a ballpark blended rent per square foot for that 500 basis points, at least a range?

Yes. So Mike, I would say that it would be when we say leased to give us some room with upside to have it occupied and paying. And then in terms of -- and Mike, we've had this conversation a bunch of times. It's going to absolutely matter what within that 95% we get leased up. So for example, we could look through our portfolio. We have a single location in SoHo. That is going to be in the -- that's going to be a very large lease, which will have a big economic impact and a relatively small impact on the occupancy. So it's really -- and I know it makes it challenging in your seat, but to put a blanket number on every 100 basis points equals x, it really is case by case. But what I would say is that stepping back, it is several hundred basis points of NOI growth and several cents of bottom line FFO growth.

Got it. Okay. And then for the second question, I guess just looking across the portfolio, and I was thinking about the Madison Avenue investments, but just generally speaking, is there a cap to a level of single-store investment that you would make? Like is it $25 million, $50 million, $100 million? Like what should we be thinking of there? What sort of guidelines for that?

Yes. Generally, for the streets that we're active in or most active in, it's more how small an add-on deal are we willing to do. And we -- you see periodically, we'll do some small bolt-ons on Armitage Avenue. On the 2 large you're really talking about Fifth Avenue boxes, and we have been hesitant to jump into that because the outcome or the volatility of a very large single-tenant acquisition, and we live that on North Michigan Avenue. The volatility is at least for a company of our size at this time, something we've always been cautious about. So worry more about us doing too many small deals than us biting one big chunky single asset deal, if you're talking about a single building. If you're talking about buying a corridor and putting several hundred millions of dollars to work quickly, that we would do all day long.

Our next question is coming from the line of Floris Van Dijkum with Ladenburg Thalmann.

Wanted to touch on the acquisition pipeline a little bit more. I think, Reggie, you indicated it was $150 million of transactions under agreement right now. Can you give us a percentage of what is New York versus other markets?

Without getting too far ahead, I would say that those are the other markets that fall into the other markets category.

Got it. Okay. So the $150 million under agreement would typically be outside of New York. Is that the right way to interpret that? Okay.

Correct.

And then one of the other things that we've seen happen in SoHo, in particular, I think with Ralph Lauren and with IKEA buying -- retailers buying their own store. Are you seeing competition for transactions from retailers themselves and/or have retailers indicated a desire maybe to purchase a store from your portfolio?

I'll take that one. So, so far, and A.J., correct me if I'm wrong, it's very rare that retailers -- well, 1 or 2 have come to us. But usually, it's retailers as competition, they're fairly to very selective we tend not to, when we're working on deals, have a retailer be our competition. But I think, again, it speaks to the commitment that retailers are willing to make to these corridors. And in general, I find it encouraging. That being said, if I find we're bidding against one and we lose, then I'll be pissed. So stay tuned.

And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Bernstein for any closing remarks.

Great. Well, thank you all for the time, and we look forward to speaking to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.