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Site Centers Corp (SITC) Q1 2021 Earnings Call Transcript

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SITC earnings call for the period ending March 31, 2021.

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Site Centers Corp (SITC -1.18%)
Q1 2021 Earnings Call
Apr 22, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the SITE Centers' First Quarter 2021 Operating Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Brandon Day, Investor Relations. Mr. Day, please go ahead.

Brandon Day-Anderson -- Head of Investor Relations

Thank you, operator. Good morning, and welcome to SITE Centers First Quarter 2021 Earnings Conference Call. Joining me today is Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and a slide presentation on to our website at www.sitecenters.com. This is intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and our filings with the SEC, including our most recent report on Form 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures, including FFO, operating FFO and same-store net operating income. The non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our quarterly financial supplement.

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

David R. Lukes -- President and Chief Executive Officer

Good morning, and thank you for joining our first quarter earnings call. We had an excellent start to the year with another quarter of near record leasing activity, continued improvement in collections and deferral payments, stabilization of our lease rate and over $200 million of growth capital raised. This year already feels a lot different than 2020, and the operating environment continues to improve each week with accelerating demand for space. The company is in a fantastic position because of the work of our SITE Centers team. So a sincere thank you to all of my colleagues for their contributions.

I'll start this morning with a summary of first quarter events and then discuss our equity offering and our acquisition pipeline as we look to grow our portfolio of assets in wealthy suburban communities. Consistent with last quarter, 100% of our properties and 99% of our tenants remain open and operating as we continue to provide convenient access to goods and services in suburban communities. Collections continue to move higher. And as of Friday, we've collected 96% of first quarter rents. Unresolved monthly rent is now running less than 3% with the majority of remaining tenants in various forms of settlement negotiations.

We continue to take a tenant-by-tenant methodical approach to resolving any unpaid rent, which, along with referral payments, is driving continued progress on prior period collections, kudos to our leasing and our collections team for their incredible work this past year. If you consider the past 12 months, from April 2020 through March 2021 and measure the durability of our portfolio during that time, three supportive data points have emerged. Number one, rent collection on a contractual rent basis continues to move higher. We've now collected 91% of rent from April 2020 through March 2021, and after including deferrals for accruals tenants we do expect to collect over 95% of base rent. Included in the 91% number is $2 million of deferral payments from cash basis tenants, which was a onetime positive benefit to us in the first quarter.

Number two, leasing volume is very high. We've completed over 700,000 square feet of new leases during this period, inclusive a three anchor leases over 10,000 square feet. And number three, bankruptcy move-outs have been relatively low, which we believe is a testament to our credit quality and the improvement of retailer balance sheets, combined with a higher top line sales number, which are pushing occupancy cost ratios lower for the tenants. The resiliency of our portfolio and the increasing demand for space at our properties is a true testament of our team, the quality of our real estate, the credit quality of our tenants and the durability of our cash flow. More importantly, it's a positive signal for future cash flow since many cash-based tenants are paying current rent along with back rent, which does give us a greater confidence in the durability of our income stream going forward.

Moving to leasing. We had another quarter of near record activity with 219,000 square feet of new leases, including nine anchors, which is half of all anchor signings in 2020. We continue to expect the remaining anchors that I identified last quarter to be executed by midyear with a dozen-or-so additional anchors in the works. There's a good chance we end up executing more anchors this year than our peak pre-COVID years for the comparable portfolio. In terms of our new deal pipeline, the level and quality of demand continues to grow, and I'm extremely optimistic about the future activity.

Conor will give us some details on the pipeline relative to our company, but needless to say, our optimism on the operating side is spilling over into investment activity, which brings me to our first quarter equity offering. We raised just over $225 million of equity in March, with $150 million of the proceeds used to retire preferred stock. We expect to use the remaining cash for acquisitions and currently have $50 million of assets under contract. Importantly, the offering puts our company and our balance sheet in a position where we can pursue accretive acquisitions with cash on hand, our improved retained cash flow, which is now running north of $40 million annually, and additional future sources of capital like the RVI preferred or select accretive dispositions.

So what's driving our increased confidence in growth? We believe that we are at the beginning of a multiyear positive operating environment, driven primarily by pandemic-induced societal shifts that I previously discussed. Specifically, the increased movement of the suburbs continued strong household income in wealthy communities and a growing work-from-home culture. Quite simply, these three changes are putting more people with more money at the footsteps of our shopping centers more frequently. And this is leading retailers to increase the value of their own existing store fleets and launch new concepts, which is broadening the universe of tenant seeking space.

All of these factors taken together are increasing the value of convenience, which is fueling market rent growth in open air properties in select wealthy submarkets. These trends are simply too apparent to ignore and we intend on investing around this thesis. We will provide more detail on the assets we expect to acquire like targeted returns, geography and format as we move later in the year and close on the assets. But we are incredibly encouraged by the size and the profitability of the opportunity, and we're looking to accelerate our investment activity.

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

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, David. I'll comment first on quarterly results and operating matters, discuss revisions to 2021 guidance and conclude with our balance sheet. First quarter results were primarily impacted by uncollectible revenue related to the pandemic. Total uncollectible revenue at SITE share was a positive $1.7 million. Included in this amount is $5 million or just over $0.02 per share of payments and net reserve reversals related to prior periods, primarily from cash basis tenants. Outside of G&A, which was just under $1 million benefit, there were no other material onetime items that impacted the quarter.

In terms of operating metrics, the lease rate for the portfolio was down 20 basis points sequentially and now this was almost entirely related to the sale of an anchor pad with a comparable portfolio flat. Based on minimal bankruptcy activity we are tracking today and the leasing pipeline that David outlined, we believe the lease rate has stabilized. Trailing 12-month leasing spreads were relatively unchanged from the fourth quarter with renewals impacted by strategic short-term deals that I called out last quarter has abridged the upgrade tenancy. Based on our leasing pipeline today, we continue to expect blended leasing spreads in 2021 to be consistent with 2020, that there will be volatility given the size of our portfolio.

Moving forward, we are revising 2021 OFFO guidance to a range of $0.94 to $1.02 per share to incorporate first quarter results, including the recent equity offering. The bottom end of the range assumes no improvement in collections with continued occupancy headwinds and no investment activity. The top half of the range assumes a steady improvement in collections and a return to a more normalized pre-COVID operating backdrop along with $75 million of acquisitions in the back half of this year, which includes the $50 million that David mentioned.

2021 JV and RVI fee-related guidance pieces are unchanged and based on RVI asset sales completed to date, we expect third quarter 2021 RVI fees to be at most $4 million. We have not reinstated same-store NOI guidance at this time, but based on first quarter results and our latest reforecast, we now expect same-store NOI guidance, including redevelopment, to be at least positive 4% for the full year. More details to follow-on that front as we move through the year.

Lastly, we provided the schedule on the expected ramp of our $14 million signed but not open pipeline on page 10 of our earnings presentation. Despite 158,000 square feet, or $2.8 million of annualized base rent commencements in the first quarter. This pipeline increased over $1 million from year-end and represents just under 4% of our share of first quarter annualized base rent. If you were to also include unsigned anchors that David referenced, the pipeline increase is closer to 5% of our base rent, providing a significant boost to net operating income and cash flow over the next two-plus years.

Turning to our balance sheet. Included the receivables line item at year-end is approximately $7 million of net COVID-related deferrals we expect to use in the future. Details on the timing and composition of the balance are outlined on pages eight and nine of our earnings slide deck. As I mentioned earlier, we've been encouraged by deferral repayment trends to date with the vast majority of the remaining revenue attributable to public tenants. Lastly, in terms of liquidity, the company remains well positioned following our first quarter equity offering with minimal 2021 maturities, no unsecured maturities until 2023 and minimal future development commitments.

Additionally, we have full availability under $970 million lines of credit. Pro forma for the equity offering and the Signed Not Opened pipeline, the company is running right around our six times debt-to-EBITDA target, which is in the top quartile for the sector. We have substantial liquidity and free cash flow and continue to believe our financial strength will allow us to take advantage of opportunities that David outlined to drive sustainable OFFO growth and create stakeholder value.

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

David R. Lukes -- President and Chief Executive Officer

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

Questions and Answers:

Operator

Yes, thank you. [Operator Instructions] And the first question comes from Rich Hill with Morgan Stanley.

Rich Hill -- Morgan Stanley -- Analyst

Hey. Good morning, guys. I wanted to just spend a little bit of time unpacking the quarter, and I know you gave some details on this, but unpacking the quarter between past rents that were caught up in 1Q versus the impacts of strong leasing velocity in 1Q. And I bring it up because, obviously, there's various different accounting under GAAP for deferrals and what was collected, what was previously accounted for in past quarters versus what's now. So if you could just maybe walk us through what was past quarter catch up versus strength in 1Q, if that makes sense?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, absolutely, Rich. It's Conor. So included in the first quarter, if you think about dollars that relate to prior periods, it's $5 million. And that's all flowing through the uncollectible revenue item. Now the pieces of that, to your point, some of that are cash-based tenants coming up or catching up on prior rent. Some are cash-based deferrals, but if you're looking for a kind of a ramp from the first quarter to the second quarter, the way to adjust for that is just to remove $5 million in your uncollectible revenue item, and that will give you a good run rate for the second quarter.

Rich Hill -- Morgan Stanley -- Analyst

Okay. That's helpful. And then as a follow-up to that, and I'll jump back in the queue. It looks like your leasing velocity is really strong. And I go back to some of the comments that you made post the spin-off of RVI, where you made a case SITE Centers was really well positioned with below-market rents and maybe higher vacancies, but intentionally higher vacancies. So I guess the question for you guys is, is the leasing velocity that you're seeing reflective of the broader industry? Or is it something unique to SITE Centers' portfolio that you intentionally set up several years ago?

David R. Lukes -- President and Chief Executive Officer

Yeah. Rich, it's a difficult question to answer because the sector is quite large, and we only own 78 wholly owned assets. So it's hard to comment. Although I will say when we did the spinoff, we selected assets that we felt had the ingredients to stay well occupied and be desirable for tenants and to have rent growth. And I do think that's going to be true. But I will say, at the time, I don't think any of us really anticipated that these big societal shifts would take place. And I do think these macro themes, I mean, particularly the suburban kind of movement and the kind of continued wealth durability in wealthy suburbs. And then there's kind of lingering work-from-home culture, it seems like it's going to have some permanence. I do think that those are tailwinds for the entire sector. So just based on tenant conversations we have, they're active in a lot of properties. I feel good about the leasing volume because it feels like they're hitting the highest income suburbs first. But I don't doubt that the next few years are going to be very active in the sector.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

The only thing I'd say, Rich, we are skewed obviously toward national tenants, and we've talked a lot about this over the last year. The national tenants are better capitalized, they have figured out the e-commerce omnichannel angle better than others. And so that is a distinct advantage for us. If you kind of roll it into numbers, and I think why you're hearing this level of excitement from us, is we're 91.4% leased. There's no reason this portfolio can't be 95%, 96% leased. And so that's why I think you're hearing us talk about this multiyear tailwind and our confidence around that continues to grow based off the leasing pipeline we have today.

Rich Hill -- Morgan Stanley -- Analyst

Okay. That's very helpful, guys. Thank you.

David R. Lukes -- President and Chief Executive Officer

Thanks, Rich.

Operator

Thank you. And the next question comes from Katy McConnell with Citi.

Katy McConnell -- Citi -- Analyst

Great. Thanks, good morning. So given occupancy fallouts been lighter than expected to date, do you think it's bottomed out at this point? And how are you thinking about fallout risk from the small shop tenant bucket at this point?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Katy, I'm sorry, we missed the first half of that question.

Katy McConnell -- Citi -- Analyst

I just said, given occupancy fallouts been lighter than expected to date, do you think it's bottomed out at this point?

David R. Lukes -- President and Chief Executive Officer

-- we're feeling like with the least to occupied spread right now. It's difficult to come up with a scenario where occupancy has not bottomed. I guess that's a triple-negative way of saying it. But yes, it really feels like just the amount of leasing velocity is so strong. I mean, even if there were a couple of more bankruptcies this year, it just feels like there's no way we're going to go backwards.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

And Katy, on the shop side, I mean, we're not seeing more dramatic rollout. There are some shops, but the kind of initial wave that we saw a fallout has definitely tapered off quite a bit.

Katy McConnell -- Citi -- Analyst

Okay. Thanks. And then on the transaction front, are you seeing much movement in pricing more by our competition picking up as you source new deals today?

David R. Lukes -- President and Chief Executive Officer

Katy, the buyer competition has actually been somewhat consistent. I guess the real issue is how much inventory is out there. I mean, last year, not many assets were put on the market by sellers. And I don't think that the despair showed up enough that the owners of real estate private owners had to sell. And so if it's their choice to sell, they're going to wait for a better time. It does feel like the debt markets became a lot more accommodative in January. And I do think that has allowed more traditional sellers to say, "hey, look, that's there." The equity is -- has been raised by both private and public companies. And now is the time to list properties. So we're seeing a little bit more activity in the past couple of months. And it's competitive. It definitely is competitive.

Katy McConnell -- Citi -- Analyst

Okay, great. Thanks.

David R. Lukes -- President and Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Todd Thomas with KeyBanc.

Todd Thomas -- KeyBanc -- Analyst

Hi, thanks. Good morning. Just first, a quick follow-up on the, I guess, the prior period adjustments. Conor, the same-store NOI growth also reflects the $5 million of prior period adjustments, I believe, which I think about a 400 basis point positive impact in the quarter. Does the better than 4% same-store NOI growth that you're anticipating for the year, assume any additional prior period adjustments in future quarters?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Todd. So it's about for same store. It's about $4.8 million of the $5 million is included in same-store, and it's about a 500 basis point boost for the quarter. So apples-to-apples, same [Indecipherable] without prior period adjustments down about 5% or 6%. Going forward on that number, the short answer is no. I mean, guidance today does not include any other prior period adjustments.

Todd Thomas -- KeyBanc -- Analyst

Okay. Got it. And then, David, back to acquisitions. I guess a couple of questions. One, can you comment on the types of assets that you're targeting, whether they're stabilized or are you targeting assets with vacancy and lease-up opportunities? And then can you also comment on the level of competition that you're seeing, I guess, if we think back over the last several years or more, the buyer pool for retail assets has been somewhat limited. And I'm just wondering if that's changed at all and if you're seeing new investors or types of capital showing up today.

David R. Lukes -- President and Chief Executive Officer

Yeah. Sure. I mean, Todd, I can be generally specific in that if you think about what we've said is working, from our perspective, it's a wealthy suburban communities that tend to have lower square footage per capita, and they tend to be a heavily based on convenience. The more convenient the property the more likely that tenants want to be there. And we're seeing that with our leasing volumes. So I think that we're somewhat format agnostic, whether it's grocery, nongrocery strip. The format, I think, is much less important than the likelihood that rents are going to grow. So to your point about the targets, if we're targeting these three macro trends that we think are multiyear trends, what's most important is rent growth. And this is a great time to be investing early in a cycle because if you believe that rents are growing, and I do think they are, it's a good time to be coming in at this basis. So we're less focused on existing vacancies, and we're more focused on really high-quality, stable assets that have rent growth.

Todd Thomas -- KeyBanc -- Analyst

Okay. And can you just comment on the competition that you're seeing, whether that's changed at all in recent -- for any of these investments that you're looking at compared to what you've seen in prior years?

David R. Lukes -- President and Chief Executive Officer

Yes. I guess it's not -- there's not quite enough activity to be able to say whether there's more capital out there. It feels like there is, it feels like a lot of private investors have started to realize that cash flow growth is happening. And part of the reason for that, Todd, is that I think the viewpoint a couple of years ago on the sector was that it had a high percentage of capex -- of leasing capex. But if you go into a rent growth scenario for the next couple of years, and you have stabilized properties. The capex is going to drop pretty fast because you just simply can't spend enough capex if you don't have vacancies. And so it becomes a renewal business where the renewal spreads are high and the capex is low. I think that's the cycle we're heading into. And I think it's not lost on a lot of private capital. So when we've been out bidding on properties, we definitely think we're competing with kind of core plus type of capital in the private sector.

Todd Thomas -- KeyBanc -- Analyst

Okay. Thank you.

David R. Lukes -- President and Chief Executive Officer

Thanks, Todd.

Operator

Thank you. And the next question comes from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb -- Piper Sandler. -- Analyst

Hey, good morning. Morning, quite early. So just a few questions here. First, Conor, on the cash tenants. Obviously, we all love cash, and it's great to get paid cash. But as we think about your full year numbers, how much -- how -- more as a percent of ABR, however, NOI, however you want to gauge it, how many of your tenants are now cash? And what is that delta? Meaning if you collected $5 million in a quarter, was that you were -- you billed $5 million of cash rents, you got $85 million. So we can think about $5 million benefit in the second quarter, third quarter, fourth quarter, etc.? Or how do we think about this -- the cash and how it's going to impact earnings?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah. Alex, good morning. So 13% of our tenants are on cash basis accounting. So in terms of numbers, it's unchanged effective from year-end. I think we could -- I could count on one hand, how do you do cash as we had in this first quarter. So no material change in the pool. If you think about -- coming back to Richard's question and how that flows through the income statement, on a cash basis, collections were about 80% in the first quarter. And so if that collection rate was unchanged in the second quarter at 80%, and you would see our uncollectible revenue from the first quarter number, minus $5 million. So call it, round numbers, about negative $3.5 million. That would be what the kind of drag would be on earnings or OFFO, assuming the same pool and the same collection rate.

Now the problem is the pool may change, right? We may take some folks off cash basis accounting. The odds of them being a payer though or we want to see a steady state of collecting for that for a period. So I don't think that will materially impact. But there could be some fallout as well, some cash basis tenants who aren't paying or in litigation or we're coming to sell [Indecipherable]. So it's a really long way of saying, it's going to change, the pool will change. But I think from a run rate perspective for you, if you just take the current uncollectible revenue from the first quarter, back out $5 million and assume -- if you assume no improvement in collections, that's a good number to use going forward.

Alexander Goldfarb -- Piper Sandler. -- Analyst

Okay. So for those who are still on the first cup of coffee, Conor. So the $5 million that you booked in the first quarter, is your full year guidance, the $0.94 to $1.02, is that assuming $5 million benefit in the second quarter, third quarter, fourth quarter? Or is not assuming that?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

There's no prior period adjustments and guidance for the rest of the year. So look, the trends, as I mentioned in my prepared remarks, we are trending toward the top end of the range, right? We're seeing a steady improvement in leasing activity. We're seeing a steady improvement in collections. The bottom end of the range assumes a deterioration in occupancy, which is what we're not seeing. But it's April 22, we're trying to be prudent. We're in the middle of pandemic. So any other prior period reversal, Alex would be good guise to earnings and the guidance.

Alexander Goldfarb -- Piper Sandler. -- Analyst

Okay. So the simple answer is that if you get another $5 million in the next -- each quarter, you're going to be at or above the top end of guidance, correct? That's how the math works.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

If we got in $5 million a quarter for the next three quarters, we'll be above the guidance range.

Alexander Goldfarb -- Piper Sandler. -- Analyst

Okay. Awesome. Okay. Second question is going back to acquisition...

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

But I just -- the only thing I would say, Alex, is just -- I mean, those are cash basis tenants, right? So implicitly, we don't expect to collect that, right? So that's a big if, right?

Alexander Goldfarb -- Piper Sandler. -- Analyst

Yes, but things are getting better. So -- OK. Second question is on acquisitions. Just given where you guys are trading on implied cap rates sort of on our numbers high sixes and the fact that it sounds like cap rates for assets are going to continue to compress. How do you think about making the math work as far as using your currency to buy assets? And as part of that, David, you emphasized the benefit of national credit, but at the same time, you guys have been willing to buy centers that are sort of nonanchored, more smaller neighborhood-type centers, which I would assume would have more small shop. So how do we think about sort of the balance of buying centers with preponderance of national credit versus infill in the neighborhoods you want? And two, competing with your cost of capital versus where cap rates probably are in the market, which I'm assuming is inside of where you guys are trading?

David R. Lukes -- President and Chief Executive Officer

Yeah. It's a great question. And since I've had three cups of coffee, I can answer it quickly. I think that, Alex, the way that I'm looking at it is from an unlevered IRR perspective. And the thing to remember about cap rate compression is there's a reason. And the reason is market rents are growing and capex is going down. And those two functions in the IRR do make a tremendous difference. So as I look at our cost of capital, I would still like to see us make acquisitions that are approaching that round numbers 10% unlevered IRR. And it may be that you can get that in the mid-six cap rate, it maybe even get that at a low five cap rate.

But I do think that if we're selecting the right assets in the right submarkets, and we have confidence that there's rent growth, natural rent growth on renewals, that's a big piece of the function. So tilting to what you mentioned about format type, I don't think we're against any format in acquisitions as long as it kind of targets the submarket and the rent growth profile that we think is available to us. Most of the acquisitions we've made in smaller neighborhood centers do have a pretty sizable component of national credit tenants. The Verizons, the Starbucks, the banks, those types of tenants are active in wealthy suburban communities.

And those are the properties that tend to drive a lot of convenience traffic and can boost market rents over time. The real difference between them and a larger format asset is they tend to control the real estate for a shorter duration. Some of these boxes have 20, 30 years of term with options, that's not necessarily the case in the smaller assets, even if you have credit, but you're able to access the rent growth a lot faster than you can with larger boxes.

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Alex, the only other thing I can say on kind of accretion dilution is David made a comment in his prepared remarks that we have north of $40 million of retained cash, so now we also have the RVI pro. So there are a number of sources of capital we have, where we can invest and not worry about also for the dilution. The other comment you made is we referenced accretive dispositions, meaning selling at a lower spread than what we're buying. So I would just tell you, we are incredibly focused on earnings growth. Along with intrinsic value growth. So I don't think we were buying just for the sake of buying, and we're not focused on earnings growth.

Alexander Goldfarb -- Piper Sandler. -- Analyst

Okay, cool. Listen. Thank you, Connor. Thank you, David.

David R. Lukes -- President and Chief Executive Officer

Thanks, Alex.

Operator

Thank you. And the next question comes from Samir Khanal with Evercore.

Samir Khanal -- Evercore -- Analyst

Hey. Good morning, everyone. David, just curious, I mean, how do you think about the long-term growth of the portfolio coming out of the pandemic here? I know you talked about anchor leasing, the peak levels. You've talked about shifts you're seeing kind of during the pandemic. So as we think about the long-term growth, I know I kind of -- if you look back for the portfolio, I believe, for the Investor Day, I think it was like 2.5% or something back in 2019. Maybe it's still early, but just kind of want to get your initial thoughts as we kind of think about recovery here.

David R. Lukes -- President and Chief Executive Officer

Yes. It's -- Samir, it's a really interesting question because I think at the time that we had our Investor Day conference, the macro trends were different. And if you remember that 2.5% growth, included 150 basis points of bankruptcy every year because we were in an environment where there was a lot of retailer churn, and we also assumed a pretty heavy capex burn in order to make that -- in order to basically keep occupancy and keep a little bit of growth, but it had a cost to it.

What's really changed in the last -- maybe since September, October last year, is that the amount of leasing from large box and small shop tenants, particularly on the national side, has been so robust and surprisingly so. That I think that the growth rate is higher than we originally thought, and the bankruptcy rate is lower. And whether that continues for 10 years or for two or three years, I guess we'll find out. But it sure feels like if you look at 2022 versus 2019 portfolio -- NOI portfolio, it feels like there's a bold case emerging where '22 is going to surpass '19 highs. And I think it comes back to Katy's questions about occupancy. If occupancy is not deteriorating, rents are growing, then it really means that 2022 is shaping up to be likely -- at least even and likely better than '19 was.

Samir Khanal -- Evercore -- Analyst

I guess as a follow-up, you think about NOI growth and maybe the breakdown of that. Is there anything that's changed on the contractual rent bump side? Is it kind of still that sort of one percentage for anchor boxes? Or are you getting more than that these days?

David R. Lukes -- President and Chief Executive Officer

Well, on certain shops or noncredit tenants, I think getting higher bumps is achievable. We've been getting higher bumps than normal on the smaller shop deals, for sure. The difference is we're 90% credit -- national credit tenants. And so our existing portfolio doesn't benefit quite as much from those tenants that can sign annual bumps. One thing you could look at that's kind of interesting. If you look at page 14 of our sup, we did add a little bit of disclosure, which I think you'll find interesting. You're looking at the signed, but not opened pipeline of leases compared to the lease expiration schedule of the existing portfolio.

And what it shows is there's a delta. The rents are higher in the box, the box average for the leases we've signed to date in the last 22, that are not open is about almost $17 a foot and the existing is about $14. So you're seeing a natural spread on the new leases, both for shops and anchors. And the compounding nature of those -- when they hit their options is helpful. But to your point, the industry, I don't think has changed in terms of -- it naturally is a 10% growth every five years for anchors, and it's kind of 2% to 3% growth for shops. And I don't see that changing dramatically, which is why we like acquiring properties that have near-term expirations because that's really where the growth is going to come from.

Samir Khanal -- Evercore -- Analyst

Right. That's very helpful. Thanks so much.

David R. Lukes -- President and Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Linda Tsai with Jefferies.

Linda Tsai -- Jefferies -- Analyst

Hi. Thanks for taking my question. You've spoken about the Stein Mart boxes having solid leasing upside, but maybe more pressure on the Pier one box. Is this still the case for Pier one in the context of the leasing strength you're describing?

David R. Lukes -- President and Chief Executive Officer

I think, generally, it is, Linda. I mean, I think we talked about 300%, 400% market on some of the Stein Mart boxes. We've just gone back at the end of last year. So -- but I would say that's generally consistent. On Pier one, I would say it's marginally better. There are -- we talked about some new concepts in that eight to 10 square footage range last quarter. Some medical users, a couple of new concepts in that exact 8,000 to 10,000 square feet. So I would say it's marginally better. But in general, it's fairly consistent with prior periods.

Linda Tsai -- Jefferies -- Analyst

Thanks. And then on micro fulfillment and the build-out of these platforms, to the extent it's happening in your portfolio and it reinforces the value of that distribution point. Are landlords helping to pay out for these build out costs? Or is it the retailers?

David R. Lukes -- President and Chief Executive Officer

I think it's generally the retailers. I mean, if you look at the capex that's been required to new anchor leases, it is kind of noteworthy. I mean we've been signing leases with a capex, which is not inconsistent at all with previous years. I think we're averaging around $40 a square foot on average. So I don't think that we've seen any additional costs for the tenants to change the interior of their space. But we have noticed it, Linda. I mean we've seen some of the permit drawings, every time a tenant goes in, they have to see that permit drawing through the city. We're able to get a copy of those drawings and review them. And you do see some changes on the interior of the store related to a little bit larger sorting areas, a little bit smaller customer areas. A big tilt toward customer pickup areas in the parking field and how that interaction occurs. So I feel like the cost is being borne from the tenant side at this point. But it is interesting to note, and I agree with you that it is happening.

Linda Tsai -- Jefferies -- Analyst

Just one last one. The $50 million under contract, are those in regions where your properties are already? Or are you kind of market agnostic?

David R. Lukes -- President and Chief Executive Officer

They are in regions where we already have staff and portfolio

Linda Tsai -- Jefferies -- Analyst

Thank you.

Operator

Thank you. And the next question comes from Floris Van Dijkum with Compass Point.

Floris Van Dijkum -- Compass Point -- Analyst

Good morning. Thanks for taking my question, guys. Obviously, very encouraging reports, net effective rents are up, the pipeline seems to be strong. I'm intrigued by your comment about going on offense. Obviously, your balance sheet is in decent shape now as well. Are you guys also thinking about JVs as a way to buy assets? And maybe if you could provide some commentary on your view of the Kimco transaction changing the sentiment perhaps in the sector for other investors as well as yourself?

David R. Lukes -- President and Chief Executive Officer

Sure, Floris, I'm happy to. Sorry. Apparently, three cups of coffee wasn't enough. The company -- this company had a long history in joint ventures, and I do think that it's always going to be a part of our platform, but it has to be for a purpose. And if you look at the JVs we've done in the past couple of years, the purpose has been a recap of a portfolio so that we could recycle capital. The need to do that before was to delever our balance sheet and kind of prepare for bad times, which turned out to be a good move. I think at this point, we do have capital to invest from multiple sources. And at this point, I think we are continuing to invest on balance sheet.

But I'm certainly not out of favor with doing ventures as long as they have a purpose. And that purpose could be the partner brings you a deal and they want to be involved with a REIT. It could be that the scale of the opportunity we find is simply too big for us, and we'd like to have a partner. So there can be multiple reasons. And I'm not against it, and I think you can assume that we'll be very careful about it, but we're open to joint ventures. From the industry standpoint with the Kimco Weingarten announcement, I mean, I do think it was positive for the industry. I agree with you that it seems to have stoked a little bit of animal spirits because it's a big deal, and it's positive for the industry. The pricing, I thought was particularly a pretty good read through. Because I do think it's a bit more consistent with where private market pricing is. So it's felt like validation of that.

And the other thing I think is interesting is that if you look under the hood, the Weingarten portfolio does have quite a few similarities to the SITE Centers portfolio. We have similar ABR per square foot. We have similar grocery sales volumes. We've got similar demographics, although I think we're helped with a little bit higher household income. And if you really carefully look through the portfolios, you'll see that we have a pretty similar mix between grocery-anchored and power center. So I thought it was great for the industry, and I particularly thought it was kind of a good read-through for us.

Floris Van Dijkum -- Compass Point -- Analyst

Thanks, David. And do you expect that there'll be additional transactions like that in your view,? Do you think that this is sort of awaking people to the possibility? And where do you see -- or how do you see yourself positioned in such a situation?

David R. Lukes -- President and Chief Executive Officer

I think your guess is good as mine whether there's more public activity. I certainly think there's going to be more private activity. I mean, the amount of private capital that's looking for yield, and they're starting to see durability. The durability is what I think was proven over the last 12 months. I mean, for us to be having collected 91% of rents through a pandemic is impressive. And I think the industry has proven quite a bit of durability. But now I think you're starting to see growth. And whenever you get market rents growing in a sector, I do think that private capital starts to raise its head, and it feels like we're getting into that period. I think we'll see because there haven't been a lot of private capital investments to date, but we'll see over the next couple of months.

Floris Van Dijkum -- Compass Point -- Analyst

Thanks, David.

David R. Lukes -- President and Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Mike Mueller with JPMorgan.

Mike Mueller -- JPMorgan -- Analyst

Yeah. Hi, David, a couple of quick questions here. First, did you mention the cap rate on the $50 million that you have lined up for acquisition?

David R. Lukes -- President and Chief Executive Officer

I did not. But I did say that once we close, we would be happy to talk a bit more about unlevered IRR, I think, is probably a better way to look at it personally. But I think once we close on the acquisitions, we'd be happy to walk through the reason and the rationale and the investment thesis, but I'd like to kind of punt on that for now, Mike.

Mike Mueller -- JPMorgan -- Analyst

Got it. And then you talked a little bit about properties that are more convenient, having better growth potential. And just curious, if you look at a market or submarket, what makes in your eyes, one property more convenient than the other?

David R. Lukes -- President and Chief Executive Officer

It feels like the most of the tenants have decided that proximity to the street with visibility and access is really important. What we've been measuring is a couple of things. We've been measuring traffic counts because during the pandemic, you have so many more people in suburban communities that are home all the time, the traffic patterns have changed. They're not as dramatic on a Saturday and Sunday, but they are much more dramatically positive on a Tuesday or Wednesday. So we're being very thoughtful about tracking geolocation cellphone mobility, and we can kind of witness how communities are acting when they're home five days a week, seven days a week. It tells you something, and the tenants are seeing it as well.

So I would say traffic patterns simply the amount of people that are nearby the property and then relate that to how much square footage per capita is in the market. That's really why I like wealthy submarkets because they tend to have much stricter zoning laws. And so the supply is less. And the result of that, Mike, is pretty amazing. And we've had a couple of shop deals we've signed in the last couple of months that are approaching $100 a foot in suburban strip centers. Our average shop rent right now in the portfolio is $28.50. So that's what I mean where I'm saying we are definitely in a period where convenience is extremely desirable, and the tenants are willing to pay for it. And to me, that's a good time to be investing if you're seeing the beginning of that cycle.

Mike Mueller -- JPMorgan -- Analyst

Got it. And maybe one last one, Conor. For the $3.3 million reserve, kind of the clean number, which you strip out prior period, can you just give us like a rough breakdown of what's making up that $3 million in terms of categories?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, it's a mix, Mike. I mean, obviously, it's -- if you look at our deck on categories that are open, it's not surprising, the laggards are more COVID sensitive, so fitness, theaters, entertainment. So it's a little bit of mix. I would say in that are some local names that we expect to fall out like in, and it's just a question of when, and we've got the right backfill in place. It's -- so you can see kind of a survivor ship buys that number shrink over the next couple of quarters. So there's not one sector, Mike, that's jumping out, but it's kind of the same genres or same categories as we've seen over the last year.

Mike Mueller -- JPMorgan -- Analyst

Got it. Okay. That was it, thank you.

David R. Lukes -- President and Chief Executive Officer

Thanks, Michael.

Operator

Thank you. And the next question comes from Chris Lucas with Capital One

Chris Lucas -- Capital One -- Analyst

Hey. Good morning, guys. David, just a sort of a big picture question as it relates to the inflation outlook. Does that impact at all how you think about your retenanting mix or things that you're looking at in terms of acquisitions? Or is it sort of too early in the process of seeing reflation to sort of make that an important part of the analysis.

David R. Lukes -- President and Chief Executive Officer

You mean consumer inflation, Chris, does that mean?

Chris Lucas -- Capital One -- Analyst

Correct. Correct. [Indecipherable] asset.

David R. Lukes -- President and Chief Executive Officer

Yeah, I agree. Yeah, I think you would probably agree or not be surprised that there's two pieces of inflation that I think are really important ones are risk and ones a benefit. So one of the risks of inflation is the long duration leases that tend to be flattish, they tend to get -- they can't keep up. And that's why sometimes these convenient properties that have shorter duration leases are a lot easier to raise rent during an inflation and keep up with market. And market rents are growing. So that's a good time to be finding acquisitions where we know we can adjust the rent roll a little bit sooner once it's fully occupied.

I think the second piece of the puzzle is really interesting, and that is if you have a lot of national credit tenants and they sign a lease with a certain occupancy cost ratio. And five years later, they're still paying the same rent, but their sales have escalated with inflation. What's happened? While the landlord hasn't benefited because we don't have percentage rent clauses, having said that, their occupancy cost ratio is much lower. And so I think what's going to happen is the probability of options being exercised will go up if you see more inflation, and so that does reduce the amount of future capex and future tenant burn because they're simply more profitable in play.

So we do think about those quite a bit, particularly on our acquisitions. And I think it would be marginally positive. The downside, of course, is exit cap rate and what's the effect on cap rates. So I think that's kind of the two sides of the coin that we think about.

Chris Lucas -- Capital One -- Analyst

Okay. Thank you for that. I guess you sort of opened up Pandora's box when you talked about occupancy costs and what I'm getting at is how are you guys dealing with the sort of sales in-store versus e-commerce, this whole omni-channel and how that impacts essentially what sales are a specific unit and how a retailer is sort of pushing back on how they're thinking about it?

David R. Lukes -- President and Chief Executive Officer

Yeah. I feel it's an issue that I know many people in the industry have been talking about for a number of years. The good news is we have almost -- I mean, so little percentage rent in the company that we just don't have to deal with that. But I agree with you that it is a challenge.

Chris Lucas -- Capital One -- Analyst

But that ultimately drives rents, right? I mean, occupancy cost is an important factor, these new renters you described before. So it's something that's got point in terms of it.

[Speech Overlap]

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Right. To David's point, we have very little over trend. And then on top of that, only about 30% of our tenants report sales, right? So it's just not a big part of our business. Now if we do get sales, does it muddy the water, whether you have a click and collect included in that or returns included? Absolutely. So to David's point, it's a focus of ours, but it's not necessarily impacting our day-to-day business.

David R. Lukes -- President and Chief Executive Officer

The other thing to remember is that, if you think about occupancy costs should drive the rent that a tenant is willing to pay, but it doesn't really drive market rents because that has more to do with what the other tenants are willing to pay for the same space. And given the amount of box leasing activity going on, there is competition brewing. And so I think it has -- market rents have more to do with multiple people seeking the same space, and that's a good situation to be in.

Chris Lucas -- Capital One -- Analyst

Sure. Conor, while I have you, can you help me sort of looking at the Signed Not Opened chart from last quarter, and I'm comparing it to this quarter, it feels like just looking at it, adjusting for the $2.8 million that you brought on board in the first quarter, looks like there's some more ramp to third and fourth quarter of this year compared to where you were in the prior period. Is that related to some faster delivery of space? Or is that related to just more leases signed in the interim?

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

I would say it's a little bit of both, Chris. So one, we have more visibility on just rent commencement and/or more confidence. And the second to your point is probably a bunch of shops that we think we can get opened this year. And to David's point, signing $70, $80, $90 foot shops, they turn into kind of mini anchors, right, in terms of their contribution. So that's probably the two factors driving it. We can dig into that and come back to you, but that's my gut.

Chris Lucas -- Capital One -- Analyst

Okay. Thank you. That's all I have this morning. Appreciate it.

David R. Lukes -- President and Chief Executive Officer

Thanks, Chris.

Operator

Thank you. And the next question comes from Tammi Fique with Wells Fargo.

Tammi Fique -- Wells Fargo -- Analyst

Hi, good morning. I guess maybe just following up on the recent transaction between Kimco Weingarten. And I guess, are you sort of satisfied with the scale and efficiencies that your current size or do you see real benefits from being a larger company in the shopping center industry? And then correct me if I'm wrong, but it sounds like you're looking to be a net acquirer this year. So I'm sort of curious if you have a five-year target in terms of size? Or is the plan just to be opportunistic depending on market conditions? Thank you.

David R. Lukes -- President and Chief Executive Officer

Hi, Tammi. It's a great question, given the announcement of that merger. I think what we're most happy with is the runway we have in the near term. And by near term, I mean probably two or three years. It just -- it feels like we've got a lot of growth runway. Our balance sheet is in really good shape. We don't have any commitments for development. We haven't committed to high capex mixed use properties. And I really feel like we're in a position where we can make external investments for high-quality properties with cash that's coming from multiple sources. So it feels like we're in a really good spot.

And back to your question of scale, the G&A load of this company can be flexed quite a bit. And so it feels like we're going to get the benefit of being able to grow without having to increase our G&A. And that's a good spot to be in. So I do think there's a benefit to scale. And I think we're beginning to get more scale over the next couple of years. So yes, I guess I would leave it at that.

Tammi Fique -- Wells Fargo -- Analyst

Okay, great. Thanks. And then I'm just wondering, are you actively marketing any assets for sale today?

David R. Lukes -- President and Chief Executive Officer

We are always actively marketing one or two. I mean, last quarter, we sold a single-tenant box pad that was across the street from our main shopping center. There are a few assets that once they get to be 100% leased, they've got long-term credit tenants. It's more likely that there's an arbitrage between what the private market is willing to pay for that flat lease and what we would like to recycle that capital into. So there's always a little bit of recycling, but it's not meaningful.

Tammi Fique -- Wells Fargo -- Analyst

Okay, great. Thank you.

David R. Lukes -- President and Chief Executive Officer

Thanks, Tammi.

Operator

Thank you. And that does conclude the question-and-answer session. I would like to return the floor to David Lukes for any closing comments.

David R. Lukes -- President and Chief Executive Officer

Thank you all very much for your time, and we will speak to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Brandon Day-Anderson -- Head of Investor Relations

David R. Lukes -- President and Chief Executive Officer

Conor M. Fennerty -- Executive Vice President, Chief Financial Officer and Treasurer

Rich Hill -- Morgan Stanley -- Analyst

Katy McConnell -- Citi -- Analyst

Todd Thomas -- KeyBanc -- Analyst

Alexander Goldfarb -- Piper Sandler. -- Analyst

Samir Khanal -- Evercore -- Analyst

Linda Tsai -- Jefferies -- Analyst

Floris Van Dijkum -- Compass Point -- Analyst

Mike Mueller -- JPMorgan -- Analyst

Chris Lucas -- Capital One -- Analyst

Tammi Fique -- Wells Fargo -- Analyst

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All earnings call transcripts

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