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DATE
Friday, July 25, 2025 at 4 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Jeff Edison
Chief Operating Officer — Bob Myers
Chief Financial Officer and Treasurer — John Caulfield
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TAKEAWAYS
Same Center Net Operating Income (NOI) Growth-- Same center NOI grew 4.2% in Q2 2025, supporting management’s decision to raise full-year guidance.
Core Funds From Operations (FFO) Per Share-- Core FFO per share rose 8.5% to $0.64 in Q2 2025.
NAREIT FFO Per Share-- NAREIT FFO per diluted share increased 8.8% year-over-year to $0.62 in Q2 2025.
Occupancy-- Total portfolio occupancy reached 97.4% as of Q2 2025; anchor occupancy reached 98.9%, with a sequential gain of 50 basis points for anchor occupancy and a 20 basis point sequential increase for inline spaces.
Leasing Spreads-- Comparable renewal rent spreads were 19.1% in Q2 2025. Comparable new leasing rent spreads reached 34.6% in Q2 2025, both demonstrating significant pricing power.
Retention Rate-- Neighbor retention was 94% in Q2 2025, which reduces downtime and capital expenditure for tenant improvements.
Acquisition Activity-- $133 million in acquisitions completed in Q2 2025, totaling $287 million year-to-date at PECO share, supporting reaffirmed full-year 2025 gross acquisition guidance of $350 million to $450 million.
Development and Repositioning Pipeline-- Twenty-one active projects averaged estimated yields of 9%-12% as of Q2 2025; Year to date through Q2 2025, nine projects stabilized, These nine stabilized projects delivered incremental NOI of approximately $3.7 million annually.
Balance Sheet and Liquidity-- Liquidity was $972 million as of Q2 2025; Net debt to trailing twelve-month annualized adjusted EBITDAR was 5.4 times as of June 30, 2025; 95% of total debt was fixed rate as of Q2 2025 with a weighted average interest rate of 4.4% and an weighted average maturity of 5.7 years as of June 30, 2025.
Debt Capital Markets-- Completed a $350 million offering of 5.25% senior notes due February 19, 2032 in Q2 2025; Proceeds were used to replenish the revolver and match-fund property acquisitions.
Updated 2025 Guidance-- Same center NOI growth guidance was raised to 3.1%-3.6% for 2025; NAREIT FFO per share growth is expected at 6.3% at the midpoint for 2025; Core FFO per share growth is targeted at 6% at the midpoint for 2025, all compared to 2024.
Portfolio Demographics-- Three-mile trade area averages 68,000 population and $92,000 median household income, 15% above the US median.
Bad Debt-- Bad debt for the quarter increased year-over-year but remained within guidance.
Tariff Exposure-- Approximately 85% of neighbors (by ABR) are expected to experience limited impact from tariffs as of Q2 2025; 70% of ABR attributed to necessity-based goods and services.
Dispositions-- Management anticipates $50 million to $100 million in annual asset dispositions, subject to market conditions and pricing discipline.
Acquisition Cap Rates-- Year-to-date acquisition cap rate was 6.3% for 2025.
Exposure to Watch List Neighbors-- Top 10 "watch list" tenants represent approximately 2% of ABR, reflecting low concentration risk.
Kroger Store Closings-- Only one Kroger-owned location in PECO’s portfolio is impacted by announced closures, with a new grocer already set to backfill.
Development Yield-- Active development projects reported an average estimated yield of 9%-12% as of Q2 2025, signaling substantial returns relative to cost.
Tenant Improvement Costs-- Renewal-related spend in Q2 2025 was only $0.49 per square foot, emphasizing operating efficiency.
SUMMARY
Management raised full-year 2025 guidance for same center NOI, core FFO per share, and NAREIT FFO per share, citing sustained operational momentum across leasing, acquisitions, and development. Discipline in acquisition underwriting was maintained as management reaffirmed its $350 million to $450 million gross acquisition target for 2025, emphasizing strong underwriting and selectivity in a competitive market. Portfolio risk from tariffs remained low, with leadership quantifying approximately 85% of ABR as having limited exposure to tariffs, as estimated by management in Q2 2025 and highlighting the defensive cash flow characteristics tied to necessity-based retail.
Bob Myers stated that high leasing spreads of up to 35% on new leases and 19% on renewals in Q2 2025 reflect ongoing demand for locations anchored by leading grocers, and that "Small shop retailers added during the quarter included Cold Stone, Firehouse Subs, H&R Block, and Pacific Dental Services, along with several other Medtail neighbors and health and beauty retailers."
John Caulfield confirmed that 95% of total debt was fixed rate as of Q2 2025 and emphasized the importance of match-funding investment activity, noting, "We continue to have one of the best balance sheets in the sector, which has us well-positioned for continued external growth."
Shadow-anchored and unanchored acquisitions accounted for 64% of acquisitions year to date as of Q2 2025, with Jeff Edison stating, "the average sales of the shadow-anchored centers we did is over a thousand dollars a foot on the grocer."
Exposure to grocer closures is minimal, as only one Kroger site is set for closure, with the closure expected in Q3 2025, and management reported, "we already have another grocer that's going to backfill it."
Asset dispositions are projected to continue at $50 million to $100 million annually based on management commentary, supporting portfolio management without reliance on equity issuance for current guidance.
Leverage is intended to remain at "mid-five times on a leverage basis," with ample liquidity of approximately $972 million as of June 30, 2025 and no meaningful maturities until February 19, 2027.
Company leadership continues to target mid to high single-digit annual core FFO per share growth on a sustained, long-term basis, without forecasting the need for near-term equity issuance.
INDUSTRY GLOSSARY
ABR (Annualized Base Rent): The annualized contractual rent from tenants, excluding percentage rents and reimbursements; key for evaluating recurring income.
Shadow-Anchored Center: Shopping center where the primary anchor store is separately owned but located adjacent, providing significant traffic to the rest of the center.
Medtail: Retail locations devoted to healthcare or medical services situated in traditional retail environments.
Inline Space: Smaller retail units located between anchor tenants in a shopping center.
Anchor Occupancy: Percentage of larger spaces (typically grocery or major retail tenants) leased within the shopping center portfolio.
Rent Spread: The percentage difference between expiring rents and the rent on new or renewal leases, indicating pricing power.
Gross Ranker Portfolio: Company-defined term for its targeted portfolio focused on highly ranked, necessity-based centers that deliver consistent NOI growth.
Full Conference Call Transcript
Jeff Edison: Thank you, Kim. Thank you, everyone, for joining us today. The PICO team is pleased to deliver another quarter of solid growth. Same center NOI increased 4.2% and core FFO per share increased 8.5%. Given the continued strength of our business, we are pleased to increase our full-year 2025 earnings guidance for same center NOI, core FFO per share, and NAREIT FFO per share. I'd like to thank our PICO associates for their hard work in maintaining our unique competitive advantages and driving value at the property level. We believe PICO's growth ranker strategy and necessity-based focus have helped to create a resilient portfolio that also delivers steady growth.
We are driving strong rent spreads, increasing occupancy, and generating dependable, high-quality cash flows. This consistency in performance and growth is attributable to several factors. First and foremost, it takes an experienced and locally smart team to bring the best retailers to our centers. Our neighbors create positive community experiences built around our grocers. Second, it takes decades to build strong grocer and national neighbor relationships that PECO enjoys. These relationships give us an advantage in working together to optimize our property. These relationships also are critical to our acquisition strategy. Third, it requires a portfolio focused on right-size neighborhood centers located in suburban trade areas with compelling demographic trends and continued macroeconomic tailwinds.
Strong demand from national retailers continues to fill our pipeline of ground-up outparcel development and repositioning activity. Fourth, it takes a dedicated team to acquire and curate a high-quality, gross ranker portfolio that is expected to deliver 3% to 4% same center NOI growth year after year. And lastly, it requires a strong balance sheet with great liquidity to invest in the properties and the portfolio. Our long operating history and track record have built these strengths for PECO that give us both offensive and defensive advantages in the market. Because of these advantages, we believe PECO is able to deliver mid to high single-digit core FFO per share growth annually on a long-term basis.
The market continues to focus on tariffs and US economic stability. As it relates to PECO's grocers and neighbors, we feel very good about our portfolio. As a reminder, 70% of our ABR comes from necessity-based goods and services. This provides predictable, high-quality cash flows and downside protection. Quarter after quarter. This also limits our exposure to discretionary goods, which are at risk of greater impact from tariffs. We estimate that approximately 85% of our neighbors based on ABR will experience limited impact from tariffs. Supporting that estimate is the strength of our neighbor retention and leasing spreads in the second quarter, which Bob will speak about in a moment. Our neighbors are watching the consumer closely.
They continue to benefit from their location in the neighborhood, where our top grocers drive strong foot traffic to our centers. We continue to see leasing demand for our existing spaces along with a healthy development and redevelopment pipeline. We are seeing strong demand from retailers who want to be located at PICO's grocery-anchored neighborhood shopping centers, especially from small shop retailers in categories like quick service restaurants, health and beauty, medical retail, and personal services. These are the types of neighbors that perform well because they are part of people's everyday routines. And importantly, the PICO team continues to find smart, accretive acquisitions that add long-term value to our portfolio.
Our active acquisitions activity is another differentiator in PICO's strategy. The PICO team is acquiring in the market through all cycles, carefully and deliberately acquiring centers that fit our growth ranker strategy and right-sized format while also delivering long-term growth potential. This has been part of our DNA for over thirty years. We're not just maintaining a high-quality portfolio, we're building one. What sets PICO apart is that we know exactly what we're looking for, and we have one of the best operating platforms stacked quickly and execute. And that puts PECO in a unique position to grow cash flows in a way that's both disciplined and opportunistic.
During the second quarter, we purchased $133 million of assets in PICO's total share. When you include assets acquired subsequent to quarter-end, this brings our year-to-date gross acquisitions at PICO share to $287 million. Despite recent market volatility, we remain confident in our ability to acquire high-quality centers at attractive returns. We are pleased to affirm our guidance range of $350 million to $450 million in gross acquisitions this year. We continue to successfully find attractive acquisition opportunities below replacement costs with strong growth profiles that we believe will exceed our unlevered 9% IRR target. We will acquire more if attractive opportunities materialize, but we are comfortable with our current pace and IRR targets.
We will continue to be disciplined buyers as we look forward. In summary, we are very pleased with our results this quarter and our ability to raise guidance for the remainder of the year. While it is still early to understand the full impact tariffs could have on PECO or our neighbors, we continue to see a resilient consumer. And we believe our portfolio will outperform as retailer demand remains strong. Our confidence is driven by the stability of our high-quality cash flows and the PICO team's ability to deliver solid growth and create value for our shareholders.
Given our demonstrated track record through various cycles, we believe an investment in PICO provides shareholders with a favorable balance of defense and offense. In summary, we believe the quality of our cash flows reduces our beta, and the strength of our growth increases our alpha. Less beta, more alpha. I will now turn the call over to Bob.
Bob Myers: Thank you, Jeff, and thank you for joining us. As Jeff said, PECO's grocery-anchored focus and necessity-based neighbor mix create strong leasing momentum. That momentum is clear in our operating results again this quarter. Our long operating history has given us an informed measure of what drives quality and value at the shopping center level. We continue to believe SOAR provides important measures of quality: spreads, occupancy, advantages of the market, and retention. This is most evident in our continued high occupancy, strong rent spreads, and high retention. In terms of leasing activity, we continue to capitalize on elevated renewal demand. The PICO team remains focused on maximizing opportunities to improve lease language at renewal and drive rents higher.
In the second quarter, we delivered strong comparable renewal rent spreads of 19.1%. Our inline renewal rent spreads remained high at 20.7% in the quarter. Comparable new leasing rent spreads for the second quarter were 34.6% and our inline new rent spreads were 28.1% in the quarter. These spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Leasing deals we executed during the second quarter, both new and renewal, achieved average annual rent bumps of 2.7%, another important contributor to our long-term growth. Portfolio occupancy remained high and ended the quarter at 97.4% leased.
Anchor occupancy remained strong at 98.9%, a sequential increase of 50 basis points. During the quarter, PICO executed leases with Dollar Tree, Planet Fitness, Ace Hardware, and Southeast Pickleball. Inline occupancy ended the quarter at 94.8%, a sequential increase of 20 basis points. Small shop retailers added during the quarter included Cold Stone, Firehouse Subs, H&R Block, and Pacific Dental Services, along with several other Medtail neighbors and health and beauty retailers. Given our robust leasing pipeline, we expect inline to remain high throughout the year, which is very positive. As it relates to bad debt in the second quarter, we actively monitor the health of our neighbors.
Bad debt in the quarter was up from a year ago, but in line on a year-to-date basis and well within our guidance range. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. We continue to have a highly diversified mix with no meaningful rent comps concentration outside of our grocers. A key advantage of PICO's suburban location is that our centers are situated in markets where our top grocers are profitable. Because three-mile trade area demographics include an average population of 68,000 people and an average median household income of $92,000. This is 15% above the US median.
These demographics are in line with the store demographics of Kroger and Publix, which are PICO's top two neighbors. Our markets also benefit from low unemployment rates, which are below the shopping center peer average. We believe the necessity-based focus of our properties is important when demographics are considered. When looking at our very limited exposure to distressed retailers, the top 10 neighbors currently on our watch list represent approximately 2% of ABR. This is not by accident. It is a product of many years of being locally smart and intensely cultivating our portfolio of grocery-anchored neighborhood centers located in lively trade areas with compelling demographic trends.
Our neighbor retention remained high at 94% in the second quarter while growing rents at attractive rates. High retention results in better economics with less downtime and dramatically lower tenant improvement costs. Lower capital spend results in better returns. In the second quarter, we spent only 49¢ per square foot on tenant improvements for renewals. In addition to our strong rental growth and retention trends, we continue to expand our pipeline of ground-up outparcel development and repositioning projects. At the end of the second quarter, we had 21 projects under active construction, with an average estimated yield between 9-12%. Year to date, nine projects have been stabilized.
This activity delivered over 180,000 square feet of space to our neighbors with incremental NOI of approximately $3.7 million annually. The overall demand environment, the balance of PECO's defense and offense, the stability of our high-quality cash flows, and the capabilities of the PICO team give us continued confidence in our ability to deliver strong growth in 2025 and in the long term. I will now turn the call over to John. John?
John Caulfield: Thank you, Bob, and good morning and good afternoon, everyone. I'll start by highlighting second-quarter results, then provide an update on the balance sheet, and finally, speak to our increased 2025 guidance. Our second-quarter results demonstrate what we've built at PICO: a high-performing grocery-anchored and necessity-based portfolio that generates reliable, high-quality cash flows. Second-quarter NAREIT FFO increased to $86 million or 62¢ per diluted share, which reflects year-over-year per share growth of 8.8%. Second-quarter core FFO increased to $88.2 million or $0.64 per diluted share, which reflects year-over-year per share growth of 8.5%. Our same center NOI growth in the quarter was 4.2%.
Turning to the balance sheet, we have approximately $972 million of liquidity to support our acquisition plans and no meaningful maturities until February 19, 2027. Our net debt to trailing twelve-month annualized adjusted EBITDAR was 5.4 times as of June 30, 2025. This was 5.3 times on a last-quarter annualized basis, which is also important to track in quarters with elevated acquisition volume. Our debt had a weighted average interest rate of 4.4% and a weighted average maturity of 5.7 years when including all extension options. At the end of the second quarter, 95% of PICO's total debt was fixed rate, which is in line with our target of 90%.
During the quarter, PICO completed a bond offering of $350 million in aggregate principal of 5.25% senior notes due February 19, 2032. Proceeds from the offering were used to replenish liquidity on our revolver, effectively match funding the $287 million properties acquired to date at PICO share. As Jeff mentioned, the PICO team is not just maintaining a high-quality portfolio, we're building one. We continue to have one of the best balance sheets in the sector, which has us well-positioned for continued external growth. As Jeff mentioned, we are pleased to raise our 2025 guidance. Key drivers of our increased guidance include a continued strong operating environment, strong year-to-date acquisition activity, and our recent bond offering.
We updated our guidance range for 2025 same center NOI growth to 3.1% to 3.6%. As we continue to enhance our neighbor mix, our actions in 2024 to improve merchandising and capture mark-to-market rent growth with new neighbors are still a slight headwind to 2025 growth. As we have said previously, the PICO team is focused on the long term, our actions to replace neighbors are intentional. Our updated guidance for 2025 NAREIT FFO share reflects a 6.3% increase over 2024 at the midpoint. And our updated guidance for 2025 core FFO share represents a 6% increase over 2024 at the midpoint. We also affirmed our 2025 full-year gross acquisition guidance.
We believe our low leverage gives us the financial capacity to meet our growth targets. We also have diverse sources of capital that we can use to grow and match fund our investment activity. These sources include additional debt issuance, dispositions, and equity issuance. Match funding our capital sources with our investments is an important part of our investment strategy. Please note that our guidance for the remainder of 2025 does not assume any equity issuance. We continue to believe this portfolio and this team are well-positioned to deliver mid to high single-digit core FFO per share growth on an annual basis.
We also believe that our long-term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity. We believe our targets for growth in core FFO and AFFO will allow PICO to outperform the growth of our shopping center peers on a long-term basis. With that, we will open the line for questions. Operator?
Operator: Thank you. We do ask that you limit yourself to one question and a follow-up. Your first question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Caitlin Burrows: I guess we hear the transaction market is competitive, but Jeff, like you went through, you did have a strong first half. So what do you think has allowed PICO to win these transactions? And it looks like shadow-anchored centers have been a focus this year. What is driving that?
Jeff Edison: Yeah. Thanks, Caitlin, for the question. So yes, we had a really good first half. I think it kind of goes back to the fact that, you know, we buy properties one at a time market by market. And if you step back and you look at it, that's how we were able to actually get this volume. It didn't come in, you know, a big chunk of buying something. It came in, like, being active in a lot of markets. And, you know, we set up our acquisition team to be able to do that over a long period of time, and it's hard. But we've been able to, you know, put that in place.
And I think that's how we've been able to get to those numbers. And, you know, as you know, we're very focused on a very disciplined approach to our acquisitions. And this is, I think, I think we feel really good about that. And we're actually really excited about the opportunities because if you look at the anchors that we were able to, you know, expand our exposure to, like HEB and Walmart, Target a little to a small amount. These are really good retailers that we and we're sort of spreading out a little bit of our exposure to. So we feel great about the first quarter and excited about what we can do, hopefully, in the second half.
Caitlin Burrows: Got it. And then also in the prepared remarks, you guys mentioned how the kind of turnover of some tenants that you focused on in 2024 was still a headwind to growth in 2025. I guess, as you guys think about tenant retention going forward and the decisions you made in 2024, when do you think those headwinds will be done? And to what extent will it be something that's kind of ongoing, that tenant replacement versus kind of done for the moment?
Jeff Edison: Bob, you want to talk a little bit about leasing activity and how we're sort of looking at that as an opportunity and as well as a headwind?
Bob Myers: Sure. Yeah. Thanks for the question. I guess I'll start a little bit on what I would call the junior anchor side. So when our occupancy dropped a little bit in the first quarter on the anchor side, there was just noise there from Joanne, Big Lots, Party City, and some of those neighbors that we knew wasn't a surprise to us. We've actually been able to backfill about 70% of those currently. So specifically to answer your question, you know, we only have probably 15 spaces over 10,000 feet that are vacant in our portfolio.
So a lot of the backfilling and recaps of some of those specific neighbors, as an example, the rent will come online in February 1926. And it'll probably be the '26 and maybe some will dribble into '27. The good news is the leasing demand continues to remain very strong for those junior boxes, and on the inline. And we continue to just see from the retailers that they're hungry for sites to open in '26, '27, and '28, and, again, we just don't see any new supply coming on. So we're in a very good spot.
And you see that retailers are wanting to follow the number one, number two grocer, because you can see it in our spreads with 35% new leasing spreads, 19% renewal spreads, you know, 94% retention. It's very, very strong. So we're encouraged by the activity. We don't see anything slowing down. And we feel real good about selectively being locally smart and merchandising around those opportunities.
Caitlin Burrows: Thank you.
Operator: Your next question comes from the line of Samir Khanal with Bank of America. Please go ahead.
Samir Khanal: Thank you. Good afternoon, everyone. I guess, Jeff or John, can you talk about the deceleration in same-store NOI growth that you're expecting in the second half based on the guidance, sort of the puts and takes to get to the sort of the 2.7% on average after having close to 4% in the first half? Thanks.
Jeff Edison: Samir, I thought you were gonna focus on how great it is that we had all that great growth in the first half. John, do you want to cover the sort of what we're looking at for the second half on same center route?
John Caulfield: Certainly. Thanks for the question. Definitely one that I was expecting. So, first, for this reason, we don't provide quarterly guidance. As we look at our earnings on same-store NOI, same-store NOI and FFO, we are projecting more consistent growth for the balance of the year. Our same center growth last year was weighted to the fourth quarter. The fourth quarter alone was over six and a half percent, which skews the quarter-by-quarter growth numbers. So as we look at our Q3 and Q4 forecast, they're actually consistent and growing, improving sequentially from Q2 this year. So I think it's more a function of 2024 than any real deceleration as we look at growth from where we stand today.
And that's for same center NOI, for NAREIT FFO, and for Core FFO.
Samir Khanal: Got it. Okay. No. That's helpful. And then just a follow-up to Caitlin's question on acquisitions. You've been doing a lot more of the shadow-anchored properties over the last two quarters. You know, I know the market is competitive for the core product right now. So just talk about kind of what you're seeing for core versus maybe shadow and unanchored. And I'm wondering if, you know, if pricing is sort of getting out of hand or just kind of are you getting priced out of some of the core product here? Thanks.
Jeff Edison: Yes. Thanks. So we in the through the first half of the year, we'll have bought three unanchored centers. That's 14% of what we bought. Seven shadow anchors, which is 50% of what we bought, and four anchor centers with that they'll represent 35% of what we bought. It's really hard to look quarter by quarter and have a view of, like, a change. These were actually stores that we were very excited about getting and we, you know, so I we saw these as great opportunities. I mean, if you think about it, like, the average sales of the shadow-anchored centers we did is over a thousand dollars a foot on the grocer.
So we've got like, a quality grocer. These are all centers that are that the grocer actually owns their store in these stores, the shadows. And so our small stores get the full benefit. We don't have that sort of flat part of our cash flow, which is the gross ranker. So we saw these as great opportunities for us to get increased growth and really stable, strong properties.
So I wouldn't say that this is caused by the market other than these are the properties that came on the market and that sort of fit with what we were trying to get, which is that number one or two grocers driving the customer to the center day in, day out because that's what allows us to really grow rents.
Samir Khanal: No. I appreciate that. Thanks.
Operator: Your next question comes from the line of Haendel St. Juste with Mizuho. Please go ahead.
Haendel St. Juste: Hey, guys. Good. Well, I don't know if it's good morning or afternoon out there, but it's afternoon here. I was hoping you could add a bit more color on the transaction market broadly, the opportunities you're looking at. Maybe there's anything under LOI at the moment. But looking at kind of $280 million of acquisitions completed year to date, I guess I'm really curious, you know, what's holding you back from moving the guide up a bit here. Seems like you're pretty far along, and seems like you know, the remaining delta is pretty achievable here.
Jeff Edison: Yeah. Haendel, thanks for the question. Yeah. We are very excited about, you know, having put, you know, $290 million on the board for the first half. And we're, you know, we are prepared to do more than guidance if we find the opportunities. I would say that our macro look at the market right now is that it's actually fairly stable. There is more product on the market, and there are more buyers. And we are finding certain buyers that are getting very aggressive, you know, which is where we've gotta keep our discipline and stay out of that competition or desire to be in that and stay true to what we do.
And I think so I think we did that in the first half. If we can find the same amount in the second half, we'll do it. We're a little bit, I think, cautious there in terms of what the second half is gonna look like. So that's why we maintained our guidance.
Haendel St. Juste: Got it. Got it. Appreciate that. And then one just on variable rate debt. Pretty low today, 5%. I think there's some swaps expiring later this year, John. I know it's one of your favorite topics but I'm curious about the outlook or the plan there and what you feel is a comfortable level of variable rate debt. Thanks.
John Caulfield: Oh, yeah. Haendel, I saw your note, and I've been looking forward to this question, man. I know you love variable rate debt and stuff. So okay. I appreciate the question. So, yes, currently, we're 95% fixed. And so we continue to monitor and look at the markets, but we want to approach the debt capital markets and the equity capital markets opportunistically. The key thing for us is making sure that we're in a position where we choose to move because we like the market and the opportunity, not because we have to.
That's kind of why we went in June and we did 5.25% debt, in extending our maturity ladder while also continuing our pattern and reputation in that unsecured bond market. So as I look to the swap market, you know, the swaps that are expiring, our debt profile, we want to continue to be a repeat issuer and market. We feel we've been well received. I would note that we continue to talk to the agencies where triple B flat, but notice that our balance sheet is very comparable to those of our peers that are either positive or even more highly rated than we are. So, you know, we continue to talk to them, think there's opportunity.
And we want to use that. So we're going to manage our variable rate exposure through additional maturities in that market. We're going to continue to buy assets and do what we've been doing in the last several years to do that. And we'll just keep extending from there. So we don't have any plans to further put it, you know, more swaps in place. Unless it matches with things that we do in the term loan market. So we will manage it through issuance. And at the same time, you know, are grateful for the deal we got done and our again, our long-term target is, you know, we target about 90% fixed.
So we'll that's what I was gonna look at on a sustained basis.
Haendel St. Juste: Got it. Got it. Appreciate the color, and thanks.
Operator: Your next question comes from the line of Ronald Kamden with Morgan Stanley. Please go ahead.
Ronald Kamden: Hey. Just two quick ones. So just one on the just remind us on the occupancy side. You know, I'm looking at the anchor at almost 99. Inline, almost 95. Just how do you guys think about sort of the structural ceiling there and the sort of the things that you're doing to maybe maximize either rent spreads or rent escalators? Just the interplay between what your peak occupancy you think it is, and, you know, where you can get more pricing power. Thanks.
Jeff Edison: Great. Thanks, Ronald. So before I turn it over to Bob, we're gonna keep saying this, and I know some of you will buy it, some of you won't. But we truly believe that occupancy is the it's our stores making a decision about where they want to be. And if you have the highest occupancy, our view is you have the highest quality assets. And we have consistently been able to do that because the retailers are telling us with their leases that we have the best properties.
And so we're really happy and about, you know, getting to these occupancy levels, and that we're very happy to be, you know, partnered with our neighbors to be able to get that to achieve those goals. So, Bob, you want to talk a little bit about occupancy where we might be able to take it?
Bob Myers: Absolutely. Yeah. Appreciate the question. We've done really well in the first half of the year. We moved anchor occupancy up about 50 basis points and inline about 20 basis points. And that certainly comes as a result of the retailer demand. I think we have another 100 to 150 basis of inline occupancy. So I really feel that we can get in the 96s. Up from the 94.8, I believe it is today. I think anchor occupancy will always be 99.2, 99.3. We still have some work to do to get that, but I feel good about the leasing demand, the LOIs that we had out for signature.
I think one real important strategy in our business, though, is that we run a parallel path. And not only growing occupancy in our current portfolio but also on the acquisition side. And I mentioned this, you know, over the last year or two, but in 2023, we bought a great portfolio combination of 14 to 16 that were around 87% occupied, and today, those are 98. In 2024, we acquired $300 million that was at 93.1%. That currently sits at 95%. And we're already making good traction on the assets that we've acquired this year.
The demand is as strong as we've seen it in years, and I just feel like, you know, we're gonna continue to move occupancy up, and you see it through the retention. When you're retaining 94% of your neighbors at spreads of 20% and you're only spending 49¢ a foot in tenant improvements, to execute that, that is money well spent. So I feel really good about the current environment, our occupancy, and that's a long-winded answer to your question, but, yes, I do feel like we still have room in occupancy.
Ronald Kamden: Super helpful. Look, my second question is on tariffs. Right? I mean, you guys have put out some data on what you think your tariff risk is. Clearly, you reiterated sort of the credit loss and you raised the same store. So nothing in your portfolio. But I guess, you're sort of taking a step back and talking to tenants, I'm curious about sort of the categories that are most impacted and where do you think like, what's happening on the ground? Like, who's eating that incremental cost on tariff that we know people are paying? Is it the tenants? Is it the consumer?
Just I'm just curious how that's playing out on your grounds and what you're hearing from your tenants. Thanks.
Jeff Edison: Yeah. We're probably not the best ones to ask about it because the necessity-based side, which is where we are, just we don't have a ton of exposure to tariffs. But I will like, our views have been that for that small part, the 15% that we think will have some impact, there the story they've told us today is that they have been able to pass that on to the supplier the majority of it.
And if it stays in that low teens kind of a percentage, that they feel pretty comfortable that they will be able to absorb that between a combination of them taking a little bit of a hit on their profits, but the majority coming from the supplier and then moderate impact on the buyer. So if you and so that I think that's our view on where that impact is gonna happen. How long it's gonna take, and how you know, where we're gonna see it. I mean, as Bob pointed out, I mean, we're certainly not seeing it on the ground on a leasing basis.
So, you know, that part we, you know, we still don't see any cracks from that. So we're I mean, we're as they say, we're very cautious probably more cautious, but still, you know, have a little bit of optimism there that this is not going to have the kind of impact that we thought it would, you know, just three months ago.
Ronald Kamden: Helpful. Thanks so much.
Operator: Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead.
Todd Thomas: Hi. Thanks. Just first question, I wanted to follow-up on some of your questions around the same store growth and growth outlook. Bob, you talked about some of the things that you've completed on recent acquisitions and, certainly some upside on some of those more recent deals. Just curious, the methodology for your quarterly pool, is that different than the full-year pool the way that you calculate that?
John Caulfield: I'll jump in on this one. That's yeah. So Todd is it's it is the same. So we disclose the quarter and the year on the same. So the same store pool is calculated as all assets acquired before January 1.
Todd Thomas: Okay.
John Caulfield: Before '25 or 2024. Sorry. January 1, 2024. Sorry, man. That's a good call. January 1, 2024. Got it. So the assets acquired last year and the assets acquired this year are not in the same center pool.
Todd Thomas: Right. Okay. That's helpful. And then, John, just sticking with you. So, you know, you talked about some of the funding sources, for acquisitions going forward. Obviously, you have a lot of options. You know, equity debt. You've talked about retained earnings and free cash flow. Does the stock price where it is today and the company's cost of equity, does that limit the amount of acquisition volume that you can achieve? And how do dispositions factor into the equation today?
John Caulfield: Sure. So, thank you for the recap there. Yeah. We actually are very happy with the amount of liquidity that we have and the ability that we have to participate in the transaction market. I wouldn't say that the equity issuance is limiting where we are or see the equity price isn't where it is limiting us today. I mean, we do believe that the stock is at a discount relative to private market values, relative to our peers that are in the same business we are, which is grocery-anchored shopping centers. And so, you know, I think the key thing for us that you heard us talk about previously is match funding. And so we're being opportunistic.
And want to find those acquisitions that make the most sense. I do think that, you know, I mentioned in the prepared remarks that we don't have any equity issuance planned, in our guide for 2025, and are very happy that we can execute on our growth plans without needing to go to the equity markets. The pieces that I would say is we are very committed to our mid-five times on a leverage basis. So we're gonna stay in this area. I do think that we're looking at it if it's a great market and there's competition out there. It also means it's a good disposition market as well.
So I think you will see us go through and capture some of the gains that we've realized over the years. So we'll look to sell some of that in the back half of the year. But to Jeff's earlier comment, if the acquisitions present themselves, we will look forward to taking our share of that.
Todd Thomas: Okay. What's the pricing? I realize you're underwriting to a 9% unlevered IRR target on new deals, but what's the how should we think about the cap rate spread between what you're buying and what you might look to sell?
John Caulfield: Sure. So we haven't been really and I've I talked about this in the first quarter or year-end. We talked about, you know, we hadn't been selling as much as we wanted to. Some of the things that we're selling, you know, to start will be closer to the $7.07 and a range, I would say, as we look forward on a weighted basis. But still, you know, capturing great returns for PECO. And then that's relative to kind of the range of what we've been buying at. So the difference isn't very great, but then we will we are, you know, taking off opportunities to monetize, you know, other assets that are meaningfully lower than that.
So I think that probably gives you some guidelines. And all of that would be captured in the guidance numbers we've provided.
Todd Thomas: Okay. Helpful. Thank you.
Operator: Your next question comes from the line of Mike Mueller with JPMorgan. Please go ahead.
Mike Mueller: Yes, hi. Guess, is there a max percentage of the portfolio that you'd want to have in shadow-anchored or unanchored centers?
Jeff Edison: Hey, Mike. Thanks for that for the question. So I think if you look at the unanchored, we've kind of 10% is probably the number that we're thinking there. The shadow-anchored, you know, we see as very changeable with our core anchored stuff. I mean, it's I mean, these are the exact same projects. You just own a little different piece of it. And you own the small store space, which gives us more upside. You know, it's 7% of our portfolio today. So not worth spending a ton of time talking about in terms of impact.
But if we see it as a really great opportunity to be able to buy some of these centers that have, in our mind, a lot of upside because of the strength of the grocer and the, you know, the dominance it has in the marketplace. So I would say that, you know, I hope I'm hopeful that we'll be well above and a 7% includes what we bought in the first half of the year. So I'm hopeful that we can get that number, you know, higher than that, but it will be driven by, you know, sort of what opportunities come in the marketplace.
Mike Mueller: And maybe just one quick follow-up to that. If you're looking at, as you mentioned, you know, because it's just part of the center, it's interchangeable. So if you're looking at a traditional shopping center that you would own that's grocery-anchored where you own the grocer, what do you think is a cap rate differential for, you know, that center that comes with the grocer versus one that's shadow-anchored? Yeah. How different is it?
Jeff Edison: So, you know, that's a very complicated question. It obviously has I mean, we're making a number of generalizations to come up with what that is because each property varies a lot in terms of like, risk, what the tenant makeup is, and then, you know, occupancy and the rest. But I think, generally, our look is we think we can get about 100 basis points, 50 to 100 basis points wider unlevered IRR from our shadow-anchored than we can from our core grocery. And so I think that's a way of looking at it. From a pricing standpoint, on a cap rate basis, it's more complicated.
But let's just say that it would be 50 basis points to 75 basis points difference between a shadow and an owned.
Mike Mueller: Got it. Okay. Thank you.
Operator: Your next question comes from the line of Paulina Rojas with Green Street. Please go ahead.
Paulina Rojas: Good morning. Some metrics suggest the consumer is very pessimistic and a lot of caution while others point to a more constructive outlook. From your perspective, how are consumers that shop in your centers behaving today? Are you seeing any trend in terms of them trading down, changes in visit frequency, or other shifts that are worth highlighting?
Jeff Edison: Yeah. Great. Thanks, Paulina. Thanks for the question. Yeah. There's this dichotomy in the market that's really weird, which is all the polling, all the, you know, the consumer sentiment, all that stuff, you know, is negative. And yet, sales continue to grow. So the consumer is sort of saying one thing and then doing another. And, you know, our views and our, you know, from the place of information and other information, we continue to see really strong foot traffic at our centers. And, you know, that is as current as, you know, within the last fifteen to twenty days. So we're, you know, there is a sort of sentiment and our view is look at employment.
And if we actually just did a study on our properties and I think our properties had a 30% lower unemployment rate than the nation. So I think employment is what drives consumer behavior more than what they think about, you know, what's happening in Washington DC or what's gonna happen to the, you know, the different things that are changing. The job is a driver there. And, you know, we continue to see really strong employment numbers, you know, from a historical standpoint. So until we see a major change in that, we think the consumer is gonna stay the same.
And our retailers are telling us the same thing with their, you know, the time they've been with us, their renewal pace, all the rents of which they're willing to move to, they're all telling us that they believe the consumer is strong.
Paulina Rojas: Thank you. And then a second question. We saw that Kroger simply announced the use of store closures. So first question is, are you aware of any locations within your portfolio that may be impacted? And then parties, are also seeing a number of grocers pursuing expansion strategy. So I'm intrigued. Which grocers are you seeing most actively expanding in your markets?
Jeff Edison: So I want to make sure I got your questions right. One question was who which grocers are expanding in our markets? And the other is what impact Kroger's announcement of closing 60 stores has those is that did I get that right?
Paulina Rojas: Yes. Exactly right.
Jeff Edison: Bob, you want to talk about the Kroger exposure, and then we can talk a little bit about the grocers that are expanding.
Bob Myers: Yeah. Yeah. Thanks, Jeff. So in terms of the Kroger announcement and the 60 stores, we had one on the list. So that's our exposure, and it wasn't a surprise. We've been working with Kroger on that particular location now for about five years. The good news is, you know, we expect them to close this month in that site. But we already have another grocer that's going to backfill it. So it's still a good grocer location. So we just haven't you know, that's what we know currently in terms of what Kroger shared with us. We had a meeting at their corporate headquarters last week.
And right you know, at this point, it's you know, they had all their store closings on hold as they were trying to do the merger with Albertsons over the last three years. So it's not a surprise that the announcement came out. And it wasn't a surprise for us, Paulina, to have the one. The answer to the second question in terms of our and grocers that are expanding, and they are. They're very selective about it. But it's Sprouts, it's Kroger, it's Publix, it's Whole Foods, Walmart. Those seem to be the grocers that are active in either, you know, they're all committing money to remodels and Publix is still very motivated on their teardown rebuild concepts.
Kroger's looking to expand in some new markets. And, again, since, you know, we're Kroger's number one landlord and Publix number two landlord, you know, we're working alongside them to see if we can assist in any way.
Jeff Edison: Yeah. The only thing I would add to that Paulina, is these are not massive changes. These are small I mean, we're like, in the scheme of things, they're it's a very small amount of space that's happening. And the only two I would add to Bob's list would be HEB and ALDI, both sort of playing, you know, a growth strategy. And, I mean, in all honesty, Aldi doesn't have a very big impact on our business. But they probably have the most aggressive expansion plan of any of the grocers. It's just they just don't have that much impact because their sales per store are just not that big.
It's almost like having a dollar store go in versus a grocer. They're you know, they've been doing well, and you know, we'll continue to follow.
Paulina Rojas: Thank you so much.
Operator: Your next question comes from the line of Juan Sanabria with BMO Capital. Please go ahead.
Juan Sanabria: Hi, thanks for the time. I just wanted to follow-up on the prior line of questioning around same store NOI. You know, the guidance implies, like, mentioned before, a second-half slowdown. And I noticed expenses year to date on the same store side are running very, very low. So just curious if the implied desal is in part related to maybe timing on expenses and if you could just elaborate on kind of what the range of expectations are there for same store NOI or if there's just a level of conservatism assumed?
Jeff Edison: Great. Thanks, Juan. John, do you want to take that?
John Caulfield: Sure. I will. So thanks for the question. As I mentioned before, I think as we look at same store NOI and if I think about it in an absolute dollar, than a relative from last year, we see growth from Q2 to '3 to four. I would, again, point out that last year, it was the timing of expensing and the spend and the recoveries associated with that moved that to the fourth quarter. And so I think we see a bit smoother this year just related to some of our spend in the mix. That I had referenced last year. I would say that, you know, from an expense standpoint, there may be some more expenses.
But overall, we see NOI growth in the portfolio sequentially from here. And, you know, again, it's tough to provide, you know, quarterly guidance because of some of these factors, but that's the part I would say is if we just focus on this year forward, you know, we do see growth. And last year, it's six and a half percent in the fourth quarter. It was more timing related.
Juan Sanabria: Gotcha. And then just on the dispositions that you mentioned, sir, what's the kind of the numbers, dollar values we're talking about? For dispositions that are assumed in guidance. To think of the ox as an offset versus the gross acquisition guidance?
Jeff Edison: Yeah. So we aren't giving guidance on that. But I would say that we're, you know, we kind of see 50 to $100 million of this for the year as, you know, kind of fairway. I almost a year in, year out that we will continue to have those, you know, those opportunities assuming we get the pricing in the market. But I think the key there is you just have to be as disciplined on your dispose as you are on your acquisitions. I mean, they're just the you know, they're the same thing just on the different side.
And where we can manage our portfolio and from a growth standpoint and, you know, from a risk standpoint, we're gonna be at, you know, at more active, I think, than we have been the last three years, probably less a little bit less active than we've been over the last ten. But we will continue to push that.
Juan Sanabria: Thank you.
Operator: Your next question comes from the line of Rich Hightower from Barclays. Please go ahead.
Rich Hightower: Good afternoon, guys. Thanks for taking the question. You know, forgive the ignorance, but back to the Kroger question for a second. Are there any in a situation like that, are there any co-tenancy issues that crop up that need to be dealt with? Just how should we think about those situations in general to the extent, you know, they kind of happen periodically? And then I've got one follow-up after that.
Jeff Edison: Bob, you want to take that one?
Bob Myers: Yeah. Sure. Yep. Yeah. So in this particular example, in this site that they're closing, there's no co-tenancies. I think when you get into co-tenancies, you're typically in the power space. So if you think about Ross, they typically have co-tenancy language with two or three other junior boxes or possibly an anchor. We just don't see that in our portfolio with our grocer-anchored focus. Our grocers are the anchor. So, typically, it's going to be the co-tenants that would want that to make sure that Kroger's gonna stay there. In our example, you know, we're absolutely fine. We just don't see it much in our space.
That is really more of a different strategy, which I would I see a lot in the power space.
Rich Hightower: Okay. That's very helpful. And then just quickly on the modeling side, I know guidance does not foresee equity issuance. But is there any incremental debt issuance baked into the guide, or is that not the case?
Jeff Edison: John, you want to take that?
John Caulfield: Sure. So from an incremental debt issuance, I would say that, you know, we talked about the sources and uses. We don't explicitly have another bond offering planned this year, but as we look ahead in addressing Haendel's variable rate interest, it's a possibility. I think the key piece that I would highlight from my previous answer is we want to access the markets opportunistically and very thoughtfully. We will look to manage the maturity calendar as well as any debt that we are getting related to acquisitions to match fund the acquisitions and to turn that out. So I think I'll stay with that.
Rich Hightower: Alright. Great. Thank you.
Operator: Your next question comes from the line of Cooper Clark with Wells Fargo. Please go ahead.
Cooper Clark: Just wanted to touch on the updated bad debt guidance held at the midpoint, but tightened the range. Just wondering if there's any more visibility into the back half of the year and what outcomes could get you to the higher low end, anything to call out there?
Jeff Edison: I think John gets to get that one. That's fine.
John Caulfield: Thanks for the question, Cooper. So, look. I think for us, it's pretty consistent. As we look at the second quarter, it was consistent with the first quarter of 2025. And if you look at it, you know, six months to '25, it's pretty consistent with '24. Overall, we're not concerned with the level that we've got and give us the confidence to tighten the range. When we're looking at the strong leasing demand and our leasing spreads that Bob talked about, you know, we're achieving 35% on new leases and 19% of renewal spreads. And we were still able to deliver 4% same store NOI growth.
So you know, as we look at the remainder of the year, I mean, we have great conversations and relationships with our retailers. You know, I would say we think it's probably consistent where we are. We intentionally set the range wider at the beginning of the year and are pleased with the portfolio performance so far that allowed us to tighten it up. So I guess the other piece is that you know, the nature of our neighborhood grocery-anchored shopping centers is that, you know, it's small pieces. So each neighbor is a small component. So we don't we're not impacted by, you know, as greatly impacted as the large anchor bankruptcies.
And so I think you're gonna see kind of this, you know, incremental here and there, but, you know, we really feel good about our centers over the long run.
Cooper Clark: Great. Thanks. And just a quick follow-up. Anything specifically that led you to tighten it on the low end or, really just kind of tightening the range more generally?
John Caulfield: I think for us, it was just tightening the range more generally. Consistent with what we've been experiencing.
Cooper Clark: Great. Thank you.
Operator: Your next question comes from the line of Ken Billingsley with Compass Point Research and Trading. Please go ahead.
Ken Billingsley: Hello. I have a question. It's a little more granular, and it's about option leases. For the second quarter, it was 7.1% in looking on an annual basis, it was 4.8. Anything that's unique about the second quarter? I know last year was a little bit higher than the rest of the quarters. Anything unique about the second quarter that drives that?
Jeff Edison: So help hey, Ken. Help me with that again. The what was the what the you said the option leases?
Ken Billingsley: The rent spread. Page 40 of the supplement. Option leases. Rent spread was 7.1%. Total is 4.8. I mean, obvious I'm just curious if there's anything unique about why the second quarter tends to roll that way? It's higher than last year, but it seems to be elevated in prior years as well.
Jeff Edison: Yeah. John, do you want to cover that?
John Caulfield: Sure. Ken, I wish I had a better answer for you, but it kind of depends on whether or not it's groceries that are rolling or other leases in the case. Because as groceries roll, those tend to be lower. If we have options with other, you know, neighbors, that can tend to be higher. So unfortunately, you know, doing 40 options in the quarter, it's just mix.
Ken Billingsley: Okay. Mix. Okay. And the other question I have and this is getting back to the question about your cap rate spread between what you're buying and selling. On the what was the spread on the acquisition the cap rate on this on the acquisitions for the quarter and maybe for year to date?
John Caulfield: Sure. So I'll take that one.
Jeff Edison: No. No. I mean, are you saying are you asking the cap the cap rate of what we year to date, what the cap rate is? Is that what you're acquiring? Yes. You get a range of seven to seven and a half is what you're targeting, but what is it what could do you have, like, specific? And if you if you said it earlier, I may have missed it.
Jeff Edison: Well, the I mean, year to date is 6.3 cap rate is what we bought stuff at. And we so that's at, you know, based on the sort of the full market value of what we bought.
Ken Billingsley: Great. I appreciate it. Thank you for taking my questions.
Jeff Edison: Yeah. Thanks, Ken.
Operator: Your next question comes from the line of Floris Van Dijkum with Ladenburg Thalmann. Please go ahead.
Floris Van Dijkum: Hey. Thanks, guys, for taking my question. Yeah. So Jeff, you mentioned something really interesting. You said that if I recall correctly in answering one of the previous questions about 10% of your total acquisition volume is likely going to be in these unanchored centers. Could you maybe elaborate a little bit on the cap rates and the rationale behind buying some of those assets? Are they you know, where's their location? What's the strategic rationale, etcetera?
Jeff Edison: Yeah. Well, thank you for the question. I'll dig in. And, Bob, you, you know, join in with me. This is a new initiative we've been talking about, you know, implementing over really over the last year and a half. And it basically is taking the view that at centers that we own and in markets where we are really locally smart and have, you know, a very strong presence in the markets, there are selected and there are select unanchored centers that we find really intriguing in terms of both initial yield, but also our ability to grow the rents in them.
And because we have boots on the ground in these markets, we actually have a really good insight into them. And so we've started to gradually buy a few of these as we've gone to make sure that we are testing them from a risk perspective, from a return perspective, from our ability to really grow rents at these centers. And our results have been very positive. So we continue to see this as an opportunity for us to grow. And it will probably be in that 10% to thirties with CAGRs above three percent. So, again, as Jeff mentioned, we're gonna be very opportunistic about the space.
It is a natural complement to what we do well day in and day out. So early indications are very positive. And if we can be selective, over the next two or three years and continue to acquire this type of product type, I think we'll do very well. These assets have a CAGR above five and a half percent, so a great complement to growing same center NOI.
Floris Van Dijkum: And maybe just a follow-up just because I noticed the one asset that you listed unanchored, it's, you know, 84% leased. How quickly are you able to ramp up occupancy in those assets as well?
Bob Myers: Yeah. So a great example is the assets that we bought in Denver, and I believe that one trying to see what the occupancy, it was in the low eighties. And we've already leased 13,000 feet. So we're in the upper nineties. On that within two months of acquiring the asset. So that's not uncommon. As I mentioned, you know, when we acquired in 2023, a portfolio that was 87% occupied, within a year, we were 98%. So we're already seeing one of the assets in Houston, we've already completed six new leases in a period of a year. So we're seeing, again, retailer demand as long as you're buying with the right criteria in mind. It happens quickly.
Floris Van Dijkum: Thanks, Bob. But maybe my follow-up is related, I guess, on the acquisitions for JVs. You do have a couple of JV partnerships. How do you feed those? And is there more demand from your JV partners to acquire more assets? In this kind of environment? And have their return expectations changed over the last, you know, twelve to eighteen months?
Jeff Edison: Yeah. So we have two JVs that we are currently buying into. And what we've done is we've basically set a target for each of the funds that is outside of PICO's balance sheet. And, you know, we now have bought, I believe it's four properties between the two. And I think we'll make even better progress in the second half of this year on those. But they I mean, the way we look at it is we own four centers today that we wouldn't own without the JVs. And we think we're gonna be able to make very strong returns on our equity investment as well as, you know, the fees in doing that. On these properties.
So we see it as another, you know, growth opportunity. And in terms of whether we're gonna buy more or less, you know, that again, is gonna be really driven by what's in the market and how well it fits with both of these funds. But we do having one of them fully placed by the end of this year. It's a smaller fund. And the second one will continue for some period of time.
Floris Van Dijkum: Thanks, Jeff.
Jeff Edison: Yep. Thanks, Floris. Thanks for the questions. So this concludes our question and answer session. And I will now turn the conference back to Jeff Edison for some closing remarks. Jeff?
Operator: Yes. Great. Thank you, everyone, for being on today. We appreciate it. And thank you, operator, for helping us. In closing, the PICO team continued our solid performance in the second quarter. Given our strong leasing momentum, year-to-date acquisitions activity, and recent bond offering, we're pleased to increase our full-year 2025 earnings guidance for same center NOI, NAREIT FFO per share, and core FFO per share. The balance of PICO's defense and offense, the stability of our high-quality cash flows, and the capabilities of the team give us continued confidence in our ability to deliver strong growth in 2025 and over the long term.
Because of our unique format and competitive advantages, we believe PICO is able to deliver mid to high single-digit core FFO per share growth annually on a long-term basis. The PICO team remains focused on delivering on this expectation and driving value at the property level. Given our demonstrated track record through various cycles, we believe an investment in PICO provides shareholders with a favorable balance of quality cash flows, mitigation of downside risk, and strong internal and external growth. In summary, and I think you've heard this before, we believe the quality of our cash flows reduces our beta and the strength of our growth increases our alpha. Less beta, more alpha.
On behalf of the management team, I'd like to thank our shareholders, PICO Associates, and our neighbors for their continued support. And thank you all for being on the call today. Have a great weekend.
Operator: This concludes today's conference call. Thank you for your participation and you may now disconnect.