Thank you for standing by, and welcome to Acadia Realty Trust First Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Jose Vilchez. Please go ahead.

Good morning and thank you for joining us for the First Quarter 2024 Acadia Realty Trust Earnings Conference Call. My name is Jose Vilchez, and I'm an analyst in our Capital Markets department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call, April 30, 2024, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for a reconciliation for these non-GAAP financial measures with the most directly comparable GAAP financial measures. [Operator Instructions]. Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Great job, Jose. Thank you. Welcome, everyone. I'm here with John and Stuart and A.J. Levine. And I'll give a few comments, then hand the call over to A.J. Then John will discuss our earnings guidance and our balance sheet metrics. And after that, our team is here to take questions. As you can see in our earnings release, our first quarter performance was strong and continues a multiyear trend of peer-leading top-line growth that is reflective of both the cyclical as well as the secular tailwinds that our portfolio is experiencing. I'll let A.J. and John discuss the building blocks of our NOI growth going forward and the moving pieces of our earnings in detail, but in short. The strong rebound and continued acceleration of The Street retail component of our portfolio continues to drive this performance. As A.J. will discuss, the combination of strong contractual growth and favorable recurring mark-to-market opportunities is positioning us for continued strong internal growth going forward. And as John will discuss, the stability of our balance sheet, further enhanced with our recent extension and expansion of our bank credit facility, positions us with limited maturities and limited floating rate exposure. All of this supports our goal of creating superior top-line growth at the property level and then having that growth translate into bottom line's earnings growth. The positive trends we're seeing in both supply-demand dynamics and retailer performance means that we are past this being just a cyclical COVID recovery story. Even once we get our portfolio to full economic occupancy, our internal growth still looks strong. And that's because our street retail component should provide long-term's growth of a couple hundred basis points higher than our suburban assets. Our goal here is to continue to craft the portfolio driven by street retail…

Great. Thanks, Ken. So once again, I'm happy to report that from where I sit and from what I'm hearing and seeing from our retailers, the positive trends, both secular and cyclical that have fueled a strong recovery over the last 36 months, continue unabated. That's true for our suburban assets, but even more so on the high-growth, higher barrier-to-entry streets where we operate from Soho to Melrose Place, the Gold Coast to M Street and everywhere in between. We are still seeing more demand than the markets can accommodate. Our tenants are healthy, and their sales are significantly above where they were in 2019. There continues to be a shift out of department stores and non-A malls, and into open-air street retail. And for the vast majority of our retailers, the physical store remains the primary driver of profitability for their businesses. And as time moves along, we're seeing leases getting signed well ahead of where we thought rents were just 1 quarter prior. Now Ken mentioned the building blocks of NOI growth in our portfolio. Why will we continue to outperform and provide a higher rate of growth than our peer set? We'll start with our SNO pipeline. At the end of the quarter, our SNO pipeline sat at $7.7 million, which represents 5.5% of in-place ABR. That includes the $1.2 million we added in the first quarter, and we've already doubled that number in April, which puts us right on pace with last year. We see no signs of a deceleration and have an additional $6 million of ABR in advanced stages of negotiation. And of course, it's only April, and there are no meaningful expirations on the horizon. It is worth noting that the vast majority of that SNO pipeline originates from our street portfolio, which…

Thanks, A.J., and good morning. We are off to a strong start with our operating results and key metrics coming in ahead of our expectations. We have also made considerable progress on our balance sheet. In addition to improving our debt-to-EBITDA by over 0.5 a turn during the quarter, we also successfully extended the maturity of our $750 million unsecured facility by an additional 4 years, along with upsizing our borrowing capacity, all while maintaining our existing credit spreads. I will now provide some further color. Starting with our first quarter results. We reported FFO of $0.33 per share, coming in slightly ahead of our expectations with strong tenant credit, along with solid property operating fundamentals. And we are continuing to see encouraging trends within our portfolio. But as we just issued our guidance a few weeks ago, we felt it was a little too premature to make an upward revision at this point. But we remain on track to meet, if not hopefully exceed, our expectations, which as a reminder was year-over-year FFO growth of 7.5% after stripping out promote income with this projected earnings growth being driven by an increase of 5% to 6% in our same-store NOI. In addition to year-over-year growth, I thought it would be helpful to walk through our sequential growth and how we see that quarterly trajectory contributing to our annual expectations. Sequentially, our first quarter FFO grew by approximately 7% or an increase of about $0.02 a share after excluding promotes and the $0.03 of termination income we highlighted in our release. And precisely as we had anticipated, it was our core NOI or more specifically our differentiated street retail portfolio that drove this growth. But before diving into the numbers, I'm going to pause and do a quick overview of how…

[Operator Instructions] Our first question comes from the line of Jeffrey Spector of BofA Securities.

It's Lizzy Doykan on for Jeffrey. Congrats on the quarter. I was hoping to, I guess, get an update on what's new in terms of what you're seeing on transactional activity especially now that you have some clarity on activity, you're helping to close on with a couple of institutional partners. So I guess, starting with, one, what are the most key opportunities for capital cycling today? And then, two, are you -- what are you coming closer to in terms of the acquisition side?

Sure. So let me take a crack at both of them. As I mentioned in our prepared remarks, Lizzy, the -- what I said is the bid-ask spread is narrowing, meaning there are buyers and sellers showing up for a variety of open-air retail. And while the volatility of the bond market is elongating that process, we are seeing interest from both buyers and sellers for a variety of products. The most crowded, most focused trade is supermarket-anchored. It was very defensive during COVID, necessity-based, and institutions are continuing to focus there. So I would say that's where you're seeing the most opportunity to sell assets and probably the most competition. Then in the other areas of open-air retail on the suburban side, the more junior anchor-focused or sometimes referred to as power center, buyers and sellers are both showing up. And we're seeing deals, albeit sellers who are showing up now are probably motivated for some reason other than profit-taking. Bids are still in the higher yield range. And so those sellers are probably showing up because they either are finite life funds, have capital expenditures necessary for that asset or elsewhere or other redeployment opportunities. And if you can find those type of sellers who are motivated to get out, they can get out at a reasonable price, but we're also seeing buying opportunities. So that's on the suburban side. Where we're seeing the best, most compelling risk-adjusted returns is in the street retail side. Now it's going to take a while. But as A.J. pointed out, the retailer demand is very strong. So as we think about what kind of deals are we going to buy, part of it is what you're going in yield, what's your purchase price per square foot or otherwise. But the other…

That's helpful. And just as a separate follow-up question. Going back to A.J.'s comments on one luxury tenant that relocated from Gold Coast to North Michigan Avenue. Is this a sign of -- or maybe are you seeing other signs of luxury showing up and other strength retail markets besides Melrose and the others that A.J. commented on?

A.J., why don't you cover that?

Yes. I mean, certainly within our portfolio, we've seen luxury show up in markets like Williamsburg where historically, you might not have expected that. And even as we look to some of our growth markets, you've seen luxury show up in Ashville, you've seen luxury show up in Austin. So luxury expansion is very real. It's not isolated to New York, L.A., Chicago. It's something that's happening everywhere.

And it's some of that secular trend of retailers in general, and luxury specifically, recognizing that they want to control their relationship with their retailers, and the best way is for them to control their store. So we are seeing that migration. And open-air retail, especially street retail, is the best channel for those kind of retailers to step forward. I think you're going to see that trend continue.

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

First question, just curious with some of these new relationships that you're sort of entering into. I guess, first, are they new relationships? Or are some of these or any of these legacy fund investors? And then is this -- should we think about strategic sort of investments like this in lieu of a Fund VI vehicle? Or should we assume that Fund VI, fundraising is also either ongoing or will begin at some point in addition to these new relationships?

So we think that this format will serve our shareholders better than a one-size-fits-all Fund VI. Again, that could change, Todd. And the investors are similar. There's some overlap, but it's also new institutions. The rationale for this is that while we still believe that that side of our business, the investment fund management business, is an important component of our dual platform for the reasons I outlined before, we're more excited in this current environment, where we don't think leverage is going to be as much of a tailwind for buyers as it was during the last couple of decades. We think the lower-leveraged public vehicle is where we're going to be able to drive more growth first and foremost. Secondly, Fund V, which thankfully is teeing up to be very successful, but it took us twice as long to deploy that capital. And that elongated investment cycle isn't friendly to our LPs or our shareholders. And so being able to do things on a small or more strategic basis seems to make sense. Final point. The fund, Fund V, let's say, or any of our funds are a one-size-fits-all pooled investment, which are great and having that discretionary capital is something that is very beneficial. However, that high teens return that is required, and especially in a higher interest rate environment, is going to be more difficult than the one-size-fits-all nature of it, a little more difficult going forward. My friends in the private equity side of that business are certainly feeling it. Now to the extent that they can go to industrial development or single-family rental and all that, there's ways they can pivot. But we want to stay focused in open-air retail. That's our core competency. So what we are doing now is working with different institutions with different leverage desires and different return goals. Some may be more core plus, low teens versus high teens. Some may have other initiatives such as distressed debt, and we can thus curate it better that way. You put it all together, and it's very likely going to look similar in terms of cash flows and revenue. So some of you might say it's a distinction without a difference. Fine. But I do think this will enable us to be a little more flexible as we focus on our main mandate right now going forward, which is to drive our core portfolio growth both internal and then now as we're getting more confident, externally as well.

Okay. Will additional investments with the investor that you're selling a 95% stake in a suburban asset too, will they be similar going forward with Acadia having a 5% stake? And then are there any additional core suburban assets that might be sold to -- in a similar manner?

Yes. So let me start with the second part of that, which is throughout our portfolio, we are constantly looking at which assets does it make sense to recycle out of, either because they are lower growth or not mission-critical or just not consistent with our growth strategy. And so yes, there are. We certainly do not need to rush to the exits. So you're not going to see us firesaling anything. And if we don't do any more of those recycles, we can still grow this company just fine. But there are certainly that opportunity. And then whether it's with this institution or some of the others that Reggie Livingston and the team are working with, some of that will be very dependent, Todd, on the kind of opportunities we see going forward. When you and I spoke a year ago, I thought the biggest opportunities would be distressed debt. Now, in fact, as it relates at least to retail, it doesn't look like that's going to be the window of opportunity. There's going to be other situations. So we'll see, right investor, right assets, and we'll be able to match it that way. And we're feeling pretty good to very good about new institutional interest. Because keep in mind, the private institutions, for the most part, have been sidelined out of retail for the last 5-plus years. And so they need partners like us to execute as they want to pivot out of some of other asset classes and back into retail.

Okay. That's helpful. And if I could, real quick, one follow-up, one for John. Just the terminated disposition in the quarter that was $0.03. Are you still working toward an asset sale? And is there any additional color you can provide around the impact that, that asset sale may ultimately have on results in the near term, either accretion or dilution, that's factored into guidance? And maybe talk about that a little bit as it results to the original guidance.

Yes. Absolutely, Todd. So it's a vacant building at this point. That was the terminated contract. And highest and best use for that is not a retail -- retail development. So it's really sort of a non-ancillary parcel. The go-forward drag is going to be a nominal amount of interest and taxes in our numbers. And like as Ken just mentioned, we're not going to fire-sell anything but looking for the right time to sell. So this is not a meaningful needle-mover in terms of proceeds or otherwise. The amount of that payment we got was just -- it was under contract for an extended period of time. So that was with the size of it. And then we had carrying an opportunity cost as we were holding that for a buyer that ultimately defaulted given where the rates were at and their development plan for the asset. Todd, maybe one last point there. Same-store, this was not in our same-store pool. We did the $3 million for the asset either way. So it's one that's -- it's not part of our same-store pool. I just want to make sure that was clear as well. It probably shows up back in our for sale one of these days. And again, it wasn't even that large an asset. It was a meaningful payment, so we did want to segregate it.

Our next question comes from the line of Linda Tsai of Jefferies Group.

The $20 million of NOI, $0.18 from FFO coming online from street year-end '23 through '27, what does the cadence look like?

Yes. So Linda, I would say that if we look at the near term, that's pretty significant in that we have $6 million in our signed-not-yet-open. So that's when we have the most clear visibility to. So about 1/3 of that shows up and will commence during the second quarter and the balance of that in the fall of this year. So call that a big chunk of that is going to be '25. So we see a very strong '25 as the balance of what we've already executed shows up. So that's the lease-up piece. And then A.J. talked about demand. I think that will be sprinkled in, but signed-not-open is the biggest piece of the $10 million we have from that bucket. Mark-to-markets, I think those are going to come in sporadically. So I think that's the $4 million that we spoke about. Those will come in cadence-wise, I think, relatively -- I don't want to say evenly, but relatively evenly. And then the 3% growth, that is contractual. That will come in each year. So I don't want to say we're going to be exactly 10% year-over-year. I think that would -- I'll be proven wrong on that. But I do see a relatively smooth trajectory of the 10% in the next couple of years as we work through this.

And then I'm just confirming if the Fed cuts rates every 100 bps, is that one step benefit on an annual basis?

Yes.

Great. Last question. The contracts you announced in your press release to sell a core suburban asset and then the one you're under contract to buy. Could you talk a little bit about the pricing?

We'll talk about that more next quarter when everything hopefully closes. But well, since that was your third question and since I don't want to answer it, we'll leave it at that. It was accretive. So I think we could say that. I mean, we could say that. It was accretive.

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

So John, I know you want to be conservative at this point of the year, but I feel like you maybe shadow-raised guidance here. So I wanted to kind of ask you some of the sensitivities around the midpoint. I know A.J. said he's seeing rents -- or he feels better about rents today than he did even a quarter ago. These -- the deals are slightly accretive, but Ken doesn't want to give pricing on. And tenant credit is kind of trending in a positive way. So as we think about the $1.28 versus the range versus some of these moving pieces, what's kind of the -- maybe could you bracket maybe the plus or minus at this point in the year that you could see, if all of these kind of hit, at least of what your view of timing could be?

Yes. So I think certainly -- and again, the decision to raise was literally just focused on weeks ago that we issued our original guidance. So I think that was the primary driver of it. But in terms of where the sensitivities as to that the midpoint of the range, so let's talk with tenant credit, as I highlighted in my remarks. Tenant credit, we had a -- I think I mentioned on last quarter call, we had $0.03 of -- call it, $0.03 of FFO built in for tenant credit. We are trending better towards that. So I think we could beat on tenant credit. That's one sensitivity to the upside. That was a positive trend first quarter. Second piece, Craig, which is harder to do because it's sometimes -- not sometimes, it is often outside of our control, is we have a big signed-not-yet-open pipeline. And that is purely timing. If we missed by a month, either -- positive, that's going to accelerate NOI and income or vice-versa, if we missed by a few weeks. So I think the rent commencement on new leases is another one, just given the volume that's out there, and we have great estimates and a great team that spends day and night focused on that. But that is a variable that could slightly deviate from where we expected. Other upside is just on the leasing front. So one of the benefits of the street -- so if A.J. signs a suburban lease today an anchor, we'll be thrilled with that, but we're not going to see NOI until some point in '25 just given the build-out process versus on the street with 84% currently occupied, A.J. can sign a lease and get that up and paying this year. So I think we've made conservative projections there. So I think A.J.'s ability to -- and his team to get leases signed and open, that's a chance for upside. And in terms of the goals for the year, A.J. doesn't have to sign another lease to commence this year to achieve our goal. So we've built in appropriate reserves around leasing. We've met our goals there. So again, acquisitions, we have no -- I can keep going on. And some of the points acquisition upside. So pipeline, our Monday morning meetings as busy as they've ever been, which is when we go through investments. We haven't closed on that anything to add. So I'm certainly not going to rise on something we haven't done, but that's another opportunity where we haven't factored that in. So I think it's sort of a bunch of things out of upside and -- there. But I would really focus the lack of a guidance range on just the time that we last spoke to the market as to our expectation.

Okay. No, that's helpful. And I guess, as we think about street, that seems like that could be kind of a pretty big swing factor here. I guess 2 questions on that. Anything on fair market value adjustments that you guys see today that could positively impact that isn't in guidance, but is looming out there? And then the second one, I guess, A.J. has an easy rest of the year since he already hit his mark. But what's the pipeline look like above and beyond what was in plan at this point that maybe could hit and positively impact kind of '24?

Yes. I'll jump in. I mean, look, a lot of the -- we've talked about the pry-loose strategy, right, and these opportunities for positive mark-to-market that are peppered throughout the portfolio. Those are all, for the most part, incremental to what we've put out there. I think Armitage Avenue is a great example of that, a $80 foot [ put ] rents average on the street, $120 a foot market. And that is a market where we are going to have the ability to probably lose a good amount of that space over the coming quarters and years. So I think that's the template, right? But those are, again, peppered throughout the portfolio. You can't have the amount of growth that we've seen over the last few years and not have those opportunities embed throughout. So that was the first question.

Yes. And then anything in the pipe kind of above and beyond your kind of goal for the year that looks promising?

Yes.

That's Ken saying yes. Yes, there is.

Yes. I mean we have -- I think the takeaway from all of this, listening to John's answer -- because we do not have any interest rate exposure. We do not have any maturities. We don't have any balance sheet concerns. The big plus and minus is just going to be rent commencement dates. And that obviously, when we have this much embedded growth, and that can impact either to the positive or the negative. But retailer demand and the rents we're getting and the spreads we are getting, whether it is through fair market value resets and we have some of those, or pry-loose and retenanting, whether it shows up in '24 or '25, we'll do our best to make sure it shows up sooner rather than later. But we're going to work even harder to make sure it shows up at maximum levels because long term, that's what's going to create the value.

That's helpful. Can I sneak one more in?

Yes.

Just how do you balance, Ken? I know you guys want to do all street retail, keep that 100% for yourself. But clearly, you guys have a niche there, and the partners -- potential partners know that. How do you kind of segment that and keep enough for yourself without offending partners?

Critical issue that I should have discussed in detail before, the distinction between being in a fund business, where we are fiduciaries and we have to go get waivers. And we've successfully done that. The distinction between that and what we're doing now is there are decision-makers on the other side of the table, some of them, who are saying they want to participate in street retail. And if we can unlock portfolios of larger size, they could be great additions. So that's fine. But the others are more focused in our suburban initiatives, which, frankly, I'd rather leverage our institutional relationships and keep in our investment management platform. So the conflicts are less. We manage them successfully historically. We will manage them successfully now. But if anything, it gives us clearer room to run for the initiatives we want to do on balance sheet in our infinite light vehicle. Because we do believe that the lower-leveraged, infinite life vehicle that is the REIT is coming into a period, where it will be a strategic advantage as opposed to during the tougher time periods where leveraged. And thus, the private equity model was superior.

Our next question comes from the line of Ki Bin Kim of Truist.

On Rush & Walton, the lease occupancy rate declined to 59%. Just curious if that -- what's happening there?

A.J.?

Yes. Nothing we didn't anticipate. That's a very tight market. Basically, no supply there. And we're already under LOI to backfill that space profitably at a higher rent than the previous tenant was taking. And of course, the tightness of that market is why we're seeing, again, this spillover back on to North Michigan Avenue. We mentioned it with Paul Stewart. So the market is side is that, it's not always the worst thing in the world to be getting back space.

And West Shore Express rate was put into the redevelopment pipeline. I'm not sure if that had any kind of noticeable impact on your same-store NOI, but if you can just provide some color on what the plans are for that asset?

Yes. So Ki Bin, and I probably should have mentioned the name when I responded to, I believe it was Todd's question, but West Shore Expressway is that asset that was under contract, just to be clear. Redevelopment that is not -- so that was the asset we were talking about.

And in terms of some of these assets on the street, where you're getting the fair market value resets, at some point, the thesis for holding that asset becomes much more tied to the individual retailer that might be doing really well versus the real estate. How do you think about that, Ken? Is that something that maybe rises up to maybe a disposition candidate? Or is there more the gift that keeps on giving later on in the future that you might want to hold on to?

Yes. So it's a critical issue. The way we think about any given market that we own any given carter, whether it's Armitage Avenue, Melrose Place, Soho, supply-demand and rent-to-sales, how are the tenants performing. So if we're in a market that the supply-demand is imbalanced and look during the so-called retail Armageddon, and we went that -- through that in a lot of markets. And as A.J. has mentioned, now it's gone the other direction, and there's more tenants buying for space in their space. But separate as supply and demand, we have to look at how our tenants performing. And there, we will think about that specific tenant. And if retailers in general on a given corridor are doing well, but that tenant is not, then first thing A.J. is going to try to do is replace that tenant. That's part of the pry-loose strategy. If we see broader reasons for concern in a given corridor or we're overexposed to a given tenant, who has no interest in departing, then that could be a disposition candidate, and we have periodically done that overall. What we've been pleasantly surprised with so far is tenant performance, in general, especially in relation to 2019, the tenant performance has been strong. So we've not had many of those issues to date, but it is something we certainly would watch closely.

Our next question comes from the line of Michael Mueller of JPMorgan.

Ken, I think you mentioned early on that the $50 million disposition was going to be modestly accretive before redeploying the proceeds. Just curious how that math works. Because they typically kind of usually cuts the other way when I think of dispositions.

Yes. The joys of an inverted yield curve, Michael, meaning our borrowing cost is going to be in the 5s and 6s, so there's not that immediate dilution. Did I explain that right, John?

Yes, plus the fees, Mike. So I think there's an addition to the fact that we do have some pockets there, but also the fees that we'll earn from that as well offset.

Got it. Okay. And then maybe one follow-up question on the street occupancy and the target of going from 84% to 95% by early -- late-20 -- I think it was late '25 or early '26. Can you give us a sense, like a ballpark average rent number -- rent per square foot number that we should be thinking of?

Yes. Mike, I would love to be able to do that, to be honest. But given different markets, there's upper floors, lower floors. It would be difficult to do. That's why we threw in the number, right? So I think I would -- why I'd love to just say $92 a foot, I think it's -- the $4 million is the best way to get there given -- just given the range, upper floor, lower floor and across different markets. A.J., I don't know or, Ken, if you have a different view but...

Yes. I'm going to give a quick ramp on -- and reminder that of all of our different metrics, occupancy is the unfortunately least relevant and least correlative to our peers because of the disparity in our assets. But if we assume John is right, and I do, on the $4 million and we assume A.J.'s right in the next couple of years, we get to that number, we probably succeed that way. If one of our suburban boxes goes away, then again, it could be a $2 rent. It can have no economic impact. It could change those metrics. So please don't rely too much on that. Rely on our economic growth. And that, I think, will be the best way to do it, and we feel very good about that economic growth. We feel pretty good about the occupancy as well because, A.J., I don't know why you would hold back on any leasing, but it's not going to work from a square footage basis. We're trying. If we can come up with that economic metric, we certainly will share it.

Our next question comes from the line of Floris Van Dijkum of Compass Point.

A question, maybe if you can give us a little bit more color on what is in your same-store pool and how rent spreads can be misleading. I'm particularly referring to the 5.2% average cash rent spreads, but you only did 22 leases, yet your -- obviously, your same-store was significantly higher. What percentage of your leasing activity is in your same-store pool? And maybe talk about some of the nonsame-store pool. What do you pull out? For example, splitting spaces or noncomparable. I would imagine City Point is probably in your noncomparable pool. Maybe if you can give us a little bit more detail on that.

John, just to set the table, touch on the fact that not all spreads are created equal in terms of duration, touch on comparable/noncomparable.

Yes. So let's first start with the exact assets that are not in there. First, it's our core only. So it's just our core portfolio that we print spreads for. Second, in terms of the assets that are not in there within our core, that's -- if you look at our redevelopment page in the supplemental, we list out the big ones being San Francisco, North Michigan Avenue. Those are stripped out. So I think those are the ones -- the individual assets that are not within our same-store. And then in terms of comparable/not comparable, and I'm going to let A.J. talk about that piece of it in terms of how we think about carving up space and why that's not going to go in there, which is a good portion of our street leases are not going to show up because we are accommodating the tenants, where we are buying in locations where we have critical mass and we could accommodate to a tenant's need cutting up space. So that's a good portion of the street that I'm going to let A.J. expand on that piece of it. But in terms of the spreads, you threw out the percentage for the quarter. Keep in mind, what's in our signed-not-yet-open. Those were the spreads that we signed last quarter that were in the 40%, 50% range. Those are in our signed-not-yet-open that haven't commenced yet that haven't contributed to our same-store growth. So I think it's when there is a timing delay between signing and occupancy, but also a mix that a good portion of the leases that we're signing are not part of that. So that's the one. And I'm going to let A.J. hit the piece on how we think about cutting up space, but getting back to Ken's point on not all spreads are created equal is keep in mind that on the street, we get a shot to mark-to-market at least every 10 years, if not 5 years, depending on the lease duration. So we're marking to market much faster. So internally, we think about the CAGR on the lease from what is the CAGR we get from the time we sign it to the time we get another crack at resetting it. And the CAGR coming from a street as compared to a suburban, even before you factor in the cost, net effectively is double as part of the growth there. So that's one, just not all lease spaces is created equal given that a suburban lease, you might not get that back for 30 years versus we've gotten within the street 3% growth and the mark-to-market after 5 or 10 years. So A.J., why don't you talk a bit about just in terms of the comparable leases that a lot of them aren't going to be there based on what the way that we cut up and carve this space?

Yes. Look, at the end of the day, it's all about maximizing value and accommodating what your tenants are looking for. Sometimes that means combining spaces, sometimes that means demising spaces. I think we're fortunate just because of the scale that we have in these markets that we can accommodate what these tenants are looking for. I mean you think about St. Laurent on the Gold Coast, for instance, that was 2 spaces that we combined, right, because Saint Laurent had the need to expand, right? They were looking for a larger space. So not necessarily a conforming lease, but certainly an important and an impactful lease nonetheless. The number you should be focusing on is total leasing volume, right, and not necessarily the number of conforming leases that we have. And I think it's also good to point -- it's also important to point out, and the folks at Green Street were kind enough to remind us that when we are carving up space or combining space, the money that we're spending to do that is much smaller as a percentage of ABR than when we're doing it in our suffers. So really, again, it comes down to maximizing value, and it comes down to accommodating what the tenant is looking for, and sometimes it doesn't fit into the existing space.

Great. It's helpful. And I think that it can be misleading sometimes to -- for people to focus too much on the spreads. It's -- ultimately, it's about the NOI growth. Maybe if you could -- if I could get your comments, Ken, maybe if you had money that you wanted to deploy today, where -- which street markets -- street retail markets you find right now are the most compelling? Is it New York? Is it DC? Is it Chicago? Where do you see the biggest opportunities? I know you have to be somewhat cagey here because you're presumably looking at all of them. But is there much of a difference between -- in the returns available as you look at those markets?

The way to think about it, and I am going to be cagey, Floris, so I'm not going to mention specific markets. There's 1 or 2 markets: Chicago, for instance, where we see a nice rebound, but we have plenty of exposure there. So I'd be reluctant to see us add there, but that's really specific to Acadia not to where we see necessarily the opportunities. Otherwise, we think about markets in a few different categories. One is kind of early-stage pathway of growth. Henderson Avenue in Dallas is an example of that, where we haven't yet added value, we haven't yet brought the retailers. A.J. mentioned the ones that we have on Armitage Avenue or the ones that you'd see on Green Street in Soho. So early pathway to growth, and there are a variety of markets as long as they are ripe for the kind of retailers we do business with. Then there's those that present opportunity for significant mark-to-market but are well established. And M Street in Georgetown is a prime example. It went through a retailer cleansing process, if you will, during COVID. And we're seeing significant rental growth already in established market, but probably less mature. And then the final are the more mature ones. Greenwich Avenue in Connecticut got a COVID lift. We're enjoying strong tenant demand, but probably doesn't seem to have that kind of growth. And then your pricing should adjust for all of those different factors: established market, generally gets lower cap rates, but if it has lower growth, then we might tap the brakes a bit more on that. And then overall, what we're trying to provide is a nice blend for our shareholders, some early stage, some moderate, some more mature, so that we can have a stable pipeline of growth. Final point around that is where luxury shows up right now. There's a lot of room to draft. And so we're certainly keeping in close contact with our retailers to understand where the luxury retailers may want to show up.

Our next question comes from the line of Paulina Rojas-Schmidt of Green Street.

Can you please add more color around the in-place occupancy, which was north of 100 basis points in street retail and suburban assets?

Paula, was your question on is the movement in occupancy sequentially from Q4 to Q1? Is that the question?

Yes. But based on what I'm seeing, it wasn't just one category but a few and a little more than I was expecting due to seasonality.

Yes. So it was -- and we tried to articulate it in our release, but the biggest driver of that was the 70 basis points from a -- we identified it was actually a liquor store at one of our suburban assets that moved out. That was 70 basis points. Another 15 basis points was the space that we got back on Rush & Walton in Chicago. And beyond that, nothing of significance. And again, going back to Ken's remarks and really following up on my remarks is that notwithstanding this occupancy, I'll call it a dip. If you look at the NOI growth, we actually increased because we're placing that -- we're putting in higher dollar rents, which doesn't show up those percentages. So I think -- I know it's a metric we need to think about and focus on. But for us, it's really the rent behind those occupancies that's much more impactful than that $10 liquor store that moved out that I believe A.J. has already backed all that.

Yes, we've signed the lease for that space, right.

Okay. And we have talked about acquisitions. I'm curious what is the IRR hurdle that you have for acquisitions?

So the IRRs, and I won't get into that specific deal, once they close the next quarter, we'll talk about. But in general, the IRRs on a -- will vary depending on the risk and the cash flows from, call it, core plus, which would be on a levered basis, low-teens through to high-teens for heavier lift either redevelopments or more opportunistic and things like that. Keeping in mind that right now, unlevered returns might be the better metric, investors still talk about it on a levered basis. And who knows where cap rate compression would be. So the pricing I'm thinking about is assuming limited or no cap rate compression.

Okay. But what about street retail? And I'm looking it more from the perspective of what is the minimum return that you expect more so than the actual pricing that you're getting?

So it's still -- and that's a very legitimate question. And I'm, again, going to be a little bit cagey because it depends on a variety of factors. But the way to think about it is that it seems as though the lowest cap rates are for high-quality supermarket anchor. That high-quality supermarket anchor is going to, in general, throw off about 2% growth. And seems to be trading in, I'm hearing some below 6% going-in yield, some above but in that range. And that seems to be the lowest cap rate trades that we're seeing. Street retail, as we've been talking about, should be, seems to be throwing off at least twice that level of growth. So if it was 200 basis points for that supermarket-anchored, it could be 400 basis points on a stabilized basis for the street retail. So we're getting similar going-in yield on a stabilized asset, similar going-in yields with twice the growth for street retail. That feels pretty compelling to us. Now add to it that we're talking about value-add, recapitalizations, a variety of other transactions that may or may not conform to simple going-in yield-plus growth, but that twice the growth for the same price feels pretty darn compelling, should produce higher IRRs. Whether they are low teens or high teens, the devils in the details, and I won't get into that yet today. As we start getting deals done, we'll give you much better visibility around that.

Okay. And then if I can -- I'm guessing I'm the last one. What's your opinion about digitally native retailers. This was a growing category a few years ago, and now some of them are showing weakness. We have the likes of Bonobos, Outdoor Voices. And so what do you think?

Yes. So -- and let's make a distinction between -- and yes, you are the last call, so I'm going to explain this. If people want to hang up, feel free to do that, but make a distinction between DTC, direct-to-consumer, and digitally native because for a while, we were blending those 2 terms. DTC is alive and well. Direct-to-consumer is what luxury retailers are doing. It's what athleisure retailers are doing is they want to control their space and have a direct connection in an omnichannel world, whether it is online or through the stores, whether it is using social media or their flagship locations to drive that relationship. DTC is alive and well. Digitally native was a transition that a bunch of retailers during the retail Armageddon started online and wanted to transition to stores because they needed the store. It was the only pathway to profitability. Some have made it to the other side successfully and will continue to thrive in an omnichannel world and then others you've mentioned may not. And that's fine because some of them have been very exciting. They're great for streets and they'll do just fine. Others, as A.J. has mentioned, are part of our pry-loose strategy. We have 2 Bonobos or maybe 3, and all of them are well below market. So if they don't make it, we'll make money. But the final point is, when I talk to my private equity and venture friends, if they're considering backing a digitally native, the only way they're going to do it is if they have a real estate strategy because that is the pathway to profitability. So there'll be shakeout. It will not have a material impact to our earnings other than if we can pry-loose. And it is the natural evolution of retailing.

I would now like to turn the conference back to Ken Gottfried (sic) [ Ken Bernstein ] for closing remarks. Sir?

The perfect combination of John and Ken. Thank you all for taking the time. We look forward to speaking to you soon.

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