Greetings, and welcome to the Brixmor third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Stacy Slater.
Thank you, operator, and thank you all for joining Brixmor's third quarter conference call. With me on the call today are Jim Taylor, Chief Executive Officer and President, and Angela Aman, Executive Vice President and Chief Financial Officer, as well as Mark Horgan, Executive Vice President and Chief Investment Officer, and Brian Finnegan, Executive Vice President, Chief Revenue Officer, who will be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures.
Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the investor relations portion of our website. Given the number of participants on the call, we kindly ask that you limit your questions to one or two per person. If you have additional questions regarding the quarter, please re-queue. At this time, it's my pleasure to introduce Jim Taylor.
Thanks, Stacy, and good morning, everyone. Once again, Brixmor continued to deliver as a value add leader in the shopping center space with strong leasing volumes at attractive spreads, highly accretive reinvestment deliveries, growing cash flows, improving traffic, and a strong leasing and reinvestment pipeline that set us up for continued growth and outperformance for several quarters to come. When you step back and consider how we've outperformed before, during, and now emerging from the pandemic, the key value-added drivers are evident.
First, the proven tenant demand for our well-located centers from growing retailers such as Target, Marshalls, Homesense, Burlington, Ross, Ulta, and Five Below, specialty grocers such as Whole Foods, Sprouts, and Aldi, fast casual restaurants such as Chipotle, CAVA, Chopt, and Starbucks, and many other national, regional, and local tenants across our core categories, as well as exciting new concepts that seek the proximity to their customer our centers offer. Speaking of grocer demand, when you factor in the grocery leases in our pipeline, the overall grocery percentage within our portfolio climbs to nearly 80%. Second, our very attractive rent basis, which is reflected in our consistently high leasing spreads. In fact, our in-place average base rent has increased in each of the last 21 quarters since this team has joined, a track record of which we are very proud.
Importantly, as I will discuss later, we have many more years of below-market lease expirations to harvest. Third, our sector-leading leasing and operating platform that continues to capture leading market share of new store openings while delivering attractive margins. Fourth, the highly accretive reinvestment deliveries that act as a flywheel for our growth, continually improving our centers and driving follow-on leasing. Importantly, we've now impacted over 150 of our centers, delivering over $600 million of investment at an average incremental return of 11%. Through our performance, we've demonstrated a unique ability to capitalize on disruption, grow beyond pre-pandemic levels, and create real value for our shareholders. That momentum continues.
As always, it begins with leasing, where this quarter we signed 332 new and renewal leases comprising 1.7 million sq ft, including over 700,000 sq ft of new leases at a cash spread of over 26%. These leasing volumes spreads and importantly delivered new ABR rival those realized at the peak of 2019, and again underscore not only the strong tenant demand to be in our well-located centers, but importantly the continued improvements we've made to them. Overall lease occupancy increased 30 basis points year-over-year. I'm particularly pleased by the acceleration in small shop leasing, where occupancy grew 140 basis points year-over-year to 85.7%.
As we've highlighted on previous calls, the upside in small shop occupancy is an additional growth lever for us as we deliver our reinvestments in anchor repositions. It's a growth lever where I believe we have several hundred basis points of continued occupancy upside, not to mention significant upside in small shop rates. Our anchor re-rent upside complements that small shop growth, where this quarter we achieved cash spreads on new deals of over 34%. When you compare what anchors we have expiring over the next few years without options, which average a rent of $8.99 a foot versus our average new anchor rent achieved over the last 12 months in the $12-$13 range, we are confident in our ability to continue to drive growth in anchor rents.
During the quarter, we also capitalized on strong tenant demand to drive great intrinsic lease terms with options in only 51% of our leases and 92% of our leases containing embedded rent growth well over 2%. Further, we remain disciplined with leasing and tenant-specific capital, achieving average net effective rents of $15.26 a foot, well above our historical averages. We also delivered another $52 million of reinvestment in the quarter at an average incremental return of 10%, creating over $34 million of incremental value. As we've observed before, to create the same amount of value in ground-up development, we would have had to deliver over $200 million or four times the investment at much higher risk.
Our value creation engine continues to deliver impressively, and I'm very encouraged by the follow-on leasing momentum these investments are driving, not to mention the cap rate compression they realize. We are excited as we look forward to 2022 and beyond. The trifecta of our signed but not commenced ABR of $44 million, our forward leasing pipeline, which is comprised of $51 million of ABR, and our in-process reinvestment pipeline, which includes $400 million of projects and an incremental 9% return, provides tremendous visibility on future growth and continued improvement in value. From an operations standpoint, we continue to embrace sustainability as a primary objective through solar power generation, LED lighting, low water landscaping, and other practices that are not only environmentally responsible, they help us achieve some of the best operating margins in the sector.
I'm also pleased to report that GRESB has once again recognized our efforts with the Green Star rating and ranked us first in our peer group in their public disclosure score. From an external growth standpoint, we've announced the acquisition of a publicly anchored center with shop lease up and mark-to-market opportunities in the high-growth coastal market of Pawleys Island, as well as an additional $250 million-$300 million of grocery-anchored acquisitions under LOI or contract. Importantly, each of these are opportunities in our existing markets that allow us to leverage our value-added platform to drive growth and compelling returns even in a compressing cap rate environment. Mark will provide some additional color on our pipeline as well as the overall investment market during Q&A. Suffice it to say, I'm very encouraged by our momentum here.
In just a minute, Angela will provide detailed color on our results, our improved guidance and expectations, the timing of our signed but not commenced pipeline, as well as our strong balance sheet and liquidity. As you would expect, we are pleased with our continued performance as well as our visibility on forward growth. Simply put, the Brixmor value-added business plan continues to deliver. In recognition of that, our board voted to increase our quarterly dividend to $0.24, an increase of 12% to reflect our growth, meet our minimum taxable income distribution requirements, and as always, position us for growth in the future. With that, I'll turn the call over to Angela.
Great. Thanks, Jim, and good morning. As Jim highlighted, the breadth and depth of the recovery continue to be evident in our financial and operational results with continued growth in billed and leased occupancy, accelerating leasing spreads, and ongoing improvement in rent collections. NAREIT FFO was $0.39 per share in the third quarter, which reflected a loss on debt extinguishment of $0.09 per share related to the previously announced redemption of our 2023 unsecured notes. Same property NOI growth was 14.5%, driven most significantly by revenues deemed uncollectible. During the third quarter, we collected over $10 million of previously reserved base rent and expense reimbursement income, outpacing the reserve required for current period billings, which has continued to fall as collections from our cash-basis tenants have continued to improve.
Base rent, ancillary and other revenues, and percentage rent were also positive contributors to same-property NOI growth this quarter. Despite a year-over-year decline in weighted average billed occupancy, base rent became a positive contributor for the first time since the beginning of the pandemic due to the impact of lease modification and abatement agreements recognized in the prior period, as well as contractual rent increases and consistently positive leasing spreads over the last year. Net expense reimbursements were a detractor from growth this quarter and were impacted by the year-over-year decline in weighted average billed occupancy and an increase in operating costs as service levels have normalized across the portfolio. We continued to experience positive momentum in occupancy this quarter with sequential improvements in both billed and leased occupancy rates. Billed occupancy was up 10 basis points sequentially, while leased occupancy was up 40 basis points.
It's worth noting that our small shop lease rate increased 90 basis points sequentially to 85.7%, which is 60 basis points ahead of our pre-COVID level. The spread between signed and commenced occupancy expanded from 300 basis points last quarter to 330 basis points this quarter. Based on the strength of the current leasing environment, and as Jim highlighted, the size of our forward leasing pipeline, we expect this spread to stay wide for some time, even as billed occupancy continues to move higher.
As a result of the occupancy upside embedded in the portfolio and on the back of significant value-enhancing reinvestment activity over the last five years, the best possible forward indicator for Brixmor is not a narrowing of the spread between billed and leased occupancy, but rather a consistently wide spread between these two metrics as newly executed leases commence, billed occupancy grows, and the signed but not commenced pool is replenished by additional incremental leasing activity. In terms of total dollars, the signed but not commenced pool, which includes the 330 basis point spread between the billed and leased rate and 20 basis points of new leases signed to replace tenants currently in occupancy, represents $43.5 million of base rent, or approximately 5% of our annualized third quarter billed base rent.
From a timing perspective, 70% of this rent is expected to come online by mid-2022. During the third quarter, we began the process of moving certain cash-basis tenants back to accrual basis. The impact of straight-line rental income from the 31 tenants that were transitioned during the quarter was approximately $800,000, which was offset by approximately $600,000 of straight-line rental income reversals during the period. At this time, tenants representing approximately 14% of our total ABR are accounted for on a cash basis, and the collection trends from these tenants continue to improve, with cash collections of third quarter billed rent exceeding 85% as of October 26, which represents a 600 basis point improvement from the second quarter collections rate at the time of our last call.
We will continue to work closely with tenants to address outstanding balances and, where appropriate, aggressively pursue our rights under the leases. We have updated our 2021 FFO expectations to a range of $1.72-$1.75 per share. Importantly, while the revised guidance is within the range of our prior FFO guidance, we have now absorbed the $0.09 per share of loss on debt extinguishment recognized this quarter that was not included in prior guidance. Adjusted for the loss on debt extinguishment, the midpoint of our range is effectively up $0.095 per share, due primarily to an improvement in our same property NOI growth expectations, with our full year guidance now 7.5%-8.5%, up from 4.5%-6% last quarter.
The improvement in our same property NOI guidance is attributable to cash collected during the third quarter related to amounts previously reserved, the realized improvement in collection rates from our cash basis tenants, and improved expectations related to net expense reimbursements, ancillary and other income, and percentage rents. Consistent with our prior methodology, the low end of our range assumes no additional recoveries of previously reserved amounts and no additional improvement in cash basis collections. In addition, I would underscore that our revised guidance range does not contemplate the conversion of any tenants to or from cash basis accounting during the remainder of the year, which could result in significant volatility in GAAP straight-line rental income. As always, our guidance range does contemplate additional expected transaction activity, but does not contemplate any items that may impact FFO comparability in future periods.
Turning to the balance sheet, at quarter end, we had $1.7 billion of total liquidity, representing our undrawn $1.25 billion revolving credit facility and over $400 million of cash on hand. We have no debt maturities in 2021 or 2023, and only $250 million of maturities in 2022. Debt to EBITDA on a current quarter annualized basis is now at 6.2x, slightly below our pre-pandemic level. Our balance sheet and liquidity will continue to support our ongoing portfolio transformation efforts through our accretive value enhancing reinvestment pipeline and a variety of external growth initiatives that will allow us to further leverage the strength of our platform to create value for all stakeholders. With that, I'll turn the call over to the operator for Q&A.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A Confirmation tone will indicate your line, the question queue. You may press star two. If you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up yours hands up before pressing the star keys. Your first question comes from Todd Thomas with KeyBank.
Hi. Thanks. Good morning. First question, I wanted to ask about the company's stance on investments from here, Jim. You know, whether we should expect the company to shift toward being a net investor as you work through the pipeline that you discussed as being in negotiation, and can you just talk a little bit about your appetite overall here?
You know, we are finding, despite an overall compressing cap rate environment, some very attractive opportunities, as I mentioned, Todd, for us to leverage our portfolio, our relationships with tenants, our access to data, our understanding of their store opening and closing plans to find opportunities within our market where we have lease up, mark-to-market, additional density, and we can drive appropriate and, I think, compelling returns, even against a backdrop of compressing cap rates. You know, stay tuned. We've kind of given you an idea of the number of opportunities that we have. They're all within our markets. You know, we expect to continue finding opportunities like that in this environment.
Okay. How should we, you know, think about, you know, pairing dispositions against, you know, acquisition activity here? I guess I'm a little unclear whether there's a desire to, you know, sort of lean into investments a little bit more at this point in the cycle. You've previously talked about investment activity being generally balanced. Just curious if there's a change at all there in the strategy.
You know, we are sitting on a significant amount of cash, but we do expect over the long- term to be balanced and capitalize on opportunities similarly in this environment to harvest assets where we see limited upside. Importantly, you know, we're finding from an external growth perspective, some pretty compelling assets within our markets that, you know, allow us to actually, you know, build more core for the value-added business.
Okay. That's helpful. Angela, I think you said 70% of the signed not occupied pipeline is expected to come online by mid-2022. Is that right? How much of that is incremental, you know, net of move-outs and what's not in the current run rate?
Yeah. No, the 70% number is right, and it's pretty ratable across the next three quarters in terms of what will come online, the timing of when that will come online. As we disclose in the sup, the vast majority of the signed but not commenced pool is incremental to tenants currently in occupancy. So the $43.5 million represents about 350 basis points of our total GLA. 330 of that is truly incremental to tenants that are in occupancy today. In terms of who might move out, you know, over the next three quarters and offset some of that growth, I would just point to the fact that move-outs have been at historically low levels this year.
You know, we're watching closely as we get into the fourth quarter of this year and first quarter of next year, but we feel good about that trend continuing here in the near to medium term.
Okay. All right. Thank you.
You bet. Thanks, Todd.
Next question, Katy McConnell with Citi.
Great. Thank you. Can you discuss your pricing expectations for the acquisition pipeline? What are you assuming in terms of closing timing within the revised 2021 guidance range versus what could potentially spill into next year?
You know, I'm gonna let Angela cover the guidance elements of the question. You know, from a pricing standpoint, we are seeing cap rates in the 5% range for assets that we think fit with our strategy. I think what's important to understand, Katy, is that with those, we see vacancy, we see significant upside in rents, we see opportunity to reposition, densify these assets consistent with the acquisition actually that we announced earlier in the year, Bonita Springs, down in Florida. Again, these are assets that are in markets we're currently operating in. We believe we have particularly good insight in terms of where market rent is and how we'll perform. That's kind of an overview of the pricing. In terms of the timing, Angela.
Yeah. I would just say, you know, we never comment too specifically on timing from an acquisition or disposition perspective, but the $250 million-$300 million that, you know, was mentioned in the earnings release, and Jim mentioned in his comments, we've already closed $25 million, you know, in the fourth quarter of the Pawleys Island acquisition. That $250 million-$300 million is incremental. I would expect some additional portion to close here in the fourth quarter, but really many of those acquisitions to close as we get into Q1.
Got it. Okay. Can you just discuss how you determine when to convert cash basis tenants back to accrual method? I'm realizing it was a small amount this quarter, but how should we think about the balance of the $37 million that was converted to cash basis throughout the pandemic? Of that, how much is still online and operating at this point?
Sure. Thanks for that question, Katy. I'd say a few things, I guess. As it relates, you know, specifically to the conversion of tenants back to accrual basis. We went through. You know, we've always handled sort of the cash versus accrual decisions on a lease-by-lease and tenant-by-tenant basis across the portfolio, and that's the process we went through again in the third quarter of this year. The tenants we're moving back at this point are not only tenants that have no outstanding AR balances, no deferral balances outstanding, but also have been paying timely really throughout the course of 2021. We do think, you know, as we continue to get longer payment history and see more tenants really, you know, kind of find their footing, you know, after the pandemic, that you will see additional tenants moved back.
That 14% of our total ABR that's on a cash basis is obviously, you know, a historically wide number given what the portfolio has been through over the last year, 18 months. I do think you'll see additional tenants move back to accrual basis as it's appropriate. In terms of the total amount of straight-line income reversals we've had to date, it has been about $37 million. I would just say, you know, it's important to remember that there are tenants included in those straight-line rental income reversals that have left the portfolio. There were 2020 bankruptcy activity and other move-outs that have happened over the course of the last 18 months. The total amount available to bring back online is gonna be a smaller number than that $37 million.
As we bring tenants back, sort of what's happened to individual straight-line balances over the course of the last 18 months will create some volatility in that number as well. It's really very difficult at this point to give any more finite guidance. As I mentioned, you know, in my prepared remarks, and I think it's laid out explicitly in the earnings release as well, we have not, from a guidance standpoint, throughout the course of this year, but I would assume as we get into 2022 as well, assumed in guidance any conversion to or from cash basis accounting, given the potential volatility there.
Okay, great. Thank you.
Thank you, Katy.
Next question, Jeff Spector with Bank of America.
Great, good morning, and congrats on the quarter.
Thanks, Jeff.
I guess if I could. Thanks, Jim. If I could start with the macro maybe first. Just given this earnings season, supply chain issue questions, margin questions are dominating earnings calls. I guess, Jim, can you just discuss those risks and, you know, how Brixmor is positioned versus those risks in the market today?
Jeff, it's a great question. When you consider what we have in the pipeline today, that $400 million, that's largely purchased through GMAC contracts. We have a pretty good handle on the cost, and we're pretty far along in that. Perhaps you see a couple of projects shift a quarter or two either way from a timing perspective, but we don't really expect much significantly there. It's certainly an issue as we look forward and beyond that, and it's something that we're working with our tenants on. We're seeing our tenants increasingly accept existing facades, existing HVAC equipment, really in their push and desire to get their stores open, in this environment. It's something that we're watching carefully. We know our tenants are all over it.
We're, you know, hopeful that, you know, through the course of 2022, you begin seeing some of that resolve.
Thank you. The second question, I just was curious, on the 332 new and renewal leases, I think you said they rivaled or maybe exceeded the peak of 2019. Are there any key differences that you would wanna highlight between, I guess, the leases done in 2019 versus today? Are they similar in terms of, you know, the tenants, the categories, etc ?
Well, I think the biggest thing is more rent. You know, we continue to drive ABR per foot, and we're real proud of that. I'd say that there's a greater breadth of tenants that we're doing business with now. Also, we're really pleased with the demand that we're seeing from grocer-type uses because we think that adds a lot of incremental value and traffic draw to the centers. Brian?
Yeah. What's been particularly encouraging is just the demand from both our core tenants, those that Jim mentioned in his opening remarks in the value apparel, specialty grocery, home, general merchandise categories. Then the new tenants that we're seeing to the portfolio because of all the things that we're doing in terms of reinvestment, in terms of better operations. We're just bringing a better class of tenants to our portfolio, and they're able to pay higher rents. Just on those higher rents, and the rents we're signing in new leases are 14% higher than they were on average over the past three years. We're continuing to see better tenants come to our centers and pay higher rents. We've been really encouraged across the board.
Thank you.
Thanks, Jeff.
Next question, Derek Johnston with Deutsche Bank. Please go ahead.
Hi, everyone. Thank you. Just sticking on the redevelopment pipeline, you know, certainly a good use of cash with a 10% yield on the projects completed this quarter and 9% overall. How are you able to continue to achieve these yields, you know, in the labor and supply-constrained environment? You know, even value add rates seem to be grappling with costs and yield compression a little more than Brixmor. What's the secret sauce here, guys?
You know, perhaps the biggest thing is an attractive rent basis. You know, we've talked about it since we've joined, that we have really well-located older shopping centers, you know, with, as I mentioned in my remarks, an average expiring rent over the next couple of years of under $9 a foot. So that gives you a lot of room, if you will, to absorb the inevitable, you know, rise in costs and other challenges that are just part of the business. You know, the other thing I would say that I think is particularly attractive about our value-added strategy is that it's a pretty granular execution. In other words, we're not making massive bets in any one location. You know, as I mentioned before, we've deployed over the last five years about $600 million of capital.
I think the average project size was about $4 million-$5 million. We had some that were a couple of million, some that were $10 million-$20 million. You know, that helps us, if you will, diversify our risks with respect to any one situation or any particular issue that we might run across with a jurisdiction or with a contractor or with an unforeseen condition, or today with rising costs. I'd say the biggest driver and differentiator for us is just where we start, and that is that attractive rent basis, where you're able to generate those returns in the high single and low double digits.
No, that's very insightful. Thanks. Just looking at the $4.4 million of recaptured uncollectible rents. You know, first off, it seems like $33 million-ish may still remain uncollected. Please correct me if I'm wrong with that number. Is there any guidance or thoughts about further recoveries going forward? Or should we just really, you know, start sunsetting this in our minds and looking to the future? Thanks.
Yeah. I'll take that in a few parts. The $4.4 million you referenced, I think, is the total revenues deemed uncollectible that was recognized on the P&L. That was comprised of actually $10.5 million of out-of-period cash collections, both base rent and net expense reimbursements. There's some disclosure on page 11 of the sup that I think helps you see that number. Then the offset to that $10.5 million, which was about $7.1 million of reserves we took related to primarily third quarter billed base rent and expense reimbursement. That's sort of the magnitude in terms of what happened during the quarter.
In terms of what's out there and remaining to potentially be recognized from an income statement impact, I'd point you to page 12 of our supplemental package, which really lays out everything we've accrued but uncollected over the last 18 months, so the entire pandemic period, which is about $50.5 million. Of that amount, $46 million has been reserved for. It's really that $46 million that would theoretically have the potential to have an income statement impact if it were collected. I would caution you a little bit in terms of thinking that that $46 million is high likelihood to be collected. There are amounts in that $46 million that do relate to tenants that were 2020 bankruptcies or have otherwise left the portfolio.
Probably somewhere between, you know, 65%-75% of that amount relates to tenants that are still in the portfolio, and where, as I mentioned in my prepared remarks, we're working very hard to address and collect those outstanding balances, as tenants, you know, are reopening and operating at more normalized levels and, are doing well for the most part across the portfolio.
Great. Thank you, Angela.
Thank you.
Next question, Juan Sanabria with BMO Capital Markets.
Hi, good morning. Just a question, Angela, on the balance sheet. You referenced that leverage is now below where you were.
Pre-COVID, so if you could just remind us or refresh us on where you're targeting leverage from here and how we should think about funding for the acquisitions? You highlighted the $250 million-$300 million that are in the works.
Sure. Yeah. We're at, as you mentioned, 6.2x on a current quarter annualized basis. Feel good about that level sort of staying in and around that range, even as some of the out-of-period amounts moderate from here. We continue, I think, to improve what the reserve on current quarter billings look like. Feel really good that that's a pretty sustainable level with potentially some volatility quarter to quarter. We've always said our long-term target from a leverage standpoint is about 6x, and we feel like that's the right leverage for this portfolio, particularly given the significant rent mark-to-market across the portfolio. On a look-through basis, even if you just capture what's in the signed but not commenced pool, you know, you're probably a third to a half of a turn inside of that.
We really feel 6x today on a spot basis is kind of the right level. We're very close to that level now. In terms of, you know, funding for the acquisitions, obviously, we generate a significant amount of free cash flow, which is used for a combination of the reinvestment pipeline and other external growth initiatives. We will continue to take advantage of what we think is a very strong market from a disposition standpoint, that has only gotten better, I would say, over the last 12-18 months. Look at really, you know, all potential sources of capital as we identify opportunities that we think are really good fits for our portfolio and allow us, as Jim mentioned earlier, to continue to build that value-enhancing pipeline over time.
Great. Just one quick follow-up. The acquisitions you talked about, that kind of 5%+ yield, I believe, is that the going-in yield that you guys are kind of targeting, or is that more of a stabilized number once you capture the mark-to-market opportunities and/or densification?
It's a great question. That is the going in NOI yield in that kind of low- to mid-5% range that we expect to realize year one of ownership. Then as we continue to execute, whether it's lease up, mark to market or value-added reinvestments, you know, expect to drive those yields a few hundred basis points higher.
Thank you.
You bet.
Next question, Michael Mueller with JP Morgan.
Yeah. Hi. Quick question. If you look at the anchor repositionings and the redevelop assets that you've taken care of to date, how much of the overall opportunity do you think's been addressed in the current portfolio? Just thinking about a go-forward pace of capital deployment.
We believe we have over $1 billion of investment behind what we have underway. Importantly, Mike, we continue to fill that shadow pipeline. We sort of highlight some of those projects in the supplement, but we're really encouraged by, you know, what we have rolling. You know, you've got these pesky things called leases that control your timing. What we have rolling, those expirations, I mean, today we've impacted about 150 of our centers. You know, I would expect over time to impact a similar number, if not more, as we continue to execute the anchor repos, the addition of outparcels, the full-scale redevelopments.
You know, what's exciting for us, and I hope it's coming across in our results, is how that activity is not only driving great return on the capital being committed, but it's driving follow-on leasing and occupancy. It's driving better rents. Brian mentioned the increase in just the absolute new rent realized across the last couple of quarters. So we're really encouraged with how this strategy is setting us up for several quarters to come.
Got it. Just thinking about the small shop leasing and the traction there. Can you talk a little bit about what the mix of tenants you're seeing, broad-based, you know, food heavy, local, national, just kind of any color in terms of what's standing out there?
Yeah, Mike, hey, this is Brian. As we mentioned, we've been incredibly encouraged by the small shop activity, and they are in many of those categories with strong casual dining operators like Chipotle and Chopt and Cava that Jim mentioned in his opening remarks. Financial institutions, we're looking at smaller general merchandise operators like the pOpshelf that we added to the portfolio earlier this year or Five Below. The depth of demand remains incredibly strong from a small shop perspective. We still think there's a tremendous runway for growth there. What's also, we have been talking a lot about small shops, but the anchor pipeline is accelerating as well. Our anchor pipeline's as strong as it's been since 2Q of 2020 when we had a backlog of anchor deals at the start of the pandemic. We mentioned a number of those categories as well.
As we get more of those anchor deals signed, as we bring more of those anchors online, we expect to continue to add stronger small shop operators at higher rents.
Yeah. I would say what's encouraging, Mike, is the complexion of what we're seeing in the small shop. It's the national tenants that Brian highlighted, but also regional and local tenants with good credit, experienced operators that are bringing, you know, really relevant uses and services to the centers.
Got it. Okay. That was it. Thank you.
You bet.
Next question, Greg McGinniss with Scotiabank. Please go ahead.
Hey, good morning.
Hey.
In trying to kind of understand what appears to be somewhat solid rent collection improvement at that 97%.
Does that reflect full collections relative to pre-pandemic norms? I mean, what's, you know, in terms of what's not paying, who's left that's unable to pay rent because of pandemic issues versus maybe not being a great fit for the portfolio longer- term?
Yeah. One of the things, as Angela highlighted in her remarks, that I would highlight for you is that the rate of increase in collections is moderating as we get closer and closer to 100%. But you are seeing our cash collections continue to improve quarter-over-quarter. You know, the last bit, you know, we're very focused on, as Angela highlighted in her remarks, you know, one of the strategies that we took that I think actually drove our outperformance in collections overall was a focus on getting tenants open, healthy, operating again. Remember also that we're dealing across a number of jurisdictions, some of which have limited our ability to legally enforce the obligations under the leases.
We're now in that last 2%-3% that's, you know, either tenant categories that have been really disproportionately impacted, think entertainment, some restaurants, and others that we're working through at this point. You know, we're very pleased with the trend we're seeing, particularly in the cash collection.
Yeah. I don't have a lot to add. I think Jim hit it on the head. I do think we're probably, if you think about our historical revenue deemed uncollectible number, it was, you know, under 100 basis points, somewhere between 75 and 100 basis points. So we are still probably, you know, give or take, 200 basis points wide of a normalized level in the portfolio. I do think, to Jim's point, what's really interesting here is how concentrated that revenue deemed uncollectible number or the collection shortfall is in those categories that were disproportionately impacted by the pandemic, namely restaurants, entertainment, fitness to some degree, and then other personal services, so kind of salons. Those are the tenants we continue to work most closely with.
Outside of that, really across the board, I would say probably the collections picture for the rest of the tenancy is better than it is in a normalized environment. It is a more concentrated, you know, issue we're dealing with today and just continuing to try to work closely to understand what's happening in specific tenants' businesses and what kind of support they'll need to get fully back on their feet.
Where we can't, we're not concerned about our ability to backfill the space, which I think is critical given the broader tenant health that Angela referred to.
Yep.
Angela, just to clarify a point you made earlier on the outstanding rent balance category, I mean, that's 65%-75% corresponding to tenants that are still in the portfolio.
Mm-hmm.
Are those tenants also current on rent or, in terms of like, you know, the October rent, and just haven't paid back rent? Or what's the percentage there?
Yeah, I mean, there's certainly some tenants that are active in the portfolio. Just get back to that point about the fact that overall collections are at 97%. There's clearly some amount in that 65%-75% of active tenants in the portfolio number that are scoped into that $46 million of reserve on the total amount accrued but uncollected over the last year. But many of them are active and in good standing across the portfolio, and we just continue to work through some of those outstanding balances, oftentimes from the kind of peak pandemic impacted periods.
Okay, thank you.
Thank you.
Next question, Ki Bin Kim with Truist.
Thanks. Good morning.
Good morning.
Good morning. I want to go back to the acquisition questions. How should we think about this bigger picture? Should we expect much financial accretion from this acquisition activity? Do we, you know, fast-forward a year from now? Are you selling assets to balance that out where, you know, there's upside, but it doesn't come for a couple of years?
You know, we think even in this environment that we can generate some accretion as we begin to grow externally, both as we deploy the cash on our balance sheet, but also as we fund that with free cash flow, dispositions, etc . You know, we like how we're positioned. You know, again, Ki Bin Kim, you know, what's striking is the cap rate environment has compressed pretty dramatically.
What we've always focused on, and I think is even more important now, are finding those assets where you've got well below market rents, for example, in the boxes as we saw in Bonita Springs, lease up opportunity in the small shop, mark to market, and really leveraging the national and regional platforms that we have to understand and underwrite what the tenant demand is to be in that center, as well as our redevelopment expertise to figure out how we can reposition and drive a value-added return. That's really been our focus. It's exciting that we're seeing some opportunities now. I think as we've emerged from the pandemic, there's a lot more coming on the market. Mark, I don't know if you have any other thoughts.
Well, one thing I would say is, you know, as we've talked about in the past, we have a target asset list. That's how we're able to look at deals that make sense for us and chase them in today's environment because we see those. We've seen the opportunities in some of these assets for a long time. We like that. You know, and if you think about today's market, you know, keep in mind, as Angela mentioned, we've got $1.7 billion in liquidity. So when we go to a seller and we position ourself as someone who can close quickly, not use financing, that's a real benefit from people who are selling to us. We think that's an advantage for us as we move into this part of the cycle when we're looking at external growth.
Got it. When you look at your lease expirations, I mean, so far you've been able to do a pretty good job on renewals and options, getting 7%-8% positive lease spreads. When you look forward, is that sustainable, or is there a mix change or vintage change that might change that number going forward?
Ki Bin Kim , hey, this is Brian. We've been encouraged by what we're seeing in terms of accelerating both renewal and new lease rent growth. You know, looking out, we've had anchor rents expiring over the next 2.5 years and under $9 a foot. We're signing those today over $12. So you've got close to a 40% spread there just in those anchor expirations. You may see some fluctuation in a given quarter. Again, the investments that we're making in our properties, the better operations, we continue to attract better tenants to our centers, and we're creating competition for space. Also there's not a lot getting built. Our centers are getting better, our tenants are performing better, so we're able to drive those increases in renewals.
Like I said, there may be some fluctuation here quarter- to- quarter, but we expect the trajectory to continue to be strong.
Yeah. One thing to highlight there, Ki Bin Kim , that Brian touched on, is that we are seeing a real nice increase in the rents we're realizing. I think it's as a result of this strategy that we've executed, where we really are improving these centers and we're able to drive higher rent.
Okay, great. Thank you.
You bet.
Next question, Anthony Powell with Barclays. Please go ahead.
Hi, good morning. A question on the acquisitions. Is there any particular geographic skew to the deals, or are they pretty widely spread across your portfolio?
Mark?
Yeah. It really mirrors our existing portfolio.
Existing markets like the Carolinas, Florida through the southeast, obviously northeast, upper Midwest, Texas and California.
Got it. Thanks. I think people have asked this a few different ways, but, you know, you've sold a lot of assets for the past few years and cleaned up the portfolio. Going forward, are you growing your portfolio size, as you do more deals? Do you expect to expand from the 386 to a higher number going forward?
I do expect us to accrete the relative size of the portfolio in time. You know, we are capitalizing on this liquidity environment to opportunistically dispose of some assets that we've fixed and where we think we've realized value. We'll remain disciplined as always on that hold IRR decision. As you also highlighted, we've sold over $2 billion over the last 4-5 years, harvesting assets that we deem non-core and exiting a number of single asset markets. Much of that work is behind us. As we look forward, we're able to be much more opportunistic. I like the position we're in from that standpoint, and certainly I'm encouraged again by the investment market and those dynamics that we're seeing.
Got it. Maybe one more. You talked about the lease to build spread maybe expanding as you continue to backfill with new leases, but is there a maximum to that? You know, when do you expect to start to see that close, either in terms of a maximum, I guess, percent leased or just a time period when you start to expect to see that number, I guess, compress?
Yeah. I mean, the comments I made in my prepared remarks were really meant to address just that. I think it's a really good question. For us, given where occupancy sits today and the embedded opportunity in the portfolio from that standpoint, it's really for us, less about the spread narrowing, but about both the build and the leased occupancy numbers continuing to move higher until we get to effectively full occupancy, where some other portfolios in the space really are today from a lease standpoint. I just think there's a lot of opportunity here, particularly as it relates to the small shop occupancy number, to continue to move the build number higher and then continue to backfill that signed but not commenced pipeline.
Keep the spread wide, but really be commencing leases throughout that time period and generating growth now and building the foundation for future growth as well.
Okay. Full occupancy could be, is it 95% leased, 96%? I'm just curious, when do you think that may start to narrow in the future?
Yeah. I think given the work that's been done on this portfolio over the last five years, and as Jim was just pointing out, you know, some of the rationalization of the portfolio from a footprint standpoint, I don't see any reason why this portfolio shouldn't, you know, over the medium to longer term, operate at levels consistent with the industry at large, which would be in that kind of 95% level.
Okay. Thank you.
Thank you.
Next question, Floris van Dijkum with Compass Point.
Hey, morning, guys. Thanks for taking my question. You know, I think we've had a lot of questions, Jim, in particular on the acquisition side. I think 'cause it's slightly different than your messaging to date over the last couple of years, which is reinvesting in your portfolio, which you've done very successfully and gotten some great returns. The returns that you're estimating probably on this $300 million odd of acquisitions is, you know, call it half as attractive or half as high as your redevelopment.
I think if I'm not mistaken, your messaging is that, look, we're just using the existing cash on the balance sheet, which is sitting there earning zero and we're getting a 5% with growth, and we're gonna continue to invest, call it $150 million-$200 million a year in redevelopments and get the double digit type returns. Is that the right way to think about it?
I think that's right. I mean, remember, we also have free cash flow, and we will be making some dispositions opportunistically. Floris, to your point, if we could wave a magic wand, terminate all those below-market leases and recapture them and deliver only reinvestment, we would. You know, we're getting after that as expeditiously as we can, given just the natural lease expiration schedule. As we highlighted, that goes on for several years. We believe we have well over $1 billion behind the $400 million that we have underway today. You're right, that is some of the very best activity that you can execute.
If you just take a look at the $600 million that we've delivered over the last 4.5 years out of 10 years, you know, that's the equivalent of about $2.5 billion of ground up development. You know, we really are pleased with our performance, but we're excited about what lies ahead. It's not finite. We can walk and chew gum at the same time. You know, we've harvested a substantial number of shopping centers, and we're looking at opportunities within our markets, frankly, to build that future pipeline, right? To find centers like Bonita Springs in Florida, where we've got an expiring box that's paying us $2-$3 a foot. Even I can lease that box. Brian won't let me, but even I can find a backup tenant for that.
You know, those are the types of opportunities that we're seeing in the acquisition environment, which is kind of interesting, right? Because all cap rates aren't created equal. You know, we focus so much on that cap rate, but the real question to ask as an investor is, where's that low to mid five going over time? You know, we like what we're seeing from a mix perspective. We're not taking any great risks. These are assets that are absolutely consistent with what we own. We're not diverging from a style perspective.
You know, we're really looking at those assets and centers and markets that we know, with tenancy that we know or tenant demand that we know, where we think we can make smart risk-adjusted bets that also help us drive growth, in addition to the great reinvestment activity that we've executed and have ahead.
Just, maybe if you can touch upon, remind us how many single asset markets you still have left in the portfolio, and then maybe also, you know, of they call it $18 million of NOI that you're gonna get from your existing ongoing development pipeline, how much of that is included in the $36 million of ABR in your SNO ABR?
I'm gonna let Angela answer the second question, but in terms of, you know, single asset markets, we're in about 30-40 still, down from a little over 100. Many of those markets, though, like Ann Arbor, are gonna be markets where we think we can find some good additional opportunities to grow.
Yeah. Floris, I think your question was just how much of the signed but not commenced pool is attributable to redevelopment or value enhancing activity. Is that your question?
Yes.
I would say it's about.
Yes, exactly.
Yeah, about 30% of the signed but not commenced pool is probably related to just our larger scale redevelopment projects, something like that. That number bounces around a lot quarter- to- quarter, but it's clearly been a big driver of leasing activity, given the excitement that a lot of those projects are generating.
Great. Thanks, guys.
You bet. Thank you, Floris.
Once again, if you would like to ask a question, please press star one on your telephone keypad. I would like to turn the floor over to Stacy for closing remarks.
Thanks, everyone. We look forward to speaking with many of you at NAREIT next week.
Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.