Curbline Properties Corp. Q3 FY2025 earnings call

• David Lukes noted the company's 1-year anniversary as a public company focused on acquiring top-tier convenience retail assets, with $850 million in assets acquired, nearly 400,000 sq ft of new leases/renewals, and capital expenditures averaging 6% of NOI.
• Conor Fennerty discussed third quarter earnings ahead of budget due to higher-than-forecast NOI, record leasing volume, a lease rate of 96.7%, same-property NOI growth, and updated 2025 guidance including raising OFFO to $1.04-$1.05 per share, with $750 million expected in full-year investments and balance sheet updates including debt raised and cash on hand.

Third quarter results were ahead of budget with NOI up 17% sequentially, driven by organic growth and acquisitions. Leasing volume hit record levels, with a lease rate of 96.7%, a 60 basis point increase sequentially. Same-property NOI was up 3.7% year-to-date and 2.6% for the third quarter despite a 40 basis point headwind from uncollectible revenue. Third quarter CapEx was just under 7% of NOI, and year-to-date CapEx was just over 6% of NOI.

• Raised 2025 OFFO guidance to a range of $1.04 to $1.05 per share, driven by better operations and acquisitions.
• Expect approximately $750 million of full-year investments, a 3.75% return on cash, and G&A of roughly $31 million.
• Same-property NOI is forecast to grow at approximately 3.25% midpoint in 2025, with considerations around the growing property pool and uncollectible revenue headwinds.

• Forward-looking statements are subject to risks and uncertainties where actual results may differ materially.
• Competition in the convenience retail asset acquisition space, and sensitivity of levered buyers to changes in interest rates.

Q: Nicholas Joseph asked about equity considerations given the balance sheet position and stock trading relative to NAV and acquisition cap rates.

A: Conor Fennerty stated they have an ATM and share buyback in place, looking at source and use of capital for accretive uses.

Q: Todd Thomas inquired about acquisition activity pipeline into 2026 and pace of acquisitions.

A: David Lukes said inventory underwriting is increasing, with $750 million expected in 2025 with potential upside, and visibility on deals growing.

Q: Ronald Kamdem asked about cap rate ranges and potential cap rate compression.

A: David Lukes said cap rates can range from low 5s to high 6s depending on asset fundamentals, and Conor Fennerty noted it's macro-dependent on rates.

Q: Alexander Goldfarb asked about opportunities with credit or vacancy issues in convenience centers and focus on FFO growth.

A: David Lukes said they focus on raising rents at renewals, not aggressive retrofitting, and Conor Fennerty emphasized FFO growth driven by external growth and scaling expense load.

Q: Floris Van Dijkum asked about leasing options and rationale behind larger acquisitions.

A: David Lukes and Conor Fennerty discussed lease options being consistent with industry, and larger acquisitions due to zoning and supply constraints in high-density markets.

Q: Mike Mueller asked about institutional competition and sensitivity to interest rates.

A: David Lukes said competition exists, but they focus on top-quartile quality assets, and competition is impacted by interest rates with them being less reliant on debt.