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Text: Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.
I hope you and your families are all well.
Although the pandemic has created many challenges, we are seeing a resurgence in open-air shopping center demand as retailers gain a better understanding of the importance of a robust omnichannel distribution platform that includes well-located bricks-and-mortar retail.
Similarly, investors have taken notice and have been allocating more capital toward open-air shopping centers.
This is leading to compressing cap rates for certain retail segments in the private markets, unlocking M&A opportunities in the public markets and recently culminated in the shopping center sector's first IPO since 2013.
At RPT, we spent the last three years thinking strategically and outside the box to reinvent, advance and differentiate our company.
This exercise led to the formation of our grocery-anchored R2G joint venture and our groundbreaking net lease platform, RGMZ.
Together with our wholly owned portfolio, we have created a powerful engine that will drive our business forward and unleash opportunities across multiple retail channels, which we expect will result in strong and sustainable growth.
Within our investments platform, we have always used a rigorous underwriting methodology and acted with discipline and patience.
Investments and our buybacks must be accretive to portfolio quality, earnings and the balance sheet; and b, in our strategic markets.
With these must-haves, RPT transformed on a scale and at a speed that exceeded our own expectations, and we are excited to share the considerable accomplishments of the reinvented RPT.
During the depths of the pandemic in 2020, while we were working on RGMZ, we were also cultivating a significant investment pipeline.
We took a thoughtful and analytical approach to curate our external growth in markets like Boston, Atlanta, Tampa and Nashville that are flourishing in today's modern landscape.
While each of our acquisition markets has its own unique set of economic drivers, we believe they will all experience strong growth over the long term, which should position the portfolio well in the coming years.
Boston, for instance, is seeing a wave of demand centered around the life science industry.
And our centers have significant adjacency advantages with 186 life science companies within a 10-mile radius of the four Boston properties that will soon be part of the portfolio.
Once the remainder of our deals close and net of expected parcel sales, Boston will become our third largest market at just under 8% of ABR.
This underscores our size advantage versus peers as we can quickly reshape our portfolio, which is particularly important in today's rapidly evolving landscape.
Let me give you a few highlights on our investments in Boston that will fit in nicely with our previously acquired Wegmans-anchored Northborough Crossings property and collectively boast a robust $148,000 household income within a 3-mile radius.
Bedford Marketplace in the Boston MSA is situated in a highly affluent suburb right outside the 128 loop with a 3-mile average household income of $193,000.
This is a center where Whole Foods is doing over $1,000 per square foot and has a fresh, newly renewed 15-year lease term.
Marshalls has been here since 1973 and is also doing extremely well.
Shoppes of Canton, this has $133,000 household income within a 3-mile radius.
This is a top-volume Shaw's-anchored center, where the small shop demand is robust.
The expected NOI CAGR on this asset is about 4%.
Lastly, we are in negotiations on a true infill grocery-anchored center inside the 128 loop with above-average household incomes and population densities versus our portfolio averages with the potential for future densification opportunities, given its size and proximity to Boston.
In total, since our last call, we closed or are under contract on eight multi-tenant deals and are in advanced contract negotiations on a ninth asset with a gross value of $500 million, covering 2.6 million square feet, which will increase our AUM by over 20%.
To put this in context, this level of activity equates to almost 50% of our equity-marketed cap, which is quite remarkable.
RPT's pro rata share of all this activity and after expected parcel sales are complete will be around $285 million.
We were only able to execute at this scale because of the power of the platforms that we put together over the last 18 months.
As we discussed last quarter, Northborough is a $104 million deal we might not have pursued without RGMZ, given the large ticket size.
Our partnership with RGMZ also made Northborough a much more attractive use of capital, given the yield enhancement that we expect to generate upon the sale of certain parcels to RGMZ.
In the Southeast region, we acquired $115 million 4-property portfolio that was split between all three platforms: RPT, R2G and RGMZ.
Let me give you a breakdown of this portfolio.
Let's start with East Lake in Tampa.
This is another grocery-anchored center that was added to the R2G portfolio.
This center is anchored by a high-volume Walmart neighborhood market and over 65% essential or investment-grade tenancy.
This is a community center in the Atlanta MSA with a strong lineup of Aldi, Home Depot and Ross.
We are selling the Home Depot and LongHorn to RGMZ and RPT is left with an Aldi-anchored center at an 8.6% yield with almost 80% essential or investment-grade tenancy.
On balance sheet, we bought Woodstock Square in suburban Atlanta.
This center is shadow-anchored by one of the highest-volume Super Targets in the Atlanta MSA.
The center is in the heart of the rapidly growing Northwest Corridor of Atlanta and is adjacent to a luxury rental community owned by Greystar.
We see great mark-to-market opportunities on both the small shop and junior boxes at the center.
Woodstock has also demonstrated great stability over the years and has retained its original anchor tenants since it was developed in 2001.
Another balance sheet deal is Bellevue Place in suburban Nashville.
This center sits on incredible real estate, where we have conviction around a small redevelopment with a potential future grocery add.
To put everything we've done into context, R2G and RGMZ provided us with a lower cost of capital than we could have achieved even after the rally in our stock price since November.
This lower cost of capital, combined with the yield enhancements from fees and multi- to single-tenant arbitrage opportunities, allowed us to lock in higher economic spreads on our capital than we could have otherwise have achieved in the public markets, thereby accelerating our earnings growth and our portfolio transformation.
In summary, power of our platforms is allowing us to grow earnings and to advance our strategic objectives faster than we could do on our own.
When time permits, please take a look.
On the operational front, our second quarter results reflected RPT's reshaped portfolio and platform.
We continue to rebound from the COVID-induced downturn with another strong leasing quarter.
We signed 58 leases covering 442,000 square feet in the second quarter, which is 59% above the trailing 12-month quarterly average leasing volume we reported last quarter, highlighting the strong demand for our high-quality open-air centers.
Demand has been particularly robust from the junior anchor category and is as high as I've ever seen in my career.
Leasing highlights for the quarter was an REI deal at Town & Country in St. Louis that replaced the majority of a former Stein Mart space and a lululemon deal.
Both of these new tenants will significantly improve the vibrancy of the centers, making them more attractive for both customers and retailers alike while also improving the credit of the portfolio.
Reflective of the strength of the off-price category, we signed two new Burlington deals this quarter.
The first is at Winchester Center, where we are replacing our last Stein Mart box.
And the second is at Shoppes at Lakeland, where we are replacing an office supply tenant.
Our leasing pipeline is robust as we are in negotiations with several grocers and wholesale clubs and are eager to announce those soon.
Underpinning all of the accomplishments of the quarter is our belief that value creation lies in our ability to improve the quality, sustainability and growth of our cash flows.
Our success in replacing weaker tenants with stronger ones and our increased exposure to Boston and Atlanta speak to the improved quality and sustainability of our cash flows.
Our increased guidance and the 60% increase in our quarterly dividend reflects our accelerated growth trajectory.
Today, I'll discuss our second quarter results, provide an update on our balance sheet and end with commentary on our improving guidance expectations for the second half of this year.
Against the backdrop of an improving macro environment, second quarter operating FFO per share of $0.22 was up $0.03 from last quarter, driven by lower rent not probable collection and abatements of $0.02 and the reversal of prior period straight-line rent reserves of about $0.01 per share.
The largest driver of the decline in our bad debt was a reduction in our reserves taken for our Regal theaters.
As expected, they have been open for over two months and have resumed rent payments accordingly.
For some context, our rent not probable collection, including abatements, peaked at $5.9 million in the second quarter 2020 and have fallen quickly to the $1.1 million we reported this quarter.
We are down to just a handful of tenants for which we are still reserving and expect our bad debt will continue to be a tailwind to year-over-year growth in the second half of the year, which is in line with the expectations that we set out at the beginning of 2021.
Our fundamentals remain strong.
We continue to experience accelerating leasing demand with one million square feet signed year-to-date, which is just below the 1.2 million we completed for the entire year in 2019.
Our positive leasing momentum resulted in sequential increases for our leased and occupancy rates of 50 and 40 basis points, respectively.
This is in line with our expectations that the trough in occupancy is behind us as we continue to drive occupancy in our newly minted transformed portfolio.
Blended releasing spreads on comparable leases signed in the quarter were 6.6%, including another strong new lease spread of 17.8%, reflecting once again the embedded mark-to-market opportunity in the portfolio.
Over the past four quarters, our comparable new lease spread was 30%.
Our powerful operating platform continued to drive leasing velocity, improved occupancy and secure higher rents.
Remerchandising projects remain our best risk-adjusted use of capital.
And our pipeline of projects continue to grow.
This quarter, we delivered three remerchandising and out-lot projects: the ground lease with Wendy's at Coral Creek Shops; the ground lease with Chase Bank at West Broward; and the combination of the boxes for Aveda at Merchants Square.
These products were completed in an average return on capital of 17%.
We also started our new REI remerchandising project at Town & Country and an expansion project for Burlington at the Shoppes at Lakeland, where we expect returns of 9% to 13%.
We added five new pipeline projects this quarter in Northborough Crossing, Deerfield Towne Center, Southfield Plaza, River City Marketplace and Providence Marketplace, highlighting the demand at our centers and future rent upside.
We ended the second quarter with net debt to annualized adjusted EBITDA of 7.0 times, down from 7.2 times last quarter.
Leverage should fall toward our target range of 5.5 to 6.5 times as our bad debt reserve normalizes to pre-COVID levels and we restabilize occupancy.
From a liquidity perspective, we ended the second quarter with a cash balance of $38 million and our fully unused $350 million unsecured line of credit.
Subsequent to the end of the quarter, we drew down $135 million on the revolver to fund acquisitions, which we expect will be repaid by the end of the year as we close on parcel sales to RGMZ that are expected to generate roughly $142 million in proceeds.
During the quarter, we repaid our $37 million private placement note with cash on hand.
Looking ahead, we have no remaining debt maturing in 2021 and only $52 million maturing in 2022.
Our refinancing options are plentiful, and we are exploring both secured and unsecured options.
We will also continue to look beyond 2022 to refinance debt early to take advantage of a low interest rate environment while adding duration to our capital stack.
And lastly, turning to guidance.
We updated our operating FFO range to $0.88 to $0.92, which is up $0.05 or 6% than last quarter's guidance and about 10% from our initial 2021 guidance provided back in February.
The primary driver of the upside is an increase in our acquisition forecast.
We have closed on or under contract or are in advanced contract negotiation on $285 million of acquisitions at our share, which is above the $100 million of acquisition that was embedded in our prior guidance.
Also, given the strength in our core business and our accretive acquisitions, our Board of Trustees has increased the dividend by 60% to $0.12 per share quarterly.
This rate allows us to maintain a low payout ratio, providing us flexibility to continue to allocate capital accretively but also leaving room for additional dividend increases in the future as we grow earnings.

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compname posts q2 operating ffo per share of $0.22.
q2 operating ffo per share $0.22.

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