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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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. [Operator Instructions] 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. [Operator Instructions]
At this time, it's my pleasure to introduce Jim Taylor.
Thanks, Stacy, and good morning, everyone. Once again, Brixmor continued to deliver as the 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, Caba, Chop 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 grocery 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.
And 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 continue to capture leading market share of new store openings while delivering attractive margins. And 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 and that momentum continues. As always, it begins with leasing, where this quarter, we signed 332 new and renewal leases, comprising 1.7 million square feet, including over 700,000 square feet of new leases at a cash spread of over 26%. These leasing volumes spread 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 leased occupancy increased 30 basis points year-over-year. And 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 rate. Our anchor 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 averaged a rent of $8.99 a foot versus our average new anchor rent achieved over the last 12 months in the $12 to $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 in 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 and ground-up development, we would have had to deliver over $200 million or 4 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. And 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 public-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 to $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 rate -- 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.
But 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 continue 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.
And based on the strength of the current leasing environment and as Jim highlighted, the size of our forward leasing pipeline, we expect the 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 5 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 2 metrics as newly executed leases commence, billed occupancy growth and the signed but not commenced pools replenished by additional incremental leasing activity.
In terms of total dollars, assigned and uncommenced pool, which includes the 330 basis point spread between the billed and lease 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 rents. 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 to 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 base 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 to $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% to 8.5%, up from 4.5% to 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 6.2 times, 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.
And with that, I'll turn the call over to the operator for Q&A.
[Operator Instructions] Your first question comes from Todd Thomas with KeyBanc.
First question, I wanted to ask about company stance on investments from here, Jim. 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?
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, I think, compelling returns even against the backdrop of compressing cap rates. So stay tuned. We've kind of given you an idea of the number of opportunities that we have. They're all within our markets, and we expect to continue finding opportunities like that in this environment.
How should we think about pairing dispositions against acquisition activity here? I guess I'm a little unclear whether there's desire to 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?
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. But importantly, we're finding from an external growth perspective, some pretty compelling assets within our markets that allow us to actually build more coal for the value-added furnace.
And then, Angela, I think you said 70% of the signed-not-occupied pipeline is expected to come online by mid '22. Is that right? And how much of that is incremental net of move-outs and what's not in the current fund rate?
Yes. No, the 70% number is right, and it's pretty ratable across the next 3 quarters in terms of what will come in line or the timing of when that will come online. As we disclosed 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 over the next 3 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. And 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.
Next question, Katie McConnell with Citi
Can you discuss your pricing expectations for the acquisition pipeline? And what are you assuming in terms of closing timing within the revised 2021 guidance range versus what could potentially spill into next year?
I'm going to let Angela cover the guidance elements of the question. But from a pricing standpoint, we are seeing cap rates in the 5% range for assets that we think fit with our strategy. But I think what's important to understand, Katie, 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. And again, these are assets that are in markets we're currently operating in. So we believe we have particularly good insight in terms of where market rent is and how we'll perform. So that's kind of an overview of the pricing in terms of the timing
Angela?
Yes. I would just say we never comment too specifically on timing from an acquisition or disposition perspective. But the $250 million to $300 million that that was mentioned in the earnings release, and Jim mentioned in his comments, we've already closed $25 million in the fourth quarter of the Pawleys Island acquisition, that $250 million to $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.
And then 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? And of that, how much is still online and operating at this point?
Sure. Well, thanks for that question, Katie. I'd say a few things, I guess. As it relates specifically to the conversion of tenants back to accrual basis, we went through -- 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 as we continue to get longer payment history and see more tenants really kind of find their footing 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 historically wide number given what the portfolio has been through over the last year or 18 months. So I do think you'll see additional tenants move back to an 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 it's important to remember that there are tenants included in those straight-line rental income reversals that have left the portfolio, they were 2020 bankruptcy activity and other move-outs that have happened over the course of the last 18 months. So the total amount available to bring back online is going to be a smaller number than that $37 million. And as we bring tenants back sort of what's happened to individual straight-line balances over the course of the last 18 months we'll create some volatility in that number as well.
So it's really very difficult at this point to give any more finite guidance, as I mentioned 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 '22 as well assumed in guidance any conversion to or from cash basis accounting, given the potential volatility there.
Next question, Jeff Spector with Bank of America.
Congrats on the quarter. 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 how Brixmor is, I guess, positioned versus those risks in the market today?
Jeff, it's a great question. So when you consider what we have in the pipeline today, that $400 million, that's largely purchased through T.J. Maxx contracts. So we have a pretty good handle on the cost, and we're pretty far along in that. So perhaps you see a couple of projects shift a quarter to either way from a timing perspective. But we don't really expect much significantly there. But it's certainly an issue as we look forward and beyond that, and it's something that we're working with our tenants on. So 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. But it's something that we're watching carefully. We know our tenants are all over it. And we're hopeful that through the course of 2022, you begin seeing some of that resolve.
And then 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 '19. Are there any key differences that you would want to highlight between, I guess, the leases done in '19 versus today? Or are they similar in terms of the tenants, the categories, et cetera?
Well, I think the biggest thing is more rent. We continue to drive ABR per foot and we're real proud of that. And I'd say that there's a greater breadth of tenants that we're doing business with now. And 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?
Yes. And 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 and 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. And just on those higher rents, the rents we're signing in new leases are 14% higher than they were on average over the past 3 years. So we're continuing to see better tenants come to our centers and pay higher rents, and we've been really encouraged across [Indiscernible]
Next question from Derek Johnston with Deutsche Bank. Please go ahead.
Just sticking on the redevelopment pipeline. 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 in the labor and supply constrained environment, even value-add rates seem to be grappling with costs and yield compression a little more than Brexit. What's the secret sauce here, guys?
Perhaps the biggest thing is an attractive rent basis. We've talked about it since we've joined, that we have really well-located older shopping centers 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 rise in costs and other challenges that are just part of the business. The other thing I would say that I think it's 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 1 location.
As I mentioned before, we've deployed over the last 5 years, about $600 million of capital. I think the average project size was about $4 million to $5 million. We had some that were a couple of million, some that were $10 million to $20 million. But that helps us, if you will, diversify our risk with respect to any one situation or any particular issue that we might run across with the jurisdiction or with a contractor or with an unforeseen condition or today with rising costs. So 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. So then just looking at the $4.4 million of recaptured, uncollectible rents. First off, it seems like $33 million-ish may still remain uncollected. Please correct me if I'm wrong with that number. And is there any guidance or thoughts about further recoveries going forward? Or should we just really start sunsetting this in our minds and looking to the future.
Yes. I'll take that in a few parts. So 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. And there's some disclosure on Page 11 of the stuff that I think helps you see that number. And 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. So 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. So 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, but probably somewhere between 65% and 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 are reopened and operating at more normalized levels and are doing well for the most part across the portfolio.
Next question, Juan Sanabria with BMO Capital Markets.
Just a question, Angela, on the balance sheet. You referenced the 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 to $300 million that are in the works.
Sure. Yes. So we're -- as you mentioned, 6.2 times 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, and we continue, I think, to improve what the reserve on current quarter billings look like. So feel really good that that's a pretty sustainable level with potentially some volatility quarter to quarter.
We've always had our long-term target from a leverage standpoint is about 6 times. 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're probably one-third to half of a turn inside of that.
And so we really feel 6 times today on a spot basis is kind of the right level. We're very close to that level now. In terms of 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's only gotten better, I would say, over the last 12 to 18 months and look at really 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.
And then just one quick follow-up. The acquisitions you talked about, that kind of 5-plus percent 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 do 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. And then as we continue to execute whether it's lease-up, mark-to-market or value-added reinvestments, we expect to drive those yields a few hundred basis points higher.
Next question, Mike Mueller with JPMorgan.
A quick question. If you look at the anchor repositionings and the redevelopment assets that you've taken care of to date, how much of the overall opportunity do you think has been addressed in the current portfolio? Just thinking about a go-forward basis of capital deployment?
We believe we have over $1 billion of investment behind what we have underway. And 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 what we have rolling. 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. 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.
And what's exciting for us, and I hope is 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.
And then 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, food heavy, local, national? Just kind of any color in terms of what's standing out there?
Yes, Mike, 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 Chop and Cabo 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, Five Below. So the depth of demand remains incredibly strong. From a small shop perspective, we still think there's a tremendous runway for growth there which also -- we have been talking a lot about small shops, but the anchor pipeline is accelerating as well. Our anchor pipeline is as strong as it's been since 2Q of '20 when we had a backlog of anchor deals at the start of the pandemic. We mentioned a number of those categories as well.
So 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.
Yes. And 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 really relevant uses and services to the centers.
Next question, Greg McGinniss with Scotiabank. Please go ahead.
I'm trying to kind of understand what appears to be somewhat stalled rent collection improvement at that 97%. Does that reflect full collections relative to pre-pandemic norms? I mean what's -- in terms of what's not paying who left’s that unable to pay rent because of pandemic issues versus maybe not being a great fit to the portfolio longer term?
Yes. 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. So the last bit, we're very focused on, as Angela highlighted in her remarks. 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. And 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. So we're now in that last 2% to 3% that's either tenant categories that have been really disproportionately impacted, think entertainment, some restaurants and others that we're working through at this point. But we're very pleased with the trend we're seeing, particularly in the cash collection.
Yes. 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 revenues deemed uncollectible number, it was under 100 basis points, somewhere between 75 basis points and 100 basis points. So we are still probably 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 seemed on collectible 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. And those are the tenants we continue to work most closely with.
But 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. And so it is a more concentrated 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.
And where we can, 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.
Yes.
And Angela, just to clarify a point you made earlier on the an outstanding an hunt category, I mean that's 65% to 75% corresponding to tenants that are still in the portfolio. Are those tenants also current on rent in terms of like the October rent and just haven't paid back rent? Or what's the percentage there?
Yes. There are 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% to 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.
Next question, Ki Bin Kim with Truist
So I want to go back to the acquisition question. How should we think about this bigger picture? Should we expect much financial accretion from this acquisition activity? Or do become fast forward a year from now, are you selling assets to balance that out word there's; upside, but it doesn't come for a couple of years.
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, disposition, et cetera. So we like how we're positioned. Again, Ki Bin, what's striking is the cap rate environment has compressed pretty dramatically. And what that -- what we've always focused on, 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. So that's really been our focus. So 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.
And Mark, I don't know if you have any other thoughts.
One thing I would say is, 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 opportunity in some of these assets for a long time. We like that. And if we think about today's market, keep in mind, as Angela mentioned, we've got $1.7 billion in liquidity. So when we go to a seller and we position ourselves with someone who can both quickly nut of these financing, that's a real benefit from people who were selling to us. And we think that's an advantage for us as we move into this part of the cycle when we're looking at external growth.
And 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% to 8% positive lease spreads. When you look forward, is that sustainable? Or is there a mix change or a vintage change that might change that number going forward?
Ki Bin, this is Brian. We've been encouraged by what we're seeing in terms of accelerating both renewal and new lease rent growth.
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. And so you may see some fluctuation in a given quarter. But 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. And also, there's not a lot getting built. So our centers are getting better. Our tenants are performing better. So we're able to drive those increases in renewals. And like I said, there may be some fluctuation here quarter-to-quarter, but we expect the trajectory to continue to be strong.
Yes. And 1 thing to highlight there, Ki Bin, 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 the strategy that we've executed where we really are improving these centers, and we're able to drive higher rent.
Next question, Anthony Powell with Barclays. Please go ahead.
A question on the acquisitions. Is there any particular geographic skew to the deals? Are they pretty widely spread across your portfolio?
Mark?
Yes, it really mirrors our existing portfolio. So existing markets like the Carolinas, Florida, through the Southeast, obviously, Northeast, upper Midwest, Texas and California.
And I think people have asked us a few different ways, but you've sold a lot of assets over the past few years and cleaned up the portfolio. Going forward, are you growing your portfolio size as you do more deals? So 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. 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. So we'll remain disciplined, as always, on that hold IRR decision. But as you also highlighted, we've sold over $2 billion over the last 4 to 5 years, harvesting assets that we deem noncore and exiting a number of single asset markets. Much of that work is behind us. So as we look forward, we're able to be much more opportunistic, and 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.
And maybe one more. You talked about the lease-to-build spread maybe expanding as you continue to backfill new leases, but is there a maximum to that? 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, compressed.
Yes. I mean, the comments I made in my prepared remarks are 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 billed 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. So 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 billed 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.
So full occupy could be, is it 95% leased, 96%. I'm just curious when do you think that may start to narrow in the future.
Yes. I think given the work that's been done on this portfolio over the last 5 years and as Jim was just pointing out, some of the rationalization of the portfolio from a footprint standpoint, I don't see any reason why this portfolio shouldn't over the medium-to-longer term operate at levels consistent with the industry at large, which would be in that kind of 95% level.
Next question, Floris Van Dijkum with Compass Point.
I think we've had a lot of questions, Jim, on, in particular, on the acquisition side. And I think because 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, 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 our -- the existing cash on the balance sheet, which is sitting there, earning 0, and we're getting a 5% with growth and we're going to continue to invest, call it, $150 million to $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. But 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. We're getting after that as expeditiously as we can, given just the natural lease expiry schedule. And as we highlighted, that goes on for several years.
And we believe we have well over $1 billion behind the $400 million that we have underway today. And 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 at a 10, that's the equivalent of about $2.5 billion of ground-up development. So we really are pleased with our performance, but we're excited about what lays ahead. It's not finite.
But we can walk and chew gum at the same time. 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? Defined centers like Bonita Springs in Florida, where we've got an expiring box that's paying us $2 to $3 a foot, even I can lease that box. Brian will let me, but even I can find a backup tenant for that. And 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. We focus so much on that cap rate.
But the real question to ask as an investor is, where is that low to mid-5% going over time? And 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. We're really looking at those assets and centers in 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 of the, call it, $18 million of NOI that you're going to get from your existing ongoing development pipeline, how much of that is included in the $36 million of ABR in your F&O ABR?
I'm going to let Angela answer the second question. But in terms of single asset markets, we're in about 30 to 40 still down from a little over 100. And many of those markets though, like Ann Arbor are going to be markets where we think we can find some good additional opportunities to grow.
Yes. And then, 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. Yes, exactly.
I would say, it's about -- yes, 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.
[Operator Instructions] I would like to turn the floor over to Stacy for closing remarks.
Thanks, everyone, and 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.