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Good morning and welcome to the SITE Center reports Third Quarter 2021 Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Steve Bakke, Senior Vice President of Capital Markets. Please go ahead.
Thank you, operator. Good morning and welcome to SITE Centers’ third quarter 2021 earnings conference call. Joining me today is Chief Executive Officer, David Lukes; and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at www.sitecenters.com, which is intended to support our prepared remarks during today’s call.
Please be aware that certain of our statements today may contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements.
Additional information may be found in our earnings press release and in our filings with the SEC including our most recent reports on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today’s call, including FFO, operating FFO and same store net operating income.
Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today’s quarterly financial supplement. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.
Thank you, Steve. Good morning and thank you for joining our third quarter earnings call. We had another strong quarter really across the board. OFFO was ahead of plan. New leasing volume was at its highest in a number of years. We exceeded our 2021 investment goals with the closing of Hammond Springs and subsequent to quarter end RVI distributed $190 million to SITE Centers. Thank you to the entire SITE Centers team for working so hard to achieve these accomplishments, which position our company for sustainable growth going forward.
I'll start this morning discussing third quarter results, talk briefly about leasing and then discuss our investments and capital as we look to grow our portfolio of assets in wealthy suburban communities. As I mentioned, third quarter OFFO was ahead of our budget and higher-than-expected NOI and lower G&A expense. We collected 99% of our build rent for the quarter.
Looking back to 2020, we've now collected 96% of 2020 base rent, including $21 million of deferral repayments. Our tenant assistance program, which effectively ended in 2020 has now collected 98% of the deferred rent due, which is really a testament to the durability of our portfolio cash flow, the credit strength of our tenant base, and the quality of our team and our real estate.
Moving to leasing, we had a truly outstanding quarter with over 1 million square feet leased, including 237,000 square feet of new leasing, which is our highest in 2 years, despite having a considerably smaller portfolio. We signed 6 anchors this past quarter, bringing our year-to-date anchors to 19. These 19 anchors signed year-to-date have a number of interesting characteristics that are indicative of the operational strength we're seeing.
First off, 15 of the 19 anchors were signed with publicly traded companies highlighting the credit quality of our primarily national portfolio. Second, 30% of the square footage is from new concepts that are sponsored by investment grade parent companies, and were launched in the last 18 months. We have 13 more anchors in lease negotiation, which we expect to be completed by the first quarter of next year with similar characteristics to the deal signed to date.
We expect this activity to be a material driver of our growth over the next several years, particularly since new anchors that have property usually drive shop demand in response. We've already seen some of this demand result in positive rental growth and an acceleration in executed shop leases, including over 50 new shop deals in this quarter alone with a number of exciting and well capitalized new concepts.
Shifting to investments. In September, we acquired Hammond Springs in Atlanta for $31 million, which pushes our year-to-date acquisitions to $80 million ahead of our $75 million goal for 2021. Atlanta is our largest market and we're very excited about the growth outlook for the city and for this property in particular with average household incomes in excess of $130,000 and incredible visibility in a high traffic corridor.
Similar to Delray and Charlottesville acquisitions, convenience is the anchor of this site as it does not have a traditional large format tenant. While box demand has been very strong, the advancements in geo location data mean that we don't have to rely on the anchor as the assumed primary driver of traffic. This opens a compelling subsector in open air shopping center and has been the bulk of our acquisitions year-to-date. That said, going forward, I'd expect us to be active in both anchored and unanchored assets that fit our growth and submarket criteria.
Our investment thesis is based on three clear facts that have emerged in the last year and a half. One, there is now more money in wealthy suburbs; two, there are more frequent customer visits due to more flexible work-from-home culture; and three, an increasing value and convenience from both tenants and customers alike. These facts are producing occupancy gains, but also rent growth.
At a time when buying vacancy is becoming increasingly challenging, given the strength of operating fundamentals, we are heavily focused on finding the right properties in the right submarkets where rent growth is happening and we have an opportunity to re-tenant existing square footage with stronger credit tenants at higher rents.
The foundation of our investments is our balance sheet and our access to capital. As was announced a few weeks ago, RVI declared and paid a distribution on Site's preferred investment in early October. In this distribution SITE Centers received $190 million and does not expect to receive any additional distributions from RVI in the future on the account of its preferred investment.
The payment along with recently announced RVI asset sales and a common dividend declaration leaves RVI with just three remaining properties and a clear path towards the conclusion. It also returns almost $700 million of capital to preferred and common stakeholders, which was part of the original thesis and the business plan for the formation of RVI. All of us at SITE Centers are incredibly proud of the thought and work that went into this innovative spin, and we are excited about future investment prospects for the return capital we received.
And with that, I'll turn it over to Conor.
Thanks, David. I'll comment first on quarterly results, discuss revisions to 2021 guidance and forward earnings considerations and conclude with our balance sheet. Third quarter results were ahead of plan as David mentioned on better operations and lower G&A expense.
Total uncollectible revenue at SITE share included $1.6 million of income, or $0.01 per share from payments related to prior periods, primarily from cash basis tenants. Outside of this, there were no other material one-time items that impacted the quarter.
In terms of operating metrics, the lease rate for the portfolio was up 50 basis points sequentially, which is on top of 40 basis points last quarter, and speaks to the strength of our leasing activity and minimal bankruptcies. Based on our current leasing pipeline that David outlined, we believe the lease rate will continue to increase into year-end.
We provided an updated schedule on the expected ramp of our $12 million signed, but not open pipeline on Page 8 of our earnings slides. We had 300,000 square feet or $5.1 million of annualized base rent commencements in the third quarter, and the SNO pipeline now represents just over 3% of annualized third quarter base rent or over 4% if you also include the anchors in negotiation in our pipeline.
Moving on to our outlook. We're increasing 2021 OFFO guidance to a range of $1.13 to $1.14 per share to incorporate reported results with outperformance driven by prior period reversals, earlier rent commencements and higher retention. Rent commencements and uncollectible revenue remain the most volatile factors which will impact fourth quarter results.
We've also increased same-store NOI guidance to a range of 12.5% to 14%. The updated range reflects reported results and excludes any future prior period adjustments. It implies that 2021 same-store NOI is effectively running slightly ahead of 2019 levels, and that 2022 NOI for comparable assets would also be ahead of 2019 based on our leasing pipeline and initial budget forecasts as well.
In terms of the fourth quarter, there are a few moving pieces to consider from the third quarter as outlined on Page 12 of our earnings slides. First, as I previously mentioned, we had $1.6 million of nonrecurring uncollectible revenue in the third quarter. Second, we are anticipating a handful of JV asset sales to close in the fourth quarter, which will impact our share of JV NOI and JV fees.
Third, we expect RVI fees to be about $3.5 million in the fourth quarter, which is roughly flat from the third quarter. And fourth, G&A will increase from the year-to-date run rate as expenses pick up. These factors will all act as headwinds versus third quarter, partially offset by rent commencements and investment activity. A summary of these factors is on Page 10 of earnings slides.
Moving to 2022 OFFO. We are not providing formal guidance at this time, but wanted to provide clarity on a few line items. First on RVI. Given that RVI now owns just three properties, it is fair to assume that RVI fees paid to site will be minimal in 2022 upon the fees resetting in January with the dilution from loss fees offset over time by the reinvestment of preferred proceeds into acquisitions.
Second, interest expense at SITE share is expected to be roughly flat to 2021. And third, we would expect G&A to total around $52 million. And fourth, included in 2021 year-to-date results are $12.7 million or $0.06 per share of nonrecurring reserve reversals related to prior periods.
Turning to our balance sheet. Including the receivables line item at quarter end, it's just under $2 million of net COVID related deferrals we expect to collect in the future as the deferral program winds down. Details on the timing and composition of the gross deferral balance are outlined on Pages 6, and 7 of our earnings slide deck. But with 84% of the total gross deferral balance repaid to date, the impact on earnings and future periods will be limited.
Finally, wrapping up with liquidity and sources and uses, pro forma for the $190 million distribution from RVI and the early retirement of our $88 million January 2022 mortgage maturity, the company has just over $150 million of cash on hand and $25 million of common equity from forward sales under our ATM which is available for future settlement. This liquidity will allow us to take advantage of investment opportunities as they arise and to drive sustainable OFFO growth and creates stakeholder value.
And with that, I'll turn it back to David.
Thank you, Conor. Operator, we're now ready to take questions.
[Operator Instructions] Our first question comes from Rich Hill from Morgan Stanley. Please go ahead.
Hey, good morning, guys. I wanted to just maybe start with a nuts and bolts question. I appreciate the disclosure about the $12.7 million benefit in '21 to date. Can you maybe walk through how much of that $12.7 million was realized in 3Q? And maybe what we can expect in 4Q?
Sure. It's -- of the $12.7 million, $1.6 million was in the third quarter. We don't budget -- or included in our budget, excuse me, any future revisions. So if we had them in the fourth quarter, that $12.7 million, we move higher.
Got it. And so just -- so since we don't know last year, exactly, what would same-store NOI had been without that benefit?
Sure. So year-to-date -- and again, that's just for the first three quarters because nothing in the fourth quarter like I mentioned. It's about a 535 -- excuse me, 530 basis point kind of good guide for the year. So all 12.7, Rich, is included in same-store.
Got it. Thank you very much. And then maybe a bigger picture question about the cadence of occupancy. If I go back to sort of your peak prior to COVID, not in 2019, but even prior to that, you were around 95%. Do you see a path to getting back to 95%, and what does that cadence look like?
Well, I mean, Rich, its David. Based on the past couple of quarters, I think the cadence looks pretty good. And from a portfolio perspective, the quality of the assets, given the spinoff of RVI is a lot higher than it was in the last cycle. So I don't see any reason why the portfolio can't be 95%, 96%.
And, Rich, the only thing to add to that, if you recall, prior to COVID, we had a couple properties and I guess, it's 3 or 4. We were keeping space offline as we looked at some redevelopment properties or projects, excuse me and some other ideas. And our comments kind of over the last couple quarters have been the retail demand has been so strong. The demand from retail tenants has been so strong, we've taken those kind of out of redevelopment and assumed that they will be leased up. So I would say our kind of peak occupancy we think we could do for this portfolio post-COVID is probably higher than it was pre-COVID.
Okay, that's helpful, guys. And just to maybe push on this a little bit. Is it -- you added almost 50 basis points of sequential improvement on our numbers. Do you think that's a fair runway or should we see acceleration in that sequential improvement?
Yes. Rich, the hard part is percentage is always difficult. But if you look on the SNL pipeline that we have in the -- excuse me in the slides, you can kind of you see the dollar amounts we expect. The percentages always can get a little screwy with -- depending on GLA, but I would focus more on the dollars.
Okay, got it. I'm going to jump back in the queue. I'm sure I have a lot more questions, but I'll give some people some airtime. Thanks, guys.
Thanks, Rich.
Our next question comes from Katy McConnell from Citi. Please go ahead. Hello, Katy. Is your line open?
Hi, good morning. Sorry about that. I was wondering if you could just walk us through the increase that you saw on leasing CapEx per square foot this quarter. And to what extent was that driven by rising construction costs versus the mix of more anchor deals this quarter?
Hi, Katy. It's Conor. So if you look on Page 14, our net effective rents slide on the right side, you can kind of see what percentage the deals are new deals, we're doing are anchors versus shops. And the reason we disclose this is just anchors have lower net effective rents by definition. So if you look on for the fourth quarter, we are assuming for the third quarter, we were up to 57% were anchors. Last quarter, it's only 34%. So I'll turn it over to David for the construction cost comment. But it really is just a mix issue as we just more anchors this quarter. And I’d expect that to continue in the fourth quarter as well.
Yes, on the construction side, Katy, there's no question that there's been some inflation, particularly in construction materials. We haven't really seen it yet in labor, but on the construction material side, there's definitely been a 10% to 15% increase in a number of categories. The issue is when you start to lump in those categories that have inflation, and you look at it as a part of the total cost of the deal, meaning landlord costs, TI and commissions, there hasn't really been that much impact yet that is meaningful. The big issue for us is really more the characterization of whether they’re shops versus anchors.
Okay, thanks. And then as you look at the near-term lease expiration schedule, what are your expectations for recapturing space at this point and potential mark-to-market upside next year?
Yes. Well, I think the biggest issue for us is that the leasing demand is so strong, pretty much across the board. I mean, if you remember a year and a half ago, it started in the outparcels and then it moved into anchors, and now it's moving into shops. I think what's really going to happen is we're going to start seeing a lot of properties move to a pretty high occupancy, which is going to put pressure on renewals from tenants because they won't have the choice to relocate. So our expectation is that renewals increase and the percentage of tenants that exercise their options increase, which means that the amount of available inventory we're going to have is going to stay a little bit low.
Okay, great. Thank you.
Thanks, Katy.
Our next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
Hey, good morning, gentlemen. So let me just continue on for Katy's question on leasing CapEx. Taken from a different angle, what are you guys seeing as far as labor and also delays in openings? Some of our recent site visits have shown some restaurants closing early because they don't have the labor, or some I think it's probably more on the F&B side. It's just tougher to open because of equipment shortages, or materials, or millwork and things like that. So curious what you guys are seeing?
Yes, I think, Alex, we're seeing the same thing. I mean, there's growing anecdotal evidence that supply chain problems are starting to have an impact on both costs and timing of construction projects. Today, there really hasn't been any economic impacts to us. And as we're signing leases, I think we're starting to see a little bit longer lead time for signature of lease to rent commencement. And so I think the landlords have had a chance to put that in their budgets, because we're seeing it when we sign the lease. But there's no question that it's been a little more difficult to get permits, it's been harder to get materials, even if you stockpile certain materials and certain pieces of equipment, it's still just a little bit more difficult to get a tenant open. And it costs a little bit more than it has. I wouldn't say it's material yet, but we're certainly keeping our eye on it.
Okay. And then next question, as you guys look, I mean, you guys just spoken about market rent growth. I think, David, in the past, you mentioned that finally, you're seeing actual market rent growth certainly 18% on new leases is impressive. But if you drill it down, would you say this is widespread across all tenants, all categories? Or is it really driven by certain parts of your portfolio? And then the flip question, what part to your portfolio are you still looking at rent roll downs?
Well, they -- I think the easiest answer to that question is that, as of this quarter, I'm feeling very confident that rent growth is pretty much across the country. I mean, we've hit a high watermark in a number of states with respect to shop rents. I think you're starting to see anchor rents pick up. Anecdotally, a property just came for sale last week across the street from one of our larger assets and the in place rents at that property for sale are in the mid 30s, we just signed four leases in the mid 50s, across the street. So, I think when you kind of turn to acquisitions, it's the same philosophy of finding value and looking for rent growth, because it feels like a lot of rents are really moving up a little bit faster than I would have expected.
In terms of mark-to-market, that's always a tough question, Alex, because it has everything to do with when a tenant decides not to exercise their option, or whether decide to exercise. And it is very common when a large portfolio like this to have one or two roll downs every quarter or every other quarter, because you're trying to figure out which tenants you want to keep it long-term. But as you start to see occupancies get up to the fact that these tenants aren't going to find a place to go within the same trade area, then the renewal rates are probably going to increase from here, and I think we'll probably have fewer roll downs.
So bottom line, I mean, I know you wouldn't admit like, hey, we have, trouble on 5,000 square foot tenant or trouble on X tenant or whatever. But bottom line is, as we head into next year, you're saying that either because of replacement demand, or just where rents have grown for that size box and that type of tenant, that there's no real area in your portfolio where you expect a material headwind. You look at everything as basically flat up as we head into '22.
That's correct.
Okay, thank you.
The next question comes from Todd Thomas from KeyBanc Capital Markets. Please go ahead.
Hi, thanks. Good morning. First question, just appreciate some of the earnings considerations for '22. Curious if you could provide some guideposts around investments. You talked about you’ve exceeded the $75 million target for '21. You were repaid the $190 million RVI pref. Just curious if you can talk about the timeline to reinvest that capital and what we might expect as we look ahead into '22?
Sure, Todd. Well, if you remember, when we set our goal for this year, we had leverage levels, we had some free cash flow. And I think we achieved those goals this quarter kind of barely moving past what our original budget for the year was. The difference, of course, as you know, is that now we have the repayment of the RVI press. So the cash on hand is about $150 million, as Conor mentioned. And I would expect that we're going to be reinvesting that capital as soon as we find assets that we think fit well with the portfolio. So I think it's fair to assume that that's kind of our target at this point, to deploy that $150 million.
Beyond that, I think it has everything to do with the opportunities because our leverage right now is at the low end of our kind of preferred debt to EBITDA range. So I think we do have a lot of capacity to grow if we find things that we want, but we're going to start with the cash on hand and then move from there.
Okay. And then I just had a follow-up, I guess, on your comments around rent growth. There has been a considerable increase in retail sales across most categories. And I'm just curious, if you see anything changing regarding the -- sort of model around setting rents and occupancy costs that retailers can tolerate, whether you'd expect to sort of participate in the higher sales environment as leases expire, as you would ordinarily or are there other implications today that sort of might prevent you from seeing the flow through as you negotiate new and renewal rents?
No, I think, Todd, just come back to David's answer, I think you're spot on. I mean, you look at the factors that are driving rent growth, tenant sales are a big part of it, right. And so I think we would agree with you that as tenant sales continue to improve and are well above COVID levels, like our top 15 tenants, I think like 13 to 15 has sales for their portfolios above 2019 levels. That inures to our benefit as we renew them or as they look to sign new leases. So I think the longer -- the short answer to your question is, yes, we do expect to participate in the sales growth in the form of either higher renewals or higher new leases, as we execute them over the next couple years.
Okay, all right. Thank you.
Our next question comes from Samir Khanal from Evercore. Please go ahead.
Hi, David. Can you provide a little bit more detail on the property you acquired in Atlanta, Georgia? What was the cap rate on the deal? Maybe broadly, what are you seeing for pricing for centers that are anchored and unanchored centers at this time?
Yes. Hi, good morning, Samir. We haven't disclosed cap rates on individual properties. I think the way I'd like to describe it is that when you're in a rent growth market, it's a lot different deploying capital than when you're in an occupancy growth market from an acquisitions perspective. It's very difficult to find vacancy to buy right now, because sellers don't want to sell vacancy. The operating fundamentals are just too good. So what we try and do is, is use all of our evidence from recent leasing to figure out where market rents are going, which tenants have demand, how we can fill that -- fulfill that demand.
And in this particular property in Hammond Springs, it was an asset we've been chasing for the last couple of years. Same with Delray, we've been really after the sellers to see if we could acquire them. And it's just very, very high traffic intersection. It's got the near-term rollovers from shop tenants with no options, which gives us a mark-to-market that's double digits. So we're very excited about the CAGR on this one more than anything else. To a certain extent, that does show up in the cap rates.
And so I think what's really happening on both anchored and unanchored, and frankly, of many types of format, whether it's grocery or power, or a mixture of both or lifestyle, you're starting to see the unlevered IRR. It's all kind of move down together, because the risk of occupancy and finding tenants has been replaced by the opportunity to raise the rents on existing tenants. So I think for the next year or two, it feels like this business is going to be a renewals business. And that endures very well to a company that's buying assets with leases that have near-term rollover.
Got it. Thanks for that color. And maybe second for me is on the occupancy side for the shop space. I mean, how long do you think it'll take you to get you to -- take you to get back to the sort of 90% level for shop space, which I think is sort of pre-COVID level?
Yes, Samir, we haven't put out kind of our multiyear target yet. It's something we're working on now. But I think just to come back to David's initial comments, we're starting to see a lot more momentum on that front. So I do think you'll start to move up -- shops move up in sympathy with our anchors, but we haven't put out kind of long-term target. I do think coming back to Rich's question now, it is fair to assume at the very least we get back to where we were pre-COVID levels. The only difference versus the anchors is unlike the 3 or 4 properties I mentioned, where we were keeping anchor space offline. We weren't keeping shops offline. So that would be the only difference, but otherwise I think it's fair to assume shops move up in sympathy with our anchors, we just haven't given that long-term target yet.
That's it for me. Thanks, guys.
Thanks, Samir.
The next question comes from Floris van Dijkum from Compass Point. Please go ahead.
Good morning, guys. Question. Obviously, saw the quarter, very strong balance sheets. Congrats, Conor on that. As you think out, how do you expect to be deploying your, call a $1.2 billion of liquidity potentially and as you think about acquisitions versus redevelopments versus ground up developments versus M&A, how would you rank those potential capital usages?
Good morning, Floris. On a risk adjusted basis, there's no question that the primary target right now is external acquisitions.
And so if you're looking at external acquisitions, you're talking about how your IRRs are becoming -- are coming in a little bit because obviously pricing has gone up. At what point does that flip and I know your redevelopment pipeline seems pretty light right now and I think that's by choice. Do you see that changing anytime or what needs to happen on the acquisition side? How much more do unlevered IRRs need to come in before that starts to flip to where you think hey, I deploy more capital in redevelopment.
Yes. What's interesting is that I'm not personally convinced that the unlevered IRRs have come in that substantially. I think the difference is the going-in cap rates have come down. But rent growth is becoming to show its -- rear its head pretty, pretty robustly I think across a lot of companies. So if your going-in cap rate is lower, but your growth is higher and there's less CapEx because it's more renewals and less occupancy driven, I think you're sustaining on unlevered IRR that's the same it was 6 or 9 months ago. So I mean, to me, I think that's why external acquisitions right now has the highest unlevered IRR at the lowest risk, because it's becoming more of a renewals business and less of an occupancy or development business.
And let's not forget that the challenge with redevelopment is the time factor, where it's a long time to entitle, it's a long time to permit. There is good NAV growth on a redevelopment pipeline, but it's not without risks particularly with construction costs going up. And I think that's why a lot of retailers are starting to focus on grabbing whatever square footage they can in wealthy submarkets, because they know there's going to be a lag before new construction shows up.
And unfortunately, only clarification just on the redevelopment side, we've got disclosed here it on Page 17 of our sub just the projects underway. We've got a number of other tactical projects, we're working on pads, out lots, et cetera. Some small scale expansions, but they just don't show up in our sup [ph] until they're underway. So we've got a couple more that we're excited about and working on. It's not like we're shelving them to focus on acquisitions. But you're right relative to the enterprise, acquisitions would be more material relative to redevelopment.
Thanks, guys. That's it for me.
Thanks, Floris.
[Operator Instructions] The next question comes from Linda Tsai from Jefferies. Please go ahead.
Hi, good morning. In terms of your interest in non-anchor centers, you mentioned you have two locational data to get comfort with demand. What do you look for from a credit or merchandise mix perspective to be comfortable around the sustainability of that traffic since there isn't an anchor?
Yes. I think the -- it's a great question, Linda. I mean, if you start with the data that tells you who the customers are, that's the most important piece, or at least the first step, are you attracting the customers, are they coming to the property to transact. And the second is the credit profile. And I think it's -- it would be somewhat surprising if you were to look at a lot of unanchored product in the U.S., it does have a lot of credit tenants, particularly on the banking side, wealth management, a lot of restaurant concepts and so forth.
So the credit profile, I don't think is all that dissimilar to any other traditional anchored center. And what we look for is kind of the right mix between the credit tenants, which usually have a number of options left. And therefore they really have your real estate for a number of years versus the local tenants that usually don't have options, and therefore there's more near-term expiration. So the game plan for quite a bit of this unanchored strip that we've been purchasing is to measure the credit quality of the tenants that are there, recognize that they're likely to be staying based on traffic, and then look for specific renewal or replacement ideas for some of the local tenants, so we can upgrade the credit quality along the way.
Makes sense. And then how are you thinking about bad debt for 2022 since 2021 benefited from portfolio [ph] bankruptcies and 20 consumer strength, improving credit profiles, government support?
Yes, it's a good question, Linda. We haven't given any guidance on bad debt or uncollectible revenue, whichever bucket you kind to look at. I would just say, in terms of bankruptcies, there's nothing material we're tracking today that could quickly change, obviously, the holiday season approaching. And again, I mean, as we talked about over the last couple of quarters since COVID started, if you look at our top tenants and the number who are public and how much capital they've accessed, they've materially changed their balance sheets from a capital structure perspective. And then coming back to I think it was Todd's question on the sales side, the sales have increased as well. So I would just say from a tenant credit perspective, we feel materially better about our tenants today than we did pre-COVID with maybe an exception or two around theaters, et cetera. But we'll see how the holiday shakes up and plays out and we will provide guidance in February as kind of explicit numbers for next year.
Thanks. Just one last one. You mentioned retention rates helping the quarter. What was -- what's the progression been like the past few quarters? And how does 3Q compare to the historical average?
Well, the progression has been an easy ride. If you think about 2020 and COVID, obviously with the number of bankruptcies et cetera, and fallout, it was it was lower. I don't have the exact figure offhand Linda. But historically we've seen anchors in the 90% and shops in that 70%, 80%. And so to David's point, if that climbs higher, you're going to see a higher retention rate and probably more pressure -- upward pressure, excuse me on rents on both anchors and shops. So again, I think for anchors it's been historically in that 90% area and for shops in the 70%, 80% area.
Thank you.
You're welcome.
Our next question comes from Mike Mueller from JPMorgan. Please go ahead.
Yes. Hi. Two questions. First, David, can you talk a little bit about some of the new concepts that you're doing deals with that you mentioned in your intro comments. And then on when you're evaluating anchor versus unanchored shopping center acquisitions, I mean, what are the differences you're generally seeing in terms of escalators, embedded organic growth differences between the two?
Sure. Well, on the concept side, I mean, there's been a couple of concepts that are sponsored by major credit investment grade corporations. Think Public Lands, which is a new concept that Dick's Sporting Goods has. It's a really interesting concept. I think it fits well with kind of this post-COVID outdoors activity-centric culture. I think they've got a great runway ahead of them. It's a really, really cool concept.
Dollar General started a unit called Popshelf, which we've been working with quite a bit. I think it's a fascinating concept that fits right in that size of box that Pier 1 left a couple of years ago. It's -- I think it's kind of a wealthier suburban oriented concept around 9,000 to 10,000 square feet, really cool concept. Bunch of restaurants, Cava and Sweetgreen and the like, really interesting and kind of adding something new to a lot of properties.
Even if you look, Mike, it's some of the capital raises lately or IPO filings. You've got First Watch and Portillo's and Allbirds, you are starting to see some of these online retailers move into bricks and mortar. So that the new concepts, I think have been one of the surprises for us in the last 6 months, where there really have been a lot of tenants focused heavily on bricks and mortar. When you translate that to acquisitions and anchored versus unanchored, I mean, part of the reason in my prepared remarks I said that we'd be looking at both types of assets is that I think it just has to do with the opportunity of an individual property and renewals right now really is where we're angling for because that's where the rent growth is at, and that's where you can capture more IRR.
I haven't really seen a big difference in escalators, frankly, with shop leases, whether it's an anchored or unanchored property and the escalators are always similar somewhere in the kind of 2.5% to 3.5% range. What's more important is which tenants have options and which ones don't because the higher occupancy gets, as I’ve said, the more likely tenants are going to be forced to trigger their options, which means there -- then is even less inventory for others. So I think that's kind of the way we're looking at it, Mike.
Great. That was it. Thank you.
Thank you.
There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to David Lukes for any closing remarks.
Thank you all very much for attending. We'll talk to you next quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.