페더럴 리얼티(FRT) 2026년 3분기 실적 발표 콜: FFO 가이던스 상향 및 써밋 인수

핵심 요약

• 2026년 3분기 FFO는 주당 1.87달러로, 전년 동기 대비 6% 가까이 증가했으며 회사 가이던스 범위의 중간값을 0.03달러 상회했습니다.
• 조정 동일점포 부동산 영업이익(POI)은 현금 기준 4.0%, 해지 수수료 제외 시 4.5% 증가했습니다. 연초 이후 현금 기준 동일점포 성장률은 4.4%였습니다.
• 임대율은 96.5%를 기록하며 전분기 대비 40bp 상승한 반면, 실질 점유율은 93.8%였습니다. 270bp의 격차는 계약이 체결되었으나 아직 입주가 시작되지 않은 임대차 계약을 나타냅니다.
• 페더럴 리얼티는 2026년 NAREIT 및 코어 FFO 가이던스를 주당 7.54~7.58달러로 상향 조정했으며, 이는 중간값 기준 2025년 대비 7.1%의 코어 FFO 성장을 의미합니다.
• 회사는 10월 1일 5억 800만 달러 규모의 더 서밋 버밍엄 인수를 완료했습니다. 경영진은 GAAP 기준 6.9%의 수익률과 5년간 연평균 5% 이상의 POI 성장을 예상하고 있습니다.
• 페더럴 리얼티는 9월과 10월에 약 870,000주의 자사주를 평균 109달러 미만의 가격으로 매입하여 약 9,500만 달러를 투입했습니다.

주요 재무 데이터

사업 및 운영 실적

임대 활동이 주요 운영 동력으로 유지되었습니다. 페더럴 리얼티는 14%의 현금 임대료 스프레드로 117건의 동일점포 임대차 계약을 체결하여 260만 달러의 추가 매출을 창출했습니다. 이번 분기 신규 임대 계약은 재계약을 상회했으며, 임대 파이프라인에는 약 130만 제곱피트에 달하는 130건 이상의 거래가 포함되었습니다.

경영진은 계약 체결 후 미개장 파이프라인이 향후 성장을 뒷받침할 것으로 기대하고 있습니다. 아직 인도되지 않은 임대차 계약을 포함해 약 4,200만 달러 규모의 파이프라인 중 약 30%는 2026년 4분기에, 약 50%는 2027년에, 나머지는 2028년에 시작될 예정입니다.

더 서밋 버밍엄 인수를 통해 포트폴리오에 87만 제곱피트와 116개 임차인이 추가되었습니다. 경영진은 인수 심사 과정에서 40개 소매업체가 관심을 표명했으며, 거래 완료 후 첫 30일 이내에 35건의 추가 문의가 들어왔다고 밝혔습니다. 회사에 따르면 향후 5년 동안 해당 자산의 임대차 계약 중 약 30%의 만기가 도래함에 따라, 10%대 중후반 수준의 시가 평가(mark-to-market) 임대료 스프레드 기회가 창출될 것으로 보입니다.

페더럴 리얼티의 중부 지역 포트폴리오는 이제 시카고, 캔자스시티, 오마하, 버밍엄의 자산을 포함하여 총 270만 제곱피트에 달합니다. 경영진은 5년간 POI 연평균 성장률이 리우드(Leawood)에서 5% 이상, 오마하에서 6% 이상, 더 서밋에서 5% 이상일 것으로 전망합니다.

캘리포니아는 2026년에도 회사에서 가장 빠르게 성장하는 지역으로 유지되었습니다. 경영진은 델몬트(Del Monte)에서 약 11%, 그로스몬트(Grossmont)에서 10%, 웨스트게이트(Westgate)에서 13%의 5년 연평균 성장률을 전망하고 있습니다. 이들 자산에 투입된 추가 자본 수익률은 두 자릿수를 기록한 것으로 전해졌습니다.

경영진 가이던스

페더럴 리얼티는 2026년 NAREIT 및 코어 FFO 가이던스를 기존 중간값 7.52달러에서 주당 7.54~7.58달러로 상향 조정했습니다. 새로운 중간값인 7.56달러는 2025년 대비 7.1%의 코어 FFO 성장을 의미합니다.

회사는 조정 동일점포 현금 POI 성장률 전망치를 25bp 상향 조정한 4.38%~4.58%(중간값 4.5%)로 제시했습니다. GAAP 기준 동일점포 POI 성장률 가이던스는 3.38%~3.58%로 좁혀졌으나, 중간값 3.5%는 유지되었습니다.

경영진은 2026년 4분기 FFO를 주당 1.92~1.96달러로 예상하고 있습니다. 체결된 임대차 계약의 입주가 시작됨에 따라 실질 점유율은 3분기 말 93.8%에서 연말까지 94%대 중반으로 상승할 것으로 전망됩니다.

수정된 가이던스에는 더 서밋의 4분기 기여분 주당 약 0.03달러와 자사주 매입에 따른 약 0.0067달러가 포함되어 있습니다. 이러한 긍정적 효과는 0.01달러의 시점 차이 영향과 일반관리비(G&A) 지출 예상액 150만 달러 증가로 인해 일부 상쇄됩니다.

이번 가이던스에는 6억 달러가 넘는 목표 자산 매각이 포함되지 않았으며, 경영진은 이 중 대부분이 2027년에 완료될 것으로 예상하고 있습니다. 페더럴 리얼티는 더 서밋의 GAAP 수익률 6.9%와 비교해 매각 수익률을 5%대 중후반으로 목표하고 있습니다. 경영진은 이러한 자본 재순환 스프레드를 통해 주당 0.07~0.08달러의 장기적인 연간 이익이 발생할 것으로 추산했습니다.

리스크 및 주시 영역

금리 상승으로 인해 리파이낸싱 비용이 증가하고 신규 주거용 개발 심사가 더욱 어려워지고 있습니다. 경영진은 장기적 관점의 리파이낸싱 역풍이 최소 50bp 이상 확대될 수 있다고 언급했습니다.

더 서밋의 단기적 실적 증가 효과는 계획된 자산 매각이 완료되기 전 일시적으로 높아진 레버리지에 기인합니다. 따라서 6억 달러 이상의 자산 매각 시기와 가격은 장기 자금 조달 계획에 있어 여전히 중요합니다.

페더럴 리얼티는 2027년 6월부터 9월 사이에 만기가 도래하는 채무가 약 6억 8,000만 달러에 달합니다. 경영진은 리파이낸싱의 대부분을 위해 7~10년 만기의 무보증 사채 시장을 활용할 것으로 예상합니다.

또한 경영진은 연료비 상승과 인플레이션으로 인한 부담을 인정했습니다. 다만 포트폴리오 유동 인구가 전년 동기 대비 3% 증가했다고 밝혔으며, 부유한 하위 시장 소비자들의 상대적인 회복력을 지적했습니다.

애널리스트 Q&A 주요 내용

• 더 서밋의 초기 수익률: 경영진은 이번 인수가 초기 자본화율보다는 시가 평가 잠재력, 지역적 지배력 및 예상 현금흐름 성장에 의해 추진되었다고 말했습니다.
• 자본 배분: 당초 2026년 가이던스에는 자사주 매입이 포함되지 않았습니다. 경영진은 인수를 선호하는 성장 수단으로 꼽았으나, 예상 수익률이 회사의 자본 비용을 크게 상회할 때 자사주 매입을 활용할 수 있다고 밝혔습니다.
• 거래 시장: 페더럴 리얼티는 금리 상승에도 불구하고 매각 대상 자산군에 대한 수요가 강력하게 유지되고 있다고 전했습니다. 경영진은 가격 재조정이 저성장 자산 및 높은 담보대출비율(LTV) 조달에 의존하는 거래에 집중되었다고 지적했습니다.
• 개발 파이프라인: 높은 부채 비용으로 인해 다가구 주택 프로젝트의 심사가 힘들어지고 있으나, 페더럴 리얼티는 토지 비용이 제한적이라는 이점을 자주 누린다고 언급했습니다. 회사는 추가 프로젝트에 착수하기 전 임대료 및 건설 경제성을 지속적으로 평가할 것입니다.
• 2027년 운영 모멘텀: 경영진은 체결된 임대차 계약의 임대료 납부가 시작되고 정액 임대료가 현금 임대료로 전환됨에 따라, 특히 현금 기준 동일점포 성장이 2027년에도 견조하게 유지될 것으로 예상합니다.

실적 발표 전화회의 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, and welcome to the Federal Realty Investment Trust Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Jill Sawyer, Senior Vice President, Investor Relations. Please go ahead.

Jill Sawyer

Thanks, [ Rako. ] Good morning. Thank you for joining us today for Federal Realty's Third Quarter 2026 Earnings Conference Call. Joining me on the call are Don Wood, Federal's Chief Executive Officer; Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and Jan Sweetnam, Chief Investment Officer; as well as other members of our executive team that are available to take your questions at the conclusion of our prepared remarks.

A reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be obtained.

The earnings release and supplemental reporting package that we issued this morning, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results.

Given the number of participants on the call, we kindly ask you limit yourselves to one question during the Q&A portion. If you have additional questions, please requeue.

And with that, I'll turn the call over to Don Wood.

Donald Wood

Thank you, Jill. Good morning, everybody. Really nice operating quarter for us with recorded $1.87 per share, beating our internal expectations and up nearly 6% from last year's quarter. Leasing remains strong. Occupancy grew, same-store cash POI growth was 4%. Just solid operating results topped the bottom, we're confident that we'll close out the year on a similarly positive note. And accordingly, we've tightened and raised our guidance. What we're most excited about has been our ability to build out a formidable central region just 18 months, most recently highlighted by our acquisition of the Summit Birmingham, which closed on October 1. And I'm excited to help investors and analysts fully understand the economic upside, this truly generational purchase of an 870,000 square foot 100-acre open-air retail asset that dominates the retail landscape for nearly 100 miles. The first time this asset has ever changed. I suspect that the real estate investor and each of you will be blown away. Basically, if you like Kansas City, Leawood, we're going to love the summit. Press release and related information that we put out earlier this month covers a lot of facts about the summit, but $508 million put to work contractually in the low 6s or 7% on a GAAP basis with projected POI growth averaging more than 5% annually over the next 5 years, supported by strong tenant sales productivity, attractive occupancy cost ratios and significant mark-to-market leasing upside means that we've added a material foundational asset to the fast-growing central region.

When you include our properties in Chicago, along with Kansas City, Omaha now Birmingham, we've created a portfolio of nearly 2.7 million square feet of best-in-market dominant assets with household annual income of $188,000 and on average, attract 4.7 million annual visits per center. These are really important and dominant aspects. A big part of our success in this geographic expansion comes from the retail tenancy of our properties like Santana Row, the Grove at Shrewsbury and Bethesda Row, among others. Strongly desiring similarly merchandised and operated assets in these dominant locations, tenants like Free People Movement, Dori, Cooper's Hawk, Alo, others.

We've also had -- we have had great success in our best properties on the coast are coming with us to these central region properties. The opposite is also true, whereby tenants new to us in the center of the country are interested in our well-known and proven coastal properties. So win-win given the quality of our portfolio now stretching from coast to coast and in between. This thesis is while embarked on a carefully chosen expanded geography. It's working even better than we had expected. Leawood and Omaha are leading away with foot traffic up 8% year-to-date, and we expect them to keep out running our original plan. More on that shortly.

Previously closed asset sales fast-growing EBITDA and free cash flow, along with timely debt refinances earlier this year, put us in a position to act on the Summit and other accretive initiatives. Additional asset sales expected to close in the coming months will further strengthen our position. In addition, and given the weakness in our share price over the past 3 months, we saw another great investment at the same time we were acquiring the Summit and repurchased nearly 870,000 shares at an average price of less than $109 in September and October at an accretive yield. Just like the Summit, we believe that buying our own shares at these levels is 1 of the best uses of our capital, that, of course, we do in balance. And we're in a position of strength to do it with a strong balance sheet, significant liquidity and a large pool of identified potential dispositions.

We're well positioned to take advantage of any dislocations in the market caused by higher rates. We feel great about our business when despite a higher interest rate environment. In terms of overall leasing and operations in our coastal markets, all I can say is consumer resilience is inspiring. Higher fuel and other costs appear to be here to stay and while not perfect, are best hedged by good paying jobs. If history is any indication, I believe it is in real estate. High-quality dominant assets in affluent suburbs are the likeliest to continue to support the resilient consumers' mindset.

On the retailer side, demand remains strong, the supply remains limited and supports our pricing power in future growth.

Let me turn it over to Wendy to provide more color on that.

Wendy Seher

Thanks, Don. We closed the quarter with strong leasing momentum with a 14% cash rent spread on comparable deals. This represents 117 leases with an incremental $2.6 million of revenue. These deals pushed our lease rate to 96.5%, up 40 basis points from last quarter and up 110 basis points over last quarter. Equally encouraging is the composition of this quarter's deal was led by the new leases over renewals, a clear signal of the demand for our centers. Anchor leasing, as we projected, continues to drive our lease rate growth of 60 basis points quarter-over-quarter, and we should continue to see that increase into the fourth quarter. Our overall lease rate is the highest we've seen since 2007, and that includes our small shop lease rate, which sits at 94.1%, up 20 basis points from last quarter and were not done.

Physical occupancy stands at 93.8%, which means roughly 270 basis points of signed not occupied leases are still to commence. As those stores open and start paying rent, they're built in growth that bodes well for 2027. Looking ahead, our leasing pipeline remains robust with over 130 deals representing roughly 1.3 million square feet of leasing, driving future growth with rollover expected to be in the double-digit range. The biggest highlight since we last spoke, by far was our acquisition of the Summit adding 870,000 square feet of new raw material and 116 tenants to our portfolio. To give you a sense of the demand for this center, -- during underwriting, we connected with 40 retailers that told us that they wanted to be there.

Since we closed, 35 additional retailers have called us directly inbound calls expressing strong interest in the property, and it's only been 30 days since we closed. Several of those retailers are new to our platform, which provides us kind of a unique opportunity to grow our network of retailer relationships to benefit the rest of our shopping centers. Retailers who recently opened and our opening in short order include such names as Brandy Melville, Reformation, LoveShackFancy and Garage as well as Boden, Free People and [indiscernible]. This center represents a true example of best-in-class retailers with a long list of demand behind the current lineup. With roughly 30% of our leases rolling over the next 5 years at the Summit, we have the opportunity to capture mark-to-market leasing spreads in the mid- to high-teen range. Very exciting.

As Don mentioned, our recent acquisitions in Leawood, Kansas and Omaha continue to provide strong opportunities as well. The longer we own and operate these centers, the more confident we are. We now project our initial 5-year CAGR at more than 5% at Leawood, which is up 50 basis points from our underwriting and more than 6% in Omaha, up roughly 200 basis points. As you might imagine, we're excited to apply these the same playbook at the Summit that we are currently forecast we're currently forecasting over 5% CAGR.

Stepping back for a moment. We know that the headlines from higher gas prices and inflation have people questioning the strength of the consumer. What we see in our centers is different. Traffic is up 3% year-over-year. Our consumer is more affluent than most Americans with a median household income in our submarkets nearly 50% above the U.S. media. That gives them more room to absorb higher costs and they remain resilient. Retailers follow that consumer, and that's what's driving the demand we're seeing for our centers. From the long list of retailers lining up behind the summit, to the depth of our pipeline across the portfolio, durable real estate matters.

And now let me turn it over to Dan to dive into the numbers. .

Daniel Guglielmone

Thank you, Wendy, and hello, everyone. Our FFO per share of $1.87 for the third quarter reflects roughly 6% growth versus last year and highlights another solid quarter operationally. This result exceeded the upper end of our guidance range coming in $0.03 above the midpoint, highlighting the earnings power and diversity of our multifaceted business plan. Drivers for the outperformance include $0.02 from higher rental income and recoveries and $0.01 from better parking revenues and incremental income initiatives and $0.01 due to timing. These drivers were partially offset by $0.01 from the write-off of straight-line rent. Adjusted comparable POI growth, our cash basis comparable growth metric was 4%, 4.5% if you exclude term fees. This cash basis comparable figure stands at 4.4% year-to-date. Our GAAP metric was 2.5% for 3Q modestly outperforming our low 2% expectations.

Cash basis minimum rent increased 3.3% for the quarter. The OPUS component of our mixed-use portfolio continues to shine with a lease rate of 99% and with significant mark-to-market opportunities at both CocoWalk and Santana Row. Our residential portfolio continues to demonstrate resilience with year-over-year POI growth at roughly 3.5% for the third quarter as our Northern California, Metro New York and Metro Boston assets drive positive results for a very targeted portfolio.

Now let's turn to the balance sheet. Our next debt maturity will not occur until mid 2027. At third quarter end, our annualized net debt to EBITDA stood at 5.5x and our fixed charge coverage was 3.9x. During the third quarter, we issued $460 million of 3.5% exchangeable notes with a maturity in 2031 and a GAAP interest cost of 4%. This compares to the 5.25% GAAP cost of a 5-year unsecured note at that time. We are very pleased with the execution and the timing given where interest rates have trended in the last 75 days. The transaction provided significant liquidity and compelling pricing and positioned us to not only purchase the Summit in Birmingham, a dominant generational retail asset, but also allowed us to be opportunistic in repurchasing our stock inside of $109 per share at over a 7% FFO yield and an implied 6.8% cap rate.

Liquidity at quarter end was in excess of $1.5 billion with a fully available $1.4 billion revolver and over $100 million of cash. We sit today post Summit acquisition and share buybacks with nearly $1 billion of liquidity after the $600-plus million of opportunistic capital allocation decisions. With respect to asset sales, we are currently active with over $600 million of transactions in process targeted pricing is in the mid to upper 5% range or roughly 25 to 50 basis points wider than our expectations make but still a meaningful spread to our targeted acquisition returns.

No residential product is part of this current pool. Now on to guidance. As a result of another solid FFO beat for 3Q on the heels of our robust first half of the year, we are raising guidance for both NAREIT and core FFO to $7.54 to $7.58 per share. At the midpoint, this 4% -- $0.04 increase represents 7.1% growth for core FFO when compared to 2025 with the range being 6.8% and 7.4% at the low and high end, respectively. We are increasing our outlook for adjusted comparable growth, our cash metrics by 25 basis points to 4.38% to 4.58% or 4.5% midpoint while we are keeping our GAAP comparable midpoint unchanged at 3.5% with a tightened range of 3.38% to 3.58%.

Drivers for the increase in guidance for FFO and cash comparable included $0.03 of permanent outperformance in the third quarter, roughly $0.03 of contribution in the fourth quarter from the Summit acquisition. But please note this accretion is inflated this quarter as we benefit short term from temporarily higher leverage in advance of completing our asset sales. More on that shortly. Plus, we had roughly $0.0067 of accretion from the $95 million of share repurchases we executed. These increases are offset by $0.01 of timing and $1.5 million increase in our forecasted G&A as we continue to invest in business development initiatives with strong ROIs.

None of our other guidance assumptions summarized on Page 27 of our 8-K, changes in any material fashion. While this updated guidance reflects the Summit acquisition and the repurchase of our common shares, it does not reflect the $600 million plus of targeted dispositions, which will not likely occur until 2027. Please keep in mind that on a long-term basis, we are funding the Summit acquisition through capital recycling. We are targeting blended yields on dispositions in the mid to upper 5% range. For modeling purposes, I would use 5.5% to 5.7% of sales versus a 6.9% GAAP yield for the Summit. So a spread of 120 to 140 basis points or $0.07 to $0.08 on a long-term annualized basis.

As discussed on prior calls, our long forecasted fourth quarter spike in our overall occupied rate is still expected as we see the 93.8% quarter-end level move into the mid-94% range to close out '26, powered by already signed leases that are scheduled to commence this quarter, many of which already have. With respect to our guide for FFO in the fourth quarter of '26, we expect a range of $1.92 to $1.96.

Now taking a look back at Federal's 2026 year-to-date FFO as we entered November, we have seen meaningful performance from where we started the year and on February 1 with roughly 130 basis points of outperformance and FFO growth at the midpoint of guidance which positions us to achieve over 7% FFO growth for the year.

With that, operator, please open the line for questions.

Operator

[Operator Instructions]

And today's first question comes from Michael Griffin at Evercore ISI.

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Michael Griffin

Just curious if you could give a little bit more color on the going in yield as it relates to Summit acquisition. If I think back to Kansas City last October. I think that was at 6.7%. This 1 was at about 6.2% and it seems like the funding costs have gone up. So I'm just curious, are you seeing more increased competition for these kind of deals and that's decreasing kind of the relative accretion spread? And any other color there would be certainly helpful. .

Donald Wood

Thanks, Griffin. I appreciate that. This is a real -- I know how special Kansas City was is effectively as a dominant asset. Birmingham is at a different level. This is 100 acres. This serves literally 100 miles. This is the only product of its type within that market. So it's not just a city. It really is a region. We wanted this 1 really badly. The notion of where the underwriting came in on this has more to do with the size of the mark-to-market here than it does the going-in cap rate. The growth that we're looking at from this asset, which is -- it's totally set up to outperform for a significant period of time. And so when we looked at that mark-to-market, and it's why you see it in the IRR that we're talking about, it's why you see it in the CAGR, which, by the way, if we were underwriting this asset today, we would probably have underwrite higher rents than we did on purchase based on what we've seen. I think Wendy talked about it a little bit.

So more than a macro comment about of going in cap rates. I think this has a lot more to do with the specific powerful power of this asset and the mark-to-market of the cash flow that should exceed pretty much anything we've seen so far.

Operator

Our next question comes from Michael Goldsmith at UBS. .

Michael Goldsmith

Maybe just to broaden out the capital allocation discussion a bit. You provided a multiyear outlook at the Santana Row Investor Day earlier this year. given just what we've seen in the changes in both the transaction market and interest rates since then, how is your view of the longer-term earnings algorithm changed, if at all? And if yes, just has the components change maybe related to capital allocation and then also the financing .

Daniel Guglielmone

Yes, good question. Obviously, an obvious one. We're in the very early stages of our budgeting process. So that was a a way to get me to kind of divulge some outlook on guidance for '27. Let me just a value there. But I would say that the framework broadly that we outlined back in May is it still holds up given the fundamental strength in our underlying business, albeit with the kind of the 2 areas that you mentioned. This is a very, very different interest rate outlook that we're dealing with here, 5 to 6 months later. The refinancing headwinds likely in terms of that framework, those outlook assumptions should move probably about 50 basis points at least on the wide end. And then I think that from a capital recycling perspective, maybe we're a little bit tighter, 25 to 50 basis points from that perspective.

However, acquisition volumes feel like that we've seen recently, we're optimistic we should be able to keep that overall outlook in line. So we bought $2.8 billion worth of assets in 23 separate transactions since COVID. And in just the last 20 months, $1.35 billion. And in the mid-6s cash yield, GAAP yields in the low 7s. You could see us lean in even further towards capital recycling heading into 2027.

Operator

And our next question today comes from Alexander Goldfarb at Piper Sandler. .

Alexander Goldfarb

Don, you talked a lot about the -- getting these larger regional dominant assets and the rents are even better, the tenant perception is even better. But just curious on the ancillary income, you guys have made an effort with expanding partnership income using technology on parking, paid parking. So just sort of curious, as you've operated these larger regional centers, how is the ancillary income grown relative to what you guys originally underwrote as far as being adding additional revenue to these outside of just the NOI and rents? .

Donald Wood

Yes. No, I love the question, Alex. And you haven't seen it yet because of the timing of which we made these purchases in the last 12 or 15 months obviously a month from Summit, you're not seeing a lot of that impact yet at this point. The opportunity is huge. And the opportunity is huge because of how we've leaned in on those things that you mentioned on our existing portfolio. And so what has happened at Santana Row, what has happened at Assembly, what has happened at Pike & Rose is certainly transferable to these type of assets that we're buying. It's 1 of the assets like this. It's 1 of the reasons that we talk about visits.

When you talk about 4.7 million visits a year to on average to the stuff that we bought just in the central region that -- if you think about it, those eyeballs give you opportunities that a typical grocery anchored shopping center obviously does not get with respect to ancillary income. So you should expect that to continue to grow. I think Wendy's given some numbers or somebody has with respect to the progress that we've made company-wide -- but everything that we're buying, Alex, is brand-new raw material to be able to keep that going and expand upon the success we've had on the coasts.

Operator

Our next question today comes from Haendel St. Juste with Mizuho. .

Ravi Vaidya

This is Ravi Vaidya the line for Haendel. I hope you guys are doing well. Can you talk about your decision to buy back stock here? Is this something that was initially contemplated in your guide for the year? And how should we think about this as a capital deployment tool as part of your other acquisition priorities? .

Donald Wood

Thank you, Ravi. Thanks for the question. I mean, look, the quickness by which this stock dropped and everybody's stock drop from -- in the 90 days made it very clear to us that there was an opportunity there that we were oversold and seeing that and coupled with the way we had set up the balance sheet, knowing we were going to do the Summit also, we considered whether this was the appropriate time to effectively make the investment in our own shares. It was hard to ignore it. And accordingly, we jumped. We will always use that tool in balance. It's about every capital allocation decision, Ravi, that we make has to have an ROI that's in excess of our cost of capital significantly, obviously.

And so when you're down at where we were trading that quickly, it seemed like a prudent thing to do for about $100 million or so. We will always have that tool. It will be balanced against what the other opportunities are to be able to acquire assets, which is always our preference. Our preference is to grow our business plan, always #1. That's what we tried. That's why we're in business. But there are times when it makes sense to use this other tool and we execute .

Daniel Guglielmone

Yes. And Ravi, just to highlight 1 piece of your question. That was not in our original guide, and that was probably a $0.005 or $0.006 of the drive in our midpoint guide from $7.52 to $7.56.

Operator

Our next question today comes from Floris Van Dijkum with Ladenburg. .

Floris Gerbrand Van Dijkum

Just -- I love the capital allocation here as well, the spread investing. But if you can talk a little bit about -- I know the Central region is getting a lot of hype here, rightly so, I guess, you're allocating $508 million to the Summit, which is a high-growth asset. And you talked about Leawood underwriting exceeding your original underwriting significantly. Maybe touch upon some of the acquisitions you've done in California in the past as well. And I'm thinking particularly of Grossmont and Del Monte. How have those investments panned out relative to your original underwriting? And how is NOI growth trended there relative to what you originally thought when you bought those assets. .

Donald Wood

Floris, it's Don. And we have Jeff Kreshek on the line, right? Just going to want him to answer this specifically. But I love the question in that California represents 25% of the company or something like that. It has been our fastest-growing region in 2026 not only with the acquisitions that Jeff will talk about in a second, I hope -- but also just generally, when you look at Santana Row and you look at what's happened with the residential income stream which we're building more out there. When you look at all of the capital that we've spent in California, the returns have been spectacular, frankly, '26, '27, '28 with our expectations. Specifically with respect to those 2 assets, Jeff? Or anything else you want to add about California?

Jeff Kreshek

Yes, happy to, Don. Floris. So as Don mentioned, I mean, we're seeing really, really strong growth coming out of the California market. And really broad-based. I mean it's across virtually every asset, and I'll get to the recent acquisitions in a second, but it's across every asset. And really, that supply-demand dynamic from leasing is really manifesting itself in both leasing volumes and spreads, which have been extremely strong. You look at something like Del Monte, which was really more of a remerchandising play as opposed to redevelopment, our 5-year CAGR there should be about 11%. We're ahead of plan on executing the remerchandising, feeling really, really good about the retailer demand that we're seeing and -- it goes back to some of the comments that Don and Wendy made about Birmingham, when we buy an asset, we really start to see retailers come out of the woodworks and say, well, the Federal is not that. That's something we want to pay attention to.

Then you go to something like Grossmont, which is really much more of a redevelopment play, certainly being done over a couple of phases, but strong anchor growth there in the Walmart and Target deals, strong additions there. and a 5-year CAGR that's going to be around 10%. But it's interesting. It's not just the recent acquisitions or redevelopment projects. Even we're seeing this in some of our legacy assets. So take something like a Westgate that you -- many of you toured when we were out for Investor Day in May, I mean, we've owned that asset for nearly 2 decades. We're still mining growth out of that project with a 5-year CAGR of around 13% and some really exciting things happening there.

So a lot to do on this portfolio still in a lot of runway. And yes, these projects take capital. But even on the capital we're deploying, we're seeing a double-digit return on cost on those. So a lot of reasons to be really, really bullish about California right now.

Operator

Our next question today comes from Samir Khanal with Bank of America.

Samir Khanal

I guess, Dan, 1 line that stood out was the higher recoveries in the quarter. I guess, how should we think about expense recoveries heading into '27? It sounds like there's more room to go on occupancy. But are there any other factors that could provide some upside to recovery ratios here? .

Daniel Guglielmone

Yes. Look, the biggest driver there is just we continue to see growth in occupancy. And I think that's probably the the resiliency of our occupancy and the momentum that we're likely to see there would be the biggest driver. It's also a little bit of timing and timing of kind of recovery payments from tenants, particularly anchored tenants and so forth. Real estate taxes coming in, in a particular quarter. So it's a quarter -- I wouldn't look at it on a quarter-over-quarter basis. It's really over the course of the year. But we're seeing kind of our ability to kind of generate stronger recoveries as we're driving occupancy upwards is logical.

Operator

Our next question today comes from Juan Sanabria with BMO Markets. .

Juan Sanabria

Two-part question, I guess. First, maybe, Don, could you speak a little bit about the densification opportunities at the Summit? And then just the second question on the funding. Could you just give a little bit more feel for the $600 million of assets that are up for sale for funding and kind of just the number of bidders and any price sensitivity that those bidders or buyers have expressed given the interest rate environment, if you could just expand on that, that would be helpful. .

Donald Wood

You bet, Juan. First of all, with respect to densification opportunities, nothing is underwritten. Everything that you've seen is really a remerchandising and mark-to-market opportunity. Having said that, you're looking at 100 acres. And the notion of something to add to that over time, I'd even call it probable particularly when you look and you understand what the zoning is there at that specific asset. But again, I've got nothing for you, certainly at this point that way.

One thing you should think about, if you know the asset or have looked at the as I understand what it is that we bought there. You know there's a vacant snacks box on the 1 component of the shopping center. We're in the process of acquiring that box and should be able to have that under our control a little bit too. So that may provide other opportunities. It's likely to be a remerchandising with respect to that box. But again, what that opens up for that part of the shopping center is nothing that's been underwritten, all good stuff. And financing, Dan, do you want to take .

Daniel Guglielmone

Yes. Yes. Look, we're in process with over $600 million. It's across a number of assets. So far, the demand has been strong, really has not been meaningfully impacted at all. I think we're happy with the direction we're going there. Most of that won't close until 2027. So there'll be a little bit of -- from a timing perspective, I would factor that in probably models end of the first quarter, probably the best approach. But in the mid- to upper 5s, initial forgone yields, IRRs, we still expect to be kind of inside a 7% unlevered 10-year and 5-year IRRs, there's no resi as part of that pool.

And I think that we'll -- we feel as though the -- that pool is holding up very, very well with regards to kind of the more challenging interest rate backdrop. I know you didn't specifically ask it, but maybe because there has to be always questions, there should be questions on the ability for us to monetize the assets that we're trying to do so on says we feel good about that. But let's just go to [indiscernible] Jan for a minute and let Jan talk about the disposition portfolio first than the overall acquisition portfolio. .

Jan Sweetnam

Yes. Thanks, Dan. And let me sort of start with what we're seeing in the transaction market, and I'll duck into our disposition pool and a little bit how we see 2027 going forward. But -- the good news, as we look at what's happened in the market in September and October, some 90% of the transactions have been moving forward. And -- there have been some hiccups in repricing and assets, but they're really assets that have little or no growth or the buyer pool really is a high loan-to-value capital stack, if you will. And -- in terms of assets, whether it's ours or other ones that are out in the marketplace that are calling for offers today. I think the hiccups are gone. But there's some repricing still on those flatter assets and higher LTV capital assets.

And so as we think about our portfolio and we're trying to be opportunistic on what we're selling, we're trying to sell into the core market for core buyers. So we're trying to provide something that someone can buy in into the 5s. It's got some growth to it. They can't make a mistake. That continues to be our focus in terms of how we think about our dispositions there. And so we feel like we're really out of some of that disruption there.

As we think about our business plan, and we've talked about it on several calls. We've had a lot of discussion on our May Investor Day. We still see a material cap rate spread on these large dominant assets compared to what we can do in a Birmingham or a Leawood or some other markets that we're looking out compared to our coastal markets. I mean, something with the CAGR, the growth profile and the dominance that Summit has would probably trade in the low 5s, maybe even the high 4s in California or the East Coast or something. So it just -- we still see that as a has some legs to it in our business plan.

We'll have to see what happens in the retail transaction market over the next several months. Don talked about a little bit. There's dislocation in the market. And any time there's dislocation in the market. you might see more motivated sellers coming to the market. And so is that going to happen, we'll have to see. Similarly, when cap rates stop going down and they've been going down, they've been going on for a while, but it looks like now they've stopped going down. So with that dynamic, you'll probably also see some more motivated sellers coming to the market. So I think Dan is right, we've got some reason to be optimistic that there's going to be some opportunities for us in 2027.

Operator

Our next question today comes from Greg McGinniss at Scotiabank.

Greg McGinniss

Thanks for all the color on the transaction environment. But given this higher rate environment that we're in and the dispositions that are looking to fund acquisitions and buybacks now as well, which is great. How is that impacting how is the rate environment impacting your potential development pipeline underwriting? Are some of those longer-term opportunities becoming even more long term at this point, is multifamily development, still pencil Obviously, a lot is going to be rolling off in the development pipeline over the next year. So just curious how you're thinking about new projects that could be added. .

Donald Wood

Yes, that's a great question, Greg. It's -- first of all, everything that we're talking about with respect to the change in rates and the environment, it's -- as you know, amazingly fast. It's been 90 days with respect to where we are. What I look at is, okay, let's say we've got a 5% or 5.25% tenure going forward as we look at it. We have an advantage, certainly in the fact that we don't have significant land cost, and we do get a premium there is it squeezed because of the higher debt -- of course, it is. And does that make it harder to effectively put new -- get new developments, the residential developments, particularly to pencil, -- of course, it does. The question comes, where -- what has happened with respect to inflation where will inflation stop and how will that impact the rents over the next few years.

So it really is going to come down to the underwriting. I can tell you, as you know, we've got a lunch underway right now that will provide that additional income stream over the next few years. We've got Hoboken, that will start early next year. We'll have a lot 12 in Santana Row, which is a big one. that will go later in the year. We've got Will Grove that has just started. So there is a pipeline here if you -- and so as you look at the 90 day you say, okay, is it going to be harder if everything stays the way it is or worsens from here. Sure, if you take that point in time, of course, it will.

But what won't stay the same as rents. And so the notion of what will those rents be? We'll keep a close eye. And as we get into early '27 and later into the year of '27, I think I can give you a much more wholesome answer as to whether we'll be able to make any [ pencil ] going forward. .

Operator

Our next question today comes from Jamie Feldman at Wells Fargo. .

James Feldman

Great. Maybe just shifting gears to the balance sheet. Can you just talk through the '27 maturities, kind of what your latest thoughts are on refinancing though? I know you did the convert in August. Is that something that you're still thinking about this round and just kind of talk us through that $800 million or so? And maybe if there's a way to handicap the impact on earnings in '27.

Daniel Guglielmone

Yes. Good question, Jamie. For 1 thing, we do have about $680 million that matures got it right in the middle of the year in June, July, August, September. You'll probably see us come to the bond market and look to extend duration, something at the longer up towards 7, 10 years is the most likely approach from that perspective. We're likely -- we're in process of extending the [ Vesta ] mortgage loan and we should get greater duration there and keep pricing kind of where it is or you actually even improve it, we're hopeful. So I think that we'll rely upon -- we have a really good standing in the unsecured market. We need to kind of issue there more frequently. I think we'll be -- hopefully, that will be well received. But you can see 2027 should be the year of going to the unsecured bond market to refinance that.

Operator

Our next question today comes from Craig Mailman with Citi. .

Craig Mailman

Maybe just going to Wendy's commentary or Don, your commentary on the Summit and the level of calls you're getting from retailers and maybe underestimate of where rents could be. I mean could you just talk a little bit about the nature of the tenants that are calling it? Are these apparel? Or are these kind of food? Are they EVs, -- like what are the tenants that are super active that want to be in this market that you guys hadn't thought about or are willing to pay rents well in excess of what you had underwritten? I'm just trying to get a sense of -- you guys have been doing this for a long time how this is kind of that much better than what you guys have been underwriting? .

Donald Wood

Yes. Craig, it's a good -- really good question. Here's the way first, and I'm going to turn it over to Wendy in a second. But think about it this way. You know that I don't know, 15, 18 of our assets are very well known. You know the Big 4. You don't know things necessarily like The Grove at Shrewsbury or even Barracks Road in Charlottesville or some of the other assets that we had that really aim for an aspirational retailer effectively and that customer. And those tenants generally, and we said this over over and over, outperform their other stores in our places on those costs in those 15 to 18 great assets.

What we've done by doing -- we underestimate the power of that on those costs to to retailers and Wendy go through them who want to be in other parts of the country that we were not at. Now they don't want to just be anywhere, and they have to be in selected places. And so hence, the the tight buy box that effectively that we have that got us Omaha, got us Kansas City, got us Birmingham. But the notion of being able to finally be in a market, get into a market that they were either underrepresented or likely not represented in with the landlord that day that they have had great experience with in these types of properties, aspirational properties, if you will, on the coast exceeded our expectations. That's what's effectively happening.

And by the way, vice versa, from tenants at the Summit, I could name a couple that effectively we're now going to put in Santana Row or Bethesda Row or The Grove at Shrewsbury because of the relationship that's being built by them. So it's really reciprocal and as I said in the comments, a win-win,

Wendy, the type of tenants that effectively we're talking about here go through. .

Wendy Seher

It's really -- these tenants that we're seeing in the Summit, as Don mentioned, we can aggregate the conversations between a Santana Row, Bethesda Row, The Grove, The Summit. We are going to see much more opportunity to grow. As I had mentioned in my remarks, our relationships with retailers. So for example, I'm just making this up. If you're a group kitchen, right, you're -- which we have not done business with before, unless it's been on a pop up, and you want to be in the state of Alabama, you are only going to want to be in the summit. There is 1 opportunity, 1 major opportunity for a brand like that to be in the state of Alabama, and that's the summit. So when we can aggregate these converted stations, they're going to go both ways. And I think that's what we're most excited about to have 30 people calling us. It's different apparel food service that want to be in the Summit. That is huge raw material for the rest of our conversations throughout our portfolio. .

Daniel Guglielmone

Craig, it is broad-based. So and Wendy went through a list of names in our comments, and I did a few of them, too. So it is certainly some lifestyle based, but it's more than that. It's also grocery stores. It's also service providers. It's also health and fitness. It is a broad-based -- the certain big assets and go ahead. .

Wendy Seher

I just want to -- just 1 other conversation that we've had before that I want to maybe repeat again is when we were going into Kansas City, there was 2 tenants that wanted to be in Kansas City, but only in the [indiscernible] , and that was Vuori and Alo. They've just opened in the Town Center Plaza right next to each other on both NCAP. So that conversation of I want to be in that market, I'm not ready to be in this particular location that you want me to be in, but now that Federal owns it, I'm more interested, and I know what federal is going to do and invest in these shopping centers and merchandise these shopping centers. And now we've had 2 just open. So that's an example of how those conversations have evolved.

Operator

Our next question today comes from Sydnie Rohme with Barclays.

Sydnie Rohme

I was wondering if you could give a little more color on the lease and occupied spread with the lease rate now at 96.5% and occupancy at 93.8%. How should we think about the timing of that 270 basis point gap converting into occupancy and rent commencement? And how much of a tailwind could that be into 2027? .

Daniel Guglielmone

Good question. Good question. Look, we're expecting kind of that -- we've got a nice gap out from 230 basis points to 270 basis points. That should shrink pretty quickly just given the occupancy growth that we'll see in terms of our occupied rate moving up into the mid-94% range. So you'll see probably of the SNO, which in total is about including kind of what's in the not delivered pipeline is probably about $42 million in total. You'll probably see about 30% of that number commence in the fourth quarter with about probably 50% in '27, commencing and then the balance in 2028. And so you'll see some good it's probably '27 it's kind of more in the middle of the year in terms of commencement. But directionally, that's kind of, I think, as you could see that roll on. And it's a longer-term momentum that we'll see.

Operator

Our next question today comes from Mike Mueller at JPMorgan.

Michael Mueller

Dan, in thinking about your CPOI outlook, what's the high level on how retail is performing in there versus resi and versus office within that overall outlook? .

Daniel Guglielmone

Repeat the question, I didn't quite understand kind of what was the .

Michael Mueller

Yes. If we're looking at your CPOI outlook, the growth outlook, how is retail driving that versus office versus resi in terms of the relative components? .

Daniel Guglielmone

Yes. Look, it's really retail driven. I mean 80% of our portfolio is retail with, call it, 10% in the office and residential. But retail is going to be the primary driver there. I don't have the specific contribution to those components. Residential has been resilient, continues to see strong growth. POI growth in the third quarter was 3.5%. So it's contributing maybe a little -- not as much as the retail, but it's largely, largely retail-driven with office and residential contributing, but the retail is -- we're a retail company, and that's going to be the primary driver.

Operator

And our next question today comes from Paulina Rojas with Green Street. .

Paulina Rojas Schmidt

Good morning. at a prior conference, I think, in September, CEOs were asked about 2027 same-store NOI expectations for the sector in general. And you were the only 1 I can remember pointing to a deceleration. So understanding that this was in the context of a rapid fire around something of that sort. Can you share more about your perspective? And are you seeing evidence not necessarily in your own portfolio but in the industry that a pullback is already taking place. Or is this more of a long-term view anchored on the cycle and expected volatility or cyclicality really that we haven't had in recent years.

Daniel Guglielmone

Yes. Paulina, good question. Look, we kind of look at those rapid fire questions, and we kind of answer them a little bit maybe more flippantly than we'd like to I think the comment there was that maybe the growth would be slower, but not for us, which was the comment. I don't think it was meant to be a broad comment in terms of the direction of the sector. We do expect our comparable growth to be strong in 2027, consistent with what we talked about in May, particularly on a cash basis, as our cash comparable numbers should exceed and will exceed as we convert straight-line rent, cash rent not only in the development pool but in the rest of the portfolio. So we're feeling good about that heading into 2027. It was more of a flippant remark as opposed to a commentary on the direction of the cycle. .

Operator

And that concludes our question-and-answer session. I'd like to turn the conference back over to Jill Sawyer for any closing remarks.

Jill Sawyer

Thanks for joining us today. We'll see many of you at NAREIT soon. .

Operator

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.