Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House, our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week, we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ICE's exchanges around the world. Now let's go Inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
Convenience retail is all about making life easier, offering quick access to the essentials you need, right when you need them. With strategically located compact stores, it's perfect for those on the go, whether near your home work or favorite hangout. Curbline Properties, that's NYSE ticker symbol CURB, stands at the forefront of this retail space since spinning off from site centers and becoming an NYSE listed enterprise last October. Focusing on unanchored properties, Curbline offers businesses both large and small, the ability to thrive without the constraints of traditional big box models.
Joining us today is Curbline Properties CEO David Lukes. Leading the company since its spin-off about four months ago, David is a real estate veteran and is positioning the still newly independent brand for continued growth and success in the months and years to come.
David, thanks so much for joining us Inside the Ice House.
David Lukes:
Thanks for having me, Lance. Great to see you.
Lance Glinn:
So back in October, Curbline spun off from site centers and officially began trading here at the New York Stock Exchange under the ticker symbol CURB as a newly independent company, obviously still in its early stages with just four months of operating history. Looking at the big picture though, as we've obviously started 2025 and now move in close to February, March, April, how would you characterize the current state of Curbline properties and the opportunities ahead for the company this year?
David Lukes:
Well, certainly the current state is fantastic. I mean, it's only been 90 days and things are going well. It's hard to see a lot of difference in the first quarter and a half, but the reality is that the consumer has changed their location. Work from home has made a big change, hybrid work. I think data analytics has helped us understand properties better than we ever have before. And so the company has a very unique strategy. We're focused on a very specific subclass of retail properties, and we've got the balance sheet with no debt and a significant amount of cash on hand to grow the company. So being unique and growthy are two features that I think are certainly warranted to be a desired in the public markets, and that's what our goal was.
Lance Glinn:
And the spin-off established Curbline as the first publicly traded REIT solely dedicated to convenience properties. Just what was the strategic thinking when you think back to October, and even the months before, what was just the strategic rationale behind the decision to separate from site centers and how has it allowed Curbline to really sharpen its focus on its core strengths?
David Lukes:
Well, any strategic action for a larger mid-cap public company is likely the result of a combination of necessity and opportunity. The necessity part was really driven by the fact that the shopping center REIT industry has a number of companies that have portfolios that are substantially similar, some grocery anchored, some urban, some suburban, some street retail, some power centers, some lifestyle centers. And when you look at all these companies that the sameness means that it's very difficult to distance yourself from the pack and become a long-term winner. It's just more complicated.
When the first year or two after COVID, when everyone's operations were fantastic, retail was basically entering a new renaissance that had been largely vacant for 10 years prior. The opportunity was for us to try and distance ourselves and become more unique. So I think necessity was more about wanting to outperform, and the opportunity was the fact that we had spent some serious years, about five years studying convenience properties and trying to really understand what makes them work. And if we could get the first move or advantage and be the largest and the only way to address that thesis in the public REIT space and list it on the New York Stock Exchange, that would be a winning strategy, and that's really what we went for.
Lance Glinn:
So you mentioned being the first and really taking advantage of this opportunity. Why do you think the market wasn't flooded, the sector wasn't flooded with players already? Why do you think it took Curbline properties to be the first to really make a dent in what is convenience retail?
David Lukes:
Well, it is funny. If you look at the commercial real estate sector, it's a $20 trillion industry in the US, and retail is one of the dominant larger food groups in that. And if you look at the amount of transaction volume of buying and selling retail properties in a five-year period, you could see, gosh, 200 billion trade, and about 20% of that trade is in unanchored convenience-oriented properties, but it's mostly, meaning like 96% is being traded by local investors. Institutions have almost exclusively gone to large format and traditionally having a grocery component. So the real question is why is that the case? Why are institutions so convicted on grocery?
And there are some positive things about anchored retail. It's got strong credit. They certainly have name brands. I think people have a great understanding of being able to look through the credit and understanding who those retailers are, but the primary reason in my mind is that there's statistics, there's data. And for a large institution to make a real estate bet, it has to be more than a hunch. A local guy can make a hunch, but an institution pouring out billions of dollars, they need to have data, and that data was historically in the form of tenant sales.
If Wegmans does $1,000 a square foot in sales, if Whole Foods does $800 a square foot in sales, you know they're three times the national average. It must be a great property. Therefore, all the shops adjacent to the grocery must also be doing well. Now we have statistics, we can make a bet. What changed in unanchored is the advent of location data on cell phones. And this was largely unavailable until, call it 2018, 2019. That data is so robust that you no longer have to only rely on tenant sales that are reported by the tenant. Now you can rely on customer traffic from cell phone data, which is incredibly robust, and it allows landlords to have information that we didn't have before. That to me, is what really crossed the Rubicon between private investors making a local bet on convenience properties to now institutions, and us being the only public institution really, being able to make a thesis that has math behind it that I think is convincing and durable.
Lance Glinn:
So David, Curbline emphasizes this unanchored retail space, the concept that shopping centers can thrive without a large anchor store to draw business. What makes this asset class so appealing to you, and how is Curbline separating itself from competition in this now growing market?
David Lukes:
Yeah. Well, first of all, why is it interesting? I mean, this is to me the most opportunistic period in my career where we could do something that I think does have a lot of math behind it, but it's got a compelling story.
If you think about post-World War II America and the advent of the suburbs, ring roads, US highways, suburban growth, population moving from the cities to the suburbs, there was a grand bargain that was made between tenants and landlords, and it basically went like this. The tenant gets a very cheap rent if they're a large operator, call a Kmart, Walmart, Target, et cetera. And for them getting a cheap rent, you are basically promised them drawing customers, right? Same thing in the malls. You had Macy's and Sears that, "Hey, we'll give you the land for free, but we want to build a mall next to you and we're going to use your customer traffic to feed ourselves with higher rents for the shops."
So economically, the leases for shops are better than the leases for large anchors. So the question we had is how can you separate the anchor that draws the traffic but pays economically less positive rewards for the landlord and try and focus on the component that has higher rent growth? And the reality is that I think that the data that we now have with cell phones shows us that shopping centers are actually large chess boards for all of these retailers to move around. And that ecosystem is for you and I to go shopping, right? We go shopping at a shopping center and you may park your car and go to a bunch of stores.
There's an entirely different part of our world, which you can think about in your own life, which is not going shopping, it's running errands. How frequently do you run an errand to go out at lunch and go to Chipotle? Do you go to the ATM at Wells Fargo? Does somebody of your family get your nails done? Do you go to the barber shop? These are running errands. These are not going shopping. For you to run errands, convenience is key. You want speed, access, and you want it to be in a timely manner.
What we've really proven, and this is really through the data analytics, is that going shopping and running errands are two distinct, differently property types. And being different property types, they deserve to have their own asset class for effectively running errands. And I'll give you some statistics. Two thirds of the customers that come onto our properties at Curbline are on our asset less than seven minutes. That's not a going shopping experience. That's not lingering longer. We're not placemaking. We're not making a place where you linger forever or you multiple shop. We want a place that is right up on the road, easy to your house and you're in and out. There's a lot of customers that come to our properties multiple times a day, and the tenants will pay dearly for that access to wealthy suburban customers who are running errands.
So being unique like that, it's not that we're saying there's a negative component to anchored retail other than the economics, but there is a distinctly positive attribute about running errands, convenience properties, which is there's not enough of that space in the US. There's simply too much demand for the existing inventory. And for someone to build more of it, they have to charge rents that are significantly higher than our in-place rent roll. So we basically have a floor in value, and now it's really all about generating returns through renewing these tenants.
Lance Glinn:
Quick and easy, in and out. You leave your house, you're back within 15 minutes, right?
David Lukes:
Yes.
Lance Glinn:
That's ultimately the goal of these unanchored properties where you can get a Chipotle burrito. You can go to AT&T and pick up a charger. You can quickly, during a lunch break, head out, back in 15 minutes, don't need to spend the 30 to 40 minutes. We're typically used to when we do go to a mall or a large shopping center where there's so much around us and so much to do and so many options that oftentimes we get lost in all the opportunity.
You talk about this data analytics, and throughout, whether it be during COVID, even before COVID, the consumer is evolving every day, right? We're talking about quick and easy. We're talking about fast and efficient. Through the data analytics, through the geolocation, how have you seen consumer preferences evolve and how are you then evolving alongside those consumer preferences to make sure that your stores and your properties stay quick and easy and stay super efficient?
David Lukes:
All right, well, consumers have evolved, right? I mean, the hybrid work has changed the workforce in America, maybe it goes back. Does it go back in five days a week nationally? I doubt it. Does it stay at about three days a week? I doubt it. Maybe it ends at four, but the point is the customer has always been, really, ever since the dual income family, the customer's always been some part shopping, some part running errands.
If we focus on the running errands part, if you're betting on a specific retail chain as an investor, you're betting on that concept lasting. And concepts never last, they change. So for a real estate investor, you're betting on your location and you're betting that it will always be desirable for whoever is in trend. So to a certain extent, we don't really care if some tenants come in and some tenants go out. What we want is a size space that everybody needs.
My favorite example is if a Sears goes out in a major mall and it's 200,000 square feet and the landlord has to turn around and release that, how many tenants will take a 200,000 square foot building? Somewhere between zero and zero If Sports Authority goes away and their 50,000 square feet, how many tenants will take that? One, two, three? If a 30 by 60 square foot shop that's 1,800 square feet goes vacant, how many tenants need that size? Hundreds.
Lance Glinn:
Because it could almost be anything.
David Lukes:
Literally hundreds. It could be a nail salon. It could be a UPS door. UPS store is one of my favorites right now. I mean, people leave their car running to drop off Amazon packages and return them at UPS stores. So what we really care most about is the fact that our real estate is desired by the next tenant, and yet it works well for the current tenants.
So one thing in retail is it's always changing. The tenant rosters are always changing over time, but there's a cost to that change, and that cost is CapEx. So one of the challenges of a large anchored property is that the cost to replace tenants over time is so expensive, it becomes like the cholesterol in the bloodstream, and that restricts your ability to have cash flow go out in dividends.
The beauty of unanchored retail and inconvenience is that the spaces are so small and ubiquitous that every time you replace a tenant, it's inexpensive to do so and the downtime is less. And so you just don't have that cholesterol in the system that restricts our dividend growth. And I think over time, that is one of the most winning components of the strategy is that we have a very capital-efficient business where rent that comes into the top line, a lot of it drops to cash flow.
Lance Glinn:
I want to pivot the conversation, talk about your career a little bit. Span several decades. You've been involved in real estate for years now, but you started as an architect. So how does one begin as an architect yet find themselves in real estate and then ultimately find themselves leading a publicly-traded NYC listed company?
David Lukes:
Well, when I had a desire to be an architect, you can imagine it was part math and part creativity. I always joke that one of the courses that we had to take was physics for poets. It was kind of physics, but it was kind of poetry. And that gray area between creativity and math was what I really aspired to do.
What I expected when the architectural profession is to go work for a genius who would come out of his or her office and bestow their creation upon everybody else to drop. What I learned is that that was decidedly not the case. And in fact, what really happens at these design firms is that there's a group of 10 or 15 young people that are all coming up with designs for the same situation. So my first learning curve was that the comparative process of coming to a conference room and everybody putting their works, their models, their drawings on a table, and you would sit there as a team and compare the pros and cons of each design. And I think the piece that I learned the most was that it wasn't you were trying to cherry-pick the best components of everybody's design. You were also trying to avoid the worst mistakes.
Eventually, most of my clients ended up being developers. There's one actually famous architect from the turn of the century, Gilbert Cass, who designed the Woolworth Building who I think probably had a similar experience for me. He started off designing unique buildings and then he started working for developers. But his famous quote was, "Buildings are a machine for creating value from the land, making the land pay." And I think it was that moment when I realized that the developers that were my clients were trying to build machines to make the land pay, and I wanted to be part of that. So I switched to be a real estate investor, and I think pretty quickly thereafter as I was starting a development, a developer is making a machine. That's their job. And it's a one-off anecdote. A real estate investor that has to put large amounts of capital out shouldn't be looking at anecdotal situations. They should be looking in the big macro.
And for me, what I'm fascinated by with real estate is trying to find what real estate investment fits with the capital that you have. And the capital I have is public capital. It wants preservation of capital. It wants safe dividends. And that's really what drove me comparing with my partners at my firm to try and figure out what strategy fit with what capital we had.
Lance Glinn:
Are there other similarities between architecture and what you're doing now that finding the right way to do things? Obviously trying to avoid the wrong way to do things. I would think that, well, yes, you're not sitting in a room each having your own individual plans trying to nitpick individual parts, but there is still some, "Hey, we know this works. Let's continue to do this. We know this isn't going to work. Let's stop doing that." Do you see those comparisons every single day from where you started?
David Lukes:
I do, but with one distinction, and that is that there is no right answer and there is no wrong answer. There's only a range of grays. And that to me is why real estate is the perfect middle child career. You're in the middle, you're in the gray area. I love the gray area. And I think when you have a good team of executives around you, what you do find is that every single decision you make, which tenant to put in, how much to pay, how much you should buy for an asset, should you densify it, should you take away tenants, should you replace people, they're all middling gray area questions. And over the long term, more right than more wrong, creates more value, but it's never as simple as this is the right solution.
In business school, they would refer to highest and best use analysis, right? That's the classic consulting term. Well, if you have a piece of land, what is the highest and best use? That assumes that you can find perfection, which is not possible.
What I actually prefer to invest in is the lowest and worst use, and that's retail. I mean, if you think about urban America, the highest and best use of land is density. And if you're a developer, you're trying to build that machine that can densify and force the land to pay more. But if you're a real estate investor putting out lots of capital, you actually do better if you buy the lowest density and the worst use with the lowest rent because you've established a floor. And in the next 20 years, there's really only the ability to go up. And that's primarily why I really, really became enamored with convenience assets because it's a very low density building on a very high quality piece of land. And in fact, there's many cases where I would expect that if the tenants all left the land is actually worth more than what we paid for it. And that's a unique position to be in, especially if you're investors have capital preservation as equally as important as growth.
So in that sense, it is similar architecture. You're trying to find the highest and best use, but that doesn't mean you want to buy the top. You actually buy the bottom where you know there's growth.
Lance Glinn:
So convenience retail accounts for nearly a billion square feet nationwide. And since the October spin-off, you've completed 20 acquisitions totaling over $200 million. So with the footprint of these shopping centers already, how do you assess expansion and the opportunities presented to grow bigger? How do you decide this is the right market we want to target, this is the right area we want to go after, this is the right location for Curbline to continue to get bigger?
David Lukes:
So if the market... I mean, the market is about 950 million square feet. I believe we have the largest high quality portfolio in the country. There are numerous private funds and private families that have invested in this asset class for years. So it's not like it's a new invention. What is new is the size of the addressable market and the capital structure we have as a public REIT. So we do have the ability to grow quickly, and the addressable market is massive. I mean, if we have the largest high quality portfolio and we are 1/3 of 1% of US inventory, that's an enormous runway, which is primarily why we structured our balance sheet with no debt and net cash because from the get-go, we can make investments and they can be accretive.
As we grow, it has more to do with being patient. I would say that the only risk to our company right now is a self-inflicted wound. If we start gobbling up a pie eating contest and buying assets we shouldn't, that's going to be a value destroyer. If we can stick to our knitting and stick to exactly what we've learned over the last five years in the sector, there is plenty of room to grow.
So to your point, in submarkets, it matters less about region and it matters very much by zip code, and that is, when you're in high income submarkets in the suburbs, highly educated, wealthy, the road infrastructure is in place, you're unlikely to find competition because local zoning boards do not like to entitle lowest and worst use zoning or highest and best use zoning. And so if you can buy assets in these restrictive markets, excess supply is pretty rare and the tenants need to be in areas where people have high discretionary income. So we're less focused on Southeast, Southwest, Northeast, Northwest, Mid-Atlantic. We're more focused on the specific suburb within maybe the top 30 cities across the United States. We found great properties in Kansas City in Denver. I'd love to be in Boise. I'd love to be in Omaha.
Today, most of our portfolio is in the Southeast and the Southwest and a little bit on the coast. And I'd say that's primarily because of the legacy portfolio that we had, plus the inventory that we saw over the last couple of years, but I think over the next five, years you'll see us expand into a number of markets that are wealthy and large enough.
Lance Glinn:
We spoke earlier and mentioned some of the various tenants that you have at your property is AT&T, UPS, FedEx, Wells Fargo, to just name a few, Chipotle another one. How important is tenant stability when you are working with these large partners that want to occupy these smaller square footage? You had mentioned that you're focused on tenant stability, but you're also focused on what the next tenant would want to. So when it comes to consistency and stability and having the same tenant, let's say in place for 10, 15 years, how important is that to what you do?
David Lukes:
Yeah. It's funny. That is the biggest asset management question. Do you renew a tenant or do you replace the tenant? And so this is not an occupancy business where you buy vacant buildings and you lease them up. This is you're buying fully leased buildings. And the question is always every single year, are you going to renew this tenant or are you going to kick them out and replace them? And that comes into credit. How much credit versus non-credit do you want?
Our portfolio is about 70% credit right now, national credit, Starbucks and Chipotle, and you mentioned Wells Fargo, JP Morgan Chase. I mean, those are the credit tenants we have. A lot of the rent growth is coming from the local tenants because they have shorter leases and they're very sticky, and in many cases, they've been there for years. And so you can push rent a little bit faster. So it's a balancing act. My point of the gray area, it's a balancing act. If you went 100% credit, you probably would have less growth if you went with 100% locals, you'd have more volatility in a recession.
So the 70/30 balance we have right now is giving us growth at a reasonable risk, and I think that's about appropriate. It may go down, maybe we end up with 50/50, 60/40, but I think what the surprising factor about unanchored convenience retailer is the retail tenants that are national, Starbucks, et cetera, they're pretty intelligent. They have found the good real estate. So if you're buying high quality dirt, it's most likely coming with high quality tenants. I'd prefer if all the tenants renewed because the cash flow generation is huge. There's no catbacks, it's a renewals business. That is the majority of what we do.
Lance Glinn:
And is there, I don't know if preference is the right word, but a difference when it's food versus retail or food versus a nail salon or an AT&T or a bank? Does that sort of change how you think, how you go about interacting with tenants? Because obviously food servicers need a different setup, need different resources than, say, the nail salon or the bank or the phone company. So how do you balance the different businesses that go into all your properties?
David Lukes:
Yeah, well, what's the biggest risk in investing in retail? Forget about office or multifamily. If you have a one bedroom apartment, it's going to be a one bedroom apartment forever. If you buy a retail property, many of the buildings have been purpose built for that specific tenant, right? Kroger is X size, Target is X size. When you get to the full service restaurant business, you're building a building that's for a Darden concept or for a certain type of restaurant. Those are the ones that I think are more risky and we tend to avoid the full service restaurant operations because those buildings have been built for that tenant and therefore the building itself is probably less useful for the next person.
The reason that convenience asset is nice is it's just a row of ubiquitous shops. They're all similar sized, and the food service we tend to get are QSRs. So if we think of the difference between a Starbucks at Chipotle and a nail salon and a UPS store, it's really not that different. There are four walls, there's a front door, there's a bathroom in the back. Yes, one has a small kitchen and maybe the mechanical unit is different, but the cost to make those changes is so low that the turnover is less. So I do like restaurants because they like our properties and they pay high rent, but we do tend to avoid really complicated purpose-built restaurants.
Lance Glinn:
We did speak earlier to data analytics and this geolocation that arose, you said in 2018, 2019, that really helped this asset class take off. Recently, of course, the big technology advent has been AI, and it's a technology that's impacted various sectors, whether it be convenience real estate, whether it be really any sort of business sector you can think of AI is having an impact. So whether it's on the consumer facing side or potentially the backend, how is Curbline properties implementing AI and integrating it into what you do?
David Lukes:
Yeah, well, on the backend it's an easy answer because subject matter expertise on certain functions will simply become less valuable. And that would be lease preparation, certain accounting functions, anything that involves digesting data. I think over time, we will see cost efficiencies like lots of other businesses.
On the investing side, it has become easier and easier every year to analyze which properties are likely to outperform in the future. And that's simply because the data that we're getting is already two, three, 4x what we had five years ago. And so your analytics and your ability to save time by passing over bad investments and finding and unearthing good investments is just becoming significantly easier.
On the tenant side, my real hope is that all of these complex national chains will become even more sophisticated in site selection and they will be even more sophisticated in getting their product to customers, which means they can pay more rent.
Lance Glinn:
So David, living in New Jersey, I've seen grow these mixed-use developments. They're popping up all over the place, these stores on the bottom with apartments layered on top. With a built-in customer base already because of the apartments on top, just what are your general thoughts on these mixed-use developments and their future?
David Lukes:
We are actively avoiding anything that's mixed use. I mean, that's basically the long and the short of it is. It's funny, I do have quite a bit of background in mixed use because that's what architects had to work on significantly is mixed use. And earlier in my career, densification of retail properties was pretty common where you would try and add density. Usually, that was multifamily or office on top of retail stores to try and build a bigger machine to generate more revenue. I think that you also need to look at why does this take place? Is it just the landlord trying to extract value? Yes, it's partly, but another part of it is that the United States is one of the few countries in the world where zoning laws are local and not federal or not even by state.
So when you get to local zoning boards, their job is to increase local tax. How do you increase local tax? Well, you can either tax your citizens more or you can tax the landlord more. It's a lot easier to tax a landlord more, which means you might want to encourage them to build more things to increase the amount of taxes that are being paid to the local school district. So zoning for mixed use has become a very popular way for local municipalities to generate tax revenue. And landlords, to a certain extent, have enjoyed that ability to densify, but it has a risk. And the risk is you put so much density on a property in the suburbs where suddenly it's not very convenient and now everyone's fighting for parking and the visibility is different.
Lance Glinn:
I feel the parking.
David Lukes:
Right? And New Jersey is a great example of that. And California is another great example where the land is so restrictive that it's forcing a little bit of densification, and that's fine in urban areas, but in suburban areas, that's not the American lifestyle. And so I think we have been very careful to avoid any property that doesn't have high parking ratios, easy access and visibility because if the operations don't work well, if you can't get in and out of it, to me that's a lifestyle center. And lifestyle is a different asset class and it's not something that I'm interested in. I'm more interested in the super simple, convenient side.
Lance Glinn:
And you mentioned something interesting there. You're focused on the high parking ratios, right? These minute, small details that when people are listening or people are looking at a shopping center, they don't really think about like, "Would I invest there? They have a lot of parking for consumers." What are some of those minute details along with the parking that you focus in on to determine this is a good investment or this is something we should avoid?
David Lukes:
Yeah, parking is, without question, the number one, and I mean I'll even go more detailed. There can be asset management stakes where you make, if you replace a tenant that's a low parking user with a high parking user, probably the classic example is a gym. If somebody goes in a gym and they stay for an hour and a half, they're using a parking stall. If you have a UPS door and somebody drops off a package, they're using it for 30 seconds.
Lance Glinn:
Five minutes. Yeah.
David Lukes:
So as an asset manager, you got to be very careful not to waste your parking ratio on one tenant and the other suffer for it.
Visibility is the other. If you're driving by... We track traffic counts very specifically, and I'll give you an example. We have a property we bought in Houston on Westheimer Road. There's 40,000 cars a day that pass it, and it's a long skinny snake of a building that faces the street. Every one of those 40,000 cars pass that. We can actually measure with the data analytics what percentage of those 40,000 pull into our parking lot and how long they stay. You never had that data five years ago. I mean, to figure out how many cars, your capture rate. So we have these new things called capture rate.
Well, then we have another one, which is okay, if you park, how often do you shop at an adjacent store without moving your car? I mean, that's how detailed you can get. And AI is only going to make that labor-intensive study even faster in the next couple of years. So parking, visibility and ease of access. New Jersey, back to your home state, is one of the most challenging to figure out because of your inability to make left-hand turns.
Lance Glinn:
Look, it's challenging to get around.
David Lukes:
Who invented this jug handle? I don't know.
Lance Glinn:
It's challenging to get around, don't get me wrong. Trust me, I get where you're going with this.
David Lukes:
Yeah. Whereas if you're in Phoenix, you turn left or you turn right. And so the access of these buildings is really important. In the unanchored convenience sector, there are buildings we could buy cheaper at better yields, but they're in locations that are maybe four blocks away from the main road around by the grade school. That's not the same as being right on the local main road. And so I would pay up for the better land knowing that the tenants are going to do better and therefore they can pay more.
Lance Glinn:
So over the course of our conversation, we obviously discussed the success, the spin-off, everything you're looking forward to in the future and just how you design your portfolio and obviously how you assess potential needs for expansion, potential needs for obviously continuing to grow. But as you plan for the remainder of 2025 and look forward to this next 9, 10 months, whatever it may be, what are the key priorities to ensure the company's continues that growth and then heads into 2026, 10, 11 months from now, still strong and still with everything in front of it?
David Lukes:
Yeah. Well, the number one is to wisely deploy our capital. When we spun off the company, remember this was an opportunity not only to have a unique idea, but to have the balance sheet that matched the idea. And that what I think is really unique. I can't think of another REIT that's ever gone public with no debt and a pile of cash. Usually companies go public because they have too much debt and they need equity. So this is the opposite.
So the benefit of having no debt and net cash means that we've got runway to make investments before we need any further equity. And so I think the proof for us in the first year is to wisely deploy the 800 million that we walked out the door with on the IPO so that we can continue to grow the company and show that the addressable market is actually achievable. That is challenging giving that rates are moving all over the place. Now, we're not using debt at this point, but rates certainly affect values. So we're being very prudent and careful to stay within our box of what we would like to buy and prove that we can have a certain acquisitions pace so that the company's earnings can consistently grow.
Lance Glinn:
And as you look now more long-term and plot out the next five, the next 10 years of Curbline Properties, however you and your leadership team shaping its future, a company that, as we talked about earlier, still just three, four months into its infancy?
David Lukes:
Yeah, I think the balance sheet management is actually job number one because our CFO is extremely talented and able to understand how the public markets view the company from a growth prospect. And our chief investment officer is such a savvy property investor that I think he understands his job is to continue to find assets that would add to our portfolio.
The way we're really managing the business is to try and keep it simple. I mean, over the course of my career, what have I learned in the public REIT market? And that is there is a complexity discount and there's a simplicity premium. Complexity discounts occur because companies run short of capital. Their ideas become a bit wider. They become more and more complex with joint ventures, with sidecars, with new property types, some development, some redevelopment. We want the simplicity premium. And what that means is staying very, very focused on what our mandate is and what we've told investors. And because the runway is so huge, I don't think we have to deviate. So really, it's keep it simple and try and keep a simplicity premium and protect the downside for investors while showing that there's significant growth.
Lance Glinn:
Keep it simple. I think that's good advice for anyone in business, regardless your sector. David, thanks so much for joining us Inside the ICE House.
David Lukes:
Thank you, Lance. Appreciate it.
Speaker 1:
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