Q2 2021 Essential Properties Realty Trust Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and.
To essential property Realty Trust second quarter 2121 conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone Keypad. This conference is being recorded on.
And welcome to the call will be available 2 hours. After the completion of the call for the next 2 weeks the dial in details for the replay can be found in today's press release. Additionally, there will be an audio webcast available on our central properties website at www Dot essential properties Dot com, an archive of which will be available for.
For 90 days. It is now my pleasure to turn the call over to Dan Donlan.
Senior Vice President and head of capital markets at essential properties. Thank you you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us today for essential properties second quarter 2021 conference.
A replay with me today to discuss our operating results from people remember what he is our president and CEO.
If I were to CLO, Mark Patten, our CFO.
During this call we will make certain statements may be considered forward looking statements on a federal securities law. The company's actual future results may differ significantly from the matters discussed on these forward looking statements I mean, not release revisions to those forward looking statements to reflect changes after the.
It's called <unk>.
Risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail on the company's bonds at the SEC and in yesterday's earnings release that Pete. Please go ahead.
Right.
Thank you Dan and thank you to everyone who is joining us today for your interest in essential properties.
Statements second quarter was another strong quarter for us on all fronts.
Starting with the portfolio.
With collections of 99, 9% in the second quarter.
On July collections at 100%.
Our portfolio has returned to pre pandemic levels.
While we continue to monitor monitor how COVID-19 could.
Could potentially impact our portfolio our tenants have largely adapted to the current realities of the pandemic and emerge stronger operators.
We're just 2 vacant properties at quarter end, 1 vacant property as of today, we have effectively repositioned all properties previously leased to tenants that did not survive.
Or by the pandemic.
With that in mind over the trailing 12 months ended June 30th we experienced recoveries of 87% on all re leasing activity, which is a strong indicator of not only the quality of our real estate, but our disciplined focus and focus on owning fungible.
Single tenant properties and an appropriate basis.
In terms of investments.
Our industrial our industry relationships.
Which we worked to cultivate and strengthened during the pandemic drove the bulk of our growth this quarter at 98% of our investments.
<unk> relationship business.
And we continue to deploy capital at high levels relative to our historical pace.
During the quarter, we invested $223 million into 94 properties at a weighted average cash cap rate of 7.1%.
With 88% of investments being originated through direct.
Sale, leasebacks, and 83% containing master lease provisions.
On the capital markets.
With the second quarter, marking the third anniversary of our IPO, we achieved several milestones, including the receipt of 2 investment grade issue ratings from S&P and Moody's.
<unk> of our $400 million inaugural 10 year unsecured public bond offering.
And our asset base, becoming 100% unencumbered with a full payoff and retirement of our ABS notes.
As a net lease REIT debt intends to build and maintain a portfolio of long.
David leases, we are thrilled to have access to the public unsecured bond market as we can now better match fund our debt obligations with our lease maturity schedule.
Additionally, we remained active on the equity issuance front with a $193 million follow on offering in April.
The $15 million of gross ATM issuance.
With quarter end net debt to annualized adjusted EBITDA.
A 4.6 times, we have ample capacity continued to capitalize on our robust investment pipeline.
Okay.
And the portfolio more specifically we ended the quarter with investments in 1325 properties. Our 99, 8% leased to 281 tenants operating in 17 industries.
Our weighted average lease term stood at 14 years with.
With 4.1% of our ABR expiring over the next 5 years.
Weighted average unit level coverage ratio was 3.2 times, which improved versus last quarter's coverage of 3.0 times.
As we have previously mentioned our traditional credit statistics.
We'll focus on implied credit ratings and unit level coverage remained negatively negatively skewed by pandemic related shutdowns that occurred last year.
However, with most of our tenants reporting.
Trailing 12 months.
Financials to us with a 1 quarter lag we expect these statistics.
We are solid improvement next quarter when the debt stood the peng them in the second quarter of 2020 are no longer in the reporting period.
Looking out to the balance of the year, we anticipate our portfolio to remain highly occupied and are focused on growing pipeline to generate accrued.
On to an attractive investment opportunities.
When coupling this positive outlook for the back half of 2021 with a strong second quarter performance and our current capital position.
We are raising our 2021 guidance range for <unk> per share to $1.30.
2.
<unk> dollars 32.
This compares to $1.24 to $1.28 previous.
We continue to believe our strong <unk> growth combined with our well covered dividend of 3.4% and our commitment to prudently manage our balance sheet and portfolio risk.
<unk> offers investors a compelling total return opportunity.
With that I'd like to turn the call over to Gregg Seibert, our COO, who will take you through the portfolio and investment activity in greater detail Greg.
Thanks Pete.
Inc.
During the second quarter.
We invested $223 million into 94 properties through 34 separate transactions at a weighted average cash cap rate of 7.1%.
These investments were made in 11 different industries with over 65% of our activity coming from quick.
Chris restaurants medical dental.
Early childhood education and casual dining.
The weighted average lease term of our investments this quarter was $13.5 years, the weighted average annual rent escalation was 1.4% the weighted average unit level coverage was 2.7 times.
With the average investment per property being $2.4 million.
Consistent with our investment strategy, 88% of our second quarter investments were originated through direct sale leasebacks, which are subject to our lease form with ongoing financial reporting requirements and 83% contain master.
<unk> lease provisions.
Looking ahead, we are seeing increased competition from existing and new market participants as there is a growing appreciation for the durability of our focused industries at middle market tenancy.
As a result, we are experiencing cap rate compression as we seek to protect.
In service our relationships.
From an industry perspective quick service restaurants, our largest industry at nearly 14% of ABR closely followed by car washes at 13.8.
Percent early childhood education at 13, 6% and medical dental.
Ill at 12, 5%.
We continue to view these 4 business segments as tier 1 industries for essential properties and therefore, they are likely to remain our highest concentration of industries for this foreseeable future.
Of note, while much of our investment activity over the last 12.
<unk> has been focused on work pandemic resistant industries, we have started to selectively invest in proven operators of profitable locations in both the entertainment in casual dining industries, which continue to experience strong rebounds in revenues and profits.
Months of tenant concentration perspective, no tenant represented more than 2.5% of our ABR at quarter end and our top 10 tenants account for just 19, 5% of ABR, which was down 70 basis points versus last quarter.
Increasing tenant diversity.
From important risk mitigation tool and a differentiator for essential properties.
And is it is a direct benefit of our middle market focus which offers a significantly more expansive opportunity set and our strategy concentrated on publicly traded companies and investment grade rated credits.
In terms of dispositions, we sold 9 properties this quarter for $19.6 million in net proceeds.
When excluding vacant properties in <unk> and transaction cost, we achieved a $7.1 weighted average cash yield on these dispositions, which had a weighted average unit level coverage ratio.
Is 1.8 times.
As we mentioned in the past owning liquid properties is an important aspect of our investment discipline as it allows us to proactively manage industries tenants and unit level of risk within the portfolio.
With that I'd like to turn the call over to Mark Patten our CFO.
<unk>, who will take you through the balance sheet and financials for the fourth quarter Mark.
Thanks, Greg and good morning, everyone. We certainly did have a strong second quarter. The notable elements of our reported operating results for the second quarter of 2021 are as follows.
Total revenue was up $18.6 million or <unk> 48.
Show of 2% versus the same period in 2020 totaling $57.1 million for Q2, 2021, which reflects the benefits of a full quarter of our $198 million of investments in Q1, 2021, and more broadly our total investment activities since we restarted our external growth in Q3.
2020, which totaled $814 million at a weighted average cash cap rate of 7.1%.
In addition, our total revenues reflected approximately $3.1 million on revenue from our determination to move a number of tenants back to on accrual basis.
The onetime adjustment, which was largely related to our flow.
<unk> leads to AMC resulted in the recognition of approximately $2.1 million of base rent revenue that was owed but not recognized in prior periods as well as another $1 million of related straight line rent.
In total this adjustment added nearly <unk> <unk> per share to <unk> and just under <unk> <unk> per share to <unk>.
Perhaps I'll note that this adjustment was based on our assessment regarding the probability of each tenant's performance pursuant to their lease both.
Both current and future rent payments, including any deferral arrangements and was further supported by our evaluation of the tenants' operations and financial condition as of quarter end and an assessment of operating dynamics in their industries.
Total G&A was $6.5 million in Q2, 2021 versus $6.3 million for the same period in 2020.
That's a 3.5% increase which was largely due to an increase in noncash stock compensation expense.
Offset by increased efficiencies related to cash components of G&A, including amounts.
<unk> incurred for professional services as well as certain outsource services more importantly, our G&A continues to scale as our cash basis G&A as a percentage of total revenue.
Was 11% for Q2.2021 versus 15% for Q2.2020.
Net income was $23.4 million.
Quarter, that's up 124% from Q2.2020.
<unk> totaled $37.2 million for the quarter or <unk> 32 per fully diluted share of <unk>.
23% increase over the same period in 2020, our <unk> was up $14.6 million or <unk> 34.
<unk> per fully diluted share that's an increase of 26% versus Q2.2020.
As Pete mentioned, our collection levels were nearly 100% in Q2.2021 and hit 100% in July 2021, so the impact of the pandemic gratefully should be largely behind us.
With regard to our recognized deferred revenue.
Brent we collected substantially all of the $1.3 million that was owed in the second quarter.
And our total collections of agreed upon deferred rents stands at roughly 50% of the total amount deferred and recognized on our results.
Turning to our balance sheet the elements I would like to highlight are the following.
You really have to start with another great quarter.
Investments by our team totaling $223.2 million of investments and 94 properties, which contributed to our gross income producing assets, reaching $2.9 billion at quarter end.
As Pete noted we were very pleased to be in a position to access the public unsecured debt markets for the first time having obtained.
Investment grade ratings from Moody's and S&P.
So certainly a significant milestone for our company.
Our upsized $400 million unsecured notes issuance allowed us to pay off the approximately $171 million outstanding on our secured ABS notes and pay down the $138 million outstanding on the revolver.
Obtained worth repeating that a result of the public unsecured bond issuance our debt position is 100% unsecured and our asset base is 100% unencumbered.
We were also certainly pleased to pay off the ABS notes, which carried a $4.1 9% coupon with our public unsecured bonds that have a coupon of 295%.
And an effective rate of approximately 3.1% when taking into account the settlement of a forward rate lock agreement, we entered into when we decided to issue these bonds.
From an equity perspective, Pete noted the primary activity for the quarter was the overnight offering we did in early April which generated net proceeds of $185 million.
And our ATM program, which generated $15 million on net proceeds in the latter part of the quarter.
As Pete also noted our net debt to annualized adjusted EBIT EBITDA.
It was 4.6 times at quarter end. In addition, our total liquidity stood at a strong $530 million.
As a result, our balance sheet remains.
Positions.
As a result, our balance sheet remains well positioned to support our investment pipeline and future growth goals.
Lastly, I'll reiterate pizza important note that the current pipeline for the third quarter.
Outlook for portfolio performance in the back half of 2021, and our strong outperform.
<unk> this quarter provided us with the basis for our decision to raise 2021 <unk> per share guidance to a range of $1.30 to $1.32, which is a 4% increase at the midpoint from our prior increased guidance.
With that I'll turn the call back over to Pete.
Thanks Mark.
We're excited that the operating environment and capital markets have allowed us to return to pre pandemic levels and move forward with capitalizing on a robust pipeline of accretive investment opportunities in order to drive attractive earnings growth.
More importantly, we believe our disciplined and differentiated.
Investment strategy has it created an incredibly resilient net lease portfolio.
That should continue to generate attractive risk adjusted returns as we grow into the future.
With that operator, let's please open the call for questions.
Thank you we will now be conducting a question and answer session.
If you would like to ask a question. Please press star 1 on your telephone keypad.
From tone will indicate your line is on the question queue. You May Press Star 2 if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, 1 moment, please while we poll for questions.
Our first question comes from the line of Nate Crossett with Bahrenburg. Please proceed with your question.
Hey, good morning, Thanks for taking my question.
Just on the pipeline I was wondering if you could characterize the deal flow a bit.
You mentioned heightened competition.
How should we be viewing that in terms of the amount of deal flow you can execute on.
Whats the size of the pipe line right now.
And what's kind of the outlook that we should be baking in per pricing.
Kind of going into the back half of the year or are we still looking at.
7% or where do you kind of see.
You see that trending.
Yes.
Thanks for the question and good morning.
We.
As I, often say, we never really have more than a 90 day visibility on our forward pipeline as our transaction.
<unk> tend to add debt 90 day transaction cycle.
But obviously, we had a strong quarter.
And we feel good about what we're seeing into the third quarter.
So the pipeline remains robust.
We tend not to give it investment guidance and really point people.
<unk> to our historical average as an indicator.
Of what we're likely to do.
And I think clearly if you look.
Back we've been pretty consistent in that regard that said, it's been elevated over the last couple of quarters as we've seen.
Good good opportunities.
Transact in that.
It remains our position in terms of cap rate.
We.
Tend to transact, maybe a low of 6 and a high of 750 in and kind of where that blends out to.
These 2 trends quarter is really an output of selection of the deals and industries the size of the credits and a lot of factors.
We have been guiding people.
With the expectation in the low sevens.
I wouldn't expect a material deviation from that.
Okay.
That's helpful.
What about the lease escalation that youre able to underwrite.
In these.
Sale leasebacks on acquisition.
The heightened competition, making it harder to get higher escalation in those contract there.
How do you see that kind of playing.
And then give out overtime.
Yes.
On the Escalations are really just 1 part of the economics of the the investments in that.
To the extent that we're having competition, it's it's impacting the overall economics, which flows into the initial cap.
Cap rate as well as the bumps in the out years.
We still expect to kind of be in that call. It 1416, I think thats pretty center mass market, but again thats going to vary.
Given the selection of deals and the nature of deals in any given quarter.
Playing in but we can get bumps in the majority of the deals we do and we work hard to get the best plants that we can.
Okay. Thanks, guys.
Thanks, Dan I appreciate the questions.
Thank you. Our next question comes from the line from the line of Katy Mcconnell with Citi. Please proceed.
Proceed with question.
Hey, guys. This is the marketing for any actually on for Katy just a couple of quick ones from me first off I think last quarter you guys discussed 7 auto service vacancies that you came off or that came back to you with termination I was just wondering at this point I think at least 8 or 9 assets.
This quarter, where all of the 7 assets included in that line and just maybe you can give some color on sort of the resolution of that.
Yes, listen we give plenty of color on the resolutions of our.
Re tendering activity in our re leasing stats at 87%. The 1 vacancy we have is not.
2 on auto service operator, so you can infer that we got all of those sites.
Released and given that we released 9 and 7 of them were related to that tenant and I think.
That's pretty darn good clarity on what happened there.
Okay.
And then secondly.
And really I, just want to understand from sort of the cash accounting basis, if theres any other tenants that you guys still have on.
Under our cash accounting.
Net revenue basis, and what the total accrued rent balance might be for some of those.
In aggregate Mark why don't you tackle that alright, I appreciate that question.
It's just a handful of tenants.
I guess it represents maybe a little bit more than a penny.
<unk>.
Recognized.
Deferred not recognized.
That has a potential to be to be reversed sometime in the future.
Okay. Thanks, that's all from me.
Thank.
Thank you. Our next question comes from the line of Greg Mcginniss with Scotia Bank. Please proceed with your question.
Hey, good morning.
So Greg you are now averaging it looks like $200 million of acquisitions a quarter from the last year.
That seems like a sustainable level.
And then also just the increased market participation impact.
On volumes or should we just.
Maybe cap rates to compress a bit how should we think about that.
Yeah, let's say that you know.
As I've said, we always point to that trailing indicators that trailing 8 quarter indicate.
Average as an indicator of what to expect in.
I would stop short has set an expectation that we're going to transact $100.800 million a year.
That is elevated we certainly have said that we're leaning into acquisitions given the current market.
Takeda, but.
I stop short of setting that is the go forward expectation.
The increasing competition.
It doesn't really create necessarily create deal flow for us.
That it really just.
Deal flow is created by the overall economic.
<unk> virus from it in the M&A environment, and how our relationships are growing but it does manifest itself in terms of cap rate and I think you've seen our cap rates.
On a drift down over the last.
A couple of years and.
We're fighting hard to stop that drift, but.
I would say.
<unk> our cost of capital Fortunately has improved along with that.
As I said the spreads we're investing at remained pretty attractive.
Okay. Thanks.
And then on the acquisitions how much.
It was close.
Quarter on the last year was driven by prior relationships.
First Vince.
New tenants.
Listen we provide that on.
Quarterly basis.
And generally just looking at page 8 of our sub.
And we define private relationships as guys that we've done deals within the past.
Hey.
And that tends to be in the mid to high Eighty's.
Okay.
I recall you guys used to provide.
This time around.
I think thats on our investor presentation.
Sure.
Yeah.
But listen this quarter it was 98% and so it remains a main driver of our investment activity, our relationships and our ability to kind of work with those guys reliably.
Okay, and just a quick follow up on that point, it looks like new top tenants that spare time apart.
Yes.
It looks like you're on about 20% of their total stores I'm just curious how that 20% number maybe compares to the average tenant.
Your portfolio just to try and get some sense for how much more you can mine those relationships.
Or if it's really just based on.
On the growth of those tenants, having new stores.
Okay.
Yeah listen it's.
I would say.
The percentage of stores, we own from any 1 tenant it can range from 5% to 100% and and.
Stop short of giving you.
Hard on average there.
As it relates to spare time and harps.
They have been existing relationships of ours, and we've been able to add units in <unk>.
Over time and populate them into into our top 10.
But obviously, it's a consideration.
As we manage our overall exposure.
Both with individual names in our top 10, we're on.
Unfortunately at times, we'd be comfortable with tenants.
That debt.
Tends to get offset by a growing denominator that allows us to do deals down the road.
But when youre doing 98%.
Of your business with people you've transacted within the past.
You want to continue to serve those relationships and take advantage of being the embedded capital provider because that provide synergies cost effectiveness and ultimately better economics, both for us and the tenant.
Alright, great. Thanks, so much Pete.
You got it thank you.
Thank you. Our next question comes from the line of Sheila Mcgrath with Evercore. Please proceed with your question.
I guess good morning, G&A as a percentage of revenue was just over 11% as you highlighted.
That's the best read since the IPO.
What is your target to that metric is second quarter G&A, a good run rate or do you envision having to add meaningfully to personnel.
Yes, Thanks, Sheila I guess, what I'd say look we've achieved some pretty good efficiencies in our cash.
Okay.
So I think the back half of the year, though as conferences and travel starts to pick up we might we might see a slight increase in the back half on the cash G&A, but I think as a percentage of revenue, it's going to continue to trend down.
But I think in terms of head count I think we are.
We're pretty well staffed up for.
Handling the business that we see ahead of us.
Okay, Great and then on you guys have the benefit of looking at rent coverage metrics for your tenants.
Just are there any business is worth noting that have already returned.
Turn to pre pandemic levels, which sectors have had the quickest recovery.
Factors have been kind of the laggards.
Yes sure.
I'll tackle that.
There is certainly some of our sectors, we're barely impacted by the pandemic.
And I would say.
Our quick service operators are car washes.
Auto service convenience stores, probably had the lowest level of impact.
On the greatest level of impact and most and longest level impact.
Pact I would say clearly in the movie theaters, which everyone knows and understands but also the gyms have continue to have been slow but have recovered.
And then.
The early childhood education guys are are still.
And are ramping back up to pre pandemic levels as.
The country is an add on full return to work status, which we hope to see in September.
So certainly there's been a wide.
Dispersion of performance.
But we feel good that <unk>.
100 <unk>.
Still cut dollar and they are all open and operating.
Okay. Great last question on <unk> guidance, you moved it higher can you remind us your thoughts on the dividend are you managing to a certain payout ratio or just your thoughts on the dividend outlook.
Yes.
On the we have said.
Like to maintain our the board like to maintain a payout ratio in the 70% range and that I think historically, we've been growing the dividend rationally alongside our <unk> per share growth.
The board looks at that every quarter.
And we will continue.
So we have that.
Thanks, a lot.
You guys sure. Thank you.
Okay.
Thank you. Our next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Hi, Good morning, I was wondering maybe if we could talk about the watch list it.
Seems like the portion of the portfolio under 1 times coverage is larger than it's been in the past, but the total coverage is actually higher than in the past over 3 times now so could you go through what this means for your watch list and how much is the end of 2020 still dragging down those coverage levels and have you already seen.
Some improvement in.
In the first half of 'twenty, 1 or are those tenants that may continue to struggle.
Yeah, Yes, Caitlin as we said on the call.
Those statistics.
Really haven't.
It really severely impacted by Covid, obviously with with the second quarter of last.
Year being.
All but shut down for many of our tenants.
And those numbers are not adjusted for any sort of rent deferrals. So what you see in the trailing 12.
Numbers as a.
Quarter of essentially no revenue.
Burdened with.
With full rent.
So.
We think those numbers are materially going to improve as those periods burn off and I would say that our watch list is much more refined than just coverage in.
We're looking at these guys on it on a quarter over quarter basis and a capitalization.
Last basis in our real estate and so.
Our overall watch list is in a very good spot and we feel good about where our tenants are in that.
Those statistics are really just.
Legacy of the Covid pandemic.
Got it and just to.
Clarify I mean, it seems like with the overall coverage of 3.2 times on debt debt. There are others that are just doing really well is that fair.
Yes, there is others that are doing really well and you also have significant.
<unk> activity being added to those statistics.
So.
<unk>, which is influenced by the selection of industries that we do but but there are people that are doing very well and emerge from the pandemic.
Really strong operators.
Got it and then maybe just.
It looks like the line for interest income on loans and direct financing leases has been increasing and I think that as a result.
On receivable portfolio growing so just wondering if you could go through some of the details of that and is it just a nuance of certain acquisitions and investments that makes them get classified as certain way versus regular NOI or is that interest income incremental to NOI.
That interest income is incremental to NOI.
<unk>.
There are certain circumstances.
Where where we may invest loans, we loan against assets that we would otherwise want to own in our portfolio, but for whatever reason.
On seller motivation tax concerns or structuring reasons.
Total can't get the ownership.
And we will make a loan and that loan.
It tends to be a great investment for us in that.
And a loan to value that's less than our traditional sale leaseback, but at economics that are generally similar.
Similar.
And so the loan book has been a modest part of our investment activity.
It should continue to be a modest part, but unfortunately, we've seen some good opportunities to make some loans over the past year and we've done that.
Got it okay. Thanks.
We.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star 1 on your telephone keypad. Our next question comes from the line of John Masako with Ladenburg. Please proceed with your question.
Good morning.
Good morning, John just going back.
Going back to the 2 new additions to the top tenant list I mean, specifically with kind of spare time.
Can you maybe give a little color on the underwriting for that tenant what kind of gotten comfortable with kind of more bowling Alley focused family Entertainment center and how they bounce back.
Given.
Similar kind of companies were hit pretty hard by the initial wave of the pandemic.
Sure.
John I think our underwriting.
For that individual tenant is going to be consistent with our underwriting for any tenant which has taken a look at the corporate.
Per credit taken a look at it the operations, taking a look at the units how they perform at in valuing the real estate at a point that we think is fair.
Spare time was a great tenant and it's a great company Great family owned company that we've been doing business with for a while.
Comfort and their ability as an operator.
And there the sites that we own and the sites that we invested in during the quarter.
Have rebounded and are doing are doing really well and really benefiting from from some pent up demand for people wanting to get out and be entertained and do things.
Great.
We like the family Entertainment business.
And we think spare time is a great operator in that space.
You had maybe spare time assets in the portfolio pre pandemic, though at a fair assumption based on what you said.
I think I said that year.
Okay.
And then with Hearts.
Maybe just any color there I guess given.
The financial outlook for.
And kind of the financial backing for that tenant.
Given kind of the competitiveness of the grocery space.
Yes, so <unk>.
Believe.
112 unit regional grocer that is well capitalized with a strong balance sheet.
And.
The sites, we've purchased or.
Well located sites with strong sales and strong profitability.
I know, it's a competitive industry, but when you're doing a sale leaseback.
Buying sites that are existing and have long track records that we can underwrite and that was the case with the sites we bought with Arps.
Okay.
Another question I've had have been covered.
Thank you very much from the time.
Thank you John I appreciate the questions.
Okay.
Thank you. Our next question comes from the line of Chris Lucas with capital 1 Securities. Please proceed with your question.
Hi, guys.
Just following up on a couple of questions. Maybe if we could go back to the less than 1 times unit level coverage.
I appreciate the sort of trailing 12 month issue I guess, if you looked at it on.
On a.
<unk>.
Annualized most recent quarter basis do you guys have that number as to what looks like 1 less day, 1 times, just kind of trying to figure out what the sort of COVID-19 status really is.
Yes.
We do and Thats on a number we disclosed or non a number we're going to disclose its.
Largely varied across industries.
I gave some commentary on how those industries are performing.
But as we said, we think that will trend back to a normalized level and its not something concerning to us.
And the fact that everyone's paying.
Currently gives us good comfort that the sites are recovered and that tenants are committed to the sites that we own.
Okay.
And then as it relates to sort of the.
The transactions that you have complete.
Kind of curious as to whether or not you have insight.
To put.
I would call the source of that you know in other words is it related to M&A that the tenant has gone through that is creating the opportunity or is it more just.
Sort of your organic unit growth or legacy portfolio that they are.
Disposing of an entering into sale leasebacks and how does that compare.
Right into pre pandemic.
Yes, yes, I would say both.
The organic growth tends not to be a big driver of the investment activity for us they tend to be.
1 and 2 units over time.
So the 2 sources.
Sort of in this for us are going to be M&A.
M&A, where an operator is buying a competitor or rolling up in.
That is a big driver of business for us the other is where an operator is harvesting.
Assets on their balance sheet.
Harvesting.
It is a bit on the sale leaseback of real estate assets to meet another capital need.
And.
Haven't broken down the source or the motivation of the seller motivation.
The recent quarter activity, but I would say, it's probably skewed 60.40.
Being towards M&A.
Okay, great. Thank you that's all I had this morning.
Great. Thank you very much Chris I appreciate it.
Okay.
Thank you there are no further questions at this time I'd like to turn the floor back over to Pete for closing comments.
Great well, we're really.
Really excited to report this quarter was a strong quarter for us and we have great momentum going into the third so thank you all for your participation today and your questions have a great day. Thank you.
This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.