Q4 2022 National Retail Properties Inc Earnings Call
Speaker 1: And.
Speaker 2: Good morning everybody and welcome to National Retail Properties 2022 Year-End Earnings 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 0 on your phone keypad.
Speaker 3: Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Steve Horn, President and CEO of National Retail Properties. Sir, over to you.
Speaker 4: Thank you Jenny. Good morning and welcome to the National Retail Property's Fourth Quarter 2022 earnings call. Joining me on the call is Chief Financial Officer Kevin Habeck.
Speaker 5: Is this morning's press release reflects NNN's performance in 2022 produced 9.8% FFO growth along with an all-time high in acquisitions of nearly 850 million?
Speaker 6: In addition, the year concluded with high occupancy of 99.4 and an impressive rank collection of 99.7, all driven by our best in class team here at N&N.
Speaker 7: The end of the year search positions the company well headed into the uncertainty of 2023.
Speaker 8: A few highlights of 2022 that I'm proud of what NN accomplished.
Speaker 9: One, 33 consecutive annual dividend increase.
Speaker 10: released its inaugural corporate responsibilities and sustainability report.
Speaker 11: Position the Board of Directors for the foreseeable future.
Speaker 12: and one of only 13 reads included in the 2023 Bloomberg Gender Equality Index.
Speaker 13: While there is a change at the helm in 2022, the building blocks the realized long-term value at below average risk for our shareholders remain in the most simplistic form.
Speaker 14: Continue to execute our strategy using a bottom-up approach. Continue to increase our annual dividend maintaining top tier payout ratio.
Speaker 15: Focus on growing FFO per share in the mid single digits over multiple years.
Speaker 16: We do this by setting our acquisition, disposition activity, and our balance sheet management to achieve that objective.
Speaker 17: As I stated earlier, Ed and Anson's solid footing as they were a month into 2023.
Speaker 18: First, at year end, NNN had $166 million drawn on our $1.1 billion line of credit after exchanging the year at all-time high acquisitions.
Speaker 19: We have the option, keeping leverage neutral, to use the reasonable amount of availability of the credit facility.
Speaker 20: The roughly 180 million of free cash love.
Speaker 21: plus oner in 10 million of dispositions to execute our 2023 stretch.
Speaker 22: Using those three sources, as I mentioned, leaves N and N with a manageable equity requirements for the year.
Speaker 23: Secondly, M&N's long-standing strategy of being selective while deploying capital and opportunistically raising capital over the years will not change for 2023.
Speaker 24: The sizeable fourth quarter, which I'll cover shortly, allows N&M to continue being opportunistic at the acquisitions as the price discovery continues.
Speaker 25: The cap rates have been out that slowly increasing evidence by a fourth quarter initial cap rate.
Speaker 26: 30 to 40 bass points higher than our third quarter, and we're still seeing further expansion in the first quarter of 2023.
Speaker 27: Shifting to the highlights of the fourth quarter, financial results are portfolio of 3,411 free-standing single-tenant properties continue to perform exceedingly well and we expect that trend to continue.
Speaker 28: maintain high occupancy levels of 99.4 for two consecutive quarters, which remains above our long-term average of 98% plus or minus a fraction.
Speaker 29: We also collected 99.6 ranch for the fourth quarter.
Speaker 30: The recent headlines of certain retailers, Bed Bath, Party City, Ragle, Red Lobster, etc., that are assumed or have filed bankruptcy in the near term have minimal effect on M&N. M&N's exposure is limited, if not zero in some cases.
Speaker 31: 30 of the acquisitions. During the quarter we invested just north of 260 million and 69 new properties. An initial cash cap rate of 6.6. Now it's an average at least duration of 16 years.
Speaker 32: It term you typically don't associate with NNN and DBA.
While we deviated from our historical trend this past quarter, typically we source the majority of our deals from our relationships and don't target investment-grade deals.
But during the quarter, at an end, was in position to be opportunistic.
As you notice in the press release, our exposure drug stores increase from 1.3% to 2.6% year-over-year.
Over the years, NNN passed on drugstore portfolios because we viewed the opportunities at not the best risk adjusted return to deploy capital at that given time. Market pricing real estate metrics, least one.
This particular portfolio was in line with our underwriting standards, the real estate and the lease form.
But more importantly, the transaction is an excellent real estate play, well-performing assets, excellent locations for the long run.
Currently, we are well into the price discovery period of the bid-ass spread has continued to adjust. We continue to maintain our thoughtful and disciplined unregistered approach.
And it then continues to emphasize acquisition volume due to the release of the transaction. Our 2022 average lease duration was sold to you over 16 years.
with our stable relationship tenants with our long duration net lease.
and more landlord-friendly than a 1031 market.
During the quarter we sold five properties at 5.9 cap plus two bacon assets raising $16 million a proceeds.
For the year, we raised 65 million proceeds from the sales 17 properties at a 5.9 cap plus 16 bacon assets.
Although job 1 is always a release vacancy.
We will continue to sell non-performing assets if we do not see a clear path to generating rental income within a reasonable timeframe.
With that, let me turn the call over to Kevin for more color and detail on our quarterly numbers and updated guidance.
Thanks, Steve. And as usual, I'll start with the cautionary statement that we will make certain statements that could be maybe considered before looking statements under federal security laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements.
and we may not release revisions to these four looking statements to reflect changes after the statements were made.
Factors and risks that could cause actual results to differ materially. From expectations, our disclosures from time to time and greater detail in the company's filing with the SXC and in this more impressive view.
With that out of the way, headlines from this morning's press release report quarterly core FFO results of 80 cents per share for the fourth quarter of 2022. That's up 5 cents or 6.7% over year ago results of 75 cents per share.
And full year 2022 core FFO results were $3.14 per share, which is a strong 9.8% increase over year-go results.
Today we also reported that AFFO per share was 81 cents per share for the fourth quarter, and that's up to 4 cents per share or 5.2% over 4 Q2 021 results.
As usual, we did footnote fourth quarter AFFO included $681,000 of deferred rent repayment in our accrued rental income adjustment.
for the fourth quarter without which would have produced AFFO of 80 cents per share for the quarter. Likewise, the full year of 2022 AFFO included 5.4 million of deferred rent repayments in our accrued rental income adjustment.
without which would have produced AFFO $3.18 per share for the full year. And that represents an 8.9% increase over the similarly adjusted $2.92 cents per share results in 2021.
These scheduled deferred grant repayments, and they continue to taper out materially in 2023, as you can see in the details that we provided on.
page 13 of the Pressure Week.
but the headline growth of 9.8% core FFO for share in 2022 is a very good result for us and notably above our historic mid-single digit growth rate. Admittedly, we did have some tailwinds in 2022 which added
something probably in the 9-10 cents per share range for the annual results.
These tailwinds, which we've talked about in fire calls, included some of the refinancing we did in 2021, most notably redeeming our 5.2% preferred, which probably added three cents a share. We also, there was a $3.3 million increase in our cash base.
executive position which generated some DNA savings in 22.
Of course, layered on top of all that, we entered 2022 with $171 million cash on the balance sheet, which created some notable accretion, a Cretion once that got invested.
that we entered 2022 with a hundred and seventy one million dollars of cash on the balance sheet which created some notable accretion accretion once that got invested but a good year.
But let me move on. Our AFFO dividend payout ratio for the full year 2022 was approximately 67% and that created about $188 million of free cash flow after the payment of all expenses and dividends for the full year.
As we think about it, this free cash flow funded over 40% of the equity needed to fund our 2022 acquisition.
funded over 40% of the equity needed to fund our 2022 acquisition.
Occupancy was 99.4% at quarter end. That's flat with the prior quarter and up 40 basis points for the year.
G&X Benz came in at $10.8 million for the quarter and that's up from 9.9 million year ago levels.
and side note, 5.6% of NLI. We ended the quarter, ended the year with $772 million of annual base rent in place for all leases as of December 31, 2022. Today, we also introduced 2023 guidance with a core FFO per share guidance range of $3.14 to $3.20 per share, and an A FFO guidance range of $3.19 to $3.25 per share.
Core FFO guidance suggests about 1% growth to the midpoint in 2023.
The more modest growth in 2023, guidance reflects the high bar of last year's 9.8% growth that was created and the lack of tailwind that were helpful in 2022 that I just outlined. And one particular headwind in 2023, I'll mention in a moment.
All of this is coupled with the slow re-crisis of cap rates on new acquisitions that we're all dealing with. But it's coming along, price discovery continues to move along. The supporting assumptions for our 2023 guidance are on page 7 of today's press release and includes 500 to 600 million of acquisitions.
120 million of dispositions.
and GNA expense of $43 to $45 million.
We modeled acquisitions at running at 30% in the first half of 2023 and 70% in the second half of 2023. A little more back-end weighted than our more typical 40-60 assumption.
As we typically do, we have assumed a hundred basis points of rent loss in our guidance, and that's a general assumption.
despite the fact that we usually experience less than half of that amount of rent loss.
The one headline, sorry, headwind of note in 2023 is the schedule $5.8 million slowdown in the cash faces deferred red repayments.
And again, that's detailed on page 13 in the press release.
Tenants continue to repay these rent deferrals on time, but what is owed is slowing notably.
As usual, we don't give guidance on any of our capital markets' assumptions regarding our capital markets activity.
except for the general assumption that we intend to behave in a fairly leveraged neutral manner over the long run.
We're hopeful we can move our guidance higher through 2023 as we've done in most years, but for now this is where we feel comfortable.
A quick side note on our AFFO guidance page 13 details of the slowdown we faced on the accrual basis deferred rent repayment.
which has weighed on our headline AFFO growth in recent quarters.
With these three payments largely completed, our 2023 AFFO for share guidance is back to its usual relationship with our core FFO, meaning the annual AFFO is normally a few pennies more than core FFO, and that's reflected in our guidance today. Let me switch over to the balance sheet. We maintain a good...
funding of last year's 848 million dollars of acquisition.
Equity issuance funded $250 million of that operating cash flow after dividends funded $188 million and property dispositions funded $65 million. The total sum of those three being $504 million and that's about 60% of our total acquisitions funded with those equity sources.
After a few years of nearly no usage, we did begin to use our bank line a bit in 2022, largely because we can. Our weighted average debt maturity is now a little over 13 years, which seems to be among the longest in the industry.
Our next debt maturity is $350 million with a 3.9% coupon in mid-2024 and all of our debt outstanding is 6th rate with the exception of the 166 million on our bank line which represents about 4% of our total debt outstanding.
A couple stats and that debt to gross book assets was 40.4% and that debt to EBITDA was 5.4 times.
interest coverage and fixed charge coverage for us is 4.7 times.
So we're in very good shape to navigate the elevated capital market uncertainties and continue to grow per share results, which in our minds is the primary measure of success.
The sector's acquisition volume growth focus over the past two years has downshifted in recent months as the marketplace seeks to adjust to the new environment and appears to be getting a little more disciplined on price, which we think is a better environment.
I've gone on long enough. Jenny, with that we will open it up to any questions.
No problem at all. At this time we are conducting a question and answer session. If you would like to ask a question, please press star one on your phone keypad. A confirmation tone will indicate your line is in the question queue and you made press star two if you wish to remove your question from the queue. For anyone using speaker equipment it may be necessary to pick up your handset before pressing
if you're seeing a narrower spread between investment grade and seven investment grade deals that might push you up the credit quality spectrum or if that deal was just a one-off.
The our strategy isn't going to change in 2023. It was a one-off deal. We were in great position, balance sheet, and a lot of our competitors already had significant exposure to the drugstore sector, where N&N, since we got a late low for a decade, essentially, of the drugstore.
And then this deal really because it was above average lease term that the company was willing to do is that's why we jumped in and the economics were good. Yeah, we don't get into specific economics on deals, but the drugstore deal was above our average or average 6.6 cap rate for the quarter.
Okay, got it, thanks for that. And Kevin, on the watch list, you mentioned a few tenants where you have a smaller no exposure, but I'm interested to get your thoughts on ANC given that the debt's obviously yielding 30% or so.
Yeah, I mean that's been, um, perpetually on our list for the last couple of years as well the lot of folks I guess at this point but yeah still current on rent, you know the liquidity to pay rent
It feels like they have a little bit more runway left. We'll see if they have the ability to continue to race a more capital here in the coming quarters. But...
don't have a lot of news to share on that front there they represent 2.8% of our total total rent to AVR.
Okay, thank you. Thank you very much. Your next question is coming from Spencer Alloway of Green Street. Spencer, your line is life.
Yeah, thank you. I'm just going back to the acquisition guidance. I know you guys mentioned you're waiting to see how that bid S-Bred continues to adjust, but just curious how much of that conservatism on guidance is reflective of your current tenant base not wanting to grow right now versus maybe conservatism on new perspective tenants. Yeah, you know Spencer, yes, we're always conservative.
for 2023 to answer your question. It feels like our current relationships are growing but our development pipeline is as robust as it's been in five years so very comfortable with that. Where we're seeing the slowdown there hasn't been as much M&A.
with our relationships of picking up three or five unit operators across the board. We feel comfortable that they're still growing and our acquisition guidance. As you always know, we pick it up through the year as time goes. We don't want to get above our skis.
five unit operators across the board. But no, we feel comfortable that they're still growing and our acquisition guidance. As you always know, we pick it up through the year as time goes. We don't want to get above our skis at this time.
Okay, great. And then can you provide some color on cap rate assumptions embedded in your guidance?
Yeah, we don't disclose, you know, cap rates in our guidance, but given that we were, we picked up 30-40 basis points in the fourth quarter, I'm seeing expansion as we sit here today for the first quarter and projecting that for the first half of the year.
And then the second half of your guess is as good as mine at this point. Okay, that's really helpful.
Thank you very much. Your next question is coming from Josh Dennerline of Bank of America. Josh, your line of life.
Thank you very much. Your next question is coming from Josh Dennerline of Bank of America. Josh, your line is live. Yeah, hey guys.
I just wanted to follow up on the drug store deal. Just curious, I think at the past you might have straight away from drug stores just because they didn't really have much rent bumps built in. I just curious if this kind of was a different where there were rent bumps and then was it a marketed or sale lease back deal?
Hey Josh, so yeah the drugstore deal as I mentioned was north of our average capillard deal for the fourth quarter but this was it was a real estate play with a sale lease back therefore it wasn't the developer Rampers Square foot numbers
So it was very comfortable that the tenants set the rents, they're very, you know, market rent deals. But more importantly, 85% of the properties were on hard corners. I think 90% had drive through. So it was really a real estate play. You know, 1.6 acres was the average.
So yeah, we got the above average lease time that you see in the market for the drug store deals and more of a landlord friendly lease than you typically would see. That's why we jumped on this one.
Okay, appreciate that. And then just looking at your top 20 lines of trade, just kind of saw some themes. It looked like other increased year over year. Could you remind us what's in that other category?
Sorry, I'm catching up to you. In other income, what are you looking at? Lines of trade. On page 15 of the SUP, your top 20 lines of trade, looks like...
you list other at 8.1% of the portfolio.
8.1% of the portfolio looks like it was up.
over the course of the year, just kind of curious if there's any kind of
what's kind of in that other bucket and if there's any kind of themes of what you're increasing.
in that other bucket and if there's any kind of themes of what you're increasing in there.
Yeah, I mean nothing notable. I mean I can circle back to you and maybe give you a little more color on that.
Okay, fair enough. I'll circle up with you Kevin. Thank you.
Thank you very much. Your next question is coming from Ronald of Morgan Stanley . Ronald, your line is live.
Hey, just going back to the 100 basis points assumptions on the bad debt, obviously appreciate that historically you've come in way below that, but just trying to get a sense of is this year is your expectation that just based on the watch list, based on what you're hearing, could we be closer to that 100 basis points this year versus last year? Just trying to figure out. Thanks.
may struggle a little bit more and so it might get more utilized, that reserve might get more utilized than it has in the past, you know, time will tell. We like the fact that it's, you know, we're...
contemplating more than what typically occurs. That, like I said, it feels like an environment that might be prudent, but there's nothing on the near-term radar that's got us worried about that not being sufficient at the moment, but we'll see how the year unfolds.
Right, and then just looking at the castle statement in the K, I think it looks like at at least in 22, that was close to $200 million.
of excess cash after the dividend. Basically, I think you mentioned a similar number earlier in your opening comments, but is that sort of a fair?
sort of range for 23 as well, given the FFO guides, make sure we're not missing anything.
Yeah, good question. Yeah, so it was about, and the way we think about it is it was about $188 million, which is close to the number you're talking about. And it probably would be a touch lower in 23 as the...
rent deferral repayments flow down and so that will take a little bit out of that number. So the number in our mind is, and we would suggest others, you know, think about is about $180 million of free cash flow after all expenses, all dividend being available to fund acquisitions.
Got it. And then my last one if I could seek it in. Just don't caprate. I guess I'm surprised they're not rising faster sooner or quickly. You guys are well-capitalized and can be opportunistic. You had a little bit of a bump in 4Q, but...
Again, maybe asking the question before is, you know, why shouldn't we expect that cap rate to be up 2550 basis when it's higher?
question before is, you know, why shouldn't we expect cap rates to be up 25, 50 basis points higher in a pretty in a hurry here?
The deals that we started pricing near the end of the fourth quarter, they're going to close in the first quarter, is where we're seeing that 30, 40 basis points again. And we're starting to see the deals that we're pricing today, which most likely we close in the second quarter.
We're seeing the market accept the higher cap rate now when I say the market that's the sale leaseback market Where it seemed to be a little bit more sophisticated and they have access or they they know a debt cost I should say which they may or may not be able to get but they're also seeing the pricing significantly higher Now the 1031 market is still fairly robust that we're not
that are accepted in the cap-rate increase.
Great, thank you. Thank you very much. Your next question is coming from Nick Joseph of City. Nick, your line is life.
Thanks. Maybe just on that last comment, but what result kind of...
So I'll pause the 1031 market there and maybe compress some of that data spread that we're currently seeing.
You said that first part again Nick, you got to broke up on me. Yeah, no, it's really kind of a bit asproud, particularly on the 1031 market. How do you see that playing out? What could actually make that start to close and see some more deals come through, that channel versus the sale lease deck?
We're always looking through the 1031 market, but it's such a small portion of our geofloat comes from the 1031 market. I'm not really dialed in what it's going to take to close that gap. If I had to speculate...
You have the assets that are $15 to $25 million in the 1031 market. You're going to see the bid-ask spread close on those because you might require debt to buy them where the $2 to $5 million, there's so much cash out there still that don't require financing. You're going to see the bid-ask spread close on those because you might require financing for the $2 to $5 million, there's so much cash out there still that don't require financing.
I don't see those cap rates moving all that much.
Good to be very warm. The take for 4.5% returns.
Yeah, that makes sense. And then just on your disposition guide, I'm sure it 100 to 120 million this year. How are you thinking about pricing for those, particularly maybe relative to where you're thinking acquisition cap rates trend?
going forward. So when we look at dispositions, you know.
It's kind of, you got the offensive disposition that somebody offers us to cap rates that they just love the real estate a lot more. So they will trade significantly below what we're deploying capital at. And then you have some defensive styles because of our relationships.
that we'll sell because we know they're not going to renew in five, seven years from now. So we'll sell those. And those cap rates typically will be where we're deploying money at the time into new 15, 20 year leases.
But overall, just like this past year, we are about 5.9 exit cap and we are at 6.4 acquisition cap. I would see the same spread going forward or expect the same spread.
Thanks, that's helpful. Thank you very much. The next question is coming from Linda Tsai of Jeffries. Linda, your line of life.
Yes, hi. In terms of credit loss, staying relatively contained, what are you assuming for occupancy at your end?
We're some fairly flat occupancy. I mean, if the 1% gets fully utilized, I guess you would suggest maybe there's 100 bases
They're potentially, but assuming that doesn't happen, we're assuming like a fairly flat occupancy.
Thanks. And then beyond the drugstores, can you talk about some of the other tenants you invested in during the quarter?
During the quarter, it's kind of representative of what we did all year. Auto service sector for the year was roughly 35% of our deployment capital. And within the auto service, it was the car washes big year. And then we did some child day care services as well. And then how does the pipeline compare to what you invested in?
So we'll throw in one or two lines of trade in there historically that we haven't done, but the vast majority will end up, will look like our current portfolio mix up.
Thank you.
Thank you. The next question is coming from John Masuker of Leidenberg. John , your line is live.
Moving back to the acquisition guidance, what's driving the 30-70 split you're seeing in 1H versus 2H? Just trying to understand the kind of broad positivity on the pipeline, but a call for kind of less acquisitions in quarters where you theoretically should have more visibility into transaction flow.
The 37-foot is the approach that we're taking this year. We had a robust fourth quarter and we made the cautious decision to let the price discovery close to the gap. We're planning to do a little bit less the first half of the year, close to that 40% we're definitely would guide to.
I'm just being a little bit more selective, no need to put the pedal down and go.
a little bit more selective, no need to put the pedal down and go.
and I think the market is trying to get real estate cap rate world caught up with.
capital market interest rate world and so that process has been going on for you know a few quarters now There's probably a little ways to go and so It doesn't seem a real Compiling me to to want to push the the volume pedal very hard
Okay. And then on the disposition side of things, how should we think about the timing split on those? I also remember from the prior earnings call, you mentioned there was a notable transaction that might slip to this year and...
So is there a potential for dispositions to maybe be front-end loaded in 23? I mean, for model purposes, John , the 110 midpoint just spread that over evenly throughout Okay, and then one quick one on the ballot sheet. How should we think about...
How you're feeling about longer term debt just given where you know the interest rate curve is today and can be tractiveness of stuff in more of a 10 year range versus
shorter term debt and availability in the markets.
Yeah, we don't have any real plans to be issuing long-term debt, near-term, and long-term debt.
in no small part because as I noted we really have not used our bank line so we have the luxury of being able to lean on that in this environment where the rate market is a little rockier.
And so we'll see how that plays out as the year progresses. And so we don't have any need. We did, like I said, chopped a lot of wood in 2021 on long-term debt. We pushed our debt maturities.
weighted average debt maturity north of 13 years, which like I said is among the longest out there. So we have the flexibility to not need to issue long term debt at this point and see where things might normalize a bit and possibly even maybe a year from now where rates might start to tail off a little bit. So we'll see but.
No near-term plans need to make that decision. The 10-year part of the curve probably makes a lot of sense today for folks, I'm guessing, where rates have backed up here recently, in recent weeks. There are unlikely issuers in the near term of long term.
Okay, that's it for me. Thank you very much.
Thank you. Your next question is coming from where's Golliday of Bad? Where's your line is life?
Hi everyone. I just want to go to the comments about the development pipeline being the most robust in five years. It looks like you have about 22 million under construction. I'm curious to know what is the commitment for these projects and how big could this pipeline get?
Historically, pre-COVID, we had about a $100 million run rate of a pipeline. That would be a good ballpark figure to think about. We don't do long-term commitments. I probably wouldn't have to offset that just now.
Once they're ready to buy the land, we'll purchase the land. So it's kind of a three month window. And then going back to your comments about the tenetute you named. We did see that you lost just one regal. And then you mentioned I think bedbath and red lobster. At one point you did have just a few bedbath and beyonds where any of these parts of your, I guess, defensive distance.
comfortable with that. And then you're right, the one regal we had in Chicagoland
We're getting good interest with that asset as well.
Got one and just for Kevin that you nailed the bottom on rates based on a lot of long term that now if you're having a big I guess willing is to have more floating rate debt. I guess you'd your call for rates to do a lower.
Yeah, I wouldn't probably underline Kevin's call for rates to go lower, but boy, that's kind of edgy for me. Yeah, no, we just, like I said, we have the luxury of being able to pivot to shorter term variable rate debt until the markets sort themselves out. Again.
and reprise a bit and so we're going to, that's the way we're going to dig in this environment. But, you know, we'll see if rates go lower. They don't have to for our model to work just fine, to be quite honest. But you don't feel any real pressure to be issuing bonds in this market.
and we have the luxury of not needing to. Got it. Thanks, everyone. Thanks, Wes.
Thank you very much. Your next question is coming from Tyo Ocasunia from Credits with Tyo. Your line is life. Hi, yes. Good morning. Just kind of giving some of the conversations around kind of retailer credit and you know credit losses and things of that nature. Are you going to do anything different from an underwriting perspective?
business model is we're real estate first.
And, well, we understand credits important to our tenetists. At the end of the day, if you're near market rent, you're down side. If you buy highly desirable real estate at market rent, you can replace that cash flow. And, since that's our underwriting, and then you do the relationships.
This is kind of where our business model gets a little difficult to understand. There's a self-selection process when we do a sale lease back. A tenant doesn't want to sign a 15, 20 year lease with high rent. They want low rent to ensure they can pay that rent for 15, 20 years. So there's a self-selection process. So we're very comfortable with our underwriting.
as you saw during the great financial crisis or during the pandemic, we've maintained the rent-paying ability of the tenants. So yeah, we're not shifting yet. That's it. I know most of you guys all track your rent coverage ratios and things of that.
not notable changing there yet, recognizing that we get the data on a lag, meaning we don't get real-time data. Some of it comes quarterly, some of it actually comes annually. There's always that lag factor. So far, we've not seen any lag.
stress levels that are keeping us up at night in any particular line. Thank you.
Thank you very much, just as a reminder, if anyone does still have any questions, please press star one on your phone keypad. Okay, we appear to have no more questions in the queue and that's the end of our question and then I'll have a session I'll now hand back over to Steve for any closing remarks.
Thank you, I appreciate everybody joining the call this morning. We look forward to seeing many of you in person in the upcoming conference season.
and we'll catch up then. Thank you. Thank you everybody. This does conclude today's conference call. You may disconnect your phone line at this time and have a wonderful day. Thank you for your participation.