Q4 2023 Agree Realty Corporation Earnings Call

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Operator: Good morning and welcome to the Agree Realty fourth quarter 2023 conference call. All participants will be in listen-only mode.

Good morning, and welcome to the acreage Realty fourth quarter 2023 conference call.

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Operator: To withdraw your question, please press star- Please limit yourself to two questions during this call. This event is being recorded today. I would now like to turn the conference over to Brian Hawthorne, Director of Corporate Finance. Please go ahead. Thank you. Good morning, everyone.

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I would now like to turn the conference over to Brian Hawthorne Director of corporate Finance. Please go ahead.

Thank you good morning, everyone and thank you for joining us for a agree realty's fourth quarter 2023 earnings call before turning the call over to Joanne Peter to discuss our results for the quarter. Let me first of all through the cautionary language. Please note that during this call we will make certain statements that may be considered forward looking under.

Brian Hawthorne: And thank you for joining us for Agree Realty's fourth quarter 2023 earnings call. Before turning the call over to Joey and Peter to discuss our results for the quarter, let me first run through some cautionary language. Please note that during this call, we will make certain statements that may be considered forward-looking under federal securities law. However, our actual results may differ significantly from the matters discussed in any forward-looking statements for a number of reasons.

Federal Securities Law, our actual results may differ significantly from the matters discussed in any forward looking statements for a number of reasons. Please see yesterday's earnings release, and our SEC filings, including our latest annual report on Form 10-K for a discussion of various risks and uncertainties underlying our forward looking statements.

Brian Hawthorne: Please see yesterday's earnings release and our SEC filings, including our latest annual report on Form 10-K for a discussion of various risks and uncertainties underlying our forward-looking statement. In addition, we discuss non-GAAP financial measures including core funds from operations or core FFO, adjusted funds from operations or AFFO, and net debt to recurring EBITDA. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release, our website, and SEC filings. I'll now turn the call over to Joey.

In addition, we discuss non-GAAP financial measures, including core funds from operations or core <unk> adjusted funds from operations or <unk> and net debt to recurring EBITDA reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release website and SEC filings.

I'll now turn the call over to Joey Thank.

Thank you Brian Good morning, and thank you all for joining US today I'm pleased to report that 2023 was another strong year for our company looking back on the past year, we executed several strategic initiatives that positioned our company for continued success.

Joey N. Agree: Looking back on the past year, we executed several strategic initiatives that positioned our company for continued success. In anticipation of capital markets volatility, we pre-equitized our balance sheet in the fourth quarter of 2022 with $560 million of forward equity raised at a net price of just over $67.50. While at the time, many thought our mindset was conservative, we were confident that while interest rates rose rapidly, cap rates would be slow to exhibit expansion in our large, illiquid, and fragmented space. We were determined to avoid deviating from our core strategy for providing debt financing, expanding into new verticals, or going up the risk curve either via credit or tenant concentration.

In anticipation of capital markets volatility, we pre advertise our balance sheet in the fourth quarter of 2022 with $560 million of forward equity raised at a net price of just over $67.50, while they're at the time. Many thought our mindset was conservative we were confident that while interest rates rose rapidly.

Cap rates would be slow to exhibit expansion in our large illiquid and fragmented space.

We're determined to avoid deviating from our core strategy, providing debt financing expanding into new verticals are going up the risk curve either via credit or tenant concentrations.

Joey N. Agree: Instead, we continue to execute our disciplined and time-tested strategy of investing in the country's biggest and best retailers, those that have the balance sheets to invest in price, labor, and fulfillment while creating a unique value proposition for customers. While the performance of our stock has certainly been frustrating, we have not wavered. Management and our tremendous Board of Directors put their money where their mouths are with almost $12 million of insider purchases during 2023. Net Lease is a long-term business.

Instead, we continue to execute our disciplined and time tested strategy of investing in the country's biggest and best retailers those that had the balance sheet to invest in price labor and fulfillment, while creating a unique value proposition for customers.

While the performance of our stock has certainly been frustrating we have not wavered management and our tremendous board of directors put their money, where their mouth Saar with almost $12 million of insider purchases during the 2023.

That lease is a long term business, we believe in consistency reliability and quality of cash flows will ultimately lead to outperformance.

Joey N. Agree: We believe consistency, reliability, and quality of cash flows will ultimately lead to outperformance. The days of free money and ubiquitous capital are behind us, which demands a strong and strategic change in capital allocation philosophy. We have seen the result of investing in de minimis spreads. It drives little to no AFFO per share growth.

While we can't control macroeconomic volatility, we can execute with a mindset of value creation, not simply short term earnings accretion.

The days of free money and ubiquitous capital are behind US, which to me is a strong and strategic change in capital allocation philosophy. We have seen the result of investing a de minimis spreads it drives little to no <unk> per share growth.

Joey N. Agree: In this new economic paradigm, our focus is on achieving outsized investment spreads and the best risk-adjusted opportunities, not simply aggregating volume. We will not grow the denominator without driving meaningful AFFO per share growth, nor will we move up the risk curve to create short-term opportunities and growth. We are laser focused on allocating capital in a disciplined manner to drive growth that is sustainable.

And this new economic paradigm, our focus is on achieving outsized investment spreads and the best risk adjusted opportunities not simply aggregating volume.

We will not grow the denominator without driving meaningful meaningful a F O per share growth nor will we move up the risk curve to create short term opportunities and growth.

We are laser focused on allocating capital in a disciplined manner to drive growth that is sustainable.

Joey N. Agree: Last quarter's call, we outlined the "do-nothing" scenario in which we would drive over 3% ASFO per share growth in 2024 with conservative assumptions and the absence of external growth. With over $235 million of forward equity raised at the end of the year and anticipated free cash flow of approximately $100 million, we have visibility beyond the "do-nothing" scenario. We can invest approximately $500 million this year on a leverage-neutral basis, excluding any disposition proceeds and without the need for any additional equity capital.

On last quarter's call, we outlined the do nothing scenario in which we would drive over 3% <unk> per share growth in 2024 with conservative assumptions and the absence of external growth.

With over $235 million of forward equity raise at the end of the year and anticipated free cash flow of approximately $100 million, we have visibility beyond the do nothing scenario, we could invest approximately $500 million. This year on a leverage neutral basis, excluding any disposition proceeds and without the need for <unk>.

Any additional equity capital.

Joey N. Agree: Most importantly, we will remain nimble and opportunistic, ensuring we are well positioned to capitalize on the opportunities as we uncover them. With over $1 billion of total liquidity, including the outstanding forward equity raised in the fourth quarter, we have ample runway and complete optionality. Our Fortress balance sheet is paired with a best-in-class portfolio, and our record investment-grade exposure of over 69% provides for highly durable cash flows in today's dynamic environment. The strength of our balance sheet and the quality of our portfolio are evidenced by the positive outlook that S&P placed on our BBB credit reading last week. We believe that our credit metrics are emblematic of a higher-rated company, and the positive outlook is another step in gaining recognition for the manner in which we operate our company and manage our balance. Moving on, to our standard update. This past quarter, we worked through significant market turbulence and ultimately invested nearly $200 million in 70 high-quality retail net lease properties across our three external growth platforms. This included the acquisition of 50 properties for over $187 million.

Most importantly, we remain nimble and opportunistic ensuring we are well positioned to capitalize on the opportunities as we uncover them.

With over 1 billion hours of total liquidity, including the outstanding forward equity raised in the fourth quarter, we have ample runway and complete optionality.

In addition, we have no material debt maturities until 2028 and pro forma net debt to EBITDA stood at just four three times at year end.

Our fortress balance sheet is paired with a best in class portfolio and a record investment grade exposure of over 69% provides for highly durable cash flows in today's dynamic environment.

The strength of our balance sheet and the quality of our portfolio are evidenced by the positive outlook that S&P placed on our triple B credit rating last week.

We believe that our credit metrics are emblematic of our higher rated company and the positive outlook is another step in gaining recognition for the manner in which we operate our company and manage our balance sheet.

Moving onto our standard update this past quarter, we worked through significant market turbulence and ultimately invested nearly $200 million and 70 high quality retail net lease properties across our three external growth platforms. This included the acquisition of 50 properties for over $187 million the properties acquired during the fourth quarter.

Joey N. Agree: The properties acquired during the fourth quarter lead to leading operators in sectors including home improvement, farm and feed supply, off-price, tire and auto service, as well as convenience. As our fourth-quarter activity demonstrated, we can continue to push cap rates higher, piercing 7% for the first time since 2019. The weighted average lease term was 10.1 years, and approximately 71% of annualized base rents were derived from investment grade retailers.

We used the leading operators in sectors, including home improvement farm and rural supply off price tire and auto service as well as convenience stores.

As our fourth quarter activity demonstrated we can continue to push cap rates higher piercing, 7% for the first time since 2019.

The acquired properties at a weighted average cap rate of seven 2%, a 30 basis point expansion relative to the third quarter and 80 basis points higher than the prior year.

The weighted average lease term was 10.1 years and approximately 71% of annualized base rents were derived from investment grade retailers.

Joey N. Agree: We acquired seven ground leases during the quarter, representing approximately $30 million, or 14.8% of total acquisition volume for the quarter. In 2023, we will invest more than $1.3 billion in 319 retail net lease properties spanning 41 states. We continue to leverage all three external growth platforms to find compelling risk-adjusted opportunities. For the full year, nearly 74% of the annualized base rents acquired were from investment-grade retailers, while ground leases represented almost 9% of the rents acquired.

We acquired seven ground leases during the quarter, representing approximately $30 million or 14, 8% of total acquisition volume for the quarter.

In 2023, we invested more than $1 $3 billion and 319 retail net lease properties spanning 41 states. We continue to leverage all three external growth platforms to find compelling risk adjusted opportunities.

For the full year, nearly 74% of the annualized base rents acquired were from investment grade retailers, while ground leases represented almost 9% of rents acquired.

Joey N. Agree: Notably, we increased sale leaseback activity in 2023, partnering with leading operators in the farm and rural supply and convenience store sector. Said leasebacks represented one-third of our acquisition activity in 2023, compared to just over 10% in the year prior, further demonstrating our ability to be a full-service, comprehensive real estate solution for our retail partners. Switching to our development and DFP platforms, we had a record year with 37 projects either completed or under construction, representing approximately $150 million of committed capital. We're continuing to see increased activity across both platforms as we work with our retail partners to help them execute their store growth plans and provide struggling merchant developers with the ability to lock in funding for their pipelines. We commence four new development and DFP projects during the fourth quarter, with total anticipated costs of approximately $13 million. The new projects include a Burlington and Home Goods in Yuma, Arizona, and two Starbucks in Illinois. Construction continued during the quarter on 12 projects with anticipated costs totaling approximately $51 million.

Notably we increased sale leaseback activity in 2023, partnering with leading operators in the farm and rural supply and convenience store sectors.

Leasebacks represented one third of our acquisition activity in 2023 compared to just over 10% in the year prior.

Further demonstrating our ability to be a full service comprehensive real estate solutions for our retail partners.

Switching to our development and D. S. P platforms, we had a record year with 37 projects either completed or under construction, representing approximately $150 million of committed capital.

We're continuing to see increased activity across both platforms as you work with our retail partners to help them execute their store growth plans and provide struggling merchant developers with the ability to lock in funding for their pipeline.

We commenced for new development in D. F. P projects through the fourth quarter with total anticipated costs of approximately $13 million. The new projects include a Burlington at Homegoods in Yuma, Arizona and two Starbucks in Illinois.

Construction continued during the quarter on 12 projects with anticipated cost totaling approximately $51 million.

Joey N. Agree: Lastly, we completed construction on four projects during the quarter with total costs of approximately $16 million. We sold five properties during 2023 for total gross proceeds of approximately $10 million, including three properties that were sold during the fourth quarter. The weighted average cap rate for dispositions in 2023 was 6.1%. I anticipate additional opportunistic dispositions in 2024 as we will seek to sell assets at attractive cap rates and redeploy that capital on an accretive basis. For the full year 2023, we executed new leases, extensions, or options and approximately 1.9 million square feet of GOA. We're in a great position for 2024 with only 28 leases or 110 basis points of annualized base rents maturing. At year-end, our best-in-class portfolio spanned 2,135 properties across 49 states, including 224 ground leases representing 11.7% of total annualized base rent.

Lastly, we completed construction on four projects during the quarter with total cost of approximately $16 million.

We disposed five properties during 2023 for total gross proceeds of approximately $10 million, including three properties that were sold during the fourth quarter.

The weighted average cap rate for dispositions in 2023 was six 1%.

I anticipate additional opportunistic dispositions in 2024, as we will seek to sell at that assets at attractive cap rates and redeploy that capital on an accretive basis.

On the leasing front, we executed new leases extensions or options on 425000 square feet of gross leasable area during the fourth quarter, including a T. J maxx in new Lenox, Illinois, and a Walmart Supercenter and hazard Kentucky.

For the full year 2023, we executed new leases extensions or options and approximately 1.9 million square feet of GLA. We're in a great position for 2024 with only 28 leases were 110 basis points of annualized base rents maturing.

At year end, our best in class portfolio spend 20, 135 properties across 49 states, including 224 ground leases, representing 11, 7% of total annualized base rents.

Joey N. Agree: Occupancy ticked up slightly to 99.8%, and again, our investment grade exposure reached a record of over 69%. Lastly, I'd like to welcome Lin Long-Hee to our Board of Directors. Wing-Long was Rocket's first software engineer over 25 years ago, and today she serves as the Chief Leadership Advisor for Rocket Central, where she is responsible for executive leadership development for the Rocket Company.

Occupancy ticked up slightly to 99, 8% and again, our investment grade exposure reached a record of over 69%.

Lastly, I'd like to welcome Lin long heed to our board of directors. When long was rockets first software engineer over 25 years ago and today serves as the Chief leadership advisor for rocket Central where she was responsible for executive leadership development for the rocket companies.

Peter: Prior to that role, she served as Chief Information Officer of Rocket Mortgage, one of the nation's largest mortgage lenders, for 10 years. I'll now hand the call over to Peter, and then we can open it up for questions. Thank you, Joey.

Prior to that role she served as chief information officer of rocket mortgage one of the nation's largest more mortgage lenders for 10 years. When long has over 25 years of experience technology and leadership and we're truly excited to add our expertise towards theme board of directors.

Now I'll hand, the call over to Peter and then we can open it up for questions.

Peter: Starting with earnings, core FFO per share was $0.99 for the fourth quarter and $3.93 per share for the full year 2023, representing 3.4% and 1.6% year-over-year increases, respectively. AFFO per share was $1 for the fourth quarter and $3.95 for the full year, representing 5.2% and 3.1% year-over-year increases, respectively. As a reminder, Treasury stock is included in our diluted share count prior to settlement if ADC stock trades above the deal price of our Outstanding Forward Equity office. The aggregate dilutive impact related to these offerings was approximately half a penny for the full year.

Thank you Joey.

Already with earnings core <unk> per share was <unk> 99 for the fourth quarter and $3 93 per share for full year 2023, representing three 4% and one 6% year over year increases respectively.

<unk> per share was $1 for the fourth quarter and $3 95 for the full year, representing five 2% and three 1% year over year increases respectively.

As a reminder, treasury stock is included in our diluted share count prior to settlement, if ADC ADC stock trades above the deal price of our outstanding forward equity offerings.

Aggregate dilutive impact related to these offerings was approximately half a penny for the full year.

Peter: Our consistent and reliable earnings growth continues to support a growing and well-covered dividend. During the fourth quarter, we declared monthly cash dividends of $0.247 per share for October, November, and December. On an annualized basis, the monthly dividends represent a 2.9% year-over-year increase. For the full year, the company declared dividends of approximately $2.92 per share, a 4.1% increase year over year, and almost a 12% increase on a two-year stack.

Our consistent and reliable earnings growth continues to support a growing and well covered dividend.

During the fourth quarter, we declared monthly cash dividends of $24 seven per share for October November and December.

On an annualized basis, the monthly dividends represent a two 9% year over year increase.

For the full year the company declared dividends of approximately $2 92 per share a four 1% increase year over year and almost a 12% increase on a two year stack basis.

Peter: Our payout ratios for the fourth quarter and full year remained at or below the low end of our targeted range of 75% to 85% of AFFO per share. The monthly dividends reflect an annualized dividend amount of over $2.96 per share, or a 2.9% increase over the annualized dividend amount of $2.88 per share from the first quarter of 2023. For the year, G&A expense totaled $34.8 million, or 6.1% of adjusted revenue. We recorded $709,000 of income tax expense during the fourth quarter.

Our payout ratios for the fourth quarter and full year remained at or below the low end of our targeted range of 75% to 85% <unk> per share.

Subsequent to year end, we declared a monthly cash dividend of $24 seven per share for January and February 2024.

The monthly dividends reflect an annualized dividend amount of over $2 96 per share or a two 9% increase over the annualized dividend amount of $2 88 per share from the first quarter of 2023.

General and administrative expenses decreased quarter over quarter to five 7% of revenue adjusted for the noncash amortization of above and below market lease intangibles.

For the year G&A expense totaled $34 $8 million or six 1% of adjusted revenue.

With our continued investments in systems, including ongoing enhancements to our proprietary our database, we anticipate that G&A expense will continue to scale as a percentage of adjusted revenue in 2024.

Peter: This brings the total for the year to $2.9 million, near the midpoint of our guidance. Turning to our capital markets activities, we raised over $370 million of gross equity proceeds during the year via the forward component of our ATM program. With more than $235 million of forward equity raised late in the fourth quarter, we anticipate putting in place a new ATM program in the coming weeks in normal course. We also demonstrated our ability to access attractive bank debt with a market-leading $350 million, 5.5-year term loan at a fixed rate of 4.52%, inclusive of prior hedging activities. The term loan received strong support from our key banking relationships, and the 5.5-year term allowed us to extend the maturity date into 2029.

We recorded $709000 of income tax expense during the fourth quarter. This brings the total for the year to $2 $9 million near the midpoint of our guidance.

Turning to our capital markets activities, we raised over $370 million of gross equity proceeds during the year via the forward component of our ATM program.

With more than $235 million of forward equity raise late in the fourth quarter, we anticipate putting in place a new ATM program in the coming weeks in normal course.

We also demonstrated our ability to access attractive bank debt with a market, leading $350 million $5 five year term loan at a fixed rate of 452% inclusive of prior hedging activity.

The term loan received strong support from our key banking relationships and the $5 five year term allowed us to extend the maturity into 2029.

Peter: As Joey mentioned, our debt maturity schedule remains in an excellent position with no material maturities until 2028. Our capital markets activity further fortified our balance sheet and positioned us for continued growth in 2024. We ended the year with over $1 billion of total liquidity, including more than $235 million of outstanding forward equity, $773 million of availability on the revolver, and approximately $15 million of cash on hand.

As Joey mentioned, our debt maturity schedule remains in an excellent position with no material maturities until 2028.

Our capital markets activity further fortified our balance sheet and positioned us for continued growth in 2024, we ended the year with over $1 billion of total liquidity, including more than $235 million of outstanding forward equity $773 million of availability on the revolver and approximately $15 million of cash on hand.

Joey N. Agree: In addition, our revolving credit facility and term loan have accordion options, allowing us to request additional lender commitments of $750 million and $150 million, respectively. In addition to our strong liquidity position, free cash flow after the dividend is now approaching $100 million on an annualized basis. As of December 31st, pro forma for the settlement of our outstanding forward equity, that tet to recurring EBITDA was approximately 4.3 times. Excluding the impact of unsettled forward equity, our net debt to recurring EBITDA was $4.7 million. Our total debt-to-enterprise value is approximately 27%, while our fixed-charge coverage ratio, which includes principal amortization and the preferred dividend, is in a very healthy position at five times. With that, I'd like to turn the call back over to Joey.

In addition, our revolving credit facility and term loan have accordion options, allowing us to request additional lender commitments of $750 million and $150 million respectively.

In addition to our strong liquidity position free cash flow. After the dividend is now approaching $100 million on an annualized basis.

As of December 31 pro forma for the settlement of our outstanding forward equity debt to recurring EBITDA was approximately four three times.

Excluding the impact of unsettled forward equity our net debt to recurring EBITDA was four seven times, our total debt to enterprise value was approximately 27%, while our fixed charge coverage ratio, which includes principal amortization and the preferred dividend isn't a very healthy position at five times with that I'd like to turn the call back over to Joey.

Operator: Thank you, Peter. To summarize, we are very well positioned to execute in 2024 to drive sustainable earnings and a growing and well-covered dividend. At this time, operator, let's open the line up for questions. We will now begin the question and answer session. If you have a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Thank you Peter to summarize we are very well positioned to execute in 2024 to drive sustainable earnings and a growing and well covered dividend at this time, operator, let's open it up for questions.

We will now begin the question and answer session.

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Rob Stevenson: To withdraw your question, please press star then 2. As a reminder, please limit yourself to two questions during the call. www.youtube.com or the link in the description below. And our first question will come from Spencer Alloway of Green Street Advisors. Please go ahead. Thank you and good morning.

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At this time, we will pause momentarily to assemble the roster.

Yeah.

Our first question will come from Spenser <unk> of Green Street Advisors. Please go ahead.

Thank you and good morning.

Joey N. Agree: Given that you guys have capital locked in, and, as you mentioned, you have a very strong liquidity position, why not provide some formal acquisition guidance at this time? Morning, Spencer. So I think, first of all, we're in an extremely volatile macroeconomic environment, including interest rate volatility that's going on. And so I think our number one focus is not going to be aggregating volume today at minimum spreads, as we talked about in the prepared remarks. We're 100% focused, and the team is disciplined here, focusing on deploying capital at 100 plus basis point spreads into our sandbox of the country's leading retailers. And frankly, with 70 days of visibility in the net lease space, that's our average duration from letter of intent to close. I can't tell you what's going to happen in 71 days, let alone later this summer or fall.

Given that you guys have capital locked in and as you mentioned you have a very strong liquidity position why not provide some formal acquisition guidance at this time.

Good morning Spencer.

So I think first of all we're in a extremely volatile macroeconomic environment, including interest rate.

The volatility here, that's going on and so I think our number one focus is not going to be aggregating volume today at de Minimis spreads as we talked about in the prepared remarks, where we're 100% focused and the team is disciplined here focusing on deploying capital with 100 plus basis points.

Reds into our sandbox of the country's leading retailers and frankly with 70 days of visibility in the net lease space as our average duration from letter of intent to close I can't tell you, what's going to happen and 71 days, let alone later this summer or fall.

Joey N. Agree: Okay, and then as you think about the three different kinds of investment verticals that you play in, can you just talk about where you're seeing the best spreads today? The best spreads, of course, would be in development, right, duration, development duration. We don't take speculative risk in terms of acquiring land or speccing buildings without a tenant in hand, without that being fully bid and all permits secured. So the best risk, excuse me, the best returns would, of course, be on the development spectrum. And so duration equals risk, so we're looking for a significant spread if we're going to develop to where we can acquire a like-kind asset. On the other end of the spectrum would be acquisitions. Again, where our focus here is deploying capital 100 basis points wide of where we see our cost of capital, and as we've noted significantly before, our cost of capital, we perceive it as a forward AFFO yield at a 75-25 split with 10-year unsecured pricing. We're not using unburdened free cash flow here. It's a conservative approach to that cost of capital, but our goal, again, is to deploy that capital 100 basis points wide. Thank you for the call, Joey.

Okay, and then as you think about the three different kind of investment.

Prior to closing that you play and can you just talk about where you're seeing the best spreads today.

Well the best spreads of course, it would be in development right duration development duration, we don't take speculative risk in terms of acquiring land respecting buildings without a tenant in hand without that being fully burden all permits secured so that the best risks excuse me. The best returns would of course be on the development spectrum and so duration equals resource at where we are.

Looking for a significant spread if we're going to develop to where we can acquire a like kind asset on the other end of the spectrum would be acquisitions again, where we're our focus here is deploying capital of 100 basis points wide of where we see our cost of capital. It is and as we've noted significantly before our cost of capital we perceive it as a forward <unk>.

Yield at a 70 525 split with 10 year unsecured pricing, we're not using unburden free cash flow here, it's a conservative approach.

Do that to that cost of capital, but our goal again is to deploy that capital 100 basis wise why do that.

Thank you for the commentary.

Joey N. Agree: Thanks, Spencer. The next question comes from Smeads Rose of Citigroup. Please go ahead. Hi, thanks. So I understand you know you don't want to provide a full year kind of outlook and think about acquisition activity. But could you maybe just talk about what you've seen kind of year to date and kind of where cap rates have moved and then moved up sequentially from the fourth quarter, where you were able to lock into seven, to maybe just a little color on kind of what you're seeing in your term? Sure. Good morning, Speeds. I would tell you cap rates right now are all over the board, given the volatility and the underlying markets that we see and the interest rates. The fourth quarter was a roller coaster.

Go ahead Sir.

The next question comes from Smedes Rose of Citigroup. Please go ahead.

Hi, Thanks so.

So I guess you know you don't want to provide a full year kind of outlook and thinking about acquisition activity.

Could you maybe just talk about what you've seen kind of year to date and kind of where cap rates have moved have been moved up sequentially from the fourth quarter were you able to lock into <unk>, maybe just a little color on kind of what you're seeing near term.

Sure.

Good morning, Smedes I would tell you cap rates right now are all over the board given the volatility in the underlying markets that we see in the interest rate fourth quarter was a roller coaster.

Joey N. Agree: Obviously, we saw the base rate for the world go up 25% from 4% to 5% in. I think it's more likely that we get a rate hike this year than a cut in March at this point. And so cap rates are all over the board, as you would imagine that sellers' expectations of the overall economy and interest rate environment are all over the board. What I will tell you is, building upon my last answer, that 100 basis points spread to where we see our cost of capital will result in a material jump in our cap rates in Q1, 30 to 40 basis points most likely, still focusing at 30 to 40 basis points jump over Q4, again, without sacrificing credit quality. And that will be an aggregation on the acquisition side of unique opportunities, short-term blend and extend opportunities, high-performing stores directed by But the market, in terms of transactional volumes, is effectively fractional of where it was historically, and sellers' expectations are all over the board. And so we really don't have any...

Obviously, we saw the base rate for the World go up 25% from 4% to 5%.

And 70 days, then dropped 28% of the subsequent 21 days. This morning, I'm not sure where it's going to do or what Goolsbee and all the fed speakers were going to say I think it's more likely that we get a rate hike this year than a cut in March at this point and so cap rates are all over the board as you would imagine that sellers' expectations of the overall economy and interest rate environment.

All over the board what I will tell you is building. Upon my last answer is that 100 basis point spread to where are we see our cost of capital will result in a material jump in our cap rates in Q1.

30 to 40 basis points, most likely still focusing a 30 40 basis points jump over Q4.

Again without sacrificing credit quality and that will be an aggregation on the acquisition side of unique opportunity short term blend and extend opportunities high performing stores directed by our retail partners.

An asymmetric opportunities, but the market in terms of transactional volume is effectively fractional where it was historically and sellers' expectations.

Are all over the board and so we really don't have unfortunately, when the 10 year was at 4% early in the fourth quarter, we were approaching it seems like a new normal or a 4% 10 year. Since then obviously the volatility has caused some consternation. Some some hope amongst borrowers that are kind of vacillates back and forth.

Joey N. Agree: Unfortunately, when the 10-year was at 4% early in the fourth quarter, we were approaching it. It seemed like a new normal of 4%. Since then, obviously, the volatility has caused some consternation and some hope amongst borrowers that kind of vacillates back and forth. Okay, thanks.

Joey N. Agree: And then I just wanted to ask, you mentioned G&A's expense will continue to move up as a percent of revenue. Do you have a sense of kind of what percentage we should expect that to move to over the course of 24? So embedded in our guidance, we'll let Peter add any color, embedded in our base case of over 3% AFFO growth, which clearly is off the table right now, given the forward equity that we've raised and the color I've given to the pipeline, the percentage of G&A's revenue will go down, the absolute number we anticipate going up, because auditors, professional services, and everything else continues to go up in this world. Peter, anything

Okay. Thanks, and then I just wanted to ask you mentioned G&A expense will continue to move up as a percent of revenue.

Do you have a sense of kind of what percentage that we should expect that to move to over the course of 'twenty four.

So embedded embedded in our guidance, let Peter add any color embedded in our base case of over 3% are full growth, which clearly is off the table right now given the forward equity that we've raised and the color I give it to the pipeline the percentage of G&A as our revenue will go down the absolute number we anticipate going up because auditors professional service.

And everything else continues to go up in this world Peter anything I'm missing.

Peter: No, that's correct. I think in recent years, we've seen scale in G&A as a percent of adjusted revenue of approximately 40 or 50 basis points on an annual basis on average. It's difficult at this point to predict how much scale we'll see in 2024, but we do anticipate that G&A as a percentage of revenue will continue to come down. Thank you.

That's correct I think in recent years, we've seen scale in G&A as a percent of adjusted revenue of approximately 40 or 50 basis points on an annual basis on average it's difficult at this point to predict how much scale, we'll see in 2024, but we do anticipate that G&A as a percentage of revenue will continue to come down.

Great.

Thank you Krishna.

Ki Bin Kim: Thank you. Our next question comes from Ki-Bin Kim of Truist. Please go ahead. Thanks, John. Good morning, Joey.

Thank you.

The next question comes from Keybanc Kim of Truest. Please go ahead.

Thanks, Dan Good morning Joey.

Joey N. Agree: So, first question, I noticed you guys have about 10 big lots. So, the question is about your guidance, and I think you embedded about 50 basis points for credit lots and reserves. So, I'm curious how much of that accounts for the known or highly likely move out versus the unknown and big lots. What is that as a percent of APR, please?

So first question I noticed you guys have about 10 big lots.

So question is about your guidance and I think you embedded about 50 basis points credit loss reserves. So curious how much of that account for the known or light highly likely move out first is the unknown.

And a big loss of what is that that as a percent of ABR. Please.

Joey N. Agree: Yes, our total watch list today is approximately inclusive of any big lots exposure or any at home exposure where we have one. These are real estate plays for us at the end of the day. You can take a look at our at home in Provo, Utah. That's a real estate play across a mall that's undergoing renovation with a new large format target. Big Lots, we continue to monitor, it's an immaterial piece of our overall, obviously, portfolio, and it's embedded in that 1%-approximately watch list with amongst at home. And so I'll give you an example, we had one big loss that didn't renew; we are now with at least right now with a national retailer in the auto parts space, a great partner of ours, for approximately a 5% lift on the NOI on a 15-year new base term.

Yes, our total watch list today is approximately inclusive of any big lots exposure of any at home exposure, where we have won these are real estate plays for us at the end of the day you can take a look at our our at home and Provo, Utah, That's a real estate play across a mall that's undergoing renovation with the new.

Large format target Big lots, we continue to monitor its an immaterial piece of our overall of our overall AR, obviously portfolio and it's embedded in that 1% approximately watch list with.

Amongst at home and so I'll give you. An example, we had one big lots. It didn't renew we just were at least right now with a with a national retailer in the auto parts space, a great partner of ours for approximately a 5% lift on the NOI.

On a 15 year new base term. So we're very comfortable with our exposures are in and frankly, the underlying real estate here. So again that total watch list that we're focused on is basically 1% and a lot of it frankly, we went back.

Joey N. Agree: So we're very comfortable with our exposures and, frankly, the underlying real estate here. So again, the total watch list that we're focused on is basically 1%. And a lot of it, Frankly. Okay, and the big loss ABR percentage? Yeah, keeping it sub 50 basis points today in terms of our overall exposure to big lots. And I'd also note, on average, to Joey's point in terms of being comfortable with the basis, they're paying over $6 per hour. Okay.

Okay, and the big loss ABR percentage.

Yeah.

Keep in its sub 50 basis points today in terms of our overall exposure to big lots and I'd also note on average to Joey's point and in terms of being comfortable with the basis, they're paying just over $6 per square foot on average.

Okay.

Joey N. Agree: And, you know, I appreciate your comments about being more disciplined on capital deployment if the pricing doesn't make a whole lot of sense. You know, since your last equity raise, obviously, your stock price has drifted slightly lower. So if you had to raise a new round of equity today, and if you still wanted to hold on to the 100 basis points spread target, it would imply that you would probably have to buy something closer to an 8% gap cap rate. I'm not sure if there's enough desirable product at those prices. So if you can provide some commentary, and if that is the case, would you just be comfortable slowing down the acquisition pace again? Well, we started the year by putting out a base.

And you know I appreciate your comments about being more disciplined on.

Capital deployment, if the pricing doesn't make a whole lot of sense.

Since your last equity raise obviously your stock price has drifted slightly lower.

And so if you had to raise a new round of equity today.

And if you still want to hold on to the 100 basis points spread target. It would imply that you would probably have to buy something closer to an 8% GAAP cap rate I'm not sure if theres enough desirable product at that at those prices. So.

So if you can provide some commentary and if that is the case like would you just be comfortable slowing down the acquisition pace again.

Well, we started the year by putting out a base, we started the year or last year by putting out a base case with no investment volume was over 3%.

Joey N. Agree: We started the year, well, last year, by putting out a base case with no investment volume, with over 3% AFFO growth, with those conservative inputs that we just went through, and Peter gave a more descriptive Analysis 2. So we will not put out capital south of that 100 basis point spread unless it is a unique, compelling opportunity, a mark to market, or something that justifies, or has the merit to justify that business. And so where our stock price is, where the stock price goes, where cap rates go, I'll be honest, I don't anticipate material expansion throughout the course of the year absent more economic macro volatility, incrementally more volatility than we see now. This is a large liquid, fragmented space.

<unk> growth with those conservative inputs that we just went through.

And Peter gave more descriptive.

Analysis too so we will not put out capital.

<unk> of that 100 basis point spread unless it has a unique compelling opportunity a mark to market or something that justifies has the merit to justify that business case.

And so where our stock price is where our stock price goes where cap rates go I'll be honest I don't anticipate material expansion throughout the course of the year absent more economic macro volatility incrementally more volatility than we see now this is a larger liquid fragmented space.

Joey N. Agree: Our focus is again 100% focused and disciplined on deploying that capital and material accretive spread. This business is very simple, and it is a forward AFFO yield. If you deploy capital inside of that forward AFFO yield, it does not work.

Our focus is again as being 100% focused and disciplined in deploying that capital in material accretive spread this business is very simple.

And afford <unk> yield.

If you do it if you deploy capital inside of that 40, <unk> yield it does not work.

Joey N. Agree: Forget debt; I don't care if you're using overnight paper. We price our cost of capital using 25% 10-year unsecured bonds. That's how we look at our cost of capital. But if you're deploying capital inside of your forward AFFO yield, it's not going to work, and it's going to drive no shareholder accretion on an AFFO per share basis. And so we're not going to be out there collecting nuts, growing our denominator, not driving per share value and per share growth for our shareholders. The relationship between cap rates and volume, at the end of the day, is exponential and not linear. And so again, people have heard me say, inside of 75 basis points is the red light. We've seen the anecdotal evidence as well as the empirical evidence of large volume numbers not producing annualized growth in the subsequent year.

Forget that I don't care, if you're using overnight paper, we price our cost of capital using 25% 10 year unsecured bonds. That's how we look at our cost of capital, but if you're deploying capital inside of your forward <unk> yield, it's not going to work and it's going to drive no shareholder accretion on an <unk> per share basis, and so we're not going to be out there collecting nuts.

Growing our denominator not driving per share value and per share growth for our shareholders the relationship between cap rates.

Between cap rates and volume at the end of the day is exponential and not linear. So again people have heard me say inside of 75 basis points as the Red way, we've seen the anecdotal evidence as well as the empirical evidence of some large volume numbers not producing annualized growth in the subsequent year.

75 to 100 basis points as a yellow light in this business you could invest selectively over 100 basis points. When you look at your true cost of capital not including Unburden free cash flow of short term debt the white because it starts to be turned green.

Joey N. Agree: 75 to 100 basis points is a yellow light in this business. You can invest selectively. Over 100 basis points, when you look at your true cost of capital, not including unburdened free cash flow or short-term debt, the light starts to turn green. If you get to 150 basis points, you can slam on the gas like we did for several years. We're not at that 150 basis point space in this market today unless you want to go significantly up the risk curve, which is adverse to everything we believe in at this company. And so that 100 basis point bogeyman, I'm not sure how much we're going to be able to aggregate for the year. We don't have that crystal ball, but we're certainly not going to deploy capital inside of it just to grow our denominator. Thank you, Joey.

Two 150 basis points, you can slam on the gas like we did for several years, we're not at that 150 basis point space in this market today, unless you want to go significantly up the risk curve, which is adverse to everything we believe in this company and so that 100 basis point bogey not sure how much we're gonna be able to aggregate for the year I don't have that crystal ball, but.

We're certainly not going to deploy capital inside of it just to grow our denominator our asset base.

Thank you Joey.

Steven.

The next question comes from Joshua <unk> of Bank of America. Please go ahead.

Hi, This is Josh.

You already made some comments about your development pipeline.

I'm curious I know over 2000 22023 was about okay.

Joey N. Agree: The next question comes from Joshua Dennerlein of Bank of America. Please go ahead. Hi, this is Val Grannis on behalf of Josh. I'm curious, I know over 2022-2023, it was about, say, a 23% increase. Is it fair to assume maybe a comparable amount going into 2024 for the total amount of development? We are.

With a 23% increase is it fair to assume maybe a comparable now going into may for a total amount.

Development.

We are <unk>.

Consistently and constantly answering the phones and responding to inquiries from merchant developers from retailers from all different types of constituents given the lack of liquidity out there in the construction lending market and the lack of ability for merchant builders to develop net new stores, where that number ends up this year is going to be frankly subject.

Joey N. Agree: Consistently and constantly answering the phones and responding to inquiries from merchant developers, from retailers, from all different types of constituents, given the lack of liquidity out there in the construction lending market and the lack of ability for merchant builders to develop net new stores. Where that number ends up this year is going to be frankly subject to where we can get returns. We're just not going to grow that number to put shovels in the ground, take duration risks, and not provide for the appropriate levels of ultimate accretion on our deployed capital. So it's difficult to say where that will go. It can change by the hour, though.

To where we can get returns we're not we're just not going to grow that number to put shovels in the ground take duration risk.

And not provide for the appropriate levels of ultimate accretion on our deployed capital. So it's difficult to say where that will go it can change by the day, we announced a number of new projects as well as completed in this quarter.

Our pipeline continues to grow the pace at which it grows it's really up in the year retailers want to grow today, that's the ultimate bottom line as the retailers in our portfolio inclusive of Walmart, who just announced a slew of new stores really since the first time since the GSC.

Joey N. Agree: We announced a number of new projects as well as completed them this quarter. Our pipeline continues to grow, but the pace at which it grows is really up in the air.

Want to grow today. The question is construction costs availability of capital return on cost and what rent per square foot they can pay.

So calibrating those things ultimately.

Joey N. Agree: Retailers want to grow today. That's the ultimate bottom line. Retailers in our portfolio, inclusive of Wal-Mart, who just announced a slew of new stores, really for the first time since the pandemic. The GFC wants to grow today. The question is construction costs, availability of capital, return on costs, and what rent per square foot they can pay. And so calibrating those things ultimately is our goal is to calibrate those things and figure out what projects make sense for us with those retail partners. What that number is, again, I wish I had that business.

Our goal is to calibrate those things and figure out what projects makes sense for us with or with those retail partners. What that number is again I wish I had that visibility.

Great. Thank you and I believe this is along the lines of what you were just mentioning that last quarter.

<unk> made some comments about partnering with retailers to kind of assist with bring stores too is there any other further update on that.

Continued discussion the team as it to national retailers are you familiar with today and tomorrow frankly.

We're constantly in dialogue trying to help break this log jam that's occurring right now in the development of new stores that said, we're not going to do it too obviously to the detriment of our shareholders, where you get the appropriate spread so.

Joey N. Agree: Great, thank you. And I believe this is along the lines of what you were just mentioning that last quarter made some comments about partnering up with retailers to kind of assist with bringing stores to a close. Is there any further update on that? Continued discussion, the team is at two national retailers that you're familiar with today and tomorrow. We're constantly in dialogue trying to help break this log jam that's occurring right now in the development of new stores. That said, we're not going to do it, obviously, to the detriment of our shareholders. We're going to get the appropriate spread. The dialogue is ongoing.

The dialogue is ongoing it is very fluid as you can imagine with the world going inside out in the fourth quarter.

But we're going to continue to have those conversations and I think our full service value proposition as I know it is they don't I know it is you need to retailers and they appreciate all of our capabilities inclusive of our asset management capabilities.

Great. Thank you.

Joey N. Agree: It is very fluid, as you can imagine, with the world going inside out in the fourth quarter. But we're going to continue to have those conversations. And I think our full service value proposition is, I know it is, I know, I know it is unique to retailers, and they appreciate all of our capabilities, inclusive of our asset management. Great, thank you.

Thank you.

The next question comes from Rob Stevenson of Janney. Please go ahead.

Good morning, guys can you talk about what the cash spread on leasing done in the fourth quarter and for 'twenty three as a whole was and have the size of the bumps or other lease terms change given the persistently higher inflation. These days.

On the first one Peter do you have a number handy I mean, it was fairly de Minimis, yeah, Rob I would just say first that we don't have a ton of actually re leasing activity in our portfolio. The vast majority of leases that are up for expiration and see the tenant exercised an option, which typically has an embedded bump within that option.

Rob Stevenson: Thank you. The next question comes from Rob Stevenson of JANI. Please go ahead. Good morning, guys.

Joey N. Agree: Can you talk about what the cash spread on leasing done in the fourth quarter and for 23 as a whole was? And has the size of the bumps or other lease terms changed given the persistently higher inflation these days? Okay. And then what about the lease terms?

That said the recapture rate for Q4 and for the full year was north of a 100%.

Okay.

And then what about the lease terms are you guys trying to push.

Joey N. Agree: Are you guys trying to push higher bumps, more frequent bumps, etc. given the higher inflation or trying to mitigate people to, you know, CPI? How are you guys thinking about that as you're starting new leases on any of these development deals or any of the other stuff? Yes, so national retailers will generally not acquiesce to CPI based bumps. They want to know what the rent is going to be on a going forward basis so they can plan.

Higher bumps more frequent bumps et cetera, given the higher inflation or trying to mitigate people to CPI. How are you guys thinking about that as youre, starting new leases on any of these development deals or any of the other stuff.

Yeah. So no national retailers will will generally acquiesce to CPI based bumps they want to know what the rent is going to be on a go forward basis. So they can plan.

Joey N. Agree: But yes, you know, that's thematic since we've seen inflation at eight, 9%, let alone over 3%, and everybody is, I think, understanding that we're in an inflationary environment. And so the frequency, as well as the size of those bumps, I think most tenants are amenable to relooking at. Okay. And then can you talk about the difference between cap rates on ground leases, you know, in the fourth quarter for the year overall versus fee simple acquisitions? That spread sort of stayed relatively consistent.

But yes, that's thematic since we've seen inflation and eight 9% let alone over 3%, but everybody is I think understanding that we're in an inflationary environment and so the frequency as well as the size of those bumps I think most tenants are amenable to re looking at their lease terms there.

Okay, and then can you talk about the difference between cap rates on ground leases.

In the fourth quarter for the year overall versus the fee simple acquisitions, such spread sort of stayed relatively consistent you're seeing better opportunities or less opportunities and ground leases today and going forward, how should we be thinking about that.

Joey N. Agree: You're seeing better opportunities or less opportunities in ground leases today and going forward. How should we be thinking about that? Very consistent, if any, a de minimis spread between the ground leases and net leases. We're generally working with our retail partners there. I think you'll see more of the same in the first quarter.

Very very consistent.

If any are de minimis.

Spread between the ground leases and net leases were generally working with our retail partners. There I think you'll see more of the same in the first quarter. Some of them are shorter term some of them are targeted by retailers.

Joey N. Agree: Some of them are shorter term. Some of them are targeted by retailers in partnership with us. So, very de minimis spread.

Partnership with us.

So very very de Minimis spread if any.

Haendel Emmanuel St. Juste: Ok, thanks guys, appreciate the time. Thank you. The next question comes from Haendel St. Juste of Mizuho. Please go ahead. Hey there, sorry about that.

Okay. Thanks, guys appreciate the time.

Thank you.

The next question comes from Handel St. Juste of Mizuho. Please go ahead.

Hey, sorry about that.

Joey N. Agree: Joey, I think you mentioned earlier in the call that you're anticipating, let's see, opportunity dispositions this year. Curious what categories you're more inclined to call, potentially how much you'd like to call, and, http://www.larryweaver.com Yeah, I would tell you, from a category perspective, we're not overly interested in decreasing our Walmart exposure or anything like that. The opportunistic dispositions will generally be into the pretty tenuous 1031 market, dominated in markets where you have significant capital, seems to be significant capital, still chasing things at fairly low yields. We'll look to redeploy that capital at approximately 150 basis point spreads. You can see it in the auto service space.

Joey I think you mentioned earlier in the call that Europe.

A quick closing.

That's the opportunity.

Awesome.

If you're curious what categories, you're more inclined to call principally how much you'd like to call in.

Hmm.

That's a range for cap rates or any pricing color. Thanks.

Yes, I would tell you from a category perspective, we're not overly interested in.

Decreasing our our Walmart exposure or anything like that the opportunistic dispositions will generally be into the two are pretty they're pretty tenuous 10, 31 market dominated in markets, where you have significant capital seems to be significant capital is still chasing things at fairly low yields will look to deploy redeploy.

That capital at approximately 150 basis points spreads you can see it in the in the auto service space you could see it amongst other categories the farm and rural supply space, the Carwash space potentially generally spaces, where.

Joey N. Agree: You can see it amongst other categories, the farm and roll supply space, the car wash space, potentially, generally spaces where we're very comfortable with our exposure, but there are still opportunistic, maybe tax-motivated purchasers out there in geographies which seem to still have. I hope that was helpful. And then just going back to the messaging here, clearly you're guiding to a capital light deployment, earnings growth, minimum three, probably looks like 4% now, expecting interest rates to be higher for longer. So I guess I'm curious, kind of from your perspective, you know, what's the investment case for investors buying the stock here today? Three to 4% earnings growth isn't too shabby in this environment, I get it, but it is still likely to lag a number of your peers, I think. Are we basically in a wait and see mode to a degree here? Well, so let's take a step back.

We're very comfortable with our exposure, but there is still opportunistic maybe tax motivated.

<unk> was out there and geographies, which seem to still have heat to them.

Got it Thats helpful.

And then just going back to the messaging here clearly youre guiding to a capital light deployment earnings growth minimum three probably looks like 4% now I'm expecting interest rates to be higher for longer. So I guess I'm curious kind of from your perspective, what's the investment case for for investors buying stock here today three of them.

A 4% earnings growth isn't too shabby in this environment I get it but they're likely to lag a number of your peers. I think are we basically in a wait and see mode to a degree here.

So let's take a step back we have a 5% plus and growing dividend thats covered at the low end of our targeted payout ratio of 75%.

Joey N. Agree: We have a 5% plus and growing dividend that's covered at the low end of our target payout ratio of 75%. We have a five-year CAGR of 6% AFFO growth while qualitatively improving the portfolio to now approaching 70% investment grade and 12% ground. It is the strongest retail portfolio, I think, without exception in the country, and most investors and analysts would agree. We have a balance sheet that is fortified with a billion dollars of liquidity, has no material debt maturities until 2028, and has no material, no floating rate exposure except anything outstanding on the line of credit. So if you take your 3% to 4% and go ahead and take the high end, then take the 5% and the growing dividend, you're at 9% total returns there alone.

We have a five year CAGR of 6% <unk> growth, while qualitatively improving the portfolio to now approaching 70% investment grade and 12% ground leases.

Is the strongest retail portfolio I think without exception in the country and most investors and analysts would agree.

We have a balance sheet that is fortified with $1 billion of liquidity has no material debt maturities until 2028, no mature no floating rate exposure accept anything outstanding on the line of credit.

So if you take your 3% to 4% you can go ahead take the high end and then take the 5% and growing dividend and you're at 9% total returns there alone.

Joey N. Agree: Assuming no dividend growth, which it will grow this year, with an underlying fortress balance sheet and an underlying fortress portfolio, I think that is a very compelling case in today's environment to invest in ADC. And I think, as I said in our prepared remarks, insiders here, including myself, agree. What we have done and what we have built, without diminishing the qualitative aspect of our portfolio, is, I think, without peer. We haven't loaded up on pharmacies yet.

Assuming no dividend growth, which it will grow this year with an underlying fortress balance sheet and underlying fortress portfolio.

I think that is a very compelling case in today's environment to invest in ADC and I think as I said in our prepared remarks insiders here inclusive of myself agree what we have done and what we have built without diminishing the qualitative aspect of our portfolio is I think is without.

Pierre we havent loaded up on pharmacies, we've ran from Walgreens exposure, we don't have double digit pharmacy exposure and double digit dollar store exposure, we're not just out there checking the box I mean, we've been talking about Walgreens now for years, reducing our Walgreens exposure to an inconsequential number watching CBS.

Joey N. Agree: We've run away from Walgreens exposure. We don't have double-digit pharmacy exposure and double-digit dollar store exposure. We're not just out there checking the IG box.

Joey N. Agree: I mean, we've been talking about Walgreens for years, reducing our Walgreens exposure to an inconsequential number, watching CVS overtake Walgreens in the pharmacy space. I think we have a proven track record now of not only being correct in our retail predictions and predilections about the concerns in an omnichannel world, but we also have the balance sheet management, and the earnings growth profile to, frankly, bank on. And so I think there's something to be said, especially in today's environment, for stability and predictability. Thank you for the thoughts. I appreciate it. Thanks, Haendel. The next question comes from Mitch Germain of JP Securities. Please go ahead. Hey, good morning. I know it's early in the year, but I'm just curious if you're seeing any changes in the buyer. Hey man, should I honestly?

Overtake Walgreens in the pharmacy space I think we have a proven track record now of not only being correct and our retail predictions and predilections about the concern that a nominee channel world, but we also have the balance sheet management the earnings growth profile.

Frankly to tobacco.

I think there's something to be said, especially in today's environment for stability and predictability.

Great. Thanks for the thoughts appreciate it thanks.

Thanks Sandro.

The next question comes from Mitch Germain of J P. Securities. Please go ahead.

Hey, good morning, I know, it's early in the year, but I'm just curious if youre seeing any changes to the buyer pool.

Hey, Mitch honestly no.

Mitch Germain: No. Yo. This market is so fragmented and large to begin with, that when you stress it in a higher interest rate environment and in a liquid credit environment, the buyer pool kind of becomes a toss up in the air. It's very difficult.

Yes.

This market is so fragmented and large to begin with that you stress it in a higher interest rate environment and in an illiquid credit environment. The buyer pool kind of becomes a toss up in the year.

So it's very difficult I mean, sometimes I'll be honest I'll ask an investment or disposition Committee, who is this who is buying this who is selling this.

Joey N. Agree: Sometimes, I'll be honest, I'll ask an investment or disposition committee, "who is this? Who is buying this? Who is selling this?" And the answer turns into something like a riddle.

And the answer turns into something like a riddle.

Joey N. Agree: And so I'll be honest, there are no parallels to be drawn. There is not a fluid market right now. It is hit or miss. It's about being disciplined. And it's about throwing darts and being decisive in what you want to accomplish.

And so I'll be honest. It's there is there are no parallels to be drawn there is not a fluid market right now it is hit or Miss it's about being disciplined and it's about throwing darts and being decisive and what you want to accomplish.

Joey N. Agree: Thanks for the call, Eric. Thank you. Our next question comes from RJ Milligan of Raymond James. Please go ahead.

Thanks for the color.

Thank you.

The next question comes from RJ Milligan of Raymond James. Please go ahead.

RJ Milligan: Hey, good morning, guys. So I just want to follow up. I think Smeet's asked this.

Hey, good morning, guys. So I just wanted to follow up I guess I'm not sure. If you provided an answer in terms of what the year to date activity has been so far.

Joey N. Agree: I'm not sure if you provided an answer in terms of what the year-to-date activity has been so far. No, we haven't provided any answer or any update on the year-to-date activity. Although I did mention that we anticipate cap rates jumping in Q1 by approximately 30 to 40 basis points on the.

No we haven't provided any answer or any update on the year to day activity. Although I did mention that we anticipate cap rates jumping in Q1 by approximately 30 to 40 basis points on the acquisition side.

Got it and so I know, there's a difference between capital previously raised via the ATM last quarter versus trying to go out and raise new capital equity capital today. So Im just curious if you are seeing that seven or seven five average cap rate or is that cap rate expansion and when.

Joey N. Agree: And so I know there's a difference between capital previously raised right via the ATM last quarter versus trying to go out and raise new equity capital today. So I'm just curious if you are seeing that seven or, you know, seven and a half average cap rate or that cap rate expansion. Would the goal then be to deploy the Q4 ATM proceeds quickly? I guess, what is the outlook for cap rates? Is it, you know, go and deploy at a seven and a half today, given that that's a pretty high absolute cap rate? Or is it still more of a wait and see with the previously raised proceeds? Yeah, just to clarify, that's not the market. These are manufactured transactions.

The goal then be to deploy the Q4 ATM proceeds quickly.

I guess what is the outlook for cap rates is it going deploy at a seven five today given that that's a pretty high absolute cap rate or is it still more of a wait and see.

The previously raised proceeds yes, just to clarify that's not market. These are manufactured transactions will work out there creating value.

Joey N. Agree: We'll work out if they're creating value. That is nowhere near market cap rates today on a like-kind product. We're not out there buying glossy brochures here that are highly marketed and sent through the auction process.

That is nowhere near market cap rate today out in like kind product, we're not out there buying glossy brochures here, they're highly marketed.

And sent through the auction process and so if we can achieve those types of cap rates, we will look at that spread relative to our cost of capital deploy that equity, but I think as we highlighted we have $500 million in leverage neutral buying power today.

Joey N. Agree: And so if we can achieve those types of cap rates, we'll look at that spread relative to our cost of capital and deploy that equity. But I think, as we highlighted, we have 500 million dollars in leverage-neutral buying power today, not inclusive of any disposition proceeds. And so as the year materializes again, as the pipeline and the pipeline grow, we'll look at all capital options for us, but we don't need to do anything today. I think that that's pretty clear with a billion dollars of liquidity and that 500 million in leveraged neutral power. Thanks, and just one follow-up. So, Joe, you've talked a lot or very often about, you know, the lack of visibility in 7070 days.

Non inclusive inclusive of any disposition proceeds and so as the year materializes again as the pipeline and the pipeline grows.

We will look at all capital options for us, but we don't need to do anything today, I think that's pretty clear, where the $1 billion of liquidity in that $500 million in leverage neutral power.

Thanks, and just one follow up so Joe you've talked a lot are very often about the lack of visibility 70 70 days.

Joey N. Agree: However, you have been able to provide, despite that lack of visibility, as sort of a guidepost, at least for acquisition volume. And I understand that we are in a volatile capital markets environment. I'm just curious, what do you need to see in the capital markets or the transaction market to get the confidence to resume the external growth guidepost? I think we have to get to a level of normalcy again. I think we have to get to a level of stability in the underlying macroeconomic environment. I mean, I haven't, I'll be honest, I haven't seen an economist who's gotten this right since we pumped $6 and a half trillion into the economy and lowered rates to zero.

However, you have been able to provide despite that lack of visibility sort of a guidepost at least for acquisition volume and I understand that we are in a volatile capital markets environment I'm. Just curious what do you need to see in the capital markets or the transaction market to get the confidence to resume a.

External growth guideposts.

I think we have to get to a level of normalcy again, I think we have to get to a level of stability in the underlying macroeconomic environment.

I mean, I haven't I'll be honest I haven't seen the economists who has gotten this right since we pumped sticks that I have truly into the economy and lowered rates to zero and so for us to sit here and be specifically to sit here.

A dozen real estate guy and try to anticipate what's going to materialize over the course of the next 11 months during this year.

Joey N. Agree: And so for us to sit here, me specifically, to sit here as a dumb real estate guy and try to anticipate what's going to materialize over the course of the next 11 months this year, I would frankly be getting ahead of myself. And so, we were able to provide those historic guideposts because we had a level of visibility into anything absent an aberration, a geopolitical event, or some type of crash.

Frankly be getting ahead of myself and so.

We were able to provide those historic guidepost, because we had a level of visibility into anything absent an aberration or geopolitical event or some type of crash today with the underlying volatility that we're seeing in these markets and frankly, the lack of clarity we are seeing in these markets.

I mean, it's a foggy world out there today.

Joey N. Agree: Today, with the underlying volatility that we're seeing in these markets and, frankly, the lack of clarity we're seeing in these markets, I mean, it's a foggy world out there today. And so when we get, and if we get that level of clarity based upon that stability, we will 100% provide it. But I think anything, if we did anything else, we would just be getting ahead of ourselves.

So when we get in if we get that level of clarity based upon that stability, we will 100% provide it but I think anything if we did anything else. We would just be getting ahead of ourselves.

One additional is clearly you guys have been pretty proactive in selling down your walgreens exposure over time I'm curious if there's any other categories.

So you are looking to sort of get ahead of the curve.

Joey N. Agree: Thanks, one additional point is that clearly, you guys have been pretty proactive in selling down your Walgreens exposure over time. I'm curious if there's any other categories that you're looking to sort of get ahead of the curve over the next year or two. Not really from a category perspective, but we saw something very specific with Walgreens in the context of the pharmacy space, the degradation of the front end, the constant need and desire to do M&A to increase store count, which didn't make sense to us, the failure of Walgreens to repurpose the front end of the store with their attempts at Beauty and Fragrance and their attempts at the W Cafe. We saw that very specifically, and frankly, we I mean, it was 45% Walgreens exposure in 2012, I think, approximately.

Over the next year or two.

Not really from a category perspective, we saw something very specific with Walgreens in context of the pharmacy space. The degradation of the front end the constant need and desire to do M&A to increase store count, which didn't make sense to us to failure of Walgreens.

To repurpose the front edge of the stored with their attempts to beauty and fragrance. Their attempts at the W. Cafe, we saw that very specifically and frankly, we had an over abundance of Walgreens exposure I mean, it was 45% Walgreens exposure in 2012, I think approximately 2013, we were 45% Walgreens exposure than we had.

A lot of intimate experience developing approximately 40 to 50 of them in six states and so that was abundantly clear to us watching those stores erode.

Joey N. Agree: We had 45% Walgreens exposure, and we had a lot of intimate experience developing approximately 40 to 50 of them in six states. And so it was abundantly clear to us watching those stores erode. I'll tell you today that the retailers in our portfolio are generally doing really well and are really healthy. Now we've stayed away from the casual dining space.

I'll tell you to do the retailers in our portfolio are generally doing really well and are really healthy now we stayed away from the casual dining space. We've stayed away from the experiential stuff and we'll continue to.

But if you look at our portfolio today, the retailers are really doing well the bigger getting bigger theyre getting stronger they're investing in price labor and distribution and figuring out how to drive EBITDA in this omnichannel world.

Joey N. Agree: We've stayed away from the experiential stuff and will continue to. But if you look at our portfolio today, the retailers are really doing well. The big ones are getting bigger. They're getting stronger.

Thanks, guys.

Thanks RJ.

The next question comes from Linda Tsai of Jefferies. Please go ahead.

Hi, Good morning regarding what you referred to is manufactured cap rates and <unk> being up 40, 50 bps through the auction process any more color on how you drive that level of expansion and how easy or difficult. It is to achieve this.

Joey N. Agree: They're investing in price, labor, and distribution and figuring out how to drive EBITDA in this omni-channel world. Thanks, guys. Thanks, RJ. Our next question comes from Linda Tsai of Jefferies. Please go ahead. Hi, good morning.

Just to clarify the morning, Linda those cap rates or effective way us creating value out there seeking off market opportunities blend and extend opportunities. These arent highly marketed glossy brochure through national brokers that we're working with our retail partners to find opportunities where they want to be there long term and we won.

Linda Tsai: Regarding what you referred to as manufactured cap rates in 1Q being up 40, 50 bps through the auction process, any more color on how you drive that level of expansion and how easy or difficult it is to achieve this? Yeah, just to clarify, good morning, Linda. Those cap rates are effectively us creating value out there, seeking off-market opportunities, and blend and extend opportunities. These aren't highly marketed, glossy brochures through national brokers; we're working with our retail partners to find opportunities where they want to be for the long term, and we want to be their landlord for the long term. Will you repeat the second part of that question? Oh, just, you know, how easy it is to or difficult to achieve this and, you know, its sustainability. Not easy. I don't think anything is easy in this world today. It takes grit.

To be their landlord long term.

We repeat the second part of that question.

Oh just.

How easy it is difficult.

Difficult to achieve.

Yeah.

Staying ability.

Not easy.

But this is I don't think anything is easy in this world today It takes grid.

That's one of our core values here greatness requires grit. It takes grid, we leverage our relationships. The team here has tremendous relationships and credibility with retailers.

We arent in the the.

Wholesale buying process anymore out there thats going but given where cost of capital are but I'm, 100% confident that the team will continue to be able to uncover opportunities across all three external growth platforms that provide outsized returns.

Relative both to the market and hopefully our own internal expectations.

And then if sale leaseback with a third of the acquisition volume what can it grow to in 'twenty four and similarly, Similarly, workin DFT grudge, who as a percentage of the volume.

Joey N. Agree: That's one of our core values here. Greatness requires grit. It takes grit.

Joey N. Agree: We leverage our relationships. The team here has tremendous relationships and credibility with retailers. We aren't in the wholesale buying process anymore out there, given where the costs of capital are. But I'm 100% confident that the team will continue to be able to uncover opportunities across all three external growth platforms that provide outsized returns relative both to the market and, hopefully, our own internal expectations. And then, if sale leaseback was a third of the acquisition volume, what could it grow to in 24? And similarly, where could DFP grow to as a percentage of the volume?

Chris early fast perspective, any any any tenant that doesn't need capital and those are the only tenants that we typically do business with we don't want to become a large unsecured creditor to any retailer that is private equity sponsored so if you looked at the retailers. We did say at least that well get there impasse right their cfos their real estate departments or what.

<unk> the volatility they know where they can issue paper in the unsecured market today theyre waiting for things to settle down here as well and so I wouldn't anticipate given today's status quo that number approaching one third its fully possible. If we get stabilization later in the year in terms of DSP everyday.

It changes.

Joey N. Agree: From a Saleifast perspective, any tenant that doesn't need capital, and those are the only tenants that we typically do business with, we don't want to become a large, unsecured creditor to any retailer that's private equity sponsored. So if you look at the retailers we did sell, lease, fail, look, they're on pause, right? They're CFOs, their real estate departments are watching the volatility; they know where they can issue paper in the unsecured market today. And they're waiting for things to settle down here as well.

We have built that team out we've built that system out in context of arc, we have improved to meet our processes more efficient again, it's just a question of pricing and the pricing is both with the developers as well as the retailers at the returns they're willing to accept and ultimately the rents that we're able to pay on those specific sites and if it works in <unk>.

Next of R. R.

The return profile.

Thank you.

Thanks Linda.

The next question comes from Ronald Camden of Morgan Stanley. Please go ahead.

Joey N. Agree: And so, given today's status quo, that number approaching one third is fully possible if we get stabilization later in the year. In terms of DFP, every day, it changes. We have built that team out, we've built that system out in context of ARC, and we have improved and made our processes more efficient. Again, it's just a question of pricing, and the pricing is both with the developers as well as the retailers, the returns they're willing to accept and, ultimately, the rents they're able to pay on those specific sites and if it works in context of our obviously return profile. Thank you. The next question comes from Ronald Camden of Morgan Stanley. Please go ahead. Hey, good morning, Joe and Peter. You have Jenny in for Ron.

Hey, Good morning, Julien Peter you have Jenny on for Ron.

Just have two quick questions. The first is can you talk a little bit on the competition environment today for the <unk> focused market and you mentioned like transaction volume is kind of low like it does here, but if you compare on a year over year.

Our basis is that like any wars are actually better than last year.

Competition in our specific sandbox has really hit or Miss right. There are the random and infrequent 10, 31 or high net worth individuals. They tell you. The competition is very similar to was what it was historically, except the amount of competition. The competition is similar but the.

Rob Stevenson: I just have two quick questions. The first is, can you talk a little bit about the competition environment today for the IT-focused market? And you mentioned, like, transaction volume is kind of low this year. But if you compare on a year-over-year basis, is that, like, getting worse, or is it actually better than last year? Thanks. Competition in our specific sandbox is really hit or miss, right? There are the random and infrequent 1031 or high net worth individuals.

Out of competition, given just the transactional slowdown the 10 31 slow down.

Is very de Minimis, and so I, often say our largest competitors are sellers expectations.

Cells.

The second part of that question.

The second is that transaction volumes, you mentioned like the transaction volume does you guys kind of low, but if you compare on a year over year basis, it's actually better than last year I think it was last year.

While the transaction volume in terms of closed acquisitions.

Off the pipeline and just overall.

We're still early look we have visibility into the Q1 pipeline. We're just starting to build Q2 transaction volume for Q1 would be down year over year relative to Q1 are undoubtedly but as I mentioned, our focus is on improving those cap rates vary significantly on a relative year over year basis. So I think.

Joey N. Agree: They tell you that competition is very similar to what it was historically, except for the amount of competition. The composition is similar, but the amount of competition, given just the transactional slowdown, the 1031 slowdown, is very de minimis. I often say our largest competitors are sellers' expectations themselves. Will you repeat the second part of that question? The second is the transaction volumes. You mentioned that the transaction volume this year is kind of low, but if you compare it on a year over year basis, it's actually better than last year or actually worse than last. What's the transaction volume in terms of closed acquisitions of the pipelines and just overall? We're still early.

Looking forward again, we will see what type of normalcy, we get or stabilization, we get into this in the underlying macro.

It's difficult, it's very difficult to predict impossible for us.

Yes. It makes sense. If you talk about dispositions I think you mentioned, you're expecting to disposal disposed more this year and based on your targeted cap rates do you think just maybe talk about them more about like this.

Joey N. Agree: Look, we have visibility into the Q1 pipeline. We're just starting to build Q2. Transaction volume for Q1 will be down year over year relative to Q1, undoubtedly. But as I mentioned, our focus is on improving the cap rate. Yeah, makes sense. If you talk about dispositions, I think you mentioned you're expecting to dispose of, like dispose more this year. And based on your target cap rates, do you think, just maybe, talk a little bit more about the disposition cap rates trending and the overall environment? Yeah, we're looking for those opportunistic areas where we can sell an asset generally in the, you know, plus or minus in the fixed cap range and then redeploy it north of 100 basis points, minimally above that, in assets that we don't think, long term, necessarily have the growth potential profile that fit within the portfolio. Okay, sounds good.

<unk> copper is trending and the overall environment.

Yes, we're looking for those opportunistic areas, where we can sell an asset generally.

Plus or minus in the fixed cap range, and then redeploy it north of a 100 basis points minimally above that.

And assets that we don't think long term necessarily have the growth potential profile.

The portfolio.

Okay. It sounds good. Thank you. Thank you.

The next question comes from Alex Hagan of Baird. Please go ahead.

Hey, good morning, guys and thank you for taking my question first off where the current yields on the new development funding bills.

When you say new development funding deals.

Generally we are targeting.

New net new in terms of approvals and starting now we're targeting.

The DSP transaction that is let's call. It six months until rent commencement approximately 50 to 75 basis points over white tie in cap rates in the acquisition.

Joey N. Agree: Thank you. Thank you. Our next question comes from Alec Fagan of Baird. Please go ahead. Hey, good morning, guys.

If it's an overall project. It takes entitlements were significantly wide of that just because of the duration risk.

Alec Fagan: And thank you for taking my question. First off, what are the current yields on the new development funding bills? When you say new development funding deals, generally, we're targeting... new and net new in terms of approvals, and starting now, we're targeting the DFP transaction that is, let's call it, six months until rent commencement, approximately 50 to 75 basis points over like time cap rates in the acquisition. If it's an overall project that takes entitlements, we're significantly wide of that just because of the duration. Second off, you kind of put on your macro hat earlier and said you think the chance of a rate hike might be higher now than a rate cut.

Okay. Thank you then.

Yes, I can.

You have kind of put on your macro had earlier said do you think.

Chance of a rate hike is might be higher now than a rate cut.

Curious, what's the most attractive source of debt today and does the company have any plans on issuing long term debt to reduce the revolver anytime soon.

Yes, just I'll, let Peter answer the second question.

Just to repeat the chance of a rate hike is probably better than that this year is probably better than the chance of a rate cut in March we'll see more data obviously tomorrow.

Joey N. Agree: I'm kind of curious, what's the most attractive source of debt today? And does the company have any plans on issuing long-term debt to reduce the revolver anytime soon? Clearly, that's off the table.

But I think that rate cut expectation that the market had for March as is clearly off the table and we'll see if we get any more hot prints that come out Peter in terms of the debt market I'll, let you take that yeah. I think we came into this year with a $1 billion of total liquidity available to us and so there is no near term need to access.

Peter: We'll see if we get any more hot prints that come out. Peter, in terms of the debt market, I'll let you take that. Yeah, I think we came into this year with a billion dollars of total liquidity available to us. And so there's no near-term need to access the debt markets.

Peter: We have no material debt maturities until 2028, and so we can continue to be opportunistic in terms of how and when we access the debt capital markets. We have access to both the unsecured markets as well as the bank debt markets, where we continue to have strong support from our bank group. I think our preference is typically for longer term, fixed-rate unsecured finance that matches the underlying lease duration of our portfolio. And to that end, as disclosed in the 10-K, we entered into $150 million of forward-starting swaps during the fourth quarter. Those swaps contemplate a future 10-year unsecured debt issuance, and they're swapped at an effective rate just under 4%. So we have discretion in terms of when we use those swaps.

The debt markets, we have no material debt maturities until 2028, and so we can continue to be opportunistic in terms of how and when we access the debt capital markets. We have access to both the unsecured markets as well as the bank debt markets, where we continue to have strong support from our bank group I think our preference is typically.

For longer term fixed rate unsecured financings.

That match, the underlying lease duration of our portfolio and to that end as disclosed in the 10-K, we entered into a $150 million of forward starting swaps during the fourth quarter those swaps contemplated future 10 year unsecured debt issuance and their swapped at an effective rate just under 4%. So we have optionality in terms of when.

We use those swaps they have a mandatory mandatory termination date in June of 'twenty, five, but contemplates us coming back to that market at some point in the future.

Peter: They have a mandatory termination date of June 25, but it contemplates us coming back to that market. Cool, thank you, that's all for me. Thank you. The next question comes from Eric Borden of BMO Capital Markets. Please go ahead. Hey guys, good morning. Just a quick one on the watch list.

Cool. Thank you that's all for me.

Thank you.

The next question comes from Eric Gordon of BMO Capital markets. Please go ahead.

Hey, guys. Good morning, just a quick one on the watch list, what's the mark to market on the assets in there today I think you mentioned big lots expiring or taking back space in the mid and mid single digits. Just curious about the rest of the portfolio.

Eric Wolfe: What's the mark to market on the assets in there today? I think you mentioned, you know, big lots. Just curious about the rest of the portfolio. Well, the big loss expiration that I mentioned, which is now at least within auto parts, that mark to market is approximately 5% on a new 15-year. In reference to where we think the remainder of the overall portfolio is, Just the remainder of the portion of the portfolio that is on the watch list or space that you anticipate taking back.

Well the big loss exploration that I that I mentioned, which was which was now at least within auto parts that mark to market is appropriately 5%.

On a new 15 year lease.

In reference to where we think the remainder of the overall portfolio was.

The remainder of the on the portion of the portfolio that is on the watch list or or space that you anticipate taking back.

Joey N. Agree: Oh, I tell you, we're extremely comfortable given the rental rates that we've recorded across those. Again, these are mid-single-digit rental rates. Today, to even build a box like that is $160, $150 vertical per foot. These are mid-single-digit rental rates that we feel extremely comfortable that if we were to get any of these boxes back, we'll have no challenge here marking them to market. Where the market is, it varies across the board, but to find any box today that has any merit to it in the mid-single-digit range is almost impossible. Alright, thank you very much, http://TheBusinessProfessor.com. The next question comes from Connor Svirsky of Wells Fargo. Please go ahead. Hey, good morning. Jesus is on for kind of this morning.

We're extremely comfortable given the rental rates that we have recorded a process we're extremely comfortable again.

These are mid single digit rental rates today to even build a box like that is a $160 150 vertical a foot. These are mid single digit rental rates that we feel extremely comfortable that if we were to get any of these boxes back.

It will have no challenge here mark them to market, where market is it varies across the board, but to find any to find any box today that has any any merit to it.

In mid single digit range is almost impossible.

Alright, Thank you very much.

Thanks, Eric.

The next question comes from Connor Seversky all of Wells Fargo. Please go ahead.

Hey, good morning, Hey, Suzanne for kind of this morning, thanks for taking the question guys.

Connor Svirsky: Thanks for taking the question, guys. In your conversations with tenants, can you offer a temperature check on the willingness of some of these retail operations to continue to expand in this current macro backdrop? Yeah, as I touched on earlier, the retailers that we talked to want to continue to expand and continue to continue to expand aggressively. I don't remember a time when Home Depot, Walmart, and Lowe's before had the desire to continue to expand across all of their different flags. And again, the challenge today is construction costs and ultimately what they can pay on a per square foot rental rate. But there is voracious demand in the discount space. Again, we're focused in the necessity-based arena here. There is a voracious demand to continue to expand and open stores. We're seeing that really across the board, whether it's all the way from O'Reilly and AutoZone to Tracker Supply, to Walmart, to Aldi, which is obviously making a large acquisition and opening net new stores. I think you see that across the board in terms of discount-oriented operations.

Just.

In your conversations with tenants can you offer a temperature temperature check and be a willingness for some of these retail operations to continue to expand in this current macro backdrop.

Yes, I touched on earlier the retailers that we talked to you want to continue to expand and continue to expand aggressively I don't remember a time when home depot Walmart Lowe's before.

Acceptance prior to the GSC, we're expanding the large format C stores the auto parts operators the off price retailers. It's all the TGF concepts Ross Burlington five below these operators are have the desire to continue to expand across all of their different flags and again the challenge today is.

Is construction costs.

And ultimately what they can pay on a per square foot rental rate.

But there is there is voracious demand for in the discount space again, we're focused in the necessity based arena here Theres, a voracious demand to continue to expand and open stores where <unk>.

That really really across the board, whether it's all the way from O'reilly and autozone or tractor supply to Walmart to all D, which is obviously, making a large acquisition in opening net new stores I think you'll see that across there across the arena in terms of discount Apple discount oriented operators.

Great I appreciate the color thanks, guys.

Joey N. Agree: Great, appreciate the color. Thanks, guys. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Joey Agree for any closing remarks. So thank you, operator, and thank you all for joining us this morning, and we look forward to seeing you at the upcoming conferences. We appreciate everybody's time, www.larryweaver.com, The conference is now concluded. Thank you for attending today's presentation and you may now disconnect. © BF-WATCH TV 2021, ?? ?? ??

Thank you.

This concludes our question and answer session I would like to turn the conference back over to Julie <unk> for any closing remarks.

Well. Thank you operator, and thank you all for joining US this morning, and we look forward to seeing you at the upcoming Congresses. We appreciate everybody's time.

Sure.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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