Q2 2024 Agree Realty Corp Earnings Call

Speaker Change: [music].

Okay.

Operator: Good morning and welcome to Agree Realty's second quarter 2024 conference call. All participants will be in listen-only mode.

Operator: Good morning and welcome to Agree Realty's second quarter 2024 conference call. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: Good morning, and welcome to E. L. P second quarter, 2024th conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask questions, you may press the star key, then 1 on your touchtone phone.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask questions to me, press star, then one on your touch-tone phone. To withdraw your question, please press star, then number two. Please limit yourself to questions during this call.

Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask questions. You May Press Star then one on your Touchtone phone to withdraw your question. Please press star and number two.

Operator: To withdraw your question, please press star, then number 2. Please limit yourself to two questions during this call and please note that this event is being recorded. I would now like to turn the conference over to Ruben Treitman, Senior Director of Corporate Finance. Please go ahead, Ruben.

Speaker Change: He used to limit yourself to two questions. During this call and please note that this event is being recorded.

Operator: And please note that this event is being recorded.

Reuben Treatman: I would now like to turn the conference over to Reuben Treatman, Senior Director of Corporate Finance. Please go ahead, Reuben.

Randall Eaton: I would now like to turn the conference over to real dance Eaton Senior director of corporate Finance.

Speaker Change: Please go ahead.

Okay.

Reuben Treatman: Thank you. Good morning, everyone, and thank you for joining us for Agree Realty's second quarter 2024 earnings call.

Thank you good morning, everyone and thank you for joining us for acre Realty's second quarter 2024 earnings call before turning the call over to Joey and Peter to discuss our results for the quarter, Let me first run through the cautionary language.

Reuben Goldman Treatman: Thank you. Good morning, everyone, and thank you for joining us for Agree Realty's second quarter 2024 earnings call. Before turning the call over to Joey and Peter to discuss our results for the quarter, let me first run through the cautionary language. Please note that during this call, we will make certain statements that may be considered forward-looking under federal securities law, including statements related to our updated 2024 guidance. Our actual results may differ significantly from the matters discussed in any forward-looking statements for a number of reasons.

Reuben Treatman: Before turning the call over to Joey and Peter to discuss our results for the quarter, let me first run through the cautionary language. Please note that during this call, we will make certain statements that may be considered forward-looking under federal securities law, including statements related to our updated 2024 guidance. 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 F60 filings, including our latest annual report on Form 10G for a discussion of various risks, uncertainties underlying or forward-looking statements.

Speaker Change: Please note that during this call we will make certain statements that may be considered forward looking under federal Securities law, including statements related to our updated 2020 for guidance.

Speaker Change: Our actual results may differ significantly from the matters discussed in any forward looking statements for a number of reasons.

Reuben Goldman Treatman: 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 state. 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 our historical non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release, our website, and SEC filings. I'll now turn the call over to Joey.

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 uncertainties underlying our forward looking statements. In addition, we discuss non-GAAP financial measures, including core funds from operations or core episode adjusted funds from operations or <unk>.

Reuben Treatman: In addition, we discussed non-GAAP financial measures, including core funds from operations, or core FFO, adjusted funds from operations, or AFFO, and net debt to recurring EBITDA. Reconciliation of our historical non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release, website, and SEC filings.

Speaker Change: And net debt you're referring EBITDA.

Joey: Reconciliations of our historical non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release website and SEC filings I will now turn the call over to Joey.

Joey: I'll now turn the call over to Joey. Thanks, Sherwin, and thank you all for joining us this morning. I'm very pleased to report that we've had a strong first half of the year, as our discipline has proven to warrant it. On our last call, I mentioned our improved visibility into the acquisition market, and I am pleased to say that visibility turned into high-quality, closed transactions at similar return profiles. Our team's efforts continue to produce unique and proprietary deal flow, and we continue to identify attractive investment opportunities across all three external growth platforms. As mentioned, our investment activity during the quarter was supported by capital markets transactions that bolstered our fordress balance sheet with approximately $650 million of unsecured debt and equity capital.

Joey: Thanks, David and thank you all for joining us this morning.

Joey: Thanks, Reuben, and thank you all for joining us this morning. I'm very pleased to report that we've had a strong first half of the year as our discipline has proven warranted. On our last call, I mentioned our improved visibility into the acquisition market, and I'm pleased to say that visibility turned into high-quality closed transactions at similar return profiles. Our team's efforts continue to produce unique and proprietary deal flow, and we continue to identify attractive investment opportunities across all three external growth plans.

Joey: I'm very pleased to report that we've had a strong first half of the year as our discipline has proven warranted.

Joey: On our last call I mentioned, our improved visibility into the acquisition market.

Joey: Pleased to say that visibility turned into high quality closed transactions similar return profiles.

Joey: Our team's efforts continue to produce unique and proprietary deal flow.

Joey: And we continue to identify attractive investment opportunities across all three external growth platforms.

Joey: As mentioned, our investment activity during the quarter was supported by capital markets transactions that bolstered our fortress balance sheet with approximately $650 million of unsecured debt and equity capital. In addition, we have received commitments to expand our revolving credit facility to $1.25 billion, which will provide us with pro forma total liquidity of $1.7 billion. This additional dry powder will enable us to execute our strategy for the remainder of the year and into 2025.

Joey: As mentioned our investment activity during the quarter was supported by capital markets transactions that bolstered our fortress balance sheet with approximately $650 million of unsecured debt and equity capital in.

Joey: In addition, we received commitments to expand our revolving credit facility to $1.25 billion, which will provide us with pro forma total liquidity of $1.7 billion. This additional drive powder will enable us to execute our strategy for the remainder of the year and into 2025. At quarter end, pro forma for our outstanding forward equity, our fordress balance sheet set at 4.1 times net debt to recurring, even though providing us with unparalleled optionality as we continue to execute on our pipeline. Given our investment activity of nearly $345 million during the first half of the year, our balance sheet and liquidity position will continue to aggregate an incredibly high-quality and robust pipeline.

Joey: In addition, we received commitments to expand our revolving credit facility to 1.25 billion.

Joey: This will provide us with pro forma total liquidity of $1 7 billion.

Joey: This additional dry powder will enable us to execute our strategy for the remainder of the year and into 2025.

Joey: At quarter end pro forma for outstanding forward equity our fortress balance sheet set at four one times net debt to recurring EBITDA, providing us with unparalleled optionality as we continue to execute on our pipeline.

Joey: At quarter end, pro forma for our outstanding forward equity, our fortress balance sheet set at 4.1 times net debt to recurring EBITDA, providing us with unparalleled optionality as we continue to execute on our pipeline. Given our investment activity of nearly $345 million during the first half of the year, our balance sheet, and liquidity position, we've continued to aggregate an incredibly high quality and robust pipeline. I am pleased to announce we have increased our acquisition guidance to approximately $700 million from $600 million previously.

Joey: Given our investment activity of nearly $345 million during the first half of the year, our balance sheet and liquidity position. We've continued to aggregate an incredibly high quality and robust pipeline.

Joey: I am pleased to announce we have increased our acquisition guidance to approximately $700 million from $600 million previously. With a rapidly changing environment, that number could prove conservative. However, I think it is prudent to give the lack of probability and to fourth quarter acquisition activity and the rapid change in our cost of capital. We will continue to be disciplined capital allocators and maintain our stringent underwriting standards. Given a liquidity profile, strong positioning of our balance sheet and portfolio performance, we have raised a handful per share guidance to a range of $4.11 to $4.14 for the year.

Joey: I am pleased to announce we've increased our acquisition guidance to approximately $700 million from $600 million previous.

Joey: With a rapidly changing environment, that number could prove conservative. However, I think it is prudent given the lack of predictability into fourth-quarter acquisition activity and the rapid change in our cost of capital. We will continue to be disciplined capital allocators and maintain our stringent underwriting standards.

Joey: With a rapidly changing environment that number could prove conservative. However, I think it is prudent given the lack of visibility into fourth quarter acquisition activity and the rapid change in our cost of capital.

Joey: We will continue to be disciplined capital allocators and maintain our stringent underwriting standards.

Joey: Given our liquidity profile, strong positioning of our balance sheet, and portfolio performance, we have raised AFFO per share guidance to a range of $4.11 to $4.14 for the year. At the midpoint, this represents a 4.4% year-over-year growth. Peter will provide more details of the inputs on these numbers momentarily.

Joey: Given our liquidity profile strong positioning of our balance sheet and portfolio performance, we have raised and <unk> per share guidance to a range of $4.11 to.

Joey: $4 14 for the year.

Joey: At the midpoint, this represents a 4.4% year-over-year growth.

Joey: At the midpoint. This represents a four 4% year over year growth Peter will provide more details of the inputs on these numbers momentarily.

Joey: Peter will provide more details of the inputs on these numbers momentarily. Turning to our three external growth platforms, during the second quarter we invested approximately $203 million in 70 high-quality retail net lease properties across our three external growth platforms. This includes the acquisition of 47 assets for approximately $186 million. The properties acquired during the second quarter are at least the leading retailers, operated sectors including home improvement, off-price, auto parts, crafts and novelties, and grocery. Our completed transactions to date in current pipeline are emblematic of our day in an impact approach to sourcing opportunities and include a variety of different transaction structures.

Peter: Turning to our three external growth platforms. During the second quarter, we invested approximately $203 million and 70 high quality retail net lease properties across our three external growth platforms.

Joey: Turning to our three external growth platforms, during the second quarter, we invested approximately $203 million in 70 high-quality retail net lease properties across our three external growth platforms. This includes the acquisition of 47 assets for approximately $186 million. The properties acquired during the second quarter are leased to leading retailers operating in sectors including home improvement, off-price, auto parts, crafts and novelties, and grocery. Our completed transactions to date and current pipeline are emblematic of our dynamic approach to sourcing opportunities and include a variety of different transaction structures, set leasebacks with relationship tenants, several unique blend and extends, shorter-term high-performing stores purchased at 50% of replacement costs, both new and repeat sellers, as well as distressed developers.

Peter: This includes the acquisition of 47 assets for approximately $186 million.

Peter: The properties acquired during the second quarter are leased to leading retailers operating in sectors, including home improvement off price autoparts, crafts and novelties and grocery.

Our completed transactions to date and current pipeline are emblematic of our dynamic approach to sourcing opportunities and include a variety of different transaction structures.

Joey: So lease backs with relationship tenants, several unique blend and extends, shorter term high-performing stores purchased at 50% of replacement costs, both new and repeat sellers as well as distrust developers. We continue to be the first and last call in a highly fragmented and disjointed market. The acquired properties had a weighted average cap rate of 7.7%, a 90 basis point increase year over year, and a weighted average lease term of over nine years. Investment-grade retailers touted for nearly 60% of the annualized base rent acquired. Note that we are not including retailers such as Hobby Lobby, and this investment grade percentage does not imply shadow ratings to non-rated companies.

Speaker Change: Leasebacks with relationship tenants several unique blend and extends.

Speaker Change: Order term high performing stores purchased a 50% of replacement costs, both new and repeat sellers as well as distressed developers we continued to be the first and last call in a highly fragmented disjointed market.

Joey: We continue to be the first and last call in a highly fragmented and disjointed market. The acquired properties had a weighted average cap rate of 7.7%, a 90 basis point increase year over year, and a weighted average lease term of over nine years. Investment-grade retailers accounted for nearly 60% of the annualized base rent acquired.

Speaker Change: The acquired properties had a weighted average cap rate of seven 7%, a 90 basis point increase year over year, and our weighted average lease term of over nine years.

Speaker Change: Investment grade retailers accounted for nearly 60% of the annualized base rent acquired.

Joey: Note that we are not including retailers such as Hobby Lobby in this investment grade percentage and do not imply shadow ratings to non-rated companies. Through the first half of the year, we've invested $343 million across 102 retail net lease properties, spanning 37 states and 24 retail sectors. Approximately $309 million of our investment activities originated from our acquisition plan. During the quarter, we also commenced five development and DFP projects, representing committed capital of approximately $19 million, and completed four development and DFP projects with total costs of $15 million. In total, we had 25 projects either completed or under construction during the first half of the year, representing $101 million of committed capital, inclusive of the $66 million incurred through June 30.

Speaker Change: Note that we are not including retailers such as hobby lobby and this investment grade percentage and do not imply shadow ratings to non rated companies.

Joey: Through the first half of the year, we've invested 343 million across 102 retail and Vietnamese properties spanning 37 states and 24 retail sectors. Approximately 309 million of our investment activities originated from our acquisition plan. During the quarter, we also commenced five development and DSP projects representing committed capital of approximately 19 million and completed four development and DSP projects with total costs of $15 million. In total, we had 25 projects either completed or under construction during the first half of the year, representing 101 million dollars of committed capital, inclusive of the 66 million incurred through June 30th.

Speaker Change: Through the first half of the year, we've invested $343 million across 102 retail net lease properties spanning 37 states in 24 retail sectors approximately $309 million of our investment activities originated from our acquisition plan.

Speaker Change: During the quarter. We also commenced five development and DSP projects, representing committed capital of approximately $19 million increase for development and DSP projects with total cost of $15 million.

Speaker Change: In total we had 25 projects either completed or under construction during the first half of the year, representing a $101 million in committed capital inclusive of the $66 million incurred through June 30.

Joey: Our pipeline for both of these platforms continues to grow quite significantly, and we are excited to further discuss an upcoming calls. Similar to last quarter, we opportunistically dispose of assets at levels where we can redeploy proceeds at attractive spreads. During the quarter, we sold 10 properties for total gross proceeds of almost $37 million, with a weighted average cap rate of 6.4%. These dispositions were opportunistic capital recycling of non-core assets, generally leads to sub-investment credit or non-rated operators, including Mr. Carwash and Select Grover Collisions. Our decision to bolster our asset management capabilities, including executive additions and IT investments, was prudent.

Joey: Our pipeline for both of these platforms continues to grow quite significantly, and we are excited to further discuss it on an upcoming call. Similar to last quarter, we opportunisticallydisposed of assets at levels where we can redeploy proceeds at attractive spreads. During the quarter, we sold 10 properties for total gross proceeds of almost $37 million with a weighted average cap rate of 6.4 percent.

Speaker Change: Our pipeline for both of these platform continues to grow quite significantly and we are excited to further discuss in upcoming calls.

Speaker Change: Similar to last quarter, we opportunistically dispose of assets to levels, where we can redeploy proceeds at attractive spreads during the quarter. We sold 10 properties for total gross proceeds of almost $37 million with a weighted average cap rate of six 4%.

Joey: These dispositions were opportunistic capital recycling of non-core assets, which generally leads to sub-investment grade or non-rated operators, including Mr. Carwash and select Gerber Collision. Our decision to bolster our asset management capabilities, including executive additions and IT investments, was prudent. On the asset management front, we executed new leases, extensions, or options on approximately 300,000 square feet of gross leaseable area during the quarter, including a Walmart Supercenter in Kimball, Tennessee. Additionally, during the quarter, we executed a ground lease with no anticipated tenant improvement allowance with a leading quick service restaurant operator, which I articulately called one of the chicken guys on last quarter's call, for a portion of the former Bed Bath and Beyond parcel inventory.

Speaker Change: These dispositions were opportunistic capital recycling of noncore assets generally leased to sub investment grade or non rated operators, including Mister car wash and select Gerber collisions.

Speaker Change: Our decision to bolster our asset management capabilities, including executive additions and it investments was prudent.

Joey: On the asset management front, we executed new leases, extensions, or options on approximately 300,000 square feet of gross leaseable area during the quarter, including the Walmart Supercenter and Kimmel, Tennessee. Additionally, during the quarter, we executed a ground lease with no anticipated tenant improvement allowance with a leading quick service restaurant operator, which I particularly called one of the chicken guys on last quarter's call, for our portion of the former BedBed to be on parcel and BedBed to Tennessee. We are negotiating multiple letters of intent for the remaining parcels and will move to lease this quarter. As previously discussed, we anticipated recapturing over 150 percent of the former Bed Bath and Beyond rent, further highlighting our ability to identify and underwrite value at real estate.

Speaker Change: On the asset management front, we executed new leases extensions or options on approximately 300000 square feet of gross leasable area during the quarter, including a Walmart supercenter in Kimball, Tennessee.

Speaker Change: Additionally, during the quarter, we executed a ground lease with no anticipated tenant improvement allowance with a leading quick service restaurant operator.

Speaker Change: Particularly called one of the chicken guys on last quarter's call, where a portion of the former bed Bath <unk> beyond parcel in Memphis, Tennessee.

Joey: We are negotiating multiple letters of intent for the remaining parcels and will move to lease them this quarter. As previously discussed, we anticipate recapturing over 150% of the former Bed Bath & Beyond rent, further highlighting our ability to identify and underwrite value-add real estate. As a result of our asset management team's efforts, our 2024 lease maturities now stand at just 0.1% of annualized base. Given the progress achieved year to date, our occupancy ticked up to a company record 99.8% at period end. We are now focused on any 2025 pending matures. With that, I'll hand the call over to Peter, and then we can open it up for questions. Thank you, Joey.

Speaker Change: We are negotiating multiple letters of intent for the remaining parcels and we'll move to lease this quarter.

Speaker Change: As previously discussed we anticipate recapturing over 150% of the former bed Bath <unk> beyond rent further highlighting our ability to identify and underwrite value add real estate.

Joey: As a result of our asset management team's efforts, our 2024 lease maturity is now standard, just 0.1 percent of annualized base rents. Given the progress of each year-to-date, our occupancy took up to a company record 99.8 percent at period end. We are now focused on any 2025 pending maturities.

Speaker Change: As a result of our asset management team's efforts, our 2024 lease maturities now stand at just <unk>, 1% of annualized base rents.

Speaker Change: Given the progress achieved year to date, our occupancy ticked up to a company record 99, 8% at period end.

Speaker Change: We are now focused on any 2025 pending maturities with that I'll hand, the call over to Peter and then we can open it up for questions.

Peter: With that, I'll hand the call over to Peter, and then we can open it up for questions. Thank you, Joey. Starting with the balance sheet, as Joey mentioned, we had a very active quarter in the capital markets, raising nearly $650 million of capital. In May, we completed a $450 million public bond offering comprised of 5.625 percent senior unsecured notes due in 2034. In connection with the offering, we terminated related swap agreements of $300 million, receiving over $4 million upon termination and reducing our effective interest rate. We offering further saggers our maturities and extends our weighted average debt maturity to approximately 7 years, excluding the unsecured revolving credit facility.

Peter: Starting with the balance sheet, as Joey mentioned, we had a very active quarter in the capital markets, raising nearly $650 million of capital. In May, we completed a $450 million public bond offering comprised of 5.625% senior unsecured notes due in 2034. In connection with the offering, we terminated related swap agreements of $300 million, receiving over $4 million upon termination and reducing our effective interest rate.

Peter: Thank you Joey starting with the balance sheet as Joey mentioned, we had a very active quarter in the capital markets raising nearly $650 million of cap.

Peter: In May we completed a $450 million public bond offering comprised of 565% senior unsecured notes due in 2034.

Peter: In connection with the offering we terminated related swap agreements of $300 million risk.

Peter: Receiving over $4 million upon termination and reducing our effective interest rate.

Peter: The offering further staggers our maturities and extends our weighted average debt maturity to approximately seven years, excluding the unsecured revolving credit facility. During the quarter, we sold over 3.2 million shares of Forward Equity via our ATM program, raising net proceeds of approximately $195 million. As of June 30th, we had approximately 7.1 million shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of over $430 million upon settlement.

Peter: The offering further staggered our maturities and extends our weighted average debt maturity to approximately seven years, excluding the unsecured revolving credit facility.

Peter: During the quarter, we sold over 3.2 million shares of forward equity via our ATM program, raising net proceeds of approximately $195 million. As of June 30, we had approximately $7.1 million shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of over $430 million upon settlement. Recently, we further strengthened our balance sheet with commitments to increase our revolving credit facility from 1 to 1.25 billion dollars, with strong support from our key banking partners. The facility includes an accordion option that will allow us to request additional lender commitments up to a total of $2 billion.

Peter: During the quarter, we sold over $3 2 million shares of forward equity via our ATM program, raising net proceeds of approximately $195 million.

As of June 30, we had approximately $7 1 million shares remaining to be settled under existing forward sale agreements, which are anticipated to raise net proceeds of over $430 million upon settlement.

Peter: Recently, we further strengthened our balance sheet with commitments to increase our revolving credit facility from $1 to $1.25 billion, with strong support from our key banking partners. The facility includes an accordion option that will allow us to request additional lender commitments up to a total of $2 billion.

Peter: Recently, we further strengthened our balance sheet with commitments to increase our revolving credit facility from one to $1 $25 billion with strong support from our key banking partners.

Peter: The facility includes an accordion option that will allow us to request additional lender commitments up to a total of $2 billion.

Peter: The term of the facility will be extended to 2029, including extension options. And our cost of our owe will be reduced by five basis points based on our anticipated credit ratings and leverage ratio at the time I'm closing. Our capital markets transactions provide us with more than $1.7 billion of total liquidity, pro forma for the closing of our expanded $1.25 billion revolving credit facility. The previously mentioned outstanding forward equity is more than $24 million of cash on hand. As a quarter-end, pro-former for the settlement over outstanding forward equity, net debts to recurring EBITDA was approximately 4.1 times, which is down to two tenths of a turn from last quarter.

Peter: The term of the facility will be extended to 2029, including extension options, and our cost to borrow will be reduced by five basis points based on our anticipated credit ratings and leverage ratio at the time of closing. Our capital markets transactions provide us with more than $1.7 billion of total liquidity, pro forma for the closing of our expanded $1.25 billion revolving credit facility, the previously mentioned outstanding forward equity, and more than $24 million of cash on hand.

Peter: Determined that facility will be extended to 2029, including extension options and our cost per barrel will be reduced by five basis points based on our anticipated credit ratings and leverage ratio at the time of closing.

Peter: Our capital markets transactions provide us with more than $1 $7 billion of total liquidity pro forma for the closing of our expanded 125 billion revolving credit facility. The previously mentioned outstanding forward equity and more than $24 million of cash on hand.

Peter: As of quarter end pro forma for the settlement of our outstanding forward equity net debt to recurring EBITDA was approximately four one times, which is down two tenths of a turn from last quarter.

Peter: As of quarter end, pro forma for the settlement of our outstanding forward equity, net debt to recurring EBITDA was approximately 4.1 times, which is down two-tenths of a turn from last quarter. Excluding the impact of unsettled forward equity, our net debt to recurring EBITDA was 4.9 times. We are told that the enterprise value is approximately 30%, while our fixed charge coverage ratio, which includes principal amortization and the preferred dividend, is very healthy at 4.7 times.

Peter: Excluding the impact of unsettled forward equity, our net debt to recurring EBITDA was 4.9 times. Our total debt to enterprise value was approximately 30 percent, while our fixed charge coverage ratio, which includes principal amortization and the preferred dividend, is very healthy at 4.7 times. We had only $43 million of floating rate exposure at quarter-end via our revolver balance, and as a reminder, we have no material debt maturity since of 2028.

Peter: Excluding the impact of unsettled forward equity our net debt to recurring EBITDA was four nine times.

Peter: Total debt to enterprise value was approximately 30%, while our fixed charge coverage ratio, which includes principal amortization and the preferred dividend is very healthy at four seven times we.

Peter: We had only $43 million of floating rate exposure at quarter end via our revolver balance, and as a reminder, we have no material debt maturities until 2028. We are very well positioned to execute on our pipeline and stay well within our stated leverage range without any additional capital. Moving to earnings, Core FFO for the second quarter was $1.03 per share, representing a 5.7% year-over-year increase. AFFO per share for the second quarter increased 6.4% year over year to $1.04.

Peter: We had only $43 million of floating rate exposure and at quarter end via our revolver balance and as a reminder, we have no material debt maturities until 2028.

Peter: We are a very well-positioned to execute on our pipeline and stay well within our stated leverage range, without any additional capital. Moving to earnings, Core FFO for the second quarter was $1.3 per share, representing a 5.7% year-over-year increase. A FFO per share for the second quarter increased 6.4% year-over-year to $1.40. Our results for the quarter include the recognition of approximately $2 million of lease termination fees from a financial institution. The tenant agreed to pay 100 percent of the remaining base rent due for the primary term of both ground leases on termination. We have taken ownership of both buildings via the termination, without any incremental investment due to the ground lease structure.

Peter: We are very well positioned to execute on our pipeline and stay well within our stated leverage range without any additional capital.

Speaker Change: Moving to earnings <unk> for the second quarter was $1 <unk> per share representing a five 7% year over year increase.

Speaker Change: <unk> per share for the second quarter increased six 4% year over year to $1 <unk>.

Peter: Our results for the quarter include the recognition of approximately $2 million in lease termination fees from a financial institution. Additionally, the tenant agreed to pay 100% of the remaining base rent due for the primary term of both ground leases upon termination.

Speaker Change: Our results for the quarter include the recognition of approximately $2 million of lease termination fees from a financial institution.

Speaker Change: Tenant agreed to pay 100% of the remaining base rent due for the primary term of both ground leases on termination we've.

Peter: We've taken ownership of both buildings via the termination without any incremental investment due to the ground lease structure. A letter of intent has already been executed on one of the properties, and there is significant interest in the second from national operators. We view this as a great outcome for the company and indicative of our focus on identifying and acquiring high quality retail real estate with long-term demand drivers. As Joey mentioned, we have increased our full year 2024 AFFO per share guidance range to $4.11 to $4.14.

Speaker Change: We've taken ownership of both buildings via the termination without any incremental investment due to the ground lease structure.

Peter: A letter of intent has already been executed on one of the properties, and there is significant interest in the second from national operators. We view this as a great outcome for the company and indicative of our focus on identifying and acquiring high-quality retail real estate with long-term demand drivers. As Joey mentioned, we have increased our full year 2024 A FFO per share guidance range to $4.11 to $4.14. The updated midpoint represents 4.4% growth and an increase of 20 basis points from our initial guide. There are parameters on several other inputs in our earnings release, including acquisition and disposition volume, general and administrative expenses, non-reinversible real estate expenses, plus income tax and other tax expenses.

Speaker Change: Letter of intent has already been executed on one of the properties and there is significant interest in the second from national operators.

Speaker Change: This is a great outcome for the company and indicative of our focus on identifying and acquiring high quality retail real estate with long term demand drivers.

Speaker Change: As Joey mentioned, we have increased our full year 2024 <unk> per share guidance range.

Joey: Q4, 11, $4 11 to $4 14.

Peter: The updated midpoint represents 4.4% growth, an increase of 20 basis points from our initial guide. There are parameters on several other inputs in our earnings release, including acquisition and disposition volume, general and administrative expenses, non-reimbursable real estate expenses, plus income tax and other tax expenses. As a reminder, Treasury stock is included within our diluted share count prior to settlement if ADC stock trades above the net price of our outstanding forward equity offer. The aggregate dilutive impact related to these offerings was minimal in the second quarter.

Speaker Change: The updated midpoint represents four 4% growth an increase of 20 basis points from our initial guide.

Speaker Change: Zero parameters on several other inputs in our earnings release, including acquisition and disposition volume general and administrative expenses non reimbursable real estate expenses and income tax and other tax expenses.

Peter: As a reminder, treasury stock is included within our diluted share account prior to settlement. Its ADC stock trades above the net price of our outstanding forward equity offers. The aggregate dilutive impact related to these offerings was minimal in the second quarter. However, our updated guidance range contemplates more meaningful Treasury Stock Method dilution in the second half of the year and assumes that our stock continues to trade near current levels. Under that scenario, again, assuming a stable stock price, we anticipate Treasury Stock Method dilution will have an impact of roughly one penny on full year 2024 A FFO per share.

Speaker Change: As a reminder, treasury stock is included within our diluted share count prior to settlement, it's ADC stock trades above the net price of our outstanding forward equity offerings. The aggregate dilutive impact related to these offerings was minimal in the second quarter. However, our updated guidance range contemplates more meaningful treasury stock method dilution in the second half of the year.

Peter: However, our updated guidance range contemplates more meaningful treasury stock method dilution in the second half of the year and assumes that our stock continues to trade near its current level. Under that scenario, again, assuming a stable stock price, we anticipate treasury stock method dilution will have an impact of roughly one penny on full year 2024 AFFO per share. Our ability to drive consistent earnings growth continues to support a growing and well-covered dividend.

Speaker Change: It assumes that our stock continues to trade near current levels.

Speaker Change: Under that scenario again, assuming a stable stock price, we anticipate treasury stock method dilution will have an impact of roughly one penny and full year 2024 <unk> per share.

Peter: Our ability to drive consistent earnings growth continues to support a growing and well-covered dividend. In April, we increased our monthly cash dividend to $0.25 per share, representing a 1.2% month-over-month increase. We subsequently declared monthly cash dividends of $0.25 for each of May, June, and July. The monthly dividend represents an annualized dividend amount of $3 per share, and is almost 3% higher than the annualized dividend from the comparable periods last year. This growth comes as our A FFO payout ratio remains at 72% for the second consecutive quarter, and they will in us to retain significant cash flow for reinvest.

Speaker Change: Our ability to drive consistent earnings growth continues to support a growing and well covered dividend.

Peter: In April, we increased our monthly cash dividend to $0.25 per share, representing a 1.2% month-over-month increase. We subsequently declared monthly cash dividends of $0.25 for each of May, June, and July. The monthly dividend represents an annualized dividend amount of $3 per share and is almost 3% higher than the annualized dividend from the comparable periods last year.

Speaker Change: In April we increased our monthly cash dividend to <unk> 25 per share representing a one 2% month over month increase we subsequently declared monthly cash dividends of 25 for each of May June and July.

Speaker Change: Our monthly dividend represents an annualized dividend amount of $3 per share and is almost 3% higher than the annualized dividend from the comparable periods last year.

Peter: This growth comes as our AFFO payout ratio remains at 72% for the second consecutive quarter, enabling us to retain significant cash flow for reinvestment. As mentioned on prior calls, pre-cash flow after the dividend for 2024 is approximately $100 million on an annualized basis. To conclude, our well-positioned balance sheet affords us tremendous flexibility with pro forma net debt to EBITDA of 4.1 times and roughly $1.7 billion of liquidity to fund our robust investment pipeline. With that, I'd like to turn the call back over to Joey.

This growth comes as our <unk> payout ratio remains at 72% for the second consecutive quarter, enabling us to retain significant cash flow for reinvestment.

Peter: As mentioned on prior calls, free cash flow after the dividend for 2024 is approximately $100 million on an annualized basis.

Speaker Change: As mentioned on prior calls free cash flow after the dividend for 2024 is approximately $100 million on an annualized basis.

Peter: To conclude, our well-positioned balance sheet affords this tremendous flexibility, with pro-forma net debt to even up of 4.1 times and roughly $1.7 billion of liquidity to fund our robust investment pipeline.

Speaker Change: To conclude our well positioned balance sheet affords us tremendous flexibility with pro forma net debt to EBITDA of four one times and roughly $1 $7 billion of liquidity to fund our robust investment pipeline.

Joey: With that, I'd like to turn the call back over to Joey.

Speaker Change: I'd like to turn the call back over to Joe.

Joey: Thank you, Peter. At this time, operator, we can open it up for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 1 on your touchtone phone. Then you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star, followed by the number. If you are using a speakerphone, please lift the handset before pressing any. One moment please for your first question.

Joey: Thank you, Peter. At this time, operator, we can open it up for questions. Thank you.

Joe: Thank you Peter at this time, operator, we can open it up for questions.

Joe: Thank you.

Operator: On, ladies and gentlemen, we will now begin the question and suggestion. Should you have a question, please press star followed by the one on your touchstone phone. Then you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by number two. If you're using a speaker phone, please lift the handset before President Heats. One moment, please, for your first question. Great.

Speaker Change: Ladies and gentlemen, we will now begin the question answer session should you have a question. Please go ahead.

Vic: <unk> followed by the one on your Touchtone phone and you will hear from Vic your win.

Vic: Should you wish to decline from the polling question, Steve Ross The Star followed by number two.

Speaker Change: We are using a speaker phone please lift the handset before pressing.

Speaker Change: One moment. Please for your first question.

Ronald Kamdem: Right, so our first question comes from the line of Ronald Kamdem from Morgan Stanley. Great. Congratulations on raising the guidance. Maybe just starting with acquisition, the guidance implies an acceleration in the second half of the year. Maybe can you give some comments on what you're seeing in the pipeline and sort of cap rate trend? Sure. Good morning.

Speaker Change: So the our first question comes from the line of.

Ronald Kamdem: So our first question comes from the line of Ronald Cumbam from Morgan Stanley. Great. Congrats on all the court and raising the guidance. Maybe just starting with acquisition, the guidance implies acceleration second half of the year. Maybe you give some comments of what you're seeing in the pipeline and sort of cap rate.

Speaker Change: Ronald from Dan <unk> from Morgan Stanley.

Speaker Change: Yes.

Speaker Change: Great.

Speaker Change: Congrats on the quarter and raising the guidance, maybe just starting with acquisition in the guidance implies an acceleration in the second half of the year, maybe can you give some comment, though what youre seeing in the pipeline and sort of cap rates.

Joey: Sure.

Speaker Change: Sure Good morning, Ron.

Joey: Good morning, Ron. I'll tell you, look, this has been, as I mentioned, a rapid ascent of our stock price here in a fairly dynamic market, obviously with a lot of crazy stuff going on. And so I think most importantly, we started sourcing for Q4 yesterday, and Q3 sourcing stopped, yes, CC yesterday as well. And so again, given the 70 days average letter of intent execution to close, let's call it given another couple of weeks to negotiate a letter of intent, there's the basic transaction timeline for you.

Joey: I'll tell you, look, this has been, as I mentioned, a rapid ascent of our stock price here in a fairly dynamic market, obviously, with a lot of crazy stuff going on. And so, I think most importantly, we started sourcing for Q4 yesterday. Q3 sourcing stopped, yes, ceased yesterday as well. And so again, given the 70 days average letter of intent.

Speaker Change: I'll tell you look this has been as I mentioned a rapid ascent.

Speaker Change: Our stock price here.

Speaker Change: Fairly dynamic market, obviously with a lot of.

Speaker Change: A lot of crazy stuff going on so I think most importantly, we started sourcing for Q4 yesterday in Q3 sourcing stopped.

Speaker Change: Yesterday, as well and so again, given the 70 days average letter of intent to execution to close call. It given another couple of weeks to negotiate a letter of intent.

Joey: Let's call it, give it another couple of weeks to negotiate a letter of intent. You know, that's the basic transaction timeline. What I'm excited about is now turning to Q4 with an improved cost of capital. It's been 12 to 18 months of, you know, gritted teeth and clenched jaws while we sit here and watch the stock price flounder and rates creep higher. And so we don't see any material macro changes yet on the cap rate horizon, but with an improved cost of capital, we certainly can lean into transactions that are high quality and additive to the portfolio.

Speaker Change: There is the basic transaction timeline for you.

Joey: What I'm excited about is now turning to Q4 with an improved cost of capital. It's been a 12 to 18 months here of gridded teeth and cleanse jaws while we sit here and watch the stock price flounder and rage creep higher. And so we don't see any material macro changes yet on the cap rate horizon. But with an improved cost of capital, we certainly can lean into transactions that are high quality and additive to the portfolio.

Speaker Change: I'm excited about is now turning to Q4 with an improved cost of capital.

Speaker Change: It's been a 12 to 18 months here.

Speaker Change: Gritted teeth.

Speaker Change: And clenched jaw is why we sit here and watch the stock price founder and rates creep higher and so we are we don't see any material macro changes yet in the cap rate horizon.

Speaker Change: But with an improved cost of capital, we certainly can lead into transactions that are high quality and additive to the portfolio.

Joey: And just on the cap rate, any cap rate trending commentary, is it bad getting better? For Q3 out, anticipate similar cap rates to Q2. That pipeline is effectively built, subject diligence in closing already. Q4, we're going to see what's out there. We start, like I said, we started yesterday. Great.

Speaker Change: And just on the cap rate.

Joey: And just on the cap rate, any cap rate trends, any commentary, is it flat, getting better? For Q3, I would anticipate similar cap rates to Q2. That pipeline is effectively built, subject to diligence and closing already. Q4, we're gonna see what's out there. We started, like I said, we started yesterday.

Speaker Change: Any cap rate trends any commentary is it.

Getting better.

Speaker Change: For Q3, I would anticipate a similar cap rates to Q2 that pipeline is effectively built subject to diligence and closing already Q4.

Speaker Change: We're going to see what's out there we still like I said, we started yesterday.

Speaker Change: Great.

Joey: Great. And if my second question is just on, maybe can you comment on just the bad debt assumptions, if any change to the watch was that, have you sort of seen any sign that the low-end consumer may be under pressure? Is that, are you hearing anything from sort of tenants on that front? Thanks.

Ronald Kamdem: And if my second one is just gone, maybe if you comment on just the bad debt assumptions, if any change to the watch list, then have you sort of seen any sign that the low end consumer may be under pressure?

Speaker Change: One is just gone maybe can you comment on just the bad debt assumptions, if any change to the watch list that have you sort of see any sign that the low end consumer may be under pressure or is that are you hearing anything from.

Joey: Is that, are you hearing anything from sort of tenants on that front? Thanks.

Speaker Change: I'm sort of tenants on that front.

Joey: Well, I think definitely, and I'll let Peter comment on the bad debt assumptions. The Well-Wend consumer has been under pressure, undoubtably. We really look at the consumer in three tranches: 50,000 median household income, 100,000, then over 150. And I think if you see the pressure on the 50,000, that's reflected in the Dollar General performance. If you look at 100,000, the Walmart core customer, they're getting trade down. Over 150 seems to be strong. It's just certainly due to the overall market environment and their 401Ks and their portfolios being elevated with that market. And so the low-end consumer continues to struggle.

Joey: I think definitely, and I'll let Peter comment on the bad debt assumptions, the low end consumer has been under pressure. Undoubtedly, we really look at the consumer in three tranches, 50,000 median household income, 100,000 and over. And I think if you see the pressure on the 50,000, that's reflected in the dollar's general performance. If you look at 100,000, the Walmart core customer, they're getting trade down over 150 seems to be strong

Speaker Change: I think definitely it I'll, let Peter comment on the bad debt assumptions, the whirlwind consumer has been under pressure.

Peter: Undoubtedly we really look at the consumer in three tranches 50000 medium household income 100000 and over 150.

Peter: I think if you see the pressure on the 50000 Thats reflected in the dollar general.

Peter: Performance. If you look at 100000, the Walmart core customer Theyre getting trade down over $1 50 seems to be strong.

Joey: Certainly due to the overall market environment and their 401Ks and their portfolios being elevated with that market. And so the low-end consumer continues to struggle. You see it in the restaurant prints. You see it in the dollar general prints. But the middle of the road, the $100,000 median household.

Peter: Certainly due to the overall market environment and there are 401K's in their portfolios.

Peter: Being elevated with that market and so the low end consumer continues to struggle you see it in the restaurant trends you see in the dollar general trends.

Joey: You see it in the restaurant prints, you see it in the Dollar General prints, but the middle, the middle of the road there, the $100,000 median household income is fairly strong, but we're seeing the trade-down effect there. And again, that's reflective in Walmart's performance today.

Peter: But the middle the middle of the road there. The $100000 median household income is fairly strong, but we're seeing the trade down effect, there and again, that's reflective in walmart's performance to date go.

Joey: It's fairly strong, but we're seeing the trade-down effect there, and again, that's reflective of Walmart's performance to date. Ron, from a credit loss perspective, in terms of what we're contemplating in guidance, we're still assuming approximately 50 basis points of credit loss in our guidance range, and again, that's fully loaded credit loss. Any form of us not receiving rent, year-to-date, we've experienced roughly while the portfolio continues to..., in line roughly with our historical. We thought it prudent to keep 50 basis points in our guidance. Great. Thanks so much.

Peter Coughenour: Hello, Peter Brian from a credit loss perspective in terms of what were contemplated in guidance, we're still assuming approximately 50 basis points of credit loss in our guidance range and again, that's fully loaded credit loss. So any form of us not receiving rent is contractually obligated is included in that 50 basis points.

Peter: From a credit loss perspective, in terms of what we're contemplated in guidance, we're still assuming approximately 50 basis points of credit loss in our guidance range. And again, that's fully loaded credit loss. So any form of us not receiving rent is contractually obligated, is included in that 50 basis points. Year to date, we've experienced roughly 25 basis points of credit loss. And so, while the portfolio continues to, that 25 basis points is in line roughly with our historical average, we thought it prudent to keep 50 basis points in our guidance for the time being. Great.

Peter Coughenour: Year to date, we've experienced roughly 25 basis points of credit loss and so while the portfolio continues to.

Peter Coughenour: 25 basis points is in line roughly with our historical average.

Peter Coughenour: Thought it prudent to keep 50 basis points and our guidance for the time being.

Speaker Change: Great. Thanks, so much that's it for me.

Ronald Kamdem: Thanks so much.

Ronald Kamdem: That's it for me.

Ronald Kamdem: Thanks, Ron.

Brian: Thanks, Brian.

Speaker Change: Operator are you there.

Operator: Operator, are you there? Oh, hi. Yeah, so thank you.

Operator: That's it for me. Operator, are you there? Oh, hi. Yeah, so thank you. Our next question comes from the line of Smedes Rose from Citi. Please go ahead. Hi, thank you.

Speaker Change: Hi, Yeah. So thank you. Our next question comes from the line.

Linda Tsai: Our next question comes from the line of me this rose from city. Please go ahead. Hi, thank you. I just wanted to ask a little more about the acceleration in the pipeline. You said I'm not a lot of change on the macro front. So, I mean, is it really driven by what you described? I think last quarter, kind of the 3Ds and then very sort of active or proactive outbound calling on your part? But it seems like the environment is maybe starting to stabilize a little bit more. I just want to hear if there's any sort of, you know, organic pickup and transaction activity that maybe it's helping you out as well.

Speaker Change: Hey, This is rose from Citi. Please go ahead.

Rose: Hi, Thank you.

Smedes Rose: I just wanted to ask a little more about the acceleration in the pipeline. You said there was not a lot of change on the macro front. So, I mean, is it really driven by what you described, I think, last quarter, kind of the 3Ds and then very sort of active or proactive outbound calling on your part? But it seems like the environment is maybe starting to stabilize a little bit more. I'm just wondering if there's any sort of, you know, organic pickup and transaction activity that maybe is helping you out as well. Yes, Smedes, I agree with you.

Rose: I just wanted to ask a little bit more about the acceleration in the pipeline.

Speaker Change: Not a lot of change on the macro front. So I mean is it really driven by what you described I think last quarter kind of the three D. And then various sort of active or proactive outbound calling on your part or are you.

Speaker Change: But it seems like the environment is maybe starting to stabilize a little bit more just wondering if there's any sort of.

Speaker Change: Again, a pickup in transactional activity that maybe is helping us as well.

Joey: Yes, we agree with you. We see some stabilization obviously in the 10-year treasury, which seems to be range bound. That could change tomorrow. But that stabilization does help the liquidity in the market and sellers' willingness to transact. Look, that said, that can change on a dime. Our transaction volume, as we mentioned on the Q1 call, would pick up in Q2 because transactions for Q1, going back to the timeline, are generally sourced during Q4 when we saw the roller coaster of the treasury peaking at 5%. And so that stabilization pulls through generally to the next quarter, again, given that transaction timeline.

Joey: We see some stabilization, obviously, in the 10-year Treasury, which seems to be range-bound. That could change tomorrow, but that stabilization does help the liquidity in the market and sellers' willingness to transact. But, look, that said, that can change on a diet.

Speaker Change: Yes, <unk> I agree with you.

Speaker Change: See some stabilization obviously in the 10 year treasury, which seems to be range bound that could change tomorrow.

Speaker Change: But that stabilization does help.

Speaker Change: Quiddity in the market and sellers' willingness to transact.

Speaker Change: But that said that can change on a dime.

Joey: Our transaction volume, as we mentioned in the Q1 call, would pick up in Q2 because transactions for Q1, going back to the timeline, are generally sourced during Q4 when we saw the rollercoaster of the Treasury peaking at 5%. And so that stabilization pulls through generally to the next quarter, again, given that transaction timeline. And I think we'll see some pull through to Q3, and like I said, I'm excited for Q4, again, assuming a normalized environment. This is going to be a tough assumption.

Speaker Change: Our transaction volume as we mentioned on the Q1 call would pick up in Q2, because transactions for Q1 going back to the timeline or generally source. During Q4, when we saw the rollercoaster of the treasury, peaking at 5% and so that stabilization pull through and generally to the next quarter again, given that transaction time.

Speaker Change: Fine.

Joey: And I think we'll see some pull through to Q3.

Speaker Change: And I think we will see some pull through to Q3 and like I said I am excited for Q4 again, assuming a.

Joey: And like I said, I'm excited for Q4 again, assuming a normalized environment here, which can be a tough one. Assumption. Okay.

Speaker Change: Our normalized environment here, which could be a tough assumption.

Speaker Change: Okay. Okay.

Joey: Okay, and then I just wanted to ask you just, you know, you issued on the ATM during the quarter, the price is about 10% lower than where the stock is now. And, you know, I realized that there's some relatively modest impact from the dilution methodology.

Ronald Kamdem: And then I just wanted to ask you just, you know, you issued on the ATM during the quarter at, you know, price is about 10% lower, so where the stock is now. And, you know, I realized, you know, there's some relatively modest impact from the, in the dilution methodology, but, you know, how are you thinking about potentially continuing the issue shares here just as you maybe care up for 2000 and 25?

Speaker Change: And then I guess I wanted to ask you just.

Speaker Change: Issued on the ATM during the quarter.

Speaker Change: Prices about 10% lower so when the stock is now.

Speaker Change: And I realize there is some relatively modest impact from the <unk>.

Speaker Change: Houston methodology, but.

Speaker Change: How are you thinking about potentially continuing to issue shares here, Jeff that you maybe gear up for 2025.

Joey: Our balance sheets are in a great position, a pro forma 4.1 times levered, obviously, with pro forma 1.7 billion dollars in liquidity, executing the $450 million on secured bond offering with no material debt maturities.

Speaker Change: Our balance sheet had a great position pro forma for one times Levered, obviously with pro forma $1 7 billion in liquidity executing on the $450 million unsecured bond offering with no material debt maturities or this is this balance sheet is a fortress.

Joey: But, you know, how are you thinking about potentially continuing to issue shares here just as you maybe gear up for 2025? Our balance sheet's in a great position, a pro forma 4.1 times levered, obviously with pro forma $1.7 billion in liquidity, executing on the $450 million unsecured bond offering with no material debt. This balance sheet is a fortress. We'll look at how we deploy them, in terms of your prior question, in terms of uses.

Joey: Where this is, this balance sheet is a fortress. We'll look to how we deploy in terms of your, your prior question in terms of uses. If we see the need for incremental capital, we'll certainly look at alternative options here, but again, we are, we are locked and loaded from a balance sheet perspective from any angle. Okay. Thank you.

Speaker Change: We'll look to.

Speaker Change: How we deploy in terms of your prior question in terms of uses if.

Joey: If we see the need for incremental capital, we'll certainly look at alternative options here. But again, we are locked and loaded from a balance sheet perspective. Okay, thank you. Your next question comes from Joshua Dennerlein with Bank of America. Your line is now open.

Speaker Change: If we see the need for incremental capital.

Speaker Change: Certainly.

Speaker Change: Look at alternative options here, but again, we are we are locked and loaded from a balance sheet perspective from any angle.

Speaker Change: Okay. Thank you thanks.

Joshua Dennerlein: Thanks, maids. Your next question comes from Joshua, Denarlyn, with Bank of America. Your line is now open.

Smedes: Thanks Smedes.

Joshua Dennerlein: Your next question comes from Joshua <unk> with Bank of America. Your line is now open.

Joey: Hi, this is Farrell Granath on behalf of Josh. I just wanted to ask specifically about the competition in the market, now with the also increased acquisition pipeline, what you're seeing. No real material changes in competition in the market; the 1031 buyers are generally sideline, the levered individual purchasers are generally signed by the sideline. We've seen the CNBS market come back to a degree at lower LTVs. You know, institutional competition in our space remains extremely muted, given the price point and nature of our transactions.

Speaker Change: Hi, This is <unk> on behalf of Josh.

Farrell Granath: Hi, this is Farrell Granath on behalf of Josh. I just wanted to ask specifically about the competition in the market now with the also the Acquisition Pipeline. What you're saying is that there are no real material changes in competition in the market. The 1031 buyers are generally sidelined. The levered individual purchasers are generally sidelined.

Speaker Change: I just wanted to ask specifically about the competition in the market now.

Speaker Change: Now with D also increased acquisition pipeline, what you're seeing.

Speaker Change: No no real material changes in competition in the market. The 10 31 buyers are generally sideline. The levered individual purchasers are generally sign sideline, we've seen the <unk> C MBS market come back to to a degree with lower Ltvs.

Joey: We've seen the CMBS market come back to a degree at lower LTVs. However, institutional competition in our space remains extremely muted given the price point and nature of our transaction. You know, we're really focused on those four to five million dollar transactions, those relationship transactions where we can create value, and so competition is extremely fierce. And also, just going back to the watch list, I was curious if there were any names that were added or fallen off. Nothing material that I can think of, it's been a fairly stable watch list. Obviously, the cons were in the news yesterday. We don't have any cons. I've never been to a gay convention.

Institutional competition in our space remains extremely muted given the price point nature of our transactions.

Joey: We're really focused on those four to five million dollar transactions, those relationship transactions, or we can create value, and so competition is extremely limited. Great.

Speaker Change: We're really focused on those $4 million to $5 million transactions those relationship transactions, where we can create value and so competition is extremely limited.

Speaker Change: Great and also just going back to the watch list I was curious if there are any names that recently have been added or fallen off.

Joey: And also, just going back to the watch list, I was curious if there are any names that recently have been added or fallen off in anything that you're keeping. Nothing material that I can think of; it's been a fairly consistent, consistent watch list. Obviously, the cotton was in the news yesterday. We don't have any cons, and there have been tons; frankly, I'm not even sure what they sell, but we don't have these restaurant tenants that we see with the challenges in the news as well. And so it's a very, it's been a consistent watch list; we're on top of here, and the management team is on top of in case we get these spaces back.

Speaker Change: And then anything that youre keeping.

Speaker Change: No nothing material that I can think of it it's been a fairly consistent consistent watch list. Obviously the tons was in the news yesterday, we don't have any cans and there have been two of times, frankly, I'm not even sure what they sell.

Joey: I'm not even sure what they sell, but we don't have these restaurant tenants that we see on the channel. [inaudible] We're on top of this, and the asset management team is on top of in case we get there. We're back, and frankly, we're excited. Thank you so much.

Speaker Change: But we don't have these restaurant tenants that we see with the challenges in the news as well and so it's a very.

Speaker Change: <unk> watch list, which.

We're on top of here in the asset management team is on top of in case, we get.

Speaker Change: These spaces back and frankly, we're excited to get some of these spaces back to recap or totally redo, the Memphis, Tennessee, former bed Bath and beyond which I discussed in the prepared remarks.

Joey: And frankly, we're excited to get some of these spaces back to recap, to really redo the Memphis, Tennessee, former Bed Bath and Beyond, which I discuss in the prepared remarks.

Joey: Great.

Speaker Change: Great. Thank you so much.

Joshua Dennerlein: Thank you so much.

Joshua Dennerlein: Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Michael Goldsmith: Okay, so our next question comes from the line of Mr. Maine from Citizen, James. Please go ahead. Thanks for taking my question. Joey, I'm curious when you look at like CVS versus Walgreens and you're making a bed on Warren and obviously trimmy explosion to the other. What are the nuances of one store versus the other that gives you confidence in that model and that brand? Great question.

Speaker Change: Thank you Sir our next question comes from the line of Mitch Germain from JMP.

Mitchell Bradley Germain: Okay, so our next question comes from Mitch Germain from Citizens Jam. Please go ahead. Thanks for taking my question. Joey, I'm curious when you look at CVS versus Walgreens, and you're making a bet on one and obviously trimming exposure to the other, what are the nuances of one store versus the other that gives you confidence in that model and that brand? Great question.

Speaker Change: Please go ahead.

Mitchell Bradley Germain: Thanks for taking my question.

Mitchell Bradley Germain: I'm curious when you look at like Cvs versus Walgreens, and you're making a bet on one and obviously trimming exposure to the other what are the nuances of one store versus the other that gives you confidence in that in that model in that brand.

Speaker Change: Great question, we've talked extensively over the years and Theres a slide in the deck about our.

Joey: We've talked extensively over the years, and there's a slide in the deck about our, Frankly, our dissatisfaction with Walgreen's both business model and performance. What we're looking for in a 21st century suburban pharmacy is, uh, 103. A high-performing store that's generally doing over $12, $13 million with limited competition. A ground lease for a basis that makes sense in the 21st century Omni. Now, I'm hesitant to compare, but I'll compare Suburban Pharmacies today to movie theaters. Movie theaters aren't going away, and neither are suburban pharmacies. They're just both going to be rash.

Joey: We've talked extensively over the years, and there's a slide in the deck about our, frankly, our dissatisfaction with Law Green's both business model and performance. What we're looking for in a 21st century suburban pharmacy is one of three things. A high performing store that's generally doing over 12, 13 million dollars with limited competition, a ground lease, or a basis that makes sense in the 21st century omnichannel world. Now, I'm hesitant to compare, but I'll compare suburban pharmacies today to movie theaters. Movie theaters are going away, and neither are suburban pharmacies. They're just both going to be rationalized.

Frankly, our dissatisfaction with Walgreens, both business model in performance.

Speaker Change: We're looking for in a 20 <unk> century suburban pharmacy is a one or three things.

Speaker Change: A high performing store, that's generally doing over $12 million to $13 million with limited competition, a ground lease or a basis that makes sense and the 20 <unk> century Omnichannel world.

Speaker Change: And im hesitant to compare but I'll compare suburban pharmacies today to movie theaters movie theaters are going away and neither are suburban pharmacies or just both going to be rationalized.

Joey: And so we're very focused on the real estate fundamentals, the residual values, and the individual store performance. You will not see us make any incremental investments in Walgreens. Obviously, we've gone from over 40% in 2010 to negligible today for a reason. The only pharmacy we're interested in is CVS. I think our CVS exposure is most likely peak tier, but we're looking for unique transactions that aren't your prototypical suburban pharmacy. Catty Corner or Kitty Corner from Walgreens paying $375,000 a year and $28 per square foot in a 14,000 square foot box. That is, Great; thanks for that.

Joey: And so, we're very focused on the real estate fundamentals, the residual values, and the individual store performance.

Speaker Change: And so we're very focused on the real estate fundamentals the residual values and the individual store performance you will not see us make any incremental investments at Walgreens, obviously, we've gone from over 40% in 2010.

Joey: You will not see us make any incremental investments in Walgreens. Obviously, we've gone from over 40% in 2010 to negligible today for a reason.

Speaker Change: To negligible today for a reason.

Michael Goldsmith: The only pharmacy we're interested in is CBS. Those, I think, are CBS exposure is most likely peaked here, but we're looking for unique transactions that are your prototypical suburban pharmacy, caddy corner or kitty corner from Walgreens, paying $375,000 a year and $28 per square foot in a 14,000 square foot box that is infangible. Great. Thanks for that.

Speaker Change: The only pharmacy, we're interested in is Cvs.

Speaker Change: As I think <unk> Cvs exposure as most likely peaked here.

Speaker Change: But we're looking for unique transactions that are your prototypical suburban pharmacy, caddy corner or Kitty corner from a walgreens paying $375000, a year and $28 per square foot and a 14000 square foot box that isn't a fungible.

Speaker Change: Great. Thanks for that and obviously I appreciate the white paper.

Joey: And obviously, I appreciate the white paper that you wrote last week. And I'm curious about C-Stores. They're becoming, obviously, a greater emphasis in the portfolio. Is there, you know, obviously, a lot of competition with those types of assets. So is it, you know, kind of through developer relationships, or corporate? How are you getting success in growing that business on all three platforms?

Joey: And obviously, I appreciate the white paper last week that you wrote, and I'm curious about sea stores. They're becoming obviously a greater emphasis to the portfolio. Is there, you know, obviously, it seems to be still a lot of competition with those types of assets. So, is it, you know, kind of through developer relationships corporate? How, how are you getting success and growing that business? All three platforms. We are very active on the development front, specifically with sea stores, large format sea stores, as well as the developer funding platform. Third, I would tell you acquisition just due to the cap rates.

Speaker Change: Last week that you wrote and I am curious about C stores, theyre, becoming obviously, a greater emphasis of the portfolio.

Speaker Change: Is there.

Speaker Change: Obviously, it seems to be it's still a lot of competition for those types of assets. So is it kind of through developer relationships corporate how how are you getting success in growing that business.

Speaker Change: All three platforms, we are very active.

Joey: We are very active on the development front, specifically with C-stores, large format C-stores, as well as the developer funding platform. Third, I would tell you acquisitions just due to the cap rates. You know, the interesting thing about the C-Store white paper is people's perception of and understanding of the large format C-Store space is generally based on where they're located regionally. And I'll tell you, here in Michigan, with sheets just entering, coming and going, now Maverick, with an entry into the space, Quick Trip entering Michigan, we're not familiar with the C-Store.

Speaker Change: The development front.

Speaker Change: Specifically with C stores large format stores as well as the developer funding platform.

Speaker Change: Third I would tell you acquisitions, just due to the cap rates. The interesting thing about the C store White paper is people's perception of an understanding of the large format C store basis generally based on where they're located regionally and I'll tell you here in Michigan with sheets, just entering come and go with now.

Joey: You know, the interesting thing about the sea store white paper is people's perception of an understanding of the large format sea store space is generally based on where they're running. They're located regionally. And I'll tell you here in Michigan with sheets just entering, come and go with now Maverick with an entry into the space, quick trip entering Michigan. We're not familiar with the sea store. The Michigan consumer is not familiar with the large format sea store that sells food and beverage for off premises consumption, primarily coffee, breakfast, and lunch here. And so, as sea stores, these regional operators, Wawa, she's Quick Trip.

Speaker Change: Maverick with an entry into the space Kwik trip entering Michigan.

Speaker Change: Not familiar with the C store, the Michigan consumer is not familiar with the large format C store.

Joey: The Michigan consumer is not familiar with the large format C-Store that sells food and beverages for off-premises consumption, primarily coffee, breakfast, and lunch. And so as these regional operators, Wawa, Sheets, Quick Trip, we go through a number of them, expand across the country, what they're learning and what consumers are becoming accustomed to is the C-Store becoming a quick-service restaurant, the C-Store becoming a place to grab something quickly, a front end, which they historically grabbed at the pharmacy, a bag of chips, a soda, any of those things. And so it's very interesting to watch them continue to grow.

Speaker Change: Sales food and beverage for off premises consumption, primarily coffee breakfast and lunch here and so as C stores. These regional operators wildlife Sheiks Kwik trip. They go through a number of them expand across the country.

Joey: We go through a number of them, expand across the country. What they're learning and what consumers are becoming accustomed to is the sea store becoming a quick service restaurant. The sea store becoming a place to grab something quickly front end, which they historically grabbed in the pharmacy, a bag of chips, soda, any of those things. And so, it's very interesting to watch them continue to grow. I think Wawa alone is long. announced seven new states and then watched the regionalized operators expand across the country and consumers flock to it. We saw it in Florida with Wawa. Now they had the history of racetrack in Florida, so a large format operator, I tell you, from my perspective, inferior food and beverage. But Wawa's success in Florida and other states has really led the way, and we were initial developer for Wawa on the state of Florida. Our father entry has led the way in giving these sea stores confidence that consumers outside of their core region are going to continue to really be attraction to the brand.

Speaker Change: What they're learning and what consumers are becoming accustomed to US is the C store, becoming a quick service restaurant the C store, becoming a place to grab something quickly front end, which they historically grab in the pharmacy, a bag of chips soda.

Speaker Change: Of those things and so it's very interesting to watch them continue to grow I think Wawa alone is launched now announced seven new states.

Joey: I think Wawa alone is a long way from being in seven new states. And then watch the regionalized operators expand across the country and consumers flock to them. We saw it in Florida with Wawa. Now they have the history of Racetrack in Florida.

Speaker Change: And then watch the regionalized operators expand across the country and consumers flocked to it we saw it in Florida with Wildlife now they have the history of race track in Florida. So a large format operator I would tell you from my perspective, inferior food and beverage, but wawa success in Florida and others.

Joey: So a large format operator, I tell you, from my perspective, inferior food and beverage. But Wawa's success in Florida and other states has really led the way, and we were the initial developer for Wawa in the state of Florida upon their entry, has led the way in giving these C-stores confidence that consumers outside of their core region are going to continue to be attracted to the brand. Thank you, and congratulations on the quarter. Thank you. Our next question comes from the line of Eric Borden from VO Capital Markets. Please go ahead. Hey, good morning.

Speaker Change: Dates.

Speaker Change: Has really led the way and we were initial developer for Wawa and the state of Florida of either entry has led the way and given the C stores confidence that consumers outside of their core region are going to continue.

Speaker Change: To really be attracted to the brand.

Michael Goldsmith: Thank you. Congrats on the corner. Thank you very much.

Speaker Change: Thank you congrats on the quarter.

Speaker Change: Thank you very much.

Michael Goldsmith: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Eric Gordon from BMO Capital markets. Please go ahead.

Eric Borden: Our next question comes from the line of Eric Borden from B.O. Capital market.

Eric Borden: Please go ahead. Hey, good morning. Thanks for taking my question.

Eric Gordon: Hey, good morning, Thanks for taking my question.

Eric Martin Borden: Thanks for taking my question. I'm just building off the comment on the white paper, you know, just given that C stores are a growing presence and you highlighted how they're potentially taking share from QSRs and coffee shops. How high are you willing to take your exposure to C stores? You know, could they eventually become a top one or two sector for you?

Eric Borden: Just building off the comment on the white paper, just given that sea stores are growing presence and you highlight how they're potentially taking share from QSRs and coffee shops, how high are you willing to take your exposure to sea stores? Could they eventually become a top one or two sector for you? And does this change your view on your current exposure to your QSR portfolio? I believe, correct if I'm wrong, Peter, sea stores are number four. It is approximately 8% of the overall portfolio. We don't have a sea store tenant in our top 15. I believe Wawa's our largest, just under 15 at approximately 1.7% 1.8%. I believe.

Eric Gordon: Just building off the comment on the White paper, just given that the stores are growing presence and you highlighted how theyre potentially taking share from kyocera and coffee shops. How high are you willing to take your exposure to C stores could they be eventually become a top one or two sector for you.

Speaker Change: And does this change your view on your current exposure to your kyocera portfolio.

Joey: And, you know, does this change your view on your current exposure to your QSR portfolio? I believe, correct me if I'm wrong, Peter, C stores are number four at approximately 8% of the overall portfolio. We don't have a C-Store tenant in our top 15, I believe Wawai is our largest, just under 15, at approximately 1.7%. Sorry, 7-Eleven, we have one in there above them too, about 2.4.

Peter Coughenour: I believe correct me, if I'm wrong, Peter C stores or number four.

Speaker Change: <unk>, 8% of the overall portfolio.

Speaker Change: Don't have a C store tenant in our top 15, I believe YY is our largest just under 15 at approximately one 7% one 8% I believe.

Joey: Sorry, 7.11. We have in there above them two, about 2.4%. There's lots of room for us to continue to add sea store. I mean, just taking them from what's called the 8% to 10% of our overall portfolio from a sector perspective would be a very significant jump, as the underlying portfolio and denominator continues to grow. So we will aggressively continue to pursue those transactions. Many of them are on ground leases. We have various strong relationships and are growing additional relationships in that space. And I think sea stores are going to be amongst them in off price, the highest growth sectors and overall in retail for probably the next five to 10 years.

Speaker Change: Sorry, 711, we have in there above them to about two 4%. There is lots of room for us to continue to add C store.

Joey: There's lots of room for us to continue to add. Just taking them from what's called 8% to 10% of our overall portfolio from a sector perspective, a very significant jump as the underlying portfolio denominator. We will aggressively continue to pursue those transactions. Many of them are on ground leases.

Speaker Change: I mean, just taking them from let's call it the 8% to 10% of our overall portfolio from a sector perspective would be a very significant jump as the underlying portfolio denominator continues to grow. So we will aggressively continue to pursue those transactions. Many of them are on ground leases, we have very strong relationships and are growing.

Joey: We have very strong relationships and are growing additional relationships in that space. And I think C-Stores are gonna be amongst them and, off price, the highest growth sector, overall, for probably the next five years. In terms of QSR, it's very negligible in our, http://TheBusinessProfessor.com, purchasers were paying five caps for them. We have Peter, our QSR exposure. Similar to our C-Store, if we are acquiring a Quick Service Restaurant or any type of restaurant, we're looking to do so on the ground... And I believe Chick-fil-A is number one or number two, and those are all on the ground... USR, We have stayed away from Popeyes and the Burger King franchisees and the Wendy's franchisees and all the Yum!

Speaker Change: Additional relationships in that space and I think C stores.

Speaker Change: Or will it be amongst them enough price the highest growth sectors in overall.

Speaker Change: Overall in retail.

Speaker Change: For probably the next five to 10 years.

Joey: In terms of QSR, it's very negligible in our portfolio. We quickly divested the Burger Kings and the other things in the 1031 markets when the private equity entered and purchasers were paying five caps for them. I think we have Peter; our QSR exposure is what? It's roughly 1% today and similar to our sea store exposure. If we are acquiring or if we own a quick service restaurant or any type of restaurant, we're looking to do so on a ground leases basis. And I believe Chick-fil-A's number one or number two when those are all ground leases in terms of QSRs.

Speaker Change: In terms of <unk>, it's very negligible in our portfolio we quickly divested.

Speaker Change: The Burger Kings and the other things in the 10 31 markets with private equity entered in.

Speaker Change: Purchasers were paying five caps for them I think we have Peter R. <unk> exposures, what it's roughly 1% and similar to our C store exposure.

Speaker Change: If we are acquiring or if we owned <unk>.

Speaker Change: Service restaurant or any type of restaurant, we're looking to do so on a ground lease basis.

Speaker Change: And I believe took place number one or number two and those are all ground leases in terms of <unk>, but we have stayed away from the popeye's in the Burger King franchisees in the windy franchisees all the umbrian franchisees.

Joey: But we have stayed away from the Popeyes and the Burger King franchisees and the Wendy franchisees and the young all the young brand franchisees. One, we don't like the real estate; the buildings are disposable, Inspector Gadget style if you recall. And then two, private equity just came into the space, levered up balance sheets to drive costs down because they're unable to raise prices fast enough to drive EBITDA and the rent coverage post Stingel, the Real Estate. So, we don't like food here in terms of selling it; we like to eat it.

Joey: Brand franchisees. One, we don't like the real estate; the buildings are disposable, Inspector Gadget style, if you recall. And then two, private equity just came into the space, levered up balance sheets to drive costs down because they're unable to raise prices fast enough to drive EBITDA and the rent coverage post-leaseback and divestment. So we don't like food here in terms of selling it. We like to eat it raw.

Speaker Change: One we don't like the real estate the buildings are disposable Inspector Gadget style, if you recall.

Speaker Change: And then two private equity came into this space Levered up balance sheets to drive cost down because they were unable to raise prices fast enough to drive EBITDA and the rent coverage post sale leaseback and divesting of the real estate. So we don't like food here in terms of selling it we like to eat it.

Eric Borden: Food is an ancillary product, like in the QSR space for convenience. We're big fans of, but you will not see us make any significant investments in the restaurant space actually around these. That's helpful.

Speaker Change: Food is an ancillary product in the <unk> space for convenience.

Joey: Food is an ancillary product, like in the QSR space for convenience. We're big fans of it, but you will not see us make any. That's helpful. And you touched on this a little bit in your parent remarks, you know, as it relates to the 24 and 2025 lease expirations. How are your conversations with tenants for the 25s? Are there tenants looking to renew early, just given the limited availability for retail real estate? And the second part of my question is, you know, are there potential move-outs that we should have on our radar? Generally, tenants don't renew early unless you give them something in exchange.

Speaker Change: We're big fans of.

Speaker Change: But you will not see us make any significant investments in the restaurant space absent a ground lease.

Speaker Change: That's helpful and you touched on this a little bit in your prepared remarks as it relates to the 24 and 2025 lease explorations.

Eric Borden: And you touch on this a little bit in your paired remarks, you know, as it relates to the 24 and 20, 25 of these aspirations, you know. How are your conversations with tenants for the 25s? Are there tenants looking to renew early, just given the limited availability for retail real estate? And the second part of my question is, you know, are there potential move-outs that we should have on our radar? Generally, tenants don't renew early unless you give them something in exchange. We're confident of the, if they get 64 lease aspirations, the vast majority will be exercising options.

Speaker Change: Are your conversations with tenants for the 20 fives are there tenants looking to renew early just given the limited availability for retail real estate.

Speaker Change: And the second part of my question is are there potential move outs that we should have on our radar.

Speaker Change: Generally tenants don't renew early unless you give them something in exchange, we are confident that when they get 64 lease expirations. The vast majority will be exercising options.

Joey: We're confident that for release expirations, the vast majority will be exercising those notifications. Frankly, starting the fourth quarter of this year, if not the end of the third quarter of this year, there's generally a minimum of a 90 day notification period. We'll be patient. At the same time, if we see any vulnerabilities from either the store-level data that we receive, the store-level conversations, corporate conversations, or market dynamics, we will definitely be in front of it, and the asset management team led by our COO Nicole Witteveen is on top of it.

Joey: Those notifications, frankly, start in the fourth quarter of this year, if not the end of the third quarter of this year. There's generally a minimum of a 90-day lease notification or option notification. That's required. And so we'll be patient. At the same time, if we, if we see any vulnerabilities from either the store level data that we receive, the store level conversations, corporate conversations or market dynamics, we will definitely be in front of it and the asset management team led by our COO and a cold would have been is on top of it.

Speaker Change: As notifications frankly start in the fourth quarter of this year, if not the end of the third quarter of this year Theres generally a minimum of a 90 day lease notification or option notification that's required.

Nickel: And so we'll be patient at the same time, if we see any vulnerabilities from either the store level data that we receive the store level conversations corporate conversations or market dynamics, we will definitely be in front of it and the asset management team led by our COO nickel would it be.

Nickel: On top of it.

Nickel: And there'll be material move out that you should be aware of that are on our radar as of today.

Eric Borden: And no material move out that you should be aware of that are on our radar as of today. Appreciate it.

Joey: And no material move out that you should be aware of that is on our radar as of yet. Appreciate it. Thank you. Your next question comes from Brad Heffer with RBC Capital Markets. Your line is now open. Yeah, thanks. Morning, everyone.

Speaker Change: I appreciate it thank you.

Brad Heffern: Thank you. Your next question comes from Brad Heffer with RBC Capital Markets.

Speaker Change: Your next question comes from Brad Heffern with RBC capital markets. Your line is now open.

Brad Heffern: Your line is not open.

Brad Heffern: Yeah. Thanks.

Bradley Barrett Heffern: Yes. Thanks. Good morning, everyone. You have this disciplined capital allocators slide in the deck slide 12, Thank your own whack calculation and the cap rates from the second quarter would put you in the pedal to the metal category.

Bradley Barrett Heffern: You have this disciplined capital allocator slide in the deck, slide 12. I think your own WAC calculation and the cap rates from the second quarter would put you in the pedal to the metal category. Would you say that that's what you were thinking, pedal to the metal for the fourth quarter and for 2025, assuming nothing changes? Or is there something that would moderate that view?

Brad Heffern: Morning, everyone. You have this Discipline Capital Allocator slide in the deck. Slide 12. Think your own whack calculation, and the cap rates from the second quarter would put you in the pedal to the metal category. Would you say that that's what you were thinking, pedal to the metal for the fourth quarter for 2025, assuming nothing changes those areas or something that would moderate that view.

Speaker Change: Did you say that that's what you were thinking pedal to the metal for the fourth quarter and for 2025, assuming nothing changes or is there something that would moderate that view.

Joey: Great question, Brad. If you look at our spot cost of capital, it's down approximately 50 basis points in the last fair to say 90 days, Peter, 80 days, 80 days. I do mention that the 700 million dollars in guidance and the prepared remarks could prove conservative. We have full optionally given our balance sheet and our cost of capital to one either maintain the 150 basis points spread. We'll call it mid seventh cash, or to put the pedal to the metal and keep it to the 100 basis point spread, which is the wider green. Now we'll look at that on a case-by-case basis on a qualitative basis.

Bradley Barrett Heffern: Great question Brad.

Joey: Great question, Brad. If you look at our spot cost of capital, it's down approximately 50 basis points. In the last, fair to say, 90 days, Peter, 90 days?

Speaker Change: If you look at our spot cost of capital is down approximately 50 basis points in the last fair to say 90 days, Peter Hay days 80 days.

Joey: I do mention that the $700 million in guidance and the prepared remarks could prove conservative. We have full optionality given our balance sheet and our cost of capital. So one, either maintain the 150 basis points spread, we'll call it mid-sevens cash, or put the pedal to the metal and keep it to the 100 basis point spread, which is the lighter. Now we'll look at that on a case-by-case basis, on a qualitative basis.

Speaker Change: I do mention that the $700 million in guidance in the prepared remarks could prove conservative.

Speaker Change: We have full optionality, given our balance sheet and our cost of capital to one either maintain the 150 basis points spread so call it mid sevens cash.

Speaker Change: Or to put the pedal to the metal.

Speaker Change: And keep it to the 100 basis points spread which is the wider group.

Speaker Change: Now we will look at that on a case by case basis on a qualitative basis. We will also look at larger transactions, if those make sense in context of our portfolio.

Joey: We'll also look at larger transactions if those make sense in the context of our portfolio. I think the interesting thing here is for fourth quarter, we maintain full optionality. And as I mentioned earlier, sourcing started yesterday, given our clock in Arc. So we have about nine arc tells us we have 92 days left to source for 2024. We are excited about those 92 days what it brings; our cost of capital and balance sheet affords us full flexibility now. and we're going to see how that materializes. So I think next quarter we'll have much more visibility into it.

Joey: We'll also look at larger transactions if those make sense in the context of our portfolio. I think the interesting thing here is that for the fourth quarter, we maintain full optionality, and, as I mentioned earlier, sourcing started yesterday given our clock in ARC. So we have about nine ARC tells us we have 92 days left to prepare for 2024.

Speaker Change: I think the interesting thing here is for fourth quarter, we maintained full optionality and as I mentioned earlier.

Speaker Change: <unk> started yesterday.

Speaker Change: Our clock in arc. So we have about 19 arc tells US we have 92 days left to source.

Joey: We are excited about those 92 days. Whatever it brings, our cost of capital and balance sheet affords us full flexibility now. And we're going to see how that materializes. So I think next quarter we'll have much more visibility into it, and again, the 700 million could prove conservative, or we could push for that 150 basis point spread and say we're going to maintain discipline. That's going to be subject to the transactions that we're able to make.

Speaker Change: For 2024.

Speaker Change: We are excited about those 92 days would it brings our cost of capital and balance sheet affords us full flexibility now.

Speaker Change: And we're going to see how that materializes. So I think next quarter, we will have much more visibility into it.

Speaker Change: And again, the $700 million could prove conservative where we could push for that 150 basis point spread it and say, we're going to maintain discipline that can be subject to the transactions that we're able to dig up.

Joey: And again, the 700 million could prove conservative, or we could push for that 150 basis points spread and say we're going to maintain discipline. That's going to be subject to the transactions that we're able to dig up. Okay, got it.

Speaker Change: Okay got it and then do you think cap rates will react to kind of the broader changing cost of capital for the public names and will they be as slow to go down as they were to go up.

Joey: Okay, got it. And then, do you think cap rates will react to kind of the broader change in cost of capital for public names, and will they be as slow to go down as they were to go up? I try to avoid predicting cap rates on these calls and in any forum because predictions always seem to be wrong.

Joey: And then do you think cap rates will react to kind of the broader changing cost of capital for the public names?

Joey: And will it be as slow to go down and say where to go up?

Speaker Change: Yes.

Joey: I try to avoid predicting cap rates. Always on these calls and any forum predictions always seem to me wrong. If I had my money, they'd peek with my money on it; they'd peeked. That said, just given the craziness of the world that we live in today, we're not going to place it either way, and we're going to be a better way to maintain our discipline here.

Speaker Change #100: I try to avoid predicting cap rates always on these calls and in any forum.

Speaker Change #101: Predictions always seem to be wrong, if I had my money they put my money on it.

Joey: If I had my money, they'd peak; if I put my money on it, they'd peak. That said, just given the craziness of the world that we live in today, we're not going to place it either way, and we're going to bet either way and maintain our dignity. The volatility out there from a macro, from a geopolitical, from a domestic perspective, is something I've never seen in my career, obviously, and so we're going to maintain our agility and flexibility here. I wouldn't anticipate cap rates materially moving up, but I... Okay, thank you.

Speaker Change #101: Peaked.

Speaker Change #102: That said.

Speaker Change #103: Given the craziness of the world that we live in today, we're not going to place it either way and we're going to be a bit either way it maintained maintain their discipline here.

Joey: The volatility out there from a macro, from a geopolitical, from a domestic perspective, is something like I've never seen in my career, obviously. And so we're going to maintain our agility and flexibility here. I wouldn't anticipate cap rates materially moving up. But I could be wrong.

Speaker Change #103: The volatility out there from a macro from a geopolitical from a domestic perspective.

Speaker Change #103: It's something like I've never seen in my career, obviously, and so where we are.

Speaker Change #103: To maintain our agility and flexibility here.

Speaker Change #103: I wouldn't anticipate cap rates materially moving up.

Speaker Change #103: <unk>.

Speaker Change #103: It could be rock.

Speaker Change #104: Okay. Thank you.

Brad Heffern: Okay, thank you. Thanks, Brad.

Bradley Barrett Heffern: Thanks, Brad.

Speaker Change #108: Thank you. Our next question comes from the line of Vanilla Loy Yang from Baird. Please go ahead.

Joey: Thank you. Our next question comes from the line of Renata Laurier from Baird. Please go ahead. It's Alec Fagan.

Brad Heffern: Thank you.

Alex Fagan: Our next question comes from the line of Renata Laurier from there. Please go ahead.

Alec Fagan: Thank you for taking my question. How much has the transactable PAM increased by your current cost of equity relative to the beginning of the year? At the beginning of the year, we were laying out do-nothing scenarios.

Alex Fagan: It's Alex Fagan. Thank you for taking my question. How much has the transactable can increase by your current cost of equity relative to the beginning of the year? The beginning of the year, we're laying out do nothing scenarios. So that was, look, it's been a dramatic shift here. Again, that ties into the hesitancy of guidance and acquisition guidance for the year. This has been somewhat of a roller coaster. Frankly, we were on a defensive mindset here. We executed on a number of internal initiatives to, frankly, prepare for a slowdown. We deployed the do nothing scenario and articulated that to the street, followed by our initial guidance or inaugural guidance.

Alex Vegan: It's Alex vegan.

Thank you for taking my question.

Alex Vegan: How much has the chaz actable Pan increased by at your current cost of equity relative to the beginning of the year.

Bradley Barrett Heffern: Okay.

Speaker Change #105: The beginning of the year, we ran a do nothing scenarios.

Joey: Uh, so that was, uh, look, it's been a dramatic shift here. Again, that ties into the hesitancy of guidance and Acquisition Guidance for the year. This has been somewhat of a roller coaster ride. Frankly, we were on a defensive mindset.

Speaker Change #107: So that was look it's been a dramatic shift here again that ties into the hesitancy of guidance.

Speaker Change #107: Acquisition guidance for the year. This has been somewhat of a rollercoaster frankly, we were at a defensive mindset here.

Speaker Change #107: Here, we executed on a number of internal initiatives.

Joey: We executed on a number of internal initiatives to, frankly, prepare for a slowdown. We deployed the do-nothing scenario and articulated that to the street, followed by our initial guidance, or inaugural guidance, I should say, with approximately $600 million. Since then, as we've talked about in prior questions here, our cost of capital has decreased by almost 10% material. And so it's been a roller coaster ride this year. I'm extremely proud of the team, and the discipline they've maintained.

Speaker Change #107: Two frankly prepare for a slowdown we deployed the do nothing scenario and articulated that to the street followed by our initial guidance our inaugural guidance I should say with the approximately $600 million. Since then as we've talked about on prior questions here our cost of capital has decreased.

Joey: I should say, with the approximately 600 million. Since then, as we've talked about, I'm prior questions here. Our cost of capital is decreased, you know, almost 10% material here. And so it's been a roller coaster of the year. Extremely proud of the team, the discipline they've maintained. It has never easy for a team or company to go through these types of strategic changes and these types of market-based changes. But we buckled down; we maintained their discipline. We ramped up our efforts. And now I anticipate we see the fruits of that waiver.

Speaker Change #107: Almost 10% materially here.

Speaker Change #107: And so.

Speaker Change #111: It's been a rollercoaster of the year extremely proud of the team the discipline they've maintained it is never easy for a team or company to go through these types of strategic changes in these types of market base changes.

Joey: It's never easy for a team or a company to go through these types of things. We've ramped up our efforts, and now I anticipate we will see the fruits of that work. Got it. Thank you. Second one for me: I also enjoyed reading your most recent white paper.

Speaker Change #107: But we buckled down we maintained their discipline.

Speaker Change #107: We've ramped up our efforts and now anticipate we'd see the fruits of that labor.

Speaker Change #109: Got it thank you.

Alex Fagan: I got to thank you.

Joey: Second one for me. I also enjoyed reading your most recent white paper. Things like few of the questions have been asked already, but if you can just kind of tell us what the percentage of your current sea storage exposure is. Large format versus smaller regular format. Dollard Tormet.

Speaker Change #113: One for me I also enjoyed reading your most recent white paper it seems like a few of the questions have been asked already but if you can just kind of.

Joey: Seems like a few of the questions have been asked already, but if you can just kind of tell us what the percentage of your current C-store exposure is large format versus smaller regular format. We don't believe in small format C-stores. There may be one or two odd ones that we have. We don't believe in the small format C-Store. Again, just hearkening back to my comment about the state of Michigan, historically, gas stations, we didn't call them C-Stores, had an auto base, sold cigarettes, gum, and a cooler. We weren't familiar with that.

Speaker Change #110: Tell us what the percentage of your.

Speaker Change #114: Current C store exposure is large format versus smaller regular format.

Speaker Change #112: Stalwarts format, we don't believe in small format C stores, there, maybe one or two other ones that we have for some reason we don't believe in the small format C store again, just harkening back to my comment about the state of Michigan Historically gas stations, we didn't call them C stores had an auto base or cigarettes government a cooler.

Joey: We don't believe in small format sea stores, and maybe one or two odd ones that we have for some reason. We don't believe in the small format sea store.

Joey: Again, just harkening back to my comment about the state of Michigan. Historically, gas stations, we didn't call them sea stores, had an auto basult, cigarette, gum, and a cooler. We weren't familiar with that. Now, some local operators in 7-Eleven have expanded to offer food and beverage. We don't believe in the small format sea stores. As the white paper articulates, the margin is not in fuel; the margin is in food and beverage. Liquid gold is coffee, sitting in front of me right now. That is where sea stores drive margin and EBITDA. And so we do not invest in small format sea stores, ABS and a ground lease or some unique circumstance.

Speaker Change #112: We work familiar with that now some local operators and 711% expanded to offer food and beverage.

Joey: Now some local operators in 7-Eleven have expanded to offer food and beverage. We don't believe in the small format C-Store as the white paper articulates. The margin is not in fuel. The margin is in food and beverage. Liquid gold is the coffee sitting in front of me right now.

Speaker Change #112: We don't believe in the small format stores as the white paper articulate the margin is not in fuel the margin is in food and beverage liquid gold is coffee sitting in front of me right now.

Speaker Change #112: That is where C stores drive margin and EBITDA.

Joey: That is where C-Stores drive margin and EBITDA. And so we do not invest in small format C-Stores absent a ground lease. That's helpful. Thank you for the time.

Speaker Change #112: And so we do not invest in small format stores absent a ground lease or some unique circumstance.

Speaker Change #112: Okay.

Alex Fagan: That's helpful.

Speaker Change #115: That's helpful. Thank you for the time.

Alex Fagan: Thank you for the time.

Alex Fagan: Thank you.

Speaker Change #112: <unk>.

Speaker Change #116: Thank you. Our next question comes from the line.

Opal Rana: Thank you. Our next question comes from the line of Opal Rana from Key Bank Capital Markets. Please go ahead.

O'Pal Runna: Our next question comes from the line of O'Pal Runna, some key Bank Capital Markets.

Speaker Change #116: Rhonda from Keybanc capital markets. Please go ahead.

O'Pal Runna: Please go ahead. Great. Thank you.

Speaker Change #117: Great. Thank you.

Joey: Great, thank you. You know, Joey, with the possibility of a September rate cut being high at this point, how would you, how would that maybe impact your strategy leading up to that cut or even after assuming we get it? Look, I think a rate cut, a short-term rate cut is most likely already priced into the We are approaching August. So I would anticipate that it's already approaching probability today. So I would tell you that it has no impact on our overall.

Speaker Change #118: Yeah, Joey with the possibility of a September rate cut being high at this point.

Joey: You know, Joe, with the possibility of a September break, you know, being high at this point, you know, how would you, how would that maybe impact your strategy leading up to that cut or even out for something we get one? I think I think a rate cut, a short term rate cut, is most likely already priced into the market today. I mean, we are approaching August year now. So I would anticipate that's already approaching. You can see it priced in at the 90-plus percent probability today. So I would tell you that it's no impact on our overall strategy.

Rhonda: How would you how would that maybe impact your strategy, leading up to that cut or even after assuming we get one.

Speaker Change #120: Look I think I think a rate cut its short term rate cut is most likely already priced into the market today.

Speaker Change #120: Our approaching August here now.

Speaker Change #121: Would anticipate that's already approaching you can see it priced at the 90 plus percent probability today. So I would tell you that has no impact on our overall strategy here.

O'Pal Runna: Got it.

Speaker Change #122: Got it okay.

Joey: Got okay. And just, you know, the follow-up question, you know, what's your opinion on the current state of retailers broadly? We continue to hear some more of these companies either filing, restructuring, closing stores, you know. Just want to get your view on the current state of the market and maybe what you may be hearing. And obviously, you don't own a lot of these names, but you know, just want to get your two cents.

O'Pal Runna: Okay.

Joey: And then just, you know, the follow up, you know, what's your opinion on the current state of retail broadly? You know, we continue to hear some more of these companies either filing, restructuring, and closing stores. I just want to get your view on the current state of the market and maybe what you may be hearing, and obviously you don't own a lot of these things, but you know, just want to get your, get your two cents. We are back to capitalism in retail or Darwinism in retail. The strong will survive the large players, which were focused on our sandbox with the balance sheets to invest in labor, in price, and in fulfillment strategies.

Speaker Change #121: Yes.

Speaker Change #123: Follow up what's your opinion on the current state of retailers broadly we continue to hear some more of these companies either filing restructuring closing stores and I just wanted to get your view on the current state of the market and maybe what you may be hearing and obviously you don't own a lot of these things, but just wanted to get your two cents.

Speaker Change #124: We are back to capitalism in retail or in Darwin Darwinism in retail.

Joey: Um, we are back to capitalism in retail, or Darwinism in retail. The strong will survive. The large players, which we're focused on in our sandbox. The balance sheets to invest in labor, and prices. Fulfillment Strategy. And we're in the fifth sitting, sixth sitting, max, of a transition to an omni-channel world. The legacy retailers that were frankly bolstered by COVID, by access to cheap capital or IPOs, we're gonna see them continue to fade and go away. This is something that we fully anticipated. It's back to a normal cycle, a normal business cycle. That was...

The strong will survive the large players, which we're focused on our sandbox with the balance sheet to invest in labor in price and in fulfillment strategies.

Joey: And we're in the fifth sitting, sixth sitting max of a transition to an omnichannel world. The legacy retailers that were frankly bolstered by COVID by the access to cheap capital or IPOs, we're going to see them continue to fade and go away. This is something that we fully anticipated; it's back to a normal cycle and normal business cycle. That was, frankly, averted during COVID and in a post-COVID world where money was free. And so now we are, it's about balance sheet, it's about execution, it's about value proposition for consumers. And that's irrespective of where the macroeconomic or consumer health way.

Speaker Change #125: And we're in the fifth inning sixth hitting Max.

Speaker Change #125: Transition to an Omnichannel world.

Speaker Change #125: The legacy retailers that were frankly bolstered by COVID-19 by the access to cheap capital or Ipos.

Speaker Change #125: Going to see them continue to fade and go away.

Speaker Change #125: This is something that we fully anticipated it's back to a normal cycle a normal business cycle.

Speaker Change #126: That was.

Joey: Frankly, avoided and, uh..., during COVID and in a post-COVID world where money, And so now we are, it's about balance sheets, it's about execution, it's about value proposition for... And that's irrespective of where the macroeconomic or consumer health lies. Dower General, we talked about how they have had a more difficult time. $50,000 median household income is obviously challenged Tower General is going to be just fine here, guys. They are a provider of food for rural America today that probably would be a national security threat if they went out. Uh... at the same time, they have a huge battle. They have a growing demand on an overall basis for their goods, primarily now servicing food essentials.

Speaker Change #126: Frankly averted.

Speaker Change #126: During COVID-19 and in a post Covid world, where money was free.

Speaker Change #126: And so now we are.

Speaker Change #126: <unk> balance sheet, it's about execution, it's about value proposition for consumers and that's irrespective of where the macroeconomic or consumer health wise.

Joey: We talked about how they had had a more difficult time because the $50,000 median household income is obviously challenged. Now, our general is going to be just fine here, guys. They are a provider of food for rural America today that probably would be a national security threat if they went out of business. At the same time, they have a huge balance sheet. They have a growing demand on an overall basis, inclusive of their new store count. For their goods, primarily now servicing food and essentials, all of them. And so we're going to go back to a world we're in the world again.

Speaker Change #127: General we talked about how they have had a more difficult time, because the $50000 and median household income.

Speaker Change #127: Is obviously challenged dollar general is going to be just fine here guys. There a <unk>.

Speaker Change #128: They are.

Speaker Change #129: Provider of food for Rural America today that probably be would be a national security threat. If they went out of business.

Speaker Change #129: At the same time, they have a huge balance sheet.

A growing demand on an overall basis inclusive of their new store count for their goods, primarily now servicing food and essentials all of them and so we're going to go back to a world where in the world again, I had a conversation yesterday with a turnaround consultant who is very busy.

Joey: So we're going to go back to the world; we're in the world again. I had a conversation yesterday with a turnaround consultant who was very busy, working with retailers. We're back in the world where the strong survive, and the weak will die out.

Joey: I had a conversation yesterday with a turnaround consultant who was very busy working with retailers. We're back in the world where the strong survive and the weak would die off. And that's a good thing. That's capitalism.

Speaker Change #129: <unk>.

Speaker Change #129: Working with retailers, we're back in the world, where the strong survive and the weak without and Thats a good thing.

Joey: And that's a good thing; that's capital. Great, thank you. Thank you. The next question comes from Michael Goldsmith from UBS. Please go ahead. Good morning.

Speaker Change #130: That's capitalism.

Speaker Change #131: Great. Thank you.

O'Pal Runna: Great, thank you.

Speaker Change #132: Thank you.

Speaker Change #132: Thank you. Our next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

Michael Goldsmith: The next question comes from the line of Michael Goldsmith from UBS. Please go ahead. Good morning. Thanks all for taking my question. We appreciate the guidance and increase visibility. The algorithm now, I think, has the investment to be trusted. They just, you know, you've talked about the acquisition guidance of $700 million being conservative. You mentioned that, like, three, at least three times on the call. So, and you took it up with this quarter.

Michael Patrick Gorman: Good morning, Thanks for taking my question. We appreciate the guidance and increased visibility into the algorithm now I think as the investment community tries to David just your approach to your outlook you've talked about the acquisition guidance of $700 million being Conservative you may have mentioned that like three at least three times.

Michael Patrick Gorman: Thanks a lot for taking my question. We appreciate the guidance and increased visibility into the algorithm. Now, I think as the investment community tries to digest your approach to the outlook, you've talked about the acquisition guidance of $700 million being conservative. You may have mentioned that at least three times on the call, and you brought it up again this quarter. So just trying to get a sense of how you are looking at setting that guidance.

Speaker Change #134: On the call. So you took it up with this quarter. So just trying to get a sense of how are you looking at setting that guidance for instance, like does that reflect your visibility into the third quarter and then a haircut of what you think is reasonable for fourth quarter, just trying to get a better understanding of the mindset when putting a piece of putting that number on a piece of paper.

Joey: So, just trying to get a sense of how you are looking at setting that guidance, you know, for instance, like does that reflect your visibility into the third quarter and then a haircut of what you think is reasonable for fourth quarter, just trying to get some better understanding of the like the mindset when putting that piece of, when putting that number on the piece of paper. Hey, look, it reflects the current visibility we have. And then gives us flexibility to deploy capital, subject to our cost of capital. I mean, this is all packaged together. So, if you look from 30,000 feet, we're assuming Treasury method of delusion in our guidance as Peter articulated.

Michael Patrick Gorman: For instance, does that reflect your visibility into the third quarter? And then a haircut of what you think is reasonable for the fourth quarter? Just trying to get a better understanding of the mindset when putting that number on the piece.

Michael Patrick Gorman: <unk>.

Joey: Yeah, look, it reflects the current visibility we have and then gives us flexibility to deploy capital subject to our cost of capital. I mean, this is all package. So if you look from 30,000 feet, we're assuming the treasury method of dilution in our guidance, as Peter Arteaga said. At the same time, we're not incorporating any assumptions that are non-static.

Speaker Change #135: It reflects the current visibility we have.

Speaker Change #135: And that gives us flexibility to deploy capital subject to our cost of capital I mean this is all packaged together. So if you look from 30000 feet. We're assuming treasury method of dilution in our guidance as Peter articulated at the same time, we're not incorporating any assumptions there.

Joey: At the same time, we're not incorporating any assumptions that are non-static based.

Speaker Change #137: That are non stats non static based so.

Joey: So, when I talk about it being potentially conservative, just not willing to go out there on a limb, given the volatility we've had with the presidential candidate being a tensed assassination, another one dropping out of the race. The volatility we have in this world, the go out on a limb and tell everyone we're going to do some wild number in the fourth quarter of this year when acquisition is sourcing for fourth quarter started yesterday. We have 1.2 million dollars in our fourth quarter pipeline for acquisitions. That is normal. That is our normal cycle. We don't want any more than that because we don't want to be on a forward basis.

Joey: So when I talk about it being potentially conservative, I'm just not willing to go out there on a limb given the volatility we've had with a presidential candidate being attempted assassinated, another one dropping out of the race, the volatility we have in this world to go out on a limb and tell everyone we're going to do some wild numbers in the fourth quarter of this year when acquisition sourcing for the fourth quarter started. We have $ We don't want any more than that because we don't want to be on a forward base.

Speaker Change #136: So when I talk about it being potentially conservative.

Speaker Change #138: Not willing to go out there on a limb given the volatility we've had with the presidential candidate being attempted assassination. Another one dropping out of the race. The volatility we have in this world that go out on O&M and tell everyone. We're going to do some wild number in the fourth quarter of this year with the acquisition of sourcing for fourth quarter started yesterday.

Speaker Change #139: We have $1 $2 million in our fourth quarter pipeline for acquisitions that is normal that is our normal cycle. We don't want any more than that because we don't want to be on a forward basis and so we just don't have visibility. This is a conservative company all around.

Joey: And so we just don't have visibility. This is a conservative company all around, whether it's our guidance, our balance sheet, our management philosophy, and then how we do things. So we're going to stick to that philosophy. Now, again, I hope the fourth quarter proves much more.

Joey: And so, we just don't have visibility.

Joey: This is a conservative company all around, whether it's our guidance, our balance sheet, our management, philosophy, and then how we message to the street. And so, we're going to stick to that philosophy through and through. Now, again, I hope fourth quarter proves much more. Much more, a much larger, I'll call it, than our conservative underlying assumptions here. But again, we maintain the willingness to stick to now a 150 basis point spread and be strategic and surgical about the acquisition pipeline and what we execute on, or step on the gas if qualitatively transactions warranted.

Speaker Change #139: Whether it's our guidance our balance sheet our management.

Speaker Change #139: Our philosophy and then how we message to the street and so we're going to stick to that philosophy through and through now again, I hope fourth quarter proves much more.

Speaker Change #139: Much more a much larger I'll call it than our conservative underlying assumptions here, but.

Joey: Much more, much larger, I'll call it, than our conservative underlying assumption. But again, we maintain the willingness to stick to the now 150 basis points spread. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, or Stephane Lagasse of Qualitatively Transactions. Thank you very much for that. I think I think we can all appreciate that.

Speaker Change #139: But again, if we maintain the willingness to stick to now a 150 basis points spread and be strategic and surgical about the acquisition pipeline and what we execute on.

Speaker Change #139: Sure.

Speaker Change #139: Step on the gas if qualitatively transactions warranted.

Michael Goldsmith: Thank you very much for that. I think we can all appreciate that.

Speaker Change #140: Thank you very much for that I think we can.

Michael Patrick Gorman: And my second question is related to the dispositions in the quarter. It included Mr. Carwash and Gerber, similar to last quarter. What are the characteristics of the properties you're looking at?

I appreciate that.

Michael Goldsmith: And my second question is related to the dispositions in the quarter, and included Mr. College and Gerber; some are in the last quarter. What are the characteristics of the properties you're looking to recycle? And should we read anything into the cap rates on the dispositions moving up 20 basis points eventually? No, I appreciate the question. This was part of our disposition program in capital recycling of non-core assets at a very aggressive basis. So, as you can see in the mid-6s, these were Gerber collisions and basically Florida-based stuff with Florida-based money that is overheated. And so this was the first half of the year Capital Recycling Program that is now, most likely, transition to given our cost of capital here.

Speaker Change #141: And my second question was related to the dispositions during the quarter included Mister car wash and Gerber similar to last quarter.

Speaker Change #142: Or the characteristics of the properties you are looking to recycle and should we read anything into the cap rates on the dispositions moving up 20 basis points sequentially. No. I. Appreciate the question. This was part of our disposition program and capital recycling of noncore assets at a very aggressive basis. So as you can see in the mid sixes here. These were gerber collision.

Joey: Recycle, and should we read anything into the cap rates on the dispositions moving up 20 basis points sequentially? No, I appreciate the question. This was part of our disposition program in capital recycling of non-core assets that are very aggressive. So, as you can see in the mid-sixes here, these were Gerber collisions and basically Florida-based stuff with Florida-based money that is over. So this was the first half of the year capital recycling program that is now, most likely, transitioned given our cost of capital. Our goal was to dispose of assets that were non-core and recycle that north of 100 basis points wide. Obviously, that has changed.

Speaker Change #142: And basically Florida based stuff with Florida based money that is overheated and so this was the first half of the year capital recycling program that is now.

Speaker Change #142: Most likely transition to given our cost of capital here. Our goal was to dispose of assets that were non core and recycled that are north of 100 basis points wide.

Joey: Our goal was to dispose of assets that were non-core and recycle that north of a hundred basis points wide. Obviously, that has changed. We were prepared not to enter any equity markets and to do nothing scenario. We bolstered our asset management disposition capabilities. We've now executed, and I believe, $60 million of those of that type of asset recycling. Not that anything is not for sale here; all real estate is for sale at the right price. But at the same time here, we're focused on all of that. Thank you very much.

Speaker Change #147: Obviously that has changed.

Speaker Change #142: We were prepared not to enter in the equity markets and the do nothing scenario until we bolstered our asset management and disposition capabilities. We've now executed on I believe $60 million of those of that type of asset recycling not that anything is not for sale here all real estate is for sale at the right price.

Joey: We were prepared not to enter The Equity Markets and the Do Nothing Scenario, and so we bolstered our asset management capabilities. We've now executed on, I believe, $60 million of that type of asset recycling. Not that anything is not for sale here; all real estate is for sale at the right price. But at the same time, here, we're focused on, Thank you very much. Good luck in the back half.

Speaker Change #142: But at the same time here, we're focused on offense now.

Speaker Change #143: Thank you very much good luck in the back half.

Michael Goldsmith: Good luck in the back-off. Thank you.

Speaker Change #144: Appreciate it.

Speaker Change #149: Ladies and gentlemen.

Operator: Ladies and gentlemen, as a reminder, should you have any questions, our next question comes from the line of John Knychowski from Wells Fargo. Please go ahead. Hi, thank you. So early in the call, you mentioned that distress is picking up in the market as it relates to acquisition opportunities. Are these idiosyncratic?

Operator: Beautiful Gentlemen.

Operator: Is there a reminder? Should you have any questions? Please press one.

Speaker Change #145: Should you have any questions. Please press one hour.

Steve: Our next question comes from the line of John. Can you tell Steve from Wells Fargo? Please go ahead.

Speaker Change #152: Our next question comes from the line of John can you Celski from Wells Fargo. Please go ahead.

Speaker Change #146: Hi, Thank you.

Steve: Hi. Thank you. So early on the call, you mentioned that distress is picking up the market as it relates to acquisition opportunities. Are these ideas in credit or are they specific to certain geographies or asset types? I don't recall seeing distress is picking up in the market. I mean, we think distress is pretty static throughout the market, based upon what we call the 3Ds: death, divorce, and death, whether it's that specific dead or just overall capital structure of an entity or an institution or individual. And so I think there's a level of distress in the market. Refinancing, obviously, is down; LTVs are down; properties are down. Local and regional banks are challenged here.

John Knychowski: Or are they specific to certain geographies or asset types? I don't recall seeing distress picking up in the market, what we call the three Ds, death, divorce, and debt, whether it's asset-specific debt or just the overall capital structure of an entity. So I think there's a level of distress in the market. Refinancing, obviously, is down. LTBs are down, and proceeds are down. Local and regional banks are challenged here.

Speaker Change #148: So early on the call you mentioned that distressed is picking up with the market as it relates to acquisition opportunities are these idiosyncratic or are they specific to certain geographies or asset types.

I don't recall seeing distress is picking up in the market I mean, we think distressed is pretty static throughout the market based upon what.

Speaker Change #150: What we call the three DS death divorce and debt.

Speaker Change #151: Whether it's asset specific debt or just overall capital structure of an entity or an institution.

Speaker Change #151: Individual.

So I think there is a level of distress in the market refinancing obviously as that Ltvs are down proceeds or dial in local and regional banks are challenged here developers. Our challenge there is a level of distress that we continue to work through and take advantage of across all three platforms.

Joey: Developers are challenged. There's a level of distress to work through and take advantage of across all three platforms, but I wouldn't say we've had, I've seen a notable increase in distress. Okay, understood. Maybe it was just the mention of distress.

Joey: Developers are challenged.

Joey: There's a level of distress that we continue to work through and take advantage of across all three platforms. But I wouldn't say we've had, I've seen a notable increase in distress throughout the course of the year. Okay, understood. Maybe it was just the mention of distress.

Speaker Change #151: But I wouldn't say we've had seen a notable increase in distress throughout the course of the year.

Speaker Change #153: Okay understood maybe it was just the mention of distress. So.

Joey: So second question here. Have you noticed a material change in seller behavior following either the most recent CPI print or how sentiment has changed around the election? Sentiment Chain here on the election, that's hot off the press, so I can't tell you anything on that front.

Joey: So the second question here: have you noticed the material change and sell over a heavier following, either the most recent CPI print or how sentiment has changed around the election? Francis, chips, drinks, right, those of candy, realicated to sea stores, the fragrance beauty, has been realicated to the alphas, the Sephora's, plus online of the world, while Simon simultaneously that share has exited the first floor of the department stores as we see shrinkage there. Pharmacy, generally, I'll tell you, has, has, has, has, they somewhat fairly stable, but the problem is the generic pressure on drugs, as well as the third party government reimbursement rates for there.

Speaker Change #155: Second question here have you.

Speaker Change #154: I noticed a material change in seller behavior following either the most recent CPI or.

Sentiment has changed around the election.

Speaker Change #156: Sentiment change here on the election Thats for hot off the press I can't tell you anything on that front in terms of the most recent CPI print. This is such a large and fragmented space I think sellers today, if they are waiting for one cutter to cut from the fed that correlated to the 10 year Treasury.

Joey: In terms of the most recent CPI print... This is such a large and fragmented space. I think sellers today, if they're waiting for one cut or two cuts from the Fed, then correlate it to the 10-year Treasury and cap rates, and thereafter, are looking at tertiary. So, I tell you, I think sellers have come to the realization now with the stabilized or semi-stabilized treasuries in the 4-2 to 4-3 band here that were in a higher for longer. Reality is amongst us, guys.

Speaker Change #156: Cap rates thereafter, looking at tertiary effects and so I would tell you look I think sellers have come to the realization now with the stabilize or semi stabilized treasury and the four two to four three band here that we're in are higher for longer periods.

Speaker Change #156: Audi is amongst those guys and so what we tell our team members is that is our working assumption. If a seller does not have that are potential seller does not have that working assumption move onto the next one.

Joey: And so what we tell our team members is that is our working assumption. If a seller does not have that, or a potential seller does not have that working assumption, move on. Got it.

Speaker Change #157: Got it thank you.

Speaker Change #157: Sure.

Speaker Change #157: Alright. Our next question comes from the line of Ben.

Joey: Thank you. Alright, our next question comes from the line of Linda Tsai from Jefferies. Please go ahead.

Ben: Hi from Jefferies. Please go ahead.

Ben: Hi.

Linda Tsai: Hi, just to follow up on C-STORES. In your white paper, you highlighted several Wawa sheets, Quick Trip, 7-Eleven. What does term look like for these deals? And what do cap rates look like across? concept. And then I guess the last question is like, who would you consider your main competition in competing? So term is generally 15 to 20 years.

Speaker Change #160: A follow up on C stores in your White paper you highlighted several wawa sheetz quick.

Speaker Change #159: A quick trip 711.

Speaker Change #161: Does term look like for these deals and putting a cap rate cap rates look like across these different concepts.

Speaker Change #161: And then I guess last question is like how would you consider your main competition in competing for these names.

Speaker Change #161: James.

Speaker Change #162: So term is generally 15 to 20 years many of them are on ground lease structures. That's wawa is preferred format as a ground lease structure, you can see that reflective in our investor deck with just our while our exposure there.

Joey: Many of them are on ground lease structures. That's Wawa's preferred format, and you can see that in our investor deck with just our Wawa exposure there. Sheets is very similar, generally on ground lease structures.

Speaker Change #163: Sheets as very similar generally on ground lease structures 711, generally on a turnkey basis cap rates vary there's a lot of regional purchasers for these operators by the way I should apologize to all the Bucky's fans that we didn't include them in the white paper, because I got lots of emails bubble.

Joey: 7-Eleven, generally on a turnkey basis, although cap rates vary. There are a lot of regional operators. By the way, I should apologize to all the Buc-ee's fans that we didn't include them in the white paper because I got lots of emails, but whatever it was, where's Buc-ee's? Where's Buc-ee's? Where's Buc-ee's? Amazing operation, if you're not familiar, but only about 100 stores. We didn't want to make it the White Encyclopaedia, it's a white paper, so we couldn't include everybody.

Speaker Change #163: It was where's bucky's wears bucky's, whereas bucky's amazing operation, if youre not familiar but only about 100 stores.

Speaker Change #164: We didn't want to make it.

Speaker Change #164: White Encyclopedia, it's a white paper. So we couldnt put include everybody. So I apologize so those buckets fans.

Speaker Change #165: We'd love to do business with Barclays.

Joey: So I apologize for those Buc-ee's. We'd love to do business with both. Cap rates range. You know, you get a lot of local buyers that fall in love with the wah-wah down the street or the sheets or the quick trip down the street from them. And so cap rates range. We're not in, we still see trades in the fives, that stuff.

Speaker Change #166: Cap rates range, you get a lot of local buyers have fallen in love with the Wawa down the street.

Speaker Change #165: Or the sheet to the kwik trip down the street from them.

Speaker Change #165: And so cap cap rates range, we're not into we still see trades in the fives, we don't pay attention to that stuff again, I would remind everyone window that we're working across all three external platforms here growth platforms.

Joey: Again, I'd remind everyone, Linda, that we're working across all three external platforms for us to buy a full term. New Wawa Sheets or Quick Trip would be great. And then just a quick question on drugstores with, you know, Rite Aid and Walgreens closing stores, and I know you were very aggressive in reducing your Walgreens exposure in recent years, but do you have thoughts on where this market share gets reallocated? Great question.

Speaker Change #165: <unk> C store opportunity so for us to buy a full term new wawa sheetz or kwik trip.

Speaker Change #165: Would be very rare.

Speaker Change #167: And then just a quick question on drug stores with Rite aid and Walgreens closing stores and I know you were very aggressive in reducing your Walgreens exposure in recent years, but do you have thoughts on where this market share gets reallocated.

Joey: Where it gets reallocated, the front end of the stores has been reallocated to C-stores, the front end of the pharmacies. Ships, drinks, right? Those of candy have been reallocated to C-Store. The Fragrance Beauty has been reallocated to the Altas, the Sephoras, plus Online of the World, while, simultaneously, that share has exited the first floor of the department stores as we see shrinkage there. Pharmacy generally, I'll tell you has, The state's somewhat fairly stable, but the problem is generic pressure on drugs, as well as third-party government reimbursement rates.

Speaker Change #168: Great question, where it gets reallocated the front end of the stores have been reallocated to C stores, the front end, but the pharmacies.

Speaker Change #169: Chip's drinks right those of candy reallocated to C stores.

Speaker Change #169: The fragrance and beauty has been reallocated to the authors the sephora plus online of the world wildfire simultaneously that share has exited the first floor of the department stores as we see shrinkage there.

Speaker Change #170: Pharmacy generally.

Joey: And we haven't seen an online penetration of pharmacy that is material. Now Costco, Walmart, all those operators also, grocery stores operate pharmacy. But the business has never driven EBITDA from the pharmacy. The business is driven from 11,000 square feet at the front end. And that front end is under pressure. As I mentioned, I think on a last call; I go to the pharmacy without picking up a script three times. Valentine's Day, my wife's birthday, and my anniversary.

Speaker Change #170: I will tell you is stay somewhat fairly stable, but the problem is the generic pressure on drugs as well as the third party government reimbursement rates for there and we haven't seen in online penetration of pharmacy that is material now Costco Walmart all of those operators also grocery stores.

Joey: And we haven't seen an online penetration of pharmacy that is material. Now Costco, Walmart, all those operators also scroll through stores, operate pharmacy, but the business has never driven EBITDA from the pharmacy. The business has driven from 11,000 square feet to the front end space. And that front end is under pressure. As I mentioned, I think, on a last call, I go to the pharmacy, acid picking up a script three times a year: Valentine's Day, my wife's birthday, and my anniversary, and I stand there and get a nine-dollar greeting card, and I can't believe it's nine dollars.

Speaker Change #171: Operator pharmacy, but.

Speaker Change #172: But the business has never driven EBITDA from the pharmacy. The business is driven from 11000 square feet at the front end space and that front end is under pressure as I mentioned I think on our last call I go to the pharmacy asset picking up a script three times a year Valentine's day, my wife's birthday and my anniversary.

Joey: And I stand there and get a $9 greeting card, and I can't believe it's $9. If you're going to run in for any convenience items, you're going to a convenience store. It's faster, they have more checkout lanes, and it's cheaper. When I need new toothpaste, I hit order again on Amazon, and it shows up cheaper the next day for free. So... the disintermediation across the aisles as you walk around the farm. It's not going to one specific competitor; it's being disintermediated by multiple. Plus Amazon, and so... There is. There's no turning back.

Speaker Change #172: And I stand, there and get a $9 greeting card and I can't believe it's $9.

Joey: Now, if you're going to run in for any convenience items, you're going to a convenience store. It's faster; they have more checkout lanes, and cheaper. When I need new toothpaste, I hit order again on Amazon. It shows up cheaper the next day for free. So, you see, you see, the disintermediation across the aisles as you walk around the pharmacy. It's not going to one specific competitor. It's being disintermediated, and, but multiple different retail sectors, plus Amazon. And so, there is, there's no turning back from this.

Speaker Change #172: If youre going to run in for any convenience items youre going to a convenience store, it's faster they have more checkout lanes and is cheaper when 90, New toothpaste ahead order again on Amazon It shows up cheaper the next day for free.

Speaker Change #172: So.

Speaker Change #172: You see you see the.

Speaker Change #173: The disintermediation across the aisles as you walk around the pharmacy is not going to one specific competitor, it's being dis intermediate it.

Speaker Change #173: And by multiple different retail sectors plus Amazon.

Speaker Change #173: And so.

Speaker Change #173: There is.

Speaker Change #173: So there is no turning back from this.

Speaker Change #173: There is no merchandizing strategy that takes the pharmacy front end and matrix successful that would not be a wholesale change.

Joey: There is no merchandising strategy that takes the pharmacy front end and makes it successful that would not be a wholesale change. Pharmacies, inclusive of Walgreens, have explored and experimented with things like the Walgreens Cafe. The challenge there is to man food and beverage or off-premises consumption. If you have, if you have soda found, the sloppy machines, if you have coffee stations, they break, they people have spills, and they're challenges to manage. And when you have three FTEs max exclusive of the pharmacy, three full-time employees, checking out, stocking, and a manager, you cannot service and maintain that type of equipment.

Joey: There is no merchandising strategy that takes the pharmacy front end and makes it successful that would not be wholesale. Pharmacies, inclusive of Walgreens, have explored and experimented with things like the Walgreens Cafe. The challenge there is to provide food and beverage for off-premises consumption. If you have soda fountains and the slurpee... Do you have coffee? They break, people have spills, and they have their challenges to

Speaker Change #173: Pharmacies inclusive of Walgreens have X have explored and experimented with things like the Walgreens Cafe.

Speaker Change #173: The challenge there is demand food and beverage for off premises consumption. If you have if you have soda fountain Slurping machines, you have coffee stations they break.

Speaker Change #173: People have spills.

Speaker Change #173: And there are challenges to manage and when you have three ftes Max exclusive of the pharmacy three full time employees checking out stocking and a manager you can that service and maintain that type of equipment.

Joey: And when you have three FTEs max, exclusive of the pharmacy, three full-time employees, checking out, stocking, and a manager, cannot service and maintain that type of pharmacy. So, that has. Walgreens also experimented with a Walgreens Boots Alliance with cosmetics and fragrance, thinking that they could replicate the Boots Alliance experience in Western Europe. They underestimated the American woman. Women in this country don't go to the traditional

Speaker Change #173: And so that Hasnt worked.

Joey: And so, that hasn't worked. Walgreens also experimented with Walgreens Boots of Lyons with cosmetics and fragrance, thinking that they could replicate Boots of Lyons experience in Western Europe. The underestimated the American consumer. Women in this country don't go to the traditional pharmacy for beauty, makeup, fragrance. Allta has taken that chair from the department stores. Very dissimilar from Western Europe.

Speaker Change #173: Walgreens also experimented a walgreens boots alliance with cosmetics and fragrance thinking that they could replicate boots alliance experienced in western Europe. The underestimated the American consumer women in this country don't go to the traditional pharmacy for beauty.

Joey: [inaudible] Makeup, Fray Alta has taken that chair from the department stores very, So next time you walk around a pharmacy, just look around the aisles and say, "where can I buy it?" For stuff in the middle that's seasonal, go to Five Below. Go to the dollar store. The Halloween junk, the Christmas stuff. That stuff has a better assortment. It's probably better organized, probably, and it's cheaper

Speaker Change #174: Makeup fragrance.

Speaker Change #175: Ulta has taken that share for department stores very dissimilar from Western Europe. So next time, you walk router pharmacy, just look around the eyes, and say where can I buy this stuff the stuff in the middle of that seasonal glorify below it's cheaper.

Joey: So, next time you walk around a pharmacy, just look around the aisle and see where can I buy the... The stuff in the middle that's seasonal, go to Five Below, it's cheaper. Go to the dollar store; it's cheaper. The Halloween junk, the Christmas stuff; that stuff has a better assortment, it's better organized probably, and it's cheaper at the dollar store. You walk around the perimeter, think of a sea store.

Speaker Change #176: The dollar store it's cheaper.

Speaker Change #177: Alright, the Halloween junk Christmas stuff.

Speaker Change #178: <unk> has a better assortment better organize probably and it's cheaper at the dollar store to walk around the perimeter think of a C store so.

Joey: You walk around the perimeter, think of a, So, you know, that's kind of what we do here and how we figure out what sectors and retailers we think make sense in 2024 and beyond. Really helpful. Alright, so there are no further questions at this time. I would now like to turn the call back over to Ruben for Faisal, who's in conference. All right, thank you very much. Great job, Cision. I hope everybody enjoys the rest of their summer. We look forward to seeing you soon. Thank you. Music Music Music Music Music Music Music Music

Steve: So, that's kind of what we do here and how we figure out what sectors and retailers we think make sense in 2024 and beyond. Thank you. Thank you, Linda.

Speaker Change #179: That's kind of what we do here and how we figure out what sectors and retailers, we think makes sense in 2020 for them yet.

Speaker Change #181: Really helpful. Thank you.

Linda: Thank you Linda.

Operator: All right, so there are no further questions at this time.

Speaker Change #182: Alright, there are no further questions at this time as now.

Reuben Treatman: I would like to turn this all back over to the Reuben for my phone, closing comments. All right. Thank you very much. Great job, Sision. I hope everybody enjoys the rest of the summer. We look forward to seeing you soon. Thank you.

Speaker Change #182: I would like to turn the floor back over to Suzanne for.

Suzanne: Closing comments alright. Thank you very much great job decision I hope everybody enjoys the rest of the summer we look forward to seeing as soon thank you.

Suzanne: Yes.

Suzanne: Yes.

Suzanne: Okay.

Suzanne: Okay.

Suzanne: Okay.

Suzanne: Yes.

Suzanne: Sure.

Suzanne: Okay.

Suzanne: Yes.