Q2 2024 Broadstone Net Lease Inc Earnings Call

Operator: Today's call is being recorded. I will now turn the call over to Brent Maedl, Director of Corporate Finance and Investor Relations at Broadstone. Please go ahead.

Brent Maedl: I will now turn the call over to Brent Maedl, Director of Corporate Finance and Investor Relations at Broughstone.

Corporate finance and Investor Relations at Brookstone. Please go ahead.

Brent Maedl: Thank you, everyone, for joining us today for Broadstone that leases 2nd quarter, 2024 earnings call.

Brent Maedl: Thank you everyone for joining us today for Broadstone Net Lease's second quarter 2024 earnings call. On today's call, you will hear prepared remarks from Chief Executive Officer John Morana, President and Chief Operating Officer Ryan Albano, and Chief Financial Officer Kevin Fennell. All three will be available for the Q&A portion of this call.

Speaker Change: Thank you everyone for joining us today for broad stone that Lisa second quarter 2024 earnings call on today's call you will hear prepared remarks from Chief Executive Officer, Jon Marino, President and Chief Operating Officer, Ryan O'donnell, and Chief Financial Officer, Kevin funnel.

Brent Maedl: On today's call, we will hear prepared remarks from Chief Executive Officer John Maranna, President and Chief Operating Officer Ryan Albano, and Chief Financial Officer Kevin Fennell. All three will be available for the Q&A portion of this call.

Speaker Change: All three will be available for the Q&A portion of this call as a reminder, the following discussion and answers to your questions contain forward looking statements, which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward looking statements and refer you to our SEC <unk>.

Brent Maedl: As a reminder, the following discussion and answers to your questions contain forward-looking statements, which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward-looking statements and refer you to our SEC filings, including our Form 10-K for the year ended December 31st, 2023, for a more detailed discussion of the risk factors that may cause such differences. Any forward-looking statements provided during this conference call are only made on the date of this call. With that, I'll turn the call over to John.

Brent Maedl: The reminder, the following discussion and answers to your questions, contain forward-looking statements, which are subject to risks and uncertainties that can cause actual results to differ materially due to a variety of factors. We caution you not to place undue reliance on these forward-looking statements and refer you to our SEC filings, including our Form 10-K for the year ended December 31, 2023, for a more detailed discussion of the risk factors that may cause such differences.

Speaker Change: Billings, including our Form 10-K for the year ended December 31, 2023 for a more detailed discussion of the risk factors that may cause such differences.

Brent Maedl: Any forward-looking statements provided during this conference call are only made at the date of this call.

Speaker Change: Any forward looking statements provided during this conference call are only made at the date of this call with that I'll turn the call over to John.

John Maranna: With that, I'll turn the call over to John. Thank you, Brent. Good morning, everyone. I am pleased to report another strong quarter of results. We are on the cusp of substantially completing our health care portfolio simplification strategy, having fully redeployed those proceeds into closed and committed investments, and are continuing to build a strong pipeline focused on our core building blocks of growth. Seeing incremental revenue generating capital expenditures with our existing tenants and building funding opportunities with our development partners that supplement our traditional net lease acquisition pipeline, I am exceptionally proud that we were able to successfully navigate that process at the same time we redeployed the proceeds into attractive investment opportunities.

John D. Moragne: Thank you, Brent, and good morning everyone. I am pleased to report another strong quarter of results. We are on the cusp of substantially completing our healthcare portfolio simplification strategy, having fully redeployed those proceeds into closed and committed investments, and are continuing to build a strong pipeline focused on our core building blocks of growth, seeing incremental revenue-generating capital expenditures with our existing tenants and build-to-suit funding opportunities with our development partners that supplement our traditional net lease acquisition pipeline.

John: Thank you Brent and good morning, everyone. I am pleased to report another strong quarter of results. We are on the cusp of substantially completing our health care portfolio simplification strategy, having fully redeployed those proceeds into closed and committed investments.

John: And are continuing to build a strong pipeline focused on our core building blocks of growth.

John: Seeing incremental revenue generating capital expenditures with our existing tenants and build to suit funding opportunities with our development partners that supplement our traditional net lease acquisition pipeline.

John D. Moragne: I'm exceptionally proud that we were able to successfully navigate that process at the same time we redeployed the proceeds into attractive investment opportunities. We are incredibly proud of the progress we've made on our strategic objectives for 2020.

Speaker Change: I am exceptionally proud that we were able to successfully navigate that process at the same time, we redeployed the proceeds into attractive investment opportunities.

John Maranna: We are incredibly proud of the progress we made on our strategic objectives for 2024. While we recognize that the current outlook for interest rates has provided a tailwind for the broader net lease space, we believe investors are beginning to reward our consistent and successful execution on our strategic initiatives. Our shares are now trading at or around an 18-month high, and we believe there is still plenty of room for continued multiple expansion as we fulfill our growth objectives. As we previously reported and discussed on last quarter's call, the majority of the 217.3 million of cash flowing investments we made in Q2 were close early in the quarter and sourced through direct relationships.

John D. Moragne: We are incredibly proud of the progress we've made on our strategic objectives for 2024.

John D. Moragne: While we recognize that the current outlook for interest rates has provided a tailwind for the broader net lease space, we believe investors are beginning to reward our consistent and successful execution on our strategic initiatives. Our shares are now trading at or around an 18-month high, and we believe there is still plenty of room for continued multiple expansion as we fulfill our growth objective. As we've previously reported and discussed on last quarter's call, the majority of the 217.3 million cash flowing investments we made in Q2 were closed early in the quarter and sourced through direct relationships.

Speaker Change: While we recognize that the current outlook for interest rates has provided a tailwind for the broader net lease space. We believe investors are beginning to reward our consistent and successful execution on our strategic initiatives.

John D. Moragne: Our shares are now trading at or around an 18 month high and we believe there is still plenty of room for continued multiple expansion as we fulfill our growth objectives.

Speaker Change: As we've previously reported and discussed on last quarter's call. The majority of the $217 3 million of cash flowing investments. We made in Q2, we're close early in the quarter and sourced through direct relationships.

John Maranna: Throughout the quarter, we continued to creatively source investment opportunities that fit within our buy box, notably including build-to-suit and forward commitments through existing relationships. We believe these opportunities are an important part of our core building blocks and a key differentiator in our mission to drive long-term sustainable growth.

John D. Moragne: Throughout the quarter, we continue to creatively source investment opportunities that fit within our buy box, notably including build-to-suit and forward commitments through existing relationships. We believe these opportunities are an important part of our core building blocks and a key differentiator in our mission to drive long-term sustainable growth. As we move into the back half of the year, we are maintaining our AFFO guidance range of $1.41 to $1.43 per share and slightly adjusting our investment disposition and cash G&A range.

Speaker Change: Throughout the quarter, we continued to creatively source investment opportunities that fit within our buy box, notably including build to suit and forward commitments through existing relationships.

We believe these opportunities are important part of our core building blocks and a key differentiator in our mission to drive long term sustainable growth.

John Maranna: As we move into the back half of the year, we are maintaining our AFFO guidance range of $1.41 to $1.43 per share and slightly adjusting our investment, disposition, and cash G&A ranges. Starting this year with a view that a neutral AFFO per share result might be our best case scenario as a result of our decision to strategically exit clinical health care, I am pleased that our execution this year will result in modest growth for 2024 and, more importantly, will set us up well for 2025 and 2026.

John D. Moragne: As we move into the back half of the year, we are maintaining our <unk> guidance range of $1 41 to $1 43 per share and slightly adjusting our investment disposition and cash G&A ranges.

John D. Moragne: Starting this year with a view that a neutral AFFO per share result might be our best case scenario as a result of our decision to strategically exit clinical healthcare, I am pleased that our execution this year will result in modest growth for 2024 and, more importantly, will set us up well for 2025 and 2026. Before I walk you through details on our growing investment pipeline, which now encompasses nearly 408.6 million in new investments under control and commitments to fund development, I would like to further highlight the significant progress we've achieved this year on our clinical healthcare simplification strategy.

Speaker Change: Starting this year with a view that a neutral <unk> per share result might be our best case scenario as a result of our decision to strategically exit clinical healthcare I'm pleased that our execution. This year and will result in modest growth for 2024, and more importantly will set us up well for 2025 and 2026.

John Maranna: Before I walk you through details on our growing investment pipeline, which now I would like to further highlight the significant progress we've achieved this year on our clinical health care simplification strategy. Energy. Our team executed decisively early in the first quarter and through the first half of the year, completing the sale of 38 assets for 262 million. This momentum continued early in the third quarter, with a third party buyer completing due diligence on 15 additional assets, posing on five of them in early July, with remaining 10 assets scheduled to close in October. These successful transactions will bring our total clinical healthcare dispositions to 342.5 million year to date, had a weighted average cash cap rate of 7.9%.

Speaker Change: Before I walk you through details on our growing investment pipeline, which now encompasses nearly $408 $6 million of new investments under control and commitments to fund developments I would like to further highlight the significant progress we've achieved this year on our clinical healthcare simplification strategy.

John D. Moragne: Our team executed decisively early in the first quarter and through the first half of the year, completing the sale of 38 assets for $262 million. This momentum continued early in the third quarter, with a third-party buyer completing due diligence on 15 additional assets, closing on five of them in early July, with the remaining 10 assets scheduled to close in October. These successful transactions will bring our total clinical health care dispositions to $342.5 million year-to-date at a weighted average cash cap rate of 7.9%. Combined with our redeployment efforts and incremental investment activity, we anticipate this will reduce our health care exposure to approximately 11 percent of our total ABR at the end of 2024.

Speaker Change: Our team executed decisively early in the first quarter and through the first half of the year completing the sale of 38 assets for $262 million. This momentum continued early in the third quarter with a third party buyer completing due diligence on 15 additional assets closing on five of them in early July with the remaining 10 assets scheduled to close in October.

Speaker Change: These successful transactions will bring our total clinical healthcare dispositions to $342 $5 million year to date at a weighted average cash cap rate of seven 9%.

John Maranna: Combined with our redeployment efforts and incremental investment activity, we anticipate this will reduce our healthcare exposure to approximately 11% of our total ABR at the end of 2024. While we continue to engage in negotiations and marketing for our remaining clinically oriented healthcare assets, we anticipate these sales will follow a more typical asset management approach and take time to achieve optimal disposition outcomes.

Speaker Change: Combined with our redeployment efforts and incremental investment activity. We anticipate this will reduce our healthcare exposure to approximately 11% of our total ABR at the end of 2024.

John D. Moragne: While we continue to engage in negotiations and marketing for our remaining clinically oriented healthcare assets, we anticipate these sales will follow a more typical asset management approach and take time to achieve optimal disposition outcomes, with a substantial majority of our clinical healthcare simplification strategy successfully behind us. I'm excited to look ahead and walk you through our evolving investment pipeline that we announced last night, including a number of highly compelling build-to-suit transactions we have been pursuing as part of our overall mission to drive long-term sustainable growth.

Speaker Change: While we continue to engage in negotiations and marketing for our remaining clinically oriented health care assets. We anticipate these sales will follow a more typical asset management approach and take time to achieve optimal disposition outcomes.

John Maranna: With the substantial majority of our clinical healthcare simplification strategy, we'll be successfully behind us.

Speaker Change: With a substantial majority of our clinical healthcare simplification strategy successfully behind us I.

John Maranna: I'm excited to look ahead and walk you through our evolving investment pipeline that we announced last night, including a number of highly compelling build-to-suit transactions. We have been pursuing, as part of our overall mission to drive long-term sustainable growth of the 408.6 million in investments under control and commitments to fund development. Approximately 307 million are brand new specialized industrial and QSR build-to-suit assets, including food distribution, cold storage, and manufacturing properties delivering in 2025 and 2026. These investments represent unique opportunities for us to capture higher going and cash cap rates and straight line yields compared to much of the regular way product that we are seeing in the traditional acquisition market.

John D. Moragne: Of the $408.6 million in investments under control and commitments to fund developments, approximately $307 million are brand new specialized industrial and QSR build-to-suit assets, including food distribution, cold storage, and manufacturing properties due in 2025 and 2026. These investments represent unique opportunities for us to capture higher going in cash cap rates and straight line yields compared to much of the regular way product that we are seeing in the traditional acquisition market. We are achieving these attractive yields not because we are running up the risk spectrum but because we are creatively sourcing and structuring investment opportunities with our developer partners.

John D. Moragne: I'm excited to look ahead and walk you through our evolving investment pipeline that we announced last night, including a number of highly compelling build to suit transactions. We have been pursuing as part of our overall mission to drive long term sustainable growth.

John D. Moragne: Of the $408 6 million in investments under control and commitments to fund developments, approximately $307 million or brand, new specialized industrial and <unk>, our build to suit assets, including food distribution cold storage and manufacturing properties delivering in 2025 and 2026.

John D. Moragne: These investments represent unique opportunities for us to capture higher going in cash cap rates and straight line yields compared to much of the regular way product that we're seeing in the traditional acquisition market.

John Maranna: We are achieving these attractive yields not because we are running up the risk spectrum, but because we are creatively sourcing and structuring investment opportunities with our developer partners. Once construction is completed and these assets are stabilized, we believe they would trade up to 150 to 200 basis points tighter than where we executed. We are not only generating attractive yields on high quality build to suits, we are also creating long term value and NAV accretion.

Speaker Change: We are achieving these attractive yields not because we are running up the risk spectrum, but because we are creatively sourcing and structuring investment opportunities with our developer partners.

John D. Moragne: Once construction is completed and these assets are stabilized, we believe they would trade up to 150 to 200 basis points tighter than where we execute them. We are not only generating attractive yields on high-quality build-to-suits, but we are also creating long-term value and NAV accretion. Ryan will go into more detail on some of the specifics around our current pipeline and opportunity set.

John D. Moragne: Once construction is completed and these assets are stabilized we believe they would trade up to a 150 to 200 basis points tighter than where we executed.

Ryan: We're not only generating attractive yields on high quality build to suits. We're also creating long term value and NAV accretion Brian will go into more detail on some of the specifics around our current pipeline and opportunity set.

John Maranna: Ryan will go into more detail on some of the specifics around a current pipeline and opportunity set. We view these development opportunities as an increasingly important part of our core building blocks to sustainable long-term growth, which include best-in-class fixed rent escalations, revenue-generating cap acts investments in our existing tenants and assets, development funding opportunities, and traditional external acquisitions. While the commercial real estate and lending environment has certainly played a role in generating these opportunities, we believe there is a long-term role for Broadstone Net Lease as the funding partner of choice for our development partners, even when interest rates eventually decline.

John D. Moragne: We view these development opportunities as an increasingly important part of our core building blocks to sustainable long-term growth, which include best-in-class fixed rent escalations, revenue-generating CapEx investments in our existing tenants and assets, development funding opportunities, and traditional external acquisition. While the commercial real estate and lending environment has certainly played a role in generating these opportunities, we believe there is a long-term role for Broadstone Net Lease as the funding partner of choice for our development partners, even when interest rates eventually decline.

Brian: We view these development opportunities as an increasingly important part of our core building blocks to sustainable long term growth, which include best in class fixed rent escalations revenue generating capex investments in our existing tenants and asset development funding opportunities in traditional external acquisitions.

John D. Moragne: While the commercial real estate and lending environment has certainly played a role in generating these opportunities. We believe there is a long term role for broad stone that lease is the funding partner of choice for our development partners.

John D. Moragne: Even when interest rates eventually decline.

John Maranna: The regular way transaction market is beginning to show increased activity as we get into the back half of the year, so absolute levels remain compressed, and much of what we are seeing continues to price at levels we believe misrepresent the underlying risks. We remain highly selective and are excited about the 69.3 million of investments we have under control and expect to close in the third quarter. The combination of our building blocks will naturally vary based on market conditions, as is the case today with more muted volumes for traditional sale, these back and assumption deals. Our ability to rely on more than one investment channel and allocate capital to the areas where we see the best risk-adjusted return opportunities provides a compelling path to near and medium-term value creation and earnings.

John D. Moragne: The regular way transaction market is beginning to show increased activity as we get into the back half of the year. However, absolute levels remain compressed, and much of what we are seeing continues to price at levels we believe misrepresent the underlying risk. We remain highly selective and are excited about the 69.3 million in investments we have under control and expect to close in the third quarter. The combination of our building blocks will naturally vary based on market conditions, as is the case today, with more muted volumes for traditional sale, leaseback, and assumption deals.

Speaker Change: The regular way transaction market is beginning to show increased activity as we get into the back half of the year. So absolute levels remain compressed and much of what we're seeing continues to price at levels, We believe misrepresent the underlying risks.

John D. Moragne: We remain highly selective and are excited about the $69 $3 million of investments, we have under control and expect to close in the third quarter the.

John D. Moragne: The combination of our building blocks will naturally vary based on market conditions as is the case today with more muted volumes for traditional sale leaseback and assumption deals.

John D. Moragne: Our ability to rely on more than one investment channel and allocate capital to the areas where we see the best risk-adjusted return opportunities provides a compelling path to near and medium-term value creation and earnings growth. Turning to our portfolio, through dispositions and ongoing investment opportunities, our portfolio composition is becoming gradually more weighted towards our industrial and defensive retail and restaurant sectors. These assets continued to perform well during the quarter, as evidenced by 99.8% rent collections, excluding Green Valley, and 99.3% occupancy as of June 30, 2024.

Brian: Our ability to rely on more than one investment channel and allocate capital to the areas, where we see the best risk adjusted return opportunities provides a compelling path to near and medium term value creation and earnings growth.

John Maranna: Growth. Returning to our portfolio, through dispositions and ongoing investment opportunities, our portfolio composition is becoming gradually more weighted towards our industrial and defensive retail and restaurant sectors. These assets continue to perform well during the quarter, as evidenced by 99.8% rent collections excluding Green Valley and 99.3% occupancy as of June 30, 2024. While our overall operating results remain strong, we are seeing incremental pockets of credit at risk as the broader impact from the duration of higher interest rates appears to be having an effect on consumer-centric industries and entities with less flexible capital structures. We remain vigilant in our tenant monitoring efforts and maintain great confidence in our portfolio due to its diversified construction, which limits the impact of any potential individual credit event, and our proven ability to manage through any such situation that may arise.

John D. Moragne: Turning to our portfolio through dispositions and ongoing investment opportunities our portfolio composition is becoming gradually more weighted towards our industrial and defense of retail and restaurant sectors.

John D. Moragne: These assets continue to perform well during the quarter as evidenced by 99, 8% rent collections, excluding Green Valley and 99, 3% occupancy as of June 32024.

John D. Moragne: While our overall operating results remain strong, we are seeing incremental pockets of credit risk as the broader impact from the duration of higher interest rates appears to be having an effect on consumer-centric industries and entities with less flexible capital structures. We remain vigilant in our tenant monitoring efforts and maintain great confidence in our portfolio due to its diversified construction, which limits the impact of any potential individual credit event and our proven ability to manage through any such situation that may arise. With that, I'll turn the call over to Ryan, who will provide additional details on our transaction efforts, our building blocks for growth, and portfolio updates.

John D. Moragne: While our overall operating results remained strong we are seeing incremental pockets of credit risk is the broader impact from the duration of higher interest rates appears to be having an effect on consumer centric industries and entities with less flexible capital structures.

John D. Moragne: We remain vigilant in our tenant monitoring efforts and maintained great confidence in our portfolio due to its diversified construction, which limits the impact of any potential individual credit event and our proven ability to manage through any such situation that may arise.

Ryan Albano: With that, I'll turn the call over to Ryan, who will provide additional details on our transaction efforts, our building blocks for growth, and portfolio updates. Thanks, John, and thank you all for joining us today. Before turning to routine portfolio updates, we wanted to expand on our growing pipeline of built-to-suit opportunities. As John mentioned, we have currently committed to fund seven opportunities for a total estimated cost to build of approximately $307 million. While still subject to final structuring and relevant permitting approvals, we anticipate funding of these developments will have varying construction start dates through the end of 2024 and anticipate rent commencement dates that will be phased in over the period of Q1 2025 and Q2 of 2026.

Ryan: With that I will turn the call over to Ryan who will provide additional details on our transaction efforts are building blocks for growth and portfolio updates.

Ryan M. Albano: Thanks, John, and thank you all for joining us today. Before turning to routine portfolio updates, we wanted to expand on our growing pipeline of built-to-suit opportunities. As John mentioned, we have currently committed to fund seven opportunities for a total estimated cost to build of approximately $307 million. While still subject to final structuring and relevant permitting approvals, we anticipate funding these developments will have varying construction start dates through the end of 2024 and anticipate rent commencement dates that will be phased in over the period of Q1 2025 and Q2 of 2026.

Ryan: Thanks, John and thank you all for joining us today before turning to routine portfolio updates we wanted to expand on our growing pipeline of build to suit opportunities.

Ryan M. Albano: Outside of these seven opportunities, there are more than $400 million of additional build-to-suit investments that we are actively evaluating as we balance this robust pipeline alongside other traditional acquisition activities. These opportunities typically represent initial cash yields in the mid-7s to low-8s, and taken together with long lease terms and rent escalations between 2% and 4%, translate into straight line yields north of 9%. We believe these built-to-suit investment opportunities are highly compelling with newly constructed buildings, typically well-located assets, and strong tenant credit with yields that are superior to most of the regular way transactions that we have evaluated since the interest rate hiking cycle began. Now, turning our attention back to routine updates.

Ryan M. Albano: As John mentioned, we have currently committed to fund seven opportunities for a total estimated cost to build of approximately $307 million.

Ryan M. Albano: While still subject to final structuring and relevant permitting approvals. We anticipate funding of these developments will have varying construction start dates through the end of 2024 anticipate rent commencement dates that will be phased in over the period of Q1 2025 in Q2 of 2020.

Ryan M. Albano: Thanks.

Ryan Albano: Outside of these seven opportunities, there are more than $400 million of additional built-to-suit investments that we are actively evaluating as we balance this robust pipeline alongside other traditional acquisition activity. These opportunities typically represent initial cash yields in the mid-7s to low-8s, and taken together with long lease terms and rent escalations between 2% and 4%, translate into straight line yields north of 9%. We believe these built-to-suit investment opportunities are highly compelling, with newly constructed buildings typically well-located assets and strong tenant credit, with yields that are superior to most of the regular way transactions that we have evaluated since the interest rate hiking cycle began.

Ryan M. Albano: Outside of these seven opportunities there are more than $400 million of additional build to suit investments that we are actively evaluating as we balance this robust pipeline alongside other traditional acquisition activity.

Ryan M. Albano: These opportunities typically represent initial cash yields in the mid sevens to low eights.

Ryan M. Albano: And taken together with long lease terms and rent escalations between 2% and 4% translate into St line yields north of 9%.

Ryan M. Albano: We believe these build to suit investment opportunities are highly compelling with newly constructed buildings typically well located assets and strong tenant credit with yields that are superior to most of the regular way transactions that we have evaluated since the interest rate hiking cycle began.

Ryan Albano: Now turning our attention back to routine updates. As John mentioned during the first half of the year, we were able to execute on key pieces of our healthcare portfolio simplification strategy through the completion of a portfolio sale during the first quarter, which comprises 37 assets for $251.7 million at a 7.9% cap rate. Further, shortly after the quarter, we sold the first tranche of the two-phase 15-properties healthcare portfolio for just inside an 8% cap rate, and the next tranche is scheduled to close in early October. As we step through this disposition effort and begin focusing on the remaining properties identified, we anticipate various transaction timelines that comfortably extend into 2025, given the need to address some combination of shorter lease duration, space utilization rates, and elevated credit rates.

Ryan M. Albano: As John mentioned, during the first half of the year, we were able to execute on key pieces of our healthcare portfolio simplification strategy through the completion of a portfolio sale during the first quarter, comprised of 37 assets for $251.7 million, at a 7.9% cap rate. Further, shortly after the quarter, we sold the first tranche of a two-phase, 15-property healthcare portfolio for just inside an 8% cap rate, and the next tranche is scheduled to close in early October. As we step through this disposition effort and begin focusing on the remaining properties identified, we anticipate various transaction timelines that comfortably extend into 2025, given the need to address some combination of shorter lease duration, space utilization rates, and elevated credit risk.

Ryan M. Albano: Now turning our attention back to routine updates as John mentioned during the first half of the year, we were able to execute on key pieces of our health care portfolio simplification strategy through the completion of the portfolio sale. During the first quarter comprised of 37 assets for 251.

Ryan M. Albano: $7 million.

Ryan M. Albano: At a seven 9% cap rate.

Ryan M. Albano: Further shortly after the quarter, we sold the first tranche of the two phase 15 properties health care portfolio for just inside an 8% cap rate.

Ryan M. Albano: And the next tranche is scheduled to close in early October.

Ryan M. Albano: As we step through this disposition effort.

Ryan M. Albano: And begin focusing on the remaining properties identified we anticipate various transaction timelines that comfortably extend into 2025, given the need to address some combination of shorter lease duration space utilization rates and elevated credit risk.

Ryan Albano: As we have communicated in the past, we are intently focused on the tactical execution of our healthcare property sales and maximizing value for our shareholders. In addition to executing the portfolio sale during the second quarter, we sold three other properties on an individual basis, including one healthcare property, one industrial property, and one small vacant office property for $24.4 million, representing a 7.3% cap rate on intended properties. Alongside our disposition efforts, we executed on a strong set of investment opportunities, closing $247.8 million of investments. This investment activity included $165.1 million of acquisitions, with a corresponding cap rate of 7.3%; an additional $30.5 million of funding associated with our UNFI, billed to suit investment, and $52.2 million of funds.

Ryan M. Albano: As we have communicated in the past, we are intently focused on the tactical execution of our healthcare property sales and maximizing value for our shareholders. In addition to executing the portfolio sale during the second quarter, we sold three other properties on an individual basis, including one healthcare property, one industrial property, and one small vacant office property for $24.4 million, representing a 7.3% cap rate on a tenanted property. Alongside our disposition efforts, we executed on a strong set of investment opportunities, closing $247.8 million in investments.

Ryan M. Albano: As we have communicated in the past we are intently focused on the tactical execution of our healthcare property sales and maximizing value for our shareholders.

Ryan M. Albano: In addition to executing the portfolio sale during the second quarter, we sold three other properties on an individual basis, including one healthcare property, one industrial property and one small vacant office property for $24 $4 million.

Ryan M. Albano: Representing a seven 3% cap rate on a tentative properties.

Ryan M. Albano: Alongside our disposition efforts, we executed on a strong set of investment opportunities closing $247 $8 million of investments.

Ryan M. Albano: This investment activity included $165.1 million of acquisitions with a corresponding cap rate of 7.3 percent, an additional $30.5 million of funding associated with our UNFI Build to Suit investment, and $52.2 million related to the previously discussed transitional capital. As part of our investment activity during the quarter, we are excited to add Jelly Belly Candy Company, a newly acquired subsidiary of Ferrara Candy Company, to our top 20 tenant roster.

Ryan M. Albano: This investment activity included $165 $1 million of acquisitions with a corresponding cap rate of seven 3%, an additional $35 million of funding associated with our UNFI build to suit investment and $52 $2 million related to the previously discussed <unk>.

Ryan M. Albano: <unk> capital as part of our investment activity during the quarter. We are excited to add jelly belly Candy company in newly acquired subsidiary of Ferrara Candy Company, two our top 20 tenant roster.

Ryan Albano: We are excited to add Jelly Belly Candy Company, a newly acquired subsidiary of Ferrara Candy Company, to our top 20 tenant roster. As a quick update on our UNFI billed-to-suit investment, we have funded approximately $161.3 million through June 30, and the project remains on track for delivery and rent commencement no later than October of this year. As we look towards the earlier stages of our investment pipeline, we continue to source opportunities across all of our core building blocks, and generally favor investments where we can provide a holistic capital solution, where price is not the sole variable of importance to the seller, as evidenced by our transitional capital investment and our growing pipeline of billed to suit investments.

Ryan M. Albano: As a quick update on our UNFI bill to suit investment, we have funded approximately $161.3 million through June 30th, and the project remains on track for delivery and rent commencement no later than October of this year. As we look towards the earlier stages of our investment pipeline, we continue to source opportunities across all of our core building blocks and generally favor investments where we can provide a holistic capital solution where price is not the sole variable of importance to the seller, as evidenced by our transitional capital investments and our growing pipeline of built-to-suit investments. Now, I'll briefly shift our focus towards the strength of our in-place portfolio. As we progress through the second quarter, trends remain largely unchanged.

Ryan M. Albano: As a quick update on our UNFI build to suit investment we have funded approximately $161 3 million through June 30, and the project remains on track for delivery and rent commencement no later than October of this year.

Ryan M. Albano: As we look towards the earlier stages of our investment pipeline, we continue to source opportunities across all of our core building blocks and generally favor investments, where we can provide a holistic capital solution, where price is not the sole variable of importance to the seller as evidenced by our transitional capital investment and.

Ryan M. Albano: Our growing pipeline of build to suit investments.

Ryan Albano: Now, I'll briefly shift our focus towards the strength of our in-place portfolio. As we progress through the second quarter, trends remain largely unchanged. Our high degree of rent collections for the quarter continue to provide confidence in the overall strength of our portfolio. While we remain confident that our portfolio will continue to deliver strong performance and generate durable and predictable cash flows, we remain cautious of the macroeconomic backdrop, which includes continued caution on industries that are sensitive to discretionary consumer spending. Our watch list has remained fairly consistent so far this year, and consumer-centric tenants, as well as some of our remaining clinically oriented healthcare properties, remain in focus.

Ryan M. Albano: Now I'll briefly shift our focus towards the strength of our in place portfolio.

Ryan M. Albano: As we progress through the second quarter trends remained largely unchanged.

Ryan M. Albano: Our high degree of rent collections for the quarter continue to provide confidence in the overall strength of our portfolio. While we remain confident that our portfolio will continue to deliver strong performance and generate durable and predictable cash flows, we remain cautious of the macroeconomic backdrop, which includes continued caution in industries that are sensitive to discretionary consumer spending. Our watch list has remained fairly consistent so far this year, and consumer-centric tenants, as well as some of our remaining clinically-oriented healthcare properties, remain in focus. As we've highlighted in previous quarters, Red Lobster, which represents 1.6% of AVR, remains on our watch list.

Ryan M. Albano: Our high degree of rent collections for the quarter continue to provide confidence.

Ryan M. Albano: The overall strength of our portfolio.

Ryan M. Albano: While we remain confident that our portfolio will continue to deliver strong performance and generate durable and predictable cash flows we remain cautious of the macroeconomic backdrop, which includes continued caution on industries that are sensitive to discretionary consumer spending.

Ryan M. Albano: Our watch list has remained fairly consistent so far this year and.

Ryan M. Albano: And consumer centric tenants as well as some of our remaining clinically oriented health care properties remain in focus.

Ryan Albano: As we've highlighted in previous quarters, Red Lobster, which represents 1.6% of the ABR, remains on our watch list. As reported in recent headlines, the company appears to be heading towards a resolution of its Chapter 11 proceedings in the second half of the year. Our 18 masterlies properties remain open, and we continue to work towards a resolution alongside the proceedings and will provide updates as available. With recurring negative headlines related to the home furnishing space, we continue to monitor the sector, specifically including our tenant at home, which represents approximately 1% of ABR. We own a distribution center in Plano, Texas, and a strong retail site in Raleigh, North Carolina, both of which we expect would be assumed through any potential reorganization event.

Ryan M. Albano: As we've highlighted in previous quarters Red lobster.

Ryan M. Albano: Which represents one 6% of ABR remains on our watch list.

Ryan M. Albano: As reported in recent headlines, the company appears to be heading towards a resolution of its Chapter 11 proceedings in the second half of the year. Our 18 master lease properties remain open, and we continue to work towards a resolution alongside the proceedings and will provide updates as available, with recurring negative headlines related to the home furnishings space. We continue to monitor the sector, specifically including our tenant at home, which represents approximately 1% of ABR.

Speaker Change: As reported in recent headlines the company appears to be heading towards a resolution of its chapter 11 proceedings in the second half of the year.

Ryan M. Albano: Our 18 Master lease properties remain open and we continue to work towards a resolution alongside the proceedings and will provide updates as available.

Ryan M. Albano: With recurring negative headlines related to the home furnishing space.

Ryan M. Albano: We continue to monitor the sector, specifically, including our tenant at home, which represents approximately 1% of ABR.

Ryan M. Albano: We own a distribution center in Plano, Texas, and a strong retail site in Raleigh, North Carolina, both of which we expect would be assumed through any potential reorganization event. Further, both sites are well located in strong markets, and we believe they would garner significant interest from alternative users if we were ever to get them back. Lastly, we only had three vacant properties as of June 30, including two for which we were actively negotiating leases with new tenants.

Ryan M. Albano: We own a distribution center in Plano, Texas, and a strong retail site in Raleigh, North Carolina, both of which we expect would be assumed through any potential reorganization event.

Ryan Albano: Further, both sites are well located in strong markets, and we believe they would garner significant interest from alternative users if we were ever to get them back. Lastly, we only had three vacant properties as of June 30, including two for which we were actively negotiating leases with new tenants. We anticipate these leases to commence and begin paying rent late this year or early next year, resulting in minimal downtime at the properties.

Ryan M. Albano: Further both sites are well located in strong markets and we believe they would garner significant interest from alternative users.

Ryan M. Albano: If we were ever to get them back.

Ryan M. Albano: Lastly, we only had three vacant properties as of June 30, including two for which we were actively negotiating leases with new tenants. We anticipate these leases to commence and begin paying rent late this year or early next year, resulting in minimal downtime at the properties.

Ryan M. Albano: We anticipate these leases to commence and begin paying rent late this year or early next year, resulting in minimal downtime at the property. We continue to demonstrate our differentiated approach to capital allocation, focusing on the pursuit and execution of investments that enhance the value of our highly diversified portfolio while simultaneously employing an active portfolio management strategy to drive strong operating performance. With that, I'll turn the call over to Kevin to provide an update on our financial results for the quarter. Thank you, Ryan.

Ryan Albano: In summary, while the broader market environment for regular way net lease acquisitions that align with our targeted investment criteria remains challenging. We continue to demonstrate our differentiated approach to capital allocation, focusing on the pursuit and execution of investments that enhance the value of our highly diversified portfolio while simultaneously employing an active portfolio management strategy to drive strong operating performance.

Kevin: In summary, while the broader market environment for regular way net lease acquisitions that align with our targeted investment criteria remains challenging.

Ryan M. Albano: We continue to demonstrate our differentiated approach to capital allocation focusing on the pursuit and execution of investments that enhance the value of our highly diversified portfolio.

Kevin: Simultaneously employing an active portfolio management strategy.

Kevin: To drive strong operating performance.

Kevin Fennell: With that, I'll turn the call over to Kevin for him to provide an update on our financial results for the quarter. Thank you, Ryan. During the quarter, we generated AFFO of $70 million, or 36 cents per share, in increase of 2.9% in per share results year over year. Result for largely driven by lower interest expense and partially offset by lower lease revenues, both as a result of our health care simplification strategy. As John and Ryan mentioned, our portfolio continues to show resiliency, realizing 33 basis points of bad debt year-to-date, excluding Green Valley. CAST-GNA continues to be well controlled, incurring $7.8 million during the quarter, or a 1.4% decrease year over year.

Ryan M. Albano: With that I'll turn the call over to Kevin for him to provide an update on our financial results for the quarter.

Kevin M. Fennell: Thank you, Ryan. During the quarter, we generated AFFO of $70 million or $0.36 per share, an increase of 2.9% in per share results year over year, largely driven by lower interest expense and partially offset by lower lease revenues, both as a result of our health care simplification strategy. As John and Ryan mentioned, our portfolio continues to show resiliency, realizing 33 basis points of bad debt year-to-date, excluding Green Valley. Cash G&A continues to be well-controlled, incurring $7.8 million during the quarter, or a 1.4% decrease year-over-year. As a result, we are lowering our GNA guidance from $32 million to $34 million, to $31.5 million to $33.5 million.

Kevin: Thank you Ryan during the quarter, we generated <unk> of $70 million or <unk> 36 per share an increase of two 9% in per share results year over year.

Kevin M. Fennell: Results were largely driven by lower interest expense and partially offset by lower lease revenues. Both as a result of our health care simplification strategy.

Kevin M. Fennell: As John already mentioned, our portfolio continues to show resiliency, realizing 33 basis points of bad debt year to date, excluding Green Valley.

Kevin M. Fennell: Cash G&A continues to be well controlled incurring seven $8 million during the quarter or a one 4% decrease year over year.

Kevin Fennell: As a result, we are lowering our GNA guidance from $32 million to $34 million to $31.5 million to $33.5 million. Once again, we ended the quarter in a strong and flexible financial position with leverage of 5.1 times net debt, up slightly from 4.8 times at the end of the first quarter. Our net debt on a pro-forma basis for our UNFI bill to suit was 4.9 times, which combined with approximately $920 million of our vulnerability, gives us ample capacity as we evaluate incremental investment opportunities. To reduce rate uncertainty through 2025 and mitigate some of our near-term rolling swap maturities, we executed $460 million in forward-starting software swaps during the quarter.

Kevin M. Fennell: As a result, we are lowering our G&A guidance from $32 million to $34 million to $31 5 million to $33 5 million.

Kevin M. Fennell: Once again, we ended the quarter in a strong and flexible financial position with leverage of 5.1 times net debt, up slightly from 4.8 times at the end of the first quarter. Our net debt on a pro forma basis for our UNFI bill to suit was 4.9 times, which combined with approximately $920 million of revolver availability gives us ample capacity as we evaluate incremental investment opportunities. To reduce rate uncertainty through 2025 and mitigate some of our near-term rolling swap maturities, we executed $460 million in forward-starting SOFR swaps during the quarter.

Kevin M. Fennell: Once again, we ended the quarter and a strong and flexible financial position with leverage of five one times net debt up slightly from four eight times at the end of the first quarter.

Kevin M. Fennell: Our net debt on a pro forma basis for UNFI build to suit was four nine times, which combined with approximately $920 million of revolver availability gives us ample capacity as we evaluate incremental investment opportunities.

Kevin M. Fennell: To reduce rate uncertainty through 2025, and mitigate some of our near term rolling swap maturities, we executed $460 million in forward starting sulfur swaps during the quarter.

Kevin Fennell: These new swaps are scheduled and are supplemental and begin in March of next year with maturities spread across 2030, blocking an awaited average software rate of 3.7%.

Kevin M. Fennell: These new swaps are scheduled and are supplemental and begin in March of next year with maturity spread across 2030, locking in a weighted average SOFR rate of 3.7%. At our quarterly meeting, our Board of Directors maintained our $0.29 dividend for common shares and OP units, payable to holders of record as of September 30, 2024, on or before October 15, 2024. Given our successful redeployment efforts, our dividend remains well covered and still represents an attractive relative yield in this market environment.

Kevin M. Fennell: These new swaps are scheduled in our supplemental and begin in March of next year with maturity spread across 2030 locking.

Speaker Change: Locking in a weighted average sulfur rate of three 7%.

Kevin Fennell: At our quarterly meeting, our board of directors maintained our $0.29 dividend for common share and OP unit, payable to holders of record as of September 30th, 2024, on or before October 15th, 2024. Given our successful redeployment efforts, our dividend remains well covered and still represents an attractive relative yield in this market environment. Lastly, we are reaffirming our AFO guidance range of $1.41 to $1.43 per share. In addition to the cash GNA reduction I previously mentioned, we are raising the low end of investing guidance from $350 million to $400 million and tightening our disposition's range to $350 million to $450 million.

Kevin M. Fennell: At our quarterly meeting our board of directors maintained our 29% dividend per common share in op unit payable to holders of record as of September 32024 on or before October 15th 2024.

Kevin M. Fennell: Given our successful redeployment efforts, our dividend remains well covered and still represents an attractive relative yield in this market environment.

Kevin M. Fennell: Lastly, we are reaffirming our AFFO guidance range of $1.41 to $1.43 per share. In addition to the cash GNA reduction I previously mentioned, we are raising the low end of investment guidance from $350 million to $400 million and tightening our dispositions range to $350 million to $450 million. Please refer to last night's earnings release for additional details. And with that, we will now open the call for questions.

Kevin M. Fennell: Lastly, we are reaffirming our <unk> guidance range of $1 41.

Kevin M. Fennell: To a $1 43 per share.

Kevin M. Fennell: In addition to the cash G&A reduction I previously mentioned, we are raising the low end of investment guidance from $350 million to $400 million.

Kevin M. Fennell: And tightening our dispositions range to $350 million to $450 million.

Kevin Fennell: Please reference last night's earnings release for additional details, and with that, we will now open the call for questions. Thank you.

Kevin M. Fennell: Please reference last night's earnings release for additional details and with that we will now open the call for questions.

Kevin M. Fennell: Yeah.

Speaker Change: Thank you.

Operator: If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2.

Speaker Change: If you would like to ask a question. Please press star followed by one on your telephone keypad now.

Eric Borden: If you want to join us from Eric Borden from BMO Capital Markets. The line is not open. Please go ahead. Hey, good morning out there. John, you've certainly made some solid progress sourcing a number of investments; you know through multiple investment verticals. You know, just curious, you know, not asking for guidance here, but how does the next 12 months play out for you in terms of, you know, the mix of development opportunities. You know, peer play acquisitions and, you know, any other things that may be developing in the pipeline. Yeah, thanks, Eric. So it's a balance here with the 307 million and the seven development deals that we have in the active pipeline plus another 400 million or so in that active prospect bucket.

Speaker Change: If you change your mind, Please press star followed by tier.

Operator: When preparing to ask your question, please ensure your device is unmuted locally. The first question is from Eric Borden from BMO Capital Markets. The line is now open. Please go ahead.

Speaker Change: But I want to ask a question. Please ensure your devices and you take locally.

Operator: The first question is from Eric Bolton from BMO capital markets. Your line is now open. Please go ahead.

Eric Martin Borden: Hey, good morning out there. John, you've certainly made some solid progress sourcing a number of investments, you know, through multiple investment verticals. Just curious, you know, not asking for guidance here, but how does the next 12 months play out for you in terms of, you know, the mix of development opportunities, you know, peer-to-peer acquisitions and, you know, any other things that may be developing in the pipeline?

Eric Martin Borden: Hey, good morning out there.

Operator: John you've certainly made some solid progress sourcing a number of investments through multiple investment verticals.

Eric Martin Borden: Just curious not asking for guidance here, but how does the next 12 months play out for you in terms of.

Speaker Change: The mix of development opportunities.

Speaker Change: Peer play acquisitions and any other things that may be developing in the pipeline.

John: Yeah. Thanks, Eric So it's a balance here.

Speaker Change: With the $307 million and the seven development deals that we have in the active pipeline plus another $400 million or so in that active prospect bucket. We've got a lot of really great opportunities and the development build to suit that we're very excited about.

John Maranna: We've got a lot of really great opportunities, and the development build the suit that we're very excited about as one of the core, you know, building blocks that we have for providing sustainable growth. We're very excited that we're allattering into this development process and the way that we had planned and talked about with investors, you know, starting earlier this year. So the strategy is playing out well, but there's still a balance. You know, we've got 69.3 million of regular way acquisitions in the pipeline today. We still continue to be a little disappointed in the volumes that are out there, as well as what we're seeing in terms of the quality of the product and where pricing is landing.

Speaker Change: As one of the core building blocks that we have for providing sustainable growth. We're very excited that we're a lateral into this development process and the way that we had planned and have talked about with investors starting earlier this year. So.

Speaker Change: So the strategy is playing out well, but theres still a balance we've got $69 $3 million of regular way acquisitions in the pipeline today, we still continue to be a little disappointed in the volumes that are out there as well as what we're seeing in terms of the quality of the product and where pricing is landing.

John Maranna: But if you've got a view towards having a little bit of relief on the interest rate side, depending on how the Fed meeting goes today and, of course, the next, you know, three to 12 months or so, I think you start to see a little bit more regular way acquisition volume. The great thing with where we sit today from a balance sheet standpoint is that we're at 4.9% on a pro form of basis. We have evaluated where we would land over the course of that development pipeline, and we stay comfortably below six throughout it. And we've got ample liquidity as well as ample room to be able to do regular-way acquisitions.

Speaker Change: But if you've got a view towards having a little bit of relief on the interest rate side, depending on how the fed meeting goes today and over the course of the next three to 12 months or so I think you start to see a little bit more regular way acquisition volume.

John D. Moragne: The great thing about where we sit today from a balance sheet standpoint is that we're at 4.9% on a pro forma basis. We have evaluated where we would land over the course of that development pipeline, and we stay comfortably below six throughout it. And we've got ample liquidity as well as ample room to be able to do regular acquisitions. So our goal is to be able to balance those things together and give the type of attractive growth that we know our shareholders are expecting.

Speaker Change: The great thing with where we sit today from a balance sheet standpoint at four 9% on a pro forma basis.

Speaker Change: We have evaluated where we would land over the course of the development pipeline and we stay comfortably below six throughout it and we've got ample liquidity as well as ample room to be able to do regular way acquisitions. So our goal is to build a balance of those things together and give the type of attractive growth that we know our shareholders are expecting.

Eric Borden: So our goal is to build about those things together and give the type of attractive growth that we know our shareholders are expecting. I appreciate that.

John D. Moragne: Okay.

John D. Moragne: And then on the capital allocation side, you know, just with shares up 23% over the last three months, you know, have your thoughts on capital outlay changed? You know, are you willing to issue equity here today, or will the majority of future investments be funded via the capital recycling program and, you know, potentially on a leverage-neutral basis?

Speaker Change: I appreciate that and then on the capital allocation side, just with <unk>.

John Maranna: And on the capital allocation side, you know, just with shares up 23% over the last three months, you know, has your thoughts on capital outlay change, you know, are you willing to issue equity here today or, you know, will the majority of future investments be funded via the capital recycling program and, you know, potentially on a leverage neutral basis. Yeah, so the equity is certainly more constructive today than it was three months ago. That being said, we don't need any right now. We've got ample liquidity. Our leverage is well south of where we are looking to operate on a sustained basis.

Speaker Change: <unk> was up 23% over the last three months has your thoughts on capital outlay changed are you willing to issue equity here today or will the majority of future investments funded via capital recycling program.

Speaker Change: Potentially on a leverage neutral basis.

John D. Moragne: Yeah, so equity is certainly more constructive today than it was three months ago. That being said, we don't need any right now. We've got ample liquidity, and our leverage is well south of where we are looking to operate on a sustained basis. We've got pretty great availability on our revolver today. We've also been very successful in the last 18, 24 months in capital recycling. Between the $200 million we did last year at a six-capital and the clinical healthcare assets we've been selling this year, as well as a handful of things that we've identified that we'd be able to sell if we needed to, we're very comfortable continuing to fund our growth through recycling and through dispositions if the cost of capital that we're looking at in the equity and debt markets isn't attractive to us.

Speaker Change: Yeah. So the equity is certainly more constructive today than it was three months ago that being said, we don't need any right now.

John D. Moragne: We've got ample liquidity, our leverage is well south of where we are looking to operate on a sustained basis and we've got pretty great.

John Maranna: We've got pretty great availability on our revolver today. We've also been very successful in the last 18, 24 months on capital recycling, you know, between the 200 million. And we did last year at a six cap in the clinical health care assets we've been selling this year, as well as a handful of things that we've identified that we'd be able to sell if we needed to. We're very comfortable continuing to fund our growth through recycling and through dispositions, if the cost of capital that we're looking at in the equity and debt markets is attractive to us.

John D. Moragne: Availability on our revolver today.

John D. Moragne: And we've also been very successful in the last 18 to 24 months on capital recycling between the $200 million, we did last year at a six cap.

John D. Moragne: Clinical health care assets that we've been selling this year as well as a handful of things that we've identified that we'd be able to sell if we needed to we're very comfortable continuing to fund our growth through recycling and through dispositions. If the cost of capital that we're looking at in the equity and debt markets as an attractive to us so opportunity set of course plays a role in this as well and we'll balance all those things together, but certainly more.

John Maranna: So opportunity set, of course, plays a role in this as well and will balance all those things together, but certainly more constructive, but not where we want it to be. And it's something that we don't need right now either. I appreciate that.

John D. Moragne: So the opportunity set, of course, plays a role in this as well. And we'll balance all those things together, but certainly more constructive, but not where we want it to be. And it's something that we don't need right now either.

John D. Moragne: Dave, but not where we want it to be and it's something that we don't need right now either.

Ryan: I appreciate that and last one from me just on the new development opportunities Ryan sorry, if I missed this but did you say the cash yields youre targeting are in the mid sevens up into the low eights.

Ryan M. Albano: I appreciate that. And last one for me, just on the new development opportunities. Ryan, sorry if I missed this, but did you say the cash yields you're targeting are in the mid sevens up into the low eights?

Ryan Albano: And last one for me, just on the new development opportunities, you know, Ryan, sir, if I miss this, but did you say the cash yields you're targeting are in the mid-7s up into the low eights? Yeah, so if you're looking at the development opportunities right now, we've got upfront cash yields in the mid-7s, and then when you straight line it over the term of the lease that we're looking at, you're in that mid-8, sometimes low-9s. So very interactive relative to what we're seeing in the regular way space, which is still sort of settling in that low sevens on an upfront cash yield basis, getting into the eighth on a straight line.

Eric Martin Borden: Yeah, so if you're looking at the development opportunities right now, we've got upfront cash yields in the mid sevens, and then when you straight line it over the term of the lease that we're looking at, you're in the mid eights, sometimes low nines. So, very attractive relative to what we're seeing in the regular waste space, which is still sort of settling in the low sevens on an upfront cash yield basis, and getting into the eights on a straight line. I appreciate the time.

Ryan: Yeah. So if you're looking at the development opportunities right now we've got upfront cash yields in the mid Sevens and then when you straight line. It over the term of the lease that we're looking at you are in that mid eight sometimes low nines, so very attractive relative to what we're seeing in the regular way space, which is still sort of settling in the low sevens on it upfront cash yield basis getting into the <unk>.

Eric Martin Borden: On a straight line.

Ryan Albano: Oh, thank you. Appreciate the time. Thank you.

Eric Martin Borden: Thank you I appreciate the time.

Speaker Change: Thank you.

Speaker Change: Thank you.

Upal Rana: The next question is from Upal Rana from KeyBank Capital Markets. The line is now open. Please go ahead. Great. Thank you for taking my question.

Aparana: The next question is from Aparana from Keybank Capital Markets. The line is now open. Please go ahead.

Apple: The next question is from Apple from Keybanc capital markets. The line is now open. Please go ahead.

Aparana: Yeah.

Aparana: Great. Thank you for taking my question. You mentioned the development funding commitments of $339 million. Any additional color you can provide on those commitments?

Aparana: Great. Thanks for taking my question.

Ryan Albano: You know, you mentioned the development funding commitments of three hundred and thirty-nine million. Any additional color you can provide on those commitments? Yeah, so we've got UNFI's part of that, and we got about maybe another thirty-two million on UNFI. We're very excited about the progress there. Looking for that to come online, you know, late Q3 rent commencement, no later than mid-October. We got about thirty-two million or so left, but the project we're expecting to come in slightly under budget and slightly ahead of schedule, so that feels really good.

Aparana: You mentioned the development funding commitments of $339 million any additional color you can provide on those commitments.

Ryan M. Albano: Yeah, so we've got UNFI is part of that. We've got about maybe another $32 million on UNFI. We're very excited about the progress there and looking for that to come online late in Q3, rental commencement no later than mid-October.

Speaker Change: Yes, so we've got a UNFI as part of that and we got about maybe another $32 million on UNFI, we're very excited about the progress there.

Ryan M. Albano: Looking for that to come online late Q3 rent commencement no later than mid October we got about $32 million or so left but the project, we're expecting to come in slightly under budget and slightly ahead of schedule. So that feels really good of the $307 million in the build to suits for new ones. There are seven different opportunities that range from things as small as $2 million and the curious our space to as large.

Ryan M. Albano: We've got about $32 million or so left, but the project is expected to come in slightly under budget and slightly ahead of schedule, so that feels really good. Of the $307 million in the build suits for new ones, there are seven different opportunities that range from things as small as $2 million in the QSR space to as large as $170 million in distribution and manufacturing spaces. These are all from, you know, new and existing development relationships, so we're expanding the roster of folks that we're working with, and we feel really good about the active prospects that we have, as Ryan mentioned, with another $400 million or so that we're actively evaluating.

Aparana: Great, that was helpful. And then in terms of the health care simplification strategy, it looks like you have completed about 65%. But on the remaining 35%, are those the one-offs that you had mentioned in prior calls that will take some time to kind of get off your portfolio?

Ryan Albano: Of the three hundred and seven million in the build suits for new ones, there's seven different opportunities that range from things as small as two million in the QSR space to as large as a hundred and seventy million in distribution and manufacturing spaces. These are all from, you know, new and existing development relationships or expanding the roster of folks that we're working with, and we feel really good about the active prospects that we have, as Ryan mentioned, with another four hundred million or so that we're actively evaluating. Great, that was helpful.

Aparana: $170 million and distribution and manufacturing spaces.

Speaker Change: These are all from new and existing development relationship. So we're expanding the roster of folks that were working with and we feel really good about the active prospects that we have as Ryan mentioned with another $400 million or so that were actively evaluating.

Aparana: Great that was helpful and then.

John Maranna: And then, in terms of the healthcare simplification strategy, so it looks like you completed about sixty-five percent. On the remaining thirty-five percent, are those the one-off that you had mentioned in prior calls that will take some time to kind of get off your portfolio? Yeah, yeah, those are all the ones you choose that will work through in a traditional asset management approach. There are some in there that have great value that we're just making sure that we're getting the right value out of, and there's a handful that will require maybe a lease extension, some tenant improvement, some work on our end to make sure that we can get the right value out of those.

Speaker Change: In terms of the health care simplification strategy. So it looks like you complete about 65% on the remaining 35% are those the one offs that you had mentioned in prior calls that we will take some time to kind of.

Speaker Change: Get off your portfolio.

Ryan M. Albano: Yeah, yeah, those are all the onesie-twosies that we'll work through in a traditional asset management approach. There are some in there that have great value that we're just making sure that we're getting the right value out of, and there's a handful that will require maybe a lease extension, some tenant improvement, some work on our end to make sure that we can get the right value out of those. So the timeline on those will comfortably extend into 2025.

Speaker Change: Yes, yes, those are all the onesie twosies that will work through in a traditional asset management approach.

Speaker Change: There are some in there that have great value that we're just making sure that we're getting the right value out of and there's a handful that will require maybe a lease extension some tenant improvement some work on our end to make sure that we can get the right value out of those so the timeline on those will comfortably extended to 2025.

John Maranna: So the timeline on those will comfortably extend into twenty twenty-five. Okay, got it.

Aparana: Okay, got it. And then lastly, on maybe cap rates here. You know, it seems like maybe, you know, what do you think? 3Q kind of trends from here and any early indication on where maybe 4Q might be headed.

Ryan M. Albano: Okay got it and then.

John Maranna: And then lastly on, on maybe cap rates here, you know, it seems like maybe, you know, where do you think three Q kind of trends from here and any early indication on where maybe four Q might be, might be headed. Yeah, I mean, we've seen cap rates sort of plateau this year on if you look at like sort of mid market industrial that's been really hot this year as hot as we saw it in twenty twenty two. You know, you're getting twenty bids on any particular acquisition that's out there; you're starting to see those creep down past the low sevens into the high sixes.

Ryan M. Albano: Lastly on.

Speaker Change: Maybe cap rates here it seems like maybe.

Speaker Change: What do you think three.

Speaker Change: <unk> kind of trends from here.

Aparana: Our lead indication on where maybe <unk> might be might.

Speaker Change: Might be headed.

Ryan M. Albano: Yeah, I mean, we've seen Caprate sort of plateau this year on if you look at sort of mid-market industrial that's been really hot this year, as hot as we saw it in 2022. You know, you're getting 20 bids on any particular acquisition that's out there. You're starting to see those creep down past the low sevens into the high sixes.

Speaker Change: Yeah, I mean, we've seen cap rates are at a plateau this year.

Speaker Change: If you look at like sort of.

Speaker Change: Mid market industrial that's been really hot this year as hard as we saw it in 2022, you are getting 20 bids on any particular acquisition. That's out there you are starting to see those creep down past the low sevens into the high sixes, we're still solidly in the <unk> as we think about capital allocation. So we're looking for the right opportunity as you heard Ryan said in his remarks, we're continuing to be very <unk>.

John Maranna: We're still solidly in the sevens as we think about capital allocation, so we're looking for the right opportunity. As you heard, Ryan saying as remarks, we're continuing to be very disciplined and focused on where we're looking to allocate capital. And if we're not seeing it in regular ideals, we're very fortunate to have multiple channels that we can allocate capital to with the build the suits where we're getting those mid seven upfront cash rates and those cash cap rates. And then the straight line yield in the mid eights to low nines. So our expectation is back after you're going to start to see some more product come online as there's a little bit more certainty around the interest rates, and hopefully we'll see a more constructive environment in terms of pricing on risk adjusted based.

Ryan M. Albano: We're still solidly in the sevens as we think about capital allocation. So we're looking for the right opportunity. As you heard Ryan say in his remarks, we're continuing to be very disciplined and focused on where we're looking to allocate capital. And if we're not seeing it in regular rate deals, we're very fortunate to have multiple channels that we can allocate capital to with the build-to-suits where we're getting those mid-seven upfront cash rates and those cash cap rates, and then the straight-line yields in the mid-eighths to low nines.

Ryan M. Albano: Supplant and focused on where we're looking to allocate capital and if we're not seeing it in regular way deals. We're very fortunate to have multiple channels that we can allocate capital to with the build to suits, where we're getting those mid seven upfront cash rates than the cash cap rates.

Ryan M. Albano: And then the straight line yield in the mid eights to low nines. So.

Ryan M. Albano: So, our expectation is that after the year, you're going to start to see some more product come online as there's a little bit more certainty around interest rates, and hopefully, we'll see a more constructive environment in terms of pricing on a risk-adjusted basis. All right, great.

Speaker Change: Our expectation is back half of the year youre going to start to see some more product come online is there is a little bit more certainty around the interest rates and hopefully we will see a more constructive environment in terms of pricing on a risk adjusted basis.

John Maranna: All right. Great.

Aparana: All right, great. That was helpful. Thank you.

Speaker Change: Alright, great that was helpful. Thank you.

John Maranna: That was awful. Thank you.

Speaker Change: Thank you.

Caitlin Burrows: As a reminder, if you would like to ask a question, please press star followed by one on your phone. Keep it now. The next question is from Caitlin Burrows from Goldman Sachs.

Caitlin Burrows: As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. The next question is from Caitlin Burrows from Goldman Sachs. The line is now open. Please go ahead.

Speaker Change: As a reminder, if you will like to ask a question. Please press star followed by one on your tariff I'll keep it now.

Speaker Change: The next question is from Caitlin Burrows from Goldman Sachs. Your line is now open. Please go ahead.

Ryan Albano: The line is now open. Please go ahead. Hi, good morning. Maybe just on the acquisition pipeline, I think you said it was about 70 million. Could you go through, to what extent, that's a mix of a lot of QSR-type small deals versus just a couple larger industrial or what that mix might be as we try to get a sense for what could ultimately close. Yeah, so a portion of it is a retail acquisition, large single-site sporting goods, and then the other is a fairly large industrial acquisition. So there's two deals on that pipeline. Got it.

Caitlin Burrows: Hi, good morning. Maybe just on the acquisition pipeline. I think you said it was about 70 million. Could you go through to what extent that's a mix of like a lot of QSR type small deals versus just a couple of larger industrial or yet what that mix might be as we try to get a sense for what could ultimately close?

Caitlin Burrows: Hi, Good morning, maybe just on the acquisition pipeline I think you said it was about $70 million could you go through is to what extent, that's a mix of like a lot of <unk> type small deals versus just a couple of larger industrial or.

Speaker Change: What that mix might be as we try to get a sense for what could ultimately close.

Ryan M. Albano: Yeah, so a portion of it is a retail acquisition, a large single-site supported goods acquisition, and then the other is a fairly large industrial acquisition. So there's two deals in that pipeline.

Speaker Change: Yeah. So.

Speaker Change: A portion of it is a retail acquisition large single site, it's pretty good.

Speaker Change: And then the other is a fairly large industrial acquisitions. So there's two deals in that pipeline.

Ryan M. Albano: Got it. Okay.

Speaker Change: Got it Okay, and then back to the build to suit topic I think I've kind of asked this in the past, but we've heard build to suit can be difficult because it's tough to get the land. So can you just talk through again, how you would do that if theres been any change in thinking and I think you mentioned in the past that you'd be working or buying from somebody who already has.

Ryan Albano: Okay.

Ryan Albano: And then back to the build-to-suit topic, I think I've kind of asked this in the past, but we've heard build-to-suit can be difficult because it's tough to get the land. So can you just talk to, again, how you would do that if there's been any change in thinking? And I think you mentioned in the past that you'd be working or buying from somebody who already has the land, so you wouldn't need to, like, go, I guess, get approvals and sourcing yourself. But yeah, is that still the case? And how do you kind of get past that hurdle of getting the land that's attractive for this user that they want?

Speaker Change: The land so you wouldn't need to I guess get approvals and source it yourself, but.

Speaker Change: Is that still the case and how do you kind of get passed that hurdle.

Speaker Change: Getting the land thats attractive for this user that they want.

John Maranna: Yeah, so that's a great question. The build-to-suit strategy is very different than your regular way, net lease, sale lease back, and assumption process where the land is already in hand with someone else. The way that we've been thinking about our commitments to fund developments is to have the certainty around that to be able to report it out to you all. The land needs to be in hand. It's not necessarily in our hand yet, but we'll have an opportunity to acquire it across over the course of the process. But the land is under control by the developer or by the tenant, depending on the situation.

Caitlin Burrows: And then back to the Build to Suit topic. I think I've kind of asked this in the past, but we've heard Build to Suit can be difficult because it's tough to get the land. So can you just talk through again how you would do that if there's been any change in thinking? And I think you mentioned in the past that you'd be working or buying from somebody who already has the land. So you wouldn't need to, like, go, I guess, get approvals and source it yourself. But yeah, is that still the case?

Speaker Change: Yes, so that's a great question the build to suit strategy is very different than your regular way net lease sale leaseback and assumption process, where the land is already in hand with someone else.

Speaker Change: The way that we've been thinking about our commitments to fund developments is to have the certainty around that to be able to report it out to you all the land needs to be in hand, it's not necessarily in our hand, yet, but we will have an opportunity to acquired across over the course of the process.

Speaker Change: But the land is under control by the developer where by the tenant depending on the situation.

John Maranna: We're in a place where we feel very comfortable that the business deals have been agreed to between the developer and their client and the relationship between us as the funding partner here. You know, you're still in the process of negotiating final documentation, but our ability to have surety around that development pipeline starts with is the land under control, because that's going to be critical to whether or not the client decides to move forward the project. And for the seven that we have and the 307 million in that pipeline, that is the case. Got it. Okay, thanks.

Speaker Change: We're in a place where we feel very comfortable that the business deals have been agreed to between the developer and their client and the relationship between us as the funding partner here.

Speaker Change: We're still in the process of negotiating final documentation, but our ability to have surety around that development pipeline.

Speaker Change: Starts with is the land under control because thats going to be critical to whether or not the client decides to move forward with the project and for the seven that we have in the $307 million that pipeline that is the case.

Speaker Change: Got it okay. Thanks.

John Maranna: Thank you.

Speaker Change: Thank you.

John Maranna: As we currently have no further questions, I'd like to hand over to John Morina for closing remarks. Thank you, Kiki, and thank you everyone for joining us today. We are incredibly excited and proud of all that we've accomplished so far this year, but we're just getting started. So we'll have more to come with our Q3 earnings call, come October November.

Caitlin Burrows: We currently have no further questions I'd like to hand over to John Murray for closing remarks.

Ryan M. Albano: And how do you kind of get past that hurdle of getting the land that's attractive for this user that they want?

Caitlin Burrows: Thank you Keith and thank you everyone for joining us today.

Ryan M. Albano: Yeah, so that's a great question. The build-a-suit strategy is very different than your regular net lease, sale, lease back, and assumption process where the land is already in hand with someone else. The way that we've been thinking about our commitments to fund developments is to have the certainty around that to be able to report it out to you all. The land needs to be in hand. It's not necessarily in our hands yet, but we'll have an opportunity to acquire it over the course of the process.

Ryan M. Albano: But the land is under control by the developer or the tenant, depending on the situation. We're in a place where we feel very comfortable that the business deals have been agreed to between the developer and their client and the relationship between us as the funding partner here. You're still in the process of negotiating final documentation, but our ability to have certainty around that development pipeline starts with, is the land under control? Because that's going to be critical to whether or not the client decides to move forward with the project. And for the seven that we have and the 307 million in the pipeline, that is the case.

Caitlin Burrows: Got it. Okay, thanks.

Speaker Change: We're incredibly excited and proud of all that we've accomplished so far this year, but we're just getting started so we will have more to come with our Q3 earnings call come October November. Thank you all for joining us and enjoy the rest of your day.

John D. Moragne: Thank you. As we currently have no further questions, I'd like to hand over to John Moragna for closing remarks.

John D. Moragne: Thank you, Kiki, and thank you, everyone, for joining us today. We are incredibly excited and proud of all that we've accomplished so far this year. But we're just getting started. So we'll have more to come with our Q3 earnings call in October or November. Thank you all for joining us, and enjoy the rest of your day.

John Maranna: Thank you all for joining us, and enjoy the rest of your day.

Operator: This concludes today's conference call. You may now disconnect your lines. Thank you.

Operator: This concludes today's conference call. You may now disconnect your lines. Thank you.

Speaker Change: This concludes today's conference call you may now disconnect your lines. Thank you.

Operator: [music].

Operator: Yes.