Q1 2025 Realty Income Corp Earnings Call
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Speaker Change: Good day, and welcome to the Realty Income First Quarter 2025 Earnings 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: Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Kelcey Mueller Vice President Investor Relations. Please go ahead. Thank.
Speaker Change: Thank you for joining us today for Realty income is 2025 first quarter operating results conference call discussing our results will be Sumit, Roy President and Chief Executive Officer, and Jonathan Pong, Chief Financial Officer and Treasurer.
Speaker Change: During this conference call, we will make statements that may be considered forward looking statements under federal Securities law. The company's actual future results may differ significantly from the matters discussed in any forward looking statement, we will disclose in greater detail. The factors that may cause such differences in the company's filings on Form 10-Q.
Speaker Change: The Q&A portion of the call we will be observing a two question limit if he would like to ask additional questions. You may reenter the queue I will now turn the call over to our CEO Sumit Roy.
Speaker Change: Thank you Kelsey and welcome everyone.
Sumit Roy: Realty Income's first quarter results reflect the strength consistency and resilience of our business model anchored by a highly diversified global portfolio.
Sumit Roy: Our ability to deliver reliable performance through varying market conditions remains a hallmark of our platform.
Sumit Roy: Over our history, we have strategically diversified our business model across client types asset classes and geographies and approach that proves to be an increasingly valuable in today's uncertain macroeconomic environment.
Sumit Roy: Our portfolio was comprised of 65% U S retail, which includes high quality clients that have demonstrated resilience through economic cycles do that and given the strength of our client base and our proactive portfolio management, we expect a negligible portion of our client base to be meaningfully impacted by tariffs which is.
Sumit Roy: Already been incorporated into our updated credit assumptions.
Sumit Roy: The diversification and quality of our portfolio combined with our proven stability as an operator position us to navigate potential external pressures effectively as we have consistently done moving to the details of the first quarter, we delivered <unk> per share of $1 six representing a year over year growth.
Sumit Roy: Of two 9% this marks a continuation of a long standing track record of positive F. A vote per share growth in all but one year over a 30 year history as a public company.
Sumit Roy: This growth combined with a 6% dividend yield resulted in total operational returns of eight 9% for the quarter underscoring the value of our platform.
Sumit Roy: We leveraged our diverse sourcing avenues to focus investment activity, where we saw the most compelling opportunities notably in Europe.
Sumit Roy: In total we invested $1 $4 billion at a 7.5% weighted average initial cash yield equating to a spread of 204 basis points over our short term weighted average cost of capital.
Sumit Roy: Importantly, 72% of our investment volume came from five transactions over 50 million illustrating one of the many ways our size and scale drive value creation.
Sumit Roy: We continue to benefit from a meaningful portfolio discount when competing for high quality net lease investments in the marketplace in the U S. We invested $479 million at an eight 3% weighted average initial cash yield and in Europe, which accounted for 65% of total investment volume this quarter with.
Sumit Roy: Deployed 893 million at an average initial cash yield of 7%.
Sumit Roy: The region continues to offer compelling opportunities as we scale, our business and seek to capitalize on the attractive dynamics at this large fragmented market.
Sumit Roy: Our international presence and capabilities differentiate us from most other net lease platforms importantly, it offers us geographic diversification, which helps navigate country specific uncertainties.
Sumit Roy: This expansion into Europe demonstrates how our entrance into new verticals can create immediate value and achieve scalability in a relatively short time.
Sumit Roy: We believe our investments in talent combined with the portability of our deep access to global capital markets have enabled us to achieve scale without adding incremental risk to the enterprise.
Sumit Roy: Turning back to the quarter, we continued to deliver strong operational results across our diversified portfolio, which now comprises over 15600 properties spanning 91 industries and almost 1600 unique clients.
Sumit Roy: We consider our clients to be well positioned through various economic cycles, given the inherently defensive nature of our top industries, including grocery and convenience stores and wholesale clubs of our client base over 34% are investment grade with average rent coverage of two nine times.
Sumit Roy: As a reminder, over 90% of our retail rent comes from clients that we consider to offer one or more of the following non discretionary goods low price point or a service oriented component for consumers.
Sumit Roy: Over a long operating history, we have consistently found these types of businesses to be highly resilient during economic downturns combined with the significant diversification of our portfolio. We believe this provides investors with relative safety as reflected in our long term operating results.
Sumit Roy: We ended the quarter with 98.5% portfolio occupancy approximately 20 basis points below the prior quarter and ahead of the historical median of 98, 2% from 2010 to 2024 hour.
Sumit Roy: Our rent recapture read across 194 leases was 103, 9% with 92% of leasing activity generated from renewables by the existing client.
Sumit Roy: Consistent with our historical experience. These results were accomplished with minimal lease incentives, which totaled less than $700000 during the quarter on over $46 million of rent of new annual rent signed.
Sumit Roy: And we remained active in our approach to optimizing the portfolio. We sold 55 properties for total net proceeds of $93 million of which 63 million was related to vacant properties. Overall, we believe our results reflect that we are operating from a position of strength as we continue to leverage our structural advantages.
Sumit Roy: Including a well capitalized balance sheet enhance liquidity and unmatched scale.
Sumit Roy: These characteristics allow us to stay agile work to capitalize on opportunities across our addressable market and maintain discipline in our capital allocation decisions above all the platform. We have built is a direct reflection of the talent and experience of our dedicated team members.
Sumit Roy: Looking at the balance of 2025, we remain confident in our ability to deliver on our expectations. Despite the current market uncertainties benefiting from our diversified platform that spans multiple geographies asset types and funding sources as such we're maintaining our outlook for 'twenty twenty-five Eva.
Sumit Roy: Per share in the range of $4.22.
Sumit Roy: Two $4.28 consistent with last quarter's update a 2025 forecast includes the expectation for 75 basis points of potential rent loss with the majority stemming from properties acquired through prior M&A transactions, there have been no material surprises or incremental headwinds to our business.
Sumit Roy: As a result of recent geopolitical uncertainties and why do we remain vigilant, we believe our resilient time tested business model positions us well to navigate potential challenges.
Sumit Roy: Additionally, we remain on track to deploy approximately $4 billion in investments throughout 2025, given the advantages of our platform. We are well positioned to increase our capital deployment should attractive opportunities materialize. Despite market wide uncertainty our short term weighted average cost of capital.
Sumit Roy: Is actually lower today than it was when we introduced that 2025 investments guidance in late February.
Speaker Change: Before turning the call over to Jonathan I'd like to share a brief update on our move into the private capital business Realty Income's U S core plus fund. This initiative represents a natural next step in the evolution of our platform and a strategic opportunity to broaden our capital sources and investment capabilities.
Speaker Change: We began formal marketing efforts in the first quarter and are pleased by the early interest and positive reception from large well known institutional investors.
Speaker Change: We consider this a clear indication that the differentiation of Realty Income's platform scale and long track record is clearly resonating in the market. We continue to expect this would be a methodical process that will enhance our access to meaningful sources of capital over time, we look forward to updating the market on that.
Speaker Change: Progress at the appropriate time with that I'd like to turn it over to Jonathan to discuss our financial results and outlook in more detail.
Jonathan Pong: Thank you Sumit.
Jonathan Pong: Fostering meaningful relationships this quarter, our ethos of the company.
Jonathan Pong: And we are grateful for their long standing support of all of our stakeholders before diving into our first quarter financial metrics I want to highlight two announcements. We made in April that we believe are a testament to the trust our investors that lenders place and the durability of the franchise.
Jonathan Pong: In early April we successfully closed on a $600 million 10 year unsecured bond offering which priced at 534% semi annual yield to maturity.
Jonathan Pong: We're grateful for the sponsorship front very high quality group of fixed income investors, who participated in transaction, which was well subscribed amidst a volatile and uncertain economic backdrop.
Jonathan Pong: Last week, we amount, we announced the recast the expansion of our multi currency unsecured credit facility to a total size of $5 38 billion, which compares to our prior facility a four point to 5 billion.
Jonathan Pong: The facility consists of a $4 billion revolving credit facility for Realty income bifurcate equally into two $2 billion tranches, which initially mature in 2027 and 2029, respectively.
Jonathan Pong: Based on our current Ace III, a minus credit ratings borrowings will accrue interest at 72, and a half basis points over silver.
In addition included in the recast of 1.38 billion dollar unsecured facility for our U S core plus fund, which as Susan mentioned is in its initial marketing phase.
Jonathan Pong: Facility for the fund will be comprised of a $1 billion unsecured revolving line of credit with an initial maturity date in 2029.
Jonathan Pong: And a $380 million delayed draw three year unsecured term loan.
Jonathan Pong: Establishing a robust source of liquidity for the fund provides meaningful debt capacity to pursue investment opportunities in the second half of the year.
Jonathan Pong: From a balance sheet standpoint, we are well positioned to remain active capital allocators with ample liquidity and modest leverage as we finished the quarter with net debt to annualized pro forma adjusted EBITDA of $5 four times.
Jonathan Pong: Our fixed charge coverage ratio of four seven times remains consistent with the four and a half to four seven times range delivered over the last two years.
Jonathan Pong: Our exposure to variable rate debt remains limited representing just over 6% of our outstanding debt principal at quarter end.
Jonathan Pong: As we look towards the balance of the year, we consider our long term and permanent capital needs manageable and our liquidity and access to diverse sources of capital to be strong.
Jonathan Pong: We are confident in our ability to lean into opportunities should this period of economic uncertainty continues.
Jonathan Pong: I would now like to hand, it back to submit to complete our prepared remarks.
Sumit Roy: Thank you Jonathan in closing, we remain focused on methodically executing a strategy supported by our resilient portfolio strong balance sheet and a talented team across the globe.
Sumit Roy: As the monthly dividend company, we have consistently returned capital to our shareholders throughout our history underscoring our commitment to delivering predictable reliable income streams.
Sumit Roy: We are continuing to thoughtfully grow our business and create durable long term value for our shareholders.
Sumit Roy: I would now like to open it up for questions operator.
Sumit Roy: We will now begin the question and answer session to.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker Change: Our first question today is from Smedes Rose with Citigroup. Please go ahead.
Speaker Change: Oh, hi, Thank you I guess I wanted to ask you a little bit about the activity that you were able to execute on it in the first quarter. It looks like the bulk of it was in Europe.
Speaker Change: Just wondering if you could maybe talk a little bit about what you're seeing in Europe at this point and maybe how that contrasts with the opportunities available in the U S.
Speaker Change: A great question. Thanks made.
Speaker Change: So what's very compelling about Europe for US is obviously the investments we were able to make 65% of the total volume came from Europe. We are targeting retail parks are in the U K as well as in Ireland that made up the bulk of the portfolio and what was very compelling to us about that particular.
Speaker Change: Set of transactions was the fact that the rents that we were underwriting well well below what would be deemed as market trends.
Speaker Change: And and we were getting these assets at replacement at well below replacement cost.
Speaker Change: And the fact that we are controlling a very wide swath of of retail footprint.
Speaker Change: It's already starting to manifest itself in calls that we are getting from very large retail operators like little and and and a few others that are very interested in helping us reposition some of these retail parks and give them a presence to continue to allow them to grow as it is our stated objective.
Speaker Change: In these markets and this backdrop is is obviously very favorable for investment purposes for us and that was the reason why we had the bulk of the investments coming in from Europe.
Speaker Change: Having said that we saw plenty of opportunities here in the in the U S. A as you as you probably heard me mentioned, we source about $22 billion worth of product and more than 60% of it was here in the U S.
Speaker Change: But when you look at some of the credit that we were being asked to underwrite on the higher yielding side of the curve.
Speaker Change: We just couldn't get comfortable with be the downside risk of the tail risks. If you will on some of those credits, but we are seeing plenty of opportunities. It's.
Speaker Change: Finding the right risk adjusted opportunity, that's compelling us to invest more in Europe today, and you should kind of expect that to be the run rate for the for the first half of this year.
Speaker Change: Okay, Okay and can I just ask you one more thing you noted that the rent recapture was 103.9% but on the same.
Speaker Change: Same same store the same list of clients I guess, the re leasing was down about 50 basis points, but it was offset by other items.
Speaker Change: Is there anything going on there in your negotiations with the re leasing to the same tenants that what's driving that down a little bit or is that normal or no. It's look we obviously if you look at the last few quarters I'm the renewals have been far superior with existing clients.
Speaker Change: So this is a bit of a one off but we tend to look at this in totality Ah we give you. The breakup. So you can see that the vast majority of the renewals does come from existing clients, but I would chalk this off to a one off but I believe it was still 99.7.
Speaker Change: <unk> and the vast majority of the renewals was well north of 100%, but we did have I want to say three a theater assets three or four theater assets that dragged it a little bit below the 100% mark but still a very favorable outcome.
Speaker Change: The next question.
Speaker Change: <unk> is from Brad Heffern with RBC capital markets. Please go ahead.
Speaker Change: Yeah, Thanks, Sumit, you're at 35% of the way to the guidance for the year on investments in the first quarter is typically one of the lighter quarters too.
Speaker Change: You, obviously left the guidance unchanged I'm curious is that just reflective of the level of uncertainty right now or was the first quarter, just particularly fall to how the pipeline looks.
Speaker Change: That's a great question, Brad look I think we are very cautiously optimistic what we didn't want to do was try to extrapolate what we have achieved in the first quarter for the remainder of the there is a fair amount of uncertainty there is a lot of transactions in the market as our sourcing volumes would suggest.
Speaker Change: But it is finding the right deals for US you know and given the exogenous factors or.
Speaker Change: Potentially higher interest rate environment for longer.
Speaker Change: And you know, allowing for some of the geopolitical you know trade driven conditions to play out.
Speaker Change: We just wanted to be a bit more cautious. So that's really the reason for not wanting to be overly aggressive and in changing guidance et cetera at such an early stage, we want to be very deliberate we want to be very focused on making sure that if we are going to use <unk>.
Speaker Change: Equity you know that we use it in a in a <unk>.
Speaker Change: Very appropriate fashion and so that's the primary reason why we chose to leave the you know need the volume numbers unchanged.
Speaker Change: Okay got it and then on the tariff impact you talked through some of the sectors that you thought it would be well insulated I'm curious is there anything in the portfolio that you would call out is potentially actually seeing an impact.
Speaker Change: No no different than what we had you know highlighted.
Speaker Change: I believe it was in February when we were expecting some of these things to play out.
Speaker Change: Gone through a list of clients that we felt like were you know more exposed to what would happen. If tariffs were introduced we feel like that's fully reflected in the in the numbers that we've shared with you with regards to our guidance with regards to our bad debt expense, we feel very calm.
Speaker Change: And and I and I think <unk> is a perfect example of a situation where you know we got a 100% renewal and we had a recapture rate of 93, 4% 94, 3%.
Speaker Change: Which was slightly better than what we had forecasted out and the at the beginning of the year. So look we feel like we we did a good job of underwriting you know what the what the potential.
Speaker Change: Tension impact of some of these exogenous factors were in into our portfolio and so.
Speaker Change: We don't expect anything new at.
Speaker Change: At this stage.
Speaker Change: The next question is from Ryan Caveolin with Green Street Advisors. Please go ahead.
Ryan Caveolin: Thank you for taking my question just on the U S core plus fund throughout this sort of economic volatility do you see US you know the uncertainty as keeping out there private buyers out of competition on the sidelines and it's helpful with Realty income size and scale or how does the private fund.
Speaker Change: Work in an environment like this.
Brian: Brian. Thank you that's that's actually a very good question under normal circumstances, I would say that.
Brian: The backdrop that we're all experiencing today wouldn't be a conducive.
Brian: Two raising private capital, but this is where I think we set ourselves apart I don't know if any other company within our sector that can do what we're doing.
Brian: And you know based on all of the conversations that we're having with these potential investors.
Brian: We feel very optimistic about meeting the objectives that we have for raising capital at a point in time, where for most others I would say even on the private side.
Brian: Who have a history of raising private capital this would be a difficult environment to raise capital, but look we feel very optimistic we look forward to sharing with you. The results later this year.
Brian: And so far so good is how I would play it.
Speaker Change: With respect to and I don't know if that's what you were asking Ryan up private investors investing in a place in our domain.
Speaker Change: We've seen a plethora of them coming in and wanting to create a net lease sleep to their investments.
Speaker Change: But you know they also tend to use higher leverage and one could make the argument that our product lends itself to a higher leverage in the private domain.
Speaker Change: But given the cost of debt and given the elevated interest rate environment that will continue to impede their ability to make investments in our space you know our investment profile.
Speaker Change: Profile tends to be core core plus and so in order for them to generate the kind of returns that they usually tried to generate on their equity.
Speaker Change: This is not a conducive environment for them to invest so I think for a variety of reasons. It's it really does lend itself to what we bring to the table our history, our reputation and we are very hopeful of a having a successful raise by the end of the year.
Speaker Change: Great. That's it for me appreciate it.
Speaker Change: You're right.
Speaker Change: Next question is from Henderson Justy with Mizuho. Please go ahead.
Henderson Justy: Hey, guys.
Speaker Change: Good afternoon.
Speaker Change: Couple of quick ones from me first I wanted to talk about the balance sheet here a bit.
Speaker Change: And your liquidity you settled a lot of ATM in the quarter I think 631 million $69 million I think is remaining so I'm curious are you thinking about the various funding sources available to you here.
Speaker Change: And the capital required to.
Speaker Change: You're required to meet your full year acquisition guidance. Thanks.
Speaker Change: And then when you look at our guidance of $4 billion on the investment front.
Speaker Change: Right, we do have $265 million outstanding forward equity.
Speaker Change: We do have about $650 million on a run rate basis that free cash flow, which of course is equity like in nature, and so and then that.
Speaker Change: To finance the remaining call.
Speaker Change: Call It $2 6 billion.
Speaker Change: And to take care of about $1 3 billion of Refis that we have for the rest of the year, that's about $2 2 billion.
Speaker Change: That will raise that obviously given the sponsorship that we've been lucky enough to.
Speaker Change: Receive from the fixed income Investor base, we feel very confident of cross currencies, we can do that.
Speaker Change: So the missing element of course is the new public equity that we would.
Have to raise to fill that gap and so if you do that math, you're looking at $7 50 to 800, new equity that we might have to raise for the balance of the year. However that doesn't take into account any disposition activity that we might do so we feel very good about where the balance sheet is and sources and uses of cash from here on.
Speaker Change: Feels very very real.
Speaker Change: Is it a ball and modest in terms of what we need to I think a lot of them and get them to market.
Speaker Change: Got it that's helpful color John So one more maybe on the other investments this quarter looks like alone on the development project yield around 10% term just under four years, so maybe some color on who or what you're you're lending to perhaps the risk profile.
Speaker Change: Profile and then your appetite for perhaps doing more of this type of activity in the near term. Thanks.
Speaker Change: Good question handle yes. This was a opportunistic loan that we've provided to a private.
Speaker Change: A global developer and the data center space. This is a.
Speaker Change: A data Center Park, that's being developed in Virginia.
Speaker Change: The ultimate clients that we have is a one of the large hyperscale or <unk> with very high investment grade rating.
Speaker Change: And our hope is that this will lead to the ultimate.
Speaker Change: Ownership or a path to ownership of these assets and so we are very excited about this relationship again it speaks to who we are our size and scale and the willingness of these very well established highly reputable.
Speaker Change: Private developers to work with us directly.
Ronald Camden: The next question is from Ronald Camden with Morgan Stanley. Please go ahead.
Ronald Camden: Just two quick ones. If you could just comment a little bit more on the cap rates in the quarter and more importantly, just what you see for trends going forward as we go into this uncertain environment.
Ronald Camden: Sure on.
Ronald Camden: So the cap rate that we were able to establish even absent. This loan was just slightly north of 7% I think you should expect cap rates to be in that ZIP code and it's largely being driven by a fair amount of you know the uncertainty that exists.
Ronald Camden: At least in the near term once we have a settling out of what's actually going to impact you know future capital raising and what does the environment look like from an interest rate environment perspective, you can start to feel you know you can start to see some pressure potentially on the cap rates, but right now we were expecting to see.
Ronald Camden: That at the beginning of the year to be very honest and we have not and so you know it's a bit of a wait and see and that is as the market becomes clearer round.
Ronald Camden: No like I said were these policies are going to land I think the cap rate environment is going to be a lot here, having said all of that this is actually benefiting us and in some ways all cost of capital has improved.
Ronald Camden: Throughout the year and so the fact that you know cap rates are going to remain in the zipcode that I've just mentioned.
Ronald Camden: It allows us to create these outsized spreads, which obviously is a benefit and.
Ronald Camden: It doesn't come without risk, which is why here in the U S. We chose not to pursue certain transactions.
Ronald Camden: But I do think that it will help create more opportunities going forward and we look forward to seeing how things settle out.
Ronald Camden: Great and then my second question was just strategically as you're thinking about sort of increasing the rents the rent escalators of the entire portfolio can you talk about some of those other buckets like like gaming like Europe and.
Ronald Camden: And like the data centers and you know it just that the updated thinking there about.
Ronald Camden: Getting the overall rent escalators in the portfolio up.
Ronald Camden: Yes, again, a great question Ron Luke.
Speaker Change: The way we are trying to address rent escalators is two folds. One is the organic rent increases that we are targeting and you're exactly right.
Speaker Change: There are certain asset types I E industrial and data centers that tend to have more inherent rent escalators, but the second is the strategy that I was trying to highlight that we are deploying in Europe, where we are buying assets that we feel is it has rent that's well below market rent.
Speaker Change: And we feel like we can capture them you know that.
Speaker Change: Mark to market on the rents come renewal times and so if you see what we've done in Europe for the first quarter I think the Walt was just right around four four years and it is with an intent to capture that upside that we're inheriting all that we are underwriting.
Speaker Change: <unk> is another way that we want to grow the.
Speaker Change: The top line without necessarily having to rely just on pure investments to drive growth.
Speaker Change: The next question is from Greg Mcginniss with Scotiabank. Please go ahead.
Greg Mcginniss: Hey, good afternoon out there.
Greg Mcginniss: Wanted to dig into the retail parks a bit cement you mentioned that those were acquired with below market rents and I'm curious what the yield will be once those are at market and then how much have you invested in retail parks to date and do you see you know a ceiling to that investment.
Greg Mcginniss: So anything in life, Craig that's going to be ceilings, but you know I'll tell you. This is something that the team has done a phenomenal job on and we.
Greg Mcginniss: We decided to go after retail parks, because we started to see what the some of the the parser knowledge. This was you know we were targeting grocery we would trial targeting home improvements like being cute.
Greg Mcginniss: And we were essentially getting the rest of the parks for for next to nothing that's how it started.
Greg Mcginniss: And it was at yields that was well north of 8% even 9%.
Greg Mcginniss: A couple of factors contributed to that one was that these assets were being held by institutional investors who are going.
Greg Mcginniss: Going through a natural capital recycling or their investment alright time horizon had what's coming to an end that created these opportunities for us.
Greg Mcginniss: Since our initial investment, which I would say it was around three years ago.
Greg Mcginniss: Fast forward today.
Greg Mcginniss: We have.
Greg Mcginniss: Seen a massive cap rate compression.
Greg Mcginniss: And you know now.
Greg Mcginniss: These same assets are trading in the mid sixes. So there's at least 200 5300 basis points of compression from when we initially started buying these assets and the rents that we were underwriting too are also based on our initial analysis anywhere between 5% to 6%.
Greg Mcginniss: Below what the current market rents.
Greg Mcginniss: The other dynamic that we are starting to see is you know.
Greg Mcginniss: Our ability because we control so much of this retail space our ability to go to some of these retailers brand new retailer Ikea.
Greg Mcginniss: I already talked about a little et cetera. These are names that are coming to us and saying in order for us to execute on our growth plans, we would like to be in these locations that you now control and we are having holistic conversations on not all not only.
Greg Mcginniss: You know forming these relationships with these growing retailers, but potentially creating a value uplift by having them in our in our retail parks and so its along.
Greg Mcginniss: Along with that I mean, I'm, so excited I can keep going.
Greg Mcginniss: We also have a repositioning opportunities with extra land that we have inherited through the strategy and so these are ways that we are trying to create grow the topline growth by by.
Greg Mcginniss: Executing on this strategy that we embarked upon three years ago.
Greg Mcginniss: And it has been Super Super successful.
Greg Mcginniss: I'd say in the UK, we are in the middle innings seventh to eighth inning of all that all faiths.
Speaker Change: H, but seventh inning of a nine inning.
Speaker Change: Investment cycle in retail parks, but in in the rest of Europe.
Speaker Change: Thinking western Western Europe for the similar strategy.
Speaker Change: It's still early days I'm, the only other country, where we owned retail Park is Ireland, where we just did a large portfolio and again it has similar dynamics and.
Speaker Change: It's accelerating our relationship with some of these very teen retail retailers, who want to grow and want to grow in the locations that we now control and so the value uplift is tremendous.
Speaker Change: Okay. Thanks.
Speaker Change: As a follow up can you just remind us on the potential.
Speaker Change: You can see risk that you take when acquiring these assets as well as capex needs. They may have.
Speaker Change: Yes, that's a great question so.
Speaker Change: What we what we have.
Speaker Change: Underwriting is a certain amount of vacancy that comes with not all parks, but but a couple of parks that we.
Speaker Change: I would say, it's 1% to 2% in that Zip code.
Speaker Change: Often with vacancy if you were to look at all of our retail parks and that's where you're starting to see when we are renewing either with the existing client or releasing to a new client we are seeing a tremendous amount of uplift.
Speaker Change: Case in point last quarter for the first quarter of 2025, we had a positive 7% recapture rate on on these vacancies that we have back filled and the Capex involved is a is not substantially different from what we have been.
Speaker Change: You know spending here in the U S and I think I in my prepared remarks, I shared that with you.
Speaker Change: So we feel very good about the strategy that we've implemented in the in the U K and now in Ireland.
Speaker Change: And.
Speaker Change: And it's it's the flow through is tremendous we were doing the analysis. It has a very similar flow through to our net lease investment silica and the 90, 596% Zip code.
Speaker Change: And that's it.
Speaker Change: Essentially our EBITDA margin.
Michael Goldsmith: The next question is from Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith: Good afternoon, Thanks for taking my questions.
Michael Goldsmith: Questions.
Michael Goldsmith: Prepared remarks, you made a comment about some of them.
Michael Goldsmith: Some opportunity.
Michael Goldsmith: And you asked about your past and control.
Michael Goldsmith: So I was just trying to.
Michael Goldsmith: Curious as you build that up just to talk about your underwriting.
Michael Goldsmith: Just compare the well.
Michael Goldsmith: Yeah.
Michael Goldsmith: Yes.
Michael Goldsmith: It was a combination of both of those points Michael you know obviously.
When we are underwriting a particular lease term you're taking into account the credit exposure to you know the that particular lease and the ability of that operator to pay the rent for the duration of the lease.
Michael Goldsmith: And if you come to a conclusion that that duration is going to get disrupted.
Michael Goldsmith: You know that in and of itself is not a disqualify them.
Michael Goldsmith: As long as we have a very high level of confidence that we are going to be able to backfill.
Michael Goldsmith: Backfill that position, but that is that is not inherent to net lease investing and in our opinion any disruptions that we underwrite to create.
Michael Goldsmith: Create a timing delay in recapturing the value and the disruption in the value creation process and that's really what.
Michael Goldsmith: Whether it's here in Europe, I mean here in the U S or in Europe. We are trying to figure out what is the total expected return profile for any investment that we are making and we are we are pursuing the ones that that yield the best outcomes, which in our case, we are finding them to be in.
Michael Goldsmith: In Europe.
Michael Goldsmith: Got it thanks for that.
Michael Goldsmith: That's helpful.
Michael Goldsmith: Yeah.
Michael Goldsmith: Tony.
Michael Goldsmith: It sounds like you also sold so they can travel the switch.
Michael Goldsmith: Which include.
Michael Goldsmith: And the decreasing exposure.
Michael Goldsmith: Jeff.
Speaker Change: Cvs in a quarter or so can you just kind of walk through some of.
Michael Goldsmith: The moving pieces are there.
Michael Goldsmith: Okay.
Michael Goldsmith: Dallas.
Michael Goldsmith: Sure.
Michael Goldsmith: Yeah look we had this this is very expected if you see what we had shared Michael about where we would come out on occupancy we had mentioned in the mid.
Michael Goldsmith: 98% ZIP code that is still our expectation.
Michael Goldsmith: We did have some outsize vacancies in the first quarter, which we have largely resolved you talked about family dollar and dollar General Yes. There were a couple of family dollar assets that we did sell vacant but I'll also share with you that we have 38 dollar generals that came up for renewal.
Michael Goldsmith: Oleds and recaptured over 109% on those renewals, we had about five dollar tree family dollar renewals there too it was over 100, and a 8.3 or 4%.
Michael Goldsmith: So you know these businesses are continuing to.
Michael Goldsmith: Hold on to their assets and are continuing to perform very well, especially with the backdrop that we're all experiencing a family.
Michael Goldsmith: Family dollar is a bit of a question Mark we will see how it all settles out.
Michael Goldsmith: But.
You know in terms of dollar general dollar tree. Those are those are going to continue to do well in my opinion.
Rich Hightower: The next question is from rich Hightower with Barclays. Please go ahead.
Rich Hightower: Hey, good afternoon guys.
Rich Hightower: Just a couple from me I guess sticking to the theme of underwriting for a second as far as the maybe the less credit worthy or higher yielding opportunities that you had foregone in the first quarter and maybe thats kind of the strategy Youre sticking to I mean could you could you help us understand is it more relates.
Rich Hightower: Two the industry vertical of those assets is at the capital structure.
Rich Hightower: Of the of the entity itself are they sponsor backed private equity style deals you know just maybe fill out the picture a little more in that sense. If you don't mind sure.
Rich Hightower: Sure.
Rich Hightower: It's not any one of those things in isolation rich when you're looking at for instance, if you're going to look at something and a very discretionary business like entertainment.
Rich Hightower: Given the backdrop that one is experiencing given that discretionary spending may be impacted by higher inflation.
Rich Hightower: Higher tariffs et cetera.
Rich Hightower: It's and recognizing that a particular operator within the entertainment sector may have a balance sheet that is.
Rich Hightower: That can't sustain a disruption to the topline.
Rich Hightower: That's what will keep us on the sidelines that is the reason one of the main reasons why we try to look for certain characteristics, especially on the retail side that we've highlighted you know non discretionary low price point.
Rich Hightower: Service orientation to that business.
Rich Hightower: And you know then we go to the next level, which says, okay, which which particular sector is fall within these areas that doesn't mean, we won't look at an entertainment opportunity. If we are getting paid for it but if your total return is 8% and you expect something to happen to this credit.
Rich Hightower: In the next four to five years.
Rich Hightower: It's not really 8% you know your expected return, it's probably going to be in the low single digits.
Rich Hightower: And in a good situation. So those types of assets we've stayed away from even.
Rich Hightower: You know on the industrial side, when we are underwriting a particular industrial asset and we feel like it is very specifically being used for that particular client and the clients business is it you know.
Rich Hightower: Does not have the the.
Rich Hightower: The safety of the room.
Rich Hightower: <unk> safety that one looks for we're going to stay away from those very specialized build in secondary potentially even tertiary markets and we saw a lot of those that we could get higher yields on and.
Rich Hightower: But it's a fool's errand in my opinion, where if we are all we are focused on is in today's yield and not underwriting to what the expected outcome is.
Rich Hightower: You know, it's not going to result in a good good overall return pieces. So.
Rich Hightower: You know there are there are on the private equity side. There are very good operators that actually come in and improve the operations of the business.
Rich Hightower: We tend to stay away from operators, who are pure financial.
Operators, where they love the business and they run it very efficiently. They tried to extract all of the cash flows.
Rich Hightower: Those are the types of situations that we tried to stay away from but we have private equity operators will actually come in and are very focused on the operations of the business.
Rich Hightower: And those we are far more comfortable with it so it's a variety of factors really.
Rich Hightower: Okay. That's that's helpful color.
Rich Hightower: And the shift gears for one second not to put anybody on the spot, but I was hoping for an update on realty income's investment in plenty.
Rich Hightower: The I guess indoor farming.
Rich Hightower: Business, you you announced a couple of years ago I did notice that they are going through a restructuring and just wondering.
Rich Hightower: How much capital is at risk from from your balance sheet perspective, and what's the outlook. There. If you don't mind, yeah, and enrich youre not putting us under the spot it's a perfectly legitimate question.
Rich Hightower: Look we feel that plenty is going to emerge.
Rich Hightower: They are and David will emerge a much stronger company they had a particular.
Rich Hightower: Patient here in Compton that they walked away from they needed to go through a bankruptcy process in order to be able to do that and the main reason for that was that particular asset had they were producing leafy greens, which just couldn't get to the margins that they were expecting to get to all of our asset if you might recall rich.
Rich Hightower: As it has been created to produce strawberries and today two out of the 12 days are in operation and the goal here is to get the remaining 10 days in operation They already have a takeout agreement with Driscoll.
Rich Hightower: And part of the process of going through a bankruptcy process, what's too again.
Rich Hightower: And up with favorable terms et cetera.
Rich Hightower: And emerge a much stronger operator, which is what we expect and we believe that they are also being able to attract a fair amount of private capital from.
Rich Hightower: From some of their existing investors I E Softbank and a couple of others.
Rich Hightower: That want to see this particular business succeed and so we.
Rich Hightower: We feel like.
Rich Hightower: You know once they emerge are there going to be a solid going concern having said all of that let's assume the downside scenario that they don't emerge which by the way is not our expectation based on.
Rich Hightower: The relationship that we have with them and how they are keeping us in the loop on on exactly how the process is unfolding.
Rich Hightower: But if that would've happened we control a very good piece of land.
Rich Hightower: We have the ability to convert this albeit with some level of capital spend into a distribution center. It sits right next door in the Amazon site.
Rich Hightower: By the way. It also has a lot of power that is that is coming to this site. So could reconsider a datacenter side, possibly but those are the things that one would start to look into the capital at risk is circa $40 million.
Rich Hightower: That's all we've invested and that's all we are planning on investing in this asset.
Rich Hightower: But the upside potential remains.
Rich Hightower: Very very strong.
Speaker Change: The next question is from Jana Galan with Bank of America. Please go ahead.
Jana Galan: Thank you hi, and congrats on a strong start to the year.
Speaker Change: I'm, sorry, if I missed it in the supplemental but can you provide an update the weighted average and the median EBITDAR to rent ratio in the retail properties I noticed the format changed a little bit, yes, Fiona and we'd love to get feedback from you and others on.
Speaker Change: On the subs.
Speaker Change: Supplemental there was a lot of work done and the idea was to try to make it a lot more user friendly we hadn't touched on the design for the last 10 12 years and so we try to incorporate a lot of the comments that we received.
Speaker Change: From folks along the way and this is our attempt to add addressing those comments, so wed love to get your comment anyway sorry.
Speaker Change: Digressed coming back to your question. It was two nine times.
Speaker Change: The average rent coverage.
Speaker Change: For our retail assets on the assets that we do get reporting.
Speaker Change: And it's 2.7 times I believe is the median.
Speaker Change: Rent coverage, so still very strong.
Speaker Change: Despite the.
Speaker Change: The environment that we find ourselves in.
Speaker Change: Thank you and then just jumping to the inverse.
Speaker Change: The investment that you made just curious given the volatility in the capital markets do you see more of those types of opportunities that you'd like to lean into.
Speaker Change: The idea is that if it allows us to form a relationship which could then result in us ultimately owning these assets.
Speaker Change: That is the goal and you know we believe that credit is a.
Speaker Change: <unk>.
Speaker Change: Is it a particular way to make headway in terms of forming relationships as well as finding a path to potentially owning the real estate. We also find that these investments that we're making have are they they tend to be over collateralized you know with the actual real estate.
Speaker Change: Date underpinning the the collateral for these investments they get better returns in terms of yield and we have some level of protection in terms of the duration and so you know it does help meet a lot of strategic objectives and the idea and I think I've said this before is yes.
Speaker Change: So where it makes sense for us we will continue to make credit investments are to.
Speaker Change: To achieve the objectives that I just laid out.
The next question is from Jay Kornreich with Wedbush. Please go ahead.
Jay Kornreich: Alright, thanks, good afternoon.
Jay Kornreich: Wanted to follow up on you mentioned the investment volume leaning towards Europe. The first half of the year and so I'm curious as you look out towards the second half I guess, what are you anticipating to occur which will open up further opportunities in the U S and do you expect opportunities in Europe to decelerate in the second half or just potentially have a more robust overall investment pipeline.
Jay Kornreich: Yeah.
Jay Kornreich: Youre trying to unpack my words.
Jay Kornreich: And look I am very hopeful.
Jay Kornreich: That given the trend of what is happening to our cost of capital, which it is improving.
We'll be able to do more here in the U S.
Jay Kornreich: I will tell you that off this volume that we sourced in the first quarter. There was about 2 billion that the only reason why we chose to pass was because we were not comfortable with the initial spread that we were making.
Jay Kornreich: On that on that volume.
Jay Kornreich: Pricing was right for that type of product B.
Jay Kornreich: The metrics from a real estate perspective, we're bang on trade. The operator that we had exposure to was ones that we've got an existing relationship with.
Jay Kornreich: But it was just that initial spread that kept us on the sidelines. So.
Jay Kornreich: That's our hope that you know as the market stabilizes our ability to do more here in the U S.
Jay Kornreich: You know, we'll we'll get enhanced and I think Europe is a it is on its own track and we are continuing to be very optimistic in terms of what we can achieve that.
Speaker Change: I appreciate that thank you and then maybe just one follow up now looking at Europe are there any kind of next frontier countries or marketplaces that present, a significant investment opportunity for you that you're targeting to potentially expand to next.
Speaker Change: None that we haven't talked about already.
Speaker Change: We had I had mentioned Poland.
As a country that continues to be of interest obviously, it's it's a NATO country. There is a fair amount of investments. It's the second largest GDP growth country in all of Europe with a lot more of capital in sourcing going on in Europe. Again. This is a phenomena that we.
Speaker Change: See it play out over the last couple of months, we expect there to be more opportunities and.
Speaker Change: We are you know.
Speaker Change: If the right opportunities. We are we are very excited about our ability to grow into Poland at some point so.
Speaker Change: Outside of that I think we're already in.
Speaker Change: Six other countries seven now.
Speaker Change: In Europe outside of the U K.
Speaker Change: And we just want to establish a footprint.
Speaker Change: Even deep more deeper.
Speaker Change: Into these geographies and I do think it will create opportunities for us given this capital in sourcing that we are starting to see play out.
Speaker Change: The next question is from Wes Golladay with Baird. Please go ahead.
Wes Golladay: Hey, everyone. Just a quick question on the funds how are you thinking about.
Wes Golladay: The assets that will go into the fund do you have a pipeline of deals that you're looking at any particular asset type where you see that with some royalty income assets just your latest thoughts.
Wes Golladay: Yeah.
Wes Golladay: Wes I think.
Wes Golladay: We had talked about this but I'll mention it again, yes, there is a seed portfolio, which realty income owns 100%.
Wes Golladay: And that's what's going to go to seed the fund we are not planning to pay down.
Wes Golladay: Or sell down our interest are being the public shareholders' interest in this in the seed portfolio.
Wes Golladay: But we're going to use that as a foundation to raise capital that we will then invest in new opportunities.
Wes Golladay: And over time you know.
Wes Golladay: We own 100% of the fund today and over time, we will dilute ourselves down, but we will continue to be a meaningful owner.
Wes Golladay: The fun and that's where the alignment comes in we genuinely think that the private capital is it complementary form of equity today, we have one source of equity and we've heard our investors loud and clear, saying look you've got this.
Wes Golladay: Amazing platform that has the ability to invest a lot of capital, but part of the down side of that as youre constantly in the public market and so in order to create this alternative we have decided to go down this path as a complementary complementary form of equity capital.
Wes Golladay: That I believe we are the only one within our net lease space that can that can do that.
Wes Golladay: So I.
Wes Golladay: I don't really see a major conflict.
Wes Golladay: I've mentioned that the initial yield is something that our public shareholders are very focused on as this should be but it is of less importance to our private shareholders as long as we are able to meet the overall return profile that we are underwriting to and so that in itself creates opportunities for us to continue to <unk>.
Wes Golladay: Leverage our existing platform and invest capital and then having a bit of an asset light model, but the public shareholders because without having to raise any public equity we're able to generate.
Wes Golladay: Permanent.
Wes Golladay: Income that goes to the benefit of our of our public shareholders. So that's how I see this.
Wes Golladay: <unk>.
Wes Golladay: Playing in the future.
Wes Golladay: Yeah that makes sense, yeah, I guess looking at your European deals. This.
Wes Golladay: This quarter you got both the high going in Europe, and then also the big pop later down the road could you talk about maybe how you're seeing the unlevered return on that or.
Wes Golladay: The stabilized yield on the European assets once you get that mark to market.
Wes Golladay: Oh.
Wes Golladay: I think that we could get 10, 5% 11%.
Wes Golladay: Uplift from just a mark to market on the cap rate compression and potentially higher than that.
Wes Golladay: On on being able to mark to market rent, which will take us time.
Wes Golladay: But as these rents start to roll as we were able to reposition these assets with.
Wes Golladay: More pristine retailers I think the value is going to potentially go up even more.
Wes Golladay: One could make the argument and I'm getting an indication from from you know that we might be about 40%.
Wes Golladay: Below what the valuation is.
Wes Golladay: In terms of when it's fully realized and fully repositioned with the right retail setup, that's the kind of value uplift that we could have on the on the retail parks.
Speaker Change: The next question is from Linda Tsai with Jefferies. Please go ahead.
Linda Tsai: Hi in terms of driving the top line growth in Europe to recapture and Mark to market is this a strategy you had in mind for some time or something Youre verbalizing more concrete concretely now.
Linda Tsai: It's always been our strategy Linda you know what we found was what started off as saying Hey, you do the sum of the parts and we are getting this retail parks at a massive discount to what we would be pursuing.
Linda Tsai: These these clients on a one off basis.
Linda Tsai: What started off that way soon morphed into the more lines. We started to control the kind of conversations that we started to have with the retailers who wanted to grow and wanted to grow in a location you know basically.
Linda Tsai: Formulated the strategy that we originally had theoretically but now are starting to see play out.
Linda Tsai: We've had situations where retailers like <unk> have come in and have identified assets.
Linda Tsai: Where they want to go and position themselves and that in itself will be an immediate uplift uplift in rent as well as in value.
Linda Tsai: Just given the given what <unk> represents for these locations.
Linda Tsai: So yes.
Linda Tsai: Yes, initially it started off as hey, we are getting great assets at well below.
Linda Tsai: Replacement cost too. This is a strategy we want to be much more aggressive on and now that we do control the the.
Linda Tsai: The sites that we do we are starting to see these strategies play out.
Speaker Change: What percentage of your portfolio, our retail parks right now and then what is the Tam.
Linda Tsai: In.
Linda Tsai: And in Europe, which represents about 10% actually it's primarily UK and Ireland.
Linda Tsai: It's about 40% and in dollar value, it's about $12 billion $13 billion of total investments that we have of which I would say between the U K and Ireland, it's about 10.
Linda Tsai: And we I would say about $4 billion.
Linda Tsai: Is is retail parks in terms of our investment not in terms of the valuation.
Speaker Change: The next question is from Oops, Colorado with Keybanc. Please go ahead.
Sumit Roy: Alright. Thank you Sumit, you mentioned, possibly being in a position to increase investment volume.
Speaker Change: Given the ongoing market volatility and the vantage of royalties platform.
Speaker Change: Are you seeing any market dislocations across larger portfolio transactions that you could potentially take advantage of.
Speaker Change: We are having discussions.
Speaker Change: And look we were able to do one in the fourth quarter of last year.
And I do expect that if this environment. This uncertainty continues to play out more and more people are going to find the sale leaseback product as a.
Speaker Change: A positive alternative to the debt markets, that's available and so.
Speaker Change: I think that that sort of a backdrop could lead to larger transactions, but I just wanted to be very clear about the 4 billion that we've talked about this is basically a flow business. This does not anticipate any large scale.
Speaker Change: <unk> $600 million.
Speaker Change: Portfolio transactions, if those happen, which we hope does then that's going to be an uplift to our earnings guidance as.
Speaker Change: As well as our acquisitions guidance.
Speaker Change: Okay, Great that was helpful. And then just on the you mentioned that they were all released and we're able to capture 94% of your prior ABR, Yes could you remind us of your original expectation was zips on any details on who you released your locations two or if there will be any downtime. There then.
Speaker Change: Are there any other tenants on your watch list that you want to highlight or give an update on.
Speaker Change: Yeah, well, Paul just to be clear, we didn't have a single asset that was rejected.
Speaker Change: All 100% of our assets were.
Speaker Change: They basically zips continue to operate it where we did have the reason why it went from 100 to 94, 3% was we did negotiate the rent on some of their assets and that's where it went from 100% to 94, 3%. We did not end up having to go.
Speaker Change: And find another client to step in.
Speaker Change: As an operator on these assets.
Speaker Change: And as part of that we negotiated higher internal growth.
Speaker Change: On an annual basis, we negotiated a longer term lease on in aggregate.
Speaker Change: And are very hopeful.
Speaker Change: <unk>.
Speaker Change: Now having emerged I believe they emerged last week.
Speaker Change: With a balance sheet that is more conducive to you know to their operations.
Speaker Change: The next question is from Anthony pay alone with J P. Morgan. Please go ahead.
Anthony: Yes. Thanks.
Speaker Change: First one is just on bad debts, I think last quarter, you said 75 basis points for the year and so I'm just wondering kind of what.
Speaker Change: Of that you think you've used thus far have visibility on kind of where it all sets.
Speaker Change: Yes, that's what I would say overall, we're reiterating that 75 basis points for the full year.
Speaker Change: When you look at the footnote to the income statement you did see that we recognized a little bit over $6 million of bad debt expense in Q1, and so trending a little bit lighter for Q1, but I'm just.
Speaker Change: Yes.
Speaker Change: Stay somewhat conservative we are ticking that original forecast, which includes some unidentified cushion.
Speaker Change: Okay.
Speaker Change: Okay and then just.
Speaker Change: On the deal flow.
Speaker Change: You kept the 4 billion you know the first quarter is obviously a stronger peso would get you north of four has much changed in terms of the flow and pipeline just in recent weeks or last couple of months given sort of the macro picture.
Speaker Change: No I wouldn't say anything has changed in recent weeks.
Speaker Change: Just feel like you know, we don't want to put ourselves in a box, where we are extrapolating what we achieved in the first quarter and then find ourselves having to chase deals, which we would never do we just feel like there is plenty of uncertainty right now.
Speaker Change: And it is better for us to when we have the signed contracts in place to come to you and say we are increasing our guidance.
Speaker Change: Versus you know increasing our guidance and then pursuing transactions that we expect will unfold.
Speaker Change: It's just it's just how we've always done it Anthony you've been you'll be following us for a very long time and.
Speaker Change: I just think it's prudent.
Speaker Change: The next question is from Omar Tayo Okusanya with Deutsche Bank. Please go ahead.
Speaker Change: Yes, good evening.
Speaker Change: Oh hi.
Speaker Change: I I get everything you guys have said so far about.
Speaker Change: Buy it on a longer term basis.
Speaker Change: Right.
Speaker Change: Talk a little bit about.
Speaker Change: Is there a big difference between retail parks.
Speaker Change: Okay.
Speaker Change: The kind of traditional big box retail.
Speaker Change: The U S. Because I think that's probably the way most of us thinking about it.
Speaker Change: The big box retail everyone's I was worried about.
Speaker Change: This is immediate.
Speaker Change: e-commerce and things of that sort.
Speaker Change: Right.
Speaker Change: The retail parks in the UK.
Speaker Change: Yes, I think the biggest difference is the net lease like characteristics of retail parks on material.
Speaker Change: If you if you think about you know any capital spend that is required.
Speaker Change: He wanted to do striping of the parking lot, so lighting or security et cetera that capex discussion happens upfront in any given year and all of the retailers that are out there.
Who are who are on that particular retail park agreed to sharing in that cost. So the flow through mechanism that we are seeing in the U K is very similar to what we would experience in a single tenant asset where you know the.
Speaker Change: The obviously the maintenance cost is all borne by the client.
Only time, it's different.
Speaker Change: When you have a vacant unit.
Speaker Change: And you know you have business rates et cetera, and thats the leakage, but that's no different than what you would have when you have a vacant unit or a vacant freestanding asset that we have because our client either the lease expired or there was an event and we are having to pay the insurance and the taxes.
Speaker Change: As well as the maintenance of that building.
Speaker Change: So from that perspective.
Speaker Change: I think that.
Speaker Change: You know it.
Speaker Change: Is it is.
Speaker Change: Very akin to what we see in the in the net lease business. That's why you haven't seen much of an impact.
Speaker Change: To our margins.
Speaker Change: Given this given this.
Speaker Change: Strategy.
Speaker Change: Now if you see.
Speaker Change: You mentioned omni channel a lot of what we've done is over the last two to three years. So all of these concepts that we're exposing ourselves to including grocery by the way.
Speaker Change: Have already been experiencing the disruption elements of the Omnichannel strategy I mean, the grocers that we have if you look at the top four shops five grosses they account for 75% of all Internet driven.
Speaker Change: Grocery expenses and so you know these retailers in some ways have have perfected their strategy to embrace omnichannel otherwise. They are no longer you know strong retailers today and either they are basically surviving on their last legs or.
Speaker Change: Or they no longer exist. So I don't see that as much of an impact what we do see is reconfiguring. The sites you know from.
Speaker Change: More discretionary use to non discretionary uses and that's some of the examples that I was sharing with you which will actually result in a valuation uplift as well as rent recapture uplift. So that's really why we're doing this so it is different in some ways from what you experienced here in the U S.
Speaker Change: That's very helpful. Thank you.
Speaker Change: Sure.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Sumit Roy for any closing remarks.
Speaker Change: Thank you all for joining US today, we look forward to speaking soon and seeing you at conferences in the coming weeks have a good evening.
Speaker Change: Yes.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
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