Q1 2026 NETSTREIT Corp Earnings Call

April 21, 2026

Speaker #1: Greetings and welcome to NETSTREIT Corp. First Quarter 2020 Earnings Conference Call. At this time, all participants are on a listen-only mode.

Operator: Greetings, and welcome to NETSTREIT Corp. Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Miller. Thank you. You may begin.

Speaker #1: A question and answer session will follow the formal presentation . If anyone should require operator assistance during the conference , please press Star Zero on your telephone keypad .

Speaker #1: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Miller. Thank you.

Speaker #1: You may begin .

Speaker #2: Good morning , and thank you for joining us for NETSTREIT Corp. first Quarter 2020 earnings conference call . On today's call , management's remarks and responses to your questions may contain statements considered forward looking under federal securities law , these statements address matters subject to risks and uncertainties that may cause actual results to differ from those discussed today .

Matt Miller: Good morning, and thank you for joining us for NETSTREIT's Q1 2026 earnings conference call. On today's call, management's remarks and responses to your questions may contain statements considered forward-looking under federal securities law. These statements address matters subject to risk and uncertainties that may cause actual results to differ from those discussed today. For more information on these factors, we encourage you to review our latest Form 10-K and other SEC filings. All forward-looking statements are made as of today's date, and NETSTREIT assumes no obligation to update them in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions, reconciliations to the most comparable GAAP measures, and an explanation of their usefulness to investors.

Speaker #2: For more information on these factors, we encourage you to review our latest Form 10-K and other SEC filings. All forward-looking statements are made as of today's date and NETSTREIT Corp.

Speaker #2: Assumes no obligation to update them in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures.

Speaker #2: Please refer to our earnings release and supplemental package for Definition's . Reconciliations to the most comparable GAAP measures and an explanation of their usefulness to investors These materials can be found in Investor Relations section of the company's website at NETSTREIT Corp.

Matt Miller: These materials can be found in the investor relations section of the company's website at netstreit.com. Today's call is hosted by NETSTREIT's CEO, Mark Manheimer, and CFO, Dan Donlon. They will make some prepared remarks, followed by a Q&A session. With that, I'll turn the call over to Mark.

Speaker #2: Today's call is hosted by NETSTREIT Corp. Mark Manheimer and CFO Dan Donlan . They will make some prepared remarks followed by a Q&A session With that , I'll turn the call over to Mark .

Speaker #3: Thank you , Matt , and good morning , everyone . Thank you for joining us today to discuss NETSTREIT Corp. first quarter 2026 results .

Mark Manheimer: Thank you, Matt, and good morning, everyone. Thank you for joining us today to discuss NETSTREIT's Q1 2026 results. I want to begin by thanking our entire team for their outstanding execution and dedication. We carried strong momentum from our record 2025 into the new year, and the organization has hit the ground running. In the first quarter, we saw continued acceleration on the investment front. We closed on $239 million of gross investment activity, driven by well-priced opportunities in our core necessity and service-based sectors, including grocery, convenience store, quick service restaurants, auto service, and other essential retail. These investments were completed at an attractive blended cash yield of 7.5%, with a weighted average lease term of 14.1 years. Complementing this, we executed targeted dispositions that further enhanced portfolio quality, reduced tenant concentrations, and recycled capital into higher quality, longer duration opportunities.

Speaker #3: I want to begin by thanking our entire team for their outstanding execution and dedication. We carried strong momentum from our record 2025 into the new year, and the organization has hit the ground running. In the first quarter, we saw continued acceleration on the investment front.

Speaker #3: We closed on $239 million of gross investment activity , driven by well-priced opportunities and our core necessity and service based sectors , including grocery , convenience store , quick service restaurants , auto service and other essential retail These investments were completed at an attractive blended cash yield of 7.5% , with a weighted average lease term of 14.1 years , complementing this , we executed targeted dispositions that further enhanced portfolio quality , reduced tenant concentrations , and recycled capital into higher quality , longer duration opportunities This robust start to the year reflects the depth of our sourcing platform and our team's ability to move quickly across a number of smaller transactions , while still adhering to our stringent underwriting criteria While there have been a few new participants entered the net lease business in recent years , something that has happened in each of each and every cycle .

Mark Manheimer: This robust start to the year reflects the depth of our sourcing platform and our team's ability to move quickly across a number of smaller transactions while still adhering to our stringent underwriting criteria. While there have been a few new participants enter the net lease business in recent years, something that has happened in each and every cycle, the market remains extremely fragmented and ripe with attractive opportunities. Turning to the portfolio, we ended the quarter with 804 properties leased to 138 tenants across 28 industries in 46 states. Our weighted average remaining lease term increased to 10.2 years, while the percentage of investment grade and investment grade profile tenants remained flat at 58.3% of ABR. Unit level rent coverage across the portfolio remains healthy and ticked up slightly to 3.9 times. Occupancy remained at 99.9%, but subsequent to quarter end, our occupancy has returned to 100%.

Speaker #3: The market remains extremely fragmented and ripe with attractive opportunities. Turning to the portfolio, we ended the quarter with 804 properties to 138 tenants across 28 industries and 46 states.

Speaker #3: Our weighted average remaining lease term increased to 10.2 years , while the percentage of investment grade and investment grade profile tenants remained flat at 58.3% of ABR unit level rent coverage across the portfolio remains healthy and ticked up slightly to 3.9 times .

Speaker #3: Occupancy remained at 99.9% , but subsequent to quarter end , our occupancy has returned to 100% . In early April , we backfilled our loan vacancy .

Mark Manheimer: In early April, we backfilled our lone vacancy, a former Big Lots location, with A-rated TJ Maxx at a more than 20% increase in rent. While vacancies have been extraordinarily rare in our portfolio, this execution highlights the expertise of our real estate underwriting and the asset management teams. On the balance sheet, we continue to maintain a conservative and flexible capital structure. Following the capital raising completed in the quarter, our leverage was an industry-leading 3.2 times. With substantial liquidity under our revolving credit facility and the benefit of previously raised forward equity, we are well-positioned to fund accelerated growth without compromising our leverage targets. Given the capital raise during the quarter, as well as the strong momentum in our investment pipeline, and attractive opportunities we are seeing, we are increasing our full year 2026 net investment activity guidance to a range of $550 million to $650 million.

Speaker #3: A former Big Lots location with a rated TJ Maxx at a more than 20% increase in rent . While vacancies have been extraordinarily rare in our portfolio .

Speaker #3: This execution highlights the expertise of our real estate underwriting and asset management teams. On the balance sheet, we continue to maintain a conservative and flexible capital structure following the capital raising completed in the quarter.

Speaker #3: Our leverage was an industry leading 3.2 times with substantial liquidity under our revolving credit facility and the benefit of previously raised forward equity .

Speaker #3: We are well positioned to fund accelerated growth without compromising our leverage targets . Given the capital raise during the quarter , as well as the strong momentum in our investment pipeline and attractive opportunities , we are seeing .

Speaker #3: We are increasing our full-year 2026 net investment activity guidance to a range of $550 million to $650 million. We are increasing the bottom end of our AFFO per share guidance range to $1.36 to $1.39.

Mark Manheimer: We are increasing the bottom end of our AFFO per share guidance range to $1.36 to $1.39. In summary, Q1 represented an excellent start to 2026, highlighted by strong momentum on the acquisitions front and opportunistic capital raising, which largely takes care of our 2026 equity needs. Our differentiated strategy, focused on high-quality real estate, rigorous underwriting, proactive portfolio management, and a low leverage balance sheet, continues to position NETSTREIT for sustainable long-term growth and value creation. With that, I'll turn the call over to Dan to review the Q1 financial results in greater detail. We will then be happy to take your questions.

Speaker #3: In summary , the first quarter represented an excellent start to 2026 , highlighted by strong momentum on the acquisitions front and opportunistic capital raising , which largely takes care of our 2026 equity needs Our differentiated strategy focused on high quality real estate , rigorous underwriting , proactive portfolio management and a low leveraged balance sheet continues to position net Street for sustainable long term growth and value creation , with that , I'll turn the call over to Dan to review the first quarter financial results in greater detail .

Speaker #3: We will then be happy to take your questions

Speaker #4: Thank you, Mark. Looking at our first quarter earnings, we reported net income of $5.7 million, or $0.06 per diluted share.

Dan Donlon: Thank you, Mark. Looking at our Q1 earnings, we reported an income of $5.7 million, or 6 cents per diluted share. Core FFO for the quarter was $32 million, or 32 cents per diluted share, and AFFO was $33.2 million, or 34 cents per diluted share, which was a 6.3% increase over last year. Turning to the expense front, our total recurring G&A in the quarter increased 9.7% year over year to $5.8 million, which is mostly the result of increased staffing and further investment in our team. That said, with our total recurring G&A representing 10% of total revenues this quarter versus 11% in the prior year quarter, our G&A continues to rationalize relative to our revenue base. Turning to the capital markets, we completed a 12.6 million share forward equity offering in early February, which raised $230.3 million of net proceeds.

Daniel Donlan: Thank you, Mark. Looking at our Q1 earnings, we reported an income of $5.7 million, or 6 cents per diluted share. Core FFO for the quarter was $32 million, or 32 cents per diluted share, and AFFO was $33.2 million, or 34 cents per diluted share, which was a 6.3% increase over last year. Turning to the expense front, our total recurring G&A in the quarter increased 9.7% year over year to $5.8 million, which is mostly the result of increased staffing and further investment in our team. That said, with our total recurring G&A representing 10% of total revenues this quarter versus 11% in the prior year quarter, our G&A continues to rationalize relative to our revenue base. Turning to the capital markets, we completed a 12.6 million share forward equity offering in early February, which raised $230.3 million of net proceeds.

Speaker #4: Core FFO for the quarter was $32 million , or $0.32 per diluted share , and a foe was $33.2 million , or $0.34 per diluted share , which was a 6.3% increase over last year Turning to the expense front , our total recurring G&A in the quarter increased 9.7% year over year to 5.8 million , which is mostly the result of increased staffing and further investment in our team .

Speaker #4: That said , with our total recurring G&A representing 10% of total revenues this quarter versus 11% in the prior year quarter , our G&A continues to rationalize relative to our revenue base Turning to the capital markets , we completed a 12.6 million share forward equity offering early February , which raised 230.3 million of net proceeds .

Speaker #4: This was supplemented by our ATM activity of 4 million shares for 73.8 million of net proceeds in total . We sold 16.6 million forward shares for 304.1 million of net proceeds in the quarter , which puts us in an excellent position to fund our forecasted net investment activity this year Turning to the balance sheet , our adjusted net debt , which includes the impact of all forward equity , was 629 million .

Dan Donlon: This was supplemented by our ATM activity of 4 million shares for $73.8 million of net proceeds. In total, we sold 16.6 million forward shares for $304.1 million of net proceeds in the quarter, which puts us in an excellent position to fund our forecasted net investment activity this year. Turning to the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $629 million. Our weighted average debt maturity is 3.8 years, and our weighted average interest rate was 4.27%. Including the extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity was $1.1 billion at quarter end, which consisted of approximately $11 million of cash on hand, $412 million available on a revolving credit facility, $606 million of unsettled forward equity, and $100 million of undrawn term loan capacity.

Daniel Donlan: This was supplemented by our ATM activity of 4 million shares for $73.8 million of net proceeds. In total, we sold 16.6 million forward shares for $304.1 million of net proceeds in the quarter, which puts us in an excellent position to fund our forecasted net investment activity this year. Turning to the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $629 million. Our weighted average debt maturity is 3.8 years, and our weighted average interest rate was 4.27%. Including the extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity was $1.1 billion at quarter end, which consisted of approximately $11 million of cash on hand, $412 million available on a revolving credit facility, $606 million of unsettled forward equity, and $100 million of undrawn term loan capacity.

Speaker #4: Our weighted average debt maturities 3.8 years and our weighted average interest rate was 4.27% , including the extension options , which can be exercised at our discretion .

Speaker #4: We have no material debt maturing until February of 2028 . In addition , our total liquidity was 1.1 billion at quarter end , which consisted of approximately 11 million of cash on hand .

Speaker #4: 412 million available on a revolving credit facility , 606 million of unsettled forward equity and 100 million of undrawn term loan capacity from a leverage perspective .

Dan Donlon: From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 3.2x at quarter end, which remains comfortably below our targeted leverage range of 4.5x to 5.5x. Moving on to 2026 guidance. We're increasing the low end of our AFFO per share guidance to a new range of $1.36 to $1.39 and increasing our net investment activity guidance to $550 to $650 million. We continue to expect cash G&A to range between $16 and $17 million. In addition, the company's AFFO per share guidance range now includes 3 to 6 cents of estimated dilution due to the impact of the company's outstanding forward equity calculated in accordance with the treasury stock method. Lastly, on 16 April, the board declared a quarterly cash dividend of $0.22 per share.

Daniel Donlan: From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 3.2x at quarter end, which remains comfortably below our targeted leverage range of 4.5x to 5.5x. Moving on to 2026 guidance. We're increasing the low end of our AFFO per share guidance to a new range of $1.36 to $1.39 and increasing our net investment activity guidance to $550 to $650 million. We continue to expect cash G&A to range between $16 and $17 million. In addition, the company's AFFO per share guidance range now includes 3 to 6 cents of estimated dilution due to the impact of the company's outstanding forward equity calculated in accordance with the treasury stock method. Lastly, on 16 April, the board declared a quarterly cash dividend of $0.22 per share.

Speaker #4: Our adjusted net debt to annualized adjusted EBITDA was 3.2 times at quarter end , which remains comfortably below our targeted leverage range of four and a half to five and a half times Moving on to 2026 , guidance , we increasing the low end of our AFO per share guidance to a new range of $1.36 to $1.39 and increasing our net investment activity guidance to 550 to 650 million .

Speaker #4: We continue to expect cash G&A to range between 16 and 17 million . In addition , the company's AIF per share guidance range now includes 3 to $0.06 of estimated dilution due to the impact of the company's outstanding forward equity , calculated in accordance with the Treasury stock method Lastly , on April 16th , the board declared a quarterly cash dividend of $0.22 per share .

Speaker #4: The dividend will be payable on June 15 to shareholders of record as of June 1. With that, operator, you may now open the line for questions.

Dan Donlon: The dividend will be payable on 15 June to shareholders of record as of 1 June. With that, operator, you will now open the line for questions.

Daniel Donlan: The dividend will be payable on 15 June to shareholders of record as of 1 June. With that, operator, you will now open the line for questions.

Speaker #1: Thank you . At this time , we'll be conducting a question and answer session . If you'd like to ask a question , please press star one on your telephone keypad .

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Hendel St. Just with Mizuho. Please proceed with your question.

Speaker #1: A confirmation tone . When . Indicate your line is in the question queue . You may press star two if you'd like to remove your question from the queue .

Speaker #1: For participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys . One moment please , while we poll for questions Our first question comes from Haendel Saint .

Speaker #1: With Mizuho . Please proceed with your question

Speaker #5: Hey , guys . Good morning and congrats on a strong quarter here Seems like things are clicking on all cylinders here . I guess I was curious about the level of activity in the first quarter .

Hendel St. Just: Hey, guys. Good morning, and congrats on a strong quarter here. Seems like things are clicking on all cylinders here. I guess I was curious about the level of activity in Q1. I guess it was close to a record quarter for you guys. If you think about what implies for the rest of the year, it seems there's pretty meaningful slowdown in activity. Maybe some color on what you saw in Q1 that drove such robust activity, what you're seeing in the pipeline, and maybe expectations near term, given what the new guide implies for activity going forward. Thanks.

Haendel St. Juste: Hey, guys. Good morning, and congrats on a strong quarter here. Seems like things are clicking on all cylinders here. I guess I was curious about the level of activity in Q1. I guess it was close to a record quarter for you guys. If you think about what implies for the rest of the year, it seems there's pretty meaningful slowdown in activity. Maybe some color on what you saw in Q1 that drove such robust activity, what you're seeing in the pipeline, and maybe expectations near term, given what the new guide implies for activity going forward. Thanks.

Speaker #5: I guess it was close to a record quarter for you guys. But if you think about what it implies for the rest of the year, things are pretty meaningful.

Speaker #5: Slowdown in activity . So maybe some color on what you saw in the first quarter that drove such robust activity . And what you're seeing in the pipeline , and maybe expectations near term , given what the new guide implies for activity going forward ?

Speaker #5: Thanks

Speaker #3: Yeah . Thanks , Randall . Yeah . I mean , I think obviously it was a very strong quarter , similar to the fourth quarter that we just had .

Mark Manheimer: Yeah. Thanks, Hendel. Yeah, I think obviously it was a very strong quarter, similar to the Q4 that we just had. We're just really seeing very attractively priced opportunities that fit our investment criteria, which I think is a credit to the acquisitions team and the underwriting team of kind of getting all of that through the system pretty quickly. We're seeing a very similar environment right now. Pricing, we expect to remain relatively the same, give or take 10 basis points. We just want to be conservative with what's going to happen in the H2. We certainly feel very comfortable that we can sustain this level of acquisitions, but we want to make sure that we're out ahead of our capital needs.

Speaker #3: We're just really seeing very attractively priced opportunities that fit our investment criteria , which I think is a credit to the acquisitions team and the underwriting team of , you know , kind of getting all that , all that through the system pretty quickly .

Speaker #3: We're seeing a very similar environment right now . Pricing . We expect to remain relatively the same . You know , give or take ten basis points .

Speaker #3: And so , you know , we just want to be conservative with , you know , what's going to happen in the back half of the year .

Speaker #3: We , you know , we certainly feel very comfortable that we can sustain this level of acquisitions . But , you know , we want to make sure that we're we're out ahead of our capital needs .

Speaker #5: That's that's helpful . I guess , is there anything more on the competitive side that you can maybe share ? You know , there's been lots of , you know , geopolitical macro volatility .

Hendel St. Just: That's helpful. I guess, is there anything more on the competitive side that you can maybe share? There's been lots of geopolitical macro volatility. I'm curious if you're seeing maybe perhaps some of the private equity players step back a bit here. Your ability to win your fair share of deals seems to not face any, I guess, headwinds. I guess I'm curious, that competitive set, what you're seeing from them, and perhaps if you're expecting the landscape near term to be more of the same or perhaps for maybe just a change in the level of volume or competition near term, given what we're seeing in the macro. Thanks.

Haendel St. Juste: That's helpful. I guess, is there anything more on the competitive side that you can maybe share? There's been lots of geopolitical macro volatility. I'm curious if you're seeing maybe perhaps some of the private equity players step back a bit here. Your ability to win your fair share of deals seems to not face any, I guess, headwinds. I guess I'm curious, that competitive set, what you're seeing from them, and perhaps if you're expecting the landscape near term to be more of the same or perhaps for maybe just a change in the level of volume or competition near term, given what we're seeing in the macro. Thanks.

Speaker #5: I'm curious if you're seeing maybe perhaps some of the private equity players step back a bit here . Your ability to win your fair share of deals seems to not face any .

Speaker #5: I guess any any headwinds . But I guess I'm curious , you know , that competitive set , what you're seeing from them .

Speaker #5: And perhaps if you're expecting the landscape near term to be more of the same, or perhaps for maybe just a change in the level of volume or competition near term, given what we're seeing in the macro.

Speaker #5: Thanks

Speaker #3: Yeah . No , look , I mean , I think I mean , I think it's a credit to the space that they're more , you know , more people looking to to get in .

Mark Manheimer: Yeah. No, look, I think it's a credit to the net lease space that there are more people looking to get in. I think there are a few that have been pretty active. We're not really running into them very often on a one-off basis. Yeah, I think the competition's really been in the space for a long period of time. You go back to kind of post-financial crisis. You had Cole, Ark, and the non-traded deploying a ton of capital, even more than what we're even seeing from the private equity world. There were still plenty of opportunities for the publicly traded REITs that had a reasonable cost of capital to go out and compete. I wouldn't expect that to change.

Speaker #3: You know , I think there are a few that have been pretty active . We're not really running into them . You know , very often on a one off basis But yeah , I mean , I think , you know , the competition has really been in the space for a long period of time .

Speaker #3: You go back to , you know , kind of post-financial crisis . You had , you know , Kol and Ark and the Non-traded deploying a ton of capital , even more than what we're even seeing from the private equity world .

Speaker #3: And there were still , plenty of opportunities for the for the publicly traded REIT's that had a , a reasonable cost of capital to go out and compete .

Speaker #3: And I wouldn't expect that to change . You know , they may look to acquire more than what they , what they've done in the past , but I don't think that's really going to have a huge impact on pricing .

Mark Manheimer: They may look to acquire more than what they've done in the past, but I don't think that's really going to have a huge impact on pricing and really our opportunity set.

Speaker #3: And really our opportunity set

Speaker #5: That's great guys . Thank you . And congrats again .

Hendel St. Just: That's great, guys. Thank you, and congrats again.

Haendel St. Juste: That's great, guys. Thank you, and congrats again.

Speaker #3: Thanks . Thanks .

Hendel St. Just: Thanks.

Mark Manheimer: Thanks.

Hendel St. Just: Thanks.

Daniel Donlan: Thanks.

Speaker #1: Our next question is from John Sulkowski Kieliszkowski with Wells Fargo . Your line is now live

Operator: Our next question is from John Kilchowsky with Wells Fargo. Your line is now live.

Speaker #6: Good morning. Thank you. My first question is on just the Treasury stock method dilution in the quarter. Could you tell us what your expectations are?

John Kilchowsky: Good morning. Thank you. My first question is on just the treasury stock method dilution in the quarter. Could you tell us what your expectations are? What's included at the midpoint in terms of expected price versus the low end and the high end?

John Kilichowski: Good morning. Thank you. My first question is on just the treasury stock method dilution in the quarter. Could you tell us what your expectations are? What's included at the midpoint in terms of expected price versus the low end and the high end?

Speaker #6: What's included at the midpoint in terms of expectation of price versus the low end and the high end

Speaker #4: Yeah , I mean , I don't want to go too much into detail . I mean , obviously we're expecting 3 to $0.06 at the midpoint .

Dan Donlon: Yeah. I don't want to go too much into detail. Obviously, we're expecting $0.03 to $0.06 at the midpoint. We're expecting, call it, $0.045. I think we've been fairly conservative on the high end, even, probably assuming even more than kind of $0.045. Our expectation is that we'll kind of drift somewhere into the low 20s and stay there. To the degree that that doesn't happen, obviously that would probably be upside relative to what we provided. We kind of just stairstep up the price per share from kind of where we ended the quarter, each and every quarter this year. Without going into too much detail. There's a healthy amount of conservatism baked in even to the high end, just from a dilution standpoint.

Daniel Donlan: Yeah. I don't want to go too much into detail. Obviously, we're expecting $0.03 to $0.06 at the midpoint. We're expecting, call it, $0.045. I think we've been fairly conservative on the high end, even, probably assuming even more than kind of $0.045. Our expectation is that we'll kind of drift somewhere into the low 20s and stay there. To the degree that that doesn't happen, obviously that would probably be upside relative to what we provided. We kind of just stairstep up the price per share from kind of where we ended the quarter, each and every quarter this year. Without going into too much detail. There's a healthy amount of conservatism baked in even to the high end, just from a dilution standpoint.

Speaker #4: You know , we're expecting a call at four and a half . I think we've been fairly conservative on the high end . Even , you know , probably assuming even more than kind of four and a half .

Speaker #4: So , you know , there are expectation is that , you know , we'll kind of drift somewhere into the , the low 20s and stay there such a degree that that doesn't happen .

Speaker #4: Obviously , that would probably be upside relative to what we provided . But you know , we kind of just stair step up the , the price per share from kind of where we ended the quarter each and every quarter this year .

Speaker #4: So , you know , without going into too much detail , but there's a healthy amount of conservatism baked in even to the high end , just from a dilution standpoint

Speaker #6: Okay . Thanks , Dan . And then maybe a follow up to that would just be what's the strategy to manage those forwards ?

John Kilchowsky: Okay. Thanks, Dan. Maybe a follow-up to that would just be, what's the strategy to manage those forwards? You have some older dated, outstanding forwards. I'm just curious if your strategy for managing those changes based on the stock price. How does this impact your growth profile heading into 2027 as you kind of get rid of these and maybe you have a faster churn of your forwards into eventually new investments?

John Kilichowski: Okay. Thanks, Dan. Maybe a follow-up to that would just be, what's the strategy to manage those forwards? You have some older dated, outstanding forwards. I'm just curious if your strategy for managing those changes based on the stock price. How does this impact your growth profile heading into 2027 as you kind of get rid of these and maybe you have a faster churn of your forwards into eventually new investments?

Speaker #6: You know , you have some some older data outstanding . Excuse me . Outstanding forwards . I'm just curious if you know your strategy for managing those changes based on the stock price .

Speaker #6: And then also how does this impact your growth profile heading into 2027 as you kind of get rid of these and maybe you have a faster churn of , of your forwards into , you know , eventually into investments

Speaker #4: Yeah, I mean, the dates really don't matter to us. What matters is: what are the lowest price forwards that we have.

Dan Donlon: Yeah, the dates really don't matter to us. What matters is what are the lowest price forwards that we have. There is a 12-month kind of expiration to these. We haven't had an issue extending those. It's really just taking what the lowest price forwards are and selling those first, because those are the most dilutive. As far as our plan for this year, we'd like to get done with everything that's still outstanding that we sold in 2024 and 2025. I think you should expect that to occur ratably over the course of the year.

Daniel Donlan: Yeah, the dates really don't matter to us. What matters is what are the lowest price forwards that we have. There is a 12-month kind of expiration to these. We haven't had an issue extending those. It's really just taking what the lowest price forwards are and selling those first, because those are the most dilutive. As far as our plan for this year, we'd like to get done with everything that's still outstanding that we sold in 2024 and 2025. I think you should expect that to occur ratably over the course of the year.

Speaker #4: I mean , there is a 12 month kind of expiration to these . We haven't had an issue extending those . So it's really just taking what the lowest price forwards are and selling those first , because those are the most dilutive .

Speaker #4: And as far as our plan for this year, we'd like to get done with everything that's still outstanding that we issue, that we sold in 2024 and 2025.

Speaker #4: So , and I think you should expect that to occur rapidly over the course of the year

Speaker #3: And yeah , you hit on something important there too , to John , you know , looking to 2027 , you know , we're taking some of that dilution now .

Mark Manheimer: You hit on something important there too, John. Looking to 2027, we're taking some of that dilution now, so that just makes it more accretive when we actually do take down the shares and really allows us to have better growth in 2027 and future years.

Speaker #3: So that just makes it more accretive when we actually do take down the shares . And , and really allows us to , to have better growth in 2027 and future years .

John Kilchowsky: Mm-hmm. Very helpful. Thank you.

John Kilichowski: Mm-hmm. Very helpful. Thank you.

Speaker #6: Very helpful . Thank you

Speaker #1: Our next question comes from Greg McGinnis with Scotiabank. Your line is now live.

Operator: Our next question comes from Greg McGinnis with Scotiabank. Your line is now live.

Speaker #7: Hey , good morning . You know , I was with the PNA guidance maintained , but a ton , plenty of liquidity and a good acquisition market .

Greg McGinnis: Hey, good morning. Obviously, with the G&A guidance maintained, but plenty of liquidity and a good acquisition market, is there any push or need in your mind to increase the size of the acquisitions team, kind of given the success that they've had and the potential for more going forward?

Speaker #7: Is there any push or or need in your mind to increase the size of the acquisitions team ? Kind of given the success that they've had and the potential for more going forward ?

Speaker #3: Yeah , that's a good question . You know , I think right now the acquisitions team is really , humming and really bringing in a ton of really attractive opportunities and , and really the filter has been pricing and where we're getting the best risk adjusted returns , I don't necessarily think if we bring on more team , that's going to automatically translate into a lot more volume .

Mark Manheimer: Yeah, that's a good question. I think right now the acquisitions team is really humming and really bringing in a ton of really attractive opportunities, and really the filter has been pricing and where we're getting the best risk-adjusted returns. I don't necessarily think if we bring on more team, that's going to automatically translate into a lot more volume. We're always making sure that we have a deep enough bench there, and right now I think the team not only gets along great and fits in very well with our culture, but they're bringing in plenty of opportunities for us to be able to hit our growth goals and beyond.

Speaker #3: But we're always making sure that we have a deep enough bench there . And right now , I think the team , not only gets along great and fits in very well with our culture , but they're bringing in , you know , plenty of opportunities for us to to be able to hit our growth , growth goals and beyond

Speaker #7: And then just looking at, on the disposition side, healthy 6.6% cash yield on those. Anything specific in there that you can talk about, or the types of tenants or assets that you're looking to— that you either sold in Q1 or that you're looking to sell later this year?

Greg McGinnis: Just looking at, on the disposition side, healthy 6.6% cash yield on those. Anything specific in there that you can talk about, or the types of tenants or assets that you either sold in Q1 or that you're looking to sell later this year?

Speaker #3: Yeah , I mean , I think the difference between this year and last year is going to be , you know , you're going to see certainly fewer dispositions .

Mark Manheimer: Yeah. I think the difference between this year and last year is going to be, you're going to see certainly fewer dispositions. We're always open to selling any asset in the portfolio if someone's willing to pay us an aggressive cap rate. It's really going to center around less so on the tenant concentrations, although you'll see a couple here and there with some pharmacies and maybe a couple of dollar stores here and there. It's really going to be more focused on where we're seeing some potential deterioration, whether it be corporate credit or unit-level performance. We'd like to try to get way out ahead of that.

Speaker #3: And , you know , we're always open to selling any asset in the portfolio . If something someone's willing to pay us an aggressive cap rate , but it's really going to center around less .

Speaker #3: So on the tenant concentrations , although you'll see , you know , a couple here and there with with some pharmacies and maybe , you know , a couple of dollar stores here and there , but it's really going to be more focused on where we're seeing some potential deterioration , whether , you know , whether it be corporate credit or unit level performance .

Speaker #3: And , you know , we'd like to try to get way out ahead of that . And , you know , I think we've been successful doing that and getting out ahead of some risks .

Mark Manheimer: I think we've been successful doing that and getting out ahead of some risks well before they start reaching headlines and really start to get more difficult to sell, which is why our credit loss rate is what it is.

Speaker #3: You know , well before they start reaching headlines and really start to get more difficult to sell , which is why our credit loss stats , are what they are .

Speaker #7: Okay, thanks, Mark.

Greg McGinnis: Okay. Thanks, Mark.

Speaker #4: Thanks , Greg .

Mark Manheimer: Thanks, Greg.

Speaker #1: Our next question is from Michael Goldsmith with UBS. Your line is now live.

Operator: Our next question is from Michael Goldsmith with UBS. Your line is now live.

Speaker #8: Good morning . Thanks a lot for taking my questions . Investment volume was robust in the first quarter . You took up the acquisition guidance pretty materially .

Michael Goldsmith: Good morning. Thanks a lot for taking my questions. Investment volume was robust in Q1, and you took up the acquisition guidance pretty materially, and you have the pre-funding. I guess, what are the factors that would limit your acquisitions kind of going forward? Q4 was strong, Q1 was equally strong. Should we expect you to kind of continue to step on the gas, or what would kind of hold you back in any way?

Speaker #8: And you have the pre funding . So I guess , you know what are the factors that would limit , you know , your acquisitions kind of going forward .

Speaker #8: Like , you know , you stepped on the , you know , fourth quarter was strong . First quarter was equally strong . Like , you know , should we expect you to kind of continue to step on the gas or what would kind of hold you back in any way ?

Speaker #3: Yeah , sure . So it's a good question . You know , we've got , you know , visibility going out 60 , 90 days .

Mark Manheimer: Yeah, sure. It's a good question. We've got visibility going out 60, 90 days. If you get beyond that, it's hard to predict not only what the opportunity set's going to look like, but also what the acquisition environment looks like, and what opportunities there are, what the pricing is. Obviously, with the war going on and a lot of geopolitical risks out there, we didn't want to get too far over our skis and predict what that's going to look like. Yeah, I think that's something that we're likely to revisit if the market remains the same and our cost of capital remains the same, then I think there's no reason why we can't keep this clip going forward for several quarters.

Speaker #3: You get beyond that . It's hard to predict , you know , not only what the opportunity set is going to look like , but also what , you know , what the acquisition environment looks like .

Speaker #3: And you know , what opportunities are , what the pricing is . And obviously , you know , with the war going on and , you know , a lot of geopolitical , you know , risks out there , we , you know , we didn't want to get too far over our skis and predict what that's going to look like .

Speaker #3: But yeah , I mean , I think that's something that we're likely to revisit if the market remains the same and our cost of capital remains the same , then I think , you know , there's no reason why we can't , you know , keep this clip going forward for several quarters

Speaker #8: And just to follow up, you know, you were able to continue to acquire quite a bit, but at a similar cap rate.

Michael Goldsmith: Just to follow up. You're able to continue to acquire quite a bit, but at a similar cap rate. I think you mentioned earlier in the prepared remarks. You are happy with the opportunities and the risk reward on what you're buying. Can you just talk a little bit about the pricing environment, what you're seeing, and what would need to happen for it to change and turn less favorable?

Speaker #8: So , and I think you mentioned earlier in the prepared remarks , you were happy with the opportunities and the risk reward on on what you're buying .

Speaker #8: So can you just talk a little bit about the pricing environment and what you're seeing and what would need to happen for it to , to change and turn less favorable ?

Speaker #3: Yeah , sure . So I mean , I think the number one thing that could , you know , make it a little bit less favorable also has an offset where our debt would get cheaper .

Mark Manheimer: Yeah, sure. I think the number one thing that could make it a little bit less favorable also has an offset where our debt would get cheaper. I think if interest rates come down, then you may see cap rates come down along with it. I don't really foresee there being much of a slowdown in the opportunity set. You go back to 2021, where the five-year was under 1% all the way up until the end of the year there. That allowed a lot of people to kind of enter the space, kind of small family offices that got very aggressive, put five-year debt on a lot of those acquisitions that they made. That debt's coming due at higher interest rates. We're starting to see some of those people that maybe don't want to refinance and are looking to sell some smaller portfolios.

Speaker #3: But I think if interest rates come down , then you may see cap rates come down along with it . I don't really foresee there being much of a slowdown in the opportunity set .

Speaker #3: You know , you had you go back to 2021 , you know , where the five year was under 1% all the way up until the end of the year .

Speaker #3: There that , you know , allowed a lot of people to kind of enter the space , kind of small family offices that got very aggressive , put five year debt on , on a lot of those acquisitions that they made that debts coming due at higher interest rates .

Speaker #3: And so, we're starting to see some of those people that maybe don't want to refinance, and, you know, are looking to sell some smaller portfolios.

Speaker #3: That's I think that's going to , you know , certainly , continue for the rest of the year because , you know , you really had that really cheap debt through 2021 .

Mark Manheimer: I think that's going to certainly continue for the rest of the year because you really had that really cheap debt through 2021, and you put 5 years on that. It really gets us through the end of 2026 and into 2027. Hard to predict there being much of a slowdown in opportunity set, but interest rates can certainly drive some cap rates down, but we just don't really see that happening too much here in the short term.

Speaker #3: You put five years on that . It really gets us through the end of 2026 and into 2027 . So hard to predict there being much of a slowdown in opportunity set , but interest rates can can certainly drive some some cap rates down .

Speaker #3: But we just don't really see that happening, you know, too much here in the short term.

Speaker #8: Thank you very much . Good luck in the second quarter .

Michael Goldsmith: Thank you very much. Good luck in Q2.

Speaker #4: Thanks , Michael .

Mark Manheimer: Thanks, Michael.

Speaker #1: Our next question comes from Jay Kornreich with Cantor Fitzgerald. Your line is now live.

Operator: Our next question comes from Jay Cornrick with Cantor Fitzgerald. Your line is now live.

Speaker #9: Hey , thanks . Good morning . I wanted to ask about the tenant credit and the watch list . You know , recognizing it's only been a couple of months since the last quarter's earnings , but has there been any changes to the watch list or how you're thinking about bad debt baked into guidance at this point ?

Jay Cornrick: Hey, thanks. Good morning. Wanted to ask about the tenant credit and the watch list, recognizing it's only been a couple of months since the last quarter's earnings. Has there been any change just to the watch list or how you're thinking about bad debt baked into guidance at this point?

Speaker #3: Yeah . No , you know , we don't see much of a change . In fact , I think if you look at the histograms that we provide in the investor presentation on , on , on slide 13 , there , you've seen some improvement really across the board with unit level performance as well as corporate performances has improved a little bit .

Mark Manheimer: Yeah, no. We don't see much of a change. In fact, I think if you look at the histograms that we provide in the investor presentation on slide 13 there, you've seen some improvement really across the board with unit level performance as well as corporate performances has improved a little bit. Look, we have a few assets under 1x coverage. I believe there's three assets that kind of fit that category, and three or four that are triple C plus on an implied rating basis. Those are ones that we're paying attention to. In each of those situations, we feel like we'll have a pretty good outcome. Really don't see much in terms of impacting AFFO for the next several years.

Speaker #3: But , you know , look , we have , you know , a few assets under one times coverage . You know , I believe there's three assets that kind of fit that that category .

Speaker #3: And you know , 3 or 4 that are triple C plus three on an implied rating basis . So those are ones that we're paying attention to .

Speaker #3: But in each of those situations , we feel like we'll have a pretty good outcome . So really don't see much in terms of impacting AFO for the next several years .

Speaker #9: Okay , thanks for that . And then if I could just follow up on the question relating to the dilution from the Treasury stock method , accounting , I guess , you know , should we be expecting that that number to come down throughout the year as you settle forward equity or as you're maybe , you know , going to be employing future capital markets activity is kind of that four and a half cents range more of a sticky number to expect going forward .

Jay Cornrick: Okay, thanks for that. If I could just follow up on the question relating to the dilution from the treasury stock method accounting. I guess, should we be expecting that number to come down throughout the year as you settle forward equity or as you're maybe going to be employing future capital markets activity? Is kind of that $0.045 range more of a sticky number to expect going forward?

Speaker #4: Yeah . I mean , it's difficult to answer the question because I don't know where the stock price is going to go , but I think you know what you should expect us to model is , you know , the stock price rising throughout the year .

Dan Donlon: Yeah, it's difficult to answer the question because I don't know where the stock price is going to go. I think what you should expect us to model is the stock price rising throughout the year, and so even though you're settling more shares, and there therefore be less dilution from those shares, the dilution stays about even because the stock price is going higher throughout the year. That's how you should think about it. Certainly going to be higher. We're certainly modeling higher than what it was in Q1. Our average stock price in the quarter was $19.26. As we sit here today, it's been in the 19s and 20s or higher 19s and 20s.

Daniel Donlan: Yeah, it's difficult to answer the question because I don't know where the stock price is going to go. I think what you should expect us to model is the stock price rising throughout the year, and so even though you're settling more shares, and there therefore be less dilution from those shares, the dilution stays about even because the stock price is going higher throughout the year. That's how you should think about it. Certainly going to be higher. We're certainly modeling higher than what it was in Q1. Our average stock price in the quarter was $19.26. As we sit here today, it's been in the 19s and 20s or higher 19s and 20s.

Speaker #4: And so even though you're settling more shares and therefore be less dilution from those shares , the dilution stays about even because the stock price is going higher throughout the year .

Speaker #4: So , you know , that's how you should think about it . It's certainly going to be higher this year . Certainly modeling higher than what it was in the in the first quarter .

Speaker #4: Our average stock price in the quarter was 1926 . So as we sit here today , it's been in the 19 and 20s or higher .

Speaker #4: 19 and 20 . So , you know what the what the midpoint assumes is kind of , you know , you're staying in and around the kind of the 20 to $21 level .

Dan Donlon: What the midpoint assumes is kind of you're staying in and around the kind of the $20 to $21 level, and that probably equates to anywhere from 4 to 5 million shares every quarter until you get out to next year.

Daniel Donlan: What the midpoint assumes is kind of you're staying in and around the kind of the $20 to $21 level, and that probably equates to anywhere from 4 to 5 million shares every quarter until you get out to next year.

Speaker #4: And , you know , that probably equates to anywhere from 4 to 5 million shares every quarter until you get out to next year .

Speaker #9: Okay . That's helpful . Thank you . That's it for me

Jay Cornrick: Okay, that's helpful. Thank you. That's it for me.

Speaker #1: Our next question comes from Smedes Rose with Citi . Your line is now live

Operator: Our next question comes from Shamiz Rose with Citi. Your line is now live.

Speaker #10: Hi. Thanks. I just wanted to ask a little bit more about what you're seeing kind of in the opportunity set. It looked like you leaned in into convenience stores a little more in the quarter.

Shamiz Rose: Hi, thanks. I just wanted to ask a little bit more about what you're seeing kind of in the opportunity set. It looked like you leaned into convenience stores a little more in the quarter. I know you've talked in the past about QSRs and maybe some more fitness. I'm just wondering where those kind of line up on your interest level right now and kind of any pricing changes around those categories.

Smedes Rose: Hi, thanks. I just wanted to ask a little bit more about what you're seeing kind of in the opportunity set. It looked like you leaned into convenience stores a little more in the quarter. I know you've talked in the past about QSRs and maybe some more fitness. I'm just wondering where those kind of line up on your interest level right now and kind of any pricing changes around those categories.

Speaker #10: I know you've talked in the past about QSR and maybe some more fitness and just wondering where those kind of line up on your interest level right now and kind of any pricing changes around those categories ?

Speaker #3: Yeah , sure . Yeah . I mean , we did buy more convenience stores in the quarter . I think that's probably not going to be the case as much in the second quarter .

Mark Manheimer: Yeah, sure. Yeah, we did buy more convenience stores in the quarter. I think that's probably not going to be the case as much in Q2. I think what we're going to be buying is going to be maybe a little bit more diversified than what we typically have bought in the past. There were just a lot. We did a lot of sale-leasebacks. Just under half of what we bought in Q1 were sale-leasebacks, and a lot of that were convenience stores, more regional operators buying smaller operators, which is kind of our favorite type of sale-leaseback because you're seeing a fixed charge coverage ratio typically go up after those acquisitions versus financing. Those were some attractive opportunities.

Speaker #3: I think what we're going to be buying is going to be maybe a little bit more diversified than what we typically have bought in the past .

Speaker #3: There were just a lot you know , we did a lot of sales spikes , just under half of what we bought in the first quarter were sale , Leasebacks .

Speaker #3: And a lot of that were , convenience store , more regional operators buying smaller operators , which is kind of our favorite type of spec because you're seeing a fixed charge coverage ratio typically go up after those acquisitions versus , you know , financing .

Speaker #3: And so those were some attractive opportunities . Right now , we're seeing maybe a little bit of a different , you know , opportunity set in that there's some more diversified , you know , pools of assets that we're that , you know , that we have under contract and , you know , are looking forward to adding to the portfolio .

Mark Manheimer: Right now, we're seeing maybe a little bit of a different opportunity set in that there's some more diversified pools of assets that we have under contract and are looking forward to adding to the portfolio. Yeah, the convenience store space is certainly one that we like. The fitness business is another one that we like, as long as we're dealing with some of the more sophisticated operators that provide unit level coverage and get very comfortable that they have enough members at those locations to generate strong enough rent coverage in the future. We were able to source a decent amount of those in Q4 and Q1, maybe a little bit less so in Q2. Quick service restaurants is always an area that we like, just sometimes the pricing can get pretty aggressive there.

Speaker #3: But yeah , the convenience store space is certainly one that we like . The fitness , you know , you know , business is another one that we like .

Speaker #3: As long as we're dealing with , you know , some of the more sophisticated operators that provide unit level coverage and get very comfortable that they have enough members at those locations to generate , you know , strong enough rent coverage in the future .

Speaker #3: And , you know , we , you know , we were able to source a decent amount of those in the fourth quarter and the first quarter , maybe a little bit less so in the second quarter .

Speaker #3: And then quick service restaurants is always that we like . Just sometimes the pricing can get pretty aggressive there . So it can be a little bit tricky to get our hands on , but we did buy a handful of Starbucks in the quarter that , you know , were really strong on placer and are doing very well .

Mark Manheimer: They can be a little bit tricky to get our hands on, but we did buy a handful of Starbucks in the quarter that were really strong on Placer.ai and are doing very well. It's always a little bit of a mix, and each quarter is a little bit different. I think I'd expect Q2 to be a little bit more diversified.

Speaker #3: So it's always a little bit of a mix, and each quarter is a little bit different, but I think, you know, I'd expect the second quarter to be a little bit more diversified.

Speaker #10: Okay . And then , you know , we noticed that Family Dollar was , I guess , upgraded to an investment grade profile from Subinvestment grade and was just wondering what drove that .

Shamiz Rose: Okay. We noticed that Family Dollar was, I guess, upgraded to an investment grade profile from sub-investment grade, and we're just wondering what drove that?

Smedes Rose: Okay. We noticed that Family Dollar was, I guess, upgraded to an investment grade profile from sub-investment grade, and we're just wondering what drove that?

Speaker #3: Yeah, I mean, it was really that they were willing to allow us to put that out there, as they are a private company now.

Mark Manheimer: Yeah, it was really that they were willing to allow us to put that out there, as they are a private company now, and so we are subject to NDAs. We can't just share everybody's financial statements and financial condition. We got them to agree to allow us to. They've always been investment-grade profile ever since they spun out, but now we're able to share that with the public.

Speaker #3: And so we are subject to NDAs. We can't just share everybody's financial statements and financial condition. And so we got them to agree to allow us to.

Speaker #3: They've always been a grade profile ever since they they spun out , but but now we're able to , to share that with the public .

Speaker #10: Okay. Great. Thank you.

Shamiz Rose: Okay. Fair enough. Thank you.

Smedes Rose: Okay. Fair enough. Thank you.

Speaker #1: Our next question comes from Wes Golladay with Baird. Your line is now live.

Operator: Our next question comes from Wes Goloday with Baird. Your line is now live.

Speaker #11: Hey, good morning, everyone. I just have a few housekeeping questions for you. For the TJ Maxx lease that you signed, has that tenant commenced rent paying as of this moment?

Wes Goloday: Hey. Good morning, everyone. I just have a few housekeeping questions for you. For the TJ Maxx lease that you signed, has that tenant commenced rent paying as of this moment?

Speaker #3: They have not . They have some work that they need to do . You know , within the store , it's a relocation store for them .

Mark Manheimer: They have not. They have some work that they need to do within the store. It's a relocation store for them. We have about a year before they actually start paying rent.

Speaker #3: And so we have about a year before they actually start paying rent .

Speaker #11: Okay. And we did notice a few loans were extended, but they were just for a very short period. Can you kind of give us an idea of what's going on and the visibility on them being repaid?

Wes Goloday: Okay. We did notice a few loans were extended, but they were just for a very short period. Can you kind of give us an idea of what's going on and the visibility on them being repaid?

Speaker #3: Yeah , sure . So , you know , I think you're probably specifically talking about Speedway and that is , you know , an ongoing negotiation where that will get extended much further .

Mark Manheimer: Yeah, sure. I think you're probably specifically talking about Speedway. That is an ongoing negotiation, where that will get extended much further. We may end up acquiring some of the assets, kind of TBD a little bit, but it should have a very positive outcome for us.

Speaker #3: We may end up acquiring some of the assets kind of TBD a little bit , but it should have a very a very positive outcome for us .

Speaker #11: Okay . Thank you very much .

Wes Goloday: Okay. Thank you very much.

Speaker #3: Thanks , Wes .

Mark Manheimer: Thanks, Wes.

Speaker #1: Our next question comes from Eric Borden with BMO Capital Markets. Your line is now live.

Operator: Our next question comes from Eric Borden with BMO Capital Markets. Your line is now live.

Speaker #12: Hey , thanks . Good morning . As you continue to lean into Igorprofile and non IG investments , you know , they do tend to have better escalators than true IG .

Eric Borden: Hey, thanks. Good morning. As you continue to lean into IG profile and non-IG investments, they do tend to have better escalators than true IG. Do you have internal growth target for these assets? How should we be thinking about the longer-term internal growth for the overall portfolio?

Speaker #12: Do you have internal growth targets for these assets? And how should we be thinking about the longer-term internal growth for the overall portfolio?

Speaker #3: Well you're right . I mean we try to negotiate you know , any time that we can to try to get better at better escalators .

Mark Manheimer: Well, you're right. We try to negotiate any time that we can to try to get better escalators. I have a little bit more leverage, more specifically, when you're doing a sale leaseback and you're writing the lease, and that a lot of the sub-investment grade or IGP opportunities that we're doing are in those categories. We try to get 2% annual, is what we shoot for. I think we're probably, on a blended basis, going to be kind of probably more in the 1.25%, is probably a good thing to model for future acquisitions. That'll continue to bring up our average escalators in the portfolio.

Speaker #3: And so , and I have a little bit more leverage , you know , more specifically when you're doing a sale leaseback and you're writing the lease and that a lot of the , you know , subinvestment grade or IGP opportunities that we're doing are in in those categories .

Speaker #3: So , you know , we try to get 2% annual is what we shoot for . I think we're probably on a blended basis , going to be kind of probably more in the 1 to 1 and a quarter .

Speaker #3: It's probably a good, good, good thing to model for future acquisitions, and that will continue to bring up our average escalators in the portfolio.

Speaker #12: Great . And then could you just quantify what what's assumed in guidance for bad debt

Eric Borden: Great. Could you just quantify what's assumed in guidance for bad debt?

Mark Manheimer: At the midpoint, we're looking in and around 50 basis points.

Speaker #4: At the midpoint , we're looking , you know , in and around kind of 50 basis points

Speaker #12: All right. Great. Thank you.

Eric Borden: All right. Great. Thank you.

Speaker #1: Our next question comes from Michael Gorman with Btig . Your line is now live .

Operator: Our next question comes from Michael Gorman with BTIG. Your line is now live.

Speaker #11: Yeah .

Speaker #13: Thanks . Good morning . If we could just go back to the Ford Equity for a minute . Obviously you've been pretty strong and opportunistic there with kind of more than 600 million outstanding that it just back of the envelope is kind of 18 months worth of acquisition volume at a pretty conservative leveraged level .

Michael Gorman: Yeah. Thanks. Good morning. If we could just go back to the forward equity for a minute. Obviously, you've been pretty strong and opportunistic there. With more than $600 million outstanding, that just back of the envelope is kind of 18 months' worth of acquisition volume at a pretty conservative leverage level. What's the target there for you to keep a runway? Is it that 18-month target, or how should we think about that going forward?

Speaker #13: What's the target there for you to keep a runway ? Is is it that 18 month target or how should we think about that going forward ?

Speaker #4: Yeah , I mean , as , as we think about it , you know , our leverage range , target leverage range is kind of four and a half to five and a half .

Mark Manheimer: Yeah. As we think about it, our leverage range, target leverage range is kind of 4.5 to 5.5. That's where we feel comfortable running the balance sheet. We could complete the $650 at the high end of our guidance and still be at 4.5. I think we'll be opportunistic with the ATM where we think it makes sense. To the degree that we continue to see opportunities at the same clip we saw in Q1, you should expect us to access that market when appropriate. I think your assessment of kind of our runway is fair. We want to stay on our front foot and make sure we're never in a position where we have to raise equity.

Speaker #4: That's where we feel comfortable , you know , running the balance sheet . We could complete the 650 at the high end of our guidance and still be at four and a half .

Speaker #4: And so I think , you know , we'll be , you know , opportunistic with the ATM where we where we think it makes sense .

Speaker #4: And , you know , to the degree that , you know , we continue to see opportunities at the same clip we saw in the first quarter , you should expect us to , you know , access that market when appropriate .

Speaker #4: But you know , I think your assessment of kind , our runway is fair , but you know , we want to stay on our front foot and make sure we're never in a position where , you know , we have to raise equity

Speaker #13: Okay . That's helpful . Makes sense . And then , Mark , maybe just thinking about the loan book again with some of the , let's call the volatility in the private credit space .

Michael Gorman: Okay. That's helpful. Makes sense. Mark, maybe just thinking about the loan book again, with some of the, let's call it the volatility in the private credit space, are you seeing more opportunities maybe on the loan book side of the portfolio to expand that? If so, how are you thinking about that in terms of the investment pipeline?

Speaker #13: Are you seeing more opportunities , maybe on the loan book side of the portfolio to , to expand that ? And if so , how are you thinking about that in terms of the investment pipeline ?

Speaker #3: Yeah , no , it's a good question . And the answer is no . I mean , really , we're looking at , providing developers with capital and kind of , you know , some acquisition capital here and there , you know , for some people , like we did on Speedway , we're not lending directly to , you know , to tenants .

Mark Manheimer: Yeah, no, it's a good question. The answer is no. Really, we're looking at providing developers with capital and kind of some acquisition capital here and there for some people like we did on Speedway. We're not lending directly to tenants, and I think we'll likely avoid that as best we can. I don't think we'd be competing with any of them, and I would not expect that to have any impact on what we're doing. In fact, I think the opportunity set on the loan side is probably not quite as good as what it was maybe a couple of years ago. I would expect us to do maybe fewer loans on a go-forward basis.

Speaker #3: And, you know, I think we'll likely avoid that as best we can. And so I don't think we'd be competing with any of them.

Speaker #3: And I would not expect that to have any impact on what we're doing . And in fact , I think the opportunity set on the on the loan side is probably not quite as good as is what it was .

Speaker #3: Maybe a couple of years ago . And so I would expect us to do maybe fewer loans on a go forward basis .

Speaker #13: That's that's very helpful . And then maybe last one for me , because it's come up a few times , obviously , C stores are important .

Michael Gorman: That's very helpful. Then maybe last one for me, because it's come up a few times. Obviously, C stores are an important exposure and a space that you like. It's also one that's going through an evolution, in kind of form and how operators are thinking about it. I think 7-Eleven announced about 650 closures last week. Can you maybe just remind us how you think about underwriting the space, both in terms of the existing portfolio and new acquisitions in terms of kind of KPIs, formats, and just how you think about that as a sector? Thanks.

Speaker #13: An important exposure and a space that you like . But it's also one that's going through an evolution in kind of form . And , and how operators are thinking about it .

Speaker #13: I think 7-Eleven announced about 650 closures last week . Can you maybe just remind us how you think about underwriting the space , both in terms of the existing portfolio and new acquisitions , in terms of KPIs , formats , just how you think about that as a sector ?

Speaker #13: Thanks .

Speaker #3: Yeah , sure . And I think that the 7-Eleven news is , you know , they're they're a very old company . They have a lot of , you know , very old , smaller stores that they're , you know , you know , doing away with .

Mark Manheimer: Yeah, sure. I think that the 7-Eleven news is they're a very old company. They have a lot of very old, smaller stores that they're doing away with. We don't own any of those. We're constantly looking at kind of a few different factors as it relates to C stores. What is the gallonage that they're generating? Is that going up or going down? We've seen pretty consistent levels across the portfolio in the C store space. In fact, it's gone up a little bit. How is the inside sales doing? They're really kind of two separate revenue drivers. Making sure that they're getting enough volume and the margins are staying the same. Seeing pretty consistent performance across our convenience store operators. Look, I think two or three years ago, we had 21 7-Elevens, now we have 13.

Speaker #3: We don't own any of those , but we're constantly looking at , you know , kind of a few different factors as it relates to Seesaws is that , you know , what is the lineage ?

Speaker #3: You know, that they're generating? Is that going up or going down? We've seen pretty consistent levels across the portfolio and the CESA space.

Speaker #3: In fact , it's gone up a little bit . And then how is the inside inside sales doing . So they're really kind of two separate revenue drivers making sure that they're getting enough volume and , and the margins are , are staying the same .

Speaker #3: And so , you know , pretty consistent performance across our convenience store . You know , operators , but , you know , look , I mean , when we , you know , I think 2 or 3 years ago , we had 21 7-Eleven .

Speaker #3: Now we have 13 because we're constantly looking at , you know , which ones are doing well , which ones aren't , and the ones that aren't aren't going to , aren't going to stay in our portfolio .

Mark Manheimer: Because we're constantly looking at which ones are doing well, which ones aren't. The ones that aren't going to stay in our portfolio until the end of the lease. We have, I think, 9.5 years of weighted average lease term on our 7-Elevens, none of them below 8.5 years. We feel pretty strong that we've got a lot of time to deal with that. That being said, we've got locations that are generating positive cash flow, and we don't think are related to the news that came out around 7-Eleven. Yeah, I think there's certainly a move towards a larger format.

Speaker #3: You know , until the end of the lease . And so , you know , we need , we have , you know , I think nine and a half years of weighted average lease term on our on our 7-Eleven .

Speaker #3: None of them below eight and a half years. So, feel pretty strong that we've got a lot of time to deal with that.

Speaker #3: But that being said, we've got locations that are generating positive cash flow, and we don't think are related to the news that came out around 7-Eleven.

Speaker #3: But yeah , I mean , I think there is certainly a move towards , you know , a larger format , you know , we're kind of seeing that across the board .

Mark Manheimer: We're kind of seeing that across the board, but really, it comes down to the fundamentals that haven't changed over the past 25 years, and that's having strong inside sales, having strong gallonage, and being able to push price and not get squeezed on margins. If you're able to do that, you're going to be successful for a long time in the convenience store space.

Speaker #3: But really it comes down to the fundamentals that haven't changed over the past 25 years . And that's having strong inside sales , having strong lineage and being able to push price and not get squeezed on margins .

Speaker #3: And if you're able to do that , you're going to be successful for a long time in the convenience store space

Speaker #13: Great. Thank you for the time.

Michael Gorman: Great. Thank you for the time.

Speaker #3: Thanks , Michael .

Mark Manheimer: Thanks, Michael.

Speaker #1: Our next question is from Linda Tsai with Jefferies . Your line is now live

Operator: Our next question is from Linda Tsai with Jefferies. Your line is now live.

Speaker #14: Thank you . Just given more volatility year to date in the ten year . As you look across your key tenant categories , C stores , grocers , home improvement , dollar stores .

Linda Tsai: Thank you. Just given more volatility year to date in the 10-year, as you look across your key tenant categories, C stores, grocers, home improvement, and dollar stores, have you seen cap rates shift more so in any of these categories?

Speaker #14: Have you seen cap rates shift more so in any of these categories ?

Speaker #3: They've been pretty consistent . So we really haven't seen much of a change . In fact , I think we've been at seven and a half for on going cap rate with very similar mix of tenants .

Mark Manheimer: They've been pretty consistent, so we really haven't seen much of a change. In fact, I think we've been at 7.5 for ongoing cap rate with very similar mix of tenants. I think the tenant mix will probably change a little bit, be a little bit more diversified in Q2, but I'd expect a very similar pricing. We haven't really seen much movement, if any, across the board.

Speaker #3: I think the tenant mix will probably change a little bit , be a little bit more diversified in the second quarter , but I'd expect a very similar , similar pricing .

Speaker #3: But we haven't really seen much movement, if any, across the board.

Speaker #14: Thanks . And then more of a big picture question . Your info per share has been high . Single digit since 2021 . How do you think about the CAGR of AFO per share over the next several years

Linda Tsai: Thanks. More of a big picture question. Your AFFO per share CAGR has been high single digit since 2021. How do you think about the CAGR of AFFO per share over the next several years?

Speaker #4: Yeah , I mean , Linda , we'd like to maintain that level . I mean , obviously this year at the high end , it's 5.3% , you know , year over year growth .

Mark Manheimer: Yeah, Linda, we'd like to maintain that level. Obviously, this year at the high end, it's 5.3% year over year growth. I think consensus assumes even higher growth next year. I think to the degree that we can maintain spreads where they are today in the kind of 190 basis points range, I certainly think we can be north of kind of where we are this year. It just remains to be seen where the stock price goes and where debt is. I think one of the many things that I feel confidence in is our team's ability to underwrite assets and get them into the portfolio in an expeditious manner. I certainly think if the cost of capital is there, the runway for us to be able to compound earnings is there for sure.

Speaker #4: And I think , you know , consensus assumes even higher growth next year . I think to the degree that we can maintain spreads where they are today and the kind of , you know , 190 basis points range , I certainly think we can be north of , you know , kind of where we are this year .

Speaker #4: But I mean , it just remains to be seen , you know , where the where the stock price goes and where debt is .

Speaker #4: But I think the one thing that, or one of the many things that, I feel confidence in is our team's ability to underwrite assets and get them into the portfolio in an expeditious manner.

Speaker #4: So , you know , I certainly think if the cost of capital is there , the runway for us to be able to , you know , compound earnings , is there for sure .

Speaker #14: Thank you

Linda Tsai: Thank you.

Speaker #1: Our next question comes from Yana Galin with Bank of America . Your line is now live .

Operator: Our next question comes from Jana Galan with Bank of America. Your line is now live.

Speaker #15: Thank you . Good morning . And congrats on the strong start to the year . There are lots of questions on C stores , but I was wondering if you could remind us on kind of how you're thinking about the grocery category now that it's above 15% .

Jana Galan: Thank you. Good morning, and congrats on the strong start to the year. There are lots of questions on C stores, but I was wondering if you could remind us on kind of how you're thinking about the grocery category now that it's above 15%, and could we see further growth there?

Speaker #15: And could we see further growth there?

Speaker #3: Yeah , that's a good question . Yana . We've seen really , you know , a lot of great opportunities in the grocery space with some strong performing stores with great credit and good lease terms .

Mark Manheimer: Yeah, no, that's a good question, Jana. We've seen really a lot of great opportunities in the grocery space with some strong performing stores with great credit and good lease terms. We expect that to continue. There's really not as much in the Q2, so a little bit difficult to predict. I don't think we'd let anything get to 20%. I think 15 is kind of nudging up against where we're comfortable. We don't really want to let things get too far above that. If there's a great opportunity, we don't want to be precluded from being able to move forward. I would expect that kind of 15% to 16% range to be pretty consistent with grocery. Just happens to be an industry that we like a lot. I think the same can be said for convenience stores.

Speaker #3: We expect that to continue. There's really not as much in the second quarter, so it's a little bit difficult to predict. I don't think we'd let anything get to 20%.

Speaker #3: And so I think 15 is kind of , you know , you know , kind of nudging up against , you know , you know , where we're comfortable and , you know , we don't really want to let things get too far above that .

Speaker #3: But if there's a great opportunity , we don't want to be excluded from being able to move forward . But I would expect that kind of 15 , 16% range to be pretty consistent with with grocery just happens to be an industry that we like a lot .

Speaker #3: And I think the same can be said for convenience stores.

Speaker #15: Thank you . And then maybe just an update on the development projects . You know , it's currently small part of the business with four underway , but can you remind us of yields there ?

Jana Galan: Thank you. Maybe just an update on the development projects. It's currently a small part of the business with four underway. Can you remind us of yields there? Would you be willing to kind of increase exposure to development if that's what some retailers prefer?

Speaker #15: And would you be willing to kind of increase exposure to development if that's what some retailers prefer ?

Speaker #3: Yeah , I mean , certainly if retailers , prefer that route and that's our best way to get the best risk adjusted returns , then that is something that we would be more aggressive on right now .

Mark Manheimer: Yeah, certainly if retailers prefer that route and that's our best way to get the best risk-adjusted returns, then that is something that we would be more aggressive on. Right now we feel like we're picking up like 25 basis points, and it just happens to be some tenants that we really want to put in the portfolio. You're really just not getting paid enough for the risk in our minds to get really aggressive on developments right now. If you were picking up 50, 75, 100 basis points, then it would be a lot more interesting to us. The pricing just isn't there. People are willing to pay up in single tenant net lease retail for the most part. The development projects are pretty short, so they don't demand that much of a premium.

Speaker #3: We feel like we're picking up, like, 25 basis points. And, you know, it just happens to be some tenants that we really want to put in the portfolio.

Speaker #3: But you know, you're really just not getting paid enough for the risk, in our mind, to get really aggressive on developments right now.

Speaker #3: You know , if you're picking up 50 , 75 , 100 basis points , then it would be , you know , a lot more interesting to us .

Speaker #3: But , you know , it the pricing just isn't there . People are willing to pay up in the , you know , in single tenant net lease retail for the most part , the development projects are pretty short .

Speaker #3: So , you know , they don't demand that much of a premium . And so we're able to get , you know , similar and , you know , similar opportunities outside of the development area and just them on the balance sheet right away .

Mark Manheimer: We're able to get similar opportunities outside of the development area and just put them on the balance sheet right away. That's right now what we're looking to do. We've had quarters where we've had almost half of what we're doing has been development. Right now it's about 10% of what we're doing. It's a little bit less. If that's to change, our acquisitions team is pretty skilled at being able to move very quickly and start adding those into the pipeline. We just don't see that happening anytime soon.

Speaker #3: And that's right now what we're looking to do , you know , we've had quarters where , you know , we've had , you know , almost half of what we're doing has been development .

Speaker #3: Right now it's about 10% of what we're doing . So it's a little bit less . But if that if that's to change our acquisition team is pretty skilled at being able to , to move very quickly and start adding those into the pipeline .

Speaker #3: We just don't see that happening anytime soon.

Speaker #15: Great. Thank you, Mark.

Jana Galan: Great. Thank you, Mark.

Speaker #1: Our next question comes from you, Paul Rana with KeyBanc Capital Markets. Your line is now live.

Operator: Our next question comes from Upal Rana with KeyBanc Capital Markets. Your line is now live.

Speaker #16: Great . Thank you Mark . Appreciate the color . You've already provided on investment pace for the rest of the year . But given we were almost through April and you probably have a good sense on on May as well , I just want to get your sense on the pace of investments for for two .

Upal Rana: Great. Thank you. Mark, appreciate the color you've already provided on investment pace for the rest of the year. Given we're almost through April, and you probably have a good sense on May as well, I just want to get your sense of the pace of investments for Q2.

Speaker #16: Q

Speaker #3: The second quarter looks strong, so I don't think you're going to see too much difference in the second quarter. We'll see what closes.

Mark Manheimer: Yeah, Q2 looks strong, so I don't think you're going to see too much difference in Q2. We'll see what closes. We're looking at some opportunities that we have under our control that may close in June, may close in July. We'll see. We're kind of getting closer to being done with sourcing for the quarter. Yeah, we like the pipeline, the quality, and the pricing. At least for Q2, I think you're going to expect a pretty similar quarter to Q1.

Speaker #3: We're looking at some some opportunities that we have under our control that may may close in June , may close in July . We'll see .

Speaker #3: You know , we're kind of getting closer to being done with sourcing for the quarter . But yeah , we like we like the pipeline .

Speaker #3: The quality and the pricing . And you know , for , you know , at least for the second quarter , I think you can expect a pretty similar quarter to the first .

Speaker #16: Okay , great . That was helpful . And then just overall , you know , dispositions were like this quarter . And you've talked about this being the case in the prior calls , but is this the pace that we should be expecting for the remainder of the year as well ?

Upal Rana: Okay, great. That was helpful. Just overall, dispositions were light this quarter, and you've talked about this being the case in the prior calls. Is this a pace that we should be expecting for the remaining third of the year as well?

Speaker #3: I think so , I mean , you know , every now and then there's an opportunity where someone comes to you and they want to pay something aggressive or , you know , take some risk off your off your hands .

Mark Manheimer: I think so. Every now and then, there's an opportunity where someone comes to you, and they want to pay something aggressive or take some risk off your hands. If that were to happen, we'd certainly move quickly on that as well. I think in general, you may see a quarter here or there that might be a little bit heavy or a little bit light, but I think in general, yeah, you can expect a pretty similar pace.

Speaker #3: And if that were to happen , you know , we certainly move quickly on that as well . But I think and in general , you may see a quarter here or there that might be a little bit heavier , a little bit light .

Speaker #3: But I think, in general, yeah, you can expect a pretty similar pace.

Speaker #16: Okay , great . Thank you

Upal Rana: Okay, great. Thank you.

Speaker #1: Our next question comes from Daniel Guglielmo from Capital One Securities. Your line is now live.

Operator: Our next question comes from Daniel Guglielmo from Capital One Securities. Your line is now live.

Speaker #17: Hi everyone . Thank you for taking my questions . Following up on the escalator question from earlier as the portfolio mix starts to move larger tenants to adding some smaller growthier tenants , are there differences in how you all manage a smaller tenant ?

Daniel Guglielmo: Hi, everyone. Thank you for taking my questions. Following up on the escalator question from earlier, as the portfolio mix starts to move from larger tenants to adding some smaller, growthier tenants, are there differences in how you all manage a smaller tenant that's maybe less visible to the public versus a large tenant that's a public filer and very visible?

Speaker #17: That's maybe less visible to the public versus a large tenant? That's a public filer, and visible?

Speaker #3: Yeah , I don't think there's much difference in terms of how we manage it . You know , certainly I think we don't want to let any concentrations get very high , you know , with some of the public tenants just because you subject yourself to some headline risk that isn't real risk as it relates to our portfolio , but we're doing the same things .

Mark Manheimer: Yeah, I don't think there's much difference in terms of how we manage it. Certainly, I think we don't want to let any concentrations get very high with some of the public tenants, just because you subject yourself to some headline risk that isn't real risk as it relates to our portfolio. But we're doing the same things across the board on every tenant. We're tracking the corporate financial performance. Obviously, you probably have a little bit less cushion with the smaller tenants than you do with some of the larger investment-grade tenants, but also tracking foot traffic and the unit level performance. We've been pretty aggressive, and we want to be proactive and not reactive on the asset management front when we start to see some potential issues.

Speaker #3: You know , across the board on every tenant . We're tracking , you know , the corporate , you know , financial performance .

Speaker #3: Obviously , you probably have a little bit less cushion with the smaller tenants than you do with with some of the larger investment grade tenants , but also tracking foot traffic and the unit level performance .

Speaker #3: And we've been pretty aggressive . And we want to be proactive and not reactive on the asset management front . When we start to see some potential issues .

Mark Manheimer: I think, if we continue to do that over time, you're just going to continue to see very low credit loss stats.

Speaker #3: And I think , you know , if we continue to do that over time , you're just going to continue to see very low .

Speaker #3: You know , credit loss stats

Daniel Guglielmo: Awesome, appreciate that. With private credit seemingly less available this year than it was last year, are you seeing more smaller operators start to search for capital funding elsewhere, like via sale-leaseback? Or is it too early to see something like that flow through to your transaction market?

Speaker #17: Awesome . Appreciate that . And then with with private credit , seemingly less available this year than it was last year , are you seeing more smaller operators start to search for capital funding elsewhere , like buy sale leaseback ?

Speaker #17: Or is it too early to see something that like that flow through to your transaction market ?

Mark Manheimer: Yeah, we have not seen that. I'd be surprised if we see a ton of that. The private credit guys were kind of not only focused on retail. They were kind of all lending to software companies. That's gotten a lot of headlines in a lot of different industries that are maybe a little bit less real estate heavy. I don't think it's going to have a huge impact one way or the other, and we have not seen any impact to date.

Speaker #3: Yeah , we have not seen that . I'd be surprised if we see a ton of that . You know , the private credit guys were kind of not only focused on retail , they're kind of all , you know , you know , lending to software companies .

Speaker #3: A lot of different that's gotten a lot of headlines and a lot of different industries that are , you know , maybe a little bit less real estate , heavy .

Speaker #3: So I don't think it's going to have a huge impact one way or the other . And we have not seen any impact to date

Daniel Guglielmo: Thank you. Appreciate it.

Speaker #17: Thank you . Appreciate it

Operator: We have reached the end of the question and answer session. I'd now like to turn the call back over to Mark Manheimer for closing comments.

Speaker #1: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Mark Manheimer for closing comments.

Mark Manheimer: Well, thank you all for joining us this morning. Good luck to the rest of the earnings season, and we look forward to seeing you at upcoming conferences. Appreciate the time.

Speaker #3: Thank you all for joining us this morning . Good luck to the rest of the earnings season , and we look forward to seeing upcoming conferences .

Speaker #3: Appreciate the time

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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