Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reported a 15% year-over-year increase in annualized base rent.
- AFFO per share increased by 3.6% year-over-year.
- Completed over $100 million in investments year-to-date.
- Increased full-year earnings guidance.
- Maintained a high occupancy rate of 99.7% across their portfolio.
Negative Points
- Continued challenges in the transaction and capital markets.
- Considerable uncertainty with respect to interest rates.
- Material bid-ask spreads between buyers and sellers.
- Potential refinancing risk with upcoming debt maturities in 2025.
- Limited traction in the convenience store investment front.
Q & A Highlights
Q: Can you provide details on the pipeline and the pricing you're seeing across your investment segments?
A: The pipeline is well distributed across all asset classes, maintaining pricing around the mid-8% cap rate range. Quick service restaurants are at the lower end of this range, while other assets are more consistent. (Mark Olear, COO)
Q: Are you seeing increased competition in the investment space?
A: The competitive landscape has remained generally the same over the last few years. Our investment team has been successful in sourcing opportunities and aligning value with sellers. (Mark Olear, COO)
Q: How have the spreads and cost of capital changed given the recent rally in share prices?
A: Closed deals have been around a 100 basis point spread, with assets under contract being slightly wider. The recent run-up in share prices could lead to increased volume or higher investment spreads. (Brian Dickman, CFO)
Q: Do you expect the 8% cap rates to be the peak, or is there potential for more upside?
A: The 8.1% cap rate for the quarter is driven by development fundings priced 12-18 months ago. We have been consistently offering in the 8% range for the balance of the year. (Christopher Constant, CEO)
Q: How are you approaching the quick service restaurant (QSR) sector?
A: We focus on building relationships and direct transactions with corporate or large franchisees that meet our underwriting criteria. This approach is similar to how we built our car wash and auto service sectors. (Christopher Constant, CEO)
Q: Can you comment on the yields during construction and how they compare to actual sale leasebacks?
A: We get a modest premium on yields for development funding due to our commitment for future deals. The realized yields are consistent with the underwritten yields, and we have seen generally good ramp-up in property performance. (Christopher Constant, CEO; Brian Dickman, CFO)
Q: Are there any tenant credit concerns within your portfolio?
A: Our tenant rent coverage has been consistent at 2.6 times. We have no specific credit concerns today, and our active dialogue with tenants helps manage individual asset performance. (Christopher Constant, CEO)
Q: What do you bake into your guidance in terms of credit loss?
A: We use about a 10 basis point assumption for credit loss, which has been de minimis over the last five years. (Brian Dickman, CFO)
Q: Is the long-term view to balance investments across all four asset classes?
A: Yes, our ultimate goal is to have a balanced investment approach across all four asset classes, although we will remain weighted towards convenience stores due to our historical portfolio. (Christopher Constant, CEO)
Q: Are you intentionally not allocating capital to the convenience store sector today?
A: No, it is not intentional. We continue to underwrite and seek opportunities in the convenience store sector, but we maintain strict real estate underwriting criteria. (Christopher Constant, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
