Financial Data and Key Metrics Changes - In Q3 2025, the company reported an AFFO per share of $0.48, representing a 12% increase compared to 2024, with total AFFO reaching $96.2 million, up 24% year-over-year [15][17] - The company increased its 2025 AFFO per share guidance to a range of $1.87 to $1.89 and established initial 2026 guidance of $1.98 to $2.04, implying a growth rate of 6% to 8% [7][21] - Total G&A expenses for Q3 2025 were $10.2 million, up from $8.6 million in the same period of 2024, primarily due to increased compensation expenses [15][16] Business Line Data and Key Metrics Changes - The company executed $370 million in investments during the quarter, with a weighted average initial cash yield of 8% and a strong average GAAP yield of 10% [6][13] - Same store rent growth was reported at 1.6%, an increase from 1.4% in the previous quarter, with overall portfolio rent coverage rising to 3.6 times [10][11] - The company sold seven properties for $11.5 million in net proceeds, highlighting the importance of maintaining a liquid portfolio [11][12] Market Data and Key Metrics Changes - The company ended the quarter with investments in 2,266 properties leased to over 400 tenants, maintaining a weighted average lease term of approximately 14 years [9] - The percentage of ABR under one times rent coverage declined by 120 basis points, indicating improved tenant credit trends [10][11] Company Strategy and Development Direction - The company continues to focus on middle market sale leasebacks with growing operators, aiming to balance new operator additions with existing relationships [6][10] - The investment pipeline remains strong, with expectations to invest between $1 billion and $1.4 billion in 2026, supported by a stable interest rate environment [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the investment market and capital markets, noting that the interest rate environment is more stable, contributing to lower cap rates [28][61] - The company anticipates modest cap rate compression in the coming quarters, driven by a stable interest rate environment [7][36] Other Important Information - The company successfully executed a $400 million unsecured bond offering with a 5.4% coupon, improving its weighted average debt maturity to 4.5 years [18][19] - The company declared a cash dividend of $0.30 in the quarter, resulting in an AFFO payout ratio of 63% [17] Q&A Session Summary Question: Expectations for cap rates going forward - Management indicated that lower cap rates are expected due to a stable interest rate environment and a strong pipeline of sale leaseback opportunities [28][29] Question: New industrial assets and future expectations - The company has been investing in industrial outdoor storage sites and expects to continue this trend, focusing on granular fungible assets [30][31] Question: Credit loss assumptions for 2026 - Management stated that credit loss assumptions for 2026 are consistent with previous years, with a focus on specific assets and tenants [46][47] Question: Watch list update - The watch list for tenants with coverage less than one time has improved to 1.2 times, down 40 basis points quarter-over-quarter [96] Question: Investment opportunities by state - The company prioritizes investment opportunities based on tenant relationships rather than specific geographies, indicating a broad range of opportunities across the U.S. [100] Question: Impact of increased competition - Management acknowledged increased competition but emphasized their ability to execute and maintain a good reputation as a reliable capital provider [86][121]

Financial Data and Key Metrics Changes - The company reported core FFO of $0.86 per share and AFFO of $0.87 per share for Q1 2025, each up 3.6% year-over-year, while annualized base rent increased over 5% year-over-year [13][14] - The NOI margin was 95.9% for the quarter, and G&A as a percentage of total revenues was 5.6% [14][17] - Free cash flow after dividends was approximately $55 million for the quarter [14] Business Line Data and Key Metrics Changes - The company successfully resolved 15 out of 35 vacant furniture stores through leasing or sale, with significant interest in the remaining properties [3] - For restaurant assets, the company gained full possession and has leased or sold 38 properties, with strong interest in the remaining 31 [3][4] - Overall leasing activity was strong with 25 renewals and eight new leases completed, achieving a blended rent recapture rate of 98% [15] Market Data and Key Metrics Changes - Occupancy at the end of the quarter was 97.7%, slightly below the long-term average of approximately 98% due to the eviction process [4][15] - The company experienced limited to no credit losses within the portfolio during the first quarter, indicating strong portfolio stability [5][12] Company Strategy and Development Direction - The company continues to prioritize acquiring well-located properties with strong national and regional tenants, supported by a robust balance sheet [9][10] - The acquisition strategy remains focused on sale-leaseback transactions, with a guidance of $500 to $600 million for 2025 [6][20] - The company is actively managing its assets to prepare for future uncertainties while maintaining a disciplined underwriting approach [5][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's ability to deliver excellent performance despite current macroeconomic uncertainties [5][12] - The company anticipates some cap rate pressure in 2025 compared to the previous year, but expects to maintain a strong acquisition pace [6][20] - Management highlighted the importance of their experienced team and strong processes in navigating economic cycles [12][13] Other Important Information - The company ended the first quarter with nearly $1.1 billion available on its $1.2 billion line of credit, reinforcing its self-funding model [8][17] - A quarterly dividend of $0.58 per share was announced, equating to a 5.4% annualized dividend yield [18] Q&A Session Summary Question: Acquisition pace in Q1 was higher than expected; can you expand on that? - Management noted that the elevated acquisition pace was primarily due to timing and relationships, with all but one transaction being sale-leaseback [23][24] Question: Expected pace of acquisitions moving forward? - Management maintained guidance of $500 to $600 million for acquisitions but expressed caution due to macroeconomic uncertainties [26] Question: Tenant appetite for growth amid economic volatility? - Tenants are reevaluating growth plans, with some deals canceled, but overall interest in growth remains [30][31] Question: Impact of tariffs on rent coverages? - Management indicated that 85% of their ABR comes from service and non-discretionary tenants, feeling comfortable about tariff impacts [32][33] Question: Concerns regarding discretionary tenants like Dave & Buster's and Camping World? - Management expressed confidence in both tenants, highlighting strong rent coverage and positive operational performance [56][60] Question: Contribution of less than expected bad debt to Q1 results? - The company reported minimal bad debt, with no notable credit loss year-to-date [63] Question: Outlook on lease termination income? - Lease termination income is unpredictable, but the company has seen elevated amounts recently due to specific tenant negotiations [71][73] Question: Performance outlook for new tenants in former Frisch's locations? - New tenants are performing well during the initial phase, with optimism for continued success [78] Question: Plans for remaining former restaurant properties? - There is interest in converting some properties to other uses, with ongoing negotiations [80]