Financial Data and Key Metrics Changes - The company reported an AFFO per share of $0.48 for Q3 2025, representing a 12% increase compared to Q3 2024 [16] - Total AFFO for the quarter was $96.2 million, up 24% from the same period in 2024 [16] - The company increased its 2025 AFFO per share guidance to a range of $1.87-$1.89 and established initial 2026 guidance of $1.98-$2.04, implying a growth rate of 6% to 8% [9][21] 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 gap yield of 10% [7][13] - Same-store rent growth was reported at 1.6%, an increase from 1.4% in the previous quarter, with overall portfolio rent coverage increasing to 3.6x from 3.4x [8][11] - The percentage of annual base rent (ABR) under one times rent coverage declined by 120 basis points [11] 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 [10] - The company expects to invest between $1 billion and $1.4 billion in 2026, with cap rates expected to compress modestly due to a stable interest rate environment [9][20] Company Strategy and Development Direction - The company continues to focus on middle-market sale-leasebacks with growing operators, highlighting a balanced investment sourcing strategy [7] - The company aims to maintain a well-capitalized balance sheet with low leverage and significant liquidity to support growth and tenant relationships [20] 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 [25][22] - The company anticipates continued strong portfolio performance and a pace of investments consistent with historical averages [9][21] Other Important Information - The company successfully executed a $400 million unsecured bond offering with a 5.4% coupon, improving its weighted average debt maturity by approximately 18% to 4.5 years [18] - 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 lower cap rates and competition - Management indicated that lower cap rates are primarily driven by a stable interest rate environment and expressed confidence in sourcing sale-leaseback opportunities despite competition [25] Question: Industrial assets acquisition and future expectations - Management confirmed ongoing investment in industrial outdoor storage sites and expects growth in this asset type, focusing on granular, fungible assets [27] Question: Cap rate expectations and guidance - Management expects cap rates to compress modestly, with a potential static spread in the future, and noted that current assumptions are similar to those from the previous year [30][41] Question: Credit loss assumptions and portfolio performance - Management stated that credit loss assumptions for 2026 are consistent with previous years, with a focus on specific operators rather than macro trends [102] Question: Tenant credit watch list update - The tenant credit watch list has improved, currently sitting at 1.2x coverage, down 40 basis points quarter over quarter [91] Question: Investment opportunities by region - Management indicated that investment opportunities are prioritized based on tenant relationships rather than specific geographic regions [95] Question: Lease escalation risks - Management acknowledged that higher rent escalations could introduce credit risk but emphasized the importance of ensuring tenants can meet their obligations [96]