Agree Realty Corporation

Good morning and welcome to the AGRI Realty first quarter 2026 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star one again. Please limit yourself to two questions during this call. Note, this event is being recorded. At this time, I would like to turn the conference over to Ruben Treatment, Senior Director of Corporate Finance. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for AgriRealty's first quarter 2026 earnings call. Before turning the call over to Joey and Peter to discuss our results for the quarter, let me first run through the cautionary language. Please note that during this call, we will make certain statements that may be considered forward-looking under federal securities law, including statements related to our updated 2026 guidance. Our actual results may differ significantly from the matters discussed in any forward-looking statements for a number of reasons. Please see yesterday's earnings release and our SEC filings, including our latest annual report on Form 10-K, for a discussion of various risks and uncertainties underlying our forward-looking statements. In addition, we discussed non-GAAP financial measures, including core funds from operations or core FFO, adjusted funds from operations or AFFO, and pro forma net debt to recurring EBITDA. Reconciliations of our historical non-GAAP financial measures to the most directly comparable GAAP measures can be found at our earnings release website and SEC filings. I'll now turn the call over to Joey.

Thank you, Ruben, and thank you all for joining us this morning. I am extremely pleased with our performance to start the year, as we have continued to execute on all fronts. During the quarter, we invested nearly $425 million across our three external growth platforms, while further strengthening our market-leading portfolio. The $403 million of acquisitions completed during the period represents our largest quarterly acquisition volume since 2022, as we continue to source superior risk-adjusted opportunities. While the macro backdrop remained highly unpredictable, we have never been better positioned. During the quarter, we raised approximately $660 million of forward equity through our ATM. We now enjoy $2.3 billion of total liquidity and more than $1.6 billion of hedge capital, including a company record $1.4 billion of outstanding forward equity. At quarter end, pro forma net debt to recurring EBITDA was just 3.2 times, giving us meaningful flexibility to execute regardless of capital markets volatility. As a reminder, we have no material debt maturities until 2028. We have married this fortress balance sheet with the highest quality retail portfolio in the country that only continues to improve. In a K-shaped economy, our industry-leading tenants stand poised to leverage their scale and value propositions to drive further share gains. We are consistently seeing leading retailers with the balance sheets and operating discipline winning across cycles and expanding their brick-and-mortar footprints. Our pipeline across all three external growth platforms is robust, yet our approach remained unchanged. We will stay consistent within our established investment parameters without compromising our underwriting standards. While our investment and earning guidance remain unchanged, I would note that we have increased our treasury stock method dilution in anticipation of an elevated stock price, and as well as the additional forward equity raised during the quarter. We'll continue to provide updates as the year progresses. and Peter will provide additional details on our guidance and input shortly. Turning to our external growth activity, we had an active start to the year, leveraging our unique market positioning and deep relationships with retail partners to uncover opportunities across all three platforms. During the first quarter, we invested nearly $425 million in 100 properties across these three platforms. Of note, during the quarter, we executed a sale leaseback with Hobby Lobby on their corporately owned stores. As we've discussed on prior earnings calls, Hobby Lobby is privately owned, has a pristine balance sheet, and stands as a clear market leader in the craft and hobby space. They are a terrific operator and partner. As a reminder, we do not impute investment grade or shadow investment grade ratings in our IG percentage. Additional acquisitions during the quarter included a Home Depot, five Wawa ground leases in Pennsylvania and Maryland, a portfolio of 11 Sherwin-Williams stores, several Aldi's and three Walmarts located in Georgia and South Carolina. The acquired properties had a weighted average cap rate of 7.1% and a weighted average lease term of 11.3 years. Nearly 60% of base rent acquired was derived from investment grade retailers and we continue to add to our ground lease portfolio during the quarter. As previously discussed, we continue to see increased activity across our development and developer funding platforms. During the first quarter, we convinced two new development or DFP projects with total anticipated costs of approximately $18 million. Construction continued on nine projects during the quarter with aggregate and anticipated costs of approximately $71 million. We completed four projects during the quarter representing a total investment of approximately $23 million. Our development and DFP pipelines continue to grow significantly. and we expect development and DFP activity to meaningfully ramp in the second and third quarters, including several additional projects that have commenced subsequent to quarter end. Moving on to dispositions, we sold seven properties during the quarter for total gross proceeds of approximately $11 million at a weighted average cap rate of 6.8%. This activity included both a Jiffy Lube and Dutch Brothers that were included in the grocery portfolio acquisition last year. We sold these assets approximately 300 basis points inside of where we acquired them less than one year ago, highlighting our ability to opportunistically recycle capital and harvest value across our portfolio. Our asset management team continues to do an excellent job proactively addressing upcoming lease maturities. We executed new leases, extensions, or options on over 876,000 square feet of gross leaseable area during the first quarter, with a recapture rate of over 104%. This included a Walmart Supercenter in Whitewater, Wisconsin, and a Home Depot in Orange, Connecticut. We remain well positioned for the remainder of the year with just 29 leases or 90 basis points of annualized base rent maturing, which is down 60 basis points quarter over quarter and 260 basis points year over year. We ended the quarter with pharmacy exposure at 3.5% of annualized base rent, and it now falls outside of our top 10 sectors. a meaningful milestone given that pharmacy once exceeded 40% of our portfolio. Anchored by assets such as our Walgreens on the corner of the Diag on the University of Michigan's campus and our CVS on Greenwich Avenue, we are confident in the real estate and performance of our remaining pharmacy assets. As of quarter end, our best-in-class portfolio comprised 2,756 properties spanning all 50 states. The portfolio included 261 ground leases comprising over 10% of annualized base rent. Our investment grade exposure stood at over 65%, and occupancy is strong at 99.7%, up 50 basis points year over year. Before I hand the call over to Peter, I'd like to thank and compliment the tremendous work he and his team did on the creation of our inaugural supplement. We have taken feedback from a number of constituents, and created a first-class document that provides investors and analysts with a thorough picture of our portfolio and financials. Peter, thank you and take it away.

Thank you, Joey. Starting with the balance sheet, we were very active in the capital markets during the first quarter, selling 8.7 million shares of forward equity via our ATM program for anticipated net proceeds of approximately $658 million. This represents yet another company record for equity raised in the quarter, and underscores our ability to raise equity at scale via our ATM and in a cost efficient manner. At quarter end, we had approximately 18.4 million shares of outstanding forward equity, which are anticipated to raise net proceeds of approximately $1.4 billion upon settlement. Additionally, during the period, we drew $250 million on our previously announced $350 million delayed draw term loan. As a reminder, we entered into forward starting swaps to fix SOFR through maturity in 2031, and inclusive of those swaps, the term loan bears interest at a fixed rate of 4.02%. We also took further steps to hedge against interest rate volatility, entering into $50 million of forward starting swaps during the quarter. In total, we now have $250 million of forward starting swaps, effectively fixing the base rate for a contemplated 10-year unsecured debt issuance at roughly 4.1%. Combined with the approximately $1.4 billion of outstanding forward equity, we have over $1.6 billion of hedge capital, which provides critical visibility into our intermediate cost of capital, particularly amidst recent geopolitical and macro uncertainty. At quarter end, we had liquidity of approximately $2.3 billion, including the aforementioned forward equity availability on a revolving credit facility, term loan, and cash on hand. Pro forma for the settlement of all outstanding forward equity, our net debt to recurring EBITDA was approximately 3.2 times. Our total debt to enterprise value is under 29%, and our fixed charge coverage ratio, which includes the preferred dividend, remains very healthy at 4.2 times. Our sole short-term or floating rate exposure was comprised of outstanding commercial paper borrowings at quarter end. And as Joey mentioned, we continue to have no material debt maturities until 2028. Our balance sheet is extremely well positioned to execute on a robust investment activity across all three external growth platforms. Moving to earnings, core FFO per share was $1.13 for the first quarter, which represents an 8.1% increase compared to the first quarter of last year. AFFO per share was $1.14 for the quarter, representing a 7.9% year-over-year increase which is the highest quarterly AFFO per share growth achieved since the second quarter of 2022. As Joey noted, we are reiterating our full year 2026 AFFO per share guidance of $4.54 to $4.58, which implies approximately 5.4% year-over-year growth at the midpoint. We provide parameters on several other inputs in our earnings release, including investment and disposition volume, general and administrative expenses, non-reimbursable real estate expenses, as well as income tax and other tax expenses. Our current guidance also includes anticipated Treasury stock method dilution related to our outstanding forward equity. Provided that our stock continues to trade around current levels, we anticipate that Treasury stock method dilution will have an impact of two cents to four cents on full year 2026 ASFO per share. This is up from approximately one penny in our prior guidance due to both a higher share price and more forward equity outstanding. As always, the impact could be higher or lower if our stock price moves significantly above or below current levels. During the quarter, we recorded approximately $2.4 million of percentage rent, up from $1.6 million in the first quarter of last year. Roughly a third of the increase was driven by strong same-store sales performance across this group of leases, as we have actively targeted leases with potential percentage rent upside. The remainder reflects a timing shift as certain tenants that have historically paid percentage rent in Q2 contributed in Q1 of this year. Our growing and well-covered dividend continues to be supported by our consistent and durable earnings growth. During the first quarter, we declared monthly cash dividends of 26.2 cents per common share for January, February, and March. The monthly dividend equates to an annualized dividend of over $3.14 per share and represents a 3.6% year-over-year increase. Our dividend is very well covered with a payout ratio of 69% of AFFO per share for the first quarter. We anticipate having over $140 million in free cash flow after the dividend this year, an increase of over 10% from last year. This provides us another source of cost-efficient capital while maintaining a healthy and growing dividend. Subsequent to quarter end, we announced an increased monthly cash dividend of 26.7 cents per common share for April. This represents a 4.3% year-over-year increase and equates to an annualized dividend of over $3.20 per share. Our inaugural financial supplement this quarter includes several non-GAAP financial metrics and key performance indicators, including our recapture rate, credit and occupancy loss, and same-store rent growth. The enhanced disclosures are intended to provide better visibility into our operations and highlight the high-quality nature of our tenancy and portfolio, reflecting our best-in-class execution. We also hope the supplement serves as a one-stop resource that centralizes the key information needed to understand the performance and drivers of our business. With that, I'd like to turn the call back over to Joey.

Thank you, Peter. Operator, at this time, let's open it up for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. As a reminder, we ask that you please limit yourself to two questions. We'll take our first question from Janet Gallen at Bank of America.

Thank you. Good morning. Julie, if you could just follow up on the investment guidance. I know it's already been raised once this year, but with 1.6 billion of hedge capital already raised, just, you know, curious if you could kind of expand on, you know, the pace or, you know, the size of the different pipelines for the platforms.

Sure. Good morning, Yana. How are you?

Great. Thanks.

So, our pipeline, as I mentioned, in the prepared remarks across all three platforms is very strong. There are two things that will determine, frankly, our pace into Q2. Number one is just the macro environment here. Obviously, we have a significant amount of uncertainty that seems to change by the hour. And then two, at our election, which transactions we decide to pursue. So we have a number of transactions across all three platforms that are under contract or under letter of intent going through the diligence period. But all three pipelines are extremely strong.

And maybe just following up on the kind of macro uncertainty rates moving around, does this cause any kind of delay in, you know, your partner's decision making or wanting to kind of pause on any type of big plans?

No, this is totally unilateral on our side here. We have pipelines that are extensive across all three platforms. Just didn't think it was appropriate to raise investment guidance at this time in the midst of a war with JD Vance sitting on the runway. Thank you. Thanks, Yana.

We'll go next to Michael Goldsmith at UBS Financial.

Thank you for taking my questions. You now have a record $1.4 billion of forward equity outstanding. Can you walk us through a bit about the timing of physical settlement relative to acquisition funding and how you're thinking about using the forwards versus term loans or other sources? Thanks.

Sure. Michael, this is Peter. To your point, we still have $100 million of capacity on our delayed draw term loan that's at a fixed rate of roughly 4% given the swaps that we entered into. So, given the attractive rate there, I think that's likely the first option we look to when we decide to term out some of our short-term variable rate debt. Beyond that, to your point, we have roughly 18.4 million shares of outstanding forward equity. As disclosed in our new supplemental, the contract for about 8 million of those shares matures at some point this year. And while we can always extend the contract if needed, I think there's a good chance that we settle those shares at or prior to maturity given our anticipated uses. So I would expect that, you know, those 8 million shares are likely settled at some point in 2026. And then lastly, we have the $250 million of forward starting swaps in place that have effectively fixed the base rate for us on a future 10-year issuance at 4.1%. And so with those swaps in place, we'll evaluate the appropriateness of an issuance later this year. But we're not in a rush to do anything given the term loan. We have the capacity there plus the forward equity. And I think most importantly, with $2.3 billion of liquidity, from multiple sources. We have plenty of flexibility and optionality here.

Thanks for that, Peter. And then, Joey, you talked on the prepared remarks about Hobby Lobby and how you've been partnering with them. Can you just talk a little bit more about what makes this particular tenant attractive and just how you view the outlook for the craft space going forward?

Sure, Hobby Lobby is clearly the far and away leader in the craft and hobby space. Out of respect for the Green family and our confidentiality, I won't go into their financials, but they are an extremely strong company here. The Green family, as well as Hobby Lobby as an entity has literally zero or no debt on a net debt basis here. So we're talking about a leading operator here that if they pursued a rating would be a high investment grade operator. They effectively put Joanne out of business. They're a market leader here. They had limited stores on their balance sheet. Most of their assets are leased. They wanted to eliminate... the real estate from the balance sheet and the management responsibilities that that entitled and had with owning those assets. And so this was a unique transaction for us. They're a tremendous operator, a tremendous partner. They're extremely methodical in their growth plans, and we are thrilled to complete this transaction with them.

Thank you very much. Good luck in the second quarter.

Appreciate it. Thank you.

We'll take our next question from Smedes Rose at Citi.

Hi, thanks. I just wanted to ask you a little bit more. I mean, I think the answer is probably no here because you mentioned that you're meaningfully ramping up your development pipeline in the second and third quarters. But I just don't have the knowledge of construction enough, I guess, to know. But you're not seeing any increases in kind of pricing or due to what's going on in the Middle East or any kind of hesitancy on the part of tenants maybe to kind of pause interest at this point, given sort of a more fluid macro backdrop? I mean, it sounds like the answer is no, but I'm just curious as to maybe why.

Yeah, no, it's a great question. We're seeing absolutely no hesitancy on the part of tenants. As world events unfold here, could that be possible? Sure. But what we're seeing is the exact opposite in the And the conflict in the Middle East has not changed the perspective of brick and mortar retailers. And as we mentioned on prior calls, if you look at just the announced store openings for the biggest and best retailers in this country, they have all come to the recognition that the store is the hub of an omni-channel world. It is not a spoke. And so they are all opening new stores, some at voracious paces here to reduce last mile delivery costs. and be efficient and so we have not seen any slowdown from any of the tenants that we're working with in fact we've seen some acceleration as i mentioned the prepared remarks we have commenced several projects subsequent to quarter close and we will be closing on additional projects later this week and next week In terms of costs, the projects that we close on have guaranteed maximum price bids. They have GMP contracts in place from general contractors. I'll remind everybody, we're not speculating on land. We're mobilizing and commencing right after close. We aren't speculating on small tenant space here. These are build-to-suit projects or ground lease projects for the leading operators in the country that are signed, sealed, and delivered at the time we close. And so we have not seen any material cost creep yet. The team here, the construction team led by Jeff Conkle does a tremendous job budgeting these projects in advance. And then we work with general contractors for the bid process prior to close.

Okay, thanks. And then I wanted to ask you, obviously, we also have 7-Eleven's announcement to close a bunch of stores. I mean, first of all, do you think any of your stores might be impacted? And, you know, given some of your leaning into convenience stores, in a way, some of the reasons that they're closing some of those stores seems like it kind of supports some of your white papers that you guys have written around this space. But just curious, any concerns around your portfolio specifically and anything it might tell you about kind of where convenience stores are going?

absolutely zero concerns we have no uh stores closing in our portfolio and i appreciate you referencing the white paper i'd ask everyone to take a look at it on our on our home page 7-eleven is closing the stores that have roller hot dogs and slurpees that's the bottom line the and they are constructing and we are developing on their behalf large format convenience stores that have food and beverage offerings that are extensive aligned with where the convenience store space. And so 7-Eleven is just a proxy here for the broader gas station convenience store space. The days of the 1,800 square foot get cigarettes and gum and a couple coolers and gas are gone. That was the gas station. If you think back 10, 15 years ago, they also had an auto bay. They probably blocked that up to add a little bit more square footage to sell in-store products. Today, the gas station is moving to the convenience store model, whether it's 7-Eleven or Sheetz or Wawa, who we acquired a number of assets this quarter and led their development entry into the state of Florida over a decade ago. These operators are taking meaningful share across sectors and the evolution of the business is happening before our eyes. And so again, The pump, while it produces significant revenue, doesn't produce the EBITDA that the inside source sale does. That is F&B food and beverage, primarily breakfast and lunch, liquid gold, coffee, and affordable meals and convenience items that also take from the front end of the pharmacy for consumers. And so this is going to be a multi-year evolution. And we're going to continue to see the 2,000 square foot, 1,200 to 2,000, excuse me, square foot, quote, unquote, gas stations go away. Michigan, we're at the heart of this right now with Sheetz and Quick Trip and 7-Eleven Speedway and operators expanding across the state while the legacy gas stations are frankly put out of business. Now, this takes time like any transition of any retail sector. But effectively, it's sweeping the country. And so it's a tremendous opportunity for us. You see us, our activity here through all three platforms. But it's truly the evolution of a business model into a highly successful operator that has significant margin in food, beverage, and in-store components.

Thanks. Appreciate it.

Thanks, Nathan.

We'll go next to John Kilachowski at Wells Fargo.

Good morning. Thank you. Joey, that was very helpful on the 7-11 breakdown. I guess if you wouldn't mind maybe just talking about the rest of the portfolio, what's in guide from a credit loss perspective, and if there's anything else in there that you're looking at that maybe is forecasted that, you know, you have some expected closures or if all of that is just precautionary.

No, no anticipated closures, all precautionary. We give our guide. We try to narrow it down during the year. The supplement does a great job of bucketing what we call credit loss, whether it's expirations or credit loss, a tenant defaulting, falling out of or entering bankruptcy, rejecting a lease. Shows that historical trend. We don't anticipate anything material in the portfolio this year. We're watching one to two, a couple assets, but really that's about it. Peter, anything to add?

No, I think you hit it. Just to hit on the numbers quickly, John, you know, in the supplement, we exposed 14 basis points of both credit and occupancy loss during the first quarter. Our AFFO per share guidance for the year still assumes 25 to 50 basis points of credit and occupancy loss. So there is an implied acceleration in Q2 through Q4 there. At this point in the year, we thought it was prudent to leave that range as is. But as Joey said, the portfolio is continuing to perform well.

TAB, Mark McIntyre, got it Thank you and then the second one, for me, is just you know yields and deployment timeline on development DST. TAB, Mark McIntyre, You know lighter one Q, I know the opening remarks you mentioned some scale and to Q and three Q, I guess, my question is, you know we've we've highlighted 250 as sort of a medium term target. Is that still a realistic target for this year? And then, you know, maybe above and beyond that, is there the opportunity to scale above that? Like would, you know, would it be surprising for us to see a number well north of 250 in a year? Or is there a reason from a risk perspective why, you know, your initial remarks sort of capped that target as like a 250 number?

So we said about, I said about 18 months ago, our intermediate target that was approximately three years was to put $250 million in commencements in the ground per year. There's a chance we hit it this year. Again, Q1 is generally light just because if you get the northern half of the country, you get weather-related, you're not going to commence a project with frost in the ground. Q1 is generally light. Q2 will be significantly larger, and Q3 is shaping up to be along the same lines of Q2. Now, these projects are generally subject to entitlements and municipal and other government authorities approvals there. But we are on track to hit that intermediate goal of $250 million in the ground. The team's doing a tremendous job working with the biggest retailers in the country and the best developers in the country on the DFB side. And we're very excited about our pipeline there. Got it. Thank you. Thanks, John.

We'll move next to Upal Rana at KeyBank Capital Markets.

Great. Thank you for taking my question. On the competition and seller behavior side, you mentioned people not pulling back due to the macro volatility, but are you seeing any change in behavior due to the volatility in the 10-year? Just wondering if you're seeing any increased deal flow the past month or so that could positively impact 2Q investment volumes?

Well, nothing that I could say is causal. You know, we've said with the 10-year between four and five, it seems like the world has been accustomed to the base rate purportedly for the entire world, the 10-year UST vacillating by 10, 15% up and down. We haven't seen anything causal. I'll tell you, we see more and more opportunities. Our funnel is bigger than it's ever been across all three platforms. We don't see increased competition. I wouldn't tell you we haven't seen a notable decrease in competition. Really, nothing's changed since coming out of 2024 in our do-nothing scenario. And so the only thing that I can point to is the performance, the size, the scope, the depth, and the experience of this team, and then our relationships within the market, highlighted in the supplemental, just the retailer relationship-driven transactions.

Okay, great. That was helpful. And then acquisitions of investment-rated tenants have come down again this quarter. I'm just curious, outside of IG credit ratings, Is there something else in the lease economics that you're acquiring that is a sign of higher quality that we should be considering?

No, but let's clarify why investment grade came down this quarter. We don't impute a credit rating to Hobby Lobby, a privately held company by the Green family. So that's the biggest piece of this here. We're talking about, again, the largest crafts and hobbies retailers, a multibillion-dollar revenue operator. that is far and away the leader in the crafts and hobby space that is privately owned by one family. So that is the driver. And I'll reiterate, investment grade is an output for us. We have tremendous operators in our portfolio that we don't impute shadow investment grade ratings to, but Publix, Chick-fil-A, Aldi, Wegmans, Hobby Lobby. Again, so that is an output. In order for us to call an operator an investment grade operator, they have to be rated by a major agency and therefore have the outstanding debt. Alta is not an investment grade company, but I believe they don't have any debt, correct, Peter? Correct. They don't have any outstanding debt. So we have debt-free, multi-billion dollar public and private operators in our portfolio. If you want to impute shadow investment grade ratings, to our portfolio, we'd be at 80%. Then add on the ground lease exposure, which doesn't have any sub investment grade. And I would tell you the safety of those assets is even greater than investment grade assets. And we'd probably be at 85, 87%. So it's an output to what we do. Our focus is on the biggest and best operators, the best real estate opportunities across the country, leveraging all three platforms. Whether or not they have an investment grade rated balance sheet or carry any debt is really, again, just a secondary here.

Great. Thank you for that.

Thank you.

We'll take our next question from Rich Hightower at Barclays.

Hey, good morning, guys. Joey, I want to go back to a comment you made in the prepared comments. You sold some grocery store assets with a pretty quick turnaround versus where you bought the assets at a lower cap rate versus the purchase price. So is there any movement specifically in grocery assets versus non-grocery, any sort of bifurcation in cap rate trends? Because obviously we all saw sort of the headline number didn't really change in terms of what you bought quarter on quarter. Just help us understand any movement there.

Yeah, just to clarify, Rich, we did not sell the grocery assets. The grocery portfolio that we bought had outlots that were leased to Jiffy Lube as well as Dutch Brothers that we disposed to approximately 300 basis points inside of where we bought the grocery-anchored portfolio inclusive of those assets. We have no interest in owning a 1,000-square-foot Dutch Brothers that trades in the low fives or a Quick Lube that's 1,200 square feet that has no residual value in the low fives either. So we quickly moved, we closed those in a TRS and then quickly moved to recycle those assets accretive to the overall transaction, and we'll redeploy those proceeds accretively into better real estate and we think better credit.

Okay, I appreciate the clarification there. I guess secondly, you know, maybe there's nothing to read into this, but you did mention the better percentage rent in the first quarter, part of which, not all of which, but part of which was due to obviously better sales at those particular properties. Is there anything to read into that in terms of strength of the consumer or particular type of consumer relative to the aggregate, just as we see sort of other indicators maybe softening, you know, given everything else going on in the world?

You know, it's such a small handful of assets. It's the biggest retailers in the country. We're talking about five or six properties that contributed to the contributed the vast majority of that percent rent. I think it's aligned with our thesis and what we're seeing in terms of the K-shaped economy. But I'd be hesitant to draw broader conclusions from it just because of the sheer limited number of properties. But we are seeing it through non Percentage rent, but through anecdotal conversations and also through other data here, and you're seeing it as well through the public reporters, the Walmarts and the TJs of the world are thriving. The trade down effect is real. And the middle income consumer, the $125,000 median household income plus minus is trading down. And we're seeing that through multiple data points, both public and private. I think the percent rent falls in line with it. That's the only conclusion I would rather.

Got it. Thank you.

Thank you.

Our next question comes from Linda Sy at Jefferies. Hi.

Two questions. In your investor deck, you highlight avoiding private equity ownership. Do you have a sense of what percentage of your tenants are owned by private equity and how it's trend over time in your portfolio?

So, Linda, we added some new disclosure to our supplemental that highlights ownership type and would just call out in that disclosure, 77% based on ABR of our portfolio today is publicly traded. The remainder of that is private companies, but that is broken down into a few buckets. Those could be privately held companies. We talked about Hobby Lobby owned by David Green. They could be nonprofit companies, ESOPs or some other form of private ownership. So there is a small component of private equity within that private bucket, but it is a significant component of the portfolio today for us.

Thanks. And then just one for Joey. You always have a clear idea of the state of retail. I guess you said the consumer is trading down, and that's been happening for quite some time, but are you seeing sectors where the consumer really is pulling back completely, and then any tenant sectors where you'd be more concerned, just broadly speaking, not necessarily in your portfolio?

Yeah, not within our portfolio, but I think if we watch the casual dining space, we're seeing with the Some of the quick service restaurants, all the guys that sell bowls for $18, $22. I don't know. I don't get to them very often. It's the discretionary options where people have the ability to trade down. And that goes across really all sectors. So whether it's basic goods and services here, basic things like groceries. I mean, I drove by the Costco gas station two days ago, and the line was about 25 cars deep for fuel alone. And so we are continuously seeing that trade-down effect now pinched by gasoline prices as well and exacerbated by gasoline prices and prices at the public. So I think it's across all luxury, experiential, and discretionary sectors, and then also trading down in the necessity-based stuff for things like groceries.

Thanks. Next, we'll go to Eric Borden at BMO Capital Markets.

Hey, good morning. Thanks for taking my question. Joey, just curious how cap rates are trending to start the year between investment grade and non-investment grade tenants. You know, are you seeing any meaningful changes in the spread between the two, just given the macro uncertainty here?

We haven't seen any changing in cap rates in, uh, I would tell you the past 18 to 20 months. Again, the volatility, even with the 10 year treasury really hasn't driven it. We're still nowhere near peak transactional activity coming out of covert or before. There's still limited 1031 or private buyer competition out there on a relative basis. So we really haven't seen any real material moves in cap rates here. The low price point stuff, the Jiffy Lube's and the Dutch Brothers, those trade extremely aggressively. Those are to the limited 1031 buyers. But if you look at just the inventory out there, even for Starbucks and things like that, there's a significant amount of inventory that's stale out there because of the lack of a bid in the buyer pool. We really haven't seen any material change here almost to two years.

That's helpful. And then just on the forward equity, just given the increasing diluted impact in the TSM as your share price rises, would you consider the more balanced approach to equity issuance between forward equity and traditional ETF? Or do you believe it's more prudent to keep the forward equity book full given the current macro? Sorry, there's a little bit I'm going off.

We'll continue to look at all alternatives. Obviously, our balance sheet is in a fortress position. But I think when we first issued forward equity and came up within the net lease space, the goal was to get an intermediate perspective on our cost of capital. So volatility could give us the decision making real time basis, whether we do something or not, because we liked it in relative to the environment, not because we had to fund it just in time. Right. And so inherently, we think the forward equity construct, and I think as adopted now by all or the vast majority of our peers, takes a just-in-time financing business and then gives you that intermediate cost of capital to truly operate looking forward months and quarters in advance. Now, we'll look at all opportunities to raise and source capital that are efficient and fit within context of our balance sheet, and so I wouldn't rule anything out on a go-forward basis, but sitting here with $1.4 billion of forward equity and $2.3 billion of liquidity, it's not something that's top of mind for us.

Thank you for the time.

Thank you.

And we'll move next to Ronald Camden at Morgan Stanley.

Great. Two quick ones. Thanks for the disclosure on the supplemental. Just comparing the acquisitions versus the DFP, developer and DFP platform, just remind us what the spread on yields are that you're getting on the DFP side, developer and DFP side. And also, I think you mentioned earlier that competition is actually easing on the acquisitions front. Maybe can you just talk a little bit more about which of those platforms is more competitive and in your better position?

Yeah, good morning, Ron. So we've always talked about development subject to the timing and scope of the project, whether it's a retrofit or a ground-up development, right? That's going to range anywhere from 9 to 18 months. Those projects being significantly wide, 75 to 150 basis points of where we can buy a like-kind asset. Developer funding platform is generally ranging from 6 to 12 months. That will be tighter just given the time horizon. We're targeting the same tenant through all three external growth platforms. The only difference here is time. And so it is just time and pricing that duration risk. And so that's where we derive that spread from. But we're not targeting different types of assets or credits here. It's all within our sandbox. We're not doing anything on a speculative basis across all three platforms. We're seeing significant activity across all three platforms that are appropriate spreads, and we're going to continue to build that pipeline, and we'll demonstrate it in Q2.

Helpful. And then just a quick one on the – so I'm looking at the recapture rates and same-store rent growth on the supplement. Is the 1.6, is some of that sort of volatility from quarter to quarter, is that all the percentage rents, or is there something else going on? There seems to be some seasonality to the same-store rent growth. Thanks.

Yeah, in terms of some of the seasonality you see in same-store rent growth, Ron, you're right that percentage rent is included in Q1, and so that's driving a portion of the seasonality. But if you look at that over a longer time series as well, that seasonality is going to be driven by the underlying lease structure of our portfolio. And we disclosed in the supplemental about 91% of our leases have fixed rental escalators. Those are typically rental escalators taking place every five years, ranging from five to 10%. And so when those escalators hit is going to drive some variability in same-store rent growth. But what we've seen over the trailing eight quarters, and it's consistent with what we've seen historically, is same-store rent growth just north of 1%, with very little falling out, as you can see from our credit loss and occupancy loss disclosure.

Helpful. Thank you.

Thanks, John.

And that concludes our Q&A session. I will now turn the conference back over to Joey Agree for closing remarks.

Well, thank you all for joining us this morning, and we look forward to seeing everyone at the upcoming conferences and appreciate your time. Thanks again.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.