FrontView REIT, Inc.

Hello everyone. Thank you for joining us and welcome to the Front View second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Pierre Revol, CFO. Pierre, please go ahead.

Thank you, Operator, and thank you everyone for joining us for Frontview's second quarter 2026 earnings call. I will be joined on the call by Steve Preston, Chairman and CEO. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risk and uncertainties that can cause actual results to differ materially from those currently anticipated due to several factors. I refer you to the Safe Harbor Statement and our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliation of Non-Gap Financial Metrics to Most Directly Comparable Gap Metrics are included in the exhibits furnished to the SEC under Form 8-K, which include our earnings release, supplemental, and investor presentation. These materials are available on the investor relations page of our company's website. With that, I am now pleased to introduce Steve Preston. Steve?

Great. Thank you, Pierre, and good morning, everyone. This quarter demonstrates why the best risk-adjusted returns in net lease come from owning exceptional real estate with a diverse tenant base in vibrant markets where the strength of the real estate leads to increases in rents and value over time. Nearly 80% of our properties are located in top 100 MSAs, 92% are positioned near shopping centers, the average five mile population exceeds 172,000 and the median placer AI ranking is in the top third of their respective concepts. Our portfolio is exceptionally well diversified with the largest tenant now representing only 2.6% of AVR and the top 10 tenants accounting for just 20.2%. In addition, 33.6% of our rents are derived from investment grade tenants. Our median box is 5,000 square feet and our median annual rent is only 174,000 per property. We often describe our portfolio as containing fungible buildings with replaceable rents. While those phrases can sound abstract, the following examples illustrate exactly what we mean. Recently, we created a Bank of America ground lease in front of our Walmart in Rochester, New York. We converted a former Burger King franchisee to a Chipotle at our property in Mechanicsville, Virginia. We replaced a Miller's Ale House with a Raising Cane's ground lease at our property in Chicago, Illinois. We released a former Tricolor location to Avis in Marietta, Georgia. We created a Panda Express and Janger's ground lease from a former single twin piece in Winston-Salem, North Carolina. And we replaced a former Walgreens with an Amazon fulfillment center in Durham, North Carolina. In aggregate, these transactions generated 1.6 million in ABR with an estimated value of 29 million compared to our basis of 19.8 million or a 47% increase in value. Importantly, This value was created from assets that were underperforming, but where the exceptional quality of the underlying real estate allowed us to unlock significant value. Although none of this value creation has been crystallized through actual property sales, the improved tenant credit, lease structures, and real estate configurations have meaningly increased their market value. We've also optimized the portfolio through a disciplined and proactive disposition strategy. Every disposition serves one of three objectives. First, to enhance real estate quality. Second, to increase diversification. And finally, to recycle capital into better opportunities. Since our IPO, we have strategically sold approximately 110.5 million of properties representing 14.6% of our original IPO assets to increase tenant and industry diversification reduce exposure to tertiary locations, and remove weaker or tired concepts. The median disposition cap rate across all these sales, which were not our best assets by any means, was 6.88%, which is below our currently implied valuation. This quarter, we sold five tertiary dollar trees, a Friendly's in New York, a Staples in Illinois, a Fast Pace in Indiana, and a Hooters in Kentucky at a weighted average 7.12% cash cap rate. Each transaction improved the overall real estate quality, tenant credit or diversification of the portfolio. Continual portfolio optimization is part of our business model, and we will continue to proactively prune the portfolio as part of our ongoing value creation strategy. While the bulk of our portfolio optimization is complete, will remain active in recycling capital where we see opportunities to enhance portfolio quality. The result is a portfolio with strong operators, exceptional real estate, and one of the most diversified tenant bases in the net lease sector. Importantly, investors can evaluate the portfolio directly as we are the only net lease REIT that discloses 100% of its ABR by tenant and the address of each and every property. Turning to acquisitions, we acquired 17 properties for $58.2 million at an average cash cap rate of 7.34% and a weighted average lease term of 7.3 years for the quarter. These acquisitions were consistent with the real estate characteristics we target across the portfolio with median metrics, including a purchase price of $2.6 million, building size of 5,700 square feet, Placer AI score of 20.4, annual rent of 217,000 per property, and five-mile population of 141,000. We continue to target larger MSAs with an emphasis on established, well-populated growth markets. While cap rates in these markets have historically been somewhat lower than the US average, we believe the premium is justified by strong demographics, favorable supply and demand dynamics, and greater long-term rental growth prospects. The weighted average lease term this quarter was slightly below our historical average because we purposefully acquired several properties with shorter remaining lease terms. These assets have below market rents, strong tenant performance and clear opportunities to create value through lease renewals or extensions. Our market knowledge and relationships allowed us to acquire them at prices well below their longer-term intrinsic value. We view these select transactions as a form of risk-mitigated development. They can provide development-like spreads without requiring us to assume construction, lease-up, or entitlement risk because the tenants are already open, operating, and paying rent. As an example, we acquired a veterinarian clinic backed by a national guarantor in Indiana with a little more than two years left under the lease at an 8.75% cap rate. The cap rate was reflective of the short-term remaining, but through our relationship with the tenant, we are extending the term to 12 years without providing any significant concessions, creating a wide development-like spread with zero development or construction risk. After the extension, this alone would have raised our Waldon acquisitions from 7.3 years to 7.7 years. Consistent with prior quarters, we are highlighting one acquisition this quarter, a corporately guaranteed Aspen Dental property in Roseville, Michigan, which is on the cover of our investor presentation. The property is located on a hard corner out parcel to a Kroger supermarket with frontage along a major arterial carrying over 25,000 vehicles per day. It also ranks in the top 15 of its concepts statewide based on Placer AI. Roseville is a suburb of the Detroit metropolitan area, the 14th largest MSA in the United States. Founded in 1998, Aspen Dental supports a nationwide network of more than 1,100 branded dental offices and is one of the largest and fastest growing dental service organizations in the country. We acquired the property at a 7.2% cap rate with annual rent of only $147,000. Given the quality of the real estate and low rent, retenanting would be a source of upside if it were ever given the opportunity. This combination of credit and use, exceptional real estate location, readily releasable box size, replaceable rent, and potential upside is a prime example of a front-view target acquisition. The asset was previously under contract with another buyer at a cap rate in the mid-six range, providing market validation. When that transaction failed to close, the seller prioritized certainty and speed of execution. Frontview stepped in, closed quickly, and acquired the property at a higher cap rate. This transaction demonstrates our ability to create value through sourcing, asset selection, certainty of execution, and the relationships we have developed across a fragmented marketplace where our typical transaction size compete less with institutional capital. This allows us to avoid portfolio transactions where pricing is a premium and invariably contain real estate we would not want to own. Last quarter, we introduced the concept of evaluating select development partnership opportunities that would leverage our team's decades of retail development experience. These partnerships could expand our sourcing channels and allow us to earn higher yields while maintaining our focus on real estate quality and mitigated risk management. We continue to evaluate a number of potential developments that meet our underwriting standards. We remain highly selective and will only pursue opportunities where the incremental yield is accompanied by appropriately mitigated execution risk. We will update you in coming quarters on this initiative. Turning to the portfolio. We ended the quarter with only two vacant properties, resulting in occupancy of more than 99%, in line with our historical average of 98 to 99% plus. While we expect occupancy to remain high, we do not manage the portfolio to maximize a headline point-in-time occupancy percentage. Because we own exceptional real estate, a lease expiration or vacancy can create an opportunity to improve tenant credit, increase rent, created a valuable ground lease or otherwise enhanced the underlying property value. Historically, when we have re-tended to properties, we've achieved rent recaptures north of 110% of prior rent, which reinforces our strategy to create value by being patient and pursuing the right long-term outcome rather than defaulting to a quick sale. That being said, in some situations, a sale of a non-performing asset ends up yielding the best outcome. On page 15 of our investor presentation, we highlight a dark hops and drops that we sold just after quarter end for a five cap rate or 3.75 million, which was a 50% increase over our original cost basis of approximately 2.5 million. Another example of how our high quality real estate can yield outsized returns. From a credit standpoint, we are performing very well. We do not have any additions to our watch list, quarter over quarter, and have a placeholder for 50 basis points of bad debt for 2026 that remains relatively unidentified, other than about 20 basis points attributable to a sleep number bankruptcy. For context, we previously owned four sleep number properties. We converted one to a seven brew. We retained one high-performing location through the bankruptcy. sold another shortly after quarter end at a 6.5% cap rate and are re-tenanting the fourth, which is part of a cash-flowing two-tenant property. Sleep number now represents less than 33 basis points of ABR. Regarding renewals, we have only eight left this year and we are already north of 115% recapture rate for properties we renewed this year. So we fully expect renewals for the year to be nicely accretive. During the quarter, we successfully re-tenanted one vacant, former Walgreens to an Amazon, representing a significant increase in value over our basis. As close to the same rent, but with a much stronger credit profile and zero tenant improvement allowance. As previously mentioned, we only have two vacant properties, including the former Smokey Bones, which we expect to lease to two tenants, and a small convenience store. Frontview's platform and strategy positions us for sector-leading growth, with size being a structural advantage. First, we can generate meaningful external growth as just $120 million of net investment increases our asset base by over 13%. Second, we can continue to focus on only adding excellent real estate at attractive values for years to come. Third, we can scale the platform through effective use of AI and new technology tools. and finally, our exposure to markets with rising rents as demonstrated by our retending results creates meaningful mark to market opportunities embedded within the existing portfolio. In closing, we are passionate about our company, our people, our alignment with our shareholders and our ability to outperform. Our focus remains on driving top quartile per share cashflow growth through our differentiated net lease strategy. Every decision we make is made through the lens of owning 100% of the company. With that, I'll turn the call over to Pierre to review the quarterly numbers and guidance. Pierre?

Thanks, Steve. We delivered another strong quarter, driven by growth in recurring cash brands for both accretive capital deployment and organic portfolio activity, together with improved NOI margins. These results, combined with an improved cost of capital and lower levered balance sheet gives us increased confidence in raising our outlook for the remainder of the year. Turning to the income statement. Second quarter base rent increased $200,000 sequentially to $16 million, driven by $59.5 million of net investment completed during the first half of the year. Contractual rent increases across the portfolio, and the commencement of rent from the former Walgreens property will be released to Amazon. This growth was partially offset by the three properties discussed last quarter, which previously generated $181,000 of quarterly rent. Those leases have expired and the properties have been retenanted. However, most of that replacement rent will not commence until 2027. In addition to base rent, we generated $200,000 of other operating income related to a lease restructuring. As we discussed last quarter, other operating income is episodic and generally not included in our forecast. However, it is a natural result of actively managing a diversified real estate portfolio and may arise from time to time. In total, adjusted cash revenue increased to $16.4 million. Our non-reimbursable property costs or slippage declined by $32,000 sequentially to $231,000 or only 1.4% of adjusted cash revenue. The improvement was driven by the Amazon rent commencement a decrease in tenant credit issues and continued benefit from the portfolio optimization work completed today. For remainder of the year, we now expect property level slippage to approximate 2% of adjusted cash revenue, an improvement of 75 basis points from our prior forecast. Adjusted cash NOI, including the full impact of acquisitions and dispositions completed through quarter end was 16.9 million. After excluding other income and normalizing property-level slippage, the portfolio enters the third quarter at an approximate $16.6 million quarterly cash NOI run rate. Importantly, that run rate does not include the future lease benefits once the retentive properties come online. Once fully operating, the new leases will generate close to $225,000 of quarterly rent, representing a 23% increase over the prior leases at those properties. Recurrent cash E&A was $2.5 million, consistent with prior quarter, and we continue to expect a similar level of cash E&A for the remainder of the year. Our investment in automation, AI workflows, and data analytics are allowing us to scale more efficiently, improve tenant monitoring, and enhance capital allocation decisions while maintaining discipline on overhead. Turning to the balance sheet, Cash interests remain stable at $3.8 million with our revolver benefiting from the $100 million of hedges we put in place last September. During the quarter, we accessed the equity market through our ATM program for the first time, issuing approximately 2.6 million shares at a gross price of $19.50 per share and raising $50.5 million of gross proceeds. We settled close to 900,000 shares during the quarter, generating 17.3 million in net proceeds. At quarter end, approximately 1.7 million forward shares remained unsettled, representing an additional 32.2 million of future net equity proceeds. This transaction marks an important step in the continued evolution of our company. It allows us to fund accretive investments with new common equity while preserving the remaining 50 million of capacity under our Series A convertible preferred. Together, our available liquidity, unsettled forward equity, and remaining preferred capacity fully fund our current investment plan through 2027 at our existing net investment base. We ended the quarter with more than $200 million of liquidity. Our loan-to-value was 33%, and net debt to annualized adjusted EBITDA REIT was 5.4 times. including the impact of the unsettled equity, our adjusted net debt to adjusted annualized EBITDA RE is only four times. In addition to our lower lever balance sheet and ample liquidity, our AFFO payout ratio was less than 65%, providing incremental retained cash flow to support future growth. Before turning to guidance, I want to briefly discuss our cost of capital and how we think about growth. Our cost of capital has improved meaningfully over the past year. based on our current acquisition yield and long-term weighted average cost of capital, we are currently generating investment spreads north of 100 basis points. As highlighted on page 22 of our investor presentation, that spread drives an attractive growth profile. Our smaller asset base means that disciplined investments can have a meaningful impact on AFFO per share growth. However, improved access to capital does not change our underwriting approach and acquisition volume itself is not our objective. Our goal is to generate sector-leading AFFO for share growth by investing in properties that meet the criteria we have consistently outlined. Strong retail locations, larger markets, diversified tenant exposure, fungible real estate, and rents that are replaceable or below market. This portfolio construction gives us two complementary avenues for growth. The first is a creative external investment, or what is sometimes referred to as a net lease virtuous cycle. The second is internal cash flow growth generated through contractual rent increases, releasing activity, lower property level slippage, mark-to-market opportunity embedded in the portfolio, and acquisitions made from retained cash flow. This combination matters because external investment alone does not guarantee durable per share growth. If the underlying real estate is weak or rents are not replaceable, tenant credit events and lease expirations can create cash flow erosion and force assets to be sold below the original basis or released at meaningfully lower rates. Our focus is to address these risks at the time of acquisition and through portfolio optimization. The objective is not simply to add cash flow, but to protect and compound cash flow per share over the long term. Turning to guidance. With half the year behind us and the continued outperformance in the portfolio operations and capital deployment, we are increasing our 2026 AFFO share guidance range to $1.32 to $1.34, from $1.29 to $1.33. We are also raising our net investment guidance to $120 million, implying $60 million in the back half of 2026. At the midpoint, this represents approximately 7% year-over-year growth and marks a third increase in our guidance since it was first introduced last November. The increase is driven by three primary factors. First, strong portfolio performance. Second, accretive capital deployment. And finally, continued discipline on overhead expenses. We entered the back half of the year with a low levered balance sheet Visible Embedded Rent Growth, a high-quality frontage-focused real estate portfolio, and sufficient capital to execute our current investment plan. Our focus remains on translating those advantages into continued AFFO per share growth while maintaining the underwriting discipline and real estate quality that define Frontview. With that, I'll turn the call over to the operator to open it up for Q&A. Operator?

We will now begin the question and answer session. Please limit yourself to one question and follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Kilikowski with Wells Fargo. Your line is open. Please go ahead.

Hi, good morning. My first one is just on now with this new access to equity here. I'm curious how you all are thinking about managing the investment guidance number. We put up 120, so a nice raise, but clearly you have the capacity to go well beyond that. So I'm interested in thinking about how you're going to manage 26 and 27 acquisition numbers, assuming that you continue to have this access to equity.

Sure. Thanks, John. So I think the guy said in our remarks that the acquisition volume isn't the goal. If we find good deals, we will pursue them. Having access to capital means there's more debt we can look at. If you just remove the dispositions and you just do acquisitions, we're tracking close to 180 million if you just annualize the first half. So we can and the rest of the company.

Thank you. And then, Pierre, one more for you just on your opening remarks. You gave some helpful color on some re-tenantings. Would you mind walking through as much as you can just to clarify the rent expected from some of those re-tenantings and timing? And are there any other upcoming known move outs that you expect may impact 27 numbers or 26 numbers and be a step up in the 27 that we should be modeling?

were $181,000. It happened in the first quarter for three tenants. We do expect some of that to come in line in the fourth quarter, but most of it will be in the first and second quarter of next year, going up to $225,000. The other one, obviously, the Walgreens turning into Amazon was a nice pickup a lot sooner than we thought. And then we have a Smokey Bones, a former to execute that for 2027. But that's all outside of the current in place NOI, but more NOI that we would expect to pick up next year.

Your next question comes from the line of Anthony Polone with JP Morgan. Your line is open. Please go ahead.

Great. Thank you. My first one is maybe a bit of a follow-on to one of John's questions. Now that your access to capital has improved quite a bit, what do you think the platform's acquisition capabilities are? Is it $150 million a year, which is kind of where you've been running over the last year, sort of the right level? Or do you feel like you have the capacity and you're seeing enough that with greater capital access you can do more?

Back in Q4 of 24, our first year as a public company, we actually acquired about $100 million of assets during that one quarter. And we have the same team in place today. We do have, you know, for the upcoming quarter, we've got very good visibility on what that's looking like. So far, we've closed on three assets for about $8.4 million and about a 7.49 cap rate. and then we have 17 assets that are currently under contract right now at about a 7.4 cap rate for 55 million. And then we're beginning to build Q4 with good deal flow. So yeah, we're excited about the quarters and the acquisitions coming forward.

Okay, thanks. And then just one follow up. You mentioned 50 base points of bad debts that you've continued to use in the guide. with 20 of it around sleep number. But is that 20 like you're using it or is that just because it sounds like you're doing pretty well in terms of, you know, addressing that situation?

Yeah, we're not really using it. Like it's sort of, it was like not in the numbers until there's another 50 basis points and just like completely unidentified that additionally that would just keep, but we're not using it.

Your next question comes from the line of Rob Simon with Compass Point. Your line is open. Please go ahead.

Hey, guys. How's it going? Thanks a lot for taking the question. This one, by the way, really, really comprehensive prepared remarks. I have kind of just a clarification question. It actually might have been implied by what you guys said, but on the preferred, is it safe to assume that you guys will likely draw the balance of that down first prior to settling the remaining forward equity commitment? And I say that because if you just think about your net investment guidance and you kind of assume, you know, and many others. So, you know, there's no common equity capital issued from here. The uses and sources implies about $50 million on our numbers of need by the end of the year. So is it just kind of safe to say that you'll use the preferred first since, you know, you lose access to it if you don't draw it?

Yeah, thanks, Rob. Yeah, that's probably right. We have to use, we have to draw the rest of the preferred by the one-year anniversary. So I think like November 10th or 11th. And so the, so we, I would anticipate we, We use that first. We save the forward equity. And then we use the forward equity effectively in 27, like the $50 million gives us more to get through this year and some into next year. And mind you, we're at four times lever if you take into account all that equity. So we have plenty of runway. But yeah, we'll use that preferred first.

Yep. Okay, great. Thanks a lot. Appreciate it, guys.

Your next question comes from the line of Jana Gallen with Bank of America. Your line is open. Please go ahead.

Thank you. Good morning and congrats on the quarter. I just wanted to ask an accounting question on the preferred. Is there anything in the AFFO guide similar to how on the forward you'd have to deal with the Treasury stock method dilution? Right now, is there anything in the guide for that preferred?

Hey, Jana, thank you. I appreciate the question. So as we've seen, the forward equity has been an issue for some of our peers. So this is governed under ASC 260 in terms of what the rules are for how that's handled. And it's handled on an if-converted basis. So it doesn't have the treasury stock method the way that normal forward equity would be accounted for. So it's going to be treated by what it is. and many others. So there's no, in the if-converted method, there's no treasury stock method impact regarding that. So that's not in the guide. Right now the guide is assuming that the preferred stays as a preferred and if it issues, if any of it does convert into common, then that impact's actually not that meaningful because we would have

Thank you, Pierre. And then again, thank you for the excellent disclosures. I just wanted to make sure I understood that in the tenant list in the SUP on pages 14 to 17, the asterisk for the new leases, those are the ones that you'd be, those are the re-tenanted assets that you expect to be coming online a little bit in the 4Q and then primarily through first quarter 27? That's right.

So those are not in our APR, but those

Great, thank you.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

Hey, great. And again, thanks so much for the disclosure. Just coming back to the acquisition pipeline a little bit, sort of thinking about sort of the cap rate and the quarter, I think 7.3. Obviously, you guys are also thinking about IRs and so forth. you know I guess part of the strategy was to be able to sort of get these sort of higher cap rate deals and I'm just wondering as you're thinking about sort of the current pipeline over the next sort of couple years like how do you sort of see these cap rates trending do you see compression do you see more competition any color there would be helpful thanks sure yeah I know it's certainly tough to predict you know too far out but you know what I can say for us right now

is that the market is stable. We're expecting cap rates in that sort of 7.3, 7.4 range for Q3. We could see maybe slightly lower, a tick lower in Q4. And really that's a result from increased institutional, just general interest in overall retail and net lease. I mean, there really is, I think, as we all know, an abundance of capital that's just really setting the tone for the marketplace. And so as we see, you know, we've seen retail and open air and shopping center cap rates come in. We've had a little pressure on cap rates, but certainly not to the same extent. So, again, I think, you know, for the foreseeable future, we hopefully will be in this range.

In the second quarter, our deal was $2.6 million median purchase price. We don't really compete with a lot of people at that purchase price. It takes a lot. If you're doing $10 billion of acquisitions, it takes a lot of $2.6 million. For us, we can do that. We have 17 deals under contract, three that we've already closed. So it's a very robust pipeline, but we're not running up against competitors. We're still finding deals at Inc. and Calgary. So that's what we've done.

That's right. And we're not competing with the institutions on the big portfolios or the larger assets, which, you know, again, is an advantage for us. Find those smaller assets, you know, sub 10 million. We're just not running into the big guys. And that provides us a competitive advantage in the market.

Great. That's really helpful. And then my second one.

I think we lost time.

My apologies. Your next question comes from the line of Matthew Erdner with Jones Trading. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. I'd like to talk on dispositions going forward. Are there any credits that you guys are wanting to work out of? I noticed the I guess cap rate investment spread came in from call it 60 basis points in the first quarter to 22 this quarter. Are you going to look to sell some of your higher cap rate properties or should we expect it to be a little bit on the lower range, sub sevens going forward? Yeah, good question.

Just to recap, so far since going IPO, we've sold about 15% of the portfolio, about $116 million of assets at a 6.9% cap rate. And we're going to continue with the strategy of portfolio optimization. We're certainly not selling off our best assets and are not planning to do that. We're going to continue with strategically selling concepts that we think they could come under pressure, maybe less optimal concepts or sort of tertiary real estate that we just want to reduce exposure to. Year to date, we're about 32 million. And I would just add,

So some of these things we're still doing. We find them. There's a lot of interest for our properties. But it's certainly, none of these are distressed sales. People just want locations. And we continue to find opportunities to add diversification and do a few dispositions here and there.

Got it. That's a really helpful color there. And then just as a follow-up to that, How do you guys kind of go out and market your properties? Like, are you out there marketing them or are some of these reverse inquiry? You know, just how are they sourced?

Yeah, that's sort of the beauty of the market is we do, you know, we do list them. We blast them. We get them out to as many people as possible. We create a lot of interest, a lot of buzz. We use top brokers and relationships that we have in this space. And, you know, we're selling to those buyers that, you know, can pay top dollar and premium pricing for it. and a lot of times it may take a time or two to get under contract and close. But we end up with that 1031 or that small unsophisticated buyer that really likes and wants that asset at that good quality location with good rent. And so it's important to make sure that we get that out into the market in the eyes of as many people as possible.

And I would also add, even with our website ad and having everything draft, we do actually have random inbounds, even from other leads that say, I did not even know you had that property in front of our site. and they come in. So there are just like a lot of cold reverses that want to think about it.

Awesome. I appreciate it, guys. Thank you.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

You're back. Sorry, I got dropped. I got dropped. I had just a second simple question just on the The investment volumes in the quarter, the acquisitions, I think it's been asked for, but is this sort of the right run rate for the team, for the business, for the opportunity set? Obviously, assuming you have the cost of capital, does this feel like a good run rate to execute on going forward? Thanks.

As I said, we're continuing to look at opportunity. We have the ability to increase the run rate when we see good acquisitions that we like, and we can continue to have sector-leading growth with

We don't need to do a lot to kind of hit our numbers. And if we're growing on acquisitions, calling 3% to 5% on only $100 million around that area, but then we have escalators. We have reinvestment of free cash flow. We have this recapture of leases. You add those components up in terms of the recapture of free cash flow, the acquisition, the escalators, you're talking about a lot of growth that can happen off of this base. And we're able to do that and find continue to find the best deals. And so we continue to look for that. And I think we can obviously expand it by just reducing dispositions or finding more interesting deals. But it does deliver a little bit of outsized growth relative to at least the concept that most investors look at us against.

Right, because our size really is a structural advantage. And with that $120 million of net acquisitions growing off that low base, even popping that up a little bit, you continue to add for years and years to come to have outsized growth.

Great. Thanks so much. Thanks for taking the follow up.

Your next question comes from the line of John Masaka with Riley Securities. Your line is open. Please go ahead.

Good morning. Apologies if I missed this earlier in the call. What was kind of the genesis of the tight kind of cash and gap cap rate spread on the TQ26 investment activity?

So, I mean, it's just escalators. It's just escalators in terms. So if you think about what drives a cash cap rate versus a gap cap rate, what's the escalators and what's the Walton? So if the Walton was a little bit shorter and the escalators, there's less of a difference in the current quarter. But I point out that a lot of these deals that we signed up are getting extended. I mean, so even though there was a shorter gap impact at this point, as those leases get extended, they don't run through normalized rental revenue.

Okay, so it was just the stage and the lease at which you bought a significant number of these assets. It wasn't like a flatter leases or some kind of CPI-based escalators? Correct.

If you think about where they are and if they're on,

for second or third option. There could be five-year leases that you buy them early on or five years from ending and you already have the funds to wait five years for your next. Some leases bump annually and a lot of them bump every five years. A lot of that is just where you sit on the curve on the lease.

I appreciate the, I believe it was new additional disclosure on the ground lease portfolio. Maybe with that in mind, is that Still an opportunity for investment volumes. I mean, are you seeing cap rates in that space kind of akin to what it is for your other acquisitions or investments? Or is that kind of maybe at this point more of like a legacy portfolio around how Frontview was kind of originally created?

No, I think that it's more we create ground leases a lot. So A lot of times we have a tenant and we create a ground lease basically through the REITs.

Yeah, it's really ultimately through the retenanting. And as I mentioned on the call, we've had a few assets that we've converted, but one particular, our single Twin Peaks, we converted that to two ground leases, a Panda and a Jaguars. We've mentioned this before. We had a Miller's we proactively went across in Illinois. that was a ground lease to a Raising Cane's. And that just allows the retenanting and the tenant relationships allow us to create the value with having that ground lease. And obviously we all know that the ground lease is terrific because you get the building at the end of the term if that comes back to you.

Okay. And then more kind of with an eye towards, you know, Future kind of repositioning of dark boxes or kind of troubled tenants. Who is the buyer for that kind of hops and drops? And I guess why are they buying that at what would be kind of an attractive cap rate?

That's the beauty of this real estate. It's very versatile. It applies to so many groups from investors to developers to end users. And in this case, it was an end user. And we've got a great large track with a versatile building. your next question comes from the line of Rob Stevenson with Huntington your line is open please go ahead

Good morning, guys. Pretty much all my questions have been answered. The one I did have was you talked earlier about the pipeline of acquisitions that you're working on at the moment. Can you talk a little bit about where that pipeline looks in terms of IG tenants? Is it roughly the third that the current portfolio is? Should we be expecting to see IG fall from that level as you do incremental acquisitions over the next few quarters? should we be thinking about the current pipeline in IG?

Yeah, we have hovered, you know, really since the inception in that sort of 30% IG range. I think we're a little bit higher than that today, almost pushing 34%. And, you know, as you look forward and you look through to the pipeline, we do have some IG in there. This, you know, the upcoming pipeline looks, you know, a little lighter, but still, you know, in line. And we expect going forward that Okay.

Thanks, guys. Appreciate the time.

You bet.

There are no further questions at this time. I will now turn the call back over to Steve Preston for closing remarks.

Great. Thank you, everyone, for your time today. We look forward to seeing you at our next conference, and we look forward to delivering strong growth going forward in good health to all. Thank you.

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