Realty Income Corporation

Good afternoon. My name is Cree, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Realty Income Fourth Quarter and Year-End 2020 Operating Results Conference Call. I'd like to have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to look for your question, press the pound key. Thank you. I would now like to turn the call over to Andrew Crum, Associate Director at Realty Income. You may begin, sir.

Thank you all for joining us today for Realty Income's fourth quarter and year-end 2020 Operating Results Conference Call. Discussing our results will be Sumit Roy, President and Chief Executive Officer, and Christy Kelly, Executive Vice President and Chief Financial Officer. During this conference call, we will make certain statements that may be considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in the forward-looking statements. We will disclose in greater detail the factors that may cause such differences in the company's Form 10-K. We will be observing a two-question limit during the Q&A portion of the call in order to give everyone the opportunity to participate. If you would like to ask additional questions, you may reenter the queue. I will now turn the call over to our CEO, Sumit Roy.

Thanks, Andrew. Welcome, everyone. As we remain in a remote work environment to promote the safety of our employees and community, I continue to be impressed by the resiliency and talent of our team to drive our business forward through the current pandemic. Additionally, I remain appreciative of the support and resiliency of our clients and partners who continue to perform under challenging circumstances. On the personal front, we were excited to welcome Christy Kelly to our management team in January. as Executive Vice President, Chief Financial Officer. And in February, Michelle Beshor joined our team as Executive Vice President, Chief Legal Officer, General Counsel, and Secretary. Mike Pfeiffer, who served as Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary, will retire after over 30 years of service. Mike will remain serving our company through June 2021 as Chief Administrative Officer and will continue leading our team members as well as assisting Christy and Michelle through their transition at Realty Income until his well-deserved retirement. Words cannot fully reflect Mike's many contributions to our company for over three decades, and I'm so immensely grateful for his partnership with me throughout the years. Moving on to financial matters, including a summary of the quarter and year. During the fourth quarter, we invested over $1 billion in high-quality real estate. including $467 million in the UK, bringing us to over $2.3 billion invested during 2020, approximately $921 million of which was invested in the UK. Investments during the year were largely concentrated in the grocery and home improvement industries, both of which continue to thrive during the current economic environment. We maintained low leverage and ample liquidity throughout the year while enhancing our financial flexibility. Highlights include the establishment of a $1 billion commercial paper program, our successful debut public issuance of sterling denominated unsecured notes, and record low coupon rates for five-year and 12-year dollar denominated bonds in the REIT sector. We have also been active in the equity capital markets to accretively fund our acquisition pipeline. During the fourth quarter of 2020, we raised approximately 655 million of equity, primarily through our ATM program. And in January, we raised an additional 670 million of equity through an overnight offering. Accordingly, our balance sheet is well positioned to address what continues to be an active investment pipeline. To that end, we are introducing 2021 acquisitions guidance of over $3.25 billion as we are well positioned to continue the momentum we experienced at the close of last year and in January. In the fourth quarter of 2020, we invested approximately 1 billion in 70 properties located in 22 states and the UK at a weighted average initial cash cap rate of 5.4% and with a weighted average lease term of 13.4 years. On a total revenue basis, approximately 68% of total acquisitions during the quarter were from investment-grade rated tenants. 71% of the revenue is generated from retail tenants. These assets are leased to 31 different tenants in 19 industries. Of the $1 billion invested during the quarter, $541 million was invested domestically in 59 properties at a weighted average initial cash cap rate of 5.2%, and with a weighted average lease term of 15.1 years. During the quarter, $467 million was invested internationally in 11 properties located in the UK at a weighted average initial cash cap rate of 5.7%, and with a weighted average lease term of 11.7 years. During 2020, we invested over $2.3 billion in 244 properties located in 30 states and the UK at a weighted average initial cash cap rate of 5.9 percent and with a weighted average lease term of 13.2 years. On a revenue basis, 61 percent of 2020 acquisitions are from investment grade rated tenants. Eighty-seven percent of the revenues are generated from retail and 13 percent are from industrial assets. These assets are leased to 56 different tenants in 26 industries. Two of the most significant industries represented are grocery and home improvement. Of the 2.3 billion invested during 2020, nearly $1.4 billion was invested domestically in 220 properties at a weighted average initial cash cap rate of 5.8%, and with a weighted average lease term of 14.9 years. And approximately $921 million was invested internationally in 24 properties located in the UK at a weighted average initial cash cap rate of 6.1% and with a weighted average lease term of 10.8 years. Transaction flow remains healthy as we sourced approximately $17.1 billion in the fourth quarter. For the full year, we sourced approximately $63.6 billion in potential transaction opportunities, the most we have ever reviewed in a given year. Of these opportunities, $42.4 billion were domestic opportunities, and $21.2 billion were international opportunities. Investment-grade opportunities represented 50% of the volume sourced during the year. Of the $63.6 billion sourced, 56% were portfolios, and 44% of approximately $28.2 billion were one-off assets. Of the $1 billion in total acquisitions closed in the fourth quarter, 66% were one-off transactions. Our investment spreads relative to our weighted average cost of capital were healthy during the quarter, averaging approximately 130 basis points. Moving to dispositions. During the quarter, we sold 60 properties for net proceeds of $77.5 million, realizing an unlevered IRR of 8.7%. This brings us to 125 properties sold during 2020 for $261 million at a net cash cap rate of 7.8%, and we realized an unlevered IRR of 11.6%. Our portfolio remains well diversified by clients, industry, geography, and property type, which contributes to the stability of our cash flow. At year end, our properties were leased to approximately 600 clients in 51 separate industries located in 49 states, Puerto Rico, and the UK. Approximately 84% of rental revenue is from our traditional retail properties. The largest component outside of retail is industrial properties at approximately 11% of rental revenue. Walgreens remains our largest tenant at 5.7% of rental revenue. Convenience stores remains our largest industry at 11.9% of rental revenue. Within our overall retail portfolio, approximately 95% of our rent comes from tenants with a service, non-discretionary, and our low price point component to their business. We continue to believe these characteristics allow our tenants to operate in a variety of economic environments and to compete more effectively with e-commerce. These factors have been particularly relevant in today's retail climate where the vast majority of recent US retail or bankruptcies have been in industries that do not possess these characteristics. We remain constructive on the credit quality of the portfolio with over half of our annualized rental revenue generated from investment grade rated tenants. Occupancy based on the number of properties was 97.9% at year end. During the fourth quarter, we released 77 properties recapturing 100.3% of the expiring rents. During 2020, we released 314 properties recapturing 100% of the expiring rent. Since our listing in 1994, we have released or sold over 3,500 properties with leases expiring, recapturing over 100% of rent on those properties that were released. In light of COVID-19, rent collection across our portfolio has remained stable over recent months. During the fourth quarter, we collected 93.6% of contractual rent due, and further improvement in rent collection percentages is primarily dependent upon improvements in the theater industry, which I will touch on shortly. We collected 100% of contractual rent for the fourth quarter from investment-grade rated tenants which further validates the importance of a high-quality real estate portfolio, leads to large, well-capitalized clients. While we have not historically prioritized investment-grade rated tenants as a primary objective, during periods of economic uncertainty, high-grade credit tenants tend to provide more reliable streams of income, as the last several quarters have exemplified. Our top four industries, convenience stores, grocery stores, drug stores, and dollar stores, Each sells essential goods and represent over 37% of rental revenue. And we have received nearly all of the contractual rent due to us from tenants in these industries since the pandemic began. Uncollected rent continues to be primarily in the theater industry, representing approximately 80% of uncollected rent in December. As the theater industry remains challenged, I would like to update the investment community on our latest view. The industry represents 5.6% of our contractual base. While we do expect the industry to downsize in the future, we continue to believe it will remain a viable industry in a post-pandemic environment, especially for high-budget blockbuster movies. You might recall that the U.S. box office reached an all-time high as recent as 2018, and 2019 produced the highest-grossing worldwide film of all time in Avengers Endgame. We continue to believe, particularly for blockbuster movies, that a theatrical release will be the preferred distribution channel for studios going forward, given the superior economics afforded to them versus streaming platforms. That said, we do acknowledge that the industry is changing and that there likely will be a rationalization of theaters in a post-pandemic reality. Under this scenario, underperforming theaters may not survive. We continue to maintain a full reserve, the outstanding receivable balance for 37 of our 77 total theater assets and continue to recognize revenue on a cash basis for these 37 assets. During the fourth quarter, we established a full reserve for one additional theater asset and we disposed of one theater asset previously on cash accounting. To be clear, We do not expect to lose the entirety of rent associated with these properties longer term, even in the event of potential closures. As of year end, the total allowance for these 37 theaters totaled $23.7 million, including $1.8 million of which is a straight-line rent receivable reserve and thus has no AFFO impact. Moving on. Our same-store rental revenue decreased 3.2% during the quarter and 1.7% year-to-date. Our reported same-store growth includes deferred rent and unpaid rent that we have deemed to be collectible over the existing lease term, but excludes rent where collectability is deemed less than probable. The decrease in same-store rental revenue is primarily driven by reserves we recognized in the theater industry. and to a lesser extent, the health and fitness industry. Now to provide additional detail on our financial results for the quarter, I would like to hand it off to Christy.

Thank you, Sumit, and I'm honored to have joined Realty Income as CFO. Having joined the board in 2019, I have experienced firsthand the talent of our Realty Income team together with the exciting growth opportunities for our business. I'm looking forward to working together with our team to deliver our strategic objectives and realization of dreams and aspirations for all at Realty Income with Sumit and our board of directors. I also look forward to engaging with our investment community over time. We are grateful for the support of all of our loyal shareholders who have invested in Realty Income for over 26 years as a public company and for our future. I would now like to provide a general overview of our recent financial results, starting with the balance sheet. We have continued to maintain our conservative capital structure and remain one of only a handful of REITs with at least two A ratings. During the quarter, we completed our debut public offering of sterling denominated senior unsecured notes, issuing 400 million pounds due 2030 for an effective annual yield to maturity of 1.71%. We also issued 725 million of senior unsecured notes in December through a dual tranche offering of five-year and 12-year notes, achieving record low U.S. dollar coupon rates in the REIT sector for each of those tenors. Additionally, we raised approximately $655 million of equity during the quarter, primarily through our ATM program. And in January 2021, we raised approximately $670 million through an overnight equity offering which we earmarked to pre-fund an active investment pipeline to start the year. We ended the year with low leverage and strong coverage metrics with a net debt to adjusted EBITDA ratio of 5.3 times or 5.2 times on a pro forma basis adjusting for the annualized impact of acquisitions and dispositions during the quarter. And our fixed charge coverage ratio remained strong at 5.1 times. We ended the year with full availability under our $3 billion multi-currency revolving credit facility, no borrowings outstanding on our $1 billion commercial paper program, and over $824 million of cash on hand. In January, we completed the early redemption of all $950 million 3.25 notes due 2022, which was done to reduce our near-term refinancing risk and take advantage of attractive borrowing rates in the fixed income market. Looking forward, our overall debt maturity schedule remains in excellent shape, with only $44 million of debt maturity through year-end 2021, excluding commercial paper borrowing. Now moving on to our income statement, ASFO per share during the quarter was 84 cents and $3.39 for the year on a fully diluted basis, representing annual growth of 2.1%. For 2020, our ASFO per share was negatively impacted by non-straight-line rent reserves of $44.1 million, which represents approximately 13 cents per share of dilution, over half of which is attributed to the theater industry. Now moving on to guidance. As we introduce our initial 2021 earnings estimate, we acknowledge that while some uncertainty related to the theater industry remains, together with the backdrop of the pandemic, our confidence in providing guidance is supported by the overall health and stability of our portfolio, combined with the acquisitions pipeline. To that end, our 2021 AFFO per share guidance of $3.44 to $3.49 represents approximately 1.5 to 3% growth over 2020. Moving on to dividends. In December, we increased the dividend for the 109th time in our company's history. We have increased our dividend every year since the company's listing in 1994, growing the dividend at a compound average annual rate of approximately 4.4%. And we are proud to be one of only three REITs in the S&P 500 dividend aristocrats and guests for having increased our dividend every year for the last 25 consecutive years. And now I'd like to hand our call back over to Sumit.

Thank you, Christy. As we reflect on 2020, we stand behind the overall resiliency of our portfolio, the relentless efforts of our team to add shareholder value, and the outlook for our business over the long term. The momentum in our investment pipeline are ample sources of liquidity And our size and scale positions us favorably to capitalize on near-term growth opportunities around the globe. At this time, I would like to open it up for questions. Operator?

At this time, I'd like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. Please limit yourself to two questions. If you would like to ask additional questions, you may re-enter the queue. Please hold for your first question. The first question is from Vikram Mohartra with Morgan Stanley.

Thanks for taking the questions. Hi, how are you? Congratulations on the new role. Thank you. I appreciate it. Maybe just to start off with the occupancy, you know, degradation as you, you know, outlined it. I'm just wondering if you can talk about, you know, two things pertaining to that. One, you know, sort of plans to backfill some of that or recapture some of that occupancy loss. And then as we think about kind of 21, what sort of embedded in terms of, you know, potential other areas where you might lose occupancy?

Those are great questions, Vikram, and thank you. So at the end of the third quarter, we were right at 98.6%. And the question was asked, you know, where do you think you're going to end the year up? And we had said that it was going to be right around 98%. And the fact that we came at 97.9% was fairly accurate. And what we saw coming was the NPC bankruptcy filing. As you might recall, we have approximately 150 assets with NPC, most of which happens to be the Pizza Hut. And then we have 19 assets that are Wendy's that's also run by NPC. We were expecting, you know, 66 assets to be rejected through the bankruptcy process. And that was the reason why we had guided the market to approximately a 98% occupancy number. Those 66 assets did come back to us during the fourth quarter, which is the largest driver of this 97.9. You will see that the net increase in vacant assets from third quarter to fourth quarter was circa 45 assets. So despite the fact that we got 66 assets back, we were able to resolve a lot more assets than we had originally thought because these assets are very well located, Vikram, and we were able to attract either QSRs that wanted to take some of these assets. And we feel very good about being able to resolve these assets fairly quickly. The other point I'll make is, you know, most of these pizza huts with NPC had less than two years remaining on their lease term. And so our asset management team had already begun the process of trying to figure out alternatives, knowing fully well that, you know, that these were the assets that would come back, even if it were to have not filed a bankruptcy. So we feel pretty good about being able to resolve these assets. And as you can see from the resolution, we had the most number of resolutions in the fourth quarter. This was a record quarter for us. And so it's a testament to the team that we have in place, Ben and TJ, who drive that particular process for us, continue to do an absolutely amazing job despite the backdrop of the pandemic. And we are very hopeful that we will climb right back up above 98%. Look, we have frictional vacancy, and we've always suggested that to the group, that because we want to have the ability to reposition some of these assets, we are always going to be in this 98%, occupancy rate, because we do want to reposition some of these assets, which does take us time. And that will continue to be what we target going forward.

That makes sense. And then just one, Christy, for you. the overall AFFO growth. I know there's some dilution or maybe just some headwinds near term. You obviously pre-funded some of this. Can you just give us a rough sense of the AFFO growth in the first half year over year versus the second half of the year?

I think, Vikram, that in terms of where we're going to see AFFO growth. I think you can expect that to be a bit similar to historical norms outside of probably the second quarter of last year where we pulled back on acquisitions a bit. But nothing out of the ordinary.

Okay. Thank you.

Your next question is from Katie McConnell with Citi.

Hi, Katie.

Katie, are you there?

You might be on mute, Katie.

Why don't we go to the next call?

Your next question is from Hendels St. Joseph with Mizzou.

Yes. Hi. Thank you. Hello there. Can you talk a bit about the decline in cash yields in the fourth quarter? Through the first three quarters of last year, the average cash yields were closer to six, a decline of 5% in the fourth quarter. So you can talk about what drove that decline. And you also mentioned that 61% of the 4Q volume was one-off transactions. So how do we think about the balance between one-offs and portfolios? near-term, and what type of pricing differential are you seeing there?

Yeah, good question, Handel. As you pointed out, the lower cap rate was largely driven by the mix of assets that we purchased here in the U.S. If you look at the prepared remarks, I suggested that 29% of what we purchased here in the U.S. were industrial assets, single-tenant industrial assets, These were very well-placed assets with clients that were executing on their omni-channel strategy, had lease terms that were north of 10 years, some 15-year leases, good growth in markets that we wanted to enhance our exposure, and with rents that were right around market rents. As you know, the industrial assets tend to be, you know, trading a lot more aggressively. And as such, that certainly had a bit of a downdraft on our cap rate. But the fact that we were able to do 5.2% for the U.S. assets was largely driven by that.

Okay. Thank you for that. And then maybe a bit of color on the guide for this year, $3.25 billion. I'm curious, you know, how we should think about the yields on that front. And as part of your conversation with potential sellers, I'm curious if in light of potential 1031 repeal, would you consider issuing units to sellers and how that might be perceived or any initial sense of, or have you discussed that with potential sellers and what feedback you might be getting on that?

Thank you. Sure. Again, good questions, Handel. Look, we came out in early January with what our pipeline looked for the first quarter. And you might recall, we had about 800 million, slightly above 800 million that we had disclosed to the market at that time that we had in our pipeline. And we were 12 days into the year. So I don't think it should have come as a surprise that we had an incredibly healthy pipeline today. developed coming out of the fourth quarter. And if you look at what we were able to achieve in the fourth quarter of a billion dollars, we had a tremendous amount of momentum that sort of carried forward into the first quarter. And that has continued. It is also a testament to the amount of sourcing that we are able to do, the new swim lanes that we have created for ourselves to continue to grow the portfolio. And I think it's a testament to the strategy that we put in place a couple of years ago to be able to, you know, now post numbers that seem very large relative to what we have come out with in years past. But that's precisely the, you know, the path that we wanted to go down. You mentioned what is the expected cap rates. I think you should expect cap rates to be similar to what we achieved in 2020. And given the mix of portfolio, the optimal portfolio allocation that we have highlighted to the market, it's really going to be a function of which particular portfolio or assets close within a quarter as to whether the cap rates are going to come out if If it's going to have a slightly more industrial slant to it, it's going to be lower cap rates. If it's going to be more retail, it's going to have a slightly higher cap rate. Having said that, even retail, especially those types of retail that are deemed essential, portfolios are now trading in the mid-fours. And so, you know, the pricing environment has gotten a lot more aggressive. But thankfully, we have the cost of capital, and we were still able to generate 160 basis points of spread for the entire year, which is north of our historical spread. So we feel very good about the quality of assets we're buying and how we are reshaping our portfolio along the lines of what we had shared with the market in the third quarter, et cetera. So really, the cap rate is going to be a function of the composition of assets that we provide within a given quarter. The last question you had talked about was 1031. And, you know, what is the impact or our ability to issue, you know, OP units? Well, it's not new for us. We have done this in the past. We've bought assets from retail shareholders who wanted to buy, wanted to take OP units as as consideration for proceeds, and we were able to satisfy that. So could I see that momentum picking up potentially to defer having to pay taxes? Absolutely. And we are very well equipped to take advantage of that and use our equity as currency to provide that to potential sellers. But having said all of that, 1031 is not a big part of our business, even on the disposition side. As you can see, most of the assets that we sell tend to be vacant assets, and that doesn't lend itself to the 1031 market. It's primarily developers or tenants who want to own their own assets that tend to play in that particular area. And on the occupied side, a lot of the transactions we did in 2020 were existing tenants exercising their option to purchase assets. And that's the reason why we were able to generate very good proceeds and very good overall returns. And the opportunistic sales tend to be, you know, an area where perhaps we run into some 1031 buyers, but that I would say is about 25% of, you know, the sellers that we interact with. So for us, I think on the disposition side is going to be fairly muted. On the acquisition side, I think not having 1031 be as aggressive, especially on the smaller boxes like USRs and drug stores, et cetera, we could see, you know, cap rates increase because of the lack of 1031 buyers. And so that could potentially accrue to our benefits, especially when we are engaging in, you know, in these one-off asset acquisitions.

Thank you, Sumit. Very helpful, very thorough. And welcome, Christy. I look forward to meeting you in person.

Thank you so much, Hendal. Me too.

Your next question is from Greg McGinnis with Scotiabank.

Hi, Greg.

Hi. See you there, Christy. Thanks, Christy. Starting with you, first, welcome. Secondly, if we can just dig into guidance real quick. There's the acquisition guidance of at least $3.25 billion, which is an interesting way to say that you're probably confident you're going to get more than that. But how should we be thinking about what gets you to the top or bottom end of the AFO per share guidance range, given that acquisition expectations?

Um, I know the question was geared towards Christie and Christie, please jump in. Um, but why don't I take that a little bit and then I'll hand it off to Christie if that's okay, Greg. Um, you know, for us, we wanted to make sure that we came out with a range that represented, uh, the facts on the ground today. And we wanted to make sure that the range was, was conservative enough where even if the situation were not to improve, And it was to be, as we have experienced early on in the year, in January and December of last year, that this is the range that we feel very comfortable with. What I'm suggesting is that there could be a fair amount of upside to the range that we have shared. And it's largely a function of what's going to happen to the theater industry at large, but also to a smaller extent to the health and fitness industry. And there we feel very confident that the theater business is going to improve, especially with the vaccination having taken hold. And, you know, every day we see more news about Pfizer and Moderna and now potentially J&J being on the approved list, that the acceleration of getting to a point where we have herd immunity is very realistic. And I've seen base case models that suggest that as early as end of June, we could get close to having herd immunity. The other data point that I would point to, Greg, is what we have seen in China. And over the Chinese, the Lunar New Year weekend, they had record numbers you know, ticket sales. And in fact, one of the movies that was shown had almost, you know, $50 million more in sales than the record that had been set by Avengers Endgame here in the U.S. and in Canada in their opening weekend. And so, you know, all of these facts sort of lead us to believe that, you know, there is a possibility that there is a fair amount of upside in on the assumptions that we have shown in our model. And that could help get us to the top end of the range. And if a lot of other things fall into place, potentially we could do even better. But we can't go out with that expectation. When you lay out all the various different scenarios, you come up with what's the probability weighted outcome. And that's what we have shared with the market. But, you know, there are things that could play in our favor. And it really is a function of how you think about the theater industry and what you think the recovery is going to look like. And we've shared with you ad nauseum, you know, some of the assumptions that we have drawn in terms of taking 37 of our 77 assets and viewing it on a cash accounting basis and how that percolates through the model. You know, if your view shifts to say, you know, that's perhaps a bit too conservative, then there is good upside. And that's what we are super excited about. There are certainly other levers for us to play, like you correctly pointed out. The acquisition market is something we are super excited about. And part of it is intentional and part of it is a function of you know, more and more operators and clients that we want to do business with wanting to engage in sale-leaseback transactions. And so that, too, could act as a potential tailwind. And, you know, look, we've come out with numbers. You've seen our history about, you know, the early estimates that we come out with and what we are able to achieve during the year. Um, but not saying that, uh, you know, but there, there, there too, there could be some tailwinds. So there's acquisition fronts. There are assumptions that we have made about the theater business and the health, uh, health and fitness business. There are assumptions we've made about how quickly we could get to a point where things are starting to normalize, um, et cetera. And all of those have room and capacity for potentially surprising on the upside. So, um, We feel pretty good, and I'll hand it back to Christy if there's anything else you would like to add.

Thank you, Sumit. And Greg, thanks so much for the question. But I absolutely echo everything that Sumit has said. We spent, you know, as you can imagine, in the backdrop of 2020, a good bit of time really thinking about the guidance and being very thoughtful about how we went out in terms of our range of ASFO per share. And, you know, as Sumit said, there are a number of levers that we have to the upside in terms of sale-leaseback transactions, a bit more on the acquisition side, and, you know, also really looking at, you know, primarily the theater industry. And so there is positive momentum, and in light of that, of We do feel, as Sumit said, very good about where we are right now and the momentum that we have in the business.

Okay, great. Thank you for all that color. For my second question, Sumit, inflation is increasingly top of conversation with investors. Could you perhaps provide some context on realty CPI-based lease escalator exposure and how the company is positioned to provide growing returns relative to peers in an inflationary environment?

Sure.

So I would say about 20%, it's probably a little bit bigger than that, of our leases have CPI adjustments. But a lot of these have a floor and a ceiling associated with them. So yes, a rising CPI environment, we have some level of protection, but there does tend to be, especially here in the U.S., there tends to be a floor and a ceiling associated with it. For us, we've encountered this problem before. What happens in an inflationary environment? The fact that we have leases that are net lease in nature, we are less susceptible to an environment where inflation expectation and actual inflation goes up because so much of the cost either in insurance, property taxes, et cetera, are paid by our tenants. And so, you know, from that perspective, we feel pretty good. We've started to see the 10-year treasury go up in anticipation of expected inflation going up. But thankfully, so far, you know, our spreads have come down as well. And our all-in costs on the tenure has gone up slightly, but not dramatically. You know, we can still issue tenure in today's environment, we think, right around a 2-1-2-2 zip code. And that is still, you know, relative to what we've been able to do in the past, a very good all-in cost on the tenure, you know, financing. So we feel pretty good about that. some of this is now offset by what we are seeing in the UK as well as in Europe, where interest rates continue to be low, inflation expectations are very much contained. And so there are all in cost of financing continues to be super exciting. And so the fact that we've created all of these different alternatives also helps us you know, shield us somewhat from inflation expectations arising in particular geographies. And so we feel pretty good about that as well. And the fact that we have long-term leases, you know, also is a benefit. Look, at some point, if the inflation expectations are going up and it is largely translating to better GDP growth, etc., that should translate to better fundamentals for our tenants. And so, you know, not so much this year. We only have about 1.7 percent of our leases expiring. But in future years, you know, that should start to reflect on higher market trends, et cetera. And so, you know, especially in 2022, 2023, we have, you know, a bit more of a expiration date. with regards to our leases, I could see us marking to market some of our leases during renewal time. And so I think from all of those perspectives, we feel pretty good. You know, one of the questions that often comes up, okay, you know, if the interest rate environment continues to go up, you know, it's going to impact your cost of capital. And that is absolutely true. But what we have found in prior cycles is that cap rates tend to follow suit as well. And there is definitely a lag, but it does sort of follow. And then it allows us to continue to maintain the spreads that we have. And in certain situations, even enhance our spreads if the cap rate moves faster than our cost of capital. So we feel like we are very well positioned as a company and based on some of the investments we've made and some of the areas that we've focused on, we feel like we are very well situated to handle an interest rate environment that increases an inflationary expectation environment that increases.

All right. Thanks, Sumit.

Sure.

Thanks, Greg.

Your next question is from Caitlin Burrells with Goldman Sachs.

Hi, Caitlin. Hi, everyone. Hi, and welcome to the Christie to the earnings call. Maybe just following up on the guidance question. One of the pieces you guys showed was income taxes and that they're expected to increase in 2021. And I think that's related to UK activity. But Could you give some more detail on what's driving this and how we should think about it increasing in the future? And is it a function of UK activity?

It is, Caitlin. And I think that you can expect modest increases, you know, as we continue to expand our UK presence.

Okay. So if we look at like the year over year increase from 2020, I guess, should we just see that if you're making a similar amount of UK investment dollars, that the income tax dollars may go up at a, I don't know, kind of similar type rate? Similarly, yes. Okay. And then when we think about the deferrals that RealtyIncome put in place in 2020, I guess, could you give some detail on when you expect to receive those and to the extent that any have already been billed, kind of how that collection is going? And similarly, when you'll start to know if the reserves you were taking were conservative, right, or the opposite of conservative would be aggressive.

Sounds good, Caitlin. You know, I think first of all, what I can say is that as it relates to the deferrals that we've been taking, you know, essentially when we look at the overall deferrals, We're really looking at a short-term payback and within, you know, 18 months. And as it relates to collections and the like, we are experiencing collections even before the deferrals are coming due. So we've been having some positive traction in that. All that being said, you know, we've got 2021 in front of us.

Got it. Okay. So when we think about what's built into guidance and the reserves that you guys took last year, obviously you gave the guidance range. You gave thinking that it would be accurate, but is it right to think that as we go through 2021, we'll start to maybe even early in the year, get some clarity on whether or not the reserves you took in 2020 were the right amount?

Yes. Yes. And we go through, Caitlin, you may already know this, but a very rigorous review on our receivables positioning, and it's cross-functional. It involves finance, it involves legal, our asset management group, and research. And so in terms of the actions that we've taken, we feel, you know, very solid about the reserve positions. And, you know, as we look forward, our collections have been consistent. and steady. You know, where we are right now in the fourth quarter, we've got, you know, close to 94% of collections. And really when you take a look at the uncollected rent in our company, it's really a story about theaters. 80% of the uncollected rent is focused on the theater business, which is 5.6%, as you know, of our contractual rent base. And the remaining, though, the story is really around health and fitness, which is primarily the remaining 16% of uncollected rent. And we did incur some collections on the health and fitness business, as Sumit said, and we've talked about. We still have theaters in front of us. But there have been really positive momentum, and we view that, you know, potentially could be an upside for our business going forward.

Okay. Thanks for the details. Sure, Caitlin.

Your next question is from Rob Stevenson with Cheney.

Good afternoon, guys. Just a question on your comments on the movie theater business. Given that, would you be an incremental buyer of movie theaters in any type of scale going forward here?

Yeah. So Rob, I think this question was asked last quarter as well. Look, we like to move into a business, but one of the lessons learned through this process is that should this represent, at least when the pandemic started, 6% of our overall portfolio. And I think what we have concluded through this process is that this business should survive, but there will be some level of real estate rationalization. And we are very happy to have put together this portfolio largely through sale leasebacks with the operators themselves. And so, you know, feel very good about, you know, our current portfolio. But the idea long term is to continue to dwindle our exposure to this particular industry to something that is closer to a 3% zip code. So I think that answers your question, Rob. We feel like over time, we need to get it down to about 3% of our overall portfolio.

Okay, helpful. And then how are you thinking about non-UK European acquisitions at this point and given what's going on over there?

non-European UK acquisition. So how am I thinking about the UK?

Non-UK European. So the continent, so Germany, Scandinavia, outside of the UK, are you got, you know, should we expect that you guys use the UK as a launching point to make, you know, bigger acquisitions and expand throughout Europe? Is it only going to wind up being UK at this point for the near term? How are you thinking about that in the context of the last, you know, 12 to 18 months? in your experience there, will we be expecting to see, you know, another line in the acquisitions at some point in 2021 or early 2022 that in addition to the U.S. and the U.K., continental Europe acquisitions?

We've always said that, you know, U.K. was our first step into a European strategy, a Western European strategy, and that continues to be the path that we are embarking upon, Rob. We are very well established in the UK. Some of the numbers that we have posted, I believe, is a testament to that statement. I'm delighted to also share with you that we've hired another full-time person at Noguera in our UK office. who has a lot of experience doing acquisitions and has a lot of relationships, et cetera, in the Western European markets. And so the goal is to continue to look for transactions and not be constrained by geography, but look for the right transactions. And there are markets that we have identified in Western Europe that we would like to be able to grow into. But it's largely a function of, you know, do we have the right operators willing to transact at the right prices, et cetera, et cetera. So are we open to acquiring in Western Europe? The answer is categorical yes. But, you know, do I expect to see something happen in Spain? I don't have a timeline for that or something in France or Italy or Germany. I don't have a timeline for you. It's largely going to be a function of what's available and who we can get to work with and whether they fit into our overall target client list.

And the financing options in the continent over there, are they as attractive to you at this point as the UK? If you were to buy something, would you finance it in local currency?

Absolutely. I mean, that's been our goal is try to minimize our exchange rate risk as much as we can. And, you know, we would follow a similar pattern to what we did in the UK, where we did our debut sterling offering. And prior to that, we had done a private placement raising capital in UK denominated pounds. And that will continue to be how we finance our transactions. And that's where it becomes super exciting, Rob. I mean, you can do a 10-year paper in euro-denominated debt at 65, 70 basis points. Yes, cap rates are a lot more aggressive. But when you sort of factor in the cost of financing for somebody who's A-A3 rated, it suddenly starts to make a lot of sense. And I think continuing to create alternative sources of capital, continuing to look at additional paths to growing our business is something that our platform allows us to do. And it's one that we are excited about and we'll continue to push on.

Okay. Thanks, guys. Appreciate it.

Thanks, Rob.

Your next question is from Brent Dilt with UBS.

Hi, Brent. Hey, guys. Hey, Christy. Hi, Brent. Welcome. Hi, Sumit.

Thank you.

So most of my stuff's been asked, but I did want to ask something. Your grocery sector exposures increased quite a bit in recent years, and I know that was intentional, but it's up to nearly 10% of rents. So maybe could you talk about how you're viewing that sector longer term, just given the wider adoption of online grocery delivery during the pandemic? I mean, do you think, like, you know, what we've seen so far is it's mostly local delivery from stores, but... Do you think there's any risk that disconnects from the customer's local store over time? And maybe the grocery store becomes, you know, a little bit more challenged from an e-commerce perspective?

Yeah. You know, Brent, I don't know if you, if you go to a local grocery, even in this environment, you still find them fairly full. Um, and I'm, you know, not trying to be facetious here. Uh, it is deemed an essential retail and they have continued to perform, Having said that, the most important thing that we are trying to focus on is the fact that the operators that we want to do business with, they have an omni-channel strategy. You know, if you look at the UK grocers that we have partnered with, they dominate the click and collect market and they dominate the, you know, delivery services. And so most of the partners that we have, and if you sort of, you know... unpack the 10%, and it's not quite 10%, but it's getting there, of our exposure, you'll find that all of the operators that we have done business with, or substantially all of the operators that we've done business with, tend to have this omni-channel strategy very well established or in the process of having it very well established. They have the wherewithal and the balance sheet to do so. And I do think that that is going to be the future of this particular industry. which is why we got very comfortable that it's not just the industry, but it's the operators that we have targeted within these industries that we have done business with. And they will be not only surviving, but thriving in the new environment where potentially there is going to be more click and collect or delivery services. So we feel very good about our specific exposure within this industry. I don't know if this was a question or not as to whether, you know, are we sort of getting up against our limits with 10%? I would say no. You know, our investment policy allows us to go as high as 15%. And for certain industries, you know, we can always go back to the board and request exceptions. But, of course, we have to put forth our thesis as to why it makes sense. But this is an industry we feel very comfortable with, Brent.

Okay. Yeah, that makes sense. I was just curious what your longer-term thoughts were. And then just one other quick one. I don't know if you've really got much to say about it, but the power grid issues in Texas recently, you have decent exposure to that market. Anything we should expect there longer-term, or is it just a blip?

Well, I don't want to underplay what's happening in Texas. But thankfully, as far as our exposure in Texas is concerned, again, that's the advantage of having a triple net. business is that it's largely being handled by the operators. And thankfully, you know, the disruption was fairly short term. And so, you know, most of these businesses are going to be able to come back. Yes, they may have some issues with product not making it through this, you know, this blip, as you put it. But, you know, I don't see this as being a major issue for for the specific clients that we have exposure to in Texas.

Okay, great. Thank you, guys. Have a good one.

Thanks, Brent.

You too, Brent. Thank you.

Your next question is from Spencer Alawai with Green Street. Hi, Spencer.

Hi. Thank you. Just looking at the total commitments for your development pipeline, I realize that's a small portion of your overall capital deployment, but it is fairly elevated versus historical norms. So I was just wondering if you could provide some color on how you're thinking about this bucket. Should we expect it to remain elevated, and what kind of stabilized yields are you underwriting?

Yeah. Spencer, that's a great question. There's a reason why we have that sheet in our supplemental, and we want to lay it out as clearly as possible. You know, this is another one of the avenues for us to continue to gain exposure to certain clients and do it at a cap rate that is north of what you would be able to transact in the open market. And so, you know, it is about $160 million of commitment, 100 of which is not funded yet. But if you look at the breakup, you will see that it's largely driven by two forward commitments we have on the non-retail side of the business. And so what that allows us to do is, again, enter into these contracts in a particular asset type that is trading super aggressively and be able to transact and get assets maybe 40, 50, 60 basis points north of where these assets would be trading had they been available today. And so I think that is part of the advantage of doing this. And this is, again, using our credit, using our scale and size to be able to get some of these assets at higher cap rates than what we would on the open markets. The other side of this is, you know, repositioning. I think it was Vikram who had asked about, hey, how are you thinking about these assets from NPC? We have a history of being able to reposition some of our assets and be able to really capture and enhance our, you know, rent from the same exact location by simply repositioning these assets. And that is something we've been doing for a few years. They tend to be smaller dollar amounts. But once again, we've given you that detail in the supplemental. And that will continue to be a bigger and bigger portion of our business. And I think as you've seen, the velocity of our lease terminations, et cetera, will only increase. And this part of our business, which we have seasoned over many years, will start to play a bigger, bigger role and will certainly, we hope, be a value-enhancing part of our business model. And so I would love to see this business continue to increase within the parameters of what I just shared with you and help us create another source of value creation for the overall business.

That's really helpful. Thank you.

Sure.

Your next question is from Wes Coladay with Baird.

Hi, everyone. Just got a quick question on dispositions. You know, how is demand for the non-core assets for the tenants that are impacted by COVID? I know you were able to sell a theater this quarter. Do you know if that will stay a theater?

Not sure. You know, but I think, Wes, we've talked about this, again, some of these theaters are located in, you know, prime locations. And we've already shared with you that, look, we don't think that the footprint of the theater business pre-pandemic is going to be exactly the same post-pandemic. So there will be some level of rationalization. But the good news is there is a fair amount of demand for, you know, last mile distribution. And there's much more of a focus on um you know development of multi-family given given some of the trends that we are seeing uh in some of these markets so it is quite possible that these assets given that they sit on you know potentially 10 12 even 15 acres of land uh could be repositioned to a higher and better use um but you know this that that question west i think is going to be very specific to the particular location and where that that that uh particular theater falls in the performance rankings. And if it tends to be in the top two quartile, I would say that, yes, the likelihood of it remaining a theater is high. But if not, I could easily see it, you know, being repositioned.

Perhaps not easily, but certainly repositioned. Okay, thank you for that. And then could you, I don't know if you shared it already, but, you know, how much of the ABR is for tenants on cash accounting? And, you know, what is the percentage collected from that tenant base? And are those mostly related, outside of the theaters, mostly related to tenants that are in bankruptcy now?

Yeah. Christy, do you want to take this one?

We have, you know, when we take a look, Wes, at our overall collections, I think I had mentioned this before. that our collections are stable at 94%. 80% of our uncollected rent is really as a result of the theater industry, and the remaining is really in regard to the health and fitness.

Okay. Thank you both. Thank you, Wes.

Thanks, Wes.

Okay, your next question comes from Todd Stinder with Wells Fargo.

Hi, thanks, and welcome, Christy.

Thank you, Todd.

Sure. Sumit, sorry if you already covered this, but I heard you quote cap rates on a few levels. But when we look at your $3 billion-plus acquisitions, we would assume some good-sized portfolios incorporated in that. Can you speak to portfolio premiums right now versus one-off deals? And maybe if you can bifurcate if there are premiums between retail and industrial.

Yeah, that's a very good question, Todd. You know, what we have seen in, even as late as last year, that there was a portfolio discount, not a portfolio premium. But there has been you know, we have seen a couple of portfolios come to market that have traded very expensively. And so I'm not quite sure, you know, where this trend is going to go, Todd. But, and I think I mentioned this already, that even some industries and some tenants that we had seen pre-pandemic, you know, are now trading at levels as a portfolio, you know, 40, 50 basis points lower. So it's tough to tell. I don't think it is a point that could be made across all industries and all operators. I do think that in most industries, and especially the higher yielding industries, if there's a portfolio transaction, you will tend to see a discount, not a premium. But in certain industries, and the industries that are in favor today, we are certainly seeing a little bit of tightening. With regards to 3.25, we are not underwriting to very large portfolio transactions. That is not part of our overall forecast, Todd. So if that were to happen, I think that would be above and beyond the numbers that we have shared with you. Uh, and, and, and so that too could be a potential tailwind for our business. As, as you might know, there are several, you know, public sale, these back transactions in the market, none of which are, are reflected in the numbers that we have shared. Um, with respect to cap rates, um, it is, it has compressed, you know, and it has compressed even over the last five months, four months. So, um, Whether it's retail here in the UK, industrial, as you know, is probably steady, but still fairly aggressive cap rates. It all has tended to become a lot more expensive today than it was six months ago. In the UK, thankfully, the cap rate market is a bit more stable. I wouldn't go so far as to say that it's compressing. But, you know, it's funny. We tend to do certain transactions where we are the only ones who are engaging in conversations. And then we will find one or two other potential buyers start to come in on subsequent transactions. So, you know, this is an interesting acquisitions environment that we find ourselves in right now. But we feel very good, again, the advantages that we have. We feel like we'll be able to get more than our share of transactions done, and we will continue to do it as spreads that will be very favorable and will help us drive earnings growth.

That's great color. Thanks, Sumit.

Sure.

Thanks, Todd. Wes, I wanted to circle back on your question because I had the theater numbers in my mind, but you were asking about cash accounting. And I just wanted to let you know that right now we have almost 50 clients on a cash basis. And just to give you some color, it's a little over $5.5 million of monthly rent exposure, for which over half of that is associated with the theater industry. Let me know if that helps.

Okay. Todd, any other questions?

That's it for me. Thank you.

Thanks, Todd.

Thanks, Todd.

Your next question is from John Masocha with Leidenberg Thalmann.

First off, welcome to the, how's it going? First off, welcome to the earnings call, Christy.

Thank you, John.

I know we're getting a little long in the call here, so I'll keep it to one question. has there been any change with regards to rent collection quarter to date in 1Q21 versus say 4Q20? I mean, essentially, can you provide any color on any of these troubled industries or non-paying tenants or any of them starting to maybe pay that hadn't been paying in December, November, October?

Yeah, I could probably help with that a little bit. I mean, if we take a look at, you know, year to date, The January recollection was relatively consistent with what we've been seeing in the past month, you know, towards that 94% range. And essentially the theater industry, you know, is still the majority at approximately 80%. And we did see some pickup as it relates to health and fitness. And it's a little early for February, but, you know, Overall, as we said at the start of the call, it's consistent and steady.

Okay. But the improvement you've seen so far this quarter has been largely on the health and fitness side rather than the theaters?

Slight bit, yes. But I would like to say, too, that theaters are paying.

Okay. That's it for me. Thank you very much. Thank you.

Your next question comes from Katie McConnell with Citi.

Hi, Katie.

OK, we'll try her second line.

Can you hear me now? Can you hear me now? Oh, yeah. We can. It's Michael Billerman. Can you hear me?

Hi, Michael. How are you?

You can hear your mic. This is what happens when I'm in the office, Katie's in Philadelphia, we have an associate at home. It creates that line merging that doesn't work too well sometimes. Christy, it's good to hear your voice. I was wondering if you can provide some perspective. Obviously, when you switched over from banking, you went to Duke as a CFO and then went to CBRE. You sit on Park Hotels, Kite Realty, Tears Board. You came on the Realty Incomes Board last year. So net lease and what real income is is very different from those other companies in terms of the type of business in terms of creating growth with this longer duration. Net lease is really where the competitive advantage is the cost of capital and obviously the relationships that the company has. But the secret to the company is being able to access well-priced capital and finding the deals. Just talk about sort of your perspectives and how you think the company should be capitalized, how you think about capital raising relative to your prior experiences.

Certainly, Michael. It's great to hear your voice again, and I look forward to seeing you in person. But I wasn't at CBRE. I was at JLL.

Definitely.

A broker. Close enough. Oh, don't tell the JLL or CBR. But in terms of, you know, overall thoughts, you know, Michael, you've known me for a long time. And I think that, you know, you really and obviously understand the triple net lease business. And Really being competitive and leveraging our scale and thoughtfulness on the capital market side is really, I think, what you've seen from us historically, what you saw from us at the beginning of the year, and what you can expect from us going into the future. As Sumit mentioned, we're excited about what we're seeing in the UK in terms of the debt markets and what we can execute as. And should something come to fruition on the continent, We have some very favorable assets, we believe, on the continent from a debt perspective as well. And when we take a look at capitalization, I mean, you can expect us to, you know, protect our balance sheet and really be focused on that net debt to EBITDA of 5.5%, 5.5 times, as we mentioned, and really going forth in that regard. And, you know... Sitting back, you mentioned some of those other businesses. I mean, as you know, you know, Realty Income is just a fantastic business with a great team. And I'm really excited about joining the team. We have a long runway ahead of us, great growth potential. And as Suma's been mentioning, some really exciting things to continue to add value to our clients.

If you think about sort of cash flow growth, You talked a little bit about on the call of some of the industries that are having some issues and how that could sway guidance. But part of the weaker growth is the pre-funding of a lot of the transaction volumes, given the sheer amount of equity that you raised in the fourth quarter and earlier this year. How should we think about your cadence on equity growth? because it is depressing current earnings. Was that like a rebalance for 21, or should we expect an acceleration of growth as we move through the year and into 2022, solely focused on the transaction side of the equation?

Not necessarily, Michael. I mean, we were just taking advantage of the market at that point in time, and it was really an opportunistic play given the the acquisition pipeline that we had in front of us. So you can expect us to still be managing our debt to equity, you know, equation thoughtfully in keeping with our A rating, but not being, you know, overly aggressive, if you will, to cause dilution.

Okay. Thank you.

Thanks, Michael.

Your next question is from Joshua Dinnerline with Bank of America.

Yeah. Hey, guys. Just wanted to see what the latest was on the 7-11 portfolio that's in the market and kind of your current feeling about, you know, if you would consider adding to your 7-11 exposure.

Hi, Joshua. I'll take that question. So, you know, we don't talk about specific transactions. You also can see that 7-Eleven is a top 10 tenant of ours. It's a client that we have done repeat business with. We helped do their first sale lease back in 2016 and did subsequently four other sale lease backs directly with them. So clearly it's an operator that we really like. It's in an industry that we like, and especially the standing that 7-Eleven has within the convenience store business, we really like their positioning. And so, you know, then the question becomes, okay, what about the 11% industry exposure that you have to convenience store business? Is that a factor that could potentially curb our ability to do more? And I think I've answered this question before. We have a limit of 15%. And we can always get exceptions in the event we can make the case that a particular industry is one that we are very favorable to be inclined towards and would like to see it increase. And this is one of those industries that we would feel very comfortable in increasing our allocation to. But again, we have to be very specific that it's industry increase in allocation, but with particular clients. in mind, and 7-Eleven would definitely fall in that bucket. Got it. Thanks for that. Are you over for it? Thanks, Joshua.

Your next question is from Linda Tsai with Jefferies.

Hi, Linda. Hi. Congratulations. Thank you, Linda.

In terms of acquisitions, what type of competition do you run into on larger portfolio deals and who would be willing to take on tenant concentration to get some of these larger deals done?

Are you asking us about whether we would be willing to take the tenant concentration or is this a general question, Linda?

Just more of a general question around competition when you're looking at these larger portfolio deals and maybe who some of the competitors are out there that would be willing to take on concentration.

Sure. So that's one of the things that we've talked about, Linda, is the fact that we do have the size and the scale to absorb large portfolios. Now, the way I would define large portfolios is one billion plus. You know, most peers would run into concentration questions doing half that size, especially if they already have a pre-existing exposure to that particular client. But we find ourselves in the enviable position of being able to continue to increase the allocation for a given client. And it's largely a testament to the size of our overall business and balance sheet. But clearly, when you start talking $5 billion, $6 billion, those are types of transactions that don't come very often. And when they do, outside of us, I don't know if there is any other public net lease buyer that could potentially entertain absorbing that sort of size. Then, In terms of who are the alternative buyers of this, it's largely driven by what is available on the financing side of the equation. And ADS has become a preferred mechanism of financing these large scale transactions, especially with highly rated operators. And, uh, and then once, once those boxes are checked, you can pretty much assume, um, you know, some of the private equity folks getting involved and being super excited about playing, uh, in, in, in that size because they can put capital to work and, uh, lever up the, the, the portfolio to, you know, call it 85, 90% and, um, you know, be able to get very enhanced their cash on cash yield. So, uh, that's the group that would be the traditional competition for very large sale-leaseback opportunities with highly rated operators. But when interest rates start to move in the direction that it has, then that does start to put pressure on some of these players because the cost of financing on that 80%, 90% leverage starts to creep up. So it really is going to have to be coupled with what we see in the financing market to help define who the potential competition could be.

Got it. And then just in terms of the cash basis tenants, what percentage did you collect from the cash basis tenants in 4Q and in 3Q?

I'll let Christy answer that.

We had a couple of million, Linda, I believe.

Okay. And then just for the 40 theaters that aren't on a cash basis, it sounds like we should assume they're paying some level of rent. For the 40, are they concentrated under one banner versus another? You know, in your disclosure, you show 40 Regal and 32 AMC.

Yeah, I can answer that. Yeah, about 41 of these assets... When we did our internal analysis, we deemed them to be in this top quartile. And that's how we came up with the 41. But when we talked about us getting some rent from both AMC as well as Regal, especially in the month of December, it was across the entire portfolio. So even those assets, those 37 assets that we have on cash accounting, they paid us rent. Not 100%, you know, but they paid us some rent for the month of December. And that's really the, you know, the upside for us going forward.

Thank you.

Sure.

Thanks, Linda.

At this time, this concludes. the question and answer portion of Realty Income's conference call. I will now turn the conference over to Summit Roy for concluding remarks.

So thank you, everyone, for joining us today, and we look forward to speaking with you at the upcoming virtual conferences. Take care. Bye-bye.

Thanks, everybody.