Spirit Realty Capital, Inc.

and a personal guarantee from the operator. The resulting disposition cap rate on the new rents was 7.84%, and the sales price was slightly higher than our original acquisition price. While theaters have been one of the more challenged industries since the onset of COVID-19, this is a good example of how our real estate underwriting help mitigate loss given default and ultimately secure a good outcome for shareholders. Before I pass the call to Mike, I want to reiterate this year's plan that we laid out on our last call. First, set forth a fully financed capital deployment plan utilizing free cash flow, asset dispositions, and in-place debt to produce investment spreads in a volatile capital markets environment. Second, showcase our portfolio strength and diversity through consistent and strong operating performance. I firmly believe we have the people, processes, and carefully underwritten real estate portfolio to be successful, even in a challenging macroeconomic environment. And I look forward to proving that out this year. With that, I'll hand it over to Mike to go over the financial highlights.

Mike? Thank you, Jackson. Good morning, everyone. The first quarter of 2023 was one of the cleanest quarters we've had since I joined Spirit. Our occupancy remained high at 99.8%. Our weighted average lease term remained unchanged at 10.4 years, and our unreimbursed property costs were 1.5%. Additionally, we recorded no lost rent, improving from the modest 0.1% in the fourth quarter. Our ABR increased by $8.2 million, reaching $689.1 million. This increase was driven by net acquisitions and organic rent growth, which contributed 3.6 and 4.6 million of ABR, respectively. Our forward SAM store sales remained constant at 1.6%. Other income was significantly lower than prior quarters, as we had no substantial interest income from cash balances or large one-time settlements during the quarter. Regarding G&A, the headline increase of 1.2 million compared to the same period last year was primarily related to this year's market-based share awards granted to the executive team and the final vesting of time-based awards issued three years ago. All executive stock awards are now 100% market-based. Time-based awards are valued using the stock price on the grant date, whereas market-based awards are valued using a fair value-based measure that results in a higher valuation and thus higher expense amortization over the life of the grant. Cash G&A, which excludes stock grant amortization expense, remained relatively flat year-over-year, despite the inflationary pressures observed across the economy. AFFO per share was 89 cents, paired 88 cents in the fourth quarter, primarily due to the net increases in rents and the resulting positive flow-through to earnings, strong portfolio performance, and accretive net capital deployment execution. Turning to our balance sheet, we ended the quarter at 5.3 times leverage, with liquidity of $1.6 billion, comprised of cash and cash equivalents, cash held in 1031 exchange accounts, and availability under our credit facility and delayed draw term loan. We did not issue any shares during the quarter. In mid-March, we took advantage of the sharp decline in the forward SOFR curve and entered into forward SOFR swaps. We anticipate we'll be fully utilized to fix our $500 million delayed draw term loan at 4.75% once fully drawn. Our floating rate exposure is now limited to our revolving line of credit, which we anticipate fully repaying when we draw on the term loan. Regarding our guidance, we're increasing our AFO per share range to $3.54 to $3.60, increasing our disposition range to $325 to $375 million, and maintaining our capital deployment range of $700 to $900 million. As Jackson mentioned, we are pleased with our results during the first quarter and believe our plan will demonstrate the strength of our portfolio while maintaining a low-leverage balance sheet without reliance on the capital markets. With that, I will turn the call back over to the operator to open up for Q&A. Operator?

We will now begin the question and answer session. To ask a question, you may press star, then 1 on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time we will pause momentarily to assemble our roster. The first question comes from Michael Goldsmith with UBS. Please go ahead.

Good morning. Thanks a lot for taking my question. Jackson, pretty considerable slowdown in the deal activity. I guess, you know, what sort of visibility do you have that, you know, your acquisitions can pick up? And, you know, can you just talk a little bit about raising the disposition expectations? And you've been doing a good job with the capital recycling, but, you know, there isn't an offsetting increase in the in the acquisition. So can you just talk a little bit about the interplay between those two factors?

Sure. First of all, our acquisition pipeline continues to be very consistent. So don't expect us to have any challenge meeting the guidance that we put out for the rest of the year. But just a little color on the four deals that we acquired this past quarter. Two of them were actually deals that we had pursued in the third quarter of last year, in 2022, and we're not, you know, the highest bidder. And so, the seller during the sale leaseback pursued another bidder at a much lower cap rate. Just given some of the challenges in the financing market, those deals came back around to us. So, we were able to secure those transactions at wider cap rates, candidly, than we bid in the third quarter. back in 2022. So I felt like that was a good opportunistic opportunity for us. If you look at the shape of our acquisitions this quarter, you know, there were two PE-backed acquisitions. There was one private company and obviously one public company in the lifetime transaction where we have a very strong relationship with that company. I would just tell you, like, We are continuing to evaluate a number, large number of retail and industrial opportunities. And the governor for us is really, you know, we think cap rates at this point have begun to find a stable point at this point. I think they've moved a bit from the third quarter last year to first quarter. And we expect probably a little bit more increased deal opportunity in the second half of this year, just given the things that we're seeing. So that's just on the top line. On the dispositions, look, the dispositions are an important part of our strategy this year. Just given where our equity multiples trading right now, we're just not going to issue stock at this level. This doesn't make sense. And what makes more sense is to sell what I'll call these granular assets that are created for us. So, you know, if you think about what we disclosed to you all on the call, You know, those were 27 separate transactions that we completed in the first quarter. A very, you know, about a quarter of it was investment grade, concentrated with Circle K, AT&T, and CVS. We sold the data center as part of one of those transactions. 30% of the rents, excluding the movie theaters, were flat, right? So no escalations. And of the 25 or so percent IG, the weighted average lease term of those leases were five and a half years. So you think about what we did. We increased spread. We increased duration. The average rent escalators that we acquired in the first quarter are 2.4%. So we're going to continue just to do that. We're just going to continue to recycle up, increase wall, increase mix, increase duration, and increase escalations. And I think we'll continue to be successful there. The assets that we sold were very liquid. I mean, they were sold in the 1031 market. You can see the math on it. We sold a lot of Sonics, the Red Lobsters, and a CBS drugstore, and a couple of other retail assets. But they're all sold with varying different buyers all over the country. So we think we're going to continue that playbook this year. And we've got a number of different assets that we think fit the criteria where they're saleable. They're not our best assets by far. And they just make sense given the opportunity we see on the investment side. I think you've done the math. So, you know, our net cap rate on the net deployment, like I mentioned on my call, is north of 10 percent. That's obviously a really good number. I think it's very creative. And if we're able to accomplish All the things I talked about, increased wealth, increased mix, increased rent escalations, get rid of flat leases, build wealth in the overall portfolio. I think that's a pretty good accomplishment if we're able to do that, continue to do that this year.

That's really helpful color, Jackson. And just to follow up, right, the cash cap rate picked up 30 basis points sequentially. So you're now acquiring in the 7.6% range. Is that a function of moving higher up the risk curve or cap rate for the product that you're looking for? Has that kind of stepped up at that 30 basis points a quarter type of movement?

I'd say absolutely we have not taken risk up. Like I said, two of the deals that we bid on last quarter, we were probably 50 basis points inside. So in other words, We bid 50 basis points tighter in the third quarter of last year, and we were able to secure these deals in the first quarter 50 wider. Same transaction, same credit. So I think it's just a step function of where cap rates are moving right now as opposed to us incrementally chasing more risk.

Thank you very much.

The next question comes from Hondell St. Just with Mizuho. Please go ahead.

Hi, good morning. This is Ravi Vaidya on the line for Hundell. Hope you guys are doing well. Just one other question about the acquisition cap rates here. We noticed that it increased heading into 1Q from 4Q, but over that same time period, debt costs have come down. Can you comment a bit about the competitive landscape and are you seeing less competition for these assets right now, given that we're past the end of the year and there may be less demand from the 1031?

Look, I feel like the things that we're buying, we're not competing with 1031 buyers, just given the size of the assets that we're pursuing. From what we can see from our lens, there's a reasonable amount of competition. Clearly, sellers, people that are looking to do sale leasebacks, if they're dealing with someone that needs bank debt or financing, they're probably going to look more to a company like ourselves or one of our peer companies that don't finance with secured mortgage debt. You know, we have the ability, obviously, to buy property unencumbered through our line of credit. And I think we have a higher degree of certainty. And I use the reference of the two deals that we were able to secure on the industrial side. Those were deals where basically the seller didn't perform and the salee's back party, you know, tenants still needed to do a transaction. So I do think that... I would say companies like ourselves and our peers probably are a preferred bidder today. Not necessarily the highest bidder, but a preferred bidder. I also think that the 1031 market is very active, as we've continued to demonstrate over the last several quarters. And we plan on, you know, kind of launching a new tranche of assets soon. That's the reason for increasing our guidance. So we think we've developed a good rhythm good relationship with brokers across the country and kind of a good idea of what really works relative to the marketplace and what makes sense for us to sell.

Got it. That's helpful. Just one more here. Can you discuss your watch list? What is it as a percentage of AVR and what are some notable tenant categories that you are currently monitoring?

I'm going to hand that over to Ken.

Hey, Robbie. So our watch list is actually very stable. You know, I've mentioned this before, what you tend to see. You know, we had an expansion of our watch list in the fall of last year, obviously, given everything going on. But since then, it's a typical every, you know, every month we're reviewing that watch list. And there are folks that we take off the watch list and maybe we add one or two folks. So overall, it's pretty steady.

What is it as a percentage of ABR?

We don't really frame it that way, Robbie. I think what we look at is, you know, the typical operating metrics that everybody can see. You know, our loss rent, our leakage, which have been extremely good. Just probably doesn't make sense to go into, you know, what it is as a percent of the base rent of the portfolio.

Okay. Thank you.

The next question comes from Kibim Kim with Truist. Please go ahead.

Hi, good morning. Can you just talk about the total basket of lower cap rate assets that you think over time you can sell? What does that total basket look like? And second, from a practical standpoint, obviously you probably wouldn't want to sell all of it. So when you think about what is realistic to assume, How much dry powder do you have in terms of dispositions?

Well, we obviously have a lot of properties. If you think about it, we disclose our retail properties in our supplemental. You can see it's quite a large number of opportunities. I guess stepping back, what I'd say is obviously we think our portfolio is a lot more diverse and stable than what the market must think at this point. So we've designed this plan, Keevan, that we think doesn't need equity. We can be opportunistic, improve the portfolio, do all those things that we talked about, and still actually grow earnings. And actually, you know, this plan does work going out into the future. We wouldn't want to do this forever. It wouldn't be very fun. But this plan does continue to work because we've got such a large asset base across this country in retail where it just gives us good opportunity to kind of continue to improve our portfolio. So you think about the things that I mentioned, we talked about what we sold. They're all shorter dated wall properties. Shorter dated wall properties doesn't mean they're bad, right? They're just, we're trying to maintain a certain level of portfolio weighted average lease term in the portfolio. So you have to sort of wait for your natural opportunity to do a blending extend. Well, we're able to actually sell at a very attractive pricing with that sub-six years, right? So, we've proven that. So, I think, you know, we'll continue to pursue this this year. My hope is, as the year progresses and, you know, we continue to show very little volatility in our rent stream, which we believe we will, that the market will start to appreciate the benefits of the diversification of the portfolio. and the opportunities that we're able to secure with our tenant base on the growth side.

Okay, and I might have missed this, but what was the interest rate on the loan just for the theaters? And if you can talk about the, I guess, a medium-term game plan, are those, is the, imagine, are they planning to refinance that loan at some point? What is the end game?

Sure. So, look, the, Mendo's comments on the call, but You know, the reality is we got 25% of our basis back in cash. The Imagine operator basically got a bridge loan for us. It's a two-year loan. It's personally guaranteed by the operator, the individual. Our expectation is he's going to refinance the loan because obviously it's a very high interest rate. But that being said, you know, we've reduced our basis in the asset The other thing is, you know, we've said this a lot of times, we've said in past calls, you know, our theater portfolio of operators is very different, you know, than maybe some of our peers. You know, we have 10, we have nine tenants, separate operators, now an additional 10 with the mortgage to imagine. You know, we've said in the past that these operators that were regional were able to recapitalize their balance sheets during COVID-19. And they're candidly in really good shape financially, probably better shape than some of the larger national players, international players. So we just saw this as an opportunistic opportunity to sort of recycle these assets out. We believe that the operator has the ability to refinance those assets. And I think I just tell you the end game, you know, we put this new slide in page four, which is, what titled Progress at Spirit, Portfolio and Balance Sheet. If you get a chance to look at that, it's a pretty interesting slide. Actually, one of our shareholders helped us put that together. I think it's a great idea that we took it. But just to focus on what Spirit was like at the IPO, movie theaters were one of our top five industries. In 2018, after the spinoff, movie theaters were still a top five industry. Obviously, today they're not, and they're continuing to reduce. They're about 3.5% of our ABR right now. So we're continuing to reshape this portfolio. We love the distribution manufacturing. That's increasing. We also love a lot of the retail tenants that we're focused on. That makes sense for the diversification mix in our portfolio. But we'll continue to evaluate creative opportunities to monetize some of our theater exposure. And I think this is a good one. It mitigates risk. We've got the operator that's got the ability to come up with the cash. They're incentivized to refinance our mortgage, and we believe they will be able to. So we think it's a real win-win for both us and Imagine, the Imagine operator.

Okay, thanks, Jack.

Our next question comes from Ronald Camden. with Morgan Stanley. Please go ahead.

Great. Just a couple quick ones on the raised disposition guidance. Apologies if you mentioned it already, but is there a certain – is there going to be more retail, some industrial? Have you guys sort of given a little bit of color on what's on the selling block and sort of cap rate thoughts would be helpful.

Sure. I'll pass that on to Ken. He's very involved in that right now.

I'd say the expectation, obviously it's lean retail, granular type retail, and would expect it would kind of continue down that road. If an opportunity presents itself on the industrial side or any of the other assets, obviously we're going to look at that. Like we've done in the past, last quarter, we sold an industrial property for sub 5% cap rate. That just made a lot of sense. But in general, I would expect it to lean to the retail granular type properties. Last comment, though, it's not dependent on that retail granular investment grade type of properties. You go back to the fourth quarter, we had a $50 million sale of medical property in a creative cap rate. Jackson mentioned, we sold a data center at a very, you know, an accretive cap rate. So, you know, it's not dependent on any one particular asset, but because we have such a diverse portfolio, it allows us to be selective.

Yeah, keep it like, you know, we don't disclose our cap rates, but, you know, the lowest cap rate sale in the first quarter was actually not, you know, the industrial deal was actually a sonic location. It was a four cap, you know, at a seven and a half year waltz, right? So individual buyer liked the location. You know, so there's, I'm just saying like, you know, there's a lot of different ideas about what people think sells or doesn't sell. We have pretty good handle on it. And so we're, we're kind of trying to utilize our rankings and all the work that we do. We've talked about in the past, you know, we've got rankings, BI tools, all this stuff. We kind of don't just randomly sell stuff. It's very, very intentional on the disposition pools that we create, one that fits the market, what the market wants, and also what makes sense for us, making sure it's accretive for us.

Great. Sir, my next one was just on the cap rate, so 7.9 in the quarter. I know the company had sort of been focused on waiting for cap rates to move more. Just where are we in that sort of process? How much have they moved? How much more do you expect to move from here, or have we sort of leveled out and so forth?

Well, anecdotally, like I mentioned, the two deals we did in the first quarter that were industrial, they were deals that were originally – we were chasing after the third quarter of 2022, and they widened out, let's call it an average of 50 basis points, the two of them. I think today what we're seeing is, candidly, we're getting beat out by other bidders. We're bidding on things where we think fair value is. So there is definitely a market that's out there. I wouldn't call it a robust buying market, but I think there's What I would say right now, I feel like there's limited quality opportunities. So when those show up, there are definitely people that come. But our expectation is that later this year, as companies continue to look at their financing needs, we just think there's going to be more volume, quality volume coming. Whether that means cap rates move out or get wider, hard to say. I think there's a lot of other factors that impact that. But our belief is that there's going to be a higher volume of, actionable opportunities that fit our risk criteria and tenant criteria and industry mix criteria.

So I don't know if that answers that for you.

Great. That's helpful. That's it for me. Thanks.

Thanks. Our next question comes from Linda Zal with Jefferies. Please go ahead.

Hi. Thanks for taking my question. In terms of dispositions, I guess you said you're selling more retail, but then you also sold some industrial. But on the flip side, in terms of wanting to increase Walt and going after higher escalators, does that lend itself more so to industrial?

Well, the industrial asset that we sold had less than nine years of Walt, and the escalators were 2%. So we're actually doing better on the industrial deals we're doing now. They're actually 2.5% to 3% escalators. That one just was, you know, just another proof of concept that we want to try to continue to show people sort of have the ability. We think we've developed an ability to improve our aptitude on industrial acquisitions at this point. But, you know, look, the retail is the easiest. It's the largest buyer base out there. So I think that's a no brainer for us. You know, we're going to continue to look at opportunities where they make sense. I mean, like we sold a camping dealer, a camping world dealership last quarter, uh, sold a supermarket, right? A couple of supermarkets, you know, LA fitness, uh, location. So, so we'll continue to like to find things that, that we think makes sense to sell without getting into details about those properties. Those, those made sense for us to sell.

But in terms of what you're buying, um, Is it, you know, with the higher rent escalators, does that fall naturally into industrial?

I'd say yes with a little but. You know, we still think owning retail is important. We've got obviously a lot of retail tenants and capability. I think what you'll see us probably start to really lean into is more repeat business with our existing retail tenants. Now, the challenge we're finding right now is that retail opportunities that come by that are just where we don't have a relationship with a tenant, just the math is just not as compelling from an escalating standpoint or a cap rate. Based on the perceived risk, we think that's involved in the transaction.

And then just between manufacturing and industrials, Where is your pipeline bigger, and where do you see the better opportunities near term?

It's very credit-dependent and locational. So, you know, look, we – I candidly would like to do more distribution. It's just trying to be able to line up our cost of capital and win those opportunities. We certainly have – we have certainly pursued a number of different distribution real estate opportunities. Just we're not successful just yet. past quarter, just given kind of where we are pricing things right now. So, you know, in time, maybe we'll be able to increase that hopefully over the rest of this year. But if I were to tell you, I think we're going to continue to do retail. We're going to do sort of a good mix of distribution and light manufacturing throughout the rest of the year. So I think, you know, that fit our cap rates in that mid seven area.

Thank you.

Our next question comes from Josh Tennerlein with Bank of America. Please go ahead.

Hey, guys. It's Josh Tennerlein. I think last quarter you mentioned in guidance there was $0.05 of reserves. Did that change at all from last quarter? I don't think you had to use any of that in one queue, but if you confirmed that, that would be great.

Yeah, Josh and Mike. I mean, that's come down a little bit. So let's say we're a little less than 1%. We didn't post any loss rent in the first quarter. We did talk about last quarter that that was a little more back half-weighted in the year because that's where we have less visibility. But we did have some of that reserve in the first quarter and we didn't use it. So we have taken that down a little bit. So it's a little bit less than 1% at this point. Okay.

And then I wanted to follow up on the seller financing on the theater sales was the, the usage of the seller finance driven just by like, like just what the theater market is like today, or is it something different like going on with maybe just like the banking sector in general for debt at the time?

It was more of that, the latter, you know, it's just really hard, you know, it's hard to get financing out there, you know, in the bank market at the moment. I believe that our belief is that this borrower has the ability to finance it. It's just been kind of a rough month in bank land the last couple months. And so our expectation is that this operator that's closed on the property will refinance that loan. It's a reasonable loan to value. You can get it done.

Do you expect to use a little bit or utilize seller financing a little bit more in this environment for the dispositions that you're talking about? I guess I'm just asking just to see if it's something we should be on the watch out for or just kind of expect.

I would say that's a very unusual one-off situation. We're not really in the business of making loans like that. This just happened to be, like I said, like this win-win. This operator's got, obviously, liquidity. It makes a lot of sense for that operator to basically cancel the lease, right? That's what they're doing. And they'll basically refinance either with a mortgage or corporately later. I mean, don't forget, this is a larger operator, regional operator, so they have the ability to finance at the corporate level. So our expectation is We just saw this as kind of a win-win for both of us in a kind of very unsettled debt market. So I don't expect us to be – this is not a strategy of providing seller financing. That's not really what we're going to do. You want to talk about trying to get theater sold?

They're not easy to sell right now. Okay. Thank you.

The next question comes from Brad Heffron with ESPN. RBC Capital Markets. Please go ahead.

Hey, thanks. Good morning, everyone. I think you own another nine theaters where Imagine is a tenant. Is there a potential for more deals like this, or was this a special situation in some regard?

I would submit that the transaction that we did was very germane to that relationship and that dynamic. We're very happy with our other Imagine theaters and that operator, phenomenal operator. So right now, there's no expectation.

Okay, got it. And then, Michael, on the increasing guide, can you just go through sort of the underlying reason for that? Obviously, the dispositions number went up, but presumably that would actually take the guide down. So what was the offsetting factor there?

Yeah, I mean, the main reasons for the increase for guide were, you know, one, the performance in the first quarter. We didn't you know, have any lost rent, right? So we had some reserves set aside for that that we didn't use. And then we had very accretive acquisitions in the first quarter to flow through the rest of the year. So what you do in the first quarter does have an impact on the rest of the year. The dispositions really aren't, the increase in dispositions really aren't an offset. You know, we're shaping up those additional incremental dispositions to take out to market now. By the time you get those out to market, get them done, that's going to be in the latter part of the year. So it doesn't really have a big impact to earnings this year. What it really does is it positions our balance sheet well going into 24, which we think will be a very good year for us. But those dispositions don't have a huge impact on earnings this year. But again, the acquisition in the first quarter coupled with just good operating performance is what really drove the increase in the guide.

Okay. Thanks. Yep.

The next question comes from Wes Galladay with Baird. Please go ahead.

Hey, good morning, everyone. Sticking with the theaters, how should we think about percent rent going forward? You did only tell the four theaters as Brad was talking about in his question. Were these theaters different in any way, like the next generation theaters? And then when you look at your vacancy, you only have a few. Are those any regals in there? And how should we think about a fully loaded loss given default for those theaters?

What I can tell you is

One part of that answer is the five vacants that we had at the end of the quarter, none of those were theaters. I'm not sure what the answer is.

Yeah, and on percent rent, I mean, we did have percent rent on the four that we sold. That was a special situation because we did re-tenant those during COVID. So with the new operator coming, they did have a ramp-up period. That period ended at the end of last year. we don't have any other situations like that. So none of our other theaters are on a percent rent basis. That was a little unique to that particular tenant, which obviously now we've sold those properties. Yes. I just want to ask, would you take that rent down for the second quarter from the first quarter run rate? Yeah. Well, that rent is not part of our ABR at the end of the first quarter since they were sold. So our ABR is snapshot at the end of the quarter. So our ABR does not include those four theaters. and then on the, um, I guess the, um, loss given default, I guess you don't have any theaters for Regal. So that's a moot question at the point.

Um, my next question would be, yeah, we do have theaters with Regal, but you know, we're still in the process with the bankruptcy with those guys. So at some point when we're, when they're done, we'll explain it, you know, but as we said, you know, we, we expect to get, we expect to lose a couple of theaters.

Okay. And then, um, You have Club Corp, their debt's trading a little bit weaker, but from what I recall on past calls, you have pretty good operational momentum at the asset you bought. And so could you maybe give us an update there, how they're performing operationally for you?

Sure. Look, they, as you guys know, invited their headquarter here in Dallas. We are very, very closely aligned with them and Apollo, candidly. We spent time with both entities. We are very bullish on the golf business, very bullish on the industry, very bullish on those guys. The performance of our master lease has continued to strengthen. So our master lease coverage right now is 2.8 times. That's 0.4 times higher than 2019. So you should sort of imply revenues are higher than pre-COVID levels right now for our properties. Um, you know, those, you know, our lease generates about 10% of, uh, invited corporate EBITDA, you know, so it's a, it's a meaningful part of their business and our units on the top line have increased 28%, 28% since 2019. So I can tell you like the, the performance of the units that we bought are very, very strong. And candidly, they're very consistent with, I believe, the experience with the rest of their portfolio. And so I personally am very confident in their ability to refinance that debt, which is due in September of 2024. I know there's some whatever articles out there, but we have pretty good insight into their business and believe that they will be able to refinance that. And so we're not worried about it.

Got it. And if I sneak just one more in, you do have that $500 million delayed term loan. How should we think about drawing that down and the use of proceeds for that? Yeah, I would model that we mask that with our acquisition needs. You know, we're in the process of working with our lenders to amend that to be able to push out some of that commitment so that we don't have to draw it all in July. So we'll update you when that is complete. So we'll be able to better match that with, you know, the needs to actually draw it. So I would not assume that we draw the entire $500 million in July. You know, we'll be able to work to push that commitment out a little bit, stagger it to really match it up with our funding needs.

Thanks for the time, everyone. Thank you.

Next question comes from John Masoka with Landenberg Thalman. Please go ahead.

Good morning.

So let me kind of just quickly touching on that last point about the debt. Should we kind of assume the goal is to get that to match up with the swap timing? Would that be kind of the ideal situation or is maybe looking to get it even more granular than that? No, I think that's a fair assumption. Okay. And then on the theaters, I think Jackson heard, um, you were looking to kind of continue monetizing those assets. I mean, what are some kind of creative solutions to monetizing, particularly some of your non big three, um, theater assets beyond, you know, things like solar financing. Is there any other kind of strategies that you have out there, um, that you're working on today?

No, I would say the answer is no. Um, This worked out well for both us and the Imagine operator because the performance at his theater is going really well. He's got other theaters and corporate facilities, debt facilities. It just made a lot of sense. But would we sell to other operators? Maybe. So we'll continue to see. We obviously have a lot of good visibility on performance at the unit level and corporate level. for our theater operators. Look, maybe we could do another one like this. Maybe it's not seller financing, maybe it's something else. But there's clearly, as negative as people are out there, some people, about movie theaters, our operators are actually quite bullish, especially the regional ones, that are not hampered with some of the cost structure of the larger, bigger theaters international kind of players.

I guess in that context, it's fair to assume there aren't any additional theater dispositions and kind of disposition guidance today? Not right now.

I actually want to make a quick correction. I mentioned out of the five vacants we have, there is one small theater. It's the first Regal that we had previously disclosed that they did reject, but it's It's got a resolution here within a matter of days. But other than that, you know, we've got to wait until we see the end of the regal until it gets wrapped up this quarter, probably late this quarter.

Okay. And then as we think about kind of assumed credit loss through the remainder of the year, is there any kind of change in the outlook for some of the tenants that are – undergoing kind of bankruptcy right now. I mean, Regal is the most obvious one, but maybe Party City as well.

Party City is zero loss for us. So, no, we don't see a lot of pressure there at the moment.

Okay.

That's it for me.

Thank you very much.

Thank you. The next question comes from Spencer Alloway with Green Street Advisors. Please go ahead.

Thank you. Just circling back to the theater assets that were sold, and I'm sorry to belabor this point, but was there any CapEx that was spent from Spirit's perspective while those were being converted from the Goodrich name?

No, it was zero. We didn't put any money into them.

Okay. And then as it relates just to general use of proceeds, has there been much consideration around share buybacks, just given where the stock is trading?

You know, we look at it, talk to the board about it, you know, and we'll continue to evaluate it. You know, at this point, we feel like we're generating 10% incrementally on our dispositions, on our net acquisitions. And like I said, we believe that what we're doing is improving the overall portfolio from a credit and stability standpoint. Diversification, obviously, Walt, I talked about, and escalations. So, Yeah, I mean, we'll always look at buying back stock, but buying back stock doesn't really improve your portfolio. And, you know, these net lease portfolios, if you just leave them be, you know, wealth goes down. So you sort of have to kind of continue to refresh these, you know, the mix of assets in these kinds of companies, in my opinion. But, yeah, we do look at stock buybacks, and, you know, we'll continue to evaluate it. We have done it in the past, obviously, since I've been here in a meaningful way. But at this point, we feel like there's still good work to be done in how we're thinking about the recycling of assets, given the market opportunities to deploy at what we think are really good cap rates. And, candidly, with the duration that we're buying, you know, we believe that when the Fed eventually finishes and interest rates stabilize, there's going to be a lot of uplift in pricing if we decide to go sell some of the things that we've been buying in the last year.

Thanks so much for the call, Jackson.

Sure.

Next question comes from Greg McGinnis with the Scotiabank. Please go ahead.

Hey, good morning. So the portfolio continues to go through some pretty substantial changes with industrial exposure at nearly 25 percent, up 20 percent since 2018. How are you thinking about the ultimate diversity of exposure to each asset class or industry?

We don't have a target out there, to be honest with you. We like both. At the current mix level, we think it provides a great deal of diversification, geographic, industry, unit, real estate, size of real estate. and takes advantage of some of the onshoring that's coming into this country. And we just see a lot of interesting positives in that light manufacturing industrial portfolio. I mean, I'm not going to tell you that we're going to take it significantly higher or lower. We're going to continue to evaluate that healthy mix. Look, there are certain retail lines of businesses that we're just not going to be able to market for anymore. either they're too expensive from a weighted average cost standpoint or don't match up in our heat map, the way we see, the way we kind of want to build this portfolio long-term. So that mix, you know, go back to page four and look at it. It's changing quite a bit. You know, like Lifetime Fitness, for example. I mean, a lot of people were criticizing us about the concentration being number one tenant. Look, we're big believers in that concept, big believers in the CEO, they're just, it's a phenomenal business and a lot of confidence in them. So that's very different than Walgreens, right? Walgreens was our number one tenant at the end of the spinoff. And quite honestly, Walgreens, we can't be a big enough partner with Walgreens to make a difference. So why should I go compete to buy developer Walgreens deals, right? Just given our size. Whereas with someone like Lifetime invited, You know, we can be a real partner. We can help them, and they can help us to have a very additive relationship. So, look, we're looking at our portfolio as a combination of trying to create that diversity, but also those win-win opportunities with what I'll call best-in-class operators in those industries that we believe have that really long runway for stability. That's really kind of what we do, right?

Right, okay, thanks.

I didn't answer your question about the mix, but that's how we look at the world right now.

No, that's fair. And I just want to touch on the watch list again. In regard to specific tenants, such as Shutterfly and Tupperware, could you provide any color on ABR exposure to those tenants and then your thoughts on bankruptcy potential and disposition or releasing expectations on those assets? And finally, just as a reminder, are all the invited club assets under a single master lease?

Yes, first of all, yeah, on the advantage, the answer is yes. Look, on the Shutterfly deal, what I can tell you about that is it's great real estate. Actually, the tenant has increased the usage, the manufacturing usage, by kind of taking out some of the office component that's in that building. So that's, I think, going to be a super sticky building. And look, on Tupperware, I'm not going to comment Directly on that, I mean, I can just tell you they paid rent this month. And, you know, we're very close. Continue to evaluate that situation. And when we have more to say, we'll do it.

Okay. And are you willing to disclose the ABR to the Senate?

Oh, I mean, it's less than 50%. 50 basis points. Sorry. Yeah.

Right. Okay. Great. Thank you.

Mm-hmm.

This concludes the question and answer session. I would like to turn the conference over to Jackson Shea for any closing remarks.

Thank you, operator. Thank you very much for participating in our call. And I just want to bring you back to the new page that we put into our supplemental deck that talks about the progress at Spirit on page four. If you look at it, we're really focused and excited about the progress we've made since the IPO. The company is quite different, and we feel quite enthusiastic about the prospects for the rest of this year. Thank you.

The conference is now concluded. Thank you for attending today's presentation.

You may now disconnect.