Eric Borden

Eric Borden asked how Realty Income's recapture rate on the 3% of ABR expiring in 2026 should compare to the long-term average, and if an acceleration is expected from re-leasing efforts across retail park exposure. He also inquired about the 173 properties available for lease, asking what percentage is slated for disposition versus believed to be releasable today.

Answer

Sumit Roy, President and CEO, noted that historical recapture rates have been north of 100% (closer to 103-105%) over the last 4-6 years, and he expects the team to meet or exceed those numbers, cautioning that each year is different due to the makeup of expirations. He highlighted that 173 vacant assets (out of 15,200+) is a smaller number than in previous years (closer to 220-230). He views this as a "natural rate of vacancy" (circa 1-1.5%) that the proactive asset management team is working on, either for disposition or repositioning/releasing.

Eric Borden asked how to think about the recapture rate on the 3% of ABR expiring in 2026 relative to the long-term average, and if an acceleration is expected from retail park re-leasing efforts. He also requested more detail on the 173 properties available for lease, specifically the percentage slated for disposition versus re-lease.

Answer

President and CEO Sumit Roy stated that while every year is different, historical recapture rates have been north of 100% (closer to 103-105%), and he expects the team to meet or exceed those numbers. He noted that 170 vacant assets (out of 15,200+) is a smaller number than in previous years, reflecting proactive asset management, and views 1.5-2% of assets being worked on (disposition or repositioning) as a 'natural rate of vacancy.'

Eric Borden of BMO Capital Markets asked for details on the company's current foreign exchange (FX) hedging strategy and whether any FX-related tailwind is included in guidance.

Answer

CFO Jonathan Pong explained that a formal policy ensures assets and liabilities are closely matched by currency to minimize risk. He emphasized the strategy is designed to neutralize FX volatility and focus on core business performance, so no material FX headwinds or tailwinds are built into guidance.

Eric Borden asked about Broadstone Net Lease's strategy for deploying proceeds if UNFI were sold, specifically whether it would fund traditional acquisitions or new developments, and the potential leverage implications. He also inquired if the 2% annual growth rate is a reasonable run rate assumption for internal growth in 2026 and beyond.

Answer

CEO John Moragne stated that UNFI is optimally a capital source later in the year for tax efficiency, and the deployment of proceeds is more about timing than the mix of investments. He reiterated a sustained target leverage of 6x pro forma. Regarding internal growth, John Moragne confirmed that 2% is a reasonable run rate assumption, noting historical consistency and potential for upward momentum.

Eric Borden (BMO Capital Markets) asked about Broadstone Net Lease's strategy for recycling assets, specifically regarding a potential UNFI sale later in the year. He questioned how the proceeds would be deployed (traditional acquisitions vs. new developments) and the potential leverage implications. Additionally, he inquired if a 2% annual growth rate is a reasonable assumption for internal growth and same-store revenue in 2026 and beyond.

Answer

CEO John Moragne explained that UNFI proceeds would optimally be deployed later in the year for tax efficiency, with deployment mix depending on timing, and that the company aims to maintain its sustained leverage target of 6x pro forma. He confirmed that a 2% annual growth rate for internal growth is a reasonable run rate assumption, with potential for upward momentum over time.

Asked about the company's goal for incremental build-to-suit developments in 2025, whether demand is increasing due to supply chain fortification, and for details on the $236 million of regular acquisitions currently under control.

Answer

The company affirmed its $500 million goal for new build-to-suit announcements, noting these projects will contribute to 2026-2027 growth. Demand is up due to both supply chain strategies and BNL's growing reputation. The acquisitions under control are primarily industrial deals with cap rates around 7%, expected to close within the year, mostly in Q3.

Eric Borden inquired about the funding strategy for the build-to-suit pipeline, including the current $200 million obligation and the potential $500 million in new projects, given the company's no-equity issuance stance. He also asked about leverage tolerance and what drove the recent $100 million in acquisitions under control.

Answer

CEO John Moragne stated that build-to-suit projects will be funded via the revolver, retained earnings, and accretive dispositions, with no plans to issue equity. He affirmed a commitment to staying below 6.0x leverage on a sustained basis, though it could temporarily exceed that with a clear path to de-leveraging. Regarding recent acquisitions, he explained that a chunky industrial deal they had pursued over the summer finally came to fruition at their target price after a prolonged negotiation.

Inquired about the funding strategy for the build-to-suit pipeline, the company's leverage tolerance, and the rationale behind recent acquisition activity.

Answer

The build-to-suit pipeline will be funded via the revolver, retained earnings, and dispositions, with no plans for equity issuance. Leverage may temporarily rise above the 5.5x target but will remain below 6x on a sustained basis, using a pro forma calculation. Recent acquisitions include a deal that took time to negotiate to the right price, and the market remains competitive.

Eric Borden inquired about the funding strategy for both the current and future build-to-suit pipeline, particularly regarding the use of the revolver and dispositions. He also asked about the company's tolerance for higher leverage during this investment phase and what prompted the recent $100 million in acquisition activity after a period of caution.

Answer

CEO John Moragne stated that build-to-suit projects will be funded via the revolver, retained earnings, and accretive dispositions, with no plans to issue equity. He explained that while they target leverage of 5.5x, they could temporarily exceed 6x with a clear path to de-leveraging, supported by pro forma adjustments for future rent streams. The recent acquisition activity was attributed to a seller's pricing expectations finally meeting BNL's disciplined underwriting on a deal pursued for months.

Eric Borden of Raymond James inquired about the decision to maintain AFFO guidance despite positive factors, the current acquisition environment and target cap rates, and whether higher rent bumps on recent acquisitions represent a new trend.

Answer

CEO John Moragne explained that the guidance was maintained due to anticipated fourth-quarter expenses from earlier credit events and vacant properties, which were already factored in. He noted the regular way transaction market is unattractive, with BNL preferring its build-to-suit pipeline's superior yields. Moragne attributed the higher rent bumps to a greater weighting of industrial assets in recent acquisitions, which command stronger escalations.

Eric Borden asked why Broadstone Net Lease did not raise its full-year AFFO guidance given positive factors like the UNFI project coming online and lower G&A expenses. He also inquired about the current acquisition environment, target cap rates, and whether the above-average rent escalations seen in recent acquisitions represent a new trend.

Answer

CEO John Moragne explained that the guidance was maintained because of anticipated carrying costs on vacant assets and the impact of earlier credit events, which were already factored in. He stated that the traditional acquisition market remains unattractive, with BNL favoring its build-to-suit pipeline for its superior yields. Moragne attributed the higher rent bumps to the quarter's heavy weighting toward industrial assets, which command stronger escalations.

Eric Borden asked about the factors driving the stabilization in competition and what would be needed for competitive intensity to increase. He also questioned the expected cadence of forward equity issuance for the year and any near-term expiration or settlement constraints on the remaining $322 million of unsettled equity.

Answer

Pete Mavoides, President and CEO, attributed competition stabilization to the access and cost of debt capital, particularly the 10-year treasury rate, noting that a mid-to-high 3s 10-year would likely increase competition. He emphasized their strategy to avoid competition through granular, relationship-driven sale-leasebacks. Rob Salisbury, Chief Financial Officer, stated no near-term expiration for unsettled equity and highlighted focus on the unsecured bond market due to attractive pricing. He added that with current low leverage and liquidity, they could meet midpoint acquisition targets without issuing more equity this year.

Eric Borden asked about the factors driving the stabilization in competition and what would be needed for competitive intensity to increase. He also questioned the cadence of forward equity issuance for the year and any near-term expiration or settlement constraints on the remaining $322 million of unsettled equity.

Answer

Pete Mavoides, President and Chief Executive Officer, attributed competition stabilization to access and cost of debt capital, largely driven by the 10-year Treasury rate, and highlighted their strategy to avoid competition through granular, relationship-driven deals. Rob Salisbury, Chief Financial Officer, confirmed no near-term expiration for unsettled equity and stated that with low leverage and significant liquidity, they could meet midpoint acquisition targets for the year without issuing more equity, focusing instead on the attractive unsecured bond market.

Eric Borden requested an update on the tenant credit watch list, specifically its current percentage, noting it was approximately 160 basis points last quarter.

Answer

Chief Investment Officer AJ Peil clarified that the watch list, defined as the intersection of B- and less than 1.5x coverage, currently sits at 1.2x, representing a 40 basis point decline quarter-over-quarter. He noted a variety of tenants are on the list, which is closely monitored.

Eric Borden requested an update on the tenant credit watch list, specifically its current percentage, which was approximately 160 basis points last quarter.

Answer

AJ Peil, Chief Investment Officer, stated that the watch list, defined as the intersection of B minus and less than 1.5 times coverage, currently sits at 1.2 times, representing a 40 basis point decline quarter over quarter.

Eric Borden of BMO Capital Markets asked why Essential Properties isn't leaning more heavily into acquisitions given its strong pipeline and raised guidance, and also inquired about a slight dip in occupancy.

Answer

CEO Pete Mavoides clarified that the company is aggressively pursuing acquisitions and that the guidance reflects conservatism due to limited long-term pipeline visibility. Regarding occupancy, he explained the vacancy involves only nine properties and is not material, with forward-looking credit indicators for the portfolio remaining very strong.

Eric Borden of BMO Capital Markets asked for the reasoning behind maintaining the current acquisition guidance given the strong start to the year and ample liquidity. He also sought details on the investment thesis for the recent Dave & Buster's acquisitions.

Answer

Executive Robert Salisbury explained that while the year has started strong, it's still early, and transaction volume typically lulls in the summer before picking up. Regarding Dave & Buster's, CIO A.J. Peil highlighted a long-standing relationship and a well-structured deal with strong coverage. COO Max Jenkins added that market volatility created a unique opportunity with less competition and attractive pricing. CEO Peter Mavoides noted the tenant's relative size in their diversified portfolio is small.

Eric Borden asked about Circle K's appearance in the top 10 tenant list and the company's appetite for acquiring more convenience stores. He also inquired about the slight moderation in occupancy, the current watch list beyond Zips, and the bad debt assumptions built into guidance.

Answer

Executive A. Peil noted that Circle K has been a top tenant before and that C-stores are an area of continued ratable growth. CEO Peter Mavoides dismissed concerns about the minor occupancy dip from 3 to 7 vacant properties as natural fluctuation. Executive Robert Salisbury explained that their guidance includes a bad debt assumption well in excess of their historical 30 basis point loss rate, derived from a bottom-up analysis of specific tenants plus a general reserve for unknown events.

Eric Borden inquired about the acquisition pipeline for the remainder of 2024 and sought clarification on why the 2025 acquisition guidance appears lighter than the recent trailing average.

Answer

CEO Peter Mavoides projected Q4 acquisitions would align with the 8-quarter average (around $250 million) and clarified that M&A activity involves supporting tenants, not corporate transactions. He explained the 2025 guidance is intentionally conservative, reflecting a prudent strategy after a period of historically high investment activity and in anticipation of increased competition as capital markets normalize.

Eric Borden asked if CVS's recent performance improvements are reflected in the company's portfolio metrics and how its CVS exposure compares to the broader store base. He also inquired about the increase in quick-service restaurant (QSR) exposure to 2.3% of ABR, asking if more QSR assets are coming to market and about brand coverage within this segment.

Answer

President and CEO Joey Agree noted a strong relationship with CVS, with pharmacy exposure down to 3.6%. He emphasized a selective acquisition process for high-performing ground leases or low-rent stores, not targeting material growth in pharmacy exposure. Regarding QSRs, Mr. Agree stated the sector is not a target, with acquisitions generally being ground leases (e.g., Panda Express, Wendy's, Olive Garden, McDonald's), and the company avoids single-purpose restaurant structures due to fungibility and residual value concerns.

Eric Borden asked if forward equity contracts must be settled before expiry or if they can be rolled forward. He also sought early thoughts on the Series A preferred shares redeemable in September of next year.

Answer

CFO Peter Coughenour confirmed the opportunity to extend forward equity contracts but stated the intention to settle upcoming forwards at maturity due to existing short-term borrowings and investment needs. He views the Series A preferred shares as an attractive piece of paper with a low coupon, not anticipating an early call.

Eric Borden asked for clarification on whether Agree Realty's forward equity contracts must be settled by their expiry dates or if they can be rolled forward. Borden also sought early thoughts on the Series A preferred shares redeemable in September of next year.

Answer

Peter Coughenour, CFO, stated that while extensions are possible, Agree Realty intends to settle upcoming forward equity at maturity to address short-term borrowings and for other strategic considerations. Regarding the Series A preferred shares, Coughenour views them as an attractive piece of paper with a low coupon, not anticipating an early call.

Eric Borden from BMO Capital Markets asked about known move-outs from 2025 lease expirations and the long-term capital allocation strategy beyond the current year.

Answer

CEO Joey Agree and CFO Peter Coughenour confirmed no known material move-outs, with any potential issues covered by credit loss guidance. Agree reiterated that the balance sheet is 'pre-equitized' for 2025 and they have no need to access capital markets, giving them significant flexibility for 2026 and beyond.

Eric Borden from BMO Capital Markets asked about any known move-outs within the 2025 lease expirations and inquired about the long-term capital allocation strategy for replenishing the company's "war chest" for 2026 and beyond.

Answer

CEO Joey Agree and CFO Peter Coughenour confirmed there are no known material move-outs for 2025, with any potential issues already factored into credit loss guidance. Agree emphasized that the balance sheet is already "pre-equitized" for 2025 and does not require replenishment, as it can fund over $1.5 billion in investments without raising additional capital.

Eric Borden asked about the expected decline in occupancy for Q1 2026, specifically inquiring about the breakdown between move-outs from existing tenants and the impact of development projects being added to the operating portfolio.

Answer

CFO Staci Tyler clarified that there is minimal impact from development transfers on Q1 2026 occupancy, with the larger effect expected in Q2, Q3, and Q4. She noted that the core portfolio's occupancy is not declining, and any projected decrease for the year is primarily due to the drag from development transfers. President Reid Dunbar added that increasing development projections can sometimes lead to a temporary decline in same-store sales as existing tenants expand into new development, representing a strategic 'half step back to take a full step forward'.

Eric Borden asked about the expected occupancy decline in Q1 2026, specifically how much is due to tenant move-outs versus development projects being added to the operating portfolio.

Answer

EVP and CFO Staci Tyler clarified that Q1 2026 occupancy is projected to be flat from Q4 2025, with the full-year decline primarily driven by development transfers later in the year, not significant Q1 move-outs. President Reid Dunbar added that increasing development can lead to a temporary decline in same-store sales as tenants consolidate or expand into new space.

Eric Borden of BMO Capital Markets asked about the 2025 bad debt guidance of 30 basis points, questioning if it reflected general conservatism or a specific tenant concern. He also asked for the outlook on lease termination income.

Answer

Executive Brent Wood clarified that the 30 basis point bad debt assumption is not tenant-specific and represents a more normalized run-rate, which is about a third lower than the actuals in 2024 that were driven by a few isolated bankruptcies. He also guided to approximately $1.1 million in non-specific lease termination income, resulting in a net impact of about $0.02 per share for 2025.

Eric Borden asked for clarification on cap rate expectations, specifically if there's a bifurcation between U.S. and European cap rates, and also inquired about the company's hedging strategy and how exchange rate movements impact AFFO per share, particularly for 2026.

Answer

CEO Jason Fox noted that U.S. and European cap rates have been roughly in line, with Europe seeing a slight tightening due to earlier rate stabilization. He highlighted that W. P. Carey still generates better spreads in Europe due to lower borrowing costs. CFO Toni Sanzone explained that the company hedges European cash flows, first naturally with euro-denominated expenses, and then through a cash flow hedging program for remaining net cash flows. She stated that material currency movements are not expected to significantly impact AFFO, citing a minimal $0.02 impact from euro movements this year.

Eric Borden inquired about cap rate expectations going forward, specifically if there's a bifurcation between U.S. and European cap rates. He also asked about W. P. Carey's hedging strategy and how movements in exchange rates might impact AFFO per share in 2026.

Answer

Jason Fox, Chief Executive Officer, noted that average cap rates have been roughly in line between the U.S. and Europe, with Europe seeing slight tightening and better spreads due to lower borrowing costs. Toni Sanzone, Chief Financial Officer, explained that W. P. Carey hedges European cash flows, naturally with euro-denominated expenses and further with a cash flow hedging program, reducing gross AFFO currency exposure to less than 20%. She stated that material movements in currencies are not expected to significantly impact AFFO, noting a minor positive impact from euro movements this year.

Eric Borden asked which sectors or geographies W. P. Carey is monitoring most closely for tariff impacts and how the company is thinking about issuing equity if its stock price remains strong and acquisitions accelerate.

Answer

Head of Asset Management Brooks Gordon stated they are watching industries with global supply chains but feel comfortable given their tenants' regional focus. CEO Jason Fox said that while they could opportunistically issue equity, they do not need to, as their plan to fund investments via non-core asset sales is sufficient even for volumes above the high end of guidance.

Eric Borden from BMO Capital Markets sought details on the progress of remaining 2025 lease expirations, the potential for delays into 2026, the lease roll dynamics of the new Ohio portfolio, and leasing activity at the Liberty Business Park development.

Answer

James Connolly, EVP & Asset Management, detailed that of the remaining 2025 expirations in discussion, roughly 40% are at the LOI stage and 50% are in active conversation, with minimal risk of significant delays. Anthony Saladino, President & CFO, addressed the Ohio portfolio, noting its short lease term but high expected tenant retention. Jeffrey Witherell, Chairman & CEO, commented on the Liberty Business Park, stating they are negotiating with full-building users and expect to sign a tenant soon.

Eric Borden asked about the potential downtime and CapEx needed to subdivide the ODW space, when that asset might return to the same-store pool, and how new development projects fit into the company's capital allocation strategy.

Answer

Executive James Connolly stated there would be minimal downtime at the ODW property, as the space would be demised quickly and the tenant would pay rent immediately. Executive Anthony Saladino projected the asset would likely re-enter the same-store pool in 2026. Executive Jeffrey Witherell explained that development is not a current priority, and they do not plan to build speculatively in the near term, focusing instead on build-to-suit opportunities.

Eric Borden inquired about the $1 billion acquisition pipeline, asking for the breakdown between balance sheet and joint venture deals. He also sought details on the timing and initial cap rates for guided acquisitions and the key variables that would lead to the high or low end of the company's guidance.

Answer

Executive Chairman and CEO Jeffrey Witherell clarified that the $1 billion pipeline is a total potential figure, with the majority targeted for the balance sheet, though one $150 million portfolio is likely JV material. President and CFO Anthony Saladino added that the guidance midpoint assumes $360 million in acquisitions deployed evenly through the year at a 6.75% cap rate. Saladino explained that reaching the high end of guidance depends on accelerated capital deployment and leasing upside, while the low end could result from slower deployment or protracted leasing.

Eric Borden of BMO Capital Markets questioned the wide acquisition guidance range despite management's commentary on an improving transaction market, asking for details on the current pipeline's composition. He also asked if the recent Moody's credit upgrade would lead to tangible savings on debt borrowing costs.

Answer

EVP & CIO Michael Chase described the pipeline as primarily one-off assets (60%+) with some portfolios. CEO William Crooker added that the bid-ask spread has narrowed, giving them confidence to maintain the guidance range. EVP, CFO & Treasurer Matts Pinard explained the credit upgrade provides a modest benefit in the private placement market and is a key step toward becoming a public bond issuer.

Eric Borden inquired about leasing demand for STAG's development pipeline and asked for an update on the full-year occupancy loss guidance of 100 basis points, including any buffers in that assumption.

Answer

CFO Matts Pinard noted that while leasing for new developments is generally slower macro-wise, STAG is seeing good activity at its Greenville and Power Road assets. He acknowledged potential for minor slippage in lease-up timing. Regarding guidance, Pinard confirmed the 100 basis point occupancy loss forecast is unchanged. He expressed confidence, stating that with 80% of the year's leasing already completed, stress tests show the company remains comfortably within its guided ranges.

Eric Borden requested an update on tenant interest for development assets in Greenville-Spartanburg and asked about the same-store average occupancy loss expectation for the remainder of the year.

Answer

CEO William Crooker stated that while there is leasing activity on the Greenville-Spartanburg assets, the market is still absorbing supply, and the company maintains its Q3 2025 lease-up expectation. CFO Matts Pinard confirmed that the guidance for same-store average occupancy loss remains unchanged at 25 basis points for the full year.

Eric Borden questioned the confidence in meeting the $90 million full-year acquisition target given lighter Q3 volume and inquired about the cap rate environment, asking if sellers are adjusting to higher rates.

Answer

CEO Andrew Spodek stated that acquisition activity is not always linear and the lighter Q3 was a matter of timing, expressing confidence in the pipeline to meet the annual target. He noted that while seller pricing expectations on cap rates haven't changed significantly, more sellers are now considering entering the market, which is a positive sign.