Ryan Caviola

Ryan Caviola asked about differences in yields between Essential Properties Realty Trust's traditional retail portfolio and its industrial properties, and if the expectation of cap rate compression applies to industrial properties or is mostly in the retail space. He also inquired if distress in the auto sector has impacted the portfolio and the outlook for that space.

Answer

President and CEO Peter Mavoides stated there is no differentiation in yields based on asset type; the biggest drivers of cap rate differences are the counterparty's credit and real estate pricing. He expects cap rate compression across the entire opportunity set, driven by lower interest rates and more stable capital markets. Regarding the auto sector, Mr. Mavoides confirmed no impact from distress, as their exposure is primarily to automotive service, not retailing or parts suppliers. He views automotive service as a good industry and expects continued investment there.

Ryan Caviola asked about differences in yields between Essential Properties Realty Trust's traditional retail portfolio and industrial properties, and whether the expectation of cap rate compression applies to industrial assets as well. He also inquired if any distress in the auto sector has flowed into the portfolio and the outlook for that space.

Answer

Peter Mavoides, President and CEO, stated there's no differentiation in yields; the biggest driver is the counterparty, credit, and real estate pricing, not the property type. He expects cap rate compression across their entire opportunity set. Regarding the auto sector, Mr. Mavoides confirmed no impact, as their exposure is focused on automotive service, not retailing or parts suppliers. He views automotive service as a good industry with desirable granular, well-located real estate, expecting continued investment.

Ryan Caviola from Green Street Advisors asked which retail sectors are most attractive for growth now that car wash exposure is near its ceiling, and also inquired about interest in industrial acquisitions.

Answer

CEO Pete Mavoides responded that he expects future investment activity to be pro-rata across their existing industries, maintaining a consistent portfolio mix. Regarding industrial properties, he confirmed the company likes the sector for sale-leasebacks with middle-market tenants, focusing on fungible assets and avoiding large, special-use properties.

Ryan Caviola from Green Street Advisors asked about the difference in pricing for net lease industrial assets between Europe and the U.S., and whether the entry into Poland completes the company's European expansion.

Answer

CEO Sumit Roy explained that European pricing is more rational due to less competition and a greater emphasis on relationships, unlike the capital-saturated U.S. market. He stated that while the core European strategy is established, the company continues to evaluate opportunities in other Western European nations and neighboring countries like Canada, though the bar for new entry is very high.

Ryan Caviola of Green Street Advisors asked how the U.S. Core Plus fund performs in a volatile economic environment and whether the uncertainty helps or hinders fundraising and competition.

Answer

CEO Sumit Roy acknowledged that the current environment is typically not conducive to raising private capital but believes Realty Income's unique platform, scale, and reputation set it apart. He expressed optimism about meeting fundraising objectives, noting that the elevated cost of debt impedes private competitors who rely on higher leverage, creating an opportunity for Realty Income's strategy.

Asked about the impact of increased private capital competition on industrial net lease pricing, whether this creates disposition opportunities, and for a breakdown of the $600 million investment guidance.

Answer

Competition for traditional acquisitions is fierce, especially in industrial, which puts pressure on cap rates. This environment makes their build-to-suit pipeline more valuable, as they can create value by building at mid-7% yields and potentially selling at a 100+ bps spread. The investment guidance for the year is split approximately 60% regular-way acquisitions and 40% build-to-suit fundings.

Ryan Caviola asked about the expected impact of onshoring on Broadstone's industrial portfolio and whether competition is increasing for these types of assets.

Answer

CEO John Moragne expressed a bullish view on onshoring, stating that BNL is well-positioned to benefit through its build-to-suit strategy. He acknowledged that competition in the industrial sector remains high, especially for large-scale deals, which reinforces BNL's focus on relationship-based build-to-suit projects and individual regular-way acquisitions where competition is less intense.

Ryan Caviola asked about the expected impact of onshoring on Broadstone's industrial portfolio and whether competition is increasing for industrial properties that stand to benefit from this trend.

Answer

CEO John Moragne expressed a bullish view on onshoring, stating that BNL is well-positioned to capitalize on this long-term trend through its build-to-suit strategy. He acknowledged that competition in the industrial sector remains high, especially for large portfolio deals, which reinforces BNL's strategic focus on relationship-based build-to-suit projects and individual regular-way acquisitions.

Ryan Caviola of Green Street asked for details on the two new industries BNL entered and whether the historical 70-30 industrial-to-retail investment mix is expected to continue.

Answer

CEO John Moragne identified one new relationship as Magna Seating, an expansion in automotive services, and stressed the importance of industry diversification for risk mitigation. He confirmed that the 70-30 industrial-retail investment split has been consistent for years and is expected to be 'par for the course' going forward, though BNL remains opportunistic.

Ryan Caviola requested details on the two new industries BNL entered during the quarter and its broader strategy for industry exposure. He also asked if the historical 70-30 industrial-to-retail investment mix is expected to remain steady.

Answer

CEO John Moragne identified an expansion in automotive services as one new area and reiterated that portfolio diversification is a core risk mitigation strategy. He confirmed that the 70-30 industrial/retail investment split is 'par for the course' and likely to continue, though the company remains nimble and will pursue attractive opportunities in any of its target sectors.