Spenser Glimcher

Spenser Glimcher asked about the comparison of deal values sourced for the private fund versus the public vehicle, seeking to understand the opportunity set for each. He also inquired about the costs associated with raising capital for the fund and the use of external marketing teams.

Answer

President and CEO Sumit Roy explained that the fund targets lower cap rate transactions with healthy long-term growth that don't meet the public company's day-one spread requirements, allowing Realty Income to pursue deals previously foregone (e.g., $2.2 billion in past quarters). He noted that the fund's 20% co-investment with management fees enhances returns for Realty Income. CFO and Treasurer Jonathan Pong confirmed using a placement agent, with fees more efficient than ATM or public equity overnight, and President and CEO Sumit Roy added that fundraising will be brought in-house beyond October.

Spenser Glimcher asked about the comparison of the dollar value of deals sourced for the private fund versus the public vehicle, seeking insight into the opportunity set for each. He also inquired about any costs associated with raising capital for the fund and whether an outside marketing team is used.

Answer

Sumit Roy, President and CEO, explained that the fund targets products that don't meet the public company's day-one spread requirements (lower cap rates but healthy long-term growth). He noted that Realty Income forewent $2 billion to $2.2 billion in transactions in past quarters that would have fit the fund's parameters if it had been operational. He also mentioned that the fund is US-centric, while overall sourcing in 2025 was $120 billion (55% US, 45% Europe). Jonathan Pong, Chief Financial Officer and Treasurer, confirmed using a placement agent, stating the fee percentage is lower than ATM or public equity overnight, making it more efficient. Sumit Roy added that fundraising will be brought in-house after October, given it's an open-ended perpetual life fund.

Spencer Glimcher inquired about NNN REIT's tenant rent coverage levels, asking for the current portfolio coverage and how it compares to historic levels. He also asked which segments of NNN REIT's existing clients are looking to grow more aggressively in the near term.

Answer

CEO Stephen A. Horn Jr. stated that while rent coverage is a stale number due to varying reporting frequencies, the vast majority of tenants report property-level financials, and the overall portfolio is not seeing a decrease. He noted that rent coverage varies by industry, with car washes often over 3-4x and auto service closer to 2x, expressing comfort with current levels. Mr. Horn identified auto services and convenience stores as the biggest opportunities for growth among existing clients in 2025 and the current pipeline.

Spenser Glimcher inquired about NNN REIT's tenant rent coverage levels, the current portfolio coverage, and how these metrics compare to historic levels. He also asked which segments of NNN REIT's existing clients are showing aggressive growth intentions in the near term.

Answer

CEO Stephen A. Horn Jr. noted that the vast majority of tenants report property-level financials, and the overall portfolio is not seeing a decrease in rent coverage. He cautioned that rent coverage is a 'stale number' and emphasized focusing on trends, providing examples of car wash assets (3-4x) and auto service (closer to 2x). CFO Vincent H. Chao added that rent coverage varies significantly by line of trade. For growth segments, Mr. Horn identified auto services and convenience stores as the biggest opportunities in 2025 and the current pipeline, driven by NNN REIT's bottom-up investment approach and focus on relationships.

Spenser Glimcher of Green Street Advisors, LLC asked for an update on the re-tenanting and sale of available assets, particularly former Badcock and Frisch's locations, and inquired about cap rate trends for Q3.

Answer

President and CEO Stephen Horn provided a detailed update, noting that rent recovery for resolved assets is tracking above historical averages, with many former Badcock furniture stores resolved at over 100% of prior rent. He stated that Q3 cap rates are expected to remain stable, with potential movement of only five to ten basis points.

Spenser Glimcher questioned the future growth appetite of Agree Realty's clients beyond their initial development projects, and how this influences confidence in achieving annual DFP goals. Glimcher also asked about near-term lease maturities for ground leases and expectations for similar favorable outcomes as a recent one.

Answer

Joey Agree, President and CEO, highlighted major retailers' strong desire for store base expansion, viewing stores as crucial omnichannel hubs, which bolsters confidence in achieving DFP goals, emphasizing Agree Realty's unique capabilities. Agree mentioned a few 'naked leases' and a vacant Brinker ground lease, but no significant mark-to-market opportunities are anticipated in 2026.

Spenser Glimcher asked about clients' future growth appetite for development projects and how this impacts confidence in achieving annual DFP goals. He also inquired about any near-term ground lease maturities and expected favorable outcomes.

Answer

President and CEO Joey Agree confirmed major retailers' strong growth appetite, viewing stores as omnichannel hubs, which gives him confidence in achieving DFP goals due to Agree Realty's multi-platform capabilities. He mentioned a few 'naked leases' and a vacant Brinker ground lease but nothing overly material for 2026 mark-to-market opportunities.

Spenser Glimcher of Green Street Advisors, LLC asked for color on the Alberta market, including its supply landscape and economic sensitivity, and inquired about potential deal activity in Canada's Maritime provinces.

Answer

CFO James Barry highlighted the company's successful three-year operating history in Edmonton and the attractive supply story in Alberta, with Edmonton still under three square feet per capita. CEO H. Michael Schwartz noted their sophisticated platform provides a competitive advantage. Barry clarified that their strategic focus remains on Canada's top six CMAs, not the Maritimes, due to greater population density and growth opportunities.

Spenser Glimcher of Green Street Advisors, LLC inquired about the number of properties slated for near-term sale and the pricing, specifically cap rates, achieved on recent dispositions.

Answer

President & CEO David Cramer indicated that a list of assets for disposition is under evaluation, with more details to be shared later. He reported that the 10 recently sold properties, which were in non-core markets, transacted at a sub-6% cap rate on a trailing basis, highlighting strong buyer demand.

Spenser Glimcher requested an operational update on the Texas joint venture portfolio acquired earlier in the year and asked for color on the Austin market, specifically the cause of high operating expense growth in the quarter.

Answer

CEO Christopher Marr reported that the Dallas JV portfolio is performing 'very much according to what we thought' and that they are 'delighted with the transaction.' For Austin, he explained that the significant operating expense growth was driven by property taxes, which faced a difficult comparison against a large refund received in the prior year. He also noted Austin is currently facing new supply pressure.

Spenser Glimcher from Green Street Advisors, LLC requested an operational update on the Texas JV portfolio acquired earlier in the year and asked about market dynamics in Austin, specifically the cause of a significant rise in operating expenses.

Answer

President & CEO Christopher Marr reported that the Hines JV portfolio in Dallas is performing in line with expectations and fits well with their existing footprint. He explained that Austin is facing supply pressure, and the quarterly operating expense spike was driven by property tax timing, creating a difficult comparison against a refund received in the prior year.

Spenser Glimcher from Green Street Advisors, LLC asked for an update on the competitive landscape for deals, particularly whether competition changes with deal size, and inquired if EPR often receives inbound interest from sellers due to its brand recognition.

Answer

CEO Greg Silvers explained that the competitive set changes with deal size; smaller deals attract family offices, while larger deals see more involvement from credit funds. He confirmed that EPR's strong brand and reputation in the experiential space mean they see most deals and frequently receive inbound calls from sellers, which they welcome.

Spenser Glimcher of Green Street Advisors, LLC posed a high-level question regarding the recent entry of large real estate players like BlackRock and Starwood into the net lease sector, asking if this poses a competitive threat to pricing and deal flow.

Answer

CEO Jason Fox acknowledged that while less competition is preferable, the US net lease market has always been competitive. He viewed the entry of new private equity firms as a positive signal for the attractiveness of the asset class. He noted that these new entrants often rely on higher leverage, which can be less reliable, and expressed confidence in WPC's continued ability to compete effectively in the market.

Spenser Glimcher from Green Street Advisors asked a high-level question about whether the entry of large players like BlackRock and Starwood into the net lease space is a concern for future competition and pricing.

Answer

CEO Jason Fox acknowledged that while less competition is always preferable, the US net lease market has always been competitive. He viewed the entry of these firms as a positive signal for the sector's attractiveness and expressed confidence in W. P. Carey's ability to continue competing effectively, particularly given its long-standing relationships and execution capabilities.

Spenser Glimcher from Green Street Advisors, LLC asked if the recent entry of large players like BlackRock and Starwood into the net lease space is a concern for W. P. Carey in terms of future competition and pricing pressure.

Answer

CEO Jason Fox acknowledged that while less competition is always preferable, the U.S. net lease market has always been competitive. He viewed the entry of new private equity as a positive signal for the asset class. He also noted that these new entrants often rely on higher leverage, which can be less reliable, and expressed confidence in W. P. Carey's ability to compete effectively based on its long-standing relationships and execution capabilities.