AFFO per Share Growth

Q: Can you grow AFFO per share over 3% without acquisitions?

A: Yes, we can achieve over 3% AFFO per share growth next year even without new acquisitions. - This growth is driven by rent bumps, which should add about 1%, the run-rate impact of 2023 acquisitions, and nearly $100 million in free cash flow that we can use to pay down debt or reinvest. - We've assumed a conservative credit loss of 50 basis points, higher than our historical average of 25 basis points and current 10 basis points year-to-date. -

Acquisition Strategy and Cap Rates

Q: How are you approaching acquisitions amid rising rates?

A: We are maintaining flexibility, targeting approximately $1.3 billion in acquisitions for the year but staying patient due to the macro environment. - Capital is now semiprecious, and we're ensuring we acquire assets at appropriate risk-adjusted spreads. - We won't acquire assets with cap rates below 7%, as it doesn't make sense in today's environment. - - We're focusing on spreads of 50 to 150 basis points depending on the project's duration and scope. -

Leverage and Balance Sheet

Q: What's your leverage tolerance for future acquisitions?

A: We're comfortable with leverage moving above 5x debt to EBITDA if needed. - Currently, we're at 4.5x leveraged with significant liquidity, including nearly 100% availability under our $1 billion revolver. - We'll deploy capital prudently and won't invest at minimal spreads just to grow the denominator. -

Tenant Credit Risk and Rite Aid Exposure

Q: What's your Rite Aid exposure and credit loss expectations?

A: We have 5 Rite Aid locations, with 2 already subleased to investment-grade tenants. - We're confident in the real estate and potential to re-lease if needed. - For next year, we've assumed a conservative credit loss of 50 basis points, higher than our historical 10 basis points realized so far this year. -

Dispositions and Impairment

Q: What's the reason for the recent $3 million impairment?

A: The impairment relates to a grocery store tenant who opted not to renew their lease. - We plan to dispose of this asset, which is a small-format, rural grocery store. -

Retailer Expansion and Development Activities

Q: Are retailers slowing down expansion plans due to rising rates?

A: No, retailers are continuing their expansion plans. - The challenge lies in executing these plans due to financing difficulties faced by merchant builders. - We're in discussions with retailers to find solutions that make sense for both parties. -

Capital Allocation and Funding

Q: How will you fund acquisitions if cap rates and costs remain high?

A: We'll exhibit patience and discipline, only deploying capital when we find opportunities that provide appropriate spreads. - If cap rates don't adjust, we may rely on free cash flow and maintain leverage neutrality. -

Sale-Leaseback Opportunities

Q: Are you seeing more sale-leaseback opportunities?

A: Yes, approximately 25% of our transactions this year are sale-leasebacks, up from 10% historically. - We're working with new retailers, particularly in the farm and rural supply space. -

Ground Lease Activity

Q: How are ground leases performing in the current market?

A: Ground leases are behaving similarly to the rest of the market. - Our Q4 pipeline includes a material component of ground leases, consistent with about 8% of our transactions. -

Competition and Market Outlook

Q: How is competition affecting cap rates and transaction volumes?

A: There's very little competition at current price points, with the 1031 market down over 50% and commercial real estate transactions down significantly. - We anticipate cap rates to gradually move up, but it will take time due to the fragmented nature of the net lease market. -