AFFO Guidance and Impact of Unsettled Forwards
Q: Why is Q4 AFFO guidance wide—dilution or other factors?
A: The wider Q4 AFFO guidance is mainly due to the timing of settling $600 million of unsettled forward equity, which affects dilution. The treasury stock method impacts AFFO per share by about $0.01 this quarter and may reach $0.02 for the full year. As we begin to settle this equity, the dilution headwind is expected to shrink in 2025.

2025 Acquisition Guidance and Market Outlook
Q: Is acquisition guidance implying lower volumes due to competition?
A: We are being conservative with our 2025 acquisition guidance, expecting to invest between $900 million and $1.1 billion. We anticipate increased competition as capital markets normalize, which may lead to cap rate compression. This cautious approach positions us to be patient and prudent in capital deployment.

Cap Rate Sensitivity and Expectations
Q: How are cap rates affected by the 10-year Treasury yield?
A: Cap rates are sensitive to the 10-year Treasury yield. A higher 10-year rate supports us by limiting competition, while a lower rate may lead to increased competition and downward pressure on cap rates. Recent volatility in the 10-year has influenced competition, and we expect cap rates to compress modestly over the coming quarters.

Competition and Market Sentiment
Q: Are you seeing tangible changes in competition?
A: We sense changes in the market with competition ebbing and flowing. As the 10-year Treasury rate fluctuates, so does competition. While we haven't seen cap rate compression in our pipeline yet, we expect more competitors to re-enter the market as capital markets normalize.

Credit Loss Expectations and Watch List
Q: What are the bad debt assumptions in your outlook?
A: Our watch list remains under 100 basis points, consistent with historical levels. Historically, we've experienced credit losses of 30 basis points per annum. We have conservative assumptions built into our guidance and feel we're well-positioned regarding credit risks.

Restaurant Industry Performance and Coverage
Q: How is the restaurant portfolio performing amid industry pressures?
A: Most pressures are in large operators with unsecured debt. Our smaller regional operators are less affected. While top-line sales face pressure, margins are expanding as inflationary costs decrease. We expect coverage to be roughly flat to down 10–20 basis points.

Portfolio Diversification and Industry Concentrations
Q: Why are you lightening up on car washes—diversification or issues?
A: It's a portfolio management decision to manage industry concentrations. We have a soft ceiling of 15% for any industry. There's nothing inherently challenging with car washes; we're just ensuring diversification to create capacity for future investments in that sector.

Tenant Concentration and Top 10 Tenants
Q: Can you discuss changes in your top 10 tenants?
A: We aim to maintain diversity, with our top 10 tenants accounting for 17.7% of ABR. Movements in the top 10 are natural as we grow with some tenants and others outgrow us. Exposures of 1–2% per tenant represent good diversity and opportunities for continued investment.

Unit Level Coverage Trends by Industry
Q: Why is unit level rent coverage down slightly?
A: Changes in rent coverage are due to industry-specific factors. Some industries like building supply show more volatility. Generally, coverage is flat to down 10 basis points in most industries, reflecting slight variations rather than systemic issues.

Disposition Strategy and Buyer Pool
Q: What's driving your property dispositions?
A: We dispose of properties to manage industry concentrations, lighten up on individual tenants, or sell assets that don't meet our criteria. Buyers are typically third parties, including local and regional investors. Our properties are fungible and liquid, allowing proactive portfolio management.

Cash G&A Guidance and Expense Drivers
Q: What's behind the increase in cash G&A guidance for 2025?
A: The increase reflects continued investment in our platform and team, including hiring. There's also embedded normal inflation in other G&A elements. As we scale our portfolio, we expect efficiency gains, with cash G&A as a percentage of total revenue declining.

Impact of ABS/CMBS Markets on Competition
Q: How do ABS and CMBS market pricing affect competition?
A: ABS spreads are generally 25–50 basis points wider than similarly rated corporate unsecured bonds. When the 10-year is elevated and spreads are wide, ABS and CMBS competitors are less competitive. As markets tighten, they become more competitive, affecting larger transactions more than our typical deals.

New Tenant Relationships and Sources of Growth
Q: Can you discuss the new tenant relationships this quarter?
A: We continuously source new relationships across all our industries. About 20% of our investments came from new relationships, which is consistent with our business model to grow with tenants over time. This diversification enhances our opportunity set.

Drivers of Tenant Demand for Financing
Q: What's driving tenants to seek your financing today?
A: The vast majority is supporting growth, such as M&A activity or new unit development. Very little is refinancing existing liabilities. Our capital helps tenants expand their businesses.

Mix of Sale-Leaseback Transactions
Q: Is there a change in the mix of sale-leaseback transactions?
A: No significant change; 89% were sale-leasebacks this quarter compared to 90% previously. We opportunistically did some existing lease transactions. The slight variation isn't material and reflects normal business activity.

Staffing and Investment in Acquisition Team
Q: Do you need to grow your acquisition and underwriting team?
A: We are constantly hiring and investing in our team to support a larger portfolio and higher investment levels. This dynamic approach ensures we have the infrastructure to manage growth, as reflected in our G&A guidance.

C-Store Industry Outlook and 7-Eleven Sale
Q: Does 7-Eleven selling stores indicate issues in the C-store industry?
A: The 7-Eleven sale is specific to their capital allocation and not indicative of systemic issues in the convenience store industry. We continue to invest in this sector and see no cause for concern.

Investment Terms and Rent Coverage
Q: How did you achieve strong rent coverage in investments?
A: Rent coverage fluctuation is due to the mix of industries we invest in each quarter. Some industries inherently have higher coverage ratios. We remain focused on securing attractive terms due to limited competition in the middle-market sale-leaseback space.