NNN REIT - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue rose 7.2% year over year to $230.854M while diluted EPS was $0.51; Core FFO/AFFO per share increased 3.6% to $0.86/$0.87. Versus consensus, NNN delivered a revenue and EPS beat, aided by $8.2M lease termination fees; full‑year guidance was maintained. EPS and revenue estimates: $0.484 and $219.900M; actual: $0.516 and $230.854M (beat)*.
• Occupancy dipped to 97.7% due to tenant defaults in 4Q24, but management reported strong re‑leasing progress and expects the total impact to stabilized Core FFO per share to be less than 1%.
• Acquisition volume was $232.4M at a 7.4% initial cash cap rate (82 properties; WALT ~18.4 years); dispositions delivered $15.8M of proceeds at a 4.9% cap rate.
• Balance sheet remained resilient: $1.1B of available liquidity, BBB+ profile, 11.6‑year weighted average debt maturity, Net Debt/EBITDAre 5.5x; dividend of $0.58/share (66% AFFO payout) was declared.

What Went Well and What Went Wrong

• What Went Well

  • Acquisition execution and pricing discipline: $232.4M invested at 7.4% cap rate, all sale‑leasebacks, with strong tenant relationships and WALT >18 years. Management avoided sub‑7% cap rate large portfolios: “we are seeing significant compression… causing us to forgo those opportunities”.
  • Re‑leasing momentum on vacancies: 31 of 64 restaurant assets re‑leased; 12 of 35 furniture assets resolved (7 sold, 5 re‑leased) by quarter‑end, with expectation of vast majority resolved by year‑end.
  • Guidance maintained and cash generation: Core FFO $0.86 and AFFO $0.87 grew 3.6% YoY; free cash flow after dividend ~$55M; FY 2025 Core FFO $3.33–$3.38 and AFFO $3.39–$3.44 reaffirmed.

• What Went Wrong

  • Occupancy decline to 97.7% (from 98.5% at 12/31/24) driven by 4Q24 tenant defaults; management expects occupancy to trend higher through 2025.
  • Real estate expenses net of reimbursements remained elevated due to vacancies; FY 2025 outlook $15–$16M vs historical ~$13M.
  • Non‑recurring lease termination fees ($8.2M; ~$0.04/share) boosted Q1; management cautioned timing is unpredictable and Q1 was unusually high.

Transcript

Operator (participant)

Greetings. Welcome to the NNN REIT First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Steve Horn, CEO. You may begin.

Steve Horn (CEO)

Hey, thanks, John. Hey, good morning, and thank you for joining NNN REIT's First Quarter 2025 Earnings Call. With me today is Vin Chao, our Chief Financial Officer. I'd like to start with a high-level update on our vacant furniture and restaurant assets before we delve into the first quarter results. We're making excellent progress resolving these vacancies, and I'm confident that we will be in a solid position to have the vast majority resolved by year-end. On a post-quarter update, in terms of our 35 furniture stores, 15 are resolved through leasing or sale, and 15 have significant interest, and we anticipate nearly all be handled by the end of the third quarter. For the restaurant assets, we gained full possession this quarter following the conclusion of the eviction process. We've leased or sold 38 and have strong interest in the other 31.

Looking ahead, as we fully put to bed the two-tenant defaults from the fourth quarter of 2024, we anticipate a total impact of only $0.015-$0.025 on our stabilized core FFO per share for the year. That's less than 1%. This minimal effect serves to highlight the lasting significance of robust real estate fundamentals throughout the duration of a 20-year lease. Let's go to the highlights of our first quarter financial performance. Our portfolio of 3,641 freestanding single-tenant properties continued its strong track record. Occupancy at the end of the quarter was 97.7%, a slight dip from our long-term average of approximately 98%± due to the finalization of the eviction process.

We are encouraged by the significant interest in our available properties from numerous strong national and regional tenants, and I expect our occupancy rate to trend upwards as the year progresses. Notably, we experienced limited to no credit losses within the portfolio during the first quarter. Given the current macroeconomic backdrop, I'm confident in the portfolio's ability to deliver excellent performance over the long term. Our portfolio's stability through events like GFC and the pandemic, with minimal impact, underscores its strength. We prioritize relationships with sophisticated tenants and actively manage our assets to prepare for future uncertainties. While maintaining our disciplined underwriting approach, we successfully acquired 82 new properties during the quarter for approximately $232 million. These acquisitions featured an attractive initial cap rate of 7.4% and a long-term lease duration of over 18 years.

Significantly, all of our acquisitions this past quarter were sale-leaseback transactions, a testament to the effectiveness of NNN's acquisition team and relationship-focused efforts. NNN takes pride in its relationship-driven business model, which facilitates consistent repeat business. Not only in the current environment, but every transaction, we remain highly selective in our underwriting and will continue to prioritize sale-leaseback transactions with our established tenant relationships and not operators or developers that are financial engineers. Regarding the current acquisition pricing market trends, we begin the year with the first quarter initial cash cap rate of 7.4%. This compression was in line with the February discussion. We anticipate some cap rate pressure in 2025 compared to the previous year. Now, at the start of May, second quarter cap rates are mostly holding steady with the first quarter.

However, we are seeing significant compression in the larger portfolio deals, causing us to forgo those opportunities. In the first quarter, we executed strategic dispositions. We sold 10 properties and generated $16 million in proceeds, and only one of those assets was vacant. These funds are earmarked for reinvestment and new acquisitions, and this activity aligns with our full-year disposition guidance. Continuing our history of sound financial management, Vin and the team have ensured a robust balance sheet. We finished the first quarter with nearly $1.1 billion availability on our $1.2 billion line of credit, and $400 million debt maturity in the fourth quarter is manageable. This reinforces the effectiveness of our self-funding model. The strong financial footing provides the company with the necessary flexibility to execute our 2025 acquisition guidance of $500 million-$600 million.

To summarize, our first quarter performance in occupancy, leasing, and rent collection further validates our consistent long-term strategy. This involves acquiring well-located properties with strong regional national tenants at appropriate rents, supported by a strong and flexible balance sheet. With that, I'll turn the call over to Vin for more detailed review of our quarterly numbers and updated guidance.

Vin Chao (CFO)

Thank you, Steve. Let me start by letting you know that during this call, we will make certain statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements are made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company's filings with the SEC and in this morning's press release. With that out of the way, before I get into the quarterly review, I wanted to start with some broader commentary and initial observations.

Although today's elevated level of uncertainty has created volatility in the capital markets, our fortress balance sheet, combined with our deeply experienced team and battle-tested portfolio, is well-positioned for long-term success in almost any environment. We know this because we've been there. In addition to the weathering that GFC and COVID-19 that Steve mentioned, we are also the only public net lease REIT to have experienced Black Monday, the bursting of the dot-com bubble, and the attacks on September 11th, all while delivering 35 years of consecutive dividend growth. While our long and successful track record gives me comfort that we can manage today's economic environment, it's the strength of the NNN platform and its people that give me the confidence that we will continue to create shareholder value in the years ahead and through economic cycles.

The depth of talent, the strength of the processes and systems, and the experience of the team are true differentiators within the REIT universe. I'm not sure if everyone knows this, but the average associate has been with NNN for over 10 years, and the senior leadership team has been here for over 20. This deep institutional knowledge is a key competitive advantage, particularly in times like these. NNN truly is a well-oiled machine. With that, I'll get off my soapbox and get into the quarter. This morning, we reported core FFO of $0.86 per share and AFFO of $0.87 per share for the first quarter of 2025, each up 3.6% over the prior year period, while annualized base rent was up over 5% year-over-year. Results were slightly ahead of our internal plan, driven primarily by lower-than-planned bad debt and net real estate expenses.

Our NOI margin was 95.9% for the quarter, while G&A as a percentage of total revenues was 5.6% and 5.9% as a percentage of NOI. Free cash flow after dividend was about $55 million in the quarter. This quarter benefited from $8.2 million of lease termination fees, or about $0.04 per share. This fee was expected and largely driven by one lease that was dark but paying for some time. We were able to negotiate a deal to recapture the PV of the remaining rents and are now looking to sell the property. Turning to operating results, overall leasing activity for the quarter was strong, with 25 renewals and eight new leases completed in the quarter for a blended rent recapture rate of 98%, reflecting the high quality of the portfolio.

Occupancy remained high at 97.7% despite the fallout from Badcock and Frisch's and has never dipped below 96.4% over the past 20 years, reflecting the stability of the portfolio and its cash flows. As Steve mentioned, we are making good progress on addressing our vacancies and have now released or sold almost 50% of our former Badcock and Frisch's stores in only about two quarters, and we have good visibility or good activity on the vast majority of the remaining stores, a testament to the strength of the underlying real estate. Although these two tenants have created some near-term noise, the reality is that our experienced operations teams are well-equipped to effectively handle these situations as they have over the last 40+ years.

As Steve noted, when all is said and done, we expect less than a 1% impact to annual FFO per share, and importantly, we expect to achieve this outcome with minimal tenant CapEx. From a watchlist perspective, things have not changed much since last quarter. No new tenants were added, and our primary concern remains At Home, which we have been flagging for some time. As a reminder, we have 11 At Home that account for about 1% of ABR. In-place rents are low at just over $6.50 per sq ft, and our stores are well-established with an average tenure of about 12 years. Turning to the balance sheet, our BBB+ balance sheet remains in great shape, and it's what keeps me sleep well at night, despite what's going on in the world.

We ended the first quarter with a sector-leading 11.6 years of term remaining on our debt maturities and just 2.5% of our total debt tied to floating rates. This gives us strong visibility. Liquidity stood at $1.1 billion. Net debt to EBITDA was 5.5x, and 100% of our assets are unencumbered, giving us great flexibility to execute our business plans. On April 15th, we announced a $0.58 quarterly dividend per share, which equates to an attractive 5.4% annual dividend yield and at a conservative 66% AFFO payout ratio. Lastly, I'd like to provide some color on our outlook for the balance of the year. As we discussed last quarter, we signed leases on former Frisch's locations that will add the greater of $2.8 million annually or 7% of sales when rent commences on May 1st.

Also, as discussed last quarter, we embedded a credit loss reserve of 60 basis points into the 2025 outlook. Given that we've had no notable credit loss year-to-date and in light of our outlook for the balance of the year, we feel comfortable with the 60 basis points for the full year. Finally, we have a $400 million, 4% on maturing in November. For perspective, we believe current pricing on a new 10-year issuance would be about 5.6%. We also have capacity on a revolver, which is priced at SOFR plus 87.5 basis points and had an effective rate of 5.2% in the first quarter. As always, we'll be opportunistic and look for ways to capitalize on the current market volatility as we manage our financing needs.

Also, while we do not provide guidance on termination fees given their inherently unpredictable timing, as you are updating your models, please keep in mind that the $8.2 million booked in the first quarter was unusually high and not reflective of a normalized run rate. All that said, given our strong start to the year, our internally funded investment plan, and with over 40% of our acquisition volume already completed, we are comfortable maintaining our 2025 outlook for core FFO per share of $3.33-$3.38 and AFFO per share of $3.39-$3.44. Details regarding the underlying assumptions supporting our guidance also remain unchanged and can be found on page three of this morning's press release. Lastly, you may have noticed some changes to the earnings release presentation.

We take pride in the transparency of our disclosures and are committed to providing investors and analysts with the information they need to efficiently and effectively underwrite the long-term value of our company. We hope you find the changes we made helpful in your analysis, and I'm always available to discuss ideas on how we can improve our reporting. Before I turn the call back to the operator for Q&A, I want to thank the executive team and the board of directors for entrusting me as only the second CFO in NNN's history. There's a long tradition of success here that I, along with the rest of the team, will work tirelessly to continue. I also want to thank the entire organization for their warm welcome to the company and for their help in making this a seamless transition. With that, John, please open up the lines for questions.

Operator (participant)

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Daniel Bion with Bank of America. Daniel, please proceed.

Good morning. The 1Q acquisition pace was much higher than expected. Could you expand on that? Do you see less competition in the transaction markets?

Steve Horn (CEO)

I mean, John, it's a good question. This is Steve. We operate in a highly competitive market, and it's been a highly competitive market for 20-plus years I've been doing it. Just the names have come and gone. Now, the result was all of our transactions except one were sale-leaseback, primarily through the relationships. It was elevated just more timing. Going into the fourth quarter, we knew there were some M&A deals that were looking to get done, and they landed in the first quarter. However, it was within our guidance range for the full year. It was primarily the auto services, again, was the sector where there's a fair amount of consolidation going on.

Got it. If I could just follow up on that, could you touch on the expected pace of acquisitions moving forward, and do you plan on expanding into the auto services?

Yeah, we do the bottom-up approach. We can only buy stuff that's for sale, and we look for consistent core FFO growth over time. We maintain guidance of the $500 million-$600 million, but as Vin alluded to, we're kind of 40% there. Looking at the pipeline for the second quarter, I'm very comfortable that we'll hit that guidance range given where we stand today. Given everything that's going on in the macroeconomy and the uncertainty, I don't think it's prudent to elevate acquisition volume since I don't have visibility to the third or fourth quarter yet. However, that being said, if everything kind of maintains status quo, I could see us hitting good acquisitions for the year.

Got it. Thank you.

Operator (participant)

The next question comes from Spenser Glimcher with Green Street. Please proceed.

Thank you. Given the recent economic volatility and ongoing uncertainty, can you just talk about existing tenant appetite for growth? Maybe on the flip side, are there any tenants who had expressed interest to grow and maybe kind of hit the brakes on growth plans as of late?

Steve Horn (CEO)

I mean, overall, I think they're reevaluating their growth plans. No deals that we had in the pipeline were canceled because of what's going on. They don't want to miss out on opportunities if things settle down. Kind of what I alluded to in the first question, our pipeline for Q2 is pretty solid, and we're just starting to look at stuff for Q3. No, our tenants are still looking to grow at the margin. I don't think you're going to see any heroic M&A deals in the near term. We've noticed that pace has slowed down in the U.S.

Okay. Any changes to tenant rent coverages, just with ongoing tariffs and things related to consumer spending?

Vin Chao (CFO)

Yeah. Hey, Spenser. This is Vin. Yeah, as far as rent coverage and tariffs and all that, I mean, I would just say on a tariff perspective, between service tenants and non-discretionary tenants, that's about 85% of our ABR. We feel relatively okay about tariff impacts, other than the impact on the overall economy, which will filter through if things stay in place. I'm not sure where we're at today, but in any case, we feel like we're comfortable on the tariff side. As far as rent coverages go, as you know, we do not really talk about rent coverages in detail, but the data is usually a little stale, and so it is not reflective of any sort of tariff impact at this point anyway. Generally speaking, I would say rent coverages have remained stable on that.

Steve Horn (CEO)

Yeah. I'll add a little kind of real-time coverage for you, Spenser. Our team was out at the car wash conference this past weekend and reported that the car wash sales were very strong for the quarter. The CEOs that I spoke with, and if it was collision or the tire sector within the auto services, said the last two months they've seen an uptick in their sales. That was all positive. Yeah, to echo what Vin said, for the most part, I would expect our rent coverages to be pretty stable throughout the portfolio.

Okay. Thank you for the color.

Operator (participant)

The next question comes from John [Jelachowski] with Wells Fargo. Please proceed.

Good morning. Thank you. I guess an extension of the tariff question. It sounds like the existing portfolio is still performing well, but maybe as we think about your strategy on underwriting go forward for new investments, have tariffs impacted that at all? Are you looking at different sectors, or is it same old, same old?

Steve Horn (CEO)

If you look across our portfolio, not that we're tariff-proof by any means, but we have a very solid tariff-resistant portfolio. Since two-thirds to three-quarters of our deal flow comes from our tenant base, I still expect it to be representative of our current portfolio. Now, when you get into discretionary tenants, this is what separates the sale-leaseback model opposed to buying from developers. The sale-leaseback model, it's inherent the tenant does some underwriting, and they're signing a 15-year to 20-year lease. They do a self-selection, and they know their consumer better than any real estate executive. We sit down with the tenants, and it's more on the discretionary side, that we are kind of sidestepping deals right now that might be pro forma if it's family entertainment sector, where there's a little bit more discretionary income.

I think the auto services and C-store, if the opportunities come, we'll still lean into those.

Okay. Maybe just jumping to the Frisch's and Badcock side, we appreciate the update. How has that impacted the non-reimbursable percentage of your OpEx outlook? It sounds like your credit expectations are still flat.

Vin Chao (CFO)

Yeah. I mean, if you look at our guidance for net real estate expenses, it's a little bit higher than we've historically reported, which is probably more in the $13 million range. We're at $15 million-$16 million for the year on guidance. That's reflective of some of the vacancies from the Badcock and Frisch's. As we release those or sell them over the course of the year, that should improve, but that's all embedded in our outlook.

All right. Thank you.

Operator (participant)

The next question is from Michael Goldsmith with UBS. Michael, please proceed.

Michael Goldsmith (Analyst)

Good morning. Thanks a lot for taking my question. Acquisition cap rates ticked down about 10 basis points in the quarter. In terms of what you're seeing in the pipeline, are you expecting that trend to kind of continue to tick down or maybe just kind of flatline from there? Just trying to get a sense of where we're headed from a cap rate perspective.

Steve Horn (CEO)

Yeah. Good question, Michael. Yeah. I'm not seeing a material move up or down for the second quarter pricing. It's pretty much in line with the first quarter. Now, as deals might slide in the third quarter, you might have 5-10 basis points either way. But the $740 is kind of where I'm looking at the second quarter. Again, third quarter is too far out to speculate. As we run out our models, we're not putting increasing cap rates because people in the first half of the year are looking to deploy money. So deals, cap rates get compressed a little bit unjustifiably, I would say. As I mentioned in my opening remarks, there were some large portfolio transactions that got done, and they looked like they were going sub-7, and we just didn't think that was the right price for the portfolios.

Michael Goldsmith (Analyst)

Got it. I'm a little jealous that I wasn't able to make it to the car wash conference this year. Last night, at the Mister Car Wash earnings, they talked about a steady reprieve to the competitive intrusion with the number of competitive new builds since the peak in 2023. They also talked a little bit about market rationalization over the next several years. Do you think the car wash tenants that you have, do you see those ones that you've partnered with as net winners over time and thus have limited downside from that perspective?

Steve Horn (CEO)

Yeah. Very comfortable with our car wash holdings. I mean, the reality is car wash real estate's really solid in-demand real estate. And the vast majority of our car wash holdings are with Mister Car Wash, arguably the best operator in the business. We did those deals well before the market got overheated. Our average cost in Mister Car Wash is significantly lower than the deals that were done in the last few years. Our acquisition team did a fabulous job passing on the deals where they thought there were financial engineers getting into the car wash business. Yeah, I'm comfortable. I think we're going to be net winners in the long run on our car wash holdings. Fortunately, we didn't do any Zips, for example. That was a good one not to do for us. The rest of our operators, we think, are pretty solid and underwrote the assets appropriately.

Michael Goldsmith (Analyst)

Thank you very much. Good luck in the second quarter.

Steve Horn (CEO)

Thanks. Bye.

Operator (participant)

Once again, if you have a question or a comment, please indicate so by pressing star one. Up next, we have Smedes Rose with Citi. Please proceed.

Hey, good morning. This is Maddie Hargis on for Smedes. I just wanted to ask, there have been kind of some negative headlines and stock underperformance from some of your more discretionary-focused tenants, particularly Dave & Buster's and Camping World. Do you have any overall concerns from a tenant perspective on these? Is there maybe anything differentiating about the particular locations that you own that maybe make you less concerned from a risk perspective?

Steve Horn (CEO)

Yeah. We'll both answer this. Good question, Maddie. As far as Camping World, Camping World arguably is probably one of our greatest partnerships within the portfolio. We are actively managing that portfolio since we've been doing business with them for over 15 years. Our rent coverage in the peak during COVID, who would have thought Camping World would explode and become a cash cow? We were over eight times covered in those assets. That has been a testament to the management team at Camping World of calling us up and renegotiating leases, selling assets, and only wanting to stay in the strong assets. The Camping World property-level coverage, I am very happy with and comfortable. The same goes with Dave & Buster. Our Dave & Buster exposure primarily was from Main Event over a decade ago of doing deals with them.

The Main Event management team were true operators that wanted to keep the rent low. Our property-level coverage at Dave & Buster's is very solid. Kind of what I alluded to, there was a couple of deals in the past year which we passed on Dave & Buster's because they were newer assets. We just thought the cap rates were getting a little bit too low for us. They're a good partner. Going forward, we'll probably do more deals with them in the future.

Vin Chao (CFO)

Yeah. I think Steve said it pretty well, so I don't have too much to add there. The coverage on Dave & Buster's is pretty healthy here. On Camping World, they just reported yesterday. I know the stock didn't do so well. From our perspective as a landlord, there are some positives in the quarter. I think their used business is a bright spot for them. As we're dealing with tariffs and uncertainty and possibly an economic slowdown, Camping World is not catering to the highest-end side of that market. We think that's relatively better. The used business can really help offset some of the tariff impacts. That was quite strong yesterday.

Great. Thank you both.

Operator (participant)

Up next is Linda Tsai with Jefferies. Linda, please proceed.

Linda Tsai (Analyst)

Hi. Thanks for taking my question. Did less-than-expected bad debt contribute to 1Q? And then of your 50 bps embedded reserves, how much of that is known versus unknown?

Vin Chao (CFO)

Yeah. Hey, Linda. It's Vin. In the first quarter, we really did not have much in the way of bad debt or credit loss. If you think about it, 10 basis points of credit loss is about $0.005 per share. You can think about it that way for the first quarter. As far as known or unknown, I mean, we have talked about At Home. That is probably the one on our watch list. That is the one that we are most focused on. At this point, we have no credit loss associated. Thanks.

Linda Tsai (Analyst)

Thanks. Then on At Home, what would be the possible outcome? Do you think you would be able to sell those leases, or would there be a backfill?

Vin Chao (CFO)

Yeah. Let me just start with At Home in terms of their potential impact, right? I mean, I know there's been some news out there on them. At this point in the year, as I said, we don't have any loss associated. If something were to happen, we think our 60 basis points would still cover us. If you think about if there is some kind of filing or something like that, we'd have a couple of months of additional rent as they go through that proceedings. At 100 basis points, if everything were to be rejected, that's about 50 basis points. We think that's pretty highly unlikely given our low rent basis of just over $6.50. We feel comfortable with our outlook for credit loss. As far as the recovery on an At Home, they're much larger, as you know.

By default, it probably will take us a little longer than your more fungible boxes that we typically invest in. There is a lot of good interest. We're already getting inbounds from some really high-quality tenants about some of the spaces, which we're pretty happy about. We've also got some flexibility in terms of how we manage these properties. I mean, yes, there's potential sale, but they sit on 11-acre lots. That gives us a lot of optionality in terms of redevelopment, carving up the boxes, things like that. We're still evaluating all the different options, but we do feel pretty good where we sit.

Steve Horn (CEO)

Yep. That is good.

Linda Tsai (Analyst)

Thanks for the context.

Vin Chao (CFO)

Sure.

Operator (participant)

Your final question comes from John Massocca with B. Riley Securities. Please proceed, John.

Good morning.

Steve Horn (CEO)

Good morning, John.

Just on the lease termination income, apologies if I misheard something on that. It seems like there's kind of this constant narrative of like, "Yeah, it's a little unusual to have this much." There are a couple of quarters it's been pretty heavy in recent quarters. What do you consider the new maybe run rate to assume for lease termination income? Maybe kind of what drove lease termination income in 1Q?

Vin Chao (CFO)

Hey, John. This is Vin. Yeah. In the first quarter, as I mentioned in my prepared remarks, I mean, we did have basically one tenant that really drove the bulk of the $8.2 million booked for the quarter. It was a dark, but paying tenant that had been dark for, I want to say, six years, five years, something like that. We were able to negotiate a great deal where we got basically the entire PV of the rent that was owed over the balance of the lease. We're now able to potentially sell that asset and redeploy that capital. We feel good about that outcome. As far as the go-forward run rate, it's really tough. I mean, I would say lease termination fees are definitely part of the business. They are recurring. They're just very hard to predict.

That is why we do not really guide on it. If you look historically, we have probably been long-term average, call it $2 million-$3 million a year. Recent years, it has been a lot higher than that. It is hard for me to say what the go-forward run rate is just because it is unpredictable. We do have additional lease terminations embedded in the outlook, certainly not $8.2 million going forward.

Steve Horn (CEO)

I mean, I'll just kind of add a little bit more, John, on the lease term. As we get bigger, lease termination fees, there's more opportunities. If you actively manage your portfolio, you're going to have lease termination fees. The lease termination fee is solving future problems and redeploying those proceeds into current opportunities. I agree with Vin. We don't know. It's kind of lightning in a bottle when they strike. You don't know as you're actively managing the properties. The elevated lease termination in the last couple of years is a result of us really focusing in and creating a high quality of earnings going forward.

Is there something maybe in terms of the tenant base or your portfolio of a certain vintage that drives this or something that's occurred in the last two, three years that seems like it wasn't really something that got called out on earnings calls, five or more years ago, as much as it has been in the last, call it, eight quarters?

No. It's primarily been just one tenant working with us, reconfiguring their portfolio. And they're larger boxes, higher rent. That's why they're being elevated.

Okay. On the Frisch's side or former Frisch's side, I know it's early days with the new tenant and the leased assets, the re-leased assets. Any outlook onto how their performance has been just given some of the rent there is contingent on that?

Yeah. I mean, just like any new retail concept, when they first open, they come out of the market really strong. There's that honeymoon period. We are currently in that honeymoon period. They are performing exceedingly well currently. As we look forward, they'll lose that a little bit. Very optimistic. I spoke with the CEO recently in the last week. Everything's going well for them, getting stores open slowly but surely. I would expect here in the next six months, I'll be able to answer that question as far as their performance a little bit more clear for you.

Fair. With the remaining kind of former restaurant properties, is the view with most of those that they would also remain restaurants? Is it thought that either whoever you sell them to or yourself, if you're looking to release them, is going to convert them to something else? If that is the case, what's kind of the CapEx outlook there maybe for you or a potential buyer?

It's too early to talk about the CapEx side of things. We are getting interest if it's car washes, if it's convenience stores, and if the large regional convenience store operators, great credit. There is some QSR involved. We're early in negotiations. We don't know if it's going to be a ground lease and they're going to fund the building or they're going to expect some CapEx from us currently. That being said, we have some good interest on those sites right now.

Okay. I guess maybe the way you kind of phrased it, it'd be fair to assume those are some of the later assets that are going to get dealt with in terms of both the former Frisch's and former Badcock's.

I think Badcock is going to definitely outpace the former Frisch's because we're probably going to sell more of those. The Frisch's, there's a lot of redevelopment opportunities. Just by definition, redevelopment takes a longer period of time to go through the permitting process and stuff like that.

Okay. That's it for me. I appreciate all the calling. Thank you.

Operator (participant)

We have one additional question in the queue coming from Ronald Kamdem with Morgan Stanley. Please proceed.

Hey, this is Jenny on for Ron. Thanks for taking my question. I'm just curious if there's any specific retail new concept you're looking to reduce exposure in the next 12 months-18 months?

Vin Chao (CFO)

I mean, ones that we're looking to reduce exposure, I mean, obviously, we have our watch list. Those are ones that we would love to pare back exposure. Unfortunately, by the time they're on the watch list, it's a little hard to get economics that make sense. I'll give you an example. I mean, AMC is on there. It's been on there forever, more from a category perspective, not so much from bottom-up performance, recent issues, or anything like that. It's not the easiest to sell one of those. That's sort of our target list. We also have the dark, but paying list. We have the sub-lease list. Those are the ones that we're trying to proactively manage to the best of our ability. It's not specific to a concept per se.

I see. Yeah. That makes sense. Regarding the acquisition volume in the last, I would say, 20 days or so, do you see any changes in the competition landscape compared to last year? If you can make some comment on that.

Steve Horn (CEO)

Yeah. No, I think the landscape's pretty similar. You probably have a little bit more of the private guys entering the market again as we move through the year. Again, kind of what I kind of said earlier, we work in a highly competitive market. Just the names change. I'm not seeing any more or less overall competition. There's plenty of opportunity for us to hit our numbers.

Makes sense. Thanks so much. That's all for me.

Thanks, Jenny.

Operator (participant)

We have reached the end of the question and answer session. I will now turn the call over to Steve Horn, CEO, for closing remarks.

Steve Horn (CEO)

I appreciate you guys taking the time this morning and jumping on the call. We look forward to seeing you guys in the upcoming conference season here. Thanks.

Operator (participant)

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.