Curbline Properties Corp. (CURB) 2026 Q2 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to the Curbline Properties second quarter 2026 call. After today's prepared remarks, we will host a question-and-answer session. (Operator Instructions)

I will now hand the conference over to Stephanie Ruys de Perez, VP of Capital Markets. Stephanie, please go ahead.

Thank you. Good morning and welcome to Curbline Property's second quarter 2026 earnings conference call. Joining me today are Chief Executive Officer; David Lukes and Chief Financial Officer; Conor Fennerty.

In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at curbline.com, which are intended to support our prepared remarks during today's call.

Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings of the SEC, including our most recent reports on Forms 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, OFFO and same property net operating income.

Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Thank you, Stephanie. Good morning and welcome to Curbline Properties' second quarter conference call.

Second quarter results highlight the strength of the platform that we have constructed in less than two years since our spin-off. We acquired $374 million of properties in the second quarter alone, and we have now acquired $564 million year-to-date. We raised almost $550 million of equity, including $350 million in our June offering.

And importantly, we continue to see elevated demand for space with the vast majority of our SNO pipeline expected to commence over the next three quarters. These factors in aggregate are driving significant earnings growth with our raised guidance representing over 17% growth, which is among the highest in the sector. I would like to thank everybody at Curbline for their contributions that have positioned the company for outperformance. We continue to lead in this unique capital-efficient sector with a clear first-mover advantage as the only public company exclusively focused on acquiring top-tier convenience real estate assets across the United States.

I will start with an overview of investment activity and shift to operational highlights before handing it off to Conor to walk through quarterly results, the 2026 guidance increase and the balance sheet in greater detail.

Beginning with investments, as I mentioned, we've acquired over $560 million of real estate year-to-date and are raising our full year investment target to $1 billion of acquisitions from $850 million.

I have spent no shortage of time previously discussing the drivers behind the acceleration in acquisition opportunities, and there is really no change as to what we are seeing today.

First, it is a fragmented industry and we have the largest team with an incredible network of relationships across the major metros of the country. Second, our reputation and track record are real assets as we look to expand our portfolio to almost 6 million square feet of convenience real estate. And third, the platform and scale that we've constructed allow us to be simply more efficient than local competition and we continue to fine tune our processes, to underwrite better and close faster. And finally, fourth, opportunities continue to be boosted by what we believe to be the long-term tailwind driven by a transfer of wealth and real estate to the next generation of owners, many of which who are seeking liquidity.

The net result of each of these four factors is an increase in opportunities that meet our criteria. Primary vehicular corridors, strong demographics, high traffic counts, and creditworthy tenants, and importantly, our additive to our future growth rate. And it highlights the unique and significant addressable convenience market that provides an opportunity for us to scale our curb line business.

Moving to operations, we signed over 167,000 square feet of new leases and renewals this quarter. Trailing 12-month spreads remain consistent with our five-year averages as the shortage of space in the affluent markets where we operate continue to lead to attractive leasing economics.

We invest in simple, flexible buildings that are at the nexus of consumer behavior. These straightforward rows of shops can support a wide variety of uses and this flexibility drives tenant demand from an extremely wide pool of tenants.

The result for our portfolio is a highly diversified tenant base with only seven tenants contributing more than 1% of base rent and only one tenant of more than 2%. We now have over 1,300 unique tenants in the portfolio, including over 500 unique national tenants, which represents approximately 70% of our base rent.

To this point, ALL15 of our new leases this quarter were with different tenants. Including FedEx Office, Tropical Smoothie and a variety of other health and service users with a similar national mix as the overall portfolio.

In terms of same property growth, year-to-date growth of 2% decelerated as we expected, with Conor providing more details on this later. But our capital expenditures also remain well below 10% of NOI, placing us among the most capital-efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class.

In summary, we remain incredibly optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience real estate sector in an effort to deliver compelling relative and absolute growth for stakeholders.

And with that, I will turn it over to Conor.

Thank you, David. I will start with second quarter earnings and operating metrics before shifting to the company's revised 2026 guidance and then conclude with the balance sheet.

Second quarter results were ahead of budget, largely due to higher NOI, driven in part by higher than forecasted occupancy and recoveries, along with higher than forecasted acquisition volume.

NOI was up 12% sequentially and over 50% year-over-year, driven by acquisitions along with organic growth.

Outside of the quarterly operational outperformance, there are no other material variances for the quarter, highlighting the simplicity of the curb line income statement and business plan.

You will note that in the second quarter, we recorded a gross up of $1.8 million of non-cash G&A expense, which was offset by $1.8 million of non-cash other income.

This gross up, which is a product of the Shared Services Agreement. And nets to zero net income will continue as long as the agreement is in place and is excluded from any G&A figures or targets.

In terms of operating metrics, the lease rate was up 20 basis points sequentially to 96.5% despite an almost 20 basis point headwind from acquisitions.

Occupancy was also up sequentially to 94.3%, which represents the highest level for the portfolio since the spin-off. Leasing volume in the second quarter accelerated from the first quarter, driven by an uptick in renewals, though quarterly volumes and figures remain volatile given the lack of available space in the portfolio.

As David noted, we remain encouraged by the amount of activity and depth of demand for available space. As expected, same-property NOI decelerated in the second quarter due to lower forecasted recovery revenue, which acted as a 260 basis point headwind.

The second quarter also included $370,000 of expense related to storm damage at a property in North Carolina, which is an additional 100 basis point headwind. Pro forma for these same property NOI growth would have been 3.1%. Yet despite these headwinds, same property NOI was ahead of budget and base rent growth was up over 2.3%. Importantly, this growth was generated by limited capital expenditures with trailing 12-month CapEx of 8% of NOI.

Moving to our outlook for 2026, we are increasing OFFO guidance to a range between $1.24 and $1.26 per share, which at the midpoint represents just over 17% growth. We believe that this level of growth will be the highest certainly in the retail space and among the highest in the entire REIT sector. Underpinning the midpoint of the range is $1 billion of full year investments, a roughly 3.5% return on cash with interest income declining over the course of the year as cash is invested, CapEx as a percentage of NOI of less than 10%, and G&A of roughly $32 million, which includes fees paid to site centers as part of the shared service agreement. Those fees totaled $1.2 million in the second quarter.

In terms of same property NOI, we continue to forecast growth of 3% at the midpoint in 2026, following 3.3% in 2025 and 5.8% in 2024. As I've noted previously, the same property pool is growing but small, and it includes only assets owned for at least 12 months as of December 31, 2025, resulting in a large non-same property pool, which we expect to grow at a similar rate to the same property pool over the course of the year.

That said, we expect a meaningful acceleration in base rent into the fourth quarter driven by lease commencements with almost 90% of the SNO pipeline expected to commence by March 31st of next year and the entire pipeline to commence by the end of the third quarter.

The speed of the deliveries speaks to the simplicity of the buildings that we buy and operate and differentiates Curbline from other purpose-built retail formats. For moving pieces between the second and the third quarters, as a result of the timing of equity settlements in the second quarter, the quarter-end share count was higher than the weighted average.

Assuming no additional settlement activity, the third quarter share count would average about 114 million shares, which is a good starting point to layer on additional share settlements, which will be the primary funding source for second-half acquisitions. Additionally, below-market revenue is expected to decline sequentially by about $300,000 due to the write-off of below-market leases in the second quarter.

Finally, G&A is expected to total about $8 million in the third quarter and $32 million for the full year. Additional details on 2026 guidance and the moving pieces that I just outlined can be found on page 10 of the earnings slides.

Ending on the balance sheet, Curbline was spun on for the unique capital structure aligned with the company's business plan. In the second quarter and including the shoe from the June offering, Curbline sold 18.1 million shares on a forward basis with $541 million of expected growth proceeds, which we expect to use to fund acquisitions, including cash on hand at quarter end of $155 million, along with total unsettled equity proceeds of $696 million. Curbline has over $800 million of immediate liquidity available to fund the roughly $500 million of remaining investments included in guidance.

The net result of the capital markets activity since formation as the company ended the quarter with a leverage ratio of approximately 20%, providing substantial dry powder and liquidity continue to acquire assets and scale, resulting in significant earnings and cash flow growth well in excess to reach average.

With that, I will turn it back to David.

Thank you, Conor. Operator, we are now ready to take questions.

We will now begin the question-and-answer session. (Operator Instructions)

Ronald Kamdem, Morgan Stanley.

Hey, great. Just starting with some of the KPIs, I think. The occupancy, obviously, you gained occupancy despite sort of the drag from the acquisitions you mentioned. I would just love to hear what you say, how much more upside of occupancy there is. And then on the same storefront, I'm just wondering if the deceleration was maybe a little bit greater than anticipated. And is this sort of 3% the right run rate we should think about going forward? Thanks.

Sure, Ron, it is Conor. I will go in reverse order. So, our budget for the quarter was for a 100 basis point decline in same property, and so we outperformed that, and so in a worst case scenario, it was in line with our expectations, but to my comments, it was better than expected.

We've talked about this ad nauseum, our same property pool is larger than it was last year, but still pretty small relative to the asset base. So, it is going to lead to a lot of volatility in operating metrics, which I've called out a number of occasions. So, we reported 4.8% growth in the first quarter, obviously, to your point, a deceleration in the second quarter, and then we aree expecting a pretty large acceleration in the back half of the year just given the yes and no pipeline that both David and I mentioned and the timing of commencements into the back half of the year.

So as I mentioned, the two other call-outs, the same property pool is only about 56% of NOI in second quarter, so you have a significant piece of the company's not captured and then the second piece is CapEx percentage NOI remains well below 10%, so the capital needed to generate that 3% plus growth.

Over the course of the year is about a third of other retail companies.

We've said, again, on other calls that we think this is a 2.5% to 4% business. Just given the supply-demand imbalance today, it is probably closer to 4. And again, there is no change to our expectations for growth over the course of the year. And then just help me remind me on the first question.

Just on the occupancy upside in the portfolio.

Good morning, Ron. it is David. I would say part of the challenge of that question is that. It really depends on what we are acquiring. Sometimes we are acquiring with vacancy and that would have a negative impact as it did this quarter. In other cases, we are acquiring assets where we might want to replace a tenant. I would say that I would point you to Page 13 of our supplemental. You will note that the relationship between new leases versus renewals is 4:1. So, there is four times as many renewals as there are new leases. And this is generally renewals business. So, I would say as long as the economy is strong, I would expect that occupancy is going to stay at the higher end over the course of time, which I would put as a traditional 97% or so, but it really depends on when we select to replace tenants as opposed to renew them.

If I could just sneak in my follow-up, just all the acquisitions, obviously pretty impressive volumes here. We'd just love to hear what you guys are seeing in terms of cap rate and return expectations for this vintage of acquisitions versus maybe 12 to 24 months ago?

Well, as of where we sit today with the pipeline of $1 billion expected to purchase this year, the cap rates are still hanging in the low 6s. As I've said on previous calls, just bear in mind that the assets that we are buying are somewhat small, which means that the internal. Growth rate of those assets can have a pretty big impact on going in cap rates. So,we've bought assets in the low 5s and we bought assets in the high 6s and it really depends on occupancy levels, mark-to-market.

I would say the better way to look at this asset class is unlevered IRR, which are around an eight. And I think for us, that is a pretty attractive trade for that type of unlevered IRR given the fact that most of that IRR is coming from cash flow simply because of the low CapEx profile.

Craig Mailman, Citigroup.

Good morning. Following up a little bit on Ron's question and maybe asking in a different way, I know you guys don't get quarterly guidance, but just given, the ramp in Quarter two acquisitions and a little bit of the drag you saw on occupancy from this crop and you kind of bought a third of it towards the end of the quarter.

I know you guys don't get quarterly guidance, but could you help us think a little bit about the net benefit that should accrue to 3Q sequentially?

From these acquisitions kind of offset by, Conor, your commentary on where the share count could be just to give us I I know that we always talk about low six cash, but there is that range in there. I don't know if there is some kind of goalpost you could give to help us out.

Just a couple of things, I don't want to make a mountain out of molehill about the lease rate and the occupancy of what we acquired. The portfolio is 96.5% leased and the assets we bought had a lease rate in '95s. So it is not like we are buying stuff in the 70% or 60%, there is a huge lease up, it just happened to be modestly dilutive to our overall portfolio lease rate.

We give the timing of each acquisition to kind of the genesis of your question in the SUP to help with the cadence, but if you use effectively a low 6% cap rate on that on those assets that were acquired in the second quarter, you will get to a really good run rate for the third quarter in terms of kind of an apples and apples comparison. And then as you think about the cadence over the course of the year for remaining acquisitions, there is about a half billion dollars left.

To hit our target if you assume roughly a 50/50 split over the course of those two quarters and with a similar level of funding or settlement timing, you should get to a really good spot in terms of the guidance range and how we are thinking about the business for the course of the year.

that is helpful. Appreciate it. We just think about the opportunity set. I mean, you guys are now at almost double what you initially thought you could do when you spun off from an annual acquisition pace this year.

Can you just talk about if this level is sustainable for how long you think it is sustainable before you get institutional competition and how you guys are now staffed to either handle this or how much more you could kind of do in a year without having to hire more people?

Sure, Craig, it is David. I will give that a shot. As our initial expectations when we spun out was to do $500 million of acquisitions in the 1st year. We ended up the 1st year, way above that in the kind of $780 million range. I would note that there were three kind of small-sized to medium-sized portfolios within that 1st year.

Portfolios in this business tend to be episodic. I don't think that they are something that can be counted on in kind of like a normal quarterly run. So, if you look at that 1st year, our acquisitions of one-off assets were around $550 million.

As we sit here today in the 2nd year. We've got a target of $1 billion, and that is exclusively one-off acquisitions. So, what's happening, I think, are a couple of factors, number one, there is definitely a transitioning of generational real estate to the next buyers. And that either happens through resolving estates or as we've seen in the last six months, and I think I mentioned on the last call, we've seen a lot more sellers that are seeking liquidity to plan for their estates, and to us that is a very good sign that deal activity seems more likely to increase than decrease over the next decade. In terms of the total addressable market, even where we stand today having effectively doubled the size of the portfolio, we are still about 60 basis points of the total US inventory of this asset class. So, I do feel like there is a very credible long-term runway.

The second. Component that I would say is unique, and I've mentioned this in the prepared remarks a number of times, is that we have been trying to find every avenue and sleeve we can to unlock more inventory in this country. If you've got a business you like and you are only 60 basis points, it is our job to figure out how to attack those sleeves. We've done that from cold calling, from mass mailers, from wealth advisors, from accounting firms and law firms we have driven up and down streets and knocked on doors.

At this point today, John has a team that is working on acquisitions in some form, whether it is diligence, sourcing or legal. We've got a 26-person department. That size of a transactions team is far larger than any other institution or non-institution in this country. So, I think we are just able to get at more of the deal flow and I personally have a pretty high confidence that that will continue for years to come.

And in terms of G&A, Craig, we talked about the time and spin-off that. We thought we could be as efficient as Site Centers. And if you recall Site, the way we look at Site's G&A as a percentage GAV was about 1.1%. We've since updated that framework to say we think CURB can be materially more efficient. And that is despite to David's point adding some folks and adding some more headcount. But we are just starting to scale our G&A load and that is obviously starting to follow the bottom line and leading to pretty significant FFO growth. So, on the G&A front, you are right, we are adding some more folks, but in terms of the, I would say, significant. Fixed expense items, those are already in place, which again is allowing us to really scale our G&A, drive free cash flow, and drive pretty significant earnings growth.

That is helpful. If I could slip a third in. How do you guys think about as your 500 or your 1,300 tenants are national, are you guys close to or going to think about this as an avenue of having like a national accounts group now that you have.

I would assume one of the biggest, if not the biggest non-anchored strip portfolios in the country. How are you guys thinking about organizing to maximize the benefits from having the scale to drive up rents or occupancy or improve tenancy?

It is a really interesting point. Craig, I really think it is prescient giving you right. we are suddenly on the map for a lot of tenants that we weren't on the map a year ago. In fact, I'm not sure the sector was really on the map a year or two ago. But this first started to come up in Vegas this year at the ICSC conference. A lot of the tenants are looking for growth and if we are buying assets that have a two-thirds to one-third national to local, the nationals can generate more four wall EBITDA from this real estate than the locals and therefore, I think a lot of the nationals are seeing an opportunity to replace local tenants with national tenants and so they started to get a lot more aggressive at Vegas with approaching us about how they can work with us on a portfolio basis.

So, I do agree with you that that is an interesting avenue. Especially given the fact that we are targeting high traffic intersections and high end demographics, which is where a lot of the national chains want to be. So, I would say it is an open question, it is a really good point. And you will probably get a lot more commentary on us over the course of the year as we develop those relationships and figure out how it is best to serve those tenants.

Great. Thanks, guys.

Thanks, Greg.

Todd Thomas, KeyBanc Capital Markets.

Yeah, hi, thanks. Good morning. First, I just wanted to follow-up on the discussion around cap rates and IRRs.

I was just wondering, I guess first, it does not sound like it necessarily, but is the recent rise in the 10-year treasury having any impact on more recent price discussions that you are having? And then is CURB changing its underwriting hurdles at all in the current environment just given the improvement in the company's cost of capital or has anything changed at all for the company's investment efforts as a result?

Good morning, Todd. I wish I could say that the industry reacts very quickly to borrowing costs it just seems like unlevered IRRs are probably the more dominant approach from even the competition that we have locally even though a lot of them use debt. So, I don't really think the cap rates have changed in the last couple of months we are still seeing the same range. The averages have been about the same. In terms of our own underwriting, I would say that given the fact that we are looking at unlevered IRRs, a lot of that IRR is dependent on the mark-to-market and what we think market rents are growing at.

And I think we are pretty conservative on both factors. And so I just don't think we've seen the need yet to kind of reconsider our underwriting assumptions.

And then, Conor, in terms of scaling the platform and some of the commentary around G&A, can you just provide an update on the shared service agreement with site centers just given where we are in the year today? Late July, what the latest is with regard to the agreement and also the impact that we should be considering for G&A after taking into account the gross-ups, which you've talked about that net out, but also the fees paid to site center and how we should start to think about that as we focus on 2027?

Sure. So, Todd Seit has had the one-time option to terminate the SSA by June 30, and they did not exercise that option. So, as a result, absent the negotiation between the two parties, the SSA would remain in place through the full length of the agreement, which is October 1 of next year. If you recall, our budget for this year assumed status quo, so there is no impact to our budget or G&A this year.

As it relates to 2027, obviously, as we get closer and provide guidance, we can give some more updates there, but we do have the pieces for you in our SUP and in in our slides in terms of the breakout between the fee paid to site, which is $1.2 million this quarter, and what I will call our core or other G&A, which is obviously just expenses related to curb line. So, as we grow, that fee to pay to site will grow. But if you recall, the structure of the SSA was that and the fees paid were meant to mirror the cost of the folks that the services that site are providing.

In layman's terms, or just to put it bluntly, we are not expecting material change to G&A once the SSA expires, whether that is today or whether that is over a year from now. So, status quo for this year, but again, just given how we structured the agreement, there is no expected material change to G&A when that agreement does expire.

Okay. that is helpful. Thank you.

You are welcome.

Floris Van Dijkum, Ladenburg.

Hey, thanks. Morning, guys. I love the simplicity of your business, which I suspect a lot of the investors on the call probably do as well. I had a couple of questions.

The Sunbelt clearly is the biggest part of your portfolio with over 70% of your ABR coming from those markets. How do you think about growing in other key markets going forward?

I think I looked briefly at your slide, I think you have only two or three assets in the New York metro area, one in New Jersey, one in Long Island, as far as I could tell. Do you not see the opportunity to acquire there, or are cap rates lower, or is there more competition? And if you can maybe talk a little bit about, obviously, you have a huge amount of assets in Atlanta. Is it just easier to acquire in markets like that because you already have a big presence. Maybe if you can talk a little bit about your acquisition strategy and how you expand into other key markets across the country, please.

Sure. Good morning, Floris. This is David.

I would say that we spent a lot of time together over the past number of years. I think you know that when we spun out Curbline, it certainly had a base portfolio that did have quite a few assets in the Southeast as well as the Southwest. So, if that was our departure point, we came with concentration in those two markets and we also came with a number of relationships that were long-standing in those areas.

As we've grown over the past 18 or 20 months, we certainly have started to develop more relationships and get more deals done in the mountain states, Denver in particular, the Pacific Northwest and the Midwest.

So I think it is less of a desire to be concentrated I think our desire is the opposite. We'd like to be as distributed as we can amongst the TOP30 MSAs as long as it meets our hurdles of traffic and primary corridors and strong demographics.

The laggards have definitely been the Northeast Corridor. Part of that is just because this real estate is generationally owned a lot of people have a very low basis. And it is just going to take time to start to penetrate some of these older markets. I would say the same thing about the Pacific Northwest, that is also been an area that has been a little bit more difficult to ramp up. But if you fast forward a number of years, I think we've proven that we are willing to allocate resources to build those relationships. we are starting to make a dent and once we get into a market, I do think that buying deals in markets forms a lot more deals to come. So, I would expect that that map is going to look a lot different in the next couple of years.

And maybe my follow-up, David, as you think about OP units, do you expect that those will become more prevalent. Particularly as you talk about these generational and tax issues going forward I note that one of your peers, who's been public for quite a while, did its first OP unit deal recently in Long Island. Do you think you are going to be more prevalent in using those to source and complete acquisitions going forward?

Well, that certainly is an open question. I mean, given how little the entire industry has used of OP units in the last decade or so, I think there is a reason for that. We certainly understand that from our perspective and from the seller's perspective, the math is better on an after-tax basis for using OP units.

But it does not necessarily mean that the seller ends up wanting that type of tax-deferred structure. In many cases, you are talking about resolving in a state where there is a couple of different heirs. there is other methods such as 1,031 when people are planning. So, we certainly love the structure. We think it makes sense for both parties, but it is not easy to get them across the finish line. I would expect it will be more than zero, but I don't really anticipate it to be a dramatic change from what you've been seeing in the last decade.

Alexander Goldfarb, Piper Sandler.

Hey, morning down there. David, just two follow-up questions. The first, just going back to the size and scale of the platform, the G&A comments that Conor mentioned on efficiency, could not you argue that perhaps you need more people if you are knocking sort of at every country club, every dentist office, every wealth management, etcetera, across the country?

Would that require more people sort of like a sales force that have to be out there pounding the pavement for each individual deal? I'm just trying to understand how the platform can be if the deals individually are a lot smaller and you have to tease them out sort of one at a time.

Well, you are right. And good morning, Alex. You certainly could make the argument that more people generates more deal flow. I think where we believe that is true, we have added people. Where we believe it is not true, we've tried other methods to unlock inventory. So, I mean, I guess if I just look back on the fact that we initially expected $500 million a year and now we are at $1 billion this year.

I don't want to be too negative on the fact that the team has grown and the team has produced pretty well. So, we are being careful with our G&A, but we certainly recognize we are willing to allocate G&A toward growing the business where we see an opportunity to do so.

And to your point, does more people necessitate a higher G&A run rate? And the answer is, in certain departments, yes, as David alluded to, transactions. But to Floris' point, this business is so simple in all the other facets that we are more efficient on that front.

So again, you are running a little bit higher headcount to your point on sourcing deals, but everywhere else, we don't have a captive, we don't have all the other kind of bells and whistles, which we think are an administrative burden and a G&A burden, and so we prefer to operate pretty simply in other departments, which is a huge benefit to G&A.

Okay. And then the second question is on tenant diversity. I hear your point that your portfolio is on the radar of more national tenants. But isn't there an argument that sort of local tenants or small regional tenants provide that sort of pizzazz that makes people want to go to your center versus the one across the street and therefore there is sort of a mix that will always bias perhaps more local tenants relative to how many nationals that you could put in? I'm just thinking especially when you have like new concepts that are on the rise, those often start out as local or small regionals. And I would just think that that is what creates a differentiating standpoint as you think about your two-thirds, one-third mix.

Certain pieces of that I would agree with, but there is other pieces of what we were talking about, which are more of a choice, an asset management choice. So, let's unpack it a little bit.

The industry, I think, is fairly consistently 70-30 in that range. Is it 65? Is it 75? I think that level of change over time is the question mark. I don't think it is ever going to get to 90-10.

And part of the reason you are right is that there are in every local community certain tenants that are longstanding, can generate enough revenue to support rents and are worthy of being in our property. So, I don't ever think we are going to be at a point where we are trying to force 100% nationals. We do spend a significant amount of time on creditworthiness.

So, our local tenants go through a pretty robust analysis on their credit and their ability to pay and their business history and there are a lot of small businesses in the country that have that high credit and high probability of retention over time so, I would agree with you that local tenants are important. I guess I would diverge a little bit about the comment of unique tenants that draw customers who want to be at your property, that to me is a philosophy that is more aligned with lifestyle where you have a destination property and you are trying to get unique and differentiated tenants to kind of attract tenants to come to your properties. Our asset class and what we've been trying to buy are very simple.

Rows of shops on vehicular corridors where it is more running errands. I mean, we know that the customers on average spend less than seven minutes on our asset. They are not coming to cross shop and they are not necessarily coming because of a unique tenant. they are coming because it is convenient. And so our job as asset managers is to generate as much rent as we can from the best credit for people that want that access to those many customers traveling 40,000 cars a day along that road.

Thank you.

Mike Mueller, JPMorgan.

Conor, you clearly have a lot of unsettled equity to tap today, but on a go-for basis, how are you thinking about the equity debt mix for acquisition funding?

Mike, good morning. it is a great question. So, to your point, we have just under $900 million of either cash, unsettled equity, free cash flow over the course of the year, and that is offset by use to satisfy the rest of our pipeline of about $500 million. So, we expect the end of the year, let's call it round numbers, $350 million, $375 million of cash, assuming no changes in investment cadence.

So, it does feel like, Mike, for the next six-plus months, we've got all the equity needed on hand or cash needed on hand. And from there, I think it is likely to see us look to the private placement market. We obviously were pretty active on the equity front and operate with a lower debt-to-equity mix, we call it kind of low 20s. But just go forward, if you think back to our original base case, we had assumed 100% debt and we remain that retain that capacity depending on the best pricing at the time. So, it is a long-winded securitest way of saying TBD and when we get to next year. We've got significant leverage capacity if for whatever reason we decided to go down that path.

Got it. Okay. And then what are you seeing today for acquisition pricing if we are looking at just one-off transactions versus buying a larger pool of comparable properties? I mean, is there a significant portfolio premium or is it actually smaller here because of how intensive the product is?

The rest of our pipeline, which is 100% spoken for, we've got $1 billion over the course of the year, those are all one-offs, Mike. So, when we are speaking about this low 6% cap rate, that is what we are referring to on an individual basis, and I will defer to David on the portfolio front.

Mike, the portfolios we are talking about in this asset class tend to be not that large. In many cases, if we find an owner that has a number of properties, we might only want a portion of them. So, I think Honestly the portfolios that we have bought in the past were simply the sum of each individual asset's value. I don't think there is really a premium or a discount for the larger portfolio size.

We have reached the end of the Q&A session. I will now turn the call back to David Lukes, CEO for closing remarks. David, please go ahead.

Thank you all for your time and we look forward to speaking to you next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.