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Operator
Greetings, and welcome to the National Retail Properties First Quarter 2017 Earnings Conference Call.
(Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Jay Whitehurst, President and CEO.
Thank you, Mr. Whitehurst.
You may begin.
Julian E. Whitehurst - CEO, President and Director
Thanks, Michelle.
Good morning, and welcome to the National Retail Properties' First Quarter 2017 Earnings Release Call.
I'm joined on this call by our CFO, Kevin Habicht.
After some opening remarks, I'll turn the call over to Kevin to discuss our financial results in more detail.
Before updating you on National Retail Properties, I want to take a moment to once again say a hearty thank you to Craig Macnab, who retired from his position as CEO and Chairman of the Board at the end of April.
I can't say enough about Craig's positive impact at National Retail Properties.
Under Craig's leadership, National Retail Properties delivered a total shareholder return that consistently beat the REIT equity averages.
Of equal importance, he mentored and groomed an executive management team with the skills and culture to carry on after his departure.
Craig left us better than he found us.
And I'd like to thank our Board of Directors for allowing me the privilege to serve as the next CEO of National Retail Properties.
It's a genuine honor to be associated with this fine company and all of our talented associates.
Turning to our portfolio.
Our diversified pool of over 2,500 primarily small box retail properties concentrated in lines of trade that are focused on services, customer experiences and e-commerce-resistant consumer necessities continues to perform very well, with occupancy staying generally constant at 99%.
This level of occupancy is higher than our excellent long-term average of 97.5% and is a tribute to our strong tenant base and our focus on low investment per property and market rent.
We were pleased to see the announcement that Seven & i, the parent company of 7-Eleven, is acquiring a majority of the Sunoco convenience store properties, including almost all of the Sunoco stores owned by National Retail Properties.
7-Eleven will become our new #1 tenant at approximately 8.3% of base rent.
This is a significant credit upgrade for our portfolio and is an example of how our relationship-focused acquisition model positions us to invest in strong regional and national operators at higher initial yields and with meaningful rent escalators who later become investment-grade tenants through growth and industry consolidation.
One of our tenants, Gander Mountain, which comprise 12 properties or about 2.2% of our base rent, filed bankruptcy in March.
The bankruptcy process is ongoing, and it's too early to announce any definitive outcomes today.
We were pleased to see that Camping World, with which we have had a long-standing relationship, was chosen by the debtor as the winning bidder at the bankruptcy auction for certain assets of Gander Mountain, including the right to take an assignment of some of the Gander Mountain leases, all subject to the approval of the bankruptcy court.
But it's too early to assess how or to what extent that might impact our particular Gander Mountain properties.
In the meantime, our experienced leasing team is on the case and reports encouraging dialogue with potential tenants for many of our locations.
When analyzed in the context of our annualized portfolio rental income stream of roughly $550 million, the incremental effect of the Gander Mountain bankruptcy will have a nominal effect on our overall financial results and our ability to continue our FFO per share growth.
Moving on to acquisitions.
During the first quarter, we selectively invested $108 million in 24 new retail properties at an initial cash yield of 6.9%.
Our tenant relationships once again played an important role in our results as we did business with 20 relationship retailers in the first quarter, which comprised approximately 90% of our dollars invested.
In the month of April, we closed on an additional 73 properties for $151 million at a comparable initial cash cap rate.
We will provide more color on those acquisitions on our next earnings call.
In terms of the impact on the current year's results, timing of acquisitions is arguably more important than volume, and our total of $259 million invested through April at an initial cap rate of near 7% positions us to deliver another year of solid core FFO per share growth.
During the first quarter, we also sold 17 properties for just under $39 million at a cap rate of 5.7%.
These dispositions included the sale of 10 SunTrust bank branches back to SunTrust at a mid-5s cap rate.
Recycling capital from dispositions plays a meaningful part in our goal to perpetuate per share growth.
Turning to our balance sheet.
As Kevin will discuss in more detail, in February, we redeemed our 6 5/8% Series D preferred, which has effectively been prefinanced with our 5.2% Series F preferred issued in the fourth quarter of last year.
While somewhat dilutive in the short term, these transactions highlight our multiyear view and our commitment to obtaining well-priced, long-duration capital when it is available.
Against this backdrop, we're pleased to increase our guidance for core FFO per share to $2.44 to $2.48 per share.
Before turning the call over to Kevin, let me address one question that I've heard a number of times during the past few months, that is, "What changes should investors look for in this era of new management at National Retail Properties?" The short answer to that question is you should not expect any dramatic changes.
Kevin, Craig and I worked together for 13 years, and Kevin and I have worked together in one capacity or another for 25 years.
We will continue to evaluate and refine our business model and adapt to the changing landscape of retailing, but you should expect us to remain focused on the strategic drivers of our long-term success at National Retail Properties, namely: One, a consistent focus on single-tenant net leased retail properties.
The real estate attributes of single-tenant retail properties are far superior to the attributes of other property types, and the universe of opportunities to acquire such retail properties remains vast.
Two, a broadly diversified portfolio of single-tenant retail properties that generates a stable, growing cash flow from long-term leases that span economic cycles.
Three, a relationship-focused acquisition model that has resulted in high-quality investments with large regional and national retailers.
Our proprietary tenant relationships allow us to obtain higher yields, superior leases and better-quality real estate locations.
Four, active asset management, which focuses on maximizing the value of each individual asset to create incremental shareholder value.
Five, a fortress-like balance sheet, which provides us with dry powder to address opportunities and withstand economic turbulence and which positions us to perpetuate our string of 27 years of consecutive annual dividend increases.
And lastly, a team of great people and a supportive culture, which is the backbone of our success.
75% of our associates have been with the company for at least 5 years, and half have been here for 10 years or more.
The senior management, which includes not just Kevin and me, but also our Chief Investment Officer, Paul Bayer; our Chief Acquisition Officer, Steve Horn; our General Counsel, Chris Tessitore; and our Chief Accounting Officer, Michelle Miller, has an average of 17 years of tenure at this company.
That kind of institutional memory and long-term industry knowledge is invaluable.
If we continue to execute on these drivers, we will consistently deliver core FFO per share growth and continue our outperformance of REIT averages on a multiyear average.
With that, I'll turn the call over to our CFO, Kevin Habicht, to provide more details on the first quarter financial results.
Kevin?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Thanks, Jay, and I'll start with my usual customary cautionary language.
We will make certain statements that may be considered to be forward-looking statements under federal securities law.
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 were made.
Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in this morning's press release.
With that, headlines from this morning's press release include announcing first quarter results of $0.60 per share of core FFO; operating results that represent the 5.3% growth over prior year 2016 results.
When coupled with early 2017 acquisition success and a strong liquid balance sheet, we're very well positioned for another good year of accretive growth in 2017.
We maintain that our AFFO dividend payout ratio at 75% during the quarter as well as maintaining our occupancy at 99.1%.
We continue to drive additional operating efficiencies, with G&A expense decreasing 100 basis points to 6.3% of revenues for the first quarter.
And for purposes of modeling 2017 results, the annual base rent for all leases in place as of March 31 was $550.1 million.
As Jay mentioned, we have increased our 2017 core FFO per share guidance slightly by raising the lower end of our prior guidance range by $0.02 to a new range of $2.44 to $2.48 per share, which represents 4.7% growth to the midpoint, which we, hopefully, can improve upon as the year unfolds.
Details of that guidance is -- can be found on Page 6 of today's earnings press release, which only has modest changes from prior guidance.
We were very active in the capital markets in the fourth quarter of 2016, which positions us well for entering into 2017.
During the first quarter of 2017, we redeemed our 6 5/8% Series C preferred stock, which effectively was prefunded with the issuance proceeds from the 5.2% Series F preferred that we issued in the fourth quarter of 2016.
This will save us $4.1 million of annual preferred dividends and is an attractive, accretive refinance using the same perpetual duration capital.
Also during the first quarter of 2017, we issued $48.5 million of common equity via our ATM.
This equity, coupled with our $39 million of disposition proceeds and $22 million of retained AFFO after dividends, funded slightly more than 100% of our total new property investments for the first quarter.
Meaning, all of our first quarter acquisitions were funded with equity capital, no debt.
Looking to our balance sheet at year-end 2016 and quarter end March 2017, we had no outstanding amounts on our $650 million bank credit facility.
Notably, our average amount outstanding during the first quarter of 2017 was $6 million.
So we're not generating per share accretion from using material amounts of short-term floating rate debt.
All of our debt was fixed-rate at quarter end.
We remain very well positioned from a liquidity perspective and a leverage position.
Our weighted average debt maturity is 6.3 years, and our weighted average interest rate of 4.4%.
And that has no benefit of short-term valuable rate debt, as I noted.
Our next debt maturity is $250 million of 6 7/8% notes due October of 2017, which should be another accretive refinance opportunity.
However, that will largely enure to the benefit of 2018 and beyond.
Our balance sheet is in great position to fund future acquisitions and weather potential economic and capital market turmoil.
Looking at a couple leverage metrics.
Debt to gross book assets was 34.2%.
As you know, we don't manage our balance sheet around market cap-based leverage metrics.
Most importantly, debt-to-EBITDA was 4.2x at March 31.
Interest coverage was 5.1x for the first quarter of 2017, and fixed-charge coverage was 3.5x for the first quarter.
Only 5 of our 2,543 properties are encumbered by mortgages totaling about $14 million.
So following 2016's 6% growth in per share result, 2017 is off to a good start.
When making capital allocation investment decisions for assets we intend to own for the long term, we are evaluating those returns versus our long-term cost of capital, not our short-term or marginal capital cost.
We think this approach will generally lead to be more selective and may lead to presumably less volume, but more per share accretion in operating results.
We are optimistic 2017 will be another year of solid growth in our per share operating results.
And we continue to maintain a conservative balance sheet profile and like the optionality that a flexible balance sheet creates.
The strategy has been very consistent for many years.
We're optimistic we're going to be able to perpetuate our 27 consecutive year track record of raising our dividend, which has been an important part of consistently outperforming REIT equity indices as well as general equity market indices.
And with that, Michelle, we will open it up for any questions.
Operator
(Operator Instructions) Our first question comes from Nick Joseph with Citigroup.
Nicholas Gregory Joseph - VP and Senior Analyst
I just want to start on Gander Mountain.
How many of your stores are amongst the 17 leases that Camping World is going to assume?
Julian E. Whitehurst - CEO, President and Director
It is too early to give you an answer to that question.
That is still up in the air in the bankruptcy proceeding.
I -- a couple of other thoughts, though, on Gander is: one, just to reiterate my earlier comments, we are very pleased that Camping World was chosen by the debtor as the winning bidder.
We've known that management team for probably 10 years and think very highly of them.
To the extent they are ultimately selected as the winner in the -- by the bankruptcy court, we're confident that they'll bring a lot of creativity and energy to running the Gander Mountain business whatever part of that they might acquire.
Another point that I kind of wanted to make on Gander as well is that this whole situation really highlights to us the benefit of being a complete real estate company.
We have leasing and development expertise in-house, and those folks immediately were all over all of these properties.
And they're able to evaluate what's the best solution for each of those properties on our behalf and reach out to our relationship retailers and other potential users.
So they're having very good dialogue with that, and we're very pleased that we're able to do all that in-house.
But it's just completely too early to talk about how any of this might come out.
Nicholas Gregory Joseph - VP and Senior Analyst
I appreciate that.
What's your sense of timing, though, in terms of both the Camping World side as well as re-leasing any potential boxes that you do get back?
Julian E. Whitehurst - CEO, President and Director
It's impossible to predict what the bankruptcy court timing might be.
They are -- I know that it's been stated that they're trying to get things resolved quickly, and that may happen.
Sometimes in these situations, it lags behind.
When we ultimately -- to the extent we ultimately get any properties back, our typical leasing time frame is, call it, 9 months to a year.
But right now, we don't know how many, if any, would be coming back.
Nicholas Gregory Joseph - VP and Senior Analyst
And do you have any color in terms of the rent that was being paid versus market rent more broadly across the Gander portfolio?
Julian E. Whitehurst - CEO, President and Director
I think in -- if you look at our long-term history of re-leasing vacancies, we recover on vacant properties in the range of about $0.70 on $1, about 70% of prior rent.
And so when we're looking at what might happen in that -- in our situation with our Gander's, we're kind of working on one standard deviation, one side or the other of that number.
But again, it's just too early to speculate beyond what I've just speculated.
Operator
Our next question comes from David Corak with FBR Capital Markets.
David Steven Corak - VP and Research Analyst
When you look at your lease expirations over the next 18 months or 24 months, how much of that is big box versus small box?
And then along those same lines, what do you think the difference is in kind of the re-leasing rates?
I know you just mentioned the 70% to 75%, but is there a material difference there between big box and small box?
Julian E. Whitehurst - CEO, President and Director
When we've looked at the history of our overall portfolio, it is very -- the renewal rates and the re-leasing rates both are very consistent regardless of the size of the boxes.
Our long-term tenant renewal rate is 80% to 90%, call it, single-point 85%, which we think is a fantastic validation of our business model and our acquisition approach and our underwriting.
The -- and that 85% renews at about 100% of what -- of prior rent.
And like I said, we find that to be the case kind of regardless of the size of the boxes.
Re-leasing is about the same.
We re-lease at about 70%.
And that -- historical numbers tell us that that's a good average kind of across the board.
David Steven Corak - VP and Research Analyst
Okay.
Do you know how much in the next, call it, 3 years is big box versus small box, Jay?
Julian E. Whitehurst - CEO, President and Director
David, it is not a great -- not a high percentage of our portfolio.
It's -- maybe -- I'm a little bit speculating here, but probably in the range of around 25% to 1/3 is big box, yes.
David Steven Corak - VP and Research Analyst
Right, right, right.
Okay.
And then just bigger retail -- bigger-picture retail question for you, Jay.
We hear a lot about the oversupply of shopping centers in the U.S., a lot of folks out there calling for a major reduction in stores.
But I was curious on how you view the current stock of freestanding, single-tenant net lease type retail properties in the U.S. versus other product.
Do you think we need a reduction in that?
Julian E. Whitehurst - CEO, President and Director
Well, I think there's a good case to be made that some parts of the country are over-retailed.
But let's take a step back a little bit.
And first, just a reminder, our portfolio is very healthy at 99% occupied.
And the primary lines of trade in our portfolio are customer services, customer experiences and e-commerce-resistant goods.
We have very little apparel in our portfolio, and other retailers that -- in the mall settings are struggling mightily.
And we have very limited exposure to lines of trade that are really struggling with e-commerce like books and office.
And I think the driver behind our success in building this really strong portfolio is our acquisition model of calling directly on retailers and establishing these programmatic business relationships.
When we're in -- when we're dealing with our relationship retailers, they're self-selecting the properties that they want to put into a sale leaseback, and they are generally -- and selling and leasing back properties that are at the higher end of their spectrum.
They're better-performing properties.
And we're both focused on low-cost and low rent when we're dealing with the retailers directly.
And put those 2 together and you create a margin of safety that's reflected in our occupancy and in our renewal rates.
I think that is -- what I've just described is the way we come back the argument about over-retailing in the country.
If we can -- we believe that there's still a great runway for well-located, small, fungible, good corners and good out-parcels located along high-traffic roads.
Operator
Our next question comes from Rob Stevenson with Janney Montgomery Scott.
Robert Chapman Stevenson - MD, Head of Real Estate Research and Senior Research Analyst
Jay, can you talk a little bit about the rationale of issuing $50 million of equity during the quarter versus selling $50 million or $60 million of incremental assets and funding the acquisition through dispositions rather than through the equity at this point?
Julian E. Whitehurst - CEO, President and Director
Rob, we take a long-term view of accessing capital.
And what you've described is really just a good summary of our balanced approach to using capital from all sources, accessing it when it's available.
Kevin, let me turn it over to you to talk a little bit about the ATM.
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Yes.
So we are inclined, as you know, to create and maintain some level of dry powder on the balance sheet.
If you look at first quarter, roughly $110 million of equity-like capital was created in terms of about half of that being common equity -- $50 million being common equity, $40 million being dispositions and $20 million being retained earnings.
So we look at all those levers.
And as we think about that, do we have to issue equity?
No.
And so that's the good news.
We never want to be in a position where we need capital.
And so we have dry powder and runway to not need it.
At this environment, we felt like it was prudent to tap it to some level.
How much we do that over the balance of the year remains to be seen.
But the key point is to keep ourselves in a position not to need to do that.
And we don't.
That won't -- that may -- we may still opt to issue equity, but we want to be in a position to have the option not to need to.
And so you saw us in the fourth quarter be very busy on both the preferred and the long-term debt side of the equation.
We didn't issue any equity, I don't think, in the fourth quarter of last year.
So we're sensitive to pricing on where we issue it.
But when it's reasonably priced, we are inclined to dribble some out.
Julian E. Whitehurst - CEO, President and Director
Rob, let me add one other thing to that, too.
If you look at our initial cash cap rate of around 7%, and then if you factor in -- we do not straight-line our rental growth.
But if you were to straight line the rent bumps that we have in our leases, you would add about another 100 basis points of long-term average yield to our acquisitions.
So at a -- at an estimated long-term yield of around 8%, we're -- our acquisitions are highly accretive at today's stock price.
Robert Chapman Stevenson - MD, Head of Real Estate Research and Senior Research Analyst
Okay.
Just curious as to the sort of rationale there in the quarter because I know that you guys have talked about $80 million to $120 million of dispositions, and I didn't know whether or not given the 10/31 mark, given demand, whether or not there was room for that to go higher this year and push the equity component down in terms of the overall mix.
Julian E. Whitehurst - CEO, President and Director
Yes, Rob.
I think it's very difficult to just look at this quarter without the context of the last 4 quarters and the next 4 quarters.
You know what I mean?
And so any particular quarter may seem like you did too much or too little of one thing, and that's not the way we think about it.
We really think about this on a long-term, multiyear basis.
And in the scheme of the next 5 years, we thought it made some sense not to issue any equity in the fourth quarter and to issue some equity, not a lot, to be honest, in the first quarter.
Robert Chapman Stevenson - MD, Head of Real Estate Research and Senior Research Analyst
Okay.
And then any -- what was special about the SunTrust locations that they bought back?
And is there a potential to do more there?
Julian E. Whitehurst - CEO, President and Director
Rob, there's probably not a potential to do more sales of the remaining 31 properties that are scheduled to go vacant a year from now.
But those were -- our overall settlement with SunTrust was a structured negotiated arrangement, and the properties that they bought back were properties where they really wanted to control their own destiny on what went on with those properties.
And then at mid-5 cap rate, we were happy to make that part of the agreement.
Operator
Our next question comes from Joshua Dennerlein with Bank of America Merrill Lynch.
Joshua Dennerlein - Research Analyst
The drop on the G&A guidance, what was the driver behind that?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
It was pretty modest.
I mean, you shouldn't read too much into that.
Just fine-tuning G&A budgets over the balance of the year.
It's not materially changed from where our guidance was before.
It's a $1 million difference.
It's about a 3 -- less than 3% change.
Joshua Dennerlein - Research Analyst
Okay.
And was that the driver of the increase to the low end of your guidance?
Or was it just a kind of better core coming through?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Not really.
It's a bunch of things, some of which are cross-currents that pushed the numbers higher.
We just felt like we have a little more visibility as the year progresses and were able to move the guidance higher for the year given that better visibility on a number of fronts, so...
Joshua Dennerlein - Research Analyst
Okay.
And for the bond coming due in October, where could you issue 10-year debt today?
And is there any plan -- or can you even refinance that before October?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
There is light -- typical of a REIT unsecured bonds, there's a treasury make-whole provision, which creates some level of prepayment penalty.
The best way for us to hedge the rates is to do forward-starting swaps, which we've done over the years at various points in time.
We did it last year, for example, where we ended up issuing debt in December of 2016 at a 3.73%.
By virtue of the forward-starting hedges we put in place, that 3.73% yield ended up turning into a 3.28% effective cost because we settled those swaps and got a big check upon closing.
So -- which gets amortized as a reduction in interest expense over time.
But to answer your question today, we would issue in the mid- to high-3s today and -- which is still very attractive.
And as you'll -- we will probably be inclined to do some forward-starting hedging to hedge that risk out in October.
Operator
Our next question comes from Todd Stender with Wells Fargo.
Todd Stender - VP and Senior Analyst
I'm sorry I missed this, Jay.
How many SunTrust bank branches did you sell in the quarter?
Julian E. Whitehurst - CEO, President and Director
Todd, we sold -- we disposed of 10 of their bank branches back to SunTrust at a mid-5s cap rate.
Todd Stender - VP and Senior Analyst
And what was the lease term left on those?
Were they the 1 year to go as well?
Julian E. Whitehurst - CEO, President and Director
Those were properties that, if SunTrust had not bought them back from us, would have had a 12-year lease on them.
Todd Stender - VP and Senior Analyst
Got it, okay.
So they were fairly liquid marketable, okay.
Have you calculated an IRR on those assets?
I know you sold some in the past a little quicker to when you purchased those.
What kind of return do you think you got on these?
Julian E. Whitehurst - CEO, President and Director
Yes, no, we did not.
It was very good, obviously, and maybe we should do that.
But we -- I don't have a number to give you.
Todd Stender - VP and Senior Analyst
But that's a good -- at least 100 basis points below where you bought them.
Wasn't that -- is that fair?
Julian E. Whitehurst - CEO, President and Director
Yes.
Closer to 200 below where we bought them, Todd, yes.
We should look back for the good news more often, Kevin.
Todd Stender - VP and Senior Analyst
And kind of just back to the debt maturity question, Kevin.
At this point, when you were issuing guidance a couple months back, did you imagine the 10-year would be sitting where it is now?
And where we're going with this, is there any impact to your FFO guidance if you can truly issue maybe at a sub-4%?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Yes, no, that didn't -- it didn't color our guidance too much.
Obviously, we make some assumptions about all that.
And that's the hard part for all of you and everyone else because we don't give guidance as it relates to our capital-raising activity.
And in part because, I'm going to be very candid, we're not certain what it is ourselves.
I mean, last year, we had no intentions of this being preferred stock last year.
And lo and behold, we issued a big slug of it, and we think that was the right thing to do.
So we try to be, back to my earlier point, keep some dry powder, keep flexibility in the balance sheet so we can be opportunistic in the market.
And so -- but to answer your question, no, we didn't -- the movement or lack thereof in the 10-year rates did not materially color our thoughts on 2017.
And the reality is that, that maturity is late enough in the year that it's primarily a 2018 impact.
Todd Stender - VP and Senior Analyst
Okay.
And just finally, your cap rates are now sub-7%.
I'm assuming, Jay, you're passing on deals out there than maybe getting a little more aggressive.
Can you comment on anything you've passed on?
You certainly don't have to mention names, but maybe just talk about the market itself on things that you're letting pass you guys.
Julian E. Whitehurst - CEO, President and Director
Yes.
Let me -- and let's take just a step back and talk about our acquisition model in general and then ease into that.
Our primary focus is on developing these direct relationships with retailers.
And just as a reminder, in 2016, we did business with about 40 different relationship retailers.
That was the largest number in that pool that we'd ever had.
And in the first quarter of this year, we did business with 20 different relationship retailers.
So that is a big focus of us to be able to develop these programmatic off-market pipelines from those folks.
And then we also look at and delve into and devaluate the deals that are out there in the open market.
And that, Todd, really gets to your question about selectivity.
We pass on a lot of deals for reasons of either real estate quality or tenant health or risk adjust -- it all lies -- it all falls into the category of risk-adjusted return, but -- or initial cap rate.
And so that's -- the beauty of our model is that we are able to be selective in the acquisitions that we look at and still be able to generate compelling mid-single-digits core FFO per share growth with acquisition goals that are very achievable given the pipeline of relationships that we've got and the volume of deals that we see out there.
Operator
Our next question comes from Dan Donlan with Ladenburg Thalmann.
Daniel Paul Donlan - MD of Equity Research
Kevin, I just want to move back to the guidance.
Just kind of curious.
It looks like it moved about $0.04 at the midpoint.
I was just curious of the driver on that.
You knew that we -- you had the preferred being redeemed when you provided guidance last quarter.
So is it really just maybe the timing of acquisitions?
What can we attribute to the increase?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Yes.
I wouldn't read too much into any one thing driving that.
I think it's just $0.02 on the midpoint, just to be clear.
But regardless, it's a variety of things.
Like I say, it increased visibility, whether it's additions or capital markets activity or at some level, kind of where Gander Mountain may or may not be going, although that's still a question mark.
There's a little more directional visibility on that.
But -- so it's a variety of things.
Like I say, you shouldn't read -- there wasn't any one thing that drove that.
I think it was just more confidence in hitting those numbers.
And like I say, hopefully, as the year progresses, we can do better on that front as well.
But we'll see.
We take it a quarter at a time on that particular guidance so...
Daniel Paul Donlan - MD of Equity Research
Right, right.
Understood.
So I guess maybe is it fair to say -- and I'm sorry to beat this horse here.
But is it fair to say that maybe your expectations for Gander haven't changed since last quarter or the quarter before?
Or is it -- just kind of curious on that.
Or is it relatively the same?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
It's relatively the same.
I mean, there's still too much uncertainty around that.
We -- as Jay said, we know some of the parties that are heavily involved there, so that's encouraging.
But there's nothing documented, nothing finalized.
Still very much in the air.
So we are loath to count chickens before they're hatched.
Daniel Paul Donlan - MD of Equity Research
Absolutely.
And then as far as Gander Mountain goes, do you guys have store-level financials there in order to figure out kind of what stores you think are most profitable versus those that are not?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
We do get annual reporting from Gander.
Daniel Paul Donlan - MD of Equity Research
Okay, okay, understood.
And then I guess just lastly for me, just going back to the lease maturities.
Is there anything kind of this year or next year that you're concerned about?
I know it's not a huge number per se, but I thought that some of the Best Buy's maybe were coming up for renewal.
So I was just kind of curious if you could comment a little bit on that as well.
Julian E. Whitehurst - CEO, President and Director
Yes.
Dan, we don't give a lot of color on any particular quarter about lease renewals just because any one quarter is a small sample.
But when you look at the leases that are coming due this year, we expect our typical high percentage of renewals even across some -- those bigger boxes that are out there.
So really, there's no concern at all with the lease renewals that are coming up being anything other than manageable as always.
Operator
(Operator Instructions) Our next question comes from Collin Mings with Raymond James.
Collin Philip Mings - Analyst
Just a bigger-picture question for me on the lease expiration front.
Just curious what your latest thinking is about potential redevelopment on some of the properties that are not renewed as opposed to just disposing of them.
Julian E. Whitehurst - CEO, President and Director
Collin, first and foremost, in our model is to try and re-lease any vacancies.
We -- as I mentioned in the -- previously, we have significant leasing and development expertise in-house.
And so our folks -- every time we have a new vacant property, our folks evaluate -- visit the site, evaluate what the highest and best use would be and attempt, first, to re-lease it.
We -- it's another benefit of having the relationships that we've got with a variety of retailers.
Those are always the first calls we make are to those folks to see if anyone's interested.
And we work very hard to re-lease or redevelop those properties.
In our mind, that -- those fall into the same category.
It's just getting someone back in there and getting the income stream started.
And we really only look to sell the property after we've concluded that getting it re-leased is not the best way to create value.
Collin Philip Mings - Analyst
Okay.
I guess what I'm going with it, Jay, is just curious -- going back to just from a capital allocation standpoint.
I mean, some of your peers have kind of suggested maybe on the margin a little bit more willingness to put in some more redevelopment dollars.
So I mean, anything kind of -- just trying to think about where your head's at as far as on that front?
Kevin B. Habicht - CFO, EVP, Treasurer, Assistant Secretary and Director
Yes.
This is Kevin.
A couple things.
One, we have the full capability of redeveloping properties.
We've done it.
We've got the expertise in-house to do it.
And if that's what it takes to maximize value, then we will do it.
We are thoughtful about putting incremental dollars in and evaluating that versus putting fewer dollars in and getting lower rent.
And so we think long and hard about, if you will, the present value of that investment.
And I will say the one thing we're not inclined to do, and that's to sell vacant properties.
Generally, in our minds, Plan A, B, C and D is to get the property re-leased, and Plan E is to sell it if you just can't.
And that has happened occasionally, but not often.
But we just think there's more value creation in getting it re-leased.
And if that re-leasing does take redevelopment and we can earn sufficient return on that versus just re-leasing it as is, we'll do it.
We're not afraid to do it or unwilling to do it.
But we're generally inclined not to throw more money at the property as a way to solve a rent problem.
Operator
Thank you.
There are no further questions at this time.
I would like to turn the floor back over to Mr. Jay Whitehurst for closing remarks.
Julian E. Whitehurst - CEO, President and Director
Well, thank you very much, and we look forward to seeing many of you at NAREIT next month.
Thanks.