NNN REIT Inc (NNN) 2017 Q2 法說會逐字稿

Greetings, and welcome to the National Retail Properties Second Quarter 2017 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Jay Whitehurst.

Thank you, you may begin.

Thank you, Matt.

Good morning, and welcome to the National Retail Properties Second 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.

We're pleased to report another consistent productive quarter for National Retail Properties, driven by our healthy portfolio, our selectively underwritten acquisitions and our low leverage balance sheet, all of which has contributed to core FFO per share growth of 8.5% over the second quarter of 2016 and has positioned us to raise our guidance for 2017 core FFO per share to a range of $2.46 to $2.50 per share.

As previously announced in July, we raised our quarterly dividend by $0.02 per share to $0.475 per share, which reflects a 4.4% increase in our annualized dividend.

With 28 consecutive years of annual dividend increases, National Retail Properties is in an exclusive club of only 4 REITs and less than 90 U.S. public companies.

The confidence to increase our guidance and raise our dividend was driven, in large part, by the fact that our portfolio remains extremely healthy.

Our broadly diversified pool of over 2,650, primarily small box single-tenant properties, remains over 99% occupied.

Our tenants typically operate large regional and national businesses that focus on customer services, customer experiences and e-commerce-resistant consumer necessities.

We have very little exposure to apparel or other retail concepts that are getting negative headlines these days.

With regard to our 12 Gander Mountain properties, we're actively working with potential new tenants, including our long-standing relationship tenant, Camping World, to re-lease those properties after the conclusion of the ongoing Gander Mountain bankruptcy.

Our leasing team is working hard, but it's too early to provide any update on our releasing efforts at this time.

Moving on to acquisitions.

We had an active second quarter in which we invested just under $300 million in 140 single-tenant retail properties at an initial cash yield of 6.9%.

Year-to-date, we've acquired 164 single-tenant retail properties for $407 million at an additional cash yield of 6.9%, with an average lease term of 19 years and an average cost per property of just over $2.5 million each.

Our tenant relationships continue to generate the majority of our acquisitions.

So far in 2017, we've done business with 30 relationship tenants who have accounted for over 80% of our total dollars invested.

Given our active acquisition pace for the first half of the year, coupled with our pipeline of both relationship and marketed transactions, we've bumped up our 2017 acquisition guidance to $550 million to $650 million.

We think it's important to note, however, that we intend to remain very selective in our underwriting as we evaluate portfolio opportunities and build new tenant relationships.

On the disposition front, during the first half of the year, we sold 25 properties and harvested approximately $48 million in disposition proceeds to be recycled into new acquisitions.

With private market cap rates for individual single-tenant retail properties continuing to remain very low, recycling capital from disposition makes economic sense in the short term, and also it positions us to continue our long-term strategy of delivering consistent FFO per share growth while remaining highly selective in our acquisition underwriting.

Although Kevin will discuss our balance sheet in greater detail, I'd like to point out that our conservative strategy of maintaining dry powder has proven its value in 2017, enabling us to continue our acquisition pace and perpetuate our consistent per share growth while retaining our low leverage fortresslike capital structure.

To sum up, National Retail Properties remains in great health with high occupancy from strong tenants; a solid pipeline of acquisitions bolstered by deep tenant relationships; and a balance sheet, which provides us with flexibility and continued access to well-priced capital.

We're positioned to continue to deliver consistent FFO per share growth, which we believe will beat the REIT averages on a multiyear basis and provide our shareholders with above average returns while taking below average risk over the long term.

With that, I'll turn the call over to Kevin to provide greater color on our second quarter financial results.

Thanks, Jay.

Let me start with my usual cautionary statement that we will make certain statements that can be mainly considered to be forward-looking statements under federal security 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 second quarter results of $0.64 per share of core FFO operating results, which represents an 8.5% growth over second quarter 2016.

These results coupled with early 2017 acquisition success and a strong and liquid balance sheet positions us very well for another good year of accretive growth in 2017.

And it has allowed us to increase 2017 guidance again this morning.

We've maintained our AFFO dividend payout ratio at 72.5% during the first half, which helped position us to announce a 4.4% increase in the common dividend a couple of weeks ago, putting 2018 on track to be the 28th consecutive year of annual dividend increases.

Occupancy ticked up 20 basis points to 99.3% at June 30.

We continue to drive additional operating efficiencies with G&A expense decreasing to 6.1% of revenues for the second quarter and a 6.2% of revenues for the first half.

And that's down 80 basis points from the first half of 2016.

For purposes of modeling 2017 results, the annual base rent for all leases in place as of June 30 was $573 million.

As I mentioned, we increased our 2017 core FFO per share guidance by $0.02 per share to a new range of $2.46 to $2.50 per share, which represents 5.5% growth to the midpoint.

Details of that guidance can be found on Page 6 in today's press release, which only has modest changes from prior guidance, including a $50 million increase in our acquisition [guidance] to $550 million to $650 million for 2017.

As noted in those details, the core FFO guidance excludes the unusual charges for retirement severance and preferred stock redemption, both of which took place in the first half of 2017.

During the second quarter of 2017, we issued $25.1 million of common equity via our ATM at an average price of $43 per share, which suggests this was executed very early in the second quarter.

Equity rate year-to-date totaled $74 million.

And if you combine this with our projected 2017 retained AFFO of approximately $100 million after all dividend payments, plus our 2017 disposition proceeds guidance of $100 million, we will have raised $274 million of equity-light capital this year.

And that's assuming we issue no additional equity in the second half.

During the first half of 2017, the weighted average outstanding balance on our $650 million bank line was $69 million.

So we've not been particularly a heavy user of that short-term variable rate capital, despite its attractive pricing.

Capital market environments like recent months where we are glad to have preserved the optionality and liquidity a strong balance sheet provides.

Continuing our acquisition plan without the need for equity or using large amounts of bank line debt is consistent with disciplined balance sheet management.

We remain very well-positioned from a liquidity perspective and leverage position.

Beyond the bank line, all of our debt is fixed rate debt and the weighted average debt maturity is 6.3 years with a weighted average interest rate of 4.4%.

Refinancing our next debt maturity, which is a $250 million 6.875% notes due this October, will allow us to improve upon these metrics and should be another accretive refinance opportunity.

However, that will largely [be in order] to the benefit of 2018 and beyond given the timing later this year.

But our balance sheet remains in great position to fund future acquisitions and to weather potential economic and capital market turmoil.

Looking at June 30 leverage metrics.

Debt to gross book assets was 35.9%.

As you know, we don't manage our balance sheet around market cap-based leverage metrics.

More importantly, debt-to-EBITDA was 4.8x at June 30.

Interest coverage was 4.7x for the second quarter, and fixed charge coverage was 3.6x for the second quarter.

Only 5 of our 2,675 properties are encumbered by mortgages totaling $14 million.

Following 2016's 6% growth in per share results, 2017 seems to be on track for a similar result.

When sourcing capital and making capital allocation investment decisions, driving per share results on a multiyear basis is at the forefront of our minds, not volume or size.

We already have more than enough scale to [produce] a diversified portfolio and access to well-priced capital.

So growing per share result is job 1. We're optimistic 2017 will be another year of solid growth in those per share operating results.

Our strategy has been consistent for many years, and we're optimistic we'll be able to perpetuate our 28th consecutive year track record of raising our dividend, which has been an important part of outperforming the REIT equity indices and general equity market indices for a long time.

With that, Matt, we will open it up to any questions.

(Operator Instructions) Our first question comes from Joshua Dennerlein from Bank of America Merrill Lynch.

Is there any update on the [re-leasing] of the 31 SunTrust assets that are going vacant in April of 2018?

Good morning, Josh.

There's -- we don't have anything to update folks on yet.

It's too early to talk about any results there.

But I will say that, of course, the leasing team is working hard on it.

And about 1/3 of those properties, we're having productive dialogue with potential tenants or buyers.

So we feel like it's off to a very good start, just too early to report anything material.

Okay, got it.

And then, with 7-Eleven's acquisition of Sunoco, what are your thoughts on dispositions there?

What kind of pricing could you get?

Yes.

First off, just a reminder, 7-Eleven has announced that they're acquiring a number of assets from Sunoco that include a fair amount of ours.

That deal has not closed yet.

And it's, I think, scheduled to close near the end of this year.

And it does appear right now that Sunoco is going to retain some of our properties.

And so 7-Eleven -- right now, it would appear 7-Eleven is going to be kind of a 6.5% to 7% tenant somewhere in that range for us.

We're somewhat agnostic as to whether those units are sold from Sunoco to 7-Eleven or not.

Our credit on either of those leases would be an investment-grade credit, so we're very happy with the real estate and happy with the credit in either situation.

But to get to the meat of your question, these are very good potential properties for capital recycling.

Pools of 7-Elevens have sold in the mid- to high 5s cap rate, and individual 7-Elevens sell at lower cap rates than that.

And if you look at our acquisition performance this year of around a 7% initial cash cap rate, they would be very good potential properties to sell and recycle capital.

So it's something that we're looking at.

But right now, the transaction hasn't closed.

Our next question is from Rob Stevenson from Janney Montgomery Scott.

Jay, given that comment about potentially selling some convenience stores, is the move up to sort of 8 from a year ago, from just under 17% to over 18% in convenience stores, just an opportunistic situation where that's where the deal flow came to you over the last 12 months?

Or are you seeing something in that space that's causing you to shift from one provider to another or to increase your exposure there longer term?

Good morning, Rob.

I got to say, we -- the attributes -- let's start with the attributes of convenience store properties.

We think those are some of the best properties that we can acquire.

There are great regional and national operators out there doing business on these sites.

The locations are typically very good corner locations with good access and visibility and are very fungible for other uses.

So we really like convenience store properties.

We've ticked up over prior quarters based on an acquisition with one of our long-standing relationship tenants, GPM Investments.

And they've now shown up in our top tenant list as well.

But that's a group that we've known for a long time, think very highly of the management, think highly of the real estate.

And when those properties became available, we were very happy to do that deal with GPM.

So it is, Rob, much more of a bottom-up approach as looking at where our -- what's the good real estate?

Is it that we have good operators?

Do we like the risk-adjusted return?

And that's really what's led us to this level of concentration right now.

Okay.

And then out of the convenience stores, how big a percentage of that is just convenience stores with no gas component?

Very little, Rob.

I don't have that -- I don't think we have that number in front of us.

But almost all of our convenience stores have gas pumps.

In fact, a lot of our stores have large format buildings of 3,000, 4,000, 5,000 square-foot buildings with anywhere from 6 to 18 gas pumps on-site.

And just another macro reminder on that, Rob, this is Kevin.

About 2/3 of the operating income on a C-store is driven by the merchandise in those buildings, and so that's very important to us.

Gas is clearly a component, but it's only 1/3 of their operating income.

Okay.

And then a question on the auto parts guys.

I mean, the stock [has] bounced back a little bit.

But those guys have gotten crushed earlier this year.

From your standpoint, anything to worry about from an operations standpoint?

Or is that just basically a stock market flavor of the day and worry about Amazon?

Or is there really something that we should be thinking about longer term with auto parts guys from a competitive standpoint and ability to cover leases going forward?

Rob, not to be cavalier about any of this.

But we do feel like a lot of it is flavor of the day for a lot of different lines of trade that are out there.

With respect to our auto parts portfolio, we are in those properties at very low rents across the vast majority of that group of properties.

And so we're not sweating the -- our tenants' business on our properties at all.

Okay, and then just one last one for Kevin.

When you think about the capital stack, I mean, where's pricing today for you for 10-year debt and also preferred?

If you wanted to go that route rather than common?

Yes, 10-year unsecured is probably in the mid- to upper 3s, maybe closer to mid-3% range.

And our preferred would be in the low 5s.

Our next question is from David Corak from FBR Capital Markets.

Just, Kevin, I appreciate your comments on the focus on per share growth in the prepared remarks.

But just thinking about the growth over the next 18 months or 24 months, I see your spot cost of equity has gone up a bit over the quarter.

But taking into consideration that along with your kind of longer-term view of cost of capital, how should we be thinking about growth over the next 2 years assuming your cost of capital for whatever reason remains where it is today?

You mentioned your capacity, but maybe just a broad roadmap of how you're thinking about growth from here?

Maybe another way to look at it.

Just hypothetically, if you had to buy $1 billion of assets today, how do you finance that?

Or don't you?

Yes, so the good news is we don't have to buy $1 billion to achieve the growth that we would like to achieve in per share results.

So that's important to know.

So yes, I think, over in recent years, we've been, I think, prudent in managing the balance sheet and creating a low-leverage position and some optionality.

But even at today's share price, accretive acquisitions can be made.

And we don't see any reason to believe we can't achieve what's generally our long-standing view that we're -- we want to try to grow per share results around 5% a year.

Some years a little better than that, maybe some years a little -- maybe not quite as good.

But generally, if we can get mid-single-digit per share growth on a relatively leveraged neutral basis without stressing the balance sheet, that consistency of results over time, we think ends up winning the race.

And so even in today's capital market environment and even if interest rates move up to some degree, I don't see that changing over the time period that you laid out there.

We're still fairly confident that we'll be able to post those kinds of numbers.

Okay, fair enough.

And then, one just one quick one.

It looks like you added a couple of Camping Worlds this quarter.

So maybe just some thoughts on what kind of exposure you're comfortable with there given all the different scenarios that could play out with Gander?

Yes, David, the -- I'm trying to recall which Camping Worlds we added.

I'm drawing a blank right now.

But just to give you the high-level picture, we're very happy with our Camping World concentration right now and our exposure to them.

Again, that's a management team that we've known for a long time, and it's a business that we've watched a long time.

We think very highly of the management team and the properties that we've got.

And we are hopeful that they'll have some success within the Gander Mountain bankruptcy, and we may pick up some more stores then.

At some point, we may recycle some capital out of Camping World.

But right now, it's not high on our list at all.

Our next question is from Michael Carroll from RBC Capital Markets.

I know you guys have mentioned this in your prepared remarks, but can you kind of give us a quick update on the Gander Mountain bankruptcy?

I guess, I'm more -- what I'm looking for is the timing of how your negotiates are going right now?

When do you expect them to come out?

And when do you think you'll have a few leases signed?

Or when you can give us more information on that?

Yes.

Michael, hi, good morning.

The -- to get to your last question there.

We're hopeful that by the next call, we'll be able to give folks some details on how that has played itself out.

Right now, in the Gander Mountain bankruptcy, the liquidators are carrying out the going out of business inventory sales.

And slowly, the stores are closing as the inventory sales are completed.

And at that point, Camping World has a period of time in which to decide what they want to do with the stores that they want to take.

And otherwise, the -- just like I suspect all the other landlords, we're out -- we're marketing our properties [now] while we're in productive dialogue with Camping World.

But it will be a few more months.

Okay.

And then with the uncertainty that -- I'm sorry, go ahead?

No.

Go ahead.

All right.

With the uncertainty impacting the retail sector, I guess, today, I mean have you changed their underwriting standards at all?

Is there anything particular you're going after today that you wouldn't have gone after or vice versa?

Michael, I'd say -- the short answer to that question is no.

We've always been primarily real-estate-focused.

And so the first thing we look for is what are good corners, what are good out parcels, what's the price for those out parcels and what's the level of rent that the tenant is going to be -- that is going to be paying on these parcels compared to market rent?

And then, after that is when we look at what the particular uses are.

And we're going to continue to be bottom-up real-estate-focused on those acquisitions.

I do want to -- let me take a little bit of a step back though and again just talk for a moment about the health of our portfolio.

We've been applying that -- the theory that I just described to all of our acquisitions through the years.

And if you look at our portfolio, not only are we 99 -- over 99% occupied at the moment.

Our long-term average is around 98% occupied, which takes into account the great recession.

When you look at our lines of trade that are the primary businesses of our tenants, you see, as I mentioned in the prepared remarks, you don't see apparel, you don't see -- we have very limited exposure to other lines of trade that are being disrupted by e-commerce and by Amazon.

And when you look at our top tenant list, what you see are really some very strong industry leaders in their sectors.

And when you put all of that together, with strong tenants in lines of trade that are less susceptible to being disrupted and then apply the focus of looking for good real estate and keeping rents reasonable so that you create a margin of safety both for the tenant in the event of any kind of disruption in their business and you create a margin of safety for the landlord in terms of being able to re-lease that property at close to what you were getting before, you end up with a very healthy portfolio that I think, just right now, we're not getting as much recognition for the health of that portfolio as we should.

Thanks for listening to my speech.

Our next question is from Nick Joseph from Citigroup.

So guidance, you did $1.24 in core FFO in the first half of the year.

And so implied in the back half of the year, it's also $1.24.

I'm just wondering what the offsetter is especially after doing $0.64 this quarter and getting some benefit from the acquisitions that you did this quarter, the additional acquisitions for the year?

And then you mentioned the likely accretive refinancing of the debt in October recognizing you don't get the full benefit this year, but I would think that the run rate for the back half of the year would be above the first half of the year?

Yes, Nick, hi, it's Kevin.

Yes, I kind of see the logic path you're getting there.

And maybe that suggests we might be closer on the top end of the guidance range rather than the lower end of the range.

I think the one key variable, and this is nothing new, is that we don't give guidance as it relates to the assumptions around our capital raising.

And so in terms of equity or debt and even to the extent, we may indicate that we're going do a debt offering or what have you.

It's -- the timing matters a lot.

And so doing a debt offering tomorrow or doing one in next October or November, it makes a big difference.

And so if you've got a couple months difference in kind of carrying from cash or et cetera.

So that can influence the numbers in any given quarter to some degree.

And so that may be part of the puzzle in terms of trying to figure out exactly how we get to our guidance.

But we've not, as I said -- consistent with the past, we have not given any guidance on our assumptions and our capital raising.

So that's a piece of the puzzle that's difficult for you to kind of factor in.

Is there anything on the acquisition timing?

Or is it pretty much across both the third quarter and the fourth quarter?

Yes.

And that, too, sometimes it's hard to pin down precisely when things we think we have good visibility on will close.

And to be honest, that piece of second quarter was we had some higher volume in the earlier part of the quarter.

So that helped second quarter maybe more than it might have on average over past quarters.

But no, the future quarters don't look notably lumpy or concentrated in terms of acquisition volumes and timing.

And then just on G&A, you talked about bringing it down about 80 bps from the first half of 2016 in terms of percentage of revenue.

What's the opportunity to drive additional efficiencies even from here?

We've come a long ways in recent years.

And so I mean, just back to 20 -- so 5 years ago, it was 9.3%, just for some context.

And last year, it was 6.8%.

This year, we think we can get probably for the full year close to sub-6%.

We'll be in the high 5s, I think.

And so we still are able to find some incremental efficiencies there.

Despite the fact the company has grown in size, we've become more efficient and there are some economies of scale.

But a lot of that has been wrung out.

But we've got a little ways to go yet.

I think next year will be another opportunity to produce somewhat lower G&A as a percent of revenues.

The question becomes how much more beyond 2019 and 2020 is there?

And I don't have an answer for that.

Our next question is from Dan Donlan from Ladenburg Thalmann.

Just was curious about cap rates.

You've been 6.9% the last 2 quarters.

You've talked about how the retail malaise is really not impacting your portfolio, but any thoughts behind it potentially impacting cap rates for the properties that you're looking at?

Just kind of curious if the sentiment's actually worse than what's going on in terms of the cap rates.

Well, Dan, good morning.

The cap rates continue -- from our perspective, cap rates remain flat.

We haven't seen any material drifting upward at all of cap rates.

And in particular, for the kind of good quality real estate that we are looking for with a good operator, we just aren't seeing them drift upwards.

They don't seem to be tightening anymore, but they are not headed north yet either.

Okay, appreciate that.

And just curious on -- going back to the SunTrust question.

Are most of the tenants that you're talking to there, are they existing banks?

And then, kind of you talked about maybe 1/3 in discussions whether it's lease or for sale.

Should we expect maybe a tick up in CapEx if there's some type of conversion that maybe needs to go on?

Or how should we look at that as we kind of head into next year?

Yes, our first priority with every vacant property or to-be vacant property is to re-lease it.

And our strong preference is to re-lease properties as is.

We are always hesitant to put more dollars into properties, and we're typically happy to trade -- not by rent, by putting in additional dollars.

With respect to the SunTrust portfolio, I think what we're going to see across this 31 properties is just the broad spectrum of possible outcomes.

We're in conversations with some local users that would use some of these properties for that professional office or something like that.

Some of these buildings are good for that kind of office use.

We've got dialogue going on regarding scraping and redeveloping -- or scraping and ground leasing the land to potential users of other types.

And then we've got some conversations going on with local banks.

So it's going to be kind of all over the ballpark.

Our first priority is to try to lease them, and we're only going to sell as kind of a last resort.

Okay.

And then, just curious on the -- I would assume most of these branches have drive-throughs.

We've been hearing from some of the other owners of fast food concepts that drive-throughs are very hard to come by these days in terms of permitting.

So I'm just curious, is there an ability for you to-- is that something that you're factoring in?

Is that something that's helping you to re-lease these -- potentially re-lease these properties?

Just kind of curious.

Yes, Dan, I wouldn't put too much stock in that being materially helpful or detrimental.

You're right.

You're absolutely right.

The drive-through facilities for any restaurant user is something that they're all finding -- they're all working on and they're finding a way to try to maximize sales through the drive-through.

But I think a bank branch that has a drive-through is really just a potential piece of real estate for all kinds of different users.

I wouldn't attribute much of a net positive to that for other -- for restaurant users.

Our next question is from Jason Belcher from Wells Fargo.

Sorry if I missed this, but can you give us a little more detail on the Q2 dispositions and maybe touch on what kinds of properties those were as well as the range of cap rates and remaining lease terms on this?

Yes, we don't disclose too much around that.

It's a variety of things.

It was a total of 8 properties in the second quarter, $9.3 million of proceeds.

It included a couple of convenience stores and one other kind of a smaller shop space, included 3 vacant properties.

And just a quick comment on that, so we've sold 7 vacant properties this year total.

2016, we sold 3 vacant properties total full year.

And in 2015, we sold 6 vacant properties.

To Jay's point just earlier, we're not inclined to sell vacancy.

I know a lot of that has been going on lately in other parts of our world.

But that -- we don't think that probably optimizes the value.

So it really wasn't a lot, and the number and size of the proceeds indicates that.

We always -- we sell them for a variety of reasons and the more defensive sales are going to create a higher cap rate possibly, and a more offensive sale would create a lower cap rate.

If you look year-to-date, first half, our -- the cap rates are below where we're acquiring properties.

And so it's an accretive redeployment of capital on our part, but it's just going to vary quarter-to-quarter.

And it's one reason why we have not chosen to give a lot of detail on a quarterly basis, a, because the sample size is small like this quarter and the results in any given quarter move around.

So we give more detail around that on an annual basis where we think the sample sizes sufficiently begins to become sufficiently large to be somewhat representative.

But year-to-date, cap rates on dispositions are below our acquisition cap rates.

All right.

And then you all mentioned that most of your C-stores are relatively large footprint gas stations.

Can you guys just remind me how you all distinguish or differentiate between those large gas stations?

And what you I guess otherwise sort of separately classify as travel plazas?

Yes.

Jason, yes.

Travel plazas, we should think of truck stops.

And so that's -- where we define the line there is really we look at how much diesel fuel is being sold and whether the use of the property is more geared toward longer-haul trucking than a typical convenience store.

Our next question is from Vikram Malhotra from Morgan Stanley.

This is Kevin on for Vikram.

I had a quick question.

So it appears according to the earnings release that you acquired some properties from GPM Investments.

I was just curious, is there any details around that acquisition in terms of coverage or cap rate?

Kevin, the -- we don't give individual cap rates for our acquisitions, but I guess we could say that it -- that was a relatively large acquisition.

It was $140 million for 66 properties, I believe, in that range.

And the cap rate was pretty consistent with what we were -- what we've -- our average for all of our acquisitions year-to-date.

It was right in that ballpark.

And then in terms of coverage, any details around that?

Rent is well covered.

Rent on these properties was relative -- dollars invested per property were relatively low.

It was just a little over $2 million per property, very safe rent.

It's well covered.

Okay.

And then, just one additional.

So in terms of cap rates, you mentioned they are flattening out.

I just want to make sure that just across the portfolio in terms of upward pressure, there's been no subsector or anything specific that you've been seeing more upward pressure at all?

Not really in the types of properties that we've been looking at.

We evaluated -- we don't track this like some of our peers do, but we evaluated we think around $4 billion or so of acquisitions so far this year.

And there were some deals that were trading at higher cap rates that we were -- that we passed on for real estate quality or risk-adjusted return issues.

But in the types of properties that we're looking for, small box retail properties with good operators, I can't really say there's a sector that's -- where cap rates are moving differently than anywhere else.

(Operator Instructions) Our next question comes from Chris Lucas from Capital One Securities.

Just a couple of knits and then I wanted to talk about the capital choices.

On the SunTrust, it looks like the number of units went down from 111 to 109 sequentially.

I know it's just 2 units.

Just curious as to whether or not those were dispositions or re-tenants?

Chris, you have an eagle eye.

Those were re-leased properties.

Okay, great.

And then, just going back to Gander Mountain quickly.

I think the original sort of general guidance that was given as they -- that they had an intention to sort of be done with their liquidations or the inventory by the end of August, just curious if there are any stores that had completed their liquidation early and closed as of the end of July in your portfolio?

Kevin, I believe that maybe a couple of stores in our portfolio may have closed at the end of July?

Yes, we got rent and -- for July for all of our properties, I think a couple, meaning 2 or 3, will close in August as a result of liquidation being done.

But we've not concluded any of that yet.

Meaning you expect to get an August rent for those stores?

Or you don't expect to get an August rent for those stores?

For those 2 or 3, I probably don't.

To the extent, the liquidation is done and they are going to reject them.

But for all of the properties, we've got them for all of July.

So today is only August 1, so it's a little early to know.

Sure.

And then just in terms of the -- on the unsecured notes that are coming due in October.

When can you redeem those without penalty?

So consistent really with all the other REIT unsecured debt counts of that vintage, meaning 10-year-old debt, they did not have a par call option like they do now.

So most REIT bonds issued today have a -- on a 10-year deal would have a 3-month par call option with no penalty so you could call 3 months prior to maturity.

10 years ago, state-of-the-art REIT bond issuance didn't provide for that.

So there really is -- there would be a treasury make whole penalty to the extent we wanted to call those early.

And obviously, you write a check.

At this point, there's not much time left so it maybe the penalty is not that big.

There's other ways, though, of hedging and -- your risks as it relates to rates between now and October, et cetera.

And so we've disclosed that we've entered into some of those kinds of forward starting swaps that hedged the rate risk as it relates to a bond offering in which we've done over the years for other note offerings.

But yes, that 10-year vintage bonds that are maturing now don't have a par call option.

Okay.

And I think there was an earlier conversation about sort of your cost of debt and preferred.

You did issue some equity in the ATM as you think about the $250 million of the unsecured debt that's due plus what's on your line as of the end of the second quarter.

How do you think about your choices if you had to make one today in terms of what mix you would think -- be thinking about there in terms of capital?

Yes, I think, generally, we're not looking to change our mix notably.

So our leverage profile [or] balance sheet won't change materially.

Obviously, at any given quarter, depending what's going on in our capital markets activity, it may influence things somewhat.

But again, we're trying to think about things on a multiyear basis.

So for years, we've been thinking about making sure we've had more than enough equity.

For example, last year, we had no intention of issuing the preferred.

And we issued $345 million last October at a 5.2% coupon, which is we just thought was very attractive, but it wasn't planned a year in advance.

That was just -- we tried to maintain a flexible balance sheet so we can react to what's available and well-priced and we are inclined to get capital early.

Having said that, like I said, we've disclosed in our Qs that we have put in place some forward starting swaps as it relates to the future issuance of debt.

So near term, 10-year long-term fixed rate debt might be a good option for us in the near term.

Thank you.

This concludes the question-and-answer session.

I'd like to turn the floor back over to management for any closing comments.

All right.

Thank you very much, and we wish you all a good end to your summer.

And we'll see you -- many of you in September during the upcoming conferences.

Thank you.

This concludes today's teleconference.

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