NNN REIT Inc (NNN) 2019 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the National Retail Properties Third Quarter 2019 Earnings Call.

(Operator Instructions)

At this time, it's my pleasure to turn the floor over to Mr. Jay Whitehurst, CEO.

Sir, the floor is yours.

Thank you, Tom.

Good morning and welcome to the National Retail Properties Third Quarter 2019 Earnings Call.

Joining me on this call is our Chief Financial Officer, Kevin Habicht.

After some brief opening remarks, I'll turn the call over to Kevin for more detail on our results.

Since today is October 31, let me open by saying Happy Halloween to you all, and I'm pleased to report that NNN delivered treats, not tricks for the third quarter this year.

Some highlights of those third quarter treats include increasing our common stock dividend for the 30th consecutive year and strengthening our balance sheet by raising over $434 million of equity, which, together with our healthy portfolio and our consistent, steady performance in acquisitions and dispositions, positions us today to raise our 2019 guidance for core FFO to a range of $2.74 to $2.77 per share and to introduce 2020 core FFO per share guidance of $2.83 to $2.87 per share.

Kevin will provide more details on our guidance, but I would like to remind you that strategically, we continue to focus our business model and execution on consistent per share growth over a multiyear basis.

This approach, we believe, creates the greatest long-term shareholder value.

Our guidance for 2020 core FFO per share reflects a growth rate of 3.4% at the midpoint -- over the midpoint of our increased 2019 guidance, which is consistent with our goal of steady per share growth on a multiyear basis.

And with regard to the recent dividend increase, I want to emphasize that our enviable track record of 30 years of increased dividends is a feat matched by only 2 other REITs and less than 90 public companies in the U.S. Moreover, our dividend remains very safe with a dividend coverage ratio of only 72% of AFFO, thus positioning us to perpetuate our record of consistent, steady dividend growth into the future.

Delving into the quarterly results, our broadly diversified portfolio of 3,057 single-tenant retail properties remained very healthy as our occupancy rate ticked up 30 basis points to 99.1%.

As you've heard us say many times, our long-term occupancy rate is 98%, plus or minus 1%, and we remain at the top end of that range.

Our broadly diversified portfolio consists primarily of large regional and national tenants operating e-commerce-resistant businesses focused on customer services and consumer necessities such as convenience stores, fast food restaurants, car washes and tire stores.

We remain largely unaffected by the disruption of mall and shopping center-based tenants that sell primarily apparel.

In the third quarter, we acquired 27 new single-tenant retail properties at an investment of just under $117 million and with an initial cash yield of 6.8%.

Year-to-date, we've now invested almost $510 million to acquire 131 single-tenant retail properties at an initial cash yield of 6.9% and with an average lease duration of 17 years.

Our focus on executing repeat programmatic business with our portfolio of relationship tenants continues to bear fruit.

Almost 80% of our dollars invested in 2019 have been with our broad portfolio of relationship tenants.

As we've said before, it's time-consuming hard work for our acquisitions team, our asset management team and our senior management to build and maintain these deep tenant relationships.

But all that effort enables us to acquire stronger real estate locations with favorable lease terms and a lease document that's tailored to our long-term perspective.

Based on our acquisition pipeline, we are increasing our guidance for 2019 acquisitions to $650 million to $750 million.

And we're establishing our 2020 acquisition guidance of $550 million to $650 million.

But let me remind you that our focus is never on the volume of acquisitions.

Our focus is on acquiring high-quality real estate locations leased to strong regional and national operators under long-term leases at reasonable prices and with reasonable rents.

Our deep market penetration, bolstered by our numerous tenant relationships, makes us confident that these investment goals are achievable while remaining highly selective in our underwriting.

During the third quarter, we also sold 13 properties, generating almost $33.5 million of proceeds.

Year-to-date, we've raised almost $95 million from dispositions of 43 properties at an average sale cap rate of 5.7%.

Accretive recycling of capital remains a significant differentiator between National Retail Properties and many of our peers.

Kevin will discuss our balance sheet and financial metrics in more detail, but I do want to acknowledge our well-timed equity offering in the third quarter.

In a highly oversubscribed overnight offering, we raised almost $400 million from the issuance of [7] million shares at a compelling price of $56.50 per share.

Then early in the fourth quarter, we utilized $288 million of these proceeds to redeem our 5.7% Series E preferred stock, making us one of a very few REITs, which has ever accretively redeemed preferred equity with common equity.

Kudos to Kevin and his team for accessing well-priced capital when it's available and utilizing that capital to strengthen our balance sheet and position us for continued per share growth in 2020 and beyond.

In closing, let me reiterate that we've run our business with a long-term focus characterized by consistent per share growth on a multiyear basis.

Our guidance for 2019 and 2020 indicates that we continue to march to that consistent beat.

I'll now turn the call over to Kevin for his additional comments.

Thanks, Jay.

And as usual, I'll start with our cautionary statement that we'll 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 report quarterly core FFO results of $0.70 per share for the third quarter of 2019, which is 4.5% higher than prior year results and consistent with our projections.

These results, along with our current view of the fourth quarter, allowed us to raise our full year 2019 core FFO per share guidance to a level producing 4% growth to the midpoint versus our 2018 results.

And we do all this while maintaining a strong and liquid balance sheet.

We increased our annual dividend for the 30th consecutive year in the third quarter, and our AFFO dividend payout ratio for the first 9 months of 2019 was 72.2%.

Occupancy was 99.1% at September 30, and that's up 30 basis points versus the prior quarter.

G&A expense was 5.2% of revenues for the third quarter and 5.5% for the first 9 months of 2019.

For purposes of modeling future results, the annual base rent for all leases in place as of September 30, 2019, was $658.3 million, and this allows you to take some of the guesswork or estimation out of timing of Q3 acquisitions and dispositions for purposes of making projections that start October 1, 2019.

As you all know, the capital market environment for both debt and equity have been favorable.

We opted to take advantage of the opportunity to raise $435 million of common equity in the third quarter.

For the first 9 months of 2019, we raised $522 million of equity at a net price just over $54 per share.

Third quarter dispositions totaled $33.5 million and first 9-month dispositions totaled $95 million.

So this $95 million of disposition proceeds plus the $522 million of common equity raised plus approximately $94 million of retained operating cash flow, and that's after all the dividend payments, that totaled $711 million of equity-like capital raised in the first 9 months of 2019, which notably totals the midpoint of our 2019 acquisition guidance.

As we've noted in the past and consistent with the past couple of decades, we expect to behave in a relatively leverage-neutral manner over time, but we remain in a very good leverage and liquidity position, which will allow us to maintain an active acquisition effort into 2020.

As Jay mentioned, we did raise our 2019 core FFO guidance by raising the lower end by $0.03 and the top end by $0.01 to a revised range of $2.74 to $2.77 per share.

Additionally, we increased our acquisition guidance by $100 million to $650 million to $750 million.

But otherwise, the underlying assumptions are largely unchanged.

We expect G&A to end -- G&A expense to end up at about $37 million to $38 million or 5.6% of revenues for the full year of 2019.

And I'll note that, that includes $2.3 million of income taxes, which I know a number of REITs report on a separate line item.

This core FFO guidance excludes the estimated $9.9 million of preferred stock redemption charge that will show up in the fourth quarter in connection with the redemption of our 5.7% preferred stock in October, and you can get details of our 2019 guidance on Page 7 of today's press release.

Likewise, this morning, we introduced 2020 core FFO guidance of $2.83 to $2.87 per share and AFFO guidance of $2.90 to $2.94 per share, which implies 3% to 4% growth in per share results, which is consistent with where we started guidance for growth in 2019.

Assumptions for 2020 guidance include: one, $550 million to $650 million of acquisitions in the mid-6 cap range; two, G&A expense of $42 million to $43 million, which is -- we approximate to be 5.9% of revenues; three, no change in occupancy; four, property expenses net of reimbursement of $8 million to $9 million for the year; and five, property dispositions of $80 million to $120 million.

I'll note, the G&A expense increase is largely connected with stock-based compensation expense as well as a little bit of head count growth here at NNN.

We don't give guidance on our capital market plans, but you should expect our behavior to remain consistent with the past 25 years, meaning that we'll maintain a conservative leverage profile and getting -- and get capital when it's available and well-priced, all with a multiyear view of managing the company and the balance sheet.

We ended the quarter with no amounts outstanding on our $900 million bank line and $354 million of cash.

We did use $287.5 million of that cash to redeem our 5.7% preferred stock in October right after quarter end.

As Jay mentioned, notably, we were able to redeem this preferred equity with common equity on an accretive basis, which does not happen often with a 5.7% coupon on the preferred.

The weighted average outstanding balance on our bank line for the first 9 months of 2019 was $8 million, continuing several years of very modest bank line usage and maintaining significant liquidity.

Leverage metrics remain very strong.

Our next debt maturity is in October of 2022, and our weighted average debt maturity is now 8.6 years.

Our balance sheet remains in good position to fund future acquisitions and weather potential economic and capital market turmoil.

Looking briefly at quarter-end leverage metrics.

Net debt-to-gross book assets was 33.8%.

As you know, we're not -- haven't found market-based -- market-cap-based leverage metrics particularly relevant, and we don't manage around those.

Net debt-to-EBITDA was 4.7x at September 30.

Interest coverage was 5.0x and fixed charge coverage was 3.9x for the 9 months.

Both of those metrics were 20 basis points higher than year-end 2018.

Only 5 of our 3,057 properties are encumbered by mortgages totaling $12 million.

So we work to source capital when it's available and well-priced.

We work to deploy capital when we can get risk-adjusted returns that are sufficiently accretive on a per share basis.

Sometimes raising capital and deploying capital makes sense nearly simultaneously, but certainly not always.

We attempt to keep the capital raising and the capital deploying decisions somewhat separated in our minds.

Well-priced capital doesn't validate paying above market for a property.

Our share price going up $2 a share doesn't make the property down the street worth more.

This approach has helped produce solid returns over many years.

2019 looks to be another year of solid growth in operating results, and the comps for multiple prior years are not easy.

And 2020 has the opportunity to be more of the same.

Our investment strategy in terms of property type and tenant type and our balance sheet strategy have been very consistent for many years.

Tom, with that, we will open it up for any questions.

(Operator Instructions) And we'll take our first question from Christine Mc (sic) [McElroy] with Citibank (sic) [Citigroup].

This is Katy McConnell on with Christy.

Could you talk about -- or maybe provide some color on how exactly you arrived at the 2020 acquisition guidance range?

And based on what you're seeing in the market today, would you expect the pace to be front-end loaded at all, just given the pipeline is already pre-funded to an extent?

The -- our primary source of acquisitions is through our relationships with our -- our tenant relationships.

And you can never have a solid, clear view of total acquisition volume or the timing, but we have confidence from those tenant relationships that there will be business that will come our way in 2020.

Our guidance for 2020 is very consistent with our -- where we started our guidance for 2019.

Our pipeline feels good.

The available property's out in the market.

There seemed like there's plenty adequate supply of properties out in the market.

And it's really a question of timing, as you mentioned, whether it's front-end loaded or back-end loaded.

We are historically conservative with our guidance.

And so in our minds, it's a little more back-end loaded.

But we're confident with the number, and it's consistent with what we said we would do when we started 2019.

Okay.

Great.

And then can you just elaborate a little bit more on what you said as far as pricing expectations?

It sounds like you're expecting cap rates to be a little bit lower than the year-to-date piece.

Yes.

Cap rates are flat to trending a little bit lower out in the market for high-quality properties.

And so our expectation right now is that they may be a little lower going into 2020.

I do want to point out one other thing, though.

When we talk about cap rates, we are always talking about initial cash yields on our investments.

We structure our leases with -- so that we are not straight-lining the rent bumps.

We get approximately 1.5% to 2% annual bumps in our acquisitions, but that is not straight-lined based on the way we structure the lease.

And when you have a 15- to 20-year lease with 1.5% to 2% bumps in it, you get about an additional ballpark, 75 to 125 additional basis points of anticipated additional yield.

And so when we talk about our initial cash yields being in the upper 6% range, there's another close to 80 to 100 basis points or so of additional growth anticipated in those leases based on the rent bumps that's not being straight-lined.

And based on a 98% occupancy, plus or minus 1%, we're highly confident that we'll get that additional yield.

So it works out to an anticipated long-term yield of -- in the high -- upper 7% range for our investments, which is well accretive given our cost of capital.

We'll take our next question from Vikram Malhotra with Morgan Stanley.

Just one on the occupancy change, nice pickup over the last, call it, 2 quarters.

Can you sort of break down the occupancy move between kind of maybe just lease-up and then maybe selling vacant assets?

Yes.

Kevin, you may have some additional comments on this.

But Vikram, I -- job 1 for us is to re-lease vacant properties.

We are a real -- retail real estate company.

And so our leasing department has been very active and efficient in re-leasing those vacancies where we can put in a new tenant somewhat quickly.

What we've also looked at is what's the carrying costs of properties that stay vacant longer.

And so we've been more focused on going ahead and selling vacant properties once we've concluded that the better long-term risk-adjusted return is to harvest those proceeds and reinvest in new investments instead of continuing to hold on to properties where we don't have -- we may not, at the moment, have great tenant interest and have some carrying costs. .

I think over the course of the year, Kevin, we're kind of in the 60% of the vacancy change would be sales and 40% re-leases.

Vikram, it's in that ballpark.

Yes.

No.

That's right.

Okay.

That's helpful.

And then just maybe one bigger picture question for you guys.

Given the diversity of your tenant base, both geography and diversity, and all the questions around kind of where we are in the economy or the innings of the economy, anything you're seeing that -- or hearing from your tenant base that would suggest any specific segments in your base are sort of slowing or maybe taking more of a wait-and-watch approach?

Yes.

Vikram, we deal primarily with large regional and national operators who are continuing to grow their store count and grow their market share.

And then we are not hearing from them indications of particularly slowing down their business.

It means they -- we are focused on companies that are intending to grow.

And so that's not -- that shouldn't be a big surprise.

The -- we're hearing also that their customers are continuing -- they're continuing to focus on bringing in customers, but their customers are still coming.

What we do hear from a lot of our retailers that they're -- finding employees is hard, but they are otherwise continuing to grow their business and add new stores.

And I'd add on to that.

This is a bit of a segue into maybe as we think about credit watch.

Our credit watch list hasn't really changed.

So clearly, retailers have struggles and issues, but their ability to pay us rent has not changed notably in our minds in recent quarters.

So that -- we're not seeing anything really new there on that front.

And the credit watch list is fairly static from where it's been.

And just sorry, just lastly, to clarify on that watch list -- or not the watch list, but just the coverage levels.

I know you update this in your book that you put out, but can you remind us where coverage levels are versus maybe the start of the year?

They're fairly -- compared to the start of the year, and I don't have those numbers in front of me, to be honest, it has not moved notably over the course of this year if you look at our averages and weighted averages for the portfolio.

And we'll take our next question from Brian Hawthorne with RBC Capital.

Just one from me.

So we've seen some REITs raise debt a bit, ball, 4%.

Can you guys or would you guys be able to take out any of your debt and replace it with kind of lower cost at this point?

Definitely.

Yes.

We could refinance some debt.

I mean you have to counterbalance that with prepayment penalties, et cetera.

And then obviously, you've got to think about the duration.

We're always inclined to get longer-duration debt.

So that augurs for not being particularly accretive to refi, but you derisk the balance sheet by taking a 2- or 3-year maturity and push it to 10 or 30 years.

We think there's value in that beyond whatever accretion there might be.

But yes, at the margin, there's still some, what I call, refinance tailwind a year ago.

We probably all thought that was coming to an end, but have gotten new life to that in recent quarters as rates have ticked lower.

We'll go next to Joshua Dennerlein with Bank of America.

For the disposition bucket for next year, any assets that you're targeting or maybe industry types that you're targeting?

And then maybe stepping back a bit, when we look at your industry buckets, what areas do you expect to grow over the next few years?

And what -- which ones maybe you expect to trim or maybe hold steady as a percent of your overall portfolio?

Yes.

Josh, I think if you look at the lines of trade that make up our portfolio now when you look back at the end of 2020, it will not be very different.

With our pipeline will -- we expect that our 2020 acquisitions will reflect the -- pretty -- closely the makeup of our overall portfolio.

So it will be convenience stores and tire stores and car washes and the categories that make up our top lines of trade, primarily small box properties located along well-trafficked roads.

As it relates to dispositions, our strategic philosophy on dispositions is kind of a barbell approach.

There are instances where people come to us with offers that figuratively knock our socks off for low cap rate acquisitions.

And so we will take advantage of some of these -- the opportunities to sell some of our properties at low cap rates in 2020, we expect.

And then the other end of the barbell is selling properties that we think are not good long-term holds for us.

And maybe those are vacant properties that we've tried to lease and haven't had any luck leasing or maybe there are other properties that have some issues, either with the tenant or with the real estate.

And -- but that is a property-by-property kind of analysis.

It's not done broadly across lines of trade or any other kind of bright-line tests.

The folks in our asset management group are always looking at every property in the portfolio as to whether we're -- we still want to hold that long-term or whether there's some other way that we can maximize the value -- shareholder value of that particular profit -- property.

So I can't really tell you that there's anything more than just one-by-one property analysis for those dispositions.

Got it.

And then maybe just one more.

Kevin, [going back to the] acquisition of Gander Mountain, any color on how your old Gander Mountain properties are performing within their portfolio?

And how do you feel about those assets today?

The -- we're still happy with those assets.

We're happy with all of our Camping World assets.

Primarily, we own the RV dealership properties leased to Camping World that are theirs.

It has always been their core business.

And we're very happy with the locations of those properties, the performance of those priorities and the rent levels on those properties.

Then with regard to the Gander Outdoor properties that are leased to Camping World, we took a significant rent write-down on those Gander properties when we leased them to Camping World for long-term -- on long-term 20-year leases with regular rent bumps in those leases.

And so the rent level on those properties is very comfortable.

We don't have specific performance numbers from Camping World on those yet.

But similarly, we're very comfortable with the rent levels on those properties now.

(Operator Instructions) We'll go next to Spenser Allaway with Green Street Advisor.

Maybe just going back to Vikram's question on dispositions that were occupied versus vacant in the quarter, so looking at your same-property metrics.

Can you provide some color on how same-property occupancy and NOI moved in the quarter?

I know you do provide enhanced color annually, but maybe some context just on how these changed during the quarter?

Yes, Spenser.

Yes.

It hasn't changed much in the quarter.

We don't publish anything.

We do it on an annual basis.

We think that's a better sample set once you have kind of a full year of disposition activity versus any given quarter.

But as we've talked, the way we think about it is there's probably 1% of credit issues, whatever they may be, vacancies or credit loss or rent reductions, et cetera, per year.

That's the way we model our internal numbers is we just assume there's going to be some level of pain somewhere.

We don't -- frequently don't know precisely where it will show up, but it's, we think, not wise to assume that there won't be any.

So in our minds, we always assume that there's about 1% of rent in a given year is going to get consumed in some tenant having an issue of some sort that, like I say, either results on a vacancy or a rent reduction or some sort of negotiation.

So -- but yes, we don't -- we'll put that out at year-end in terms of our same-store occupancy results and try to give a little detail then.

Okay.

That's very helpful color.

But -- and I understand that you guys -- I understand the rationale for doing it annually but it's -- just even the breakthrough that you just made is very helpful color.

Is there any plans, perhaps, in your annual disclosure to kind of walk through those components or just even the thought process that you just conveyed in some sort of enhanced disclosure?

We'll take a look at that.

I mean, fair point.

We'll see what -- if there's something that's relatively simple.

As Jay said, each of these properties have a bit of a story.

And so it -- sometimes it's difficult to communicate succinctly what's happening, but we will definitely revisit that.

Yes.

And Spenser, we appreciate you and other folks trying to get their model as refined as possible.

But I would be remiss if I didn't say the real driver for growth, and the real metric to watch over is new rent from acquisitions.

That $700 million of acquisitions at a 7% cap is annually, almost $50 million of new rent.

And so that's the big driver.

Yes.

No.

Understood.

It's just obviously part of our job.

So like you said, refining model as best as possible.

I understand.

I understand.

We'll take our next question from Jason Belcher with Wells Fargo.

Yes.

One more on dispositions, if I could, please.

Just wondering if you could give us a little more detail in terms of what kind of cap rates you saw on the 13 properties you sold in the quarter, maybe a range and then also, what kind of average lease term was remaining on this.

Yes.

Jason, the quarter -- I'll give you a little bit on the quarter, but at 13 properties, it's really not a very good sample size.

So I'll give you a little bit of that information on the year-to-date, I think is -- gives you a little bit more -- makes things seem a little bit more accurate.

In the quarter, the -- they were primarily defensive dispositions.

I talked about that barbell approach.

And so the quarter's dispositions of leased properties averaged kind of an 8% cap rate.

There was a low -- there was this 1 leased bank branch in there that's sold for sub 6. And then there was another leased property that we were -- did not want to be a long-term owner of that was at a much higher cap rate.

But that's a small subset.

I think if you look at the year-to-date dispositions of 43 properties, there's -- the cap rate range there is from as low as around 4% to, again, a few defensive sales that were around 10% cap rate.

So it's a broad range.

But in our mind, we're breaking it into 2 very distinct buckets.

There's these offensive sales at low cap rates and then the others are -- we're less concerned about cap rate when it's a defensive sale.

And so I think the number on average for the 9 months is we're selling at just under 6 cap.

Yes.

Oh, yes.

5.7% for the 9-month period.

So that's why -- which goes back to the -- my last answer on the last question is some of the quarterly data in our minds is not a great data point because they can swing from -- as Jay said, from a 5 cap to a 9 cap.

And neither one of those maybe is particularly representative of what you should think about as it averages 5.7%.

So that's why we've tended to be a little more annual focused on some of this information we publish just because we think it presents a better, more representative sample size.

Yes.

Got it.

And then just one more, if I could, please.

I know this isn't a big focus for you guys, but would you mind to update us on what your investment-grade tenant mix is?

Yes.

We're right around 19% right now in terms of investment-grade-rated tenants.

A reminder to everyone, we got there by virtue of having non-investment-grade tenants become investment grade.

Our approach has always been to focus on acquiring sub-investment-grade tenant properties.

And we think our tenants are sufficiently large who operate hundreds or thousands of stores and have sufficient creditworthiness.

But we think there's some detrimental things that frequently come along with investment grade that we try to avoid.

And so we've got to our 19% kind of the hard way, if you will.

And to be honest, we don't manage anything at the company around that number.

If that number was 15% in a year or 25% in a year, we wouldn't think any more or less of it.

And so it's just not our approach.

Well, I guess the last point as it relates to that, and this goes to our big view on credit, we just don't find it prudent to focus too heavily on tenant credit.

Look, as a part of our underwriting, it's important, and our occupancy suggests we do a pretty good job at it.

But the reality is we really don't know who -- which retailers are going to be in business 10 years from now or not.

And so because of that, we want to stay particularly focused on real estate merits and metrics.

We'll take our next question from John Massocca with Ladenburg Thalmann.

So you guys left real estate expenses net of reimbursements for the 2019 guidance unchanged.

And that would seem to imply, based on what you did the last 9 months, a pretty big step-down in that cost in 4Q.

I mean can you provide some color maybe on what's driving that?

Yes.

I mean this year has been a little bit elevated.

I mean if you look at our 2020 guidance, for example, on that same line item, you see a decrease as well.

And so I mean it's not a big number in the scheme of things.

And so maybe we'll be at the higher end of our 2019 guidance on net property expenses.

But generally, we see them drifting lower into 2020.

So that's consistent I think with our view.

Look, it can always change.

And like I said, it's dependent on what happens with particular tenants and properties, but that's our current view.

And I don't think it will -- we think our guidance is appropriate.

But there's not like a specific sale coming in 4Q or that was late in the Q or...

No.

Okay.

No, no, no.

Yes.

Most of our property-level expense comes from vacant properties, generally.

And so as vacancy goes down, that line item tends to tick down.

We don't have a lot of expense leakage, if you will, from our properties because they're triple-net leased.

And so it's really vacancy that will push that net property expense number around a bit.

Okay.

And then as we look at kind of the acquisitions you completed in the quarter, I know there were a couple of wholesale clubs in there.

But anything else that was really kind of big within that mix in terms of industry or tenants that we just don't see because they're not in the top tenant list?

No.

There's -- they're -- not really, John.

There was a 1 portfolio of restaurant properties with a regional operator.

And then as you noted, there are 2 discount club properties.

And other than that, it was just a whole bunch of small transactions with our relationship tenants.

Okay.

And then within restaurants, specifically, has your view maybe on franchisee restaurants changed at all, let's say, in the last 12 months in terms of deals?

Yes.

Our view hasn't changed.

Our -- as Kevin mentioned a few minutes ago, our focus is on good quality real estate.

We analyze tenant credit and sweat tenant credit.

But at the end of the day, what we take -- our view is our -- our most important security is getting good locations at reasonable prices and reasonable rents.

And so when you take that focus, then you much more spend your time underwriting the real estate and making sure you're comfortable with that regardless of the operator that's on the real estate.

That said, we do focus on -- when we do deals with restaurant operators, we're focused on dealing with larger operators.

We want to deal with tenants and create relationships with tenants where they've got a full staff and some "body fat" to be able to withstand the ups and downs in their particular business, whether they're a restaurant franchisee or operate any other type of business.

And Mr. Whitehurst, there appear to be no further questions at this time.

I'd like to turn the call back over to you for any closing comments.

All right.

Thank you, Tom, and we thank you all for joining us, and we'll see many of you at NAREIT in the next few weeks.

Good day.

This does conclude today's teleconference.

We appreciate your participation.

You may disconnect your line at this time and have a great day.