NNN REIT, Inc. (NNN) 2026 Q2 法說會逐字稿

Greetings. Welcome to the NNN REIT Inc second quarter 2026 earnings call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Steve Horn, CEO at NNN REIT Inc. You may begin.

Thanks, Holly. Good morning, and welcome to NNN's Second Quarter 2026 Earnings Call. On the call today with me is Chief Financial Officer, Vin Chao.

As this morning's press release reflects, NNN's performance in 2026 continues to produce strong results, including high occupancy, impressive rent collections with under 5 basis points of uncollected rent and solid acquisitions driven by our deep tenant relationships. We're well positioned to continue enhancing shareholder value as we move into the second half of the year and beyond.

In July, we announced just over a 3% increase in our common stock dividend payable on August 14, marking 2026 as our 37th consecutive year of annual dividend increases. That places NNN among 70 US public companies and just three REITs to achieve that track record.

Given our continued consistent performance of the portfolio and the acquisition pipeline, we're updating our 2026 guidance for AFFO per share to a range of $3.55 to $3.59, our second guidance increase of the year. This reflects our discipline of long standing multiyear strategy for consistent per share growth.

As far as the portfolio performance, the 3,774 freestanding single tenant properties continue to perform exceedingly well during the second quarter. Occupancy is up 50 basis points from the first quarter to 99.1%, which is an increase of 110 basis points from last year. We see positive momentum across our tenant base, highlighted by two significant M&A transactions announced in mid July involving tenants in the portfolio.

Mavis Tire announced an agreement to acquire Pep Boys for approximately $700 million of cash further strengthening its position as one of the nation's leading automotive service providers. Additionally, Big Brand Tire announced an agreement to acquire Belle Tire. The combination creates a network of more than 530 stores with over $1.5 billion in annual revenue.

Acquisitions for the quarter, we invested just north of $290 million in 89 new properties at an initial cash cap rate of 7.3%. More importantly, an average lease duration of just shy of 18 years. The product mix is primarily auto service, discount retail and early childhood education with a median purchase price of $2.1 million, an average of $3.2 million.

During the first half of 2026, we invested $430 million in 130 new properties at an initial cash cap rate of 7.4%, average lease duration just over 18 years. Cap rates range have been fairly stable over the past 6 quarters, reflecting competitive investment environment.

But looking ahead, we believe modest cap rate compression is possible during the second half of the year, supported by the composition of our active acquisition pipeline and the portfolios that are currently in the market today. Our investment approach remains unchanged.

We continue to apply disciplined underwriting standards and focus on originating direct sale leaseback transactions with relationship tenants, where we can negotiate favorable economics and structure investments utilizing our landlord friendly long term duration triple net lease. This strategy continues to provide the most attractive risk adjusted opportunities than broadly marketed assets, including 1031 driven transactions.

Given the visibility provided by our pipeline and our ongoing discussions with transaction partners, we are increasing the midpoint of our 2026 acquisition guidance to $750 million from $600 million. We expect most of the acquisition volume to be sourced through direct original sale leaseback transactions, reinforcing our emphasis on proprietary deal flow, disciplined capital deployment and long term value creation.

As far as dispositions, during the quarter, we sold 26 properties, including 19 vacant assets, generating approximately $37 million in proceeds for reinvestment. The income producing assets were primarily noncore properties that were sold at cap rates approximately 170 basis points below our acquisition cap rate, demonstrating continued demand for well located net lease assets.

As we previously discussed, we expect to be more active on the disposition front throughout 2026 as we continue to optimize portfolio quality and enhance long term shareholder value.

While our strategy remains focused on acquiring durable, income producing real estate, disciplined capital recycling is an important component of our investment process. And with that backdrop, we're lifting disposition range to a midpoint of $140 million.

Active portfolio management is essential to maintain a high quality portfolio that is positioned to generate stable and growing cash flows. We believe selectively recycling capital from noncore assets into higher conviction investment opportunities will strengthen the portfolio and improve its long term earnings and cash flow profile.

As far as the balance sheet, I don't want to take all of Vin's thunder, but the balance sheet remains among the strongest in the net lease sector and continues to provide significant financial flexibility.

We ended the quarter with a weighted average debt maturity of approximately 10.1 years, which is nearly double the nearest net lease peer, and we also maintained $1.4 billion of liquidity. This conservative capital structure positions us well to fund the remainder of 2026 pipeline while maintaining ample capacity for future growth.

Having a robust acquisition pipeline, a strong balance sheet and experienced management team, we remain confident in our outlook. We are committed to our self funded growth strategy, disciplined capital allocation and maintaining the financial flexibility that has long differentiated our platform.

We believe this approach will continue to support sustainable earnings growth and long term value creation for our shareholders. We're focused on finishing 2026 strong and positioning NNN for continued success over the years ahead.

With that, I'll pass it over to Vin. He can go through our quarterly numbers in detail and updated guidance.

Thanks, Steve. During this call, we will make certain statements that may be considered 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 are made.

Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company's filings with the SEC and in this morning's press release.

Turning to results.

This morning, we reported AFFO of $0.90 per share and Core FFO of $0.89 per share, up 5.9% and 6.0% respectively over the prior year. Results were ahead of our internal projections, with upside driven primarily by lower than expected bad debt, which totaled about two basis points of quarterly ABR.

Our NOI margin of 96.6% in the second quarter was up 70 basis points versus last quarter, as we further drove portfolio occupancy above our long run average, thereby reducing net real estate expenses. G&A as a percentage of total revenue was 5.8%, while our cash G&A margin was 4.4%.

Annualized base rent grew by over 7% year over year to $959 million on the back of our strong acquisition volumes. Free cash flow after dividend was about $56 million in the second quarter. Turning to the tenant credit.

Our watch list of near term credit concerns remains immaterial at this time, which has led to better than budgeted credit loss year to date. That said, our portfolio management team remains focused on identifying and proactively mitigating potential future credit risks through asset sales, targeted lease terminations, and leasing.

From a capital markets perspective, during the quarter, we exercised the accordion option on our term loan, issuing an additional $200 million to bring the total term loan size to $500 million. Of this total, $400 million has been swapped to an attractive all in fixed rate of 4.1%.

In addition, we lowered the spread on our term loan and revolver by 5 basis points. In light of our improving cost of equity, we were active on the ATM in the second quarter, selling roughly 6 million common shares on a forward basis at just under $46 per share.

We also settled 1.7 million forward shares, generating net proceeds of about $73 million, which were used to pay down our revolver. From a modeling perspective, these shares were settled on 6/30 and therefore are not included in the reported weighted average share count.

As of June 30th, we had roughly $272 million of unsettled forward equity, which combined with our $215 million of expected free cash flow and $140 million of expected dispositions for the year, provides us with ample liquidity with which to execute our strategic objectives for 2026 and beyond.

Regarding the balance sheet. At the end of the quarter, we had no encumbered assets, $1.4 billion of available liquidity, and just 2.5% of our debt tied to floating rates. N

et debt to EBITDA of 5.7 times was unchanged from last quarter, but including the impact of unsettled forward equity, pro forma net debt to EBITDA was 5.4 times, down from 5.6 times last quarter. Our sector leading debt duration of 10.1 years was well matched with our lease duration, also 10.1 years.

On July 15, we announced the $0.62 quarterly dividend, which is a 3.3% increase in the quarterly rate and represented our 37th consecutive annual dividend increase, an achievement that we are extremely proud of and one that reflects the sustainability of our growth model.

The new dividend rate equates to a 5.3% annualized dividend yield and a healthy 69% AFFO payout ratio. Lastly, I will end my comments with some additional color regarding our updated 2026 guidance. As disclosed in our earnings release, we are raising both Core FFO and AFFO per share guidance for 2026 by $0.01 at the respective midpoints.

Updated AFFO per share guidance of $3.55 to $3.59 implies about 3.8% year over year growth at the midpoint and acceleration from 2.7% growth in 2025.

The primary drivers of our improved earnings outlook are better than planned second quarter performance, a $150 million increase in expected acquisition volume, and a half a million dollar decrease in expected net real estate expenses resulting from a faster than planned reduction in vacancies.

We also raised the midpoint of our annual disposition guidance by $10 million. From a credit loss perspective, we are leaving our second half assumptions unchanged, but given the year to date outperformance versus plan, we now expect full year bad debt to be about 40 basis points, down from 60 basis points as of last quarter.

More details regarding line item guidance can be found on page three of our earnings release. While our guidance reflects our near term outlook, over the longer term.

We continue to target sustainable mid single digit growth driven by disciplined capital allocation, proactive portfolio management, and a largely self funded growth model supported by our conservatively managed balance sheet.

With that, I'll turn the call over to Holly for questions.

(Operator Instructions) Ronald Kamdem with Morgan Stanley.

Great. Maybe we could start with the acquisitions. Obviously, the guide raise in the quarter. If you could talk a little bit about just what kind of activity that you're seeing. We did see sort of cap rates, I think down 20 basis points from the cap rates in the first quarter. We'd love to hear what you're seeing on the trend and the competition as well, in addition to the volumes. Thanks.

Yeah. Just us lifting the acquisition volume from the original guide, shows there's plenty of activity out there for us. We're seeing a lot of opportunities. The summer times things slow down a little bit, but going into the summer, and had a great second quarter because we were able to stack the pipeline.

The remainder of the year, we have a good pipeline. There's a fair amount of activity. Hopefully, we can end up on the higher side of our guidance. We don't want to count our chickens until they're hatched. Yeah, no. Robust pipeline, and there's a few portfolios out in the market currently, that we could have a good second half of the year. As far as competition, it's the usual suspects. It's the other public REITs. We're not running into much of the private money out there.

That could change the second half of the year. Competition's always robust in the net lease sector. I'm not seeing it go up or down in the remainder of the year. That being said, knowing what's in my pipeline, that's why we're kind of speculating that there'll be a little cap rate compression the second half of the year.

Got it. That's helpful. I think my second question is just on the portfolio health and sort of asset management. Seems like the bad debt has been trending well below your expectations or even historical this year. At this sort of juncture, what other sort of industries, what are you guys sort of watching out for? Is it fair to say at 99% plus occupancy, this is the best shape the portfolio has been in? Thanks.

I'm gonna let Steve handle the historical perspective because he has more of it than I do. From my perspective, yes, it's the best shape that the portfolio's been in since I've been here. As far as watchlist tenants, as I mentioned on my prepared remarks, we don't really have any material tenants that are on the watchlist from a near term perspective.

We do talk about some tenants that have historically been on the watchlist for a long time, like AMC. Again, that's more of a movie theater thing. Quite honestly, the movie theater business has been doing quite well this year. Box office is up pretty strongly, and I think AMC just recently got a credit upgrade from S&P, you know, in the near term, things are fairly calm on that front.

From a line of trade perspective, we've never really had specific focus on lines of trade, movie theater being maybe one exception. Overall, it's more idiosyncratic in terms of how we think about the watchlist as opposed to specific lines of trade. Again, as I often say, there's winners and losers in every line of trade.

Yeah, as far as the portfolio health historically, our portfolio's in great shape. Currently, given the size of the portfolio, we do deal with retailers. Retailers do come and go throughout the years. That's why we focus really hard on the asset level financial performance and real estate quality. Yeah, I mean, overall, the portfolio today is as good as it's ever been. No major retailers in our top are giving us any heartburn. More importantly, the asset level financial performance seems to be pretty robust the last 18 months.

Thanks so much.

Jana Galan, Bank of America.

Thank you. Good morning, and congrats on the quarter. Can you walk us through how you're thinking about your marginal cost of capital as you accelerate acquisitions? Following up on the higher dispositions, are those mostly vacant or opportunistically low cap rates, or kind of what is targeted for disposition?

I'll let Vin talk about the way the average cost of capital, how we're looking at it, I'll follow up and talk about the dispositions.

Yeah. Hey, Jana, how are you doing? Look, as far as the cost of capital, I mean, we have seen an improvement on our cost of equity, which was nice to see, we were active on the ATM during the quarter. I think we're in good shape from a liquidity perspective.

From a cost of capital, our debt cost of capital is, one, we always think about things on a long term basis, so thinking 10 year debt, cost of equity.

We have an absolute hurdle that we think about, sort of in the 8% plus range, which is sort of a long term view. From an earnings accretion perspective, dilution perspective, we look at the AFFO yield. If you take our typical 60/40, we blend probably around a six, seven today. That's plus or minus.

As far as the dispositions, yeah, the majority of the dispositions this past quarter were the vacant assets. 19 of them were vacant. The income producing ones was from active portfolio management, discussing with the retailer that they weren't stellar performers and that the retailer was probably gonna not renew the lease. That being said, the 5.6% cap rate that we sold, that was a pretty tight bandwidth. The portfolio's stronger, and it was primarily were more than 50% of the income producing, and the remainder was primarily convenience stores.

Thank you.

Brad Heffern, RBC Capital Markets.

Hey, everybody. Thanks for the questions. Just following up on AMC. The yields on the debt have improved a lot. As you said, it was upgraded by S&P. Do you see theaters trade at all right now, and might there be an opportunity to reduce exposure there just given, it seems like their credit profile's improved?

Yeah. If you recall, we sold one actually in the first quarter. We're always looking to reduce our exposure on the movie theaters that aren't performing as well, that haven't rebounded completely to pre COVID numbers. We're not seeing them personally, many of them on the market.

Yeah, we are always going through every industry, not just movie theaters, and looking at our exposure and the real estate risk associated with those certain tenants. Yes, I'm looking actively to reduce our movie theater exposure as we move forward.

Okay, got it. Vin, on the guidance, the FFO guidance, all the underlying assumptions look like they moved in a positive direction, from acquisition volumes to taxes to, well, everything. What was the offset that kept the high end of the guidance from increasing along with the low end?

The reality is, Brad, we felt like given where we are in the year, we wanted to narrow the range. We did feel a one penny increase at the midpoint was appropriate, that's just kind of how the numbers shook out. There's nothing really preventing the high end from going up per se, specifically.

Okay, thanks.

Bennett Rose, Citi.

Hi. Thanks. You mentioned M&A activity that took place across the quarter. I was just wondering, when you've seen this in the past, do you have any sort of concerns around potential closings just as maybe competing stores overlap?

Just sort of on that, there was some headline news earlier in the year around 7 Eleven looking to close some stores and leaning into a slightly different format. I'm just wondering if you've heard anything relative to your portfolio on that front.

No. As far as seven eleven, in 2025, we did a full, a big renegotiation with 7 Eleven that renewed a lot of their leases. Basically all of them at the end of the day.

Yeah, 7 Eleven's moving into quote, the larger format store. Our seven eleven's are very low cost basis. We're kind of more in that $3 million to $4 million range in the seven eleven's.

Now they're building $10 million. I don't want to own a $10 million even eleven. I want to maintain that $3 million $5 milloon range. I'm not concerned on our seven eleven portfolio.

As far as M&A, we have long term leases with it, so they can close them, they got to pay us rent, we'll manage the portfolio as we move forward throughout the length of the lease.

One thing I'll just add to that, Bennett, is that on the renegotiations that Steve just mentioned on 7 Eleven, they could've just taken an option, a five year option, but we did renegotiate, I think it was 15 year leases with them. They wanted to stay where they're at in our portfolio.

Very good. Okay. Thank you. Appreciate it.

Michael Goldsmith, UBS.

Good morning. Thanks a lot for taking my question. Just on the dispositions, I know you touched a little bit on some were vacant, some was active portfolio management. Can you talk a little bit about more specifically what restaurants you were selling? Also, are there more dispositions to be coming in the future quarters?

Yeah, good question. As far as the dispositions, we lifted our midpoint a little bit, signaling that we're going to have more dispositions. I got back in the first quarter call, I said 2026 would be elevated. As far as the restaurants we disposed, off the top of my head, one Ruby Tuesday we disposed of and a Bob Evans in particular that were just lower performing assets, the management team contacted our portfolio manager and decided to work a deal out. Those things were in the high fives that sold. It was a good deal for the tenant and a good deal for us.

Thanks, Steve. As a follow up, it looks like you increased your exposure to early childhood education. That is a category that some of the other Triple Net Leases have played in. Can you give a little bit more color on those acquisitions, maybe the opportunity set that you are seeing, and then has there been any cap rate compression in that space specifically? Thanks.

Last 15 years, we have seen our fair share of volume opportunities in the early childhood segment. This year, we did a little bit more than we have historically. We have played in that space. We are very knowledgeable. When we see the right opportunity as far as the initial cap rate and the real estate metrics and the right management team, then that is when we will lean in and do it. As far as the risk adjusted return, we feel pretty good at the tenants that we are doing business with within that segment.

Yeah. In this quarter, we did do a small portfolio deal with a new relationship tenant, a very strong management team, a low leveraged balance sheet, attractive fundable real estate, in that 1 2 acre land size, a nice size building, and high rent coverage to start. We feel very good about that.

Thank you very much. Good luck in the back half.

Thanks.

Spencer Glimcher, Green Street.

Thank you. Sorry if I missed this. Just going back to the acquisition pipeline, you mentioned a few portfolios out in the market. Just curious if these would be new tenants, assuming you would land one or two of these bigger deals?

Yeah, the portfolios we're currently evaluating would be new tenants for us if we ended up being awarded the deal.

Okay, great. Just on the relationship driven deals, which of your tenant segments are looking to grow the most aggressively right now? Is it still largely in the auto space or is there any update there?

It's primarily the auto space. Convenience stores, we're seeing some opportunities. Where we're not seeing opportunities currently for NNN is the limited service restaurants. We're not seeing much M&A or growth in that sector. Of course, movie theaters, we're not seeing any growth either. Really just kind of the auto service and convenience stores seem to be. The early childhood education seems to be where a lot of the opportunities lie currently.

Okay, great. Thanks. That's all for me.

Rob Stevenson, Huntington.

Good morning. Vin, back to the sort of guidance question. Any other major levers other than transaction volume that pushes you to the bottom of the range versus the top of the range at this point of the year?

I mean, the biggest drivers. Hey, Rob, how you doing? Welcome back. Biggest drivers really are kind of always the same. I mean, bad debt is a big swing factor. Things are pretty calm right now, but if that tick higher, that could move us a little lower, although I think we have a pretty healthy cushion in our back half assumptions.

Timing and volume of acquisitions is definitely a big driver. I guess to some degree, timing of our capital markets activities. We do have a $350 million debt maturity in December of this year. How we deal with that and timing of when we deal with that could influence the numbers a bit.

What's the best source of debt for you today, and where's pricing if you wanted to do something to fix that?

Yeah, look, I think we look at all opportunities. We're evaluating a lot of different options, and we do have plenty of liquidity to deal with it on the line of credit. We have the $272 million of forward equity that we could draw down on. In all likelihood, we are thinking about some kind of debt offering later in the year. 10 year debt today, it moves around way more rapidly than ever before, but I'd say we're probably in the mid 5% 5.6% on a 10 year debt. If we want to do something shorter, we could be inside of 5%. Just given what we've done in the last couple of bond offerings and with the term loan, I'm probably thinking more of a longer term issuance.

Okay, that's helpful. Last one for me. Steve, you guys have sold 35 vacant assets year to date. In terms of what's still vacant in the portfolio, is the majority of that likely to be sales going forward, or is there a significant re tenanting operation that's happening and that'll start to modestly impact earnings going forward? How should we be thinking about the remaining vacancy in the portfolio, and how you guys are sort of addressing that in the near term?

Good question. Yeah, we, for the most part, have gone through what the vacant assets that we want to sell. Right now, we are currently working on re leasing, not the remainder, but the vast majority should be re leasing. It varies this stage. Some might come online in the fourth quarter, some might come online in the third quarter next year, because it takes a while for the permitting and negotiations to get them re leased. Yeah, for the most part, I think our vacant asset sales will be limited moving forward.

Okay. Thanks, guys, appreciate the time.

Thanks.

Wes Golladay, Baird.

Hey. Good morning, everyone. I just want to go back to the comment about cap rate compression. Is that primarily due to mix or competition?

Both. What I know, what we're buying, because we don't go up and down the risk curve, so our competition is pretty much what we have in our current portfolio. Cap rate compression, it's modest, but it was really kind of on some deals that to win them with our current tenants, had to go a little bit lower than we have in the last first half of the year, or really the last six quarters. Our bandwidth is pretty tight, Wes. When we do acquisitions throughout the quarter, we're not completely bar belling it, doing the high cap rate and the low cap rate, or the high risk deal and the low risk deal, and combine it. Ours are pretty narrowed.

Okay. You did mention a few new tenants that you're looking at, and I know that's a big part of the growth engine for the out years. Are you finding a lot more tenants this year relative to last year?

I don't know if it's a lot more, exactly right. It's for the out years. One of the mandates we give our acquisition team is, go find a half a dozen new tenants, going forward because, case in point, the M&A activity that happened, big brands buying Belle Tire. Belle Tire, we did a fair amount of deals with over the years. It's always that kind of that $15 million to $20 million range. That's going to dry up, the new relationships for the out years have to backfill it. That is a conscious effort that our guys and gals are always looking at.

Okay. Just one last one. I apologize for this, when a company is acquired, is there any chance you can retain the relationship, or they just typically go find another source going forward?

We do everything we can to maintain that relationship. Usually, the target gives good words for NNN that we've done business with. A lot of times, the acquirer, the consolidator, has a cheaper form of capital than NNN is willing to provide them, so they do business elsewhere. They bring in their own relationships, and we do everything we can to break it.

All right. Thanks for the time.

Omotayo Okusanya, Deutsche Bank.

Yes. Good morning, everyone. Congrats on the quarter and the solid outlook. Wanted to focus a little bit more on the dispositions and the guidance raise, on that front. Obviously, you're getting great cap rates on this stuff, well inside where you're acquiring assets and clearly a win for you.

I'm still trying to understand how that pricing is coming about and why the buyer is kind of comfortable paying those prices, especially when you were talking about, again, some of these assets being underperformers, some of them being non strategic. Just trying to understand how that pipeline is existing against that kind of backdrop.

Yeah. No, it's a good question. We have 3,700 assets. We have a lot of great real estate. When we're doing dispositions, it usually kind of falls into a couple different categories. One's our defensive sale, where our relationships will kind of give us the wink wink, nod nod that they might not renew in the out years or they're changing markets.

They give us plenty of opportunity where there's lease term where we can maximize the proceeds for that asset. Secondly, there's sometimes, there's individuals that like the real estate a lot more than we do, or they have other opportunities that we don't know or can't do. They overpay for the asset. Also in that is the 1031 buyer that will always overpay NNN for an asset opposed to paying taxes to the government. They do the 1031 exchange.

We're willing to part ways. That's where we're getting a lot of our low cap rates. The other piece is, within dispositions, is the vacant assets, which obviously, your recovery rate's a little bit lower, but we've had a good recovery rate recently, because of the inflation. We've been around in business for a long time that the cost base is fairly low in a lot of those assets. We've had decent recovery rates that way.

That's helpful. For the increase in the acquisition guidance, could you help us in regard to back half of 2026 and weighted average when you think some of those deals could happen, just to help us for modeling purposes?

Hey, Omotayo. How are you doing? In terms of our guidance for back half, we typically take a pretty conservative approach. When we're dealing with deals that we are in on our live deals, we have decent visibility for the next 90 days. We can plan those out. Beyond that, we tend to be a little bit more conservative on more speculative deal activity. We push those out usually towards the tail end of the quarters. I'd say there's nothing really overly skewing the average for the back half. I think mid quarter or mid half convention for the back half is fair to start.

Great. All right. We look forward to you guys raising the high end of guidance and getting the stock back to $50.

Us too.

(Operator Instructions) John Massocca, B Reily.

Good morning. Kind of a blue sky one, given we're kind of in the back half of the call here. How are you kind of thinking about leverage? Given it's not just unique to NNN, but kind of in an environment where your cost of equity capital has become a little bit decoupled from your cost of debt capital.

Like, does that create an opportunity to maybe lean more on that equity capital rather than going to the debt markets, especially given you have kind of a successive series of maturities here over the next couple of years? Just kind of curious your philosophy on that, given maybe where we are in the interest rate cycle and, as I said, kind of the decoupling of not just you, but a lot of REIT equity valuations from interest rates.

Yeah. I think that the way we think about it is just we look at our overall leverage, and we try to balance that. We are shooting for something ± 5.5x is where we're shooting for, and we're comfortable going a little bit higher than that for a temporary period of time. But generally speaking, we try to manage right around 5.5x. That's going to kind of dictate the mix between equity and debt more so than the cost of equity and debt. But because we can do things on a forward basis, that gives us a really powerful tool to be able to issue equity when the price is right and decide when to draw it down as we need to manage the overall leverage level.

I don't know that we just sit here and say, "Well, the cost of equity is much better." To some degree, depending on how high the cost of equity or how much it improves, we could use that to de lever, but we're at roughly 13.8x multiple. It's improved. It's great. We think it can be a lot better.

Okay. Then splitting hairs a little bit, any thoughts on kind of swapping out the remainder of the term loan? What would drive you to do that? What made it attractive to leave it floating for a period of time? I know we're talking about a very small percentage of the overall debt stack, but maybe kind of also within that, what's your view on a little bit more floating rate debt in the debt stack going forward?

Yeah, we have $100 million out of $500 million, so whatever we do on that last piece isn't going to really move the needle on the total for the full $500 million. I think our decision to leave the last $100 million floating was more driven by the fact that there's been so much volatility around rates, just given a lot of the macro and geopolitical news that's been out there. We're just waiting for things to settle down a bit before we lock in that last piece. I think the same goes for how we're thinking about a potential offering in the back half of the year on the debt side. We are actively looking at hedging opportunities. Again, it's a little volatile right now, but as things settle down, we are looking for opportunities to lock rate.

Sure. I appreciate that color. That is it for me. Thank you.

We have reached the end of the Q&A session. I will now turn the call over to Steve for closing remarks.

Guys. Thanks for taking the time and joining the call. NNN's in really good shape here. We are looking forward to closing out 2026 strong. Solid pipeline, I look forward to running into you guys in the halls of the conference season coming up. Thank you.

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