NETSTREIT Corp. Price & Performance (NTST)

In addition to the press release distributed yesterday after market close, we posted a supplemental package and an updated investor presentation. Both can be found in the Investor Relations section of the company's website at www.netstreet.com NETSTREIT. On today's call, management's remarks and answers to your questions may contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements address matters that are subject to risk and uncertainty that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our Form 10 ks for the year ended 12/31/2023, our other SEC filings. All forward looking statements are made as of the date hereof and that Street assumes no obligation to update any forward looking statements in the future. In addition, certain financial information presented on this call includes non GAAP financial measures. Refer to our earnings release and supplemental package for definitions of our non GAAP measures. Reconciliations to the most comparable GAAP measures and an explanation of why we believe such non GAAP financial are useful to investors. Today's conference call is hosted by NetStreet's Chief Executive Officer, Mark Manheimer and Chief Financial Officer, Dan Donlin.

They will make some prepared remarks and then we will open the call for your questions. Now, I'll turn the call over to Mark. Mark?

Thank you, Amy, and thank you all for joining us this morning on our fourth quarter twenty twenty four earnings call. I first want to congratulate the team on an outstanding quarter of accelerated transaction activity as we completed over $195,000,000 of gross investments our highest quarter on record at a blended cash yield of 7.4%. Or 8.1% a straight line basis. Fourteen years of weighted average lease term. Included in this activity were three development projects totaling over $7,000,000 that commenced rent in the quarter. Of today, our development pipeline consists of five projects with a total estimated cost of $14,600,000 which includes estimated remaining funding of $6,700,000 Similar to last quarter, a greater portion of our quarterly investments were sale leaseback transactions as we have seen improved risk adjusted returns emerge from our opportunity set within the sourcing channel. Conversely, we continue to see stickiness and less attractive returns as it pertains to the investment grade opportunities that we have historically acquired. These market dynamics have caused a shift in our our mix of investment grade and non investment grade opportunity sets, we are continuing to find great assets with healthy unit level performance fungible real estate with replaceable rents, strong credit profiles all with improved risk adjusted returns.

Turning to the portfolio, we ended the quarter with investments in six eighty seven properties that were leased to 98 tenants operating in 26 industries across 45 states. A credit perspective, nearly 71% of our total ABR leased to investment grade or investment grade profile tenants. Our weighted average lease term remaining for the portfolio was nine point eight years with just 2.4% of ABR expiring through 2026. From an asset management perspective, we were very active this quarter a broad array of real estate investors, including small ten thirty one buyers, and large institutions. This strong level of demand, which has continued into 2025, resulted in our top 10 concentration declining four ten basis points to 45.1% of ABR. Including a 100 basis point reduction in Walgreens to 3.8% of ABR and a two sixty basis point drop in Dollar General to 8.6% of ABR. While we have made tremendous strides towards our diversification goals, we are not slowing down our efforts. Moreover, we expect our top 10 concentration to more closely mirror the sector average over the near to intermediate term. Which includes having no tenant above 5% of ABR by year end. Additionally, similar to this quarter's $59,000,000 of dispositions at a blended cash yield of 7.1%, we expect to accretively recycle the proceeds generated by future diversification efforts in we have done each and every quarter since coming public nearly five years ago.

Next, I would like to focus on a few portfolio tenants namely Walgreens, CVS, Family Dollar, Advanced Auto and Big Lots. That have remained in the net lease new cycle over the past twelve months as they have struggled to pass on higher prices to their consumers and therefore they have appropriately decided to close underperforming stores to maximize cash far, we have experienced virtually no impact from these closure announcements, which while not surprising to us is a testament to the level of due diligence we complete underwriting. Notwithstanding our long term tenant relationships, and the constructive two way dialogue we maintained with most tenants, our evaluation during the underwriting process includes much more than understanding a tenant's By utilizing technology and asymmetric asymmetrical information, we have proven to be highly accurate in how we decipher the unit level productivity of our locations the strength of our real estate. More specifically, Family Dollar, Walgreens, CVS and Advanced Auto have closed or have announced the closure nearly 10% of their stores in aggregate. However, despite owning 162 properties leased to these four tenants, we currently have just one dark store among these concentrations, which is a smaller asset that generates around $100,000 in ABR with more than eight years of remaining lease term.

Based on our assessment, we do not foresee any loss to our small investment given our projection for re tenanting the asset and the expected lease termination fee. We saw a similar outcome as it relates to our Big Lots concentration, whereby the tenant entered bankruptcy with thirteen eighty nine stores which was subsequently reduced to roughly 800 stores under the proposed Nexus Capital acquisition. After that acquisition failed and Variety Wholesalers emerged as the new buyer, this was further reduced to an expected two twenty five to two fifty stores. As we sit here today, we expect to have six of our original seven store assumed by variety wholesalers and just one store in Bowie, Maryland rejected, which we expect a new tenant to pay rent at or above the prior rent. Again, we believe this stark difference in outcome when comparing our portfolio to the broader market is driven by our aforementioned relationships experience and aptitude of our underwriting team and the discipline we consistently exercise All told, this has resulted in an average credit loss of just four basis points since inception. From a risk perspective, we also have very low lease expiration risk with the aforementioned tenants as just 132 basis points of our ABR expiring through 02/1930 is derived from these concentrations.

While our conviction in the strength of our assets and our underlying underlying locations has remained steadfast, We believe the market should gain similar comfort in our portfolio given the de minimis impact experienced from these store closures to date and our proven ability to sell properties at least to these tenants an accretive matter. Before handing the call over to Dan, I wanted to reiterate a message we have consistently provided in the past. Strive to remain thoughtful and opportunistic in our mission to maximize total shareholder return that includes maintaining balance sheet discipline. Despite seeing a robust opportunity set that we would prefer to pursue more aggressively, we will not grow for the sake of growth. We will remain patient with our cost of capital. With that, I'll hand the call over to Dan to go over our fourth quarter financials and then open up the call for your questions. Thank you, Mark. Looking at our fourth quarter earnings, we reported a net loss of $5,400,000 or $0.07 per diluted share.

Core FFO for the quarter was $26,500,000 or $0.32 diluted share and AFFO was $25,900,000 or $0.32 per diluted share which was a 3.2% increase over last year. For the full year 2024, we reported a net loss of $0.16 per diluted share, core FFO of $1.26 per diluted share, and AFFO of $1.26 per diluted share which represented 3.3% growth over 2023. To the expense front, total recurring G and A in the quarter declined 10% year over year to $4,300,000 while recurring cash G and A declined 6% year over year to $3,300,000 In addition, with our total recurring G and A representing 11% of total revenues for 2024, versus 15% in 2023 our G and A continues to steadily rationalize relative to our revenue base. Turning to the capital markets. On 01/15/2025, we closed on $275,000,000 of additional financing commitments. This included a new fully drawn $175,000,000 senior unsecured term loan, which was swapped to an all in fixed rate of 5.12% to final maturity in January 2030 and an upsized $500,000,000 revolving credit facility which has increased from $400,000,000 We also extended the maturity date of our existing $175,000,000 term loan to January 2030 from January 2027.

And amended all of our existing credit agreements to remove various financial covenants and provide for improved pricing when we meet certain investment grade rating and leverage targets. Turning to the balance sheet. When accounting for the impact of the aforementioned debt transactions, our pro form a total adjusted net debt includes the impact of all forward equity, was $848,000,000 On a pro form a basis, weighted average debt maturity was four point three years and our weighted average interest rate was 4.53%. Including extension options, which can be exercised at our discretion, we have no material debt insuring until February of twenty twenty eight. In addition, our pro form a liquidity $635,000,000 at year end which consisted of $14,000,000 of cash on hand, $436,000,000 of availability in our revolving credit facility [indiscernible] hundred and $85,000,000 of unsettled Ford equity.

From a leverage perspective, our was 4.5x at quarter end which remains well within our targeted leverage range of 4.5x to 5.5x. Moving on to guidance. We are introducing our twenty twenty five AFFO per share guidance range range at $1.27 to $1.3 Additionally, we expect our net investment activity for the year to range between $75,000,000 to $125,000,000 and our cash G and A to range between $14.5 to 15,500,000.0 which is exclusive of transaction costs and severance payments. From a rent loss perspective, our guidance assumes unknown rent loss at the midpoint of our range which we believe should prove conservative as the year unfolds. Lastly, on February 21, the Board declared a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 31 to shareholders of record as of March 14.

Based on the dividend amount, our AFFO payout ratio for the fourth quarter was 66%. That operator, we will now look in the line for questions.

Thank you. We'll now be conducting a question and answer session. Our first question is from Greg McGinniss with Scotiabank. Please proceed with your question. Thanks. Good morning. This is Elmer Chang on with Greg. So you sort of killed two birds with one stone by reinvesting asset sales of your riskier exposures into another record quarter of transaction volume. At an amount of fee accretive spread. You didn't settle any equity forward. So how should we think about the use of those forwards this year and how you're planning to optimize potential investment spreads with your capital sources?

Yes. Hey, Elmer, it's Dan. You should expect us to settle the equity in the back half of twenty twenty five.

Got it. Okay. And then are you required to settle them at the end of the year or can you potentially extend them another six months or so?

Right now the agreement calls for settle them by the end of the year. We could always push that out further if we want, but I think we were likely to sell them in the back half of this year.

Got it. Okay.

Yeah. And then And then you also mentioned in the release taking a more measured approach to investing this year. More sell e spec opportunities. Does that help much on cap rates As you think about investments throughout the year and will transacting still or will transacting still require slightly less investment grade exposure Yes. I mean, right now, we're seeing risk adjusted returns a little bit more attractive with some of the investment grade profile and sub investment grade opportunities. We really just haven't seen a big move a big enough move, I should say, with some of the investment grade tennis there. Some that have moved up and some haven't. So So we've kind of mentioned this on several of the last five or six earnings calls, but we're really not dogmatic about whether something is investment grade or not. We're really trying to maximize our risk adjusted returns and sometimes those opportunities are investment grade and sometimes they're not. We've had quarters where we've been 100% investment grade and obviously we've had somewhere where kind of 25%, 30% investment grade. And right now, the best opportunity that we're seeing largely are on the sale leaseback side, the blend and extend side, with various other retailers that we some are new relationships ones that we've continued like Gerber Collision.

Okay.

Thanks so much. That's helpful. That's it for me.

Our next question is from Michael Goldsmith with UBS. Good morning. Thanks a lot for taking my question.

You talked about diversifying the portfolio and reducing exposure. With no tenants above 5%, which implies kind of continued selling of Dollar General and CVS. So can you talk a little bit about the cap rates that you're seeing in the market from that as well as what sort of cap rate you're seeing on the Walgreens that you've been selling? Thanks.

Yes. Thanks, Michael. Yes. So the Walgreens that we've we've sold, I mean, honestly, the cap rates have varied quite widely. Depending on really the quality of the asset and lease term certainly driving some of that. So we've seen a pretty wide range there. Some of the sixes and some pretty far north of that. So and then as it relates to CVS, I think we can move those at lower cap rates. I think there's more ability to get a better cap rate on some of the CVS opportunities that we're potentially looking at. And then Dollar Stores we've been we've seen a really robust market to be able to sell those, which has been encouraging. Not just from individual ten thirty one buyers, but also some larger institutions.

Thanks for that. And as follow-up, right, like in conjunction with your dispositions this quarter, you saw strong levels of demand from the buyer. So I guess the question is then what sort of competition are you seeing out there when you're purchasing? And then maybe you can split out how that looks for investment grade properties or investment grade tenants versus non investment grade, which you've been targeting more? Thanks. [indiscernible] That's a good question. So, as it relates to investment grade tenants, there is more competition. There's really always been a little bit more competition there. It's easier for ten thirty one site buyers to go get financing from a bank if it's got an investment grade rating. And then on the non investment grade side, Really, I think I think everything that we acquired in the last quarter, we really there was no auction process was no bidding process. It was really us negotiating with the seller versus what their expectations were on price. Thank you very much. Our next question is from Robbie Vaya with Mizuho, Please proceed with your question.

Hi there. Good morning. Hope you guys are doing well. Just wanted to think about how do you view your acquisition criteria today? Are you still focusing on investment grade And what can we expect for a minimum acquisition spread in the current environment?

Yes. So, yes, thanks, Ravi. So I'll take the first part of that question and tackle the spread side of the equation. Our investment criteria has not changed one iota, really since inception. We continue to look the best risk adjusted returns that we can find. There's really three big pieces. I mean, there's probably 100 things that go into our underwriting, but there's really three big pieces that fall into our investment criteria, one of which is corporate credit, which I think some people think investment grade, not investment grade. We're really trying to understand what's the cash flow generated versus financial obligations of the tenant and how volatile is that going to be. I think it has a big charge coverage ratio well north of two for a long of time or are we going to start having conversations when that dips below one. We obviously want to avoid those situations as much as possible. And that is correlated to investment grade tenancy and correlated to credit ratings, but not entirely. And then the second big piece that we're focused on we want to buy assets whether that's an investment grade tenant or not.

Where they're generating strong cash flow at the unit level so that at the end of the lease term, in a restructuring tenant wants to stay there and the negotiation is pretty simple. [indiscernible] there's no conversation on reducing rent or rejecting a store or not renewing a store at the end of the lease term. And then the third big piece of course is the real estate which is ultimately what we're buying. And then if we have to we get the first two things wrong and we have to take the asset where the world changes and that use doesn't work anymore, How much is it going to cost us to put a new tenant in? What's the demand going to be? And what's the market rent at that location? So how much rent are we going to lose or how much rent would we potentially gain? So that really kind of all filters through to what's the expected loss at each investment and we're trying to minimize that while maximizing returns. And so right now, just the opportunity set is really all that has changed. And so while we might be doing fewer acquisitions that might have an investment grade rating at the tenant level.

We think that in most cases, we're actually taking less risk in getting better returns. Yes. Hey, Ravi.

Our 100 basis points.

Got it. That's That's helpful. Just one more here. How should we think about your tenant credit maybe watch list and any reserves Can you remind us of your target exposures for some of your tenants here such as Walgreens, CBS? And do you have any further color on big lots Regarding the remaining six boxes that you have.

Yes. So I'll go in reverse order here. So yes, I mean, Bing Glass obviously, the Nexus Capital acquisition we were kind of settled in with six of the seven locations where we're going assume. We had an agent course that Holly's that took over and assumed and is current on. So we kind of exclude that from the analysis. We expect the negotiations with kind of getting that done, I think, are almost complete. So we think that it's going to look very similar where we end up with six assets assumed. We do have a lot of demand for those assets. So there is a possibility that we try to negotiate With Big Lots and with Variety, to potentially try to get a new tenant in there that's willing to pay a lot more rent. But variety wholesalers also has you may or may not know, is also an investment grade profile.

A tenant with no debt, a large operator that has a long history of being very successful.

And then I'm sorry, what was the other part of the question? Just wanted to ask about the target exposure levels for some of your your underperforming tenants with Walgreens and CVS and broad commentary regarding tenant credit your watch list and your reserves?

Yes, sure. Yes. So, I mean, big loss was really it on the watch list last year. So, we're not really anticipating any specific issues with any of our tenants this year. Of course, we're always kind of have a little bit left in the budget in case something that we're not thinking of happens, which is always, of course, a risk. But then in terms of our concentrations, we'd really like to get all tenants below 5%. You see Walgreens already down to 3.8%.

That will come down maybe not as rapidly as it has In the past two quarters, you may see us be a little bit more active with some of the other tenants and just trying to get a more diversified top five and top 10.

Thanks so much. Appreciate it. Thanks, Robbie.

Our next question is from Smedes Rose city, Great, is your line on mute? [indiscernible] Our next question is from Michael Korman with [indiscernible] additional disclosure in the presentation on the lease expirations for some of the top tenants. I'm curious, for Dollar General, does any of that kind of 120 basis points of loans receivable, does any of that burn off in 2025 that could potentially help reduce some of the concentration there? Or are those loans also marketable? Or would these be kind of property dispositions?

Yes. And there will be a little bit of both It's a good question. I think we've and Daniel correct me if I'm wrong, but I think it's 170 basis points of loans that could roll this year.

So that certainly helps reduce the exposure. So that kind of gets us down below seven.

And then we'll make up the rest with dispositions.

And I don't really think there's a huge market for them because they're just short term loans.

If they were longer term, I think we would and should be able to sell those loans.

And then maybe just stepping back and I don't know if I've missed it, so I apologize. If I did. But do you all have kind of a coverage level or rent coverage level across the portfolio and how we think about that in terms of kind of buckets across the portfolio in terms of below two, above two kind of situation?

Yes. And so we have not disclosed what that what that coverages across the entire portfolio. But we mainly just because we're extrapolating what that coverage is and many cases where we're not getting a full P and L. In many cases, we get sales. In many cases, we have conversations directly with the indication of what the cash flows are that are generated.

And in other situations, we're deriving that from Placer, which tells us what the foot traffic is versus the average foot traffic and then you can extrapolate from there what the sales are and then apply margins. And so overall, our portfolio rent coverage is haven't disclosed in the past, but since you asked, I think it's extraordinarily healthy in the neighborhood of four times. Great. That's really helpful. And then maybe just last one, maybe just an off to that. Mark, you've talked about kind of your experience with the portfolio versus some of the headline risk and obviously you've done a good job underwriting You have a significant platform here. How do you think about the opportunity to get better risk adjusted returns based on the quality of your platform and underwriting and credit monitoring while also kind of bridging the gap with market sentiment and expectations versus some of the tenants, whether they're currently the portfolio or future investment opportunities. How do you balance that out between your capabilities and getting better returns for shareholders versus also maybe dealing with some market sentiment issues?

It's a great question, Michael. That's certainly something that we've been wrestling with for the better part of last year or so. We've been very confident in our ability to underwrite especially at the asset level and the real estate level. Getting very comfortable that we've got locations that even if there's some disruption or some headlines that it's not going to impact us economically really at all. But then where we've been hit is some of the considerations being a little bit higher getting some headlines, there can be a knee jerk reaction with some investors and it certainly has impacted us. So really the where we've kind of come down is we'll continue to underwrite the way that we have and continue to try to get better and and learn as much as we can. But I think very comfortable with our ability to underwrite assets. But we just need to get the concentrations lower on a go forward basis and that really kind of allows us to kind of keep our head down and not get impacted by headlines that might not have a real economic impact on our business.

Fantastic. Thanks for the time. Thanks, Michael.

Our next question is from Alex Fagan with Baird, Hey, good morning and thank you for taking my question. On the acquisition side, curious which categories are you prioritizing right now? I saw that there's five new tenants quarter over quarter. You can speak on maybe category or who they are?

Yes, sure. So, yes, I mean, we've seen a lot of [indiscernible] I guess auto service, auto collision and then grocery. And and even farm supplies, we continue to invest in with Tractor Supply, but we a couple of their competitors that we think are pretty attractive as well. So it's a pretty diversified mix. And the new tenant relationships, they or as you mentioned, Can you do that again?

I asked, with the With the new tenant relationships, are they in the categories you mentioned? Yes, they are. Yes. Okay. And Mark, you mentioned believe that total credit loss since inception is a very small number but can you maybe give the specific for what that was in 2024? Yes. I mean, it's four basis points annually per year and all of that was in 2024. So that's going to be a pretty good idea.

Thank you. Our next question is from Linda Tsai with Jefferies.

Hi.

In terms of your underwriting helping to limit store closure exposure, I know you mentioned Placer AI. What are some examples of asymmetrical asymmetrical information you utilize?

Yes. So certainly Placer is a Sonoma really taken advantage of and really helps us understand the assets and the foot traffic.

But I don't think you can ever completely replace your relationships directly with the tenants and your conversations with them.

And how they're thinking about their assets. And the cash flow generated at the asset level. And so that's that's kind of where our relationship relationships play a big part.

And then in terms of G and A coming down, I realize there is natural positive leverage from you growing your revenue base, but are you also running any process Sure, Linda. We were always looking to improve efficiencies across the board. I would say our cash G and A is going up in 2025 versus 2024. And that is just kind of increasing the headcount on the margin across a couple of different roles. As we continue to scale the portfolio.

Thanks.

Our next question is from Daniel Guglomo Securities, Please proceed with your question.

Hi, everyone. Thanks for taking my questions. On the acquisition weighted average lease escalation for the leases coming in versus those going out? Yes. I would say on the disposition side, the leases are short in general. And so when we're looking at dispositions, oftentimes we're looking at either decreasing exposure overall and oftentimes trying to get out ahead of some potential risk as we go closer to renewal. And so in general, you're going to see the lease term over going to be on the margin a little bit shorter. Okay, great. And with around kind of like the renewal the lease escalation bumps each year, is that The same, sorry.

Like each quarter the bumps or each year the bumps Yes, absolutely. So what we're acquiring [indiscernible] significantly better internal growth than what we're disposing of. That's just really, I mean, you think about Walgreens, you think about CVS, many dollar stores kind of a mix of whether they've got bumps or not. But most of those are going to be entirely flat leases. And so and really where we're focused and where we're seeing the best opportunities On the acquisition side, we're getting annual increases, which is certainly helpful.

Perfect. That's really helpful. And I appreciate that. And then the next one is just there are few changes to the differs diversification by state map. Quarter to quarter. And I know there's going to be lots of ins and outs with the acquisitions and then increased dispositions So thinking about that map, are there certain states or regions where you would expect material changes there?

No, I wouldn't think so. And I think overall, you'll likely see us continue to grow more in the Sunbelt new construction and more opportunities there. But we're somewhat agnostic to what part of the country an asset is in as long as we get comfortable with the individual market and the market dynamics and the potential demand for other tenants in the event that we had Great. Thank you.

Our next question is from Jay Kornreich Wedbush Securities, Hey, thank you. So earlier you mentioned aiming to get all 10 exposures under 5%. And I wanted to just be on that, which is really just the top three tenants, how much additional work really want to do on the tenant exposures this year And is there a ballpark of disposition volume you're really aiming for in 2025?

Yes. I mean, I think we're going to be pretty opportunistic as it relates to the disposition side. If we're getting pretty good demands and we're able to sell at attractive cap rates. We may push that a little bit harder.

But I think, if we're not, then we're going to just work hard to try to find the right buyers for assets. We're not going to fire sale anything.

And yes, I mean, I think you'll likely see, of course, all 10 is below 5%, but I think it makes sense for that to only that to be the exception of the rule and really have most tenants even if we like them below 3%. Okay. Appreciate that. And then just one more. Going back to the hundred and $85,000,000 of unsettled forward equity, which you mentioned letting settle at the end of the year. I guess if you saw a compelling acquisition opportunity during the year in the first half, for example, would you consider deploying that capital Or is the plan for this year really to focus on tenant exposures and wait close to 2026 really drive the acquisition volume back up?

Yes. I mean, look, I think the net investment activity guidance that we set is really driven with the viewpoint of the forwards embedded in the leverage that we're assuming. So I think we've really order for us to get more aggressive on the net investment front, and start to be more quizzive than we've laid out, have to see a more attractive cost of equity, I think, come alongside that. But as you can tell with what we've done in the fourth quarter, which was a record quarter for us, we have the capability to significantly than we were currently guiding to. We just want to see our cost of capital return to more appropriate levels.

And the other piece to that, a good question, Jay, is in the event that we see an attractive acquisition, we are pretty close on price on some dispositions that we can potentially push forward if we really just love an opportunity that we see on the acquisition side. All right. Appreciate it. Thanks so much. Thanks, Jeff. Our next question is from Upal Rano Please proceed with your question.

Great. Thanks for taking my question.

Mark, I appreciate the update on the big lot so far, but do you anticipate any downtime from any of your six locations? And how is that baked into your guidance for this year?

We do not expect any downtime at all. Okay, great. And then last one on for me would be just what kind of investors are you selling your Walgreens to? And given you were successful in selling several of your Walgreens properties over the last few months, What did you learn about the appetite from investors to buy some of these troubled tenants? Yes. It's a good question. So So most really all of the ten thirty all of the buyers on the Walgreens side have been And it just takes a little bit more hand holding than it does for some of the other tenants just because they've been in the news so much. Just getting the buyer comfortable that this is not going to be a location that's going to be closed. We're extraordinarily confident in that all of the Walgreens that we own are not going to get closed. And so getting investors comfortable that that's an unlikely outcome is really just kind of what made that little bit slower than being able to sell Ballard Generals. But the appetite is there once people get comfortable.

Okay, great. That was helpful. Thank you.

Thanks.

Our next question is from Thiago Granite Bank of America, Hi. Thank you so much for taking my question. I was curious, what is your cap rate expectations, especially associated with your guidance that you have in place for 2025?

Yes. In terms of cap rates, we really only have, call it, ninety day maximum visibility. So it's always a little bit of a dangerous game of predicting where cap rates are going to be, but we feel very comfortable at least for the next quarter will be at or above where we were this quarter, most likely above.

Okay. Thank you. And I guess also a little bit more on the macro front. When thinking about the consumer and the impacts that may be having on some of your tenant base, How are you seeing that trend going forward?

That's a good question. I mean, I think inflation is rampant as it was and that certainly isn't gone yet. It's nowhere near what it was. So I think we've really seen the worst of it. And so now it's really going to come down to consumer at the lower end certainly continues to struggle. And we've tried to adjust for that here in the short term, but I think most of the damage has been done by inflation, which was I think the bigger problem But we're always focused on trying to understand the health of the consumer overall. Which does seem to be softening a little bit.

Okay. Thank you so much.

Thank you. Are no further questions at this time. I'd like to hand the floor back over to Mark Mannheimer for any closing comments. Thank you everyone for joining today and for your interest in Nestle. We look forward to seeing many of you at the upcoming conferences here in the next couple of weeks. This concludes today's conference.