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Management emphasizes a ‘real estate-first’ philosophy, focusing on fungible, high-traffic frontage assets in top 100 MSAs to ensure rapid re-tenanting and value preservation.
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Performance was bolstered by proactive asset management, such as re-leasing a bankrupt Tricolor dealership to Avis, resulting in a 24% increase in asset value.
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The company successfully executed a significant portfolio pruning in 2025, disposing of $78 million in less optimal assets to improve overall credit quality and concentration.
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Strategic diversification remains a core risk mitigant, with the top 10 tenants representing only 24% of annualized base rent (ABR) and no single tenant exceeding 3.5%.
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Management highlighted a significant valuation disconnect, noting that their implied market cap rate of 8.1% is considerably higher than the 6.79% average cap rate achieved on 2025 dispositions.
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Operational strength is supported by a ‘developer DNA’ that allows the team to resolve complex title or construction issues, positioning the REIT as a ‘buyer of choice’ for fragmented assets.
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The 2026 AFFO guidance of $1.27 to $1.32 assumes 4% growth at the midpoint, driven by the deployment of $100 million in net acquisitions.
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Management expects acquisition cap rates to remain in the mid-7% range for early 2026, though they anticipate potential compression as institutional interest in net lease assets increases.
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The company is fully funded for its 2026 growth plan through a $75 million convertible preferred equity investment, reducing dependency on volatile capital markets.
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The pace of dispositions is expected to decline materially in 2026 as the bulk of strategic portfolio optimization was completed in the prior year.
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Guidance assumes a conservative bad debt reserve of approximately 50 basis points, reflecting a stable watch list and high historical recovery rates on lease expirations.
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Two tenants, Smokey Bones and Twin Peaks, are currently in bankruptcy, representing a combined 0.56% of ABR; management expects to exceed 100% rent recovery through re-leasing.
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The acquisition of a 7 Brew in Jacksonville at an 8% cap rate was achieved by resolving complex construction liens that limited other potential buyers.
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Exposure to casual dining was intentionally reduced in 2025 to mitigate risks associated with shifting consumer spending patterns and inflationary pressures.
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Non-recurring G&A charges of $534,000 in Q4 were primarily related to legal expenses for credit facility amendments and corporate restructuring.
