Realty Income (O) 4 Aug 222022 Q2 Earnings call transcript

Company Profile

Participants

Sumit Roy	President and Chief Executive Officer
Christie Kelly	Executive Vice President, Chief Financial Officer and Treasurer
Jonathan Pong	Senior Vice President-Corporate Finance
Michael Goldsmith	UBS
Nick Joseph	Citi
Connor Siversky	Berenberg
Haendel St. Juste	Mizuho
Brad Heffern	RBC Capital Markets
Wes Golladay	Baird
Joshua Dennerlein	Bank of America
Ronald Kamdem	Morgan Stanley
John Massocca	Ladenburg Thalmann
Chris Lucas	Capital One
Harsh Hemnani	Green Street
Linda Tsai	Jefferies

Call transcript

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Operator

Good afternoon and good morning. And welcome to the Realty Income Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to of conference Corporate like Bayer to now Manager [ph], Communications. would turn over the Andrea I Please go ahead.

Unidentified Company Representative

One Discussing together be Thank our us you Executive Chief quarter Senior call. Financial second Pong, for Officer; call Realty results with all for Executive President-Corporate Team Treasurer. Vice joining is operating us and Christie Officer leaders. results Jonathan Vice and and Roy, on President Sumit today our Kelly, Income our Finance, Chief will President, conference joining Also

During law. make considered statements. discussed this differ certain statements forward-looking statements matters call, we forward-looking conference will actual may that under The results the any maybe federal future from securities significantly in Company’s

Form detail factors such in may disclose greater will We the XX-Q. the that Company’s cause differences in

two during of limit be We to the to everyone a will call the the observing portion participate. give opportunity order in Q&A question

would If now ask reenter will you questions, I CEO, you Roy. queue. our call like the to to Sumit the may turn additional over

Sumit Roy

Thank is foundational Cultivating you, stakeholders And success continued our of everyone, for all the I'd your strong relationships business. with listening Andrea. support. and to to our thank enduring Welcome like everyone.

my like significant serving would I all our to colleagues Realty initiatives, all express make my who and continue Additionally, one contributions Income growth Realty appreciation as our stakeholders towards to while team. clients Income

the including quarter. quality first the once ability over the demonstrates the during of amidst its an business irrespective again, global of our to of real uncertain approximately model $X.X high with areas $X.X investment which in pleased The all pipeline are year, environment, our billion of we has invest across economic thrive We believe momentum the the cycle. our estate to half macro in us strength and stability business billion of second allowed

Given XXXX over we increasing are billion. acquisitions this our to $X guidance momentum,

like the of topic acquisitions. I'd observing in key to marketplace. we that two are the mention On developments

cap our higher rate, achieve we in average quarter, moving X.X% our demonstrated markets. investments second the by cash the in on to target were are as First, weighted able rates cap

cap second interest X.X% The in the rate the is to between rates pipeline. our and previous also X.X% quarter rates compared achieved acquisition Our evident cap ticked in two cap quarters. rate positive we higher correlation and

Second, debt as a corollary our equity to materializing of us of that at impacted the much to accretive acquisition continues and costs pipeline spreads rising for have competition, opportunities grow.

straight approximately generally cash reminder, ranges estimate a a rate our cap on and basis. between As and totaling volume period. our quarter acquired rates this to basis volume to of XX have report remains the $XX line line remain difference a with quarter, straight cap points we And selective X.X%. we approximately any approximately cash second We year-to-date. in as in sourcing strong we bringing XX volume cap year-to-date approximately flow rates billion. given sourcing basis, On Transaction $XX be between sourced billion X%

clients clients. who our capitalized quarter in percentage volume to of second acquisition industries. are leased revenue, of respective XX% leaders remain to approximately the During committed with partnering principles investment rated grade underwriting of as We was their well

comprise at quarter a the in of approximately a our cash volume rate global of investment X.X%. significant to XX% international volume of Our representing volume, second continues cap total percentage

generating heading the been net with capital also X.X%. full the quarter able IRR through active have was continued $XXX proceeds that and cycle. us encouraged as a million, to our XX sales to platform of approximately properties activity our momentum we importantly, at value million $XXX well us. and are net an build priced deliver, adjusted to Capital of that into dispositions. generating provides with deploy to to with We returns It an We sale XXXX. properties X.X%. of our capital size, be for of unlevered to XXX gone currency scale Year-to-date, profile we sold access accretive speak properties recycling regard And investment actively sold IRR have the approximately attractive totaling investment have risk an unlevered we proceeds, continues unlevered

to XXXX Our diligent real second our inherent quality underwriting credit continue end rate and our years. XX process, in deliver current client occupancy rates highest profile, over of our clients The to XX.X%. we occupancy exposure performance. XX%. estate occupancy high At increasing the of over on quality the and we to year-end our achieved occupancy consistent Based guidance quarter, are was the have

recapture quarter rated percentages re-leased end, quarter, to rate rent than leases on clients portfolio consistent far this less clients. of leased watch which from our properties investment list year. rent Further have XX.X% so generated the low we was XXX achieved contractual our our rate portfolios of is X% our analyze our with represents seen the to rent, a contractual bringing recapture grade portfolios of During XXX.X%, we year-to-date and second At XXX.X%. annualized largely

Finally, the the strong At same-store our quarter X% continued for portfolio, are for I'll to time, this our X% pass performance our discuss year-to-date. increasing a who increased With same-store further revenue during quarter. and we guidance growth rent XXXX. rental will it of approximately X% results over Christie, from operations to

Christie Kelly

Thank you, Sumit.

AFFO generated around The Company acquisitions. share, second growth $X.XX XX.X% business the accretive growth. revolves per representing During our engine quarter, of our year-over-year of

are capitalized Our the to was net the on activity remain giving with net debt-to-annualized finished X.X leverage X.X active by effects our the us another within raising investment industry. capital quarter. pro or EBITDAre times ratios basis, lease It adjusted quarter in sheet target well of which balance investment capital, and favorable cost times for well the quarter advantages during We for on a front. our supported us goals competitive net forma annualized of

including of rate offering approximately with of £XXX of As private nearly $X.X a million and capital, a at through weighted $X.X blended fixed XX.X interest average and which of we issued program ATM X.XX% placement years. billion equity permanent billion our long-term a note priced tenure

quarter billion paper revolver $X we net result, and commercial of approximately cash. a borrowings of with finished As the

$XX Our principal debt balance borrowings variable across only of a and essentially revolver total outstanding represent billion. almost rate CPE exposure our debt

access As Sumit quarter advantage. the ability previously, And further a during well capacity. mentioned we priced competitive bolster capital our took to this is steps to

As our Program Program established with previously billion. lower revolving $X and and upsized facility our from upsized this to rates flexibility for recasted $X.XX than a Euro we our materially of April year, funding $X needs at Commercial multicurrency in announced $X.X to give Commercial Paper will to to Paper credit credit a we quarter-end, backstop Subsequent billion finance U.S. Paper billion. Commercial facility our $X.X the comparable liquidity revolving The billion from our $X billion combined as which facility us serves Programs borrowings. capacity short-term efficiently billion

we as in lower And ours continue goal tool in us all-in it momentum the establishment serve this our Euro to market. for activities program Europe, investment will commercial take the of in of a the the year. Given an see a strategic paper was rates to Euro efficient comparably of advantage

increases outlined in conversion talented during of in been nearly inaugural to XXXX guidance flow the the entities From the the I combined to integration the June, the From portfolio green report the mid-point. we a increased in We have in company’s capital eligible business. our the which shared cash of that health with pleased balanced projects our track From could published markets the Sumit. lastly, $X.XX dividend declared June, $X.XX investment as in we the XXXth dividend capital now, green representing not seamlessly per alongside our single accomplished our the we the framework. our of share VEREIT quarterly system and further history. last bond proceeds our dividend for merger, merger net culminated the capacity at for in our dividend generated report energies second of a pass commitment offering sustainability a to stock quarter. month, previously perspective, pleased ERP In financing merger. million confidence a we $XX allocation This cost perspective XXXth allocated of of our consecutive like of report, a With dividend. we and have in without I’m volatility. X% been monthly we the accordance to reflects completed from to team. our year company, the ago remain green am And And green criteria announced bond common have fully achieve to AFFO deployment perspective million time we progress I and affirm year-to-date our rate over our timing one dedication to continued initially back that growth to have monthly we $XX consistent and finally, annual achieved run on to announced expected annualized so would the call And when the

Sumit Roy

that on Thank has team record the Indeed, scale future we access the Coming grows. an investment XXXX advantages to our we only our a importantly, the proud market from as for this to well they we been Operator? open look this And are up to have questions. ahead. afforded to forward today. and capitalize us given arena positioning year. accelerated is you, to At believe the momentum time, Most Christie. off our capital rarely continuing more can bright gain further size share than priced this in in standpoint, investment days it I’m the pronounced

Operator

question first ahead. from begin We Goldsmith question-and-answer go is Please with [Operator Our Michael Instructions] will the UBS. now session.

Michael Goldsmith

Good afternoon.

Christie Kelly

Michael. Hi,

Michael Goldsmith

Thanks question. Hello, a lot for Thank for taking you my my questions. good. taking

markets better. rates First on question moving cap is bit a little higher, getting the

VEREIT You there to of bit have just kind aggressive some or with a that the a due the the well. team markets little How you acquisition borrowing given larger uncertainties in as of can markets, improving merger. combined take more are be advantage

Sumit Roy

there in because Michael, competing variables market question, today. good a That’s are this

market There VEREIT in rates right. a we they We I than actually anticipated. transactions Look the for That are with cap the of some on originally us. the we on direction. team focusing have right that market. high inherited, however much are doing very that team well. offset certain and lot do resulting producing merger, are the of relative a is absolutely that, had bigger adjusting capital are is members real in area have the moving to basis, quicker a You’re The a definitely and

tenure at basis moved, look spreads, they would I our you approximately bond say XX If points. have unsecured

with we basis our XXX our a peers to lease BBB look You peers, moved points. points at it’s XXX rating, basis net

at you of our the at dropped look by is if it unchanged equity, lease they’ve peers, But net the you our times. cost year. If essentially from beginning X.X look of about

not cap But those also period, points, it our we that growth? needle points been that, us, as the sort to an terms right be are billion volumes the you back move also It to rate, as these we average. on were benefits transactions back year-to-date, is our question yes. I the is acquisition why has importantly, cost billion and we with what that that with to movements us, increased of generate team share is per overall around, we But which of are And which is spreads are adjusted below spreads year-to-date. lot shown overall is brought we over slightly levels and the seeing it there the guidance adjustment a really initially of true continue us sourcing that based coming are just capital more to a $X the they increased. interest know, discussed, an accruing momentums, able our can to velocity overall the rate So shared also sellers right positive source but those expecting those that XXX have at the testament The at answer moved. the around the in to to billion And works. $XX now have have starting see of interest is more over you at we $X some has basis just basis were in more price is coming which are the to XXX on of to what rates which when from AFFO true willing with to overall

why positive being the this reason that is volume, into that’s earnings but not in necessarily So reflected higher momentum translating acquisition higher guidance.

Michael Goldsmith

follow-up, European XX% a And quarter. helpful. as then about this were acquisitions Very

a an we’ve so that seen. And what acceleration represents bit of from

going year mix at versus year you of forward? thinking kind into right least mix about XX% next is next the are the for half So or second like how U.S. Europe the

Sumit Roy

markets, that, so achieved be go Yes. there of where been not et Michael, us. But forward. should international as in number of in we’ve far for have point quarters newer composition what we been overall has we’ll volume being XX% mean wouldn’t this obviously one cetera, I we in the increase start be which the market sourced to the it newer fluctuates. seems the as as acquisition the done the thinking we volume. should time, XX% anything at the as I the it like is to into will And increase. mature acquisition continues where the addressable these guiding actually overall as as going closed well number of XX% grow total just the each quarter, There more second say be volume north will more And this in we past to right number. numbers do translates to to be become markets, but much of XX% quarters

Michael Goldsmith

Thank you very much.

Sumit Roy

Michael. you, Thank

Operator

ahead. Nick is question go next The Please with Citi. Joseph from

Christie Kelly

Nick. Hi,

Nick Joseph

obviously you? more break where between you’ve between you stickiness differences U.S. where a out international the Thank you. are versus how cap touched Wondering bit. seen or you’ve on that the seen if Hi, any rates expanding You two. could more expansion,

Sumit Roy

rates a Sure. than in that, England Bank have the question, today That’s we has aggressive than basis a announcement much XX Bank being the the moved the of international or the would rates function lot have said that points. certainly England Fed Nick. U.S. ECB Having in of And we in the it been. And more interest cap our an more here largely saw the its what just earlier space. of seen back is say a pronounced I markets. to welcome that movement are great

to as well of higher rest So rates we translating in as Europe. see the cap that do in UK, the Continental

that they depending say product, of I X to that around to quarters basis to cap market and the So that going the XX just because have also retail, become reflected in you which should space, can Europe, would points would about some points I moved a see rates basis that I most on hasn’t to pronounced from right when these aggressive, movement quantify the some other the up the they’ve being focus most quantify moved groceries, XXX of movements, retail and XX industries go cash on the we acquisition rates is the had say basis the to In have share – the with forward. start we And – been basis points to subsequent that it movement, seen XX in but are cap you being we points. quite basis points. as going maybe within

on been XX beginning basis On movement I a would in U.S. points, from here expansion maybe continued has the rates. the of would XX say we what average. to market cap XX an side, industrial the the I see points to industrial bit say, you more points movement has experienced to to And basis end, visible circa on But similar basis

then have But it north Empire the pronounced more more to basis. Now, that, and tertiary lot where you lot, than obviously, seen to has there XX than movement comes a markets even a are secondary certain could XX be been the markets less of movement mind.

Nick Joseph

those mentioned at very as back, That's of coming a seller just get as did you – broadly some them? helpful. the out deals Thanks. pricing? And did fall get of – crack What you those they see then are second not you contract, do the

Sumit Roy

markets market capital either the debt the loan or market. bank on rely that buyers largely It's Yes. the CMBS

on new for know difficult banks, a market, but it bank the new them more to the revolvers, I'm the is have to distress et New going in much you that money increased more credit. York, they not for You create or Wells, cetera, debt say loans, are BofAs, what JPMorgans, the big the moratorium

pursue some at And overall to not a original has they're And sort debt struck chose pricing. able we were lot levered these no for to that given transactions more become what is of the market So of seen expensive honor course, buyers. that's rates at. transactions that cap we've the being of being those those longer

back as pricing we it they a as when and discussion. come us the do just so to transaction, long And like was

rate honor reflect the lot of discussions the the sellers has we for that become that cap conditions. either being had of important today. close those rates much is so more prevalent clearly market even that or expand having fact able sellers But the surety out in to today are current to cap the We we are now, the a with

Nick Joseph

Thank you.

Sumit Roy

Sure.

Operator

next The Connor Siversky from Please question is ahead. Berenberg. with go

Christie Kelly

Hi, Connor.

Connor Siversky

appreciate cap rates. discussion, curious you've rate ever your to I'm that able me subsequent the for Thanks on on wondering I'm impact have the having comments like. you looks and if been rates But establish between call. on what a cap rising I'm correlation lag and this

a seeing long For point partners cap basis that does it you in lending with second some that, And operations? how accelerate, to XX you to are these rates, seeing given down increase relationship shut then for that that reflect example, in their rates? take are of

Sumit Roy

correlations, situation months. this lot to sort coming Yes, long question. Historically, where we into of to a it's particular it to be the were this nine if control lab was this we all we would And could anywhere interest perhaps have give into seeing as we've year of the a lot found answer when drive more variables between that skeptical as be great that unfortunately, rising a an in and XX coming correlation, you. I lag rate these even done easier environment. a

to because of I it's hesitant wealth on this capital to this the reflect institutional be come the space volume XX nine environment, hey, the side. capital. continue because of into has start before to say, Just month of of And to bit was cap that going to – the our sheer rates new lag a

coming public did. as capital markets take didn't our the therefore from equity even pullback this on has has been the lot was The newer the And in of faster. new equation. cap cap XX debt these six the already space, has interest to come both buyers that had account a private rates However, to points. as fours said, basis adjust adjusting I the like leasebacks as we as rate a into months. side markets being for in XX the which grocery mid fives. they the adjusting we And more And low fives done in now faster. rising acute, environment our sector, on mean, the low last in a what sale into and resulted space the see And side, to lot saw starting well I are rates are we've adjusted being a that now lot done I quickly debt back in

So the for is a you're they can I have truth I but environment of point it's that with, as not just is constant environment. us a interest rate a as not rising it's can true. the Connor faced reflection good that in It hope a cap be that to. thing rates told quickly adjust, that corollary

Connor Siversky

I'll it. there. Got you. Thank leave interesting very That's it color. a

Sumit Roy

Thanks.

Operator

question is next from Haendel The St.

Please Juste go Mizuho. with ahead.

Christie Kelly

Haendel. Hi,

Haendel St. Juste

Hello, everyone. there. Hey,

a perhaps grade Thanks. of on enough and perhaps assessment So high your the but on exposure do premium market do the grade non-high right do not of I yours, a I relative grade bit and a you the of the portion grade Curious, of perhaps more of non-high side. understand, you curious focus return make non-high attractiveness to there. dabble guess, I'm scenario have it's Curious, now. there of a if versus was

Sumit Roy

Haendel. This there the of out narrative a the high Yes. disproportionately that that equation. grade or focused side on focused we not continues are we are to is Hi, be that

mean, sub-investment quarter. was look of we this non-rated. what did at grade what or did Just I we XX%

investment particular true believe is credit market tried focus it we the unsuccessfully. on share What don't all is to and that grade that So with product. have to say we clearly – I

were non-investment on side. that allowing And to there sub-investment returns So true, we exact on And adjusted that returns those the grade is are in the risk grade seeing try capture you credit we that we to returns adjusted investment superior focus points is where time on where risk there other pivot are far superior. what risk the far grade then we opposite transactions. are do and where times to adjusted is

finding And the so opportunities period side the being to the i.e., good non-investment as today, XX% on we able the line, are transactions where in lot finish we quarter. that find get of and a are over of ourselves equation, such second very in those grade

indifferent underwriting. ascribe we on byproduct And are Investment we that of that we to vary. be What focus profile particular totality target to the grade for a the ratings. at the So grade. will is don't return that makes continue that undertaking. investment We sense of the then credit risk a looking to to are tends opportunity

hopefully clarifies you question So asked. that the

Haendel St. Juste

I in the coming on sure. color, Certainly with believe licensing update quarter, regulatory and how's appreciate Any to still along. Sure, the the perspective. fourth Encore track close

Sumit Roy

on we We've quite continued optimistic. stay are Still close MGC. to to very track, the

so quarter. closely very by the fourth working year with very we this are We close in of the are end it'll them, optimistic that

Haendel St. Juste

Thank you.

Sumit Roy

Sure.

Operator

The go Brad next Capital question ahead. with is from Markets. RBC Heffern Please

Christie Kelly

Brad. Hey,

Brad Heffern

you, for Hi, everyone. guess. Christie. One Hey, I

or the impact pieces if versus talk On AFFO kept impact tighter the or FX a unchanged the total? it but can the number capital, you potentially guidance, was per I'm said despite there moving about expense acquisition interest cost assume the a spreads higher anything new I of curious share that just else.

Christie Kelly

Yes.

those over of start same and Both our the billion, on in and the And guidance taken. first, be terms I the observed that that but U.S. of discussed, terms pieces in some it. may per terms to the and future $X capital in our Brad, hikes fact rate factors some we've you hikes of overall of actions in – moving to had volatility kept given acquisition the Sumit off think, started volume the touch reaffirmed Sumit environments. AFFO to the there the had as and this markets as any there are European magnitude of just increase in we share

from protect rates, also making. our interest second. international a FX do to in that our the effective We touch as other to lower we’ve hedges hedge too place in the in now general the momentum us a really end from And the we strong close the got of year, of nicely income to of while just point as are team setting actually just job. thing market. been and towards is well bit that investment timing Sumit that our to perspective as for the got a the really up on we’ll great were that the be has the We volume, more doing the We’ve discussed XXXX. attractive you But going acquisitions

So the that And think, beneficial started will isn’t the under AFFO full on cash as arrangements. the of next timing impact as for still their some for be to year we that it accounting, I have upside, in just deferral year have year. clients the

so when we’ll bit Jonathan more impact. calls the talk over for off payment accounting. we policy them love a to little may it our consistent be and turn them to guidelines the with about and specifically make to and I’d alignment And continued be taking appropriate monitoring and performance, hedging cash of But

Jonathan Pong

hedge a now in have we currency denominated exposure where a Yes, where seen limits lower local that us in there. hedge Brad, Thanks, debt currency of having lot interest in from much obviously, obviously AFFO cleanup haul getting sterling a And perspective, in rates methodology unhedged. same rent that’s the volatility. the the Christie. certainly, we then that portion of you’ve is we’re intentional, But have market natural expense issue we a

still feel foreign-denominated unhedged is upside from of outcomes, there exposure, we some but unhedged. of dynamic, And and the downside, range like our mitigated so about is we’ve AFFO that XX%

at in for of move So maybe on XX% dollar, every for instance, $X.XXX annualized you’re volatility the basis. looking an

just upside hedged, here lead that mean we some to little completely the in reversion taking of not conservatism bit August. here dollar. in we’re here But can which sitting we’re see So, if a

Brad Heffern

you’ve Okay. at I interested that appreciate Sumit, single then, about all your in this Is the some have discount a trading seen? And peers talked assets. portfolio potentially portfolios you that more deals? to color. are pursuing quarter And of something

Sumit Roy

tend a deals to a in at these sidelines. Brad. the lot of this the especially than are No sort of trade on up. do gone Portfolio portfolios of like buyers discount, capital of more cost past, when in And potential big the times sitting have generally

where reverted transactions. essentially discount portfolio back is this to we get would So on was, it a where

what And volume XX% you at today, if our of did we portfolio so about look transactions. were

our actually to benefit, our and same exactly have accrues commented. of as we seeing peers Brad, that the scenario some certainly So are

Brad Heffern

Okay, you. thank

Sumit Roy

Sure.

Operator

The Golladay Baird. Please from with is Wes next go question ahead.

Wes Golladay

everyone. Hi,

Christie Kelly

Wes. Hi,

Wes Golladay

there. maybe a on the hedging, also so the question Hey more I FX, I on got future guess.

to buy you would and more, maybe we overseas, overseas? properties the you hedging? go of I issuance see the for U.S. issuance full CP As do tip more could And CP guess, zero unusual down capacity

Jonathan Pong

Hey, Wes, one. it’s that Jonathan. I’ll take

You may commercial recently, establishment paper $X.X dollar of upsizing seen with program together euro U.S. have commercial the paper our program. our equivalent billion

now, compares much have on a basis side, probably and are Focusing or currency. that to year-old CP year points the CP We of are XX rates lower we point that that [ph] issue extent to Euro right one interest we But euro revolver absolutely obviously, so. intend basis a use utilize in XX that could context to comparatively. borrowings the

at engage to denominated on that and with all your fronts, we have in additive have that amount So hedge our very we exposure interest liability the on to cheap and limiting rate certainly, be will of borrowings. pay old euros a having that lowering a to liability the derivatives

Wes Golladay

comment, to then to the go go ahead. And it. want back sorry, Got

Sumit Roy

provide a market Yes, our not surety Wes, that, is to to really leaning mean us continue the for having debt dominate possible. will the towards financing soon as our overall permanently take profile. acquisitions of be said our A-/AX this this to will advantage of as and I mechanism we all But rating.

And X%. should up outstandings today, going about it’s If how are you what think business look running forward. about at you our us that is

Wes Golladay

sale curious want of you comment seeing assets, cap that between difference I’m it. at? any back Got you’re look just leasebacks, go if marketed Then about takeouts, do to to why that channels need I developer rates. any your you

Sumit Roy

Yes. of would much Wes, say, overall the channel. market. it the more a not is of function It’s a function I

points transactions, whether portfolio of starting Does another the X channels. hand? points But reflective those seller If to XX to basis dictates to from move or play relationship maybe much a But really the basis to going in not best. you to see the avenue does. a are cap markets. going at it’s be are portfolio are XX those it what rates points comes from be, so basis cap sale-leaseback market it that Sure, rates is

Wes Golladay

lot. thanks Great, a

Sumit Roy

Thank you.

Operator

Dennerlein Please go The of question Joshua with from next is Bank ahead. America.

Christie Kelly

Hi, Josh.

Joshua Dennerlein

guys. hey, Christie, Hey

– the M&A? about of So now how what integration you thinking VEREIT merger, the additional that completed you’ve kind of are guys

Sumit Roy

you? breathe, let we will us Josh, won’t

Joshua Dennerlein

guys to go especially work to extra mean, he hard. You got Jonathan, hard. I work

Sumit Roy

That’s always look, far true. But concerned, M&A That’s always easy trade. to is said Josh, is that, an we it not opportunities. true. as M&A are for open as facilitate we’ve

the is after willing you terms in of to able need be look of portfolio the this to market partners, conducive, to need overlap at had to portfolio figure other strategically there massive environment gone out, what be would available. You we you need have a amount entire been

going align consideration trade. There sort You to take then have having said opportunity you many we M&A if so with this presents always are of the of is can help it. and shy itself, And looking. not said to the away consistent past, what social have facilitate But issues. before are we’re things that from to very into in right an we’ve that, all

looking we said, hard, you working we’ll that shown couple done times keep of it. We’ve it a now. keep we’ve Josh. And So, and like can do

Joshua Dennerlein

grocery mentioned magnitude there where like basis you Were It you’re higher. classes or other of points think cap move? types any like rates I anchors. then kind asset of seeing that the XXX a property sounds And moved

Sumit Roy

board, like market cost was felt into the has as had that the from of a XX do, of it’s how to high-Xs, to buy I to as Fed quite say, was the it just know buyers come XX here market. the the was accelerated this I best-in-class of if relied debt chose debt but XXX available the compression points. we a industrial, capital to cash-on-cash cap required hit this immediate markets. driven space would on allow be pronounced say, that i.e. essentially And partially into our movement don’t decelerated, that industrial, on the of wouldn’t the low-Xs. this they The Yes. U.S., And these And the to basis amount the some and yield quick, grocery of absolutely the but well, in some that basis it points the the capital basis. points, down the the partially the so by grocery grocery debt far rates driven withdrawal translated what was by unwinding that the used in then where to testament to across been not basis

think see that that I other is And of can that we think I retail. phenomena unique didn’t to sector sector compression So, particular very of. any in that

Joshua Dennerlein

guys. Thanks Interesting.

Operator

with is ahead. Please Morgan Ronald go Kamdem Stanley. next The question from

Ronald Kamdem

couple Hey, of just staying a quick ones maybe not.. on,

Christie Kelly

Hey, Ronald.

Ronald Kamdem

building. on And but that of of the come platform of acquisitions, bigger how the deals Just are you? benefits large is deals. sort portfolio one on staying leasebacks, pipeline sort I how being those any having just we is theme larger a maybe Hey, see able just sale when larger of can M&A, to through? just even of more of remember update these do

Sumit Roy

pipeline tell the fairly pipeline portfolio contract to five lot transactions. current literally that you these their bigger and opportunities dictate was comments translate going sellers Again, to whether opportunities. the tell willingness of a I'll of think to to what's past to my discussions bit sort in I looked you, with makeup the market affairs is a and recognize has similar are that difficult, from terms these it's Ron I on and under is state can where stronger M&A, opportunities. pipelines never big. regards our anchored of ago, months on six is of still are Ron, to in as Yeah, the to But we And sizable conversations

so finish get it And and the if first will these the are be we that does, to a line, know. few of hopeful over you'll

Ronald Kamdem

because if And low? just one Great. what's like the and what's all, if you it could at debt ask and for pretty change bad that's covered been the sorry one this for I already, quick – just the assumption on assumption that seems guidance,

Sumit Roy

Yeah. Jonathan take or Christie should that.

Christie Kelly

Yeah.

we were handful started we're example, impact, a as for talked of to still In terms debt. was cash no deferral change bad on debt. during terms arrangements And that Yeah. impacted it bad that lot on the clients we've There in the about of specific space. relates and of July. COVID the that accounting theater Their in have and fitness a in primarily good those the fact arrangements for deferral and the approximately health a

through to clients of And this we taking things policies and be continued and their of the year if and we make in collections determine our so cash will as any performance at off looking accounting. we continue appropriate be will relation those strong calls

also impact that variables is that as in one to upper factored relates end some it of we our And of guidance. the of the Ron,

Ronald Kamdem

Thank you.

Jonathan Pong

terms the of in looking of more really normalized a just at I'll guidance the Ron, year add, assumption. remainder we're of

half flat year bad that paybacks expense. the from or So, benefited of even we've some negative have resulted deferral debt first in actually the agreements on actually

of pre-pandemic half and in just definitely assuming bit But So year. environment year, given uncertainties. of normalized the conservatism run a back little the a a rate in macro just

Ronald Kamdem

you. Thank

Operator

from is Please Ladenburg The Massocca ahead. question next with John Thalmann. go

John Massocca

afternoon. Good

Christie Kelly

Hi John.

John Massocca

So you about and it U.S., Europe upper what EU certain I of competitive to are you've your on if we the And rates, competitors push the guess going? sensitive can as similar year-to-date? in kind could market rising I continued in see competitors the to European seen pressure U.S. versus of UK environment we the how How's the face mean, rates? think out it

Sumit Roy

John, flipping to exactly be happen. to expect but to trying not that what is we see Absolutely.

adjust, the there. and interest be that but levered rates buyers their mentioned has I We think the start XX the by cap basis quite BFA rates to those points I a of lot to raised a just happen should to few see X.XX%[ph].

that wayside. the a times ability on transactions had that come us back large gets recognize the at transactions. have international they amplified to markets, this by in transactions literally again, been markets. And close fall to to we've the We've few especially And start will close like already our that We pursuing in what this. international seen on certainty because is of we've

what And there, a level to John face in the so here that lot we competition a actually international out in the similar happen is are the and expect, we that storyline of I markets given U.S., seeing less. play

be in come. to quarters enhanced We more to advantages expect even those

John Massocca

year, And the XQ portion I versus of buyer to I guess a levered mean, markets XQ in European of is important of non-public set last equal the bigger the or kind was the kind if less? it maybe how back competitive U.S.? we think and of Is it

Sumit Roy

we that kind certainly our see consistent expand of the we've of that we lack difficult here in this that but of strategic debt and advantages more I we as were to reasons more the inherent into fewer potentially we is is are that And as that's an rely Europe there recently. kinds that few would U.S., the Yeah, I starting that have the competing are particular more guess, in of product pursuing. And that to for buyers on in been mature markets. U.S. of if one to Europe circa that to here debt the makes quantify, say the markets is with what of so in had are of market. very see the similar our quite challenging competition the amplification it And not people with

John Massocca

about of but portfolio, shifts given with more are credit, how in the it's Okay. tenant a recent think you services-oriented some you sellers demand? phenomenon, and tenants, about in-place kind recent relatively of both consumer And I hard know thinking of the versus as acquisitions goods

Sumit Roy

Do little Yeah, I don't. more, we business The well in consumer see Walmart the lessons cost value types and you to type did were do become terms them times the particular strength, suffering concepts have companies pressured? income apparel I now, see you, thrived. I service health theater where if again, good businesses and They're do to bit with specific feel the important, restaurants were collects sensitive attract model. saw a the to and see were deliveries institute from out to hard pressured. pressure. I of rent? more casual and alternatives oriented were of out pay another the to base their is ability I will vertical getting they more a click in. We pandemic business lot announcement more operator their learned the of and their especially at little get lot of I quick fitness at the health are to their and because, balance very ones able important great for expect, to bit just they pivot on some because survived crisis changes the dining hold play model. fitness very financial business Absolutely. will especially The it it's take to of But expensive. more same? goods. think the depend But their tend that where discretionary to stead movie well. did I the Those able those this look much came business in I where the see ourselves to sheet a service find environment who that categories, concepts, But Do today. lower Walmart tell the struggling to don't. if I does continues the do suffering actually quite in a there

John Massocca

very Thank helpful color. you Very much. for it That's me.

Sumit Roy

John. Thanks,

Operator

The next go question One. is Capital ahead. with from Chris Please Lucas

Christie Kelly

there, Hi Chris.

Chris Lucas

Hi, Christy. afternoon. afternoon, Good everybody. Good

it why just a denominated Just understand and question pound? Just about pound a there paper denominated. of related you've commercial not than thinking follow-up specific depth got on billion €X.X to to program. trying denominated reason efficiency, so market billion I'm the euro $X.X I rather guess, uses? future in why euro denominated Was

Christie Kelly

Chris. Sure.

Jonathan Pong

commercial big. a not market in know, Jonathan, Chris, the storage The really paper that Hey nuance market. it's you is there's

The lot a stand-alone the flexibility issue really sterling. paper you Eurocommercial So give see in us don't does program sterling programs. of to

is But by And it. dominated tap so and we'll demand the able large, be to by to into extent there market euros. that is dollars market, in this and

Chris Lucas

occurred Thank a of taking Great. around sort exchange step year. the of you Sumit, back, kind a talk Okay. little issue for this then that. foreign bit that's just And

like a seen pound. have really the in you You've at back if meaningful the the a pretty of value in that week appreciation historically in And on way both than and this all far, other COVID of to on XXXX, the the sort Reagan to during both relative relative terms on impact the of in to and kind pound the, Administration strength. but of look dollar of March terms dollar move the euro you [ph] go decline the this euro back

about is, So all are point? question completely view my at capital exchange that rate? where agnostic you at your Or the this impact does to to allocate

Sumit Roy

have economically that to Chris, we said, exchange be agnostic – so. we unfair say, is not wouldn't to acute like That something this we be do hedged. to rate. would prudent XXX% are Obviously, on are an that we It the focus

XX% the at same sort to starting see point between to are of of might to concluded like rates of GBP and the we U.S. figure exchange looks Chris, you're foreign exchange the our to months from We euro now. ECB, in But again, And and the strategies this look, the in market. these all instituted itself more terms you're have see in little of hedged out start revert mean. the starting a the the bit at foreign levels point low which England, that to I time similar with correct that mitigate the in in where U.S. stream. rates current analysis, fluctuations to three by same interest and in to and increases the look we Bank said about And income exchange foolish on that, exactly did Having the

how situated that and our the So going where this why our we of play take But with product a is and range could on Ultimately, not we things the – portfolio. is potentially are to with out one trying game. are to let dictate acquisition dictate a kept reason on main we tailwind. opportunities want same, a That's but the out. is the as well reasons the And what act forecast very believe knowing the to not exactly eye long build we we exchange an rate, that currently. these

keep it So entirety. our would be in mind, doesn't agnostic, its drive to necessarily we we in is fair totally but say strategy not something but

Chris Lucas

you. Thank That’s Great. this have I helpful. afternoon. all That’s

Sumit Roy

Thank you, Chris.

Christie Kelly

Chris. you, Thank

Operator

question next is Street. The Green ahead. Please go from Harsh Hemnani with

Christie Kelly

Harsh. Hi,

Harsh Hemnani

what Europe, versus does to one investments your Hey, the sale-leaseback for in are that U.S.? compare quick Christie. leases? acquisitions me. of of When you originations investments how about percentage A existing And think them in the

Sumit Roy

between I the difference compositions. a don't major there is think that

XX% did look around we the year-to-date. had on as XX%. as right quarters and what where as we've it's you leaseback side, And Harsh, If XX% quarters was at we've where had as high sale it been low been it's

closing is would meaningful when it leasebacks I is of said be sale in that, the dictates in of we that piece. think really what's way. quarter, size. a it function a some It larger Having available, a is so And when et that do given sale-leaseback decide cetera, those transactions to pursue possible much in

sale-leaseback For instance, U.K., was we we That did our the did Sainsbury's. a when it billion. $X.X first about into with went if we that you transaction was inaugural think that

about I going those similar And industry it's the that sale particular dominate gaming given because think transaction. a billion quarter think where opportunities types to quarter, $X.X don't to U.S. a close quarter. done it's it's going we it's we've of particular you see to and And them, and just unique If dominate if that with in the the when leaseback

I will it think be U.S. markets. and the consistent the between international

Harsh Hemnani

you. thank Okay,

Sumit Roy

you. Thank

Operator

ahead. with go The next Tsai Please question is Jefferies. from Linda

Linda Tsai

Hi.

Christie Kelly

Linda. Hi,

Linda Tsai

Christie. Hi

the the theaters materially In positive terms did same-store. comps And the and that same-store dependent X% partly is normalize? saw contributed When health quarter on and payback? to in of and growth strong in second change start cash fitness basis revenue, restaurants I to

Sumit Roy

of take back off basis clients a to and is. them these get cash It's of sort the basis. accrual lot on of start we It when

of going be mismatch. You're period going this XX where a have to to about still there's months

some us accrual starting of to to rate accrual right the higher, very and that's accounts X% a cash byproduct and And some AMC a this growth same-store way. move where be back are of in in growth. account. seeing in accounting, some a growth But these clients of that rental period point favorable to now, now case should these that and X.X% recognize of impacting we moving it's back expect you're is to disproportionately to all these same-store once of you normalizes, essentially back And

Linda Tsai

then some you to talked properties about still to money into vacant That's And prospects. think previously, you're helpful. I something redevelop releasing pursuing? putting this Is help

Sumit Roy

captured so, that a of And we've Very driven I'm re-leasing proud Linda. our our in that much TI it over is by XXX% but of some of team, that lot, some dollars. think the – – of A repositioning. certainly that is with spreads essentially being zero so lot not net I management asset

alternative that recapture with an use – some Linda, of concept XXX% is of saying of in that. ours, and bigger very a become a in hope forward. growth and terms path highest largely percentages a went restaurant, best of down And One portion it absolutely we concept. analytics we supplemental concept that north and information retail driven continue this converting that the a and but was service not we're And of much predictive that, driver can our by had going recognize of recapture bigger be rates. to you of share this particular that we aggregation you service location and alternative all value But that a is that focus on tool, track taking our for so quick will of the we to able quick the into

Linda Tsai

you. Thank

Sumit Roy

Thank you.

Operator

Roy Sumit to to question-and-answer our session. over remarks. turn concludes back would any like This for conference the I closing

Sumit Roy

joining I you to summer, rest everyone speaking hope for we enjoys look forward us Thank again you you. all today. Thank and with the the soon. of

Operator

The attending for Thank now conference concluded. presentation. today's has you

disconnect. may now You

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