Peter Coughenour: Yes. The impairment that was recorded during the quarter is related to one asset that we’re targeting for disposition. The tenant’s lease is expiring, and they’ve opted not to renew that lease.
Richard Milligan: Any color as to what industry that tenant is in?
Peter Coughenour: Yes. The tenant is in the grocery sector.
Richard Milligan: Okay. And Joey, just a follow up on the last quarter conference call, the stock was trading around $64 a share, you commented that ADC wouldn’t be issuing equity at those levels. And I’m just curious, is that still a line in the sand? Or what would need to change for you guys to be willing — what would need to change for you guys to be willing to issue equity at a price below that or at current levels?
Joel Agree: Cap rates would have to adjust and returns have to adjust. Again, this is at the end of the day, we’re going to focus on driving spreads here. And so we’re not going to go off the risk curve. We’re not interested in the entertainment — family entertainment or childcare, car wash space, we’re not going to enter into sale leasebacks with private equity-sponsored retailers, again that is — I’ll tell you, that’s the firm line, that’s the red line. The line in the sand is if the wind shifts and cap rates move, which we anticipate them to move, it’s going to be incremental and take time. We’ll look at what those appropriate spreads are, where our cost — relative cost of capital are and we would invest capital at an accretive — appropriately accretive basis, if that were the case.
So again, raising capital at these types of yields, unless we’re going significantly up the risk curve, which we won’t do, doesn’t provide for shareholder returns at the end of the day.
Richard Milligan: My last question, Joey, you’re sort of the, I guess, second or third net lease REIT to report earnings thus far and give a little bit additional commentary on the transaction market. Just more broadly, sort of outside of ADC, how do you think the transaction volume will trend in the fourth quarter and as we get into next year?
Joel Agree: Undoubtedly, significantly down. There’s no question. Anybody who goes against the grain in terms of transaction volume or hit the pedal right now and slams that pedal down probably needs to rethink that position given the — in light of the macro environment we’re in and the rate environment that we’re in.
Operator: Next question comes from Connor Siversky with Wells Fargo.
Connor Siversky: A couple of quick ones for Peter on the term loan. Could you just walk us through the math on the swap again? And then in the event that you were looking at the unsecured market instead of the term loan market, any sense what that rate would have looked like?
Peter Coughenour: Sure. So to hit on the $350 million term loan that we closed in July, that’s an all-in rate, including the swaps that we entered into, fixed at roughly 4.5%. Those swaps were entered into in the mid-3s and then there’s a spread on top of that, that gets us to the mid-4s. We also have an accordion option on that for $150 million on that term loan. We could exercise that accordion option today or look to a term loan of a different tenor with pricing likely in the mid-5s today, and we continue to have strong support from our bank group. And the $350 million term loan is the only bank debt that we have outstanding today. And so I think the bank debt market is certainly open for us today. In terms of a public unsecured issuance, 10-year issuance today for us would likely be in the high 6s. And obviously, there’s been a significant move in rates since our last call, the 10-year is up about 80 basis points since early August.
Connor Siversky: Got it. And then maybe one for Joey. Late in the summer, there was some commentary out there that certain blue-chip retail operations were looking to expand their footprint. I’m just wondering in the context of rising rates since then, if those conversations have died out somewhat and maybe those retailers are reconsidering those expansion plans?
Joel Agree: Haven’t seen any instance of retailers reconsidering their expansion plans. The true challenge is the moat and method which they execute those expansion plans. And that continues to be, as you would anticipate, with the 10-year at 4.9% this morning and SOFR where it is, and the curve where it is and frankly, the regional banks who are typically lending to merchant builders that continues to be the choke point. And so those conversations between us and retailers, the growing retailers or retailers that want to grow, continue. But I’ll tell you, every day, they’re getting a developer call them and telling them that they need to move up the return profiles because they can’t make that historic return work anymore. And so we’re seeing a shift, albeit it’s slow because of the gradual and fragmented nature of the space, but we’re seeing a shift upwards.
We’ll continue to have dialogue with those retailers and see if we can come to a solution that makes sense for both parties. But I think we’re only going to continue to see those trends continue.
Operator: The next question comes from Ki Bin Kim with Truist.
Ki Bin Kim: So the deals you closed on this quarter at a 6.9% cap rate. Obviously, those deals were probably underwritten a couple of months ago at least. When you look at the conversations you’re having today, and I realize cap rates can take a while to change, but how much has it changed so far from that 6.9% to today?
Joel Agree: Well, I’ll tell you that we anticipate printing north of a 7% in Q4. Again, volume is still up in the air. That will be at our election. Those conversations continue to move gradually, Ki Bin. This is — these are one-on-one, one-off sellers and they are sellers that — some are still hopeful for yesteryear. Hence, the challenge in moving cap rates in a quick and decisive manner. There are those that need immediate liquidity. I anticipate the year-end closures now really rethinking their pricing or the closures, I should say, the owners that want to sell by year-end and have a closing by year end, rethinking their strategies. We still see a wide range of asking cap rates. It’s truly amazing how many e-mail blasts we get that are still asking 4 handles in front of things with the 10-year at 4.9%.
