And that really keeps a lot of our competition on the sideline. So it allows us to be very selective, allows us to really negotiate terms and the way we like to see them where we’re not really competing against other people that are in that are trying to buy the assets that we think that we are. So yeah, I mean cap rates have continued to move up. I know what we’re seeing in the second quarter I think will likely look a lot like the first quarter on. But yeah, I think there has been a little bit more of an acceptance that the Fed’s not going to turn around and just start cutting rates and bring it back to 2021.
Smedes Rose: I’m sorry, if it’s second quarter cap rates should be kind of in line with what you saw in the first quarter or you think it will be or your unit the sequential increase will be similar?
Mark Manheimer: I think the rates will be similar in the second quarter than the first. We saw them depending on what closes and we’re still sourcing a few more opportunities in the second quarter. But kind of what we have in the pipeline today looks pretty similar, although the lease term that we’re getting a much longer lease terms with better rental increases.
Smedes Rose: Okay. Thank you.
Operator: Thank you. Our next question is from Greg McGinniss with Scotiabank. Please go ahead.
Greg McGinniss: Hey, good morning. On the acquisition side. I’m just curious we kind of expect to see more of the same in terms of what you’re looking to target from a concept and industry standpoint, or are there any kind of new concept industries out there that given your cost of capital, maybe you’re now able to address or where cap rates have changed, you’re now able to address some or I guess just any changes in terms of industries that you’re targeting?
Mark Manheimer: Yeah. I mean you’ve seen no specific mostly the Dollar General. You’ve seen that concentration move up quite a bit. A lot of that was funding developers that we committed to last year. So I think we’ve got maybe another call it four or five months left of kind of kind of funding some of that on, but that’s going to be a little bit less than what you’ve seen in the past. You will see a few new tenants come into the portfolio. We do think it’s important for us to increase the diversification, not only in the top 20 just to be just broadly across the portfolio. And we are seeing some attractive sale leasebacks and other opportunities that we had in the past. There’s a few that we’ve been active with on the development side that maybe haven’t popped into our top 20 but are kind of get close there in the collision space.
So I think you will see a few new tenants and pop into the portfolio that I think we find to be very attractive and cap rates would have been much lower call it 18 months — 24 months ago that we would not have been able to have in the portfolio.
Greg McGinniss: Okay. And then on that development side, I believe you previously mentioned that you’ve been able to negotiate escalators into some of those development deals that previously didn’t have them. Have there been any other changes on the on the leasing side in terms of being able to build in escalators or different terms as the financing market has changed?
Mark Manheimer: Yes. I mean, I think not much of a change quarter over quarter. But yes, I mean, we’re getting better rent escalators and leases that historically have been flat. So that’s driven a lot of our capital recycling program bringing in some of those tenants with now longer leases with better rent bumps that turnaround and selling some of the flat leases a little less term and out of the portfolio and being able to do that slightly accretively is has been something that we focused on but no real big change quarter-over-quarter.
Greg McGinniss: Okay thanks. And final from me. Apologies if you already addressed this but have you guys talked about bad debt expectations built into guidance for the year?
Dan Donlan: Yes, we did on the last call I think as we sit here today and we’re still — on an annualized basis we’re still modeling somewhere between 20 basis points to 25 basis points at the high end of our AFFO guidance range.
Greg McGinniss: Okay. Thank you.
Operator: Thank you. Our next question is from the line of Alec Feygin with Baird. Please go ahead.
Alec Feygin: Hi. Thank you for taking my question this morning. First one for me is can you just talk about what are the categories that are in the assets held for sale?
Mark Manheimer: It’s a pretty big mix of. Yes we’ve got some of the big lots are in there and a lot of the dollar stores that I mentioned where we’re kind of recycling through to improve the escalators but it’s a pretty broad mix of a property type.
Alec Feygin: Got it. Thank you. And second one is maybe provide some color on the current in-place rents for the 19 Family Dollar stores in the portfolio and where you think the market is at for those properties if you did the to release them?
Mark Manheimer: Yes. I mean you’re talking about $90,000 to $100,000 per property. So the annual rents are very inexpensive rents that we think are largely replaceable That being said, you know, we’ve worked very closely with the tenant there and understanding the profitability and their commitment to our sites. So we still feel good that there’s no it could always close with a couple of cleanup going to close as many stores as they’re talking about. But certainly pleased to see their first list of 103 locations that none of ours we’re on that list on. But that being said, we do think that a lot of ours are pretty infill locations and we would have a lot of interest from various different tenants to take those assets at similar rents or potentially even higher.
Alec Feygin: Got it. That’s helpful. Thank you.
Operator: Thank you. [Operator Instructions] Our next question is from the line of Joshua Dennerlein with Bank of America. Please go ahead.
Farrell Granath: Hi. This is Farrell Granath, on behalf of Josh. I wanted to know if you could touch on what you’re seeing in investment spreads relative to where you can deploy capital today.
Mark Manheimer: Yes, yes sure. I mean I’ll take the first piece which is you know we most recent quarter were up 7.5. I think you’re going to kind of expect that to be similar in the second quarter. We really only have visibility going out into the second quarter and not as far as getting into the third. So tough to project beyond that, but it certainly gives us a pretty healthy spread off of where we raised capital earlier this year.
Farrell Granath: Great. And I know you already touched on Big Lots and Family Dollar. Was curious if there’s any other color on tenant largely Is there a watch list?
