NETSTREIT Corp. (NYSE:NTST) Q3 2025 Earnings Call Transcript

NETSTREIT Corp. (NYSE:NTST) Q3 2025 Earnings Call Transcript October 28, 2025

Operator: Greetings, and welcome to the NETSTREIT Corp. Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Miller, Capital Markets and IR. Please go ahead.

Matt Miller: We thank you for joining us for NETSTREIT’s Third Quarter 2025 Earnings Conference Call. 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 netstreit.com. 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 risks and uncertainties 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-K for the year ended December 31, 2024, and our other SEC filings.

All forward-looking statements are made as of the date hereof, and NETSTREIT 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. Please refer to our earnings release and supplemental package for definitions of our non-GAAP measures, reconciliations to the most comparable GAAP measure and an explanation of why we believe such non-GAAP financial measures are useful to investors. Today’s conference call is hosted by NETSTREIT’s Chief Executive Officer, Mark Manheimer; and Chief Financial Officer, Dan Donlan. They will make some prepared remarks, and then we will open up the call for questions. Now I’ll turn the call over to Mark.

Mark Manheimer: Thank you, Matt, and good morning, everyone. We appreciate you joining us today to discuss our strong third quarter results, which were highlighted by record quarterly investment activity, well-executed capital markets transactions and consistent performance from our defensive net lease portfolio. Looking ahead to the fourth quarter and beyond, we expect to remain highly acquisitive due to our improved cost of capital, our attractive opportunity set and well-capitalized balance sheet. With that in mind, we are increasing our 2025 net investment guidance range to $350 million to $400 million from $125 million to $175 million. Additionally, our year-to-date disposition activity has us well ahead of schedule to exceed our year-end diversification goals as evidenced by our top 5 tenancy declining 600 basis points this year to 22.9% at quarter end.

Our momentum on the external growth front picked up considerable pace in the quarter as we closed a record $203.9 million of investments across 50 properties at a blended cash yield of 7.4%. These assets, which are primarily within resilient sectors such as grocery, auto service, convenience stores and quick-service restaurants have an average lease term remaining of 13.4 years and more than 1/3 of these investments are occupied by investment-grade or investment-grade profile tenants. Our weighted average lease term now stands at 9.9 years, up from 9.5 years a year ago, providing a strong foundation for predictable cash flows. Our ability to quickly ramp investments after raising capital in late July illustrates the inherent strength of our relationship-driven investment underwriting and closing teams.

We would also note that our later start in the quarter did result in a substantial number of investments closing in the last week of the quarter, which limits their impact to the full year results. On the disposition front, we sold 24 properties for $37.8 million at a 7.2% cap rate, allowing us to recycle the proceeds into higher-yielding opportunities as we have done every quarter in our existence. Please note that we see the fourth quarter as our last quarter of elevated disposition volume due to our focus on diversification as we plan to return to our more normal disposition volumes focused on credit risk and opportunistic sales. Turning to the portfolio. We ended the quarter with 721 investments with 114 tenants in 28 industries generating more than $183 million in ABR across 45 states.

With more than 62% of our ABR being generated from tenants with investment-grade ratings or investment-grade profiles and only 2.7% of our ABR expiring through 2027, our portfolio should continue to produce consistent and predictable cash flow. Our active portfolio management continues to contribute to our occupancy rate remaining at an industry-leading 99.9% with no material tenant disruptions. With that in mind, we expect to have our loan vacant property, a former Big Lots, leased by the fourth quarter to an investment-grade tenant at more than a 20% increase in rent with rent to commence later in 2026. While we have been able to generate highly favorable cash yields on investments as a public company, we are proud of our best-in-class credit loss statistics as we again had no credit losses in the quarter.

On the left side of the balance sheet, we believe our job is to find assets that generate the best risk-adjusted returns available, which is supported by our creative multipronged investment approach, proven underwriting method and proactive asset management process. By adhering to those core competencies, we aim to provide attractive and consistent cash flow generation for our investors. Looking at the right side of the balance sheet, we had an active quarter adding long-dated unsecured debt, further extending our debt maturity profile and decreased our leverage with significant equity raising, which has accelerated our ability to accretively grow our portfolio and in turn, enhance our earnings power as we look out to 2026 and beyond. Ending with the macro, while we have seen softness develop in the lower and middle-income consumer and some noise in the private credit markets, our focus remains on accretive investments in high-quality and less volatile necessity-based retail properties.

We believe our tenant quality, diversification and emphasis on opportunities with the best risk-adjusted returns positions us well for any and all macroeconomic environments. With that in mind, we are currently seeing the most attractive opportunity set that we have seen since going public over 5 years ago, and we are excited to have the dry powder to execute and drive growth well into the future. With that, I’ll turn it over to Dan for more details on our financials and outlook.

Daniel Donlan: Thank you, Mark. Looking at our third quarter earnings, we reported net income of $621,000 or $0.01 per diluted share. Core FFO for the quarter was $26.4 million or $0.31 per diluted share, and AFFO was $28 million or $0.33 per diluted share, which was an increase of 3.1% over last year. Turning to the expense front. Our total recurring G&A in the quarter increased year-over-year to $5.1 million, which is mostly a result of our staffing levels normalizing after restructured various roles last year. That said, with our total recurring G&A representing 10.6% of total revenues this quarter versus our 11.1% quarterly average last year, our G&A continues to rationalize relative to our revenue base, and we expect this rationalization to accelerate in 2026 and beyond.

Turning to capital markets activities in the third quarter. We completed a 12.4 million share follow-on offering in July, which raised $209.7 million in net proceeds. Turning to the ATM. We sold 1.2 million shares for $20.6 million of net proceeds in the quarter. And subsequent to quarter end, we sold an additional 1.6 million shares for $29.7 million of net proceeds. Looking at the balance sheet. Our adjusted net debt, which includes the impact of all forward equity, was $623.5 million. Our weighted average debt maturity was 4.2 years, and our weighted average interest rate was 4.45%. Including extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity was over $1.1 billion at quarter end, which consisted of $53 million of cash on hand, $500 million available on our revolving credit facility, $431 million of unsettled forward equity and $150 million of undrawn term loan capacity.

From a leverage perspective, our pro forma adjusted net debt to annualized adjusted EBITDAre was 3.6x at quarter end, which remains well below our targeted range of 4.5 to 5.5x. Moving on to 2025 guidance. We are reiterating our AFFO per share guidance range of $1.29 to $1.31 and are increasing our net investment activity range to $350 million to $400 million from the prior range of $125 million to $175 million. We continue to expect cash G&A to range between $15 million and $15.5 million. Additionally, with our outstanding forward equity increasing to $430 million this quarter from $202 million last quarter, our AFFO per share guidance now assumes $0.015 to $0.025 of dilution from the treasury stock method. Lastly, on October 24, the Board declared a quarterly cash dividend of $0.215 per share.

The dividend will be payable on December 15 to shareholders of record as of December 1. With that, operator, we will now open the line for questions.

Operator: [Operator Instructions] Our first question is from John Kilichowski with Wells Fargo.

Q&A Session

William John Kilichowski: Mark, you made the comment in the opening remarks that you’re currently seeing the most attractive opportunity set that you’ve seen. Maybe could you dive deeper there in terms of the assets that you’re looking at pricing and then maybe the cadence that you think you can achieve going forward from here?

Mark Manheimer: Yes, sure. Good to hear from you, John. Yes, so I mean, very similar types of assets. I mean, we’re looking at a lot of C-stores, quick-service restaurants, grocery, QSR, similar to what we’ve really kind of done in the last several quarters. Pricing very close to what we did in the most recent quarter. So I think we’re probably going to be in the 7.3%, 7.4% range. Maybe a little bit more investment grade so far. We’ll kind of see what we source from here on out, but pretty confident that we should be able to be at the high end of the acquisition range provided. And then looking forward to 2026, I’m not giving guidance on acquisitions at this point, but I think you can expect the dispositions to come in quite a bit.

We’ll continue to opportunistically sell some assets and focus on potential credit issues down the line and try to get ahead of that, which we did even when we were in diversification mode, but we’ve really accomplished the goals that we set out at the beginning of the year on the dispose side. So it feels like the net investments should be a little bit higher next year.

William John Kilichowski: Okay. That was very helpful. And then just from a pricing perspective, I know this quarter, there was a step down, but you had communicated that several times intra-quarter. I’m just curious, are the cap rates that you’re seeing today a better run rate for the business going forward?

Mark Manheimer: Yes, I think so. And yes, I mean, I appreciate your comment there. We did try to make that clear in the second quarter that the 7.8% was not going to be repeated, and we’ve returned back to that kind of 7.4%, 7.5% type cap rate range. I think right now, the 10 years come in from, call it, 4.5% to 4%, inside 4% right now. And so a little bit more competition in the space. So I think it’s reasonable to assume that there could be another 10 basis points of compression looking forward into 2026, but that’s always difficult to predict outside of, call it, 60, 90 days on a go-forward basis.

Operator: Our next question is from Michael Goldsmith with UBS.

Michael Goldsmith: Lots of activity in the quarter, but the guidance didn’t really move. So can you just talk a little bit about what are the factors that maybe didn’t move the 2025 AFFO per share outlook? And I guess, how will that impact the earnings growth kind of going forward?

Mark Manheimer: Yes. Michael, I think there’s really 2 drivers to the guidance. The first being that while we had a ton of activity in the third quarter, the timing of that activity was — on the investment side was heavily weighted to the back half of the quarter. We closed basically $100 million on the last 2 days of the quarter, whereas the loan payoffs and the dispositions were heavily weighted to the front end. And you can see that on the income statement. Our total revenues went up $22,000 quarter-over-quarter. So certainly, timing has played a big part in that, whereas in the second quarter, it was the exact opposite was true. And the other is just the unknown nature of the treasury stock dilution. I mean we clearly know how much we’ve raised.

We know how much we’re thinking about raising. It’s just the price at which the stock is going to average over the quarter is unknowable. And so we certainly baked in a ton of conservatism. What I can say is if the stock kind of stays were to open this morning, obviously, the bottom end of the range would be nowhere possible. But hopefully, that’s not the case. And we think our stock price should continue to season and move higher from here, just given the growth that we see coming in 2026 from everything that we’re doing here in 2025. I’m sure, as you know, what you do in the third and the fourth quarter has a very big impact on what can happen in the following year, and we’re cognizant of that, too. So I certainly think looking at where our cost of capital is today, where we’ve already raised capital in terms of our term loans, we have another $150 million we can draw down on, basically in the mid-4s.

And assuming we can get an IG rating coming up here shortly, that moves down even further from there. So as you think about that accretion, we feel pretty strongly we can get back to certainly an above-average growth rate in 2026 and beyond. And just a little bit of color on the extreme nature of the timing of our acquisitions in the quarter. We raised capital at the end of July. So we’re — we don’t want to get over our skis and start deploying capital before we raise it. So we really had a couple of months to deploy the capital. We were really only planning on doing a little bit more on top of the — covering the dispositions that we did, but raising capital at the end of July kind of put us in a spot where we had 2 months to close, and we’re still able to hit pretty good numbers.

But to Dan’s point, that was all very late in the quarter.

Michael Goldsmith: Got it. I really appreciate it. And my follow-up question is just on the equity that needs to be settled. How are you thinking about that? And then what would be kind of the accretion on that equity associated with future deals?

Daniel Donlan: Yes. So in terms of the forward equity, as you think about it, you also got to think about where we raised the prior equity versus where our prior cap rates were. In the first half of the year, we averaged 7.7%. So some of the equity raise that was at lower stock prices than we are today, the spread is still fairly high on that anywhere from 135 to 150 basis points when you think about where we raised the term loan capital. As we sit here today, our spreads are closer to, call it, 165, 170, which is still a very healthy spread when you think about the historical average for the sector over the last 20-plus years. So I think for us, that should allow us, again, to continue to grow AFFO per share as we look out to 2026 at a fairly healthy pace and then should ramp up further, hopefully, in 2027 as some of the lower-priced forwards get settled over the course of 2026.

But for modeling purposes, I think you should settle somewhere around 8 million to 9 million shares at the end of the fourth quarter. And then we should get rid of most of what was raised over the course of 2024 and 2025 ratably over the course of 2026.

Operator: Our next question is from Greg McGinniss with Scotiabank.

Greg McGinniss: So although we weren’t surprised by the lower cash cap rates achieved this quarter because of the commentary that you guys have been providing, we were a little surprised by the limited increase in IG or IG-like acquisitions. Now it sounds like you’re not really expecting much of an increase on that front going forward either. Could you just help us understand what you’re seeing on pricing for the IG or equivalent assets and potential for increased acquisition levels within that subset as your cost of equity improves?

Mark Manheimer: Yes, sure. So I’d say there’s probably about a 50-basis-point difference in terms of the investment-grade and investment-grade like assets that we acquired versus the non-investment grade. So enough of a delta there where as long as we’re not taking much more risk, that’s something that we’re more than comfortable doing. And there just is a lot more attractive opportunities in the non-investment-grade side at this point. I am expecting the fourth quarter to be a little bit more heavy on the investment-grade side than what we’ve done for this year. But the reality is investment grade is just not really something that we focus on. We’re looking for the best risk-adjusted returns that we can. In some quarters, that’s going to be high and some quarters, that’s going to be low.

And we’re really kind of focused on getting the best pricing that we can, managing the portfolio and then not having credit losses, which I think we’ve been able to accomplish both really strong pricing with minimal loss.

Greg McGinniss: Are you seeing any trends in terms of what you’re looking to acquire from that standpoint on an industry level in terms of where you’re seeing the better risk-adjusted returns now versus maybe historically?

Mark Manheimer: Yes, sure. I mean we certainly have seen more opportunities on the convenience store side. Quick-service restaurants is another area that has been a focus. Grocery, auto services, that’s really been kind of the main 4 food groups that we’ve had the most success, but there’s always a deal here or there that’s outside of those. We’ve added a bit more tractor supply. You saw that move up quite a bit. We’re adding a little bit more in the fourth quarter, but it’s a pretty broad diversified mix what we’re adding in the fourth quarter.

Operator: Our next question is from Haendel St. Juste with Mizuho Securities.

Haendel St. Juste: I wanted to ask about competition. Certainly quite a bit on the call so far this quarter, you mentioned that you’re seeing a bit of competition from private equity. I’m curious what you think of — what you think their investment strategy is, where are they deploying more capital versus where you are looking to deploy and if and how you’ll be able to insulate yourself from that a bit?

Mark Manheimer: Yes, that’s a great question, Haendel. It’s been a big topic. I think every private equity firm is a little different. You saw a couple of larger private equity firms kind of get in the game a few years ago and didn’t really make much of an impact, quite frankly. And then you’ve seen a couple more in the last couple of years, really kind of smaller teams going out elephant hunting. A lot of those have been more focused on industrial, but even on the retail side, kind of looking for the larger transactions to put a lot of capital to work. So we’re not really running into, obviously, the industrial side, but also if someone’s kind of doing 9-figure type transactions, that’s not going to be where we play. More recently, we’ve seen one large player focused on smaller transactions, but further down the credit curve than really where we like to play, although we have seen them a little bit on the sale leaseback side, but there’s more than enough opportunity where — and especially being that they are looking at a different credit profile for the most part than what we’re looking at, not going to have a big impact on us, but they’re really the first one that we’ve seen out there in the investment world.

But I think with how fragmented the net lease retail space is and how little institutionally owned it is, there’s just a lot of opportunity for even more groups to come in without having a large impact on the pricing that we’re seeing.

Haendel St. Juste: Appreciate the thoughts there. Maybe as a follow-up, I was curious, maybe an update just more broadly on your strategic plans to reduce your Dollar General, Walgreens and CVS. It looks like you made quite a bit of progress in your quarter. Curious how the pricing came in versus prior sales versus your expectations. And then looking ahead, any other category that you’re looking to call a bit into next year, understanding that much of the heavy lifting has already been done?

Mark Manheimer: Yes. I mean I think the heavy lifting, to your point, is really already done. We made a big move on the dollar store side. Pricing was pretty attractive. We did do a little bit more with some institutions where the cap rate was maybe slightly higher than the 1031 market. So I think the remaining sales that we have in that space are going to be 1031 driven. We were already in a pretty good spot going into the quarter as it relates to pharmacy. So we’re being a little bit more selective on pricing there. And so we’ve hit our goal on Walgreens getting that below 3%, just about there on CVS. Certainly, we’ll be there here in the next couple of weeks. So getting those down, we can be a little bit more choosy when it comes to the pricing and not feel as much pressure there.

So I’d expect us to continue to run the portfolio with tenants below 5%. Walgreens will continue to decrease over time, a little bit less of a — a little bit less pressure there, but that will still continue to come down with a sale here or there and then with us not adding to either of those sectors, just increasing the asset base will decrease those exposures over time.

Operator: Our next question is from Smedes Rose with Citi.

Bennett Rose: I just wanted to understand maybe the opportunity set a little better. I mean you significantly increased the acquisitions outlook, obviously, for the year. I know part of that is driven by better cost of capital. But also, I mean, is the overall market kind of expanding? Because I mean we just hear from other companies, too, it seems like the acquisitions outlook just continues to sort of accelerate. I’m wondering if you think that’s sort of going to continue indefinitely? Or is there anything in particular that’s driving that?

Mark Manheimer: Yes. No, it’s — yes, we certainly are seeing a lot more opportunity. I think to your point, others are saying the same thing on their call. So I don’t think it’s just us. And thinking through really what’s driving that, rates have come in enough where you have the 10-year has gone from 4.5% to 4%, the 5-year, which is probably more important to 1031 buyers, down around 3.6% or wherever I even looked today. But I mean, that’s an area where it pencils on the debt side. So I think we’re at a point where rates aren’t really restrictive to getting deals done. So I think that’s kind of opened up the — maybe not the floodgates, but I think on the margin, we are seeing more opportunity across the board with every different approach to acquisitions that we take, we’re seeing more opportunity really everywhere.

Operator: Our next question is from Linda Tsai with Jefferies.

Linda Yu Tsai: Yes, it makes a lot of sense to continue diversification in your portfolio, reducing the drug and dollar stores and AAP exposure. That being said, where do you think spreads between acquisitions and disposition cap rates could trend into ’26?

Mark Manheimer: Linda, yes, I mean, it’s probably a little bit difficult to say because we’re going to be more opportunistic on the disposition side. So the cap rates could come in a little bit if we’re — if we see some good opportunities there. We had some pressure on our — put some pressure on ourselves by setting some diversification goals where we’re selling assets in industries that were maybe a little bit out of favor. So I think that made it a little bit more difficult, but certainly, a strong 1031 market allowed us to be able to hit those goals a little bit ahead of time. So — but the dispositions really aren’t going to drive much next year. We’ll probably return to a $15 million to $25 million pace, which I think is historically what we had done coming into 2025. But overall, I think the cap rates will probably be a little bit lower on the disposition side.

Linda Yu Tsai: And then just in terms of your investment spread at 160 bps relative to your WACC, how do you think that could trend, say, by like the second half of ’26?

Daniel Donlan: Yes. I mean, you tell me where the stock is going to go, Linda, I can give you that answer. I think as we look at cap rates, as Mark said, we think cap rates may — could potentially drift down 10 basis points over the next 6 to 8 months. It’s really unsure. I think we have a very good value proposition here. We’ve got our cost of capital back. We can continue to grow earnings at a healthier clip and a stronger clip than we did last year. So it really just all depends on kind of the stock price and then to a lesser degree, the — where debt is. I mean we’ve basically satisfied our debt needs for the next, call it, 12 to 15 months. So any type of our capital raising and/or our usage of debt is going to be relegated to the credit facility as well as just bring — settling the forwards over the course of 2026.

So I’m hopeful that — we’re hopeful the stock price can continue to move higher, just given the opportunity set that we’re seeing. And so I think spreads can hang out where they are or move higher. But I think the one thing we feel confident in at least over the next 6 months is that cap rates should remain in and around kind of where they have been.

Linda Yu Tsai: Just one last question. Your tenant credit outlook versus a year ago, how does that compare?

Mark Manheimer: Yes, not much different. I mean, I guess, a year ago, we had Big Lots, which we knew was something that we had to work through. Right now, we don’t really have anything on the credit watch list. Some coverages have moved around a little bit here or there, but nothing that we’re concerned with.

Operator: Our next question is from Jay Kornreich with Cantor Fitzgerald.

Jay Kornreich: I wanted to go back to the pace of growth going forward. You mentioned a robust opportunity set and net investments to pick up in 2026. I’d be curious just about how you think about your goals for next year. Are you more focused on getting to a certain quarterly investment pace? Is it more about achieving a certain earnings growth level? Just how do you think about that now that you’ve returned to that opportunity set?

Mark Manheimer: Yes. I mean I think you have to evaluate what the opportunity set is. And right now, it’s robust. We expect that to continue. And then you have to consider your cost of capital, which is improving, certainly not quite where we want it to be. And you need to consider your team and what we’re capable of. And I think we’re capable of significantly more than what we’ve done in the past. And so I think there’s an opportunity as our stock has continued to recover and get better that we can ramp acquisitions beyond what we’ve done historically. To what level remains to be seen. I guess we’ll decide when we want to give AFFO per share guidance and acquisitions guidance at a later date. But I think right now, that’s trending to a larger number.

Jay Kornreich: Okay. And then just as a follow-up, you referenced the prospects of getting investment-grade rating. Can you just give an update as to where that process stands and potential timing to achieve that?

Daniel Donlan: Yes. I mean I think what we said all along is that we would hope that we have some type of discussion this year. And I think that still remains true. But obviously, nothing is set in stone. And so I think we’ll continue to say, hopefully, we can do something by the end of the year.

Operator: Our next question is from Wes Golladay with Baird.

Wesley Golladay: Looking outside of traditional acquisitions, are you seeing any development opportunities? And do you have any appetite to increase the loans?

Mark Manheimer: Good question, Wes. So yes, we are seeing good opportunities, both on the loan side and the development side, but really not seeing enough of risk-adjusted return on the development side to really kind of ramp that. We’ve continued to work with a few tenants directly on some development. That’s been pretty good. And I think we’ll probably see 1 or 2 new tenants kind of pop up in our top tenant list in 2026 from that, but it’s — I don’t think it’s going to be as big a piece of what we’ve done historically. The loan book, we’ve decided to kind of bring that down a little bit over time. And — but we’re still seeing some pretty good opportunities to replace some of the loans that are being paid off.

Operator: Our next question is from Upal Rana with KeyBanc Capital Markets.

Upal Rana: Just one quick one for me. I want to get your thoughts on the auto parts exposure as it makes up about 2.5% of your ABR, just given some of the recent bankruptcy news out there.

Mark Manheimer: Yes, sure. I mean, so we’ve got really 3 tenants there, Advanced Auto, which has been brought down quite a bit closer to 1% at this point. O’Reilly’s and AutoZone. We don’t really think that the most recent bankruptcy is something that is going to impact them or even really tangential to them. Really, the bankruptcies that we’ve seen and kind of the cockroaches that people are talking about, we haven’t seen the spread of the cockroaches at this point. And some of that is really due to fraud, which we don’t think is really indicative of what’s really going on in the economic market.

Operator: Our next question is from Jana Galan with Bank of America.

Jana Galan: Given the increased competition for net lease retail strategies, are you seeing any changes in lease structures, whether it’s term or escalators or options? Just curious if people are trying to compete on something other than price.

Mark Manheimer: We haven’t really seen any change. I mean I think the institutional capital that’s come to the space, I think they’re pushing to try to get a lot of the same things that our public peers are trying to get, which is longer leases with good rental escalations. So we haven’t really seen much of a change in terms of lease structures.

Operator: Our next question is from Daniel Guglielmo with Capital One Securities.

Daniel Guglielmo: Based on the commentary and results, you are exiting the recycling phase and headed back into a growth and scaling phase. Looking back on the recycling efforts, are there any learnings that you’re going to take with you as net acquisitions ramp back up?

Mark Manheimer: Yes. I mean I think we’ve always been confident in our ability to reduce exposures. And I think maybe the lesson learned for us is having some larger concentrations with publicly traded companies that are constantly in the news cycle at the tenant level, even if you’ve got really strong assets that generate a lot of cash flow, sometimes it doesn’t matter and can still impact your cost of capital, which matters as an external growth vehicle like we are. So I think we’re going to be a little bit more cognizant of allowing some exposures to get higher, which is a little bit easier to do now that we’ve got about $2.5 billion of assets. So being a little bit bigger does help that.

Daniel Guglielmo: Okay. Great. I appreciate that and makes sense. And then we always like to look at the ABR by state slide. So when you think about the existing pipeline, are there states or regions where you see better investment opportunities over the next year or so?

Mark Manheimer: Yes. I mean we’re somewhat agnostic to what state an asset is in. We’re focused a little bit more on the micro market of does that location have the demographics to support not only the use of the asset that we’re buying, but also potentially future uses and future tenants. And I think overall, we’re probably seeing a little bit more opportunity in the Sunbelt where you’re seeing more population growth. Texas is a big state. So that being our #1 state. We kind of think of Texas as kind of being like 2 or 3 states, depending on what region of Texas you’re in. And so kind of breaking that up by state, sometimes I think you see a lot of our peers also have Texas as the #1 state. But I wouldn’t draw too many conclusions from what’s in the pipeline or where we’re looking to grow. I think it’s really just where the opportunities are, where we can get the best risk-adjusted returns and that can be in really any state.

Operator: There are no further questions at this time. I’d like to hand the floor back over to Mark Manheimer for any closing comments.

Mark Manheimer: Well, thanks, everybody, for joining today. We appreciate the interest in the company and look forward to meeting up with everybody in the conference season. Take care.

Operator: Thank you. This concludes today’s conference. We thank you again for your participation. You may now disconnect.