Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: How should we think about the use of equity forwards this year and optimizing potential investment spreads with your capital sources? A: You should expect us to settle the equity in the back half of 2025. The agreement calls for us to sell them by the end of the year, but we could push it out further if needed. We are taking a more measured approach to investing this year, focusing on risk-adjusted returns.
Q: Can you talk about the cap rates you're seeing in the market for Dollar General, CVS, and Walgreens? A: Cap rates for Walgreens have varied widely depending on asset quality and lease term. CVS opportunities can move at lower cap rates, and there's a robust market for Dollar stores, attracting both individual and institutional buyers.
Q: How do you view your acquisition criteria today, and what can we expect for a minimum acquisition spread in the current environment? A: Our investment criteria remain unchanged, focusing on the best risk-adjusted returns. We assess corporate credit, unit-level cash flow, and real estate quality. Currently, spreads are less than 100 basis points relative to where we're acquiring.
Q: What are your target exposure levels for tenants like Walgreens and CVS, and do you have any further color on Big Lots? A: We aim to have all tenants below 5% exposure, with Walgreens already at 3.8%. For Big Lots, we expect six of seven locations to be assumed by Variety Wholesalers, which has an investment-grade profile.
Q: What categories are you prioritizing for acquisitions, and who are the new tenant relationships? A: We are focusing on convenience stores, quick service restaurants, auto service, grocery, and farm supplies. The new tenant relationships are within these categories.
Q: How do you balance getting better returns for shareholders with market sentiment and expectations? A: We focus on underwriting quality assets and reducing tenant concentration to avoid being impacted by market headlines. This approach allows us to maintain economic stability despite external perceptions.
Q: What are your cap rate expectations for 2025, and how do you see consumer trends affecting your tenant base? A: We expect cap rates to be at or above current levels in the next quarter. Inflation has softened, but consumer health remains a focus, particularly as the lower end continues to struggle.
Q: What kind of investors are buying your Walgreens properties, and what have you learned about the appetite for these assets? A: Most buyers are 1031 exchange investors. It requires more handholding due to Walgreens' news presence, but once investors are comfortable with the asset's stability, the appetite is strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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