Participants

Amy An; Senior Associate - Investor Relations; Netstreit Corp

Mark Manheimer; President, Chief Executive Officer, Company Secretary, Director; Netstreit Corp

Daniel Donlan; Chief Financial Officer, Treasurer; Netstreit Corp

Elmer Chang; Analyst; Scotiabank Global Banking and Markets

Michael Goldsmith; Analyst; UBS Investment Bank

Ravi Vaidya; Analyst; Mizuho Securities USA

Michael Gorman; Analyst; BTIG LLC

Alex Sagal; Analyst; Robert W. Baird & Co. Incorporated

Linda Tsai; Analyst; Jefferies LLC

Daniel Guglielmo; Analyst; Capital One Securities

Jay Kornreich; Analyst; Wedbush Securities

Upal Rana; Analyst; KeyBanc Capital Markets Inc.

Farrell Granath; Analyst; Bank of America

Presentation

Operator

Greetings and welcome to the Netstreit Corp fourth quarter 2024 earnings call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce Amy An, Investor relations. Please go ahead.

Amy An

We thank you for joining us for Netstreit's fourth quarter 2024 earnings conference call. In addition to the press release distributed yesterday after market closed, 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 www.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 risk 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, 2023 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, reconciliation to the most comparable GAAP measures, 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 the call for your questions. Now, I'll turn the call over to Mark. Mark?

Mark Manheimer

Thank you, Amy, and thank you all for joining us this morning on our fourth quarter 2024 earnings call. I first want to congratulate the team on an outstanding quarter of accelerated transaction activity as we completed over $195 million of gross investments, our highest quarter on record, at a blended cash yield of 7.4% or 8.1% on a straight-line basis with 14 years of weighted average lease term.
Included in this activity were three development projects totaling over $7 million that commenced rent in the quarter.
As of today, our development pipeline consists of five projects with a total estimated cost of $14.6 million which includes estimated remaining funding of $6.7 million. Similar to last quarter, a greater portion of our quarterly investments were [Selly's back] transactions, as we have seen improved risk adjusted returns emerge from our opportunities set within the sourcing channel.
Conversely, we continue to see stickiness and less attractive returns as it pertains to the investment grade opportunities that we have historically acquired.
While these market dynamics have caused a shift in our mix of investment grades and non-investment grade opportunity sets, we are continuing to find great assets with healthy unit level performance, fungible real estate with replaceable rents, and strong credit profiles, all with improved risk adjusted returns.
Turning to the portfolio, we ended the quarter with investments in 687 properties that were leased to 98 tenants operating in 26 industries across 45 states. From a credit perspective, nearly 71% of our total ABR is leased to investment grade or investment grade profile tenants. Our weighted average lease term remaining for the portfolio is 9.8 years, with just 2.4% of ABR expiring through 2026.
From an asset management perspective, we were very active this quarter, as evidenced by our record disposition activity, which was facilitated by interest from a broad array of real estate investors, including small 1031 buyers, family offices, and large institutions.
This strong level of demand, which has continued into 2025, resulted in our top 10 concentration declining 410 basis points to 45.1% of ABR, including a 100-basis point reduction in Walgreens to 3.8% of ABR and a 260-basis point drop in Dollar General to 8.6% of ABR.
While we have made tremendous strides towards our diversification goals, we are not slowing down our efforts. Moreover, we expect our top 10 concentration to more closely mirror the sector average over the near to intermediate term, which includes having no tenant above 5% of ABR by year end.
Additionally, similar to this quarter's $59 million of dispositions at a blended cash yield of 7.1%, we expect to accretively recycle the proceeds generated by future diversification efforts as we have done each and every quarter since coming public nearly five years ago.
Next, I would like to focus on a few portfolio tenants, namely Walgreens, CVS, Family Dollar, Advanced Auto, and Big Lots that have remained in the net lease news cycle over the past 12 months as they have struggled to pass on higher prices to their consumers and therefore they have appropriately decided to close underperforming stores to maximize cash flow.
Thus far, we have experienced virtually no impact from these closure announcements, which, while not surprising to us, is a testament to the level of due diligence we complete at underwriting. Notwithstanding our long-term tenant relationships and the constructive two-way dialogue we maintain with most tenants, our evaluation during the underwriting process includes much more than understanding a tenant's corporate credit.
By utilizing technology and asymmetrical information, we have proven to be highly accurate in how we decipher the unit level productivity of our locations and the strength of our real estate.
More specifically, Family Dollar, Walgreens, CVS, and Advance Auto have closed or have announced the closure of nearly 10% of their stores in aggregate. However, despite owning 162 properties leased to these four tenants, we currently have just one dark store among these concentrations, which is a smaller asset that generates around $100,000 in ABR with more than 8 years of remaining lease term.
Based on our assessment, we do not foresee any loss to our small investment given our projection for re-tenanting the asset and the expected lease termination phase.
We saw a similar outcome as it relates to our Big Lots concentration, whereby the tenant entered bankruptcy with 1,389 stores, which was subsequently reduced to roughly 800 stores under the proposed Nexus Capital acquisition.
After that acquisition failed and Variety Wholesalers emerged as the new buyer, this was further reduced to an expected 225 store to 250 stores. As we sit here today, we expect to have six of our original seven stores assumed by Variety Wholesalers and just one store in Bowie, Maryland rejected, where we expect a new tenant to pay rent at or above the prior rent.
Again, we believe this stark difference in outcome when comparing our portfolio to the broader market is driven by our aforementioned relationships, experience, and aptitude of our underwriting team, and the discipline we consistently exercise when making long-term investments.
All told, this has resulted in an average credit loss of just 4 basis points since inception. From a risk perspective, we also have very low lease expiration risk with the aforementioned tenants as just 132 basis points of our ABR expiring through 2030 is derived from these concentrations.
While our conviction in the strength of our assets and our underlying locations has remained steadfast, we believe the market should gain similar comfort in our portfolio given the de minimis impact experienced from these store closures to date and our proven ability to sell property at least to these tenants in an accretive manner.
Before handing the call over to Dan, I wanted to reiterate a message that we have consistently provided in the past. We strive to remain thoughtful and opportunistic in our mission to maximize total shareholder return, and that includes maintaining balance sheet discipline.
Despite seeing a robust opportunity set that we would prefer to pursue more aggressively, we will not grow for the sake of growth, and we will remain patient with our cost of capital.
With that, I'll hand the call over to Dan to go over our fourth quarter of financials and then open up the call for your questions.

Daniel Donlan

Thank you, Mark.
Looking at our fourth quarter earnings, we reported a net loss of $5.4 million or $0.07 per diluted share. Core FFO for the quarter was $26.5 million or $0.32 per diluted share, and AFFO was $25.9 million or $0.32 per diluted share, which was a 3.2% increase over last year.
For the full year 2024, we reported a net loss of $0.16 per diluted share, core FFO of $1.26 per diluted share, and AFFO of $1.26 per diluted share, which represented 3.3% growth over 2023.
Turning to the expense front. Total recurring G&A in the quarter declined 10% year over year to $4.3 million while recurring cash G&A declined 6% year over year to $3.3 million. In addition, with our total recurring G&A representing 11% of total revenues for 2024 versus 15% in 2023, our G&A continues to steadily rationalize relative to our revenue base.
Turning to the capital markets. On January 15, 2025, we closed on $275 million of additional financing commitments. This included a new fully drawn $175 million senior unsecured term loan which was swapped to an all-in fixed rate of 5.12% through final maturity in January 2030 and an upsized $500 million revolving credit facility which was increased from $400 million.
We also extended the maturity date of our existing $175 million term loan to January 2030 from January 2027 and amended all of our existing credit agreements to remove various financial covenants and provide for improved pricing when we meet certain investment grade rating and leverage targets.
Turning to the balance sheet. When accounting for the impact of the aforementioned debt transactions, our pro forma total adjusted net debt, which includes the impact of all forward equity was $848 million. On a pro forma basis, our weighted average debt maturity was 4.3 years and our weighted average interest rate was 4.53%.
Including extension options which can be exercised at our discretion, we have no material debt maturing until February of 2028. In addition, our pro forma liquidity was $635 million at year end, which consisted of $14 million of cash on hand, $436 million of availability in our revolving credit facility, and $185 million of unsettled forward equity.
From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 4.5 times at quarter end, which remains well within our targeted leverage range of 4.5 times to 5.5 times.
Moving on to guidance. We are introducing our 2025 AFFO per share guidance range at $1.27 to $1.30. Additionally, we expect our net investment activity for the year to range between $75 million to $125 million and our cash G&A to range between $14.5 million to $15.5 million which is exclusive of transaction costs and severance payments.
From a rent loss perspective, our guidance assumes roughly 100 basis points of unknown rent loss at the midpoint of our range, which we believe should prove conservative as the year unfolds.
Lastly, on February 21, the Board declared a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 31 to shareholders of record as of March 14.
Based on the dividend amount, our AFFO payout ratio for the fourth quarter was 66%.
With that, operator, we will now open the line for questions.

Question and Answer Session

Operator

(Operator Instructions)
Greg McGinniss, Scotiabank.

Elmer Chang

This is Elmer Chang on with Greg.
So you sort of killed two birds with one stone by reinvesting asset sales of your riskier exposures into another record quarter of transaction volume at a mildly accretive spread. But you didn't settle any equity forward.
So how should we think about the use of those forwards this year and how you're planning to optimize potential investment spreads with your capital sources?

Daniel Donlan

Yeah. Hey, Elmer. It's Dan. You should expect us to settle the equity in the back half of 2025.

Elmer Chang

And then are you required to settle them at the end of the year, or can you potentially extend them another six months or so?

Daniel Donlan

Right now, the agreement calls for us to sell them by the end of the year. We could always push it out further if we want, but I think we're likely to sell them in the back half of this year.

Elmer Chang

Yeah. And then you also mentioned the release taking a more measured approach investing this year. You're seeing more selling spec opportunities. Does that help much on cap rates as you think about investments throughout the year? And will transacting still -- or will transacting still require slightly less investment grade exposure?

Mark Manheimer

Yeah. I mean right now, we're seeing risk adjusted returns a little bit more attractive with some of the investment grade profile and some investment grade opportunities. We really just haven't seen a big move -- a big enough move, I should say, with some of the investment grade tenants.
There are some that have moved up and some haven't. So we've kind of mentioned this on several of the last five or six earnings calls. But we're really not dogmatic about whether something is investment grade or not. We're really trying to maximize our risk adjusted returns.
And sometimes those opportunities are investment grade and sometimes, they're not. We've got quarters where we've been 100% investment grade and obviously, we've had some where we were kind of 25%, 30% investment grade.
And right now, the best opportunities that we're seeing largely on the sale-leaseback side, the blend and extend side, with various other retailers that we -- some are new relationships and some are ones that we continued like Gerber Collision.

Operator

Michael Goldsmith, UBS.

Michael Goldsmith

You talked about diversifying the portfolio and reducing exposure with no tenants above 5%, which implies kind of continued selling of Dollar General and CVS. So can you talk a little bit about the cap rates that you're seeing in the market from that as well as what sort of cap rate you're seeing on the Walgreens that you've been selling?

Mark Manheimer

Yeah. Thanks, Michael.
Yeah. So,the Walgreens that we've sold, I mean, honestly, the cap rates have varied quite widely depending on really the quality of the asset and lease term certainly driving some of that.
So we've seen a pretty wide range there. Some of the sixes and some pretty far north of that. So and then as it relates to CVS, I think we can move those at lower cap rates.
I think there's more ability to get a better cap rate on some of the CVS opportunities that we're potentially looking at. And then Dollar stores, we've been -- we've seen a really robust market to be able to sell those, which has been encouraging not just from individual 1031 buyers but also some larger institutions.

Michael Goldsmith

And as a follow up, right, like in conjunction with your disposition this quarter, you saw strong levels of demand from the buyer. So I guess the question is then what sort of competition are you seeing out there when you're purchasing?
And then maybe you can split out, how that looks for investment grade properties or investment grade tenants versus non-investment grade which you've been targeting more?

Mark Manheimer

Yeah. That's a good question.
So as it relates to investment grade tenants, there's more competition. There's really always been a little bit more competition there. It's easier for 1031 site buyers to go get financing from a bank if it's got an investment grade rating.
And then on the non-investment grade side, really I think everything that we acquired in the last quarter, we really, there was no option process, there was no bidding process. It was really us negotiating with the seller versus what their expectations were on price.

Operator

Ravi Vaidya, Mizuho.

Ravi Vaidya

Just wanted to think about how do you view your acquisition criteria today? Are you still focusing on investment grade and what can we expect for a minimum acquisition spread in the current environment?

Mark Manheimer

Yeah. So yeah, thanks, Ravi.
So I'll take the first part of that question. I'll let Dan kind of tackle the spread side of the equation.
Our investment criteria has not changed one iota really since inception. We continue to look for the best risk adjusted returns that we can find. There's really three big pieces. I mean there's probably 100 things that go into our underwriting, but there's really three big pieces that fall into our investment criteria, one of which is corporate credit, which I think some people think investment grade, not investment grades.
We're really trying to understand what's the cash flow generated versus the financial obligations of the tenant. And how volatile is that going to be. Are they going to have a big surcharge ratio? Well north of two for a long period of time, or are we going to starting having conversations when that dips below one, which we obviously want to avoid those situations as much as possible.
And that is correlated to investment grade tendency and correlated to credit ratings but not entirely. And then the second big piece that we're focused on is we want to buy assets whether it's an investment grade tenant or not, where they're generating strong cash flow at the unit level so that at the end of the lease term in a restructuring, the tenant wants to stay there and the negotiation is pretty simple.
If they're generating a lot of cash flow at the location, there's no conversation on reducing rent or rejecting a store or not renewing a store at the end of lease term. And then the third big piece, of course, is the real estate, which is ultimately what we're buying.
And then if we have to -- we get the first two things wrong and we have to take the asset back where the world changes and that use doesn't work anymore. How much is it going to cost us to put a new tenant in, what's the demand going to be, and what's the market rent at that location?
So how much rent are we going to lose or how much rent would we potentially gain? So that really kind of all filters through to what's the expected loss at each -- in each investment, and we're trying to minimize that while maximizing the returns.
And so right now, just the opportunity set is really all that has changed. And so while we might be doing fewer acquisitions that might have an investment grade rating at the tenant level, we think that in most cases, we're actually taking less risk and getting better returns.

Daniel Donlan

Yeah. Hey, Ravi.
Our AFFO guidance doesn't assume any equity raising in it. And so I think you can infer that spreads for us right now are relative to where we're acquiring or less than 100 basis points.

Ravi Vaidya

Just one more here. How should we think about your tenant credit, maybe watch lists and any reserves? Can you remind us of your target exposures with some of your tenants here such as Walgreens, CVS? And do you have any further color on Big Lots, regarding the remaining six boxes that you have?

Mark Manheimer

Yeah. So I'll go in reverse order here.
So yeah. I mean Big Lots obviously, the Nexus Capital acquisition we were kind of settled in with six of the seven locations where we're going to get assumed, we had an ace of course that allies that took over and assumed in his current on as we kind of exclude that from the analysis.
We expect the negotiations with kind of getting that done, I think are almost complete. So we think that it's going to look very similar where we end up with six assets assumed. We do have a lot of demand for those assets.
So there's a possibility that we try to negotiate something with Big Lots and with Variety to potentially try to get a new tenant in there that's willing to pay a lot more rent. But Variety Wholesalers also, as you may or may not know, is also an investment grade profile, a tenant with no debt, a large operator that has a long history of being very successful.
And then I'm sorry, what was the other part of the question?

Ravi Vaidya

Just wanted to ask about the target exposure levels for some of your underperforming tenants with Walgreens and CVS and broad commentary writing tenant credit, your watch list and your reserves.

Mark Manheimer

Yeah. Sure. Yeah. So I mean Big Lots was really it on the watch list last year. So we're not really anticipating any specific issues with any of our tenants this year. Of course, we're always kind of have a little bit left in the budget in case that there's something that we're not thinking of happens which is always of course a risk.
But then in terms of our concentrations, we'd really like to get all tenants below 5%. You see Walgreens is already down to 3.8%. That'll come down maybe not as rapidly as it has in the past two quarters. You may see it feel a little bit more active with some of the other tenants and just trying to get a more diversified top five and top ten.

Operator

Smedes Rose, Citi.
Michael Gorman, BTIG.

Michael Gorman

I appreciate the additional disclosure in the presentation on the lease expirations for some of the top tenants. Curious for Dollar General, does any of that -- kind of 120 basis points of loans receivable, does any of that burn off in 2025 that could potentially help reduce some of the concentration there, or are those loans also marketable or would these be kind of property dispositions?

Mark Manheimer

Yeah. And there it would be a little bit of both. It's a good question. I think we, and Dan, correct me if I'm wrong, but I think it's 170 basis points of loans that could roll this year. So that certainly helps reduce the exposure.
So that kind of gets us down below seven. And then we'll make up the rest with disposition. And I don't really think there's a huge market for them because they're just short term loans. If they were longer term, I think we would potentially be able to sell those loans.

Michael Gorman

And then maybe just stepping back. And I don't know if I've missed it. So I apologize if I did. But do you all have a kind of a coverage level or a red coverage level across the portfolio? And how we should think about that in terms of kind of buckets across the portfolio in terms of below two, above two kind of situation?

Mark Manheimer

Yeah. No. And so we have not disclosed what that coverage is across the entire portfolio. But we -- mainly just because we're extrapolating what that coverage is in many cases where we're not getting a full P&L. In many cases, we get sales. In many cases, we have conversations directly with the tenant that give us a pretty good indication of what the cash flows are that are generated.
And in other situations, we're deriving that from Placer which tells us what the foot traffic is versus the average foot traffic. And then you can extrapolate from there what the sales are and then apply margins. And so overall, our portfolio rent coverage haven't disclosed in the past, but since you asked, I think it's extraordinarily healthy in the neighborhood of 4 times.

Michael Gorman

And then maybe just last one. Maybe just an offshoot of that. Mark, you talked about kind of your experience with the portfolio versus some of the headline risk. And obviously, you've done a good job underwriting. You have a significant platform here.
How do you think about the opportunity to get better risk adjusted returns based on the quality of your platform and underwriting and credit monitoring while also kind of bridging the gap with market sentiment and expectations versus some of the tenants whether they're currently in the portfolio or future investment opportunities?
How how do you balance that out between your capabilities and getting better returns for shareholders versus also maybe dealing with some market sentiment issues?

Mark Manheimer

It's a great question, Michael. That's certainly something that we've been wrestling with for the better part of the last year or so.
We've been very confident in our ability to underwrite, especially at the asset level and the real estate level and getting very comfortable that we've got locations that even if there's some disruption or some headlines that it's not going to impact us economically really at all.
But then where we've been hit is some of the concentrations being a little bit higher, getting some headlines that just, there can be a knee jerk reaction with some investors.
And it certainly has impacted us. So really where we've kind of come down is we'll continue to underrate the way that we have and continue to try to get better and learn as much as we can, but I think very comfortable with our ability to underwrite assets.
But we just need to get the concentrations lower on a go forward basis. And that really kind of allows us to kind of keep our head down and not get impacted by headlines that might not have a real economic impact on our business.

Operator

Alex Sagal, Baird.

Alex Sagal

On the acquisition side, curious which categories are you prioritizing right now? I saw that there's five new tenants quarter over quarter. You can speak on maybe which category or who they are.

Mark Manheimer

Yeah, sure. So yeah, I mean we've seen a lot of opportunity, the convenience store side, quick service restaurants, I guess auto service, auto collision. And then grocery. And so and even farm supplies. We continue to invest with tractor supply, but we -- there are a couple of their competitors that we think are pretty attractive as well.
So it's a pretty diversified mix.

Alex Sagal

And the new tenant relationships, are they -- or as you mentioned?

Mark Manheimer

Can you say that again?

Alex Sagal

I asked with the new tenant relationships, are they in the categories you mentioned?

Mark Manheimer

Yes, they are. Yes.

Alex Sagal

And Mark, you mentioned the, I believe the total credit loss since inception as a very small number. But can you maybe give the specific for what that was in 2024?

Mark Manheimer

Yeah. I mean it's 4 basis points annually per year. And all of that was in 2024. So that should give you a pretty good idea.

Operator

Linda Tsai, Jefferies.

Linda Tsai

In terms of your underwriting helping to limit store closure exposure, I know you mentioned Placer.ai. What are some examples of asymmetrical information you utilize?

Mark Manheimer

Yeah. So certainly, Placer is a phenomenal tool that we have really taken advantage of. And really helps us understand the assets and the foot traffic. But I don't think you can ever completely replace your relationships directly with the tenants and your conversations with them and how they're thinking about their assets.
And the cash flow is generated at the asset level. And so that's kind of where our relationships play a big part.

Linda Tsai

And then in terms of G&A coming down, I realized there's natural positive leverage from you growing your revenue base, but are you also running any processes differently to improve efficiencies?

Daniel Donlan

Sure, Linda. We're always looking to improve efficiencies across the board. I would say our cash G&A is going up in 2025 versus 2024. And that is just kind of increasing the headcount on the margin across a couple of different roles as we continue to scale the portfolio.

Operator

Daniel Guglielmo, Capital One Securities.

Daniel Guglielmo

On the acquisitions and the disposition side, are there any material differences between the weighted average lease escalation for the leases coming in versus those going out?

Mark Manheimer

Yeah. I would say that on the disposition side, the leases are shorter in general. And so when we're looking at dispositions, oftentimes, we're looking at either decreasing exposure overall, and oftentimes, trying to get out ahead of some potential risk as we get closer to renewal.
And so in general, you're going to see the the lease term what we're selling to be on the margin a little bit shorter.

Daniel Guglielmo

And with around kind of like the renewal, the lease escalation bumps each year. Is that the same? Like each quarter, the bumps -- each year, the bumps?

Mark Manheimer

Yeah. Absolutely. So what we're acquiring has significantly better internal growth than what we're disposing of. And that's just really, I mean, you think about Walgreens, you think about CVS, many Dollar stores kind of a mix of whether they've got bumps or not.
But most of those are going to be entirely flat leases. And so and really where we're focused and where we're seeing the best opportunities on the acquisition side, we're getting annual increases, which is certainly helpful.

Daniel Guglielmo

And then the next one is just there are a few changes to the diversification by state map quarter to quarter. And I know there's going to be lots of ins and outs with the acquisitions and then increased dispositions. So thinking about that map, are there certain states or regions where you would expect kind of material changes there?

Mark Manheimer

No. I wouldn't think so. And I think overall, you'll likely see us continue to grow more in the Sun Belt where you're seeing population increases. There's just going to be new construction and more opportunities there. But we're somewhat agnostic to what part of the country an asset stands as long as we get comfortable with the individual market.
And the market dynamics and the potential demand for other tenants in the event that we have to take an asset back.

Operator

Jay Kornreich, Wedbush Securities.

Jay Kornreich

So earlier, you mentioned aiming to get all tenant exposures under 5%. And I'm wondering just on that, which is really just the top three tenants, how much additional work do you really want to do on the tenant exposures this year? And is there a ballpark of disposition volume you're really aiming for in 2025?

Mark Manheimer

Yeah. I mean I think we're going to be pretty opportunistic as it relates to the disposition side, if we're getting pretty good demands. And if we're able to sell it at attractive cap rates, we may push that a little bit harder. But I think if we're not, then we're going to just work hard to try to find the right buyers for assets.
We're not going to buy or sell anything. And yeah, I mean I think you'll likely see, of course, all tenants below 5%, but I think it makes sense for that's only -- that to be the exception, not the rule. And really have most tenants even if we like them below 3%.

Jay Kornreich

And then just one more. Going back to the $185 million of unsettled forward equity, which you mentioned planning to settle at the end of the year, I guess if you saw a compelling acquisition opportunities during the year in the first half, for example, would you consider deployment capital or is the plan for this year really to focus on tenant exposures and way closer to 2026 to really drive the acquisition volume back up?

Daniel Donlan

Yeah. I mean look, I think the net investment activity guidance that we set is really driven with the viewpoint of the forwards embedded in the leverage that we're assuming. So I think we really, in order for us to get more aggressive on the net investment front and start to be more inquisitive than we've laid out, we have to see a more attractive cost of equity, I think, come alongside that.
But as you can tell, what we've done in the fourth quarter, which was a record quarter for us, it -- we have the capability to do significantly more than we're currently guided to. We just want to see our cost of capital return to more appropriate levels.

Mark Manheimer

And the other piece of that is a good question, Jay, is in the event that we see an attractive acquisition, we're pretty close on price on some dispositions that we can potentially push forward if we really just love an opportunity that we see on the acquisition side.

Operator

Upal Rana, KeyBanc Capital Markets.

Upal Rana

Mark, I appreciate the update on the Big Lots so far. But do you anticipate any downtime from any of your six locations and how's that baked into your guidance for this year?

Mark Manheimer

We do not expect any downtime at all.

Upal Rana

And then last one on for me would be just, what kind of investors are you selling your Walgreens to? And given you were successful in selling several of your Walgreens properties over the last few months, what did you learn about the appetite from investors to buy some of these troubled tenants?

Mark Manheimer

Yeah. It's a good question. So most -- really all of the 1031 -- all of the buyers on the Walgreens side have been 1031 buyers. And it just takes a little bit more handholding than it does for some of the other tenants just because they've been in the news so much.
And just getting the buyer comfortable that this is not going to be a location that's going to be closed. We're extraordinarily confident in that all of the Walgreens that we own are not going to get closed. And so getting investors comfortable that that's an unlikely outcome is really just kind of what made that a little bit slower than being able to sell Dollar Generals.
But the appetite is there once people get comfortable.

Operator

Farrell Granath, Bank of America.

Farrell Granath

I was curious, what is your cap rate expectations, especially associated with your guidance that you have in place for 2025?

Mark Manheimer

Yeah. I mean in terms of cap rates, we really only have call it 90 days maximum of visibility. So it's always a little bit of a dangerous game of yeah, predicting where cap rates are going to be. But we feel very comfortable at least for the next quarter that we'll be at or above where we were this quarter, most likely, above.

Farrell Granath

And I guess also, a little bit more on the macro front. When thinking about the consumer and the impacts that you may be having on some of your tenant base, how are you seeing that trend going forward?

Mark Manheimer

Yeah. It's a good question.
I mean I think inflation is rampant as it was that certainly isn't gone yet. It's nowhere near what it was. So I think we've really seen the worst of it. And so now, it's really going to come down to the consumer. And the lower end certainly continues to struggle.
And we've tried to adjust for that here in the short term. But I think most of the damage has been done by inflation, which was I think the bigger problem. But we're always focused on trying to understand the health of the consumer overall, which does seem to be softening a little bit.

Operator

Thank you. 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

Thank you, everyone for joining today and for your interest in Netstreit. We look forward to seeing many of you at the upcoming conferences here in the next couple of weeks.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.