NETSTREIT (NTST) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Feb. 11, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Mark Manheimer
• Chief Financial Officer — Daniel Donlan

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TAKEAWAYS

• Record Gross Investments -- $245.4 million in the quarter and $657.1 million for the year at a blended cash yield of 7.5% and weighted average lease terms of fifteen years (quarter) and thirteen point nine years (year).
• Dispositions -- Sold 76 properties in 2025 totaling $178.6 million at a 6.9% cash yield, with all tenants brought below 5% of ABR, and expects materially fewer sales in 2026 focused on opportunistic dispositions and risk mitigation.
• Tenant Diversification -- Added 15 new tenants in the quarter and 31 throughout the year; ended with 129 tenants across 28 industries in 45 states, and plans to add five to six new tenants per quarter going forward.
• Investment-Grade Exposure -- 58.3% of total ABR is from investment-grade or investment-grade profile tenants, with observed downward drift due to more attractive risk-adjusted returns among non-rated tenants.
• Portfolio Credit Metrics -- Achieved portfolio weighted average unit-level rent coverage at 3.8 times and blended rent coverage ratio of 5.1 times on near-term expirations; only 2.4% of ABR will expire through 2027.
• Lease Terms -- Average remaining portfolio lease term is ten point one years, supporting long-duration cash flows.
• Quarterly Financial Performance -- Reported quarterly net income of $1.3 million or $0.02 per diluted share, core FFO of $26.6 million or $0.31 per diluted share, and AFFO of $28.2 million or $0.33 per diluted share, marking a 3.1% AFFO increase year over year.
• Full-Year Financial Results -- Reported full-year net income of $0.08 per diluted share, core FFO of $1.23 per diluted share, and AFFO of $1.31 per diluted share, a 4% AFFO increase year over year.
• G&A Expense -- G&A expense was 11% of total revenues in 2025, unchanged from 2024; management expects this to decline below 10% in 2026.
• Leverage and Liquidity -- Pro forma leverage is 3.8 times; $100 million of undrawn term loan capital, $373.1 million unsettled forward equity, total year-end liquidity of $1 billion, and no major debt maturities until 2028.
• ATM and Equity Activity -- Raised $104 million via 5.8 million shares in Q4 through ATM; subsequent $46 million raised after quarter-end from 2.6 million shares.
• Interest Rate and Debt Maturity -- Weighted average debt maturity is three point nine years, and weighted average interest rate is 4.24%.
• Dividend Increase -- Quarterly dividend raised by 2.3% to $0.22 per share, declared for payment March 31 to shareholders of record on March 16.
• 2026 Guidance -- AFFO per share guidance reaffirmed at $1.35 to $1.39 (5% growth at midpoint), net investment activity expected between $350 million and $450 million, and cash G&A between $16 million and $17 million; projected dilution from forward equity included at $0.015 to $0.03 per share.
• Investment-Grade Rating Impact -- Received first BBB- rating from Fitch, reducing term loan pricing by 20-25 basis points and generating approximately $2 million in annual interest savings; incremental upgrades could lower rates by an additional 10 basis points.
• Dispositions Strategy -- Management will prioritize selective and opportunistic sales based on capital redeployment and risk, rather than volume, in 2026.

SUMMARY

Management reported record annual and quarterly investment volumes, attributing growth to successful execution of diversification and capital deployment initiatives. Strategic efforts resulted in achievement of key tenant concentration goals, demonstrated by all tenants now below 5% of ABR and robust rent coverage statistics. The portfolio’s long average lease term and minimal near-term expirations further supported confidence in cash flow stability. Management confirmed cost and leverage ratios are trending favorably, reinforced by a new investment-grade rating that improved debt pricing and capital access, supporting both the announced dividend increase and sustained acquisition capacity without imminent need for further equity issuance.

• CEO Manheimer emphasized pursuing higher risk-adjusted returns in non-rated tenant investments, supported by underwritten creditworthiness and favorable lease structures, rather than public credit ratings.
• CFO Donlan highlighted that balance sheet flexibility and over $1 billion in liquidity give the company discretion on equity issuance timing, with only a de minimis amount projected in current guidance.
• Manheimer stated that the competitive landscape is stable, with little impact from larger acquirers on the company’s target segment, and cap rates expected to remain consistent with 2025 levels in early 2026.
• Management explained that guidance allows for optionality, with net investment capacity determined more by acquisition accretiveness and capital costs than sourcing constraints.
• Donlan indicated that upcoming debt needs are not significant before 2028, providing flexibility between unsecured private placements and public bond markets based on future company growth and rating status.
• Management reported confidence that renewals will occur on nearly all near-term lease expirations due to lease option availability and strong unit economics.
• Company expects incremental improvement in portfolio diversification, particularly lowering Walgreens exposure to under 2% of ABR by year-end 2026.

INDUSTRY GLOSSARY

• ABR (Annualized Base Rent): The total contractual rent obligation on an annualized basis for properties in the portfolio, serving as a key measure of income stability.
• Core FFO (Funds From Operations): A non-GAAP REIT performance metric excluding certain nonrecurring and non-cash items to reflect ongoing cash-generating potential.
• AFFO (Adjusted Funds From Operations): An adjusted measure of FFO that deducts capital expenditures and straight-line rent adjustments to better reflect cash available for dividends.
• Master Lease: A lease structure where a tenant leases multiple properties under a single contract, often with enhanced credit protection and operational control.
• Sale-Leaseback: A transaction in which a property owner sells real estate assets to a buyer and simultaneously leases them back, enabling continued operational use while unlocking capital.

Full Conference Call Transcript

Mark Manheimer: Thank you, Matt, and thank you all for joining us this morning on our fourth quarter 2025 earnings call. I first want to congratulate the team on an outstanding 2025. We are efficiently running on all cylinders as we have the right people in place in each role across the entire organization to expand upon our success. We are well equipped from a balance sheet and cultural perspective at NETSTREIT to source the best opportunities, thoroughly underwrite them, and close them efficiently while also maintaining rigorous monitoring and asset management to get ahead of future risks.

We had a strong quarter of accelerated transaction activity as we completed $245.4 million of gross investments, our highest quarter on record, at a blended cash yield of 7.5% with fifteen years of weighted average lease term. For the full year, we completed a record $657.1 million of gross investments at a 7.5% blended cash yield with thirteen point nine years of weighted average lease term. When considering how modest our investment goals were to start the year, this record level investment activity is even more impressive as it demonstrates our team's ability to rapidly adapt to fluctuations in both our cost of capital and the overall net lease marketplace.

In addition, we accomplished this record activity while maintaining focus on diversification as evidenced by our record level of dispositions, which were completed 60 basis points inside our blended cash yield on investments. Additionally, our diversification efforts led to 15 new tenants joining our roster in the fourth quarter alone, and with 31 new tenants being added for the full year. From an earnings perspective, our attractive investment activity helped us reach the high end of our upwardly revised AFFO per share guidance range. And looking ahead to this year, the team continues to find well-priced high-quality investment opportunities with heightened levels of activity within the grocery, fitness, convenience store, and quick service restaurant industries.

As previously announced, we achieved an investment-grade rating of BBB- from Fitch Ratings, which has greatly improved our access to debt and allows for tighter spreads. Coupled with our growing pipeline of opportunities, improving cost of capital, and our low dividend payout ratio, all of which have accelerated our growth prospects, we are increasing our quarterly dividend by 2.3% to $0.22 per share. Our balance sheet remains in excellent condition with pro forma leverage of 3.8 times, $100 million of undrawn term loan capital as of today, $373.1 million of unsettled forward equity at year-end, and no major debt maturities until 2028.

Turning to the portfolio, we ended the quarter with investments in 758 properties that were leased to 129 tenants operating in 28 industries across 45 states. From a credit perspective, 58.3% of our total ABR is leased to investment-grade or investment-grade profile tenants. Our weighted average lease term remaining for the portfolio was ten point one years, with just 2.4% of ABR expiring through 2027. The portfolio weighted average unit level coverage is a very healthy 3.8 times. Moving on to dispositions, we sold 76 properties in 2025, totaling $178.6 million at a 6.9% cash yield, which allowed us to accomplish all of our diversification goals for the year, including bringing all tenants below 5% of ABR.

With our diversification efforts now met, we do anticipate selling fewer assets in 2026, with our focus turning more towards opportunistic sales and risk mitigation in order to get ahead of potential risks well before they can impact our AFFO per share. That said, we do expect to improve portfolio diversity through the year with Walgreens representing less than 2% of ABR by 2026 year-end. We are confident in the strength of the portfolio we have constructed and the durability of our place rent stream.

More specifically, when analyzing the ABR that expires over the next four years, we continue to see a high probability of renewal given the cohort blended rent coverage ratio of 5.1 times and our ongoing dialogue with these tenants. Coupled with our high corporate credit portfolio, properties with in-place rents near market with strong real estate fundamentals, and an active asset management process, we remain confident that our portfolio can continue to produce consistent cash flow generation in the net lease space. In summary, 2025 was a year of record achievements for NETSTREIT driven by our focus on high-quality, necessity-based retail properties and commitment to a well-capitalized balance sheet.

We are excited about the momentum we have established in 2026 and our ability to deliver value to shareholders as one of the fastest AFFO per share growers in the space. With that, I'll hand the call to Dan to go over fourth quarter financials and then open up the call for your questions.

Daniel Donlan: Thank you, Mark. Looking at our fourth quarter earnings, we reported net income of $1.3 million or $0.02 per diluted share. Core FFO for the quarter was $26.6 million or $0.31 per diluted share, and AFFO was $28.2 million or $0.33 per diluted share, a 3.1% increase over last year. For the full year 2025, we reported net income of $0.08 per diluted share, core FFO of $1.23 per diluted share, and AFFO of $1.31 per diluted share, which represented 4% growth over 2024. Turning to the expense front, with the company making seven net new hires during the year, our total recurring G&A represented 11% of total revenues in 2025, which was unchanged versus 2024.

Looking ahead to 2026, we expect this metric to average below 10% as our G&A continues to rationalize relative to our revenue base. Turning to capital markets activity, we sold 5.8 million shares for $104 million of net proceeds in the quarter via our ATM program. Subsequent to quarter-end, we sold an additional 2.6 million shares for $46 million of net proceeds. Looking at the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $720 million. Our weighted average debt maturity was three point nine years, and our weighted average interest rate was 4.24%. Including extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028.

In addition, our total liquidity of $1 billion at year-end consisted of $14 million of cash on hand, $500 million available on our revolving credit facility, $373 million of unsettled forward equity, and $150 million of undrawn term loan capacity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was four times at quarter-end, which remains comfortably below our target leverage range of four and a half to five and a half times. Including ATM, raise subsequent to quarter-end adjusted net debt to annualized adjusted EBITDAre was 3.8 times. Moving on to guidance, we are reaffirming our 2026 AFFO per share guidance range of $1.35 to $1.39, which assumes year-over-year growth of 5% at the midpoint.

Additionally, we continue to expect our net investment activity to range between $350 million to $450 million and our cash G&A to range between $16 million to $17 million. In addition, the company's AFFO per share guidance range includes $0.015 to $0.03 per share of estimated dilution due to the impact of the company's outstanding forward equity calculated in accordance with the treasury stock method. Lastly, on February 5, the Board declared a quarterly cash dividend of $0.22 per share, which represented a 2.3% increase from the prior quarter dividend of $0.215 per share. The dividend will be payable on March 31 to shareholders of record on March 16. With that, operator, we will now open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. The first question is from Haendel St. Juste from Mizuho Securities. Please go ahead.

Ravi Vaidya: Hi there. Good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. I wanted to ask how are you thinking about balancing tenant credit and yield as part of your capital deployment? Saw that Seven Eleven and Festival are no longer on your top tenant list. But Academy, a lower corporate credit, has entered the list. Is there more of a focus on four-wall coverage or lease term as you move forward with your capital deployment? Thanks.

Mark Manheimer: Ravi, good to hear from you. So, yeah, I mean, I guess specifically as it relates to Academy, I mean, double B plus, so that's one notch away from being investment grade. And I think if you just look at their current ratios, I mean, very low debt levels, you know, 3.3 times fixed charge coverage ratio, more than a $6 billion revenue company. I think if you just took the name off of it, you might think that they'd be investment grade.

I think the fact that they went public on a five-plus years ago after being a private equity-backed company, you know, they've really kind of returned to their roots as being, you know, what they were as a kind of a family-run business. When most people really thought of them as an investment-grade company. So I do think that they are a high-quality retailer, we have been very selective in terms of the assets that we've acquired. You know, got a very good relationship directly with the folks down in Katy, Texas. And so, you know, we make sure that we're buying locations that generate very strong cash flows.

But I do think that is a potential upgrade at some point in time. So that could, you know, at some point in time, move up into the investment-grade bucket. And then just more broadly, you know, as it relates to investment-grade investment-grade profile, versus kind of the sub-investment grade. You know, overall, I'd say we are seeing probably the better risk-adjusted returns in the non-rated bucket where we're doing our own underwriting of the corporate credit. Many of whom don't have any debt, so there's no reason for them to have a rating. And I think could be really safer than some of the investment-grade names out there.

And then we're getting, you know, stronger leases where we're getting, you know, master leases. We're getting better rent escalations and pure absolute triple net leases. So, you know, we feel like the risk-adjusted returns are a little bit stronger there. But as you note in the past, you know, we've gone a little bit heavier on the investment-grade side where the pricing was condensed. There wasn't much of a difference. And so I think it shows the strength of the acquisitions team and the underwriting team to be able to go out and source a lot of different types of opportunities and really sort through where we're getting the best risk-adjusted returns.

Ravi Vaidya: Got it. That's really helpful color. And maybe you could just talk about the guide. What is your level of confidence towards reaching the upper end of the acquisition rate and the upper end of the AFFO guide? And maybe some thoughts on how 1Q has progressed so far from a capital deployment standpoint? Thanks.

Mark Manheimer: Yes, I'll just jump in on the acquisition side. Yes, I mean, I think you saw the number of acquisitions that we did last year. Certainly feel very comfortable that we can hit the high end of the acquisitions guide. Especially in light of the fact that we're gonna be selling significantly fewer properties this year.

Daniel Donlan: Yeah. You know, Ravi, anytime we put together guidance, you know, I think we obviously have a bias towards the upper end of the range. You know, as you think about it, there's really four drivers. It's not investment activity in the timing thereof. It's cash G&A. It's dilution from, you know, treasury stock method and as well as potential loss rent from credit events. I would say it's not linear. So, you know, if we come in at the low end of some of those ranges, it doesn't mean we can't be at the high end.

It's kind of a mixed bag, in terms of where we can end up, but we certainly confident as we did last year, you know, that we can reach the upper end of our range.

Ravi Vaidya: Thanks so much, guys. Appreciate the color.

Operator: The next question is from Greg McGinniss from Scotiabank. Please go ahead.

Greg McGinniss: Hey, good morning. Mark, with these non-IG investments, you mentioned master leases and stronger rent escalation. Are you also getting property-level P&Ls to compensate for the lower lack of credit?

Mark Manheimer: Yeah. I mean, I think, you know, in most cases, we are. Each transaction is a little bit different. And again, just because, you know, S&P or Moody's or Fitch doesn't say that somebody's investment grade. They can still have an investment-grade balance sheet and strong operations generating a lot of cash flow. But, yeah, I mean, I think in general, you have a little bit more leverage. A lot of these are sale-leasebacks where we're dealing directly with a tenant, not buying the assets from other landlords. So it makes it a lot easier to have that negotiation.

It is very important for us to, you know, to really understand not just so much at the corporate level, but also at the unit level, that we're getting, you know, productive stores that, you know, the tenant's committed to long term.

Greg McGinniss: Mhmm. Okay. Thanks. And, Dan, on the guidance, are you able to give us some maybe some guidelines or your thoughts around the equity issuance that you're kind of building in there and on the treasury solution as well?

Daniel Donlan: Yeah. You know, look, I think where we sit today at three pro forma leverage and you think about we have $100 million of undrawn term loan capital today. We have over $400 million of unsettled forward equity that we can draw upon, you know, over $40 million of free cash flow. You know, we certainly don't need to raise any equity at the moment. We can afford to be patient. I think what I'd tell you is we sort of have a de minimis amount of equity baked into the model at this point in time. So, you know, nothing that we can't handle as we sit here today.

Greg McGinniss: So could we assume that with a, you know, slightly higher or I don't know how much higher you guys feel it needs to be stock price, then you kinda open up a lot of opportunity on the acquisition side. And growth.

Daniel Donlan: Yeah. I think what I would say is just from a leverage perspective, our targeted range is four and a half to five and a half times. I think we can easily operate within that range, raise no additional equity. I think our preference is to obviously be over-equitized. And to the degree that our stock price stays where it is or moves higher, I think we're comfortable raising equity as we sit here today. Our spreads are 160 to 170 basis points over. You know, I think that's certainly above the, you know, industry average over the last twenty years.

But at the same time, you know, it's early in the year, and, you know, we're not necessarily in we can be patient. And, so, I think to the degree that the pipeline continues to increase, and we feel good about cost of equity, we could certainly raise it, but it's still early on in the year.

Greg McGinniss: Great. Thank you.

Operator: The next question is from John Kilichowski from Wells Fargo. Please go ahead.

John Kilichowski: Hi, good morning team. First one, just kind of going back to that last question. I'm curious if there's no real extra need for equity here. I guess as far as the acquisition guide is concerned, how much of that is dictated by capital needs versus just what the opportunity set is out there on the market? Because it's good to hear there's nothing that you need, but I'm curious like, you know, how far above and beyond you can go given where leverage is and given the equity capacity you've built up.

Mark Manheimer: Yeah. And I think with the guide, I mean, we've, you know, we want some optionality in there. I think the team is able to source significantly more than what we've done in the past. And so, yeah, I mean, I think it's really, you know, capital cost of capital constraints. You know, if our cost of capital gets meaningfully more attractive, we can certainly, you know, ramp up acquisitions, you know, quite a bit.

John Kilichowski: Mhmm. And then maybe just one for me on the IG side. You've seen a little bit of drift downwards in that IG profile exposure over the past couple of quarters. Is there anything to note there strategically? I understand there's just better risk-adjusted returns in that space that you're seeing right now, but I'm curious what's the net move. Are you just is there a target subsectors that sit outside of that box that you like more? You like the unit level coverage? Just curious what's making that move.

Mark Manheimer: Yeah. I mean, it's really just the pricing of the opportunities. You know, we're seeing a lot of great opportunities really on both sides. It's just, you know, we feel like the pricing has been more attractive and really kind of our efficient frontier of, you know, what our portfolio allocation looks like right now. It's kind of really more it's not really it's a byproduct of what we're doing, which is, you know, to 40% investment grade investment grade profile. Tenants you know, right now, but that can certainly change if we see the market dynamics change. And then, you know, I think things that don't jump off the page are really, you know, the quality of the leases.

You know, we don't really want to go out and buy what are shopping center leases where you have, you know, co-tenancy, use restrictions, you know, and a lot of things, you know, landlord responsibilities that we don't really want to be taking on and taking on the cost of. And so, you know, we're not as dogmatic about whether something is just investment grade or not investment grade. We're really just kind of focused on the right risk-adjusted returns.

John Kilichowski: Thank you.

Operator: The next question is from Michael Goldsmith from UBS. Please go ahead.

Michael Goldsmith: Good morning. Thanks a lot for taking my questions. As portfolio diversification is presumably more complete, how would you characterize the shift in strategy from here? I think you talked a little bit about being more opportunistic. Is there a way to think about, like, shifting from defense to offense? Just trying to get a sense of how your actions this year and in the future may change from kind of what you what kind of transpired in the last year or so?

Mark Manheimer: Yeah. Sure. I mean, I think, you know, coming out of the gates back in 2020, you know, with a smaller portfolio, any that we saw a really great opportunity that had some size to it, it really kind of moved the concentrations around, you know, quite a bit, you know, with a smaller portfolio. And so, really, just with the market reaction of, you know, some of the tenants even though we felt like were good assets and, you know, continue to think that they were good assets, they're gonna continue to pay rent and continue to renew their leases. You know, it had an impact on our multiple.

So we became a little bit more aggressive on addressing some of the concentrations to bring them down, which was kind of a longer-term plan, but we, you know, that into a shorter or medium-term plan. I think, you know, as we look forward today, I would just expect us to not have to, you know, down as much. It would take a lot more for us to buy really start to run into any type of concentration concerns. On a go-forward basis, I think under 5% is, where all tenants are today.

I'd be surprised to see anybody move up above that threshold in I think you're gonna see the diversity of the portfolio just continue to improve over time.

Michael Goldsmith: Thanks for that. And as a follow-up, the sub-one-time coverage tranche, it picked up sequentially by 50 basis points. So what's driving that? Is that something that you're monitoring? Just trying to get a little more color there.

Mark Manheimer: Yeah. Yeah. Sure. So I mean, it is something that we monitor. I mean, we're monitoring everything on that histogram. I think that's gonna move around a little bit. Quarter to quarter, so, we try not to overreact to any moves there. But that relates to some assets that, you know, we feel like are fine, you know, that are, you know, the rent per square foot is below market for each of those assets. And we've got some lease terms. So we'll continue to monitor that if we don't see improvement over the next, you know, several quarters, then we may look to monetize the assets or do something there.

But, you know, it's certainly nothing of concern here in the short or medium term.

Michael Goldsmith: Thank you very much. Good luck in 2026.

Daniel Donlan: Thanks, Michael.

Operator: The next question is from Smedes Rose from Citi. Please go ahead.

Joseph: Thanks. It's Joseph here with Smedes. Maybe just following up on that last I think in the opening remarks, you talked about opportunistic sales. And really just risk mitigation. As you look at the portfolio today, is that a comment more on industries? Or is that, you know, tenant or property specific?

Mark Manheimer: Yeah. No. I think, you know, last year, we sold a lot of properties. And so that was really addressing some of the concentrations, trying to bring those down. I think we're more or less done with what needs to get accomplished there. We hit the goal that we set out at the beginning of the year. And so when we think about dispositions now, you we've got some relationships where people will come to us with, you know, very aggressive cap rates, on some assets that we own, and we feel like, okay. They're valuing those assets more than we are, and so we can take that capital and redeploy it accretively. Improve the quality of the portfolio.

So anytime we can do that, we're gonna we'll take advantage of those situations. And then it's just general risk mitigation. I think you can kind of look at, you know, the histogram to get some idea of, you know, the things that we're thinking about. And, you know, if we start to see degradation of performance either at the corporate or unit level, those will likely be more likely to be disposed of in the future. But it's when you think about the quantum of what we'll be selling, it'll be significantly less than what we did last year.

Joseph: Thanks. And then, no, there's not a high percentage of rent expiring this year, but what are the expectations for kind of the new rent versus the expiring rent?

Mark Manheimer: Yeah. I mean, I think in most cases, they're just gonna renew the lease. And then I think there's one property where rent's about $160,000 where we do not expect the lease to get renewed, but we're in conversations with a convenience store operator that would be interested in taking that over as a ground lease either to ground lease it or to just sell it. We're gonna kind of figure out where we're getting the better outcome.

Joseph: Thanks.

Operator: The next question is from Jay Kornreich from Cantor Fitzgerald. Please go ahead.

Jay Kornreich: Hey, good morning guys. Following up on the deal spreads you outlined currently 160 to 170 basis points. Can you maybe just describe the competitive landscape for net lease assets currently? I mean, it looks like cap rates hold up at 7.5% in 4Q. Just curious if you anticipate elevated competition to compress rates in 2026. Or perhaps that's why you like these nonrated tenant investments that they face less competition and have better yields just curious of your thoughts on that as the year goes on.

Mark Manheimer: Yeah. And, you know, we've certainly, you know, read a lot about competition coming into the space and you know, are aware of some groups, you know, stepping in and buying some larger portfolios. But you know, they're really not chasing the smaller opportunities. You know, we're averaging, you know, 3 and a $4 million per property. It's a little bit too cumbersome for a lot of those larger shops with smaller teams to go out and compete there. So just haven't really seen them very much. You know? And so the competition has not changed at all. We're typically competing with the seller's expectations in most cases and occasionally a 1031 buyer.

But for the most part, you know, the competition has not had an impact on pricing at all. We've seen a very tight band of where the ten year is trading. I think it was, you know, a little less than 4.2%, before we got on the call. So, it's really kind of bounced around four, low fours, and maybe a little bit under four here and there. But that tight band has really allowed prices to get very sticky. And so we expect at least through, you know, first quarter and even some of what we've acquired, or looking to acquire in the second quarter that's in our pipeline.

To see very similar cap rates what we saw, throughout 2025.

Jay Kornreich: Okay. Appreciate that. And then just one follow-up. You received your first rating as investment grade from Fitch in December. So can you just outline what the cost of capital improvements are you expect from that and any update to timing or impact from further ratings from Moody's or S&P?

Daniel Donlan: Sure. Look, as you can see in the disclosure, you know, most of our term loans priced down 25 to 20 basis points. So it kind of resulted in basically $2 million of annual interest rate savings. You know, we feel good about the rating that we received. To the degree that we got an upgrade in that rating, it'd be another probably 10 basis points of upside across the term loan stack. As we sit here today, you know, we don't really have a need to go out and raise long-term debt until probably mid-2027.

So we're not necessarily in a rush to get another rating, but you know, certainly, we'll be talking and speaking with the agencies, you know, throughout this year and into next year just to maintain dialogue.

Jay Kornreich: Okay. Thanks very much.

Operator: The next question is from Wesley Golladay from Baird. Please go ahead.

Wesley Golladay: Hey, guys. I believe you mentioned you added 31 tenants in 2025. I guess when you look at the deal volume in 2026, do you expect to add a lot more relationships like you did last year? You just kind of work more with the existing relationships.

Mark Manheimer: Yeah. I mean, it will certainly be a combination. You know, we expect to add new tenants, you know, to be totally frank, those 31 tenants, most of those are, you know, one or two properties, you know, a couple portfolios in there. Sale leaseback, but, you know, a lot of those are just kind of, you know, very small investments that kind of, you know, make that number seem maybe a little bit bigger. But I would expect us to be adding, you know, five, six, new tenants per quarter would be a good assumption.

Wesley Golladay: Okay. And what about categories? Do you expect to add a lot this year or lean into some a lot more?

Mark Manheimer: I think we'll be shopping in the same food groups as we've been, you know, more recently. So, you know, we're seeing really good opportunities. And, yeah, convenience stores continue to be, you know, a big one. Grocery even some fitness selectively and quick service restaurants have been really, really good for us as well.

Wesley Golladay: Okay. That's all for me. Thank you.

Mark Manheimer: Thanks, Wes.

Operator: The next question is from Michael Gorman from BTIG. Please go ahead.

Michael Gorman: Yes, thanks. Just one quick one for me, Dan. Going back to your mentioning not needing to raise long-term debt until kind of mid-2027, can you just remind us of the road map? Would that be an unsecured would you be looking at the unsecured listed market then? Or just kind of what the road map is to get to the unsecured listed market there? Thanks.

Daniel Donlan: Yes. So yeah. So you actually don't even need an investment-grade credit rating or to access the private placement market. That certainly is preferred. So as we sit here today, if we wanted to go out and access the private placement market, efficiently, I think we could. As we think about 2027, it's a year and a half away. I think it could take the it could be a private placement. It could be unsecured bonds. The degree that we got a second or third rating from one of the rating agencies.

I think it just kind of depends on kind of the growth of the company and, you know, where we see, you know, the lowest cost of capital from the debt side. So, you know, it just kind of remains to be seen, Michael.

Michael Gorman: Great. Thanks, Dan.

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

Upal Rana: Great. Thank you. I want to get your thoughts on the broader retail space and what you're seeing in terms of any kind of troubled tenants or troubled categories. You've had your fair share of headline risks in '24, but was able to sidestep that last year. So just curious on your thoughts heading to '26 and how maybe bankruptcies or store closings might impact how you invest or divest this year?

Mark Manheimer: Yeah. Sure. I mean, there's really not anything in our portfolio, that, you know, any themes there. I think just more broadly, as you think about the consumer, you know, not new news to anybody, but, you know, the k-shaped economy is real, and the, you know, lower-income consumers, you know, felt a lot more pressure, and that's leaked into, you know, some middle-income consumers. So I think you have to be very careful about, you know, understanding who the consumers are of each business, and, you know, whether these are necessity products or, you know, how discretionary they are.

And so that cross-section of the lower-income consumer and more discretionary spend is likely to have a little bit more pressure. We've seen, you know, a handful of casual diners, you know, come under some pressure. Whether it be Bahama Breeze, I think, you know, completely shutting their doors one of the Darden concepts. And, you know, we've seen a couple of those types of things, but I think that's gonna be the theme is it's gonna be the, lower-income consumer, you know, at a cross-section of more discretionary spend.

Upal Rana: Okay. Great. That was helpful. And then, you know, I'm just doing fewer dispositions this year. Just curious, are you still planning to reduce store account exposure? Some of your troubled tenants, or are you comfortable with what you currently own? And maybe you could talk about the appetite for those types of tenants in the transaction market today.

Mark Manheimer: Yeah, sure. I mean, I'm not sure if we have troubled tenants. I think we had a couple of tenants that maybe the news flow wasn't quite as positive. But that being said, we're unlikely to be adding to the tenants that we were decreasing exposure to. I think they're likely to continue to decrease a little bit on the margin. But the portfolio as it sits today and even with those tenants, we've got really strong performing assets.

You know, our relationship with the tenants is really very helpful in making sure that we understand, you know, what that risk looks like, and making sure that we've got locations that generate, you know, very strong cash flow, and we're very confident in the portfolio.

Upal Rana: Okay. Great. Thank you.

Operator: The next question is from Jana Galan from Bank of America. Please go ahead.

Jana Galan: Hi, thank you for taking the question. Following up on the rent recapture conversation, Mark, I thought your comments on rent coverage of 5.1 times for the near to medium-term lease expirations were very interesting. Most of these tenants still have renewal options available, or can lease recapture in the future be higher than the historical level?

Mark Manheimer: I wish we had a lot of, you know, leases with no options, but I, you know, very rarely do we have any, you know, lease that doesn't have options left. Our expectation is that, you know, almost all of those locations or at least the lion's share of those locations the tenant's just gonna hit the option. Because they're generating so much cash flow.

Jana Galan: Thank you. And maybe for Dan on the balance sheet. Some of your peers in net lease have implemented commercial paper programs. Is that something you would look to in the future?

Daniel Donlan: Yeah. It's not something I've looked into in the near term. I think you have to be, you know, much more sizable than we are today to access that program. So it's something we would look forward to doing. But I think at our size today, I don't think that, as well as our credit ratings, I don't think that market is available to us at the moment.

Jana Galan: Thank you.

Operator: The next question is from Daniel Guglielmo from Capital One Securities. Please go ahead.

Daniel Guglielmo: Hi, everyone. Thank you for taking my questions. On the net investment guidance, do you think of kind of the higher end of the range as a limit or would you be willing to push through that if the conditions are right?

Mark Manheimer: Yeah. I mean, it certainly, you know, I have very few concerns about us being able to source attractive opportunities. So that's not really a limit, you know, at all. In fact, I think we could do significantly more than the high end of the band there. It's really gonna come down to, you know, how accretive would it be for us to go down that path if we've got a really strong cost of capital and our stock price is doing really well. I would expect us to increase that.

Daniel Guglielmo: Okay. I appreciate that. Thank you. And then on the 3Q call, you all had said there was about $100 million of acquisitions the last two days of the quarter. There similar kind of investment volumes the last few days of 4Q? Or was it more evenly spread?

Daniel Donlan: No. It wasn't as bad as the third quarter. Just because, you know, we really started to accelerate our growth when we got to follow on in mid-July. I think our average closing date was, you know, kind of middle December, and we did close about $77 million of transactions in the last three days of the quarter. So it was more back-end weighted, similar to the third quarter.

Mark Manheimer: And then just to piggyback on that, I would not expect that in the first quarter where we were able to close more earlier in the quarter.

Daniel Guglielmo: Great. Thanks. Appreciate that color.

Operator: There are no further questions at this time. I would like to turn the floor back over to Mark Manheimer for closing comments.

Mark Manheimer: Well, thanks, everybody, for joining today. We appreciate your interest in the company and look forward to seeing many of you at the upcoming conference season.

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

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