NETSTREIT (NTST) 2026年第三季度业绩电话会议：维持AFFO指引，上调投资目标

NETSTREIT (NYSE: NTST) 维持其 2026 全年每股 AFFO 展望，同时上调了净投资目标，这得益于高出租率、保守的杠杆率以及 13 亿美元的流动资金。

核心要点

• 第三季度净利润为 850 万美元，即摊薄后每股 0.08 美元。AFFO 同比增长 6.1% 至 3750 万美元，即摊薄后每股 0.35 美元。
• 投资总额达到 2.731 亿美元，组合现金收益率为 7.4%，加权平均租赁期限为 13 年。今年迄今投资总额为 8.11 亿美元。
• NETSTREIT 维持其 2026 年每股 AFFO 指引为 1.37 美元至 1.39 美元，目前预计净投资额至少达到 8 亿美元，高于此前预期的 7 亿至 8 亿美元区间。
• 投资组合出租率为 99.9%，共有 913 项投资，产生 2.463 亿美元的年化基础租金。投资级及具备投资级特征的租户占年化基础租金的 58% 以上。
• 季度末流动资金为 13 亿美元，而调整后净债务与年化调整后 EBITDAre 的比率保持在 3.7 倍的保守水平。
• 管理层预计收购资本化率将温和上升，因为较高的融资成本减少了来自高杠杆私人买家的竞争。随着公司寻求更佳定价，第四季度的收购活动可能主要集中在季度后半段。

关键财务数据

业务与经营业绩

截至本季度末，NETSTREIT 在 46 个州拥有 913 项投资，涵盖 158 家租户和 28 个行业。该投资组合产生了 2.463 亿美元的年化基础租金，加权平均租赁期限为 10.1 年。

出租率为 99.9%，仅有一处资产空置。店铺层面的租金保障倍数提升至 3.9 倍，而 3.4% 的年化基础租金保障倍数低于 1.5 倍。管理层表示，大部分改善源于资产出售，而现有投资组合的保障倍数总体稳定至略有提升。

租户集中度继续下降。前 10 大租户占年化基础租金的 29.2%，而去年同期为 37.9%。管理层表示，目前仅对一两项资产的潜在信用问题进行监控，预计不会对投资组合产生重大影响。

公司继续将收购重点放在刚需型、服务型和深度折扣零售类别。第三季度投资产生的年化基础租金中，约 44% 来自投资级或具备投资级特征的租户。

NETSTREIT 通过其 ATM 计划增发 100 万股，获得 2100 万美元净收益，并结算了 2400 万股远期股票，金额近 4.2 亿美元。公司还设立了一笔新的 4 亿美元、2033 年 9 月到期的七年期延迟提取定期贷款，在业绩电话会议举行时该贷款尚完全未提取。

管理层指引

NETSTREIT 维持其 2026 全年每股 AFFO 指引为 1.37 美元至 1.39 美元，经常性现金行政开支指引为 1650 万美元至 1750 万美元。

管理层目前预计 2026 年净投资额至少达到 8 亿美元。若交易定价变得更有吸引力，这一开放式目标为扩大资金投放留出了空间。

AFFO 指引包含了由库存股法稀释带来的估计每股 0.035 美元至 0.04 美元影响，相当于 280 万股至 310 万股。然而，第三季度远期股票的结算使预计 2026 年加权平均股数较先前假设增加了约 200 万股至 230 万股，带来了估计每股 0.025 美元至 0.03 美元的稀释影响。

展望 2027 年，基于截至 2027 年底投放约 5.5 亿美元的净投资额度，管理层认为在不增发新股的情况下有希望实现中单位数的 AFFO 增长。该展望仍受投资时机、再融资成本、信用损失、行政开支以及七年期定期贷款的最终提取和套期保值影响。

风险与关注事项

较高的利率推高了整个净租赁领域的融资和股权成本。管理层表示，当前的投资利差约为 60 至 70 个基点，低于其发行新股历史要求的 100 个基点以上门槛。

公司预计资本化率将适度上升，但重新定价的时机和规模仍存在不确定性。管理层指出，第四季度的收购可能倾向于在期末完成，以给卖家更多时间降低价格预期。

2027 年的增长框架还面临 1.75 亿美元掉期合约带来的再融资阻力。其他变量包括潜在的租户信用损失、资金投放时机以及未来借贷成本。

在消费者不确定性和资本成本上升的背景下，零售租户在开店方面仍保持选择性。然而管理层表示，刚需型、服务型和深度折扣业态的运营商仍在继续扩张。

分析师问答要点

• 资本容量：管理层估计，在杠杆率达到其目标区间中点 5.0 倍之前，净投资容量约为 5.5 亿美元。NETSTREIT 表示，在基准情况下，截至 2027 年底前无需增发股票。
• 交易定价：公司对第三季度末的 10 笔交易进行了重新定价，平均提高约 30 个基点，使本季度的整体收购收益率从 7.3% 提升至 7.4%。管理层预计面临再融资压力的卖家会更快作出调整。
• 收购标准：NETSTREIT 不计划为了获取更高收益率而进入新的物业类别或放宽承销标准。管理层表示，目前储备项目的信用状况可能相对更强。
• 资本回收：公司预计第四季度将进一步出售药店和折扣店资产。如果出于税务考量的买家给出具备吸引力的出价，公司也可能出售便利店资产。
• 贷款机会：如果融资承诺取消或放贷机构重新对交易定价，管理层可能会考虑抵押贷款投资，但也表示此类机会可能需要一到两个季度才会显现。
• 回报门槛：投资决策基于当前的重置资本成本，而非历史上募集股权时的价格。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Thank you. Greetings and welcome to the NETSTREIT Third Quarter 2026 Earnings Call. Please note this conference is being recorded. I will now turn the conference over to your host, Matt Miller. Thank you. You may begin.

Matt Miller

Good morning, and thank you for joining us for NETSTREIT's third quarter 2026 earnings conference call. On today's call, management's remarks and responses to your questions may contain statements considered forward-looking under federal securities law. These statements address matters subject to risk and uncertainties that may cause actual results to differ from those discussed today. For more information on these factors, we encourage you to review our latest Form 10-K and other SEC filings. All forward-looking statements are made as of today's date, and NETSTREIT assumes no obligation to update them 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, reconciliations to the most comparable GAAP measures, and an explanation of their usefulness to investors. These materials can be found in the investor relations section of the company's website at netstreit.com. Today's call is hosted by NETSTREIT CEO Mark Manheimer and CFO Daniel Donlan. They will make some prepared remarks followed by a Q&A session. With that, 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 NETSTREIT's third quarter 2026 results. Before I get into the numbers, I want to recognize the hard work of our team across acquisitions, asset management, accounting, and capital markets. Their discipline and focus have allowed us to stay both active and selective in a quickly changing transaction environment. We are pleased to report another solid quarter of investments leased to high-quality net lease tenants. While higher interest rates have raised capital costs across the net lease sector, our smaller relative denominator, low leverage, and strong liquidity are true differentiators for NETSTREIT. We can afford to remain discriminating in our investment decisions, and yet we still have considerable capital capacity to fund an increasingly attractive opportunity set from a nominal yield perspective as the market evolves.

In the third quarter, we completed strong gross investment activity of $273.1 million at a 7.4% blended cash yield with a weighted average lease term of 13 years. Approximately 44% of the annualized base rent from these investments was derived from investment-grade and investment-grade profile tenants. These investments are focused around our core necessity and service-based retail categories, which we believe should prove resilient in any macroeconomic backdrop. Year-to-date, gross investments have totaled $811 million at the same 7.4% blended cash yield, which is well ahead of $657.1 million we completed for all of 2023. This meaningful increase in volume speaks to the scalability of our platform and our team's ability to ramp up when market conditions are favorable.

During the third quarter, we also executed dispositions of $39.5 million at a 7.2% cash yield and had $28.2 million of loan repayments. In the near term, we intend to remain active on asset sales to prudently manage the risk profile of our assets and lease maturities in order to maximize cash flow for the long term. Looking at the broader market, we believe cap rates are likely to increase moderately in the short term as higher financing costs continue to work through the system. A meaningful portion of the buyer universe, particularly smaller private buyers, have historically relied on higher leverage and more expensive debt to make deals pencil. As that capital has become less available and more costly, these buyers are increasingly being shut out of the acquisition market. At the same time, larger institutions have materially less dry powder today. This dynamic is precisely why we operate with lower leverage and look to pre-fund our capital needs several quarters in advance. It preserves our flexibility and gives us the optionality to step up and take advantage of market disruption when and if it materializes, rather than being constrained by balance sheet capacity.

Turning to our portfolio, we had 913 investments at quarter-end generating $246.3 million of ABR, leased to 158 tenants across 28 industries in 46 states. With just 1 vacant asset at quarter-end, our occupancy was 99.9%, our weighted average lease term was 10.1 years, and investment grade and investment grade profile tenants represented over 58% of ABR. From a diversification standpoint, our top 10 tenants now represent 29.2% of ABR versus 37.9% at this time last year. Furthermore, the unit-level coverage of our portfolio improved to 3.9 times, and just 3.4% of ABR had less than 1.5 times coverage. We are well insulated should a weaker economy more broadly dampen retail sales.

From a capital markets perspective, we secured $550 million of additional financing commitments and extended our weighted average debt maturity profile with no major debt maturities until 2029. Total liquidity at quarter end exceeded $1.25 billion, including significant undrawn revolver and term loan capacity, along with cash forward equity. Leverage remains conservative with adjusted net debt to annualized adjusted EBITDA RE of 3.7 times. Turning to guidance, we are maintaining our full year 2026 AFFO per share guidance range of $1.37 to $1.39, and we now expect 2026 net investment activity of at least $800 million, which is modestly up from our prior range of $700 million to $800 million.

In summary, the third quarter demonstrated the strength of our platform, the resilience of our portfolio, and the flexibility of our balance sheet. We remain optimistic about our growth prospects, given our capital runway through 2027, and the continued availability of attractive opportunities. With that, I'll turn the call over to Dan to review the third quarter financial results in greater detail. And we will then be happy to take your questions.

Daniel Donlan

Thank you, Mark. Looking at our third quarter earnings, we reported net income of $8.5 million, or $0.08 per diluted share. Core FFO for the quarter was $36.6 million, or $0.34 per diluted share, and AFFO was $37.5 million, or $0.35 per diluted share, which was an increase of 6.1% over last year. Turning to the expense front, our total recurring G&A in the third quarter increased 3.3% quarter over quarter to $6 million. From a G&A scale perspective, our total recurring G&A represented 9.1% of total revenues this quarter versus 10.6% in the prior year quarter. As such, G&A continues to rationalize relative to our revenue base.

Turning to the capital markets, we remain opportunistic on the ATM front, raising 1 million shares for $21 million of net proceeds. In addition, we settled 24 million shares for nearly $420 million in net proceeds, which was significantly more than we anticipated when we reported second quarter earnings in July. While this will help to reduce future dilution from the Treasury stock method, as a remaining unsettled forward balance has a weighted average gross price of $20.09, we are now starting the fourth quarter with considerably higher share count versus our prior expectations. From a debt perspective, we paid off our $200 million term loan due February 2028 with proceeds from draws on our 2031 and 2032 term loans and simultaneously transferred over the swaps from the 2028 term loan to these new draws. As such, when including extension options, which can be exercised at our discretion, until 2029. In addition, we also raised a new $400 million seven-year delayed draw term loan due September 2033, which remains fully undrawn as of today. We intend to draw down on this term loan over the course of 2027 to fund future net investment activity and term out our revolving line of credit.

Turning to the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $853.7 million. Our weighted average debt maturity was 4 years, and our weighted average interest rate was 4.26%. In addition, our total liquidity was $1.3 billion at quarter end, which consisted of approximately $42 million on hand, $500 million available on a revolving credit facility, $312 million of unsettled forward equity, and $400 million of undrawn term loan capacity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDA RE was 3.7 times at quarter end, which remains comfortably below our leverage comfort zone of 4.5 to 5.5 times.

Moving on to guidance, we are maintaining both our full year 2026 AFFO per share guidance range of $1.37 to $1.39 and our recurring cash G&A range of $16.5 million to $17.5 million. As Mark stated earlier, we now expect 2026 net investment activity to be at least $800 million. In addition, our AFFO per share guidance now includes approximately 3.5 to 4 cents per share of estimated dilution, or 2.8 million to 3.1 million shares, due to the impact of the company's outstanding forward equity calculated in accordance with the Treasury stock method. This compares to the prior range of 5 to 8 cents per share of estimated dilution. However, due to our deliberate decision to settle 24 million forward shares in the third quarter, our estimated weighted average share count for 2026 is now approximately 2 million to 2.3 million shares higher than previously anticipated, which has an estimated dilutive impact of 2.5 to 3 cents per share. In short, the positive impact to 2026 from having less dilution from the treasury stock method has been more than offset by our decision to settle more forward shares this quarter. Lastly, on October 15th, the Board declared a quarterly cash dividend of 22.5 cents per share. The dividend will be paid on December 15th to shareholders of record as of December 1st. With that, operator, we are now open the line for questions.

Operator

We will now be conducting a question and answer session. [Operator Instructions] And our first question will come from Haendel St. Juste with Mizuho Securities.

分析师问答

Haendel St. Juste

Hey guys, good morning, and thanks for taking my question. I was hoping you could talk a bit more about your capital deployment, balance sheet management strategy here in light of higher rates and your replace cost of capital. How much capital runway do you estimate you have? Is it fair for us to assume capital deployment's going to slow in the near term? Dispositions will tick up a bit. Leverage may tick up as well. So maybe some thoughts on the deployment and balance sheet strategy would be helpful. Thank you.

Daniel Donlan

Yes, hey, Haendel, appreciate the question. So as we think about the next 5 quarters, we have roughly $550 million of net investment capacity before we got to 5 times, which is the midpoint of our leverage comfort zone. So that's kind of how we're thinking about next year. And so if you think about that $550 million, we do see a path towards mid-single-digit AFFO growth next year without needing to raise any equity between now and 2027 year-end. And I would note that, you know, keep in mind that does include headwinds from refinancing the $175 million swap. So that's how we see the base case shaping up for 2027, which is not dissimilar to how we've guided to the forward year in prior years. But look, if our cost of equity improves, we could obviously accelerate our net investment activity, and the sooner the better, and that would push up our potential growth to the higher end of that mid-single-digit range while still ending the year, actually in the low to mid-4 times range. So it really just depends on kind of where our cost of equity is and how quickly we deploy the capital, but I think we're going to be judicious with the capital that we have raised. I guess Mark, do you wanna?

Mark Manheimer

Yes, sure, and so, I mean, I think we're in a really good position. I mean, just turning to page 19 in our investor presentation, you kind of see – there's really only 3 other REITs, or 3 REITs including us, that are in a pretty good leverage position where we have a lot of dry powder. We've seen from a competition standpoint, the private buyer really dry up. You think about the 1031 small family office buyer that is kind of borrowing from their community banks that 50% to 65% LTV has 7-plus percent interest rates. They're just not really competitive right now. So the supply and demand is shifting. We're seeing it happen real time. And so, you know, cap rates need to move up unless interest rates move down and everybody's equity price gets a lot better really fast. So I think something's gotta give, and I think it's likely going to be cap rates here in the short term. We're certainly already seeing that. And the good news for us is we're in a really good capital position where we have capital to deploy, which is why we maintain a low leverage balance sheet.

Haendel St. Juste

That's great guys, appreciate the call there. And maybe a follow-up on cap rates you brought up. How much price, I guess, thoughts on balancing pricing power and risk management here as you look to optimize yield versus risk? How much do you think you could push cap rates? Are you willing to enter new verticals or maybe I wouldn't say push risk, but just how do you envision sourcing higher cap rates that involve new verticals or any change to perhaps your views on certain subsectors or risk profiles. Thanks.

Mark Manheimer

Yes, thanks, Haendel. So, I wouldn't anticipate really any change in terms of our investment criteria. We see plenty of opportunity. Deals that we're chasing look a lot like what we've bought in the past. If you look at the pipeline currently, maybe the credit profiles are a little bit better. There's certainly more investment grade, investment grade profile in what's in our pipeline currently. That's, you know, when we add more, that might not look like that, so I wouldn't necessarily count on that. But that's what, you know, we've got in the pipeline currently. I don't think we're going to have to move into any other verticals or anything that will surprise investors. It's just a matter of how long is the bid-ask going to compress. You know, when we went back, at really the very end of the third quarter. We had already closed most of our transactions, but we went back and were able to reprice a bunch of deals. And fortunately, the sellers were a lot more receptive this time around to those conversations if you compare to 2023, 2024, when deals were repricing, there was just a very large bid-ask spread for a long period of time. This time, I think, I think sellers aren't really assuming that cap rates are just going to drop back down like they did the last go around so that we were able to really get better terms, get better pricing. You know, we were looking at a couple of portfolios where, you know, there were a few assets we thought we were going to likely put in our TRS and turn around and sell those, you know, quickly after buying portfolios. We were able to just remove those from the portfolios so we didn't have to take on that risk, which was helpful. So sellers are much more responsive this time around. So it feels like it could move a little bit more quickly, but we'd still like to kind of get a little bit more pricing, which is, again, why I think we're going to see fourth quarter acquisitions likely be pretty back-end loaded, which is somewhat intentional because we want to give as much time as possible, allow sellers to reprice their expectations.

Haendel St. Juste

Super helpful. Thank you.

Operator

And our next question will come from Jay Kornreich with Cantor Fitzgerald.

Jay Kornreich

Hey, thanks. Good morning. First, I just wanted to ask about tenant credit. The sub-1 times rent coverage bucket dropped to a very low 0.2%. So just curious how you're thinking about tenant credit and if there's any changes to the watch list and maybe how that's all baked into guidance, if there's been any adjustments there you can talk about.

Mark Manheimer

Yes, fortunately we just really aren't seeing very much at all in terms of credit issues. 1 or 2 assets here or there that we're paying attention to, but out of 913 assets, that's not very much. So we don't really think there's going to be anything material there. And you kind of hit the nail on the head. We're very focused on not only the credit of our assets and the real estate of our assets, but also the unit level coverage. And so seeing our under 1 times bucket get cut in half, certainly helpful. Some of that is our focus on dispositions of really kind of trying to cull some of those assets. And so you've seen some pretty good movement, both from the assets that we own improving, as well as our focus on the disposition side of really trying to keep that very healthy. And I think if you compare our unit level migration to others, it's really been very strong.

Jay Kornreich

Okay, appreciate that. And then just following up on the previous question around just overall transaction market, you mentioned how sellers are willing to bake in higher cap rates this time around. But just as you think about the overall transaction market, is it remaining healthy? Are opportunities that you generally foresaw before the spike in interest rates, are those remaining on the table that gives you confidence that as you have the financing availability, that there still is a robust investment pipeline into next year that you can take advantage of?

Mark Manheimer

Yes, I think the opportunity set remains very strong. So the supply is there every bit as much as it's been so far this year, maybe even a little bit better. And then the demand side is weakened substantially. So we just really think it just needs to reprice a little bit more for us to get aggressive. We've got dry powder. We think that's a great asset to have in this environment, where most others do not have that. So we want to take advantage of it and not just chase every deal. So we really want to maximize the pricing on every opportunity that we get. And so, yes, I mean, you know, I think, you know, going into next year, the opportunity set certainly won't be holding us back. It's really going to come down to, you know, whether assets reprice enough or if cost of capital improves.

Jay Kornreich

Got it. Okay. I'll hold it there. Thank you.

Operator

We'll go next to Jamie Feldman with Wells Fargo.

Unknown Speaker

Great, thank you. You may have, I think you kind of touched on it, but maybe I'll just ask it again. But with the new investment guidance and $646 million of net investment volume to date, is $150 million implied for 4Q reflect conservatism or a deliberate pullback? I know you said you were kind of delaying things a little bit. And I guess even more importantly, you know, would you think $150 million is a good run rate for the first half of '27 also? Or the pipeline is still so strong, you could be meaningfully higher?

Mark Manheimer

Yes. No, I think it's a good question, but I you know the $150 million. You know, we did say at least $800 million, so if things don't really change all that much, then it'll be probably right around $800 million. If things get better, we're ready and able to ramp that up. And so the team's really shown a lot of ability to ramp up when opportunities are there, as well as show a lot of discipline when things maybe aren't there as much. And so right now the pricing isn't exactly where we want it to be, but if that improves, we certainly feel like the opportunities are there and we'd certainly be able to do a lot more than $150 million, which is why we kind of just left that as an open-ended, you know, above $800 million.

Unknown Speaker

Okay. And then, I mean, what are you hearing from tenants in terms of like any changes to their expansion plans or business models, uh, with either the risk to the consumer, higher cost of capital, just like if you guys are, from your vantage point, what else feels different other than, you know, we would think cap rates move a little bit here.

Mark Manheimer

Yes, I mean, I'd say really on a little bit, where I think people have, you've seen some announcements of some of the store openings being a little bit more conservative and operators being a little bit more selective in terms of what real estate they're willing to go in. But what's working continues to work, even if margins have compressed a little bit with a lot of retailers. And so fortunately that's really where we've focused on investing in the necessity service and deep discount type sectors. They just remain defensive and continue to do well and they continue to expand, which is why we continue to see just a lot of opportunity for acquisitions, whether it be new developments or just buying existing assets.

Operator

Okay, thank you. And we'll go next to Nick Joseph with Citigroup.

Nicholas Joseph

You touched on having plenty of capacity. Obviously, cap rates still expanding a bit, and you were opportunistic on the ATM this quarter as well and have the unsettled. But as you kind of go forward and work through that current capacity, how do you think about issuing additional shares? Obviously, the stock is kind of below consensus NAV now. I think in the past, you've talked about investment spreads obviously being an important consideration. But can you just remind us of the broader framework associated with that as investment spreads hopefully start to normalize?

Daniel Donlan

Yes, we hope they normalize as well, Nick. Look, as we sit here today, we, I think our spreads are about 60 to 70 basis points. And what we've historically said is that we really need to be north of 100. So, you know, we don't have any, you know, near-term need to raise equity. You don't have to raise equity at all next year if we so choose. So I think we need to be above kind of 100 basis points and feel comfortable we can stay at those levels. But right now it's just not really a concern of ours given the capacity that we have.

Operator

Thanks. And our next question will come from Greg McGinnis with Scotiabank.

Greg McGinniss

Hey, good morning. So you got supply, you're saying supply is still there, demand side is weakened. Are you optimistic that cap rates may react faster to this rate cycle than the 2 to 3 quarters? Is that a good thing? that it took historically to see cap rates move up higher.

Mark Manheimer

Yeah, I think we're optimistic just because the conversations that we had about revisiting pricing on deals that we had in the third quarter were very constructive, where I don't really feel like they were that constructive back in 2023. And so I think people kind of get it a little bit more this time, and there's not a knee-jerk reaction that things are going to change, just going to swing back to the way that they were. So it does feel like it's going to be quicker. How much quicker, I don't think we really know. So that's why we're just kind of putting in some conservatism in terms of how we're thinking about deploying capital in the fourth quarter.

Greg McGinniss

How would you categorize that seller that's kind of more willing to adjust to repricing?

Mark Manheimer

Yes, I mean it typically will depend on their level of sophistication and kind of understanding that there's probably not a buyer right around the corner that's just going to step into our place. And then the other big piece is going to be how much pressure is on that seller to transact. If they have debt coming due and it's a portfolio and they say, okay, if I have to do something and redoing the debt, it's just going to be really painful, I'd rather just sell and maybe sell it 30, 40 basis points higher.

Greg McGinniss

Okay. And then with regards to kind of the forward equity that you have in place, how you think about raising capital today and cap rates that you're looking to achieve? doing the acquisitions, you know, looking forward from the acquisitions and considering your weighted average cost of capital, is that kind of think about hey we already raised this capital at this rate so we just need to get the spread to that rate? Or are you thinking about hey here's the environment today, what's a reasonable cap rate spread based on today?

Daniel Donlan

Yeah, Greg, it's obviously the latter. So we definitely need to, we definitely factor in where we are today versus kind of where cap rates are today. So as we think about settlement of equity, you know, I think it'll be light over the next, you know, 2 quarters. could be and then probably pick back up in the back half of 2027. But as far as new equity's concerned, that's just not in the model at this point in time given where we are. But we're optimistic that people will see the value in our shares, as well as frankly the net lease space in general. So, you know, we're hopeful that we can be back to issuing equity at some point in time.

Operator

Great, thanks. And moving on to Michael Goldsmith with UBS.

Michael Goldsmith

Good morning. Thanks a lot for taking my question. Uh just on the settled shares, which is used to pay down debt, I guess just, you know, why is now the right time to do that? And then also, right, like your reported leverage ratio comes down, you know, do you expect that to have a material impact in your conversations with the rating agencies, what could that eventually lead to by having a reported leverage ratio that's now 1 and a half times lower?

Daniel Donlan

Yes, I appreciate the question, Michael. Look, it certainly puts us in a more favorable light with the rating agencies. They really look at leverage without the impact of the forward. And so you really want to be below 6 and a half times without the forward. And so at 5 times, we're comfortably below that. We're optimistic that we can continue to have constructive dialogue, um, with those parties when and if we decide to get additional ratings, probably sometime next year. And I think the first part of your question, why is now the time? I mean, look, we don't really view beating earnings on having less TSM dilution than we expected as a clean beat or as a good way to guide higher. So in order to kind of blunt the positive impact that came from that, we decided to settle more shares, which obviously has the positive impact that you referenced in terms of the rate agencies. It obviously increases our float. You know, it also allowed us to delay the pull down of the 7-year term loan. And kind of given where swap rates have moved in the last like week or 2, hopefully they continue to move down and that will allow us to swap at better than expected rates versus what we have in the model today. So it did afford us a lot of advantages while not impacting earnings at all relative to our prior guidance.

Michael Goldsmith

Thanks for that. And as a follow-up, it seems like you're less into capital recycling at this time, maybe than others. So I'd love to get your thoughts around capital recycling. You know, you continue to dispose of targeted assets in the pharmacy and dollar store industries, just trying to get a sense. So, you know, would you be interested in doing that? It seems like you have pretty good access to capital. So just trying to get like the thought process and how you think your portfolio is positioned from here.

Mark Manheimer

Yes, thanks Michael. We'll continue to do what we've been doing in those sectors. In fact, I think you can expect some more sales in both of those sectors in the fourth quarter. And then, we'll be, we've always been opportunistic. So in the event that there is somebody that wants to pay aggressive cap rates for some of our assets, then we can redeploy that capital into, you know, better assets at better pricing. You know, we're always interested in doing that. We've been asked a few times about the bonus appreciation buyer. We certainly have a lot of convenience stores and some interested parties, so there's always the possibility that we go down that route, but, um, but yeah, we're going to be opportunistic, and, you know, I think historically we've probably been the most active on the disposition side, whether it be focused on concentrations or just improving the quality of the portfolio, which ultimately is why I think we've got the lowest credit loss stats in this space at 3 basis points per year.

Michael Goldsmith

Thank you very much. Good luck in the fourth quarter. Thanks.

Operator

We'll go next to Eric Borden with BMO Capital Markets.

Eric Borden

Great. Thanks for taking my question. Rent coverage remained healthy, you know, just curious, um you know, looking beyond the portfolio average, are there any categories where tenant margins or coverage are beginning to weaken? And, you know, how much of the improvement this quarter came from existing store performance versus investments and sales that you completed?

Mark Manheimer

Yes, it's a good question. So I'd say most of the improvement came, quite frankly, from some sales. And then overall, I would say the coverages for the existing portfolio slightly improved, but was really just pretty stable. And then from new investments, that was kind of more in the kind of the 3 and a half times coverage. So that actually brought it down a little bit, but certainly feel comfortable with where those came in.

Eric Borden

Great, thank you. And then you mentioned being able to remove assets from portfolio purchases that you would otherwise have sold after closing, but beyond price, are sellers becoming more flexible on other terms that improve your to improve your returns or reduce credit risks.

Mark Manheimer

Yes, I mean, I you know, that was kind of the big one. is you know, we look at a portfolio, there's a bell curve for every portfolio. Uh, that that we look to buy. Uh, even if we like all the assets, there's certainly, you know, some better than others. And so in the event that we're able to cull down, uh, and really kind of chop off the tail of the weaker assets, uh, at acquisition, that's obviously a big plus to us. I think in sale leasebacks you might be able to get better escalators and some other maybe longer terms, things like that. But yes, everything's on the table. And fortunately, uh, we've had very constructive conversations with all sellers.

Eric Borden

Great. Uh, thank you very much.

Operator

Linda Tsai with Truist has our next question.

Unknown Speaker

Hi, thank you. Um, to the extent that you repriced deals with your sellers in 3Q, how much expansion on acquisition cap rates did you achieve? And by back-end loading your 4Q acquisitions, how much additional expansion might you expect on those deals?

Mark Manheimer

Yes, it's a little bit difficult to know where things are going to land in the fourth quarter. You know, our expectations are certainly much higher and we'll kind of see what we're able to extract. But in terms of the third quarter, most of that was really at the very end of the quarter because you know, you really think about when things moved. I mean, you mean the 10-year at the beginning of the quarter was, you know, less than 4 and a half, uh, and moved up to, you know, I think 5.3 at the at the at the end of the quarter and most of that was really in the last 3 weeks, which you also kind of saw most of that move in our and our stock price and other stock prices, uh, in the in the space was really in the in that last 3 weeks. So it was really, we had closed on most of the transactions at that point in time, or were in the closing process. So we were able to revisit pricing on 10 different deals. And we're able to move pricing on average about 30 basis points on those transactions. But it just didn't really move the needle that much for the entire quarter. It did take it from a 7.3 to a 7.4 overall for the quarter. But it was, you think about it, it was really very late stages of the quarter when things really started to move. And we weren't willing to move to sacrifice relationships as well as have a ton of dead deal costs, which we didn't think was really needed.

Unknown Speaker

Did you have any dead deal costs? No, we did not. Just one other question. In terms of the 1031 buyers going away across the top industries you invest in, you know, grocery, convenience, home improvement, dollar stores, where are you seeing the cap rate expand fastest?

Mark Manheimer

Yeah, I mean, it's not necessarily driven by sector, it's driven by seller. And again, how sophisticated is that seller? Do they kind of really understand where you're coming from? And really what's going on in the market and then how much pressure is on them to transact. And so I think the people that maybe need to kind of see some comps, at higher cap rates, that's going to take a little bit more time, but it's really pretty broad across all sectors. It's really driven by who the seller is and what position that they're in.

Unknown Speaker

Thanks. Thanks, Linda.

Operator

We'll go next to Alex Fagan with Baird.

Unknown Speaker

Hey, thanks for taking my question. Maybe just one for me. Are there any changes in the expectations for how much lending you can do that could lead to acquisitions and just helping your partners out in this kind of environment?

Mark Manheimer

Yes, it's an interesting question, Alec, because we kind of think that the longer this disruption lasts, there's just going to be kind of some one-off opportunities. We haven't really seen much on the lending side currently that's that attractive to us beyond on what's normal course for us, but we do think there's the possibility that that could pop up.

Operator

Got it. Thank you. Thanks, Alec. We'll go next to Jana Galan with Bank of America.

Jana Galan

Thank you. Good morning. Maybe just following up on that last question, during the last market disruption in 2023, you guys were able to find some attractive opportunities with mortgage loans. I'm curious, how long did those take to enter the pipeline, and if that's an area that you would consider, in any specific tenant categories or structures.

Mark Manheimer

Yes, I mean, I think we'd consider anything, especially as some of those have paid off were converted into fee ownership. Our loan book is certainly a lot smaller, so I think we have a little bit more capacity there. And last time, it really was some people that had some financing commitments that fell through. So, I think that'll probably take some time, maybe a quarter or 2, if that's going to happen again, or if lenders wanna, you know, kind of reprice the interest rates on deals if they burn through some rate locks or things like that. that's certainly possible it's just you know very difficult to predict whether that happens again or not.

Operator

Thank you, Mark. Thank you, Jana. Our next question will come from Upal Rana with KeyBanc Capital Markets.

Upal Rana

Great. Thank you for taking my question. Just following up on that as well, you know, on the loan repayments this quarter, that carried about an 8.8% yield. How much additional repayment or conversion activity should we anticipate over the next year, and how are you incorporating that income replacement into your acquisition needs?

Mark Manheimer

Yes, I mean, I think in most cases, the loans as they repay, uh, they're replaced with, uh, a new development and, uh, a new loan. And so as those assets are sold. Uh, and so I would think of it just kind of, you know, standing in place, um, you know, with most of those. There's a couple of chunkier deals that may uh pay off, but those are at much lower interest rates, and that would be a great source of capital.

Upal Rana

Okay, great. And then, you know, when looking at new deals today, you know, how are you distinguishing between a deal that is accretive using capital that you've already raised versus one that clears your return hurdles that, you know, today's replacement cost of capital? And just curious which standard is, you know, driving your investment decisions right now?

Daniel Donlan

Yeah, we never take into account where we've raised equity in the past when we think about putting new capital to work. It's really where can we raise it today? And what does that outlook look like? And what is the spread on that cost of capital? It's where we raise equity in the past is not relevant to us at all.

Upal Rana

Okay, great. Thank you.

Operator

Moving next to Jamie Feldman with Wells Fargo.

Unknown Speaker

Great. Thanks for taking the follow-up. Dan, I just want to go back to a comment you made earlier where you said you see a path towards mid-single-digit AFFO growth next year without needing to raise any equity between now and '27-year end. Can you just walk us through the key building blocks to get there? And, you know, as you think about the course of the year, are there certain quarters you think are higher or lower? What would really move that away from that mid-single-digit number?

Daniel Donlan

Well, I mean, there's a lot of different factors. So equity is not one of them. But I think it would be, you know, where we refinance the $175 million swap in January, what type of credit losses, you know, we recognize in the quarter where our cash G&A shapes up relative to this year. Um, you know, the timing of of investments, um, uh, would also factor into that. Um, and where we're able to eventually you know pull down the the 7-year term loan and swap that. Those are all different Those are all the factors that would go into, um, you know, the growth range that we gave. But that growth range is is based upon, again, $550 million of of net investment capacity being deployed between now, um, and the end of 2027.

Unknown Speaker

Okay, and then what are you assuming for like core growth?

Daniel Donlan

before investments? I mean, you think about our average escalator growing at kind of, you know, a little bit around 1%, give or take, you know, 10 to 20 basis points, depending upon, you you know, how, you know, what, you know, lease bumps we have.

Unknown Speaker

Okay. And then just going back to the bonus appreciation comments, how big is that pipeline for your team? And you think it's gonna grow meaningfully or stay pretty constant? And is there any timeline on people wanting to get those deals done?

Mark Manheimer

Yeah, I mean, it's very opportunistic and really escalates massively at the very end of the year. So it's a little bit tough to predict how much we do, if any. I imagine we'll do some there. Yeah, I mean, we had a lot of people coming to us, literally in early to mid-December last year, frantically wanting to figure out how to get their hands on some of our C-Star assets. And so I would expect this to continue to be the same this year. running out of the last couple of years of this administration. I think there's a fear that maybe that goes away at some point in time, but it's, you know, the tax planning seems to really, you know, really escalate quite a bit in the last few weeks of the year.

Unknown Speaker

Do you have a certain pool of assets that are ready to go for that or you'd consider.

Mark Manheimer

We understand which of our assets would qualify for that for that tax treatment. And so if somebody approaches us, we're ready to go.

Unknown Speaker

which type of assets qualify.

Mark Manheimer

Yes, yes. There are certain criteria beyond just what sector that they're in, but it's primarily just convenience store assets within our portfolio.

Operator

Okay. All right. Thank you. Thanks, Jamie. And this now concludes our question and answer session. I would like to turn the floor back over to Mark Manheimer for closing comments.

Mark Manheimer

Well, thanks, everybody, for your interest in the company today. We look forward to seeing many of you at the upcoming conference schedule. Take care.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

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