Hello, everyone. Thank you for joining us and welcome to the Frontview third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Pierre Revol, CFO. Pierre, please go ahead.

Thank you, Operator, and thank you everyone for joining us for Frontview's third quarter 2026 earnings call. I will be joined on the call by Steve Preston, Chairman and CEO. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to several factors. I refer you to the safe harbor statement and our most recent violence with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliation of non-GAAP financial metrics to most directly comparable GAAP metrics are included in the exhibits furnished to the SEC under Form 8K, which include our earnings release, supplemental, and investor presentation. These materials are available on the investor relations page of our company's website. With that, I'm now pleased to introduce Steve Preston. Steve?

Great. Thank you, Pierre, and good morning, everyone. We had our second anniversary as a public company this October, and our portfolio and prospects could not be stronger. We own exceptional real estate with a diverse tenant base in vibrant markets where the quality of the real estate drives rents and values higher over time. We are small enough that every good investment moves the needle. And we have a low levered balance sheet and high retained free cash flow to support our growth. These attributes, combined with our experienced team and competitive market advantages, attractively position us to capitalize on growth opportunities, especially in the current environment. Turning to our investor presentation on page five, we added a slide that shows the progress we have made. Since the first quarter as a public company, we have grown annualized base rent by 19% to $69.8 million in the portfolio from 307 to 327 properties, while increasing occupancy from 97.7% to 99.4%. We reduced casual dining tenancies from 15.6% of rent to 9.1%, grew Texas and Florida from 11.6% to 17.8%, and lowered net debt to adjusted annualized EBITDA from 5.5 times to 5 times or 4.5 times, including our undrawn preferred. Our largest tenants have changed as well. At the end of 2024, our top tenants were Fast Pace Urgent Care, Verizon, Adams Auto Group, Oak Street Health, and IHOP. A year ago, Dollar Tree was our largest tenant at 3.6% of rent, and our top 10 tenants comprise 24.3% of rent. Today, we have reduced Dollar Tree from 14 leases to eight and Fast Pace from eight leases to four. Our top five tenants are Verizon, Raising Canes, Best Buy, Bank of America, and LA Fitness, three of which are investment grade. Importantly, our exposure to both Raising Canes and Bank of America was increased through proactive asset management, either by replacing a weaker existing tenant or unlocking additional value from our frontage. These are just a few examples that demonstrate the opportunity we find by owning great real estate in great locations with a team that knows how to create value from our existing portfolio. Diversification continues to be a key strength of the portfolio. Our largest tenant, Verizon, is only 2.5% of rent, the lowest amongst net lease peers, and our top 10 stands at only 20.1%. To put that in perspective, Realty Income, the largest net lease REIT, owns nearly 16,000 properties compared to our 327, yet has a greater concentration amongst its top 10 tenants. Our diversification is intentional. Our real estate first strategy continues to evolve with 79.2% of our rent coming from top 100 MSAs, 92% of our properties near shopping centers, and a median rent of just $176,000 per property. Why does this matter? Because as we outline on page seven of our investor presentation, our strategy starts with great real estate. We target fungible buildings, attractive markets, strong frontage, and replaceable rents. Thank you for joining us. strengthened our model, providing greater access to capital and allowing us to pursue more opportunities while maintaining our disciplined approach. As we grow, we can continue to compound these advantages, creating long-term shareholder value. Pages 8 and 9 of our investor presentation shows what this means in practice and captures what makes front view different. Page 8 illustrates what happens when a tenant leaves. In net lease, that is the moment of truth. With a specialized building or a weak location or high rents, there are few good alternatives. Downtime is long and the landlord usually ends up accepting lower rent, funding tenant improvements, or selling at a big discount to purchase price. Our frontage assets attract competitive lease and purchase offers, giving us flexibility to retenant, redevelop, divide a property into multiple leases, or sell, depending upon what creates the most value. Look at the results. When Twin Peaks parent went into bankruptcy, we re-leased our Winston-Salem site to Panda Express and Jagger's at a 92% increase in rent. When Tricolor liquidated, we upgraded the site to Avis on a 10-year lease. When Walgreens closed our Durham store, we replaced it with Amazon with no tenant improvement allowance. We converted a Miller's Alehouse into a 15-year Raising Cane's ground lease with no landlord capital, and we created a new Bank of America ground lease on unused land in front of our Walmart. and this quarter, we delivered another example of successful proactive management. Our Wendy's in Stone Mountain, Georgia, operated by Meritage, had below market rent, expiring in March of 27. We have already signed a 15-year chase ground lease that would commence upon Wendy's expiration at a 53% increase in rent. Across these six outcomes, we estimate the value of these sites are now approximately $29 million against a combined purchase Thank you for watching. With weaker real estate, a tenant problem often leads to an auction where recoveries can be less than 30 cents on the dollar. With our real estate, 1031 investors, developers, and end users compete. And across all of our sales, we have sold above our cost, whether the property was occupied, dark, or vacant. In July, we sold our dark hops and drops at 150% of our cost. And we sold our sleep number and AT&T property to a developer at 120% of our cost, while sleep number was in chapter 11. In May, we sold a friendlies, a shrinking chain with two prior bankruptcies at a 5.35% cap rate and 131% of our cost. Earlier this year, we sold a vacant former take five at 191% of cost. We also got ahead of the Twin Peaks and Meritage bankruptcies, selling those properties before the filings at 120% and 113% of our cost, respectively. The common thread is that buyers are underwriting the real estate, not simply the lease for the tenant. This quarter, we sold five properties, including the hops and drops in the sleep number, for $17.1 million at a 6.56 cap rate. Since our IPO, we have sold 56 properties for $128 million, including vacant properties, with our 42 occupied properties selling at a 6.8% cap rate. Over the same period, we acquired 104 properties for $370 million at a 7.7% cap rate. That is approximately 90 basis points of positive spread while simultaneously upgrading the portfolio. This is what we mean by real estate-first investing. protecting the downside through the quality of the real estate, creating upside through active asset management, and recycling capital at attractive spreads to compound growth. Turning to acquisitions, we acquired 16 properties in Q3 for $50.6 million at a 7.56 average cap rate, with a median purchase price of about $2.65 million and median rent of about $208,000. Our lease term on acquisitions is lower by design. We selectively buy well-located properties with shorter terms and below market rents when we perceive the opportunity for development-like upside without the risks associated with ground-up development. For example, the Indiana Veterinary Clinic we discussed last quarter is at final stages of being extended for 10 years, creating substantial value in the lease. Another example is the 20,000 square foot specs situated at 1.88 acres on the cover of our investor presentation. Spex is the largest wine and spirits retailer in Texas, family-owned since 1962, with more than 200 stores. Our property is in the Legacy Shopping Center in San Antonio, alongside Best Buy and Main Event near US 281 and Loop 1604, which carry more than 238,000 vehicles a day, and across from an HEB Anchorage Center. More than 225,000 people live within a five-mile radius, with an average household income above $130,000. Spex has been in the center since 2012 and in 2019 more than doubled its footprint by moving into its current 20,000 square foot store. What makes this deal stand out is the rent and the price. Spex pays about $10 per square foot with two five-year fixed options at 11 per square foot and then 12 per square foot in a sub-market where rents are estimated at about $20 today. The seller asked a 6.25% cap rate. We sourced the property off market through a longstanding relationship and worked through complications with the center's declaration that frankly kept other buyers away. Ultimately, we acquired it for $2.6 million, approximately 18% below the asking price, at a 7.6% cap rate and just $132 per square foot, roughly half of replacement costs. We fully anticipate specs to renew, pushing the yield on cost to 9.1% at the time of the second option. and the unlikely event that Spex leaves, we get a box back at half of market rent. This transaction demonstrates our ability to create value and acquisition through sourcing, asset selection, certainty of execution and the relationships we have built over the years across a fragmented marketplace. In August, we also invested $2.7 million in a joint venture with an existing Frontview partner to re-tenant a well-located property with frontage near downtown Thank you for joining us. We ended the quarter at 99.4% occupied with only two vacancies, including the former Smoky Bones, which is out for lease execution, and a small gas station, which has now been sold. We had no new additions to our watch list, and our 50 basis point bad debt placeholder for 2026 remains largely unidentified. With the new Chase lease, we have no remaining exposure to Meritage. Looking ahead, our pipeline remains very active. recent movements in interest rates have allowed us to source more opportunities at higher yields while maintaining our focus on high-quality real estate and attractive locations with replaceable rents. We currently have over $40 million under LOI or purchase and sale agreement at yields above those achieved in the third quarter. Depending on closing timing, we are well positioned to meet or exceed our full-year net investment guidance of approximately $120 million. In closing, one of Frontview's most important competitive advantages is the depth of our involvement in every aspect of the business. I take as much pride in the details of an individual $2 million acquisition as I do in the broader strategy and direction of our company. We combine their strategic vision and discipline of an institutional platform with the entrepreneurial intensity and asset-level knowledge of a founder-led business. Thank you. Thank you. Thank you. Before I turn the call over, I am pleased to announce that our board has appointed Pierre Revol as president of Frontview, in addition to his role as chief financial officer. Pierre has been a true partner to me in building this company, and we share a common vision for Frontview, from our long-term strategy and capital allocation to the details of individual investments. This appointment reflects the strength of the leadership team we've built and our commitment to scaling Frontview while preserving the entrepreneurial culture and attention to detail that define our company. With that, I'll turn the call over to Pierre.

Thank you, Steve. And thank you to the board of directors for your confidence and support. I look forward to continuing to work alongside a talented team to build Frontview into a differentiated net lease platform. As Steve mentioned, a highlight this quarter was our capital deployment. where we generated a 100 basis point spread between our acquisitions and dispositions. We funded close to 100% of our acquisitions this year with dispositions and equity, reducing net debt to adjusted annualized EBITDA RE from 5.6 times at the beginning of the year to 5 times at quarter end. Pro forma for the final preferred draw on November 10th, leverage declines further to 4.5 times, well below our leverage range of 5 times to 6 times. In terms of capacity, this allows us to complete our 2026 investment plan and fund an additional $80 million of net investment in 2027 while maintaining leverage at or below 5.5 times. If we repeated our 2026 net investment guidance of approximately $120 million in 2027, leverage would be close to 5.8 times, still comfortably within our targeted range. Turning to the quarter, contractual cash rents increased $777,000 sequentially to $16.7 million, driven by net acquisitions and contractual rent increases, partially offset by dispositions. Percentage rent increased to $131,000, yet we expect the run rate to be close to $50,000 quarterly. Mortgage interest income was $228,000, including a $3.7 million short-term take-back loan on the sale of sleep number and AT&T property, which was repaid during the quarter. As a result, mortgage interest income in the fourth quarter will decrease to $196,000. Unlike the first half of the year where we generated $495,000 of other income, we only had $11,000 this quarter. As we've said previously, other income is episodic. In total, adjusted cash revenue increased 4.4% to $17.1 million, or 5.6% excluding other income. Notably, with our portfolio almost fully leased and continued success in retaining properties, non-reimbursable property expenses declined to just $216,000, or 1.3% of adjusted cash revenue, compared to $405,000, or 2.6% of cash revenue a year ago. and others. Adjusted cash NOI, including the full impact of acquisitions and dispositions, was $17.4 million. Adjusting for percentage rent, repayment of the short-term loan and slightly higher expected slippage, our exiting run rate adjusted cash NOI is approximately $17.2 million. Importantly, of annualized rent, and another two commencing in 2027, adding $699,000. In total, these leases represent $1.2 million in annualized rent, a 19.3% increase over the prior leases, highlighting the embedded organic growth within the portfolio. As Steve mentioned, in August, we made an investment in a Dallas redevelopment project, which we account for as an unconsolidated joint venture. It contributed $19,000 to AFFO in the first partial quarter, and the contributions will grow as rent steps up at the project. Recurring cash G&A was $2.7 million, and for a full year, we expect cash G&A of approximately $10.5 million, excluding non-recurring expenses. As shown on page 23, our G&A is about 1.5% of gross assets versus peers at closer to 0.5%. While this is higher than our peers, we have already built much of the infrastructure needed to support a significantly larger company, positioning us to generate meaningful operating leverage as we grow. We could more than double our asset base with the similar levels of G&A. Year-to-date, we have acquired 43 properties for $144.5 million, including closing costs, and invested $2.7 million in the joint venture. We also sold 20 properties for $47.4 million, including proceeds from a short-term seller financing, bringing our net capital deployment to approximately $100 million. We funded these investments with $50 million in common equity, $43 million of Series A preferred, and retained free cash flow. As a result, we grew the portfolio while reducing leverage over the year. We ended the quarter with $174 million of liquidity, and since year-end, our leverage ratio declined to 30.6% from 34.5%, and our AFFL payout ratio proved to 64.7% from about 69%. Fixed charge coverage ratio remained strong at 3.5 times. On October 15th, We extended our revolver and term loan to October 2028 with an option to extend to October 2029 and added a ratings-based pricing grid that would lower our borrowing costs with investment-grade rating. As a reminder, our term loan and revolver are part of a single credit facility established at our IPO. We swapped $200 million of term loan to a fixed one-month SOFR rate of 3.66% and subsequently swapped another $100 million on our revolver at approximately 3%. both swaps run through March of 2028, giving us a blended fixed SOFA rate of approximately 3.4%. We have close to a year and a half to evaluate our options before these swaps mature. As we build a more laddered balance sheet, we expect to turn out and fix more of our floating rate debt. In the meantime, our pre-funded equity covers our 2027 acquisitions with the balance financed through our revolver until we term it out. In terms of our share count, we settled 1.7 million shares. We sold forward last quarter for 32.7 million, and 6.7 million of the Series A Preferred converted to common, adding an additional 392,000 shares. Also, OP unit holders converted 869,000 units to common. Together, our common shares outstanding increased by about 3 million to 26.6 million, and total shares, including OP units, increased by about 2.1 million to 31 million. On November 10th, we will issue the remaining $30 million of the preferred, completing the $75 million investment. That brings our Series A preferred outstanding to $68.3 million, or about $1.15 million of quarterly dividends at a 6.75% dividend rate. We're maintaining 2026 AFFO of $1.32 to $1.34 per share, which represents approximately 7% growth at the midpoint and includes $0.02 of other income earned in the first half of the year. Our guidance implies $0.33 per share in the fourth quarter with no other income assumed, as the contributions from our acquisitions and strong operations is partially offset by dilution from the equity we settled and the final draw of our preferred in November. Before we open the line, I want to leave you with the four new pages from our investor presentation that we believe help frame the investment opportunity from here. First, page seven. Our growth is structural. Contractual escalators and below-market rents drive 1.5% to 2% of annual organic growth. On top of that, our low payout ratio allows us to retain and reinvest free cash flow, adding approximately 3% to annual growth. Combined, that gives us 4.5% to 5% growth before raising and equitably deploying any new capital. Second, page 23. analysts expect Frontview to grow AFFO per share meaningfully faster than our peers at 6.8% this year and 5.5% next year, compared to 5.1% and 4% respectively. Put simply, investors are paying roughly the same multiple for Frontview, but getting meaningfully more growth. Third, page 24. The chart on the left shows how we can generate outsized growth through relatively modest acquisition volumes, with 100 to 150 basis points spread through a cost of capital. The table on the right highlights a significant runway ahead for us. Unlike larger peers, we don't need to chase portfolios or find new ways to deploy capital. Assuming 15% annual asset growth, we have approximately 10 years before needing to acquire more than $500 million annually. This allows us to continue compounding growth by acquiring granular, high-quality properties that fit Frontview's model for years to come. Finally, page 25. Based on November 3rd's closing price, Frontview trades an applied cap rate of approximately 7.5%, which does not reflect the underlying value and quality of our real estate portfolio. While net leads generally do not trade on NAB alone, our portfolio gives us strategic flexibility. If the public markets are not reflecting the value of our assets, we can create value by monetizing select properties in the private market and recycle that capital to new acquisitions at attractive spreads. A year ago, when we announced the priority investment for Maywin, we said our overriding objective was creating shareholder value and that our size is a structural advantage. Since then, we've done what we said we would do. We delivered top quartile AFFO for share growth, reduced leverage, improved NOI margins, and demonstrated through numerous case studies how real estate creates value. Importantly, we've earned the confidence of institutional investors who have committed new equity capital to support our growth, giving us the capacity to fund our acquisition plans into 2027. We have a clear strategy, significant capacity to grow, and a track record of execution. We will continue building Frontview the same way, one disciplined investment at a time. With that, I'll turn the call over to the operator to open it up for Q&A. Operator?

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jamie Feldman with Wells Fargo. Your line is open. Please go ahead.

Great. Thanks for taking the question. Congratulations, Pierre. Nice to see things going well.

Thanks, Jamie. I appreciate it.

Of course. I guess just looking at your last few quarters of investments, you've got Walt's Declining, you've got cap rates going up. Can you just talk through how to think about the wall piece of what you're buying and is there something different in what you're underwriting or you just happen to find better deals and we're looking too much at that as a trend?

Yeah, no, good. Thanks for the question. First, we're focusing on great locations, replaceable rents, and then, of course, diversification. you know this quarter and last quarter we acquired a few shorter term properties as we know we have strong operating performance on them and we have the opportunities to extend those leases and we really get to create value so we see spreads in the sort of 100 to 200 basis point arena you know we again having performance metrics and relationships with the tenants it helps us feel very good about those types of assets and what's really kind of interesting in the space is that how many sellers just don't try to extend terms and leave a lot of value on the table. They don't have the relationships, they're unsophisticated, and that's where we get to step in. We really view these opportunities like development-like, but without taking on any kind of construction risk, which is really important. I think that, you know, echoed in our San Antonio Spex liquor, you're buying that at about a 7.6 cap rate with three years left with $10 a foot rent in a $20 market.

I would just add to that, Jamie, that if you just look at our track record on renewals and how we do, we have a really strong experience in terms of what happens when we get access to a lease. And it's sort of according to how we invest and look at profits.

OK, thank you for that. And then I guess going back to some of your earlier comments just about, you know, the market's changing, feels like you'll get more opportunities Can you talk more about what you do expect to see? Do you think it'll shift at all the types of assets you're buying? And then anything coming out of the election that you think is kind of interesting that might change what might come to market, especially on the bonus depreciation side?

I'll say that cap rates are up a little bit. What we're seeing in the market is we're seeing assets that are coming back to us that we otherwise would have bid on and lost out on to higher pricing. So as circumstantial buyers, it's tougher to achieve capital. We're starting to see more opportunities. So this is actually a really great time for us. And we expect to take full advantage of the market. I do not see anything different. It's more of that same quality, that same great real estate, that same replaceable rents. I mean, that's the MO since we founded the business in 2016. And that's what we expect to continue going forward. if you want to come on the election, but it's new.

Yeah, on the election, I don't think that anything really has changed immediately. We still target Texas and Florida. We've increased those exposures. A lot of our pipeline continues to be in those markets. And we continue to strategically look at these markets because the population growth, the demand, our experiences with when we get a property. Everything we bought in Texas has had a really good outcome and a lot of stuff in this quarter, like the San Antonio deal we talked about, have been really positive. And so I think that this market continues to see a lot of demand and we're seeing that across our portfolio when you target these funded properties that we want to continue to build within these markets.

Okay, great. Thank you.

Your next question comes from the line of Eric Borden with BMO Capital Markets. Your line is open. Please go ahead.

Great. Thanks for taking the question, and congrats to Pierre. I know you're not providing 27 guidance on the call, but you've previously outlined 4.5% to 5% structural growth for new capital. How should we think about the carryover from this year's acquisitions and signed leases relative to the full year impact of the common equity and the preferred funding for next year? Thank you.

Thank you, Eric. I appreciate it. So I think our plan as we laid out in our investor presentation is there is structural growth from the escalators and the pre-cash flow. And we've been funded this year. So what really will dictate 2027 guidance is the structural growth piece of it. But we will be borrowing on the line as we grow into next year. And so rates do impact. I also mentioned that we had the swaps. And so if we do anything on the swaps, that would also have an impact. that's basically where the event 2027 we're in early stages and we'll provide an update when we get closer to February when we provide guidance for the year.

Thank you. And then you talked about about $40 million under LOI or contract versus the approximately $27 million of net investment implied in fourth quarter. How much of that pipeline could close this year and then what disposition amount should we weigh that against?

Yeah, we've got an opportunity to close a bulk of that this year. Obviously, it depends on due diligence. Planning for dispos, we're expecting something in the $50 million or so range. So it looks like the guidance looks pretty good and in check for the rest of the year.

All right. I will leave it there. Thanks for the time. Thanks, Eric.

Your next question comes from the line of Anthony Pallone with JP Morgan. Your line is open. Please go ahead.

Thanks, and I can only congrats Pierre on the title. On the 2027 expirations in six and a half percent, you sound pretty confident in terms of recapture and your rents and so forth, but just trying to think through Should we expect any downtime or how does that net into things just from an earnings point of view?

I can just comment globally on where we sit right now for 27. We are effectively done for 26. So far in 26, 116.4% recovery. We have three left. One is a very small, it's called a falafel. We're releasing that to a new tenant. We have a T-Mobile that's renewing. We have a Sherman Williams right now we're negotiating to sell to a bank. So 2026 for history was very accretive. And we expect 27 to be the same. And we're about 6.5, 6.7 ABR. 34 total of that 10 are already complete. and we feel like we've got visibility all the way through into Q3 right now and are expecting very similar results to 26 with recovery rates. So again, you view these as assets and opportunities and historically the data suggests and points to that.

Okay, got it. And then second question, prior call you talked about looking at net lease development and it looks like you have a small venture there. Just any additional color progress towards those goals or what you're seeing on that front?

Yes, we actually are looking at a couple of development opportunities. on the heels of the joint venture that we just completed in Dallas. And we like to see that as a great way to access other value add opportunities and channel additional deal flow. So look to see a couple of those opportunities coming for us in the next quarter. And I think you'll be very happy with what you see and the risks and the relative level of returns and value enhancement and creation that those will bring to the shareholders.

Okay, thank you.

Your next question comes from the line of Jana Gallen with Bank of America. Your line is open. Please go ahead.

Thank you. Good morning and congrats, Pierre. Maybe big picture question. You know, your opening remarks really focused on the ability to be granular and maximize value at each location. You would think that there'd be, you know, a size where that stops being, you're unable to kind of continue that So curious how you're thinking about that and any kind of technology you're implementing to be able to scale that ability.

Yeah, I think that's the beauty of the size. And Pierre pointed that out in his remarks that we have literally years and years to go where we have to exceed significant acquisition cadence. And the $100 to $300 million a year is going to drive growth for very many years to come. and that allows us to keep with this strategy and continue to acquire this great real estate and have these great opportunities and be that circumstantial buyer to drive value and drive better cap rates across the marketplace. So we're very excited. It's a very broad market. It's very deep. Add a little development, add some joint ventures into the mix. There's a long way we can go with this and we're real excited.

And I would just add on your AI question, allows us to scale. The improvements in AI are phenomenal. We can get more access to tenants, on financials, on how we process everything today. In fact, we recently had a board meeting, and I'm sitting next to one of our board members at Walltower, and he told me the amount of AI investment that they've had versus what we've had, we can catch up to that a lot quicker, even at our small size, just given what's available. and so I think we can truly scale. If you go to page 24 again, that table on the right does highlight how little we have to do relative to peer. So, I mean, just bring this out to 2029, 2030, you're doing 150 to 250 million of acquisitions in a market that's in the billions. And we are using AI in a lot of ways, not only to run processes, but also to source new transactions. and we're seeing a lot of benefits from that. And I think that it's part of what we can do today to scale the business.

Thanks, Pierre. Thanks, Stephen. And then maybe just on kind of the tenant credit quality, that debt has trended really well this year. Just curious, any updates there?

No changes. Buying great tenants. continue to do that as we go. And again, obviously focusing on our low rents. But the credit watch list, as we mentioned, is very minimal. And we know we expect that in the foreseeable future.

Thank you.

Your next question comes from the line of Matthew Erdner with Jones Trading. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. You guys touched on it a little bit already in terms of leverage and that 80-120 kind of range for next year. I guess what would make you guys be willing to increase to that higher end of leverage versus the lower end?

So I think on the leverage side, we're comfortable within the five to six times. It's just about the opportunities that we see. We're not shying away from acquisitions. The entire point of that comment is to show how much capacity we do, that we are effectively funded through 2027. We're comfortable, like our target is really to stay around five and a half times. But if we want to go a little bit higher, if we find the right opportunities, we will go there. And if we're able to you know, raise equity equitably, that would be another component to issue. Right now, just on cost of capital, taking recent stock prices, we're around 6.6, 6.7% cost of capital. So it's not, based on our acquisitions, it's close to 90 to 100 basis points spread, so it's not too far off. But as highlighted in our presentation, we think that our NAB is a lot higher, so those are considerations. I think it comes down to our cost of capital and the types of acquisitions that we see in the market that will dictate whether or not we push higher on the acquisition numbers.

Got it. Appreciate the comments there. And then as it relates to investment spreads, you guys had 100 basis points this quarter. I guess as most of the pruning has been done in terms of dispositions, should we expect that number to marginally expand? throughout 2027, or is that 100-point mark kind of a good idea to have in mind?

Yeah. I think this quarter, 100 is pretty strong. I don't think you can factor that in as going forward as a number. I think it would be a little bit less than that in the fourth quarter. At the same time, I would just highlight, I know a lot of people don't care about impairments and gains, but we had zero impairments this quarter. and close to $4 million in gains. And so there's a lot of our gains over impairments are like seven times. So we're seeing a lot of benefit in our dispositions. People are buying our properties. There's a lot of demand for our types of properties. And that gives us an additional source of capital if we just ever try to use them.

We have sold about $128 million at a 6.8 cap rate since the IPO, and we think it's healthy to continue to prune and to sell assets, but most of that optimization is definitely complete and behind us. Perfect. Thank you, guys. Appreciate it.

Your next question comes from the line of John Mazzocca with B. Reilly. Your line is open. Please go ahead. A reminder to unmute locally if you are muted.

Wonderful.

Your next question comes from the line of Rob Simone with Compass Point. Your line is open. Please go ahead.

Hi, good morning. This is Ken Billingsley for Rob. I have a question for you. On slide 11, you listed ABR over the next five years is approximately $25 per square foot. If you were to look at market rates and they were all released today, what would that $25 look like?

What I'll say is our median box rent is $176,000 approximately, and you look at that across the portfolio and with the real estate and the location that we have, and I think that feels really, really good. What I'd also add is that our average rent in the portfolio was set in 2014, well before 2020 and COVID, where the massive rental increases have hit us with construction costs rising, etc., so I think overall you look at that and you see that this is a very well-rented and below market-rented debt portfolio.

And I would just add, I know you're pointing to the $25 on the per square foot, but I'd point you down to the $157,000 in rent per box over the next five years. That's low. If you think about where the market is for rents per box, a lot of it, the reason the number looks a little bit higher is because it might be a small building, but it's all about the acreage in terms of how many is on that parcel. But I think at 160 over the next five years, those are probably very similar to what we produced in 2026. I mean, if you think about this number, 119% we capture on new tenants in 2026, that's a pretty strong number in terms of where rents are relative to market. In the next five years, we do have some low rents with that median box size of 160,000.

So it could be exponentially higher considering that that's 30% of AVR renewing in the next five years.

It could be higher. It's a source of tailwind. Now, I would remark that a lot of these tenants have options, so they will renew on their options. But it only comes down to play when we get a tenant back. And if we get a tenant back, then we're able to access it. but ultimately it leads to just a very high likelihood of renewal and that's why we're not as nervous around expirations or those types of situations.

A good example is our Twin Peaks that we talked about last quarter where we released that to a Panda and a Jagger's. We had $138,000 of rent at that time and then now we have $265,000 of rent so almost a double of the rent and both of those tenants are now open and operating so it's a good litmus test.

That's great. And if you don't mind, just to follow up, with less supply out there, is there anything that you or potential tenants are doing that's creative as you're looking over the next few years, just as they're looking for space?

In terms of expanding space for tenants, is that what you mean?

As they're looking to expand, maybe they've underdeveloped, and so with no real new supply, is there just anything that they have done, maybe are looking to do in the next five years that's creative or different from what they've done over the last 10 years? You're trying to fix that.

Yeah, it makes the versatility of our land and our building worth more, obviously, as you have less supply. And it allows us to continue to push rents. And you see that with our retenanting exercises that we've had across the portfolio.

And I think what we did with our Dallas redevelopment is one example. It acts as a new pipeline of opportunities where we can partner with people to access these opportunities as tenants who are trying to figure out new ways to add to their footprint or to get to market rents. So I think that you'll continue to see that. And fortunately, we have these relationships that will allow us to participate in that. Great.

Thank you very much.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

Hey, great. I'd just love to go back to the acquisition pipeline, both in terms of volume and economics, because you guys do compete in sort of small or maybe 1031 buyers, I guess. I'd just love to hear just what you're seeing post this sort of REIT environment in terms of cap rate movements, in terms of opportunities, and your ability to capitalize on it. Thanks.

Sure, you bet. You know, cap rates for Q2 were 7.6. They were up a little bit from Q2. We've had a couple of special circumstances as buyers. We actually have sourced a couple of those for next quarter. So we think we can drive up cap rates a little higher into Q4, and we'll get to report on that next quarter. Pipeline is very strong. We continue to see a lot of opportunity. And it's really obviously what we're looking at and doing great real estate, replaceable rents. It's exactly what we want to acquire. And I think I mentioned it earlier, but it's kind of important. You know, we've seen a number of deals that we've passed on prior with, you know, pricing that we were beat out on or outbid on that have come back to us. And that's really good to see. So some of the mid-six pricing is coming back and landing in our buy box. I wouldn't say that we're seeing cap rates adjust in the marketplace, so to speak. It's rather that there's opportunities coming back to us just with some of the lesser buyers in the space, a little bit tougher to achieve financing from community banks. And then, of course, returns are down a little bit with the higher rates. You look at the health of the market. I mean, it's very healthy. McDonald's, Chick-fil-A's, JP Morgan's, they're still trading in the four cap rates. So there really hasn't been movement. So it's really us specialized circumstances that in this market allows us to drive outsized returns, really in any market rather, but especially in this market. So look to hopefully see a great Q4 print on the acquisition pipeline.

Great, that's helpful. And then, you know, I think you guys clearly have leaned in on dispositions here as well. And there's some, I'm sure there's some portfolio pruning happening. Just can you can you just go back remind us just the bad debt guidance at the beginning of the year versus what's baked in sort of now, you know, after three quarters? and is that sort of a good run rate to think about coming in into next year given the health of the portfolio? Thanks.

Sure. So at the end of the year, we talked about 50 basis points. It's still mostly unidentified. It hasn't changed. There hasn't really been any additions. The portfolio is performing really strongly and that's one of the drivers that resulted in us increasing the midpoint of our AFO for share guidance from A dollar twenty eight when we first set it to the midpoint of 33. And so the portfolio continues to perform really well. The 50 basis points is is unidentified and we feel pretty strong about the portfolio, most notably that the that non-reversible property cost has dropped to 1.3%. People are retaining our space a lot faster. I don't think you've seen any other other net lease peers put up six new tenant leases at 119. So that I would say that that is a pretty good situation to be in when you think about portfolio health. That's it for me.

Thanks so much. Thanks, Ron.

As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of John Mazzocco with B. Riley. Your line is open. Please go ahead.

Can you hear me?

Yes. Yes. Can you hear me? Yes. I don't know why I didn't unmute the first time. You know, maybe thinking about the market today, and kind of, you know, after the interest rate moves we saw kind of in the August, September, October timeframe. You know, how does that impact the way you think about investments going into 2027? I know you have this runway with capital recycling, with some of the capital you have on hand to kind of invest without being beholden to the capital markets. But how are you kind of weighing maybe your spot cost of capital as you look at your return threshold for new investments versus, kind of your in-place cost of capital, if you will.

Pierre can take that, but what I'll just comment on is the market, and I'll just echo that again, that we're seeing spreads widen for us, again, being that buyer of choice in this marketplace, going up against that unsophisticated investor. So as rates continue to remain stubborn, I think you'll see those spreads continue to remain very healthy and wide. So specifically on the market there, there's my contribution here.

Yeah, and in terms of cost of capital stock versus long-term, I think that at least the way I think about cost of capital I look at we're going to be the bank term loan market for a period of time just given our size and so I do look at the five-year forward curve spread to that obviously we've made some amendments to to our term loan so that's looking around five six five seven percent today on the debt cost and then you can take our affo yield and many more. were actually, if you look at the trajectory, we did go up a little bit in cap rate and the fourth quarter is going higher. Not guaranteed we'll do that every quarter, but we do pay attention to our cost of capital quite closely. I make sure that as we deploy capital that is accretive on a per share basis while not diluting the types of real estate that we would feel comfortable putting on our website. And I think that will continue to do that. And I think that that sort of model will deliver a lot of growth for us and our shareholders.

Okay. And then on the development side, as that potentially grows as a portion of your kind of investment box, what kind of increase in spreads relative to traditional net lease investments or traditional third-party investments are you looking for, if at all? Are you looking at the same kind of return hurdles?

Sure. So, you know, first, when we're looking at development, it's going to be risk mitigated. You know, we're leases signed, entitlements in place, site plan approval, zoning, GC contract, et cetera. And, you know, our partner is going to, you know, take on the pursuit costs. So there's not a lot of upfront exposure to us. And what we like to see typically historically built in is at minimum 100, but I like to see that 100 to 200 basis point in spread. so there's some real value and then you're putting a shovel on the ground and then building this asset and theoretically in under a year you're getting that back with 100 to 200 basis point embedded spread so there's a lot of value in it for us and the shareholders and as I mentioned there's a couple of opportunities we're looking at right now that are specific and we look forward to sharing those with you in due course.

And I would just highlight on the one deal that we did this quarter that as SRETs increase and you'll be, you'll be upper eights into the, maybe closer to 10 cap as it stabilizes for frontage real estate in Dallas. Like that is, that's pretty remarkable. And just to be, just to be able to get access to that with the trends that we're seeing, I think that that makes a ton of sense for our show.

Okay. I appreciate all that detail. That's it for me. Thank you.

Thank you. Thank you.

Your next question comes from the line of Logan Epstein with Wolf Research. Your line is open. Please go ahead.

Thanks for taking the question. Maybe if I could follow up to the comments you made and the prepared remarks in a prior question. Let me just focus on that slide seven that you guys added to the deck. If we use that math, it kind of implies a minimum seven-ish percent growth rate at $100 million investment volumes at 100 BIP spread. just curious if you can kind of talk about the potential moving pieces there as we look at a long-term growth rate for the company. I know you mentioned the swaps and retaining upside, but curious if you could just hit on any other potential moving pieces there. Thanks.

Thanks, Logan. So that slide seven is really the thesis to front view. If you think about how most net lease REITs operate. And I'd encourage people to read around most net lease and how we operate in terms of our annual organic growth rate, why our payout ratio is important to keep that low. And then the external investment coming from a smaller base. So it's structural in terms of the growth. What it doesn't factor in is changes in interest rates, other things that could affect it. But this is more of a structural growth rate that you could think about really just cost of capital and interest rates that could change things. But this sort of formula in terms of 1.5 to 2 plus 3% should be the minimum that you should expect for the structural growth within the company.

Thank you. Maybe a follow-up. You talked about in an earlier question that bad debt is trended positively. I'm just curious if you can touch on whether the move-in rates in the broader macro environment has just had any impact across any of your tenants as you discuss with them and maybe if there is a common theme across any industry types there?

I would say not yet. Our tenants are performing very well. We're in the service industry is essential, mission critical. We have not seen anything. Rent is coming in on time as expected and so I think everyone thinks about the consumer for sure. We feel very insulated and especially with Again, that real estate, that quality, and then the low rent. So if there is something that comes back to us, we have very good tools to make that a creative opportunity for us.

That's it for me. Thank you. And congrats, Pierre.

Thanks, Louis.

There are no further questions at this time. I will now turn the call back to Steve Preston for closing remarks.

Yes, thank you, everyone, for your continued interest and front view. We look forward to seeing you all at NARID in Atlanta. And of course, be safe and be healthy. Thank you. Take care.

This concludes today's call. Thank you for attending. You may now disconnect.