Good morning, and thanks for taking my questions.

Sticking with the acquisition pipeline, we're going to get ahead maybe around the cap rates in the industrial market. It looks like Newport was high sixes, red butt, low nines. Obviously, there's some variance between those two properties, but just any of the puts and takes that we should be thinking about to maybe get a better beat on cap rates?

Sure, and as you know, Dave, we're not able to compete down in the sixes at this point in time. although we are, as we sell non-core assets, able to take the cash from those sales, put them into new deals. Obviously, it doesn't cost us to raise that money, so it makes the transaction more accretive for us. But the cap rates that we're seeing are going to be 7.5 north. That 9% that you referenced was an average as it relates over the term of the lease. The longer the term, the better for us. So we are looking at transactions that have a cap rate going in the door approximately 7.5%, looking to get to averages north of 9.

Understood. Very helpful. Thank you. It also looked like spending improvements to existing real estate maybe came in a little bit lower. I know you mentioned this in your prepared remarks. Is that mostly a timing thing there, or is there anything else we should read into that?

I don't believe there's anything else you would read into that. Yes, it is a matter of timing. and as I mentioned, we look to try to, we're not going to spend money that's not going to be accretive to us at the end of the day. We look to have a payback period on our tenant improvements as a general rule of between six to nine months. We want to make sure those dollars are obviously recaptured because we want to be cognizant and again, tenancy and cash flow is important.

Understood, thank you. And then maybe just last one, in a land purchase, if I remember right, that was right next to an existing property. Is that the kind of profile that you're looking for in land purchases, or are there other variables that you try to keep in mind there?

That property, the purchase was, again, for the expansion. It will come along at the end of the day with a 15-year lease. The average cap rate on that transaction is north of 9.5%. I'm not sure because I got a little garbled there exactly if I hit all of your question, but that is a very opportune purchase for us. We'll build it out here and hope to have that completed by second quarter of next year. That's perfect.

Thank you for taking my questions. You bet. Thanks, Dave. Okay. We've got some more questions.

Our next question comes from the line of Guarav Mehta with Alliance Global Partners. Please proceed with your question.

Thank you. Good morning. I wanted to ask you on the industrial asset that you guys decided to sell. Just want to get some more color on why you sold that asset and are there any more industrial assets in your portfolio that you may look to sell?

We had that asset. We purchased it in 2021, Gaurav. The reason for the sale is the tenant came to us with a very profitable number and we were able to redeploy those assets into the Huntington transaction. that doubled the straight line rent and the current rent. So it made all the sense in the world and we didn't have to raise equity to do the transaction.

Any more industrial properties in your portfolio that you could look to sell to redeploy that into other industrial assets?

We have certainly within our portfolio some of the leases carry a purchase option. I don't have any at the moment that I would classify that are going to happen anytime eminently. But are there a few out there that could happen? Yes. But nothing that I have today, although certainly we are looking at some to see if we could sell them at economics that makes sense, we would.

All right. Thank you. That's all I have.

Thank you. Next question.

Our next question comes from the line of John Masoko with B. Reilly. Please proceed with your question.

Hi, good morning. Good morning, Mark. Technical one, if I think about accelerated rent versus the lease termination fee and understanding those are separate things, is there a gap impact from that accelerated rent as well, or is that – The Termination Fee was a one-time hit in the quarter. The Accelerated Rent, you can call that a variation on the same theme.

This will have a gap effect. You take the amount of the termination fee, divide it by the total amount of months that you have left on your lease, and then you straight line it through. So yes, it will have a small gap impact. It's not a significant amount.

The cash has already been received. The $1.9 million, though, was all impacting in 2Q, correct?

Yeah, correct.

And then apologies if I missed this earlier in the call. I kind of was cutting in and out. The leasing activity, can you maybe provide a little color on where kind of rents moved for kind of all the leasing activity you discussed and if there's any kind of significant cap-backs associated with any of those leases?

As I mentioned, we look for the CapEx to get a payback on that, obviously as quickly as we can, and we try to keep that CapEx and lease commissions as low as we can. On average, we see a payback of between six to nine months. The approximately $200,000 that we had in leases that were renewed as a plus-up prior at the end of the quarter is an average across the portfolio of the leases that we renewed. We always look to do what we can to, I hate to put it this way, get as much as we can. And the market is improving. It's referenced in my remarks that lease rates are going up. So we are very cognizant of the CapEx dollars needed, but I'd rather have the property occupied and paying and creating cash flow for us versus obviously vacancy.

Okay. And then, yeah, I guess if we look out on the kind of future lease expiration schedule, maybe out over the next two years, where do those assets maybe sit versus kind of market roughly? And, you know, like for exact numbers, just kind of up or down?

They are all positioned and with the numbers that we are discussing with the tenancies, they are all, oh, gee, except maybe two are up. So we've got 15 between this year and next year that we're looking at, two of which are going to go vacant. We have had tours within the buildings. So I feel confident that at the end of the day, as a net-net, it's going to be a plus-up. And again, I have one office building down in Florida that we are working on, and that – does not mature until September of 27, so I don't want to say we have time.

We are aggressively addressing it. Occupied and or sold.

Okay. That's it for me. Thank you very much for taking questions.

Thank you. Is there another question?

Our next question comes from the line of Francois Swanepoel, a private investor. Please proceed with your question.

Good morning. I would like to ask about if you could clarify our current payout ratio. What is our current payout ratio with the dividend at 10 cents a month?

Let me get this for you. It is in the low 80s. Actually, it was, what, 79, I think, this time around. Hold on. I believe it was our payout ratio is just under 80% this last quarter. Yeah.

Yeah. So my question on that is, as a REIT, shouldn't we be keeping that as a percentage of profit at closer to 90% to keep our status on REIT?

Well, I... As a triple net, we typically are paying more than a non-triple net as far as a distribution ratio of dividends over to FFO. But we would like to maintain more internal cash flow. And you'll see the triple nets are probably in the mid-70s to low-80s as a general group. We would like to kind of get our distribution ratio a little lower. It's better for the shareholders in the long run as we can redeploy the capital into our portfolio and grow the portfolio and earnings over time. So then eventually we can then increase the dividend. But if you can maintain, if you look at some of the bigger REITs, you know, their yields and they have a much lower distribution than we do. So over time, if you can do that, you can reinvest those proceeds or that cash into new properties without having to sell new equity and thus potentially dilute the shareholders.

I understand that. I understand that. My question on that is, according to the IRS rule, what's the rule of keeping that at 90% for us to qualify not as a corporation to not pay taxes on that income?

Yes, that's a 90% of taxable income, not of gap income. So we probably pay out probably in many cases way above the 90% required to maintain REIT status. So we're definitely doing that. Oh, yeah, absolutely. We will not lose our REIT status there. Okay.

Well, the annual increases in rent, if they are implemented and when they are implemented, I'm not sure when you guys implement annual increases on rent. But will we be able to use those proceeds to maybe look at an increase in the dividend?

We'll certainly consider it, but that's something to look at in the future.

All right. Thank you very much. Appreciate it. Thank you.

Thank you.

Thank you.

We have no questions.

We have any additional questions?

We have no questions at this time. Mr. Gladstone, I'd like to turn the floor back to you for closing comments.

Well, thank you very much, everybody, for listening to this, and we appreciate the questions. Hope you have a lot more questions next quarter. And that's the end of this, so thank you again.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.