NNN REIT, Inc. (NYSE:NNN) Q1 2023 Outcomes Convention Name Might 2, 2023 10:30 AM ET
Firm Contributors
Steve Horn – CEO
Kevin Habicht – CFO
Convention Name Contributors
Spenser Allaway – Inexperienced Avenue
Joshua Dennerlein – Financial institution of America
Eric Roth – Citi
Rob Stevenson – Janney
Wes Golladay – Baird
John Massocca – Ladenburg Thalmann
Operator
Greetings, and welcome to the NNN REIT First Quarter 2023 Earnings Name. Presently all members are in a listen-only mode, and a question-and-answer session will observe the formal presentation. [Operator Instructions] Please notice, this convention is being recorded.
I’ll now flip the convention over to your host, Mr. Steve Horn, CEO of NNN REIT. Sir, you could start.
Steve Horn
Thanks, Ali. Good morning, and welcome to the inaugural NNN REIT First Quarter 2023 Earnings Name. Becoming a member of me on this name is Chief Monetary Officer, Kevin Habicht.
As this morning’s press launch displays NNN’s efficiency within the first quarter produced 3.9% core FFO progress together with acquisitions, barely over $155 million with a 7% preliminary money yield. As well as, our portfolio retained a excessive occupancy of 99.4%, which I attribute to the upfront due diligence on property acquisitions and the continual portfolio administration that NNN does every single day. However earlier than we proceed with the operational efficiency, I wish to handle the identify change, which I’m enthusiastic about.
First, as I acknowledged within the press launch, the change doesn’t sign a method shift with acquisitions, steadiness sheet administration with deliberate and constant NNN. We felt it was time to benefit from the NNN model. The fact is NNN is what we’re known as with our circle of traders, friends, purchasers every single day. As well as, our web site and emails use the NNN REIT model. Subsequently, the change is making NNN much more constant inside our sector.
Turning to the highlights of the primary quarter monetary outcomes. Our portfolio of three,449 freestanding, single-tenant retail properties proceed to carry out exceedingly properly. As I acknowledged earlier, occupancy ended at 99.4% for the quarter, which is above our long-term common of 98%.
Occupancy remained flat from year-end. On the quarter-end, NNN solely had 20 vacant belongings, which is one lower than the year-end, which is a product of our leasing division having fun with a excessive stage of curiosity by quite a lot of sturdy nationwide and regional tenants in our vacancies. As well as, 91% of our leases that have been up for renewal in the course of the quarter exercised an extension. I’m positive we’ll cowl extra of the credit score watch checklist within the Q&A, however I simply wish to get slightly bit extra colour. There have been some giant names that filed chapter, and our portfolio remains to be acting at excessive ranges. And we count on that development to proceed. One of many latest filings of Mattress Tub & Past, which NNN at the moment owns three of their belongings with a median lease of $13 per sq. foot. We’ve been getting a variety of inbound curiosity on the belongings due to the standard of actual property. So I count on when the time involves launch the belongings, we’ll have superior restoration fee in a well timed method. Keep in mind, as I acknowledged earlier, the typical occupancy from NNN since 2003 is 98%. So the portfolio has stood the check of time by GFC and COVID.
Turning to acquisitions. We’ll proceed to be prudent in our underwriting, and NNN is afforded the luxurious to proceed to be selective. We acquired 43 new properties within the quarter for about $155 million, the preliminary cap fee of seven% with a median lease period of 19 years. Nearly all of our acquisitions this previous quarter have been sale-leaseback transactions. That may be a results of the calling effort of our NNN acquisitions division. NNN prides itself on sustaining the connection enterprise mannequin, which we do repeat programmatic enterprise.
With regard to the acquisition pricing atmosphere, the final quarter of preliminary cap fee of seven% is roughly 40 foundation factors wider than the fourth quarter of 2022. As I discussed in the course of the February name, we have been seeing cap charges steadily enhance. However now as we sit right here originally of Might, the cap fee will increase are beginning to plateau some. What I imply, the speed of enhance is unquestionably slowing down. So, I’m not anticipating one other 40 foundation factors for the second quarter of 2023. That is leading to NNN seeing that cap charges are beginning to hit the glass ceiling, assuming the macroeconomic atmosphere settles down.
Throughout the quarter, we additionally offered 6 properties that generated almost $12 million of proceeds to be reinvested in new acquisitions. The tendencies consisted of three vacant belongings and three income-producing belongings at a 6.6% fee. I do count on disposition exercise to be higher within the second quarter, and we’re maintaining our disposition steerage unchanged for the 12 months.
As I end up and to stay constant as previous calls, Kevin and his group preserve the steadiness sheet rock strong. We ended the primary quarter with $209 million out on our $1.1 billion line of credit score, no materials debt maturities till 2024. Thus, NNN is in a terrific place to fund the remaining of our 2023 acquisition steerage.
In abstract, the occupancy fee, leasing exercise, the relationship-based sale leaseback acquisition quantity, we imagine as soon as once more validated our constant long-term technique of buying well-located parcels, leased to sturdy regional and nationwide operators at affordable lease, whereas sustaining a powerful and versatile steadiness sheet.
As I acknowledged earlier, NNN is in strong footing as we’re 1 / 4 into 2023. With that, let me flip the decision over to Kevin for extra colour intimately on our quarterly numbers.
Kevin Habicht
Okay. Steve, thanks. And as normal, I’ll begin with the cautionary assertion. We’ll make sure statements which may be thought-about to be forward-looking statements underneath federal securities legislation. The Firm’s precise future outcomes might differ considerably from the issues mentioned in these forward-looking statements, and we might not launch revisions to those forward-looking statements to mirror adjustments after the statements have been made. Components and dangers that would trigger precise outcomes to vary materially from expectations are disclosed sometimes in higher element within the Firm’s filings with the SEC and on this morning’s press launch.
Okay. With that out of the way in which, headlines from this morning’s press launch report quarterly core FFO outcomes of $0.80 per share for the primary quarter of 2023, and that’s up $0.03 or 3.9% over 12 months in the past outcomes of $0.77 per share, and that was flat with prior fourth quarter outcomes. Right now, we additionally reported that AFFO per share was $0.82 per share for the primary quarter, and that’s additionally up $0.03 per share or 3.8% over Q1 2022 outcomes.
As may be seen within the footnote on web page 1 of the press launch in addition to the detailed deferred lease compensation schedule on web page 13, the accrual foundation, deferred lease repayments have now been nearly absolutely repaid and won’t create any actual noise in our AFFO quantity going ahead.
The scheduled money foundation deferred lease repayments proceed to taper off materially in 2023 as may be seen once more within the particulars supplied on web page 13 of the press launch. And that slowdown produces a few $5.8 million or $0.03 per share headwind for the complete 12 months which we clearly — beforehand, I ought to say, famous and is baked into our 2023 steerage. One final notice on first quarter outcomes. We did obtain $1.7 million of lease termination revenue and that’s increased than regular and compares with $1.0 million in Q1 of 2022. However, total, quarter, consistent with our expectations.
Shifting on, our AFFO dividend payout ratio for the primary quarter of ‘23 was roughly 67%. That created roughly $49 million of free money move, that’s after the fee of all bills and dividends for the quarter.
This free money move funded 31% of our complete acquisitions within the first quarter, and that’s about half of the fairness wanted for these acquisitions, assuming we run a steadiness sheet at roughly 60% fairness and 40% debt on a gross e book worth foundation. Occupancy was 99.4%, as Steve talked about, at quarter finish, and that’s flat with year-end of 2022. G&A expense was $12.25 million for the quarter, and that represents about 6% of revenues, however our midpoint steerage for this line merchandise remains to be $44 million for the complete 12 months 2023, which might put G&A better to about 5.5% of revenues for the 12 months. We ended the quarter with $782 million of annual base lease in place for all leases as of March 31, 2023.
Right now, we didn’t change our 2023 steerage, which we launched in February. First quarter outcomes may recommend we’ve got the chance to be on the increased finish of the steerage vary, however we’ll revisit any steerage adjustments after we report second quarter outcomes. The 2023 steerage and the important thing supporting assumptions are on web page 7 of right this moment’s press launch.
Switching over to the steadiness sheet, we keep leverage and liquidity profile of roughly $900 million of liquidity. The primary quarter was pretty quiet when it comes to capital markets exercise. We issued $17 million of fairness within the first quarter, executing trades round $46 per share stage. After a couple of years of almost no utilization of our $1.1 billion financial institution line of credit score, we did start to make use of it a bit in 2023, and that was part of our plan to navigate this rockier rate of interest and capital market atmosphere. Our weighted common debt maturity is about 13 years, together with that financial institution line. All of our debt excellent is mounted fee except that — the $209 million on our financial institution line, which represents about 5% of our complete debt.
A few metrics. Web debt to gross e book belongings was 40.4%, which is flat with year-end. Web debt-to-EBITDA was 5.3 instances at March thirty first. Curiosity protection and stuck cost protection was 4.7 instances for the primary quarter of ‘23.
So, we’re in excellent form to navigate the elevated financial and capital market uncertainties and to proceed to develop per share outcomes, which we view as the first measure of success.
And with that, we’ll open it as much as any questions. Ali?
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] Our first query is coming from Spenser Allaway with Inexperienced Avenue.
Spenser Allaway
You talked about in your ready remarks that the speed of cap fee will increase has slowed. However are you able to simply remark broadly on the totally different retail industries, or are there any segments that stand out as persevering with to have a wider bid-ask unfold. So, cap charges haven’t moved simply rapidly. After which on the contrary, any industries which have seen cap charges transfer quicker?
Steve Horn
Sure. The cap charges by the second half of final 12 months, you noticed slowly — you’re growing at a reasonably good clip. And what we’re discovering is the acquisitions within the second quarter. And now you particularly requested what segments. Simply consider no matter our portfolio is, that’s the phase I’m actually talking of, if it’s QSR, comfort retailer, auto service, usually the place we’ve completed essentially the most quantity just lately and the big regional operators, non-investment-grade tenants. However sure, we’re seeing slightly little bit of a plateau within the cap charges, they’re acceptable cap charges. However we picked up that 40 foundation factors. I’m sort of considering extra within the vary of 20, 30 foundation factors for the second quarter. After which, as we transfer out within the third quarter, it’s slightly bit too early on the pricing. However assuming the economic system stays the place it’s, I believe we’re sort of getting close to the highest of it proper now at the moment.
Spenser Allaway
Okay. That’s useful. After which, the cap fee on the tendencies. These are fairly low for the second quarter in a row. Is there something distinctive right here driving that decrease than prior quarters? And is there any purpose to suppose that that would proceed on future tendencies this 12 months?
Steve Horn
The tendencies, we’re not altering our steerage for 2023. I’m anticipating to hit that steerage vary. It was a — extra of a timing problem, decrease within the fourth quarter and the primary quarter, however the stars are beginning to align the place I’m anticipating the second quarter to choose up tempo slightly bit. So far as our tendencies this quarter, once more, the three vacancies and the 6.6% cap fee was a results of actually two defensive gross sales, which means one was a [indiscernible] lease asset we offered and the opposite was an out of date, I’ll name it a fuel station, not a comfort retailer. After which the third one was an opportunistic sale the place someone favored the property greater than we did.
Operator
Our subsequent query is coming from Joshua Dennerlein with Financial institution of America.
Joshua Dennerlein
May you remind us what the dangerous debt quantity is assumed in steerage and the way the Mattress Tub & Past BK falls inside that vary?
Kevin Habicht
Sure. Positive. That is Kevin. Sure. So we assumed in our steerage as we’ve got for quite a lot of years, 100 foundation factors of lease loss in our steerage and didn’t actually use any of that within the first quarter. And because it particularly pertains to Mattress Tub & Past, we — our shops haven’t been closed or on the rejection checklist. And so, we anticipate they are going to proceed to pay lease up till that adjustments, if and when that adjustments. So in the meanwhile, we’re not experiencing any notable stage of dangerous debt at this level.
Joshua Dennerlein
Okay. Attention-grabbing. So, they’re not on the closure checklist or…
Kevin Habicht
Right. Sure. They’ve introduced, I believe, 480 complete shops, 360 Mattress Tub, 120 buybuy BABY, and our shops are usually not on that checklist.
Joshua Dennerlein
Okay. Okay. Good colour. After which I believe simply studying the 10-Q that got here out this morning, there’s one other tenant in chapter. I suppose, may you replace us on that tenant, the belongings and possibly what the developments are in comparison with the market?
Kevin Habicht
Sure. So we actually solely have two in chapter. One is Mattress Tub, which we talked about within the different is Regal Cinema, which we’ve talked about previously, which is only one property and we’ll see the place that goes. They’re nonetheless paying lease, however we’ll negotiate that. That goes alongside, whether or not that survives or doesn’t survival, time will inform, however very small within the scheme of issues.
Operator
Our subsequent query comes from Eric Roth with Citi.
Eric Roth
Thanks. Good morning. Simply beginning with the steerage query, what takes you kind from that present run fee of $0.82 within the first quarter all the way down to $0.80 for the remainder of the 12 months. I believe, you bought a lease termination revenue, however it might appear to be there’s something off that will get you down there aside from the lease termination revenue.
Kevin Habicht
Sure, nothing actually — I imply I believe as I famous in my ready remarks, we’re clearly monitoring for the excessive finish of our steerage vary, and it was slightly little bit of a dialogue or thought course of right here internally, whether or not we might take into consideration revisiting our steerage. However we’re simply sort of measured and delivered sort of folks. And so, we deferred that to the second quarter. I did notice, like I say, to your level, there’s $0.01 of surprising onetime sort of revenue, lease time period revenue within the first quarter that assist the outcomes. And so we’re not anticipating that to proceed. However sure, we’re — we like the place we stand, and hopefully, with time, we’ll have the ability to let the steerage drift increased, which is — has occurred sometimes over time. However sure, that’s simply the way in which we went at it this time.
Eric Roth
Okay. And then you definitely talked about that cap fee — you’re hitting the glass ceiling round 7%, though I believe you stated that may develop about 20, 30 foundation factors additional. However simply curious at that stage, form of, name it, the low-7 kind cap fee. How are you feeling about your capability to create worth at that stage, given your price of capital? I observed that you just didn’t elevate a lot in your ATM within the first quarter, however possibly that was simply extra timing associated.
Steve Horn
Sure. I’ll take that one, the primary a part of the — speaking concerning the cap charges hitting the glass ceiling. Sure. No, we’re anticipating the second quarter develop off our 7% cap fee and sort of what I stated within the opening remarks. Third quarter is slightly bit too early. However we’re going to — we’ll deploy cash at that 7.25%, 7.3% vary. And Kevin can speak about sort of — because it pertains to our price of capital.
Kevin Habicht
Sure. I imply — and we’ve talked about this over time, how we take into consideration our price of capital. I gained’t go into all the main points in the meanwhile, nevertheless it’s in our pitch e book. And we attempt to burden our price of fairness right this moment at round 8.5% sort of price. For functions of deploying capital, that’s the sort of return hurdle we’ve arrange internally as we take into consideration deploying capital into new investments. So what that finally ends up producing is a weighted common price of capital, together with that within the low 7s.
And so, we really feel like right this moment, that’s what we have to earn to generate the ample and applicable return for NNN shareholders. And so — and different folks take totally different views round their price of fairness and all that sort of factor. However like I stated, I gained’t go into all the main points there. However the excellent news is for us — and that’s why I sort of highlighted our free money move funded half of our fairness want, if you’ll, within the first quarter simply from operations.
And so, we actually have a — when it comes to elevating extra capital, and that’s earlier than property tendencies, which might be one other 10%, 15% of our acquisition fund — fairness funding for acquisitions. And so on the finish of the day, we want treasured little new fairness capital on a money move foundation to sort of run the — or obtain the steerage — acquisition steerage, we’re considering of for the years. Having stated that, the free money move we generated, the property disposition proceeds in our minds we proceed — we burdened that at a 8.5% price as properly. It’s not free money move, price 8.5%. And if we will’t earn that sort of return on fairness, then we in all probability are doing a disservice in our opinion, to shareholders, and we’d ought to ship it again to shareholders if we don’t suppose it has a ample sort of price to it. So, that’s simply the way in which we give it some thought. Like I say, it’s slightly totally different than I believe a variety of people, however I believe it’s helped us being slightly extra disciplined over time, and we like that strategy.
Operator
Thanks. Our subsequent query is coming from Rob Stevenson with Janney.
Rob Stevenson
Good morning, guys. Steve, again to the cap fee commentary that you just have been making earlier than. How a lot does that defer the motion between sale leasebacks versus the one-off and small portfolios that possibly extra delicate to all these points with the banks lately?
Steve Horn
Hey Rob, good query. I imply, you understand we don’t play in, like we name it 1031 market the place there’s the one-off. I imply, we’ve got a devoted acquisition man that’s all the time looking for the diamond within the tough. However as day-to-day operations, we do the sale leaseback. The sale leaseback market, the subtle purchasers have understood the capital markets or simply the general lending atmosphere is a bit more tough for the center market. So it’s being migrated to the sale leasebacks. And so they’ve allowed for the cap fee enlargement. The 1031 market, the place there’s much more competitors, if it’s doing the 1031 exchanges or simply there’s additional cash consumers, so that they’re not as delicate to the financial institution lending market at the moment. So, these cap charges haven’t moved fairly as a lot. Now, all that being stated, for those who performed within the funding grade market and also you’re shopping for these offers that you’re shopping for at high-4s, low-5s, you’ve seen a major cap fee motion as a result of they began off so low, traditionally the final couple of years. However the sale leaseback market, we’re nonetheless seeing a rise for the second quarter, simply not as quick of a fee.
Rob Stevenson
Okay. And the way deep is that purchaser pool right this moment? I imply, if the vendor doesn’t like the value that you just give them — they’ve 25 guys behind you prepared to do this value, or is that purchaser pool for these sale-leaseback transactions form of thinned out as properly, given charges and different points?
Steve Horn
Form of the identical story line. I’ve been within the enterprise right here at NNN REIT for 20 years. And we’ve been extremely aggressive market from day one. Simply the names have modified over the course of the years. Sure, there’s a couple of much less consumers out there at the moment that relied on the sort of the secured loans nevertheless it’s nonetheless extremely aggressive. No one is stealing belongings. It’s market pricing at the moment. If someone doesn’t like my pricing, there’s someone proper behind me that’s prepared to do it.
Rob Stevenson
Okay. That’s useful. After which, Kevin, given all that’s gone on with the financial institution time period mortgage market in addition to rate of interest hedge pricing, the place is your finest debt entry right this moment? And what’s that costing you right this moment?
Kevin Habicht
Rob, it’s humorous, right this moment, all the pieces just about price the identical roughly or no less than within the scheme of issues. And so, financial institution traces are shut to five.5%, 10-year debt is shut to five. 5% and 30-year debt isn’t an entire lot greater than that. And so right this moment, it’s actually any resolution across the time period of debt you could be utilizing or issuing is a little bit of a guess on the place charges might be 2 years or 4 years from now. And so like I stated, we chopped a variety of wooden on long-term debt in prior years, notably in 2021 and pushed our weighted common debt maturity fairly far out, and for the final a number of years, actually haven’t used our financial institution line. So we — our strategy has been to pivot considerably to make use of our financial institution line, which has been nearly unused. We’ve the flexibleness to do this and let this rate of interest cycle play out a bit and see the place charges go, name it, a 12 months from now and make possibly a long run guess on rate of interest course. So, that’s the way in which we’re sort of enjoying it in the meanwhile. And having stated that, I’ll say, a, I — we don’t usually — we don’t give steerage on our capital markets exercise, and b, I reserve the correct to vary my thoughts. And so hopefully, I’ve been sufficiently elusive. So…
Operator
Our subsequent query is coming from Wes Golladay with Baird.
Wes Golladay
Are you seeing any indicators that the tenants will pause enlargement as a result of macro uncertainty?
Steve Horn
You sort of broke up.
Wes Golladay
Sure. Are you seeing any indicators of — at your present tenant roster, those that you just’re rising with will pause their enlargement plans as a result of macro uncertainty?
Steve Horn
I believe, what we’re seeing on the market proper now, our growth pipeline is absolutely excessive in comparison with historic foundation. So, we’re not seeing a slowdown so far as them selecting and selecting enlargement so far as particular person websites. What we’re seeing is — and it’s extra probably not the financial uncertainty of their buyer. It’s extra of the debt lending aspect of issues, that the M&A exercise we’re seeing slowdown. There’s not many doubles or residence runs within the M&A market that we’re seeing that our tenants are selecting up. It’s sort of extra base hits the place they’re doing 1 or 2 web site bolt-on acquisitions. Now, we’re afforded the luxurious is that we don’t want the house run right here at NNN, that the pool that we’re procuring at is lots massive for us to hit our targets.
Wes Golladay
Okay. After which, Kevin, I wish to return to your feedback concerning the — the way you view your weighted common price of capital. I believe you stated it was within the low-7s and also you’re — at the moment the place you’re shopping for, have you ever traditionally tried to focus on a variety over that, or do you simply view that, hey, we’re shopping for higher high quality and the general high quality combine is being transacted at our weighted common price of capital…
Kevin Habicht
Sure. And I do know I’m swimming upstream on this as a result of that’s the vernacular of our trade to consider a variety above your price of capital. However I believe the way in which a variety of people get to a variety above their price of capital is they only take a low view as to what they — what sort of return on fairness hurdle that they should meet. So — and so in our pitch e book, we use that instance. If you happen to suppose your price of fairness is 5.5%, to choose a quantity, then you definitely come out on the weighted common price of capital day shut to five.5% as a result of that’s not removed from that. And so, you suppose your price of capital could be very low-cost.
Once more, this isn’t — we divorce sourcing capital from deploying capital. And look, I perceive these two issues get linked ultimately. However we attempt to layer on a stage of additional self-discipline, if you’ll, of burdening our price of fairness for functions of deploying capital at about 8.5% price. And for those who absolutely burden your price of fairness, you don’t really want a variety above that since you’re incomes sufficient. You’re justifying — that’s what the hurdle fee’s there for is to say what do we have to earn to sufficiently compensate NNN shareholders. And so, — to your reply your query, we usually haven’t had a giant unfold above our price of capital, nevertheless it’s been that method as a result of we burden our fairness at a better fee than most different firms do. And we’ve set that hurdle there. And I believe it results in the higher outcomes in the long term.
Prior to now, name it, two years in the past when the world was awash with cash, we burdened our price of fairness at about an 8% return, and our price of debt was an entire lot decrease and our weighted common price of capital in our minds was a few 6% stage. That’s what we stated was the return requirement for NNN shareholder then. And so that you didn’t see us do nearly any sub-6 cap fee offers, name it, two years in the past.
And now, the world’s modified. Rates of interest are up. We’ve raised our return on fairness hurdle. And so now we’re focusing on sort of a low-7s sort of return. And we expect that absolutely and sufficiently compensates our shareholders. And once more, that is for functions of deploying capital. Relating to sourcing capital, we actually take slightly bit totally different view and we attempt to get capital when it’s out there and properly priced, virtually regardless of want. We all know we’ll use it will definitely. However that’s simply the strategy we take. And like I say, it — and we’ve been doing this for sort of constantly for a very long time, however we do go about it slightly in another way. And so, we by no means actually get into the vernacular of a variety over our price of capital as a result of we actually — we put additional burden on our fairness return hurdles that I believe compensates for that. So, anyway, sorry, that was a long-winded reply to your query.
Wes Golladay
No, I recognize it. Thanks for the detailed reply, Kevin.
Operator
[Operator Instructions] Our subsequent query is coming from John Massocca with Ladenburg Thalmann.
John Massocca
Perhaps constructing slightly on Wes’ first query. As you sort of take into consideration what your tenants are utilizing, new {dollars} you’re investing with them for? Is it — what’s sort of the broad breakdown between enlargement and possibly refinancing?
Steve Horn
It’s undoubtedly skewed in the direction of enlargement at the moment. Our tenants haven’t — it’s nonetheless early on over a 12 months into it that we’re not seeing our tenants having to refinance debt. Most of our tenants, it’s a enterprise mannequin resolution to do sale-leaseback financing. They imagine in not proudly owning actual property as a result of they perceive they’ll take that fairness, put it into operations and make a better margin promoting a service or that they’re promoting against the elevated worth of actual property. So, we don’t do a variety of refinancing. Traditionally, we’ve completed a variety of M&A financing and bolt-on acquisitions and new retailer growth is the overwhelming majority of the place we deploy capital.
John Massocca
Okay. After which, you talked about it slightly bit when it comes to Mattress Tub & Past, however possibly extra typically, what’s the demand like on the market for vacant belongings, vacant packing containers, et cetera?
Steve Horn
So, out of the 20 present vacant belongings that we’ve got, we’ve got about exercise round slightly over half of these belongings proper now, which — it’s slightly bit good shock, John, how a lot exercise we’ve had. As a result of usually, when it’s a vacant asset, it’s not our greatest actual property within the portfolio. We don’t get that again. However sure, these are undoubtedly some motion of the smaller regional and even the mom-pop operators taking our vacant belongings.
John Massocca
And I suppose possibly how does that exercise quantity in comparison with pre pandemic or earlier years?
Steve Horn
It’s undoubtedly elevated proper now that we’re seeing extra exercise with our vacant. Initially, we all the time attempt to re-lease our vacant. However after a sure period of time, it’s not reasonable to carry on the vacancies. You possibly can get the overhead drag and we’d reasonably simply promote them, despite the fact that it won’t be prime greenback after which redeploy that cash accretively into acquisitions.
Operator
Thanks. Right here is we’ve got reached the tip of our question-and-answer session. So I’ll now flip the decision again over to Mr. Horn for closing remarks.
Steve Horn
Thanks, Ali. NNN’s in an excellent place right here heading into the second quarter. I look ahead to it. Thanks for becoming a member of us this morning. And we look ahead to seeing a lot of you in particular person within the upcoming convention season, particularly ICSC and NAREIT. Thanks for becoming a member of.
Operator
Thanks. This does conclude right this moment’s convention, and you could disconnect your traces at the moment, and we thanks in your participation.
Steve Horn
Thanks, Ali.
