Essential Properties Realty Trust, Inc. (EPRT) Q2 2026 Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to Essential Properties Realty Trust's Second Quarter 2026 Earnings Conference Call. This conference call is being recorded, and a replay of the call will be available three hours after the completion of the call for the next two weeks. The dial-in details for the replay can be found in yesterday's press release. Additionally, there will be an audio webcast available on Essential Properties' website at www.essentialproperties.com, an archive of which will be available for 90 days. On the call this morning are Pete Mavoides, President and Chief Executive Officer, Rob Salisbury, Chief Financial Officer, Max Jenkins, Chief Operating Officer, A.J. Peel, Chief Investment Officer, and Cheryl Call, Director of Financial Planning and Data Analytics. It is now my pleasure to turn the call over to Cheryl Call.

Thank you, Operator. Good morning, everyone, and thank you for joining us today for Essential Properties second quarter 2026 earnings conference call during this conference call we will make certain statements that may be considered forward-looking statements under federal securities law the company's actual future results may differ significantly from the matters discussed in these forward-looking statements and we may not release revisions to those forward-looking statements to reflect changes after the statements were made factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in yesterday's earnings press release in our earnings release last night, for the quarter, we reported GAAP net income of $74.5 million and ASFO of $110.1 million. With that, I'll turn the call over to Pete.

Thanks Cheryl. Thank you to everyone joining us today for your interest in essential properties. In the second quarter, we accretably invested $332 million dollars, reflecting the strength of our deal sourcing engine and the deep relationships we have built with middle market operators in our targeted industries. As transaction activity accelerated through the quarter, our team effectively converted a strong pipeline of opportunities into closed sale-lease-backed investments, demonstrating our execution capabilities and the competitive advantage of our relationship-driven origination platform. Gap rates came in slightly better versus prior quarter at an average initial cash yield of 7.8% and a gap yield of 9.1%, preserving a meaningful spread to our cost of capital that is a key driver of our earnings growth. This also reflects our ability to consistently source and close attractive opportunities, even in a dynamic transaction environment. 84% of our investments were structured as sale-leasebacks, and sale-leaseback liquidity continues to be a compelling source of growth capital for middle market operators across our targeted industries. Our capital position remains robust with pro forma leverage of 3.5 times and $1.7 billion of liquidity, which was bolstered by our unsecured bond issuance during the quarter. With our capital needs largely addressed for the balance of 2026 and well into 2027, we are well-funded to continue to execute on our growth strategy and drive durable and compelling earnings growth. Investment activity and portfolio operating trends are tracking ahead of budgeted expectations, allowing us to once again increase our 2026 AFFO per share guidance to a new range of $2.01 to $2.05, and our investment volume guidance to a range of $1.2 billion to $1.5 billion. Our revised AFFO per-share guidance implies a growth rate of over 7% at the midpoint and over 8% at the high end. Turning to the portfolio, we ended the quarter with investments in 2,493 properties that were leased to over 510s. Our weighted average lease term is over 14 years. our weighted average lease escalations are 1.9% and just 2.3% of our annual base rent is expiring through 2028. With that, I'll turn the call over to AJ Peel, our Chief Investment Officer, who will provide an update on our portfolio and asset management activities.

AJ? Thanks, Pete. Overall, our portfolio fundamentals remained healthy during the quarter and continued to perform in line with our expectations. Standsboro rent growth improved sequentially to 1.5 percent while occupancy remained strong at 99.6 percent with only nine vacant properties. Portfolio rent coverage was stable since last quarter at 3.5 times and the percentage of ABR with rent coverage below 1.5 times declined 50 basis points sequentially reflecting continued improvement in credit quality. During the quarter we disposed 54.3 million dollars of assets at a weighted average cap rate of 7.3 The dispositions were largely driven by ongoing proactive asset management decisions during Going forward, we expect our disposition activity to moderate toward our trailing eight-quarter average. Our portfolio benefits from broad diversification as our top 10 tenants represent just 15.2% of ABR at quarter end, while our top 20 tenants account for only 25.4%, reflecting our continued focus on partnering with a broad base of middle market operators and limiting concentration We also reduced our top industry exposure by 40 basis points during the quarter to 12.6% of ABR. As a result, our portfolio construction remains healthy with our top three industries, car wash, medical dental, and early child education, each now representing approximately 12% of ABR. With that, I'll turn the call over to Max Jenkins, our Chief Operating Officer, who will provide an update on our investment activities and the current market dynamics.

Thanks, AJ. Okay, on the investment side, activity picked up over the course of the second quarter, culminating in $332 million of investments at an average initial cash yield of 7.8%. Notably, pricing remained stable, with cap rates coming in modestly better than our expectations. Our investments in the quarter had a weighted average initial lease term of 16 years and a weighted average annual rent escalations of 1.9%, generating a strong average gap yield of 9.1%. Our capital deployment during the second quarter was broad-based across most of our top industries as we completed 36 transactions totaling 103 properties, with approximately 84% of investment volume sourced through sale-ease-backed transactions. One of our sale-ease-backed transactions this quarter in the early childhood education sector was partially funded in a tax-efficient execution through the issuance of operating partnership units. This is the first OP unit transaction for EPRT, and while such deals tend to be episodic, it represents another tool in our toolkit for servicing our valuable relationships. Our average investment size was $3.1 million per property during the quarter, which continues to reflect our focus on acquiring granular, highly fungible assets that provide attractive risk-adjusted returns. Pricing in our forward pipeline continues to produce cap rates in the mid to high 7% range, and with over $1 billion of closed plus identified opportunities year-to-date, we are well-positioned to execute on our increased full-year investment guidance range of $1.2 to $1.5 billion. With that, I'd like to turn the call over to Rob Salisbury, our Chief Financial Officer, who will take us through the financials for the second quarter.

Thanks, Max. Overall, we delivered another quarter of strong financial performance, supported by a large, diverse portfolio of leased properties, disciplined capital deployment, and continued balance sheet strength. Our AFO per share was $0.50, representing an increase of 9% versus the second quarter of $0.20, while nominal AFO increased 18% year-over-year to $110.1 million. This AFO performance came in modestly ahead of our expectations, driven by stronger than underwritten portfolio performance and better investment volume and price. Slightly later timing of closings during the quarter, allowing us to increase both our investment guidance and info per share guidance. The total G&A in the quarter was $10.9 million, $10.2 million, which is trending toward the bottom half of our guidance range of $30 million to $34 million for the year and represents just 4.4% of total revenue, down from 5.2% in the same period, we declared a cash dividend of 32 cents in the second quarter, which represents an AFFO payout ratio of 64%. Our retained free cash flow after dividends totaled $43 million in the quarter, equating to approximately $170 million on an annualized basis, representing a substantial source of internally generated capital to support our future. According to the balance sheet, our financial position remains robust. During the quarter, we successfully completed a $400 million dollar 10-year unsecured bond offering with a coupon of five and three this transaction supports our growth plan for 2026 while further extending our weighted average debt maturity and creating more liquidity in our bond complex we have been modestly active on the equity side in support of extending our equity runway raising approximately 85 million dollars of equity during the second quarter and subsequent and the op unit transactions that max discussed given the excess liquidity generated by our bond offering, we did not settle any forward equity during the quarter, leaving us with approximately $575 million. Our pro forma net debt to annualized adjusted EBIT dairee remained low at 3.5 times at quarter end, and total available liquidity increased to $1.7 billion, providing us with ample capacity to end well into next year. At quarter end, income-producing gross assets totaled $7.8 billion, and the continued growth and diversification of our portfolio further strengthened our credit profile. Our AFO per share guidance continues to incorporate a conservative assumption for Treasury stock method dilution on our unsettled forward equity balance, totaling approximately one to two cents for the full year. Even after incorporating this potential headwind, we increased our AFO per share guidance, our operating performance and as we noted earlier we increased the low end of our 2026 info per share guidance by one cent to a new range of two dollars in the penny to two dollars and five over seven percent at the midpoint and over eight percent at the high end with that thanks rob in summary we are happy with our second quarter results the diversified portfolio and ample balance sheet capacity we remain confident in our long-term growth trajectory and our ability to deliver

Best-in-class total shareholder return. Operator, please open the call up for questions.

Certainly. At this time, if you would like to ask a question, please press star 1 on your keypad. To leave the queue at any time, please press star 2. We'll take our first question from Greg McGinnis with Scotiabank. Your line is open. And, Greg, you may be on mute. Your line is open.

Certainly was. Sorry about that. Good morning. I was hoping you could touch on the utilization of OP units in Q2, whether you plan on doing more of those, whether that's a type of tenant you're trying to bring into the portfolio more so, any details would be appreciated.

You know, it was a traditional leaseback with an operator who had owned real estate on balance sheet that they were looking to monetize. And there was not a cash out or a business need for the cash. And, you know, it was tax efficient for them to take OP units and participate in the OP and have ownership in EPRT going forward. And it was a valuable currency in the transaction. It differentiated us from competitors. And it was an efficient way for us to close that transaction without tax leakage for the seller. You know, there's not a lot of situations where that comes to play. There certainly – they come in from time to time, and, you know, we like to utilize that currency and the tax efficiency of it. And so to the extent that there is further opportunities, great, but I'm not optimistic that, you know, there are.

Okay, thanks. And then just looking at the category exposure, early childhood education ticked up 1% this past quarter. Is that an area where you're having more increased focus, or was it a single one-time kind of transaction that looked attractive?

Obviously, you've done a good job in terms of diversification of the top three, but I'm just curious where you're seeing the best opportunities for investment right now. yeah i wouldn't read too much into that greg we you know maintain and and seek investments across all our industries and you know obviously as you've seen they they have in flow um there was a larger um opportunity in the child care space during the quarter but um you know we'll seek to maintain that diversity going forward okay thank you our next question will come from caitlin Burroughs with Goldman Sachs.

Your line is open.

Morning, everyone. I was wondering if you could first talk a bit about your acquisition process from the standpoint of what was the industry mix of deals in 2Q and what drove that? Does it end up being yield-driven, portfolio construction, like why that mix in 2Q?

In the second quarter, it was 36 individual transactions.

The vast majority of those, 72% were existing relationships. We maintain relationships and seek to build relationships in all our industry verticals and grow our portfolio radically. Each industry has different risk return parameters, different competitive parameters, and we price deals in each industry, in part, based upon our credit performance and recovery experience within those industries. And so, you know, as investing as granular as we do in $3.1 million assets and 30 transactions in the quarter, you know, it's going to be broad based across all our industries based upon that aspect as to which industries we invest in. We want to service profitable relationships.

Okay, got it. And then maybe from a coverage perspective, I think last quarter you mentioned that perhaps we could see some headwinds on the restaurant side, wondering, A, if you've seen that play out, and then, B, it looks like your exposure to the under one-time bucket ticked up a bit. So, wondering if you could comment on that.

Sure.

Generally, what we've seen in the restaurant space is the restaurant operators are flat, same store, flat margins, resulting in pretty flat coverage so I haven't really seen material drop off in the coverage within that cohort as as it pertains to the under one bucket you know as it as is the case most times it tends to be pretty idiosyncratic and not you know industry related and you know there's just normal ebbs and flows within that bucket overall the under one 1.5 times bucket came down 50 basis points in the portfolio sitting in there.

Okay, thanks. Our next question will come from Hundle St. Just with Mizuho. Your line is open.

Hey, good morning. Thanks for taking the question. Just looking at the volume you've accomplished in the first half of the year on acquisitions and what your updated guide is, suggests a pretty meaningful decel or slowdown in volume in the back half of the year. I'm curious if that's conservatism. Is it something maybe that we're missing? And maybe can you shed some light on the pipeline, your expectations for cap rates amid the geopolitical macro volatility that's impacting your conversation with counterparties at all?

Yeah, Hansel. The cap rate, as Max said in his comments, remain in kind of the mid to high sevens. Overall, the capital market volatility that we're seeing, you know, helps our negotiating leverage relative to our counterparties and allows us to keep rates higher. I think you see that in the second quarter print. As it pertains to volume, you know, Max had some commentary around that. In general, you know, we bumped our investment guidance for the year and the pipeline's in a really good spot.

Okay, fair enough. So maybe there's a little bit of upside. We'll see how the year plays out. And then secondly, I was hoping you could share some color on Treasury stock method, kind of what's embedded in the updated guide versus prior quarter.

What's on you, Bobby? Hey, Handel. Yeah, so we traditionally have incorporated very conservative assumptions around the Treasury stock method dilution just so that we can put ourselves in a good position for conservatism on guidance. That has changed this quarter. as we updated our modeling, stock has moved up recently, which creates a little bit of incremental dilution. As we mentioned in my prepared remarks today, we see one to two cents of headwind to AFO per share this year from the Treasury stock method dilution. I'd say we're probably trending closer to the high end of that range currently, whereas we were closer to the low end of that range last quarter when we gave you an update. And so we'll see how the rest of year progresses on that front. Not a massive headwind, but relative to our guidance range, we would have been able to hike by more, but for a slight amount of headwinds incrementally from that.

Got it. Thank you, guys. You got it.

Thank you.

Our next question will come from Michael Goldsmith with UBS. Your line is open.

Good morning. Thanks a lot for taking my questions. First question is, you know, as of May rate, the acquisition volumes were pretty muted through the quarter, but clearly picked up through the back half of June. So can you just talk a little bit about just the cadence of acquisitions and closings through the quarter? You know, is that typical of what you see? Did you push hard to get this volume in the period, just trying to get a sense of what has changed through the quarter to achieve this high volume of acquisitions?

Yeah, and I would say it's certainly not out of the norm. The total volume in the quarter is relatively consistent with past quarters, albeit the timing may have been slightly delayed. When you're thinking about 36 transactions with counterparties that we don't always control, we drive the process and try to make it as efficient as possible. But ultimately, we don't control the closing. And then you layer in a chunky $50 to $100 million deal that's really going to affect your weighted average close date.

So nothing abnormal during the quarter. generally our closing team strives to be as efficient as possible and close deals as quickly as possible.

But, you know, we're often, you know, subject to the timing of the counterparty that we don't control. So nothing unusual. We'll continue to close deals as quickly as possible and, you know, be as efficient as possible.

Got it. Thanks for that. And then as a follow-up, continue to push further into the health and fitness space. And I think with fitness ventures kind of moving their way up into the top 10 tenants and then you also have undefeated tribe maybe with a little bit of a logo change in your, in your deck. But you know, can you just talk a little bit about that category, you know, the opportunities there and where you ultimately would like to get that as a category within the mix? Sure.

I mean, those two tenants are both tenants operating within a Crunch Fitness franchise system. They're both great operators. You know, we really like the Crunch model, low price point, high quality service.

So we really like Crunch. We like that system.

We particularly like these operators. It provides us an opportunity. We generally invest through new development, which is typically repositioning of old boxes. We like the space. We don't see a ton of opportunity within the space, so I would not expect it to grow disproportionately.

Thank you very much. Good luck in the back half. Okay, thank you.

Our next question will come from Eric Borden with BMO Capital Markets. Your line is open.

Hey, good morning, everyone. Understanding that you don't guide to bad debt, but just, you know, thinking about the restaurant pregnancy in the first quarter, and then maybe coupled with an increase in the sub-times, one-time coverage in the second quarter, do you expect bad debt expense to remain near your long-term average of roughly 28 basis points, or is there a risk it trends modestly above that level?

Thank you. and and you know that really isn't necessarily bad debt and um it's really just lost we we generally take a more conservative um estimate relative to our historical average as you would expect we'd expect the portfolio to perform relatively consistently great thank you and

then my follow-up question is around the loan book just with loan repayments occurring at you 9.3% yield, how attractive does that lending opportunity set look today? Can you replace those repayments with similar yielding loans, or would you rather redeploy that capital into traditional debt lease acquisitions?

Generally, we do loans purely as an accommodation to the counterparty. Our preference is to do a sale-leaseback. We structure the loans with similar economics to our sale leaseback transactions. And so, you know, any cash flow from loan repayments will generally be redeployed into our investment pipeline, which generally has a percentage of loan consistent with the overall portfolio, which is right around 5%. So not a meaningful driver a mover of the needle, but we'll continue to do loans as they come available and when we can't get true ownership of the real estate, but our focus will be continuing.

Great. Thank you very much, guys. Thank you.

And as a reminder, if you would like to ask a question, that is star and one on your keypad to join the queue. Our next question will come from Jana Galen with Bank of America. Your line is open.

And this is Dan Byun on Freyana Gallen.

For my first question, looking at 2Q investments, it looks like master leases, uppered around 50% in the last two quarters.

Is this more of a function and deal mix or does it reflect a broader evolution in the opportunities you're seeing today?

Hey, Dan, thanks for the question. I wouldn't read too much into it.

It's just a industry tenant preference and we're pricing, you know, individual versus master leases into every transaction but overall the portfolio is pretty consistent kind of around that 60 percent so um nothing meaningful there in q2 thank you and then just to uh just follow up here on your february 2027 term loan is your nearest maturity at two points around 2.3 given current rates like how are you thinking about hedging or turning that out and then potentially add color on the AFO impact for 2027?

Sure, yeah, thanks. So, yes, that's the next maturity that's coming up on the ladder. We have a number of alternatives to address it, but yeah, as you pointed out, at a 2.26% all-in rate, it's already hedged at that rate. It'll very likely be dilutive under most scenarios that we would entertain. As we look to the bond market or the term loan market, when you look at the current pricing today, the dilution would probably be somewhere in the order of $0.04 to $0.06, depending on what we end up doing. In general, our preferred method is to go into the bond market. You saw that we just did a long 10-year bond in June, and we would probably look to do something similar to that. However, when you look at our ladder, we do have some opportunities to do a five or a seven-year as well. So, as you guys all know on the call, the rate environment changes by the minute, so we'll see what the world looks like later this year. We would certainly look to address it well ahead of time, and we have plenty of available liquidity and resources between our credit facility, our forward equity balance, and, of course, internally generated cash flow. So, a lot of options there. Certainly a manageable headwind, but, you know, important to think about that as we move into 2027.

Got it. Thank you so much.

Thank you.

Our next question will come from Smeeds Rose with Citi. Your line is open.

Hi, thank you. We were just wondering, it looks like the provision for credit losses in the quarter was maybe a little higher than what you typically book. It's just wondering if you could speak to anything going on there.

Hey, Smeeds, it's Rob. Yeah, so when you look at our loan portfolio, we have a balance today of approximately $400 million. And as Pete mentioned earlier, just as a reminder, although these loans are characterized and accounted for as loans, they're generally the same structure as our state lease-back investments with long duration and annual escalators. Similar to our impairment review process that we undergo each quarter, we review these loan investments to assess their carrying value under GAAP accounting principles. The loan loss reserve was a little larger this quarter, reflecting some management conservatism, but this reserve is a non-cash item in our income statement. And overall, the loan book is current today with nothing on non-accrual, and that's consistent with our broader commentary that tenant credit trends remain favorable in our portfolio overall.

Okay.

All right. Fair enough.

And then I just wanted to clarify something. Maybe I'm not looking at the right numbers here, but you said a couple of times that the under one times bucket improved sequentially by 50 basis points. But at least the numbers we're looking at, it looks like it went up by 50 basis points from 3.4 to 3.9%. sign. Is that correct?

I was referring to the under one and a half times bucket and we kind of have a look at these cords together.

So the under one times bucket went up, what you've talked about a little bit, but you see that as just sort of the normal ebb and flow. I think you've talked before about sometimes newer tenants coming on so their business is still ramping. Is that kind of what you're seeing, or is there anything else you can talk about in that category?

And it's, I would start, it's not material, and it is certainly just the normal ebbs and flows and various businesses and various tenants, and there's certainly a component of that, which is sites coming online that are nothing out of the ordinary and nothing that's given us a credit concern. And, you know, as we usually say, you know, any sort of concerns would be okay.

Thank you.

Thank you, Spence.

Our next question will come from Spencer Gilcher with Green Street. Your line is open.

Thank you. As you guys continue to grow at a sector of leading pace, so double digit expansion each year, how do you foresee headcount changing, if at all, over the medium term?

Yeah, Spencer, you know, we've grown the firm, substantially since coming public in 2018. And as we continue to invest in our investment volumes, processing, sourcing and processing and underwriting deals takes incremental personnel as well as managing. Our headcount will grow. We've tended to grow five to 10 professionals a year. I would anticipate that kind of tapering off as we get more efficient. We'll continue to grow, albeit our G&A will continue to rationalize, would be our expectation.

Okay, great. And you kind of got to my second question, which was, is EPRT using AI at all to help with sourcing or vetting your acquisition pipeline and or on the asset management front? You noted that both obviously are people in tents right now. Just curious if you guys have leaned into that capacity yet.

Hey, Spencer, this is Max. Short answer is yes. We're investing in our technology platform and our tech stack with AI across the board from the front end of sourcing through management, property management, asset management, and utilizing it wherever we can, as Pete said, just to continue to be better investors and be as efficient as possible.

Awesome. Okay, thanks so much.

Thanks, Spencer.

Our next question will come from Rich Hightower with Barclays. Your line is open.

Hi, good morning, guys. Just really one for me this morning, but just to go back to the dispositions in the quarter, I know, AJ, you said it was more of an asset management, kind of idiosyncratic method there. But, you know, just tell us a little more about, you know, what were the situations, who's buying, what's the outlook for further dispositions, and does anything sort of change going forward?

Yeah, you know, listen, dispositions has always been a part of our business.

We, you know, very deliberately have a fungible portfolio so that we can readily manage risks, whether it be concentration risks or individual credit risks. And that was certainly what you saw, you know, during the quarter. Like I said on the call, you should expect those to moderate back to a normalized level of, you know, call it $20 to $30 million a quarter. But we'll continue to prune the portfolio at the edges, manage forward credit risk and industry and tenant exposures.

Thanks, Pete. I guess just to follow up, I mean, is there anything about, you know, it doesn't sound like it, but just to clarify, you know, increasing prepayment or lease termination fees or anything like that, that we should be modeling going forward, or does it all kind of move, you know, in a similar percentage to the overall, just on that particular point?

Yeah, there's nothing abnormal.

Okay, thank you.

Thank you.

And as a reminder, if you would like to ask a question that is star one on your telephone keypad, we'll take our final question from John Masoka with B. Reilly Securities. Your line is open.

Good morning, everyone. Morning, John.

So I know we've talked probably more about your loan receivable book than any earnings call I can remember, but it seems like a lot of the repayments were actually kind of prepayments. Is that something that's pretty extensive throughout that kind of portion of your investment portfolio? And I guess, you know, how sensitive is that to moves we have in interest rates or maybe just timing of things that become prepayable? I'm just kind of curious if we could see that bucket of kind of effective dispositions increase over time or even your term.

Yeah, so most of our loans are multi-property loans supporting, you know, similar assets to which we own in the portfolio. and those loans generally carry prepayment rights when an individual asset is sold, and those prepayments tend to come at, you know, with prepayment penalties, and, you know, it tends to be constrained and limited, you know, to the extent that rates go down and there's a very liquid market for retail disposition of properties. you might expect that to pick up.

And then maybe on the investment side, you know, thinking back to kind of disclosure ahead of the Naderi conference, you said you had between acquisitions that were closed and stuff under LOI or PSA, you know, roughly $430 million of transactions, and you've kind of done $350 since the end of 1Q. So we're just kind of curious, is that reflective of just purely timing, and we should maybe expect that delta to close over the coming months, or are there things that kind of fell out of the pipeline, you know, understanding it includes a pretty broad – deals and kind of a broad level of kind of, you know, where they are in terms of closing?

Generally, when we flash our portfolio, it's a forward 90-day look, I would say, our pipeline, excuse me. And to the extent it's in our pipeline, I would say there's a 90-plus percent chance of that transaction closing. We don't spend a lot of time working on deals before flashing a number.

The second month of a quarter, you can expect.

And then lastly, given the amount of cash on hand the day, how should we think about timing of forward equity pulldowns? Is that something going to wait until 4Q maybe to complete, or could that kind of restart here in the third quarter?

Hey, John. It's Rob. Good question. So, if you go back in the first quarter, we did a fair amount of settlement activity funding the investment pipeline, and we had planned on doing more settlements in 2Q, but then we did our unsecured bond offering in June, which created excess liquidity. So we ended the quarter with some excess cash. So that meant there was no need for us to settle in 2Q. As we move through 3Q, and Max mentioned earlier that we have a great pipeline heading into the summer. We'll start to consume that capital. And I think you should expect some settlement activity later in 3Q. As we get to 4Q, we'll probably still have some unsettled forwards that are available to us. And in addition to that, we'll also look to the bond market as we start thinking about taking out the 2027 term loan. That doesn't mature until February, of course, but we could potentially prepay that as well. So, from a capital plan standpoint, I'd expect some settlements in 3Q, and then in 4Q, it should probably be a mix of bond and equity.

Okay. I appreciate that color. That's it for me. Thanks.

And it appears we have no further questions. I'll turn the program back over to Pete Mavoides for any additional or closing remarks.

Thank you very much, Operator. Good job today. And thank you all for your questions and participating in a call, and I hope you all have a great summer.

This concludes today's program. Thank you for your participation, and you may disconnect at any time.