Greetings and welcome to the NetStreet second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Miller, Capital Markets, Investor Relations. Thank you. You may be in.

Good morning and thank you for joining us for NetStreet's second quarter 2026 earnings conference call. On today's call, management's remarks and responses to your questions may contain statements considered forward-looking under federal securities law. These statements address matters subject to risk and uncertainties that may cause actual results to differ from those discussed today. For more information on these factors, we encourage you to review our latest Form 10-K and other SEC filings. All forward-looking statements are made as of today's date, and NetStreet assumes no obligation to update them in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions, reconciliations to the most comparable GAAP measures, and an explanation of their usefulness to investors. These materials can be found in the Investor Relations section of the company's website at NetStreet.com. Today's call is hosted by NetStreet CEO Mark Mannheimer and and CFO, Dan Dottland. They will make some prepared remarks, followed by a Q&A session. With that, I'll turn the call over to Mark.

Thank you, Matt, and good morning, everyone. We appreciate you joining us today to discuss NetStreet's second quarter 2026 results. I want to begin by thanking our entire team for their outstanding execution and dedication. We have now grown the portfolio to over $3 billion in assets, and we continue to see an elevated number of high-quality opportunities at accretive pricing, which should provide for an increasingly attractive growth backdrop as we head into 2027 and beyond. In the second quarter, we saw continued acceleration on the investment front. We closed $298.9 million of gross investments driven by well-priced assets in our core necessity and service-based sectors, including quick-service restaurants, grocery, convenience store, auto service, and other essential retail categories. These investments were completed at a blended cash yield of 7.4% with a weighted average lease term of 9.8 years. As a complement to this, we executed targeted dispositions at a 6.8% blended cash yield, the proceeds of which were recycled into higher quality, longer duration opportunities that enhanced our portfolio quality and further reduce select tenant and industry concentrations. This robust start to the year reflects the depth of our sourcing platform and our team's ability to move quickly across a wide swath of opportunities while still staying disciplined in our underwriting criteria. With that in mind, we have seen an uptick in portfolio transactions in recent months, which historically have priced away from us given the large premiums these deals typically demand. command. That said, we were successful in a couple of instances this quarter, which has fortuitously carried over into the third quarter. As a result, we have gained additional exposure without sacrificing our investment spreads to various high-quality tenants like Chick-fil-A, Sprouts, and Quick Trip that usually price too aggressively for us in the one-off market. Also of note, this quarter was the up-reap acquisition of 20 Speedway properties that we previously invested in via a first mortgage in early 2023. This was a great example of our creative structuring within our debt program, providing a path to direct fee ownership at cap rates that are significantly above market. More specifically, we acquired the Speedway assets at a 6.75% initial cash yield, which we see as a strong risk-adjusted yield given the long-term leases, the investment-grade credit support, high unit-level rent coverage, and the low basis in these assets. Turning to the portfolio, we ended the quarter with 859 investments leased to 156 tenants across 28 industries in 46 states. Our weighted average lease term is 10 years, and the percentage of investment-grade and investment-grade profile tenants is 56.5% of ABR. Unit-level rent coverage across the portfolio remains healthy at 3.8 times. As expected, occupancy increased to 100% with the backfill of our loan vacancy, a former big loss location, with A-rated TJ Maxx at a more than 20% increase in rent. While vacancies have been extraordinarily rare in our portfolio, we believe this execution highlights the strength of our asset management team and underwriting process. From a balance sheet perspective, we continue to maintain a conservative and flexible capital Following the capital markets activities in the quarter, our leverage remains an industry-leading 3.2 times. With substantial liquidity under our revolving credit facility and the benefit of our previously raised forward equity, we are well-positioned to fund accelerated growth without compromising our leverage targets. Turning to guidance, given the aforementioned strength of our balance sheet and continued momentum in our investment pipeline, we are increasing our full-year 2026 net investment activity guidance range to $700 to $800 million. We are also increasing the bottom end of our AFFO per share guidance to a new range of $1.37 to $1.39. In summary, the second quarter continued upon our excellent start to 2026, highlighted by strong momentum on the investment front and opportunistic capital raising, which has pre-funded our equity needs for the remainder of 2026. We believe our focus on healthy tenancy, strong unit-level performance, high-quality real estate, proactive portfolio management, and a low-leverage balance sheet continues to position NetStreet for sustainable long-term growth and value creation. With that, I'll turn the call over to Dan to review our second quarter financial results in greater detail. We will then be happy to take your questions.

Thank you, Mark. Looking at our second quarter earnings, we reported net income of $6.3 million, or $0.06 per diluted share. Core FFO for the quarter was $34.2 million, or $0.33 per diluted share, and AFFO was $35.5 million, or $0.35 per diluted share, which was a 6.1% increase over last year. Turning to the expense front, our total recurring GNA in the quarter increased 6.7% year-over-year to $5.8 million, which, similar to last quarter, has mostly resulted from staffing increases that occurred over the course of 2025. That said, with our total recurring G&A representing 9.5% of total revenues this quarter versus 11.3% in the prior year quarter, our G&A continues to rationalize relative to our revenue base. Turning to the capital markets, we remained opportunistic on the ATM front, raising 9 million shares for our $183 million of net proceeds as our cost of equity continued to improve throughout the quarter. Turning to the balance sheet, our adjusted net debt, which includes the impact of all Ford equity, was $672.2 million. Our weighted average debt maturity was 3.6 years, and our weighted average interest rate was 4.3%. Including extension options, what can be exercised at our discretion, we have no material debt maturing until February of 2028. In addition, our total liquidity was $1.1 billion at quarter end, which consisted of approximately $20 million of cash on hand, $301 million available on a revolving credit facility, and $714 million of unsettled forward equity, and $50 million of undrawn term line capacity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDA RE was 3.2 times at quarter end, which remains comfortably below our targeted leverage range of 4.5 to 5.5 times. Moving on to 2026 guidance, we are increasing the loan under our AFO per share guidance to a new range of $1.37 to $1.39 and increasing our net investment activity guidance to $700 to $800 million. We now expect cash G&A to range between $16.5 and $17 million exclusive of transaction costs and severance payments. In addition, the company's AFO per share guidance range now includes $0.05 to $0.08 per share of estimated dilution for $3.6 million to $5.9 million shares for the full year due to the impact of the company's outstanding forward equity calculated in accordance with the Treasury stock method. Lastly, on July 16th, the Board declared a quarterly cash dividend of $0.22.5 per share. The dividend will be paid on September 15th to shareholders of record as of September 1st. With that, Operator, we will now open the line for questions.

Thank you. At this time, we'll conduct a Q&A session. To ask a question, press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And your first question comes from And Handel Sanjust with Mizuho Securities, please state your question.

Hey, guys. Good morning. Thanks for taking the question. First one is just on the implied volume for acquisitions. Into the back half of the year, CNS has existed pretty meaningful deceleration. So I guess I'm curious if it's conservatism, the volatility, the macro, maybe something else we're missing. So maybe shed some color on that. And if the macro volatility is impacting your conversations at all from a, you know, pricing or, you know, maybe having deals take a bit longer. So curious on how that all is playing out and what your expectations into the back here are.

Yeah, thanks, Andel. Yeah, I think there is a little bit of conservatism built into that. But there's also, you know, we don't want to have a target out there with capital that we haven't raised yet. So, you know, if we do choose to raise a little bit more capital, I think there's likely some upside to that. But as it, you know, more broadly relates to what we're seeing out in the market, you know, I don't recall a healthier acquisitions market than what we're seeing right now, really, across all the different avenues that we look to add properties, whether that be sale effects or even portfolio deals, as I mentioned in the prepared remarks, the one-off market, blend and extends. we're really kind of clicking on all cylinders. So there's really a great opportunity set with very attractive pricing that we're seeing. And then we're following the macro and kind of what's going on geopolitically. That's obviously had some impact on interest rates. We have not yet seen that have much of an impact on cap rates, but I would imagine if that sustains and we continue to see upward pressure on the five-year and the 10-year, that could potentially move up cap rates, but we just have not seen that yet.

Got it. Got it. That's great color. And then my second question, I guess it pertains to some comments you made earlier in your discussion. You referred to some higher tenant credit tenants like Chick-fil-A. I think you mentioned Sprout. So I guess I'm curious, you know, we've seen your I-grade share trickle down over the last couple of quarters as you've pursued, you know, kind of optimizing your risk-adjusted growth. But your cost of capital has must improved. You're now, I guess, able to underwrite deals that perhaps you weren't able to do six, 12 months ago. So I'm curious if your strategy, your IG capital deployment strategy might be evolving here and if we might see that start to tick up a little bit. So I'm curious on all your thoughts on that.

Yeah, no, it's a good question. I think it's really the dynamic that there's been just a large number of portfolios that have crossed our desk and that we've had the opportunity to try to tackle. I think it's too difficult for one or two shops that historically have really paid up for those portfolios to take them all. And so a few of those have kind of come our way, which has allowed us to get some of those assets that historically maybe we wouldn't have been able to. But as it relates to, you know, this quarter being a little bit high on the investment grade, investment grade profile, you know, a good chunk of that was the Speedway, you know, uproot, you know, OP unit transaction that we did this quarter. So I think that's maybe more of a one-off. You know, we're just going to continue to try to find the best risk-adjusted returns. And, you know, right now that has not really evolved other than the portfolio dynamic, which we have seen a little bit of that in the third quarter as well. But I'd expect us to kind of, you know, stick around that, you know, 30%, 35% investment grade, investment grade profile, assuming the market dynamics continue. Got it.

Thank you very much. Thanks, Indel.

Your next question comes from John Kilachowski with Wells Fargo. Please state your question.

Hi, good morning. Thanks for taking my question. Maybe could you guys talk about the composition of what you bought in the quarter outside of the Speedway deal? And then, Mark, you talked about some portfolios out there. Can you talk about the sectors that you're seeing some opportunity?

Yeah, sure. So, I mean, yeah, I think the sectors that have kind of shown up in some of the portfolio deals are similar, but there's maybe a few names. You know, we mentioned, you know, Quick Trip, Sprouts, you know, Chick-fil-A that are in our portfolio. We just didn't have much of a concentration there, but it's created a unique opportunity for us to add some of those. But then we've also added some other names like tire discounters, some of the Darden brands that, you know, the cap rates have historically been pretty aggressive. There are some, you know, Brinker, Chili's assets as well we've added, you know, during the quarter, which, you know, haven't really been in our mix over the past, you know, call it, you know, a couple of years. So it's very similar sectors, just maybe some other tenants that don't trade as much in the one-off market. And I think that's likely the reason why I think we're seeing so many of these portfolio deals is, as you recall, maybe in 2021, when interest rates were near zero and cap rates were at all time lows, you had a lot of players enter the space, look at putting financing on those transactions, get a really nice cash on cash, even though the cap rates were low, because they could borrow so cheaply. that debt's coming due, typically a five-year term on most of that bank debt. That comes due, the refi looks a lot different. So selling the portfolios makes a lot more sense. And so we're just seeing a lot of opportunity there. And I think that's probably what's driving a lot of that. Each deal has got its own idiosyncratic reasons for why it comes to market or why it crosses our desk. But I think that's one theme that we've seen a little bit of. But yeah, I mean, I think the mix in terms of sectors has been very similar to what we've tried to pull into the portfolio. And then we've also gotten a little bit creative when we're buying some of these portfolios and simultaneously sold some assets at the same time. Some of these portfolios had some banks and things in there that maybe were not as big of a fan, but they still trade a pretty good cap rate. So that can allow us to kind of juice our net cap rate a bit while I think kind of getting a better risk-adjusted return. So we've gotten a little bit creative in some of those situations. But I think in terms of you look at the categories and the industries that we've added to, it looks pretty similar to what we've done. It's just been a little bit different in how we've gotten into those transactions and added further tenant diversity to the portfolio.

Got it. That's very helpful. And I guess that leads me into my next question, which would be a little bit chunkier on the disposition side in 2Q. Is that related to the Speedway deal? And if we were to see more portfolio deals and net investments climbing, you know, if you were able to do that, would you also expect kind of that disposition number to run a little bit more elevated?

Yeah, that's a good question. So on the, you know, the portfolio deals, if it's going to be a diversified portfolio, we're likely to, you know, we, you know, we've been very active on the disposition side. So that's allowed us to really build some relationships with some, you know, people to sell to that we can rely on that, you know, that perform. So I would, you know, I think you may see dispositions elevated a little bit in the event that we, you know, do some more portfolio deals. But, you know, each quarter is going to be a little bit different. So it's hard to hard to but we've seen third quarter a little bit similar to second quarter in that we've done some portfolio deals and also been able to sell some of the assets that maybe we didn't want to own long-term.

Very helpful. Thank you.

Next question comes from Jay Kornreich with Cantor Fitzgerald. Please state your question.

Thanks. Good morning. I just want to go back to the forward equity. The Treasury stock method accounting caused, I guess, two more cents of dilution this quarter as it relates to the annual guidance. So just wondering when do you think that could hit a peak And then just in general, as you seemingly have more than enough equity to meet your near-term investment needs really well into next year, yet your cost of equity continues to improve, I guess, what is your appetite to continue tapping incremental forward equity at these levels?

Yeah. Hey, Jay, I appreciate the commentary. You know, from a – if you look at our total share is outstanding relative to the weighted average share count, I think it's kind of at 38% today. you know, that should normalize close to 15% as we get out through the course of 2027. So now it remains to be seen where the, you know, kind of the stock price goes relative to the outstanding forwards, but certainly from a standpoint on a percentage basis, you know, the outstanding forwards will normalize, you know, again, closer to 15%. And so I think what you'll probably see, you know, is that the amount of TSM dilution probably peaks in third quarter, just kind of depends on where the stock price goes. And then we'll, you know, kind of drop off from there, not only nominally, but on a percentage basis as well. So I think that answers the first part. I think the second part on kind of equity, you're right, we don't need to do anything if we don't choose. But I think to the degree that the, you know, the investment market remains as robust as it has, I think we'll likely utilize the ATM at some point in time in the third and potentially in the fourth quarter, just to stay well ahead of our capital needs. But I think we can certainly choose to be selective, you know, given where our leverage is. And, you know, we saw a kind of big front half coming for us, and so we wanted to get out ahead of that. And with the S&P 600 inclusion, we had a ton of liquidity coming to the name, and we wanted to take advantage of that in the back half of June. So, you know, that also kind of accelerated our needs, you know, relative to kind of what we were expecting when we put out, you know, guidance in April of this year.

Appreciate that, Dan. All helpful. And just going off the comment about the inclusion to S&P 600 recently, you know, which should bring liquidity and additional passive investors to the name. I guess, are there any other incremental, I guess, corporate goals we should be monitoring for, you know, other either index inclusion, new credit ratings, unsecured bond issuance, or anything else we should just have on the radar?

Yeah, I mean, as far as index inclusions, nothing comes to mind. Hopefully we stay in the 600 a very long period of time because that results in quite a hefty ownership amongst passive funds. I think the next kind of – there's a lot of corporate goals, but as it pertains to kind of the credit rating or additional credit ratings, we already have a triple mu minus from Fitch. We're likely to go out to other agencies sometime, you know, early next year, which would then open us up to the public bond markets, which is something we're very excited about potentially tapping in 2027. So I think that should be, that's kind of the intermediate term goal for us.

Okay. All right. Thank you so much.

Thank you. And your next question comes from Michael Goldsmith with UBS. Please state your question.

Good morning.

Thanks a lot for taking my question. I guess just with the improved cost of capital, You've talked a little bit about getting into some portfolio deals and getting maybe into a little bit of higher quality tenants than maybe you normally would have. Is that maybe at the expense of kind of – does that come at the expense of maintaining larger spreads than some of the more traditional tenants that you've been interacting with in the past? Or is this just like, hey, for the for the same price that we would pay for some, you know, what would be traditional or able to improve the quality of our tenant base?

Yeah, Michael, I mean, I think, quite frankly, we were a little bit surprised that some of the portfolio deals we're able to get at the pricing that we that we did. But I think that's really driven by the fact that there were just so many portfolios that that came to market, you know, in a in a pretty short period of time. So that made it difficult for some others to just buy them all. And so I would have thought that would have been a very unique quarter, but we're seeing a similar dynamic play out in the third quarter. But, yeah, I mean, I would say that, you know, you look at the cap rate that we achieved this quarter, and I think really what drove that down to a 7.4 from a 7.5, which is, you know, minimal, was, you know, the Speedway deal at 6.75, the uproot deal that we did, that kind of drove that down. You take that out, and we're probably, you know, 7.5, 7.6. So we really didn't have to deviate on pricing. We don't expect that to happen in the third quarter either. And so, you know, as long as that dynamic continues to play out in the market, we're going to participate. If it doesn't, we can, you know, surely, you know, transition quickly into, you know, more similar approach that we had in the fourth quarter and first quarter.

Yeah, and hey, Michael, you know, a lot of the 7.4 was rounding, and sometimes the 7.5 is rounding. So the delta between kind of where we've been transacting is actually less than 10 basis points when you factor in rounding. Got it. Thanks for that.

And my follow-up is, you know, you continue to move into grocery with Sprouts, and the penetration of that within your portfolio of grocery overall remains elevated. Today, Albertsons reported and stocked this down quite a bit, with the company noting that poor grocery faced increasing pressure from software industry unit trends and a more cautious consumer. So, you know, clearly not all grocers are equal, but how are you feeling about the grocery within your portfolio and just any update from the tenants within the grocery category would be helpful?

Yeah, sure. So, you know, obviously we pay attention to what's going on with the consumer and, you know, kind of what the margins we see across the board with grocery. And really what we're seeing is kind of the larger operators have been able to, you know, kind of push pricing a little bit more and hold up a little bit better. Certainly having a very conservative balance sheet is extremely important in that industry. You don't want to combine any operating leverage with financial leverage. And so, you know, we feel really comfortable with the grocery assets that we have. They generate, you know, very strong sales, which, you know, kind of flows through to the bottom line with very high rent coverage in that sector. And so as long as we feel like we're buying, you know, good assets at or below market rents with high rent coverage, you know, we like the industry, but, you know, you do have to be careful not to just, you know, partner with any operator and be careful about which assets that you're But, you know, we feel really strong about the assets that we have in that sector and the rent coverage that we have.

Thank you very much. Good luck in the back half. Thanks, Michael.

Your next question comes from Smeeds Rose with Citi. please hit your question.

Thanks. It's Nick Joseph. Oh, sorry. Nick Joseph here. You had mentioned conservatism in the kind of guide potentially to the back half of the year on acquisitions. How much visibility do you have, you know, now that we're towards the end of July in the pipeline? And, you know, where does that pipeline stand today versus, you know, where it's stood on average over the last year or so?

Yeah, sure. Yeah. I mean, we're seeing a very healthy acquisitions market. I think we're sitting in a very similar spot that we were three months ago on this call. So no real reason to think that, you know, we should expect to see any real slowdown in the third quarter. And that's really, I mean, we still have some sourcing to do for the third quarter, but a lot of that is done. We have, you know, virtually no visibility into the fourth quarter. And, you know, not only, you know, deals that, you know, that we'll be able to access, but then also what the macro is going to look like and where cap rates are. And we don't want to overextend ourselves, especially if there is the possibility of cap rates going up. We want to have that flexibility.

Hi, this is Smeets. I just wanted to follow up on some of the comments you made a little bit earlier around grocery. But just for your tenants that are more or less focused on lower-end consumers, are you hearing anything from them just in terms of trends that might give you pause and maybe think about the way you are underwriting, you know, some of those kinds of leases.

Yeah, no, it's a good question. I mean, I think, you know, the K-shaped economy is definitely real. The lower leg of that is certainly under pressure. And so, you know, if we're going to have a sector, which we don't, quite frankly, have a lot of exposure to the lower end consumer, fortunately. But I think, you know, what you really need to have there is you need to have a real value proposition. And, you know, whether that be a necessity-based product where they kind of need that to survive, need those products to survive, or there's a real value proposition to that consumer that will drive them to the stores. But we really, you know, make sure that we've got very healthy rent coverages and, you know, corporate credit there with a little bit less risk. And so most of that's going to be with investment-grade tenants, locations that we know that they're committed to long-term that are generating very strong cash flows where we have some cushion because the lower-income consumer is certainly under pressure.

Thank you. Appreciate it.

Your next question comes from Wes Galladay with Baird.

Please state your question.

Hey, good morning, guys. Going back to the comments on having success on the portfolio deals, are you seeing a portfolio discount or just no premium? What are you seeing exactly on the pricing that's changed?

It's kind of funny, Wes. We've seen some portfolios go off that are really well marketed where there's several rounds of bidding, and I think those are going off at a pretty substantial premium. But the ones that are maybe a little bit smaller, I think if we're achieving the cap rates that we are for the quality of what we're pulling in, I wouldn't go as far as to call it a discount, but I'd say that it's very similar to for us kind of doing our onesie-twosie kind of small portfolios that we've done in the past. So it's probably pretty close to, you know, no premium, no discount, so maybe at par. But some of the larger ones that we've seen that we bid on and don't get, you know, quite frankly, you know, I think are still going at a premium.

Okay. That's all for me. Thanks, Wes. Your next question comes from Greg McGinnis with Deutsche Bank. Please state your question.

Hey, Greg McGinnis with Scotia. I wanted to go back to your earlier comment on the portfolio deals that were coming to market. I'm curious if you have any view on what's driving those deals to market. And I know you mentioned the expected moderation that's yet to materialize. But if there's anything that you would expect to see in terms of a slowdown there, what would drive that?

Yeah, I mean, every deal has its own idiosyncratic reason for coming to market. So it's a little bit tough to overly generalize, but certainly we saw in 2021 and even early 2022, a lot of players kind of coming out of the woodwork, buying very high quality properties and levering it up with very cheap debt. And that debt's coming due because five years have passed. And now they need to say, do I want to refinance this and watch my cash on cash deteriorate or do I want to turn around and sell these assets because they're still marketable? and in a lot of cases that people are deciding that the best outcome for them is to sell the portfolio to a larger institution. And, you know, I think that's driving a lot of it. We're seeing more of that in the third quarter. And so, you know, if you kind of just, you know, extrapolate when people were being aggressive in 2021 and 2022, that could continue into 2027 if you just kind of add five years to when people were buying those portfolios and assembling them. But you never really know, you know, what the calculus is going to be for those people and what their financial situation is and where interest rates are.

Okay, thanks. And then last quarter, you mentioned a limited pool of sub one times covered assets. Did any of those get resolved in Q2 or any part of the disposition pool?

Yes. But we did dispose of one of those assets, and then we also had one that we were expecting to start to ramp as ramped out of that bucket, and we may continue to explore the couple that are left. Great.

Thank you. Thanks, Greg. Your next question comes from Eric Borden with BMO Capital Markets. Please go ahead.

Hey, good morning, everyone. Thanks for taking my question. You continue to add grocery, see stores, QSRs, as you talked about in your early remarks. Just given the acquisition opportunities in those categories, you know, how much further are you willing to increase exposure to those categories? And, you know, what kind of concentration level would start to make you uncomfortable from a portfolio construction standpoint?

Yeah, no, that's a good question. I mean, we're, you know, we'll, we never like to turn down a good deal. And so you kind of never say never. So I never want to kind of totally box myself in. But, you know, we've always had a little bit of a soft ceiling in the, you know, kind of 15 plus percent industry target. You know, the industries that we really like where that gets a little bit softer, you know, you get up around 20 percent, then maybe we start looking at disposing some of those, you know, some of the other assets in that category. We don't really want to see it, you know, get up to that level. But, you know, if there's a good transaction and, you know, we really think it's our best risk adjust to return, we may pursue those opportunities, but then look to dispose of some assets and kind of whittle that down as you've seen us do in the past with some tenant concentrations.

Great. Thank you. And then my next question is just on the impairment you recognize in the quarter, the $4.2 million charge, could you provide a little bit more detail around that, whether or not it reflects like an isolated asset specific issue, or is there a broader theme there?

Yeah. I mean, that's typically going to be when we're selling a lot of assets, whether we bought them three, four years ago when cap rates were a lot lower and you've seen some cap rate expansion, just selling some assets and what we put them on the books for and what we sell them for. Anytime that you're selling a lot, you're going to have some impairments, but then it was largely offset with gain on sale. So you had a lot of ones that were resold at gains and some at losses. A lot of times there's just kind of you buy a portfolio. It's how you allocate it or how the accountants want you to allocate it, quite frankly. And so there's not much of a read-through there. But if you look at the gain on sale, I think that largely offset the impairments.

All right. Appreciate it. Thanks for the time.

Your next question comes from Michael Gorman with BTIG. Please go ahead with your question.

Yeah. Thanks. Good morning. I'm just wondering, following up on the Speedway transaction, are there more opportunities or are you seeing additional opportunities to use the upgrade structure in the transactions market? And if so, does that provide any kind of pricing advantage for you here? Are you generally competing with other public buyers for those types of transactions?

Yeah, that's a good question. I try not to talk about other competitors on these calls, but I did notice one of our competitors did their first OP unit deal this quarter as well. So I don't know if there's too much of a read through there. But yeah, we love the upread structure. We love doing these types of transactions when we can. And obviously right now our currency is very attractive to them and it's attractive to us. We use a stock price of $21 on the upread transaction, which at the time was slightly higher than where our stock was trading. And so it's accretive, fewer fees. It's just a much more efficient way to deploy capital. People really like it because it allows them to avoid taxes, and then they end up being very sticky shareholders. So I certainly love the structure. I wouldn't be surprised to see more in the future, but they're going to be one-off, and you kind of can't count on them. But when they pop up, we're certainly big fans of using that structure.

Great. That's helpful. And then maybe just going back to the IG exposure, It has ticked down a little bit here. Is that more of a function of just as the portfolio grows, there's just less of a focus or less of a need because there's more diversification? Or is this kind of you all saying that you think IG is a little bit mispriced in the market in terms of opportunities as you continue to build the portfolio?

Yeah, sure. I mean, I think it's a little bit more of the latter. You know, there's a lot of things that go into risk adjusted returns. And that's, you know, for us, it's, you know, where are you going to get, you know, where could you expect there to be a loss on a property? And, you know, what's that percentage look like versus the pricing that you're able to achieve in the market? And there's a lot of things that go into, you know, to the risk. And, you know, the credit is really just one piece of it. The other two pieces that are equally as important and in some cases more important is how sticky is that tenancy going to be and how committed to that location and mission critical is it, and that's going to be driven off of the rent coverage. If a tenant is driving a lot of their cash flow from your location, they're going to stay there. If they're not making any money there, they're not going to stay there. So whether the credit goes away or not, at the end of the lease term, they're going to decide to leave your property anyway. And then, you know, how fungible is that real estate? How easy is it going to be to get somebody else in paying the same or more rent? Are there going to be a lot of TIs associated with that? You know, there's just a lot that kind of goes into it. So I think the easiest thing to point to is the credit. And I think the easiest thing to kind of share with investors and get them comfortable, you know, is showing a high percentage of investment-grade credit. But I think over time, you know, we've been around for six years and have had virtually no credit loss. So I think we're proven underwriters at this point, and I think just continuing to go out and getting the best risk-adjusted returns is really our focus. And when interest rates moved up, you saw the non-investment grade, as kind of a general statement, saw the cap rates move up quite a bit. On the investment grade side, there were still a lot of buyers willing to pay very low cap rates for those assets. So the cap rates didn't move up as much for that. So you're just not getting the same risk-adjusted returns there in most cases, not all cases. And so we just see the mix of where we can get, you know, where our efficient frontier is right now is kind of in that 30%, 35% investment grade, which is really more of a byproduct of what we're buying. We're not really focused on that. It's just been fairly consistent of what that's been a byproduct of, you know, where we're seeing the best risk-adjusted returns in the market currently.

Great. Thanks for the time.

Thanks, Michael.

So your next question comes from Upal Rana with KeyBank Capital Markets. Please say your question.

Great. I wanted to get your updated thoughts on the competition in the transaction market, you know, with borrowing costs trending higher. Are you seeing less competition overall, or you mentioned a lot of the portfolio deals that did come online at once this quarter, and you're able to grab a few at attractive pricing despite the higher quality. So just any color there would be helpful.

Yeah, sure. And we continue to see virtually no competition from, you know, kind of the larger private institutions, which grabbed a lot of the headlines. Our competition continues to be the 1031 market individuals and small family offices, occasionally the public REITs. But, you know, when we're up against the other public REITs, we typically don't win those transactions. So we view our competition as more the 1031 type buyer. and they're typically borrowing, putting 50%, 60% LTV bank debt on their transactions and those interest rates have made it more difficult for them to compete. So I would say competition is significantly lower.

Okay, great. And then I wanted to get your updated thoughts on the watch list. As you made further progress on reducing the exposure to some of your troubled tenants again this quarter, I just wanted to get your thoughts there on those tenants and how much more there is to do and then maybe what's currently baked into your guidance for credit loss?

Yeah, sure. So, you know, we don't really have, you know, troubled tenants. I think we had a few tenants that were out of favor, and I think we've got, you know, those concentrations down significantly. We'll likely chip away a little bit on the margin, you know, here and there at some of those. Our real focus is really on, if you look at the histogram in our presentation, I think it's on page 13, that shows, you know, the corporate credit and the unit level coverage of those assets. You know, we really want to kind of keep chopping the tail off of the weaker corporate credits and the weaker unit level coverage. You've seen some pretty strong progress there, and we'll continue to do that.

Okay, great. That was awful. Thank you.

There are no further questions at this time, so I'll hand the floor over to Mark Manheimer for Closer Remarks.

Well, thanks, everyone, for joining us today. We certainly appreciate everyone's interest in NetStreet. Thanks. This concludes today's conference. All parties may disconnect. Have a good day.