Earnings Call Transcript - NTST Q2 2025

Amy An, Senior Associate of Investor Relations

We thank you for joining us for NETSTREIT's Second Quarter 2025 Earnings Conference Call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and an updated investor presentation. Both can be found in the Investor Relations section of the company's website at www.netstreit.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our Form 10-K for the year ended December 31, 2024, and our other SEC filings. All forward-looking statements are made as of the date hereof, and NETSTREIT assumes no obligation to update any forward-looking statements 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 of our non-GAAP measures, reconciliations to the most comparable GAAP measure and an explanation of why we believe such non-GAAP financial measures are useful to investors. Today's conference call is hosted by NETSTREIT's Chief Executive Officer, Mark Manheimer; and Chief Financial Officer, Dan Donlan. They will make some prepared remarks, and then we will open the call for your questions. Now, I'll turn the call over to Mark.

Mark Manheimer, CEO

Thank you, Amy, and thank you all for joining us this morning to discuss our second quarter 2025 results. Similar to past quarters, we continued to improve our tenant diversification by thoughtful and accretive dispositions, and we are now slightly ahead of pace as it relates to our year-end goals. On the external growth front, our team is actively sourcing attractive investments across a broad spectrum of tenants and industries and we remain confident in our ability to find off-the-run opportunities that fit our underwriting standards. From a portfolio perspective, our tenants remain incredibly healthy and our heavy concentration within necessity discounts and service industries adds further stability to our cash flows. In addition, we provided new disclosure during the second quarter to illustrate our de minimis credit losses since inception and better demonstrate the overall strength of our portfolio, which I will discuss later. We believe this enhanced disclosure continued diversification efforts and disciplined approach to capital deployment have all contributed to the improvement in our cost of capital. While there is still plenty of room for improvement on this front, we did take advantage of our favorable investment spreads to raise over $46 million via the ATM this quarter. With all these positives in mind, we are increasing our AFFO per share guidance midpoint by $0.01 to a new range of $1.29 to $1.31, and we are increasing our net investment guidance by $50 million at the midpoint to a new range of $125 million to $175 million. Turning back to external growth. We completed $117.1 million of gross investments at a blended cash yield of 7.8% during the quarter. While we are thrilled to achieve our highest quarterly cash yield on record in the second quarter, we do not expect this to repeat in the back half of the year as the opportunities that have the best risk-adjusted returns are currently blending to a 7.4% to 7.5% cash yield. The weighted average lease term for our second quarter investments was 15.7 years with investment grade and investment-grade profile tenants representing more than 1/4 of these acquisitions. Additionally, more than half of our investment activity this quarter was accretively funded with disposition proceeds, which totaled $60.4 million across 20 properties at a 6.5% blended cash yield. As we look out to the third quarter and beyond, we are currently seeing great investment opportunities across a variety of tenants and industries, including farm supplies, grocery, quick service restaurants, and other services to name a few. Turning to the portfolio. We ended the quarter with investments in 705 properties that were leased to 106 tenants operating in 27 industries across 45 states. From a credit perspective, 68.7% of our total ABR is leased to investment-grade or investment-grade profile tenants. Our weighted average lease term remaining for the portfolio was 9.8 years with just 1.2% of ABR expiring through 2026. As mentioned earlier, we have updated our disclosure to better demonstrate the individual property risks within our portfolio as well as provide more details around how our best-in-class track record as it relates to credit loss. Moreover, we believe this disclosure serves to better illustrate the underwriting discipline that we have maintained since inception, which, as we said before, goes well beyond just understanding the corporate credit. We also emphasize unit-level performance in locations where we believe the rent is replaceable, which helps us to carefully manage lease expirations. We also focus on larger and more established operators that we believe are more capable of adapting to market changes. As you can see from our investor presentation, our portfolio-wide unit-level rent coverage ticked up to 3.9x from 3.8x when we initially provided the disclosure less than 2 months ago. To reiterate, we believe this disclosure provides excellent visibility into our best-in-class default and credit loss statistics while providing the necessary context around future risks within our portfolio. We believe this insight, which is not uniformly disclosed across the net lease industry should provide investors with greater comfort in the future cash flow production of our portfolio, both on an absolute basis and relative to our net lease peers. Before handing the call over to Dan, I wanted to reiterate a message that we have consistently provided in the past. We will not sacrifice our balance sheet for growth nor will we grow for the sake of asset growth without an appropriate level of per-share earnings growth. However, with our cost of capital having meaningfully improved throughout the year, we can now afford to be more acquisitive, which is a welcome development for the NETSTREIT team. We very much appreciate the support of our shareholders, and we remain confident that our growth from a small base narrative can gain additional traction as we execute our strategy. With that, I'll hand the call to Dan to go over our second quarter financials and then open up the call for your questions.

Daniel Paul Donlan, CFO

Thank you, Mark. Looking at our second quarter earnings, we reported net income of $3.3 million or $0.04 per diluted share. Core FFO for the quarter was $25.6 million or $0.31 per diluted share and AFFO was $27.5 million or $0.33 per diluted share, which is a 3.1% increase over last year. Turning to the expense front. Our total recurring G&A in the quarter increased year-over-year to $5.4 million, which is mostly a result of our staffing levels normalizing as we restructured various roles last year. That said, with our total recurring G&A representing 11% of total revenues this quarter versus 12% in the prior year, our G&A continues to rationalize relative to our revenue base. Turning to capital markets activity in the second quarter. We sold 2.8 million shares via our ATM program, generating over $46.1 million of net proceeds. Additionally, we settled 1.1 million shares during the quarter. Turning to the balance sheet. Our adjusted net debt, which includes the impact of all forward equity, was $713.8 million, our weighted average debt maturity is 3.8 years and our weighted average interest rate was 4.58%. Including extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity was $594 million at quarter end, which consisted of $20 million of cash on hand, $373 million available on our revolving credit facility, and $202 million of unsettled forward equity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was 4.6x at quarter end, which was down from 4.7x last quarter and remains well within our targeted leverage range of 4.5 to 5.5x. Moving on to guidance for 2025. We are increasing our AFFO per share guidance range to $1.29 to $1.31 from the prior range of $1.28 to $1.30, and we're increasing our net investment activity guidance range to $125 million to $175 million from the prior range of $75 million to $125 million. Additionally, we now see recurring cash G&A ranging between $15 million to $15.5 million for 2025. From a rent loss perspective, our guidance now assumes roughly 25 basis points of unknown rent loss at the midpoint of our range. Lastly, due to our outstanding forward equity, our midpoint assumes slightly less than $0.01 of dilution resulting from the treasury stock method. Lastly, on July 21, the Board declared a quarterly cash dividend of $0.215 per share, which represents a 2.4% increase over the prior quarter dividend. The dividend will be payable on September 15 to shareholders of record as of September 2. With that, operator, we will now open the line for questions.

Haendel St. Juste, Analyst

Great quarter. I wanted to ask you a question, I guess, Mark, a big picture one, and it kind of dovetails on your prepared remarks. The stock is up 30%. Your WACC and investment spreads have improved pretty dramatically. So I guess, can you talk a bit more about how this improved WACC impacts the range of capital deployment alternatives available to you now? And how much and where you can deploy capital? Your initial guide, obviously was pretty conservative, even though the updated acquisition that keeps below where you've been in some other quarters recently. So I was just curious on some thoughts on that front.

Mark Manheimer, CEO

Yes, thank you, Haendel. It's going to remain dynamic as we monitor our cost of capital. Regarding our capital deployment around current cap rates, perhaps not this quarter, which might have been an anomaly at 7 to 8, we're seeing a more typical range of around 7.4% to 7.5% in this environment. Being able to deploy net $150 million to $200 million would be manageable. It's closely tied to our cost of capital, and we're hopeful for continued improvement in that area.

Haendel St. Juste, Analyst

Got it. It sounds like a bit more IG will be part of the mix and part of why we expect the yields to come down in the next couple of quarters?

Mark Manheimer, CEO

Yes. I think this quarter, we had a couple of unique opportunities with some C-store operators where we have relationships where they're doing some add-on acquisitions of from some smaller operators. We were able to get attractive leases, add these properties into existing master leases, extend the term out at 4x rent coverage. So at a pretty attractive cap rate. So any time we see those types of opportunities, we're going to jump all over them. We just don't expect to see that every quarter. We really felt like this was a great opportunity for us this quarter, which is why you see that 7.8%. It's a larger operator doesn't quite qualify for investment-grade profile. It doesn't have a credit rating that has no debt for all of those operators. So an operator, we're very comfortable with. And of course, at 4x rent coverage in a master lease, you're pretty well protected.

Haendel St. Juste, Analyst

Great. Great. And second question is on the Walgreens, the Dollar Store disposition things seem to be proceeding pretty well. And maybe some color on if you could compare and contrast the demand for the assets and the cap rates you're getting the private market on those fronts? And then maybe some color on where we expect you to maybe add more exposure to deploy some of that capital.

Mark Manheimer, CEO

Yes, I'd say regarding dispositions, they were somewhat aligned with our acquisitions this quarter. The cap rate was slightly better than what we've observed in the past. We executed several attractive dispositions, selling some advanced autos at around a low 6% cap rate range, which brings our concentration to a more comfortable level. The CVS outside of natural was at a 5.5 cap, which had a couple of cap rates that pulled us back down a bit. We're nearing completion on what we need to sell regarding Walgreens; we may need to offload one or two more properties this year to get us below the 3% concentration we discussed a few quarters ago. I feel optimistic about that. The demand for Dollar stores is still strong, with significant interest from both 1031 buyers and institutional investors at appealing cap rates. Each quarter since we started, we've managed to accretively recycle capital, and I don’t expect that to change in the third and fourth quarters, though it might not be as significant as it was this quarter.

John Kilichowski, Analyst

Just kind of a follow-up to the first question. Mark, you answered this a little bit, and I'm not sure if you can give any more color here. But just as we think about, in the second half of the year, you said IG percentage is going to increase and cap rates are going to tighten a little bit and your increased investment guidance. How much of your new investment guide has some sort of conservatism for the uncertainty about your access to equity capital and maybe if the opportunity arises here in the near future for you to lock in more equity capital. Where do you think that investment guide could go to? Or what do you think the opportunity set is for you all?

Mark Manheimer, CEO

I believe the current opportunity is quite significant. The team is eager to engage more actively in the acquisitions market than we have in recent times. With our current team and the existing market conditions, I think it's feasible to deploy $150 million to $200 million in net acquisitions each quarter at the current cap rates and a similar product mix. However, we will remain cautious regarding our equity trading and our capital costs.

John Kilichowski, Analyst

Got it. And then maybe just on the test side of the equation. I know you discussed the potential for ratings upgrade. Curious if you've had any conversations with the rating agencies and what do you think the impact would be on your WACC and if that's considered at all in your guide?

Daniel Paul Donlan, CFO

Yes, John, it's Dan. We don’t have anything included in our guidance for this year. Currently, we don’t have a rating, so there’s nothing to upgrade at this time. However, if we receive an investment-grade credit rating, it would allow us to utilize the leverage title, which could reduce our term loan debt by 20 basis points. Additionally, we would get a credit service adjustment of about 10 basis points, leading to a total decrease of approximately 30 basis points for all our debt. We plan to start conversations about this later in the third quarter and are optimistic about achieving a favorable outcome, but that's our current situation.

Wes Golladay, Analyst

Just looking at the balance sheet. You have about $58 million held for sale. Will this all be done disposed of this year? And will this be the last of the heavy dispositions?

Mark Manheimer, CEO

Yes. I mean, I think that we have a decent amount of that we’re still doing. So I mean, in the last few quarters have been pretty heavy. I think the third quarter will be pretty heavy again. We'll start to moderate a little bit in the fourth quarter. We can never guarantee that anybody that we're trying to sell a property to is actually going to close. So I can't get guarantees that will all be gone. But I'd say the lion's share of that should be gone. And then when you look towards next year, I would expect our disposition pace to moderate more closely to what it was, maybe 2, 3 years ago.

Wes Golladay, Analyst

Okay. When you look at the investment pipeline, is there a lot of loans in that?

Mark Manheimer, CEO

There are some, but it's really about enough to replace what's getting paid off. So it's not a massive amount.

Wes Golladay, Analyst

Okay. And then just one more big last question, I know you all lease. Do you have an update on the vacant lease?

Mark Manheimer, CEO

Yes, we have made significant progress. We are currently negotiating with two operators, but there are three letters of intent where we are still in discussions. The two more promising operators are national tenants with investment-grade ratings, and they are both prepared to offer higher rent than what was previously in place. They just need to navigate their investment committee and finalize their plans for what modifications are required to prepare the space for their occupancy. I anticipate that we will have a signed letter of intent this quarter before the next earnings call. However, the actual start of rent payments will likely occur early next year.

Elmer Chang, Analyst

This is Elmer Chang on with Greg. You mentioned maybe 7% cap rates for investments with risk-adjusted returns. Are you just facing pricing power challenges given investment-grade sellers may have been aware that your high cost of equity at the start of the year was restricting any healthier investment spreads? Or are there any other trends driving cap rates for investment-grade tenants below that mid-7% level?

Mark Manheimer, CEO

Unfortunately, we cannot control market conditions or the prices at which properties are offered for sale. While we can negotiate on our end, we require a seller who is willing to cooperate. From what we've observed in the investment-grade sector, unless you are prepared to take on risks like co-tenancy, we are hesitant to include those in our portfolio. Cap rates have not sufficiently increased for us to believe that we are receiving an adequate risk-adjusted return on most investment-grade opportunities. This is why we've focused on other opportunities that have met our criteria, specifically larger operators with strong financial stability and excellent unit-level performance. For instance, we sold a CVS at a 5.5 cap rate, but we're not inclined to purchase CVS properties at that cap rate or to reinvest in pharmacies. The market currently tends to favor higher cap rates for non-investment-grade tenants, yielding better risk-adjusted returns compared to investment-grade tenants. We are still identifying good opportunities, though they may not be marketed very effectively, allowing us favorable pricing on many of those deals. However, scaling acquisitions of investment-grade properties at justifiable cap rates does not seem feasible at this time.

Elmer Chang, Analyst

Okay. Given you've had no major events to date, what are you now assuming for bad debt expense for the rest of the year since why you increased on investment guidance and the AFFO range, but that you expect less based on your comments for cap rates for the rest of the year.

Daniel Paul Donlan, CFO

Elmer, it's Dan. I think I caught most of your question, you're breaking up a little bit. But as we stated in the prepared remarks, we're assuming about 25 basis points of credit loss between here and year-end at the midpoint of the range.

Michael Goldsmith, Analyst

You're feeling more comfortable with issuing equity at the ATM. Is that dependent on buying at the current elevated cap rates in the 7.7% to 7.8% range? As you move into more investment grade assets, the cap rates should decrease on a blended basis. I'm trying to understand the spreads you're comfortable with for issuing and acquiring.

Mark Manheimer, CEO

Yes. Michael, we've always said that we would be comfortable issuing equity if we were north of 100 basis points of spread relative to our WACC. As we sit here today and you think about a 7.5% cap rate in the back half of the year, maybe 7.4%. When you think about our AFFO yield using our run rate AFFO coming out of the second quarter, and then looking at 5.5 year to 7-year term loans as the debt source there, we can source transactions about 150 to 160 basis points wide of what we think our WACC is at the current moment.

Michael Goldsmith, Analyst

Got it. And my follow-up question is, baked into the guidance, obviously, you've been able to acquire more on a net basis. But are there any mitigating factors that we've contemplated within the guidance are you taking into account the treasury stack solution just given some of these issuances and just kind of understand kind of the moving pieces within the outlook?

Mark Manheimer, CEO

Yes. At the midpoint, I mean, that's the mitigating item that we mentioned at the midpoint. We're assuming a little bit less than $0.01 of dilution from the treasury stock method. Obviously, we have no idea where the stock is going to go, but we assumed a pretty healthy movement even from current levels to justify our guidance range. So we feel, I'm really comfortable we've been conservative on that front.

Michael Gorman, Analyst

I was wondering if you could just talk a little bit more about competition in the deal market. We've seen new entrants, I would say, from nontraditional net lease investors. And I understand it's a deep liquid market, but I'm just curious if you started to bump into any of these new buyers in the marketplace or kind of where you're seeing them show up as you look at the deal pipeline and future transactions?

Mark Manheimer, CEO

Yes, I mean, good question. We've certainly heard a lot about some new entrants are aware of some capital that has been deployed by a number of them, but we just really have not run into them at all on the acquisition side. And so I think most of the deals that we're looking at are pretty small bite-size deals or their relationship deals where really the only negotiating that we're doing is with the tenants and then where the tenant and the seller trying to figure out where they're willing to park with their properties and less so in getting ourselves in bidding wars anytime we see those opportunities, we'll come in and we'll bid, but we're not really interested in paying the top price for our deals we want to get the best risk-adjusted returns. And from our perspective, the largely marketed deals typically don't really yield those opportunities too well. And so I'm pretty aware of a number of the new entrants. And I think their strategies don't really line up too much with ours. So I'd be surprised if we run into them very frequently. I'm sure there will be a situation here or there where we see them, but I don't think it's going to have much impact on our capital deployment.

Michael Gorman, Analyst

That's helpful. Regarding competition, are you noticing more individual bidders or owner occupants in the market? Are they looking at previously sold properties, or is there increased competition for sale leasebacks as they seek more control over their properties in a supply-constrained environment?

Mark Manheimer, CEO

Yes. We have not really seen that quite yet, but I think that's something to potentially keep an eye on.

Linda Tsai, Analyst

With your cost of capital having improved, what verticals or investments are you considering now that you couldn't have before, and then how would investment grades trend as a result?

Mark Manheimer, CEO

Yes. I don't think really much is going to change at all in terms of what we're looking at. I think if we were to deploy a lot more capital than we are right now, which isn't necessarily the plan in the near term. I think that maybe the filter kind of opens up a little bit more, where we're going to act a little bit more on pricing, which is why I think our 7.8% could come down to a 7.4%, 7.5%. If we wanted to deploy more capital, but I would expect for us to continue to buy similar types of products that we have over the past 5 years.

Linda Tsai, Analyst

And then can you give us some general color on dynamics in the C-store space? And does your pipeline have more of these?

Mark Manheimer, CEO

Yes. I mean the C-store space is an attractive industry for us. Obviously, you've got 2 large profit drivers coming from the gas pumps as well as the inside sales of the store. And we've got really good relationships in that space. I mean, I know I've been doing convenience store deals for I guess, going on 20 years. So pretty aware of who's in the space and who the operators are as well as our team has done a great job of going out and finding some of these opportunities and building relationships with some operators. We'll continue to look for those. We did a few of them this quarter. We may do one this quarter. But I think it's likely that we're going to do as many as we did in the second quarter as in the third quarter.

Linda Tsai, Analyst

Just one last one for Dan. What do you expect G&A as a percentage of revenues to be at the end of next year, similar to this year?

Daniel Paul Donlan, CFO

No, I think it should continue to trend down and I don't have the model pulled up. I definitely think when you think about the year-over-year growth, it should slow dramatically next year versus this year just given that we had a lot of hiring to do this year and into the back half of last year and that hiring pace should moderate considerably as we look out to 2026. So I don't know what that would impute necessarily on a percentage basis, but it's certainly going to be lower as a percentage of revenues next year. And again, the year-over-year growth rate should be down considerably versus what it was this year.

Smedes Rose, Analyst

I just wanted to ask a quick question. You talked about 25 bps of rent loss embedded through the back half of the year. And so what is it now for the full year, I guess, I think you said last quarter was 75 bps baking into full year or...

Mark Manheimer, CEO

Yes. So last quarter, we said our guidance was based on 75 basis points of credit loss, I guess, for the full year. I mean this 25 basis points of credit losses for the full year as well. It's just that at half year ago.

Wes Golladay, Analyst

I wanted to ask if you expect to settle most of this forward equity by the end of the year, or are you now in a position to start preparing with Dry Powder for next year as well?

Mark Manheimer, CEO

Yes. When we consider our leverage, we always factor in the Ford. Currently, at 4.6 times, we are comfortable with our leverage. We do not need to take any actions to reach the high end of our guidance at $175. By the end of the year, we anticipate being around 4.9 times. We have a tendency to raise at-the-market equity around current levels. Regarding selling forward, it really hinges on whether we raise more capital. However, we need to keep our debt to gross assets ratio below 35% to secure the best pricing for our term loans and credit facilities. This requirement influences our decision to draw down equity. Expect to see some activity in the third quarter, and we anticipate a significant amount in the fourth quarter as well.

Daniel Guglielmo, Analyst

I think it was in the 4Q call where we had talked about increased population growth in the Sunbelt and elevated opportunities there, but that you all don't have a specific regional focus. Has there been any changes to that view or population trends you are watching? And then are there regions that are more attractive in the second half?

Mark Manheimer, CEO

I would say it really hasn't changed very much at all. You're still kind of seeing population growth in the same areas, which is where retailers are going to continue to try to grow. So you're going to see more opportunities there on the development side as well as the sales-leaseback side. So I don't think that has really changed much since the fourth quarter last year.

Daniel Guglielmo, Analyst

Okay. Appreciate that. And then year-over-year average earnings have continued to increase across the country. When you talk with tenants and then think about your investments, has the spending and revenue been able to keep pace with something like the labor and technology costs? Or has it become an increased kind of topic of conversation when you're talking with them and thinking through the investment?

Mark Manheimer, CEO

Yes. I don't know if it's really been an increased topic of conversation with people. I mean, there are challenges in some industries as it relates to labor costs more specifically restaurants and some others where just the labor line item has become more expensive and has squeezed profitability a little bit. Many have, of course, seen inflation last year, kind of squeezed margins a little bit for some operators, but that's really moderated quite a bit. And most of the retailers that we're talking to, maybe kind of curious to see what happens with tariffs, but there really hasn't been much of an impact from that yet. So most retailers that we've spoken to are feeling pretty bullish and are really more in growth mode than they were maybe this time last quarter.

Upal Rana, Analyst

With the net investment activity accelerating and that you expect cap rates to trend lower to the mid-7% range, are there any changes you would point out on lease economics in terms of wall escalators or rents that we should expect?

Mark Manheimer, CEO

No, we had quite favorable terms this quarter with longer lease durations, and you can anticipate something similar, although possibly not as lengthy in the third quarter. Much of our focus for the third quarter will be on the sale-leaseback side, and even on the nonsale-leaseback side, we still expect to have relatively long lease terms with attractive rent escalators. For the past year to a year and a half, we've been concentrated on enhancing the internal growth of the portfolio, and that will continue. I don't expect to see significant changes as we adjust back to what we were doing in the second quarter around 7.4% to 7.5%. Overall, I'm optimistic about the opportunities we have in front of us right now.

Upal Rana, Analyst

Okay. Great. That was helpful. And then I want to get your sense on what the appetite is from buyers for Walgreens today. You mentioned you wanted to sell maybe 1 or 2 by year-end to reach that 3% ABR, but has demand for pharmacy changed in any way in recent months? I know you did sell that on CVS for 5.5 cap.

Mark Manheimer, CEO

Yes, I believe CVS and Walgreens are a bit different. With Walgreens, there's a lack of clarity regarding the buyer environment. We have some insight into their balance sheet, which should not be heavily leveraged. Once that information is available, expected around the transaction closing in December, people will see that the balance sheet remains strong, which will be a positive development early next year. Until then, selling those assets is more challenging, but we're pleased that we've reduced our exposure to 3.5% and only need to sell 1 or 2 more to drop below 3%. We should be able to find a 1031 buyer for those assets, confident that they won’t close the store and that the location is sound, with rents at $19 per square foot, which is competitive compared to Walgreens and CVS. This makes it easier for potential buyers to feel secure in renting the properties. There's been significant interest from retailers and developers in our sites, but the challenge is getting Walgreens out. While it’s a positive issue to have, our protection regarding Walgreens looks solid due to lower rents and strong real estate. Various operators, including convenience store owners and auto service retailers, are interested in these stores at or above our current rents. However, we can only sell 1 or 2 more and expect to continue receiving payments from Walgreens for the next decade or more.

Jana Galan, Analyst

Congrats on a great quarter. Just a quick one. Looking at the 1.2% of ABR expiring in 2026, and granted it's very small. But can you remind us of how early renewal discussions start? And when do you typically get notice of the tenant's decision?

Mark Manheimer, CEO

Yes. I mean each lease is a little bit different, but typically, it's about 6 months at a time that you have to tell you whether they're leaving or staying. But we're somewhat proactive, especially if we have a reason to be talking to a tenant about other locations. We usually try to loop those conversations in. Typically, not a great idea to reach out to kind of a year or two out without having another recent stock to them, otherwise you kind of start to lose some leverage in that negotiation, if there is one. But yes, I mean, we feel very comfortable with what's expiring in 2026. We think we'll have very close to, if not all of those renew at their option rent. Well, thanks, everybody, for your interest on the call today and in the company, and we look forward to continuing the dialogue here in the near future.

Operator, Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.