Good morning, and welcome to the Agree Realty 4th Quarter and Full Year 2018 After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to Joey Agree, President and CEO. Please go ahead, Joey.
Thank you, operator. Good morning, everyone, and thank you for joining us for Agree Realty's 4th quarter and full year 2018 earnings call. Joining me this morning is Clay Phelan, our Chief Financial Officer. 2018 was an exceptional year for our growing company as we made tremendous progress further transforming Aigre Realty into a leader retail ownership. We achieved several significant milestones during the past year.
Among them, we exceeded $3,000,000,000 in enterprise value. We We added a record of over 230 high quality properties to our growing portfolio. We increased our exposure to leading investment grade retailers by approximately 800 basis points from 43% to 51% via leading tenants such as Sherwin Williams, TJX, Tractor Supply and Home Depot. We further improved the diversification of our portfolio by investing across 38 states and 22 retail sectors. We received an investment grade credit ratings from Moody's Investors Service.
We solidified our balance sheet by raising worth $750,000,000 in permanent capital, and And we increased our well covered dividend by 6.4%. While these metrics are quantifiable and visible to our shareholders, We simultaneously invested significantly in our very bright future, expanding our organization to 36 team members and counting, as well as embarking on an expansion of our headquarters to accommodate our growing company. During the past year, we invested $629,000,000 of which a record $607,000,000 was through our record acquisition platform activities. The 2 25 properties acquired during the year span 22 but diverse retail sectors. Over 61% of annualized base rents acquiring during the year are derived from retailers that carry an investment grade credit rating.
While we achieved another record year of acquisition volume in 2018, We continue to adhere to our rigorous underwriting standards that pair an emphasis on retail real estate fundamentals with a top down focus on leading omnichannel retailers. Our robust and growing pipeline similarly represents best in class retailers in our targeted retail sectors. We closed out this past year with a very busy final quarter, investing a record amount across our 3 external growth platforms, while executing several capital market transaction that served to fortify our balance sheet for additional growth. During the Q4, we invested nearly $263,000,000 and 139 high quality retail net lease properties. 129 of these investments were originated through our acquisition platform, representing total acquisition volume of a record $256,000,000 for the quarter.
A record 84% of annualized base rents acquired during the quarter are derived from investment grade retailers, not solely because of their rating, but rather the combination of their market positioning in an omnichannel retail world and their superior risk adjusted real estate. Most notable during the quarter was the completion of the Sherwin Williams sale leaseback transaction, The world's largest paint and coatings retailer, which carries an investment grade credit rating from all major rating agencies. This was a unique transaction created a differentiated capability from our traditional focus on granular sourcing activities. Since this transaction, we have seen increased opportunities to continue to partner with leading retailers such as Sherwin Williams. Pursuant to the sale leaseback transaction with Sherwin, we acquired 88 properties across 29 states for a purchase price of approximately $142,000,000 The properties are subject to long term triple net leases and had very fungible boxes averaging 5,800 square feet.
The portfolio has extremely strong demographics with an average 5 mile population of 180,000 people and an average 5 mile household income of 72,000 with daily traffic counts averaging almost 30,000 vehicles. Inclusive of the Sherwin William transaction, the properties acquired during the Q4 are leased to 28 secondtor leading retail tenants operating in 15 diverse sectors including home improvement, off price retail, auto parts, tired auto service, discount grocery and convenience stores. Notable other retailers acquired during the quarter include Home Depot, Ross Dress For Less, AutoZone, O'Reilly Auto Parts, Bridgestone Firestone and Sheetz Convenience Stores. The properties were acquired at a weighted average cap rate of 6 point 7 percent and had a weighted average remaining lease term of approximately 12.5 years. Excluding the Sherwin Williams sale leaseback transaction, The company's 4th quarter acquisitions were completed at a weighted average cap rate of 7.2% and had a weighted average remaining lease term of approximately 13 years.
Our top tenant roster continues to be a list of the strongest retailers in their respective sectors and what we continue to view as a dynamically changing omnichannelretailworld. During 2018, we added Sherwin Williams, O'Reilly Auto Parts, Best Buy and Burlington Coat Factory as top tenants. Simultaneously, we eliminated Smart and Final, Michaels, Academy Sports, Rite Aid, 24 Hour Fitness and and Petsmart for our top tenant list during the year. You will see us continue to evolve our portfolio as we proactively embrace today's changing Omnichannel Retail Environment. In addition to our roster of leading top tenants, our ground lease portfolio continues to expand, evidenced by the more than 100 basis point year over year increase to now over 9% of our annualized base rents.
During the quarter, we added 8 ground lease assets, most notably a Walmart Supercenter in Franklin, Ohio and a Home Depot in Forked River, New Jersey. Our ground lease portfolio derives 89% of rents from investment grade tenants and is comprised of leading retailers including Walmart, Home Depot, Lowe's, Wawa, Aldi, AutoZone, Chick Fil A, McDonald's and Starbucks. We continue to see a number of high quality opportunity to add assets to portfolio and look forward to updating you in the coming quarters. Subsequent to year end, we announced 2019 position guidance of $350,000,000 to $400,000,000 and disposition guidance of $25,000,000 to $75,000,000 I'm very pleased with both the volume as well as the composition of our current pipeline. It contains several unique opportunities that are anticipated to close in the upcoming months.
Moving on to our development and partner capital solutions platform, I am pleased to announce that we commenced 3 new developments in PCS projects during the 4th quarter with total anticipated costs of approximately $15,000,000 The project consists of our first development with Gerber Collision in Round Lake, Illinois. Our 3rd project was Sunbelt Rentals in Georgetown, Kentucky. During the quarter, we also commenced the redevelopment of the former Kmart space in Frankfort, Kentucky. We recently completed commenced demolition of the former Kmart building and are now very pleased to announce that Aldi, Big Lots and Harbor Freight Tools have executed new 10 year leases for the project. Our development team has been working diligently on this project for over a year.
And as you might recall, we recently added a Chick Fil A on a recently created out lot. During the Q4, we also made considerable progress in our 5 previously announced development and PCS projects, which represent committed capital of approximately $14,000,000 The projects include our 3rd and 4th developments with Vistar Car Wash in Orlando and Tavares, Florida. Our first two projects with Sunbelt Rentals in Batavia and Maumee, Ohio and the redevelopment of the former Kmart in Mount Pleasant, Michigan for Hobby Lobby. For the full year 2018, we had 16 development and PCX projects either completed or under construction that represent total spent or committed capital of approximately $74,000,000 8 of those projects were completed during this past year representing total investment volume of approximately $46,000,000 I'm pleased with our progress during the year as we continue to focus on providing full service real estate solutions to leading omnichannel retailers. The relationships we've built with these retailers have served to significantly expand our investment opportunities across all three of our external growth platforms.
During this past year, we also strengthened and diversified our portfolio through proactive asset management and disposition efforts. We were again active on the disposition front during the 4th quarter selling 4 assets for gross proceeds of approximately $6,000,000 For the full year, we disposed of 21 properties for approximately $68,000,000 in gross proceeds. Included in our 2018 disposition activity was the sale of 3 Walgreens assets, reducing our exposure to 5.4% at year end 2018, down from 7.7% at the end of 2017. Similarly, the company decreased its pharmacy exposure significantly during the year, reducing at approximately 380 basis points from 12.3% to 8.5%. We would anticipate further reduction in our pharmacy and specifically our Walgreens exposure from additional asset sales that are forthcoming.
Our asset management team has also been diligently focused on addressing our upcoming lease maturities. At year end, we had only 11 remaining lease maturities in 2019, representing just 1.6 percent of annualized base rents. During the Q4, we executed new leases, extensions or options on approximately 90,000 square feet of gross leasable area throughout the existing portfolio. This included our T. J.
Maxx in Logan, Utah, which extended their lease to 2029. And for the full year 2018, we executed new leases, extensions or options in approximately 331,000 square feet of gross leasable space. Other notable leases, extensions or options include Old Navy in Grand Chute, Wisconsin and Harbor Freight Tools in Cedar Park, Texas. As of December 31, our rapidly growing retail portfolio consisted of 6 45 properties across 46 states. Our tenants are comprised primarily of industry leading retailers operating in more than 28 distinct retail sectors.
And again with more than 51% of annualized base rents coming from investment grade tenants. Occupancy ticked up slightly during the Q4 at 99.8% and the portfolio had a weighted average remaining lease term of 10.2 years. Overall, our portfolio was in the strongest shape in the history of our company. I would like to take this opportunity to thank all of our loyal shareholders for their continued support during another fantastic year for our company. With that said, I want to be clear that we are focused on creating the highest quality retail portfolio in the country and our past success only sets the bar higher as we look forward to our bright future.
With that, I'll turn it over to Clay to discuss our financial results.
Thank you, Joey. Good morning, everyone. I'll begin by quickly running through the cautionary language. As a reminder, please note that during this call, we will make certain statements that may be considered forward looking under federal securities law. Our actual results may differ significantly from the matters discussed in any forward looking statements.
In addition, we discuss non GAAP financial measures, including funds from operations or FFO and adjusted funds from operations or AFFO. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release. As announced in yesterday's press release, total rental revenue including percentage rents for the 4th quarter was $36,400,000 an increase of 27.1 percent compared to the same period last year. For the full year 2018, total rental revenue increased 26 0.4 percent to $133,100,000 General and administrative expenses in the 4th quarter totaled of $3,200,000 or 7.8 percent of total revenue. For the full year 2018, general and administrative expenses totaled 12 point $2,000,000 or 8.2 percent of total revenues.
For 2019, we anticipate G and A expenses to contract roughly 50 basis points And be closer to 7.7 percent of total revenues. Income tax expense for the Q4 was $125,000 For the full year 2018, income tax expense was approximately $516,000 For 2019, we anticipate total income tax expense for the year to be in the range of $525,000 to $575,000 Funds from operations for the Q4 was $25,600,000 representing an increase of 20% over the Q4 of 2017. On a per share basis, FFO increased to $0.72 per share, a 1.2% year over year increase. Funds from operations for the full year was $93,400,000 representing an annual increase of 22.5%. On a per share basis, FFO increased $2.85 per share, a 4.9% annual increase.
Adjusted funds from operations for the Q4 was $25,400,000 a 21.2% increase over the comparable period of 2017. On a per share basis, AFFO was $0.71 an increase of 2.2% year over year. Adjusted funds from operations for the full year 2018 was $92,700,000 a 22.4% annual increase. On a per share basis, AFFO of $2.83 per share represented a 4.9% increase over 2017. On a quarterly and full year basis, FFO per share and AFFO per share were impacted by dilution required under GAAP related to the forward equity offerings we completed in March September of 2018.
Treasury stock is to be included within our diluted share count in the event that Prior to settlement, our stock trades above the deal price from the offerings. The aggregate dilutive impact related to these offerings was roughly a penny to both FFO and AFFO per share for the 3 months and $0.03 for the full year periods. In 2019, there will be no treasury related to the March forward offering given we settled the transaction in 2018. To the extent that prior to settlement, our stock continues to trade above the deal 5,000,000 shares from our September forward and view this as a meaningful equity backstop to fund our future growth. As a reminder, beginning in the Q1, we will modify our calculation of NAREIT FFO to exclude the add back of the amortization of above and below market lease intangibles and introduce core FFO, which will include the add back of this non cash item.
Core FFO will be consistent with our As Joey already mentioned, we had an active year on the capital markets front, raising a company record $750,000,000 to continue to fund our dynamic growth as well as position our company for 2019 and beyond. This capital raising is in addition to the almost $90,000,000 generated through our position activity and free cash flow after dividend. In May, we were very pleased to receive an investment grade credit rating of BAA2 with a stable outlook from Moody's investor service. The receipt of an investment grade credit rating not only demonstrates the strength of our balance sheet and our conservative and disciplined approach to capital markets decisions, but also the strength of our real estate portfolio. The BAA II credit rating improved the cost of borrowing on our revolving credit facility and unsecured term loans and will further enhance our long term access to capital.
As previously mentioned, we also completed 2 forward equity offerings during the year. In March, we completed a follow on public offering of 3,450,000 shares of common stock in connection with a forward sale agreement. We settled the entirety of the March forward equity offering in September and received net proceeds of roughly $160,000,000 In conjunction with the settlement Of our March forward offering, we completed another follow on public offering of 3,500,000 shares of common stock in connection with a forward sale agreement. Upon settlement this September, Ford is anticipated to raise net proceeds of approximately $190,000,000 after deducting the underwriting discount. To date, the company has not received any proceeds from the sale of shares of its common stock in connection with the September offering.
We retain the ability to settle the transaction in whole or in tranches at any time between now September 3, 2019. Most recently, during the Q4, we raised Gross proceeds of approximately $181,000,000 through our ATM issuance of 3,100,000 shares at an average price of $59.28 Including the September forward offering, total common Equity raised in 2018 totaled approximately $525,000,000 While we efficiently accessed the equity markets in 2018, We were also very active in the debt capital markets. In July, we exercised the accordion option on our unsecured revolving credit facility, securing increased commitments of $75,000,000 and increasing our total revolver capacity to $325,000,000 The increased capacity on our revolving credit facility reflects the continued growth of the company since our credit facility was last amended in December of 2016. In September, we completed a private placement of $125,000,000 of senior unsecured notes. The notes bear interest at a fixed rate of 4.32 percent and have a 12 year term maturing in September of 2030.
In December, we closed on a $100,000,000 unsecured term loan. The term loan has a 7 year term and matures in January of 2026. The term loan has an interest rate that is effectively fixed at 4.26% and is based on the company's credit rating. At December 31, we had just $19,000,000 outstanding on our unsecured revolving credit facility, reflecting additional capacity of $306,000,000 Our capital markets activities are emblematic of our disciplined approach to opportunistically accessing attractively priced capital and positioning our balance sheet for continued growth. As of December 31, our net debt to recurring EBITDA was approximately 4.7 times, well below our stated range.
Pro form a for the settlement of the September forward equity offering, our net debt to recurring EBITDA is approximately 3.3 times. Total debt to total enterprise value was approximately 24.4% and our fixed charge coverage ratio, which includes principal amortization remains at a very healthy level of 4 times. Our balance sheet is in the strongest position it has been in the company's history. Pro form a for the full settlement of the September forward, we have capacity to acquire up to $600,000,000 of acquisitions without raising additional equity and staying within our stated leverage range of 5 to 6 times net debt to recurring EBITDA. The company paid a dividend of $0.555 per share on January 4th to stockholders of record on December 21, 2018, representing a 6.7% year over year increase.
This was the company's 99th consecutive cash dividend since its IPO in 1994. For the full year 2018, the company declared dividends of $2.155 per share, a 6.4% year over year increase. Our quarterly payout ratios for the 4th quarter were a conservative 77% of FFO per share and for 78% of AFFO per share. For the full year 2018, our per share payout ratios were 76% of both FFO and AFFO. These payout ratios are at the low end of the company's targeted ranges and continue to reflect a well covered dividend.
With that, I'd like to turn the call back over to Joey.
Thank you, Clay. To conclude, I'm very pleased with our record performance during the year. We're in excellent position for 2019 and I look forward to seeing many of you in the upcoming weeks. At this time, operator, we will open it up for questions.
Thank you. We will now begin the question and answer The first question comes from Collin Mings with Raymond James. Please go ahead.
Good morning, Joey. Good morning, Clay.
Good morning, Kevin. How are you doing?
Good, good. First question for me, just going back to the prepared remarks on the Sherwin Williams deal. As you look at your current deal pipeline, do you have any other sizable sale leaseback portfolio opportunities you're actively pursuing? And And just along those lines, do you expect these type of larger transactions will be an increasing share of your deal flow?
Yes, I think Look, the Sherwin Williams deal was a unique transaction. There's nothing in our pipeline of that nature, of that size. As we mentioned in the prepared remarks, we've seen a significant flow of opportunities with our retail partners, smaller opportunities, But nothing of size of Sherwin Williams. That was really an atypical opportunity for us. But we continue to assess Both the typical granular sourcing activities as well as larger opportunities as well.
Okay. And then moving to
the JV and PCS business, just as you think about The opportunity set with Gerber Collision looks like they have over 400 locations already. Just moving forward, do you think that's going to be There's a runway there for more development opportunities. Just how are you thinking about that relationship?
Yes. We're very pleased to have commenced Our first project with Gerber in Round Lake. We're working on a number of opportunities with a number of retailers inclusive of Gerber. Gerber, of course, is owned by the Boyd Group of Canada, we think they're the premier auto collision operator in the United States, very conservative company, very conservative balance sheet. We'll continue to work with them on all types of opportunities through all three external growth platforms, partner capital solutions, acquisitions, And hopefully we're able to also layer in more development activity in the future.
Okay. I'll turn
it over. Thank you, Joey.
Thanks, Collyn.
The next question comes from Christy McElroy with Citi. Please go ahead.
Hi, good morning everyone. Joey, just going back to your comment about those several unique opportunities anticipated to close in coming months. Do you Do you have anything under contract today? And as we sort of think about that guidance range of $350,000,000 to $400,000,000 which is unchanged from 6 weeks ago, What does this kind of visibility mean for how front loaded you expect that level of volume could be?
Yes, good morning, Christy. It's a good question. Yes, I referenced some unique opportunities. I tell you we're working on everything, some are under contract, going through different diligence, have different I have different unique attributes of them. Everything from urban condos, that we're working on in core city center locations, The smaller sale leaseback transactions with our retail partners, to our typical granular sourcing activity, Inclusive of early extensions or what we call blend and extend.
And so the timing on a number of those transactions because of the complexities of them Can be a little bit more difficult to pin down than our typical 71 days from LOI execution to closing. But at the same time, And we're seeing more and more of those unique real estate opportunities to fit into our pipeline. In terms of timing between front end or back end Noted. It's hard to pin down. I'll tell you our pipeline is of a similar quality and a similar nature as we executed In Q4, albeit most likely not as big given the Sherwin Williams transaction.
But we think it's a robust pipeline in a In a fragmented market and we see tremendous opportunity.
Okay. And then just going back to Colin's question, I mean you don't do a lot of sale leaseback. So When you think about the potential for doing more just philosophically, how do you think about the balance of paying a lower cap rate for an investment grade tenant Versus sort of moving your tenant mix in the direction that you want. And just given where your stock trades today at that lower implied cap rate, Does that enable you to do more of these deals?
I think to your last point, sure, it It enables us, but I'll tell you our discipline from a 30,000 foot perspective and our perspective on an omni channel retail world and our bottoms up underwriting analysis are really the drivers of our asset level or portfolio level transactions. And so, we are very selective in terms of granular. I'd tell you we're more even more selective in terms of sale leaseback transactions. I wouldn't want anybody to think that we're the corporate we're the provider of finance For Corporate America, that's just not our business model. There are a handful of tenants where we have unique relationships, there are industry leaders such as Sherwin Williams, where we will look at sale leaseback transactions.
But if and when we do look at those transactions, I think it's fair to assume we're also looking at granularly sourcing one off Potentially developing for them or deploying our PCS capabilities simultaneously.
Thanks, Christy.
The next question comes from Ki Bin Kim with SunTrust. Please go ahead.
Thanks. Good morning, guys. Good morning, Gary. Good morning. Can you talk about the replacement cost versus the price you pay for some
Up to 9%. I mean, we're paying significantly below replacement costs because, of course, we're not actually purchasing a building. So the reversionary interest in the ground lease portfolio, again adding another Walmart Supercenter, another Home Depot opportunity there is pretty unique. And so I would tell you the same as for some of the junior boxes that we've acquired, most notably the TJ Maxx And the Rosses, and of course the Burlington's here, one of which we developed, of course. But I think that from a replacement cost perspective, we're able to find opportunities given our relationships with tenants and also the unique transactional structure in the ground lease portfolio, which It's fairly significantly below replacement cost.
And the one kind of deal that caught my eye was like a Big Lots construction deal. Is a retailer like that and a deal like that, is that something that you want to hold on to your balance Hold on in your balance sheet for a long period of time or is that more of a kind of shorter term opportunity?
Yes. So the big lots You're referencing is the redevelopment of the former Kmart in Capital Plaza or Frankfort, Kentucky. And so demolition is almost complete. The team was on-site yesterday. Demolition of the former Kmart box, the 80,000 foot box is almost complete.
We're building a 3 tenant all on net leases, 3 tenants, 3 juniors lined up ALDI, which we're very excited to add, Harbor Freight Tools as well as Big Lots. Big Lots is Great operator. The overall asset upon completion will be comprised of those three tenants, the recently created Chick Fil A Outlot, A freestanding Walgreens and a Family Dollar, which potentially will be converted to Dollar Tree. And so we're really pleased to be able to actually harvest the value. We were very pleased to get the Kmart box back.
They were paying $2 net, and there's some true incremental upside there. In terms of holding it long term, I think we'll get it complete, we'll get it open and operating. We anticipate rent commencing in 2020, and then we'll make a decision whether or not it's a core asset for us to hold in
portfolio.
Okay. And if I think about Agree over the past couple of years, your cost of capital is In a very enviable position, multiple great. The market is actually giving you a green light to invest in Smaller cities, non typical of like the core urban areas that we're used to, like Maumee, Ohio, Chickasha, Oklahoma. So I'm just curious, how do you balance, locational quality versus tenant quality and safety in a contract and things like that?
Everything, every asset better throughout the course of this year is to understand the different sub portfolios in context of the overall portfolio, which today spans over 6.50 assets. We talk a lot about our ground lease portfolio over 9%. We now have some additional ground lease assets we'll be adding, which are fairly, Frankly, very compelling. We have a number of, as I mentioned earlier with Christy, a number of urban condos, which are very interesting in our portfolio as well as our pipeline. We have a hard corner portfolio in dominant intersections.
We have junior boxes adjacent to Target and Costco's and dominant retailers positioned within their market. And we also have outlots to dominant power and grocery anchored centers. And so I think people are going to see, we're going to do a better job of it. It's one of our goals this year. The high quality nature of the portfolio and frankly the diversified nature of this portfolio because we believe it's the best retail portfolio, not Not only from a credit perspective, but from a real estate quality perspective in the country today.
All right. Thanks, guys. Thank you, Ki Bin.
The next question comes from Todd Stender with Wells Fargo. Please go ahead.
Thanks guys. I just want to hear more details on the 2 ground leases you acquired. You got a Walmart, a Home Depot. So can we hear cost and cap rate and lease term? Thanks.
Good morning, Tom. So specifically on the Walmart, that Walmart has approximately 10 years remaining, high performing store, really a high quality asset, great fantastic Underlying real estate, the Home Depot in Forkwood River, New Jersey, I believe has 17 years correct me if I'm wrong, 17 years, 19 years of remaining term. So that's a long term Home Depot ground lease in New Jersey. So they'll be there for While with that Home Depot ground lease, we also acquired an out lot, which was a Taco Bell ground lease in Forked River as well as in Aldi on And so again, we're looking at high quality real estate here with best in breed tenants, and we'll continue to look for those opportunities and we see them in
Is this stuff that's sub-five percent cap rate? Is this in that zip code?
No, no. Both of those transactions are in the mid-6s.
Okay. And just As a reminder, how do you capitalize these? You can pretty high LTV long term secured debt, but that's certainly not your traditional balance sheet method, more on the unsecured side. How do you guys look at that stuff?
I'll leave it to Clay, but you can expect us to continue to be an unsecured borrower using leveraging at that private placement market. Anything in hand Clay?
That's right. That's right. We'll continue to be an unsecured dollar.
Thanks. And Clay, just to stick with you, the debt to EBITDA, you still Sub-five times, you kind of mentioned if you include the September forward equity agreement, you're getting into the 3s. How does that factor in the timing decision to settle those shares? Can we expect a delay potentially just because you're so low levered right now?
Sure. So where we ended the year really allows us to be opportunistic from a balance sheet perspective. As you said, we ended at 4.7 times. The settlement of the forward is roughly a turn and a half. So the settlement The forward will really be dependent on the uses of capital, the timing of the uses of capital and we'll continue to be strategic in settling those shares.
But we'll always remain focused on maintaining our leverage within our stated range of 5 to 6 times and even conference? Operating below that range when opportunistic and when prudent to do so.
Okay. Thank you. And then just finally, just to stick with you, Clay. You received these pricing amendments on your term loans in the Q4. Was that triggered due to your better credit rating?
Or is that something you guys proactively seek out?
So we proactively sought that out. It was driven the pricing amendments were Enhanced by our credit rating, as well as the just the timing of having some additional term turned off of what was originally a 7 year loans, remodified to 5 year notes. So really Two factors there, but certainly the investment grade credit rating was a significant boost to us.
Okay. Thank you. Thanks, Todd.
Okay. The next question comes from John Massocca with Ladenburg Thalmann. Please go ahead.
Good morning.
Good morning, John.
So ABR from general merchandise tenants came up by about $830,000 In the quarter, what drove that? And then is there a possibility maybe for kind of a contrarian investment opportunity in that segment given You kind of heard things about cap rates expanding for more traditional retail tenants?
Well, the general merchandise, the driver there is the Walmart ground leases. So that is the driver in terms of general merchandise. Your second question in terms of contrarian, we just don't invest in opportunities. We just don't see that and I personally don't see that As a driver for our growth on a go forward basis. Now if we find something with real estate fundamentals that has a tenant that doesn't fit within proverbial sandbox, below market rents or an opportunity or we have a backfill candidate, we'll look at it.
But I tell you that We see tremendous opportunity based just in the fragmentation of the market that's in front of us and all of the opportunities that the team here is uncovering through the 3 external growth platform. So I think you're going to expect more of the same from us, consistency, stability, but we are real estate opportunists at our heart and we'll look at opportunities such as that.
Understood. And then as you kind of have continued to reduce your pharmacy exposure and seem to look to reduce your pharmacy exposure, And how has kind of cap rates drifted for that property type maybe over the course of last year and then as you kind of look out?
Yes, they really have not drifted. And so we've sold effectively long term Walgreens, medium term Walgreens. We really haven't seen Any draft. And just to give you an example, we have a couple of Walgreens right now that are under contract, still subject to basic Diligence requirements that are in the upper 5s and low 6 caps. So we haven't seen any cap rate drift.
We continue to look to prudently redeploy those proceeds and diversify the portfolio.
And then kind of a quick detailed question. Are there any additional portions of the Sherwin Williams transaction that you plan to close or close subsequent to quarter end? I know the original press So you contemplated over 100 assets and over $150,000,000 of investment?
Correct. We've closed 98. There are I would tell you there are 10 plus or minus that are still going through diligence, title survey, environmental or have some miscellaneous. The exact amount of the transaction in terms of purchase price and number of assets that we will end up closing in the first Still a little bit open in the year, I would anticipate plus or minus 10%.
Makes sense. That's it for me. Thank you very much.
Great. Thanks,
John. The next question comes from Tayo Okusanya with Jefferies. Please go ahead.
Hi, yes. Good morning. When I think about your acquisition outlook, I remember in the past we talked about You weren't seeing a lot of competition for deals, the non traded REITs were not actively participating. Would you Kind of say that's still the same environment you're in today or whether you're kind of facing more competition?
No, it's a great question and it holds true today. Blackstone, obviously, with their non traded vehicle has The fundraising efforts and proportionally has generated the majority, if not vast majority of fundraising. We don't see them Playing in the $4,000,000 to $5,000,000 space, which is our typical granular activity really in retail in their non traded vehicle. And so the competition, institutional competition that we face is fairly de minimis. Our typical competitors, Our private individuals, 1031 buyers, and we don't run into the same competitor regularly or even two times.
And so Again, the fragmentation of the market, our positioning, our cost of capital, our balance sheet, and most importantly, I'd tell you our relationships And the quality of the team here continues just to ramp our pipeline and uncover opportunities that we think are really unique.
Okay. That's helpful. So just a follow-up on that then. So kind of given that backdrop, again, you have an acquisition guidance of $350,000,000 to $400,000,000 You did over for $600,000,000 in 2018. Just kind of curious a little bit about how did you kind of come up with the guidance number that's about a third lower versus what you did in 2018?
Or is it just extra when Williams you're kind of doing similar number this year versus last year?
Yes, I think that look, I think that is the starting point at Sherwin Williams. That transaction effectively materialized in 30 days at the end of last year. And then we start every year clean. I mean, we have 60 to 70 days of visibility. We put a number out there to start the year that frankly we're fairly confident that we'll be able to achieve.
We don't want to set the bar too high or the bar too low. Again, We're opportunistic in a huge space in a fragmented market. And so I would tell you as the year progresses, we get more visibility. Right now, we have visibility where Q1 is based generally going to end up and we're working into Q2 and Q3. And I wouldn't preclude raising that as we progress through the year And get increased visibility, that acquisition target line.
Okay, fair enough.
Thank you, sir. Thank you, Tayo.
The next question is a follow-up from Ki Bin Kim with SunTrust. Please go ahead.
Thanks. So in 2018, you guys finished the year 4.9% higher AFFO per share. If I think about the parameters you gave for 2019 guidance In terms of acquisitions and dispositions and the run rate you're at already, it feels like it actually, I mean, it feels like you should reaccelerate earnings growth in 2019. And because a lot of the equity needs are prefunded already, is that Sound right to you? Or is there something that we should expect in 2019, maybe it's more forward equity or early funding that could hamper that growth rate from reaccelerating?
No, I think that's generally a fair proposition. And I would tell you that the 4 point 9 percent earnings growth that you quoted was post treasury impact from the treasury impact required by the forward equity offering. The opportunistic capital markets transactions, the March and the September forward and then the ATM activity put ourselves in a position to Continue to ramp and accelerate that growth in 2019. Our stated goal is to provide double digit Growing shareholder returns, that's comprised of 2 pieces in my mind, AFFO as well as a growing and well covered dividend. And so I think the premise Your question is true.
That being said, when there's opportunities for access long term capital at attractive pricing, we'll execute on those opportunities or at least assess them. And we on those opportunities or at least assess them. And we never want to be cut off thinking quarter to quarter over year over year. But the company, the investment Spreads that we have, the smaller base that we have, the high quality assets that we're looking at and acquiring through all three platforms Provide for meaningful and we think on a relative basis, significantly meaningful risk adjusted returns for our shareholders that are outstretched from our peers.
All right. Thanks, Joey. Thank you, Keith.
Okay. This concludes our question and answer session. I would like to turn the conference back over to Joey Agree for any closing remarks.
Well, I thank you everybody for your patience and for joining us today. We look forward to seeing hopefully many of you in the upcoming conference season. Thanks again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.