Good morning, and welcome to the Agree Realty First Quarter 2021 Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Simon Leopold, Chief Financial Officer.
Please go ahead, Simon.
Good morning, everyone, and thank you for joining us for Avery Realty's Q1 2021 Earnings Call. Before we begin, I'd like to thank Joey and the Board for the opportunity Join ADC and the outstanding team that they have assembled. I'm very excited to build upon the long track record of success here at Agree. I look forward to contributing to the company's next phase of growth while maximizing value for all stakeholders. Before turning the call over Joey to discuss our results for the quarter, let me first run through the cautionary language.
Please note that during this call, we 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 for a number of reasons, including uncertainty related to the scope, severity and duration of the COVID-nineteen pandemic, The actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures on us and on our tenants. Please see yesterday's earnings release and our SEC filings, including our latest Annual Report on Form 10 ks and subsequent reports For a discussion of various risks and uncertainties underlying our forward looking statements. In addition, we discuss non GAAP financial measures, including core funds from Operations or core FFO, adjusted funds from operations or AFFO and net debt to recurring EBITDA. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release, website and SEC filings.
I'll now turn the call over to Joey.
Thank you, Simon, and welcome aboard. Good morning, everybody. I'm pleased to report that ADC 3.0 is officially underway. Our focus on people, processes and systems combined with unique and unprecedented opportunity in the marketplace Has accelerated trajectory of our company in every respect. Our increase in guidance reflects the success we are seeing on the acquisition front, While externally these results speak to our present and future capabilities, what is less visible is the platform infrastructure that we have constructed that powers the ADC engine.
The launch of ARC, our proprietary technology platform is the culmination of a multiyear effort. What started as an idea and a static Spreadsheet has now materialized into a powerful and dynamic tool for our growing company. At the core of our decision making is real time data. Arc enables and informs everything from relationship management through its CRM tool, our asset level underwriting, portfolio construction fast modeling and planning capabilities as well as its asset management through its work order management system. These tools have enabled our team to execute quickly and decisively on opportunities, aggregate and access data, establish Key performance indicators measure our performance, streamline and provide clarity to team members and proactively manage our growing We are very excited to demonstrate Arc's capability in the very near future.
In addition to the technology that we have The leadership and Board additions match the opportunity we see in front of us. This is not a company that sits still, but we intend to continue to rise to the occasion and take advantage of our Moving now to our results. During the Q1, we invested approximately $391,000,000 90 high quality retail net lease properties across our 3 external growth platforms. 86 of these properties were originated through our acquisition platform, Presenting acquisition volume of almost $387,000,000 While achieving another very strong quarter of acquisition volume during these uncertain times, We maintained our disciplined focus on best in class opportunities with leading retail partners. This was clearly demonstrated by a record 32% 1st quarter acquisition volume being comprised of ground leases and more than 72% of 1st quarter volume being derived from investment grade retailers.
The 86 properties acquired during the Q1 leased to 46 tenants operating in 20 distinct sectors, including best in class operators in the off price, Consumer Electronics, Auto Parts, General Merchandise, Convenience Store, Grocery and Tire and Auto Service Sectors. The acquired properties had a weighted average cap rate of 6.3% and had a weighted average lease term of 12.9 years. We executed on several notable transactions during the quarter, including our first two Amazon Fresh grocery stores located in Westmont and Bloomingdale, Illinois. We're very pleased about the opportunity to add Amazon as a top 50 tenant within our portfolio and look forward to additional opportunities to grow our relationship with them. Additionally, we acquired a unique portfolio of 10 CVS stores, all of which recently signed brand new 20 year net leases At below market rents of just over $14 per square foot on a weighted average basis.
Even with this portfolio Our pharmacy exposure is still down nearly 110 basis points year over year, driven by portfolio growth and the opportunistic disposition of Walgreens assets. With this transaction, CVS has surpassed Walgreens as our largest pharmacy tenant, quite an accomplishment for a former Walgreens developer At one time had nearly 40% exposure to Walgreens. By year end, I anticipate our exposure to Walgreens to drop to atorbelow1.5 The pharmacies that we've added in recent years, including this portfolio and the long term CVS In Downtown Greenwich, Connecticut, reflect unique opportunities to acquire high performing CVS stores with duration and residual values that are difficult to find in the pharmacy space. As I've discussed in recent calls, we continue to favor CVS as the sector leader given their innovation and adaptation to consumer preferences And overall market dynamics in the pharmacy space. The acquisition of Aetna in 2018, the rollout of the MinuteClinics Now their HealthHUB concepts continue to demonstrate thoughtful leadership.
During the quarter, we also added our 1st REI store located on a major retail thorough Fair in East Hanover, New Jersey. With median household incomes of $150,000 and a daytime population of $165,000 within 5 mile radius. This store is positioned for long term success. Our focus on building the highest quality retail portfolio is further evidenced by record number of ground leases that we acquired during this past quarter. We added 31 ground leases to our portfolio for an aggregate purchase price of 127,000,000 Again, representing almost 32% of annualized base rents acquired during the quarter.
Our overall ground lease exposure now stands at a company record of 11.4 Notable ground lease acquisitions during the quarter include a CarMax in Pleasant Hill, California, 6 Wawa convenience stores, our 1st discount tire and the previously announced portfolio acquisition of 15 ground lease assets from Kite Realty Group. Inclusive of our Q1 acquisition activity, our ground lease portfolio now derives 89% of rents from investment grade tenants and is comprised of the Our deep relationships across the industry as well as our team's strong track record of execution Continues to deliver additional opportunities to add such properties to this expanding sub portfolio. Given our robust acquisition activity in the Q1 and enhanced visibility into our pipeline. We are increasing our full year 2021 acquisition guidance to a range of $1,100,000,000 to $1,300,000,000 representing a 33% increase at the midpoint as compared to our previous annual guidance. This increase reflects the fact that we're seeing very strong opportunities to grow our portfolio, while remaining disciplined and committed to our stringent investment criteria.
We continue to view retail real estate as dynamic and bifurcated 7%, representing a significant year over year increase of more than 7.50 basis points. On a 2 year stacked basis, our Great exposure has improved by almost 1500 basis points. Moving on to our Development and Partner Capital Solutions platforms, We continue to see compelling opportunities. We had 4 development and PCS projects either completed or under construction during the Q1 that represent total capital committed of more $14,000,000 One of these projects was completed during the quarter, our second development with Burlington in Texarkana, Texas. I'm pleased to announce we also commenced our first development with 711 during the quarter located in Saginaw, Michigan.
711 will be subject to a new 15 year lease upon completion and we anticipate delivery will take place in the Q1 of 2022. Construction continued during the Q1 on 2 development and PCS projects with anticipated total costs of more than $8,000,000 The projects consist of a grocery outlet in Port Angeles, Washington and a Gerber Collision in Buford, Georgia. Subsequent to quarter end, we commenced our first development with Floor and Decor in Naples, Florida, where they will be subject to a new 15 year lease. We anticipate total cost for this project to be approximately $20,000,000 with rent commencing by January of 2022. We remain focused on leveraging our 3 pronged external growth platform to expand our relationships with best in class And we look forward to updating you on progress in the quarters ahead.
Moving on to dispositions. We sold 3 properties for total gross of nearly $9,000,000 during the Q1. These dispositions were completed at a weighted average cap rate of 6.8% and included a short term Walgreens in Big Rapids, Michigan as well as another franchise restaurant. Subsequent to quarter end, we sold our Dave and Buster's in Austin, Texas for approximately 10 point $5,000,000 representing a cap rate of 7.4%. Notably, Dave and Buster's had less than 4 years remaining on the base term of their lease at the time of sale.
This disposition is reflective of our real estate underwriting and the ability to sell this asset in an IRR of more than 8% It's a testament to the quality of real estate in our portfolio. This sale reduced our Dave and Buster's exposure to just 2 remaining locations. During the quarter, we executed new leases, extensions or options on approximately 66,000 square feet of gross leasable area. As a result of our asset management team's efforts, at quarter end, our lease maturities for 2021 stood at just 0.4% of annualized base rents, representing a quarter over quarter decrease of approximately 50 basis points and a year over year decrease of approximately 170 basis points. Our 2022 lease maturities are in a very positive position as well with only 21 leases or 1.2% of ABR expiring during the course of the year.
No single lease maturity exceeds $600,000 annualized base rents and represents only 0.2% of ABR. As of March 31, our rapidly growing retail portfolio consisted of 1213 properties across 46 states, including 120 ground leases. The thoughtful and disciplined construction of our leading retail portfolio continues to be reflected in our rent collections data. Including April, we've now collected at least 99% of rent payments for 8 consecutive months. During the quarter, we collected more than 99% of rent payments for our portfolio, while entering into deferral agreements representing less than 1% of 1st quarter rents.
As a reminder, our collections data includes both base rent and recurring operating cost reimbursements. In addition, we include base rent and operating cost reimbursements charged to tenants and bankruptcy and have not made any COVID related adjustments to the denominator when making these calculations. We remain committed to providing complete and transparent data to our investors on our collections. I'm also pleased to report that our inaugural ESG report published in the Q1 and can be found in the Investors section of our website. I look forward to continue to engage with our stakeholders on the ESG front and excited Lastly, I'd like to take a moment to welcome Ambassador John Rakolta, Jr.
Back to our Board of Directors. John previously served on our Board from 2011 until his confirmation as United States Ambassador to the United Arab Emirates September of 2019. His leadership helped shape our company and his contributions will be invaluable as we enter the next phase of With that, I'll hand the call over to Simon, then we can open it up for any questions.
Thanks, Joey. Starting with earnings, core funds from operations for the Q1 was $0.84 a share, a 3% year over year increase. Adjusted funds from operations per share for the quarter was $0.83 an increase of 2.3% year over year. During the past four quarters, we have elected to COVID-nineteen rent deferrals as delinquent receivables and our FFO measures include this revenue. As a reminder, treasury stock is included within our diluted These offerings was negligible in the Q1.
Per FactSet current analyst estimates for full year AFFO per share range from 3 point $3.9 to $3.53 per share, implying year over year growth of 6% to 10%. Given current visibility into our investment pipeline and the broader operating environment, we view this level of growth as achievable G and A expense was 8.8 percent of total revenue or 8.3% excluding the non cash amortization of above and below market lease intangibles. While we continue to invest in People and Systems, our anticipation is that G and A as a percentage of total revenue will decrease approximately 100 basis points from 2020 To roughly 7% for 2021, excluding the impact of lease intangible amortization on total revenues. As a reminder, G and A expense for our acquisitions team fluctuates based on acquisition volume for the year and our current anticipation for G and A expense reflects acquisition volume within our new increased annual guidance range of $1,100,000,000 to $1,300,000,000 Due in part to a one time true up of almost $500,000 related to 2020 income taxes, total income tax expense for the Q1 was approximately 1,000,000 For 2021, we now anticipate total income tax expense to be approximately 2,500,000 Moving on to our capital markets activities for the quarter.
As mentioned on last quarter's call, in January, we completed a follow on public offering of Approximately 3,500,000 shares of common stock, including the underwriters option to purchase additional shares, which generated net proceeds of almost $222,000,000 We were also active on the ATM during the Q1, entering into forward sale agreements to sell more than 372,000 shares common stock at an average gross price of $68.93 for anticipated net proceeds of more than $25,000,000 On March 31, we settled 578,000 shares of our under our outstanding ATM forward offerings for net proceeds $37,000,000 At quarter end, we had approximately 2,900,000 shares outstanding under our ATM forward offerings, which in total are anticipated to raise net proceeds of approximately $190,000,000 upon settlement. Inclusive of the anticipated net proceeds from our outstanding forward offerings and availability under our credit facility, we have more than $450,000,000 in available As of March 31, our pro form a net debt to recurring EBITDA was approximately 4.2 times As our outstanding forward equity offerings continue to meaningfully reduce pro form a leverage. Excluding the impact of unsettled forward Our net debt to recurring EBITDA was approximately 4.9 times. Total debt to enterprise value at quarter end was approximately 4%, while fixed charge coverage, which includes principal amortization, increased to a company record 5 times.
During the Q1, we announced the transition to a monthly dividend and declared monthly cash dividends of $0.207 per share for January, February In March, the monthly dividend reflected an annualized dividend amount of $2.484 per share, Representing a 6.2% increase over the annualized dividend amount of $2.34 per share from the Q1 of last year. Our payout ratios for the Q1 were a conservative 74% of core FFO per share and 75% of AFFO per share, respectively. Subsequent to quarter end, we declared an increased monthly cash dividend of $0.217 per share. The monthly dividend reflects an annualized dividend amount of $2.64 per share or 8.5% increase over the annualized dividend amount of $2.40 per share from the Q2 of last year. With that, I'd like to turn the call back over to Joey.
Thank you, Simon. Operator, at this time, we'll open it up for questions.
We will now begin the question and answer session. Our first question comes from Ki Bin Kim with Truist. Please go ahead.
Thanks. Good morning. Joey, can you just talk about your leverage philosophy? I believe your last quoted target range is about 4 to 5 times Why is that the right range for you guys? Why not a little bit higher?
It will be great to see that Total AFFO growth translates to more AFFO per share growth. And when you take into account The high quality nature of your EBITDA, 70% investment grade and all that, I would think it could support A higher leverage range relatively speaking.
Yes. Good morning, Ki Bin. I think well, I think if you look Net lease generally in our portfolio, specifically in a private context, I think net lease of course, you're right, it does in a private Support significantly more leverage. What we found is running a conservative balance sheet with the liquidity And frankly, the balance sheet capacity to continue to expand our business, which is growing at a clip of, call it, 33% Per annum here, it is prudent. And so during the pandemic, we brought our stated leverage target down from 4 from 5 to 6 times to 4 to 5 times.
We've historically been operating in that range and really, really anyway inclusive of the forward equity offering. So today sitting at pro form a 4.2 times, We think we're in fantastic position to continue to execute on our pipeline near term and long term. But at the same time, look, these aren't hard and fast rules. Tools like the forward equity offering give us the ability, right, to move leverage between that 45 and even potentially to a north Five times. But I think as Simon mentioned in the prepared comments, we think we can achieve Upper single digit AFFO growth here even with a strong balance sheet, for that that's running between 4 times and 5 times.
So While the portfolio certainly could support higher leverage, we think it's prudent to maintain the dry powder to continue to execute on the business. Simon, do you
want to add anything?
Yes. The only thing I'd add
Ki Bin is that we it's really important that we continue to be able to raise capital In an efficient cost effective way and with the leverage where it is right now, we think we're clearly going to be very appealing to investors in the bond market And that's a really important part of our overall capital strategy. And we're able to achieve the kind of AFFO growth that Joey talked about that I talked about on the call At these leverage points, so it seems like the right place. So it's a comfortable balance between sort of all the stakeholders' interest in the company.
Our next question comes from Katie McConnell with Citi. Please go ahead.
Thanks and good morning everyone. Can you provide some insight into the volume of deals sourced versus closed during the quarter? And are you making any changes in your Underwriting criteria or assets that you're targeting based on the new technology are you saying with the ARC platform?
Good morning, Katie. The first part of your question broke up. Was that the specifics about what we acquired during the quarter?
Yes, just the volume that you sourced as opposed to closed.
So I tell you, we closed the vast Majority of assets that we source as long as obviously we clear diligence and receive estoppels and the like. And so In terms of sourcing, we will continue to bat upper single digits. That's our business here. We've got 6%, 7%, 8% of what we actually close on in terms of what comes into investing committee. And so the team is doing a tremendous job uncovering opportunities.
And so it's fair to say we will get 1,000,000,000 of dollars in any given quarter We're acquiring close to $400,000,000 The second to your second part of your question, what ARC enables is really real time That's 2 data and the transactional capabilities to match and then the dashboarding capabilities as I mentioned in the prepared remarks. So It's a fantastic tool for our team both on the origination side as well as throughout the entire real estate life cycle of an asset, but I would anticipate our acquisition activity in coming quarters to be similar in terms Composition will continue to focus on industry leading retailers in our sandbox. We'll continue to source opportunistically high quality ground lease assets And our focus will remain in invest in class omnichannel operators.
Okay. Thanks. And then now that you've sold the Dave and Buster's asset, what are your plans to further sell down entertainment exposure? And what does demand look like for this category of tenants today?
So the totality of our entertainment exposure is the 2 remaining Dave and Buster's assets and the one is in Downtown New Orleans in a mixed use complex, which is a very Very unique property for us. Adjacent to the Smoothie Center and the Mercedes Benz Dome, The former dome there in New Orleans and so the Superdome. So those the totality that's the totality of our exposure there. And so we were never overly inquisitive In the experientialentertainment sector to begin with. And so those are the 2 assets.
We're very comfortable with them. Obviously, if we get the right bid for them, we look at the opportunity to dispose of them. I think the Dave and Buster's in Austin is representative of The high quality nature of our real estate, that asset had 3.7 years of remaining term on it, and we were able to achieve a mid-seven cap rate. So I think that was An optimal outcome for us there and that was an inbound, which we've been talking about for a couple of quarters now. It wasn't even openly marketed.
Okay, great. Thank you.
Thanks, Katie.
Our next question comes from Nate Crossett with Berenberg. Please go ahead.
Hey, good morning, guys. Just curious to get your comments on what the outlook for pricing looks like As far out as you can see, I guess, is there any pressure there? Have you seen any change with Kind of rates backing up or what should we kind of be expecting?
Well, I think pricing in the Seeing in the high quality net lease space and from comments from some of our peers and just general market data, we see it in the lower tier in terms of quality in the net lease Space continues to be attractive and we continue to see aggressive cap rates marginally compressing. We continue Here specifically to source value given our relationships, our technology now and just the depth and breadth of our team. But In terms of cap rates on a go forward basis, if the 10 year stays in this range bound here in the 1.6% range, let's Call it plus or minus 20 basis points. I truly don't see any material movement in cap rates Any upward pressure in terms of GAAP rate.
Okay. That's helpful. And then record quarter Ground leases for you guys, is there anything to call out there that's driving the increased volume there? Was it Or is it just a function of the Kite Realty portfolio? And are there other portfolios like that that are out there that
You can get it. Well, Kite was certainly a component there. But as we talked about in the prepared remarks, we acquired a number of Wah Wahs. We acquired a CarMax In California, long term ground lease in Pleasanton, California to CarMax, who we continue to view and really in a superior position in the used car space Given the nature and breadth and depth of their different lines of businesses, and we continue to source unique opportunities like the Discount Tire on a one So the pipe portfolio certainly was a piece of it. We'll continue to look at such portfolios as they arise, But the vast majority of opportunities were truly on a one off basis there.
Okay. Thanks guys.
Thanks, Nate.
Our next question comes from Haendel St. Juste from Mizuho. Please go ahead.
Hey, good morning.
Good morning, Haendel.
Hey, Jerry, I guess we've seen a pickup Pierre, in M and A, Kimco, Weingarten and Real Estate Income and VEREIT, the latest. I guess I'm curious on what your view on the backdrop for M and A Today is here in the space and if there's any scenarios we could see ABC participating and then also more broadly curious what are your thoughts on the pricing from the Realty Income and BE REIT Merger.
Thanks. Well, it's certainly interesting to see public to public M and A in the overall retail space. So I think the shopping center space potentially was a long time coming and I'm not sure if we've seen the remainder all of it in totality given just The number of operators in the space and the different pressures on the space. I think, look, M and A is obviously It is unique. It is transaction specific.
We'll continue to look at any and all opportunities. And most importantly, I think the M and A we've seen In our space and as well as adjacencies provides us a continued opportunity to execute on what we do. We are Not a portfolio purchaser, generally speaking. We're not a sale leaseback purchaser, generally speaking. We're focused on a very tight sandbox here Of the best retailers in the country and we have 80 plus or minus transactions going through our pipeline at Any given time at a very granular nature average price point of $4,000,000 to $5,000,000 And so our competitive set continues to be private purchasers, 10/31 purchasers, levered purchasers on the asset leverage on the asset level.
And so it's a very unique opportunity for us to continue to accelerate and expand our With an M and A backdrop there and we'll continue to look at opportunities, I've always said what we will never do is to lead the quality of this portfolio. We are on a march to improve what we think is already the highest quality retail portfolio in the country, and we are going to continue to drive That Home. Now pandemic surge sales and the like and a lot of unique circumstances have made Retailers outside of our sandbox appear more attractive in the near term. But as I stated in the prepared remarks, we really view retail as a K here. There's going Continued dynamic transformation in retail, we're focused on the uplag of that K and the winners there.
Got it. Thank you for that. Anything other contractor LOI today? And then as part of that, so I'm thinking what your Overall view on exposure for the ground lease out of your business could grow to how you're thinking about that over time? Thanks.
Well, I continue the team continues to surprise me by the ability to source ground lease assets. They are And I say consistently that we think the best risk adjusted returns, but by a significant margin in retail real estate. The ground lease portfolio at 11.4% It's almost doubled in size in approximately, I'd say, 24 months. I anticipate it to take higher in Q2, just given The extent of the pipeline that we can see currently with similar opportunities that we executed on Q1. And so It is a unique aspect to our business.
The team and through their efforts surprised me about their capabilities to continue to uncover those Truly on a granular basis, where it goes from here will be a function of the team's efforts in pricing and what makes sense Qualitatively within the portfolio. So I wouldn't have predicted 11.4%. I wouldn't have predicted historically it would be north of there at 30, but we continue to find those opportunities.
On the contractor LOI side, anything you can share on that front?
Nothing specific. Our pipeline continues to be strong for Q2, hence the raise of the guidance we're beginning to source for Q3 Tunerds today, there are some unique transactions in there similar to Q1, obviously diverse geographically by sector and By sector and by tenant, but nothing overly notable or nothing that we're going to call out today.
That's got it. Thank you.
Thanks, Endel.
Our next question comes from Linda Tsai with Jefferies. Please go ahead.
Hi, good morning. Good morning. To reach the high end of consensus Good morning. The high end of consensus estimates, Simon, I think you said 10% year over year growth. Does this assume $1,300,000,000 in transaction volume?
And What kind of assumptions does this incorporate on the equity side?
Linda, the range was 6% to 10%. And what we said was that we expect it to be towards the higher end, not necessarily all the way to 10%. But it does incorporate The range of outcomes on acquisitions that we put out there, the 1.1 to 1.3, and look, you never know exactly where you're going to get. This is not a precise Science, we're out there buying things every day, but that's what we're trying to get to. It also does require An acceleration of the results quarter over quarter.
So we had, call it, dollars 0.83 of AFFO in this Q1. In order That higher end of the range, it does require an acceleration of results towards the back end, and that's really a function of our acquisition pipeline.
Thanks. And then Joey, in your prepared remarks, you highlighted the CVS in Greenwich and then REI in East Hanover. Are you seeing more compelling opportunities come to market in higher income areas? Or is this part of a focus to gain higher exposure to these markets?
Just for clarity, Linda, the CVS in Greenwich was acquired, I believe, in 2020 or late 2019. The CVS portfolio, the 10 pack was Acquired in the Q1. We continue to be geographically very dispersed. That is from Urban to rural to street retail to ground leases, really across that spectrum as long as we're in our sandbox. So We've seen accelerated opportunities in the Sunbelt, just given the nature of construction starts down there.
We've seen accelerated opportunities in the South. But really we're opportunistic in terms of going coast to coast and north to south across the country.
Thank you.
Thanks, Linda.
Our next question comes from Todd Stender with Wells Fargo. Please go ahead.
Thanks. And Joey, just to kind of hone in on the CVS transaction, how big a deal was that? What was the remaining lease Term before you blended and extended maybe just some context there. I think you've commented on the rent being below market. Maybe any more color please?
So that transaction, as I mentioned, was unique. These are CVS locations in their core markets in the Midwest, Short remaining lease terms, approximately 5 years on those stores, fully recasted to 20 year leases, 10 stores. It was approximately off the top of my head about $30,000,000 The unique aspect of the transaction was not only that CVS, as I mentioned The remarks extended for a full 20 years. But also if you look at per square foot rental rates and aggregate rental rates across the pharmacy They typically range from $25 to $35 per square foot. Part of my challenge with pharmacy acquisitions historically and hence the dispositions of the Walgreens in Our overall exposure reduction overall exposure was the replacement rents on those approximate 13000 to 14000 square foot buildings, Which typically ran from a third to half.
And so in context of this transaction, we have CVSs that are paying approximately just $14 per square foot, brand new recast, 20 year leases. CBS results by chance came out this morning again Beat the Street with impressive results. And so we're a fan of what CVS is doing both transformationally within their business, but also on the And so as I mentioned, Walgreens really went really post the acquisition by Boots Alliance And hence, then the attempted acquisition of Rite Aid to increasing store count, while CVS went into divergent health and wellness Aspect, they had the PBM historically, the Aetna purchase, the MinuteClinic rollout and now the HealthHUBs, which are extremely impressive, If anyone has had the opportunity to see them as they continue to roll out, it's really a vertically integrated health and wellness business. And so we are we like what they're doing from a corporate We're hesitant on the front end of pharmacy. We're hesitant on the residuals historically.
But given the nature of the low price points, the low per rental rates and the low per square foot purchase prices and the 20 year CVS leases, we thought this was an extremely attractive transaction.
All right. That's helpful. Thanks, Joey. And then I don't know if I missed this. What are the assets that are on top of the ground leases that you acquired from Kite?
Any color there?
So it was a mixed bag. And so everything from Chick Fil A to, I believe Bank of America to a couple of Panera Bread locations out lot to their existing shopping centers throughout their portfolio. It was an opportunity for us, portfolio level opportunity to increase the ground lease exposure there. And so it was a direct transaction that we thought It would be beneficial obviously to both parties.
And so all single tenant standalone, no shopping centers?
Correct. All single tenant standalone out lots, which is fairly unique for us.
All right. Thank you.
Thank you, Todd.
Our next question comes from Peter Herrmann with Baird. Please go ahead.
Hey, Joey. Thanks for fielding the questions today. Can you talk about the ability to potentially close deals faster now with the new platform? Thanks.
Yes. And just to I appreciate the question. I talked about ARCA a little bit. I'll just take the opportunity. So what I found a few years ago As the acceleration of the business really began to ramp, what was just being the nature of an aggregator was difficult to project forward critical key metrics.
And So Peter Koganow, our VP of Advanced and I started sketching out literally on a piece of paper an idea and a concept. That idea Quickly then morphed into a static spreadsheet, which required obviously significant manual input. That static spreadsheet then became powered by an IBM MTM-one database, the IBM TM-one database then got switched to a MySQL database to give us the real time and dynamic capability. And from there, we customized our CRM tool that we hooked in to Arc through the MySQL database. That initial Projection tool then became a dashboarding tool for us for our acquisition team, really guided in part by Greg Lemkoos, the CEO of Lineage, who's a fantastic director Our Board and who is a lean guru and whose team trained and facilitated ours just in operational and using visual key management tools.
So Every member of our acquisition asset management transaction team now has a dashboard that they can drill into all levels of data, cut, slice, dice it, Display it visually, export it to all types of really cool things. In the last few quarters, we have constructed even more Additional modules, really expanding it to really the entire company. And so now we have a full pipeline and database that ties into our underwriting. And so it's literally a map of country that can be drilled into, sorted and filtered by any criteria, a work order management system that spans the property level maintenance all the way to the full data aggregation here, Work orders by duration, type of work order, planning tools in terms of seeing the number of work orders and where they span across the country. Another transaction team is in beta and we'll go live very shortly here.
That enables the full team to see the real time status of all transactions in our pipeline From the first contact at the CRM level, at the customer management level to the current status of the diligence. So Arc is truly the connectivity between the team and the technology we've created to harness the opportunity in a very fragmented market. It's a key ingredient for us to continue to scale. Without ARC, our people and our culture, it wouldn't be possible to execute $1,100,000,000 to $1,300,000,000 of transactions with an average purchase price of $4,000,000 to $5,000,000 So Again, we have 50 to 100 transactions going through the pipeline at any given time. This system, this tool, the platform really gives us real on all real estate activities.
It gives us the capability through its dashboarding both team and individual to establish KPIs to measure and manage to them. So It's a powerful tool that will continue, to expedite and accelerate the business here both at the transaction level and obviously that rolls up those 300 plus or minus transactions rolls up to our results at the end of the day.
Got it. Appreciate that color. Thank you so much.
Thank you.
Our next question comes from John Massocca from Ladenburg Thalmann. Please go ahead.
Good morning.
Good morning, John. How's it going?
Could you maybe provide some color on the expected investment volume cadence This year, it's just kind of if you look at the 1Q21 acquisitions and you back those out of guidance, Essentially, calls are kind of around $300,000,000 of investments, which will be kind of a notable decline versus 1Q. I'm just trying to figure out if that's Based on your visibility into 2Q or just kind of conservatism around maybe 2H?
Well, I think given just the nature of our businesses as a granular purchaser, it's very difficult to predict or project. We truly have zero visibility into Q4, minimal visibility into Q3. We have very good visibility now into Q2. Again, I'd remind people, our average transaction is approximately 70 days from letter of intent execution to close, some longer, some shorter, just about The nature of the transaction. And so, it's difficult given obviously a fluid market, a fragmented space and just the of our business to project forward.
Now, we come out with the initial guidance of $800,000,000 to $1,000,000,000 in the 1st week of January, Given what we know at the time and our promise has always been when we know what we know, we will come out and adjust any expectations and provide that transparency to investors. So I would tell you it's a combination of the environment, it's a combination of our business And we just can't see the future. I wish we could. Arc does not allow us to see the future unfortunately, but that will be the next module, right Peter?
Amanda, just as I think about maybe I know you guys don't give quarter to quarter investment volume guidance. But If you think about the investment volume guys, if you think about the $1,100,000,000 to $1,300,000,000 is that significantly front end loaded based on what you see today?
Well, I would say, this is front end loaded. I mean, we just printed Q1 at 300 approximately $380,000,000 acquired. And so I think we can cut that up for the remaining three quarters. I don't anticipate Q2 to be very Different in terms of assets that we're acquiring, volume maybe down or at that level. So we'll see Where things close.
Again, we can't predict whether something is going to close on July 27, 28 or July 2. It won't close on July 4 because Close. But our business, the last outstanding issue generally to close an asset in our business is relying upon the tenant to provide estoppels. And so things can cross quarters. We have ideas what we'll close this quarter and then everything can get jumbled around.
ARP gives us the visibility to move things around in those corners as we have those 3rd party respondents, Diligence, outstanding estoppels, and such like that. And so that provides a level of transparency, visibility for us. But Closing and the timing of transactions really isn't relying necessarily upon just our operations or execution here.
Okay, understood. And then, how did the cap rate on ground lease assets acquired in the quarter compared to kind of non ground lease investments? And I guess if you saw ground leases as a percentage of investments maybe normalized versus historical levels, how much higher Assuming ground leases were lower cap rate, how much higher could the overall kind of blended cap rate trend?
So the ground lease assets interestingly enough due to the duration of relationships, the duration of their base term remaining We're buying short term, long term ground leases. We obviously did the Kite transaction. They generally speaking fall within the range Of our general acquisition volume. Now long term ground leases in California can be at the lower end of the acquisition, obviously spectrum for us in terms Of cap rates, and so but they generally fall within that range. I don't have a percentage for you off the top of my head, but just given the nature and the Disparity between some of these assets, it generally is falling within, call it, that 5% to 7% range for us.
And then we end up generally in the mid-6s. There's a second part of that question, sorry.
No, I think it's kind of irrelevant because they are in the same range. So, makes sense. And then one last kind of bigger picture one. There have been some rumblings about kind of increased capital competition in the net lease Based from leverage non public buyers, Lifeco's, etcetera. Are you seeing these competitors in the sandboxes in which you tend to play?
No, I think the ABS backed buyers, the CTL backed buyers, the heavy lever buyers are looking at larger price point transactions, some of the larger sale We're seeing very aggressive cap rates where we haven't participated. I think it just again, the $4,000,000 to $5,000,000 average Doesn't play itself very well to private equity sponsors or ABS or CTL backed purchasers there. So our Competition continues to be Jane Doe, and it's a unique competitive set. Given our balance sheet, our team, our capabilities and our technology The cost of capital, it's frankly, it's a mismatch. Okay.
That's it for me. Thank you very much for taking my questions.
Great. Thank you, John.
This concludes our question and answer session. I would like to turn the conference back over to Joey Agree for any closing remarks.
Thank you, operator, and thank you everybody for joining us today, and we look forward to catching up with everybody in June at Virtual NAREIT. We'll talk to you soon. Thanks.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.