Good morning, ladies and gentlemen, and welcome to the Essential Properties Realty Trust First Quarter 2022 Earnings Conference Call. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. This conference is being recorded and a replay of the call will be available two hours after the completion of the call for the next two weeks. Dial-in details for the replay can be found in today's press release. Additionally, there will be an audio webcast available on Essential Properties website at www.essentialproperties.com. An archive of which will be available for 90 days. It is now my pleasure to turn the call over to Daniel Donlan, Senior Vice President and Head of Capital Markets at Essential Properties. Thank you, Dan. You may begin.
Thank you, operator, and good morning, everyone. We appreciate you joining us today for Essential Properties First Quarter 2022 Conference Call. Here with me today to discuss our operating results are Pete Mavoides, our President and CEO, Gregg Seibert, our COO, and Mark Patten, our CFO. During this call, we'll make certain statements that may be considered forward-looking statements under U.S. federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements. We may not release revisions to those forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's files with the SEC and in yesterday's earnings press release. With that, Pete, please go ahead.
Thank you, Dan, and thank you to everyone who is joining us today for your interest in Essential Properties. The first quarter was another strong quarter for the company as our portfolio experienced solid same-store rent growth, quarterly investment activity above our trailing eight-quarter average, and leverage moved down sequentially. In terms of the portfolio, with no vacant properties at quarter end and same-store rents growing 2% year-over-year, our granular portfolio of single-tenant net lease properties remains stable and our tenants are performing well. In terms of investments, during the quarter, we invested $238 million into 105 properties at a weighted average cash yield of 7%. More specifically, 100% of these investments were directly originated on our standard form with 83% containing master lease provisions and 83% being sourced from prior relationships.
These positive investment stats, in addition to the stability of our historical cap rates, are a testament to the strength of our relationships and the benefits that accrue to a long tenured market participant and a reliable capital provider. This has become ever more apparent in the current environment as new market entrants have struggled to execute given the volatility in the debt markets. With that in mind, while we had expected our investment pace to moderate this year, this has not come to pass for a number of reasons. One, there is a growing sense among owner-operators that now is a good time to monetize their real estate given the lagging effect that interest rates have on historical cap rates. Two, sale-leaseback financing has become increasingly more attractive relative to alternative financing options. Three, competition for new investments has moderated in the recent months.
In terms of the capital markets, similar to prior quarters, we remained active on the equity front with $158 million of net ATM issuance in the quarter, which helped to lower our leverage to 4.6x . Coupled with our $200 million increase in our amended $600 million unsecured credit facility, we have ample liquidity and balance sheet flexibility to continue to execute on our investment pipeline. We ended the quarter with 1,545 properties that were 100% leased to 323 tenants operating in 16 industries. Our weighted average lease term stood at 13.9 years, with only 4.9% of our ABR expiring over the next five years. Our weighted average unit level coverage ratio was 3.8x , which improved versus last quarter's coverage of 3.7x .
While our traditional credit statistics, which focuses on implied credit ratings and unit level coverage, experienced sequential improvements this quarter, these statistics are still negatively skewed by one, our trailing 12-month reporting convention, which lags our own reporting by one or two quarters. Two, the fact that certain industries like theaters, early childhood education, and health and fitness face state-level shutdowns and capacity restrictions well into the spring of 2021 in certain areas of the country. With that in mind, we continue to expect these statistics to experience solid sequential improvements in the coming quarter. With that, I'd like to turn the call over to Gregg Seibert, our COO, who will take you through the portfolio and investment activity in greater detail. Gregg?
Thanks, Pete. During the first quarter, we invested $238 million through 23 separate transactions at a weighted average cash yield of 7%. These investments were made in 12 different industries, with 70% of our activity coming from quick service restaurants, car wash, auto service, entertainment, and equipment rental and sales.
The weighted average lease term of our investments this quarter was 15 years. The weighted average annual rent escalation was 1.4%. The weighted average unit level coverage was 3.3x , and the average investment per property was $2.2 million. Consistent with our investment strategy, 100% of our quarterly investments were originated through direct sale-leasebacks, which are subject to our lease form with ongoing financial reporting requirements, and 83% contain master lease provisions. From an industry perspective, early childhood education is our largest industry at 14.1% of ABR, followed by quick service at 12.9%, car washes at 11.5%, and medical dental at 11.4%.
We continue to view these four business sectors as tier one industries for Essential Properties, and therefore they are likely to remain our highest concentration industries for the foreseeable future. From a tenant concentration perspective, no tenant represented more than 3.3% of our ABR at quarter end, and our top 10 tenants account for just 19.2% of ABR, which was down 50 basis points versus last quarter. Increased tenant diversity is an important risk mitigation tool and differentiator for us, and it is a direct benefit of our focus on middle market operators, which offers an expansive opportunity set. In terms of dispositions, we sold six properties this quarter for $18.4 million in net proceeds. When excluding transaction costs and properties sold subject to tenant buyback options, we achieved a 7.1% weighted average cash yield on those dispositions.
As we have mentioned in the past, owning liquid properties is an important aspect of our investment discipline as it allows us to proactively manage industries, tenants, and unit level risk within the portfolio. With that, I'd like to turn the call over to Mark Patten, our CFO, who will take you through the financials and balance sheet for the first quarter.
Thanks, Gregg, and good morning everyone. As Pete noted, the first quarter was another strong quarter for us. The notable elements of our reported operating results for the first quarter of 2022 are as follows. Total revenue was up $21.6 million or 44.4% versus the same period in 2021, totaling $70.1 million for the quarter, which reflects the benefits of our 2021 investment activity and nearly 85% of our $238 million of Q1 2022 investments closing before March. In addition, I'll note that we brought two additional tenants back to accrual status. While not a material impact to revenues, it did result in our having no remaining tenants on non-accrual or cash basis accounting.
Total G&A was just under $8.1 million in Q1 2022 versus $6.4 million for the same period in 2021, which really was a result of higher non-cash stock compensation expense, which for the first time included the vesting of the subjective portion of performance shares awarded in 2019. Our cash G&A did move up sequentially from Q4 2021, but importantly, our cash basis G&A continues to scale favorably as a percentage of total revenue, coming in at just 7.5% for the first quarter of 2022 versus 10% for Q1 2021. Net income was $26.8 million in the quarter. Our FFO totaled $49.4 million for the quarter or $0.39 per fully diluted share. That's a 30% increase over the same period in 2021.
Our nominal AFFO totaled $48.9 million for the quarter, up $16.5 million over the same period in 2021, which on a fully diluted per share basis was $0.38, an increase of 27% versus Q1 2021. Turning to our balance sheet, I'll highlight the following. With another great quarter of investments by our team, our income producing gross assets reached $3.6 billion at quarter end. From an equity perspective, I'll reiterate that we're active on our ATM program, generating approximately $158 million of net proceeds during the first quarter, which effectively utilized the remaining capacity on our $350 million program. As a result, our board approved a new $500 million ATM program, which we will launch shortly.
As Pete also noted, our balance sheet remains strong with net debt to annualized adjusted EBITDA at 4.6x at quarter end and total liquidity of $467 million. As a result, our balance sheet and liquidity position continue to provide a strong foundation from which to support our investment pipeline and future growth aspirations. Lastly, I'll also reiterate Pete's important note that our current investment pipeline outlook for the core portfolio and strong performance this quarter provided us with the basis to increase our 2022 AFFO per share guidance range to $1.50-$1.53, which implies a 13% year-over-year growth at the midpoint. With that, I'll turn the call back over to Pete.
Thanks, Mark. Before I open the call to questions, Gregg Seibert, the company's COO, and my longtime business partner and close friend, has notified the company that after 25 years of net lease investing, he plans to retire and therefore will not renew his employment contract that expires near the end of June of this year.
Gregg has agreed to consult for the company at least through the end of the year to help us manage through this transition. Gregg has been instrumental in crafting our investment strategy, mentoring our credit, closing, underwriting, and asset management teams, and helping to develop strong relationships between industry participants and our team. Gregg will be sorely missed around the office, but we have incredibly strong bench of professionals that he helped to develop and that are ready to assume his many roles. With that, operator, let's please open the call for questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Greg McGinniss with Scotiabank. Please proceed with your question.
Hey, good morning. Pete, cost of capital changed fairly dramatically over the last six months, but Q1 acquisition cap rates were in line with the historical average. Is there any expectation for expansion there? Have you started seeing any at this point? How do you expect cap rates to kind of trend through the balance of this year?
Sure. And as I always say, our cap rates are really driven by our perception of the appropriate risk-adjusted return for the individual investments that we make and not really driven by our underlying cost of capital. You know, we were able to hold our cap rates relatively steady, you know, as our cost of capital and rates moved down. You know, I don't expect us to materially change the risk parameters of our underlying investments. We're unlikely to see cap rates move materially up. I would also note that cap rates are generally sticky and trail movements in interest rates. All that said, we are seeing a bit less competition and having a little bit more pricing power on the deals we are doing.
I wouldn't anticipate a material move in our cap rates.
Okay, thanks. I guess kind of along those same lines regarding cost of capital, do you anticipate needing to raise debt this year, and what rate feels achievable?
Yeah, I think. Mark, why don't you tackle it?
I think, you know, look, Greg, we've consistently, you know, held a major component of our business thesis is to match fund our leverage to our long-dated leases. Since we got our investment grade rating last year and access to public markets for the first time, our mindset was kind of that that was gonna be a good way to term out the revolver balance. Public unsecured debt markets right now seem a little dislocated. Although I would say if we were to access that market, it might be in the high 4s, low 5s, possibly. Given that dynamic, we'll continue to evaluate all our leverage options, including using the $70 million accordion we've got on the 2027 term loan and maybe looking at the term loan market generally.
Is there any within guidance, is there any expectation for kind of an unsecured debt raise, or should we just assume it's more the term loan and revolver use?
Yeah, I mean, you know, I guess what I'd say is, the way we think about our investment activity is that, if you are gonna term out the revolver would be something we could use given the rate on it. Our expectations have been, and we've consistently kind of communicated, that we would execute a leverage issuance sometime, you know, maybe the back half of the year.
Okay, great. Thanks so much, Mark.
Thanks, Greg.
Thank you. Our next question comes from the line of Nicholas Joseph with Citi. Please proceed with your question.
Hey, it's actually Michael Bilerman here with Nick. It's good seeing you guys down in Florida a couple months ago. Pete, I was wondering if you can sort of outline a little bit the change in guidance, you know, which went up $0.03 at the midpoint. You know, I assume, as you outlined in your release, the investment activity is a big driver of that. I wonder if you can unpack a little bit how much of it's due to volume, where you talked a little bit about how the pipeline is robust and you thought it would moderate, but it hasn't. How much of it is timing? I think Gregg talked about 85% of the deals closing by the beginning of March. Then how much of it is rate?
Because you talked a little bit about sort of pricing power, even though cost of capital, and rates have moved up. Each of those seems like it's higher than where it probably was in your guidance, but not knowing what was in your guidance for the three items, I don't know how those three items have changed, relative to your new guidance. I don't wanna jump to any conclusions. Maybe can you outline those three for us, please?
Yeah. I would say the biggest change in guidance is gonna be, you know, past events. I would say, you know, clearly the first quarter was strong for us. Also between when we initially issued guidance, you know, we closed the books and finalized the fourth quarter. You know, as we look at full year guidance and, you know, we look at our first quarter, clearly, you know, we're off to a strong start of the year. You know, in the back half of the year, you know, I would say our volume expectations have not changed. As I said earlier in the call, you know, our cap rate expectations have not changed materially.
That, you know, I think also embedded in guidance or capital market assumptions, and clearly, you know, those have changed as, you know, the markets have changed materially, both on the debt and the equity side as we, you know, think about the back half of this year. You know, there's a lot of puts and takes in the business model, and it's hard to unpack in all of them. You know, clearly, you know, having one quarter of the year done and, you know, pretty good visibility into, you know, a second quarter gives us the confidence to move guidance up.
Yeah. I guess I was looking for a little bit more specific details because, you know, obviously you had earnings in mid-February. You know, at that point it sounded like most of the deals in the quarter were already underway, with most of them closing by the end of that month. I wouldn't imagine that the, you know, your average quarter was $200 million, right? I would assume that from a modeling perspective, you would assume mid-quarter convention, which would be, you know, mid-Feb, that doing $238 million of deals wouldn't cause a $0.03 positive impact, especially given the things you just talked about, which are negatives, right? Debt rates are up, equity cost is higher, so all of that is dilutive to your future in that back half relative to the acquisition volume.
I would surmise that your volumes and your guidance are up or the timing of it is earlier because the first quarter wouldn't drive that much given your previous comments that we should look at your eight-quarter running average, which is $200 million, and use mid-quarter convention as a modeling.
Yeah. You know, listen, I would say we've never really given mid-quarter convention as a guidepost and quite frankly, we have a more conservative internal modeling convention here, and we beat that materially. You know, you're also ignoring the base capital assumptions that we had embedded in that initial guidance as well. As I said, Michael, there's a lot of puts and takes and you know, as we look at the back half of the year, our expectations are pretty consistent with what we expected, you know, in the first quarter.
Even though your pipeline is more robust and things are I mean, it just sounds like the transaction activity and, you know, our back and forth, you know, when you say, "Oh, you're more conservative, but we beat that regularly." You know, to me, putting out the actual guidance is what you're expecting. Hey, we're, you know, like, why not put that out, you know, rather than us going back and forth and trying to hone in on what the changes of your guidance?
Yeah. You know, I mean.
I mean, what's the hesitation?
You know, as I said, we made this painfully clear on the last call. We rarely have visibility beyond 90 to 180 days on our pipeline. The commentary we give on a quarterly basis is what we're seeing out in front of us. You know, you're asking for guidance that goes out for a full year and really ignores the kind of independent quarters. You know, we think we have a convention that allows investors to have good visibility in what to expect, and it matches the visibility that we have without going out beyond that. You know, as I said on the call, we got a good pipeline.
Right.
It looks good relative to what we're seeing. I don't know what's gonna happen in the fourth quarter.
Yeah. No, nor do I, but I just wanna know what's in your assumptions, right? So it sounds like the assumptions are beginning of, you know, end of quarter close for your volumes rather than mid-quarter close. I'm just trying to understand what's embedded so that when you change your guidance, I know what to benchmark it to, you know? If you don't tell us what was in there when you say you've updated it, we have to know what changed. Obviously there's a lot of levers that you can pull to change. Anyways, I'll yield the floor. Thank you.
Yeah. There are. You know, you're asking for one data point, and there's a lot of puts and takes in the business plan. Thank you. Appreciate your input.
Thank you. Our next question comes from the line of Sheila McGrath with Evercore. Please proceed with your question.
Oh, good morning. You have two new tenants in the top ten, Festival Foods and The Track Family Fun Parks. Just wondered if you could tell us a little bit about those tenants. My second question is, how much of your potentially increasing opportunity set is from existing customers versus new tenant opportunities?
Great. Thanks, Sheila. You know, I would say both of those tenants have been tenants we've been dealing with for quite some time now, and they were in our portfolio and moved into our top ten through follow-on acquisition activities, repeat business. You know, kind of going to your second question. The Track is a well-capitalized consolidator in the family entertainment centers space with about 13 locations. You know, as they roll up, we're able to help finance their consolidation through sale-leasebacks and have been able to continue to invest with them. Festival Foods is a 39-unit grocery chain that operates predominantly in the state of Wisconsin. It's a third generation family-owned ESOP-owned company that's been in business for about 75 years.
Great operator, strong credit, and I'm sure anyone up in the Wisconsin markets knows them well and thinks highly of them. In terms of existing versus new, you know, I think the 80/20, 85/15 mix continues to kind of represent our portfolio. We continue to invest with existing relationships and we continue to work hard to source new relationships that will bring you know deals down the road. I wouldn't expect a material change in that blend, Sheila.
One more question. You mentioned that the last two tenants that were on cash accounting went to accrual. Maybe you could comment on the health of your tenants. Are most back to pre-pandemic levels, and maybe who are the laggards? Looking back at the crisis, maybe you could comment on how your portfolio held up.
Yeah. Those last two tenants were. Those two tenants were the last two kind of cash accounting tenants as a result of the COVID pandemic. In general, you know, I always start that question by saying the portfolio is 100% occupied and our collections are 100%. You know, the deferrals are, you know, pretty far in our rearview mirror at this point.
As you see in our coverage reporting, you know, there are some guys that are still kind of on a trailing twelve-month basis recovering, and as we said on the call, that's, as Gregg said, you know, in the fitness, early childhood education, and movie theater space, where they kind of had a little bit of a lagging effect from COVID. Overall, the health of the portfolio continues to improve. It's in a great spot and I think, you know, we were very proud about how our operators came out of COVID. You know, the modest rent deferrals that we granted as accommodations to help them through were well-received and have been largely paid back.
You know, I think our portfolio performance, you know, is really something to be proud of and really a testament to great underwriting, but more importantly, just great operators who were able to, you know, navigate through that, you know, that period.
Thanks. Congrats, Gregg, on your retirement.
Thank you.
Thanks, Sheila.
Thank you. Our next question comes from the line of Nate Crossett with Berenberg. Please proceed with your question.
Hey, good morning. Yeah, congrats on the retirement. Maybe just a question on the dispo side or the sales side. You know, if there's less, you know, levered players in the market, less bidders for things, does that maybe make you more reluctant to do sales? If cap rates are going up, does that make you more reluctant? How should we be thinking about that side of the equation?
Yeah, I think you know, sales, there's a couple buckets to our sales, Nate. You know, the opportunistic sales where you know, we see a bidder that offers a price that you know, we think is very compelling and not reflective of the underlying risks of that particular investment. Then there's you know, de-risking sales where we're looking to get out of a potential problem down the road. You know, I think as the market cools, you'll see us do less opportunistic and continue to focus on the de-risking sales, and really just getting at assets that we think present you know, a potential long-term issue for the portfolio, and managing exposure.
All that said, you know, I wouldn't expect our disposition activity to deviate materially from what we've done in the past. Kind of that $15 million-$20 million quarterly average would be, you know, a good barometer there.
Yeah, that's helpful. I think last quarter, there was some discussion about loan payoffs, and I'm just curious, is there any update there? If rates have gone up, does that make people less likely to kind of repay?
Yeah. You know, I think our loans, you know. Our loan book is very small. You know, there will be periodic repayments from that loan book. You know, clearly the fourth quarter was kind of an outlier in that regard with bigger loans coming in. You know, I do think, you know, the capital markets with rates higher, and the availability of alternative financing being more expensive would create a little more stickiness in our loan book.
Okay. That's helpful. I'll leave it there. Thank you.
Thank you, Nate.
Thank you. Our next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Hi. Good morning. I had a couple of model ones. First, it looked like operating expenses were particularly low in the quarter. I was wondering if you could go through what drove that and to what extent we should expect your NOI margin to remain in the mid-97% range by 2019 to 2021 versus, I think it was above 98% this quarter.
Caitlin.
Yeah, that's really.
I'm sorry. Go ahead, Pete.
I was just gonna say, you know, that's really, you know, when you take those tenants off of cash and put them on accrual, you stop accruing for their property costs. Then, you know, we also had 100% occupancy, so we had no vacancies during the quarter. Go ahead, Mark.
That's what I was gonna say. Those two factors were pretty significant.
Okay. It sounds like that could be sustainable. That fair?
That's fair.
I think that's fair.
Okay. You mentioned briefly in the prepared remarks, but G&A was up meaningfully in the quarter on an absolute basis. Could you go through whether there was something in particular that drove that, or is that just the reality of a growing business maybe plus some inflation?
I mean, look, I guess the one thing I'd say is, we had in the first quarter, we pulled forward a little bit more of the 401K match and the Social Security taxes that would've been a little bit more leveled out in the second quarter, given the size of or the difference between really probably incentive comp quarter over, you know, year-over-year. So it was really, I'll almost call it seasonality, if you will.
Okay. Got it. Then maybe bigger picture, the company's obviously grown significantly in the past two years. I was wondering if you could comment on the strategy of granular relationships based acquisitions, and how long you think that could work for, like, if you end up targeting $1 billion-$1.5 billion of acquisitions in the future, do you think anything has to change with how you guys run your business, or could you just do more of what you're doing today?
Yeah. I think it's more the latter. I think, you know, the way we invest and you know is really driven by where we see you know in our view the best risk-adjusted returns in the net lease market by investing in very granular transactions with growing middle market operators through direct sale-leasebacks. We feel we're able to compete as a capital provider and provide value to those tenants and get outsized risk-adjusted returns. You know, that middle market for us is very expansive and you know a very important part of what we do is continuing to grow our relationships and expand our network to provide you know ever increasing investment you know opportunities to grow with.
You know, we've grown our quarterly investment activity from $125 million a quarter to, you know, close to $200 million a quarter, you know, since coming public back in 2018, and there's nothing that would indicate we can't do that, you know, going to, you know, whatever your scenario is, $300 million or $400 million. You know, specifically in the fourth quarter last year, we did $340+ million. You know, we need to continue to grow our team. We need to continue to grow our relationships and make investments in both, and that's what we're doing.
Okay, thanks.
Thank you.
Thank you. Our next question comes from the line of John Kilichowski with Wells Fargo Securities. Please proceed with your question.
Good morning. To start off, congratulations on your retirement, Gregg.
Thank you very much.
Then, if my back of the envelope math is kind of correct, it seems like you've done about $50 million of acquisitions to date since the start of March. I guess maybe what kind of caused, if you will, this kind of air pocket in acquisition activity, given you seem very positive on the pipeline, for the remainder of the year and even, you know, maybe in the somewhat near term?
Yeah, I mean, listen, it's, we don't control the timing of our deals and, you know, when you're supporting the sale-leaseback transaction, it's really operator driven, and there's just natural ebbs and flows. There's natural, you know, pressure around the quarter ends where people tend to bunch deals and, you know, it just, it's just you don't control it. Then, you know, when your average deal is $6 million and, you know, or $8 million or $9 million, and then, you know, you have a big deal of $40 million-$50 million, it can be chunky. So, don't read too much into that. It's just the nuances of the business that we don't control.
Okay. That makes sense. You know, does the change in the competitive environment you alluded to in the prepared remarks change the dynamics of the acquisitions you're targeting at all? I guess specifically, could you see more attractive opportunities with sale-leaseback transactions that are not on your lease form?
Well, I mean, listen, you know, a sale-leaseback is by definition, you're writing the lease at the close and you know, we're generally gonna start with our lease form. I think that remains, you know, our preference. I think the bigger point is, you know, in the context of the sale-leaseback, you're acting as a capital provider and competing against other providers and based upon your reliability and certainty of execution. You're not competing against a broad audience of investors purely on cap rate and price and proceeds. We prefer to compete on the strength of our execution and not on cap rates, and that's gonna be the way we continue to invest.
I mean, I guess, does some of the more maybe broadly marketed, you know, sale-leaseback portfolio transactions are gonna have more bidders per se, right? Maybe be a little less kind of middle market in nature. Do they become more attractive because some of these competitors have been kind of priced out of the market given what's happened with interest rates?
Yeah, I mean, you know, for those bigger, more high-profile deals, you know, it's really not gonna impact us if it goes from 10 to 15 bidders to five to eight. It's still competitive and you're still, you know, it's still likely to be a bloodbath, you know, and where you're not getting appropriate risk-adjusted returns. You know, if you're talking about a bigger, more broadly marketed, higher profile transactions, you know, we prefer avoiding those situations and finding opportunities that, you know, just present better risk-adjusted returns in our view. That said, you know, we see them, we're an active market participant, you know, and, you know, if the pricing comes in line that makes sense for us, we'd certainly be willing to participate.
Okay. That's it for me. Thank you very much.
Thanks, John.
Thank you. Our next question comes from the line of Joshua Dennerlein with Bank of America. Please proceed with your question.
Good morning, everyone. Pete, wanted to touch base. I think it was something you mentioned about maybe the buyer pool seems to be thinning out a little bit. Curious just what your thoughts are on maybe what's driving that.
Yeah. I think, you know, it's just the volatility in the debt markets, right? Debt rates, both underlying treasury rates as well as debt spreads have moved pretty rapidly and the availability of that capital is less certain. Buyers who were participating, you know, based upon a levered bid are, you know, less certain in the current environment.
Okay, that makes sense. Appreciate that. Are you seeing market participants maybe changing kind of the terms that they might want to put in a sale-leaseback in response to the rise in inflation? Are people trying to push for more kind of inflation-linked bumps or just trying to get higher fixed rent bumps?
Yeah. You know, listen, I think we all try to get the best terms we can and the best economic package that we can. You know, escalations certainly are part of that. I think, you know, some buyers are particularly sensitive to that. You know, it's not gonna come without a cost or a lower cap rate. You know, clearly sellers and sale-leasebacks are sophisticated, and they're looking at the total economic package that's offered. So the market's pretty efficient, and we've been pretty consistent with our escalations, and I don't expect the market to change materially.
Thanks.
You got it, Josh. Thanks.
Thank you. Our next question comes from the line of Ki Bin Kim with Truist Securities. Please proceed with your question.
Thank you. Congrats, Gregg. Sorry, I jumped on the call a little bit late here, but going back to your credit metrics, it was good to see some improvement quarter-over-quarter. You still have, you know, 8% below 1x coverage. You mentioned it was fitness, childhood education, movie theaters. My question is, if you looked at more real-time data, not just trailing twelve months, you know, what's your best indication of what that coverage looks like?
Yeah, I guess, you know, the most real-time data, Ki Bin Kim, is the fact that they're paying rent and, you know, the leases are being honored. You know, we would expect that bucket to normalize, you know, back to a historical level, which is, you know, closer to around 2%. You know, the current data that we have suggests that, you know, that's the trend these guys are on. You know, that said, the big chunk of that is movie theaters. You know, for our AMCs, you know, anyone's guess on, you know, where those things shake out. But clearly that company has ample liquidity to kind of manage through.
Tied to that, your same-store NOI, or not NOI, same-store rent went up 2%. You know, the outlier was experiential. Any thoughts on what that's gonna look like going forward for the rest of the year, the same store rent?
Yeah, I mean, our contracts are generally written to get 1.6%, and it could be, you know, could be annual or every five years, so it creates some lumpiness there. What you see happening there, Keebin, is, you know, we had some experiential tenants that went through a COVID-related bankruptcy restructuring where there was a discounted rent period that's burning off, and those sites are coming back on at more of a full rent, and that's kind of drove that outsized increase there.
Okay. Just going back to the G&A, can you just give a hard number guidance for 2022 G&A?
Mark?
Well, yeah, I mean, look, we don't really guide to a G&A number. I think, you know, what we've consistently held is, you know, right now we're at 7.5% cash G&A to revenue. We think that's gonna continue to go down. I think if you started there and worked your way down, you'd probably have a pretty good reference point.
Okay. Just to clarify, 'cause, going back to Caitlin's question, you mentioned, I mean, you had $8 million of G&A On a GAAP basis this quarter, you said there was some expense pull forward. Should we expect that absolute number to move lower for remainder of the year?
Well, yeah, sequentially, it's not a whole lot, I think. You know, I think the GAAP, G&A is really a function of, as I mentioned in the prepared remarks, we had our 2019 awards that have a subjective component in the TSR. They were granted and therefore vested in January. That was kind of a unique, well, I shouldn't say unique now, but it was outsized for a year-over-year comparison. That 25% is actually included in each grant that's occurred since 2019. That's gonna start happening every first quarter from here on out to the extent that there's an award and a vesting.
In terms of this year, I guess what I'd say cash G&A is that it should normalize through the next three quarters because like I said there was a little bit of pull forward in the first quarter.
Okay, thank you.
Thanks, Ki Bin Kim.
Thank you. Our next question is a follow-up question from the line of Nicholas Joseph with Citi. Please proceed with your question.
Hey, it's Michael Bilerman again. I just wanted to follow up on John's question just on the pace. So I think, Gregg Seibert, and congratulations on your retirement, I'm very jealous. But I think you said 85% was done by the beginning of March, which would have left about $35 million in the month of March. I was wondering if you can share how much is closed in the month of April already. And then separately, how much you have under contract and under LOI, just to really understand, going back to Pete Mavoides, where you know, you've talked about just not having clarity in the future, which I get.
Maybe you can share with us a little bit more details about the here and now size of the overall pipeline, how much is under contract, how much is under LOI, and how much is closed so far in the quarter, already?
Well, let's see. The subsequent events in our Q, we have what's closed in the quarter. What number, Dan?
$17 million.
$17 million.
Yeah.
We got $17 million. I won't break out PSA or LOI because that's not really relevant to the pipelines. You know, our current pipeline, you know, sits around $200 million.
$200 million. Does that include the $17 million that was closed in the first month of the quarter, or that's separate?
Well, not that it'd be material to the $17 million.
Right.
Certainly the you know with the you know variability 'cause all that $200 may or may not close as you know again to that timing question. We don't control the timing and our sellers do. But that's exclusive of the quarter date activity.
How do I know?
Yeah, go ahead.
Michael, if you dug deep into the queue, you'd discover that we've got about $25 million under PSA right now.
Okay. I haven't been able to review the queue as of yet, given all the earnings overnight. Does that pace, I guess, you know, $55 million in two months relative to, you know, what had been much more aggressive? Pete, I take your comments about, you know, average size of, you know, $6 million-$7 million, and you do a portfolio deal, and it dramatically increases that. I'm just trying to reconcile some of the robustness and this, you know, real confidence in a growing pipeline, but yet the last two months have been well below what that pace would have been, previously, right? You'd been on, you know, call it a $70 million-$80 million monthly pace, and now that's down pretty meaningfully in March and April.
Yeah, Michael, I think you're getting way too granular on a business that's, you know, It's not a science, right? I'm giving you a general feel about the market and my pipeline, and I gave you a very specific number and, you know, a sense of what are our ongoing dialogues with our operators and the feeling that they're conveying to us about their businesses and their prospects. It's not this business is not a model. This business is not a month-to-month model where I can predict. It's not an assembly line. I'm not cranking out trucks or cars.
We're doing deals with middle-market operators to the tune of, you know, 20-40 a quarter that may or may not close. These deals involve negotiations and diligence, environmental issues. My feel for our pipeline is that it's robust, and it's very consistent with our past quarters, and we're feeling good about the things. To drill down deeper than that is, you know, trying to create a level of precision and understanding that's just not attainable.
Yeah. I'm not trying to get to that. It's obviously external growth is a key component for the net lease REITs. And obviously, there's two sides to it, your own cost of capital and then the deals that you're able to complete in terms of volumes, right? The core business is a pretty stable net lease business that we can model pretty well. These questions are not to get precision on estimates. They're you know, they're questions about the direction overall of growth of your cash flow driven by the key part of your business, which is to go out and acquire assets. That's the reason, Pete, for the questions.
You know, just looking at the numbers, there appeared to be a pretty material decline in volumes in March and in April. It was just trying to dig in a little bit deeper just to understand some of the variables that may be impacting that and your views going forward. That's the intent. I'm not trying to model down to the tenth of a penny. It's more so just trying to understand the business, and you had focused me on more of the near term rather than the long term, and that's what I was digging in on.
We gave you very specific.
Yep.
Metrics around the near term, so hopefully it.
Yep.
Works for you.
Yep. Thank you so much.
Thank you.
Thank you. There are no further questions at this time. I'd like to turn the floor back over to Pete for closing comments.
Great. Thank you all for your time today and, you know, more importantly, Gregg, thanks for being my partner for the past, you know, 10+ years. Wanna wish you the best going forward. Certainly, I know you'll be around with us for the coming months as we navigate through this transition, but this is a very appropriate forum to thank you for all you've done for this company. Thank you, and everyone have a great day.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.