Earnings Call: Q4 2020

Mar 5, 2021

Greetings, and welcome to the NetStreet Corporation 4th Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Amy Ahn. Thank you, Amy. You may begin. We thank you for joining us for NetStreet's Q4 and full year 2020 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and an updated investor presentation. Both can be found in the Investor Relations section of the company's website at www.netstreet.com. On today's call, management's remarks and answers to your questions may contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our perspectives dated August 13, 2020, and our other SEC filings, including our Form 10 ks for the year ended December 31, 2021 available. All forward looking statements are made as of the date hereof, and NetStreet assumes no obligation to update any forward looking statements in the future. In addition, certain financial information presented on this call includes non GAAP financial measures. Please refer to our earnings release and supplemental package with definitions, GAAP reconciliations and an explanation of why we believe such non GAAP financial measures are useful to investors. Today's conference call is hosted by NetStreet's Chief Executive Officer, Mark Manheimer and Chief Financial Andy Blocker. They will make some prepared remarks, and then we will open the call for your questions. Now, I will turn the call over to Mark. Good morning, everyone, and thank you for joining us today for NetStreet's 4th quarter and full year 2020 earnings call. We hope this call finds you and your families well, and we are pleased to be here with you today. I'll start with a brief overview of our accomplishments over the last year, Then I'll discuss our acquisition and portfolio management activity and close with a few comments on ESG related efforts. Andy will then provide more detail on our Q4 and full year results, balance sheet and outlook for 2021. We will then open the call for questions. Since our inception, NetStreet's strategy has been to create a high quality, diversified and fortress net lease retail portfolio with a conservatively capitalized balance sheet and scalable platform to support accretive and consistent long term cash flow growth. As many of you are aware, we spent the first half of twenty twenty deploying capital raised from our private rule 144 offering. We built a portfolio that was e commerce resistant and recession resilient, which ultimately helped us to have significantly higher rent collections as compared to our net lease peers during the 2nd and third quarters of 2020 at the height of COVID-nineteen related closures. In addition, we built out our team from 8 employees to 19. We made several executive hires, including Andy Blocker, Trish McRatney and Randy Hauge, who are on this call with us today. We also hired Chad Schaeffer as our SVP of Credit and Underwriting. We added 3 members to our Board of Directors, Robin Ziegler, Heidi Everett and Michael Christa Deleeuw. We believe we have a best in class team in place to lead us forward. We successfully completed our IPO last August amid the COVID-nineteen pandemic, raising a total of $227,000,000 of net proceeds, which included the over allotment option exercised by our underwriters. I would like to pause here to take a moment to note that many of last year's accomplishments wouldn't have happened had it not been for every member of our team who worked diligently to get us to where we were where we are today. I'm very proud of everyone and I look forward to sharing more successes with them in the future. Moving on to our portfolio. As of December 31, 2020, our portfolio contained 203 properties comprising 3,700,000 square feet in 38 states with a diversified tenant roster of 56 tenants in 23 industries. Our weighted average lease term is 10.5 years and we are 100% occupied with no lease expirations until 2023 and less than 1% of our leases expiring before 2025. Based on ABR, our tenancy is 70% investment grade with an additional 8% classified as unrated with an investment grade profile and over 90% of our industry exposure is what we refer to as defensive. Put simply, we focus on well positioned tenants who have strong balance sheets and great access to capital and are focused on tenants for whom their physical locations are integral to their ability to generate cash flow for their business. This defining characteristic has proven to be a key protection against both e commerce risk and COVID related disruption. As a result, our collections have been extremely strong throughout the COVID pandemic. We collected approximately 97% of our rents for the full year 2020. Andy will discuss further, but we believe these results validate our strategic approach to portfolio construction and resulting COVID related rent payment disruptions are now in the rearview mirror. Throughout 2020, we continued to grow our portfolio through disciplined acquisitions. As a reminder, we underwrite and acquire properties with strong underlying tenant credit and seek fungible real estate with strong market fundamentals and locations that are highly productive for the parent tenant. In 2020, we completed $409,000,000 of acquisitions. The depth and breadth of our pipeline meant that we kept a steady pace of acquisitions throughout the year with no slowdown due to COVID. This activity included investments in stabilized assets, blend and extend opportunities, sale leaseback transactions and development projects, which demonstrates the depth of our opportunity set. For the Q4, we completed $81,000,000 of acquisitions at an initial cash capitalization rate of 6.8%. These acquisitions had a weighted average remaining lease term of 8.8 years with 68.7% of the properties occupied by investment grade rated tenants and an additional 12% occupied by tenants with investment grade profiles. Finally, with respect to timing, these acquisitions were back end loaded in the quarter, which tends to be the case in most quarters. During the Q4, we added a few new tenants to our portfolio roster, including Best Buy, Sunbelt Rentals and our first 15 year Chick Fil A groundless. We also added our first target in Massachusetts just south of Boston to the portfolio at a 6.4% cap rate, subject to a 7 year ground lease with rent of just $2.81 per square foot. The adjacent former Sears box has been demolished and Trammell Crow has begun construction on a luxury Class A 282 unit apartment community in its place. Not only are we encouraged by the new customers that will be moving in next door in the next couple of years, but also by the increasing land value that we expect on our 3.5 acre parcel that we acquired at what we feel was a bargain price. We also continue to consider strategic dispositions to improve portfolio quality and reduce risk. In 2020, we sold 15 properties for $50,000,000 of which 12 properties and $37,400,000 were closed in the 4th quarter. We felt that market conditions in the 4th quarter presented an attractive opportunity to eliminate or lessen our exposure to certain tenants, geographies and industries and improve our overall credit quality. This drove our decision to sell these assets sooner rather than later despite their near term impact on absolute earnings. During the Q4, we took an opportunity to reduce our exposure to casual dining, which has been a stated goal of ours. This exposure was reduced from 4.5% to 2.2% during 2020. We believe that we have now addressed the immediate potential credit risks in this category, but we'll continue to decrease exposure in this category over time. We also look to refine our geographic exposure and to date have done so in a way that was accretive. During the Q4, we sold an Ollie's in Texas at a 6.4% cap rate and replaced it with an acquisition of another Ollie's in Indiana with similar remaining lease term at a 7.8% cash cap rate. As a result of our active capital recycling and portfolio management in 2020, we transformed our existing portfolio, enhancing its credit quality and improving diversity. We acquired 124 total assets, adding 23 new tenants, 10 new states and 4 new industries. Importantly, our percentage of investment grade tenants grew from 63.7% to 70% and our weighted average lease term grew from 10.1 to 10.5 years. At the same time, we reduced ABR exposure to our largest tenant, which was BBB rated CBS at 11.8 percent of ABR on December 31, 2019, to AA- rated 711 at 8.9% as of December 31, 2020. We continue to evaluate future acquisitions, including with many of our top 10 tenants. However, over time, we expect tenant concentration to decrease due to the denominator effect as our portfolio continues to grow. Finally, let me remind you that we have 0 exposure to theater, health club or early childhood education tenants, reflecting our long held view that these tenants have generally weaker tenant credit profiles and lack of fungibility of their underlying real estate. As we look ahead, we are targeting net acquisition activity inclusive of dispositions of $320,000,000 in 2021. We expect that the bulk of this activity will be a mix of investment grade and high quality unrated tenants that is similar to our current portfolio mix and reflect the current mix of our industry concentrations. Given the sheer size of the net lease sector and our deep industry relationships, we believe we have plenty of growth opportunities ahead of us. And due to our relative smaller size, we know that future acquisitions can move the needle for us in terms of earnings growth in a meaningful way. We continue to improve our portfolio quality and diversification with no erosion in going in cash cap rates or weighted average lease term. We are encouraged by our robust and growing pipeline of opportunities as we look forward to reaching our 2021 acquisitions goals with high quality properties. As this is our Q4 call, let me take a brief moment to cover an important topic here, ESG. When we came to market at the time of our IPO, we indicated that ESG would be a part of our strategy and processes. First, we are committed to strong governance. From the time of our IPO, we ensured that our Board was designed to fit today's standards for governance. We have an independent and diverse Board with a strong mix of backgrounds and expertise, including real estate, financial markets and human capital. These are the same three pillars that support NetSuite itself. 2nd, from the beginning, employee well-being and engagement has been and remains very important to Andy and me. From a social perspective, we made sure that NetStreet offers professional training, continuing education reimbursement, competitive benefits and flexible parental leave to our employees. We also survey employee satisfaction annually. I am proud to say that every one of our employees is a shareholder in NetStreet, meaning all of our employees have a personal stake in our collective success. Finally, with respect to the environment, 17 of our top 20 tenants have corporate sustainability programs and our acquisition due diligence process has an ESG and environmental component. At the asset level, we look to fund capital improvement projects with an eye towards sustainability. We are very proud of all that we've accomplished in 2020, having significantly grown our portfolio while improving its quality and built an operating platform designed for growth, supported by a low leverage balance sheet. Finally, our strong performance on collections objectively proves the durability of our strategy as we meaningfully outperformed our peer set in an unforeseen uncertain economic environment over the past year. As a result, we believe we are extremely well positioned as we enter 2021 and we are excited for the future at NetStreet. I'll now turn the call over to Andy. Andy? Thanks, Mark, and thank you all for your time with us this morning. Let me begin with our results for the Q4 and full year 2020. Yesterday in our press release, we reported net income of $0.15 core FFO of $0.18 and AFFO of $0.20 per diluted share for the Q4. For the full year, we reported net income of $0.01 core FFO of $0.65 and AFFO of $0.69 per diluted share. As of December 31, 2020, the in place portfolio was generating $41,800,000 of annualized base rent or AVR, which as a point in time metric reflects the effect of acquisitions and dispositions completed in the Q4. From a collections perspective, we're very pleased with our portfolio performance. Prior to giving any consideration to deferral or abatement arrangements granted as a result of COVID, we collected 100% of 4th quarter rent payments and for the full year collected 96.9% of rent. Further, based on the payment history of our tenants, we currently have 0 bad debt reserves and recognize 0 bad debt in the Q4 and for the full year of 2020. Finally, based on our 100 percent rent collections in the 4th quarter, we did not provide any deferrals or abatements and have not done so since August. Turning to our balance sheet and our capital markets activity. The work we completed in 2020 with respect to our balance sheet was very important and set the stage for future growth for NetStreet. We accessed the equity markets and raised net proceeds of approximately $227,000,000 through our IPO in August. We repaid our outstanding line of credit, retired our outstanding Series A preferred shares and completed $175,000,000 LIBOR swap to hedge floating rate exposure on the entire balance of our term loan. As of December 31, we had $93,000,000 of cash, which includes $14,000,000 of restricted cash held in 10.31 exchange accounts and remain fully undrawn on our $250,000,000 revolving line of credit. We have no debt maturities until the maturity of our revolver in December 2023, which is subject to a 1 year extension option, which would match the December 2024 maturity of our fully drawn term loan. In addition, our net debt to annualized adjusted EBITDA ratio of 2.8x is well below our 4.5x to 5.5x long term target. With respect to dividends, earlier this week, the Board declared a $0.20 regular cash dividend to be payable on March 30 to shareholders of record on March 15, reflecting an annualized dividend rate of $0.80 per share. Let me now take a few minutes to discuss our outlook on a couple of guidance items and provide some forward looking perspective. We're starting the year with $41,800,000 of in place annualized base rent. As Mark mentioned, we expect to complete $320,000,000 of acquisitions this year, net of dispositions, back end weighted in each quarter and a cap rates comparable to our Q4 and full year 2020 activity. We expect cash interest expense to range from $3,000,000 to $3,500,000 depending on the timing of draws, if any, on our revolving line of credit and expect an additional $600,000 of non cash deferred financing fee amortization. We expect to incur state and franchise tax of $200,000 to $300,000 and expect to report those amounts on their own line item in 2021, reflecting the growth and increasing geographic diversity of our portfolio. We expect 2021 cash G and A in the range of $11,000,000 to $12,000,000 with an additional $3,000,000 to $4,000,000 of non cash compensation expense, which reflects executive compensation agreements that have been recently finalized through our compensation committee process. As we have largely stabilized the size of our team, our overall compensation structure and our outside service requirements to efficiently and effectively execute our strategy and perform as a public company, we expect that we will continue to gain the benefits of scale on a relatively fixed cost structure as we grow. As a result, our G and A as a percentage of revenue and assets is expected to decrease over time. I will echo Mark's comments and say that I'm grateful to our entire team for their exceptional contributions in 2020. Their hard work each day through a pandemic no less allowed us to establish and build what we believe is a truly great platform and portfolio. As we start 2021, we believe we have significant momentum to continue to grow both our portfolio and earnings and remain focused on creating significant shareholder value. This concludes our prepared remarks. We'll now open the line for questions. Operator? Thank you. Thank you. Our first question comes from Linda Tsai with Jefferies. Please proceed with your question. Hi, good morning. You collected 100% of rent payments for October, November December, but we didn't see any mention of rent collections for January February in your press release. Is there anything to highlight here? Hi, Anna. Thanks, Linda, and good morning. Yes, we did collect 100 percent of rent in January. But yes, just to preface that question, as it relates to COVID and or any tenant requesting any rent relief, we have not had a discussion with any tenant since the Q2 about paying rent as we had hoped and still believe that we have fully resolved and documented all COVID impacts to the portfolio last year going back to the Q2. But this February, we had an investment grade tenant send us our rent check, but we never received it. And so we had the tenant cancel the check and then move that tenant to ACH, so which we're trying to do with all of our tenants. And we've got all the confidence that we're going to be receiving that rent from them on Tuesday, which is the day of the week that they release all their wires. And we'll continue to collect 100% of our rent not only for February but for the rest of the Q1. But we wanted to be really hyper careful when it comes to transparency and maintaining our credibility. So technically, we're waiting on one rent payment of $23,000 to get to 100% in February. And that would make our 6th consecutive months of receiving every penny of rent. So hopefully that answered your question. Thanks for that clarification. And then we're also seeing a growing number of net lease transactions occur in the multi tenant shopping center space with a smaller shopping center REIT announcing yesterday JV acquire high quality investment grade net lease tenants. This sounds like your sandbox. How are you viewing the competitive landscape right now? And should we be concerned about greater cap rate compression or more difficulty sourcing deals in 2021? Yes, sure. So, first, I think it shows how attractive the space is that we have seen a couple more entrants in the last few years. But I do think it bears mentioned that this particular new entrant has a very specific acquisitions approach that would make it very unlikely that we'd be competing directly with them. And again, it's just a very, very fragmented market, which was really a big topic. When we raised capital in the 144A that we'd be able to deploy capital and the quality that we have the pricing that we have was also a topic at the time of the IPO and is still today. But we think we just continue to prove our ability to compete and still be able to hit pretty attractive yields for the quality of assets that we're bringing in. And in fact, as we look forward to the pipeline, I think it's more robust today than it really has been over the past few quarters. Just one last one. How are you approaching tenant concentration? Is this best addressed through dispositions or dilution through higher acquisition volume? Yes. No, that's a good question. I mean, obviously, we're a smaller portfolio at this point. And so the majority of that is going to come through the denominator increasing in size. With that being said, if we have one particular outsized tenant, We did sell a couple of 711 assets, 1 at a 5 cap and 1 at a 4.95 cap back in the 4th quarter, pretty accretively, which is great. But we will continue to selectively work through dispositions. But you did see in the Q4 a little bit more dispositions that went then what I think you can typically expect from us on a go forward basis. We just had an opportunity to move some tenant credits that we that really thought made sense to move out of the portfolio and some shorter term leases where we felt like we were getting pricing similar to longer term leases. So we felt like that was helpful for us to improve our lease expiration schedule. Thank you. Thank you. Our next question comes from Nate Crossett with Berenberg. Please proceed with your question. Hey, good morning. I was wondering if you could comment on the And you mentioned the pipeline is bigger than it's been in the last two quarters. I was wondering if you could just help us size that in terms of dollar terms. And within that pipeline, is it mostly concepts you already own or is it a mix of new and current? Yes, sure. So, yes, I mean, again, I'd say, I think this quarter, similar to the Q4, is likely to be a bit back end loaded. We closed in the neighborhood of $20,000,000 of assets so far. I know there's a couple that should be closing either today or early next week. We have a little bit over $120,000,000 of assets that are under contract approved through investment committee and moving through the closing process. So that can take anywhere from 30 to 60 days. So some of that will be in the Q1, some of that will leak into April. And I think the good thing there is that we will have probably a pretty robust April as well. So that will kind make the acquisitions a little bit less back end loaded that we saw in the Q1 and likely to see in the Q1. But yes, as it relates to the tenants that we're seeing, we did add a few new tenants as you heard in my prepared remarks, Target being 1. We do have a couple more new tenants that I think are pretty attractive investment grade tenants that we'll be adding to the portfolio here in the Q1. But it's going to look a lot like what you saw in the Q4 in terms of investment grade and investment grade profile, pretty high quality assets with an attractive weighted average lease term that yields that are pretty consistent with what we've done in 2020. Okay. That's helpful. You mentioned some ground leases you did in the quarter. I was wondering if you could just remind us how much of your portfolio is ground leases and where is that going to grow over time or kind of how do those opportunities present themselves to you? Yes, sure. So, yes, I mean, I think ground leases to us are they're not operated weak people. I mean, you see Wawa and Sheets and some of those tenants out there that are ground leases, but they're several $1,000,000 to acquire. So when you look at the rents on a fee simple versus ground lease, there's really not much difference. So I don't really think you're picking up much of an advantage other than losing out on some depreciation. But when we do see rents that are reflective of really just what the land is worth or less, those are very attractive. Typically, those are going to get we're going to get priced out on a lot of those types of transactions. I think the target, if that was a more effective marketing of that asset, I think that cap rate would be significantly inside of the 6.4% going in cash cap rate that we acquired those. We do have a handful of ground leases in the portfolio. I mean, we've got a Lowe's, which is I think a real ground lease. Obviously, we mentioned the Chick Fil A and we've got a few others, but it's inside 5% of the portfolio. I don't really think that's going to grow meaningfully. We don't really want to pay up for ground leases. But in the event that we find them and they're priced similar to a fee simple deal and we're coming in at low rents, those are going to be pretty attractive to us. Okay. That's helpful. I'll leave it there. Thank you. Thank you. Our next question comes from Greg McGinnis with Scotiabank. Please proceed with your question. Hey, good morning. Andy, I apologize if covered this in your opening remarks and the call dropped for a few seconds. But just curious what prevented you from providing a flow per share guidance this year And whether you expect that to be an abnormality this year or kind of what we should be expecting going forward? Yes, Greg. Thanks for the question. Yes, I mean, look, I think that it is a 2021 phenomenon certainly at this point. But based on our current size, the assumptions that we make around timing, size, pricing of additional capital raises, things that we've talked about in the past, and to a lesser extent expectations around our ordinary course business. The range that we would have had to provide would have been so wide. It would have been meaningless to users. So what we did is, I think that we provided guidance around the key operational items that we really expect are going to dictate our 2021 corporate performance, right? And left the capital raising to the side, knowing that we're going to be opportunistic with respect to our access to capital as we move throughout 2021. But yes, I mean for us to produce AFFO per share in the high 60s and then provide a $0.10 to $0.15 guidance range as a result of those things, we just didn't think was meaningful to users. I can appreciate that. In regards to the capital raises though, are there any updates you can provide there in terms of how you're thinking about funding acquisitions this year? Yes. I mean, as I talked about in my prepared remarks, I mean, we've got $93,000,000 worth of cash on the balance sheet as of year end. Mark's got a very robust pipeline that we're working through. We have a fully undrawn $250,000,000 credit facility. We were at 2.8x net debt to EBITDA. So we feel like we've got room and as a result, we have the ability to be opportunistic with respect to capital. Okay, great. Thank you so much. Thank you. Our next question comes from Todd Stender with Wells Fargo. Please proceed with your question. Good morning. Thanks. You touched on your reduced casual dining exposure. But when it comes to quick service, we don't see specific names in your top tenant list. Can you guys just comment on your appetite to buy portfolios of QSRs? It's not in the essential or necessity bucket, but it sure seems that way during COVID. Yes. No, I think that's a great question, Todd. I mean, going back to when COVID first hit, we hit the brakes entirely on acquisitions for a short period of time. And similar to the Great Recession and the COVID disruption, you saw quick service restaurants perform extraordinarily well. I mean, we're still going to be very focused on credit and there's really probably a list of about 10 names that we're very comfortable with as it relates to quick service restaurants. And we want to make sure that we've got drive thru when we've got enough a large enough parcel to accommodate drive thrus and we're even seeing some quick service restaurant operators that historically hadn't had a drive through are going to that model. So we want to make sure that that's going to be a very fungible box. But it is an area I think you can expect to see us acquire some assets in the future. And again, as you mentioned, casual dining down to a little over 2%. I think you're likely to see that creep below 1% by year end. All right. That's helpful. You added some Best Buys, Burlington's and some grocery stores in the quarter. Can you speak to these? At first glance, it doesn't these don't appear terribly fungible, but maybe like the credit, maybe like location, maybe just kind of touch on these things. Yes, absolutely. I mean, I think the size boxes specific to Burlington and Best Buy, they've been really kind of decreasing the size of their box. So we were in pretty close communication with the tenants on those particular assets and how committed they are to those long term generating very strong sales at each of them. So we are fairly confident that those particular tenants are likely to remain in those boxes beyond their initial lease term. But that being said, there are a lot of tenants in kind of that 35,000 to 40000 square foot range. And so we feel that those are actually fairly easy for us to either replace the rent or increase the rent should we be put in a position to replace the tenant. All right. Thanks. Last one for me. Just with this year, kind of a backdrop, there's commentary out there just as an increased M and A activity potential. Where do you guys stand on doing sale leasebacks? Do you think that will be a part of your strategy or you think you're going to be more on a highly widely marketed space? Yes. So hopefully not in the widely marketed space, because I feel like the pricing gets awfully competitive and a little bit less attractive. But that being said, last year, I was asked a lot of different questions related to how we source acquisitions. We really do have a lot of different ways that we approach the acquisition side, whether they be blend and extends, whether it's partnering with a multi tenant buyer and where we pull up the net lease or on the development side or even sale leasebacks. I did not really expect at that time to be doing many sale leasebacks as you typically see those as being a tenant that doesn't have great access to capital, resource to selling their real estate to in a sale leaseback really leverages themselves and puts that in maybe not a great position long term on a credit profile. That being said, we've seen a large number of investment grade high quality tenants that just don't want to have their capital tied up in their real estate and have seen an increasing list of opportunities within some of those tenants that we like and I think are really strong performers. So we have done a little bit more than what I think we expected and there's even some of that in our go forward pipeline. Our next question comes from Katy McConnell with Citi. Please proceed with your question. Hey, guys. This is Parker DeCrani on for Katy. I guess I was just curious about how you guys are thinking about inflation sort of I think it's been a key topic that's come up over the past few weeks and sort of keeping in mind where your lease escalators are sort of at, just how you're thinking from a competitive standpoint versus some of your peers? Yes, sure. I mean, yes, I mean, I think you're right. I mean, our leases, as you'd expect with a higher credit profile, typically those leases are going to be a little bit flatter than maybe some of the other peers that are really kind of financing through sale leasebacks, kind of your kind of smaller credits. But that being said, I think we're also going to have and we view it as predictability of cash flow should be a little bit better on a go forward basis, so maybe a little bit less in rent loss. But yes, I mean, I think we're getting close to 1% on our escalators within our leases. And so I think inflation is maybe not going to be here permanently. It could be a temporary situation where it comes into the portfolio if you listen Mr. Powell. But yes, I mean, I think that if you're anticipating a very high inflation market, then our leases are going to be a little bit less attractive. Okay, got it. Thanks. And then I guess I have one other one just in terms of cap rates for this year and sort of recently as well if you're seeing any sort of movement just within the sort of IG category that you guys are targeting? Yes, we really have not. I mean, I think there's a good advantage to the fact that we're only looking to acquire $80,000,000 or so per quarter. So that allows us to really source significantly more than that and then focus really on the assets where we think the pricing is a little bit less efficient and really kind of chop off that tail of that bell curve and has really allowed us to get pretty attractive cap rates. We've shown that as a private company. We've shown that as a public company in the last couple of quarters. And even in the Q1, we're seeing similar types of cap rates. Got it. Okay. That's all for me. Thanks. Thank you. Our last question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question. Hi, thanks. Good morning. Andy, I just wanted to follow-up. I think you said acquisitions would be back end weighted. Was that for the quarter or for the year? And I guess it seems like the pipeline is growing. So I'm just curious why deal flow would sort of slow from the current pace a bit, if that's the case? Yes. And look, I don't know that deal flow was going to slow in any material way. I would just tell you that the nature of the beast for us has been that, on average, if you look at since last year, if you look at the average timing of our execution of our acquisitions, I think that they're like the 2nd day of the 3rd month of the quarter, right? And as Mark indicated in his prepared remarks, I think that that's just been somewhat typical to what it is that we've seen. And from a modeling perspective, the impact of that for a company of our size can be meaningful. But what we're pushing, as Mark indicated, we're pushing as we go into end of Q1, into Q2 to try to change that. But from a modeling perspective, like I said, it could be a meaningful impact. Okay. And then Mark, you talked a bit about the COVID resistant nature of the company's tenants, right, which benefited a bit during the pandemic, some convenience auto drugstores. How are you thinking about tenant categories and credits moving forward as we hopefully continue to move away from the pandemic? Is there a little bit of froth in the market around the edges maybe that could benefit the company from a capital recycling standpoint? Would you potentially look to shift away from essential retail to some extent either in terms of some of the newer acquisitions you're looking at or assets that you might be looking to sell? Yes. No, I think it's a good question. And when you think about when Andy and I first started trying to raise capital for this venture back in, I guess, it was back half of twenty nineteen, the strategy was the same then as it is today, very focused on the essential retailers, ones that are really what's working in retail today was really what was working pre COVID as well. And those sectors are really where we focus in those defensive names. And so it was a little bit less popular when we were raising capital back in late 2019 and early in the early 2020 pre COVID. But that being said, that's our strategy. We think retail is going to continue to evolve. We think having capital available and management teams that have shown a propensity to continue to reinvest in their business are going to be the ones that are going to be less standing. And really that's what we think is the appropriate way to invest in retail. And so it shouldn't surprise you that that held up very well in the first bit of disruption. I think we're going to see more disruption may come sooner and may come later, but we want to be prepared for that disruption as it comes over the next 10, 20 years. And so I don't I would not anticipate us selling off our assets and going buying movie theaters or things that are really outside of our Ballywix. But on the margin, we will look to if the market is going to pay us at a very aggressive cap rate for a specific asset, we're always going to be opportunistically looking to recycle capital. But I think we'd be redeploying into back into what our bread and butter is, which is essential retail. Okay, got it. And just last one for me, apologies if I missed this, but can you just talk about that development project that was disclosed in the 10 ks? What kind of asset and tenant credit is that? And is that an area where you see some growth opportunities? Yes. I mean, I think we've got a few development projects in the works. It's something that we spoke a lot about really at the time of the roadshow in the IPO is an area that we're really going to focus on and try to drive a little bit more yield that way. But really getting those going takes some time and now we're starting to see the fruits of the labor of the acquisitions team. So I do think that is an area that you'll see us be a little bit more active. What kind of yield expectations are you targeting for that project or for developments in general? Yes. So we're not going to be spec developers and we're not going to go buy land and build a building and hope someone comes. We're only going to get involved in the development process in the event that we've got a lease in hand with the tenant. So we're going to be pretty far and that shouldn't too surprising, pretty conservative with the way that we approach development. And I think we'll pick up maybe 50 basis points. I don't think it's going to be again, we're not going to take much risk and we need the lease in hand, we need the tenant committed to the site and we need to keep a developer into a pretty tight box in terms of cost overruns and the like. And we think it's going to it could be a meaningful percentage of what we do because we're not really looking to deploy several $100,000,000 a quarter. So if we can do $30,000,000 $40,000,000 a year in that area, we think that can really help move the needle on our yields. All right, great. Thank you. There are no further questions at this time. I would like to turn the floor back over to Mark Mannheimer for closing comments. Well, thank you everyone for joining and your interest in NetSuite. Again, if you are attending the REIT conference next week, hopefully, we'll get a chance to talk. We're really excited about the growth opportunities ahead of us for NetSuite. So take care everyone. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.