Good morning, everyone, and thank you for joining us today for the Alpine Income Property Trust Fourth Quarter and Year-End 2021 Operating Results Conference Call. With me is Matt Partridge, our Chief Financial Officer. Before we begin, I'll turn it over to Matt to provide the customary disclosures regarding today's call. Matt?
Thanks, John. I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. 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 Form 10-K, Form 10-Q, and other SEC filings. You can find our SEC reports and our earnings release, which contain reconciliations of non-GAAP financial measures we use on our website at alpinereit.com. With that, I will now turn the call back over to John.
Thanks, Matt. We capped off a record-setting year for the company with our strongest quarter ever of acquisition volume, acquiring more than $100 million of well-located, high-quality net lease properties at a weighted average going-in cap rate of 6.2%. The success we had growing the organization in 2021 allowed us to generate the highest total shareholder return of any of our public company peers. We meaningfully beat our fourth quarter and full year guidance, increased our quarterly cash dividend by nearly 23% year-over-year, and dramatically improved our cost of capital. During the fourth quarter, we acquired 26 properties spread across 11 different states and 17 markets, with Houston being the largest market we invested in during the quarter.
More than half of the acquired rents during the fourth quarter came from MSAs with over a million people, and approximately half of the acquired rents were in the Urban Land Institute's top 25 markets for 2022. Our new acquisitions included 19 tenants, nine of which were new tenants to the growing portfolio, operating in 12 sectors. Most notably, we had the unique opportunity to purchase a portfolio of ground lease properties in Houston. The ground lease transaction resulted in 34% of acquired rents in the fourth quarter coming from the ground lease properties where the tenant has invested in the improvements, and we own the land. The ground lease structure is a superior investment because it provides an extra layer of protection due to the tenant's investment in the improvements, making the tenant much more likely to operate in the location over the long term.
Those improvements then revert to us if the tenant ever leaves or at the end of the lease term, which results in a higher overall residual value for our investment. As I previously mentioned, the portfolio of ground leases we purchased is all in the Houston market and has strong macro fundamentals. While the ground lease portfolio did bring our average cap rate down in the fourth quarter, this was a special opportunity to invest in the asset with excellent risk-adjusted returns. I'll stress that this quarter was unique and therefore we anticipate a higher average cap rate on our investments for the first quarter of 2022, more in line with what you saw from us during the first three quarters of 2021.
For the full year of 2021, we more than doubled our portfolio through acquisition of 68 net- lease retail properties for just over $260 million at a weighted average going- in cap rate of 6.8% and a weighted average remaining lease term at acquisition of 8.1 years. Throughout the year, we acquired a number of new tenants into our portfolio, including our first Lowe's, Academy Sports, Burlington, Camping World, Tractor Supply, Harris Teeter, and O'Reilly Auto Parts, just to name a few. When we take a step back and look at the markets where we acquired properties throughout the year, they included some of the strongest in the United States, including Houston, Dallas, Charlotte, Atlanta, Seattle, Washington, D.C., Phoenix, and Orlando.
With the attractive locations of our assets and rents that we believe are below market and our 2021 execution is a good representation of our overall investment strategy, where we look to combine excellent real estate fundamentals with well-performing retailers and sectors that mitigate the near-term risk, but preserve upside through long-term residual value. At the end of the year, our portfolio was once again 100% occupied and consisted of 113 properties totaling 3.3 million sq ft, with tenants operating in 26 sectors within 32 states. Our top tenants include Wells Fargo, At Home, Hobby Lobby, Academy Sports, Dollar General, Walmart, Walgreens, and Lowe's. The largest change to our top tenant list came from the sale of our Hilton Grand Vacations properties.
This sale generated a true cash gain of over $7 million and a book value gain of more than $9 million, helping improve our overall book value by $0.70 per share. With the Hilton sale complete, the Wells Fargo property in Hillsboro, Oregon, is the sole remaining office asset in the portfolio. We are in active discussions with interested parties, and we have included this property sale in our 2022 disposition guidance, which will help fund our acquisition activity for the year. For 2022, we'll continue to execute our real estate focus investment strategy, where our size affords us the opportunity to be nimble and acquire high-quality acquisitions in a competitive but fragmented net lease transaction market. With that, now let's turn the call over to Matt.
Thanks, John. As John mentioned earlier, our portfolio remains 100% occupied and our tenants have performed very well, paying 100% of their contractual base rents in the fourth quarter and throughout the entire year, including all of their scheduled COVID-related deferral repayments. For the fourth quarter of 2021, FFO was $0.42 per share, a $0.05 per share increase over the third quarter, and AFFO was $0.41 per share, which was a $0.04 per share increase from the third quarter. For the full year, FFO was $1.58 per share, representing a 28% increase over 2020, and AFFO was $1.59 per share, which was a 53% increase over 2020.
Our AFFO for the full year was positively impacted by $0.43 million of repaid rent related to previously disclosed COVID-19 rent deferral agreements. As we disclosed last quarter, we have one remaining tenant making repayments under a previously agreed- to rent deferral agreement, and these payments of $22,000 per quarter are scheduled to occur through the second quarter of 2022. General and administrative expenses for the year, which includes the $3.2 million of management fees to our external manager, totaled $5 million. This was a year-over-year increase of 7.9% , which was meaningfully offset by our revenue growth of more than 56 %.
G&A as a percentage of revenues in 2021 was 16.7%, a year-over-year decrease of more than 750 basis points, which compares very favorably to a number of our small-cap net lease peers and continues to reflect our improving organizational scale and efficiency. Our growth allowed us to increase our cash dividend in the fourth quarter by nearly 6% to $0.27 per share. FFO and AFFO fourth- quarter payout ratios were very healthy at 64% and 66%, respectively, and we currently have a strong annualized yield of approximately 5.6%.
Our fourth quarter dividend marked the sixth dividend increase by the company since its IPO in late 2019, our fifth consecutive increase in as many quarters, and a 23% increase over our fourth quarter 2020 quarterly dividend. We anticipate announcing our regular quarterly cash dividend for the first quarter of 2022 towards the end of February. Turning to our capital markets activities and the balance sheet, 2021 was a very busy year. We nearly doubled the size of the company, sourcing $250 million of debt and equity through a combination of term loans, loan assumptions, ATM issuance, and our inaugural follow-on offering and OP unit issuance. During the fourth quarter, we issued 152,000 shares of common stock through our ATM program for total net proceeds of $2.8 million.
Year to date in 2022, we have issued 0.213 million shares of common stock through our ATM program at an average price of $19.98 per share for total net proceeds of $4.2 million. We ended the year with net debt to total enterprise value of just under 50%, net debt to pro forma EBITDA of 8.1x, and a very healthy fixed charge coverage ratio of 6.2x, which is one of the strongest in the net lease sector. With no debt maturities other than our revolving credit facility until 2026; year-end liquidity from revolver availability and available cash on the balance sheet of $60 million and anticipated future proceeds from disposition activities, we believe we have adequate liquidity to fund our projected acquisition activities for the near future.
As we look out into 2022, we did provide initial guidance in our press release last night. This guidance relies on a number of significant assumptions, including, but not limited to, our ability to raise funds for investment at a reasonable cost of capital, our ability to acquire and sell assets at reasonable valuations in support of broader capital markets and an overall stable economy. We begin 2022 with portfolio-wide in-place annualized straight-line base rent of $36.9 million, or $35.7 million of in-place annualized cash base rent. Our full year 2022 FFO guidance range is $1.53 per share-$1.58 per share, and our full year 2022 AFFO guidance range is $1.51 per share-$1.56 per share.
As I previously mentioned, our 2021 AFFO per share results included the positive effects of $430,000 of COVID rent deferral repayments, and with those COVID rent deferral repayments having largely run their course, in 2022, they are anticipated to total just $45,000. While the year-over-year changes do create some noise in our AFFO per share comparisons from 2020 to 2021 and from 2021 to 2022, they do not impact year-over-year comparisons for FFO because we continued to straight-line the contractual rents during the repayment period instead of moving to a cash-based revenue recognition approach for those impacted tenants. Our 2022 per share guidance does assume some delevering of the balance sheet when compared to our year-end 2021 credit metrics, both from a forecast of dispositions and from our projected capital markets activities.
While the ebbs and flows of leverage do impact period-to-period growth metrics for PINE, we have maintained that a long-term focus on risk-adjusted returns drive the best long-term value for our shareholders. On the transaction front, we expect to acquire between $200 million - $250 million of retail net lease properties during 2022, and subject to market conditions, we believe these acquisitions will occur at a similar blended yield to our 2021 full-year acquisition cap rates. Our transaction volume guidance and anticipated cap rates do not include the potential grocery development site at our existing property in Jacksonville, Florida, which we disclosed in the third quarter and is still subject to finalizing customary due diligence and approvals.
Finally, our guidance does assume we sell between $40 million-$50 million of assets throughout the year, including, as John mentioned earlier, the lone remaining office property leased to Wells Fargo in Hillsboro, Oregon. Given the lease with Wells Fargo has less than four years remaining, we expect our portfolio's weighted average lease term to meaningfully improve after we sell this property and redeploy the proceeds. With that, I wanna thank our shareholders and business partners for their strong support in 2021, and we look forward to continued success in 2022. I'll now turn the call back over to John for his closing remarks.
Thanks, Matt. 2021 was a strong year of growth for Pine, and we're excited to be entering 2022 with such a high-quality portfolio, with no meaningful near-term lease maturities and robust acquisition pipeline. All of our momentum to the end of 2021 has continued with a fast start in 2022, and that momentum will be a strong tailwind as we execute our real estate-focused strategy and seek to drive further value for our shareholders. I want to congratulate our team on a record-setting year, and thank you to our shareholders for their support. At this time, we'll open it up for questions.
Thank you. If you have a question at this time, please press star then one on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of RJ Milligan with Raymond James. Your line is open. Please go ahead.
Hey, good morning, guys. Couple questions. I wanted to start out with the acquisition guidance. You guys did $260 million in 2021, calling for $225 million, slight decline in 2022. I'm just curious what's sort of driving that and what's your visibility over the next couple quarters in terms of acquisition volume? You know, what potentially could we see to get to the higher end of that range by the end of 2022?
Yeah. Thanks, RJ. I mean, the visibility looks really good as far as the pipeline. I think we're just basically, you know, hedging our bets here a little bit in that, you know, obviously we're in a kind of a choppy macro market, capital markets and, you know, who knows where things go. Maybe there's a war in Europe and everything. I think we're just not saying we're slamming on the pedal to the metal and doing acquisitions, you know, just to do them. We're just being a little bit careful. We're optimistic that, you know, you know, obviously we'd like to do more, but it's all obviously dependent on capital markets and so forth. I'm not as concerned about pipeline and ability to find high- quality at good yield. It's just a little bit more concerned about the backdrop.
Yeah, that makes sense. Matt, in your opening comments, you talked about leverage just over 8 times at the end of the quarter, and obviously that bounces around depending on, you know, capital markets activity. Assuming, obviously, the dispositions or planned dispositions are factored in there, but can you just talk about how you expect leverage to trend, you know, as we go through the year and sort of on a longer- term basis?
Thanks, RJ. I think the good news is that we've got more liquidity in the stock over the last few months, and we've been able to execute on the ATM to start the year pretty efficiently. I think you can assume we'll probably be active on the ATM to match fund transactions throughout the quarter going forward. Then within guidance, you know, our guidance sort of assumes we're gonna be plus or minus that 7x range at the end of the year; so, there is some de-levering in there. Obviously we gave some indication on what we thought the share issuance would look like with the range that we provided. There certainly will be some de-levering, and we'll be efficient on the ATM. Then to John's point, we'll see how the capital markets evolve.
Thanks. Then my last question, just to make it a little bit more broad. John, you talked about, you know, the expectations for cap rates to sort of remain the same in terms of 2022 versus 2021. Can you just talk about what you're seeing out there in the market in terms of cap rates? Has any of this, you know, macro headwinds that we've seen over the past couple weeks, has that impacted pricing or the availability of product?
We have not seen it as far as the pricing get better as a buyer. It's held fairly steady right now. You know, we are being a little bit more picky as far as, you know, not looking to, we're bidding a little wide to see if there is some loosening in the market. So far we haven't seen it. We're optimistic that, you know, we'll be able to pick off some things at more attractive prices. We're finding, you know, good acquisition properties at good yields for us. We're seeing whether we can do a little bit better. We have not seen the pricing change in the market. There's just so much capital still out there.
I think a lot of people are looking at this as far as going in for the inflation hedge. You know you're hearing dialogue from the brokerage market that you know there is capital going to the safety of this type of asset for the obvious reasons. We're competing with that. You know, last year was 1031 scramble; everyone's worried about that. Now it's the inflation scramble. We'll keep monitoring it and keep pursuing things.
Thanks, guys. Appreciate it.
Thank you.
Thank you. Our next question comes from the line of Michael Gorman with BTIG. Your line is open. Please go ahead.
Yeah, thanks, good morning, guys. John, just sticking with the acquisition market for a bit, obviously, you know, still see some strength there. Can you just talk about are you seeing any kind of divergence in opportunities, whether it's amongst geographies or the different kind of retail property types that you're looking at?
You know, I think, as a backdrop, you know, as we're working on the sale of Wells Fargo, we want to make sure we curate a very strong, you know, top- ten tenant list. We're working hard to kind of, you know, keep on impressing you with the quality of our portfolio; I think you're gonna see us, you know, pursuing some really good credits that will make its way up to the higher- end of the leaderboard with regards to tenant concentration. We're very excited that we're seeing some good acquisition opportunities in good markets that will help us kind of formulate even a stronger tenant backdrop.
It's really all across sectors and locations. I would say we're pleasantly surprised to get some of the locations we're getting. Like, you know, for instance, the Houston acquisition that happened in the fourth quarter. When we did that ground lease portfolio, we were really, you know, happy to get that portfolio at that type of pricing with that kind of quality. It just kind of reinforces the quality of our whole portfolio that we were able to source something like that. That was totally unexpected and a terrific acquisition for us and for the company. Hopefully we can do more of those going forward.
That's great. Maybe kind of transitioning off of that with the quality that you just talked about, you know, your presentation has some new disclosures in it talking about demographics. It's not something that often comes up a lot in net lease. So I'm just curious, as you focus on kind of the quality of the actual real estate itself, is that something that's getting priced into the market, or is this a situation where not a lot of the other bidders are looking at the underlying real estate demographics, and maybe you can pick up what we would call better- quality real estate at the same pricing as another location?
Yeah. I mean, look, I mean, that's we're trying to force the conversation because obviously our portfolio is super strong compared to maybe other folks. It's certainly not getting priced into our stock. I mean, we're. You know, the multiple we're trading at is on the low side. If you look through the portfolio and the demographics and the locations, you know, we certainly should be trading higher just based on the quality.
We're trying to draw out those that fact pattern so people, as they look at investing in different net- lease REIT companies, that you know they'll say, "Okay, I can pick up Alpine at a very low multiple, higher dividend yield in a much better- quality real estate portfolio in strong markets." We're very focused on that where you know, obviously Houston's our largest market now, you know, obviously incredible macro tailwinds for Houston with oil and so forth. You know, very much a strong growing economy.
We did a John Burns study two years ago and basically said, you know, giving John Burns basically different criteria, you know, what cities with major airports, big universities, who has the highest job growth, population growth, and actually Houston came on top, and this is when oil was at, like, $20 a barrel, which was a little bit shocking to us. In digging deeper with John Burns on it, you know, it's a little bit, a lot of it had to do with being a business-friendly city. It's all about growth. You know, look, Houston probably won't be the top one forever, but it just shows you kind of, you know, how we look at it, really going with a macro backdrop and then really strong real estate within our acquisitions.
Mike, the other thing I would add is, you know, in the net lease space, a lot of times people focus on the tenant quality, which is important. But when you see us acquire assets that maybe have a tenant that isn't as strong as you would typically see us acquire, it's usually because we see a lot value in the real estate, and that's where we're finding some unique opportunities in the market where maybe it's being priced off the type of tenant that's there, and the quality of the real estate and the ability to mark those rents to market gives us an opportunity for longer- term residual value.
Right. There's a different opportunity there because other people aren't looking at it the same way. That makes sense. Last question, just on the amount of capital in the space. Just as you're out there looking at acquisitions, what kind of competition are you coming across? Is there still a lot of the 1031 money out there that maybe isn't non-economic? I'm just trying to get a sense for there could be a lot of capital out there, but how economically sensitive is it? How rate sensitive is it? Like, is the market gonna move in concert with rates here, or is there gonna be a stickiness where maybe it's a 6-month, 9-month lag if we get a more significant move- up in rates, but the capital doesn't necessarily care because it's got other motivations?
Yeah, good question; We're seeing less of that right now on these smaller acquisitions where it's being 1031- driven. I think a lot of that happened at the end of the year. I think now you're seeing more on the individual side; on these smaller transactions, you know, people are buying more allocation of capital rather than 1031- driven. I don't see, you know, cap rates just, you know, some sort of frenzy getting tight, very tight because there's a feeding frenzy with regards to 1031 money. But, I mean, you do see that in, you know, call it a Chick-fil-A ground lease. I mean, that stuff trades at, you know, crazy low cap rates. But, you know, we're not seeing it kind of across the board.
You know, on the larger institutions, you know, they're obviously not focused on this type of product. We are seeing on larger acquisitions there, you know, deep institutional capital that is chasing. We're kind of in the in-between zone, which is perfect for us, where we're more competing with smaller players, and that's where we're picking up a lot better yield in high- quality. If we were going down to the McDonald's ground lease, that would be really difficult for us to transact on. If we're going into the $300 million type acquisition range, that would be really tough to compete on. This in-between zone is actually kind of the sweet spot.
Okay, great. Thanks for your time, guys.
Thank you.
Thank you. Our next question comes from the line of Robert Stevenson with Janney. Your line is open. Please go ahead.
Good morning, guys. John P. Albright, what's the right way to think about the fourth quarter acquisitions ex the ground leases? Were the cap rate on that consistent with the 6%-8% in the third quarter that you did, and the 6%-8% for the full year? Was there something in terms of the quality that brought that down in addition to the, you know, ±5% cap rate on the ground leases?
Yeah. It really, the ground leases kind of drove the cap rate. As we mentioned in the intro that we expect cap rates to be higher than our fourth quarter average. You know, that was a little bit of a, you know, one-off, if you will, that did that. We're being picky going forward and elevate that.
All right. There wasn't anything from outside of the ground leases that sort of, you know, skewed the 2/3 of the non-ground lease acquisitions away from a sort of high sixes, low seven sort of cap rate in the fourth quarter.
Right.
There's no market pressure that's pulling that down inherently.
There wasn't any. Correct.
Okay. What are the characteristics of the dispositions beyond Wells Fargo? What makes those assets ripe to sell, you know, in 2022 for you guys?
Well, you just gave me the fat pitch, so I appreciate that. We are getting kind of reverse inquiry on assets that we've bought not too long ago, where someone just feels like they have to own it. We will put a price on it and say, "Look, if you wanna own it at this price, we're happy to sell it to you." I mean, we like the asset, we like the credit, but, you know, there's a price for everything. That's really driving it, really some inbounds on things that we've recently purchased. Even with Alpine Valley Music Theatre opening up for the summer concerts, I got a couple of calls on that not too long ago.
Anyway, that's a little bit of that guidance.
Okay. Last one for me. Matt, you know, how should we think about the rough timing of the fourth quarter acquisitions? Sort of mid-quarter? Was it a lot of, you know, late December weighting? How much of the call it $1.6 million of NOI was included in that $0.42 of FFO should we be thinking about?
Yeah. I'd say the majority of it occurred in December. It wasn't all in the last week or anything, but it was certainly back half weighted within the quarter.
Okay. Like ex dispositions, your runway is actually higher than that 42 at this point?
Correct.
Okay. Thanks, guys. I appreciate the time.
Thank you.
Thank you. Our next question comes from the line of Barry Oxford with Colliers Securities. Your line is open. Please go ahead. Barry, your phone may be on mute.
It was on mute. Thank you so much. Thanks, guys, for taking the question. Getting back to the capital structure, and paying down some of the debt in 2022, and utilizing the ATM, your share count does go up, you know, a fair amount. Can you guys get to that share count just via the ATM? You think there's enough liquidity there? Or look, at some point during the year, we'd probably do a follow-on.
I mean, I think it's to be determined. The liquidity, like I said, has improved quite a bit over the last few months. Far be it for me to project how that's gonna trend going forward, but if it continues to improve, I think it's feasible that we could do that amount off the ATM. I'm not gonna sit here and tell you one way or the other that that's the way that we've assumed it's gonna happen. We're gonna maintain flexibility in terms of how we execute on that.
You got a couple models with a couple different scenarios in them.
We do.
Got it. All right. Most of the other questions have been answered. Thanks so much, guys.
Thanks, Barry.
Thank you.
Yep.
Thank you. Our next question comes from the line of Anthony Hau with Truist Securities. Your line is open. Please go ahead.
Good morning, guys. Thanks for taking my question. Just one quick question on ground lease. What's the lease structure on those Houston ground lease?
I mean, the lease structure is, you know, basically that obviously we own the ground. The tenant owns the sticks and bricks, and we have a long-term ground lease. There's escalations along the way in different forms. It's really traditional, nothing special about it. You know, we love it because obviously you're in a very asset-protected position with residual upside. It's kind of a, you know, a lot of optionality for us as a holder of the ground.
What's the rent escalation in those ground lease again? Are they like, you know, 5% over 5 years?
It varies. Some of them are annual escalations, some are 5% or 10% every 5 years. Some of them are flat with escalations in the options, so it depends on the tenant.
Gotcha. What's your appetite to buy more ground leases in this environment?
I mean, look, we'll buy 'em if, you know, it's set up, you know, as if we're getting paid a little bit higher than where this would be traded normally if a portfolio discount kind of arises, and that's what happened with the portfolio we had. You know, just hypothetically, let's say we had a $50 million ground lease portfolio opportunity, we may buy it, but then sell off retail out some of them to retain some of the ground leases at a much higher yield than you'd be able to manufacture. We may do something like that to make sure we're not compromising our cap rate, but , I don't expect to see a lot of that because obviously, there's a lot of buyer interest for ground leases. We certainly keep an eye out for it.
Gotcha. This is like my last question. John, what's your philosophy on issuing equity to reduce leverage and growing the size of the portfolio and earnings growth if, you know, the stock price stay the same?
You know, I think you see. You know, it's interesting looking back at some. Let's just take a step back and look at the highest FFO multiple net lease REIT out there right now. I think it's NETSTREIT. Alpine was outperforming NETSTREIT until they got a lot larger, and then all of a sudden they took off. I think everyone realizes it in this market that we need to get a little bigger to kind of get that traction on the cost of capital. I think we've come a long way, for sure. We don't need to really do a lot in the capital markets as we modify the portfolio to be, you know, best- in- class.
Once we have Wells Fargo sold and we have that capital to deploy in acquisitions, and we have those acquisitions come through, and you look and see our tenant list, and it's very strong, it's gonna be very self-evident to everyone that, hey, this is the place to be. We're, you know, look at the yield that Alpine's priced at, look at the FFO multiple. We're very, you know, cautious on the capital markets until we get, you know, good cost of capital. We know that as we get larger, a lot of people look at it as like, okay, as we get larger, there's more liquidity, we're de-risking, and that's all good. We're careful with it and we kind of monitor it.
I know, you know, we're, you know, obviously very attractive stock given where we're valued. I think our shareholders are getting paid to wait for that transformation to happen.
Okay. Thanks, guys.
Thank you.
Thank you. Our next question comes from the line of Craig Kucera with B. Riley Securities. Your line is open. Please go ahead.
Yeah, hey, good morning, guys. I wanted to circle back to the Wells Fargo sale. I think last quarter you mentioned that there was some consideration that, from residential redevelopers. First of all, is that potentially driving better pricing than we would've seen maybe six months ago, given the interest in the sector? Second, sort of, you know, can you handicap when you think that might close given activity?
Yeah. The residential part of it certainly played a very large role in the interest; I would say that the buyer interest— the quality of the buyer interest —is very strong because of the residential play and because of, as you mentioned, the very you know, that sector is very strong and great, you know, market backdrop for it and a lot of players. That certainly helped quite a bit. With regards to timing, you know, that's kind of a second quarter expectation on a close.
Got it. I feel like last quarter, as far as considerations regarding overall office asset sales, you were thinking kind of maybe in the mid sevens. Is that maybe tightening given the increased interest from some of these residential developers?
No, I wouldn't say that because, you know, what you have to remember, you know, Wells Fargo has, you know, a certain amount of time left on their lease, you know, almost five years. They have renewal options. You know, a developer has to kind of wait to kind of get to that development opportunity. It just factors into their overall yield expectations. I wouldn't say that the pricing got tight because of that with regards to having that the lease in place. You know, you had to have a big enough player that could live off the yield and so forth. Got it. Shifting gears, I know that you added Sportsman's Warehouse here in the fourth quarter.
I'm curious as to whether or not those purchases occurred before the canceled merger with Bass Pro Shops, and did that impact your underwriting at all. They did happen before the cancel, but you know, we got very comfortable with the acquisition. We're more concerned, to be honest with you, that the merger may have a situation where they close some of the Sportsman's Warehouse because there's some sort of overlap. Now, obviously, that's gone away. But we got comfortable because in talking to the Sportsman folks, you know, these particular stores are very strong operations and do very well. You know, obviously, the company, given that they got a $50 million termination fee, and you know, they have no debt, they're in a very strong position.
I expect in looking at their investor presentation that they're gonna be growing the company further now as a standalone. To answer your question, is we bought it before the canceled merger, but we had more concern with the merger than we do now.
Okay, great. Just thinking about your lease expirations, it looks like a few of the purchases you made in the fourth quarter were shorter term leases. You now have some expiring in 2022, a little bit more in 2023. Do you recall whether or not those leases were priced at market, or are there any opportunities maybe for increases to market?
Most, if not all, I'll let Matt answer, but you know, I don't think I've seen a renewal where it's flat. The expectation is they're gonna have escalations.
Yeah. Most of them, Craig, over the next few years have escalations at the renewal options. Just given the rise in inflation, I think it's gonna be a lot harder for tenants to relocate in a specific market because, you know, the cost of occupancy is going up. To make that change, they're gonna get repriced to where rents are in the market at that time. You know, we feel pretty good about the stickiness of the tenants.
Great. One more for me, that kind of dovetails with my final question. Can you give us a sense, after this round of acquisitions here in the fourth quarter of sort of what the breakout is, from a rent escalation perspective? What percentage is flat versus fixed versus maybe any CPI sprinkled in there as well?
Yeah, very few have CPI; It's not as relevant in the more institutional net- lease space, right? 'Cause most of our tenants, almost three-fourths are publicly traded. You know, in terms of what's flat and what's annual and what's other, about half the leases are flat, and about half have contractual rent increases. The one thing I would highlight is with our weighted average lease term being a little bit lower than the peers, we're set to benefit from the rent increases that come in the options, which are typically between 5%-10%. So even though we might have some flat leases in the portfolio, as those flat leases come up for renewal at the end of the primary lease term, we should benefit from additional rent growth going forward through those option increases.
Okay. Thanks. I appreciate the color.
Thanks, Craig.
Thank you. Our next question comes from the line of Jason Stewart with JonesTrading. Your line is open. Please go ahead.
Thanks, good morning. I wanted to sort of loop back to the concept of capital outflowing from the broader economy and think about the way you're looking at disposition and acquisition cadence throughout the year and how that sort of comes back to that. I think, John, the first comment you made about activity there and flow of funds. Yeah. I mean, the pipeline we have is very strong for, you know, what we see in the quarter. That's with being, you know, very selective. We hope that, you know, the backdrop, you know, we are seeing it on larger assets where people are looking to monetize. We feel like there'll be more opportunities going forward.
We're not trying to kind of, you know, bring it all in the early part of the year. We wanna be mindful that we might even have better opportunities. We're just kind of, you know, buying our time, but bringing in the acquisitions as we see good opportunities, not trying to time the market one way or the other.
Gotcha. Aside from the Wells Fargo asset on the disposition side, does that factor into your cadence of thought process for dispositions?
Yeah. Outside of Wells Fargo, it really, you know, has to do with, you know, we're certainly not looking to sell some of these assets. If someone just really wants to have it, you know, and being very aggressive on the pricing, we won't try to time that. We'll just, you know, sell it as that sort of interest formulates. You know, that one, we're not kind of picking our spots. If someone really wants to pay our number, we're happy to entertain selling assets.
Got it. Okay. Thanks for taking the questions. Appreciate it. Thank you.
Thank you. Our next question comes from the line of Wesley K. Golladay with Baird. Your line is open. Please go ahead.
Hey, yeah, good morning, guys. I just wanna go back to the, I guess, the building out a footprint in top MSAs. Can you, I guess, give us color on how you see the renewal opportunity for the top MSA assets versus traditional net lease? Typically, we see those renew at flattish rates. Would this be for the top MSAs more like the mid- to high-single digits that the shopping center companies produce on renewal?
Sorry, Wes, you kind of broke up there.
Yeah.
What particularly are you looking for us to talk about related to the top MSAs?
Yeah. For the net lease that's in the top MSAs. Typically, what we see for the net- lease companies would be renewals are flat after the annual escalations; but when you look at your portfolio, you have that emphasis on the top MSAs, and I'm just curious if the renewals there would be more like the shopping- center companies, where you may get that mid-single- digit renewal, maybe a high- single- digit renewal.
Yeah. I think, going back to my comment related to Craig's question, you know, most of our leases, a vast majority of them have 5%-10% increases in the options. We're continuing to see positive demographic trends in those top MSAs, right, I mean.
I mean, one thing we're kind of seeing is tenants looking to maybe do an early extension with us because they know that they wanna stay there, and they don't wanna necessarily pay the escalation at. So they're coming to us and saying, "Hey, if we give you term now, will you kinda keep our rent flat?" We get a lot of that. So it's a little bit of a dance that if we certainly roll out to a lease termination or expiration, there's that, as Matt said, 5% or 10% bump. But you know, sometimes we'll be a little bit more risk averse and take an early extension. But anyway, I hope. Does that help answer?
Yeah. I mean, I get that you guys have some that have the big pop, the ones that have the flat leases. I guess what I'm trying to get at is you have the ones that have the annual escalators, and a lot of net lease companies have those. Typically, what we see is for the tenants that do renew, those typically renew at a kind of similar rate to the last rent you received. Being that you're in a more inflationary environment, you're in a top MSA, replacement costs are rising. For those ones that you do have the annual escalators in there, when you do come to renew, assuming there's no options, would that be more typically like a shopping center where you may get that 5%-10% bump versus a-
Most of them all.
They stay flat.
Yeah, most of them all have renewal options embedded; so, there's not that one where they don't have any renewal option and you can basically get a mark-to-market.
Got it. That's what I was looking for. Thank you very much.
Yeah. Sorry about that.
Thank you. I'm showing no further questions at this time, and I would like to turn the conference back over to John Albright for any further remarks.
Thank you very much for attending the call and look forward to talking with you going forward in this new year. Thank you.