NNN - NYSE

Good day, everyone. Welcome to the NNN REIT Third Quarter 2025 earnings. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Steve Horn. The floor is yours.

Thanks, Kelly. Good morning. Thank you for joining NNN's Third Quarter 2025 earnings call. I'm joined today by our Chief Financial Officer, Vin Chao. NNN's disciplined growth strategy, proven operations and commitment to deploying shareholder money and sufficiently accretive acquisition continues. Our focus remains on delivering long-term value, navigating market challenges and capitalizing on opportunities that drive sustainable growth. As detailed in this morning's press release, NNN delivered strong performance in the third quarter, the team did an outstanding job closing 20 deals containing 57 assets for $283 million. While maintaining balance sheet flexibility with $1.4 billion in total availability and the industry-leading average debt maturity of nearly 11 years. Based on our consistent performance, we are raising our 2025 guidance for core FFO per share to a range of $3.36 to $3.40 reflecting the strength and discipline of our multiyear growth strategy. In addition, we're increasing our 2025 acquisition value to a midpoint of $900 million, which would be an all-time high for the company. Before we discuss day-to-day operations and market conditions, I want to highlight several important risk management events that demonstrate NNN's proactive approach and resilience. At home, emerged from bankruptcy in late October and eliminated substantially all of its nearly $2 billion of funded debt and secured $500 million in new financing. More importantly, NNN had 100% of its leases affirmed during the restructuring, given the strong property level performance and low in-place rent. Moving to the vacant assets. By the end of the third quarter, we resolved 23 of the 35 furniture assets, and we have strong interest in the remaining assets. We expect to only have 2 left to work out by the end of the year. There's still a real possibility of reducing that number to 0. This rapid progress reflects both the quality of our real estate and the effectiveness of our disposition and leasing team members. Around the same time, we were doing with the furniture tenant, we proactively took back 64 assets that were previously leased to a restaurant operator by quickly executing an eviction process. This decisive action allows us to reposition the assets for future growth. As we discussed on previous earnings calls, we executed a lease on 28 assets, which provided ample time for the new operator to prepare for openings, commence rental payments, more importantly, allow us to evaluate the performance. However, an unfortunate legal dispute that does not involve NNN arose between our new tenant and former tenant and is ongoing with no definitive end. With that backdrop, during the quarter, NNN and the tenant agreed to part ways due to the continued legal uncertainty, temporarily reducing our occupancy to 97.5% as of September 30. Out of the 64 properties, 15 have been sold or re-leased, 12 more are slated to be resolved by year-end and 14 more are expected to be sold during the first quarter. Based on our execution and current visibility since the end of September, we are confident that our occupancy will again exceed 98% by year-end. We have clear line of sight to resolving more than 75% of the former furniture and restaurant operator assets by the end of the first quarter of 2026. Importantly, NNN has already recognized the full financial impact of these events positioning us for earnings upside as we re-lease these assets and redeploy the proceeds from the sales without the need for future capital. NNN's proactive management, rapid asset resolution reinforces our ability that turn short-term challenges into long-term value creation. We are well positioned to capture upside as these assets are resolved, further strengthening our portfolios and supporting continued growth. Turning to the operating results. Portfolio of approximately -- or portfolio of 3,697 freestanding single-tenant properties across all 50 states continue to perform well. I would classify this quarter as a home run on renewals. 92 of the 100 renewed ahead of our historical renewal rate of 85%. More importantly, rental rates were 108% above prior rents. We also leased seven new properties to new tenants at rates of 124% of previous rents, demonstrating strong demand and execution. Our asset management team and leasing team have done a fantastic job getting deals done at a high level. Our tenant base remains stable. No material concerns at this time. Moving to acquisitions. During the quarter, we invested $283 million in 57 new assets, an initial cap rate of 7.3% with an average lease duration of nearly 18 years due to the sale-leaseback nature of our deals. The first 9 months, we've invested $750 million in 184 properties at a cash cap rate of 7.4%, which has NNN tracking to a record year of acquisition buying. As we move through the year, cap rates for the most part have stabilized, and I don't see any material way either up or down as we head into the fourth quarter and for the deals we were pricing for the first quarter of 2026. As one of the original net lease companies in the public markets, NNN has successfully operated the diverse economic cycles, while private capital has increased competition, especially for the large portfolios, our disciplined approach and long-standing tenant relationships enable us to consistently execute and deliver a highly competitive environment. During the quarter, we sold 23 properties, 11 of which were vacant, generating $41 million in proceeds from redeployment into income-producing properties. Also, the properties we sold were not core assets and the sales were executed at approximately 145 basis points below our invested cash cap rate, demonstrating strong upfront underwriting and value extraction. Our balance sheet is one of the strongest in the sector. Our credit facility has plenty of capacity, as I mentioned earlier, with no balance outstanding and we maintained the industry's best nearly 11 years weighted debt maturity. NNN is well positioned to fund our remaining 2025 acquisition guidance and beyond. With a robust pipeline, strong financial foundation and proven leadership, NNN is well positioned for continued success. We are committed to optimizing our portfolio, driving sustainable growth, enhancing shareholder value. With that, let me turn the call over to Vin for more color and detail on our quarterly numbers and updated guidance.

Thank you, Steve. Let's start with our customary cautionary statements. During this call, we will make certain statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not release revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ from expectations are disclosed in greater detail in the company's filings with the SEC and in this morning's press release. Now on to results. This morning, we reported core FFO of $0.85 per share and AFFO of $0.86 per share for the third quarter of 2025, up 1.2% and 2.4%, respectively, over the prior year period. Annualized base rent was $912 million at the end of the quarter, an increase of over 7% year-over-year. Our NOI margin was 98% for the quarter, while G&A as a percentage of total revenues and as a percentage of NOI was about 5%. Cash G&A was 3.6% of total revenues. AFFO per share for the quarter was slightly ahead of our expectations, driven primarily by lower-than-planned bad debt and higher interest income on our cash balances. Free cash flow after dividend was about $48 million in the third quarter. Lease termination fees totaled $669,000 in the quarter or less than $0.05 per share. This line item has begun to normalize following the proactive monetization of the largest of our dark but paying tenants. From a watch list perspective, there have been no material changes since last quarter. And while we remain vigilant regarding potential issues, we do not currently view any of our watch list tenants as near-term concerns. At Home, which remains on the watch list, successfully exited bankruptcy with a significantly derisked capital structure, reducing total debt by $1.5 billion through the bankruptcy process. As expected, at Home, assumed all of our properties, reflecting the strength of our underwriting and the high quality of our real estate. Turning to the balance sheet. Our Baa1 balance sheet remains in great shape. At the end of the quarter, we had no floating rate debt. No encumbered assets and $1.4 billion of liquidity, including full capacity on our $1.2 billion revolver and almost $160 million of cash. Our leverage ticked down modestly to 5.6x from 5.7x last quarter, and our debt duration remained the highest net lease space at 10.7 years. As previously announced, on July 1, we issued $500 million of 4.6% 5-year unsecured notes. Additionally, during the quarter, we issued 1.7 million shares, primarily through our ATM as part of our overall capital plan for the year. In total, we raised $72 million in gross proceeds at a weighted average price of $42.89 per share. Looking forward, we had a $400 million 4% coupon bond maturing later this month. With our July bond offering, we have prefunded a portion of this pending maturity and our force balance sheet provides us with multiple options to refinance accounts. As I've stated on prior calls, our balance sheet is a source of strength, and we will look for ways to utilize this competitive advantage to support growth while protecting downside risk. On October 14, we announced a $0.60 quarterly dividend payable on November 14, which equates to an attractive 5.6% annualized dividend yield and a healthy 70% AFFO payout ratio. Notably since going public in 1984, NNN has paid over $5 billion in total dividends. I will conclude my opening remarks with some additional comments regarding our updated outlook. We are raising core per share guidance to a new range of $3.36 to $3.40 and AFFO per share to $3.41 to $3.45. Increases reflect our year-to-date outperformance versus plan as well as our updated assumptions over the balance of the year. We now expect to complete $850 million to $950 million of acquisitions of $250 million from our prior forecast. We expect fourth quarter acquisitions will be weighted towards the back half of the quarter. At the $900 million midpoint, our updated guidance represented a record level of annual investment volume for the company. We are also increasing our disposition outlook by $50 million to a new range of $170 million to $200 million. As a reminder, we typically fund our investments with a leverage-neutral 60-40 mix of equity and debt. From a credit loss perspective, we are now including 25 basis points of bad debt in our full year outlook, including about 20 basis points booked year-to-date. This is down from our prior 60 basis points projection given our limited losses thus far, the successful resolution of the At Home bankruptcy and the collection of pre-petition rent from At Home. Lastly, there were no notable run rate adjustments to call in the third quarter. With that, I'll turn the call back over to the operator for questions.

[Operator Instructions] Your first question is coming from Jana Galan with Bank of America.

This is Dan Byun of for Jana. My first question is could we get a little bit more color around the outsized interest income as well as just what caused the increase at the low end of the range?

Yes. For interest income, really, we did do the debt offering in July 1, and so we were sitting on a fairly high cash balance. And interest rates on that, we were deploying that into money markets and other short-term interest-bearing deposits and rates were a little bit better than we had projected. So that was driving interest income. As far as the low end of the AFFO guidance, I mean, we did outperform for the quarter. And I think the upside is really fueled by the acquisition volume that we've had so far as well as what we expect for the balance of the year. Offset by a couple of things. And so I want to point to south. I think I saw a couple of notes suggesting the flow-through wasn't as much as expected. But if you look at our G&A guidance for the year, sort of the implied fourth quarter is a little bit higher than we had in the fourth quarter -- third quarter. So that's just naturally just the timing of G&A expenses. And so there's a little bit of higher G&A in the fourth quarter and the third quarter. And as we deploy that cash into acquisitions, we will see interest income come down as well. So those are 2 things that are sort of a little bit of a headwind for the fourth quarter.

Got it. And just a follow-up on the acquisition volume. Just could we get a bit more on the rationale behind using equity to fund this, given that the current stock price in your presentation, you showed that your cost of capital is around 7.3% year-to-date. It was around 7.4% cap rates. If I can get a little bit more on kind of just the investment spread and the rationale beyond that?

Yes. Look, I mean, I think when we think about how we deploy capital, we're looking to issue or funded, it was 60-40 equity and debt. And as far as the WACC, I think what we put in the deck. Really, we don't try to change that too often. That's probably higher than a long-term debt perspective, that's higher than we would be issuing today. And so think about where are we positioned today and the potential for using a little bit shorter-term debt, just given how long our debt duration is. We probably could be in the mid-6s, maybe slightly higher than that on an all-in WACC. And so at that level, we can still fund 60-40 and be accretive on our acquisitions. We're certainly not looking to lever up to drive growth.

Your next question is coming from Brad Heffern with RBC Capital Markets.

Maybe as a follow-on to that last question. I mean, NNN has never really been a volume story historically, and it doesn't seem like spreads are uniquely attractive right now. So I guess I'm just wondering why we're seeing record volumes. Is that -- is it a pull from your relationship tenants? Or is there something that I'm missing on the cost of capital side that makes it more attractive than normal?

No. Again, you've been touched based on the cost of capital, yes. But our relationships are in the market, and we had the ability to do a little bit more elevated volume in the third quarter. And yes, basically, the tenants are kind of pushing us to do a little bit of the deals. And it's still accretive, maybe not historically as accretive. But yes, it's good deals, good real estate, and we can service the tenant base.

Okay. Got it. And then there's been a decent amount of talk on your peers' calls this quarter about increased competition. Obviously, you're seeing very high volumes. So I'm curious, are you seeing that? And is it impacting pricing at all?

I mean we've always operated in a highly competitive market since I've been with the company. You had private REITs, non-traded REITs always in the market and it's a highly competitive space. The difference is now you're having more financial institution brand names that people recognize in the space. So that being said, the larger portfolios we're seeing increased competition and they're using leverage to lower the cap rates. The good news is NNN doesn't need to do that ridiculously high volume so we don't need the big portfolios. And the $15 million to $20 million deals, we're not seeing that much competition outside of our ordinary competitors. We did 5 deals this past quarter under $5 million. So we're still finding our fair share.

Your next question is coming from Michael Goldsmith with UBS. Your line is live.

You provided an update on At Home, and it seems like the Frisch's and Dolly situation. But are you seeing any other credit issues within your portfolio? And what are your bad debt assumptions now maybe compared to where they were earlier in the year?

I'll take the first half of that. Currently, our overall portfolio, just based on the bad debt that we mentioned earlier is in really good shape. And we are getting to a solution on the restaurant and the furniture tenants here in short over the next 4 months. And I'll let Vin talk about the bad debt assumptions.

Yes, Michael. As far as bad debt goes, as I mentioned in my prepared remarks here, we have assumed for the full year now 25 basis points of bad debt, that is down from our prior expectation of 60 basis points. And that's largely a function of at-home resolving with no issues and assuming all of our leases. We've also had pretty limited bad debt so far this year, roughly 20 basis points booked year-to-date. And then what's helping the fourth quarter a little bit here is we are actually getting pre-petition rent from At Home. So we'll have no credit loss from At Home by the end of the year.

Got it. And as a follow-up, can you just kind of walk through the occupancy path going forward? I think you kind of laid out some sort of -- laid out kind of the plan of disposing of some assets. But can you just kind of walk through the trajectory and where it should be kind of by the end of the year and the setup as you enter in 2026?

Yes. it's kind of when I touched based on my prepared remarks. For the most part, it's the restaurant operator and 15 have been solved. So we have 12 more that will be resolved by the year-end, which will help with our occupancy. And we have 14 more that are under contract or under advanced negotiations that potentially can be resolved a little bit in the end of the year. But if not, for the most part, it will be resolved in the fourth quarter and kind of what we talked about with our renewals being at 92% this past quarter. That helps with the occupancy on a go-forward basis. And we don't see any other tenants in the portfolio that are calling us that there's issues.

Yes. One other thing on that, Michael, Steve mentioned the former restaurant tenant. But on the for furniture tenant, we do have line of sight on 10 additional resolutions by the end of the year. So it's another 10 vacancies that were targeted to be out of -- completed by year end.

Your next question is coming from John Kilichowski with Wells Fargo.

The first one for me would be back on the cost of capital question. I'm just trying to think about '26 here. And Vin, I think you gave some helpful color on that your cost of debt might be a little bit tighter and therefore, there's some spread here, but it's inside of 100 bps. I'm curious, at what point would your stock need to trade or where would your AFFO yields or your capital need to be where the spread would you say is insufficient, and therefore, equity is no longer a consideration.

Yes. Look, I think the way we think about -- if you're thinking about 2026, right, we've stated repeatedly that we can self-fund about $550 million without really hitting equity markets. And so that part is sort of addressed upfront. And then beyond that, we would require some additional equity if we wanted to maintain leverage neutrality. Part of the solution could be to lean into dispositions a bit more. We do have higher vacancies than usual. And so that is a potential source of capital that can offset some of the equity needs or stock needs, I should say. But as far as when the stock price or where the stock price would be to say, "Hey, we're just cutting off equity." I mean I think that is a hard question without knowing exactly what we're talking about buying. But I think the reality is we certainly don't want to be sufficiently less than where we're at today. And I think it's a case-by-case situation when we're dealing with the deal in front of us, it's hard to kind of talk theoretically.

Okay. And then the second one would just be on sort of onetime fees, any termination fees, anything else that you've received this year that you would expect to roll off next year to be somewhat of a headwind? I know I think historically, you've talked about maybe a $3 million being a run rate number. Is that a reasonable expectation for next year? And what would that mean as far as decel from this year?

Yes. Well, I think we had booked about $11 million year-to-date. So I think $3 million is probably more consistent with historical levels, and you saw that our volume or lease termination volume in the quarter did normalize down to about $670,000. So we are starting to see some normalization, as I mentioned in the last quarter, I think we had a number of very large dark but paying tenants that we've been working our way through, and that was driving the outsized lease termination fees. So call it, $11 million to $3 million, would be an $8 million headwind. But I will point out, though, if you look at our real estate expense net, that's going to be the offset, maybe not 100%, but we do -- we do expect to be around $17.5 million of real estate expense net this year, that's largely because of the vacancies. As those vacancies they are addressed, and we kind of outlined visibility on 20 plus by the end of the year to be resolved, that real estate expense net will come down to our historical levels, which is closer to $12 million or so. So that will be a natural offset to some of the lease termination headwinds.

Your next question is coming from Spenser Glimcher with Green Street. Your line is live.

In regards to the higher acquisition volume, despite the lower spreads you're seeing today, do you think that the increased competition is impeding your ability to push cap rates with existing tenants? Because I would think with the long-standing relationships here, you have some leverage just given surety of close and just familiarity with your team. So do you think that the alternative capital sources are kind of swinging the pricing power pendulum more to tenants than we've seen historically?

I mean our relationship tenants are very sophisticated tenants and understand what the market is. So we're not stealing properties from our tenants. Yes, we may get 5, 10 basis points for certainty of closing, saving money on the transaction costs because our documents are in place. But I don't think it's the increased competition because what I stated we're always operating in a highly competitive market, just the names come and go.

Okay. Yes. And then I think you mentioned you did deals with 7 new tenants and sorry if I missed this, but can you just provide some color on what industries or segments these are in? Have you got a sense from these newer tenants what their growth pipelines look like in the next 12 to 24 months? Just trying to get a sense if these are higher-growth tenants in the near term.

Yes. The 7 new tenants were just vacancies that we re-leased and primarily in the convenience store, QSR, auto service sector. But no, I don't have a grasp to give you a good number about their growth trajectory over the next 12 months. However, there's high demand for our vacant assets. So I feel like our tenants are trying to grow, and we're actually getting some new tenants in the portfolio.

Your next question is coming from Smedes Rose with Citi. Your line is live.

We'll come back to Smedes.

Okay. You got it. Your next question is Rich Hightower with Barclays. Your line is live.

I guess really quickly on the At-Home rent. Have you guys disclosed the -- I guess, the amount of pre-petition rent that you've gotten from them or that you expect in 4Q?

Yes, Rich. Yes, at this point, we haven't disclosed the dollar amount, but at this point, we have collected all of June rent from At-Home.

Okay. Great. And then I guess, maybe bigger picture, just -- it seems like renewal spreads have been pretty good, maybe relative to history. I mean, do you expect that trend to continue, maybe just with sort of the supply-demand tightness in retail generally? I mean what are you kind of seeing on that front?

And as we move forward, I'm not expecting it to be below our historical norms given the conversations we're having for the 2026 renewals. But do I think it is sustainable on the re-leasing to have 125%? Probably not. It will be closer to kind of our 100% renewal price around 26% or re-leasing. And the renewals, I kind of expect to fall between that 85%, 95% range.

Your next question is coming from Wes Golladay with Baird.

Just want to look at the acquisition guidance. It looks like it's implying about $100 million to $200 million for the fourth quarter, which is typically a big quarter for you guys. So just curious if you pulled any deals forward into 3Q? Or are you just being conservative here?

I think it's a little bit of a combination, Wes, that we pulled a little bit of the deal volume into the third quarter. And as Vin mentioned, that we have some deals that are slated to close probably back half of the fourth quarter. So you do want to be a little conservative if they did slide to the first quarter.

Your next question is coming from Ronald Camden with Morgan Stanley.

This is Jenny on for Ron. I hope you guys are doing well. Just want to follow up on the At Home portfolio. Just curious, are you looking to hold those assets? Or if you have any plan to kind of dispose them?

Yes. I mean, given the position that At Home is in currently, it was a balance sheet issue, and they solved that issue. Their credit profile going forward is pretty solid. But more importantly, it's a testament to the real estate quality and the in-place rent being so low on those assets that they're good real estate and financially, they're performing. So there's no knee-jerk reaction to sell those assets. Now if somebody comes and offers us a really good deal, yes, absolutely, we would sell that at the right price.

Makes sense. Just switching gears to kind of refinancing plan. Have you thought about your debt maturity in 2026 yet? And like what's your approach given the current rate environment?

I think you said '26, I think you meant '25, but yes.

Yes, I said '26.

As far as the November maturity, we are looking at a variety of options. As I mentioned, we have some flexibility on how we deal with it. Certainly, we could running on line for some period of time. We have plenty of capacity, full capacity on our revolver. That's one option. We could -- obviously, we could hit the bond market. We are looking at -- we've been considering some bank debt as well. We've got a maturity hole in 2029 that fits. And given the size of what we expect, we'll need by the end of the year here that fits a bit more in line with the bank loan as opposed to a bond deal. So a couple of different options we're weighing, but we certainly are -- we've got lots of options as well.

Your next question is coming from Linda Tsai with Jefferies. Your line is live.

If your cost of equity stays the same, with the mix of disposed and free cash flow and debt usage look similar for 2026 acquisitions?

Yes. I think if our cost of equity stay where it's at, it certainly makes -- it makes it a little bit more challenging. So I mean, depending on what we're sourcing on the acquisition side will be part of the equation. But I think from a disposition perspective, yes, if the equity is where it's at today, dispositions could be an alternative form of equity to help fund deals. So yes, I mean I think free cash flow is what it is. It's not like I can increase that just or decrease it something that will be around $200 million or so. But I think that's a good point, though, and we're talking about the spread. I know that that's what folks are focused on in terms of earnings and whatnot. But from a cash flow perspective, even if the spread is a little tighter than we'd like it to be, we are still getting good cash flow spread on that. If we think about the dividend yield. And so that generates more free cash flow, which then generates additional internal capacity.

And then on Steve's comments that tenants are pushing you to do more deals. Can you give us some color on who these tenants are? And would these be the same types of tenants that would push you to do more higher acquisition volume in '26?

No. I mean, when I say push, there's opportunities to do deals with that event. And we passed on a lot, and we did a little elevated number this year. But historically speaking, we kind of did that $750 million range. So midpoint of $900 million is not a big jump in acquisition volume per se. It's just elevated a little bit. But primarily, it was kind of the auto services, auto parts of our portfolio that are being active of doing some new development and small M&A.

Does that continue in '26?

In 2026, we only have line of sight in our industry, 60, 90 days. And the first quarter is starting to -- or pricing deals in the first quarter right now. I can't speak second or third quarter if they continue.

One final follow-up, just on the idea of tenants not calling you with any credit issues. What is the line of sight for that type of situation?

Usually, it's -- I mean, it could be 12 months. It's amazing how retailers have the innate ability to keep paying rent when things are going -- being challenged. Just per se, when you take a public company that's traded on the stock exchange just because their stock is getting hit doesn't mean they can't pay rent. They're just not as profitable. So we usually have a line of sight of 12 months plus. Just like when we were talking about Frisch's. I mean we were talking about Frisch's 12 to 18 months because they knew the challenges were coming, and we started trying to work with them. But yes, so right now, as far as 2026, we're not hearing any rumblings.

The next question is coming from Jim Kammert with Evercore ISI.

Actually, just on that last point, Steve. This Frisch's is kind of interesting. You said the tenant had a dispute with its former landlord or I missed that entirely. I'm trying to understand also what rent would have been collected by NNN in the third quarter that you would theoretically then lose correct in the fourth quarter?

I'll touch on the first part. The former tenant Frisch's entered into a lawsuit with our new tenant to operate in the markets and it's tied up in the courts. And we thought we were going to have resolution spring time, early spring, but the courts keep delaying decision. First kicked it out, I believe it was September then kicked it out until November. And that's when we decided we have to move forward and monetize these assets or re-lease them.

Yes. And Jim, on your second part of your question, I'm not sure I was following there. You were saying something about getting some -- running and then giving it back later, I wasn't following...

No, I'm sorry, I'm saying, did you collect rent from, I guess, it was Dolly's or whatever it was the new tenant. Did you collect rent from them in the third quarter, meaning that, obviously, you're taking these assets back where you have a little bit of a headwind in other words, for fourth quarter?

Yes. I mean there was an immaterial amount collected early on in the quarter, but nothing material at all. And nothing...

Okay. So that's in your guidance, that's okay.

Yes. Correct.

[Operator Instructions] Your next question is coming from John Massocca with B. Riley Securities.

Apologies maybe if I missed this earlier in the call, but the other element of the guidance, right, is the ramp expected in 4Q in disposition activities. And I'm imagining the Dolly situation plays a part in that. But is there anything else factoring into the acceleration in dispositions expected by year-end? And I guess in the context of the former restaurant properties, the furniture properties, the broader market, like how should we expect the split in 4Q disposition activity to be between vacant and rent-paying assets?

Yes. I mean I think you're spot on in terms of the restaurant operator, the decision to kind of move in a different direction there is leading to some additional sale of assets. And so yes, there will be a higher mix of vacant sales that maybe we've historically had. Exactly what the split is, I can't say for sure, but I think 50% plus might be vacant sales at this point given our visibility.

And I guess kind of following on that question, is beyond what's going on with the former restaurant tenant properties. Is some of that increase in disposition activity at all a reaction to maybe where cap rates in capital markets are kind of diverging. Or is that just purely kind of working out of the former Frisch's and bad cap assets?

Yes. It's the latter part more so that there's a high level of interest, and we have the opportunity to dispose of the former restaurant assets at good pricing. And then secondly, there's a fair amount of interest if it's QSR, convenience store for some of those restaurant assets as well.

I guess, I mean, I don't know if you can give guidance on this, but it would be fair to assume kind of cap rate trends in the last 2 quarters continue into 4Q for occupied sales?

The occupied sales, yes, I still think for modeling purposes, 100 basis points inside of where we're deploying capital is probably a better number because the tenant mix, we may do some dispositions that are defensive that would be a little bit elevated for proactive portfolio management, also selling assets that are real low cap rate. But, yes, 100 basis points is what I would model.

[Operator Instructions] There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Steve Horn for closing remarks.

Thanks for joining us this morning, and we'll see many of you in-person in the next few weeks and then into NAREIT. Enjoy the rest of your day. Thanks.