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'll 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 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 1 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, 9 of which were new tenants to the growing portfolio, operating in 12 sectors, and most notably, we have the unique opportunity to purchase a portfolio ground leased properties in Houston..

The ground leased transaction resulted in 34% of acquired rents in the fourth quarter coming from the ground leased properties where the tenant has invested in improvements and we own the land..

The ground leased structure is a superior investment because it provides an external layer of protection due to the tenant's investment in 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 are all in the Houston market and has a strong macro fundamentals, while the ground lease portfolio did bring our average cap rate down in the fourth quarter, this is 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 3 quarters of 2021..

For the first -- 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 and 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 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 in 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 square feet 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-focused investment strategy, where our size supports us the opportunity to be nimble and acquire high-quality acquisitions in a competitive, but fragmented net lease transaction market..

With that, I'll now 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 $430,000 of repaid rent related to previously disclosed COVID-19 rent deferral agreements.

And as we disclosed last quarter, we have one remaining tenant making repayments under our 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..

As has been the case in each quarter of 2021, 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. And year-to-date in 2022, we have issued 213,000 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 to 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 began 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 to $1.58 per share and our full year 2022 AFFO guidance range is $1.51 per share to $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 continue 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 forecasted 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 and $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..

And finally, our guidance does assume we sell between $40 million and $50 million of assets throughout the year, including, as John mentioned earlier, the loan remaining office property leased to Wells Fargo in Hillsboro, Oregon.

Given the lease with Wells Fargo has less than 4 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 want to 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 are 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. And at this time, we'll open it up for questions. .

[Operator Instructions] And our first question comes from the line of RJ Milligan with Raymond James. .

A couple of questions. I wanted to start out with the acquisition guidance. You guys did $260 million in 2021, calling for $225 million, a slight decline in 2022. I'm just curious what's sort of driving that and what's your visibility over the next couple of quarters in terms of acquisition volume.

And what potentially could we see to get to the higher end of that range by the end of 2022?.

Yes. Thanks RJ. So I mean the visibility looks really good as far as the pipeline. I think we're just basically hedging our bets here a little bit in that. Obviously, we're in a kind of a choppy macro market, capital markets and who knows where things go. Maybe there's a war in Europe and everything.

So I think we're just not saying we're slamming on the pedal to the metal and doing acquisitions just to do them. So we're just being a little bit careful..

We're optimistic that -- 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 the ability to find high-quality and a good yield. It's just a little bit more concern about the backdrop. .

That makes sense. And then, Matt, in your opening comments, you talked about leverage just over 8x at the end of the quarter. And obviously, that bounces around depending on capital markets activity. Assuming, obviously, the dispositions or planned dispositions are factored in there.

But can you just talk about how you expect leverage trends as we go through the year and sort of on a longer term basis?.

Yes. 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 ATMs to start the year pretty efficiently. So I think you can assume we'll probably be active on the ATM to match fund transactions throughout the quarter going forward..

And then within guidance, our guidance sort of assumes we're going to be plus or minus 7x range at the end of the year. So there is some delevering in there. And obviously, we gave some indication on what we thought the share issuance would look like with the range that we provided.

So there certainly will be some delevering, and we'll be efficient on the ATM. And then to John's point, we'll see how the capital markets evolve. .

And then my last question, just to make it a little bit more broad. John, you talked about the expectations for cap rates to sort of remain the same in terms of '22 versus '21.

Can you just talk about what you're seeing out there in the market in terms of cap rates? And has any of this macro headwinds that we've seen over the past couple of 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. We are being a little bit more picky as far as not looking to -- or 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 we'll be able to pick off some things at more attractive prices.

But we're finding good acquisition properties at good yields for us, but we're seeing whether we can do a little bit better..

But we have not seen the pricing change in the market. There's 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. So you're hearing dialogue from the brokerage market that there is capital going to the safety of this type of asset for the obvious reasons. So we're competing with that.

So last year was 1031 scramble, everyone was worried about that, and now it's the inflation is scramble. So we'll keep monitoring it and keep pursuing things. .

And our next question comes from the line of Michael Gorman with BTIG. .

John, just sticking with the acquisition market for a bit. Obviously, you 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?.

Yes. So I think as a backdrop, we're -- as we're working on the sale of Wells Fargo, we want to make sure we curate a very strong top 10 tenant list. And so we're working hard to kind of keep on impressing you with the quality of our portfolio..

And so I think you're going to see us pursuing some really good credits that will make itself up to the higher end of the ledger on with regards to tenant concentration. And so 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..

So it's really all across sectors and locations.

But I would say we're pleasantly surprised to get some of the locations we're getting, like, for instance, the Houston acquisition that happened in the fourth quarter, when we did those -- that ground lease portfolio, we were really 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're able to source something like that. And that was totally unexpected and a terrific acquisition for us and for the company. So hopefully, we can do more of those going forward. .

And maybe kind of transitioning off of that with the quality that you just talked about. Your presentation had 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?.

Yes. 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. And so it's certainly not getting priced into our stock. I mean, we're -- you know the multiple we're trading at in the -- on the low side.

And so -- but if you look through the portfolio and the demographics and locations, we certainly should be trading higher just based on the quality.

And so we're trying to draw out those -- that fact pattern to -- so people, as they look at investing in different net lease REIT companies, that they'll say, okay, I can pick up Alpine at a very low multiple, higher dividend yield and a much better quality real estate portfolio in strong markets..

So we're very focused on that. Where -- obviously, Houston is our largest market now. Obviously, incredible macro tailwinds for Houston with oil and so forth. And so -- and very much a strong growing economy.

We did a John Burns study 2 years ago and basically said, giving John Burns basically different criterias, 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..

And in digging deeper with John Burns on it, is a little bit -- a lot of it had to do with being a business-friendly city. It's all about growth. And so, look, Houston probably won't be the top one forever, but it just shows you kind of 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. 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 of 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 markets -- mark those rents to market, gives us an opportunity for longer term residual value. .

So 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? Look, is the market going to move in concert with rates here? Or is there going to be a stickiness where maybe it's a 6-9-month lag if we get a significant -- more significant move up in rates, but the capital doesn't necessarily care, because it's got other motivations?.

Yes. Good question. So we're seeing less of that right now on these smaller acquisitions where it's been 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 the smaller transactions. People are buying more allocation of capital rather than 1031 driven.

So I don't see cap rates just some sort of frenzy getting tight -- very tight, because there's a feeding frenzy with regard to 1031 money..

But I mean, you do see that in, I'll call it, a Chick-fil-A ground lease. I mean that stuff trades at crazy low cap rates. But we're not seeing it kind of across the board.

And I will say on the larger institutions, they're obviously not focused on this type of product, but we are seeing on larger acquisitions, they're deep institutional capital that is chasing..

So we're kind of in that 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.

And if we're going into the $300 million type acquisition range, that would be really tough to compete on. So the this in-between zone is actually kind of the sweet spot. .

And our next question comes from the line of Rob Stevenson with Janney. .

John, 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 plus or minus 5% cap rate on the ground leases?.

Yes. Really the ground leases kind of drove in the cap rate. And as we mentioned on -- in the intro that we expect cap rates to be higher than our fourth quarter average. So that was a little bit of a one-off, if you will, that did that. So we're being picky going forward and elevate that. .

But there wasn't anything from an outside of the ground lease, it sort of skewed the 2/3 of the non-ground lease acquisitions away from a sort of high 6s, low 7 sort of cap rate in the fourth quarter. There's no market pressure that's pulling that down inherently. .

Correct. .

Okay.

And then what are the characteristics of the dispositions beyond Wells Fargo? What makes those assets ripe to sell in 2022 for you guys?.

Well, that was -- you just gave me the fat-pitch. So I appreciate that. But we are getting kind of reverse inquiry on assets that we bought not too long ago, where someone just feels like they have to own it. And so we -- we'll put a price on it and say, look, if you want to own it at this price, we're happy to sell it to you.

You -- maybe like the asset, you like the credit, but there's a price for everything. So that's really driving it. It is really some inbounds on things that we've recently purchased. So even with Alpine Music Theater opening up for the summer concerts, I got a couple of calls on that, not too long ago. So anyway, so that's a little bit of that guidance.

.

And then last one for me. Matt, what was the -- how should we think about the rough timing of the fourth quarter acquisitions? Sort of mid-quarter? Was it a lot of 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. .

Yes. 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. .

So ex-dispositions, your run rate is actually higher than that $42 million at this point. .

Correct. .

And our next question comes from the line of Barry Oxford with Colliers International. Barry, your phone may be on mute. .

It was on mute. Getting back to the capital structure and paying down some of the debt in '22 and utilizing the ATM, your share count does go up a fair amount. Can you guys get to that share count just via the ATM? Do 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 and it's hard for me to project how that's going to trend going forward.

But if it continues to improve, I think it's feasible that we could do that amount off the ATM, but I'm not going to sit here and tell you one way or the other, that that's the way that we've assumed it's going to happen. We're going to maintain flexibility in terms of how we execute on that. .

So you got a couple of models with a couple of different scenarios in them. .

We do. .

Got it. Most of the other questions have been answered. .

And our next question comes from the line of Anthony Hau with Truist Securities. .

Just one quick question on ground lease.

What's the lease structure on those Houston ground lease?.

I mean the lease structure is, basically that -- obviously, we own the ground. The tenant owns the sticks and bricks and we have a long-term ground lease and there's escalations along the way in different forms. So it's really a traditional, nothing special about it.

But we love it, because, obviously, you're in a very asset protected position with residual upside. So it's kind of a lot of optionality for us as a holder of the ground. .

And what's the rent escalation in those ground lease again? Are they like 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. .

And what's your appetite to buy more ground leases in this environment?.

I mean, look, we'll buy them if it's set up as -- if we're getting paid a little bit higher than where this -- well, this would be traded normally if a portfolio discount kind of arises, and that's what happened with the portfolio we had.

So 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. So we may do something like that to make sure we're not compromising our cap rate.

So -- but I don't expect to see a lot of that, because obviously, there's a lot of buyer interest for ground leases, but we'll certainly keep an eye out for it. .

And this is 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 the stock price stay the same?.

So I think you see -- it's interesting looking back at some. Let us take a step back and look at the highest FFO multiple net lease REIT out there right now, I think it's Netstreit and Alpine was outperforming Netstreit until they got a lot larger. And then all of a sudden, they took off.

And 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..

And so we don't need to really do a lot in the capital markets as we modify the portfolio to be best-in-class. So 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 going to be very self-evident to everyone that hey, this is the place to be, you look at the yield that Alpine's priced at, look at the FFO multiple..

So we're very cautious on the capital markets until we get good cost of capital. But 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 derisking and that's all good. So -- but we're careful with it, and we kind of monitor it.

But no, we're obviously a very attractive stock given where we're valued. So I think our shareholders are getting paid to wait for that transformation to happen. .

And our next question comes from the line of Craig Kucera with B. Riley Securities. .

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 have seen maybe 6 months ago, given the interest in the sector?.

And second, sort of can you handicap when you think that might close given the activity?.

Yes. So the residential part of it certainly played a very large role in the interest. And so 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 -- that sector is very strong and great market backdrop for it and a lot of players.

So that certainly helped quite a bit. And with regards to timing, that's kind of a second quarter expectation on a close. .

And I feel like last quarter, as far as considerations regarding overall office asset sales, you were thinking kind of maybe in the mid-7s.

Is that maybe tightening given the increased interest from some of these residential developers?.

No, I wouldn't say that, because what -- you have to remember, Wells Fargo has a certain amount of time left on their lease, almost 5 years, and they have renewal options. So a developer has to kind of wait to kind of get to that development opportunity. And so it just factors into their overall yield expectations.

So I wouldn't say that the pricing got tight because of that -- with regards to having that -- the lease in place, you had to have a big enough player that could live off the yield and so forth. .

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 and did that impact your underwriting at all?.

It did happen before they canceled, but 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 closed some of the Sportsman's because there's some sort of overlap. And now, obviously, that's gone away.

But we got comfortable because, in talking to the Sportsman folks, these particular stores are very strong operations and do very well. And obviously, the company, given that they got a $50 million termination fee and they're -- they have no debt, they're in a very strong position.

So I expect -- and looking at their investor presentation that they're going to be growing the company further now as a standalone. So to answer your question, as we bought it before the canceled merger, but we had more concern with the merger than we do now. .

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 '22, a little bit more in '23.

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 I don't think I've seen a renewal where it's flat. So the expectation is they're going to have escalations. .

Yes. Most of them, Craig, over the next few years have escalations at the renewal options.

And just given the rise in inflation, I think it's going to be a lot harder for tenants to relocate in a specific market, because the cost of occupancy is going up and to make that change, they're going to get repriced to where rents are in the market at that time. And so we feel pretty good about the stickiness of the tenants. .

And 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?.

Yes. Very few have CPI. It's not as relevant in the more institutional net lease space, right, because most of our tenants -- almost 3/4 are publicly traded. In terms of what's flat, 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% and 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. .

And our next question comes from the line of Jason Stewart with JonesTrading. .

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. .

Yes. I mean, so the pipeline we have is very strong for what we see in the quarter, and that's with being very selective. And so we hope that the backdrop, we are seeing it on larger assets where people are looking to monetize. And so we feel like there'll be more opportunities going forward.

So -- but we're not trying to kind of bring it all in the early part of the year. We want to be mindful that we might even have better opportunities. So we're just kind of buying our time, but bringing in the acquisitions as we see good opportunities. And so I'm not trying to time the market one way or the other. .

And then aside from the Wells Fargo asset on the disposition side, does that factor into your cadence of thought process for dispositions?.

Yes. Outside of Wells Fargo, it really has to do with -- we're certainly not looking to sell some of these assets, but if someone just really wants to have it and being very aggressive on the pricing, we won't try to time that. We'll just sell it as that sort of interest formulates. So 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. .

And our next question comes from the line of Wes Golladay with Baird. .

I just want to go back to the -- I guess, the built out of footprint in top MSAs. Can you just 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 would be more like the mid-to-high single-digits that the shopping center companies produce on renewal?.

Sorry, Wes, you kind of broke up there.

What particularly are you looking for us to talk about related to top -- some of top MSA?.

Yes. For the net lease in the top MSAs, typically what we see for the net lease companies would be renewals are flat after a few -- after the annual escalations. But when you look at short portfolio, you have the 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?.

Yes. I think going back to my comment really to Craig's question. Most of our leases, a vast majority of them have 5% to 10% increases in the options. And so as 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 doing early extension with us, because they know that they want to stay there and they don't want to necessarily pay the escalation. And so they're coming to us and saying, hey, if we give you term now, will you kind of keep our rent flat? We get a lot of that.

So it's a little bit of down side. If we -- certainly, if we roll out to a lease termination or expiration, there's that as Matt said 5% or 10% bump. But sometimes we'll be a little bit more risk converse and take an early extension.

But anyway, does that help answer?.

Yes. 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.

And 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.

But being that you're in a more inflationary environment, you're in the top end, and let's say 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 make it that 5% to 10% bump versus a mid-single-digit...

.

Yes, 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. .

Yes, sorry about that. .

And 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. .

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day..