Greetings, and welcome to the Spirit Realty Capital fourth quarter 2020 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Pierre Revol, Senior Vice President of Corporate Finance and Investor Relations. Thank you, sir. Please go ahead. Thank you, operator, and thank you everyone for joining us this morning for Spirit's Q4 2020 earnings call. Presenting today's call will be President and Chief Executive Officer, Jackson Hsieh, and Chief Financial Officer, Michael Hughes. Ken Heimlich, Chief Investment Officer, will be available for Q&A. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although the company believes these forward-looking statements are based upon reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to a number of factors. I would refer you to the safe harbor statement in today's earnings release, supplemental information, and Q4 2020 investor presentation, as well as our most recent filing with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP measures. For reconciliation of non-GAAP financial measures to most directly comparable GAAP measures are included in today's release, supplemental information, and Q4 2020 investor presentation furnished to the SEC under Form 8-K. Today's materials are available on the investor relations page of the company's website. For our prepared remarks, I now please introduce Mr. Jackson Hsieh. Jackson. Thanks, Pierre. Good morning, welcome everyone. It's hard to believe that just a little over a year ago, we held our investor day in New York. For those of you who attended or had the chance to watch the webcast, it was a turning point for Spirit. We had finally become a simplified triple net REIT with a competitive cost of capital, and we outlined our plans to take Spirit forward and create value for our shareholders. As I was preparing for this call, I reflected on several of the key objectives we talked about. What we have accomplished and what is still left to do. For this earnings call, I will revisit many of those objectives in the context of our 2020 results. Let's start with our portfolio. At our investor day, we laid out our medium-term portfolio targets. One of which was to overweight our investments in large, sophisticated operators with a particular focus on public, non-investment grade credits where we find attractive yields and lease terms. We like these tenants because of their scale and operating sophistication, access to permanent capital, moderate leverage policies and governance. Believe these types of credits anchoring a diversified portfolio will provide better risk-adjusted returns than a purely investment grade-focused strategy. Not only did we experience very few tenant defaults, we actually saw many credit improvements. In our most recent investor presentation, we added a slide called Credits on the Move, where we provided examples of credit improvements across 15 tenants. As you'll see, several have received recent credit upgrades, including At Home, BJ's, Tractor Supply, and PetSmart. A few of our larger private tenants became public, like Albertsons, GPM Investments, and Academy Sports. A few are being consolidated through M&A to form larger companies, including Bass Pro Shops' acquisition of Sportsman's Warehouse and Callaway's acquisition of Topgolf. We're already seeing many of these credit improvements translating into cap rate compression, and these operators, along with several more across Spirit's diverse portfolio, are good examples of how our rigorous credit analysis informs investment decisions that add value. Another investor day target was to further diversify our asset allocation by layering in a higher percentage of industrial assets. Given the nature of our industrial portfolio and the attractive acquisition opportunities in 2020, the strategy proved both timely and fortuitous. During the fourth quarter and the full year, 56.5% and 57.7% of our acquisitions, respectively, were in the industrial asset category. 14.9% of our portfolio is now comprised of this asset type, compared to 9.5% one year ago. I should also note that we collected 100% of rents from our industrial tenants during the fourth quarter. Overall, Spirit's portfolio was put through the ultimate stress test in 2020, and I believe it proved itself. As you saw in our release, during the year, we sold 18 income-producing properties for $76.7 million in proceeds and at a blended cash cap rate of 5.89%. We also sold 20 vacant properties for $27.7 million, producing a net gain of $1.3 million, further demonstrating the granularity, liquidity, and institutional demand for our properties even during periods of economic dislocation. We also achieved 99.6% occupancy across 1,860 properties, ending the year with only seven vacant assets. Our cash rent collections increased to 94% in the fourth quarter, and if you exclude movie theaters, the cash rent collection rate was 98%. In addition, we had no bankruptcies across our top 20 tenants since the COVID pandemic began. In fact, you would have to go to our 39th tenant, Studio Movie Grill, to find a bankruptcy in Spirit's portfolio. Bottom line, our portfolio strategy is working, our asset base is stable, and as we enter the new year, we see upside as the vaccine rollout gains momentum. Some important growth-oriented goals we laid out at Investor Day were to expand the acquisitions team, increase deal flow, and return to $600 million in rents by 2022. We added key members to the acquisitions team in April and May and plan to add a couple more support personnel this year, expanding our bandwidth to source and process new business. We were one of the earlier institutional players to pivot back to growth in 2020, and as you can see in our most recent quarterly results, our acquisition pace has ramped up meaningfully. For the quarter, we added 99 properties across 15 transactions at a cash yield of 6.7% and an economic yield of 7.45%. The weighted average lease term for our acquisitions was 15.2 years, which increased our total portfolio WALT to 10.1 years. You may remember our original pre-COVID 2020 capital deployment guidance was $700 million-$900 million. Even with pausing in the second quarter, we deployed $878 million, near the top end of our pre-COVID guidance range. We also grew our annualized base rent to $510 million from $461 million last year, an increase of 10.6%. Despite the impact of COVID-19, we stay right on plan to meet our growth targets. Another key goal was to further integrate our asset management and acquisition teams. At our Investor Day, we talked extensively about how our teams work together to close acquisitions. I've always believed their complete integration is critical, not only for transacting efficiently, but for developing tenant relationships that ultimately result in new business. To that end, we recently completed an important realignment within the organization that has formally folded acquisitions and asset management teams together. Ken Heimlich moved from the head of asset management to Chief Investment Officer, with both the acquisitions and asset management departments reporting to him. Danny Rosenberg, who previously moved from asset management to head acquisitions in 2018, will now head the asset management function under Ken's direction. These changes bring Danny's extensive tenant relationship building experience gained through his multiple roles back to the asset management team. He will spearhead the initiative to develop business from existing tenants, freeing up Ken's time to focus more on new tenant underwriting and the deal pipeline. From a tenant relationship building standpoint, we have continued to make headway. The circumstances we faced in 2020 allowed us to deepen relationships meaningfully with tenants, which resulted in new acquisitions with Life Time, At Home, and BJ's, to name a few. In fact, you can see from our recent disclosure, Life Time is now our number one tenant. In 2018, we purchased five Life Time locations from Blackstone. Since that time, we've cultivated a deep, direct relationship with Life Time. Those efforts allowed us to add two more properties under a new direct sale leaseback during the fourth quarter. We believe Life Time is a best-in-class health and fitness operator, and their resort-like health clubs are well located and have a variety of offerings that make them an attractive destination for their customers while providing stiff barriers to entry for their competitors. This transaction is an example of the type of relationship business we are expanding upon. A couple of other important goals that I will briefly touch on from our Investor Day were improving our credit rating and enhancing our scalability with technology tools. I will let Mike discuss our credit profile and progress in detail during his remarks, but I will just say that our balance sheet is stronger now than before the COVID-19 pandemic. As for the technology, that's something we have continued to refine and invest in every day. We have integrated Power Apps to our BI tools, which are used for every acquisition, predictive analytics are becoming more developed and widely adopted across the company. Our accounting, legal, and operational systems are excellent, as demonstrated by our ability to release earnings sooner and provide sector-leading disclosures while executing 238 deferral agreements and hitting the high end of our pre-COVID acquisition guidance. All possible because of the continued efficiencies gained from our technology tools. We have continued to move the ball forward, and we accomplished a lot in 2020. What's left? For us, not surprisingly, it's simply the recovery of movie theaters, which represents 5.1% of our annualized base rent. While the industry remains challenged, it is worth noting that the liquidity and survivability of our operators has improved and may improve even further. Most of our regional operators have accessed the Main Street Lending Program, which provided five-year unsecured financing. We believe all of our regional operators are eligible for $10 million in grants under Save Our Stage relief plan, approved by Congress in December. Outside of the regional operators, our national operators have all raised substantial amounts of capital, significantly improving their liquidity positions. Regarding our two operators that filed in 2020, Goodrich and Studio Movie Grill, there are some positive developments there as well. As we previously disclosed, the four former Goodrich locations are now under a master lease and are being converted to a strong regional concept, Imagine. The tenant plans are to invest approximately $10 million into the renovation to those four theaters starting in the next few months. Our Studio Movie Grill site in Georgia is being assumed in the bankruptcy, and we are in LOI negotiations with a new operator for the three former Studio Movie Grill sites in California. While we only recognized 34.5% of movie theater rental revenues during the fourth quarter, by the end of 2021, we may have all of our operators within the movie theater segment paying rent. Regardless, I don't believe theaters are at zero for Spirit. They will come back. It's just a question of when and how much. In the meantime, we are moving forward and growing the AFFO, and the theaters will just have to catch up to us. When I first started thinking about where we are today versus where we were a year ago and the impact COVID had on our progress, I initially focused on our 2020 AFFO per share of $2.95, which is ironically the same pro forma number we guided to you for 2019 at our Investor Day. For a moment, I thought, "Wow, we just lost a year of progress." When I walked through the rest of our goals and objectives, I realized that we didn't actually lose a year. Yes, our earnings took a hit, which I believe is just transient, but we achieved every other goal and benchmark that we set out to do and more. Today at Spirit, we have a proven portfolio with strong tenants and tested underwriting, a fully integrated asset management and acquisitions platform that is producing results, deeper relationships with our tenant base, enhanced tools to support our underwriting, forecasting, and monitoring, a pristine balance sheet, and the opportunity to substantially accelerate earnings growth over and above our expectations, depending upon the shape of the movie theater industry's recovery. Finally, I believe our team is best in class, and I hope we have demonstrated that over the past three years. Spirit is much stronger and a better-positioned company than just a year ago, and our team, portfolio, and platform are in a great position to create the value we outlined at our Investor Day. I'll just end by saying, if you attended or listened to our Investor Day in 2019 and you liked the Spirit story and the value creation opportunity then, you should really like it now. With that, I'll turn it over to Mike. Mike? Thanks, Jackson. We compounded the growth that began last quarter by more than doubling our capital deployment volume during the fourth quarter, which increased Annualized Base Rent by $29 million, slightly offset by accretive dispositions for a net increase of $26.3 million. Fourth quarter rental income, which included base cash rent of $117.9 million, increased $15.5 million- $128.4 million. The increase was driven by acquisitions completed in both the third and fourth quarters and recoveries of prior period cash rents of $600,000 in the fourth quarter compared to write-offs of prior period cash rents of $2.9 million in the third quarter. The net recoveries this quarter versus prior quarter losses reflect the better cash collections trajectory we are continuing to experience. Other income was very small this quarter, contributing only $68,000 in earnings. As I mentioned last quarter, our two remaining mortgage loan receivables, totaling $29 million, were repaid in full, greatly simplifying our income streams. Going forward, other income will primarily be generated by our one remaining direct financing lease, interest income on invested cash, and any lease termination fees. Property cost leakage, defined as unreimbursed property cost as a percent of base rent, improved to 1.9% in the fourth quarter, compared to 2.7% in the third quarter and 4.1% in the second quarter. We target 2% as our long-term average run rate. This improvement was driven by the continued stabilization in our tenants' operations and balance sheets, enabling them to pay current on their lessee obligations, such as property taxes. Corporate G&A remained low this quarter at $12 million, and we reported $48.4 million for 2020, or $4 million less than 2019. We do expect that G&A will mildly increase in 2021 due to the normalization of travel, office expenses, performance-based compensation, and additional ESG initiatives. Finally, while modest, I do want to point out that our income tax expense was a positive $133,000 this quarter versus the normal run rate expense of around $150,000 due to a one-time tax liability true-up related to the termination of our external management agreement with SMTA. I turn to everyone's favorite topic, rent collections. As Jackson mentioned, we collected 94% of our base rent during the fourth quarter, or 98% excluding theaters. That collections rate was very stable over all three months of the quarter. We've also seen an uptick in January, with cash rent collections currently standing at 95%. We believe that percentage may go higher. Please note that our collections metric does not include any recoveries from prior quarters or any repayments of deferred rent. Regarding movie theaters, we recognized in earnings $2.3 million of movie theater rents during the fourth quarter out of a base of $6.6 million, or 35% of movie theater ABR. Of that $2.3 million, we collected 44% in the fourth quarter, a slight increase from the 40% collection rate we reported during the third quarter. We have not placed any additional movie theater tenants on cash recognition. For the year, we deferred $31.9 million in rent, of which $5.6 million was deemed not probable of collection, or said another way, was not recognized in our earnings. We had also abated $6.3 million of rent. During 2020, we received $6.1 million in deferral repayments and ended the year with a deferred rent receivable balance of $20.2 million. Our deferred rent balance is primarily comprised of four industries: 20% movie theaters, 18% health and fitness, 18% casual dining, and 16% entertainment. During 2021, we expect deferred rent repayments of approximately $12.9 million and expect to incur additional rent deferrals primarily through percentage rent agreements with certain movie theater tenants. While the actual amount of those deferrals will depend on each tenant's 2021 revenues, the maximum amount of those deferrals as currently structured would equate to $9.2 million. We've also currently agreed to abate $1 million in rent during 2021. Given the stability in our tenant base and rent collections, with the remaining area of recovery primarily confined to movie theaters, we are returning to our pre-COVID operating metrics to report on tenant health. As such, you will see in this morning's reporting materials the inclusion of lost rent, which is a percentage of contractual rent that we deem not probable of collection. For the fourth quarter, our lost rent was 3.4%, or 1% excluding movie theaters. The delta between our fourth quarter cash rent collections of 94% and base rent is the 3.4% of lost rent, 2% of recognized rent deferrals, and 0.6% of rent abatements. Now turning to the balance sheet. During the quarter, we entered forward contracts to issue 6.4 million shares at a weighted average price of $36.85 per share. Also during the quarter, we settled 8.9 million shares under forward contracts, resulting in net proceeds of $310.9 million. As of year-end, we had unsettled forward contracts for 4.1 million shares of common stock. We ended the year with corporate liquidity of $1 billion, leaving us in a great position to start 2021. Our credit metrics also improved from the third to the fourth quarter. Leverage declined from 5.6 times- 5.3 times, or five times pro forma for the unsettled forward equity. Our fixed charge coverage ratio rose from 4.2- 4.4 times, and our unencumbered asset ratio improved from 2.6- 2.8 times. As a result of our conservative balance sheet and stabilized operations, we received two outlook changes from the rating agencies, including an outlook upgrade from negative to neutral from Fitch and an upgrade from neutral to positive from Moody's. We are very pleased with both outcomes. Regarding our upcoming maturities, we paid off our 2020 term loan in January and anticipate paying off the convertible notes when they mature in mid-May. After the convertible notes maturity and excluding our revolving credit facility, we will have no unsecured debt maturities until the second half of 2026. Now turning to guidance. For 2021, we forecast net capital deployment, which includes acquisitions and revenue-producing capital expenditures net of dispositions, of $700 million-$900 million. We forecast AFFO per share of $3-$3.10, implying a year-over-year growth rate of 2%-5%. I also want to note that we are maintaining a higher loss rent reserve in our forecast this year, which we believe is prudent until we have further clarity around the economic recovery, COVID-19 vaccine rollout, and government stimulus. Finally, I just want to reiterate what Jackson said earlier, that Spirit is in a better position now than we were a year ago. While our earnings growth was stunted last year, I believe we will recover quickly and ultimately provide shareholders with the value creation that we originally laid out at our investor day. With that, I will turn the call back to the operator to open up for Q&A. Operator? Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we are asking people to please limit yourself to one question and one follow-up. Once again, that is star one to register questions. Our first question is coming from Haendel St. Juste of Mizuho. Please go ahead. Hey, good morning. Hope you guys are safe and warm down there in Texas. Thanks for taking my question. First, I guess is on rent collection and deferrals. How much of the 3.4% of lost rent is reserved against, and did you move any tenants to cash basis in the fourth quarter or January? Mike, do you want to go ahead? Yeah. Yeah, all the 3.4% of loss rent is reserved against. We didn't have any material changes in terms of tenants moving to a cash base in the fourth quarter. In fact, I can't think of any that actually moved in the fourth quarter. Okay, thanks. The $1 million of abatements that you mentioned in 2021, can you give us a little bit of color on maybe what industry it's coming from? Is that $1 million included at both the upper and lower end of your guidance range this year? Yeah. The $1 million is in all the ranges. It's in the upper and the lower. Those are set. That's going to be primarily in the theater industry. Those are just abatements that we exchanged for lease enhancements. Got it. On movie theaters, Jackson, 5% of rents here. I'm curious if we should read in the answer comments that you would be more willing to transact in this sector and perhaps engage with some of the larger national operators. How should we think about that 5% of exposure there? I guess as part of that, AMC having recently done some recapitalization, just curious on your level of comfort with not only the sector, but larger national operators like AMC. Thanks. Maybe I'll take that. Good morning, Haendel. This is Jackson. I'd say more than likely our theater exposure will not increase in the short term. We're still trying to make sure we work with our diverse portfolio of operators. I did see the AMC reference. Can't really comment on it. Obviously, if it went through, it'd be great. The other anecdotal information that we saw last weekend was in China, on the opening weekend of Chinese New Year. They did a tremendous amount of business out there. It was $775 million of revenue. The theaters are doing well in China, and obviously they're handling the pandemic quite admirably in terms of containment. In China, they're still booking seats online and things like that. People are going to the theaters, and they're not really seeing any new big content. It's all maybe more local-driven content. As my comment said, people are going to go to the theaters. With the stimulus that's been put through Main Street Lending and hopefully our Save Our Stage grants. Those grants, by the way, those $10 million grants are just grants. They don't have to be repaid. We think that's going to give both our regional and nationals the time. Obviously, the national operators don't get that $10 million grant, but we think they're going to get the time to be able to get that content that's on the shelf come out. I'd say to answer your question, I don't see any new net investment in theaters for us in the short term, but we'll evaluate it as time goes on. Got it. Thanks for the thoughts. Thank you. Our next question is coming from Vikram Malhotra of Morgan Stanley. Please go ahead. Thanks for taking the question. I hope everyone's well and safe. Just maybe Jackson, you talked a lot about sort of the goals that you had set out for the year. As you look back, you've achieved most of them. I'm just wondering, given sort of the push in acquisitions, the hiring, as you look into the next year or two, and given the hiring you've done on the acquisitions team, what areas are you sort of focused on that were maybe similar to what you were doing pre-COVID? Can you talk a little bit about where are you making changes in terms of either property types, geographies, and just maybe even if there's any changes in the approach? Sure. Thanks, Vikram. Well, first let me just spend a minute on how we're doing the business as it relates to the current team. That realignment that we talked about with Ken, in practice, that started to happen in the middle of last year. As we restarted our investment process again after the second quarter, I brought Ken into the acquisition pipeline meetings as well as Travis. They were integrally involved in just even the formation of what we were going to pursue. As you remember, a lot of our acquisitions people were also working on rent deferrals. Danny was running one of the asset management teams. It just became really clear as we continued on in that process that this was like a natural move to have Daniel Rosenberg do what he does best, which is asset management, and build those client relationships with our existing tenant base and Ken Heimlich's leadership on the investment side to make that final shift as we talked about moving him into the Chief Investment Officer role. I want to make sure people understand that we've been doing this already for a good half year this past year. It just was a natural adjunct. In terms of investment approach, you've heard us talk a lot about our sweet spot being public tenants in the single B, double B area. We put that slide. If you get a chance to look at it later, I think it's slide eight in our investor deck. It talks about those top 20 public tenants in the Spirit portfolio. The other interesting stat is if you looked at our publicly owned tenants and looked at it compared to 2017 in the second quarter, if you remember, that was about 37%. Shopko, surprisingly, was our number one tenant back then. Today we're at 51%. In terms of public ownership. We love that because that's permanent capital, that's tenants that de-lever. As we think about our investment approach, we're looking at not only good real estate, good credit, but we're looking at tenants that can benefit from positive uplift, so to speak. That's why we really love that page on page nine that talks about these credits on the move. If you look at that page, that's 19% of our contractual rent, if you look at that, and just read the little comments and see what's happened. It's quite good, to be honest with you. It wasn't luck, it was very deliberate and intentional on our part. We think that continued work on focusing on the heat map, focusing on real estate rankings, focusing on credit, being really deliberate about asset allocation is going to pay off. I think finally, this is a long-winded answer, if you just look at our investment in the fourth quarter, our average investment size is about $4 million. We did 99 properties. You can do the math. The range of asset that we acquired was, $1 million to average up to north of $30 million in terms of size. There was a lot of diversification within the portfolio. If you look at the average deal size, transaction size for the year, it's right around $30 million, if you look at the math. We're going to continue to try to build diversity, be very focused on these industries, very deliberate, and just do the business. I don't think we have to do very much organizationally this year, just add a couple more, I'll call it junior level support into that team to support Ken, and we'll be in good shape. Okay, great. Just to get your sense of sort of the earnings power of Spirit in a post-COVID world. You mentioned the balance sheet is in a better position versus pre-COVID. Can you touch upon sort of where would you like sort of leverage to be in a 12-18 month period? If we think about a target for, say, cash flow growth, I shouldn't call it a target, but the ability to grow AFFO from here on a multi-year period is, do you think there's a change in that range in terms of what Spirit can achieve? Well, before I pass it over to Mike to answer some of this, one thing I'll just say is the portfolio is very stable, and I don't know if we could've said that four years ago. It was more challenging. We have a very stable tenant and portfolio base. You have to have that as a starting point. We also have the benefit of the portfolio's improving, right? Like credits are improving, that's a really good thing. It's simply just acquiring assets where there's "no surprises." One thing that we did in 2020, we had one deferral request from the acquisitions that we did in 2020, that deferral request was ultimately retracted by the tenant. They're all current on their obligations, and if you keep doing that, and you sort of are deliberate about what you do and you finance appropriately, yeah, this is a really powerful earnings machine. Mike will go into the nuance of the movie theaters, which I've told you that they will come back and we expect them to really help us as we move on through the course of the year. I don't know, Mike, if you want to add on to that. Yeah. I'll add on a couple of things. Let me start with the balance sheet. As Jack said, on the portfolio, we have a very stable base. I think our acquisition strategy is going to produce a lot of growth. I think that's the key. If you look at us today, we can produce AFFO growth, and our cost of capital is not as good as a lot of our peers, but we can still produce that growth. With our acquisition strategy, we get good yields. Our balance sheet will continue to improve. You saw the ratings actions in the last couple of quarters. I believe that with Moody's, we were only one of two people in their universe that they rate, that they took a positive ratings action on since COVID hit. It's pretty impressive. We're going to continue to improve, and our cost of capital is going to continue to improve. I think that's the difference. I think we can produce AFFO growth today with our existing strategy comparable to all of our peers. As our equity multiple catches up, which I think it will as people see that growth, and our cost of debt continues to improve with continued ratings improvement, continued size build of the company. Our spreads are going to continue to compress on our bond side. You've seen that materially over the last couple of years. All that's going to continue to widen the investment spreads we can get, which will accelerate our growth. When I think about our balance sheet, and I think about every time we issue debt, it gets cheaper and cheaper, and I look forward. We saw some legacy pieces of paper in our capital stack. We have these converts coming due on May 15th. When I started as CFO about three years ago, those seemed pretty cheap. Today, 3.5% paper seems really expensive for us. I think forward, we have CMBS debt still on the books at over 5.5%. We have preferreds that we issued at 6%, callable next year in 2022. I start thinking about it with even our current cost of debt. Those are very accretive refinancing opportunities that we have today because our cost of capital has improved so much, and that'll continue to improve more. I think that's a big thing that Spirit has, that our acquisition model works to grow AFFO, and our cost of capital continue to get better. On theaters, as Jackson mentioned, look, we've taken a very conservative approach on our theater revenue recognition, I think more conservative than some. That really leaves you a lot of upsides. When you look at our Q4 numbers, you know that 70% of our theater revenue is not in there. Just knowing the diversification of our theater tenant base, it was very diversified. A lot of regional operators that are getting a lot of government stimulus and are actually in pretty good shape. There's a lot of upside as those earnings return. We're not kind of banking on those today. I think when you just take all that into account, I think it's a very good multi-year growth trajectory for Spirit that could really surprise people. One last thing I'll add. You talked about years to come, I think that ultimately. Vikram, you know my former career before I came to Spirit. I was on the banking side, so it was all about trying to solve clients', really trying to work with clients' objectives and try to help them. What we do here at Spirit, as we kind of continue to align our organization with our tenants. Our tenants are our partners, right? We want to really help them grow. That conversation is happening now. We're doing repeat business with existing tenants. It's a very powerful advantage for us, not just from a predictability standpoint as you kind of map out the future in terms of our acquisition pipeline, but how we can shift the allocation of the portfolio. NNN does it as well as anyone. We are trying to aspire to do it that way. I believe we have the right people in place, processes in place. We're still not there yet. I think we're really gaining a lot of momentum. When we really pull that piece of the puzzle together, you're going to see some tremendous earnings acquisition power off the platform. Great. Thanks so much for all the color. Thank you. Our next question is coming from Harsh Hemnani of Green Street Advisors. Please go ahead. Thank you. Just talk about the industrial deals this quarter. About half of the deals you did were industrial. I'm just trying to understand your appetite for the property type going forward, given all the capital chasing it right now. What kind of cap rates you're seeing, and are you still looking to acquire it going forward? Morning. Yeah. I would say yeah. The answer is yes. Harsh. We do have an appetite for industrial. We will do more. We don't have a particular target in mind. Part of what we're doing is trying to find the best risk-adjusted returns for our capital, right? It's going to fluctuate. It was obviously high this past year and particularly high in the fourth quarter. What I will tell you is it's going to continue to moderate going forward. We still like what we do in terms of the other industries that we invest in, like gyms. You saw us do health and fitness. We're absolutely excited about what we did with Life Time, and we did another property on the high volume, low-cost operator side. Yeah, I wouldn't say there's any new shift in what we do. Industrial, we've talked about it for a while, and we've continued to increase our investment activity, and that's going to be an important part of what we do. I think the piece of the puzzle that's a little bit different and nuanced for us is the type of industrial properties that we're buying. They tend to be long-dated direct sale leasebacks with fixed escalations. We're not buying multi-tenant industrial. We're not buying industrial value add. That's not in our wheelhouse. Where we think we can add value is really understanding kind of the credit profile and upside of a particular tenant and hopefully getting in at a very good basis with a long-term lease. We've already seen that in some of our industrial acquisitions where you've seen real credit upgrades, and that's a big positive for us. I'd say that our industrial is a very narrow defined lane right now. We're not competing, I would say, with some of the broader based value add and core industrial buyers right now. Thank you. Then on the health and fitness side, you talked about the Life Time deal a little bit. Obviously, we haven't seen a lot of public market capital flowing towards the health and fitness property type. I was just wondering, how was the bidding process there? Was there a lot of competition? What kind of cap rates you're seeing on that property type? If you can share that. Yeah. Well, I can tell you on that particular transaction, we talked about it being a direct. Life Time was a direct deal. There was no broker, right? They had a desire to do something by year-end. We had similar desire. We know these properties well. We know that credit well. What's great about what they do, all of their facilities are open today in the United States. They have a very unique business model. It's almost country club-like. In terms of their data, the data that they have on who's coming into their gyms, who got COVID, if they did. It's very impressive data, and they're very safe. What we like about them is they've been able to adjust their business model to be very profitable, even with some of the space constraints that were put upon them by different municipalities. I don't know about you, I can tell you about me personally, I really want to go back to the gym. I'm tired of riding Peloton at home. It's really kind of getting a little bit annoying. I believe that people will vote with their feet when they can, and not all operators are going to do well. We really like Life Time. Like I said, we made an investment in the fourth quarter on a high volume, low cost operator, which is equally going to be super successful, we believe. Yeah, no, we still are very favorable on that industry because we believe that the COVID vaccines are going to eventually get us back to some semblance of normalcy. Thank you. In terms of cap rates, I would just say they were wider than a year ago. To state the obvious from an investment standpoint. We also thought that that was kind of an interesting time for us to make those investments. We believe there will be cap rate compression in that segment as time goes on this year. Thank you. Our next question is coming from Ki Bin Kim of Truist. Please go ahead. Thanks. Good morning. In terms of your 2021 guidance, the $2.3 million of movie theaters that you are currently booking, recognizing in revenue. What is implicit in 2021's guidance? Mike? Yeah. We won't be too much in the details, Kevin, but I can tell you it assumes a very modest recovery in the back half of the year. Said another way, that recovery trajectory will have some impact on the low and the high end, but it will not make or break our guidance. As normal in a normal year, our guidance is going to really hinge on our acquisition volume timing and cap rate. Okay. In terms of acquisitions and dispositions, can you just provide a little more detail in terms of cap rates on your acquisitions and dispositions? For acquisitions, what type of assets you're targeting? Well, hey, Ki Bin, it's Jackson. I think it's going to look a lot like what it looked like in the fourth quarter. We usually talk about trying to target somewhere between a high six and a seven going-in cap rate. That's going-in cap rate, not economic cap rate, right? Most of our deals have very elongated lease terms with escalations, so the yield is much higher. Economic yield. I would say, if you look at our heat map, we're just going to continue to do what we do. I think one of the things that's interesting about Spirit, if you look at our top five tenants from a percentage of total ABR or contractual rent, they're right on top of each other. There's very little spread in terms of 2.5%-3% of ABR in that top five tenancy. If you go down to the top 10, sort of similar. I think there's like 100 basis points of difference between the 10th tenant and the largest tenant, Life Time. What I would tell you is our top tenancy is going to move just given as we deploy and move. We're not going to tell you exactly what they are right now, but we will in time. The industries are, if you look at our heat map, we're pretty disciplined. It's all pretty transparent there. Yeah, look, we look forward to doing more car washes. I think you'll see us continue to do industrial light manufacturing. You'll see us hopefully do more casual dining. QSRs are challenging because of pricing, but we think there's going to be some interesting casual dining opportunities. We love health and fitness. We love the sporting goods area. We love warehouse clubs. At Home, love those guys, right? We've continued to do more At Homes. It's such a good story. A lot of the things that we had acquired have been real beneficiaries of COVID. As we come out of COVID, we'll shift some of that allocation into more, what I'll call real estate that relies on high touch aggregation of people right now. You'll see us make that shift as the year goes on. Got it. Thank you. Thank you. Our next question is coming from Wes Golladay of Baird. Please go ahead. Hey. Good morning, guys. Thanks for taking the questions. I guess a question on the capital allocation. Is it fair assumption to say that you're willing to move up the risk curve for a certain segment of what you're going to allocate this year? I guess do you view as maybe not as high a risk based on the quality of the real estate? I'm looking in specifically at the Life Time. I see it's been under pressure from the rating agencies, but maybe you could talk about the quality of the real estate. Sure. To us, Life Time it's such a unique business model. If you look at the size of those facilities, they will do what they do because there's demand for those facilities, right? The way we think about it is credits can change, obviously, given different exogenous events that occur outside. Even if there were a deterioration of the credit, I'm not saying specifically Life Time, but just to use them as a hypothetical example. That facility is going to still be what it is today. The credit may change, the credit recalibrate, restructure. If it did, it would still be what it is. Once again, there is demand for those facilities. To me, what we really focus on is, what is the demand for this particular unit type? Does it have the ability to go through different economic cycles, i.e., 20 years at a minimum, right? We believe that facilities like that have the consumer demand backdrop to propel them for the next two decades. If you have that, you're going to get through it, whether a credit changes or not, because things do happen as you go through different economic cycles. That's an important part of the discussion that we look at when we make an investment like that. Plus it's good real estate, right? Yeah. Real estate's really important, that's also a consideration. When you look at the long-term demand, consumer demand, that's really what it comes down to. The barriers to entry for those types of facilities, and it's really difficult to replicate that. We think that we're very confident about their abilities. There may be shorter term credit downgrades and things like that, but long term, we think the viability of that unit, the operator, that location, because of all that consumer demand coming on the top line will support it. Yeah. Maybe say it another way- In terms of other risk, we don't consider ourselves a risk taker. We're buying very long-dated steady assets. If you look at our portfolio, we used to get a lot of comments on quality of the portfolio. It is not a risky portfolio, what we have today. We're not going out on the risk curve. That's why when we focus on that seven or high six going in cap rate, we think we're taking adequate risk-adjusted, making risk-adjusted investments based on our cost of capital. When you start to go for higher yield, obviously there's better return, but the default rates start to come into play. Obviously we're not in that low six area, which is pure investment grade. We think our sweet spot, we think we understand it, we know what we've got, history behind it, and we're going to sort of stay in that lane. Yeah. Got it. I guess maybe another way to frame up the question is looking at your slide nine, you obviously had a lot of credit improvements, and there are maybe some tenants that are, when the rating agencies look at them, maybe a little bit higher credit, but maybe you see improvement. To be fair to the Life Time, looks like even the rating agencies say that credit's likely to improve over the next few years. Do you see opportunity to invest in stuff that you see will make it to slide nine over the next call it a year or two? Absolutely. If you were sitting in our investment process, that's a huge part of what we talk about. I'll look over to Dave Wegman, I'll look at Travis, Ken. We're making real estate decisions, but the credit is huge, and it's not just the current credit. What will the credit be? Obviously we have the hindsight of COVID. Without getting specific, I can tell you that the things that we invested in 2020, if those tenants had closed for business, you should assume that we were able to get structure protection for us in the event those facilities had to be closed. There was no rent disruption for us. Got it. Can you talk about what is the embedded bad debt reserve in guidance for this year, and then maybe what it was for the fourth quarter, last year, 2020? Mike, do you want to Yeah. I can talk a little bit about that. Historically, and we talked about this back at our investor day, we typically have a 1% loss rent reserve built into our forecasting. We've taken that up in our guidance for 2021, excluding theaters. That's a whole another animal. Ex-theaters, we've taken it up over 50 basis points that we're running, that's embedded in our guidance at the midpoint. You can flex that up or down, low or high. Theaters, again, we assume You know what we did in the fourth quarter, you know what we recognized. It's pretty stable. We have a moderate recovery in the back half of the year. That's the best way to model that out and think about it with our portfolio stabilizing. A little higher reserves and very modest recovery on theaters built in there. Great. Thank you. Yep. Thank you. Thank you. Our next question is coming from Brent Dilts of UBS. Please go ahead. Hey, good morning, everyone. This is Upal in place for Brent. Most of my questions have been answered already, I was wondering if you could provide any detailed metrics, like deal metrics around the industrial assets you've acquired in the fourth quarter. Anything around yields, cap rates, location, and the types of the underlying tenants. I would say that a good number of them were public tenants. The thing that's interesting about our industrial acquisitions, without getting into super detail on the names of the tenants, the facilities could be smaller mission critical facilities, i.e., $4 million size- $30 million size facilities. They all sort of have a common theme to them. We really believe in the fundamental underlying credit behind them. We believe in the long-term prospects of the industry that they act in. We think that the facilities that they operate in that we've acquired are pretty mission critical for them. We think that the basis per square foot makes sense as it relates to if we had to release that facility. We generally think that of the buildings that we're buying, they are straight up industrial buildings, sheds, right? The other fundamental attribute is that they generally all have long-term leases. We are not buying things to re-lease, value add. These are really critical facilities for good tenants, and all they want to do is just pay us rent and do what they do. We support. That's how I would describe the layout in that portfolio. Okay, great. Thank Thank you for taking my question. Thank you. Our next question is coming from Linda Tsai of Jefferies. Please go ahead. Hi, good morning. Any thoughts on growing the dividend in 2021? Should it mirror low to mid-single digit AFFO growth you outlined? Mike is smiling right now, so I'm going to let him take this question. Linda, we actually talked about this back before COVID hit, actually. I think it was our Q4 2019 earnings call in February last year. Our goal is to get to a 75% AFFO for sure payout ratio before Sugar on the dividend. I think is that achievable in 2021? Obviously, that's not where guidance stays, but again, there is upside and indeed there's some other things that could drive us there. Yeah, it's not that far away. Certainly when I think back to where we were at Investor Day and the forecast we were talking about then and the timeline to hitting that 75% payout ratio and growing the dividend, it feels like we're at that point again. I think it's definitely near term, whether it's 2021 or not. I'd say not impossible, but we'll see. In terms of the 1.5% rent escalators, does this vary across industry type in terms of retail distribution or manufacturing? Ken, you want to take that? Ken, how about you? You're on mute, Ken. Yeah, I couldn't hear the question. Oh, the 1.5% rent escalators variation across retail distribution or manufacturing. What I would say is all the acquisitions that we're looking at now tend to have, obviously, rent bumps escalators in them. Industrial, you're going to lean more to the upside on that in the 2%, maybe even a little more. The industrial escalations tend to be a little higher than the other, the retail type of escalators. That's an important feature in what we look for in all of our acquisitions. Does that answer your question? Yes. Thanks. Just the last one on ESG initiatives. What's the focus as it relates to E, S or G, and what are some key benchmarks you're working towards? Well, I think when our proxy comes out, you'll see some commentary on some of the rating improvement. I'll focus on S for a minute. We did a lot of things during COVID-19, actually, which really I'm proud of. We had a company-wide diversity symposium. We had an outside consultant come in. We invited our board to participate. Really the purpose of it was to talk about implicit bias. It was a great day. We were able to do it on Zoom. Like I said, it was moderated and participatory by the whole company. We since then created a diversity initiative committee, and they are moving forward with some initiatives this year for the company diversity. On the women's side, we've really made a big effort to try to instill gender diversity as well as racial diversity within the company. We have an initiative there as well. On the E side, it's a little bit harder for us, just given the nature of what we do. We're not developers. We are capital providers, and sometimes we are doing takeout financing, and we're looking at different ways where we can advance the E side of what we do. I can tell you on the social side, we are very active and committed as a senior leadership team, and that goes down throughout the organization. New York, I think during COVID, we tried to find interesting ways to bring the company together, have more fun, do things together, and I think that's really helped build our community just within our company. Thanks. Maybe just as a follow-up, when you underwrite acquisitions, do you look at the resiliency of the buildings you're buying? Absolutely. Well, Ken, why don't you take that, Ken. Yeah. No. The answer would be absolutely. We've talked about before, we feel like we have a very nuanced property ranking model that every single acquisition we do, that's one of the first steps when we're in the early stages when we're still exploring the opportunity, is we have the asset management team put every potential property through our property ranking model, and a big piece of that model is specifically that, is the building and the real estate that the building sits on. Yes, it's absolutely an ingredient in our acquisitions and underwriting. Thanks. One last thing, Linda, our organization is almost 50% split gender, just so you know. Great. Thank you. Thank you. Our next question is coming from Joshua Dennerlein of Bank of America. Please go ahead. Thanks, guys. Hope everyone's well. Ken, congrats on the new role as CIO. Guess I'm kind of curious to hear your early thoughts on how this new structure will help SRC accelerate acquisition growth in the coming years, and maybe also how you think you'll spend most of your time under this new structure. Thank you very much. I would say I'm going to be spending a lot more time working with our acquisitions team. As Jackson mentioned, Dani, we're very fortunate Dani can come over and really focus on a very important initiative for us, which is continuing to grow with our existing tenants. Through COVID-19, one silver lining, if you will, was how close we got to our tenants. We know exactly which tenants that we like, which ones we want to grow with, and we're doing that. In the fourth quarter, over 40% of our acquisitions were with existing tenants. That's just kind of a start. I would say that a lot of my time will be spent on the acquisition side. We've made a lot of improvements to our processes. We'll continue to do that. Excuse me. We're laying the foundation of the targeted sources that we want to do business with, which is not just our existing tenants. There's other targeted sources that we feel like we've got the flywheel spinning, and we're in a position now we can put a lot of focus time on building those processes. Great. That's it for me. Thanks guys. Josh, I would just add one more thing, Josh, on that front. The exciting thing I can tell you without being specific is, traditionally when tenants get through COVID, the next thing they say is, "Hey, you guys were really good to work with. I got this new idea. I'm thinking about doing this." When we can get in early in that conversation, this might be, "I want to acquire this other operator. How do I do that? What can you do for me?" If you go back to listen to what we've said in the past in terms of some of our values, when we do what we say to a tenant, that goes a long way because I think that while people talk about cap rates going down and people buying, it's people want certainty, especially on the operator side. They want to know who's on the other end. If I get into trouble or I need capital or I see a fantastic opportunity, I think they're going to make different decisions about who their financing partners are going to be going forward. I don't know. I think that's the silver lining. Those conversations have accelerated a lot recently, and I think will only continue to accelerate as the year progresses with our tenants. I'm excited about that. That's great. It'll be exciting to watch. Appreciate that, guys. Thank you. Our next question is coming from Greg McGinniss of Scotiabank. Please go ahead. Hey, good morning, everyone. Jackson, lots been covered so far, so probably just one question from me today. Spirit had a busy fourth quarter, a productive year despite the pandemic. You're expanding the acquisition team, and I'm not trying to take away from the strong 2021 guidance at all, but what prevents you from being more bullish on net investments? If we might consider the target to be, I don't want to say conservative, but maybe the high end of the range is very reasonable if the transaction market doesn't shift much. I think what would change it would be we're very disciplined about this allocation. We're very focused on industry allocation and concentration and diversification. I'd say that's one thing that could change it. I think the second is, look, I've said this in the past, there have been some interesting portfolios that we looked at last year. One in particular where we weren't successful. We're always looking at. We have the ability to kind of size up big portfolios, given our technology tools, quite efficiently. If we did a larger portfolio, that would obviously impact the current guidance. Current guidance for this year doesn't assume any portfolio acquisitions. That could kind of move the needle a bit. Yeah, look, we're open for business. I think this is a reasonable range that we put out there, and we feel good about acquisition side-wise. Okay. Thank you. I guess I lied. Actually, I do have a follow-up. What's a reasonable level of dispositions to assume within the net investment guidance? Do you anticipate harvesting more of those kind of lower cap rate assets that we've seen you sell over the last couple of quarters? I think first and foremost, I'm going to pass it to Ken. Remember that we talked about this proof of concept. When we decided to structure our disposition program last year, 2020, it was in the depths of COVID-19, right? We wanted to have a proof of concept. This year, you might see some pretty Ken, I'll take thunder from you, but there's some real cap rate compression in some parts of our portfolio right now that we're evaluating. Yeah. The level of unsolicited inbound inquiries into our existing portfolio has been interesting. It's definitely elevated. A couple of things I would throw out is, we like to look at our acquisition to disposition ratio at six to one, 10 to one, somewhere in that range. I would say that dispositions are always going to be a smaller ingredient just simply based on that ratio that we're kind of targeting. We do believe dispositions are really important for portfolio shaping. Throughout the year, it's still early, we will identify both risk mitigation dispositions, and we'll identify opportunistic or offensive dispositions that make a lot of sense when we're getting some compelling inbound inquiries. At the end of the day, what I would suggest is it's much more focused on acquisitions. All right. Thanks, Ken. Thanks, Jackson. Thank you. Thank you. Our next question is coming from Chris Lucas of Capital One Securities. Please go ahead. Hey, good morning, everybody. Hey, Jackson, just one question for you. The high-yield market has been incredibly liquid to say it. It's certainly helped some of the liquidity for some of your tenants over the past several months. My question is, does the aggressive yields and financing availability in the high-yield market act as a potential competitive source of funds for those companies relative to sale-leasebacks, and is that a concern of yours at all? It's certainly something that when we talk with those types of tenants is on their menu as they look at their most efficient way to finance their business. I guess the way I would describe it is we can be very complementary to the high-yield market, especially as some of these companies look at acquisitions, particularly in that business, where they're looking at sale-leasebacks, high yield, leveraged loans. That's not the main part of what we do, but for sure, lower leverage lending spreads do affect our cap rates, that's for sure. I think there's still, like I said, our sweet spot is $500 million in revenue, $500 million- $1 billion, in terms of a company's revenue. While spreads have tightened, they haven't really compressed dramatically in this area. I would say it's not as aggressive as it was cap rate-wise for what we're looking at as, I would say, last year at this time. We watch it carefully, and we think it can be complementary at times for us as well. Okay. Thank you. That's all I have this morning. Thank you. At this time, I'd like to turn the floor back over to management for closing comments. Okay. Look, I want to just once again, I'm very proud of our entire organization, the senior leadership team, the board. We are in very good position to move forward this year, and I'm very excited about the company's prospects. Look forward to meeting many of you next week at this upcoming conference and look forward to your continued support. Thank you. Thank you. Ladies and gentlemen, thank you for your interest. You may now disconnect your lines and log off the webcast, and have a wonderful day.