Good day, welcome to the Spirit Realty Capital First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on a touch-tone phone. To withdraw your question, please press Star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Pierre Revol, Senior Vice President of Corporate Finance and Investor Relations. Please go ahead. Thank you, operator, and thanks everyone for joining us for Spirit's first quarter 2023 earnings call. Presenting today's call will be President and Chief Executive Officer, Jackson Hsieh, and Chief Financial Officer, Michael Hughes. Our Chief Investment Officer, Ken Heimlich, will be available for Q&A. Before we start, I want to remind everyone that this presentation contains forward-looking statements. We believe these forward-looking statements are based on 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 several factors. I refer you to a Safe Harbor statement in our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains specific non-GAAP measures. Reconciliation of non-GAAP financial measures to most directly comparable GAAP measures are included in the exhibits furnished to the SEC under Form 8-K, which include our earnings release and supplemental investor presentation. These materials are also available on the investor relations page of our website. For our prepared remarks, I'm now pleased to introduce Jackson Hsieh. Jackson. Thanks, Pierre. Good morning, everyone. I'm pleased to report that Spirit had another quarter of strong operating performance. Our diversified real estate portfolio produced steady results with high occupancy and no lost rent. Our capital deployment strategy produced accretive earning spreads and improved our industry diversification mix. We completed four sale-leaseback transactions totaling $182.7 million at a weighted average cash capitalization rate of 7.57%, representing a 106 basis point increase from the same period last year. Additionally, we invested $55.1 million in revenue producing expenditures at a weighted average capitalization rate of 9.4%, which included a $33 million seller note related to the disposition of four movie theaters. The resulting overall capital deployment cash capitalization rate was 7.91%, an increase of 149 basis points from the same period last year. Our acquisitions consisted of a newly renovated Life Time property located in McKinney, Texas, five industrial properties leased to large food and building materials manufacturers, and an ILS facility in Odessa, Texas. The weighted average lease term on these transactions was 19.1 years. The weighted average annual escalators were 2.4%, which is 80 basis points higher than the escalators we acquired during the same period last year. We continued to successfully sell smaller, predominantly retail properties, which generated positive returns on capital and improved our portfolio mix. We divested 39 income producing properties, including Red Lobsters, movie theaters, C-stores, QSRs, drugstores, a data center, a distribution facility, and a diverse mix of other retail assets. Our key portfolio metrics, such as asset mix and weighted average rental escalators, saw improvements with these sales. Excluding the theater sale, they also had a positive impact on our portfolio WALTs. Excluding the movie theater transaction, we generated a total of $107.8 million in sale proceeds at a weighted average disposition capitalization rate of 6.13%, with a weighted average lease term of only 9 years. In terms of size, our dispositions averaged $3.8 million per property, or $3.1 million excluding movie theaters. The rental escalators on our dispositions were lower than our acquisitions, and several of the disposed properties had flat leases. We continue to see healthy demand from 1031 buyers, family offices, and other institutional bidders, and expect continued success from our disposition program through the remainder of the year. I'm also pleased to highlight another industrial success story resulting from the recent distribution building sale. We acquired the property for $3.8 million in December 2019 at a cash capitalization rate of 6.85% and sold it this quarter for $5.8 million at a disposition capitalization rate of 4.75%. From acquisition through disposition, we achieved a return of more than 50% and cap rate compression of 210 basis points. Excluding the theater sales and corresponding loan, we deployed $98.1 million net of dispositions at an effective cap rate of 9.19%. Including theaters, the effective capitalization rate was 10.2%. Despite the headwinds in the capital markets and our elevated cost of capital, this year's disciplined investment strategy is producing great results that are accretive to shareholder value. As I mentioned earlier, we completed the sale of four movie theaters during the first quarter. Given theater sales are rare in this environment, I want to provide a brief overview of this transaction and a history of the four sites. In November 2019, we acquired the four theaters for $44 million as part of a $435 million portfolio acquisition, representing a 12.4% cash capitalization rate on the theater properties. While the underlying real estate locations were good for theater use, a high cap rate represented our belief that the rents were above market and the operator at that time, Goodrich Quality Theaters, was struggling. In February 2020, Goodrich filed for bankruptcy and vacated the properties. In September of 2020, when virtually all theaters in the U.S. were closed, an operator of Emagine Entertainment signed a new lease for all 4 theaters, which provided for a period of percentage rent that converted to base contractual rent in the fourth quarter of 2022. In January of 2023, the operator approached Spirit to purchase the 4 theaters for $44 million, paying $11 million in cash with the remainder financed through a $33 million loan secured by the properties and a personal guarantee from the operator. The resulting disposition cap rate on the new rents was 7.84% and the sales price was slightly higher than our original acquisition price. While theaters have been one of the more challenged industries since the onset of COVID-19, this is a good example of how our real estate underwriting helped mitigate loss given default and ultimately secure a good outcome for shareholders. Before I pass the call to Mike, I want to reiterate this year's plan that we laid out on our last call. Set forth a fully financed capital deployment plan utilizing free cash flow, asset dispositions, and in-place debt to produce investment spreads in a volatile capital markets environment. Showcase our portfolio strength and diversity through consistent and strong operating performance. I firmly believe we have the people, processes, and carefully underwritten real estate portfolio to be successful, even in a challenging macroeconomic environment. I look forward to proving that out this year. With that, I'll hand it over to Mike to go over the financial highlights. Mike. Thank you, Jackson. Good morning, everyone. The first quarter of 2023 was one of the cleanest quarters we've had since I joined Spirit. Our occupancy remained high at 99.8%. Our weighted average lease term remained unchanged at 10.4 years, and our unreimbursed property costs were 1.5%. Additionally, we recorded no loss rent, improving from the modest 0.1% in the fourth quarter. Our ABR increased by $8.2 million, reaching $689.1 million. This increase was driven by net acquisitions and organic rent growth, which contributed $3.6 million and $4.6 million of ABR respectively. Our forward same-store sales remained constant at 1.6%. Other income was significantly lower than prior quarters as we had no substantial interest income from cash balances or large one-time settlements during the quarter. Regarding G&A, the headline increase of $1.2 million compared to the same period last year was primarily related to this year's market-based share awards granted to the executive team and the final vesting of time-based awards issued three years ago. All executive stock awards are now 100% market-based. Time-based awards are valued using the stock price on the grant date, whereas market-based awards are valued using a fair value-based measure that results in a higher valuation and thus higher expense amortization over the life of the grant. Cash G&A, which excludes stock grant amortization expense, remained relatively flat year-over-year despite the inflationary pressures observed across the economy. AFFO per share was $0.89 compared to $0.88 in the fourth quarter, primarily due to the net increases in rents and the resulting positive flow through to earnings, strong portfolio performance, and accretive net capital deployment execution. Turning to our balance sheet, we ended the quarter at 5.3 times leverage with liquidity of $1.6 billion comprised of cash and cash equivalents, cash held in 1031 exchange accounts, and availability under our credit facility and delayed draw term loan. We did not issue any shares during the quarter. In mid-March, we took advantage of the sharp decline in the forward SOFR curve and entered into forward SOFR swaps. We anticipate will be fully utilized to fix our $500 million delayed draw term loan at 4.75% once fully drawn. Our floating rate exposure is now limited to our revolving line of credit, which we anticipate fully repaying when we draw on the term loan. Regarding our guidance, we're increasing our AFFO per share range to $3.54-$3.60, increasing our disposition range to $325 million-$375 million, and maintaining our capital deployment range of $700 million-$900 million. As Jackson mentioned, we are pleased with our results during the first quarter and believe our plan will demonstrate the strength of our portfolio While maintaining a low leverage balance sheet without reliance on the capital markets. With that, I will turn the call back over to the operator to open up for Q&A. Operator? We will now begin the question-and-answer session. To ask a question, you may press star then 1 on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. First question comes from Michael Goldsmith with UBS. Please go ahead. Good morning. Thanks a lot for taking my question. Jackson, pretty considerable slowdown in the deal activity. I guess, you know, what sort of visibility do you have that, you know, your acquisitions can pick up and, you know, can you just talk a little bit about raising the disposition expectations and you've been doing a good job with the capital recycling, but, you know, there isn't an offsetting increase in the acquisition. Can you just talk a little bit about the interplay between those two factors? Sure. First of all, you know, our acquisition pipeline continues to be very consistent, so don't expect us to have any challenge meeting the guidance that we put out for the rest of the year. Just a little color on the 4 deals that we acquired this past quarter. 2 of them were actually deals that we had pursued in the 3rd quarter of last year in 2022, and we're not, you know, the highest bidder, and so the seller, during the sale-leaseback, pursued another bidder at a much lower cap rate. Just given some of the challenges in the financing market, those deals came back around to us. We were able to secure those transactions at wider cap rates, candidly, than we bid in the 3rd quarter back in 2022. I felt like that was a good opportunistic opportunity for us. If you look at the shape of our acquisitions this quarter, you know, there were two PE-backed acquisitions. There was one private company and obviously one public company in the Life Time transaction where we have a very strong relationship with that company. I would just tell you, like, we are continuing to evaluate a number, large number of retail and industrial opportunities. The governor for us is really, you know, we think cap rates at this point have begun to find a stable point at this point. I think they've moved a bit from the third quarter last year to first quarter. We expect probably a little bit more increased deal opportunity in the second half of this year, just given the things that we're seeing. That's just on the top line. On the dispositions, look, the dispositions are an important part of our strategy this year. Given where our equity multiple is trading right now, we're just not going to issue stock at this level. It doesn't make sense. What makes more sense is to sell what I'll call these granular assets that are accretive for us. You know, if you think about what we disclosed to you all on the call, you know, those were 27 separate transactions that we completed in the first quarter. A quarter of it was investment grade concentrated with Circle K, AT&T, and CVS. We sold a data center as part of one of those transactions. 30% of the rents excluding the movie theaters were flat, right, so no escalations. Of the 25% or so IG, the weighted average lease term of those leases were 5.5 years. You think about what we did, we increased spread, we increased duration. The average rent escalators that we acquired in the first quarter are 2.4%. We're going continue just to do that. We're just going to continue to recycle up, increase wallet, increase mix, increase duration, and increase escalations. I think we'll be continuing to be successful there. You know, the assets that we sold, you know, were very liquid. I mean, they were sold in the 1031 market. You can see the math on it. You know, it was. We sold a lot of Sonics, you know, the Red Lobster and a CVS drugstore and a couple of other retail assets, but they're all sold, you know, with varying different buyers all over the country. We think we're going to continue that playbook this year, and we've got, you know, a number of different assets that we think fit the criteria where they're sellable. They're not our best assets by far, and they just make sense given the opportunity we see on the investment side. I think you've done the math, so you know, our net cap rate on the net deployment, like I mentioned on my call, is North of 10%. That's obviously a really good number. I think it's very accretive. If we're able to accomplish all the things I talked about, increase wallet, increase mix, increase rent escalations, get rid of flat leases, build wallet in the overall portfolio, I think that's a pretty good accomplishment if we're able to do that, continue to do that this year. That's really helpful color, Jackson. Just to follow up, right? The cash cap rate picked up 30 basis points sequentially, so you're now acquiring in the 7.6% range. Is that a function of moving higher up the risk curve or cap rates for the product that you're looking for? Has that kind of stepped up at that 30 basis points a quarter type of movement? I'd say absolutely we have not taken risk up. Like I said, two of the deals that we bid on, last quarter, we were probably 50 basis points inside. In other words, we bid 50 basis points tighter in the third quarter of last year, and we were able to secure these deals just in the first quarter, 50 wider. Same transaction, same credit. I think it's just a step function of where cap rates are moving right now, as opposed to us incrementally chasing, you know, more risk. Thank you very much. The next question comes from Haendel St. Juste with Mizuho. Please go ahead. Hi. Good morning. This is Ravi Bulchandani on the line for Haendel St. Juste. Hope you guys are doing well. Just one other question about the acquisition cap rates here. We noticed that it increased heading into 1 Q from 4 Q, but over that same time period, debt costs have come down. Can you comment a bit about the competitive landscape, and are you seeing less competition for these assets right now, given that we're past the end of the year and there may be less demand from the 1031? Look, I feel like the things that we're buying, we're not competing with 1031 buyers, just given the size of the assets that we're pursuing. From what we can see from our lens, there's a reasonable amount of competition. Clearly, you know, people that are looking to do sale-leasebacks, if they're dealing with someone that needs bank debt or financing, they're probably going to look more to a company like ourselves or one of our peer companies that don't finance with secured mortgage debt. You know, we have the ability, obviously, to buy property unencumbered through our line of credit, and I think we have a higher degree of certainty. I use the reference of the two deals that we were able to secure on the industrial side. Those were deals where basically the seller didn't perform, and the sale-leaseback party, you know, tenants still needed to do a transaction. I do think that I would say companies like ourselves and our peers probably are a preferred bidder today. Not necessarily the highest bidder, a preferred bidder. I also think that the 1031 market is very active, as we've continued to demonstrate over the last several quarters. We plan on, you know, kind of launching a new tranche of assets soon and that's the reason for increasing our guidance. We think we've developed a good rhythm, good relationship with brokers across the country and kind of a good idea of what really works, relative to the marketplace and what makes sense for us to sell. Got it. That's helpful. Just one more here. Can you discuss your watch list? What is it as a% of ABR, and, what are some notable tenant categories that you are currently monitoring? I'm going to hand that over to Ken. Hey, Ravi. Our watch list is actually very stable. You know, I've mentioned this before, what you tend to see. You know, we had an expansion of our watch list in the fall of last year, obviously, given everything going on. Since then, it's a typical every, you know, every month we're reviewing that watch list and there are folks that we take off the watch list and maybe we add one or two folks. Overall it's pretty steady. What is it as a% of ABR? We don't really frame it that way, Ravi. I think what we look at is, you know, the typical operating metrics that everybody can see. You know, our loss rent, our leakage, which have been extremely good. Just probably doesn't make sense to go into, you know, what it is as a% of the base rent of the portfolio. Okay. Thank you. The next question comes from Ki Bin Kim with Truist. Please go ahead. Hi. Good morning. Can you just talk about the total basket of lower cap rate assets that you think over time you can sell? What does that total basket look like? Second, from a practical standpoint, obviously you probably wouldn't wanna sell all of it, so when you think about what is realistic to assume, how much dry powder do you have in terms of dispositions? Well, we obviously have a lot of properties. You know, just if you think about it, if. You know, we disclose our retail properties, you know, in our supplemental, you can see, you know, it's quite a large number of opportunities. I guess stepping back, what I'd say is, obviously, we think our portfolio is a lot more diverse and stable than what the market must think at this point. We've designed this plan, Ki Bin, that we think doesn't need equity. We can be opportunistic, improve the portfolio, do all those things that we talked about, and still actually grow earnings. Actually, you know, this plan does work going out into the future. Wouldn't wanna do this forever, it wouldn't be very fun, but this plan does continue to work because we've got such a large asset base across this country in retail where, you know, that's this just gives us good opportunity to kinda continue to improve our portfolio. You think about the things that I mentioned. We talked about what we sold, they're all shorter-dated WALT properties. Shorter date to WALT properties doesn't mean they're bad, right? They're just, you know, we're trying to maintain a certain level of portfolio weighted average lease term in the portfolio. You know, you have to sort of wait for your natural opportunity to do a blend and extend. We're able to actually sell at very attractive pricing with WALT that's sub 6 years, right? We've proven that. I think, you know, we'll continue to pursue this year. My hope is as the year progresses and, you know, we continue to show very little volatility in our rent stream, which we believe we will, that the market will start to appreciate the benefits of the diversification of the portfolio and the opportunities that we're able to secure with our tenant base on the growth side. Okay. I might have missed this, but what was the interest rate on the loan just for the theaters? If you can talk about the, I guess the medium-term game plan. Are those is the Emagine Are they planning to refinance that loan at some point? What is the end game? Sure. Look, I'll amend those comments on the call, but, you know, the reality is we got 25% of our basis back in cash. The Emagine operator basically got a bridge loan for us. It's a 2-year loan. It's personally guaranteed by the operator, the individual. Our expectation is he's gonna refinance the loan because obviously it's a very high interest rate. But that being said, you know, we've reduced our basis in the asset. The other thing is, you know, we've said this a lot of times, we've said it in past calls, you know, our theater portfolio of operators is very different, you know, than maybe some of our peers. You know, we have 9 tenants, separate operators. Now, an additional 10 with the mortgage to Emagine. You know, we've said in the past that these operators that were regional, were able to recapitalize their balance sheets during COVID, and are currently in really good shape financially, probably better shape than some of the larger national players, international players. We, we just saw this as an opportunistic opportunity to sort of recycle these assets out. We believe that the operator has the ability to refinance those assets. I think, like, just carry you the end game. You know, we put this new slide in, page 4, which is what titled Progress at Spirit Portfolio and Balance Sheet. If you get a chance to look at that, it's a pretty interesting slide. Actually, one of our shareholders, you know, helped us put that together. I think it's a great idea, so we took it. Just if you focus on what Spirit was like at the IPO, you know, movie theaters were 1 of our top 5 industries. In 2018, after the spin-off, movie theaters were still a top 5 industry. Obviously today they're not, they're continuing to reduce. They're about 3.5% of our ABR right now. We're continuing to reshape this portfolio. We know we love the distribution manufacturing, that's increasing. We also love a lot of the retail tenants that we're focused on that make sense for the diversification makes in our portfolio. You know, we'll continue to evaluate creative opportunities to monetize some of our theater exposure. I think this is a good one. It mitigates risk. We've got the operator that's got the ability to come up with the cash. You know, they're incentivized to refinance our mortgage. We believe they will be able to. We, we think it's a real win-win for both us and Emagine, the Emagine operator. Okay. Thanks, Jackson. Our next question comes from Ronald Kamdem with Morgan Stanley. Please go ahead. Great. Just 2 quick ones on the, you know, the raise disposition guidance. Apologies if you mentioned already, but is there a certain? Is there gonna be more retail, some industrial? Have you guys sort of given a little bit color on what's on the selling block, and sort of cap rate thoughts would be helpful? Sure. I'll pass that on to Ken. He's very involved with this right now. Yeah. I'd say the expectation that obviously it's lean retail, granular type retail, and would expect it would kind of continue down that road. If an opportunity presents itself on the industrial side or any of the other assets, obviously, we're going to look at that, like we've done in the past. Last quarter, we sold an industrial property for sub 5%, cap rate. You know, that just made a lot of sense. In general, I would expect it to lean to the retail granular type properties. Last comment, though. It's not dependent on that retail granular investment grade type of properties. You go back to the fourth quarter, we had a $50 million sale of a medical property that at a, in an accretive cap rate. Jackson mentioned we sold a data center at a very, you know, an accretive cap rate. You know, it's not dependent on any one particular asset, but because we have such a diverse portfolio, it allows us to be selective. Yeah. Keep in, we don't disclose our cap rates, but the lowest cap rate sale in the first quarter was actually not the industrial deal. It was actually a Sonic location. It was a 4 cap with 7.5 year WALT, right? Individual buyer liked the location. There's, as I'm saying, there's a lot of different ideas about what people think sells or doesn't sell. We have pretty good handle on it, we're kind of trying to utilize our rankings and all the work that we do. We've talked about in the past, we've got rankings, BI tools, all this stuff. We kind of don't just randomly sell stuff. It's very... It's very, very intentional on the disposition pools that we create. One that fits the market, what the market wants, and also what makes sense for us. You know, making sure it's accretive for us. Great. Sir, my next one was just on the cap rate. 7.9% in the quarter. You know, I know the company had sort of been focused on waiting for cap rates to move more. Where are we in that, in that sort of process? How much have they moved? How much more do you expect to move from here? Have we sort of leveled out, and so forth? Well, like anecdotally, like I mentioned, like the two deals we did in the first quarter that were industrial, they were deals that were originally we were chasing after the third quarter of 2022, and they widened out just call it an average of 50 basis points, the two of them. I think today what we're seeing is, you know, candidly, we're getting beat out by other bidders. You know, we were bidding on things where we think fair value is. There is definitely a market that's out there. I wouldn't call this a robust buying market, but I think there's. What I would say right now, I feel like there's more limited quality opportunities. When those show up, there are definitely people that come. Our expectation is that later this year, as companies continue to look at their financing needs, we just think there's going to be more volume, quality volume coming. Whether that means cap rates move out or get wider, hard to say. You know, I think there's a lot of other factors that impact that. Our belief is that there's going to be a higher volume of actionable opportunities that fit our risk criteria and tenant criteria and industry mix criteria. I don't know. If that answers that for you. Great. That's helpful. That's it for me. Thanks. Thanks. Our next question comes from Linda Tsai with Jefferies. Please go ahead. Hi. Thanks for taking my question. In terms of dispositions, I guess you said you're selling more retail, but then you also sold some industrial. On the flip side, in terms of wanting to increase WALT and going after higher escalators, does that lend itself more so to industrial? Well, the industrial asset that we sold had less than 9 years of WALT, and, you know, the escalators were 2%. We're actually doing better on the industrial deals we're doing now. They're actually 2.5%-3% escalators. That one just was, you know, just another proof of concept that we want to try to continue to show people we sort of have the ability. We think we've developed an ability to improve our aptitude on industrial acquisitions at this point. You know, look, the retail is the easiest. It's the largest buyer base out there. I think that's a no-brainer for us. You know, we're going to continue to look at opportunities where they make sense. I mean, like, we sold a Camping World dealership last quarter. Sold a supermarket, right? A couple supermarkets. You know, a LA Fitness location. We'll continue, like, to find things that we think make sense to sell. Without getting into details about those properties, those made sense for us to sell. In terms of what you're buying, is it, you know, with the higher rent escalators, does that fall naturally into industrial? I'd say yes with a little but. You know, we still think owning retail is important. We've got obviously a lot of retail tenants and capability. I think what you'll see us probably start to really lean into is more repeat business with our existing retail tenants. You know, the challenge we're finding right now is that retail opportunities that come by that are just where we don't have a relationship with a tenant, just the math is just not as compelling, from an escalating standpoint or a cap rate based on the perceived risk we think we're that's involved in the transaction. Just between manufacturing and industrial, where is your pipeline bigger and where do you see the better opportunities near term? I'm sure it's very credit dependent and locational. You know, look, I candidly would like to do more distribution. It's just trying to be able to line up our cost of capital and win those opportunities. We have certainly pursued a number of different distribution real estate opportunities, just we're not successful this past quarter, just given kind of where we are pricing things right now. You know, in time, maybe we'll be able to increase that hopefully over the rest of this year. If I were to tell you, I think we're going to continue to do retail. We're going to do sort of a good mix of distribution and light manufacturing throughout the rest of the year. I think, you know, that fit our cap rates in that mid 7% area. Thank you. Our next question comes from Joshua Dennerlein with Bank of America. Please go ahead. Hey, guys, it's Joshua Dennerlein. I think last quarter you mentioned in guidance there was $0.05 of reserves. Did that change at all from last quarter? Did you I don't think you had to use any of that in Q1, but if you confirm that would be great. Yeah. Joshua, it's Michael. I mean, that's come down a little bit, so I'd say we're a little less than 1%. You know, we didn't post any loss rent in the first quarter. We did talk about last quarter that that was a little more back half weighted in the year because that's just where we have, you know, less visibility. We did have some of that reserve in the first quarter, and we didn't use it. You know, we didn't. We have taken that down a little bit, so it's a little bit less than 1% at this point. Okay. I wanted to follow up on the seller financing on the theater sales. Was the usage of the seller finance driven just by like the theater market is like today? Or was it something different, like, going on with maybe just like the banking sector in general for debt at the time? It was more of that, the latter. You know, it's just really hard. You know, it's hard to get financing out there, you know, in the bank market, at the moment. I believe that our belief is that this borrower has the ability to finance it. It just, you know, just been a kind of a rough month in bank land last couple months. Our expectation is that this operator that's closed on the property will refinance that loan. You know, it's a reasonable loan-to-value. I think you can get, you can get it done. Actually, maybe one follow to that. It's really more of an accommodation by us. Do you expect to use a little bit or utilize seller financing a little bit more in this environment for the dispositions that you're talking about? Uh. I guess I'm just asking just to see if it's something we should. Yeah kind of be on the watch out for or just kind of expect. I would say that's more... that's a very unusual one-off situation. Like, we're not, we're not really in the business of, you know, making loans like that. This just happened to be, like I said, like this win-win. This operator's got obviously liquidity. It makes a lot of sense for that operator to basically cancel the lease, right? That's, that's what they're doing. They'll basically refinance either with a mortgage or corporately later. I mean, don't forget, this is a larger operator, regional operator, so they have the ability to finance, you know, at the corporate level. Our expectation is, we just saw this as kind of a win-win for both of us in a kind of very unsettled debt market. I don't expect us to be... This is not a strategy of, like, providing seller financing. That's not really what we're gonna do. Just, you wanna talk about trying to get theater sold? They're not easy to sell right now. Okay. Thank you. The next question comes from Brad Heffern with RBC Capital Markets. Please go ahead. Hey, thanks. Good morning, everyone. I think you own another nine theaters where Emagine is the tenant. Is there a potential for more deals like this, or was this a special situation in some regard? I would submit that the transaction that we did was very germane to that relationship and that dynamic. We're very happy with our other Emagine theaters and that operator, phenomenal operator. Right now there's no expectation. Okay. Got it. Then Michael, on the increasing guide, can you just go through sort of the underlying reason for that? Obviously, the dispositions number went up, but presumably that would actually take the guide down. What was the offsetting factor there? Yeah. I mean, the main reasons for the increase for our guide were, you know, one, the performance in the first quarter. We didn't, you know, have any lost rent, right? We had some reserves set aside for that we didn't use. Then we had very accretive acquisitions in the first quarter just flow through the rest of the year. You know, what you do in the first quarter does have an impact on the rest of the year. The increase in dispositions really aren't an offset. You know, we're shaping up those additional incremental dispositions to take out to market now. By the time you get those out to market and get them done, that's gonna be in the latter part of the year, so it doesn't really have a big impact to earnings this year. What it really does is it positions our balance sheet well going into 2024, which we think will be a very good year for us. Those dispositions don't have a huge impact on earnings this year. Again, the acquisition in the first quarter, coupled with just good operating performance, is what really drove the increase in the guide. Okay, thanks. Yep. The next question comes from Wesley Golladay with Baird. Please go ahead. Hey, good morning, everyone. Sticking with the theaters, how should we think about percent rent going forward? You did only sell the 4 theaters, as Brad was talking about in his question. Were these theaters different in any way, like, the next generation theaters? When you look at your vacancy, you only have a few. Are those any Regals in there? How should we think about a fully loaded loss given default for those theaters? What I can tell you is, one part of that answer is, the five vacant that we had at the end of the quarter, none of those were theaters. I'm not sure. Yeah. On percent rent, I mean, we did have percent rent on the four that we sold. You know, that was a That was a special, you know, situation because, you know, we did retenant. During COVID. you know, during COVID. With the new operator coming, they did have a ramp-up period. That period ended at the end of last year. We don't have any other, you know, situations like that, so none of our other theaters are on a percent rent basis. That was, you know, a little unique to that particular tenant. Yeah. Which obviously now we sold as property, so. Yeah. I just wanted to ask, would you take that rent down for the second quarter from the first quarter run rate? Yeah. I mean, Well, that rent is not part of our ABR at the end of the first quarter since they were sold. Our ABR is, you know, a snapshot at the end of the quarter. Our ABR does not include those four theaters. On the, I guess the, loss given default, I guess you don't have any theaters for Regal, so that's a moot question at the point. My next question would be. No, we do have. Well, yeah, we do have theaters with Regal, but, you know, we're still in the process with the bankruptcy with those guys. At some point when they're done, we'll explain it, you know. Yeah. As we've said, you know, we expect to lose a couple theaters. Okay. Then, you have ClubCorp, their debt trading a little bit weaker, but from what I recall on past calls, you have pretty good operational momentum at the assets you bought. Could you maybe give us an update there how they're performing operationally for you? Sure. Look, they, you know, as you guys know, Invited, they're headquartered here in Dallas. We are very, very close, closely aligned with them and Apollo, candidly. We spent time with both entities. We are very bullish on the golf business, very bullish on the industry, very bullish on those guys. The performance of our master lease has continued to strengthen. Our master lease coverage right now is 2.8 times. That's 0.4 times higher than 2019. You should sort of imply revenues are higher than pre-COVID levels right now for our properties. You know, those, you know, our lease generates about 10% of Invited's corporate EBITDA, you know, it's a meaningful part of their business. Our units on the top line have increased 28%, 28% since 2019. I can always tell you, like, the performance of the units that we bought are very, very strong. Candidly, they're very consistent with, I believe, the experience with the rest of their portfolio. I personally am very confident in their ability to refinance that debt, which is due in September of 2024. I know there's some, whatever, articles out there, but we have pretty good insight into their business and believe that they will be able to refinance that. We're not worried about it. Got it. If I could sneak just one more in. You do have that $500 million delayed draw term loan. How should we think about drawing that down and the use of proceeds for that? Yeah. I would model that we match that with our acquisition needs. You know, we're in the process of working with our lenders to amend that to be able to push out some of that commitment so that we don't have to draw it all in July. We'll update you when that is complete. We'll be able to better match that with, you know, the needs to actually draw it. I would not assume that we draw the entire $500 million in July. You know, we'll be able to work to push that commitment out a little bit, stagger it to really match it up with our funding needs. Thanks for the time, everyone. Thank you. Next question comes from John Massocca with Ladenburg Thalmann. Please go ahead. Good morning. Morning. Maybe kind of just quickly touching on that last point about the debt. Should we kind of assume the goal is to get that to match up with the swap timing? Would that be kind of the ideal situation? Or is you maybe looking to get even more granular than that? No, I think that's a fair assumption. Okay. Then on the theaters, I think, Jackson, heard, you were looking to kind of continue monetizing those assets. I mean, what are some kind of creative solutions to monetizing particularly some of your non-big three, theater assets beyond, you know, things like seller financing? Is there any other kind of strategies that you have out there, that you're working on today? No, I would say the answer is no. This worked out well for both us and the Emagine operator because, you know, the performance at his theater is going really well. He's got other theaters and corporate facilities, debt facilities. It just made a lot of sense. Look, would we sell to other operators? Maybe, you know. You know, we'll continue to see, you know... We obviously have a lot of good visibility on performance at the unit level and corporate level for our theater operators. Hey, look, you know, maybe we could do another one like this. Maybe it's not seller financing, maybe it's something else. There's clearly, you know, as negative as people are out there, some people about movie theaters, you know, our operators are actually quite bullish, you know, and, you know, especially the regional ones, that are not hampered with some of the cost structure of the larger, you know, bigger, international kind of players. I guess in that context, it's fair to assume there aren't any additional theater dispositions and kind of disposition guidance today? Not right now. Actually, go ahead. Well, yeah, yeah. I actually wanna make a quick correction. I mentioned out of the five vacants we have, there is one small theater. It's the first Regal that we had previously disclosed that they did reject, but it's got a resolution here within a matter of days. Other than that, you know, we're, we gotta wait until we see the end of the Regal until it gets wrapped up this quarter, probably late this quarter. Okay. As we think about kind of assumed credit loss through the remainder of the year, is there any kind of change in the outlook for some of the tenants that are undergoing kind of bankruptcy right now? I mean, Regal is the most obvious one, but, you know, maybe Party City as well. Party City is 0 loss for us. No, we don't, we don't see a lot of pressure there at the moment, so. Okay. That's it for me. Thank you very much. Thank you. The next question comes from Spenser Allaway with Green Street Advisors. Please go ahead. Thank you. Just circling back to the theater assets that were sold, and I'm sorry to belabor this point, but, was there any CapEx that was spent from Spirit's perspective while those were being converted from the Goodrich name? No, it was zero. We didn't put any money into them. Okay. Then as it relates just to general use of proceeds, has there been much consideration around share buybacks, just given where the stock is trading? You know, we look at it, talk to the board about it, you know, we'll continue to evaluate it. You know, at this point, Look, we're generating 10% incrementally on our dispositions, you know, on our net acquisitions. Like I said, we believe that what we're doing is improving the overall portfolio from a credit and stability standpoint. Diversification, obviously, WALT, I talked about, and escalations. Yeah, I mean, we'll always look at buying back stock, but buying back stock doesn't really improve your portfolio. You know, these net lease portfolios, if you just leave them be, you know, WALT goes down. You sort of have to kind of continue to refresh these, you know, the mix of assets in these kinds of companies, in my opinion. Yeah, we do look at stock buybacks, and, you know, we'll continue to evaluate it. We have done it in the past, obviously, since I've been here in a meaningful way. At this point, we feel like there's still good work to be done in how we're thinking about the recycling of assets, given the market opportunities to deploy at what we think are really good cap rates. Candidly, with the, with the duration that we're buying, you know, we believe that when the Fed eventually finishes and interest rates stabilize, there's gonna be a lot of uplift in pricing if we decide to go sell some of the things that we've been buying in the last year. Thanks so much for the color, Jackson. Sure. The next question comes from Greg McGinniss with Scotiabank. Please go ahead. Hey, good morning. The portfolio. Morning. continues to go through some pretty substantial changes with industrial exposure at nearly 25%, up 20% since 2018. How are you thinking about the ultimate diversity of exposure to each asset class or industry? Look, you know, I mean, Greg, we don't have a target out there, to be honest with you. Like, we like both. We think, you know, At the current mix level, we think it provides, you know, a great deal of diversification, geographic, industry, unit, real estate, you know, size of real estate, and takes advantage of some of the onshoring that's coming into this country. You know, we just see a lot of interesting, you know, positives in that light manufacturing industrial portfolio. I mean, I'm not gonna tell you that we're gonna take it significantly higher or lower. You know, we're gonna continue to evaluate that healthy mix, you know. Look, there are certain retail lines of businesses that we're just not going to be in the market for anymore. Either they're too expensive from a weighted average cost standpoint or don't match up in our heat map, the way we kind of want to build this portfolio long term. That mix, you know, go back to page 4 and look at it. It's changing quite a bit. You know, like Life Time, for example. I mean, a lot of people were criticizing us about the concentration being number 1 tenant. Look, we're big believers in that concept, big believers in the CEO. It's a phenomenal business and a lot of confidence in them. That's very different than Walgreens, right? Walgreens was our number 1 tenant at the end of the spin-off. You know, quite honestly, Walgreens, we can't be a big enough partner with Walgreens to make a difference. Why should I go compete to buy developer Walgreens deals, right? Just given our size. Mm-hmm. Whereas with someone like Life Time, Invited, you know, we can be a real partner. We can help them, and they can help us to have a very additive relationship. Look, we're looking at our portfolio as that combination of trying to create that diversity, but also those win-win opportunities with what I'll call best-in-class operators in those industries that we believe have that really long runway for stability. That's really kind of what we do, right? Okay. Thanks. I didn't answer your question about the mix, but that's how we look at the world right now. Mm-hmm. No, that's fair. I just wanted to touch on the watchlist again, in regard to specific tenants such as Shutterfly and Tupperware. Could you provide any color on ABR exposure to those tenants and then your thoughts on bankruptcy potential, and disposition or re-leasing expectations on those assets? Finally, just as a reminder, are all the Invited Club assets under a single master lease? Yes. First of all, yeah, on the Invited, the answer is yes. Look, on the Shutterfly deal, what I can tell you about that is it's great real estate. Actually the tenant has increased the usage, the manufacturing usage by kind of taking out some of the office component that's in that building. That, that's, I think gonna be a super sticky building. Look on Tupperware, I'm not gonna comment directly on that. I mean, I can just tell you they paid rent this month and, you know, we're very close, continuing to evaluate that situation. When we have more to say, we'll do it. Okay. Are you willing to disclose ABR to those tenants? Oh, I mean, it's, they're, it's less than 50%. 50 basis points. 50 basis points. Sorry. Yeah. Right. Okay, great. Thank you. Mm-hmm. This concludes the question and answer session. I would like to turn the conference over to Jackson Hsieh for any closing remarks. Right. Thank you, operator. Thank you very much for participating on our call. Just really bring you back to the new page that we put into our supplemental deck that talks about the progress at Spirit on page 4. If you look at it, we're really focused and excited about the progress we've made since the IPO. This company is quite different and we feel quite enthusiastic about the prospects for the rest of this year. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.