Operator: Thank you. Next question comes from Joshua Dennerlein from Bank of America. Please go ahead.
Farrell Granath: Hi. This is Farrell Granath on behalf of Josh. I just wanted to touch on, I know last quarter there were comments on the most attractive investment verticals in terms of investment spreads. Are you still seeing developments as your most attractive, or do you have any other commentary around that?
Joey Agree: Our development and DFP platform remain active. I mean, the standard mode of the majority of retailers’ growth through merchant developers is broken today. And so we continue to have those conversations with both the developers as well as the retailers on how we can step in and create value. As I mentioned last quarter here, we can be a solution, but that solution has duration risk, whether it’s a four-month project or an 18-month project, and we’re going to price in that duration risk. And so we continue to have those conversations. I’ll be on the road, actually, with a couple of retailers’ headquarters in the next few weeks here to see how we can continue to be a solution in a world where elevated construction costs, lower loan-to-values, higher interest rates, and unknown cap rates upon completion, frankly, just inhibit a merchant builder’s ability to perform.
Farrell Granath: Great. And also, when you were mentioning the increase in call volumes outbound, is this a new internal initiative just going forward, or what was the shift in the increase?
Joey Agree: So ARC, obviously ARC is instrumental and tracks all of our connections through conversion rates, utilizing KPIs across all functions, really, here at the company. But we’ve made a concerted effort, led by Craig Erlich, our Chief Growth Officer, to ramp that call volume [indiscernible] use our vast database embedded in ARC, to mine for opportunities out there that aren’t glossy brochures and in an auction environment. And so those, I’ll reiterate, those opportunities are really going to come to fruition more so in Q2 here. Q1 sourcing, the majority of that was done during Q4, right? If we just use our standard 70 days to letter of intent execution to close. We only got 20 days of sourcing in Q1. Now Q2 is really post-rollout and coming up after the new year here of our dialed-in strategy, and that’s the theme here for the year. It’s dialed-in, and we’ll see that come to fruition in Q2 here.
Operator: Thank you. Next question comes from Eric Borden at BMO. Please go ahead.
Eric Borden: Just one on the disposition guidance. I was hoping that you could talk about some of the opportunistic capital recycling program that you have going on. What are the different tenant types or geographies that you’re looking to prune from the portfolio?
Joey Agree: Yes. As I mentioned in the prepared remarks, there seems to be a disproportionate amount of activity, albeit at a low base, of 1031 activity specifically in Florida. We dispose of a Gerber Collision, of a Mr. Carwash. I think you’ll continue to see us dispose of and recycle some non-core assets primarily in Florida, but also opportunities that are inbound with a 1031 that needs to be filled quickly, where we can opportunistically sell an asset and recycle that capital 150 basis points spread. So, again, Florida seems to be the hotspot for a number of reasons, and so we’re very confident in that range of 50 to 100, considering we’ve already closed over 20 and have visibility into over 20 for Q2.
Eric Borden: That’s helpful. And then I just noticed that occupancy had a small dip sequentially. I was just hoping you could provide some additional color on the tenant vacates and how should we be thinking about occupancy for the remainder of the year?
Joey Agree: Well, we were 99.8% in Q4, which is pretty high. I mean, that’s effectively occupied. I’d argue 99.6 is effectively occupied. It’s really the resolution of one box, which we anticipate in Q2. We’re going to have some interesting embedded real estate opportunities, inclusive of the Bed, Bath & Beyond redevelopment in Memphis, Tennessee, in Q2, it looks here. And I think it’s going to demonstrate our underwriting prowess and our real estate prowess and also our ability to identify transactions and assets within our portfolio, I should say, not transactions, but assets within our portfolio that have real estate fundamentals that aren’t being, frankly, utilized to the highest and best purpose. And so hopefully those are done and complete in Q2, and we can give, obviously, a much more detailed breakdown.
Operator: Thank you. Next question comes from Rob Stevenson from Janney, Montgomery. Please go ahead.
Rob Stevenson: Good morning, guys. Joey, can you talk a little bit about the expected return on the $74 million of development in DFP projects that were under construction at the end of the quarter and what was a similar sort of return to the projects you completed in ’23?
Joey Agree: Yes. I don’t recall that the 2023 returns offhand. Again, it’s really duration. Obviously, there’s real estate and credit, but duration becomes the critical aspect. If we’re able to retrofit an existing building through either project and the tenant’s going to be paying rent in 120 or 150 days, we do that often with Sunbelt Rentals. We do that often with Gerber Collision. We’re looking to, I would say, approximately 50 basis point spreads to where we’re very, frankly, wide of that if it’s going to be a 12 to 18-month project. We’re not going to go out there on the duration curve without a significant preview. And so that’s really the tension, again, which we’re trying to work through with retailers and merchant developers here.
The team is on the phone all day talking to developers with broken projects where they can’t get financing or the returns don’t make sense and they’re unable to perform or, frankly, just won’t perform because they don’t have clarity upon the back end. And so there’s a significant opportunity there. The question becomes which ones hit the risk-adjusted return threshold that we just talked about, Rob. But you can assume that if we’re buying here in the mid-upper sevens, we’re certainly not putting or financing shovels in the ground at those rates.
Rob Stevenson: Okay. And then you talked a bit earlier about the Dollar Trees. Can you talk about how many, excuse me, are likely to close or not likely to be Dollar Trees in the near future, given your current discussions, that you’re going to need to re-tenant it at some point? And what’s the average size of those boxes?
