Joey Agree: Well, again, historically the minority of what we’ve done is third-party acquisition. So, we’re not negotiating a lease with escalators. I’ll tell you, in the sale leaseback transactions or the development or retailers are more comfortable today and more amenable to increasing acquisitions — excuse me, increasing those increases that are scheduled for every five years.
Ravi Vaidya: Got it. That’s helpful. Just one more here. Are you expecting any impact of the portfolio from the Kroger-Albertsons merger?
Joey Agree: Absolutely not. Kroger is one of our largest partners. We have full Kroger guarantees. The recent speculation has to a 250 store divestiture. We’ll see how that materializes with the 2024 potential closing as they’ve telegraphed. We’ll see how that materializes through the FTC. But we expect — absolutely, no, we have we have no Albertsons in the portfolio, I should mention.
Operator: Our next question comes from Linda Tsai from Jefferies.
Linda Tsai: Hi. Can you remind us, what percentage of your acquisitions have been from the 1031 market versus sale leasebacks historically?
Joey Agree: Peter, I’m going to try to throw that one to you. I don’t have that number on hand. I’ll tell you, approximately last year 7%. Does that sound right with sale leasebacks?
Peter Coughenour: Yes, sub-10%, I think in 2022.
Joey Agree: Sub-10%, we anticipate that number being elevated in Q1. I can’t give you historic — when you say 1031 market, don’t forget, these are sellers. And so, there will be 1031 buyers competing with us. What they do with the proceeds, whether they enter into a down leg, they have the ability to do a new purchase agreement or they just pay capital gains tax isn’t always — we’re not always privy to it, frankly, Linda. We’re not privy to it.
Linda Tsai: Got it. And then just earlier you were talking about the ground lease situation with the Chase Bank in Georgia. You noted a lack of options that resulted in a high recapture rate. Was that more of a one-off situation or something you think happens more in the current environment?
Joey Agree: Well, I appreciate the question. It was a very unique situation. It was the first time in the history of the Company we had ever had a ground lease expire with no options remaining. We had another tenant at the table who was ready to take the property at over $170,000 a year which was that — what 60% plus lift? Chase came around and signed a new 15-year lease at that 60% plus lift with 10% bumps every five. And so, I think that demonstrates the embedded value in the ground lease portfolio when a building reverts for free. Again, this was the first instance. I look forward to future instances of it. But when you get a building back for free and then all of a sudden somebody has to pay rent on it, you’re going to see NOI go up.
And again, I’ll remind everybody, we have a fee simple ownership of the land. This isn’t a leasehold split — fee simple leasehold split, and the tenant paid for the construction of that building. In this instance, it was a predecessor to Chase that was on a ground lease paid for the building. Then Chase had taken that lease, and hence why there was no options remaining. And so, we were obviously able to negotiate a very favorable outcome there. We actually bought that ground lease with two years remaining and no options.
Linda Tsai: Thanks for that. And then how do you feel about the overall retailer environment, Regal, Party City, Tuesday Morning, Bed bath, they’re not issues for you, but do you think this is a limited situation or indicative of more distressed forthcoming?
