Joey Agree: Oh, no, I think it’s what’s coming. I think we’re on the pre-COVID train. So, there will be no timeouts called like COVID where everyone just tried to call a timeout and flood the system with capital and cheap debt. Obviously, you mentioned we saw another bankruptcy just recently with Tuesday Morning. Bankruptcies will occur. We can probably say, hello bankruptcy to at home and office supply operator, a pet supply store, sporting goods operator, as we saw TOMS Capital, large Burger King franchisee, we disposed of all of their assets in years prior. If you look at our disposition we developed for them in the Chicago MSA filing bankruptcy, there will be more — the carwash space, the childcare space, the urgent care space, the quick lube oil change operators, the experiential entertainment operators, there will be private equity backed companies that have to again either have fixed or variable rate short-term debt where their LTVs and their rates are going to go way up, those loans don’t last longer than five years, as we all know.
And then, again, we’re going to see retailer attrition akin to the pre-COVID days as we march towards this omni-channel world where 25% e-commerce penetration, either through online, delivery, BOPIS, click and collect, it’s coming. And so it’s just a matter of time. So, I am very confident that we are now on the pre-COVID train for a rationalization of retailers.
Operator: And our next question comes from Wes Golladay from Baird.
Wes Golladay: Are you guys seeing the lot of opportunity for the multi-tenant PCS openings? Looking at the earnings release, you had a few anything Brenham, Texas and then Onalaska, Wisconsin at almost like a shopping center at first glance. So, what is going on there?
Joey Agree: Yes. The TJX multi-tenant effectively development, we’re doing a number — looking at a number of opportunities with them, off-price retailers, TJX, Burlington, the Rosses of the world, Hobby Lobby, again, those retailers that are looking to expand that were historically working with developers and/or merchant builders that can no longer finance these projects and make them work. And so, that’s an area where we can continue we think to invest capital and continue to seek out opportunities.
Wes Golladay: Got it. And then, I know — maybe two quarters ago there seemed to be a bid-ask spread between what you wanted to do these transactions at, what the retailers thought they were — the pricing should be. Has that narrowed at all? Now that debt markets have calmed down a bit, like you mentioned your debt — cost of debt down about 100 basis points over the last few months?
Joey Agree: I think Peter referenced about 20 basis points over the last few months, 10 years specifically, right?
Peter Coughenour: 10-year came down from maybe call it low-6s to what’s mid-5s today relative to what we discussed on the last quarter call, but less than 100 basis points.
Joey Agree: I think everybody’s looking at the relative cost of capital. I think from the merchant builders’ perspective for specifically, they’re looking at not only the relative cost of capital, they’re looking at their construction loans, the availability of construction loans, the interest rate on the construction loans. The labor shortage we have in this country leading to the inflationary pressures. Construction costs in this country haven’t gone down since 1904 year-over-year. And so, now you combine that with an exit cap rate that’s unknown to put a shovel in the ground as a private developer and build a TGX combo store with a Burlington or a Ross, you got to be pretty bold. And so, we think those are the types of asymmetrical opportunities where we can step in with our divergent capabilities and create value and create the appropriate spread for shareholders, while not going up the risk curve into assets that we don’t think are appropriate.
