John Massocca: Okay. That’s very helpful. And then maybe Mark, talking about having enough equity capital to finance deals for the remainder of the year and stay within the leverage targets, but maybe kind of more near term, I mean, is the thought process to use nothing, but kind of the in-place equity capital to finance transactions and may even be able to kind of stay off the line on a short-term basis or just giving, you know how low that would take to deleverage? And the fact that as you kind of think about dilution, you might kind of stretch the existing forwards out a little more over the course of the year?
Mark Patten: Yeah, I guess what I’d say it’s probably a little bit more towards the latter, meaning today you’re utilizing — first of all, I’ll start with I think you made this point, you know, at our pro forma leverage level, we are pretty significantly equitized. So we have some room to utilize leverage. In addition, utilizing that leverage, just frankly, accretive to utilizing the remainder of our forward. So most likely to your latter point, we would probably push out settling the forwards and utilize some of our leverage capacity that then becomes more accretive if you execute a term loan that is going to be well south of a revolver.
Operator: The next question comes from Joshua Dennerlein with Bank of America.
Farrell Granath: Hi, this is Farrell Granath on behalf of Josh. I was wondering if you could quickly touch on your current watch list.
Peter Mavoides: Sure. Our watch list as we define it, is a single beam credit or low end five coverage or below. And that represents about 100 basis points of ABR, which is up slightly from last quarter. It’s kind of what we got on the watch list.
Farrell Granath: And what is driving that increase?
Peter Mavoides: Just to my earlier commentaries, it is very idiosyncratic events around individual tenants and their credit ratings and their coverage at the asset level, there’s no real macro trends driving it. And going from 70 basis points to 100 basis points is really not a material move.
Mark Patten: And I’d say similar that AMC is really the biggest chunk of it.
Farrell Granath: Okay, thank you. And so what is driving your confidence for the increase in the low end of your guidance?
Peter Mavoides: Yeah, it’s a lot of factors. I would say, first and foremost, the stability we’re seeing in our portfolio, we bake a pretty conservative credit loss assumptions into our guidance when we initially put it out for the year. And so, we’re seeing positive momentum there. Visibility into our pipeline, as we sit here, we have good visibility into a strong second quarter and then having printed the first quarter good visibility into one quarter of the year. So you got half of the year pretty well baked in a strong performance. And we feel good about what we’re seeing. And the numbers would suggest the low end need to be raised.
Operator: [Operator Instructions]. The next question comes from Jim Kammert with Evercore.
Jim Kammert: Good morning. Thank you. We’ve talked about it around on the call, but would it be possible to quantify the delta between let’s say a year represent sale leaseback cap rate now and the alternative funding costs for a representative pool of your tenants, is that delta 100 basis points and has widened or narrowed over time? Just curious.
Peter Mavoides: Yeah, again, it’s really ebbs and flows. If you think about, you know, or you look at any sort of a single B bond metric, one of the key factors is just having an inverted yield curve and with SOFR in the short end of the curve being so elevated, you throw any kind of regional spread for these credits on it, you’re going to be wide of what is our initial cap rate of 8% in the average cap rate over the life of the lease of 9.3 in the last quarter. And so it varies. I would say, you know, certainly the recent move in the 10 year from has helped that, it’s material for these guys. But it’s a unique period of time, unique to my 20 years of investing in this asset class.
Jim Kammert: It’s interesting. Secondly, if I could. You obviously enjoy all the unit level reporting for your tenants. I’m just curious, are there any particular trends and call out that people are spending — the consumers are spending more on convenience stores or casual dining? Or I’m just wondering how that cash shapes up across your different verticals?
Peter Mavoides: I would say we don’t enjoy all the reporting. Some of it’s negative. But the most part that we’re seeing positive trends, casual dining has generally been flat. But when our leases are growing at and you have a period of high CPI, you’re seeing rent coverages that increase. And you can really see that quarter over quarter down from despite adding $250 million at . So generally, the trends are positive. But the casual dining would be the one callout is to flat, but carwashes continue to do really well and overall health is fine.
Operator: The next question comes from Connor Siversky with Wells Fargo.
John Kilichowski: Hi, this is John Kilichowski on for Conor. Last quarter, you mentioned the target range for acquisitions were 75% existing relationships versus 25% new, but over the chilling eight quarters, you’ve been running over that 75% number. And I’m just interested in why you think that is and wouldn’t you expect this rate environment to be pushing new potential tenants to you given your differentiated leasing strategy?
Peter Mavoides: Yeah, so the 75% I would say was an ideal aspirational mix, really recognizing that tenants naturally outgrow our capital as a larger, more sophisticated operators with access to more capital sources. In the current environment we are aware the capital markets are volatile. Capital reliability is getting a higher premium and we’re more focused on servicing our existing relationships and who were the embedded solution and they value us as well counterparty than going out and finding new relationships. But on a long-term stabilized basis, we’ve got to continue to find new relationships and we spent a lot of time, effort, and energy to doing that. I would expect that to balance out over time.
