Alex Saigon: Got it. That’s it for me. Thank you.
Operator: Our next question is from Mitch Germain with Citizens JMP. Please proceed.
Mitch Germain: Thank you. I’m just curious. I know a lot of emphasis on leasing this call. Is the lease structure changed at all in terms of maybe, financial reporting requirements or rent bumps, and kind of maybe are you pushing those at all in terms of some of the new leases that you’re signing?
Mark Olear: Generally, lease terms haven’t changed over the last several months. I think when we started to see cap rates move, started to see inflation, one of the first things to move probably 15 or 18 months ago, were rent bumps. So our rent bumps today, that we’re putting on paper on are 2% plus, as opposed to maybe in the trough of — they were sort of bottomed out at 1.5%. But other lease terms specially — really aren’t changing.
Mitch Germain: Great. And then is there any potential emphasis, given where your cost of equity is today, to maybe consider some asset sales, I know that you are still — you own a bunch of legacy assets that may not be — that I know they’re performing well, but may not be completely aligned with the type of assets that you would buy today. So could you be pursuing any additional dispositions down the road?
Mark Olear: We certainly, entertain that type of thought all the time. Several quarters ago, we sold a portfolio in upstate New York and reinvested that into assets in Austin, Texas. And should that align — that type of transaction align in the future, we would consider it. We’re fortunate today that being 99.7% occupied and having leases with healthy rent coverages and tenants that are performing well, right, we’re not forced to look at asset sales. So it’d be really maybe, more of an opportunistic transaction where we could maybe divest a portfolio and reinvest in a new set of assets. But we look at the portfolio all the time, Mitch, for value and certainly, would expect to continue to do so. And if that works — if the numbers work, we would transact on them.
Mitch Germain: Great. Thanks so much.
Operator: [Operator Instructions] Our next question is from Michael Gorman with BTIG. Please proceed.
Michael Gorman: Yes, thanks. Good morning. Chris. I was wondering if you could talk a little bit about some of the new tenants or new relationships that you’re looking at from the sale-leaseback perspective and just the expectation side? If they’re new to the market, are you finding that these are deals that take a longer time to get through to close? Are there expectations further off or kind of what the negotiation process is like there versus the existing market and what their alternatives look like in the current financing environment?
Christopher Constant: Yes, I think with some of the newer conversations, you’re often — our process and the way we like to transact being a portfolio, unitary master lease as opposed to one-off transactions, the first obstacle is always the conversation on pricing, what people could get on the one-off basis in the 1031 market, versus where we think value is for a portfolio. So our number in the first quarter was 7.7%. Mark talked about putting deals out today that are 8% plus. There are still one-off transactions that are happening, probably that start with a 6% range if somebody’s willing to transact one asset at a time. So I think that’s where we need to educate what a portfolio sale-leaseback looks like to an institutional buyer as opposed to a retail transaction.
So that does take some time. That is part of our process in terms of educating someone and hasn’t been through a sale-leaseback before. But I think our track record is such that we’ve been able to be there and provide that commitment to somebody, whether it’s a sale-leaseback or whether it’s through development funding, where it makes sense for them to transact in a portfolio, as opposed to taking the risk and the time that it takes to transact one-off. So it does take time, Mike. But I think we’ve been really successful at really kind of educating tenants that haven’t been through the sale-leaseback process before, and forming those new relationships and bringing those tenants into the portfolio.
Michael Gorman: That’s helpful. Thanks, Chris, And Brian, just quickly, on the coverage side of things, you mentioned the two leases. Can you just give us a little bit more color in that kind of one to two bucket? What the breakdown of the properties and the property types in that bucket are. And then just generally, when you think about the portfolio, where do you look for the coverages based on product type as you’re kind of thinking about the portfolio or thinking about underwriting?
Brian Dickman: Yes, happy to. I’ll work backwards there, Mike. We’ve been really consistent over the years with underwriting C-Stores to a 2 times coverage. Car washes we will push 2.5 times, maybe upwards of 3 times, depending on if it’s a new build and we’re looking off pro formas or whether there’s an operating history to look at. So that’s where the underwriting comes in. In terms of the actual performance, I’d say in that 1 times to 2 times a bucket would be a mix of some ramping car washes, which I think we referenced on the call last time. So as things are coming into our data set, which we bring in after 12 months, and I mentioned earlier that typically the car wash target for stabilization is more like 36 months. So that is some of the 1 times to 2 times.
And then there’s a couple C-Store portfolios that are definitely performing. They’ve been in the portfolio for a long time. As I mentioned, they were north of 2 times in our last data set, and they happened to drop, just south of 2 times for this data set, but not in such a material way that it changed the overall average. So think of it as a mix of ramping car washes and some older but very much performing C-Store portfolios that have been in our broader portfolio for a long period of time.
Michael Gorman: Great. Thanks for the color.
Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to Chris for closing remarks.
Christopher Constant: Thank you, operator. Thank you, everyone, for being on the call this morning. We look forward to getting back on in July when we report our second quarter of 2024 results.
Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.
