Ronald Kamdem: Great. And then just switching gears to the acquisition market a little bit, maybe talk a bit more about the competition today versus previously? I know you mentioned some of the REITs maybe in your opening comments, but curious about 1031 private buyers just today versus six, 12 months ago, what is that – who are you competing now? Thanks.
Steve Horn: Yes, because we go after the sale leaseback approach, that’s our model. We think it’s a lot better of a risk-adjusted return. That we don’t play in the 1031 market. So we don’t run into the 1031 guys at all to speak off. But we would run into the private equity buyers that have been on the sidelines for a while. We are hearing rumblings that they’re starting to thinking about getting back in the market but they’re not the groups I would lean on that were hurting the price – cap rate expansion. It was more our competitors. But Ron, to be honest, that happens typically in the late in the fourth quarter, early in the first quarter when companies are coming out with their guidance for the year. They feel the pressure to do the volume. So we see that year-over-year.
Ronald Kamdem: Right. Thanks so much.
Operator: [Operator Instructions] Your next question is coming from Connor Siversky with Wells Fargo.
Connor Siversky: Good morning. Thank you for the time. A quick question for Kevin on the balance sheet. I’m just looking at this $350 million maturity in June. I’m wondering how the swaps are set up. Can you just roll that over and keep the same rate in? Or should we expect the kind of cash outlay associated with paying down that stack?
Kevin Habicht: Yes. So yes, we have no derivatives or swaps connected to that debt or any debt at the moment. And so any swaps that we or derivatives that we use were only pre-issuance if you will, and those were terminated at the time we issued the bond. And so any cost or gain associated with those get amortized over the life of the bond. But like I say, all of those derivatives get terminated at the time of debt issuance. So nothing outstanding there. So yes, you should think about that as a true $350 million debt maturity. We’ll see what we want to do in terms of accessing the debt markets. They’re obviously open right now. They are, I would say, reasonably priced at the moment. For us today, we’re probably kind of a mid-5% for a 10-year kind of issuance would be my guess.
And – but we do love the optionality and this may or may not be plan A, but we can use our bank line, too. We have sufficient capacity on our bank line that if the markets weren’t aware we might like or we wanted to wait, we could easily pay off that maturity just using our bank credit facility.
Connor Siversky: Okay. Thank you for the clarification. That’s all for me.
Operator: Your next question is coming from John Massocca at B. Riley.
John Massocca: Good morning.
Kevin Habicht: Good morning John.
John Massocca: Sorry if I missed some of the responses to earlier questions, but do you have like brackets around the amount of contractual rent you have in place from cash basis tenants today, just given the movement of one tenant to an accrual basis?
Kevin Habicht: Yes. So yes, we have 5% of our annual ABR, annual base rent is on a cash basis. And like I say, really 90% of it really consists of two tenants, AMC and Frisch’s. And – but we – through the year, 2023, they are all current. And so there was no delta between cash and book basis or booked revenue as it relates to that. And again, as I mentioned, we don’t expect – I don’t expect either of those tenants moving from a cash basis to accrual basis in the near term. And so they’ll remain cash basis. But it has no real impact really on the way we operate or the way we think or frankly, and I wouldn’t include it in the way we model things. And so we assume they’ll continue to pay rent going forward. Having said that, we created 100 basis point rent loss assumption baked into our guidance to hopefully account for any kind of hiccups on the tenant rent side.
John Massocca: Okay. And then I know we’re dealing with small sample sizes, but what’s the plan for the Rite Aids you’re getting back or might potentially get back? And do you think there’s a market out there to release them as pharmacy or that they need to be kind of repositioned for I guess, higher and better use, if you will.
Steve Horn: Yes. Currently, the two that were rejected out of the six, we have a lot of interest if it’s not surprising the car wash, but we have some QSR interest as well. So I’d expect those two to be redeveloped and put on a ground lease the other four as far as Rite Aid performed fairly well. So we’ll see what happens if and when we get those back. But again, kind of what I stated in the opening remarks, they’re well positioned. They’re near market rent. So I’m not expecting anything outside our historical averages as far as a recapture rate.
John Massocca: Okay. And then just in terms of kind of modeling and AFFO, anything to be aware of in terms of rent bumps – I just know given a good portion of the portfolio has kind of five year look backs on bumps. Just is there any seasonality this year or last year, just to be aware of as we’re kind of updating your models.
Kevin Habicht: Yes. No, in terms of rent increases, while we have a variety of one year annual increases or increases every three years or increases every five years, we have a sample size that’s sufficiently large that it all pencils out to be about 1.5% a year despite those varying terms for rent increases. So the way I would think about it is a 1.5% rent increase for this year and going forward.
John Massocca: Okay. That makes sense. And that’s it for me. Thank you very much.
Kevin Habicht: Thank you, John.
Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to Steve for closing remarks.
Steve Horn: Thanks, Olli. Thanks for joining us this morning. Just to kind of reiterate and then we’re in good shape as we head into 2024. We’re willing to pivot if market conditions change. We look forward to telling the story to many of you guys kind of in the upcoming conference season. Take care. Thanks.
Operator: Thank you. This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
