Mark Manheimer: So I’ll let Dan kind of tackle the first part of your question, and the second part of your question as it relates to competition. The competition is de minimis. The 1031 market, we’ve — even we got to sell assets, historically, if we had a property that was an investment-grade rating and some lease term went out and try to get bids, we’d get 5 or 6 bids in the first week. Now it takes a little bit more time. So we see that certainly on the acquisition side, where we’re not really competing with large family offices as much. The private equity bid is gone. Again, not much from the 1031 market. Historically, in a fragmented market, we really weren’t running into the larger public REITs unless it was a large portfolio, which we always had trouble competing with them to try to make those work.
So yes, I mean, the competition has really gone away significantly. And mostly, what we’re competing with is the seller and their need to sell the property. So if they don’t have a gun to their head and don’t have a reason to have to sell the property, then they’re probably not going to sell, which is why you’ve seen transaction volumes down north of 70% over the past year. So while there’s fewer transactions to work on, across the industry, there’s even less competition. So that’s allowing cap rates to migrate upwards.
Daniel Donlan: Yes. Smedes, in terms of investment spreads, I mean, look, the — our equity price as well as interest rate has been fairly [ thoughtful ] just over the last 45 days. So if you kind of look at that and you think about the average, we’re probably right now somewhere around 110 basis points in terms of investment spread, just on an average basis in the first 45 days of the year.
Operator: Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets.
Antara Nag-Chaudhuri: This is Antara Nag-Chaudhuri, on for Todd Thomas. Just a quick one for me. So I know that you have a lot of unsettled equity in the quarter. So at what point would you consider issuing forward capital through the ATM to keep funding intact?
Daniel Donlan: Yes. I mean, look, we — right now, we can basically, as we talked about in our prepared remarks, we can essentially execute our 2024 external growth plan with the existing equity we have and in the year at the low end of our targeted leverage range of 4.5x to 5.5x. So I think to the degree, the opportunity set became more attractive, and we were able to achieve spreads that were certainly in line or if not better than where we’re seeing right now. I think you could see us access the equity markets via the ATM.
Antara Nag-Chaudhuri: Okay. Perfect. And one more. I saw that the Big Lots exposure decreased during the quarter. So was that an asset sale? Or did something else happen? And what are your plans to further reduce exposure?
Mark Manheimer: Yes. Good question. I guess we should have made it clear that we sold an asset that there wasn’t anything negative that happened. But yes, so we’re down to 8 stores and 1.5% of rent. We’ve seen pretty good interest — inbound interest for those locations, more from the types of buyers that value the real estate in below market rents. And so fortunately, that’s really kind of what we’re left with, good performing assets for Big Lots in terms of foot traffic, but locations that we think would be very attractive to other buyers. So we’re open to potentially moving more assets out of the portfolio, but the price has to be right.
Operator: Our next question comes from the line of Greg McGinniss with Scotiabank.
Greg McGinniss: I’m just trying to reconcile a few comments that have made so far. So you mentioned an increasingly attractive market in the opening remarks and spoke about seeing some movement on cap rates. So does that mean that cap rates are moving higher? And if that’s the case, how much and why the hesitance to provide some guidance on net investments? And I guess besides, with already under negotiation, is there just greater opacity than usual into the future potential pipeline? And if so, what’s driving that?
Mark Manheimer: Yes, sure. So yes, I mean, I think we are seeing cap rates move up, I would expect another 20 basis points or so with what we are planning on closing in the first quarter. Some of that may slip into the second quarter, so that could move things around a little bit on the margins. But I think we’re hesitant to kind of really give concrete guidance on what we plan to acquire because we are seeing cap rates move around a little bit, and we just want to make sure that the capital that we raised from investors that were using that wisely and trying to maximize the returns that we can get from that capital.
Greg McGinniss: So are you comfortable maybe completely pulling back to the market, not doing any acquisitions if it means you’re not hitting some target investment spread. And based on what you’ve said before, is that kind of 100 plus?
Mark Manheimer: I think that’s unlikely for us to completely pull back. If we couldn’t find anything that was worth buying, then that would be on the table. But really, what we’re seeing currently is a very attractive acquisitions market.
Greg McGinniss: Is that kind of a coin flip in terms of more or less versus last year at this point, though?
Mark Manheimer: Your guess is as good as mine.
Operator: Our next question comes from the line of Alec Feygin with Baird.
