Craig MacNab - Chairman and Chief Executive Officer Kevin B. Habicht - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer, Assistant Secretary, Director, Director of CNL Commercial Finance Inc and Director of Commercial Net Lease Realty Services Inc Julian E.

Whitehurst - President and Chief Operating Officer

Daniel P. Donlan - Ladenburg Thalmann & Co.

Inc., Research Division Vikram Malhotra - Morgan Stanley, Research Division Jonathan Pong - Robert W. Baird & Co.

Incorporated, Research Division Richard C. Moore - RBC Capital Markets, LLC, Research Division Juan C.

Sanabria - BofA Merrill Lynch, Research Division Cedrik Lachance - Green Street Advisors, Inc., Research Division Todd Stender - Wells Fargo Securities, LLC, Research Division John Ellwanger Christopher R. Lucas - Capital One Securities, Inc., Research Division

Latanya, thank you very much. Good morning, and welcome to our First Quarter 2014 Earnings Release Call.

On this call with me are Jay Whitehurst, our President; and Kevin Habicht, our Chief Financial Officer, who will review details of our first quarter financial results, following my brief comments. National Retail Properties delivered another quarter of consistent performance, as we strive to build value for shareholders.

Despite all the hubbub in the net lease sector, our team continues to focus on triple net leased freestanding retail real estate, which we believe offers the ideal mix of risk-adjusted returns. In addition, as we expand our portfolio, we are still being disciplined in identifying predominantly off-market acquisitions, which we continue to underwrite individually.

In the first quarter, we acquired 47 properties, investing $94 million at an initial cash yield of 7.7%. We're very pleased with the yields on our acquisitions completed in the first quarter, and they came in a little ahead of what we had originally been budgeting, primarily due to mix.

In the first quarter, we had 16 different closings, predominantly with existing relationship tenants, investing right at $2 million per property. In terms of the acquisition environment, as evidenced by a productive first quarter, our team continues to source attractive opportunities, primarily directly with our relationship tenants.

We believe that our attractive initial yields, with growth of about 1.5% per annum, is helped by the fact that we participate in a large market which has less competition than many of the other property-type sectors, primarily due to the size of each property that we acquired, as evidenced by the $2 million per property in this quarter. Initial cash cap rates have trended lower in the last 12 months, but the spread that we are deploying capital at remains very wide and well in excess of our cost of capital.

At a high level, we do think that cap rates are not likely to go any lower, but will likely remain at this level for a while. Our portfolio continues to be very well leased with occupancy remaining at 98.2%, which is where it was at year end.

With just over 1,900 properties located all across the country, our portfolio continues to be fully diversified. Earlier this week, we were delighted to read that our largest tenant, Susser Holdings, is being acquired by a very large company called Energy Transfer Partners.

Obviously, this is a material credit upgrade for us, and it is a terrific complement to the outstanding team at Susser, who executed flawlessly, since we did our first sale leaseback with them when they were a private company. When this transaction closes, we will receive about 25% of our rent from investment-grade tenants.

Perhaps, more importantly, this transaction is further validation of our strategy of providing carefully underwritten sale leaseback capital to well-managed growing retailers. As Kevin will describe, our balance sheet remains very strong, which means that NNN is very well-positioned to continue to build shareholder value as our excellent real estate team sources new properties for us to acquire.

Thanks, Craig. I'll start with usual cautionary language that we will make certain statements that may be considered forward-looking statements under federal securities law.

The company's actual future results may differ significantly from the matters discussed in these forward looking statements and we may not release revisions to these forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC, as well as in this morning's press release.

With that, this morning we reported first quarter FFO of $0.51 per share, as well as recurring FFO and AFFO of $0.51 per share. This represents a 6.3% increase over prior year's recurring FFO first quarter results, and was largely in line with our expectations.

The dividend payout ratio decreased to 79.4% for the first quarter. This quarter's strong results, again, were a combination of maintaining high occupancy and making new accretive investments while keeping our balance sheet more than strong.

Occupancy ended at 98.2% at the end of the first quarter, that's unchanged from the prior quarter, and up 40 basis points from a year ago. And as Craig mentioned, we completed $94 million of accretive acquisitions in the first quarter.

Comparing to 2013's first quarter, rental revenue increased $10.4 million or 11.7%. And that's primarily due to the acquisitions we made over the past 4 quarters.

In place, annual base rent, as of March 31, 2014, was $401.1 million on an annual run rate. So at the end of -- as of March 31, we had $401.1 million of annual base rent in place.

Property expenses for the quarter, net of tenant reimbursements, totaled $1.1 million compared with $1.6 million in the immediately prior fourth quarter. G&A expense increased to $8.9 million in the first quarter.

We probably still see full year 2014 G&A expense coming in right around $34 million. The big picture of 2014 is off to a good start.

Core fundamentals, occupancy, rental revenue, expenses, all performing well with no material surprises or variances. The first quarter 6% FFO per share growth comes after 3 years of 8% per share growth.

So the comps are not particularly easy. This solid first quarter start did allow us to bump up our 2014 guidance, up $0.01 to $1.95 to $2 of FFO per share, and to $2.01 to $2.06 of AFFO per share.

All the underlying operating assumptions underneath all that are essentially unchanged. Now, turning to the balance sheet.

After a busy 2013, raising a fair amount of long duration capital, we did not have a lot of capital market activity the first quarter of 2014, raising -- only raising $21 million of additional common equity. But our balance sheet remains in a great position to fund future acquisition.

Coming up next month, we have $150 million of debt with a 6.25% coupon, which will get paid off on June 15 of 2014. Looking at our quarter end, March 31, leverage metrics total debt to total gross book assets was 33.3%, only -- we only had $91 million outstanding on our bank line, so that leaves us with over $400 million of availability on the bank credit facility.

Debt-to-EBITDA was 4.4x for the quarter. Interest coverage was also 4.4x for the first quarter, and fixed charge coverage was 3.1x for the first quarter, despite the large preferred offering we did last May.

Only 6 of our 1,903 properties, well under 1%, are encumbered by mortgages and those mortgages total $9 million. And despite the significant acquisition activity over the last 3 years, our balance sheet, as I said, remains in very good shape.

The bottom line, 2014 is off to a good start. We're optimistic we can produce another year of solid per-share results growth, including making this our 25th consecutive year of increased dividend per share.

We continue to believe we're well-positioned to deliver the consistency of results, dividend growth and balance sheet quality that has supported attractive, absolute and relative total shareholder returns for many years. And so, with that, Latanya, we will open it up to any questions.

Craig, you made some interesting comments about how, given the smaller size of the assets that you focus on, that's why you're able to achieve higher cap rates, given that there's few institutional investors competing for such assets. But was just curious if you've seen any increase in demand for these properties from 1031 exchange buyers.

We've heard recently that this buyer has come back quite a bit in the last couple of months. Was just curious what you guys are seeing and if you think they might start impacting your little niche.

Dan, good morning, and a good question. I think that there are a couple of different elements to the question you asked.

The first one is, that the 1031 buyer is definitely back in the market and at surprisingly aggressive cap rates. But given the constraints that a 1031 buyer has, having to identify the property in 90 days and close it in a 180 and so forth, they are not really competition for us in buying properties from sellers who demand certainty.

So as a marginal buyer, where we are divesting properties, the 1031 buyer is a terrific person for us to target. And frankly, there's a lot of demand, right now, from that type of buyer, for one-off properties.

But in terms of being competition for us sourcing acquisitions, we are not seeing it at all.

And I'm sorry if I missed this in your remarks. But did you say what percentage of the acquisitions made in the quarter were sourced direct from retailers?

Dan, this is Jay. It was about 3/4 of our dollars invested, this quarter, were with our relationship tenants, which is pretty much in line with past years and past practices.

I think, just to embellish one point that Craig was making, we are calling on retailers directly for deals, and in that instance, the 1031 buyer is not competition.

Right, of course. And then lastly, was just curious, there's been some negative commentary, in terms of closing stores, out of some of the dollar stores.

I'm looking at your top 10 holders or top 10 or top 15 tenants, and you don't seem to have an exposure there. Is that going to change?

Or any type of detail there would be helpful.

So, I think, in terms of -- at a high level, there are always changes going on within retailers, opening stores, closing stores, transitioning business models, et cetera. And I think if you take a look at the large closures from companies like RadioShack, Staples, Sears, JCPenney, et cetera, I would observe that we have 0 properties leased to those tenants.

In terms of the dollar stores, we did do a small amount of business in that category, at very attractive initial rents. Where that property type trades right now, it's very low initial rents and they are opening in round numbers, close to 1,000 stores, between Dollar General and Family Dollar.

So that's attractive cannon fodder for people that are trying to deploy capital. But at the very low cap rates that those seem to trade at, we do not find them attractive.

Especially as they have very little rental growth, which is what is typical of an investment-grade tenant that has a lot of leverage in a transaction. So, you're correct, we don't have much exposure to that category.

I think your point is a fair one. The Family Dollar has announced that they're going to be closing some stores and so forth.

But I think that's just the natural ebb and flow in the retail world. It's nothing to focus in on.

Craig, could you just maybe give us some color or thoughts, over the last 30 days or so, if you've met with many of your clients and potentially new clients? Can you just give us updated thoughts on what the leaseback market looks like, any concerns tenants are raising and any incremental commentary you might have heard from them?

Vikram, good morning. Jay Whitehurst has been on the roads a lot, as have our acquisition team.

And then, obviously, we're going to be meeting a lot of these tenants here in a couple of weeks at the shopping center convention in Las Vegas. But the feedback that I can give you is that it's business as usual amongst our types of tenants.

They're continuing to execute well and retail sales are chugging along just fine. One way to think about this -- and, really, I'm just so proud of our team.

For many years ago, 8, 9 years, and Jay Whitehurst was the one who lead this initiative, went out and we've been hearing about this great convenience store company, Susser. And Jay went out and built a relationship with Sam Susser many, many years ago.

And lo and behold, over a period of time, they became our single biggest tenant. Now the reason that we increased our exposure to them is they were a best-in-class operator.

And let me quantify what best-in-class means. They have had 24 years of consecutive same-store sales.

So clearly, management is doing something right. And that execution gave us the confidence to increase our exposure with them.

And so when we see them getting sold here to Energy Transfer Partners and their Sunoco retail concept, that is a function of the fact that they are executing extremely well, and Energy Transfer Partners wanted to have them in their portfolio. So our challenge in sourcing relationship tenants is to identify companies that you and we want to have exposure to.

So what you're finding right now is it's a market share gain and there are always retailers executing well. It's our challenge to find those.

And then, if you can just -- Kevin, maybe if you can give us a quick update. If we look at your run rate, FFO and obviously the guidance, you did tick up a little bit.

But if we look at the run rate, it seems like you should kind of come in kind of the high end. Could you maybe just give us updated thoughts on just pieces kind of forming the guidance and also just on accessing the markets as you kind of come close to your debt maturity?

Yes. I mean, as I noted in my comments, underlying fundamental assumptions really have not moved much for us.

We started the year with around $300 million of acquisition guidance, in the low-7s and G&A expense around $34 million. It ticked up a little bit, I guess, from maybe original guidance.

But underneath, all those have really been pretty consistently flat. The big one that we don't give guidance around, obviously, is our capital market activity.

And in part, we want to retain some optionality around that. And last year was a good example of that, where we entered 2013 with really no intention of issuing preferred stock, and we should a bunch a year ago last May.

But the impact is significant from when the timing, as well as the type of capital, as well as the amount of capital. And so that does have material impact on our per-share results that -- like I said, we don't give guidance around -- and that investors need to make their own assumptions.

But I think the bottom line on what we do, as people who have watched us for many years, we tend to behave more conservatively than aggressively on those kinds of things. So I hope that kind of gets to the answer.

Just on the disposition strategy here. Have you guys seen any buyers out there, whether it's 1031 or institutional buyers, going further on the risk curve, that look to satisfy some of their acquisition mandates and then doesn't make sense in that kind of environment to maybe fill into that bid more aggressively to take advantage?

Jonathan, it's Jay Whitehurst. As you know, we have a very solid disposition platform here at NNN.

We've got some folks that are very good at handling our dispositions, and we handle them all in house. As you saw from this first quarter, we did some sales.

Craig mentioned earlier that the 1031 market is hot. It is a good time to do some pruning of the portfolio.

And we have been doing that and I expect you'll see us continue to do that throughout the year. But also wanted to take a moment just to hearken back to the way we go through our acquisition process.

When you are calling on retailers directly, and doing deals direct with retailers, they give you the properties in the sale leaseback pool that are the ones those retailers are committed to long-term leases. And so our due diligence and our underwriting, and just the process of originating deals directly from retailers, results in our portfolio being above average with respect to the individual retailers.

And so we do not have, in our portfolio, a great deal of properties where we look around and say, these are the ones that we really want to get rid of. So all of that said, it allows us to play offense in this 1031 market, and pick some of the assets that are slightly less core and get a good price for them.

And do that all in-house with minimal commissions and, ultimately, at an outcome that we're very happy with.

Wanted to follow-up with you, Craig, on the Susser-ETP thing, which I think is a testimony to what you been saying, which is that you got a lot of good tenants that could be taken over by others, and here's perfect example. But I'm curious, this being your biggest tenant, have you -- I guess you haven't yet, but would you anticipate or will you be talking to ETP about their plans, overall, for Susser?

And you have, I think, 86 properties. And I'm wondering, do any of those come due, the lease mature near-term, so that ETP might be able to get out of some of those?

So the good news, Rich, is that with 24 years of consecutive same-store merchandise sales growth, the EBITDA growth in our Susser portfolio has been quite significant, which is to say that the rent coverage ratio is super. ETP brings something to the table, in that they are a very, very large company and they have, I would speculate -- I think analysts are suggesting better fuel purchasing efficiencies than Susser.

So, the rent coverage, as we think about it, is likely to improve. So for us it's just a fabulous outcome.

And in terms of the lease duration, we have no near-term Susser lease expirations.

Okay. And so you think your view is that they want to probably keep all of these locations?

They're not really looking to consolidate any of this?

Yes. It's a little early to give a definitive answer to that, Rich.

But I can assure you, our relationship with our largest tenant is superior. And we have pretty good information and we are just delighted with this transaction.

And they have the obligation to pay rent for the next 12 years, that's the remaining average lease term on the Susser portfolio. And secondly, there's really little overlap between the Sunoco platform and the Susser platform.

So which I think is why they bought this. They're really expanding their reach a bit.

And so I don't foresee a lot of discussion around that, regardless of the fact they are still obligated to pay us rent.

So, just to say it slightly differently, the territories in which Sunoco has their strongest presence, it does not include South Texas or Texas, which is where Susser has a concentration. So it's a very complementary add-on to Sunoco and ETP.

And then, I take it from your bankruptcy comments, that even though bankruptcies in retail -- and store closing, not just bankruptcies, kind of ticked higher. You're not seeing anything that you would see as a problem inside your portfolio in that regard?

Rich, we're not seeing any duress, no.

And then I want to ask you, too, about the shrinking bank formats. I think Wells was out there saying they want to shrink the size of their bank branches and all.

And did that give you any pause at all, given your exposure? I mean, I realize it's fairly new for you guys, but are you concerned at all about the shrinkage in size of bank branches?

Rich, I think there are couple of different comments. The most important is that -- to just go back to what Jay Whitehurst said when we purchased this transaction, which is that we have a very low rent per property in our SunTrust Bank portfolio.

Which means that the marginal profitability for those branches should be considerably higher. And when I say a varied rent [ph], it is in the range of 50% to maybe 1/3 of what newer branches would cost.

In terms of the retail footprint, it's inevitable that there is going to be some consolidation, one way or another. But if you -- I just had the opportunity to read JPMorgan's annual report, and I believe JPMorgan references how important retail bank branches are to their retail customer base.

Okay. So, you feel comfortable about those?

We feel more than comfortable. And just to be clear, if we had another opportunity to buy those bank branches at the rent embedded in those, we'd do it tomorrow.

Right, I got you, okay. And then the last thing I was going to ask you guys is on the lease expirations, and there's not much in the way of lease expirations.

I think, you got 20, 21 properties. Do most of those get renewed, you think, or do you have to actually go find new tenants for some of those spaces?

Rich, it's Jay Whitehurst. Historically, we have a very high renewal rate.

It's one of the reasons that we really think that sticking to our knitting with our retail properties is the right way to go. I think over the last few years, we were in the 95% kind of renewal rate percentage.

We had very few expirations in this first quarter. But again, most of those renewed at slightly north of the prior rent.

So it's one of the great things about owning single-tenant small-box retail properties. And so we feel comfortable that, that trend is going to continue.

Just to put it in context. In the next 3 years, we have 4.2% of our total rents coming to full term.

Very little, number one. And number two, the historic renewal rate has been, as Jay said, close to perfect.

Just following up on that last question. Do you guys have a sense of what your current rents are relative to market level?

We have to -- that is property by property, of course. But I don't want to speculate, to be honest.

Jay, maybe you could give him a high-level comment.

Yes, a high-level one. We're very comfortable with the level of the rents on our new acquisitions.

It is something that we look at in our underwriting process. And I think it bares itself out at the back-end through lease renewals.

Our lease renewal rate, at the expiration of initial term, is right about prior rent. Which, to remind you, includes all of the rent bumps that have occurred through the 15- to 20-year term of the lease.

So, we're very comfortable that our rents are right where you want them to be, given the good locations of the properties that we've got.

That's helpful. And do you have any details you can provide on average rent coverage?

And maybe what percentage of the portfolio would sort of be below call it 1.1x?

Ron, Kevin. We do speak to -- particularly for our top tenants, so the ones listed in our press release, which is about half of our rent stream.

So the average for that cohort, if you will -- it's not materially different as it goes down. Rent coverage is about 2.9x, that's average as well as weighted average, and it ranges from the high-1s to the mid-4s in that group.

And so we feel pretty good about that. I think, overall, if you think about tenant credit quality, we would say the last 2 or 3 years have been very kind to us in that regard.

And this is before even Susser happened recently. Pretty good upticks in credit quality of tenants, where tenants are getting either acquired by 7-Eleven or were just seeing improvements in the underlying credit, they're are going public, AMC Theatres, et cetera.

So overall, the tone of the credit of our tenants feels pretty good right now.

Great. And just one last question.

What's your guys’ views on restaurants? Obviously, been a big driver of demand across the retail spectrum.

But just looking back, historically, what's been your experience on rent growth, both for the quick serve and casual formats?

Rent growth across our portfolio is, pick a number, 1.5 percent.

Sorry, I was maybe more referencing the renewal experience.

Yes. I mean, we have such a small sample there, that I don't think that's the issue.

Yes. I think what you're finding in the restaurant space, at a high level, is you've got a couple of different things.

There are a couple of concepts that are not performing as well as some of the others. So the quick serve category has had a couple of years of fantastic performance, Chipotle, Panera, et cetera.

And they have been taking market share away from other concepts. And so they've been taking market share away from the casual dining sector.

And the company is that have an old, tired concept there have been losing market share. And those companies report same-store sales and the picture has been quite ugly.

As it so happens, we have almost 0 exposure to those companies that are truly struggling. In the fast food category you, again, have market share shifts taking place.

And companies like Taco Bell have executed extremely well. And over the last several years, we booked quite a lot of Taco Bells.

At the high-end, we are not much of a participant. We have a small exposure to, for example, Seasons 52, which is a gardens concept.

We have a couple of Del Frisco's that have just very high rent coverage factor. You've got to drill down into how that concept is performing.

I think just making a broad brush statement is difficult here.

Craig, what would you say is the difference in cap rates right now, between an investment-grade credit and a non-investment grade credit? And more specifically, I'd be curious to get your view as to by how much the cap rate on your Susser portfolio changed as it got acquired by Sunoco?

Okay. So, specifically, to that latter question, Susser-ETP, I cannot comment, because it hasn't closed yet.

But which is to say, there are no data points of there. But if you were to ask by way of analogy, we had a fairly large portfolio of convenience stores leased to a tenant called C.L.

Thomas. Very, very similar to the Susser portfolio in many respects.

Both geographically, by footprint, by size, et cetera. And they got acquired by 7-Eleven.

And in round numbers there was, in that particular case, about 200 basis points of compression between what we acquired those properties at and what a 7-Eleven sells for in the open market. And so the answer is, in round numbers, today, 7-Eleven with growth will sell at about a 6 cap.

That depends on the geography and the lease term and all the rest. But in terms of your first question, which is the spread between investment-grade and non-investment grade, the first thing I would just remind you is that an investment-grade lease doesn't have rent growth.

And the difference at the time of closing, is in the range of 75 to 100 points. However, the non-investment grade has got rent growth, in our case, of about 1.5%.

So if you take over the duration of the lease, the difference is actually about 200 basis points difference. If a Walgreens sells for a 6 cap and we buy a restaurant property at just, hypothetically, a 7 cap with 100 basis points of average straight line, which we don't straight line.

That's 200 basis points of difference.

Okay. So what is the best way for you to finance future growth?

Is it to sell those now, investment grade assets that you bought at much higher cap rates, or is it to issue equity in the public market?

That's a good question, Cedrik, and we're looking at all of that. But let me be clear, when we have a great property with low rent and rental growth, with a fabulous rent coverage factor, we don't think selling our best children is the best approach to building long-term shareholder value.

In the short-term, we can drive near-term earnings growth by selling our best properties at really low cap rates and reinvesting at the kind of yields we're getting. But in terms of the portfolio balance, we like having great properties, such as the Susser properties.

So it's an interesting question. Susser today is 5% of our rent.

They're executing well, same-store sales chugging along, rent coverage is improving and now we've got great credit. So for us to go out into the open market and sell some of those at a 6 cap, which validate NAV perhaps, but it wouldn't make Kevin and me, Jay, feel a whole lot better about our earnings growth.

Craig, you mentioned that cap rates are coming in a little higher than you thought, certainly 7.7% is at the high-end of the range that we see for the public guys. What's behind this?

What do you think is contributing to this? And is this something that's sustainable, at least for you guys because you maintain the existing relationship business?

Todd, I think if you were to track us in the last many quarters, many versus our peers, you're going to find that we consistently are doing a very good job in sourcing off-market properties that have attractive risk-adjusted returns. So maybe you could say we got lucky.

But we have done it for so many quarters in a row, that I would like to remind you that I consistently report that we have the best acquisition team in the business.

But nothing you can quantify to say that you came in thinking they'd be 7.25 and now they're 7.75? There's nothing other than -- any other competitive things going on that can contribute to that high number?

No. We've bought 47 different properties.

Some of them had outstanding yield. Some of them had mediocre and some had pretty low cap rates.

And that's a mix of all of the above. But if we can buy properties at a 7.7% cap rate, with 1.5% or so rent bumps, which means that the straight line yield on those acquisitions is about 8.7% for a 15-year timeframe.

And you contrast that with buying some Dollar Generals, pick a number, 7.3%, with a very modest bump in the 11th year, there's quite a lot of difference there, which ultimately shareholders will reward us for. And that's what we're going to continue to do, Todd.

And, Kevin, the equity raised in the quarter, was this some DRIP? Was through your ATM or a combination of the two?

How do you raise that?

All the above. Combination.

Okay. And anyway you could quantify what your costs are?

Obviously, it's a lower cost way to raise equity than doing an overnight. Is it 2%?

No, it's under 2%. It's probably closer to 1.5%, maybe, something like that.

And, Jay, just moving towards -- kind of looking at the current pipeline for the rest of the year. Can you just give us a glimpse of some of the stuff you're seeing?

Is it a mix of 75% existing relationships? And anything worth noting in that?

Yes, Todd, I did a deep dive on or pipeline the other day with our Chief Acquisition Officer, Steve Horn. And it feels very similar to what we've closed so far and what we saw last year.

So it's a good mix. We're seeing all the deals that are out there.

And the whole team is doing a very good job of calling on retailers directly, and selling more than just low cap rates. Certainty and solutions and flexibility and timing.

And when you look at the property mix that's in the pipeline for the rest of this year, it feels just like our existing portfolio.

This is actually John Ellwanger here with Nick. Going back to the discussion in cap rates.

What gives you confidence that cap rates won't go lower?

Nick or John, the demand for good real estate is well in excess of the supply and there's terrific demand for good product and prices are very, very low for the next 90 days, 180 days. They may tick a little bit lower, but I think if you think about it over a multiyear cycle, they're probably a little -- they're close to or at the bottom.

Okay. And then kind of along those lines, could you maybe elaborate on the competition you're seeing for acquisitions?

Yes, there is always competition. I mean, we've had competition for a long, long period of time.

But as I pointed out in my opening comments, we have less competition in our property type, net leased retail, than you do in almost any other sector. But for sure, there's competition.

There are several good public companies that we compete against, but I can count those on one hand.

Just a couple of quick questions. Craig, as you guys think about portfolio risk management, is there an individual tenant concentration level that you guys sort of red line as sort of the high-end?

Chris, we pay a lot of attention to portfolio management, which is why you will always see us selling a small number of properties every quarter. But one of the things that gives me a lot of confidence in, for example, our exposure to Susser, or Energy Transfer Partners once this deal is closed -- and it's going to be a 7% tenant -- is we have a lot of outstanding real estate corners.

So for sure, once that deal closes, we will have about 115 properties leased to that company. But in many respects, at the rents that the tenant is paying, which is not that high given where market is, they're irreplaceable assets.

So we take a look at the underlying pieces of real estate, not just the exposure to the single-tenant with a bright line test. The reason that I think what's important is that we have 115 different properties there which, on average, if you take the portfolio, cost us, pick a number, $2.5 million.

And they're in so many different geographic markets with their own distinct features. It's not like we have an office building with one big mega lease.

Yes, it's very granular. And I think, just not answering your question directly, but just sort of some context, I guess, I'm not sure that we have ever been over 10% as a largest tenant.

I'm not saying that's the line, but I'm just saying, historically, I don't think we've been over that.

Just to stick with that a little bit longer. If we have a tenant that's executing well, obviously, we pay attention to the absolute amount of rent that they pay.

But if it's a great company executing well, that has excellent real estate characteristics, let me be clear, we want more of it, not less of it. Those are hard to find by the way.

But they're in our top tenants.

And then I guess, if you could, maybe comment on just the operating quality between Susser and ETP, Sunoco stations. You've got both in your portfolio, obviously.

Is there something you like about either of these that you hope, I guess, pulled in to the post transaction company?

The biggest point of distinction is that Susser has a unique food service offering. They have their own branded concept, Laredo Taco.

And I have no doubt, where it makes sense, they will look to take their food service expertise into the Sunoco portfolio. But this deal hasn't closed yet.

So there's a lot to go under this bridge.

Latanya, thanks very much. We appreciate all of your attention.

A couple of excellent questions. And, Kevin, Jay and I will be manning our posts if you want to follow-up.

We look forward to talking to you in about 90 days, and we'll see many of you at NAREIT in a couple of months. Thank you very much.