Aug 6, 2015
Executives
Mary Jensen - Vice President, Investor Relations Thomas Nolan - Chairman and Chief Executive Officer Phillip Joseph - Executive Vice President and Chief Financial Officer Mark Manheimer - Executive Vice President, Asset Management Gregg Seibert - Executive Vice President and Chief Investment Officer
Analysts
Juan Sanabria - Bank of America Merrill Lynch Vikram Malhotra - Morgan Stanley Alexander Goldfarb - Sandler O’Neill & Partners, LP Vincent Chao - Deutsche Bank Ross Nussbaum - UBS Christopher Lucas - Capital One Securities Dan Donlan - Ladenburg Thalman & Co.
Operator
Good afternoon, ladies and gentlemen. And welcome to Spirit Realty Capital’s 2015 Second Quarter Earnings Conference Call.
At this time, all lines have been placed in listen-only mode. Please note that today’s conference call is being recorded.
An audio replay will be available for one week beginning at 6 o’clock PM Eastern Time today and the webcast will be available for the next 90 days. The dial-in details for the replay can be found in today’s press release and can be obtained from the Investor Relations section of Spirit Realty’s website at www.spiritrealty.com.
After our speakers’ remarks there will be a question-and-answer period. [Operator Instructions] I would now turn the conference over to Mary Jensen, Vice President of Investor Relations for Spirit Realty Capital.
Mary Jensen
Thank you, operator. Joining us on the call today are Tom Nolan our Chairman and Chief Executive Officer; Phil Joseph, our Chief Financial Officer; Gregg Seibert, our Chief Investment Officer; and Mark Manheimer, our Executive Vice President of Assent Management.
During the course of this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to us.
Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect.
Therefore, our actual future results can be expected to differ from our expectations and those differences may be material. For a more detailed description of some potential risks, please refer to our SEC filings which can be found in the Investor Relations section of our website.
All the information presented on this call is current as of today August 6, 2015. Spirit does not intend and undertakes no duty to update forward-looking statements unless required by law.
In addition, reconciliation to the non-GAAP financial measures presented on this call such as FFO and AFFO can be found in the company’s quarterly report, which can be obtained on the Investor Relations section of our website. During our prepared remarks today, Tom Nolan, our Chairman and CEO will provide a review of our second quarter growth metrics as well as a message on how we are progressing on our key focus areas.
Phil Joseph, our CFO, will then discuss our quarterly financial results that were released earlier today. After our prepared remarks, Tom, Phil, along with Gregg Seibert and Mark Manheimer, will be available to take your questions.
With that I would like to turn the call over to Tom Nolan. Tom?
Thomas Nolan
Thank you, Mary. And thank you, everyone, for joining us today, as we discuss our second quarter results.
Before I touch directly on that, I would note that later this quarter we’ll mark the third year anniversary of Spirit’s initial public offering. I would like to spend a few minutes to reflect on the company’s activities since that date.
During our IPO road-show in September of 2012, our commitment to prospective investors was to create a dynamic industry leader in the then relatively small world of public triple-net REITs. We expressed our view at the time that there was tremendous risk-adjusted value potential in the sector and then we intended to capitalize on that.
We also expressed the confidence that the institutional market would finally embrace this sector, which up to that point the leading market participants had capitalized themselves mostly through retail investor outreach. Clearly, this institutionalization occurred and is continuing.
The market capitalization of public companies in this sector has increased many-fold over these three years. However, today, our commitment to investors and prospective investors remains the same.
We intend to be an industry leader and I would also note our view on the relative risk/reward of the investment potential in this sector is also as favorable as it is ever been. I say that in the context that I appreciate the recent anxiety over the prospect that interest rates could go up and negatively affect our sector.
It is certainly possible that rates could increase, but this isn’t something we haven’t managed before. And I would remind everyone that the 10-year treasury yield is lower today than it was a year ago.
And importantly, the spread between our acquisition cap rates and the benchmark yield remains wide by historical standards, and therefore, from my perspective continues to present excellent risk-adjusted investment opportunities. This quarter our reported initial cash yield on acquisitions was 7.67%.
The 10-year treasury has been hovering recently around 2.2% or a spread of over 500 basis points. That spread level indicates risk-adjusted investment opportunity, and we intend to continue to capitalize on it.
At the IPO, when we put our stake in the ground about being a leader in the sector goes natural and legitimate skepticism. Number one, the executive management team is newly assembled.
Number two, the portfolio had revenue concentration issues with one tenant representing over 30% of the company’s revenue. And three, the right side of the balance sheet was viewed as too high and too rigid, therefore, limiting growth potential.
Let me touch on what has transpired over these almost three years, starting in reverse order with the balance sheet. As you read in our press release, our debt to EBITDA at the end of this quarter stands at 6.7 times, the lowest ratio we have reported.
We’re very comfortable that around this range of indebtedness is a rationale level to run this business. And also, there is more to balance sheet and liability management than just a spot number.
We have proven. We are adept at proactively and accretively managing maturities.
Today, we have a well laddered debt profile and for those maturities that are on the horizon, we are proactively addressing those now with every expectation that they will be refinanced on a long-term basis with better terms as to both rates and collateral requirements. As Phil will reiterate later, our unencumbered asset pool stands at $2.8 billion, compared to practically zero, at the time of the IPO.
And this pool will only increase as we continue to refinance existing debt. As to those IPO concerns over our inability to grow, I would note that today our market capitalization is around three times larger than at the IPO.
And importantly, from someone that is not a believer in growth for growth sake, I would call attention to the press release today that notes our AFFO per share, the ultimate litmus test of execution, grew at almost 6% this quarter over the comparable quarter last year, and has grown over 13%, since the closing of the Cole merger. As to item two, revenue diversification, we have long acknowledged the issue and put a tosoled [ph] plan in place to address it.
We devised a multi-pronged strategy and then executed it. At the time of the IPO, with the exception of EPR, Spirit had the least diversified top 10 portfolio in the industry.
Today, against that same peer group, we have the most diversified top 10 portfolio, we even have the most diversified top five portfolio. And I would add that not only is our top 10 portfolio diversified, but at a weighted average unit level rent coverage ratio of 2.5 times, it has excellent credit metrics that should ensure the durability of our future cash flow.
Finally, as to item 1. Yes, we were a new management team, but we didn’t lack industry experience and we aren’t newly assembled now.
I’m happy to have added Phil to the team. Of the other three of us in the room today, I’ve been here since the IPO and this team has executed.
In addition to the items I’ve already touched on, I would note since the IPO in addition to the Cole merger, Spirit has invested in over $2 billion of real estate and an aggregate initial cash yield of 7.7%. Almost all of these investments contain contractual rent escalations, and to-date, we have had not had one payment default.
In addition, through active and aggressive portfolio management, we have divested and recycled over $900 million of property. Finally, we have executed over $6.5 billion of capital markets transactions, all the while improving our AFFO per share in the aggregate quality of the portfolio.
As I said a moment ago, in the less than two years since the closing of the Cole merger, Spirit has grown AFFO per share 13.4%. Perhaps, this is a good spot to touch on our executive staffing plan.
As I noted on prior calls, I assume many of the executive oversight responsibilities of our prior COO, as I continue to assess the long-term needs of the organization. Over the intervening period, I’ve assigned acquisition oversight responsibility to Greg, and portfolio management oversight to Mark.
With the addition of Phil to the team, we now have close to 100 years of actual real estate transaction experience sitting in this room, much of it, in the case of Mark and Gregg, directly from the net-lease sector. I’m very comfortable with the depth and breadth of our senior leadership team and the rest of the organization.
That said, I am intending to add another executive to the team with more internal focus on important administrative and HR duties to complement our group and to recognize the current and future needs of the company. I expect to complete that search shortly.
Now, after you have indulged me for a short look back in history, let me turn to the second quarter of 2015. As to our financial results, Spirit had an excellent first-half and I believe our second-half will be equally productive.
This quarter we reported AFFO per share of $0.22, a 5.8% increase over the comparable period from last year. Through our focused investment underwriting and capital recycling execution, revenues increased approximately 11% in the quarter.
In addition, we paid a quarterly dividend of $0.17 per common share. Phil, will get into greater detail on these numbers in a moment.
Turning to our existing portfolio, we continue to derive predictable cash flows from a stabilized portfolio due to the credit quality of our tenants and our asset management expertise. We increased our occupancy by 40 basis points, remaining above 98% during the quarter, with an average remaining lease term of 10.8 years, which is essentially unchanged from last quarter, and up from 10.1 years at this time last year.
At June 30, 2015 approximately 46% of our annual revenues were derived from mass re-leases, and approximately 89% of our single tenant leases provides for periodic rent increases. We believe the disciplined underwriting is the first step to a high quality diversified tenant roster.
But it doesn’t end there. As part of our asset management program, we continually review our tenant’s corporate and unit-level financial performance, which helps us monitor our tenant’s credit risk as well as any underlying business and market trends.
For the trailing 12 months, our unit level rent coverage was a healthy 2.8 times for our reporting tenants in consistent with what we reported a year ago. Moving onto our investment activity, during the quarter we acquired 95 properties for approximately $289 million.
The initial cash yield on these investments was approximately 7.67%, and average remaining lease term was 16.5 years. 77.5% of our acquisition activity was achieved through direct sale-leaseback transactions and we obtained master leases on approximately 65.6% of them.
Finally, over 95% of these leases provide for rent escalations over the term, an important element in establishing organic growth in the future. We continue to execute on what we believe is a proven investment strategy, acquiring a diverse group of net lease properties that are operationally essential to our tenants; principally, middle market in terms of credit underwriting and well-located geographic areas and across various industries.
As of the end of the quarter, you will note, we have also have a new top 10 tenant. Haggen Inc., a regional grocery chain moved up to our number four tenant, representing 2.7% of our normalized revenues.
As you may know, we were able to require these assets from a larger retail grocer who is mandated by the Federal Trade Commission to dispose of them. We acquired 20 assets for approximately $225 million representing an initial yield of approximately 7.5%.
These assets were underwritten on in-place and pro forma basis, with the unit level coverage north of two times. The assets are in well-located infill neighborhoods spanning the West Coast from Southern California to Washington State, and are secured under one master lease for 20 years.
The lease provides for annual rent escalations of 2% per year. While we are confident of Haggen’s expansion execution, we also took comfort in the quality of the real estate, particularly as it related to our acquisition basis.
In a study we completed as part of our due diligence, our acquisition price was pegged at less than 60% of replacement cost for these assets. Now, I would note that while the replacement cost is not always reliable metric for all triple-net assets, it most certainly is when you’re analyzing densely populated high barrier to entry West Coast locations, such as Laguna Beach and Carlsbad California.
Going forward, we have a solid acquisition pipeline with numerous transactions already closed or under contract. The market for net lease properties were still competitive.
It’s essentially unchanged from last quarter and we continue to underwrite attractive acquisition opportunities that are in line with our disciplined underwriting. Turning back to our owned assets, as I noted, we now have the most diversified portfolio among the top net lease REITs.
We got there, because I’m pleased to report they were well ahead of our stated ShopKo diversification goal, and have successfully reduced our ShopKo concentration to approximately 10% of our normalized revenues from 14% at the beginning of the year. You will note that in our supplemental package, we have included additional detail of the ShopKo portfolio, both for assets that we have sold, as well as those we still own.
This is more granular detail than we will likely provide on an ongoing basis. But given the volume of activity over the last six months, we thought it was appropriate and useful disclosure at this time.
I would draw your attention to a couple of key points highlighted on page 11 of the supplement. Clearly, Shopko is an attractive tenant and investors have responded accordingly.
Our aggregate cap rate on sale of 7.3% is over 35 basis points inside of our acquisitions over the comparable period. In other words, not only we met our stated divestiture goal, we have done so creatively, in spite of the reality that we were transacting as a motivated seller.
Second, as you will note, the key valuation in operating metrics of the assets we still own are substantially equal to or superior to the assets that we sold. I hope this puts the notion to bed that we only sold the best performing or most marketable locations.
As you recall, we set a target of less than a 10% concentration by the end of the year. As we sit here on August 6, I’m happy to report that after giving effect to what is closed subsequent to quarter end and what’s in the imminent pipeline, we have already met that goal.
In prior calls, we’ve been asked if we expect the concentration to continue to decline, and the simple answer to that question is, yes. But as opposed to the very public and motivated sales effort we have executed over the last six months, we will likely sell additional assets under our customary approach to active portfolio management, as we do with any disposition, where we’re looking to opportunistically achieve superior pricing.
In other words, the concentration will go down, but we will do it rationally when the opportunity presents itself. Moving to our balance sheet.
Our leverage in capital structure continued to improve. Through our capital recycling efforts, as well as our well-timed capital markets transaction, we generated ample funds to finance our acquisition activity without the need to utilize our ATM during the quarter.
As such, as I noted earlier, we have successfully reduced adjusted debt to annualized adjusted EBITDA to 6.7 times. Our fixed charge coverage ratio was 2.8 times, and we continue to un-encumber our portfolio to create greater flexibility.
Year-to-date, we’ve also extinguished approximately $337 million of high coupon secured debt that had a weighted average rate of 5.64%. With many of our stated portfolio objectives well underway or essentially behind us, we now intend to conduct more active shareholder engagement activities.
We’re currently planning a non-deal road show in late September among other initiatives. We will have more details to share in the coming weeks.
We believe, we have an exciting story to tell and look forward to that opportunity. With that, I’ll turn the things over to Phil, who will walk you through our second quarter financial highlights.
Phil?
Phillip Joseph
Thanks, Tom. We are very pleased with our strong second quarter financial results.
More importantly though this quarter represents a beginning for us in terms of enhanced financial disclosure. We are very excited about our inaugural supplemental financial disclosure and welcome your feedback.
Our Spirit team put in a lot of hard work to produce this disclosure and I want to thank those throughout our organization that contributed. Before I provide commentary on our earnings results for the quarter, I want to once again highlight the disciplined and measurable improvement in our portfolio and financial position.
Our second quarter portfolio and financial overview, as noted on Page 4 of the financial supplement, highlights our progress in this regard. We have accretively reduced Shopko exposure to 10.4%, increased our real estate investment portfolio year-over-year by 8.7% to $8.2 billion, essentially remained full occupancy at 98.7%, and reduced leverage to 6.7 turns.
We also hope that you find our financial ratios disclosure on this page informative as it relate to our stated goal of diversifying our access to institutional capital. As Tom said, this afternoon we reported AFFO of $0.22 per diluted share for the second quarter ended June 30, an increase of 6% compared to the second quarter of 2014, and 2% increase from the 2015 first quarter.
This year-over-year increase is primarily due to higher rental income as a result of our strong acquisition activity over the last 12 months, coupled with moderate same-store rental growth, consistent operating expenses, and lower cash interest expense. On the same-store rental growth that we now disclosed for our portfolio, please note that this figure will fluctuate from time to time, given the nature of annual versus periodic escalation terms contained in our leases, as well as the intra-quarter timing of schedule based rent increases.
We believe that you will find this incremental financial disclosure on our portfolio helpful. Total revenues for the quarter ended June 30 increased approximately 11% to $167.9 million compared to $151.8 million in the second quarter of 2014.
Sequentially, revenues grew by over 3% in the second quarter when compared to the first quarter. During the current year second quarter, we recognized $2.1 million legal settlement in other income following resolution of a dispute with a prior tenant.
You may recall that we recognized a similar settlement with a different tenant in Q2 2014, which approximated $2.7 million. Total operating expenses in the second quarter of 2015 decreased 1% to $173.4 million from $175.9 million in the same period of 2014.
In the second quarter of 2014 we had ABS restructuring costs of approximately $13 million. Adjusting for this one-time charge, our operating expenses increased year-over-year by approximately $10.6 million.
$10 million of this variance is attributable to certain non-cash items, namely asset impairments, depreciation and amortization and non-cash interest. With respect to G&A, our G&A run rate remained consistent at 7.1% of total revenues.
Cash interest notably decreased over the second quarter of 2014 by approximately $1.2 million even in light of a moderately higher principal debt balance. Furthermore, it is important to note that our weighted average cash interest rate decreased by approximately 17 basis points to 4.92% from the prior second quarter, principally due to repayment and refinancing of high coupon debt.
Moving on to our capital structure and liquidity, the company is entering the second-half of the year well-positioned for prudent growth. In April, we raised net proceeds of approximately $268.8 million via a follow-on equity offering at $11.85 per share.
In addition, during the quarter we sold 42 properties raising gross sales proceeds of $285 million at a weighted average cap rate of 7.25%. These sales resulted in the recognition of a gain on sale of approximately $63 million, $57 million of which resulted from the sale of 16 Shopko assets.
The proceeds from these transactions enabled us to improve our well-balanced capital structure and accretively acquire over $288 million of assets during the quarter at a weighted average cap rate in excess of 7.6%. During the quarter, we extinguished approximately $175 million of high coupon secured debt with a weighted average coupon rate of 5.54%, increasing our unencumbered asset base to $2.8 billion, or 35% of our real estate investments.
As a result of very efficient capital recycling and timely capital market transactions during the quarter, we’ve reduced our net debt to adjusted EBITDA to 6.7 turns. As I have stated previously, we plan to end the year sub-7 from a leverage perspective.
Additionally, our credit metrics continue to organically improve, as noted by our fixed charge coverage ratio of 2.8 turns, and our ratio of unencumbered assets to unsecured debt in excess of 3.7 turns. These credit metrics, as is, when paired with our sizable and growing unencumbered asset base, and proven access to institutional capital markets helps to solidify our goal of diversifying our access to institutional capital in an accretive fashion.
Now, turning to corporate liquidity, as of June 30, we’ve approximately $20 million drawn on our $600 million unsecured credit facility. Currently, we have approximately $40 million in unrestricted cash and cash equivalents on our balance sheet, and $55 million drawn under our $600 million line of credit.
In addition, we have approximately $40 million of liquidity available in our 1031 Exchange and Master Trust Notes release accounts that are available to fund real estate investments. In summary, our strong corporate liquidity position well positions us for putting an accretive growth.
During the quarter, we declared dividends to common stockholders of $75.1 million, which represented an AFFO payout ratio of 79%, compared to $66.3 million, representing an AFFO payout ratio of 84% in the comparable period a year ago. In conclusion, as a result of our strong first-half performance, we are increasing our 2015 AFFO guidance range to $0.85 to $0.87 per share from $0.84 to $0.86 per common share.
With that, we will be happy to take your questions.
Operator
We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Juan Sanabria from Bank of America Merrill Lynch.
Please go ahead.
Juan Sanabria
Hi, thanks for the time. I was just hoping you could speak a little bit about, it seems like the revolver balance has gone up post-quarter, and how we should be thinking about that?
Has that been going towards retiring debt, or funding the potential acquisitions that you’ve noted you, of course, got some stuff post-quarter?
Phillip Joseph
Well, you said that the line has gone up a little bit. I mean, we have ample corporate liquidity on our corporate line of credit, I mean, it’s de minimis in terms of overall borrowings.
In that regard, it’s clearly viewed as an interim working capital facility, we would look to keep our line balances at a minimal balance at all times.
Juan Sanabria
Okay. What – 1 think you referenced in your press release, so that it’s up from the $20 million as of the quarter end, is that?
Phillip Joseph
Yes, but that’s a de minimis amount, I mean, it’s…
Juan Sanabria
Okay. And then just…
Thomas Nolan
I mean, yes, we have bought, we have bought some properties subsequent to quarter end. But to Phil’s point, I don’t think it went up that much.
Matter of fact, I think it went up very small number.
Juan Sanabria
Okay. On the new disclosure on the NAV at the back of the sup, is the annualized rent figure that you gave, is that pro forma for acquisitions and dispositions that would have occurred during the quarter?
Phillip Joseph
No, that’s just based on in-place rent at the end of the quarter
Juan Sanabria
So not pro forma for – sorry, but at the end of the quarter, it implies that it’s adjusted for transactions that happened before the end of the period?
Phillip Joseph
It’s the in-place rent that’s in place at the end of the quarter annualized.
Juan Sanabria
Okay.
Phillip Joseph
So, if there is a tenant in place of it at the end of the quarter it’s that annual rent annualized for the rent received during that quarter.
Juan Sanabria
And then the difference then versus the lease role where you have the total rents expiring, could you just explain that?
Phillip Joseph
Sorry, Juan. We’re toggling between a lot of different places.
Juan Sanabria
Yeah, the page – the last 17 and 18.
Phillip Joseph
Yes. That – I need to get back to you on that one.
I don’t have a crisp answer on that one. But we definitely can spend some time with you offline.
Juan Sanabria
Okay. And then, I just noticed some interesting disclosure.
I think it was Page 15 on the sort of variance with the different industries. Is that – is it percent change in industry type, is that the change in sort of same-store rents across the industries?
Is that what you’re highlighting there?
Mark Manheimer
Yes, now that’s right. This is Mark.
Yes, so we kind of did the same-store rents quarter-over-quarter for stores that were in place for the past call it 15 months, and then kind of bifurcated all by industry. [Multiple Speakers]
Juan Sanabria
Okay. And what drove them or what drives the above average year-over-year increases for general merchandise, home-improvement and entertainment.
Is that some sort of percent rent that you can capture as part of a lease? Are those…
Mark Manheimer
Yes. So, it’s always going to be kind of lumpy quarter-to-quarter.
But what you’re seeing there is there were rent bumps, contractual rend bumps within both of those two industries. So both of those in home-improvement and general merchandise were multiyear increases, so they’re going to be a little bit more than kind of our 1% to 1.5% usual bumps.
Thomas Nolan
Right, I mean, if you recall, I mean, we get bumps two different ways. We either get them annually or we get them a certain percentage over a certain amount of years.
And in the general merchandise category, I believe, the biggest tenants, some is only every three years. So, you’re going to get – given this presentation you’re going to get lumpiness.
Mark Manheimer
Yes, and the home-improvement one, for instance is actually one property. It’s the Home Depot, a pretty large property up in San Francisco, where we had five years of CPI rolled through that one property.
Juan Sanabria
Okay. And just lastly, I think I missed the detail, you mentioned the other income, the $2.3 million some sort of settlement.
What was that regarding again?
Mark Manheimer
That was just a longstanding settlement with a tenant that we just had a recovery with them on. It was nothing out of the ordinary.
Juan Sanabria
Is that something we should think of as an annual short of number that occurs every second quarter or it’s just a more one-off in nature?
Mark Manheimer
Not at all. It’s just – as you manage your portfolio, you’re going to have tenant defaults and you’re going to have recoveries coming from tenant defaults.
So it’s not – until then you should…
Thomas Nolan
I mean, obviously, with 2,300 tenants there’s always the opportunity for a settlement. But the only reason we called it out is because it’s not a recovering.
It’s just the opposite. It’s not a recurring item, and so, we had revenues that people would not consider it to be recovering.
So we call it out and let people know that it was unusual. But it’s not something I think we certainly don’t underwrite and we wouldn’t look at it to be recurring.
Juan Sanabria
So it was sort of a lease-term payment?
Thomas Nolan
Yes. It was the settlement after dispute.
Juan Sanabria
Okay. Thanks.
That’s it for me.
Thomas Nolan
Great.
Operator
Our next question comes from Vikram Malhotra from Bank of America Merrill Lynch – I’m sorry from Morgan Stanley, please go ahead.
Vikram Malhotra
No problem. Congrats guys on the strong quarter and getting the supplement out.
Lot of useful information in here, so well put together. Just first question on Shopko, I guess, as you went through this process over the second quarter, maybe what surprised you most?
You’re obviously ahead of your target and the cap rate seemed pretty attractive, maybe even versus where you’re budgeted, but kind of what surprised you? And then, could you give us a little more color on kind of big picture where you intend to take this eventually in terms of the exposure?
Thomas Nolan
I hope you’re not disappointed with the answer. But we weren’t surprised very much.
We’ve been saying for a while, we think they’re very good tenant, not sure everybody read with us, and clearly, again, with the concentration, it’s just drew a lot of attention. But we knew, given the improving performance and Shopko has had improving performance over the last 12-months between the quality of the real estate, the improving performance of the tenant, we talk pretty confident that we were going to be able to move within a relative scale the amount of product that we needed to move.
And so, clearly, we set a target by the end of the year. We gave ourselves some room, but if we could get there sooner, we were certainly going to do that, and we were happy to do that.
Now, as to the final target, we expected to go lower. I really want to avoid kind of, again, having better motivated seller for the last six months, I’m pretty happy that we were able to get 7.31%, as a motivated seller.
I’m try to take the motivated seller’s mental [ph] off and so from here on now, we’re going to be – we will be selling them and we will be doing that opportunistically. But I want to resist putting a target out there, because quite frankly that makes you a motivated seller again.
So I think you said, you can look for the concentration to continue to go down, but we’ll be doing it hopefully in terms of – we find attractive.
Vikram Malhotra
Okay. And then…
Phillip Joseph
And stay affirmative. [ph]
Vikram Malhotra
Sorry, go ahead.
Phillip Joseph
I just want to add maybe a little bit of color, as you can kind of take a look, which I would add a little bit in the supplement on Page 11, where we get into, not only we’re able to hit 7.3% on the cap rate, but we also try to improve the portfolio at the same time. So we’re able to increase the sales per unit, sales per square foot, cash flow per location and the rent coverage, as well as the lease term.
Vikram Malhotra
And to clarifying that, did that number, the overall sales number include the distribution center that you had as part of Shopko?
Phillip Joseph
Yes, it does.
Vikram Malhotra
Okay. It does.
Phillip Joseph
[indiscernible].
Vikram Malhotra
So just a question on one of your tenants I saw in the top 20, the Red Lobster Hospitality, is that something new, or has that been there all along?
Mark Manheimer
That’s something that we bought at the end of last year.
Vikram Malhotra
Okay, the end of last year. And was that part of – how do that process work in terms of your – buying those assets?
Gregg Seibert
It was the sale-leaseback with the private equity firm that purchased Red Lobster.
Vikram Malhotra
Okay.
Mark Manheimer
Which we did maybe six months after the largest elixir [ph] that get done.
Vikram Malhotra
Okay, okay. And then just last one, on your new tenant the Haggen, obviously, the metrics you cited seem pretty strong.
I’m just kind of wondering, you mentioned coverage at two and we’ve heard, at least, in certain press releases that there have been some, call it, operational challenges, some layoffs. Was that kind of preplanned as part of Haggen’s original acquisition, or is this something more recent?
Gregg Seibert
So layoff and some of the sales changes were mostly part of their business plan, things that they had in their plan. They were anticipating for the most part.
Vikram Malhotra
Okay. Okay, thanks, guys.
Congrats on – congrats again on the strong quarter.
Thomas Nolan
Thank you, Vikram.
Operator
Our next question comes from Alexander Goldfarb from Sandler O’Neill. Please go ahead.
Alexander Goldfarb
Yes. Good afternoon and again nice job on the supplemental.
Two questions. The first is, Tom, just stepping back sort of from everything, and if you look at the market and obviously what it unfortunately done to your stock price, hopefully, the Shopko dispositions get some recognition.
But assuming that market stays as it is, how do you guys think about your acquisition potential for the remainder of this year and into next with where the stock currently is, or is your view that, with what you have lined up to sell, you’ll be able to sell enough to fund acquisitions and still be able to delever and encumber as you guys have discussed?
Thomas Nolan
Sure. I’m happy to address that.
I guess, there were a couple of points embedded in there. And there’s no question, the general stock performance of the triple net sector has been tough the last 60 days, and it’s been a little tougher on us.
And it can’t – the numbers speak for themselves. I do believe, obviously, we are confident we’ve had a good quarter.
We’ve had a good year and our expectation is for brighter days ahead. But in terms of the reality of dealing with where we are right now, I think we’re moving ahead business as usual.
At the – the cap rates that we’re buying and we’re very happy with the type of real estate that we’re getting where it would support a nice portfolio of real estate at a 7.7 cap. We can buy accretively at a 7.7 cap today even with this share price where it is, so kind of that’s certainly one level.
And I think that we were – I would like to point, I think we’ve been reasonably disciplined on that cap level even when we had a better amount. I look at acquisitions in terms of what’s the right risk-adjusted return for the asset, not necessarily what can pay for it, and then run up and pay that amount.
You saw in the industry, across the industry, there were – in the last couple of quarters there’ve been some decent portfolios that have moved to have some pretty aggressive cap rates, I guess, in our view portfolios in the 6s, more than at least one of them sub-6. And we weren’t participating in those.
We looked at them. We certainly price them.
But, we really like the portfolio that we’re able to put together and the assets that we’re able to acquire. And we did that at a 7.7 cap.
So with the general tradeoff in this sector you might not see some of those portfolios being done at the pricing that was being done. But we weren’t doing those anyway.
And so, yes, we can buy accretively. To your other point, yes, we expect to continue to recycle.
I mean, we have been doing it since we’ve been here. I mean, $900 million of assets have been recycled through this company since the IPO.
We’ll continue to do that. We’ll continue to do it from a portfolio management standpoint.
And in other words, we’ll make portfolio management decisions and get ahead of what may be prospective issues. Or alternatively, we’ll do it where we see opportunities to recycle and reinvest the capital at a better rate.
So I think you’ll see a combination of all of those things, but we’re – the bottom line is that, the stock is where it is, but we can continue to buy property accretively, grow AFFO per share. And obviously, we’re very confident that we’re going to close that multiple gap and hopefully have better performance going forward.
That’s certainly our ambition.
Alexander Goldfarb
Okay. And then the second question is, in the release it talked about renewals being only about two-thirds of the leases that expired.
So what’s going on with the leases that didn’t expire as far as where those tenants who closed shop or moved out? And then as far as downtime for backfilling, and just more broadly, how should we think about renewals of – for the portfolio?
Mark Manheimer
Yes.
Thomas Nolan
I’ll let Mark touch on it. I guess, I would offer one quick view, which is historically our renewals have been around 80%.
We’re a little lower this particular quarter, but the sample size is so low that it’s – any of it really takes kind of one property and your rate just go out away. So, I’ll let Mark get to the specifics.
But we don’t draw [ph] any friends from that one quarter given the relative small amount of properties that are involved.
Mark Manheimer
Yes, and to echo what Tom said, it is an extremely small sample size which we like to have a low number of expirations and I would probably kind of think we gravitate back towards the mean over time. And then, I guess, the second part of question, the specific locations that did not renew this year, those are up for re-let or for sale.
Alexander Goldfarb
Okay. Thank you.
Mark Manheimer
Thanks, Alex.
Operator
The next question comes from Vincent Chao from Deutsche Bank. Please go ahead.
Vincent Chao
Hey, good afternoon, everyone. Maybe just a follow-up on the renewals here, just of the remaining 20 that are set to expire this year, I guess, what’s the – how are those conversations going?
And, I guess, do you expect retain roughly 80% of those or how should we be thinking about just the near-term expirations?
Mark Manheimer
I mean, I hate to speculate how those are going, but I would generally assume it will be generally in line with our past experience.
Gregg Seibert
The sample size is so small. It shouldn’t have a material impact on our performance.
Mark Manheimer
Right.
Vincent Chao
Okay. And then maybe just on the investment side, obviously, we just talked about the cost of capital side of things.
But just from an opportunity set perspective, given some of the volatility in the rate environment and things like that, just curious, has that changed the dynamic? I think, I heard you earlier in the call saying that the conditions have been basically the same, but just curious if there’s any geographic areas or industry pockets where you’re seeing more or less opportunity as a result of the current rate environment?
Thomas Nolan
No, I think it’s been reasonably consistent. I mean, as we have said in the prior calls, I mean, obviously, if you have a big rate move, ultimately, it will work its way through the cap rate, it always does, that they don’t go a large step.
But at the moment, the changes and there’s obviously been volatility, but I mean, again, we’re lower than we were a year ago and it’s seemingly going to stay there for a while. And I know it seems like the CNBC and The Wall Street Journal are all focused on the Fed.
We look at the 10-year treasury more than what the Fed is going to do. And it really hasn’t added that much element.
That volatility really hasn’t changed the pricing dynamic very much. Hey, Gregg, I don’t know if you want to weigh in on…
Gregg Seibert
No. The industry is again a very consistent.
In the past quarter, there hasn’t been any much fluctuations at all. And the cap rates, I don’t find one industry whether there has been a significant impact one way or the other on where they’ve been through the past 12 months.
Vincent Chao
Okay. And then probably you know the answer of this too, but just in terms of Texas, I mean, obviously, we now had another fallback in oil prices, so you’ve got that plus the interest rate environment.
But I guess, is that – anything changing there in terms of investors or companies willingness to sell?
Gregg Seibert
No, I mean, I haven’t seen that dynamic impact the market.
Vincent Chao
Okay. And then just last question.
On the settlement fee income in the quarter, I think it’s about $0.02 or so additive. I guess, was that something that you guys were thinking about or new, what is a potential in the context of the prior guidance, or was that – is that incremental to the outlook?
Thomas Nolan
First, just as a correction, it’s $2 million not $0.02…
Vincent Chao
Oh, sorry, sorry.
Phillip Joseph
$2 million and not $0.02, right, it’s definitely not $0.02.
Vincent Chao
And, again, as we said, again we have a large portfolio. Time-to-time, we will have tenant settlement, issues come up.
And like, Tom said, we just want to point it out. But as I did point out in my script as well is that we had same amount in the second quarter of last year.
So directionally want to point you guys in the right direction.
Thomas Nolan
And I see in terms of specific guidance question, I think, we made a guidance change here, because we’re sitting in August. We’ve come off of a strong first-half of the year.
The Shopko recycling has gone well. And so, therefore, we have made an adjustment, so…
Vincent Chao
Okay. Thanks, guys.
That’s helpful.
Operator
Our next question comes from Ross Nussbaum from UBS. Please go ahead.
Ross Nussbaum
Hey, guys, good afternoon. Phil, could you elaborate a little more on what the game plan is for the $1.2 billion of CMBS you got expiring before the end of 2017.
Is it unsecured, is it bank term loans, or is it a little of both, what’s the game plan for that at this point?
Phillip Joseph
No, it’s not recourse debt. And I guess, when you look – when I look at our debt maturity profile, I view it has been a tremendous opportunity for us.
From a couple of different standpoints, obviously, it’s a great opportunity for us to reduce our cost of capital and refinance that debt in a much lower much rate. Also, you already have a very sizable unencumbered asset base, and that’s just going to only increase the size of it.
So if your question is from a refinancers’ perspective, there is – it’s not there. It’s very moderately leverage debt.
It’s granular, and as I mentioned, it’s not recourse in nature. And you also need to bear in mind that, given our existing unencumbered asset pool of $2.8 billion, I mean, that’s an additional source of liquidity if the question is refinance related.
Ross Nussbaum
No, I think the question is, is it your intent to replace CMBS with CMBS investment grade unsecured or bank term loans?
Thomas Nolan
I think, I mean, we’re converting to a more unsecured borrower. So, again, I think to, Phil’s question, this is a real opportunity.
We’re going to have a host of different alternatives to put in place for that. And I was actually coming at it sooner.
Phillip Joseph
Right. So Ross, I’m sorry, you – we kind of touched you off there.
Did we miss your question or what?
Ross Nussbaum
No, no, I think you addressed that one. I got a follow-up, it’s on a different topic, which is Haggen.
From an acquisition underwriting perspective, maybe I can just say this bluntly. How did you gain confidence that they weren’t going to screw up going from 18 stores to something nearly ten-fold that?
I mean, this went from a small operator to somebody who grew ten-fold. So how do you have comfort that they’re going to make that transition and how do you underwrite that risk?
Thomas Nolan
Yes, again, I’ll let Gregg do it, because he ran the due diligence team. But for me it’s just what we do.
The real estate due diligence is like from my standpoint, I guess, what I’ve always done, which is getting to know the real estate, getting to know the tenant, getting to know the business plan. When we met with management, we reviewed, but still as we reviewed all the comps, we reviewed market trends so we ran a very sensitive due diligence, and we took tremendous confidence.
These are some of the best infill grocery store locations that were being disposed off. And so from an – as I mentioned in my original tax fee, the replacement cost of these assets was less than 60%.
So we had a strong tailwind of fantastic real estate. And, yes, we had a regional operator who is becoming a super regional operator, and there was risk associated with that.
But I think that’s one of the reasons you’re seeing the economics that you saw, that’s why you have a master release, that’s why you have rent bumps at the level that you have. But, again, Gregg, I’ll let you go from there.
Gregg Seibert
Just add a couple of notes to what, Tom, said. But they still have the back office being done by super value.
So that was not something they had to convert overnight to a totally new system. Another thing to point out is, they did not buy these all at once.
it was phased in over a few quarters. So they would buy, for example, a store or two every other day.
The team is in place. The executive team specifically heavy in Southern California, a market they were not in, they were already in the Pacific Northwest obviously.
The executive team has been in place for some time prior to the merger to work on this conversion. And they have a plan going-forward that makes a lot of sense on dispositions.
They held back, they have a lot of dry powder, lot of unencumbered assets. Their plan was to not always operate all of these locations, as Haggen’s and that does not apply to Spirit stores.
We were able to effectively cherry pick the best assets that they wanted to keep long-term. So plus as Tom alluded to, we have – there’s a lot of financial diligence on the locations, unit level information, we looked at every site and some of the ones we thought were missed kind of an agreement with the company that they wanted to keep over long-term, and which we got comfortable in a variety of ways.
Thomas Nolan
And, I guess…
Ross Nussbaum
Are these freestanding, or are these sitting in shopping centers?
Gregg Seibert
They are – in general, they’re both, but a lot of them are the anchor of a shopping center.
Ross Nussbaum
And you’ve got a ground lease…
Gregg Seibert
We do not have any – we do not own the shop space, we own the anchor.
Mark Manheimer
And, I guess, just as a side-note, I would add to Gregg’s statement, where not only did we cherry pick the strongest cash flow properties that were available and put them on a master lease; the assets that we did not select will have subsequently been sold out on the 1031 market at about 5% cap.
Gregg Seibert
Right. There has been six-trades [ph] in the past 45 days at a 5.23% cap rate.
[Multiple Speakers]
Ross Nussbaum
Okay. And then just to clarify, so you don’t own the dirt under most of the 20?
Gregg Seibert
No, we own all the dirt.
Ross Nussbaum
You do?
Gregg Seibert
We own all the lands and all the buildings.
Ross Nussbaum
Okay. And then the rent per square foot, ballpark, can you give us a sense of where that is?
Gregg Seibert
Yes. I mean, it’s market rents we feel or below market rents in the mid-teens.
Ross Nussbaum
Okay. Thank you.
Thomas Nolan
Yes. I mean, we got pretty comfortable in the real estate underwriting, as they’re well-located in California and up the West Coast locations, at or below market where even if this is something that we get back, we feel that there are a number of grocers that would step in at these rents or higher.
Gregg Seibert
All right, and most – as Mark, I mean, further nailed down to the specifics, but most of our exposure on this transaction is in Metropolitan areas of Seattle, Portland, Los Angeles and San Diego.
Ross Nussbaum
[It’s a good color. Thanks for that.]
[ph]
Thomas Nolan
But just to – I know you – just to be clear, so there’s no misunderstanding, we own the store, we own the dirt.
Gregg Seibert
We own the land and the building.
Thomas Nolan
Right. These are 100% owned by Spirit.
And then, and what you were referencing, Mark, is properties that we did buy. They were outside of the portfolio that we bought.
They have subsequently traded and they traded since some of this noise has come out that been made reference to earlier, and then, traded at cap rates between 5% and 6%. Our portfolio is on a master release at 7.5%.
Operator
Our next question comes from Chris Lucas from Capital One Securities. Please go ahead.
Christopher Lucas
Good afternoon, everyone. Maybe Tom to follow-up on the last point that you were making, looks like you had a little bit of a net spread between what you bought this past quarter and what you sold.
Given the capital markets conditions, should we expect more of an opportunity in the matching of dispositions and taking advantage over the arbitrage opportunity that might exist in the disposition market to help fund better acquisition opportunities?
Thomas Nolan
I mean, a lot of what you saw in the dispositions was Shopko. So, I mean, we have to recognize that we won’t have that significant volume in every quarter.
But we are an active recycler. I mean, we will sell and we will look for opportunities where we think we can get and make basically a trade of an asset we own for one that we’d like to own.
And obviously do it in an accretive fashion. So, we will do that and have done that.
And as I said, since the IPO this team has sold at this point and recycled over $900 million of assets. So, we’re afraid to do it.
We’ll do it when we see the opportunity and it will be a component of the funds that we have available to us going forward.
Mark Manheimer
And in every quarter, we take a look at the portfolio. And I’d probably put our sales into three buckets that we try to take a look at: one being strategic or non-core assets, for instance, strategic being Shopko and non-core being the multi-tenant assets that we got from the Cole II merger; and then another bucket would be opportunistic sales where we think the market is recognizing or overvaluing assets.
For instance, that might not have a great lease but might have an investment grade credit where with some expense leak is where we think we can get out of them at pretty aggressive cap rates. And then the third bucket that we’re constantly looking at are de-risking sales, where we’re taking a look and where we think that we might be susceptible to losing some rents.
And so, we try to protect the cash flow streams by selling those properties.
Christopher Lucas
Okay. And then, Phil, I guess, just wanted to get an update on how you’re thinking about approaching the rating agencies and what kind of conversations you’re having with them as you continue to build that on encumbered base and work towards having a more flexible structure on the debt side?
Phillip Joseph
.
They’re able to look ahead 12 to 18 months and they’re making a decision today. So we are going to be having more active dialogues with them.
But the key thing to point out is that this is going to happen organically. There is not a seismic shift that needs to happen on our balance sheet to get there.
And clearly, I would be remiss if I didn’t say, today, I think we clearly are in investment grade credit. And I think all that’s going to really take for us to get there is more active engagement with them and just stay tuned.
Christopher Lucas
Okay. And then the last question from me, again with Phil, on the operating expenses, I mean, just on a gross basis expenses were down sort of year-over-year, revenues were up 10%.
I guess, is there some seasonality or some, one-time items that sort of drive some of the volatility in the operating expense line quarter-to-quarter?
Phillip Joseph
There really isn’t a big movers. From a seasonality perspective, our G&A remains constant at 7% of gross revenues.
As I mentioned in my prepared comments, we normalized our operating expenses, taken out the one-time charges related to the ABS restructuring that occurred in the second quarter of last year. But not much seasonality in our operating expenses.
Christopher Lucas
Okay. Thanks a lot.
I appreciate it.
Thomas Nolan
You are welcome.
Operator
Our next question comes from Dan Donlan from Ladenburg Thalman. Please go ahead.
Q - Dan Donlan Thank you and good afternoon. Just going back to the Haggen’s acquisitions, I think, the Albertsons – did Albertsons have to sell assets for the FTC?
And if so, was that more representative of the general set of properties that they had? I mean, they didn’t really sell their poorest performing properties, did they?
Gregg Seibert
Could you repeat the last couple of words you said, the what properties? Q - Dan Donlan The Haggen’s assets, could you…
Gregg Seibert
Right, so it is obviously part of the Albertsons-Safeway merger. So the FTC mandated that they sell us a negotiated number and location of stores.
So in order to complete their merger they had to simultaneously sell those assets.
Mark Manheimer
And they had to sell to a strategic buyer as well.
Gregg Seibert
Right, as you – if you go back, in the press at the time, you can see there were lots of funds. I think Sam Zell wanted to buy it.
And there was a lot of interest in the transaction. But the FTC required that the assets be sold to an existing chain that was already in the market.
And Haggen was already on the West Coast. So, they were a prime candidate for the West Coast assets.
Q - Dan Donlan Okay. And then as far as you mentioned some sales in the low-5s some in the low 6s.
How do you think those property stack up relative to what you bought and did you get a look at the assets you bought before the other assets were sold to that entity?
Gregg Seibert
Yes. We looked at those assets and the assets we have.
We picked the assets we have obviously. And that transaction closed after ours.
And we think ours are equal to or better than the asset that were sold. Q - Dan Donlan Okay, perfect.
And then looking at Shopko on Page 11, all of the metrics that you provided are better that you own or better than what was sold. So just kind of curious on how we should think about the cap rate on the remaining assets.
You sold everything thus far for a 7.3%. Would you think that the remaining assets that you have with Shopko are kind of worse at or below that or maybe the real estate associated with what you have maybe – the ground maybe is worth less than maybe what you sold or do you think it’s you kind of equal in that sense?
Mark Manheimer
Yes. We selected the assets that we brought to market, because we thought that, A, they would be marketable, and then we’d be able to move them; but, B, we really wanted to increase the performance metrics of the portfolio that we deal less with.
So, if we were to go out and sell some of the cherries that are still in there, we could certainly get a lower cap rate. But that’s not something that I would anticipate us doing.
Q - Dan Donlan Okay.
Thomas Nolan
Yes, I mean, obviously, Dan, I mean, as I said in my prepared remarks, I kind of hope the statistics speak for themselves in the sense that – it’s just, I was constantly getting informal queries as to, I hear there is transacting but you must only be transacting the very best. And I think – they’re pretty monolithic as we’ve made the point before.
The box is kind of the box, and they are very similar to bell-curve and their performance is actually pretty narrow. Their best stores isn’t that much different than their probably the weaker stores.
So, we feel we are obviously reluctant to give you a cap rate. So, I’m not going to give you a number.
But I think we feel pretty good that we’ve lightened up the exposure by a third, and yet all of the operating metrics have gotten better. So we clearly hope that people will look at that and say, they own a pretty solid group of assets that they have left.
Q - Dan Donlan Yes. It will be pretty ironic, if people start to saying you sold too much a year from now, so.
But just kind of I just have a couple of more questions. Did the 2.8 coverage that you provided, is that four-wall?
Phillip Joseph
Yes. That’s four-wall.
Q - Dan Donlan Okay. And then going back to Page 18, one of the – I forgot to ask.
One of the other questions about the annualized rents that you provided the $614.7 million is that a GAAP or cash number?
Thomas Nolan
Cash. Q - Dan Donlan Cash.
Okay.
Thomas Nolan
Yes. Q - Dan Donlan But that’s – and so, is the number on Page 17 cash as well or is that a GAAP?
Thomas Nolan
I’m going to – that should be cash, and I – let me get back to you on that one. I want to just circle back in terms of, I think, I have an answer, but I want to give you the right answer, Dan.
Q - Dan Donlan Okay. You’ve got some assets held for sale in that NAV page.
So I got them at…
Thomas Nolan
Right, that’s what I’m thinking, so… Q - Dan Donlan Right. Okay.
I’ll follow-up with that. And then, lastly, footnote two on Page 9 it looks like you have some debt that’s in default that’s coming due this year.
And then, you have just something on the income statement, the accrued interest on defaulted loans. So are you just basically not paying any interest on those loans, you’re going to give back the assets, in which case there shouldn’t be any type of economic change, when this debt actually comes due?
Phillip Joseph
Yes. The capitalized interest, we’re obviously not – we were not paying.
And again, when we look at our loans that are like in default, we view them as a pure opportunity for us given the option value there and the low debt yield. They’re pretty much non-income-producing assets.
And you can imagine the pick-up that you get with respect to debt-to-EBITDA in that regard.
Thomas Nolan
And to your point, yes, it won’t have an impact. Most of these assets were actually legacy assets, that has been restructured actually prior, believe it or not, [they’re isn’t linked today] [ph] from the IPO, prior to the IPO and most of the economics had already been taken off of the table.
There were no economics associated with them, but we basically had, what in the private world I used to refer to as a hope certificate. Again, this was done prior to my even joining the company.
And so those are the assets that just kind of sat there and then the debt is ultimately – the hope certificate didn’t turn out, which is fine. But so now those loans will ultimately and the assets will go up the balance sheet, but there is no economic impact, because we didn’t have any economic impact associated with them in our underwriting.
Mark Manheimer
Yes, and it’s not mentioned, the bulk of that is from pre-IPO and then the remaining loans that are potentially going back to the lender are from the Cole II merger. Q - Dan Donlan Okay.
And I lied, I’ve got one more. So is it unheard of this or is it possible that you guys could get investment grade graded between now and year-end?
Thomas Nolan
I like to put the pressure on, Dan, I like that.
Phillip Joseph
No, no, I – [indiscernible] look, nothing is off the table. But again, it’s going to take – if they don’t move on a dime, and again, not all agencies thing alike.
Certain agencies – there’s a potential, but again the clearest thing to message is that – it’s we’re going to get there organically. I do think we’re there now.
Thomas Nolan
Yes. I think that’s an important point, Dan, and it is a nice way to finish, which is I guess that – we think we’re there now.
We don’t really – it’s not that’s going to require cathartic change. We’re going to present a nice business plan.
But we also understand the kind of courtesies we’re dealing with the rating agencies and they don’t particularly like it when you put dates out there and suggest that you’re going to have something occur at a certain time. We’re going to get in very active engagement with them.
I think they’re going to like what they see. So as already said, we think that the metrics as we put them through their models, suggest that we’re already there.
But it will take time, and if we can get there sooner, we’re certainly – we’re going to work hard to do that. But – when something is outside of your control, we certainly want to be conservative.
And I know that’s certainly Phil’s perspective as well. So all I can tell you is we’re going to work hard on it.
It’s just going to be hard to say today. Q - Dan Donlan Okay.
I appreciate that and thanks for the additional disclosure as well.
Phillip Joseph
Thanks, Dan.
Operator
Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Mr.
Nolan for any closing remarks.
Thomas Nolan
Thank you, operator, and thank you all again for joining us today. We do believe we had an excellent and productive first-half of the year, and now looking forward to delivering an equally attractive second-half.
We believe the quality and diversification of our portfolio, as well as our expertise within the net lease space will continue to provide sustainable, risk adjusted growth that supports an attractive dividend and creates value for our stakeholders. On behalf of Phil, Gregg, Mark, and I, we look forward to meeting with you and discussing all the positive things Spirit is doing and to create value for our constituency.
However, in the meantime, if you would like to meet with us, please feel free to contact Mary Jensen, our Vice President, Investor Relations. In the meantime, good night to all, and thank you very much.
Operator
The conference is now concluded. Thank you for attending today’s presentation.
You may now disconnect.