Management emphasizes a 'real estate-first' philosophy, focusing on fungible, high-traffic frontage assets in top 100 MSAs to ensure rapid re-tenanting and value preservation.

Performance was bolstered by proactive asset management, such as re-leasing a bankrupt Tricolor dealership to Avis, resulting in a 24% increase in asset value.

The company successfully executed a significant portfolio pruning in 2025, disposing of $78 million in less optimal assets to improve overall credit quality and concentration.

Strategic diversification remains a core risk mitigant, with the top 10 tenants representing only 24% of annualized base rent (ABR) and no single tenant exceeding 3.5%.

Management highlighted a significant valuation disconnect, noting that their implied market cap rate of 8.1% is considerably higher than the 6.79% average cap rate achieved on 2025 dispositions.

Operational strength is supported by a 'developer DNA' that allows the team to resolve complex title or construction issues, positioning the REIT as a 'buyer of choice' for fragmented assets.

The 2026 AFFO guidance of $1.27 to $1.32 assumes 4% growth at the midpoint, driven by the deployment of $100 million in net acquisitions.

Management expects acquisition cap rates to remain in the mid-7% range for early 2026, though they anticipate potential compression as institutional interest in net lease assets increases.

The company is fully funded for its 2026 growth plan through a $75 million convertible preferred equity investment, reducing dependency on volatile capital markets.

The pace of dispositions is expected to decline materially in 2026 as the bulk of strategic portfolio optimization was completed in the prior year.

Guidance assumes a conservative bad debt reserve of approximately 50 basis points, reflecting a stable watch list and high historical recovery rates on lease expirations.

Two tenants, Smokey Bones and Twin Peaks, are currently in bankruptcy, representing a combined 0.56% of ABR; management expects to exceed 100% rent recovery through re-leasing.

The acquisition of a 7 Brew in Jacksonville at an 8% cap rate was achieved by resolving complex construction liens that limited other potential buyers.

Exposure to casual dining was intentionally reduced in 2025 to mitigate risks associated with shifting consumer spending patterns and inflationary pressures.

Non-recurring G&A charges of $534,000 in Q4 were primarily related to legal expenses for credit facility amendments and corporate restructuring.

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The high end of the range depends on the timing of acquisitions (front-half vs. back-half) and the continued outperformance of the existing portfolio relative to bad debt reserves.

Current acquisition cap rates in the mid-7s are providing a slight tailwind compared to previous assumptions of 7.25%.

Management believes their weighted average cost of capital remains 75 to 125 basis points below acquisition yields, supporting accretive growth even at current stock prices.

While the preferred equity facility is the primary 2026 funding source, the company intends to return to traditional equity markets once the share price better reflects NAV.

Management is proactively replacing two of their five Wendy's locations and noted that their average rents of $120,000 are well-supported by sales volumes.

For Advance Auto, the REIT extended several leases to 10-year terms and maintains a low rent basis, expressing confidence in re-leasing if any units are vacated.

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