Realty Income Corporation (O) Earnings Call Transcript & Summary

We appreciate everyone being with us for Realty Income's call covering how we performed in the fourth quarter. Sumit Roy, our President and Chief Executive Officer, will walk through the results, alongside Jonathan Pong, who serves as Chief Financial Officer and Treasurer. As part of this call, certain remarks we make could fall under the definition of forward-looking statements per federal securities laws. Outcomes that the Company actually experiences down the road might vary substantially from anything addressed in those forward-looking statements; the factors behind such variances will be laid out more thoroughly in the Company's Form 10-K. Throughout the Q&A segment, we'll hold to a limit of two questions per person so that everybody gets a chance to take part. Should you wish to pose more questions, you're welcome to get back into the queue. At this point I'll hand things over to Sumit Roy, our CEO.

Appreciate that, Steve, and greetings to all of you. Looking at what we delivered in Q4 and across all of 2023, you can see the unique platform value Realty Income has built — something that distinguishes us as a real estate partner for the world's top businesses. During the year, we hit several milestones demonstrating the benefits that come from our size, our scale, and our relationships. To start, we set a company record for annual investment volume at the property level, completing over $9.5 billion in high-quality, diversified investments spanning eight countries through 271 individual transactions, with a weighted average cash yield of 7.1%. The year ended with an especially active fourth quarter, during which we closed $2.7 billion in investments at a 7.6% weighted average cash yield. Among the quarter's highlights was a $527 million sale leaseback transaction involving Decathlon — a sporting goods retailer ranked among the highest investment-grade rated in the world — spanning properties across Germany, France, Spain, Italy and Portugal. Despite choppy conditions in the capital markets, our fourth-quarter investment spread came in at about 115 basis points, and for all of 2023 it landed near 120 basis points. We hit those figures while maintaining our full commitment to real estate quality and dependable cash flow — a reflection of how seasoned our team is and how attractive sophisticated sellers find our platform as a counterparty. Second, over the year we gained a foothold in the data center sector via a build-to-suit development joint venture alongside Digital Realty; and we cultivated fresh relationships with blue-chip partners including Blackstone and the EG Group by way of large-scale investments, among them the $950 million investment for a 21.9% stake in the Bellagio and the $1.5 billion sale leaseback involving primarily Cumberland Farm convenience stores. Third, on top of the achievements I just mentioned, in October we also announced the $9.3 billion merger with Spirit Realty Capital in an all-stock transaction, which closed after year-end on January 23. Looking at how those results shaped our performance, we achieved AFFO per share of $4 for 2023. That works out to roughly a 7% total operational return across the year, and what matters is that this, when paired with the Spirit merger, sets us up to offer a strong earnings growth story in 2024. With the Spirit merger having closed last month, plus the significant debt and equity capital we raised at appealing prices during December and January—something Jonathan will walk through in greater detail—we believe we're positioned well for solid growth in 2024. For 2024, we've introduced AFFO per share guidance spanning $4.13 to $4.21 per share, which represents a 4.3% annual growth rate at the midpoint. We're confident we can hit that growth figure while avoiding any new issuance of public stock. When you factor in the dividend as well, that leaves us set to produce a total operational return above 10% at the middle of our guidance range, using the closing price for our common shares on February 20, 2024 as the reference point. In addition to the Spirit deal at $9.3 billion, our 2024 acquisitions guidance sits at about $2 billion, and we anticipate funding that fully by combining cash our portfolios generate internally — which after dividend payments now exceeds $800 million on an annualized basis — with roughly $605 million in unsettled ATM proceeds, and also our $3.7 billion in cash plus unused capacity under our revolving credit facility at year-end. Even though we continue to source and evaluate strong investment opportunities, we remain very selective, deploying capital solely into appealing risk-adjusted return opportunities that meet our near-term and long-term investment spread requirements. Looking at the $2 billion we originally projected for investment volume, about 50% of that ought to come through as development financing, and we've already pinpointed most of it. Again, from an investment perspective, the attractive return profile we have for 2024 comes with minimal execution risk, so we can afford to remain patient, disciplined, and opportunistic regarding how we deploy capital. That being said, our platform lets us shift rapidly back toward expansion if the market turns, just as we demonstrated at the height of the pandemic. We're going to remain careful with how we put money to work, because that's how our investors get the risk-adjusted returns they deserve. But we also want to keep driving home the point that nobody is set up better than we are to seize the really attractive opportunities that will come along over time. Start with the net lease real estate sector, which is fragmented — the potential to roll it up is massive. We figure the total addressable market in the U.S. and Europe, counting both traditional net lease and newer categories such as data centers and gaming, comes to $14 trillion. Then there's our track record: we've proven we know how to put capital to work. Since we came out of 2020, the pandemic year, we've deployed at least $9 billion in each of the past three years, and that figure includes public M&A. Over that stretch, our AFFO per share has climbed at a yearly rate of roughly 6%, and stockholders have seen a total operational return of about 10% annually. As we look ahead to 2024 and later, we expect to hit comparable goals this year for both capital deployment and AFFO per share growth. We're particularly excited about the chance to play a meaningful role in sectors such as data centers and gaming, where we can secure solid initial yields alongside appealing contractual rent escalators. And third, thanks to the Spirit merger, our access to capital markets is stronger because our publicly-listed stock now trades more heavily — averaging over $400 million in daily volume since the Spirit transaction was announced. That places us among the top 150 members of the S&P 500. Over that same period, it's over seven times what our net lease peers average, which means we're in an even stronger position to finance the business efficiently and without disruption via our ATM equity program. Fourth, as time goes on, our real estate holdings grow more diversified, made up of properties leased to relationship clients who are among the top companies globally in their fields. A broader blend of such customers gives our platform greater stability, and as a result, our monthly dividend payments continue to rise. Finally, our platform's strength is a key differentiator. We leverage our expertise while holding ownership of over 15,400 properties globally, the Spirit portfolio included. We've completed more than 5,900 lease resolutions since 1996, and the lessons from those are integrated into analytical AI tools that provide valuable insights, enabling us to identify acquisition opportunities with greater accuracy and optimize returns from our existing assets. Now, turning to our key operational highlights for Q4: approximately $2.7 billion in investment activity was allocated to high-quality investments, carrying a weighted average cash yield near 7.6%. On the international side, we concluded $1.1 billion in overall investment volume, with a weighted average cash yield of 7.8%. We put money into 119 distinct deals, including 29 sale leaseback arrangements that added up to $884 million. Across the full year, our investments reached $9.5 billion, and 35% of that originated outside the US, highlighting the strength of our platform's global footprint. Within the Q4 total was a loan made to ASDA stores in the UK carrying a 10.9% yield.

This loan is secured by ownership stakes and real estate that includes grocery stores and supermarkets, and it was provided through a sale leaseback deal with ASDA. Also, fourth quarter volume reflected the $650 million preferred equity investment in the Bellagio JV with Blackstone that we announced earlier, which carries an 8.1% yield. Much like the ASDA loan investment, the Bellagio preferred equity investment came alongside investment in high-quality real estate. With both investments, being able to provide clients a broader range of capital solutions gave us access to high-quality net lease real estate investments at better risk adjusted returns than we could have obtained otherwise; these deals act as models for upcoming sale leaseback transactions. Additionally, during the fourth quarter, we completed our first investment in a data center development JV with Digital Realty. That initial $200 million investment equals an 80% equity stake in the venture and should produce a 6.9% initial cash yield, 2% annual rent escalators, and a long-term triple-net lease with an S&P 100 investment grade client once finished. Moving to portfolio operations, same-store rent increased 2.6% in the fourth quarter and 1.9% for the year, helped partly by lower net bad debt expense versus the prior year. On a normalized basis, our contractual rent growth is roughly 1.5% annually given the current makeup of our portfolio. That figure is higher by more than 50 basis points compared with only five years ago and stems from a deliberate effort by our team to drive improved organic growth. We stay dedicated to moving this growth rate upward over time through our intentional underwriting approach. Our thorough asset management work produced a recapture rate of 103.6% for the quarter and 104.1% for the year, excluding the effect of the Cineworld bankruptcy. At year-end, occupancy stood at 98.6%, down 20 basis points from the previous quarter because of anticipated client move outs. I'll now hand it over to Jonathan, who will provide additional detail on the quarter.

Thanks, Sumit. During Q4 we had a busy stretch in the capital markets, raising $1.6 billion of equity at a weighted average price of $56.25. Counting what happened after year-end, we now have roughly $605 million of forward equity still outstanding that can help fund part of our 2024 equity needs. Add to that more than $800 million in yearly free cash flow we'll have once the Spirit merger is done, and we can cover every bit of our equity requirements under the $2 billion investments guidance without going back to the public equity markets for the rest of 2024. That's also before any capital recycling from dispositions, which we anticipate exceeding the $116 million of volume we closed in 2023. As Sumit said earlier, the midpoint of our AFFO per share guidance works out to 4.3% annual growth and bakes in just $2 billion of investments volume, with close to half of that already reflected in our development pipeline. On the debt side, we took risk off our 2024 maturity schedule by issuing about $2.2 billion of bonds across a 45-day window, starting with our GBP 750 million sterling notes deal in December and finishing with our US$1.25 billion offering that closed last month. Together, those two deals produce a weighted average tenure of roughly 10.2 years and a weighted average yield to maturity of roughly 5.5%. In the near term, these two deals let us fund the business under our current investment outlook without any need to access the debt capital markets in 2024, which we see as a prudent move given the ongoing instability that's been present in the capital markets for the past two years. Longer term strategic reasons also drove this decision. After our first euro offerings in the summer of 2023, we think these deals further support our firm commitment to keeping investor diversification across our multi currency debt platform, while pushing out future debt repayment risk into years where we have significant capacity. Last month we also used the first of two one-year extension options we hold on our $1.1 billion multi currency term loan that we put in place in January of 2023. Alongside that extension, we signed a two-year floating to fixed interest rate swap that effectively locked in a fixed rate of about 4.85% on this principle until it matures in January 2026. When the Spirit merger closed, we also took on $1.3 billion of term loan debt from Spirit, plus $1.3 billion in existing floating to fixed interest rate swaps, giving us an effective weighted average fixed rate of 3.9% on that debt. Out of this term loan principal, $800 million comes due in 2025 and $500 million comes due in 2027. Turning to the important credit figures as we closed out the year, we ended with net debt to annualized pro form EBITDA at 5.5x, which matches the leverage ratio we were aiming for, and that figure leaves out the $605 million in forward equity still outstanding that we have at our disposal right now. Fixed charge coverage came in at 4.7x at year-end, marking our highest point in 2023, helped by stronger investment yields during the fourth quarter as well as fewer short-term borrowings outstanding at a lower cost; looking at 2024, we do expect a $45 million rise in annualized non-cash interest expense that we anticipate recognizing from amortization of below market debt on the Spirit debt we took on. Keep in mind this non-cash interest expense adjustment brings down the annual FFO per share run rate by roughly $0.05 per share, though it does not show up in AFFO, which is the main explanation for why our initial FFO and AFFO guidance ranges sit tighter together than they did in 2023; we should note that purchase price accounting adjustments remain underway for the merger, so straight line rents and FAS 141 adjustments stemming from the merger will probably drive FFO upward once they are finalized, and we will revise our FFO guidance at that point. Naturally, these are non-cash adjustments with no effect on AFFO. Going forward, I want to echo Sumit's opening remarks regarding how little we depend on the capital markets to finance our growth in 2024. When it comes to liquidity, we see our near-term capital availability as a strength after our bond yield last month, we entered the remainder of 2024 with about $4 billion of liquidity at year-end, variable rate debt making up under 5% of our total debt capital stack, and no capital market execution risk when it comes to funding our growth for the rest of 2024. With that, I'll hand things back to Sumit for closing remarks.

Thank you, Jonathan. Before we wrap up, I want to express my deep appreciation to Ron Merriman for the valuable contributions he has made to Realty Income on our Board of Directors over the last 19 years. Ron's leadership, his guidance, and his mentorship have meant so much, and he has our heartfelt gratitude. I'd also like to give a warm welcome to Jeff Jacobson, who is coming onto our Board. Everyone here at Realty Income is excited to gain from Jeff's perspective, shaped by his time as former CEO of LaSalle Investment Management, one of the premier global real estate asset management firms in the world, and by the role he holds today as Chairman of the Board of Cadillac Fairview Corporation. To close, our 2023 results highlight the many paths to growth available to us across the global commercial real estate industry, whether through one-off and portfolio acquisitions, a range of asset types, corporate sale leasebacks, development and joint venture partnerships, or public M&A opportunities. The strength of our platform, our team, and our relationships lets us pursue some or all of these sourcing avenues at the same time as opportunities come up. During 2023, we closed five transactions larger than $500 million, and two of those exceeded $1 billion, not counting the Spirit merger; these are deals Realty Income was uniquely positioned to complete thanks to our size, our scale, and our global access to capital. These distinct competitive advantages help us act as real estate partner to the world's leading companies at a scale that has no equal. Beyond that, we believe that acting as capital provider to a diverse spectrum of clients, each a leader in its respective industry, advances our core mission of delivering dependable monthly dividends that grow over time. At this point, we'll open the line for questions.

Good afternoon, and thanks a lot for fielding my question. To start, I'd like to ask about the guidance you've given for acquisitions. As the year gets underway, you've got $2 billion of deals in the pipeline. From what you're saying, it sounds like roughly half of those are already within sight. That means only about $1 billion of that total carries real execution risk over the course of the year. So what factors would have to shift in order for that figure to rise later in the year? Would it be interest rates? Would it be new opportunities that present themselves? Or would it be your own ability to close transactions — along the lines of what you pulled off with the Bellagio through preferred equity, or the loan involving ASDA? What could drive that figure upward, and how might it increase as the year goes on?

Thanks for asking, Michael. Much of it comes down to exactly what you described. When you examine the current market and the cap rate picture, the changes we've observed haven't kept pace with shifts in the cost of capital. So our business plan essentially takes the position that these two factors, which lie outside our control, won't factor into how we achieve the 4.3% growth and the more than 10% total return growth. That explains how we arrived at the figures we provided. Should cap rates move, we'd be at the front of the queue to capitalize on it. And if interest rates began declining—which would lower our cost of capital—we'd be the first to respond. Our goal was to present a business plan that doesn't depend on capital markets for funding, along with a target we all feel extremely confident we can hit, and possibly surpass. Should conditions shift—say, rates begin declining and so on—that would work in our favor regarding what we pay for capital. My sense is that plenty of the discussions we're engaged in are still happening; what's stalled isn't the dialogue itself, but rather how the market views where the reservation price ought to land, and that's what has to adjust. This could occur if cap rates shift, or if our cost of capital improves. At this point, we're quite sure when we say the strategy we've set out carries almost no risk at all, and we're able to produce a return above 10% without needing to push hard in the market. That, essentially, is the reasoning behind what we've introduced.

No, that helps, Sumit. So, as I think about what I want to ask next—and this isn't intended to be about '24—there's still a lot for us to work through on that front. So it isn't really specifically about '25; it's more about the thinking around whether conditions remain in a roughly similar range to where they sit today, where almost no deals are getting done. The M&A market remains pretty murky, and you've moved ahead anyway. You've locked in growth for '24 through an acquisition. How would you think about—how would you think about navigating a multi—potentially multi-year stretch of murkiness? Yeah, right. How do you plan to navigate a multi-year murky environment, if that turns out to be the case?

So Michael, the reason I believe cap rates haven't moved is that the market is volatile. If it were obvious that, hey, this cost of capital situation will remain at these elevated levels for the next three years, then guess what? Cap rates would change, would shift, and sellers would be more willing to transact right now; the ten-year was at 4.2% toward the end of last year, dropped to 3.75% in January, and then it went back up to 4.2%. In that sort of environment, you have sellers saying they expect the Fed will start cutting interest rates later this year. They figure it can wait another six to seven months. So why complete a deal in this environment now? And I think that accounts for the hesitation and the lack of the broad cap rate movement you'd expect if people were to accept that this cost of capital environment has been permanently impaired. So in the scenario you've laid out, if that became the norm and if everyone were to accept that, hey, for the next three years, the cost of capital environment won't change, I truly believe transactions will come back. I truly believe cap rates will move far more than they have so far. And yes, we'll be first in line to take advantage of that.

Thanks for making room for me. I just had one item about the development funding. When that money goes to work, how should we think about the NOI it produces? Is it the case that NOI or a return arrives only after the project wraps up? Or is there some return flowing in while the capital is being drawn down for that development?

Josh, it's Jonathan here. Since the answer truly shifts from one lease to another, here's a way to frame it. When we handle a development takeout, it's clear-cut: the funds go out once the project is complete, those assets come to us, rent kicks in, and there's essentially no gap. With a development build-to-suit, we're providing money throughout the process. That carries somewhat more nuance, since the economics we're owed aren't fully landing in your hands as we disburse this funding; even so, on the accounting side, what carries it through to the income statement is basically our cost of short-term debt. So when you're modeling it, the tidiest approach, as I see it, is simply to presume that once you observe us developing and putting capital to work, that's the point where the yield starts, since that will hold true in most situations.

Yeah, with Josh's question — the bulk of what's in that pipeline consists of takeouts. What we're doing, in effect, is signing a forward contract. No capital goes out while those assets are under development; then, after development wraps up and the certificate of occupancy comes through, that's the moment we buy the asset. And clearly, rent starts flowing right then — so that's the way to view the development pipeline.

Thanks for all those details. Perhaps one additional question about development. How should we be thinking about it — when you consider your willingness to bring in new assets, what's your take on development? Will you push harder into this area? Development offers stronger yields compared with plain acquisitions. I'm just wondering.

Correct; for us, Josh, development is simply one more instrument in our toolkit for generating growth. We already have relationships with clients. Those clients have ambitious growth strategies. They approach us saying, look, we're partnering with a certain developer. Would you want to earn somewhat better yields than the market rate would be if this asset were on the market right now? And would you put your balance sheet behind us to support our expansion? That's a piece of how our development pipeline gets built, since the idea is that the return achievable from development ought to exceed whatever is possible in the deals market if that property were up and running at full capacity today; that was the underlying logic. Clearly, though, you may notice certain yields we've reported for these developments came in a bit under what we could achieve through acquisitions, which mostly reflects how fast the cost of capital picture shifted along with the changes that occurred on the cap rate front, yet as cost of capital moves lower, that too will show up as a benefit to what the markets will look like. So, for example, the kinds of deals we're signing right now in development will reflect today's yield conditions. And should cost of capital get better — say 12 months out, or up to 18 months out — by the time those assets are completed, you ought to observe a favorable gap between development yields and the cap rates being traded in the market at that point. So truly, this is one more instrument. It will never become the biggest piece of our operations, yet it absolutely is an instrument that, if we intend to see ourselves as real estate partners to top-tier operators, we should likewise extend to our clients so they can expand their operations.

Understood. Let me try to squeeze in one final question, if that's alright. My apologies for that. I realize your guidance sits at just $2 billion, but considering the wider pipeline you have, would you say there are plenty of portfolio deals available? I mean, larger transactions? I realize those take time to finalize. I'm just a bit curious.

Josh, I believe I attempted to give a hint about that during the previous discussion, when someone inquired about what you're observing and what's behind the market's movement. What I can say is that we keep having numerous discussions with our clients, and the sticking point is the price at which they're prepared to transact. That's precisely where the disconnect lies. So it isn't as though we've abruptly stopped engaging with our clients; in fact, we recently talked with one of our biggest clients a couple of weeks back, and the point where things essentially stalled was the gap between their cap rate expectations and what we would require in order to produce the spreads necessary for us to complete the deal. That's the nature of the discussions we're having; and obviously, looking at what we accomplished last year, over five transactions exceeded $500 million in size, with two of them surpassing $1 billion in size. That's what we're capable of delivering. That's what we can offer. And that's exactly what our clients require — big solutions for big problems. So yes, once the spigots open and our cost of capital meets this reservation price, we'll be in a position to capitalize on it and expand our pipeline, just as we managed to do across the last three years.

I just have a question regarding the pipeline, leaving out development. I'm curious whether you've been able to get anything across the finish line in Q1 yet. If so, what sort of pricing were you able to achieve? Then my second one: the occupancy guidance landed a bit beneath where we sit today, so maybe you could provide some color on that? And which items currently sit on the watch list that we should be keeping an eye on?

Hi, Nate. I'm not going to start handing out cap rates for assets we've already closed in the first quarter. Suffice it to say that we did complete deals during the first quarter; that lines up with comments we've made before. Cap rates have moved, indeed. You'll see that once our first quarter numbers come out, though the movement in cap rates isn't as wide as we'd like. It fails to reflect what's occurred when it comes to the cost of capital. So — but yes, our flow business keeps going. And we're being much more selective so that our spreads aren't given up just to chase volume. And we're helped by coming into this year with a business plan that lets us do that. On occupancy, we've said it will be above 98%. A lot of these were expected — at lease expiration, these were expected vacancies. And we have — our tendency is to guide toward this low 98% occupancy. One thing that distinguishes our business a bit from what you might see with the other — with certain other peers of ours is that we actually like keeping some of our vacant properties, when we get the chance to reposition those properties and create more economic value. I know that for a good while, over the last six quarters, we were close to that 99%, which wasn't normal for us — it dipped to 3.75% in January. But we're very comfortable if we believe we can generate more economic value that exceeds the carry cost of some of those vacant properties by repositioning them, and so forth, we're very comfortable doing that. So the way to think about how we run our business is that the normal occupancy level should live in this 98.5% ZIP code; that 1.5% is vacancy we need to be able to execute on the plans I just outlined.

Sumit, could you discuss how appealing Europe looks at the moment compared with the U.S.? My sense is that you don't find anything particularly appealing on the whole, but in Europe at least, the cost of debt is better?

Yes, Brad, that's a great question. What I'd say is that the volume of transactions is considerably lower even in Europe, once again because of that disconnect between buyers and sellers and what each side needs in order to keep a transaction moving forward. That said, though, pockets of opportunity are showing up, particularly in the UK, where our view is that deals can still be completed even in this environment. So that, combined with the fact that our cost of debt is meaningfully lower in Europe by 110, 120 basis points, means we keep hunting for opportunities. But low volume isn't something unique to the U.S. It applies across all the geographies where we operate.

Then, Jonathan, given that extra revenue from Spirit arrived without much added G&A, I figured we'd see a bigger drop this year in G&A as a percentage of revenue than the guidance implied. So is something else at play that's preventing that number from falling further?

Brad, when you're sitting in mid-February, there's invariably a healthy dose of conservatism baked into line items of that sort. From a resource perspective, we grew substantially during the back half of 2023, and the full annualized impact of that will show up. On the synergy side with Spirit, it remains too soon to say what will ultimately be attainable, but across the first month or so — actually less than that — of ownership, everything is coming in better than our expectations on synergies. And remember, on a cash basis, we anticipated $30 million of synergies against a $40 million annualized cash G&A load. So we're hopeful, but understand, we're working to build a platform. We're working to sharpen particular parts of the business, but with all that's happening, we're genuinely working to resource all of our groups to build this moat, so to speak, that can endure for a long time. So that brings with it some investment in areas such as technology and in people. That's truly what's driving that.

Morning, everyone. My first question concerns the investment spreads. I believe you had previously laid out expectations calling for at least a 200 basis point spread on new investments relative to your cost of capital, which is far higher than what was seen last year, I think. So I'm curious: first, does that 200 basis points remain your minimum required spread? And if it does, how can you get there now, given that your cost of capital looks to be somewhere in the 6s? And if some of your free cash flow has to be used for that, how are you weighing the required return on that slice of your capital too?

Haendel, thanks for the question. A few points. I've picked up a few remarks regarding free cash flow. We will produce more than $800 million of free cash flow. When you consider our $2 billion of acquisition guidance, that accounts for 40% of the total volume. And on a leverage-neutral basis, that accounts for 60% of the total capital. So being able to generate 200 basis points on free cash flow means, in fact, you can do deals at 2% cap rates and still generate 200 basis points. But clearly, that isn't how we view our business; and incidentally, the 200 basis points we managed to achieve, I'd say roughly 3 years ago now, 2.5 years ago, came in an environment where our cost of capital was vastly different from what it is now. And generating 200 basis points wasn't all that hard. On average, since we began tracking spreads, we've consistently stated that the average spread has been 150 basis points. We also want to be clear that there will be periods such as last year and the fourth quarter of last year and all of last year when we did 120 basis points, when you assemble a pipeline against a particular backdrop with respect to your cost of capital and the cap rates at which you're entering into a contract. And when you close, if your cost of capital environment shifts and you're permanently financing it at that moment, that's exactly what happened throughout last year. We had a very strong pipeline and we were signing contracts expecting not necessarily 200 basis points, but definitely 150 basis points and at times considerably more than that. But by the time we actually permanently financed the transaction, the cost of capital environment had changed. And one more point: if you look at the cost of permanent financing that we ultimately put in place in 2023, what we locked in, in terms of spread, was nearer to 140 basis points; it was 136 basis points, I believe. We're a lot nearer to the typical level that we've seen ever since we started monitoring this specific metric. Yet I simply want to confirm that if the assumption is that in every deal we do, we'll aim to secure 200 basis points, that isn't the way we approach pursuing deals. We also employ a bar build strategy, and there could be deals that are exactly the right investment for us. And should it generate just 100 basis points, we believe that on a risk-adjusted return basis, that represents the right profile for that investment, and we're at ease completing that specific investment. However, we will always aim to offset it with deals that carry a 200 basis point profile. Yet that volatility, or that range of spreads in this volatile environment, is extremely hard to forecast, and that's why we are — we've introduced the plan that we have, which — even in this environment, we can still deliver more than 10% without needing to depend on the acquisition market.