VEREIT, Inc. (O) Earnings Call Transcript & Summary

Thanks, everybody, for joining us to go over VEREIT's results for the first quarter of 2020. Here with me are our Chief Executive Officer, Glenn Rufrano; our Chief Operating Officer, Paul McDowell; our Chief Financial Officer, Mike Bartolotta; and our Chief Investment Officer, Tom Roberts. If you'd like to watch a webcast of today's session, it's posted on our website, vereit.com, in the Investor Relations section. A replay will be up beginning at about 2:30 p.m. Eastern Time today. To access that replay, call 1 to 877 to 344 to 7529 and use confirmation code 10143075. Before I turn the call over to Glenn, a quick reminder: some of what we say today isn't historical fact — it's forward-looking. VERIET's real results could end up materially different from those forward-looking statements, and the reasons that could happen are spelled out in our SEC filings, including the quarterly report we filed today. Also, as our SEC reports explain in more detail, VERIET has no intention or obligation to update these forward-looking statements unless the law specifically requires it. Now let me briefly walk through how today's call will go. To start things off, Glenn is going to give a quick overview of the business. After that, Paul will share updates on operations, and then Mike will walk us through the financials and balance sheet. Following that, Glenn will return to offer some final thoughts. Once that's done, we'll open up the lines for Q&A, and our Chief Investment Officer, Tom Roberts, will be joining us for that portion. Glenn, over to you.

Thank you, Bonni, and I appreciate everyone being here today. The landscape has shifted, and although we recognize that typical first-quarter numbers won't be the main focus of this discussion, I'd like to share a few brief points. For the quarter, AFFO per diluted share came in at $0.17. Acquisitions so far this year reached $146 million. Beyond that, the office partnership bought a property worth $33 million, with the company's cash contribution amounting to $2.7 million. Dispositions came to $188 million, which includes the Company's portion of dispositions added to the office partnership totaling $70.2 million. When Covid-19's effects escalated during March, we halted balance sheet acquisitions so we could gain a clearer picture of the current conditions. Net debt to normalize EBITDA held steady versus the prior quarter at 5.7x. So what's been on our minds since the quarter closed? We're definitely pleased that our team, together since 2015, carried out various strategies and deals as a foundation for entering a growth phase in 2020. We felt it was wise to divest the nontraded REIT business, Cole Capital, significantly lower our exposure to our biggest tenant, and broadly diversify the portfolio. Resolve all remaining litigation and secure an investment grade rating for the balance sheet. Our business model broadens our capital sources to encompass institutional partnerships, selecting assets that create no conflict. Even so, here we find ourselves in a disrupted economy. And at this point we have four primary objectives. Ensure our employees remain safe and offer a workplace and resources that allow productivity. Acknowledge how significant the challenges are and engage in a cooperative manner. Preserve the gains we fought hard for, particularly the investment grade balance sheets that resulted, and leverage the business model we established to expand AFFO once the market settles. We realize there are several portfolio matters you'd like to hear about, so I'll turn it over to our Chief Operating Officer, Paul McDowell, who has been collaborating closely with our tenants, to give you the latest. Paul?

Thanks, Glenn. As was already noted, we're aware that the main focus of this call is on how the portfolio has been doing through the COVID-19 pandemic. That said, our teams continue to concentrate heavily on day-to-day asset management, which matters a great deal too. Leasing activity during the quarter was quite robust, with more than 2 million square feet signed, and 1.4 million square feet of that consisted of early renewals. Breaking down the total activity: 1.3 million square feet was industrial, 498,000 square feet was office, 190,000 square feet was retail, and 73,000 square feet was restaurants. On renewal leases, we brought back roughly 94% of the rents we had before, calculated on an initial cash basis. And a number of these newly extended leases carry additional rent increases built into them. Importantly, we managed to close on leases that were already in process before the pandemic caused disruption, along with certain dispositions, and a portion of that activity has continued on into Q2. Occupancy closed out the quarter at a healthy 99.1%. Now let's dig deeper into how the portfolio has performed and where things stand today. Our April rent collection came in at 81%, and thus far May rent sits at 78%, which includes 2% that will come from a government agency tenant that pays in arrears. The foundation for these fairly solid collection numbers was our diversification across property types, our mix of industries, our investment grade tenancy, whether tenants are public or private, and our geographic spread. Our weighting toward office, industrial, and necessity based retail, including our biggest industry exposures like discount, pharmacy, grocery, warehouse clubs, and convenience, has been a help when it comes to collecting rent. On the whole, 17 of our Top 20 tenants effectively paid rent in full during April. In May so far, 16 of our Top 20 tenants have paid. Roughly 37% of investment-grade tenancy across the total portfolio, and 46% within retail, made up a strong portion of April rent collections at nearly a 100%. And well over 95% so far in May. More than 60% of our tenants are public across the overall portfolio, and over 68% are public within the retail portfolio, which we see as a very positive sign. Fortunately, we have considerable geographic diversity, with many of our properties located in parts of the country that have seen less impact from the virus, and many sit in states that have begun reopening for business. Even so, they remain a patchwork of restrictions depending on which regions of the country are open now or opening soon in some capacity, and we have 3,393 properties, or 88%, in these open locations. Just about 9.6% of our portfolio sits in the hard-hit northeast, with 2.3% and 3.1% in the hardest-hit states of New York and New Jersey respectively. The biggest real estate teams in our company have always been our strong and highly experienced asset management and property management departments, and they have served us well. Over the past two months, these teams have been supplemented with personnel from underwriting and acquisitions. Taken as a whole, their performance has been remarkable given the difficult environment, and the payments we have gathered so far partly show what those efforts have achieved. I want to use this moment to express my appreciation to them. Members of our specialized teams managing assets by property type have been talking with our renters to learn how Covid-19 has affected their operations. We have gotten requests for rent relief from tenants who account for roughly 34% of rental income on an annualized basis; every request has been assessed individually, according to the particular financial and operational circumstances of each tenant, looking at measures including industry segments, the geographic locations in which they operate; corporate financial health, rent coverage and the liquidity of those tenants. Our aim has been to assist the tenants we believe require and are worthy of help in the near term, while simultaneously pushing for payment from tenants whom we determine are not deserving of rent relief, can obtain other sources of capital or are acting opportunistically. Among the requests received so far, slightly more than one-third have gotten approval, roughly one-third are under negotiation and approximately one-third have either been turned down or we have chosen to take no action. The deferral agreements we have reached have typically fallen within a two to four month range and are repaid within 12-months together with interest where appropriate. Although we have usually arranged any rent relief as a deferral rather than an abatement, in a limited number of instances we have established rent per term for tenants we believe will remain over the long term and where we believe value has been created through a longer lease. It deserves repeating that the overwhelming majority of our ARI is generated by large public and private companies possessing the financial resources and access to capital needed to get through this storm; we do, however, have certain smaller tenants and so we have likewise been tracking the different government assistance programs, which we believe can assist some of our hardest-hit industries including franchise restaurants and entertainment related retail. Around half of the tenants within the restaurant portfolio have submitted applications to the Paycheck Protection Program and we anticipate some amount will be able to obtain these funds. We have also been tracking new governmental initiatives like the Main Street Lending Program which could assist some of our larger tenants. Lastly, as I mentioned earlier rent collections thus far for May stand at 78% which is roughly 1% ahead of where we stood during the same time period in April. As others have noted, many tenants entered April carrying some momentum from the first quarter with May being the month when the full impact of the shutdown has been felt. Keeping that in mind, we are extremely pleased with our collection levels thus far for May. Our present expectation is that total collections for May will be approximately where April finished. Up to now, industrial has been arriving slightly under April, mostly because of one tenant that made its payment in April and, in our view, is able to keep paying. Talks are underway right now with that tenant. As things stand, we expect June collections to fall within the same range as what we saw in April and May. You can find more segment-level portfolio information and specifics in the Investor presentation file we have out today. At this point I'll hand things over to Mike. Mike?

Appreciate it, Paul, and thanks to everyone for being here. The results for our first quarter hit the mark; that said, we understand the road ahead for a while looks different, and the priority right now is our balance sheet along with liquidity. But before I cover that, let me briefly walk through how we readied the company so the shift to a virtual setup would go as smoothly as possible; at this point we're running at basically 100% remote. Expecting an office closure was likely, our IT group moved fast on our business continuity plans and ensured equipment was available for every employee capable of working productively from home. Staff are using virtual private networks at home to keep security at a high level, and we put together training and awareness materials to assist employees in getting set up, and they keep having access to a 24x7 IT support desk. On top of that, the management committee takes part in daily virtual meetings to confirm the business runs efficiently. I've been struck by how well everyone has adjusted through this challenging period, and I want to thank our whole team for everything they've done to keep operations running as normally as possible. Now shifting to our balance sheet. The company is still well positioned, with net debt to normalize EBITDA holding steady versus year-end at 5.7x. One central focus for us as a company has been keeping a strong and liquid balance sheet, and we put in a lot of effort across the past few years to regain our investment grade rating. As the Covid-19 pandemic kept unfolding, we made an additional draw beyond normal operating requirements of $600 million on our revolving line of credit to strengthen our cash position. As of May 15, VEREIT had corporate liquidity of approximately $1.2 billion, made up of $601 million in cash and cash equivalents and $588 million of availability under our credit facility. Our fixed charge coverage ratio stayed healthy, rising to 3.3x, and our net debt to gross real estate investment ratio came in at 39%. Our unencumbered asset ratio climbed to 81%; the weighted average duration of our debt was 4.4 years, and we are 86% fixed, which mirrors the higher utilization of our line of credit this quarter. Also, we have a very manageable amount of debt maturing in the near term. At quarter end, we had $90 million in mortgage notes payable due this year at a weighted average interest rate of approximately 5%. And we had a $322 million convertible bond due at the end of December; in 2021, we have $299 million in mortgage notes payable due throughout next year but no other corporate bonds coming due until 2024j. Based on what I see now, we see no issues with our covenants. Moving to our outlook. Back in April, we pulled our guidance, and given the unpredictable market conditions everyone is dealing with, we aren't offering a fresh update right now. Our Board of Directors is cutting the second quarter dividend down to $0.077 from $0.1375, which works out to a 44% decline. That cut came about following a thorough review of our finances. It puts us in a position to keep our debt under control and maintain the balance sheet strength we've strived toward across the last five years. Regarding dividend policy past the second quarter, the Board of Directors hasn't reached any conclusions, and we will keep watching today's conditions and how they affect our tenants and operations. Judging by our current projection of taxable net income, this reduction poses no problems and meets our REIT obligations; with that, I'll hand the call back over to Glenn.

Thank you, Mike. We have a stated company pledge: to serve as well as we possibly can, three key groups at all times — our stakeholders, our tenants, and our employees. Everything we do keeps all three in focus. Halfway through March, we moved our staff to a completely remote, work-from-home setup; new procedures and business intelligence tracking tools came together quickly to help us keep an eye on tenants and any potential dangers heading our way. This company has a team with deep experience, not just among executive management but across every one of our real estate groups. Since leasing and asset management matter even more right now, we have shifted some of our acquisition staff, along with others, to help handle the difficulties our tenants are going to encounter. Our legal team — attorneys and paralegals — is putting in work to back our efforts. I also mentioned daily calls, where we push to find the best solutions for tenants. Each request moves through a process and finishes with approval from our investment committee, which is made up of myself, Paul, Tom, and Mike. Our committed employee teams have shown tremendous energy and determination as a group, and we are grateful to them. Mike walked everyone through our present balance sheet figures. Notably, we hold net debt to EBITDA of 5.7x. Our cash position and revolving liquidity stay adequate, and our assets are extremely liquid, with 81% unencumbered. Apart from our converts later in the year, no corporate bonds come due before 2024. The Board's choice to cut the dividend this quarter rests not on a narrow, micro look at our business but, more significantly, on a macro reading of an economy full of uncertainty. How long this economic disruption will last is painfully hard to pin down. The range of possible outcomes is remarkably broad. Once you understand your position, you can judge better what to do and how to go about it. Although April and May give us a clearer picture of tenant receipts, the duration could play out in many different ways. Our thinking is that amid such uncertainty, a strong balance sheet preserves stakeholder value. The dividend's size came out of a set of financial analyses that broke down a spectrum of potential outcomes across this year and the next; we picked this base amount as the foundation for building the dividend while guarding against any rise in debt. As fresh information arrives in each of the coming two quarters, we will keep this decision under continual review. As Paul explained in his presentation, our portfolio's diversification benefits us greatly — not only across property type but also investment grade parentage, credit, industry, and geographic limits, plus a large share of public companies. Naturally, we will reassess the portfolio parameters as this year unfolds. Even though the environment is very tough, our business model gives us the capacity to grow and flourish once we are through this. Even though it's a letdown that 2020 is going to be a bridge year, the know-how we've gained from reshaping this business across the past 5 years is going to give us the resilience needed to come through it. Looking ahead, we expect our strong cash position, wide-ranging asset mix, seasoned leadership, and alliances to deliver results and hopefully spark a rebound in 2021. Before I wrap up, I'd like to give a shout-out to the healthcare workers and every first responder whose efforts have changed so much for people, including me personally. I'd also like to use this moment to say thanks to all of you for the thoughtful messages while I was getting over the virus; they lifted my spirits enormously, and I'm truly grateful. With that, I'll turn it over for questions.

Hi there, good afternoon. Glenn, it's nice to hear from you once more. I'm pleased the budget is restored and you're doing fine; so my first question is fairly big-picture regarding the portfolio, and I'm wondering how Covid, along with life after Covid, could be shaping your thinking about portfolio allocation and subcategory exposures down the road. Obviously, holding somewhat more office and industrial has paid off; so I'd like to know how your thinking, and the board's, may be developing around portfolio balance effects or allocation after Covid. Thanks.

Absolutely. Thanks, Haendel. And I appreciate your thoughtful message. As you're aware, we — since you've tracked us, Haendel, along with others — have remained rather disciplined starting in 2018. Back then, the portfolio generally wasn't well understood, so we attempted to ensure the market grasped our future intentions. We established metrics covering several elements, including percentages of property type, tenant credit, investment grade rating, geography, and several others, all meant to deliver diversification. Thus we've long believed that comprehending the portfolio over the long term is the correct approach. And we'll keep doing so going forward. So that's the before picture. Now, if we moved to January first and considered where our portfolio ought to be, we would have been saying things such as experiential real estate being a solid idea, since it serves as a hedge against e-commerce, while restaurants and entertainment look fairly attractive. We also held several discussions on these calls regarding pharmacies. Well, whether pharmacies would be ideal or not ideal within the portfolio — that has reversed as of today. Every one of us has reversed as of today because of this pandemic, in terms of which property types might or might not perform across stretches of time. The single thing I'd say about how we now view the portfolio is that we won't base choices on what has occurred today. We're in the midst of the storm. We'll hold off until some of this storm fades before deciding where the metrics will land and how we'll reshape the portfolio. I think some reshaping will occur, yet exactly how we'll shape it is quite difficult for us to determine at this moment. To your point, certain property types such as office are performing well now. Our industrial results are very strong, and the sole thing — the sole steady denominator I can draw from what has transpired across the last five to six years is that diversification helps, we will always stay diversified, but we might alter some of our metrics later on. We simply aren't ready to do so yet, Haendel.

Understood. Thanks for that view, I appreciate it; now a little more about the dividend — I appreciate what you said earlier, but I was hoping you might offer additional insight into the reasoning behind reducing it in Q2 in particular by 44%. In some cases other sectors chose to lower the payout or halt it through the end of the year before making a final call; others moved straight to credit, so I'm wondering why 44% for the second quarter rather than those alternatives, and maybe we're reading too much into it if we take this to imply an anticipated recovery of roughly 90-ish percent of your cash flows, the cash flow you had before Covid; so any further context on your thinking and what we perhaps ought to take from it. Thank you.

No, fine, that's another solid question. Definitely that stood out this quarter. First off, I'd say it isn't simple — lowering a dividend is not a simple call, it simply isn't. It makes your feet burn and your stomachs churn when you're forced into a choice like that, yet we as a company and the board felt that choice had to be made. That choice, as I said, rested not solely on the macro review of what's going on now; more significantly, it rested on the uncertainty about what's going on in the economy; predicting the duration here is extremely hard and all of us — will all of us — struggle with duration, and duration will matter a great deal in what our tenants do and how they operate their businesses. What we settled on, though, was to examine different outcomes for what might unfold across the next year or two. We have a foundation in April and May, which helps, since it was stronger than the sort of April. I'm not certain we understood what was coming. We have a clearer sense of April and May, and you've heard Paul discuss June, and if we considered the unknowns ahead, the shared thread we identified was that a strong balance sheet had to be preserved. Yet because we had, I'd say, considerable cash flow across the last couple of months — not a 100%, which is what we'd hoped for, but cash flow — we felt it was fair to return part of that cash flow to the shareholder. The issue then became how to balance the two. Balancing the two involves the sizing of the dividend, which is truly the question. And we approached that by beginning and reviewing a set of financial analyses; we truly broke down potential outcomes through this year and next. And our guiding principle was whether we could establish a base amount of a dividend to build on while also shielding against any rise in debt. So those are the 2 connections we’re aiming for. And if you—if someone asked me to explain how we look at things, I’d frame it as a V, a U, and a W. The V is a fast bounce back; the U is a slower one, and maybe the start of the U sits above where the U finishes, while with a W, plainly the middle section won’t match the left side. I happened to be going through a piece, and it’s basically the debate between Minuchin and Powell. Minuchin’s position would be that it’s a V; Powell’s position would be that it’s a U or W. We took a hard look at each of those 3, which really hinges on how long it lasts, and from those perspectives, we concluded that a dividend of $0.077 for this quarter was something sustainable that we could build on; now we aren’t—we’ve only just given the second quarter dividend. By no means are we signing off on the third or fourth quarter dividend, and obviously should there be any truly major disruption in the economy, we can’t be certain about that base, but as things stand we view it as a very strong foundation for growing a dividend. And that growth will happen once we judge it to be suitable given what we’re observing in the conditions around us each day.

Yes. Good afternoon. Welcome back, Glenn. Could you provide some perspective regarding credit loss for your portfolio, perhaps looking at it historically over time? And what's your view on credit loss for the portfolio in the near term? And then, right after that, do you anticipate converting some leases to cash accounting in the near term?

Good. I believe those are two very good questions, Sheila, and I'm going to hand the first one on credit over to Paul, and then Paul, I would ask you to hand it off in terms of accounting to Mike. So Paul, you take that first one.

Absolutely. Certainly. Hello, Sheila. Regarding losses on credit within the portfolio, we've been quite lucky, and our credit losses have been extremely minimal across the last several years. So we haven't experienced much when it comes to credit losses. There have been a handful of minor bankruptcies, as you're aware, occasionally, and typically, we've taken a hit on that credit, yet we've still managed to re-lease those properties and recover cash flows. Looking ahead from here, we can't say precisely how this will ultimately play out, and as Glenn said during his comments, the crucial factor is duration. We entered this pandemic with a credit watch list that normally sits somewhere between 2% and 2% of adjusted rents, and all at once we now have many credits in our portfolio that are very strong businesses that, through no fault of their own, are suddenly facing a considerable degree of credit pressure. And the real question is how long will that pressure persist; we're lucky because the bulk of the portfolio consists of publicly traded companies, and they have access to capital. So we're fairly confident that the majority of our tenants will be able to get past this hurdle and go back to being the healthy businesses they once were. But it's somewhat too soon to provide you with a sense right now regarding where we anticipate credit losses will settle, given that we still don't know the duration. And with that, I think I'll hand the accounting question over to Mike.

Hey Sheila, this is Mike. When it comes to that accounting question, I believe it essentially boils down to this: normally, prior to the pandemic, any deferrals or adjustments to our leases would have been handled as a lease modification under 842. But the FASB issued something they refer to as an expediency, since they recognized that everyone, or at least a large number of people, would be facing deferral scenarios. What the new FASB guidance says under this expediency is that when there's no genuine substantial change to the cash flow of the original contracts — instead, what you typically have is a deferral of two, three, four months, and afterward you collect that rent, say across the following six months or a year — then it can be addressed under this new expediency. The expediency contains a couple of decision points. The first: is it reasonable to expect that you'll be able to make that collection within that period? If yes, then you can simply recognize the revenue the way you ordinarily would and set up a receivable during those deferral periods. You'd record the revenue during the deferral periods as regular revenue, establish a receivable, and your AFFO, your NOI, and your normalized EBITDA would all reflect it as though it were included in those amounts — which differs from the situation where there was a lease amendment. They also provide the option of something called variable accounting, which closely resembles cash accounting. I'm not entirely sure why someone would choose that given this other treatment, but you do first have to make a determination regarding collectability. If you believe there's some doubt about collectability, then you account for it on a cash basis. And then the final option is if you're actually altering the lease terms — and that could typically be a blend and extend for some reason, where someone receives a month or two of free rent and, say, an extreme case, a three to five year extension on the lease — you do have to go back and apply the normal 842 lease modification accounting. So that decision tree is something we'll walk through for every completed transaction and determine which bucket it falls into and how we account for it.

Hi, everyone. Paul, I wanted to ask you something — it breaks into two pieces. First, might you bring us up to speed on where things stand right now with Art Van and the locations you have there? Then, turning to that request for rent relief, I suppose what I'm wondering is how you walk that narrow line between saying yes to deferrals and saying no. I mean, you could argue that simply because a tenant has the ability to pay, plenty of merchants notice other people receiving a deferral, so how do you strike that balance of keeping those tenants healthy, happy, and staying put, so that you're giving others some breathing room, especially when it comes to retail and restaurants.

Do you just want me to jump right into this, Glenn?

Yeah. Go ahead. Paul, yeah, I was thinking Jeremy — thank you, Jeremy, for — he sent it my way, and I ought to have passed it along so that Paul would definitely receive it. I won't be the one responding, since Paul will handle that inquiry more effectively than I could.

Okay. Regarding Art Van, as you might recall, we operate 8 locations. Art Van filed for bankruptcy before Covid, and Covid played no role in that filing. However, they later chose to wind down. All of those locations are now listed, and we currently hold an LOI from a highly seasoned operator covering 4 of the 8, at roughly 70% of the prior rental rates, while the other 4 remain listed. As for the tricky balance involved in handling tenant requests to defer, I mentioned this in my prepared remarks, and you're right to describe it as tricky, since many factors are in play. On one side there's the scale of our own balance sheet and available liquidity, and on the other side there's the scale of each tenant's balance sheet and their liquidity. Then there's their probability of securing funds elsewhere, plus we must consider tenant relationships—how frequently we engage with that tenant, when lease renewals are scheduled, and so forth. Every one of those considerations matters. As I said, deferral requests have come in across the spectrum. Some requests have come from tenants who plainly possess the means to pay and are merely seeking deferrals since it appears everyone else is doing so. Those we typically reject outright. Then there are other tenants who are plainly in serious trouble, and we must determine whether we're actually able to assist them. And if assistance is possible, at what amount and for what period. So we make these calls daily. A committee convenes multiple times each week. I speak with our asset managers nearly every day to go over each individual case. We follow a committee process, and after a determination is reached, it moves upward, and then Mike, Glenn, and I decide on the appropriate action.

I appreciate that context. And could I circle back and pose a single follow-up regarding Art Van, given what you said about four of them going with the highly seasoned operator; it sounds as though this operator differs from the one we heard a few of your net lease counterparts walk away from a deal with, is that right?

That is right.

Alright. Then, Tom, I was simply curious regarding the deal side of things — it appears there are still properties available out there. You noticed roughly 10.31 money moving around that we've been hearing about. We're around two months in on this, so I just wanted to know if there's any color on what's taking place on the ground? Are you observing deals getting signed and what's the initial sense on pricing? How much are our yields resetting right now? If there's activity, that's still occurring.

You got it, Tom.

Okay, so like Glenn said, we're paused, and so are most others in our industry, meaning there isn't much happening in the market at the moment, especially on the retail side. My feeling is it's simply too soon to determine what effect this will have on the market. That said, you brought up that there are 10.31 exchange activities occurring, and we have been actively selling some properties to those kinds of buyers. Even so, the strongest category by far is industrial, which is exactly what we acquire through our joint venture with our Korean partner. In that area, we've noticed a bit of a slowdown, but it's likely only a 10%, 20% effect on pricing. Sellers have adjusted their expectations somewhat, yet we believe there will still be movement in that segment too. Office would be similar, specifically for single tenant, long-term, investment grade credits. I'd say that market has remained fairly resilient, likely within that same price range. We're hoping to be active in both of those front end partnerships during the back half of the year; we do have a partnership deal we told you about on our previous call. It's a very large industrial project, roughly 2.3 million square feet, a $247 million transaction, and we expect it to close around the middle of this year. We also have two other builder suits under contract that should close in either the third or fourth quarter. So we're still active. Covid has affected them, but we're certainly hopeful that both partnerships will be busy in the latter half of the year. Overall, I'd say it's too soon and too early to know for sure, but generally speaking, in our sector—industrial, office, and even investment grade or better quality retail—there will be very minimal, very slight impact on pricing.

So there isn't a VEREIT price — my apologies, Glenn. Please continue.

No problem. Jeremy, I simply wanted to confirm something, since I believe I misheard what Tom said. Tom, you referred to 10 to 25 in cap rates, not a decline expressed as a percent.

Yes. Very small percent.

I misunderstood, sorry I just misunderstood.