Realty Income Corporation (O) Earnings Call Transcript & Summary

We appreciate everyone being on this call about Realty Income's results for the second quarter of 2026. Present with us today are Sumit Roy, our President and Chief Executive Officer; Jonathan Pong, Chief Financial Officer and Treasurer; Neil Abraham, Chief Strategy Officer and President, Realty Income International; and Mark E. Hagan, Chief Investment Officer. At points during this call, we'll say things that federal securities law could treat as forward looking statements. What actually happens for the company in the future could be very different from what those forward looking statements describe. The reasons such differences might arise will be spelled out more thoroughly in our Form 10 Q as filed with the SEC. For the Q and A portion, we'll hold each person to a 1 question and 1 follow-up limit. That way everybody gets a chance to take part. With all that said, I'll hand things over now to Sumit Roy, our CEO.

Thanks, Alexander, and good morning everyone. Realty Income delivered another strong quarter in Q2. That performance shows the benefit of diversifying our investments across numerous sectors and of our reputation as a reliable capital partner to many leading businesses around the world. Our opportunity set's width was evident in our investment activity, demonstrating our ability to deploy capital throughout the capital stack, spanning geographies and property types, in manners that foster accretive growth. Against that backdrop, AFFO per share increased 3.8% to $1.09 for the quarter. Year to date, AFFO per share came in at $2.22, equating to 5.2% growth and representing a significant acceleration compared with the same period in 2025. This strength enables us to raise the midpoint of our full-year AFFO per share guidance by $0.02, moving it to a fresh range of $4.44 to $4.45 — roughly 4% growth at the midpoint. Similarly, we are increasing our 2026 investment volume goal from $9.5 billion to $10 billion, as our pipeline stays robust. Before exploring market conditions across each of Realty Income's strategic areas, allow me to walk you through the quarter's key investment highlights. We completed approximately $2.6 billion in global investments, equivalent to $2.1 billion at our pro rata share, with an initial weighted average cash yield of 7.3%. In Q2, our activity leaned more toward The United States, where we allocated about $1.7 billion into pro rata investments bearing a 7.4% weighted average cash yield. Industrial properties made up roughly $800 million of that amount, accounting for nearly 75% of U.S. real estate investments. Amid this U. S. Activity, we continued deploying capital through our U. S. Core Plus fund, which acquired around $73 million in assets globally, with over half of that volume in industrial and retail comprising the remainder. In Europe, we finalized approximately $400 million at a 7% weighted average yield. To wrap up, we informed the market on June 30 about a joint venture for programmatic hyperscale data centers valued at $6 billion, established with Cloud Capital. Through this arrangement, Realty Income's expected commitment over time could reach up to $1.4 billion, securing a 45% equity stake. Shifting to specifics on where those funds were directed, Industrial leads the way — about 65% of the real estate investments we undertook globally were in that category. Deals with attractive risk-adjusted returns keep emerging, underpinned by improving fundamentals and lease terms for rent escalations that generally fall between 2% and 3.5% annually. Regarding the Industrial acquisition NOI recorded this quarter, slightly under fifty percent came from investment grade tenants, and the transactions were concentrated in solid primary and infill markets. Notably, in the U.S., the quarter experienced a marked improvement in industrial fundamentals, with net absorption accelerating substantially. Additionally, we reported $673 million in something relevant here. Vacancy went down, so occupancy got better, and development activity began moving higher along with the market overall. Those positive industrial tailwinds carried over into our U.S. Core Plus fund too, which keeps demonstrating the value of pairing our reach and deal sourcing with patient private capital. During the quarter, we fully deployed the remaining cornerstone commitments of the Fund, lifting total gross asset value to approximately $3 billion. The properties added to the fund in Q2 produced a 6% weighted average cash yield. Although these investments come with lower yields at the outset, they consist of high-quality properties in sought-after markets, leased to tenants with strong credit, and supported by contractual rent escalations that are considerably above typical levels. That pattern is reflected in the Fund's same store revenue growth of 2.9% year to date. The important thing is that the management fee stream the fund creates allows us to pursue these lower initial yield investments while still delivering day 1 accretion to Realty Income's shareholders. That expands our overall buy box. Moving to Europe: certain global customers became more cautious in the early months of the year due to geopolitical uncertainty, but deal activity there has improved since then, and several of those same customers are now actively pursuing transactions. The region keeps producing attractive spreads on a risk adjusted basis, helped by lower financing costs. With the footprint we've already established there and a competitive landscape that remains gentler than what we encounter in The US, our view on Europe remains positive, and we still see it as a strong long term driver of our growth. Now on data centers — the joint venture we created with Cloud Capital provides us with another programmatic investment vehicle at meaningful scale. That venture holds 3 data center assets in Northern Virginia, representing capacity of under 400 megawatts. Last week we completed the acquisition of our first stabilized property, and we expect to acquire our share of 2 development properties once they achieve stabilization. What began as a credit investment has grown into a lasting partnership with Cloud Capital, centered on developing and holding hyperscale data centers in leading U.S. and European markets. After the venture was announced, discussions about data centers have only grown more intense, widening the range of opportunities we can pursue throughout the sector. In our view, the industry is still in the early stage of a digital infrastructure buildout that will last many years, driven by AI adoption, cloud computing and broader digitization trends. Consequently, demand for data center space keeps surpassing what is available in many highly desirable industry markets; our focus remains on premier markets where supply is limited and on partnering with experienced operators who value our capacity to supply long-term, programmatic financing. Across all our investing activities, our scale and our sourcing platform remain major advantages that are hard to replicate by buying assets individually. Take, for example, a portfolio of 19 properties that the fund acquired earlier this year, leased to a top quick service restaurant operator, for more than $100 million. A subsequent third-party appraisal for our core Plus fund confirmed that this portfolio's present market cap rate is more than 30 basis points beneath our acquisition cost. That's plain proof of just how much value can be unlocked immediately through portfolio transactions. Although acquiring properties and deploying capital stay key engines of growth over the long term, we continue to uncover additional opportunities to create value through active portfolio management and capital recycling. During the quarter, we completed $161 million of dispositions, shifting those proceeds into areas of the portfolio where we see the strongest combination of organic growth, pricing power, and value creation. The key point is that we don't limit this to non-core or vacant properties — we deploy it across the whole portfolio whenever we believe capital could be used more strategically elsewhere. Discipline of that kind raises the quality of our holdings, makes our capital more productive, and supports earnings growth we can maintain. Looking ahead, we continue to identify attractive opportunities to redeploy capital into properties that align better with our long-term strategic priorities, and in the quarter we kept enhancing portfolio quality, with investment grade tenant exposure rising to 34% of annualized rent, compared with 32% in the first quarter. Portfolio fundamentals remain healthy, with occupancy of 98.8% and 482 re leased units generating a blended rent recapture rate of 102.7%, while renewals reached 104.6%; these included a large batch renewal with a single client covering nearly 150 assets, demonstrating the scale and efficiency of our platform. Industrial represented about 1 third of leasing activity during the quarter and produced a rent recapture rate of 105.8%, and international recapture rates reached 112.9%, reflecting the continued strong performance of our UK value add retail park strategy. We continue to benefit from our overseas retail park approach, given limited new development, robust retailer demand, and historically tight vacancy levels—all of which underpin attractive leasing spreads and additional value creation. Just as important, along with widening and diversifying our investment options, we've achieved comparable progress on the funding side. As our capital platform grows, it lessens our dependence on public equity and strengthens our capacity to fund expansion in a cost-effective way. With that, I'll hand things over to Jonathan.

Thanks, Sumit, and good afternoon, everyone. During the second quarter, we showed how dedicated we are to broadening where our capital comes from around the world, all while keeping our balance sheet in solid shape. We keep running the business with plenty of liquidity, conservative leverage, and wide entry to a number of capital channels. At quarter's close, we had roughly $3.5 billion in available liquidity, calculated on a pro rata basis. When the second quarter ended, net debt to annualized pro forma adjusted EBITDA came in at 5.4x, or 5.2x once unsettled ATM forwards are included. That sits comfortably inside our target range. After the quarter closed, we strengthened our liquidity position even more by growing both our global revolving credit facility and our commercial paper program. We also did an unsecured bond offering in Europe and kept issuing forward equity under the ATM. Borrowings of as much as $5.5 billion are now permitted under our updated credit facility — $1.5 billion more than the earlier facility — with our borrowing rate cut by 5 basis points. In the same way, we grew our global commercial paper program to $5.5 billion, which is an increase of $2.5 billion. Second, we finished a bond offering denominated in euros worth €600 million at a yield of 3.7%; and last, we raised an extra $90 million of forward equity, which brings our current ATM unsettled balance to about $1.3 billion. Once these transactions are given pro forma effect, available liquidity rose to over $5.7 billion. With our enterprise value nearing $90 billion and a strong pipeline of external growth opportunities, this access to additional capital improves our capacity to fund our investment pipeline right away while we stay patient and opportunistic about bringing in longer term and permanent capital. As a reminder, the only variable rate debt exposure we carry is outstanding borrowings on our credit facilities and commercial paper programs. And we plan to keep that variable rate exposure at 10% or less of our total outstanding debt. Our dedication to a strong balance sheet, backed by entry to multiple capital sources, was recognized recently when Fitch began covering Realty Income and assigned a solid A long term issuer default rating. That rating puts us in a group of just 4 US REITs holding a solid A or equivalent rating from 1 of the 3 major rating agencies, and we appreciate that our scale, diversification, and performance track record have lifted us to this rating. We're still busy raising capital — including the euro bond offering mentioned earlier, we've issued $3 billion of new debt so far this year at a blended effective coupon of 3.9%, versus $1.4 billion of debt that has matured to date at a blended coupon of 4%. We keep diversifying our debt capital sources across various currencies and investor capital pools, focusing on steering clear of saturation or dependence on any 1 market while bringing down our all in cost of borrowing and managing a suitable maturity ladder going forward; year to date, we have issued 4 discrete debt instruments, among them a convertible bond and a U. S. A dollar-denominated unsecured bond was switched into euros, along with a municipal prepaid term loan swap converted to euros, plus a euro unsecured bond. Every one of these instruments was picked deliberately, with a lean toward reaching a distinct set of investors while also keeping our worldwide and combined debt expense as low as possible. Moving to equity, private capital has cut how much we depend on public equity markets to finance expansion. Consequently, our consumption of public equity as a share of investment volume has dropped considerably, making up just 18% of investment volume so far this year versus a 47% average across the last 3 years. Through the year to date, we settled a mere $825 million of forward equity to complete $4.7 billion in pro rata investment activity, and all the while leverage stayed inside our 5.5x target. That shows what our recent capital initiatives have delivered by broadening where our equity capital comes from. Now for our 2026 outlook: as Sumit said, we're lifting our full year AFFO per share guidance range to $4.44 to $4.45, and we're also raising our full year acquisitions guidance to $10 billion, up from $9.5 billion before; this mirrors the strength of our investment pipeline and our confidence that we can source and close appealing opportunities. For our share, we anticipate investing roughly $9 billion across 2026. We're likewise keeping our 2026 credit loss outlook unchanged at approximately 40 basis points of rental revenue, which mirrors steady operating performance throughout our client base. Importantly, we aren't increasing our lease termination income guidance. We posted about $1 million in the second quarter and still anticipate $45 million to $50 million for the full year. So the bump in AFFO guidance mirrors the fundamental strength of the business when it comes to investment volumes, yields, modest credit losses, the successful completion of multiple capital markets transactions, and what we expect will be sustained momentum for the rest of 2026. With that, I'll hand the call back to Sumit.

Thanks, Jonathan. In short, during Q2 we demonstrated disciplined execution throughout the entire platform. The highlights included continued resilience from our high-quality portfolio, disciplined deployment of capital at attractive yields, and the development of differentiated capital vehicles that provide Realty Income with a durable funding engine to accelerate AFFO per share growth in future years. Acquisition cap rates came in at 6.4% for the quarter. With that said, I'd now like to open the floor for questions. Rocco?

Afternoon, and thanks for the opportunity to ask. For the quarter, acquisition cap rates came in at 7.4%, a touch under what you recorded in the prior quarter. Does that reflect deal mix, competition, or some other factor at work — including industrial properties carrying those higher lease escalators? And how are we meant to view the accretion on those 7.4% cap rates?

Thanks — that's a wonderful question. What we're always aiming for is blending toward a figure that brings us back to our historical spreads, Michael. The blended cap rate, or investment yield, sits at 7.4%. Now, the piece above $100 million landed in the fund, and that's exactly where the lower-yielding cap rates were placed — intentionally so, since that's the very reason the fund exists. Anything we couldn't buy accretively on balance sheet was going to be directed into the fund. Those deals would clear the long-term return hurdles, but not the initial accretion. What's left carries a profile that returns us to our historical spreads of roughly 150 basis points. That's the right way to view our investments.

Appreciate the explanation. As a quick follow-up, could you give us an update on how things stand regarding the fee income we're generating, and the amount for the quarter? Is that roughly the right run rate, or should we expect it to pick up from here? And on top of that, how much of it sits inside the underlying guide?

Hi, Michael. If you turn to the supplement, I think it's Page 22, we show management fee income to realty income. For the quarter, that came to roughly $3.2 million. Most of it, clearly, relates to The U. S. Core plus fund. During our cornerstone round, we raised $1.7 billion And, as you know, by early July, we had drawn down all of the capital that is now fee generating. There's also, you know, a separate piece of that tied to the insurance JV that we announced back in March. So taken together, that's how you arrive at the 3.2; on guidance, we've discussed this previously, but we expect roughly $10 million or so for the fund when it comes to management fees. And then, then, you know, maybe there will be $2 million to $3 million, attributable to insurance JV.

Thanks.

Good afternoon, everyone. Appreciate the questions. Clearly, interest rates have been swinging quite a bit, though the overall direction is upward. That said, we've also heard a few of your competitors mention a bit of cap rate compression — so first off, are you observing that too? And second, do you expect elevated rates to ultimately pass through, or are competitive forces keeping that from occurring?

Excellent question, Brad. Honestly, it's a really unusual backdrop, since the inverse relationship that typically exists between how net lease trades and the 10-year largely still applies; however, over the past 2 months, that inverse relationship hasn't applied. The real issue is what will happen with the 10-year — what does the forward picture look like? It's not so much the current trading level; that's what will determine where cap rates go. We've frequently noted that cap rates tend to be a lagging variable relative to interest rates, specifically the 10-year treasury. And if the expectation is that the 10-year sits somewhere in a 4.6% to potentially 5% ZIP code, then based on historical patterns, cap rates do tend to follow. But as you pointed out in your question, the way you put it, there's far more competition now here in The US. Many more new entrants have come in on the private side, plus a handful on the public side; so that competitive dynamic will hold cap rates down; yet in the end, when the cost of capital is this elevated, cap rates will have to adjust. Okay. Understood. Thanks for that.

You also mentioned in your prepared remarks that you're feeling good about Europe. What I really want to focus on is the UK specifically. Borrowing costs there look quite poor, particularly when you set them against euro-denominated debt. So does that mean you're observing cap rates being pushed higher in the UK because of it? Or would you say the market just isn't very attractive at the moment?

Neil?

Appreciate it, Sumit. Brad, regarding what you asked, my view is that we're dealing with opposing forces. First, obviously, there's the broad economic sluggishness, shifts in the PM, and movement in interest rates. On the other side of that, institutional money is flowing in, and you can observe this happening more widely throughout Europe too. It genuinely began with malls, or shopping centers as people refer to them in that region. And there's a fairly fierce competition for those types of properties. So in The UK, somewhat counterintuitively, we're genuinely witnessing institutional capital arriving in substantial volume, which pushes cap rates lower. And although we haven't acquired retail parks or multi tenant retail anywhere on the continent, There are now also 1 or 2 bigger private equity firms fueling consolidation. My sense is the industrial rationale being that they essentially overlooked that opportunity in The UK, yet an opening still exists throughout Europe. Plus the modest level of base rates means it's genuinely quite accretive when you use leverage. Therefore I don't believe we're experiencing cap rates being pushed upward in The UK, or honestly across most of Europe, apart from Germany. And my feeling is that, if anything, downward pressure on cap rates for retail parks in The UK is going to persist?

Thanks.

Hi everyone, good afternoon. Sumit, when we look at roughly $5 billion of investments planned for the second half that are baked into guidance, how much should we expect to land on Realty Income's own balance sheet and be funded by the REIT, compared with what flows into the different JVs, funds, partnerships, and any new vehicles you might set up during the rest of this year?

Right. So that 500. We've told you we intend to complete roughly $10 billion — that's what guidance reflects — and what we've communicated to the market is that $9 billion out of that $10 billion will sit on balance sheet. If you look at what we've put to work so far this year, on the fund side, we've mostly exhausted the equity — the cornerstone equity, in fact. All of the equity we raised has been fully drawn down. As a result, the only assets headed to the fund will come from the leverage capacity the fund still has left. And clearly, that follows the same split — 1/3, 2/3. So roughly $1.7 billion of equity has been raised by us. About 1/3 of that figure in leverage capacity has been deployed. Everything else, though, goes on balance sheet. Okay. That's useful; and now, given the various funds, JVs, partnerships, and so on that you currently have set up, do you already possess every source of capital you believe is necessary to carry out the business plan? Looking ahead across the coming couple of years? Or should we anticipate additional partnerships and JVs of this kind being announced within the next 6 to 12 months, based on what your pipeline currently shows? So Rob, regarding the product we intend to chase from an investment standpoint, that's mostly settled; we've discussed our wish to move into data centers. We've now established joint ventures. Could there be further JVs formed with developers whose strong pipeline matches our criteria? Yes, that's possible. And particularly right after the conversation, right after the announcement we've issued. Some quite intriguing discussions are underway. And that aligns much more closely with what we've already told you. As for the remaining asset types, those are ones we simply keep investing in. And, clearly, since we've built these multiple channels across geographies and asset classes, we're pursuing wherever the best risk adjusted returns can be found. When it comes to financing, that's an area where we're still relatively inexperienced, and the reason we took the actions we did was to attempt to harness the platform we've built alongside a significantly cheaper cost of capital—more specifically, a significantly cheaper cost of equity capital. From there, we'd be able to produce an earnings contribution via the fee stream. I'd say we have—that's the path we're traveling. And it's—I've heard Jonathan describe it as an ecosystem we're working to build, one where we're getting the most out of a platform while, you know, seeking to draw in the cheapest equity capital available, capital that's eager to employ leverage, eager to pay fees, and essentially wants exposure to net lease investing. So, you know, I won't claim that what we've told you represents the final, complete answer for every source of equity capital. I'd describe it as the start. Additional channels will emerge. What we'll be sharply focused on is ensuring that the overlap among these various sources of equity capital—private equity capital sources—stays as small as possible; we want to be sure we're deploying our platform very prudently to support these different capital sources, to make each one of them highly successful, so that the fee stream we can produce remains one with a very strong degree of permanence, one we can rely on and one our shareholders can gain from in the years ahead.

Hello, and thanks. I simply hoped to dig a bit deeper into your view on acquisitions, broadly speaking. From what I can tell, on your side, roughly $4.3 billion is the projection for the latter six months; that would imply somewhat of a pullback compared with the opening six months. Might you perhaps just address what you're observing in that area? Is this a deliberate deceleration? Are you taking a cautious stance? Is rivalry intensifying? And I'd just like whatever detail you can offer regarding that forecast.

Mark.

Absolutely, and I appreciate the question. So, when we look at the $10 billion guidance alongside $5.3 billion in total investments for the first half, I don't see much of a slowdown there. That said, I'm focusing specifically on your piece of it. You mentioned that for your portion, it would come to $9 billion for the year. Right, that's the overall global investment figure. But here's the thing — nothing about this is being pushed by any kind of deterioration we're witnessing in market conditions; if anything, it's quite the reverse. We actually raised our volume guidance across the board thanks to how strong and robust the pipeline is. So, as we sit here right now, we genuinely feel terrific about that pipeline and about having at least one more robust second half ahead of us this year.

Right. And then, um, please continue. My apologies. For attempting to, you know, project ahead and work backward to figure out, you know, how big the gap is between the amount we projected and the amount we haven't.

From a pipeline standpoint, looking at the pipeline's health and what we're observing, we feel great. Okay; and on that note, you know, you clearly pushed further into industrial this quarter. I'm just curious — going forward, is that where the main emphasis will be? Or are you satisfied with the level of exposure you currently have in that asset class?

Industrial has consistently been one of our areas of focus. We obviously can't participate in those 3-cap deals that were just announced recently. Single tenant industrial, more specifically, across different geographies, has always been something we've moved toward. And the way we're approaching that is via the development channel. It's about partnering with top-tier developers and being able to produce yields with more of a built-to-suit nature rather than a spec nature, where we can clear the hurdles we need to clear in order to produce the spread investing that you and our shareholders are accustomed to seeing. So what you're seeing today is — and I'm certain you've heard this from other industrial companies — what we anticipate will be a new trend, where absorption rates are moving very positively, vacancies are at historic lows, And what's fueling this demand is far more widespread than e-commerce, which was what drove industrial demand 4, 5 years ago. It's far more broad based. It's industrial, it's manufacturing, it's data center equipment that has to be stored in warehouses, etcetera — that is also fueling some of the demand. We feel very good about the pipeline we've built. We're able to do it at cap rates and investment yields that make sense for us through a mix of investing on the credit side as well as on the equity side. Thank you.

Hi everyone, and thanks for fielding the question. Sumit, perhaps I'll direct this to you first — I found myself quite interested in what you said regarding taking advantage of the market to engage in some portfolio recycling and to boost the quality of the assets held on your balance sheet. So I'd like to know, roughly what portion of the portfolio could potentially be upgraded or recycled? It sounds as though you're doing somewhat more IG activity here. Should we anticipate that in the near term, and could you offer some color or perspective regarding the gap in cap rates, or the bumps, and what's being purchased versus what's being sold? Thanks.

That's an excellent question, Haendel. During the prepared remarks, I believe you noticed our intention to keep recycling capital. Naturally, we've discussed that certain metrics hold our strong attention — internal growth stands as 1 of them, the duration of the lease term is another, and exposure to credit that we hold a long term view on and feel at ease with is yet another metric we'll be watching closely. This capital recycling that we wish to keep pushing further into will, on a pro forma basis, mostly assist in making every 1 of these variables I just listed accretive. That's what we want. It could clearly mean pushing toward the data center side, pushing toward the industrial side, and reshaping our overall portfolio so that the net lease metrics we track, the KPIs that command our strong attention, keep heading in the right direction via this capital recycling.

That's really helpful context. I appreciate it.

Jonathan, I've got a question for you. Perhaps you'll let me ask it in two parts. I just want a bit more clarity on what falls under the other adjustments per share. It appears we left that out. Guidance for FFO and AFFO per share would come down. Perhaps I'm reading it wrong, so maybe you can shed some light on that. And then I'd also like some perspective or your thinking regarding how long the loan book runs. It seems there's a fair amount of higher yielding paper coming due over the next 2 years. I'm wondering whether you anticipate being able to originate additional loans or whether you intend to handle that dilution. Thanks. Hey, Haendel. The other category really isn't anything new. It's mainly tied to FX. Gains or losses that are noncash by nature. You've also got other CECL related sorts of effects too. But that's nothing that would, you know, rise to the level of a cash adjustment affecting FFO and ought not to affect AFFO since it's noncash and nonrecurring. On the loan tenor, assuming you mean the investments we make — look, we've discussed this previously. But when you consider the right hand side, of our balance sheet, when you consider, you know, a legacy balance sheet carrying a good amount of debt that rolls each and every year, you know, this offers a nice hedge, so to speak, a natural hedge where, you know, should rates decline, yes, in theory, there's reinvestment risk, but also, you know, the other side of our ledger becomes much more appealing for refinancing at significantly lower rates, and the reverse holds too. So we manage it. We examine it just as carefully as we examine, you know, the liability side of the balance sheet. And that's how we mitigate risk and project what our exposure is. Should different scenarios unfold in the rate environment. Thank you.

Yes. Good afternoon, everyone. Just following up on the line of questioning Haendel raised regarding capital recycling. Might we also see that show up in the form of new joint ventures, or doing additional things alongside the JV partners you already have? Or how should we be thinking about it? Or is the approach going to be much more along the lines of simply selling assets outright?

Yeah. Recycling is the concept here; so, indeed, Omotayo, we constantly review our portfolio, and we attempt to determine which assets are mispriced by the market, where we lack a strategic long-term hold view on particular pieces of our portfolio; and we would far prefer to dispose of those assets, generate that capital, and put it back to work in either different asset categories or different geographies or risk-adjusted opportunities where our conviction about holding for the long term is much stronger. That is what we are referring to. It is not meant to signify additional JVs, and so on. That is not what sits behind the capital recycling you ought to have in mind when we discuss capital recycling?

Thanks for the clarification.

Sure. Thank you.

Hello, and thank you for allowing me to ask. Regarding those hyperscale data center transactions, once those 3 properties are accounted for, could you tell us whether you're broadening the mix of tenants — or the ultimate tenant base — across your data center holdings?

Absolutely, and I appreciate the inquiry. The answer is yes. As you know, 3 years back we closed a deal involving 2 data centers located in Northern Virginia, and a single, particular tenant occupied those. With the transaction we made public just last month, those 3 data centers contain a mix of tenants, and they differ from the initial 2. So at present we hold 5 assets occupied by a range of different tenants. Moving forward, while we keep expanding what we own in the data center space, that's 1 item we will stay focused on as part of how we approach things, since clearly our preference is to target hyperscalers carrying investment grade ratings along with enterprise customers. Those fit our model nicely. Even so, we'll be extremely careful to ensure we keep our exposure to any single property properly balanced.

And broadly on the tenant question, should any new top 20 tenants be expected to join the portfolio this year?

Well, Alec, once that takes place, an announcement will be made, and my sense is it will be seen in a very favorable light. Clearly, these data center clients are usually quite large. And, you know, when those deals get done, might our top 20 potentially be reshuffled? Yes, that's the answer. In my view, though, it will be received very positively. Thank you.

Staying with the data center portfolio topic, could you expand a bit more on the economics — for example, stabilized yields or price per megawatt — and share your outlook on that going forward? And what about competition? Right? Since I believe there are many large private equity firms involved, plus other public capital. What is that environment like when trying to get these deals done? Thanks.

Sure. Thanks, Ron. If it's alright, I'll address the second part of your question first. Yes, many participants are in this sector at present, on both the development side and among those looking to put capital to work here; so, you know, competition is heavy, for both building these assets and holding them. One key point, though, I believe, is that many are still in the development stage. When we discuss the big hyperscale data centers; and there's likely no obvious natural owner for the eventual long-term holding of those assets. Certain developers might wish to retain ownership over the long term, while others don't. And so that does create — despite the competition out there and the players in the sector pursuing some of these assets; for a company like ours, whose model centers on, you know, keeping long leased assets, that have customers with strong IG credit ratings and with solid annual bumps, there's a natural sweet spot for us, as long-term holders of that. And so I think that makes us maybe somewhat distinct from, you know, some of the other participants who are active in the space right now. Regarding your question about cap rates, I think there's still a bit of general discovery happening in the market. There are, many of these large assets are still moving from the development phase into potentially trading hands for the stabilized phase; and I think some transactions have recently come to market that were announced where some cap rate data is available on them. I think that's a solid signal of where cap rates stand right now; for these types of assets.

Then for my second question, if you don't mind, I'd like to revisit something. I believe the figure mentioned was 40 basis points regarding the bad debt you've selected for this year. Could you refresh our memory on the watch list — were there any shifts at all during the last 3 months, perhaps involving bigger tenants, or is it still fairly granular?