Another long week is behind us. I’m pleased to report we had a fairly positive work week, all things considered. Our team has continued to click on all cylinders, as we carry on through this environment together.
Deal Flow and Points of Strategy:
Our Dollar General focus has continued. We put additional units under contract this week and saw demand continue for DG. In general, we’ve seen sellers “flex to be fair,” to get deals inked with good buyers. Also, we’re seeing the need to delay some closings/diligence periods too. With everyone working remote, the trickle-down effect seems to stretch things out more than usual. Fortunately, I’m happy to report our sellers have been flexible and understanding. Thankful for that.
Tractor Supply was really active for us in the prior week and did not carry through this week. We have several deals under contract, but just have not seen enough inventory to add to our pipeline. Pricing and demand do remain strong.
AMC Movie Theaters:
We have (5) AMC deals right now – (4) occupied and (1) vacant. I watched an interview with AMC’s CEO last week and was impressed with his message. I agreed: Americans want to be out again, and in my opinion, going to the movies is woven into the “fabric” of American culture. AMC is being extra careful, but they seem to have an optimistic hope that summer movies still might be realistic. Also, interesting to report: We’ve seen a number of smaller movie operators inquire on our listings too. I think it speaks to the health of cinema (Pre-Covid-19). How these companies move forward will be really interesting to watch.
We spend large portions of our days trying to get educated on the current NNN climate.
As we monitor which companies are having success right now, it might be smart to assess, who provides “nice to have products” vs. ”must have products”. I read an interesting article on CNBC that talked about popular direct to consumer brands like Casper and Warby Parker, who could have some upcoming challenges. What is “necessary” right now and how will the supply chains hold up? Stay tuned.
Our team makes a habit of listening to many earnings and updates calls from the REIT’s we work with. Without identifying companies, I’ll cover some high-level observations.
- Most are putting acquisitions on hold; letting the market settle, figure itself out, etc…
- April 1st = Rent is DUE! I’ve heard many groups talk through the balance of which tenants expect relief, which expect deferral, and how that impacts the landlord, their lenders, etc.
- Once we get a better handle on when the shutdown orders are relieved, I expect things to start opening up again. Until then, many groups are likely taking the wait and see approach.
- Opportunistic Buyers. There are some groups aggressively pursuing buys right now. Deal hunting, looking for opportunity and pressing the market. This is not my favorite thing to see with so many people on the sideline. It is very tough to distinguish talk vs. reality right now as well. But, no one can dispute, some deals will get done this way. Upcoming weeks will clarify a bunch and it will be important to monitor the comps.
I had the pleasure of talking to a few developers this week. The small groups are really being cautious, as I think they should be. Some of the larger groups I talked to are trying hard to feel the market out. Job sites are a real issue right now too. Can schedules be kept and how will delays impact things? One developer commented how industrial developments are a little easier right now with workers spaced out vs. some of the denser retail or multifamily sites.
I connected with several bankers this week as well. I tried to get a pulse for the overall climate. PPP loans / Government stimulus programs have dominated discussions recently. Most don’t seem overly informed yet, which is understandable. It will be interesting to see how these programs fund and replenish the economy.
Also, banks are pretty consumed with managing landlord problems. Some tenants can’t or don’t want to pay, which affects the ability of the landlord/borrower to pay the debt. Let’s do the right thing and offer deferrals for deferrals, which seems really reasonable. If one party takes a hard-lined unreasonable approach, that will have ripple effects that won’t be good.
Question to ponder for next week: FITNESS
Fitness is a large part of my own life. I can’t manage without my workouts and know many of you cannot either. However, the big box gym/club model is under attack right now. I’m curious how others are feeling about their gym memberships and how this pandemic will influence future fitness decisions.
Hope you all had a safe and healthy week and had some time to enjoy the weekend too.
All the best,