Item 2. Properties
Item 2. Properties.
Our Real Estate Investment Portfolio
As of December 31, 2022, we had a portfolio of 1,653 properties, inclusive of 153 properties that secure our investments in mortgage loans receivable, that was diversified by tenant, concept, industry and geography and had annualized base rent of $297.2 million. Our 350 tenants operate 538 different concepts in 16 industries across 48 states. None of our tenants represented more than 3.4% of our annualized base rent at December 31, 2022 and our top ten largest tenants represented 18.0% of our annualized base rent as of that date.
Diversification by Tenant
As of December 31, 2022, our top ten tenants included ten different concepts. The following table details information about our tenants and the related concepts they operate as of December 31, 2022 (dollars in thousands):
Tenant (1)
Concept Number of
Properties (2)
Annualized
Base Rent % of
Annualized
Base Rent
Equipmentshare.com Inc. EquipmentShare 33 $ 9,962 3.4 %
CNP Holdings, LLC Chicken N Pickle 6 5,546 1.9 %
Captain D's, LLC Captain D's 75 5,353 1.8 %
Whitewater Holding Company, LLC WhiteWater Express Car Wash 16 4,953 1.7 %
Cadence Education, LLC Various 23 4,941 1.7 %
MDSFest, Inc. Festival Foods 5 4,681 1.6 %
The Track Holdings, LLC Five Star 9 4,649 1.6 %
Mammoth Holdings, LLC. Various 17 4,552 1.5 %
Car Wash Partners, Inc. Mister Car Wash 13 4,479 1.5 %
Bowl New England, Inc. Spare Time 6 4,444 1.5 %
Top 10 Subtotal 203 53,559 18.0 %
Other 1,448 243,599 82.0 %
Total 1,651 $ 297,158 100.0 %
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(1) Represents tenant or guarantor.
(2) Excludes two vacant properties.
As of December 31, 2022, our five largest tenants, who contributed 10.3% of our annualized base rent, had a rent coverage ratio of 5.8x, and our ten largest tenants, who contributed 18.0% of our annualized base rent, had a rent coverage ratio of 4.7x.
As of December 31, 2022, 94.9% of our leases (based on annualized base rent) were triple-net, and the tenant is typically responsible for all improvements and is contractually obligated to pay all operating expenses, such as maintenance, insurance, utility and tax expense, related to the leased property. Due to the triple-
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net structure of our leases, we do not expect to incur significant capital expenditures relating to our triple-net leased properties, and the potential impact of inflation on our operating expenses is reduced.
Diversification by Concept
Our tenants operate their businesses through 538 concepts (i.e., generally brands). The following table provides information about the top ten concepts in our portfolio as of December 31, 2022 (dollars in thousands):
Concept Type of
Business Annualized
Base Rent % of
Annualized
Base Rent Number of
Properties (1)
Building
(Sq. Ft.) (1)
EquipmentShare Service $ 9,962 3.4 % 33 589,550
Captain D's Service 6,595 2.2 % 88 228,470
Chicken N Pickle Service 5,546 1.9 % 6 202,057
WhiteWater Express Car Wash Service 4,953 1.7 % 16 77,746
Festival Foods Retail 4,681 1.6 % 5 379,640
Mister Car Wash Service 4,479 1.5 % 13 54,621
Spare Time Experience 4,443 1.5 % 6 272,979
The Nest Schools Service 4,146 1.4 % 17 217,282
Zaxby's Service 4,062 1.4 % 22 76,790
Crunch Fitness Experience 4,022 1.4 % 10 348,072
Top 10 Subtotal 52,889 17.8 % 216 2,447,207
Other 244,269 82.2 % 1,435 13,606,130
Total $ 297,158 100.0 % 1,651 16,053,337
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(1) Excludes two vacant properties.
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Diversification by Industry
Our tenants' business concepts are diversified across various industries. The following table summarizes those industries as of December 31, 2022 (dollars in thousands except per sq. ft amounts):
Tenant Industry Type of
Business Annualized
Base Rent % of
Annualized
Base Rent Number of
Properties (1)
Building
(Sq. Ft.) (1)
Rent Per
Sq. Ft. (2)
Car Washes Service $ 39,192 13.2 % 137 697,050 $ 56.23
Early Childhood Education Service 37,905 12.8 % 170 1,825,083 20.77
Quick Service Service 34,468 11.6 % 397 1,095,609 31.47
Medical / Dental Service 32,902 11.1 % 193 1,379,947 23.84
Automotive Service Service 25,455 8.6 % 195 1,256,845 20.06
Casual Dining Service 21,237 7.1 % 102 801,106 25.83
Convenience Stores Service 14,664 4.9 % 131 491,449 30.25
Equipment Rental and Sales Service 13,993 4.7 % 57 1,013,151 13.10
Other Services Service 7,541 2.5 % 35 438,901 17.18
Pet Care Services Service 5,142 1.7 % 46 371,069 14.44
Family Dining Service 4,746 1.6 % 32 179,942 26.38
Service Subtotal 237,245 79.8 % 1,495 9,550,152 24.78
Entertainment Experience 23,459 7.9 % 46 1,416,208 17.18
Health and Fitness Experience 11,495 3.9 % 29 1,125,329 9.44
Movie Theatres Experience 4,301 1.4 % 6 293,206 14.67
Experience Subtotal 39,255 13.2 % 81 2,834,743 13.81
Grocery Retail 9,747 3.3 % 28 1,341,200 7.27
Home Furnishings Retail 2,048 0.7 % 4 217,339 9.42
Retail Subtotal 11,795 4.0 % 32 1,558,539 7.57
Other Industrial Industrial 5,008 1.7 % 20 852,888 5.87
Building Materials Industrial 3,855 1.3 % 23 1,257,017 3.07
Industrial Subtotal 8,863 3.0 % 43 2,109,905 4.20
Total/Weighted Average $ 297,158 100.0 % 1,651 16,053,339 $ 18.46
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(1) Excludes two vacant properties.
(2) Excludes properties with no annualized base rent and properties under construction.
As of December 31, 2022, our tenants operating service-oriented businesses had a weighted average rent coverage ratio of 3.6x, our tenants operating experience-based businesses had a weighted average rent coverage ratio of 2.2x, our tenants operating retail businesses had a weighted average rent coverage ratio of 4.1x and our tenants operating other types of businesses had a weighted average rent coverage ratio of 24.5x.
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Diversification by Geography
Our 1,653 property locations are spread across 48 states. The following table details the geographical locations of our properties as of December 31, 2022 (dollars in thousands):
State Annualized Base Rent % of Annualized Base Rent Number of Properties Building (Sq. Ft.)
Texas $ 38,919 13.1 % 193 2,114,977
Georgia 20,761 7.0 % 123 745,559
Ohio 19,919 6.7 % 139 1,153,163
Florida 19,266 6.5 % 78 786,740
Wisconsin 12,953 4.4 % 56 778,137
North Carolina 11,253 3.8 % 57 641,085
Missouri 11,038 3.7 % 58 792,979
Michigan 9,363 3.2 % 60 950,862
Arizona 8,492 2.9 % 46 503,403
Oklahoma 8,418 2.8 % 51 524,865
New Jersey 8,337 2.8 % 27 215,705
Alabama 8,083 2.7 % 52 458,898
Tennessee 7,998 2.7 % 50 344,772
Minnesota 7,261 2.4 % 36 496,939
Arkansas 7,207 2.4 % 55 447,342
Illinois 7,150 2.4 % 43 311,152
New York 6,555 2.2 % 44 223,324
Pennsylvania 6,389 2.2 % 35 338,665
Virginia 6,336 2.1 % 24 262,428
Massachusetts 5,861 2.0 % 29 406,159
Colorado 5,659 1.9 % 27 262,068
South Carolina 5,645 1.9 % 34 378,796
Iowa 5,464 1.8 % 34 327,473
Mississippi 4,755 1.6 % 41 271,991
Indiana 4,700 1.6 % 38 303,066
Kentucky 4,165 1.4 % 37 220,095
Kansas 3,695 1.2 % 17 130,257
Connecticut 3,449 1.2 % 13 217,985
New Mexico 3,380 1.1 % 22 130,210
Nevada 3,115 1.1 % 10 90,620
California 3,087 1.0 % 15 151,566
New Hampshire 2,740 0.9 % 13 230,149
South Dakota 2,410 0.8 % 9 124,912
Louisiana 2,368 0.8 % 13 124,161
Maryland 2,276 0.8 % 9 79,028
Washington 1,731 0.6 % 11 87,243
West Virginia 1,636 0.6 % 24 66,746
Oregon 1,240 0.4 % 8 127,673
Utah 945 0.3 % 2 67,659
Nebraska 880 0.3 % 9 33,103
Maine 509 0.2 % 1 32,115
Wyoming 444 0.2 % 2 14,001
Idaho 403 0.1 % 1 35,433
Alaska 246 0.1 % 2 6,630
Vermont 219 0.1 % 2 30,508
North Dakota 197 0.1 % 1 13,050
Rhode Island 164 0.1 % 1 5,800
Montana 77 — % 1 —
Total $ 297,158 100.0 % 1,653 16,059,492
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Lease Expirations
As of December 31, 2022, the weighted average remaining term of our leases was 13.9 years (based on annualized base rent), with only 6.1% of our annualized base rent attributable to leases expiring prior to January 1, 2028. The following table sets forth our lease expirations for leases in place as of December 31, 2022 (dollars in thousands):
Lease Expiration Year (1)
Annualized
Base Rent % of
Annualized
Base Rent Number of
Properties (2)
Weighted
Average Rent
Coverage Ratio (3)
2023 $ 1,306 0.4 % 14 3.1 x
2024 5,076 1.7 % 49 5.8 x
2025 2,246 0.8 % 19 2.1 x
2026 2,790 0.9 % 19 4.5 x
2027 6,852 2.3 % 66 2.5 x
2028 4,056 1.4 % 13 2.2 x
2029 5,671 1.9 % 78 3.9 x
2030 4,495 1.5 % 49 6.2 x
2031 13,773 4.6 % 80 2.9 x
2032 11,295 3.8 % 46 3.8 x
2033 7,446 2.5 % 25 2.9 x
2034 28,544 9.6 % 206 5.8 x
2035 14,916 5.0 % 101 6.7 x
2036 42,248 14.2 % 176 3.7 x
2037 26,486 8.9 % 129 7.3 x
2038 11,451 3.9 % 77 2.4 x
2039 19,157 6.4 % 94 3.8 x
2040 29,976 10.1 % 140 2.7 x
2041 22,841 7.7 % 113 2.4 x
2042 34,316 11.5 % 155 3.3 x
Thereafter 2,217 0.7 % 2 2.3 x
Total/Weighted Average $ 297,158 100.0 % 1,651 4.0 x
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(1) Expiration year of leases in place as of December 31, 2022, excluding any tenant option renewal periods that have not been exercised.
(2) Excludes two vacant properties.
(3) Weighted by annualized base rent.
Unit Level Rent Coverage
Generally, we seek to acquire investments with healthy rent coverage ratios, and as of December 31, 2022, the weighted average rent coverage ratio of our portfolio was 4.0x. Our portfolio’s unit-level rent coverage ratios (by annualized base rent and excluding leases that do not report unit-level financial information) as of December 31, 2022 are displayed below:
Unit Level Coverage Ratio % of Total
≥ 2.00x 72.6 %
1.50x to 1.99x 14.3 %
1.00x to 1.49x 8.4 %
< 1.00x 3.0 %
Not reported 1.7 %
100.0 %
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Implied Tenant Credit Ratings
Tenant financial distress is typically caused by consistently poor or deteriorating operating performance, near-term liquidity issues or unexpected liabilities. To assess the probability of tenant insolvency, we utilize Moody’s Analytics RiskCalc, which is a model for predicting private company defaults based on Moody’s Analytics Credit Research Database, which incorporates both market and company-specific risk factors. The following table illustrates the portions of our annualized base rent as of December 31, 2022 attributable to leases with tenants having specified implied credit ratings based on their Moody’s RiskCalc scores:
Credit Rating NR < 1.00x 1.00 to 1.49x 1.50 to 1.99x ≥ 2.00x
CCC+ — % 0.4 % 0.3 % 0.2 % 0.6 %
B- — % 0.1 % — % — % 1.6 %
B — % 0.3 % — % 2.5 % 1.3 %
B+ 0.1 % 0.9 % 0.6 % 0.6 % 3.8 %
BB- — % 0.1 % 2.0 % 1.7 % 13.6 %
BB 0.2 % 0.5 % 0.7 % 0.6 % 12.4 %
BB+ 0.1 % 0.2 % 1.3 % 1.3 % 8.6 %
BBB- 0.2 % — % 0.4 % 1.2 % 7.7 %
BBB — % 0.4 % 1.7 % 5.3 % 11.3 %
BBB+ — % 0.1 % 1.1 % — % 2.0 %
A- — % — % — % 0.1 % 5.2 %
A — % — % — % — % 2.6 %
A+ — % — % — % — % 0.7 %
AA- — % — % — % — % — %
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NR Not reported