Getty Realty Corp (NYSE:GTY) Q2 2022 Earnings Conference Call July 28, 2022 8:30 AM ET
Company Participants
Joshua Dicker – EVP, General Counsel & Corporate Secretary
Christopher Constant – President, CEO & Director
Mark Olear – EVP, CIO & COO
Brian Dickman – EVP, CFO & Treasurer
Conference Call Participants
Todd Thomas – KeyBanc Capital Markets
Bradley Heffern – RBC Capital Markets
Mitchell Germain – JMP Securities
Joshua Dennerlein – Bank of America Merrill Lynch
John Massocca – Ladenburg Thalmann & Co.
Operator
Good morning, and welcome to Getty Realty’s earnings conference call for the second quarter 2022. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to the starting of the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker.
Joshua Dicker
Thank you, Operator. I would like to thank you all for joining us for Getty Realty’s Second Quarter Earnings Conference Call. Yesterday afternoon, the company released its financial results for the quarter ended June 30, 2022. The Form 8-K and earnings release are available in the Investor Relations section of our website at gettyrealty.com.
Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Examples of forward-looking statements include our 2022 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company’s future company operations, future financial performance and the company’s acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially.
I refer you to the company’s annual report on Form 10-K for the year ended December 31, 2021, and our other filings made with the SEC, for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call.
Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures including our updated definition of adjusted funds from operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.
Christopher Constant
Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the second quarter of 2022. Joining us on the call today are Mark Olear, our Chief Operating Officer and Brian Dickman, our Chief Financial Officer. I will lead off today’s call by providing commentary on the quarter’s financial results and investment activities and offer some observations and perspective on the operating environment for the convenience store sector. As usual, Mark will then take you through our portfolio, and Brian will discuss our financial results.
Our second quarter results again demonstrated the successful execution of our strategy as both stable cash flows from our existing portfolio and growth from our investments in the convenience and automotive retail sectors. For the quarter, our base rental income grew 8.1%. Our adjusted funds from operations, or AFFO, increased 8.3% and our AFFO per share grew to $0.53.
In the first half of the year, the company invested approximately $59 million, including more than $50 million in the second quarter. We also ended the quarter with more than $125 million of commitments for the development and acquisition of primarily new industry properties in the convenience store and car wash sectors, which we expect to fund and close over the next year or so. We are well positioned to fund this investment activity with cash and debt capacity, including the 3.65% private placement notes that will be funded in January of 2023.
We continue to build our pipeline across all of our target asset classes and remain disciplined in our approach as we navigate an evolving marketplace. Our strategy continues to emphasize only high-quality real estate and partnering with growing retail and national operators across the convenience and automotive retail sectors. With our relationships, underwriting expertise and opportunity set, we are confident in our ability to continue executing on our investment strategy as the year progresses.
With regard to the convenience store sector, as we highlighted last quarter, when discussing the National Association of Convenience Stores State of the Industry Report, the overall industry had a record year in 2021. Now that we’ve seen the full report, a few themes stand out. First, larger multistore operators continue to grow and take market share, primarily due to expanded product offerings and a focus on customer engagement and store experience. Second, the use of loyalty programs in the C-store sector has more than doubled to almost 70% over the last 2 years, which is one of the leading factors in driving customer business and larger basket sizes per visit. Third, 2021 saw a significant rebound in foodservice sales and gross profits, which both grew approximately 18% for the year. And finally, despite continued volatility in the oil markets, fuel volumes continued to recover and average fuel gross profit continued to be healthy and generally in line with recent years performance.
Focusing on our portfolio, our tenants continue to produce strong results as evidenced by the slight increase in our rent coverage ratio to 2.7x this quarter. And in the course of our discussions with our tenants, we are receiving information that supports the themes I just highlighted. Their businesses continue to thrive as they offer customers quick and easy access to food and beverages, car washes and fuel, all of which cannot be replicated by grocers, big-box retailers or online purchases. The vast majority of our tenants are top 100 C-store operators or top 20 car wash operators based on U.S. store counts, and they continue to demonstrate that they have the scale to compete and the ability to perform in various market environments.
In general, we believe Getty is very well positioned for the current environment with a portfolio of institutional tenants providing essential consumer goods and services, a strong balance sheet, low leverage and ample liquidity. We remain as focused as ever on growing the company as we diligently source and underwrite new investment opportunities in strong metropolitan markets and look to unlock embedded value through active asset management and selective redevelopments. We believe our success year-to-date and our current pipeline demonstrates our ability to source opportunities that align with our investment strategy and that we are positioned to continue creating shareholder value through earnings growth and portfolio diversification as we move through 2022 and beyond. With that, I will turn the call over to Mark to discuss our portfolio investment activity.
Mark Olear
Thank you, Chris. As of the end of the second quarter, our portfolio includes 1,013 net lease properties, 5 active redevelopment sites and 6 vacant properties. Our weighted average lease term was 8.6 years, and our overall occupancy, excluding active redevelopments, was 99.4%. Our portfolio spans 38 states across the country, plus Washington, D.C., and our annualized base rents, 65% of which come from the top 50 MSAs in the U.S., are well covered by our trailing 12-month tenant rent coverage ratio, which increased marginally to 2.7x this quarter.
In terms of our investment activities, we completed $59.3 million of investments in the first half of 2022, which reflects $50.5 million of acquisitions or development planning on 17 properties in the second quarter. Highlights of this quarter’s investments include closing on the acquisition and leaseback of 8 Express Tunnel carwash properties in the Austin, Texas MSA, with Go Car Wash for $36.4 million, acquiring one additional car wash property from Go Car Wash in San Antonio MSA for $3.6 million, acquiring 2 properties from Splash Car Wash, which are located in New York, for $6.1 million, acquiring 1 convenience store in New York City MSA for $1.1 million, and providing approximately $3.3 million of construction funding for the development of 5 new industry properties, including 2 convenience stores in the Charleston, South Carolina metropolitan area and 3 carwash properties, including our initial transaction with Magnolia Carwash. These properties are located in Jacksonville, Florida, New Haven, Connecticut and Newburgh, New York metropolitan areas.
As part of these funding transactions, we will create interest on our investment during the construction phase of the project. We expect to acquire the property via sale-leaseback transaction upon completion of final funding. Our aggregate initial cash yield on our second quarter investments was approximately 6.6%. Year-to-date, the weighted average lease term of the properties acquired was 14.8 years, and the aggregate initial cash yield on our year-to-date investments was approximately 6.6%.
Looking ahead regarding the commitments to fund the acquisitions and developments that Chris referenced, while we have fully executed agreements for each transaction, the timing and amount of each investment is ultimately dependent on our counterparties and the schedules under which they are able to complete development projects and close certain business acquisitions. It is our expectation that we will be funding these transactions throughout the next 12 months or so and that the average yields will be in excess where we have closed acquisitions year-to-date.
We continued to underwrite a variety of potential investment opportunities during the quarter with convenience stores representing 30% of underwritten volume and our other convenience automotive retail sectors representing the balance of 70%. We did not see a material expansion of the asking cap rates for the potential transactions we underwrote in the quarter, but we are starting to see movement in favor of the buy side and expect the transition to continue as we continue through ’22 and into 2023.
While the timing of direct sale-leaseback transactions can be difficult to predict, based on our current visibility, we’re confident that we can continue partnering with institutional operators in our target asset classes to acquire high-quality real estate in major metropolitan markets.
Moving to our redevelopment platform, during the quarter we invested approximately $300,000 in projects which are in various stages in our pipeline. We have 7 signed leases or letters of intent, which includes 5 active projects, 1 project at a property which is currently subject to a triple net lease and has not yet been recaptured from the current tenant, and 1 signed LOI on a vacant property. The company expects rent to commence at these and other projects over the next several years, including later in 2022.
Turning to our asset management activities for the second quarter, we sold 1 property realizing $1.5 million of gross proceeds connected to 1 leased property. We will continue to pursue disposition of properties that we have determined are either no longer competitive in their current format, do not have compelling redevelopment potential, or which we believe have compelling valuations that may allow us to recycle capital and manage our balance sheet. With that, I’ll turn to Chris over to Brian to discuss our financial results.
Brian Dickman
Thanks, Mark. Good morning, everyone. Last night, we reported AFFO per share of $0.53 for the second quarter of 2022, representing a year-over-year increase of 1.9% versus the $0.52 per share we reported in the second quarter of 2021. For the quarter, FFO and net income were $0.83 and $0.64 per share, respectively, including a significant noncash environmental adjustment which we will discuss shortly.
Our total revenues were $41.2 million for the second quarter, representing a year-over-year increase of 6.5%. Base rental income, which excludes tenant reimbursements, GAAP revenue adjustments and any additional rent, grew 8.1% to $36.8 million in the second quarter. Strong acquisition activity and recurring rent escalators were the primary drivers of the increase with additional contribution from redevelopment projects that were completed last year, all of which was partially offset by some modest disposition activity.
On the expense side, G&A costs were $5.3 million for the second quarter, an increase of $200,000 compared to the second quarter of 2021 due to higher personnel costs. Property costs declined in the second quarter of 2022 due to lower property operating expenses, including a permanent reduction in rent expense as we have exited 9 leased properties over the past 12 months. These reductions were partially offset by increases in leasing and development costs primarily related to demolition work at certain of our active redevelopment projects.
Environmental expenses, which are highly variable due to a number of estimates and noncash adjustments, declined to a credit of $15.9 million for the quarter versus an expense of $100,000 in 2021, primarily due to a reduction in estimates related to unknown environmental liabilities. Specifically, during the quarter we concluded that there is no material continued risk of having to satisfy contractual obligations relating to pre-existing unknown environmental contamination at certain properties. Accordingly, we removed $16.8 million of unknown reserve liabilities which had previously been accrued for these properties.
Turning to the balance sheet and our capital markets activities, we ended the quarter with $625 million of total debt outstanding, consisting entirely of senior unsecured notes with a weighted average interest rate of 4.1% and a weighted average maturity of 6.6 years. We have no floating rate debt exposure other than our $300 million unsecured revolving credit facility, which was undrawn at quarter end. And having addressed our 2023 notes maturity with the private placement we completed in February, we have no debt maturities until 2025.
As of June 30, net debt-to-EBITDA was 4.9x, and total debt to total capitalization was 33%, while total indebtedness to total asset value calculated pursuant to our credit agreement was 36%. For the quarter, we did not issue any shares under our ATM program. With low leverage, $20 million of cash on the balance sheet, an undrawn revolver and committed 2023 debt financing at an attractive rate, we have sufficient capital to fund $125 million of acquisition and development funding commitments we have under contract. Pro forma for these transactions, we expect our balance sheet to remain strong, including ample liquidity and leverage in line with our previously stated ranges.
As our investment pipeline evolves, we will evaluate all capital sources, including common equity, disposition proceeds and incremental debt to ensure we’re funding transactions in an accretive manner while maintaining our investment-grade credit profile.
With respect to our environmental liability, we ended the quarter at $29.5 million, which was a decrease of more than $18 million from the end of 2021. The primary driver of the significant reduction was the renewal of $16.8 million of unknown reserve liabilities as I described earlier. These reserves were primarily for legacy properties where we retained the responsibility to clean up pre-existing unknown environmental contamination for defined look-back periods which expired during the quarter. In the second quarter, our net environmental remediation spending was approximately $1.3 million.
Finally, the company is maintaining the 2022 AFFO guidance we provided last quarter, which was $2.10 to $2.12 per share. As a reminder, our outlook includes completed transaction activity to date, but does not otherwise assume any potential acquisitions, dispositions or capital markets activities for the remainder of the year. Specific factors which impact our AFFO guidance include variability with respect to certain operating and deal pursuit costs and approximately $400,000 of demolition costs, which run through property costs on our P&L. With that, I’ll ask the Operator to open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. Our first question comes from the line of Todd Thomas with KeyBanc.
Todd Thomas
Chris, or Mark I guess, on the $125 million portfolio of development and acquisition properties, I think you indicated that the expected yields are above the 6.6% cap rate on the year-to-date investments. What’s that spread look like? I guess just given that there’s uncertainty around interest rates and asset pricing over the next year, can you just provide a little bit more color? Maybe bookend sort of the premium in yield you said is embedded in that pricing?
Christopher Constant
Yes, sure. It’s a little hard to give a specific range. There’s multiple transactions that make up the $125 million. Again, what I’d say is, we’ve put capital out at 6.6% over the first 6 months of the year. What we expect in the back half of the year, both for the $125 million of committed deals plus everything that we’re pursuing in our existing pipeline, is at north of where we’ve deployed year-to-date.
Todd Thomas
Okay. Can you just give — is that sort of 50 basis points, maybe 100 basis point premium? Just sort of any additional insight there to just help us kind of size up what that premium might look like?
Christopher Constant
Yes. Again, there’s multiple deals inside of that, Todd, so I think it ranges from 20 bps to higher across the board.
Todd Thomas
Okay. And then in terms of the timing, so you have 12 months roughly for these to be acquired upon completion. Are there certain properties that could be delivered in ’22? Or is it all expected to be sort of around the same time, that timeframe, perhaps maybe midyear ’23?
Christopher Constant
No, I think the reason we phrased it the way we did, again, is our — there’s several transactions that make up the $125 million, and some of this is development funding, again, which we expect to complete the deals as sales leaseback upon the final draw. We expect to start investing that $125 million in the back half of ’22 and some will definitely be in ’23 as well.
Brian Dickman
Todd, this is Brian. About roughly 75% of that total are development funding deals. And again, those are funded over time as Chris was saying, so we’ll be deploying that capital, accruing interest and then ultimately acquiring the properties at the end. The balance of that pipeline are acquisitions and so that capital will be deployed in one transaction versus over the course of time like the development funding.
Todd Thomas
Okay. All right. That’s helpful. Got it. And then just thinking about acquisitions and sort of the investment pipeline from here and I guess beyond that $125 million portfolio, how do you feel about the pipeline for more near-term opportunities? I think last quarter it sounded like there was a healthy pipeline. We see this 30-property portfolio hitting. But is there potential for additional investments sort of before that really hits or should we expect to see the pace flow ahead of next year as these developments are funded and ultimately acquired?
Mark Olear
It’s Mark. Regarding the kind of inbound or the activity around the pipeline, it’s been pretty consistent. We’re pretty happy about where we are. Not only consistent quarter-to-quarter, but year-over-year it continues to grow. We see a lot of opportunities. As we mentioned, we continue to grow the diversity within our pipeline, where we’re looking at not only convenience stores, carwashes, but all the other automotive experiences. We’ve got a lot of activity, a lot that we’re looking at too in various stages of underwriting and valuation, and we’re encouraged by what we’re seeing.
Todd Thomas
Okay. Just one last question around the environmental liability. I’m curious if you have any visibility on the balance of that liability. I think, Brian, you mentioned that there were defined look-back periods that expired during the quarter. Can you discuss the balance of the environmental liabilities that are on the balance sheet and any additional insights around that?
Brian Dickman
Sure. The balance at June 30 was $29.5 million. That’s what’s on the face of the balance sheet. Within that, there’s about $10.6 million of what we call known liabilities. So those are as defined, they have known contamination that we’re working through and those are dollars that will be deployed over time. The balance, the $18.9 million, that represents unknown reserve liabilities. And it’s within that bucket, Todd, that we’ll continue to have similar reductions, although nothing quite of this magnitude. The second quarter here was the largest. But as additional look-back periods expire throughout this year, primarily in Q4, we’ll see that come down as well. Again, not quite the order of magnitude we saw this quarter, but potentially another $5 million, $6 million. As we get towards the end of the year, we’ll see similar activities that we saw this quarter.
Operator
Our next question comes from the line of Brad Heffern with RBC Capital Markets.
Bradley Heffern
Brian, a question on the guidance. So just given you don’t normally include forward acquisitions, I’m curious why the guide didn’t go up this quarter, given the $50-plus million in acquisitions that you completed during the quarter. Is there some sort of offsetting factor there?
Brian Dickman
No, no offset. We do it as including completed transactions as of the date of the call, Brad. When we put out the release and had the call last quarter, upwards of 85%, 90% of that activity on the quarter had already closed. The incremental activity from a closed transaction perspective was just about $6 million or $7 million, and that didn’t have an impact on the range that we put out.
Bradley Heffern
Okay. Got it. And then on the new $125 million, I think you said 75% of that is development funding. It seems like a pretty big number. I’m just curious, has there been a change in terms of how counterparties are thinking about you as a source for development funding, maybe related to just backdrop and rates going up?
Christopher Constant
Yes. We didn’t throw out 75%. So just to clear that up, it’s a combination of development funding and acquisitions. There has not really been a change as to how our tenant partners are thinking about us. What I would say is that by offering both conventional sale-leaseback financing and development funding, it has opened up more transaction opportunities for Getty. And in certain cases, with the same tenant where they’ve got an acquisition and they want to do new construction for new industry sites. It really is about being a capital provider to our tenants in our core asset classes. And across the asset classes, certain of our tenants are more comfortable developing their prototype stores as opposed to maybe chasing what had been some pretty frothy acquisition pricing. And others have just — they continue to steadily acquire small chains or more small portfolios that are adjacent to their existing footprint. Again, I don’t view it as a change. I think it’s just another tool that we can offer to our partner tenants in our asset classes that has been very well received.
Bradley Heffern
Okay. Got it. And sorry, just for clarification, Brian, I thought earlier you said something about 75% of the $125 million. What was that figure?
Christopher Constant
Brian was referencing, when we talked about the guidance, about 85% of what we completed in the second quarter, that were already completed by the time we reported our first quarter earnings at the end of April.
Operator
Our next question comes from the line of Mitchell Germain with JMP Securities.
Mitchell Germain
This isn’t a unitary lease on the $125 million, right? How many transactions does it represent?
Christopher Constant
It’s not a unitary lease. Yes, I’d say about half a dozen different tenants within there. And again, it’s a combination of funds that will be dispersed through our development funding program, which ultimately will be completed with a sale-leaseback at the end and then typical sale leaseback funding for acquisitions.
Mitchell Germain
And are these leases expected to have a greater amount of term relative to your broader portfolio? Should we think of it from that perspective?
Christopher Constant
The lease term kicks in upon project completion and upon the sale leaseback, so no, I would say it would be relatively in line with our standard lease terms.
Mitchell Germain
And given the rate environment and obviously costs, labor and construction going higher, does that have any — is that having any impact on your underwriting and the yield potential of your development business?
Mark Olear
Yes, it’s Mark. As far as the forward look, obviously on the development side, the tenants are dealing with supply chain, material costs, labor issues like everyone else. One of the good things, as Chris mentioned, is the tenants have some scale, so they do have some buying power that we’re dealing with so they can hedge against that risk. But we are — we do contemplate a contingency in each budget that we do on a project by — property-by-property basis, which allows for some cost overrides as time goes by. And the underwriting assumes that contingency, so we’re protected against that cost. And we have a collar, a not-to-exceed number in these deals, so we have a hedge against that also.
Mitchell Germain
Okay, last question, thank you very much. If you — how should we think about your kind of one-off granular investment strategy knowing that you’ve got this $125 million commitment outstanding? Is it likely to slow things a bit? Or is your appetite still there to continue to grow?
Christopher Constant
No, I’d say our appetite is still there to continue to grow. Mark and his team are out there sourcing new opportunities. Again, this is a year — multiple transactions which we expect to fund over a year. I think it’s a little different than if it were a large $125 million single tenant unitary lease sale leaseback. It certainly allows us to figure out how to raise that capital over time.
Operator
[Operator Instructions]. Our next question comes from the line of Joshua Dennerlein with Bank of America.
Joshua Dennerlein
Just kind of curious on the capital needs for that $125 million. Is that all kind of taken care of? I know you did the forward debt offering last quarter, but are there any additional needs?
Brian Dickman
Josh, it’s Brian. The short answer is no. If you think of just initial funding, again, we have an undrawn revolver, we have significant leverage capacity. You could fund all of this with that and still be within our previously stated ranges. When you look at it from more of a permanent financing perspective, and we have $20 million of cash on the balance sheet, as we’ve mentioned a few times, this activity takes place over the next year and change, so generate call it another $15 million to $20 million of free cash flow during that time frame. And you have the $50 million of net incremental debt proceeds in January. Again, that’s a $125 million loan, but we’re using $75 million to repay our June maturity, so that’s that $50 million net. If you just look at cash and those debt proceeds, proceeds, excuse me, you’re $85 million, $90 million right there of the $125 million. The balance could be on the revolver for a period of time and then we take it out maybe with asset sale proceeds, maybe we term it out at a later date as part of a larger debt offering. If we see some movement on the equity side or equity side vis-a-vis the investment yields on this, maybe you go back to using ATM activity, things like that. But it’s a small amount, so the lion’s share of it we feel is taken care of from a permanent perspective, and again, significant revolver and leverage capacity beyond that.
Joshua Dennerlein
Okay. Thanks for the color, Brian. And then maybe just thinking about investment spreads in today’s environment, kind of where do you think those are maybe relative to kind of your historical average? It seems like there’s a lot of moving pieces between cost of capital and then just private cap rates.
Brian Dickman
I’ll start, it’s Brian. I don’t think there’s any question that they’ve gotten a little skinnier, Josh. I think we’re all seeing that. The capital costs, the increases in capital costs are impacting us. Probably don’t want to get into too specifics in terms of order of magnitude, but I think the important takeaway is that we can continue to invest accretively and we can continue to maintain the investment, a great profile of the balance sheet. And it’s incumbent upon Mark and his team to identify the right investments, and it’s incumbent upon myself and the rest of the group to source the capital to fund it. But we feel well positioned for this environment given the assets we invest in and given the current status of our balance sheet on liquidity. And again, that’s the business model we have and that’s the challenge and the opportunity in front of us.
Operator
Our next question comes from the line of John Massocca with Ladenburg Thalmann.
John Massocca
I know we’ve kind of sliced and diced the $125 million of transactions quite a bit already. But just maybe roughly speaking, what’s kind of the split between C-store and carwash in those collection of portfolios?
Christopher Constant
This set of $125 million I’d say is predominantly carwash. I don’t have the exact number right in front of me, but it’s probably 75%, 80% carwash, the balance is C-store. And again, similar distribution as development funding, although there are some acquisitions with carwashes in there. But it’s weighted towards carwashes is the answer.
John Massocca
Okay. That makes sense. And then have any of those transactions closed yet quarter-to-date? And then kind of as a follow-on, are any of them kind of included in guidance?
Christopher Constant
No, that $125 million is as of last night, we have not funded any of that.
John Massocca
Okay. And then maybe kind of getting away from that transaction, on the redevelopment side of things, what does that pipeline look like today maybe in light of some of the things we’ve seen around construction cost inflation and construction labor inflation? Does that maybe slow the outlook for what you can do on the redevelopment side with the existing portfolio? Or is that still kind of going as it was maybe 6 months ago?
Christopher Constant
I don’t think it slows the outlook and our desire to continue to participate and grow in that offering. It does affect, has effect on the ability to forecast timing. Where at a steady property level you’ve got, as you just mentioned, supply chain and labor, material sourcing issues that the tenants who are actually building these properties out deal with on a day-to-day basis. We’re in contact with them on a nonstop basis to stay current on where their projects are so we can forecast it quarterly for our funding needs. And it’s all around just managing it, managing the relationship, managing kind of, as I said before, the bookends of the deal with the maximum cost exposure, maximum time exposure for Getty. And I think we do a great job of doing that and working with our tenants. But working back to your question, it doesn’t, we don’t have any slowed appetite or excitement around the future to continue to grow that program.
Mark Olear
And just to add, John, the redevelopment has always been sort of the value-add, yields far in excess of the acquisition market. I think that we’re still comfortable taking that program and expanding it as much as we can because the yields are still pretty attractive from our standpoint.
John Massocca
Okay. Is there an amount that you would view as reasonable to have in that program at any one given time or kind of targeted investment in that program at any one time?
Christopher Constant
I think that our limitation in that program has always been having the ability to access some of our assets. With a portfolio that’s almost 100% occupied and tenants performing quite well in their own businesses, there’s not a lot of ability for us to always access an attractive site that might be a great redevelopment candidate. The team here has done a great job of sourcing these opportunities, working with our existing tenants, working with new retailers in the portfolio. But it’s more about finding properties in our portfolio where there is a need to do something with them. And then we’re matching that with a retailer who is looking to expand. I don’t view it as a capital issue for us.
Operator
There are no further questions in the queue at this time. I’d like to hand the call back to management for closing remarks.
Christopher Constant
Great. Well, thank you, everyone, for joining us for our second quarter call. We look forward to getting back on the line with everybody in October when we report our third quarter of 2022.
Operator
Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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