EPR Properties (EPR) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 EPR Properties Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to hand the call over to your speaker for today, Mr. Brian Moriarty, Vice President, Corporate Communications. Thank you. Please go ahead, sir.

Thank you, Deb. Hi, everybody, and welcome. Thanks for joining us today in our fourth quarter 2019 earnings call. I'll start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause such results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earning release supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to the company's President and CEO, Greg Silvers.

Thank you, Brian, and good morning. Let's begin today with our Q4 and year-end headlines. Our first headline, strategic refocus creates a stronger company. Put simply, we are better positioned for long-term sustainable growth today than we were a year ago. Our decision to sell our charter school portfolio reduced our income volatility, strengthened our overall rent coverage and importantly, positions us to focus on continuing to build the premier Experiential REIT. The Experiential real estate opportunity is fueled by the two largest population segments: baby boomers, who control approximately 70% of disposable income; and millennials, who have a strong orientation towards Experiential lifestyles. Ultimately, this refocus activates our time-tested thesis that people have an innate desire to connect, congregate and to create memorable experiences. As consumer goods become increasingly commoditized through online transactions, simple experiences like watching a movie in a compelling theater environment, hitting a golf ball while enjoying outstanding food at TopGolf or passing friends on the track at Andretti Karting create memories that last a lifetime. Our second headline, Experiential Opportunity, sets the stage for growth. As we've highlighted, our broader target Experiential opportunity includes nine property types and an estimated addressable real estate market of $100 billion or more. We are bullish on the opportunity set for quality Experiential investments. Our intent is to further penetrate these opportunities in 2010. Since 2018, we've made a concerted effort to broaden our traditional investment categories to include the nine categories we've identified as premier Experiential real estate opportunities. During 20191, our acquisitions team successfully invested in most of these categories, with significant investments in theaters, eat and play, ski, Experiential lodging and cultural. As our investment guidance indicates, our growth will continue to diversify our product categories and tenants and will reduce current concentrations over time. We believe our unique focus on the Experiential spectrum will fuel outsized growth for years to come. Three, seizing the opportunity, concerted acquisition process begins paying off. Our primary investing objective is to curate a portfolio of real estate assets that delivers on the following characteristics: one, focused exposure to the Experiential economy; two, consistent and reliable cash flows; three, stable and underlying asset values with durability through various economic cycles; and four, optimize risk return through asset and tenant diversity. To execute our plan, it's critical to meet the operators at their offices, to go to the industry conferences and to establish the relationships necessary to build a quality portfolio. Our long-standing relationships, along with new ones we're creating, continue to grow our industry-leading depth of knowledge in Experiential real estate. Just this month, along with most of our acquisitions team, Greg Zimmerman and I were in Los Angeles for the Sixth Annual Entertainment Experience Evolution. We were impressed with the volume of creative new ideas and it remains clear that baby boomers and millennials continue to prefer experiences to physical goods. We've also met with most of the major casino operators over the past year. At a time when gaming companies are seeking diversified revenue beyond the casino floor, our broad knowledge of Experiential opportunities is highly valued by these operators. And finally, introducing guidance for 2020. Today, we're introducing FFO as adjusted per share guidance of $5.19 to $5.39, which, at the midpoint, represents nearly 4% growth after removing fees related to investments that were sold in 2019. To accomplish this task, we're also introducing investment spending guidance of $1.6 billion to $1.8 billion. This increase reflects our bullish outlook for Experiential spending and includes a projected $1 billion investment in a gaming property. As we stated in our press release, we're making significant progress on the definitive agreements for this gaming property. We expect to execute definitive agreements within the coming weeks and to provide additional details at that time. This transaction is expected to close in the second quarter. Additionally, we are proud to continue our commitment of increasing dividends for our common shareholders, and this increase reflects our tenth consecutive annual increase. Now I'll turn the call over to Greg Zimmerman to go through the quarter in greater detail.

Thanks, Greg. At the end of the fourth quarter, our total investments were approximately $6.7 billion, with 370 properties in service that were 99% occupied. During the quarter, our investment spending was $110 million, and our proceeds from dispositions were $492.7 million, of which $477.3 million was related to the sale of our entire charter school portfolio. Our company-level rent coverage was 1.92x, demonstrating the continuing strength and consistency of our portfolio. Our Experiential portfolio comprises 282 properties, with 88 operators, is 99% occupied and accounts for nearly $6 billion of our $6.7 billion in total investments, with two properties under development. The bulk of our fourth quarter investment spending, $104.7 million was in our Experiential portfolio. The primary investments were $37 million mortgage note on the Alyeska Resort, the premier sea resort in Alaska just south of Anchorage and Girdwood; and the acquisition of three high-quality theater projects – properties for a total of $48.6 million. The remaining investments consisted primarily of build-to-suit development and redevelopment projects. I want to spend a moment on theaters. The cinema industry is the most popular form of out-of-home entertainment in the U.S., providing a low cost entertainment option which draws more customers than all professional and collegiate sports combined. 2019 was the second-highest grossing box office of all time. People still like to see movies in large auditoriums on the big screen. The cinema model is dynamic with new titles arriving weekly. It's a content-driven business with ups and downs corresponding to consumers' interest in the movie slate. As shown by this year's Oscar winners, storytelling is becoming more and more diverse with the ability to reach wider audiences. Movie theaters have resisted any number of threats for as long as there have been movies. Our history demonstrates our theater portfolio has been a steady generator of solid and reliable cash flows for over 20 years, highlighted by our consistent rent coverages. We expect that to continue in the future. As we grow our Experiential opportunities, our first focus is understanding of business at the industry level. We look for proven business models and enduring cash flows. As real estate investors, it goes without saying that we're also looking for great real estate, high-quality locations and strong competitive positions with good asset-based cash flows and rent coverages. Last but not least, we want tenants with demonstrated success, entrepreneurial vision and solid management. As you can see from our robust investment spending guidance, we're excited about the many opportunities that our Experiential focus offers. Whether it's a $10 million family entertainment center or a $1 billion gaming venture, we have the strategy, the talent and the resources needed to execute simultaneously, both the flow business and transformative transactions. To execute this strategy, it takes a deep understanding of Experiential businesses combined with a strong proven underwriting team and process. We believe we're the only group that combines these skills in the entire Experiential platform. With that, I'll turn it over to Mark for a discussion of the financials.

Thank you, Greg. I will begin today by discussing our financial performance for the quarter and year. FFO as adjusted for the quarter was $1.26 per share versus $1.39 in the prior year. As Greg discussed, we sold our remaining charter school portfolio during the fourth quarter. These sales were all recorded, as discussed in our call in November, and we have reclassified the financial performance of all charter schools sold in 2019 to discontinued operations. Total revenue from continuing operations for the quarter increased by 13% versus prior year. In addition to revenue associated with net new investments in Experiential real estate, this increase is also due to the fact that the Kartrite Resort and indoor water park continues to be operated under a traditional REIT lodging structure, which impacts other income included in total revenue as well as other expense. In addition, $7.1 million of the revenue increase for the quarter relates to the adoption of the new lease accounting standard, which is offset by higher property operating expense, as I have discussed on previous calls. These increases were offset by the fact that the prior year included $7.4 million in prepayment fees from mortgage note payoffs and there were no such prepayment fees in the current quarter. Finally, percentage rents and participating interest for the quarter totaled $6.4 million versus $5 million in the prior year. G&A expense decreased to $10.8 million for the quarter compared to $12.2 million in the prior year primarily due to a decrease in payroll and benefit costs, including stock grant amortization as well as professional fees. Transaction costs were $5.8 million for the quarter related primarily to the transfer of the remaining four CLAs to Crème. We are pleased that this transition is now complete. As a reminder, transaction costs are excluded from FFO as adjusted. Disposition proceeds received during the quarter totaled $492.7 million, bringing our year-to-date disposition proceeds of just under $883 million. In addition to the charter school sales I discussed earlier, disposition proceeds for the quarter also included the sale of an attraction property and two land parcels, with result – which resulted in a combined gain of $3.7 million. For the full year 2019, FFO as adjusted was $5.44 per share versus $6.10 in the prior year. Note that during 2018, we recognized $71.3 million in prepayment fees related to the payoff of two non-education mortgage notes. If you exclude this income, our FFO as adjusted per share for the year increased by 5% versus prior year. Now let's move to our balance sheet and capital market activities. Our debt-to-adjusted EBITDA ratio was 4.7x at quarter end. If you adjust this ratio to annualize the dispositions that occurred during the quarter as well as other acquisitions and properties that went in service, this ratio was 4.8x at quarter end, which is at the low end of our targeted range of 4.6x to 5.6x. Our net debt-to-gross assets was 35% on a book basis and 31% on a market basis at December 31. At year end, we had total outstanding debt of $3.1 billion, all of which is either fixed-rate debt or debt that has been fixed through interest rate swaps, with a blended coupon of approximately 4.3%. Additionally, our weighted average debt maturity is approximately seven years and we have no debt maturities until 2023. Also during the quarter, we issued approximately $17 million in common equity in our direct stock share purchase plan or DSP plan. This brings our year-to-date issuance under this plan to approximately $306 million. With low leverage, $520 million of unrestricted cash in the bank at year end, nothing outstanding on our $1 billion line of credit and no near-term debt maturities, our balance sheet is certainly well positioned to fund our investment opportunities. Turning to the next slide. We are introducing guidance for 2020 FFO as adjusted per share of $5.19 to $5.39 and guidance for investment spending of $1.6 billion to $1.8 billion, both of which include the anticipated $1 billion investment in a gaming venue that Greg discussed earlier. Disposition proceeds are expected to total $50 million to $100 million for 2020. Excluding termination and prepayment fees primarily related to the charter school portfolio that was sold in 2019, the midpoint of our FFO as adjusted per share guidance for 2020 reflects approximately 4% growth despite coming off a year where dispositions exceeded investment spending, with most of those dispositions occurring in the fourth quarter. Guidance details can be found on Page 24 of our supplemental. As part of our year-end earnings release, we also announced an increase in the monthly common dividend of 2%, beginning with the dividend payable April 15 to shareholders of record as of March 31. This represents the tenth straight year with a dividend increase. Before concluding, I would like to give some additional details regarding 2020 guidance. With respect to the approximate $1 billion gaming venue investment that is expected to close in the second quarter, our strong balance sheet position provides us great flexibility as to how this transaction is funded. Due to our favorable liquidity position, we can fully fund this transaction at closing with cash on hand and drawing a portion of our line of credit. While we do have equity issuance in our plan to maintain our leverage metrics, consistent with our stated target range, the timing and method of raising such equity will be based on market conditions and could be in the form of stock issuance under our DSP plan in which we can raise an excess of $70 million per month or one or more offerings or a combination of both. We could also rebalance our leverage by executing additional asset purchases funded substantially with common shares. In addition, it should be noted that the remaining $600 million to $800 million of other investment spending in our guidance is more heavily weighted to the second half of the year. Lastly, due to the timing of the redeployment of the significant disposition proceeds we received in 2019 into new investments in 2020, we anticipate that we will report approximately $0.15 lower FFO as adjusted per share in the first quarter than the expectation for the full year divided by 4. Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. Hopefully, everyone's heard the message we're talking about this morning: EPR's returned to growing net investment. Over the last two years, we faced and solved many challenges. However, we've refocused our strategy and now we're positioned to grow both net investments and earnings, and we look forward to delivering superior results as we continue to build the premier Experiential REIT. With that, Deb, why don't we open it up for questions?

[Operator Instructions] And your first question comes from the line of Craig Mailman with KeyBanc.

Hi, good morning, guys.

Good morning, Craig.

Just curious here on the casino investment. I think previously, you guys had indicated maybe a more measured approach to entering the property type and this first deal is almost 15% of your total investment of the company. Could you just give some thoughts around kind of that decision to jump in a little bit harder here?

I think, Craig, you always start off saying, this is kind of the direction we would like. And I think we talked about I think, slightly higher, something in the $500 million to $700 million. But when you're presented with an opportunity for a great asset, it isn't often that you're able to say, you know what, I'd like to come, get that one later. Part of our deal is if you get what we think is going to be pretty well recognized as a premier kind of asset and it can anchor our investment in gaming, I think you've got to look long and hard on those. And I think when we're able to discuss this, that there'll be a growing appreciation of that this quality of asset at the levels that we're able to buy it at and at the coverage that we're able to get doesn't present itself every day, and the risk/reward for us completely outweighed going a little deeper.

Okay. Was this one kind of in the pipe when you gave kind of the dilution relative to where the charter school sale could come in? Or could this be a little bit of a lower yield than expected just given the size and maybe prominence of it?

I think part of it is we were talking and have been talking to several people. So I don’t think we kind of had identified this replacement asset because we were working on several things. As we’ve said, there’s lots of – we still think there are many gaming opportunities for us out there. So I think really what we’re talking about – and we have to remember, when you go back and look, we sell – as we talked about, we sold slightly more than $450 million of charter schools, earning that $10 million, and then we had 30 million – approximately $30 million of fees, so you’re down $75 million of revenue are practically $1. So it wasn’t – we never set out to say, hey, we’ve got to replace that. But what we did is say, if we find the right asset that makes sense for us, I mean, we remain committed for owning market-dominant assets. If you look at our portfolio, and what we’ve established over 22 years is that in our Experiential portfolio, we own the best assets in the industry. So I think that kind of commitment led us to this asset, which, I think, will be a great anchor for our introduction into the gaming space.

That’s helpful. Then maybe, Mark, kind of what should we assume as a blended yield on the whole $1.6 billion to $1.8 billion? What’s kind of a good placeholder?

Let’s say, for a GAAP kind of low 8s roughly, maybe a little slight – maybe let’s call it, around the 8 blended.

Okay, okay. And then just one last one for me. I don’t know if you guys have this off hand. But just when SARS hit early in the 2000s. Kind of do you remember what the impact was on theater attendance or kind of the Experiential retail tenants that you guys kind of invest in? Vis-à-vis, what could happen if the Coronavirus continues to spook people?

Sure. It’s actually a great question, Craig. And we went back, and I’ve gone back and looked at it. And it really did have a negligible effect. If you recall, SARS actually affected Canada more than it did the U.S. It showed up mainly in Toronto. So if you use that as a kind of a set, it was really impactful for about 20 to 35 days, but to the overall year, it had a negligible effect.

Okay. Great, thank you.

Thank you.

Your next question comes from the line of Rob Stevenson with Janney.

Good morning. Greg, heard you described the gaming purchase as one asset. So one asset in one market rather than a portfolio here?

That’s a fair assessment.

Okay. And then you’ve got – I think some investors has moved a little bit on the theater side by the horrible stock performance of AMC, Cinemark and Cineworld Regal in recent years. Obviously, you’re more concerned about the credit and the equity value. But can you talk about where your rent or 4-wall coverage or whichever credit metric you guys use to monitor the theater business is on your assets today, and what you’ve seen in terms of the trend over the last couple of years?

Sure. That’s actually a great question, Rob. And what – let’s talk about it generally. And if you look at our investor package, our investor presentation, we show you a 10-year kind of mark of our theater coverage, and it’s been within a very, very tight range for all 10 years. So again, that’s both down-content years and up-content years. The reality is that our theater portfolio doesn’t necessarily respond nearly as dramatically as people think to the box office. And it’s – that shows our entire theater portfolio coverage. And if you take a look at it, I think it’s probably traded within a range of 1 6 to 1 8 for 20 years, so it’s been a very, very tight range.

Okay. And then can you talk about Cal Kartrite is performing to date versus your expectations?

Yes. I think what we’ve said all along is last year was a year that we expected Cal Kartrite to lose money. This year was kind of more of a breakeven year as we kind of ramp into this really, as I’ve spoken to many of you, this is about growing into what we think will be another kind of launch point, which is the introduction of LEGOLAND, which is much more a family-friendly entertainment and will fit hand in glove with what we’re doing that, which is 2021, when we think consistent with the plans of our operator, we can kind of turn to making money at that property.

Okay. thanks, guys.

Thank you.

And your next question comes from Ki Bin Kim with SunTrust.

Thanks, good morning.

Good morning.

So obviously, you guys have some big plans for 2020 investment activity. I was just wondering if you can provide some color on pricing. Well, you mentioned the cap rate’s blended, but maybe for the casino gaming asset, the quality of the tenants or the assets that you’re looking for?

I mean, I think, Ki Bin, what we’ve said is, and we’ll have more information when we get announced the transaction, but I think consistent kind of with where the market’s at. I don’t think for the quality, we’re necessarily – we’re not going to be – have to overpay for that quality. I think also we’ve talked about kind of what kind of quality asset that we wanted, which was kind of a market-dominant kind of property, of which, I think, as all of the analysts here who have gaming analysts within their staff, when they – when we get to this announcement and they go back and talk to them, they will concur that this is a great property as an anchor to anything that we would be going into in gaming.

Okay. And given that you suggested that you’re going to close on a gaming asset in 2Q 2020, is it fair to assume that this is a location where you already have a license?

No, that would be – I mean, again, I think it’s false to assume that we haven’t been doing things along the way to kind of deal with this. So I think that’s jurisdictional-dependent. And like I said, we didn’t just find this transaction a couple of weeks ago. There’s work been going on with our team and with our gaming people who we have on staff, who’ve been working on this for some time.

Okay, thank you.

Thank you.

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Yes, thanks. Greg, can you talk a little bit about your theater exposure? Is your exposure to theater is largely comprised in the three big master leases that you put in your supplement? And what is the dispersion of that coverage? I know that the total portfolio is around 176. Is the dispersion of those three master leases right around there?

Yes. I mean, if you look at generally, I mean, just how big of a concentration that if you look at our top 10 list with AMC, Regal and Cinemark, I think you couldn’t – you would get to the assumption that each one of those constitutes big enough that they’re – it’s reflective of the – of what we’re talking about in the overall rent coverage.

Okay. So it’s pretty tight around that 176 in with those – with your measurements?

As always, there’s some degree of dispersion in there. But like I said, over time, what we’ve seen is there’s – it’s a relative kind of comes to the median of that within an operator, so…

Okay. And then what type of theaters are you targeting to invest today? Is the stuff that you’re buying today different from five years ago? And I mean, what’s the drive – big, I guess, factors? I mean, is it too many screens you try to shy away from that? Is the smaller boutique operators typically doing better? I mean, what’s the strategy there?

I think, Michael, we’re still looking at amenitized theaters. I think that the market has kind of spoken that the consumer likes the high-amenitized. I would say we’re not pursuing true kind of high-intensity in-theater dining. But we do like the amenitized theaters. The idea of big screens, that really is – I mean, now those have been kind of out of vogue probably for 10 years. The sweet spot is probably somewhere in between 12 and 16 screens. Greg, I don’t know.

Yes. And I would also add that we’re looking at market-dominant theaters, whether they’re in large DMAs or in smaller DMAs, that are more resistant to any competition going forward.

And Michael, I know you didn’t ask this question, but I want to go back to something, and I apologize for this for Ki Bin’s question because he asked a question and I didn’t appreciate what he said. Let me be clear to everyone on the phone. This isn’t – the asset we’re talking about in gaming, while I can’t give you a lot, I could tell you, it’s not our New York asset. So those who are – when he said is it a place we’re licensed in, maybe then he thought that we might be buying that asset. It is not that asset.

Okay, great. Yes, no problem. And then just, I guess, how many theaters do you have right now that would be over 16 screens? And is that the type of stuff that you’ve already disposed of, or are you still happy wholly?

I don’t know, but we don’t have – I mean, again, like I said, it’s really kind of market-driven. So if you have – if you had the Empire 25, you’re not worried about having over 16 screens in New York City. So I think it’s not so much – it’s dependent upon the market. But I would say generally speaking, the large kind of 24 screens are going to be in major MSAs, and new builds really are more fill in locations, which don’t support that many screens.

Okay. And then last question for me is the additional $600 million to $800 million of investments outside of that gaming asset, I mean, is that largely dependent on your cost of capital and ability to fund those deals? Or do you feel pretty comfortable about doing those deals without meaningfully accessing the capital markets?

I mean, I think as a net lease investor, you’re always worried about your cost of capital and how you’re going to do that, as Mark talked about, maintaining our kind of investment-grade metrics are that. So again, we will always be mindful of how we’re going to fund that. But also, as he said, there’s a variety of tools that we have to affect our cost of capital, whether you have a marketed deal or a DSPP. There’s a lot of tools that we can use to effectuate that. But I think we always have to be mindful of our cost of capital.

Yes, we’re not just focused on the near-term benefit of using low-cost capital. Obviously, we got cash in the bank and nothing on our line. Anything you do practically would be accretive. We generally look at it, we do look at it more on a permanent finance basis and we will do those transactions that provide an appropriate spread calculated in that way.

Okay. Great, thanks.

Your next question comes from Nick Joseph with Citi.

Thanks. For the $1 billion casino asset, is that of the 100%, or will there be a JV partner?

Again, like I said, I think our – we could tell you what our intent has been always is to be long-term holders leased property rather than – I don’t want to give anything specific about this transaction, but we’ll be glad, hopefully, in the coming weeks to go into detail. But our intent is to be an owner of a leased asset, and that’s what our strategy is.

Okay. So maybe just more broadly, what sort of coverage do you underwrite gaming assets to typically?

I mean, I think the market’s kind of fairly established those. I mean, again, at around two. I mean, would we be happier with higher coverage? No doubt. So again, I say, stay tuned.

All right. And then maybe just finally, how large of exposure do you want to gaming? And then what is the pipeline of other gaming assets behind the $1 billion?

Again, I think the question, I think, makes a lot of sense in the sense that we’re trying to rebalance and find greater kind of diversity across our overall portfolio. So the difficulty of that is we don’t get to pick when tenants want to finance something. We get to decide if we want to do it. I think, overall, if you look at kind of the Experiential platform and you do our $100 billion addressable – immediately addressable market, those could be kind of 20 – low 20%. That’s gaming as an opportunity set. The question is could you go outside that and then work yourself down because the right opportunity presented itself? We’ll have to see on that. But I think the long-term goal is to create diversity across all nine of those categories and kind of balance them in relative proportion to the opportunity set.

Are there other gaming assets included in guidance beyond the…

At this point, there’s not – it doesn’t mean that, that – our guidance throughout the year couldn’t go up because of the fact that we have – and as Greg mentioned, several ongoing discussions with gaming operators. Again, we’ve been met with a lot of interest of people who, for one reason, like I said, our entire Experiential background and people wanting exposure to a lot of the tenants that we have. So I think it – there’s a lot of operators who are seeing this as a win-win and are definitely wanting to have discussions with us about how we could partner together.

Thank you.

Your next question comes from John Massocca with Ladenburg Thalmann.

Good morning.

Good morning, John.

You had a pretty wide range for 2020 guidance. I guess, is there anything driving the difference between the high end and the low end of that range besides the investment volume range? And maybe, I guess, also the funding for the casino acquisition?

Well, I think – first of all, I think it’s less than 2% both ways, the $0.10, up down. But as far as what can move the needle, the timing and amount of investment spending, how you finance it, obviously, the Kartrite Water Park is an operating asset, so that could vary somewhat. And then obviously, a variability of percentage rent. So there’s a number of things that can move it, but I think on a percentage basis, up down 2 – up or down 2% from the midpoint is not that big a range in the grand scheme of things.

Okay. So it sounds like it’s basically Kartrite funding of the casino transaction and then just investment volume?

Yes. Investment volume and the funding of that volume.

And the timing.

Timing, yes.

Okay. And I guess, on the disposition side, I mean, how much of that disposition activity is going to be kind of legacy Education assets versus just kind of regular way, pruning of the Experiential portfolio?

As I said, I think it’s going to be more of the pruning of either taking advantage of improving the risk profile of our portfolio or if somebody wants to pay a big number for something, we’re always in the market. At this point, it’s not so much of the legacy education asset.

And it’s only pretty modest at $50 million to $100 million.

Understood. I guess, could that potentially ramp as we get later in the year, if you feel like you can prune some of those education assets given their non-core? I mean, I know there’s probably a little bit of a balance you’re trying to achieve as you redeploy proceeds here, but…

Yes. I mean, I think that’s – John, you’re dead on in the sense, could there be? Yes. I mean, it’s truly a function of – I mean, if you look at the last two years, we’ve probably sold more stuff or right at about the same amount of stuff that we sold, that we bought. Now we were able to achieve growth throughout that, but it still is a challenge. So it’s probably a function. Clearly, we’re getting calls in daily about our Educational portfolio from a lot of our net lease competitors who own those types of assets. So if the opportunity set was to grow substantially and present itself, yes, that could be an opportunity. But we’re really focused after two years of the kind of lower net asset growth that are – we need to be focusing on growing the overall net investment spending.

Okay. That’s it for me. Thank you very much.

Thanks, John.

[Operator Instructions] We have no questions in queue. Do you have any closing remarks?

I just want to say thank you for everyone’s time and attention, and we look forward as we begin conference season to seeing you guys outside of our offices in our call. So thank you, guys.

Thank you.

Thanks.

Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect.