FrontView REIT Q3 2026 Earnings Call Transcript

FrontView REIT (NYSE:FVR) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

FrontView REIT reported a 19% increase in annualized base rent to $69.8 million and expanded its portfolio to 327 properties with a 99.4% occupancy rate.

The company significantly reduced its casual dining tenancy from 15.6% to 9.1% and increased its presence in Texas and Florida from 11.6% to 17.8%.

FrontView REIT’s debt was reduced, lowering net debt to adjusted annualized EBITDAR from 5.5 times to 5 times, with plans to further reduce it to 4.5 times with the upcoming preferred draw.

Strategically, the company focuses on acquiring properties with replaceable rents and high-quality real estate, generating a 100 basis point spread between acquisitions and dispositions.

Future guidance remains strong with potential for increased acquisition volumes and continued focus on high-quality real estate, targeting a net investment guidance of approximately $120 million for 2026.

Operational highlights include successful re-tenanting of properties, resulting in significant rent increases and maintaining a nearly fully leased portfolio.

Management expressed confidence in the company’s strategy and growth potential, supported by recent board appointments and expansion into key markets.

Full Transcript

OPERATOR

Hello everyone. Thank you for joining us and welcome to FrontView REIT third quarter 2026 earnings call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Pierre Revol, CFO. Pierre, please go ahead.

Pierre Revol (Chief Financial Officer)

Thank you, operator, and thank you everyone for joining us for FrontView REIT’s third quarter 2026 earnings call. I will be joined on the call by Steve Preston, Chairman and CEO. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to several factors. I refer you to the safe harbor statement in our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements.

This presentation also contains certain non-GAAP financial metrics. Reconciliations of non-GAAP financial metrics to the most directly comparable GAAP metrics are included in the exhibits furnished to the SEC under Form 8-K, which include our earnings release, supplemental, and investor presentation. These materials are available on the Investor Relations page of our company’s website. With that, I’m now pleased to introduce Steve Preston. Steve.

Thank you, Steve, and thank you to the Board of Directors for your confidence and support. I look forward to continuing to work alongside a talented team to build FrontView REIT into a differentiated net lease platform. As Steve mentioned, a highlight this quarter was our capital deployment, where we generated a 100 basis point spread between our acquisitions and dispositions. We funded close to 100% of our acquisitions this year with dispositions and equity, reducing net debt to adjusted annualized EBITDAre from 5.6 times at the beginning of the year to 5 times at quarter end pro forma.

For the final preferred draw on November 10th, leverage declines further to four and a half times, well below our leverage range of five times to six times. In terms of capacity, this allows us to complete our 2026 investment plan and fund an additional 80 million of net investment in 2027 while maintaining leverage at or below 5.5 times. If we repeated our 2026 net investment guidance of approximately 120 million in 2027, leverage would be close to 5.8 times, still comfortably within our targeted range. Turning to the quarter, contractual cash rents increased 777,000 sequentially to 16.7 million, driven by net acquisitions and contractual rent increases, partially offset by dispositions.

Percentage rent increased to 131,000, and we expect the run rate to be closer to 50,000. Quarterly mortgage interest income was 228,000, including a 3.7 million short-term take-back loan on the sale of a Sleep Number and AT&T property, which was repaid during the quarter. As a result, mortgage interest income in the fourth quarter will decrease to 196,000. Unlike the first half of the year, where we generated 495,000 of other income, we only had 11,000 this quarter.

As we said previously, other income is episodic. In total, adjusted cash revenue increased 4.4% to 17.1 million, or 5.6% excluding other income. Notably, with our portfolio almost fully leased and continued success in re-tenanting properties, non-reimbursable property expenses declined to just 216,000, or 1.3% of adjusted cash revenue, compared to 405,000, or 2.6% of cash revenue a year ago. Adjusted cash NOI, including the full impact of acquisitions and dispositions, was 17.4 million. Adjusting for percentage rent, repayment of the short-term loan, and slightly higher expected slippage, our exiting run rate adjusted cash NOI is approximately 17.2 million.

Importantly, this excludes the impact of six new leases highlighted on page 10, with four commencing in the fourth quarter contributing 485,000 of annualized rent and another two commencing in 2027 adding 699,000. In total, these leases represent 1.2 million in annualized rent, a 19.3% increase over the prior leases, highlighting the embedded organic growth within the portfolio. As Steve mentioned, in August we made an investment in a Dallas redevelopment project, which we account for as an unconsolidated joint venture. It contributed 19,000 dollars to AFFO in the first partial quarter, and the contributions will grow as rent steps up at the project. Recurring cash G&A was 2.7 million, and for the full year we expect cash G&A of approximately 10.5 million, excluding non-recurring expenses. As shown on page 23, our G&A is about 1.5% of gross assets versus peers of closer to 0.5%.

While this is higher than our peers, we have already built much of the infrastructure needed to support a significantly larger company, positioning us to generate meaningful operating leverage as we grow. We could more than double our asset base with similar levels of G&A. Year to date we have acquired 43 properties for 144.5 million including closing costs and invested 2.7 million in the joint venture. We also sold 20 properties for 47.4 million including proceeds from a short-term seller financing, bringing our net capital deployment to approximately 100 million. We funded these investments with 50 million of common equity, 43 million of Series A preferred, and retained free cash flow. As a result, we grew the portfolio while reducing leverage over the year.

We ended the quarter with 174 million of liquidity, and since year end our leverage ratio declined to 30.6% from 34.5%, and our FFO payout ratio improved to 64.7% from about 69%. Fixed charge coverage ratio remains strong at three and a half times. On October 15th, we extended our revolver and term loan to October 2028 with an option to extend to October 2029 and added a ratings-based pricing grid that would lower our borrowing costs with investment grade ratings. As a reminder, our term loan and revolver are part of a single credit facility established at our IPO. We swapped 200 million dollars of term loan to a fixed one-month SOFR rate of 3.66% and subsequently swapped another 100 million on our revolver at approximately 3%.

Both swaps run through March of 2028, giving us a blended fixed SOFR rate of approximately 3.4%. We have close to a year and a half to evaluate our options before these swaps mature. As we build a more laddered balance sheet, we expect to term out and fix more of our floating-rate debt. In the meantime, our pre-funded equity covers our 2027 acquisitions with the balance financed through our revolver until we term it out. In terms of our share count, we settled 1.7 million shares we sold forward last quarter for 32.7 million, and 6.7 million of the Series A preferred converted to common, adding an additional 392,000 shares. Also, OP unitholders converted 869,000 units to common. Together, our common shares outstanding increased by about 3 million to 26.6 million, and total shares including OP units increased by about 2.1 million to 31 million. On November 10, we will issue the remaining 30 million of the preferred, completing the 75 million investment.

That brings our Series A preferred outstanding to 68.3 million, or about 1.15 million of quarterly dividends at a 6.75% dividend rate. We’re maintaining 2026 AFFO of $1.32 to $1.34 per share, which represents approximately 7% growth at the midpoint and includes $0.02 of other income earned in the first half of the year. Our guidance implies $0.33 per share in the fourth quarter, with no other income assumed, as the contributions from our acquisitions and strong operations are partially offset by dilution from the equity we settled and the final draw of our preferred in November.

Before we open the line, I want to leave you with the four new pages from our investor presentation that we believe help frame the investment opportunity with FrontView. First, page 7: our growth is structural. Contractual escalators and below-market rents drive 1.5% to 2% of annual organic growth. On top of that, our low payout ratio allows us to retain and reinvest free cash flow, adding approximately 3% to annual growth. Combined, that gives us 4.5% to 5% growth before raising and accretively deploying any new capital.

Second, page 23: analysts expect FrontView to grow AFFO per share meaningfully faster than our peers, at 6.8% this year and 5.5% next year, compared to 5.1% and 4%, respectively. Put simply, investors are paying roughly the same multiple for FrontView but getting meaningfully more growth. Third, page 24: the chart on the left shows how we can generate outsized growth through relatively modest acquisition volumes with a 100 to 150 basis point spread to our cost of capital.

The table on the right highlights a significant runway ahead for us. Unlike larger peers, we don’t need to chase portfolios or find new ways to deploy capital. Assuming 15% annual asset growth, we have approximately 10 years before needing to acquire more than 500 million annually. This allows us to continue compounding growth by acquiring granular, high-quality properties that fit FrontView’s model for years to come. Finally, page 25: based on November 3rd’s closing price, FrontView trades at an implied cap rate of approximately 7.5%, which does not reflect the underlying value and quality of our real estate portfolio.

While net lease generally do not trade on NAV alone, our portfolio gives us strategic flexibility if the public markets are not reflecting the value of our assets. We can create value by monetizing select properties in the private market and recycle that capital to new acquisitions at attractive spreads. A year ago, when we announced the priority investment for Mawin, we said our overriding objective was creating shareholder value and that our size is a structural advantage. Since then, we’ve done what we said we would do. We delivered top quartile AFFO per share growth, reduced leverage, improved NOI margins, and demonstrated through numerous case studies how our real estate creates value. Importantly, we’ve earned the confidence of institutional investors who have committed new equity capital to support our growth, giving us the capacity to fund our acquisition plans into 2027.

We have a clear strategy, significant capacity to grow, and a track record of execution. We will continue building FrontView the same way, one disciplined investment at a time. With that, I’ll turn the call over to the operator to open it up for Q&A.

OPERATOR

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jamie Feldman with Wells Fargo.

Your line is open. Please go ahead.

Jamie Feldman (Analyst)

Great. Thanks for taking the question. Congratulations, Pierre. Nice to see things going well.

Pierre Revol (Chief Financial Officer)

Thanks, Jamie. Appreciate it.

Jamie Feldman (Analyst)

Of course. I guess just looking at your, you know, last few quarters of investments, you’ve got WALT’s declining, you’ve got cap rates going up. Can you just talk through, you know, how to think about the WALT piece of what you’re buying and is it, is there something different in what you’re underwriting, or you just happen to find better deals and we’re looking too much at that as a trend?

Pierre Revol (Chief Financial Officer)

Yeah, yeah, no, good, good. Thanks for the question. You know, first, you know, we’re focusing on great locations, replaceable rents, and then of course, diversification. You know, this quarter and last quarter we acquired a few shorter-term properties. As we know, we have strong operating performance on them, and we have the opportunities to extend those leases, and we really get to create value. So we see spreads in the sort of 100 to 200 basis point arena.

Again, having performance metrics and relationships with the tenants helps us feel very good about those types of assets. And what’s really kind of interesting in the space is how many sellers just don’t try to extend terms and leave a lot of value on the table. They don’t have the relationships, they’re unsophisticated, and that’s where we get to step in. We really view these opportunities like development-like, but without taking on any kind of construction risk, which is really important. I think that, you know, echoed in our San Antonio Spec’s Liquor, you’re buying that at about a 7.6 cap rate with 3 years left with $10 a foot rent in a $20 market.

Steven

I’ll say that cap rates are up a little bit. What we’re seeing in the market is we’re seeing assets that are coming back to us that we otherwise would have bid on and lost out on to higher pricing. So as circumstantial buyers, as, you know, it’s tougher to achieve capital, you know, we’re starting to see more opportunities. So this is actually a really great time for us. And, you know, we expect to take, you know, full advantage of the market. I do not see anything different.

It’s more of that same quality, that same great real estate, that same replaceable rents. I mean, that’s the movie, you know, since we founded the business in 2016 and that’s what we expect to continue going forward. Do you want to comment on the election? I don’t think that anything really changed immediately, but we still target Texas and Florida. We’ve increased those exposures. A lot of our pipeline continues to be in those markets. And we continue to strategically look at these markets because of the population growth, the demand, our experiences with when we get a property. Everything we bought in Texas has had a really good outcome. And a lot of stuff in this quarter, like the San Antonio deal we talked about, have been really positive.

And so I think that this market continues to see a lot of demand and we’re seeing that across our portfolio when you target these frontage properties that we want to continue to build within these markets.

OPERATOR

Your next question comes from the line of Eric Borden with BMO Capital Markets. Your line is open. Please go ahead.

Eric Borden (Analyst)

Great. Thanks for taking the question. And congrats to Pierre. I know you’re not providing 27 guidance on the call, but you’ve previously outlined 4.5% to 5% structural growth before, you know, new capital. How should we think about the carryover from this year’s acquisitions and signed leases relative to the full-year impact of the common equity and the preferred funding for next year? Thank you.

Pierre Revol (Chief Financial Officer)

Thank you, Eric. I appreciate it. So I think our plan, as we laid out in our investor presentation, is there is structural growth from the escalators and the free cash flow. And we’ve been funded this year. So what really will dictate 2027 guidance is the structural growth piece of it. But we will be borrowing on the line as we grow into next year, and so rates do impact. I also mentioned that we had the swaps and so we do anything on the swaps that would also have an impact.

That’s basically where 2027—we’re in early stages, and we’ll provide an update when we get closer to February when we provide guidance for the year.

Eric Borden (Analyst)

Okay, thank you. And then you talked about about $40 million under LOI or contract versus, you know, the approximately $27 million of net investment implied in fourth quarter. You know, how much of that pipeline could close this year and then what disposition amount should we weigh that against the $40 million that is.

Steven

Yeah, yeah, we’ve got an opportunity to close a bulk of that this year. Obviously depends on due diligence, planning for dispositions. You know, we’re expecting something in the $50 million or so range. So it looks like the guidance looks pretty good and in check for the rest of the year.

Eric Borden (Analyst)

All right, I will leave it there. Thanks for the time.

OPERATOR

Hey, Sarah, your next question comes from the line of Anthony Pellone with JP Morgan. Your line is open. Please go ahead.

Anthony Pellone (Analyst)

Thanks, and echo the congrats, Pierre. On the 2027 expirations, the 6.5%, you sound pretty confident in terms of recapture and your rents and so forth. But just trying to think through, should we expect any downtime or how does that net into things just from a, you know, earnings point of view, like.

Steven

Well, I can just comment, you know, globally on sort of where we sit right now for 27, and we are effectively done for 26. So far in 26, 116.4% recovery. We have three left. One is a very small, let’s call it a floppy. We’re releasing that to a new tenant. We have a T-Mobile that’s renewing. We have a Sherwin-Williams—right now we’re negotiating to sell to a bank. So 2026, our history, was very accretive and we expect 27 to be the same, you know, about 6.5, 6.7 ABR, 34 total.

Of that, 10 are already complete, and we feel like we’ve got visibility all the way through into Q3 right now and are expecting very similar results to 26 with recovery rates. So again, we view these as assets and opportunities. And historically the data suggests and points to that.

Anthony Pellone (Analyst)

Okay, got it. And then second question—you know, in the prior call you talked about looking at net lease development and it looks like you have a small venture there. Just any additional color, progress towards those goals, or what you’re seeing on that front?

Steven

Yes, we actually are looking at a couple of development opportunities on the heels of the joint venture that we just completed in Dallas. And, you know, we like to see that as a great way to access other value-add opportunities and channel additional deal flow. So look to see a couple of those opportunities coming for us in the next quarter. And I think you’ll be very happy with what you see and the risks and the relative level of returns and value enhancement and creation that those will bring to the shareholders.

Anthony Pellone (Analyst)

Okay, thank you.

OPERATOR

Your next question comes from the line of Jana Gallon with Bank of America. Your line is open. Please go ahead.

Jana Gallon (Analyst)

Thank you. Good morning and congrats, Pierre. Maybe big-picture question—you know, your opening remarks really focused on the ability to be granular and maximize value at each location. You would think that there’d be, you know, a size where that stops being—you’re unable to kind of continue that focus—but, you know, so curious how you’re thinking about that and any, you know, kind of technology you’re implementing to be able to scale that ability.

Steven

Yeah, I think that’s the beauty of the size. And Pierre pointed that out in his remarks, that we have literally years and years to go where we have to exceed significant acquisition cadence. And, you know, the $100 to $300 million a year is going to drive growth for very many years to come. And that allows us to keep with this strategy and continue to acquire this great real estate and have these great opportunities and be that circumstantial buyer to drive value and drive better cap rates across the marketplace.

So we’re very excited. It’s a very broad market. It’s very deep. Add a little development, add some joint ventures into the mix—there’s a long way we can go with this, and we’re real excited.

Pierre Revol (Chief Financial Officer)

And I would just add, on your AI question and how that allows us to scale: the improvements in AI are phenomenal. Like, we can get more access to tenants on financials, on how we process everything today. In fact, we recently had a board meeting, and I’m sitting next to one of our board members at Welltower, and he told me the amount of AI investment that they’ve had versus what we’ve had. We can catch up to that a lot quicker, even at our small size, just given what’s available.

And so I think we can truly scale. If you go to page 24 again, that table on the right does highlight how little we have to do relative to peers. So, I mean, just bring this out to 2029, 2030—you’re doing $150 to $200, $250 million of acquisitions in a market that’s in the billions. And we are using AI in a lot of ways, not only to run processes, but also to source new transactions. And we’re seeing a lot of benefits from that. And I think that it’s part of what we can do today to scale the business.

Jana Gallon (Analyst)

Thanks, Pierre. Thanks, Steven. And then maybe just on kind of, you know, the tenant credit quality—you know, that debt has trended really well this year. Just curious, any updates there?

Steven

No changes. Buying great tenants, continuing to do that as we go. And again, obviously focusing on our low rents. But the credit watch list, as we mentioned, is very minimal. And we expect that in the foreseeable future.

Jana Gallon (Analyst)

Thank you.

OPERATOR

Your next question comes from the line of Matthew Erdner with Jones Trading. Your line is open. Please go ahead.

Matthew Erdner (Analyst)

Hey, good morning, guys. Thanks for taking the question. You guys touched on it a little bit already in terms of leverage and that 8–12 kind of range for next year. I guess what would make you guys be willing to increase to that higher end of leverage versus the lower end?

Pierre Revol (Chief Financial Officer)

So I think on the leverage side, we’re comfortable within the five to six times. It’s just about the opportunities that we see. We’re not shying away from acquisitions. The entire point of that comment is to show how much capacity we do have. We are effectively funded through 2027. We’re comfortable—like our target is really to stay around five and a half times. But if we want to go a little bit higher, we find the right opportunities, we will go there.

And if we’re able to raise equity accretively, that would be another component to issue. Right now, just on cost of capital, taking recent stock prices, we’re around 6.6%, 6.7% cost of capital. So it’s not—based on our acquisitions, it’s both 90 to 100 basis point spread. So it’s not too far off. But as highlighted in our presentation, we think that our NAV is a lot higher. So those are considerations, but I think it comes down to our cost of capital and the types of acquisitions that we see in the market that would dictate whether or not we push higher on the acquisition numbers.

Matthew Erdner (Analyst)

Got it. Appreciate the comments there. And then, you know, as it relates to investment spreads, you guys had 100 basis points this quarter. You know, I guess as most of the pruning has been done in terms of dispositions, should we expect that number to marginally expand throughout 2027? Or is that 100 point mark kind of, you know, a good idea to have in mind?

Pierre Revol (Chief Financial Officer)

Yeah, I think that, like, look, this quarter, 100 is pretty strong. I don’t think you can factor that in as going forward as a number. I think we have a little bit less than that in the fourth quarter. At the same time, I would just highlight—I know a lot of people don’t care about impairments and gains—but we had zero impairments this quarter and, you know, close to $4 million in gains. And so there’s a lot of—our gains over impairments are like seven times.

So we’re seeing a lot of benefit in our dispositions. People are buying our properties. There’s a lot of demand for our types of properties, and that gives us an additional source of capital if we just ever try to use that.

Steven

Yeah, we have sold about $128 million at a 6.8% cap rate since the IPO, and we think it’s healthy to continue to prune and to sell assets. But most of that optimization is definitely complete and behind us.

Matthew Erdner (Analyst)

Perfect. Thank you, guys. Appreciate it.

OPERATOR

Your next question comes from the line of John Mazzoca with B. Riley. Your line is open. Please go ahead. A reminder to unmute locally if you are mute. Maybe take the next question. He may just not be there. Yeah. John, if you don’t mind just jumping back in the queue if you want. Wonderful. Your next question comes from the line of Rob Simone with Compass Point. Your line is open. Please go ahead.

Ken Billingsley (Analyst)

Hi, good morning. This is Ken Billingsley for Rob. I have a question for you. On slide 11, you list that ABR over the next five years is approximately $25 per square foot. If you were to look at market rates and they were all released today, what would that $25 look like? That’s great. And if you don’t mind, just a follow-up. With less supply out there, is there anything that you or potential tenants are doing that’s creative as you’re looking over the next few years, just as they’re looking for space Right. Either as they’re looking to expand, maybe they’ve underdeveloped. And so with no real new supply, is there just anything that they have done, maybe are looking to do in the next five years that’s creative or different from what they’ve done over the last 10 years?

Great, thank you very much.

OPERATOR

Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

Ronald Camden (Analyst)

Hey, great. I’d just love to go back to the acquisition pipeline both in terms of volume and economics because you guys do compete in sort of smaller, maybe 1031 buyers, I guess. I’d just love to hear what you’re seeing post the sort of rate environment in terms of cap rate movements, in terms of opportunities, and your ability to capitalize on it. Thanks. Great, that’s helpful. And then I think you guys clearly have leaned in on dispositions here as well, and I’m sure there’s some portfolio pruning happening. Can you just go back and remind us the bad debt guidance at the beginning of the year versus what’s baked in now after three quarters, and is that a good run rate to think about coming into next year given the health of the portfolio? Thanks.

That’s it for me. Thanks so much.

OPERATOR

As a reminder, if you would like to ask a question, please press Star one to raise your hand. Your next question comes from the line of John Mazzocco with B. Riley. Your line is open. Please go ahead.

John Mazzocco (Analyst at B. Riley)

Can you hear me? Can you hear me? I don’t know why I didn’t unmute the first time. Maybe speaking about the market and kind of after the interest rate moves we saw in the August, September, October time frame, how has that impacted the way you think about investments going into 2027? I know you have this runway with capital recycling with some of the capital you have on hand to invest without being beholden to the capital markets. But how are you weighing maybe your spot cost of capital as you look at your return threshold for new investments versus kind of your in-place cost of capital, if you will?

Pierre Revol (Chief Financial Officer)

Yeah. And in terms of cost of capital, stock versus long term, I think that at least the way I think about cost of capital, I look at we’re going to be in the bank term loan market for a period of time just given our size. And so I do look at the five-year forward curve spread to that. Obviously we’ve made some amendments to our term loan, so that’s looking around 5.6–5.7% today on the debt costs. And then you can take our affiliate yield using next 12 months and you’ll see roughly where it lies, and we will be kind of mid to high sixes on a WAC in terms of how we think about buying things.

That’s the most important decision—where we allocate capital appropriately. If we find deals that make sense for us, we’re actually, if you look at the trajectory, we did go up a little bit in cap rate and in the fourth quarter it’s going higher—not guaranteed we’ll do that every quarter, but we do pay attention to our cost of capital quite closely. I make sure that as we deploy capital that it is accretive on a per-share basis while not diluting the types of real estate that we would feel comfortable putting on our website.

And I think we’ll continue to do that, and I think that sort of model will deliver a lot of growth for us and our shareholders.

John Mazzocco (Analyst at B. Riley)

Okay. And then on the development side, as that potentially grows as a portion of your investment box, what kind of increase in spreads relative to traditional net lease investments or traditional third-party investments are you looking for, if at all? Or are they looking at the same kind of return hurdles? Okay, I appreciate all that detail. That’s it for me. Thank you.

OPERATOR

Your next question comes from the line of Logan Epstein with Wolf Research. Your line is open. Please go ahead.

Logan Epstein (Analyst)

Thanks for taking the question. Maybe if I could follow up to the comments you made in the prepared remarks in a prior question. And we just focused on that Slide 7 that you guys added to the deck. If we use that math, it kind of implies a minimum 7ish percent growth rate at $100 million, investment volumes at 100 FIP spread. Just curious if you can kind of talk about the potential moving pieces there as we look at a long term growth rate for the company.

I know you mentioned the swaps and retaining upside, but curious if you could just hit on any other potential moving pieces there. Thanks.

Pierre Revol (Chief Financial Officer)

Thanks, Logan. So, that Slide 7 is really the thesis to FrontView REIT if you think about how most net lease REITs operate. And I’d encourage people to read around most REITs and how we operate in terms of our annual organic growth rate, why our payout ratio is important to keep that low and then the external investment coming from a smaller base. So it’s structural in terms of the growth. What it doesn’t factor in is changes in interest rates, other things that could affect it, but this is more of a structural growth rate that you could think about from this existing portfolio with the offsets being really just cost of capital and interest rates that could change things. But this sort of formula in terms of 2122 plus 3% should be the minimum that you should expect for the structural growth within the company.

Logan Epstein (Analyst)

Thank you. Maybe a follow up. You talked about in an earlier question that bad debt has trended positively. Just curious if you can touch on whether the move in rates in the broader macro environment has just had any impact across any of your tenants as you discuss with them and maybe if there is a common theme across any industry types there.

Pierre Revol (Chief Financial Officer)

I would say not yet. Our tenants are performing very well. We’re in service industries, essential, mission critical. We have not seen anything. Rent is coming in on time as expected. And so, you know, I think everyone thinks about the consumer for sure. We feel very insulated and especially with, again, that real estate, that quality and then the low rent. So if there is something that comes back to us, we have very good tools to make that accretive, an opportunity for us.

Logan Epstein (Analyst)

That’s it for me. Thank you. Congrats, Pierre.

Pierre Revol (Chief Financial Officer)

Thanks, Logan.

OPERATOR

There are no further questions at this time. I will now turn the call back to Steve Preston for closing remarks.

Steve Preston (Chairman and Chief Executive Officer)

Yes, thank you everyone for your continued interest in FrontView REIT. We look forward to seeing you all at Nareit in Atlanta. And of course be safe and be healthy. Thank you. Take care.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.