Q3 2021 WP Carey Inc Earnings Call
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Okay.
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Hello, and welcome to W. P. Carey's third quarter 2021 earnings conference call.
My name is Brock and I'll be your operator today.
All lines have been placed on mute to prevent any background noise.
Note that todays event is being recorded.
After today's prepared remarks, we'll be taking questions via the phone line and instructions on how to do so will be given at the appropriate time.
I would now I'll turn today's program over to Peter Sands head of Investor Relations. Mr. Sands. Please go ahead.
Good morning, everyone. Thank you for joining us this morning for all of 2021 third quarter earnings call.
Before we begin I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward looking statements.
That could cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings.
An online replay of this conference call will be made available in the Investor Relations section of our website at W. P. Carey dot com, where it will be archived for approximately one year and where you can also find copies of our investor presentations and other related materials.
And with that I'll pass the call over to our Chief Executive Officer, Jason Fox.
Thank you Peter and good morning, everyone.
I'm pleased to say, our third quarter results keep us on pace to deliver strong year over year <unk> growth.
We continue to see strong deal momentum during the quarter for 2021 set to be a record year for investment volume.
<unk> already surpassed our full year investment volume for all prior years.
And establishing a new phase of externally driven growth for W. P. Carey.
We're also entering a period of higher entirely driven growth with.
Inflation ticking up in recent months and generally expected to last longer than originally anticipated WP.
WP Carey is uniquely positioned to benefit.
Higher inflation had a positive impact on our same store growth during the third quarter, especially for leases tied to uncapped CPI. However, it is really just to start with the bulk of the impact occurring over the next few quarters.
Consequently, we believe WP carry currently offers one of the best combinations of external and internal growth across the net lease sector.
Supported by the strength of our near term pipeline ample liquidity and continued access to well priced capital in addition to providing an attractive dividend yield.
This morning, I'll focus my remarks on these aspects of our growth and Tony Sam Zell, Our CFO take you through the details of our results for the quarter guidance and balance sheet positioning.
Tony and I are joined by our President John Park and our.
Our head of asset management, Brooks, Gordon who are available to take questions.
Starting with growth through acquisitions.
During the third quarter, we completed about $200 million of investments primarily into class a warehouse properties in the U S. At a weighted average initial cap rate of six 2%, bringing our total deal volume for the first nine months of the year to $1 2 billion.
At a weighted average initial cap rate of five 9% and a weighted average lease term of 19 years, among the longest for new investments across the net lease sector.
Our ability to structure these deals with long lease terms and strong rent increases averaging over 2% for those with either fixed rent increases or floors.
Translates to an average annual yield of over 7%.
Metric that we believe better captures the prolonged accretion we're achieving.
It's also meaningfully more attractive than that of most of our net lease peers, who tend to be investing in shorter term leases lower for even notebooks.
In addition to entering a new phase of externally driven growth. We're also entering a period of higher internally driven growth with one of the best positioned net lease portfolios for inflation.
One of the key benefits of our focus on originating sale leasebacks is our ability to directly negotiate the lease structure, including the rent bumps as a result, we constructed a portfolio in which 60% of ABR has rent increases tied to inflation.
During many years of low inflation, our rent growth was driven by leases with fixed rent increases that with inflation picking up in recent months. We expect lease is tied to inflation to drive rent growth and strongly outpaced the two 3% average fixed rent bump we saw for the third quarter.
Inflation began to flow through to rents during the third quarter, although on a relatively small portion of our portfolio.
Leases with CPI linked rent increases they went through scheduled rent adjustments during the quarter experienced rent increases averaging three 3%.
The vast majority of CPI linked leases that did not bumped during the third quarter are scheduled to do so over the next nine months, adding about 100 basis points to our same store rent growth based on current inflation forecasts, taking it from about one 5% to about two 5%.
Higher same store growth is especially valuable in an environment, where investment spreads are expected to continue to compress.
And if inflation runs higher or for longer than currently anticipated, we would expect to see additional upside.
Turning to the market environment and our pipeline during.
During the quarter, we saw a continuation of many of the dynamics that have driven the transaction market in recent quarters with continued cap rate compression both in the U S and Europe, largely fueled by private capital.
Warehouse and industrial remains sought after asset classes in both regions and logistics assets traded at especially tight cap rates in Europe.
While these trends look set to continue heightened M&A activity is sparing a steady flow of deals in part driven by the attractive valuation arbitrage that exists for private equity investors between the multiples. They can acquire businesses that in real estate values more broadly M&A activity is expected to continue at record levels, which is positive for the supply of sale lease.
Back opportunities for.
A top down perspective, we continued to focus predominantly on warehouse and industrial assets, which comprised about three quarters of our deal volume through the end of the third quarter.
Moving the AVR, we generate from these property types 40 basis points higher to 48, 7%.
While the proportion of ABR, we generate from office properties has continued to decline.
So far in the fourth quarter, we completed an additional $41 million industrial investment and we expect to maintain a strong piece of activity into year end, including $100 million of capital investments and commitments scheduled for completion during the fourth quarter.
Our pipeline remains strong and includes a handful of larger portfolio deals that are working towards closing around year end.
This is reflected in our investment volume guidance range, which we're maintaining at one $5 billion to $2 billion and depending on the number of deals that come to fruition and the eventual timing it could take us to the top end.
Lastly, I want to briefly mentioned, our recent green bond offering.
We're proud to have successfully completed our inaugural Green bond issuance earlier this month.
With the proceeds allocated to new and existing eligible green projects.
This was a major milestone demonstrating our commitment to ESG and we would note that we have one of the best ESG profiles in the net lease peer group.
First net lease REIT to provide an annual ESG report to the market.
Which we've been publishing since 2019, where the second net lease REIT to issue a green bond and the first to do so in the U S.
We were very pleased with the execution, achieving one of the tightest ever spreads for net lease REIT on a 10 year bond offering.
It also allowed us to further diversify our investor base to include ESG focused investors, which we hope will continue to be a source of capital for W. P. Carey as we acquired more eligible buildings and seek opportunities to redevelop existing properties to enhance their sustainable characteristics.
In closing, we remain focused on creating value for our investors through both accretive investment opportunities and the rent growth built into our leases offering potential additional upside from sustained higher inflation.
We expect our recent pace of investment activity to continue in 2022 and as a result, we believe WP carry currently offers one of the best combinations of external and internal growth across the net lease sector plus one of the most compelling dividend yields at around five 5% supported by our stable cash flows the strength.
Our pipeline ample liquidity and continued access to well priced capital and with that I'll pass the call over to Tony.
Thank you, Jason and good morning, everyone.
During the third quarter, we continued to make good progress towards our full year guidance with our results showing steadily increasing lease revenues and the continued decline in interest expense for.
For the quarter, we generated total <unk> of $1 24 per diluted share driven by real estate <unk> of $1 21, representing 8% year over year growth.
Our third quarter results build on the momentum we established during the first half of the year for investment volume, reflecting the new phase of external growth, Jason referred to but also demonstrating the quality of our portfolio.
Due to continued strength of our rent collections and a growing contribution from rent escalations.
We continue to expect that we will complete record investment volume in 2021 totaling between one five and $2 billion.
Accordingly, we're also maintaining our full year <unk> guidance range of $4 94.
To $5 <unk> per share, including real estate <unk> of between $4 82.
And $4 90 per share representing over 5% annual growth at the midpoint.
Turning to our same store rent growth.
Contractual same store rent growth, which reflects the rent growth built into our leases was one 6% year over year, a 10 basis point increase over the second quarter.
As Jason discussed higher inflation is just starting to flow through to rents and within this metric our same store growth from leases tied to uncapped CPI with 50 basis points higher than it was for the second quarter.
Comprehensive same store rent growth, which is based on pro rata rental income included in <unk> increased 90 basis points over the second quarter to two 9%, primarily reflecting COVID-19 related recoveries and restructurings over the past 12 months. In addition to the positive impact of inflation on rents.
Among our other key portfolio metrics occupancy increased 40 basis points during the quarter to 98, 4%.
We ended the quarter with a weighted average lease term of 10 six years.
And a top 10 concentration of 25% among the lowest in the net lease sector.
Third quarter dispositions totaled $30 million, bringing total dispositions for the first nine months of the year to approximately $130 million and.
And based on our current visibility into the timing of certain sales, we're maintaining our expectations that total disposition activity for the year will fall between 150 and $250 million.
Moving to our capital markets activity and balance sheet.
We've demonstrated ample access to well priced debt and equity this year issuing about $2 $2 billion of long term and permanent capital supporting both our increased pace of investment activity and the refinancing of higher cost mortgage debt with lower cost unsecured debt as well as further enhancing our credit profile and.
Hitting our commitment to ESG.
During the third quarter, we settled equity forward agreements on 2 million shares for net proceeds of $147 million.
This occurred close to the end of the quarter. So it will be fully reflected in our fourth quarter diluted share count.
In August we executed our second equity forward for the year pricing a public offering of five 2 million shares, including the full exercise of the underwriters over allotment option, enabling us to match fund acquisitions with approximately $400 million of equity raised at a gross price of $78 per share.
Currently we have the ability to settle the remaining $7 2 million shares under forward sale agreements for anticipated net proceeds of about $540 million.
Turning to our debt capital as Jason discussed we're proud to be among the first net lease Reits to issue green bonds in.
In October our inaugural Green bond offering raised $350 million at a coupon of 245% with a 10 year maturity.
With an amount equal to the net proceeds to be allocated to eligible green projects in accordance with our green financing framework.
Copy of which appears on our website.
Approximately 70% of the proceeds have already been allocated to existing green investments.
We were able to upsize the transaction and priced at our tightest spread to date for a U S. Dollar denominated bond, reflecting both strong support for our credit and incremental demand created by our ability to access ESG focused investors.
Year to date through today, we've issued unsecured notes totaling $1 4 billion.
With a weighted average interest rate of about one 7%.
Inclusive of the Green bond issued after quarter end.
During that same year to date period, we've prepaid secured and unsecured debt totaling $1 $3 billion with a weighted average interest rate of three 5%.
Including about $300 million of secured mortgage debt subsequent to quarter end, which had a weighted average interest rate of four 4%.
The combination of our green bond issuance and mortgage repayments occurring after quarter end extends our weighted average debt maturity from five three to five seven years and reduces our secured debt as a percentage of gross assets from four 2% to under 3%.
We currently have no bond maturities until 2024, and we remain on positive outlook from Moody's.
Our key balance sheet metrics remained strong ending the third quarter with debt to gross assets of 44%, which continues to be at the low end of our target range of mid to low <unk>.
Net debt to EBITDA was five nine times at the end of the third quarter also within our target range of mid to high five times and meaningfully lower if we factor in the proceeds from shares to be settled under outstanding equity forward agreements.
While we expect the proceeds from our outstanding equity forward to be primarily used to fund new investments. They nonetheless provide us with additional flexibility in managing our balance sheet.
Our cash interest coverage ratio continues to trend positively ending the quarter at five seven times among the strongest in the net lease peer group steadily increasing as our weighted average cost of debt has declined through debt refinancings.
At the end of the third quarter, our weighted average interest rate was two 6% a significant decline from 3% a year ago, reflecting the continued improvement in our cost of debt and generating substantial year over year interest savings.
Our liquidity position also remains very strong ending the third quarter with total liquidity of approximately $2 2 billion, including $1 5 billion of availability on our revolving credit facility.
Cash on hand, and net proceeds available under equity forward agreements, ensuring we are well positioned to continue executing on our deal pipeline and accessing the capital markets Opportunistically.
To sum up we're pleased with our results for the third quarter, including the progress we made towards our full year guidance and the pace of our investment activity, we remain well.
Well positioned for continued higher growth, both externally and internally driven given our active pipeline and sector, leading same store growth profile all of which are supported by the strength and flexibility of our balance sheet.
And with that I'll hand, the call back to the operator for questions.
Thank you at this time, we will take questions. If you would like to ask a question simply press Star then one on your telephone keypad.
If you would like to withdraw your question press. The Star then the number two.
One moment, please while we poll for questions.
Yeah.
The first question today comes from Brad Heffern of RBC capital markets. Please proceed with your question.
Thanks, Good morning, everybody.
I was wondering if you could do a quick walk on the AVR quarter over quarter I would have expected it to be up at.
At least some just given the same store growth and the acquisitions and it doesn't look like there was a big roll down in the releases or anything like that so.
Any color you can give there.
Okay sure. Thanks, Brad is your question more about.
Inflation kind of rolling through were more specific to to ABR numbers, maybe it's the ladder. Tony you can talk about if it's the former I can I can jump in around inflation.
Yes, it's more just the army and it was 12 to 20, both last quarter and this quarter. So I'm just curious why it didn't go up more.
Tony do you want to take that.
The bulk.
Got it I think.
The bulk of the activity on ABR is certainly coming from the acquisition activity.
Smaller extent on the same store growth.
But I think I'm not sure what youre missing here, we did sell some vacant assets. So there was some vacancy between kind of this time.
Last year and now that's running through kind of a year over year ABR.
So I don't think there's any other material movers there outside of the acquisition activity in the same store growth.
Okay got it.
And then any update on the process with CPA 18.
Yes, I think the only update is there some disclosure by GPA team, maybe a couple months back that essentially says.
Fund is considering liquidity alternatives and we as its adviser has presented various options, including a potential combination with us but this is really just to start the process and really not unexpected since <unk> liquidity.
Kind of guidelines from its prospectus is approaching early next year, but other than that there's really nothing new to update and ultimately this is going to be a process that is run by.
Its independent directors and they will have an ultimate discretion as well.
Okay. Thank you.
Yes.
Okay.
The next question is from harsh Hemani of Green Street. Please proceed with your question.
Thank you I wanted to talk about what you're seeing on the European side.
You mentioned you've mentioned in the past.
The sale leaseback market there has been strong, but I guess, we didn't see anything sourced from the during this quarter.
Is there something we should be expecting in the pipeline from Europe in the fourth quarter.
Yes, sure. So so year to date, we've done about 30% of our deal volume in Europe, a lot of that is driven by sale leasebacks and some large deals that we've talked about previously like the casino grocery deal we did in France, and the <unk> deal the Jaguar land Rover deal we did in the UK.
Keep in mind this summer in Europe tends to slow down has a lot of people are on vacation during July and August so it's not.
Atypical for.
For the summer months to have a little bit of a law and it has picked up I think about a call. It right about half of our pipeline for the remainder of the year is in Europe.
Youll see that activity pick up as we come to the end of the year.
Great.
Was it from me thank you.
Okay, you're welcome.
The next question is from Greg Mcginniss of Deutsche Bank. Please proceed with your question.
Hey, good morning.
So the warehouse quarter Realty income announced its car for deal in Spain, and then I know you were doing grocery deals in Spain at the end of last year as well, which leads me to two questions.
And I realize it's covered the topic of Realty income entering Europe in the past, but does this deal represents the start maybe to more head to head competition that you might be seeing with them.
Two were you looking at those assets as well or maybe is your history with car for kept you away.
We did see that deal I think there's some reasons that it wasn't really a fit for us, but I don't think we'll get into any of those those details more broadly with realty income you.
You may be coming more into continental Europe.
Just the U K.
Europe generally there is less competition Theres really no pan European rights to even with Realty income entering Europe, there's still a lot less competition compared to what we see in the U S.
I think it's also worth noting that it's a big market over there is an estimated 4% to five trillion dollars of owner occupied corporate real estate and I think some reports suggest even as big as $8 billion.
That's our addressable sale leaseback market. So it's a big market you've got to keep in mind that we've had an established platform there for over 20 years.
Transacting and building relationships.
And our platform.
In London.
Amsterdam so.
We will continue to be active in with regards to Realty income.
Yes, they will add some incremental competition, but I think there are investor perception benefits that may even outweigh that increased competition.
Europe I think is largely viewed as a competitive advantage for us, but it's also less familiar to U S. Based investors. So to the extent realty incomes increased ownership of European assets helps investors get more comfortable with Europe I think that's a good thing for us.
But at the end of the day I think.
It is a big market, we don't typically run in the same lanes as them, perhaps we were a little bit more in Europe, but they continue to look a little bit more like WP Carey I don't think Thats, a bad thing for us and our multiple.
Okay fair. Thank you.
And then on rent growth I appreciate it.
In your opening comments there in terms of negotiating in negotiations on rent growth I was just hoping you could expand on that a little bit has the type of escalator that you include in leases changed much over time or maybe during this inflationary period, and then why might at least be fixed versus CPI based is that just underlying credit quality or what are the other factors.
<unk>.
Yes, I mean, certainly the ease at which we can negotiate inflation base increases kind of.
Depending on the market conditions, and what the broader view on inflation and so.
I think it's probably stating the obvious it's a little bit more difficult now negotiate CPI based leases.
And then we had in the past, but I think maybe a couple of important things to note.
One as we said we still think we're the best positioned net lease REIT in terms of inflation.
60% of our ABR on a $20 billion asset base have CPI increases.
So thats really going to drive same store growth as we talked about earlier in this higher inflationary environment, yes.
One is focused on it now but were happy this is something that we've been focusing on for for many many years. We've always said it makes sense to have inflation protection, even in low inflation environment, where we've been for maybe the 10 prior years.
And we're happy to take that tradeoff, then to see the benefits now and Thats going to start start flowing through in terms of how it's what we're seeing in the market right now year to date deal volume, it's more weighted towards fixed increases as you would expect.
It is about.
Third our inflation based and two thirds are fixed.
And we're okay with that we like having fixed fixed increases that provide a strong base regardless of the inflationary environment our pipeline, though is still.
Is healthy I think right now going into the end of the year.
It's probably more than 50% of our deals maybe close to two thirds of our deals in our pipeline are inflation based some of this is because theres more Europe in our pipeline and there has been year to date and it is more customary for inflation.
To be factored into increases in Europe.
Alright, Okay, and then just on the potential pipeline could you give us some sense for the size of the portfolio of investments under review.
Do you need to close on all of the deals under negotiation to hit the high end of the guidance range.
And then you know how long.
Some of these deals slipped into Q1.
Yeah. So.
The pipeline continues to build as with any pipeline there are deals at various stages. Some we would expect to close in the coming weeks some of which.
There is still work to do on them and May take.
Closer to the end of the year and some of those may even flipped into January so, it's really hard to predict where we sit right now, especially when we're when we're.
Transacting through sale leasebacks predominantly that we feel good about the range I think of some of our larger.
Transactions come together is probably an interesting opportunity to get to the top end of that range, but I think it will depend on where some of these fall in how we progressed through some of the deals.
Great. Thanks, so much.
Yes, you're welcome.
The next question is from Joshua <unk> of Bank of America. Please proceed with your question.
Yes, good morning, everyone.
Josh if I can just.
Curious on.
I know you said most of the deals now are like trending towards the fixed side when youre doing the bumps for underwriting.
Do you factor in like the CPI into your underwriting.
Sure.
And do you expect some kind of baseline or or acceleration going forward. If you can get the CPI I guess I'm trying to figure out it maybe you would take a lower cap rate.
Yeah. So.
Yes, I did mention that our pipeline is still has a meaningful percentage more than half our inflation basis. A lot of that is driven by Europe, where inflation is more accepted as I.
As I mentioned, but in terms of how we underwrite model maybe that's the heart of your question I mean, we're using.
We're using market forecasts.
And those typically go out several years and then we're making.
Decisions on on.
Where we fix the remaining years in terms of inflation expectations and yes in an environment right now where where inflation is expected to continue to run hot.
May be willing to trade some initial cap rate for higher bumps in the future I think.
It's an important point when when looking at our portfolio. Our cap rates are still quite interesting I think we kind of have a weighted average for the year at just under 6%, but what makes them even more interesting is the embedded increases in these leases, especially compared to our peers in that lease that typically have flatter or very minimal increases so even though we may be in.
<unk> six which is a good a good number.
<unk>.
Over the life of the lease we're probably going to average something closer to the low to mid sevens, given the types of bonds right with the structure.
Okay interesting.
And Europe is it also vary a bit by property type.
Willing to give you the.
CPI linked bumps.
Or is it just we haven't we haven't seen that variation as much I think its just more customer over there.
So it's really across property types on every deal.
But more often than Europe, and the U S.
Okay Awesome, maybe one big picture any kind.
Kind of strategic initiatives you guys are working on as you kind of look ahead to 2022.
No look I mean, I think a lot of the strategic changes that we've focused on over the last several years.
In terms of our exit from investment management and really.
Becoming a pure play net lease REIT, which we are now.
I think 98% of our assets I was driven by real estate income and only 2% from the management fees and Thats.
Basically all of that is in CPA 18.
Fees, so that will go away once that liquidity that happens. So really we're just focused on growth I think we're well positioned for that.
Our cost of capital that works really well with great access to the capital markets. We have a good pipeline we have strong momentum.
With deal volume and that's really our focus at this point.
Got it thanks, Jason.
Yes, you're welcome.
The next question is from Sheila Mcgrath of Evercore. Please proceed with your question.
I guess good morning, I know, Jason you can't get into.
Details on CPA 18, but just if you could give us.
Remind us what is in that portfolio that would appeal to WPC in other words pure play and at least I know it has.
Student housing and self storage, just remind us on that and also just to remind us.
Entity is much smaller than CPA.
<unk>. So if you pursue that elude to be.
Much smaller as compared to the enterprise value of the WPC.
Yes, sure that not only is it smaller in terms of gross assets, it's about call. It $2 $5 billion of assets versus CPA 17 that was around $6 billion of assets, you're right as a percentage of our total asset base, it's even much smaller because we're clearly bigger.
Compared to what we were prior to CPA 17, So I think those are all good points.
In terms of what's in CPA 18 is about 60%.
Net lease which is obviously a fit for us it's a portfolio, we constructed and know well and have managed since inception.
So thats clear.
The bulk of the remainder I would say probably half or was it more than half of the remaining value isn't self storage. These are operating assets that are primarily.
Managed by extra space and cube Smart we are.
So you have a history of investing in that space for a long long time really since the early two thousands.
So we would have a home for that especially given the.
The transaction that we structured with extra space and converting operating storage assets to net lease structure.
We'll see if that's a.
Interesting for us to the extent, we're able to <unk> and then the remainder of student housing and.
There is some disclosure around a leasing deal with purchase options and CPA eighteens.
Filings that.
That will.
We will effectively put that infrastructure.
In a structure that makes it easier for us to handle as well because we're not really interested in owning operating assets on a long term basis.
Okay, Great and then in there.
Your supplemental one of your acquisitions appears to be buying the land under Marriott properties that you own is that a precursor to a sale of those properties.
To want to own the land and building or just if you could comment on.
That transaction.
Yes, sure that was more opportunistic.
The owner of the ground.
Was looking for liquidity and it was effectively a captive deal for us. So it was an easy decision for us to make an interesting yield for ground and it does simplify the ownership.
Love that Marriott portfolio, so nothing more than that it was just something that's.
Opportunistic that was a big benefit to help us clean up that those assets.
Okay. Thank you.
Youre welcome.
Yes.
The next question is from Manny Korchman of Citi. Please proceed with your question.
Good morning, everyone.
Jason You mentioned, a couple of big portfolios that should close in <unk>.
A couple of questions on that one could you give us some idea of just the flavor of those I think you mentioned that a lot of your pipeline is Europe or those large portfolios in Europe.
Maybe the likelihood of them closing this year versus next year.
And then just other types.
It sounds like a puppy Weyerhaeuser industrial division of the guess.
Yes, sure. So so as I mentioned earlier.
About 50% of the pipeline in Europe.
As in Europe. Some of that does include some portfolio transactions, mainly sale leasebacks.
I think that there's a good chance to a lot of that closes in Q4, but I think it remains to be seen over the next two months.
Year to date about 70% of our deals have been industrial.
And the bulk of the remainder is retail I think the pipeline is predominantly industrial but we also have some retail and other service assets involved in there as well so.
A bit of a diverse.
But it's going to be weighted more towards industrial has been the case for us.
Thanks, and then just just thinking about lease terms for a moment on the industrial side. There is almost been a benefit of having a shorter lease term, where you were able to capture increases in market rents more quickly.
Are probably on the other end of that spectrum, signing 15 in 2025 year leases.
Is there any reason to for you guys to move to shorter leases to be able to capture that upside are you comfortable with.
Longer term sort of a traditional net lease structure.
Look we do like to traditional net lease structure I think there is value in having visibility into really stable cash flows over a long period of time.
That said this past quarter, we did do some shorter term deals, including a we were willing to do a shorter term lease up on a redevelopment project in Lehigh Valley that was very attractive and obviously the fundamentals in that market are quite strong and we're more than happy to take shorter lease exposure.
On a on an asset like that.
But also keep in mind, even though we have long term leases with very good bumps built into them over the long term, we think those probably track the market even if.
In the near term it could lag some of the stronger markets in <unk>.
Especially the case, because we have inflation.
Links and 60% of the leases and I think that a lot.
Sort of what we're seeing around.
The industrials in terms of their there they are releasing spreads.
I think long term inflation hopefully.
We'll be on a similar pace to that.
Thanks very much.
Youre welcome.
If you would like to ask a question simply press Star then the number one on your telephone keypad.
Our next question is from Anthony Pallone of Jpmorgan. Please proceed with your question.
Yes. Thanks.
If im looking at your expirations between now and I guess the end of 'twenty two it's about 3%. So it's not a lot, but just wondering if theres anything in there that you expect to get back that could offset that pickup in an internal growth from from one and a half to two and a half that you outlined.
Perhaps you want to cover that.
Sure.
Yes, we are pretty minimal explorations in the coming years really all my only about 7% through 2023 even.
Over that three year period.
About 40% warehouse industrial.
And the balance.
Office and other.
So too early to really comment on any specific deals.
Oh, it could be a mix of outcome some big upside.
Mainly.
It kind of par renewals I would expect.
And then we will have some vacates through that period, as well, but I wouldn't point too over that period.
Anything major but that'll be certainly incorporated in our guidance when we when we provided our next call.
Okay.
And then just my other question, maybe for Tony and thinking about the $7 2 million shares remaining to be settled any guideposts in terms of bringing that in as we model deal flow. What do you think of it as is matching.
Yes.
Some percentage of the capital out the door, how should we think about that.
Yeah, I mean, I think we do we said we have a lot of flexibility in terms of how we settle that we'd like to have kind of the.
The optionality there.
In terms of how we have been using it really to fund investment activity as it's coming through so.
We are still maintaining our balance sheet leverage neutral and our guidance assumes that we're issuing the equity to maintain leverage to where we are right now.
So that's probably the best way to think about it.
I don't think you can expect any material movement from a leverage perspective or that we would do anything different with that equity.
Okay. Thank you.
At this time I am showing.
No further questions I'll hand, the call back to Mr Sands.
Great. Thank you everyone for your interest in W. P. Carey if you have additional questions. Please call investor relations directly on to one to four nine to 1110 that concludes today's call you may now disconnect.
Yeah.
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Sure.
Okay.
Okay.
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