Q4 2023 W. P. Carey Inc Earnings Call

Operator: Hello, and welcome to WP Carey's fourth quarter and full year 2023 Earnings Conference call. My name is Darryl, and I will be your operator today. All lines have been placed on mute to prevent any background noise.

Hello, and welcome to W. P. Carey's fourth quarter and full year 2023 earnings Conference call. My name is Daryl and I will be your operator today all lines have been placed on mute to prevent any background noise. Please note that today's event is being recorded after today's prepared.

Operator: Please note that today's event is being recorded. After today's prepared remarks, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I will now turn the program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead.

Remarks, we won't be taking questions via the phone line instructions on how to do so will be given at the appropriate time.

Ill now turn today's program over to Peter Sands head of Investor Relations Mr.

Peter Sands: Mr. Sam Please go ahead.

Peter Sands: Morning, everyone, and thank you for joining us this morning for our 2023 fourth quarter earnings call. Before we begin, I would like to remind everyone that some of the statements made on this call are not historical facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from WP Carey's expectations are provided in our SEC filings.

Peter Sands: Good morning, everyone and thank you for joining us this morning for our 2023 fourth quarter earnings call.

Peter Sands: Before we begin I would like to remind everyone that some of the statements made on this cool are not historic facts and may be deemed forward looking statements factors.

Peter Sands: Factors that could cause actual results differ materially from W. P. Carey's expectations are provided in our SEC filings.

Peter Sands: An online replay of this conference call will be made available on the Investor Relations section of our website at wpcarey.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. Thank you, Peter, and good morning, everyone.

Peter Sands: An online replay of this conference call will be made available in the Investor Relations section of our website.

Peter Sands: E P Carey dot com, but it'll be archived for approximately one year.

Peter Sands: You can also find copies of our investor presentations and other related materials.

Peter Sands: And with that I'll pass the call over to a lot Chief Executive Officer, Jason Fox.

Jason E. Fox: Thank you Peter and good morning, everyone.

Jason E. Fox: Today, I'll briefly recap 2020 and talk about how we're positioned for the year ahead. We have significant capital ready to deploy. Improving the Transaction Market Outlook. Toni Sanzone, our CFO, will focus on some of the details of our 2023 financial results and our 2024 guidance, both of which reflect the impacts of successfully executing on the office exit strategy we announced. Toni will also cover certain tenant-specific impacts we expect in 2020, which your guidance also reflects. John Park, our President, and Brooks Gordon, our Head of Asset Management, are also on the call to take questions, starting with external growth. The 2023 transaction backdrop is largely a continuation of the one that existed in 2009. CapRate's Latin Rising Industry. Preserving investment spreads without resorting to investing in riskier assets therefore remained a high priority. U.S. interest rates continued to move higher for most of the year, reaching a peak in October.

Jason E. Fox: Today I'll briefly recap 2023 talk about how we're positioned for the year ahead with significant capital ready to deploy.

Jason E. Fox: Improving transaction market outlook.

Jason E. Fox: Toni Sanzone, our CFO will focus on some of the details of our 2023 financial results and our 2024 guidance both of which reflect the impacts of successfully executing on the office exit strategy, we announced in September.

Toni Sanzone: He will also cover certain tenant specific impacts we expect in 2024, Mr guidance also reflects.

Speaker Change: John Park, our President and Brooks Gordon head of asset management are also on the call to take questions.

Speaker Change: Starting with external growth.

Speaker Change: 2023 transaction backdrop, it was largely a continuation of the one that existed in 2022 with cap rates lap and rising interest rates.

Speaker Change: Preserving investment spreads without resorting to investing in riskier assets, therefore remains a high priority for us.

Speaker Change: In the U S interest rates continued to move higher for most of the year, reaching a peak in October.

Jason E. Fox: Sale leasebacks, however, remain an attractive source of capital for companies, as high-yield debt and other financing alternatives have become very expensive. In April, we completed our single largest ever investment with the Apotec Sale Leaseback on a portfolio of four pharmaceutical R&D and advanced manufacturing campaigns. That was a new industrial subsector for us, but it shares many of the key characteristics with other industrial assets we invest in, including critical operating properties backed by a tenant business with reliable cash flows on a long-term lease with attractive rent bumps. We've also expanded our focus to include more U.S. retail and now have investment officers dedicated to that sector. As a result, we completed a handful of retail transactions in 2009 across various subsectors and are exploring others, both in the U.S. and Europe, focusing on those we believe we can achieve terms and structures consistent with those we get on our other property types in Europe. This steep rise in interest rates resulted in wide bid-ask spreads and a pronounced slowdown in transaction activity throughout 2009.

Speaker Change: Sale leasebacks, however remain an attractive source of capital for companies is high yield debt and other financing alternatives became very expensive.

Speaker Change: In April we completed our single largest ever investment with the Alphatec sale leaseback on a portfolio of four pharmaceutical R&D and advanced manufacturing campuses.

Speaker Change: That was a new industrial sub sector for us, but shares many of the key characteristics with other industrial assets, we invest in including critical operating properties backed by tenant business with reliable cash flows on a long term lease with attractive rent bumps.

Speaker Change: We've also expanded our focus to include more U S retail and now have investment officers dedicated to that sector.

Speaker Change: As a result, we completed a handful of retail transactions in 2023 across various subsectors and are exploring others. Both in the U S and Europe focusing on those we believe we can achieve terms and structures consistent with those we get or other property types.

Speaker Change: In Europe.

Speaker Change: Keep rising interest rates resulted in wide bid ask spreads and a pronounced slowdown in transaction activity throughout 2023.

Jason E. Fox: We continued to find pockets of opportunity, however, and in November, we completed a $157 million cross-border sale leaseback of 11 manufacturing facilities in Italy, Spain, and Germany and Fedrigoni, which is a global manufacturer of specialty papers for premium packaging and labels. Investment volume for the first quarter totaled $346 million at a weighted average cap rate of 7.7%, which brought overall investment volume for 2023 to $1.3 billion at a weighted average cap rate of 7.6%. Single-tenant industrial and warehouse assets represented about three quarters of our full year investment volume.

Speaker Change: We continue to find pockets of opportunity however, and in November completed up 157 million dollar cross border sale leaseback 11 manufacturing facilities in Italy, Spain, and Germany, It's phaedra going which is a global manufacturer of specialty papers for premium packaging and labeling.

Speaker Change: Investment volume for the first quarter totaled $346 million at a weighted average cap rate of seven 7%, which brought overall investment volume for 2023 to $1 $3 billion at a weighted average cap rate of seven 6%.

Speaker Change: Single tenant industrial and warehouse assets represented about three quarters of our full year investment volume and <unk>.

Jason E. Fox: And given the execution of our exit from office, it now makes up a larger majority of our... Industrial and warehouse are very broad categories, however, comprised of many subsectors, providing both a wide investment opportunity set and added diversification. Sale leasebacks, which have the advantage of enabling us to structure the lease terms, represented close to 90% of our 2023 investment volume. Going forward, we will continue to focus on originating investments through a sale lease fax and build-to-suits in order to achieve the strong rent escalations, long lease terms, and robust protections we're able to get through the lease structure. Looking ahead, I'm pleased to say that in recent months, the outlook for the transaction environment hasn't changed, both in the U.S. and Europe.

Speaker Change: The execution of our exit from office now makes up a larger majority of our portfolio.

Speaker Change: Industrial and warehouse are very broad categories. However comprised of many sub sectors, providing both a wide investment opportunity set and added diversification.

Speaker Change: Sale leasebacks, which had the advantage of enabling us to structure. The lease terms represented close to 90% of our 2023 investment volume.

Going forward, we will continue to focus on originating investments through sale leasebacks and build to suits in order to achieve the strong rent escalations long lease terms and robust protections were able to get through lease structuring.

Speaker Change: Looking ahead I'm pleased to say that in recent months the outlook for the transaction environment has improved both in the U S and Europe today, we're able to transact at cap rates well into the sevens, providing an attractive spread to our cost of capital.

Jason E. Fox: Today, we're able to transact at cap rates well into the sevens, providing an attractive spread to our cost of capital. We're also seeing some pent-up supply from sellers and expect a pick-up in corporate M&A, which often creates sale-leaseback opportunities. Market conditions playing out as we expect, we believe we're very well positioned for higher investment volume in 2020. While it's still early, five weeks into the year, we've completed investments totaling $177 million and have over $100 million of capital investments and commitments scheduled to complete in 2020, in addition to an acquisition pipeline that continues to build. One aspect of our positioning for 2024 that I want to highlight is our substantial liquidity position. At the end of 2023, we had over $600 million of cash on our balance sheet. Since then, we've paid down some debt and funded some acquisitions with our cash, including paying down our credit facility with proceeds from the Spanish government. After the sale of the U-Haul portfolio for approximately $465 million, our cash balance will be close to $1 billion.

Speaker Change: We're also seeing some pent up supply from sellers and expect to pick up in corporate M&A, which often create sale leaseback opportunities.

Speaker Change: If market conditions play out as we expect we believe we're very well positioned for higher investment volume in 2024, while it's still early five weeks into the year, we've completed investments totaling $177 million and have over $100 million of capital investments and commitments scheduled to complete in 2024. In addition to an acquisition.

Speaker Change: [noise] pipeline that continues to build.

Speaker Change: One aspect of our positioning for 2024th I want to highlight is our substantial liquidity position.

Speaker Change: At the end of 2023, we had over $600 million of cash on our balance sheet. Since then you paid down some debt and funded some acquisitions with their cash including paying down our credit facility with proceeds from the Spanish government disposition.

Speaker Change: After the sale of the U haul portfolio for approximately $465 million, our cash balance will be close to $1 billion.

Jason E. Fox: With the additional cash we expect to generate from remaining office asset sales, plus free cash flow after paying our dividend, we could have close to $1.5 billion of cash to invest in 2019. We'll also continue to have our $2 billion revolver to fund deals or address debt maturities in the short term. And as we've discussed in the past, we have some unique additional internal sources of capital over the longer term, including our equity stake in lineage logistics, which we currently have valued at approximately $400 million. We view our cast position and internal sources of liquidity as meaningful differentiating factors compared to many other net lease companies. We don't need to raise new capital to fund investment. We have a lot of flexibility in how we approach any new capital markets issuance.

Speaker Change: With the additional cash we expect to generate from remaining office asset sales plus free cash flow after paying our dividend, we could have close to $1.5 billion of cash to invest in 2024.

Speaker Change: We will also continue to have our $2 billion revolver to fund deals or address debt maturities in the short term and.

Speaker Change: And as we've discussed in the past we have some unique additional internal sources of capital over the longer term, including our equity stake in lineage logistics, which we currently have marked at approximately $400 million.

Speaker Change: We view, our cash position and internal sources of liquidity as meaningful differentiating factors compared to many other net lease Reits, we don't need to raise new capital to fund investments and we have a lot of flexibility on how we approach any new capital markets issuance this year.

Jason E. Fox: Our equity multiple has improved since we announced our office exit and benefited from the broader rally in REIT equities since the Fed signaled the end of its tightening cycle, notwithstanding some weaker performance in recent months. The liquidity of our stock has also benefited from our recent addition to the S&P 400 index. So far in 2024, bond markets have generally been supportive of new issuance, with rates coming off their 2023 highs and spreads compressing. Despite the substantial capital we've built up, we remain mindful of our overall cost of capital and achieving appropriate returns on our investments. Deals with cap rates in the sevens and rump bumps over long lease terms that take their unlevered returns into the eights and nines provide an attractive spread, even if funded with newly issued capital.

Speaker Change: Our equity multiple has improved since we announced our office exit and benefited from the broader rally in REIT equities since the fed signaled the end of its tightening cycle notwithstanding some weaker performance in recent weeks.

Speaker Change: The liquidity of our stock has also benefited from a recent addition to the S&P 400 index.

Speaker Change: So far in 2024 bond markets have generally been supportive of the new re issuance with rates coming off their 2023 highs and spreads compressing.

Speaker Change: Despite the substantial capital we built up we remain mindful of our overall cost of capital and achieving appropriate returns on our investments deals with going in cap rates in the sevens and rent bumps over long lease terms that take their unlevered returns into the eights and nines provide an attractive spread even if funded with newly issued capital.

Jason E. Fox: They are, therefore, also deals we're very comfortable executing the liquidity we have on. So we continue to have a strong bias to deploy cash into new investors. Lastly, I want to briefly discuss the progress we've made with the office exit strategy we announced in September, laying out an ambitious plan to proactively exit our office exposure over an accelerated time, while successfully and efficiently executing on that plan.

Speaker Change: We are therefore also deals we're very comfortable executing with the liquidity we have on hand. So we continue to have a strong bias to deploy cash into new investments.

Speaker Change: Lastly, I want to briefly discuss the progress we've made with the office exit strategy would be announced in September laying out an ambitious plan to proactively exit our office exposure over an accelerated timeframe.

Speaker Change: We're successfully and efficiently executing on that plan and I could not be prouder of our employees and the dedication and hard work they've shown both in the lead up to the announcement and in the time since.

Jason E. Fox: I could not be prouder of our employees and the dedication and hard work they've shown both in the lead-up to the announcement and in the time since. In addition to the 59 properties that were spun off into NLOP in November, to date, we've sold 79 of the 87 properties under the Office Sale Program, the largest component of which was the State of Andalusia Portfolio Sale we completed in January, all of which has reduced our exposure We're actively working on transactions to sell the remaining properties and expect to reduce our office exposure to a negligible amount over the coming months. Exiting office over a short space of time has reset the baseline from which we will grow AFFO without the headwinds associated with owning an office building. Since our announcement, office fundamentals have remained under pressure, while our multiple has expanded, reinforcing our conviction in the strategy and benefiting our cost of equity, making us more competitive on deals. As a result, we are able to achieve wider investment spreads, thereby enhancing our ability to generate AFFO growth. With that, I'll pass the call over. Thank you, Jason, and good morning, everyone.

Speaker Change: In addition to the 59 properties that were spun off into N. L. O P. In November to date, we have sold 79 of the 87 properties under the office sale program the largest component of which was the state of annually see a portfolio sale. We completed in January all of which has reduced our exposure to office to just two 7% of ABR.

Speaker Change: We're actively working on transactions to sell the remaining properties and expect to reduce our office exposure to a negligible amount over the coming months.

Speaker Change: Exiting office over short space of time has reset the baseline from which we would really thought though without the headwinds associated with owning office assets.

Speaker Change: Since our announcement office fundamentals have remained under pressure, while our multiple has expanded reinforcing our conviction in the strategy and benefiting our cost of equity, making us more competitive on deals we're able to achieve wider investment spreads, thereby enhancing our ability to generate <unk> growth.

Speaker Change: And with that I'll pass the call over to Tony.

Tony: Thank you, Jason and good morning, everyone.

Toni Sanzone: This morning, we reported AFFO per diluted share of $1.19 for the 2023 fourth quarter and $5.18 for the full year, which were 7.8% and 2.1% lower versus the prior year periods, respectively, driven by our exit from office assets, including the spinoff of NLOP in early November. During the fourth quarter, we sold 17 properties for gross proceeds of $266 million, including the sale of 7 properties for $132 million under our office sale program, bringing total dispositions for the year to $462 million. Our fourth quarter disposition activity also included the sale of five Marriott Hotel operating properties for $84 million. We've now sold eight of the 12 Marriott hotels that converted from net lease to operating properties in January of 2023, and we expect to sell one additional Marriott hotel this year.

Tony: This morning, we reported <unk> per diluted share of $1 19 for the 2023 fourth quarter and $5.18 for the full year, which were seven 8% and two 1% lower versus the prior year periods, respectively, driven by our exit from office assets, including the spinoff of N. L. O P. In early November.

Tony: During the fourth quarter, we sold 17 properties for gross proceeds of $266 million, including the sale of seven properties for $132 million under our office sale program, bringing total dispositions for the year to $462 million.

Tony: Our fourth quarter disposition activity also included the sale of five Marriott hotel operating properties for $84 million.

Tony: We've now sold eight of the 12 Marriott hotels that converted from Nat leaf to operating properties in January of 2023, and we expect to sell one additional Marriott hotel this year.

Toni Sanzone: The remaining three will be held for redevelopment over the next few years but will continue as operating properties throughout 2024. In January of this year, I'm pleased to say we completed the sale of our largest office asset, the State of Andalusia Portfolio, for approximately $360 million. This, along with the sale of another office asset in January, brings gross proceeds under the office sales program in 2024 to $388 million and the total to date to $608 million. Looking ahead to 2024, our guidance assumes office sales totaling between $550 and $600 million, including the $388 million already completed, with the remaining sales under the program weighted to the first half of the year. Our disposition guidance also includes the sale of the U-Haul Net Lease Self-Storage Portfolio through the exercise of its purchase option for approximately $465 million. We expect to receive the proceeds in tranches during the first quarter and have already collected the full first quarter of rent on the portfolio, totaling $9.7 million.

Tony: The remaining three will be held for redevelopment over the next few years, but will continue as operating properties throughout 2024.

Tony: In January of this year I'm pleased to say, we completed the sale of our largest office asset state of Andalusia portfolio for approximately $360 million.

Tony: This along with the sale of another office asset in January brings gross proceeds under the office sales program in 2000 $24 million to $388 million and the total to date to $608 million.

Tony: Looking ahead to 2024, our guidance assumes office sales totaling between 550 and $600 million, including the $388 million already completed with the remaining sales into the program weighted to the first half of the year.

Tony: Our disposition guidance also includes the sale of the U haul net lease self storage portfolio through the exercise of its purchase option for approximately $465 million.

Tony: We expect to receive the proceeds in tranches during the first quarter and if collected the full first quarter of rent on the portfolio totaling $9 $7 million.

Tony: Ordinary course dispositions in 2024 are expected to total between 150 and $350 million, which includes the Marriott operating hotel I mentioned earlier.

Toni Sanzone: Ordinary course dispositions in 2024 are expected to total between $150 and $350 million, which includes the Marriott operating hotel I mentioned earlier. During 2023, our net lease portfolio continued to benefit from the high proportion of rents generated from leases with increases tied to inflation, even as inflation remained well below its 2022 peak, both in the US and Europe. This is reflected in the 4.1% year-over-year contractual same-store rent growth we reported for the fourth quarter. Based on current inflation forecasts, we expect our contractual same-store rent growth to be close to 3% for the 2024 first quarter and moderate to an average in the mid to high twos for the full year. Comprehensive same-store rent growth was 2.3% year-over-year for the fourth quarter, driven lower by the lease expiration on a large warehouse property which previously generated an ABR of $6.2 million.

Tony: During 2023, our net lease portfolio continued to benefit from the high proportion of rents generated from leases with increases tied to inflation, even as inflation remained well below its 20 twenty-two peak both in the U S and Europe.

Tony: This is reflected in the four 1% year over year contractual same store rent growth, we reported for the fourth quarter.

Tony: Based on current inflation forecasts, we expect our contractual same store rent growth to be close to 3% for the 'twenty 'twenty four first quarter and moderate to an average in the mid to high twos for the full year.

Tony: Comprehensive same store rent growth was two 3% year over year for the fourth quarter, driven lower by the lease expiration on a large warehouse property, which previously generated a b or a $6.2 million.

Tony: This vacancy also reduced our net lease portfolio occupancy to 98, 1% at year end.

Tony: As we work to re tenant the property over the near term.

We're currently in active negotiations to re lease the property at or potentially slightly above the prior in place rent, although our guidance assumes downtime on the property for most of 'twenty 'twenty four.

Toni Sanzone: This vacancy also reduced our net lease portfolio occupancy to 98.1% at year-end as we worked to re-tenant the property over the near term. We're currently in active negotiations to release the property at or potentially slightly above the prior in place rent, although our guidance assumes downtime on the property for most of 2024. While our historical experience with rent loss has been relatively negligible, our outlook for 2024 reflects our expectations for two specific assets which we're closely monitoring. First, we are proactively working with one of our top 10 tenants, Helwig, a do-it-yourself retailer in Europe, to restructure and extend its leases as it works to improve its financial position. Although this is a developing situation, our guidance currently assumes a rent abatement on this portfolio for the first quarter totaling $7.5 million and a reduction in annual rent going forward from approximately $30 million of ABR to an estimated $26 million. Second, the tenant of four cold storage and fruit packing facilities we own in Central Valley, California, which produces $5.2 million of ABR, has been operating in bankruptcy. While the tenant is current on rent through the end of February, we expect our lease to be rejected.

Tony: Yeah.

Tony: Well, our historical experience with rent loss has been relatively negligible.

Tony: Look for 2024 reflects our expectations on two specific assets, which we're closely monitoring.

Tony: First we are proactively working with one of our top 10 tenants helwig, a do it yourself retailer in Europe to restructure and extend its leases as it works to improve its financial position.

Tony: Although this is a developing situation our guidance currently assumes the rent abatement on this portfolio for the first quarter totaling $7.5 million and a reduction in annual rent going forward from approximately $30 million of ABR to an estimated $26 million.

Tony: Second the tenant or for cold storage in fruit packing facilities, we own in Central Valley, California, which produces $5.2 million of ABR has been operating in bankruptcy.

Tony: The tenant is current on rent through the end of February we expect our lease to be rejected.

Tony: Our guidance therefore assumes no additional rent from this tenant in 2024 as we worked through a resolution and carry the property is vacant.

Tony: In aggregate our guidance assumes these two tenants situations have an estimated seven cent impact on our 2020 for a S. S O through a combination of lost rent and carrying costs, partly offset by lower income taxes.

Tony: Incremental to this our guidance includes a normal course rent contingency of around 70 basis points of ABR.

Toni Sanzone: Our guidance therefore assumes no additional rents from this tenant in 2024 as we work through a resolution and carry the property vacant. In aggregate, our guidance assumes these two tenant situations have an estimated $0.07 impact on our 2024 ASFO through a combination of lost rent and carrying costs, partly offset by lower income tax. Incremental to this, our guidance includes a normal course rent contingency of around 70 basis points of ABR. Other lease-related income for the 2023 fourth quarter was $2.6 million, bringing the full year total to $23.3 million, slightly below our expectations as certain lease-related negotiations were pushed into 2024.

Tony: Other lease related income for the 2023 fourth quarter with $2 $6 million, bringing the full year total to $23 3 million slightly below our expectations as certain lease related negotiations were pushed into 'twenty 'twenty four.

Tony: For the 'twenty 'twenty four full year. We are currently expecting this line item to total in the low to mid $20 million range with visibility into almost half of that based on the negotiations currently in process.

Tony: Our operating property portfolio. Currently comprises 89 self storage properties five hotels and two student housing properties, which are expected to generate between 85 and $90 million of NOI in 'twenty 'twenty four with approximately 80% coming from self storage.

Toni Sanzone: For the 2024 full year, we are currently expecting this line item to total in the low to mid $20 million range, with visibility into almost half of that based on negotiations currently in process. Our operating property portfolio currently comprises 89 self storage properties, five hotels, and two student housing properties, which are expected to generate between $85 and $90 million of NOI in 2024, with approximately 80% coming from self storage. Our 2024 guidance assumes same-store NOI from our operating self-storage portfolio is relatively flat to the prior year. Asset management fees and reimbursements totaled $2.1 million for the fourth quarter, primarily reflecting a partial period as the external manager of NLOP. For 2024, we expect our administrative reimbursement from NLOP to total $4 million, which is fixed over time, while our asset management fees are expected to total between $5 and $7 million, declining over the course of the year with asset sales. As a reminder, both of these items have no impact on our G&A expense.

Tony: Our 'twenty 'twenty four guidance assumes same store NOI from our operating self storage portfolio is relatively flat to the prior year.

Tony: Asset management fees, and reimbursements totaled $2 $1 million for the fourth quarter, primarily reflecting a partial period as the external manager of N. L O P.

Tony: For 2024, we expect our administrative reimbursement from L. O P to total $4 million, which is fixed over time, while our asset management fees are expected to total between five and $7 million declining over the course of the year with asset sales.

Tony: As a reminder, both of these items have no impact on our G&A expense.

Tony: Nonoperating income totaled $7 $4 million for the fourth quarter, driven primarily by $4 6 million of interest income on cash and realized gains on currency hedges of $2 $9 million.

Tony: For the full year non operating income totaled $21 $4 million comprised of $14 5 million in realized gains from currency hedges and $6 9 million of interest income.

Our 'twenty 'twenty four guidance assumes nonoperating income totaling between 32 and $36 million, including interest income on cash totaling between 19 and $23 million.

Tony: Which is expected to be higher early in the year and decline as we invest excess cash.

Toni Sanzone: Non-operating income totaled $7.4 million for the 4th quarter, driven primarily by $4.6 million of interest income on cash and realized gains on currency hedges of $2.9 million. For the full year, non-operating income totaled $21.4 million, comprised of $14.5 million in realized gains from currency hedges and $6.9 million of interest income. Our 2024 guidance assumes non-operating income totaling between $32 and $36 million, including interest income on cash totaling between $19 and $23 million, which is expected to be higher early in the year and decline as we invest excess cash. It also assumes that currency rates remain at or around their current levels, which would result in expected gains from currency hedges of approximately $10 million. Our 2024 guidance also includes a $3 million dividend from Lineage Logistics, which we received in January of this year and will flow through as non-operating income in the first quarter.

Tony: It also assumes that currency rates remain at or around their current levels, which would result in expected gains from currency hedges of approximately $10 million.

Tony: Our 2024 guidance also includes a 3 million dollar dividend from lineage logistics, which we received in January of this year and will flow through non operating income in the first quarter.

Tony: Non reimbursed property expenses for the fourth quarter were $13 $3 million, bringing.

Tony: Bringing the full year total to $44 5 million, which included a property tax accrual reversal of approximately $6 million early in 2023.

Tony: For 2024, we expect non reimbursed property expenses to total between 41 and $45 million, reflecting a reduction in expenses associated with the office assets. We have exited partly offset by unexpected increase in carrying costs related to the vacancies, which I discussed earlier.

Tony: G&A expense was $21 $5 million for the fourth quarter, bringing the full year total to $96 million.

Toni Sanzone: Non-reimbursed property expenses for the fourth quarter were $13.3 million, bringing the full-year total to $44.5 million, which included a property tax accrual reversal of approximately $6 million early in 2023. For 2024, we expect non-reimbursed property expenses to total between $41 and $45 million, reflecting a reduction in expenses associated with the office assets we have exited, partly offset by an expected increase in carrying costs related to the vacancies which I discussed earlier. G&A expense was $21.5 million for the fourth quarter, bringing the full year total to $96 million.

Tony: For 'twenty 'twenty four we expect G&A to fall between 101 hundred $3 million, reflecting an inflationary increases.

Tony: G&A expense typically trends higher in the first quarter, given the timing of certain payroll related items.

Tony: Tax expense on a cash or a F O basis, which primarily reflects foreign taxes on our European assets totaled $11 $2 million for the fourth quarter and $44.3 million for 2023.

Tony: For 2024, we are anticipating these taxes total between 38 and $42 million in our guidance.

Tony: Turning now to our 'twenty 'twenty four guidance, we expect to generate full year a F O per share between $4 65, and $4.75 with a decline versus 2023, driven primarily by the full year impact of the N. L. O P spin off and the completion of the office cell program.

Toni Sanzone: For 2024, we expect GNA to fall between $100 and $103 million, reflecting inflationary increases. G&A expense typically trends higher in the first quarter, given the timing of certain payroll-related items. Tax expense on a cash or AFFO basis, which primarily reflects foreign taxes on our European assets, totaled $11.2 million for the fourth quarter and $44.3 million for 2023. For 2024, we are anticipating these taxes to total between $38 and $42 million in our guidance. Turning now to our 2024 guidance, we expect to generate full-year AFFO per share between $4.65 and $4.75, with the decline versus 2023 driven primarily by the full-year impact of the NLOP spinoff and the completion of the office sale program. Guidance assumes full-year investment volume of between $1.5 and $2 billion and reflects the timing of investments and dispositions, with investment volume expected to be more back-end weighted, while dispositions are more front-end weighted, driven primarily by the state of Andalusia office portfolio sale and the U-Haul purchase option. Moving to our Capital Markets Activity and Balance Sheet. We settled all outstanding equity forwards during the fourth quarter, issuing 4.7 million shares for net proceeds of $384 million shortly before the NLOP spinoff.

Tony: Guidance assumes full year investment volume of between 1.5, and $2 billion and reflects the timing of investments and dispositions with investment volume expected to be more back end weighted while dispositions are more front end weighted driven primarily by the state of Andalusia office portfolio sale and the U haul purchase option.

Tony: Moving to our capital markets activity and balance sheet.

Tony: We settled all outstanding equity forward during the fourth quarter issuing $4 7 million shares for net proceeds of $384 million shortly before the Antelope you spin off.

Tony: In December we completed the recast of our unsecured credit facility pushing out the maturity on a significant portion of debt maturing over the next few years.

Tony: We upsized, our existing multi currency revolver from one $8 billion to $2 billion and pushed its term out four years to February of 2029.

Tony: As part of the recast we also refinanced our euro term loan and a pound sterling term loan extending their maturity three years to February of 2028 with the option to extend for a further year subject to certain conditions.

Tony: The extension and upsizing of our credit facility demonstrates the continued strength and flexibility of our balance sheet as well as the breadth of our valued banking relationships with 16 lenders participating.

Tony: It also enhances our liquidity further supporting accretive external growth going forward.

Turning now to the strength of our liquidity position.

Tony: During the fourth quarter, a significant amount of capital came back to us, including the distribution. We received as part of the spin off of L. O P and from the settlement of all outstanding equity forwards.

Toni Sanzone: In December, we completed the recast of our unsecured credit facility, pushing out the maturity on a significant portion of debt maturing over the next few years. We also upsized our existing multi-currency revolver from $1.8 to $2 billion and pushed its term out four years to February of 2029. As part of the recast, we also refinanced our Euro Term Loan and a Pound Sterling Term Loan, extending their maturity for three years to February of 2028, with the option to extend for a further year subject to certain conditions.

Tony: We ended 2023 with total liquidity of $2.2 billion, including $634 million of cash.

Tony: We expect our liquidity position to further increase during the first quarter driven primarily by proceeds from the office sale program and the U haul disposition.

As a result, we will remain exceptionally well positioned to both fund our acquisitions and manage our debt maturities in 2024, which as Jason noted gives us plenty of flexibility and allows us to be very opportunistic when we choose to access the capital markets.

Toni Sanzone: The extension and upsizing of our credit facility demonstrates the continued strength and flexibility of our balance sheet, as well as the breadth of our valued banking relationships, with 16 lenders participating. It also enhances our liquidity, further supporting accretive external growth going forward. Turning now to the strength of our liquidity position, during the fourth quarter, a significant amount of capital came back to us, including the distribution we received as part of the spinoff of NLOP and from the settlement of all outstanding equity forward. We ended 2023 with total liquidity of $2.2 billion, including $634 million of cash.

Tony: At year end, our leverage metrics remained well within our target ranges with debt to gross assets at 41, 6%, which is at the low end of our target range of mid to low forty's.

Tony: Net debt to EBITDA was five six times relative to our target range of mid to high five times, although we expect it to be in the low fives. During the first half of 'twenty 'twenty four is there.

Tony: Disposition proceeds are redeployed into new investments before returning to our targeted range in the second half.

Tony: Lastly, regarding our dividend during the fourth quarter, we reset our dividend about 20% lower to 86 cents per share, reflecting the impact of our office exit strategy on a F O and a lower targeted payout ratio.

Toni Sanzone: We expect our liquidity position to further increase during the first quarter, driven primarily by proceeds from the office sale program and the U-Haul disposition. As a result, we will remain exceptionally well-positioned to both fund our acquisitions and manage our debt maturities in 2024, which, as Jason noted, gives us plenty of flexibility and allows us to be very opportunistic when we choose to access the capital market. At year-end, our leverage metrics remained well within our target ranges, with debt-to-growth assets at 41.6%, which is at the low end of our target range of mid-to-low 40s. Net debt to EBITDA was 5.6 times relative to our target range of mid to high five times, although we expect it to be in the low fives during the first half of 2024 as disposition proceeds are redeployed into new investments before Lastly, regarding our dividend, during the fourth quarter, we reset our dividend about 20 percent lower to 86 cents per share, reflecting the impact of our office exit strategy on AFFO and the lower targeted payout ratio. Reducing our target payout ratio to a low to mid-70% range enables us to retain and accretively reinvest greater internally generated cash flow.

Tony: Reducing our target payout ratio to a low to mid 70% range enables us to retain and accretively reinvest greater internally generated cash flow.

Tony: Going forward the intention is to grow our dividend in line with our S. F O, which we anticipate will enhance our dividend growth compared to recent years.

Tony: In closing 'twenty 'twenty four is a transitional year, primarily reflecting the execution of our office exit strategy and establishing a new baseline from which to grow our E. F F O going forward.

Tony: We believe we're very well positioned to generate a F O growth over both the near term and long term supported by an improving investment environment, a strong balance sheet and an exceptional liquidity position as well as the embedded rent growth within our portfolio of high quality, primarily warehouse and industrial net lease assets.

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 number one on your telephone keypad.

Tony: If you would like to withdraw your question Press Star then number two.

Tony: One moment, please while we poll for your questions.

Tony: Our first questions come from the line of Brad Heffern with RBC. Please proceed with your questions.

Toni Sanzone: Going forward, the intention is to grow our dividend in line with our AFFO, which we anticipate will enhance our dividend growth compared to recent years. In closing, 2024 is a transitional year, primarily reflecting the execution of our office exit strategy and establishing a new baseline from which to grow our AFFO going forward. We believe we're very well positioned to generate AFFO growth over both the near term and the long term, supported by an improving investment environment, a strong balance sheet, and an exceptional liquidity position, as well as the embedded rent growth within our portfolio of high quality, primarily warehouse and industrial, net lease assets. 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 number one on your telephone keypad.

Brad Heffern: Yeah. Good morning, everyone. Thanks on the guide it seems like the offset to the investment volumes moving higher with these two credit issues in the warehouse lease exploration I guess first of all is that correct and is that the full extent of the offsets and can you confirm that those issues weren't contemplated in the prior guide.

Brad Heffern: Tony you want to take that that is correct. Yeah, I've got that Brad that is correct and the impact that I highlighted on the call was about seven cents that was not contemplated in our preliminary guidance and in terms of the offset I think there were a handful of items. You know we went out with a fairly wide range. A three months ago, you know things have come into focus since.

Speaker Change: When I say, a handful of things aggregating to the the Delta there is probably better line of sight on re leasing assumptions in rent and recoveries.

Speaker Change: And then just generally a better outlook on interest based rates since our early November so that in combination with the linearity dividend, which we had not anticipated in our November guidance I'm really is largely offsetting that keeping up at about the $4 77 midpoint.

Brad Heffern: If you would like to withdraw your question, press star, then number two. One moment, please, while we poll for your question. Our first questions come from the line of Brad Heffern with RBC. Please proceed with your question. Yeah, good morning, everyone.

Okay got it.

Speaker Change: And then I think your recent commentary on the watch list had been you know relatively unconcerned I guess did these two credit issues largely come as a refund surprised and I is there anything else that we need to be keeping an eye on and it is in addition to those.

Toni Sanzone: Thanks. On the guide, it seems like the offset to the investment volumes moving higher with these two credit issues and the warehouse lease expiration. First of all, is that correct? And is that the full extent of the offsets? And can you confirm that those issues weren't contemplated in the prior guide? Toni, do you want to take that?

Brooks G. Gordon: This is brooks so it's really both so the one of them was on the watch list and the situation with how we'd got Tony described Havent been that was really a very late in the year development.

Toni Sanzone: That is correct. Yep, I've got that. Brad, that is correct. The impact that I highlighted on the call was about 7 cents. That was not contemplated in our preliminary guidance.

Brooks G. Gordon: They now are on our watch list and as we mentioned, we're proactively addressing that situation, but the other kind of was on the on the watch list.

Brooks G. Gordon: And in terms of the offset, I think there were a handful of items. You know, we went out with a fairly wide range three months ago. You know, things have come into focus since then. I'd say a handful of things aggregating to the delta there is probably a better line of sight on releasing assumptions and rent recoveries, and then just generally a better outlook on interest base rates since early November. So that, in combination with the lineage dividend, which we had not anticipated in our November guidance, really is largely offsetting that, keeping us at about the $4.70 midpoint. Okay.

Speaker Change: Okay, but nothing else notable in terms of movement in the watch list.

Speaker Change: No the big stories really.

Speaker Change: Outside of that the watch list is actually came down somewhat.

Speaker Change: In total that's it's around.

Speaker Change: Or in a quarter percent.

Speaker Change: So that's certainly up but the real addition, there is how big.

Speaker Change: Outside of that the net reduction that maybe are on watch list.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. Our next question is come from the line of John Kim with BMO Capital markets. Please proceed with your question.

John P. Kim: Thank you.

John P. Kim: So on the hallway rent reset.

Brooks G. Gordon: Um, and then I think your recent commentary on the watch list was, you know, relatively unconcerned. I guess, did these two credit issues largely come as a recent surprise? And is there anything else that we need to be keeping an eye on in addition to those? This is Brooks.

Down about 4 million EBITDAR rent coverage metric you can look at that shows that.

John P. Kim: This new this new rents is sustainable the reason why I ask is you had also returns abatement on top of that so it seems like.

A further cut maybe necessary.

Brooks G. Gordon: So it's really both. So one of them was on the watch list. And the situation with Helwig that Toni described hadn't been that was really a very late development in the year. They are now on our watch list. And as we mentioned, we're proactively addressing that situation. But the other tenant was on the on the, Okay, but nothing else notable in terms of movement on the watchlist. No, the big story is really adding Helwig. Outside of that, the watchlist actually came down somewhat. So, you know, in total, that's around 4.25%. So that's certainly up, but the real addition there is Helwig. Outside of that, the net reduction in ABR on Watchdog.

John P. Kim: Yes, so as I mentioned, we're working in conjunction with their other landlords as well to really put them on a better trajectory.

So very sharp slowdown in their business towards the end of last year.

John P. Kim: Rent abatement combined with the ongoing rent reductions across their real estate portfolio, we think puts them in a much better position, we will keep them on our watch list, because we need to see real execution there.

John P. Kim: From a coverage basis, you know they are coming off a very slow period, but we would expect this to be kind.

John P. Kim: Kind of in the one and a quarter coverage range.

John P. Kim: That's before they execute on what we think is a robust turnaround plan.

Brooks G. Gordon: Okay, thank you. Our next questions come from the line of John Kim with BMO Capital Markets. Please proceed with your question. Thank you. So on the Hellwig rent reset, down about 4 million, is there an EBITDA rent coverage metric that you can look at that shows that this new rent is sustainable? The reason why I asked is that you also had a rent abatement on top of that.

But again, we're going to watch them very closely but we do think that.

John P. Kim: Proactive actions that we and other stakeholders are taking puts them in a much better place to operate through this.

John P. Kim: And how do you define your your watch list is it.

John P. Kim: If the tenant starts paying their rents late or do you have any of the other visibility or metric that you look at that.

Brooks G. Gordon: So it seems like a further rent cut may be necessary. Yeah, so, as I mentioned, we're working in conjunction with their other landlords as well to really put them on a better trajectory. So, you know, a very sharp slowdown in their business towards the end of last year. The renovation, combined with the ongoing rent reductions across their real estate portfolio, we think puts them in a much better position. We will keep them on our watch list because, you know, we need to see real executions there.

John P. Kim: You know provide some clarity on who may be.

John P. Kim: At least you're paying rent going forward.

John P. Kim: Yes. The watch list is really meant to be a tool for us to monitor tenants that we think could be at risk of default in a 12 to 18 months timeframe.

John P. Kim: And so that includes the tenants that are operating in bankruptcy as well as tenants, where we see a potential risk of default in the future.

John P. Kim: I'll note that that methodology has been consistent for very long period of time decades.

Brooks G. Gordon: From a coverage basis, you know, they're coming off a very slow period, but we would expect this to be kind of in the one and a quarter coverage range. But that's before they execute on what we think is a robust turnaround plan. But again, we're going to watch them very closely. But we do think the proactive actions that we and other stakeholders are taking put them in a much better place to operate through that. And how do you define your watch list?

John P. Kim: And over that time.

John P. Kim: Timeframe, you know a small portion of the tenants on the watch list actually do end up defaulting.

John P. Kim: It certainly does happen, but it's really a management tool for us to track and monitor that so it's meant to be forward looking and that's really kind of the timeframes we have in mind.

Speaker Change: I'm just wondering what with one of the kind of issues you didn't have that their money to watch list last quarter.

Brooks G. Gordon: Is it if the tenant starts paying their rent late, or do you have any other visibility or metrics that you look at that, you know, provide some clarity on who may be at issue with paying rent going forward? Yeah, the watch list is really meant to be a tool for us to monitor tenants that we think could be at risk of default in a 12 to 18 months time frame. And so that includes tenants that are operating in bankruptcy, as well as tenants where we see a potential risk of default in the future. You know, I'll note that that methodology has been consistent for a very long period of time, decades.

Speaker Change: It came as a surprise.

Speaker Change:

Speaker Change: Yeah I mean, the question is the base of the others.

Speaker Change: On your watch list today that could pop up.

Speaker Change: Yes, that's certainly how big was that.

Speaker Change: Rapidly developing situation really that came.

Speaker Change: <unk> into play at the very end of last year. Its a company that operates with a higher.

Speaker Change: Higher leverage point and somewhat smaller overall scale, but they've operated very consistently for 20 plus years with that setup.

Speaker Change: And a variety of factors really contributed to what we saw a very quickly evolving situation and so we really wanted to be proactive work with their other stakeholders to put them on a better path.

Brooks G. Gordon: And over that time frame, you know, a small portion of the tenants on the watch list actually do end up defaulting. It certainly does happen, but it's really a management tool for us to track and monitor that. So it's meant to be forward looking.

Speaker Change: So agree that wasn't one we.

Brooks G. Gordon: And that's really kind of the time frames we have in mind. I'm just wondering, with one of the tenant issues, you didn't have them on your watch list last quarter, so it obviously came as a surprise. www. FoxFoundation.com Yeah, I mean, the question is that there could be others that are not on your watch list today that could pop up.

Speaker Change: I see.

Speaker Change: Ah you're out, but it's something we're addressing proactively and working through it.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Our next question is coming from the line of Anthony Polo with J P. Morgan. Please proceed with your questions.

Anthony Paolone: Yeah. Thanks, So Tony on the same store I guess, you gave the the contractual expectations that close to three in the first quarter and then drifting down but like I guess, if you incorporate the industrial vacancy. These couple of credit items and then I guess you said another 70 bps like Where's.

Brooks G. Gordon: Yeah, certainly Helwig was a rapidly developing situation. Really, that came into play at the very end of last year. You know, it's a company that operates with a higher leverage point and a somewhat smaller overall scale. But they've operated very consistently for 20 plus years with that setup.

Anthony Paolone: That land is from just a core number for 'twenty four for like on a comprehensive basis.

Brooks G. Gordon: And, you know, a variety of factors really contributed to what we saw as a very quickly evolving situation. And so we really wanted to be proactive, work with their other stakeholders to put them on a better path. So green, that wasn't one we had seen a year out.

Tony: Yeah, I think the expectation, especially with the the rent abatement for Hell rig expected to happen in the first quarter is that you know that would be most negatively impacted our first quarter and then that would sort of stabilize but still be down over the course of the year kind of reflecting the various items that I highlighted so I do think that.

Brooks G. Gordon: But it's something we're addressing proactively and working through. Great, thank you. Thank you. Our next questions come from the line of Anthony Paolone with JP Morgan. Please proceed with your, Yeah, thanks.

Tony: Comprehensive same store standpoint, we are looking at a relatively flat year on.

Tony: On a full year basis.

Tony: Okay, and then I mean for the cold storage facility.

Tony: Facility for instance, you know like what does recovery for an asset like that look like like does it have to get released or just a new agreement with the existing operator like what happens with an asset like that.

Anthony Paolone: So, Toni, on the same store, I guess you gave the contractual expectations that, you know, close to three in the first quarter and then drifting down. But, like, I guess if we incorporate the industrial vacancy, these couple credit items, you know, and then I guess you said another 70 BIPs, like, where does that land us from just a core number of 24, on a comprehensive basis? Yeah, I think the expectation, especially with the rent abatement for Helwig expected to happen in the first quarter, is that, you know, that would be most negatively impacted in our first quarter, and then that would sort of stabilize, but still be down over the course of the year, kind of reflecting the various items that I highlighted.

Speaker Change: Yes. So these are.

Speaker Change: Cold storage and fruit.

Speaker Change: Packing facilities really right adjacent to the farmland in the Central Valley. So they remain very critical for addressed operating that farmland, where we are right now is.

Speaker Change: Working through the resolution to find that the operators have that farmland and so that land is being sold.

Speaker Change: And we're in close contact with the buyer pool on that you know I'll note. Our rents are quite low there is around 350.

Speaker Change: <unk> 50 per square foot.

Speaker Change: So we think these facilities will be very attractive.

Speaker Change: Critical to operating land that's there.

Speaker Change: Our guidance as Tony mentioned includes a vacancy for the remainder of the year.

Anthony Paolone: So I do think that from a comprehensive same store standpoint, we are looking at a relatively flat year on a four-year basis. Okay, and then I mean, for the cold storage facility, for instance, you know, what is recovery for an asset like that look like? Like, does it have to get released or just a new agreement with the existing operator? Like what happens with an asset like that?

Speaker Change: Gossip.

Speaker Change: Okay, and then maybe for Jason the the one and a half to $2 billion of investments that you're assuming in guidance.

Jason E. Fox: Can you maybe help us with just your confidence level, you talked about the skew towards sale leasebacks, which just intuitively seems maybe a bit more idiosyncratic than just being in the market day to day for secondary deals and so you know with that level of volume and just the skew towards you know towards the deals that you are you like to do like I don't know I guess.

Brooks G. Gordon: Yeah, so these are cold storage facilities and the Fruit Packing Facility is really right adjacent to the farmland in the Central Valley. So they remain very critical for operating that farmland where we are right now is, working through the resolution to find the operators of that farmland. And so that land is being sold, and we're in close contact with the buyer pool on that. You know, I'll note our rents are quite low there. It costs around $350 per square foot.

Jason E. Fox: Help us with the confidence level, there that you'll get there.

Speaker Change: Yeah sure I mentioned earlier, we've closed about $200 million of deals year to date, maybe a little underneath that and then we have another 100 million of capital projects and loan commitment fundings that we expect to complete this year. So you know a month five weeks into the year, we have you know.

Brooks G. Gordon: So we think these facilities will be very attractive and critical to operating the land. That said, our guidance, as Toni mentioned, includes a vacancy for the remainder of the year in those assets.

Speaker Change: Clear visibility into 300 million and then the pipeline is building and I think that 2024 is shaping up to be a pretty interesting environment. I mean, our view is there is a meaningful piece.

Jason E. Fox: And then maybe for Jason, the $1.5 to $2 billion of investment that you're assuming as guidance, can you maybe help us with just your confidence level? You talked about the skew towards sale leasebacks, which just intuitively seems maybe a bit more idiosyncratic than just being in the market day-to-day for secondary deals. And so with that level of volume and just the skew towards the deals that you like to do, I don't know, I guess just help us with the confidence level there that you'll get there. Yeah, sure.

Speaker Change: Up supply of sellers that are out there both in the U S and maybe even more so in Europe actually given the spike in rates that we saw there over 2023 that led to persistently wide.

Speaker Change: As spreads in frozen transaction markets, you know I think sellers' expectations have adjusted some and then with interest rates, having come down that's really allowed us to get a little bit more aggressive on pricing you know lean and deals where we think.

Speaker Change: We have a lot of interest and I think that combination should help you open up deal flow and you you mentioned sale leaseback, saying, it's especially true there I think that environment is still quite strong it's a very attractive option for corporates and sponsor backed companies in particular, those just below investment grade that have you know fewer cheaper options to fund deals, but we think.

Jason E. Fox: You know, I mentioned earlier that we've closed about $200 million of deals year-to-date, maybe a little underneath that. And then we have another $100 million of capital projects and loan commitment funding that we expect. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, The pipeline is building, and I think that 2024 is shaping up to be a pretty interesting environment.

Speaker Change: Private.

Speaker Change: Bid competition has remained thinned out see MBS markets are still not quite back there remain constrained and an unreliable. So I think that's going to help from a competitive position and you know we're seeing opportunities.

Speaker Change: We also mentioned the <unk>.

Jason E. Fox: I mean, our view is there's a meaningful, pent-up supply of sellers that are out there, both in the U.S. but maybe even more so in Europe, actually, given the spike in rates that we saw there over 2023, which led to persistently wide bid-ask spreads and frozen transaction markets. You know, I think sellers' expectations have adjusted some. And then, with interest rates having come down, that's really allowed us to get a little bit more aggressive on pricing. You know, lean on deals where we think we have a lot of interest, and I think that combination should help, you know, open up deal flow. And you mentioned, say, lease backs. I think it's especially true there.

Speaker Change: The capital position, we're in which is probably.

Speaker Change: Our strong relative to our peers as you know we've ever been and I'm sitting on as much cash as we are so we do like how we're positioned well.

Speaker Change: We do think the environment is interesting we have a bias to put that capital work, but of course, we don't have visibility into a full year at this point a lot of things have to come together, but we feel good about that guidance range at this point in time.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you our next questions come from the line of Smedes Rose with Citibank. Please proceed with your questions.

Smedes Rose: Hi, Thank you.

Smedes Rose: I just wanted to ask you a little bit about the final exit from the <unk>.

Smedes Rose: It looks like the timeline was extended a little bit from kind of early 2024.

Smedes Rose: The first half of 'twenty four is there anything that's delaying that or you just have a little more or maybe less visibility on that sale and it's that supporting some of the I guess your unchanged midpoint earnings outlook for the year by owning them a little longer.

Jason E. Fox: I think that the environment is still quite strong. It's a very attractive option for corporates. Sponsor back companies, in particular those just below investment grade that have, Spenser Allaway Spenser Allaway Spenser Allaway, The bid competition has remained thinned out; the CMBS markets are still not quite back. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, The Capital Position we're in, which is probably..., as strong relative to our peers as we've So we do like how we're positioned, and we do think the environment is interesting.

Smedes Rose: Bruce you want to take the first after that and maybe Tony you can take the second half.

Bruce: Sure Yes.

Bruce: I mentioned, we still continue to target the remaining office sales for the first half.

Tony: You know I'll note about 80% of our overall office sale program is either closed or under binding contract.

Tony: Another 10% to 12% of that is under contract and diligence.

Tony: And then the remainder is in progress you know from a timing perspective.

Tony: It's really comes down to diligence can take some time on these.

Tony: I'll note a few jurisdictions in Europe, there's also statutory preemption period that needs to pass before the the local jurisdiction approve.

Jason E. Fox: We have the bias to put that capital to work, but of course, we don't have visibility into a full year at this point. A lot of things have to come together, but we feel good about that guidance range. Okay. Thank you.

Tony: Approve the sale.

Speaker Change: So that's a little bit of it.

Speaker Change: But we're making very good progress in the real heavy lift is complete.

Jason E. Fox: Our next questions come from the line about Smedes Roads with Citibank. Please proceed with your question. Hi, thank you.

Speaker Change: And so we're optimistic on our prospects to complete this imminently.

Speaker Change: And working actively through it.

Brooks G. Gordon: I just wanted to ask you a little bit about the final exit from the office space. It looks like the timeline was extended a little bit from kind of early 2024 to do the first half of 24. Is there anything that's delaying that? Or do you just have a little more or maybe less visibility on that sale? And is that supporting some of your, I guess your unchanged midpoint earnings outlook for the year by owning them a little longer? Brooks, you want to take the first half of that, and maybe Toni can take the second half.

Speaker Change: And in terms of the guidance I'd say that the disposition timing really didn't have a material impact I think if anything that was maybe about a penny from our initial expectations.

Speaker Change: Okay, and then I just wanted to turn back to the pipeline a little bit obviously, you increase at the midpoint for the full year, but you could you quantify what you see as sort of your near term pipeline and I think in the third quarter, you talked about maybe 400 million of sort of near term visibility can you just speak to what you're seeing now and then maybe just from the cap rate commentary in the near term.

Speaker Change:

Speaker Change: Yeah sure I mean, it's it's a little difficult right now to quantify the near term pipeline. Its certainly building. It does include several large deals, but those who had no I'd call. It very early stages. So it's kind of difficult to translate that into a number but you know we are off to a good start with the deals we close in <unk>.

Brooks G. Gordon: Sure. Yeah, as I mentioned, we still continue to target the remaining office sales for the first half. You know, I'll note about 80% of our overall office sale program is either closed or under binding contract. You know, another 10 to 12% of that is under contract in diligence, and then the remainder is in progress.

Speaker Change: And you know, we do like kind of the the market backdrop for US right. Now is explain a second ago with sale leasebacks and you know a lot of seller supply out there that we think is going to come to market. So yes, we feel pretty positive I think cap rates.

Toni Sanzone: It's really come down to diligence, which can take some time on these. I'll note in a few jurisdictions in Europe, there are also statutory preemption periods that need to pass before the local jurisdiction approves the sale. So that's a little bit of it. But we're making very good progress, and the real heavy lift is complete. And so, you know, we're optimistic about our prospects to complete this imminently and are working actively through it. And in terms of the guidance, I think that the disposition timing really didn't have a material impact. I think if anything, it was maybe about a penny less than our initial expectation.

Speaker Change: You know the.

Speaker Change: Cap rates at least in the U S. We think have been stabilizing over the last quarter. So interest rates came off the highs from October 10 year treasuries and bouncing around four in the low fours.

Speaker Change: So you bid ask spreads have tightened we think that translates into some more market activity.

Speaker Change: Last year, we were at 7.7%.

Jason E. Fox: Okay, and then I just wanted to turn back just to the pipeline a little bit. Obviously, you increased at the midpoint for the full year. Could you sort of quantify what you see as sort of your near-term pipeline? I think in the third quarter, you talked about maybe $400 million in sort of near-term visibility. Can you just speak to what you're seeing now and maybe just some cap rate commentary for the near term? Yeah, sure.

For the fourth quarter I think the full year was seven 6%. So we've seen a little bit of an uptick I think right. Now we're targeting you know deals into sevens that works for us from a cost of capital standpoint, certainly we would have considered the liquidity that we have and and so yes. So I think Europe Europe is maybe a little bit more dynamic I mentioned that.

Speaker Change: It's been some steeper increases in the.

Speaker Change: The debt markets there over the past 12 to 18 months and a reversal of that more recently I think at this point, we can probably borrow 100 to 150 basis points inside of where we can borrow in U S dollars, which you go back a quarter or two and that was at par. So we've certainly seen some tightening of rates in Europe, which you know allows.

Jason E. Fox: I mean, it's a little difficult right now to quantify the near-term pipeline. It's certainly building. It does include several large deals, but those are at, you know, I'd call them, very early stages. So it's kind of difficult to translate that into a number.

Jason E. Fox: But, you know, we are off to a good start with the deals we've closed. And, you know, we do like the kind of market backdrop for us right now, as I explained a second ago, with sale-lease SPACs and, you know, a lot of seller supply out there that we think is going to come to market. So, yes, we feel pretty positive right now. I think cap rates... You know, the. Cap rates, at least in the U.S., have been stabilizing over the last quarter or so. Interest rates came off the highs from October, and the 10-year Treasuries have been bouncing around four in the low fours.

Speaker Change: Just to get a little bit more aggressive on cap rates and with seller expectations. Adjusting we think that's going to help bridge that gap and loosen up that market. Some.

Speaker Change: Numbers on it you know, maybe Europe would be a little bit inside of where we're targeting in the U S. But it certainly varies by country. You know, Germany. For instance is probably you know on the on the lower end of a range and maybe a country like Italy, we can get a little bit more yield.

Speaker Change: Even though we're working with big kind of multinational companies in those markets.

Speaker Change: Okay. Thank you.

Speaker Change: Welcome.

Speaker Change: Thank you. Our next question will come from the line of Mitch Germain with JMP Securities. Please proceed with your questions.

Jason E. Fox: So bid-ask spreads have tightened. We think that translates into some more market activity. Last year, we were at 7.7%.

Mitch Germain: Hi, good morning.

Mitch Germain: Jason you mentioned, some additions two or more emphasis on retail maybe some additions to the team and anything that you can share.

Jason E. Fox: For the fourth quarter, I think the full year was 7.6%; we've seen a little bit of an uptick. I think right now we're targeting deals in the sevens, which works for us from a cost of capital standpoint. Certainly, we need to consider the liquidity that we have. And so, yeah, I think Europe is maybe a little bit more dynamic. I mentioned that there's been some steeper increases in the debt market over the past 12 to 18 months, and a reversal of that more recently, I think, www.thevenusproject.com the You know, put numbers on it, maybe Europe would be a little bit inside of where we're targeting in the U.S., but it certainly varies by country.

Jason E. Fox: Yeah, I mean look we've been.

Mitch Germain: We've been diversified for a long time, I think we always explore new growth verticals and.

Mitch Germain: We're focused on growing our opportunity said retail has always been a big part of the U S net lease market.

Jason E. Fox: Europe I think it's been more consistently something that we've been active in in the U S. I would say it's been more opportunistic when you think about some of the deals we've done and in Las Vegas and in other areas. So yes, we've hired over the last year or so several dedicated investment officers. They have lots of experience acquiring retail net lease.

Jason E. Fox: You know, Germany, for instance, is probably on the lower end of a range like Italy, but we can get a little bit more yield. Even though we're working with a big, kind of multinational... Okay, thank you. Thank you. Our next question has come from the line of Mitch Germain with JMP Securities. Please proceed with your question. Good morning, Jason. You mentioned some additions to or more emphasis on retail, maybe some additions to the team. Anything that you can share?

Jason E. Fox: And really deep relationships with tenants in the brokerage community. So you know given our scale our reputation and we think we can take some market share the market timing seems good there's fewer competitors as a result of some of the competition or the consolidation that we've seen and in some of the existing players are starting to reach exposure limits dessert.

Jason E. Fox: Segments in and even specific tenants. So I think that you know we've heard from conversations with brokers and tenants that you know we're a welcome participant you know help diversify their capital partners and so we think it's a good time to ramp up and you know we're optimistic that's going to be a contributor going forward to our deal volume.

Jason E. Fox: Yeah, I mean, look, we've been, you know, diversified for a long time. I think we always explore, you know, new growth verticals. We're focused on growing our opportunities. And that retail has always been a big part of the US net lease market. Europe, I think it's been more consistently something that we've been active in.

Speaker Change: Got you. Thanks for that you mentioned, how big I believe you had suggested they run they ran a little bit high on leverage and.

Jason E. Fox: In the US, I would say it's been more opportunistic when you think about some of the deals we've done in Las Vegas and in other areas. So yeah, so we've hired over the last year or so several dedicated investment officers. They have lots of experience acquiring retail net leases, and they have really deep relationships with tenants in the brokerage community. So, given our scale, our reputation, we think we can take some market share. The market timing seems good. There are fewer competitors as a result of some of the consolidation that we've seen. And some of the existing players are starting to reach exposure limits in certain segments, and even...

Speaker Change: Curious if there was any other tenants.

Speaker Change: In your portfolio that have either a similar business model would be a similar balance sheet structure.

Speaker Change: Yeah on the health situation.

Speaker Change: That's a very tenant specific situation.

Speaker Change: And really it was caused by a few combined factors one of which was a pull forward in demand through COVID-19 for their business.

Speaker Change: Combined with balance sheet.

Speaker Change: And inventory issue so.

Speaker Change: My view that as really a tenant specific situation.

Speaker Change: The broader portfolio, it's a huge portfolio and broadly diversified there's tenants.

Jason E. Fox: So I think that we've heard from conversations with brokers and tenants that we're a welcome participant, we've helped diversify their capital partners, and we think it s a good time to ramp up. You know, we're optimistic that it's going to be a contributor going forward to our... Got you. Thanks for that. You mentioned Helwig.

Speaker Change: Every store, but we think our our watch list is really where we see them.

Speaker Change: The potential for default risk.

Speaker Change: And.

Speaker Change: So hard to comment on any specific tenants there, but it's really a broad range of business models.

Speaker Change: Balance sheets and in regions and industry.

Speaker Change: Great I appreciate that thanks for taking my questions.

Speaker Change: Thank you our next questions come from the line of Greg Mcginniss with Deutsche Bank. Please proceed with your questions.

Brooks G. Gordon: I believe you suggested they ran a little bit high on leverage. Curious if there are any other tenants in your portfolio that have either A, a similar business model, or B, a similar balance sheet structure. Yeah, on the Helwig situation, you know, that's a very tenant-specific situation and really was caused by a few combined factors, one of which was the pull-forward in demand through COVID for their business, combined with balance sheet and inventory issues. So, you know, in my view, that's really a tenant-specific situation. In the broader portfolio, it's a huge portfolio and broadly diversified. There are tenants of every sort. But we think our watch list is really where we see the potential for default risk.

Greg Mcginniss: Hey, this is Greg Scotia.

Greg Mcginniss: Regarding that large industrial lease that ended up falling out of guidance.

Greg Mcginniss: Is that an active negotiation with the tenant decided to move elsewhere, where they consolidated can you just walk us through kind of at least negotiation process regarding typical timing.

Greg Mcginniss: How close to the end of lease term to tenants are typically resigning.

Speaker Change: Yeah. This one was a very specific situation, where they just needed to downsize as too big a building for them.

Speaker Change: So there wasn't a renewal negotiation.

Speaker Change: We do feel very good about that situation that it's an excellent building.

Speaker Change: In the Chicago market and as Tony mentioned, we're actively in negotiations there to release that so we.

Brooks G. Gordon: And, It's hard to comment on any specific tenants there, but there is really a broad range of business models, balance sheets, regions, and industries. Great. Appreciate that. Thanks for taking my question. Thank you. Our next question comes from the line of Greg McGinnis with Deutsche Bank. Please proceed with your question. Hey, this is Greg, Scotia.

Speaker Change: We think that would be a good outcome.

Speaker Change: In terms of more generally.

Speaker Change: We typically are pursuing lease negotiations with tenants.

Speaker Change: Anywhere from two to five years before lease expiration depending on the situation.

Speaker Change: And so it really runs the gamut, but this was a unique situation where great building serve them well, but it was just that they needed a different size.

Greg McGinnis: Regarding that large industrial lease that ended up falling out of guidance, was that an active negotiation, and the tenant decided to move elsewhere? Were they consolidating? Can you just walk us through kind of the lease negotiation process regarding typical timing and how close to the end of the lease term tenants are typically resigning? Yeah, this one was a very specific situation where they just needed to downsize. It was too big of a building for them.

Speaker Change: Okay. So are you just expecting to have a different tenant moving in there earlier than you are getting one which is why that negative impact on guidance.

Speaker Change: As you already know they're moving out.

Speaker Change: Well I don't know I would clarify that they there yeah, yeah that was not one of the changes that was baked into our initial guidance range.

Speaker Change: What kind of credit issues that were not baked in so that one was contemplated.

Speaker Change: Okay. Okay. Thank you.

Speaker Change: And sorry, just to clarify for myself on helwig, So theres, if you're providing a three month of rent at the old rate and then renegotiating to potentially $26 million a year going forward.

Brooks G. Gordon: So there wasn't a renewal negotiation. We do feel very good about that situation. It's an excellent building in the Chicago market.

Speaker Change: Yeah.

Speaker Change: So to clarify there, where it's a one quarter rent abatements so for Q1.

Brooks G. Gordon: And as Toni mentioned, we're actively in negotiations there to release that, so we think that would be a good outcome. In terms of more generally, we typically are pursuing lease negotiations with tenants, anywhere from two to even five years before lease expiration, depending on the situation. And so it really runs the gamut.

Speaker Change: And an ongoing reduction as you described we're also extending that at least to 20 years.

Speaker Change: And you know I'll note that that's a a.

Speaker Change: A similar structure that.

Speaker Change: The the other stakeholders are doing as well so other landlords other than us.

Brooks G. Gordon: But this was a unique situation where a great building served them well, but it was just a different size. Okay, so were you just expecting to have a different tenant moving in there earlier than you were getting one, which is why it had a negative impact on guidance? If you already knew, they were moving out.

Speaker Change: And so that really in our view shores up there.

Speaker Change: Their financial position substantially.

Speaker Change: Putting them on a better footing to.

Pursuing.

Speaker Change: Our robust turnaround plan so.

Speaker Change: That's really the proactive approach there.

Speaker Change: To put them in position to execute.

Speaker Change: And so what was the catalyst to doing this deal and realizing that hey, there financial position is maybe not as good as we thought was that them reaching out to you.

Toni Sanzone: Well, no, I was just going to say there, yeah, that was not one of the changes that was baked into our initial guidance range. It was really the other credit issues that were not baked in, so that one was contemplated. Okay, okay. Thank you.

Speaker Change: No we get financial disclosure from all of our tenants and you know when we saw late last year. There are second half had deteriorated quite quickly.

Brooks G. Gordon: And sorry, just to clarify for myself on Helwig, so there's a you're providing three months of rent at the old rate and then renegotiating to potentially 26 million a year going forward. So to clarify there, we're it's a one-quarter rent abatement. So for Q1, and an ongoing reduction, as you described, we're also extending that lease to 20 years. And, you know, I'll note that that's a similar structure that other stakeholders are doing as well, so other landlords other than us, and so that really, in our view, shores up their financial position substantially and really puts them on a better footing to pursue a robust turnaround plan. So, that's really the proactive approach there, to put them in position to execute. And so what was the catalyst for doing this deal and realizing that, hey, their financial position is maybe not as good as we thought it would be when they reached out to you? No, we get financial disclosure from all of our tenants. And, you know, when we saw them late last year, their second half had deteriorated quite quickly.

Speaker Change: That's when we really took a proactive approach and you know again I think that was a.

Speaker Change: A combination of factors that aligned.

Speaker Change: And.

Speaker Change: Again, that's really a demand pull forward, which isn't which then dropped off quite quickly after COVID-19.

Speaker Change: You know a broader slowdown in potential consumer spending and then inventory mismatch and so what we saw there was a risk that they could have a constrained liquidity position in 2024, and you know when they need to be buying inventory and really being aggressive. So we wanted to manage that situation is that there are other landlords and lenders.

Speaker Change: And working with the company itself. So all stakeholders have come to the table and put the company in a in a better place from.

Speaker Change: From a status perspective, we're actively working on it.

Speaker Change: The deal is.

Speaker Change: Agreed and we're in kind of documentation mode.

Brooks G. Gordon: That's when we really took that proactive approach. And, you know, again, I think that was a combination of factors that aligned. And, again, that's really a demand pull forward, which then dropped off quite quickly after COVID. You know, a broader slowdown in potential consumer spending and then an inventory mismatch. And so what we saw there was, you know, a risk that they could have a constrained liquidity position in 2024 and, you know, when they need to be buying inventory and really being aggressive. So we wanted to manage that situation, as did their other landlords and lenders and working with the company itself. So all stakeholders have come to the table and put the company in a better place. You know, from a status perspective, we're actively working on it, the deal is largely agreed, and we're in kind of documentation mode. And so we expect we'll get that completed over the coming month or so. Okay, thanks. And last one for me.

Speaker Change: And so we expect we will get that completed over the coming month or so.

Speaker Change: Okay. Thanks, and last one for me I saw you did a deal with Morrison grocery store in the U K I'm curious if that's kind of opening the door for you to be doing more business with them. So that theyre doing other sale leasebacks.

Speaker Change: Uh huh.

Speaker Change: What's your comfort level with the financials there there's just been some news that.

Speaker Change: Not quite operating to a level. They once were and then if you could just you know if you're able to disclose your level of exposure to private equity backed tenants as well.

Speaker Change: Yeah. So the deal with more since that was a relatively small deal I kind of look at that more as a one off opportunity. It was pretty opportunistic in nature and that we purchased it from a fund that had redemption pressures and it had some liquidity needs. So.

Speaker Change: It was a good opportunity to to buy into what we view as a very good location solid unit level economics, and we think that helps mitigate any you know you know, let's say the higher leverage that they're operating yet you know could there be future deals there potentially I don't think there's anything we're working on right now it was not a.

Brooks G. Gordon: I saw you did a deal with Morrison's grocery store in the UK. I'm curious if that's kind of opening the door for you to be doing more business with them. We saw that they're doing other sale leasebacks. What's your comfort level with the financials there? There's just been some news that they're not quite operating to the level they once were. And then, if you could just, you know, if you're able to disclose your level of exposure to private equity back tenants as well. Yes, the deal with Morrison's was a relatively small deal.

Speaker Change: Sale leasebacks I wouldn't say, there's a direct relationship there that could lead you know imminently 20, new deals, but we've been active in grocery in Europe for quite some time and I wouldn't necessarily rule it out.

Jason E. Fox: I kind of look at that more as a one-off opportunity. www.wpcarey.com. We think it was a good opportunity to buy into what we view as a very good location, solid unit level economics, and we think that helps mitigate any... say the higher leverage that they're operating at. You know, could there be future deals there? Potentially.

Speaker Change: Okay. Thank you.

Speaker Change: Youre welcome.

Speaker Change: Thank you. Our next question is coming from the line of Spencer Alloway with Green Street. Please proceed with your questions.

Thank you and maybe just following up on the theme of pent up seller demand you cited in both the U S and in Europe can you just elaborate on whether there are any trends either by property type or kind of industry.

Jason E. Fox: I don't think there's anything we're working on right now. It was not a sale-leaseback, so I wouldn't say there's a direct relationship there that could lead, you know, imminently, to any new deals. But we've been active in grocery in Europe for quite some time, and I wouldn't necessarily rule it out.

Speaker Change: Yeah, I mean, I would say, it's more of a broader theme in probably correlates a lot with.

Jason E. Fox: Okay, thank you. Yep, you're welcome. Thank you. Our next question has come from the line of Spenser Allaway on Green Street.

Speaker Change: Sale leasebacks.

You know in terms of being a source of relatively cheap capital compared to many of the other options.

Spenser Allaway: Please proceed with your question. Thank you. Maybe just following up on the theme of pent-up seller demand you cited in both the US and Europe, can you just elaborate on whether there are any trends either by property type or tenant industry?

Speaker Change: You know, we talked about wanting to ramp up retail. So we're hoping that that we're seeing more opportunities. There I think the theme, it's probably most relevant to industrial transactions that tend to correlate maybe most with sale leasebacks.

Jason E. Fox: Yeah, I mean, I would say it's more of a broader theme and probably correlates a lot with sale lease backs, you know, in terms of http://thevenusproject.com. We talked about wanting to ramp up retail, so we're hoping that we're seeing more opportunities there. I think the theme is probably most relevant to industrial transactions that tend to correlate maybe most with sales back. So, you know, I don't think there's any broader themes than that. Okay, and then lastly, on the office front, and thank you for the commentary thus far, but has anything changed in terms of the conversations you're having with the ongoing asset sales in terms of buyer expectations since you initiated the process a few months ago? No, I'd say, over this period of time, our expectations have remained very firmly in place. You know, timing has moved around a little bit on the final piece of this.

Speaker Change: So.

Speaker Change: I don't think there's any broader themes than that right now.

Speaker Change: Okay, and then lastly on the office front and thank you for the commentary thus far but has anything changed in terms of the conversations you're having with the ongoing asset sales in terms of buyer expectations. Since you initiated the process a few months ago.

Speaker Change: No I'd say you know over this period of time, our expectations have remained very firmly in.

Speaker Change: In place.

Speaker Change: Timing has moved around a little bit.

Speaker Change: On the final piece of this but again I think that's.

Speaker Change: Do you expect it to a point pricing has held in about where we thought.

Speaker Change: So we're confident we can get that done.

Speaker Change: And making good progress on our balance and as I said you know the large.

Speaker Change: Majority of that is already closed.

Speaker Change: That's it for me thanks, guys.

Speaker Change: Thank you our next questions come from the line of RJ Milligan with Raymond James. Please proceed with your questions.

RJ Milligan: Yeah. Good morning, just a couple of <unk>.

Brooks G. Gordon: But again, I think that's to be expected to a point. Pricing is held in about where we thought. And so, you know, we're confident we can get that done and make good progress on the balance. And as I said, you know, the large majority of that is already closed. That's it for me.

RJ Milligan: Follow ups, it's Tony I think you mentioned in the original guidance what was contemplated for credit loss.

RJ Milligan: 24.

RJ Milligan: And how much of that has been used up just some of the known credit issues.

Tony: Yeah as I mentioned in my remarks that we're starting the year with an estimate of about 70 basis points of ABR mm for overall rent related contingency that did not as I mentioned, that's separate from the 210 initiatives that I discussed that we quantified as having roughly a 7% impact so we did not.

RJ Milligan: Thank you. Our next questions come from the line of RJ Milligan with Raymond James. Please proceed with your question. Yeah, good morning.

RJ Milligan: Just a couple follow-ups. Toni, I think you mentioned in the original guidance what was contemplated for credit loss? 24, and how much of that has been used up, just given the non-credit.

Tony: The seventh sense in our initial guidance, but any sense of 70 basis points as more normal course for us and that that would be in the range of what we had assumed back in November.

Toni Sanzone: Yeah, I mentioned in my remarks that, you know, we're starting the year with an estimate of about 70 basis points of ABR for overall rent related contingency. That, as I mentioned, is separate from the two tenant issues that I discussed that we quantified as having roughly a seven cent impact. So we did not have the seven cents in our initial guidance, but 70 basis points is a more normal course for us, and that would be in the range of what we had assumed back in November. So does guidance still assume some of the additional basis points, or not?

Tony: So as soon as the guidance still assume so some of the additional basis points or.

Speaker Change: Yeah, well, there's seven of them.

Speaker Change: The basis point outside of the <unk> and that's really just kind of where we start the year I mean, I think there's you know tenant disruptions from time to time, we generally are relatively conservative in keeping tenants on a cash basis there.

Speaker Change: This feeling any kind of rent. So that's meant to cover all kinds of broad issues over the course of the year Theres nothing really specific eating into that right now outside and this is separate from the hallway and the bankruptcy issues that Mark mentioned.

Toni Sanzone: Yes, there are 70 additional basis points outside of the, and that's really just kind of where we start the year. I mean, I think there are tenant disruptions from time to time. We generally are relatively conservative in keeping tenants on a cash basis if they're disputing any kind of rent.

Speaker Change: That's helpful. Thanks, and then my.

Speaker Change: Second question is obviously.

Speaker Change: Obviously, a lot of questions on the on our watch list, but I just wanted to go back more towards the lease expirations and so it looks like there's about $60 million of ABR expiring this year and I realize some of that is U haul.

Speaker Change: I'm just curious you know actually the discussions have gone with some of these explorations are there any other.

Toni Sanzone: So, you know, that's meant to cover all kinds of broad issues over the course of the year. There's nothing really specific eating into that right now, you know, outside, and this is separate from the Hell Wig and the bankruptcy issue that Brooks mentioned. Okay, cool. Thanks. My second question is, obviously, a lot of questions on the watch list, but I just want to go back more towards the lease expirations. And so it looks like there's about $60 million of ABR expiring this year. And I realized that some of that is U-Haul.

Speaker Change: Material or major Nonrenewals expected.

Speaker Change: For 2024.

Speaker Change: Yeah, as you mentioned U hauls, but by far the biggest piece of our 224 expirations.

Speaker Change: Making good progress on a lot of the others.

Speaker Change: Given year, we will have a couple of non renewals here or there or not.

Speaker Change: Sizable ones I think it's.

Speaker Change: Potentially for non renewals, a little under 50 basis points that ABR.

Speaker Change: And actively working on those so certainly nothing nothing material or a or the size of the warehouse, we're working on right now.

RJ Milligan: But I'm just curious, you know, as your discussions have gone with some of these expirations, are there any other material or major non-renewals expected for the year 2020? Yeah, as you mentioned, U-Haul is by far the biggest piece of our 2024 expirations, and we're making good progress on a lot of the others. In any given year, we'll have a couple non-renewals here or there.

Speaker Change: Okay. That's it for me thanks, guys.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad.

Speaker Change: Our next questions come from the line of Joshua <unk> with Bank of America. Please proceed with your questions.

Joshua: Hi, This is on behalf of Josh online I was wondering if you could walk me through or elaborate on what the dispositions and having putting more capital on hand, with Geely holdings cash and getting about five and a half is that they're paying down between 'twenty poor maturity that three point.

Brooks G. Gordon: Sizable ones, I think it's potentially, for non-renewals, a little under 50 basis points of ABR and actively working on those. So, certainly nothing material or of the size of the warehouse we're working on repenting right now. Okay, that's it for me. Thanks. Thank you. As a reminder, if you would like to ask a question, please press star and then one on your telephone keypad. Our next questions come from the line of Joshua Dennerlein with Bank of America. Please proceed with your question. Hi, this is Carol Granitz on behalf of Joshua Dennerlein. I was wondering if you could walk me through or elaborate on what the dispositions and having kind of more capital on hand would you be holding this cash and getting about like a five and a half percent yield or paying down the 2024 maturities at 3.5? Sure, I can give you a little color on that.

Speaker Change: Hi.

Speaker Change: Yes sure.

Speaker Change: A little color on that.

Speaker Change: Sorry go ahead Jason.

Jason E. Fox: That's okay. Yeah. So in the short term if we haven't deployed that capital in new investments you know likely be resolved in a little bit of delevering, but but to your point you know we can held.

Jason E. Fox: A lot of that in cash as well given the returns that we can generate I think the expectation is that we'll be at the low end of our target leverage range for probably the first half of 'twenty four.

Jason E. Fox: But we're not planning to Delever your longer term, we're still kind of targeting in the mid to high fives on net debt to EBITDA basis.

Jason E. Fox: Okay and I just wanted to ask about the 80 basis point decline in occupancy is that being driven off of them.

Jason E. Fox: The bankruptcies or is there other asthma.

Joshua Dennerlein: That's okay. Yeah. So in the short term, we haven't deployed that capital in new investments, which will likely result in a little bit of de-leverage. But to your point, you know, we can pay for a lot of that in cash as well. The expectation is that Leverage Range for probably the first half. We're not. Target, mid to high fives on a net. Okay, and I just wanted to ask about the 80 basis point decline in occupancy. Is that being driven by the bankruptcies? Or are there other aspects to that?

Jason E. Fox: Brooks you would take that.

Jason E. Fox: Sure.

Brooks G. Gordon: The biggest driver is that warehouse and.

Brooks G. Gordon: And so again, we're actively working on that but that's really the moving part in the in the vacancy piece.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you at this time I'm showing no further questions I'll now hand, the call back over to Mr. Sands.

Sands: Great. Thanks, 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 and that concludes today's school you may now disconnect. Thank you.

Toni Sanzone: Thank you, everybody. Okay, thank you. Thank you. At this time, I am showing no further questions. I'll now hand the call back over to Mr. Great, thank you everyone for your interest in WP Carey. If you have additional questions, please call Investor Relations directly on 212-492-1110.

Speaker Change: Thank you that does conclude today's teleconference. We appreciate your participation you may now disconnect at this time.

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Operator: That concludes today's call. You may now disconnect. Thank you. That does conclude today's teleconference. We appreciate your participation. You may now disconnect at this, ?? ?? ?? ?? ??

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