Q2 2024 W P Carey Inc Earnings Call

Hello, and welcome to W. P. Carey's second quarter 2024 earnings conference call.

Operator: Hello, and welcome to WP Carey's second quarter 2024 earnings conference call. My name is Diego, and I will be your operator today. All lines have been placed on mute to prevent any background noise.

Unknown Attendee: Hello and welcome to WP Carey's second quarter 2024 earnings conference call.

Diego: My name is Diego, 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.

Diego: My name is Diego and I'll 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.

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 today's program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead.

Unknown Attendee: After today's prepared remarks, we will be taking questions via the phone line.

Speaker Change: After today's prepared remarks, we'll be taking questions via the phone line.

Unknown Attendee: Instructions on how to do so will be given at the appropriate time.

Instructions on how to do so will be given at the appropriate time.

Peter Sands: I will now turn today's program over to Peter Sands, head of Investor Relations.

I will now turn today's program over to Peter Sands.

Head of Investor Relations Mr. Sands. Please go ahead.

Unknown Attendee: Mr. Sands, please go ahead.

Peter Sands: Good morning everyone, and thank you for joining us this morning for our 2024 second 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 filing. An online replay of this conference call will be made available in 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 material. And with that, I'll pass the call over to our Chief Executive Officer, Jason Fox.

Peter Sands: Good morning, everyone, and thank you for joining us this morning for our 2024 second quarter earnings call. Before you begin, I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from WP Carey's expectations are provided in RACC filings.

Peter Sands: Good morning, everyone and thank you for joining us this morning for our 2024 second quarter earnings call.

Speaker Change: 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 that could cause actual results to 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 in the Investor Relations section of our website at WPCarey.com, where we will be archived for approximately one year and where you can also find copies of our investor presentations and other related materials.

An online replay of this conference call will be made available in the Investor Relations section of our website at W. P. Carey dot com, where it will be archived for approximately one year and where you can also find copies of our investor presentations and other related materials.

Jason Fox: And with that, I will pass the call over to our Chief Executive Officer, Jason Fox.

Speaker Change: I'll pass the call over to our Chief Executive Officer, Jason Fox.

Jason Fox: Thank you, Peter, and good morning, everyone. This morning, I'll provide a brief update on some recent events, but we'll focus my remarks on our investment activity and where we stand relative to our revised guidance. I'm joined this morning by our CFO, Tony Sanzone, who will cover the details of our second quarter results, guidance, and balance sheet. John Park, our president, and Brooks Gordon, our head of asset management, are also on the call to take questions.

Jason E. Fox: Thank you Peter and good morning, everyone. This morning, I'll provide a brief update on some recent events.

Jason E. Fox: Thank you, Peter, and good morning, everyone. This morning, I'll provide a brief update on some recent events but will focus my remarks on our investment activity and where we stand relative to our revised guidance. I'm joined this morning by our CFO, Toni Sanzone, who will cover the details of our second quarter results, guidance, and balance sheet. John Park, our President, and Brooks Gordon, our Head of Asset Management, are also on the call to take questions. Before we jump into the call, I wanted to take this opportunity to acknowledge the departure of our president, colleague, and friend, John Park, who is leaving WP Carey after 37 years.

Jason E. Fox: Focus my remarks on our investment activity and where we stand relative to our revised guidance.

Toni Ann Sanzone: I'm joined this morning by our CFO, Toni Sanzone, who will cover the details of our second quarter results guidance and balance sheet.

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

Jason Fox: Before we jump into the call, I wanted to take this opportunity to acknowledge the departure of our president, colleague, and friend, John Park, who is leaving WP Carey after 37 years. John has been an integral member of our management team, and his insights and creativity have played a pivotal role in shaping WP Carey into the leading net lease REIT it is today. Yesterday, we recorded a FOPE for share of $1.17 for the second quarter, which increased over the first quarter as expected to further increase over the second half of the year as we continue to deploy cash into new investments.

Speaker Change: Before we jump into the call I wanted to take this opportunity to acknowledge the departure of our president colleague and friend John Park, who is leaving WP carry after 37 years.

Jason E. Fox: John has been an integral member of our management team, and his insights and creativity have played a pivotal role in shaping WP Carey into the leading net lease REIT it is today. Yesterday, we reported an AFO per share of $1.17 for the second quarter. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES www.verbalink.com Page PAGE, Currently, all of the properties within our office sale program have now been sold, except for one final asset, which is under a binding contract and scheduled to close in December.

Speaker Change: John has been an integral member of our management team and his insights and creativity. They played a pivotal role in shaping WP carry into the leading net lease REIT. It is today.

Speaker Change: Yesterday, we reported <unk> per share of $1 17 for the second quarter.

Speaker Change: Increased over the first quarter is expected to further increase over the second half of the year as we continued to deploy cash into new investments.

Jason Fox: Currently, all of the properties within our office sale program have now been sold except for one final asset, which is under a binding contract and scheduled to close in December. With the conclusion of this program, I'm pleased to say we achieved pricing consistent with the blended average cap rate in the high single digits and generated total gross proceeds just under $800 million. Both of which are in line with the expectation that we set, and we announced our office exit strategy. During the second quarter, we addressed both of our 2024 bond maturities, raising over $1 million of new, unsecured debt through bond issuances in both Europe and the US, achieving tight spreads over their benchmark rates and attractive yields relative to where bond pricing has been over the last few years.

Speaker Change: Currently all of the properties within our office sales program have now been sold except for one final asset which is under a binding contract and scheduled to close in December.

Jason E. Fox: With the conclusion of this program, I'm pleased to say we achieved pricing consistent with the blended average cap rate in the high single digits and generated total gross proceeds just under $800 million, both of which are in line with the expectation that we set when we announced our office exit strategy. During the second quarter, we addressed both of our 2024 bond maturities, raising over $1 billion of new unsecured debt through bond issuances in both Europe and the U.S., achieving tight spreads over their benchmark rates and attractive yields relative to where bond pricing has been over the last few years.

Speaker Change: Conclusion of this program I'm pleased to say, we achieved pricing consistent with the blended average cap rate in the high single digits and generated total gross proceeds of just under $800 million both of which are in line with your expectations. If he sent me announced their office exit strategy.

Speaker Change: During the second quarter, we addressed both of our 2024 bond maturities raising over $1 billion of new unsecured debt three bond issuances in both Europe, and the U S achieving tight spreads over their benchmark rates and attractive yields relative to where bond pricing. It's been over the last few years.

Jason E. Fox: Pricing for both bond deals was also attractive relative to the yields we've been seeing on new investment opportunities. Our liquidity position is at an all-time high, with an almost entirely undrawn $2 billion revolver, plus the cash generated from the NLOP spinoff, unbalanced sheet office sales, and the U-Haul disposition.

Jason Fox: Pricing for both bond deals was also attractive relative to the yields we've been seeing on new investment opportunities. Our liquidity position is at an all-time high with an almost entirely undrawn $2 billion revolver plus the cash generated from the NLOP spin-off on balance sheet office sales in the U-all disposition. Deploying the substantial capital we've built up into new investments remains our top priority, although we will continue to earn a relatively high return on our cash in the meantime. Starting in the third quarter, the accretive impacts on AFFO of redeploying that cash into new investments will be much cleaner without the impact of office asset sales and having reset our interest expense, calling our recent bond refinancing.

Speaker Change: Pricing for both bond deals was also attractive relative to the yields we've been seeing on new investment opportunities.

Toni Ann Sanzone: Our liquidity position is at an all time high we can almost entirely undrawn $2 billion revolver.

Toni Ann Sanzone: Plus the cash generated from the <unk> spin off on balance sheet office sales in the U haul disposition.

Jason E. Fox: Deploying the substantial capital we've built up into new investments remains our top priority, although we will continue to earn a relatively high return on our cash in the meantime. Starting in the third quarter, the accretive impacts on AFFO of redeploying that cash into new investments will be much cleaner without the impact of office asset sales and having reset our interest expense following a recent bond refinance.

Toni Ann Sanzone: Employing the substantial capital we built up into new investments remains our top priority, but there'll be we'll continue to earn a relatively high return on our cash in the meantime.

Toni Ann Sanzone: Starting in the third quarter, the accretive impacts on air So redeploying the cash into new investments will be much cleaner without the impact of office asset sales and having reset our interest expense following our recent bond refinancings.

Jason Fox: A longer term source of liquidity is our equity stake in Lineage, which, as many of you know, recently priced its IPO. We're one of its larger investors, which came about through several sales back that we did with Lineage when it was just getting started. At its current stock price, our equity stake is currently valued at just under $400 million net of promote. The successful pricing of their IPO highlights that we will have a very unique and highly accretive source of capital that we would expect to redeploy over the next few years, subject to Lineage's decision on timing for settling pre IPO investors.

Jason E. Fox: A longer-term source of liquidity is our equity stake in Lineage, which, as many of you know, recently priced its IPO. We were one of its larger investors, which came about through several sale leasebacks that we did with Lineage when it was just getting started. At its current stock price, our equity stake is currently valued at just under $400 million, net of promotion expenses. The successful pricing of their IPO highlights that we will have a very unique and highly accretive source of capital that we would expect to redeploy over the next few years, subject to Lineage's decision on timing for settling pre-IPO investors. In the meantime, we expect Lineage to start paying more regular cash dividends, which will flow through to our AFFO.

Toni Ann Sanzone: A longer term source of liquidity is our equity stake in lineage, which as many of you know recently priced its IPO.

Toni Ann Sanzone: We're one of its larger investors, which came about through several sale leasebacks that we did with lineage. When he was just getting started.

Toni Ann Sanzone: At its current stock price or equity stake is currently valued at just under $400 million net of promote to.

Speaker Change: The successful pricing here with your IPO highlights that we will have a very unique and highly accretive source of capital that we would expect to redeploy over the next few years.

Speaker Change: Objected lineages decision on timing for settling pre IPO investors.

Jason Fox: In the meantime, we expect Lineage to start paying more regular cash dividends, which will flow through to our AFFO. Moving to investment activity, while the deal environment presented some compelling opportunities during the first half of the year, transaction activity has recently felt somewhat muted. The sellers increasingly focused on potential rate cuts as a catalyst to bring new sales aspects to market, or looking to alternatives in the financing markets and anticipation that rates will come down. Some deals have moved to the sidelines at current pricing. The sellers that don't have an immediate need for the capital often elective.

Toni Ann Sanzone: In the meantime, we expect linear to start paying more regular cash dividends, which will flow through to I hate this up.

Speaker Change: Moving to investment activity.

Jason E. Fox: Moving to investment activity, while the deal environment presented some compelling opportunities during the first half of the year, transaction activity has recently felt somewhat muted, with sellers increasingly focused on potential rate cuts as a catalyst to bring new sale leasebacks to market, or looking to alternatives in the financing markets in anticipation that rates will come down. Some deals have moved to the sidelines at current prices, with sellers that don't have an immediate need for the capital often electing to wait.

Speaker Change: While the deal environment presented some compelling opportunities during the first half of the year transaction activity has recently felt somewhat muted sellers increasingly focused on potential rate cuts as a catalyst to bring new sale leasebacks to market or looking to alternatives in the financing markets in anticipation that rates will come down.

Speaker Change: Some deals have moved to the sidelines at current pricing the sellers. They don't have an immediate need for the capital often electing to wait.

Jason Fox: We continue to see new investment opportunities across a range of cap rates, focusing on transactions with going in cash cap rates in the 7s, and in some cases into the 8s. With the attractive bumps we're able to achieve over long lease terms, that translates to average yields and unleivered IRRs well into the 9s, which is sufficiently above our spot cost of capital to transact, even though we don't need to raise any new debt or equity to fund deals this year. Year-to-date will be completed investments totaling $641 million, at an initial weighted average cash cap rate of 7.7%, and an average yield of just over 9%.

Speaker Change: We continue to see new investment opportunities across a range of cap rates focusing on transactions and what's going in cash cap rates in the sevens and in some cases into the eights with the attractive bumps were able to achieve over a long lease terms that translates to average yields and unlevered IRR is well into the nines, which is sufficiently above our <unk>.

Jason E. Fox: We continue to see new investment opportunities across a range of cap rates, focusing on transactions with cash cap rates in the 7s and, in some cases, into the 8s. With the attractive bumps we were able to achieve over long lease terms, that translates to average yields and unlevered IRRs well into the 9, which is sufficiently above our spot cost of capital to transact even though we don't need to raise any new debt or equity to fund Year-to-date, we've completed investments totaling $641 million at an initial weighted average cash cap rate of 7.7% and an average yield of just over 9%.

Speaker Change: <unk> cost of capital to transact, even though we don't need to raise any new debt or equity to fund deals this year.

Speaker Change: Year to date, we've completed investments totaling $641 million at an initial weighted average cash cap rate of 7.7% and an average yield of just over 9%.

Jason Fox: Our first half investment volume included $293 million of deals closed during the second quarter, at similar weighted average cap rates and average yields. The vast majority of investments over both periods were warehouse and industrial properties. Investments closed during the second quarter were almost entirely located in North America, resulting in a relatively even split between North America and Europe for deals closed over the first half of the year. We continue to achieve favorable rent escalations. About 60% of the investment volume we closed over the first six months had run pumps tied to inflation. The vast majority of which comprised CPI caps ran escalations, but the average CPI cap set it around 4.5%.

Jason E. Fox: Our first half investment volume included $293 million in deals closed during the second quarter at similar weighted average cap rates and average yields. The vast majority of investments over both periods were warehouse and industrial properties. Investments closed during the second quarter were almost entirely located in North America, resulting in a relatively even split between North America and Europe for deals closed over the first half of the year. We continue to achieve favorable rat escalation.

Speaker Change: Our first half investment volume included $293 million of deals closed during the second quarter at similar weighted average cap rates and average yields.

Speaker Change: The vast majority of investments over both periods, where warehousing industrial properties.

Speaker Change: Once closed during the second quarter were almost entirely located in North America, resulting in a relatively even split between North America and Europe for deals closed over the first half of the year.

Speaker Change: We continue to achieve favorable rent escalations.

Jason E. Fox: About 60% of the investment following we closed over the first six months had rump bumps tied to inflation, the vast majority of which comprise CPI caps around escalations, but the average CPI cap set at around 4.5%. About 40% of our first half investment volume had fixed rent bumps, averaging approximately 3% annually. The slight majority of the deal volume we closed during the first half comprised acquisitions of existing leases, driven by the closed portion of the portfolio deal with Angela Gordon.

Speaker Change: About 60% of the investment following me close over the first six months had rent bumps tied to inflation.

Speaker Change: The majority of which comprise CPI capped rent escalations with the average CPI cap centered around four 5%.

Jason Fox: About 40% of our first half investment volume had fixed rent bumps, averaging approximately 3% annually. The slight majority of the deal volume we closed during the first half comprised acquisitions of existing leases, driven by the closed portion of the portfolio deal with Angela Gordon. Typically, sale leasebacks comprise the vast majority of our deals. However, we will acquire portfolios of existing leases when their structures and terms align with our standards. This portfolio was a good example of that, and is a source of investment volume we're looking to do more. Our pipeline currently totals over $200 million of investments, half of which we expect to close within the next 30 to 60 days, including the remaining portion of the portfolio acquisition I just mentioned.

Toni Ann Sanzone: About 40% of our first half investment volume had fixed rent bumps, averaging approximately 3% annually.

Toni Ann Sanzone: The slight majority of the deal volume we closed during the first half comprised acquisitions of existing leases driven by the closed portion of the portfolio deal. The Angela Gordon typically sale leasebacks comprised the vast majority of our deals. However, we will acquire portfolios of existing leases when their structures and terms aligned.

Jason E. Fox: Typically, sale leasebacks comprise the vast majority of our deals. However, we will acquire portfolios of existing leases when their structures and terms align with our standards. This portfolio was a good example of that and is a source of investment volume we're looking to do more of. Our pipeline currently totals over $200 million of investment.

Toni Ann Sanzone: With our standards.

Toni Ann Sanzone: This portfolio is a good example of that it is a source of investment volume, we're looking to do more of.

Toni Ann Sanzone: Our pipeline currently totals over $200 million of investments.

Jason E. Fox: Half of which we expect to close within the next 30 to 60 days, including the remaining portion of the portfolio acquisition I just mentioned. Two of the larger transactions we were pursuing this year, totaling over $300 million, recently fell out of our near-term pipeline. This is unusual, and we're disappointed by it, especially given the timing. However, we uncovered critical issues during diligence that couldn't be resolved.

Toni Ann Sanzone: Half of which we expect to close within the next 30 to 60 days, excluding the remaining portion of the portfolio acquisition I just mentioned.

Jason Fox: Two of the larger transactions we were pursuing this year, totaling over $300 million, recently fell out of our near-term pipeline. This is unusual, and we're disappointed by it, especially given the timing. However, we uncovered critical issues during diligence that couldn't be resolved. While new deals continue to be added, it creates a drag on our investment pace as we enter the late summer period, which is typically slower for transaction activity. As I noted earlier, on margin, some sellers are looking for greater visibility on rate cuts before moving forward with sale of these specs. If the Fed lowers rates during the third quarter, it will likely spur them to act, adding to what is traditionally a strong fourth quarter.

Toni Ann Sanzone: Two of the larger transactions, we were pursuing this year totaling over $300 million recently fell out of our near term pipeline.

Toni Ann Sanzone: This is unusual and we're disappointed by it especially given the timing. However, we uncovered critical issues during diligence that couldnt be result, while new deals continue to be added it creates a drag in our investment pace as we enter the late summer period, which is typically slower for transaction activity.

Jason E. Fox: While new deals continued to be added, it creates a drag on our investment pace as we enter the late summer period, which is typically slower for transaction activity. As I noted earlier, on margin, some sellers are looking for greater visibility on rate cuts before moving forward with sale leaseback. If the Fed lowers rates during the third quarter, it will likely spur them to act, adding to what is traditionally a strong fourth quarter.

Toni Ann Sanzone: As I noted earlier on margin some sellers are looking for greater visibility on rate cuts before moving forward with sale leasebacks.

Toni Ann Sanzone: If the fed lowers rates during the third quarter, it will likely spur them to act, adding to what is traditionally a strong fourth quarter.

Jason Fox: And there's also some evidence that there has been a recent increase in brokers conducting BOVs or broker opinions of value, which we find is typically a leading indicator for deals coming to market. So while we're cautiously optimistic, the deal activity will pick up, it's very hard to predict the specific timing, which clearly affects the volume of deals that will be completed over the remainder of the year.

Jason E. Fox: And there's also some evidence that there has been a recent increase in brokers conducting BOVs, or Broker Opinions of Value, which we find is typically a leading indicator for deals coming to market. So while we're cautiously optimistic that deal activity will pick up, it's very hard to predict the specific timing, which clearly affects the volume of deals that will be completed over the remainder of the year. We're therefore lowering our expectations for investment volume, which flows through to our full-year guidance, as Toni will discuss in more detail. And with that, I'll pass the call over to Toni.

Toni Ann Sanzone: And there's also some evidence that there has been a recent increase in brokers conducting povs, where broker opinions of value, which we find is typically a leading indicator for deals coming to market.

Toni Ann Sanzone: So while we're cautiously optimistic that deal activity will pick up it's very hard to predict the specific timing, which clearly affects the volume of deals that will be completed over the remainder of the year.

Jason Fox: We're therefore lowering our expectations for investment volume, which flows through to our full-year guidance, as Tony will discuss some more detail.

Toni Ann Sanzone: We're therefore, lowering our expectations for investment volume, which flows through to our full year guidance as Tony will discuss in more detail.

Tony Sanzone: And with that, I'll pass the call over to Tony.

Toni Ann Sanzone: With that I'll pass the call over to Tony.

Tony Sanzone: Thank you, Jason, and good morning, everyone. AFFO for the 2024 second quarter totaled $1.17 per share, with the increase over the first quarter primarily reflecting lower G&A expense, the completion of the first quarter rent debatement for Hellwig, and higher other lease-related income, partly offset by our first half disposition activity, which included the sale of the U-Haul portfolio, our former top tenet. Dispositions over the first half of the year totaled just over $1 billion, with $152 million completed during the second quarter, including the last of the Marriott operating hotels earmarked for sale.

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

Toni Ann Sanzone: Thank you, Jason, and good morning, everyone. ASFO for the 2024 second quarter totaled $1.17 per share, with the increase over the first quarter primarily reflecting lower G&A expense, the completion of the first quarter rent abatement for Hellwig, and higher other lease-related income, partly offset by our first half disposition activity, which included the sale of the U-Haul portfolio, our former top tenant. Dispositions over the first half of the year totaled just over $1 billion, with $152 million completed during the second quarter, including the last of the Marriott operating hotels earmarked for sale.

Tony: A S F O for the 2024 second quarter totaled $1 17 per share with the increase over the first quarter, primarily reflecting lower G&A expense. The completion of the first quarter rent abatement for helwig and higher other lease related income, partly offset by our first half disposition activity, which included the sale of.

Tony: The U haul portfolio, our former top tenant.

Toni Ann Sanzone: Yeah.

Toni Ann Sanzone: Dispositions over the first half of the year totaled just over $1 billion with $152 million completed during the second quarter, including the last of the Marriott operating hotels ear marked for sale.

Tony Sanzone: We sold two additional office assets in July, and have one asset representing just 45 basis points of ABR under a binding contract and scheduled to close by December, which will be the final asset sale under our office sale program. We've also completed sales of three of the four vacant pre-Mawawona assets, one of which closed in July.

Toni Ann Sanzone: We sold two additional office assets in July and have one asset representing just 45 basis points of ABR under a binding contract and scheduled to close by December, which will be the final asset sale under our office sale program. We've also completed sales of three of the four vacant Prima Bowona assets, one of which closed in July.

Toni Ann Sanzone: We sold two additional office assets in July and have one asset representing just 45 basis points of a b are under binding contract and scheduled to close by December which will be the final asset sale under our office sale program.

Toni Ann Sanzone: We've also completed sales of three of the four vacant Primo water assets, one of which closed in July.

Tony Sanzone: Turning to our portfolio, starting with same-store rent growth. Contractual same-store rent growth for the second quarter was 2.9% year-over-year, including leases with CPI-linked rent escalations still tracking in the mid-3% range, and those with fixed rent escalations just above 2%. For the full year, we expect contractual same-store rent growth to average around 2.8%. Comprehensive same-store rent growth was negative 40 basis points year-over-year, with the variance to contractual primarily reflecting the current quarter impact of the assets we discussed in our last earnings call, specifically the Primaawona lease rejection, the build-out period ahead of the Samsung lease commencement, and the restructured rent from Hellwig, which started in the second quarter.

Toni Ann Sanzone: Turning to our portfolio, starting with same store rent growth.

Toni Ann Sanzone: Turning to our portfolio, starting with same-store rent growth. Contractual same-store rent growth for the second quarter was 2.9% year-over-year, including leases with CPI-linked rent escalations still tracking in the mid-3% range and those with fixed rent escalations just above 2%. For the full year, we expect contractual same-store rent growth to average around 2.8 percent. However, comprehensive same-store rent growth was negative 40 basis points year over year, with the variance to contractual primarily reflecting the current quarter impact of the assets we discussed in our last earnings call, specifically the Prima Wuona lease rejection, the build-out period ahead of the Samsung lease commencement, and the restructured rent from Helwig, which started in the second quarter

Toni Ann Sanzone: Actual same store rent growth for the second quarter was two 9% year over year, including leases with CPI linked rent escalations still tracking in the mid 3% range and those with fixed rent escalations just above 2%.

Toni Ann Sanzone: For the full year, we expect contractual same store rent growth to average around 2.8%.

Toni Ann Sanzone: Comprehensive same store rent growth was negative 40 basis points year over year with the variance to contractual primarily reflecting the current quarter impact of the assets. We discussed in our last earnings call specifically, the premium will want to lease rejection.

Toni Ann Sanzone: Build out period ahead of the Samsung lease commencement and the restructured rent from helwig, which started in the second quarter.

Tony Sanzone: The impacts of these will continue to run through our comprehensive same-store growth, although to a lesser degree in the back half of the year, resulting in our expectation that same-store growth will be flat for the full year. Our watch list remains around 5% of ABR and is largely the same as it was on our last earnings call, with no significant tenants added or taken off. Rent collections total just over 99% for both the second quarter and the first half of the year, with no material changes in our cash basis tenants. And the bad debt assumption within our AFFO guidance continues to cover uncollected rents.

Toni Ann Sanzone: The impact of these will continue to run through our comprehensive same store growth, although to a lesser degree in the back half of the year, resulting in our expectation that same store growth will be flat for the full year.

Toni Ann Sanzone: The impacts of these will continue to run through our comprehensive same-store growth, although to a lesser degree in the back half of the year, resulting in our expectation that same-store growth will be flat for the full year. Our watch list remains around 5% of ABR and is largely the same as it was on our last earnings call, with no significant tenants added or taken off. Rent collections totaled just over 99% for both the second quarter and the first half of the year, with no material changes in our cash basis tenants. And the bad debt assumption within our AFFO guidance continues to cover uncollected rent. We have a small number of current and former tenants with rent outstanding, which we continue to pursue.

Toni Ann Sanzone: I'll watch list remains around 5% of ABR and is largely the same as it was on our last earnings call with no significant tenants added or taken off.

Toni Ann Sanzone: Rent collections totaled just over 99% for both the second quarter and the first half of the year with no material changes in our cash basis tenants and the bad debt assumption within our asos all guidance continues to cover uncollected rents.

Tony Sanzone: We have a small number of current and prior tenants with rent outstanding, which we continue to pursue. Based on current progress and expected timing, our guidance assumes recoveries totaling approximately three to four cents of AFFO in the back half of the year. Second quarter releasing activity resulted in overall rent recapture of 116%, and added 6.5 years of incremental weighted average lease term on 50 basis points of ABR, driven by positive releasing spreads across industrial and retail assets. The weighted average lease term of the overall portfolio ended the quarter at 12 years, which remains among the highest in the net lease sector, and our occupancy remained high at 98.8%.

Toni Ann Sanzone: We have a small number of current and prior tenants with rent outstanding which we continue to pursue.

Toni Ann Sanzone: Based on current progress and expected timing, our guidance assumes recoveries totaling approximately 3 to 4 cents of AFFO in the back half of the year. Second quarter releasing activity resulted in overall rent recapture of 116% and added 6.5 years of incremental weighted average lease term on 50 basis points of ABR, driven by positive releasing spreads across industrial and retail assets. The weighted average lease term of the overall portfolio ended the quarter at 12 years, which remains among the highest in the net lease sector, and our occupancy remained high at 98.8%.

Toni Ann Sanzone: Based on current progress and expected timing our guidance assumes recoveries totaling approximately three to four cents of a F. F O in the back half of the year.

Toni Ann Sanzone: Second quarter re leasing activity resulted in overall rent recapture of 116% and added six five years of incremental weighted average lease term on 50 basis points of a b are driven by positive re leasing spreads of Clara across industrial and retail assets.

Toni Ann Sanzone: The weighted average lease term of the overall portfolio ended the quarter at 12 years, which remains among the highest in the net lease sector.

Toni Ann Sanzone: Our occupancy remained high at 98, 8%.

Tony Sanzone: Other lease related income was $9.1 million for the second quarter, primarily comprising deferred maintenance and other settlement payments. Our current guidance continues to assume this line item falls in the low to mid $20 million range. Non-operating income during the second quarter was $9.2 million, which includes $5.9 million of interest income on cash and $3.3 million of realized gains on currency hedges, bringing the total for non-operating income over the first half of the year to $24.7 million. How cash on hand in the US currently earns interest at an average rate of approximately 5.3%, generally offsetting the interest expense incurred on our newly issued US bonds until that cash is deployed into new investments.

Toni Ann Sanzone: Other lease related income was $9 $1 million for the second quarter, primarily comprising deferred maintenance and other settlement payments.

Toni Ann Sanzone: Other lease-related income was $9.1 million for the second quarter, primarily comprising deferred maintenance and other settlement payments. Our current guidance continues to assume this line item falls in the low to mid $20 million range. Non-operating income during the second quarter was $9.2 million, which included $5.9 million of interest income on cash and $3.3 million of realized gains on currency hedges, bringing the total for non-operating income over the first half of the year to $24.7 million.

Toni Ann Sanzone: Our current guidance continues to assume this line item falls in the low to mid $20 million range.

Toni Ann Sanzone: Non operating income during the second quarter was $9 $2 million, which includes $5 9 million of interest income on cash and $3 3 million of realized gains on currency hedges.

Toni Ann Sanzone: Bringing the total for nonoperating income over the first half of the year to $24 7 million.

Toni Ann Sanzone: Our cash on hand in the U.S. currently earns interest at an average rate of approximately 5.3%, generally offsetting the interest expense incurred on our newly issued U.S. bonds until that cash is deployed into new investments. Operating Property NOI totaled $21.8 million for the second quarter, up $1.5 million from the first quarter, bringing total Operating Property NOI for the first half to $42.1 million on an AFFO basis. On a year-over-year same-store basis, operating self-storage NOI declined 4.2% through the first six months, and on a full-year basis, it is assumed to decline by 5% to 6%, which is down from our initial guidance assumption that it would be relatively flat year-over-year. After factoring in the completed sale of the Marriott property I mentioned earlier, NOI from all operating properties is now expected to total between $81 and Moving to expenses.

Toni Ann Sanzone: Our cash on hand in the U S. Currently earns interest and an average rate of approximately five 3% generally offsetting the interest expense incurred on our newly issued U S bonds until that cash is deployed into new investments.

Tony Sanzone: For the full year, we currently expect non-operating income to total between $45 and $50 million, based on our expectations for the timing of cash deployment. Operating property NOI totaled $21.8 million for the second quarter, up $1.5 million from the first quarter, bringing total operating property NOI for the first half to $42.1 million on an AFFO basis. On a year-over-year same-store basis, operating self-storage NOI has declined 4.2% through the first six months, and on a full year basis is assumed to decline by 5% to 6%, which is down from our initial guidance assumption that would be relatively flat year-over-year.

Toni Ann Sanzone: For the full year. We currently expect nonoperating income to total between 45 and $50 million based on our expectations for the timing of cash deployment.

Toni Ann Sanzone: Operating property NOI totaled $21.8 million for the second quarter up 1.5 million from the first quarter, bringing total operating property NOI for the first half to 42.1 million on an a F F O basis.

Toni Ann Sanzone: On a year over year same store basis operating self storage NOI has declined 4.2% through the first six months and on a full year basis is assumed to decline by 5% to 6%, which is down from our initial guidance assumption that would be relatively flat year over year.

Tony Sanzone: After factoring in the completed sale of the Marriott property I mentioned earlier, NOI from all operating properties is now expected to total between $81 and $85 million for 2024. Moving to expenses, GNA expense totaled $24.2 million for the second quarter, down $3.7 million from the first quarter, due primarily to timing, bringing the total for the first half of the year to $52 million. We've lowered our expectation for full-year GNA expense and currently anticipate that it will total between 98 and 101 million. Non-reimbursed property expenses for the second quarter totaled $13.9 million, which included carrying costs on vacant properties prior to sale and the Samsung asset prior to its lease commence.

Toni Ann Sanzone: After factoring in the completed sale of the Marriott property I mentioned earlier NOI from all operating properties is now expected to total between 81 and $85 million for 2024.

Toni Ann Sanzone: Moving to expenses.

Toni Ann Sanzone: G&A expense totaled $24.2 million for the second quarter, down $3.7 million from the first quarter, due primarily to timing, bringing the total for the first half of the year to $52 million. We've lowered our expectation for full year GNA expense and currently anticipate that it will total between $98 and 101 million. Non-reimbursed property expenses for the second quarter totaled $13.9 million, which included carrying costs on vacant properties prior to sale and the Samsung asset prior to its lease commencement.

Toni Ann Sanzone: G&A expense totaled $24 2 million for the second quarter down $3 7 million from the first quarter due primarily to timing, bringing the total for the first half of the year to $52 million.

Toni Ann Sanzone: We've lowered our expectation for full year G&A expense and currently anticipate that it will total between 98 and $101 million.

Toni Ann Sanzone: Non reimbursed property expenses for the second quarter totaled $13 $9 million, which included carrying cost on vacant properties prior to sale and the Samsung asset prior to its lease commencement.

Tony Sanzone: Smith. For the full year, we expect non-reimbursed property expenses to total between $44 and $48 million. Tax expense on an AFFO basis totaled $7.6 million, which included certain one-time benefits associated with the settlement of tax-related matters. For the full year, we expect tax expense on an AFFO basis to total between $37 and $41 million. Turning now to guidance, as Jason discussed, we're lowering our expectations for full year investment volume and now expected to fall between $1.25 and $1.75 billion, and we're also anticipating lower NOI from our operating self-storage portfolio. As a result, we're lowering our AFFO guidance range by two pennies at the midpoint to between $4.63 and $4.73 per share.

Toni Ann Sanzone: For the full year, we expect non reimbursed property expenses to total between 44 and $48 million.

Toni Ann Sanzone: For the full year, we expect non-reimbursed property expenses to total between $44 and $48 million. Tax expense on an AFFO basis totaled $7.6 million, which included certain one-time benefits associated with the settlement of tax-related matters. For the full year, we expect tax expense on an AFFO basis to total between $37 and $41 million.

Toni Ann Sanzone: Tax expense on an F O basis totaled $7.6 million.

Toni Ann Sanzone: Which included certain one time benefits associated with the settlement of tax related matters.

Toni Ann Sanzone: For the full year, we expect tax expense on an F O basis to total between 37 and $41 million.

Toni Ann Sanzone: Turning now to guidance as.

Toni Ann Sanzone: As Jason discussed, we're lowering our expectations for full year investment volume and now expect it to fall between $1.25 and $1.75 billion. And we're also anticipating lower NOI from our operating self-storage portfolio. As a result, we're lowering our AFFO guidance range by two pennies at the midpoint to between $4.63 and $4.73 per share. If Lineage declares any dividends in the second half of 2024, that could potentially offset some or all of the reduction that we are currently seeing to our AFFO guidance. For now, we aren't considering any additional dividends from Lineage in our 2024 AFFO guidance.

Toni Ann Sanzone: As Jason discussed, we're lowering our expectations for full year investment volume and now expect it to fall between 1.25 and 175 billion.

Speaker Change: And we're also anticipating lower NOI from our operating self storage portfolio.

Toni Ann Sanzone: As a result, we're lowering our <unk> guidance range by two pennies at the midpoint to between $4.63 and $44 73 per share.

Tony Sanzone: If Lineage declares any dividends in the second half of 2024, that would have the potential to offset some or all of the reduction that we are currently seeing to our AFFO guidance. For now, we aren't considering any additional dividends from Lineage in our 2024 AFFO guidance. We will look for more color on their dividend policy going forward and provide any updates to our AFFO expectations accordingly.

Toni Ann Sanzone: If lineage declares any dividends in the second half of 'twenty 'twenty four.

Speaker Change: That would have the potential to offset some or all of the reduction that we are currently seeing to our F O guidance.

Speaker Change: For now we aren't considering any additional dividends from lineage and our 'twenty 'twenty four F. O guidance, we will look for more color on their dividend policy going forward and provide any updates to our a S. F O expectations accordingly.

Toni Ann Sanzone: We will look for more color on their dividend policy going forward and provide any updates to our ASFO expectations accordingly. Moving now to our Capital Markets Activity and Balance Sheet position. We had an active second quarter on the capital markets front, issuing approximately $1.1 billion in unsecured notes. In May, we completed a 650 million euro bond issuance with a coupon rate of 4.25%, taking advantage of the lower interest rate environment in Europe.

Tony Sanzone: Moving now to our capital markets activity and balance sheet positioning, we had an active second quarter on the capital markets front, issuing approximately $1.1 billion in unsecured notes. In May, we completed a 650 million euro bond issuance with a coupon rate of 4.25 percent, taking advantage of the lower interest rate environment in Europe. And in June, we issued $400 million of US dollar bonds at a 5.375 percent coupon. We're pleased with the execution of these bond issuances, which priced its spreads of 160 and 130 basis points, respectively, over their applicable benchmark rates. Since the end of the first quarter, we've repaid $1 billion in maturing bonds comprising a $500 million US bond repaid in April and a $500 million euro bond repaid in July.

Toni Ann Sanzone: And in June, we issued $400 million of U.S. dollar bonds at a 5.375% coupon. We're pleased with the execution of these bond issuances, which priced at spreads of 160 and 130 basis points, respectively, over their applicable benchmark rates. Since the end of the first quarter, we've repaid $1 billion in maturing bonds, comprising a $500 million U.S. bond repaid in April and a $500 million euro bond repaid in July. We have no further bonds maturing in 2024 and only $61 million of mortgage debt coming due in the second half of the year.

Speaker Change: Moving now to our capital markets activity and balance sheet positioning we had an active second quarter on the capital markets front issuing approximately $1.1 billion in unsecured notes.

Toni Ann Sanzone: In May we completed a 650 million eurobond issuance with a coupon rate of four point to 5%.

Toni Ann Sanzone: Taking advantage of the lower interest rate environment in Europe.

Toni Ann Sanzone: And in June we issued $400 million of U S dollar bonds at a 5.3, 75% coupon.

Toni Ann Sanzone: We're pleased with the execution of these bond issuances, which priced at spreads of 160, and 130 basis points, respectively over their applicable benchmark rates.

Toni Ann Sanzone: Since the end of the first quarter, we've repaid $1 billion of maturing bonds, comprising a $500 million U S bond repaid in April and a 500 million eurobond repaid in July.

Tony Sanzone: We have no further bond maturing in 2024 and only $61 million of mortgage debt coming due in the second half of the year. The bond issuances and repayments completed so far this year have extended the weighted average maturity of our debt by nearly a year and ensure we continue to have a well-lattered series of maturities. Our liquidity position further increased during the second quarter, ending the period at $3.2 billion, including a virtually undrawn revolver with $2 billion of availability and over $1 billion in cash. Although, as I mentioned earlier, we subsequently used some of that liquidity to repay the bond that matured in July.

Toni Ann Sanzone: We have no further bonds maturing in 2024, and only $61 million of mortgage debt coming due in the second half of the year.

Toni Ann Sanzone: The bond issuances in repayments completed so far this year have extended the weighted average maturity of our debt by nearly a year and ensure we continue to have a well lettered series of maturities.

Toni Ann Sanzone: The bond issuances and repayments completed so far this year have extended the weighted average maturity of our debt by nearly a year and ensured we continue to have a well-laddered series of maturities. Our liquidity position further increased during the second quarter, ending the period at $3.2 billion, including a virtually undrawn revolver with $2 billion of availability and over $1 billion in cash. Although, as I mentioned earlier, we subsequently used some of that liquidity to repay the bond that matured in July.

Toni Ann Sanzone: Our liquidity position further increased during the second quarter, ending the period at $3.2 billion, including a virtually undrawn revolver with $2 billion of availability and over $1 billion in cash.

Toni Ann Sanzone: Although as I mentioned earlier, we subsequently used some of that liquidity to repay the bond that matured in July.

Tony Sanzone: Our weighted average interest rate remained relatively low for the second quarter at 3.1 percent and is expected to average in the low to mid-3 percent range over the remainder of the year. The refinancing of our matured bonds is expected to increase interest expense in the back half of the year, partially offset by higher interest income, which will be worked down as we deploy the capital into new investments. The leverage ended the second quarter at similar levels to those at the end of the first quarter. Debt to gross assets was 41.7 percent, which remained well within our target range of low to mid-40s. Net debt to EBITDA was 5.4 times, which remained below the low end of the target range of mid to high five times.

Toni Ann Sanzone: Our weighted average interest rate remained relatively low for the second quarter at three 1% and is expected to average in the low to mid 3% range over the remainder of the year.

Toni Ann Sanzone: Our weighted average interest rate remained relatively low for the second quarter at 3.1% and is expected to average in the low to mid 3% range over the remainder of the year. However, the refinancing of our matured bonds is expected to increase interest expense in the back half of the year. Although partially offset by higher interest income, which will be worked down as we deploy the capital into new investments, leverage ended the second quarter at similar levels to those at the end of the first quarter.

Toni Ann Sanzone: The refinancing of our matured bonds is expected to increase interest expense in the back half of the year.

Toni Ann Sanzone: Partially offset by higher interest income, which will be worked down as we deploy the capital into new investments.

Toni Ann Sanzone: Leverage ended the second quarter at similar levels to those at the end of the first quarter.

Toni Ann Sanzone: Debt-to-Growth Assets was 41.7%, which remained well within our target range of low to mid-40s. Net debt to EBITDA was 5.4 times, which remained below the low end of the target range of mid to high 5 times. Although we continue to expect it to trend back into that range over the second half of the year as we deploy further capital into new investments. And with that, I'll hand the call back to the operator for questions.

Toni Ann Sanzone: Debt to gross assets was 41.7%, which remained well within our target range of low to mid forties net.

Toni Ann Sanzone: Net debt to EBITDA was 5.4 times, which remains below the low end of its target range of mid to high five times, although we continue to expect it to trend back into that range over the second half of the year as we deploy further capital into new investments.

Tony Sanzone: Although we continue to expect it to trend back into that range over the second half of the year, as we deploy further capital into new investments.

Unknown Attendee: And with that, I'll hand the call back to the operator for questions.

Speaker Change: And with that I'll hand, the call back to the operator for questions.

Unknown Attendee: Thank you. At this time, we will take questions. If you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the star, then the number two.

Speaker Change: Thank you.

Operator: At this time, we will take questions. If you would like to ask a question, simply press the star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the star, then the number 2. Our first question comes from Michael Goldsmith with UBS. Please state your question.

Speaker Change: At this time, we will take questions. If you would like to ask a question simply press Star then the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question press.

Speaker Change: The Star then the number two.

Michael Goldsmith: Our first question comes from Michael Goldsmith with UBS. Please state your question.

Speaker Change: Our first question comes from Michael Goldsmith with UBS. Please state your question.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. My question is on the two deals falling out of the pipeline. Can you talk a little bit about what factors that the Unknown Speaker that you had you interested in them and then what were the kind of critical issues that made them kind of fall out of the pipeline? Just trying to better understand, you know, the dynamics around the transaction environment and some of the risks or other factors that may influence the ability to get deals done? Thanks. Yeah, sure.

Jason Fox: Good morning. Thanks a lot for taking my question. My question is on the two deals falling out of the pipeline. Can you talk a little bit about what are the factors that you had you interested in them and then what were the kind of critical issues that made it fall out of the pipeline, just trying to better understand the dynamics around the transaction environment and some of the risks or other factors that may influence the ability to get the old time. Thanks.

Michael Goldsmith: Good morning, Thanks, a lot for taking my question.

Speaker Change: <unk> is on the two deals falling out of the pipeline can you talk a little bit about what are the factors that are there.

Toni Ann Sanzone: Yeah.

Speaker Change: You had you're interested in them and then well what were the kind of critical issues that made it kind of falls out of the pipeline just trying to better understand.

Speaker Change: The dynamics around the transaction environment and some of the.

Speaker Change: Risks or other factors that may influence the ability to get deals done. Thanks, Yes, sure yeah, and clearly that's the biggest change from.

Jason E. Fox: And clearly, that's the biggest change from where we were in June when we last talked about pipeline and guidance and the biggest impact on modifying a range. So those two deals were originally over $300 million combined. I think for the larger of the two deals, we uncovered what I would call a critical issue in the late stages of diligence. The owner was unaware of it, and it couldn't be, you know, timely resolved.

Jason Fox: Yeah, sure. Yeah, and clearly that's the biggest change from where we were in June. We last talked about pipeline and guidance and the biggest impact on modifying a range. So those two deals were originally over three hundred million dollars combined. I think for the larger of the two deals, we uncovered what I would call a critical issue in the late stages of diligence. The owner was unaware of it, and it couldn't be, you know, timely result. So, you know, something like this happens; I would call it rare, and they're out of our control. I would say it's most unusual for it to happen when we have deals that are this far along.

Jason E. Fox: Yeah, sure. Yeah.

Speaker Change: You know, where we were in June when we last talked about pipeline and guidance and in the biggest impact on.

Speaker Change: And modifying our range. So those two deals were originally over $300 million combined I think for the larger of the two deals we uncovered what I would call a critical issue in the late stages of diligence the owner was unaware of it and it couldnt be timely resolved.

Jason E. Fox: So, you know, something like this happens, I would call it rare, and they're out of our control. I would say it's most unusual for it to happen when we have deals that are this far along. So, certainly, we're disappointed that they didn't get over the finish line. And now we're in the process of replenishing our pipeline with new opportunities.

Toni Ann Sanzone: So you know something like this happens I would call it rare and they're out of our control.

Toni Ann Sanzone: I would say, it's most unusual Ford happened when we have deals that are this far along.

Jason Fox: So, you know, certainly we're disappointed that they didn't get over the finish line, and now we're in the process of replenishing our pipeline with new opportunities. But I don't think it's a read-through into anything, you know, structurally wrong with the transaction markets. These we viewed as, again, unusual for this kind of stage of the transaction, and I'd call them isolated.

Toni Ann Sanzone: Certainly we are disappointed that they didn't get over the finish line and now are in the process of replenishing our pipeline with new opportunities, but I don't think its a read through into anything structurally wrong with the transaction markets.

Jason E. Fox: But I don't think it's a read through into anything, you know, structurally wrong with the transaction markets. These would be viewed as, again, unusual for this kind of stage of the transaction. And you know, I'd call them isolated.

Toni Ann Sanzone: These be viewed as again unusual for this kind of stage of of of the transaction and yeah I'd call them isolated.

Speaker Change: Got it and then as a follow up.

Jason E. Fox: Got it. And then as a follow-up, you know, as you sit here today, right? You've made a lot of progress on the dispositions, whether it's office or some of the other categories. And, you know, now that the acquisition volume guidance has been taken down, but is this kind of like a, like, does the strategy now shift to the offense in terms of finding deals, being aggressive with deals, and just kind of putting that capital that you have to work? I can just try to get a sense of, you know, the narrative shift and the strategy shift as we sit today and what we should expect over the coming quarters.

Jason Fox: And then, as a follow-up, you know, as you said here today, you've made a lot of progress on the disposition, whether it's office and some of the other categories, and now the acquisition volume guidance has been taken down. But is this kind of like a strategy now shipped to the offense in terms of finding deals, being aggressive with deals and just kind of putting that capital that you have to work. I could just try to get a sense of like the, you know, the narrative shift in and the strategy shifts, you know, as we sit today and what we should expect over the coming quarters.

Speaker Change: As you sit here today right you've made a lot of progress on.

Toni Ann Sanzone: The dispositions, whether its office and some of the other categories.

Toni Ann Sanzone: Now the.

Toni Ann Sanzone: Yes.

Speaker Change: The acquisition volume guidance has been taken down but is this kind of like a like.

Speaker Change: Does this strategy now ship shipped to the offense in terms of finding deals being aggressive with deals and just kind of putting that capital that you have to work I'm just trying to get a sense of like the.

Speaker Change: Good narrative shift in the strategy shifts.

Speaker Change: As we sit today and what we should expect over the coming quarters.

Jason E. Fox: Yeah, absolutely. I think it's a, you know, that's, you know, how we would characterize it.

Jason Fox: Yeah, absolutely. I think it's a, you know, that's, you know, how we would characterize it. We've done some of the heavy lifting on the strategic front with the office spin last year. You know, that is, you know, the office sale program is done at this point. You know, obviously, you know, the U-Haul transaction is a big capital source, but it was also, you know, a drag to sell off a portfolio of that large. And now we've also, you know, repaid our two bond maturities this year and reset our interest expense. So, yeah, we're in a good position now.

Speaker Change: Yeah, absolutely I think it's it's a.

Speaker Change: That's how we would characterize it we've done some of the heavy lifting on the strategic front with the office spend last year. You know that is you know the office sale program is done at this point you know obviously you know the U haul transaction, it's a big capital source, but it was also a.

Jason E. Fox: We've done some of the heavy lifting on the strategic front with the office spin last year. You know, that is, the office sale program is done at this point. Obviously, the U-Haul transaction is a big capital source, but it was also, you know, a drag to sell off a portfolio that large. And now we've also, you know, repaid our two bond maturities this year and reset our interest expense.

Speaker Change: Drag to to sell off a portfolio of that large you know we've also.

Speaker Change: You know repaid our two bond maturities this year and reset our interest expense. So yeah. We're in a good position now we're certainly on the offense in terms of looking for new opportunities. We're in a very strong liquidity position.

Jason E. Fox: So, yeah, we're in a good position now. We're certainly on the offense in terms of looking for new opportunities. We're in a very strong liquidity position, which, you know, that'll help us lean into deals. And so now we need to see the transaction activity pick up, and where we are right now, kind of, you know, late summer, you know, this is the summer law. It's especially pronounced in Europe. So we don't have as much visibility into, you know, the transaction markets and kind of the dynamics of that right now. But we'll know more, you know, at the end of summer, you know, in September and certainly October what the end of the year looks like.

Jason Fox: We're certainly on the offense in terms of looking for new opportunities. We're in a very strong liquidity position, which, you know, that'll help us lean into deals. And so now we need to see the transaction activity pick up and, you know, where we are right now.

Speaker Change: Which you know that'll help us lean into deals and so now we need to see the transaction activity pick up.

Speaker Change: And you know, where we are right now kind of late.

Jason Fox: You know, late summer, you know, this is the summer law; it's especially pronounced in Europe, so we don't have as much visibility into, you know, the transaction markets and kind of the dynamics of that right now, but we'll know more, you know, at the end of summer, you know, in September and certainly October what the end of year looks like.

Speaker Change: Late Summer you know this is the summer law is especially pronounced in Europe.

Speaker Change: So we don't have as much visibility into you know the transaction markets and the kind of the dynamics of that right now, but we'll know more at the end of summer you know in September and certainly October what the end of year looks like.

Jason E. Fox: Thank you very much. Good luck in the back half. Yeah, you're welcome.

Unknown Attendee: Thank you very much. Good luck in the back end. Yeah, you're welcome. Thank you.

Speaker Change: Thank you very much good luck in the back half yeah, you're welcome. Thank you.

Speaker Change: Yeah.

Spenser Allaway: Our next question comes from Spenser Allaway with Green Street Advisors.

Operator: Our next question comes from Spenser Allaway with Green Street Advisors. Please state your question.

Speaker Change: Our next question comes from Spenser Alloway with Green Street Advisors. Please state your question.

Spenser Allaway: Please state your question. Thank you.

Spenser Bowes Allaway: Thank you. You noted that there have been fewer willing sellers because folks are kind of waiting for interest rate cuts, but can you provide some color on how competition for deals has trended in both the US and Europe and where do you expect to see more competition in the second half of the year?

Spenser Bowes Allaway: Thank you you noted that there have been fewer willing sellers and folks are kind of waiting for interest rate cuts, but can you just provide some color on how competition for deals has trended in both U S and Europe, and where do you expect to see more competition in the second half of the year yeah.

Jason Fox: You noted that there have been fewer willing sellers, if the folks are kind of waiting for interest rate cuts. But can you provide some color on how competition for deals has trended in both the US and Europe, and where do you expect to see more competition in the second half of the year. Yeah, so, yeah, I think transaction markets have been a bit muted recently. I think we can attribute that maybe to some pausing happened around expectations of Fed rate cuts. We've seen competition, I would say, incrementally pick up both in the US and Europe, probably a little bit more so in the US.

Jason E. Fox: Yeah, so, yeah, I think transaction markets have been a bit muted recently. I think we can attribute that maybe to some pause around expectations of Fed rate cuts.

Speaker Change: Yeah. So yeah, I think transaction markets have been a bit muted you recently I think we can attribute that maybe to some pausing happen around expectations of fed rate cuts.

Jason E. Fox: We've seen competition, I would say, gradually pick up both in the U.S. and Europe, probably a little bit more so in the U.S. I think that's putting some downward pressure on cap rates, and again, maybe that's a little bit more in the U.S. than in Europe, although I will expect maybe a little bit of that in Europe as well, especially given where barring costs have gone. So, yeah, I think more competition will push cap rates down.

Speaker Change: Competition, I would say incrementally pick up both in the U S and Europe, probably a little bit more so in the U S. I think that's putting.

Jason Fox: I think that's putting, you know, some down, we're pressure on cap rates. And again, maybe that's a little bit more in the US, you know, than in Europe, although I will expect maybe a little bit of that in Europe as well, especially given for bar and cost of the gone. So, yeah, I think more competition will push cap rates down. We can lean into pricing that a little bit. We mentioned that we're sitting on a lot of liquidity while that does earn 5% in cash. We're motivated to put that to work, and we can certainly generate some accretion relative to cash, but also relative to where we can kind of issue capital right now.

Spenser Bowes Allaway: Some downward pressure on cap rates.

Spenser Bowes Allaway: And again, maybe that's a little bit more in the U S than in Europe, Although I will expect maybe a little bit of that in Europe, as well, especially given your borrowing costs have gone.

Spenser Bowes Allaway: So yeah, I think more competition will.

Spenser Bowes Allaway: Pushed cap rates down we can lean into into pricing a little bit would be mentioned that we're sitting on a lot of liquidity.

Jason E. Fox: We can lean into pricing that a little bit, but we mentioned that we're sitting on a lot of liquidity. While that does earn 5% in cash, we're motivated to put that to work, and we can certainly generate some accretion relative to cash but also relative to revenue. So, competition is there, it always has been, and I expect it maybe will pick up a little bit once the cost of capital kind of resets with where the Fed ends up.

Speaker Change: All that does earned.

Speaker Change: 5% in cash you know, we're motivated to put that to work and we can certainly generate some accretion relative to cash, but also relative to where we can kind of issue capital right now so.

Jason Fox: So, you know, competition is there; it always has been, and I expected maybe we'll pick up a little bit once, you know, cost of capital kind of your resets with where the Fed ends up.

Speaker Change: Competition is there it always has been and I expect it maybe it will pick up a little bit once you know cost of capital kind of resets with with where the fed ends up.

Speaker Change: Okay.

Jason E. Fox: And then in regards to the investment you made for the storage space expansion, I know it's a really small investment, but can you just provide some color on how you got comfortable with the underwriting, just given the challenges the storage industry has been facing on the rental rate front, and maybe just some broader thoughts on how you're thinking about the industry in general?

Jason Fox: And then in regards to the investment you made for the storage space expansion, a really small investment, but can you just provide some color and how you got comfortable with the underwriting just given the challenges the storage industry has been facing on the rental right front and maybe just some broader thoughts and higher thinking about the industry in general. Yeah, if I think about what it was small, I'm trying to think if that was an expansion of an existing asset or a tuck-in deal, but you know, I think importantly, you know, the storage deals kind of go through the same, you know, underwriting process that we do for net lease; they need to generate the right spreads to our cost of capital.

Speaker Change: And then in regards to the investment you made for the storage space expansion and also really small investment, but can you just provide some color on how you got comfortable with the underwriting just given the challenges the storage industry has been facing on the rental rate front and maybe just some broader thoughts on how youre thinking about the industry in general.

Jason E. Fox: You have to think about what it was small. I'm trying to think of that was an expansion of an existing asset or a Tuck-in deal, but you know, I think importantly You know the storage deals kind of go through the same, you know underwriting process that we do for net lease They need to generate the right spreads to our cost of capital I think you know, we can expect probably long-term growth that's higher than than what we would see in net lease But they still need to have kind of underlying kind of return fundamentals that work for us But I don't remember the exact specifics on that deal But I think it was either an expansion of existing asset or or a tuck-in for for properties in a market that we're already in

Speaker Change: I also think about what it was small I'm trying to think if that was an expansion of an existing asset or a tuck in deal, but you know I think importantly.

Speaker Change: The storage deals kind of go through the same.

Speaker Change: Underwriting process that we do for net lease they need to generate the right spreads to our cost of capital I think we can expect probably long term growth that's higher than than what we would see a net lease but they still need to have kind of underlying kind of return fundamentals that work for us.

Jason Fox: I think, you know, we can expect probably long term growth that's higher than what we would see in net lease, but they still need to have kind of underlying kind of return fundamentals that work for us. But I don't remember the exact specifics on that deal, but I think it was either an expansion of existing asset or we're tucking for properties of market that we're already in. Okay, great.

Speaker Change: I don't remember the exact specifics on that deal, but I think it was either an expansion of existing asset or were tuck ins for for properties in the markets we're already in.

Speaker Change: Yeah.

Spenser Bowes Allaway: Okay, great. Thank you so much.

Speaker Change: Okay, great. Thank you so much you're welcome sensor.

Anthony Paolone: Our next question comes from Anthony Palon with JP Morgan. Please see your question. Yeah, thanks. So I guess Jason just wants to make sure to understand some of the comments about it. It sounds like, you know, some of the sellers are waiting for rates to come down, and you mentioned maybe even being able to lean into price a bit. So, you know, you talked about cap rates mid sevens, I guess, even up into the eight range.

Speaker Change: Our next question comes from Anthony Powell loan with J P. Morgan. Please state your question.

Operator: Our next question comes from Anthony Paolone with J.P. Morgan. Please state your question.

Anthony Paolone: Yeah, thanks. So, I guess, Jason, I just want to make sure I understand some of the comments about it. It sounds like, you know, some of the sellers are waiting for rates to come down, and you mentioned maybe even being able to lean into price a bit. So, you know, you talked about cap rates, mid-7s, I guess, even up into the 8 range. Should we think about those going forward as being lower, like maybe low 7s, or in order to get things to clear? I mean, how should we think about that?

Anthony Powell: Yeah. Thanks, So I guess, Jason just wanted to make sure I understand some of the comments about it it sounds like you know some of the sellers are waiting for rates to come down and you mentioned, maybe even being able to lean into price a bit so.

Speaker Change: You talked about cap rates mid Sevens, I guess, even up into the eight range should we think about those going forward as being lower like maybe low sevens or in order to get things to clear I mean, how should we think about that.

Jason Fox: Should we think about those going forward as being lower, like maybe low sevens, or in order to get things to clear, and how should we think about that? Yeah, it's a good question, and it's certainly dynamic. I mean right now we're broadly targeting cap rates. This is cash cap rates in the sevens, which given our bump structures would typically equate to an average yield in the 9s. So that kind of pricing works for us. I think while we're sitting on as much liquidity as we are right now, I think for the right deal we can probably dip below that range.

Jason E. Fox: Yeah, it's a good question, and it's certainly dynamic.

Speaker Change: Yeah. It's a good question and it's certainly dynamic I mean, right now were broadly targeting cap rates. It is cash cap rates in the sevens, which given our bump structures typically equates to an average yield in the nines. So.

Jason E. Fox: I mean, right now, we're broadly targeting cap rates, and there are cash cap rates in the sevens, which, you know, given our bump structures would typically equate to an average yield in the nines. So that kind of pricing works for us. I think, you know, while we're sitting on as much liquidity as we are right now, I think for the right deal, we can probably dip below that range. You know, especially, we tend to transact across a broad range of cap rates.

Speaker Change: So that kind of pricing works for US I think you know while we're sitting on as much liquidity as we are right now I think for the right deal. We can probably dipped below that range you know, especially you know.

Jason Fox: You know, especially we tend to transact across a broad range. So there'll be some higher than that range as well, but I think we're comfortable for the right asset, especially ones that have higher growth embedded into the leases to get a little bit more aggressive than, you know, then maybe the 7.7 average cash cap rate that was reported this quarter or year to date, I should say.

Speaker Change: We tend to transact across a broad range of cap rates, so there'll be some higher than that range as well, but I think we're comfortable for the right asset, especially ones that have higher growth embedded into the leases to get a little bit more more aggressive than that.

Jason E. Fox: So there'll be some higher than that range as well. But I think we're comfortable for the right asset, especially ones that have higher growth embedded into the leases, to get a little bit more, more aggressive than, you know, then maybe the 7.7 average cash cap rate they reported this quarter or year to date, I should say.

Speaker Change: And then maybe the seven seven average cash cap rate they reported this quarter or year to date I should say.

Anthony Paolone: Okay, thanks. And then just to follow up, the 5% of ABR on the watch list, is any of that from any of the top 25 tenants that you could help us call out? Yeah, Brooks. Do you want to take that?

Tony Sanzone: Okay, thanks. And then just follow up the 5% of ABR on the watch list.

Speaker Change: Okay. Thanks, and then.

Speaker Change: Just follow up on the 5% of ABR on the watch list.

Tony Sanzone: Is any of that from any of the top 25 tenants that you could help us call out? Yeah, perhaps you want to take that?

Speaker Change: Is any of that from any of the top 25 tenants that you could help us call out.

Speaker Change: Perhaps you want to take that.

Tony Sanzone: Sure. Yeah, Tony mentioned the watch list is very consistent quarter after quarter. And as we discussed in prior calls, the bulk of that is Hellwig and hard side, which we've discussed in prior conversations.

Speaker Change: Sure Yeah, Tony mentioned in the watch list is very consistent quarter over quarter and as we've discussed in prior calls.

Brooks G. Gordon: Sure. Yeah, as Tony mentioned, the watch list is very consistent quarter over quarter. And as we discussed in prior calls, the bulk of that is Hellwig and Hartside, which we've discussed in prior conversations. That's about two-thirds of the watch list. And those are the top 25 tenants. But those are the only two. And the remainder of the list is very consistent, again, around 5% of ABR.

Speaker Change: All of that is <unk> and heart side.

Speaker Change: Which we've discussed in prior conversations that's about two thirds of the watch list and those are those are top 25 tenants.

Tony Sanzone: That's about two thirds of the watch list; in those are top 25 tenants, but those are the only two. In the remainder of the list, it is very consistent again, around 5% of ABR. But the hell wig and hard side are in the 5% correct, and they were a fire quarter as well. Yes, okay, got it. That's what I thought.

Speaker Change: But those are the only two.

Speaker Change: And the remainder of the West has been very consistent again around 5% of ABR.

Speaker Change: Or it would be the that.

Speaker Change: But how are we again are hearthside or are in the 5%.

Anthony Paolone: But Allaway again, Hartside is in the 5%. Correct, and they were a prior quarter as well. Okay, got it. That's what I thought. Thank you.

Speaker Change: Correct than they were prior quarter as well.

Speaker Change: Got it thank.

Speaker Change: Thank you.

Brad Heffern: Next, Tony. Our next question comes from Brad Heffen with RBC Capital Markets.

Tony: Thanks, Tony.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Brad Heffern with RBC capital markets. Please state your question.

Operator: Our next question comes from Brad Heffern with RBC Capital Markets. Please state your question.

Tony Sanzone: Please state a question. Yeah, hi everybody. Thanks. So, for deal volumes, you're roughly halfway to the low end of the guide. As at the end of the second quarter, then you obviously said third quarter has a law. Sellers are waiting. There's more competition. So I guess I'm wondering why not take down the guide more. I guess what gives you confidence in hitting the midpoint of this range, just given what you've closed here today. Yeah, sure. Yeah.

Bradley Barrett Heffern: Yeah. Hi everybody.

Bradley Barrett Heffern: Yes, hi, everybody. Thanks, so for deal volumes, you're roughly halfway to the low end of the guide as of the end of the second quarter. Then you obviously said third quarter has the law.

Bradley Barrett Heffern: Sellers are waiting there is more competition. So I guess I'm wondering why not take down the guide more I guess, what gives you confidence in hitting the midpoint of this range just given what you've closed year to date.

Bradley Barrett Heffern: Thanks. So for deal volumes, you're roughly halfway to the low end of the guide as of the end of the second quarter. Then, obviously, you said the third quarter had a lull.

Speaker Change: Sure Yeah. So maybe I'll just recap quickly. So we're roughly at now I would say $700 million of deal volume. After you factor in the remaining capital projects that are expected to close this year and its probably like $40 million or so and then we have a pipeline that I would call over $200 million, they're at various stages. I think we expect the majority of that probably at least half of that too.

Tony Sanzone: So let me be able to recap quickly. So we're roughly at now would say 700 million of deal volume after you factor in the remaining capital projects that are expected to close this year. It's probably like 40 million or so. And then we have a pipeline that I'd call over 200 million. There are various stages. I think we expect the majority of that, probably at least half of that, to close in August and September. So that gives us visibility into, you know, I could say close to a billion dollars investments right now, at least that's where we're right now.

Speaker Change: Those in August and September so that gives us visibility into.

Bradley Barrett Heffern: Say close to $1 billion of investments right now at least that's where we're at right now.

Bradley Barrett Heffern: Sellers are waiting. There's more competition. So I guess I'm wondering why not take down the guide more? I guess what gives you confidence in hitting the midpoint of this range just given what you've closed here today?

Tony Sanzone: And you know, that's certainly lower than where we'd like to be. And yeah, I think we know that it's mainly because of those two deals that I mentioned earlier that trapped out of our pipeline.

Bradley Barrett Heffern: And that's certainly lower than where we'd like to be in and I think we know that it's mainly because of those two deals that I mentioned earlier that dropped out of our pipeline. So yeah. There is some work to do with the second half of the year.

Jason E. Fox: Yeah, sure, yeah. So maybe I'll just recap quickly. So we're roughly at, I would say, 700 million in deal volume after you factor in the remaining capital projects that are expected to close this year, and it's probably like 40 million or so. And then we have a pipeline that I'd call over 200 million. There are various stages.

Tony Sanzone: So yeah, there's some work to do with the second half of the year. We are sitting on a ton of liquidity. We do have a bias to put capital work and just mention that we can lean into pricing on the right deals. I think there's signs that the market activity will pick up coming out of summer. I mentioned that BOV activity has picked up, and that's typically, you know, a bit of a precursor to deal activity. I think that rate cuts may have some of that effect as well.

Bradley Barrett Heffern: We are sitting on a ton of liquidity, we do have a bias to put capital work I just mentioned that we.

Jason E. Fox: I think we expect the majority of that, probably at least half of that, to close in August and September. So that gives us visibility into, I'd say, close to a billion dollars of investments right now. At least that's where we are right now.

Jason E. Fox: And, you know, that's certainly lower than where we'd like to be, and, you know, I think we know that it's mainly because of those two deals that I mentioned earlier that dropped out of our pipeline. So, yeah, there's some work to do in the second half of the year. We are sitting on a ton of liquidity. We do have a bias to put capital to work, and I just mentioned that we, you know, can lean into pricing on the right deals.

Bradley Barrett Heffern: Can lean into pricing on on the right deals.

Bradley Barrett Heffern: I think there are signs that the market activity will pick up coming out of summer.

Jason E. Fox: I think there's signs that market activity will pick up coming out of summer. I mentioned that BOV activity has picked up, and that's typically, you know, a bit of a precursor to deal activity. I think Fed rate cuts may have some of that effect as well. And on top of that, keep in mind that our fourth quarter, you know, tends to be our largest and our most active. I think, on average, looking back over around 10 years, about 35% of annual deal volume does occur in the fourth quarter.

Bradley Barrett Heffern: I mentioned that <unk> B O V activity has picked up and that's typically a bit of a precursor to deal activity I think fed rate cuts may have some of that effect as well and on top of that keep in mind, our fourth quarter tends to be our largest and in our most active I think on average looking back over around 10 years.

Tony Sanzone: And on top of that, keep in mind our fourth quarter tends to be our largest and our most active. I think, on average, looking back over around 10 years, about 35% of annual deal volume does occur in the fourth quarter. So, you know, we don't have visibility into year-end deals yet. And that will come more focus in September and October. But yeah, I think we think that's, you know, the right range. It is a range. It's relatively wide given the uncertainty, but we think it's the appropriate range. and we'll keep on finding ways to become a work.

Bradley Barrett Heffern: About 35% of annual deal volume does occur in the fourth quarter. So.

Jason E. Fox: So, you know, we don't have visibility into year-end deals yet, and that will come more focused in September and October. But yeah, I think we think that's the right range. It is a range. It's relatively wide given the uncertainty, but we think it's the appropriate range, and we'll keep on finding ways to put capital to work.

Bradley Barrett Heffern: We don't have visibility into year end deals yet.

Bradley Barrett Heffern: I'll come more focus in September and October.

Speaker Change: But but yeah I think we think that's the right range is a range.

Bradley Barrett Heffern: It is relatively wide given the uncertainty, but we think it's the appropriate range in and we'll keep on finding ways to put capital to work.

Speaker Change: Okay got it and then on lineage it sounded from your comments like you don't really have visibility on when you might be able to actually monetize that is that the correct interpretation and then.

Tony Sanzone: Okay, got it.

Bradley Barrett Heffern: Okay, got it. And then on lineage, it sounded from your comments like you don't really have visibility on when you might be able to actually monetize that. Is that the correct interpretation? And then when might you have visibility on that?

Tony Sanzone: And then on lineage, it's not in your comments like you don't really have visibility on when you might be able to actually monetize that.

Tony Sanzone: Is that the correct interpretation? And then when might you have visibility on that? Yeah, I think that's a fair characterization. You know, there are lockups in place. There's will be, you know, kind of, you know, periodic or maybe regular opportunities for liquidity throughout the settlement period, but it's mostly at the sponsor's discretion, so we don't have full visibility of that. I think that they're motivated, in all likelihood, to remove any overhang there, but we don't have a lot of visibility into that.

Speaker Change: When might you have visibility on that.

Jason E. Fox: Yeah, I think that's a fair characterization. You know, there are lockups in place. There is an outside date of three years, but we do expect that, you know, there'll be, you know, kind of, periodic or maybe regular opportunities for liquidity throughout the settlement period, but it's mostly at the sponsor's discretion, so we don't have full visibility into that. I think that they're motivated, in all likelihood, to remove any overhang there, but we don't have a lot of visibility into that. But I think that's fair.

Jason E. Fox: Yeah, I think that's fair, you know...

Speaker Change: Yes, I think that's a fair.

Speaker Change: Characterization.

Speaker Change: There are lockups in place there is an outside date of three years, but we do expect that there'll be you know kind of you know.

Speaker Change: Periodically or maybe regular opportunities for liquidity throughout the settlement period, but it's mostly at the sponsor's discretion. So we don't have full visibility to that I think that they're motivated and all likelihood to remove any overhang there.

Speaker Change: But we don't have a lot of visibility into that I think that's fair.

Tony Sanzone: I think that's fair.

Speaker Change: Okay. Thank you.

John Kim: Our next question comes from John and Kilachowski with Wells Fargo. Please stay a question. Hi, thank you. You mentioned the 5% of ABR that's on the watch list, but could you talk about the quarter of a quarter performance of the rest of the portfolio? Like, are you seeing a weaker, lower-end consumer and back to these businesses more generally? Brooks, anything you... No, not any major trends that I would point to. I mean, I think the watch list is a good indicator where we see more acute risk. You know, again, I'll remind people that it's not an indicator of what we expect to default, but just the tenants where we want to pay even more close attention.

Speaker Change: Our next question comes from John and Killer Celski with Wells Fargo. Please state your question.

Operator: Our next question comes from John Kilichowski with Wells Fargo. Please state your question.

Speaker Change: Hi, Thank you you mentioned the 5% of ABR. That's on the watch list, but could you talk about the quarter over quarter performance of the rest of the portfolio like are you seeing a weaker low red consumer back in these businesses more generally.

John Kilichowski: Hi, thank you. You mentioned the 5% of ABR that's on the watch list, but could you talk about the quarter over quarter performance of the rest of the portfolio? Like, are you seeing a weaker lower end consumer impacting these businesses?

Brooks G. Gordon: Brooks anything you know.

Brooks G. Gordon: Brooks, anything you... No, not... Not any major trends that I would point to. I mean, I think the watch list is a good indicator of where we see more acute risk. You know, again, I'll remind people that it's not an indicator of what we expect to default, but just those tenants where we want to pay even more close attention. You know, certainly some challenges for consumers in various regions, but we haven't seen that flowing through to our tenant base other than the tenants we've identified on the watch list.

Brooks G. Gordon: Not any major trends that I would point to I mean, I think the watch list.

Speaker Change: Good.

Speaker Change: Indicator of where we see more acute risk.

Speaker Change: I'll remind people that it is not an indicator of what we expect to default, but just those tenants where we monitor that.

Speaker Change: Even more close attention.

Brooks Gordon: You know, certainly some challenges to consumers in various regions, but we haven't seen that flowing through to our tenant base other than the tenants we've identified on the watch list.

Brooks G. Gordon: Certainly some challenges to consumer in various regions, but we haven't seen that flowing through.

Speaker Change: To our tenant base other than the tenants leave.

Speaker Change: Ratified on watch list.

Speaker Change: Okay. Thank you and then second maybe just jumping back to the operating self storage portfolio, you took down the guide to a negative five to negative 6% year over year versus flat last time, we spoke and I feel like the salt the weakness in self storage has been understood. So curious what.

Brooks Gordon: Okay, thank you.

John Kilichowski: Okay, thank you. And then second, maybe just jumping back to the operating self-storage portfolio, you took down the guide to a negative 5 to negative 6% year-over-year versus flat last time we spoke. And I feel like the weakness in self-storage has been understood. So curious what kept the guide from getting taken down earlier? What changed quarter over quarter?

Tony Sanzone: And then a second, maybe just jumping back to the operating self-sourge portfolio. You took down the guide to negative 5% to negative 6% year-over-year versus flat. Last time we spoke. And I feel like the weakness of self-sourge has been understood, so here's what kept the guide from getting taken down earlier: what changed quarter of a quarter. Don't you have any thoughts on that? Yeah, I would say the, you know, in terms of kind of the performance over the first half of the year, we've been looking month after month at how the portfolio has tracked. And, you know, I think it's continued to show softening.

Speaker Change: The guy who's going to take it out earlier, what changed quarter over quarter.

Toni Ann Sanzone: Toni, any thoughts on that?

Tony: Tony any any thoughts.

Toni Ann Sanzone: Toni, any

Speaker Change: Thoughts on that.

Tony: Yeah, I would say the you know in terms of kind of the performance over the first half of the year. We you know we've been looking month after month at how the portfolio is tracked and you know I think it's continued to show softening theres been signs of optimism generally out there in the market with potential interest rate.

Toni Ann Sanzone: Yeah, I would say the, you know, in terms of kind of the performance over the first half of the year, we've been looking month after month at how the portfolio has tracked, and, you know, I think it's continued to show softening. There are signs of optimism generally out there in the market with potential interest rate cuts, but we just aren't seeing that come through as of right now. So, you know, at this point, I think our guide is really based on what we're seeing come through our portfolio at this moment in time. I think there's still some optimism out there in the back half of the year, generally, as it relates to self storage.

Tony Sanzone: There's been signs of optimism generally out there in the market with potential interest rate cuts. We just aren't seeing that come through as of right now. So, you know, at this point, I think our guide is really based on what we're seeing come through our portfolio at this moment in time. I think there's still some optimism out there in the back half of the year generally as it relates to self-sourge, and, you know, we hope that would be some upside for us relative to where we've marked it. But I think, you know, we feel good about what we've marked it to at this point in the year.

Tony: Cuts, we just arent seeing that come through as of right. Now. So you know at this point I think our guide is really based on what we're seeing come through our portfolio at this moment in time I think there's still some optimism out there in the back half of the year generally as it relates to self storage and we hope that would be some upside for us relative to where we've marked it but I think.

Toni Ann Sanzone: And, you know, we hope that would be some upside for us relative to where we've marked it. But I think, you know, we feel good about what we've marked it at this point in the Yeah, in those numbers, Janet.

Tony: We feel good about what we've marked it to at this point in the year.

Tony Sanzone: Yeah, and those numbers generally are, you know, part of budgets that we get from our operators as well. So, that's certainly a big input in how we look at, you know, what we're modeling and including in our guidance.

Speaker Change: Yeah, no and those numbers generally are are you know part of budgets that we get from our operators as well. So that's certainly a big input and how we look at them you know.

John Kilichowski: Yeah, and those numbers generally are, you know, part of the budgets that we get from our operators as well, so that's certainly a big input into how we look at, you know, what we're modeling and including in our guidance.

Speaker Change: What we're modeling and including in our guidance.

Unknown Attendee: Understood. Thank you. Yes, you're welcome.

Speaker Change: Understood. Thank you.

Speaker Change: Youre welcome.

John Kim: Our next question comes from John Kim with BMO Capital Markets.

Speaker Change: Our next question comes from John Kim with BMO capital markets. Please state your question.

Operator: Our next question comes from John Kim with BMO Capital Markets. Please state your question.

John Kim: Please... Thank you.

John P. Kim: Thank you. I just wanted to clarify on the two deals that fell apart this quarter and the issues that you found. Were those issues tenant or lease related, or real estate related? And were these transactions something that you'd be willing to reprice?

John P. Kim: Thank you.

John Kim: I just wanted to clarify on the two deals that celebrate this quarter and the issues that you found were those issues tenants or lease related or real estate related, and were these transactions something that you be willing to reprise? Yeah, I don't want to get into too many of the details, you know, the larger of the two that was a sale lease back and it was, you know, slated to be completed and conjuncted with a broader company refinancing. When we hit the roadblock that we uncovered during due diligence, this was a real estate, you know, diligence issue, you know, they kind of had to move forward their plan V, which was an alternative capital source in order to get their refinancing done, you know, by their deadline.

John P. Kim: I just wanted to clarify on the two deals that fell apart this quarter and the issues that you found were those issues tenants or at lease related or real estate related and where these transactions something that you'd be willing to reprice.

Speaker Change: Yeah, and I don't want to get into too many of the details.

Jason E. Fox: Yeah, I don't want to get into too many of the details. You know, the larger of the two, that was a sale leaseback, and it was, you know, slated to be completed in conjunction with a broader company refinancing. And when we hit the roadblock that we uncovered during due diligence, this was a real estate, you know, diligence issue, you know, the tenant. You had to move forward with their plan B, which was an alternative capital source in order to get their refinancing done, you know, by their deadline.

Speaker Change: The larger of the two that was a sale leaseback and it was you know slated to be completed in conjunction with a broader company refinancing and when we hit the roadblock that we uncovered during due diligence. This was a real estate deal.

Speaker Change: Diligence issue.

Speaker Change: The tenant had to move forward with their plan B, which was an alternative capital source in order to get the refinancing done by their deadline. So that was the biggest driver here as you know this was part of a bigger transaction debt that was scheduled to close and.

Jason Fox: So that was the biggest driver here is, you know, this was part of a bigger transaction that was scheduled to close, and, you know, there, there, it wasn't possible to kind of ensure that there were, or kind of accelerate any resolution on the issues that we came up with. Maybe there's a chance that that deal could come back; you know, likely it would be smaller, but the company doesn't have, you know, specific use of proceeds in mind right now.

Jason E. Fox: So That was the biggest driver here is that this is part of a bigger transaction that was scheduled to close, and, you know, it wasn't possible to kind of ensure or or, or kind of accelerate any resolution on the issues that we came up with. Maybe there's a chance that that deal could come back. You know, likely, it would be smaller, but the company doesn't have, you know, specific use of proceeds in mind right now. So, you know, we have a good relationship there, and I think that we'll stay, you know, in touch, but I'm not expecting or including, you know, a restart of that deal anytime soon, if at all.

Speaker Change #100: You know there there it wasn't possible to kind of ensure or or.

Speaker Change: Or kind of accelerated any resolution on the issues that we came up with maybe there's a chance that that deal could come back you know likely it would be smaller.

Speaker Change: But the company doesn't have a specific use of proceeds in mind right now so.

Jason Fox: So, you know, we have a good relationship there, and I think that we'll stay, you know, in touch, but I'm not expecting or including, you know, a restart of that deal anytime soon, if at all. Appreciate the color.

Jason E. Fox: So you know we have a good relationship there and I think that will stay.

Speaker Change: In touch, but but I'm, not expecting or or including you know a restart of that deal anytime soon if at all.

Speaker Change: I appreciate the color.

Jason E. Fox: I wanted to also follow up on lineage. You mentioned that as a source of capital. There are some unrealized gains in the investment. It could be an investment where the dividend growth is pretty attractive. So how do you balance that aspect that it could be a higher growth vehicle or investment versus reinvesting with a higher yield but potentially lower growth going forward? Yeah, look, this was a very unique investment that we made.

Jason Fox: I wanted to also follow up on lineage; you mentioned that as the source of capital, there are some unrealized gains in the investment. It could be an investment where the dividend growth is pretty attractive. So how do you balance that aspect that it could be a higher growth vehicle or investment versus reinvesting with a higher yield, but, you know, potentially lower growth going forward. Yeah, look, this was a very unique investment that we made, and we did it, I don't know, probably 10, 12 years ago now, when Lineage first got their start. We helped see the business with some sales back and, you know, it took a meaningful equity stake at the time.

Speaker Change: Wanted to also follow up on lineage.

Speaker Change: You mentioned that.

Speaker Change: The source of capital there.

Speaker Change: There are some unrealized gains in the investment.

Jason E. Fox: Could be an investment where the dividend growth is pretty attractive. So how do you balance that aspect that it could be a higher growth vehicle or investment versus reinvesting.

Speaker Change: With a higher yield, but potentially lower growth going forward.

Speaker Change: You looked at it this was a very unique investment that we made and we did it I don't know it could be 10 12 years ago now when when lineage first got their start we helped seed the business with some sale leasebacks and took a meaningful equity stake at the time.

Jason E. Fox: Yeah, look, this was a very unique investment that we made, and we did it, I don't know, probably 10, 12 years ago now when Lineage first got its start. We helped seed the business with some sale leasebacks and, you know, took a meaningful equity stake at the time. So I wouldn't say it's our business, and I'm assuming that investors wouldn't say it's their business to own publicly traded securities

Jason Fox: So, I wouldn't say it's our business, and I'm assuming that investors wouldn't say it's our business to own publicly traded securities. So we will look for, you know, liquidity options when they're offered and reinvest that capital into our core business, which is net lease, of course. The investment has performed extremely well. So yeah, there are meaningful, you know, gains and, you know, potentially outsized tax play income that will have to manage, but we're pretty big. You know, the liquidity likely comes in over a multi-year period given the lock-up structure. So we feel pretty comfortable that we're going to be able to manage those gains and, you know, tax play income with our normal kind of course distributions.

Speaker Change: I wouldn't say, it's it's our business and I'm, assuming that investors wouldn't say its our business to own publicly traded securities. So we will look for liquidity options. When they are offered and reinvest that capital into our core business, which isn't at least of course the investment has performed extremely well. So yes, there's there are meaningful gains.

Jason E. Fox: So we will look for, you know, liquidity options when they're offered and reinvest that capital into our core business, which is Net Lease, of course. The investment has performed extremely well, so yeah, there are meaningful, you know, gains and, you know, potentially outsized taxable income that we'll have to manage. But we're pretty big. You know, the – The liquidity likely comes in over a multi-year period, given the lock-up structure. So we feel pretty comfortable that we're going to be able to manage those gains and tax blink and with our normal kind of course distributions. So I don't think that's a factor.

Jason E. Fox: And you know potentially outsized taxable income that will have to manage but we're pretty big.

Jason E. Fox: You know the the liquidity likely comes in over a multiyear period, given the lockup structure. So we feel pretty comfortable that we're gonna be able to manage those gains and you know tax plank and with our normal kind of course distributions. So I don't think that's a factor in other words I think there were we're looking forward to.

Jason Fox: So I don't think that's a factor. In other words, I think that we're looking forward to, you know, reinvesting that capital into net lease. It's going to be highly, highly accretive. I do think that they will start paying a dividend, you know, likely in the second half of the year. We don't have good timing on that or the magnitude of that. But, you know, regardless of what the growth prospects of that dividend are, I think we want to get reinvested into net lease, like I said. Be highly creative.

Jason E. Fox: In other words, I think that we're looking forward to reinvesting that capital into net lease. It's going to be highly, highly accretive. I do think that they will start paying a dividend, likely in the second half of the year. But we don't have good timing on that or the magnitude of it. But regardless of what the growth prospects of that dividend are, I think we want to get reinvested in net lease. Like I said, it will be highly accretive.

Jason E. Fox: Due to reinvesting that capital into net lease it's going to be highly highly accretive.

Speaker Change: Do you think that they will start paying a dividend likely in the second half of the year. We don't have good timing on that or the magnitude of that but you know regardless of what the growth prospects of that dividend or I.

Jason E. Fox: I think we want to get reinvested in at least like I said it'll be highly accretive.

Speaker Change: Okay.

Mitchell Germain: Thanks, Jason.

Speaker Change: Jason.

Speaker Change: Welcome.

Mitchell Germain: Our next question comes from Mitchell Germain with Citizens' JMP. Please stay your question. Thank you.

Speaker Change: Our next question comes from Mitch Germain with citizens JMP. Please state your question.

Operator: Our next question comes from Mitch Germain with Citizens JMP. Please state your question.

Mitchell Bradley Germain: Jason, any potential decision to maybe modify the way that you, you know, come up with a guide, the best way to say it is maybe guide your deployment in 2025? I think there have been a couple of times where you've had to kind of, you know, switch things up. Is there maybe any change in philosophy that you might adopt?

Mitchell Bradley Germain: Thank you Jason.

Mitchell Germain: Jason, any potential decision to maybe modify the way that you, you know, come up with guide, that's what it says maybe guide your deployment in 2025. I think it's, you know, been a couple of times where you've had to kind of, you know, switch things up. Is there maybe any change in philosophy that you might adopt? Yeah, it's something for us to think about. I mean, the deal of volume maybe more so than anything else is hard to predict. It's very dependent on market forces, you know, things like, you know, macro things like interest rate environment, obviously cost of capital and competition, you know, player role there.

Speaker Change: Jason any potential decision to maybe.

Speaker Change: Modify the way that you come up with.

Speaker Change: That's what would you say is maybe guide your deployment.

Speaker Change: In 2025 I.

Speaker Change: I think it's been a couple of times, where you've had to kind of switch things up.

Speaker Change: Is there maybe any change in philosophy that you might adopt.

Jason E. Fox: Yeah, it's something for us to think about. I mean, deal volume, maybe more so than anything else, is hard to predict. It's very dependent on market forces, you know, things like macro, things like the interest rate environment, obviously, cost of capital, and competition, you know, play a role there. So it's not the easiest to predict. I think that we, you know, certainly have a range that we include within our corporate model that will flow through and provide guidance.

Jason: Yes, it's something for us to think about I mean.

Speaker Change: The deal volume, maybe more so than anything else is hard to predict it its very dependent on market forces.

Speaker Change: You know things like you know macro things like interest rate environment, and obviously cost of capital and competition you know play a role there. So it's not the easiest to predict I think that we certainly have a.

Jason Fox: So it's not the easiest to predict. I think that we, you know, certainly have a range that we include within our corporate model that will flow through and provide guidance, and we recognize that it's, you know, I don't think everyone does it, but it's more common to provide guidance around deal volume and not. But I think your point is we're going to continue to look at what's the best way to provide those assumptions at the beginning of the year and how we think about updating those along the way. Gotcha.

Jason E. Fox: Our range that we include within our corporate model that will flow through and provide guidance and we recognize that it's yeah. I don't think everyone does it but it's more common to provide guy.

Jason E. Fox: And we recognize that it's, you know, I don't think everyone does it, but it's more common to provide guidance around deal volume than not. But I think your point is well taken. We're going to continue to look at what's the best way to provide those assumptions at the beginning of the year and how we think about updating those along the way.

Jason E. Fox: Guidance around deal volume than not but but but I think your point is well taken but we're going to continue to look at what's the best way to provide those assumptions at the beginning of the year and how we think about updating those along the way.

Jason E. Fox: Gotcha, and then I think somebody else had mentioned, maybe the kind, broadly speaking, the way that you're looking at your storage portfolio, I think, I don't know, maybe about a year ago or so, so obviously not a fresh number, but I think you've thrown out a valuation of about $1.5 billion. I mean, you know, how strategic is that portfolio today in your mind if you're looking at another potential liquidity Yeah, sure. I, you know, it's a big deal.

Speaker Change: Got you and then I think somebody else had mentioned maybe they come broadly speaking the way you're looking at.

Jason Fox: And then I think somebody else had mentioned maybe they come probably speaking the way that you're looking at your storage portfolio. I think, I don't know, maybe about a year ago or so. So obviously not a fresh number, but I think you've thrown out evaluation of about 1.5 billion. I mean, you know, how strategic is that portfolio today in your mind if you're looking at another potential liquidity source? Yeah, sure. I, you know, it's a little under maybe between 70 million, maybe 65 to 70 million of NOI associated with the portfolio. So I think we've probably characterized it as, you know, over a billion dollars in value.

Speaker Change: Your storage portfolio I think I don't know, maybe about a year ago or so so obviously not a fresh number but I think you had thrown out a valuation of about $1 5 billion I mean.

Speaker Change: How strategic is that portfolio today in your mind.

Speaker Change: If youre looking at another potential liquidity source.

Jason E. Fox: Yeah, sure. It's a little under, maybe it's between $70 million, maybe it's $65 to $70 million of NOI associated with the portfolio. So I think we've probably characterized it as over a billion dollars in value. That's probably a good number, and it's somewhere above that, but we don't have an exact valuation.

Speaker Change: Yeah sure you know.

Speaker Change: It's a little under maybe it's between $70 million 65 to 70 million of NOI associated with the portfolio. So I think we've probably characterize it as you know over $1 billion and valued up that's probably a good number and it's somewhere above that but we don't have.

Jason Fox: That's probably a good number, and it's, you know, somewhere above that, but you don't have an exact, you know, evaluation. You know, we continue to like the industry long term, despite the fact that 2024 has been a challenging year. We've talked a lot about the various options we have for that portfolio. You know, one of the things was we could potentially replicate that prior and at least conversion that we did a couple of years back. I say we're spending a little more time exploring that right now, be for a portion of the portfolio. But certainly, you know, we would have the ability to sell, you know, some portion of the properties as well if we think that's the best way to fund new net lease purchases.

Jason E. Fox: And exact evaluation.

Jason E. Fox: We continue to like the industry long term. Despite the fact that 2024, it's been a challenging year.

Jason E. Fox: We continue to like the industry long-term despite the fact that 2024 has been a challenging year. We've talked a lot about the various options we have for that portfolio. One of the things was that we could potentially replicate that prior net lease conversion that we did a couple of years ago. I'd say we're spending a little more time exploring that right now, maybe for a portion of the portfolio. But certainly, you know, we would have the ability to sell some portion of the properties as well if we think that's the best way to fund new net lease purchases.

Jason E. Fox: We've talked a lot about the various options we have for that portfolio.

Speaker Change: You know one of the things we could potentially replicate that prior net lease conversion that we did a couple of years back.

Speaker Change: I'd say, we're spending a little more time exploring that right now it would be for a portion of the portfolio.

Jason E. Fox: But certainly you know we would have the ability to sell some portion of the properties as well. If we think that's the you know the best way to fund new net lease purchases.

Jason E. Fox: You know, we'd view it, like anything else, as another accretive source of internal capital, and we think we can make some, you know, pretty sizable spreads trading out of storage and into net lease. But, you know, we are sitting on a ton of liquidity right now, so I would say it's not high on the priority list to create more capital by selling storage, but it's certainly an option. And, you know, I think maybe the broad message is, or the main point is that, you know, we have a lot of flexibility in the way we look at that portfolio, and we'll continue to evaluate all the different options.

Jason Fox: You know, we'd view it like anything else, another accretive source of internal capital. And we think we can make some, you know, pretty sizable spreads, you know, trading out of storage and into net lease. But, you know, we are sitting on a ton of liquidity right now. So I would say it's not high on the priority list to create more capital by selling storage, but it's certainly an option.

Speaker Change: No we'd view it like anything else another accretive source of internal capital and we think we can make some pretty.

Speaker Change: Pretty sizable spreads trading out of storage and an internet lease, but we knew we are sitting on a ton of liquidity right. Now so I would say, it's not high on the priority list to create more capital by selling storage, but it's certainly option and you know I think maybe the broad messages are the main point is that you know we have a lot of flexibility in the way, we look at that portfolio and.

Jason Fox: And, you know, I think maybe the broad message is, the main point is that, you know, we have a lot of flexibility in the way we look at portfolio and, you know, we continue to value it all the different options. Thank you.

Jason E. Fox: We continue to evaluate all the different options.

Speaker Change: Thank you.

Unknown Attendee: Yep, you're welcome.

Speaker Change: You're welcome.

Val Granath: Our next question comes from Joshua Dennerland with Bank of America. Please do. Hi, good morning or afternoon.

Speaker Change: Our next question comes from Joshua <unk> with Bank of America. Please state your question.

Operator: Our next question comes from Joshua Dennerlin with Bank of America. Please state your question.

Speaker Change: Hi, good morning or afternoon. This is now granted on behalf of Josh I just wanted to circle back on some of your comments that you had laid out some of the recoveries that you're expecting from tenants at three to four cents in the back half of the year. I was wondering if you can give a little bit more color I'll walk through them Oh.

Joshua Dennerlin: Hi, good morning or afternoon. This is Farrell Granath on behalf of Josh. I just wanted to circle back on some of your comments that you had laid out some of the recoveries that you're expecting from tenants at three to four cents in the back half of the year. I was wondering if you could give a little bit more color or walk through the elements of that if those are tenants who are currently on the watch list currently or if it's a majority from one.

Tony Sanzone: This is Val Granath on behalf of Josh. I just wanted to circle back on some of your comments that you would laid out some of the recoveries that you're expecting from tenants that three to four cents in the back half of the year. I wanted to give a little bit more color or walk through the elements of that if those are tenants who are on the watch list currently or if it's a majority from one.

Joshua Dennerlin: Elements of that is those are tenants who are on the watch list currently or if its majority from one.

Toni Ann Sanzone: Tony, do you want to dig into that? Sure, yeah.

Tony Sanzone: Tony, do you want to dig into that? Sure. Yeah. I'm happy to just give a little bit of color there. I think we have a small handful of tenants. I think it's roughly about five tenants, smaller in size, all on the watch list. None of them are our top 25, and they've been somewhat sporadic rent payers. So I think, you know, we've consistently had them on a cash basis, and we tend to only recognize the AFO there when the cash comes in. So we do have line of sight to collecting about three to four cents worth of that past due rent, and some of that current rent, and some of that's rent from prior years just based on negotiations and where we are in the year.

Joshua Dennerlin: Tony you want to dig into that.

Toni Ann Sanzone: Sure, yeah, I'm happy to just give a little bit of color there. I think we have a small handful of tenants I think it's roughly about five tenants smaller in size all on the watch list None of them are our top 25 and they've been somewhat sporadic rent payers So I think you know We've consistently had them on a cash basis and we tend to only recognize the AFO there when the cash comes in So we do have line of sight to collecting about three to four cents worth of that Past due rent and some of that current rent and some of that's rent from prior years just based on Negotiations and where we are in the year That's all been factored into guidance and it has been but we do have kind of clear line of sight and I think it'll just You know We provided that context to help bridge the gap to get from kind of the first half to the second half of the year

Tony: Sure Yeah, I'm happy to just give a little bit of color. There I think we have a small handful of tenants I think it's roughly about five tenants smaller in size all on the watch list none of our top 25, and they've been somewhat sporadic rent payers. So I think you know we've consistently had them on a cash basis and we tend to only recognize the Eva.

Toni Ann Sanzone: They are when the cash comes in.

Speaker Change: So we do have line of sight to collecting about three to four cents worth of that past due rent and some of that's current rent and some of that's rent from prior years, just based on negotiations and where we are in the year. That's all been factored into guidance and it has been but we do have kind of clear line of sight and I think it'll just.

Tony Sanzone: That's all been factored into guidance, and it has been, but we do have kind of clear a line of sight, and I think it'll just, you know, we provided that context to help bridge the gap to get from kind of the first half to the second half of the year.

Toni Ann Sanzone: We provided that context to help bridge the gap to get from kind of the first half to the second half of the year.

Tony Sanzone: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you and also if I could just get a little more color on the the nine 1 million additional revenue. Our other revenue now that you had laid out it was mixed between settlements and I missed the first word that you had said I'm just curious if you could give a little bit more color because I know.

Joshua Dennerlin: Okay, great, thank you. And also, if I could just get a little more color on the 9.1 million additional revenue or other revenue. I know that you had laid out a mix between settlements, and I missed the first word that you had said, but I was curious if you could give a little bit more color because I know that a quarter of a quarter is a little higher.

Tony Sanzone: And also if I just get a little more color on the 9.1 million additional revenue or other revenue, another you had laid out is mixed between settlements and I missed the first word that you had said. But curious if you could give a little bit more color because I know quarter of a quarter is a little higher. Sure, yeah, that line will tend to fluctuate. It's typically when what I referenced were deferred maintenance payments. So at the end of any lease kind of scheduled, you know, we'll recoup some recoveries around any maintenance or repairs that need to be done at facility, or we'll settle sort of any other obligations at the end of the lease.

Speaker Change: Every quarter is a little higher.

Toni Ann Sanzone: Sure, yeah, that line will tend to fluctuate. It's typically what I referenced were deferred maintenance payments. So at the end of any lease kind of scheduled, you know, we'll recoup some recoveries around any maintenance or repairs that need to be done at a facility, or we'll settle sort of any other obligations at the end of the lease. It was a little bit higher this quarter, and I think there was another settlement in there related to the Prima lease rejection. So we did get some recovery on that, and so that made up the bulk of our revenue in this quarter.

Speaker Change: Sure Yeah that line will tend to fluctuate it's typically when what I referenced were different for deferred maintenance payments. So at the end of any lease kind of schedule them, you know well, we'll recoup some recoveries around him any maintenance or repairs that needed to be done at a facility or will settle sort of any other obligations at the end of the lease it was a little bit higher this quarter.

Tony Sanzone: It was a little bit higher this quarter, and I think there was another settlement in there related to the premalese rejection. So we did get some recovery on that, and so that made up the bulk of the million this quarter. Okay, thank you so much.

Toni Ann Sanzone: And I think there was another settlement in there related to the premium lease rejections. So we did get some recovery on that and so that made up.

Toni Ann Sanzone: The bulk of it in.

Toni Ann Sanzone: This quarter.

Joshua Dennerlin: Okay, thank you so much.

Speaker Change: Okay. Thank you so much.

Joshua Dennerlin: Yeah.

Unknown Attendee: Thank you, and a reminder to the audience to ask a question. Press star one on your telephone keypad to remove yourself from the queue. Press star two. Once again, to ask a question, press star one on your telephone keypad.

Speaker Change: Thank you and a reminder to the audience to ask a question press star one on your telephone keypad to remove yourself from the queue press start to once again to ask a question press star one on your telephone keypad.

Operator: Thank you, and a reminder to the audience: to ask a question, press star 1 on your telephone keypad. To remove yourself from the queue, press star 2. Once again, to ask a question, press star 1 on your telephone keypad. Our next question comes from Smitty's Rose with Citi. Please state your question.

Smedes Rose: Our next question comes from Smedys Rose with City. Please stay your question. Hi, thank you. I just wanted to ask you a little bit about the acquisition activity that you completed in the quarter. Sure, you mentioned it sounded like a bulk of it was in North America, and I was just wondering because it seemed like maybe a month or so ago there was more sort of optimism about opportunities in Europe. And I was just curious if something specifically sort of changed there or if you would expect, you know, international opportunities to kind of pick up as you knew through the balance of the year.

Operator: Our next question comes from Smedes Rose with Citi. Please state your question.

Bennett Rose: Hi, Thank you.

Bennett Rose: Hi, thank you. I just wanted to ask you a little bit about the acquisition activity that you completed during the quarter. You mentioned it sounded like the bulk of it was in North America. And I was just wondering because it seemed like maybe a month or so ago, there was more of a sense of optimism about opportunities in Europe. And I was just curious if something specifically sort of changed there, or if you would expect, you know, international opportunities to kind of pick up as you move through the balance of the year. You know, given that I know there's probably more right now with summer, but just sort of in general. Yeah, sure.

Speaker Change: I wanted to ask you a little bit about that because it's an activity that you completed in the quarter you.

Bennett Rose: You mentioned that it sounds like the bulk of it within North America and I was just wondering because it seemed like maybe a month or so ago. There was more sort of optimism about opportunities in Europe.

Bennett Rose: And I was just curious if there's something specifically sort of change there or if you would expect.

Speaker Change: International opportunity just to kind of pick up as you move through the balance of the year you know.

Jason Fox: You know, given that I know there's probably a role right now with some of it just sort of in general. Yeah, sure. Yeah, we did do, I would say, you know, since the end of Q1, most of the transactions have been in the US. I think post Q2, so year to date, we have done a little bit more in Europe, and I would say, you know, the pipeline is probably, you know, close to half in Europe. So there is activity that we would expect, you know. So, closing over the next 30 to 60 days there, and then we also expect once you get out of the summer law that activity will pick up.

Bennett Rose: Given that I know, there's probably a lull right now with the summer, but just sort of in general.

Jason E. Fox: Yeah, sure. Yeah, we did, I would say, since the end of Q1, most of the transactions have been in the U.S. I think post-Q2, so year-to-date, we have done a little bit more in Europe, and I would say, you know, the pipeline is probably, you know, close to half in Europe, so there is activity that we would expect, you know, closing over the next 30 to 60 days there.

Speaker Change: Yeah sure Yeah, Yeah, we did do that.

Jason E. Fox: I would say since the end of Q1 most of the transactions have been in the U S. I think post Q2, so year to date, we have done a little bit more in Europe, and I would say the pipeline is probably close to half in Europe. So there is activity that we would expect.

Joshua Dennerlin: You know.

Speaker Change: Closing over the next 30 to 60 days there.

Jason E. Fox: And then we also expect once you get to the summer law that activity will pick up it's hard to you know entirely predict them, but I think there's reasons to think that that activity will pick up and as I mentioned earlier you know we have you know the the low cost of borrowing in euros. Its about 150 basis points inside of where we can borrow.

Jason E. Fox: And then we also expect once you get out of the summer law, that activity will pick up. It's hard to entirely predict, but I think there are reasons to think that activity will pick up. And as I mentioned earlier, we have a low cost of borrowing in euros. It's about 150 basis points inside of where we can borrow on US dollars. So spreads have been better in Europe. I think we can lean into pricing a little bit more to the extent that's gonna help bring some deal flow in, but I think we need to see the activity, and we're hopeful and maybe expecting to see that pick up come September.

Jason Fox: It's hard to entirely predict, but I think there's reasons to think that activity will pick up. And as I mentioned earlier, we have a low cost of borrowing in euros. It's about 150 basis points inside of where we can borrow on US dollars. So, spreads have been better in Europe.

Jason E. Fox: On U S. Dollar so spreads had been better in Europe, I think we can lean into pricing a little bit more to the extent that's going to help bring some deal flow in but I think we need to see the activity in and we're hopeful and maybe expecting to see that pick up come September.

Jason Fox: I think we can lean into pricing a little bit more to the extent that's going to help bring some deal flow in, but I think we need to see the activity and we're hopeful and maybe expecting to see that pick up comes September.

Speaker Change: Okay.

Bennett Rose: Okay, and I wanted to ask you just with inflation coming down, what is the minimum kind of rent bumps or same store rent growth that you would kind of expect across your portfolio if it comes in, if inflation comes down to kind of the ranges that the Fed has been targeting?

Tony Sanzone: Okay, and I wanted to ask you to just, with inflation coming down, what sort of just sort of like the minimum rent bonds are same for rent growth that you would kind of expect across your portfolio, if it comes in, if your inflation comes down to kind of the ranges that the Fed has been targeting for some time now. Yeah, sure. So, not on new deals, but what the existing portfolio is going to do. Tony, do you have any, you know, inside into that maybe, Brooks? Yeah, I think we need to see kind of the inflation, you know, as you've said, it's moderating now.

Speaker Change: I wanted to ask him to just with inflation.

Bennett Rose: Coming down what what sort of just sort of like the minimum kind of rent bumps or same store rent growth that you would kind of expect across your portfolio if the.

Bennett Rose: If it comes in.

Speaker Change: Comes down to kind of the range is that the fed has been targeting for some time now yes.

Jason E. Fox: Yeah, sure. So not on new deals, but what the existing portfolio is going to do. Toni, do you have any, you know, insight into that? Maybe Brooks?

Speaker Change: Yeah sure so not not on new deals, but with the existing portfolio is going to do.

Jason E. Fox: Tony do you have any insight.

Brooks G. Gordon: Insight into that maybe Brooks.

Toni Ann Sanzone: Yeah, I think we can see inflation, you know, as you've said, it's moderating now. I think we're approaching kind of that sort of stabilized level at the back half of this year in terms of how it's flowing through our metrics. So, you know, we're looking at kind of the mid 2%, and that includes both inflation-based leases as well as fixed rent increases, which we've been pretty successful in increasing the fixed bumps over the last few years as well. So I'd say the mid 2% range for contractual same store.

Brooks: Yeah, I think we look at that unfortunately.

Toni Ann Sanzone: The inflation you know as you've said, it's it's moderating now I think we're approaching kind of that sort of stabilized level is at the back half of this year in terms of how it's flowing through our metrics. So you know we're looking at kind of mid 2% and that includes both inflation based leases as well as fixed rent increases, which we've been pretty successful in increasing the fixed bumps over.

Tony Sanzone: I think we're approaching kind of that sort of stabilized level at the back half of this year in terms of how it's flowing through our metrics. So, you know, we're looking at kind of mid to percent, and that includes both inflation-based leases as well as fixed rent increases, which we've been pretty successful in increasing the fixed bumps over the last few years as well. So I'd say kind of the mid to percent range for contractual same store. Okay, thank you.

Toni Ann Sanzone: The last few years as well, so I'd say kind of in the mid 2% range for contractual same store.

Toni Ann Sanzone: Great.

Bennett Rose: Okay, thank you. Welcome.

Toni Ann Sanzone: Okay. Thank you.

Speaker Change: Welcome.

Greg McGuinness: Our next question comes from Greg McGuinness with Scotiabank. Please state your question. Hey, good afternoon. So, same store in a wide growth for the self storage reach is expected around minus 2% this year. Are you seeing any particular geographies facing more headwinds, or what's driving the underperformance in your operating portfolio? Yeah, I mean, it's a relatively diverse portfolio, obviously, much smaller than the big publics, but I think it's the typical dynamics. I think there's obviously a big drag on street rates or new moving rates. I think ECRIs are helping to offset some of that. I think our occupancy has slipped slightly, maybe by a percentage point or so.

Speaker Change: Our next question comes from Greg Mcginniss with Scotiabank. Please state your question.

Operator: Our next question comes from Greg McGinniss with Scotia Bank. Please state your question.

Greg Michael McGinniss: Hey, good afternoon.

Greg Michael McGinniss: So same story on why growth for the self-storage REITs is expected around minus 2% this year. Are you seeing any particular geographies facing more headwinds, or what's driving the underperformance in your operating portfolio?

Greg Michael McGinniss: The same store NOI growth for the self storage Reits expected around minus 2%. This year are you seeing any particular geography, any particular geographies facing more headwinds or what's driving the underperformance in your operating portfolio.

Speaker Change: Yeah, I mean, if it's a <unk>.

Jason E. Fox: Yeah, I mean, it's a relatively diverse portfolio, obviously, much smaller than the big publics, but I think it's the typical dynamics. I think there's obviously a big drag on street rates or new move-in rates. I think ECRIs are helping to offset some of that. I think our occupancy has slipped slightly, maybe by a percentage point or so, but as Toni mentioned, I think a lot of what we're reporting and forecasting is based on what we're seeing on the ground and maybe more so influenced by the budgets that we're getting, you know, from our operators.

Speaker Change: Relatively diverse portfolio, obviously much smaller than the big publics.

Jason E. Fox: But I think it's the it's the typical dynamics I think there's obviously a big drag on street rates or new move in rates I think ECR eyes are helping to offset some of that I think our occupancy has slipped slightly maybe by a percentage point or so.

Greg McGuinness: But, as Tony mentioned, I think a lot of what we're reporting and forecasting is based on what we're seeing on the ground and maybe more so influenced by the budgets that we're getting from our operators. Those are a little bit on a lag, so to the extent there might be some more optimism starting to flow into the market, into the end of the year. As Tony mentioned, maybe there's a little bit upside there, but I think for now, that's our assumption. But I don't think there's any read through or any other dynamics coming into play here.

Jason E. Fox: But as Tony mentioned I think a lot of you know.

Toni: What we're reporting and forecasting.

Toni: You know it was based on what we're seeing on the ground and and maybe more so influenced by the budgets that were getting.

Jason E. Fox: You know from our operators. So those are a little bit on a lag so to the extent there might be some more optimism starting to flow into the market until the end of the year as Tony mentioned, maybe theres, a little bit of upside there, but I think for now that's our assumption, but I don't think theres any read through or any other dynamics come.

Jason E. Fox: These are a little bit on a lag, so to the extent there might be some more optimism, you know, starting to flow into the market at the end of the year, you know, as Toni mentioned, maybe there's a little bit of upside there, but I think for now, you know, that's our assumption. But I don't think there's any read-through or any, you know, other dynamics coming into play here.

Jason E. Fox: We are going to play here.

Jason E. Fox: Okay.

Brooks Gordon: Okay. And then the positive rent recapture on the retail assets that include the fairly substantial PI package with, I think it was like a six-year payback period. Could you provide some color on the type of tenant taking that space, why they needed that package, whether this level of spend might be required going forward to support releasing, and maybe the expected IRR on that lease. Brooks, do you have any of that detail? Yeah, sure, yeah, that one relates to Dick's Sporting Goods and we're converting it to their state-of-the-art House of Sport concept. So a reasonably capital intensive, I say that's a bit of an outlier, but we won't have to take to do those when we think they create a lot of value; in this case we certainly do.

Greg Michael McGinniss: And then the positive rent recapture on the retail assets that include the fairly substantial TI package with, I think it was like, a six-year payback period. Could you provide some color on the type of tenant taking that space, why they needed that package, whether this level of spend might be required going forward to support the release and maybe the expected IRR on that lease?

Speaker Change: And then the positive rent recapture on the retail assets include the fairly substantial Ti package with I think it was like a six year payback period could you provide some color on the type of tenants taking that space why they needed that package, whether this level of spend might be required going forward to support <unk>.

Leasing and maybe the expected IRR on that lease.

Brooks G. Gordon: Brooks, do you have any more of that detail? Yeah, that... Sure. Yeah, that.

Brooks: Brooks do you have any of that detail yet.

Brooks G. Gordon: Sure. Yeah, that one relates to Dick's Sporting Goods, and we're converting it into their state-of-the-art House of Sport concept. So, reasonably capital-intensive. I'd say that's a bit of an outlier. But we won't hesitate to do those when we think they create a lot of value. In this case, we certainly do.

Brooks: Sure, Yes that one relates to Dick's sporting goods and we're converting it to their state of the art houses sport concept.

Brooks G. Gordon: So reasonably capital intensive I'd say, that's a bit of an outlier but.

Brooks G. Gordon: But we won't hesitate to do those when we think they create a lot of value. In this case, we certainly do I think the incremental yield on capital is kind of low single digits.

Greg Michael McGinniss: I think the incremental yield on capital is kind of low single digits, but it's a long-term lease with good bumps, excellent credit, and this is expected to be a top-tier performing store, so net value creation is very strong. But I agree that capital-intensive up front for that particular one. Again, I wouldn't read through that to a trend, per se. That's a very specific conversion to a different concept for Dick's Sporting Goods.

Brooks Gordon: You know, I think the incremental yield on capital is kind of low single digits, but it's a long-term lease with good bumps, excellent credit. This will be expected to be a top tier performing store. So net value creation, very strong, but agreed that, you know, capital intensive upfront for that particular one. Again, I wouldn't read through that to a trend, per se.

Greg Michael McGinniss: But it's a it's a long term lease with good bumps excellent credit that there'll be is expected to be.

Greg Michael McGinniss: Top tier performing store for.

Greg Michael McGinniss: So net value creation very strong pedigree that capital intensive upfront for that particular, one again I wouldn't read through that to a trend per se that's a very specific.

Brooks Gordon: That's a very specific conversion to a different concept for Dick Sporting Goods.

Greg Michael McGinniss: Conversion to a different concept for predict sporting goods.

Greg Michael McGinniss: Yeah.

Speaker Change: Okay. Thank you.

Operator: Okay, thank you.

Jamie Feldman: Thank you, and our next question comes from Jamie Feldman with Wells Fargo. Please state your question. Great, thank you for taking the question. I just wanted to think bigger picture here. You know, you've got the election coming to pretty different candidates. Just what are your thoughts on just the global transaction market investment landscape, you know, as you think about, you know, what the political environment might look like starting next year. Are there certain markets you think are more interesting, less interesting? Are there certain asset types? Do you think are more interesting, less interesting, which is be great to hear your thoughts on all of that?

Speaker Change: Thank you and our next question comes from Jamie Feldman with Wells Fargo. Please state your question.

Jamie Feldman: Thank you. And our next question comes from Jamie Feldman with Wells Fargo. Please state your question.

Jason E. Fox: Great, thank you for taking the question. I just wanted to, you know, think bigger picture here. You've got the election coming up, two pretty different candidates. Just what are your thoughts on just the global transaction market investment landscape, you know, as you think about, you know, what the political environment might look like starting next year? Are there certain markets you think are more interesting, less interesting? Are there certain asset types you think are more interesting, or less interesting? It would just be great to hear your thoughts on all that. Yeah, sure.

James Colin Feldman: Great. Thank you for taking the question.

Jason E. Fox: Just wanted to think bigger picture here, you know you've got the election coming two pretty different candidates.

Jason E. Fox: What are your thoughts on just the global transaction market investment landscape.

Speaker Change: Think about what the political environment might look like starting next year are there certain markets. You think are more interesting less interesting are there certain asset types. Do you think are more interesting less interesting, but just be great to hear your thoughts on all of that.

Jason Fox: Yeah, sure.

Jason E. Fox: Yeah, sure. I mean, for starters, I don't know if the elections directly we think are going to have a big impact on transaction activity. It's going to be more Fed rate decisions and kind of the direction of the economy. I think the strength of the consumer is going to matter, obviously, a lot when it comes to retail, something that we've talked about in some detail in Europe and maybe specifically in Germany. So I think it's going to be more kind of macro-driven, as opposed to, you know, elections, whether it's in the US or UK or France. That's our perspective.

Speaker Change: Yeah sure I mean, I think for starters.

Jason Fox: I mean, I think for starters, I don't know if the elections directly we think are going to have a big impact on transaction activity. It's going to be more, you know, Fed rate decisions and kind of the direction of the economy. I think the strength of the consumer is going to matter, obviously, a lot when it comes to retail, something that we've talked about some in Europe and maybe specifically in Germany. So I think it's going to be more kind of macro driven as opposed to, you know, elections, whether it's in the US or UK or France.

Jason E. Fox: I don't know if the elections directly we think youre going to have a big impact on transaction activity, it's going to be more you know fed rate decisions and kind of the direction of the economy I think.

Jason E. Fox: The strength of the consumer is going to matter, obviously, you're allowed when it comes to retail it's something that we've talked about.

Jason E. Fox: Some in Europe, and maybe specifically in Germany.

Jason E. Fox: So I think it's going to be more kind of macro driven as opposed to you know E elections, whether it's in the U S or U K or France.

Jason Fox: That's our perspective. I think we're still seeing, you know, onshoring, and maybe, you know, there can be a catalyst with the election this fall for more of that in the US that's helping on the build the suit side. It's helping on critical natures of our real estate. I think we're seeing it in underlying, you know, demand and maybe in the rents for manufacturing as well. So then got to positive and that's an area that, you know, I think you'll continue to see us, you know, over all K capital.

Jason E. Fox: That's our perspective, I think we're still seeing onshoring and maybe you know there can be a catalyst with the election. This fall for for more of that in the U S. That's helping on the build to suit side is helping on critical natures of the of our real estate I think we're seeing it in underlying demand in maybe in the rents for.

Jason E. Fox: I think we're still seeing, you know, onshoring, and maybe, you know, there can be a catalyst with the election this fall for more of that in the US. That's helping on the build to suit side, it's helping on the critical nature of our real estate. I think we're seeing it in underlying, you know, demand and maybe in the rents for manufacturing as well. So I think that's positive. And that's an area that, you know, I think you'll continue to see us allocate capital.

Jason E. Fox: <unk> as well so I think that's a positive and that's an area that I think you'll continue to see US you know over allocate capital.

Speaker Change: Okay, and I mean, along the big picture lines I mean, what do you think the biggest risks are here.

Jason Fox: Okay, and along the big picture lines, I mean, what do you think the biggest risks are here, as you're putting fresh capital to work? Well, I think, you know, for starters, I think, you know, we want to make sure that we are finding enough good opportunities. As I've mentioned, you know, the markets are a little bit muted right now. We think that's probably mostly just to the timing of, you know, the seasonal nature of what typically happens in the summer. So, you know, for our business and maybe for net lease generally, we want to make sure we're finding, you know, enough transaction activity, but we also want to see, you know, the right pricing and structures with those deals.

Jamie Feldman: Okay, and I mean, along the big picture lines, I mean, what do you think the biggest risks are here as you're putting fresh capital to work?

Speaker Change: Putting fresh capital to work.

Speaker Change: Well I think for starters I think you know we want to make sure that we are are finding enough. Good opportunities as I've mentioned, you know the markets are a little bit muted right now.

Jason E. Fox: Well, I think, you know, for starters, I think, you know, we want to make sure that we are finding enough good opportunities. As I've mentioned, the markets are a little bit muted right now, but we think that's probably mostly just due to the timing of, you know, the seasonal nature of what typically happens in the summer.

Jason E. Fox: I think that's probably mostly just due to the timing of the seasonal nature of what typically happens in the summer. So you know for our business and maybe for net lease generally we want to make sure we're finding.

Jason E. Fox: So, you know, for our business and maybe for NetLease generally, we want to make sure we're finding enough transaction activity, but we also want to see, you know, the right pricing and structures on those deals. So there could be some more competition, but I think it listed a lot of the reasons why we feel optimistic about coming into the end of the year and that we're really well set up from a balance sheet and liquidity standpoint to continue to lean into deals and, you know, provide some growth going forward.

Jason E. Fox: If transaction activity, but we also want to see you know the right pricing and structures with those deals.

Jason Fox: So there could be some more competition, but I think it listed a lot of the reasons why, you know, we feel optimistic about coming into the end of the year. And, you know, we're really well set up from a balance sheet and liquidity standpoint to continue to lean into deals and, you know, provide some growth going forward. But, you know, that's, you know, something that we think about.

Jason E. Fox: So there could be some more competition, but I think elicit a lot of the reasons why you know we feel optimistic about coming into the end of the year and you know, we're really well set up from a balance sheet and liquidity standpoint to continue to lean into deals and you know provide some growth going forward, but you know that's that's something that we think about that.

Jason E. Fox: But, you know, that's, you know, something that we think about. I think our portfolio itself, I mean, the question was asked earlier to Brooks about any, you know, trends in credit, you know, our watch list has been stable, you know, we feel good about our portfolio, you know, even if there is, you know, weakness at some point, you know, we very much focus on critical operating real estate when we're acquiring real estate and it's something that we monitor, you know, on a regular basis within the portfolio, we're very proactive about, you know, making changes and, and, and, you know, using that information to, you know, to manage the portfolio.

Jason Fox: I think our portfolio itself, and the question was asked earlier to Brooks about any, you know, trends in credit. You know, our watch list has been stable. You know, we feel good about our portfolio. You know, even if there is, you know, weakness at some point, you know, we very much focus on critical operating real estate when requiring real estate. And it's something that we monitor, you know, on a regular basis within the portfolio. We're very proactive about. You know, making changes and using that information to manage the portfolio. So even if there's a slow down, we think that we're pretty well protected given the critical nature of our real estate and the length of our leases and the size of our company is all factor into that.

Jason E. Fox: Our portfolio of itself that the question was asked earlier to Brooks about any trends in credit.

Jason E. Fox: Our watch list has been stable, we feel good about our portfolio.

Jason E. Fox: Even if there is weakness at some point.

Jason E. Fox: We very much focus on critical operating real estate, one requiring real estate and it's something that we monitor on.

Jason E. Fox: On a regular basis within the portfolio, we're very proactive about may.

Jason E. Fox: Making changes and and and using that information to you know to manage the portfolio. So you know even if there's a a slowdown.

Jason E. Fox: So, you know, even if there's a slowdown, we think that we're pretty well protected given the critical nature of our real estate and the length of our leases and the size of our companies all factor into that.

Jason E. Fox: We think that we're pretty well protected given the critical nature of our real estate and the length of our leases and the size of our company is all factor into that.

Unknown Attendee: Okay, great. Thank you for your thought. Yeah, if you're welcome.

Speaker Change: Okay, great. Thank you for your thoughts yeah, you're welcome.

Jamie Feldman: Okay, great. Thank you for your thoughts.

Unknown Attendee: At this time, I'm not showing any further questions.

Jamie Feldman: At this time I'm not showing any further questions I'll now hand, the call back to Mr Sands.

Operator: At this time, I am not asking any further questions. I'll now hand the call back to Mr. Sands.

Peter Sands: I'll now hand the call back.

Peter Sands: Back to Mr. Sands. Great. Thanks everyone for joining the call and for your interest in WP Carey.

Peter Sands: Great, thanks everyone for joining the call and for your interest in WP Carey. If anyone has additional questions, please feel free to call Investor Relations directly on 212-492-1110. That concludes today's call.

Peter Sands: Great. Thanks, everyone for joining the call and for your interest in W. P. Carey if anyone has additional questions. Please feel free to call Investor relations directly on to one to four nine to 1110.

Peter Sands: If anyone has additional questions, please feel free to call Investor Relations directly on 212 or 92 1110.

Unknown Attendee: That concludes today's call. Thank you. Thank you all parties.

Peter Sands: That concludes today's cool.

Speaker Change: Thank you.

Speaker Change: Thank you all parties may now disconnect.

Operator: Thank you; all parties may now disconnect.