Q2 2025 WP Carey Inc Earnings Call

Hello.

And welcome to WP carries second quarter 2025 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. 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 to today's program, over to Peter Sands head of investor relations Mr. Sands please go ahead.

Good morning everyone. And thank you for joining us for our 2025 second quarter earnings. Call before we begin, I'd 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. WP Carey 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 WPC carry.com where it'll be archived for approximately 1 year and where you can also find copies of our best of presentations and other related materials.

Jason Fox chief executive officer.

Thank you, Peter and good morning everyone.

Our second-quarter results highlight a very strong first half of the year, tracking ahead of our initial expectations on a variety of fronts.

As a result, we're raising our outlook for full year, afo growth to 4.5% at the midpoint of our revised guidance range.

To date. We've closed over 1 billion dollars of new Investments at initial cap rates. Averaging in the mid 7s primarily with fixed rent, escalations approaching 3%.

We've made excellent progress with asset sales, including the first batch of Self Storage operating properties. Executed at attractive, pricing in a significant spread to where we're reinvesting. The proceeds,

While we haven't needed to access the capital markets this year, to achieve our investment goals earlier in July, we opportunistically issued bonds that. Enhance our liquidity and further, strengthen our balance sheet.

While there's lingering uncertainty over the broader economy to date. We've not experienced any unforeseen disruptions in our business. Either tenant, credit, events or tariffs.

accordingly for reducing our reserved for estimated potential, rent Los

This morning. I'll review our progress over the first half of the year and our confidence in sustaining that momentum Tony Sansone. Our CFO will focus on our results and guidance Rays as well as touch upon aspects of our portfolio and balance sheet.

Tony and I are joined by Brooks Gordon, our head of asset management to take questions.

starting with Investments supported by favorable market conditions, we maintain strong investment volume throughout the first half of the year

Building on the increase in the level of activity we achieved in the fourth quarter of 2024,

Year to date, we've completed over $1 billion of investments, including approximately $550 million of deals we closed during the second quarter at an initial weighted average cap rate of 7.5% and a weighted average lease term of 19 years.

Factoring in rent escalations over those long lease terms that translates to an average yield in the mid 9% range which we believe is 1 of the highest average yields in the net lease sector.

And 1 that provides a very attractive spread to our cost of capital.

We've already closed about 230 million dollars of investments in the third quarter, and our pipeline remains strong.

700 million dollars of deals at Advanced stages. Some of which we expect to close in the next few weeks.

So at just over the halfway point, in the year we've surpassed our initial expectations and are there for raising our investment guidance which Tony will review in detail.

Looking ahead. We believe there's still potential to be towards the top end of the new Range. If the transaction environment remains favorable in the second half of the year and we have a strong fourth quarter for deal closings. As is often the case.

We've also continued to build out our pipeline of capital projects which includes build a suits expansions and redevelopments.

Areas of investment where we have always been relatively active.

Currently we have nearly $300 million of projects underway and scheduled for completion over the next 18 months or so which add to our Pipeline and help support future growth?

In terms of property type virtually, all of our second quarter Investments were warehouse and Industrial.

Which also represent the vast majority of our investments here to date as well as the bulk of our pipeline.

The strength of our internal growth continues to be supported. Not only by inflation linked rent, escalations

But also by our ability to structure leases with attractive fixed rent bumps, which have averaged 2.8% on our investments here to date.

Geographically, our second quarter Investments. Were concentrated in the us where we continued to identify and evaluate many compelling opportunities, especially in industrial?

Investment spreads have generally remained wider in Europe which represents the bulk of the deal volume. We've completed so far in the third quarter as well as a significant portion of our near-term pipeline.

But our expectation is to continue to see and close attractively priced and structured deals in both regions over the remainder of the year.

Turning to our sources of capital.

In parallel. With our first half Investments, we've also made good progress with our funding strategy, which we outlined at the start of the year in is centered on a creative sales of non-core assets.

We recently sold an initial tranche of 15 Self Storage, operating properties for 175 million executed, at a sub 6% cap rate.

Ten properties closed during the second quarter for $112 million, with the remaining sales completed in July.

Currently we have 2 additional storage portfolios. Totaling 17 properties under contract with closings expected in August,

Initial projections for storage sales this year are ahead of our original expectations on disposition cap rates.

We remain confident that this year will achieve well over 100 basis points of spread, between our overall asset sales and our new Investments with the potential to be closer to 150 basis points by the end of the year.

In line with higher anticipated investment volume, we're also raising our expectations for full-year dispositions, which could include additional tranches of storage assets.

Even if investment volume exceeds the upper end of our guidance range, we're confident we can fund it with dispositions that generate strong accretion and afo growth.

While we believe we're generating attractive, spreads to our spot cost of capital, which we're keeping in mind when we evaluate New Deals, the spreads were generating, our particularly attractive when we factor in the average, yields over the life of the leases. And when considering our actual source of funding, which is non-core dispositions at tight cap rates.

Turning now to our portfolio and made an environment of broader economic uncertainty. We started the year with an appropriately conservative view on the potential for credit events within our portfolio.

7 months into the year, we're lowering our estimate of potential rent Los by 5 million dollars.

Part of what's left in our rent Reserve reflects ongoing caution towards helvig which remains current on rent, but is still navigating its turnaround plan.

We've made good progress with our strategy of reten and selling helvick stores. Further reducing our exposure and keeping us on track to move it out of our top 10, tenants this year and out of our top 25 next year.

Other has been some recent progress on you as trade policy, especially with Europe, many issues. Remain unresolved. We continue to see no direct impacts in our portfolio. However and we're confident that our rent. Reserve can cover any potential impacts over the second half of the year that said we'll continue to monitor for further developments.

With that, I'll pause and hand. The call over to Tony to discuss our results and guidance.

Thanks Jason.

Starting with earnings afo per share was a $1.28 for the second quarter, which represents an 11 Cent or 9.4%, increase compared to the second quarter of last year, driven by a creative investment activity, along with our sector leading rent growth.

As compared to the first quarter, the increase in afo per share was also primarily the result of debt investment activity and rent escalations, as well as certain timing impacts such as higher expenses in the first quarter and higher other lease related income in the second quarter.

Given our strong first half results and visibility into the second half of the year. We have raised our full year afo guidance range to between $4.87 and $4.95 per share which implies 4.5% year-over-year growth at the midpoint

As outlined in our earnings release. Our revised Outlook is based on higher, expected investment, volume of 1.4 to 1.8 billion. Mostly funded by higher expected, dispositions of 900 million to 1.3 billion.

As Jason discussed, we continue to expect to fund our investments at creatively, with proceeds, from dispositions of operating and non-core assets generating spreads averaging well over 100 basis points.

Contractual same-store rent growth for the second quarter was 2.3%. Year-over-year, this was comprised of CPI-linked rent escalations averaging 2.6% for the quarter, while fixed rent increases averaged 2.1%.

For the full year, we expect contractual same store. Rent growth to average in the mid 2% range, which is also in line with our longer term, expectations, assuming inflation remains around current levels.

Comprehensive same store, rent growth for the quarter was 4% year-over-year reflecting the impact of rent collections, including the recovery of some past due rent this quarter as well as leasing activity and vacancies.

Historically, our comprehensive same store growth has typically tracked around 100 basis points below contractual.

However, based on our current estimates, we expected to track in line to slightly higher than contractual for the full year.

Our portfolio continues to perform well with no significant. New tenant credit events during the quarter.

Therefore we've lowered the potential rent Los assumption embedded. In our afo guidance to between 10 and 15 million down from our previous estimate of 15 to 20 million.

Within that range. We currently have visibility into identified rent loss of about 4 to 5 million or 1. Third at the current midpoint which includes downtime on the helvig stores. We're taking back.

We continue to believe the balance of our rent. Los assumption should conservatively cover. Any incremental tenant issues over the back half of the year.

Total for the first half to 12.8 million.

While the timing of these payments can vary from quarter to quarter. We continue to expect other lease related income to Total between 20 and 25 million, for the full year which is unchanged from our prior estimate.

Turning briefly to our operating properties.

Taking into account the self-storage properties we sold during the second quarter, plus those already sold or expected to be sold in the third quarter, we estimate that our operating property NOI for 2025 will fall between $55 million and $60 million, including the four hotel and two student housing properties in our portfolio.

Given the possibility of additional operating assets sales this year. We'll continue to update that estimate as needed.

Moving to expenses and non-operating income.

At the halfway point of the year, we've refined our guidance assumptions for expenses. We are slightly lowering our expectations for G&A expense, which we anticipate will fall between $99 million and $102 million for the full year.

As mentioned on our last call, GNA tends to run higher in the first quarter due to timing, with the second quarter reflecting more of a run rate for the remainder of the year.

Non-reimbursed property, expenses are expected to Total between 50 and 54 million for the full year with the remaining quarters anticipated to be in line with the second quarter.

Tax expense on an afo basis, which primarily reflects foreign taxes on our European assets is now expected to fall between 42 and 46 million for the full year.

our expectations for both non-reimbursed, property expenses and income tax, expense have marginally increased due in part to the stronger Euro,

Non-operating income is expected to Total around 20 million for the full year. Primarily comprised of the quarterly dividend we received on our Equity stake in lineage, which total 2.8 million for the quarter, and is assumed to remain at that level for the remainder of the year.

Foreign currency hedging gains are expected to be negligible for the remainder of the Year. Given the strengthening of the Euro relative to the US dollar.

As a reminder, despite lower realized FX hedging gains and marginally higher expenses, a stronger Euro positively impacts our European cash flows and therefore AFO, with the benefit primarily flowing through as higher lease revenue.

moving now, to our balance sheet,

We continue to proactively manage our balance sheet, leaving us well positioned with ample liquidity and very manageable near-term debt maturities.

Earlier in July we opportunistically issued million dollars of 5-year us bonds achieving, excellent execution pricing at a coupon rate of 4.65%.

Our overall weighted average cost of debt remains low at 3.1% and is expected to stay around that level for the remainder of the year.

We ended the second quarter with liquidity totaling about 1.7 billion dollars comprised primarily of the availability on our credit facility.

At quarter end, we were about 660 million drawn on our revolver and early in July. We use the proceeds from our bond offering to partially pay that down giving us additional flexibility as we execute on new Investments over the remainder of the year.

We have less than $50 million of mortgage debt maturing over the remainder of 2025, and our next bond maturity is not until April 2026, leaving us a substantial amount of flexibility in how and when we access the capital markets.

We ended the quarter with our key leverage metrics within our Target, ranges with debt to growth assets at 43.2% and net debt to adjusted ibida at 5.8 times.

We continue to expect both of these leverage metrics to remain within our Target, ranges.

Lastly, we continue to grow our dividend.

During the second quarter, we declared a dividend of 90 cents per share or 3.60 annualized, representing a 3.4% increase over the prior year.

Our dividend is well supported by our earnings growth with our year-to-date payout ratio at approximately 73% of afo per share.

And with that, I'll hand the call back to Json.

Thanks Tony.

as we passed the midpoint of the Year, we're pleased with the momentum, we've built across our business

Our investment activity in the pipeline remains strong, and we're on track with our funding strategy. We're achieving very good results and dispositions, and reinvesting the proceeds at compelling spreads.

Disciplined execution, combined with stable, tenant credit and no discernable. Tariff related. Impacts positions us very well for the second half of the year. And we continue to see a path to the high end of our revised. Guidance ranges for both Investments and earnings.

Our updated afo guidance, reflects growth, that's a meaningful step up from recent years.

We believe we're well on our way, to delivering a double-digit total shareholder return for 2025.

Furthermore, we're confident that the foundation we built this year positions us well to maintain that level of growth in the coming years and deliver long-term value creation for our shareholders.

That concludes our prepared, remarks. I'll hand the call back to the operator for questions.

Thank you. At this time. We will take questions.

If you would like to ask a question simply press star, then 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 John Kim, with BMO Capital markets, please State your question.

Thank you. Um, for the second straight quarter, your comprehensive income was pretty meaningfully above contractual. And Toni, you reminded us that typically it's 100 basis points below. So for the second half of the year, do you expect it to be back to that historical level—100 basis points below? Or would it be lower, just given the outperformance this year?

Uh, thanks John. Yeah, I would say if you look at it on a full year basis, we are expecting that to normalize a bit in the back half of the year and is there's a couple of things behind that first. If you think about how we've described our rent loss Reserve. Um, we've got about 12 and a half million dollars at the midpoint of the revised range and that assumption right now we haven't had any real disrupt.

In the first half of the year. So our guidance, assumption and comprehensive same store, all assume that the 12 and a half million is taken in the third and fourth quarters, um, that could prove conservative and we could outperform that. So, um, that's something that we're we're monitoring as well. Um, and then I would just note that maybe the first half of the year was also impacted by some of the uh, Tailwind associated with some of the headwinds we had in the portfolio last year. So it, you know, it's a little uneven in the first half to the second half but there could be some upside relative to the full year estimate that I described which would track probably just north of the contractual in the mid 2% range.

Okay? And my second question is on yourself storage operating portfolio. Um, you provided, uh, a bit of an update on the income, but I was wondering, you've sold the first tranche. Uh, you trans transition some assets? Do you expect to transition more to the triple net lease structure? And then as far as the buyer of the first tranche? Um, I mean reportedly, it's not, uh, an operator of those assets and I'm wondering, um, if a buyer can come in and uh, cancel the third party management, contracts,

Yeah, sure. So, in terms of the first question, you know, we have kind of lots of flexibility.

On what we do with the remaining portion of operating Self Storage portfolio. Um you noted last year, we did uh take a sub portfolio and put it under net lease with extra space and that's always been the goal for some portion of the portfolio. We thought the timing was right. Um, and then this year obviously we're clearly selling a substantial portion of it. And we think that's the best way to fund new Investments. So, kind of looking forward. You know what we do with, you know, the rest of the portfolio will you know that'll depend on Deal volume, um, for the second half of the year and the next year what our Capital needs are what our other funding options are. But um, you know, I would expect that we could lean into some more sales in the second half of the year, um, since execution has been strong. But I also think that we could, you know, convert some portion of it to net lease as well. Um, and, you know, it's likely going to be a combination of the 2. So, either way, um, you know, I think that probably, by this time. Next year, we're out of the operating, uh, storage business. Um,

But we have some options between what we do between now and then, in terms of the, um,

The portfolio that we did sell. Um, yeah, I think the way those contracts work, the management agreements, they're typically canceled upon 30 days' notice. So there's not a lot of, um,

You know, hurdles you have to overcome when you're selling assets to a different operator.

That's great. Thank you.

Yep, you're welcome.

Your next question comes from, Greg mcginness with Scotia Bank, please State your question.

Hey, good morning.

Um, Tony. I'm I'm just trying to get better understand on the afo guidance. Uh, it seems to imply back half quarterly results falling from where we were in Q2. Now, aside from the lower lease termination income and I guess a potential how we credit event. Are there any other headwinds that are being participated?

I'm not sure what the issue was, but on the back of the laptop.

You can take a paper clip and set the power. There's like a little on the left side I can show you. Yeah. Mute are you able to mute that person? I'm not sure if that's

CSS. See it.

Okay.

Uh, yeah. So Greg I'll just maybe highlight that you you were either really the 2th thinking about as we get into the second half. So when you look at the second quarter relative to the outlook for the remainder of the year, the other release related income is the probably the biggest driver in terms of um, second quarter being elevated. Um, you know, maybe worth noting, we didn't update our full year guidance on that. This is really just more of a timing. And it is, you know, these types of payments don't lend themselves really to a run rate from 1 quarter to the next. Um, but if you really take the balance of our full year guidance, over the back half of the year that would normalize out about 3 cents in each of the third and fourth quarters. And then, on the rent Reserve side is I mentioned on the comprehensive income question. Um, you know, the 12 and a half million Reserve is assumed to all be taken in the third and fourth quarter. So you got another roughly 3 cents in each of those quarters, as well. So, you know, I think those are really the anomalies from there. We do expect to grow our asfo. Um, there's certainly a path where uh, we could see out.

Performance relative to the, not needing the full rent, contingency that we've discussed. And, you know, again as we continue to see the pipeline Investments, grow, that growth is going to continue to play through the third and fourth quarters as well.

Okay, thank you. That's really helpful. Uh, Jason. I was hoping you'd touch on, you know, some of the Acquisitions that you guys do are not necessarily brand names that we're all familiar with, um, in terms of the, the credit of the, the tenants, uh, that you're doing sale lease backs with or financing expansions, for whatever it happens to be, you know, how are you getting comfortable with those transactions? And the credit quality, considering some of the the troubles that have happened over the last year with certain tenants,

Yeah, sure. I mean we we've always targeted 7 best and great tenants. We think that's the

Sweet Spot in at least investing and we typically focus on large companies with operationally critical real estate. So, but, you know, nothing new there. Um, you know, really our our approach hasn't changed a lot. We we focus on value, the criticality, uh, the kind of credit underwriting. It's something that we've we're good at, we've done that for a long time. We think we can underwrite and structure around risk really well. Um, and and, and that's part of the model. So it's, it's really a range of credits. I mean, but I think 1 of the themes that we've talked about before while it's just below investment grade, I think the large companies do make a big difference.

And is there, is there something happening now that's bringing more of these companies to market? Or are you just doing more deals now that you have the capacity to do so?

Yeah, I mean, look to Market, you know, feels quite strong and constructive right now. Um, there are lots of opportunities. I think some of this is driven by um, what feels like a relatively stable interest rate environment. It's probably been the case now, for several quarters. Um,

Which is always a key ingredient in, you know, kind of the increase in transaction activity. So that's despite you changing expectations throughout the year around tariffs. If you look at treasury yields, they've been mostly range Bound in the low to mid 4S for, you know, most of the Year even dating back to the fourth quarter of last year. So, um, you know, that creates stability, I think you see transaction activity increase, but as spreads have come in and we're taking advantage of that. I think we've had a, you know, really strong first half of the year. Um, you know, we're tracking ahead of our initial expectations and, um, and a good healthy pipeline. So I think some of its Market driven and, um, but a lot of it is, you know, who we are as a company. We've been doing this for a long time, we have a lot of relationships, um, and environment where maybe there's stability, but there's still this overlaying, uh, uncertainty. I think execution really comes into play, and, and we're going to fare quite well, if we're competing on deals, um, executions of strength of ours, I think it's really a combination of all of those things. But, you know, generally it's a, it's a good environment right now for us.

Great. Thank you.

And your next question comes from John Kilichowski with Wells Fargo. Please state your question.

Uh, good morning, thank you. Uh, in your initial remarks, you touched on it. But, you know, we've we've had a lot in the news flow, recently, around our conversations between the US and the EU on on trade discussions and tariffs. I know in our last quarter's earnings, you know, you mentioned that there really hasn't been an impact, uh, to your numbers. It sounded like a more of the same. Here, I, I'm curious if you spoke to your operators, and if they've started to give any sort of opinion on what they're hearing out of the government, and if they, they think it will affect the, you know, their business at all, or if maybe there's some Tailwinds that we're not considering.

At this point in time. Um, and that's similar with our portfolio. We we haven't seen impacts, we haven't seen a lot of, um, you know, commentary from our intents and it really hasn't impacted investment activity as well. Um, and I think there's probably reasons to think that, you know, given the more moderate moderate nature, kind of at the tariffs that are being discussed right now. Why, you know, there wouldn't be, you know, big impacts at least on us and our tenants ability to pay rent going forward. But, you know, certainly it's something that we keep you know, monitoring um and and, you know, we'll see where everything lands.

Got it and then maybe on the opportunity, he said it sounded like you highlighted it in the opening remarks that Europe was providing better spreads. I'm curious just what's the the primary drivers of that?

In terms of better spreads? Well, I mean the the the biggest driver is, you know, the cost to borrow in Europe.

Um, you know, we can borrow probably a hundred 125 to 150 basis points inside of where we could issue us bonds. Um, yet cap rates are in the similar, zip code, maybe a little bit tighter depending on the country and and in Europe the you know cap rates just kind of range fairly widely given the different markets. Um, but that's the biggest drivers, our ability to, um, you know, to borrow cheaper in Euros than we can, in US Dollars. And, you know, we've talked about this before, but we think that is something that is sometimes overlooked or at least underappreciated in our model. Um, that we do have a access to, you know, very cheap capital in Europe.

Got it. Thank you.

Welcome.

Your next question comes from Michael Goldsmith with UBS. Please State your question.

Good morning. Thanks a lot for taking my question. Uh, first question is just about the opportunities sticking with the topic of your what's the opportunity set you're seeing in Europe and the us both, you know, you talked a little bit on on spreads and cap rates but you know, just during the quarter there was predominantly uh Acquisitions in the US relative to to Europe. And so, just trying to get a sense of you know.

Forward. And was that kind of timing related, where you were a little bit more U.S. than Europe? Thanks.

Yeah, I mean look we we we've been seeing really good opportunities in Europe, especially in the industrial sector. And especially through sale lease backs um you know as you noted or as as I talked about earlier, you know, call 34 of our deals year to date have been in North America. Um, the pipeline is shaping up a little differently. I would say, right now looking forward, it's probably 50/50 split between North America and Europe. So we're starting to see more activity. Um, you know, our our pipeline is is, um, you know, within Europe. You know, the deals tend to take a little longer to close there, so maybe we have, um, you know, a little less visibility into the timing there, but, but it, it's picking up there and I would expect the second half of the year to be more active over there. Um, you know, maybe we end up

You know something that's closer to 2/3 1/3 split between the 2 but um but it'll it'll vary quarter to quarter for sure.

Thanks. Thanks for that Jason and as a follow up, maybe similar question. But on on the retail versus industrial split, uh, clearly a lot of industrial being done and and in the pipeline but also write like at the beginning of the year, you talked a little bit more about uh you talked about how how you wanted to do more in the retail space. So is that timing related? Is that uh, you know, the the opportunities or or is there, you know, any sort of changes strategy, just trying to get a sense of preference between an industrial and Retail? Because it did seem pretty industrial heavy uh, in the quarter.

Yeah, no, no, no change. In strategy we want to continue to build and and ramp up our retail vertical. And you know, we'll continue to be opportunistic there. Um but yeah, but year to date we're finding better risk. Adjusted returns in the industrial sector, um you know, look the the US retail. It's just something we've always characterized it as, as being more competitive and, you know, pricing is a little bit tighter there, maybe less. So the going in cap rates but more, when you factor in the bumps, um, in in kind of the total return on on us retail. You know, it's a little bit, a little bit tighter than maybe um we think it should be. Um so yeah. So it's been it's been more industrial less retail I think the second half of the year we'll see you know us get some retail done. Um but look I I think it's okay if we're later on on retail for points in time it's kind of highlights the value of our platform and the benefits of a diversified model where we can allocate Capital to the best opportunities across

You know, wide range of property types. Um, you know, and, and geography, so more to come there, but, um, but I think we'll see more as as the second half. Um, you know,

That goes along.

Thank you very much. Good luck in the back half.

Thank you.

our next question comes from smees Rose with City police state your question,

A little bit more about um, The increased outlook for, for acquisition volume and and the back half of the year. Um, and it sounds like you're seeing a lot more um, attractive opportunities. And so could you just maybe talk about what you're seeing on the competitive side or kind of maybe what's just sort of being? What's driving? The incremental opportunities?

For you.

Yeah, it's really it's really market conditions that are driving the opportunities. If you think about over the past couple of years, there's been um less activity and and maybe characterized it as pent-up sellers looking for kind of a stable transaction Market to get better execution and I think that's what we've been seeing I mentioned earlier. A lot of that's driven by, you know, the the kind of being range bound with with treasuries at least in the US um you know, competition. I I think um in in the US, you know that's always been a competitive market, you know, less. So in our in um, you know where we've historically targeted, which is Industrial Sales East backs a little more. So as I just mentioned in, in in retail, but it's all manageable, it's been, it's it's always been competitive and, you know, we continue to find ways to compete there. Um, so I would say it's more, you know, driven by kind of overall marketing conditions.

Okay, and then I just wanted to ask you, you're so it sounds like um the hell which you know is is kind of in line with your revised expectations and then you you took down the um, Credit Law or rent Los expectations for the year for a little bit. I mean any other sort of changes on your on your watch list of of tenants that are maybe, you know coming in better to relative to your expectations or things that

Yeah, you could highlight.

Uh, Brooks, you want to take that?

Sure. Yeah, I mean, credit quality, uh, has improved substantially. I mean, True Value in hardside were the only other 2, uh, tenants of any, uh, large size on the watch list in addition to Hellwig. So those have been resolved with, with, very little impact. Uh, we've had a handful of other smaller, tenants, you know, complete refinancing, and we've moved them off the watch list. Um, so you know, credit quality is in in a solid place right now. You know that said, you know, we have a degree of caution around it an uncertain world right now, especially around tariffs and trade. Um, also how we turn around like we discussed, um, you know, so we have that 10 to 15 million, uh, Reserve that we've described, you know, that may prove conservative, but that that's kind of the perspective. We're, we're taking right now.

Thank you, appreciate it.

Your next question comes from Spencer glimcher with Green Street, advisors please stay your questions.

Thank you. Um,

Start. Um we've recently seen some large real estate players like BlackRock and Starwood acquire, some netley portfolios. Um, slash platforms. Is there any concern on your end that over time? The firms are going to start impacting the bidding tents or pricing, or just become a larger competitive force. And then, at least Market,

Yeah, I mean, look, less competition is always better, which is kind of what we've liked about Europe for some time now. But as I said before, the net lease market has always been competitive in the U.S., and yeah, we have seen some new private equity entrants.

Some non-traded platforms that you mentioned and they're finding that lease attractive, um, and I think that's a, you know, maybe a positive signal, um, you know, take away their, you know, they typically are focused on using higher leverage, um, which is generally more expensive and, and, you know, maybe less reliable in the, in the current market. Um, but uh, but, but like I said, we've, we've been able to compete, you know, with, you know, in the, in the, in the US market for, for quite some time. And and I don't think that's uh, that's going to change.

Okay, that's all for me. Thanks, guys.

Your next question comes from Brad Heffron. With RBC Capital markets, please State your question.

Yeah, thanks. Good morning, everybody. Um, the equity cost of capital has improved quite a bit this year. I know the plan for 2025, at least, is to fund with dispositions. But I'm curious if you're close to seeing equities as an attractive option or do you think the primary funding source will remain dispositions, you know, for the foreseeable future?

Yeah, we've had some nice momentum in the stock, um, price year to date. But, you know, I think we continue to believe that, you know, we don't need to be in the equity markets this year and, you know, we're continuing to be comfortable with kind of the approach that we've talked about about selling non-core assets to fill our deal, funding needs this year. Um I wouldn't rule out and and maybe couldn't rule out any opportunistic, issuance. The right situation, you know, comes up and that could help us get ahead of future Capital needs. But again, I think the reality is, you know, we don't need to do that this year, um, given our our, our funding plan. But um, you know, then that's even if we push through the top end of our investment volume guidance. So if something to monitor but but it's not a need

Works about the channel 1 from a stronger euro. Can you give a figure for how much of the guidance raised was due to that? And then just remind us what the AO sensitivity is to changes in the euro.

Sure. Yeah, I think, you know, as you're highlighting there, there's certainly some, uh, impacts on the Euro, but maybe it's, it's worth kind of just stepping back and thinking about how that's playing through for us. I think, overall, on a net basis just given how we hedge um both with the natural interest expense and property expenses nominated in Euro, um, and then the the cash flow program, the cash flow hedging program on top of that, we really do mitigate out any significant impact. So you know, over the first half of the year we always call it, a 10% change in the Euro from the start of the year. Um, it's probably only having between a 1 and 2 Cent net impact and you know that flows through various line items but um you know something pretty manageable and you know that goes in both directions I think to the extent the Euro uh declines relative to the dollar, we wouldn't expect a material impact in the back half of the Year either.

Okay, thank you.

Your next question comes from Anthony pallone with JP Morgan. Please stay your questions.

Uh, thanks. I think the only thing I'd left was, um, I may have missed this, but what were your acquisition and disposition cap rates for the quarter? And just the pipeline, what do those look like for the pipeline as well?

Yeah. Acquisitions for year to date, um, mid 7s. Call it 7.5 percent, and that's where we've been for a while now. It's where we.

Going to end it. Uh, last year, it's where we've been in the in the uh first half of the year and I would say it's roughly, you know, where kind of the average is across our our pipeline as well. And again that's reflective of maybe a little bit more stability. Um in the interest rate environment in terms of um dispositions you know, we noted we closed about

A little under 600 million dollars of dispositions year to date. Um, you know, the biggest piece of that was uh, 1 of the Self Storage portfolios has about 175 million dollars in total. Um, that was a sub 6% cap rate. We're not getting this specifics because we have other,

um, uh, portfolios in the market. In fact, we have, you know, 2 others that, you know, we think probably close this quarter. That's all part of the, the initial plan for the, for the first half of our storage that we've been talking about. Um, but you know, maybe the the the way to describe kind of dyspo cap rates is we do expect to achieve 100 basis points at least in in, probably closer to 150 basis points of spread between, where we're investing and what we'll sell this.

This year. So I think you can think about dispo cap rates, you know, approaching 6%. Um, you know, for the full year that that's probably a a, you know, decent assumption to use.

Okay, great. That's all I got.

Okay. Thanks. Tony.

Thank you. And before we take the next question, just a reminder to the audience to ask a question, press star 1 on your telephone keypad to withdraw, your question, press star, then the number 2. Once again to ask a question press star 1 on your telephone keypad,

And your next question comes from Jana Gallon with Bank of America. Please state your question.

Thank you. Uh, good morning and congrats on a great quarter. Just a question on the um, fixed in place. Rent bumps. I think you mentioned that the portfolio. Is it 2.1% and then then on the leasing to date, you mentioned the fixed escalators are 2.8. I was just curious, if this is due to more industrial being in that mix or our tenants. Now conversations you're having accepting these kind of higher escalators,

Yeah, it's probably it's probably a combination of the 2 Jana. Um, you know, we've talked before that, you know, we've gotten a little bit less, uh, inflation based increases in the new deals that we're doing. Um, but with that means, is we've been able to push the fixed increases a little bit higher. Um, so yeah. So year to date on new deals with fixed increases. I think the average fixed increase was 2.

8% on New Deals and, um, you know, again, I think that's reflective of of, um, you know where alternative, you know, lease bump structures could be with inflation. But I think it's also a reflection of the industrial deals. We're doing, um, you know, retail tends to be meaningfully lower. You know, probably, you know, 1 and a half to 2% per year and and depending on the the credit especially if you go investment grade, those tend to be, you know, flat to maybe 1% or 10% every 10 years.

Life's the least, and we think, you know, the mid-90s that we've been achieving as of late, that's probably one of the highest, if not the highest, and then at least after. So, um, so quite attractive, so,

Thank you and then maybe just following up on that. Can you talk a little bit about how you think about the developments?

Developments as in.

You're targeting there, and how that comp, you know, the trade-off between.

Um, sales lease backs on income producing and doing these, uh, built to suits.

Yeah. And and we do provide you some pretty good disclosure um in our sub uh capital investment projects is what we uh you know categorize it as and that includes build a suits expansions and redevelopments and it's something that we've been doing for a long time. I think historically they probably made up maybe 10 to 15% of annual deal volume and I think that we can ramp that up. Um you know, you may have noted this quarter, we committed to funding several new uh projects totaling about a hundred million dollars. That brings our total projects currently under construction to about 300 million. Um, those will deliver over the next, you know, call it 18 months or so and it with cap rates, you know, it does depend on the deal. Obviously, I would say on average, you probably see you know, 15 or or 25 to 50 basis points of premium for long-term build the suits. When you think about the expansions

Or redevelopments that we can do within our portfolio. It's probably meaningfully higher than that, in terms of the spread that we can generate, um, and that's something we want to ramp up. And we've we've built up a dedicated project management team in house. They have deep operational, real estate expertise. And, you know, that gives us a real competitive advantage and, um, you know, something that we can offer, you know, development services and solutions to our existing tenants and and and hopefully um you know ramp up deal volume there.

Great, thank you so much for the time.

And your next question comes from Jim Cameron with Evercore ISI. Please state your question.

Good morning. Thank you, really just building on that last theme, Jason and team. You know, the current Administration certainly seems to want to bring manufacturing to the US or this Pharmaceuticals Autos. Etc. And is that really, to really, to translate to any opportunity, particularly among your very manufacturing specific, uh, tenant base. Are they having more conviction in their conversations with you about expanding or, you know, putting Capital work and therefore need more space? Just curious at a high level.

Yeah. I mean it's anecdotal but I think there is some you know, truth behind that that we've we've heard, you know, more inbound conversations on build a suits. Um, you know, but also expansions and adding capacity to our existing management uh, or existing asset base. So that's, you know, certainly some some Tailwinds that, you know, we can foresee, um, how widespread or impactful it'll be it's kind of hard to tell. Um,

Yeah, these are long-term decisions that companies need to make and obviously you know there's been a lot of of um you know fits and starts and stops and in terms of where tariffs are going to land. But I I think long term I think that that you know, we would uh you know benefit uh within our industrial portfolio and especially the manufacturing side

That's great. Thank you for your time.

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

Thank you for your interest in WP Carey. If anyone has additional questions, please call Investor Relations directly at 212-491-1111. That concludes today's call, and you may now disconnect.

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