W.P. Carey, Inc. Q3 FY2024 earnings call

• Transaction Environment: Since summer, transaction activity has increased, on track for full-year investment volume. Pipeline over $500 million, with focus on industrial and retail. Year-to-date closed investments have a 7.6% weighted average going-in cap rate.
• Tenant Credit: Focus on top 25 tenants like Hellweg, Hearthside, and True Value. Preliminary view on 2025 rent loss from credit events net of recoveries is approximately 100 basis points (excluding True Value uncertainty).
• Capital Needs: Sufficient liquidity with over $800 million cash, $2 billion revolver minimally drawn, no need to raise equity to fund pipeline.
• 2024 Performance: Strong finish in investment volume, sector-leading rent growth, full year rent from Samsung warehouse in Chicago, full year of Lineage dividends.

The third quarter AFFO totaled $1.18 per share. Full-year AFFO guidance is narrowed to between $4.65 and $4.71. Year-to-date deal volume is approximately $1 billion, on track for the midpoint of the full-year investment volume guidance of $1.5 billion. Retail currently makes up about 25% of the portfolio. Contractual same-store rent growth for the third quarter was 2.8% year-over-year, with comprehensive same-store rent growth 20 basis points year-over-year. Overall re-leasing spreads trended positively during the third quarter, with re-leasing activity impacting 2.9% of ABR.

• AFFO: Full-year AFFO guidance narrowed to $4.65-$4.71.
• Investment Volume: Expect to be in the top half of $1.25 billion to $1.75 billion range.
• Rent Growth: Contractual same-store rent growth expected to be 2.8% for the full year.
• Dispositions: Full-year dispositions expected to total between $1.3 billion and $1.4 billion.

• Tenant Credit Issues: Potential rent loss from credit events, uncertainty regarding True Value's bankruptcy outcome.
• Market Competition: Incremental increase in competition, with sellers expecting lower rates affecting cap rates.

Q: Michael Goldsmith on retail mix and framework.

A: Jason Fox discusses retail making up ~25% of the portfolio, pipeline in U.S. retail, plans to lean in with dedicated team and looking at various retail property types.

Q: Mitch Germain on retail deals and credit reserve.

A: Jason Fox talks about retail deals being portfolios, credit reserve estimate of 100 basis points for 2025 rent loss excluding True Value.

Q: John Kilichowski on storage assets ABR and escalators.

A: Jason Fox discusses escalators in line with portfolio, ABR set for earnings neutrality with consideration of CapEx and percentage rent.