W P Carey at Citi’s Conference: Strategic Growth Plans

On Tuesday, 04 March 2025, W P Carey Inc (NYSE: WPC) presented a strategic roadmap at Citi’s 30th Annual Global Property CEO Conference 2025. CEO Jason Fox outlined a positive outlook for 2025, focusing on earnings growth and shareholder returns, while acknowledging the challenges of a transitional 2024. The company aims to enhance shareholder value through strategic divestitures and conservative financial planning.

Key Takeaways

• W P Carey anticipates high single to low double-digit shareholder returns in 2025.
• Plans to fund investments through non-core asset sales, avoiding equity raises.
• $800 million to $850 million expected from self-storage portfolio sales.
• Conservative credit loss guidance of $15 million to $20 million.
• Expansion opportunities in Europe with favorable borrowing conditions.

Financial Results

• AFFO Growth: Targeting mid-3% growth in 2025 after a transitional 2024.
• Total Shareholder Return: Expected to reach high single-digit to low double-digit percentages.
• Deal Volume: $1.6 billion in transactions at mid-7% cap rates for the year.
• Capital Projects: Over $100 million in projects set for delivery in 2025.
• Disposition Proceeds: Anticipated $800 million to $850 million from self-storage sales.

Operational Updates

• Portfolio Diversification: Focus on industrial properties, with two-thirds of the portfolio in warehouse and manufacturing.
• Self-Storage Divestiture: Plans to sell self-storage assets with $50 million to $55 million NOI, targeting low to mid-6% cap rates.
• Retail Investment: $200 million invested in Dollar General properties across 21 states.
• Tenant Management: Strategies in place to manage exposure to underperforming tenants like Hearthside and True Value.

Future Outlook

• Investment Funding: New investments in 2025 to be funded through asset sales, not equity raises.
• Europe Expansion: Increased activity expected in Europe, leveraging lower borrowing costs.
• Same-Store NOI Growth: Forecasted growth in the low to mid-twos, outperforming peers by 100 basis points.

Q&A Highlights

• Self-Storage Market: Interest expected from public REITs and private equity for self-storage sales.
• True Value Resolution: Agreement with Do It Best to lease six properties, with plans to sell three vacant assets.
• Helbig Exposure: Focus on reducing exposure through asset sales and re-tenanting.

Readers are encouraged to refer to the full transcript for a comprehensive understanding of W P Carey’s strategic plans and financial outlook.

Full transcript - Citi’s 30th Annual Global Property CEO Conference 2025:

Sumeet Srooz, Analyst, Citi Research: All right. Welcome to Citi’s twenty twenty five Global Property CEO Conference. I’m Sumeet Srooz of Citi Research. We’re pleased to have with us Jason Fox and, CEO of WP Carey. This session is for Citi clients only, and disclosures have been made available at the corporate access desk.

To ask a question, you can raise your hand or go to liveqa.com and enter code GPC25 to submit questions. Jason, I’m going to turn it over to you to introduce the company, your team, and provide any opening remarks, And then tell the audience the top reasons an investor should buy your stock today, and then we’ll go into some Q and A.

Jason Fox, CEO, WP Carey: Yes. Thanks. Thanks, Smedes, and thanks, Citi, for hosting us as always. With me today is Jeremiah Gregory, who is Head of Strategy and Capital Markets, and a member of our operating committee. And I’m also here with Peter Sands, who heads up Institutional Investor Relations.

So at W. P. Carey, we’re a diversified net lease REIT, diversified across property types with a focus on industrial, split between warehouse and manufacturing, as well as retail, both U. S. And European.

About close to two thirds of our portfolio at this point is industrial. We’re also diversified across geographies, about two thirds of our portfolio is in North America with the vast, vast majority of that being in The U. S. And the remainder spread across Northern And Western Europe. We were founded in 1973, so it’s been around for a little over fifty year.

Twenty dollars plus billion of assets. You want me to start with reasons to

Sumeet Srooz, Analyst, Citi Research: Well, yeah, why don’t you give us your sort of top reasons of why you think now would be a good time to buy the stock?

Jason Fox, CEO, WP Carey: Yes, sure. Number one, there’s an improved outlook for earnings growth, AFFO growth for us. 2024, we’ve talked about was we view as a transitional year or a year in which we reset our baseline coming off of a year in which we separated from office, completed office sales, as well as other, I would call, dilutive events such as the U Haul purchase option. Now that’s behind us, we’re poised for growth this year, kind of set guidance kind of in the mid-3s for growth when we add that to a dividend yield. We’re approaching that high single digit low double digit for total shareholder return, which we think is attractive to investors.

And that incorporates what we view, we can get more of the details, a appropriately conservative initial deal volume guidance, as well as a initially appropriately conservative credit loss assumption, both of which are big drivers. So that’s number one. Number two, we continue to find appealing opportunities to put capital to work. We had a very strong fourth quarter with cap rates kind of in the mid to low 7% s for the year. We transacted at 1,600,000,000 at mid 7% s cap rate.

Currently pipeline is we characterize as greater than $300,000,000 dollars with much of that we expect to close in and around the end of this quarter. We also have $100 plus million of capital projects underway that we delivered this year. So we view the $1,250,000,000 guidance number for deal volume as conservative given and again appropriately so given the uncertainty in the world. But we do think there’s appealing opportunities. And I think lastly, importantly, we can fund new investments in 2025 without the need to raise equity and happy to get into the details.

But we can get to or even through the top end of our guidance assuming just accretive non core asset sales. And importantly, we would expect to generate 100 plus basis points of spread between where we’re selling and what we’re acquiring, which helps drive our growth.

Sumeet Srooz, Analyst, Citi Research: Great. Okay. Thank you. So maybe we can just talk a little bit about that last point, the not really needing to rely on capital markets activity to fund the acquisitions outlook that you’ve outlined. And I think part of that is disposing of your operating platform, specifically in the self storage space.

In your guidance, I think you’ve talked about that this portfolio generates $70,000,000 to $75,000,000 of NOI. So maybe you could just talk a little bit about the process to sell, the gap between realizing proceeds and reinvesting those proceeds and just kind of maybe we can just talk about that in general for a little bit. And I know you have a few other operating assets, we can talk about those too, but I think the bulk of it is the self storage.

Jason Fox, CEO, WP Carey: Yes, the bulk is self storage. It’s around $50,000,000 to $55,000,000 of NOI expected for this year. And just to give a little bit of context, we own a number of operating properties as a result of some the mergers we previously did with managed funds CPA seventeen and eighteen, both of which had broader mandates and invested in operating properties and it’s mainly self storage. There’s also several student housing assets as well as a couple legacy hotel assets, which we can talk about. But the bulk of it is operating self storage and it’s something that we’ve talked about that we have willing to be patient with how we exit those properties.

We’ve always expressed that being a pure play net release is important to us and they weren’t long term holds. I think historically, we’ve moved some of the operating assets into a net lease category through net lease conversions with extra space where we put them under a net lease and they’re now our top tenant. I think this year, we’re more focused on leaning into asset sales mainly to fund our investment growth for the year. We do think that these will generate a lot of accretion for us. I think self storage historically and almost consistently has traded well inside of net lease and we still think that’s the case now.

I mean, our we haven’t marketed the properties. We’re assuming big round number of roughly 100 basis point spread between where we can redeploy capital. So call it low to mid six cap rate range is an expectation. And of course with storage and with many asset classes, there are two cap rates. There’s a buyer cap rate and a seller cap rate.

That’s a seller cap cap rate. I think buyer underwriting, once you reset for taxes and other moving parts, it’s probably a bit lower than that, but the important one that we focus on is the seller cap rate.

Sumeet Srooz, Analyst, Citi Research: So sorry, you’re saying do you think you could sell the portfolio to six cap?

Jason Fox, CEO, WP Carey: No. Low to mid 6% s, so somewhere in that neighborhood. Okay. I think the expectation is it’s a big portfolio of $50,000,000 to $55,000,000 We do have lots of alternatives. We do expect to sell it.

We think there is a lot of interested parties from public REITs to private players who have raised a bunch of capital recently. There hasn’t been a lot of self storage portfolios sold over the last couple of years. So we think there’s a lot of pent up demand for something this and we’ll monitor. And my guess is that it’s not sold in one large portfolio, maybe it’s two or three chunks, but we can be a bit opportunistic in how we approach it. And my expectation is over the next self storage operating space.

And that’s important to us to simplify our business. We’ve been on a journey over the last number of years to continue to simplify our business. And this is one further step, which we think is going to be well received by investors.

Sumeet Srooz, Analyst, Citi Research: And you said this self storage portfolio now generates maybe $50,000,000 to to $55,000,000 of NOI?

Jason Fox, CEO, WP Carey: That’s right.

Sumeet Srooz, Analyst, Citi Research: Okay. So you’re looking at kind of, call it, dollars 800,000,000 to $850,000,000 of gross proceeds

Jason Fox, CEO, WP Carey: on sale? Yes. In and around that neighborhood, correct. So, And again, that’s not all necessarily this year. I would say, We’re expecting second half of the year execution for this.

Some of that, if we do multiple portfolios, some of that could bleed over into the beginning of next year depending on our needs and what our alternatives are. We do have lots of alternatives apart from self storage, but that’s kind of the primary one that makes up maybe the bulk of the expected dispositions.

Sumeet Srooz, Analyst, Citi Research: And the I mean, I don’t cover that space, although I did for a while. And it’s, you know, it’s been having a lot of difficulties, kind of it did very well coming during and coming out of COVID, and it’s kind of continues to reset. So what’s the interest level from buyers? Are they just taking a longer term view or kind of what’s the you know, how do you think the sales process will go?

Jason Fox, CEO, WP Carey: Well, there’s a lot of platforms. So I think they’re dedicated self storage platforms. Clearly, the publics will be involved in this and we know them well and we don’t do you know there’ll be interest. But the private equity backed platforms as well, I mean, they haven’t had many opportunities to expand their platforms as well, I mean, they haven’t had many opportunities to expand their portfolios. So I think this is going to be a good one to do in scale.

It’s a good diversified portfolio, concentrations in some of the bigger states as you expect, California, Texas, Florida, Illinois, it’s, I think 70 plus odd assets. So we do think there’ll be a lot of interest and that’s what we’ve heard as a kind of a soft launch. My guess it will be in the market over the next month or so. And are they branded? They are.

They are. They’re managed, I would say, the vast majority are managed by Extra Space and CubeSmart.

Sumeet Srooz, Analyst, Citi Research: Okay. So they and they so branded under those names already? That’s correct. Okay. So presumably, there might be some interest from those guys.

And then, you know, I know it’s a smaller piece, but the student housing, and I think you have maybe four or five hotels. Could you just touch on maybe your thoughts on exiting from

Jason Fox, CEO, WP Carey: the Yes, it’s similar. It helps with the simplification strategy. Those asset classes, in particular student housing, those will trade well within inside of where we can reinvest into net lease. I think the student housing is it’s maybe $7,000,000 or $8,000,000 of NOI. So it all adds up, of course, but it’s not nearly the scale as the self storage.

So I think hotels are a little different. We have one operating asset, again, a legacy CPA 2018 asset, that recently had to go through a PIP, so this is the time to sell it. The other three assets are part of the Marriott Courtyard portfolio that we’ve sold. There’s 12 of those, we’ve sold nine of them. The remaining three are very high quality locations, one right on Newark Airport, 1 in Prime Irvine, California and another kind of Maine and Maine in San Diego.

Each of those we think have higher and better use to be redeveloped. I think the one in Newark perhaps we do because it’s likely to be industrial. The other two, we’ll go through entitlements to optimize value and then we’d likely sell to developer, but there’s a lot of kind of upside opportunity in those. But in the meantime, they’re generating very good and consistent NOI, so we can hold them through that entitlement process, but ultimately those will be sold, if not this year, likely over the next year or two beyond.

Sumeet Srooz, Analyst, Citi Research: What sort of proceeds

Jason Fox, CEO, WP Carey: do you think they could bring? So those in total probably have around $10,000,000 of NOI. So I think there’s a range and I don’t think that we’re prepared yet to give an indication of what that is. But again, another chunk that’s probably in the size range of the student housing.

Sumeet Srooz, Analyst, Citi Research: Okay.

Jason Fox, CEO, WP Carey: And then just to be clear, I think beyond that, there’s other sources of We’ve talked probably often about our stake in Lineage, the public company. That’s come down, of course, as their stock prices come down, but it’s still a sizable investment in and around maybe slightly below $300,000,000 now. That’s going to be very accretive capital to reinvest. It’s currently paying a dividend yield inside of 4%. So reinvesting it into the 7% s in net lease is going to be highly accretive.

We’ve also talked about a $260,000,000 construction loan on a project that we backed in Las Vegas that’s been very, very successful. It’s almost 100% leased up. That loan is bearing interest at 6%. So at the time we source that in 2021 when we were investing at 5% net lease yields that looked attractive now. That’s going to be attractive capital to get back and reinvest at a higher spread.

And we think that’s probably, if not this year, next year, but another sizable piece of capital. And then of course, we always have the option to look into equity. I think our stock has rebounded. We think it’s getting to more attractive levels. But I think our position and our assumption for this year right now is that we won’t need to raise equity, but it’s always an option, and it’s a good thing to have that flexibility of a number of different sources to fund investments.

Sumeet Srooz, Analyst, Citi Research: Yes. I mean, between just the stuff that you just delineated, I mean, that’s getting you, I mean, well over $1,000,000,000 So you’ve just kind of satisfied the acquisition guidance that you’ve laid out for this year. I know some of this is going to bleed into next year, but Yes.

Jason Fox, CEO, WP Carey: And on top of that, we generate, call it, roughly $250,000,000 of free cash flow. We have a $2,000,000,000 credit facility that is largely undrawn at this point in time. So lots of liquidity. I think we’re well within our target ranges for leverage. So there’s a lot of flexibility on how we can operate our business this year and going forward and we like the position we’re in.

Sumeet Srooz, Analyst, Citi Research: I just wanted to go back just a little bit. So two thirds of your asset class, you said it’s in warehouse and manufacturing right now. Just with what’s going on with the broader tariffs that have been announced, concerns over the retaliatory tariffs, etcetera. Maybe how are you thinking about how those warehouses and manufacturing facilities are going to hold up in the current environment? I realize you’re not operating them, you’re collecting rents, so you’re kind of the secondary person there, but and more of a safety spot, but kind of what do you think what are you kind of expecting?

Jason Fox, CEO, WP Carey: Yes. Look, I think that what we own in manufacturing and warehouses, we think their tariffs could provide tailwinds for domestic manufacturers and we certainly have a very large installed base within our portfolio. We think that’s a likely tailwind, if anything. I think there’s balances in terms of the uncertainty and perhaps the impact that we may see on margins and consumer demand. But by and large, I think that anything that is going to drive near shoring or on shoring, we think we’re going to be a beneficiary of that.

And we’ve seen anecdotes within our portfolio, within our tenant base, where we’ve had inquiries and we’ve also had some activity picking up on expansions within our portfolio, as well as conversations about build to suits and in fact a couple of new investments have been companies that in one instance, a Canadian company that manufacture a lot of their goods in Asia. We have a newly purchased warehouse that they’re going to convert into a battery manufacturer. And as part of that likely have $500,000,000 plus of investment into our facilities. So I think there’s a number of examples that suggest that tariffs from a portfolio standpoint could provide a tailwind. I think from a new investment standpoint, obviously, there’s risks and there’s needs to be focused diligent on the credit side and think about who winners and losers may be.

And it’s very early days. I mean, we’re effectively day one today in tariffs. Yes. But in our view, historically, uncertainty and volatility can create opportunity, especially when you think about how a sale leaseback fits into the financing landscape.

Sumeet Srooz, Analyst, Citi Research: You mentioned on your fourth quarter call a little more of an emphasis on retail investing. You bought, you can remind us, at least one or maybe more Dollar General portfolios, and I think that bleeds over into the first quarter. Maybe just talk about the cap rates you’re paying for those, what you like about that portfolio, comfort with getting more exposure to Dollar General? Yes.

Jason Fox, CEO, WP Carey: I mean, we completed it was about $200,000,000 of Dollar General’s in Q4, over 100 properties and it could spread across 21 states. So what’s pretty typical of a Dollar General portfolio? I think it was four separate transactions, four separate sellers, and I think it’s consistent with what we’ve talked about. We’ve discussed how we believe U. S.

Retail can be a source of incremental deal volume. I think to be clear, because we’ve had some questions around this, this is not a pivot away from what we’ve done in industrial to U. S. Retail. We’re going to remain very active and I would expect that the majority of what we buy is still industrial.

This is going to be incremental, what we’re doing here and it’s ramping up. I think in Dollar General, I think we view and I think that the market generally agrees that they’re the strongest of the dollar store operators. The sector was somewhat out of favor for much of 2024. There’s obviously headwinds to their equity. I don’t think there’s a lot of concern certainly not near medium term, maybe not even long term about their ability to continue to pay rent.

They’re still a big company, profitable and highly Uh-huh. Uh-huh. Uh-huh. Uh-huh. Uh-huh.

Uh-huh. Uh-huh. Uh-huh. Uh-huh. Uh-huh.

Uh-huh. Incremental market share for us to contribute several hundred, $300,000,000 4 hundred million dollars of potential deal volume, maybe more over time to our pipeline.

Sumeet Srooz, Analyst, Citi Research: I’m just kind of interested, you mentioned car washes, it’s obviously, it’s been a big topic of late because it is a big, tenant for a lot of other net lease companies, generally the smaller ones. But, why wouldn’t you wanna have more exposure there? Just anything you don’t like about it, or it’s just not in your wheelhouse of where you do your Yeah.

Jason Fox, CEO, WP Carey: I mean, it’s look. I think right now, we’re probably a little bit under 1%. We don’t have a lot of exposure. I think for the right opportunity, we’d be open to that. I think the industry, we’re broadly right now, has seen some headwinds.

Obviously, there is the recent bankruptcy. Yep. So So I think we’re just being cautious, but I think that we could also be opportunistic, and I wouldn’t I certainly wouldn’t rule it out. Okay.

Sumeet Srooz, Analyst, Citi Research: Maybe just let’s switch to, you know, always there’s always the topic of watch lists and credit loss. What what remind us what’s embedded into your guidance in terms of credit loss, and maybe how does that compare to what you’ve realized in ’24 and kind of how it’s been historically?

Jason Fox, CEO, WP Carey: Yeah. Sure. So we, in our guidance that we issued, it assumes $15,000,000 to $20,000,000 of credit loss. And like deal volume, I think I’ve I’ve characterized that as, appropriately conservative given the uncertainty in the environment right now. That’s both a, you know, a top down, you know, looking at the kind of the the the views, from a top down perspective and and maybe a lot of the uncertainty that we can, you know, foresee coming and and and staying for some period of time.

But it also is informed by a lot of bottoms up analysis as well. And, and and and we can talk about some of those details. I think What is it sorry.

Sumeet Srooz, Analyst, Citi Research: So 15 to $20,000,000, just what does that translate to into bips? I mean, normally, people say, you know, we’ve embedded 50 bips of credit loss or whatever. So what is that?

Jason Fox, CEO, WP Carey: Yeah. So at the midpoint, it’s approximately a 25 basis points, which to your question is is meaningfully higher than where we’ve been historically, both under assumptions, but also realized credit loss. We’ve probably been more in the 50 to 75 basis point range. And so, part of the philosophy and the approach to guidance this year is to include, again, what we view as appropriately conservative assumptions both on deal volume and credit loss, certainly relative to historical numbers that’s the case. So we can have, you know, you know, some events within our portfolio, that can get absorbed by that and still maintain what we view as, you know, mid threes, if not higher, earnings growth.

And to the extent the world proves to be more benign, there there could be upside as well for us then.

Sumeet Srooz, Analyst, Citi Research: So it seems like backing up from a minute coming into 02/2024. Obviously, you had the sale of your office portfolio. So we all, you know, there’s kind of well communicated reset in terms of your earnings, and that’s about when I actually started covering your company. So I kind of missed that piece. But it seemed like, you know, as I kind of started learning the space, the last thing people wanna have is surprises.

And I feel like last year, your company was a little bit plagued by surprises. You know? It was Hellwig. It was a couple of other things, you know, that kind of worked through. And it seems like those are kind of behind you now or well identified in terms of factoring into your earnings.

And you’ve talked about potential upside to acquisitions. You have a lot of credit loss baked in relative to peers, and you have 3% earnings growth, and it seems like there’s upside to that. So you’re kind of trying to take an overly cautious stance so that you can provide significant upside as we move through the year? Or kind of how are you thinking about guidance now as to as as opposed to maybe how you’d provided guidance previously? Yeah.

I mean,

Jason Fox, CEO, WP Carey: I think that’s right how you described it. I think we’re we’re starting the year off with what again, I think what we’ve heard from investors is an attractive starting point for earnings growth in a 3.6% at the midpoint, you know, with conservative consumption conservative assumptions driving that, you know, is a good place to start the year. But look, there’s a lot of uncertainty. I mean, I think there’s reasons to stay conservative on on these assumptions. And and I say conservative, it’s relative to what we’ve done historically.

I mean, on the credit front, I mean, we we talk about, you know, Helbig, True Value, and Hearthside. I think the good news is that, you know, Hearthside is largely unchanged. We expect them to emerge from bankruptcy. We expect to continue to get paid a % rent, they’ll affirm all of our all of our leases, and emerge with a stronger balance sheet. And and that’s the expectation.

Big company, important company, and we have a lot of critical facilities that they need to operate. True Value was another company that Sorry.

Sumeet Srooz, Analyst, Citi Research: Can I so on Hearth’s side, just I’m just just wondering, when so when they come out and they’re kind of reset and they’re do you keep them on the watch list or you take them off at that point?

Jason Fox, CEO, WP Carey: Because I think we need to continually evaluate and see what the balance sheet looks like, see what, you know, the operating environment they’re in. You know, there’s still headwinds certainly to a lot of consumer, you know, driven products. But, yeah, I I think they will continue to monitor like we do all our tenants, and that would include our side.

Sumeet Srooz, Analyst, Citi Research: K. So sorry. I didn’t mean to interrupt you. You were gonna touch on True Valley. Yeah.

Jason Fox, CEO, WP Carey: So True Valley is another one that’s that’s attracted headlines when we learn to their bankruptcy. And and I think that, you know, you characterized some of these things as surprises. I mean, that one was, you know, they were kinda limping along, but, you know, we think they would have continued to do that for quite some time. The sale to do it best, I think, you know, perhaps was a bit of a catalyst to, you know, to push them through bankruptcy to help facilitate that sale. So that has taken some attention.

I mean, the the outcome there, we think, is, you know, is is has been well received. At this point, we view it no longer a credit concern. We have an agreement in place with Do It Best still subject to documentation. And I can, you know, recap it really quickly. There’s seven sorry.

There’s nine properties that we had leased to true value, eight warehouses and one paint manufacturing facility. Do it best is going to, operate and lease six of those nine on a weighted average lease term, call it seven years, at 100% of the rents. And, you know, those are stable assets that that that that we think are are, you know, are well placed. The other three assets, they’re gonna lease through the June of this year, at which point, you know, we’ll you know, we’re running a dual process right now of leasing and sale. I think we’re likely to lean towards the sales to move, you know, the vacancy and carrying costs off our, out of our portfolio sooner than later.

It’s all baked into our guidance number for this year. I think, the expectation is we’d probably sell those in August or September and and, you know, then we’ll reinvest those proceeds, you know, back into into our typical net lease.

Sumeet Srooz, Analyst, Citi Research: So that’s effective. Would you expect from those three? You

Jason Fox, CEO, WP Carey: know, we don’t have a number yet. I think we’re still in in in the process right now. I think it’s maybe, roughly $4,000,000 of ABR associated with those three assets, half of which we’ll receive for this year. And then and then, obviously, we’ll we’ll sell those for, you know, vacant assets. They’re not gonna sell as well as they would if they’re occupied, but but we think there’s a good market for those.

That’s effectively been resolved, and we think that’s helpful to have, you know, full resolution on there. And, you know, based on conversations we have with investors, I think that that’s, you know, a a good outcome, and and and we would agree with that. I think, lastly, Helbig is one that’s been, you know, obviously, front and center for us and one that we’ve talked about quite a bit. And and that’s one where, you know, I would say, you know, we talked about this on our earnings call quite a bit. The, you know, the German economy is still and and those that don’t know, Helbig is a a do it yourself retailer in Germany.

So there’s sort

Sumeet Srooz, Analyst, Citi Research: of like a Hobby Lobby or something?

Jason Fox, CEO, WP Carey: More like a Lowe’s or a Home Depot. Oh, gotcha. Okay. So that kind of The, you know, the operating environment there hasn’t improved. I think Helvig’s operations haven’t improved either.

You know, the consumer is still struggling in in Germany, and and DIY is clearly a consumer driven driven, industry. So, you know, we still focus on them. We we get regular updates, and, you know, we’re focused on their liquidity. Their lenders have been supportive, and we expect they’ll continue to be. But from a landlord’s perspective, I think we’re focused on reducing our exposure to them, and we can do that through, you know, really two levers we can pull.

One is we we can sell some assets, and we’re in the process of selling a couple assets at what I would expect, you know, to be to to be, you know, good outcomes for us. I think where we can move the needle a little bit more is to take back some of these stores and re tenant them with, you know, alternative German DIY retailers. Germany’s a bit different than The US. You have a duopoly in The US with Home Depot and Lowe’s. In Germany, there are, 10 operators, and so we do have other options.

I think we’ve talked publicly about being in dialogue and being proactive about what those options are. And so I think there’s a there’s an expectation, and and we have been dialoguing with them and targeting nine underperforming stores. We can help them with their liquidity, and we can help ourselves by putting in, you know, stronger operators and helping decrease our exposure. I think there’s a pathway to get them out of our top 10, you know, maybe sometime this year. And we think that’s gonna be a positive outcome, and we can keep on whittling away at that exposure.

But, you know, I think the the the maybe the message there, they’re still struggling. But I think there’s a reason why we have a 25 or I’m sorry, a 15 to $20,000,000 credit loss assumption. It certainly could cover, you know, a range of outcomes, you know, within Helvig. And, you know, when you think about putting in alternative operators, there’s likely to be some downtime in in free rent periods. And I think that is is, you know, something that the $15,000,000 to $20,000,000 certainly could accommodate.

Sumeet Srooz, Analyst, Citi Research: You’re incorporating, like, a range of particular sub outcomes there?

Jason Fox, CEO, WP Carey: Yeah. It doesn’t cover every outcome imaginable. They’re current on rent. If they stop paying rent, you know, tomorrow, I’m not gonna cover that, but they are current on rent. And, again, there’s a pathway to continue to reduce our exposure there.

Sumeet Srooz, Analyst, Citi Research: Okay. And maybe I know we’re coming towards the end, but could you just talk broadly about kind of the landscape of investing in The US versus in Europe right now? You obviously have active platforms in both. So

Jason Fox, CEO, WP Carey: Yeah. Sure. I mean, in in 2024, we did about 75% of our investments in The US, and, you know, Europe was quite choppy. I mean, it had a very slow summer. I think that we’re seeing some some, increased activity beginning of this year, while it was 25% of our investments last year.

It’s currently, call it, one third to one half of our pipeline. I think importantly, and this is something that I think is underappreciated about W. P. Carey, is, you know, we can borrow substantially cheaper in euros. In fact, our cost to issue, euro bonds is about a 50 basis points cheaper than where we can issue US bonds.

So we can generate wider spreads over there. I think that gives us an opportunity to lean into pricing a little bit. We are seeing increased activity, so I think we’re optimistic that, you know, Europe will play a bigger part this year. You know, it’s hard to predict exactly what that’ll look like, but we sit here, you know, at the March. We don’t have visibility into, you know, the second half of the year.

I mean, we typically have kind of ninety days of visibility into a pipeline. But where we sit right now, I think there’s reason to think that there’s going to be a little bit more activity, with really interesting spread levels in in Europe.

Sumeet Srooz, Analyst, Citi Research: And you have a don’t you have a European euro term loan? I mean, do you either this year or maybe it’s next year that you’ll need

Jason Fox, CEO, WP Carey: to recap? Jeremy, do you wanna talk kinda balance you a little bit?

Jeremiah Gregory, Head of Strategy and Capital Markets, WP Carey: Yeah. There’s a term loan that’s coming due next year. We’re already working on a recast there. So, would expect to maybe be done with that even by the next earnings call. You know, pretty typical just bank debt refinancing.

We have a a large diverse bank group. They continue to be very supportive, kind of push that out and and just, you know, push out the maturity basically with very similar structure the same way I think most REITs do. You know, that loan, when we put it in place, we swapped it. I think it was, at the time, it was a rate when we swapped it probably in the low fours. As the, you know, the swap burned off recently, it’s currently floating, so it’s it’s it’s lower now.

Kind of the the spot rate today is probably, in the low to mid threes. So the new term loan, you know, we’ll we’ll consider on on whether or not we let that float or we swap it. To the extent we do swap it, there’s probably room for the that kind of fixed rate to be even lower, maybe call it around 3%.

Sumeet Srooz, Analyst, Citi Research: Okay. Okay. And, I mean, anything you’re seeing on the competitive landscape in Europe in terms of either, US folks coming in or, other local players that are being more or less aggressive? Yeah.

Jason Fox, CEO, WP Carey: I mean, the reason why we can get better pricing here, why it’s attractive is there is much less competition there. There’s no built out kind of, really pan European public net lease REIT. We’ll see realty income, you know, clearly from time to time over there, and there are some, you know, domestic or local, competitors, you know, mainly by country. But, it’s it’s generally less competitive than what we have seen historically and what we currently see in The US.

Sumeet Srooz, Analyst, Citi Research: And as we come into the last forty five seconds or so, for 2026, what do you think same store NOI growth can be for the net lease industry overall in The US? Yeah. We’ve been a market leader. We’ve been

Jason Fox, CEO, WP Carey: kind of, I think our expectations for same store on a contractual basis, low to mid twos, we think will be, you know, probably at least a hundred basis points better than our peers. So call it, you know, kind of one to 2% on, on same store for the peers. And when you factor in credit loss, vacancy, you know, releasing, you know, which we disclose, I think a lot of our peers don’t, and maybe there’s a wider spread there.

Sumeet Srooz, Analyst, Citi Research: Okay. And more, the same, or fewer net lease companies in the space a year from now? Yeah.

Jason Fox, CEO, WP Carey: I mean, look, there’s a lot of net lease companies, a lot of them, you know, 20 to 25. It seems like there should be fewer eventually. I’m not so sure there’s a catalyst this year to see, some m and a. Maybe in the second half of the year, you’ll see fewer.

Sumeet Srooz, Analyst, Citi Research: Okay.

Jason Fox, CEO, WP Carey: Thank you. Appreciate your work.

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