W. P. Carey at Nareit REITweek: Strategic Growth and Risk Management

On Wednesday, June 4, 2025, W. P. Carey Inc. (NYSE:WPC) participated in the Nareit REITweek: 2025 Investor Conference. The company highlighted its strategic growth initiatives and robust financial health, while also addressing potential risks. CEO Jason Fox and Head of Capital Markets Jeremiah Gregory discussed the company’s diversified portfolio, investment strategies, and plans to leverage sale-leaseback opportunities, all while maintaining a strong financial position.

Key Takeaways

• W. P. Carey is the second-largest net lease REIT with a $14 billion market cap.
• The company plans to fund investments through asset sales without accessing capital markets.
• Investment targets include mid-7% cap rate deals, with a focus on sale-leaseback transactions.
• Weighted average cost of debt is around 3%, among the lowest in the sector.
• The company is on track to meet its $1 billion to $1.5 billion investment guidance.

Financial Results

• Investment Activity:

- $570 million in deals completed year-to-date.

- Targeting initial cash yields in the mid-7% range.

- Construction projects worth $120 million expected to deliver this year.

• Rental Escalators & Returns:

- Fixed rent increases in the mid to high 2% range.

- Unlevered IRR through lease life is around 9%.

- "GAAP cap rate" (including inflation) exceeds 9%.

• Cost of Capital:

- Weighted average cost of debt is approximately 3%.

- Euro debt is 100 to 200 basis points cheaper than U.S. debt.

- New deals funded at mid-5% in the U.S. and closer to 4% in Europe.

Operational Updates

• Portfolio Diversification:

- Two-thirds of the portfolio in North America, one-third in Europe.

- Diversified by tenant, industry, property type, and geography.

• Investment Strategy:

- Focus on sale-leaseback transactions and build-to-suit leases.

- Targeting industrial, warehouse, and retail properties.

- Typical lease terms range from 15 to 25 years.

• Geographic Focus:

- Shift towards European investments, with up to two-thirds of the pipeline in Europe.

- European team based in Amsterdam and London.

Future Outlook

• Disposition and Capital Recycling:

- Guidance for $500 million to $1 billion in asset sales.

- Sale of non-core assets, mainly self-storage, to fund new investments.

- Construction loan repayment of $260 million expected this year.

Tenant Updates

• Hearth: Continues to pay 100% of rents post-bankruptcy.
• True Value: Restructured with Do Best, maintaining 100% rent payments on key warehouses.
• Helveg: Ongoing asset sales and retenanting efforts to mitigate financial struggles.

In conclusion, W. P. Carey remains committed to strategic growth and risk management. For further details, readers are encouraged to refer to the full transcript.

Full transcript - Nareit REITweek: 2025 Investor Conference:

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Well, good morning all. Welcome to the W. P. Carey general session. I’m Jim Cameron with Evercore ISI and I’m pleased to have the opportunity to moderate today’s general session for W.

P. Carey. Just make sure I’m sure they’ll introduce themselves and tell you a little bit more about the preamble of the company, but to my immediate left is Jason Fox, CEO of W. P. Carey and to his left is Jeremiah Gregory, Head of Capital Markets and Strategy for the company.

So maybe, I don’t Jason, do you want to give a quick overview of Carey and then we can into Q and A and obviously if you have questions, please come to one of the mics and we invite your participation.

Jason Fox, CEO, W. P. Carey: Yes. Yes, sure. And thanks, Jim, for moderating today and thank you all for joining us this morning. Hopefully, many or maybe all of you know a little bit about W. P.

Carey. We’re the second largest net lease REIT, ranking in the top 25 of all REITs in the RMZ by market cap. Our current market cap is about $14,000,000,000 with the enterprise value of about $22,000,000,000 We’ve been investing in net lease for over fifty years at this point in time, founded back in 1973, and we’ve been investing in Europe now for over twenty five years as well. We primarily invest in single tenant net lease properties, industrial and warehouse as well as retail properties. These are all triple net lease to a variety of tenants in a variety of industries with a target for very long term leases.

We do have a diversified approach, which is a bit unique to us. This is by tenant, by industry, property type and geography, as I mentioned. And this does offer good downside protection that’s proven out over many cycles over the last fifty plus years. But it also provides a wide funnel of investment opportunities from which we can grow. As I mentioned, we’re in both The U.

S. And Europe. About two thirds of our portfolio is in North America with the vast majority of that in The U. S. And the remaining one third is in Europe.

This is predominantly in the developed countries in Northern And Western Europe. We feel we offer investors a unique combination of both growth and downside protection. And I know we’ll get into this some with Jim, but our AFFO growth comes from really two drivers. And this is also a bit unique given the percentage of our growth that can come from same store bumps. And obviously, as a net lease REIT, we also drive growth through spread investing, investing externally.

And all this is supported by an investment grade balance sheet. We’re rated BBB plus by Moody’s, DAA one on stable outlook from S and P, well laddered debt maturities with our next bonds not due until 2026. We’ve taken care of maturities this year. And then importantly, and something that we I’m sure we’ll talk about and emphasized on recent calls, we do not need to access any capital markets this year to fund our investment program. We have a big non core portfolio of assets that we plan to sell this year.

It’s predominantly operating self storage, which is not core to our Net Lease platform. So let me pause there, Jim, let you kind of dig into some of the details.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Great. Well, thank you for the overview. And maybe going back, Jason, you noticed off your diversified global footprint and you have a pretty broad investment appetite. Maybe you could just spend a little time telling us where you are for Cary in terms of your pace this year and where you’re seeing the opportunities and perhaps the type of returns you’re seeing on those various buckets.

Jason Fox, CEO, W. P. Carey: Yeah, I mean the investment market is quite strong right now for us. I think that there’s been expectations as we’ve come into this year and into the first quarter that tariffs could have an impact on investment activity. I still think that’s possible. There’s certainly the potential that the uncertainty around tariffs could slow things down. But as of now, we’ve seen very little impact on deal activity.

In fact, we feel things are accelerating as we get into the summer. A lot of that is driven by companies’ needs for sale leasebacks, and we can talk about some of that as well. We are targeting deals in terms of pricing that you asked about across the 7s, relatively wide range, but we do have a diversified approach. Generally speaking, we expect to be in the mid-7s on an average on a cap rate basis, which is roughly where we were last year. It’s where we are year to date.

It’s also roughly where our pipeline is. So despite the uncertainty in the world and a little bit of volatility in the bond markets, we’ve seen some stability on cap rates, which does help deal activity for sure.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: And what would that translate to? I know you put out a range of guidance for your anticipated investment for the year, but how is that trending? And if you have any updates there, it might be helpful for the audience.

Jason Fox, CEO, W. P. Carey: Yes, sure. So as of our last earnings call, we had announced $450,000,000 of deals done year to date, and that was through the April. On top of that, we also have a little over $100,000,000 1 hundred and 20 million dollars of what we call construction and process that will deliver this year. And once it delivers and begins generating rent, we’ll count that towards our deal volume. So in total, have visibility at this point in the year into $570,000,000 of deal volume.

That’s against a guidance initial guidance to start the year between 1,000,000,000 and $1,500,000,000 So we’re trending quite well. If you look at annualizing the year to date components, we’re probably certainly in the top half of our guidance range, perhaps even at the top of the range. I think there’s reason to be optimistic that if we continue to see activity at levels that we’re currently experiencing, I think there’s a good chance that we can be even above our range, and we’ll talk about that as we get closer to our next earnings call at the July, we’ll

Jeremiah Gregory, Head of Capital Markets and Strategy, W. P. Carey: look at that more closely.

Jason Fox, CEO, W. P. Carey: But we like the activity levels and we think that’s going to help drive the growth this year.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Great. And one point you made was you’re targeting initial that’s initial cash yields in the mid-70s. This call for poops and giggles, with your escalators on your long term leases, what does that translate to in terms of a GAAP or average return?

Jason Fox, CEO, W. P. Carey: Yes, it’s a good question and one that every opportunity I like to emphasize, because I think we’re quite unique in the net lease space given the size of the bumps that we have built within our portfolio, the contractual increases that are embedded into all of our leases. When you factor in our going in cap rates in the mid-7s plus bumps that tend to be in the mid to high 2s, and in many cases, in the current environment, above 3%, that’s on the fixed side. We’re also getting still substantial I would say, majority of what we’re doing in Europe are CPI based increases. So when you factor all that in, we look at it as an unlevered IRR or an average yield through the life of the leases in the nines. So quite substantial.

When we think about spreads, we look at both year one accretion, but it’s also very important that we think about what these average yields over the life of the lease are compared to cost of capital or how we’re funding deals. And this is important. Mean, we see, you know, if you want to compare it to, you know, kind of across the space, can think of this as a bit of a GAAP cap rate. So our GAAP cap rate, not technically GAAP because inflation is treated differently under GAAP, but effectively GAAP cap rate is something north of 9%, which is quite substantial. And that’s what helped drives the internal growth that I mentioned in the very beginning.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: All right. And maybe if we put Jeremiah on the spot, but you just mentioned also your cost of capital, thinking about how you can borrow in Europe as well as in The U. S. And then obviously we can kind of all do the math and the implied cap rate of the equity, but your implied equity for our modeling is below the mid seven, so that’s accretive, but maybe a little more amplification on the debt side too, because I think that’s a little unique for Kerry in terms of their flexibility and access to debt. Yeah, I

Jeremiah Gregory, Head of Capital Markets and Strategy, W. P. Carey: mean we invest in both The U. S. And Europe, and accordingly we’ve funded that with bonds in both The U. S. And Europe.

And so we do overweight euro bonds in our capital structure, which is relatively consistent with what other international REITs have been doing. So even though about a third of our investments in Europe is probably more like half of our debt. And euro debt has, for the most part, been 100 to 200 basis points cheaper than U. S. Debt.

So the impact that that’s had, if you look at our weighted average cost of debt, it’s right around 3%. We think that’s the lowest or certainly one of the lowest in the entire net lease sector on a blended basis. And if you look at what we could do new deals on, we could do maybe mid-5s in The U. S, but it’s probably closer to 4% in Europe right now. And so even funding new deals, you can see how that kind of debt average blends us down to a cheaper cost of debt than if we were just funding in The U.

S.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Right.

Jason Fox, CEO, W. P. Carey: And it’s an important point to note, the advantages we have to invest in multiple markets. This past year, there’s a lot more activity in The U. S. I think Europe is still recovering from a lot of the volatility. Going back to 2021 when rates were effectively zero and they rose even more sharply than they did in The U.

S. Bid ask spreads had been wide for buyers and sellers on the things that we’ve been looking at in Europe for probably the last couple of years, and Europe has been underweighted. And that’s been the case to start the year. About 80% of our deals to start the year have been in The U. S.

Or North America and 20% in Europe. But as we look forward to our pipeline, we’re starting to see a lot more activity in Europe. I’d say the pipeline, depending on how far out we go, we’re seeing as much you know, at least 50%, maybe as much as two thirds of our portfolio, or of our pipeline right now is in Europe. See how that plays out, I think that’s, you know, it’s interesting to see, especially since when you think mentioned about how cheaply we can borrow in euros relative to U. S.

Dollars, we’re generating wider spreads. Cap rates in Europe, going in cap rates are roughly in line with what we’re seeing in The U. S, maybe a little bit inside depending on the market. Again, it’s a wide range given the number of countries we’re investing in. But our cost to borrow is probably 150 basis points inside of where we can borrow in U.

S. Dollars, which means we’re generating meaningful spreads over there. And as someone who’s been investing in Europe for the past twenty five years, we have a real distinctive advantage. We have a team of 50 people on the ground in Amsterdam that run our operations, so we have a real platform there. Tax, accounting, cash management, compliance, asset management, all the functions that you would typically see and read.

We have on the ground in Europe, staffed by Europeans, the countries, the cultures, the markets, and that’s important. And then in London, have our investments team closer to the capital markets, which are going to be more prominent in London in sourcing deals. They too are staffed by Europeans and speak probably a dozen languages amongst the group that is a big advantage for us given how long we’ve been there.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Right. And we’ve touched upon it in both your investing and then the organic growth, can you just provide just a little more clarity on what are your representative escalators per your because you really have two main themes, industrialmanufacturing assets and that’s about 60% of the assets, if I’m not mistaken, another 20% is retail. How are those organic pro escalators compared, just to give folks a general sense? And you’re probably going to sort of invest in those ratios prospectively, so Yeah.

Jason Fox, CEO, W. P. Carey: Okay. Yeah. So I mean historically, we’ve always experienced higher bumps in our deals. I think there’s a good reason for that. We source most of our transactions through sale leasebacks, which means that we can kind of write the terms of the lease, can add downside protections in there, we can pick cherry pick assets within a portfolio, we can structure with master leases, all these things have great benefits for downside protection.

On the growth side, we can dictate the type of bumps we want to have. It’s part of the broader economics, so you might have a little bit of a lower going in cap rate in exchange for higher bumps. But that’s important to us that we continue to have growth within the portfolio so that we’re a little bit less reliant on external growth, something that we don’t always control given the volatility in the transaction activity. So historically, we’ve probably been in the low 2s. More recently, over the last three or four years since inflation has ticked up, we’ve seen an increase in the types of bumps that we can negotiate when we’re completing sale leasebacks.

A lot of that is clearly driven by inflation. We do have inflation increases in The U. S. They’re more difficult to get now, as you would expect. But instead of getting inflation, we’re able to negotiate higher fixed increases.

Historically, was in the 2% to 2.5% per year range. Over the last couple of years, it’s been more in the 2.5 to 3.5% range with the average fixed bumps over the last couple of years on new deals around 3%. So that really drives these average yields growth over the long term. I think that the portfolio as a whole, we’re expecting kind of low to mid-2s for contractual increases this year.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: And when

Jason Fox, CEO, W. P. Carey: you think about adding a little bit of leverage within the model, that’s going to provide probably half of the growth that we target to generate on an annual basis, which is going to be significantly more than probably all of the peers.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Right. I would agree, looking at our net lease coverage. One thing you mentioned caught my attention was downside protection. That’s great. You get 2% to 3% escalators, but are you concerned that your rents outpaced the profitability or the economics of the property for the occupant?

Maybe talk about coverage ratios or endemic in your portfolio, give the audience a sense of that.

Jason Fox, CEO, W. P. Carey: Yes. I mean, we’re generally targeting bumps that correspond to our expectations for market increases for that particular asset in that particular market. For instance, in some of the stronger markets on the West Coast, that’s where we’ve been getting the 3.5 and even 4% increases. Our the industrial properties we bought in the Toronto market, which is perhaps the strongest industrial market in North America, those also have higher bumps. And we think the market is going to track those bumps.

And that’s the goal. We want to be within the realm of markets so that at the end of lease terms or if there’s scenarios we need to retent the building, we can go to a market tenant if we have to and maintain those levels of cash flows. What was the second half?

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Well, I’ll say, so what are like the coverage ratios and then also don’t a lot of your tenants put a fairly decent amount of their own capital in that kind of gives you comfort that they’ll be around here for their lease term?

Jason Fox, CEO, W. P. Carey: Yes, they’re both very good points. Especially in the manufacturing side, there’s significant tenant investment in our buildings. We’re buying the base building at a typical basis for an investor for an industrial building. Tenants tend to have a lot of investment. They may have overhead cranes that have significant value, but that’s something that the tenant had put in for higher power, maybe higher floor loads to the extent it’s a food production, you have clean room space, you may have cold storage space or boxes within boxes, and these could be multiples, tenant investment could be multiples of what we put in the building.

And a lot of this, ask about, can our rents become bigger than maybe the tenant would like given the bumps that are embedded in our leases? And one of the things, one of the big benefits of doing sale leasebacks is we can really dig into the underwriting. Our counterparty on the sale is also going to be our long term creditor, our long term tenant, which allows us to dig in during underwriting. And when we’re looking at manufacturing facilities, one of the criteria we look at to help assess criticality is what is the site level contribution of EBITDAR. And most companies do track and report, at least internally, P and Ls on a production plant level.

And so we don’t get it in all of our deals, but I’d most of the underwriting we do and in many of them, we’re also getting ongoing reporting. It’s a big range depending on the business. But on average, typically, you call it five to 15 times and probably on average, closer to double digits. Is going to be the coverage that the facility produces in terms of EBITDAR relative to our rents. So said differently, the rents are a pretty small input into the broader scheme of the tenants operations.

However, they’re the most critical. Without our real estate that has all of their expensive equipment that’s been invested, without that they can’t operate. So in many cases, we view ourselves as the senior most creditor for these companies with good collateral.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Very good. We need to take a pause, I’d like to get into some sources of capital discussion, but do we have any questions from the audience that people would like to pose?

Jason Fox, CEO, W. P. Carey: Yeah, sure. So on sale leasebacks, one of the other benefits is we can dictate long lease terms and tenants are usually more than happy to provide longer lease terms, especially if there’s an economic benefit to them, which there can be. We may be willing to price things a little bit more aggressively for longer lease terms. But they also maybe more importantly, want to make sure they can control these properties for a long time given how important they are. So I would say typical lease terms for us in sale leasebacks and build to suits are fifteen to twenty five years.

And if I look back over the last five years, I would say most of these deals are probably at least twenty years, we’re able to get that. We’ve probably averaged a little bit over twenty years in terms of lease terms. So as a lot of visibility into our cash flows going forward, as a lot of downside protection. One of the questions we get asked a lot is industrial market, for instance, a market like LA that’s had some difficulties, and are you guys feeling that? And we do own some properties in that market, but we have very long lease terms.

So while there might be cycles in which there’s dips and rents have dropped and occupancies have come down, we don’t feel those because we ride right through them with their long term leases. In terms of the underwriting, in practice, we have perpetual capital. So generally speaking, when we like our assets, we’re not selling them. On an underwriting basis, we’re typically using some kind of spread to our going cap rates, I would say it’s maybe around 100 basis points. But it’s maybe more of a of a DCF of kind of a lease term going out.

And that’s going be the long lease term. That’s going be the bigger driver than some residual cap rate.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Thank you for the question. Any others before we? Great. Well, so you have a nice pipeline, you’re getting nice organic growth for Toni, she’s not here, your CFO, how are going to pay for all this? What are some of your primary sources of capitalists you mentioned on the intro that you felt you’re well positioned for ’25 in particular from a capital sourcing, no need for equity issuance.

Jason Fox, CEO, W. P. Carey: Yes, we’re very well positioned this year. I mean, we’ve talked about this pretty regularly over the past couple of quarters. We have through some legacy M and A, we have a substantial portfolio of operating self storage assets. Currently, now, that portfolio generates, call it, dollars 50,000,000 to $55,000,000 of NOI, so substantial size portfolio. So our expectation, our plan for this year is to fund our investment activity with the sale of what we’re calling our noncore operating assets.

It’s predominantly self storage. It’s not entirely self storage, but that’s what we plan to do. And if you look at historically, certainly probably over the last ten years, maybe longer, storage has always traded well inside of where net lease cap rates are, certainly where we’ve been buying net lease. And so there’s an expectation this year that we can sell noncore operating assets, by the way, which also simplifies our business. Operating self storage not something that we’ve expected to hold long term.

It’s been a bit of a rainy day pocket for us. We think this is a good time to lean into sales to help fund our deals. We do expect to generate at least 100 basis points of spread between where we sell our non core assets and where we’re reinvesting into net lease. And I say at least, that’s the number we’re talking about. I think we have expectations to do better than that.

Let’s see how the market shake out. But for us, that’s going to be some of the cheaper capital within that lease space to invest. If you think about maybe it’s around six, maybe it’s inside of that. But again, it’s going be at least 100 basis points from where we expect to reinvest. I think that’s an important piece to emphasize.

It’s not just the self storage also. To the extent we continue to think that funding new investments with asset sales is the best way to do it. And our equity is not far off, and Jeremiah can talk But we do think that these non core assets have a better way to go. We have other pockets of money as well.

We have a construction loan that we sourced back in 2021 that’s yielding 6%. That’s likely going to get repaid this year. It’s a $260,000,000 loan on a highly, highly successful development in Las Vegas. So that’s also very cheap capital we get back. You know, we can go into it if it’s interesting.

We also own a chunk of lineage. We helped seed that company back in 2010 with some sale leasebacks and at one point zero, nine point nine percent of the operating company. Our stake in that company is worth about $250,000,000 right now, which is down from where it was for those of you that follow Lineage, but it’s still a substantial stake paying a dividend in the mid-4s. So again, very cheap capital to reinvest selling something that’s yielding in mid-4s, reinvesting into the mid-7s, it’s going to generate a lot of accretion for us going forward. I

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: think one thing just and Jason, on the cell storage, what’s a reasonable bandwidth of total proceeds? I don’t think we went over. So because you have a guidance of 500,000,000 to $1,000,000,000 of asset sales or capital recycling as total dollar proceeds. You talk about the construction loan, it’s $260,000,000 Just trying to put

Jason Fox, CEO, W. P. Carey: bookends on that. Yes. The investment guide is 1,000,000,000 to $1,500,000,000 Disposition guidance right now is 500,000,000 to $1,000,000,000 which is a pretty big range, of course, especially for disposition guidance within the net lease space. But we have a lot of assets we can choose from. And so we’ll size our dispositions based on our needs from the investment side.

I mentioned that self storage, have 50,000,000 to $55,000,000 of NOI associated with that portfolio. We currently have half of that in the market right now, so call it $2,725,000,000 to $27,000,000 of NOI that’s in the market. We are we’ve grouped it into three sub portfolios. Think sizing it, call it big round numbers, dollars 150,000,000 for each portfolio. We think that’s sized appropriately to attract the deepest pool of reputable buyers.

And these buyers will span from some of the public REITs have expressed interest, some of the private platforms that have scale are interested, and even some of the players who have raised dedicated self storage funds and they utilize third party management platforms have also had interest. It wouldn’t surprise me if we see some combination of those types of buyers buying these pools. It’s a deep pool. And to the extent our investment volume increases, we can lean into more self storage sales if we like, but we also have the sources that I mentioned earlier between the construction loan and how we could refinance this year. We’re not anticipating that Lineage is something that we have liquidity this year, maybe not even next year.

There is a pre IPO investor like us, there’s a lockup until 2027. But it’s still a pocket of capital that we know at some point will become liquidated. And by the way, we also generate $250,000,000 of free cash flow for a year. So, you know, we feel pretty confident that, you know, even as we go up through the top end of our guidance range on investments, that we have plenty of capital access to plenty of capital to support that investment activity.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Are there opportunity questions from the audience? Please.

Jason Fox, CEO, W. P. Carey: Yes. The question was do we do any sale leasebacks in Japan? Our focus right now is our two platforms, which is North America and Europe. So Japan is not something that Asia is not something that we’re targeting right now. I think there probably are opportunities there, but we want to focus our efforts where we have a platform on the ground and we’re not considering opening up a platform in Asia at this point.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Great. We all see there’s lot of good news, but we do have to address on occasion, you have some tenant hiccups and maybe you could refresh or bring us up to speed, you kind of dealt with two of the three that were sort of the known problem children, if you will, this year, and maybe an update on the third, which is kind of ongoing.

Jason Fox, CEO, W. P. Carey: Yeah, sure. Mean, one of the things that we’ve been doing over the past, you know, probably six quarters is we provided a lot more disclosure around our portfolio. I think we’re the only net lease REIT that has expanded the top tenant list to 25. We used to disclose the top 10 list, now we disclose the top 25 list. And we want to make sure that we provide updates on any changes to the tenant quality, especially within that top 25 since that’s going to have the biggest impact on the portfolio.

So over the last year, we have been talking about three tenants, Jim, as you mentioned, and let me touch on the first two quickly because those are pretty easy. On the Hearth side, which is a very large kind of the largest contract snack food manufacturer in North America, They’ve experienced some credit weakness, inflation, some other headwinds on labor costs, etcetera. And they’ve been a leveraged company. So they went through a bankruptcy about a year ago is when they entered bankruptcy, they recently exited. Our thesis on that investment from the very beginning, which held true, is that we held their most important operating assets with very high site level coverage, as we talked about earlier, that made up a majority of their production and their sales.

All of this held on a master lease, predominantly one master lease, that provides also rent protection. So as we expected, they needed our facilities, they paid rent on time throughout the bankruptcy process, and when they exited bankruptcy, they continued to pay rent at 100% and affirmed the leases for all the facilities. It’s a bit of a test case, a case study on our model. We don’t have defaults that often, but when we own critical operating asset and we have a default, this is the outcome. We tend to get 100% of our rents because the company needs to continue.

It’s a big company, dollars 5,000,000,000 in sales. They have a blue chip customer list, all the big consumer packaging companies like Procter and Gamble and Kraft Heinz, etcetera. So this was an outcome that wasn’t surprising to us, but it was a technical default given the bankruptcy, so we did talk about this pretty substantially. The second one is a company called True Value, which I’m sure all of you know from the branding on the hardware space. They went through a difficult period.

A lot of it was the pull forward from of demand coming out of COVID And then the void that left when all that demand was pulled forward. And they restructured and sold themselves to a company called Do Best, which is a competitor of theirs in the hardware store distribution network. And to be clear, Do It and True Value, they’re not retailers. They don’t own stores. They own distribution and they sell into or they distribute into many of the independent hardware stores.

So do it best took over six of our leases, six of the nine warehouses that we had leased to true value at 100% rents with a staggered maturities around seven years. So good assets with a good credit paying rent at 100% of the rents we had previously. The three that they needed less, we’re allowing them to terminate those leases at the end of this month of June. And we think we have good leasing It may take a little bit of time.

We do have good buyers for those. So it’s likely that we’ll sell those assets relatively quickly. But they’re paying 100% of rent on those assets until those leases expire, and then we’ll reposition them. So that situation is resolved. All of that had been baked into our guidance for the year, there’s really no impact on earnings.

And then lastly, Helveg is a big do it yourself retailer in Germany, who has had financial struggles as well, And they continue to. The German economy is not as strong as they or we would like it to be. So we’ve approached this where we want to reduce our exposure to Helvetica, and I think this is something that I’m really impressed with at the speed and execution we’ve seen out of our asset management team. We’ve sold four assets out of our 35. We’ve agreed to take back stores, which we want to do from Helveg and retenant those with competitors, so we have lot of interest.

So we feel that by the end of this year, we’ll have them out of our top 10 list. By the end of next year with continued lease terminations and retenanting with competitors who really want the spaces as well as some asset sales, we think we’ll have them out of our top 25.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Great. That’s very well done to literally to the last second. I think our thirty minutes is up unless anyone has any last minute. We just want to thank the audience. Oh, it’s John.

Jason Fox, CEO, W. P. Carey: I mean, we don’t use secured debt, but we can talk about kind of the relationship there. I mean, this math would be we’re executing deals in the mid-7s. And I think mortgage financing is probably it could be close to a 200 basis point spread. So if you think about mortgage borrowing costs, it’s probably in the low 6s. As Jeremiah mentioned, we’re not funding our deals with mortgage financing.

We’re using bonds. We can borrow much cheaper than that. We’re probably generating from a spread to where our kind of weighted average cost of debt is. It’s probably more like two fifty basis points. That’s different.

I think our competitors are probably inside of 150, the number you mentioned. Yes? Yes, yeah. Yep, absolutely. Which is a competitive advantage.

And look, the other part of that is we don’t rely on mortgage financing, which adds another kind of moving part to a transaction. We’re an all cash buyer, so we can be quite competitive in the markets right now relative to a lot of the private buyers who rely on debt.

Jim Cameron, Moderator, Evercore ISI, Evercore ISI: Great. Thank you, Jason. Thank you, Jeremiah. Thank you for your questions, audience.

Jason Fox, CEO, W. P. Carey: Take care. Ken.

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