W. P. Carey Inc. REIT

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 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 from WP Carey's expectations are provided in our SEC filings. An online replay of this conference call will be made available in the investor relations section of our website at wpcary.com, where it'll be archived for approximately one year and where you can also find copies of our investor presentation and other related material. And with that, I'll pass the call over to 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 AFFO growth to 4.5% at the midpoint of our revised guidance range. To date, we've closed over $1 billion 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 enhanced our liquidity and further strengthened 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 reserve for estimated potential rent loss. This morning, I'll review our progress over the first half of the year and our confidence in sustaining that momentum. Tony Sanzone, our CFO, will focus on our results and guidance raise, 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 maintained strong investment volume throughout the first half of the year, building on the increased level of activity we achieved in the fourth quarter of 2024. Year to date, we've completed over $1 billion of investments, including the 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 one of the highest average yields in the net lease sector, and one that provides a very attractive spread to our cost of capital. We've already closed about $230 million of investments in the third quarter, and our pipeline remains strong, $700 million 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 therefore 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, but 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 U.S., 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 and is centered on accretive 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 two additional storage portfolios, totaling 17 properties under contract, with closings expected in August, keeping us on track with our initial projections for storage sales this year, and 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 AFFO 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 we're generating are 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, amid an environment of broader economic uncertainty, we started the year with an appropriately conservative view on the potential for credit events within our portfolio. Seven months into the year, we're lowering our estimate of potential rent loss by $5 million. 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 re-tenanting and selling Helvig 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. While there has been some recent progress on U.S. 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.