W. P. Carey Inc. REIT

Hello and welcome to WP Carey's fourth quarter and full year 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.

Hello everyone and thank you for joining us today for our 2025 Fourth Quarter Earnings Call. Before we begin, I would 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 will be archived for approximately one year and where you can also find copies of our investor presentations and other related materials. And with that, let me hand the call over to WP Cary's Chief Executive Officer, Jason Fox.

Thanks, Peter. Good afternoon, everyone, and thank you for joining us. 2025 was a standout year for WP Cary. reflecting successful execution across our business, producing strong performance for the year, and laying the foundation for attractive, sustainable growth that supports long-term value creation. The 5.7% AFO growth we generated for the year was among the best in the net lease industry, reflecting our record investment activity, sector-leading rent growth, and strong portfolio performance. The dividends we paid, combined with the appreciation of our stock price, provided our shareholders with a total return of 25% for the year, placing us in the top tier of publicly traded REITs. Looking ahead, we're confident the momentum we established in 2025 will carry into this year. Our deal flow remains strong. We have access to multiple forms of accretive capital. We expect incrementally higher contractual rent growth compared to last year and stable credit quality within our portfolio. Our competitive advantage on investment spreads should also continue to differentiate us. Our average yields in IRRs are among the highest of the public net lease rates, reflecting both the strength of our rent bumps and the long duration of our leases. But combined with our lower average cost of debt, aided by access to Euro-denominated financing, we believe we're exceptionally well-positioned to drive industry-leading AFO growth in 2026 and beyond. On this call, I'll briefly recap 2025 and expand on how we're positioned to continue delivering attractive growth. I'm joined by Tony Sanzone, our CFO, who will review the key details behind our results, balance sheet, and guidance, and Brooks Gordon, our head of asset management, to take your questions. Starting with our investment activity, we finished the year at the top end of our guidance range, closing record annual investment volume totaling $2.1 billion. representing substantial growth over our initial guidance and demonstrating our ability to source and close a high volume of transactions in a competitive market. Throughout 2025, we put capital to work at attractive spreads relative to the pricing we achieved on our asset sales, as well as to our overall cost of capital. Our investments carried a weighted average initial cash cap rate of 7.6% for the year, translating into an average yield just above 9%, over long-term leases averaging 17 years. In contrast, the occupied assets we sold traded at cap rates averaging 6%, generating an average spread of about 150 basis points and creating significant value as we recycled capital from non-core asset sales to higher-yielding net lease investments. We allocated the most capital to warehouse and industrial, which accounted for 68% of our full-year investment volume. and found additional compelling opportunities in retail, which represented 22%. Geographically, 26% of our 2025 investment volume was in Europe, and 74% was in North America, the vast majority of which was in the U.S. Importantly, we finished the year with continued strong momentum, completing $625 million of investments during the fourth quarter. Among them was our $322 million investment and a portfolio of high-quality, lifetime fitness facilities, which significantly expanded our relationship with that tenant, making it our third largest by AVR. One of the compelling aspects of our business model that continued to stand out in 2025 was our industry-leading rent growth. Even with inflation remaining below the peak levels of the recent years, we generated among the best internal growth in the net lease sector. Rather than a meaningful share of our overall AFO growth, independent of our transaction activity. We expect this to continue in 2026, supported by the strength of our fixed rent escalations. Turning to our sources of capital. As mentioned, our 2025 investment activity was supported by disciplined capital raising, funding new transactions primarily with sales of non-core operating assets. This approach enabled us to both accretively recycle capital and further simplify our portfolio mix. effectively exiting the operating self-storage business. During the year, we also successfully refinanced our Euro-denominated term loan, locking in an attractive all-in rate below 3%, further demonstrating the advantages of having access to Euro-denominated debt and multiple forms of capital. And mid-year, we achieved execution on our five-year U.S. bond issuance, giving us additional funding flexibility. Furthermore, during the second half of the year, We utilized our ATM program to sell forward equity, getting ahead of our 2026 needs. So looking ahead to 2026, we remain very well positioned to sustain a high level of investment activity and deliver attractive AFFO growth. Following a strong fourth quarter, we've already closed approximately $312 million of new investments year to date. And we currently have a sizable investment pipeline with several hundred million dollars of transactions at various stages of completion. In addition, our year-to-date investment volume includes roughly $50 million of completed capital projects, with another $290 million underway and scheduled to deliver over the next 12 to 18 months. We remain just as active, if not more active, than other net lease REITs in build-to-suits, expansions, and redevelopment projects. These are capabilities we've built over many years and view as a meaningful competitive strength, now further supported by our recently launched carry tenant solutions platform. Historically, we've generally maintained a pipeline around $200 million of such projects, which typically deliver above-market yields, extend lease terms, and enhance the strategic importance of the assets involved, creating highly attractive, proprietary deal flow that leverages and strengthens our tenant relationships. We see significant opportunity to lean further into these capabilities, with our carry tenant solutions platform positioning us to do even more going forward. alongside other initiatives such as our expansion in U.S. retail. With all these factors in mind, we're confident in our ability to continue generating higher investment volumes than we have historically, as we demonstrated in 2025. At the same time, we're mindful that it's still early in the year, so we're starting with an initial investment volume guidance range of $1.25 to $1.75 billion. As we move through the year and gain more visibility to the second half we expect to refine and potentially raise that range as we did in 2025. We also foresee cap rates being incrementally lower this year. Based on our current pipeline, we're anticipating going in cash cap rates in the mid to low 7% range compared to 2025's weighted average of 7.6%. The momentum we're generating on the investment side of the business is supported by our strong funding positions. having already accounted for the vast majority of our anticipated 2026 equity needs. The more than $400 million of forward equity sold in 2025 remains available for settlement with an active ATM program in place, enabling us to issue additional forward equity as needed. We also anticipate generating close to $300 million of retained cash flow this year, providing an additional source of equity capital. And importantly, for the option to pursue additional accretive disposition opportunities, potentially taking us over the top end of our initial disposition guidance range, should we choose to do so, enabling us to continue driving AFO growth. Accordingly, we have ample flexibility to fund additional investments above the top end of our initial acquisition guidance range, regardless of equity capital market conditions. Let me pause there and hand the call over to Tony to discuss our results, balance sheet, and guidance in more detail.