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.

Thanks, Jason, and good afternoon, everyone. Our fourth quarter and full year results demonstrate a strong, consistent pace of investment activity throughout 2025 at attractive spreads, coupled with sector-leading internal rent growth from our portfolio. I'll walk through the details of those results, starting with ASFO. ASFO per share for the fourth quarter was $1.27, representing a 5% increase over the prior year fourth quarter. For the full year, AFFO totaled $4.97 per share, representing 5.7% year-over-year growth and coming in just above the midpoint of our guidance range. As Jason mentioned, the record investment volume we completed came in just above the top end of our guidance range, at an average spread of just over 150 basis points to our dispositions, which will continue to benefit our earnings in 2026 as the full-year impact flows through our results. During the fourth quarter, we continued to fund our investment activity accretively through opportunistic dispositions, selling 44 properties for gross proceeds totaling $507 million, bringing full-year disposition volume to $1.5 billion, the vast majority of which was sales of non-core assets. Our 2025 dispositions included sales of 63 self-storage operating properties for gross proceeds totaling approximately $785 million, and leaving us with 11 such properties at year-end, which we're currently in the process of selling and hope to complete in the first half of the year. Turning to our portfolio growth, contractual same-store rent growth remains strong, averaging 2.4%, both for the fourth quarter and the full year, on a year-over-year basis. CPI-linked rent escalations average 2.6% for the year, which comprise about half of our ABR, while fixed increases, which make up the other half, averaged 2.1% for the year. We continue to see fixed increases in new investments trend higher than the averages in our existing portfolio, which will support sustained higher levels of internal growth, even as CPI is moderating. About three-quarters of our 2025 investment volume had leases with fixed rent escalations, averaging 2.5%. For 2026, we anticipate the contractual same-store rent growth will trend slightly higher than it did in 2025, although still averaging in the mid-2% range for the full year. Comprehensive same-store rent growth for the quarter was 70 basis points, which moderated from the first half of the year as anticipated, driven by the impact of a prior year fourth-quarter rent recovery, as well as higher vacancy over the back half of 2025. On a full-year basis, comprehensive same-store averaged 2.8%, in line with our contractual same-store growth, after taking into account the impacts of releasing, rent collections, vacancies, and lease restructurings. Our portfolio continued to perform well throughout 2025, with minimal rent disruption. As previously announced, rent loss from tenant credit events totaled $6.4 million for 2025, or about 40 basis points of rent, which was well within our conservative assumption of around $10 million earlier in the fourth quarter. We continued reducing our Helvig exposure in 2025 through a combination of releasing activities and asset sales, bringing it down to 1.1% of total ABR by year end. And we're currently engaged in active transactions that will further reduce our exposure by mid-year. Looking ahead to 2026, we're taking a similar approach to last year, initially assuming a conservative estimate for rent loss from tenant credit, totaling $10 to $15 million, or 60 to 90 basis points of expected rent. Importantly, we've not seen any material changes in credit throughout the portfolio since our last earnings call. As was the case in 2025, we hope to be able to reduce our rent loss estimate as the year progresses, which could provide some upside to our initial AFFO guidance. Portfolio occupancy at the end of the year increased to 98%, up 100 basis points from the end of the third quarter, as we completed vacant asset sales and entered into new leases during the fourth quarter as we had anticipated. During 2026, we expect portfolio occupancy to remain over 98% through a combination of releasing and dispositions. Fourth quarter releasing activity resulted in the recapture of 100% of prior rent on 1.3% of ABR and added almost eight years of weighted average lease term. We saw similar positive results for the full year with about 100% recapture on 5.3% of total portfolio ABR, adding 5.7 years of weighted average lease term. Other lease-related income for the fourth quarter was $8.1 million, bringing the total for the year to $24.6 million, in line with our expectations. While the timing of these payments can vary from quarter to quarter, and even from year to year, they demonstrate our proactive approach to managing our portfolio, often identifying opportunities to maximize the outcome for assets that may be better suited for releasing, redevelopment, or disposition. Turning now to our guidance. For 2026, we currently expect to generate AFFO of between $5.13 and $5.23 per share, implying a healthy 4.2% year-over-year growth at the midpoint, and which is based on investment volume of between 1.25 and 1.75 billion. Currently, we're assuming 2026 dispositions total between $250 and $750 million. This includes ordinary course net lease dispositions, notably certain of our vacant assets and a subset of our Helwig portfolio, as well as the expected sale of our remaining operating self-storage assets. And as Jason discussed, we've identified additional opportunistic and non-core asset sales we could execute at attractive cap rates, giving us a great deal of optionality in funding investments accretively. As the year progresses and we have a greater visibility, we'll be able to refine that range. G&A is expected to total between $103 to $106 million for 2026, which includes additional investments in data and technology initiatives, with a focus on expanding AI further into our business processes and portfolio monitoring. We have a highly scalable operating platform and remain keenly focused on driving further long-term efficiencies. For modeling purposes, just a reminder that our G&A expense runs highest in the first quarter, mainly due to the timing of payroll taxes. We currently expect first quarter G&A to total about $28 million with the balance of the year expected to trend lower and more evenly. Non-reimbursed property expenses are expected to total between 56 and $60 million for 2026, including approximately $6 million of expected demolition costs associated with the planned redevelopment work. I'll note these incremental costs are expected to mostly occur in the first half of the year, and will be more than offset by an associated termination payment, which will be recognized in other lease-related income, since we proactively terminated the in-place lease at these facilities to commence the development work. Excluding demolition costs, we expect non-reimbursed property expenses to decline as we continue reducing vacancy and the related carrying costs. Including the termination payment related to this redevelopment, other lease-related income is expected to total in the low to mid-$30 million range for 2026. with about $20 million of that total expected to be recognized in the first half of the year. Tax expense on an ASFO basis, the vast majority of which comprises foreign taxes on our European assets, is anticipated to fall between $45 and $49 million for 2026, with the increase over last year mainly reflecting growth in our European portfolio. As we've now exited the vast majority of our operating assets, we expect operating NOI to total only about $10 million in 2026, which contemplates the sale of our remaining self-storage properties by the end of the first quarter. Investment management fees are expected to decline to about $5 million this year, down from $9 million in 2025, as NLOP continues to execute asset sales. Non-operating income for 2026 is currently estimated to total between $7 and $11 million this year, declining from about $17 million in 2025. For 2026, we assume a flat dividend from our equity stake in lineage of about $11 million, as well as lower estimated FX derivative hedging impacts, assuming the euro remains around its current level for the full year. Given the effectiveness of our hedging strategy, movements in the foreign currency rates are not expected to result in any meaningful impact on our 2026 ASFO. Considering all these factors, we see encouraging momentum heading into the year. The midpoint of our initial AFFO guidance range implies meaningful year-over-year growth of 4.2%, driven primarily by accretive external growth and continued strong internal growth. And importantly, we're delivering this growth outlook even while initiating guidance with a conservative stance towards both investment volume and credit-related rent loss. Moving to our balance sheet. In 2025, we demonstrated we have a variety of capital sources to fund our investment activity accretively, and we expect to continue to optimize our funding approach in the coming year, allowing us to execute on a strong pipeline of activity while generating attractive spreads. We sold 6.3 million shares of forward equity through our ATM program at a weighted average price of $67.53 for gross proceeds totaling $423 million. All of this forward equity remains outstanding, positioning us well to fund our investment activities throughout the year. Our strong investment-grade balance sheet and diversified asset base also gives us the unique opportunity to access attractive debt capital across a variety of markets. We have two bonds maturing in 2026, a €500 million bond in April and a €350 million U.S. bond in October. Our initial guidance assumes we refinance these bonds with issuances in the same currencies, although we continue to have a wide range of options available to us. Our weighted average interest rate on debt was 3.2% for 2025, which we believe is among the lowest in the net lease sector. Despite having to refinance our upcoming bond maturities, our weighted average interest rate for 2026 is expected to remain in the low to mid 3% range. Net debt to adjusted EBITDA was 5.6 times, inclusive of unsettled forward equity at the end of the year, well within our target range. Excluding the impact of unsettled equity forwards, net debt to adjusted EBITDA was 5.9 times. We expect to continue to manage the balance sheet, maintaining leverage within our target range of mid to high five times. We ended the year with liquidity totaling $2.2 billion, including the availability of our credit facility, cash on hand or held for 1031 exchanges, and unsettled forward equity. In December, we increased our quarterly dividend by 4.5% year-over-year to 92 cents per share. Based on our current stock price, that equates to an attractive annualized dividend yield over 5%, which remains well-supported with a full-year payout ratio of approximately 73%. We expect our dividend to continue to grow in line with our ASFO growth while maintaining a conservative payout ratio. And with that, I'll hand the call back to Jason.

Thanks, Tony. 2025 was a successful year that demonstrated the strength of our business model, the quality of our portfolio, and the dedication of our team. We executed on our objectives across the company, delivering attractive external and internal growth, maintaining disciplined capital allocation, and continuing to strengthen and incrementally optimize our portfolio composition. We've entered 2026 well-prepared to build on that progress. Our investment momentum remains strong, and our initial acquisition guidance for the year is effectively fully funded, with the flexibility to execute additional investments without needing to access the equity capital markets. Through the combination of our internal growth, the spreads we're achieving on new investments, and a well-supported dividend, we're confident that we can again deliver attractive double-digit total returns this year before factoring in any expansion to our multiple.

That includes our prepared remarks, so I'll pass the call back to the operator for questions.

At this time, we will take questions. If you would like to ask a question, please press the number one, the star key, then the number one on your telephone keypad. If you would like to withdraw your question, please press the star, then the number two.

And your first question comes from

Jana Gallen with Bank of America, please say your question.

Thank you. Hi, and congratulations on a very successful 2025. Jason, I wanted to follow up on the strategy of the expansion in U.S. retail. It looks like Lifetime Fitness was part of this goal. I'm kind of curious what other categories within retail you're targeting and whether these will be kind of in the form of more larger sale leaseback opportunities.

Yeah, sure. Yeah, we're making good progress. In retail, it accounted for about 22% of our deal volume last year, and of course, about two-thirds of that was the lifetime deal. Looking forward to this year, a good chunk of our pipeline is retail. It's probably about half and half right now. Overall, net lease retail is the biggest part of the net lease market, especially in the U.S., and we think it could become a bigger market. you know, part of our deal volume on an annual basis. I'd like to build it to maybe, you know, 25, 30% of our annual deal volume. That would include both the U.S. and Europe. When you think about what we're targeting, I mean, we've done, you know, deals recently with Dollar General and Lifetime, some other fitness. We've done some family entertainment, some grocery, some C-stores in Europe. I mean, we're kind of looking across the sector and, you know, we'll be somewhat opportunistic and, you know, the things that we typically look for in You know, generally what we do in net lease, we're focused on tenant credit and lease term and structure, you know, master lease versus individual leases, coverage, things like that are all important, and that won't change.

Thank you. And then maybe also on the Cary Tenant Solutions platform, you know, maybe just near term, how much above $200 million should we think about that growing?

Yeah, sure. So we've historically, as I mentioned, done about 200 million per year or had active projects, maybe in that range at any given point. And we do think that this can become a larger component of the business. Last year, we started a number of new projects. I think year to date, we completed about 50 million of those. And there is another 280 million in construction that we'll deliver over the next 12 to 18 months. You know, some of those new deals were done in conjunction with some recent investments where we agreed to either build a suit or an expansion as part of that. And there's other things that we're doing related to our existing portfolio. I mean, namely, there are some expansions and redevelopments. It includes, you know, I think two redevelopments that Tony had referenced earlier as well as an expansion for one of our top tenants. So it's becoming more of an emphasis for us. And, you know, it's hard to predict exactly how big of a component it could be. But I do think we can increase it.

Thank you. Your next question comes from Greg McGinnis with Scotiabank. Please state your question.

Hey, Jason. I appreciate the commentary on the retail side. I'm also hoping you can kind of dig in a bit more on the industrial types of assets that you're finding or looking for cap rates and then kind of U.S. versus Europe. If you comment on whether or not realty income is becoming more of a competitive company that you're seeing more on deals in Europe as well, that'd be appreciated.

Yeah, sure. I mean, industrial is still really the core part of our business. We want to keep on adding retail, but industrial is significant. It's probably made up two-thirds to maybe even three-quarters of our deal volume over the last number of years. In terms of you know, what type of industrial, it's really a mix between both manufacturing and logistics. And we do provide some disclosure on those two components. I think in the past, we've also layered in some food production and processing, which we've always liked. Those tend to be, you know, non-discretionary spend type products. You know, the tenants tend to have a very meaningful investment in these facilities. We also tend to get, you know, long lease terms and in many cases, higher yields as well. So that's certainly a component as well. In terms of cap rates, I mentioned earlier, I think that there's maybe some expectation they could tighten a little bit this year. Last year, our average for the year was 7.6%. We'll continue to target deals in the sevens this year, but I do think they could come in some. So maybe that ends up somewhere in the low to mid 7% range on average for us versus the mid sevens last year. Maybe that's 25%. basis points of tightening. But it's early in the year. It's kind of hard to predict what will happen over the next 10 months or so. In terms of real estate income, I mean, we see them from time to time, I would say, more in Europe than we have in the U.S. But they've focused a lot of their investing in the U.K., which has not been a country in which we've allocated a lot of capital. We're still doing more of our deals in continental Europe than And we're doing more of our deals, at least lately, in industrial. So, you know, we see them from time to time. But Europe's a big market, and there's not a lot of competition there generally. So I wouldn't say it's all that impactful.

Okay. I don't know if I missed anything else there. Yeah, no, thank you. I appreciate that. Just on the potential cap rate tightening, is that just kind of an assumption based on maybe cost of borrow lowering or increased competition? Is it anything that you're seeing today – or is it just some conservatism that we're building in there?

Yeah, you know, it's really a combination of all of that. I think that to the extent rates come down and stay stable, I mean, they've really been range-bound in this kind of low fours for probably the better part of six months now. I think a lot of that maybe has flowed through to cap rates, but probably not all of that. Incremental competition, yeah, maybe there's some of that, but we haven't seen a lot of it. We hear about you know, new entrance, but we haven't seen it and we haven't seen it, you know, be all that impactful yet. But I think ultimately that could, you know, be a little bit of a catalyst, you know, towards that as well. So, yeah, and I think overall cost of capital, you know, across the sector is probably getting a little stronger too. But, you know, we haven't seen a lot of it. I would say our year-to-date deals are still within our target range, maybe at the low end, but I would probably attribute most of that being that the bulk of what we've done year to date have been in Europe. And, you know, we can borrow, call it 100 basis points in euros inside of where we can borrow in dollars. Even if those cap rates are a little bit lower than what we've done historically, I think our spreads are still wider than where we've been. So it's shaping up. It's a good market. You know, we think that we're going to be quite active this year. And I think our spreads are probably going to be similar to what we did last year.

Okay, great.

Thank you.

Welcome. Thank you.

And your next question comes from John Kim with BMO Capital Markets. Please state your question. Thank you.

I wanted to ask about Cary Tenant Solutions, which I think is just your branding for Build-A-Suit. Just wanted to make sure that was the case. But how do you protect yourself from development risks associated with these type of projects? And I think in the past, you talked about a 25 to 50 basis point premium on built-to-suit versus acquisitions. Is that still the right range to think about?

Yeah, sure. Yeah, maybe it's helpful just to kind of spend a minute or so high level on carry tenant solutions. And we've been quite active on what we call capital investment projects for some time. It's been in our disclosure and our sub for many years at this point in time, and it includes build the suits, expansions, and redevelopments. We're good at these types of investments. We have a lot of experience on the team. I've mentioned that I'd like to see us do more, and I think there's real potential for that. So part of our effort around this is to formalize it, brand it, be a bit more holistic in our outreach to our tenants, and more proactive in our approach overall. And I think that we can see some increased activity. I mentioned earlier that we historically have seen about $200 million of in-process capital projects I think that can get bigger and become a more meaningful component of our annual deal volume. And, look, it's also something that investors ask us about. I think there's been some other REITs that have made it more high profile, and we've been asked about what our capabilities are. So, you know, that's kind of the thought process behind our recent launch of carry tenant solutions, you know, what we're calling it. You know, in terms of development risk, most of what we're doing here are build-to-suits and expansions. There are, you know, occasionally – really high-quality, very attractive redevelopments, and it's a real high bar for us to do that type of work. So it's going to be predominantly build-to-seats and expansions, and you can see that in our supplemental. That's what the disclosure is as well. So, you know, the development risk, typically you have, you know, very strong and large general contractors that provide fixed-price contracts. In many cases on build-to-seats, we'll have, you know, guaranteed rent start dates, built into the structures. So even if there's delays, we still get our rent. We'll also have a construction rent kind of built into the budget as well. So we effectively either earn or accrue interest, something for our cost of capital during the construction period. So like I said, we've done this for a really long time. We box the risks. We have a great team in place that one of the benefits of being as large as we are in having the scale is, you know, we can build out a dedicated in-house project management team. They have lots of experience, a lot of connections to local partners and, you know, it's a real competitive advantage for us. I think you also asked about cap rate spread. Yeah. Yeah. I would say on a build a suit, which is more of a market deal, it's probably in the, you know, 25 to 50 basis point premium. And a lot of that will depend on the length of the build period and maybe the specifics of the deal with, you know, basis relative, you know, the construction costs relative to kind of the market, you know, market basis or where that puts you relative to market rents. I think on the other end of the spectrum are these expansions that we do for our tenants where, you know, this is truly proprietary deal flow. It's a captive deal. You know, the tenant can either fund these expansions themselves on property that we own, or they can, you know, choose to maybe do something outside of what is likely a really, you know, critical core facility for them. Or they can do a deal with us. And so we have, you know, some price and power, of course. You know, we're very mindful of our tenant relationships, and we want to make sure that, you know, there is – you know, kind of fairness to how we price it. But we'll typically see on those, you know, anywhere from 100 to, you know, 200 or 300 basis points of spread depending on the specific project. And it's not just the premium that we benefit from in many cases on these expansions and kind of follow-on deals that we do for tenants. We're also, you know, increasing the criticality of the real estate. We're lengthening lease terms. And when those are on master leases with other properties that you know, there's a drag-along effect with other properties as well, you know, and also just deepening the tenant relationship through these type of transactions. So, you know, all those are reasons why we want to lean into this more, you know, especially because we're quite good at it.

Great. Thank you. And then my second question is on your leverage. You talked about operating at a mid-to-high five times leverage. Is that where you think you get the premium multiple for your stock? I'm just wondering how you balance ASO growth versus... having a cleaner balance sheet with more fiber power.

Yeah, sure. I mean, look, there's no real changes to our leverage targets. We'll continue to operate in the mid to high fives. We're very comfortable with that. But I think you're right. There is a certainly impact on equity multiple based on leverage. And I think over time, you know, I can see this drifting to the lower end of that range. I wouldn't say there's a specific timeline in that. And that should help the equity multiple, but right now we're very comfortable within that mid to high fives range.

Great. Thank you. Thank you. And your next question comes from Jason Wayne with Barclays. Please state your question.

Good afternoon.

Just on the 60 million in dispositions year-to-date, I'm just wondering the cap rate there, and can you give some color on the cap rates that you're assuming on dispositions for the full year?

Yeah, maybe I'll start, and if Brooks has any color he can add. For the full year, you know, our disposition guide is quite wide. As you know, it includes, you know, a – hold on a second. sorry, another call came in. It includes kind of a, you know, a normal course dispositions, you know, example would be, you know, some Helvigs, but it also includes a meaningful number of assets that we've talked about how we can sell opportunistically at very attractive pricing. These are what our care tries as non-core. And we've referred to, you know, call it several hundred million dollars at those deals. So the average disposition cap rate for the year is very much going to depend on the mix of assets we choose to sell and, There are certainly scenarios that could put us in and around the execution we saw in 2025, especially if we factor in some vacant sales. So, you know, we'll dial that in, you know, as we execute and as the year, you know, continues. In terms of the $60 million, I mean, it's a small amount. It really probably depends on the exact assets we've disclosed. We tend not to go into that level of detail. I don't know, Brooks, if you have any commentary on broadly, you know, if that's any indication for the rest of the year.

No, I think you've largely hit it. You know, we have closed a few transactions. The largest so far in Q1 was a warehouse property formerly leased at the 10 Joanne, which vacated. We sold that at an extremely attractive price relative to the prior in-place rent.

I can't share the specific cap rate, but highly accretive. Got it.

And then, yeah, just on the non-core deals that you've identified to go above the high end of the guidance range, can you just go into what's still available there?

What's still available there? Yeah, sure. I mean, it's a mixture of assets, and maybe I'll just kind of rattle off a couple. These are just examples, of course. I mean, we do have a final property in Japan, and given where rates are over there, those tend to sell tight. We have an operating student housing asset, a net lease hotel. And really, there's a number of assets that are leased to tenants who regularly approach us about repurchasing properties. Those tend to be at very aggressive pricing. I think that we can answer the phone on some of those if we feel a need to do it. And of course, Brooks just mentioned the Joanne's deal, which is very attractive as a sub-6 cap rate based on prior rent for a vacant asset. So Good transaction there. But I think maybe the important note is we have lots of flexibility here. We mentioned earlier that we feel that we've pre-funded our equity needs for the year and to the extent we need to. If our deal volumes are higher than our initial guidance would suggest, we can lean into some of these accretive asset sales. We can also consider equity as well. We've certainly had A nice run over the last 12 months in equity is a lot more interesting, too. But, you know, there's a lot of flexibility. There's no immediate needs, though, based on our current deal volume guidance. It's fully funded.

Got it. Thank you.

Thank you. And your next question comes from Smates Rose with Citi. Please state your question.

Hi. Thank you.

I wanted to ask about a little bit more about your acquisitions outlook for the year. I understand, you know, you said that you were coming into the year from a conservative standpoint. But just going back and looking at some of your commentary on your third quarter call, you know, you talked about having the infrastructure in place to support a similar pace of activity you were seeing in the back half of 25 and not seeing anything that would disrupt the pace of activity that you were seeing from a broader kind of macro perspective. And it seems like this is, you know, more than conservative. It seems like a very market slowdown from what you're seeing, and especially in light of what you've already talked about in a year to date. So can you just kind of help me understand a little bit more, you know, conservative versus, like, is there something disruptive that's happening that's slowing down the overall pace and just trying to get a better sort of handle on that?

Yeah. No, there's nothing that we're seeing in the market right now that suggests there could be a slowdown. It's strong, it's constructive, stable interest rates. And look, we're confident in our ability to continue generating high deal volumes. And maybe we're back to what we did in 2025. But if you look back to last year, maybe at the beginning of last year, we took a measured approach to how we view guidance. And that led to a series of increases throughout the year and I think that's our preference going forward. So you can think about our initial guidance as a starting point, and our expectation is that as we progress through the year and get more visibility into the back half of the year, we'll refine that range and hopefully raise it as we did in 2025. But it's worth noting, and Tony mentioned this earlier, that even at the current midpoint of what I think could be characterized as conservative deal volume guidance, we believe we can achieve AFO growth of over 4%, and that should be you know, very attractive, you know, relative to, you know, many, you know, of our net lease peers. You know, I think also just look at, you know, where we've started the year. We're off to a good start, you know, a little over $300 million closed already. I mentioned earlier that we have about $200 million of capital projects that were delivered this year, and then a sizable near-term pipeline, you know, that I would characterize as several hundred million dollars. So we're probably ahead of pace of our initial guidance, but again, you know, you know, we don't have visibility into the back half of the year to necessarily extrapolate this, you know, initial pace out for the full year. So, you know, as we get more into the year, we'll continue to review it and hopefully be in a position to raise it.

Okay.

And, you know, you talked a little bit more about, you know, you're leaning into more retail, you moved to lifetime fitness to your number three tenant. I'm just wondering if you could talk a little bit more about the profile of that tenant. I don't know if you can give kind of coverage levels. And I'm just asking because it seems like the fitness world, I don't know, can be subject to maybe a certain amount of kind of fickleness on the part of consumers and things come and go. I realize this is a popular asset class amongst the large, you know, net needs companies. But I'm just sort of wondering if you could talk a little bit about your comfort level of moving them to such a large position within this portfolio.

Yeah, sure. I think, first of all, this is not a new tenant for us. We've done deals with them in the past and had, and because of that, had good access to management during underwriting, both on the credit itself, but also, you know, into the specific assets. And we like Lifetime as a credit. They're one of, if not the strongest of the U.S. fitness operators. They're publicly traded, have a $6 to $7 billion equity market cap, have had a nice run since their, you know, IPO, and they can bring leverage down as well. So it's a good credit. We bought Ten facilities. These are all well-located and affluent, kind of highly desirable markets near dense retail. Very difficult to replicate these locations. I think our basis is very attractive, well below replacement costs. Low in-place rents, and that's both for these locations but also relative to, you know, the rents that Lifetime pays on, you know, other properties throughout the country. And we also have strong site-level coverage. I can't get into the details on the specifics for it, but it's quite strong in our understanding. It's better than the median within their portfolio. I think the other part about this deal is the seller is a group we know well and have transacted with before on other portfolio deals, and they were exiting a fund and looking to make distributions to their investors by year-end. So that drove a quick close, and we think that dynamic contributed to the better-than-market economics. But overall, I think fitness is something that we've done some deals with, over the last couple years, but clearly this is the largest one, and we do like Lifetime. And look, I don't live in the suburbs. I live in the city. If I did and I lived near Lifetime Fitness, I'd be a member. I have a number of kids, and it's a great model, and it's a very unique model relative to many of the other fitness operators out there. These are more like country clubs with outdoor pools and water slides and restaurants and obviously very – you know, large and modern, you know, fitness facilities and workout rooms, et cetera.

Okay. Thank you. I appreciate that. Yep. You're welcome.

Your next question comes from Anthony Palalone with J.P.

Morgan. Please state your question.

Thanks. Yeah, just first one on – credit loss, the $10 to $15 million. If I go back to last year at this time, I think the number you gave incorporated a couple situations that maybe you wanted some room for, like true value perhaps, and maybe another one. So I'm just wondering if any of the $10 to $15 million spoken for at this point, or if that's just kind of the number you're giving yourself cushion on.

We're setting the range. Sorry. Go ahead. Sorry.

Go ahead, Tony.

Yeah, we're setting the range. They're really – to capture a wide variety of scenarios there. I think there's nothing really specific in the portfolio at the moment. You know, we set this range last year and this year. Our objective is really early in the year taking a broad view so that we have no concerns around any AFO impact from rent disruption. And I think that, you know, again, similar to what Jason said on the investment side, our guidance is set at a level where we can achieve over 4% growth even with a range of rent loss at this level. So I Again, nothing specific. It's probably the only uncertainty out there is in the macro environment, and it's something that, you know, we feel comfortable with at this stage of the game. But I think our goal here is to continue, you know, managing the portfolio, seeing the same limited level of disruption that we're seeing now, and hopefully be able to reduce that and see some upside to our guidance.

Okay, thanks. And then second question is just on the balance sheet. You have 2.25% Euro bonds coming up. Where do those get refinanced today? Just any other details on how you're thinking about debt refinancing over the course of the year?

Yeah, sure. Maybe I'll start here. I don't know if there's anything to add, Tony. But, yeah, the 26 maturities are very manageable. It's two bonds. It's one in each market, a Euro bond, and then later in the year, U.S. dollar bond. I think the balance sheet's in great shape. We have access to multiple forms of debt and lots of flexibility right now given our liquidity. So I think our guidance assumes that we replace each bond coming due with unsecured debt, probably in the same currency. I think that's what we will do, but we have lots of flexibility. In terms of where things are pricing, a 10-year euro bond is probably somewhere – you know, in the low, you know, 4% range in the U.S. is maybe 100 basis points inside of that. You know, obviously we'll think about, you know, which tenors we want to do and, you know, to the extent it's a little bit less than 10 years in Europe, which is maybe more of the norm, we'll pick up some basis points and get inside of 4% is my guess.

Okay. Thank you.

Your next question comes from Jim Kammer with Evercore ISI. Please state your question.

Thank you. Good afternoon. Perhaps just an extension of that last topic. You obviously have done a very nice job as the benefit of the company having a lot of Euro debt exposure. But could you remind me, where do you stand in terms of capacity in terms of, you know, about two-thirds of your overall debt? Can you do a lot more there? Or how do you think about that going forward in terms of the overall debt composition?

Yeah, Tony, do you want to take that?

Sure. Yeah, I'd say we still have room in our capital structure to issue incremental euro-denominated debt. You know, as Jason mentioned, we have a euro bond that's maturing this year as well. And a big part of our pipeline is denominated in euros. So, you know, we'll still have room beyond that. I'd say it still continues to create an effective hedge for us on both on the foreign currency side. And, you know, it's really we're benefiting from a lower cost borrowing there. So, I think you'll continue to see us access those markets when the time makes sense for us. But overall, we do see that there's really no bright line at the moment. We have some room for additional capital there.

Okay, thank you. And then a different question. Obviously, you're not going all in on retail investing assets, but thinking about protecting your above sector average escalator, weighted average escalator, can you get industrial-like escalators on C-stores in Europe or fitness centers in the U.S., etc.? I'm just curious how that blend is incorporated into your numbers.

Yeah, certainly. I mean, in Europe, I would say that retail, like industrial, typically has inflation-based increases. So I think that we'll continue to get that, whether we're doing industrial or retail. I think in the U.S., you're right, we've always talked about this, that the bump structures in retail deals tend to be a little bit lower. I think that You know, it's probably if we're doing industrial deals in the two and a half to three percent range, I would say that the retail deals are probably 50 to 100 basis points below that. But it depends on the deal. I mean, I think that that's a lease back. So lots of times you can, you know, kind of play with the different economics. And there's always tradeoffs between going in cap rates and what the bump structure is, which is why we're always quick to remind people that it's not just the going in cap rate that matters, the cap rate. plus the bump structure is important. And, you know, when we're investing in the mid-7s based on a going in cap rate with bumps that are in the, you know, mid to high 2s on average, that puts us to average yields in the 9s, which I think is quite attractive. And, you know, there'll be a mix of retail in there, but we don't think it's going to be overall impactful.

Appreciate the comments. Thank you.

Thank you.

And your next question comes from Michael Goldsmith with UBS. Please state your question.

Good afternoon. Thanks a lot for taking my questions. You talked about cap rate compressing this year to the mid to low 7% range versus 7.6% in 2025. So are there specific areas where you're not seeing that compression? And does that help drive your acquisition strategy? Are you just trying to understand what the implications of this, of the cap rate compression is for your acquisition strategy?

Yeah, I mean, it's a good question, Michael. And, you know, we tend to target, you know, a diverse set of opportunities. The cap rate ranges tend to be quite wide depending on lots of factors. You know, certainly the bumps that I just mentioned on the prior question, you know, are a factor in that as well. You know, I would say that the more commodity-driven net lease is going to have the most compression, and I think that's going to be investment-grade retail is an area that we've seen that, and it's not something that we target, I would say, mostly for that reason, is that the cap rates and the bump structures are being driven down more and more there. I think on the other side of that, sale leasebacks, which is maybe our specialty and where a large part of our deal volume is generated from, we're able to maintain, I would say, you know, cap rates that are, you know, closer to what we've done historically. I think there could be a little bit of compression there, but I think we'll have more pricing power around there, and I think they'll continue to see us, you know, have a bigger emphasis on sale these SPACs as a means to source new transactions.

Thanks for that, Jason. And then just as a follow-up, you guys cited a roughly 150 basis points spread between dispositions and acquisitions. Is that expected to be – is that sustainable – this year and just, you know, given what you're disposing, is that the right range to think about this? And then does that still make sense in a more competitive net lease environment?

Yeah, I mean, sure. I mentioned earlier that, you know, our dispo range is quite wide and where we shake out on cap rates is going to depend on what that mix is of what we actually sell. And it's a combination of, you know, our normal course dispositions, which, you know, this year probably includes some Helvigs among others. It's going to be some of these kind of accretive non-poor assets that I listed off earlier. And we can probably factor in some vacant assets there as well, like the Joanne's asset that I mentioned. So when you put all that together, we're probably in and around where we were last year. But again, it's really going to depend on the mix. I think where we started last year with spreads, we talked about that we think we can achieve at least 100 basis points. And then we dial that up through the year. that's probably a reasonable starting point for this year. I think that cap rates could come down, but, you know, our equity price has gotten better to the extent, you know, we choose to fund deals with incremental deals above our investment volume with new equity. And I think there's also, you know, a number of assets we can lean into with very attractive pricing if we choose to fund, you know, incremental deals, you know, through asset sales. But we feel pretty comfortable we could be, you know, in the same or similar ballpark to where we were last year. And, And that certainly gives us a green light to keep on investing and driving earnings growth.

Thank you very much. Good luck in 2026.

Yeah, thank you.

Thank you. And before we take the next question, just a reminder to the audience, if you'd like to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the star, then the number two. Our next question comes from Ryan Caviola with Green Street Advisors. Please state your question.

Definitely, everyone. There were four vacant warehouse sales in the fourth quarter, and it sounds like there's a fifth after the quarter end. Could you just walk us through the decision on re-tenanting versus disposing of those properties? Were re-tenanting opportunities not there, or is the choice to sell just opportunistic? Thanks.

Brooks, do you want to take that? Sure. Yeah, we look at vacancy just like we would any new investment. We want to understand what are the forward-looking risk-adjusted returns that we can underwrite to. Where those returns are sufficient and attractive on a risk-adjusted basis, we will aggressively lease properties up. when available disposition opportunities make those forward-looking returns insufficient, we won't hesitate to sell and do so quite quickly. So that's really the exercise we pursue. And so something like a Jo-Ann where an owner-occupier needed to own it and could pay a large premium, that's a very easy decision for us on a sale. But elsewhere, we won't hesitate to release properties you know, where we see a direct path to leasing velocity and an ability to underwrite those forward-looking returns.

Thanks. Appreciate that.

And then it was outshined by the lifetime purchase, but there was the healthcare acquisition with New Era for $140 million during the quarter. And I also noticed there's an expansion on the capital commitments with the same tenant. Just wanted to see if you could share color on the relationship there and if healthcare is a venue you view as attractive going into 2026. Yeah, sure.

Yeah, I mean, we're always looking to expand Our opportunity set in healthcare is an area we've been tracking for a while, and we do have some in-house expertise as well. It's a competitive space, but we do think that there's probably opportunity to add some deal volume there over time. And it's a diverse sector, lots of segments. I think broadly it continues to outperform the real estate outperforms, and that's probably supported by long-term dynamics of a growing and aging population. So, you know, I think that what we target in healthcare is, We still want to make sure it fits within our existing net lease framework. It's going to be single-tenant. It's going to be long-term leases, typically absolute net. We're going to focus on strong site-level coverage, and, of course, we're going to want to partner with reputable operators and creditworthy tenants. So, yeah, so, you know, an example of what we're targeting is what we recently closed, and those are in the inpatient rehab facility space. I think, to be clear, we're not looking at at acute care hospitals, just when I talk about healthcare more generally. But on the new era deals, there's one else we did earlier in the year called Earnest Health as well, which is a large IRF operator at the same time. These were all kind of somewhat recently developed. They're well-located, attractive basis, as I mentioned earlier, strong site-level coverage, and they're good operators. So I think that The IRF model is one that we like, and I think we could do hopefully more of this. And you're right, one of them did come with an expansion. One of the properties is performing quite well with a lot of demand, and so that's an easy thing to do if you have the land to expand these properties and get kind of the operating leverage with additional rooms.

Got it.

Appreciate the commentary. Yep.

Thank you. And at this time, I'm not showing any further questions.

I'll now have a call back to Mr. Sands.

Great. Thank you, everyone, for your interest in WP Carey. If anyone has additional questions, please call Investor Relations directly on 212-492-1110. And that concludes today's call. You may disconnect.