Good day, welcome to the Realty Income second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Alex Waters, Vice President, Investor Relations. Please go ahead. Thank you for joining Realty Income second quarter 2026 results conference call. Joining us on the conference call today are Sumit Roy, President and Chief Executive Officer; Jonathan Pong, Chief Financial Officer and Treasurer; Neil Abraham, Chief Strategy Officer and President, Realty Income International; and Mark Hagan, Chief Investment Officer. During this conference call, we will make certain statements that may be considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail the factors that may cause such differences in our Form 10-Q filed with the SEC. We'll observe a one question and one follow-up limit during the Q&A portion of the call to ensure that everyone has an opportunity to participate. With that, I would now like to turn the call over to our CEO, Sumit Roy. Thank you, Alex, welcome everyone. Realty Income delivered another strong quarter in Q2, reflecting the benefits of our diversified investment strategy and our position as a trusted capital partner to many of the world's leading companies. Our investment activity highlighted the breadth of our opportunity set, demonstrating our ability to invest across the capital stack, geographies, and property types to support accretive growth. Against that backdrop, AFFO per share grew 3.8% to $1.09 during the quarter. Year to date, AFFO per share was $2.22, representing 5.2% growth and a meaningful acceleration from the same period in 2025. This momentum supports a $0.02 increase in our full-year AFFO per share guidance midpoint to a new range of $4.44 to $4.45, representing growth of approximately 4% at the midpoint. We're also increasing 2026 investment volume guidance from $9.5 billion to $10 billion as our pipeline remains robust. I'll cover key investment highlights during the quarter before detailing market dynamics in each of Realty Income's strategic areas. Global investments totaled approximately $2.6 billion, or $2.1 billion at our pro-rata share, at an initial weighted average cash yield of 7.3%. Second quarter activity was weighted more heavily toward the United States, with approximately $1.7 billion in pro-rata investments at a weighted average cash yield of 7.4%, including roughly $800 million in industrial assets, representing approximately 75% of U.S. real estate investments. Also embedded within this U.S. activity was continued deployment through our U.S. Core Plus Fund, which acquired approximately $673 million of assets on a global basis, with industrial representing more than half of that volume and retail accounting for the balance. In Europe, we closed on approximately $400 million at a weighted average yield of 7%. Finally, on June 30th, we announced a $6 billion programmatic hyperscale data center joint venture with Cloud Capital, in which Realty Income expects to invest up to $1.4 billion over time for its 45% equity interest. Turning to additional investment details. Let's start with industrial, which represented approximately 65% of our global real estate investments. We continue to find attractive risk-adjusted opportunities supported by improving fundamentals and contractual rent escalators that generally range from 2%-3.5% annually. Just under half of industrial acquisitions NOI this quarter came from investment-grade clients with investments concentrated in high-quality primary and infill markets. Notably, U.S. industrial fundamentals strengthened during the quarter as net absorption accelerated sharply, vacancy declined, and development activity began to improve alongside market conditions. That positive industrial momentum also carried through to our U.S. Core Plus Fund, which continues to demonstrate the value of pairing our scale and sourcing with long-term private capital. During the quarter, we fully deployed the fund's remaining cornerstone commitments, increased total gross asset value to approximately $3 billion. Assets acquired into the fund in Q2 generated a 6% weighted average cash yield. While these investments carry lower initial yields, they consist of high-quality assets in attractive markets, leased to strong credit customers, and supported by contractual rent escalators well above average. A dynamic reflected in the fund's 2.9% year to date same-store revenue growth. Importantly, the management fee stream from the fund enables us to pursue these lower initial yield investments with day one accretion to Realty Income's shareholders, thus expanding our overall buy box. In Europe, while several international clients were more cautious earlier in the year amid geopolitical uncertainty, activity has improved, and a number of those clients are actively pursuing transactions today. Europe continues to offer attractive risk-adjusted investment spreads, supported by lower borrowing costs, our established presence in the region, and a landscape that remains less competitive than in the U.S. We remain constructive on Europe and continue to view it as an important contributor to our growth over time. Turning to data centers, our joint venture with Cloud Capital establishes another large-scale programmatic investment vehicle. The venture includes three Northern Virginia data center assets representing under 400 MW of capacity. We closed on the first stabilized asset last week and expect to acquire our share of two development assets upon stabilization. Our partnership with Cloud Capital originated from a prior credit investment and has evolved into a long-term relationship focused on developing and owning hyperscale data centers across leading U.S. and European markets. Since announcing the venture, data center dialogue has continued to increase, expanding our access to opportunities across the sector. We believe the industry is still in the early stages of a multi-year digital infrastructure build-out, driven by AI adoption, cloud computing, and broader digitization trends. As a result, demand for data center capacity continues to exceed available supply in many of the industry's most attractive markets. We remain focused on top-tier supply-constrained markets and partnering with experienced operators that value our long-term programmatic financing capabilities. Across our investment activity, our scale and sourcing platform continue to be significant advantages that are difficult to replicate through individual asset acquisitions. As an example, earlier this year, the fund acquired a combined 19-property portfolio leased to a top-performing quick-service restaurant operator for more than $100 million. A subsequent third-party valuation completed in connection with our Core Plus fund verified a prevailing market cap rate for the portfolio that is more than 30 basis points below our acquisition basis, providing tangible evidence of the immediate value creation that can be achieved through portfolio transactions. While acquisitions and capital deployment are important drivers of long-term growth, we are seeing increasing opportunities to create value through active portfolio management and capital recycling. During the quarter, we completed $161 million of dispositions, reallocating capital towards areas of the portfolio where we see the strongest combination of organic growth, pricing power, and value creation. Importantly, this approach is not limited to non-core or vacant assets but extends across the portfolio whenever we believe capital can be redeployed more strategically. This disciplined approach enhances portfolio quality, improves capital efficiency, and supports sustainable earnings growth. Looking ahead, we continue to see attractive opportunities to recycle capital into assets that are better aligned with our long-term strategic priorities. We also continued to improve portfolio quality during the quarter, with investment-grade client exposure increasing to 34% of annualized rent from 32% in the first quarter. Portfolio fundamentals remain strong, with occupancy of 98.8% and 482 re-leased units generating a blended rent recapture rate of 102.7%, with renewals at 104.6%. This included a large batch renewal with a single client covering nearly 150 assets, demonstrating the scale and efficiency of our platform. Industrial comprised approximately one-third of leasing activity during the quarter and generated a rent recapture rate of 105.8%, while international recapture rates reached 112.9%, reflecting the continued success of our U.K. value-add retail park strategy. Our international retail park strategy continues to benefit from limited new supply, strong retailer demand, and record low vacancy rates, helping drive attractive leasing spreads and incremental value creation. Importantly, the growth and diversification of our investment capabilities have been matched by similar progress on the capital side of the business. Our expanding capital platform is reducing our reliance on public equity while enhancing our ability to fund growth efficiently. With that, I'll turn the call over to Jonathan. Thanks, Sumit, and good afternoon, everyone. The second quarter demonstrated our commitment to diversifying our sources of capital on a global scale while maintaining a healthy balance sheet. We continue to operate from a position of significant liquidity, conservative leverage, and broad access to multiple capital channels. We ended the quarter with approximately three and a half billion of available liquidity on a pro rata basis. Net debt to annualized pro forma adjusted EBITDA at the end of the second quarter stood at 5.4x or 5.2x inclusive of unsettled ATM forwards, which is well within our target range. Subsequent to quarter end, we further enhanced our liquidity profiles through an expansion of both our global revolving credit facilities and commercial paper programs, an unsecured bond offering in Europe, and continued forward equity issuance under the ATM. Our updated credit facility now provides for borrowings of up to $5.5 billion, an increase of $1.5 billion from the prior facility with a five basis point reduction to our borrowing rate. Similarly, we expanded our global commercial paper program to $5.5 billion, an increase of $2.5 billion. Secondly, we completed a EUR 600 million denominated bond offering at a yield of 3.7%. Finally, we raised an additional $90 million of forward equity, bringing our current ATM unsettled balance to approximately $1.3 billion. Pro forma for these transactions, available liquidity increased to more than $5.7 billion. With our enterprise value approaching $90 billion and a robust pipeline of external growth opportunities, the access to additional capital enhances our ability to immediately finance our investment pipeline while remaining patient and opportunistic in accessing longer term and permanent capital. As a reminder, outstanding borrowings on our credit facilities and commercial paper programs represent our only exposure to variable rate debt. We intend to maintain the variable rate exposure at 10% or less of our total outstanding debt. Our commitment to maintaining a strong balance sheet supported by access to multiple sources of capital was recently recognized in Fitch's initiation of coverage for Realty Income with a solid A long-term issuer default rating. This rating places us among just four U.S. REITs with a solid A or equivalent rating from one of the three major rating agencies. We are grateful that our size, diversification, and track record of performance have elevated us to this rating. We remain active on the capital raising front. Inclusive of the aforementioned EUR bond offering, we've issued $3 billion of new debt year to date at a blended effective coupon of 3.9%, compared to $1.4 billion of debt that has matured year to date at a blended coupon of 4%. We continue to diversify our sources of debt capital across different currencies and investor capital pools with the focus on avoiding saturation or reliance on any one market while lowering our all-in cost of borrowing and managing an appropriate maturity ladder going forward. On a year to date basis, we have issued four discrete debt instruments, including a convertible bond, a U.S. dollar unsecured bond swapped to EUR, a municipal prepaid term loan swapped to EUR, and a EUR unsecured bond. Each of these debt instruments was selected with an intentional bias towards tapping into unique investor bases while minimizing our global and blended cost of debt. On the equity side, a private capital has reduced our reliance on the public equity markets to fund our growth. As a result, we have meaningfully lowered our public equity consumption as a percentage of investment volume, comprising only 18% of investment volume year to date, compared to an average of 47% over the past three years. Year to date, we have settled only $825 million of forward equity to close on $4.7 billion of pro-rata investment activity, all while maintaining leverage within our 5.5x target level. This reflects the benefit of our recent capital initiatives, which have diversified our sources of equity capital. Turning to our 2026 outlook, as Sumit mentioned, we are increasing our full year AFFO per share guidance range to $4.44-$4.45. We're also increasing our full year acquisitions guidance to $10 billion, up from $9.5 billion previously, given the strength of our investment pipeline and the confidence in our ability to source and execute attractive opportunities. At our share, we expect to invest approximately $9 billion during 2026. We are also holding our 2026 credit loss outlook flat at around 40 basis points of rental revenue, reflecting stable operating performance across our client base. Notably, we are not raising our lease termination income guidance. We recorded approximately $1 million in the second quarter and continue to expect $45 million to $50 million for the full year. As a result, the increase in AFFO guidance reflects the underlying strength of the business in terms of investment volumes, yields, modest credit losses, the successful execution of several capital markets transactions, and our expectations for continued momentum throughout the balance of 2026. With that, I'll turn the call back over to Sumit. Thank you, Jonathan. In summary, the second quarter represented disciplined execution across the platform, highlighted by continued performance of a high-quality portfolio, disciplined capital allocation at attractive yields, and the curation of unique capital vehicles that provide Realty Income with durable financing engine to accelerate AFFO per share growth in the years ahead. With that, I would now like to open it up for questions. Rocco? Thank you. We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from queue, please press star then two. Once again, that's star then one if you have a question. Today's first question comes from Michael Goldsmith at UBS. Please go ahead. Good afternoon. Thanks a lot for taking my question. The acquisition cap rates during the quarter were 6.4%, which is a bit lower than what you saw last quarter. Is that a reflection of mix competition or something else? Does that have to play into also the industrial assets with the elevated lease escalators? Just how should we think about the accretion on cap rates of 6.4%? Yeah, that's a great question. The idea here is to always try to blend to a number that is getting us back to our historical spreads, Michael, and the blended cap rate or the investment yield is 7.4%. When you think about the portion, north of $600 million was in the fund, that was where the lower yielding cap rates went. That was by design because that's why the fund was created. Stuff that we couldn't accretively buy on balance sheet was going to be allocated to the fund, where the long-term return hurdles were going to be met. That initial accretion was not. What's remaining has a profile that gets us to our historical spreads of circa 150 basis points. That's how you should think about our investments. Thanks for that clarification. Just as a follow-up, can you provide an update of where we are in terms of generating the income? Is the amount in the quarter, is that kind of the right run rate, or do you expect that to accelerate from here? Also, how much is included in the underlying guidance? Thank you. Hey, Michael. If you look at the supplement, I believe it's page 22, we do show management fee income to Realty Income is about $3.2 million for the quarter. The majority of that obviously is for the U.S. Core Plus Fund. We had raised $1.7 billion during our cornerstone round, and as of early July, we had drawn down all of the capital that is now fee generating. There is also a separate component of that that is attributed to the insurance JV that we announced back in March. In totality, that's where you get the $3.2. In terms of guidance, we've talked about this before. You expect around $10 million or so for the fund in terms of management fees, and then perhaps there'll be perhaps $2 million-$3 million attributable to the insurance JV. Thank you. Our next question today comes from Brad Heffern at RBC Capital Markets. Please go ahead. Hey. Afternoon, everybody. Thanks for the questions. Obviously, rates have been bouncing around a lot, but generally going up. We've also been hearing some of your peers talk about some slight cap rate compression. I guess first, are you seeing that as well, and then do you think higher rates will eventually flow through or are competitive dynamics preventing that from happening? That's a great question, Brad. It's a very strange environment really, because this inverse correlation that exists between how net lease generally trade versus the 10-year largely holds true. What has happened over the last two months is that inverse correlation hasn't held true. It really is a question of what is going to happen to the 10-year, what is the forward outlook, not so much where it's trading at today, that's going to dictate what's going to happen to cap rates. We've oftentimes talked about cap rates being a trailing variable when it comes to interest rate, the 10-year Treasury. If the view is that the 10-year is going to be in this 4.6% to potentially 5% zip code, then what we have historically seen is cap rates do follow. You mentioned it in your question, the way you framed it, there is a lot more competition here in the U.S. There are a lot more new entrants on the private side, along with a few on the public side. There is that competitive dynamics that's going to keep cap rates lower. Ultimately, in a highly elevated cost of capital environment, cap rates will need to adjust. Okay, got it. Thank you for that. You talked a bit about the positive European outlook in the prepared comments. I wanted to specifically zoom in on the U.K. Cost of debt seems pretty unattractive over there, especially compared to EUR debt. Are you seeing upward pressure on cap rates in the U.K. to reflect that, or is it just a less appealing market right now? Neil? Thanks, Sumit. Brad, in response to that question, I think we have countervailing effects. One, of course, is the sort of macro malaise change in the PM and the move in rates. Against that, what you have is institutional capital coming in, and you can see this more broadly across Europe as well. It started really with malls or shopping centers as they're called over there's quite an aggressive bid for those kinds of assets. In the U.K., almost perversely, we're actually seeing institutional capital coming in in good size and driving down cap rates. While we haven't bought retail parks or multi-tenant retail across the continent, there is also now one or two larger private equity players driving consolidation. I think the industrial logic is that they sort of missed that play in the U.K., but there's still an opportunity across Europe. The low level of base rates makes it actually quite accretive on a levered basis. I don't think we're seeing upward pressure on cap rates in the U.K. or frankly, much of Europe, with the exception of Germany. I think if anything, the pressure on cap rates downward on retail parks in the U.K. will continue. Thank you. Our next question today comes from Rob Stevenson at Huntington. Please go ahead. Good afternoon, guys. Sumit, how should we be thinking about how much of the $5 billion or so of second half investments in the guidance is likely to be put on Realty Income's balance sheet and financed by the REIT versus going into various JVs, funds, partnerships, and anything new that you would create over the remainder of the year? Yeah. We've said we are going to do about $10 billion. That's the guidance. What we have shared with the market is that $9 billion of that $10 is going to be on balance sheet. If you see what we've invested year to date on the fund, we have largely used up the equity, the cornerstone equity. Actually, we've completely used up all of the equity that we've raised. The only assets that are going to go on the fund will be the leverage capacity that the fund has that is still available to it. That's going to be obviously, it's the same ratio, one third, two-thirds. We've got about $1.7 billion that we've raised in equity. We've got about one third of that amount in leverage capacity to deploy. The rest of it will be on balance sheet. Okay. That's helpful. With these various funds, JVs, partnerships, et cetera, that you now have in place, do you have all of the sources of capital that you guys think that you need to execute the business plan over the next couple of years? Should we expect to see more of these types of partnerships and JVs being announced over the next six to 12 months, given what your pipeline looks like? Rob, I think in terms of the product that we are going to pursue from an investment perspective, that's largely defined. We've been talking about our desire to go into data centers. We have now formed joint ventures. Is it possible that there could continue to be other JVs that we form with developers who have a very healthy pipeline that fits our box? The answer is yes. Especially on the heels of the announcement that we've made, there are some very interesting conversations that are taking place, and that is much more in line with what we've already shared. The other asset types are ones that we are just continuing to invest in. Obviously, the fact that we've created these multiple channels of geography and asset types, we are going where the best risk-adjusted returns are. On the financing side is where we are sort of still new in the game. The rationale behind why we did what we did was to try to sort of leverage the platform that we have with a lot lower cost of capital, a lot lower cost of equity capital, let me be more precise, that we could then generate earnings contribution through the fee stream. I would say that's the journey that we are on. I've heard Jonathan mention it as an ecosystem that we are trying to create where we are maximizing the utilization of a platform with trying to attract the lowest cost of equity capital that wants to leverage and wants to pay fees and basically be exposed to net lease investing. I won't go so far as to say what we've shared with you is the end all and be all of all equity capital sources. I would characterize it as it's the beginning and there'll be other channels. What we are going to be acutely focused on is to make sure that the overlap on these various different sources of equity capital, private sources of equity capital, is very minimal. We want to make sure that we're using our platform very judiciously to serve these various different sources of capital, make each one of them very successful so that this fee stream that we are able to generate continues to be one that is a very high level of permanence and one that we can count on and our shareholders can benefit from in years to come. Thank you. Our next question today comes from Smedes Rose at Citi. Please go ahead. Hi. Thank you. Just to follow up on kind of your acquisitions outlook. It looks like for your portion, the back half of the year is estimated around $4.3 billion. That suggests it decelerates a little bit from what you saw in the first half. Could you maybe just speak to what you're seeing there? Is it slowdown by design? Are you being conservative? Is competition heating up? I'm just interested in any kind of color around that outlook. Mark? Yes, thanks for the question. I think that, with the guidance at $10 billion and the first half total investments of $5.3 billion, I don't think there's a lot of deceleration in there. I'm just looking at your portion. You said for your portion, it would be $9 billion for the year. Yes. Right? That's the overall global investment amount. Look, it's not driven by anything in terms of what we're seeing in the market conditions in terms of deceleration. In fact, it's really the opposite. We increased our overall volume guidance because of the strength and robustness of the pipeline. As we're sitting here today, we feel great about the pipeline and about another strong second half of the year. Yes. Okay. Yeah, go ahead. Sorry. To forecasting out and trying to back into what is the delta between what we have forecasted versus what we haven't. What I can tell you from a pipeline perspective, from the health of the pipeline, from what we are seeing, we feel great. Great. Okay. Just on that, you obviously leaned into industrial in the quarter. Just wondering, is that a primary focus going forward from here, or are you happy with the kind of exposure that you have in that asset class at this point? Industrial has always been a focus of ours. We obviously can't go into the three cap deals that we just saw recently announced. In industrial, single-tenant industrial, more specifically, across various geographies, has always been something that we've leaned into. The way we are playing that is through the development channel. Is partnering with the best-in-class developers and being able to generate yields, with more of a built-to-suit characteristic rather than a spec characteristic, where we are able to meet the hurdles that we need to meet in order to generate the spread investing that you and our shareholders are used to seeing. What you're seeing today is, and I'm sure you've heard it from other industrial companies, is what we expect to be a new trend, where absorption rates are trending very positive. Vacancies are all at all-time lows. What's driving this demand is much more widespread than e-commerce, which was the driver of industrial demand four, five years ago. It's much more broad-based. It's industrial, it's manufacturing, it's data center equipment that needs to be stored in warehouses, et cetera, that is also driving some of the demand. We feel very good about the pipeline that we've created, and we are being able to do it at cap rates and investment yields that make sense to us through a combination of investing on the credit side as well as on the equity side. Thank you. Our next question today comes from Haendel St. Juste with Mizuho. Please go ahead. Hey, guys. Thanks for taking the question. Sumit, maybe starting with you, I guess I was intrigued by some of the comments you were making about capitalizing on the market to do some portfolio recycling, improving the quality of your on-balance sheet assets. I'm curious how much of the portfolio ballpark might be subject to being upgraded, recycled. Sounds like you're doing a bit more high-grade here. Is that something we should expect near term? Maybe some color perspective on the difference in cap rates or bumps in what you're buying versus selling. Thanks. That's a great question, Haendel. I think, in the prepared remarks, you picked up on our desire to continue to recycle capital. Obviously, we have talked about there are certain metrics that we are very focused on, internal growth being one of them, duration of the lease term being another. Being exposed to credit that we have a long-term view on and we feel comfortable with is another metric that we are going to be very focused on. This capital recycling that we would like to continue to lean into is largely on a pro forma basis, going to help make each one of these variables that I just mentioned accretive. That's the desire. It could be obviously leaning into the data center side, leaning into the industrial side, and repositioning our overall portfolio to make sure that our net lease metrics that we focus on, KPIs that we are very focused on, continues to move in the right direction through this capital recycling. That's great color. Thank you for that. Jonathan, a question for you. Maybe if you'll allow me a two-parter. Just, I wanted to get some clarification on what's in the other adjustments per share. Looks like if we excluded that, the AFFO per share guidance would be down. Maybe I'm misinterpreting it, so maybe some color on that, and then just some color or thoughts on the duration of the loan book. Seems like there's a decent amount of high yielding paper maturing in the next couple of years. I'm curious if you guys are expecting to be able to originate more or how you plan on managing that dilution. Thanks. Hey, Haendel. The other category is really nothing new. It's primarily FX related gains or losses that are non-cash in nature. You also have other CECL related type of impacts as well. That's nothing that would raise to the level of a cash adjustment that would impact the AFFO and shouldn't impact the AFFO given that it's non-cash and it's not recurring. I would say on the loan tenor, assuming you're talking about the investments that we make. Look, we've talked about this before. When you think about the right-hand side of our balance sheet, and you think about legacy balance sheet with a fair amount of debt that's rolling every single year, this provides a nice hedge, if you will, a natural hedge where if rates go down, yes, theoretically there's reinvestment risk, but also, the other side of our ledger is also much more attractive in refinancing at much lower rates and vice versa. We manage it. We look at it just as closely as we look at The liability side of the balance sheet, and that's how we risk mitigate and forecast what our exposure is should there be various scenarios play out in the rate environment. Thank you. Our next question today comes from Omotayo Okusanya with Deutsche Bank. Please go ahead. Yes. Good afternoon, everyone. Just along Haendel's line of questioning in terms of capital recycling, could we see that also manifest itself as kind of new JVs or doing more with your current JV partners, or are you kind of thinking much more of just kind of outright asset sales? Yeah. The idea being recycling. Yes, we are continuously looking at our portfolio, Omotayo, and we are trying to figure out where are the assets that are mispriced in the market, where we don't have a long-term hold strategic outlook on certain portions of our portfolio, and we'd much rather sell those assets, raise that capital, and redeploy it in either asset types or geographies or risk-adjusted opportunities where we feel we have a much higher conviction on holding long term. That's what we're talking about. It's not supposed to represent additional JVs, et cetera. That is not the idea behind the capital recycling that you should sort of think about when we are talking about capital recycling. Thanks for the clarification. Sure. Thank you. Our next question today comes from Alec Fagan with Baird. Please go ahead. Hey, thanks for taking my question. On the data center hyperscale deals, can you speak if, after these three assets, are you diversifying your tenant base or the end tenant base for your data center portfolio? Sure. Thanks for the question. Yes, we are. Obviously, we announced a transaction three years ago with two data centers in Northern Virginia that had a specific tenant in it. The transaction that we just announced last month, that's three data centers, has varied tenants in it that are different than the original two. We currently have the five assets with different tenants in them. Going forward, as we continue to build out our data center portfolio, that is one thing that we're going to keep our mind on as part of our strategy in terms of obviously we want to focus on the investment-grade-rated hyperscalers and enterprise users, and those work well for us, but we are going to be very mindful of making sure that we balance our concentration to any particular assets or tenant, sorry, rather. Nice. That's kind of on the tenant question broadly, should we expect any new top 20 tenants entering the portfolio this year? Well, Alec, when that happens, it'll be announced, I think it'll be viewed very positively. Obviously, these data center clients tend to be very large. When those close, could it potentially reshuffle our top 20? The answer is yes, it'll be viewed very positively in my opinion. Thank you. Our next question today comes from Ronald Kamdem with Morgan Stanley. Please go ahead. Great. Just staying on the data center portfolio theme, maybe can you talk a little bit more about sort of the economics, whether it's sort of stabilized yields or price per megawatt, just your views on that going forward and also on the competition, right? Because I think there's a lot of big private equity players out there. There's other public capital. Just what that environment is like to get these deals through. Thanks. Sure. Thanks, Ronald Kamdem. Let me hit the second part of the question first, if that's okay. Yes, there are a lot of people in the sector right now, both on the development side and people wanting to invest capital into this sector. There is a lot of competition for both developing these assets and owning them. I think that one of the important things, though, is that there are a lot that are still in the development phase if we're talking about the large hyperscale data centers. There's probably a lack of a natural home for the ultimate long-term ownership of those assets. Some of the developers may want to keep ownership of them for the long term, but others do not. That does create despite the competition out there and the players in the sector going after some of these assets. For somebody like us whose model focuses on holding long-leased assets that have clients with strong IG credit ratings in them with good annual bumps, there's a natural sweet spot for us to be long-term holders of that. I think that makes us perhaps a little bit different than some of the other people who are playing in the space right now. In terms of your question on cap rates, I think there's still a bit of just overall discovery going on in the market. There are a lot of these large assets are still rolling from the development phase into the potentially changing hands for the stabilized phase. I think there's been some transactions that have been in the market recently that have been announced where there's some cap rate data out there on them. I think that's a good indication of kind of where cap rates are right now for these types of assets. Great. My second one, if I may, I think just going back, I think the comments were 40 basis points in terms of chosen bad debt for this year. Just can you remind us the watch list, sort of any changes over the last three months, any sort of larger tenants, or does it remain pretty granular? Thanks. Hey, Ron. The watchlist remains in the high 5% area, and I'll say it's a very granular watchlist. I think there's 137 individual tenants that comprise that, with a median of about two basis points. At the very top, it's the usual suspects. I would say it's home furnishings, it's casual dining, and then drops off pretty significantly thereafter. When you were thinking about any changes to credit quality in the portfolio, very stable. Some things have come out, some things have gone in. Broadly speaking, from a guidance perspective or from a forecast perspective, the 40 basis points does still feel fairly conservative. Remind folks that our historical credit loss across our entire history has been in the low 20 basis points area. We are trending back towards that area, but still create a little bit of buffering cushion there guidance-wise. Thank you. Our next question today comes from James Kammert at Evercore. Please go ahead. Hi. Good afternoon. Thank you. Again, if I could get back to the data centers, there's no doubt there's an abundant opportunity out there for Realty Income. I'm just curious if I play devil's advocate. If you're underwriting these to zero residual value, given your bumps and you're going in representative cap rates, what would the zero residual value IRRs look like today? Yeah, Jim. We're not going to go into the details, but that is definitely one of the scenarios that one should look at. There's been a lot of debate about residual values, the fungibility of these assets, which is why the box that we've created takes into account where these data centers are located. What is the throughput required? Do we see Northern Virginia suddenly in 20 years' time, when the leases come due, no longer be the epicenter of data center world? Do we see data centers demand completely dry up? Based on that, you run various different scenarios, and that is one of the reasons why we sort of lean into these very long duration leases. 15 to 20 years and preferably 20. We are trying to partner with developers who have the ability, such as Cloud, to get these types of long duration contracts with very minimal responsibilities on the landlord side. What we feel is when we run these various different scenarios, we are very comfortable with the downside. We are very comfortable assuming the outcome if the world were to completely fall apart and it is in fact going to be sold for land at the end. That is certainly a scenario we run, but the way we try to mitigate it is by looking at all of these other factors. What kind of an asset is it? What's the duration of the lease? What's the growth you're getting in it? What's your going-in yield? Those are the things that you sort of protect, will allow you protection when you're running these downside and Herculean scenarios. That's how I would leave it. That's fair. Quickly, what were your tolerance in terms of absolute exposure to data centers as a percent of ABR or your gross investment? Yeah, Jim, we are not targeting a percentage of our portfolio needs to be data centers. What we are seeing is a once-in-a-generation demand for a particular asset type that has clients that we are very attracted to in locations that we find very interesting. We are having multiple conversations. How many of those conversations actually translate over to transactions, time will tell. This is a fascinating environment for us, and we are very excited about the deals that we do get over the finish line, the deals that we pursue and are able to sort of enter into. We're going to talk about it, and we'll be able to defend those every day. We are as focused on some of the obsolescence risk and the residual risk that people talk about. There are obviously mitigants that we have built into the process to make sure that we only engage in transactions that have a return profile that meets our overall long-term return expectations. Thank you for the color, Sumit. Thank you. Sure. Thank you. Our next question comes from Jason Wayne at Barclays. Please go ahead. Thanks for the question. To step away from the data centers, on the rest of the investment pipeline, you said you were still interested in Europe. Just wondering if you could give kind of a mix of what's in the pipeline today. Sure. Neil will take that. Sure. Look, I would say the mix today is largely reflective of the kinds of things we've done in the past and continue to like. We're looking at deals in grocery, in DIY, on the industrial logistics space. Generally, many of these are with marquee names in their country or globally. Some of the industrial deals, as Sumit alluded to, are development driven. The majority of what we're looking at today, I would say, is in markets where there is also a theme that we're looking to play, whether it's onshoring or advanced manufacturing. I think the pipeline looks quite good across Europe as we look at the back half of the year. Got it. Then you mentioned that public equity funding was down to 18% of your investment volume this year. Is there any kind of long-term target there since the private capital is obviously more one time in nature? Well, Jason, I think it's going to depend on circumstances. We're not saying we're never going to touch the public equity markets. It's been very good to us over the years, and it's a very deep market. We don't want to be beholden to just one source. Whether it's 18%, whether it's 50%, a lot of it's going to be dependent on what other partnerships and how we grow our existing partnerships and sources of private capital. Then obviously, the bigger question is the volume of opportunities that we see is very robust. It's hard to put a number there. What we do want to make clear is that all of these sources of private capital are meant to, as Sumit mentioned, not overlap with one another but also increase the buy box for us. There are deals that are very high quality, and I think you see that with the Core Plus Fund in terms of what we're putting into the fund that we haven't been buying on balance sheet because of the lower initial yield. From that standpoint, the reason we went into this a matter of a few years ago was really to solve that one underlying question as to whether or not we could expand our sources of equity beyond the public markets, maintain a level of scarcity value in our securities, and not have as much exposure to a very volatile source of funding. Yeah. Jason, just to be very clear, you mentioned that it's one time in nature. It's the exact opposite of what we've created. I mean, the open-ended fund, by definition, will be a vehicle that will continue to raise capital out into the future. That's the reason why we constructed it as an open-ended vehicle rather than a closed-end fund. The JV that we have with GIC is meant to be a programmatic JV. Once we've utilized the initial capital commitment, the hope is that they will continue to deploy more and more capital with us. It's a similar situation with Apollo. We are shying away from partnerships, et cetera, which is one time in nature or closed-ended in nature, primarily because we want this fee stream to be permanent and growing into the future. I just wanted to make that one correction, Jason. Thank you. Our next question today comes from Jana Galan with Bank of America. Please go ahead. Thank you. Good afternoon, and congrats on the quarter. Jonathan, I just wanted to follow up on the guidance increase to better understand the driver of the $0.02 increase at the midpoint. I guess there's no change to bad debt, no change to fees. Is it just primarily the higher investment volumes? A lot of what drives AFFO in a very finite span of time is timing. Then obviously, what we haven't discussed is capital markets, because for obvious reasons, we don't give capital markets guidance. I think between those two dynamics, especially that we're sitting here in August right now and a lot of the capital markets execution risk has been taken off the table, given the fact that we have much better visibility today on the deal pipeline and importantly, the timing of when those deals will close that gave us a lot more comfort to take this guidance range up. I think it's really a combination of just de-risking certain question marks that you inherently have at the beginning of a year, then obviously a very attractive pipeline of deals with more certain closing dates. Great. Thank you very much. Thank you. Our next question today comes from Anthony Paolone at JPMorgan. Please go ahead. Yeah, thanks. Good evening. I have a question about just the allocation of capital and your investments across these various buckets. I was wondering what a wholly owned acquisition yield needs to look like for it to be interesting. The reason I ask is when I look at what you're doing, it seems like eights and nines on some of the loan investments and the sevens on the development and the fee enhancements from your various private capital sources will get you into the sevens as well. When you get to a wholly owned deal, what does that have to look like to kind of be interesting and competitive? Yeah. The answer is it's different by geography, Anthony. That's the reality, and that is something that we are tracking on a weekly basis. We have hurdle rates that need to be met because we need to permanently finance it. What we try to generate is 150 basis points of spread. That's what we've historically achieved. Given dynamics that might be unique to certain geographies, the cap rates need to get to those levels is going to differ. Obviously, the cost of capital also comes into play, especially in places like Europe, where they just tend to be a lot lower given the cost of debt. The corollary is also true. In places like the U.K., I think there was a previous question that was asked. The cost of debt is slightly higher, therefore the expectation is that deals need to have a higher yield to satisfy that 150 basis points of spread. There isn't one cap rate. It is definitely something that we track very closely and the team tracks very closely. Okay. I just have one item that I'm curious about. Your fee earning AUM, I think went up $1.3 billion from 1Q to 2Q. When I look at what your investment activity was, it was half a billion dollar difference between everything you did versus your share. Am I confusing concepts? I would have thought that that AUM would go up with that difference. Anthony, I think you should think about the Apollo JV. That was a contribution of assets off our balance sheet, We are getting fees off of the portion that we are managing on behalf of our partner there. Thank you. Our next question today comes from Greg McGinniss at Scotiabank. Please go ahead. Hey, good afternoon. Not to belabor the point here, taking us back to data centers for a moment. Are you open to data center investment in Europe? Curious how returns there compare to the U.S., are you avoiding investing in the development phase, or is that just the nature of the agreement with Cloud that you would wait until stabilization? Sure. Thanks, Greg. Thanks for the question. Without going into the specifics of the Cloud transaction, I think your first part of your question, which was whether we'd be interested in investing in Europe or outside the U.S., the answer is yes to that. We're certainly in a lot of different countries now in Europe. There's some very good data center markets there as well, the FLAP markets plus some other emerging, very attractive markets. That is absolutely something that we would be open to. As part of the Cloud JV that we announced, as you saw, that could present us with opportunities not only in the U.S. but also in Europe. Your question about, I think, cap rates and yields, and this ties back into Sumit's earlier answer. It really is dependent on a country by country basis. Cap rates can be different, asking cap rates can be different, our cost of capital also varies by region, by country. Hard to give you a definitive answer on that other than like everything else, depending on what country those data center assets might be in, we're going to underwrite them and seek to get the same historical spreads and returns that we would normally get. In terms of investing in the development phase versus post-stabilization preference. Yeah. Thanks. Sorry, I forgot about that part of the question. There are ways that we can, for example, I think we've mentioned this, what led to our Cloud JV and the three seed assets was actually by lending during the development phase of projects. So, that is something that we can do. We can play in different parts of these phases of these assets, not just with Cloud, but with other potential transactions as well. Okay, thanks. On the loan investments, the initial yields are up to 9.2% this quarter. Was there anything in particular that was driving up that yield? Assuming a similar kind of rate environment going forward, I guess, what are your expectations on turning those investments into real estate versus recycling that capital back into more loans? It could have multiple reasons as to why we do the credit investments, Greg. Part of it is precisely what Mark was mentioning, that it is a way for us to then have access to the real estate, which is acting as the collateral in the development phase. We are able to, depending on where we invest, able to get outsized returns, depending on the risk that is associated with that investment. The idea has always been that we will use credit investments to either have a channel to owning that real estate, because that's one way to play it, or to build relationships with operators that have a pipeline of assets that we are interested in. More often than not, the investments that we are making is secured by real estate. Real estate that we would love to own. That's the thinking and thesis behind the yields. If it's obviously a stabilized asset, the yields tend to be lower. If it's during the development phase, the yields are going to be higher. That's definitely going to be a function of the risk inherent in those investments that will dictate what the yield is. Thank you. Our next question today comes from Eric Borden at BMO Capital Markets. Please go ahead. Great. Thanks. Just going back to the guidance raise on the $0.02 at the midpoint. When you mentioned capital markets execution risk being taken off the table, is that primarily related to debt issuance or equity funding and cross-currency financing? Is just the overall funding visibility for the pipeline greater increased? The combination of all of that, Eric. I would say, obviously debt financing, we've taken a lot of that risk off the table. The European markets and the shape of the FX curve has been very beneficial to us. Importantly, a lot of what we've done on the acquisitions and investment side is EUR denominated. We've had a net investment hedge capacity that can match fund the financing in the same currency as where we're getting rent and where we're deploying our capital. On the equity side, you can see we've got $1.3 billion of unsettled forward equity. That's at a reasonable price. Certainly that's a risk where you have initial guidance that you come out with in February, where you don't want to take for granted that you're going to be able to have that type of equity cost. I'd also say, just looking forward, part of it is also thinking about yields. If we have more visibility to the pipeline in terms of volume, you can assume that we would have pretty good visibility in terms of yields, which translates directly into investment spreads. I would say it's really a combination of all the factors that you mentioned there. Great. Thanks. Just on the same-store revenue growth of 1.2% in the quarter with strength from the industrial and gaming sectors. There was an offset of a 5.1% decline from the other bucket. Hopefully you could provide some more color on what's driving the underperformance in that category, whether it's a specific asset type or tenant cohort. When you look at the footnote in terms of other, you do see that we've added hotel to that category. The quantum itself is not meaningful, but I would say it is an asset that we assumed from a prior merger. We feel like we're coming to a good resolution on this. There was a little bit of non-payment of rent that we absorbed in the second quarter. Thank you. Our next question today comes from Upal Rana with KeyBanc Capital Markets. Please go ahead. Great. Thank you. Sumit, on your updated investment guidance of $10 billion, is that a reasonable annual deployment run rate we should be expecting for the company can achieve going forward? Not looking for any future guidance numbers, just there were some larger investments this year. Just curious if that's a level that we should expect going forward. Well, Upal, in 2022, we did $9 billion. In 2023 or 2021, one of those years, we did $9.5 billion. This is the third year that we are forecasting to do north of $9 billion. All we've done is expanded our investable channels and we've expanded our geography. Look, we are very comfortable guiding to 2026 at $10 billion. Obviously, we've been very open about the areas that we would like to invest in. We've talked about once in a generational opportunity on the data center side. Those are the things that I would ask you to consider. In terms of sourcing, year to date, we've sourced north of $62 billion. This is very much in line with the all-time high that we had in 2025. Every year, as we've expanded these investable channels and geographies, our sourcing numbers have gone up. One could even make the argument if we had a better cost of capital, things would be even simpler. I'm not going to go into whether $10 billion is the right run rate or not. I can speak to this year being something that we are very, very confident about and very much believe in meeting. Okay, great. That was helpful. Just a quick one on the new client rent recapture rate. I know it only represents about 10% of the total re-leasing, it was materially below the portfolio average. Just wanted to get your comments on what was driving that. The 102.7% was materially lower than our guidance. I don't believe we give guidance on recapture rates. My team is showing me some numbers. Are you talking about with new clients? Correct. I understand. There were very few assets that went through a new client. Upal, what I would ask you to focus on is what is the blended rate that we are able to achieve. For the right client, we are absolutely willing to give rent haircuts and enter into a longer-term contract with more growth. Those are things that we will continue to play. What we have said is we are a very mature, highly effective asset management business. Those are going to be areas that you will see fluctuate quarter-over-quarter. What we focus on is when you take that into consideration, along with releasing of the same clients, what are we blending out to? Is that a positive number? I would say that this almost 103%, that has largely been the case quarter in, quarter out since we've been tracking this number over the last eight, nine years now. That's something we talked about 10 years ago when asset management wasn't as big a part of our business. Today, what is it, Janine? Close to $400 million of leases that are rolling on an annual basis, and it'll be closer to $500 in the years to come. It is very much a big part of our business, and it'll continue to be a driver of growth, and it's a team that I'm very proud of, and they continue to post amazing results for us. Thank you. Our next question today comes from Jay Kornreich at Cantor Fitzgerald. Please go ahead. Hey, thanks. Just one question for me on the private capital fund. You mentioned deploying the initial $1.7 billion of equity from the Private Core Plus Fund. Wondering just where do you go from here? Were there any limits or barriers that led to the initial raise being that $1.7 billion? How should we think about the private capital fund growing in size from here? Hey, Jay. I think one way to think about it is, for a cornerstone raise, that's when the big initiative is to build the AUM. Once you get that capital in the door you've proven that you can deploy it accretively, there's a performance track record that we are trying to build here. You generally need a three-year track record until you can come back to the market and really open up the floodgates for more capital. I'll remind everyone that, Sumit mentioned earlier, open end perpetual fund, which in the environment we've been in, is not exactly the most active market from a fundraising standpoint, and we were able to buck that trend. Now the focus is on performance. I think where we go from here is, there's a lot of focus internally on making sure that we're making all the right decisions. Should there be capital recycling? Obviously, the deployment of the capital has been a big focus on the right deals with the right underwriting and the right structuring. We're constantly going to be open for business in terms of trying to raise capital. The expectation was always you get the cornerstone capital in the door, you deploy it, you manage it, you show results, three years in, that's when your next round starts to really take off. Okay. That's a helpful context. That's all for me. Our next question today comes from Spenser Glimcher with Green Street Advisors. Please go ahead. Yeah, thank you. As Realty Income continues to find accretive ways to grow, I'm just curious how big you envision the credit platform could be as a percent of overall investment volume in any one given year. Then can you remind us, do you have a dedicated team looking for these credit opportunities? I'll answer your second question first, Spenser. Yes, we do. We have dedicated folks here in the U.S. as well as in Europe looking for transactions on the credit side of the equation. In terms of how big we would like for this to be, again, just like there was a question on asset type composition and what we want data centers to be or industrial to be. We view credit as a way to ultimately get to owning assets fee simple. That is how we are using credit to enhance relationships with developers, to cultivate relationships with developers, and gain access to the real estate that we have a long-term view on. So today, it's a very small portion of our balance sheet. It's circa $3 billion is our credit investments. We feel like it has allowed us access to channels that wouldn't have been available to us had we not gone down this path. While we are investing higher up on the balance sheet with better collateral, while generating yields that are quite compelling. So if that leads to then owning real estate, I think it's a channel that we want to continue to lean into. Obviously, this is not something that's going to dominate our balance sheet. We are not a bank. It is a way to sort of cultivate relationships that allows us to execute our core business, which is owning net lease assets, long-term net lease assets. Okay, great. Maybe just circling back to the capital recycling. I know you provided a lot of great color around the direction there. It looks like you've sold more occupied assets this quarter as a percent of your total disposition. That's just speaking to your more proactive asset management. I'm just curious, was there any one credit or industry that drove elevated asset management in 2Q, or was this just a slightly busier quarter? Yeah. Look, I hope that this trend continues. What you are going to see, Spenser, is that it could be a credit-driven decision. It could be a mispricing decision that we see that the private markets are valuing assets at a much lower cap rate than what we would have on our balance sheet. We are not tied to any one asset. If there is a massive mispricing that we are going to see, we're going to try to lean into that. We know where we want to put capital to work, if this could become a source of capital that allows us to sort of reposition our portfolio in a way that is incredibly accretive, we want to lean into that. You shouldn't just look at occupied sale as a way to reduce credit. That could certainly be a reason to do that, but it is not the only reason why we would be selling assets, occupied assets, into the market. Thank you. That does conclude our question- and- answer session. I'd like to turn the conference back over to Sumit Roy for any closing remarks. Thank you so much, everyone, for joining this call, and we look forward to seeing you in upcoming conferences. Rocco, thank you for hosting us. Yes, sir. Thank you very much, and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.