Hello, and welcome to W. P. Carey's Second Quarter 2022 Earnings Conference Call. My name is Kevin. I'll 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'll be taking questions via the phone. Instructions on how to do so will be given at the appropriate time. It's now my pleasure to turn the call over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead. Good morning, everyone. Thank you for joining us this morning for our 2022 Second 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 W. P. 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 wpcarey.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. With that, I'll hand the call over to our Chief Executive Officer, Jason Fox. Thank you, Peter, and good morning, everyone. During the second quarter, we continued to successfully navigate a dynamic market backdrop, performing strongly on a number of fronts. Same-store rent growth reaching a new high and raising our expectations for the deal volume we can achieve this year. In an environment where investors are concerned about inflation, rising rates, and potential for recession, we believe we're uniquely positioned among our net lease peers to continue growing. The outperformance of our stock has enabled us to raise additional forward equity, ensuring we have ample capital to deploy to new investments, raised at stock prices that help offset some of the spread compression caused by sharply higher interest rates. With cap rates moving higher, we're optimistic about our ability to continue investing accretively in the second half of the year. We also continue to offer downside protection with one of the healthiest balance sheets in the net lease sector, a diversified approach, and a roughly 5% dividend yield, supported by high quality cash flows and best-in-class rent collections throughout COVID. I'm joined this morning by Toni Sanzone, our CFO, and together we'll cover these topics in addition to our earnings and updated guidance, which includes the impacts of our merger with CPA:18 closing just a few days from now. John Park, our President, and Brooks Gordon, our Head of Asset Management, are also here to take questions. I'll start with our acquisition of CPA:18. Earlier this week, we announced that CPA:18 shareholders approved our proposed merger, which is scheduled to close on Monday, August 1st. This acquisition adds about $2 billion of high-quality real estate to our portfolio at a cap rate in the mid-sixes after planned asset sales, the vast majority of which have now been completed. In addition to being well aligned with our existing portfolio with no integration risk and minimal balance sheet impact, the transaction concludes our exit from the non-traded REIT business, incrementally simplifying our company and enhancing the quality of our cash flows. I'm pleased to say that we ended up to the high side of our original estimates for accretion from the merger through a combination of several factors, including stronger NOI growth from its portfolio of operating self-storage properties. Moving to our internal growth. With close to 60% of rents coming from leases tied to inflation, we continue to generate sector-leading rent growth, a result of our longstanding focus on sale-leasebacks, where we are able to directly negotiate lease structures. During the second quarter, about 15% of our inflation-based ABR went through scheduled rent increases with an average increase of 5.6%. Within this, leases with uncapped CPI rent bumps saw rent increases averaging just under 7%, and CPI-based leases, which had rent bumps tied to CPI but with caps, saw rent increases approaching 4%. This resulted in our overall contractual same-store growth increasing to 3% during the second quarter, which we believe is the highest in the net lease sector. Based on current forecasts for inflation, we anticipate that our overall contractual same-store growth will further increase to about 3.5% in the second half of the year and closer to 4% in early 2023, with the potential to move higher if inflation remains at recent levels. In addition to the assets we're adding through the CPA:18 merger, we've also made excellent progress towards the investment volume embedded in our original guidance, completing about $1.1 billion of investments year to date, including $478 million in investments during the second quarter and just over $300 million in July. Within our diversified approach, we remain primarily focused on warehouse and industrial properties, which comprise over 80% of our second quarter deal volume. On a regional basis, our second quarter investments were split roughly two-thirds to one-third between the U.S. and Europe. We continue to generate strong deal flow from existing tenant and sponsor relationships, representing close to 80% of our second quarter deal volume. While our pipeline remains fluid, we continue to see plenty of opportunities and feel good about where we are at this point in the year. In total, given the transactions we've completed so far, those that we have in our pipeline at advanced stages, and capital projects or commitments scheduled to complete in 2022, we have good visibility into investment volume approaching $1.5 billion, with five months of the year remaining, including the fourth quarter, which is typically the strongest quarter as sellers seek to complete transactions ahead of year-end. Turning now to the transaction market backdrop, which continued to evolve during the second quarter and can fairly be characterized as remaining in an adjustment period in response to sharply higher interest rates as sellers' expectations on cap rates catch up with those of buyers across property types and regions. Broadly speaking, to the types of investments we target, we've observed market cap rates move roughly 50-100 basis points higher year to date, with the bulk of that movement occurring since the end of the first quarter. The $1.1 billion of investments we completed year to date had a weighted average cap rate of about 6.1%, which includes investments closed at tighter cap rates earlier in the year. While we executed deals across a wide range of cap rates, generally, we went from making investments with going-in cap rates in the fives during the first quarter to making investments with cap rates in the mid-sixes during the second quarter, and we see potential for cap rates to further increase during the second half of the year. Of course, we are not solely focused on initial cap rates. Importantly, our investment spreads are also benefiting from higher growth on newly originated deals. For leases with rent escalations tied to CPI, we're projecting a relatively high growth rate in the first year or two, benefiting our unlevered IRRs or average yields. Fixed rent bumps on new deals have also been getting gradually higher. The combination of higher rent growth and a more favorable cost of equity means we won't need to see as much cap rate movement compared to most of our net lease peers in order to get back to the spreads we were achieving last year. In terms of our ability to win deals, our established approach continues to work, providing certainty of close to sellers given the moderate use of leverage in our underwriting and ample liquidity. In fact, we've strengthened our competitive position now that the higher-levered buyers, including private equity real estate funds and other buyers relying on CMBS, have largely moved to the sidelines given dramatic rate increases in their cost of capital or the unavailability of asset-level debt. This is in marked contrast to the last few years, when sellers would largely overlook the execution risks associated with such buyers, allowing them to win deals on pricing that was only a few basis points tighter than traditional REITs. In terms of the types of transactions we're focused on, sale leasebacks continue to comprise the large majority of our investments during the second quarter. Corporate owner-users of real estate contemplating sale leasebacks typically have a use of proceeds, which supports deal flow during both times of economic expansion, often in conjunction with M&A activity, and during times of economic contraction, when alternative sources of capital, such as high-yield debt, are considerably more expensive or less available. This is especially the case for tenants just below investment grade, which is the segment of the sale leaseback market we target. Turning now to our capital position. Having issued over $300 million of equity forwards through our ATM program during the second quarter at an average price close to $84 per share, we're in an exceptionally strong position. In conjunction with previously issued equity forwards that remain undrawn, we currently have enough equity capital available to fund over $1 billion of investments on a leverage-neutral basis. Our ability to execute on our 2022 investment volume will therefore largely be driven by what happens in the broader economy and net lease transaction markets, particularly cap rates, rather than our ability to access the capital markets. The forward equity we sold during the second quarter also factors into our ability to maintain adequate investment spreads, with our stock price improving since earlier in the year and relative to where it was during 2021. Because we are conservatively levered, our cost of equity has a larger impact on our overall cost of capital than our cost of debt does. The improvement in our stock price has therefore helped offset some of the increase in our borrowing costs. In closing, despite investors' concerns about the slowing global economy and potential for a recession, the factors I've discussed this morning give us confidence in our ability to navigate the second half of the year. In addition to higher internal growth, we expect to continue finding interesting new investment opportunities at increasingly wider cap rates, armed with ample liquidity and an advantaged cost of equity. We also continue to believe we're better positioned than any other net lease REIT for inflation protection and have one of the safest REIT portfolios with proven stability in our cash flows. With that, I'll pass the call over to Toni. Thank you, Jason, and good morning, everyone. Total AFFO for the second quarter was $1.31 per share, with real estate AFFO of $1.27 per share, driven by strong same-store rent growth and the continued pace of our investment activity. We are pleased to announce our updated guidance this morning, with an increase to our expected real estate AFFO of $0.08 per share at the midpoint, or about 1.6%, driven largely by the expected impact of our merger with CPA:18. Anticipated accretion from the merger, combined with overall strong performance from our core real estate business, is expected to more than offset the investment management income we previously earned from managing CPA:18. As a result, for the full year, we currently expect total AFFO of between $5.22 and $5.30 per share, an increase of $0.02 to the midpoint of our initial guidance range. This includes real estate AFFO of between $5.13 and $5.21 per share, representing estimated year-over-year growth of approximately 5.7%. As Jason discussed, given the pace of our investment activity year to date and the visibility we have into our pipeline, we are raising our guidance assumption for investment volume by $250 million at the midpoint to between $1.75 billion and $2.25 billion, which of course is separate and in addition to the approximately $2 billion of assets we expect to add through our merger with CPA:18. Upon completion of the merger, we expect CPA:18's net lease assets to add approximately $75 million of annualized base rent. In addition, the 65 self-storage operating properties we are acquiring from CPA:18 are expected to generate approximately $60 million of annualized operating NOI, with an estimated $26 million contribution to our 2022 guidance from the close of the merger through the end of the year. This is in addition to roughly $10 million of NOI we currently generate from the 19 self-storage operating properties we owned prior to the merger. Disposition activity remains on track with our initial expectations of $250 million-$350 million for the full year. Second quarter dispositions comprised eight properties for total proceeds of $93 million, bringing the total for the first half of the year to $119 million. Certain CPA:18 assets initially anticipated to be sold prior to closing the merger are now expected to close in the remainder of 2022, which may take us to the top end of the range. The addition of high-quality core real estate earnings from CPA:18's assets over the remainder of the year is expected to offset substantially all of the income we previously earned from managing CPA:18. Our third quarter results are, however, expected to include approximately $1 million of asset management fees from CPA:18, as well as between $3 million-$4 million of AFFO from our ownership interest in CPA:18, which are included in earnings from equity method investments. Beginning in the fourth quarter, those income streams will be eliminated, after which virtually all of our AFFO will be derived directly from real estate, further simplifying our business and enhancing the quality of our earnings. Turning now to our expenses. We expect the CPA:18 merger to have a nominal impact on our expenses, incrementally improving our overall efficiency in relation to our asset base and revenues. Because substantially all of the net lease assets acquired from CPA:18 are triple net, non-pass-through property expenses are not expected to change materially in the back half of the year. For G&A expense, our updated guidance assumes it will total between $88 million and $91 million for 2022, an increase of approximately $2 million at the midpoint, primarily reflecting the loss of reimbursements from CPA:18. Interest expense is expected to increase in the second half of the year as we take on approximately $780 million of CPA:18 mortgage debt at a weighted average interest rate of 4.3%. Lease termination and other income totaled $2.6 million for the second quarter, a significant decline from $14.1 million in the first quarter. Our guidance currently assumes the total for the year will be approximately $25 million-$30 million. Lastly, non-operating income for the second quarter totaled $6 million, primarily comprising realized gains on foreign currency hedges. As you may recall, non-operating income for the first quarter also included an annual dividend received from our investment in Lineage Logistics of $4.3 million, which we do not expect to receive again until the first quarter of 2023, and a $900,000 final cash dividend on preferred stock of Watermark Lodging Trust, which has since been redeemed. For the remainder of the year, we therefore expect this line item to reflect only foreign currency hedging gains. As a reminder, we hedge the impact of foreign currency movements on our cash flows in two principal ways. First, by overweighting debt denominated in foreign currencies, primarily the euro, creating a natural hedge through interest expense. Our foreign-denominated operating expenses also add to that natural hedge. Secondly, we continuously monitor and hedge the majority of the remaining cash flows through derivative contracts, further insulating our earnings from adverse currency movements. This dual approach has proved to be very effective, and as a result, we expect the euro weakness in 2022 to have a very limited impact on our guidance. Moving now to our balance sheet and capital markets activity. Year to date, we further strengthened our balance sheet positioning through the use of our ATM program. During the second quarter, we issued equity totaling $39 million at an average price close to $82 per share. In addition to this, we sold 3.7 million shares through our ATM program in the form of equity forwards during the second quarter, locking in our ability to fund future investments with over $300 million of equity raised at an average gross price close to $84 per share. With about $285 million remaining available for settlement under equity forwards we put in place during 2021, we currently have nearly $600 million of dry powder available from undrawn equity forwards. On the debt side, as we discussed on our last quarter's call, we exercised the accordion feature on our term loans in April for the equivalent of about $300 million, with proceeds used to pay down our revolver balances. We ended the second quarter with about $400 million drawn on our $1.8 billion unsecured revolving credit facility, which in conjunction with our undrawn equity forwards, puts us in an exceptionally strong liquidity position, totaling over $2 billion at the end of the second quarter. We expect to fund the merger cash consideration substantially from cash on hand generated by the proceeds received from CPA:18 asset sales, with minimal required draw on the facility. With no bonds maturing until 2024 and ample liquidity to fund our second half investments, we will continue to access capital markets opportunistically, an especially strong position to be in given the current uncertainty in capital markets. Turning to our key leverage metrics at the end of the second quarter. Debt to gross assets was 39.8% toward the low end of our target range, which is expected to be virtually unchanged with the closing of the merger. Similarly, net debt to EBITDA was 5.6x at quarter end and is expected to remain well within our target range with the closing of the merger. Cash interest coverage ratio was 6.6 x o ver the second quarter, among the strongest in the net lease peer group. At the end of the quarter, our debt outstanding had a weighted average interest rate of 2.6%, reflecting the proactive management of our liabilities through the debt refinancings we completed in recent years, helping offset the impact of rising interest rates. As a reminder, our credit facility represents the vast majority of our floating rate debt. Lastly, I wanna mention that earlier this week, we issued our green bond allocation report, which is available on our website. I'm pleased to say the proceeds have been fully allocated to eligible green projects, all of which have either BREEAM Very Good or LEED Gold ratings or better. In closing, we remain uniquely positioned to outperform with our sector-leading internal growth and strong capital position, supporting continued deal momentum in an environment where cap rates are moving higher. With that, I'll hand the call back to the operator for questions. Thank you. I'll now be conducting your question-and-answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment please while we poll for questions. Our first question today is coming from Anthony Paolone from JP Morgan. Your line is now live. Yeah, thanks. Good morning. Maybe a question, Jason, on the deal flow picking up, and you seem pretty optimistic about what you're seeing there. Just wondering how much of that is the environment shifting and becoming more attractive versus just W. P. Carey's capital costs holding up relatively well and giving you the opportunity to, you know, kind of be more aggressive. Yeah, it's probably a combination of the two, Tony. I mean, certainly, you know, our diversified approach has always given us a wider opportunity set than many of our peers, both, you know, across asset types as well as geographies. And then we also focus, you know, mainly on sale-leasebacks. You know, we've continued to see the availability of those ramp up. You know, we've talked in the past about a shift in how corporates view owning versus leasing real estate, and that's continued. You know, we're still seeing sale-leasebacks in support of M&A activity, particularly private equity-backed activity. Maybe more recently, with the rising rates and the dislocation in the debt capital markets, especially the high-yield bond markets, where, you know, many of our tenants, you know, focus just below investment grade. You know, we've seen and sellers have seen sale-leasebacks as maybe a better alternative source of capital, and meaningfully more attractive than their other alternatives. It's probably a combination of something specific to us. You know, rising rates, obviously. I think sellers understand that cap rates are gonna go up as well. Maybe there's an expectation from many sellers that they're gonna continue to rise, and this is a good time to get into the market, if cap rates are gonna continue to rise from here. Got it. Thanks. On CPA:18, you know, how much more in sales will you need to do after, I guess, it closes next week? Just wondering, like, how long you'll be carrying some extra assets there. Then the mid-sixes, I think, cap rate that you'd mentioned. I mean, what has been roughly the pickup, I guess, from the better performance coming out of storage there? Yeah. Brooks, do you wanna take asset sales? Maybe Toni, you can just touch on CPA:18, storage. Sure. This is Brooks. On the disposition front, we've completed about 75% of what we've planned. We have two more in process, one we would expect later in August and another kind of later in the summer and maybe early September. Okay. That's like, I guess, a little over $100 million, $100 million-$200 million that you'll kind of still keep for a few months there. About $100 million. Yeah. Okay. Yeah. Then on the self-storage side, you know, I think we're just seeing continued improvements over the back half of the year, in line with what we've been seeing in recent periods. You know, what that's done is really kind of moved us into kind of positive accretion or essentially break even from what we were initially expecting on the merger. Okay. Just last one, your floating rate debt, I think is about 15% of total, and it sounds like you'll put a little bit more on there with CPA:18. What, where do you think you want that to be going forward? How should we think about it? Yeah, I would say our floating rate debt is predominantly limited to our credit facility and our borrowings on our credit facility. While CPA:18 will add pretty minimally to that. I think you can expect that, you know, we'll continue to look to do fixed rate debt going forward. You know, and on the variable side, I think maybe it's important to also remember that a good portion of that is denominated in euro. We haven't entirely seen kind of movements, you know, as the euro was pegged at sort of a negative base rate, even up until now. You know, I think that there's been minimal impact on rates rising for us, as it relates to where we are in the year and what we're expecting for the remainder of the year. I don't expect it, you know, our variable interest rate to move up. I think you would probably see our exposure there moving down over time. Yeah Tony, keep in mind that we just mentioned that we have about $600 million of equity forwards left to settle. You know, we have you know some flexibility on how we fund deals, but also how we treat the floating rate debt on our line. Got it. Great. Thank you. You're welcome. Thank you. Next question is coming from Nicholas Joseph from Citi. Your line is now live. Thanks. You know, as you execute on new deals, particularly on the sale leaseback side, how are conversations going in terms of rent escalators, if they're CPI based, starting out in new leases or just fixed rate? How are those conversations actually proceeding? Yeah, look, we still focus on CPI, and as you can imagine, it's gotten, you know, maybe incrementally, you know, more difficult to get those. We're still seeing them, especially in Europe. I think CPI-linked leases are more standard there. You know, prior to, you know, the recent trends in inflation, you know, almost all of our deals were uncapped CPI in Europe, especially. I think caps and floors are maybe now part of the conversation. We're still getting. I mean, year to date, I think it's about maybe just under 50% of the $1.1 billion of deals year to date have CPI-based escalators built in. I think our pipeline is about the same. If some of those have caps, I think the pipeline is maybe, you know, more significantly skewed towards uncapped CPI. You know, it's gotten incrementally more difficult, or maybe it's just part of the conversation, but it's still a big focus point of ours. Thanks. That's helpful. Just with CPA:18 closing in a few days, how much integration work is there to do? Obviously, you've done these in the past, but just you know, as you think about bringing the assets onto the balance sheet. Yeah. It's virtually none. I mean, we've been managing these since inception. Tony, if you wanna talk quickly about the integration is mainly on the accounting side, but it's not from an operations standpoint or from an asset management standpoint at all. Yeah. I think given we've been managing these assets, as Jason said, it's pretty insignificant even bringing on, you know, from an accounting perspective. You know, it's not as much of a heavy lift as you'd expect in M&A. Thank you very much. You're welcome. Thank you. Next question is coming from Greg McGinnis from Scotiabank. Your line is now live. Hey, good morning. Jason, just wondering how you're thinking about tenant credit risk today? Has the operating environment and I guess official recession that we're now in, forced you to add some tenants to your internal watch list? Brooks, you wanna talk about the watch list and tenant credit? Sure. I mean, credit quality is very strong right now. Investment grade is a little over 30%, and we're collecting materially all of our rent. From a watch list perspective, it's still very low. It's about under 1%, and that's down from a COVID peak of in the kind of 4% range. Certainly we're potentially nearing the end of a business cycle, and so this is the period of time where we paying particularly close attention, but really no credit deterioration as of yet. Greg, I think COVID is a good stress test for any portfolio for that matter. I think you know we performed obviously very well during that period, kind of sector leader in terms of collections. We you know kind of quickly got to the high 90% range in collections. It's credit quality, but it's also criticality of the assets that we own and the importance that tenants kind of keep rents current. You know we feel good about you know where we sit in the current environment and whether we do technically hit a recession or maybe we already have you know I don't think it's gonna be a big concern or impactful for us. As Brooks said, we do keep a close eye on all the, you know, credits within our portfolio. Okay. Yeah. I just wasn't sure if the kind of continued supply chain issues matched up with your more industrial warehouse focus. The tenant base was creating any difficulties over kind of the past few months versus kind of accelerated impact from COVID. Not that we've seen. Yeah. Yep. Okay. Do you have any update in terms of the expected plan for the self-storage assets of CPA:18? You know, no real update here. You know, we are acquiring a meaningful size portfolio. I think it's 65 operating assets, 42,000 units. You know, we still have a number of options. We've owned these for a long time as operating assets. You know, certainly we could continue to own these in that format under the current property management agreements with Cube and Extra Space. We can also look to put in place a net lease structure similar to what we did with Extra Space a couple of years back. You know, that's always an option. Of course, you know, we could sell some or all the properties depending on what we're seeing in our ability to fund new deals. That's an option. I think right now, we look at all those as you know, very good alternatives, but I think we'll be patient with whatever we choose, especially given the high expected growth, within that asset class. We'll wanna see some more stabilization in NOI before we really make any decisions there. Okay. I think you mentioned in the past that even if you do convert to a net lease structure, you expect the contribution earnings to be relatively the same. Yeah. There could be a little bit of shift between how we book CapEx versus how it flows through to NOI or ABR. Mm-hmm. It won't be meaningful. Okay. Thank you. Thank you. Our next question is coming from Spenser Allaway from Green Street. Your line is now live. Thank you. Just in regards to your comments on cap rates being around 50-100 basis points higher, is this across the board? Or can you just provide a little more color on how that differs in the U.S. versus Europe and perhaps a little bit more color on specific property types? I mean, I would say kind of, you know, both geographies as well as maybe all property types that we're looking at, they probably fall within that range of 50-100 basis points high. I mean, it's hard to, you know, to really quantify. You know, if anything, I would say industrial assets in Europe maybe have seen a little bit more movement in other asset classes, but that's mostly because they had also compressed the most. You know, leading up to the end of last year into Q1 as well. It's probably, you know, fairly consistent across at least the asset types that we target or the types of deals that we target, you know, across geographies and property types. Okay. Then just one on tenant health. Energy costs in Europe are obviously kind of moving higher, and there's a growing risk of restricted energy use for business in some particular countries. Have you guys heard anything from tenants, and do you see any risk there? Brooks, anything on your side? This is Brooks. I believe so, but I'll let you answer. Sure. Yeah. Certainly energy costs have moved sharply higher in Europe. We have not thus far seen any acute impacts on tenants. Certainly some grumbling. I will say it presents an opportunity for us. You know, solar is a big opportunity set, especially for industrial assets, and so that's become incrementally more appealing for tenants, and in certain areas of Europe, extremely appealing. That will present, you know, a good run rate opportunity for us going forward. Okay. Great. Thank Okay. Great. Thank Okay. Great. Thank you. Yeah. It's an opportunity both to invest some capital, but maybe equally important, you know, allows us to kinda have these conversations with tenants, get lease extensions, kind of further embed our properties within their operations. I think that's all positive. Yeah, in the short term, you know, it's gonna provide a little bit of pressure on some tenant margins certainly. Okay. Thank you both. Thank you. Next question is coming from Sheila McGrath from Evercore. Your Your line is now live. Yes, good morning. I was just curious if you could give us some insight on the CPI caps. Those leases that are capped, are the escalators. I mean, are the caps closer to 2% or 3%? I think historically, I think within the portfolio, Toni, correct me if I'm wrong, the caps are in kind of the low threes. I think on deals that we've been negotiating more recently that include caps, you know, maybe they're up a little bit into the mid threes. Yeah. I think internationally it's mid-threes, and in the U.S. it's closer to 3%. Yeah. Okay, great. On guidance, you did tweak that higher on acquisition growth, even in the face of FX, which has been a headwind, which has gotten worse. I just wonder, you know, absent the FX headwind, would guidance have gone even higher? Can you provide any insight on how much of a headwind, FX is for, WPC in the back half of the year? Sure, yeah, Sheila, I'll take that. I think you know, I mentioned in my remarks that our hedging strategy mitigates the majority of the risk of movements in our foreign cash flows. You know, after taking into account hedging, I think the impact from when we initially came out with guidance to where we are now is just under 1% reduction in total AFFO. That's really based on an assumption that the euro holds flat to where it is now, which is about 1.02. You know, I think potentially there could be some upside there depending on which way you see rates moving over the back half of the year. We were substantially able to mitigate that with the hedging strategy that we have in place. Okay. Thank you very much. Thank you. Next question today is coming from John Kim from BMO Capital Markets. Your line is now live. Thank you. You remain very active in acquisitions, but Jason, you mentioned that cap rates expansion has really accelerated since your last call. I'm wondering if you think that dynamic's gonna continue, and if so, why not pause a little bit more on investment activity? Yeah. Look, it's hard to predict, you know, what's gonna happen. I mean, we have seen cap rates. You know, if we look at just our portfolio, what we purchased in the first quarter, we were buying deals kind of in the fives. You know, a lot of those were originated in the second half of 2021 and then closed in Q1, and that was really before we saw a big shift in interest rates. In Q2, I think, you know, most of our deals, or at least the average of our deals were, you know, more in the mid-sixes. I think our pipeline is probably similar, maybe slightly higher, depending on the mix of assets that we close. I mean, your question about is it better to wait for higher cap rates, I mean, I guess from my perspective, if we're able to generate sufficient spreads, you know, relative to the riskiness of the investments that we're making, I think we wanna stay active. We do believe we're able to do that in the market. You know, we're in a very good position from a capital funding perspective as well with, you know, $600 million of equity forwards in place that are left to be settled. When you combine that with the availability on our credit facility, we have kinda $2 billion of liquidity at this point in time. I think we can do deals now 'cause they're interesting, and we hope that cap rates continue to increase, you know, second half of the year and into next year and you know, they'll get even more interesting. Okay. You have a fair amount of debt expiring in the next couple years. Can you just provide an update on where you could raise mortgage debt and unsecured debt today? Yeah. I mean, look, we're not really in the mortgage market. We do have some mortgages left on the balance sheet from some legacy assets, but you know, we'll likely pay those off as they come due. We have paid off a lot of those over the past couple years and prepaid in many cases. There's not a lot maturing over the next two years. I think really our next biggest maturity is 2024. I think it's hard to predict, you know, where the bond market pricing is right now. You know, we're probably 200-250 basis points wider than where we've issued in the past, and that's probably both in the U.S. and Europe, but it's pretty dynamic, so it's kind of hard to predict. I think importantly, we do have a lot of flexibility. I mentioned the $600 million of equity forwards, a lot of availability on a revolver. Frankly, it's not just the bond markets we look at. I think bank debt as well as private placement market are also alternatives. You know, I think we have flexibility. We can be opportunistic. We really don't need to issue any debt because of the maturity schedule as well as kind of the funding that's in place for the deal volume through the end of the year. We'll be opportunistic, but, you know, and the markets are pretty volatile right now. Thank you. Our next question is coming from Mitch Germain from JMP Securities. Your line is now live. Thank you. Just confirming, there's no specific plan in place for the CPA debt? For the CPA debt. For the CPA mortgages that are in place right now? Yeah. Yes. Yeah. Yeah. I mean, with those we will. Yeah, I think. Go ahead, Toni. You can answer. Yes, it's pretty minimal. I think we have about $200 million or a little under $300 million being added to our maturities in the next year or so. You know, I, you know, we'll continue to look to take those out the same way we've been dealing with our mortgage debt as they've been expiring. I don't, you know, in this environment, you know, we don't feel obligated to kind of bring any of that forward any sooner than it would expire. I think we'll continue to address those as we have been with unsecured borrowing. Okay, that's helpful. Then if you could provide some perspective on the assets that you're disposing? It looks like obviously some vacant, but, you know, some warehouse and retail. Is that gonna be, you know, kind of the mix we should expect going forward? What sort of characteristics do these properties have? Brooks, you wanna take that? Sure. Yeah. You know, we continue to expect about $250 million-$350 million. As Toni mentioned, a couple of CPA:18 dispositions coming, having on balance sheet, you know, brings that likely maybe towards the higher end of that range. Deal type, about a quarter by proceeds is vacant assets. The balance is really a mix of managing residual risk and a few opportunistic exits. Property type will be a little over half office, about a third industrial and warehouse, maybe 10% retail. It's a pretty broad mix. Typically these are really bottoms-up decisions. We're not necessarily taking a big thematic approach in any given year. Though I will say in the long run, we tend to overweight office dispositions. Thank you. Thank you. Next question is coming from Chris Lucas from Capital One Securities. Your line is now live. Hey, good morning, everybody. Can you hear me okay? We can. Yep. Good morning, Chris. Okay. Good morning, Jason. I guess a couple of questions. Jason, you mentioned that competition has sort of gone away as rates have gone up. Is there a difference in the competitive environment between what's happening in the U.S. versus what's happening in Europe? Yeah. I mean, maybe it's a little bit different. I mean, we tend to see more private equity real estate buyers as competition in the U.S. than we do in Europe. I think they are, you know, they're typically higher levered buyers. They tend to rely on CMBS and other asset level debt. You know, that's either gotten significantly more expensive or, in many cases, unavailable. I think it's thinned out probably a little bit more in the U.S. I think generally speaking, though, there's just less competition in Europe for us. It's not a crowded space. There are no public REITs that focus on what we do. In fact, I think many people in Europe consider us as the de facto net lease public REIT, even though we don't obviously trade on an exchange over there. It's probably a little bit more acute in the U.S. Some of those same dynamics play out to the extent there are private equity buyers that we're competing against in Europe. I guess, you know, you mentioned the foreign exchange headwinds is an issue related to sort of the year-to-date performance. But when I think about it, I think about the buying power that U.S. investors have relative to the euro. Does that make a big difference? I mean, I think peak to trough, it's like 13% move so far just this year. Does that impact how you think about where the opportunity set is for you guys? You know, maybe incrementally it's helpful, but no, it's not part of our thesis. We're not looking at a currency trade in what we're acquiring. You know, we typically do borrow meaningfully in euros and ultimately match fund what we're doing over there. But you know, to the extent we are buying now, and we do see a change or a strengthening of the euro, I think that'll provide some cash flow benefits in the future. But it's all muted, you know, based on the hedging strategy that we have in place. Okay. Just, there was a comment earlier about sort of, you know, being maybe towards the end of the business cycle. I guess curious just if there's a change of biases or what's your thoughts about investment grade versus non-investment grade rated tenants, you know, in terms of doing transactions at this point in the cycle? Yeah, look, in this environment, I think that we are seeing more opportunities with some investment grade, you know, tenants. Our focus is still on just below investment grade. I think that, you know, underwriting has always been a key part of our strengths in being in the net lease market. You know, acquiring highly critical real estate is really important, especially as, you know, credit profiles potentially weaken. Even if companies get into some balance sheet trouble, and there's a restructure, we feel pretty confident, especially with larger credits that they are gonna restructure with critical operating assets, we tend to fare quite well, you know, relative to maybe, you know, other unsecured borrowers or the equity holders certainly. Okay. Thanks. Toni, question for you, sort of a follow-up on the cost of debt issuance today, but I guess more focused on what your swap to fix would look like relative to what you could do in the unsecured debt market on a similar maturity, so five-seven years kind of situation. I think it's tough to comment on that at any point in time, just kind of given the volatility that's out there, both you know with rates and the FX as we've talked about. You know, hesitant to give kind of a rate as to where we could swap. I think that you know we certainly think we could do better than what's out in the unsecured markets in a straight bond offering. You know hard to quantify the exact number. Let me just maybe simpler. Not looking for a specific number, but the relative cost. Is the swap to fix a more expensive avenue at this point, or is the unsecured bond market a more expensive avenue? Yeah. I mean, and maybe you're talking about the, you know, the bank markets or even private placements for that matter, probably more the, you know, bank debt. You know, I think it's probably a little bit more attractive than the bond markets given, you know, the volatility and really the fact that no one's issued bonds in the REIT world anytime recently. There's just a lot of uncertainty there as well. Okay. Thank you. That's all I have. You're welcome. Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Josh Dennerlein from Bank of America. Your line is now live. Hi, everyone. It's Lizzy Doykan on for Josh. Just a question on the same-store rent growth. You guys saw 3%. You know, that growth seemed pretty consistent across property types. I'm just wondering, you know, if there's anything specific you see driving that additional 50 basis points I believe you mentioned for the second half. Is there any, you know, additional upside to that rent growth we might expect from specific asset types? Thank you. Yeah. I would say there's nothing really specific. Yeah, got that. I don't think there's anything specific to highlight from an asset type perspective. You know, I think that the inflation-based linked leases are across the portfolio, and we do continue to see, you know, the expectations on inflation outpacing, or the actual outpacing expectations. I think we've seen 2.7% in the first quarter, 3% in the second quarter. We do expect that to tick up with the rates coming in the back half of the year to closer to 3.5%. Maybe importantly for us, what we've highlighted in the past, and it's important to remember, is that we do see a lagged effect in terms of when inflation runs through our leases. Not all of our leases bump every quarter, you know, and even every year. The vast majority of our escalations occur on a lag that generally has a look back period that will pull in inflation from three to six months prior to the escalation date. You know, with the prints you're seeing now, you'll see that push us up in the back half of the year. I think, you know, we're seeing current data that's showing stabilization is now pushing out to the end of 2023, both in the U.S. and Europe. We would expect that to have a continued tailwind well into 2023 and into 2024 in terms of how our leases bump. Again, nothing specific on an asset type. Okay, great. Thank you. July investment closed. If maybe there's any change in your assumptions, your underwriting assumptions on acquisitions given the, you know, new portfolio from CPA? Yeah. I missed the first part of that question. I I don't know if it was on my side or your side. It broke up there a second. Could you repeat that? Do you mind? Just around if you could talk a little bit more about the July investments closed. I believe you said it was like an additional $300 million. Yeah. It was. It was about $300 million. It was predominantly one large transaction and several smaller ones. The large one was about a $260 million sale leaseback. It was with one of the largest food contract manufacturers in the U.S. that, you know, serve many or most of the large consumer goods companies. You know, they basically manufacture or produce a lot of the recognizable brands you'd see in the food world. Good size sale leaseback. I think the proceeds were used for growth capital for that company. I think they're investing in new production lines as they kind of expand and support some new customer products. It was a portfolio of, I think about 20 manufacturing and distribution assets, all highly critical to tenants' operations. The bulk of those properties were under master lease, and I think it was a 20-year term as well with fixed annual increases. That was the largest deal in July. You know, like I said, it was a U.S. deal with a private equity sponsor that we worked with before. I think we were able to get some favorable economics as well. Okay, great. Thank you. If I could just, if there's time for one more question, if there's any change in your thinking around underwriting, you know, besides concerns over the macro environment, but you know, any change in thinking given the CPA, the added assets from CPA? No, I mean, nothing related to the CPA:18 acquisition. CPA:18 acquisition. I think underwriting generally, you know, as we mentioned earlier, you know, where you know, there's some economic headwinds, I think we'll be even more acutely focused on credit underwriting than typical, and we wanna make sure that we're generating the right spreads. We are seeing cap rates move up. I think importantly, you know, we are also still achieving, you know, a meaningful percentage of these new deals with inflation-based increases as well. But overall, no, I don't think the underwriting has changed a lot from a credit perspective or from you know, the real estate or criticality of that real estate to the operating company. It's all important. Great. Thank you. Thank you. The next question is coming from John Massocca from Ladenburg Thalmann. Your line is now live. Good morning. Good morning, John. Just a quick big picture one from me. You know, given some of the success in kind of capital recycling with the CPA:18 assets, does that make you look at your own office portfolio any differently? Just 'cause I know a big portion of that capital recycling was office. I mean, is that, you know, does that give you maybe confidence to potentially do more capital recycling with on balance sheet or currently on balance sheet office assets? You know, I guess maybe how would you weigh that against, you know, a pretty strong cost of capital today? Yeah. I mean, look, we've been doing a little bit more of that over time. I think Brooks mentioned that typically our dispositions are a little bit more weighted in office overall. If you look at our office exposure, I think five or six years ago, it made up about 30% of our ABR. Today, it's just under 20%. Maybe that ticks up a little bit with CPA:18, although performance for some of the dispositions, we're probably gonna be in a similar zip code. You know, look, we're always evaluating the best way to fund deals, the best way to position our portfolio to optimize our cost of capital. Yeah, I think that's something that we think about. Really right now we're primarily focused on adding industrial and retail primarily in Europe, but also perhaps some in the U.S. as well. That's where our focus is right now. I guess big picture was the office and CPA:18 or, you know, the office particularly you sold or are selling from CPA:18. Is that pretty comparable to what's in, you know, the W. P. Carey portfolio today? Yeah. Brooks, you wanna take that? Yeah. Broadly comparable. Maybe a slightly higher weighting towards Europe in the CPA:18 office portfolio. But, you know, broadly comparable kind of investment types. Okay. That's it for me. Thank you very much. Great. Thanks, John. Thank you. Next question is from John Kim from BMO Capital Markets. Your line is now live. Thank you. I was wondering among your top tenants if there's like a watch list you have or any concerns that you have from a credit profile just given the looming recession. Brooks, you wanna tackle that? No. Sure. You know, broadly speaking, as I mentioned, credit quality is very good, and that very much includes our top ten. There's no top ten tenants on our credit watch list. Okay. I wanted to confirm, you increased your termination fee guidance for the year by $5 million-$10 million. I just wanna confirm, that's not included in your AFFO guidance. The increase that we are proposing that I mentioned, the $25 million-$30 million, is included in our AFFO guidance. It's part of AFFO. Okay. Yes, it is. Okay, great. Thank you. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments. Thank you for your interest in W. P. Carey. If you have any additional questions, please call investor relations directly on 212-492-1110. That concludes today's call. You may now disconnect. Thank you.