Hello, and welcome to W. P. Carey's Third Quarter 2023 Earnings Conference Call. My name is John, and 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 will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I'll now turn today's program over to Peter Sands, Head of Investor Relations. Thank you, Mr. Sands. Please go ahead. Good morning, everyone, and thank you for joining us this morning for our 2023 third 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. On this earnings call, in addition to discussing our third quarter results, we want to take the opportunity to provide an update on our recently announced strategic plan to exit office, including the progress we've made over the last six weeks and how we would be better positioned for growth going forward. I'll also discuss how the significant amount of liquidity coming back to us puts us in an exceptionally strong capital position, and touch upon what we're seeing in the transaction market and how we're approaching new investment opportunities as a result. I'm joined this morning by our CFO, Toni Sanzone, who will review the third quarter and our expectations for the remainder of 2023, as well as our preliminary expectations for 2024 AFFO and the resetting of our dividend to reflect our strategic exit from office. John Park, our President, and Brooks Gordon, our Head of Asset Management, are also on the call to take questions. Starting with our strategic exit from office, which accelerates the approach we've been taking over the last eight years or so to reduce our office exposure, and will effectively take it down to zero over the next few months. I'm pleased to say that on November first, we completed the spin-off of Net Lease Office Properties, which we'll refer to as NLOP on this call. As a result, assets representing about two-thirds of our office ABR are now owned by NLOP. W. P. Carey has no ownership interest in NLOP, and as a separate, publicly traded company, NLOP will make its own public disclosures, including updates on its progress with asset sales. We're also making good progress selling the office assets that remained on our balance sheet, which we are referring to as the office sale program. So far, we've completed sales of four office assets under this program, totaling $143 million in gross proceeds, including the Telefónica asset sold during the third quarter. And we have signed contracts on another roughly $500 million. This includes our largest office asset, net leased to the Spanish government, which remains on track to close in January, in a sale back to the tenant for approximately $350 million. In total, we have closed or have transactions in place on over 90% of assets in the program based on gross proceeds, giving us confidence that the vast majority of on-balance sheet office sales will be completed by early 2024. We're pleased with the progress we've made to date, particularly given the remaining 10%, which we are actively working on selling, represents less than 1% of our total ABR. As a result, by early 2024, we will have a higher quality portfolio with some of the strongest metrics in the net lease sector. Just over 60% of the ABR will come from warehouse and industrial assets. The weighted average lease term will remain over 11 years on a portfolio maintaining strong geographic diversification, with over half of ABR generated by assets with rent escalations tied to inflation. We will continue to have among the strongest same-store rent growth in our peer group, both from CPI-linked leases and higher fixed rent escalations. Proactively exiting our office exposure over a short period of time also ensures we won't face a drag in our earnings over multiple years, or the risks associated with large lease expirations and increased vacancies driven by declining demand for office. Our view is that the leasing market, financing market, and investment sales market for the office sector will all remain under pressure, and that office assets will see worse outcomes going forward than they've seen in the past, which will be particularly impactful on a single-tenant office portfolio with a declining weighted average lease term. These factors all contributed to our conviction in addressing office more proactively, while it still has a reasonable amount of lease term remaining, and to provide investors a cleaner and clearer path for earnings growth on our core portfolio. As I look ahead, W. P. Carey will be better positioned for growth. The quality of our cash flows will be enhanced through better end-of-lease outcomes, including fewer vacancies, higher overall leasing spreads, reduced downtimes and carrying costs, and lower CapEx requirements. Exiting office will also enable our sector-leading internal growth to have a greater impact on our overall AFFO growth. In addition, the significant amount of capital that has and will continue to come back to us over the next several months uniquely positions us within the net lease space. In aggregate, the combination of settling our equity forwards, the cash distribution received at execution of the spin-off, asset sales under the office sale program, along with the upcoming exercise of the U-Haul purchase option and other dispositions, is expected to generate around $2 billion of liquidity. We will also start retaining more cash as a result of resetting our dividend. Based on our revised investment volume expectations for the remainder of 2023 and our current assumptions for 2024, we don't expect to need to issue new capital in the near term. It could potentially go to the end of 2024 without having to access the capital markets if they remain unfavorable, even if we temporarily repaid our 2024 debt maturities with cash. The significant pool of dry powder we have gives us a meaningful competitive advantage on new deals, especially versus net lease peers that may become capital constrained if they're unable to access the capital markets or their cost of capital remains too high. Looking further ahead, we have additional sources of capital, such as our investment in Lineage Logistics and potential operating property sales, which could provide even more of a runway to fund accretive investments should capital market conditions remain unattractive over an extended period of time. Turning now to the transaction environment and how we're approaching new investments as a result. The current environment for sale-leasebacks continues to be one of the most interesting I've seen in my career. High-yield debt and other financing alternatives are constrained and generally very expensive, making sale-leasebacks the most attractive source of capital. In addition, the capital market backdrop remains volatile, creating uncertainty over the pool of buyers able to raise and deploy capital accretively. Competition has thinned out, especially from buyers using mortgage financing. We are seeing less capital chasing deals. Coming out of summer, we had a substantial pipeline with around $500 million of new investments at various stages of execution and at cap rates generally in the low to mid sevens. After steadily rising over the summer, interest rates moved sharply higher in late September, bringing deal pricing even more into focus. We began more actively exerting our pricing power, pushing cap rates higher to better reflect the current capital market environment. Specifically, we repriced most of our live deals to cap rates in the mid to high sevens and even into the eights, providing unleveraged returns in the high single digits and into the low double digits. Deals are therefore taking longer to negotiate and close as sellers either adjust to or are unwilling to accept higher pricing. That translated to a very slow third quarter, with investment volume totaling just $40 million and lower expectations for overall 2023 investment volume. Looking ahead, we have a strong bias towards deploying capital into new investments, although we are taking a balanced approach, recognizing that macro factors, including the trajectory of interest rates, also matter. For sale- leasebacks in particular, where sellers are motivated to transact through a specific use of proceeds and face a lack of attractive alternatives, we believe pricing will adjust quicker than in other parts of the net lease market. As transaction cap rates gradually move higher, we will allocate capital when we see appropriately priced opportunities. We will continue to press for higher cap rates, knowing we're exceptionally well positioned to deploy more capital as sellers adjust their expectations. For the types of transactions we focus on, we will be competing against a shrinking pool of buyers who can raise and deploy capital. Currently, our pipeline stands at over $400 million, with many deals back on track and heading towards closing, most of which we expect to close around year-end. Additionally, we have a handful of large portfolio deals at relatively early stages. With that, I'll pass the call over to Toni. Thank you, Jason, and good morning, everyone. For the 2023 third quarter, we generated total AFFO of $1.32 per diluted share. The $0.04 decline versus the second quarter primarily reflects certain non-recurring items which added to our AFFO in the prior period. Contractual same-store rent growth was 4.2% for the third quarter, 80 basis points above where it was a year ago, and it's expected to remain around 4% during the fourth quarter as we continue to see the lag in CPI-linked rent increases flowing through our leases. Comprehensive same-store rent growth for the third quarter was 3.5%. During the third quarter, rent recapture on re-leasing activity was 81% overall, primarily driven by restructurings on three of our four movie theater properties, which fall within the other category and comprise an insignificant proportion of our overall portfolio. The one office asset that renewed during the quarter is now part of NLOP. Going forward, we expect to see improved rent recapture metrics driven by our exit from office, although it can vary from quarter to quarter with limited re-leasing activity. Turning to our 2023 guidance. We've lowered and narrowed our AFFO guidance range to between $5.17 and $5.23 per share, based on full year investment volume of between $1.3 billion and $1.5 billion, having closed almost $1 billion of investments year to date. As a reminder, when we announced our strategic exit from office in late September, we reset our 2023 AFFO guidance range to reflect its, its expected impacts. The updated guidance we've announced today lowers the midpoint of that range by two cents to $5.20, mostly to reflect greater uncertainty over the timing of deal closings as we push for higher cap rates on the active deals in our pipeline, as Jason discussed. We disposed of six properties during the third quarter for gross proceeds of $148 million, bringing dispositions for the first nine months of the year to $196 million. Disposition volume for 2023 is anticipated to total between $450 million and $550 million, including up to $300 million of sales under the office sale program. ABR totaled $1.46 billion at the end of the third quarter. With the completion of the NLOP spin-off, our ABR was reduced to $1.31 billion and is expected to be further reduced to $1.25 billion upon completion of the office sale program in early 2024. Operating NOI for the third quarter totaled $24 million, mostly comprising $17 million from our operating self-storage portfolio and $6 million from our remaining operating hotel properties. During the third quarter, our disposition activity included sales of three Marriott operating hotels for $49 million, with another three sales completed in October, totaling $46 million. We currently expect NOI from all operating properties to total between $91 million and $94 million for 2023, taking into account the timing of the sales of the operating hotel properties and slower NOI growth within our operating self-storage portfolio. Other lease-related income totaled $2.3 million for the third quarter, bringing it to about $21 million year to date. For the full year, we expect this line item to total between $22 million and $25 million, which has been adjusted to exclude expected termination income on assets that are now part of NLOP. Moving to expenses. Non-reimbursed property expenses totaled $13 million for the third quarter and $31 million year to date. As a reminder, during the second quarter, we recognized a one-time benefit from the reversal of a property tax accrual totaling $6.3 million. For the full year 2023, we expect non-reimbursed property expenses to total between $41 million and $43 million. Tax expense, which primarily relates to foreign taxes on our European portfolio, was $9.4 million for the third quarter and $33 million year to date on an AFFO basis, and includes a one-time expense of $3.3 million in the second quarter, resulting from a tax audit in Europe. For 2023, we expect cash basis taxes to total between $43 million and $45 million. G&A was $23 million for the third quarter and is expected to total between $96 million and $98 million for 2023, a reduction of $1.5 million from the midpoint of our previous range, which reflects better visibility on the timing of certain expenses, given where we are in the year. We will receive fees and reimbursements from NLOP for acting as its external manager. Specifically, asset management fees will start at an initial annual rate of $7.5 million, declining as NLOP's assets are sold, and a $4 million annual administrative reimbursement, which will remain flat over time. For the fourth quarter, we expect to receive asset management fees and reimbursements totaling approximately $2 million, both of which will be reflected as revenue with no impact on our G&A expense line item. Interest expense totaled $77 million for the third quarter, and our weighted average interest rate remained at 3.3% at quarter end. Interest expense is expected to decline by $8 million-$10 million in the fourth quarter, reflecting the impact of the NLOP spin-off and our office sale program. This is driven by the cash proceeds we received from the NLOP distribution, the settlement of equity forwards and asset sales. We've assumed any excess cash after reducing our revolver and funding new investments earns interest income at a rate of almost 5% over the near term. Turning now to 2024. This morning, we announced preliminary 2024 AFFO guidance of between $4.60 and $4.80 per share, reflecting the full year impact of the NLOP spin-off and the estimated impact from the expected completion of our office sale program early in the year, combined with a preliminary outlook on the overall investment environment, disposition activity, and our liquidity positioning. Starting with the spin-off, the impact of the assets that were contributed to NLOP is about a $0.50 per share decline in AFFO on a full year basis, based on their ABR, less property expenses, mortgage interest expense, and income taxes. Similarly, the completion of asset sales under the office sale program early next year is expected to result in an approximate $0.27 decline in our 2024 AFFO per share. During 2024, we also expect to receive a total of approximately $0.04 per share in asset management fees and reimbursements for managing NLOP. When thinking about 2024 earnings, it's important to also take into consideration our cash positioning and the deployment of the various sources of capital we've received and expect to receive in the coming months, which will serve as a meaningful offset to the decline in AFFO associated with our exit from office and should therefore be viewed along with our anticipated net investment activity and capital markets activity in 2024. Specifically, our current projections assume investment volume of $1.5 billion for 2024, weighted more towards the back half of the year. We view this as a very preliminary estimate for directional purposes as opposed to a target, given the dynamic environment, and expect to have a more refined view and formal range when we issue guidance in February. Expected dispositions during 2024 fall into four main buckets. First, the remaining roughly $500 million of office asset sales under the office sale program, the bulk of which comprises the Spanish government portfolio sale, which is under contract and expected to close in January. Second, the exercise of the U-Haul purchase option in the first quarter, which we currently estimate will generate about $470 million in gross proceeds. Rent from the U-Haul portfolio in 2024, prior to its sale, is expected to be $9.7 million. Third, potential non-core operating property dispositions of up to $100 million, including one Marriott hotel sale and the possibility of selling a student housing operating asset. And lastly, going forward, we expect normal course net lease dispositions of between $100 million and $300 million annually.... Given the timing of the U-Haul and Spanish government transactions, 2024 disposition volume is heavily weighted to the first quarter of the year. It's important to note that our preliminary 2024 guidance makes certain simplifying assumptions, and the specific timing of both acquisitions and dispositions over the course of the year may have a meaningful impact on our AFFO. We have two bonds totaling $1 billion maturing in 2024, as well as approximately $220 million of mortgage debt. Taking into account the estimated $2 billion of capital inflows we expect, our guidance assumes we have sufficient capital and liquidity to fund our anticipated investment activity and repay our 2024 debt maturities without needing to access the debt markets until late in the year, and that we may not need to raise equity capital at all in 2024. In terms of other assumptions, I want to reiterate that we expect contractual same-store rent growth to remain strong in 2024, averaging about 3% for the full year. For the bulk of the remaining line items impacting AFFO, beyond the impact of NLOP spin-off and completion of the office sale program, our preliminary 2024 guidance assumptions are relatively in line with 2023. We expect to provide additional color and details with our fourth quarter earnings in February, when we announce our formal guidance for the year. Moving now to our capital markets activity and balance sheet positioning. In conjunction with the NLOP spin-off, we settled our remaining equity forwards in October, issuing 4.7 million shares, generating aggregate proceeds of $384 million. This was equity we originally raised at a gross price of over $83 per share, which for technical and legal reasons, we decided to settle ahead of the spin-off. As Jason discussed, with around $2 billion of capital expected to come back to us through early 2024, we remain exceptionally well positioned to fund acquisitions and manage our upcoming debt maturities. We therefore continue to have significant flexibility in when and how we access the capital markets, enabling us to look for favorable windows of opportunity to do so. We are maintaining our leverage targets of low to mid 40s on debt to gross assets and mid- to high-5x on net debt to EBITDA, although we do expect to be in the low-5s on net debt to EBITDA going into 2024 and potentially for much of the year. As we deploy capital into new investments, we expect leverage to gradually increase back into our target range. I also want to note that we remain on track to recast our $1.8 billion credit facility by the end of this year, pushing out the maturity on a significant portion of the total debt we have maturing over the next couple of years. The final topic I want to discuss this morning is our dividend. On our office exit announcement call a few weeks ago, we noted that after spinning off NLOP, we intended to reset our dividend, reflecting both the impact of exiting office on our AFFO and a lower targeted AFFO payout ratio, enabling us to retain higher cash flow going forward, which can be accretively reinvested to further drive AFFO growth. We anticipate a one-time dividend reset during the fourth quarter to achieve these goals, subject to our board's approval. Our dividend is expected to reflect a payout ratio in the low- to mid-70% range, more in line with that of our peer group and helping contribute to an improvement in our cost of capital. We expect that to translate to a one-time reduction of approximately 20% in the fourth quarter compared to our most recently declared dividend. From there, the intention is to grow the dividend in line with our AFFO growth, which we anticipate will result in higher dividend growth than in recent years. In closing, having completed the NLOP spin-off and making strong progress selling the remaining office assets on our balance sheet, we're confident we will have exited the vast majority of our office exposure by early 2024, better positioning us for growth. And with roughly $2 billion of capital coming back to us, we believe we're exceptionally well positioned to continue investing through 2024, especially if cap rates continue to move higher and capital market conditions remain unfavorable. And with that, I'll hand the call back to the operator for questions. Thank you. At this time, we will take questions. If you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. One moment while we pull for questions. The first question comes from the line of Eric Wolfe with Citi. Please proceed with your question. Hey, good morning. For the 2024 AFFO guidance, it sounds like there is some dilution associated with the timing lag between when you sell the properties and reinvest the proceeds, just given the back half weighting that you mentioned in terms of investments. So I was hoping you could quantify it, just so we can understand what AFFO would look like more on a run rate basis after you redeploy the proceeds? Yeah, thanks for the question, Eric. I think, you know, we really do view 2024 as a new baseline for us. I think you highlighted the timing of the dispositions. That's really weighted really towards the very front part of the year. And so we will see some impact in Q1, maybe a slightly higher Q1 there, but I think the expectation is really to deploy that capital from there and to grow on that baseline. I would say that, you know, with that vast majority of the office sales and U-Haul for that matter, being out of that, the run rate really gets reestablished early in the year. So this is effectively how we're viewing it, from which we can grow going forward. Okay. So that means that the sort of the estimate that you put out would imply that, you know, if we're trying to model on 2025, you could model a more normal growth rate off of that, not a sort of more inflated growth rate, if you will, just because as you redeploy the proceeds, maybe you're holding something in cash. As you sell it at 5%, you redeploy it at 7.5-8%. You would expect that there'd be a little bit of improvement in growth, I would think, through the year. But it sounds like you're saying that this is sort of a normal baseline from which we can then grow into 2025. That's the right way to think about it. I think we do expect that, you know, growth in 2025 and beyond to be more normalized, and that, that is coming off of the 2024 base year, which again, has some ins and outs from a timing perspective, but for all intents and purposes, is our new baseline. Okay, thank you. And then the second question, just on the $500 million that's under contract today, that will likely close, I think you said in early part of next year. Just curious if there are any sort of conditions that need to be met before these close. Are there sort of contingency financing, financing contingencies? You know, they have to achieve a certain level of financing at a certain rate. Just wondering what needs to happen before that $500 million can close. Brooks, you want to take that? Yeah, sure. This is, this is Brooks. The bulk of it, as, as Toni mentioned, is the transaction of the Spanish government portfolio, and that- that's under a binding contract. Several other assets also under binding contract. So it's a mix, but when you look at closed transactions plus what's under binding, that's about 65% of the total, plan. And then there's an incremental chunk, under contract and, and transactions in progress. And as Toni mentioned, there's a, there's a small stub piece we're still working on, but over 90% of that is, is transactions in progress. Okay. All right. Thank you. The next question comes from the line of Greg McGinniss with Scotiab ank. Please proceed with your question. Hey, this is Greg with Scotia. Jason, how much are you hoping to get, how much are you hoping to see cap rates expand from here? What do you consider appropriately priced? And what would you need to see in order to start maybe increasing 2024 investment guidance? Is that more a function of cap rates or transaction availability? I mean, it's a little bit of both. I think they certainly, you know, go together. I mean, we've seen cap rates come up, you know, over the last, you know, call it to last quarter, to where, to where we're comfortable transacting, I would call it mid-sevens, into the high sevens. I think that feels comfortable for us right now. You know, there's not a lot of market comps out there looking backwards, so it's hard to peg where the market is right now. But it feels like it's probably come up 50 basis points, and that's a pretty comfortable place for us to invest. But look, it's volatile. I mean, look, we—you go back a month and, and it was a pretty sharp increase up until three days ago, and now we're seeing a bit of a rally in Treasury. So it's hard to predict, of course, but, you know, we have a lot of liquidity. We're sitting on $2 billion of capital that's coming in the door, you know, over the near term. And so there's a bias to put the money to work. And we think where we're seeing cap rates right now, especially in conjunction with sale leasebacks, we think that's a good place to be. Sorry, and so are you expecting further cap rate expansion from here? And as you- You know, look, as of a couple of days ago, I would say yes, we would have expected to see some increasing cap rates over time. And look, I think the dynamics with cap rates, it's you know, on the way up, cap rate movements you know tend to lag interest rates. And obviously, we had a pretty meaningful move over a short period of time, notwithstanding this week. You know, so disciplined buyers like us tend to push for higher yields, and sellers hold out hope. You know, ultimately, that leads to bid-ask spreads kind of widening. And the pattern we've seen this year is that sellers ultimately move, and I think that's what we'll continue to see going into next year. But with this recent rate moving back downward, hard to predict, of course. I think if Treasuries settle at the levels they are today and maybe gradually move lower, I think there's a sustained move lower, then I don't think we'll see increases next year, but we may not need to in order to do more deals if that's the case. Mm-hmm. So then just to follow up on that: So in terms of the decrease to acquisitions guidance this year, is that just a function of maybe deals that you had been looking at in Q2 that aren't seeing their cap rates move to where you're comfortable transacting, or are those deals fully out of the market? Just curious, any color you can provide. Did you say an increase to our guidance this year? I missed the first part of that. No, no, no. The decreased acquisition guidance- Yeah. this year. Just trying to understand- Yeah T he key drivers there with cap rates having moved up already. Yeah, I think the key driver was the third quarter. I mean, heading kind of end of summer, call it August, on our last earnings call, and that's really the last time, you know, we gave an update to the market. You know, we were sitting on about $1 billion of deals closed year to date, you know, some capital projects that were scheduled to deliver, you know, later this year. And we had a pipeline of over $400 million at that time, and so we felt, you know, pretty good at, of, you know, of the $2 billion number at that point in time. But with rate movements, we did decide to reprice deals. You know, deal volume, if you think of the big picture, it's not about deal volume, it's about how that translates into earnings growth. And so that's what we're focused on. But we did push pricing higher. I think a lot of what was in our pipeline early in the summer that slowed down, in some cases went away and is now back for that matter, you know, is what we hope to close this year and maybe bleeding a little bit into January. But that's kind of the environment for us right now. It's kind of reset back to, you know, what we were looking at over the summer, and we feel pretty good about the prospects going forward as well, given the longer-term pipeline is starting to build too. All right. Thank you, Jason. Yep, you're welcome. The next question comes from the line of Connor Siversky with Wells Fargo. Please proceed with your question. Great, thank you. This is actually Jamie Feldman here with Connor. I guess just to start, so the $1.5 billion of investments you have in your guidance, I know you said that's kind of a placeholder, but can you just give more color on, you know, where you are on, on any of that? I mean, is there stuff that maybe just handicap, if you can maybe bucket it into, like, this is stuff we're actually working on, this is stuff we think is on the come. And then also any kind of thoughts on yields for those different buckets? Yeah, the $1.5 billion for next year, I mean, that, that's an assumption right now. I wouldn't quite call it a placeholder. I think that we've historically been able to put money to work in all different types of environments. So, I think that's a good starting point. We're hoping to update that in February, maybe, you know, depending on the markets, you know, with some upside to that. But where we sit right now, we don't have a lot of visibility into 2024. I think deals typically take, you know, from when we first start seeing them until they close, typically it's several months. So maybe some of the deals that we're currently working on right now, you know, could be January-type closes. I think the early stage pipelines are some larger transactions, especially in Europe, where we're seeing some opportunities. Again, pretty wide bid-ask spreads, but these are sale-leasebacks. There are uses of proceeds. We do think that these sellers will likely transact, but they do take some time. So I would say we have some green shoots of deal opportunities, but not, you know, far enough along where we have a comfort level to say that, you know, we have a chunk of that $1.5 billion done. But, you know, look, I think over the years, we've been able to get deals done in different environments. And I think importantly, right now, we're sitting on a lot of dry powder. We mentioned the $2 billion that either has come in or is coming in over the next, you know, couple of months. That's going to provide us with a real competitive advantage, and we do have a bias to put that to work. Okay, thank you. That's helpful. And then, you know, to your point, you are sitting on a lot of dry powder. There's probably a lot of real estate that's going to need to be recapitalized, assuming rates don't pull in too much and bail people out. I know you had mentioned kind of industrial warehouse being a target, but, you know, as you sit back and think about the future of this company, you know, you just kind of exited office in one fell swoop. I mean, how do you think about other property types that might work for WPC over time, that maybe, you know, most people aren't thinking about? Or do you feel like, you know, your messaging today is, this is where we're going to grow, these are the types of assets we're going to put in the portfolio? We're not going to veer from that at all. No, look, we're a diversified net lease REIT. I mean, we've always been open to adding more diversification and new verticals, and I think we've shown that we've done that. I think, you know, recently we've done a little bit more retail. This year, we did some medical schools with some really kind of strong market leaders earlier in the year. And, you know, the bulk of what we've been doing, call it 70%+ over the last several years, has been industrial and warehouse. But even within those categories, you know, there's some diversification. There's cold storage, and there's food production and processing, some R&D. You know, clearly, we also own self-storage, both as a net lease and in some cases, operating assets. I think there's opportunities to convert, you know, more of that, you know, to net lease over time, too. So, you know, we're pretty diversified as is, which I think gives us the opportunity to see a wide, you know, kind of opportunity set to kind of, you know, to look at where we want to put our capital to work. I don't think that's going to change. So maybe a better way to ask it is, if you look at your portfolio composition as a percentage of NOI post the office sales, I mean, do you think that that pie chart would change meaningfully after you put a lot of this capital to work? Or do you think it's going to be- Yeah, if the last couple years are any indication, I can see industrial warehouse drifting up a little bit. I mean, right now, pro forma for the separation of office, once the office sale program is complete, it will be at a little over 60% industrial and warehouse. Maybe that drifts up, but I think we do, you know, want to maintain diversification. And I think the other, you know, verticals that I mentioned are all opportunities that we'll see. But I think that the bulk probably still, you know, flows into industrial. Okay. All right, thank you. Yeah, you're welcome. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question. Thank you. Toni, in your prepared remarks, you mentioned the improved rent recapture with the exit of office. So does that mean the comprehensive income will more closely align with contractual rent increases? I think, in the past you said there's 100 basis point leakage, and I was wondering if that leakage improves. Yeah, I think that's our expectation going forward. You know, the 100 basis points is really over an extended period of time, and you know, I think maybe even with some line of sight to what's coming in 2024, we do see that marginally improving. I... You know, it certainly could go either way in any one quarter, just given the amount of leases we have rolling at any one time. But I think we do marginally expect some improvement from the 100 basis point drag that we've seen against our contractual. Okay, and then can we clarify what the $2 billion of proceeds you expect are coming to you? Because some of this might be timing related, but in the past, you've said $465 million from U-Haul. You have the office sale program at $643 million, and then with NLOP and the equity forward, $735 million. I just wanted to make sure that was in that $2 billion and Lineage was not, and if there's anything that I'm missing in that number. Yep. I think U-Haul is about $470 million now. In the office sale program, we're looking at a total of $800 million. I think what you classified there is what we see kind of in the current state closing before the end of the year. So we've got $800 million there, the $470 million from U-Haul, as well as kind of our normal course dispositions next year, which we said would be in the range of $100 million-$300 million, as well as some additional operating properties that could make up another $100 million. So those were the components there, in addition to the equity that we settled, as well as the NLOP distribution that we just received. Yeah, and it does not include anything with Lineage. Cool. Thanks a lot. You're welcome. The next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question. Yeah, thanks. Jason, you mentioned a number of large portfolio deals in the early stages. Does that represent a shift in the type of deal flow that you've been seeing? Is there any additional color you can give on what the composition of those portfolios is? Yeah. Yeah, Yeah, I don't think it's any different shift. These are sale-leasebacks. They're generally with, you know, sponsored back companies as they consider, you know, the best way to capitalize either their current portfolio companies or as they look at making new acquisitions and in some cases, add-on acquisitions. You know, so sale-leasebacks of industrial companies and, you know, kind of varying degrees of size. But I don't think it's any different than than we've seen. It. You know, maybe the difference is that there's a little bit more of these in Europe right now that we're seeing, and Europe's been pretty slow over the last, you know, 12-18 months. There was kind of more adjusting that needed to happen to steeper rate increases there than than there had been in the U.S. So maybe that's the kind of new difference here. Okay, got it. And then, Toni, how are you guys treating the Vegas construction loan in the 2024 guidance? In the 2024 guidance, we're just assuming we fund the total commitment there, and it continues to earn, based on its current rate at 6%. Okay, thank you. Yeah, and I think, Brad, importantly, and maybe this is what you're highlighting, at some point in time, that loan will get repaid, and as Toni mentioned, that's a 6% coupon. So that could be some more, you know, cheap capital that we get access to and can, you know, reinvest in higher yielding, you know, net lease. I think when we, when we did that loan a couple of years ago, 6%, you know, was a fairly interesting rate relative to where we were investing in net lease, and and obviously, that's changed. That's gonna be some pretty cheap capital to have access to over the next maybe year or two, if not sooner. Great. Thanks. The next question comes from the line of Jim Kammert with Evercore. Please proceed with your question. Thank you. Good morning. Toni, if I could, you were very helpful in talking about how the third quarter recovery is obviously a very small subset portfolio, but what historically has been really W. P. Carey's toward typical 90% recovery, 95%? I'm just curious if you had any trend data there on the re-leasing. Yeah. Brooks, do you want to jump in on that? I know you have- Sure. more of the details. Yeah, as you noted, any given quarter, and especially one with not a lot of activity, can move around a little bit. But we really like to think about it on a trailing 8-quarter basis. And on that basis, for the last several years, we've been recovering about 100% of expiring rent in our leasing table. And importantly, the TIs and leasing commissions component of that, so the capital intensity is very, very low, around $2.50 ish per sq ft, expiring. So that's kind of the world we've been in. We do expect, post office exit that our leasing outcomes in the long run will improve as well. Thanks, Brooks. That makes sense. And then stepping back, just a second question: Have you ever disclosed, as a company, what percentage of your annual base rent is covered by reporting tenants, where you get either parent or unit level, any form of financial reporting regarding your, your assets? Yeah, I mean- On it. We don't disclose it, and it's a little bit different than, I would say, a typical retail REIT. Sure. I think there's a couple components here. I think number one, with financial reporting for the tenant or the guarantor, I would say, you know, probably close to all of our tenants, you know, the high 90% range of ABR provides us with annual audits and quarterly updates. I think, you know, in addition to that, a number of our tenants will provide site-level coverage to the extent that's relevant. I think with some of the retail operating assets, you know, that clearly would be self-storage, you know, things like that. And even in our case, you know, many of our light manufacturing, where there are P&Ls at the property level, we'll get that so we can understand coverages and how that translates to our view on criticality, you know, contribution from those properties to the parent. Things like that, I think, are important to us. But, you know, high level, it's high 90s reported to us with audits and quarterly financials for the tenants themselves. Great. No, that's worth having. No, it's great you have that, that insight. That's what I was looking for. Thank you. You're welcome. The next question comes from the line of Josh Dennerline with Bank of America. Please proceed with your question. Hi, this is Farrell Granath on behalf of Josh. And so I wanted to touch on, I know we've now been speaking a lot about dry powder and acquisition guidance for 2024. Curious if you could touch on any more color of other key drivers for internal growth, into next year? Yeah, certainly. I think- So, Toni, why don't I start high level, and why don't you jump in with some of the details? I think from a, you know, just from a macro perspective, certainly, you know, external deal volume is a driver of growth for any net lease REIT. I think what's maybe a bit unique for us is the magnitude of our built-in rent increases within our leases, especially the amount that's tied to inflation. So that's going to be a big driver for us as well. We were at 4% for most of 2024 in terms of maybe the lower 4% from a same store contractual basis. You know, with inflation moderating a little bit next year, I think we'll expect to be around 3%, but it'll still be meaningful. Toni, I don't know if you want to add any color on some of the details, but that's kind of high level, big picture. I think that's the driving component is really on a same-store basis. And as I just highlighted in a previous answer, that, you know, the drag that we would expect from contractual to comprehensive is expected to diminish from kind of our previous history. So I would throw that in. Great. And also, I wanted to ask about, compared to the last time, of the announcement with the strategic assets or the office sales, was there a change in either just the timing or volume coming out of 3Q into 4Q? I believe you were mentioning it was the cap rates that maybe were a driver of changing in timing, but curious if you could give a little bit more detail on, Is this a changing in timing on office sales, or do you mean just- Yeah N ormal course investments that we're doing on the office sales? Yeah. Brooks, do you want to- do you want to touch on that? No, I'd say our office sale program on balance sheet is going pretty much according to plan, potentially even a little bit ahead of plan. So we're making good progress there, and certainly a choppy market, but I think where we are right now, we feel very good about it. So, that's materially in line with when we made the announcement. Great, thank you for that. You're welcome. The next question comes from the line of Harsh Hemnani with Green Street. Please proceed with your question. Thank you. Jason, as you mentioned, you know, since the time you announced the office sales program, yields have moved up quite a bit. Are you seeing, you know, some of the dispositions on the office sale program that might be under contract, maybe coming back, trying to renegotiate on that? And then can you talk about the 10% of sales that are still, you know, to be negotiated? How confident do you feel in, you know, getting the pricing that you guys have outlined on that piece? Yeah. Brooks, you want to tackle that? Sure. So I think overall, our confidence level is good. I mean, I think in this market, nothing's closed until we receive the funds, and that's our mindset. But we have a very clear path to get this done as expected. You know, there's a two-thirds of it is either closed or under binding contracts that do not have wiggle room to retrade. And we feel like the balance, you know, really, those deals were negotiated post-rise in interest rates, and really, that's baked into people's thinking. And so we're certainly cautious and cognizant of a volatile market, but, you know, every deal we've negotiated with that in mind. And so, you know, we feel optimistic that we can get this done according to plan. So, we'll certainly keep everybody posted, but that's currently where we're on track. That's helpful. Then on the acquisition side, so you mentioned that from the third quarter to the fourth quarter, seller expectations have adjusted. The bid-ask spread is now coming in. Are you seeing the same in Europe? And you know, how's the dynamic differing there? Yeah, I mean, Europe, as I mentioned earlier, that's been slower to adjust. I think that we're maybe finally starting to bridge, you know, that gap. Bid-ask yields have come in, so, you know, the pipeline, I would say right now, is weighted about 50/50 between the U.S. and Europe, and that's in contrast to year-to-date deal volume of, you know, probably closer to 90/10, you know, North America and Europe. So, we expect to see some contributions from Europe going forward. I think what's helpful over there is we've seen our cost to borrow in euros also come down. You look back over the summer, and there's a point in time in which there probably was not a lot of difference between, you know, our borrowing costs in U.S. dollars versus euros, and we're starting to trend back to maybe what's been more the historical norm, which is, cost of euro debt is inside of the U.S., and it's maybe, you know, 50-100 basis points, maybe even a little bit more if we were to do some cross-currency swaps, as opposed to direct euro issuances. So, I think that's helping, you know, especially because cap rates probably, maybe are in line or similar, maybe slightly below, if anything, to the U.S. Maybe there's an opportunity to generate some better spreads in Europe going forward, similar to what we've done in the past. Got it. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star, then one on your telephone keypad. Our next question is a follow-up from Eric Wolfe with Citi. Please proceed. Hey, appreciate you taking the follow-up. I thought I heard you say that 1Q 2024 AFFO guide, or not guidance, but the, the actual number would be the highest next year. Because I would think it would be the lowest or maybe 2Q be the lowest, given U-Haul option. But I guess, either way, you know, I'm trying to understand what the cadence of AFFO should be through the year. I would think that second half AFFO should ramp, but is that not the right way to think about it? ... No, that is the right way to think about it. I think I wanna caution that we, you know, typically don't get into kind of quarterly run rates, especially this early in advance of 2024. But we do expect kind of the U-Haul and office sale program to fall off at the end of the first quarter. And then the ramp from there, I think what I said in my remarks, was that we do have—our expectation is that the majority of the $1.5 billion assumption that we have in our 2024 guidance is weighted towards the back half of the year. So that ramp will come, and whether that happens in the third quarter or more in the fourth quarter, kind of time will tell for us, and we'll refine that as we get, you know, better line of sight. But I think that is the right way to think about it. Okay. Right, 'cause when you talked about $2 billion of capital inflows, and $350 million is coming from NLOP right now, $800 million from office sales by early 1Q, $470 million from U-Haul, I think that's March, and then another $100 million from Marriott sales by year end. So that's like $1.7 billion of capital coming to you by 1Q. So I mean, are you just assuming that, like, I guess, what level of cash are you assuming through the first half of the year is just earning 5%? Because you have a lot of capital coming to you in a short period of time. So trying to understand what the assumption is around how you're deploying that before you end up reinvesting into other acquisitions. Yeah, look, I think cash is fungible, as we all know, and, you know, we don't really wanna get into too much of the specifics around the timing of deployment in 2024, given where we stand. But as you know, we have a bond maturity that's due in April and another in July. So we could certainly put that capital to work there. Our bias is towards putting it into investments and potentially, you know, would like to be in the capital markets and need to do more in next year. But I think that really does all come down to the plan coming together and having better line of sight into timing in 2024. So we'll give a lot more color on that, I think, as we get into February. Okay. Thanks for taking the follow-ups. At this time, I am not showing any further questions. I'll now hand the call back to Mr. Sands. Great. Thanks, everybody, for your interest in W. P. Carey. If anyone has additional questions, please call investor relations directly on 212-492-1110. That concludes today's call. Everyone may now disconnect.