Hello and welcome to W. P. Carey's first quarter 2024 earnings conference call. My name is Diego 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 will now turn today's program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead. Good morning everyone and thank you for joining us this morning for our 2024 first 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. Good morning everyone. Today I'll focus my remarks on our recent investment activity and the current strength of our pipeline, as well as touch upon how we're positioned and our outlook. As usual, I'm joined by our CFO, Toni Sanzone, who will cover our first quarter results and balance sheet, as well as our recent asset management activities. We have John Park, our President, and Brooks Gordon, our Head of Asset Management, on the call to take questions. Starting with investment activity. year-to-date, we've completed investments totaling $375 million, the vast majority of which were industrial properties. This comprises $280 million of investments closed during the first quarter and a $94 million acquisition completed in early April of an approximately 1.2 million sq ft distribution facility near Rickenbacker International Airport, just outside of Columbus, Ohio. I'm pleased to say that in Europe we've seen bid-ask spreads come in significantly, creating more opportunities in the region compared to last year. Year- to- date, about 70% of our investment volume has been in Europe. Our European presence also gives us a cost-of-debt advantage given our ability to issue euro-denominated bonds. Currently, that advantage has moved closer to where we've seen it historically, at rates around 150 basis points tighter than where we could issue U.S. bonds. With high-yield debt and other financing alternatives remaining very expensive, sale leasebacks continue to be an attractive source of capital and comprise the largest proportion of our investments year-to-date. A key advantage of sale leasebacks is our ability to directly negotiate the lease structure, including rent escalations. As a result, we're uniquely positioned within the net lease sector, with 99.6% of ABR generated by leases with built-in rent growth, which is currently just over 3% on a contractual same-store basis. Given the strength of our rent growth over long lease terms, we believe it's important to look both at initial cap rates and average yields relative to our cost of capital. Our investments year-to-date had a weighted average going-in cash cap rate of approximately 7.4%, providing initial accretion, and average yields around 9%, reflecting rent growth over the life of the leases. For average yield, we're assuming 2% inflation, in line with the Fed and ECB targets, although that may prove to be conservative with inflation running at over 2% for some time now, which is generally expected to continue. While we will continue investing across a range of cap rates, for the full year we expect to target initial cap rates averaging in the mid-sevens and average yields over the life of the leases in the nines. We currently have a strong pipeline totaling over $500 million of investments, including about $300 million at advanced stages that we expect to close over the next few months. Additionally, we have $66 million of capital investments and commitments scheduled for completion in 2024. All told, that gives us clear visibility into over $700 million of investments so far in 2024 for deals that are either completed or viewed as imminent, and we have several hundred million dollars of other identified deals in the pipeline with longer timelines to close. So we're making good progress towards the $1.5-$2 billion of investment volume in our guidance. The significant liquidity we've built up gives us a distinct advantage executing on those transactions. Essentially, pre-funding our deal pipeline at a time when the outlook for interest rates has become increasingly uncertain and net lease REITs generally have an unfavorable cost of equity. During the first quarter, we added to our liquidity, primarily through the State of Andalusia and U-Haul dispositions. Toni will get into the specifics, but the main point I want to make is that even after funding new investments, we ended the first quarter with just over $1 billion in cash and were minimally drawn on our $2 billion revolver. While both are available to fund investments or repay near-term debt maturities, our strong bias over the short- term remains to deploy that capital into new investments. Over the longer term, the unique additional internal sources of capital available to us, including our equity stake in Lineage and our operating self-storage portfolio, continue to be meaningful differentiators to other net lease REITs, giving us a longer investment runway should the capital markets remain challenging over an extended period of time, as well as additional flexibility in how and when we access the capital markets. Lastly, as we near the completion of our strategy to exit the office assets in our portfolio, it's a good time to review where we stand, including the near-term impacts to earnings versus how we are positioning the company for higher long-term growth. Given the office assets we've spun off or sold, along with the exercise of the U-Haul purchase option, 2024 AFFO won't be comparable to prior periods, but instead sets a new baseline AFFO from which to grow going forward, without the headwinds associated with deteriorating office fundamentals and without any purchase options on significant assets ahead of us. To a lesser extent, 2024 AFFO has also been impacted by certain tenant matters. We've made good progress working through them and do not expect any additional downside to that currently embedded in our guidance. Toni will review the specifics here too, but in summary, the Hellweg restructuring was completed on the terms we expected and the tenant is current on rent and on track with its turnaround plans. The Prima Wawona lease on 4 cold storage and packing facilities was rejected, as we talked about last quarter. In April, we successfully sold one of the facilities. We expect to complete the sale of a second smaller property over the next few weeks, and we're actively working on the other two. In addition, we completed the re-tenanting of the large vacant warehouse property we spoke about last quarter, both at a higher rent compared to the prior lease and to a stronger credit tenant, which was an excellent outcome. Since our last call, we've made some additional tenant disclosures, including details showing that 85% of our ABR comes from tenants where they or their parent company generate over $500 million in annual revenue, or our government entities. As a reminder, our investment approach is to invest in mission-critical properties, favoring large companies. During the tougher periods of the economic cycle, large companies generally have better access to liquidity and are far more likely to continue operating in critical properties in the event of a restructuring compared to small companies, which have a higher risk of liquidation. We've also expanded the top tenant disclosure in our supplemental to show our 25 largest tenants, which are generally very large companies, including investment-grade and strong sub-investment-grade credits. Within those top 25 tenants, we're closely monitoring Hearthside, which is the largest contract food manufacturer in North America, with around $4 billion in annual revenue and provides critical production capacity for a number of well-known and long-tenured blue-chip customers. While it has experienced some credit deterioration, we do not expect any disruption to our rents, even in the event of a restructuring, given the highly critical nature of the properties we own, which comprise the large majority of Hearthside's two largest divisions, all of which were central to our original investment thesis on this portfolio. In closing, with the completion of our office exit strategy this year and resolution of some recent tenant issues, we expect to end 2024 with an even stronger portfolio. We're making good progress towards our investment volume guidance, including a robust pipeline, which we're extremely well-positioned to execute on given the liquidity we've amassed. The full impact of deploying that capital will flow through next year, which, along with the strength of our rent escalations, gives us confidence that we will see a significant uptick in year-over-year growth in 2025. As that growth is reflected in our cost of capital, we believe we will be well-positioned to drive total shareholder returns over the long term in the low double digits through a combination of earnings growth and our dividend yield. With that, I'll pass the call over to Toni. Thank you, Jason, and good morning everyone. AFFO for the first quarter totaled $1.14 per share, with a decline from prior periods primarily reflecting the execution of our office exit strategy, as well as the impact of a three-month rent abatement under the Hellweg lease restructuring, which had about a $0.03 per share impact on our first quarter AFFO. Given our investment activity year-to-date, coupled with the strength of our pipeline, we remain on track to generate full-year AFFO in line with the midpoint of our guidance range. We completed the large majority of our anticipated 2024 disposition activity during the first quarter, including 72 properties sold under our office sale program for gross proceeds totaling $411 million, leaving us with just seven office assets representing 1.3% of ABR remaining to sell under the program. During the quarter, we also completed the disposition of our U-Haul portfolio under its purchase option for gross proceeds of $464 million and sold three additional assets totaling $15 million, bringing total dispositions in the first quarter to approximately $890 million. First quarter releasing activity included the completion of the Hellweg lease restructure, which resulted in a 14.6% rent reduction commencing on April 1st, bringing its ABR to $25.2 million. The lease term was also extended by seven years, and we provided a rent abatement for the first quarter. Excluding Hellweg, releasing activity resulted in overall rent recapture of 107% and added 3.4 years of incremental weighted average lease term on 40 basis points of ABR. As Jason mentioned, Prima Wawona rejected our lease in April, and we disposed of one of the assets in that portfolio for gross proceeds of $9 million. We're currently working through resolutions on the other three, one of which is close to being sold. We collected rent on the portfolio for the full first quarter, and our guidance continues to assume no additional rent on these assets in 2024 as we work through a resolution and carry the properties vacant. Occupancy at the end of the first quarter increased 100 basis points to 99.1%, primarily reflecting the lease-up of a 1.6 million sq ft warehouse property just outside Chicago. As Jason noted, we achieved a great outcome on this asset, signing a lease with the U.S. logistics division of Samsung for a 10.5-year term with attractive fixed rent escalations. The initial ABR of $6.4 million represents 102% of the prior-in-place rent, with cash rent beginning in the first quarter of 2025. Turning to same-store rent growth. For the 2024 first quarter, contractual same-store rent growth was 3.1% year-over-year, which is expected to moderate and average around 2.7% for the full year. Comprehensive same-store rent growth was - 30 basis points year-over-year, as reported, largely reflecting the abatement of Hellweg's first quarter rent. Excluding this abatement, first quarter comprehensive same-store would have grown at just over 2% year-over-year. On a full-year basis, we expect comprehensive same-store to be relatively flat, inclusive of the Hellweg impact. Other lease-related income was lower for the first quarter at $2.2 million, and based on current negotiations, lease-related settlements and recoveries are expected to run higher over the remaining three quarters of the year, with our current guidance assuming a total for the full year in the low to mid-$20 million range. G&A expense totaled $27.9 million for the first quarter, which we do not view as a run rate since first quarter G&A typically runs higher than the rest of the year due to the timing of certain payroll-related items. So for the full year, we continue to expect G&A to be between $100-$103 million. Non-operating income during the first quarter was $15.5 million, which includes $9.4 million of interest income on cash, $3.1 million of realized gains on currency hedges, and the $3 million Lineage annual dividend we received in January. During the first quarter, cash earned interest income at a rate averaging around 5%, although we expect the amount of interest income to decline over the remaining quarters of the year as we deploy cash into new investments. For the full year, we expect non-operating income to total between $35 million-$39 million. Moving now to our balance sheet. Our liquidity position increased during the first quarter, driven by proceeds from the office sale program and U-Haul dispositions. We ended the quarter with liquidity totaling approximately $2.8 billion, including $1.7 billion of availability under our revolver, close to $800 million in cash, and $284 million of 1031 exchange proceeds, which are presented as restricted cash within other assets on our balance sheet. We continue to have a robust liquidity position, noting that very early in the second quarter, we repaid our $500 million U.S. bonds at maturity using cash on hand. Our debt maturity schedule for 2024 remains very manageable, with EUR 500 million euro-denominated bonds maturing in July, along with some incremental mortgage debt coming due. Given the substantial cash we've built up, our revolver balance remained relatively low, reducing our exposure to floating-rate debt. Our weighted average interest rate, therefore, remained at 3.2% for the first quarter and is expected to average in the low to mid-3% range for the rest of 2024. With ample capital to fund our pipeline, we continue to have a great deal of flexibility on how we approach the capital markets in 2024. We have a strong preference to deploy our current liquidity into new investments and expect to see some appropriate windows of opportunity to execute bond deals this year, both in Europe and the U.S. We ended the first quarter with debt to gross assets of 40.9% and net debt to EBITDA of 5.3x, which is inclusive of 1031 exchange proceeds. While net debt to EBITDA was below the low end of our target range of mid-5x to high-5x, we expect it to trend back into that range over the back half of the year as we deploy capital into new investments. Lastly, on the sustainability front, I'm pleased to say we've enrolled more than half of our portfolio in our electricity usage reporting program, a key step in making further progress towards quantifying and reducing our carbon footprint. We continue to incorporate green lease provisions in our leases and currently have a quarter of our portfolio under leases that contain green lease provisions. We look forward to sharing further detail regarding our ESG objectives and progress in our sixth annual ESG report, which we're planning to publish later this month. In closing, our first quarter AFFO and investment activity year-to-date keep us on track with our expectations for the full year. Deal activity has picked up, and given the capital we've amassed and additional liquidity available to us, we're well-positioned to execute on a strong pipeline of deals. Within the portfolio, we've made good progress resolving some near-term tenant issues, and we're close to completing our office exit strategy. We believe all those factors, in conjunction with the strength of the rent growth built into our portfolio, position us for long-term growth. 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, press the star then the number two. Thank you. And our first question comes from Mitch Germain with Citizens JMP. Please state your question. Thanks for taking my question. I'm just trying to gain some sense on the capital markets strategy. I think, ToniAnn, you said some planned notes offerings in Europe and U.S. this year. So does it look like you'll re-file the July notes and then maybe try to pre-fund the February? Is that the way to think about it in the back part of the year? Yeah, I think we have those maturities in our line of sight. As we said, we've seen some positive movement in rates in Europe. There's some interesting opportunities. I think we still feel good about where the balance sheet sits now and don't necessarily have to hit the capital markets, but we would look to refinance those with bonds, likely over the latter part of the year. Great. Then maybe, Jason, I'm just curious about the competitive landscape in terms of any capital you might be competing against in deals. I'm curious in terms of how do you think it sits today versus maybe where we were in the back part of last year. Are you seeing more parties emerge, or is it still kind of scarce in terms of the deal pools? Yeah, look, I think the private bid still remains thinned out. I think buyers that rely on asset-level debt, such as CMBS, they still remain constrained and maybe unreliable. I think sellers certainly value all-cash buyers much more. I think that gives us a big advantage. We generally don't run into the public REITs all that much, so it's really the private bid that is more competitive. But I think generally, we sit in a pretty good position right now, especially given the liquidity position that we're in right now. So the environment's interesting as well. We talked about Europe earlier on the call about how that's loosening up, and we're seeing more opportunities there. So it's shaping up to be an interesting transaction environment for us in 2024. Great. Thank you so much. Thank you. Our next question comes from Jim Kammert with Evercore ISI. Please state your question. Good morning. Thank you. Jason, could you just clarify a little bit more about your comments on Hearthside? Is it technically on your watchlist, and I presume they're current on rent? Yes. Yeah. So yeah, we mentioned Hearthside. They're a leveraged company, and we talk about them because we think they could go through restructuring at some point, which is why we brought it up in the context of our top 25 disclosure. Very large company. They provide critical production capacity, their customer base, and importantly, we own highly, highly critical real estate to the company's operations. So for that reason, we feel very good about our position. They are current on rent right now, but even in the event of a balance sheet restructure, we don't expect any disruption in rents. We did add it to our watchlist to be proactive. We're talking about it to be transparent, but we do expect them to continue to pay rent for the foreseeable future. That's very helpful. I mean, it's obviously very premature. Let's assume in the worst case, if they did not stay, where would you classify the rents on those properties relative to market? Brooks, you want to tackle that? Yeah. I mean, I think the best way to think about it is from a replacement cost perspective for the capacity. I mean, it's highly critical capacity, not only to the company but also to a long list of their blue-chip customers. So without that capacity, there's a huge disruption in that packaged food business. To replace this capacity would be orders of magnitude higher cost than our facilities. Rents are under $5 a foot, so reasonable. But again, I think the key takeaway here is the mission criticality of this real estate for the company as well as for their end customer. So really, two layers of criticality there. And so we feel good about the situation. But as Jason said, we want to be proactive with it. Very good. And just could you remind me - and I apologize - what percentage of your private tenants do you receive some sort of entity-level financial or some sort of property-type information? Realize they're not retail properties per se, but so that you can, you're proactively mentioning this one, for example. But just refresh us as to how much insight you get on an operating basis and financial basis from your private tenants. Yeah. We get financials from materially every tenant, so effectively 100%, 99% and change by ABR. We get those typically on a quarterly basis and then annual audits. There's a delay. After the quarter ends, they prepare them and then send them to us. We track those very, very closely. We have very good visibility. I think, importantly, as we've discussed before, a key piece of our approach there is the tenant engagement as well. It's not just looking at the numbers, but also we want to have a constant dialogue with the companies and their management teams. Terrific. I'll get off. Thank you very much. You're welcome. Thank you. Our next question comes from Anthony Paolone with JP Morgan. Please state your question. Thanks. Maybe, Toni, can you give us a sense as to where you think comprehensive revenue growth will shake out this year and what all you've included in it on the credit side, either that you've discussed already or just that maybe you didn't talk about? Sure. Yeah. Right now, I think we mentioned comprehensive is about -30 basis points for the first quarter. That really has the front weighting of the Hellweg abatement built into it. And as we mentioned, we have Prima running vacant for the rest of the year, assuming we don't sell those assets. So that's all baked into it. In addition to that, we have about 70 basis points of rent contingency, which we've not yet used at this point in the year. We do expect in total, when you kind of look at all four quarters together, we run around flat, potentially slightly positive if we don't use that rent contingency. Okay. And any sense as to what that does looking out to 2025 for a full-year impact? Or it sounds like a lot of the credit situations were more front-end loaded for this year, so we get the bulk of it. That's right. I think we don't really have any line of sight into any material credit rent disruptions that we would expect to kind of go past this year at this point. It's early in the year. I think we'll continue to monitor that. But I don't think there's any major impact to expect on the comprehensive side. We've typically trended around 100 basis points below contractual historically. I think that it goes up or down any given quarter, but that's generally the run rate that we would expect on a long-term basis. Okay. I mean, I guess on the credit side, you talked about it sounds like there's nothing else really on your watchlist at this point. So just trying to understand if that was just for top 25 or the entire portfolio because it just seems like you had a bit of a string here of credit matters, and so didn't know if that was coincidental or if there's just other stuff that you're watching. So maybe a little bit more depth there would be helpful. Sure. Yeah, we have about. Sorry, I wanted to maybe just address that in the context of rent collections. We have about, I would say, about 90 basis points of what I'd call uncollected rent in the first quarter from cash-basis tenants that we did not recognize in AFFO. The majority of that we do expect to collect, so we don't really view that as sort of a credit issue or long-term bad debt expense. It's really more timing from our perspective. So again, we don't really foresee needing the full 70 basis points that I've outlined here, but I think it's still kind of early in the year and want to kind of remain conservative. Yeah. And then from a credit watch perspective, just to clarify, Jason mentioned Hearthside specifically. There are other tenants on our credit watch list. Relative to prior quarter, it's up somewhat. It's around 5% of ABR. Prior quarter's around 4.5%. Really, the delta is the addition of Hearthside. A few tenants actually came off the list as well. One was the retailer JOANN, which has emerged from bankruptcy with a much stronger balance sheet. So they've come off of our credit watch list. That's sort of the range of credit watch by ABR right now. Okay. And if I could just sneak one last one in. You talked about, I think, mid-sevens in the pipeline for the rest of the year. And then there was an article about the Columbus deal that put it in the sixes. And so just wondering if that was right or if there's just enough higher-yielding stuff to get to that mid-sevens that you're looking at to offset that. Yeah, that's right. Our target is still in the mid-sevens, maybe higher if rates stay where they are and we see some cap rate expansion. But we do invest across a wide range of yields with some deals above that target, even well into the eights. Others, especially deals with higher-quality real estate with strong rent bumps and maybe below-market rents, we might get a little tighter on those, and they could even fall a little bit below the low end of that range. And yeah, HanesBrands deal falls into that category. It's Class A, newly built, modern DC, below-market rents. Importantly, it also has 3% annual rent increases, which I think that always needs to be factored in when comparing kind of going in cap rates with other deals that we do or with some of our peers. But it's a well-located asset, Rickenbacker International Airport, which is one of the stronger industrial markets in the country. But yeah, it'll be a range of cap rates, and we still would expect to be in that mid, even high sevens for the rest of the year. Okay. Thank you. You're welcome. Our next question comes from Greg McGinniss with Scotiabank. Please state your question. Hey. Jason, just on that cap rate color that you just gave, mid- to- high sevens, how does that look from a U.S. versus Europe standpoint? Yeah. I mean, it's a good question. In the U.S., we started to see cap rates stabilize at the beginning of the year, now that interest rates become a little bit more volatile and looking more like the Fed's going to kind of push rate cuts into the back half of the year, if at all, for that matter. So there could be a little bit of room for cap rate expansion in the U.S. I think the big difference right now is the changes that we've seen in Europe. It's been very dynamic over there. For the better part of the last 12-18 months, I think the transaction markets were relatively frozen over there. Rates had spiked, which we've seen that now reverse course. And I mentioned earlier that our cost to borrow in euros is now back to what I would call historical averages relative to where we can borrow in the U.S., about 150 basis points spread. So yeah. So I think that what we've seen is that we can get a little bit more aggressive or tighter on cap rates in Europe than what we've been looking at and maybe relative to the U.S. And for that reason, we've seen more activity over there. It's been about 70% of our year-to-date deal volume has been in Europe and our pipeline's probably 50/50. But the cap rates, they do range. I mean, range by country, property-type deal. Germany, for instance, is probably at the tighter end of the range that we're targeting, and countries like Italy might be on the higher end of the range. Then again, it's always important to include or factor in the rent increases when we're talking about cap rates. When we are doing initial cap rates in the sevens with bumps that have been averaging around 3% for us, that puts average yields over the life of the lease well into the 9s. And that's a pretty interesting yield relative to cost of capital right now. Right. Okay. I guess for Europe, obviously, they've got a lot of liquidity right now and more dispositions for more cash. But for Europe acquisitions, should we expect that you'll be issuing euro-denominated debt still given that cost of debt there? Yeah. I mean, look, I think that if we were to issue bonds today and want to emphasize that we have a lot of flexibility given our liquidity and we don't need to do anything in the capital markets for some time. But if we were to issue bonds today, yeah, we'd probably lean towards issuing in euros based on the quotes we've been getting in each market and observing how different bond deal executions have gone. But we do have flexibility. It's one of the benefits of having diversification and the ability to issue bonds in different markets is we can see where we can get back to execution. And so we'll continue to evaluate that. Okay. And then given the tenant issues announced last quarter plus some issues you've had potentially with Hearthside or Casino and previously JOANN, have you adjusted how you're underwriting acquisitions or evaluating ongoing tenant risk? Let me start. I can let Brooks jump in there on how we're evaluating going forward within the portfolio. I mean, I think the shorter answer is no. We're comfortable with our business model and underwriting process. It focuses on buying high-quality real estate and, importantly, with companies that we believe in from a credit standpoint. We do target just below investment grade. We think that's the sweet spot to invest in net lease. We can dictate terms, whether it's rent increases, lease terms, other provisions, or covenants within these leases. And then very importantly, we mentioned this with respect to Hearthside. It's also played in with JoAnn's that we buy highly critical real estate. That's very important to tenant operations. And even if there is restructuring, like in the case of JoAnn's, our rent was continued to be paid throughout and they exited bankruptcy without any disruption. And that's our business model. We've done very well, and our portfolio has performed very well over decades and through numerous economic cycles. So no, I think that the approach is still the same. But yes, we're always very focused on credit. And we spend, I would say, the majority of our time underwriting deals, talking to the tenants, understanding their market position, meeting with management. But yeah, we like our business model. Okay. Sorry. And just a final question, more for our education. In terms of the lease renewal process, when does that tend to take place? I'm just looking at the top 10 disclosure. FM Logistic looks like it's expiring at the end of next year. When would we typically see a renewal be taking place? Brooks, you want to take that? Yeah. Yeah. It really takes a few different approaches, and we pursue them all. So it takes anything from we could be as proactive as, say, five years in advance for certain situations where we pursue what they call a blend-and-extend transaction. And we're very proactive with that. We've taken that approach for many, many years. There are other situations where we either really like our position or the tenant maybe has already signaled to us something where we might wait until later in the lease and not negotiate. You referenced FM Logistic. I think it's our 24th or 5th tenant. We're in active discussions on that. Expect we'll renew them on the majority of that square footage. And so we take a very proactive approach. But I think the good rule of thumb is around three years in advance of lease expiration on balance is kind of where we're most active in those discussions. And that's where you see a lot of the leasing activity in our quarterly disclosures. When might we expect to see something on FM? I can't comment on a specific transaction, but that's an active situation with them now. Okay. Thank you. Our next question comes from Joshua Dennerlein with Bank of America. Please state your question. Hi. This is Farrell Granath on behalf of Josh. I was wondering if you can give color on the guidance that's assumed as far as your operating assets? Toni, you want to take that? Sure. Yeah. The mid-point of our guidance range assumes our self-storage is generally flat to last year on a same-store basis. And in general, I think we give guidance in a full range, which includes the few hotel operating assets that we continue to hold. We do expect to sell one of those this year. But on whole, we expect about $85 million-$90 million of operating NOI, and that's from the total portfolio. Okay. In terms of the remaining office assets, is there any kind of insight if these may be closing still within that first half of this year that you had mentioned last quarter? Yes. So we're making really good progress there. Again, to reiterate, we've closed around 80% by expected proceeds. We're making very good progress on the balance. Another four of the larger transactions are under contract and in various stages of closing. That represents another, call it 17% or 18% by way of proceeds. On the very small amount that's outstanding beyond that, we're evaluating offers now. So we're making good progress. We think we're in line with what we discussed in the last several quarters in terms of total proceeds and pricing. So we think we'll get it done. One transaction, it's awaiting a tax ruling. It's under a binding contract. So that's a little bit out of our control, but it's not material to guidance. But we do expect we're on track for that. Okay. Thank you. Our next question comes from Eric Borden with BMO Capital Markets. Please state your question. Hey. Good morning, everyone. I was just hoping you could talk about the overall health and strength of your portfolio. Just given your insight into the tenant financials, is there maybe a pool of tenants that have kind of moved lower but not hit that watchlist criteria? And then conversely, are you seeing signs of strength in any of your tenant industries? Yeah. So to answer your question in a few different ways, I mean, first, I think overall credit quality is very consistent with where it's been in recent years. Investment-grade ABR is about a quarter of the portfolio. As I mentioned, the watchlist is around 5%. So that's ticked up a little bit, and that's really concentrated in a few tenants that we've discussed. Broadly speaking, the overall credit distribution of the portfolio has remained pretty constant, especially at portfolio scale. Certainly, credit for any given company can migrate over time up and down. For example, something like half of our investment-grade tenants were sub-investment grade when we acquired them. And so that credit migration can happen in both directions. And we would expect there are a few tenants we're looking at on our watchlist that we would expect to move off that as they complete refinancing transactions. There are others that over time will migrate onto the watchlist. But I think what the most important takeaway there is that our watchlist has been demonstrably conservative for decades. So the actual default experience out of that watchlist is a very small portion of that. So while we want to monitor a subset of the tenants, that's by no means indicative of a percentage of ABR where we expect an actual default. In fact, much less than that actually occurs in our experience. So we're comfortable with the credit quality of the portfolio. It's something we monitor very closely. Certainly, we've talked about a few specific situations, but broadly speaking, it's very consistent. That's helpful. And then on the disposition front for this year, outside of office and the U-Haul transaction, what types of tenant assets or verticals are you looking to actively recycle today? Yeah. So as you mentioned, the vast majority of our disposition plan for 2024 is in the office sale program and the U-Haul transaction. We have a smaller bucket of what you could call normal course, $150 million-$350 million in that range. Toni mentioned one, which was the last of the operating Marriott that we intend to sell. As a reminder, there are three others, which we're in process of working through redevelopment opportunities there. Broadly speaking, I'd say the theme is managing residual risk where appropriate. Vacancy is a smaller part of the puzzle, a little under 10% of our total disposition, but it's a few of the buildings in that normal course bucket. So not broad thematic trends there outside of the office exit, which certainly is the major story there from a thematic part of the disposition plan. All right. Thanks. And then last one for me, just for the model. Toni, could you just provide an update on your income tax expense guidance for 2024? I think it was $38 million-$42 million you talked about last quarter. Yep. That's right. And I think we're holding that consistent. I think we're just about $10 million for the first quarter, and that seems really on par with what we would expect for the remainder of the year. All right. Sounds good. I'll leave it there. Thank you. Thank you. And our next question comes from Nick Joseph with Citi. Please state your question. Thanks. Yeah. Just as you think about resetting rents for some of these restructured tenants, right? You did Hellweg recently. How do you think about setting coverage levels to make sure that both you and the tenant are comfortable with the rent levels going forward and it won't reoccur as an issue? Yeah. I mean, that's a good question. It's certainly a balancing act. We want to preserve economics, certainly. But at the same time, we want to put the company in question—in this case, it was Hellweg—on a better footing. We think they're making good progress on their turnaround plan, both on the cost-containment front as well as improving sales efficiency. And we do expect they will grow back into that coverage. But as we discussed, it's suboptimal. So we're watching it closely. They'll remain on our watchlist. But look, they've got the support of their landlords as well as their lenders. They're taking the right actions. But we want to see that be a sustained recovery process. So there's not a magic number in terms of a rule of thumb of where we would reset a rent from a coverage perspective. It's really a balance between what we perceive to be appropriate for the company to navigate a challenging period of time while preserving as much of the economics as we can. Thanks. Then how do you think about lease escalators and term given the range of outcomes with a tenant that has struggled before? From an existing tenant perspective, we think term in many situations not all is extremely valuable for us. In this situation, we very much did think extending that lease was the right outcome. As Jason has mentioned numerous times, rent growth is a core tenet of our business model. So that's very important. We retain that rent growth in these leases. The only thing I'll add there is with these longer lease terms, especially as you have perhaps M&A activity that could happen, whether it's someone like Hellweg or other tenants, you can get meaningful credit upgrades there. Brooks mentioned that about half of our investment-grade ABR is from upgrades over time. Some of that is business models improving. Others is M&A transactions where the acquirer has an investment-grade rating. So when you add term to even something like Hellweg where the credit behind it is maybe weaker than we would like at this point in time, there is the potential for some real upside to the extent there's consolidation. Appreciate it. Thank you. You're welcome. Thank you. Just a reminder, to ask a question, press star one on your telephone keypad. To remove yourself from the queue, press star two. Our next question comes from Brendan Lynch with Barclays. Please state your question. Good morning. Thanks for taking my question. If I heard you correctly, the Samsung lease has 6% escalators. Maybe you could just provide some detail around that large escalator and any other considerations like the initial rate compared to market that would allow you to dictate such terms. Just to clarify, I'm not sure where the 6% is, but it's 3.5% bumps there. Okay. All right. That makes more sense. And then maybe you could just provide some details on the buyers of the office assets. Were these primarily occupiers or office REITs or other net lease companies? It's really been a mix. Each building is very specific. I mean, the bulk of what has transacted in Q1 was a sale back to the tenant in the Spanish portfolio. But it's really been a mix. We've seen virtually all types of buyers. I would say we haven't seen public REIT buyers. It's primarily private capital and/or the tenant. Okay. Very good. Thank you. Our next question comes from Harsh Hemnani with Green Street. Please state your question. Thanks. Jason, just thinking about the cap rate, it seems to have moved down a little bit quarter-over-quarter, and it seems that it's going to stabilize there in the mid-sevens for the rest of the year. Coupled with that, acquisition volume has been a bit slow to start off for the year, and your cost of equity hasn't been what it used to be. Given that backdrop, have you evaluated returning some of the capital in the form of a special dividend or a share buyback that you're getting back through these dispositions instead of deploying them in maybe an uncertain capital market environment? Yeah. Maybe I'll tackle the last point first and then kind of address some of the points you made in the first half of your question. I mean, look, we're always considering options when it comes to how we allocate or deploy capital, including buybacks or distributions, however you do it to return capital. But right now, the best opportunity is still allocating capital to new investments. I mean, we can achieve cap rates yeah, the year-to-date, we're kind of mid-sevens. Depending on where rates go and allocation between Europe and U.S., I would say mid to high sevens, but hard to predict exactly what the cap rates look like. But we think that we'll generate some interesting spreads regardless, especially since we're sitting on significant cash right now. And so where we can issue either equity or debt in the markets right now is important, and that certainly factors into how we price deals. But right now, we are sitting on a lot of cash that's earning 5%. So we're generating really good day-one accretion, maybe significant accretion when you think about the 5%. That's not a hurdle for us by any stretch. But even if we were to issue new capital where we're trading now, we think that we can generate interesting spreads, especially because we're not totally focused on just going in cap, right? We've mentioned it several times today, but the embedded increase is built into our leases is really important. When you factor, call it 3% bumps on mid- to high-sevens cap rate, that generates an average yield or an unlevered IRR somewhere in the nines. Even relative to where equity and debt is trading right now, we think that probably generates within the range that we've been at historically, which is a 200 basis point-300 basis point spread to our cost of capital. We're comfortable investing now. I do think that if the rates stay where they are in the U.S., we'll see some cap rate expansion nonetheless as well. Thanks for that. I'll leave it there. Thank you. Okay. You're welcome. Thank you. At this time, I am not showing any further questions. Thank you for your interest in W. P. Carey. If you have any additional questions, please call Investor Relations on 212-492-1110. That concludes today's call. You may now disconnect.