W. P. Carey (WPC) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Peter Sands
• Chief Executive Officer - Jason Fox
• Chief Financial Officer - ToniAnn Sanzone
• Head of Asset Management - Brooks Gordon

TAKEAWAYS

• AFFO per Diluted Share -- $1.33 for the third quarter, representing a 6.4% increase year over year driven by investment activity and contractual rent growth.
• Full-Year AFFO Guidance -- $5.23 to $5.29 per share, representing a $0.03 increase to the midpoint of the prior range and implying 5.8% annual growth.
• Year-to-Date Investment Volume -- $1.6 billion, completed at a weighted average initial cash cap rate of 7.5%.
• Full-Year Investment Guidance -- $1.8 billion to $2.1 billion, representing a $100 million increase to the low end of the range.
• Contractual Same-Store Rent Growth -- 2.6% year over year, reflecting the impact of higher inflation on lease revenues with nearly half of the portfolio tied to the Consumer Price Index.
• Comprehensive Same-Store Rent Growth -- 2.2% during the third quarter, supported by improved occupancy and strong rent collections.
• Portfolio Occupancy -- 98.6% as of Sept. 30, representing a 10 basis point increase from the prior quarter following vacant asset sales.
• Forward Equity Available -- $540 million, comprising approximately 7.6 million shares raised at an average stock price of around $73 per share.
• Net Debt to Adjusted EBITDA -- 5.5, or 5.2 including the impact of unsettled forward equity, placing leverage at the low end of the target range.
• Total Liquidity -- $2.6 billion, including almost full availability on a $2 billion credit facility and cash on hand.
• Quarterly Cash Dividend -- $0.95 per share, representing a 4.4% increase year over year with a healthy payout ratio of 71%.
• Full-Year Disposition Guidance -- $350 million to $450 million, narrowed from the previous forecast of $350 million to $550 million.
• Property Expenses Guidance -- $54 million to $57 million, representing a reduction due to the timing of demolition costs and tax payment shifts.
• Tax Expense Guidance -- $40 million to $43 million, lowered because of international leasing activity tax optimization and investment composition.
• General and Administrative Expenses Guidance -- $104 million to $106 million, representing a slight increase from the prior forecast.
• Rent Abatement Impact -- $0.02 to $0.03 per share in the fourth quarter, primarily due to a 10-year lease extension with Nord Anglia involving $3.5 million in one-time free rent.
• Potential Rent Loss Estimate -- $3 million to $5 million, lowered from the prior range of $7 million to $10 million following successful rent collections from Hellweg.
• Active Capital Projects -- $325 million across 11 projects, with approximately $95 million scheduled to deliver during the fourth quarter.
• Re-leasing Spreads -- 105% recapture of prior rents, adding approximately nine years of incremental weighted average lease term on just under 1% of total annualized base rent.
• Weighted Average Interest Rate -- 3.3% on total debt, reflecting a marginal increase from the second quarter due to bond refinancings earlier in the year.

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RISKS

• Fox stated, "the recent sharp rise in long term interest rates has made the outlook for fourth quarter activity harder to predict," noting that broader corporate transactions in the pipeline may take longer to close.
• Gordon warned that Hertz, which represents approximately 60 basis points of annualized base rent, was recently added to the credit watch list and may seek to restructure its balance sheet.
• Sanzone stated, "our AFFO guidance implies a lower fourth quarter, partly reflecting the impact of rent abatements associated with certain re-leasing activity," specifically referencing a $3.5 million impact from one tenant.

SUMMARY

W. P. Carey Inc. (NYSE:WPC) reported third-quarter results driven by high investment volume and rent escalations linked to inflation. Management adjusted the full-year outlook for Adjusted Funds From Operations (AFFO) upward based on improved tenant credit performance and tax optimization. The company maintained a strong liquidity position, supported by substantial forward equity and retained cash flow, which the executive team believes will cover funding needs through 2027 without requiring additional equity issuance. Strategic activity remains focused on industrial sale-leaseback transactions in both the United States and Europe.

• Management identified sale-leaseback transactions as having the greatest pricing power in the current market, noting that these deals often adjust to higher interest rates faster than commodity retail assets.
• CEO Fox stated, "With the significant amount of capital we have raised this year, we are very well positioned to continue investing if attractive opportunities remain available."
• The company expects to generate approximately $300 million in annual retained cash flow from its real estate portfolio, providing a consistent source of internal equity capital.
• Asset Management Head Gordon noted that the credit watch list has decreased, specifically as the Hellweg exposure was reduced and moved out of the top 25 tenants.
• CFO Sanzone stated, "we would expect to refinance these maturities in the same currency, allowing us to continue benefiting from the lower cost of debt in Europe," regarding upcoming euro-denominated bond maturities.
• The company plans to liquidate its Lineage shares beginning in the second half of 2027, which management anticipates will provide $150 million to $200 million of capital for reinvestment into core net lease assets.

INDUSTRY GLOSSARY

• AFFO (Adjusted Funds From Operations): A non-GAAP financial measure used by REITs to measure operating performance by adjusting FFO for certain non-cash items and non-core expenses.
• Net Lease: A lease agreement where the tenant is responsible for property expenses such as taxes, insurance, and maintenance in addition to rent.
• Sale-leaseback: A transaction where a company sells its real estate to an investor and immediately leases it back to maintain operations while freeing up capital.
• Cap Rate (Capitalization Rate): The ratio of a property's net operating income to its purchase price, used to estimate the potential return on an investment.
• ABR (Annualized Base Rent): The annualized amount of contractual rent due under a lease, excluding tenant reimbursements.
• Same-Store Rent Growth: A metric comparing the rental income from properties owned for the entirety of both the current and prior year periods.
• Forward Equity: An agreement to sell shares at a future date at a price determined at the time the agreement is executed, providing deferred capital.

Full Conference Call Transcript

Operator: Hello, and welcome to W. P. Carey's Third Quarter 26 Earnings Conference Call. My name is Donna, and I will be your operator today. All lines have been placed on mute to prevent any background noise. Please note that today's event is being recorded. After today's prepared remarks, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I will now turn the call program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead.

Peter Sands: Good morning, everyone, and thank you for joining us today. For our 2026 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. It will be archived for approximately 1 year. And where you can also find copies of our investor presentations and other related materials.

And with that, I will pass the call over to W. P. Carey's Chief Executive Officer, Jason Fox.

Jason Fox: Good morning, everyone, and thank you for joining us. We have continued to execute at a high level throughout 2026. Enabling us to further raise our outlook for AFFO per share growth, which we believe will be among the strongest in the net lease sector this year. Importantly, our growth has been supported by broad based momentum across the business. Year to date investment activity has continued to exceed our initial expectations. Enabling us to raise the low end of our full year guidance range for investment volume.

While the recent sharp rise in long term interest rates has made the outlook for fourth quarter activity harder to predict, We continue to see a path to the top half of the range. Our AFFO growth also continues to be supported by the strength of our rent escalations. Providing a meaningful source of earnings growth independent of transaction activity. And our portfolio is performing well, reducing our outlook for rent loss for the remainder of 2026. As we look further ahead to 2027, we are pleased with the early signs of repricing we are seeing. With the significant amount of capital we have raised this year, we are very well positioned to continue investing if attractive opportunities remain available.

And with only 1 bond scheduled to mature in each 2027 and 2028, our exposure to refinancing headwinds should be manageable. even if interest rates remain elevated. This morning, I will briefly review our progress so far this year, and how we are thinking about the transaction market outlook for the fourth quarter and into 2027. Our CFO, ToniAnn Sanzone, will focus on our results and guidance and touch upon aspects of our portfolio and balance sheet. and we are joined by Brooks Gordon, our Head of Asset Management, to answer your questions. Starting with our investment activity. Year to date, we have completed approximately $1.6 billion of investments at a weighted average initial cash cap rate of 7.5%.

Cap rates have moved incrementally higher compared to the first half of the year. The investments we closed during the third quarter and those we expect to close in the fourth quarter have cap rates averaging in the mid to high 7s. That translates to average yields well into the 9s, approaching double digits in some cases. We continue to invest across a range of property types and cap rates. With most of our investment volume so far this year going into warehouse and industrial properties. Consistent with what we have done in recent years. Similarly, from a geographic perspective, the mix between The US and Europe has remained broadly in line with what we have done historically.

Our existing portfolio remains a meaningful source of investment opportunities, including expansions, build to suits and redevelopment projects. Supported by our Carey Tenant Solutions initiative, these projects allow us to deepen tenant relationships while deploying capital at attractive returns. Currently, we have 11 projects underway that will add approximately $325 million to our investment volume over the next 12 to 24 months. Including about $95 million scheduled to deliver during the fourth quarter. And we continue to find these projects have higher cap rates and longer lease terms than traditionally sourced investments.

Turning our attention to fourth quarter investment activity specifically, As the broader transaction market continues to adjust to higher rates, it is added some uncertainty around fourth quarter deal timing. Particularly for deals in our pipeline tied to broader corporate transactions, that may take longer to close in the current environment. If those transactions remain on their anticipated timelines, we could see a path to the top half of our investment volume guidance range. Until we have greater visibility, however, we are maintaining a measured outlook for the remainder of the year and only moderately raising the low end. Resulting in an overall range of $1.8 billion to $2.1 billion Moving to our sources of capital.

Our balance sheet remains in exceptional shape. Ample liquidity. including about $540 million of forward equity available for settlement. And leverage at the low end of our target ranges. As we look further ahead to next year, we expect to generate approximately $300 million of annual retained cash flow from our real estate portfolio. Providing another meaningful source of equity capital. We also retain the flexibility to pursue accretive asset sales. In addition to ordinary course dispositions, Depending on investment activity and relative pricing, we can lean further into that source of capital if needed. And beginning in the second half of 27, our Lineage shares will provide another source of liquidity.

Together, these sources position us very well to continue deploying capital accretively throughout 2027. Without needing to access the equity capital markets. With our funding needs well covered and limited refinancing requirements, we are approaching 2027 from a position of strength. The key remaining questions therefore are, how quickly will sellers adjust to the higher rate environment? And what will that mean for investment activity? While we started to see cap rates on comparable deals move higher, not all sellers will alter their expectations immediately. Which can create a period where bid ask spreads widen and transaction activity slows.

If long term rates remain elevated, however, we would expect to see the upward pressure on cap rates to continue next year. Ultimately, that should create more opportunities to transact at initial cap rates in the high 7s and in some cases into the 8s. In the meantime, we are continuing to pursue attractive opportunities. While pushing for yields and returns that reflect current market conditions. Taking into consideration both our spot cost of capital and the more favorable pricing achieved on the capital we have already raised. Given our diversified approach across property types and geographies, we expect to see a wide range of cap rates.

And believe we are well equipped to find opportunities where pricing has adjusted appropriately and spreads remain attractive. Also worth remembering that most of our investment activity comes from sale leasebacks. Which are often driven by a company's capital needs, Frequently, there is a specific use of proceeds. Whether that is funding growth, pursuing M&A, strengthening their balance sheet. As a result, many of these companies need to access capital within a defined timeframe, which we believe should continue to support attractive investment opportunities in 2027. Our focus on sale leasebacks also gives us greater pricing power. And our expectation is that we will see pricing move faster than in other areas of the net lease market.

Particularly those focused on smaller investment grade commodity retail. In addition to external growth, a meaningful portion of next year's earnings growth is already embedded in our portfolio. We expect contractual same store growth in 2027 to be slightly above the mid-2% range we anticipate for this year. Reflecting current inflation forecasts and the fact that almost half of our rent escalations are tied to CPI. Combined with our relatively high rent bumps, that gives us a unique profile amongst our net lease peers. Providing a more predictable source of growth hedge against rising inflation, and making us less dependent overall on transaction market conditions to drive earnings growth.

Let me pause there and hand the call over to Toni to discuss our results guidance and balance sheet in more detail.

Toni Ann Sanzone: Thank you, Jason, and good morning, everyone. Before I get started, I would like to quickly note our new investor presentation. We have updated and expanded it to provide a more comprehensive overview of our portfolio, strategy, and the key drivers of our growth, and you can find it posted to the Investor Relations section of our website. Starting now with earnings and guidance. AFFO per share for the third quarter was $1.33, up $0.08 or 6.4% year over year driven by the continued strength of both our investment activity and rent growth, partly offset by the impact of settling forward equity.

The $0.01 decline in AFFO per share compared to the second quarter was mainly a function of timing for other lease related income, which was higher in the second quarter as anticipated and built into our initial guidance. For the full year, we further raised and narrowed our expectations for 2026 AFFO per share to between $5.23 and $5.29, increasing the midpoint by $0.03 and implying year over year growth of 5.8%. As Jason mentioned, we believe the AFFO per share growth we will deliver this year will be among the strongest in the net lease sector.

While the underlying drivers of our growth remain strong, our AFFO guidance implies a lower fourth quarter, partly reflecting the impact of rent abatements associated with certain re-leasing activity. Which I will come back to in a moment. Our portfolio continues to perform well. With strong tenant collections and no new rent disruption from credit events. During the third quarter, we collected rent for the full period from Helwig, and received its previously outstanding June rent payment. Contributing to better than expected rent collections. As a result, we are lowering our estimated potential rent loss from tenant credit events to between $3 million and $5 million or 25 basis points of ABR at the midpoint.

Down from our prior estimate of $7 million to $10 million We have made good progress reducing our overall Hellweg exposure this year. Moving it out of our top 25 tenants by the end of the third quarter. This included executing new leases with stronger operators, recapturing close to 100% of the prior rent, with rent scheduled to commence between late 2026 and mid 2027. Following Helwig's remaining lease terminations at the end of November. And we expect to complete the sales of the other Hellweg stores over the remainder of this year and into early 2027. Other lease related income for the full year is expected to total in the mid-30 million dollars range.

Inclusive of the proceeds from the Hellweg Bank guarantees which we expect to draw upon in the fourth quarter. Our third quarter results continued to benefit from the strength of our internal growth built into the portfolio with contractual same store rent growth of 2.6% year over year reflecting the impact of higher inflation on lease revenues, as well as certain multiyear rent escalations occurring this year. With nearly half of our rent coming from leases tied to CPI, we expect inflation to remain a tailwind to contractual same store rent growth trending slightly higher over the next few quarters and remaining in the mid- to high 2% range throughout next year.

Supporting what we believe will be the strongest embedded internal growth in the net lease sector. Comprehensive same store rent growth for the third quarter was 2.2%, benefiting from improving occupancy, and a strong quarter of rent collections. As we have noted on prior calls, comprehensive same store rent growth can fluctuate from period to period due to certain impacts in a quarter, which are more onetime in nature. Over the long term, however, we continue to expect comprehensive same store growth to trail contractual, in line with our historic average of about 100 basis points. We had another strong quarter on the re-leasing front.

Recapturing about 105% of prior rents and adding about 9 years of incremental weighted average lease term on just under 1% of total ABR. Our third quarter re-leasing activity included a 10-year lease extension on a property leased to 1 of our top tenants, Nord Anglia, completed in conjunction with an expansion project. This is a good example of how we work closely with our tenants to support their growth while enhancing the value of our real estate. The transaction also provided for a onetime rent abatement that will primarily flow through the fourth quarter. Occupancy increased by 10 basis points to 98.6% at the end of the third quarter reflecting our third quarter disposition activity.

Was mainly comprised of vacant asset sales. During the quarter, we completed asset sales totaling $27 million bringing total dispositions for the first 9 months of the year to $273 million Based on our current visibility, we have tightened our expected dispositions for the full year to between $350 million and $450 million Moving to expenses and nonoperating income. Property expenses were lower in the third quarter reflecting the timing of demolition costs, which we had previously would be higher in the first half of the year. Additionally, during the third quarter, we had lower property tax expenses, as a result of tenant payment of amounts we were previously accruing.

For the full year, we have reduced our expectation for property expenses to between $54 million and $57 million We have also lowered our full year expectation for tax expense to total between $40 million and $43 million resulting from international leasing activity tax structuring optimization, and our current visibility into the composition of our investment activity. G&A expense for the full year is now expected to total between $104 million and $106 million representing a slight increase from our previous guidance. Non operating income totaled $4.7 million for the third quarter. Which is also a reasonable quarterly run rate for the fourth quarter.

This line item includes the $2.8 million quarterly dividend on our equity stake in Lineage, interest income on cash deposits, and realized gains and losses on foreign currency hedges. As a reminder, hedging impacts are generally offset by changes in foreign denominated revenues and expenses, resulting in no material impact on our AFFO. Moving to our balance sheet and capital markets activity. We remain well ahead of our capital needs after raising substantial debt and equity capital during the first half of the year to prefund our investment activity and prepay our October bond maturity. That execution has left us very well positioned, particularly given the current capital market backdrop.

The weighted average interest rate on our debt was 3.3% during the third quarter. Increasing marginally versus the second quarter as expected reflecting the bond refinancings we completed earlier this year. We expect interest expense to increase further in the fourth quarter and into next year as those higher rates continue to flow through. Looking ahead, our bond refinancing needs remain very manageable with only 1 bond maturity in each 2027 and 2028. Both denominated in euro. Consistent with our prior approach, we would expect to refinance these maturities in the same currency, allowing us to continue benefiting from the lower cost of debt in Europe.

On the equity side, we settled 2.3 million shares under forward sale agreements during the third quarter, for net proceeds totaling approximately $150 million leaving us with about $540 million of forward equity available to settle which was raised at around a $73 stock price. At the end of the third quarter, net debt to adjusted EBITDA was 5.5 times excluding the impact of unsettled forward equity. Which is at the low end of our target range. Inclusive of unsettled forward equity, net debt to adjusted EBITDA was 5.2. Our liquidity position also remained strong. Ending the third quarter at $2.6 billion including almost full availability on our $2 billion credit facility.

We therefore continue to have ample runway to fund our investment activity for remainder of the year and throughout 2027 without the need to raise additional equity capital. And lastly, turning to our dividend, In September, we raised our quarterly dividend 4.4% year over year. To $0.95 per share, or $3.80 annualized. While maintaining a healthy payout ratio of 71%. At our current stock price, that equates to an attractive dividend yield of around 7%. And with that, I will hand the call back to Jason.

Jason Fox: Thanks, Toni. Despite the uncertainty around interest rates, and how that will flow through to net lease investments, in the broader REIT market 2026 is shaping up to be a very strong year for W. P. Carey. We expect to have 1 of the highest levels of earnings growth in net lease sector, with AFFO growth approaching 6% exceeding last year's already strong year over year results. We expect to maintain healthy deal volume supported by attractively priced capital that we raised in the first half of 2026, And our portfolio performance has remained steady. With our rent loss numbers trending lower throughout the year.

While it is too early to set specific expectations for 2027, we are encouraged by early signs of repricing we are seeing in the market. As well as our ability to move cap rates higher on transactions in our pipeline. Particularly on sale leasebacks driven by sellers with defined capital needs and timelines. If that trend continues, we expect to see increasingly attractive opportunities next year to put the capital we have raised to work. We are confident that we can fund deals in 2027 without needing to raise new equity. Through a combination of the forward equity dry powder we have retained cash flow, ordinary course dispositions, and accretive reinvestment for our Lineage position.

We also see a meaningful portion of next year's earnings growth already embedded in our portfolio. Through rent escalations that have upside if inflation runs higher. Taken together, we believe the building blocks remain firmly in place to continue delivering durable and competitive returns for our shareholders. Through a combination of our earnings growth, and our attractive and well covered dividend yield. That concludes our prepared remarks. So I will hand the call back to the operator for questions.

Operator: Thank you. At this time, we will be taking questions. Again, that is star 1 to register a question at this time. Today's first question is coming from Brad Heffern of RBC Capital Markets. Please go ahead.

Brad Heffern: Yes. Hi, everybody. Thanks for the question. Jason, maybe following off on your last comment there, about 2027. Post all the business transformations you have talked about, mid single digit AFFO growth, and the double digit TSR. Is there any reason that we should not expect that next year, either just because the cost of capital has gone higher or cap rates maybe not adjusted adjusting. Any other reasons that you can think about?

Jason Fox: Yeah. it is a good question. I mean, a bit early to talk about details for 2027, but some of the things that you mentioned are in play. There are higher rates. that is going to be a headwind for everyone. Higher financing costs, meaning more interest expense and maybe tighter spreads too, and it probably brings some uncertainty around the transaction markets. And that is something that, you know, really, you know, the REIT industry is gonna have to navigate next year. But you know, as I also mentioned, I think we have a lot of factors that position us very well to still generate interesting and competitive growth next year.

Talked about the type of deals that we do and our ability to push cap rates higher. We have already seen that. You know, Toni went through the details on the capital that we have already raised at attractive pricing. that is gonna continue to allow us to invest accretively. And then our bumps, We have a portfolio with high same store contractual rent increases. A large percentage of those are indexed to inflation, that could provide some offsets to higher interest expense. So, you know, we do think that we will be competitive in terms of growth relative to the peers in the sector.

I think that looking at the dividend yield is important as well, and if you combine those 2 we should be able to continue to deliver some interesting returns to our shareholders.

Brad Heffern: Okay. Thanks for that. And then you walked through some of the funding options for 2027. Without raising equity. You did not bring up the Vegas construction loan. I know it matures mid 27. there is a couple of extensions there as well. Would you expect to get that back in that potentially to be a source of capital? Or would you expect that to stay in place?

Jason Fox: Potentially, second half of the year, I would say. No real updates right now. We have mentioned before that our development partner controls the refinancing decision. there is a little bit of leasing to do. I think, you know, it is probably 90% leased right now, and there is just. there is 1 unit that, you know, once that gets leased, then there is a lease negotiation in place now, I think that you know, the developer could go to market. Obviously, not a great time to be looking at the financing market.

I think you know that the coupon on the loan that we have, it is 6% right now, but it is worth noting that ratchets up to 8% starting in January. So there is potential for upside for us as, you know, keeping that loan in place. And, obviously, if it is refinanced, that will provide some more liquidity. Okay. Thank you. Yes.

Operator: Thank you. The next question is coming from John Kim of BMO Capital Markets. Please go ahead.

John Kim: Thank you. You talked about pricing quicker on sale leasebacks. I am wondering if you are seeing the same thing on build to suit developments And if you could just comment overall on the investment spreads you expect just given your cost of capital changes and where you see cap rates moving.

Jason Fox: Yeah. Certainly, on sale leasebacks where there are, you know, defined proceeds earmarked for the seller. They are also, you know, more complex, so that tends to reduce the buyer pool some, and we certainly stand out from an execution standpoint. I think some of those carry over to build to suits where you have an added layer of complexity. You know, we can come in and purchase land and fund construction from the get go. There is a forward component to build to suits as well in a rising interest rate environment that tends to give you some pricing power also. So we have not added a lot of build to suits over the last quarter.

So cannot say that it is falling through into our pipeline or into our closed deals right now. But we anticipate as we see more build to suits that there will be some ability to continue to pass higher rates through. You had a last question there. What was that the final question you asked?

John Kim: Yes. Investment spreads, like, where you see that.

Jason Fox: Yeah. I mean, spreads, it is a bit of a nuanced question when we think about spreads. I mean, certainly, cost of capital has gotten, you know, more expensive and spreads have gotten tighter across the REIT sector. But, you know, for us, how we look at it right now is our position and ability to fund, you know, deals with pre raised equity, or free cash flow and dispositions if needed. That allows us to, you know, really continue to invest accretively next year. Without having to access the equity market. So we think about spreads, that capital matters. We do not solely tie new deals to where our spot cost of capital is.

You know, obviously, that is a factor that we consider, and it is part of our underwriting and pricing. But the actual accretion we will generate is really based on the previous capital that we use to fund new investments. And that is, you know, much cheaper than where we can raise capital right now. So spreads are interesting, as we push cap rates higher. We want to see, you know, where the equilibrium is once we see a more stable split place in rates as well.

John Kim: Okay. And my second question is on the interest rate environment and how you are seeing refinancing headwinds in 2027. I know a lot of your swaps and maturities, a lot. Some of that is back end loaded next year. But if you can comment at all on what kind of earnings impact you are seeing from that? Yeah.

Jason Fox: Toni, do you want to talk about that?

Toni Ann Sanzone: Yeah. I think, we addressed sort of all of our 26 earlier this year. And as we look into 2027, we have 1 Eurobond €500 million maturing in April. So that is our biggest refinancing risk, if you will. And I think, as we have said before, we still believe that we can replace Eurobonds with Eurobonds and that those are trading probably 100 to 150 basis points, maybe right now at the lower end of that inside of where the US bonds are trading. So you know, we still expect to see some spread to the maturity of the coupon of the maturity that is in April, but you know, we do think that is manageable.

It certainly will contribute to some of the headwind next year, but we do agree that will be manageable for us. Thank you. You are welcome.

Operator: Thank you. The next question is coming from Greg McGinniss of Scotiabank. Please go ahead.

Greg McGinniss: Hey, good morning. On those projected Q4 acquisitions and additional $330 million or so at this point, are you already seeing the high-7% cap rates on those deals? And does that level of volume maybe the 500 for the quarter, whatever it happens to be, feel like a fair minimum for quarterly acquisitions as cap rates continue to adjust. You know, seeing enough at that kind of high 7%, 8% bogey.

Jason Fox: Yeah. I mean, we have been able to move cap rates higher. If you look at the first half of the year, we were transacting in the low to mid 7s. And what we have closed since then, a little bit in the third quarter and the beginning of the fourth quarter, those have averaged in the mid to high 7s. So we are seeing some movement. And that is, again, both closed deals, but it is also of the pricing that is in our pipeline right now. Kind of think mid- to high- 7s. I mean, look, we hope to continue to be able to push cap rates higher if rates stay, you know, at or above 5%.

On the 10-year treasury. You know, the pipeline is interesting right now. I would kind of reference $200 million to $300 million of deals that are in process. You know, we do have some larger deals at earlier stage at the top of the funnel that could materialize, but some of those are part of broader corporate transactions, so unclear exactly on timing or execution is a little less predictable. But we are seeing activity, and the activity is at this higher pricing level that we referenced earlier.

Greg McGinniss: Okay. Thank you. And with the rent abatement, on Nord Anglia, should we just think about that as kind of a quarter of free rent? Or maybe 4 months of free rent? How should we think about that? In relation to how it is gonna impact Q4 and what we should be pulling out of the model.

Jason Fox: Toni, you wanna tackle that?

Toni Ann Sanzone: Yeah. that is right. We have about. On the Nord Anglia transaction that I specifically referenced, we have 4 months of free rent there on just the 1 property. that is about $3.5 million. In exchange, we extended the lease term by 10 years. Had rent recapture there of over 100%. And that is all done in connection with an expansion with an attractive yield on newly invested capital.

So that free rent specifically, a little bit in the third quarter, the majority in the fourth quarter, And then really baked into our guidance, I mentioned that we are active on the re-leasing front. there is potentially 1 or 2 transactions that would also have rent abatement baked into the fourth quarter. In total, it could be $0.02 to $0.03 impact in Q4, and part of the dip that you are seeing between Q3 and Q4. Again, really depends on whether the transactions close as we expect them to, but that is what we have embedded in our guidance.

Greg McGinniss: Okay. And then, Toni, is there anything else notable in, kinda Q4 assumptions that we should be aware of that is kind of creating that range?

Toni Ann Sanzone: I mean, nothing outside of the assumptions that we provided. I think you will look at some of the midpoints of the expense ranges. there is a little bit of seasonality in there. I think if you factor that in with the rent abatements, it is probably reasonable not to look at Q4 as a run rate or a starting point for 2027 growth. I think if you look at Q3, that is probably a better jumping off point from which to grow for 2027. Okay. Great. Thank you.

Operator: Thank you. The next question is coming from Smedes Rose of Citi. Please go ahead.

Smedes Rose: Hi, thanks. I guess I just wanted to follow-up on the rent abatements. As you look into 2027. I guess, I mean, is it fairly typical if someone re-ups for the lease that you would give them a certain amount of free rent, and is that something that might come into play across the course of 2027 for you?

Jason Fox: Brooks, you wanna tackle that?

Brooks G. Gordon: Sure. it is not atypical, but it is not something that we do particularly often. it is 1 of a number of levers we have in a lease negotiation rental rate. Potential some rent abatement. TIs, etcetera. Just another tool in our toolbox, and these particular deals that emerged as the preferred 1. In the negotiation, but I would not expect that to be a trend.

Smedes Rose: Okay. And then, I mean, you mentioned that, you know, cap rates are adjusting something we are hearing from other companies. I was just wondering as you look out across potential investment opportunities, are there any areas where cap rates are maybe changing more quickly kind of outside of your sort of core food groups, if you will, or anything there you can share?

Jason Fox: Yeah. Sure. I mean, we mentioned on sale leasebacks, you know, especially where we target sub investment grade industrial properties. that is where we have had the most pricing power at this point in time. You know, for the reasons that I mentioned earlier. Probably on the other end of the spectrum, it is gonna be, you know, retail, in particular, investment grade credits. We can see, you know, kind of adjustments or changing cap rates to take a little bit longer there. there is more capital chasing those, and I think investment grade retailers tend to have more capital options than, you know, say, a company that is looking to do a sale leaseback. Okay.

Operator: Thank you. Thank you. The next question is coming from Jason Wayne of Barclays. Please go ahead.

Jason Wayne: Good morning. Thanks for the question. Just on the rent loss assumption proved to be conservative much every quarter this year. Was just wondering if you could walk through your tenant credit watch list at this point and if you are seeing any change tenant credit trends recently.

Jason Fox: Wanna take that, Brooks?

Brooks G. Gordon: Yeah. So sure. Overall, credit risk has improved. I mean, several companies have come off our watch list Helwig comes off completely in Q4, as Toni mentioned. We have, as you said, consistently reduced our rent loss assumption over the course of the year. You know, we started from a conservative place there intentionally. 1 tenant we have previously discussed is Cornerstone. Around 60 basis points. You know, another we have recently added is Hertz. it is also about 60 basis points. Everything else is much smaller, in the credit watch list. And then maybe just quickly on Hertz, we own 3 of their most important sites, serving airports at SFO, Newark, and Logan.

So it is possible they will seek to restructure their balance sheet. But very similar to Cornerstone, we would not expect any impacts on us and our leases And, you know, should either of those restructure expect to have improved credit on the other side of that, So broadly speaking, CreditWatch has come down and, you know, come down further as Helwig comes off the list in Q4.

Operator: The next question is coming from Michael Goldsmith of UBS. Please go ahead.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. It seems like you have already moved from low- to mid-7 cap rates in the first half to mid- to high-7s in the current pipeline. If you kind of mentioned visibility or potential for cap rates to move to the high 7s and even into 8s. So I guess, like, you know, how quickly would you expect that to play out And then also if cap rates do start to get to 8%, you know, is that back to, like, kinda, like, business as usual type, environment? Thanks.

Jason Fox: Yeah. I mean, timing is hard to predict, and maybe it seems obvious. A lot of this can depend on where and when interest rates settle and that is obviously very complicated. Lots of different factors influence rates. So I think we first need to see some stability in long term yields and we do not have that right now. But maybe a hypothetical is if we see a month or 2 of stable rates you know, say around 5%, then I think we can say that you know, maybe the real estate market will settle around what the right pricing is. In our world, that probably means somewhere in the high 7s on average.

But if you think about it where we are right now, we are still in the period of volatility. it is hard to predict exactly how quickly that could happen. You know, maybe it is worth noting again, we do think the types of deals that we target in particular sale leasebacks, pricing there will adjust fastest, and maybe other areas of retail, for instance, may take you know, a little bit longer. But if, you know, if things do settle into the high 7s or in around 8, I think you are right. it is it is maybe business as usual. But keep in mind, we have raised a lot of capital at this point in time.

And we are gonna be comfortable and confident investing you know, through 2027 without the need to raise any new equity capital. So we are going to pick and choose and continue to put capital to work. It will be measured, you know, the approach we take and you know, in some ways, if we have a rising rate environment, you know, we can think of it as dollar cost averaging into it. But we have well priced capital that we can invest, and I think that gives us the ability to continue to grow next year.

Michael Goldsmith: Got it. And then as a follow-up, What was I going to ask? You know, just to clarify, you know, of those that are doing it at 8% camp, are you actually having discussions right now at around 8, or is that just more your expectation of where it ultimately if rate remains here?

Jason Fox: Yeah. Pipeline is mid- to high- 7s on average. there is always a range in what we do. I would say the range, you know, across the 7% into the 8s depending on the deals. Certainly, the deal specifics matter. The rent bumps are really important. And maybe that is, you know, worth emphasizing when we are talking about mid to high 7s on initial cap rates, year 1 cap rates. With the bump structures, we are able to negotiate both inflation and/or kind of high and interesting fixed rate increases, that translates or generates average yields over the life of the lease, well into the 9s.

And so that is still generating spreads that are, you know, within our historical target range 200 to 300 basis points over a spot cost of capital. And obviously, it is gonna be more for factoring in you know, the price at which we raised our forward equity. So. Yeah. I mean, there is discussions happening right now in that ZIP code and, you know, depending on the deal and the bump structure, you know, it could vary a little bit, but that is that is where the averages are right now. Got it.

Michael Goldsmith: And now I remember what I was going to ask is just third quarter investment volume was a little bit slow. I know third quarter is kind of like a seasonally slow period for you, but did any deals that were set to close in the third quarter get repriced and, you know, have potential to close now in the fourth quarter.

Jason Fox: Yeah. I think the way you characterize that is right in that the Q3 can be slow for us. it is not that unusual, especially in Europe for the summer to be quite a bit slower. We had 1 deal, about a $100 million deal that closed on October 1. So that, I guess, could have just easily have been September 30. And fallen into, you know, the third quarter as opposed to the fourth quarter. But, you know, what is in our pipeline right now, you call it $200 million to $300 million, I would not suggest those are deals that are holdover from the third quarter.

I mean, most of them kinda came into the top of our funnel during third quarter. Or perhaps, you know, early fourth quarter. But I do not think there was an expectation that the ones in our pipeline now could have or should have closed earlier.

Michael Goldsmith: Thank you very much. Good luck in the fourth quarter.

Jason Fox: Yes. Thank you.

Operator: Thank you. Our next question is coming from Jana Gallen of Bank of America. Please go ahead.

Jana Galan: Thank you. Good morning and congrats on a strong 3Q. I know still a lot of unknowns in the transaction market but curious if you are seeing a difference in volume or willingness to negotiate in Europe versus The US?

Jason Fox: Yeah. In many ways, the Europe environment kinda mirrors what, you know, we are seeing and talking about in The US. In headlines, our similar increased rates volatility, you know, higher inflation, higher energy prices, you know, all of those things like they have done in The US have added degree of uncertainty. So, yeah, there is there is wider bid ask spreads over there. Europe's been choppy over the last couple of years. I would not say that is anything new. But we are still finding pockets of activity. You know, year to date, we. About 30% of our deal volume has been in Europe. I think the pipeline is at similar levels.

And, you know, most of what we are doing. I think pretty much all of what we are doing over there are sale leasebacks. And we are seeing those at cap rates that are kinda in line with the cap rates in The US. So those can still generate, you know, maybe wider, more attractive spreads given the lower borrowing cost that we still enjoy in Europe. So I would not say there is big differences, but we are seeing activity over there with similar dynamics to what we are seeing in The US.

Jana Galan: Thank you. And just wanted to ask, there were, you know, press reports of you know, W. P. Carey acquiring an education asset from a another REIT. Just curious if there is, you know, anything you would wanna comment on why that was attractive to you guys and growing on the education space.

Jason Fox: Yeah. Sure. I mean, the asset we bought is 1 of the schools run by Nord Anglia. They are a current tenant of ours. I think they are now maybe number 4 in our top 25 list. We like the company. They are 1 of the largest. I think maybe the largest international K-12 private school operator in the world. it is close to 100 schools across 30 countries. You know, we particularly like the schools that we own. We have 4 of them now. 1 in Orlando, 1 in Miami, 1 in Houston, and the most recent deal we bought was in Chicago. You know, we like the schools. They are highly respected in their markets.

But also, you think about the operational performance. They have very site level coverage as well. So this is just a tenant that we knew well. We had comfort with them. We know the management team well, and we think we executed a good deal. And we like doing follow on deals with our tenant base as well. So you know, Brooks mentioned earlier that we have done some expansions. And some releasing with them as well. So it is a very good relationship and, you know, perhaps, we will see more opportunities there.

Jana Galan: Thanks, Jason. Appreciate the detail.

Jason Fox: Yeah. You are welcome.

Operator: Thank you. Our next question is coming from James Feldman of Wells Fargo. Please go ahead.

James Feldman: Greg. Thank you. Hoping you could talk a little bit more about your disposition guidance and the change to it and just is it. Is. Are deals falling out of bed? Are you just not getting the pricing you wanted? Do you just kinda wanna wait and see you know, what changes here? Just maybe a little bit more color on the types of assets you were thinking about selling and why things have changed Yeah.

Brooks G. Gordon: The overall, you know, as we have discussed in previous several calls, we retained a lot of flexibility, and that was kind of indicative in our wide disposition guidance range. it is really just a matter of we have been simplifying that down and refining it as we as we go through the year. So it is not that field of falling out of bed. it is just we have decided to narrow that the size there. We have ample capital, as Jason's described, You know, in 2027, Jason alluded to in his remarks, we retain a lot of optionality. I mean, we are. there is a number of different levers we can pull on to generate incremental accretive capital.

But we will evaluate the market conditions at the time, the pipeline at the time, and our overall amount of capital we raised. kind of make and form that range going to 2027. But I would not read too much into the range. It was just quite wide range starting the year that we have continuously narrowed.

James Feldman: Okay. Thank you for that. And then I guess, just thinking about your capital sources before you raise equity. I mean, can you frame the magnitude? I know you talked about you know, multiple buckets there. But let's just say a ton comes your way. I mean, what would that look like in terms of buying power? When you think about all the you know, the options you discussed?

Jason Fox: Yeah. I mean, we have you know, call it, $540 million of unsettled forward equity. Raised at around $73 a share. We generate about $300 million of annual free cash flow. Think the expectation is that next year, will refine it when we issue guidance, but we will generate, call it, several hundred million dollars of proceeds from normal course dispositions. And the next year in particular, we also have this lineage stake that it unlocks. that is another depending on whether stock price is $150 million to $200 million of capital.

So you take all that together, you factor in the largely undrawn revolver, and the fact that we are right now at the low end of our target range for leverage. So, you know, we feel that we can invest at similar levels to what we did last year and what we expect to do this year. In 2027, without the need to raise, you know, any equity. And so, you know, I think that gives us a lot of, you know, comfort and confidence to continue to invest. Of course, we are gonna, you know, push on pricing and certainly monitor where spot cost of capital is, and that will inform us how we price deals.

But we are we are pretty well set up to you know, execute the business plan next year with, without the need to raise equity. Okay. Great. Thank you for that.

Operator: Thank you. The next question is coming from Anthony Paolone of JPMorgan. Please go ahead.

Anthony Paolone: So my question is looking out into 2027 and trying to just think through what you talked about with limited debt refinancing, different things like that. And is it fair that there is no greater headwinds in 2027 as you sit now than there were in 2026? Like, do they do they seem pretty comparable? And I guess where I am going with that is you know, 6% growth this year is pretty strong, and I am trying to think whether there is anything in the way of that other than the deal activity for 2027.

Jason Fox: Yeah. I mean, certainly, deal activity in spreads are gonna have a big impact. Obviously, you know, what is built into the portfolio right now in terms of the rent bumps, you know, that is going be a meaningful driver and also help offset especially the inflation component of our rent increases, help offset at least some of the rising interest expense You know, the other details, I think a lot of the details will matter. We will get into those when we issue guidance in February. But we think we are well positioned.

You know, we will have you know, some leasing activity that we will do as well, you know, next year and all that flows through to our comprehensive same store. But, you know, we think the drivers are in place to have another year that will generate certainly interesting, you know, growth relative to, you know, what we are seeing and maybe expecting from the peers, but too early to get into any details on all the drivers.

Anthony Paolone: Okay. Got it. And then my second 1. I think, Jason, in the past, when you have been asked about competition in the market from the various PE shops and asset managers that have gone into net lease. You have said it is been limited. Just can you update us on your thoughts there now? And also, we have been hearing more about just the bonus depreciation being a driver behind some deals and whether that is something you see or whether it has any implications in the market from your point of view?

Jason Fox: Yeah. In terms of competition, you know, a lot of the competition that we see. And we see from time to time. I would not say that they are any more active than they have been over the last, you know, year or 2 since you know, a number of these funds have formed or some of the larger asset managers had bought smaller fund operators. Most of them are private equity. I would not say we run into them anymore so than we have in the past, and maybe 1 thing that has changed a little bit is that you know, private equity funds do tend to underwrite the higher leverage.

So the higher rate environment is likely to be more impactful to their model. So we will see how that, you know, impacts things. But it does not feel like the competitive environment is any different than it has been over the last year or 2 from a new capital standpoint. So, you know, we have competed well up to this point and there is probably not, you know, a lot of reason to think, you know, that could change Bonus depreciation. I think for certain property types, that has become you know, a bit of a driver around pricing and, obviously, not all real estate, you know, will qualify for bonus depreciation.

So you know, things like, you know, we have seen, you know, some 1 offs in car washes and c stores that you know, should qualify for bonus depreciation, at least the vast majority of the purchase price. You know? I think when those trade in smaller chunks, especially individual assets, I think we have seen or heard about some fairly aggressive pricing around that. But it does not really impact or flow through, you know, to the bulk of what we are doing, which are in you know, big industrial sale leasebacks and portfolio deals. K. Thank you. Yep. You are welcome.

Operator: Thank you. The next question is coming from Spenser Allaway of Greg Street Advisors. Please go ahead.

Spenser Allaway: Thank you. I know you guys obviously have not issued 27 guidance. it is too early to talk numbers. But just curious your higher level thoughts on dispositions in the current environment. So even with cap rates moving higher, if you cannot find the same opportunistic divestment opportunities. How important is pruning the portfolio just from an asset management standpoint regardless of executing at better prices for you guys?

Jason Fox: Yeah. But, Brooks, do you wanna do you wanna tackle that?

Brooks G. Gordon: Sure. I mean, we. We have navigated, you know, port. Strategic portfolio dispositions through every sort of cycle. And so I think we are, you know, we are very well set up to accomplish that. From a you know, capital creation perspective, if we choose to increase the disposition cadence to create incremental accretive capital. In many cases, those are situational where maybe a tenant really wants to buy back a property or portfolio of properties, and we can drive pricing which is a little less tied to kind of the market interest rate dynamics.

So you know, there is a lot of different types of disposition transactions I would say many of ours are not your kinda true investment sales. They are very situationally specific. So I have a little less exposure to directly the kind of the ups and downs of interest rate markets. So. But it is a fair observation, something we certainly watch closely, but I think we have a lot of flexibility to certainly close out 2026 and then into 2027 to have a number of options at our disposal.

Jason Fox: Yeah. The only thing I will mention, Spenser, you know, the heavy lifting in terms of you know, shifting the composition of the portfolio, that is in the past. A lot of that was self storage operating assets that we sold. And if you go a couple years, obviously, there was a lot of office, you know, sales there as well. So you know, the. You know, pruning the portfolio is more around the margins. And as Brooks mentioned, there will be opportunities for us to pick and choose you know, which ones to do, but I do not think it is gonna have a big impact on how we, you know, prune and kinda manage for risk.

Spenser Allaway: Okay. Great. Thank you for all that color. And then maybe just 1 follow-up on the Nord Anglia. Can you just update us on your thesis in general for childhood education just beyond this 1 operator? And how large of a concentration would you be comfortable for that segment?

Jason Fox: Yeah. The vast, vast majority, maybe almost all of it at this point, that we own in K-12 education is NORD. We like the operator, and in particular, we like the schools. That we are in. I think it is a case by case. You know, we wanna underwrite strong operators, site level coverage makes a lot of sense, and we wanna be in markets where we think they are there is demand and kind of the right supply balance at the same time. So I think we will pick and choose.

Would not say it is strategy where we are trying to expand our educational portfolio. it is more opportunistic at this point. it is worth noting we do have some higher ed as well with medical schools, which we believe that supply demand dynamic is it is undersupplied. You know, that was a bit of a thesis that we backed there and perhaps there is some more deals to do down the road there, but nothing specific at this point in time. Okay. Thank you.

Operator: Welcome. Thank you. The next question is coming from Jim Kamert of Evercore ISI. Please go ahead.

James Kammert: Good morning. Thank you. Just 1 quickly, please. Is it safe to assume that given it is a very competitive transaction market, clearly, but is it reasonable to assume that W. G. Carey is really focused on really even pushing escalators further in terms of your lease negotiations on new deals, particularly sale leasebacks. Can you get that today? Yeah.

Jason Fox: that is an important component of the terms in our deals. When you think about the economics of a sale leaseback, there is the going in cap rate, which is obviously very important. But the bumps are also very important. I mean, flat leases, we should be able to demand much higher going in cap rates if we chose to go that route. Instead, there is a focus for us to make sure that we can drive a fair amount of growth through you know, internal growth through the portfolio so that as we get larger, you know, we will not have as much of an issue of having to put up you know, more and more deal volume.

So it is certainly a focus of ours. We have been very successful doing it. I think, generally speaking, we do wanna set, you know, rents or the bumps that are in line with market rents. I think to the extent we can get CPI, we have been doing that. And, you know, on average, I would say it is kinda mid- to high-2s right now in our fixed increases. And then, you know, CPI is CPI and, obviously, the expectations those bumps look like will depend on, you know, a lot of factors, in particular, the you know, the region in which we are operating. Appreciate it. Thank you. You are welcome.

Operator: Our next question is coming from Greg McGinniss of Scotiabank. Please go ahead.

Greg McGinniss: Hi. Just 1 more for me. The expectation that the Lineage shares will be kind of sold right when they unlock? And it is a 6.9%-ish cost of equity. Just thinking you guys compare that to your forwards.

Jason Fox: Slightly more expensive. Yeah. I mean, I would not say that the day that they are available to trade we are gonna hit the sell button. I mean, I think that we will, you know, make sure that we are not selling into, you know, some bad trading environment or dynamic, I should say. because they do have a lot of capital locked up. But probably safe to say over a quarter or 2 we would look to liquidate that and reinvest into core net lease. And, you know, all we are recognizing right now is dividend yield. So, you know, we will have a step up.

It will be accretive capital, you know, at almost any price at this point in time or any expected price.

Greg McGinniss: Great. that is it for me. Thank you.

Jason Fox: Okay. You are welcome.

Operator: Thank you. I am showing no further questions. I will now turn the call back over to Mr. Sands. Thanks, Donna, and thanks, everyone, for joining us and for your interest in W. P. Carey. If anyone has additional questions, please call investor relations directly on (212) 492-1.11 thousand. That concludes today's call, so you may now disconnect.

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