W. P. Carey(US:WPC)2024-07-31 19:01Financial Data and Key Metrics Changes - AFFO per share for Q2 2024 was reported at $1.17, an increase from the first quarter, with expectations for further increases in the second half of the year as new investments are deployed [3][12] - Dispositions in the first half of the year totaled just over $1 billion, with $152 million completed in Q2 [12][18] - G&A expenses decreased to $24.2 million in Q2, down $3.7 million from Q1, leading to a revised full-year G&A expense expectation of $98 million to $101 million [17][18] Business Line Data and Key Metrics Changes - The majority of investments in the first half of the year were in warehouse and industrial properties, with a total investment of $641 million at a weighted average cash cap rate of 7.7% and an average yield of just over 9% [7][8] - Same-store rent growth for Q2 was 2.9% year-over-year, with expectations for full-year growth averaging around 2.8% [13][18] - Operating self-storage NOI declined 4.2% year-over-year, with a full-year decline expected between 5% and 6% [17][18] Market Data and Key Metrics Changes - The investment environment has become muted, with sellers waiting for potential rate cuts before bringing new sale leasebacks to market [6][10] - Competition for deals has increased, particularly in the U.S., leading to downward pressure on cap rates [29][30] - The company has a pipeline of over $200 million in investments, with expectations for half to close within the next 30 to 60 days [9][10] Company Strategy and Development Direction - The company is shifting to an offensive strategy to find new deals after completing significant dispositions and bond repayments [26][27] - The focus remains on deploying liquidity into new investments, with a strong emphasis on maintaining a well-laddered series of maturities [21][22] - The company is exploring options for its self-storage portfolio, considering potential sales or conversions to net lease properties [56][57] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about a potential pickup in deal activity, particularly if the Fed lowers rates in the third quarter [10][11] - The company is lowering its full-year investment volume guidance to between $1.25 billion and $1.75 billion due to the current market conditions [18][19] - Rent collections remain high at just over 99%, with no significant changes in cash basis tenants [14] Other Important Information - The company has an all-time high liquidity position of $3.2 billion, including a virtually undrawn $2 billion revolver [5][21] - The equity stake in Lineage, valued at just under $400 million, is expected to provide a unique source of capital in the future [5][19] - Non-operating income for Q2 totaled $9.2 million, contributing to a total of $24.7 million for the first half of the year [15][16] Q&A Session Summary Question: Factors behind two deals falling out of the pipeline - The two deals, totaling over $300 million, fell out due to critical issues uncovered during diligence that could not be resolved in time, which is considered unusual for deals at that stage [24][25] Question: Shift in strategy towards finding deals - The company is now on the offense, looking for new opportunities after completing significant strategic actions, including the office spin and bond repayments [26][27] Question: Competition and cap rates in the U.S. and Europe - Competition has increased, particularly in the U.S., leading to downward pressure on cap rates, with expectations for more competition as the market stabilizes [29][30] Question: Performance of the watch list tenants - The watch list remains around 5% of ABR, primarily consisting of Hellweg and Hearthside, which are top 25 tenants [34] Question: Guidance on self-storage portfolio performance - The self-storage portfolio is expected to decline by 5% to 6% year-over-year, reflecting ongoing challenges in the industry [17][18]