WP Carey Inc (WPC) 2021 Q3 法說會逐字稿

Hello, and welcome to W. P. Carey's Third Quarter 2021 Earnings Conference Call. My name is Brock, and I will be your operator today.

(Operator Instructions) Please note that today's event is being recorded. (Operator Instructions)

I will now turn today's program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead.

Good morning, everyone. Thank you for joining us this morning for our 2021 Third Quarter Earnings Call. Before we begin, I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings.

An online replay of this conference call will be made available in the Investor Relations section of our website at wpcarey.com, where it will be archived for approximately 1 year, and where you can also find copies of our investor presentations and other related materials.

And with that, I'll pass the call over to our Chief Executive Officer, Jason Fox.

Thank you, Peter, and good morning, everyone. I'm pleased to say our third quarter results keep us on pace to deliver strong year-over-year AFFO growth. We continued to see strong deal momentum during the quarter with 2021 set to be a record year for our investment volume, having already surpassed our full year investment volume for all prior years and establishing a new phase of externally driven growth for W. P. Carey.

We're also entering a period of higher internally driven growth with inflation ticking up in recent months and generally expected to last longer than originally anticipated, W. P. Carey is uniquely positioned to benefit. Higher inflation had a positive impact on our same-store growth during the third quarter, especially for leases tied to uncapped CPI. However, it is really just the start with the bulk of the impact occurring over the next few quarters.

Consequently, we believe W. P. Carey currently offers one of the best combinations of external and internal growth across the net lease sector, supported by the strength of our near-term pipeline, ample liquidity and continued access to well-priced capital, in addition to providing an attractive dividend yield.

This morning, I'll focus my remarks on these aspects of our growth, and Toni Sanzone, our CFO, will take you through the details of our results for the quarter, guidance and balance sheet positioning. Toni and I are joined by our President, John Park; and our Head of Asset Management, Brooks Gordon, who are available to take questions.

Starting with growth through acquisitions. During the third quarter, we completed about $200 million of investments, primarily into Class A warehouse properties in the U.S. at a weighted average initial cap rate of 6.2%, bringing our total deal volume for the first 9 months of the year to $1.2 billion at a weighted average initial cap rate of 5.9% in a weighted average lease term of 19 years, among the longest for new investments across the net lease sector.

Our ability to structure these deals with long lease terms and strong rent increases, averaging over 2% for those with either fixed rent increases or floors, translates to an average annual yield of over 7%, a metric that we believe better captures the prolonged accretion we're achieving. It's also meaningfully more attractive than that of most of our net lease peers who tend to be investing in shorter-term leases, with lower or even no bumps.

In addition to entering a new phase of externally driven growth, we're also entering a period of higher internally driven growth with one of the best positioned net lease portfolios for inflation. One of the key benefits of our focus on originating sale leasebacks is our ability to directly negotiate the lease structure, including the rent bumps. As a result, we've constructed a portfolio, in which 60% of ABR has rent increases tied to inflation.

During many years of low inflation, our rent growth was driven by leases with fixed rent increases. But with inflation picking up in recent months, we expect leases tied to inflation to drive rent growth and strongly outpace the 2.3% average fixed rent bump we saw for the third quarter.

Inflation began to flow through to rents during the third quarter, although on a relatively small portion of our portfolio. Leases with CPI-linked rent increases that went through scheduled rent adjustments during the quarter experienced rent increases averaging 3.3%. The vast majority of CPI-linked leases, that did not bump during the third quarter, are scheduled to do so over the next 9 months, adding about 100 basis points to our same-store rent growth based on current inflation forecasts, taking it from about 1.5% to about 2.5%. Higher same-store growth is especially valuable in an environment where investment spreads are expected to continue to compress. And if inflation runs higher or for longer than currently anticipated, we would expect to see additional upside.

Turning to the market environment and our pipeline. During the quarter, we saw a continuation of many of the dynamics that have driven the transaction market in recent quarters with continued cap rate compression, both in the U.S. and Europe, largely fueled by private capital. Warehouse and industrial remain sought after asset classes in both regions and logistics assets have traded at especially tight cap rates in Europe.

While these trends look set to continue, heightened M&A activity is spurring a steady flow of deals, in part driven by the attractive valuation arbitrage that exists for private equity investors between the multiples they can acquire businesses and in real estate values. More broadly, M&A activity is expected to continue at record levels, which is positive for the supply of sale-leaseback opportunities.

From a top-down perspective, we continue to focus predominantly on warehouse and industrial assets, which comprised about 3/4 of our deal volume through the end of the third quarter, moving the ABR we generate from these property types, 40 basis points higher to 48.7%, while the proportion of ABR we generate from office properties has continued to decline.

So far in the fourth quarter, we've completed an additional $41 million industrial investment, and we expect to maintain a strong pace of activity into year-end, including $100 million of capital investments and commitments scheduled for completion during the fourth quarter. Our pipeline remains strong and includes a handful of larger portfolio deals that are working towards closings around year-end. This is reflected in our investment volume guidance range, which we're maintaining at $1.5 billion to $2 billion. And depending on the number of deals that come to fruition and their eventual timing, it could take us to the top end.

Lastly, I want to briefly mention our recent green bond offering. We're proud to have successfully completed our inaugural green bond issuance earlier this month, with the proceeds allocated to new and existing eligible green projects. This was a major milestone, demonstrating our commitment to ESG, and we would note that we have one of the best ESG profiles in the net lease peer group.

We were the first net lease REIT to provide an annual ESG report to the market, which we've been publishing since 2019. We're the second net lease REIT to issue a green bond, and the first to do so in the U.S. We were very pleased with the execution, achieving one of the tightest ever spreads for a net lease REIT on a 10-year bond offering. It also allowed us to further diversify our investor base to include ESG-focused investors, which we hope will continue to be a source of capital for W. P. Carey, as we acquire more eligible buildings and seek opportunities to redevelop existing properties to enhance their sustainable characteristics.

In closing, we remain focused on creating value for our investors through both accretive investment opportunities and the rent growth built into our leases, offering potential additional upside from sustained higher inflation. We expect our recent pace of investment activity to continue in 2022, and as a result, we believe, W. P. Carey currently offers one of the best combinations of external and internal growth across the net lease sector, plus one of the most compelling dividend yields at around 5.5%, supported by our stable cash flows, the strength of our pipeline, ample liquidity and continued access to well-priced capital.

And with that, I'll pass the call over to Toni.

Thank you, Jason, and good morning, everyone. During the third quarter, we continued to make good progress towards our full year guidance with our results showing steadily increasing lease revenues and a continued decline in interest expense. For the quarter, we generated total AFFO of $1.24 per diluted share, driven by real estate AFFO of $1.21, representing 8% year-over-year growth.

Our third quarter results build on the momentum we established during the first half of the year for investment volume, reflecting the new phase of external growth, Jason referred to, but also demonstrating the quality of our portfolio through the continued strength of our rent collections and the growing contribution from rent escalations.

We continue to expect that we will complete record investment volume in 2021, totaling between $1.5 billion and $2 billion. Accordingly, we're also maintaining our full year AFFO guidance range of $4.94 to $5.02 per share, including real estate AFFO of between $4.82 and $4.90 per share, representing over 5% annual growth at the midpoint.

Turning to our same-store rent growth. Contractual same-store rent growth, which reflects the rent growth built into our leases, was 1.6% year-over-year, a 10 basis point increase over the second quarter. However, as Jason discussed, higher inflation is just starting to flow through to rents. And within this metric, our same-store growth from leases tied to uncapped CPI was 50 basis points higher than it was for the second quarter.

Comprehensive same-store rent growth, which is based on pro rata rental income, included in AFFO, increased 90 basis points over the second quarter to 2.9%, primarily reflecting COVID-related recoveries and restructurings over the past 12 months, in addition to the positive impact of inflation on rents. Among our other key portfolio metrics, occupancy increased 40 basis points during the quarter to 98.4%. We ended the quarter with a weighted average lease term of 10.6 years and a top 10 concentration of 20.5%, among the lowest in the net lease sector.

Third quarter dispositions totaled $30 million, bringing total dispositions for the first 9 months of the year to approximately $130 million. And based on our current visibility into the timing of certain sales, we're maintaining our expectations that total disposition activity for the year will fall between $150 million and $250 million.

Moving to our capital markets activity and balance sheet. We've demonstrated ample access to well-priced debt and equity this year, issuing about $2.2 billion of long-term and permanent capital, supporting both our increased pace of investment activity and the refinancing of higher cost mortgage debt with lower-cost unsecured debt as well as further enhancing our credit profile and demonstrating our commitment to ESG.

During the third quarter, we settled equity forward agreements on 2 million shares for net proceeds of $147 million. This occurred close to the end of the quarter, so it will be fully reflected in our fourth quarter diluted share count. In August, we executed our second equity forward for the year, pricing a public offering of 5.2 million shares, including the full exercise of the underwriters' overallotment option, enabling us to match fund acquisitions with approximately $400 million of equity raised at a gross price of $78 per share. Currently, we have the ability to settle the remaining 7.2 million shares under forward sale agreements for anticipated net proceeds of about $540 million.

Turning to our debt capital. As Jason discussed, we're proud to be among the first net lease REITs to issue green bonds. In October, our inaugural green bond offering raised $350 million at a coupon of 2.45% with a 10-year maturity, with an amount equal to the net proceeds to be allocated to eligible green projects in accordance with our green financing framework, a copy of which appears on our website. Approximately 70% of the proceeds have already been allocated to existing green investments.

We were able to upsize the transaction and priced at our tightest spread to date for a U.S. dollar-denominated bond, reflecting both strong support for our credit and incremental demand created by our ability to access ESG-focused investors. Year-to-date through today, we've achieved unsecured notes totaling $1.4 billion with a weighted average interest rate of about 1.7%, inclusive of the green bond issued after quarter end. During that same year-to-date period, we've prepaid secured and unsecured debt totaling $1.3 billion, with a weighted average interest rate of 3.5%, including about $300 million of secured mortgage debt subsequent to quarter end, which had a weighted average interest rate of 4.4%.

The combination of our green bond issuance and mortgage repayments occurring after quarter end, extends our weighted average debt maturity from 5.3 to 5.7 years and reduces our secured debt as a percentage of gross assets from 4.2% to under 3%. We currently have no bond maturities until 2024, and we remain on positive outlook for Moody's.

Our key balance sheet metrics remain strong, ending the third quarter with debt-to-gross assets of 40.4%, which continues to be at the low end of our target range of mid- to low 40s. Net debt-to-EBITDA was 5.9x at the end of the third quarter, also within our target range of mid- to high 5x and meaningfully lower if we factor in the proceeds from shares to be settled under outstanding equity forward agreements.

While we expect the proceeds from our outstanding equity forwards to be primarily used to fund new investments, they nonetheless provide us with additional flexibility in managing our balance sheet.

Our cash interest coverage ratio continues to trend positively, ending the quarter at 5.7x, among the strongest in the net lease peer group, steadily increasing as our weighted average cost of debt has declined through debt refinancings. At the end of the third quarter, our weighted average interest rate was 2.6%, a significant decline from 3% a year ago, reflecting the continued improvement in our cost of debt and generating substantial year-over-year interest savings.

Our liquidity position also remains very strong, ending the third quarter with total liquidity of approximately $2.2 billion, including $1.5 billion of availability on our revolving credit facility, cash on hand and net proceeds available under equity forward agreements, ensuring we're well positioned to continue executing on our deal pipeline and accessing the capital markets opportunistically.

To sum up, we're pleased with our results for the third quarter, including the progress we made towards our full year guidance and the pace of our investment activity. We remain well positioned for continued higher growth, both externally and internally driven, given our active pipeline and sector-leading same-store growth profile, all of which is supported by the strength and flexibility of our balance sheet.

And with that, I'll hand the call back to the operator for questions.

(Operator Instructions)

The first question today comes from Brad Heffern of RBC Capital Markets.

I was wondering if you could do a quick walk on the ABR quarter-over-quarter. I would have expected it to be up at least some just given the same-store growth in the acquisitions, and it didn't look like there was a big roll down in the releases or anything like that. So any color you can give there.

Okay, sure. Thanks, Brad. Is your question more about inflation kind of rolling through or more specific to ABR numbers? Maybe it's the latter, Toni can talk about it. But if it's the former, I can jump in around inflation.

Yes. It's more just the ABR. I mean it was 12.20% both last quarter and this quarter. So I'm just curious why it didn't go up more.

Toni, you want to take that.

Yes, I've got it. I think the bulk of the activity on ABR is certainly coming from the acquisition activity to a smaller extent on the same-store growth. But I think I'm not sure what you're missing here, and we did sell some vacant assets. So there was some vacancy between kind of this time last year. And now that's running through kind of the year-over-year ABR. So I don't think there's any other material movers there outside of the acquisition activity and the same-store growth.

Okay. Got it. And then any update on the process with CPA:18?

Yes. I think the only update is there is some disclosure by CPA:18 maybe a couple of months back that essentially says the fund is considering liquidity alternatives and we, as its adviser, have presented various options, including a potential combination with us. But this is really just the start of the process and really not unexpected since CPA:18 liquidity kind of guidelines from its prospectus is approaching early next year. But other than that, there's really nothing new to update. And ultimately, this is going to be a process that's run by its independent directors and they'll have ultimate discretion as well.

The next question is from Harsh Hemnani of Green Street.

I wanted to talk about what you're seeing on the European side. You've mentioned in the past that the sale-leaseback market there has been strong. But I guess we didn't see anything sourced from that during this quarter. Is there something we should be expecting in the pipeline from Europe in the fourth quarter?

Yes, sure. So year-to-date, we've done about 30% of our deal volume in Europe. A lot of that is driven by sale leasebacks and some large deals that we've talked about previously, like the Casino grocery deal we did in France and the JLR deal, the Jaguar Land Rover deal we did in the U.K.

Keep in mind, summer in Europe tends to slow down as a lot of people are on vacation during July and August. So it's not atypical for the summer months to have a little bit of a lull. And it has picked up. I think about, I would call it, right about half of our pipeline for the remainder of the year is in Europe. So I think you'll see that activity pick up as we come through the end of the year.

The next question is from Greg McGinniss of Deutsche Bank (sic) [Scotiabank] .

So this past quarter, Realty Income announced its Carrefour deal in Spain. I mean, we know you were doing grocery deals in Spain at the end of last year as well, which leads me to 2 questions. First, and I realize we've covered the topic of Realty Income entering Europe in the past. But does this deal represent the start maybe the more head-to-head competition that you might be seeing with them? And two, were you looking at those assets as well? Or maybe has your history with Carrefour kept you away?

We did see that deal. I think there are some reasons that it wasn't really a fit for us, but I don't think we'll get into any of those details. More broadly, with Realty Income, you may be coming more into Continental Europe than just the U.K. I mean Europe, generally, there's less competition. There's really no pan-European REITs. So even with Realty Income entering Europe, there's still a lot less competition compared to what we see in the U.S.

I think it's also kind of worth noting that it's a big market over there. It's an estimated, I think, $4 trillion to $5 trillion of owner-occupied corporate real estate, and I think some reports suggest even as big as $8 trillion. That's our adjustable sale-leaseback market. So it's a big market. You got to keep in mind that we've had an established platform there for over 20 years, transacting and building relationships and a platform in London as well Amsterdam. So we're -- we'll continue to be active.

And with regards to Realty Income, yes, they'll add some incremental competition, but I think there are investor perception benefits that may even outweigh that increased competition. Europe, I think, is largely viewed as a competitive advantage for us, but it's also less familiar to U.S.-based investors. So to the extent Realty Income's increase in ownership of European assets, helps investors get more comfortable with Europe. I think that's a good thing for us.

But at the end of the day, I think it is a big market. We don't typically run in the same lanes as them, perhaps we will a little bit more in Europe. But if they continue to look a little bit more like W. P. Carey, I don't think that's a bad thing for us and our multiple.

Okay. Fair. And then on rent growth, I appreciate your opening comments there in terms of negotiations on rent growth. I was just hoping you could expand on that a little bit. Has the type of escalator that you include in lease has changed much over time or maybe during this inflationary period? And then why might a lease be fixed versus CPI-based? Is that just underlying credit quality? Or what are the other factors?

Yes. I mean, certainly, the ease at which we can negotiate inflation-based increases kind of varies depending on the market conditions and what the broader view on inflation is. So I think it's probably stating the obvious that it's a little bit more difficult now to negotiate CPI-based leases than we had in the past.

But I think maybe a couple of important things to note. One, as we said, we still think we're in the best position that leads REIT in terms of inflation. 60% of our ABR on a $20 billion asset base have CPI increases. So that's really going to drive same-store growth, as we talked about earlier, in this higher inflationary environment. And yes, everyone is focused on it now, but we're happy this is something that we've been focusing on for many, many years. We've always said it makes sense to have inflation protection even in a low inflation environment where we've been for maybe the 10 prior years. And we're happy to take that trade-off then to see the benefits now, and that's going to start flowing through.

In terms of how it's -- what we're seeing in the market right now, the year-to-date deal volume, it's more weighted towards fixed increases as you would expect. It is about 1/3 our inflation base and 2/3 our fixed. And we're okay with that. We like having fixed increases that provide a strong base regardless of the inflationary environment.

Our pipeline, though, is still -- is healthy. I think right now going into the end of the year, it's probably more than 50% of our deals, maybe close to 2/3 of our deals in our pipeline are inflation-based.

Some of this is because there's more Europe in a pipeline than there has been year-to-date, and it's more customary for inflation to be factored into increases in Europe.

Right. Okay. And then just on that potential pipeline, could you give us some sense for the size of the portfolio investments under review? Just like do you need to close on all the deals under negotiation at the high end of the guidance range? And then how likely is it that some of these deals look in the Q1?

Yes. So the pipeline continues to build. As with any pipeline, there are deals at various stages, some we would expect to close in the coming weeks, some of which there's still work to do on them and may take closer to the end of the year, and some of those may even flip into January. So it's really hard to predict where we sit right now, especially when we're transacting through sale leasebacks predominantly. So we feel good about the range. I think if some of our larger transactions come together, is probably an interesting opportunity to get to the top end of that range. But I think it will depend on where some of these fall and how we progress through some of the deals.

The next question is from Joshua Dennerlein of Bank of America.

Jason, I guess, I was just curious on -- I know you said most of the deals now are like trending towards the fixed side when you're doing -- putting in the bumps for your underwriting. How do you factor in like the CPI into your underwriting? Like if you're -- do you expect some kind of baseline or acceleration going forward if you can't get the CPI? I guess I'm trying to figure out if maybe you would take a lower cap rate to...

Yes. So yes, I mean I did mention that our pipeline still has a meaningful percentage, more than half our inflation base. And a lot of that is driven by Europe, where inflation is more accepted, as I mentioned. But in terms of how we underwrite model, maybe that's the heart of your question, and we're using market forecasts. And those typically go out several years, and then we're making decisions on where we fix the remaining years in terms of inflation expectations.

And yes, in an environment right now where inflation is expected to continue to run hot, we may be willing to trade some initial cap rate for higher bumps in the future. I think it's an important point when looking at our portfolio, our cap rates are still quite interesting, I think. We kind of have a weighted average for the year at just under 6%. But what makes them even more interesting is the embedded increases in these leases, especially compared to our peers in that lease that typically have flat or very minimal increases.

So even though we may be in and around 6%, which is a good number, I think over the life of the lease, we're probably going to average something closer to the low to mid-7s, given the types of bumps we're able to structure.

Okay. Interesting. And in Europe, is it also vary a bit by property type, who's willing to give you the CPI-linked bumps? Or is it just kind of...

Yes. We haven't seen that variation as much. I think it's just more custom over there. So it's really across property types. Not on every deal, but more often in Europe than it is in the U.S.

Okay. Awesome. Maybe one big picture, any kind of strategic initiatives you guys are working on as you kind of look ahead to 2022?

No. Look, I mean, I think a lot of the strategic changes that we focused on over the last several years in terms of our exit from investment management and really becoming a pure-play net lease REIT, which we are now. I think 98% of our AFFO is driven by real estate income and only 2% from the management fees. And that's -- basically, all of that is in CPA:18 fees. So that will go away once that liquidity event happens.

So really, we're just focused on growth. I think we're well positioned for that. We have a cost of capital that works really well. We have great access to the capital markets. We have a good pipeline. We have strong momentum with deal volume, and that's really our focus at this point.

The next question is from Sheila McGrath of Evercore.

I know, Jason, you can't get into details on CPA:18. But just if you could give us -- remind us what is in that portfolio that would appeal to WPC? In other words, pure play net leased. I know it has student housing and self-storage. Just remind us on that.

And also, just remind us that entity is much smaller than CPA:17. So if you pursue that, it would be much smaller as compared to the enterprise value of the WPC.

Yes, sure. Not only is it smaller in terms of gross assets, it's about, call it, $2.5 billion of assets versus CPA:17, that was around $6 billion of assets. You're right, as a percentage of our total asset base, it's even much smaller because we're clearly bigger compared to what we were prior to CPA:17. So I think those are all good points.

In terms of what's in CPA:18, it's about 60% net lease, which is obviously a fit for us. It's a portfolio we constructed and know well and have managed since inception. So that's clear. The bulk of the remainder, I would say, probably half or a little bit more than half of the remaining value isn't self-storage. These are operating assets that are primarily are managed by, I think, Extra Space and CubeSmart. We obviously have a history of investing in that space for a long, long time, really since the early 2000s.

And so we would have a home for that, especially given the transaction that we structured with Extra Space and converting operating storage assets to a net lease structure. And we'll see if that's interesting for us to the extent we're able to buy CPA:18.

And then the remainder is student housing, and there's some disclosure around a leasing deal with purchase options in CPA:18's filings that we'll effectively put that in a structure that makes it easier for us to handle as well because we're not really interested in owning operating assets on a long-term basis.

Okay. Great. And then in your supplemental, one of your acquisitions appears to be buying the land under Marriott properties that you own. Is that a precursor to a sale of those properties to want to own the land and building? Or just if you could comment on that transaction.

Yes, sure. That was more opportunistic. The owner of the ground was looking for liquidity and is effectively a captive deal for us. So it was an easy decision for us to make. It's an interesting yield for ground, and it does simplify the ownership of that Marriott portfolio. So nothing more than that. It was just something that was opportunistic that it was a big benefit to help us clean up that -- those assets.

The next question is from Manny Korchman of Citi.

Jason, you mentioned a couple of big portfolios that should close in 4Q. A couple of questions on that. One, could you give us an idea or just the flavor of those? I think you mentioned that a lot of your pipeline is Europe or those large portfolios in Europe. Maybe the likelihood of them closing this year versus next year? And then just asset types, it sounds like they're probably a warehouse or industrial, but just a guess.

Yes, sure. So as I mentioned earlier, about 50% of the pipeline in Europe -- is in Europe. Some of that does include some portfolio transactions and mainly, say, leasebacks. I think that there's a good chance a lot of that closes in Q4, but I think it remains to be seen over the next 2 months.

Year-to-date, about 70% of our deals have been industrial, and the bulky remainder is retail. I think the pipeline is predominantly industrial, but we also have some retail and other service assets involved in there as well. So it's a bit of a diverse mix, but it's going to be weighted more towards industrialized that's been the case for us.

And then just thinking about lease terms for a moment, on the industrial side, there's almost been a benefit of having a shorter lease term where you're able to capture increases in market rents more quickly. You guys are probably on the other end of that spectrum, signing 15-, 20- and 25-year leases. Is there any reason to -- for you guys to move to shorter leases to be able to capture that upside? Are you comfortable with that longer-term sort of traditional net lease structure?

Look, we do like the traditional net lease structure. I think there's value in having visibility into really stable cash flows over a long period of time. That said, this past quarter, we did do some shorter-term deals, including a -- we were willing to do a shorter-term lease up on a redevelopment project in Lehigh Valley that was very attractive. And obviously, the fundamentals in that market are quite strong, and we're more than happy to take shorter lease exposure on an asset like that.

But also keep in mind, even though we have long-term leases, we have very good bumps built into them. Over the long term, we think those probably track market even if in the near term, it could add some of the stronger markets. And that's especially the case because we have inflation links in 60% of the leases. And I think that's a lot of what we're seeing around the industrials in terms of their releasing spreads. I think long-term inflation, hopefully, we'll be on a similar pace to that.

(Operator Instructions)

Our next question is from Anthony Paolone of JPMorgan.

If I'm looking at your expirations between now and, I guess, the end of '22, it's about 3%. So it's not a lot. But just wondering if there's anything in there that you expect to get back that could offset that pickup in internal growth from 1.5% to 2.5% that you outlined?

Brooks, do you want to cover that?

Sure. Yes, we have pretty minimal expirations in the coming years, really only about 7% through 2023. Even over that 3-year period, it's about 40% warehouse industrial and the balance, office and other. So too early to really comment on any specific deals. It's always going to be a mix of outcomes, some big upside, mainly kind of par renewals, I would expect. And then we'll have some vacates through that period as well.

But I wouldn't point to over that period anything major, but that will be certainly incorporated in our guidance when we provide that next call.

Okay. And then just my other question, maybe for Toni. In thinking about the 7.2 million shares, remaining to be settled, any guideposts in terms of bringing that in as we model deal flow? Like do you think of it as matching some percentage of the capital out the door? How should we think about that?

Yes. I mean, I think we do. We've said we have a lot of flexibility in terms of how we settle that. We'd like to have kind of the optionality there. In terms of how we have been using it really is to fund investment activity as it's coming through. So we are still maintaining our balance sheet, leverage-neutral in our guidance assumes that we're issuing the equity to maintain leverage to where we are right now. So it's probably the best way to think about it. I don't think you can expect any material movement from a leverage perspective that we would do anything different with that equity.

At this time, I am showing no further questions. I'll hand the call back to Mr. Sands.

Great. Thank you, everyone, for your interest in W. P. Carey. If you have additional questions, please call Investor Relations directly on (212) 492-1110. That concludes today's call. You may now disconnect.