WP Carey Inc (WPC) 2011 Q1 法說會逐字稿

Hello, this is the Chorus Call operator. Welcome to W.P. Carey First Quarter Earnings Conference Call. (Operator instructions)

At this time, I would like to turn the Conference over to Susan Hyde, Director of Investor Relations. Ms. Hyde?

Thank you. Good morning, and welcome, everyone, to our First Quarter 2011 Earnings Conference Call. Joining us today are W.P. Carey's Chairman, Bill Carey; President and CEO, Trevor Bond; Chief Financial Officer, Mark DeCesaris; and Chief Operating Officer, Tom Zacharias. Today's call is being simulcast on our website, wpcarey.com, and will be archived for 90 days.

Before I turn the call over to Trevor, I need to inform you that statements made in this earnings call that are not historic fact may be deemed forward-looking statements. Factors that could cause actual results to differ materially from our expectations are listed in our SEC filings.

Now I'd like to turn the call over to Trevor.

Thanks, Susan. And thanks, everyone, for being on the call today. We have a lot to talk about, so I'll be brief in my remarks.

During past calls, I've tried to summarize management's views on the macroeconomic environment, and more specifically on how those conditions give rise to the opportunities and challenges that we face as a company. The theme for the past year has been uncertainty. And that hasn't changed. In fact, that trend in some ways has become more pronounced during these first few months of 2011.

Granted, fears of a double-dip recession have lessened, and the US stock market's up, as are trophy property prices in the 24/7 gateway cities. And moderate growth is still projected in the US, [include] for much of the rest of the world. But still, each week it seems something new happens that reminds us how unpredictable the world really is.

For example, at the time of our last earnings call in February, it might've seemed possible that somewhere in the world a nuclear disaster might take place that was on the scale of Chernobyl. But few observers, I think, would've predicted that such a tragedy would occur in Japan. Also, back in February, I doubt many people would've predicted the death of Osama bin Laden, or that the US would be involved in a third war in Libya.

But of course, all these things did happen, and they'll each have their own respective impacts on the economy. And it's difficult to say what those will be exactly, just as we can't say for sure what the impact will be of the ending of QE2 or the budget impasse in Washington, or the sovereign debt crisis in the eurozone, or the volatility in commodities markets, and so on. So clarity remains an elusive target.

While we in management certainly try to anticipate the future, particularly as it pertains to the investment side of our business, to see beyond a few months forward is difficult. By contrast, our business model has much less inherent volatility. And in this sort of environment, it continues to serve our goal of delivering stable income to our investors. And our results for the first quarter demonstrate that.

Mark DeCesaris, our CFO, will go over the financial performance in detail in a moment. So I'll just briefly summarize the highlights for the quarter.

Our adjusted funds from operations rose to $0.97 per share, up from $0.71 per share in the first quarter of 2010. Adjusted cash flow from operations declined relative to the first quarter of 2010, but that was due to some timing factors that Mark will describe. This still resulted in a payout ratio for the first quarter of 85%, and we believe that will improve during subsequent quarters. Total revenues net of reimbursed expenses were also up this quarter, from $47.7 million in the first quarter 2010 to $59.8 million.

As I said before, our core business continues to be stable. And in a moment, I'll go into a bit more detail about the capital-raising side of our business, as well as highlights of our acquisition activities for the quarter. But before I do that, I want to briefly describe two transactions that took place recently, both of which represent significant milestones for W.P. Carey.

The first was the merger that closed on May 2nd between two of our managed REITS -- CPA-14 and CPA-16 Global. This transaction was approved by more than 90% of the voting shareholders and represented the 13th successful liquidation of a W.P. Carey fund. The return to CPA-14 investors was 8.96%. And to those who reinvested their dividends during the entire cycle, it was approximately 13%.

Following this liquidation, the average annual return for investors in those full-cycle funds has been 11.4%. And when one considers what's occurred in the world over that timeframe, which covers more than 30 years, we think it's a record that stands out and continues to enhance our brand in the private REIT sector.

The merger will have important implications for W.P. Carey itself. First, simultaneously with the merger, we purchased from CPA-14 its interest in three properties in which we already had joint venture interests. These investments will be accretive to our cash flow and will help lengthen the average lease term of our portfolio and to diversify the sources of our lease revenue, which continues to be a key goal for us.

Additionally, pursuant to that same goal and to facilitate the merger, W.P. Carey reinvested all of its fees from the transaction, as well as additional capital, into shares of CPA-16, so that we now own approximately 17% of CPA-16 shares. Again, this investment not only reaffirms our belief in the long-term value of CPA-16 but also provides our investors with additional diversification and accretive cash flow that will significantly enhance the coverage and stability of our dividend.

One other important aspect of this transaction is that it involved a restructuring of CPA-16, such that, going forward, W.P. Carey will receive a portion of its asset-management compensation as a percentage of the cash flow of the operating partnerships that own the assets, as opposed to receiving a straight fee.

This is the same way we are already compensated for our management of CPA-17. It has the advantage of being more tax-efficient, but also furthers our goal of earning more of our income from real estate ownership, as opposed to fees to our taxable subsidiary. This change, in conjunction with the broadening of our asset base, will give us more flexibility going forward in managing our balance sheet.

A second notable development -- or actually, two developments that occurred since our last call were in connection with Carey Watermark Investors, which is our first hotel REIT. That fund, as you may recall, launched in late September of last year. And in early March, it raised sufficient funds to break ESCROW and admit its initial investors as shareholders. And then, on May 5th, CWI closed its first transaction, an $88 million joint venture for two hotel properties located on the waterfront in Long Beach, California.

In the non-traded REIT sector, two very significant milestones to achieve in a new blind pool offering are first breaking ESCROW, and then closing the first deal. So we're pleased that we've accomplished both those.

Now, before I turn the microphone over to Mark, I'll talk briefly about fundraising and investment activities in the sale leaseback segment of our business, both of which were strong in the first quarter. We closed on six transactions totaling approximately $345 million, which is well ahead of the first quarter volume booked in 2010. The largest of these deals was a $207 million acquisition of key distribution facilities in the Netherlands from a company called C1000, which is a leading Dutch grocery retailer.

As we stated repeatedly, acquisition volume tends not to be smooth throughout the year. So we can't assume, of course, that this pace can be annualized, especially when you factor in capital markets conditions that are beyond our control. But we do believe that current conditions continue to be attractive in terms of potential deal flow, both in the US and internationally. Our current pipeline is healthy. And that's letting us remain selective in the types of credits, property types and geographic markets in which we invest on behalf of our CPA investors.

Our fundraising also continued to be strong in the first quarter. CPA-17's registration statements for its follow-on public offering for up to $1 billion of common stock was declared effective by the SEC on April 7th, which automatically terminated its initial public offering. While we can't guarantee that CPA-17 will sell the full number of shares registered, or even that we'll want to, as always, we'll pay close attention to market conditions on the investment side to be sure that the equilibrium that currently exists between potential investments and available capital remains in balance.

With that, I'll turn the microphone over to our Chief Financial Officer, Mark DeCesaris.

Thanks, Trevor, and good morning.

We hit a strong quarter and reported AFFO of approximately $39 million, or $0.97 per share; versus approximately $28 million, or $0.71 per share last year; an increase of 37% overall. AFFO from our investment management segment was approximately $20.6 million, versus $9.5 million in the prior year. We invested approximately $345 million on behalf of the CPA funds and earned approximately $15.9 million in structuring revenues; an increase of $9.1 million over the previous year. In addition, our annual asset management revenue stream increased by approximately $1 million, to $19.8 million for the quarter. AFFO from our net lease segment was fairly stable, as this segment generated approximately $18.5 million, or $0.46 per share.

We have changed our segment reporting for the first quarter to include the income we earned from our investment in the CPA funds. We believe that this is a more accurate presentation, as our ownership in the CPA funds represents an indirect investment in a well-diversified, stable portfolio of net leased assets. And the income we earned from those investment should be included in the net lease segment of our operating results. Actual cash distributions received from these holdings were $4.5 million in the first quarter, an increase of $1.6 million over the first quarter of 2010.

We have leases coming due this year that generate approximately $4.8 million in revenue and $4.2 million in cash flow. Tom will discuss the renewal prospects in his remarks. But as part of the 14-16 merger in the second quarter, we have also purchased CPA-14's interest in three assets that we currently own an interest in. This purchase will generate approximately $8.8 million in lease revenue and $4 million in cash flow on an annualized basis. So while I fully expect some of the expiring lease revenue to be renewed, this additional investment in properties will serve to enhance the cash flow stream from our own portfolio.

In addition, as part of the merger in the second quarter, we purchased an additional 13.75 million shares of CPA-16 at $8.80 per share. This investment will generate approximately $9.1 million per year in cash flow at CPA-16's current distribution rate. Our distribution coverage based on AFFO for the first quarter was approximately 189%.

Trevor mentioned that adjusted cash flow from operations decreased this quarter by approximately $3.5 million, to $24.2 million or $0.60 per share. As we have discussed in prior quarters, this decrease is due partially to a timing issue on the receipt of the [deferred] acquisition fees. CPA-17 pays these fees throughout the year, as opposed to the other CPA funds, which historically made a lump-sum payment in January of each year. In addition, in 2008 and 2009, we experienced lower-than-average investment volume. So the portion of fees being paid were not fully made up by the new acquisitions.

In the first case, this is strictly a timing issue that will be made up as the year goes along. The second case -- offsetting this, we had a very strong year in 2010 and a strong first quarter in 2011, investing on behalf of CPA-17. So this will serve to increase these revenues as we go forward.

In addition, CPA-17 is fully invested. The value of our GP interest continues to grow. Distributions from this interest in Q1 were $1.8 million, versus approximately $0.5 million in the first quarter of last year. We are able to receive this revenue stream in a tax-efficient manner. And as Trevor mentioned, as part of the 14/16 merger, we were able to restructure the post-merger CPA-16 entity into an UPREIT structure. And rather than continuing to receive performance fees on that entity, we will receive an interest entitling us to 10% of the net cash flow, similar to 17's structure. Our dividend coverage on this metric is about 117% in the first quarter, but I would expect both our adjusted cash flow as well as our coverage ratios to increase this year over last year.

From a balance sheet standpoint -- we ended the quarter with total debt-to-total market cap ratio of 20.5%. In addition, we have notified our bank group that we will extend the current line of credit through June of 2012.

In closing -- Trevor mentioned the merger of CPA-14 and 16. This is a second quarter event for us, and my intent would be to walk you through that transaction as part of the second quarter call when you have the numbers in front of you. But at a high level, we will recognize in excess of $50 million in fees, over $11 million in special distributions from our ownership in CPA-14, as well as an ongoing economic benefit from our additional investment in net lease properties, CPA-16 ownership, and the conversion of our fee stream in that entity to a more tax-efficient participation in the cash flow of the combined entity.

With that, I'll turn the call over to our Chief Operating Officer, Tom Zacharias.

Thank you, Mark. I will now provide a brief portfolio report for the first quarter for the public company and the managed CPA funds.

I'm happy to report we have made significant progress with the upgrading of the WPC portfolio. Our goals are to increase the diversity of the income streams and extend the average lease term. On May 2nd, WPC acquired from CPA-14 the balance of three JV interests in three office complexes, totaling another 420,000 square feet, for $96.1 million. The equity component was $31.8 million. This transaction extends the weighted average lease term of the portfolio to 6.75 years.

In the first quarter, we sold two small buildings back to the tenants for approximately $9.2 million in proceeds. These were assets where the leases were nearing expiration. So we're very pleased with the upgrade we've been able to execute.

Another positive impact of the completed CPA-14/CPA-16 merger, as Mark mentioned, was the additional shares of CPA-16 that we acquired. These additional shares will increase our total annual cash distributions to over $30 million per annum.

In the reporting beginning this year, this stable dividend stream from the diversified CPA portfolios will be included in the real estate segment. This year, CPA REIT distributions will be approximately a third of the income in the real estate segment.

The WPC portfolio -- we anticipate we will renew at least half of the $4.8 million in revenue that is scheduled to expire over the remainder of this year. With the additional revenue from the recently completed acquisitions, we expect that revenue in the owned real estate portfolio will increase this year.

The portfolio finished the first quarter at 89.9% occupancy, up slightly from year end. We're happy to report that Google leased the entire Frank Gehry-designed former Omnicom building in Venice, California to attractive rents. That rent stream will commence the completion of the tenant build-out early next year.

In the WPC portfolio, we have only four mortgages, totaling approximately $22 million, maturing in the remainder of 2011. And we are in the process of refinancing these.

Now, a few comments on the CPA REIT portfolios, which now have real estate assets in excess of $9.2 billion. The end of the first quarter, the occupancy rate on the 103 million square feet owned in aggregate by the CPA funds was approximately 97.8%, up slightly from year end. There are no significant lease maturities in the CPA funds over the next three years. And the combined weighted average lease term in these funds is now 12.5 years.

CPA-17 Global is growing dramatically. Its portfolio now includes 154 properties, 18.5 million square feet, and over $156 million in annual revenues. Our tenant credits on average continue to improve in this economic environment.

In summary -- after the additional investments in CPA-16, the public company owns over $410 million in CPA shares. These funds are performing well. The cash distributions are well covered from adjusted funds from operations. It's fair to say that we are bullish on the investment funds that we have created.

Now, I would like to turn the call over to our Founder and Chairman, Mr. William Polk Carey.

Thank you very much.

I'm very pleased with the results of the year. But [what] I'm pleased with is also the Company overall, last year and this quarter. This quarter is obviously great. But it's only -- I look at it for much longer term.

As you know, our mottos are -- investing for the long run, doing good while we're doing well. And we have a new one, which we adopted when we had -- new French officer asked us to. It's "Faire l'amour, pas la guerre." Means, "Make love, not war." And that's very appropriate. And we are doing extraordinarily well.

Looking at our financial condition -- our debt equity ratio is probably better than any other financial institution that you know, including household words of all kinds. We've -- I think it's smaller than 1 to 10. It was 1 to 25 before we did the merger, and we borrowed some more money. And maybe it's 10 to 1 -- 1 to 10, or something like that. But it's still -- most [of the national] institutions -- seems to me, I heard that a normal number was 20 to 1. And to have 1 to 10 would be -- make us stronger than anybody. But if you know of anybody stronger, let me know -- maybe I'll buy some of their stock -- or anybody's had a better record of paying dividends to their investors. You know you've received increases every quarter for the last 10 years.

And now, I feel that we might be -- and I'm not promising anything -- but because of the progress we're making, and my hope [is a feature] -- I hope our dividends will go up a little more. Most of my dividends go to the W. Carey Foundation to fund charitable activities. And it was just more in line with our goal to do good while doing well.

But we're also doing good while doing well with all of our investments. Because what we're doing is we're financing the growth of worthy companies. We analyze them and see -- are they going to succeed with this project? Is this going to grow? And in almost every case, I can't imagine why we're not creating more jobs and prosperity every place we invest. We've got a bad unemployment rate in this country. And we're going to fight hard to bring it down, and we're going to make our contribution, while still giving you [any] ordinarily good dividends.

The other thing I might mention is that when investing in a company which owns a lot of real estate, you don't look at net income. That's one advantage of investing in real estate -- you get to deduct [the depreciation] on the real estate, even though it may be going up in value. And we've [depreciated] our properties very much, and [then] actually suffered some reductions in valuation during the economic turmoil. I can't promise that those will be reversed. But it would seem logical that when you get -- everything just goes -- up goes down, and vice-versa. And so I hope that we'll have some improvements in values, and time will tell.

Thank you so much for being our investors. And we'll work very hard to outperform every other investment that you make. Thank you very much.

Thank you, Bill, for your remarks this morning.

That concludes our presentation. So now we'd like to open up the call for any questions that you may have.

(Operator instructions) Andrew Dizio, Janney Capital Markets.

Actually, it's Dan Donlan here.

I guess first question will be for Tom. Was just curious if you could let us know, if it's meaningful, what cap rate you sold those assets to the tenants for.

I don't have that handy. One was a sale back to AT&T of a building that they were either going to leave or consolidate into. And it was a great investment for us; I just don't happen to have it. The rent had moved to be significantly above market by the time they bought it back. The other was a third-generation tenant, and we did very well on that sale, too. I just don't happen to have the cap rates. But they were -- it's good recycling of capital, because we're taking assets that are not that stable and putting them into high-quality corporate headquarters. And the new tenants are FedEx, [Amlen] and Pfizer.

Okay.

So we're happy.

And then, I think you mentioned that you expected at least half of the revenue that's expiring this year to be renewed. Could you maybe [offer us] some color on why you think the other tenants may leave? Is it --

Yes, we have one large tenant in that $4.8 million of revenue that we've been working with. And I don't want to give too much color on it, but the reasons why we've been unsuccessful so far in getting them today -- we got a three-month extension. But there are reasons why our facility will no longer meet some of their needs. So we're still working very hard trying to do something there. But it's basically one tenant; the other ones we feel pretty comfortable with.

Okay. In that large space, how fungible is that real estate? Is it easily releasable, or is it -- it would be kind of -- would take some CapEx in order to -- if you did need to bring somebody else in there to lease it up?

It depends. We'll do whatever the -- we'll do market deals. It's outside of Minneapolis, Minnesota.

Okay.

And it should work for a number of tenants. It's office space.

Okay.

And then, the rest of the vacancy you have out there -- what's your outlook there --

It's interesting. We're a little frustrated, because it's 1.3 million square feet, really, of vacant space. There's a smaller denominator in the public company of real estate than the others, so that's why the occupancy percentage is lower. Three spaces make up 70% of that space we have to lease.

And we continue to pursue opportunities on those spaces. Had a deal fall apart. We have some deals that we think will happen. So we think this is the year that some activity will happen on those three large spaces. Two are in North Carolina; one's in Jacksonville, Florida. And they're distribution space. And that space is beginning to fill up again.

Yes, I've heard that as well. The bigger spaces -- there's just not a lot out there. So once you get somebody big enough to get in there, it's -- I've heard that on numerous other calls as well.

There's a lot of positive things happening. So I'm not disappointed that it's taken a little bit of time. Because I think we will get things done.

Okay.

And I'm not sure if this is for you again -- but what's the outlook on the sale leaseback pipeline for you guys, in US versus Europe? I think the mix was expected to be more in Europe. Is that still the case going forward?

We certainly -- in this particular quarter, because we did that large deal in the Netherlands -- C1000 -- it was disproportionally in Europe. But I think that the activity that we're seeing in terms of the preliminary conversations is active in both markets. I would say that the difference in the two markets is that the European deals are tending to be larger than the US deals. And so they may take a little bit more time to pull together. And also, debt financing is not quite there yet in terms of coming back, as far as the debt financing markets here in the US.

But in terms of the actual activity -- the preliminary discussions into the LOI phases, the letters of intent that we signed -- I think that we feel that we're just as active this year as we were last year. So we don't see much of a change. What we're seeing is a lot more build-to-suit activity this year relative to last year, which suggests that the economy is starting to create the sort of conditions that make companies want to expand. And we find that to be encouraging.

We're also seeing in the US more activity related to mergers and acquisitions, which I think is a promising sign that in prior years had been a big source of acquisition volume for us. And that's starting to come back as well. We'll have more to report next quarter, we hope.

Okay.

And then, moving on to Mark -- what are you guys seeing in the financing market, individual mortgages versus CMBS? Are you starting to see CMBS come back a little bit more? And if so, is this going to bring some additional players bidding on deals on a going-forward basis?

Yes, I think we've seen a couple of CMBS offerings go off in the last quarter themselves. And that does seem to be coming back. We're able to get the mortgage debt we want, especially domestically. I think it's a little bit more difficult to put it on some of the larger international acquisitions. But we --

I'm sorry we don't have the acquisitions officers here. Because really, they're doing a good job. And I don't think they're having -- they haven't expressed to me any difficulty in getting financing on their deals.

Now also, in addition to the CMBS, we're seeing activity from the life companies now and local banks continue. But I don't think that that tends to --

Everybody's gotten back in the same.

Yes.

There's so much money around; the question is just asking for it. And we have -- we could use our own credit. We've got -- we could raise billions, if we wanted to just do these things in all cash for the time being.

I think that from a competitive standpoint -- because I think your question was related to whether or not the additional debt that's available is bringing in or making the market more frothy. I think that -- was that the intent of the question?

Yes. Yes, sir.

Yes. So in response to that, I'd say that certainly, it's a vibrant, competitive market, but that for what we do, which is rather specialized, we haven't quite seen that as much. In the bigger, highly visible, highly marketed portfolio deals, you'll see some of the players that have raised quite a lot of capital. And there may be some pressure to put that capital to work. And that's not typically where we get as involved.

But in the types of credits that we evaluate -- where it's time-intensive to understand the business and the management, et cetera -- we're still finding that we're equally competitive. And the availability of the non-recourse mortgage debt hasn't significantly altered that dynamic. It's continued to make it attractive for us, when we find a deal, to finance it on accretive terms. But I wouldn't say that it's affected the competitive side of things.

But it is nice to have it. Because if, for instance, you borrow two thirds, you get -- and your CPI increases -- you get three times CPI increase --

Right.

-- goes to the equity owners.

That's right.

And we're borrowing without recourse. We have some 280 different obligors. So one of them got in trouble, we -- it just doesn't make that much difference (inaudible). We have -- we always have recourse of the property, and we have the fact that the property is essential to their profitable operation.

So when Western Union went bankrupt, all the properties we owned were taken over by AT&T. So we went from [a weak] (inaudible) to a triple A. And that's happened to us a number of times. We have -- this credit aspect of our transactions is unique. And having the independent investment committee -- some of the best, long-term credit people alive -- make judging every transaction.

And it just -- it's not -- and it's so important that -- you can't look at it just from a real estate standpoint. This is a bond fund, which has critical real estate in addition to the full faith and credit of great companies.

Understood.

I guess the last question would be, in going through the press release -- on the Carey Watermark fund, it looks like you guys have raised about $19 million. But then it looks like your equity investment was $20.8 million in the Long Beach properties. What's the delta there?

After you factor in the cost of fundraising, we ended up as the advisor funding about $4 million of that deal.

Okay.

We'll get paid back through future fundraising of that. But I think it was important for us to get the first deal closed in that fund. And we think it'll have a positive impact on the fund going forward.

And what's your pipeline look like there? And how dependent upon that is obviously additional equity -- I mean, additional raising in that particular fund?

It's a very good time to be looking at lodging investments. And that particular one was structured as a joint venture where we got a preferred return on our equity investment. And there's a lot of transactions like that that are very attractive. And we did that with a local partner. We're looking at a number of other ones, where we will be a financial partner, recapitalizing something -- you get a very attractive return and ownership of the -- in that case, we own 49% of two very good waterfront hotels in Long Beach, California.

But you bring up a good point, Dan. We think that closing this first deal -- this is a new fund for us, this is a new type of investment for us. So we're hopeful that closing this first deal will help to serve as a kind of a track record into what we can do as we raise capital in this environment. But it has been slow up till now. But we think it'll pick up as we go forward here.

The only thing that I would add is that it's been slow, but we're still within the realm of what we had projected at the outset of the fund. So we feel that we're on schedule relative to the development of the new fund.

And are these investors your typical retail investors, or are you going for more institutional investors? And maybe that's a naïve question from me, but just curious more so than anything else.

It's essentially the same distribution channel that we use for our CPA REITs.

Okay.

That's it for me. Thank you.

We also have a secret [capability] for raising institutional funds. Right now, with the hotel fund -- I think [it's] been a lot of demand for it [on the] --

Well, I'm extremely bullish on lodging, so I'm with you guys on that.

Okay.

Thank you.

Again, you look at the investment committee on that one. I don't know anything about the hotel business. But I'm glad to see -- look at that list of people, including the dean of the Cornell Hotel School, and others of comparable and even greater experience, making these decisions. So I don't [think] -- I think we have reason to believe we won't make too many mistakes.

Understood. Thanks a lot.

Thank you.

Paul Adornato, BMO Capital Markets.

Just to follow up on the last discussion -- was wondering if you could talk a little bit about the industry exposure that you see in your pipeline. What industries do you think will present better opportunities, and which industries do you think you might deemphasize a little bit more going forward?

I think at this stage -- our history, as you may remember, Paul, has been somewhat opportunistic. We don't have a defined strategy. Because one of our main goals is diversification. So I think that when you look across all the funds, we're invested in some 28 different industries. And that approach has served us very well over the years. And it's also allowed us sometimes to invest in industries that might've been at the time considered slightly out of favor. And so the pricing on those relative to the risk has been attractive for us.

So I think the short answer is that we would continue to focus in that regard. We don't have any specific industries where we said we're going to cut back on that. I mean, I could give you -- there would be some credits in there that over time -- we had some blips during the crisis, but we've come out of, for instance, the auto industry pretty well. But for the most part, we look for well-managed companies in solid industries and in different geographic markets to give that diversification to our investors.

And given the improving economy, does that change your underwriting criteria with respect to hurdle rates, as companies start to do a little bit better and the economy starts to pick up steam?

Well, I don't think so. Right now, we're still looking for the most attractive risk-adjusted return. And we have a dividend to cover in the fund. And so what we're finding is that we're still able to find investments that -- and perhaps the improving debt market has helped that -- we're still able to find investments that -- we look at them as they add to the portfolio incrementally in terms of the diversification, and then what they do to the funds available for distribution. And so far, we've been able to maintain that equilibrium between the funds raised and the types of opportunities.

So no, I don't think that we've added a specific sort of discount to yields to incorporate a more upbeat view on the economy, if that's what the question is.

Yes, exactly. Great. Thanks very much.

That concludes the question-and-answer session. I would like to turn the Conference back over to Ms. Hyde for closing remarks.

Thank you.

We'd just like to remind you that a replay of today's call, including a webcast and podcast, will be available after 2.00 p.m. And the information can be found at the end of our earnings Press Release.

As always, we thank you for joining us today, and we look forward to speaking with you again next quarter. Thank you.

Thank you for your time, and thank you all very much for participating in the W.P. Carey First Quarter Earnings Conference Call. This concludes today's call.