WP Carey Inc (WPC) 2015 Q3 法說會逐字稿

Hello and welcome to the W. P. Carey's Third Quarter 2015 Earnings Conference Call. My name is Lauren and I will be your event specialist today. (Operator Instructions). Please note, that today's event is being recorded. After today's presentation, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time.

It is now my pleasure to turn today's program over to Peter Sands, Director of Institutional Investor Relations. Mr. Sands, please go ahead.

Good morning everyone and thank you for joining us on this call to review our 2015 third quarter results. Joining us today are Trevor Bond, Chief Executive Officer; who will provide a business and strategic update, Jason Fox President and Head of Global Investments; who will review our recent on-balance sheet acquisitions and the market backdrop and Hisham Kader, our Chief Financial Officer; who will discuss our third quarter results and balance sheet. Following that we will take your questions, along with Katy Rice, Senior Managing Director; and Jeremiah Gregory, Head of Capital Markets.

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 may cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings. Lastly, an online rebroadcast 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 90 days.

And with that I will hand the call over to Trevor.

Thank you, Peter, and good morning everyone. For the 2015, third quarter, we generated adjusted funds from operations or AFFO of $1.19 per diluted share, which is up 5.3% compared to the $1.13 per diluted share for the 2014 third quarter. As previously announced, during the third quarter, we paid a quarterly cash dividend of $0.955 per share. That's equivalent to an annualized dividend rate of $3.82 per share. And based on yesterday's closing stock price this represents a dividend yield of about 6%.

Turning to our owned real estate portfolio, at the end of the third quarter, the Company's owned real estate consisted primarily of 854 net lease properties, comprising 89.8 million square feet and leased to 221 tenants. Approximately 64% of the annualized base rent comes from our US properties and about 34% from our properties in Europe. Portfolio occupancy remains high at 98.8% and our weighted average lease term stood at 8.9 years. Approximately 95% of our annualized base rent came from leases with contractual rent escalations, either linked to CPI or through fixed rent increases, which provides built-in revenue growth, and since they are net leases, tenants bear the impact of inflation on our costs associated with operating and maintaining the property.

Looking at our same-store rent growth and re-leasing activity, the details of which you'll find in our supplemental by the way; rents were approximately 1.2% higher compared to the year ago quarter. This excludes any properties acquired, sold or vacated or subject to lease modifications during the 12-month period and it's on a constant currency basis to allow for comparability.

During the third quarter, three leases were renewed at or above the existing rent. We also entered into six new leases with a weighted average lease term of 8.1 years. In the aggregate, this re-leasing and new leasing activity represented just over 1% of our portfolio's total annualized base rent, so a very small part of our overall portfolio. We have eight leases expiring in the remainder of 2015 representing about 1.9% of annualized base rent, which is factored into our 2015 AFFO guidance.

And now I'll hand over to Jason, to talk briefly about our recent acquisitions and the market environment.

Thank you, Trevor and good morning, everyone. During the third quarter, we completed two acquisitions for our owned real estate portfolio, totaling approximately $98 million, bringing total on balance sheet investment volume for the first nine months in the year to approximately $543 million.

We acquired a portfolio of three modern truck and bus servicing facilities in Germany and Austria for approximately $44 million, leased to wholly owned subsidiaries of MAN Group, which is one of Europe's leading producers of commercial vehicles, engines and engineering equipment. The facilities built by a third-party developer to the tenant's specifications, are among the largest service facilities operated by MAN Group and are important sales drivers for its fleet repair and maintenance business. Well located on arterial routes, the facilities benefit from high commercial traffic flow, connecting several major European cities. All three facilities are net leased with 15 years remaining lease term and built-in rent growth through CPI-based rent escalations.

We also acquired a Class A office facility in North East England, for approximately $54 million, net leased to a wholly owned subsidiary of RWE N-Power, one of the UK's leading energy companies. It's critical real estate for the tenant, housing about one quarter of its workforce. It's also a high-quality, well-located facility and it's triple net leased for a 10-year term with built-in rent growth linked to the UK retail price index.

We remain focused on extending the overall weighted average lease term of our portfolio and the deals completed in the first nine months of the year have been additive to it. Acquisitions completed during the third quarter, had a weighted average lease term of approximately 12.3 years, while acquisitions completed in the first nine months of 2015, had a weighted average lease term of approximately 14.1 years. In addition to these acquisitions, we completed an office build-to-suit project for Banco Santander, located just outside of Dusseldorf in Germany, for a total investment of just over $51 million. The approximately 212,000 square foot building was placed in service in September, commencing a triple net lease, with a 20-year term, and built-in rent growth linked to German CPI.

Acquisitions for our owned portfolio during the third quarter, had a weighted average cap rate of approximately 6.9%, acquisitions completed in the first nine months of the year also had a weighted average cap rate of approximately 6.9%. Disposition activity was light during the third quarter, totaling approximately $6.7 million, bringing total dispositions for the first nine months of the year to about $32 million. We expect further capital recycling this year, in line with the revised $40 million to $100 million target range factored into our updated 2015 AFFO guidance, with a focus on extending lease term, improving credit quality and increasing asset criticality within the portfolio.

Turning briefly to the investment environment, in United States, it remains very competitive. However, the market's feedback we are receiving indicates that, although deals continue to clear at lower cap rates, the majority of bids are clustered at slightly higher levels, indicating that cap rates may have begun to firm, with the potential to move higher. Europe remains at a different point in the cycle, with cap rates continuing to compress as US investors are becoming increasingly more comfortable with the risks associated with investing in that region, creating capital inflows.

And with that, I hand it back to Trevor.

Thanks, Jason. Turning briefly to our Investment Management business now, we continue to execute on our strategy of diversifying our product offerings. In May, we launched our second lodging fund Carey Watermark Investors 2 and during the quarter it generated investor capital inflows of approximately $75.5 million.

As I mentioned on our last earnings call, during the third quarter we launched our first non-traded business development company or BDC, which is called Carey Credit Income Fund and we're currently working through the due diligence process for it to be added to various brokers platforms. At September 30, 2015, total assets under management within our investment management business, stood at approximately $10.5 billion, up about 26% from the year ago quarter.

Now before handing over to Hisham I'd like to briefly address our announcement in this morning's earnings release, that the Board of Directors has authorized management to actively explore the potential separation of the Company into more focused entities. As you know, Katy Rice recently assumed an internal advisory role examining our core competencies and the strategic and operational opportunities and challenges unique to each. Now, as part of that ongoing initiative, we are actively exploring their potential separation and the ability to create long-term value, by allowing each to pursue distinct business strategies and what we believe, would be superior opportunities for growth. Our review is well underway and we feel we have good visibility into the fundamental issues involved.

However, considerable work remains concerning the specific details of potential structures, timetables and the like, particularly regarding things like tax, regulatory and legal matters. We're excited by the opportunities that a separation may create and look forward to providing an update on the outcome of our review and details of our specific plans, once they're fully developed. Until then, it continues to be business as usual for most of the firm and we remain focused on the day-to-day operations of the Company. We felt it was important to provide this progress update, however at this time, we're very limited in what further we can say, as I'm sure you'd expect.

And now I'll hand over to Hisham.

Thank you, Trevor and good morning, everyone. As Trevor mentioned for the 2015 third quarter, we generated AFFO of $1.19 per diluted share, up 5.3% compared to $1.13 per diluted share for the 2014 third quarter. This increase was driven by two key factors; first, the assets we acquired for our owned real estate portfolio had a positive net impact on AFFO; second, within our investment management business, growth in assets under management resulted in both higher asset management fees and higher distributions of available cash from our interest in the operating partnerships of the managed REITs. These factors were partly offset by the impact of a stronger US dollar year-over-year, primarily relative to the euro, net of realized gains from our currency hedging program, as well as higher G&A expenses.

Now turning to our 2015 AFFO guidance, for the 2015 full year we have narrowed our AFFO guidance range to between $4.83 and $4.97 per diluted share. This assumes acquisitions for W.P. Carey's balance sheet totaling approximately $600 million to $700 million and dispositions of between $40 million and $100 million for the full year period. It also assumes acquisitions on behalf of the managed REITs of between $2.1 billion and $2.8 billion. Looking ahead, we expect to address 2016 AFFO guidance on our next earnings call.

Turning briefly to our balance sheet and leverage metrics, at quarter end, pro rata net debt to enterprise value stood at 41.8%. Total consolidated debt to gross assets was 49.8% and pro rata net debt to adjusted EBITDA was approximately 6 times. We continue to view our near-term secured debt maturities as manageable, with approximately $149 million maturing over the remainder of 2015 and $252 million maturing in 2016, compared to total liquidity at the end of the third quarter of about $1.3 billion. At quarter end, the weighted average cost of our pro rata secured debt was 5.4% and our overall weighted average cost of debt was 4.1%.

The majority of our debt maturing over the next few years is secured debt, with interest rates that we continue to believe are above, where we could issue unsecured debt today. Please note that, as part of our ongoing effort to provide helpful information to investors, we have added a summary of debt by currency on page 16 of our supplemental.

Lastly for completeness, I'd like to note that we did not issue any shares under our, at the market or ATM program, during the third quarter or subsequently.

And with that, I'll turn it back to the operator for questions.

At this time, we would like to take any questions you might have for us today. (Operator Instructions) Sheila McGrath, Evercore.

Yes. Good morning. Trevor, I understand you can't go into details, but I was just wondering, if you could give us a little bit more background on the thought process, why splitting the entities might make sense and are there specific public company comparables, that you think are relevant for us to look at, versus how WPC is trading, all under one umbrella?

Sure, thanks for the question, Sheila. First off, I have to caution that there clearly are many possible permutations of this theme of separation. And so I think, the goal of this call is to present and we're comfortable discussing what's common to many of those permutations, but as I said, we have to be careful about getting into too much detail.

But with respect to the rationale and the goals of this idea, we think that there are clear advantages and I can enumerate some of them. We believe that separation would provide for more focused and simplified structures that would be easier for investors to understand. We think that, aligning each platform with sector specific shareholders is desirable and that we could achieve a cost of capital most appropriate to each entity by this alignment. We think that would allow us to allocate capital in a more focused way. We think this idea allows for better alignment of currency exposure, by each of the platforms different investors. Most importantly, I think we feel that, this could potentially allow us to pursue individual growth and business opportunities for each of the separate entities. For instance, the investment management arm would have a greater ability to grow, unconstrained by REIT status. We can also pursue individual inorganic growth strategy -- strategic opportunities, where with having a public currency that we could use for that.

So I think that, the bottom line here is that, this creates even stronger businesses that can pursue better growth opportunities as separate entities and create long-term value and we look forward to posting you more in the future as that unfolds.

Okay. And do you think, you outlined that you would be giving guidance on the next call, like earnings guidance; do you think that, that would be the venue where you would -- might have more information or how long do you think this process would take?

Well, we certainly recognize that it's in everyone's interest to move expeditiously. But as mentioned, there are a number of considerations with respect to tax, regulatory and legal and we're trying to be methodical and thoughtful in our approach. So I wouldn't want to pin this down to a particular time right now.

Okay. And then just, were there any costs related to this potential restructuring in G&A? And should we think about G&A being a little bit elevated or will you break out the cost separately? How should we think about this, over the next couple of quarters?

In our 10-Q, which will be filed soon, you'll see that, we've incurred so far about $1.1 million on this exercise, but just for your clarification, we're not -- it doesn't impact AFFO. So we are -- it's not included in G&A, it shows up as a separate line item.

Okay. Great. I will get back in the queue. Thanks.

Juan Sanabria, Bank of America Merrill Lynch.

Hi. Just following up on Sheila's questions, on the strategic review, are you guys running a concurrent process, where you're looking to potentially sell in the market these business that you may be looking to spin out, it sounds like?

Well, nothing is ruled out. But as I said, and thanks for the question first Juan, we're looking at a lot of different permutations, so I don't think I could comment on any one particular one, that's so specific as that.

I mean, in the interest of maximizing shareholder value, do you think, when you have more clarity and what exactly you want to do? Do you look at both options kind of concurrently or what's the Board's view on that?

The Board's view and management's view is, as I said that, we have three really strong core competencies that we're working with. Each of them has strength and we believe strong growth capability and we believe that the growth capabilities of each would be better off if they were on their own, but we're still exploring some of the legal, regulatory and tax issues, that would be connected with that. And so within that umbrella of possibilities, there are a lot of possible things that, again I won't comment on individual details; but I can certainly talk about the strength of each of the platforms themselves.

And these three core competencies would be; US triple net, overseas triple net and the investment management business?

Yes. I think that's right. We have an investment management business that's 42 years old, that has delivered 15 full cycle funds. These are long life funds, not quick flips. No full-term investor has lost money with those funds, so that, that has given us a tremendous track record, a brand value and a name recognition. There are significant barriers to entry in that business. We believe that there is improved prospects in the business notwithstanding some regulatory changes. We think that transparency will help that industry generally over the next several years.

In Europe, where we've been, as you know, since 1998. We have a self contained operation, we have all functions on the ground in the UK and Amsterdam,18 to 19 languages are spoken in that office, and based on our portfolio there, we would be the largest public net lease REIT, if that's the route we chose to go. We feel that the opportunity in Europe as we've said on earlier calls, is still in the earlier innings than here and you might disagree on where we are in the United States in terms of, what inning we're in, but Europe is still contemplating another round of quantitative easing, interest rates are still low and we have yet to have full cap rate compression. And that's what we've seen here. So we think that Europe, and this is just repeating what I've said on earlier calls, is a great opportunity and so we have to be mindful of the fact that a separate European platform might be able to better take advantage of that for a variety of reasons that I already enumerated.

And then finally, the US REIT would be -- if that's the route we went to have a separate US REIT, would be one of the largest of the net lease REIT even without the European assets. It would be pure play. We could better illuminate the cost structure, if we did not have the G&A from our investment management business in there. As I think you've pointed out Juan, in some of your observations.

And so finally, most of our leases are tied in some way to inflation and that would apply to both Europe and the United States, and we really feel that, once inflation does revive, we think it ultimately will that those portfolios will do very well from the same-store rent growth point of view.

And then from a G&A perspective, it sounds like, these three businesses are relatively staffed up to run as separate business lines, outside of I guess, public listing fees or whatever if they are in fact spun out or listed, is that fair to say?

We have at deep bench, we're really proud of the resources that we've put in place for each of these platforms and one of the reasons we feel very confident that each of the platforms will grow well is because we think we're staffed appropriately and yes, we have talented individuals within each of them.

And could you remind us of the G&A, we should be thinking of that's associated with the investment management business?

Do we have that broken out? I mean, I think it's in the supplemental.

Yes. We don't have that number right now handy, Juan. We'll get it back to you certainly.

And annual number, just kind of ballpark?

For the [IM] company?

Yes.

That's in the supplemental where we break it down.

Yes. It should be there. Yes.

The specific allocation.

Yes.

We'll get back to you on the actual. Are you looking for an absolute number, not percentage of total G&A, right?

Yes, that'd be helpful. Thank you.

We're not going to getting that right this moment.

We will get back to you Juan.

Dan Donlan, Ladenburg.

Thank you and good morning. Trevor, I'm sorry if this has been asked before, but I was just looking at the lease expiration schedule and noticed that the annualized base rent has picked up, that's about $13 million plus versus last quarter of about $9.8 million. So just kind of curious, what the change was there? Did somebody exercise an early termination right?

And then what the plan is to -- I think the plan last quarter was to basically dispose of most of the properties that were underlying that rent, but just kind of curious, what's going to happen to the expiring rent? How much of it you think you're going to recapture, how much is it -- is going to go via asset sales?

I'm sorry. Is your question in connection with the increase in the annualized base rent or?

Yes. The first question is, why did it go up and the second question is, how much of that do you think you're going to be able to recapture through re-leasing or how much of it is kind of going to go away, just tenants going to leave or how much is going to be sold via asset sales?

Well, it went up because, I believe that would have been Santander coming online. I mean there is some -- well we did have a build-to-suit. And I think that, with respect to our re-leasing, we're still in the middle of negotiations with respect to the remainder of the year. And I don't think we expect untoward declines relative to what we reported historically, but I wouldn't care to comment on the actual outcomes of specific leases that we're in the middle of negotiating. I think that our -- by affirming our guidance actually tightening the range we've sort of factored in the questions that you're asking. At least I hope I've answered that question.

So Dan, I mean, the primary driver for the increase in ABR is acquisition. So it's a $85.8 million of ABR growth.

No, I'm talking about in the year for 2015, when I looked at the supplemental last quarter, it was I think like $9.8 million, you had expiring rent coming due in 2015 at the end of 2Q and now you have $13.3 million, so I was trying to figure out why that went up?

Yes, we have -- there are lease expirations that are coming due, but then see, when we look at our guidance also would be like, like Trevor is saying, we have estimates that we make over re-leasing and acquisitions, so it's bundled in there.

Well, okay. So if I look at the remaining 2015 lease expiration.Okay. You have eight leases coming due, you have $13.3 million of annualized base rent. As I look at the exact seems stat, in the last quarter -- at the end of the last quarter for 2015 that number I think was, from my notes like $9.8 million and was nine leases expiring. So, I'm just trying to figure out, why that number changed? Is somebody terminating early, like what's the difference, why did that number go up, it should have either gone down or stayed the same?

It's a good question, Dan, it's a level of specificity that I'm not prepared to talk about, frankly. Right now, there's a lot of moving parts to this. And we could certainly look into that.

Nick Joseph, Citi.

Thanks. For the three core businesses, do you view each as more independent or do some more overlap together than others?

I think that each have a clear path to growth, Nick. That don't rely upon any of the others. That's the short answer. So that we're not -- and in so saying, I am not precluding anything or implying anything. The advantages that I mentioned before, I think if you walk through those, you'll see that each of the businesses could grow really quite independently of one another.

Right. I guess I'm thinking more from a staffing or from a G&A perspective, is there more overlap between some than others? For example, is it on the wholly owned balance sheet side, is that G&A more -- is there more overlap there between the US and Europe, versus the investment management business?

I mean, I think you can look at the relative concentration of assets, but the way that we look at things, our international operation, which is primarily UK and Amsterdam based, is devoted in part to the investment management platform with assets under management and in part to the real estate and so theoretically you could do an allocation in terms of just the gross assets. But I think other than that, the G&A that's devoted to the US REIT is appropriate to what comparable pure net lease companies would have, we believe. And the G&A that's allocable to the investment management platform generally is appropriate to that segment. Does that answer your question or not?

Yes, it does. Then I guess in terms of management structure, how do you think about that, particularly the importance of internal management and its impact on any potential separations?

Well, we certainly recognize that internal management is quite important to REIT investors, and other than to say that, I mean, we are internally managed right now.

Right. I'm thinking more if you do end up spinning out or breaking up into the three different core businesses, what is your thoughts around internal management on each of those core businesses?

Well, again I apologize I have to go back to the idea that, there are several different permutations on the theme. I know what you're getting at and I'd like to be able to provide you with more details and specifics on how each of those entities would look. We're certainly quite familiar with other transactions that have taken place. But we wouldn't want to preclude anything at this stage, it's too early I think, and that's one reason why we are being cautious.

Paul Adornato, BMO Capital Markets.

Thanks, good morning. Switching gears a little bit, I just wanted to follow-up on one of your comments that, dispositions were little light this quarter, yet you also mentioned that, the market is still very competitive. So I was wondering if you could square those two comments that dispositions perhaps came in a little bit less than what you might have estimated.

This is Jason, I'll respond to that. I think a lot of it is a timing issue. Our expectation is that capital recycling will pick up substantially in 2016. We're still working on the specific assets and what the numbers will be, but we do expect that will tickup considerably from, where it has been in 2015.

Thanks. And you also mentioned that you might have started to see the beginnings of cap rate movements, I was wondering if you could expand on that?

Yes, it's more anecdotal than anything else. In some of the transactions we bid on, feedback has been that perhaps the winning bidders are a bit more of an outlier now than they have been in the past. We've seen in the past, the cluster of bids might be in and around where the clearing price was we feel on some of the transactions we've looked at, the clearing price has been more of an outlier and the cluster has been at a slightly higher yield than where it has been in the past. So anecdotal, but we do think, -- this is in the US by the way I'm referring to, we do think it's perhaps a sign of some firming of where cap rates will end up.

And were you referring to both kind of bulk portfolios, as well as larger individual assets or what type of assets?

I would say more towards individual assets. We have looked at a lot of the portfolios as well. And I think that, pricing seems to vary more widely on how people look at the larger portfolios.

Chris Lucas, CapitalOne Securities

Good morning, everyone. I joined the call late, so if this has already been covered, I apologize. Just on the lease term fee income, could you maybe provide some color on, whether that was a single tenant or multiple leases or just give us a little bit more on what that involved?

Yes, there were three dispositions. One was a vacant building, one is a -- it's multi-tenant, but it has an NOI of over $100,000, so it's very small and third disposition was a self-storage assets with a single asset where it's about $200,000 of NOI.

I guess, I was looking for the lease term fee income for the quarter?

Termination.

We had three of them.

Okay.

Sorry, Chris, did that answer your question or did you want more detail on the lease termination fees. When you say lease term you're referring to lease termination? Is Chris still with us?

Jon Woloshin, UBS.

Good morning. Just a couple questions. Is the tightening of the AFFO range a function of reduced structuring income? Because I noticed, it was down a bunch in the third quarter.

No, there are number of factors. One we just have -- as we get -- number one, structuring revenue is lumpy as you know and as we get closer to the end of the year, we get more clarity on, what we can and cannot close. There are deals in our pipeline that may or may not close and may close in the fourth quarter between December and Jan and that impacts our revenue, our AFFO for 2015 versus 2016. That's one reason, that's the one primary reason for why we were able to tighten our range a bit.

Okay, thanks. And Trevor, just on any potential strategic transaction, if after your detailed review you conclude that, you're not going to do anything and leave the structure of the business as is, what would be the overriding considerations that would lead you to conclude that?

Well as I said, at this point, we're encouraged by what we've seen so far with respect to separation, but we're still looking at tax, regulatory and legal perspective so as to maximize efficiency et cetera and so I suppose, if we found something that causes a change our mind on those, but like I said, we're very encouraged by what we've seen so far.

Sheila McGrath, Evercore.

Just on the acquisitions for the balance of the year, third quarter was less closings than we had anticipated. I'm just wondering if you have expectations that fourth quarter will kind of pick up the slack, number one? And number two, you did put an ATM in place, is this -- given your acquisition plans, do you think that would include tapping the ATM?

With regards to acquisitions, I think we're still within our guidance range of $600 million to $700 million for the year. So, you can kind of factor that into, where we are now versus what we expect to close between now and the end of the year.

And Sheila, with regard to the ATM, it's a tool in our chest, right, so we look at what Jason just said, the likelihood of us closing some of these acquisitions along with, what dispositions we're able to accomplish in the remainder of this year. But certainly a tool that we have no immediate plans to tap it just yet.

Dan Donlan, Ladenburg.

Thank you. Just going to page 29 of the supplemental, which seems to be new disclosure, so thanks very much for including that. We're just kind of curious on the new leases, what that rent looks like relative to what it was before? You provided that on the renewals, but you don't provide them on the new leases. Just kind of curious, how that looks and I realize it may be that the space had been vacant for a while, but just any kind of clarity, that you could provide particularly on the office side, given how large of a lease that was, would be helpful?

Yes. I don't have too specific information right at my fingertips on that, but typically earlier in my remarks when I was talking about this metric, this number tends to be down 10% to 15% relative to what might have been in place before. And I hope that, that helps, that sort of when I was referring to our historical average and that I think is the case with that information.

Chris Lucas, Capital One Securities.

Operator had a pretty quick trigger before. On the strategic review Trevor, I guess the overriding question I have, and again if you've covered this I apologize, but what's driving this review process? What is sort of the number 1 consideration that you're looking at as part of the reasons for even evaluating it at this point?

Well I think that, we've said at our Investor Day, on earlier calls that we are trying to unlock shareholder value. That's a broad term and it can include a lot of different things. And I think on this call, what we're saying is that we've begun to narrow our focus somewhat and that we've been encouraged by what we've seen when we look at the possibility of separating the companies. But really it's all about, how you generate the most growth, that's really what unlocking shareholder value means. And so, when I spoke earlier about the specific attractive growth characteristics of our main operating platforms, that's what I was referring to. So that our review has focused on, what each of those operating platforms would look like as an independent entity, how do they affect one another, to refer back to Nick Joseph's question, how they relate to each other, how they could be managed by themselves for maximum growth opportunities and we feel very good that that each of them does have those capabilities. So I'd say that that's what our analysis has been driven by, really more in the affirmative, would you be creating shareholder value by unlocking growth potential.

And then as it relates to just the different combinations and thoughts that go on, any thought as to whether this would be one of those processes that was announced so that the transactions were concurrent or that they would be sequenced or how are you guys thinking about that?

Well, it's precisely that kind of permutations that I really can't comment on at this time, sorry, Chris.

That's all right. Great. I appreciate it. Thank you very much.

Nick Joseph, Citi.

Hey Trevor, it's Michael Bilerman. Good morning. I just wanted to come back to the strategic process and you talked to Dan's question about unlocking the growth potential of the various entities as the reason for the value creation aspect of it. And I'm curious as you think about WPC and one of the consistent things that you've heard as your tenure CEO has been the perceived and to some extent potentially real conflicts of interest that come from managing both the non-traded REITs that you're active in the same business that you are in at the Mothership, and the potential for the integration of those non-traded REITs into WPC and being on both sides of the transaction.

If you think about that aspect of the Company and the feedback that you've received and you think about that potentially of being a value inhibitor to WPC, I guess, I'm looking from you about a more definitive statement that as you think about potentially three different companies that the relationship between them, there actually won't be. There won't be an externally managed REIT which doesn't really do a lot from a value perspective as we've seen from others, that there won't be any long-term interactions but that you'd create three and grant that there will be G&A, dis-synergies, but the question is, will you pick up enough value from having three independently internally managed run companies? And can you comment a little bit about that?

To the extent that I can, subject to the limits that I've already mentioned. As I said and in answer to I think it was Nick's question. We do believe that each of the potential entities can compete quite effectively and grow effectively without having a significant relationship with any of the others. But -- and also that we're well aware of other companies and different approaches to this and we're studying that very carefully. But for me to commit to anything beyond that, I think at this stage would be premature and I certainly understand why investors want to know that and I think that, when we're ready to talk in much more detail about what these entities would really in fact look like, all those questions will be answered.

But we're aware of different objections to different structures and what people like about some and dislike about others and all that being factored in. What we're really trying to do here, Michael is to have a high quality process and take a thoughtful and methodical approach, we're carefully exploring all aspects of the separation and that would include the questions that they've just raised.

Right. But I guess, what I had heard was that this is more about growth than trying to overcome any sort of conflict perceived and/or real that perhaps and maybe causing a discount on your stock. So, I guess if I would have heard from you that, look we continually hear that the non-traded REIT business for WPC, even though we've been there for 40 years and it's something that we're really good at and we have a very high standards. But we know from our investor base, it's an issue for people to be on both sides of the transaction in similar businesses and we would expect that if WPC were an externally managed REIT and that this net lease business by WPC advisor that that would be an issue. I guess, what I'm looking for is if that's really how you're thinking about it or you just thinking, if I have three separate entities I can grow faster?

Well, I understand specifically what you'd like me to say. And again, there I have very valid reasons for not going into more detail. But I can comment a little bit, with respect to this question of conflicts of interest and clearly the feedback that we've received from external stakeholders, which would include you and other analysts, has influenced our thinking and it caused us to refine our thinking.

I would note that, earlier we had announced a pivot according to which first look for all net lease transactions would be given the W. P. Carey, when CPA 18 was fully invested, we do think that we're slightly ahead of schedule on that, so that by the first quarter, we do believe CPA 18 will be fully invested and that we'll be able to fully execute the pivot that we talked about. And then all our new products in the investment management platform or at least our current ones are a lodging offering and a BDC offering. So that, when I speak about growth of the individual platforms, I should have said that, implicit in that is that by freeing them from one another, you would be reducing the potential for perception of conflict, because I think that has weighed on our -- in our considerations, our deliberations.

(Operator Instructions)

Okay. Looks like we have no more questions today. Thanks everybody for participating. That concludes today's call. You may now disconnect. Thank you.