Financial Data and Key Metrics Changes - AFFO per share for Q2 2024 was reported at 1.17,anincreasefromthefirstquarter,withexpectationsforfurtherincreasesinthesecondhalfoftheyearasnewinvestmentsaredeployed[3][12]−Dispositionsinthefirsthalfoftheyeartotaledjustover1 billion, with 152 million completed in Q2 [12][18] - G&A expenses decreased to 24.2 million in Q2, down 3.7 million from Q1, leading to a revised full-year G&A expense expectation of 98 million to 101million[17][18]BusinessLineDataandKeyMetricsChanges−Themajorityofinvestmentsinthefirsthalfoftheyearwereinwarehouseandindustrialproperties,withatotalinvestmentof641 million at a weighted average cash cap rate of 7.7% and an average yield of just over 9% [7][8] - Same-store rent growth for Q2 was 2.9% year-over-year, with expectations for full-year growth averaging around 2.8% [13][18] - Operating self-storage NOI declined 4.2% year-over-year, with a full-year decline expected between 5% and 6% [17][18] Market Data and Key Metrics Changes - The investment environment has become muted, with sellers waiting for potential rate cuts before bringing new sale leasebacks to market [6][10] - Competition for deals has increased, particularly in the U.S., leading to downward pressure on cap rates [29][30] - The company has a pipeline of over 200millionininvestments,withexpectationsforhalftoclosewithinthenext30to60days[9][10]CompanyStrategyandDevelopmentDirection−Thecompanyisshiftingtoanoffensivestrategytofindnewdealsaftercompletingsignificantdispositionsandbondrepayments[26][27]−Thefocusremainsondeployingliquidityintonewinvestments,withastrongemphasisonmaintainingawell−ladderedseriesofmaturities[21][22]−Thecompanyisexploringoptionsforitsself−storageportfolio,consideringpotentialsalesorconversionstonetleaseproperties[56][57]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedcautiousoptimismaboutapotentialpickupindealactivity,particularlyiftheFedlowersratesinthethirdquarter[10][11]−Thecompanyisloweringitsfull−yearinvestmentvolumeguidancetobetween1.25 billion and 1.75billionduetothecurrentmarketconditions[18][19]−Rentcollectionsremainhighatjustover993.2 billion, including a virtually undrawn 2billionrevolver[5][21]−TheequitystakeinLineage,valuedatjustunder400 million, is expected to provide a unique source of capital in the future [5][19] - Non-operating income for Q2 totaled 9.2million,contributingtoatotalof24.7 million for the first half of the year [15][16] Q&A Session Summary Question: Factors behind two deals falling out of the pipeline - The two deals, totaling over $300 million, fell out due to critical issues uncovered during diligence that could not be resolved in time, which is considered unusual for deals at that stage [24][25] Question: Shift in strategy towards finding deals - The company is now on the offense, looking for new opportunities after completing significant strategic actions, including the office spin and bond repayments [26][27] Question: Competition and cap rates in the U.S. and Europe - Competition has increased, particularly in the U.S., leading to downward pressure on cap rates, with expectations for more competition as the market stabilizes [29][30] Question: Performance of the watch list tenants - The watch list remains around 5% of ABR, primarily consisting of Hellweg and Hearthside, which are top 25 tenants [34] Question: Guidance on self-storage portfolio performance - The self-storage portfolio is expected to decline by 5% to 6% year-over-year, reflecting ongoing challenges in the industry [17][18]
W. P. Carey(WPC)2024-07-31 19:01