Hello and welcome to W. P. Carey’s Second Quarter 2020 Earnings Conference Call. My name is Victor, and I will be your operator today. All lines have been placed on mute to prevent any background noise. Please note that today’s event is being recorded. After today’s prepared remarks, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I will now turn the program over to Peter Sands, Director of Institutional Relations. Mr. Sands, please go ahead.

Good morning, everyone. Thank you for joining us today for our 2020 second 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’ll be archived for approximately one year, and where you can also find copies of our investor presentations and other related materials. And with that, I’ll hand the call over to our Chief Executive Officer, Jason Fox.

Thank you, Peter and good morning, everyone. I hope everyone is remaining safe and well as we continue to face the challenges of COVID-19. Today, I’ll focus my remarks on several important topics; a recent portfolio performance into the pandemic, a recent investment activity, what we’re seeing in the transaction environment and how we position the company for growth while maintaining strong performance. And after that our CFO, Toni Sanzone will review our second quarter results which reflects our strong collections and our continued move out of the managed funds business. As well as touching upon our recent leasing activity and some of the specifics on our balance sheet and liquidity positions. We are joined today by John Park, our President and Brooks Gordon, our Head of Asset Management who are available to take questions when we get to that part of the call. For 2020 second quarter or the impact to the pandemic over the entire period which has been a stress test on net lease portfolios. I’m pleased to say our collections remains consistently strong throughout the quarter, making it one of the best in the net lease peer group as well as being among the strongest collections in the broader REIT sector, a reflection of several key elements of our approach. When owning single-tenant assets on a very long-term leases often for over 20 years unexpected events or significant market changes will occur. Our diversified approach in shares that issues within a particular asset type or industry will not have an outsized impact on our performance. Also, our disciplined investment process has always been focused on deep credit underwriting and mission critical assets. We’ve made important decisions over the past five decades to focus on companies, industries and real estate that we believe can withstand dislocations in…

Good morning, everyone. I’ll start with the review of our second quarter results and portfolio activity and in the absence of formal guidance. I’ll provide some insights on areas where we have better visibility on our outlook for the remainder of the year. We’ve reported total AFFO of $14 per diluted share for the second quarter with 97% coming from our real estate segment. Comparisons to the prior year period continue to reflect the ongoing roll off of investment management fee streams given the substantial progress we’ve made towards exiting that business. Within our real estate segment. Second quarter lease revenues increased compared to the prior year period benefitting from net acquisition activity and contractual rent increases as well as the transaction we entered into last year, to convert self-storage assets to net leases. These increases more than offset the impact of lease restructuring and uncollected rents during the second quarter. Lease termination and other income declined to $1.9 million in the second quarter down significantly from both the prior quarter and the prior year resulting from higher than usual lease related settlements in the prior period. While this line item can fluctuate from quarter-to-quarter. We currently expect to see a further decrease over the back half of the year. As Jason mentioned, to-date our portfolio has remained resilient throughout the pandemic collecting 96% of total rent due during the second quarter and that continues to trend positively with 98% collected for July. In line with the accounting guidance and a conservative analysis of tenant rent collectability. Our second quarter lease revenue and AFFO include only about $500,000 of uncollected rent which we expect to fully collect in 2020 under short-term deferral agreements. We’ve not recognized in second quarter AFFO $8.5 million of contractual rental income owed for the period.…

[Operator Instructions] our first question comes from Emmanuel Korchman with Citi. Please proceed with your question.

Jason, maybe to start with you, as you look at the back half of the year. I think you talked about your motivation, your ability to increase volumes. What asset types are you targeting especially give your conversation about the fact that industrials and such high demand and maybe bigger risk to sort of the other net lease factors?

Yes, I mean you’re right. Our portfolio has held up well. Our balance sheet is in great shape, so we do expect to get back and offense in the second half of the year. The pipeline is building nicely. We mentioned we’ve done about $400 million of deals mostly these capital improvement projects that have delivered this year with another call 40 to go for the year. Going forward, I think that the pipeline is a little bit more weighted towards the US right now. Europe is showing some - a more clear signs of recovery. So I think we would expect that to pick up as the year goes forward. We are more focused on industrial despite the fact that those are receiving more capital flows and probably more compression. In fact, I think the highest quality of the industrial assets are probably at this point pricing at tighter levels than they were pre-COVID. So that just shows some demand in that space especially high-quality tenants as well as despite the quality. So we’re going to be more focused on sale leasebacks. That’s where we can acquire industrial assets. I think the complexities involved with sourcing and structuring sale lease backs will help us generate some incremental yield. It also helps us better underwrite these deals as well, sales lease backs tend to get more and better access to senior management since the company itself is your counter party in a deal. So that’s our preference especially in times of uncertainty right now and I think you’ll see some more of that. Now other assets classes like office [ph] and retail. I think we’ll be more opportunistic there and probably a little bit more conservative in our underwriting especially with lease ends scenarios as we know those tend not to be as critical. But we do believe in diversification. So I think you’ll see us continued to look at across the asset class metric.

Great and then, Toni one for you just. As you sat there in June saying, we’d like to improve our capital position. How do we do that? What made you do it a larger forward rather than doing either ATM at the time and getting $100 million that you guys used in the quarter and then sort of assuming or hoping that the market would recover as you need more capital versus doing that forward equity deal.

Manny, I think the equity forward gives us a few advantages. It locks in our cost of equity capital and we can fund deals accretively at that level and also gives us some flexibility to match fund our capital needs and our investment opportunity is really kind of depending on the timing when they flew in over the course of the year. So we did take the opportunity to draw down $100 million from that forward to fund the completion of two of our projects towards the end of June.

Thank you.

Our next question comes from Frank Lee with BMO. Please proceed with your question.

Jason in the past you talked about potentially moving down the risk curb in acquiring lower cap rate assets, given your cost of capital. Just want to get your current thoughts on this and if this scenario is still in the table?

Yes certainly, I mean given our diversification we can really consider a wide range of asset types, geographies for that matter and also that kind of plays into a fairly wide range in cap rates at the same time. I think that we still believe, we can do creative investments in the mid-to-low five’s. This would be for higher quality in most likely logistics properties like the Fresenius deal that we just announced or the Stanley Black & Decker deal that we did at the end of last year. So I think there’s still a certainly an interest, maybe a bias to do some more of those higher quality deals, even if it’s tighter spreads again sale lease backs allows to get in those. But we think it’s incrementally higher yields. But we’re still looking at deals in the mid-sixs and through sevens kind of these maybe more of our typical sale lease backs where again we can drive some incremental yield through sourcing and structuring and maybe just focus on [indiscernible] credits as well. We can use our underwriting expertise to help to differentiate sales and make that certain credits in tenants.

Okay and then want to follow-up on your comment on focusing on industrial acquisitions. And you talked about the higher increase in competition you’re seeing for this asset class? How does this compare with competition you’re seeing prior to COVID and are you seeing any changes to the buyer pool?

Pre-COVID I think industry was still the most sought-after asset class and had experienced the most cap rated compression. So that really hasn’t changed. In terms of a buyer pool, I think some of it depends on US versus Europe. I think that there are some have and have not’s, lot of the industrial REITs obviously have done quite well in terms of collections like we have despite being diversified. So we tend not to compete against the industrial REITs. They’re more focused on in many cases multi-tenant industrial assets. In other cases, if they’re single tenant. They tend to be short-term leases generally so they can have a market-to-market opportunities. We still prefer to do the longer-term net leases. It fits our model of stability and predictability in our cash flows. So not a lot of change on who those players are given that asset class is generally held up and fairly well.

Thank you. [Operator Instructions] our next question comes from Emmanuel Korchman with Citi. Please proceed with your question.

Just a quick follow-up to sort of the questions discussed. A lot of companies have talked about sort of more safety stock and building out there the warehousing part of what they do. Does that change your approach or your underwriting or your conversations with any of these companies where previously you hadn’t really looked at those locations as maybe as mission critical but that backup inventory stock seems to at least and those prices have become critical?

I think that’s a good point. I think there’s also some conversations happening about on shoring of manufacturing as well for some of those same reasons, to have more control over the supply chain. And I think we’ll be a beneficiary of that. Anywhere that there is a change in demand and we own real estate, we’re going to be a beneficiary whether its’ warehousing for some backup supply or it’s on shoring in the manufacturing space. I think that we can see some tailwinds certainly when it comes to releasing. But at the same time our model is long-term net leases so they’re stable. So perhaps if rents continue to grow because of this increased demand. It’s also going to provide further downside protection upon these expiration.

Thanks Jason.

Thank you. Our next question comes from Spenser Allaway with Green Street Advisors. Please proceed with your question.

Have you guys talked about deal flow picking up subsequent the quarter end? Can you just provide a little bit more color on how deal volume has trended between the US and Europe?

Yes, sure. Yes, we’ve seen certainly a pick up over the last I would say four to six weeks in both the US and Europe. But currently deal activity is more weighted towards the US. But our pipeline is right now perhaps counterintuitive since Europe has been a little ahead of the US early infections and now perhaps clear signs of earlier recoveries and reopening. But it’s also the slow part of year for Europe as well where activity tends to slow down considerably in July and August. So while we’re seeing a little bit more activity in the US right now. I think once we hit September in the back half, back quarter of the year. I think we’ll see some interesting opportunities in Europe and that will be a positive for us. Obviously, it helps widen our funnel. But there’s also generally less competition in Europe for the type of assets that we buy and we’re also still able to generate wider spreads in Europe. So more US now, but I think we’ll see that moderate some as we get to the end of the year and Europe reopens.

Okay and then, I understand there’s obviously a lot of unknowns still regarding the ongoing pandemic. But just curious if you guys kind of approach closer to you’re at 98% rent collection for July. You’re fast approaching it looks to be return to normal in terms of rent collection. What you guys need to see to get comfortable perhaps [indiscernible] guidance?

Yes and it’s a good question. It’s something that we think about because our rent collections have been strong. We performed very well thus far. But we just have the sense that there’s a lot of uncertainty out there. Companies going back to work, perhaps school reopening across the country. It’s just hard to predict, what’s going to happen. So I think we just want to see some broader stability before we kind of change our view on guidance. It just seems pretty mature right now to reinstate anything and seem more to come on the next earnings call. We’ll give an update at that point in time.

Okay and maybe just one more, if I may. Again just with rent collection being so high and I’m just curious, how are conversations going with tenants. What is general sentiment? Are tenants comfortable with liquid positions? Just curious if you still have any conversation around potential for deferrals or anything like that, there’s a need for that on behalf of your tenants.

Yes, sure. Brooks, you want to handle that?

Sure. Credit quality as you said it’s held up quite well in the face of COVID. There’s a lot of things causing that one of which is that, our tenants are generally large in size, about 97% have revenues in excess of $100 million and what that’s allowed them to do, is have a fair bit more breathing room and access to capital. So I would say the conversation with tenants have shrunk in number substantially. We have a few tenants which we would characterize as requesting relief and virtually all of that is really just switching frequency from quarterly to monthly payments and all of them are current and we expect them to remain so, so that’s really a cash flow management tool and other than that, those conversations have really dissipated, so little bit of cash flow management conversations with tenants. But the focus is really as we said in the fitness clubs and theatres and restaurants categories which is pretty small for us.

Okay, thank you.

Thank you. At this time, I’m not showing any further questions. I’ll now hand the call back over to Mr. Sands.

All right. Thank you everyone for your interest in W. P. Carey. If you have additional questions please call Investor Relations directly on 212-492-1110. And that concludes today’s call. You may now disconnect.