W. P. Carey, Inc. (WPC) CEO Jason Fox Presents at Citi Virtual Global Property CEO Conference - (Transcript)

W. P. Carey, Inc. (NYSE:WPC) Citi Virtual Global Property CEO Conference March 8, 2021 10:30 AM ET

Company Participants

Jason Fox - Chief Executive Officer

Jeremiah Gregory - Head of Capital Markets

Conference Call Participants

Manny Korchman - Citi Research

Manny Korchman

Good morning, everyone and welcome to Citi’s 2021 Virtual Global Property CEO Conference. I am Manny Korchman with Citi Research and we are pleased to have with us, W. P. Carey, Inc. CEO, Jason Fox. This session is for Citian clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast.

For those joining us here today, if you’d like to ask management any questions, simply type them into the question box on the screen. They’ll come to me and I will do my best to ask them during the session. Jason, I’ll turn it over to you to introduce the company and your management team. And as you sort of conclude that, if you could answer the following question for us, that’ll be helpful.

Coming out of the pandemic, if an investor were to choose only one real estate stock to own, what are three reasons they should choose W. P. Carey?

Jason Fox

Sure. Thank you, Manny. Thanks for having us and with me that’ll speak some today is Jeremiah Gregory, our Head of Capital Markets. I think that most people are aware of who we are. We are the one of the largest net lease REITs in the index with around $18 billion total enterprise value and we are known for diversification across geographies and asset types and we are currently focused on growth.

So, let me start with your question. So, I think the three reasons are, number one, we view our stock as currently undervalued on an AFFO multiple basis. We are currently trading maybe two or three turns lower than much demanded lease peer groups and lower than where we were – where we traded pre-pandemic.

I mean, we believe investors are both under appreciating the value of our stable income throughout the pandemic and the benefits of diversification, or maybe more importantly are underestimating our ability to resume external growth.

We talk about this before deal volume, rebound of trust in the fourth quarter and we’ve continued to show strong momentum into 2021 as we’ve guided couple of weeks back in earnings of $1 billion to $1.5 billion for this year.

That’s coming off of a fourth quarter as we get around $300 million of investments and we’ve also announced about $200 million of deals so far in 2021. There is another $100 million of capital projects that we’ll deliver throughout the year and then I’ve talked on our earnings call a few weeks back about our near-term pipeline, strong as it has been in, I would say, five or six years, years in which we were doing $1.5 billion to $2 billion in net lease transactions across the platform.

So we are feeling quite good about that. So, that’s number one. I think number two is our sound balance sheet management, something what we are constantly focused on maintaining using a strong and flexible access to multiple forms of capital. And really, when you think about where we were positioned heading into the pandemic, we had lots of liquidity having just recaptured credit facility, very limited debt maturities and that allowed us to be patient about accessing the capital markets.

It also assured that we were very well positioned when market activity kind of resumed and it led us to having a very strong fourth quarter. So, now in 2021, over $2 billion of total liquidity, coupled with a very strong pipelines and we are feeling quite good about – about where we sit right now.

And then number three, and we’ve mentioned this a number of times, we’ve proven that how we invest provides greater downside protection than our peers and I think that, if anything the pandemic has been a real stress test on REITs and that really has proven the benefits of our investment approach which is focused on, deep credit underwriting, large public companies as our tenants, and a diversified portfolio that’s really always been underway to retail.

Our collections have consistently been in the high 90% range for the second half of 2020 and now in 2021. So, I think that’s another reason. But the – really the biggest opportunity I think is, now, our ability to drive future growth through the momentum that we are in right now and seeing external deal volume.

Manny Korchman

Great. There is a lot of topics here to jump into there. I guess, maybe starting from diversification, which you brought up a couple times. I think that the one of the more unique things is your diversification globally. If you were to go in certain in your net lease REIT today, would you do one of that was domestically focused or global in the way that you are expecting now?

Jason Fox

No, I mean, we would continue with – and actually global model, you say global model. It’s really focused on two main geographies where we have strong presence in the U.S. obviously has got two-thirds of our portfolio. And then Europe, we’ve been investing in Europe since 1998. We have around 40 – 45 people based in Amsterdam to run our operations.

We have a team of seven or eight people based in London that run the investment side. And really diversification, whether it’s across property types, or to your question across geographies, there is really two components here. Number one, it does provide downside protection. It’s not any overexposure to one aspect of our portfolio.

But maybe, more importantly, where we sit right now, it does provide more opportunities to growth. We can allocate capital where we see the best opportunities in any given point in time. And in particular in Europe, there is much less competition, especially, as a net lease REIT.

We are the – just have to a public net lease REIT in Europe. We are the largest owner of net lease European assets and there are no publicly traded companies that focus on net lease. Very little competition. Wider spreads. So, yes, we would continue with the same model being diversified geographically across the U.S. and Mainland, Europe and the UK.

Manny Korchman

In other meetings, especially for companies that are transaction heavy, we’ve talked about the pause and sort of coming out of that pause what that’s going to look like? So I’d love your views on how you think when things unpause the markets look both from a buyer and seller perspective and what that means for you?

Jason Fox

Well, I mean, when you say, when things do unpause, I mean, I think we’ve seen that. We’ve seen momentum pick up. I think deal volume hasn’t freezed. I think in our world where we focus very much on sale leasebacks where we can dictate structure and terms, including rent bumps, as well as generate incremental yields, we’ve seen that pick up.

It probably started end of December and it’s really accelerated into 2021. I think there is a couple of reasons for that. I think there is some pent-up demand for transactions, but maybe even more so, I think companies are recognizing that the optimal balance sheet does not include having capital tied up in their real estate.

So, more and more companies are, maybe for a lack of better word, outsourcing the ownership of their real estate to someone like us who has a cost of capital set up.

So, the unpause is happening. I think that we are well set up before as I mentioned, given liquidity, I think our cost of capital is in a strong position. Any multiple on the equity side we’ve lost and it’s really monop and substantial has more than been made up for our cost of debt. So we are in a good position and I think we are excited for the opportunities to come.

Manny Korchman

And what about the competitive side of that others that have capital, maybe cost of capital that’s similar to you or just north of yours, south of yours doesn’t really matter all that much. But they are targeting those same markets and same assets because there is a lot of cash in the system.

Jason Fox

Yes.

Manny Korchman

Is any of that… go ahead.

Jason Fox

Yes. No. I think that’s right. I mean, there is no secret that investors are seeking income right now and stability given the volatile markets. So, I think there is a lot of competition. I mentioned earlier, Europe, we think there is less.

I think a lot of the competition in the U.S. is focused on retail. That’s the biggest component of net lease. It’s also, what we view as the commodity segment where it’s easier to transact and there is more – there is more trading of assets, there might be more supply.

I think it’s a unique area and there is others who do this. I am not saying we are the only ones to do it. But we do have an advantage in the sale leaseback market given our long execution history and our ability to more complex transactions. So, I think that we’ll continue and I think we’ll continue to generate some incremental yield perhaps relative to the market pricing that we see out there.

Manny Korchman

And I guess, how deep is that more of others not being in Europe currently. So, if you take your largest U.S. competitor and you say, flights are going to start to London and Paris soon. They are going to send five of their best guys over there. They are going to tour some assets and they can cut a check, what am I missing? Why can’t base sort of become competitive quickly?

Jason Fox

Yes. I mean, you can do that. I think you are going to make mistakes. We were doing this now for over 20 years, close to 25 years now, given our first deal was in 1998 and we’ve made a lot of those mistakes early. There is a lot to learn over there.

There is a lot of different jurisdictions to understand the regulatory and legal environments, but maybe more importantly is the relationship building, to build a source of deals, especially ones that are either limited to be marketed or off market entirely, you need to have an established reputation there and that doesn’t happen overnight and it certainly doesn’t happen if you were to send five couple of people from New York and drop off some money.

There is execution risk that I think a lot of people are not willing to see and that’s really where we excel and differentiate ourselves.

Manny Korchman

And if we go back to your comment, I think you said that $1.5 billion, $2 billion sort of a year type of transaction volume is not unattainable how big is your sort of pipeline to get down to completing that level of transactions right now?

Jason Fox

Yes. So, I mean, we did mention on guidance on our earnings call, the latest guidance was $1 billion to $1.5 billion. We feel clearly good about that range. That’s not a target. That’s an assumption to make at the beginning of the year. It’s hard to really predict a full year given that we only have visibility in the deals if it close probably over the next three months.

But we see every deal opportunity that there is, we’ve been doing this for a long time and are one of the largest in this space. So, we’ll have the deal flow.

From a pipeline standpoint, from a funnel standpoint, I mean, we see billions and billions of transactions in theory. Maybe it’s – put a round number on it, maybe it’s $10 billion of deals. So, I think that there is enough opportunity out there even given the competitive environment we are in to be able to do that deal flow.

We also have a real installed base of tenants which really drive follow-on deals. We recently announced the Eroski transaction that we did. That was the third of four sale leaseback we did with them. They are now a top-10 tenant. One of the largest groceries in Spain really core locations, infill, strong barriers to entry. So, I think that our installed base really gives us a big advantage to add deal volume relative to our solid peers.

Manny Korchman

One other thing that we spend quite a bit of time talking about on the public calls is, your involvement in sort of the industrial space, both in the U.S., maybe to a lesser extent in Europe. That’s been a market that’s been on fire.

Everyone has realized that if retail is bad and hotels are bad and everything else is bad then industrial is good and office is bad, what else is bad? Can we make a bad list? But industrial seems to be on the good list, no matter how people are looking at it. Yes, on the last call, you had a lot of confidence in being able to find deals that both underwrite well and have returns that are appropriate. What’s the advantage there? How are you getting those deals?

Jason Fox

Yes. I mean, I think there is a couple things. I think number one and we’ve exercised this a lot. It’s how we source these transactions. Many of them, most of them are sourced through sale leasebacks, which is going to provide an advantage again. We are not the only ones that can do sale leasebacks, but we certainly are one that has a very long history of good execution and that helps.

I mentioned a lot of the internally sourced deals, expansions, redevelopments, built-to-suit with the existing tenants, that makes a big difference. But I think the – one of the misperceptions maybe that all industrial assets are trading in the threes and four cap rates and how are we competing with Prologis, now to spike them and we are really not.

Our model is not, but I think a lot of the models are to buy shorter term leases with rollover and exposure to mark-to-market opportunities where they can really drive growth where those three caps become five cap, cap you see that bump in resetting the market. Our model is a little different. We like predictability. Our investors like predictability.

So we are able to lock in longer term cash flows, perhaps we are not getting that near-term mark-to-market opportunity and instead the trade office, we are buying these assets for 5s or 5.5 cap rates, which is a very interesting yield and it gives spreads to our cost of capital. So I think that’s probably the primary driver here of what differentiates our model.

I think the second component is, industrial is kind of a broad description of the asset class. We segmented into logistics, as well as light manufacturing, and we are sourcing a lot of our sale leasebacks in the light manufacturing space and maybe even some sub asset classes like suit production which we feel have very strong dynamics given the non-discretionary products they are generating, given the credits that we are doing as well as the length of lease trends.

These typically are 20 to 25 years and so there is some niches within the industrial that we’ve carved out and done quite well. And at this point, industrial is almost 50% of our portfolio. So, we’ve shown that we can be successful on that and more and more industrial assets to growing portfolio.

Manny Korchman

Right. Do changing demographics or demographic shifts within the U.S. changed the way you are looking at potential deals or exposure at all?

Jason Fox

In mix between demographics what would you mean by that?

Manny Korchman

Every other meeting I am going to have here talks about people leaving the closer markets and going more, whether it’d be suburban or Sun Belt. We are going to talk about and industrial meetings we can talk about onshoring, all of those types of trends together is sort of what I meant by demographics.

Jason Fox

Yes. I think they are less impactful for someone like us. I mean, we are doing a lot of logistics and manufacturing which is going to shift towards kind of the, maybe it’s the southeast and the Sun Belt and we are seeing more and more of that moving from the Rust Belt down south. So, there is probably some impact that we are following our tenants and where their capital needs are and where they are growing their own businesses.

But unlike, say, in office REITs or multi-family, it is probably the less dynamics that are being impacted by kind of the current shifts in where people want to live and where the populations are changing.

Manny Korchman

People open up your presentation or supplemental they notice that there is a slice of the pie that’s office and that will scare some people off if they dig into it. A lot of that office is, is what the government office in Spain and so and that has impacted as some of the trends that we see, is that a correct assumption in my part that work from home and people moving out of the dense urban centers is not going to impact your office exposure?

Jason Fox

Yes. I think that is, Jeremiah, why don’t you jump in? And you’ve talked about this before in the past and you have a good perspective on our portfolio.

Jeremiah Gregory

Sure. Yes, I mean, Manny, I’ll start with the point that you made, which is, our largest office tenant, which is probably in and around 2% of our total ABR and I mean, it’s probably we are emphasizing that’s probably around 10% of our total office portfolio is Spanish government, that’s an investment-grade rated government credit with, I think close to 15 years left on a lease.

That is not something that we think is going to be impacted by any of the near-term trends. The changes to offices that I think everyone is thinking about and that we are obviously paying attention to, and I think maybe just extending that point a bit, our office portfolio as a whole is the highest credit rated part of our portfolio.

Like much of the rest of our portfolio it has a longer weighted average lease term. And so, while we are, I think tracking whatever the changes in office are, I don’t think it’s something where we feel that it’s going to have kind of the same kind of near-term impact to its duration that some of the large multi-tenant office REITs are probably dealing with where they have tenants rolling over every day, always kind of in the market dealing with the REIT leasing.

I think for us, it’s going to be a much more gradual shift, whatever the broader market forces are that’s going to have – it’s going to impact us over a five or ten year period, not over a six month period or 12 month period.

And then, I just think, bigger picture, Spanish government in fact isn’t our own REIT. Government credit in Europe, several of our largest office exposures we have, in the UK, Tax Authority and Manchester England, we have a French police station in Paris, these are some of our largest European office exposures.

And in the U.S., it’s probably more they a mix of kind of suburban or certainly drive-through locations, not CBD, downtown, served by public transit locations. Again, it’s probably we are all going to be watching to see what the overall shifts are in the market, but to the extent, one of the forces at work is, people maybe migrating more after the suburbs or those types of locations or smaller buildings of the Sun Belt, that probably has more of a neutral effect on us or even perhaps in some cases, a positive effect on our portfolio.

So, I think that, overall office is, it has become and it will probably continue to become a smaller and smaller part of our overall portfolio. That’s primarily because we are overweighting the new investments in industrial and at this time certain types of retail in Europe. There is no real new investments that you’ve seen us make substantial investments in office over the last few years.

I think where it’s going to be appropriate we’ve been pruning that portfolio, selling off certain pieces of it. So, we’ve already brought it down from where it was perhaps in the low 30s to close to 20% of our annual rent.

And I think you’ll see that probably continuing to decline over time. That’s going to be the trend. But overall, I don’t think we have sort of the near-term risk or a challenge that perhaps other office companies may have when they are dealing with how those forces might impact them in the very near term.

Manny Korchman

Jeremiah, is there a – sort of a pricing advantage or discrepancy if you were to go and sell some of those larger, especially government occupied European office assets that at least as a U.S. based public company don’t give you much credit and then you might say, they’ve good cash flow, they’ve good credit and so we like them as part of our portfolio construction, but are they better served as a use of capital to go other places?

Jeremiah Gregory

And I think, Jason, I’ll let you jump in and I’ll just make one quick comment which is, I think in any given point in time we have many assets in our portfolio that we could sell for a tight cap rate, certainly, sell for a cap rate inside of where we can potentially reinvest, but – and, I mean, frankly, that could be true of other net lease REITs as well.

I think as a net lease REIT, the mandate I think from investors what we are looking to do is, continue to grow and fund those investments with our – with new capital – with – that’s sort of the most accretive thing we can do is, sell equity, raise bonds, buy new investments and so there is always that opportunity where we can look in our portfolio and find assets that we can sell at a high cap rate.

And I guess, that just gives us I think more flexibility and certainly optionality to keep separate cost of capital and they were to become dislocated, I guess, those are opportunities for us. But just from a balance sheet perspective, from a cost of capital perspective, I would say, our best – our best approach right now is to continue to grow externally and fund that with new capital which would be very accretive capital. Jason, I don’t know, if you would add to that?

Jason Fox

I think you touched on and on. I mean, the broader message you also touched on where obviously it has been shrinking and we’ll continue to shrink over time given where we are investing in and probably where we are pruning our portfolio as well.

Manny Korchman

If we think about some of the whether it be sale leaseback or sort of just new leasing that you are doing, has there been any changes in tenant expectations or tenant desires to those leases, more flexibility, shorter terms, longer terms, any of that kind of stuff that’s changed since we’re last talking a year ago or 8 months ago?

Jason Fox

Well, I mean, we manage our lease expirations highly proactively. So, we just haven’t had, meaning one of the benefits of that is, we just haven’t had a lot of lease maturities or rollover over the past year. I mean, I think it’s been less than 2%. And generally speaking, we are owning critical operating real estates. So, I don’t think the pandemic really has changed their approach.

I think we are an office REIT and we had a lot of office exposure, which is not the time to be having the deals reach maturities. And then on the new deal side, in terms of structuring, again, we are doing mainly sale leasebacks and we are focusing on critical operating assets.

And to optimize pricing in many cases they are longer lease terms and tenant are more than happy to trade that for what might be a little bit more aggressive cap rate. So, we are not seeing a lot of pushback there. Our weighted average lease terms for our deals in 2020 I think was, right around maybe slightly over 20 years. And we are seeing similar trends in our pipeline this year.

Manny Korchman

Great. If we turn to ESG, what are your top three priorities to improve your ESG score over the course of the next year?

Jason Fox

Yes. Sure. I think, first of all, we are very focused and try not to excel in all three of the ESG categories. But given that we are already quite strong in governance and social standards for that matter, I think where we can make the most progress on our score over the next year is going to be focused on environmental.

It’s probably important to start by saying that the work that we are doing with our tenants, it’s not just about achieving a score there. We are still doing our best to be good corporate citizens and that’s a primary driver here. But there is a real business case to many of or maybe even most of our initiatives on the ESG side.

So, I think it’s also important to note, we are only one of two REITs in our immediate net lease peer group that currently issues an annual ESG report. So we’ve already are showing ourselves as the leader in this space. And so three areas; I think the first would be information gather. As a net lease REIT, we don’t operate most of our properties.

So, we don’t have easy access to, for instance utility data. So I think that’s key. We want to do that really for two reasons. One is to benchmark where we are today. So we can make and measure progress as we go forward. And then two, we want to start reporting to the key environmental agencies such as GRESB and CDP.

We currently report to ISS and MSCI, but we want to continue to kind of push the needle on all of this. And that’s going to require a lot of work with our tenants. We are going to be employing technology. I think that we are seeing much more reception in Europe, which is not surprising and we have done a lot of tenant outreach on how to best club that data and I think we are going to have some good success there.

I think number two, we do want to focus on reducing the environment tax of our portfolio and we can do that by buying or modifying our buildings into more green – to more of a green portfolio. So, new investments, I would say this is a primary driver of the deals we are doing, but it certainly is a secondary driver.

Example is a $75 million build-to-suit that we recently completed in San Antonio food production facility leased to Cuisine Solutions. I was told that was awarded to 2021 Sustainable Plan of the Year by Food Engineering Magazine. So we are doing some good things there.

And then, prior this within our existing portfolio we just completed 1 million square foot, a solar roof top installation on a logistics building in the Port of Rotterdam and told that’s the – it’s the largest or one of the largest in Europe based on generation capacity.

And then lastly, we want to continue to be forward thinking on green financing opportunities and engaging with green investors. I mean, to that end, we are currently exploring the potential to issue a green bond and we have the goal to be in the market if not possible as soon as this year. More work to be done there and again it’s about data gathering. But we feel good about the momentum we are seeing there.

Manny Korchman

Two follow-ups on that. Do you find that – since you have a little bit less control of the actual box than the tenant does, do you find that they are exploring these same ESG or at least the e-concepts and are aligned with you to make that happen? And so, if they have to invest some capital to do what they are with you doing that?

Jason Fox

Yes. I mean, there is a real business case for, I mean, there is, there certainly is the push from investors to have a greener footprint and I think that’s going to drive a lot of the tenants within our portfolio. But there is also the economic benefits of generating their power needs through solar projects.

We have some wind turbines for some of our facilities as well. So, there is a partnership there. I think maybe more importantly, I mean, this is an opportunity for us to continue to dialogue with our tenants. Understand how to use our real estate. How we can continue to invest alongside them and maybe even fund many of these projects for them in a change for length meaning lease terms.

Obviously, we would earn some yields on lot of this capital investment that we are going to do. And that’s a good partnership that we’ve seen our tenants feel where they are receptive to.

Manny Korchman

Jeremiah, a topic near and dear to you in the last few minutes here, rising rates as a net lease investor and landlord.

Jeremiah Gregory

Sure.

Manny Korchman

How should the market be thinking about the fact that there has been so much focus on tenure and it’s obviously a big part of your capital stack?

Jeremiah Gregory

Yes. I mean, I think it’s we are obviously acutely aware of the focus on base rates and we are focused on that as well. I think that, frankly, to the extent there is a rising rate environment and it especially speaks that, that that’s correlated with inflation. I think we are particularly well positioned to do well and probably then outperform our peers in that type of environment.

And I think we haven’t talked about it a lot in this call, but as many of you may know, who follow us, a large portion, approximately two-thirds of our leases are on that index to inflation. Many of those completely untapped, but, again, the majority of leases that we have would in fact show better internal growth in some cases, it could be much better internal growth for our portfolio in an inflationary environment.

I think on the balance sheet side, though, really good – are good questions in terms of rates and then I think what we’ve done there is we’ve tried to be very proactive in managing our debt maturities and in taking advantage of the environment that frankly we’ve been in over the last year. We’ve done three bond financings.

Going back to the end of last year, we just completed about $1 billion of financings really in the last week or two where we pushed out much of our remaining mortgage debt maturities into a U.S. dollar bond, it’s a 12 year, $425 million 12 year maturity that’s a 2.25 coupon. On the Euro side, we took out a 2023 maturity with a new 9.25 year bonds that’s like a 71% [Ph] coupon. So, we don’t really have any meaningful maturities until 2024.

So, I think that really we’ve positioned ourselves to be – I think, to have a lot of flexibility even in a rising rate environment, we don’t need to be hitting the markets kind of right into the face of whatever that volatility is and I think we can be thoughtful about how we continue to deploy capital. And presumably, in the past at least, as rates have moved, ultimately, the capital to adjust as well, I mean, they tend to be correlated. So, I think in the medium-term or long-term we continue to see a spread between wherever rates are and wherever our new investments are and I think that the key for a net lease REIT.

The key for us is to make sure that we continue maintain flexibility on the balance sheet side. So that we don’t have the pressure basically to jump into the markets if rates rise rapidly over a short period of time.

Manny Korchman

And just to finalize the clean bond discussion, if you were to go to the market today, what would the pricing advantage be of a clean bond versus not?

Jeremiah Gregory

Yes. I mean, that’s a great question and I am sure there is perhaps a variety of views on that. I mean, my own observations from dialogue with our investment banking partners and just sort of tracking markets that you’ve gone back a year or two ago, I would sort of have consistently heard that there perhaps wasn’t a big differential between the pricing that you could get on a green bond versus regular bond or seeing usual course same maturity, same issuer of that.

I think what we’ve seen over the last year, particularly perhaps recently, there does seem to be a bit of a pricing advantage that can be identified in many of the recent issuances and how those bonds are trading. So, what I’ve heard anecdotally is perhaps five basis points in the U.S. and perhaps as much as ten basis points in Europe, all things being equal, I think that a lot of people are interested to see if that’s just sort of a moment in time in the markets or if that – if pricing differential persists over a longer period of time.

I think for us we probably have appetite and interest doing a green bond either way. But for sure, to the extent that there is a pricing benefit and advantage, we must take advantage of that too. And I think our point of view is in the long-term, this is just all going to get more focus. I mean, clearly, that’s where the trajectory in the long-term focus of investors will be.

I would expect there to be some kind of advantage in the long-term for these capital markets and then perhaps we are seeing that starting today.

Manny Korchman

Great. Well, we only have a couple minutes left. So let’s turn to our rapid fire closing questions. When we are sitting physically together in Florida a year from today, what will be the one thing that will surprise people the most about your business over the prior twelve months?

Jason Fox

I’d say, our ability to deliver significantly higher deal volume in 2021 and really prove our ability to provide real externally-driven growth despite having such a large asset base.

Manny Korchman

What do you think your corporate travel budget will be next year as a rough percentage of what you’ve spent in 2019?

Jason Fox

I would say, about 75% and that assumes that deal-related travel for our investment team kind of continues and returns to 100% probably more quickly and then, reduced a lot and whether the rest of our travel returns are pre-pandemic levels or if we used a video kind of says it’s my level of stories should I?

Manny Korchman

What was same-store NOI growth be for the net lease sector overall in 2022?

Jason Fox

It’s a little bit tricky one. I think there is a couple of ways to define same-store growth in its actual which is just year-over-year built into the leases, I would say, it’s going to be around 1% and it will meaningfully outperform that maybe by double.

The other one is that’s even more difficult to probably put a number to is, what we call comprehensive same-store growth that will take into account things like leasing activity and vacancies and deferrals and restructurings.

I think the overall sector average will most likely depend on how much unpaid rent gets reset at either lower levels or returns to pre-COVID levels as opposed to any other kind of bumps there. So, I am going to say there is going to be a fair amount of return to pre-COVID levels. So, let’s say 3% on that definition.

Manny Korchman

And final one here, what will the ten year treasury yield be, one year from today?

Jason Fox

2% and I am saying that given the reasons Jeremiah just talked about our inflation hedges built into our bumps. So I think that we should outperform just like we do in benign times as well as in higher inflationary times with the same-store.

Manny Korchman

Right. Thank you very much guys.

Jason Fox

Great. I appreciate it, Manny. Thank you.

Question-And-Answer Session

End of Q&A