Ladies and gentlemen, hello and welcome to W. P. Carey’s Fourth Quarter and Full Year 2016 Earnings Conference Call. My name is Adam and I will be your operator for 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’ll be taking questions via the phone line. Instructions will be given at that time on how to do so. I’d now like 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 for our 2016 fourth quarter and full year earnings call. 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. Also an online replay 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 one year. And with that, I will hand the microphone over to Mark.

Thank you, Peter, and good morning, everyone. I’m joined this morning by Jason Fox, our President; John Park, Head of Strategic Planning and Capital Markets; and Toni Sanzone, our Chief Financial Officer. In addition Mark Goldberg, Head of Carey Financial and Brooks Gordon, Head of our Asset Management Group are here and will be available for questions. While I will let Jason, John and Toni get into a more detailed discussion of their specific areas, I would like to speak this morning about 2016 in general and what you should expect in 2017. I’m pleased with the progress we made in 2016 in all facets of the company’s operation. We were able to generate sustainable increases in the company’s AFFO stream this year even while transitioning away from one-time structuring revenues, which were reduced by roughly 50% compared to 2015. While this presents a headwind to short-term growth, it is good for the long-term valuation of the company. One-time structuring revenues are volatile in nature generally hard to forecast, transitioning our revenue mix towards a more stable recurring annual lease revenues and asset management fees will better position the company to deliver more consistent and predictable growth over the long-term. Similarly, selling assets always presents a challenge for short-term growth in AFFO, but it’s good for the valuation of the portfolio on a long-term basis as that capital is reinvested in assets that increased the weighted average lease term of the portfolio, increased the criticality of the asset base and improve the overall quality of the portfolio. Reinvesting disposition proceeds cannot always be perfectly timed, but ultimately those proceeds are reinvested and contribute to our long-term AFFO growth. We also executed on our plan to focus on cost efficiencies delivering a 20% reduction in G&A costs in the prior year.…

Thank you, Mark, and good morning, everyone. 2016 was an active year for capital recycling with $158 million of dispositions during the fourth quarter bringing the full year total to $636 million. Dispositions typically fall into three categories: residual risk assets, value creation opportunities and vacant properties. In any given year, we expect to have dispositions with average metrics that in aggregate we can meaningfully improve upon when the capital is reinvested thereby enhancing the overall quality of our portfolio. 2016 was unusual both because the total volume of dispositions was high and because dispositions were more heavily weighted towards residual risk assets. About 70% of our 2016 disposition proceeds came from residual risk office assets reducing our overall exposure to the office sector from 30% of ABR to 25%. The weighted average lease term of disposed assets was four years with weak criticality and low renewal probabilities. Considering these average metrics, we are pleased with the execution we achieved at a weighted average cap rate of 8.2%. In contrast, we acquired $544 million of primarily industrial assets with a weighted average lease term of just over 20 years high criticality and at a weighted average initial cap rate of approximately 8%. The vast majority of our investments and in fact all of our deals in 2016 are sourced as directly sale leasebacks as opposed to buying pre-existing leases from third-party landlords in the secondary market. This differentiates us from any other net lease REITs. Focusing on more complex sale leasebacks has several key advantages. First, we face limited competition. There is a much smaller universe of buyers who can legitimately compete outside of the commodity segments of net lease. We have a 43-year track record of executing highly structured sale leaseback transactions, which gives us a high degree of…

Thank you, Jason, and good morning, everyone. This morning, I will cover our results for the fourth quarter and the full-year touching on our revenue and expense drivers; dividends; and finally, our current guidance expectations. For the fourth quarter of 2016, AFFO per diluted share was a $1.22 compared to a $1.27 for the year-ago quarter. Declines in both our lease revenues and structuring revenues were partially offset by a reduction in interest expense, as well as higher asset management fees and distributions from our partnership interest in the managed funds. For the full-year 2016, we generated AFFO per diluted share of $5.12 compared to $4.99 for 2015. On a full-year basis, lower G&A and interest expense combined with higher asset management fees and distributions from our partnership interest in the managed funds more than offset a decline in structuring revenues. On a segment basis, owned real estate generated about 95% of our total AFFO for the full-year coming in at $4.85 per diluted share, with the remaining 5%, or $0.27 coming from our Investment Management business. As both Mark and Jason mentioned, real estate dispositions outweighed acquisitions in 2016, resulting in lower ABR at year-end compared to 2015. However, the impact of net dispositions on lease revenues in 2016 was mitigated by the timing of dispositions, which were weighted towards the back-half of the year. Structuring revenues declined 49% to $47.3 million in 2016 compared to $92.1 million in 2015, driven by lower investment activity on behalf of the managed funds and a lower proportion of investments on behalf of the CPA REITs, which have a higher structuring fee than our other funds. For 2016, structuring revenue represented 5.6% of total revenue, excluding reimbursable costs, as compared to 10.7% in the prior year, reflecting our transition away from these…

Thank you, Toni, and good morning, everyone. I’ll start with a brief overview of key leverage metrics in our supplemental, which provide a snapshot as of year-end. As Mark mentioned, we made significant progress with our balance sheet during 2016 and that has continued into 2017. Consequently, I want to focus on how the balance sheet looks today, including our Eurobond issuance in January and the renewal of our credit facility in February, and in particular, the impact I’ve had on our debt maturity profile. At year-end, net debt to enterprise value was 40.3%. Total consolidated debt to gross assets was 49.7%, and net debt to adjusted EBITDA was 5.8 times. As we grow our balance sheet through accretive acquisitions, we expect our leverage metrics to remain at similar levels, while our credit profile continues to improve through the execution of our unencumbered strategy. During 2016, we successfully accessed both the debt and equity capital markets issuing approximately $84 million in equity through our ATM program and issuing US$350 million of 10-year unsecured unsecured bonds in September at a coupon of 4.25%. Furthermore, in January of this year, we issued $500 million of euro-denominated 7.5-year unsecured bonds at a 2.25% coupon. Since the start of 2016, we have issued a total of approximately $877 million in unsecured debt and we paid $865 million in mortgage debt on a consolidated basis. Since embarking on our unsecured debt strategy into 2014, we have issued a total of $1.3 billion in U.S. dollar bonds and $1 billion in euro-denominated bonds, and we paid approximately $1.7 billion of mortgage debt on a consolidated basis. As a result, we have reduced secured debt as a percentage of gross assets from 36% at the start of 2014 to below 20% today. We have also become a…

Thank you. Ladies and gentlemen at this time, we will now be taking questions. [Operator Instructions] Our first question comes from the line of Dan Donlan from Ladenburg Thalmann. Please go ahead.

Hi, thank you and good morning.

Good morning, Dan.

Good morning. I just wanted to touch on the dispositions in the fourth quarter. It looks like you fell about $115 million, $114 million short of your guidance for the year. So I was just curious what happened there, and whether or not there’s – previously you identified sales maybe just got pushed into 2017 and maybe after the election cap rates rose, and you decided just to kind of hold back. Just curious kind of what happened there relative to your original expectations?

Yes, sure. Hey, Dan, this is Jason. It’s really simply the timing of these transactions. It didn’t have to do with the election, or expected pricing, it’s really just timing. And you’ll see those dispositions come through in 2017.

Okay. And then just curious on the – do you guys have a leverage ceiling in mind for the CPA REITs, and or should we expect kind of a that as long as Carey is managing CPA-17 and CPA-18, there’s always the desire to add investments to those vehicles, given that you might have excess cash flow in a given year and you can potentially count the recycles. Just kind of curious, given that these funds are close to capital raising, how comfortable are you with continuing to add to these funds in terms of investments?

Good morning, Dan, it’s John. Historically, we’ve had – the leverage in the CPA funds has been around 50%. That obviously moves over time depending on the – where we’re in the portfolio. And we have limited capital to be invested in the funds currently, and we expect to fully invest those by – in 2017.

I would say, it’s more a reflection of – when we updated our guidance last year, when we’ve – the investment volume down just because the deal we saw available for – that capital is still available to invest. So we would expect to invest that this year. Again, in the funds, it’s primarily all mortgage debt. So the leverage is really at the asset level on all those funds going forward. But I would expect that this year as we have roughly targeted, I think, in our guidance about $400 million for the CPA funds, $300 million to $500 million for the CPA funds put to work, and I expect that to get completed this year.

Okay. Yes, I’m just asking as it pertains to like 2018, because you guys exceeded my expectations in 2017 for the CPA funds. So I’m just kind of curious if there’s more probably coming in 2018, or if you really think these things are going to be where they need to be in 2017?

So I think that number I gave you include 2017 and 2018 combined.

I’m talking, sorry, I’m talking about the years 2017 versus 2018. In other words, the sector seems to be enclosed, you continue to add a little bit to them. I’m just curious, is there going to be natural acquisition that’s going to happen in the CPA-17 and CPA-18 on an annualized – on an annual basis just given kind of excess cash flow and potential capital recycling, that’s the question?

No, I don’t think so. As I said, I think the available capital in CPA-17 and CPA-18 that existed last year trailed into this year, we’ll put that capital to work and those funds will primarily be fully invested at that point in time.

Okay. Okay, perfect. And then, Toni, just a quick question for you and welcome to the net lease party.

Thank you, Dan.

What should we be – how should we be thinking about G&A, overall G&A for 2017? You guys brought it down to $20 million all in, in third quarter, $27 million in fourth quarter, so just kind of curious what we should be forecasting for a run rate in 2017?

Sure. I think we highlighted the G&A savings early in the year that we anticipated on an annualized basis. And I think it’s fair to think about it that way you with any – within any one quarter costs can fluctuate up or down due to timing. But the 2016 savings that we recognized in the level that we achieved on a full-year basis is a good approximation, I think for the 2017 G&A cost as well. So the savings will continue, but we expect it to be relatively flat year-over-year.

Okay. Okay, I appreciate that. And then maybe question for Brooks, are there any large known tenant move-outs in 2017 or 2018 that you guys are aware of at this point?

We’re making good progress on 2017. That lease roll is is largely handled at this point, no large move-outs to report, making good progress on 2018 as well. We’re currently pretty far along negotiations with over 50% of those deals. We don’t expect large move-outs there as well. So all in all, keep in mind that those two years represent a very small portion of total ABR, and a lot of that progress has been made, as Jason described, in 2016.

Okay. I appreciate the color. And just maybe one or two last ones here on the Investment Management business. So a question for either Mark. As you look at the Investment Management business, I’m curious on your thoughts on Blackstone’s recent success in the non-traded REIT space, namely that they’re selling the non-traded product through the wire houses that has an infinite life. And so I’m curious, is this something that WPC is also exploring, or is there – are there some type of limitations on what your traditional independent broker deals can sell? Are they allowed to sell infinite life vehicles? Just curious your thoughts there, and if there is a potential shift in the wrapper that you may offer these non-traded products going forward?

I’ll give you my view and turn it over to Mark. As I’ve said during the year, I felt that with Blackstone and Apollo entering that market that was a good thing for us. Number one, I think they’re pretty reputable. Number two, they may open up capital sources beyond our own today. So, yes, we look at that. We continue to look at it. Their fund is structured, I think Mark similar to or a lodging fund from a few standpoint, similar to those fees and raising it in the wire house themselves. Mark, do you have any?

Yes, Dan, as you think about products and our Investment Management business, so we would kind of encourage you to just think we have like three things that are going on for funds corporate credit. We have two funds; one a low load fund, one a fee-based fund entirely without a commission structure. And that is a perpetual life vehicle through a master feeder. So we’re already in an infinite life vehicle and we’re selling it into the independent broker dealer space. As far as the other efforts, they are as well not – one of them is not an NTR, it’s a private equity real estate offering that has a lot of places to go through, and it’s a high net worth market for us. So it’s not even an NTR. And then finally, what Mark was referring to, which was our lodging effort. So all of our investment management activity in 2016 and expected in 2017 and beyond is outside of net lease, and we’ll take the format of infinite life, finite life as it make sense based on the opportunistic perhaps private equity real estate opportunity, it leads itself and lends itself to a finite life, or a credit fund that might be an infinite life. So we have all the options on the table. It really depends on what suitable from an investment point of view. And in direct response to your question, the IBD market certainly is already accepting these products.

Okay, I appreciate that. And just last one on the DoL fiduciary rule, once that finalized or the outcome is know there, how long do you think it’s going to take for CPA-19 to start leading capital?

I think if anything right now would be speculative in the market. I think the entire industry is trying to – is in a state of flux, or they wait and see what goes on in the regulatory environment. I certainly can’t speculate on what’s going on in D.C. with that today.

Right. But once we know the outcome now – how long will it take you to mobilize to get up in capital raising?

Yes, I think it just depends how those structures come out what the ultimate structures are and what we have to do to take advantage of that.

One way to – Dan, one way to think about it if I can add to it is, whether or when we do a CPA-19 is somewhat not relevant to the Investment Management segment, as it stands today, because everything that we plan for in 2017, as it stands today, doesn’t include it. And we have cautious and constructive view of how that might turn out. And whether it turns out one way or another, what drives the interest in our fund is our investment performance. And we’re well situated to put it in whatever product and through whatever distribution post DoL world will look like. So we’re very confident of that.

Okay. Thanks, Mark.

Thank you. Our next question comes from the line of Joshua Dennerlein from Bank of America Merrill Lynch. Please go ahead.

Hey, good morning, guys.

Good morning.

Question, so you guys have a pretty high percentage of uncapped CPI in your portfolio. What kind of, I mean, if you kind of look at other REITs out there and it seems like a bit unusual, I think you guys are an outlier on the high side. What kind of – what allows you to get these uncapped CPI, is that assets you’re investing, it’s the geography, Europe, just kind of curious?

Yes, you’re right. I would think that our exposure to uncapped CPI is probably as high as anyone in net lease market perhaps in the broader real estate markets as well. But how do we get that? Well, some of it is geography. You certainly can. It’s more typical in Europe to have CPI-based increases. But in the U.S., we get it more often than not as well. I think that’s a function of the fact that we do a lot of direct sale leasebacks in structure our transactions from the start. So we can structure a negotiating a deal based on what we think is the optimum structure and we do try to get CPI, and I think that’s going to pay off over the next couple years as expectations for inflation increase.

Okay. So you guys – you typically asked for that directly in a sale leaseback?

We do absolutely.

Okay. And what’s the rationale on that versus like the fixed? I would think the for fixed would work out better recently?

Well, we look at our portfolios in net lease as a hedge against inflation in many ways. So it’s something that that we wanted to correlate with inflation.

Okay, all right. It makes sense. And I kind of come back to an earlier question, how long after a CPA fund is fully invested. So it doesn’t have any more capital on the table to put to work. How long after that does the Board typically look to monetize the fund? Do you guys have a sense of that, or…?

We usually in the perspectives – historically, it’s been the eight to 12-year range. But the board, the independent directors of those Boards have a great deal of flexibility when they see liquidity.

Okay. And are they looking at kind of a – what they look at, or is it like the market conditions where REITs are trading, or any sense, just trying to get a sense on maybe what…?

They have their own advisors. Their advisors work with them on the factors they look at and evaluate as they go through their process.

Okay. And then maybe one more question on CPA-17. What – how does that portfolio is asset quality and asset mix really compared to your portfolio?

It’s structured very similarly – very similar to our portfolio, both from a diversification standpoint, geographic standpoint, type of investments that are in that portfolio.

This is John, CPA-17 has a very high-quality net lease portfolio, but it also had some operating assets such as self storage and others. So if we were to acquire that, we would look to bring on the net lease assets on to our balance sheet and have other plans for the other operating assets that are in the CPA-17’s portfolio.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Nick Joseph from Citigroup. Please go ahead.

Thanks. Wondering if you could breakdown the midpoint of guidance at 520 between the Owned Real Estate segment and the Investment Management segment?

Sure. I think the way we think about it is not that dissimilar from the result we saw this year. We expect our own real estate to generate about 90% to 95% of our AFFO in 2017, with the balance being from Investment Management. And that is driven largely by the reduction in structuring revenues. I think, we highlighted in our remarks and in the press release the decline year-over-year, you’re going to expect to see a further decline anywhere in the range of another 30% to 40% in 2017. I think you can expect to also see or we anticipate that, we would make up some of that loss and majority of that loss with increases in our asset management fees, as well as our ownership interest and distributions from the management – managed funds.

Okay.

I think the other piece of the puzzle maybe that’s important to highlight is that, we do expect to recognize substantial savings in interest expense that’s being driven by the lower cost of debt, as John highlighted.

Thanks. And then I guess just a couple of other guidance line items. What are your expectations for deferred taxes and straight line rent?

Yes, I think deferred taxes are really not something that are predictable, it relates to typically the timing differences between our – the basis – on a financial basis, on a tax basis of our assets, so impairments generally can cause basis differences and those are really one-time in nature and tough to predict. Typically, we evaluate taxes from a perspective of the ones that do impact AFFO, our current taxes on our investment management business and some of the income tax expense at our foreign portfolio case. And again, as you see structuring revenue go down, I think you can expect to see taxes decline.

Thanks. And then on the straight-line rent?

The non-straight-line rent again is relatively consistent year-over-year. There is probably somewhat of a one-time anomaly in 2016 as it relates to the Craft lease termination earlier in the year. We have some notes on that in the supplemental, I think if you kind of back that out the straight-line rent is relatively stable period over period.

Thanks. And then just for the $450 million of assumed dispositions in 2017, what are you expecting in terms of the cap rate?

Well, I think as we go in the year, we will have better clarity on that. I think our expectations it will be inside of where our disposition cap rates were in 2016.

And for that comment are you including [indiscernible] or you excluding [indiscernible]?

We are including it in there, correct.

All right. Thanks.

Welcome.

Thank you. Our next question comes from the line of Sheila McGrath from Evercore. Please go ahead.

Yes, good morning.

Good morning, Sheila.

Mark, I think it makes a lot of sense transitioning away from the lumpier structuring fee and kind of going to recurring. I’m just wondering, are you giving up economic in that or are you shifting a lot of the cost of the structuring piece to straight up hire other recurring fees just out of network?

I think in answer to your question, it’s more market driven on some of the structure of the newer funds I would say. I’ve said right along this year that there – as a result of some of the new regulation out there concerning – putting the NAV on the statement in the DOL rules that there was going to be a lot of pressure on our one-time structuring revenues up front as there are commissions in the broker-dealer. So, I would say, it’s more market-driven. I think that translates into more money going into the ground. You’ll see the benefit of that through our participation in the cash flow of the fund. You’ll see it in higher assets under management through the management revenue component of the funds and you’ll see it in the back-end of the funds as part of that.

And would that net – with more assets going into the ground that – the life of the funds could be shorter than your historical ones?

No, I think it gets – it helps you get to NAV a lot faster.

Yeah.

Obviously, with more asset, with more dollars going into the ground, but I don’t think it really has any impact on the life of the funds itself.

And just to augment, Mark, as these costs get reduced including the lower commission structures that both we initiated and lead the market with as well as the market now responding to lower and no commission structures, our ability to not only increase the net assets and AUM, but also to earn performance fees both on a current basis in some of our funds and on a long-term basis as these funds liquidate. So it’s all very constructive from a W. P. Carey’s shareholder point of view and in an investor point of view in our funds.

Okay. And then just your thoughts on your Europe and investing there with – the nervousness around the EU. Just your thoughts on Europe and if there is any big lease expirations that we should be aware of?

Yeah, I mean, generally the markets are competitive both in Europe and the U.S. Global search for yield continues to persist and there are a lot of capital flows into net lease for that very reason. We’ve been significantly lighter investing in Europe in 2016 as you know, I think that we will continue to be more heavily weighted significantly to the U.S. but a lot of it depends on opportunities. You know in net lease with long-term leases and a lot of emphasis on the quality of real estate and strength of the credit, we feel like we still structure deals that make sense over there despite some of the broader political uncertainty within Europe. But I think you’ll see Europe probably decrease over time given that this year market conditions, again, I think, that are more favorable in the U.S. but also the fact that a lot of our disposition pipeline for 2017 is weighted in Europe as well. So I think you’ll see a trend towards our portfolio moving more U.S.-based.

Okay. And one last question. Just – I think, Jason, you mentioned most of your business last year was corporate sale lease back that you structured…

All of it actually, yeah.

All of it. So can you just remind us of the benefit – generally is it higher yielding outcomes, that’s the first part of the question and then the second is, in higher interest rate environment, does that pipeline generally increase because it’s – the bank – the other lending is less competitive?

I will start with the second question, first. Yeah, I think that’s right. I mean sale-leasebacks really provide companies with an alternative source of capital. They can go to the debt markets or the equity markets or they can look at their assets and sell those to generate cash flow and to the extent higher interest rates impact their ability or interest in accessing the debt markets. I think you will see more sale-leasebacks. I think as expectations for interest rates to increase continue you will also see more sale-leasebacks as people look to lock in because clearly interest rates have an impact on cap rates as well. You’ll see companies look to lock in these long-term rental rates on these 15- to 20-year leases. So I think there’s some validity to that. In terms of the benefits of sale-leasebacks, I did touch on some of those in the prepared remarks, but certainly yield is a great benefit. When there’s a small universe of buyers that have the experience and expertise to structure sale-leasebacks – and companies know that, they don’t want to go down the path of someone that doesn’t understand or have experience in getting a transaction complete. So for us, we do get incremental yield, we really believe that. We also get better structures. I think earlier on the call we had a question about CPI and when we do sale-leasebacks, we can write our own leases. We get stronger lease terms. We get better rental structures. We can add in covenants when we think they’re important. We can trade lease term for cap rate if we think it’s warranted. There is a lot of different ways that we can customize a net lease when we structure the sale-leaseback ourself and we think that’s a big benefit to how we operate.

Okay. Thank you.

Thank you. Our next question comes from the line of Paul Adornato from BMO Capital Markets. Please go ahead.

Thanks. Good morning.

Good morning, Paul.

Well, just a follow-up on the dispositions. If you were to look at 2016 dispositions, you mentioned a couple of buckets of residual risk, vacant properties, how many – what proposition would you had a positive outcome or positive IRR versus those that would be considered portfolio repositioning.

This is Brooks. Just to answer your first question, on the positive IRR front, I can say on kind of a weighted average basis if you look at the entire 2016 disposition portfolio. The investment level IRRs there were a bit north of 16% from acquisition to disposition. So that answers that question and that’s roughly over a 14-year weighted average hold period. And I would say a residual risk outcome does not necessarily mean in all cases a painful one on a cap rate basis. It just means that at residual at the end of our lease we perceive that renewal probability might be low or the asset might require a substantial capital investment that we don’t find attractive. There can be a lot of different reason why we call it residual risk and this year they were more heavily weighted towards those type of assets in 2016.

Great, thanks for that color. And then in terms of sourcing new acquisitions, you mentioned that these are proprietary deals, I was wondering if you could maybe just give us a little bit more detail? Also to follow-up, are the companies actively looking for sale-leaseback or they are just capital constrained? Do they know what a sale-leaseback is? Maybe you could just give us a little color about how you approach potential sale-leaseback partners?

Right. Certainly. When I started 15 years ago, I think a lot of companies didn’t know what sale-leasebacks were and didn’t know that that was an option to raise capital. I think now though it’s much more prevalent in the marketplace, I think that the advisers to these companies certainly recognize the benefits of doing sale-leasebacks. And really our pitch has been simple to a lot of companies is that our cost of capital was more suited to own real estate than theirs. They are better off taking the capital that’s tied up in their real estate and reinvesting it in their core business. And I think that resonated with a lot of the companies we work with. I think in particular we’ve seen that with private equity backed companies. The sponsors want to optimize their capital structure and they see owning real estate is not the optimal structure, so a lot of our sales leasebacks in 2016 were alongside or with private equity sponsored companies. And I think we will continue to see that. For one, they value the capital structure, but I think, two, they tend not to run a wide process. They value certainty of close and ease of execution as much or more than pricing. So we tend to get good execution on transactions with private equity firms and in particular on sale-leasebacks with private equity firms.

Great. And then just one final question, you mentioned – it’s difficult to match the timing of acquisitions and dispositions and so, there’s some loss to dilution, I was wondering if you’ve calculated or had an estimate of dilution from acquisitions and dispositions?

Not sure if I fully understand the question.

I think those kind of acquisitions costs will be minimal given the flexibility of our balance sheet. So, for example, if we see acquisition opportunities that are attractive ahead of our dispositions, we can certainly fund those out of our credit facility and payback it back through – from disposition proceeds or other capital markets alternatives. So, I think that’s the reason why we focus so much on creating that balance sheet flexibility so that we can execute asset level decisions such as acquisitions or dispositions at the optimal timing for those particular transactions.

Yeah, I think the other thing I will add in there quickly is that we do lots of times have a little bit more control over the timing of the dispositions and in 2016, for example, we were able to match up our gains on those sales and do reverse 1031s to limit the taxable income that we generated.

Okay, great, thank you.

Thank you. Our next question comes from the line of Chris Lucas from CapitalOne Securities. Please go ahead.

Good morning, everyone.

Hi, Chris.

Just a question, you guys have been very successful doing Eurobond issuances, I think it was €1 billion of euros outstanding at this point. What is the capacity that you have left to issue in the euro market given sort of the dynamics of the portfolio and the size of it currently, how do you feel about that?

Well, that’s a good question, Chris. I think as you have noticed we have intentionally over-weighed the euro market – euro debt in our capital structure that’s to increase the natural hedge both from the cash flow and NAV perspective. I think that right now we are probably around 80% levered on the euro side. So there is probably an upper limit. We have more capacity, but we’re probably approaching the limit and that’s – but obviously all of this can change based on what’s happening at the asset level. We continually monitor it based on our acquisition and disposition and overall portfolio makeup.

Okay. And then on the – thanks for that. On the disposition pool, specific question for this year’s pool, but also maybe a bigger picture question, which is, on the disposition pool that you are looking at for this year, are there any that are being driven by options that the tenants have to purchase assets from you?

Yeah, this year in particular, in 2017, there are fair amount of those. We are working with the tenants to perhaps unwind some of them because they are good real estate asset that we like to own in many cases, but yeah, I think that’s a good question. We do have some of those this year more so than in the years past.

And can you give us a sense as to maybe the size of that – of that or of the scale of the dispositions that you guy have guided to, roughly what’s the percentage there?

It’s in the 25% to 30% range.

And that’s above sort of a normal level that you normally would be getting to on an annual basis?

Yeah, that is. I mean on any given year, there could be a large transaction, as I think everyone knows, we do own the New York Times building and there is a purchase option on that several years out, but I think that’s high relative to a typical run rate.

Okay, great. Thank you. I appreciate the time.

Sure.

Thank you. Ladies and gentlemen, that is all the time we have for questions for today. I would now like to hand the call back over to Mr. Sands for closing.