Ladies and gentlemen, hello and welcome to WP Carey's Third Quarter 2018 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 program 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 would 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 today for our 2018 third quarter 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. 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 where you can also find copies of our investor presentations. And with that, I will hand over to our Chief Executive Officer, Jason Fox.

Thank you, Peter, and good morning, everyone. This morning I’m joined by our CFO, Toni Sanzone; our President, John Park; and our Head of Asset Management, Brooks Gordon. Before covering our usual earnings call topics, I want to start briefly with the announcement we made on Wednesday of this week, that we have closed our merger with CPA:17. We had an accelerated timetable and we contribute to the dedication and effort of our employees who are able to achieve it a whole two months ahead of our original schedule. At closing we issued 54 million shares in an all stock deal, which has increased our market cap $11 billion in an enterprise value to a little over $17 billion, making us one of the largest REITs. The driver to this transaction is for both strategic and tactical, as the large company we will operate more efficiently with the simplified business model and improved earnings mix. We have added a high quality diversified pool of assets and about a 7% cap rate that fits well into our existing portfolio. Diversification has increased and weighted average lease term has been extended. It has also further strengthened our credit profile with earnings from real-estate covering a much larger percentage of our interest expense dividends, as well as having the deleveraging impact on the consolidated debt to grow assets basis. And because we assembled the CPA:17 portfolio and managed it for over a decade, we expect a swift and seamless integration of the assets. So with that, let's turn to the third quarter. Tony will review the combined portfolio and our balance sheet, as well as our revised 2018 guidance reflecting the earlier than anticipated closing of the merger. At a high level, year-over-year AFFO growth was driven primarily by higher real-estate revenues from…

Thank you, Jason. I will touch on our results for the quarter followed by some highlights from our portfolio and balance sheet. Lastly, I will give an update on how we are tracking towards full-year guidance, after taking into account the impact of closing CPA:17 merger at the end of October. Our third quarter financial results and the portfolio information in our supplemental disclosure are off course all as of September 30th which is before we closed our merger with CPA:17. We have provided pro forma portfolio information as part of our investor presentation available in the investor relations section of our website. This morning we announced AFFO per diluted share $1.48 through 2018 third quarter, up 8% compared to the prior year period, driven largely by revenue growth within our real estate segment. On a year-over-year basis Annualized Base Rent or ABR is up over 5% to $714 million as of the end of the quarter reflecting the impact of net acquisitions and same-store growth. Same-store rents on a constant currency basis was 1.5% higher year-over-year. We remain well-positioned to see this growth level continue with rent escalators in the CPA:17 portfolio very similar to our own. On a combined company basis 65% of our ABR comes from leases with rent escalators going to CPI and 31% comes from leases with fixed increases. Turning now to portfolio composition, which is pro forma for our merger with CPA:17. Our net lease portfolio now consist of almost 1200 properties covering 133 million square feet net lease to 304 tenants generating ABR of $1.1 billion. Occupancy remains high at 98.3% and weighted average lease term is now 10.5 years. As a result of our merger with CPA:17, we also now own a portfolio of 44 self storage operating properties from which we…

Thank you. [Operator Instructions] Our first question comes from the line of Manny Korchman from Citigroup. Your line is now live.

Just thinking about your acquisitions target for the year, if I'm factoring the $73 million of capital projects you are expected to deliver but 4Q volume seem pretty light compared to what you have been doing, am I thinking about that incorrectly?

I think we have historically done transactions that are chunkier in nature and we certainly closed some big portfolios that earlier in the year. I think based on where we are at this point in the year and what we expect to close towards the end of this year, I think any volume we do in the fourth quarter would have the significant impact on this year's guidance, but it's certainly possible the transactions at this point would be more skewed towards the first quarter.

And on the with that same point, I know it's early and you haven't given guidance yet, but how would you sort of help us think about transaction volumes going into 2019.

Yes, I think that it's a fair point. We are not giving 2019 guidance at this point time, as if we evaluate our opportunities set in a number way that Jason mentioned and really look at our growth there. But in terms of volume specific to the investments that we expect on balance sheet for 2019, I don't think we have a number or range to give at this point in time.

And the last one from me, given your comments frothy acquisition markets or transaction markets, does the merger provides you opportunities for outsize dispositions compared to where you have been you sort kind of mentioned about storage, but anything else there that you would think about that leads to bigger disposition volumes.

This is Brooks, regarding dispositions, I think it’s important to note that our strategy remains consistent. It’s too early to provide specifics, but typically we are looking to improve the portfolio, it’s a combination of harvesting value opportunistically and risk management. CPA:17s portfolio very much align with WP Carey’s long-term targets. It is important to note that next year we do have the New York Times purchase option for $250 million in the fourth quarter of 2019. So that will skew next year’s dispositions up somewhat. But we don’t expect our approach to disposition to change materially.

Thanks everyone.

Our next question comes from the line of R.J. Milligan from Robert W. Baird. You are now live.

This is Will Harman on for R.J.. You guys mentioned that pricing still remains pretty aggressive for acquisitions. Just given the optionality to invest in different real estate sectors, which sectors are you seeing more attractive opportunities right now? And which sectors are you seeing deals that just aren’t penciling for you?

Yes. It’s a good question. It’s one of the benefits of diversification who we can look at a broad range of opportunities and choose to allocate capital to either the markets or the asset types that provide us best risk return at that particular time. In a market that is competitive like we are seeing right now and that is both in the U.S. and Europe. We are still focused on sale leasebacks and built-to-suits and structural transactions each of which provide us opportunities to really control the structure of the deal, which in tight markets tend to loosen generally, and we can maintain our focus on the restructures. It also allows us to get higher than market yields when there is a more complex components to deal front, it doesn’t mean the deal is anymore complex once its closed. In terms of geographies, for the year we have been most skewed towards Europe given some larger portfolio transactions that we have done, including Danske Freight and Intergamma. I think going forward it will probably be a little bit more evenly balanced between the two. And then in terms of asset types, especially when we are focusing on sale leasebacks, really the opportunities tend to be with companies whose real estate makes up relatively large percentage of their total enterprise value that tend to be companies in the manufacturing logistics space. So therefore, we tend to see more sale leasebacks in the industrial asset class and that is consistent with our portfolio I mean we are almost half of our total ABR is generated from industrial assets and I think that should continue to see some overweight towards that asset class.

That is it’s for us. Thanks guys.

Our next question comes from the line of Todd Stender from Wells Fargo. You are now live.

Thanks. The usage split the net lease assets between CPA funds and on balance sheet several different metrics winning to that whether it was yield or lease term, but now that everything at least in net lease will be on balance sheet. Will you buy properties that once only qualified for the CPA funds on balance sheet, just any color on your combined acquisition strategy will be helpful? Thanks.

No, I mean our strategy won't change. Really in the past when we had raised CPA:17 that was the primary investor for net lease assets. Over the last couple of years when we have been investing on our balance sheet more prominently it's mostly been cut CPA:17 was fully invested and some of the dry powder that we had in that fund as well CPA:18, those were growing more into operating assets, such self storage and student housing. So the short answer is no, that won't change, we will continue to evaluate all net lease assets as we have and continue to grow our balance sheet that way.

Okay. Thank you. Can you give us the lease terms in cap rates maybe I missed the cap rates, but at least the lease terms on the warehouse in industrial you purchased in Q3?

In where I’m sorry?

The stud you acquired in Q3 Portugal, Netherlands, Wisconsin looks like the warehouse and industrial stuff?

Cap rates were in the high sixes, low sevens, we don’t talk specifically or give details on any specific deal. And then for year-to-date we have mentioned that our weighted average cap rate was right around 7% for all of our transactions, but for those specific deals it was kind of high sixes into the low sevens. Lease term on average for this year weighted average is around 20 years as well, the Sonae transaction that we did in Portugal recently was a little shorter, a little bit north of 10-years for high quality of logistics asset in a prime logistics park outside of Lisbon.

Alright, pretty long. So no short-term stuff the Netherlands, or the Wisconsin property.

That's correct. Those were all long-term. 10-years plus.

Thanks.

Our next question comes from the line Sheila McGrath from Evercore ISI. You are now live.

Hey yes, good morning. CPA:17 closed and now the asset management business is much smaller. I'm just wondering how we should think about the timeframe but the remainder will wind down over and can you remind us is there any assets in CPA:18 that would be a target for W.P. Carey.

Sure, hi Sheila. So yes, since our acquisition of CPA:17 we have shifted our revenue streams significantly from it was 80% contribution from real-estate in 20 from IM to where it is now about 95% from real-estate and 5% from IM on a pro forma basis. So for all practical purposes IM segment really is contributing significantly, but there is some AUM to wind down and I would say timeline is over the next several years of course it's up to the independent directors of those funds to make those decisions. CPA:18 you asked that question, it does have substantial net lease assets, I think about a 1.5 billion to 2.5 billion of assets and we assemble that portfolio the same as we have assembled all of our net lease assets.

And for the remaining funds Jason that W.P. Carey would be eligible if you hit certain hurdle rates for a back entry, is that correct?

That is correct. That is part of the fee structure, I think you can look in the supplemental, which outlines in detail the fee structure associated with each of those.

Okay, and then I apologize if you mentioned this already, I have to get on in progress, but the self storage assets that were part of CPA:17 are those assets currently on the market for sale or just what are your plans there?

Yes, you are right. Those are operating assets as oppose to the U-Haul assets that we have owned in W. P. Carey for a while. We are evaluating different options, we are comfortable holding those until we have the best option for us. And it’s a strong portfolio as you know, storage is an asset class, it’s an high demand very liquid. So lots of options and I would say stay tuned on what we end up doing there.

Okay, great. And then I guess maybe this is for you Toni. The new guidance implies about $1.32 for fourth quarter. That is still fourth quarters not a good run rate, because one month before the merger. So I was just wondering if factored into that implied guidance are additional structuring fees and following up on that we should assume structuring fees continue to go down relative to 2018 and 2019 is that correct?

That is right. I mean I will start with the restructuring revenue part of that. As we continue to manage the assets and those funds we expect there will be some of level of capital recycling. We have done just over 12 million year-to-date and we are holding our range at about 15 million to 20 million. Again transactions can certainly close on either side of the year given where we are in November. I think we would even expect that to come down further beyond this year, but we don’t really have the specific number to give at this point. In terms of overall run rate for the fourth quarter, you are right that there is only two months of activity reflected there. So CPA:17 being on balance sheet. I think in terms of how we think about it I will go back to maybe how we thought we mentioned it earlier in prior calls, on an annualized basis the CPA:17 management fee stream go away and that is the tune of about $0.65 to $0.70 of our AFFO on a full-year annualized basis. The incremental AFFO that we earn in the real estate lease we have acquired offset that by more than half or roughly $0.35. so that is kind of the full-year, you can certainly extrapolate back to the last two months of the year and that essentially translates to the $0.06 adjustment we made on our guidance range.

Okay, that is super helpful. Just last question for me. I think Toni you did outlined previously the guidance for 2018 on G&A 65 to 70 and beyond the higher end. Can you remind us, there would be a little bit of pickup in G&A after acquiring CPA:17. Can you just remind us what that magnitude was?

Sure, I think our cash G&A expense increases on absolute dollar basis simply because we no longer collect the reimbursement from CPA:17. So on a full-year basis that reimbursement was about $7 million to $8 million. Our internal cost structure remains largely the same while we absorb the 50% in our on balance sheet assets. And you know that model becomes very scalable such that we can add incremental assets with minimal to no increase in personal going forward.

Okay. thank you.

Thank you. Our next question comes from the line of John Massocca from Ladenburg Thalmann. You are now live.

Good morning, as we look at that 1.1 billion run rate pro forma ABR you are giving in the presentation does that include the impact of kind of known tenant issues at CPA:17 maybe specifically Agricore and has your view on Agricore changed at all recently given some of the move they have made to settle some of the debt issues they had?

This is Brooks. That is correct, that ABR number fully incorporates our view of the Agricore portfolio. Just as a reminder we fully underwrote a 50% share cut to contract rent when acquiring CPA:17 and we do expect that that will prove to be a conservative approach. So were making good progress on restructuring negotiations with the tenant and we will have more to report on that in the coming quarters.

And then looking on Page 33 those warehouse property that had a pretty decent releasing spread down in terms of rent and at least in that tenants improvement as well, you got a decent that more lease term, but maybe just some color on what situation is of those properties, those two warehouse properties.

Sure. So first to put it in the broader context for the quarter we did recover 101% of the rent versus prior rent. So I think it's important to put that into context, those two specific assets what we call tri-temp warehouses, so freezer, cooler and dry leased to Reinhart, which is a very large food distribution company. We don’t know the assets for 20 years, they have very attractive rent bumps throughout that period, and the approach we took with this renewal was to extend them by about 10-years and we are evaluating those for sales. So we think that created a lot of value and it’s a very good tenant and good properties, but those did require a roll down for that particular long-term lease expansion.

Okay, that makes sense. And then if you kind of look at the debt capital markets going forward what do you think your capacity for additional kind of euro unsecured debt. It's kind of significant portion of your debt fact today maybe relative to what your kind of rents from Europe was but just kind of thinking as the additional capacity you have to be more euro denominated debt.

Yes, I think we obviously you are highlighting we executed a €500 million bond officering early in October with a six coupon up two in the quarter and its 7.5 term and that did help us accomplishing number of important objectives one of which you are referencing. We created capacity and flexibility and by reducing the borrowings on our revolver that we use to fund our recent acquisitions and we do risk our balance sheet by locking in a low fixed interest rates while we also increased the natural hedge on our euro denominated assets. In this issuance when it is closer to our optimal balance to euro debt and euro assets, but still needed some capacity to further levering Euros in the short-term if you get back to our three merger levels. In terms of specifics, we will monitor sort of the acquisition and disposition environment, but we do believe we have some room there.

Understood. That is it from me. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from the line of Doug Christopher from DA Davidson. You are now live.

Hi thank you for taking my question and congratulations on the really closing. Just mentioned in the early the debt, how should we think about debt to EBITDA, it would be coming down over the next eight quarters. Does it decline through a debt coming down or repayment or through EBITDA moving higher, how should we think about that? Thanks.

Yes, I think just overall I mean you will get just kind of an overview on the balance sheet in general while we view the transaction as deleveraging and hasn’t really changed our overall philosophy on how we manage the balance sheet. So with debt to growth assets coming down to about the mid-40 that remains in-line with leverage target and give this is a little bit of flexibility to work with. On net debt to EBITDA basis, the shift in our earnings mix it will bring this up to about six times after the merger. But as we continue to replace the management fees with rental revenues, we expect that come back down to under six times.

Thank you so much.

Thank you. Ladies and gentlemen, at this time we have no further questions in queue. I would now like to hand the call back over to Mr. Sands.

Thanks everybody for your interest in W. P. Carey. If you have additional questions please call Investor Relations directly on 212-492-1110. That concludes today's call. You may now disconnect.