W. P. Carey Inc. (WPC) Earnings Call Transcript & Summary

Hello, everybody, and thanks for being with us today on this call about our second quarter 2022 results. Prior to getting started, I want to note that certain remarks we make during this session do not reflect historical facts and might be classified as forward-looking statements. Details on factors that could lead actual outcomes to vary materially from what W. P. Carey anticipates can be found within our SEC filings. A web replay of today's conference call will be posted in the Investor Relations area of wpcarey.com, and it will remain archived there for roughly 12 months; that same location also hosts copies of our investor presentations along with other associated materials. Having said that, I'll now turn things over to Jason Fox, our Chief Executive Officer.

Thanks, Peter, and hello everybody on this call. Through Q2, we kept steering effectively through a fast-changing market environment, delivering solid results across several areas. Our same-store rent growth hit an all-time peak, and that has led us to lift what we expect for deal volume this year. When investors are worried about inflation, climbing rates and the chance of a recession, we think our position among net lease competitors is unlike any other for sustained growth. Because our shares have outperformed, we were able to issue more forward equity, so we now hold plenty of capital to put into new investments—equity raised at prices that assist in countering a portion of the spread tightening brought on by interest rates jumping sharply. And as cap rates climb, we feel good about our capacity to keep making accretive investments through the back half of 2022. On top of that, we keep providing downside protection thanks to one of the strongest balance sheets anywhere in net lease, a diversified strategy and a dividend yield of approximately 5% backed by premium cash flows and top-tier rent collection all through COVID. With me this morning is Toni Sanzone, our CFO, and together we'll address those items as well as our earnings and revised guidance, which factors in the effects from our CPA 18 merger closing only a few days from today. John Park, our President, plus Brooks Gordon, who leads Asset Management for us, are here too for questions. Let me begin with the CPA 18 acquisition. At the start of this week, we shared that holders of CPA 18 shares gave approval to the merger we proposed, set to be finalized on Monday, August 1. Through this deal we bring in roughly $2 billion in quality real estate, at a cap rate in the middle-6% range following the asset sales we planned, and nearly all of those sales are finished now. Besides fitting nicely with what we already own, with no integration risk and barely any effect on the balance sheet, this deal marks the end of our departure from the non-traded REIT space, making our company simpler step by step and improving the caliber of our cash flows. I'm happy to report we landed at the upper end of what we initially projected for merger accretion, driven by a mix of things, among them better NOI growth from the self-storage properties it operates. Turning to organic growth, since almost 60% of our rents stem from leases linked to inflation, we keep producing rent growth that leads the sector, thanks to our decades-long emphasis on sale leasebacks and our ability to negotiate lease terms directly. In Q2, roughly 15% of our inflation-linked ABR underwent scheduled rent bumps, averaging a 5.6% increase. Among those, leases featuring uncapped CPI escalators recorded average rent growth of slightly below 7%, while CPI-linked leases—those with escalators tied to CPI but subject to caps—saw increases nearing 4%. All of this pushed our total contractual same-store growth up to 3% in Q2, which we think stands as the net lease sector's highest. With the inflation outlook as it stands now, we expect our total contractual same-store growth to climb even more, reaching roughly 3.5% during the back half of the year and moving nearer to 4% by early 2023, possibly going beyond that should inflation stay around the levels seen lately. Beyond the assets coming in via the CPA 18 merger, we've also moved ahead very well on the investment volume built into the guidance we originally gave, with approximately $1.1 billion invested so far this year, comprising $478 million put to work in the second quarter plus a bit more than $300 million during July. Inside our diversified strategy, warehouse and industrial properties stay our main emphasis, making up more than 80% of second quarter deal volume. Looking at regions, our second quarter investments divided approximately two-thirds to one-third between the US and Europe. We also keep producing robust deal flow from relationships with existing tenants and sponsors, accounting for nearly 80% of second quarter deal volume. Our pipeline is still fluid, yet we keep seeing abundant opportunities and feel positive about our position at this stage of the year. Altogether, counting the transactions already closed, those sitting in advanced pipeline stages, and capital projects or commitments set to finish during 2022. We have solid visibility into investment and volume nearing $1.5 billion with five months left in the year, the fourth quarter included, which tends to be the best quarter since sellers look to wrap up transactions before year-end. Now shifting to the transaction market backdrop, which kept shifting through the second quarter and can reasonably be described as still in an adjustment period responding to sharply higher interest rates, as sellers' cap rate expectations catch up with buyers' across property types and regions. Generally speaking, for the sorts of investments we pursue, we've seen market cap rates rise about 50 to 100 basis points so far this year, with most of that shift happening after the first quarter ended. The $1.1 billion of investments closed year-to-date carried a weighted average cap rate of roughly 6.1%, which takes in investments finalized at tighter cap rates earlier in the year. Though we closed deals spanning a broad range of cap rates, broadly we moved from making investments with going in cap rates in the fives during the first quarter to making investments with cap rates in the mid-sixes during the second quarter, and we see potential for cap rates to rise further in the second half of the year. Naturally, initial cap rates aren't our only concern. Just as importantly, our investment spreads are gaining from stronger growth on newly originated deals. For leases where rent escalations are tied to CPI, we're projecting a fairly high growth rate in the first year or two, which benefits our unlevered IRRs or average yields. Fixed rent bumps on new deals have likewise been trending gradually upward. Because rent growth has picked up and our cost of equity has improved, we won't require the same amount of cap rate expansion that most of our net lease competitors will need before spreads return to where they stood a year ago. When it comes to our capacity to secure transactions, the strategy we've built continues to deliver, since sellers get confidence that we'll close thanks to the modest leverage we use in underwriting and our substantial liquidity. In fact, our competitive standing has gotten stronger, because buyers who rely more heavily on debt — private equity real estate funds among them, along with others depending on CMBS — have mostly stepped away, since their cost of capital has jumped dramatically or acetate debt simply isn't available. That stands in Mark's contrast to recent years, when sellers tended to ignore the execution risks tied to those buyers, which let them capture deals at pricing just a few basis points tighter than what traditional REITs offered.

Moving on to where we stand with capital: during Q2 we sold more than $300 million in equity forwards via our ATM program, at an average price near $84 a share, which leaves us extremely well capitalized. Combined with equity forwards we issued earlier that are still undrawn, we have sufficient equity capital on hand right now to support more than $1 billion of investments while keeping leverage neutral. So whether we can carry out our 2022 investment volume depends mostly on the broader economy and the net lease transaction markets — especially cap rates — and not on whether we can tap the capital markets. The forward equity we sold in Q2 also plays into our capacity to sustain adequate investment spreads, given that our stock price has improved since earlier in the year and compared with where it stood during 2021. And since we use leverage conservatively, our cost of equity matters more to our overall cost of capital than our cost of debt does. The rise in our stock price has thus helped counter part of the increase in what we pay to borrow; to wrap up, even though investors worry about a global economy that's slowing and the possibility of recession, the points I've gone over this morning leave us confident about navigating the year's second half; beyond stronger internal growth, we anticipate continuing to uncover appealing new investment opportunities at cap rates that keep widening, given our ample liquidity and advantaged cost of equity. We also remain convinced that no other net lease REIT is better positioned than we are when it comes to inflation protection. Our portfolio is among the safest in the REIT space, with cash flows that have proven stable; and with that, I'll hand the call to Toni.

I appreciate that, Jason, and good morning to all of you. For the second quarter, total AFFO came in at $1.31 per share, while real estate AFFO was $1.27 per share, powered by robust same-store rent growth along with the ongoing tempo of our investment activity. We're happy to share our revised guidance this morning, which lifts our projected real estate AFFO by $0.08 per share at the midpoint, or roughly 1.6%, mainly because of what we anticipate from our merger with CPA 18. The accretion we foresee from that merger, together with solid overall results from our core real estate operations, should more than make up for the investment management income we used to receive from managing CPA18. Consequently, for the entire year, our present expectation is total AFFO ranging from $5.22 to $5.30 per share, which is $0.02 higher at the midpoint of our original guidance range. That figure encompasses real estate AFFO of $5.13 to $5.21 per share, reflecting projected growth of about 5.7% compared with last year. Like Jason said, given the pace of our deployment during this year to date and what our pipeline shows us, we are raising the midpoint of our assumption for investment volume by $250 million, which brings the range to $1.75 billion to $2.25 billion. That figure, of course, is separate from and in addition to the approximately $2 billion in assets we expect to bring on through our merger with CPA:18. Once the merger closes, we expect CPA:18's net lease assets to contribute approximately $75 million in annualized base rent, and in addition, the 65 self-storage operating properties we're picking up from CPA:18 should produce about $60 million in annualized operating NOI, with an estimated $26 million flowing into our 2022 guidance from the merger's close through year-end. That comes on top of roughly $10 million of NOI we presently generate from the 19 self-storage operating properties we already owned before the merger. Our disposition activity is still tracking with our original expectations of $250 million to $350 million for the entire year. In Q2, we completed sales of eight properties, generating $93 million in proceeds, and that lifts our first-half figure to $119 million. Certain CPA:18 holdings we originally expected to be divested prior to the merger's completion are now projected to finalize later in 2022, which might move us closer to the top of that range. Once we incorporate the strong core real estate income contributed by CPA:18's assets for the remainder of the year, it ought to more than make up for the management fee revenue we used to receive from CPA:18. That said, when we report for the third quarter, we anticipate roughly $1 million in asset management fees tied to CPA:18, plus approximately $3 million to $4 million of AFFO generated by the stake we hold in CPA:18 — and both of those figures flow through earnings from equity method investments. Beginning in Q4, we will no longer receive those revenue streams, and from that point forward, virtually all of our AFFO will be produced directly by real estate, which simplifies how our business operates and raises the quality of our earnings. Let's turn now to expenses. Regarding the CPA:18 merger, we expect it to impact our expenses only modestly, steadily improving how efficiently we operate compared with the assets and revenue we hold, because nearly every net lease property acquired from CPA:18 carries triple net terms, meaning we don't expect non-pass-through property costs to move much during the second half of the year. Turning to G&A, the updated guidance we've issued presumes a figure in the range of $88 million to $91 million across 2022, which is about $2 million higher at the midpoint, largely attributable to the loss of CPA:18 reimbursements. We expect interest costs to climb during the back half of the year, since we're taking on roughly $780 million in CPA:18 mortgage debt with a weighted average rate of 4.3%. In the second quarter, lease termination and other income totaled $2.6 million — a big drop from the $14.1 million we saw in Q1. At this point, our guidance calls for a full-year figure of about $25 million to $30 million. Last, non-operating income in Q2 was $6 million, driven primarily by realized gains on foreign currency hedges. You may recall that Q1 non-operating income also featured a $4.3 million annual dividend tied to our Lineage Logistics investment, and we don't expect to see that again until the first quarter of 2023. It additionally included a $900,000 final cash dividend on Watermark Lodging Trust preferred stock, which has since been redeemed. So looking at the remainder of the year, we anticipate that this line item will reflect nothing but gains from foreign currency hedging. As a reminder, we hedge the impact of currency fluctuations on our cash flows in two primary ways. The first is by holding an overweight position in debt denominated in foreign currencies — mainly the euro — which produces a natural hedge via interest expense. Our operating expenses denominated in foreign currencies also add to that natural hedge. Additionally, we keep close tabs on the bulk of our leftover cash flows and offset them through derivative agreements, giving our earnings extra protection against adverse swings in foreign exchange. This dual strategy has demonstrated considerable success. As a result, we anticipate that the euro's depreciation during 2022 will impact our guidance only to a minimal degree. Moving on now to our balance sheet and what we've been doing in the capital markets. Through this year to date, we have continued to reinforce our balance sheet position by tapping our ATM program. During Q2, we brought in $39 million from equity issuance, with an average price of roughly $82 for each share. Also, in the second quarter, we sold 3.7 million shares through equity forwards as part of our ATM program. That let us secure funding for future investments, with over $300 million in equity raised at an average gross price of about $84 per share. Along with around $285 million that remains available to settle equity forwards we set up in 2021, we now have nearly $600 million in dry powder from undrawn equity forwards. On the debt side, like we said on last quarter's call, in April we tapped the accordion feature on our term loans for roughly $300 million, and used that money to pay down revolver balances. At the close of Q2, we had drawn about $400 million against our $1.8 billion unsecured revolver. Add in the equity forwards we've only partially tapped, and our liquidity stands in an exceptionally solid place — north of $2 billion when Q2 ended. For the cash portion of the merger, we expect to cover most of it using cash on hand generated by selling CPA-18 assets, with only a small draw on the facility likely needed. With no bond maturities before 2024 and plenty of liquidity to fund our second-half investments, we'll continue to tap capital markets when attractive opportunities arise — a particularly favorable setup amid today's capital markets uncertainty. Turning now to our main leverage metrics. By the close of Q2, our ratio of debt to gross assets came in at 39.8% — near the bottom of our target range — and we anticipate it will remain basically flat once the merger is completed. In the same way, net debt to EBITDA finished the quarter at 5.6 times, and we expect it to remain comfortably inside our target range after the merger closes. For the second quarter, our cash interest coverage ratio reached 6.6 times, which ranks among the best within the net lease peer group. Our outstanding debt at quarter end carried a weighted average interest rate of 2.6%, a reflection of proactive liability management through debt refinancing we completed over recent years, which has helped counterbalance rising interest rates. Just to remind everyone, most of our floating rate debt sits within our credit facility. Also, earlier this week we put out our Green Bond Allocation report — you can find it on our website. I'm glad to share that all proceeds have now been allocated to eligible Green projects, and every one of those projects has either a bream very good rating or a lead Gold Rating or higher. To wrap up, we're in a unique position to outperform thanks to sector leading internal growth and a strong capital position, which support ongoing deal momentum even as cap rates rise; with that, I'll turn the call back to the operator for questions.

Yes, thank you. Good morning. Jason, I'd like to ask about the increase in deal flow — you sound fairly confident regarding what you're seeing. I'm curious whether that's mostly because conditions have shifted and become more appealing, or because WP Carey's cost of capital has stayed comparatively strong, which lets you act more boldly?

Yes, Tony, it's likely a mix of both. Of course, because we take a diversified approach, we've consistently had a broader range of opportunities available than a lot of our competitors, in terms of both the kinds of assets and the locations. And on top of that, our primary emphasis is on sale leasebacks. And those have kept becoming more and more obtainable. In past discussions, we've mentioned how companies' thinking has shifted regarding whether to purchase or rent their real estate, and that trend has carried on. Sale leaseback deals are still happening to help fund mergers and acquisitions, especially those backed by private equity, though more lately, with interest rates climbing and the debt capital markets — particularly the high-yield bond markets, where a lot of our tenants sit just under investment-grade — being out of sorts, we've observed that sellers now view sale leasebacks as perhaps a superior way to raise capital, and considerably more appealing than whatever else they could do. It's likely some mix of factors unique to our situation, but with rates climbing, sellers clearly recognize that cap rates will rise too. Many of them may also figure that further increases are coming, which makes right now an appealing moment to enter the market if cap rates are indeed going to keep moving up.

Understood, thank you. Then regarding CPA 18, how many additional sales will be required once it closes next week, I suppose? I'm just curious how long you'll be holding onto some additional assets there. And that cap rate in the mid-6s you referenced — what has the improvement roughly been, I guess, from the stronger storage performance at that property?

Sure. Brooks, would you like to address the asset sales? And Toni, perhaps you could briefly speak to the storage at CPA 18?

Yes, Brook here. Regarding sales, roughly 75% of our intended total has been finalized, and a pair of additional deals are underway — one should close in August, while the other likely lands toward the end of summer or possibly the start of September.

Alright. So that amounts to roughly a bit above $100 million — somewhere between $100 million and $200 million — that you'll be holding onto for a couple more months or so?

Roughly $100 million, that's right.

All right.

That's correct. Then when it comes to self-storage, what we're observing is ongoing gains across the latter six months of 2025, consistent with trends from recent quarters. As a result, that has effectively shifted us toward positive accretion—or basically break-even—relative to our original projections for the merger.

All right, and the final item from me. I believe your floating-rate portion represents roughly 15% of the whole, and it appears CPA 18 will add a bit more to that. Where would you like that figure to land moving forward? How should we frame our thinking around it?

Sure. I'd characterize our floating-rate borrowings as mostly confined to the credit facility and amounts drawn under it. CPA-18's contribution to that will be fairly small, and I'd anticipate we keep favoring fixed-rate obligations down the road. Regarding the variable portion, it's worth keeping in mind that a sizable chunk is euro-denominated — and since the euro has carried a negative base rate right through to the present, we haven't really witnessed the same kind of shifts. So rate increases have had only a slight effect on us given where we sit in the year and our outlook for the rest of it. That said, I don't anticipate our variable rate climbing. More likely, you'd observe our exposure in that area declining gradually.

Right, and Tony, don't forget what we just said — roughly $600 million in equity forwards still needs to settle. That gives us a bit of room in terms of how we finance deals, and also in how we handle the floating rate debt on our line.

Got it. Great. Thank you.

You're welcome.

Thank you. When you're getting new transactions done, especially with sale leasebacks, what's the tone of the discussions around rent bumps — whether they're tied to CPI from the outset on fresh leases, or simply a set rate? How are those talks really unfolding?

Sure. Listen, CPI remains our emphasis. Naturally, as you'd expect, securing those has perhaps become a bit harder step by step; even so, we continue to find them, particularly across Europe. In that region, I'd say CPI-linked leases tend to be the norm. Before the inflation patterns we've seen lately, nearly every deal we did in Europe, in particular, carried uncapped CPI. These days, caps and floors have likely entered the discussions. We're still securing them — actually, on a year-to-date basis, I believe slightly less than 50% out of the $1.1 billion in deals so far this year include a CPI-based escalator baked in. Our pipeline looks roughly comparable, and should some of those carry caps, then the pipeline probably leans much more heavily toward uncapped CPI, though it has become a bit harder step by step — or perhaps it's simply now something we discuss. Even so, it remains a major point of emphasis for us.

Appreciate it, that clears things up. And since CPA-18 wraps up in just a handful of days, what level of integration effort remains? Clearly you've handled this kind of thing before, but how are you thinking about getting those assets onto the balance sheet?

Yes, so — we've been handling the early stages reasonably well — Toni, would you mind briefly walking through how the integration is primarily accounting-related, and not at all a matter of operations or asset management?

Yes. Considering that we've been handling assets, and like Jason mentioned, it's quite minor even when added. When it comes to accounting, it isn't the sort of substantial undertaking that you might anticipate with M&A.

Thank you very much.

You're welcome.

Morning. Jason, I just wanted to ask how you're viewing tenant credit risk right now. With the operating environment as it is, and I suppose the official recession that's now upon us, are you having to put some tenants onto your internal watch list?

Brooks, would you like to address the watch list and tenant credit?

Alright, credit quality at present is extremely solid — investment grade sits slightly above 30%, and essentially all rent payments are being collected. Looking at the watch list, it remains quite small, coming in at less than 1%, which represents a decline from the roughly 4% peak reached during COVID. Of course, we may be approaching the tail end of the business cycle, so this is a stretch when we are watching things with extra care. Even so, we have not seen any actual credit deterioration up to this point.

Yeah. And Greg, I'd say COVID serves as a solid stress test for just about any portfolio. And obviously, we did really well through that stretch — sort of a leader among peers when it came to collections; we reached the high 90% range pretty quickly on that front. And — the credit quality, but also the credit quality of the assets we hold and how much it matters that tenants, you know, stay current on rent; so we're feeling good about where we stand right now and whether we technically enter a recession or perhaps already have. I don't believe it'll be a major worry or have much impact on us. But like Brooks mentioned, we do watch all the credits in our portfolio very closely.

All right. Yeah. I merely couldn’t tell whether the ongoing problems with the supply chain lined up with your greater emphasis on industrial warehouses. Over roughly the last several months, had the tenant base run into any trouble, compared with a kind of stepped-up effect from COVID, or —

Nothing that has come to our attention. Yeah. Yeah.

All right. Is there anything new regarding what you anticipate doing with the self-storage properties held for CPA:18?

Nothing much to report on that front. The portfolio we're buying is sizable. As I recall, it's 65 operating assets and 42,000 units. A range of possibilities remains open to us. These have been in our ownership as operating assets for quite a while. We definitely could keep them in that same format, with Cube and Extra Space managing the properties under the existing agreements. Alternatively, we might establish a net lease arrangement, much like the one we set up with Extra Space 2 years ago. That possibility is always there. And naturally, selling part or all of the properties is something we could do, based on how well we're able to finance new transactions, so that too is on the table. Still, at this moment, we view each of those paths as quite attractive, though whatever we decide, patience will be our approach — particularly since this asset class is expected to grow substantially. Before reaching any firm conclusions, we'd like to observe additional stabilization in NOI.

All right, and I believe you said previously that regardless of whether you move to a net lease structure, you'd anticipate the earnings contribution staying about the same?

That's right. There may be some slight movement in terms of how we record CapEx compared with how it comes through into NOI or ABR, though it won't amount to anything significant.

All right. Thanks.

Thanks. About what you said regarding cap rates running roughly 50 to 100 basis points greater — does that apply everywhere, or could you give us a bit more detail on how it varies between the US and Europe? And maybe some additional detail on particular property types?

Yeah. What I'd say is that, sort of, both regions, and possibly every property type we're evaluating, likely land inside that 50 to 100 basis point higher band. Honestly, it's tough to put a real number on it. If anything, I'd say industrial assets in Europe may have experienced somewhat more movement than other asset classes, though that's largely due to them having also compressed the most heading into the close of last year and into Q1. So it's likely pretty consistent across at least the asset types we target, or the kinds of deals we target, across regions and property types.

All right. And then, just one more on how tenants are doing. So obviously, energy expenses over in Europe are sort of climbing, and in certain countries there's a rising danger that businesses could face limits on their energy usage. Has anything come to you folks from the tenants? And do you perceive any danger in that area?

Brooks, anything from where you sit? Go ahead and take that one.

Of course. Yes, without a doubt, power expenses have climbed considerably across Europe. Up to this point, we haven't observed any severe consequences for renters — though there has definitely been a bit of complaining. What I'd say is that this creates a chance for our business. As a result, it has grown steadily more attractive to tenants, and in a number of markets Europe is highly appealing. So moving ahead, that should give us a solid run rate opportunity.

Yes, this gives us a chance to put money into capital, but just as crucially, it lets us sit down with tenants and discuss extending their leases, which helps weave our properties more deeply into how they run things. So overall, I see that as a good thing. That said, over the near term, it will definitely create some strain on certain tenants' margins.

Thank you, and thanks to you both.

Yes, good morning. I wanted to ask whether you might share some perspective regarding the TPI cap. For those leases subject to a cap, do the escalators, meaning the caps, sit nearer to 2% or 3%?

Looking back historically — Toni, please correct me if I have this wrong — across the portfolio those caps tend to be around the low 3s. On transactions we've more recently been working through that carry caps, I believe they've crept somewhat higher, into the mid-3s. However —

Yeah. I think internationally, it's mid-3s. And in the US it's closer to 3%.

All right, that's helpful. And regarding the guidance, you actually nudged it up on acquisition growth, even with FX acting as a headwind that's become more severe. I'm curious, if that FX headwind weren't there, would the guidance have been raised even more? Also, could you give us any sense of how big a headwind FX represents for WPC during the latter half of the year?

Absolutely. Yes, Sheila, I'll handle that one. I believe I noted during my prepared comments that the majority of risk movements in our foreign cash flows get offset by our hedging strategy. Once hedging is factored in, the effect between when we first issued guidance and where things stand today amounts to slightly less than a 1% decrease in total AFFO. That figure assumes the euro stays unchanged from its current level, roughly 102. So there may be some potential upside, depending on how you expect rates to move across the back half of the year. Still, we managed to offset a substantial portion of it through the hedging strategy we currently have.

Alright, thank you very much, and thanks. You've still got a lot going on with acquisitions. Jason, though, you mentioned that cap rate expansion has picked up substantially compared to the last call. I'm wondering if you think that's going to continue. And if so, what's the reasoning behind not waiting a little longer before making more investments? Yeah. Well, predicting what's going to happen isn't easy. I mean, we've been watching cap rates, at least within our own portfolio, and for what we purchased during the first quarter, the deals we were doing were generally in the 5s. A lot of those came about during the latter part of 2021 and were finalized in the first quarter, which happened prior to any significant shift in rates. Then, during Q2, I'd say the majority of our transactions—or at minimum the typical one—landed closer to the mid-6s. Our pipeline, as I see it, is likely in a similar range, perhaps a bit stronger, though that hinges on which kinds of assets we end up closing. But to address what you're really asking—whether holding out for higher cap rates makes more sense. From where I sit, as long as the returns we can earn are large enough to justify the level of risk in the deals we're doing, my view is that we should keep deploying capital. We're confident that's achievable in this market, and our funding and capital situation is quite strong too, since we still have $600 million in equity forwards that haven't yet been settled. If you add that to what we can draw from our credit facility, we're sitting on roughly $2 billion in liquidity right now. So my view is that we're in a position to pursue transactions, since they look appealing. Our hope is that cap rates keep climbing through the back half of this year and on into the next one, which would make things even more appealing.

Alright. There's a decent chunk of debt coming due over the next few years. Could you give us an update on where you might be able to raise mortgage debt and unsecured debt at this point?