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

Welcome to the session of Citi's 2023 Global Property CEO Conference. I'm Eric Wolfe with Citi Research, and we are pleased to have with us W. P. Carey and CEO, Jason Fox. This session is for Citi clients only. If any other individuals are on the line, please disconnect now. Disclosures are available on the webcast and at the AV desk. And as a reminder, the questions I will ask during the session will not reflect or imply user opinions from myself or Citi Research and are being asked for information purposes only. For those in the room or the webcast, you can sign on to liveqa.com and enter code Cit2023 to submit any questions if you do not want to raise your hand. Jason, we'll turn it over to you to introduce your team and get some opening remarks, and then we'll go into Q&A.

Okay. Sure. Yes. Thank you, Eric. Appreciate having us, and thanks to all of you for joining us today. And of course, the tens of thousands of you that are listening over the airwaves. I'm joined today by Peter Sands to my left, who heads up Investor Relations; and Jeremiah Gregory, who heads up Capital Markets for us. W. P. Carey, we're one of the largest net lease REITs with about an $18 billion equity market cap, about a $25 billion total enterprise value. We are diversified. We invest both in the U.S., North America and Europe across property types, primarily industrial, both in the U.S. and Europe. And in addition to that, retail in Europe as well. And we'll open it up to you for questions.

Great. So we're in a pretty volatile environment, both in terms of capital costs and sort of future expectations around economic growth. Given that you're a global investor, as you just mentioned, you look at multiple property types, you look in multiple geographies. Can you just sort of talk about how you manage that entire process given that you're looking at so much and then sort of making sure that you get the right spread, your cost of capital and the right risk adjusted returns for your investors?

Yes, sure. I mean being diversified, there's a lot of advantage in that. I think there's downside protection, which we talk about, and that's certainly important during times of economic volatility. It's also important on the growth side. As you mentioned, we have a lot of different geographies and property types we focus on, and we have a wide funnel and therefore, we're able to kind of select the best opportunities and provide a higher level of externally driven growth. We do have teams based both here in the U.S. and in Europe. We've been in Europe investing since 1998. So we've made our mistakes over time, but we have a pretty well-oiled machine at this point in time. The team in Amsterdam is about 40 to 50 people, focus on operations, and we invest primarily out of London from the investments team. And they're pros. We have local people on the ground. They understand the markets, they understand the cultures. They have lots of relationships there, and it's part of the process. Certainly, management based in New York, we have a very rigorous pricing committee, investment committee process that oversees all of it, but a lot of it is managed locally where we have good people on the ground.

And I guess, what were some of the mistakes -- you said you made some mistakes in Europe. And I guess just curious sort of what those were and sort of what you learned from and how that sort of applied in your investment process today?

Yes, sure. I mean look, when you get into new markets, there's lots to learn, whether it's tax structuring, understanding local laws, bankruptcy laws. And I wouldn't say there's a lot of mistakes, but each time you do a new deal, you've learned something that you hadn't done in the past. At this point, we're in many markets across Europe, but it's primarily Northern and Western. Germany is our largest country. And like I said, we have great people on the ground and local partners that help us get through the underwriting and closing processes as well as managing the asset portfolio kind of on a long-term basis.

And I think you mentioned on the call that last year, at this time, you saw rates rise pretty quickly, and that was a bit of a headwind towards acquiring more just sort of an uncertain cost of capital. Same thing is somewhat happened this year, the 10-year is getting down to call it 3.2%, 3.3%, and then now in the 3.9% to 4% range. So I guess now that the same thing is happening in this year, should we expect that to be a sort of a headwind towards your acquisition growth? Or are cap rates adjusted enough to where you feel like you're getting the right spread to your cost of capital?

Yes, I think there's a couple of things to point out here. Number one, cap rates have adjusted, especially in the markets that we target and really maybe especially in the ways that we source new investments. 90-plus percent of what we've been acquiring in the last couple of years have been sourced either through sale leasebacks were build-to-suits. We were able to dictate pricing, terms, lease lengths, the type of bump structures that are in there. They're more complicated deals. There tends to be a smaller universe of buyers. And I think from a seller's perspective, there's more execution risk. So we do have a bit more pricing power. We have seen cap rates rise more within the sale-leaseback market, especially when you consider the types of companies that we target, which is just below investment grade, where we think we can get better structures and more yield. And really, at this point in time, we think in my 20-plus years of doing this, I'm not sure if we've seen a more constructive point in the cycle to do sale leasebacks, where corporates have fewer alternatives to raise capital, especially those that are just below investment grade, the high-yield markets have ballooned out a lot further than an investment-grade bond issuer like we have. So our cost of capital is in a very strong position relative to their alternatives, which might be the leveraged loan market. I think on top of that, historically, our competition for sale leasebacks has been mainly private equity real estate investors funds that are targeting a similar asset or transaction that we are. They've historically relied on higher leverage to generate their returns. And it's mainly in the mortgage markets that have gapped out again much further than where our costs have. So we're in a good position. We have some pricing power. We have the history of execution. We have relationships. And I think all those tailwinds have benefited us to maintain spreads despite the volatility in the rate markets. I think on top of that, we have been very proactive in how we've raised capital. We're sitting on just under as of the end of Q4, just under $600 million of equity forwards all raised at or above where we're currently trading. We also have significant availability on our revolver, which gives us over $2 billion of liquidity. So we can be patient. We don't need to be in the capital markets. We could execute on a large percentage of our 2023 target investment volume and not have to be in the capital markets. But we're certainly mindful of where bond prices have gone, where interest rates have gone. And we're going to demand that we get cap rates and pricing execution or deals that make sense in that -- in the current interest rate environment.

I mean that leads to my next question, which is if you hadn't sort of prefunded some of your growth rather through equity or raising debt capital earlier on and you just had to look at today's sort of unsecured debt costs or wherever you think you could borrow, like would deals at the current cap rate makes sense?

Yes. I think that we underwrite based on the current capital markets, not necessarily what we've already raised. Historically, we've targeted cap rates in the 5% to 7% range, a relatively wide range, but it's a diverse target of investment opportunities. We're currently targeting, I would say, 6% to 8% range, with the vast majority of the deals we're acquiring in the 6.5%, 7% and into the -- maybe up into the mid-7s as well. So we think that is enough spread relative to where we can currently issue bonds based on where our current multiple is. And like I said, it's a good environment for us.

Got you. And you mentioned that the sale leaseback market has never been sort of more promising because debt costs are higher. The private equity guys have moved away. I guess one thing you probably want to avoid though is being the sort of the lender of last resort. So when you think about the sort of type of opportunities that you're looking at, I mean, are you looking at companies that are trying to grow with this capital? Or are they simply trying to refinance debt that they can't get refinanced anywhere else? What are the type of sort of companies? And why are they utilizing the sale-leaseback market to raise capital from you?

Yes. I mean more recently, a lot of our target deals have been alongside private equity firm buyouts. So alongside sponsors who are putting in a big equity check larger than what we're contributing to the capitalization. So I think that's certainly a piece of it. But we're open to underwriting across the credit spectrum. Most of the deals are just below investment grade. We had a history and an expertise in credit underwriting, I think it's part of our competitive advantage relative to many of our peers. So a lot of it is underwriting, the corporate credit. A lot of it is selecting the right assets, acquiring at the right basis, setting rents at levels that are at or below market. So in the event there is some downside scenario, you can reposition these assets and maintain the single level of cash flows. But it's part of a pretty well-honed process at this point in time. We've been doing this for 50 years. We actually celebrated our 50th anniversary next month as a company. And the history of the company has been focused on structuring these transactions. So it's a market that we're comfortable with. And these tend to be large companies. For instance, some of the deals we're looking at now are with multibillion-dollar buyouts where we're a piece of the transaction. These are big companies that have access to institutional capital who have liquidity, and that's a big part of our underwriting.

And maybe you could give us a sense of sort of the total deal volume you're looking at sort of what percentage or how you source it? What percentage of it generally closes? And between the time that you're looking at, if it closes the due diligence that you do? Obviously, it's different probably, whether it's a new tenant or existing tenant, but maybe you could go into the diligence process.

Yes, sure. I mean, sale leasebacks tend to be a little bit more complicated from an accounting and tax standpoint. So again, that's a competitive advantage for us where execution is something that the advisers and the companies are more focused on than pricing. We may not be the top bidder or even the top 2 bidders, but we have a cost of capital that allows to be competitive. And of course, we have the execution history on our side. So the process typically is a -- we might be one of a very few group of buyers that are engaged with the tenant. In many cases, these are private equity sponsors and these are repeat transactions. And so there is a lease negotiation that adds some uncertainty deal, but on repeat deals, that tends to be easily navigated. I would say deals tend to take 60 to 90 days start to finish and includes an underwriting period upfront, a negotiation of terms and ultimately, the lease and the other transaction documents. So it's typically a 60- to 90-day period. We're careful not to have hard deposits in place until we're ready to close until our diligence is done. We don't typically enter into binding purchase and sale agreements. They tend to be letters of intent that then move their way into a closed transaction. I think that's especially important in an environment like we're in right now with the change in capital markets. But again, it's a process that's been well honed through many years. I think that, again, a lot of our counterparties rely on us to do transactions in tough environments and distress causes opportunity, and this is a time when I think that we will outshine many of our peers that are newer to the space than we are.

And I guess what percent of deals would you say that you look at end up closing? I guess what I'm trying to get a feel for is if you're doing $2 billion of acquisitions in the year, does that mean you're looking at sort of $10 billion of deals and sort of trying to think through all the organizational sort of necessities to look at $10 billion of deals?

Yes. I mean that's probably order of magnitude, it's somewhere in the $10 billion range. Our funnel is pretty wide at the top, but we can discard a lot of deals pretty quickly that I wouldn't even include in the $10 billion, either they don't have structures in place that we like. They're too small. They're in geographies or property types that we're not focused on. But I think $10 billion is probably the big round number that funnels down into a $2 billion year for us. Out of that $10 billion, I would say maybe $3 billion of that is something that we're pursuing in a serious way. And so once we get to a point where we're negotiating with a tenant, it's a pretty good hit rate. The deals that we passed on are ones typically, I would say, pricing can be an issue. Structure is also an issue. We are very much focused on doing portfolio transactions with master leases. We're looking for critical operating real estate. We're looking for fungible real estate in markets that have velocity in terms of re-tenanting and those are things that get shaken out relatively early in the process. So it probably gets filtered down to somewhere in the $3 billion range that would ultimately result in a $2 billion transaction year.

Got it. And one of the many things about your portfolio and the way you've structured a number of your deals is that you have a higher percentage of CPI-linked escalators than many of your peers. Just given how high inflation has been for the last 2 years or so, is there more reluctance to structure deals like that? Are you still able to get people to agree to the CPI-linked deal? I would think that if inflation is running at 6% or 5%, they'd probably be less likely in the environment to agree to something like that.

Yes. Look, it's certainly, as you can expect, more of a conversation at this point in time. I mean we -- as I mentioned earlier, we've been doing this for a long time. When Bill Carey founded the business, a lot of the growth happened in the late '70s and into the '80s investing. And obviously, those were high inflationary points in time. And so inflation was an important mitigant, especially when you have these long-duration contracts, we typically focus on 15 to 25 years. So historically, it was something that we're able to negotiate, especially during benign inflationary environments. I would say it's a little bit more prevalent in Europe, where it's more customary. And we still are achieving a fair amount of our deals have inflation-based increases. But the conversation is -- there's more pushback in uncapped CPI. Sometimes it's just reflected in a higher cap rate if we're willing to provide a cap in place. When we are willing to put a cap in place, we tend to get a floor as well. And in this current environment, both the floors and the caps to the extent we have them are higher than where they have been in the past. Instead of, call it, a floor of 1% and a cap of 4%, we might be talking about a 2% floor and a 5% cap now. And even when we're not getting an inflation-based increase during our negotiations, we tend to end up with better fixed increases as well. I think historically, if we were not able to achieve inflation-based increases, we would settle on a fixed increase that was typically in and around 2% per year. Those now are 2.25%, 2.5%, sometimes 3%. So if it's not directly flowing through in our increases into an inflation-based lease, we're still seeing the benefits flow through to our fixed increases. And that's reflected in our same-store growth, which is very much at the top end of all of our peer set.

Then we had a question from the audience is where do you think your stock trades relative to NAV since you've issued stock below the current share price via the ATM over the past year?

Jeremiah, do you want to talk about that from a capital markets perspective?

I mean I think our view is that we're certainly trading at a premium to NAV here. We're certainly trading at a premium to NAV, maybe more or less on any given day, but a healthy premium one that feels comfortable for us to be issuing equity accretively both from an earnings perspective, but also from an NAV perspective. I guess the second part of the question was we're issuing stock, I guess, at prices both above and below. I mean, most of the stock that we've issued really over the course of the last year has kind of been in the zone that we're trading in right now. And then I think if you go back to 2021, we did, I think, some overnight transactions that were below $80 a share. Maybe it's in reference to that. But certainly, over time, I mean, our goal is, of course, to keep growing accretively, keep growing our equity value and continually fund deals with the mix of debt and equity, keeping leverage neutral.

You've been leaning on the ATM a little bit more than sort of using follow-on offerings. Just curious, is that a strategy to sort of try to spread out your cost of capital not sort of time the markets or just simply a product of just how things have worked out with your acquisition activity?

I mean it's maybe a little more of the second. I mean I don't think there's any intent on our part to signal that we're meaning more strongly to ATM versus overnight issuance. We're always going to evaluate kind of what our needs are, where the stock is trading, obviously, our view of the markets and our view of our needs in terms of upcoming investments. I think over the course of the last year, for the most part, we've been ahead of whatever our funding needs are. Like Jason said, we're currently sitting on just under $600 million of equity forward. And I think in that kind of stance when sort of the way the deal flow has been working out and just where the stock has been trading, the ATMs made a lot of sense to kind of sort of continue to stay ahead of needs and maybe kind of match funding needs but preserve our dry powder. But we could certainly imagine scenarios where we'd be just as interested or more interested in doing overnight transactions. It really just depends on all those factors. I mean the bottom line for us right now is we're in a very comfortable position. We would say a very strong position from an equity perspective. The balance sheet metrics are at or below what our leverage targets are, and that's without accounting for the almost $600 million of equity that we're sitting on. So we certainly feel like we have a position here where the balance sheet is strong, and we can do deals. If we like those deals, we think they're the right risk-adjusted returns, then we obviously wouldn't hesitate to use that equity that we've raised, but I think that gives us a lot of flexibility and a lot of optionality in terms of how we raise capital over the course of 2023.

I mean, when you see your cost of capital go down, I guess the question is how aggressive would you be in sort of thinking about accelerating external growth, some of your peers, they tripled in and have kind of come up with a more strategy of just trying to generate mid-single-digit growth. But just curious, like when you see maybe your spread gap out to like 250 basis points of accretion or whatever level of accretion is, do you try to accelerate growth at that point? Are you trying to keep things a little bit more steady, predictable and kind of generate a, call it, double-digit type of return with mid-single-digit earnings growth and a 5% dividend yield?

Look, I think that if the capital markets and cap rates are in sync and we're generating spreads, especially if they're excess and what we've been generating stores, I think that we would lean in and want to do more deals and accelerate growth. I think that's an environment that we would embrace and hopefully, that's what we see this year.

And then in terms of thinking about industry asset types, where are you seeing sort of the best opportunities right now?

Yes. We're still seeing the best opportunities in industrial, I say, skewed towards the U.S. right now. These are -- you can hear the theme, it's primarily sourced through sale-leasebacks where we have a lot of advantages to drive some yield. Many of these, as I said, are in conjunction with a with larger buyouts. And these are still diverse -- it's a little bit diverse group of assets. There are logistics assets, light manufacturing, but we've also found a good niche in food production and food processing kind of nondiscretionary businesses with high criticality, really substantial tenant investment, highly disruptive to shut down or change facilities. Those are the type of investments that we like. And again, we've seen some traction in that space as well as well as R&D -- there's been some lab investments we've made. So those are all areas that we think are interesting right now. Retail in Europe has been another place that we've focused. I think they're added volatility and maybe the sharper increases in interest rates have created a little bit of a bid-ask spread on deals in Europe, but we're starting to see some activity percolate over there. So I think that's going to be interesting for us, too.

We have some more questions here. Can you address tenant retention in the current environment? Is there good versus bad churn at the end of the lease?

Do you want to talk about lease outcomes Jeremiah?

Yes. I mean I don't think that we'd sort of point to any big trends we're seeing right now. I think when we think about tenant retention, we're going to just refer to what kind of our historical metrics have looked like. And so while we've had, frankly, on re-leasing, we've had several quarters where our releasing spreads have been positive and sort of stronger than they've been historically. We tend to look at a longer period of time historically to kind of point to an average of anywhere from 100% recovery to maybe 3% to 5% rent rolled on, on average across the portfolio. And so I don't think there's anything that we see right now in terms of trends or changes in the portfolio that would cause us to sort of think about it differently when you think about underwriting the company as a whole. So -- and we always have to remind people that for us, these really long-term leases, 20 years or more than 20 years in terms of the new ones we're originating, in any given year, it's always a very small amount of our portfolio that's rolling. It may, in some cases, just be a handful of tenants. And so it can be tricky to extrapolate too much from what you see in any given year, certainly, what you see in any given quarter. And that's why we focus more on a longer-term kind of trailing average.

And presumably, if you're selling assets, you're either selling them for 1 or 2 reasons. One, it's just the price is so attractive or 2, you're trying to sell problem assets, things that are vacant or things that you think will be problems in the future. Is there any just general level that you're able to recover of your original investment if you put in $100 into something and you're having to sell it for whatever problem raising, you get it back $0.80 on the dollar. Or just trying to understand how much of asset value generally cover when you have these sort of problem assets that you're trying to sell?

Yes. Look, it's a mix of outcomes. And I think that we're not selling many assets to peer. I think our guidance for this year is $300 million to midpoint -- so $300 million to midpoint on a $25 billion portfolio. There are some that are no longer core assets once we think of peaked in value. I can think of an example of a recent deal in which we provided a small amount of capital for expansion. We extended the lease term, and we thought that was the optimal time to sell. It was noncore real estate and a credit that we saw deteriorating and we got great execution on that. I think what's embedded in our -- a big piece of what's embedded in our guidance this year are some Marriott hotels that were under a long-term lease to investment-grade. Marriott just recently went through a conversion from net lease to -- they did not renew and we've said entered into long-term franchise agreements. These are performing hotels that have really a little bit of an uptick in cash flow post conversion. But those aren't core to our holdings, and we would expect to sell those. I think the guidance we suggest would be sold at the end of the year this year. So we can be opportunistic on the exact timing, but again, it's not in our core holdings to keep those assets.

Got it. And there is actually an audience question around that. But also, could you give some color of company expectation around the leases of U-Haul?

Yes, sure. So U-Haul is our largest tenant. We had acquired the self-storage assets on a -- through a sale leaseback with U-Haul back in 2004. And as part of that transaction, we agreed to give them a purchase option at the end of the initial lease term, which is in the spring of 2024. So 1 year from now. And we do expect them to exercise that option. The purchase price is a function of the original -- the purchase option price is based on the original purchase price grown by inflation, really it's 90% of inflation over the 20-year period. So we've seen some good tailwinds in terms of what that option price looks like. It's something that is certainly higher than where it would have -- where we thought it would have been several years ago. So the disposition cap rate has effectively been coming down. We've also had the benefit of seeing rising cap rates on the reinvestment side. So that spread that maybe a couple of years ago, looked like it could have been more substantial is really just a modest spread at this point in time and maybe even a very slight headwind to growth beginning next spring when they exercise that. But we do expect them to exercise. These are a very good portfolio, the options in the money. And that's something that we'll provide a little bit more color around the timing, I think, when it becomes more visible. But it will be a very modest drag at this point. I think one thing that we want to make sure we mentioned in conjunction with you all, we have another similar size asset on our balance sheet. But this is the lineage logistics securities that we own. It's -- I think the latest mark is around $400 million. That investment is not providing or not paying a dividend. So it's effectively a 0 yielding investment that we have that ultimately will be a very cheap source of capital for us to invest. When you think about we have negative spread on the U-Haul transaction 81% will more than make up for, call it, the positive 7% spread that we'll have in reinvesting the Lineage proceeds when we choose to do that.

Yes. So I guess I don't know if you can share the size of the U-Haul but also the cap rate. But I'm assuming from what you just said, it sounds like a 1% sort of negative, kind of like 8% rate, then you reinvested at 7%, that's where you're getting 1%?

Yes. So it's probably in the low 8s, depending on where the purchase price moves with inflation, and it's in the $400 million to $500 million range in terms of asset value.

Got you. And I guess any other sort of repurchase options in the near term next kind of 3 years, 4...

No. The only 2 that have been of scale and worth talking about was the New York Times transaction from several years ago, and that was a benefit to disposed office after a very successful 10-year investment and then the U-Haul transaction. I think any other purchase options that are in our portfolio are going to -- for one, there is nothing of significant size. And then 2, they're primarily and probably almost entirely structured as the greater of some factor above our original purchase price or fair market value. So in this case, U-Haul would have a different outcome if it had been an F&B purchase option.

Your bad debt is pretty low and was frankly low through a lot of COVID, which certainly speaks to asset quality. But when you do see problems, tenant, like how are you monitoring your tenants' financial health? What do you do to try to get in front of those issues? If anything, what sort of recourse do you -- or like ability do you have to actually do something? I'm assuming that mainly you can just sell the asset, but I'm wondering if there's other cases where you actually work with the tenant to improve performance or if it's really just more of an asset management type decision?

Yes. Look, I mean, we have a big portfolio, and we have a very talented asset management team and they each have their portfolio of assets that they oversee. We have a quarterly process where they report on the state of the assets to our management team. But that's their day job is to stay on top of the assets and look for best outcomes to stay in front of negative events and potentially look to either sell those assets or understand what the alternatives may be. Our watch list is quite benign at this point in time. And when we do have any kind of defaults, our outcomes usually are quite strong. We tend to own critical operating assets with big companies. Big companies tend to restructure rather than liquidate -- when you have a critical operating asset, the vast majority of the time, they're going to firm the lease at $100 on the $1. I think at other times, when we either got underwriting wrong or we don't have a critical asset because it's changed over time, we do have the real estate to fall back on. It's predominantly the largest percentage of our portfolio is industrial. We tend to see certainly some tailwinds in those markets. And we've tended fair -- quite well on outcomes like that.

You mentioned the same-store growth of around 4%, but there's a bit of a gap between that and the comprehensive same-store growth, at least last year. It sounds like this year, based on your earnings call, you're expecting more like 4% in terms of same-store contractual escalators, but maybe around 3% in terms of comprehensive same-store growth. First, I guess, question is, is that correct? And then second, maybe you could help people understand like why does the 4% go down to 3%?

Yes. Jeremiah, you want to touch on that?

Sure. Yes. I mean the comprehensive same-store growth is probably -- I mean, I think in the net lease world, a lot of people focus on contractual rent bumps, certainly, it's something that people have been interested with us. So that's an important disclosure to have out there. But the comprehensive number is probably more akin to what people are used to thinking about certainly outside the net lease space when they're thinking about just what's referred to as same-store growth. So all that means is that it's accounting for not just the contractual rent bumps, but also if there's a vacancy, if there's downtime, if there's a lease roll down. I guess, for that matter, if there's a lease roll up from a vacant asset, if the tenant stops paying rent for some reason, all that's going to be captured in comprehensive. So it's all in that number. I mean that number when we first started disclosing it, which was maybe 4 or 5 years ago, certainly before COVID, we always sort of -- our thesis was that there was going to be about 100 basis points of leakage. We then got into COVID in the last several years, and those numbers have really gotten scrambled. We've had some quarters and maybe even close to a year where comprehensive same-store growth was actually higher than contractual same-store growth. I think this year, we think maybe it settles back into what we would view as -- what we would have expected to have been more of a long-term equilibrium. In any given year, I think it could be a little bit more, a little bit less than that depending on what happens with individual assets or individual tenants. But as far as expectations we might want to set or the way maybe we think people should look at it, we do think that on average, there's going to be some leakage between the contractual headline number and then what's actually kind of flowing through earnings.

And if there's no more audience questions, we've been asking each session about your top ESG priority. And then, again, if there's no more audience questions, then we'll go into rapid fire questions after that.

Sure. So ESG, our focus has been on data collection. We built a scalable system to collect and aggregate and analyze really our tenants' energy usage across the portfolio, so that we're ultimately going to be in a pretty strong position to report on portfolio emissions. Non-needy task as a net lease REIT, it was by definition, our tenant is operating these properties, and we're effectively asset managing. But we've had some good response. And at this point in time, we're a little over 50% of our ABR or our tenants by ABR. We're able to collect the vast majority of that is automated where we built in systems through some cloud-based technology. We hope to expand on that. I think our goal for this year is to get to 60%. But I think we're -- I think clearly the market leader in net lease from an actual data collection. And importantly, the data gathering and the tenant outreach that goes along with the data gathering really helps lead to project-based investments as well, whether it's solar installations or other systems that we can invest, lengthen lease terms, put more capital to work, so all beneficial to us.

All right. And I've been told that I forgot to ask top 3 reasons to buy your stock, and I have to ask because we need it for our weekly.

Sure. Number one, internal growth, we've talked about that. We continue to generate sector-leading same-store growth, mainly driven by the 55% of our ABR of leases that are tied to CPI. 37% of that is uncapped. 18% is capped, and we expect that to translate into 4% same-store growth in Q1 of this year and really for the full 2023. External growth, mainly with a focus on sale leasebacks. I talked about the constructive environment we're in as companies continue to explore sale leasebacks and an alternative to high-priced high-yield debt -- we expect more deal volume this year at higher cap rates and greater spreads. And then I think, third, we alluded to it earlier, we're well positioned on a balance sheet perspective. Dry powder, well-priced equity forwards that will support our investments for the year.

Thank you very much.

Welcome.