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

All right. Welcome to Citi's 2026 Global Property CEO Conference. I'm Smedes Rose of Citi Research. We're pleased to have with us W. P. Carey and CEO, Jason Fox. This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 and submit questions. Jason, I'll turn it over to you to introduce your company and team, provide any opening remarks and then tell the audience the top reasons an investors should buy your stock, and then we'll open it up to Q&A.

Yes. Thanks for having us, as always, and thanks for joining us for this Q&A session. With me to my left is Peter Sands, who heads up Investor Relations for us. And to my right is Jeremiah Gregory who is our Head of Strategy and Capital Markets. So W. P. Carey, we are a net lease REIT that has a diversified model across geographies and property types. We have about a $16 billion equity market cap, call it, $25 billion enterprise value and have been around for over 50 years. In terms of the reasons to buy us right now, I think first and foremost, we're seeing continued strength in our investment activity, which lays the foundation for attractive, sustainable growth going forward. We had a record year for deal volume in 2025, including a very strong Q4, and that momentum has carried over into 2025. So that's number one. Number two, we're very well positioned from a funding perspective. with over $900 million of unsettled equity forwards. So our 2026 investment volume is effectively prefunded and really we have prefunded into 2027 in all likelihood. Three, our portfolio continues to have one of the best rent growth profiles in the net lease sector and likely contributes close to half of our expected earnings growth. So that derisks our growth profile relative to someone who's focused solely on acquisitions. And then lastly, we do think there's upside in our stock, and really, there's 2 reasons for that. One is our earnings guidance, our AFFO guidance. We view as conservative and as a starting point, particularly with our assumptions around 2026 deal volume and potential credit loss. And then lastly, while our stock has been on a good run, it still trades at a multiple that's at a discount to some of our net lease peers that have similar growth profile. So we think there's an opportunity to compress that delta.

Okay. Great. Okay. That's a good opening commentary. So maybe we can just talk about a little bit on those. I mean I think the first question is always, you had mentioned on your fourth quarter call and even in third quarter last year about momentum in the acquisitions outlook, you activity was elevated last year. I remember I asked on your fourth quarter call, it seemed like your outlook was sort of conservative this year. So maybe just talk about deal flow, the pipeline, kind of what you're seeing. Let's talk about U.S. versus Europe, just kind of some broad picture and then we can drill down a little more.

Yes, sure. Yes. I mean, look, deal activity is quite active right now. And in the U.S., that's been the case now for, call it, 5 or 6 quarters. And that's for the sector. A lot of that is driven by stability in rates. That's one of the key ingredients and increased investment activity in the net lease space. And for us, if you look back over the past 5 quarters to the fourth quarter of 2024, we've done over $3 billion of investments during that time period. And if you think about what's changed, I mean, a big part of the catalyst here is that 2025 was for all practical purposes, our first clean year in a number of years after having gone through a series of strategic changes from simplifying the model to net lease -- [ pure-play ] net lease REIT, no longer with an investment management platform. Obviously, we spun an office portfolio out. So 2025 is kind of the reset year for us, a clean year from which we can fully utilize the platform that we've developed over many decades. And I think that's kind of showing in the level of activity that we've seen.

Okay. And then as you think about kind of your outlook, maybe just kind of remind us kind of what you're seeing maybe on the watch list, what's embedded into your guidance? And kind of how does that compare to prior year?

Yes. Jeremiah, do you want to talk kind of watchlist credit loss?

Sure. I think the first, I think, point we would make is just where we started the year in guidance in terms of potential credit loss cushion from lost rents. We started with $10 million to $15 million baked into our guidance. And so that assumes if that were to happen, we would still achieve the 4.2% growth that's kind of the midpoint of our AFFO guidance. So I think we would say a reasonably conservative starting point that can allow for some unexpected unforeseen events on the tenant credit side and still achieving this 4.2% growth. I think if as the year goes on, tenants are paying rent, there are no unforeseen or major unforeseen outcomes on the tenant credit side, then I think we'd look as the year goes on to tighten up that estimate. And hopefully, that would be able to flow through to perhaps even better growth than the 4.8% we're showing.

What does the $10 million to $15 million equate to as a percent of rent? I think that's normally how your peers quote it. So just to make it kind of easily comparable.

Yes, I think that's -- I want to say that's like 60 to 90 bps.

Say again?

60 to 90.

60 to 90 bps.

And I think if you look at where we ended last year, it was roughly $6 million of -- that flowed through that lost rent number. That was approximately 40 bps last year. So ended last year, I guess, below the low end of the range that we're starting this year with.

I mean, Smedes, one of the kind of themes, if you look at our guidance, and we characterized it on the earnings call as with conservative inputs, and it's similar to the approach we took last year. We started off with a lower deal volume number and a bigger credit loss. And as the year went we had better visibility into the middle part and the end of the year, we were able to refine that and raise the deal volume and we meaningfully brought down the credit loss assumption. That's the kind of expectation that we're starting this year. And despite having conservative deal volume, $1.5 billion at the midpoint relative to the $2.1 billion we did last year and the credit loss assumption that Jeremiah just went through. Despite that, we're still able to generate our base case assumption of 4.2% growth at the midpoint, which is probably better than many of our peers. So we think there's upside there. And again, as we get better visibility into the middle part of the year, I think there's an expectation that we'll refine that and hopefully raise it as well.

Okay. So -- yes, so 2 kind of potential sources of upside: One, less credit loss; two, more acquisition activity. I guess that partly also depends on when that's made during the year, right, because it might be more important for '27, depending on when you acquire stuff this year.

Yes, I think that's fair.

Can you talk a little bit about pricing and how you're thinking about your investing spreads? I mean your cost of capital is obviously much improved over the last year. I assume that makes accretion better for you, but maybe just -- maybe touch on pricing and the spreads that you think you're investing at?

Yes, sure. I mean it's always a pretty wide range of cap rates that we target. I would say, generally speaking, and this is similar to last year, we're targeting across the 7s. In 2025, our weighted average cap rate for the year was 7.6%. And I think importantly, that included bumps that were in the contractual increases that were in the mid- to high 2s. So when factoring in the bump structure, you get to an average yield that's going to be in the low to mid-9s. So pretty substantial spreads we were able to generate last year. That compares to kind of our funding cost of around 6%. And we talked about that a lot of where we were selling self-storage and other assets last year as our primary funding source for the year. I think this year, the expectation is that, that cap rates, I think, broadly for real estate, probably more specifically for net lease could come in a little bit. When you look at where [ 10-year ] treasury has gone, it's been pretty range bound in the kind of 4% to 4.25% for much of this year. And then more recently, it's been at the lower end of that range. That tends to lead to a little bit of cap rate compression, and it's hard to predict exactly how much will take place throughout the year. Our expectation, maybe our assumptions are probably in the 10, 20, 30 basis points. So instead of achieving what's probably mid-7s for this year, we're probably expecting something closer to low to mid-7s. And when you look at how -- and you referenced our cost of capital getting stronger. When you look at where our stock price has gone, what our implied cap rate is, where we raised our recent equity offerings, we think that we can probably generate wider spreads than we did last because our cost of capital has come in. So it's a good environment for us to invest. I think that we want to put capital to work, and we think we'll have success in doing that.

And you mentioned one of the things that could drive cap rates down a little bit is, obviously, the 10-year is an important component for everyone to think about. But what do you see kind of on the competition side? Is that Steady Eddie? Or do you see more, less? And what -- is it such a big industry?

U.S. net lease has always been quite competitive. There are 27 net lease public REITs alone that target U.S. net lease. Most of them target U.S. retail, which is an area that we do want to do deals in. We do have a team that focuses on U.S. retail in the net lease space. But it's not, I would say, a core part of what we've always done. It's more opportunistic. So there's much more competition in U.S. retail. It tends to come from the public REITs. It tends to come from those looking at especially the investment-grade credits in the retail. You also have a pretty substantial [ 10 31 ] bid that can compress cap rates there. So for that reason, I would say we're more active in the industrial side over the last, call it, 5 years, probably something close to 3/4 of our deal volume has been industrial. Most of that is sourced through sale leasebacks. We're able to differentiate ourselves from many of our competitors. So it's less impactful there. I think in that space, we have seen maybe incrementally some of the private capital coming in. You hear about the big asset managers that are expanding into net lease. They generally are acquiring other platforms. I think Elm Tree is now BlackRock. Fundamental is now Starwood. That doesn't mean that there's more net lease investing or more competition or more changing kind of the names of the brands of these competitors or players in this space. So we haven't seen it impact us. I think if you look backward, $3 billion of deals over the last 5 quarters would indicate that it hasn't had a big impact to us. The fact that we're able to continue to generate cap rates in the mid-7s, I think it's also a good evidence that it hasn't impacted us. Hard to predict exactly how active these different investors will get, but we've competed in net lease for a long, long time. And we do have our advantages, especially given our liquidity position and our ability to do complex transactions and write big cash checks.

And what kind of percent of your deals within industrial are coming from, I guess, existing clients versus...

It's a good question. It's probably close to half. And when I think of existing clients, I put it in a couple of categories, certainly existing tenants. We have opportunities to do follow-on deals with existing tenants, and we have a clear built-in advantage there. We also tend to do some transactions with private equity sponsors. So while it may not be the same company when we work with the same sponsor and we can replicate documents and there's a comfort level, there's a big benefit as well. I think the biggest part of what we do, maybe the lowest hanging fruit for us is when we expand buildings that our tenants currently occupy, those are also proprietary deals that are follow-on, and we're doing more and more of those.

Okay. I wanted to ask you, I feel like last year, you did a little more retail as part of your acquisition volume. You talked about just wanting to have more retail exposure in general. I think, is sort of a percentage of your portfolio. I guess could you maybe talk about where you are in terms of percentage exposure kind of where you want to be? And within that, correct me if I'm wrong, but I think of retail as having less embedded bumps relative to industrial. So does this slow your potential kind of organic growth, if you will, if you have more retail exposure?

Yes, maybe I'll start with the last part of that question. Yes, I mean that's part of what the more crowded U.S. retail space creates is deals that tend to have a little bit lower bumps. They tend to have a little less structure. They tend to have lower starting cap rates as well, generally speaking. And that's the -- it's the efficiency of that market with more competition. So we do have a team that targets U.S. retail. We currently have is 22% of our portfolio by ABR. More of that is based in Europe than it is the U.S., but we'd like to do more in the U.S. I think the caveat is we want to maintain discipline around pricing. We think that we can find more opportunistic deals that fit the profile that we typically see with the industrial deals. I think the Life Time Fitness deal that we did at the end of the year is probably a good example to that. I mean Life Time is an existing tenant of ours. We know them well.

And that counts as retail, right?

That counts as retail. I mean for us, retail is pretty broad, and we have pretty big food groups and industrial, we do break down into warehouse and manufacturing. Retail is going to encompass pretty much anything that has an individual user component to it, like a Life time Fitness. So that is under retail. That was a deal where, again, we've done deals with them in the past. The seller of that portfolio is someone that we know well. It was a fund that was looking to generate liquidity for their investors by year-end and make a distribution. So had a quick closing time frame. In fact, it's [ ex W. P. Carey ] people who run that fund, and we have bought assets from them before. So we were an easy partner for them to generate a sale in a short period of time. And Life Time is a company that we like to credit. They're the best -- one of the best, if not the best, high-end fitness operator in the U.S., public company, $6 billion to $7 billion market cap. In the particular portfolio we bought, strong assets, low rents, meaningfully below replacement costs, locations in affluent markets and coverages that are better than their typical store. So we think we got a really strong subset, and that gave us some conviction there. I think that -- maybe the point here is that when we're investing in retail in the U.S., it's going to be more opportunistic. We'd like it to be a bigger piece. If we can generate an incremental $100 million to $200 million of U.S. retail in any given year, along with a couple of other areas that we think we can increase deal volume, that's additive. And we think that will help us get to the $2 billion-plus mark on a year-on-year basis to help us drive earnings growth.

Okay. And so just sticking with retail for a moment. So you talked about Life Time Fitness. What about like the dollar stores, which are kind of a big part of a lot of the other public REITs. And I know you've made some investing there. So how do you think about that?

Yes, we did. We -- if you look at the public net lease REITs, most of them have dollar stores in their top 10 or the top 5 for that matter. August of, I think, 2024 now, I believe, when Dollar General kind of hit their low point, we thought that was an opportune time to buy in low point from the credit standpoint. Their sales has slowed and their stock price had traded off and it's better to buy low than it is to buy high. So we were able to buy when others weren't. And I think we aggregated close to $200 million over about a 6-month period and at cap rates that were mid-7s, I think those are now trading probably in and around 7%. So we think that we got them at a good yield. We do think that Dollar General is the strongest of the 3 dollar store operators. They have the commonality in their name that they're dollar-oriented stores, but their business models are all very different. Dollar General tends to be more nondiscretionary spend, a lot of grocery, a lot of consumables. Very little of their product are exports from China and other overseas places. So it's a credit that we spent time on and looked at over the years and found an opportunity to add some to our portfolio. They're a big tenant of ours. They're top 25. They're not a top 10 tenant. I think we can be opportunistic if we see more deals that we like, but we think it's a good additive to our tenant mix.

You mentioned in your opening remarks that you trade a multiple below some of your net lease peers as there's a lot of them in the space. What do you think investors are concerned about that's driving that multiple down? Or what do you think investors are misunderstanding that you think needs to be clarified?

It's a question that we address with our investors when we leave them. I think the primary hurdle that we talk to our investors about is, can we generate recurring deal volume that can lead to consistent growth? And I mentioned it earlier, 2025 was the reset year for us after close to a decade of resetting the business, exiting the investment management platform, exiting office space, going through COVID. And obviously, we had a credit issue with one of our German tenants, which we're happy to give you updates on that. So I think that our diversified platform, the infrastructure we have in place, the long history of executing on difficult transactions, having scale that allows us to have a lot of flexibility around how we fund deals and that's the capital markets. I think there's a lot of things that we can point to. And part of it is the show-me story. I mean we've done $3 billion of deals in the last 5 quarters. Our pipeline to start the year, I think we're probably ahead of pace for our guidance, and we would expect 2026 to be another very strong year. And when you think about how we can generate deal volume, I think there's a lot of pathways for us to get to those numbers. And it's not just about deal volume, obviously, it's about how does it flow through to earnings growth. This year, and I mentioned this, our 4.2% growth at the midpoint of our initial guidance is conservative. We do that -- expect that to get higher. Our target is to get to mid-single digits. And when you combine that with a dividend yield that's in and around 5%, that can generate a double-digit total shareholder return before any multiple expansion. We think that's a level that will attract investors. And we've started to see it. I mean we're up 30% last year, one of the top-performing REITs in the sector. We still think there's a couple of turns of multiples to go once we can continue to prove out our story and maybe that will take a little bit more time, but there is upside here.

Do you think having a lot of operating assets in the portfolio for a while was a drag on your multiple? Or do you think people sort of didn't care because they understood that you'd ultimately be selling them or how?

Yes. I mean, look, back when there was big same-store growth in self-storage specifically, I think it was viewed positively. But I think memories are short, and there has been volatility over the last 2 years where NOI growth was flat to negative. I think simplifying the story is helpful. That's been a theme of what we've done over the last number of years, simplifying the asset base, simplifying how the different pathways that we earn revenue and certainly reducing our operating exposure to, at this point, a negligible level. I think that's going to be helpful. I think that's additive.

We have a question from the audience. I'll just read to you. How do you see your competitive advantage evolving amidst the heightened competition in the market and expected impact on profit margins?

And what was the last part of that?

The expected impact on profit margins.

I mean, look, the last part is probably pretty easy. I mean net lease is very high margin. There's very little variable cost in our business, and our G&A load is what it is. We have a platform in the U.S. and in Europe. And I think we can do multiple billions of dollars of new deals with really not adding any G&A. I think AI can help that as well, some technology investments, which we're happy to get into as well. So how do we differentiate ourselves? I mean, we have a model that's proven. We have access to capital that allows us to be confident and comfortable in how we target investments and a reputation that I think is very well known across the net lease industry. So I think down about execution. We have -- again, the setup is there for us. And I think we see a transaction market that's quite constructive, and I think you'll continue to see us outpace our peers in terms of deal volume and growth.

Okay. You mentioned AI. So that is a topic that we are definitely required to ask you about this year. I want to ask you kind of 2 pieces. The first is using AI internally at a corporate level to maybe help curb your growth in costs? And do you think that SG&A as a percent of revenues or a percent of gross asset value with some of measuring it these days can come down or flatten out? So that's part one. Let's talk about maybe just how you're using it sort of internally.

Yes. I mean we mentioned on our recent earnings call that as part of the couple of million dollars of increase in our G&A, we are increasing investments in technology. A lot of that is around AI initiatives. And to your point, the goal is to create kind of long-term processes that will help us scale more efficiently. A lot of this would be in kind of the typical business processes or portfolio monitoring streamlining or automating certain accounting tasks, asset management tasks like compiling tenant financials, things along those lines. We think that those are probably the lowest hanging fruit from an operational standpoint. But ultimately, we'd like to incorporate other areas that can help us grow. Maybe it's in underwriting models, looking at -- we have 50-plus years of history. We have 1,700 properties, lots of data that can be very valuable. So I think the starting point for us in addition to all these efficiencies to find ways to -- and we're using AI tools to help structure our data that's more usable and can be more predictive going forward.

Yes. That was kind of, I guess, sort of my part 2, in terms of identifying opportunities, do you think AI can be helpful to you in terms of underwriting a potential deal essentially?

Yes. I mean there's opportunities for that. Again, we have 53 years of history. We know outcomes on deals. We have thousands of investment kitting memos and many of those deals have gone full circle. So those are data that we think can be really useful. I think the expectation is that we can partner with vendors that we've used previously and help generate some tools that can help us be more predictive in underwriting. I think in deal sourcing as well, that's a big part of net lease is how effectively can you source deals? Can you find off-market opportunities? Can you generate some alpha and some incremental yield. And we're starting to utilize some tools that will allow us to better screen tenant needs, earnings calls, Ks, various public disclosures, scrubbing data, and we think that will be effective as well. It's one of the benefits of having scale. I mean having a big balance sheet, being one of the largest in net lease we can spend some dollars and spread it across a very large asset base, and we think it could be pretty additive. And certainly, we think that a lot of the spend that we will do will offset that with future savings on...

Okay. I mean do you think it's one of the things that within public net lease world that this will be like a distinguishing factor when we look back, let's say, 5 years from now, where like they were early on the curve? Or is this sort of -- is everyone doing the same thing? Or kind of -- is there a way for you to differentiate yourself, I guess, relative to?

I would expect those with scale are going to be able to point to some tools that have been really beneficial. I think those without scale are probably going to rely more on off-the-shelf products that you can buy, subscription models that will be helpful. We'll do some of those, too. Those will make a lot of sense in some of the efficiency. But I think the -- some of the things that allow us to be smarter in how we do business and can move the needle more, I think those with scale will be more impactful. I mean, look, net lease is not multifamily when there's a big property and operational aspect. I mean, by nature, net lease is there's no property level management. I mean we asset manage but we're not on the ground on a daily basis. So I think for that reason, you're going to see probably some other sectors have more impacts, multifamily, maybe retail, others that are probably more pronounced. But from a net lease perspective, I would expect us to be one of the leaders.

I feel like the carry tenant solutions platform has got a little bit more sort of a branding edge to it. I think you've had it for a while, but it seems like it's been highlighted a little more. It's also something that other net lease companies highlight the ability to work with developers, bring capital, go on balance sheet if need be, buyout commitments. So is that kind of what the tenant solutions is? And is it just a part of so you can be sort of like a one-stop shopping?

Yes. I mean look, you mentioned it. We've done this for a long time. We've been very active in the build-to-suit space probably for the last 25 to 30 years. I mean one of the observations that we've had is that a number of our peers in the net lease space have gotten a lot of mileage by talking about the build-to-suit opportunities and -- so for us, we think we're quite good at it. We have a lot of experience. Again, the theme -- one of the themes I keep on talking about is scale is beneficial. Because we have scale, we have a built-out project management team that oversees our projects, whether they're build-to-suits or expansions or redevelopments or at end of lease property condition assessments on our properties, lots of different things they do. So the branding of Carey tenant solutions is for us to be a little bit more proactive, a little bit more systematic in how we approach this, both for branding to our investors so they can become more aware of what we do and what our capabilities are, but maybe more impactful to our tenants with an outreach that's, again, more programmatic, and we think there's a lot of low-hanging fruit there. A big part of our investments are follow-on investments with our tenant base. And to the extent we have more tools that we can put in front of them, we think that's going to be incremental. I mean, historically, build-to-suits and expansions and redevelopments have probably been about $200 million of annual deal flow, call it, 10% to 15% in any given year. We think we can move that up by $100 million or $200 million, and that can be additive, help sustain deal volume. And we think we can do that by generating some really interesting opportunities, especially if they're generated through our existing tenant base.

What sort of time frame do you think you can grow it by that amount?

I mean, these tend to be chunkier deals. So it's probably going to be a bit lumpy in how they get added. I mean, I'd like -- right now, we have, what, Peter, $240 million of construction in progress. I think we've already had some delivered this year. There's a pipeline beyond that. I mean there's no reason why this couldn't start over the next 12 to 18 months to get into that territory. There's been years we've probably been that high but I'd like to see it on a more consistent basis.

And is that mostly U.S. focused? Or do you do that internationally?

It is more weighted towards the U.S. We do have a team in Europe. We'll do build-to-suits over there. In fact, we're doing some expansions over there right now as well. I would say it probably is a similar kind of allocation to our ABRs, probably 2/3, 1/3.

So this year, you think about 2/3 U.S., 1/3 Europe or international?

In terms of the build-to-suit and construction projects.

Actually, I was switching back to acquisitions, sorry.

Yes. I mean, historically, I would say our targets are roughly 2/3, 1/3, 2/3 North America, the vast majority of that is in the U.S. and 1/3 in Europe. On any given year, it can certainly fluctuate, but those are our long-term targets. The last, call it, 5 years, we've probably been overallocating in the U.S., maybe it's 75% of what we've done has been U.S. based. And if I look at what we've done that change in Europe second half of last year, Q4 got more active. Year-to-date, we've done about $300 million deals through our earnings call 2 weeks ago. About 2/3 of that was in Europe. The pipeline right now is about 50-50 between North America and Europe. So we're seeing more opportunity over there. And that's good because we tend to generate wider spreads in Europe, and it's been slow for a bunch of years. There was more dislocation there. Credit markets through real estate. Interest rates were more volatile, and we've finally seen some stability over there, and that is resulting in some increased transaction activity.

And is this a newer structure in Europe? Or has it been around a long time, sale leaseback, just in general.

Yes. Look, it's well known now, but it certainly is newer than the U.S. I mean Bill Carey, who founded W. P. Carey kind of pioneered the sale leaseback space in the '70s and '80s. We started our European office in the late '90s and spent most of the first decade over there educating the market. So it's become more mainstream, but there still is, I would say, a bigger opportunity set there in terms of owner-occupied corporate real estate, maybe 60% in Europe compared to probably 25% or 30% of all the corporate real estate is owner-occupied. So there's still an educational standpoint, but we're mostly past that. I think the good news is it's also less mature from a competitive standpoint. So we're seeing -- we see less competition. The deal opportunity is a little bit less efficient. So there's some pricing power that we have, and I think that's reflected in the wider spreads.

And just one last question on that. As a U.S.-based REIT and the REIT tax code is basically for North U.S.-based assets. I mean, is there any -- are there tax considerations as you continue to invest more in Europe to make it more difficult to bring back money or the tax rate go up or...

No. We have structures in place that account for all of that, and it's pretty efficient. I mean each country has its own -- in Europe has its own tax structure that we're very mindful of and have a lot of experience optimizing in terms of the structure. But there's no -- at least as of right now, that could change. There's no impacts on U.S. regulatory changes that could impact the return of capital to the U.S.

Okay. And then just before we start wrapping up, the Hellweg obviously was a tenant that you've taken down your exposure to over the last year or so. Kind of what's the kind of latest on that and kind of just updates on that plan [indiscernible] kind of a multiyear plan, right, to reduce exposure.

Yes. I mean the very brief version is that we've continued to reduce our exposure there. So they -- since we restructured their rent, which was the end of 2023, early 2024, I mean that was a restructuring that all the landlords had to agree to it as part of a broader restructuring where their lenders also agreed in the owner, which is -- it's privately owned, but it's not private equity, it's family-owned. Everyone agreed to that restructuring at the time. They've been current on rent since. We -- our assessment is it continues to be sort of a challenged operator, a difficult operating environment. We haven't seen them recover as much as we'd like or improve as much as we like on the operations. So what we've been doing is reducing exposure through, in some cases, negotiating directly with them, terminating some of their leases and putting in stronger operators. And some of those assets, we've generally found that we can put stronger operators in at or around the rents we were charging Hellweg, so basically market rents in this portfolio. And then in some cases, we've been selling assets. And the net result of all of that is they've gone down to our #17 tenant. They're just about 1%, maybe a little bit above 1% of ABR now. We expect that to continue to come down probably below the top 25, perhaps as soon as the first part of this year, but certainly during the course of the year. And so at that point, less than 75 basis points of rent. And so I think that our goal here was to box the risk for our investors. So even if they continue to stay current, but even if something were to happen there, we think that this is a risk that is substantially mitigated in our portfolio and hopefully, would not have any meaningful impact on the share price.

And that takes us out. So thank you very much. Appreciate your time.

Thank you, everyone.