W. P. Carey Inc. (NYSE:WPC) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 10:00 am ET


W. P. Carey Inc. (NYSE:WPC) Q2 2020 Earnings Conference Call - Final Transcript


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Jason E. Fox

any cost, over the long run, we've generated strong total returns for our shareholders while maintaining exceptional downside protection which our rent collections reflect.

Net leases rightfully viewed as a relative steady business. And we believe providing better downside protection and lower volatility in our cash flows, is an important characteristics of the returns we generate for our shareholders. Our approach has clearly produced more durable rental streams, giving rise to higher quality and therefore more valuable revenues in earnings. This approach coupled with our focus on maintaining a strong and flexible balance sheet has put us in a very advantaged position today.

Overall, we collected 96% of rent due during the second quarter. Importantly, collections were consistently strong across each of the three months, across our core property types and across our U.S. and European portfolios. Warehouse, industrial and self-storage assets in aggregate comprised about half of our portfolio. In the second quarter, our rent collection rate was 94% for warehouse, 98% for industrial and for self-storage it was 100%. Office which comprises just under a quarter of our ABR, performed comparably with rent collections at 99%.

The retail, in which we maintained a long-standing underweight position representing just 17% of ABR, we collected 98% of second quarter rent. We've limited our investments in retail and disposed of retail assets, especially in areas most affected by the threat in ecommerce. Most of our retails in Europe, where there is a slower supply and we focused on assets classes like do-it-yourself and grocery which had performed well. The minor exception to our strong portfolio performance continued to be fitness centers, theaters and restaurants for which we received 37% of second quarter rents, although these represent just 2% of our ABR.

I'm pleased to report that the strength in our rent collections has continued into the third quarter, with an overall 98% collection rate so far for rent due in July. With deferrals remaining extremely low, we've been able to take the tailored approach to each situation and contrasted a broad action required by many other net lease REIT's that are dealing with widespread issues. This has afforded us considerable flexibility allowing us to opportunistically work with tenants on lease restructuring that create value.

During the second quarter, we entered into one such restructuring with a significant tenant. While the tenant was current on its rent and expected to remain that way, in return for a six-month deferred with a deferred rent spread over the following five years, we gained two years of additional lease term and improved the rent bumps by adding 50 basis points to its annual increases. Along with gaining the right to first refusal on all future sale lease backs. We will continue to look for these opportunities, but we can help strong tenents preserve capital over the short-term and create long-term value for our shareholders.

Turning now to investments. During the quarter, we completed three capital investment projects at a total cost of $148 million, comprising