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Hello, and welcome to W. P. Carey's Third Quarter 2025 Earnings Conference Call. My name is Diego, and I will be your operator today. [Operator Instructions]. Please note that today's event is being recorded. [Operator Instructions]. I will now turn today's program over to Peter Sands, Head of Investor Relations. Mr. Sands, please go ahead.

Good morning, everyone, and thank you for joining us this morning for our 2025 third quarter earnings call. Before we begin, I'd like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements and factors that could cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings. An online replay of this conference call will be made available in the Investor Relations section of our website at wpcarey.com, where it will be archived for approximately 1 year and where you can also find copies of our investor presentations and other related materials. And with that, I'll pass the call over to Jason Fox, Chief Executive Officer.

Good morning, everyone, and thank you for joining us. Strong momentum we established over the first half of the year has continued in the second half, and we remain ahead of our prior expectations. As a result, we're further raising our full year AFFO guidance resulting in mid-5% year-over-year growth, which we believe will be among the highest in the net lease sector this year. Our raised guidance is supported by several positive trends within our business. Year-to-date, we completed $1.65 billion of investments at attractive initial cap rates averaging in the mid-7s, primarily with fixed rent escalations averaging in the high 2% range. The strength of our investment activity year-to-date has put us just over the midpoint of prior guidance range. I'm pleased to say we're raising our full year expectations for investment volume to between $1.8 billion and $2.1 billion. Our sector-leading same-store rent growth continues to be in the mid-2% range and is expected to remain around there or be slightly higher in 2026. The progress we've made funding our investments this year, primarily through asset sales, is expected to continue in the fourth quarter, achieving better than initially expected disposition cap rates and attractive spreads to where we're reinvesting the proceeds. Our original rent loss assumption, which reflected a degree of caution given the backdrop of broader economic uncertainty earlier in the year proved to be conservative and the performance of our portfolio has enabled us to lower our estimate as the year has progressed and the strength and flexibility of our balance sheet with over $2 billion of liquidity, including our recent forward equity sales provides us with additional flexibility to fund future investments. This morning, I'll review this progress and our confidence in sustaining that momentum into 2026. Toni Sanzone, our CFO, will focus on our results and guidance raise and touch upon aspects of our portfolio and balance sheet. And as usual, we're joined by our Head of Asset Management, Brooks Gordon, to answer questions. Starting with the transaction environment and investment volume. Lower interest rate volatility has helped keep net lease cap rates relatively steady this year, and that sense of stability has positively impacted our transaction activity, both in the U.S. and Europe, specially sale leasebacks, which have comprised a large majority of our investments to date. Our continued strong pace of investment activity, adding close to $660 million of investments during the third quarter and about $170 million so far in the fourth quarter brings our year-to-date investment volume to $1.65 billion at a weighted average initial cap rate of 7.6%. We continue to structure leases with attractive rent escalations, the significant majority of which were fixed bumps averaging 2.7% for our investments year-to-date. When factoring in rent escalations and a weighted average lease term of 18 years, our average initial cap rates in the mid-7s translate to average yields in the mid-9% range. By transacting at these levels, we continue to generate very attractive spreads to our cost of capital. Warehouse and industrial represents over 3/4 of our investment volume year-to-date, although we continue to invest in a diverse range of property types. And while the large majority of our investment volume was in the U.S., where we continue to see a significant number of opportunities at attractive spreads, we also continued to grow our investment volume in Europe relative to the last couple of years. The investment we've made over the last 27 years to steadily build and develop our European platform continues to serve as a key competitive advantage there. Today, our European team consists of over 50 people across our offices in London and Amsterdam, which has built strong broker and developer relationships and has the local expertise necessary to successfully execute across Europe. Moving to our pipeline and capital projects. Our near-term pipeline remains strong with several hundred million dollars of transactions currently in process at cap rates and weighted average lease terms consistent with where we've been transacting year-to-date. We expect many of those deals to close in the fourth quarter, although some may spill over into next year depending on where they are in the closing process, which would set us up for a strong first quarter. Our near-term pipeline includes close to $70 million of capital projects scheduled for completion in the fourth quarter. We also have approximately $180 million of additional capital projects underway, the large majority of which will deliver in 2026. While capital projects are something we've been doing for a long time, it's an area we can allocate more capital to often with higher returns compared to acquiring existing assets. Over time, we've built up a dedicated in-house project management team with deep real estate expertise and strong local connections to development resources. We have a long track record of build-to-suits, expansions, renovations and development projects. Historically, capital projects have averaged around 10% to 15% of our annual investment volume, and we believe we can expand that proportion. Turning now to our capital sources. Since our last earnings call, we've made further progress with our strategy of funding investments with accretive sales of noncore assets this year, including operating self-storage properties. Currently, we're in the market with the second half of our self-storage portfolio and have closed further sales since quarter end. We're confident we'll close additional sales during the fourth quarter but we're also maintaining a degree of optionality on the timing and execution of certain storage sub portfolios. And while we expect asset sales to fund our fourth quarter investment activity, the approximately $230 million of forward equity we recently sold gives us additional flexibility as well as enabling us to get ahead of our funding needs for 2026. So let me pause there and hand the call over to Toni to discuss our results and guidance.

Thanks, Jason. AFFO per share for the third quarter was $1.25, representing a 5.9% increase compared to the third quarter of last year. Our strong results continue to benefit from both the pace and volume of our investment activity as well as the internal rent growth generated by our portfolio. We've raised and narrowed our full year 2025 AFFO guidance, driven largely by higher investment volume and lower expected rent loss within the portfolio and we currently expect AFFO to total between $4.93 and $4.99 per share for the year, implying 5.5% year-over-year growth at the midpoint. As Jason mentioned, given the investments we've completed to date and our outlook for the remainder of the year, we raised our expected 2025 investment volume to a range of $1.8 billion to $2.1 billion. As we continue to fund our investment activity this year with proceeds from dispositions of operating and noncore assets, we're also revising our expected disposition volume to total between $1.3 billion and $1.5 billion which has increased to include additional sales of operating self-storage assets. And based on the successful execution we've had to date, we expect to generate overall spreads of approximately 150 basis points between our investments and dispositions for the year. On the expense side, G&A continues to track in line with our expectations to fall between $99 million and $102 million for the full year. Property expenses are expected to total $51 million to $54 million, with a minimal increase to the lower end of the range. And tax expense is expected to be between $41 million and $44 million, representing a marginal reduction at the midpoint. Turning now to our portfolio, which continues to generate strong internal growth. Contractual same-store rent growth for the quarter was 2.4% year-over-year. comprised of CPI-linked rent escalations averaging 2.5% for the quarter, while fixed rent increases averaged 2.1%. For the full year, we expect contractual same-store rent growth to average around 2.5%. Based on current inflation levels and further supported by the higher fixed increases we are achieving on new investments, our contractual same-store growth is expected to remain strong in 2026, likely surpassing the 2.5% growth we expect to see this year. Comprehensive same-store rent growth for the quarter was 2% year-over-year and is expected to track in line with our contractual rent growth for 2025 and at around 2.5% despite the uptick in vacancy flowing through the back half of the year. Portfolio occupancy declined to 97% at the end of the third quarter, which we view as temporary in nature and was factored into our earlier guidance. Of the 3% total vacancy at the end of the third quarter, around a quarter has since been resolved or is in the final stages of closing and another half is in process and well underway to being resolved. Hellweg added minimally to our third quarter vacancy following planned store takebacks in September, and our asset management team continues to further reduce our exposure through re-leasing and dispositions. Hellweg now represents our 14th largest tenant, down from 6th largest a quarter ago, and we expect it to be out of our top 25 next year. We've experienced minimal rent disruption this year, enabling us to further reduce the rent loss assumption embedded in our guidance to $10 million, down from our prior estimate of between $10 million and $15 million. Currently, we have visibility into total rent loss of about $7 million for the year, representing about 45 basis points of ABR, which includes the downtime on the Hellweg assets we took back. The balance of our reserve includes ongoing caution towards Hellweg, which remains current on rent, but is still navigating a challenging turnaround, and we hope for that to be conservative with only 2 months of the years remaining. Other lease-related income totaled $3.7 million for the third quarter, down from $9.6 million in the second quarter and is expected to total in the mid-$20 million range for the full year. Turning to our operating properties. So far this year, we've completed sales of 37 operating self-storage properties and 1 student housing property and converted 4 operating self-storage properties to long-term net leases. Factoring in the additional sales we expect to close before year-end, we estimate operating property NOI for the fourth quarter will total between $7 million and $9 million, reducing further in 2026. Moving now to our balance sheet and capital markets activity. Our balance sheet remains strong and extremely well positioned to fund our continued growth, further bolstered by our equity and debt capital markets activity this year. Since the start of the third quarter, we sold approximately 3.4 million shares subject to forward sale agreements through our ATM program at a gross weighted average price of $68.5 per share all of which remains outstanding, resulting in gross proceeds of approximately $230 million available to fund future investment activity. And on the debt side, as previously announced, Early in the third quarter, we enhanced our liquidity position with the opportunistic issuance of USD 400 million bonds priced at a coupon rate of 4.65%, which was used to repay amounts outstanding on our credit facility. Our weighted average interest rate for the quarter was 3.2%, and we continue to believe we have one of the lowest cost of debt in the net lease sector through our mix of U.S. dollar and euro-denominated debt. Our debt maturities remain very manageable. We have a EUR 500 million bond maturing in April of 2026, and our next U.S. dollar bond maturity isn't until October of next year. We currently expect that we would refinance these bonds with issuances in the same currencies at or near their maturities. We ended the third quarter with liquidity totaling about $2.1 billion, comprised of availability on our credit facility, cash on hand and held for 1031 exchanges and unsettled forward equity. With dispositions expected to fund investment activity for the remainder of this year, we have a great deal of flexibility in accessing the capital markets. Taking into account our free cash flow of over $250 million annually, in addition to our unsettled forward equity, we expect to be well ahead of our funding needs for new investments as we enter 2026. Our key leverage metrics remained within our target ranges at quarter end. Net debt to adjusted EBITDA, inclusive of unsettled equity forwards was 5.8x. Excluding the impact of unsold equity forwards, net debt to adjusted EBITDA was 5.9x. In September, we increased our quarterly dividend by 4% year-over-year to $0.91 per share, equating to an attractive annualized dividend yield of 5.4%. Our dividend continues to be well supported by our earnings growth as we maintain a healthy year-to-date payout ratio at approximately 73% of AFFO per share. And with that, I'll hand the call back to Jason.

Thanks, Toni. In closing, the investment volume we've completed year-to-date and lower rent loss assumption have enabled us to again raise both our full year investment volume and AFFO guidance ranges. We've repeatedly raised our guidance this year and have consistently executed strong investment volume since mid-2024, completing well over $2 billion of new investments over the trailing 12-month period. We have the infrastructure, expertise and team in place to continue performing at these levels. As we look ahead, we have an active deal pipeline that extends into the first quarter of 2026. We're not seeing anything in the transaction environment that would take us off our current pace of activity. Given where our debt and equity is pricing, we view all the elements as being in place to continue generating double-digit total shareholder returns in 2026. Through a combination of AFFO growth that would put us in the top tier of net lease REITs and our dividend yield. That concludes our prepared remarks. So I'll hand the call back to the operator for questions.

[Operator Instructions] Our first question comes from John Kilichowski with Wells Fargo. John Kilichowski, your line is open. Please go ahead.

You might be on mute, John.

We'll move on to the next question. Our next question comes from Anthony Paolone with JPMorgan.

Now that you guys are rounding the corner on the operating self-storage asset sales, can you maybe give us a sense as to what the menu of noncore and other internally generated capital sources, maybe as we start to think about deal activity next year and maybe perhaps how to help fund it?

Yes, sure. I mean, certainly, when we think about next year, equity is going to be a much bigger picture and part of that story than this year, and we're not currently teeing up a disposition program, anything close to what we did this year. So dispositions should revert back to a more typical run rate. We do have a couple of operating properties left, but apart from the possibility of some self-storage sales slipping into next year, we should be back at more normalized levels. Disposal will still be a source of incremental capital for us, but it won't be significant like it was this year. So the expectation is we're kind of back to normal core spread investing, typical the net lease company where issue equity and debt, keep leverage targets in mind and you use it to do deals and generate spreads. So that's kind of the plan going forward. I think the other thing maybe to note is, and Toni talked about this, that we do have lots of funding flexibility right now looking into 2026. Revolver at a little over $2 billion is mostly undrawn. She referenced, call it, $250 million of free cash flow and then as we talked about earlier, we have gotten a head start on equity needs. We have $230 million of forwards that we recently issued on the ADM. So we're in good shape, and we think we're ahead of the game there for funding for next year.

Okay. And then just a follow-up. Are you seeing any competition or greater competition on deals from some of the private net lease platforms that are out there in any part of your buy box?

Yes. I mean look, the net lease market has always been competitive, especially in the U.S., and we have seen a bit of a pickup in new competition. It's mainly the private equity players, as you mentioned, and they're finding that lease attractive. We really don't think we run into all that much. We don't always have full visibility on who we may be competing with and that's at least thus far right now. So I'd imagine we'll see incremental competition that comes up and that likely leads to some pricing pressures, but it feels manageable right now. And we certainly have a cost of capital to allow us to compete on price when needed. So I think that's -- I think it's okay. I think it's also worth keeping in mind that especially on sale leasebacks, experience and track record on execution matter quite a bit. So newer entrants may have a little bit more of a hurdle to cover there and our reputation and kind of history should be a real competitive advantage, too.

Your next question comes from Smedes Rose with Citi.

I wanted to ask you first just a little bit, if you could just give us an update or a reminder, I guess, on where you are on the Hellweg process in terms of leases that I think you had expected 7 to be terminated by this time of the year and then maybe I think 5 more to go. Is that still kind of the case and maybe where you are on stores that are expected to be sold versus released?

Yes, sure. Brooks, do you want to cover that?

Yes. So first, maybe just a broader status update. As Toni mentioned, they remain current on rent. We've reduced them down to our #14 tenant, and we're making good progress on our plan to reduce that. Specifically to your question, we're taking a number of actions to reduce our exposure there. We've sold 3 occupied stores in Q3, I expect a couple more over the next few months there. As you mentioned, we took back 7 -- the first 7 of the 12 in total, we're taking back. So of those 7, we signed leases with new operators at 2 and 1 is in process, that should be signed soon or are under contract to sell. Those will close in Q4 and into Q1 and then as I mentioned, we're taking back another 5 in 2026. We signed leases on 3 of those locations, 1 more in process and then 1 will be targeted for sale. So making very good progress on that strategy and we would look to reduce the exposure on top of that quite quickly. We're targeting out of our top '25 sort of towards the midyear of '26. And we think we have a path to get them out of the top 50 kind of by the end of 2026. So we expect the exposure to come down meaningfully going forward.

Great. And then you mentioned in the fourth quarter, maybe having gone in a little too conservative around rent loss assumptions. And as you just think about next year, any thoughts on how you could sort of maybe assess that? I mean are you concerned about the underlying economy at all that would maybe drive you to be maybe more conservative than you have been historically? Or just any kind of thoughts on how you're thinking about that at this point?

Yes. Brooks, do you want to take that one as well?

Sure. I mean without kind of projecting forward any specific guidance, I think what's important to note is that our broader watch list and kind of credit quality has improved materially over recent quarters. Again, that's driven by resolutions on True Value and Hearthside and the progress we're making on Hellweg. And we continue to closely monitor that turnaround at Hellweg, and we'll continue to have caution there. That said, our broader credit watch universe has come down meaningfully. So we'll continue to take a conservative and cautious approach there with respect to credit broadly and how specifically but we expect to be able to drive strong earnings growth even net of that.

Your next question comes from Michael Goldsmith with UBS.

This is Kathryn Graves on for Michael. So my first, you've completed the $1.6 billion of investments so far year-to-date. You raised investment guidance. Can you maybe just provide some color on the -- what's currently in your pipeline as far as the incremental volume increase? Anything just in terms of geographic split between Europe and U.S., property-type mix, industrial versus retail and any non cap rates that you're currently seeing in the pipeline as you build for 4Q?

Yes, sure. So near term, currently includes, I would call it, several hundred million dollars of identified transactions, most of them in advanced stages. We think many of those will close in the fourth quarter, although at this time of the year, it's always hard to predict and some may slip into next year, which would set us up for a strong start to '26. I think on top of that, which you can also factor in and we included in our sub is about $70 million of capital projects that are scheduled to complete this year. These are the build-to-suits and expansions that we regularly do. You probably would also note that we have -- in addition to that $70 million, we have another $180 million that are in construction much of that, probably most of that would close in 2026. In terms of geographies, I mean, one of the things that we've -- maybe worth noting is more activity in Europe, while year-to-date, North America still makes up about 75% of the deals that we've done. The third quarter, we saw the split closer to 50-50 between North America and Europe. And I think the themes that we're seeing in Europe are probably similar to those in the U.S., where rate stability has led to a tightening of bid-ask spreads and sellers who may have been on the sidelines for a while now are willing to transact, and that's kind of translated into more activity, and that's both in the U.S. and Europe, but I think it's maybe most notable that we've seen more deal flow in Europe over the last, call it, 1 quarter, 1.5 quarters compared to the prior years. In terms of property type, we continue to see the best opportunities in industrial, and that includes both manufacturing and warehouse. I think that's reflected in our deals completed to date, and it also makes up the bulk of our pipeline as well. I think you asked about kind of pricing as well. And we continue to target deals in the 7s, and we've been transacting on average in the 7s, and that's been the case for pretty consistently throughout 2025, and it's also largely where the pipeline is right now. So cap rates have mostly remained unchanged year-to-date. But as I mentioned earlier, I would expect to see some tightening as we head into 2026, especially if rates kind of stay at the current levels in that 4% zone and certainly increased competition could factor into that as well, but that kind of remains to be seen. So overall, I think the pricing still works for us very well, and we always want to make sure we remind people that we're achieving kind of mid-7 initial cap rates that equates to an average yield and kind of the 9s which we still believe that's among the highest in the net lease sector and certainly provides really interesting spreads relative to how we're funding these deals.

Got it. Thank you for the comprehensive answer. That's super helpful. And then my second -- same-store rent growth looks like it ticked up about 10 basis points this quarter. And I know you talked about the expectations for the remainder of the year. But just thinking through the roughly 50% of rent currently tied to CPI. How should we think about the sustainability of that like mid-2% growth if inflation moderate? And then should we also sort of expect in the future to see more fixed rent bumps in future acquisitions going forward?

Yes. Let me take the second question, and maybe Toni can just comment on how we kind of look on a on a kind of go-forward basis of the CPI impacts on our same-store. In terms of should we continue to expect to see inflation, I think since we saw the inflation spike a couple of years back, it's gotten a little bit more difficult as we're negotiating kind of rent structures and sale leasebacks. It's been a little bit more difficult to get inflation, at least in the U.S. Year-to-date, it looks like about 1/4 of our deals have CPI-linked increases. And a lot of that is in Europe, and that's where it's still customary to get those increases in Europe, and we would expect to continue to see that. But I think with CPI increases or inflation changes have also impacted is our fixed increases and the levels at which we're able to negotiate those. I think historically, we've probably been closer to 3% on average. And now we're typically seeing new deals with fixed increases in the maybe 50 to 100 basis points above that. Year-to-date, the deals that we've done have averaged a fixed increase of 2.7% and the pipeline is fairly consistent with that. So while we're not getting as much inflation on new deals, our same store is still quite strong and it should remain that way. Toni, I don't know if you have any views into moderation of inflation, kind of the timing of our bumps and how that could flow through.

Yes. I think it's helpful to just think through the way that our leases work, and we've mentioned this historically. The CPI-based leases specifically have a bit of a look back. So they're looking at inflation really in this kind of last quarter of the year, if you will. So we have a pretty reasonable line of sight into what next year same-store could look like, especially just given how many of our leases bump in January or in the first quarter. So even with CPI stabilizing kind of at its current levels are decreasing slightly, we do still expect our contractual same-store to be even north of where it is this year. And some of that, as I mentioned, is supported by the fixed increases being higher than what they've been historically but also with the expectation that CPI stabilizes. So again, north of 2.5% is our expectation for next year.

Your next question comes from Greg McGinniss with Scotiabank.

My apologies if I missed it, but did you provide the disposition cap rate achieved on the self-storage assets? And do you expect to fully sell out next year, early next year at similar cap rates?

Brooks, do you want to cover that?

Yes. Sure. So we were not going to speak to kind of active transactions. But as we mentioned on our Q2 call, we've thus far transacted just inside of a 6% cap rate on the storage assets. In total, I'd expect it to be right around 6%. Some will be a little higher, some a little lower. It really depends on exactly the mix this year. And with respect to the full platform, as Jason mentioned, we're in the market with the balance of it, we do retain a bit of flexibility in terms of the exact timing -- I mean what sub-portfolios transact. But over the medium near term, we'll be exiting the full operating storage platform.

Is there any difference in terms of the operations or occupancies of those assets that would lead you to believe that maybe cap rates might be different geography, something like that?

Each sub portfolio is different. And as I mentioned, some will trade a little higher, some will trade a little lower. But on average, we would expect the total self-storage exit to be in and around a 6% cap rate.

Okay. And then I appreciate the color you guys provided on your thoughts on acquisitions. And you've certainly been busy over the last couple of quarters, some guidance Q4 may slow down a little bit, but I'm just trying to clarify whether or not you expect to generally maintain this level of investment pace in 2026.

Yes, sure. Look, it's hard to predict since the macro certainly factors in and at this point, we typically only have visibility out maybe 60 to 90 days. But our intention is certainly to keep the pace and I think you can look at what we've done. I referenced earlier that if you go back on a trailing 12-month basis, we've been well over $2 billion, and there's not a lot that we're seeing right now that's a catalyst to change that dynamic. And the infrastructure team is in place here with lots of liquidity including meaningful free cash flow, we referenced the equity forwards that we've raised already and improved cost of capital that work. So we should continue to see good activity. We can lean into pricing and kind of feed that net lease growth algorithm. So we do feel good, but it's hard to predict exactly where things will go.

Your next question comes from Mitch Germain with Citizens JMP.

Congrats on the quarter. It seems like operating storage assets are going to be dwindled down. How should we think about the remaining operating properties. I think you still have a couple of hotels, maybe one other student housing asset. Is that -- are those also sale candidates?

Yes. Brooks, do you want to take that?

Yes, you're right. So we own 4 operating hotels. So that includes 3 of the former net lease Marriotts that we still own. One is the Hilton in Minneapolis, we'll sell that when the time is right, that could be in 2026, something we're evaluating. The 3 Marriotts are all slated for either sale or redevelopment. We're evaluating both paths. They're all operating normally in the meantime. I'd say the first is one in Newark, which we're still -- in our final evaluation phase there, but towards mid-'26 would seek to trigger redevelopment into warehouse there. The others are great locations in Irvine and San Diego, but we're being patient there. And then you mentioned we have one remaining student housing property in the U.K., something we're evaluating from a sale perspective, again, that could be a near-term sale candidate, something we're evaluating now.

Great. That's helpful. And then maybe Brooks will have you, the rent recapture on your retail leases a little bit lower than the rest of your portfolio. Is that Hellweg and is that kind of how we should expect the leases that you're looking to release going forward?

No. Actually, this is totally unrelated. These are just 2 AMC theaters. So we only own 4 movie theaters total. We'll bring that number down to 0 as quickly as we can, but it's a very, very small piece of ABR, if you look at the actual contribution there. So we rolled those rents down to keep those theaters open and operating.

Your next question comes from Jason Wayne with Barclays.

Just on the move-outs that led to the sequential drop in occupancy. So those have been known for a few quarters. I know you said that many of those have been resolved or nearly resolved by now. So just wondering kind of the strategy you think about managing occupancy when you're aware of some known vacates.

Yes. So they can pick up a bit Yes, Vacancy did tick up a bit, as Toni mentioned, just to recap, the largest addition or 2 warehouses, formerly to Tesco that we had discussed previously. That's about 50 basis points of occupancy. Also 2 former True Value warehouses for about 45 basis points and a couple of Hellweg for -- or several Hellwegs for about 20 basis points. All of those are in process of being resolved and should be closing imminently. If you step back and look at our total vacancy, we really do view this as a temporary spike. Of the total, roughly 30% of the vacant square footage has either already closed or is closing imminently. And then another 50% of that is in active negotiations or diligence. So we'd expect the vacancy rate to get back to a normal place kind of over the next quarter or 1.5 quarters time frame. So periodically, we'll get a bigger building back vacant. We work very proactively to resolve those, and that's why these resolutions are well on their way.

And then yes, just on a couple of debt raises expected next year. Just wondering what kind of pricing you're seeing in the U.S. and Europe right now?

Sure. Yes, we have 2 bonds coming due next year. I think the expectation is that we would probably repay each of those in kind of the same currency. In terms of where we're seeing pricing, I think, in the U.S., you can kind of think of it as low 5s. And in Europe, it's probably maybe 100, 125 basis points below that. So kind of think about it high 3s and around 4% is roughly where they are.

Your next question comes from Eric Borden with BMO Capital Markets.

I just wanted to talk a little bit more about the cap rate expectation going forward. I know you mentioned you expect maybe some compression just given where the 10-year sits today. But just curious if there's any difference or bifurcation between cap rates in the U.S. versus cap rates in Europe?

Yes, sure. I mean over the last couple of years, cap rates, obviously, it's a pretty wide range depending on a lot of the specifics of the transaction and in Europe geographies matter as well. But I think on average, we've been roughly in line between the U.S. and Europe. Maybe this year, we've seen a little bit of tightening in Europe, attribute that to rates stabilizing a little bit earlier there than over here. But it's also important to note, and I just mentioned it that we can borrow meaningfully inside of where we can borrow in the U.S. So we're still generating better spreads in Europe. But yes, I think they're roughly in line. Maybe it's 25 basis points delta between the 2.

Okay. Great. And then can you just remind us of your hedging strategy and like how movements in exchange rates impact AFFO per share? And then if you have any thoughts or indications on the impact positively or negatively in 2026?

Sure. Toni, do you want to cover that?

Yes. I think just a big picture in terms of our strategy. We continue to hedge our European cash flows. First, naturally, we do that with our expenses. So if you think about our interest expense is denominated in euro and certain of our other property expenses. That really reduces our gross AFFO currency exposure to less than 20% of AFFO for the euro before hedging. So if we focus on that, we've implemented a cash flow hedging program beyond that to further reduce our exposure on the vast majority of the remaining net cash flows. So really material movements in the currencies are really not expected to have an impact on positive or negative. I'd say over the course of this entire year, we saw pretty meaningful movements in the euro and that maybe added about $0.02 to our total AFFO this year, relative to where we started the year from an expectation standpoint. I wouldn't want to go as far as to predict what next year would look like from an FX rate and movements there. I would just say that our strategy should continue to be effective from a hedging standpoint so that we wouldn't see any material movement to the bottom line from an AFFO perspective.

Your next question comes from Daniel Byun with Bank of America.

I appreciate the update on your potential rent loss forecast. I was wondering if you could touch on how that compares historically for portfolio and whether it's more weighted towards Europe or the U.S.

Brooks, do you want to take that?

Sure. So as Toni mentioned, with respect to rent loss forecast, there's a degree of caution embedded in that. We've continuously brought that down throughout the year. I think in terms of a good way to think about credit loss in any given year, as we've discussed in the past, kind of the spread between our contractual and comprehensive same-store that number will move around, but we expect that on average to be something like 100 basis points for a round number. We think out of that 100 basis points about 30 to 50 could relate to credit with the balance being the kind of portfolio activity. So that kind of 30-ish basis points is a good kind of average credit loss assumption. And that matches up closely to what our actual data suggests from the last 20-plus years. So that's kind of a good rule of thumb. Again, that's going to move around in any given period, but that has been our history. With respect to geographic concentration, I don't have that data directly in front of me, but I would expect that to broadly track our overall portfolio ABR allocation of kind of 2/3 U.S.

I guess for my second question, I think you just mentioned the escalators are trending in the high 2s. Which sectors delivered the strongest rent escalations in Q3? And where are you seeing pressure, if any?

Yes. Toni, I don't know if you have any details around that.

This is on the new deals you're referencing?

Correct.

Oh, on new deals? Let me take that out, that you meant just in the same-store growth of the portfolio. I mean most of what we've been doing this year has been industrial, and that's a mix of both manufacturing and warehouse. And I think one of the maybe drivers of our ability to achieve higher negotiated rent bumps within these leases is the fact that it's in an asset class that the market for those assets tend to have higher expected market rent growth compared to say retail, where a lot of those leases, especially with the investment-grade retailers, they tend to be flat. And if they're not flat, you see them in maybe the 1% to 2% range on average. So yes, there is a bit of a driver behind the mix that more of what we're doing is industrial. So yes, I think that's a theme.

[Operator Instructions]. And our next question comes from Ryan Caviola with Green Street.

With acquisitions in the quarter across Europe, Canada and Mexico, could you provide any color on international competition? And has any of the private capital that has entered the net lease space competed on international deals? Or do they stay primarily in the U.S.?

Yes, sure. Yes, Europe historically has been less crowded. Certainly, there's not many, if any, pan-European public REITs. So it's more on the private side, and that's what it's been historically. I would say we are seeing a little bit of competition pop up there and much of those are U.S. funds that are looking to kind of enter in Europe. It's probably worth noting that that's easier said than done. I mean we've been on the ground in investing in Europe over 2.5 decades. I mentioned earlier that we have a team of over 50 people on the ground there across our London and Amsterdam offices. We have deep relationships. We have a very good brand and track record across Europe. We know the various markets well. We also know to optimize leases and tax structures and have scale and all that stuff matters. So we have our advantages over there. That said, even with a little bit more competition, it's still a big fragmented market. I think activity levels are increasing with more opportunities opening up. So we still feel good about our prospects for more deal volume in Europe.

Appreciate that. And then -- just kind of going back to the U.S. I know there's been more of a focus on industrial and the acquisition front, but I did notice Dollar General assets have been consistent additions to the portfolio the last few quarters and the net larger deal in the fourth quarter of last year, now they're top 20, 10 and could you just update us on that relationship? And how you feel about the Dollar Store space in general and how much you'd like to grow that?

Yes, sure. I mean we do have a relationship with the company itself as a good sized landlord now. Those deals, and I think pretty much all or most Dollar General deals that are traded in the market come through the development pipeline. So we have relationships with a most of our deals that came through were from developers that you were recently built stores and I think we've been opportunistic there. Dollar General took a little bit of a credit hit mid last year when they reported on lower growth expectations and your stock price went down, but we took advantage of that. I think a lot of our peers are pretty full on Dollar General, maybe dollar stores more broadly. So I look at it as opportunistic pricing, and we've been in the layer in a really good credit, good concept, long leases. And so would we do a lot more? I don't know. I mean, they're top 20 now. Could they enter our top 10 at some point? Perhaps, but it's going to be more opportunistic based on pricing.

And your next question comes from Jim Kammert with Evercore ISI.

Are you able to provide any sort of visibility or details regarding, say, the '26 and '27 lease expirations. I'm just curious about maybe what percentage of that is kind of being actively discussed with the tenants today, if you will, versus I think you run at the last moment?

Yes. Sure, Brooks, do you want to take that?

Yes. So virtually all, if not all, of the 2026 and 2027 expiring ADR is actively being worked on. Our general process is that 3 to 5 years out, we're really engaging with and strategizing and then 3-ish years out, really engaging with tenants. So virtually, all that's active. 2026 is a pretty manageable year to 2.7% of ABR expiring. And so we're working on virtually all of that.

Great. And you can kind of tease out as a related question, just looking at the average ABR per square foot, seems like a little lower in '26 versus '27. But I'm just trying to think about the organic. Is there any tilting towards industrial or retail across those next 2 years or getting too granular here?

Well, both years have reasonably similar breakdown in terms of property types, they're, call it, 60% warehouse and industrial. In 2026, we have a couple of warehouses, which we expect to be able to put new tenants at much higher rents. These are very high-quality warehouses in the Lehigh Valley, where rents are, call it, 40% or 50% below market. So we're working on those actively. The others often tenants have renewal options at continuing rent. So we don't necessarily always get a true mark-to-market opportunity. But so it will be a mix, but I think -- we think it's a very manageable year with some opportunities to push rents.

Thank you. And at this time, I am not showing any further questions. I'll now hand the call back to Mr. Sands.

Thank you. And thank you, everyone, for joining us and your interest in W. P. Carey. If anybody has additional questions, please call Investor Relations directly at (212) 492-1110.