Peter Sands - Director, Institutional IR Mark DeCesaris - CEO Jason Fox - President & Head of Global Investments Toni Sanzone - MD & InterimCFO John Park - Director, Strategy & Capital Markets Mark Goldberg - Chairman, Carey Financial LLC.

Nicholas Joseph - Citigroup Sheila McGrath - Evercore Partners Chris Lucas - Capital One Securities Michael Bilerman - Citigroup.

Hello and welcome to W. P. Carey's third quarter 2016 earnings conference call. My name is Kevin and I will be your operator today. All lines have been placed on mute to prevent any background noise. Please note that today's event is being recorded. After today's prepared remarks, we'll be taking questions via the phone line.

Instructions on how to do so will be given at the appropriate time. I will now turn today's program over to Peter Sands, Director of Institutional Investor Relations. Mr. Sands, please go ahead..

Good morning, everyone, and thank you for joining us for our 2016 third quarter earnings call. I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from W. P.

Carey's expectations are provided in our SEC filings. Also an online rebroadcast 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 one year. And with that, I will turn the call over to Mark..

Good morning, everyone. I'm pleased with the progress that we have achieved through the third quarter, which we will review on this call.

Jason Fox, Head of Global Investments, will provide an update on our investment and asset management activities; Toni Sanzone, Interim CFO, will review our third quarter results; and John Park, Head of Strategy and Capital Markets, will discuss our balance sheet and recent capital markets activity.

We're also joined this morning by Mark Goldberg, Head of Carey Financial; and Brooks Gordon, Managing Director, Asset Management Group will be available to answer questions.

I thought I would spend a little bit of time this morning at where we stand with our corporate initiatives especially as it relates to some of the feedback that we have received over the last few months through our investor outreach.

One of our main initiatives continues to be improving the quality of our portfolio through acquisitions and proactive asset management, both extending weighted average lease term and selectively disposing of assets.

As a result, the weighted average lease term of the portfolio has increased over the last 12 months from 8.9 years to 9.4 years despite the passage of time. We have also reduced lease expirations coming due in 2017 from 2.3% of ABR a year ago to 1.4% at the end of the 2016 third quarter.

Similarly over the last 12 months, we have reduced lease expirations coming due in 2018 from 8.3% of ABR to 5.4%. This has been further reduced to about 2% through the recently completed sale of the Carrefour portfolio, which Jason will cover in more detail. Capital recycling activity during 2016 is greater than in recent years.

On average we have disposed of properties at cap rates around 7%, excluding Carrefour which we've used an outlier, and we're able to reinvest those proceeds into higher cap rate investments like Nord Anglia and Forterra.

On the Investment Management side, year-to-date through today we have closed approximately $1.1 billion of transactions on behalf of the managed funds. We have also filed for CPA 19, which remains under review by the SEC. Diversification has been an important principle of our business since day one when Bill Carey founded this firm in 1973.

We have always believed that the net lease real estate portfolio where lease duration is long, 15 to 20 years in most cases, should be diversified. It helps to insulate the income generation of the portfolio during industry specific downturns or events affecting a specific geographic area.

It also allows us to be opportunistic in both investing and disposing of properties at certain points in the economic cycle.

When you think about the four main factors that go into our underwriting process; tenant credit worthiness, asset criticality, real estate value, and transaction structure and pricing; that expertise is the most transferable of any real estate sector across property type, industry, and geography.

We also have diversity in our capital sources and the ability to put that capital to work on an international platform. During the quarter we accessed the capital markets, both utilizing the ATM program and issuing bonds, which John will provide some details on.

We continue to execute on our strategy of becoming a primarily unsecured borrower and building balance sheet strength and flexibility. In addition, we continue to focus on costs and that benefit is now showing up in our quarterly results as Tony will discuss.

Lastly, we have focused on providing transparency both in our disclosure and through investor outreach. Since May we have held roughly 250 meetings with equity and fixed income investors both in the US and Europe. We have explained our model, our track record, answered questions, and clarified certain misconceptions.

First, we are an internally managed with approximately 95% of our AFFO generated by our Owned Real Estate segment. Second, executive management is paid in cash and stock of W.P. Carey with performance compensation tied only to AFFO growth per share and total shareholder return generated for shareholders at W.P. Carey.

Management receives no benefit based on how deals are allocated or liquidation of the funds and we have no interest in outside entities linked to the funds. All fees generated by the funds flow directly to W.P. Carey for the benefit of its shareholders. Third, Investment Management.

We have built an enviable and valuable track record in our managed funds business generating average annual returns for full-term investors of approximately 11% and that's net of all fees and expenses.

Although a relatively small contributor to our overall AFFO, it provides us the opportunity to grow earnings through almost any economic cycle by giving us access to capital that earns fees for W.P. Carey supported by hard assets.

What I have learned through these meetings is that although we have been net lease investors for over 40 years and a public company since 1998, W.P. Carey's still relatively new to the REIT space having converted to REIT status in late 2012.

We're also relatively new to the public debt and equity capital markets issuing securities for the first time in 2014 although we are becoming more regular issuers.

We have a proven business model and while it has evolved over time, what hasn't changed is the value that we have generated for our stakeholders both through returns to those stakeholders and our ability to be opportunistic and maintain growth through multiple economic cycles.

We will continue to meet with our stakeholders, answer their questions, and explain the value our Company brings to the table. With that, I will turn the call over to Jason to walk through our portfolio activity..

Thank you, Mark, and good morning everyone. At the end of the third quarter, our portfolio included 910 properties covering roughly 92 million square feet net leased to 222 tenants. As Mark mentioned, we've increased the weighted average lease term of the portfolio to 9.4 years and occupancy has remained high at 99.1%.

At quarter-end roughly 63% of ABR came from our properties in the US and 34% from our properties in Europe, 99% of ABR came from leases with contractual rent escalation including approximately two-thirds tied to CPI providing built-in rent growth. Our same-store rents were close to 1% higher year-over-year on a constant currency basis.

Turning to recent investment activity. For the year-to-date period, we have completed two acquisitions for our balance sheet totaling $386 million, which I reviewed in our last earnings call.

They have attractive initial cap rates averaging in the mid-7% range and long lease terms of 20 to 25 years, which are highly additive to the overall weighted average lease term of our portfolio. We continually look for expansion opportunities within our portfolio.

Our existing base of critical real estate provides a steady stream of repeat business with our current tenants. Currently we have approximately $60 million of redevelopment and expansion projects underway that we expect to complete by the end of 2017.

This includes an agreement we entered into in late September to construct a new auto parts manufacturing facility for approximately $23 million, which will also extend the existing lease on the adjacent property from 11 years to a new 20-year term.

Also as part of the Nord Anglia sale leaseback that we announced in April of this year, we agreed to provide up to $128 million in build-to-suit financing to fund the expansion of existing facilities over the next four years, which will effectively extend the overall lease terms of these assets up to four years past their initial 25-year term.

Turning to the acquisition environment. The US market remains competitive as the search for yield persists and global capital flows continue to move into the relative safety of the US dollar. As a result, cap rates remain low.

However, we continue to find investment opportunities with good risk return profiles as our focus remains outside the commodity segments of the net lease sector.

Instead we target transactions like sale leasebacks, structured net leased investments with private equity firms, multi-country transactions, and more generally net leased opportunities with non-investment grade tenants where we feel that inadequate risk premium still exists.

In Europe cap rates continue to compress and it is becoming increasingly challenging to secure attractive investments with adequate yields and long-term sustainable value.

Although capital inflows have led to increased competition, our established presence and reputation for reliable execution across the continent continues to give us access to deals that are not heavily marketed. Following the Brexit vote, UK cap rates rose moderately in certain sectors of the market and lenders were initially cautious.

However, activity levels appear to have picked up again as the weaker sterling has helped attract offshore capital and lending has resumed for high quality assets. Keeping in mind that we are still in the early stages of Brexit, we are maintaining our underwriting and investment discipline, but continue to closely monitor developments.

Turning to dispositions. During the third quarter, we disposed of four properties from our portfolio for total proceeds of $219 million bringing total dispositions through the first nine months of 2016 to $481 million.

2016 has been an active year for capital recycling, during which we have addressed the majority of our near-term lease maturities including two transactions involving significant tenants, AMD and Carrefour.

In August, we sold a corporate headquarters office facility in Sunnyvale, California leased to AMD for an approximately 7.3% sale cap rate with two years left on the lease for gross proceeds of $175 million, which was almost double what we paid for it in 1998.

In October, we completed the final piece of the sale of the Carrefour portfolio, for which we had been planning for several years. Total gross proceeds for the entire portfolio were $142 million at an effective sale cap rate on NOI of approximately 17%.

We achieved what we consider to be the best possible execution in a transaction that had significant benefits for our overall portfolio by eliminating near-term vacancy risk for a Top 10 tenant, adding weighted average lease term, and reducing residual risk on an aging portfolio of properties; the majority of which we expected to become vacant upon lease expiration.

Despite the differences in their sale cap rates, both the AMD and Carrefour transactions generated investment level levered IRRs in excess of 20% over their respective 18-year and 14-year hold periods.

Dispositions for the year-to-date period through today totaled approximately $620 million and for the full year we expect an overall weighted average disposition cap rate of approximately 7% excluding Carrefour which we have always said would be an outlier.

Year-to-date through the end of the third quarter, over 90% of disposition proceeds have come from the office sector taking our office exposure from 30% of ABR down to 25%. Moving on to leasing activity.

First of all, in the context of our overall portfolio, keep in mind that third quarter leasing activity related to only a very small portion of AVR less than 1.5%.

During the third quarter, we extended or modified six leases recapturing 92% of the existing rent and adding about seven years of incremental weighted average lease term while investing less than $1.50 per square foot in tenant improvement and leasing commissions.

Separately during the third quarter, we entered into two new leases with a weighted average lease term of 10.4 years. Turning to our upcoming lease expirations. At September 30, we have 12 leases expiring in 2017 representing just 1.4% of total ABR.

For 2018, the data in our supplemental shows 24 leases expiring representing 5.4% of total ABR at September 30. As Mark mentioned, after the final piece of the Carrefour sale that it's come down to about 2% of ABR. Looking ahead, leases expiring in 2019 represents about 5% of ABR.

Our asset management team is currently doing the required work to achieve optimal outcomes including site visits, market research, property inspections, and discussions with tenant management. Accordingly, we expect to address the majority of our 2019 lease maturities during 2017.

And with that, I'll hand it over to Tony to review our financial results..

Thank you, Jason, and good morning everyone. As Mark mentioned, for the 2016 third quarter we generated AFFO per diluted share of the $1.34, which is up 13% compared to $1.19 for the prior year period.

This is due primarily to lower general and administrative expenses as a result of the cost reduction initiative we implemented earlier this year as well as growth in assets under management within our managed funds, which generated both higher asset management fees and higher distributions from our partnership interest in the managed funds.

Additionally, interest expense was lower compared to the prior year period. In terms of the contribution from each business segment, Owned Real Estate generated AFFO of $1.22 per diluted share and Investment Management generated AFFO of $0.12 per diluted share. Turning to AFFO guidance and where we are today relative to our expectations.

We expect to generate AFFO per diluted share for the 2016 full year of between $5.05 and $5.15, which narrows our previous range. Our expectations for acquisitions and dispositions for W.P. Carey's balance sheet remains unchanged. Specifically we continue to expect acquisitions for W.P.

Carey's balance sheet for the year to be between $400 million and $600 million, of which we have completed $386 million to-date as Jason mentioned. In addition, we continue to expect dispositions of between $650 million and $850 million for the year.

Year-to-date dispositions including dispositions that have closed since the end of the third quarter totaled approximately $620 million. For the managed funds, we are lowering our assumption for acquisition.

Based on our current views on the timing of deal closings, we expect acquisitions completed on behalf of the managed funds to be between $1.4 billion and $1.8 billion for the full year with roughly 30% to 40% of that for the CPA funds and 60% to 70% for the CWI funds.

For the year-to-date period including acquisitions closed since quarter-end, we have structured roughly $1.1 billion of acquisitions on behalf of the managed funds. We expect to provide 2017 AFFO guidance early next year. Turning to our Investment Management business.

Investor capital inflows for the managed funds for the 2016 third quarter including direct proceeds and net of redemptions totaled $180 million.

During the third quarter, we commenced raising capital for a new fund, the Carey European Student Housing Fund, a limited partnership formed for the purpose of developing, owning, and operating student housing properties in Europe.

At quarter-end, total assets under management for the managed funds stood at $12.2 billion, up 16% from $10.5 billion at the end of the prior year period. And with that, I will hand it over to John to talk briefly about our capitalization and balance sheet..

Thank you, Toni, and good morning everyone. An important part of our balance sheet strategy is maintaining access to multiple forms of capital. During the third quarter, we issued additional shares under our ATM program and completed a US dollar denominated bond issue.

We issued approximately 970,000 shares of common stock under our ATM during the quarter raising net proceeds of $65 million. This brings the total for the year-to-date period to approximately 1.25 million shares issued at an overall weighted average price of $68.52 per share raising net proceeds of $84 million.

We have not issued any shares under the ATM since the end of the third quarter. As Mark discussed, we have done considerable investor outreach this year with fixed income investors both in the US and in Europe.

We believe that our investor outreach and recent successful bond offering have continued to expand our fixed income investor base, which has helped enhance the liquidity of our bonds and improved our spreads. In September we completed an underwritten public offering of $350 million of 10-year unsecured notes at a coupon of 4.25%.

Net proceeds were used primarily to reduce amounts outstanding under our credit facility revolver that was initially used to fund acquisitions as well as to repay higher cost secured debt. Turning to our key leverage metrics and liquidity.

At the end of the third quarter net debt to enterprise value stood at 37.6%, total consolidated debt to gross assets was 49.2%, and net debt to adjusted EBITDA was 5.3 times. Our total liquidity at quarter-end was $1.3 billion, which includes cash and cash equivalents and undrawn availability on our $1.5 billion credit facility revolver.

We continue to execute on our unsecured debt strategy, which provides three key benefits for the Company. First, our credit profile continues to improve as we grow our unencumbered pool of assets. As a result, S&P upgraded our unsecured notes earlier this year from BBB minus to BBB with a stable outlook.

Most recently in October, Moody's reaffirmed our investment grade rating of Baa2 with a stable outlook. In each case, the rating agencies specifically acknowledged the progress we have made in growing our unencumbered pool. Second, we generate interest expense savings as we price higher cost secure debt with lower cost unsecured debt.

We have a substantial amount of secured debt both in the US and Europe at rates around 5% or higher. We believe that it can be replaced with lower cost bond financing in upcoming years. Third, we're lowering the balance sheet risk by extending our debt maturities through issuing long duration bonds.

As a result, our weighted average debt maturity increased from 4.4 years at the end of the second quarter to 5.0 years at the end of the third quarter.

In summary, as you heard from our team today; we are focused on improving the quality of our portfolio, enhancing our credit profile, maintaining the flexibility of our balance sheet, and running our Company as efficiently as possible. We believe that this will create long-term value for our shareholders.

And with that, I'll hand the call back to the operator for questions..

Thank you. At this time we will take questions. [Operator Instructions] Joseph Nicolas, Citigroup..

Mark, you mentioned all the client outreach over the last year.

So, I'm curious what are the common themes or push back that you receive on the story and then how do you plan to address those issues?.

As I said I think what I've learned on the call, it's more of us being relatively new to the REIT space. I get a lot of questions on our model and how we do business and at the end of the day as we answer those, I get very little push back on the model itself.

We spend a lot of time highlighting the fact that we've been doing net lease investment for 40 years even though we just converted to a REIT in 2012. We're focused on trying to drive down borrowing costs, we're becoming a more regular issuer in the bonds markets, we just for the first time accessed the public equity and bond markets in 2014.

So, we're relatively new to a lot of them and it's more of them just trying to understand W.P. Carey the company than anything else..

In terms of where the stock is trading, you're trading at 11% discount to consensus NAV and multiple discount to all of your peers. So, I'd imagine there has to be some push back in terms of the story or the execution just given where the stock is trading.

What are their thoughts or what is the investor feedback on valuation and ways to close that gap?.

I think it's doing what we're doing, we're executing on our business plan. We're continuing our outreach with those investors explaining the model to them, explaining our business plan. And I think as we execute that and we become more regular issuers in the public markets, we expect to close that gap..

Then for Carrefour, you mentioned it's an outlier in terms of the 17% cap rate.

How many other outliers are there in the portfolio today with lease rollover risk or above market rents?.

Overall the dispositions we had this year, we're very happy with the execution. As I said, we've done that at an average cap rate of about 7%. Carrefour was acquired as part of a portfolio.

When we do portfolio acquisitions, we tend to look at the value of those acquisitions through what the portfolio delivers in increased AFFO per share and growth in our dividend and those acquisitions were very accretive to us from that standpoint.

But as in any portfolio acquisition, you have purchase price allocations so looking at returns on individual assets aren't necessarily the best way to evaluate those. On Carrefour specifically if we look at the investment level IRR, that's north of 20% from where it was initially purchased to where we disposed of it at.

So we're very happy with that asset, it's done very well for us, it was an execution that needed to happen which it did. Jason, I don't know if you have anything you want to add to that..

The only thing I'll add is that we're constantly evaluating our portfolio of assets and we're looking at inflection points in that asset whether it's a change in criticality, a change in tenant credit, and we make those decisions on what to do with assets based on that analysis that we do on an ongoing basis.

So, we'll update you with more asset sales as they come to fruition..

Thank you. Our next question today is coming from Sheila McGrath, Evercore. Please proceed with your question..

I had question I hate to ask on the non-traded [REIT] because I know it is a small component of your FFO.

But if you can help us understand how we should think about the recent changes in the industry, how that will impact demand from your distribution channels where advisors have a premium commission? I'm wondering if you are introducing other distribution partners that might manage more money on a fee basis..

Let me just give you my view of it and then I'll turn it over to Mark Goldberg to give you his view on that as well. He's involved more in the day to day than I am. But overall I think the new regulatory changes, the impact they're going to have is more on the upfront cost to raise that capital.

So the upfront cost that advisors earn on putting that capital to work and the structuring fees that we earn, there will be significant pressure on. I think the structure of the funds will change somewhat. What I don't think will change is the annual revenue streams that we earn off of that capital source.

And at the end of the day for me, the capital source itself isn't going anywhere. There is still a group of people out there that are going to want preservation of capital and yield to live on. So how we access it, who we access it through, the type structures we put it into; that's all going to change.

But at the end of the day, we'll figure that out and the capital will still be there.

Mark, do you have anything you want to add to that?.

I guess I'll break your question into two parts. One is an outlook question, which Mark touched on, and then it's sort of tactical one of how we approach it. I think from an outlook question, we're in a creative disruption as broker dealers and financial advisors adapt to the new rules and regulations, which we're very positive on.

Some of the compression that Mark identified in terms of financial adviser compensation is really not an area that we tend to comment on because as investment managers, our focus is not on the pricing which financial advisers receive for recommending products, but more on the investment management.

We believe that the outlook is actually very promising. Our flows in capitals have been very steady. We've made adaptations already to our products.

We are working in close concert with our broker dealer clients for the adaptations that they're going to require come April with the introduction of the [dealer rule] and we have very consistent capital flows through the Q2, Q3, and beginning Q4. So, we have a very positive outlook.

And then when you layer on top of that the introduction of Blackstone and others into Merrill Lynch and Morgan Stanley and their combination and introduction of non-traded real asset products on to their private wealth platforms, that does not go unnoticed here at W.P. Carey either.

So, we have a generally positive outlook with a recognition that there is a regulatory disruption at the moment..

Okay. On G&A, I was wondering that was much lower this quarter.

Can you remind us were the savings were from and if you think that third quarter is a good run rate for the Company?.

I'll answer that first question and then I'll turn it over to Toni to handle the second part of that question. But overall that came throughout the organization.

When I started back in February, the senior management team got together and we looked at the overall cost structure of the Company as a whole and areas where we can make it more efficient and leverage our platform. Those cost cuts came from literally every part from compensation related cost to professional fees to supply costs to office costs.

We closed down the Shanghai office where that had been open for almost five years and we really hadn't been doing any business out of there. So, it was literally every facet of the organization. As far as the run rates and I'll turn that over to Toni to handle that..

I think you're seeing the first full quarter of the implementation of the cost reductions earlier this year. I think it's fair to say that a lot of that will continue, those efficiencies will continue into this year and next year.

I think to be mindful, there are some seasonality in some of the expenses we incur in G&A like professional fees and other costs that fluctuate from here to there. But generally speaking, on a full-year basis we are on track to achieve the savings we intended and in line with our guidance..

[Operator Instructions] Our next question today is coming from Chris Lucas from Capital One Securities. Please proceed with your question..

One, on the new product the limited partnership you broke out this quarter, what's the audience for that product? Is that a retail or is that an institutional product?.

I'll let Mark Goldberg handle that question..

It's an accredited only offering NLP and I do have to say that we're very limited in what we can say because as a non-public reporting company, we rely on Safe Harbor provisions and we don't want to say anything promotional on the call or something that might be deemed such.

But it is accredited only private placement offering that we launched late July. And more than that, I really can't say other than to kind of direct you to the supplemental information that we sent out, pages 40 and 41..

Okay. And Mark, I joined the call late so I apologize if you've already talked about this.

But can you provide an update on the CFO search?.

We're in the middle of it. We've engaged an outside search firm focused on finding the right individual not necessarily the timeframe. But beyond that, there's not a lot to report. We are actively interviewing people and I'm comfortable we'll have a decision shortly..

Okay. And then last question from me. Just bigger picture as it relates to where you see the opportunities on the investment side.

Big picture where do you anticipate allocating capital more over the next couple of quarters in the US or in Europe?.

Chris, this is Jason. It's going to be more in the US this quarter. We've seen Europe continually tighten and we're not seeing many opportunities that really offer what we feel are adequate risk adjusted returns over there. That being said, we're still active so we have great relationships.

We do expect there to be one-off opportunities, off-market deals where we can generate pricing that makes sense. But the market's tight right now and for that reason, I do think that it will shift more toward the US.

We've had more success in the US working alongside private equity firms who are more focused on ease of execution and certainty of closing as opposed to just focused on pricing or yield.

So, we expect to have some transactions that we'll announce by the end of the year, but of course the timing is not guaranteed, but we do think it will be mainly in the US this year. And we'll wait and see, we're opportunistic next year market cycles, we'll see where Europe goes next year relative to the US as well..

And just a follow-up on that.

Given the impact of Brexit on the markets in the UK, do you guys look at that as a potential opportunity or is the unknown a risk that you're not interested in in the current environment there?.

Certainly any disruption or volatility in a market we feel creates opportunity. So, there was I would say some modest increases in cap rates shortly following the Brexit announcement in July, I think that's moderated some. Where the FX has moved in the UK I think has attracted some capital flows into that market, but we'll be opportunistic.

We're certainly mindful that there is more to come on the Brexit news and we'll continue to monitor that and we'll stay disciplined in how we approach all of our deals, but we think there could be some opportunity resulting from that..

I would tell you we're looking for opportunities there and I think the reason we haven't really seen a lot of them is that really nothing's happened at this point yet. People are still I think standing on the sidelines and the news yesterday I don't know helps that situation at all with the fact that Parliament has to approve that.

So, I think that kind of throws that into a little bit more of uncertainty in the near term over there..

[Operator Instructions] Our next question is a follow-up from Nick Joseph of Citi. Please proceed with your question..

Now it's Michael Bilerman. Mark, I wanted to come back to the Carrefour discussion and you commented that you believe it was an outlier.

This was your third largest tenant, a very large concentration for the Company and obviously the exit cap relative to people's applied values is pretty wide irrespective of the fact of the IRR that you got over the life of the transaction.

I don't think anyone was assuming that this would be 17% cap rate asset in a net lease company where cap rates are much lower. Putting that aside, I wanted to understand sort of the timing to where this became a bigger issue. Because if you go back to May of last year when you held your Investor Day, this was being promoted as a success.

The slides would indicate that you renewed the extension for facilities in 2014, that you were in discussions to further extend the lease term on a number of the facilities, talked about rent indexation linked to the French construction cost index. All of it was being showcased in a positive light not a risk.

And so can you sort of help bridge that gap for us in terms of how the Company talks about their investments and the security of the cash flow and the security of asset value and ultimately what occurred?.

I don't know. I'm not going to comment on an Investor Day last year I wasn't here for. What I will tell you is that Carrefour has been an asset we have been looking at for the last three to four years and working with the tenant on possible outcomes and it's not unlike other assets that we work with.

In this case at this point in time based on what was going on at the asset, we felt this was the best exit for it. As I said overall on our dispositions this year, we've achieved about a 7% cap rate outside of Carrefour and reinvested that money in cap rates north of 7%. So, I'm very happy with the activity.

But you will have assets at points in time where our exit isn't necessarily the greatest exit going. But at the end of the day we did get out of the asset, we're happy with the execution, it's improved our portfolio, and we'll reinvest those proceeds.

As I said, I tend to look at the individual investment in an asset based on the life that we've owned it over. And when we talk about stable cash flow, this is an asset we've owned for 15 years and the tenant has paid their rent on time every quarter and it's been a good performing asset.

And at the end of the day, we exited that asset at an IRR north of 20%. So, that's been a pretty good asset for us over time..

But Mark, you have to understand also that the market doesn't look on past performance, they look at current results, right? And so when current results is a tenant that made up almost 4% of your annualized base rent that I don't think anybody would have assumed with only 1.5% of your enterprise value.

It's completely mismatched from a current value perspective of what was likely in your stock. And while you were not there at the Investor Day, many of the people around the table were, number one.

Number two, you are also Chairman of the Board, you're on the Board of Directors and the way the Company talks about their investments and this is talked about again. In a very positive light you can bring up the presentation, there was no mention of potential rolldown risk, no potential of reduced asset value.

And this is again 4% of your third largest tenant, this is not an outlier that's number 50 on the list..

I think it's an outlier in our disposition activity for this year, Michael, and from that standpoint, it is an outlier. And again I tend to look back how that investment has performed over the long term and with an IRR north of 20%, that's been a well performing investment for us..

The only thing I would add, Michael, about Investor Day is that at that point in time we did get a renewal. So, there was a point in time when Carrefour viewed those assets as something that they wanted to continually use. Things change and in this case it did change.

They became less critical, they changed their distribution model, and these assets were the fallout from that and so we reacted at that point in time. So, we had every reason to believe that there was perhaps a better outcome in 2014 than we were seeing today..

Michael, you're welcome to insinuate whatever you like in your articles. From my standpoint, this Company has always given accurate information based on what it knew at the time.

I know when I talked about Carrefour earlier and I got questions on it in earlier earnings calls, I specifically said I expected it to be an outlier from where other disposition activity is has occurred. So while we didn't have clear view into what that would be, we do today and that's what we're talking about..

The question is whether the market for a 4% tenant would have assumed that the value of the assets would have been on a current basis 1.3% of your enterprise value.

That's pretty widespread again not demeaning the fact of how this investment has performed, but stocks are valued on the basis of current rents, current asset value not what they have achieved over time..

Yes. And I think if you look at our disposition activity for the year ex this asset, we've disposed of assets in the 7% cap rate range and have invested that north of 7%. Overall I'm pretty satisfied with that..

I think it's also important to note cap rate is one metric to look at in dispositions. But this is also something we had a weighted average lease term of four years remaining on those assets that we were disposing, this is for the full-year expectations. Core criticality, ones in which we didn't expect in many cases renewal.

It was also a high percentage of office, ones that we viewed with a residual risk. I think it's going to about two-thirds office and about one-third warehouse industrial.

So we are generating a good cap rate excluding Carrefour, but we're also going to be substantially improving the portfolio metrics especially when we reinvest that money into assets like Nord Anglia and Forterra who both of those transactions have lease terms times greater than 20 years at cap rates that I think blend at around mid-7%.

So, we view the recycling as a positive this year..

Okay.

Is there anything else that we should be mindful of from a large lease rolldown in the next couple of years?.

I think we've gotten over that. We've reduced our lease expiration exposure in 2017 and 2018 to less than 2% each year..

Thank you. At this time, I'm not showing any further questions. I'm now going to turn the call back over to Mr. DeCesaris..

Thank you. I'm very satisfied with our progress this year. We have reduced our cost structure significantly. We are on target for balance sheet acquisitions. We have issued equity at a net price north of $68. We have executed on our disposition plan which both extends lease term and improves the quality of the portfolio.

We have reduced our secured debt and increased availability on our revolver as well as extending the overall term of our debt. We have reduced reliance on one-time structuring fees and increased higher value annual manager revenues and lease revenues while increasing AFFO per share.

We have added products within our investment management platform and we have access to the public debt markets. But we have work to do as we continue to make improvements on all fronts. We will continue to meet with equity and fixed income investors and answer their questions and explain the value of our business model.

We will continue to drive down our borrowing costs by becoming regular issuers in the public debt market and we have a path to do that. We must continue to access the equity markets when it makes sense to do so and build dry powder for balance sheet growth.

And we must continue to manage our portfolio with an eye toward extending lease term and improving the quality of our portfolio. The entire W.P. Carey team is focused on executing on this business plan. We thank you for your interest in W.P. Carey and look forward to speaking with you again next quarter..

That concludes today's call. You may now disconnect..