# W. P. Carey Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [W. P. Carey Inc.](/companies/wpc.md) (CIK 1025378)
- Form: 10-Q
- Filed: 2024-07-31
- Accepted by EDGAR: Jul 31, 2024, 16:06 ET
- Period: 2024-06-30
- Accession: 0001025378-24-000119
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1025378/000102537824000119/wpc-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1025378/000102537824000119/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $389.7m | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $779.5m | us-gaap:Revenues |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $65.3m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $134.0m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $6.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $14.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $142.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $302.1m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 220,214,118 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 220,261,525 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $1.26bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $380.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-06-30 | $1.09bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-06-30 | $17.77bn | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $9.13bn | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $8.10bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-06-30 | $8.63bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,955 characters.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial statements and the reasons for changes in certain key components of our financial statements from period to period. This item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the 2023 Annual Report and subsequent reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Refer to Item 1 of the 2023 Annual Report for a description of our business.

### Significant Developments

### Management Change

On July 10, 2024, we announced that John J. Park will step down as President of the Company effective September 30, 2024. The separate role of President will be eliminated, and the title will be assumed by Jason E. Fox, the Company’s Chief Executive Officer, effective October 1, 2024. Mr. Park will remain Senior Advisor to the Company through February 28, 2025.

### Financial Highlights

During the six months ended June 30, 2024, we completed the following (as further described in the consolidated financial statements):

### Real Estate

#### Investments

- We acquired ten investments totaling $535.2 million (Note 4, Note 5).
- We completed three construction projects at a cost totaling $33.2 million (Note 4).
- We funded approximately $4.9 million for a construction loan to build a retail complex in Las Vegas, Nevada, during the six months ended June 30, 2024. Through June 30, 2024, we have funded $236.3 million (Note 7).
- We committed to fund a redevelopment project for $44.1 million. We currently expect to complete the project in 2025 (Note 4).

#### Dispositions

- We disposed of 165 properties for total proceeds, net of selling costs, of $1.0 billion, including (i) our portfolio of 78 U-Haul properties for total proceeds, net of selling costs, of $464.1 million, (ii) 75 properties sold under the Office Sale Program for total proceeds, net of selling costs, of $451.9 million, and (iii) 12 additional properties for total proceeds, net of selling costs, of $87.0 million (Note 14).

### Financing and Capital Markets Transactions

- In April 2024, we repaid our $500 million of 4.6% Senior Notes due 2024 at maturity (Note 10).
- On May 16, 2024, we completed an underwritten public offering of €650.0 million of 4.25% Senior Notes due 2032, at a price of 99.526% of par value. These 4.25% Senior Notes due 2032 have an 8.2-year term and are scheduled to mature on July 23, 2032 (Note 10).
- On June 28, 2024, we completed an underwritten public offering of $400.0 million of 5.375% Senior Notes due 2034, at a price of 98.843% of par value. These 5.375% Senior Notes due 2034 have a 10.0-year term and are scheduled to mature on June 30, 2034 (Note 10).
- We repaid non-recourse mortgage debt outstanding totaling $118.7 million with a weighted-average interest rate of 4.8% (Note 10).

### Dividends to Stockholders

We declared cash dividends totaling $1.735 per share during the six months ended June 30, 2024, comprised of two quarterly dividends per share of $0.865 and $0.870 (Note 12).

### Consolidated Results

#### (in thousands, except shares)

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $389,672 | $452,578 | $779,470 | $880,368 |
| Net income attributable to W. P. Carey | 142,895 | 144,620 | 302,118 | 439,000 |
| Dividends declared | 192,046 | 230,405 | 382,993 | 460,375 |
| Net cash provided by operating activities (a) |  |  | 1,256,595 | 530,334 |
| Net cash used in investing activities |  |  | (387,164) | (905,618) |
| Net cash (used in) provided by financing activities |  |  | (318,016) | 435,521 |
| Supplemental financial measures (b): |  |  |  |  |
| Adjusted funds from operations attributable to W. P. Carey (AFFO) | 257,099 | 293,306 | 508,991 | 572,525 |
| Diluted weighted-average shares outstanding | 220,214,118 | 215,184,485 | 220,261,525 | 213,875,471 |

(a) Amount for the six months ended June 30, 2024 includes $807.1 million of proceeds from the sales of net investments in sales-type leases (U-Haul and State of Andalusia portfolios) (Note 5). Such proceeds are included within Net cash provided by operating activities in accordance with ASC 842, *Leases.*

(b) We consider Adjusted funds from operations (“AFFO”), a supplemental measure that is not defined by GAAP (a “non-GAAP measure”), to be an important measure in the evaluation of our operating performance. See Supplemental Financial Measures below for our definition of this non-GAAP measure and a reconciliation to its most directly comparable GAAP measure.

#### Revenues

Total revenues decreased for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to lower lease revenues (substantially as a result of the Spin-Off and the Office Sale Program (Note 1)) and lower operating property revenue (substantially as a result of dispositions of hotel operating properties) (Note 4).

#### Net Income Attributable to W. P. Carey

Net income attributable to W. P. Carey decreased for the three months ended June 30, 2024 as compared to the same period in 2023, primarily due to the impact of the Spin-Off and the Office Sale Program, and impairment charges recognized during the current year period, partially offset by higher gain on sale of real estate.

Net income attributable to W. P. Carey decreased for the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to lower gain on sale of real estate, the impact of the Spin-Off and the Office Sale Program, and impairment charges recognized during the current year period.

#### AFFO

AFFO decreased for the three and six months ended June 30, 2024 as compared to the same periods in 2023, primarily due to the impact of the Spin-Off and Office Sale Program, as well as certain lease restructurings and property vacancies.

### Portfolio Overview

Our portfolio is comprised of operationally-critical, commercial real estate assets net leased to tenants located primarily in the United States and Northern and Western Europe. We invest in high-quality single tenant industrial, warehouse, and retail properties subject to long-term net leases with built-in rent escalators. Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our various net-leased jointly owned investments. See Terms and Definitions below for a description of pro rata amounts.

### Portfolio Summary

| Net-leased Properties | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| ABR (in thousands) | $1,294,521 | $1,339,352 |
| Number of net-leased properties | 1,291 | 1,424 |
| Number of tenants | 346 | 336 |
| Total square footage (in thousands) | 170,133 | 172,668 |
| Occupancy | 98.8% | 98.1% |
| Weighted-average lease term (in years) | 12.0 | 11.7 |
| **Operating Properties** |  |  |
| Number of operating properties: | 95 | 96 |
| Number of self-storage operating properties | 89 | 89 |
| Number of hotel operating properties | 4 | 5 |
| Number of student housing operating properties | 2 | 2 |
| Occupancy (self-storage operating properties) | 90.5% | 90.3% |
| Number of countries | 26 | 26 |
| Total assets (in thousands) | $17,769,285 | $17,976,783 |
| Net investments in real estate (in thousands) | 14,092,672 | 14,913,899 |

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Acquisition volume (in millions) (a) | $540.1 | $918.5 |
| Construction projects completed (in millions) | 33.2 | 20.6 |
| Average U.S. dollar/euro exchange rate | 1.0811 | 1.0805 |
| Average U.S. dollar/British pound sterling exchange rate | 1.2651 | 1.2330 |

(a) Amounts for the six months ended June 30, 2024 and 2023 include $4.9 million and $23.7 million, respectively, of funding for a construction loan (Note 7). Amount for the six months ended June 30, 2024 includes $83.9 million of sale-leasebacks classified as loans receivable (Note 5).

### Net-Leased Portfolio

The tables below represent information about our net-leased portfolio at June 30, 2024 on a pro rata basis and, accordingly, exclude all operating properties. See Terms and Definitions below for a description of pro rata amounts and ABR.

#### Top Ten Tenants by ABR

#### (dollars in thousands)

| Tenant/Lease Guarantor | Description | Number of Properties | ABR | ABR Percent | Weighted-Average Lease Term (Years) |
| --- | --- | ---: | ---: | ---: | ---: |
| Apotex Pharmaceutical Holdings Inc. (a) | Pharmaceutical R&D and manufacturing properties in the Greater Toronto Area leased to generic drug manufacturer | 11 | $32,473 | 2.5% | 18.7 |
| Metro Cash & Carry Italia S.p.A. (b) | Business-to-business retail stores in Italy leased to cash and carry wholesaler | 19 | 27,838 | 2.1% | 4.3 |
| Extra Space Storage, Inc. | Net lease self-storage properties in the U.S. leased to publicly traded self-storage REIT | 27 | 25,808 | 2.0% | 19.8 |
| Hellweg Die Profi-Baumärkte GmbH & Co. KG (b) (c) | Retail properties in Germany leased to German DIY retailer | 35 | 25,302 | 2.0% | 19.7 |
| ABC Technologies Holdings Inc. (a) (d) | Automotive parts manufacturing properties in the U.S., Canada and Mexico leased to OEM supplier | 23 | 24,978 | 1.9% | 18.8 |
| Fortenova Grupa d.d. (b) | Grocery stores and warehouses in Croatia leased to European food retailer | 19 | 24,587 | 1.9% | 9.8 |
| OBI Group (b) | Retail properties in Poland leased to German DIY retailer | 26 | 24,421 | 1.9% | 6.9 |
| Nord Anglia Education, Inc. | K-12 private schools in Orlando, Miami and Houston leased to international day and boarding school operator | 3 | 22,963 | 1.8% | 19.2 |
| Fedrigoni S.p.A (b) | Industrial and warehouse facilities in Germany, Italy and Spain leased to global manufacturer of premium packaging and labels | 16 | 22,695 | 1.8% | 19.4 |
| Eroski Sociedad Cooperativa (b) | Grocery stores and warehouses in Spain leased to Spanish food retailer | 63 | 21,140 | 1.6% | 11.7 |
|  |  | 242 | $252,205 | 19.5% | 14.9 |

(a) ABR from these properties is denominated in U.S. dollars.

(b) ABR amounts are subject to fluctuations in foreign currency exchange rates.

(c) During the first quarter of 2024, we entered into a lease restructuring with Hellweg Die Profi-Baumärkte GmbH & Co. KG (“Hellweg”), which included (i) abated rent from January 1, 2024 to March 31, 2024, (ii) a €4.0 million reduction in annual base rent, and (iii) a seven-year lease extension, with a new lease maturity of February 2044.

(d) Of the 23 properties leased to ABC Technologies Holdings Inc., nine are located in Canada, eight are located in the United States, and six are located in Mexico.

#### Portfolio Diversification by Geography

#### (in thousands, except percentages)

| Region United States Midwest | ABR | ABR Percent | Square Footage (a) | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Illinois | $62,230 | 4.8% | 9,892 | 5.8% |
| Ohio | 40,595 | 3.1% | 8,275 | 4.9% |
| Indiana | 31,556 | 2.4% | 5,516 | 3.2% |
| Michigan | 25,262 | 2.0% | 4,423 | 2.6% |
| Wisconsin | 15,423 | 1.2% | 2,904 | 1.7% |
| Other (b) | 47,983 | 3.7% | 7,127 | 4.2% |
| **Total Midwest** | 223,049 | 17.2% | 38,137 | 22.4% |
| **South** |  |  |  |  |
| Texas | 79,957 | 6.2% | 10,426 | 6.1% |
| Florida | 36,711 | 2.8% | 3,134 | 1.8% |
| Georgia | 25,413 | 2.0% | 4,067 | 2.4% |
| Tennessee | 23,900 | 1.9% | 3,864 | 2.3% |
| Alabama | 22,549 | 1.7% | 3,394 | 2.0% |
| Other (b) | 15,880 | 1.2% | 2,300 | 1.4% |
| **Total South** | 204,410 | 15.8% | 27,185 | 16.0% |
| **East** |  |  |  |  |
| North Carolina | 36,998 | 2.9% | 8,226 | 4.8% |
| Pennsylvania | 31,028 | 2.4% | 3,375 | 2.0% |
| New York | 20,492 | 1.6% | 2,220 | 1.3% |
| South Carolina | 19,356 | 1.5% | 4,952 | 2.9% |
| Kentucky | 18,645 | 1.4% | 3,141 | 1.8% |
| Massachusetts | 16,248 | 1.3% | 1,188 | 0.7% |
| New Jersey | 14,364 | 1.1% | 835 | 0.5% |
| Other (b) | 33,516 | 2.6% | 5,219 | 3.1% |
| **Total East** | 190,647 | 14.8% | 29,156 | 17.1% |
| **West** |  |  |  |  |
| California | 55,782 | 4.3% | 5,669 | 3.3% |
| Arizona | 20,880 | 1.6% | 2,269 | 1.4% |
| Utah | 14,755 | 1.1% | 2,021 | 1.2% |
| Other (b) | 53,350 | 4.1% | 4,925 | 2.9% |
| **Total West** | 144,767 | 11.1% | 14,884 | 8.8% |
| **United States Total** | 762,873 | 58.9% | 109,362 | 64.3% |
| **International** |  |  |  |  |
| Germany | 61,629 | 4.8% | 6,323 | 3.7% |
| The Netherlands | 60,852 | 4.7% | 7,054 | 4.1% |
| Poland | 59,599 | 4.6% | 8,157 | 4.8% |
| Italy | 58,750 | 4.5% | 8,183 | 4.8% |
| Canada (c) | 51,617 | 4.0% | 4,804 | 2.8% |
| United Kingdom | 47,318 | 3.7% | 4,266 | 2.5% |
| Spain | 35,172 | 2.7% | 3,073 | 1.8% |
| Croatia | 25,414 | 2.0% | 2,063 | 1.2% |
| Denmark | 24,792 | 1.9% | 3,002 | 1.8% |
| France | 21,913 | 1.7% | 1,679 | 1.0% |
| Mexico | 13,592 | 1.1% | 2,489 | 1.5% |
| Lithuania | 13,410 | 1.0% | 1,640 | 1.0% |
| Other (d) | 57,590 | 4.4% | 8,038 | 4.7% |
| **International Total** | 531,648 | 41.1% | 60,771 | 35.7% |
| **Total** | $1,294,521 | 100.0% | 170,133 | 100.0% |

*W. P. Carey 6/30/2024 10-Q –* **40**

#### Portfolio Diversification by Property Type

#### (in thousands, except percentages)

| Property Type | ABR | ABR Percent | Square Footage (a) | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Industrial | $458,402 | 35.4% | 71,930 | 42.3% |
| Warehouse | 368,884 | 28.5% | 66,526 | 39.1% |
| Retail (e) | 276,572 | 21.4% | 21,140 | 12.4% |
| Other (f) | 190,663 | 14.7% | 10,537 | 6.2% |
| **Total** | $1,294,521 | 100.0% | 170,133 | 100.0% |

(a) Includes square footage for any vacant properties.

(b) Other properties within Midwest include assets in Minnesota, Iowa, Kansas, Missouri, Nebraska, South Dakota, and North Dakota. Other properties within South include assets in Louisiana, Arkansas, Oklahoma, and Mississippi. Other properties within East include assets in Virginia, Connecticut, Maryland, West Virginia, New Hampshire, and Maine. Other properties within West include assets in Oregon, Colorado, Washington, Nevada, Hawaii, Idaho, Montana, Wyoming, and New Mexico.

(c) $48.2 million (93%) of ABR from properties in Canada is denominated in U.S. dollars, with the balance denominated in Canadian dollars.

(d) Includes assets in Belgium, Hungary, Norway, Mauritius, Slovakia, Portugal, the Czech Republic, Austria, Finland, Sweden, Latvia, Japan, and Estonia.

(e) Includes automotive dealerships.

(f) Includes ABR from tenants within the following property types: education facility, specialty, office, self-storage (net lease), laboratory, hotel (net lease), research and development, and land.

#### Portfolio Diversification by Tenant Industry

#### (in thousands, except percentages)

| Industry Type | ABR | ABR Percent | Square Footage | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: |
| Retail Stores (a) | $300,723 | 23.2% | 37,095 | 21.8% |
| Beverage and Food | 108,156 | 8.4% | 14,988 | 8.8% |
| Consumer Services | 104,498 | 8.1% | 5,735 | 3.4% |
| Automotive | 98,546 | 7.6% | 15,017 | 8.8% |
| Grocery | 84,403 | 6.5% | 7,406 | 4.4% |
| Healthcare and Pharmaceuticals | 72,451 | 5.6% | 6,594 | 3.9% |
| Containers, Packaging, and Glass | 58,392 | 4.5% | 9,966 | 5.9% |
| Capital Equipment | 50,463 | 3.9% | 8,858 | 5.2% |
| Cargo Transportation | 47,322 | 3.7% | 7,723 | 4.5% |
| Construction and Building | 45,681 | 3.5% | 8,443 | 5.0% |
| Durable Consumer Goods | 44,461 | 3.4% | 9,715 | 5.7% |
| Hotel and Leisure | 43,506 | 3.4% | 2,137 | 1.3% |
| Non-Durable Consumer Goods | 38,630 | 3.0% | 8,000 | 4.7% |
| Chemicals, Plastics, and Rubber | 33,783 | 2.6% | 6,131 | 3.6% |
| High Tech Industries | 32,655 | 2.5% | 4,479 | 2.6% |
| Business Services | 31,566 | 2.4% | 3,415 | 2.0% |
| Metals | 28,735 | 2.2% | 4,976 | 2.9% |
| Wholesale | 14,823 | 1.2% | 2,614 | 1.5% |
| Telecommunications | 14,266 | 1.1% | 1,500 | 0.9% |
| Other (b) | 41,461 | 3.2% | 5,341 | 3.1% |
| **Total** | $1,294,521 | 100.0% | 170,133 | 100.0% |

(a) Includes automotive dealerships.

(b) Includes ABR from tenants in the following industries: aerospace and defense, insurance, sovereign and public finance, environmental industries, media: advertising, printing, and publishing, oil and gas, consumer transportation, forest products and paper, banking, and electricity. Also includes square footage for vacant properties.

#### Lease Expirations

#### (in thousands, except percentages, number of leases, and number of tenants)

| Year of Lease Expiration (a) | Number of Leases Expiring | Number of Tenants with Leases Expiring | ABR | ABR Percent | Square Footage | Square Footage Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Remaining 2024 | 12 | 11 | $11,499 | 0.9% | 1,826 | 1.1% |
| 2025 | 34 | 16 | 42,836 | 3.3% | 5,621 | 3.3% |
| 2026 | 38 | 29 | 59,980 | 4.6% | 8,539 | 5.0% |
| 2027 | 43 | 26 | 62,471 | 4.8% | 7,149 | 4.2% |
| 2028 | 41 | 25 | 53,893 | 4.2% | 4,465 | 2.6% |
| 2029 | 62 | 35 | 76,721 | 5.9% | 9,421 | 5.5% |
| 2030 | 33 | 29 | 36,978 | 2.9% | 3,964 | 2.3% |
| 2031 | 36 | 20 | 68,132 | 5.3% | 8,448 | 5.0% |
| 2032 | 39 | 20 | 41,739 | 3.2% | 5,835 | 3.4% |
| 2033 | 29 | 22 | 77,795 | 6.0% | 11,791 | 6.9% |
| 2034 | 56 | 25 | 79,459 | 6.1% | 9,509 | 5.6% |
| 2035 | 16 | 14 | 30,481 | 2.4% | 5,572 | 3.3% |
| 2036 | 44 | 18 | 69,813 | 5.4% | 10,827 | 6.4% |
| 2037 | 27 | 15 | 35,456 | 2.7% | 4,665 | 2.8% |
| Thereafter (\>2037) | 269 | 116 | 547,268 | 42.3% | 70,473 | 41.4% |
| Vacant | — | — | — | —% | 2,028 | 1.2% |
| **Total** | 779 |  | $1,294,521 | 100.0% | 170,133 | 100.0% |

(a) Assumes tenants do not exercise any renewal options or purchase options.

### Terms and Definitions

*Pro Rata Metrics —* The portfolio information above contains certain metrics prepared on a pro rata basis. We refer to these metrics as pro rata metrics. We have certain investments in which our economic ownership is less than 100%. On a full consolidation basis, we report 100% of the assets, liabilities, revenues, and expenses of those investments that are deemed to be under our control or for which we are deemed to be the primary beneficiary, even if our ownership is less than 100%. Also, for all other jointly owned investments, which we do not control, we report our net investment and our net income or loss from that investment. On a pro rata basis, we generally present our proportionate share, based on our economic ownership of these jointly owned investments, of the portfolio metrics of those investments. Multiplying each of our jointly owned investments’ financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investments.

*ABR —* ABR represents contractual minimum annualized base rent for our net-leased properties and reflects exchange rates as of June 30, 2024. If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is not applicable to operating properties and is presented on a pro rata basis.

### Results of Operations

Effective January 1, 2024, we no longer separately analyze our business between real estate operations and investment management operations, and instead view the business as one reportable segment. As a result of this change, we have conformed prior period segment information to reflect how we currently view our business (Note 1).

We evaluate our results of operations with a primary focus on increasing and enhancing the value, quality, and number of our properties. We focus our efforts on accretive investing and improving portfolio quality through re-leasing efforts, including negotiation of lease renewals, or selectively selling assets in order to increase value in our real estate portfolio.

### Revenues

The following table presents revenues (in thousands):

| Real Estate Revenues Lease revenues from: | Three Months Ended June 30, 2024 | 2023 | Change | Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Existing net-leased properties | $287,066 | $288,203 | $(1,137) | $574,825 | $569,699 | $5,126 |
| Recently acquired net-leased properties | 35,501 | 17,788 | 17,713 | 66,157 | 19,689 | 46,468 |
| Net-leased properties sold, held for sale, derecognized, or reclassified to operating properties | 1,537 | 63,133 | (61,596) | 5,373 | 132,072 | (126,699) |
| Total lease revenues (includes reimbursable tenant costs) | 324,104 | 369,124 | (45,020) | 646,355 | 721,460 | (75,105) |
| Income from finance leases and loans receivable | 14,961 | 27,311 | (12,350) | 40,754 | 48,066 | (7,312) |
| Operating property revenues from: |  |  |  |  |  |  |
| Existing operating properties | 29,477 | 29,404 | 73 | 57,877 | 57,164 | 713 |
| Operating properties recently reclassified from net-leased properties or recently acquired | 7,804 | 6,976 | 828 | 14,505 | 10,837 | 3,668 |
| Operating properties sold, held for sale, or derecognized | 1,434 | 14,296 | (12,862) | 2,976 | 23,561 | (20,585) |
| Total operating property revenues | 38,715 | 50,676 | (11,961) | 75,358 | 91,562 | (16,204) |
| Other lease-related income | 9,149 | 5,040 | 4,109 | 11,304 | 18,413 | (7,109) |
| **Investment Management Revenues** |  |  |  |  |  |  |
| Asset management revenue | 1,686 | 303 | 1,383 | 3,579 | 642 | 2,937 |
| Other advisory income and reimbursements | 1,057 | 124 | 933 | 2,120 | 225 | 1,895 |
|  | $389,672 | $452,578 | $(62,906) | $779,470 | $880,368 | $(100,898) |

*W. P. Carey 6/30/2024 10-Q –* **44**

#### Lease Revenues

“Existing net-leased properties” are those that we acquired or placed into service prior to January 1, 2023 and that were not sold, held for sale, derecognized, or reclassified to operating properties during the periods presented. For the periods presented, there were 1,101 existing net-leased properties.

For the three months ended June 30, 2024 as compared to the same period in 2023, lease revenues from existing net-leased properties decreased due to the following items (in millions):

For the six months ended June 30, 2024 as compared to the same period in 2023, lease revenues from existing net-leased properties decreased due to the following items (in millions):

(a) Excludes fixed minimum rent increases, which are reflected as straight-line rent adjustments within lease revenues.

(b) During the first quarter of 2024, we entered into a lease restructuring with our tenant Hellweg, which included abated rent from January 1, 2024 to March 31, 2024 and the reclassification of 13 properties leased to this tenant from direct financing leases to operating leases (Note 5).

“Recently acquired net-leased properties” are those that we acquired or placed into service subsequent to December 31, 2022 and that were not sold or held for sale during the periods presented. Since January 1, 2023, we acquired 22 investments (comprised of 95 properties).

“Net-leased properties sold, held for sale, derecognized, or reclassified to operating properties” include:

- 164 net-leased properties disposed of during the six months ended June 30, 2024;
- one net-leased property classified as held for sale at June 30, 2024, which was sold in July 2024 (Note 4, Note 15);
- 23 net-leased properties disposed of during the year ended December 31, 2023;
- 59 net-leased properties derecognized in connection with the Spin-Off (Note 1); and
- a portfolio of 12 net-leased hotel properties that converted to operating properties in the first quarter of 2023 upon expiration of the master lease with the Marriott Corporation, after which we began recognizing operating property revenues and expenses from these properties (eight of these properties were sold during the third and fourth quarters of 2023 and one property was sold during the second quarter of 2024).

Our dispositions are more fully described in Note 14.

#### Income from Finance Leases and Loans Receivable

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, income from finance leases and loans receivable decreased due to the following items (in millions):

(a) We sold our U-Haul and State of Andalusia portfolios during the first quarter of 2024. Such investments were previously reclassified to net investments in sales-type leases during 2023 (Note 5).

(b) Amount is primarily related to a lease restructuring we entered into with our tenant Hellweg during the first quarter of 2024, which resulted in the reclassification of 13 properties leased to this tenant from direct financing leases to operating leases (Note 5).

#### Operating Property Revenues and Expenses

“Existing operating properties” are those that we acquired or placed into service prior to January 1, 2023 and that were not sold or held for sale during the periods presented. For the periods presented, we recorded operating property revenues from 78 existing operating properties, comprised of 75 self-storage operating properties (which excludes nine self-storage properties accounted for under the equity method), two student housing operating properties, and one hotel operating property.

“Operating properties recently reclassified from net-leased properties or recently acquired” include (i) three net-leased hotel properties that converted to operating properties in the first quarter of 2023 (after which we began recognizing operating property revenues and expenses from these properties) and (ii) five self-storage operating properties acquired during 2023.

“Operating properties sold, held for sale, or derecognized” are comprised of (i) nine hotel operating properties disposed of during 2023 and 2024 and (ii) a parking garage attached to a net-leased property that was derecognized in connection with the Spin-Off.

#### Other Lease-Related Income

Other lease-related income is described in Note 4.

#### Asset Management Revenue

During the periods presented, we earned asset management revenue from (i) NLOP (upon closing of the Spin-Off on November 1, 2023) and (ii) CESH (Note 3). Asset management revenues from NLOP and CESH are expected to decline as assets are sold (CESH owns one remaining build-to-suit project).

#### Other Advisory Income and Reimbursements

Other advisory income and reimbursements are comprised of (i) fixed administrative fees earned from NLOP (upon closing of the Spin-Off on November 1, 2023) and (ii) reimbursable costs from CESH (Note 3).

### Operating Expenses

#### Depreciation and Amortization

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, depreciation and amortization expense decreased primarily due to the impact of the Spin-Off, the Office Sale Program, and other dispositions, partially offset by the impact of property acquisition activity and certain tenant vacancies (amortization of intangible assets for such properties was accelerated upon vacancy).

#### Impairment Charges — Real Estate

Our impairment charges on real estate are more fully described in Note 8.

#### Property Expenses, Excluding Reimbursable Tenant Costs

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, property expenses, excluding reimbursable tenant costs, increased by $8.6 million and $8.0 million, respectively, primarily due to the release of real estate taxes accrued for a cash basis tenant during the prior year periods. The tenant was previously not current on real estate taxes due, and repaid the outstanding amount in the second quarter of 2023.

#### Stock-Based Compensation Expense

For the six months ended June 30, 2024 as compared to the same period in 2023, stock-based compensation expense increased by $1.0 million, primarily due to changes in the projected payout for PSUs and higher amortization of RSUs.

#### Merger and Other Expenses

For the six months ended June 30, 2024, merger and other expenses are primarily comprised of the write-off of a value added tax receivable that was previously recorded in connection with an international investment.

### Other Income and Expenses, and Provision for Income Taxes

#### Interest Expense

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, interest expense decreased by $10.2 million and $8.7 million, respectively, primarily due to (i) the reduction of our mortgage debt outstanding by prepaying or repaying at or close to maturity a total of $486.7 million of non-recourse mortgage loans with a weighted-average interest rate of 4.9% since January 1, 2023 (Note 10), (ii) the derecognition of non-recourse mortgage loans with an aggregate carrying value totaling $164.7 million in connection with the Spin-Off on November 1, 2023, (iii) lower outstanding balances on our Unsecured Revolving Credit Facility, and (iv) the repayment of our $500 million of 4.6% Senior Notes on April 1, 2024, partially offset by our Unsecured Term Loan due 2026 that we entered into in April 2023 (Note 10).

The following table presents certain information about our outstanding debt (dollars in thousands):

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Average outstanding debt balance | $7,844,471 | $8,633,387 | $7,888,323 | $8,412,813 |
| Weighted-average interest rate | 3.1% | 3.2% | 3.1% | 3.1% |

#### Gain on Sale of Real Estate, Net

Gain on sale of real estate, net, consists of gains and losses on the sale of properties that were (i) disposed of or (ii) subject to the exercise of a purchase option during the reporting period, as more fully described in Note 4, Note 5 and Note 14.

#### Non-Operating Income

Non-operating income primarily consists of interest income on our cash deposits, realized gains and losses on derivative instruments, and dividends from equity securities.

The following table presents non-operating income (in thousands):

| Non-Operating Income | Three Months Ended June 30, 2024 | 2023 | Change | Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income on our cash deposits (a) | $5,891 | $762 | $5,129 | $15,247 | $1,283 | $13,964 |
| Realized gains on foreign currency collars (Note 9) | 3,324 | 3,747 | (423) | 6,441 | 7,852 | (1,411) |
| Cash dividends from our investment in Lineage (Note 8) | — | — | — | 3,032 | — | 3,032 |
|  | $9,215 | $4,509 | $4,706 | $24,720 | $9,135 | $15,585 |

(a) Increases for the three and six months ended June 30, 2024 as compared to the same periods in 2023 are due to higher cash deposit balances as a result of proceeds from issuances of Senior Unsecured Notes (Note 10), the Spin-Off, the Office Sale Program, and other dispositions.

#### Earnings from Equity Method Investments

Our equity method investments are more fully described in Note 7. The following table presents earnings from equity method investments (in thousands):

| Earnings from Equity Method Investments | Three Months Ended June 30, 2024 | 2023 | Change | Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Earnings from Las Vegas Retail Complex (a) | $5,234 | $2,576 | $2,658 | $8,329 | $5,868 | $2,461 |
| Earnings from Johnson Self Storage | 1,213 | 1,119 | 94 | 2,349 | 2,224 | 125 |
| Earnings from Harmon Retail Center | 213 | 210 | 3 | 429 | 426 | 3 |
| Earnings from Kesko Senukai (b) | (24) | 450 | (474) | 393 | 1,073 | (680) |
|  | $6,636 | $4,355 | $2,281 | $11,500 | $9,591 | $1,909 |

(a) Increase is due to funding of this construction loan since January 1, 2023, which has an interest rate of 6.0%.

(b) Decrease is due to higher interest expense as a result of refinancing the non-recourse mortgage loan encumbering the properties during the second quarter of 2024.

#### Other Gains and (Losses)

Other gains and (losses) primarily consists of gains and losses on (i) foreign currency exchange rate movements, (ii) extinguishment of debt, and (iii) the mark-to-market fair value of equity securities, as well as changes in the allowance for credit losses on finance receivables. The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation. Certain of our foreign currency-denominated unsecured debt instruments were designated as net investment hedges during the three and six months ended June 30, 2024 and 2023. Therefore, no gains and losses on foreign currency exchange rate movements were recognized on the remeasurement of such instruments during those periods (Note 9).

The following table presents other gains and (losses) (in thousands):

| Other Gains and (Losses) | Three Months Ended June 30, 2024 | 2023 | Change | Six Months Ended June 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net realized and unrealized gains (losses) on foreign currency exchange rate movements (a) | $1,369 | $(1,102) | $2,471 | $262 | $1,379 | $(1,117) |
| Change in allowance for credit losses on finance receivables (Note 5) | 1,094 | 209 | 885 | 5,097 | 3,629 | 1,468 |
| Gain (loss) on extinguishment of debt | 37 | (91) | 128 | (58) | 2,662 | (2,720) |
| Gain on repayment of secured loan receivable (b) | — | — | — | 10,650 | — | 10,650 |
| Other | 4 | (382) | 386 | 392 | (936) | 1,328 |
|  | $2,504 | $(1,366) | $3,870 | $16,343 | $6,734 | $9,609 |

(a) Remeasurement of certain monetary assets and liabilities that are held by our subsidiaries in currencies other than their functional currency are included in other gains and (losses). This includes foreign currency-denominated intercompany loans to our foreign subsidiaries that are scheduled for settlement. Beginning in the first quarter of 2023, our intercompany loans subject to remeasurement were hedged by certain of our foreign currency-denominated unsecured debt that we de-designated as net investment hedges.

(b) We acquired a secured loan receivable with a fair value of $13.3 million in our merger with a former affiliate, Corporate Property Associates 17 – Global Incorporated, in October 2018, for which the outstanding principal of $24.0 million was fully repaid to us in March 2024 (Note 5). Therefore, we recorded a $10.7 million gain on repayment of this secured loan receivable during the six months ended June 30, 2024.

#### Provision for Income Taxes

For the three and six months ended June 30, 2024 as compared to the same periods in 2023, provision for income taxes decreased by $3.9 million and $10.4 million, primarily due to (i) the impact of international office property dispositions and (ii) the release of deferred tax assets in connection with the tax restructuring of certain international properties during the six months ended June 30, 2023.

### Liquidity and Capital Resources

### Sources and Uses of Cash During the Period

We use the cash flow generated from our investments primarily to meet our operating expenses, service debt, and fund dividends to stockholders. Our cash flows fluctuate periodically due to a number of factors, which may include, among other things: the timing of our equity and debt offerings; the timing of purchases and sales of real estate; the timing of the repayment of mortgage loans, our Senior Unsecured Notes, and our Unsecured Term Loans; the timing of our receipt of lease revenues; the timing and amount of other lease-related payments; the timing of settlement of foreign currency transactions; changes in foreign currency exchange rates; and the timing of distributions from equity method investments. Despite these fluctuations, we believe that we will generate sufficient cash from operations to meet our normal recurring short-term liquidity needs. We may also use existing cash resources, available capacity under our Senior Unsecured Credit Facility, proceeds from term loans or other bank debt, proceeds from dispositions of properties (including the Office Sale Program (Note 1)), and the issuance of additional debt or equity securities, such as issuances of common stock through our ATM Program (Note 12), in order to meet our short-term and long-term liquidity needs. We assess our ability to access capital on an ongoing basis. Our sources and uses of cash during the period are described below.

*Operating Activities —* Net cash provided by operating activities increased by $726.3 million during the six months ended June 30, 2024 as compared to the same period in 2023, primarily due to $807.1 million of proceeds received from the sales of net investments in sales-types leases during the current year period (Note 5), partially offset by the impact of the Spin-Off and Office Sale Program (Note 1).

*Investing Activities —* Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and funding for build-to-suit activities and other capital expenditures on real estate. We also received $24.0 million from the repayment of a loan receivable (Note 5).

*Financing Activities —* Our financing activities are generally comprised of borrowings and repayments under our Unsecured Revolving Credit Facility and Unsecured Term Loans, issuances and repayments of the Senior Unsecured Notes, payments and prepayments of non-recourse mortgage loans, issuances of common equity, and payments of dividends to stockholders.

### Summary of Financing

The table below summarizes our Senior Unsecured Notes, our non-recourse mortgages, and our Senior Unsecured Credit Facility (dollars in thousands):

| Carrying Value Fixed rate: | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Senior Unsecured Notes (a) | $6,519,887 | $6,035,686 |
| Unsecured Term Loans subject to interest rate swaps (a) | 532,592 | 549,109 |
| Non-recourse mortgages (a) (b) | 439,752 | 513,863 |
|  | 7,492,231 | 7,098,658 |
| Variable rate: |  |  |
| Unsecured Term Loans (a) | 567,764 | 576,455 |
| Unsecured Revolving Credit Facility | 15,005 | 403,785 |
| Non-recourse mortgages (a) | 27,448 | 65,284 |
|  | 610,217 | 1,045,524 |
|  | $8,102,448 | $8,144,182 |
| **Percent of Total Debt** |  |  |
| Fixed rate | 92% | 87% |
| Variable rate | 8% | 13% |
|  | 100% | 100% |
| **Weighted-Average Interest Rate at End of Period** |  |  |
| Fixed rate | 3.1% | 2.9% |
| Variable rate (c) | 5.3% | 5.1% |
| Total debt | 3.2% | 3.2% |

(a) Aggregate debt balance includes unamortized discount, net, totaling $35.6 million and $31.8 million as of June 30, 2024 and December 31, 2023, respectively, and unamortized deferred financing costs totaling $28.5 million and $21.5 million as of June 30, 2024 and December 31, 2023, respectively.

(b) Includes non-recourse mortgages subject to variable-to-fixed interest rate swaps totaling $68.4 million and $45.0 million as of June 30, 2024 and December 31, 2023, respectively.

(c) The impact of our interest rate caps is reflected in the weighted-average interest rates.

### Cash Resources

At June 30, 2024, our cash resources consisted of the following:

- cash and cash equivalents totaling $1.1 billion. Of this amount, $598.9 million, at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts;
- funds totaling $106.9 million that are held by an intermediary and have been designated for future 1031 Exchange transactions (Note 2);
- our Unsecured Revolving Credit Facility, with available capacity of approximately $2.0 billion (net of amounts reserved for standby letters of credit totaling $5.8 million); and
- unleveraged properties that had an aggregate asset carrying value of approximately $13.0 billion at June 30, 2024, although there can be no assurance that we would be able to obtain financing for these properties.

We may also access the capital markets through additional debt (denominated in both U.S. dollars and euros) and equity offerings, as well as term loans and other bank debt.

Our cash resources can be used for working capital needs and other commitments and may be used for future investments.

### Cash Requirements and Liquidity

As of June 30, 2024, we had (i) $1.1 billion of cash and cash equivalents, (ii) $106.9 million of funds that are held by an intermediary and have been designated for future 1031 Exchange transactions (Note 2), and (iii) approximately $2.0 billion of available capacity under our Unsecured Revolving Credit Facility (net of amounts reserved for standby letters of credit totaling $5.8 million). As of June 30, 2024, scheduled debt principal payments total $603.0 million during the remainder of 2024 (including €500 million of senior notes that were repaid in July 2024 (Note 15)) and $707.3 million during 2025 (Note 10).

During the next 12 months following June 30, 2024 and thereafter, we expect that our significant cash requirements will include:

- paying dividends to our stockholders;
- funding acquisitions of new investments (Note 4);
- funding future capital commitments (Note 4) and tenant improvement allowances;
- making scheduled principal and balloon payments on our debt obligations, including (i) €500 million of senior notes that were repaid in July 2024 (Note 15) and (ii) $450 million of senior notes due in February 2025 (Note 10);
- making scheduled interest payments on our debt obligations (future interest payments total $1.2 billion, with $242.9 million due during the next 12 months; interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding at June 30, 2024); and
- other normal recurring operating expenses.

We expect to fund these cash requirements through cash generated from operations, cash received from dispositions of properties, the use of our cash reserves or unused amounts on our Unsecured Revolving Credit Facility (as described above), proceeds from term loans or other bank debt, issuances of common stock through our ATM Program (Note 12), and potential issuances of additional debt or equity securities. We may also choose to prepay certain of our non-recourse mortgage loan obligations, depending on our capital needs and market conditions at that time.

Our liquidity could be adversely affected by unanticipated costs and greater-than-anticipated operating expenses. To the extent that our working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our Unsecured Revolving Credit Facility, mortgage loan proceeds, and the issuance of additional debt or equity securities to meet these needs.

Certain amounts disclosed above are based on the applicable foreign currency exchange rate at June 30, 2024.

### Supplemental Financial Measures

In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial measures in order to facilitate meaningful comparisons between periods and among peer companies. Additionally, in the formulation of our goals and in the evaluation of the effectiveness of our strategies, we use Funds from Operations (“FFO”) and AFFO, which are non-GAAP measures defined by our management. We believe that these measures are useful to investors to consider because they may assist them to better understand and measure the performance of our business over time and against similar companies. A description of FFO and AFFO and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are provided below.

#### Funds from Operations and Adjusted Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as restated in December 2018. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from the sale of certain real estate, impairment charges on real estate or other assets incidental to the company’s main business, gains or losses on changes in control of interests in real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO on the same basis.

We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on loans receivable and finance leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt, and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt, merger and acquisition expenses, and spin-off expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that are currently not engaged in acquisitions, mergers, and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.

We believe that AFFO is a useful supplemental measure for investors to consider as we believe it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.

Consolidated FFO and AFFO were as follows (in thousands):

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to W. P. Carey | $142,895 | $144,620 | $302,118 | $439,000 |
| Adjustments: |  |  |  |  |
| Depreciation and amortization of real property | 136,840 | 142,932 | 254,953 | 298,800 |
| Gain on sale of real estate, net (a) | (39,363) | (1,808) | (54,808) | (179,557) |
| Impairment charges — real estate | 15,752 | — | 15,752 | — |
| Proportionate share of adjustments to earnings from equity method investments (b) | 3,015 | 2,883 | 5,964 | 5,489 |
| Proportionate share of adjustments for noncontrolling interests (c) | (101) | (268) | (204) | (567) |
| Total adjustments | 116,143 | 143,739 | 221,657 | 124,165 |
| FFO (as defined by NAREIT) attributable to W. P. Carey | 259,038 | 288,359 | 523,775 | 563,165 |
| Adjustments: |  |  |  |  |
| Straight-line and other leasing and financing adjustments | (15,310) | (19,086) | (34,863) | (34,136) |
| Stock-based compensation | 8,903 | 8,995 | 17,759 | 16,761 |
| Above- and below-market rent intangible lease amortization, net | 5,766 | 8,824 | 9,834 | 19,685 |
| Amortization of deferred financing costs | 4,555 | 5,904 | 9,143 | 10,844 |
| Other (gains) and losses (d) | (2,504) | 1,366 | (16,343) | (6,734) |
| Tax (benefit) expense — deferred and other | (1,392) | (2,723) | (2,765) | 1,643 |
| Other amortization and non-cash items | 580 | 527 | 1,159 | 999 |
| Merger and other expenses (e) | 206 | 1,419 | 4,658 | 1,443 |
| Proportionate share of adjustments to earnings from equity method investments (b) | (2,646) | (255) | (3,165) | (1,181) |
| Proportionate share of adjustments for noncontrolling interests (c) | (97) | (24) | (201) | 36 |
| Total adjustments | (1,939) | 4,947 | (14,784) | 9,360 |
| AFFO attributable to W. P. Carey | $257,099 | $293,306 | $508,991 | $572,525 |
| **Summary** |  |  |  |  |
| FFO (as defined by NAREIT) attributable to W. P. Carey | $259,038 | $288,359 | $523,775 | $563,165 |
| AFFO attributable to W. P. Carey | $257,099 | $293,306 | $508,991 | $572,525 |

(a) Amount for the six months ended June 30, 2023 includes a gain on sale of real estate of $176.2 million recognized upon the reclassification of a portfolio of 78 net-lease self-storage properties to net investments in sales-type leases. This portfolio was sold in the first quarter of 2024 (Note 5).

(b) Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Earnings from equity method investments on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis.

(c) Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.

(d) Primarily comprised of gains and losses on extinguishment of debt, the mark-to-market fair value of equity securities, and foreign currency exchange rate movements, as well as non-cash allowance for credit losses on loans receivable and finance leases.

(e) Amount for the six months ended June 30, 2024 is primarily comprised of the write-off of a value added tax receivable that was previously recorded in connection with an international investment.

While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company’s operating performance. These non-GAAP measures should be used in conjunction with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures.

## Market risk

As filed, 6,888 characters.

#### Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, and equity prices. The primary market risks that we are exposed to are interest rate risk and foreign currency exchange risk; however, we do not use derivative instruments to hedge credit/market risks or for speculative purposes. From time to time, we may enter into foreign currency collars to hedge our foreign currency cash flow exposures.

We are also exposed to further market risk as a result of tenant concentrations in certain industries and/or geographic regions, since adverse market factors can affect the ability of tenants in a particular industry/region to meet their respective lease obligations. In order to manage this risk, we view our collective tenant roster as a portfolio and we attempt to diversify such portfolio so that we are not overexposed to a particular industry or geographic region.

#### Interest Rate Risk

The values of our real estate and related fixed-rate debt obligations, as well as the values of our unsecured debt obligations, are subject to fluctuations based on changes in interest rates. The value of our real estate is also subject to fluctuations based on local and regional economic conditions and changes in the creditworthiness of lessees, which may affect our ability to refinance property-level mortgage debt when balloon payments are scheduled, if we do not choose to repay the debt when due. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control. An increase in interest rates would likely cause the fair value of our assets to decrease. Increases in interest rates may also have an impact on the credit profile of certain tenants.

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we generally seek long-term debt financing on a fixed-rate basis. However, we are subject to variable-rate interest on our Unsecured Term Loans, Unsecured Revolving Credit Facility, and certain of our non-recourse mortgage debt. We have entered into, and may continue to enter into, interest rate swap agreements or interest rate cap agreements with counterparties related to certain of our variable-rate debt (Note 10). See Note 9 for additional information on our interest rate swaps and caps.

Our debt obligations are more fully described in Note 10 and Liquidity and Capital Resources — Summary of Financing in Item 2 above. The following table presents principal cash flows based upon expected maturity dates of our debt obligations outstanding at June 30, 2024 (in thousands):

|  | 2024 (Remainder) | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | Fair Value |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed-rate debt (a) (b) | $602,952 | $679,846 | $1,510,520 | $537,595 | $585,239 | $3,636,308 | $7,552,460 | $6,993,934 |
| Variable-rate debt (a) | $— | $27,448 | $— | $— | $571,653 | $15,005 | $614,106 | $643,922 |

(a) Amounts are based on the exchange rate at June 30, 2024, as applicable.

(b) Amounts include non-recourse mortgages and unsecured term loans subject to variable-to-fixed interest rate swaps. Amounts are primarily comprised of principal payments for our Senior Unsecured Notes (Note 10). In July 2024, we repaid our €500 million of 2.25% Senior Notes due 2024 at maturity (Note 15).

The estimated fair value of our fixed-rate debt and our variable-rate debt is affected by changes in interest rates. Annual interest expense on our unhedged variable-rate debt that does not bear interest at fixed rates at June 30, 2024 would increase or decrease by $3.4 million for our British pound sterling-denominated debt, by $2.6 million for our euro-denominated debt, and by $0.2 million for our Japanese yen-denominated debt, for each respective 1% change in annual interest rates.

#### Foreign Currency Exchange Rate Risk

We own international investments, primarily in Europe, Canada, and Japan, and as a result are subject to risk from the effects of exchange rate movements in various foreign currencies, primarily the euro, the British pound sterling, the Canadian dollar, the Japanese yen, and certain other currencies which may affect future costs and cash flows. We have obtained, and may in the future obtain, non-recourse mortgage financing in the local currency. We have also completed several offerings of euro-denominated senior notes, and have borrowed under our Senior Unsecured Credit Facility and Unsecured Term Loan due 2026 in foreign currencies, including the euro, British pound sterling, and Japanese yen (Note 10). Volatile market conditions arising from certain macroeconomic factors may result in significant fluctuations in foreign currency exchange rates. To the extent that currency fluctuations increase or decrease rental revenues, as translated to U.S. dollars, the change in debt service (comprised of principal and interest, excluding balloon payments), as translated to U.S. dollars, will partially offset the effect of fluctuations in revenue and, to some extent, mitigate the risk from changes in foreign currency exchange rates. We estimate that, for a 1% increase or decrease in the exchange rate between the euro, British pound sterling, or Japanese yen and the U.S. dollar, there would be a corresponding change in the projected estimated cash flow (scheduled future rental revenues, net of scheduled future debt service payments for the next 12 months) for our consolidated foreign operations at June 30, 2024 of $2.2 million, $0.3 million, and less than $0.1 million, respectively, excluding the impact of our derivative instruments.

In addition, we may use currency hedging to further reduce the exposure to our equity cash flow. We are generally a net receiver of these currencies (we receive more cash than we pay out), and therefore our foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar, relative to the foreign currency.

We enter into foreign currency collars to hedge certain of our foreign currency cash flow exposures. See Note 9 for additional information on our foreign currency collars.

#### Concentration of Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities or have similar economic risks or conditions that could cause them to default on their lease obligations to us. We regularly monitor our portfolio to assess potential concentrations of credit risk. While we believe our portfolio is well-diversified, it does contain concentrations in certain areas. There have been no material changes in our concentration of credit risk from what was disclosed in the 2023 Annual Report.

## Controls and procedures

As filed, 1,509 characters.

#### Disclosure Controls and Procedures

Our disclosure controls and procedures include internal controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Exchange Act is recorded, processed, summarized, and reported within the required time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls.

Our chief executive officer and chief financial officer, after conducting an evaluation, together with members of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of June 30, 2024 at a reasonable level of assurance.

#### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Filed Jul 31, 2024.
Source: SEC EDGAR, the filing index for accession 0001025378-24-000119. Last ingested by Listed: Nov 4, 2026, 18:42 ET. No prices; not investment advice.