Daniel Bion

Daniel Bion asked for a historical comparison of W. P. Carey's rent loss forecast and whether it was more weighted towards Europe or the U.S. He also inquired about which sectors delivered the strongest rent escalations in Q3 and where the company is seeing pressure.

Answer

Brooks Gordon, Head of Asset Management, discussed the historical average credit loss assumption of 30 to 50 basis points, expecting it to broadly track the overall portfolio's ABR allocation (two-thirds U.S.). Jason Fox, Chief Executive Officer, explained that industrial (manufacturing and warehouse) delivered the strongest rent escalations on new deals due to higher expected market rent growth, contrasting with retail leases which tend to be flatter or in the 1% to 2% range.

Daniel Bion asked how the current rent loss forecast compares historically for the portfolio and its geographic weighting. He also inquired which sectors delivered the strongest rent escalations in Q3 new deals and where pressure, if any, is being observed.

Answer

Head of Asset Management Brooks Gordon explained that a good average credit loss assumption is around 30-50 basis points, which aligns with historical data over 20+ years, and broadly tracks the portfolio's ABR allocation (2/3 U.S.). CEO Jason Fox stated that industrial (manufacturing and warehouse) sectors delivered the strongest rent escalations in new deals, driven by higher expected market rent growth in those asset classes compared to retail, where fixed increases are typically lower.

Daniel Bion asked about the health of the middle to lower-end consumer as it relates to Getty Realty's drive-through Quick Service Restaurant (QSR) acquisitions, and inquired about the Q2 environmental expense adjustments and future expectations.

Answer

Mark Olear, Chief Operating Officer, explained that the QSR concept aligns with macroeconomic pressures due to favorable price points, food quality, convenience, and the automotive experience. Brian Dickman, Chief Financial Officer, clarified that the environmental expense adjustments were due to the alleviation of environmental contamination risk at legacy sites, with responsibility shifting to tenants, similar to past activities.

Daniel Bion asked about Getty Realty's strategy for drive-through QSR acquisitions and the perceived health of the middle to lower-end consumer impacting this business segment, and also inquired about Q2 environmental expense adjustments and future expectations.

Answer

Mark Olear, Chief Operating Officer, explained that Getty Realty is gaining momentum in QSRs due to their alignment with macroeconomic pressures, offering attractive price points, quality food, and convenience. Brian Dickman, Chief Financial Officer, clarified that environmental adjustments involved removing reserves for potential contamination at legacy sites, as risk has been alleviated and now falls on tenants.

Daniel Byon of Bank of America asked for clarification on the reason for the timing pushback on the Maplewood development project.

Answer

CEO C. Pickett clarified the delay for the DC development is minor, shifting from December to January, a 30-day change. He attributed it to the final steps of completing construction and obtaining the certificate of occupancy.