W. P. Carey Inc. (WPC) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.

The following discussion should be read in conjunction with our consolidated financial statements in Item 8 of this Report and the matters described under Item 1A. Risk Factors. Please see our Annual Report on Form 10-K for the year ended December 31, 2023 for discussion of our financial condition and results of operations for the year ended December 31, 2022. Refer to Item 1. Business for a description of our business.

Financial Highlights

During the year ended December 31, 2024, we completed the following (as further described in the consolidated financial statements):

Real Estate

Investments

•We acquired 29 investments totaling $1.4 billion (Note 6).

•We completed five construction projects at a cost totaling $87.0 million (Note 6).

•We funded approximately $16.3 million for a construction loan to build a retail complex in Las Vegas, Nevada, during the year ended December 31, 2024. Through December 31, 2024, we have funded $247.7 million (Note 9).

•We entered into agreements to fund construction loans for projects in Las Vegas, Nevada, and funded $31.9 million during the year ended December 31, 2024 (Note 7).

•We committed to fund four construction projects totaling $95.8 million. We currently expect to complete the projects in 2025 and 2026 (Note 6).

•We acquired the remaining 10.0% controlling interest in a jointly owned investment for $10.5 million, bringing our ownership interest to 100%. In addition, we converted the nine self-storage properties that comprised this investment from operating properties to net leases, as described below under Leasing Transactions (Note 9).

Dispositions

•We disposed of 176 properties for total proceeds, net of selling costs, of $1.2 billion, including (i) our portfolio of 78 U-Haul properties for total proceeds, net of selling costs, of $464.1 million, (ii) 78 properties sold under the Office Sale Program for total proceeds, net of selling costs, of $524.8 million, and (iii) 20 additional properties for total proceeds, net of selling costs, of $227.4 million (Note 14).

Leasing Transactions

•On September 1, 2024, we entered into net lease agreements with Extra Space Storage, Inc. (“Extra Space”) for certain self-storage properties previously classified as operating properties. As a result, on September 1, 2024, we converted 12 self-storage operating properties to net leases (Note 6, Note 9). In connection with these agreements, we also amended the terms of the existing net lease agreements with Extra Space on 27 properties, extending the term to 25 years and resetting ABR higher to a total of $26.2 million commencing on September 1, 2024. As a result of these transactions, Extra Space became our largest tenant by ABR, with 39 properties under net leases generating ABR totaling $35.6 million.

Financing and Capital Markets Transactions

•In April 2024, we repaid our $500 million of 4.6% Senior Notes due 2024 at maturity (Note 12).

•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 had an initial 8.2-year term and are scheduled to mature on July 23, 2032 (Note 12).

•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 had an initial 10.0-year term and are scheduled to mature on June 30, 2034 (Note 12).

•In July 2024, we repaid our €500 million of 2.25% Senior Notes due 2024 at maturity (Note 12).

•In September 2024, we executed an amendment to our Senior Unsecured Credit Facility to incorporate a sustainability-linked feature that provides for interest rate and facility fee adjustments if certain key performance indicators, primarily related to emissions reduction targets, are met.

•On November 19, 2024, we completed an underwritten public offering of €600.0 million of 3.700% Senior Notes due 2034 at a price of 98.880% of par value. These 3.700% Senior Notes due 2034 had an initial 10.0-year term and are scheduled to mature on November 19, 2034 (Note 12).

•We repaid non-recourse mortgage debt outstanding totaling $215.1 million with a weighted-average interest rate of 4.5% (Note 12).

Dividends to Stockholders

We declared cash dividends totaling $3.490 per share, comprised of four quarterly dividends per share of $0.865, $0.870, $0.875, and $0.880.

Consolidated Results

(in thousands, except shares)

__________

(a)Amount for the year ended December 31, 2024 includes $806.8 million of proceeds from the sales of net investments in sales-type leases (U-Haul and State of Andalusia portfolios) (Note 7). Such proceeds are included within Net cash provided by operating activities in accordance with Accounting Standards Codification (“ASC”) 842, Leases.

(b)We consider Adjusted funds from operations (“AFFO”), a supplemental measure that is not defined by U.S. generally accepted accounting principles (“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 in 2024 as compared to 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 revenues (substantially as a result of dispositions of hotel operating properties) (Note 6).

Net Income Attributable to W. P. Carey

Net income attributable to W. P. Carey decreased in 2024 as compared to 2023, primarily due to lower gain on sale of real estate, non-cash unrealized losses recognized on our investment in shares of Lineage (a cold storage REIT) during 2024 (Note 10), and the impact of the Spin-Off and the Office Sale Program, partially offset by lower impairment charges and a gain on change in control of interests recognized in connection with the purchase of the remaining interest in a jointly owned investment during 2024 (Note 9).

AFFO

AFFO decreased in 2024 as compared to 2023, primarily due to the impact of the Spin-Off and Office Sale Program.

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

__________

(a)During the third quarter of 2024, we entered into net lease agreements for certain self-storage properties previously classified as operating properties. As a result, during the third quarter of 2024, we reclassified 12 self-storage properties from operating properties to net leases (Note 6, Note 9). In addition, we acquired one self-storage operating property during 2024 (Note 6).

(b)We sold one hotel operating property during 2024 (Note 6, Note 17).

(c)Amounts for the years ended December 31, 2024 and 2023 include $16.3 million and $38.2 million, respectively, of funding for a construction loan accounted for as an equity method investment (Note 9). Amount for the year ended December 31, 2024 includes $238.6 million of sale-leasebacks classified as loans receivable (Note 7). Amount for the year ended December 31, 2024 includes $31.9 million of funding for two construction loans accounted for as secured loans receivable (Note 7). Amount for the year ended December 31, 2024 includes the purchase of the remaining interest in a jointly owned investment for $10.5 million (Note 9).

Net-Leased Portfolio

The tables below represent information about our net-leased portfolio at December 31, 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)

__________

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

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

(c)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.

(d)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.

Portfolio Diversification by Geography

(in thousands, except percentages)

Portfolio Diversification by Property Type

(in thousands, except percentages)

__________

(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 East include assets in Virginia, Connecticut, Maryland, West Virginia, New Hampshire, and Maine. Other properties within South include assets in Louisiana, Arkansas, Oklahoma, and Mississippi. Other properties within West include assets in Oregon, Colorado, Washington, Nevada, Montana, Hawaii, Idaho, Wyoming, and New Mexico.

(c)$49.5 million (90.5%) of ABR from properties in Canada is denominated in U.S. dollars, with the balance denominated in Canadian dollars.

(d)All ABR from properties in Mexico is denominated in U.S. dollars.

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

(f)Includes automotive dealerships.

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

Portfolio Diversification by Tenant Industry

(in thousands, except percentages)

__________

(a)Includes automotive dealerships.

(b)Includes ABR from tenants in the following industries: aerospace and defense, insurance, telecommunications, 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

(dollars and square footage in thousands)

__________

(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 December 31, 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):

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 or sales-type leases during the periods presented. For the periods presented, there were 1,104 existing net-leased properties, including 12 self-storage properties that converted from operating properties to net leases during the third quarter of 2024 (Note 6, Note 9).

For the year ended December 31, 2024 as compared to 2023, lease revenues from existing net-leased properties increased 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 (i) abated rent from January 1, 2024 to March 31, 2024, (ii) a reduction in annual base rent, and (iii) the reclassification of 13 properties leased to this tenant from direct financing leases to operating leases (Note 7).

(c)Includes (i) lease revenues of $3.5 million from 12 self-storage operating properties that were converted to net leases on September 1, 2024 (Note 6, Note 9) and (ii) an increase in lease revenues of $1.5 million as a result of a lease restructuring for 27 existing net-leased self-storage properties that was executed on September 1, 2024.

“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 37 investments (comprised of 342 properties).

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

•175 net-leased properties disposed of during the year ended December 31, 2024;

•23 net-leased properties disposed of during the year ended December 31, 2023;

•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);

•two net-leased properties that were reclassified to net investments in sales-type leases in the third quarter of 2024, since we agreed to sell the properties to the tenant, resulting in a lease modification; following this transaction, we began recognizing earnings from these properties within Income from finance leases and loans receivable in the consolidated financial statements (these properties were sold in January 2025 (Note 19)); and

•59 net-leased properties derecognized in connection with the Spin-Off (Note 3).

Our dispositions are more fully described in Note 17.

Income from Finance Leases and Loans Receivable

For the year ended December 31, 2024 as compared to 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 7).

(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 7).

(c)Represents interest income from a secured loan receivable of $15.0 million that we provided in connection with a property disposition in June 2024, which was repaid in full in September 2024 (Note 7).

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, held for sale, or reclassified to net-leased properties during the periods presented. For the periods presented, we recorded operating property revenues from 75 existing operating properties, comprised of 72 self-storage operating properties, 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), (ii) five self-storage operating properties acquired during 2023, and (iii) one self-storage operating property acquired during 2024 (Note 6).

“Operating properties sold, held for sale, derecognized, or reclassified to net-leased properties” are comprised of (i) nine hotel operating properties sold during 2023 and 2024, (ii) a parking garage attached to a net-leased property that was derecognized in connection with the Spin-Off (Note 3), and (iii) three self-storage operating properties that were reclassified to net-leased properties during 2024 (Note 6).

Other Lease-Related Income

Other lease-related income is described in Note 6.

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) Carey European Student Housing Fund I, L.P. (“CESH”) (Note 5). 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 5).

Operating Expenses

Depreciation and Amortization

For the year ended December 31, 2024 as compared to 2023, depreciation and amortization expense decreased primarily due to the impact of the Spin-Off (Note 3), 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).

General and Administrative

For the year ended December 31, 2024 as compared to 2023, general and administrative expenses increased by $2.6 million, primarily due to higher compensation expense and employee benefits expense.

Property Expenses, Excluding Reimbursable Tenant Costs

For the year ended December 31, 2024 as compared to 2023, property expenses, excluding reimbursable tenant costs, increased by $5.2 million, primarily due to the release of real estate taxes accrued for a cash basis tenant during 2023. The tenant was previously not current on real estate taxes due, and repaid the outstanding amount in the second quarter of 2023.

Impairment Charges — Real Estate

Our impairment charges on real estate are described in Note 10.

Stock-Based Compensation Expense

For a description of our equity plans and awards, please see Note 15.

For the year ended December 31, 2024 as compared to 2023, stock-based compensation expense increased by $6.4 million, primarily due to (i) changes in projected performance share units (“PSUs”) payouts of $4.4 million, (ii) the modification of restricted share units (“RSUs”) and PSUs in connection with an executive departure totaling $1.1 million, and (iii) the higher value of RSUs granted in 2024 compared to those RSUs that vested in 2024 totaling $1.0 million.

Merger and Other Expenses

For the year ended December 31, 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.

For the year ended December 31, 2023, merger and other expenses are primarily comprised of costs incurred in connection with the Spin-Off, which was completed in November 2023 (Note 3).

Other Income and Expenses, and Provision for Income Taxes

Interest Expense

For the year ended December 31, 2024 as compared to 2023, interest expense decreased by $14.5 million, primarily due to (i) lower outstanding balances on our Unsecured Revolving Credit Facility, (ii) the reduction of our mortgage debt outstanding by prepaying or repaying at or close to maturity a total of $583.0 million of non-recourse mortgage loans with a weighted-average interest rate of 4.7% since January 1, 2023, and (iii) 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, partially offset by (i) our Unsecured Term Loan due 2026 that we entered into in April 2023 (Note 12) and (ii) higher outstanding balances and interest rates on our Senior Unsecured Notes.

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

Other Gains and (Losses)

Other gains and (losses) primarily consists of gains and losses on (i) the mark-to-market fair value of equity securities, (ii) extinguishment of debt, (iii) foreign currency exchange rate movements (except those foreign currency-denominated unsecured debt instruments that were designated as net investment hedges (Note 11)), and (iv) changes in the non-cash allowance for credit losses on loans receivable and finance leases. The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation.

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

__________

(a)As a result of the declining financial position of one of our top ten tenants, we recognized a $28.8 million non-cash allowance for credit loss during the year ended December 31, 2023, based on our expectation of collecting lower rents going forward.

(b)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.

(c)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 7). Therefore, we recorded a $10.7 million gain on repayment of this secured loan receivable during the year ended December 31, 2024.

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, (ii) subject to the exercise of a purchase option, (iii) subject to a purchase agreement resulting in a lease modification during the reporting period or (iv) included in assets held for sale and subject to a revised estimated purchase price during the reporting period, as more fully described in Note 6, Note 7, and Note 17.

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):

__________

(a)Increase for the year ended December 31, 2024 as compared to 2023 is due to higher cash deposit balances as a result of proceeds from issuances of Senior Unsecured Notes (Note 12), the Spin-Off, the Office Sale Program, and other dispositions.

Gain on Change in Control of Interests

On September 1, 2024, we acquired the remaining interest in an investment in which we already had a joint interest and accounted for under the equity method. Due to the change in control of this jointly owned investment, we recorded a gain on change in control of interests of $31.8 million reflecting the difference between our carrying value and the fair value of our previously held equity interest. Subsequent to this acquisition, we consolidated this wholly owned investment (Note 9).

Earnings from Equity Method Investments

Our equity method investments are more fully described in Note 9. The following table presents earnings from equity method investments (in thousands):

__________

(a)On September 1, 2024, we acquired the remaining 10% controlling interest in the Johnson Self Storage jointly owned investment, bringing our ownership interest to 100%. Following this acquisition, we no longer recognize equity income from this consolidated investment (Note 9).

(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.

Provision for Income Taxes

For the year ended December 31, 2024 as compared to 2023, provision for income taxes decreased by $12.3 million, primarily due to (i) the impact of international lease restructurings during 2024, (ii) the impact of international office property dispositions, and (iii) the release of deferred tax assets in connection with the tax restructuring of certain international properties during 2023, partially offset by a deferred tax benefit recognized during 2023 related to an impairment charge recorded on a foreign property.

Liquidity and Capital Resources

Sources and Uses of Cash During the Year

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 14), 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 $759.7 million during 2024 as compared to 2023, primarily due to $806.8 million of proceeds received from the sales of net investments in sales-type leases during 2024 (Note 7), 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 in 2024 from the repayment of a loan receivable (Note 7).

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 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):

____________

(a)Aggregate debt balance includes unamortized discount, net, totaling $39.3 million and $31.8 million as of December 31, 2024 and 2023, respectively, and unamortized deferred financing costs totaling $30.9 million and $21.5 million as of December 31, 2024 and 2023, respectively.

(b)The interest rate swaps on these Unsecured Term Loans expired on December 31, 2024, after which the Unsecured Term Loans incur interest at a variable rate.

(c)Includes non-recourse mortgages subject to variable-to-fixed interest rate swaps totaling $43.5 million and $45.0 million as of December 31, 2024 and 2023, respectively.

Cash Resources

At December 31, 2024, our cash resources consisted of the following:

•cash and cash equivalents totaling $640.4 million. Of this amount, $141.9 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 $14.6 million that are held by an intermediary and have been designated for future tax-deferred like-kind exchanges under Section 1031 of the Internal Revenue Code (“1031 Exchange”) transactions (Note 2);

•our Unsecured Revolving Credit Facility, with available capacity of $1.9 billion (net of amounts reserved for standby letters of credit totaling $4.9 million); and

•unleveraged properties that had an aggregate asset carrying value of approximately $13.6 billion at December 31, 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 December 31, 2024, we had (i) $640.4 million of cash and cash equivalents, (ii) $14.6 million of funds that are held by an intermediary and have been designated for future 1031 Exchange transactions (Note 2), and (iii) approximately $1.9 billion of available capacity under our Unsecured Revolving Credit Facility (net of amounts reserved for standby letters of credit totaling $4.9 million). As of December 31, 2024, scheduled debt principal payments total $669.5 million during 2025 and $1.5 billion during 2026 (Note 12).

During the next 12 months following December 31, 2024 and thereafter, we expect that our significant cash requirements will include:

•paying dividends to our stockholders;

•funding acquisitions of new investments (Note 6);

•funding future capital commitments (Note 6) and tenant improvement allowances;

•making scheduled principal and balloon payments on our debt obligations, including $450 million of senior notes that were repaid in February 2025 (Note 19);

•making scheduled interest payments on our debt obligations (future interest payments total $1.3 billion, with $246.9 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 December 31, 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 14), and potential issuances of additional debt or equity securities.

Our liquidity could be adversely affected by an unanticipated disruption to our operating cash flow, which could include interrupted rent collections or 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 December 31, 2024.

Environmental Obligations

In connection with the purchase of many of our properties, we have required the sellers to perform environmental reviews. We believe, based on the results of these reviews, that these properties were in substantial compliance with federal, state, and foreign environmental statutes at the time the properties were acquired. However, portions of certain properties have been subject to some degree of contamination, principally in connection with leakage from underground storage tanks, surface spills, or other on-site activities. In most instances where contamination has been identified, tenants are actively engaged in the remediation process and addressing identified conditions. We believe that the ultimate resolution of any environmental matters should not have a material adverse effect on our financial condition, liquidity, or results of operations. We record environmental obligations within Accounts payable, accrued expenses and other liabilities in the consolidated financial statements. See Item 1A. Risk Factors for further discussion of potential environmental risks.

Critical Accounting Estimates

Our significant accounting policies are described in Note 2. Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. Below is a summary of certain critical accounting estimates used in the preparation of our consolidated financial statements. Please also refer to our accounting policies described under Critical Accounting Policies and Estimates in Note 2.

Accounting for Acquisitions

In accordance with the guidance for business combinations and asset acquisitions, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. When we acquire properties with leases classified as operating leases, we allocate the purchase price to the tangible and intangible assets and liabilities acquired based on their estimated fair values.

The tangible assets consist of land, buildings, and site improvements. The intangible assets and liabilities include the above- and below-market value of leases and the in-place leases, which includes the value of tenant relationships. The recorded allocations of tangible and intangible assets incorporate discount rates, capitalization rates, interest rates, market rents, leasing commissions, and certain other assumptions and estimates. We use considerable judgment in developing such assumptions and estimates, and significant increases or decreases in these key assumptions and estimates would result in a significantly lower or higher fair value measurement of the real estate assets being acquired.

Impairments of Real Estate

For real estate assets held for investment and related intangible assets in which an impairment indicator is identified, we follow a two-step process to determine whether an asset is impaired and to determine the amount of the charge. First, we compare the carrying value of the property’s asset group to the estimated future net undiscounted cash flow that we expect the property’s asset group will generate, including any estimated proceeds from the eventual sale of the property’s asset group. The undiscounted cash flow analysis requires us to make our best estimate of market rents, residual values, and holding periods. We estimate market rents and residual values using market information from outside sources such as third-party market research, external appraisals, broker quotes, or recent comparable sales.

As our investment objective is to hold properties on a long-term basis, holding periods used in the undiscounted cash flow analysis are generally ten years, but may be less if our intent is to hold a property for less than ten years. Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets and associated intangible assets can vary within a range of outcomes. We consider the likelihood of possible outcomes in determining our estimate of future cash flows and, if warranted, we apply a probability-weighted method to the different possible scenarios. If the future net undiscounted cash flow of the property’s asset group is less than the carrying value, the carrying value of the property’s asset group is considered not recoverable. We then measure the impairment loss as the excess of the carrying value of the property’s asset group over its estimated fair value.

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, gains or losses on the mark-to-market fair value of equity securities, 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. 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.

FFO and AFFO were as follows (in thousands):

__________

(a)Amount for the year ended December 31, 2023 includes (i) 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 and (ii) a gain on sale of real estate of $59.1 million recognized upon the reclassification of a portfolio of 70 office properties located in Spain to net investments in sales-type leases (Note 7).

(b)Amount for the year ended December 31, 2023 includes an impairment charge of $47.3 million recognized on the 59 properties contributed to NLOP in connection with the Spin-Off (Note 1, Note 10).

(c)Amount for the year ended December 31, 2024 represents a gain recognized on the remaining interest in an investment acquired during the third quarter of 2024, which we had previously accounted for under the equity method (Note 9).

(d)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.

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

(f)Primarily comprised of gains and losses on extinguishment of debt, the mark-to-market fair value of equity securities, foreign currency exchange rate movements, and changes in the non-cash allowance for credit losses on loans receivable and finance leases. Amount for the year ended December 31, 2024 includes a mark-to-market unrealized loss for our investment in shares of Lineage of $134.0 million (Note 10).

(g)Amount for the year ended December 31, 2024 is primarily comprised of the write-off of a value added tax receivable that was previously recorded in connection with an international investment. Amount for the year ended December 31, 2023 is primarily comprised of costs incurred in connection with the Spin-Off (Note 1, Note 3).

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.