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W. P. Carey Inc. (WPC -0.85%)
Q1Â 2019 Earnings Call
May. 9, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, hello and welcome to WP Carey's First Quarter 2019 Earnings Conference Call. My name is Adam and I will be your operator for today. All lines have been placed on mute to prevent any background noise. Please note that today's event is being recorded. After today's prepared remarks, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I would now like to turn today's program over to Peter Sands, Director of Institutional Investor Relations. Thank you, Mr Sands. Please go ahead.
Peter Sands -- Director of Institutional IR
Good morning, everyone, and thank you for joining us today for our 2019 First Quarter Earnings Call. I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from WP Carey's expectations are provided in our SEC filings. An online replay of this conference call will be made available in the Investor Relations section of our website at wpcarey.com where it will be archived for approximately one yea and where you can also find copies of our investor presentation.
I'll now hand the call over to our Chief Executive Officer, Jason Fox.
Jason Fox -- CEO
Thank you, Peter, and good morning everyone. The 2019 first quarter was the first full quarter since the completion of our merger with CPA 17 and we're off to a good start for the year. Investment volume is strong, primarily into industrial and warehouse properties at attractive spreads to our cost of capital. And we continue to have an active pipeline.
From a funding perspective, we utilized our ATM program during the quarter to efficiently raise equity capital, using the proceeds to prepay mortgage debt and fund acquisitions, which reduced leverage and expanded our pool of unencumbered properties. Today, I'll focus my remarks on our recent investments before handing over to our CFO, Toni San zone, to discuss the details of our first quarter results, guidance and balance sheet. We're joined this morning by our President, John Park and our Head of Asset Management, Brooks Gordon who are here to also take your questions.
Starting briefly with the investment backdrop, which was a continuation of the competitive environment we've been in over the last few years. In the US, cap rates remain low amid continued low interest rates and strong competition for deals. Particularly from private equity funds, which have recently had strong capital inflows. Industrial sector especially continues to attract high demand. While competitive, the market opportunity in the US for net lease remains vast. Our long-standing presence, with stretches back close to 50 years, and track record of providing certainty of close to sellers ensures we get access to almost every deal. Combined with our diversified approach and a competitive cost of capital, we continue to win transactions without having to compromise on lease term or deal structure.
Similarly in Europe, the industrial sector continues to attract the most interest, followed by office. The transaction market remains very active with significant capital inflows and compressed yields despite lower forecasted economic growth. The ECB has pledged to keep interest rates low, however, and the resulting yield rate spread is likely to continue to drive capital inflows, especially from international investors. We remain focused on sourcing off market transactions from both existing tenants and our deep network of relationships across the continent. As a pioneer of net lease in Europe, we benefit from our strong presence and established platform built on more than 20 years of investment in the region.
We're pleased with our first quarter investment volume, which totaled $240 million at a weighted average cap rate of 7.1% comprising 5 acquisitions totaling $188 million all of which were in the US and 2 depleted capital investment projects at a total cost of $52 million. Looking at 3 of the acquisitions a bit more in detail. First, we completed the $48 million acquisition of a 220,000 square foot office facility net leased to PPD, a leading global pharmaceutical contract research organization. The facility is located in Mauriceville, North Carolina in the Raleigh, Durham Research Triangle which has a heavy concentration of the pharmaceutical and biopharmaceutical companies they serve. This is the triple net lease with the remaining lease term of about 15 years and includes fixed annual rent increases. Second, a $38 million investment in a 763,000 square foot distribution facility in Inwood, West Virginia, net lease to an existing tenant Orgill, which is the world's largest independent hardware distributor. The facility is strategically located on I-81 which is home to distribution centers for many large companies. And just south of the I-70 interchange providing additional access to the Baltimore and Washington DC markets. The properties Orgill sold distribution facility for the Northeastern US and is triple net leased for a period of 15 years with fixed annual rent increases.
Lastly, we closed a $17 million acquisition for a 58,000 square foot tractor-trailer hub, less than a mile from O'Hare International Airport. Triple net leased to a Amerifreight, a growing trucking company for a period of 12 years and includes annual fixed rent increases. It's a very desirable location, at the center of one of the largest industrial markets in the country. We view this is as a covered land play that may have significant development value at the end of the lease. The acquisitions we completed during the quarter were all critical properties on long-term leases with the weighted average lease term of approximately 17 years and supported by strong tenant businesses. They provide built-in rent growth, either tied to inflation or from fixed increases with a weighted average fixed increase of close to 2%. And in keeping with our diversified investment approach, they cover a range of property types, tenant industries and geographic locations.
As I mentioned earlier, we completed 2 capital investment projects during the quarter at a total cost of $52 million. We also added one new capital project with an existing tenant for 138,000 square foot expansion of an automotive manufacturing plant in Alabama that we expect to complete in the 4th quarter of this year at a total cost of $12.5 million. While this particular deal is small relative to our overall portfolio, it's a great example of our proactive approach to asset management and the benefits of staying close to our tenants.
This is the third such expansion, we've done with the tenant. Each time resetting the lease term, which has resulted in a total term of 35 years since the inception of the original lease. The increased size of our portfolio provides a fertile source of investment volume for us. We ended the quarter with 8 capital projects outstanding for an expected total investment of approximately $200 million. We currently expect 5 such projects to be completed in 2019 for a total investment of just over $100 million, in addition to the 2 we completed during the first quarter. So plenty of investment activity, both completed and under way. We continue to find transactions at attractive cap rates without compromising on deal structure or asset quality and with the demonstrably improve cost of capital, we're able to generate wider spreads on those deals as well as select the best deals from an expanded opportunity set. And with that, I'll hand the call over to Tony to talk more about our earnings, guidance and balance sheet.
Toni Sanzone -- CFO
Thank you, Jason, and good morning everyone. This morning we announced AFFO of a $1.21 per share for the first quarter in line with our projections and as expected down from a $1.28 in the prior year. Real estate AFFO increased almost 7% to a $1.13 per share compared to a $1.6 in the prior year. Since announcing our merger with CPA-17, we've discussed it's near-term impact on our earnings and we see the first full-quarter of that impact in our 2019 first quarter results. Elimination of advisory fees previously earned from CPA-17 were partly offset by the accretive impact of the real estate acquired in the merger as well as net acquisitions over the last 12 months.
First quarter lease revenues increased to $263 million compared to $169 million for the year-ago quarter. Highlighting the impact of the merger on our real estate earnings. Separately, I'll take a moment here to highlight a presentation change as a result of adopting the new leasing standard on January 1st of this year. Lease revenues reported in our income statement now include the reimbursement of operating costs from tenants which was historically reported as a separate line item within the revenue section.This presentation change has no impact on our AFFO or net income . Related to this within the operating expenses section of our income statement, we are now separately breaking out reimbursable tenant costs which helps identify the amount we received within lease revenue. Given that the majority of our first quarter acquisition activity occurred at the end of March, the related lease revenues did not flow through our first quarter results in a material way. Annualized base rent, however, increased to $1.08 billion at quarter end, resulting primarily from the $240 million of investments we completed during the first quarter which Jason discussed.
We also benefited from same-store rent growth of 1.5% year-over-year on a constant currency basis driven by rent increases built into our leases. Disposition activity for the quarter was limited to the sale of one small retail property for $5 million at a 6.4% cap rate. For the full-year, we continue to expect total dispositions to be in line with our original guidance assumption of between $500 million and $700 million which we generally expect to be weighted toward the second half of the year, including the New York Times repurchase in December. Turning to our Investment Management segment. The significant decline in the contribution from this segment reflects a full quarter's impact of the elimination of fees and earnings previously received from managing CPA-17.
Last year's first quarter included asset management fees from CPA 17 of $7.5 million and earnings from equity method investments of $8.8 million, representing our prior ownership and profits interest in that fund. We continue to earn fees on the remaining non-traded funds we manage, which are laid out in detail in our supplemental. Structuring and other advisory revenue has become a much less meaningful component of our investment management earnings totaling $2.5 million for the first quarter of 2019 and nothing significant is expected for the remainder of the year.
Moving to expenses, G&A expense for the first quarter was $21 million compared to $19 million for the year-ago quarter. Due primarily to the elimination of expense reimbursements previously received from CPA-17. G&A expense is typically higher in the first quarter of the year due to timing of annual compensation and related taxes. We continue to expect G&A for the full-year to fall within our guidance range of $75 million to $80 million.
Turning now to our balance sheet and capital markets activity. As a result of our recent merger, we have significantly larger scale in greater trading liquidity in our stock. During the first quarter we utilize these benefits to further enhance our credit profile by efficiently raising $304 million of equity capital issued through our ATM program at a weighted average price of $76.17 per share. Proceeds from this equity issuance were used primarily to fund acquisitions and prepaid $200 million of mortgage debt that had a weighted average interest rate of nearly 5% while incurring minimal fees.
Since the end of the first quarter, we raised an additional $59 million through our ATM at a weighted average price of $78.27 per share and have continued to use those proceeds to prepay mortgage debt. Debt prepayments had a minimal impact on our first quarter results given their timing; however they are expected to reduce our interest expense going forward largely offsetting the dilutive impact of the shares issued to date. We ended the first quarter with debt-to-gross asset to 41% and net debt to EBITDA 5.8 times. We also reduced secured debt as a percentage of gross assets to 16.8% at quarter end, down from 18.3% at the end of the fourth quarter. And based on our current plans, we see a clear path to reducing this to below 14% by the end of the year.
Given the current availability on our credit facility, which is substantially undrawn and expected proceeds from our disposition pipeline, we have considerable financing flexibility and can remain opportunistic in our capital markets efforts. We are extremely well positioned to execute on the acquisition volume in our guidance and access to capital markets when it is most advantageous to do so.
In summary, we've had a solid start to the year on all fronts. As we noted in our earnings release this morning, we are affirming our guidance range for total AFFO of $4.95 to $5.15 per share for the full-year and real estate AFFO of $4.70 to $4.90 per share
And with that I will hand the call back to the operator to take questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions). Our first question comes from the line of Sheila McGrath from Evercore. You're now live.
Sheila McGrath -- Evercore -- Analyst
Hi, good morning.
Jason Fox -- CEO
Good morning Sheila.
Jason, you still have guidance for dispositions at $500 million to $700 million. I was wondering if you could give us a little insight on what the profile of those assets that you're targeting for sale is and if the proceeds from these transactions will match fund planned acquisitions or do you still expect to use ATM in your current plan?
Yeah, but I will turn to Brooks to talk and some color.
Brooks Gordon -- WPC Carey Inc -- Head of Asset Management
Sure, so on the disposition pipeline as Toni mentioned, certainly we expect to be back and loaded in the year again. Again, we sold one small asset this quarter and we subsequently sold one further small asset. Subsequent to quarter we do expect to be in the $500 million to $700 million range again inclusive of the times purchase option in December, we expect kind all in execution to be roughly in line with our acquisition cap rate from a pricing perspective. In terms of deal type, again with that the need of times it is about 50% purchase option, about 30%, what we call, non-core and then small percentages in the other asset types kind. Geographically it is about 85% US, 8% Asia Pacific and 8% Europe and about half of this, 22% we think will be an operating hotel that we're looking at exiting.
So it's a good mix, but it is weighted toward the back half of the year.
Sheila McGrath -- Evercore -- Analyst
And Brooks , does that include self-storage from the recent CPA-17 ?
Brooks Gordon -- WPC Carey Inc -- Head of Asset Management
It does not.
Sheila McGrath -- Evercore -- Analyst
Okay. And then just quickly on G&A, you maintain guidance for the year. Toni, I was just wondering if you could just give us a little insight on seasonality, is first quarter is typically higher than the other 3 quarters?
Toni Sanzone -- CFO
It is. I think the first quarter differential includes roughly around $2 million of additional compensation-related costs, payroll taxes and one-time cost in nature that wouldn't recur over the remainder of the year.
Sheila McGrath -- Evercore -- Analyst
Okay, thank you.
Operator
Thank you. Our next question comes from the line of Greg McGinnis from Scotiabank. You're now live.
Greg McGinnis -- Scotiabank. -- Analyst
Hey, good morning, Toni, AFFO in line with your projections was a bit below street estimates. Could you let us know how you're thinking about earnings acceleration into the end of the year and if you still feel that the top-end guidance is a realistic goal, I'm curious what needs to happen to actually reach the top end?
Toni Sanzone -- CFO
Sure, yeah, in terms of kind of just looking at the first quarter results, I think I highlighted in my remarks a number of issues or a number of areas where we don't feel that's the run rate. If we focus first just on the lease revenue in terms of the first quarter, the acquisition activity occurring at the end of the quarter and no dispositions at that point certainly isn't something we'd expect to annualize.
So, from a modeling perspective, I think it's better captured If you look at the ABR at the end of the quarter, but I think on top of that, we are always actively managing our portfolio well ahead of lease expiation's and right now we're working on some leasing activity that we expect to have a positive impact on our lease revenues over the back half of the year. It's too soon to get into any specifics on that, but we look forward to giving more details on that as things firm up. So that's on the revenue side, on the expense side, I mentioned in my remarks that the interest expense would be impacted by the debt prepayments we made that were just at the end of the quarter and subsequent to quarter end. So I think you're going to see a lot of these impacts flow through more toward the back half of the year, as we get into that and that really drives a lot of the reasons why the Q1 is not a run rate for us.
Greg McGinnis -- Scotiabank. -- Analyst
Okay, thank you. And moving on to kind of acquisitions, dispositions, and you have one of the largest investable universes within that lease rates considering the breadth of asset types and geographies within the portfolio. Are there any industries or geographies that are particularly attractive today? I know you touched on a few in the opening comments, but I must curious where you might be seeing some trouble or some areas with some trouble. Just thinking about how you're going to build or decrease exposure from here.
Jason Fox -- CEO
Yes, sure. Diversification certainly is something that we value substantially. It does allow us to allocate capital across asset classes and geographies, where we see the best risk return opportunities in any given point in time. If you look back at the first quarter even into 2018 as well, we had a lot of success allocating capital into the industrial segment. Many of those deals were structured deal, sale leasebacks, some build-to-suits as well and we can command better pricing and structure as well but lease term in lease provisions which we find very important. We hope to continue that. I think our pipeline, looking forward, also is more heavily weighted toward industrial. I think currently right now we are also more heavily weighted toward the US. I think some of that is more just timing of specific transactions as opposed to a falloff in expected deal flow in Europe. But I would expect is for the full year to be more weighted toward the US this year certainly compared to last year.
In terms of asset classes that we are not focused on, I think retail is certainly one that we continue to maintain an underweight position. Something that we've talked about for years and years now going back close to 2 decades at this point in time. It's always been the asset class that we view as the one that trades most efficiently. A lot of capital inflows, a lot of smaller bite size deals with tenants that are easily understood by a broad range of investors. So they do trade pretty tight. And obviously over the last 10 years, there's been the Amazon effect and e-commerce on that asset class, not to mention the supply issues that we see in the US.
We've also talked in the past about where we do see opportunity in retail is more in Europe. Out of our total ABR, 18% of the portfolio is retail, but 14 of that 18% is in Europe, but we think the supply dynamics are much more in check. And we've also focused on tenants and components of the retail industry that are less exposed to e-commerce.
Greg McGinnis -- Scotiabank. -- Analyst
Thanks so much for the color.
Jason Fox -- CEO
Your are welcome.
Operator
Thank you. Our next question comes from the line of Emmanuel Korchman from the Citigroup. You're now live .
Emmanuel Korchman -- Citigroup -- Equity Research Analyst
Hi, good morning everyone. Just a follow-up on the comments on industrial. You mentioned that it's a healthy industry, but you also talked about some of the competition looking for assets there, so just how do you balance the deals you're able to execute on an insource versus the massive amount of competition out there?
Jason Fox -- CEO
Yes, sure. It's -- yes, there is a lot of competition within industrial, even within net lease, but certainly the broader industrial market, I think is where even more the capital inflows have shifted. I mean, we compete in a couple of fronts. Number one, we've been around for close to 50 years now. We have a strong reputation, we're going to get an opportunity to look at all the deals of anything of meaningful size. We typically get early looks at those transactions as well. And I think through our long track record of ease of execution and the lack of that execution risk, we are given very good opportunities to compete on these deals. I think we've also really carved out a niche specifically within the sale leaseback and build-to-suit component of net lease. Those transactions tend to have more structured complexity upfront, which allows us to drive some yield as well as structure as I mentioned earlier. And so that's primarily where we compete. I think the other component of this is, this is a bit of a differentiator relative to our peers. As we do have the ability to invest within our existing portfolio, both follow on deals with existing tenants whether those expansions or other capital investment projects or follow-on transactions with some of our existing tenants. I think the Orgill transaction I mentioned earlier is a good example of that. That's a tenant that we've done some deals with and hope to do more with over time.
Emmanuel Korchman -- Citigroup -- Equity Research Analyst
So if we think your pipeline right now, how many of those sort of follow-on, exclusive to you deals, that you are in that, whether you can quantify it in some way for us.
Jason Fox -- CEO
Yeah, I think the deal flow that I think is truly proprietary and truly up market. Are those what we call capital investment projects, these expansions and follow-on investments, specifically ones that are related to an existing asset or portfolio of assets. The pipeline right now contains about $200 million of those projects and are supplemental. Those are projects that are under contract and really under way in terms of construction. The count toward our deal volume for the year once they complete in rents commences. So out of that 200, about $100 million of those are expected to close in 2019, perhaps we would see a little bit of incremental deal flow to that this year, but more building to future years as well.
Emmanuel Korchman -- Citigroup -- Equity Research Analyst
Thanks. Tony, maybe just to dig into earnings more specifically. can you help us sort of just understand the trajectory cadence of how earnings is going to fall in? I think couple of other analysts have mentioned that 1Q was surprisingly more number if we annualize your real estate AFFO, we don't get your range . So, how quickly does that ramp, especially given the dispositions at the end of the year?
Toni Sanzone -- CFO
I mean, I think we've always historically said we don't give quarterly guidance. But what we can give you color on is, as I mentioned, is really around the lease revenue. The timing of transaction does have an impact for us and we can have a quarter like we did this quarter, which is on pace with the guidance range that we've given on acquisition volume and have no dispositions toward the end of the year. The ramp up that you'll see will come again from the timing on the investment volume when that closes and as I mentioned in terms of the leasing activity that we mentioned. So that's not something that we can't guide on specifically and give you that much color, but we do see that happening more toward the third and the fourth quarters of the year. I mean that's specific to the revenue side.
Operator
Thank you. Our next question comes from the line of Karin Ford from MUFG Securities. You're now live.
Karin Ford -- MUFG Securities -- Director-Senior Analyst
Hi, good morning. Can you give us some color on where investment spreads today? And are you interested in going up the quality spectrum on new deals given your better cost of capital.
Jason Fox -- CEO
Yes, sure. So the answer to the last question is yes, we do have a meaningfully better cost of capital, a lot of which is related to the simplification of business that we've talked about in the past as part of our CPA-17 strategy. So yeah we do have interest in expanding the funnel into lower yielding investments that may be with higher quality real estate or real estate they may provide higher-than-typical growth. But we view that as incremental to our typical deal flow and the opportunity set that's we more historically have targeted. I would say, to give a range in terms of deal spreads. We typically target cap rates in the US and in the low to mid 6s, up into the 7s. We referenced the weighted average for the first quarter which was almost entirely US deals was a little bit over 7%. But we can come down from that, we can get into the sub 6 category if we think there is the appropriate risk return associated with that. Cap rates in Europe are probably 25 to 50 basis points lower. All of these being equal and of course our borrowing costs are even wider spread than that to the cap rates, so we could pick up some higher accretion there and again that's one of the benefits of being diversified and the ability to invest in Europe.
Karin Ford -- MUFG Securities -- Director-Senior Analyst
Great, that's helpful. Second question is just on releasing spreads. It wasn't a huge volume but, they did look pretty positive this quarter. Is that the start of a trend or was that just the nature of the leases that you did this quarter ?
Jason Fox -- CEO
I'm sure this is Brooks. I certainly would hesitate to extrapolate trends in any given quarter, but it was an active quarter and one we are very pleased with. If you look at the last 8 quarters, for example, to try and extrapolate a little bit more trend, we've recaptured on the order of 96% and we're optimistic going forward as well. I think it's important to note that during that trailing 8 quarter time frame, we've added 8 years of weighted average lease term. The tenant improvement allowance has been kind of sub $1 per square foot and that's impacted about 14% of ABR, so it's a good outcome for us. Again, each quarter is going to be very, very different. But over the long run, we're optimistic about our lease expiration outlook.
Karin Ford -- MUFG Securities -- Director-Senior Analyst
Great, thanks. And just one more. Given the favorable current debt environment, any interest in extending out debt duration from the current level, just under 5 years ?
Jason Fox -- CEO
Sure. I think that currently we have excellent access to almost all forms of capital. We have a lot of options at our disposal to efficiently access capital, both here in the US and Europe so we are actively evaluating options.
Karin Ford -- MUFG Securities -- Director-Senior Analyst
Great. Thank you.
Operator
Thank you. Our next question comes from the line of Anthony Paolone with JPMorgan. You're now live.
Anthony Paolone -- JPMorgan -- Executive Director
Great, thank you. Just on the cap rates side with your comment about the current pipeline leaning a bit more toward industrial, do you think you'll be able to keep that 7ish number over the balance of this year? Should we think about the rest of the activity in the pipeline and your guidance being a bit lower?
Jason Fox -- CEO
Yeah, it's, hard to predict how the, how the full year will come out. If you look over the past couple of years we had been in that 7% range, but it's a pretty big range, I mean we'll do deals in the low sixes, and perhaps even lower depending on the opportunity set that we see, certainly our cost of capital could allow us to do those, but we are also finding deal opportunities into the sevens including I feel that are higher than that especially the ones that are the capital investment products I mentioned earlier. So hard to give you a number right now, but we hope that if we do have a lower cap rate we will come with a larger opportunity set and hopefully an incremental growth from there.
Anthony Paolone -- JPMorgan -- Executive Director
Okay. And then any comments on just reality income going outside the US and whether that creates more competition for you or whether that help spread the word about shaking corporate real estate. Brooks, you have any thoughts on what that does, if anything ?
Brooks Gordon -- WPC Carey Inc -- Head of Asset Management
Yes, sure. We have great respect for realty income as a peer and we certainly understand their rationale behind their decision to expand into Europe as a source of both growth as well as diversification. As you know diversification has always been a hallmark of our approach to investing in that lease. We've been over there for 20 years and had a substantial platform centered in London and Amsterdam. But in terms of competition, I mean I think Sumit said it well last week on their investor call post their announcement that we have a complementary existence. I think that'll be true in Europe as well, it's a very large market over there. So we may see them on a handful of deals, but I don't think we envision competing with them substantially directly but we'll wait and see how that plays out. I think more than anything, I think you're right we view this as a positive from WP Carey's perspective and from a capital markets' perspective, in many ways it validates the value of our platform in Europe and the benefits of geographic and the industry diversification within the net lease asset class. This is something that we've talked about for decades.
And I do think that we'll see an increased focus from the investing community on European net lease and I think there no longer be examining it just in the context of WP Carey. So that we see as beneficial to our story.
Anthony Paolone -- JPMorgan -- Executive Director
Okay. And then last question maybe for Toni. I think this along the lines of some of the other questions around just the first-quarter variance to perhaps street models. If I look at your AFFO statement, you added back $4.1 million of what looks like FX related stuff. Is it fair to think about that? Is kind of we should maybe just net that against or add that to NOI to kind of get the full effect quarter to quarter is that just being overly simplistic ?
Toni Sanzone -- CFO
Yeah, I mean I think it's hard to look at this on an individual line item basis, but I think what you're highlighting is the issue that the currency is flowing through on the various NOI lines, so certainly our lease revenue will see it on the interest expenses and offsetting impact and then we do offset that with realized gains from settling hedges, so you know it is part of our hedging strategy. We actually have contracts in place that will mitigate some of the remaining risks of our the cash flows that are not hedged naturally. So that does flow through that line in that add back. So I think, again, depending on how your model is working specifically, looking at that as a component of the NOI is probably reasonable.
Anthony Paolone -- JPMorgan -- Executive Director
Okay, thank you.
Operator
Thank you. Our next question comes from the line of Joshua Dennerlein with Bank of America, Merrill Lynch. You're now live.
Joshua Dennerlein -- Bank of America, Merrill Lynch -- Equity Research Analyst
Hi, good morning guys. You mentioned earlier that the deals this year would most likely be in the US and heavy industrial focused. Is that a function of competition to supply of deals or kind of pricing is it in terms of less deals in Europe?
Jason Fox -- CEO
Yeah, there is the GDP growth has slowed a little bit in Europe. I think that perhaps that has dampened activity a little bit, but if you think about it, the interest rates are still quite low there. The ECP has pledged to keep rates low throughout 2019 and perhaps beyond that. So there is still our good spreads there. I think we'll see some pickup in Europe, our pipeline does include some of that and we'd certainly don't have visibility to what a full-year will look like at this point in time. Pipeline is really, I would say, maybe 3 months forward-looking. so I think stay tuned there, but we are seeing better opportunities in the US than we have in the past. The first quarter was indicative that I think our current pipeline is maybe it's two-thirds weighted toward the US right now. So we have more to come as deals progress forward, but I think you'll probably see a little bit more of a US in industrial team this year.
Joshua Dennerlein -- Bank of America, Merrill Lynch -- Equity Research Analyst
Okay. Okay. And then just kind of following up on the earlier question about Europe, and do you think there's opportunities for some more cap rate compression over there as you get a big tier coming in and then many others following on the back so that's an opportunity for you guys to maybe monetize some assets over time ?
Jason Fox -- CEO
Yeah, we have been doing that some. We've been opportunistic especially with some retail assets more recently. We talked last quarter about taking some profits and held portfolio, especially after acquiring some more portfolio, especially after acquiring some more held as a part of the CPA-17 transaction. So I think, certainly that's a possibility, but the broader message is Europe is a very, very big market. In fact from a sale leaseback standpoint, it has a meaningfully higher percentage of owner occupied real estate that really could be targeted for sale-leasebacks and in net lease assets. So it's big. I think that the benefits of something like a realty Income and perhaps others entering the market is more to add more visibility and credibility to being a diversified net lease, which we've really always been focused on.
Joshua Dennerlein -- Bank of America, Merrill Lynch -- Equity Research Analyst
Got it. Thank you. Appreciate it.
Jason Fox -- CEO
Sure.
Operator
Thank you. Our next question comes from the line of Todd Stender with Wells Fargo. You're now live .
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
Good morning. Thank you. So regarding the ATM, we haven't seen very often in the equity markets, so the volume is pretty big but not compared to your size, but it does definitely improve your liquidity. How much visibility do you get to see who the shareholders are? Is it more of a blind issuance or these truly reverse increase? Do you get to see who it is? Can you just kind of characterize who you're placing the shares in the hands of?
Jason Fox -- CEO
Good morning, Todd. We don't have a lot of visibility in terms of ultimate buyers of the ATM issuance, but the way we view that as that while we have excellent access to all forms of capital given our increased trading volume, we felt that last quarter and this quarter was particularly attractive time for us to access the ATM.
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
Thanks for that. And is it at a handful of shareholders? Is it one or two building up business, you really don't get to see who it is on the other side?
Jason Fox -- CEO
No, we've had broad interest from institutional investors. So, I think that the distribution and origin has been broad.
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
Okay, thanks. And then probably for Jason the AmeriFreight acquisition in the quarter seems pretty interesting. You characterized it as a covered land play. How much land is in the deal and maybe kind of just share with the cap rate was? Thanks.
Jason Fox -- CEO
Yeah, I think it's still a little over I think in and around 10 acres. It's currently being used predominantly for truck parking. So we think we have the ability to convert that into a trucking terminal is well at some point in time. But we have a good tenant in place, we have 12 years of term and so over time I think that becomes more value as a redevelopment play, but in the meantime, that will provide some pretty solid income. The cap rate, we don't really give specifics, but you can call it mid-sixes.
Unidentified Participant
Okay, thank you. But then probably for Toni, you paid off quite a bit of secured debts. Any prepayment penalties? When were these due? And is there a sense of urgency to do more of this?
Toni Sanzone -- CFO
Yes, I know we did. We paid off roughly 200 million during the quarter and even subsequent to the quarter end through today, about $185 million. But we've incurred right just under $2 million of prepayment penalties. So pretty minimal at this point.
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
No issue with your credit rating, right? I mean, is this a renewed sense to do this or coupons were still fairly low?
Toni Sanzone -- CFO
Yeah, I mean we knew we assumed $2 billion of secured mortgage debt with our acquisition of CPA-17 and as we've already said we're committed to the unsecured strategy, looking to reduce those borrowings and increase our unencumbered asset pool. This was a good opportunity of us to pull some of that forward and it did have a weighted average interest rate of about 5%. So we will see some incremental interest savings from that as well. So we will continue to explore opportunities to reduce the secured debt ahead of scheduled maturities, but balance that with certainly the other need on the capital side including our acquisition pipeline.
Jason Fox -- CEO
We certainly don't have an issue with credit rating. In fact, I would say that our credit profile continues to improve as our revenue composition quality improves as we continue to pay down our secured debt. So I think that we're in good place and we continue to improve.
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
Okay, thank you.
Operator
Thank you. Our next question comes from the line of Chris Lucas with Capital One Securities. You're now live.
Chris Lucas -- Capital One Securities
Hey, good morning, everybody. Given the income and obviously, the increased attention that you guys are receiving based on the post-CPA 17. Maybe if you could remind us the scale of the operation you guys have in Europe in the two main offices and their responsibilities and there.
Jason Fox -- CEO
Yes, sure. So about a third of our portfolio is in Europe. Call it $6 or $7 billion and as you mentioned, we've been over there since 1998 investing in Europe. It's predominantly out of 2 offstage we investing out of London. The team of 5 or 6 people, very experienced all Europeans who understand the culture in the markets and have deep relationships within the European markets. From an operational side, it's based side of Amsterdam, it's got 40 plus people based in Amsterdam with a host of ranges of responsibilities and job functions. Asset management is focused there. We have a large team that really follows the same proactive approach that we do in the US, staying ahead of lease maturities and trying to find opportunities to continue to further invest in our properties through expansions and follow-on deals with our tenants. Again, all Europeans who understand those markets. And then the other functions we have there are really what you'd expect. We have financial reporting, treasury, tax accounting. All based within the office.
Chris Lucas -- Capital One Securities
Thank you for that and then I guess just one other question, just as it relates to deal sourcing. Is there a material differences between sort of how you forth the US versus how deals are sourced in Europe?
Jason Fox -- CEO
We've been in the US for 50 years and Europe for 20 years. So I think reputationally, we're very understood, a lot of name recognition and a long history of track record is good execution. But the approach is similar. I mean, it's relationship driven through the different deal sources whether they are through developers, brokers, investment banks or directly with the tenants themselves. Very much relationship driven with a life final given the diversification.
Chris Lucas -- Capital One Securities
Great, thank you for that. So that's all I have this morning.
Operator
Thank you. (Operator Instructions) Now our next question comes from the line of Greg McGinnis with Scotiabank. You're now live.
Greg McGinnis -- Scotiabank. -- Analyst
Hey, hello again, I just wanted to get a couple quick details actually from Sheila's follow-up question. I know we asked about this a lot, but I was just hoping you can give us your updated thoughts on the self-storage platform. Whether you expect to hold onto it or what your options are for offloading those assets and what that time frame might look at?
Jason Fox -- CEO
Right, sure. Yeah. We've talked about this in the past a little bit in and really the message is similar, we remain focused on being a peer play net lease, so we're not going to own operating properties long term and when we have something to announce on that front, we will let you know.
Anthony Paolone -- JPMorgan -- Executive Director
Okay, thanks.
Operator
Thank you, ladies and gentlemen, at this time I'm not showing any further questions. I would now like to turn the call back over to Mr Sands.
Peter Sands -- Director of Institutional IR
Thanks everybody for your interest in WP Carey. If you have additional questions, please feel free to call Investor Relations directly onto 212-492-1110 . And that concludes today's call. And you may now disconnect. Thank you.
Duration: 45 minutes
Call participants:
Peter Sands -- Director of Institutional IR
Jason Fox -- CEO
Toni Sanzone -- CFO
Sheila McGrath -- Evercore -- Analyst
Brooks Gordon -- WPC Carey Inc -- Head of Asset Management
Greg McGinnis -- Scotiabank. -- Analyst
Emmanuel Korchman -- Citigroup -- Equity Research Analyst
Karin Ford -- MUFG Securities -- Director-Senior Analyst
Anthony Paolone -- JPMorgan -- Executive Director
Joshua Dennerlein -- Bank of America, Merrill Lynch -- Equity Research Analyst
Todd Stender -- Wells Fargo Securities -- Senior Equity Analyst
Unidentified Participant
Chris Lucas -- Capital One Securities
