Hello, welcome to W. P. Carey's third quarter 2020 earnings conference call. My name is Brock, and I will be your operator today. All lines have been placed on mute to prevent any background noise. Please note that today's event is being recorded. After today's prepared remarks, we will be taking questions via the phone line. Instructions on how to do so will be given at the appropriate time. I will now turn today's program over to Peter Sands, Director of Institutional Investor Relations. Mr. Sands, please go ahead.
Good morning, everyone. Thank you for joining us today for our 2020 third quarter earnings call. Before we begin, I would like to remind everyone that some of the statements made on this call are not historic facts and may be deemed forward-looking statements. Factors that could cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings. 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 year, and where you can also find copies of our investor presentations and other related materials. With that, I'll hand the call over to our Chief Executive Officer, Jason Fox.
Thank you, Peter, and good morning, everyone. I hope everyone remains safe and well during this period in which we've grown accustomed to working remotely and managing through the COVID-19 pandemic. Through a combination of ample liquidity and an advantage cost of capital, we're very well positioned to execute on our growing pipeline of investment opportunities. We've reinstated formal guidance, which our CFO, Toni Sanzone, will review along with our third quarter results, as well as touching upon aspects of our portfolio and balance sheet. Toni and I are joined today by John Park, our President, and Brooks Gordon, our Head of Asset Management, who are here to take questions later in the call.
The third quarter posed another stress test for net lease REITs, during which our portfolio has continued to show remarkable resilience and consistency with rent collections that remain among the best in the net lease peer group as well as the broader REIT sector. Overall, we collected 98% of rents due during the third quarter. Our collections again showed consistent strength across each of the three months across our core property types, including retail, for which we collected 100% of third quarter rents, and across the U.S. and European portfolios. Furthermore, to date, all of our top 10 tenants have remained 100% current on rent throughout the pandemic. I'm pleased to say the overall strength of our collections has continued in the fourth quarter, with a 99% collection rate for rent due in October.
This is a testament to our underwriting process, focused on deep credit underwriting and mission-critical assets, as well as the expertise of our investments and asset management teams. W. P. Carey's portfolio generates rental income that is more reliable, and therefore more valuable, than that of REITs with weaker or more variable collections. The downside protection this provides is a differentiating factor that we believe the market is currently undervaluing, especially in the present environment, given the recent surge in case numbers and potential for new lockdown measures. Turning to our recent investment activity. Transaction activity paused following the first wave of COVID, significantly slowing our deal volume over the summer, we focused on rebuilding our pipeline, which is translating into deal closings.
During the third quarter, we completed investments totaling $112 million, comprising the origination of two industrial sale leasebacks in the U.S. and the completion of a warehouse expansion project for one of our grocery tenants in Europe. Specifically, in September, we completed the $44 million sale leaseback of two state-of-the-art food manufacturing facilities in the Midwest. The tenant is a leading manufacturer of a wide variety of pretzels and related snacks, including well-known food brands. Facilities are highly critical, comprising the tenant's entire manufacturing footprint, in which the tenant has made significant capital investments into equipment to support growing demand for its products. They're master leased on a triple net basis for 25 years with fixed annual rent escalations. Also in September, we completed a $40 million sale leaseback of a light manufacturing facility net leased to Weber Grills, the global leader in barbecue grills and accessories.
The facility comprises Weber's primary North American manufacturing footprint, into which it has made significant capital investments. It is strategically located near Weber's global distribution center, as well as being close to the I-90 freeway and Chicago's O'Hare International Airport. It is triple net leased for 15 years with fixed annual rent escalations. That same month, we also completed a $28 million capital project for a 300,000 sq ft warehouse expansion near Lisbon in Portugal with our existing tenant, Sonae, which is one of the country's largest food retailers. This is a good example of our ability to do follow-on deals with existing tenants, something we identified at the time of the original acquisition in 2018. The expansion was added to the original lease, which has been extended by 10 years to a new 20-year lease term.
Property includes a 4,000 MW solar roof installation and has been approved for a LEED Gold rating. Our third quarter investments had a weighted average going-in cash cap rate of 6.5%, providing a good spread to our cost of capital in a weighted average lease term of 21 years, helping maintain an overall portfolio weighted average lease term of 10.6 years. These investments brought total investment volume for the first nine months of the year to $516 million. Since quarter end, we've completed an additional $51 million investment, bringing us to $567 million of investments at a weighted average cap rate of 6.6% for the year to date period through today. Moving to the market environment. In the U.S., cap rates have continued to compress, particularly for industrial assets or those with tenants in pandemic resistant industries.
Given strong demand and low interest rates, which are expected to remain low despite expectations of further government stimulus, it's not been uncommon for these sorts of assets to trade at cap rates lower than pre-COVID-19 levels. In Europe, it's been a similar story, amid an even lower interest rate backdrop and government programs that have provided capital alternatives. Capital markets in both regions have reopened and been accessed by corporations contributing to the downward pressure on cap rates. Sale leasebacks, however, remain a viable alternative for corporations to unlock existing capital tied up in real estate and allow us to generate incremental yield relative to secondary net lease asset trades. We remain competitive from a cost of capital perspective, able to do higher quality deals at tighter cap rates on an accretive basis.
Ample liquidity and the ability to provide certainty of close continue to give us an advantage, especially as corporations seek to complete deals ahead of year-end, which often translates into our fourth quarter being the most productive of the year for deal closings. Turning briefly to our recent capital markets activity and some closing comments on our pipeline. The equity forward we completed in June, along with the U.S. bond deal we completed earlier this month, exemplify just how much progress we've made in recent years in this area. Both deals received strong support from institutional investors, including traditional REIT-focused institutions, resulting in beneficial pricing. The equity forward gives us significant flexibility, locking in our ability to match fund the deals in our pipeline with equity issued at a predetermined price.
Strong demand for the bonds we issued in early October enabled us to significantly upsize the deal, raising $500 million in senior unsecured notes, and issue bonds at our tightest ever spread to the benchmark 10-year Treasury rate. We also believe that at 2.4%, it was the lowest ever coupon rate for a 10-year net lease bond. Despite the tight cap rate environment, strong demand for our capital has ensured a cost of capital that supports accretive investment activity. Deal activity has rebounded since the end of the summer, and our pipeline has continued to build, returning to pre-pandemic levels. We're further along with a variety of industrial opportunities in the U.S., although we're also seeing pockets of opportunity beyond industrial, with Europe historically offering better retail fundamentals. With ample liquidity, we're confident in our ability to execute on our robust pipeline.
Given where we are in the year, we have good visibility to transactions likely to close before year end, which is reflected in our guidance assumptions. With that, I'll hand the call over to Toni.
Thank you, Jason, and good morning, everyone. This morning we reported total AFFO of $1.15 per diluted share for the third quarter, with 97% or $1.12 per share coming from our real estate segment. We continue to grow lease revenues through net acquisition activity and the escalations built into our leases while also recognizing improved rent collections of 98% for the third quarter, up from 96% for the second quarter. While the impact of uncollected rents has been de minimis relative to our overall portfolio, I'll spend a minute breaking down how that is reflected in earnings. In terms of revenue recognition, we've taken the same approach I outlined last quarter, in line with accounting guidance and taking a conservative view on collectability. As a result, our third quarter AFFO includes only about $1 million of uncollected rent, which we expect to fully collect over the next six months.
Approximately $5.7 million of uncollected rental income, net of recoveries, was not included in AFFO during the third quarter, down from $8.5 million in the second quarter, as certain tenants resumed paying rent. About half or $2.8 million of uncollected rent for the quarter related to one deferral agreement, which we entered into and discussed last quarter as part of a broader lease restructure. That was a six-month deferral payable over five years, and the tenant has resumed rent payments in the fourth quarter, including the deferred portion. The remainder of the rent we did not recognize during the third quarter largely comprised rents due from fitness centers, theaters, and restaurants, some of which have resumed paying reduced rent but will remain on a cash basis for AFFO purposes for the foreseeable future. Turning to leasing activity.
We completed seven lease renewals or extensions across a variety of property types during the third quarter, representing just under 1% of ABR, on which we recaptured 95% of the prior rent and added 7.3 years of incremental weighted average lease term. Given the quarter-to-quarter variability inherent in this metric, internally, we continue to focus on it over the trailing eight quarters, over which time frame we've recaptured 97% of the prior rent and added 7.3 years of incremental lease term while spending only $1.42 per sq ft on tenant improvements and leasing commissions. Contractual same store rent growth, which is measured based on ABR on a constant currency basis and reflects year-over-year rent growth built into our leases, was 1.6% for the third quarter.
The decline in this metric compared to the second quarter primarily reflects the periodic rent increase rolling out of the calculation for our largest tenant, U-Haul. Comprehensive same-store rent growth, which we added to our disclosure earlier this year, is based on pro-rata rental income included in AFFO, taking into account any leasing activity, vacancies, restructurings, rent deferrals or abatements, and therefore fully reflects the impact of the pandemic on earnings year-over-year. For the third quarter, this metric improved to -1.7%, up from -2.6% for the second quarter, driven primarily by tenants resuming scheduled rent payments, as well as the recovery of back rent from certain tenants. Turning briefly to expenses. Property expense has ticked up slightly over the last two quarters, driven by the accrual of real estate taxes on properties where we believe there is a heightened risk of tenants not paying those expenses directly.
Our approach to accruing property expense is aligned with our evaluation of our tenants' ability to pay rent and has resulted in an additional accrual of $2.4 million during the third quarter and $4 million year to date. G&A expense totaled $19.4 million for the third quarter. We remain on track for it to be between $76 million and $79 million for the full year. Moving now to our capital markets activity and balance sheet. We continue to manage our balance sheet from a position of strength, allowing us to opportunistically access both equity and debt capital at pricing that enables us to invest accretively. Towards the end of the third quarter, we raised $100 million in net proceeds from the issuance of approximately 1.5 million shares under the equity forward agreements we put in place in June.
Because those shares were issued at the very end of the quarter, the impact on diluted share count will be reflected starting in the fourth quarter. In total, we've now settled 2.95 million shares under the equity forwards, raising $200 million, leaving us the ability to issue an additional 2.5 million shares or approximately $166 million in equity. During the third quarter, we repaid mortgage debt totaling $192 million, which had a weighted average interest rate of 5.1%. This further reduced secured debt as a percentage of gross assets to 8% at quarter end, compared to 12% a year ago, and unencumbered an additional $30 million of ABR in the process. Our balance sheet metrics remain strong, ending the third quarter with debt to gross assets at 40.6%, essentially flat to the prior quarter and at the low end of our target range.
Net debt to EBITDA was 6.1 times at the end of the quarter, a slight increase from the second quarter. Factoring in the remaining shares we can issue under our equity forward agreements would bring net debt to EBITDA below 6 times. We ended the third quarter with $1.9 billion of total liquidity, including $1.6 billion of availability on our credit facility, cash on hand, and the approximately $166 million of proceeds available under equity forward agreements I noted earlier. As Jason mentioned, we further enhanced our positioning early in the fourth quarter with the successful issuance of $500 million of 10-year U.S. bonds at an annual coupon rate of 2.4%, well below the interest rate on the mortgage debt we repaid during the third quarter, as well as our overall weighted average interest rate of 3% at quarter end.
This, in conjunction with an advantaged cost of capital, gives us a clear path to accretively execute on our investment pipeline through the end of the year. Turning now to our 2020 guidance. Based on the visibility we have into the remainder of this year, we've reinstated formal 2020 AFFO guidance with a range of $4.65- $4.75 per share, including real estate AFFO of between $4.51 and $4.61 per share. As Jason discussed, year-to-date investments through today totaled $567 million, and our full year guidance assumes total investment volume of between $750 million and $1 billion, based on the current visibility into our pipeline. For the dispositions based on what's been completed year-to-date and our expectations for the fourth quarter, we're assuming total dispositions for 2020 of between $300 million and $350 million.
In closing, I'm pleased to say that our third quarter results reflect another quarter of consistently strong rent collections, something our portfolio has produced since the start of the pandemic, demonstrating the reliability of our earnings and positioning us to perform well should the recent spike in case numbers cause further economic disruption. Given ample liquidity, an advantaged cost of capital, and increased deal activity, we're also confident in our ability to generate growth by executing on the accretive investment opportunities in our pipeline. With that, I'll turn the call back to the operator for questions.
Thank you. At this time, we will take questions. If you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the star, then the number two. Our first question today comes from Greg McGinniss of Scotiabank. Please proceed with your question.
Hey, good morning, everyone.
Good morning, Greg.
With just a couple months left in the year, I'm just curious what could drive you to the top or bottom end of the guidance range. Is there any potential tenant fallout built into that assumption, or is it really just based on the acquisition number?
Yeah, I think in terms of downside, Greg, there's nothing specific that we're concerned about at this point. Again, timing of transactions, uncertainty around the current environment, that's really all that's baked into the downside.
Okay, thanks. Regarding the potential 4Q transactions, if those expected acquisitions do not end up closing this quarter, is it more likely that those deals are being pushed into early 2021 or that they may not be completed at all?
Yeah. It's probably a combination of the two, Greg. We have a number of transactions that are pretty far along. I don't think it'll be more of a timing issue. We do feel good about the pipeline right now. If there are deals that could straddle near the end of the year, those would be then included in next year's deal volume. Really the bottom line is whether they close on December 31st or January 1st, not really impact our 2021 numbers any differently. Maybe that's the basis of your question is, will those deals continue to provide growth for next year? I think, generally speaking, the answer is probably yes.
Okay. Yeah. Thanks. Just a final question. On the warehouse rent collection, which remained at 94% this quarter, is that driven by any tenants in particular? Is there risk of losing that permanently, or is that just the deferral agreement that you alluded to before?
Brooks, you want to take that one?
Sure. Yeah. Correct. It's really that one larger opportunistic deferral, which we discussed on last quarter's earnings call, and they've resumed paying rent per the lease. Expect that to tick back up.
Okay. Thanks so much.
The next question is from Emmanuel Korchman. I'm sorry, Chris Lucas of Capital One Securities. Please proceed with your question.
Hey. Good morning, guys. Just a couple quick ones. Can you remind us on the Marriott lease, what types of Marriotts are in that lease? I'm assuming you're still getting the rent, but I'm just curious as to the type of properties that are in that pool.
Rod, this is Brooks. Correct. Marriott has remained current throughout coronavirus period. These are Courtyard Marriotts, and they are open, but certainly operating at a lower occupancy as you expect.
Okay, thanks. Then just on a couple of the leases done during the quarter were down double digits. Can you give some background as to sort of what those discussions were like?
Sure. There was two I think you're really referring to. One is in the industrial side. That was a long-term blend-and-extend transaction on a two-property lease with properties in Kentucky and Tennessee. Your typical blend-and-extend type transaction there created an enormous amount of long-term value, but certainly had a slight rent reduction in the immediate term. The other was a similar type deal on a automotive training school in Sacramento. Again, both we think create substantial intrinsic value but did require kind of an upfront reduction in exchange for long-term lease extension.
Okay. The last question from me. Toni, just in terms of your capacity to issue Euro bonds at this point, are you fully matched at this point, or is there still an opportunity to do another long-term institutional deal?
Yeah. I think we continue to kind of look at our leverage levels both as it relates to the overall level, but as well as kind of, as you mentioned, on a matched funding basis. I think with the acquisition pipeline, there is some activity that we see building in Europe. With that there, I think Europe always remains a possibility for us in terms of where we could access the capital markets. Again, we're sort of mindful of the overall leverage levels at this point.
Okay. Thank you so much. That is all I have this morning.
Great. Thanks, Chris.
The next question is from Emmanuel Korchman of Citi. Please proceed with your question.
Hey. Good morning, everyone.
Good morning.
Jason, just as we look at your pipeline, maybe beyond just the next couple of months into 2021, just how big is that sort of total pipeline, and realize that you're going to be hesitant to give guidance for next year? Are volumes going to be similar to sort of what we expected going into 2020, and then also mix between the U.S. and Europe there?
Yeah. We have good momentum right now. We mentioned the $567 million we've done year to date, and there are several imminent closings that would bring us near the bottom end of the reinstated guidance range that Toni mentioned earlier. Beyond that, we feel really good about our pipeline as we head into the end of the year. I think there's visibility into a number of deals that could get us into the top half of our guidance range for this year. 2021, it's difficult to really project out much further than the next couple of months. I think that we do have good momentum, and I think there's a couple of things to keep in mind, at least for 2020. One, the range that we've reinstated, $750 million-$1 billion.
We expect to fall within that range, of course, that's despite the fact that our investment activity was on pause for close to six months of the year because of the pandemic. I think also in 2021, what we do have visibility into is about $170 million of build-to-suits and expansions that are currently under construction and expected to deliver and begin paying rent during 2021. I think we'll add to that amount maybe with a build-to-suit or two that could reasonably complete next year as well. You think about our diversified model. That gives us the wider opportunity set. As Toni mentioned in her script
We have been able to pre-fund deals with our equity forward and the recent bond offering that we did with really attractive rates gives us a pretty good cost of capital to compete. If the deal opportunities are there, we feel really good about 2021 and how we're positioned. It's difficult to predict, as you can imagine, much further along than a couple of months. Really anything that's 2021 outside of those expansions really aren't in our pipeline at this point in time.
Great, thanks. Then just looking at disclosure of collections between Q3 and October, it looks like the ABR in the fitness restaurant in that segment actually came down from 2% to 1%. Maybe that's rounding. Is there a tenant that might have come out of that? Is there something else there that would change your exposure to that segment even though collections have gotten better?
Yeah. Brooks, you want to talk about that?
Sure. Certainly the area of weakness in our collections is really in that one category. That category where it did come down a little bit. Primarily that's two things. One is we had several gyms that were rejected in the 24 Hour Fitness bankruptcy. Also the restructure of several theater leases. It's a bit of a combination of those two things. That combined really doesn't have a material impact on the overall collection story either.
Thanks, everyone.
Great. Thanks, Manny.
The next question is from Anthony Paolone of JPMorgan. Please proceed with your question.
Thanks. Good morning.
Morning, Toni.
Hi. You all have talked about for a bit now the pipeline being skewed to industrial, but you'd also mentioned some other areas in your diversified model. What else is coming up that seems interesting for you all in the pipeline?
Yeah. We are still biased towards industrial, and I would look at that more as our core focus. Anything that we do in office, I would probably more characterize as opportunistic and we'd require longer lease terms and stronger credits and generally underwrite those more conservatively, especially for lease-end scenarios. Less likely office, but I think that it's something that we would still consider in the right situation. Retail is more likely to be in Europe. We think there is better supply fundamentals and pricing dynamics there, and of course less competition as well given that you don't have any retail-dedicated net lease REITs in Europe. We can typically generate wider spreads there in addition to pushing on structure and lease term, et cetera. I think you'll continue to see us do more in industrial. That's been the bulk of what we've done this year to date.
It's the bulk of what's in our pipeline. We are diversified and that's a good benefit where it gives us more pathways to grow.
Okay. Looking at your major tenant roster, Marriott and U-Haul both with less than four years left. What would those situations look like today? How would you think about just like a mark to market on those two?
Brooks, you want to talk about that?
Sure. I'll take those two. U-Haul, as we've discussed before, they have a purchase option in April of 2024. We do expect them to exercise that purchase option. For Marriott, we have two tranches of that lease. We have regular dialogue with Marriott regarding these lease expirations. It's really too early to tell. I think what we do like is that we have some term there to really get past the COVID period before we're really entering into lease-end outcomes. Both of those are certainly larger lease expirations, but both have pretty solid lease-end outcome built in.
Okay. Then just last question, I think it's for Toni, just as a clarifying item. You'd mentioned some property tax accruals, and I don't know if I caught it all correctly, but just trying to understand if I think about Q3 and impacts from COVID, it sounds like you were impacted by the additional accrual and also maybe some reserves or non-collections. What was the combined, I guess?
Yeah, I think that's a good point. It really is the aggregation of the two that we're focused on. I think I mentioned it was about $5.5 million of lost or uncollected rent that did not flow through AFFO. Add to that I'd consider it about a $2 million increase in our expenses for the quarter. All in that NOI on our leases is about $7 million.
Okay. You just think about that as being you'll continue to do that until that situation with those tenants change?
Yeah, I think it is similar to how we look at the tenants from the revenue standpoint. If we see them pay the rent obviously, or sorry, pay the taxes, we get to reverse that. We are taking kind of a conservative view in accruing it until we kind of see some improvement there.
Okay, great. Thank you.
The next question is from Spenser Allaway of Green Street. Please proceed with your question.
Thank you. Just going back to external growth, I know you guys have already provided guidance and a lot of color here, but just perhaps higher level. How do you guys think about trying to balance your preferred property type exposure and external growth? If we look at where you focus your acquisition efforts, you guys are targeting industrial, and you said you had a bias here. You also mentioned that this net lease prototype has certainly seen cap rate compression. There's a lot of capital chasing these deals. Just curious how you guys balance that given the outsized emphasis on external growth in this sector in particular.
Yes, it's a good question, and that's kind of the challenge that I think all of us are faced with in the current environment. I think across the board, not just industrial cap rates have come in and there's more competition. I think there's a lot of capital to be deployed given the pause in deal activity for most investors in the first half of the year. Generally speaking, I think most of what we're buying are through sale leasebacks, where we can dictate structure and terms, and especially generate some incremental pricing that works for us. We also have the cost of capital that allows us to invest at a relatively wide range, and we talked previously about this. We'll do deals in the low fives and maybe even in certain circumstances, deals that are sub fives, depending on the rent increases embedded in the leases.
These would be for higher quality assets like the Fresenius warehouse that we announced in the second quarter or the Stanley Black & Decker distribution center outside of Charlotte that we've talked previously about. Our pipeline includes some of those deals. Again, our cost of capital can support those types of assets where we can get some longer terms. The deals that are trading at the tightest cap rates, and cap rates is just one component of how we look at deals. Certainly the unlevered IRR is more important. The skinniest cap rates in an industrial are going to be shorter term leases, and those that have real marked-to-market opportunities. That's what you're hearing. That's what's happening when you're hearing about four caps and sub four caps on properties. There's a lot of growth built in.
We can still buy these longer-term leases that may not be as interesting to the pure industrial buyers who are focused on these big mark-to-market opportunities. Of course, I mentioned sale leasebacks. We are also going to do our traditional sale leasebacks where timing of closing, complexity of the deal will also add to our pricing power. We hope to continue to do deals in the sixes and maybe even the sevens as well. The weighted average cap rate for the year is then kind of mid-sixes. That probably comes down a little bit. I still think that we can blend out to something in that neighborhood for the year.
Okay. Thank you. Maybe just shifting gears just to your disposition activity in the quarter. Just curious if the divestments that you made were more a decision to exit certain regions, or were they more tenant or industry specific?
Brooks, you want to take that?
Yeah. These are really, each one is very much its own story. The largest one of the quarter was an opportunistic exit of an industrial property in Germany. There's really not a geographic or industry theme in our disposition plans here.
Okay. Thank you.
Thanks, Spenser.
The next question is from John Massocca of Ladenburg Thalmann. Please proceed with your question.
Good morning.
Hey, good morning, John.
Maybe starting off on the balance sheet. What maybe is the kind of runway to opportunity for mortgage debt kind of prepayment just beyond the scheduled repayments you have here?
Yes, obviously that's been a big part of our balance sheet management over the last couple of years, bringing the secured debt down to the 8% level where we are now. As you mentioned, kind of limited opportunity in terms of, I think we have roughly $170 million due between now and the end of next year. It is something that we look at as we're kind of seeing positive pricing in the markets there. I would say it's not off the table, but it is something that we're looking at and evaluating with our other uses of capital, which primarily now are funding our investment activity. That is our priority.
Structurally, can you start maybe paying off some of the 2022 notes? I don't think that really changed kind of quarter-over-quarter. You're able to kind of dig into some of the 2021 maturities.
Yeah. You're right. I think 2022, we do look at it kind of from a price point standpoint and see economically what the cost might be to that. We'll weigh that with the other opportunities we have for deploying capital. Obviously, we've been the beneficiary of significant interest savings as a result of paying that stuff down early. We'll continue to look at it. I don't think there's as significant an opportunity as we've seen in the past couple of years, but there is some still out there that we potentially could bring forward.
Okay. Maybe bigger picture on the investment front. I know you've talked about cap rate compression in the industrial space a little bit already. Is there other kind of levers you can pull to maybe keep those yields higher, whether it be expanding kind of the geographic reach, maybe more of a focus on manufacturing, just things other than sale leasebacks?
Yeah. John, the diversified approach does give us those opportunities where we can allocate capital where we're seeing the best opportunities at the best yields relative to the risk. I think one area that's a bit unique to us that we've been taking advantage of substantially over the last bunch of years is really what we call internal investments. These are going to be expansions of our existing properties, follow on sale leasebacks or build-to-suits with our existing tenant base. I think we've done maybe $240 million of that this year. I mentioned earlier the $170 million that's in our pipeline. Those tend to be at higher cap rates because they're a bit of a captive, especially the expansions.
They're a bit of a captive investment for us where it's either us or the tenant that's going to put the money into the expansion of one of our buildings. Because of that, we can drive pricing and structure. I think you'll continue to see more of that. Generally speaking, I think that the diversified model will allow us to explore lots of opportunities and we have experience across a number of different asset classes and geographies, of course. It does give us a path to continue to grow and continue to generate attractive yields and spreads.
Okay. Digging into the comprehensive same-store growth a little bit, the warehouse, the negative increase there, how much of that was tied to, if any, to the deferral agreement that was talked about earlier on the call and was talked about last quarter? If that's excluded, maybe what was that same store pro rata rental growth for just warehouse?
I don't know if I have that metric specifically in front of me, but I think you are right in that that is the bulk of the total in terms of what we see as the downside. Again, given kind of the collections and deferrals were not that impactful outside of that one deferral agreement.
Those would flow through same store. I think you answered that earlier, but.
Yes, that is correct.
Okay. That's it for me.
Yeah. That was really the bulk of it was that one transaction from a comprehensive same store perspective.
Okay. That's it for me. Thank you all very much.
Thanks, John.
The next question is from Sheila McGrath of Evercore. Please proceed with your question.
Yes, good morning. Jason, there's been a lot of discussion about bringing manufacturing back to the U.S., particularly for medicines and PPE. I'm just wondering if you're seeing any new build-to-suit manufacturing opportunities, and given cap rates and warehouses are so low, would you entertain skewing a little bit more capital towards manufacturing?
Yeah. Manufacturing has always been a core part of our investment thesis, and we tend to get longer leases. They tend to be highly critical assets. The disruption of moving from a manufacturing plant, shutting down lines tends to be very expensive, and again, disruptive to supply chain. It's a great investment for us. We've fared very well there. I don't think there's anything specific that we're working on right now that has to do with reshoring. Certainly, if there are those opportunities, we would very much welcome them. The build-to-suits that we're doing right now and the sale leasebacks providing capital to some of these companies probably support some of that, but nothing specific. I think generally the reshoring or onshoring trend that's going to be a positive for our industrial portfolio, which makes up almost half of our ABR at this point in time.
If it happens, I think that's a positive, and we could see some tailwinds from that.
Okay, great. Then on the acquisition environment, a lot of companies have the choice to go access low interest rate debt capital. Just curious, what's driving the increasing acquisition pipeline? Are improving M&A prospects a positive for W. P. Carey in this regard?
Yeah. You're right. We do compete with corporations' alternative sources of capital, and that could be debt, could be equity for that matter. There is correlation with M&A. I think a lot of the deals we've been seeing, there's been some M&A either some previously to our deal or concurrent to our deal, in which case it's just another way to capitalize a company. I mean, our argument is that the debt, maybe you get three, five, seven-year terms on bank debt. In this low interest rate environment, companies are better off locking in these long-term rental rates at historically low pricing. That's a pretty interesting option, and I think that's resonating with a lot of companies.
Okay, great. Last question on the fitness and restaurants component are such a small part of your portfolio. Just wondering how you're thinking about that. Once you stabilize those situations, do you think you'll exit those assets, or are you considering just disposing them in the near term?
Take that one, Brooks.
Yeah. This is Brooks. I mean, yeah, it's certainly not a core part of our investment thesis or our portfolio. I think over time, we'll be working that down. Certainly not an optimal time to exit those at this moment. When the time is right, we will kind of look to trim that further.
Okay. Thank you.
Great. Thanks, Sheila.
As a reminder, if you would like to ask a question, simply press star then the number one on your telephone keypad. Our next question is from Frank Lee of BMO. Please proceed with your question.
Good morning, everyone. With the elections just around the corner, just want to get a sense of how active you are in the 1031 market, and what are your thoughts on the potential impact to the industry if the business is eliminated?
Yeah. We're not overly active in that market. I think that we'll do 1031s just to preserve some flexibility around our gains. Generally speaking, we're pretty comfortable with how we manage taxable gains throughout the year, and it generally doesn't impact our distributions. There's other ways to manage that. I think from an investment standpoint, we typically don't play in that space. I think it probably impacts the amount of trades that happen in the retail markets, especially the smaller assets where people can trade in and out of things relatively liquidly. Not all that impactful to our business model, Frank.
Okay. Can you provide an update on your watch list? How is it currently looking, and how does it compare historically?
Brooks, you want to take that one?
Sure. The watch list currently is about 4% of total ABR. That's pretty consistent with during the whole COVID period. It's roughly double where it was kind of pre-COVID. Note that 75% of that is current on rent. Absent some concentrations, again, in that gyms, theaters space, there's not a whole lot of industry concentration. It's really kind of anecdotal. Certainly a little bit higher than it was pre-COVID, but manageable and something we watch very closely.
Okay, great. Thank you.
Great. Thanks, Frank.
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