WPC | Q2 2025

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Overview

• FFO of $1.28 beats by $0.07.

• Revenue of $430.78M (+10.5% Y/Y) beats by $14.52M.

KEY Takeaways

• WPC reported strong Q2 results and raised full-year AFFO guidance to 4.5% growth at the midpoint.

• They’ve closed over $1 billion in new investments this year at 7.5% cap rates, with long leases and 2.8% average rent bumps.

• The company is funding growth through self-storage sales at sub-6% cap rates, generating 100–150 basis point spreads.

• Tenant credit remains stable, and WPC reduced its rent loss reserve to $10–$15 million.

• Same-store rent rose 2.3% contractually and 4% on a comprehensive basis, helped by collections and leasing activity.

• Liquidity is strong at $1.7 billion, with minimal near-term debt maturities and no equity issuance needed this year.

• The dividend was raised to $0.90 per share, with a conservative 73% payout ratio.

• Deal flow is picking up thanks to interest rate stability, and WPC expects more activity in Europe and capital projects.

NOTES

W. P. Carey (WPC) had a strong second quarter and didn’t shy away from saying so.

AFFO per share came in at $1.28, up 9.4% from the same time last year. That strength came from steady investment activity and solid rent growth, which gave them enough confidence to bump their full-year AFFO guidance to a new range of $4.87 to $4.95 per share (4.5% growth at the midpoint).

So far this year, they’ve already closed over $1 billion in new deals, mostly in U.S. industrial and warehouse properties, with average lease terms around 20 years and starting cap rates in the mid-7s. With built-in rent increases around 2.8%, those leases end up producing yields in the mid-9% range over time, which is very attractive in the net lease world. With that said, Europe is still offering wider spreads, and management expects more activity there in the second half of the year.

What’s allowing them to be so active without hitting the equity markets is their asset recycling strategy. WPC’s been selling non-core self-storage properties at cap rates under 6% and reinvesting the proceeds into higher-yielding deals.

So far they’ve sold $175 million of storage assets and have more under contract. By year-end, they expect to be generating a 100–150 basis point spread between what they’re selling and what they’re buying.

The existing portfolio is in good shape, too. No major credit hiccups in the quarter, and they lowered their rent reserve from $15–20 million to $10–15 million. Hellweg, a struggling German DIY retailer, is still on watch—but they’ve been slowly selling or re-leasing those stores and expect Hellweg to drop out of their top 10 tenants this year.

As mentioned earlier, rent growth was healthy. Contractual same-store rent rose 2.3% in the quarter—split between CPI-linked increases averaging 2.6% and fixed bumps of 2.1%.

Total same-store rent growth came in at 4%, thanks to past-due collections and a bit of leasing activity. Management expects that to normalize a bit in the second half but said there could still be upside.

Fortunately, the balance sheet is still in good shape. In July, they issued $400 million in 5-year bonds at 4.65% and used the cash to pay down their credit line.

Liquidity stands at $1.7 billion, and there’s less than $50 million in debt maturing for the rest of the year. Their next bond maturity isn’t until April 2026, and all of their leverage metrics are comfortably within target.

The dividend was also raised again—now at $0.90 per share quarterly, or $3.60 per year. That’s a 3.4% increase from last year, and with a payout ratio sitting around 73% of AFFO, it looks sustainable.

During the Q&A, management talked about how a more stable interest rate backdrop has helped unlock more deal flow. They’re still focused on sub-investment-grade tenants with critical real estate—nothing new there—and they’re seeing good opportunities in both the U.S. and Europe. They also expect to ramp up capital projects like build-to-suits and expansions, which can deliver even better returns.

Overall, this was a solid quarter for WPC. It isn’t a high-growth story by any means, but it’s doing exactly what you’d want from a defensive, income-focused REIT. I’ve had thoughts about selling it in the past, but their consistent execution now has me thinking about adding more to my position.

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