WPC | Q3 2024

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Overview

• FFO/share of $1.18 beats by $0.01.

• Revenue of $397.38M (-11.4% Y/Y) beats by $2.94M.

Takeaways

In Q3 2024, W.P. Carey’s (WPC) adjusted funds from operations (AFFO) were $1.18 per share this quarter, showing a slight increase from the previous quarter. With this, the company narrowed its full-year AFFO guidance between $4.65 and $4.71 per share.

The company has also been active in turning over its portfolio, completing the sale of seven properties for a total of $82 million. This brings their year-to-date sales total to roughly $1.3 billion, on track to meet their goal of $1.3 to $1.4 billion in dispositions by year-end.

Notably, their same-store rent grew by 2.8% year-over-year, while occupancy stayed high at 98.8%, reflecting the strength of their portfolio and high demand for their properties.

One of the quarter’s significant developments was W.P. Carey’s restructured arrangement with Extra Space Storage, now their largest tenant, representing 2.7% of total annual rent.

W.P. Carey converted 16 self-storage properties into long-term net leases with Extra Space and extended leases on 27 additional properties. This shift has helped keep W.P. Carey’s portfolio healthy, with an average lease term of 12.2 years.

The company continues to maintain a conservative approach to debt, keeping it manageable and well-covered. Their leverage—as measured by debt to gross assets—remains in a comfortable range (low 40%), and management highlighted that their strong liquidity position should cover the company’s growth plans without needing to raise equity this year.

On the topic of growth, W.P. Carey is strategically increasing its presence in the U.S. retail net lease sector, which it sees as a high-potential area for growth. Currently, about 25% of its portfolio is retail-focused, with much of it located in Europe.

As far as potential risks to the portfolio, the company is closely monitoring certain tenants to manage risks. For example, Hellweg, a German home improvement retailer, has been restructuring to improve performance but continues to go through a tough time.

Additionally, True Value, which rents nine properties from W.P. Carey, recently filed for Chapter 11 bankruptcy. True Value’s assets may be sold to Do It Best, a cooperative hardware chain, which could change the leasing dynamics, but W.P. Carey noted that True Value is current on its rent obligations.

On a positive note, W.P. Carey successfully leased a Chicago warehouse to Samsung’s U.S. logistics operations, which will start generating revenue in early 2025.

As W.P. Carey closes out the year, they remain focused on growth that supports steady AFFO improvement. Management is confident that their diversification strategy, combined with disciplined capital allocation, will drive rent increases even as inflation rates normalize.

New acquisitions are expected to be accretive to AFFO, while existing rent bumps, especially from inflation-linked leases, will maintain income stability across the portfolio. The company is confident that these moves will help it continue delivering value for shareholders. We’ll see what happens.

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