Weekly Real Estate News
Summary
W. P. Carey reported $1.6 billion of year-to-date property investments and raised its full-year AFFO guidance to $5.23–$5.29 per share. Higher borrowing costs are affecting transaction pricing.
W. P. Carey raised its full-year earnings outlook after reporting $1.6 billion in net-lease property investments completed year to date through its October 27 earnings release, including transactions after September 30. The company’s October 27 earnings release also pointed to a more complicated acquisition market as sharply higher interest rates alter the prices investors can justify paying.
The real estate investment trust reported third-quarter results showing adjusted funds from operations of $308.2 million, or $1.33 per diluted share. Net income attributable to the company totaled $141 million, or 61 cents per diluted share. Revenue, including reimbursable costs, reached $468.3 million, an 8.6% increase from a year earlier.
Management raised and narrowed its expected full-year AFFO range to $5.23 to $5.29 per share. At the midpoint, that represents approximately 5.8% growth from the prior year, according to the company. AFFO is a non-GAAP measure intended to help evaluate recurring REIT performance; it is distinct from net income under generally accepted accounting principles.
The investment total includes $181.9 million of purchases during the third quarter and $143.2 million of activity completed after September 30. The company also identified $95.2 million in active capital investments and commitments scheduled for the fourth quarter. A completed purchase should be distinguished from a commitment that still requires execution.
W. P. Carey increased the lower end of its full-year investment-volume assumption by $100 million, bringing the expected range to $1.8 billion to $2.1 billion. It reported contractual same-store rent growth of 2.6%, a useful measure for an owner whose long-term leases typically include scheduled escalations.
The REIT also reported $273.2 million in gross disposition proceeds during the first nine months, including $27 million in the third quarter. Its capital strategy therefore combines acquisitions with selected property sales and equity issuance rather than relying on one financing source.
On the debt side, the company issued $350 million of 5.2% senior unsecured notes due 2036 and used the proceeds to prepay $350 million of 4.25% notes due in October 2026. The replacement extends the maturity of that borrowing but carries a higher stated coupon, an example of the refinancing pressure facing even large property owners.
The company said it had approximately $538 million of equity subject to forward-sale agreements available for settlement at quarter end. That capacity may help finance future transactions, although issuing the shares would also increase the equity base over which earnings are spread.
For commercial brokers and net-lease investors, the central issue is whether sellers accept the pricing implied by more expensive financing. Management described signs of repricing but did not establish a marketwide recovery in transaction volume. Its stronger guidance reflects investments already completed and expected performance, subject to the usual risks of acquisitions, leasing and interest-rate movements.
