W. P. Carey Announces Third Quarter 2024 Financial Results
NEW YORK, Oct. 29, 2024 /PRNewswire/ -- W. P. Carey Inc. (NYSE:WPC) (W. P. Carey or the Company), a net lease real estate investment trust, today reported its financial results for the third quarter ended September 30, 2024.
Financial Highlights
2024 Third Quarter
Net income attributable to W. P. Carey (millions)
$111.7
Diluted earnings per share
$0.51
AFFO (millions)
$259.3
AFFO per diluted share
$1.18
2024 AFFO guidance range narrowed to between $4.65 and $4.71 per diluted share based on anticipated full year investment volume of between $1.25 billion and $1.75 billion
Third quarter cash dividend of $0.875 per share, equivalent to an annualized dividend rate of $3.50 per share
Real Estate Portfolio
Investment volume of $971.4 million completed year to date, including $167.0 million during the third quarter and $230.8 million subsequent to quarter end
Active capital investments and commitments of $38.0 million scheduled to be completed in the fourth quarter
Gross disposition proceeds of $1.2 billion completed year to date, including $81.8 million during the third quarter and $79.8 million subsequent to quarter end
Entered into agreements to convert 16 existing self-storage operating properties to net leases
Contractual same-store rent growth of 2.8%
Balance Sheet and Capitalization
Repaid €500 million of 2.25% Senior Unsecured Notes due July 2024
Credit facility and term loans amended to incorporate a sustainability-linked feature
MANAGEMENT COMMENTARY
"With close to $1 billion of deals completed so far this year and a near-term pipeline in excess of $500 million, we're well positioned to reach or exceed the $1.5 billion midpoint of our 2024 investment volume guidance, depending on the specific timing of deal closings," said Jason Fox, Chief Executive Officer of W. P. Carey.
"We generally expect to fund our investments in the fourth quarter with the cash we've built up. We also believe the alternative sources of capital available to us, primarily through operating asset sales, will enable us to continue to make accretive investments throughout 2025, without the need to issue equity. These factors, along with a constructive investment backdrop, the completion of our exit from office and the strength our rent growth, all support AFFO growth in 2025, despite the potential impacts of certain tenant-related issues."
QUARTERLY FINANCIAL RESULTS
Note: Effective January 1, 2024, the Company no longer separately analyzes its business between real estate operations and investment management operations, and instead views the business as one reportable segment. As a result of this change, the Company has conformed prior period segment information to reflect how it currently views its business.
Revenues
Revenues, including reimbursable costs, for the 2024 third quarter totaled $397.4 million, down 11.4% from $448.6 million for the 2023 third quarter.
Lease revenues decreased primarily as a result of executing the Company's strategic plan to exit the office assets within its portfolio, including the NLOP Spin-Off in November 2023 and dispositions under the Office Sale Program during 2023 and 2024.
Income from finance leases and loans receivable decreased primarily as a result of the disposition of the U-Haul portfolio during the 2024 first quarter.
Operating property revenues decreased primarily as a result of the sale of eight hotel operating properties during 2023 and one during the 2024 second quarter (out of 12 hotel properties that converted from net lease to operating upon lease expiration during the 2023 first quarter).
Net Income Attributable to W. P. Carey
Net income attributable to W. P. Carey for the 2024 third quarter was $111.7 million, down 10.6% from $125.0 million for the 2023 third quarter, due primarily to a mark-to-market loss recognized on the Company's shares of Lineage of $43.6 million during the current-year period and the impact of the NLOP Spin-Off and dispositions under the Office Sale Program. These declines were partly offset by a $31.8 million gain on change in control of interests recognized in connection with our acquisition of a third party joint venture partner's interest in nine self-storage operating properties (see Self-Storage Transaction).
Adjusted Funds from Operations (AFFO)
AFFO for the 2024 third quarter was $1.18 per diluted share, down 10.6% from $1.32 per diluted share for the 2023 third quarter, primarily reflecting the impact of the NLOP Spin-Off and dispositions under the Office Sale Program.
Note: Further information concerning AFFO, which is a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.
Dividend
On September 19, 2024, the Company reported that its Board of Directors declared a quarterly cash dividend of $0.875 per share, equivalent to an annualized dividend rate of $3.50 per share. The dividend was paid on October 15, 2024 to shareholders of record as of September 30, 2024.
AFFO GUIDANCE
The Company has narrowed its guidance range for the 2024 full year and currently expects to report AFFO of between $4.65 and $4.71 per diluted share based on the following key assumptions:
(i) investment volume of between $1.25 billion and $1.75 billion, which is unchanged;
(ii) disposition volume of between $1.3 billion and $1.4 billion, which is revised higher at the bottom end of the range, including:
(a) completion of the Company's strategic plan to exit office, including asset sales under the Office Sale Program totaling approximately $550 million;
(b) completion of the U-Haul purchase option during the 2024 first quarter, which generated gross proceeds of $464 million; and
(c) other dispositions totaling between $300 million and $400 million, which is revised higher;
(iii) total general and administrative expenses of between $98 million and $100 million, which is revised lower at the top end of the range.
Note: The Company does not provide guidance on net income. The Company only provides guidance on AFFO and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets, and depreciation and amortization from new acquisitions.
REAL ESTATE
Investments
Year to date, the Company completed investments totaling $971.4 million, including $167.0 million during the 2024 third quarter and $230.8 million subsequent to quarter end.
The Company currently has two capital investments and commitments totaling $38.0 million scheduled to be completed during 2024.
Dispositions
Year to date, the Company completed dispositions totaling $1.2 billion, including seven properties for gross proceeds totaling $81.8 million during the 2024 third quarter (comprising two properties under the Office Sale Program for gross proceeds totaling $50.9 million and five non-Office Sale Program properties for gross proceeds totaling $30.9 million), and one property for gross proceeds of $79.8 million subsequent to quarter end.
The Company has effectively completed the strategic plan it announced on September 21, 2023 to exit the office assets within its portfolio through (i) the spin-off of 59 office properties into Net Lease Office Properties, a separate publicly-traded REIT, which was completed on November 1, 2023 (the NLOP Spin-Off), and (ii) the disposition of 85 properties retained by W. P. Carey under a sale program (the Office Sale Program).
Contractual Same-Store Rent Growth
As of September 30, 2024, contractual same store rent growth was 2.8% year over year, on a constant currency basis.
Conversion of Self-Storage Operating Properties to Net Leases and Joint Venture Buyout (Self-Storage Transaction)
On September 1, 2024, the Company entered into agreements with Extra Space Storage Inc. (Extra Space) to convert 16 self-storage operating properties to net leases, each with a term of 25 years and fixed annual rent escalations plus a variable component based on revenue growth. Twelve self-storage operating properties converted to net leases on September 1, 2024, with the remaining four properties expected to convert in 2025.
In connection with the agreements, the Company also amended the terms of its existing net lease agreements with Extra Space on 27 properties, extending the term to 25 years and resetting base rents higher to a total of $26.2 million annually commencing on September 1, 2024, and further to a total of $28.0 million annually commencing on March 1, 2025, with fixed annual rent escalations plus a variable component based on revenue growth.
Also effective on September 1, 2024, the Company completed the buyout of its joint venture partner's 10% interest in nine of the self-storage operating properties being converted to net leases for $10.5 million.
As a result of these transactions, Extra Space became the Company's largest tenant by ABR, with 39 properties under net leases generating ABR totaling $35.6 million, or 2.7% of total ABR, and a remaining lease term of 24.9 years, as of September 30, 2024.
True Value Bankruptcy
As previously announced, on October 14, 2024, the Company's tenant, True Value Company, L.L.C. (True Value), announced that it had initiated voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware and that it had entered into an agreement to sell substantially all of its business operations to Do it Best Corp.
As of September 30, 2024, the Company net leased nine properties to True Value through two master leases and three individual leases that in aggregate generated $18.8 million, or 1.4%, of the Company's ABR (ranking it as the 15th largest tenant) and had a weighted-average lease term of 13.8 years.
True Value remains current on rent, having paid substantially all rent owed through the end of the year.
Composition
As of September 30, 2024, the Company's net lease portfolio consisted of 1,430 properties, comprising 172 million square feet leased to 346 tenants, with a weighted-average lease term of 12.2 years and an occupancy rate of 98.8%. In addition, the Company owned 78 self-storage operating properties, four hotel operating properties and two student housing operating properties, totaling approximately 6.4 million square feet.
BALANCE SHEET AND CAPITALIZATION
Liquidity
As of September 30, 2024, the Company had total liquidity of $2.6 billion, including approximately $1.8 billion of available capacity under its Senior Unsecured Credit Facility (net of amounts reserved for standby letters of credit) and $818.2 million of cash and cash equivalents.
Senior Unsecured Notes
On July 19, 2024, the Company repaid €500 million of 2.25% Senior Unsecured Notes due July 2024.
Sustainability-Linked Amendment to Credit Facility and Term Loans
During the 2024 third quarter, the Company executed amendments to its credit facility and term loans to incorporate a sustainability-linked feature that provides for interest rate and facility fee adjustments if certain key performance indicators, primarily related to emissions reduction targets, are met.
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Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2024 third quarter and certain prior quarters, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on October 29, 2024, and made available on the Company's website at ir.wpcarey.com/investor-relations.
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Live Conference Call and Audio Webcast Scheduled for Wednesday, October 30, 2024 at 11:00 a.m. Eastern TimePlease dial in at least 10 minutes prior to the start time.
Date/Time: Wednesday, October 30, 2024 at 11:00 a.m. Eastern TimeCall-in Number: 1 (877) 465-1289 (U.S.) or +1 (201) 689-8762 (international)
Live Audio Webcast and Replay: www.wpcarey.com/earnings
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W. P. Carey Inc.
W. P. Carey ranks among the largest net lease REITs with a well-diversified portfolio of high-quality, operationally critical commercial real estate, which includes 1,430 net lease properties covering approximately 172 million square feet and a portfolio of 78 self-storage operating properties as of September 30, 2024. With offices in New York, London, Amsterdam and Dallas, the company remains focused on investing primarily in single-tenant, industrial, warehouse and retail properties located in the U.S. and Northern and Western Europe, under long-term net leases with built-in rent escalations.
www.wpcarey.com
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Cautionary Statement Concerning Forward-Looking Statements
Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "will be," "goals," "believe," "project," "expect," "anticipate," "intend," "estimate" "opportunities," "possibility," "strategy," "maintain" or the negative version of these words and other comparable terms. These forward-looking statements include, but are not limited to, statements made by Mr. Jason Fox regarding deal volume, sources of capital, and expectations for future AFFO growth. These statements are based on the current expectations of our management, and it is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable risks or uncertainties, like the risks related to fluctuating interest rates, the impact of inflation on our tenants and us, the effects of pandemics and global outbreaks of contagious diseases, and domestic or geopolitical crises, such as terrorism, military conflict, war or the perception that hostilities may be imminent, political instability or civil unrest, or other conflict, and those additional risk factors discussed in reports that we have filed with the SEC, could also have material adverse effects on our future results, performance or achievements. Discussions of some of these other important factors and assumptions are contained in W. P. Carey's filings with the SEC and are available at the SEC's website at http://www.sec.gov, including Part I, Item 1A. Risk Factors in W. P. Carey's Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.
Institutional Investors:Peter Sands1 (212)
Individual Investors:W. P. Carey Inc.1 (212)
Press Contact:Anna McGrath1 (212)
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W. P. CAREY INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share amounts)
September 30, 2024
December 31, 2023
Assets
Investments in real estate:
Land, buildings and improvements, net lease and other
$ 12,745,926
$ 12,095,458
Land, buildings and improvements, operating properties
1,204,351
1,256,249
Net investments in finance leases and loans receivable
657,054
1,514,923
In-place lease intangible assets and other
2,287,824
2,308,853
Above-market rent intangible assets
682,345
706,773
Investments in real estate
17,577,500
17,882,256
Accumulated depreciation and amortization (a)
(3,195,204)
(3,005,479)
Assets held for sale, net
29,785
37,122
Net investments in real estate
14,412,081
14,913,899
Equity method investments
299,465
354,261
Cash and cash equivalents
818,194
633,860
Other assets, net
1,122,571
1,096,474
Goodwill
979,265
978,289
Total assets
$ 17,631,576
$ 17,976,783
Liabilities and Equity
Debt:
Senior unsecured notes, net
$ 6,134,810
$ 6,035,686
Unsecured term loans, net
1,156,442
1,125,564
Unsecured revolving credit facility
229,607
403,785
Non-recourse mortgages, net
451,962
579,147
Debt, net
7,972,821
8,144,182
Accounts payable, accrued expenses and other liabilities
590,347
615,750
Below-market rent and other intangible liabilities, net
125,934
136,872
Deferred income taxes
