Thinking Of Buying WP Carey? Here Are The Properties And Tenants You'd Add To Your Portfolio

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Real estate investment trusts (REITs) have been wonderful investments over the years, despite the difficulties encountered more recently due to inflation and interest rate hikes. But it’s important to consider the properties, tenants and contractual agreements that comprise the largest percentage of a REIT’s business.  

Take a look at one diversified REIT whose tenant base is strong and well-established and whose last 14-year total return has been extraordinary.

W.P. Carey Inc. WPC is a New York City-based diversified net-lease REIT, whose single-tenant properties include industrial, warehouse, office, retail and self-storage units. It recently celebrated its 50th year of investing in properties.

W.P. Carey has 1,449 net leased properties with 176 million square feet. It has 392 tenants and an excellent occupancy rate of 98.8%. Rent escalators are included in 99% of its property leases to buffer the inflationary environment prevalent today.

W.P. Carey has a well-diversified portfolio by property type, industry and geographic areas. The breakdowns of type are as follows:

26.5% industrial

24.1% warehouse

17.4% office

16.8% retail

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4.5%  self-storage

10.7% other

W.P. Carey’s tenants by industry are also well diversified, with over 23 different industries listed on its website. Its largest industries are:

20.5%  retail stores

8% consumer services

7.7%    beverage and food

6.2%    automotive

5.8%    grocery

4.6%    cargo transportation

4.1%    hotel and leisure

As for geographic diversification, 63.4% of W.P. Carey’s properties are in the United States, 34% are in Europe and 2.6% are in areas such as Canada, Mexico, Mauritius and Japan.

W.P. Carey’s top 10 tenants are well-known, long-established companies:

  1.   U-Haul:                         78 net lease self-storage properties
  2.   State of Andalucía:        70 government office properties in Spain
  3.   Metro Cash & Carry:      20 business-to-business wholesale stores in Europe
  4.   Hellweg:                       35 do-it-yourself retail properties in Germany
  5.   Extra Space Storage:     27 net-lease self-storage properties in the U.S.
  6.   OBI Group:                    26 do-it-yourself properties in Poland
  7.   Marriott Corp.:              18 net-lease hotel properties in the U.S.
  8.   Nord Anglia Education:   3 K-12 private schools in the U.S.
  9.   Advance Auto Parts:      29 distribution facilities in the U.S.
  10. Eroski Sociedad Cooperativa:  63 grocery stores and warehouses in Spain

Here is a brief summary of some of W.P. Carey’s more well-known, publicly traded tenants:

U-Haul Holding Co. UHAL is a Phoenix-based moving truck, trailer and self-storage rental company that has been in operation since 1945. It has over 17,000 active dealers and 19,500 employees across the U.S. Its initial public offering (IPO) was in 1994.

Extra Space Storage Inc. EXR is a Cottonwood Heights, Utah-based self-storage REIT with 1.4 million storage units in more than 2,000 stores across 41 states. Extra Space Storage is one of the fastest-growing self-storage REITs and recently almost doubled its portfolio by acquiring rival Life Storage Inc. LSI. Extra Space Storage went public in 2004.

Marriott International Inc. MAR is a Bethesda, Maryland-based multinational company that operates, franchises and licenses hotel, residential and timeshare properties. It’s the largest hotel chain in the world with 30 brands that directly or indirectly operate 8,000 properties with 1.4 million rooms in 131 countries and territories. Marriott Corp. was founded in 1927 and became a publicly traded company in 1953.

Advance Auto Parts Inc. AAP is a Raleigh, North Carolina-based automotive aftermarket parts provider that serves professional and do-it-yourself customers. As of Dec. 31, Advance Auto Parts operates 4,770 stores and 316 WorldPac branches in the U.S., Canada, Puerto Rico and the U.S. Virgin Islands. Advance Auto Parts also serves 1,311 independently owned Carquest stores throughout the same areas. It’s been a publicly traded company since 2001.

W.P. Carey has been a stalwart among REITs for many years. Since the bear market lows of April 2009, W.P. Carey has had a total return of 428.63%, for an average annual total return of 12.63%.

Recent News On W.P. Carey

On Feb. 10, W.P. Carey reported its fourth-quarter 2022 operating results. Funds from operations (FFO) of $1.29 beat the consensus estimate of $1.26 and was a penny lower than the fourth quarter of 2021. Revenue of $402.6 million also beat the estimates by $11.98 million and was an 8.72% increase over the fourth quarter of 2021 revenue of $370.32.

On March 10, W.P. Carey declared a quarterly dividend of $1.067 per share, an increase of 0.2% from its prior dividend of $1.065. W.P. Carey has raised its quarterly dividend for 97 consecutive quarters since March 1999. The annual dividend of $4.27 presently yields 5.79%, and the forward FFO payout ratio is 82.7%.

On April 4, W.P. Carey announced the closing of a new sale-leaseback investment of a $468 million industrial portfolio in Toronto. The portfolio consists of 11 properties across four pharmaceutical R&D and manufacturing campuses with Apotex Pharmaceutical Holdings Inc., the largest generic drug manufacturer in Canada.  

Over the last three months, analysts have been somewhat quiet on W.P. Carey. On Feb. 13, RBC Capital Maintained its Outperform rating on W.P. Carey and raised its price target from $86 to $88. On March 21, JMP Securities Reiterated its Market Outperform rating with an $86 price target. W.P. Carey’s most recent price of $73.45 is from 17% to 19.8% below those two price targets.

Although the payout ratio at nearly 83% is somewhat high, it seems logical to assume that W.P. Carey’s FFO will continue to rise with the new Canadian acquisition. The price-to-FFO ratio (P/FFO) is a reasonable 14.28. The 52-week price range is $67.77 to $89.63, and year to date, the total return is negative 4.49%.

The high occupancy rate, stability and diversity of W.P. Carey’s tenants should relieve fears that investors may have about serious declines in occupancy rates should the U.S., Canada or Europe go into recession in 2023 or 2024. In addition, the present dividend yield of 5.79% is still above the five-year average of 5.59%, suggesting that shares are still a little undervalued.

Summing up, if REIT investors are looking for steady and consistent dividends with a long history of increases as well as a diverse and strong tenant base, it’s hard to find many REITs better than W.P. Carey. The long-term performance also makes W.P. Carey an investment that could continue to be a stalwart among REITs for years to come.

Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.

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