W. P. Carey Announces Second Quarter 2022 Financial Results

NEW YORK, July 29, 2022 /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 second quarter ended June 30, 2022.

Financial Highlights

• 2022 AFFO guidance range raised and narrowed to between $5.22 and $5.30 per diluted share, including Real Estate AFFO with a guidance range of between $5.13 and $5.21 per diluted share based on full-year investment volume raised to between $1.75 billion and $2.25 billion, and closing of the proposed merger with CPA^®:18 on August 1, 2022
    
• Quarterly cash dividend raised to $1.059 per share, equivalent to an annualized dividend rate of $4.236 per share

Real Estate Portfolio

• Investment volume of $1.1 billion completed year to date, including $477.8 million during the second quarter and $307.6 million subsequent to quarter end
    
• Active capital investments and commitments of $97.4 million and construction loan funding of $37.7 million scheduled to be completed in the remainder of 2022
    
• Gross disposition proceeds of $92.7 million during the second quarter, bringing total dispositions for the first half of 2022 to $119.4 million

Balance Sheet and Capitalization

• Utilized ATM program to raise approximately $218 million in net proceeds year to date, including $39 million during the second quarter
    
• Approximately $586 million in anticipated net proceeds currently available for settlement pursuant to forward sale agreements, including approximately $301 million pursuant to forward sale agreements sold through the Company’s ATM program during the second quarter
    
• As previously announced, exercised the accordion feature on the Company’s Senior Unsecured Credit Facility during the second quarter

MANAGEMENT COMMENTARY

“We continue to perform well on a number of fronts, with same store rent growth reaching a new high and increased expectations for the investment volume we can achieve this year,” said Jason Fox, Chief Executive Officer of W. P. Carey. “And the outperformance of our stock has enabled us to enter into additional equity forwards at prices that partly offset the impact of higher interest rates on our investment spreads.

“With ample liquidity and cap rates moving higher, we’re confident in our ability to continue successfully navigating a dynamic market backdrop during the latter half of the year. We’re also on track to close our merger with CPA:18 on August 1, and expect to be to the high end of our original accretion estimates — which, along with our performance year to date, is reflected in our raised full-year AFFO guidance.

“Lastly, amid an uncertain economic outlook, we believe we remain uniquely positioned within net lease, given the inflation protection inherent in our portfolio and the proven stability of its cash flows.”

QUARTERLY FINANCIAL RESULTS

Revenues

• Total Company: Revenues, including reimbursable costs, for the 2022 second quarter totaled $344.4 million, up 7.7% from $319.7 million for the 2021 second quarter.
  
• Real Estate: Real Estate revenues, including reimbursable costs, for the 2022 second quarter were $339.8 million, up 7.9% from $314.8 million for the 2021 second quarter, due primarily to higher lease revenues resulting from net acquisitions and rent escalations, partly offset by the impact of a stronger U.S. dollar relative to foreign currencies, primarily the euro.

Note: Starting with the 2021 fourth quarter, income from direct financing leases and loans receivable are presented on a separate line item on the consolidated statements of income (for both current and prior year periods). Prior to the 2021 fourth quarter, the Company presented income from direct financing leases within lease revenues and income from loans receivable within lease termination income and other.

Net Income Attributable to W. P. Carey

• Net income attributable to W. P. Carey for the 2022 second quarter was $127.7 million, up 6.2% from $120.2 million for the 2021 second quarter. Net income from Real Estate attributable to W. P. Carey was $123.2 million, which increased due primarily to a non-cash mark-to-market gain of $15.4 million recognized on our investment in common stock of Watermark Lodging Trust (WLT), a higher aggregate gain on sale of real estate and the impact of net acquisitions and rent escalations, partly offset by the net impact of a stronger U.S. dollar relative to foreign currencies, primarily the euro, and impairment charges recognized during the current year period.

Adjusted Funds from Operations (AFFO)

• AFFO for the 2022 second quarter was $1.31 per diluted share, up 3.1% from $1.27 per diluted share for the 2021 second quarter, driven by the company’s Real Estate segment, which generated AFFO of $1.27 per diluted share, primarily reflecting higher lease revenues resulting from net investment activity and rent escalations. These increases were partly offset by the net impact of a stronger U.S. dollar relative to foreign currencies, primarily the euro, and accrued dividends received during the prior year period on preferred shares of WLT, which were redeemed in the 2022 first quarter.

Note: Further information concerning AFFO and Real Estate AFFO, which are both non-GAAP supplemental performance metrics, is presented in the accompanying tables and related notes.

Dividend

• As previously announced, on June 16, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $1.059 per share, equivalent to an annualized dividend rate of $4.236 per share. The dividend was paid on July 15, 2022 to stockholders of record as of June 30, 2022.

AFFO GUIDANCE

• For the 2022 full year, the Company has raised and narrowed its guidance for total AFFO to between $5.22 and $5.30 per diluted share, including Real Estate AFFO with a guidance range of between $5.13 and $5.21 per diluted share, based on the following key assumptions:

(i)   investments for the Company’s Real Estate portfolio of between $1.75 billion and $2.25 billion, which has been revised higher;

(ii)  dispositions from the Company’s Real Estate portfolio of between $250 million and $350 million, which is unchanged;

(iii)  total general and administrative expenses of between $88 million and $91 million, which has been revised higher; and

(iv)  includes the expected impact of the Company’s proposed merger with CPA:18

Note: The Company does not provide guidance on net income. The Company only provides guidance on total AFFO (and Real Estate 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 has completed investments totaling $1.1 billion, including $477.8 million during the 2022 second quarter and $307.6 million subsequent to quarter end, comprising sale-leasebacks totaling $281.9 million and the completion of a $25.7 million capital investment.
  
• Currently, the Company has four capital investments and commitments totaling $97.4 million and construction loan funding of $37.7 million, scheduled to be completed during the remainder of 2022, for an aggregate total of $135.1 million.

Dispositions

• During the 2022 second quarter, the Company disposed of eight properties for gross proceeds of $92.7 million, bringing total disposition proceeds for the six months ended June 30, 2022 to $119.4 million.

COVID-19 Update on Rent Collections

• The Company received over 99.6% of contractual base rent that was due in the 2022 second quarter.

Composition

• As of June 30, 2022, the Company’s net lease portfolio consisted of 1,357 properties, comprising 161 million square feet leased to 356 tenants, with a weighted-average lease term of 11.0 years and an occupancy rate of 99.1%. In addition, the Company owned 19 self-storage operating properties and one hotel operating property, totaling approximately 1.4 million square feet.

BALANCE SHEET AND CAPITALIZATION

“At-The-Market” (ATM) Program

• During the 2022 second quarter, the Company issued 491,068 shares of common stock under its ATM program at a weighted-average price of $81.70 per share, for net proceeds of $39 million.
  
• This activity brought issuances under the Company’s ATM program during the six months ended June 30, 2022 to 2,740,295 shares of common stock at a weighted-average price of $80.79 per share, for net proceeds of approximately $218 million.

 Forward Equity

• During the 2022 second quarter, the Company used forward sale agreements under its ATM program to sell 3,674,187 shares of common stock at a weighted-average gross price of $83.98 per share, all of which remain available for settlement, for anticipated net proceeds of approximately $301 million.
  
• As of June 30, 2022, the Company continued to have 3,925,000 shares available for settlement pursuant to forward sale agreements previously entered into, for anticipated net proceeds of approximately $285 million.

Increase in Capacity of Senior Unsecured Credit Facility

• As previously announced, during the 2022 second quarter, the Company entered into a Second Amendment to its Credit Agreement, exercising a portion of the Accordion Feature on its Senior Unsecured Credit Facility to increase (i) the amount outstanding on its Term Loan by £120 million to £270 million (approximately $350 million USD equivalent) and (ii) the amount outstanding on its Delayed Draw Term Loan by €118.5 million to €215 million (approximately $230 million USD equivalent), thereby increasing the total capacity of the Senior Unsecured Credit Facility from approximately $2.1 billion to approximately $2.4 billion.
  
• The Company used the proceeds from this increase in capacity to partially repay amounts outstanding under its Unsecured Revolving Credit Facility. There were no other changes to the terms of the Credit Agreement.

Green Bond Allocation Report

• Since quarter end, on July 27, 2022, the Company published an allocation report regarding the $350 million of green bonds it issued in October 2021, reporting that proceeds were 100% allocated to eligible green projects and entirely to properties with either BREEAM “Very Good” or LEED “Gold” ratings, or better.

PROPOSED MERGER WITH CPA:18

• As previously announced, on July 26, 2022, the Company’s proposed merger with CPA:18 was approved by the stockholders of CPA:18, in a transaction initially estimated to be valued at approximately $2.7 billion and expected to add approximately $2.0 billion of assets after proposed asset sales, the substantial majority of which have been completed.
  
• The Company currently expects the proposed merger to close on August 1, 2022.

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2022 second 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 July 29, 2022, and made available on the Company’s website at ir.wpcarey.com/investor-relations.

W. P. Carey Inc.

W. P. Carey ranks among the largest net lease REITs with an enterprise value of approximately $23 billion and a diversified portfolio of operationally critical commercial real estate that includes 1,357 net lease properties covering approximately 161 million square feet as of June 30, 2022. For nearly five decades, the company has invested in high-quality single-tenant industrial, warehouse, office, retail and self-storage properties subject to long-term net leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe and is well-diversified by tenant, property type, geographic location and tenant industry.  www.wpcarey.com