W. P. Carey Is Just Getting Started

Core Thesis - W P Carey Inc (WPC) is undervalued with a P/FFO of 12 2x compared to the net lease retail REIT sector average of 13 5x and diversified REIT sector average [3] - The company's AFFO generation is primarily from industrial and warehouse properties which typically command higher multiples [3] - WPC has an investment grade balance sheet robust cash generation and a conservative AFFO payout ratio supporting growth [3] Valuation and Market Position - WPC's FWD P/FFO multiple is 13 1x lower than Realty Income (14 9x) and STAG Industrial (16 5x) [4] - The company should theoretically trade between Realty Income and STAG Industrial due to its heavy bias towards industrial/warehouse properties [4] Q2 2024 Performance - AFFO per share increased to $1 17 up $0 03 from the prior quarter driven by organic same store rent growth of 2 9% [5] - Positive rent recapture of 116% added 6 5 years of incremental weighted average leases with 50 basis points of incremental ABR [5] - Occupancy reached 98 8% [6] Asset Recycling and Growth Strategy - WPC has divested most office buildings reducing top-line generation but the asset recycling process is nearly complete [7] - The company has invested $641 million YTD at an initial weighted average cash cap rate of 7 7% focusing on industrial and warehouse properties [7] - 60% of investments are tied to CPI-linked rent escalators with an average cap of ~4 5% [7] Debt and Financing - WPC retired most of its 2024 debt reducing outstanding debt to $61 million with $700 million due in 2025 at a blended average interest rate of 4 2% [7] - The company issued $1 1 billion in unsecured notes with coupon rates of 4 25% and 5 375% minimizing future AFFO pressure [7] Future Outlook - WPC is expected to register continued AFFO growth as the asset recycling program concludes and liquidity is deployed at attractive cap rates [9] - Refinancing risk has been neutralized with future interest rate cuts likely to provide additional boosts to AFFO growth [9] - The company's P/FFO multiple remains below sector average despite its strong position in the industrial and warehouse segment [9]