W.P. Carey Inc. (WPC) Earnings & Analysis

Latest quarter

W.P. Carey reported third-quarter adjusted EPS of $1.33 against the consensus estimate of $1.30. Revenue as counted for the consensus comparison was $467.4 million, above the $457.7 million estimate; the company reported total revenue, including reimbursable costs, of $468.3 million, up from $431.3 million a year earlier.

The filing attributed revenue growth primarily to net investment activity and rent escalations, partly offset by lower operating-property revenue following self-storage sales. It said adjusted funds from operations (AFFO) rose as investment activity and rent increases were partly offset by the settlement of forward equity.

W.P. Carey reported diluted EPS of $0.61, compared with $0.64 a year earlier. Its operating margin rose to 55.2% from 47.8%, while gross margin increased to 91.7% from 89.7%. The company reported free cash flow of $68.2 million, down from $154.6 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Jason Fox said higher long-term interest rates had made the timing of fourth-quarter deals less predictable, particularly transactions tied to broader corporate activity. He said W.P. Carey could reach the top half of its investment-volume range if those deals close on their anticipated schedules. Most investment volume so far this year had gone into warehouse and industrial properties, he said.

Fox said capitalization rates on recent deals had moved higher, and he expected continued upward pressure if long-term rates remained elevated. Asked whether higher rates were also flowing through to build-to-suit developments, he said the company had not added enough of those projects recently to confirm that in its pipeline or closed deals. He said sale-leasebacks could reprice faster because sellers often have defined capital needs and timelines.

On competition, Fox said private equity funds often use more leverage, making higher rates potentially more consequential for their models, but he had not seen a material change in competitive activity. He also told analysts that W.P. Carey considers its current cost of capital when underwriting deals, while the capital already raised affects the returns it can generate.

CFO Toni Sanzone said contractual same-store rent growth was 2.60% year over year in the third quarter, supported by inflation-linked leases and scheduled increases. She said the company collected outstanding June rent from Helvig and had signed replacement leases that recaptured close to prior rents. Sanzone also said a Nord Anglia lease extension included a rent abatement that would mostly affect the fourth quarter.

Asked about refinancing, Sanzone said a euro bond maturing in April was the company’s largest refinancing exposure for next year and that she expected to replace it with another euro bond. Fox said W.P. Carey expected to fund investments through 2027 without raising new equity, using sources including forward equity, retained cash flow and asset sales.

Guidance

W.P. Carey raised and narrowed its FY2026 AFFO outlook to $5.23 to $5.29 per share. Fox said the company raised the low end of its full-year investment-volume range to $1.8 billion to $2.1 billion.

Sanzone said the company lowered its estimate of potential rent loss from tenant credit events to $3.0 million to $5.0 million and tightened expected dispositions to $350.0 million to $450.0 million. She also reduced the property-expense outlook to $54.0 million to $57.0 million and increased the general and administrative expense outlook to $104.0 million to $106.0 million.