W. P. Carey Inc., a global net-lease real estate investment trust (REIT) that owns 189 self-storage facilities in 28 states, is evaluating whether the company should break into three separate businesses. The new structure would likely include a U.S. net-lease REIT that would own and manage domestic commercial properties, an international net-lease entity, and an asset-management company that would create non-traded REITs and other alternative investment products, according to the source.
The company announced the possible restructure in its second-quarter earnings release and reiterated the possibility during a Nov. 3 conference call with analysts. “We are actively exploring their potential separation and the ability to create long-term value by allowing each to pursue distinct business strategies and what we believe would be superior opportunities for growth,” CEO Trevor Bond, said during the call. “Our review is well underway, and we feel we have good visibility into the fundamental issues involved.”
W. P. Carey currently operates as a REIT and a manager of non-traded REITs. Last year, the company announced it would back off from selling non-traded REITs focusing on net-lease real estate to concentrate on lodging and self-storage real estate, the source reported. It’s also been exploring real estate opportunities in Europe.
The company makes many of its self-storage acquisitions through subsidiary CPA:18 – Global, a publicly held, non-traded REIT, which it manages.
Bond didn’t elaborate on details during the call but indicated more information would be forthcoming regarding legal matters, regulation and taxes, according to the source.
“The bottom line is we don't know what it will look like,” Paul Adornato, an analyst with BMO Capital Markets, told the source. “There are many questions about how much [general and administrative] expenses each potential entity would bear. If you don't know that, it's very tough to come up with an estimate of the value of each component of the company.”
The restructure could make the company more attractive to investors by bringing clarity to what it does, Bond said. “We believe that separation would provide for a more focused and simplified structure that would be easier for investors to understand,” he said during the call. “We think that aligning each platform with sector-specific shareholders is desirable and that we could achieve a cost of capital most appropriate to each entity by this alignment. We think that would allow us to allocate capital in a more focused way. I think that each [business line] has a clear path to growth that doesn't rely upon any of the others.”
With regard to earnings, the company reported third-quarter revenue of $214.7 million, a 9 percent increase from the same period last year. It also had adjusted funds from operation of $126.6 million, equal to $1.19 per diluted share, during the quarter, which was a year-over-year increase of 5.3 percent.
W. P. Carey is a New York-based investment-management company that oversees a global investment portfolio. It manages a series of non-traded REITs with assets under management of approximately $10.5 billion. The company’s enterprise value is approximately $10.4 billion. It provides companies worldwide with long-term sale leaseback and build-to-suit financing, and engages in other types of real estate-related investment.
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