W. P. Carey Inc. (WPC) Earnings Call Transcript & Summary

Hello, everyone, and thanks for being with us on this 2026 First Quarter Earnings Call. Prior to getting started, I must point out that certain remarks shared during this call don't reflect historical facts and might be considered forward-looking statements. Details on factors that could lead W. P. Carey's actual outcomes to differ materially from what we expect can be found in our SEC filings. A web replay of this conference call is going to be posted within the Investor Relations area of our site, wpcarey.com, and it will stay archived there for about 1 year; you can also locate copies of our investor presentations and other associated materials there. Having said that, I'll now turn things over to W. P. Carey's Chief Executive Officer, Jason Fox.

Thank you, Peter. Morning, everybody. It's a pleasure to report that we've kicked off this year continuing to execute strongly throughout the company, especially when it comes to our investment efforts and raising capital, which extends the base we've built for appealing, durable growth. In light of how we've done so far, we are lifting our guidance for the entire year on both investment volume and AFFO per share, which mirrors the deals we've already finished, the robustness of our deal pipeline, and an improved view on projected brand loss. This morning, I'll quickly walk through a few of the quarter's highlights, with a focus on what we've been investing in. Our CFO, Toni Sanzone, will follow by walking you through the specifics of our results, balance sheet, and guidance. We also have Brooks Gordon, who leads our Asset Management team, here with us to assist with your questions. Beginning with our investment efforts. To this point in the year, we've closed investments worth roughly $680 million. Our pipeline is still quite robust, with more than $0.5 billion in transactions presently in advanced stages, among them a sale leaseback involving a sizable industrial portfolio that is in the last stages of closing. This provides us with clear sight lines to considerably more than $1 billion in investments. Crucially, we've kept witnessing solid momentum in our deal flow, with recent geopolitical tensions having no discernible effect on transaction activity so far. In light of our activity and outlook, we've increased our guidance range for full-year investment volume by $250 million, to somewhere between $1.5 billion and $2 billion. Taking into account what's already been closed, our present pipeline, and the capital projects being delivered this year, that works out to an average cap rate of roughly 7.5%. And we anticipate staying near that level for the whole year. We keep transacting across a variety of cap rates; the transactions closed so far this year have generally leaned toward the lower end of our target range and below where our pipeline is priced, with completed deals averaging 7.2%. This mostly comes down to timing, since it includes some of what we anticipate will be our tightest cap rate deals during the first half of the year. I'd also point out that our investment activity at the start of the year has leaned mostly toward Europe and Canada, where we obtained cheaper debt during the quarter, among it a 2 tranche Eurobond offering carrying a 3.5% average coupon, plus a Canadian dollar term loan at slightly above 3%, which helps us keep appealing spreads relative to our going-in cap rates; we also keep originating deals that carry fixed rent bumps averaging in the high 2% range, or that have CPI-based rent escalations. Consequently, we're still delivering average yields near 9% across lengthy lease terms. In the first quarter, we directed most of our capital toward warehouse and industrial assets, which made up roughly 60% of investment volume. Retail accounted for the other 40%, driven mainly by the sale leaseback we closed with Go Auto covering a portfolio of auto dealerships, with robust site-level coverage clustered in the Greater Vancouver area. Go Auto ranks as the number two automotive dealership group in Canada, and it now sits within W.P. Carey's 25 biggest tenants when measured by ABR. During the quarter, we finished 4 capital projects worth a combined $68 million, and those are counted in our year-to-date investment volume; we also tacked on several smaller projects set to be delivered later in the year. All told, we hold 11 capital projects representing roughly $280 million that will come online across the coming 12 months. The cap rates on these projects come in progressively above what we've seen on both our year-to-date investments and our expectations for the full year, which gives us appealing risk-adjusted returns. As I've mentioned on earlier calls, these efforts — especially the expansions — often produce yields above what the market offers, while at the same time stretching out lease terms and boosting how strategically important the underlying assets are. Because our portfolio is so large and we've been doing this for so long, plus the backing of our recent Carey tenant solutions initiative, we feel we're in a strong spot to grow this very appealing proprietary pipeline of deals. Our organic growth is holding up well too and keeps climbing on new investments; and should inflationary pressure stemming from elevated energy prices stick around, our portfolio sits in a rare position to gain, since such a large share of ABR carries rent escalations linked to CPI. Finally, let's look at where our capital comes from. Well-run capital raising keeps fueling our investment activity, powered by the debt issuance and forward equity sales that closed in February. Beyond making our balance sheet even stronger, those moves have in effect prepaid our investment requirements for 2026. We've likewise secured favorable pricing and substantially cut back what we're exposed to if capital markets swing further during this year. Consequently, we feel sure we can keep putting capital to work all through 2026. One more reminder: we anticipate producing about $300 million in retained cash flow during this year, which gives us another equity capital source; and though selling more assets isn't central to how we fund ourselves, we still retain the ability to make further accretive dispositions at appealing cap rates should the need arise. I'll stop there and pass the call to Tony, who will walk through our results, balance sheet and guidance in greater depth.

Thank you, Jason, and good morning to all of you. Let's begin with earnings. For the first quarter, AFFO per share came in at $1.30, marking a rise of $0.13, or 11.1%, versus the same period a year ago. Our year-over-year growth keeps being powered by accretive investment activity, as we've completed $2.8 billion in investments since 2025 began, at cap rates that are accretive and spreads that are healthy relative to our funding sources. As Jason noted, because of how quickly and how much we've invested to kick off the year, along with the strength of our pipeline, we've lifted our expectations for both full year investment volume and AFFO per share. As laid out in our earnings release, our investment volume guidance has been raised to a range of $1.5 billion to $2 billion, which, combined with lower estimated potential rent loss, produces a total $0.03 bump to our AFFO per share guidance at the midpoint. For 2026, we consequently now anticipate AFFO per share landing between $5.16 and $5.26, which implies 4.8% growth at the midpoint. Now to our portfolio, beginning with dispositions. Asset sales in the first quarter brought in gross proceeds of $163 million altogether. That figure included selling the 11 remaining operating self-storage properties we held, for $75 million. With that done, our exit from operating self-storage is now complete, which further simplifies our business and has generated aggregate proceeds of roughly $860 million at an average cap rate slightly under 6%, proceeds we've recycled accretively into investments with higher yields. Contractual same-store rent growth for the quarter reached 2.4% year-over-year, with fixed and CPI-linked rent escalations both averaging 2.4%. For the full year, our expectation remains that contractual same-store rent growth will average in the mid-2% range. On our new investments, we keep achieving strong rent escalations. Roughly 3/4 of our first quarter investment volume involved leases with rent increases tied to CPI, while the remaining 1 quarter carried fixed rent escalations averaging 2.8% annually. Comprehensive same-store rent growth for the quarter, which factors in the impacts of re-leasing, rent collections, vacancies and lease restructurings, was 1%, with the gap to contractual largely attributable to the impact of vacancy during the quarter. Because of the way this metric works, comprehensive same-store rent growth can fluctuate from period to period, often because of onetime items or properties entering and exiting the same-store pool. Over time, our comprehensive same-store rent growth has trailed contractual by about 100 basis points on average, and we view that as a reasonable estimate for the portfolio over the long term. Portfolio occupancy stood at 98.1% at the close of the first quarter, a slight increase over the fourth quarter, and should continue improving as we retenant or dispose of vacant assets. Our portfolio keeps performing well, with no new material credit changes across it so far this year. So because of that, we've reduced the assumed potential rent loss that sits inside our AFFO guidance, bringing it to a range of $8 million to $12 million — roughly 50 to 75 basis points of ABR — whereas previously we had estimated $10 million to $15 million. And judging by what's in front of us right now, we'd still call that updated assumption conservative. When it came to re-leasing in the first quarter, we recaptured 103% of the rents we had before overall. That came on 1.4% of portfolio ABR, and it contributed just over 5 years of weighted average lease term. On other lease-related income, the first quarter brought in $10.5 million, which matched what we had expected, and that figure includes termination income tied to redevelopment work that got underway during the quarter. Given the visibility we have now, we anticipate other lease-related income in the second quarter will match the first quarter, and for the whole year it should land somewhere in the low to mid-$30 million range, since we keep managing the portfolio proactively. Non-reimbursed property expenses came to $14.6 million in the quarter, and that number includes roughly $1.2 million of demolition costs connected to redevelopment work, which we talked about on our previous call. We anticipate incurring more demolition costs during the second quarter, which will push nonreimbursed property expenses higher still, before they return to a more normalized run rate across the back half of the year. For the entire year, our expectation remains that nonreimbursed property expenses will come in between $56 million and $60 million. G&A expense for the first quarter was $27.3 million, matching our expectations, because the first quarter is typically the year's highest for G&A due to when payroll taxes fall. For the whole year, we still expect G&A to land between $103 million and $106 million, with the second quarter going back to a more regular run rate. Turning to our balance sheet. We stayed quite active in the capital markets in the first quarter, tapping close to $2 billion of capital from a range of sources, and taking proactive measures to strengthen our balance sheet further and make sure we're well positioned to fund the investment activity we've projected. During February, we issued EUR 1 billion of senior unsecured notes, split into two EUR 500 million tranches, with coupon rates of 3.25% on a long 5-year maturity and 3.75% on a long 9-year maturity. We moved during a particularly attractive window, and the proceeds went toward addressing our April Eurobond maturity, which we repaid in March, to rehire the EUR 215 million term loan, and to boost our overall liquidity so we can support externally driven growth. In March, we amended our credit agreement, swapping the euro term loan I just referenced for the new Canadian dollar term loan carrying a current all-in rate of approximately 3.1%, with those proceeds funding our Canadian investment activity. Simultaneously, we managed to enhance our total revolver pricing grid, achieving a 5 basis point improvement across every tier, which steadily brought down our debt expense; on top of that, we had a successful run in the equity markets over the quarter, disposing of 6.9 million shares through a forward arrangement, which brought in gross proceeds amounting to $497 million. Add to that the forward equity we disposed of through our ATM program during the latter half of 2025. This provides us with sufficient capacity to pursue investment volume beyond the upper limit of the guidance range we currently have. As the first quarter closed, we settled 3.45 million shares tied to forward sale agreements, generating net proceeds of $247 million in total, which leaves 9.7 million shares yet to be settled, translating to projected net proceeds of $653 million as of March's end. Thanks to our capital markets efforts, we closed out the first quarter holding considerable liquidity of roughly $2.8 billion, encompassing credit facility availability, cash on hand, and unsettled forward equity. What remains of our debt maturities for this year is quite limited, mostly consisting of the $350 million in U.S. bonds set to mature in October. Our debt's weighted average interest rate continues to be modest, sitting at 3.1% during the first quarter, and should stay within the low to mid-3% bracket for the entire year once our recent bond issuances are factored in. Net debt to adjusted EBITDA finished the quarter at 5.3x, factoring in unsettled forward equity. If you set aside the effect of unsettled forward equity, net debt to adjusted EBITDA came to 5.7x, a decline from 5.9x at year-end and comfortably inside our target range of mid- to high 5x. Finally, regarding our dividend. During March, we raised our quarterly dividend by 4.5% compared to a year earlier, bringing it to $0.93 per share, while keeping a solid payout ratio of 72%. Given where our stock price stands now, that works out to an appealing annualized dividend yield exceeding 5%. We anticipate our dividend will keep rising alongside our AFFO growth, all while preserving a cautious payout ratio. With that said, I'll return the call to Jason.

Thanks, Tony. To wrap up, we feel good about how we've done so far this year, and that comes from ongoing momentum in our investing, a solid pipeline, and how we've executed in the capital markets. Those things leave us well positioned to keep delivering going forward. Looking forward, we're still confident that we'll hit double-digit total shareholder returns once more in 2026, and that's without any multiple expansion. The earnings growth we're projecting stacks up well against the net lease sector. Over time, we'd anticipate that showing up further in how our trading multiple performs. That wraps up what we had prepared. So I'll hand the call back to the operator for questions.

To start, you've got a third — that European portfolio, you keep buying more over there. Are you noticing any effect on that portfolio? Or do you have any concern that you've simply been handed some of these worldwide macro developments, plus the fighting in Iran as well. Is that affecting what you hold in Europe?

No. I suppose Europe carries somewhat greater room for unpredictability, since energy costs run higher in that region, yet it hasn't touched us. And when you look at what we own, it's spread out, mostly consisting of really big businesses capable of getting through various cycles, and we've demonstrated that before. So no major worries on that front. We're feeling positive about what we hold. Nothing has shown up so far. That's definitely a statement I could make with certainty.

My next question: during the prepared remarks, you mentioned that investment needs for 2026 have effectively been prefunded. So how are you approaching funding from here on out? Do you simply hold back and wait to see what opportunities present themselves, taking an opportunistic stance with fundraising? Or has the moment arrived when you can act somewhat more aggressively, begin prefunding for '27, and then, should volumes keep rising in '26, be in a position to push harder? I'm just trying to grasp how you view the funding environment and what lies ahead.

Yes. What I'd say is that at present we hold $650 million in forward equity still awaiting settlement. As you noted, we have ample liquidity; regarding additional equity, if attractive chances arise to get ahead of our 2027 needs and bring in more equity, I believe we would always look at that; we are definitely at ease with where things stand today; and much will hinge on the investment opportunity set and its appearance. That will likely be the primary factor; yet the key point is that at the moment we have no needs in sight, so we're able to be — as I think you know, we're opportunistic.

This is Dan calling in for Yana. Would you mind giving us an update on the carried tenant solution platform?

Yeah, absolutely. We actually went into this somewhat deeply during the prior quarter's call — and these construction projects are the kind we've been handling for a long stretch, going back several decades. They cover build-to-suits, expansions, and redevelopments, and the reason we've become more intentional about discussing it is so that people recognize this as one piece of our business — and potentially another piece we believe can expand. Part of the branding effort around it is to make it official and perhaps take a somewhat more holistic approach in how we reach out to our tenants. Looking back at what we've done, it's likely averaged roughly $200 million a year. That figure will fluctuate annually, but that's probably a reasonable average. And we believe it might be able to get larger. One advantage of operating as a big REIT, like VR, is that we've assembled a highly skilled in-house project management team. So that's a genuine competitive edge. What we've discovered through our tenant outreach, and when we're able to present them with different development services and other solutions, is that it can generate follow-on deals. At present — and we give quite a lot of detail on our sub regarding this — we've got roughly $280 million of projects underway, and approximately $180 million of that $20 million will finish this year. Past that, there's a very active pipeline of potential projects that we'd anticipate advancing over the quarters ahead.

And now that the sale of the self-storage operating assets has wrapped up, which other assets do you have in mind to hit your disposition guidance for the full year? And what about the remaining 5 operating assets — any plans there?

Brooks, would you like to handle that?

Yes. Like Tony said, our disposition strategy for this year stays quite flexible this early on — somewhere from $250 million to $750 million. That flexibility matters a lot to us. As for other operating assets, we hold a handful of hotels plus 1 student housing property, and we're assessing those for possible sales, maybe in the back half of this year, though possibly slipping into next year as well. So it's under review. Still, as I said, we've kept considerable flexibility when it comes to liquidity and capital. So the investment pipeline will really be what shapes just where in that range we end up.

Could you discuss the investment pipeline and how it's skewed geographically right now? And also the property type buckets where you're seeing more or less, and just where the dispersion sits around that mid 7s cap rate?

Yeah, absolutely. Our pipeline remains robust. I noted before that it contains more than $0.5 billion of identified transactions, a number of which have progressed to advanced stages. It also contains 1 bigger sale leaseback involving a sizable U.S. industrial portfolio; that ought to close within the coming couple of weeks. We also said that roughly $180 million of projects are slated to be finished this year. So all of that feeds into the visibility we have for deal volume this year; on the geography side, Europe keeps ramping up. Among deals closed year-to-date, roughly half happened in Europe. A deal in Poland, Robin was the biggest, another 30% occurred in Canada, and the remainder was in the U.S. yes. As for Europe, we anticipate the heightened activity we first observed in the second half of last year will carry on; that said, it doesn't signal any slowdown in the U.S. The pipeline, I'd say, is now roughly aligned with our ABR mix; approximately 2/3 sits in the U.S; and 1/3 is in Europe at present; then on property types, I believe this is a steady theme for us. We keep finding appealing opportunities in industrial, covering both manufacturing and warehouse, and year-to-date about 60% was industrial, with 2/3 of that being warehouse, and we additionally witnessed a pickup in retail. Much of that came from the < > deal we discussed previously; and the pipeline now leans more heavily toward industrial; that's around 80% at the moment. But but plenty of opportunities sit at the top of the funnel that will come in too.

All right. Now for my second question. Your company has long maintained a significant connection to private equity. So I'm curious whether the difficulties we're seeing in private credit have affected your pipeline for deals — perhaps by making sale-leaseback arrangements more appealing, or simply by influencing your tenant roster in some way?

Sure. I'll take the deal side first. What I'd say is we anticipate that sale leasebacks might turn into a more compelling opening for certain companies backed by private equity, maybe if a gap opens up in private capital should underwriting or the movement of capital get tighter in that area. I wouldn't claim that's a pattern we're observing at this moment, though it's definitely something that could surface more often. Brooks, have you noticed anything in our portfolio tied to private credit?

Not really — nothing clearly identifiable has shown up in that regard. We'll keep monitoring for it, though so far it hasn't played any role.

I'd like to spend a moment on something you've mentioned before — your push further into retail. Clearly, you closed a few deals up in Canada during this quarter. So my question is this: in that segment, how do you view rent escalators relative to what you see in other types of assets?

Yeah, absolutely. There's definitely a gap there. Market conventions in retail, as I see it, usually mean smaller increases than the ones we can get done on industrial and warehouse properties, and I think that's logical. Over the past 2 years or so, the warehouse sector has expanded a great deal when it comes to rent growth, and many of the escalations built into our leases are designed to stand in for what market rent would be, plus rents for warehouses or manufacturing plants at industrial firms usually aren't a major component of their costs. Retail rent, on the other hand, is generally their largest expense, so people pay closer attention to it. That, I believe, explains why leases have historically looked flatter. In the space we go after — sub-investment-grade retail — the bump structures average out to roughly 1.5% to 2%, I'd say, while industrial is running closer to 2.5%, 3%, or perhaps higher. Once you move into investment-grade retail, which strikes us as the commodity end of net lease and one we mostly avoid, those leases are flatter still, and pricing ends up being the sole lever for standing out as an investor there. So that's the — I'd say there are real distinctions between the 2 when it comes to bump structures.

Then I suppose there's one more thing I'd like to ask. You brought up some deals with tighter cap rate spreads, I believe, that you're considering during the first half — I mean, does that apply to the bigger industrial-style portfolios you're evaluating? Or does it relate more to individual opportunities, or perhaps it's simply a remark about pricing for bigger deals compared with smaller ones.

Sure. That has nothing to do with bigger or smaller deals, and in fact the mention of tighter cap rates referred to — it was about the deals we've already closed so far this year. That's roughly $680 million; on a blended basis those deals landed at the lower end of our target range, at 7.2%. And I expect those will rank among the tighter cap rate deals we wrap up this quarter. Also, I think it may be worth pointing out, and we discussed this previously, that most of those deals took place in Europe and Canada, where our borrowing costs are considerably cheaper than they are in the U.S. So even with the lower cap rate, we still saw appealing spreads on those deals; and then I'd say the other side of this is our pipeline, along with our capital investment projects being delivered this year — those sit more toward the upper end of our target range, which helps us blend to the mid-7s for the year; so on the whole, it seems like cap rates have stayed fairly steady this year despite the macro volatility. Naturally, it's hard to forecast what will occur in the second half of the year; but since we transact across a broad range of cap rates, at times the timing of the mix will produce some dispersion there, though I don't believe it signals anything about market trends or particular geographies or asset classes.

A fast question about onshoring. Clearly, this pattern ought to be a positive for the industrial portfolio already in place. Do you figure those tailwinds will bring about greater rivalry and bidding tents, with fresh purchasers keen on industrial net lease? And might that result in a sustained emphasis on intentional acquisitions in Europe? Or is it simply an overall gain for every buyer in that segment?

Yes. My view is it's the second one. To whatever degree more onshoring or reshoring occurs, I believe we are positioned — certainly inside our portfolio, we are positioned — to gain considerably. We rank among the bigger industrial property owners, particularly manufacturing, and if that ramps up demand for those sorts of buildings we hold, we consider that favorable for rent growth. We consider that favorable for the criticality factor we typically underwrite in the buildings we hold. Might it draw greater rivalry? Possibly — if a certain end of the market turns more appealing, some capital flows could show up there. Yet it's a large market, and the deposit would surely surpass any sort of heightened competitive cash flow or capital flows.

Then regarding the balance between new deals involving inflation-linked rent bumps versus ones centered on larger fixed escalators — could you bring us up to speed on the current position, and does it vary at all by nation or by sector?

Yeah, absolutely. What I'd say is that ever since inflation surged 4 or 5 years ago, getting CPI-tied leases worked into new transactions has become somewhat harder to pull off. That's especially true, I suppose, in the U.S.; during 2025, which was last year, roughly 1/4 of the deals we did carried increases linked to CPI. Yet through this year so far, the picture has actually flipped. Around 3/4 of transactions signed to date were CPI based. And I believe, touching on what you raised, that this mostly comes down to geography rather than anything else. With European leases, embedding inflation-based increases remains the standard practice. So as we've noted, year-to-date there have been — a greater share of our transactions took place in Europe. I'd point to the Go Auto deal in Canada — a CPI-based increase was also negotiated into that one, and having that inflation hedge baked into our portfolio is definitely something we prize and consider important to secure; however, in cases where we don't secure inflation-based increases, the impact of elevated inflation has still largely carried over into our fixed increases, since historically our typical fixed increase sits nearer to 2%, whereas across the last 3 or 4 years, on new deals with fixed increases, we've likely been 50 to 100 basis points above that.; So some of those benefits are still coming through; and it probably serves as a useful reminder of the — and we've discussed this frequently — how our portfolio stands apart from a lot of our net lease peers, given that we hold substantial internal growth within our model rather than depending solely on spread investing and external growth.

So Jason, to pick up on that point, is a CPI-linked lease more of the norm in Europe compared with, say, whatever the going rate is over here in the U.S.?

Understood. Over in Europe, it is without question more of the norm and more customary. I believe we have always incorporated it into our model wherever we're able to in the U.S., and this goes back to — we've existed for 50-something years now, and much of this traces back to the 80s, around the idea of building an inflation hedge into what can sometimes be a fixed income style stream, which is what net lease can be, and we feel we've accomplished that well.