W. P. Carey Inc.’s WPC investment volume for 2022 reached $1.42 billion. This came amid a challenging market backdrop, and roughly two-thirds of its 2022 investment volume was in high-quality, single-tenant warehouse and industrial properties.
The investments are in line with the company’s externally-driven growth strategy, which is focused on high-quality industrial and warehouse assets. Also, geographically, around two-thirds of its 2022 investment volume was located in North America and one-third in Europe.
WPC, which specializes in corporate sale-leasebacks, build-to-suits and the acquisition of single-tenant net lease properties, remains well-poised to execute on a significant near-term pipeline. Its strong near-term pipeline includes more than $500 million of opportunities at advanced stages or under letters of intent.
Per Jason Fox, the CEO of W. P. Carey, in 2022, capitalization rates were “slow to adjust to higher interest rates.” This resulted in increasing uncertainty over the timing of investments. He noted that cap rates moved higher in the fourth quarter. The majority of the $160 million of investments completed during this period were “industrial and warehouse properties with cap rates in the high sixes and into the sevens.”
Fox also believes that “this sets up an environment in 2023 conducive to higher investment activity at wider spreads.” With substantial “dry powder”, the company remains well-poised to execute accretive investments. Moreover, with more than half of its portfolio having rent escalations tied to CPI, WPC is well-placed for internal growth within the net lease sector.
Amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, the demand for industrial real estate space and efficient distribution networks has been shooting up. Apart from the fast adoption of e-commerce, the industrial real estate space is poised to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption.
Hence, W. P. Carey is well-poised to benefit from investments in the industrial distribution warehouse space in some of the busiest distribution markets worldwide.
However, rate hikes, inflation and macroeconomic uncertainty are raising concerns. Shares of this Zacks Rank #4 (Sell) company have rallied 14.7% in the past three months, outperforming the industry’s increase of 10.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties Inc. VICI and STAG Industrial, Inc. STAG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ 2022 funds from operations (FFO) per share has moved 3.2% north to $1.92 over the past two months.
The Zacks Consensus Estimate for STAG Industrial’s 2022 FFO per share has been raised marginally over the past week to $2.21.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.