Adds a Well-Diversified Net Lease Portfolio and Attractive Operating Self-Storage Assets
February 2022
• | Acquisition by W. P. Carey (NYSE: WPC) of CPA:18 - Global ("CPA:18") | ||
Transaction | • | Total transaction value of ~$2.7 Bn including $1.1 Bn of debt assumed or repaid at closing | |
Details | • | Consideration per CPA:18 share consists of 0.0978x shares of WPC common stock (fixed exchange ratio) and $3.00 of cash(1) | |
• | Pro forma WPC ownership of approximately 93% by legacy WPC shareholders and approximately 7% by CPA:18 shareholders (2) | ||
Management and | • No changes to WPC's management team or Board of Directors |
Board | |
• No expected change to WPC's quarterly dividend as a result of the transaction
Dividend
- WPC intends to maintain its current dividend policy post-closing with a focus on continuing its consistent increases
Earnings | • Immediately accretive to Real Estate AFFO - largely offsets reduction in investment management income from transaction |
Impact | |
Planned | • | Existing purchase option on 11 European student housing assets owned by CPA:18 expected to be exercised prior to closing | |
Dispositions | |||
• | Planned disposition of one additional operating student housing asset and certain European office assets will contribute to partially | ||
to Fund Cash in | |||
Transaction | funding cash component of the transaction | ||
Closing | • | Expected to close in Q3 2022 subject to customary closing conditions, including CPA:18 shareholder approval | |
Considerations | • | WPC shareholder approval is not required | |
- Based on WPC's trailing 3-day volume weighted average price ("VWAP") of $76.17 as of February 25, 2022.
- Excludes the ~5.6% of CPA:18 shares owned by WPC as of December 31, 2021.
Positive Impact
to Earnings
Similar Net Lease
Portfolio with
Operating Self
Storage Assets
Maintains
Strong, Scalable
Balance Sheet
Enhances
Growth Profile
Completes
Exit of IM
Business
- Transaction expected to generate Real Estate earnings accretion of ~2% on a full year basis
- Virtually 100% of total pro forma AFFO will be derived from higher-multiple real estate related earnings
- Replaces finite investment management fee streams with earnings derived from long-term, recurring lease revenues
- Net lease portfolio assembled by WPC as advisor to CPA:18 that aligns with existing portfolio
- Further increases portfolio diversification and reduces top 10 tenant concentration to below 20%
- Includes substantial operating self-storage portfolio with potential upside
- Collapses remaining joint ventures between WPC and CPA:18 on seven properties
- Further solidifies WPC as one of the largest REITs in the RMZ; increases rank to #23
- No material change to balance sheet given size and leverage of CPA:18
- Expect to maintain BBB (stable) and Baa2 (positive) unsecured credit ratings
- Enhances operating efficiency with G&A spread over larger asset base
- Additional growth opportunities through improved cost of capital resulting from a simplified business with increased contribution from higher-multiple real estate earnings and simplified financial reporting
- Self-storageportfolio within CPA:18 may further enhance WPC rent growth upon completion of transaction
- Potential future earnings upside from refinancing higher cost secured CPA:18 debt with WPC bonds
- Completes planned exit of investment management business with liquidation of last sizeable managed fund
- No integration risk given advisory role and strong track record of prior CPA acquisitions
W. P. Carey's successful track record of integrating prior acquisitions and growing its business is evident in its improved
balance sheet, portfolio metrics, earnings quality and operating efficiency
Total Enterprise Value
CPA Acquisition
IM | |
Assets Under Management | |
Revenue Composition (RE / IM) | |
(3) | |
Earnings/ | Debt to Gross Assets |
Sheet | Secured Debt to Gross Assets |
Balance | Unencumbered Net Lease ABR % (4) |
Unsecured Credit Rating | |
$11.1 Bn | $17.2 Bn | $23.4 Bn (1) | ||
2014 YE | 2018 YE | Pro Forma CPA:18 | ||
CPA:16 - $4.0 Bn | CPA:17 - $5.9 Bn | CPA:18 - $2.7 Bn (2) | ||
$9.2 Bn | $7.6 Bn | $229 MM | ||
82% / 18% | 90% / 10% | 99% / < 1% | ||
46% | 43% | ~42% | ||
29% | 18% | ~7% | ||
38% | 53% | ~87% | ||
Baa2 Stb / | Baa2 Stb / | Baa2 Pos / | ||
BBB Stb | BBB Stb | BBB Stb |
Portfolio Progression (4)
WALT | 9.1 Years | 10.2 Years | 10.6 Years |
Top 10 Tenant Concentration | 31.8% | 23.5% | 19.1% |
Warehouse Asset Type | 18.0% | 20.7% | 23.6% |
Office Asset Type | 31.6% | 25.5% | 20.6% |
Note: Pro forma CPA:18 data as of December 31, 2021 unless otherwise noted.
- Pro forma enterprise value based on public filings. WPC stock price of $77.66 as of February 25, 2022. Share count assumes issuance of approximately 14 million shares plus the WPC share count as of December 31, 2021.
- Equity per share based on WPC's trailing 3-day VWAP of $76.17 as of February 25, 2022 and a 0.0978x exchange ratio plus cash consideration, and CPA:18's share count as of December 31, 2021.
- Based on public filings. Pro forma metrics based on data as of December 31, 2021, inclusive of select transaction adjustments.
- Figure based on pro forma annualized base rent ("ABR"). Includes only net lease properties and excludes net lease student housing properties under a purchase option and three additional net lease assets in CPA:18's portfolio scheduled for disposition.
WPC is one of the largest REITs in the RMZ index and the second largest net lease REIT
Largest REITs in the RMZ Index ($Bn) (1)
Company | Equity Market Cap | |
1 | Prologis Inc | $109.9 |
2 | Equinix Inc | 64.9 |
3 | Public Storage | 63.5 |
4 | Simon Property Group Inc | 45.9 |
5 | Realty Income Corp | 39.9 |
6 | Digital Realty Trust Inc | 39.1 |
7 | Welltower Inc | 37.7 |
8 | AvalonBay Communities Inc | 34.1 |
9 | Equity Residential | 32.8 |
10 | Alexandria Real Estate Equities Inc | 31.0 |
11 | Extra Space Storage Inc | 26.0 |
12 | Mid-America Apartment Communities Inc | 24.2 |
(1) | ||
13 | Invitation Homes Inc | 23.7 |
14 | Ventas Inc | 21.7 |
15 | Sun Communities Inc | 21.4 |
16 | Essex Property Trust Inc | 21.2 |
17 | Duke Realty Corp | 20.6 |
18 | Boston Properties Inc | 19.3 |
19 | UDR Inc | 17.8 |
20 | VICI Properties Inc | 17.7 |
21 | Camden Property Trust | 17.4 |
22 | Healthpeak Properties Inc | 17.1 |
23 | W. P. Carey Inc (Pro Forma) | 15.8 |
24 | Kimco Realty Corp | 15.1 |
25 | Equity LifeStyle Properties Inc | 14.1 |
26 | Iron Mountain Inc | 14.1 |
27 | American Homes 4 Rent | 13.4 |
28 | Host Hotels & Resorts Inc | 13.4 |
29 | Medical Properties Trust Inc | 12.4 |
30 | CyrusOne Inc | 11.7 |
WPC is a Top 25 REIT
Net Lease REITs: Equity Market Cap ($Bn) (1)
$39.9
$15.8 | |||||||||
$7.6 | $7.2 | ||||||||
$8.5 | |||||||||
$6.0 | |||||||||
$4.6 | $4.4 | $3.8 | |||||||
O | WPC (PF) STOR | NNN | STAG | SRC | ADC | LXP | BNL |
Net Lease REITs: G&A Efficiency (% of Gross Assets) (2)
74 bps
69 bps | 67 bps | |||||||
59 bps | 55 bps | |||||||
50 bps | 50 bps | 50 bps | ||||||
30 bps | ||||||||
STAG | LXP | SRC | BNL | WPC (PF) | STOR | NNN | ADC | O |
Source: Factset and company filings as of February 25, 2022.
- RMZ constituents ranked by Equity Market Cap based on FactSet as of February 25, 2022. Pro forma enterprise value based on public filings. WPC stock price of $77.66 as of February 25, 2022. Share count assumes issuance of approximately 14 million shares plus the WPC share count as of December 31, 2021.
- Based on full year G&A plus stock compensation divided by total assets plus accumulated depreciation and amortization, as of December 31, 2020. WPC data is pro forma for merger close.
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W.P. Carey Inc. published this content on 28 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 February 2022 12:44:03 UTC.