W.P. Carey Begins Selling 78 Self-Storage Facilities to U-Haul Affiliates

Last week, W.P. Carey Inc., a prominent net lease REIT, began selling 78 self-storage facilities valued at approximately $465 Million to U-Haul, whose affiliates had been leasing them for the past 20 years. This comes on the heels of the sale of the REIT's largest office portfolio (70 properties total) to the State of Andalusia, an autonomous community in Spain. This deal closed in January of this year, just before the REIT announced it was cutting its quarterly dividend amount from $1.07 to $0.86. 

In its Q4 2023 financial report, the REIT reported disappointing Q4 earnings, with missed estimates for FFO and revenue. Over 16% of its total debt is maturing in 2024, which will have to be refinanced at a much higher rate. Additionally, two tenants are having financial troubles, with one operating in bankruptcy which is expected to have an impact on adjusted funds from operations (AFFO).

Despite this, the sales are expected to enable the resumption of AFFO and dividend growth in the future. The REIT plans to channel the proceeds from these sales into investments in properties with superior long-term growth prospects, positioning itself to navigate the evolving real estate landscape more effectively. 

"In the face of a dynamic market, W.P. Carey's portfolio refresh serves as a testament to the company's forward-thinking approach," writes BNN Breaking, an independent news network. "By strategically repositioning its assets, the REIT is not only adapting to the current environment but also laying the groundwork for a prosperous future." The outlet notes, however, the the path ahead may be fraught with challenges.

Seeking Alpha, the leading website for actionable stock market opinion and analysis, writes that despite these challenges, "WP Carey has a solid balance sheet and is undervalued...  the company is currently trading at bargain basement levels, even lower than many other peers in the sector, making it a potential buy for long-term investors."