W.P. Carey NYSE: WPC raised its 2026 outlook for investment volume and adjusted funds from operations, citing continued acquisition activity, higher lease revenue and a balance sheet it said is positioned to fund investments into 2027.
Chief Executive Officer Jason Fox said the company completed more than $700 million of investments during the second quarter, bringing first-half investment volume to $1.3 billion. The investments carried a weighted average initial cash cap rate of 7.4%, and Fox said rent escalations and an average 18-year lease term translate to an average yield above 9%.
The company increased its full-year investment-volume guidance to $1.7 billion to $2.1 billion, from a prior range of $1.5 billion to $2 billion. Fox said W.P. Carey’s near-term pipeline includes several hundred million dollars of prospective investments, while 10 capital projects under its Carey Tenant Solutions initiative are expected to add roughly $300 million of investment volume over the next 18 months.
GardenCore transaction leads second-quarter activity
The largest investment completed in the quarter was a $400 million sale-leaseback transaction with GardenCore, a U.S. manufacturer of lawn and garden consumables. The portfolio includes 43 manufacturing, packaging and industrial outdoor storage facilities in 24 states, leased under a 20-year triple-net master lease with fixed rent escalations.
Fox said GardenCore is now W.P. Carey’s fourth-largest tenant. He described the transaction as attractive because of the defensive nature of the tenant’s business, the mission-critical properties and the rent-growth structure.
Warehouse and industrial properties accounted for the majority of second-quarter investment activity. Fox said the split between U.S. and European investments was broadly consistent with the company’s long-term average. He said cap rates on deals closed in the second quarter were somewhat higher than in the first quarter because of the timing of individual closings, rather than a broader market shift.
For the full year, the company expects cap rates to average in the mid- to low-7% range. Fox said the company has not experienced a noticeable effect on transaction activity from tensions in the Middle East.
AFFO guidance raised as rent growth accelerates
Chief Financial Officer Toni Sanzone said second-quarter AFFO per share was $1.34, up 4.7% from a year earlier. W.P. Carey raised and narrowed its full-year AFFO guidance to $5.19 to $5.27 per share, increasing the midpoint by $0.02 and implying 5.2% year-over-year growth.
Sanzone said the updated outlook reflects stronger investment activity, rising lease revenues, higher CPI-linked rent increases, a more favorable outlook for rent loss, and lower expected property and tax expenses. Those benefits are partly offset by the effect of forward equity settled during the second quarter.
Contractual same-store rent growth was 2.6% year over year in the quarter. CPI-linked escalations, representing 49% of same-store leases, averaged 2.7%, while fixed escalations, representing 48%, averaged 2.5%. The company expects full-year contractual same-store rent growth of 2.6%, with growth trending modestly higher in the second half and potentially moving toward the mid- to high-2% range in 2027 based on current inflation expectations.
W.P. Carey lowered its expected rent loss from tenant credit events to $7 million to $10 million, from $8 million to $12 million previously. Through June, rent loss across the portfolio, including Hellweg, totaled $1.7 million after certain rent recoveries, according to Sanzone.
Hellweg exposure reduced
Fox said the company has reduced its Hellweg exposure over the past two years to 16 stores from 35 through lease terminations, re-leasing and asset sales. Hellweg recently filed for insolvency, but W.P. Carey said its remaining gross exposure is only 90 basis points of annualized base rent and the tenant is no longer among its top 20 tenants.
Hellweg did not make its June rent payment of about $1.2 million but paid July rent in full, Sanzone said. W.P. Carey’s guidance assumes it receives no additional Hellweg rent during the rest of 2026, while recognizing three months of bank guarantees. That results in an assumed net rent loss of about $3 million from Hellweg this year.
The company has springing leases on half of the remaining Hellweg stores at rents comparable to Hellweg’s prior rents. Fox said management is in discussions with prospective tenants and buyers for the remaining locations and expects lease agreements or asset sales to be arranged by year-end.
Capital markets activity supports investment plans
W.P. Carey said it has sold nearly $900 million of forward equity and issued approximately $1.5 billion of bonds so far this year. During the second quarter, it sold 5.3 million shares on a forward basis for gross proceeds of $392 million and settled 5.1 million forward shares for net proceeds of $345 million.
At quarter-end, the company had 9.9 million shares remaining to settle, representing anticipated net proceeds of $691 million. Together with its largely undrawn $2 billion credit facility, W.P. Carey reported approximately $2.7 billion of liquidity.
The company also issued $350 million of 10-year U.S. dollar bonds at a 5.2% coupon rate, with the transaction settling in early July. Proceeds are intended to prepay an October bond maturity without prepayment costs. W.P. Carey said it has no remaining debt maturities in 2026, with its next maturity a €500 million bond due in April 2027.
Net debt to adjusted EBITDA was 5.1 times including unsettled forward equity, or 5.5 times excluding it, at the low end of the company’s target range. In June, W.P. Carey increased its quarterly dividend 4.4% year over year to $0.94 per share.
About W.P. Carey (NYSE:WPC)
W. P. Carey Inc is a diversified net-lease real estate investment trust specializing in single-tenant commercial properties. The company structures sale-leaseback and build-to-suit transactions to provide long-term net lease financing across a variety of asset classes, including industrial facilities, office buildings, retail centers and self-storage facilities. By employing triple net leases, W. P. Carey transfers property operating expenses, taxes and maintenance responsibility to tenants, creating a stable, predictable income stream for investors.
Founded in 1973 by William Polk Carey, the firm has expanded organically and through strategic mergers and acquisitions.
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