WPC: Q2 2023 Update & Some Net Lease Lessons
W.P. Carey (WPC) tightened guidance for AFFO and maintained other guidance. It should be the simplest update to write, but it’s been a while since we wrote on WPC. We’ll give it a deeper look.
While this article is focused entirely on WPC, it will dive into several factors that drive the net lease sector. I could write a similar article about Realty Income (O), National Retail Properties (NNN), Agree Realty (ADC), and Four Corners Property Trust (FCPT). The numbers would be different, but the same macro elements are impacting the entire sector.
By different, I only mean slightly different. AFFO per share growth is looking pretty similar.
I prepared the following table to highlight key metrics:
Net lease REITs tend to have fewer numbers for guidance. In general, they tend to be the simplest type of equity REIT. Relative to other net lease REITs, WPC was more complex. The complexity was due to having an “investment management” section. That’s no longer an issue, but it can still complicate some historical measurements.
Types of AFFO
WPC provides guidance on two FFO metrics. “Real Estate AFFO” and “AFFO”. However, because each REIT comes up with its own definition of “AFFO”, I labeled it as “WPC AFFO”.
In Q4 2022, WPC indicated all of WPC AFFO would be real estate AFFO. This is a change from prior years.
In 2022 WPC reported:
Real Estate AFFO: $5.20
WPC AFFO: $5.29
Therefore, there was still $.09 coming from investment management.
Why does that matter today? Because the “growth rate” depends on which starting value we choose.
Note: WPC tightened guidance in the Q2 2023 release. The midpoint is the same, but the low and high values each came in by $.02.
Most equity REITs have same-store metrics. WPC has same-store values, but they don’t provide explicit same-store guidance consistently. The commentary they provided is included below for Q1 and Q2.
For Q1 2023:
That’s as close as you’ll get to guidance on that metric.
For Q2 2023:
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