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W. P. Carey Inc. (WPC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $409.9M, up 5.2% YoY, and essentially flat QoQ; diluted EPS was $0.57, and AFFO per diluted share was $1.17 . Versus S&P Global consensus, WPC posted a slight revenue miss ($409.9M actual vs $412.7M estimate*) and an EPS miss ($0.57 reported vs $0.68 estimate*), with the EPS shortfall driven by FX losses and a higher non-cash credit loss allowance .
  • Management reaffirmed full-year 2025 AFFO guidance of $4.82–$4.92 per share and investment volume of $1.0B–$1.5B, funded primarily through accretive non-core dispositions ($500M–$1.0B) without equity issuance .
  • Active portfolio optimization: contractual same-store rent growth of 2.4% (comprehensive 4.5%); occupancy 98.3%; WALT 12.3 years; and progress on reducing top-tenant exposure (Hellweg agreements to take back 12 stores and re-tenant/sell) .
  • Balance sheet actions: repaid $450M notes due Feb-2025 and refinanced €500M term loan to 2029 with a swap fixing all-in EUR rate at ~2.80%, supporting a low 3.2% weighted average cost of debt .
  • Near-term stock catalysts: potential guidance raise if deal visibility and tariff backdrop improve; accretive spread between asset sales and new investments (~100 bps spread targeted); and additional self-storage operating portfolio sales in H2 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • “We’ve had a strong start to the year, closing approximately $450 million of investments to date… and reaffirming both our AFFO and investment volume guidance ranges” — CEO Jason Fox .
    • Comprehensive same-store rental income grew 4.5% YoY, with CPI-linked increases a key tailwind; contractual same-store ABR growth was 2.4% .
    • Refinanced €500M term loan to 2029 and executed an interest rate swap to fix EURIBOR at 2.00% (2.80% all-in), underpinning a 3.2% weighted average debt cost .

  • What Went Wrong

    • EPS missed consensus; net income fell 21% YoY due to FX losses ($27.9M) and a $12.3M non-cash credit loss allowance, partially offset by gains on real estate sales .
    • Slight revenue miss vs S&P consensus; operating property revenues were lower YoY given prior hotel sale and self-storage conversions to net lease .
    • Occupancy slipped modestly QoQ (to 98.3%) on partial renewals at two European warehouses; management expects efficient backfill over 2025 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenues ($USD Thousands)$389,672 $406,165 $409,858
Net Income Attributable to WPC ($USD Thousands)$111,698 $47,023 $125,824
Diluted EPS ($USD)$0.51 $0.21 $0.57
AFFO per Diluted Share ($USD)$1.18 $1.21 $1.17
Adjusted EBITDA ($USD Thousands)$339,036 $342,628 $335,499

Revenue components ($USD Thousands):

ComponentQ3 2024Q4 2024Q1 2025
Lease revenues$334,039 $351,394 $353,768
Income from finance leases & loans receivable$15,712 $16,796 $17,458
Operating property revenues$37,323 $34,132 $33,094
Other lease-related income$7,701 $1,329 $3,121
Investment management revenues$2,608 $2,514 $2,417

Same-store growth trajectory (%):

MetricQ3 2024Q4 2024Q1 2025
Contractual same-store rent growth (YoY, %)2.8% 2.6% 2.4%
Comprehensive same-store rental income (YoY, %)——4.5%

Portfolio KPIs:

KPIQ3 2024Q4 2024Q1 2025
Occupancy (net-lease)98.8% 98.6% 98.3%
Weighted Average Lease Term (years)12.2 12.3 12.3
ABR ($USD Thousands)——$1,399,283

Drivers and commentary:

  • EPS pressure was primarily FX losses and the credit loss allowance; AFFO per share remained resilient due to investment activity, escalations, and leasing .
  • Revenue mix reflects higher lease revenues with lower operating property revenues after hotel sale and storage conversions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO per diluted shareFY 2025$4.82–$4.92 $4.82–$4.92 Maintained
Investment volumeFY 2025$1.0B–$1.5B $1.0B–$1.5B Maintained
Disposition volumeFY 2025$500M–$1.0B $500M–$1.0B Maintained
G&A expenseFY 2025$100M–$103M $100M–$103M Maintained
Property expenses (excl. reimbursable)FY 2025$49M–$53M $49M–$53M Maintained
Tax expense (AFFO basis)FY 2025$39M–$43M $39M–$43M Maintained
Other lease-related incomeFY 2025$20M–$25M (implied prior run-rate) $20M–$25M Maintained
Dividend per quarterCurrent$0.880 (Dec-2024) $0.890 (Mar-2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Tariffs/macro uncertaintyCautious stance; potential tailwinds from onshoring; guidance incorporated credit conservatism No direct impacts to portfolio to date; guidance assumptions sufficient even if tariffs pressure tenants Stable cautious; watchlist down
Capital allocation & spreadsFunding via non-core asset sales; expect ~low/mid-6% sale cap rates vs mid-7% buy cap rates Target ~100 bps spread this year; euro debt lowers cost; pipeline visibility improving Favorable spreads; potential increase
Tenant credit (Hellweg, Do It Best, Hearthside)True Value resolution path; monitor Hellweg and Hearthside; credit loss placeholder ~100bps for ’25 Hellweg re-tenant/sell plan; Do It Best leases assumed; Hearthside leases assumed post Chapter 11 De-risking; actively reducing exposure
Self-storage strategyConverted some properties to net lease; plan to sell substantial portion over time Marketing ~half of operating storage NOI; H2 2025 timing; accretive funding Accelerating dispositions
Competition & sale-leasebacksPrivate equity competition creeping back; Europe less competitive Sale-leasebacks as attractive capital for corporates; all-cash advantage; Europe spreads strong Supportive environment

Management Commentary

  • Strategy and guidance: “We’re reaffirming both our AFFO and investment volume guidance ranges and believe there’s potential to raise as we continue to gain better visibility into transaction activity, tariffs and how the overall economic environment progresses throughout the year.” — CEO Jason Fox .
  • Capital sourcing: “We remain comfortable that we'll generate at least 100 basis points of spread this year between our asset sales and new investments… we continue to feel good about our ability to generate growth through new investments.” — CEO Jason Fox .
  • Balance sheet and cost of capital: “We refinanced our EUR 500 million term loan… locking in an attractive all-in rate of 2.8%… Our overall weighted average cost of debt… 3.2%.” — CFO ToniAnn Sanzone .
  • Credit reserve: “Our AFFO guidance continues to include an estimated $15 million to $20 million for potential rent loss from tenant credit events.” — CFO ToniAnn Sanzone .

Q&A Highlights

  • Acquisition cap rates and spreads: Pipeline cap rates mid-7s across U.S. and Europe; European borrowing ~150–175 bps inside U.S., enhancing spreads .
  • Dispositions funding plan: Target ~100 bps spread vs acquisitions; self-storage sale likely in H2 with multiple-buyer flexibility .
  • Hellweg exposure reduction: Agreements to take back 12 stores (7 by Sep-2025, 5 by Sep-2026); re-tenant most at similar rents; additional store sales under binding contracts .
  • Other lease-related income: Expected $20–$25M for FY 2025; comprehensive same-store benefited from Samsung lease commencement and prior Hellweg abatement .
  • Nonoperating income: Dividend from Lineage assumed flat; interest income to decline as excess cash deployed; FX hedging gains lower with weaker USD .

Estimates Context

Metric (Q1 2025)S&P Global ConsensusActual (S&P)
Revenue ($USD)$412.7M*$411.0M*
Primary EPS ($USD)$0.68*$0.594*
FFO / Share (REIT) ($USD)$1.202*—

Notes:

  • Reported diluted EPS was $0.57 (company-reported) .
  • Reported AFFO per diluted share was $1.17 (non-GAAP) .
  • FFO actual not disclosed in S&P dataset for the quarter above; AFFO consensus not available; company reaffirmed FY AFFO guidance .

Values retrieved from S&P Global.*

Implications:

  • EPS miss driven by FX losses and credit allowance, both largely excluded from AFFO; modest revenue variance vs consensus .
  • Given reaffirmed guidance and pipeline, estimates may need less adjustment to AFFO but could reflect a slightly higher credit reserve or FX sensitivity.

Key Takeaways for Investors

  • Core cash earnings intact: AFFO per share of $1.17, with full-year AFFO guidance reaffirmed; cash dividend increased to $0.890 and well covered .
  • Funding advantage: Accretive non-core dispositions (notably self-storage) to fund $1.0B–$1.5B investments without equity; targeted ~100 bps positive spread supports AFFO growth .
  • Credit de-risking: Concrete steps to reduce Hellweg exposure and stable outcomes for Do It Best and Hearthside lower near-term tail risk .
  • Rate and FX positioning: Low-cost euro debt (2.80% all-in on term loan) and CPI-linked escalators (50% of ABR) provide defenses against higher inflation and support internal growth .
  • Trading lens: Near-term narrative hinges on execution of H2 dispositions and closing pipeline transactions; a guidance raise is plausible with improved visibility and muted tariff impacts .
  • Macro watch: Tariffs/macro uncertainty remain key variables, but long WALT (12.3 years) and minimal near-term expirations (1.3% ABR in 2025) dampen operational volatility .
  • European spreads: With borrowing costs ~150 bps below U.S. and similar cap rates, Europe remains a lever for incremental investment spread .

Additional Detail and Non-GAAP Notes

  • Non-GAAP AFFO excludes FX mark-to-market and credit-loss allowances; Q1 “Other gains and losses” reflected $27.9M FX losses and $12.3M non-cash credit loss impacts .
  • Comprehensive same-store rental income reconciliation highlights normalization and constant currency presentation for comparability .