Today I have a REIT that not many of you have probably have heard about, but after this post, maybe you would be interested in it. I am going to introduce you to W.P. Carey (WPC), which is a net-lease REIT similar to Realty Income.
What net lease REIT means is the landlord (W.P. Carey) bears no responsibility for the property. The tenant is required for all the maintenance, insurance, and even taxes. This makes the landlord only liable for the cost to purchase the property as long as there is a tenant.
WPC Real Estate Portfolio
WPC has 1,215 properties that equate to around 141 million. The properties are mostly located in the U.S. and Europe. Another impressive fact is that the occupancy rate is 98.8%. Additionally, the percentage of tenants who are investment-grade currently resides at 29.4%.
As you can see from the breakdown of property type, it is a very diverse portfolio. That diversification is critical as WPC reported in their Q1 2020 earnings that in April the collection rates by property type were:
- Industrial – 98%
- Warehouse – 93%
- Office – 96%
- Retail – 96%
- Fitness, movie theaters and restaurants – 1%
- Self Storage (net lease) – 100%
- Other – 97%
To provide some perspective, Realty Income has almost 70% of its properties as retail establishments.
After covering the type of properties, let’s dive into who rents the properties.
As you can see the tenants are even more diverse than the properties!
The top 10 tenants make up 21.7% of the total portfolio, and these are keen businesses.
WPC has an excellent management team, and they have crafted almost all of the contracts in such a way that they all have rent increase built into their lease contract.
On top of having leases that will grow, WPC has long term leases that are well laddered. You will not find a year that would leave WPC vulnerable and desperate for tenants.
Another factor for any REIT is that to consider is occupancy. WPC has maintained tenants at least 96% of their properties, even during the Great Recession.
Due to COVID and the uncertainty that it creates for companies like WPC, I have to mention the debt schedule. WPC has less than 2% of its debt due in 2020, with it slightly increasing to 3.9% in 2021. 2023-2026 has the most substantial amount of debt maturing, but it is still a manageable load. Having low debt maturity until 2023 should help WPC weather the current COVID crisis.
As I started this post off, WPC is probably a company that you have never heard of, but I would advocate that it is one of the best REITs available to buy. As mentioned, it is highly diversified and well run! Another thing that I have not mentioned yet is that it has a dividend yield of over 6% that WPC continues to grow.
Another thing for consideration is that REITs are usually highly sensitive interest rates, and rising interest rates are bad in general. With the Fed announcing a long recovery that will require a low-interest-rate environment for a long time, this will only further benefit WPC.
Last but not least, I will work on initiating a position in WPC and try to get some of the stock drops below $65. Even though you would probably be ok buying the stock at today’s price ~$69, I would prefer being in below $65 to have some additional buffer for my investment.
This post is my opinion, which is strictly for information & educational purposes only. The post is not intended to provide any investment advice. Please seek your own duly licensed professional for investment advice as they will be able to consider your situation. Please read my Terms & Conditions Page for a full disclaimer.
Another disclaimer: I recently purchased Realty Income Stock (O) which is also a net lease REIT.