The W.P. Carey stock experienced a significant decrease of approximately 16% in the year 2024.
The W.P. Carey stock experienced a significant decrease of approximately 16% in the year 2024.
W.P. Carey's shares took a hit in 2024, plummeting 15.9% despite the S&P 500 soaring by 23.3%. Let's dissect what went wrong for this diversified REIT and explore if it can bounce back in 2025.
Time for a revolution, W.P. Carey style
In the final quarter of 2023, W.P. Carey embarked on a major strategic overhaul. The REIT decided to wave farewell to the challenging office sector, offloading its portfolio through a spinoff and selling. This move, coupled with the desire to retain additional cash flow for future investments, led to a dividend reset, marking the end of a 25-year streak of increases.
The first half of 2024 was all about selling. Not just its remaining office properties, but also several other assets. The year saw the company offloading a whopping $1.3 to $1.4 billion worth of properties. This sale followed the disposal of over $450 million of properties in 2023 and the creation of office REIT, Net Lease Office Properties.
Unsurprisingly, these divestitures took a toll on W.P. Carey's earnings. The company predicted its adjusted funds from operations (FFO) to hover between $4.65 and $4.71 per share in 2024, significantly lower than the $5.18 it earned in 2023.
But fear not, W.P. Carey! The capital gained from those sales was swiftly recycled into new properties with promising long-term fundamentals. In 2024, the REIT spent an impressive $1.6 billion on new properties, with a record $845 million invested in the fourth quarter alone. This robust investment strategy places W.P. Carey among the top half of its $1.25 billion-$1.75 billion guidance range.
The REIT also started rebuilding its dividend, slowly raising it each quarter after the reset.
2025: Redemption or Regret?
W.P. Carey closed 2024 strong, setting the stage for a promising 2025. In a press release outlining its 2024 investment volume, CEO Jason Fox noted, "The full benefit of these investments will flow through our earnings in 2025." Add to that its outstanding safety net rent escalations, and W.P. Carey looks set to continue its rebound in 2025.
The REIT boasts substantial liquidity, having built it from asset sales and other non-core assets it can sell to fund new investments. This financial freedom should enable W.P. Carey to raise its AFFO above its 2024 baseline and increase its dividend in 2025 and beyond.
When you factor in W.P. Carey's already impressive yield of around 6.5%, it's safe to say that this REIT could deliver strong total returns in the coming year.
Enrichment Insights:
- W.P. Carey is predicted to benefit from increased transaction volume in 2025. This growth is driven by a strong economy and improving fundamentals.
- The company has significantly transformed its portfolio, with industrial and retail assets now comprising over 85% of its holdings.
- W.P. Carey's deal pipeline has expanded due to reduced competition from traditional buyers, which could lead to increased deal activity in 2025.
- Despite recent financial challenges, W.P. Carey maintains a strong gross profit margin of 92.12%.
- The company plans to strategically reinvest the proceeds from its office property sales into new properties, enhancing its financial performance and shareholder value.
- W.P. Carey has taken proactive steps to strengthen its balance sheet, issuing $400 million in ten-year unsecured notes.
In light of its strategic changes, W.P. Carey is keen on reinvesting the funds gained from asset sales back into promising properties, showcasing their commitment to long-term growth in the world of finance and investing.
The REIT's financial flexibility, derived from asset sales and other disposals, opens up opportunities for investing more money in potential high-yielding properties, potentially setting the stage for increased dividends in the future.