W. P. Carey Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. W. P. Carey is a diversified REIT focused primarily on long-term net leases of commercial properties in the U.S. and Northern and Western Europe.
Business context
At year-end, the portfolio included 1,424 net-leased properties across 26 countries, leased to 336 tenants, plus 96 operating properties. Net-leased occupancy was 98.1%, and the weighted-average lease term was 11.7 years. The company completed its spin-off of 59 office properties into Net Lease Office Properties (NLOP) on November 1, 2023, and continued a program to sell retained office assets.
Key financial metrics
| Metric | FY 2023 | FY 2022 | Change / context |
|---|---|---|---|
| Total revenue | $1.741 billion | $1.479 billion | Up 17.7% |
| Net income attributable to W. P. Carey | $708.3 million | $599.1 million | Up 18.2%; includes substantially higher real estate sale gains |
| Diluted EPS | $3.28 | $2.99 | Up 9.7% |
| AFFO | $1.118 billion | $1.061 billion | Up 5.4%; non-GAAP measure |
| Net cash from operating activities | $1.073 billion | $1.004 billion | Up $69.9 million |
| Net cash used in investing activities | $905.9 million | $1.053 billion | Lower net cash use |
| Net cash from financing activities | $292.6 million | $57.9 million | Includes $343.9 million received in connection with the NLOP spin-off |
| Total debt, net | $8.144 billion | $7.878 billion | Debt to gross assets was approximately 41.6% |
| Cash and cash equivalents | $633.9 million | $168.0 million | $203.1 million held in foreign subsidiaries |
| Available revolving credit capacity | $1.6 billion | Not stated here | Net of standby letters of credit |
Year-end debt was 87% fixed-rate and 13% variable-rate; the weighted-average rate was 3.2% overall and 5.1% on variable-rate debt. Reported conventional operating-margin guidance is not provided. The fourth-quarter dividend was $0.860 per share; total dividends declared in 2023 were $4.067 per share.
Material changes versus FY 2022
- Revenue growth reflected acquisitions and rent escalations, including the full-year contribution of assets acquired in the 2022 CPA:18 merger. Hotel properties converting from net leases to operating properties also contributed to reported revenue.
- Real Estate net income benefited from higher gains on property sales and acquisitions, but was partly offset by higher interest expense, increased impairment and credit-loss charges, and the NLOP spin-off. Investment Management revenue fell as fees and distributions from CPA:18 ceased after its 2022 merger.
- Interest expense increased $72.7 million to $291.9 million. Average debt outstanding rose to $8.404 billion from $7.392 billion, and its average interest rate increased to 3.2% from 2.7%.
- Net-leased ABR decreased to $1.339 billion from $1.382 billion; property count fell to 1,424 from 1,449, tenant count to 336 from 392, and occupancy to 98.1% from 98.8%. Portfolio changes include the spin-off and property sales.
- Shares issued and outstanding increased to 218.7 million from 210.6 million, including settlement of forward equity that raised approximately $634 million net.
Outlook, risks and unusual items
- Portfolio transition: Management targeted completion of the Office Sale Program in the first half of 2024. As of the report date, 79 of 87 retained office properties had been sold for approximately $608.1 million gross. In January 2024, a further 71 properties sold for $387.8 million gross, including the 70-property Spanish government-office portfolio.
- Dividend policy: In September 2023, the company reset its dividend policy, targeting an AFFO payout ratio of approximately 70% to 75%. The board retains discretion over future dividends; the filing gives no earnings or AFFO forecast.
- Upcoming funding needs: Scheduled principal payments totaled $1.279 billion in 2024 and $707.3 million in 2025. Major 2024 maturities include $500 million of U.S.-dollar notes and €500 million of euro notes. Management expects to use operating cash flow, dispositions, cash, credit capacity, and potential debt or equity issuance to meet requirements.
- Credit and impairment: The company recorded $86.4 million of real estate impairment charges, including $47.3 million related to office properties contributed to NLOP. It also recorded a $28.8 million credit-loss allowance associated with a top-ten tenant whose financial position deteriorated; management expects lower rents going forward.
- Sale gains: Net gain on real estate sales was $316.0 million, versus $43.5 million in 2022. It included $176.2 million related to the tenant’s exercise of an option to repurchase 78 self-storage properties and $59.1 million related to the Spanish office portfolio sale agreement. These items materially affect GAAP net income; AFFO is a supplemental non-GAAP measure and is not a substitute for cash flow or net income.
- Other risks: Management identifies interest rates, inflation, tenant credit and bankruptcy, lease expirations, foreign exchange, international and geopolitical exposure, climate and environmental obligations, and access to capital as risks. About 21% of ABR was associated with leases expiring within five years; the top ten tenants represented 21.1% of ABR. The company reported compliance with debt covenants at year-end and stated it expects sufficient cash from operations for normal recurring short-term liquidity needs.
- Contingencies and controls: Routine claims and lawsuits were not expected to materially affect financial position or results. No material cybersecurity incidents affecting the company in the prior three years were known as of year-end. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Completion, final proceeds, and remaining costs or obligations of the office disposition program, including any NLOP-related indemnities or guarantees.
- Repayment or refinancing of 2024 and 2025 debt maturities, and the resulting interest expense and leverage.
- The affected top-ten tenant’s credit trajectory, rent collections, and whether further credit-loss provisions or lease changes are required.
- Post-reset dividend coverage against AFFO and operating cash flow, including the effect of share issuance and portfolio sales.
- Progress on the announced sale of the 78 self-storage properties and the use of resulting proceeds.
- How portfolio ABR, occupancy, lease renewals, and acquisition returns evolve after the office exit and other 2023–2024 portfolio changes.