W. P. Carey Inc. (NYSE:WPC), a real estate investment trust, disclosed today that one of its tenants, True Value Company, L.L.C., has voluntarily filed for Chapter 11 bankruptcy. True Value also announced an agreement to sell most of its business operations to Do it Best Corp.
As of June 30, 2024, W. P. Carey had leased nine properties to True Value, comprising both master and individual leases, which generated an annualized base rent (ABR) of approximately $18.7 million. This positioned True Value as W. P. Carey's 15th largest tenant, with a weighted-average lease term of 14.1 years.
Despite the bankruptcy proceedings, True Value has maintained its rent payments through October 2024. The properties leased to True Value include distribution warehouses located in Oregon, Georgia, Arizona, Texas, California, Missouri, Ohio, and Minnesota, as well as a manufacturing facility in Illinois.
The total ABR from these properties represents about 1.4% of W. P. Carey's ABR, with the square footage leased amounting to 4,362,000. The leases are structured either through two master leases or three individual leases.
This announcement was made in a Form 8-K filing with the Securities and Exchange Commission, which serves as an official communication of significant events that shareholders should be aware of. The information is based on a press release statement.
In other recent news, W. P. Carey, a global net-lease real estate investment trust, announced an increase in its quarterly cash dividend to $0.875 per share, reflecting its commitment to shareholder value. The company also reported adjusted funds from operations (AFFO) per share of $1.17 for the second quarter of 2024 and revised its full-year AFFO guidance to a range of $4.63 to $4.73 per share.
In response to these developments, JPMorgan updated its price target for W. P. Carey, raising it to $70.00 from the previous $68.00, while RBC Capital revised its outlook on the company, lowering its price target to $62.
These adjustments are due to unforeseen issues during the due diligence process for deals worth approximately $300 million, which influenced the company's acquisition guidance and full-year AFFO.
Despite these challenges, W. P. Carey maintains a robust liquidity position and continues to focus on properties under long-term net leases that feature built-in rent escalations. These recent developments highlight the company's strategic focus and its commitment to transparency and reliability in financial guidance.
Despite a slowdown in investment activity, W. P. Carey successfully raised over $1 million in new unsecured debt through bond issuances in both Europe and the U.S. This follows the successful sale of most properties in their Office Sale Program.
RBC Capital analysts anticipate a potential reset in expectations for W. P. Carey's acquisition strategy for 2025.
InvestingPro Insights
In light of W. P. Carey's recent disclosure regarding True Value's bankruptcy, investors may find additional context from InvestingPro data valuable. Despite the potential impact of this tenant's situation, W. P. Carey maintains a robust financial position. The company boasts an impressive gross profit margin of 91.73% for the last twelve months as of Q2 2024, indicating strong operational efficiency.
An InvestingPro Tip highlights that W. P. Carey has maintained dividend payments for 27 consecutive years, suggesting a commitment to shareholder returns even in challenging times. This is further supported by the current dividend yield of 5.84%, which may be attractive to income-focused investors.
However, it's worth noting that analysts anticipate a sales decline in the current year, which aligns with the potential revenue impact from True Value's situation. The company's P/E ratio (adjusted) stands at 26.93, reflecting the market's current valuation of the stock in light of recent events.
For a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into W. P. Carey's financial health and prospects.
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