On Friday W. P. Carey & Co. LLC (NYSE: WPC) announced that its Board of Directors has increased the company's quarterly cash distribution to $ 0.567 per share for the quarter ending June 30, 2012 (payable on July 16, 2012 to shareholders of record as of July 2, 2012). This marks the company's 45th consecutive distribution increase and the company's continued track record for growing its 15 year track record of consistency.
W. P. Carey & Company is also growing closer to merging its Corporate Property Associates 15 Inc. (CPA®: 15) non-traded REIT into W. P. Carey & Co., LLC . Upon merging these two entities, the merged company will become a publicly-listed REIT. The total transaction value is estimated to be around $2.6 billion, including the assumption of CPA®: 15 debt of $1.2 billion. The proposed merger transaction is expected to close around Q3 2012.
By owning over 75% of its combined (merged) assets, W. P. Carey will qualify as a REIT and the benefits of the planned merger will provide further risk-alignment for current and future investors:
· The merger will substantially increase W. P. Carey's scale and liquidity - pro forma equity value of approximately $3 billion
· Transaction expected to be accretive to AFFO per share and CAD per share, and provides for continuation of stable dividend growth
· Provides liquidity to CPA®:15 stockholders without incurring significant additional indebtedness
· Increases income contribution from owned properties, reinforcing benefits from REIT conversion while preserving asset management platform
In addition, the new REIT will provide enhanced access to capital markets and simplify tax reporting for shareholders. The conversion will also increase Wall Street coverage and qualify Carey to be included in REIT indices. Also, shareholders and investors will be able to benchmark Carey against similar triple net REITs like Realty Income (O), National Retail Properties (NNN), and American Realty Capital Trust (ARCT).
Following the merger transaction, W. P. Carey's rental revenues are expected to represent 81 percent of the company's revenues, which will likely solidify the market's recognition of W. P. Carey as a REIT and reinforce the benefits from REIT conversion. The combined company market capitalization will be approximately $5.0 billion - making the REIT the second largest triple net REIT in the NAREIT sector (behind Realty Income).
The combined high-quality portfolio will consist of around 450 properties and around 42 million square feet. The well-balanced portfolio will consist of a diverse spectrum of property types ranging from office (29%), industrial (27%), retail (14%), warehouse/distribution (20%), and self-storage (10%).
In addition, the combined company will have a broad geographic reach with 70 percent of assets in the U.S., 12 percent in France, 110 percent in Germany, and 9 percent other Europe (Spain, Poland, Finland, Netherlands, Belgium, and United Kingdom).
Like the other triple net REITs, Carey should also continue to be a classic dividend champion. The company's historical performance supports continued dividend durability as Carey has increased its dividend every year since going public in 1998. In addition, Carey has increased its quarterly dividends each of the last 45 quarters. Annual dividend growth has averaged 2.4 percent from 1998-2011:
Three other non-traded REITs have listed as public REITs this year. American Realty Capital Trust listed on March 1, 2012, Retail Properties of America, Inc. (RPAI) listed on April 5, 2012, and Healthcare Trust of America (HTA) listed on June 6, 2012.
When Corporate Property Associates 15 Inc. becomes a merged entity (with W. P. Carey & Company), the triple-net REIT will become the fourth non-traded REIT to list this year and its differentiated platform will consist of high-quality world-class sale-leaseback originated assets. The company's founder, Wm. Polk Carey, passed away in January of this year after leading the iconic sale-leaseback legend to over four decades of consistent performance. Mr. Carey was a legend in his own right and his long-term investment strategies were often described as sound risk control principles - and also the mission of the company:
These returns demonstrate our success in fulfilling our most important corporate mission: Investing for the long run. Our aim is to help our investors build and maintain lifestyles, and have the resources they need to meet their obligations and achieve their dreams, without constant worry about where the income to fund will come.
The merged companies and new REIT will provide the same sound fundamentals that Mr. Carey described - Investing for the long run. This remarkable track record of consistency built on extraordinary risk-control and principal preservation is what makes the namesake REIT an exceptional choice. By continuing to invest in high-quality triple-net assets, Carey's consistent and durable brand will provide strategic competitive advantages that will enhance the REIT and also enable shareholders to sleep well at night.
I have no ownership interest in any of the stocks mentioned and I have recently written articles on ARCT, HTA, O, and NNN. Also, WPC was included in my Seeking Alpha article last week, Defend Your Portfolio With These 'Wide Moat" REITs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.