W. P. Carey Spins Off Office Assets, Setting Strategy for 2024 Exit

It will spin off a majority of its office assets into a new publicly traded REIT as the office real estate market continues to struggle.

By Rethinking65

Real estate investment trust (REIT) W. P. Carey Inc. (NYSE: WPC) announced Sept. 21 a significant restructuring of its office portfolio.

In a two-pronged move, the company will spin off a majority of its office assets into a new publicly traded REIT, Net Lease Office Properties (NLOP), and has further established an aggressive office asset sale program aiming to wrap up by January 2024.

The spin-off, set to complete around November 1, will see 59 office properties transitioned into NLOP, representing about 10% of W. P. Carey’s annualized base rent (ABR) as of mid-2023. NLOP will mainly house U.S. properties, with some European holdings, covering approximately 9.2 million leasable square feet. The combined value generated from these assets surpassed $141 million in June.

Simultaneously, W. P. Carey has expedited the sale of its remaining 87 office properties. More than half of these are already marked for sale or have changed hands. This move aligns with the company’s strategy to optimize its portfolio and extract value from its legacy office holdings.

“This move dramatically fast-tracks our office exit, amplifying the quality of our portfolio and the stability of our earnings,” said Jason Fox, W. P. Carey’s CEO, in a press release. “Our goal is clearer monetization of our traditional office assets, ensuring more value for our shareholders.”

Office real estate has been particularly hard hit since the Covid-19 pandemic. More people have been working from home and have continued to do so even as the pandemic has ended.

Green Street, a well-known real estate research and advisory company, noted recently that property values in the office market have declined 31% from recent highs, and “REIT-quality,” or average, office properties have fallen 40%.

Financial details surrounding the spin-off reveal that NLOP has secured a $455 million debt facility from J.P. Morgan. Around $350 million of this sum will be channeled back to W. P. Carey in conjunction with the spin-off. As it carves its own path, NLOP’s operations will primarily center around strategic asset management and, over time, the selling of its property portfolio.

As part of the restructuring, shareholders of W. P. Carey can expect to receive NLOP shares as a special distribution, which will likely be taxable. NLOP shares are anticipated to debut on the New York Stock Exchange under the ticker NLOP.

According to Dun & Bradstreet, W. P. Carey owns more than 1,000 properties mainly in the U.S. and Europe, and manages properties for several non-traded real estate investment trusts (REITs). Its management portfolio totals approximately $15 billion.

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