W.P. Carey to Become REIT

February 23, 2012
By Barbra Murray, Contributing Editor

Change is afoot at W. P. Carey & Co. L.L.C. The multibillion-dollar investment firm — a leader in the sale-leaseback sector — has received the green light from its board of directors to convert to a REIT, but that’s just for starters. Upon completion of the transition to REIT status, W. P. Carey will acquire Corporate Property Associates’ 15 Inc., its publicly held, non-traded REIT affiliate, in a cash and stock transaction valuing CPA:15 at $2.6 billion. The resulting new REIT, which will be known as W. P. Carey Inc., will have a total market capitalization of $5 billion and a global corporate real estate portfolio spanning 43 million square feet.

The list of advantages that will come with W. P. Carey operating as a REIT is short but substantive. The change will allow for improved access to capital markets; provide better currency to support future growth; and give shareholders the added bonus of streamlined tax reporting. Over the long-term, the company believes, the conversion may allow for the inclusion in REIT indices, added Wall Street research coverage and additional liquidity.

And W. P. Carey’s merger with CPA:15, established in 2001, certainly has its advantages, as well. As one entity, the new REIT will have greater scale and liquidity; a stronger platform for future growth; and increased income contribution from owned properties. CPA:15 brings to the table a 29 million-square-foot diversified portfolio of 321 high-quality with an average occupancy rate of 96 percent. Rental revenues will account for roughly 81 percent of W. P. Carey’s total revenue. The combined REIT will have a stable of 450 properties, including a segment of Manhattan’s New York Times Building, which W. P. Carey acquired in 2009 in a $225 million sale-leaseback transaction with the newspaper publisher.

W. P. Carey is relying on BofA Merrill Lynch to serve as financial advisor on the merger, while CPA:15 is being guided by Deutsche Bank However, the transaction is not yet set in stone; both companies’ shareholders and stockholders must green light the deal. If all goes as planned, the transaction will close in the third quarter of this year.

News of W. P. Carey’s merger and REIT conversion plans come less than two months after the death of company founder William Polk Carey.

*This story was updated on Feb. 24, 2012, at 8:05 a.m. EST.