Bill Carey was one of the most popular freshmen in his dorm at Princeton… and it wasn’t because of good looks or a charming personality.
It was because he owned a rare luxury: a small refrigerator.
And being a born entrepreneur, Bill saw an opportunity to make some money.
He bought as many refrigerators as he could… and rented them out to his schoolmates. By the end of sophomore year, Bill had made over $10,000. (This was back in 1950 – that’s worth over $125,000 today.)
Bill would later go on to start the W.P. Carey Company (WPC), bringing his entrepreneurial spirit and knack for finding investment opportunities to the world of corporate real estate.
Here at the Intelligent Income Daily, we’re focused on finding the safest income investments on the market. It’s easy to get caught up by news headlines and short-term changes in the prices of stocks. But it’s important to remember that we’re investing for the long run, not just whatever happens tomorrow or in the next few months.
As I shared yesterday, W.P. Carey is one of the three companies that I believe will come out on top in the commercial real estate crisis. Today I want to take a deeper dive into the fundamentals of W.P. Carey, and how it approaches long-term investing.
“Investing for the Long Run”
When Bill started W.P. Carey, he had two goals in mind.
First, he saw an opportunity to support growing companies with an immediate cash infusion by buying their real estate.
Second, he wanted to give individual investors a way to enjoy the benefits of income-producing real estate without the financial burden of owning an investment property.
W.P. Carey was one of the first real estate companies to offer sale-leaseback deals. Sale-leasebacks are a creative and flexible form of financing that allows a company to raise money by selling the real estate it owns while entering a long-term lease so that it can continue using the property for its day-to-day business.
To raise the funds, it needed to buy real estate, W.P. Carey started private investment funds that would allow individual investors to pool their money and get a diversified portfolio of income-producing properties.
W.P. Carey went public in 1998 and has been raising its dividend every year since. In 2012, the company changed its corporate structure into a real estate investment trust (REIT).
It was also one of the first American real estate companies to expand overseas and start investing in properties in Europe.
Today, W.P. Carey owns properties in 26 different countries, leased to a wide variety of companies using the real estate for industrial, warehouse, office, retail, and self-storage purposes. It typically offers triple-net leases lasting at least 10 years, with annual rent increases. (In a triple-net lease, the tenant pays for maintenance, taxes, and insurance on a property.)
W.P. Carey’s diversified investment approach gives it the ability to invest across property types and across geographies and focus in on the best opportunities that it sees.
And the recent rapid rise in interest rates and turmoil in the stock market has led to increased opportunities for W.P. Carey. Companies are increasingly exploring alternative sources of capital, such as sale-leasebacks.
According to CEO Jason Fox “the combination of more companies considering sale-leasebacks and less competition has created a nice environment for us to compete. We feel good about where we are right now in terms of growth and expect to continue to find good deal opportunities this year.”
W.P. Carey has plenty of access to various forms of capital and is in a good position to execute on new investments. The company’s credit rating was recently upgraded to BBB+.
True to its motto, W.P. Carey is “Investing for the Long Run.”
50 Years and Counting
W.P. Carey is celebrating its 50th anniversary this year and has rewarded shareholders with rising dividends for 25 years.
The company’s time-tested portfolio is structured with downside protection in mind. Looking forward, Fox says that “we’re ready for any environment, but in particular one in which we could see some turmoil. We’re excited to continue our momentum over the next 50 years with a focus on investing for the long run.”
That’s the kind of income investment that helps me sleep well at night.
So if you are interested in adding W.P. Carey to your portfolio, it currently yields 6% and is trading at a reasonable valuation near its historical average of 13X adjusted funds from operations.
With the looming recession ahead and sky-high inflation, it’s important to find safe and secure dividend investments that will create a growing income stream to passively support your lifestyle.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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Source: Wide Moat Research