W.P. Carey (WPC) Q2 AFFO Jumps 9.4%

W.P. Carey (WPC 0.79%), a leading diversified net lease real estate investment trust (REIT), reported earnings on July 29, 2025. The company outperformed analyst forecasts with adjusted funds from operations (AFFO, non-GAAP) per share of $1.28, significantly ahead of the consensus non-GAAP EPS estimate of $0.63. Revenue (GAAP) reached $430.8 million, well above the $401.64 million GAAP estimate and up 10.5% year over year. However, net income (GAAP) fell sharply to $0.23 per share, impacted by mark-to-market losses and currency effects. For investors, the period showed strong cash generation and stability in core operations, but earnings volatility from non-cash items was pronounced. Management raised full-year AFFO (non-GAAP) guidance for FY2025, reflecting confidence in its business model.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Overview of W.P. Carey's Business and Priorities

W.P. Carey operates as a diversified net lease REIT, owning a broad portfolio of commercial real estate with tenants responsible for property expenses. The company leases its properties to businesses in the U.S. and Europe, featuring a mix of industrial, warehouse, retail, and self-storage assets. As of June 30, 2025, the portfolio included 1,600 properties leased to 370 tenants, with total occupancy at 98.2% and a weighted average lease term of 12.1 years.

W.P. Carey's core business model centers on diversification, long-term leases with built-in rent increases, and a focus on tenant creditworthiness. The company's success depends on steady rental income, rigorous asset management, and prudent capital recycling. Diversification across property types, industries, and geographies supports stable cash flows and lowers risk from single asset or sector weakness. The combination of inflation-linked and fixed rent escalators in lease agreements helps mitigate the impacts of rising costs.

Key Developments in the Quarter

The company posted strong growth in AFFO per diluted share—a key cash earnings measure for REITs—of 9.4% (non-GAAP). AFFO, which excludes non-cash items and focuses on operating profitability, improved due to new acquisitions, rent escalations within existing leases, and high occupancy. Revenue rose by 10.5% year-over-year, Lease revenue increased by $40.1 million year-over-year and a $5.3 million year-over-year increase in income from finance leases and loans. Rising lease income reflects successful new investments and the benefits of inflation-indexed or contractually increasing rent structures.

On the bottom line, diluted earnings per share (GAAP) declined 64.2% year-over-year as a result of non-cash losses. The main contributors were a $69.0 million mark-to-market loss on an equity holding in Lineage, and additional foreign currency remeasurement losses. These factors do not affect current cash flow, but can create volatility in net income. Despite the headline earnings drop, the underlying cash-generating ability of W.P. Carey's portfolio remained solid.

The period also saw high levels of investment and disposition activity. New investments totaled $548.6 million, bringing the year-to-date total over $1.1 billion. Dispositions reached $364.2 million, including sales of 10 self-storage operating properties. These asset sales are an important part of the company's capital recycling strategy, allowing W.P. Carey to exit lower-yield or non-core properties and reinvest in new net lease deals with more attractive returns. The shrinking self-storage portfolio now consists of 66 properties, while other operating holdings include four hotels and two student housing assets.

Contractual same-store rent growth—which measures recurring rent increases on a like-for-like property basis—was 2.3% year over year on a constant currency basis, supported by a mix of inflation-linked and fixed escalators in lease agreements. About half (50.7% as of December 31, 2024) of all leases are tied to consumer price indices, providing a cushion against inflation. Management reported a credit reserve in FY2025 AFFO guidance, accounting for potential rent loss tied to tenant credit events, particularly for tenants under heightened watch such as Hellweg. Exposure to tenants with financial uncertainty is being actively managed, including partial store takebacks and asset sales.

Business Focus, Segments, and Portfolio Structure

W.P. Carey's business revolves around owning long-term, triple-net leased properties. In a triple-net lease, tenants cover maintenance, insurance, and taxes, reducing landlord expense risk and making rental income more predictable. The company's recent strategic focus has included deepening its diversification, expanding its capacity for new investments, and continuing to prune non-core properties from its portfolio.

Diversification across property type and region is a key pillar. Approximately 61% of annualized base rent comes from U.S. operations and 33% from Europe as of December 31, 2024. Active asset management underpins the model, with frequent tenant engagement and capital investments supporting high occupancy. Capital structure remains a focus, with liquidity exceeding $1.7 billion as of June 30, 2025, including a $1.3 billion undrawn revolving credit line and over $244.8 million in cash.

Looking Ahead: Guidance and Investor Considerations

Management raised its full-year 2025 AFFO (non-GAAP) outlook to $4.87 to $4.95 per share, reflecting expected year-over-year growth of 4.5% at the midpoint. Investment volume and disposition volume guidance were both increased, to $1.4–$1.8 billion and $900 million–$1.3 billion, respectively, for FY2025. General and administrative expense guidance dropped, while property and tax expense guidance rose, in line with ongoing operational trends, a precaution given continued tenant credit monitoring.

The quarterly dividend was increased 3.4% to $0.90 per share, annualized at $3.60 per share. Going forward, investors should monitor additions or removals from the company's credit watch list, progress on recycling of self-storage and other non-core properties, and trends in leasing and occupancy rates. The company did not cite material direct impacts from tariffs or shifting macroeconomic conditions in the period but acknowledged ongoing market uncertainty and maintained conservative reserves for potential credit or market events.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.