Trevor Bond, President and CEO of W.P. Carey Inc. (NYSE: WPC), a sponsor to non-traded REITs, discussed capital raising, sales rankings, and deployment strategies as these topics relate to their non-listed REITs during a recent earnings call.
Currently, W.P. Carey is raising capital for two non-traded REITs.
CPA®:18-Global, which launched in May 2013, is about 50% subscribed and on its way to reaching its goal of an initial public offering of $1 billion in equity.
Plus, Carey Watermark Investors, which raised $582.4 million in its initial offering through September 15, 2013, broke escrow in February on a $350 million follow-on offering.
When it comes to the capital raise standings amongst industry peers, Bond isn’t concerned. He looks to maintain equilibrium with inflows and their skill of deploying capital into investments with solid risk adjusted returns.
“We don’t measure success in terms of where we end up in the sales rankings. We believe that raising too much capital at the wrong time in the cycle is worse than raising too little capital at the right time in the cycle,” commented Bond.
In 2013, W.P. Carey ranked 8th in the direct investment industry for total capital raised with $655 million, down from 4th in 2012 with just over $1 billion, according to data from Robert A. Stanger & Co.
Bond added, “I think we are still at that equilibrium point.”
Of course landlords prefer investment grade tenants, however, W.P. Carey’s strategy is to build investment grade portfolios “by virtue of diversification”, across industry, geography, property type, and using conservative leverage rather than pay a premium for a property based on its occupant’s credit rating.
According to Bond, the critical question is can the tenant pay rent even during a short term economic cycle?
“Our senior management, including me, reviews each transaction during the underwriting and negotiation stage and each deal must be approved by an investment committee comprised of outside independent board members,” said Bond.
He concedes that this method is time consuming, but assures his team can handle it.
Despite the U.S. domestic net lease market competition, W.P. Carey insists they are able to find attractive deals that other net lease buyers walk away from, according to Bond. He says, “These require more work to underwrite and negotiate, but that is what we see as our core competency.”
The transcript for this call was made available by Seeking Alpha. To see the entire transcript, click here.