W.P. Carey Announces REIT Conversion Plans

Investment firm W.P. Carey & Co. LLC on Feb. 21 announced plans to convert to a publicly traded REIT. In conjunction with the conversion, the newly formed REIT, which would be named W.P. Carey Inc., would acquire Corporate Property Associates 15 Inc. (CPA:15), the firm's existing non-traded REIT affiliate.

"This is an extreme milestone in our history and a natural evolution for us as well," said Trevor Bond, W.P. Carey's president and CEO, during a Feb. 22 conference call.

W.P. Carey has been "somewhat held back" by its structure, size and business model, according to Bond, who said becoming a REIT will help make the company a better-known brand in the market.

"We are confident that our new structure will go a long way with helping us increase visibility," he said.

Judith Fryer, an attorney with Greenberg Traurig LLP who serves as co-chair of the law firm's REIT group, endorsed the idea that W.P. Carey would boost its visibility through the conversion. "It will give them a different kind of currency and may give them a higher profile for better coverage," she said.

Bond also touted a variety of other factors behind the move, such as an increase in scale, better financial strength and access to capital for growth. Bond said the total square footage in the company's real estate portfolio is expected to grow by 250 percent as a result of the move. Additionally, the restructuring should help lengthen the average lease term for W.P. Carey's properties and boost occupancy.

"The transaction will increase our income contribution from owned properties, which will reinforce benefits for REIT conversion," he said. "Being a bigger, stronger REIT will make us a better asset manager as well."

Under the terms of the multifaceted proposal, CPA:15 stockholders would receive W.P. $125 and approximately a quarter of a share of W.P. Carey common stock for each share of CPA:15 stock that they own.

"In addition to providing liquidity for CPA:15 investors, this transaction will enhance our strength and flexibility, with a larger balance sheet and more diversified portfolio," said Bond.

Industry analysts said the transaction would allow W.P. Carey to attract devoted REIT investors and increase its liquidity. Andrew DiZio, analyst with Janney Montgomery Scott LLC, said W.P. Carey is in a unique situation because it can hold on to the non-traded REITs.

"It's a move that we like," DiZio said.

The deal is expected to close by the third quarter. It is currently awaiting shareholder approval.