WP Carey Sees Sluggish Start to 2004

NEW YORK CITY-Despite a slow start to this year, WP Carey says less-than-strong first quarter results are not that unusual in business and the firm is expecting a pick-up by the end of the second quarter.According to the company’s first quarter financial results, net income for the three-month period was $11.1 million, down from the $17.3 million in the first quarter of 2003. In addition, funds from operation for the three-month period were $21.4 million, also down from the $381 million the company registered in 2003.”The earnings and FFO were impacted by a relatively low volume of acquisitions in the first quarter of this year relative to last year,” says president and co-CEO Gordon DuGan. He adds that the transaction volume tends to be “lumpy,” making it hard to judge. In addition, the first quarter is typically the slowest of the year and the first half is typically slower than the third and fourth quarters when companies focus on balance sheet management and raising capital in “a more strong fashion,” DuGan says.To put it in perspective, in three of the prior five years the company has seen acquisition volume under $100 million in the first quarter, he adds. “It’s not a historical aberration to have a relatively slow first quarter,” DuGan explains. “What is different is the first quarter last year was by far our strongest over the last five years as we had a large transaction from the fourth quarter slip into the first quarter.”However, WP Carey has already experienced an increase in the second quarter. “We’ve seen a pick-up in volume for the second quarter. The pipeline looks strong,” he says. “We’ve disclosed in our 10K that we have reached an agreement to make a $300-million investment. We are in the process of closing that transaction. …We expect the second quarter to be strong based in part on that.”Overall, DuGan says, in terms of assets under management for the business, on March 31, 2003 the company was at $3.9 billion; on March 31, 2004 it was at $4.8 billion. The 23% year-to-year increase shows underlying growth in the assets under management, according to DuGan, who adds that the growth continues to be steady and increasing. CFO John Park acknowledges that the first quarter results were weaker than last year’s results–primarily due to a reduction in investment volume–but adds the company’s fundamentals remain solid.