NEW YORK CITY-After W.P. Carey unveiled it will acquire Corporate Property Associates 15 and convert to REIT status, the investment bank anticipates “substantial” growth in its commercial real estate portfolio. During an earnings call on Wednesday morning, W.P. Carey’s president and CEO Trevor Bond said that the company’s total square footage will grow by 250%—and lease terms will lengthen and occupancy rates will increase as a result.
“It will also provide us with higher visibility in the market,” he said, addressing investors on the call. “We’ve been held back in the past by being an LLC, and it served us well during the earlier stage of our company’s life, but I think converting to a REIT will simplify the tax reporting for the shareholders, which I know will be appealing to different group and a broader group of investors.”
Describing the transaction as an “extremely important milestone” in the company’s history, Bond called the deal “transformative,” but also a natural evolution. The company’s real estate portfolio will go from 14 million square feet to 43 square feet, which will be leased to 135 companies worldwide following the merger. It will have a total equity market capitalization of approximately $3 billion, and a total market capitalization of $5 billion.
“The transaction will increase our income contribution from owned properties, which will reinforce the benefits from the REIT conversion, while at the same time, preserving this very valuable asset management platform,” Bond commented.
Under the terms of the proposed merger, CPA:15 stockholders will receive $1.25 in cash and 0.2326 of a share of W. P. Carey common stock for each CPA:15 share at closing. The transaction values CPA:15 at $2.6 billion, including the assumption of debt of $1.2 billion, as of December 31, 2011.
“One of the main benefits for us is that this would be another milestone for the 14th successful liquidation of one of our funds,” Bond said. “We would consider this a full-cycle liquidation, because shareholders for CPA:15 would be receiving a marketable security and cash. That’s quite significant when you consider where we stand in the non-traded REIT space. We are one of the few firms that have gone full-cycle, even once or twice.”
The company will also change its name to W.P. Carey Inc. following its status change but will continue to be traded under ‘WPC’ on the New York Stock Exchange. In addition, the new REIT will increase its annual dividend to $2.60 per share to maintain compliance with REIT tax requirements.
In terms of WP Carey’s management of the board, Bond said no executive changes are anticipated. “We think this is one of the key advantages of the transaction, he said. “We think there is zero integration risk, though this is a merger of two companies, it is really a portfolio of assets we know very well. We originated them, we’ve been managing them all along, so there’s no integration risk.”
BofA Merrill Lynch is acting as financial advisor to W. P. Carey and DLA Piper US LLP is acting as the legal advisor to W. P. Carey. Deutsche Bank is acting as financial advisor to CPA:15 and Clifford Chance LLP is acting as legal advisor to CPA:15. The transaction is expected to close in third quarter 2012.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
