O - 11.2 Years Is a Key Figure for W.P. Carey. Here's Why.
2023-09-08 06:36:00 ET
There are a lot of moving parts when it comes to investing in real estate, from location to tenant quality, and a fair amount in between. However, there's one statistic that probably doesn't get nearly enough consideration from investors, and that's the weighted average lease term. Here's why W.P. Carey (NYSE: WPC) stands tall on this figure, and why it is important to consider when you compare it to net lease peers like Realty Income (NYSE: O) and NNN REIT (NYSE: NNN) .
Owning and operating a property can be a lot of work, which is why W.P. Carey, Realty Income, and NNN REIT (formerly known as National Retail Properties) use the net lease approach. Essentially, they all own single-tenant properties for which the tenant is responsible for most asset-level operating costs. It materially reduces the time and energy that these REITs have to put in to maintain their portfolios.
Tenants are happy to take on these costs and obligations because, by paying them, they are effectively ensuring that the property is maintained to whatever standard they see fit. Net lease properties are often acquired via sale/leaseback transactions that are used by the seller to raise cash for other purposes. Essentially, W.P. Carey, Realty Income, and NNN REIT are more like financial partners than landlords in many ways. In exchange for the cash they provide in the sale/leaseback deals, they get reliable tenants and low-maintenance properties.
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11.2 Years Is a Key Figure for W.P. Carey. Here's Why.