W.P. Carey, CPA:18 to Merge in $2.7B Deal

W.P. Carey Inc., one of the largest net lease REITs, has entered into a definitive merger agreement to acquire Corporate Property Associates 18 – Global Inc., a public non-traded REIT with a diversified portfolio of net lease commercial real estate properties, in a transaction valued at $2.7 billion. Upon completion of the merger, W. P. Carey will have a combined enterprise value of $23.4 billion.

W.P. Carey serves as adviser to CPA:18, which closed its two-year initial public offering in 2015. Under the terms of the merger agreement, CPA:18 stockholders will receive 0.0978 of a share of W. P. Carey common stock plus $3.00 of cash for each share of CPA:18 common stock, marking a total initial implied value of $10.45 per share. W. P. Carey plans to partially fund the cash portion of the CPA:18 acquisition through the disposition of certain office properties in Europe and one student housing property. The deal includes the assumption of approximately $1 billion of existing mortgage debt.

Jaguar Land Rover facility, Solihull, U.K. Image courtesy of W. P. Carey Inc.

The analyst community views the impending merger favorably. “It’s a good move for WPC strategically, as they are very familiar with the assets and can transition the ownership fairly effortlessly, while the acquisition simplifies the story for WPC, which investors tend to reward,” John Kim, real estate analyst with BMO Capital Markets, told Commercial Property Executive. “WPC will also increase its scale and become a top 25 REIT in market capitalization, which tends to attract a larger investor base, and may be beneficial to WPC’s cost of capital.”

W.P. Carey’s equity market capitalization will increase to $15.8 billion post-merger, pushing the company up in rank to the 23rd largest REIT in the RMZ Index.

Matching portfolio metrics

The portfolios of W. P Carey and CPA:18 feature similar characteristics and will, therefore, blend well when combined post-merger. The balance of industrial/warehouse, office, retail, self storage and other property types will remain practically unchanged, with industrial/warehouse going from 50 percent of the portfolio to 49 percent. Office assets will increase from 20 percent to 21 percent of the holdings. As part of the merger transaction, W. P. Carey will acquire a 65-property self storage portfolio totaling 42,000 units.

Additionally, there will be no major geographical adjustments, as, 63 percent of the portfolio will continue to be located in the U.S. The international profile of a 5 percent footprint in the U.K.—where W. P. Carey purchased a 1.1 million-square-foot facility in a $195 million sale-leaseback with Jaguar Land Rover Ltd. in 2021—Germany and Poland will remain unchanged, as will the company’s 2 percent presence in Italy and France and 1 percent presence in Denmark. The percentage of the holdings in Spain and the Netherlands will each drop from 5 percent of the annualized base rent to 4 percent.

If all goes as planned, including the anticipated approval of CPA:18 shareholders—WPC shareholder approval is not required for the deal to move forward—W. P. Carey’s acquisition of CPA:18 will close in the third quarter of 2022. The resulting portfolio will encompass 164 million square feet spanning 1,338 properties, with an average occupancy level of 98.5 percent.