The REIT Decision
Transformational but a natural evolution” is how Trevor Bond, president and CEO of what is now W.P. Carey Inc., describes his company’s Sept. 28 conversion to a REIT. “Going from an LLC to a REIT is an important change in our form and structure, but it’s a natural evolution in that nothing’s changing in terms of our basic approach to the business,” Bond tells REAL ESTATE FORUM. “It gives us some additional capabilities that are very important strategically, yet with the same fundamental approach.”
That essential modus operandi was established in 1973 by Wm. Polk Carey, the late founder of what is now reportedly the world’s largest owner/manager of net-leased assets. Although Carey did not invent sale-leasebacks, having done them in one-off transactions since the 1950s, he was among the pioneers in the concept of “pools of net-leased assets held in securitized form,” says Bond. Carey did this initially through limited partnerships and later began a series of public non-traded REIT affiliates that the company manages externally, including Corporate Property Associates 15 Inc., with which W.P. Carey merged on the day it became a REIT. The merger created a company with a market capitalization of $5 billion and a net lease portfolio of more than 39 million square feet globally.
For CPA:15’s shareholders, the merger provided a satisfying and lucrative outcome, while for W.P. Carey as a whole, it did more than simply double the company’s size. It also made it more appealing to institutional investors, “which was one of our goals,” says Bond. Further, being listed in REIT indices enhances shareholder value, and Bond says the company was surprised at how quickly its addition to the MSCI US REIT and MSCI US Mid Cap 450 indices was approved: two days after the newly minted trust commenced trading on the New York Stock Exchange.
The company founder’s initial approach was creating a fee-based business through asset management, aimed at retail-oriented investors interested mainly in steady dividend checks. It was a format that proved lucrative and, in Carey’s case, enabled him to become a philanthropist. “He was such a successful asset manager that when it came time for the Kimcos and the other early upREITs that helped the public market develop in the early 1990s, this company really chose to stay out of that,” Bond says. “He liked being an asset manager and he liked being a privately owned company for a number of years. There was just no reason that he could see to become a public REIT.”
...For the rest of the story, go to the November 2012 issue of Real Estate Forum online.