W.P. Carey Inc (WPC) CEO Trevor Bond says that at the beginning of the year, the company’s earnings guidance assumed acquisitions for its owned portfolio of approximately $200 million. But, when the company reported Q2 earnings, management increased that number to about $500 million to $600 million.
“That reflects a strong growth in our anticipated acquisition pipeline,” Bond says. “We tend to be cautious about making our announcements too soon, but I think we feel reasonably confident that we can hit those numbers.”
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Bond says part of the increase in the owned portfolio is attributable to opportunities in Europe, where he says the buying opportunities are less competitive than in the United States.
“For a comparable tenant quality and real estate quality, we’re finding that the cap rates are higher in Europe than in the United States, if you compare properties and tenants pound for pound,” Bond says. “At the same time, the debt market there is at a different point in its cycle. The cost of 10-year debt at the company level, for instance, if we were to do a Eurobond offering, is significantly less than in the U.S.”
Bond says the advantage for W.P. Carey as a borrower in euros is that the company has strong euro revenues from its owned portfolio.
“We can match those revenues against debt service in euros, and that’s a good hedge while we’re still taking advantage of the lower rates,” he says.
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