Forward-looking REITs prefund potential M&A
Having just reported Q4 earnings last week, three REITs have taken to the ECM market on Tuesday evening to raise a combined US$913.2m via the sale of forward blocks to fund this year’s pipeline of investments.
WP Carey’s fundraise was the largest, at US$432m. Bank of America and JP Morgan offloaded their purchase of 6m shares at US$72, bottom of the US$72–$73.50 range and a 3% discount to the US$74.16 last sale.
The books were multiple-times oversubscribed, with concentrated allocation where the top 10 investors took home 60% of the deal, a banker on the deal said.
WP Carey shares fell 3.7% Wednesday to US$71.39, below the offer price.
The commercial real estate REIT concurrently sold €1bn in debt, comprising €500m in five-year senior notes with 3.25% interest and €500m in nine-year notes carrying 3.75% interest.
Bank of America teamed up with Mizuho Securities, Truist Securities and Wells Fargo to dispose of an upsized US$350m block or 10.9m Essential Properties Realty Trust shares at US$32.20 from US$31.70–$32.69 guidance and a 1.5% discount to the US$32.69 last sale.
Essential Properties shares fell 1.1% to US$32.33 but held just above issue price.
JP Morgan and Wells Fargo raised US$131.2m in offloading 4m shares in Getty Realty at US$32.80, the bottom of the US$32.80–$33.50 marketed range and 3% discount to the US$33.83 last sale.
Getty shares slipped below the offer price in Wednesday session, falling 7.2% to US$31.41.
REITs prefer to sell forward equity as it allows them to lock in current share prices without immediate dilution. They will receive the cash when it’s needed for acquisitions, which can take months to realise.
The trio have all laid out ambitious acquisition plans for the year.
WP Carey – which specialises in single-tenant, operationally critical real estate – expects to invest US$1.25bn–$1.75bn this year and for adjusted funds from operations to rise as much as 5% to US$5.13–$5.23 per diluted share, from this year’s US$4.97.
“Following the strong fourth quarter, we've already closed approximately US$312m of new investments year to date,” said CEO Jason Fox on the Q4 earnings call.
WP Carey already raised US$422.6m last year from its ATM programme in dry powder that it hasn’t yet tapped, bringing total liquidity to US$2.2bn as of December 31.
“We also anticipate generating close to US$300m of retained cashflow this year, providing an additional source of equity capital,” Fox said.
Also with a single-tenant focus, Essential Properties expects AFFO this year to grow as much as 8% to US$1.99–$2.04 per share from 2025’s US$1.89, on US$1bn–$1.4bn investments.
Getty’s latest raise adds to US$500m of liquidity.
The net lease REIT that focuses on convenience and automotive retail real estate reaffirmed its 2026 AFFO guidance of US$2.49–$2.50 per diluted share, representing an estimated growth of 7%.
Getty has already started its acquisition streak, with US$8.7m investment made since the beginning of the year in four drive-through quick service restaurants and four auto service centres.
Looking ahead, it has an additional US$100m investment under contract at an initial cash yield in the high 7%, most of which it expects to fund by the end of the year.