W. P. Carey's 2025 Results Confirm AFFO Growth but Highlight Persistent FX and Leverage Risks

What happened

W. P. Carey announced its fourth quarter and full-year 2025 financial results, showing continued growth in adjusted funds from operations (AFFO) driven by accretive acquisitions and contractual rent escalators. Net income, however, faced pressure from foreign exchange losses and mark-to-market adjustments, similar to prior quarters, obscuring the underlying stability of property-level cash flows. The company maintained high occupancy rates and long weighted average lease terms, reflecting its refined focus on industrial, warehouse, and retail assets post-office spin. Despite management's positive framing, the results underscore ongoing vulnerabilities from moderate leverage around 5.8x net debt to EBITDA and exposure to currency volatility in a still-uncertain interest rate environment. Overall, the performance aligns with the DeepValue thesis of a potential buy opportunity, but reinforces the need for vigilance on capital allocation and external headwinds.

Implication

The sustained AFFO growth demonstrates the resilience of W. P. Carey's core net-lease operations, providing a basis for reliable dividend payments and potential share price appreciation if valuation gaps narrow. Persistent foreign exchange losses highlight earnings sensitivity to currency swings, which could erode investor confidence and complicate near-term stock performance despite operational strength. Stable portfolio metrics post-restructuring are encouraging, but the elevated leverage ratio necessitates careful monitoring of refinancing risks and acquisition spreads in a competitive market. For income-focused investors, these results justify accumulating shares on pullbacks, but aggressive positioning is premature given macroeconomic uncertainties and the overhang from higher-for-longer rates. Key areas to watch include future AFFO guidance, progress on reducing debt, and management's ability to hedge FX exposure effectively to mitigate earnings volatility.

Thesis delta

The new results do not significantly shift the existing thesis; they affirm the view that W. P. Carey offers attractive upside based on DCF modeling, but with unchanged risks from leverage and FX that temper enthusiasm. However, if subsequent quarters show accelerated AFFO growth or improved net income stability, the thesis could lean towards a stronger buy, whereas continued FX headwinds or rising leverage might necessitate a more defensive stance.