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Triple Net Gains from Carey

12/06/2002 12:00 am EST


Neil George

Editor, Profitable Investing

“I wish I could tell you that these are the good times again,” says Neil George. “I hate being a grumpy bear, pointing out all of the woeful ills of the markets. But I can’t change my views.”  Despite his bearish market outlook, the editor of By George! still finds value in select situations. Here’s his favorite among REITs.

“A priority on the political agenda was insurance legislation, a godsend for a whole host of industries: high-profile property owners as well as property owners in higher-profile cities. These companies were really sweating it out, as insurance premiums were getting out of hand, if they could get a quote at all. The terrorism insurance legislation is going to help insurers write and maintain insurance, with the US taxpayer as the ultimate underwriter.

“This will benefit a collection of property companies, but my front-line favorite is New York-based W.P. Carey (WPC NYSE). This company is structured like a REIT and also does sale lease-back deals, in which corporations liquefy their property holdings by selling them to W.P. Carey. The company then leases the properties back on a long-term triple net basis whereby tenants absorb ongoing costs and the leases have inflation protection. WP Carey has a solid track record in both its public company, as well as its privately placed partnerships. Everything from headquarter buildings to distribution centers are bought from their owners and leased back for long-term leases on a triple-net basis, which puts the risks and costs of the facilities back onto the tenants and not Carey's investors.

“Bill Carey is an old veteran of the financial and properties markets and continues to lead a group of sharp and astute buyers of properties. The company has delivered a return of nearly 70%  over the last several years and still continues to consistently pay its owners a series of fat dividend checks that currently yield in excess of 7.1%. And the great thing about this company is that during tougher times for the business world, Carey gets to buy properties from eager and highly motivated companies that need to liquefy assets, which then appreciate when bear times turn bullish. For those who want to cash in on the prime property markets while also earning a nice yield, the Carey family is your company.”

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