We previously discussed W. P. Carey (NYSE:WPC) in August 2023, highlighting its safe dividend due to its reaffirmed FY2023 AFFO guidance. However, due to its highly leveraged business model and rising expenses, the stock saw a significant sell-off as investors sought safer options. Despite our previous Buy rating, the stock has further declined in recent months following the unexpected office asset sale and mixed FQ3’23 earnings call. Nevertheless, we maintain our Buy rating as we believe the management’s decision to deleverage amidst the current interest rate environment shows prudence.

WPC has delivered unexpected news twice in recent months, with the divestiture of its office assets and a mixed FQ3’23 earnings call. The divestiture is expected to bring in approximately $735 million in net proceeds, which will likely be used to improve the balance sheet. The REIT’s annualized interest expenses have increased due to the elevated interest rate environment, but we believe that the management’s actions will position WPC for improved cash flows and balance sheet health in the future. Additionally, the divestiture has been long anticipated, indicating the management’s foresight.

The FQ3’23 earnings results were mixed, leading to a lower FY2023 AFFO guidance. However, we believe that WPC’s strategy may be more prudent compared to other REITs in the current macroeconomic conditions. The stock’s FWD Price/AFFO valuations have also moderated, making it an attractive investment opportunity based on our long-term price target of $66.09 and the current depressed share price of $55.11.

Despite the stock’s recent decline, we maintain our Buy rating for WPC, especially for income-oriented investors. However, we advise that the stock may only be suitable for investors with higher risk tolerance and a long-term investing trajectory.