Since joining W. P. Carey’s International Investments Team in 2006, Arvi Luoma has been directly involved in the acquisition and financing of more than €2 bln of net-lease, sale-leaseback and build-to-suit investments across Europe on behalf of W. P. Carey Inc. and its CPA® series of managed REITs. Arvi Luoma, Executive Director Europe, W.P.Carey spoke to Europe Real Estate about the company’s future plans and discussed future real estate trends.
What is W. P. Carey involved in at the moment and what are its future plans?
2014 was an eventful year overall for W. P. Carey and for the firm’s European acquisitions team - we completed a record of over €1.2 bln of European real estate acquisitions over the year. In addition, we diversified our funding sources by successfully completing the company's inaugural public debt and equity offerings and attaining an investment grade credit rating. We have started 2015 with similar activity, closing several transactions and issuing both euro- and U.S. dollar-denominated bonds. My hope is for this acquisition’s activity to continue in 2015 and beyond.
What distinguishes W. P. Carey from its competition?
As an income-driven player, our strategy is to generate attractive risk-adjusted long-term cash flow, taking into account local market dynamics; we are not an opportunistic buyer with a view to exit in 5-10 years. Our strength lies in our ability to be flexible and adapt to each individual market, as well as our access to capital. Few other players are as diversified as W. P. Carey by geography, industry and asset class. In addition, our ability to provide build-to-suit financing complements our sale-leaseback and net-lease acquisitions.
Among the European countries W. P. Carey is focusing on, where are the most developments and which asset class is preferred?
There are some markets, such as the UK and Germany, which remained popular throughout the financial crisis and continue to see sustained demand. However, appetite has spread out of these core countries with investors returning to previously troubled markets such as Spain, Italy and Ireland, often in search of higher returns. We remain interested in all asset classes, including office, retail, logistics, and warehouse. Regardless of asset type, the real estate assets we acquire tend to have mission-critical operational significance to the tenant and therefore have inherent long-term value.
The latest net-leased and built-to-suit acquisitions by W. P. Carey and its managed REITs were in Norway, Poland, Spain and Germany. Are you planning to expand into these countries further?
We remain interested in all these markets. We take each transaction on its own merit, weighing up the risks and rewards of the lease terms, quality and creditworthiness of covenant, and country credit ratings, among other criteria.
In your opinion what will be the new trends in real estate in the coming year?
All the signs point towards a vibrant year for the European real estate sector. We are seeing improved investor sentiment across all sectors and at all points of the risk spectrum. The influx of capital into Europe means that investors in general are increasingly willing to take on more risk. Northern Europe is popular but I envisage increasing activity in secondary cities and in southern and eastern Europe.
The increased liquidity in the market should continue to attract corporates looking to take advantage through sale-leasebacks, as well as developers and investors seeking timely exits from the investments. Long-term income opportunities should consequently arise for well capitalized investors keen to structure yield driven versus IRR driven transactions.