W.P. Carey held office properties for nearly forty years. On September 21, 2023, the board voted to exit the asset class entirely and to do so quickly. As one of the largest and oldest net lease REITs in the US, W.P. Carey was the first major firm of its scale to leave office real estate while most of the industry was still debating whether the sector’s post-pandemic decline would persist. CEO Jason Fox chose to act before the consensus formed.
A Decisive Exit from Office Real Estate
W.P. Carey had been quietly trimming its office exposure for years, reallocating capital to industrial and retail assets, and selling office properties when market conditions allowed. The September 2023 shift was about speed and finality. The board approved a two-part exit: spinning off 59 office properties into a new, separately traded REIT, Net Lease Office Properties, and selling the remaining 87 office assets, aiming to complete most sales within months. The spin-off closed on November 1, 2023, six weeks after the announcement. By the annual report, 79 of the 87 remaining office properties had been sold, generating about $608 million in gross proceeds. The office sector's headwinds would last, and investors would be willing to wait longer for a recovery that might not arrive on any predictable timeline. Rather than continuing to manage a shrinking, increasingly distressed asset class indefinitely, the company chose to absorb the cost of a rapid exit upfront and redeploy the proceeds into industrial and warehouse properties, a sector benefiting directly from e-commerce growth and companies' efforts to build more resilient supply chains. The logic extended to how the market would value the company itself. With office assets fully removed from the portfolio, W.P. Carey management believed the stock could eventually trade closer to the higher valuation multiples industrial-focused REITs commanded, rather than carrying a persistent discount tied to lingering office exposure.
The Cost of Acting Early
This was not a simple or painless decision. The exit required a nearly 20 percent dividend cut in December 2023 to reflect lost rental income. That move ended a long record of annual and quarterly dividend increases. The stock declined 17.1 percent in 2023, a drop attributed to the announcement and the dividend reset. Fox asked shareholders to accept a real, immediate cost to remove office risk, a trade few large REITs were willing to make at the time.
Assessing the Decision in Hindsight
Industry observers took notice immediately. Scott Merkle, managing partner at SLB Capital Advisors, described the plan at the time as a significant move because it came from what he called the original net lease REIT, a company with decades of institutional history in the exact asset class it was now abandoning outright. He expected the move to improve the company's overall portfolio quality and remove a persistent overhang weighing on the stock.
The office sector has continued to deteriorate since W.P. Carey’s exit. National office vacancy is now around 20 percent, with downtown markets even higher. Stranded asset risk and discounted pricing have become common for portfolios still holding lower-quality office properties. In retrospect, W.P. Carey’s decision to take a near-term loss in 2023 rather than wait for a recovery that has yet to materialize appears more prudent than it did to shareholders facing a dividend cut and falling stock price at the time. What the Decision Reveals: What makes this a genuine bold bet, rather than simple prudent portfolio management, is the willingness to take the financial pain immediately and publicly rather than managing the exposure down gradually while hoping conditions improved. Fox chose certainty over optionality: a real, visible cost paid upfront in exchange for removing a risk that, based on how the broader office market has actually unfolded since, was considerably larger and more durable than much of the industry was prepared to admit at the time.
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