Industrial
Tenant Partnerships – The Road to a Sustainable Future
As Climate Week NYC approaches, the spotlight on sustainability is brighter than ever. For companies across industries, the annual event underscores the urgent need to address climate change. The real estate sector, estimated to be responsible for nearly 40% of global carbon emissions, plays a critical role in advancing this worldwide effort. At W. P. Carey, we recognize our potential to drive meaningful impact in the fight against climate change through our extensive portfolio of over 1,200 net lease properties. While the net lease model means our tenants have full operational control of their properties, we are committed to collaborating with them to achieve shared sustainability goals and enhance the quality of our properties. Here’s how: Gaining insights through data Collecting detailed energy data remains a core focus for us. Collaborating with our tenants to install IoT smart meter systems provides both us and our tenants access to high-quality utility data for their leased properties. This data can be utilized to assess energy usage for regulatory compliance as well as voluntary reporting. It also enables us to calculate the carbon footprint of our portfolio and identify opportunities to implement energy-saving measures at our properties. In 2023, we began a smart meter installation program with our European tenants, making the process more efficient for both W. P. Carey and our tenants while also reducing the risk of data errors. Renewable energy opportunities Renewable energy can reduce building operating costs and lower carbon emissions. One of the most accessible sources of renewable energy is solar power, which can be harnessed through the installation of solar panels. Particularly given the roof space that our industrial and warehouse assets provide, we believe we have a large addressable market for solar. Through W. P. Carey’s CareySolar® program, tenants have the opportunity to take advantage of rooftop and carport solar installations at their leased properties through a broad array of structures. These include: Landlord-operated Landlord-financed Tenant projects Rooftop leases W. P. Carey collaborates with each tenant to understand their current energy usage and determine the ideal solar solution for their unique property. In 2023, W. P. Carey extended the lease term with an existing tenant for their 265,000-square-foot industrial facility in Illinois. Simultaneously, we signed a 15-year power purchase agreement where we plan to build a 1,350-kilowatt roof mounted solar system that would offset 740 metric tons of CO2 annually. We will manage and fund the construction of the system and sell the power generated by the system to the tenant. Building energy retrofits Implementing sustainable features to improve energy efficiency has a huge impact on a property’s life-cycle emissions. W. P. Carey can do this through property-specific energy retrofits. An example of an energy retrofit is the installation of LED lighting. LED lights are 80% to 90% more energy efficient than other light bulbs and do not contain any environmentally hazardous materials. Additionally, LEDs last up to 25 times longer than traditional incandescent bulbs. In 2023, W. P. Carey completed a full LED retrofit at our 1.5 million-square-foot warehouse in University Park, Illinois. The LED project is expected to result in a 35% reduction in lighting electricity usage and 41% reduction in utility and maintenance bills at the property. Following the completion of the retrofit, we leased the property to Samsung for a term of 10.5 years. Green-building certifications Green-building certifications such as LEED and BREEAM can provide many benefits for both landlords and tenants. Achieving a green-building certification means that a property meets certain sustainability requirements across a variety of categories including energy, air quality and water usage. Certified buildings are typically more energy and cost efficient and create healthier work environments for employees. In addition to being more environmentally friendly, green-certified buildings can offer tax benefits. Many states offer tax incentives for green building projects, based on either energy savings or reaching a certain level of certification. Real estate studies have also shown that green buildings sell and lease faster than traditional buildings, and garner higher rents and lease rates. At W. P. Carey, we’re committed to achieving green-building certifications where we can, and our portfolio includes 6.6 million square feet of green-certified buildings as of June 30, 2024. In 2024, our state-of-the-art food research facility in the Netherlands received a BREEAM Outstanding certification, the highest level of BREEAM certification for buildings worldwide. Conclusion Reducing the carbon footprint of a net lease portfolio is an enormous challenge, but by bolstering tenant engagement and systematically identifying sustainability opportunities, progress is possible. Sustainable real estate is beneficial to the planet, attractive to tenants and improves the value of our broader portfolio, making it a win-win-win for all.
Keeping Up with Industrial in a ‘Wildcard’ Year
Uncertainty around interest rates, slowed transactional volumes, and a future of unknowns has left investors in the industrial sector watching trends closely. “This year has been a bit of a wildcard,” says Jason Patterson, senior vice president of investments at W. P. Carey. “People constantly speculate about what the future holds regarding interest rates, and we also saw a bit of softening on the lease demand side at the end of 2023.” As uncertainty persists, understanding a few key trends can help the industrial sector track what’s next as it moves closer to a new normal. Cost of Capital Challenges Persist As 2024 began, forecasts predicted multiple interest rate cuts; however, the Fed has held rates unchanged to date. Recently, it adjusted the previous forecast from three expected rate cuts in 2024 to one, against the backdrop of persistent inflationary concerns. Volatility around rates has also led to investor hesitancy in making long-term commitments, further impacting transaction volumes. “There is also a long and continuous trend toward e-commerce,” says Patterson. “In the near term, there has been a bit of volatility due to overbuilding in certain markets, and there is a bit more vacancy that needs to be absorbed. These shorter blips are relative to what seems to be a long-term trend toward higher value in industrial real estate.” Despite ongoing challenges, opportunities still exist for the industrial market, and understanding some existing tailwinds can help investors capitalize on these. Shift to Onshoring Onshoring is a continued tailwind for the industrial sector, especially on the manufacturing side according to Patterson. “It seems there is bipartisan agreement around a movement to onshore, as sentiments trend toward increased American manufacturing.” Upticks in high-tech chip manufacturing and transitioning the auto fleet to electric are also drivers of long-term industrial demand, says Patterson. While electric cars accounted for only 2% of vehicles in 2018, that number jumped to roughly 18% of all vehicles sold in 2023. A push toward more sustainable vehicle technologies could further drive long-term industrial demand, but Patterson cautions that continued growth could depend on the outcome of the election. Strategic Positioning and Access to Capital When operating in a market with many unknowns, a good place to start is focusing on what’s within your control, suggests Patterson. “Factors such as interest rates are out of the hands of most folks,” says Patterson. “We focus on sticking to our competitive advantage, which is underwriting sub-investment-grade long-term lease opportunities.” Agility is also key, as is working with partners who can support the market’s need for increased flexibility. According to Patterson, “This is a time when having a reputation for strong performance and access to capital is very valuable. At W. P. Carey, we are well positioned to execute with significant liquidity and capital, enabling us to be nimble in the current environment.”
Looking into the Crystal Ball
2023 was undoubtedly a challenging year for the net lease sector. High inflation, rising interest rates and other economic uncertainty caused a notable decrease in overall transaction volume, sparking apprehension about the trajectory of the industry. However, there have been some signs of renewed life in the market. Most experts believe we have hit the interest rate peak and expect cuts to be made in 2024. In addition, dealmakers generally anticipate that the M&A environment will improve given the market has stabilized, which could bring more investment opportunities to the market. While no one has a perfect crystal ball about what the future will hold, there are certainly reasons for optimism in 2024. Here are three net lease market predictions for the year ahead. Boost in net lease deal volume fueled by projected interest rate cuts The U.S. Federal Reserve indicated in its latest summary of economic projections that three cuts may be coming in the year ahead. The cuts are expected to be slow and gradual and will be dependent on the state of the economy, but investors reliant on third-party debt are hoping for a much-needed reduction in borrowing costs to remain competitive. The signaling of rate cuts is positive news for the market as it means interest rates have most likely reached their peak. This should help the market stabilize therefore narrowing the bid-ask spread between buyers and sellers, leading to a more active deal environment in 2024. In addition, many investors who have stood on the sidelines in anticipation that there will be more favorable opportunities down the road are likely to start jumping back into the market in 2024 and new entrants are expected to join in. Uptick in private equity sale-leasebacks as M&A surges The dealmaking environment in 2024 is already off to a better start than 2023. Inflation has declined, interest rates have likely reached their peak and private credit has become more widely available for more kinds of deals, while traditional credit markets are starting to improve. Private equity firms are also sitting on an unprecedented amount of dry powder – $2.59 trillion – with mounting pressures to deploy that capital into new investments. As a result, M&A activity is expected to increase in 2024. Along with an uptick in dealmaking, savvy private equity firms are expected to continue looking for alternative strategies for growth given lingering economic and geopolitical uncertainties. One effective strategy is through the sale-leaseback of their portfolio company real estate, which allows private equity firms to unlock immediate capital to redeploy into other initiatives, such as new acquisitions or portfolio company growth. Typically, when M&A activity surges, sale-leaseback opportunities follow, so more private equity-backed real estate deals will likely emerge in 2024. Pandemic office trends remain while industrial holds steady More than three years since the start of the pandemic, the real estate industry has finally accepted that the office sector will not return to the way it was before – and hybrid- and- remote work models are here to stay. As a result, offices have lost much of their appeal for investors, with transactions declining more than twice as much as any other property sector in 2023. W. P. Carey announced its strategic plan to exit office last year, through the spin-off of 59 office properties into Net Lease Office Properties and an office sale program to dispose of the remaining on-balance sheet assets. This trend is expected to continue into 2024 and some office investors will likely start to look for alternative uses for office assets – such as residential or industrial. Industrial, on the other hand, will continue to perform well into 2024, as re-shoring and nearshoring provide a boost to the sector. While the asset class is showing some signs of softening post-pandemic as the need for robust inventory decreases, the long-term outlook remains positive. Moody’s Analytics CRE forecasts that annual rent growth for warehouse and distribution properties will track at approximately 5-6% per year over the next 10 years, suggesting that the sector has moved on from its huge boom into a steadier state of growth.
The Benefits of LED Lighting for Commercial Real Estate Tenants
As environmental concerns become prominent in today’s market and green initiatives drive corporate decisions for investors and consumers, businesses are focused on reducing their carbon footprint. Commercial real estate is one of the largest contributors of greenhouse gas emissions today due to the fuel-generated electricity each asset requires. A misconception about green initiatives is that completing sustainability projects is a complicated process which require extensive capital investment from tenants. However, there are many cost-efficient ways to significantly reduce the carbon footprint of commercial buildings. One solution that can make a substantial difference is the installation of efficient LED lighting systems. The simple upgrade from outdated lighting systems to LED can provide the tenant with operational savings, optimized lighting performance and reduction of its carbon footprint. What makes LED lighting more efficient than other lighting? LED lights use a process called electroluminescence to operate at a far greater efficiency than traditional lighting technologies. LEDs are 80% to 90% more energy-efficient, shine at a cooler temperature and do not contain the environmentally hazardous materials that incandescent lights do. Not to mention, LEDs last longer than any traditional commercial lighting solution. Incandescent lights create illumination by heating a small wire filament. They get extremely hot, losing most of their energy to heat. Halogen and fluorescent lights are more efficient than incandescent bulbs yet costly to obtain. Let's dive deeper into the many benefits of LED lighting, including their long lifespan, financial savings and reduced environmental impact. 1) Long Lifespan LEDs should last for almost 14 years in a building which uses lighting for approximately 10 hours each day. In contrast, the longest lasting fluorescent bulbs will last for about 4 years. This improved lifespan reduces the amount of maintenance work needed to maintain adequate light in a workspace. The average incandescent bulb lasts approximately 1,000 hours without power surges or manufacturing flaws, whereas commercial installations of halogen or fluorescent lighting may last between 2,000 hours to 15,000 hours. The average LED bulb is rated for 50,000 hours of use, multiplying the lifespan of the longest-lasting fluorescent bulbs. 2) Financial Savings LEDs are also the most energy-efficient of commercial lighting options. By switching to LEDs, tenants could see as much as 90% improvement in their overall energy savings, which translate directly into financial savings. Between the savings on monthly utility bills and reduction in maintenance costs, LED lights can bring impactful reductions to a tenant’s operating expenses. 3) Reduced Environmental Impact Due to their low energy consumption, LEDs contribute the least amount of carbon dioxide into the atmosphere of all lighting sources. For example, use of a simple incandescent bulb results in 4,500 pounds of CO2 annually, while LED bulbs contribute only 451 pounds of CO2 per year. LED lights also give off very little heat compared to other types of lighting. Therefore, switching to LEDs can help reduce a building’s temperature and limit the power load on its mechanical systems. LEDs are safe to handle and install which eliminates the risks of burns and potential bulb explosions. Start Enjoying the Benefits of LED Lighting with W. P. Carey Installing LED lighting is one of the best solutions for companies looking to improve the sustainability of their buildings. Those leasing commercial space may be able to leverage their relationship with the landlord to explore LED installations. W. P. Carey is a leading real estate investor with a portfolio of over 1,400 properties and recently launched a suite of sustainability offerings for tenants, including LED lighting installations. With no upfront cost to tenants, W. P. Carey will manage the design, development and implementation of LED upgrades at its portfolio properties. A more sustainable and energy-efficient commercial property is a win-win for both the tenant and the building owner. By embracing opportunities such as LED lighting installations, tenants can save money, reduce carbon emissions and fulfill their sustainability goals. Check out a recent case study featuring an LED lighting transformation or contact W. P. Carey today to learn more!
Where Will Net Lease Go in 2024?
In 2023, higher debt costs, a looming $2 trillion-plus wave of corporate debt coming due and other economic uncertainty have clouded the CRE outlook. And while the net lease sector, with its low risk and steady income, has weathered recent economic headwinds better than most, it’s not immune. Execution uncertainty was a central theme in 2023, reports Zachary Pasanen, managing director, investments at W. P. Carey. “With the ramp-up in interest rates, buyers and sellers have struggled to meet at a price that made sense,” he says, noting that a lot of deals after the first quarter had repricing challenges or re-trade concerns. In a competitive market, those who rely on debt financing have been constrained by higher rates. Investors, however, are still seeing cap rate expansion within certain sectors. Shifting Rates & Fundamentals With deals more difficult to come by, investors have re-focused on fundamentals. Pasanen notes that, with industrial, this has meant a refocus on rent growth and the assets “criticality.” There remains good demand for industrial assets, but investors should realize the changing fundamentals of the sector: it is no longer the “darling” product, attracting unlimited cheap capital in pursuit of properties requiring lower capex. Pasanen uses the word “retrenchment” for the asset class as people are getting smarter with rent growth projections following their internal modeling. “With the sector still offering a lot of attractive elements, there is no desire to move out of the sector,” he says. “Unlike office, we view industrial, particularly manufacturing, as profit centers: it’s where the widgets are made. We focus on good, underlying fundamentals but also where there’s criticality in the real estate.” The sudden shift in rates has caused a break in investor expectations, Pasanen says, with one-off, syndicators or family offices still pursuing at compressed numbers. Meanwhile, institutional investors are focusing on tenant credits and cap rates at 8% and higher. Outlook Pasanen notes there’s opportunity in sale-leasebacks for companies looking to raise capital. He says W. P. Carey has a successful history here, taking the time to understand a business to ensure they will be a good investment for the long haul. “No one has a perfect crystal ball, but we try our best and we've got a long history of underwriting credits that are sub-investment grade in nature, and we have a good track record in doing so.” Market expectations are leaning toward interest rate cuts in 2024, an outlook reaffirmed by the Fed’s latest announcement on December 13. Smart investors, however, should prepare for all situations and also have contingency plans for a long pause or even a rate hike if inflation kicks up again. With inflation and increasing interest rates making borrowing more expensive, will CFOs and fund managers continue to strategize on how to recalibrate their business and find that new normal? “I think it will actually be a big year in 2024,” he says. “The rise in interest rates happened quickly so if we have a long pause [on rate movement] the deal environment should become more normalized. When the behavioral element settles in we’ll see more normal investment activity.”
Is the Net Lease Industrial Market Still "Red Hot"?
The single-tenant net lease industrial market has been on fire in recent years. Buoyed by e-commerce growth, industrial properties were seeing record low cap rates and record high competition from investors following the COVID-19 pandemic. However, the sector has not been immune to recent macro-economic volatility. Search -In fact, quarterly transaction volume fell more than 46 percent in the first quarter of 2023, making it the slowest quarter reported by the net lease industrial sector since mid-2017. Does this mean that the industrial market is losing its steam? While some investors are waiting on the sidelines, trends including onshoring, supply/demand dynamics and rising interest in sale-leasebacks will help bolster the industrial market in the long term. Here’s why: Impact of onshoring Supply chain issues during the pandemic have been a major catalyst for onshoring in the industrial market. Having manufacturing facilities overseas meant accessibility was limited (or in some cases, completely restricted), which had a major impact on companies’ ability to get their product to consumers. As a result, more companies have focused on bringing their facilities back to the U.S., which has only been supported by lower labor-related costs, better automation technology and an accessible highway and interstate system. Technology companies have largely been leading the onshoring charge, with companies like Intel, Micron and Texas Instruments committing to building large manufacturing plants in the U.S. This has led to a steady rise in demand for warehouse and industrial spaces from U.S. companies, with notable growth seen in the Southeast. Supply/demand dynamics After several years of growth post-COVID, warehouse construction is on the decline due to higher interest rates, a slower economy and Amazon’s reduced spend on new facilities for 2023. 6,700 warehouses are expected to be built in 2023, a 35% reduction compared to the 10,000 built in 2022. Despite this, e-commerce growth is expected to keep demand for warehouse space strong, with rents anticipated to increase over the next year. The good news for investors is that cap rates are also on the rise – Search -up 35 basis points from record lows in 2022. As the buyer-seller price gap continues to close, more investors will likely jump back into the market, strengthening transaction volume in 2024. Uptick in sale-leaseback interest The volatility in the capital markets environment has certainly been challenging for companies, with cost of capital rising considerably given increasing interest rates. Alternative forms of financing such as sale-leasebacks have come to the forefront as companies look for ways to unlock capital. Sale-leasebacks offer a “naturally accretive” funding source, particularly for companies that own fungible, mission-critical real estate and are willing to sign a long-term lease. Industrial facilities have inherent criticality which makes them uniquely attractive to investors, making owners of these types of facilities great candidates for sale-leasebacks. While inflation is starting to cool, experts predict that the Fed won’t start cutting interest rates until 2024, which will encourage more industrial companies to pursue a sale-leaseback. With more opportunities likely coming to market and investors poised to execute (particularly all-equity buyers), we believe industrial will maintain its position as the “darling” of net lease for the foreseeable future.
Where Net Lease is Heading
With financing options restricted by interest rate uncertainty, corporate real estate sellers have been turning to sale-leasebacks. It’s easy to see why: these deals offer liquidity and immediacy. For the net lease sector at large, Tyler Swann, managing director, investments at W. P. Carey, is seeing US deal flow coming almost exclusively from new sale-leasebacks versus acquisitions of existing leases, a change largely driven by the changing capital markets landscape. CRE Psychology Playing Catch-up As interest rates have risen and asset values have fallen, the pricing expectations of sellers have not followed suit. That’s led the market to favor new sale-leasebacks as opposed to investment properties that are acquired from third-party landlords, Swann says. "There's a disconnect between what buyers can realistically pay given current capital markets and what a seller wants,” he says. “It takes time for psychological expectations of sellers to reset and I think we haven't seen that play out just yet, which is why those existing lease deals haven't really been moving or coming to market at all.” New sale-leaseback sellers are more realistic, comparing and choosing the costs of such a deal versus the current cost of capital, especially the added expense of raising debt in the current high interest rate environment. The benefits of the here and now – unlocking their CRE equity means it's "go time" for deals, unlike the often disparate expectations of a third-party landlord seller. Open Opportunity, With Caveats While there are fewer overall opportunities in the net-lease market compared to the last couple of years, there are fewer market challengers due to the more restricted financing options. “Plenty of investors who were very competitive just a couple of years ago, for example, were reliant on CMBS debt and are now no longer nearly as competitive as they used to be,” Swann says. “And that's given us a leg up.” Office demand continues to suffer from uncertainty, mainly from lagging return-to-office efforts and hard-to-figure valuations given the large amounts of vacant and shadow space. On the plus side, Swann views the industrial sector as the most favored by net lease investors, as strong demand post-COVID for logistics facilities persists, with companies building out their supply chains amid a more general move to on-shoring production. Earlier this year, W. P. Carey completed an approximately $468 million, 20-year lease sale-leaseback with Apotex for a portfolio of pharmaceutical manufacturing assets in the greater Toronto area. Swann points out that the combination of sector (industrial), type (new vs. existing lease) and trend (taking advantage of better cost of capital through a sale-leaseback) all led to the deal getting done. “In a lot of ways I think that Apotex deal is a good example of where the market is going,” says Swann.
What’s Next for Net Lease?
The effect of rising interest rates registers in many ways around the real estate world, but perhaps the starkest impact can be seen in the investment volume differential in one of CRE’s most popular sectors. Net lease investment volume decreased roughly 35% year over year in the third quarter, according to Jason Patterson of W. P. Carey. The VP of investments at one of the largest diversified net lease REITs notes the Fed’s impact on market players has been far-reaching. “Net lease volume prior to the Fed moves had been near or at record levels so the run-up in rates certainly impacted people getting on the same page with the value of real estate or what they were willing to commit to on a cap rate basis,” Patterson said. “A high level of volatility in a space where people are making long-term investments is not the ideal environment.” A Debt Market in Disarray Call it a pause, a disconnect, or total debt market disarray, 2022 has brought major headwinds to a CRE industry and net lease sector that have gotten accustomed to cheap capital. Yet, Patterson reports still seeing a lot of attractive opportunities in the market. “Private equity-backed sellers or tenants continue to use sale-leasebacks as an attractive form of unlocking tied-up capital in their acquisitions, a counter-inflationary move that in some cases has been beneficial to us,” he said. “They’re viewing it more and more as a regular, very attractive component of the capital stack, which I think is good from a broad industry perspective.” Unencumbered by rising capital costs, equity investors have certainly found more room to work within the net lease market “The current environment favors people in a high certainty or all-cash type of capital structure like W. P. Carey,” Patterson said. “We’ve seen increased focus on certainty of close as levered buyers signed up for deals maybe in the early part of the summer and then with rising debt costs their assumptions didn’t pan out. You see deals come back to market as more investors have to reevaluate pricing in this period of volatility.” 2023 Outlook Citing the first half 2022 industrial deal volume exceeding more than 50% of the STNL market, Patterson forecasts that industrial product will continue to be a very attractive investment target. He added though that not all industrial product types are created or viewed equally. “Rather than just lump everything into broad industrial, we’re looking for real estate that is extremely critical to operations for our tenants,” he said. “Maybe we’re willing to give up a little bit in terms of fungibility for increased certainty that tenants are going to renew and keep paying rent for the long term. Asset classes such as cold storage and food production are extremely important to users and they don’t have a ton of alternative options available.” A $75 million sale-leaseback W. P. Carey completed in the second quarter embodies the above trends. The 25-year net lease for six mission-critical specialty manufacturing facilities totaling approximately 1.1 million square feet in three countries is backed by private equity. “There continue to be more and more deals getting done with private equity sponsorship, and we’d expect that to largely continue in 2023,” Patterson said. “The trend, a positive one for the industry, really is private equity ownership looking toward sale-leasebacks.”
Why Tenant-Landlord Relationships Matter
Since our founding in 1973, W. P. Carey has been a long-term partner to our tenants. This means that when we invest in a property, we are also committed to advancing the tenant’s business and look to support their evolving real estate and capital needs throughout the duration of their lease and beyond. A Long-term Partner: Building Beyond the Original Transaction W. P. Carey partnered with Sonae MC, a leading Portuguese food retailer, in 2018 when it acquired its mission-critical warehouse facility in the Azambuja logistics park, Portugal’s prime logistics hub outside of Lisbon. Since its founding in 1985, Sonae MC has steadily grown its market share. Today, the company has more than 1,300 stores throughout Portugal and Spain, 35,000 employees and a broad range of products and services. At the time of the acquisition, Sonae MC was experiencing rapid growth, particularly through its city-center convenience stores and e-commerce operations. In order to meet rising demand and continue executing on its strategic plans, the company needed additional food distribution warehouse space. “In recent years, Sonae MC has been expanding its store portfolio, mostly with small, convenience stores; in the last decade, 750 new stores were opened. This growth will continue for the next few years to solidify even more of our dominant market share. This means our company’s logistics operation has to continue growing its warehouse footprint to be able to receive, prepare and ship an ever-growing number of merchandise," explained Rui Braz, Head of Area – Logistics Development at Sonae MC. To support Sonae MC’s growing business, W. P. Carey partnered with the company and agreed to fund a $28 million expansion of the Azambuja facility. Completed in 2020, the 300,000-square-foot expansion was custom built to Sonae MC’s specifications and totaled over 840,000 square feet, making it the largest refrigerated warehouse in Portugal. With the additional space, Sonae MC was able to increase its capacity and speed of supply to Mainland stores in the central and southern regions of Portugal. “The Azambuja expansion was part of a plan to strengthen our logistic capability, which makes it a fundamental piece to the company’s strategy,” said Braz. A Shared Vision: Committing to a Greener Future Our ability to support our tenants’ real estate needs goes beyond just expansions. We can also partner with our tenants on projects to help reduce their carbon footprint and meet their sustainability goals. W. P. Carey and Sonae MC are both committed to creating a greener future, which meant the expansion of the Azambuja warehouse was built with sustainability in mind. In 2021, a solar roof generating an estimated 4,000 MWh/year was successfully installed on the newly expanded facility, earning a LEED Gold certification for the property. This makes the facility Portugal’s first LEED Gold certified warehouse, an exciting milestone for W. P. Carey, Sonae MC and the country as a whole. “Receiving a LEED Gold certification for our new building in Azambuja, being the first in Portugal and, on top of that, the first for a refrigerated warehouse, is an important acknowledgement of our focus on sustainability. The thought that was put into multiple aspects like the isolation of the building, rainwater utilization system, and the investment in the photovoltaic solar plant–that reduces 30% of our electrical power grid needs for the entire facility–clearly portrays our intention in diminishing the operation’s environmental footprint,” Braz added. The new building is also equipped with innovative cooling and insulation systems that are more energy efficient and environmentally friendly. The joint delivery of fresh produce allows 20% fewer deliveries to shops, a reduction of 1.4 million km traveled per year and the equivalent of 1,100 tons of CO2 saved per year. A Win-Win: Long-term Benefits for Both Tenant and Landlord W. P. Carey prides itself on serving as a long-term, flexible partner to its tenants. By building strong relationships we are able to not only understand the business objectives of each tenant, but also their unique corporate values. In the case of Sonae MC, we were thrilled to have the opportunity to support them and their business needs, while also advancing our goal of reducing the carbon footprint of our overall portfolio. “W. P. Carey has had a fundamental role in the development of this project, proving to be the right partner along the entire process of building this warehouse and its sustainability and efficiency features, which we’re all proud of,” Braz concluded.