S&P Global Ratings upgraded W.P. Carey’s (NYSE:WPC) credit rating to BBB+ from BBB on expectations that its contractual rent increases and acquisitions will support further operating outperformance over the next two years despite recession risks.

The New York-based net lease REIT turned in stronger-than-expected Q3 earnings as high inflation fueled its same-store rent growth during the quarter, and “we expect the company will continue to experience some additional upside from leases scheduled for rent bumps over the next year as inflation remains somewhat resilient heading into 2023,” S&P Global said.

WPC’s portfolio benefits from periods of high inflation as ~55% of its leases have embedded rent escalators tied to the consumer price index, S&P Global explained, 37% of which are uncapped.

Also, S&P Global expects demand for the company’s properties to “remain healthy over the next several years,” reflecting solid industry trends, “which should support its cash flow streams. And the credit quality of WPC’s tenants provides additional downside protection in a recessionary environment.

WPC stock inched down 0.1% in morning trading.

Seeking Alpha contributor WideAlpha said in early January that WPC is slightly undervalued but noted concerns over its ~18% exposure to the office property type.