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NYSSA Investment Research Challenge

NYSSA Investment Research Challenge. Recommendation: Buy at $29.92 Close as of 4/29/07. NAV is $48 per share – 57% upside from current price At 11 times FFO, WPC is priced like a capital intensive REIT Excellent potential for WPC to expand at a 35% growth rate in Europe

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NYSSA Investment Research Challenge

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  1. NYSSA Investment Research Challenge

  2. Recommendation: Buy at $29.92 Close as of 4/29/07 • NAV is $48 per share – 57% upside from current price • At 11 times FFO, WPC is priced like a capital intensive REIT • Excellent potential for WPC to expand at a 35% growth rate in Europe • Predictable, recurring fees from retail investors in managed funds • Non-executive chairman holds 30% of the shares. • Price Weighted Target : $38

  3. Company Overview WPC Owned Commercial Real Estate Asset Management AUM ($B) • 112 tenants • 197 properties

  4. Tenant Surveys and Market Research • Survey of Regional Commercial Real Estate Brokerage Managers • Analyzed Credit Ratings of All 370 Carey Tenants • Interviews with Carey Tenants • Third Party Market Research - Real Capital Analytics, Cap Rates - NAREIT ReitWatch - Fitch Ratings 2008 REIT Scorecard - King Sturge 2008 European Market Outlook - CB Richard Ellis Global Market Rents - S&P/GRE Commercial Real Estate Indices Methodology - Jones Lang LaSalle IP

  5. Valuation Overview Dividend Discount Model Sum-of-Parts Net Asset Value

  6. Deep Discount to NAV • WPC’s stock is substantially undervalued relative to NAV • Based on a 6.6% cap rate, WPC’s properties are worth $48/share • Comparable REITS are trading at a 16% discount to NAV • Large margin of safety in WPC’s valuation Sources: Real Capital Analytics; Rutgers Business team analysis

  7. Trades like a REIT, but it’s not WPC FFO/Share -$2.87 Multiple - 10.5x Sum-of-the-Parts Real Estate Ownership Investment Management FFO/Share -$1.51 Multiple - 10.7x $16.17 EPS -$1.29 Multiple - 15.8x $20.34 $36 Source: Rutgers Business team analysis

  8. Valuation Overview Dividend Discount Model Sum-of-Parts Net Asset Value $40 $36 $40 25% 50% 25% $38 Source: Rutgers Business team analysis

  9. European Growth Opportunities 2002 – European Commercial Real Estate 2002 – US Commercial Real Estate Owner Occupied Private/Public Source: “European Real Estate Ownership Structures,“ Jones Lang LaSalle, April 2002

  10. Carey’s Investment Volume – Shift to Europe E E Sources: WPC-Annual Reports, Rutgers Business team forecasts

  11. Pending Changes in French Legislation “Loi Raffarin” • Stimulate new construction and increase demand for real estate financing • Well positioned with strategic partners to capitalize on growth

  12. High Return Investment Management Business • Pre-Tax ROE of 37% • $8.4 billion in AUM • Customers (managed fund investors) are locked in for ten years • Historical returns to fund investors of 11.6% • WPC is raising fees Source: WPC Annual Reports

  13. Potential External Catalysts • Wm. P. Carey, Founder • Non-executive chairman • 30%+ ownership • Potential acquisition target • Unlocking value • $1.2 billion market cap Source: WPC Annual Reports

  14. Investment Risks – US Credit Crunch CMBX – BBB Index • Underleveraged • Low Historical Default Risk • Limited Obligations • Attractive Credit Facility Turbulent Credit Markets Source: Markit

  15. Investment Risks – Funding New Deals Dry Powder ($500 M) Yield Starved Retail Investors Ability to Raise Capital ? Source: CPA-14, CPA-15 & CPA-16 Annual Reports

  16. Recent Developments • New property acquisitions - Berry Plastics ($87M) - Best Brands ($50M) - Mantsinen Group ($18M) • New Hotel REIT - Watermark Capital partnership - $2-3 per share value over 3 years

  17. Summary • Deep Discount to NAV • Trades like a REIT, but misunderstood • Growth Opportunity in Europe • Customers locked in for 10 years • Potential to be acquired Compelling Buy

  18. Appendices Slide 19 - Comps- Real Estate Management Slide 20 - Comps- Investment Management Slide 21- Sum-of-the-Parts I Slide 22- Sum of Parts II Slide 23- DDM Slide 24- NAV Slide 25- CPA Fee Increase Impact Slide 26- Forecasted Acquisitions Slide 27- Sale-Leaseback Structure Slide 28- Risk, Currency Slide 29- Risk, Inflation Slide 30- Risk, Tenant Defaults Slide 31- Credit Rating  Slide 32- Geographic & Sector Analysis Slide 33 - WPC – Industry Positioning – Pie Charts Slide 34 – Hotel UPREIT- Impact on EPS

  19. Comparables – Real Estate Management Source: Company Documents, Yahoo!Finance, Student Estimates

  20. Comparables – Investment Management Source: Company Documents, Yahoo!Finance, Student Estimates

  21. Valuation – Sum-of-the-PartsReal Estate Ownership

  22. Valuation – Sum-of-the-PartsInvestment Management

  23. Valuation – DDMDividend Discount Model

  24. Valuation – NAVNet Asset Value

  25. CPA Fee Increase Impact

  26. Forecasted Acquisitions

  27. $ Property Trustee - private equity - investment bankers - corporations BANK Sale – Leaseback Structure Mortgage Equity $

  28. Additional Risk Currency Fluctuations Euro at historical highs Increased exposure to European currency Hedge currency exposure by borrowing in Euros Increased leverage in Europe

  29. Additional Risk Inflation • WPC leases include CPI escalators • Long-term loans paid back in deflated dollars • Central banks pumping money into the system

  30. Additional Risk Tenant Defaults • Mission critical properties • Hedge risk with regional and sector diversification • Tenant credit ratings • Long-term leases

  31. Tenant Credit Ratings CPA-14 Average Rating of REITs BB+ 11.1 Average Rating of WPC(owned) BBB 9.1 Average Rating European Tenant A+ 5.4 Source: www.Standardandpoors.com

  32. Geographic & Sector Analysis Source: 2007 WPC Financial Reports

  33. WPC- Industry Positioning

  34. New Hotel UPREIT – Impact on EPS

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