NYSSA Investment Research Challenge

1
NYSSA Investment Research Challenge

• Jesse Cohen(Captain)
• Jorge Barreiro
• Elizabeth Moore
• Sylvie Nappey
• Benjamin Schmid

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
• - SP/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

• WPCs stock is substantially undervalued relative
  to NAV
• Based on a 6.6 cap rate, WPCs properties are
  worth 48/share
• Comparable REITS are trading at a 16 discount to
  NAV
• Large margin of safety in WPCs valuation

Sources Real Capital Analytics Rutgers Business
team analysis
7
Trades like a REIT, but its not
36
Source Rutgers Business team analysis
8
Valuation Overview
Dividend Discount Model
Sum-of-Parts
Net Asset Value
38
Source Rutgers Business team analysis
9
European Growth Opportunities
2002 European Commercial Real Estate
2002 US Commercial Real Estate
Source European Real Estate Ownership
Structures, Jones Lang LaSalle, April 2002
10
Careys 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

• Turbulent Credit Markets
• 
  

CMBX BBB Index

• Underleveraged
• Low Historical Default Risk
• Limited Obligations
• Attractive Credit Facility

Source Markit
15
Investment Risks Funding New Deals

• Ability to Raise Capital ?
• 
  

Dry Powder (500 M) Yield Starved Retail Investors
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
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