Presenting a live 90-minute webinar with interactive Q&A Real Estate Sale Leaseback Financing: Structuring Deal Terms for Property Owners, PE Firms and Other Sponsors Strategies for Maximizing Value, Optimizing Cost of Capital, and Minimizing Tax Liabilities and Risks THURS DAY, AUGUS T 7, 2014 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Katie Barthmaier, Executive Director, W. P . Carey Inc. , New Y ork Armand (Bud) Grunberger, Partner, Fisher Broyles LLP , Washington, D.C. Anthony Palazzo, Attorney at Law, Private Holding Company , Durham, N.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Real Estate Sale-Leaseback Financing August 2014 Katie Barthmaier, Executive Director (212) 492-1125 kbarthmaier@wpcarey.com Investing for the long run TM | 5
About W. P. Carey Inc. • Founded in 1973, W. P. Carey is a leading global real estate investment firm and provider of net lease financing for corporations worldwide • W. P. Carey specializes in sale-leaseback and build-to-suit transactions, as well as the acquisition of existing net-leased properties, and currently owns and manages approximately $16 billion in total assets • Transaction size ranges from $5 million to $500 million • W. P. Carey is a publically traded real estate investment trust (REIT) listed on the New York Stock Exchange under the symbol WPC • 5 offices worldwide: New York, London, Dallas, Amsterdam & Shanghai Investing for the long run TM | 6
Presentation Overview • Sale-Leaseback deal structures • Overview of market • Critical considerations for investors • Critical considerations for property owners, PE firms and other sponsors • Case studies Investing for the long run TM | 7
Traditional Sale-Leaseback • Alternative form of financing • Company sells its real estate for cash and enters into long-term lease • Long-term leases translate into steady cash flow Owner raises capital and the investor creates an income producing investment asset Investing for the long run TM | 8
Build-to-Suit • Expanding existing facilities/constructing new facilities • Acquiring additional facilities, technology and equipment to grow business Investing for the long run TM | 9
Current Market Trends • Investor search for yield in low interest rate environment • Competition for quality long term income-generating investments • Cap rate compression • Shorter average lease term • More deals in secondary cities and non-core locations Investing for the long run TM | 10
Current Market Trends Per Real Capital Analytics: • Total volume of net lease sales across all property types reached nearly $44.8 billion in 2013 • Up about 24 percent compared to $36.2 billion in sales recorded in 2012 Composition of Market: • Traditional sale-leaseback • Build-to-suit • Existing net lease investments Investing for the long run TM | 11
Transaction Drivers – Sale-Leaseback Benefits Realizes • In exchange for illiquid assets 100% of Asset Value • M&A • Build-to-suit financing for new construction Diverse Range of • Restructuring & turnaround transactions Uses for • Acquiring facilities, technology and equipment to grow business Proceeds • Improving balance sheet Lease • Tenant retains operational control Flexibility to Assimilate • Leases structured to meet tenant’s needs Ownership Operating • Leaves the borrowing capacity of the company unaffected Lease Treatment • Reduces need for higher cost mezzanine debt & equity Cost Efficient Funding • Decreases EBITDA multiple Source • Lowers required equity investment to improve ROE Investing for the long run TM | 12
Critical Asset Characteristics for Investor Creditworthiness of the tenant Four key components Transaction structure and Asset(s) critical to the of a pricing tenant’s business sale-leaseback transaction Fundamental value of the underlying real estate Investors strive to balance these four elements Investing for the long run TM | 13
Critical Investor Characteristics for Seller/Tenant/Owner • Established source of capital • Ability to execute and close on a timely basis • Long term investment outlook • Ability to evaluate tenant credit and the real estate • Asset management capabilities/ongoing tenant relationships • History and reputation Investing for the long run TM | 14
Case Study – Janus Sale-leaseback transaction supports private equity investment in portfolio company • Manufacturer of steel roll up sheet doors and storage facility components for self- storage, commercial and industrial markets • Portfolio company of private equity firm Saw Mill Capital Investing for the long run TM | 15
Case Study – Janus $17 million purchase of three facilities located in Georgia, Arizona and Texas from Janus • Properties leased back to Janus for 20 years • Three critical facilities housing Janus’ manufacturing capacity • Provide the company with manufacturing bases across the United States Sale-leaseback financing enabled Janus to access the value tied up in these critical assets: • Allowed the company to reinvest in its strategic initiatives • Supported Saw Mill Capital’s investment in the company Investing for the long run TM | 16
Case Study – Sun Products Build-to-Suit financing funds construction cost for PE portfolio company distribution center • Leading North American provider of laundry detergent, fabric softeners and other household products • Portfolio company of Vestar Capital Investing for the long run TM | 17
Case Study – Sun Products $41 million in build-to-suit financing for a to-be built distribution center in Bowling Green, Kentucky Upon completion, the 1.4 million square foot facility was leased to Sun Products on a long-term basis: • Sun Products consolidated nine facilities in the area • Effective savings of $2 million annually in operation costs • No out of pocket cash costs • Provided developer “one stop” financing for construction and development of the building Investing for the long run TM | 18
Existing Net Leases • Institutional owner, sponsor or developer seeks near term liquidity • IRR objectives • Re-investment objectives • Restructuring an existing lease to achieve maximum current liquidity value – Lease Term – Rent – Net Lease vs. Gross Lease – Other Incentives Investing for the long run TM | 19
Case Study – Avnet Purchase of existing net leased asset from institutional owner • Headquarters for Avnet Technology Solutions • One of two operating groups of Avnet, Inc. Investing for the long run TM | 20
Case Study – Avnet $23 million acquisition of 132,070 square foot critical property • Located within the Arizona State University Research Park in Tempe • Property leased to Avnet for a period of 10 years Sale provided liquidity to institutional owner allowing seller to: • Meet year end closing objectives • Achieve IRR return targets • Recycle capital into new investments Investing for the long run TM | 21
TAX ASPECTS-SALE-LEASEBACK TRANSACTIONS ARMAND (BUD) GRUNBERGER, ESQ PARTNER, FISHERBROYLES LLP WASHINGTON, DC Tax Aspects - Sale-Leaseback 22 Transactions
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