W. P. Carey Inc. (WPC) stock intrinsic value fair value estimate & owner earnings analysis

W. P. Carey is a net-lease real estate investment trust. At the end of 2025 it owned interests in 1,682 properties (about 183 million square feet) leased to 371 tenants under long-term "net" leases, where the tenant pays property taxes, insurance and upkeep. Annualized base rent was about $1.55 billion: industrial 38%, warehouse 25%, retail (including car dealerships) 22%, and other uses 14% (net-lease self-storage, hotels, education, labs and a small remainder of office). About 61% of rent comes from the United States and 39% from Europe and Canada/Mexico. Occupancy was 98.0%, the average remaining lease term 12.0 years, and 99.7% of rent carries built-in increases, split roughly evenly between inflation-linked (48%) and fixed bumps (48%). Tenants are mostly not investment-grade: only 15% of rent comes from investment-grade tenants and a further 7% from subsidiaries of rated parents, so roughly 78% comes from sub-investment-grade tenants (an earlier version of this analysis put this at about 85%; the 2025 annual report shows 78%). How we measured earning power. The company spun off its office properties as Net Lease Office Properties in November 2023, so we measure the business from 2024 onward. We start from operating cash flow and strip out (1) one-time proceeds from selling lease receivables ($807 million in 2024 and $200 million in 2025, which are asset sales, not rent), (2) working-capital timing, (3) stock-based pay, and (4) all of the company's spending on construction, redevelopment and other capital work on its properties ($135 million in 2024, $191 million in 2025), which we treat as the cost of keeping the portfolio current even though part of it builds new space. Property purchases ($1.1 to $1.7 billion a year) are treated as growth investment, not a cost. On that basis owners earned $3.84 per share in 2024 and $3.81 in 2025 after interest. Because we value the property business first and then subtract what it owes, we add back cash interest paid ($256.6 million and $267.5 million), giving business cash flow before lenders of $5.00 and $5.02 per share. We anchor on the $5.01 middle of those two post-spin years. Earlier years ran $4.38 to $5.64 but included the office portfolio that shareholders received separately. Recent results and year one. Business cash flow grew just 0.3% in 2025. Our base case assumes about 8% growth in the first year, above that trailing rate, for a specific reason: the June 2026 quarterly report shows first-half 2026 business cash flow per share up about 13% from a year earlier, driven by $1.1 billion of property purchased in the second half of 2025 and $1.21 billion purchased in the first half of 2026. Those buildings are already owned and paid for with the debt and shares we count below, so their rent is not a forecast. We do not credit the company's continuing program of buying $1 to 2 billion of property a year, because it depends on raising new shares and debt on terms nobody can know in advance. Base case ($68.61 per share): business cash flow of about $5.41 per share in year one, then growth of 2% a year through year ten. That is the contractual rent bumps of roughly 2.3% a year, less about 0.8% for tenant failures, vacancies and re-leasing, plus about 0.5% from construction and redevelopment projects funded from retained cash, which the company has done every year. After year ten we hold cash flow flat in dollars and do not grow it. The land and buildings last and have been re-leased for decades, but flat dollars means a falling real value, which is how we charge for aging buildings. At 6% the property business is worth about $23.6 billion. It owes about $7.9 billion net (see below), leaving about $15.6 billion for shareholders, or $68.61 per share on about 228 million shares. Bear case ($41.06 per share): tenant credit losses concentrated in the sub-investment-grade 78% of rent (the company has already absorbed tenant restructurings in recent years) cancel most of the rent from recently bought property, so year one rises only 3%, to about $5.16. After that, rent bumps are fully offset by defaults, vacancies and weaker renewals, leaving no growth through year ten. After year ten cash flow declines 1.5% a year indefinitely as older buildings, especially retail, need more money to re-lease. The business is worth about $17.3 billion, owes about $7.9 billion, leaving about $9.4 billion, or $41.06 per share. Even in this case, business cash flow covers the roughly $292 million annual interest bill about four times. Bull case ($83.93 per share): first-half 2026 growth of about 12% holds for the full year ($5.61), then 2.8% a year through year ten, with inflation-linked rents running at recent inflation, low credit losses, and continued self-funded development. Rent bumps on leases running past year ten add 1% a year for another decade, then cash flow holds flat. The business is worth about $27.1 billion, owes about $7.9 billion, leaving about $19.1 billion, or $83.93 per share. Debt, and why our numbers moved. Our previous estimates ($60.80 bear, $82.10 base, $100.22 bull) valued the cash left after interest and never subtracted the company's roughly $8.9 billion of borrowings. That quietly assumed today's unusually cheap debt would roll over forever on today's terms. We now value the whole property business before interest and subtract what it owes. That lowers the estimate in every case, partly offset by the stronger 2026 results. At June 30, 2026 the company owed about $7.44 billion of senior unsecured notes, about $1.17 billion of bank term loans, $116 million on its revolving credit line and $194 million of property mortgages, against $164 million of cash (we keep $50 million as working cash). Much of this debt is fixed at low rates: euro notes at 0.95% due 2030, 1.35% due 2028 and 2.125% due April 2027, and dollar notes at 2.25% to 2.45% due 2031 to 2033. The weighted average is about 3.3%. Paying well below a 6% cost of money until those notes mature is worth about $0.9 billion to shareholders, so we count the debt at about $8.0 billion instead of $8.9 billion. Add $16 million owed to outside partners in partly owned properties and net debt is about $7.9 billion. As the cheap notes mature they will be refinanced at higher coupons. The company's newest notes (euro notes at 3.25% and 3.75% in February 2026, and dollar notes at 5.2% in June 2026) show this, and our debt figure already assumes it by giving no credit for cheap money beyond each note's maturity. Maturities are spread out: about $0.35 billion in October 2026 (already refinanced by the June 2026 issue), about $0.57 billion in 2027, $0.57 billion in 2028, about $1.9 billion in 2029 (including the term loans and credit line) and about $1.0 billion in 2030. The debt is rated investment grade, and the notes and credit agreement carry standard leverage and coverage covenants that the company met at year-end 2025. What would make this estimate wrong: several large sub-investment-grade tenants in European retail or manufacturing failing at the same time; inflation-linked European rents stalling if inflation falls to zero; or construction spending that is more upkeep than we assume, which would slow growth. On the upside, we give no value to future acquisitions. If the company keeps buying property at returns above its cost of capital, as it has for decades, the business could be worth more than our bull case. We cannot count that until the purchases are made.