Attached files
| file | filename |
|---|---|
| 8-K - 8-K - W. P. Carey Inc. | wpc2013q48-ksupplemental.htm |
| EX-99.2 - EXHIBIT - W. P. Carey Inc. | wpc2013q48-ksupplementalex.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
COMPANY CONTACT: PRESS CONTACTS:
Peter Sands Kristina McMenamin Guy Lawrence
W. P. Carey Inc. W. P. Carey Inc. Ross & Lawrence
212-492-8989 212-492-8995 212-308-3333
psands@wpcarey.com kmcmenamin@wpcarey.com gblawrence@rosslawpr.com
W. P. Carey Announces Fourth Quarter and Year-End 2013 Financial Results
New York, NY – March 3, 2014 – W. P. Carey Inc. (NYSE: WPC) (“W. P. Carey” or the “Company”), a global net-lease real estate investment trust (“REIT”), today reported financial results for the fourth quarter and full year ended December 31, 2013.
During 2013, the Company:
• | Generated Funds from operations—as adjusted (“AFFO”) of $1.12 per diluted share and $4.22 per diluted share for the fourth quarter and full year, respectively |
• | Acquired seven properties for a total of $347.1 million |
• | Structured $1.4 billion of investments on behalf of the Managed REITs |
• | Raised its annualized dividend rate to $3.48 per share in the fourth quarter, an increase of 31.8% over the fourth quarter of 2012 and the Company’s 51st consecutive quarterly increase |
• | Declared a special distribution of $0.11 per share in the fourth quarter |
• | Generated a total shareholder return of approximately 23.0% for the full year |
Subsequent to year-end, the Company:
• | Completed its merger with CPA®:16 – Global, valued at approximately $4.0 billion |
• | Received investment grade corporate ratings of BBB and Baa2 from Standard & Poor's Ratings Services and Moody’s Investors Service, respectively |
• | Closed on a new credit agreement that increased the capacity of its unsecured line of credit from $625.0 million to $1.25 billion, comprised of a $1.0 billion revolving line of credit and a $250.0 million term loan |
QUARTERLY AND FULL YEAR RESULTS
• | AFFO for the fourth quarter of 2013 was $78.1 million, or $1.12 per diluted share, compared to $78.8 million, or $1.13 per diluted share, for the fourth quarter of 2012. For the 2013 full year, AFFO was $294.2 million, or $4.22 per diluted share, compared to $180.6 million, or $3.76 per diluted share, for the 2012 full year, an increase of $113.6 million and $0.46 per diluted share, respectively, due primarily to income from properties acquired in the Company’s merger with CPA®:15, which closed on September 28, 2012 (the “CPA®:15 Merger”), partially offset by the cessation of asset management revenue received from CPA®:15 upon completion of the CPA®:15 Merger. Per share data for the 2013 periods also reflects the issuance of approximately 28.2 million shares in connection with the CPA®:15 Merger to stockholders of CPA®:15. Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes. |
W. P. Carey Inc. 2013 Earnings Release 8-K – 1
• | Total revenues net of reimbursed expenses for the fourth quarter of 2013 were $116.1 million, compared to $121.7 million for the fourth quarter of 2012, a decline of $5.6 million due primarily to lower acquisition volume in the fourth quarter of 2013. For the 2013 full year, total revenues net of reimbursed expenses were $416.3 million, compared to $254.1 million for 2012, an increase of $162.2 million, due primarily to income from properties acquired in the CPA®:15 Merger and newly acquired properties in the fourth quarter of 2012 and full year 2013. Reimbursed expenses are excluded from total revenues because they have no impact on net income. |
• | Net Income for the fourth quarter of 2013 was $23.0 million, compared to $15.5 million for the same period in 2012. Net Income for the year ended December 31, 2013 was $98.9 million, compared to $62.1 million for the prior year. |
• | For the fourth quarter and full year ended December 31, 2013, the Company received approximately $17.6 million and $62.4 million, respectively, in cash distributions from its equity ownership in the Managed REITs. Included in these amounts were $10.2 million and $34.1 million, respectively, in Available Cash distributions related to the Company’s special general partnership interests in the Managed REITs. |
W. P. CAREY OWNED PORTFOLIO UPDATE
• | W. P. Carey completed two transactions for a total investment of $98.6 million during the fourth quarter of 2013 and |
seven transactions for a total investment of $347.1 million for the 2013 full year.
• | During the fourth quarter of 2013, the Company disposed of 20 properties for total proceeds of $118.0 million, 19 of which were self-storage properties disposed of in a single transaction. For the 2013 full year, the Company sold 28 properties for total proceeds of $175.6 million. |
• | As of January 31, 2014, following the closing of the Company’s merger with CPA®:16 – Global (the “CPA®:16 Merger”), the W. P. Carey owned portfolio consisted primarily of 702 leased properties, comprising 83.6 million square feet leased to 232 tenants. At that date, the average lease term of the combined portfolio was 8.9 years and the occupancy rate was 98.4%. |
W. P. CAREY MANAGED PORTFOLIO UPDATE
• | W. P. Carey is the advisor to the Managed REITs, including the CPA® REITs (currently CPA®:17 – Global and CPA®:18 – Global) and Carey Watermark Investors Incorporated (“CWI”). As of December 31, 2013, excluding CPA®:16 – Global, the Managed REITs had aggregate real estate assets of approximately $5.7 billion, cash of approximately $0.6 billion and total assets of $6.3 billion. The average occupancy rate for the 35.4 million square feet owned by the CPA® REITs at December 31, 2013, exclusive of CPA®:16 – Global, was 99.9%. |
• | CPA®:17 – Global: During the fourth quarter of 2013, the Company structured eight new investments totaling $124.0 million on behalf of CPA®:17 – Global, bringing the total for the 2013 full year to $515.0 million. |
• | CPA®:18 – Global: For the 2013 full year, CPA®:18 – Global, the Company’s newest publicly-registered non-traded REIT offering, raised approximately $237.3 million, during which time the Company structured three investments on its behalf totaling $152.0 million. For the year-to-date period ended February 28, 2014, the Company structured six transactions on behalf of CPA®:18 – Global, totaling approximately $212.1 million. |
• | CWI: For the 2013 full year, CWI invested in 12 hotels for a total of $745.3 million, including investments in two hotels during the fourth quarter of 2013 totaling $272.4 million. |
W. P. Carey Inc. 2013 Earnings Release 8-K – 2
On December 20, 2013, CWI commenced a follow-on public offering of up to an additional $350.0 million of its common stock and an additional $300.0 million in shares of common stock through its distribution reinvestment plan.
MERGER WITH CPA®:16 – GLOBAL
• | On January 31, 2014, W. P. Carey issued approximately 30.7 million shares in connection with the consummation of the merger of its publicly held, non-traded REIT affiliate, CPA®:16 – Global, with and into a subsidiary of W. P. Carey in a transaction valued at approximately $4.0 billion, including debt. At the close of the merger, W. P. Carey had an equity market capitalization of approximately $5.9 billion and a total enterprise value of approximately $9.6 billion. |
AFFO GUIDANCE
• | The Company maintains its previously announced AFFO guidance of between $4.40 to $4.65 per diluted share for the 2014 full year. This guidance range reflects certain assumptions, as described in an 8-K filing on January 27, 2014, including approximately $1.5 billion of total acquisitions, with approximately $1.3 billion in acquisitions for the Managed REITs, and anticipated asset dispositions. |
DIVIDENDS
• | As previously announced, the W. P. Carey Board of Directors raised the quarterly cash dividend to $0.87 per share for the fourth quarter of 2013, representing a 31.8% increase over the fourth quarter of 2012 and the Company’s 51st consecutive quarterly increase. The quarterly dividend was paid on January 15, 2014 to stockholders of record as of December 31, 2013. In addition, as previously announced, the W. P. Carey Board of Directors declared a special distribution of $0.11 per share in order to distribute its 2013 taxable income to stockholders, which was also paid on January 15, 2014 to stockholders of record as of December 31, 2013. |
MANAGEMENT COMMENTARY
“During the fourth quarter of 2013 we delivered our fifty-first consecutive quarterly dividend increase, raising it to an annualized equivalent rate of $3.48 per share, up 31.8% from the year-ago quarter, and for the full year generated a total shareholder return of approximately 23.0%,” said W. P. Carey President and CEO Trevor Bond. “Furthermore, early in 2014 we completed a number of strategic steps designed to deliver long-term growth for our shareholders and position the company for enhanced access to capital markets. Specifically, we closed our merger with CPA®:16 – Global, increased the capacity of our unsecured line of credit and obtained investment grade corporate ratings from both Moody’s and Standard & Poor’s.”
Conference Call and Audio Webcast Scheduled for 11:00 AM (ET)
Please call at least 10 minutes prior to call to register.
Time: Monday, March 3, 2014 at 11:00 AM (ET)
Call-in Number: +1-877-317-6789
(International) +1-412-317-6789
Webcast: www.wpcarey.com/earnings
Podcast: www.wpcarey.com/podcast
Available after 2:00 PM (ET)
Replay Number: 877-344-7529
(International) + 1-412-317-0088
Replay Passcode: 10039695
Replay available until March 13, 2014 at 9:00 AM (ET).
W. P. Carey Inc.
W. P. Carey Inc. is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. It also acts as the manager to a series of non-traded REITs. The Company’s owned and managed diversified global investment portfolio had a combined enterprise value of approximately $15 billion at December 31, 2013. Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Furthermore, its portfolio of long-
W. P. Carey Inc. is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. It also acts as the manager to a series of non-traded REITs. The Company’s owned and managed diversified global investment portfolio had a combined enterprise value of approximately $15 billion at December 31, 2013. Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Furthermore, its portfolio of long-
W. P. Carey Inc. 2013 Earnings Release 8-K – 3
term leases with creditworthy tenants has an established history of generating stable cash flows, enabling it to deliver consistent and rising dividend income to investors for over four decades.
www.wpcarey.com
Cautionary Statement Concerning Forward-Looking Statements:
Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Act and the Exchange Act, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of W. P. Carey and can be identified by the use of words such as “may,” “will,” “should,” “would,” “assume,” “outlook,” “seek,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast” and other comparable terms. These forward-looking statements include, but are not limited to, statements regarding the benefits of the CPA®:16 Merger, annualized dividends, funds from operations coverage, integration plans and expected synergies, and anticipated future financial and operating performance and results, including estimates of growth. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that the actual results of W. P. Carey could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of W. P. Carey. Discussions of some of these other important factors and assumptions are contained in W. P. Carey’s filings with the SEC and are available at the SEC’s website at http://www.sec.gov, including Item 1A. Risk Factors in W. P. Carey’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC on March 3, 2014. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.
W. P. Carey Inc. 2013 Earnings Release 8-K – 4
W. P. CAREY INC.
Financial Highlights (Unaudited)
(in thousands, except per share amounts)
These financial highlights include the non-GAAP financial measure, Funds from operations—as adjusted (“AFFO”). A description of this non-GAAP financial measure and a reconciliation to its most directly comparable GAAP measure is provided on the following pages.
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net Income | $ | 23,022 | $ | 15,477 | $ | 98,876 | $ | 62,132 | |||||||
AFFO from real estate ownership | $ | 66,770 | $ | 64,706 | $ | 263,657 | $ | 159,511 | |||||||
AFFO from investment management | 11,343 | 14,116 | 30,494 | 21,120 | |||||||||||
Total AFFO | $ | 78,113 | $ | 78,822 | $ | 294,151 | $ | 180,631 | |||||||
Per Share (Diluted) | |||||||||||||||
Net Income | $ | 0.33 | $ | 0.22 | $ | 1.41 | $ | 1.28 | |||||||
AFFO from real estate ownership | $ | 0.96 | $ | 0.93 | $ | 3.78 | $ | 3.32 | |||||||
AFFO from investment management | 0.16 | 0.20 | 0.44 | 0.44 | |||||||||||
Total AFFO | $ | 1.12 | $ | 1.13 | $ | 4.22 | $ | 3.76 | |||||||
W. P. Carey Inc. 2013 Earnings Release 8-K – 5
W. P. CAREY INC. | |||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||
(in thousands) | |||||||||||
December 31, | |||||||||||
2013 | 2012 | ||||||||||
Assets | |||||||||||
Investments in real estate: | |||||||||||
Real estate, at cost | $ | 2,516,325 | $ | 2,334,488 | |||||||
Operating real estate, at cost | 6,024 | 99,703 | |||||||||
Accumulated depreciation | (168,958 | ) | (136,068 | ) | |||||||
Net investments in properties | 2,353,391 | 2,298,123 | |||||||||
Net investments in direct financing leases | 363,420 | 376,005 | |||||||||
Assets held for sale | 86,823 | 1,445 | |||||||||
Equity investments in real estate and the Managed REITs | 530,020 | 565,626 | |||||||||
Net investments in real estate | 3,333,654 | 3,241,199 | |||||||||
Cash and cash equivalents | 117,519 | 123,904 | |||||||||
Due from affiliates | 32,034 | 36,002 | |||||||||
Goodwill | 350,208 | 329,132 | |||||||||
In place lease intangible assets, net | 467,127 | 447,278 | |||||||||
Above-market rent intangible assets, net | 241,975 | 279,885 | |||||||||
Other assets, net | 136,433 | 151,642 | |||||||||
Total assets | $ | 4,678,950 | $ | 4,609,042 | |||||||
Liabilities and Equity | |||||||||||
Liabilities: | |||||||||||
Non-recourse debt | $ | 1,492,410 | $ | 1,715,397 | |||||||
Senior credit facility and unsecured term loan | 575,000 | 253,000 | |||||||||
Below-market rent and other intangible liabilities | 128,202 | 106,448 | |||||||||
Accounts payable, accrued expenses and other liabilities | 161,369 | 158,684 | |||||||||
Income taxes, net | 44,056 | 24,959 | |||||||||
Distributions payable | 67,746 | 45,700 | |||||||||
Total liabilities | 2,468,783 | 2,304,188 | |||||||||
Redeemable noncontrolling interest | 7,436 | 7,531 | |||||||||
Redeemable securities - related party | — | 40,000 | |||||||||
Equity: | |||||||||||
W. P. Carey stockholders’ equity: | |||||||||||
Preferred stock (None issued) | — | — | |||||||||
Common stock | 69 | 69 | |||||||||
Additional paid-in capital | 2,256,503 | 2,175,820 | |||||||||
Distributions in excess of accumulated earnings | (318,577 | ) | (172,182 | ) | |||||||
Deferred compensation obligation | 11,354 | 8,358 | |||||||||
Accumulated other comprehensive income (loss) | 15,336 | (4,649 | ) | ||||||||
Less: treasury stock at cost | (60,270 | ) | (20,270 | ) | |||||||
Total W. P. Carey stockholders’ equity | 1,904,415 | 1,987,146 | |||||||||
Noncontrolling interests | 298,316 | 270,177 | |||||||||
Total equity | 2,202,731 | 2,257,323 | |||||||||
Total liabilities and equity | $ | 4,678,950 | $ | 4,609,042 | |||||||
W. P. Carey Inc. 2013 Earnings Release 8-K – 6
W. P. CAREY INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
Years Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Revenues | |||||||||||
Lease revenues: | |||||||||||
Rental income | $ | 262,330 | $ | 104,079 | $ | 49,618 | |||||
Interest income from direct financing leases | 37,294 | 15,217 | 10,278 | ||||||||
Total lease revenues | 299,624 | 119,296 | 59,896 | ||||||||
Reimbursed costs from affiliates | 73,572 | 98,245 | 64,829 | ||||||||
Structuring revenue from affiliates | 46,589 | 48,355 | 46,831 | ||||||||
Asset management revenue from affiliates | 42,670 | 56,666 | 66,808 | ||||||||
Other real estate income | 16,341 | 9,885 | 7,168 | ||||||||
Dealer manager fees from affiliates | 10,856 | 19,914 | 11,664 | ||||||||
Incentive, termination and subordinated disposition revenue from affiliates | 199 | — | 52,515 | ||||||||
489,851 | 352,361 | 309,711 | |||||||||
Operating Expenses | |||||||||||
Depreciation and amortization | 121,822 | 44,427 | 20,481 | ||||||||
General and administrative | 84,112 | 86,916 | 75,850 | ||||||||
Reimbursable costs | 73,572 | 98,245 | 64,829 | ||||||||
Stock-based compensation expenses | 37,280 | 26,241 | 17,750 | ||||||||
Property expenses | 20,840 | 11,534 | 8,852 | ||||||||
Merger and acquisition expenses | 9,230 | 31,639 | 33 | ||||||||
Other real estate expenses | 556 | 489 | 478 | ||||||||
Impairment charges | 5,294 | — | (1,365 | ) | |||||||
352,706 | 299,491 | 186,908 | |||||||||
Other Income and Expenses | |||||||||||
Net income from equity investments in real estate and the Managed REITs | 52,731 | 62,392 | 51,228 | ||||||||
Other income and (expenses) | 7,997 | 3,396 | 4,579 | ||||||||
Other interest income | 1,092 | 1,332 | 1,996 | ||||||||
Gain on change in control of interests | — | 20,744 | 27,859 | ||||||||
Interest expense | (103,728 | ) | (46,448 | ) | (18,210 | ) | |||||
(41,908 | ) | 41,416 | 67,452 | ||||||||
Income from continuing operations before income taxes | 95,237 | 94,286 | 190,255 | ||||||||
Provision for income taxes | (1,252 | ) | (6,772 | ) | (37,214 | ) | |||||
Income from continuing operations | 93,985 | 87,514 | 153,041 | ||||||||
Discontinued Operations | |||||||||||
Gain (loss) on sale of real estate, net of tax | 40,043 | (5,015 | ) | (3,391 | ) | ||||||
Income from operations of discontinued properties, net of tax | 8,967 | 3,242 | 318 | ||||||||
Gain on deconsolidation of a subsidiary, net of tax | — | — | 1,008 | ||||||||
Impairment charges, net of tax | (8,415 | ) | (22,962 | ) | (11,838 | ) | |||||
Loss on extinguishment of debt, net of tax | (2,415 | ) | — | — | |||||||
Income (loss) from discontinued operations, net of tax | 38,180 | (24,735 | ) | (13,903 | ) | ||||||
Net Income | 132,165 | 62,779 | 139,138 | ||||||||
Net (income) loss attributable to noncontrolling interests | (32,936 | ) | (607 | ) | 1,864 | ||||||
Net income attributable to redeemable noncontrolling interests | (353 | ) | (40 | ) | (1,923 | ) | |||||
Net Income Attributable to W. P. Carey | $ | 98,876 | $ | 62,132 | $ | 139,079 | |||||
Basic Earnings Per Share | |||||||||||
Income from continuing operations attributable to W. P. Carey | $ | 1.22 | $ | 1.83 | $ | 3.78 | |||||
Income (loss) from discontinued operations attributable to W. P. Carey | 0.21 | (0.53 | ) | (0.34 | ) | ||||||
Net income attributable to W. P. Carey | $ | 1.43 | $ | 1.30 | $ | 3.44 | |||||
Diluted Earnings Per Share | |||||||||||
Income from continuing operations attributable to W. P. Carey | $ | 1.21 | $ | 1.80 | $ | 3.76 | |||||
Income (loss) from discontinued operations attributable to W. P. Carey | 0.20 | (0.52 | ) | (0.34 | ) | ||||||
Net income attributable to W. P. Carey | $ | 1.41 | $ | 1.28 | $ | 3.42 | |||||
Weighted Average Shares Outstanding | |||||||||||
Basic | 68,691,046 | 47,389,460 | 39,819,475 | ||||||||
Diluted | 69,708,008 | 48,078,474 | 40,098,095 | ||||||||
Amounts Attributable to W. P. Carey | |||||||||||
Income from continuing operations, net of tax | $ | 84,637 | $ | 87,571 | $ | 153,011 | |||||
Income (loss) from discontinued operations, net of tax | 14,239 | (25,439 | ) | (13,932 | ) | ||||||
Net income attributable to W. P. Carey | $ | 98,876 | $ | 62,132 | $ | 139,079 | |||||
W. P. Carey Inc. 2013 Earnings Release 8-K – 7
W. P. CAREY INC.
Reconciliation of Net Income to Funds From Operations –– as adjusted (AFFO) (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Real Estate Ownership | |||||||||||||||||||
Net income from real estate ownership attributable to W. P. Carey | $ | 21,021 | $ | 5,507 | $ | 94,515 | $ | 44,895 | |||||||||||
Adjustments: | |||||||||||||||||||
Depreciation and amortization of real property | 31,390 | 28,652 | 121,730 | 45,982 | |||||||||||||||
Impairment charges | 6,790 | 10,700 | 13,156 | 22,962 | |||||||||||||||
(Gain) loss on sale of real estate, net | (39,422 | ) | 4,240 | (39,711 | ) | 2,676 | |||||||||||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO | 4,917 | 3,211 | (5,868 | ) | (9,688 | ) | |||||||||||||
Proportionate share of adjustments for noncontrolling interests to arrive at FFO | 18,549 | (4,235 | ) | 5,783 | (5,504 | ) | |||||||||||||
Total adjustments | 22,224 | 42,568 | 95,090 | 56,428 | |||||||||||||||
FFO (as defined by NAREIT) - Real Estate Ownership | 43,245 | 48,075 | 189,605 | 101,323 | |||||||||||||||
Adjustments: | |||||||||||||||||||
Loss (gain) on change in control of interests (a) | — | 60 | — | (20,734 | ) | ||||||||||||||
Loss on extinguishment of debt | 1,399 | 10 | 1,189 | — | |||||||||||||||
Other gains, net | (97 | ) | (12 | ) | (399 | ) | (2 | ) | |||||||||||
Other depreciation, amortization and non-cash charges | 88 | (1,556 | ) | (334 | ) | (1,662 | ) | ||||||||||||
Stock-based compensation | (997 | ) | 211 | 347 | 211 | ||||||||||||||
Deferred tax benefit | (3,777 | ) | (644 | ) | (5,555 | ) | (2,745 | ) | |||||||||||
Acquisition expenses (b) | 89 | — | 4,074 | — | |||||||||||||||
Realized losses on foreign currency, derivatives and other | 503 | 171 | 724 | 828 | |||||||||||||||
Amortization of deferred financing costs | 792 | 468 | 2,565 | 1,843 | |||||||||||||||
Straight-line and other rent adjustments | (1,643 | ) | (2,248 | ) | (8,019 | ) | (4,446 | ) | |||||||||||
Above- and below-market rent intangible lease amortization, net | 7,374 | 7,534 | 29,197 | 7,696 | |||||||||||||||
CPA®:15 Merger and CPA®:16 Merger expenses (c) | 2,238 | 1,049 | 5,030 | 41,338 | |||||||||||||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO | 398 | 123 | 1,261 | (681 | ) | ||||||||||||||
AFFO adjustments to equity earnings from equity investments | 10,659 | 11,971 | 41,587 | 37,234 | |||||||||||||||
Hellweg 2 restructuring (d) | 8,357 | — | 8,357 | — | |||||||||||||||
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO | (1,858 | ) | (506 | ) | (5,972 | ) | (692 | ) | |||||||||||
Total adjustments | 23,525 | 16,631 | 74,052 | 58,188 | |||||||||||||||
AFFO - Real Estate Ownership | $ | 66,770 | $ | 64,706 | $ | 263,657 | $ | 159,511 | |||||||||||
Investment Management | |||||||||||||||||||
Net income from investment management attributable to W. P. Carey | $ | 2,001 | $ | 9,970 | $ | 4,361 | $ | 17,237 | |||||||||||
FFO (as defined by NAREIT) - Investment Management | 2,001 | 9,970 | 4,361 | 17,237 | |||||||||||||||
Adjustments: | |||||||||||||||||||
Other depreciation, amortization and other non-cash charges | 271 | 226 | 1,050 | 961 | |||||||||||||||
Stock-based compensation | 12,761 | 6,281 | 36,848 | 25,841 | |||||||||||||||
Deferred tax benefit | (4,703 | ) | (2,625 | ) | (13,815 | ) | (24,055 | ) | |||||||||||
Impairment charge on marketable security | 553 | — | 553 | — | |||||||||||||||
Realized gains on foreign currency | (4 | ) | (55 | ) | (7 | ) | (61 | ) | |||||||||||
Amortization of deferred financing costs | 464 | 319 | 1,504 | 1,197 | |||||||||||||||
Total adjustments | 9,342 | 4,146 | 26,133 | 3,883 | |||||||||||||||
AFFO - Investment Management | $ | 11,343 | $ | 14,116 | $ | 30,494 | $ | 21,120 | |||||||||||
Total Company | |||||||||||||||||||
FFO (as defined by NAREIT) | $ | 45,246 | $ | 58,045 | $ | 193,966 | $ | 118,560 | |||||||||||
FFO (as defined by NAREIT) per diluted share | $ | 0.65 | $ | 0.84 | $ | 2.78 | $ | 2.47 | |||||||||||
AFFO | $ | 78,113 | $ | 78,822 | $ | 294,151 | $ | 180,631 | |||||||||||
AFFO per diluted share | $ | 1.12 | $ | 1.13 | $ | 4.22 | $ | 3.76 | |||||||||||
Diluted weighted average shares outstanding | 69,628,498 | 69,505,871 | 69,708,008 | 48,078,474 | |||||||||||||||
W. P. Carey Inc. 2013 Earnings Release 8-K – 8
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(a) | Gain on change in control of interests for the year ended December 31, 2012 represents a gain of $14.6 million recognized on our previously held interest in shares of CPA®:15 common stock, and a gain of $6.1 million recognized on the purchase of the remaining interests in five investments from CPA®:15, which we had previously accounted for under the equity method. We recognized a net gain of $20.7 million to adjust the carrying value of our existing interests in these investments to their estimated fair values. |
(b) | Prior to the second quarter of 2013, this amount was insignificant and therefore not included in the AFFO calculation. |
(c) | Amount for the year ended December 31, 2012 included $31.7 million of general and administrative expenses and $9.6 million of income tax expenses incurred in connection with the CPA®:15 Merger. |
(d) | In connection with the Hellweg 2 restructuring in October 2013, our share of the German real estate transfer tax incurred by Hellweg 2 was $8.4 million. |
Non-GAAP Financial Disclosure
Funds from operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income or loss (as computed in accordance with GAAP) excluding: depreciation and amortization expense from real estate assets, impairment charges on real estate, gains or losses from sales of depreciated real estate assets and extraordinary items; however FFO related to assets held for sale, sold or otherwise transferred and included in the results of discontinued operations are included. These adjustments also incorporate the pro rata share of unconsolidated subsidiaries. FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers. Although NAREIT has published this definition of FFO, companies often modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations.
We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash charges such as amortization of intangibles, deferred income tax benefits and expenses, straight-line rents, stock compensation, gains or losses from extinguishment of debt and deconsolidation of subsidiaries and unrealized foreign currency exchange gains and losses. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude acquisition expenses and non-core expenses such as, merger and restructuring expenses. Merger expenses are related to the CPA®:15 Merger and CPA®:16 Merger and restructuring expenses are related to the restructuring of Hellweg 2. We also exclude realized gain/losses on foreign exchange and derivatives which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income as they are not the primary drivers in our decision making process and excluding those items provides investors a view of our portfolio performance over time and make it more comparable to other REITs which are currently not engaged in acquisitions, mergers and restructurings which are not part of our normal business operations. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.
We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess the sustainability of our operating performance without potentially distorting the impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.
W. P. Carey Inc. 2013 Earnings Release 8-K – 9