Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT - W. P. Carey Inc. | wpc2014q38-ksupplementalex.htm |
| 8-K - 8-K - W. P. Carey Inc. | wpc2014q38-ksupplemental.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Institutional Investors:
Peter Sands
W. P. Carey Inc.
212-492-1110
psands@wpcarey.com
Individual Investors:
W. P. Carey Inc.
212-492-8920
ir@wpcarey.com
Press Contact:
Guy Lawrence
Ross & Lawrence
212-308-3333
gblawrence@rosslawpr.com
W. P. Carey Inc. Announces Third Quarter 2014 Financial Results
New York, NY – November 4, 2014 – W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), a global net-lease real estate investment trust, today reported its financial results for the third quarter ended September 30, 2014.
Financial Update – Third Quarter 2014
• | Revenues of $195.9 million and revenues, excluding reimbursable expenses, of $175.0 million |
• | AFFO of $114.4 million, equivalent to $1.13 per diluted share |
• | Quarterly dividend raised to $0.94 per share, equivalent to an annualized dividend rate of $3.76 per share |
• | Full year 2014 AFFO guidance range raised to $4.70 to $4.86 per diluted share |
• | Full year 2015 AFFO guidance range of $4.76 to $5.02 per diluted share announced |
Business Update – Third Quarter 2014
• | Acquired two properties for a total of $163.3 million |
• | Successfully completed an inaugural public equity offering, raising approximately $282 million |
• | Owned net-leased portfolio occupancy of 98.1% |
• | Structured $122.8 million of investments on behalf of the Managed REITs |
• | Raised $158.7 million on behalf of the Managed REITs |
• | Took steps to further diversify our non-traded product offerings |
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 1
MANAGEMENT COMMENTARY
“During the third quarter, we made progress towards two of our core business strategies — funding accretive acquisitions through an appropriate mix of equity and unsecured debt, and further diversifying our non-traded product offerings,” said W. P. Carey President and CEO, Trevor Bond. “In particular, we achieved an important milestone with the successful completion of our inaugural public equity offering. And we took steps to expand the product lineup of our Investment Management business to include a second non-traded lodging REIT and a non-traded BDC. Throughout, we remained focused on generating stable and growing dividend income for our shareholders through disciplined investing, as we have done for over forty years.”
FINANCIAL RESULTS
Revenues
• | Total Company: Revenues, excluding reimbursable costs, for the 2014 third quarter totaled $175.0 million, down 14.7% from $205.2 million for the 2014 second quarter, due primarily to lower revenues from the Managed REITs, excluding reimbursable costs. Compared to the 2013 third quarter, revenues, excluding reimbursable costs, increased 65.6% from $105.7 million, due primarily to additional real estate revenues from properties acquired in the Company’s merger with CPA®:16 – Global, which closed on January 31, 2014 (the CPA®:16 Merger). |
• | Real Estate Ownership: Real estate revenues, excluding reimbursable tenant costs, for the 2014 third quarter were $157.9 million, down 7.7% from $171.0 million for the 2014 second quarter, due primarily to lower lease termination income. Compared to the 2013 third quarter, real estate revenues, excluding reimbursable tenant costs, increased 107.2% from $76.2 million, due primarily to additional lease revenues from properties acquired in the CPA®:16 Merger. |
• | Investment Management: Revenues from the Managed REITs, excluding reimbursable costs, for the 2014 third quarter were $17.0 million, down 50.3% from $34.2 million for the 2014 second quarter and down 42.4% from $29.5 million for the 2013 third quarter. In each case, the decline was due primarily to lower structuring revenue resulting from reduced acquisition activity on behalf of the Managed REITs. |
Adjusted Funds from Operations (AFFO)
• | AFFO for the 2014 third quarter was $114.4 million, or $1.13 per diluted share, down 6.4% and 6.6%, respectively, from AFFO of $122.2 million, or $1.21 per diluted share, for the 2014 second quarter, due primarily to lower structuring revenue resulting from reduced investment activity on behalf of the Managed REITs. |
• | Compared to the 2013 third quarter, AFFO and AFFO per diluted share increased 60.9% and 9.7%, respectively, from $71.1 million, or $1.03 per diluted share, due primarily to additional real estate revenues from properties acquired in the CPA®:16 Merger. |
• | Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes. |
Dividend
• | As previously announced, on September 18, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.94 per share, equivalent to an annualized dividend rate of $3.76 per share, which was paid on October 15, 2014 to stockholders of record as of the close of business on September 30, 2014. The dividend represented a 4.4% increase over the 2014 second quarter and was the Company’s 54th consecutive quarterly increase. |
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 2
AFFO GUIDANCE
• | 2014: The Company has raised its 2014 full year AFFO guidance range to $4.70 to $4.86 per diluted share, up from its previously announced range of $4.62 to $4.82 per diluted share, based on assumed full year 2014 total acquisition volume of approximately $2.9 billion to $3.2 billion, including approximately $1.9 billion to $2.2 billion on behalf of the Managed REITs. |
• | 2015: For the full year 2015, the Company currently expects to report AFFO of between $4.76 and $5.02 per diluted share, based on assumed full year 2015 total acquisition volume of approximately $2.4 billion to $3.1 billion, including approximately $2.0 billion to $2.5 billion on behalf of the Managed REITs, and dispositions from its owned real estate portfolio of approximately $100 million to $200 million. The Company expects to update its 2015 AFFO guidance in connection with the release of its quarterly earnings. |
BALANCE SHEET AND CAPITALIZATION
Equity Offering
• | As previously announced, on September 30, 2014 the Company successfully completed its inaugural public equity offering of 4,600,000 shares of common stock, which included the full exercise of the underwriters’ option to purchase an additional 600,000 shares of its common stock. |
• | Total net proceeds from the offering, after underwriting discounts and offering expenses, were approximately $282 million, which the Company used primarily to reduce the balance outstanding under its revolving credit facility. |
OWNED REAL ESTATE PORTFOLIO
Acquisitions and Dispositions
• | During the 2014 third quarter, the Company completed two investments for $163.3 million, bringing total acquisitions for the nine months ended September 30, 2014 to $252.7 million, including acquisition related-costs and fees. |
• | Total dispositions for the nine months ended September 30, 2014 were $298.7 million, including transaction related-costs and fees, as part of the Company’s active capital recycling program, with a goal of extending the average lease term through reinvestment, improving portfolio credit quality, increasing the asset criticality factor within the portfolio and/or executing strategic dispositions of assets. |
Composition
• | As of September 30, 2014, the Company’s owned portfolio consisted of 688 net-leased properties, comprising 80.8 million square feet leased to 215 tenants, and four operating properties. As of that date, the weighted-average lease term of the net-leased portfolio was 8.5 years and the occupancy rate was 98.1%. |
INVESTMENT MANAGEMENT
• | W. P. Carey is the advisor to CPA®:17 – Global, CPA®:18 – Global (together the CPA® REITs), and Carey Watermark Investors Incorporated (CWI) (together the Managed REITs). At September 30, 2014, the Managed REITs, in aggregate, had total assets under management of approximately $8.3 billion. |
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 3
Acquisitions
• | During the 2014 third quarter, the Company structured ten new investments totaling $122.8 million on behalf of the CPA® REITs, including acquisition related-costs and fees. Total acquisitions for the nine months ended September 30, 2014 were $674.5 million on behalf of the CPA® REITs and $422.8 million on behalf of CWI, in both cases including acquisition related-costs and fees. |
Fundraising
• | During the 2014 third quarter, the Company raised $158.7 million on behalf of the Managed REITs, comprised of $55.6 million on behalf of CPA®:18 – Global in its initial public offering and $103.1 million on behalf of CWI in its follow-on offering, bringing the total raised on behalf of the Managed REITs during the nine months ended September 30, 2014 to $1.1 billion. |
• | In September 2014, the Company filed registration statements with the SEC regarding a new non-traded business development company (BDC). As of the date of this press release, the registration statements have not been declared effective by the SEC and there can be no assurance as to whether or when the related offering would be commenced. |
* * * * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2014 third quarter, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the SEC on November 4, 2014.
* * * * *
Live Conference Call and Audio Webcast Scheduled for 11:00 a.m. Eastern Time
Please call to register at least 15 minutes prior to the start time.
Date/Time: Tuesday, November 4, 2014 at 11:00 a.m. Eastern Time
Call-in Number: +1-877-317-6789 (US) or +1-412-317-6789 (international)
Audio Webcast: www.wpcarey.com/earnings
Audio Webcast Replay
An audio replay of the call will be available at www.wpcarey.com/earnings.
* * * * *
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. At September 30, 2014, the Company had an enterprise value of approximately $9.8 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded REITs with assets under management of approximately $8.3 billion. 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-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
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 4
* * * * *
Cautionary Statement Concerning Forward-Looking Statements:
Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, 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, the statements made by Mr. Bond as well as statements regarding annualized dividends, funds from operations coverage and guidance, including underlying assumptions, plans to become a primarily unsecured borrower through mortgage prepayments, and with regard to its capital recycling and intended results thereof, 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 W. P. Carey’s actual results 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. 9/30/2014 Earnings Release 8-K – 5
W. P. CAREY INC. | |||||||
Consolidated Balance Sheets (Unaudited) | |||||||
(in thousands) | |||||||
September 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Investments in real estate: | |||||||
Real estate, at cost | $ | 4,572,313 | $ | 2,516,325 | |||
Operating real estate, at cost | 84,594 | 6,024 | |||||
Accumulated depreciation | (243,639 | ) | (168,958 | ) | |||
Net investments in properties | 4,413,268 | 2,353,391 | |||||
Net investments in direct financing leases | 838,475 | 363,420 | |||||
Assets held for sale | — | 86,823 | |||||
Equity investments in real estate and the Managed REITs | 218,103 | 530,020 | |||||
Net investments in real estate | 5,469,846 | 3,333,654 | |||||
Cash and cash equivalents | 530,276 | 117,519 | |||||
Due from affiliates | 26,075 | 32,034 | |||||
Goodwill | 702,791 | 350,208 | |||||
In-place lease intangible assets, net | 935,008 | 467,127 | |||||
Above-market rent intangible assets, net | 545,462 | 241,975 | |||||
Other assets, net | 291,991 | 136,433 | |||||
Total Assets | $ | 8,501,449 | $ | 4,678,950 | |||
Liabilities and Equity | |||||||
Liabilities: | |||||||
Non-recourse debt | $ | 2,702,133 | $ | 1,492,410 | |||
Senior unsecured credit facility and unsecured term loan | 618,945 | 575,000 | |||||
Senior unsecured notes | 498,300 | — | |||||
Below-market rent and other intangible liabilities, net | 178,070 | 128,202 | |||||
Accounts payable, accrued expenses and other liabilities | 294,364 | 166,385 | |||||
Deferred income taxes | 96,372 | 39,040 | |||||
Distributions payable | 98,996 | 67,746 | |||||
Total liabilities | 4,487,180 | 2,468,783 | |||||
Redeemable noncontrolling interest | 6,346 | 7,436 | |||||
Equity: | |||||||
W. P. Carey stockholders’ equity: | |||||||
Preferred stock (None issued) | — | — | |||||
Common stock | 105 | 69 | |||||
Additional paid-in capital | 4,313,896 | 2,256,503 | |||||
Distributions in excess of accumulated earnings | (399,116 | ) | (318,577 | ) | |||
Deferred compensation obligation | 30,624 | 11,354 | |||||
Accumulated other comprehensive (loss) income | (21,271 | ) | 15,336 | ||||
Less: treasury stock at cost | (60,948 | ) | (60,270 | ) | |||
Total W. P. Carey stockholders’ equity | 3,863,290 | 1,904,415 | |||||
Noncontrolling interests | 144,633 | 298,316 | |||||
Total equity | 4,007,923 | 2,202,731 | |||||
Total Liabilities and Equity | $ | 8,501,449 | $ | 4,678,950 | |||
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 6
W. P. CAREY INC. | |||||||||||
Quarterly Consolidated Statements of Income (Unaudited) | |||||||||||
(in thousands, except share and per share amounts) | |||||||||||
Three Months Ended | |||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | |||||||||
Revenues | |||||||||||
Real estate revenues: | |||||||||||
Lease revenues | $ | 149,243 | $ | 148,253 | $ | 75,702 | |||||
Operating property revenues | 8,338 | 8,251 | 248 | ||||||||
Reimbursable tenant costs | 6,271 | 5,749 | 3,624 | ||||||||
Lease termination income and other | 360 | 14,481 | 236 | ||||||||
164,212 | 176,734 | 79,810 | |||||||||
Revenues from the Managed REITs: | |||||||||||
Reimbursable costs | 14,722 | 41,925 | 23,259 | ||||||||
Asset management revenue | 9,088 | 9,045 | 10,961 | ||||||||
Structuring revenue | 5,487 | 17,254 | 14,775 | ||||||||
Dealer manager fees | 2,436 | 7,949 | 3,787 | ||||||||
31,733 | 76,173 | 52,782 | |||||||||
195,945 | 252,907 | 132,592 | |||||||||
Operating Expenses | |||||||||||
Depreciation and amortization | 59,524 | 63,445 | 30,534 | ||||||||
Reimbursable tenant and affiliate costs | 20,993 | 47,674 | 26,883 | ||||||||
General and administrative | 20,261 | 19,133 | 15,739 | ||||||||
Property expenses, excluding reimbursable tenant costs | 10,391 | 11,211 | 1,824 | ||||||||
Stock-based compensation expense | 7,979 | 7,957 | 7,852 | ||||||||
Impairment charges | 4,225 | 2,066 | — | ||||||||
Dealer manager fees and expenses | 3,847 | 6,285 | 4,296 | ||||||||
Merger and property acquisition expenses | 618 | 1,137 | 3,630 | ||||||||
Subadvisor fees (a) | 381 | 2,451 | 867 | ||||||||
128,219 | 161,359 | 91,625 | |||||||||
Other Income and Expenses | |||||||||||
Net income from equity investments in real estate and the Managed REITs | 11,610 | 9,452 | 9,180 | ||||||||
Interest expense | (46,534 | ) | (47,733 | ) | (26,262 | ) | |||||
Other income and (expenses) | (4,080 | ) | (872 | ) | 2,778 | ||||||
(39,004 | ) | (39,153 | ) | (14,304 | ) | ||||||
Income from continuing operations before income taxes and gain (loss) on sale of real estate | 28,722 | 52,395 | 26,663 | ||||||||
Provision for income taxes | (901 | ) | (8,021 | ) | (5,391 | ) | |||||
Income from continuing operations before gain (loss) on sale of real estate | 27,821 | 44,374 | 21,272 | ||||||||
Income from discontinued operations, net of tax | 235 | 26,421 | 378 | ||||||||
Gain (loss) on sale of real estate, net of tax | 260 | (3,823 | ) | — | |||||||
Net Income | 28,316 | 66,972 | 21,650 | ||||||||
Net income attributable to noncontrolling interests | (993 | ) | (2,344 | ) | (2,912 | ) | |||||
Net loss (income) attributable to redeemable noncontrolling interest | 14 | 111 | (232 | ) | |||||||
Net Income Attributable to W. P. Carey | $ | 27,337 | $ | 64,739 | $ | 18,506 | |||||
Basic Earnings Per Share | |||||||||||
Income from continuing operations attributable to W. P. Carey | $ | 0.27 | $ | 0.38 | $ | 0.27 | |||||
Income (loss) from discontinued operations attributable to W. P. Carey | — | 0.26 | — | ||||||||
Net Income Attributable to W. P. Carey | $ | 0.27 | $ | 0.64 | $ | 0.27 | |||||
Diluted Earnings Per Share | |||||||||||
Income from continuing operations attributable to W. P. Carey | $ | 0.27 | $ | 0.38 | $ | 0.27 | |||||
Income (loss) from discontinued operations attributable to W. P. Carey | — | 0.26 | — | ||||||||
Net Income Attributable to W. P. Carey | $ | 0.27 | $ | 0.64 | $ | 0.27 | |||||
Weighted-Average Shares Outstanding | |||||||||||
Basic | 100,282,082 | 100,236,362 | 68,397,176 | ||||||||
Diluted | 101,130,448 | 100,995,225 | 69,400,825 | ||||||||
Amounts Attributable to W. P. Carey | |||||||||||
Income from continuing operations, net of tax | $ | 27,107 | $ | 38,275 | $ | 18,541 | |||||
Income (loss) from discontinued operations, net of tax | 230 | 26,464 | (35 | ) | |||||||
Net Income | $ | 27,337 | $ | 64,739 | $ | 18,506 | |||||
Distributions Declared Per Share | $ | 0.940 | $ | 0.900 | $ | 0.860 | |||||
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 7
W. P. CAREY INC. | |||||||
Year-to-Date Consolidated Statements of Income (Unaudited) | |||||||
(in thousands, except share and per share amounts) | |||||||
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Revenues | |||||||
Real estate revenues: | |||||||
Lease revenues | $ | 420,563 | $ | 222,145 | |||
Operating property revenues | 21,580 | 706 | |||||
Reimbursable tenant costs | 18,034 | 9,781 | |||||
Lease termination income and other | 15,841 | 1,319 | |||||
476,018 | 233,951 | ||||||
Revenues from the Managed REITs: | |||||||
Reimbursable costs | 96,379 | 50,694 | |||||
Structuring revenue | 40,492 | 27,539 | |||||
Asset management revenue | 27,910 | 31,330 | |||||
Dealer manager fees | 17,062 | 7,329 | |||||
181,843 | 116,892 | ||||||
657,861 | 350,843 | ||||||
Operating Expenses | |||||||
Depreciation and amortization | 175,642 | 89,681 | |||||
Reimbursable tenant and affiliate costs | 114,413 | 60,475 | |||||
General and administrative | 62,066 | 47,336 | |||||
Merger and property acquisition expenses | 31,369 | 6,879 | |||||
Property expenses, excluding reimbursable tenant costs | 30,021 | 5,871 | |||||
Stock-based compensation expense | 22,979 | 25,430 | |||||
Dealer manager fees and expenses | 15,557 | 9,421 | |||||
Impairment charges | 6,291 | — | |||||
Subadvisor fees (a) | 2,850 | 2,537 | |||||
461,188 | 247,630 | ||||||
Other Income and Expenses | |||||||
Net income from equity investments in real estate and the Managed REITs | 35,324 | 52,377 | |||||
Gain on change in control of interests (b) | 104,645 | — | |||||
Interest expense | (133,342 | ) | (77,596 | ) | |||
Other income and (expenses) | (10,403 | ) | 6,627 | ||||
(3,776 | ) | (18,592 | ) | ||||
Income from continuing operations before income taxes and loss on sale of real estate | 192,897 | 84,621 | |||||
Provision for income taxes | (11,175 | ) | (3,050 | ) | |||
Income from continuing operations before loss on sale of real estate | 181,722 | 81,571 | |||||
Income from discontinued operations, net of tax | 33,063 | 2,066 | |||||
Loss on sale of real estate, net of tax | (3,482 | ) | (332 | ) | |||
Net Income | 211,303 | 83,305 | |||||
Net income attributable to noncontrolling interests | (4,914 | ) | (7,312 | ) | |||
Net income attributable to redeemable noncontrolling interest | (137 | ) | (139 | ) | |||
Net Income Attributable to W. P. Carey | $ | 206,252 | $ | 75,854 | |||
Basic Earnings Per Share | |||||||
Income from continuing operations attributable to W. P. Carey | $ | 1.78 | $ | 1.08 | |||
Income from discontinued operations attributable to W. P. Carey | 0.34 | 0.02 | |||||
Net Income Attributable to W. P. Carey | $ | 2.12 | $ | 1.10 | |||
Diluted Earnings Per Share | |||||||
Income from continuing operations attributable to W. P. Carey | $ | 1.76 | $ | 1.06 | |||
Income from discontinued operations attributable to W. P. Carey | 0.34 | 0.02 | |||||
Net Income Attributable to W. P. Carey | $ | 2.10 | $ | 1.08 | |||
Weighted-Average Shares Outstanding | |||||||
Basic | 96,690,675 | 68,719,264 | |||||
Diluted | 97,728,981 | 69,846,320 | |||||
Amounts Attributable to W. P. Carey | |||||||
Income from continuing operations, net of tax | $ | 173,016 | $ | 74,809 | |||
Income from discontinued operations, net of tax | 33,236 | 1,045 | |||||
Net Income | $ | 206,252 | $ | 75,854 | |||
Distributions Declared Per Share | $ | 2.735 | $ | 2.520 | |||
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 8
__________
(a) | We earn investment management revenue from CWI. Pursuant to the terms of the subadvisory agreement, we pay a subadvisory fee equal to 20% of the amount of fees paid to us by CWI, including but not limited to: acquisition fees, asset management fees, loan refinancing fees, property management fees, and subordinated disposition fees, each as defined in the advisory agreement. We also pay to the subadvisor 20% of the net proceeds resulting from any sale, financing, or recapitalization or sale of securities by us, the advisor. |
(b) | Gain on change in control of interests for the nine months ended September 30, 2014 represents a gain of $74.4 million recognized on our previously-held interest in shares of CPA®:16 – Global common stock, and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global, which we had previously accounted for under the equity method. |
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 9
W. P. CAREY INC.
Quarterly Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended | |||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | |||||||||
Net income attributable to W. P. Carey | $ | 27,337 | $ | 64,739 | $ | 18,506 | |||||
Adjustments: | |||||||||||
Depreciation and amortization of real property | 58,355 | 62,354 | 30,483 | ||||||||
Impairment charges | 4,225 | 2,066 | 1,416 | ||||||||
Gain on sale of real estate, net | (259 | ) | (25,582 | ) | (240 | ) | |||||
Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (2,924 | ) | (2,586 | ) | (4,252 | ) | |||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO | 457 | 533 | 2,365 | ||||||||
Total adjustments | 59,854 | 36,785 | 29,772 | ||||||||
FFO (as defined by NAREIT) | 87,191 | 101,524 | 48,278 | ||||||||
Adjustments: | |||||||||||
Above- and below-market rent intangible lease amortization, net | 14,432 | 17,124 | 7,330 | ||||||||
Stock-based compensation | 7,979 | 7,957 | 7,853 | ||||||||
Other amortization and non-cash charges (a) | 5,670 | 1,719 | (429 | ) | |||||||
Straight-line and other rent adjustments | (1,791 | ) | (8,999 | ) | (1,930 | ) | |||||
Tax benefit – deferred and other non-cash charges | (1,665 | ) | (1,246 | ) | (4,282 | ) | |||||
Loss (gain) on extinguishment of debt | 1,122 | 721 | (143 | ) | |||||||
AFFO adjustments to equity earnings from equity investments | 1,094 | 935 | 10,961 | ||||||||
Amortization of deferred financing costs | 1,007 | 999 | 1,117 | ||||||||
Property acquisition expenses | 609 | 224 | 1,076 | ||||||||
Realized (gains) losses on foreign currency, derivatives, and other | (272 | ) | 159 | 60 | |||||||
Other gains, net | (86 | ) | (13 | ) | (46 | ) | |||||
Merger expenses | 9 | 915 | 2,464 | ||||||||
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO | (918 | ) | 259 | (1,470 | ) | ||||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO | (14 | ) | (32 | ) | 306 | ||||||
Total adjustments | 27,176 | 20,722 | 22,867 | ||||||||
AFFO | $ | 114,367 | $ | 122,246 | $ | 71,145 | |||||
Summary | |||||||||||
FFO (as defined by NAREIT) | $ | 87,191 | $ | 101,524 | $ | 48,278 | |||||
FFO (as defined by NAREIT) per diluted share | $ | 0.86 | $ | 1.01 | $ | 0.70 | |||||
AFFO | $ | 114,367 | $ | 122,246 | $ | 71,145 | |||||
AFFO per diluted share | $ | 1.13 | $ | 1.21 | $ | 1.03 | |||||
Diluted weighted-average shares outstanding | 101,130,448 | 100,995,225 | 69,400,825 | ||||||||
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 10
W. P. CAREY INC.
Year-to-Date Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Net income attributable to W. P. Carey | $ | 206,252 | $ | 75,854 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 172,329 | 90,340 | |||||
Gain on sale of real estate, net | (29,017 | ) | (290 | ) | |||
Impairment charges | 6,291 | 6,366 | |||||
Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (9,002 | ) | (12,766 | ) | |||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO | 2,255 | (10,785 | ) | ||||
Total adjustments | 142,856 | 72,865 | |||||
FFO (as defined by NAREIT) | 349,108 | 148,719 | |||||
Adjustments: | |||||||
Gain on change in control of interests | (104,645 | ) | — | ||||
Above- and below-market rent intangible lease amortization, net | 45,042 | 21,823 | |||||
Merger expenses (b) | 44,302 | 2,793 | |||||
Stock-based compensation | 22,979 | 25,431 | |||||
Tax benefit – deferred and other non-cash charges | (13,841 | ) | (10,890 | ) | |||
Straight-line and other rent adjustments | (13,459 | ) | (6,376 | ) | |||
Loss (gain) on extinguishment of debt | 9,835 | (210 | ) | ||||
Other amortization and non-cash charges (a) | 8,244 | 413 | |||||
AFFO adjustments to equity earnings from equity investments | 4,965 | 30,928 | |||||
Amortization of deferred financing costs | 3,031 | 2,813 | |||||
Property acquisition expenses (c) | 934 | 3,985 | |||||
Realized losses on foreign currency, derivatives, and other | 548 | 218 | |||||
Other gains, net | (65 | ) | (358 | ) | |||
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO | (2,076 | ) | (4,114 | ) | |||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO | (41 | ) | 863 | ||||
Total adjustments | 5,753 | 67,319 | |||||
AFFO | $ | 354,861 | $ | 216,038 | |||
Summary | |||||||
FFO (as defined by NAREIT) | $ | 349,108 | $ | 148,719 | |||
FFO (as defined by NAREIT) per diluted share | $ | 3.57 | $ | 2.13 | |||
AFFO | $ | 354,861 | $ | 216,038 | |||
AFFO per diluted share | $ | 3.63 | $ | 3.09 | |||
Diluted weighted-average shares outstanding | 97,728,981 | 69,846,320 | |||||
W. P. Carey Inc. 9/30/2014 Earnings Release 8-K – 11
__________
(a) | Represents primarily unrealized gains and losses from foreign exchange and derivatives, as well as amounts for the amortization of contracts. |
(b) | Amount for the nine months ended September 30, 2014 includes reported merger costs as well as income tax expense incurred in connection with the CPA®:16 Merger. Income tax expense incurred in connection with the CPA®:16 Merger represents the current portion of income tax expense including the permanent difference incurred upon recognition of deferred revenue associated with the accelerated vesting of shares previously issued by CPA®:16 – Global for asset management and performance fees. |
(c) | Prior to the second quarter of 2013, this amount was insignificant and therefore not included in the AFFO calculation. |
Non-GAAP Financial Disclosure
Funds from Operations, or FFO, is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts, or 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 real estate-related 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 expenses. Merger expenses are related to the CPA®:16 Merger. We also exclude realized gains or 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 not currently engaged in acquisitions, mergers, and restructuring, 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 the potentially distorting 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 or 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. 9/30/2014 Earnings Release 8-K – 12