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EX-4.2 - EXHIBIT 4.2 - VEREIT, Inc.vereit06302015-ex42.htm
EX-10.2 - EXHIBIT 10.2 - VEREIT, Inc.vereit06302015-ex102.htm
EX-32.3 - EXHIBIT 32.3 - VEREIT, Inc.vereit06302015-ex323.htm
EX-32.2 - EXHIBIT 32.2 - VEREIT, Inc.vereit06302015-ex322.htm
EX-3.10 - EXHIBIT 3.10 - VEREIT, Inc.vereit06302015-ex310.htm
EX-10.5 - EXHIBIT 10.5 - VEREIT, Inc.vereit06302015-ex105.htm
EX-10.7 - EXHIBIT 10.7 - VEREIT, Inc.vereit06302015-ex107.htm
EX-31.1 - EXHIBIT 31.1 - VEREIT, Inc.vereit06302015-ex311.htm
EX-31.3 - EXHIBIT 31.3 - VEREIT, Inc.vereit06302015-ex313.htm
EX-10.6 - EXHIBIT 10.6 - VEREIT, Inc.vereit06302015-ex106.htm
EX-31.4 - EXHIBIT 31.4 - VEREIT, Inc.vereit06302015-ex314.htm
EX-3.15 - EXHIBIT 3.15 - VEREIT, Inc.vereit06302015-ex315.htm
EX-32.4 - EXHIBIT 32.4 - VEREIT, Inc.vereit06302015-ex324.htm
EX-10.4 - EXHIBIT 10.4 - VEREIT, Inc.vereit06302015-ex104.htm
EX-10.9 - EXHIBIT 10.9 - VEREIT, Inc.vereit06302015-ex109.htm
EX-31.2 - EXHIBIT 31.2 - VEREIT, Inc.vereit06302015-ex312.htm
EX-32.1 - EXHIBIT 32.1 - VEREIT, Inc.vereit06302015-ex321.htm
EX-10.3 - EXHIBIT 10.3 - VEREIT, Inc.vereit06302015-ex103.htm
EX-3.17 - EXHIBIT 3.17 - VEREIT, Inc.vereit06302015-ex317.htm
EX-10.1 - EXHIBIT 10.1 - VEREIT, Inc.vereit06302015-ex101.htm
EX-10.10 - EXHIBIT 10.10 - VEREIT, Inc.vereit06302015-ex1010.htm
EX-4.3 - EXHIBIT 4.3 - VEREIT, Inc.vereit06302015-ex43.htm
EX-10.8 - EXHIBIT 10.8 - VEREIT, Inc.vereit06302015-ex108.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to __________

Commission file numbers: 001-35263 and 333-197780
VEREIT, Inc.
VEREIT Operating Partnership, L.P.
(Exact name of registrant as specified in its charter)
Maryland (VEREIT, Inc.)
 
45-2482685
Delaware (VEREIT OPERATING PARTNERSHIP, L.P.)
 
45-1255683
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2325 E. Camelback Road, Suite 1100, Phoenix, AZ
 
85016
(Address of principal executive offices)
 
(Zip Code)
(800) 606-3610
(Registrant’s telephone number, including area code)
AMERICAN REALTY CAPITAL PROPERTIES, INC.
ARC PROPERTIES OPERATING PARTNERSHIP, L.P.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
VEREIT, Inc. Yes x No o VEREIT Operating Partnership, L.P. Yes x No o
Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
VEREIT, Inc. Yes x No o VEREIT Operating Partnership, L.P. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
VEREIT, Inc.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
VEREIT Operating Partnership, L.P.
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer x
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
VEREIT, Inc. Yes o No x VEREIT Operating Partnership, L.P. Yes o No x
As of August 5, 2015, there were 905,020,348 shares of common stock outstanding.



VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )
For the quarterly period ended June 30, 2015

 
Page
PART I — FINANCIAL INFORMATION
PART II — OTHER INFORMATION


VEREIT, INC.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data) (Unaudited)

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
 
 
June 30, 2015
 
December 31, 2014
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
3,351,303

 
$
3,472,298

Buildings, fixtures and improvements
 
11,779,450

 
12,307,758

Land and construction in progress
 
83,104

 
77,450

Intangible lease assets
 
2,339,273

 
2,435,054

Total real estate investments, at cost
 
17,553,130

 
18,292,560

Less: accumulated depreciation and amortization
 
1,401,843

 
1,034,122

Total real estate investments, net
 
16,151,287

 
17,258,438

Investment in unconsolidated entities
 
94,502

 
98,053

Investment in direct financing leases, net
 
49,801

 
56,076

Investment securities, at fair value
 
55,802

 
58,646

Loans held for investment, net
 
40,598

 
42,106

Cash and cash equivalents
 
121,651

 
416,711

Restricted cash
 
53,336

 
62,651

Intangible assets, net
 
135,340

 
150,359

Deferred costs and other assets, net
 
403,606

 
389,922

Goodwill
 
1,847,295

 
1,894,794

Due from affiliates
 
53,456

 
86,122

Assets held for sale
 
242,701

 
1,261

Total assets
 
$
19,249,375


$
20,515,139

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Mortgage notes payable and other debt, net
 
$
3,500,144

 
$
3,805,761

Corporate bonds, net
 
2,546,864

 
2,546,499

Convertible debt, net
 
979,852

 
977,521

Credit facility
 
2,300,000

 
3,184,000

Below-market lease liabilities, net
 
298,102

 
317,838

Accounts payable and accrued expenses
 
168,877

 
163,025

Deferred rent, derivative and other liabilities
 
122,999

 
127,611

Distributions payable
 
9,938

 
9,995

Due to affiliates
 
268

 
559

Mortgage notes payable associated with assets held for sale
 
118,493

 

Total liabilities
 
10,045,537

 
11,132,809

Commitments and contingencies (Note 14)
 

 

Preferred stock, $0.01 par value, 100,000,000 shares authorized and 42,834,138 issued and outstanding as of each of June 30, 2015 and December 31, 2014
 
428

 
428

Common stock, $0.01 par value, 1,500,000,000 shares authorized and 905,062,673 and 905,530,431 issued and outstanding as of each of June 30, 2015 and December 31, 2014, respectively
 
9,051

 
9,055

Additional paid-in capital
 
11,924,547

 
11,920,253

Accumulated other comprehensive (loss) income
 
(1,928
)
 
2,728

Accumulated deficit
 
(2,951,019
)
 
(2,778,576
)
Total stockholders’ equity
 
8,981,079

 
9,153,888

Non-controlling interests
 
222,759

 
228,442

Total equity
 
9,203,838

 
9,382,330

Total liabilities and equity
 
$
19,249,375


$
20,515,139


The accompanying notes are an integral part of these statements.

-1

VEREIT, INC.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data) (Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
341,183

 
$
314,519

 
$
683,942

 
$
558,934

Direct financing lease income
 
697

 
1,181

 
1,438

 
2,187

Operating expense reimbursements
 
25,312

 
29,256

 
48,286

 
50,732

Cole Capital revenue
 
26,529

 
37,222

 
54,023

 
91,479

Total revenues
 
393,721


382,178


787,689


703,332

Operating expenses:
 
 
 
 
 
 
 
 
Cole Capital reallowed fees and commissions
 
3,710

 
7,068

 
5,741

 
41,504

Acquisition related (1)
 
1,563

 
7,201

 
3,745

 
20,618

Merger and other non-routine transactions (2)
 
16,864

 
7,422

 
33,287

 
167,720

Property operating
 
32,598

 
39,286

 
63,597

 
69,041

Management fees to affiliates
 

 

 

 
13,888

General and administrative (3)
 
33,958

 
37,224

 
67,064

 
92,593

Depreciation and amortization
 
217,513

 
250,739

 
436,654

 
424,581

Impairments
 
85,341

 
1,556

 
85,341

 
1,556

Total operating expenses
 
391,547


350,496


695,429


831,501

Operating income (loss)
 
2,174


31,682


92,260


(128,169
)
Other (expense) income:
 
 
 
 
 
 
 
 
Interest expense, net
 
(90,572
)
 
(103,897
)
 
(186,271
)
 
(224,848
)
Extinguishment of debt, net
 

 
(6,469
)
 
429

 
(15,868
)
Other income, net
 
5,302

 
4,442

 
14,263

 
8,417

Gain (loss) on derivative instruments, net
 
311

 
14,207

 
(717
)
 
7,086

Total other expenses, net
 
(84,959
)

(91,717
)

(172,296
)

(225,213
)
Loss before income and franchise taxes and loss on disposition of real estate and held for sale assets
 
(82,785
)
 
(60,035
)
 
(80,036
)
 
(353,382
)
Loss on disposition of real estate and held for sale
assets, net
 
(24,674
)
 
(1,269
)
 
(56,042
)
 
(18,874
)
Loss before income and franchise taxes
 
(107,459
)

(61,304
)

(136,078
)

(372,256
)
(Provision for) benefit from income and franchise taxes
 
(1,250
)
 
4,706

 
(3,324
)
 
9,818

Net loss
 
(108,709
)

(56,598
)

(139,402
)
 
(362,438
)
Net loss attributable to non-controlling interests
 
2,187

 
1,878

 
2,910

 
16,274

Net loss attributable to the Company
 
$
(106,522
)

$
(54,720
)

$
(136,492
)

$
(346,164
)
 
 
 
 


 
 
 
 
Basic and diluted net loss per share attributable to common stockholders
 
$
(0.14
)
 
$
(0.10
)
 
$
(0.19
)
 
$
(0.58
)
Distributions declared per common share
 
$

 
$
0.25

 
$

 
$
0.54

_______________________________________________
(1)
Includes $113,000 and $1.7 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.
(2)
Includes $40,000 and $137.8 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.
(3)
Includes $437,000 and $16.0 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.

The accompanying notes are an integral part of these statements.

2

VEREIT, INC.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands) (Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(108,709
)
 
$
(56,598
)
 
$
(139,402
)
 
$
(362,438
)
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Unrealized loss on interest rate derivatives
 
(585
)
 
(9,857
)
 
(10,981
)
 
(13,696
)
Amount of loss reclassified from accumulated other comprehensive loss into income as interest expense
 
2,793

 
2,574

 
5,529

 
4,115

Unrealized (loss) gain on investment securities, net
 
(110
)
 
5,878

 
686

 
8,973

Reclassification of previous unrealized gains on investment securities into net loss
 
110

 

 
110

 

Total other comprehensive income (loss)
 
2,208

 
(1,405
)
 
(4,656
)

(608
)
 
 
 
 
 
 
 
 
 
Total comprehensive loss
 
(106,501
)
 
(58,003
)
 
(144,058
)
 
(363,046
)
Comprehensive loss attributable to non-controlling interests
 
2,187

 
1,878

 
2,910

 
16,274

Total comprehensive loss attributable to the Company

$
(104,314
)

$
(56,125
)

$
(141,148
)

$
(346,772
)

The accompanying notes are an integral part of these statements.



3

VEREIT, INC.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for share data) (Unaudited)

 
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated
Deficit
 
Total Stock-holders’ Equity
 
Non-Controlling Interests
 
Total Equity
Balance, January 1, 2015
 
42,834,138

 
$
428

 
905,530,431

 
$
9,055

 
$
11,920,253

 
$
2,728

 
$
(2,778,576
)

$
9,153,888


$
228,442


$
9,382,330

Repurchases of common stock to settle tax obligation
 

 

 
(142,587
)
 
(1
)
 
(1,338
)
 

 

 
(1,339
)
 

 
(1,339
)
Equity-based compensation, net forfeitures
 

 

 
(325,171
)
 
(3
)
 
6,176

 

 

 
6,173

 

 
6,173

Tax shortfall from equity-based compensation
 

 

 

 

 
(544
)
 

 

 
(544
)
 

 
(544
)
Distributions to non-controlling interest holders
 

 

 

 

 

 

 

 

 
(5,814
)
 
(5,814
)
Distributions to participating securities
 

 

 

 

 

 

 
(5
)
 
(5
)
 

 
(5
)
Distributions to preferred shareholders
 

 

 

 

 

 

 
(35,946
)
 
(35,946
)
 

 
(35,946
)
Disposition of consolidated joint venture interest
 

 

 

 

 

 

 

 

 
3,041

 
3,041

Net loss
 

 

 

 

 

 

 
(136,492
)
 
(136,492
)
 
(2,910
)
 
(139,402
)
Other comprehensive loss
 

 

 

 

 

 
(4,656
)
 

 
(4,656
)
 

 
(4,656
)
Balance, June 30, 2015
 
42,834,138

 
$
428

 
905,062,673

 
$
9,051

 
$
11,924,547

 
$
(1,928
)
 
$
(2,951,019
)
 
$
8,981,079

 
$
222,759

 
$
9,203,838


 
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income
 
Accumulated
Deficit
 
Total Stock-holders’ Equity
 
Non-Controlling Interests
 
Total Equity
Balance, January 1, 2014
 
42,199,547

 
$
422

 
239,234,725

 
$
2,392

 
$
2,940,907

 
$
7,666

 
$
(877,957
)
 
$
2,073,430

 
$
155,798

 
$
2,229,228

Issuance of common stock (1)
 

 

 
662,305,318

 
6,623

 
8,916,947

 

 

 
8,923,570

 

 
8,923,570

Conversion of Common OP Units to common stock
 

 

 
1,017,355

 
10

 
14,715

 

 

 
14,725

 
(14,725
)
 

Conversion of Preferred OP Units to Series F Preferred Stock
 
530,466

 
5

 

 

 
10,795

 

 

 
10,800

 
(10,800
)
 

Issuance of restricted share awards, net
 

 

 
5,361,423

 
54

 
(2,073
)
 

 

 
(2,019
)
 

 
(2,019
)
Equity-based compensation
 

 

 

 

 
20,384

 

 

 
20,384

 
6,880

 
27,264

Distributions declared on common stock
 

 

 

 

 

 

 
(368,339
)
 
(368,339
)
 

 
(368,339
)
Issuance of OP Units
 

 

 

 

 

 

 

 

 
152,484

 
152,484

Distributions to non-controlling interest holders
 

 

 

 

 

 

 

 

 
(21,967
)
 
(21,967
)
Distributions to participating securities
 

 

 

 

 

 

 
(2,280
)
 
(2,280
)
 

 
(2,280
)
Distributions to preferred shareholders
 

 

 

 

 

 

 
(44,468
)
 
(44,468
)
 

 
(44,468
)
Contributions from non-controlling interest holders
 

 

 

 

 

 

 

 

 
982

 
982

Non-controlling interests retained in Cole Merger
 

 

 

 

 

 

 

 

 
24,766

 
24,766

Net loss
 

 

 

 

 

 

 
(346,164
)
 
(346,164
)
 
(16,274
)
 
(362,438
)
Other comprehensive loss
 

 

 

 

 

 
(608
)
 

 
(608
)
 

 
(608
)
Balance, June 30, 2014
 
42,730,013

 
$
427

 
907,918,821

 
$
9,079

 
$
11,901,675

 
$
7,058

 
$
(1,639,208
)
 
$
10,279,031

 
$
277,144

 
$
10,556,175

_______________________________________________
(1) Includes $2.2 million issued to affiliates of the Former Manager (as defined in Note 15 – Equity) for the six months ended June 30, 2014.

The accompanying notes are an integral part of these statements.


4

VEREIT, INC.
(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)

 
 
Six Months Ended June 30,
 
 
2015
 
2014
Cash flows from operating activities:
 
 

 
 

Net loss
 
$
(139,402
)
 
$
(362,438
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Issuance of OP Units
 

 
92,884

Depreciation and amortization
 
444,713

 
473,184

Loss on disposition of real estate and held for sale assets, net
 
56,042

 
18,874

Impairments
 
85,341

 
1,556

Equity-based compensation
 
6,173

 
27,264

Equity in (income) loss of unconsolidated entities
 
(1,503
)
 
385

Distributions from unconsolidated entities
 
5,229

 
4,033

Loss (gain) on derivative instruments
 
717

 
(7,086
)
Gain on sale and unrealized gains of investments securities
 
(61
)
 

Gain on extinguishment and forgiveness of debt
 
(5,307
)
 
(16,985
)
Changes in assets and liabilities:
 
 
 
 
Investment in direct financing leases
 
986

 
525

Deferred costs and other assets, net
 
(41,788
)
 
(93,553
)
Due from affiliates
 
32,666

 
(5,685
)
Accounts payable and accrued expenses
 
14,841

 
(51,771
)
Deferred rent, derivative and other liabilities
 
(7,581
)
 
(8,732
)
Due to affiliates
 
(291
)
 
(41,262
)
Net cash provided by operating activities
 
450,775

 
31,193

Cash flows from investing activities:
 
 
 
 
Investments in real estate and other assets
 
(10,207
)
 
(1,246,588
)
Acquisition of real estate businesses, net of cash acquired
 

 
(756,232
)
Capital expenditures
 
(6,791
)
 
(9,989
)
Real estate developments
 
(35,370
)
 
(21,733
)
Principal repayments received from borrowers
 
5,028

 
4,155

Investments in unconsolidated entities
 

 
(2,500
)
Proceeds from disposition of real estate assets
 
324,949

 
94,823

Investment in intangible assets
 

 
(266
)
Proceeds from sale of investments
 
229

 

Deposits for real estate assets
 
(7,555
)
 
(129,602
)
Uses and refunds of deposits for real estate assets
 
11,878

 
196,075

Line of credit advances to affiliates
 
(10,000
)
 
(80,300
)
Line of credit repayments from affiliates
 
10,000

 
15,600

Change in restricted cash
 
4,927

 
(15,499
)
Net cash provided by (used in) investing activities
 
287,088

 
(1,952,056
)
Cash flows from financing activities:
 
 
 
 
Proceeds from mortgage notes payable
 
1,314

 
718,275

Payments on mortgage notes payable and other debt
 
(106,799
)
 
(884,398
)
Proceeds from credit facilities
 

 
3,246,000

Payments on credit facilities
 
(884,000
)
 
(4,628,800
)
Proceeds from corporate bonds
 

 
2,545,760

Payments of deferred financing costs
 
(334
)
 
(84,165
)
Repurchases of common stock for tax obligation
 
(1,339
)
 

Proceeds from issuances of common stock, net of offering costs
 

 
1,593,462

Contributions from non-controlling interest holders
 

 
982

Distributions to non-controlling interest holders
 
(5,814
)
 
(15,831
)
Distributions paid
 
(35,951
)
 
(427,618
)
Net cash (used in) provided by financing activities
 
(1,032,923
)
 
2,063,667

Net change in cash and cash equivalents
 
(295,060
)
 
142,804

Cash and cash equivalents, beginning of period
 
416,711

 
52,725

Cash and cash equivalents, end of period
 
$
121,651

 
$
195,529

The accompanying notes are an integral part of these statements.

5

VEREIT OPERATING PARTNERSHIP, L.P.
(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data) (Unaudited)

 
 
June 30, 2015
 
December 31, 2014
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
3,351,303

 
$
3,472,298

Buildings, fixtures and improvements
 
11,779,450

 
12,307,758

Land and construction in progress
 
83,104

 
77,450

Intangible lease assets
 
2,339,273

 
2,435,054

Total real estate investments, at cost
 
17,553,130

 
18,292,560

Less: accumulated depreciation and amortization
 
1,401,843

 
1,034,122

Total real estate investments, net
 
16,151,287

 
17,258,438

Investment in unconsolidated entities
 
94,502

 
98,053

Investment in direct financing leases, net
 
49,801

 
56,076

Investment securities, at fair value
 
55,802

 
58,646

Loans held for investment, net
 
40,598

 
42,106

Cash and cash equivalents
 
121,651

 
416,711

Restricted cash
 
53,336

 
62,651

Intangible assets, net
 
135,340

 
150,359

Deferred costs and other assets, net
 
403,606

 
389,922

Goodwill
 
1,847,295

 
1,894,794

Due from affiliates
 
53,456

 
86,122

Assets held for sale
 
242,701

 
1,261

Total assets
 
$
19,249,375


$
20,515,139

 
 
 
 
 
LIABILITIES AND EQUITY
 
 

 
 

Mortgage notes payable and other debt, net
 
$
3,500,144

 
$
3,805,761

Corporate bonds, net
 
2,546,864

 
2,546,499

Convertible debt, net
 
979,852

 
977,521

Credit facility
 
2,300,000

 
3,184,000

Below-market lease liabilities, net
 
298,102

 
317,838

Accounts payable and accrued expenses
 
168,877

 
163,025

Deferred rent, derivative and other liabilities
 
122,999

 
127,611

Distributions payable
 
9,938

 
9,995

Due to affiliates
 
268

 
559

Mortgage notes payable associated with assets held for sale
 
118,493

 

Total liabilities
 
10,045,537


11,132,809

Commitments and contingencies (Note 14)
 


 


General partner's preferred equity, 42,834,138 General Partner Preferred Units issued and outstanding as of each of June 30, 2015 and December 31, 2014
 
961,041

 
996,987

General partner's common equity, 905,062,673 and 905,530,431General Partner OP Units issued and outstanding as of June 30, 2015 and December 31, 2014, respectively
 
8,020,430

 
8,157,167

Limited partner's preferred equity, 86,874 Limited Partner Preferred Units issued and outstanding as of each of June 30, 2015 and December 31, 2014
 
3,375

 
3,375

Limited partner's common equity, 23,763,797 Limited Partner OP Units issued and outstanding as of each of June 30, 2015 and December 31, 2014
 
197,273

 
201,102

Total partners’ equity
 
9,182,119


9,358,631

Non-controlling interests
 
21,719

 
23,699

Total equity
 
9,203,838


9,382,330

Total liabilities and equity
 
$
19,249,375


$
20,515,139

The accompanying notes are an integral part of these statements.


6

VEREIT OPERATING PARTNERSHIP, L.P.
(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data) (Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 

 


 
 
 
 
Rental income
 
$
341,183

 
$
314,519

 
$
683,942

 
$
558,934

Direct financing lease income
 
697

 
1,181

 
1,438

 
2,187

Operating expense reimbursements
 
25,312

 
29,256

 
48,286

 
50,732

Cole Capital revenue
 
26,529

 
37,222

 
54,023

 
91,479

Total revenues
 
393,721


382,178


787,689


703,332

Operating expenses:
 

 

 
 
 
 
Cole Capital reallowed fees and commissions
 
3,710

 
7,068

 
5,741

 
41,504

Acquisition related (1)
 
1,563

 
7,201

 
3,745

 
20,618

Merger and other non-routine transactions (2)
 
16,864

 
7,422

 
33,287

 
167,720

Property operating
 
32,598

 
39,286

 
63,597

 
69,041

Management fees to affiliates
 

 

 

 
13,888

General and administrative (3)
 
33,958

 
37,224

 
67,064

 
92,593

Depreciation and amortization
 
217,513

 
250,739

 
436,654

 
424,581

Impairments
 
85,341

 
1,556

 
85,341

 
1,556

Total operating expenses
 
391,547


350,496


695,429


831,501

Operating income (loss)
 
2,174


31,682


92,260


(128,169
)
Other (expense) income:
 

 

 
 
 
 
Interest expense, net
 
(90,572
)
 
(103,897
)
 
(186,271
)
 
(224,848
)
Extinguishment of debt, net
 

 
(6,469
)
 
429

 
(15,868
)
Other income, net
 
5,302

 
4,442

 
14,263

 
8,417

Gain (loss) on derivative instruments, net
 
311

 
14,207

 
(717
)
 
7,086

Total other expenses, net
 
(84,959
)

(91,717
)

(172,296
)

(225,213
)
Loss before income and franchise taxes and loss on disposition of real estate and held for sale assets
 
(82,785
)

(60,035
)

(80,036
)

(353,382
)
Loss on disposition of real estate and held for sale
assets, net
 
(24,674
)
 
(1,269
)
 
(56,042
)
 
(18,874
)
Loss before income and franchise taxes
 
(107,459
)
 
(61,304
)
 
(136,078
)
 
(372,256
)
(Provision for) benefit from income and franchise taxes
 
(1,250
)
 
4,706

 
(3,324
)
 
9,818

Net loss
 
(108,709
)

(56,598
)

(139,402
)

(362,438
)
Net income attributable to non-controlling interests
 
(613
)
 
(272
)
 
(793
)
 
(80
)
Net loss attributable to the OP
 
$
(109,322
)

$
(56,870
)

$
(140,195
)

$
(362,518
)
 
 
 
 
 
 
 
 
 
 Basic and diluted net loss from continuing operations per unit attributable to common unitholders
 
$
(0.14
)
 
$
(0.10
)
 
$
(0.19
)
 
$
(0.58
)
Distributions declared per common unit
 
$

 
$
0.25

 
$

 
$
0.54

_______________________________________________
(1)
Includes $113,000 and $1.7 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.
(2)
Includes $40,000 and $137.8 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.
(3)
Includes $437,000 and $16.0 million of expenses incurred for the three and six months ended June 30, 2014, respectively, paid to affiliates. No such expenses were incurred during the three and six months ended June 30, 2015.

The accompanying notes are an integral part of these statements.

7

VEREIT OPERATING PARTNERSHIP, L.P.
(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands) (Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(108,709
)
 
$
(56,598
)
 
$
(139,402
)
 
$
(362,438
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized loss on interest rate derivatives
 
(585
)
 
(9,857
)
 
(10,981
)
 
(13,696
)
Amount of loss reclassified from accumulated other comprehensive loss into income as interest expense
 
2,793

 
2,574

 
5,529

 
4,115

Unrealized (loss) gain on investment securities, net
 
(110
)
 
5,878

 
686

 
8,973

Reclassification of previous unrealized gains on investment securities into net loss
 
110

 

 
110

 

Total other comprehensive income (loss)
 
2,208


(1,405
)

(4,656
)

(608
)
 
 
 
 
 
 
 
 
 
Total comprehensive loss
 
(106,501
)

(58,003
)

(144,058
)

(363,046
)
Comprehensive income attributable to non-controlling interests
 
(613
)
 
(272
)
 
(793
)
 
(80
)
Total comprehensive loss attributable to the OP
 
$
(107,114
)

$
(58,275
)

$
(144,851
)

$
(363,126
)

The accompanying notes are an integral part of these statements.


8

VEREIT OPERATING PARTNERSHIP, L.P.
(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except for unit data) (Unaudited)

 
 
Preferred Units
 
Common Units
 
 
 
 
 
 
 
 
General Partner
 
Limited Partner
 
General Partner
 
Limited Partner
 
 
 
 
 
 
 
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Total Partners' Capital
 
Non-Controlling Interests
 
Total Capital
 Balance, January 1, 2015
 
42,834,138

 
$
996,987

 
86,874

 
$
3,375

 
905,530,431

 
$
8,157,167

 
23,763,797

 
$
201,102

 
$
9,358,631

 
$
23,699

 
$
9,382,330

 Repurchases of common OP Units to settle tax obligation
 

 

 

 

 
(142,587
)
 
(1,339
)
 

 

 
(1,339
)
 

 
(1,339
)
 Equity-based compensation, net of forfeitures
 

 

 

 

 
(325,171
)
 
6,173

 

 

 
6,173

 

 
6,173

 Tax shortfall from equity-based compensation
 

 

 

 

 

 
(544
)
 

 

 
(544
)
 

 
(544
)
 Distributions to Common OP Units, LTIPs and non-controlling interests
 

 

 

 

 

 
(5
)
 

 

 
(5
)
 
(5,814
)
 
(5,819
)
 Distributions to Preferred OP Units
 

 
(35,946
)
 

 

 

 

 

 

 
(35,946
)
 

 
(35,946
)
 Disposition of consolidated joint venture interest
 

 

 

 

 

 

 

 

 

 
3,041

 
3,041

 Net (loss) income
 

 

 

 

 

 
(136,492
)
 

 
(3,703
)
 
(140,195
)
 
793

 
(139,402
)
 Other comprehensive loss
 

 

 

 

 

 
(4,530
)
 

 
(126
)
 
(4,656
)
 

 
(4,656
)
Balance, June 30, 2015
 
42,834,138


$
961,041


86,874


$
3,375


905,062,673


$
8,020,430


23,763,797


$
197,273


$
9,182,119


$
21,719


$
9,203,838

 
 
Preferred Units
 
Common Units
 
 
 
 
 
 
 
 
General Partner
 
Limited Partner
 
General Partner
 
Limited Partner
 
 
 
 
 
 
 
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Number of Units
 
Capital
 
Total Partners' Capital
 
Non-Controlling Interests
 
Total Capital
 Balance, January 1, 2014
 
42,199,547

 
$
1,054,989

 
721,465

 
$
16,466

 
239,234,725

 
$
1,018,123

 
17,832,274

 
$
139,083

 
$
2,228,661

 
$
567

 
$
2,229,228

 Issuance of common OP units, net (1)
 

 

 

 

 
662,305,318

 
8,923,570

 
7,956,297

 
152,484

 
9,076,054

 

 
9,076,054

 Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units
 

 

 

 

 
1,017,355

 
14,725

 
(1,017,335
)
 
(14,725
)
 

 

 

 Conversion of Limited Partners' Preferred OP Units to General Partner's Preferred OP Units
 
530,466

 
10,800

 
(530,466
)
 
(10,800
)
 

 

 

 

 

 

 

 Issuance of restricted share awards, net
 

 

 

 

 
5,361,423

 
(2,019
)
 

 

 
(2,019
)
 

 
(2,019
)
 Equity-based compensation, net forfeitures
 

 

 

 

 

 
20,384

 
10,744,697

 
6,880

 
27,264

 

 
27,264

 Distributions to Common OP Units, LTIPs and non-controlling interests
 

 

 

 

 

 
(370,619
)
 

 
(21,166
)
 
(391,785
)
 
(801
)
 
(392,586
)
 Distributions to Preferred OP Units
 

 
(35,147
)
 

 

 

 
(9,321
)
 

 

 
(44,468
)
 

 
(44,468
)
 Contributions from non-controlling interest holders
 

 

 

 

 

 

 

 

 

 
982

 
982

 Non-controlling interests retained in Cole Merger
 

 

 

 

 

 

 

 

 

 
24,766

 
24,766

 Net (loss) income
 

 

 

 

 

 
(346,164
)
 

 
(16,354
)
 
(362,518
)
 
80

 
(362,438
)
 Other comprehensive loss
 

 

 

 

 

 
(581
)
 

 
(27
)
 
(608
)
 

 
(608
)
Balance, June 30, 2014
 
42,730,013

 
$
1,030,642

 
190,999

 
$
5,666

 
907,918,821

 
$
9,248,098

 
35,515,933

 
$
246,175

 </