Attached files
| file | filename |
|---|---|
| EX-32.4 - EXHIBIT 32.4 - VEREIT, Inc. | vereit9302016-ex324.htm |
| EX-32.3 - EXHIBIT 32.3 - VEREIT, Inc. | vereit9302016-ex323.htm |
| EX-32.2 - EXHIBIT 32.2 - VEREIT, Inc. | vereit9302016-ex322.htm |
| EX-32.1 - EXHIBIT 32.1 - VEREIT, Inc. | vereit9302016-ex321.htm |
| EX-31.4 - EXHIBIT 31.4 - VEREIT, Inc. | vereit9302016-ex314.htm |
| EX-31.3 - EXHIBIT 31.3 - VEREIT, Inc. | vereit9302016-ex313.htm |
| EX-31.2 - EXHIBIT 31.2 - VEREIT, Inc. | vereit9302016-ex312.htm |
| EX-31.1 - EXHIBIT 31.1 - VEREIT, Inc. | vereit9302016-ex311.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 September 30, 2016
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) |
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
There were 974,174,176 shares of common stock of VEREIT, Inc. outstanding as of October 31, 2016.
EXPLANATORY NOTE
This report combines the Quarterly Reports on Form 10-Q for the three and nine months ended September 30, 2016 of VEREIT, Inc., a Maryland corporation, and VEREIT Operating Partnership, L.P., a Delaware limited partnership, of which VEREIT, Inc. is the sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “VEREIT,” the “Company” or the “General Partner” mean VEREIT, Inc. together with its consolidated subsidiaries, including VEREIT Operating Partnership, L.P., and all references to the “Operating Partnership” or “OP” mean VEREIT Operating Partnership, L.P. together with its consolidated subsidiaries.
As the sole general partner of VEREIT Operating Partnership, L.P., VEREIT, Inc. has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control.
We believe combining the Quarterly Reports on Form 10-Q of VEREIT, Inc. and VEREIT Operating Partnership, L.P. into this single report results in the following benefits:
• | enhancing investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |
• | eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and |
• | creating time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
There are a few differences between the Company and the Operating Partnership, which are reflected in the disclosure in this report. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how we operate as an interrelated consolidated company. VEREIT, Inc. is a real estate investment trust whose only material asset is its ownership of partnership interests of the Operating Partnership. As a result, VEREIT, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity or debt from time to time and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries. The Operating Partnership holds substantially all of the assets of the Company and holds the ownership interests in the Company’s joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by VEREIT, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units. To help investors understand the significant differences between VEREIT, Inc. and the Operating Partnership, there are separate sections in this report that separately discuss VEREIT, Inc. and the Operating Partnership, including the consolidated financial statements and certain notes to the consolidated financial statements as well as separate Exhibit 31 and Exhibit 32 certifications. As general partner with control of the Operating Partnership, VEREIT, Inc. consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of VEREIT, Inc. and VEREIT Operating Partnership, L.P. are the same on their respective consolidated financial statements. The separate discussions of VEREIT, Inc. and VEREIT Operating Partnership, L.P. in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.
For the quarterly period ended September 30, 2016
Page | |
1
VEREIT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data) (Unaudited)
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
September 30, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Real estate investments, at cost: | ||||||||
Land | $ | 2,946,105 | $ | 3,120,653 | ||||
Buildings, fixtures and improvements | 10,800,316 | 11,445,690 | ||||||
Intangible lease assets | 2,073,076 | 2,218,378 | ||||||
Total real estate investments, at cost | 15,819,497 | 16,784,721 | ||||||
Less: accumulated depreciation and amortization | 2,188,998 | 1,778,597 | ||||||
Total real estate investments, net | 13,630,499 | 15,006,124 | ||||||
Investment in unconsolidated entities | 24,711 | 56,824 | ||||||
Investment in direct financing leases, net | 40,785 | 46,312 | ||||||
Investment securities, at fair value | 48,098 | 53,304 | ||||||
Mortgage notes receivable, net | 23,014 | 24,238 | ||||||
Cash and cash equivalents | 116,618 | 69,103 | ||||||
Restricted cash | 61,828 | 59,767 | ||||||
Intangible assets, net | 30,849 | 50,779 | ||||||
Rent and tenant receivables and other assets, net | 339,529 | 303,637 | ||||||
Goodwill | 1,602,610 | 1,656,374 | ||||||
Due from affiliates | 20,883 | 60,633 | ||||||
Real estate assets held for sale, net | 118,396 | 18,771 | ||||||
Total assets | $ | 16,057,820 | $ | 17,405,866 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Mortgage notes payable and other debt, net | $ | 2,861,210 | $ | 3,111,985 | ||||
Corporate bonds, net | 2,225,157 | 2,536,333 | ||||||
Convertible debt, net | 970,691 | 962,894 | ||||||
Credit facility, net | 496,008 | 1,448,590 | ||||||
Below-market lease liabilities, net | 229,340 | 251,692 | ||||||
Accounts payable and accrued expenses | 139,150 | 151,877 | ||||||
Deferred rent, derivative and other liabilities | 89,154 | 87,490 | ||||||
Distributions payable | 159,415 | 140,816 | ||||||
Due to affiliates | — | 230 | ||||||
Total liabilities | 7,170,125 | 8,691,907 | ||||||
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 September 30, 2016 and December 31, 2015 | 428 | 428 | ||||||
Common stock, $0.01 par value, 1,500,000,000 shares authorized and 974,183,819 and 904,884,394 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 9,742 | 9,049 | ||||||
Additional paid-in-capital | 12,637,049 | 11,931,768 | ||||||
Accumulated other comprehensive loss | (4,687 | ) | (2,025 | ) | ||||
Accumulated deficit | (3,933,092 | ) | (3,415,233 | ) | ||||
Total stockholders’ equity | 8,709,440 | 8,523,987 | ||||||
Non-controlling interests | 178,255 | 189,972 | ||||||
Total equity | 8,887,695 | 8,713,959 | ||||||
Total liabilities and equity | $ | 16,057,820 | $ | 17,405,866 | ||||
The accompanying notes are an integral part of these statements.
2
VEREIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income | $ | 303,383 | $ | 333,766 | $ | 928,706 | $ | 1,017,708 | ||||||||
Direct financing lease income | 494 | 659 | 1,598 | 2,097 | ||||||||||||
Operating expense reimbursements | 27,969 | 22,983 | 77,862 | 71,269 | ||||||||||||
Cole Capital revenue | 31,069 | 27,546 | 94,788 | 81,569 | ||||||||||||
Total revenues | 362,915 | 384,954 | 1,102,954 | 1,172,643 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cole Capital reallowed fees and commissions | 5,897 | 3,896 | 20,940 | 9,637 | ||||||||||||
Acquisition related | 90 | 1,764 | 373 | 5,509 | ||||||||||||
Litigation and other non-routine costs, net of insurance recoveries | 4,630 | 8,032 | 2,372 | 41,319 | ||||||||||||
Property operating | 34,820 | 31,950 | 107,832 | 95,547 | ||||||||||||
General and administrative | 29,761 | 32,842 | 92,255 | 99,906 | ||||||||||||
Depreciation and amortization | 195,173 | 208,542 | 596,826 | 645,196 | ||||||||||||
Impairments | 6,872 | — | 176,214 | 85,341 | ||||||||||||
Total operating expenses | 277,243 | 287,026 | 996,812 | 982,455 | ||||||||||||
Operating income | 85,672 | 97,928 | 106,142 | 190,188 | ||||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | (79,869 | ) | (89,530 | ) | (242,763 | ) | (275,801 | ) | ||||||||
(Loss) gain on extinguishment and forgiveness of debt, net | (2,003 | ) | — | (1,751 | ) | 5,302 | ||||||||||
Other income, net | 1,744 | 2,368 | 4,022 | 10,255 | ||||||||||||
Equity in income and gain on disposition of unconsolidated entities | 212 | 6,837 | 10,686 | 8,340 | ||||||||||||
Loss on derivative instruments, net | (2,023 | ) | (1,420 | ) | (3,286 | ) | (2,137 | ) | ||||||||
Total other expenses, net | (81,939 | ) | (81,745 | ) | (233,092 | ) | (254,041 | ) | ||||||||
Income (loss) before taxes and real estate dispositions | 3,733 | 16,183 | (126,950 | ) | (63,853 | ) | ||||||||||
Gain (loss) on disposition of real estate, net | 28,111 | (6,542 | ) | 45,723 | (62,584 | ) | ||||||||||
Income (loss) before taxes | 31,844 | 9,641 | (81,227 | ) | (126,437 | ) | ||||||||||
Provision for income taxes | (1,598 | ) | (1,500 | ) | (1,374 | ) | (4,824 | ) | ||||||||
Net income (loss) | 30,246 | 8,141 | (82,601 | ) | (131,261 | ) | ||||||||||
Net (income) loss attributable to non-controlling interests (1) | (751 | ) | (612 | ) | 2,156 | 2,298 | ||||||||||
Net income (loss) attributable to the General Partner | $ | 29,495 | $ | 7,529 | $ | (80,445 | ) | $ | (128,963 | ) | ||||||
Basic and diluted net income (loss) per share attributable to common stockholders and limited partners | $ | 0.01 | $ | (0.01 | ) | $ | (0.15 | ) | $ | (0.20 | ) | |||||
Distributions declared per common share | $ | 0.14 | $ | 0.14 | $ | 0.41 | $ | 0.14 | ||||||||
_______________________________________________
(1) | Represents (income) loss attributable to limited partners and consolidated joint venture partners. |
The accompanying notes are an integral part of these statements.
3
VEREIT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 30,246 | $ | 8,141 | $ | (82,601 | ) | $ | (131,261 | ) | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 3,178 | (10,076 | ) | (9,811 | ) | (21,057 | ) | |||||||||
Reclassification of previous unrealized loss on interest rate derivatives into net income (loss) | 4,650 | 2,787 | 8,668 | 8,316 | ||||||||||||
Unrealized loss on investment securities, net | (29 | ) | (918 | ) | (1,599 | ) | (232 | ) | ||||||||
Reclassification of previous unrealized loss on investment securities into net income (loss) as other income, net | — | — | — | 110 | ||||||||||||
Total other comprehensive income (loss) | 7,799 | (8,207 | ) | (2,742 | ) | (12,863 | ) | |||||||||
Total comprehensive income (loss) | 38,045 | (66 | ) | (85,343 | ) | (144,124 | ) | |||||||||
Comprehensive (income) loss attributable to non-controlling interests (1) | (940 | ) | (283 | ) | 2,236 | 2,627 | ||||||||||
Total comprehensive income (loss) attributable to the General Partner | $ | 37,105 | $ | (349 | ) | $ | (83,107 | ) | $ | (141,497 | ) | |||||
_______________________________________________
(1) | Represents (income) loss attributable to limited partners and consolidated joint venture partners. |
The accompanying notes are an integral part of these statements.
4
VEREIT, 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 Loss | Accumulated Deficit | Total Stock-holders’ Equity | Non-Controlling Interests | Total Equity | |||||||||||||||||||||||||||||
Balance, January 1, 2016 | 42,834,138 | $ | 428 | 904,884,394 | $ | 9,049 | $ | 11,931,768 | $ | (2,025 | ) | $ | (3,415,233 | ) | $ | 8,523,987 | $ | 189,972 | $ | 8,713,959 | ||||||||||||||||||
Issuance of common stock, net | — | — | 69,000,000 | 690 | 701,792 | — | — | 702,482 | — | 702,482 | ||||||||||||||||||||||||||||
Conversion of OP Units to common stock | — | — | 15,450 | — | 159 | — | — | 159 | (159 | ) | — | |||||||||||||||||||||||||||
Repurchases of common stock to settle tax obligation | — | — | (424,726 | ) | (4 | ) | (4,144 | ) | — | — | (4,148 | ) | — | (4,148 | ) | |||||||||||||||||||||||
Equity-based compensation, net | — | — | 708,701 | 7 | 7,090 | — | — | 7,097 | — | 7,097 | ||||||||||||||||||||||||||||
Contributions from non-controlling interest holders | — | — | — | — | — | — | — | — | 675 | 675 | ||||||||||||||||||||||||||||
Distributions declared on common stock | — | — | — | — | — | — | (382,819 | ) | (382,819 | ) | — | (382,819 | ) | |||||||||||||||||||||||||
Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | (9,889 | ) | (9,889 | ) | ||||||||||||||||||||||||||
Distributions to participating securities | — | — | — | — | — | — | (400 | ) | (400 | ) | — | (400 | ) | |||||||||||||||||||||||||
Distributions to preferred shareholders and unitholders | — | — | — | — | — | — | (53,811 | ) | (53,811 | ) | (108 | ) | (53,919 | ) | ||||||||||||||||||||||||
Cumulative-effect adjustment for equity-based compensation forfeitures | — | — | — | — | 384 | — | (384 | ) | — | — | — | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (80,445 | ) | (80,445 | ) | (2,156 | ) | (82,601 | ) | ||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (2,662 | ) | — | (2,662 | ) | (80 | ) | (2,742 | ) | ||||||||||||||||||||||||
Balance, September 30, 2016 | 42,834,138 | $ | 428 | 974,183,819 | $ | 9,742 | $ | 12,637,049 | $ | (4,687 | ) | $ | (3,933,092 | ) | $ | 8,709,440 | $ | 178,255 | $ | 8,887,695 | ||||||||||||||||||
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 | — | — | (183,492 | ) | (1 | ) | (1,633 | ) | — | — | (1,634 | ) | — | (1,634 | ) | |||||||||||||||||||||||
Equity-based compensation, net | — | — | (386,705 | ) | (4 | ) | 10,193 | — | — | 10,189 | — | 10,189 | ||||||||||||||||||||||||||
Tax shortfall from equity-based compensation | — | — | — | — | (629 | ) | — | — | (629 | ) | — | (629 | ) | |||||||||||||||||||||||||
Distributions declared on common stock | — | — | — | — | — | — | (124,225 | ) | (124,225 | ) | — | (124,225 | ) | |||||||||||||||||||||||||
Distributions to non-controlling interest holders | — | — | — | — | — | — | — | — | (16,879 | ) | (16,879 | ) | ||||||||||||||||||||||||||
Distributions to participating securities | — | — | — | — | — | — | (222 | ) | (222 | ) | — | (222 | ) | |||||||||||||||||||||||||
Distributions to preferred shareholders | — | — | — | — | — | — | (53,920 | ) | (53,920 | ) | — | (53,920 | ) | |||||||||||||||||||||||||
Disposition of consolidated joint venture interest | — | — | — | — | — | — | — | — | 6,339 | 6,339 | ||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (128,963 | ) | (128,963 | ) | (2,298 | ) | (131,261 | ) | ||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (12,534 | ) | — | (12,534 | ) | (329 | ) | (12,863 | ) | ||||||||||||||||||||||||
Balance, September 30, 2015 | 42,834,138 | $ | 428 | 904,960,234 | $ | 9,050 | $ | 11,928,184 | $ | (9,806 | ) | $ | (3,085,906 | ) | $ | 8,841,950 | $ | 215,275 | $ | 9,057,225 | ||||||||||||||||||
The accompanying notes are an integral part of these statements.
5
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (82,601 | ) | $ | (131,261 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 610,291 | 660,715 | ||||||
(Gain) loss on real estate assets and joint venture, net | (55,921 | ) | 55,855 | |||||
Impairments | 176,214 | 85,341 | ||||||
Equity-based compensation | 7,097 | 10,189 | ||||||
Equity in income of unconsolidated entities | (488 | ) | (1,611 | ) | ||||
Distributions from unconsolidated entities | 3,007 | 9,578 | ||||||
Loss on derivative instruments | 3,286 | 2,137 | ||||||
(Gain) on investment securities | — | (65 | ) | |||||
Loss (gain) on extinguishment and forgiveness of debt, net | 1,751 | (5,307 | ) | |||||
Changes in assets and liabilities: | ||||||||
Investment in direct financing leases | 1,861 | 1,503 | ||||||
Rent and tenant receivables and other assets, net | (51,702 | ) | (59,509 | ) | ||||
Due from affiliates | 50 | 19,141 | ||||||
Accounts payable and accrued expenses | (6,726 | ) | 6,679 | |||||
Deferred rent, derivative and other liabilities | (1,235 | ) | (24,939 | ) | ||||
Due to affiliates | (230 | ) | (318 | ) | ||||
Net cash provided by operating activities | 604,654 | 628,128 | ||||||
Cash flows from investing activities: | ||||||||
Investments in real estate assets | (19,952 | ) | (10,207 | ) | ||||
Capital expenditures and leasing costs | (15,892 | ) | (10,880 | ) | ||||
Real estate developments | (6,288 | ) | (51,863 | ) | ||||
Principal repayments received from borrowers | 4,906 | 6,043 | ||||||
Investments in unconsolidated entities | (2,500 | ) | — | |||||
Proceeds from disposition of real estate and joint venture | 615,246 | 413,270 | ||||||
Investment in leasehold improvements and other assets | (726 | ) | — | |||||
Proceeds from sale of investments and other assets | — | 229 | ||||||
Deposits for real estate assets | (11,686 | ) | (15,105 | ) | ||||
Uses and refunds of deposits for real estate assets | 9,753 | 42,619 | ||||||
Line of credit advances to affiliates | (10,300 | ) | (10,000 | ) | ||||
Line of credit repayments from affiliates | 50,000 | 10,000 | ||||||
Change in restricted cash | (5,674 | ) | 10,488 | |||||
Net cash provided by investing activities | 606,887 | 384,594 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from mortgage notes payable | 1,450 | 1,379 | ||||||
Payments on mortgage notes payable and other debt, including extinguishment costs | (145,802 | ) | (113,570 | ) | ||||
Proceeds from credit facility | 783,000 | — | ||||||
Payments on credit facility | (1,743,000 | ) | (1,074,000 | ) | ||||
Proceeds from corporate bonds | 1,000,000 | — | ||||||
Payments on corporate bonds, including extinguishment costs | (1,311,208 | ) | — | |||||
Payments of deferred financing costs | (19,056 | ) | (2,412 | ) | ||||
Proceeds from 2016 Term Loan | 300,000 | — | ||||||
Repayment of 2016 Term Loan | (300,000 | ) | — | |||||
Repurchases of common stock to settle tax obligations | (4,148 | ) | (1,634 | ) | ||||
Proceeds from the issuance of Common Stock, net of underwriters’ discount | 702,765 | — | ||||||
Payments of equity issuance costs | (274 | ) | — | |||||
Contributions from non-controlling interest holders | 675 | — | ||||||
Distributions paid | (428,428 | ) | (67,537 | ) | ||||
Net cash used in financing activities | (1,164,026 | ) | (1,257,774 | ) | ||||
Net change in cash and cash equivalents | 47,515 | (245,052 | ) | |||||
Cash and cash equivalents, beginning of period | 69,103 | 416,711 | ||||||
Cash and cash equivalents, end of period | $ | 116,618 | $ | 171,659 | ||||
The accompanying notes are an integral part of these statements.
6
VEREIT OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data) (Unaudited)
September 30, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Real estate investments, at cost: | ||||||||
Land | $ | 2,946,105 | $ | 3,120,653 | ||||
Buildings, fixtures and improvements | 10,800,316 | 11,445,690 | ||||||
Intangible lease assets | 2,073,076 | 2,218,378 | ||||||
Total real estate investments, at cost | 15,819,497 | 16,784,721 | ||||||
Less: accumulated depreciation and amortization | 2,188,998 | 1,778,597 | ||||||
Total real estate investments, net | 13,630,499 | 15,006,124 | ||||||
Investment in unconsolidated entities | 24,711 | 56,824 | ||||||
Investment in direct financing leases, net | 40,785 | 46,312 | ||||||
Investment securities, at fair value | 48,098 | 53,304 | ||||||
Mortgage notes receivable, net | 23,014 | 24,238 | ||||||
Cash and cash equivalents | 116,618 | 69,103 | ||||||
Restricted cash | 61,828 | 59,767 | ||||||
Intangible assets, net | 30,849 | 50,779 | ||||||
Rent and tenant receivables and other assets, net | 339,529 | 303,637 | ||||||
Goodwill | 1,602,610 | 1,656,374 | ||||||
Due from affiliates | 20,883 | 60,633 | ||||||
Real estate assets held for sale, net | 118,396 | 18,771 | ||||||
Total assets | $ | 16,057,820 | $ | 17,405,866 | ||||
LIABILITIES AND EQUITY | ||||||||
Mortgage notes payable and other debt, net | $ | 2,861,210 | $ | 3,111,985 | ||||
Corporate bonds, net | 2,225,157 | 2,536,333 | ||||||
Convertible debt, net | 970,691 | 962,894 | ||||||
Credit facility, net | 496,008 | 1,448,590 | ||||||
Below-market lease liabilities, net | 229,340 | 251,692 | ||||||
Accounts payable and accrued expenses | 139,150 | 151,877 | ||||||
Deferred rent, derivative and other liabilities | 89,154 | 87,490 | ||||||
Distributions payable | 159,415 | 140,816 | ||||||
Due to affiliates | — | 230 | ||||||
Total liabilities | 7,170,125 | 8,691,907 | ||||||
Commitments and contingencies (Note 14) | ||||||||
General Partner's preferred equity, 42,834,138 General Partner Preferred Units issued and outstanding as of each of September 30, 2016 and December 31, 2015 | 871,758 | 925,569 | ||||||
General Partner's common equity, 974,183,819 and 904,884,394 General Partner OP Units issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 7,837,682 | 7,598,418 | ||||||
Limited Partner's preferred equity, 86,874 Limited Partner Preferred Units issued and outstanding as of each of September 30, 2016 and December 31, 2015 | 3,207 | 3,315 | ||||||
Limited Partner's common equity, 23,748,347 and 23,763,797 Limited Partner OP Units issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 172,625 | 184,800 | ||||||
Total partners’ equity | 8,885,272 | 8,712,102 | ||||||
Non-controlling interests | 2,423 | 1,857 | ||||||
Total equity | 8,887,695 | 8,713,959 | ||||||
Total liabilities and equity | $ | 16,057,820 | $ | 17,405,866 | ||||
The accompanying notes are an integral part of these statements.
7
VEREIT OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income | $ | 303,383 | $ | 333,766 | $ | 928,706 | $ | 1,017,708 | ||||||||
Direct financing lease income | 494 | 659 | 1,598 | 2,097 | ||||||||||||
Operating expense reimbursements | 27,969 | 22,983 | 77,862 | 71,269 | ||||||||||||
Cole Capital revenue | 31,069 | 27,546 | 94,788 | 81,569 | ||||||||||||
Total revenues | 362,915 | 384,954 | 1,102,954 | 1,172,643 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cole Capital reallowed fees and commissions | 5,897 | 3,896 | 20,940 | 9,637 | ||||||||||||
Acquisition related | 90 | 1,764 | 373 | 5,509 | ||||||||||||
Litigation and other non-routine costs, net of insurance recoveries | 4,630 | 8,032 | 2,372 | 41,319 | ||||||||||||
Property operating | 34,820 | 31,950 | 107,832 | 95,547 | ||||||||||||
General and administrative | 29,761 | 32,842 | 92,255 | 99,906 | ||||||||||||
Depreciation and amortization | 195,173 | 208,542 | 596,826 | 645,196 | ||||||||||||
Impairments | 6,872 | — | 176,214 | 85,341 | ||||||||||||
Total operating expenses | 277,243 | 287,026 | 996,812 | 982,455 | ||||||||||||
Operating income | 85,672 | 97,928 | 106,142 | 190,188 | ||||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | (79,869 | ) | (89,530 | ) | (242,763 | ) | (275,801 | ) | ||||||||
(Loss) gain on extinguishment and forgiveness of debt, net | (2,003 | ) | — | (1,751 | ) | 5,302 | ||||||||||
Other income, net | 1,744 | 2,368 | 4,022 | 10,255 | ||||||||||||
Equity in income and gain on disposition of unconsolidated entities | 212 | 6,837 | 10,686 | 8,340 | ||||||||||||
Loss on derivative instruments, net | (2,023 | ) | (1,420 | ) | (3,286 | ) | (2,137 | ) | ||||||||
Total other expenses, net | (81,939 | ) | (81,745 | ) | (233,092 | ) | (254,041 | ) | ||||||||
Income (loss) before taxes and real estate dispositions | 3,733 | 16,183 | (126,950 | ) | (63,853 | ) | ||||||||||
Gain (loss) on disposition of real estate, net | 28,111 | (6,542 | ) | 45,723 | (62,584 | ) | ||||||||||
Income (loss) before taxes | 31,844 | 9,641 | (81,227 | ) | (126,437 | ) | ||||||||||
Provision for income taxes | (1,598 | ) | (1,500 | ) | (1,374 | ) | (4,824 | ) | ||||||||
Net income (loss) | 30,246 | 8,141 | (82,601 | ) | (131,261 | ) | ||||||||||
Net (income) loss attributable to non-controlling interests (1) | (12 | ) | (404 | ) | 23 | (1,197 | ) | |||||||||
Net income (loss) attributable to the OP | $ | 30,234 | $ | 7,737 | $ | (82,578 | ) | $ | (132,458 | ) | ||||||
Basic and diluted net income (loss) per unit attributable to common unitholders | $ | 0.01 | $ | (0.01 | ) | $ | (0.15 | ) | $ | (0.20 | ) | |||||
Distributions declared per common unit | $ | 0.14 | $ | 0.14 | $ | 0.41 | $ | 0.14 | ||||||||
_______________________________________________
(1) | Represents (income) loss attributable to consolidated joint venture partners. |
The accompanying notes are an integral part of these statements.
8
VEREIT OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands) (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 30,246 | $ | 8,141 | $ | (82,601 | ) | $ | (131,261 | ) | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 3,178 | (10,076 | ) | (9,811 | ) | (21,057 | ) | |||||||||
Reclassification of previous unrealized loss on interest rate derivatives into net income (loss) | 4,650 | 2,787 | 8,668 | 8,316 | ||||||||||||
Unrealized loss on investment securities, net | (29 | ) | (918 | ) | (1,599 | ) | (232 | ) | ||||||||
Reclassification of previous unrealized loss on investment securities into net income (loss) as other income, net | — | — | — | 110 | ||||||||||||
Total other comprehensive income (loss) | 7,799 | (8,207 | ) | (2,742 | ) | (12,863 | ) | |||||||||
Total comprehensive income (loss) | 38,045 | (66 | ) | (85,343 | ) | (144,124 | ) | |||||||||
Comprehensive (income) loss attributable to non-controlling interests (1) | (12 | ) | (404 | ) | 23 | (1,197 | ) | |||||||||
Total comprehensive income (loss) attributable to the OP | $ | 38,033 | $ | (470 | ) | $ | (85,320 | ) | $ | (145,321 | ) | |||||
_______________________________________________
(1) | Represents (income) loss attributable to consolidated joint venture partners. |
The accompanying notes are an integral part of these statements.
9
VEREIT 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, 2016 | 42,834,138 | $ | 925,569 | 86,874 | $ | 3,315 | 904,884,394 | $ | 7,598,418 | 23,763,797 | $ | 184,800 | $ | 8,712,102 | $ | 1,857 | $ | 8,713,959 | ||||||||||||||||||||||
Issuance of common units, net | — | — | — | — | 69,000,000 | 702,482 | — | — | 702,482 | — | 702,482 | |||||||||||||||||||||||||||||
Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units | — | — | — | — | 15,450 | 159 | (15,450 | ) | (159 | ) | — | — | — | |||||||||||||||||||||||||||
Repurchases of common OP Units to settle tax obligation | — | — | — | — | (424,726 | ) | (4,148 | ) | — | — | (4,148 | ) | — | (4,148 | ) | |||||||||||||||||||||||||
Equity-based compensation, net | — | — | — | — | 708,701 | 7,097 | — | — | 7,097 | — | 7,097 | |||||||||||||||||||||||||||||
Contributions from non-controlling interest holders | — | — | — | — | — | — | — | — | — | 675 | 675 | |||||||||||||||||||||||||||||
Distributions to Common OP Units and non-controlling interest holders | — | — | — | — | — | (383,219 | ) | — | (9,803 | ) | (393,022 | ) | (86 | ) | (393,108 | ) | ||||||||||||||||||||||||
Distributions to Preferred OP Units | — | (53,811 | ) | — | (108 | ) | — | — | — | — | (53,919 | ) | — | (53,919 | ) | |||||||||||||||||||||||||
Net loss | — | — | — | — | — | (80,445 | ) | — | (2,133 | ) | (82,578 | ) | (23 | ) | (82,601 | ) | ||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (2,662 | ) | — | (80 | ) | (2,742 | ) | — | (2,742 | ) | |||||||||||||||||||||||||
Balance, September 30, 2016 | 42,834,138 | $ | 871,758 | 86,874 | $ | 3,207 | 974,183,819 | $ | 7,837,682 | 23,748,347 | $ | 172,625 | $ | 8,885,272 | $ | 2,423 | $ | 8,887,695 | ||||||||||||||||||||||
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 | — | — | — | — | (183,492 | ) | (1,634 | ) | — | — | (1,634 | ) | — | (1,634 | ) | |||||||||||||||||||||||||
Equity-based compensation, net | — | — | — | — | (386,705 | ) | 10,189 | — | — | 10,189 | — | 10,189 | ||||||||||||||||||||||||||||
Tax shortfall from equity-based compensation | — | — | — | — | — | (629 | ) | — | — | (629 | ) | — | (629 | ) | ||||||||||||||||||||||||||
Distributions to Common OP Units and non-controlling interest holders | — | — | — | — | — | (124,447 | ) | — | (3,269 | ) | (127,716 | ) | (13,610 | ) | (141,326 | ) | ||||||||||||||||||||||||
Distributions to Preferred OP Units | — | (53,920 | ) | — | — | — | — | — | — | (53,920 | ) | — | (53,920 | ) | ||||||||||||||||||||||||||
Disposition of consolidated joint venture interest | — | — | — | — | — | — | — | — | — | 6,339 | 6,339 | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (128,963 | ) | — | (3,495 | ) | (132,458 | ) | 1,197 | (131,261 | ) | |||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (12,534 | ) | — | (329 | ) | (12,863 | ) | — | (12,863 | ) | |||||||||||||||||||||||||
Balance, September 30, 2015 | 42,834,138 | $ | 943,067 | 86,874 | $ | 3,375 | 904,960,234 | $ | 7,899,149 | 23,763,797 | $ | 194,009 | $ | 9,039,600 | $ | 17,625 | $ | 9,057,225 | ||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
10
VEREIT OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (82,601 | ) | $ | (131,261 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 610,291 | 660,715 | ||||||
(Gain) loss on real estate assets and joint venture, net | (55,921 | ) | 55,855 | |||||
Impairments | 176,214 | 85,341 | ||||||
Equity-based compensation | 7,097 | 10,189 | ||||||
Equity in income of unconsolidated entities | (488 | ) | (1,611 | ) | ||||
Distributions from unconsolidated entities | 3,007 | 9,578 | ||||||
Loss on derivative instruments | 3,286 | 2,137 | ||||||
(Gain) on investment securities | — | (65 | ) | |||||
Loss (gain) on extinguishment and forgiveness of debt, net | 1,751 | (5,307 | ) | |||||
Changes in assets and liabilities: | ||||||||
Investment in direct financing leases | 1,861 | 1,503 | ||||||
Rent and tenant receivables and other assets, net | (51,702 | ) | (59,509 | ) | ||||
Due from affiliates | 50 | 19,141 | ||||||
Accounts payable and accrued expenses | (6,726 | ) | 6,679 | |||||
Deferred rent, derivative and other liabilities | (1,235 | ) | (24,939 | ) | ||||