Attached files
| file | filename |
|---|---|
| 8-K - 8-K - W. P. Carey Inc. | wpc2016q38-ksupplemental.htm |
| EX-99.2 - EXHIBIT 99.2 - W. P. Carey Inc. | wpc2016q38-ksupplementalex.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Institutional Investors:
Peter Sands
W. P. Carey Inc.
212-492-1110
institutionalir@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 2016 Financial Results
New York, NY – November 3, 2016 – W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), an internally-managed global net lease real estate investment trust, today reported its financial results for the third quarter ended September 30, 2016.
Total Company Update
• | Net income attributable to W. P. Carey of $110.9 million, or $1.03 per diluted share |
• | AFFO of $144.5 million, or $1.34 per diluted share |
• | 2016 AFFO guidance range narrowed to $5.05 to $5.15 per diluted share |
• | Quarterly cash dividend raised to $0.9850 per share, equivalent to an annualized dividend rate of $3.94 per share |
• | Issued $350 million of 4.250% Senior Unsecured Notes due 2026 |
• | Raised an additional $65.4 million in net proceeds through the Company’s ATM offering program |
Business Segment Update
Owned Real Estate
• | Segment Net income attributable to W. P. Carey of $100.0 million |
• | Segment AFFO of $131.5 million, or $1.22 per diluted share |
• | Disposed of four properties for total proceeds of $219.3 million |
• | Net lease portfolio occupancy of 99.1% |
Investment Management
• | Segment Net income attributable to W. P. Carey of $11.0 million |
• | Segment AFFO of $13.0 million, or $0.12 per diluted share |
• | Assets under management of $12.2 billion |
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 1
MANAGEMENT COMMENTARY
"For the 2016 third quarter, we generated AFFO per diluted share of $1.34, up 12.6% from the prior year period, reflecting the impact of the cost reduction initiative that we implemented earlier this year, growth in assets under management within our Investment Management business and lower interest expense,” said Mark J. DeCesaris, Chief Executive Officer of W. P. Carey. “Our third quarter results keep us on pace to generate full-year AFFO within our guidance range, which we have narrowed to between $5.05 and $5.15 per diluted share.
"Within our Owned Real Estate portfolio, we have now addressed the majority of our near-term lease maturities, which has both reduced residual risk and, in conjunction with recent acquisitions, extended the portfolio’s weighted-average lease term. We have also made further progress with our capital plan, raising additional equity through our ATM program at a weighted-average price of $68.54 and completing a public offering of senior unsecured notes through which we were able to replace higher-cost mortgage debt with lower-cost unsecured debt.”
FINANCIAL RESULTS
Revenues
• | Total Company: Revenues excluding reimbursable costs (net revenues) for the 2016 third quarter totaled $204.2 million, up 3.0% from $198.2 million for the 2015 third quarter, due primarily to higher net revenues from Investment Management. |
• | Owned Real Estate: Owned Real Estate revenues excluding reimbursable tenant costs (net revenues from Owned Real Estate) for the 2016 third quarter were $173.5 million, down 1.3% from $175.8 million for the 2015 third quarter, due primarily to lower lease termination income as well as lower lease revenues resulting from the sale of properties. |
• | Investment Management: Investment Management revenues excluding reimbursable costs (net revenues from Investment Management) for the 2016 third quarter were $30.6 million, up 37.2% from $22.3 million for the 2015 third quarter, due primarily to higher structuring revenue resulting from increased investment activity on behalf of the Managed Programs, as well as higher asset management revenue resulting from growth in assets under management. |
Net Income Attributable to W. P. Carey
• | Net income attributable to W. P. Carey for the 2016 third quarter was $110.9 million, up significantly compared to $21.7 million for the 2015 third quarter, due primarily to a $49.1 million aggregate gain on sale of real estate recognized in the current-year period, lower general and administrative expenses, lower interest expense and an increase in Investment Management revenues. |
Adjusted Funds from Operations (AFFO)
• | AFFO for the 2016 third quarter was $1.34 per diluted share, up 12.6% compared to $1.19 per diluted share for the 2015 third quarter, due primarily to lower general and administrative expenses, higher asset management fees and distributions of available cash from the Company’s interests in the operating partnerships of the Managed Programs and lower interest expense. |
• | 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 22, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.9850 per share, equivalent to an annualized dividend rate of $3.94 per share. The dividend was paid on October 14, 2016 to stockholders of record as of October 3, 2016. |
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 2
AFFO GUIDANCE
• | The Company has narrowed its AFFO guidance range for the 2016 full year to between $5.05 and $5.15 per diluted share, leaving the midpoint unchanged, based on the following key assumptions: |
(i) | acquisitions for the Company’s Owned Real Estate portfolio of between $400 million and $600 million, which is unchanged; |
(ii) | dispositions from the Company’s Owned Real Estate portfolio of between $650 million and $850 million, which is unchanged; and |
(iii) | acquisitions on behalf of the Managed Programs of between $1.4 billion and $1.8 billion, which has been revised lower. |
BALANCE SHEET AND CAPITALIZATION
Bond Issuance
• | As previously announced, on September 12, 2016, the Company completed an underwritten public offering of $350 million aggregate principal amount of 4.250% Senior Notes due October 1, 2026. The Company used the net proceeds from this offering primarily to reduce amounts outstanding under its senior unsecured credit facility. |
“At-The-Market” (ATM) Offering Program
• | During the 2016 third quarter, the Company issued 968,535 shares of common stock under its ATM offering program at a weighted-average price of $68.54 per share, for net proceeds of $65.4 million. |
• | During the nine months ended September 30, 2016, the Company issued 1,249,836 shares of common stock under its ATM offering program at a weighted-average price of $68.52 per share, for net proceeds of $84.4 million. |
• | The Company has not issued any shares of common stock under its ATM offering program between the end of the 2016 third quarter and the date of this press release. |
OWNED REAL ESTATE
Acquisitions
• | During the 2016 third quarter, the Company did not complete any investments for its Owned Real Estate portfolio, leaving total investment volume for the nine months ended September 30, 2016 unchanged from June 30, 2016 at $385.8 million, including transaction-related costs and fees. |
Dispositions
• | During the 2016 third quarter, as part of its active capital recycling program, the Company disposed of four properties from its Owned Real Estate portfolio for total proceeds of $219.3 million, bringing total dispositions for the nine months ended September 30, 2016 to $481.3 million, before transaction-related costs and fees. |
• | Subsequent to quarter end, the Company disposed of 17 additional properties for total proceeds of $136.8 million, including 15 properties leased to a top-10 tenant, bringing total dispositions for the year-to-date period through November 3, 2016 to approximately $618.1 million, before transaction-related costs and fees. |
Composition
• | As of September 30, 2016, the Company’s Owned Real Estate portfolio consisted of 910 net lease properties, comprising 91.8 million square feet leased to 222 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.4 years and the occupancy rate was 99.1%. |
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 3
INVESTMENT MANAGEMENT
• | W. P. Carey is the advisor to CPA®:17 – Global and CPA®:18 – Global (the CPA® REITs), Carey Watermark Investors Incorporated (CWI 1) and Carey Watermark Investors 2 Incorporated (CWI 2) (the CWI REITs, and together with the CPA® REITs, the Managed REITs), Carey Credit Income Fund (CCIF), and Carey European Student Housing Fund I, L.P. (CESH I) (together with the Managed REITs and CCIF, the Managed Programs). |
Acquisitions
• | During the 2016 third quarter, the Company structured new investments totaling $432.1 million on behalf of the Managed Programs, including transaction-related costs and fees, bringing total investment volume on behalf of the Managed Programs for the nine months ended September 30, 2016 to $1.0 billion. |
Assets Under Management
• | As of September 30, 2016, the Managed Programs had total assets under management of approximately $12.2 billion, up 16.2% from $10.5 billion as of September 30, 2015. |
Net Investor Capital Inflows
• | During the 2016 third quarter, investor capital inflows for the Managed Programs, including Distribution Reinvestment Plan proceeds, net of redemptions, totaled $180.1 million. |
Product Update
• | During the 2016 third quarter, CESH I, a limited partnership formed for the purpose of developing, owning and operating student housing properties and similar investments in Europe, commenced fundraising through a private placement offering. |
• | Note: At inception, the Company consolidated CESH I, which is reflected in the Company’s 2016 second quarter results. During the 2016 third quarter, the Company deconsolidated CESH I. |
* * * * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2016 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 Securities and Exchange Commission (SEC) on November 3, 2016.
* * * * *
Live Conference Call and Audio Webcast Scheduled for 10:00 a.m. Eastern Time
Please call to register at least 10 minutes prior to the start time.
Date/Time: Thursday, November 3, 2016 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-465-1289 (US) or +1-201-689-8762 (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. 9/30/2016 Earnings Release 8-K – 4
* * * * *
W. P. Carey Inc.
W. P. Carey Inc. is a leading internally-managed net lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. At September 30, 2016, the Company had an enterprise value of approximately $11.0 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded publicly registered investment programs with assets under management of approximately $12.2 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
* * * * *
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. DeCesaris, including statements regarding our operational efficiencies, cost reductions, disposition plans, lease maturities, residual risk, weighted-average lease term, growth in assets under management, capital markets access, and cost of debt; annualized dividends; adjusted funds from operations coverage and guidance, including underlying assumptions; capital recycling and intended results thereof; our continued ability to sell shares under our ATM program; investor capital inflows; and anticipated future financial and operating performance and results, including underlying assumptions and 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, 2015, as filed with the SEC on February 26, 2016, and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the SEC on August 4, 2016. 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. 9/30/2016 Earnings Release 8-K – 5
W. P. CAREY INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Investments in real estate: | |||||||
Real estate, at cost | $ | 5,221,986 | $ | 5,309,925 | |||
Operating real estate, at cost | 81,665 | 82,749 | |||||
Accumulated depreciation | (455,613 | ) | (381,529 | ) | |||
Net investments in properties | 4,848,038 | 5,011,145 | |||||
Net investments in direct financing leases | 740,745 | 756,353 | |||||
Assets held for sale, net | 128,462 | 59,046 | |||||
Net investments in real estate | 5,717,245 | 5,826,544 | |||||
Equity investments in the Managed Programs and real estate | 294,690 | 275,473 | |||||
Cash and cash equivalents | 209,483 | 157,227 | |||||
Due from affiliates | 51,508 | 62,218 | |||||
In-place lease and tenant relationship intangible assets, net | 817,151 | 902,848 | |||||
Goodwill | 640,305 | 681,809 | |||||
Above-market rent intangible assets, net | 406,245 | 475,072 | |||||
Other assets, net | 331,658 | 360,898 | |||||
Total Assets | $ | 8,468,285 | $ | 8,742,089 | |||
Liabilities and Equity | |||||||
Liabilities: | |||||||
Non-recourse debt, net | $ | 1,926,331 | $ | 2,269,421 | |||
Senior Unsecured Notes, net | 1,837,216 | 1,476,084 | |||||
Senior Unsecured Credit Facility - Revolver | 378,358 | 485,021 | |||||
Senior Unsecured Credit Facility - Term Loan, net | 249,915 | 249,683 | |||||
Accounts payable, accrued expenses and other liabilities | 258,977 | 342,374 | |||||
Below-market rent and other intangible liabilities, net | 125,790 | 154,315 | |||||
Deferred income taxes | 72,107 | 86,104 | |||||
Distributions payable | 106,545 | 102,715 | |||||
Total liabilities | 4,955,239 | 5,165,717 | |||||
Redeemable noncontrolling interest | 965 | 14,944 | |||||
Equity: | |||||||
W. P. Carey stockholders’ equity: | |||||||
Preferred stock (none issued) | — | — | |||||
Common stock | 106 | 104 | |||||
Additional paid-in capital | 4,389,363 | 4,282,042 | |||||
Distributions in excess of accumulated earnings | (834,868 | ) | (738,652 | ) | |||
Deferred compensation obligation | 50,576 | 56,040 | |||||
Accumulated other comprehensive loss | (221,326 | ) | (172,291 | ) | |||
Total W. P. Carey stockholders’ equity | 3,383,851 | 3,427,243 | |||||
Noncontrolling interests | 128,230 | 134,185 | |||||
Total equity | 3,512,081 | 3,561,428 | |||||
Total Liabilities and Equity | $ | 8,468,285 | $ | 8,742,089 | |||
W. P. Carey Inc. 9/30/2016 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, 2016 | June 30, 2016 | September 30, 2015 | |||||||||
Revenues | |||||||||||
Owned Real Estate: | |||||||||||
Lease revenues | $ | 163,786 | $ | 167,328 | $ | 164,741 | |||||
Operating property revenues (a) | 8,524 | 8,270 | 8,107 | ||||||||
Reimbursable tenant costs | 6,537 | 6,391 | 5,340 | ||||||||
Lease termination income and other | 1,224 | 838 | 2,988 | ||||||||
180,071 | 182,827 | 181,176 | |||||||||
Investment Management: | |||||||||||
Asset management revenue | 15,978 | 15,005 | 13,004 | ||||||||
Reimbursable costs from affiliates | 14,540 | 12,094 | 11,155 | ||||||||
Structuring revenue | 12,301 | 5,968 | 8,207 | ||||||||
Dealer manager fees | 1,835 | 1,372 | 1,124 | ||||||||
Other advisory revenue | 522 | — | — | ||||||||
45,176 | 34,439 | 33,490 | |||||||||
225,247 | 217,266 | 214,666 | |||||||||
Operating Expenses | |||||||||||
Depreciation and amortization | 62,802 | 66,581 | 75,512 | ||||||||
Reimbursable tenant and affiliate costs | 21,077 | 18,485 | 16,495 | ||||||||
General and administrative | 15,733 | 20,951 | 22,842 | ||||||||
Impairment charges | 14,441 | 35,429 | 19,438 | ||||||||
Property expenses, excluding reimbursable tenant costs | 10,193 | 10,510 | 11,120 | ||||||||
Subadvisor fees (b) | 4,842 | 1,875 | 1,748 | ||||||||
Stock-based compensation expense | 4,356 | 4,001 | 3,966 | ||||||||
Dealer manager fees and expenses | 3,028 | 2,620 | 3,185 | ||||||||
Restructuring and other compensation (c) | — | 452 | — | ||||||||
Property acquisition and other expenses (d) | — | (207 | ) | 4,760 | |||||||
136,472 | 160,697 | 159,066 | |||||||||
Other Income and Expenses | |||||||||||
Interest expense | (44,349 | ) | (46,752 | ) | (49,683 | ) | |||||
Equity in earnings of equity method investments in the Managed Programs and real estate | 16,803 | 16,429 | 12,635 | ||||||||
Other income and (expenses) | 5,101 | 426 | 6,608 | ||||||||
(22,445 | ) | (29,897 | ) | (30,440 | ) | ||||||
Income before income taxes and gain on sale of real estate | 66,330 | 26,672 | 25,160 | ||||||||
(Provision for) benefit from income taxes | (3,154 | ) | 8,217 | (3,361 | ) | ||||||
Income before gain on sale of real estate | 63,176 | 34,889 | 21,799 | ||||||||
Gain on sale of real estate, net of tax | 49,126 | 18,282 | 1,779 | ||||||||
Net Income | 112,302 | 53,171 | 23,578 | ||||||||
Net income attributable to noncontrolling interests | (1,359 | ) | (1,510 | ) | (1,833 | ) | |||||
Net Income Attributable to W. P. Carey | $ | 110,943 | $ | 51,661 | $ | 21,745 | |||||
Basic Earnings Per Share | $ | 1.03 | $ | 0.48 | $ | 0.20 | |||||
Diluted Earnings Per Share | $ | 1.03 | $ | 0.48 | $ | 0.20 | |||||
Weighted-Average Shares Outstanding | |||||||||||
Basic | 107,221,668 | 106,310,362 | 105,813,237 | ||||||||
Diluted | 107,468,029 | 106,530,036 | 106,337,040 | ||||||||
Distributions Declared Per Share | $ | 0.9850 | $ | 0.9800 | $ | 0.9550 | |||||
W. P. Carey Inc. 9/30/2016 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, | |||||||
2016 | 2015 | ||||||
Revenues | |||||||
Owned Real Estate: | |||||||
Lease revenues | $ | 506,358 | $ | 487,480 | |||
Lease termination income and other (e) | 34,603 | 9,319 | |||||
Operating property revenues (a) | 23,696 | 23,645 | |||||
Reimbursable tenant costs | 19,237 | 17,409 | |||||
583,894 | 537,853 | ||||||
Investment Management: | |||||||
Reimbursable costs from affiliates | 46,372 | 28,401 | |||||
Asset management revenue | 45,596 | 36,236 | |||||
Structuring revenue | 30,990 | 67,735 | |||||
Dealer manager fees | 5,379 | 2,704 | |||||
Other advisory revenue | 522 | 203 | |||||
128,859 | 135,279 | ||||||
712,753 | 673,132 | ||||||
Operating Expenses | |||||||
Depreciation and amortization | 213,835 | 206,079 | |||||
Reimbursable tenant and affiliate costs | 65,609 | 45,810 | |||||
General and administrative | 58,122 | 78,987 | |||||
Impairment charges | 49,870 | 22,711 | |||||
Property expenses, excluding reimbursable tenant costs | 38,475 | 31,504 | |||||
Stock-based compensation expense | 14,964 | 16,063 | |||||
Restructuring and other compensation (c) | 11,925 | — | |||||
Subadvisor fees (b) | 10,010 | 8,555 | |||||
Dealer manager fees and expenses | 9,000 | 7,884 | |||||
Property acquisition and other expenses (d) | 5,359 | 12,333 | |||||
477,169 | 429,926 | ||||||
Other Income and Expenses | |||||||
Interest expense | (139,496 | ) | (145,325 | ) | |||
Equity in earnings of equity method investments in the Managed Programs and real estate | 48,243 | 38,630 | |||||
Other income and (expenses) | 9,398 | 9,944 | |||||
(81,855 | ) | (96,751 | ) | ||||
Income before income taxes and gain on sale of real estate | 153,729 | 146,455 | |||||
Benefit from (provision for) income taxes | 4,538 | (20,352 | ) | ||||
Income before gain on sale of real estate | 158,267 | 126,103 | |||||
Gain on sale of real estate, net of tax | 68,070 | 2,980 | |||||
Net Income | 226,337 | 129,083 | |||||
Net income attributable to noncontrolling interests | (6,294 | ) | (7,874 | ) | |||
Net Income Attributable to W. P. Carey | $ | 220,043 | $ | 121,209 | |||
Basic Earnings Per Share | $ | 2.06 | $ | 1.14 | |||
Diluted Earnings Per Share | $ | 2.05 | $ | 1.13 | |||
Weighted-Average Shares Outstanding | |||||||
Basic | 106,493,145 | 105,627,423 | |||||
Diluted | 106,853,174 | 106,457,495 | |||||
Distributions Declared Per Share | $ | 2.9392 | $ | 2.8615 | |||
__________
(a) | Comprised of revenues of $8.5 million and $23.6 million from two hotels for the three and nine months ended September 30, 2016, respectively, and revenues of $0.1 million from one self-storage facility for the nine months ended September 30, 2016. During the three months ended March 31, 2016, we sold our remaining self-storage facility. |
(b) | We earn investment management revenue from CWI 1 and CWI 2 in our role as their advisor. Pursuant to the terms of their subadvisory agreements, however, 20% of the fees we receive from CWI 1 and 25% of the fees we receive from CWI 2 are paid to their respective subadvisors. In connection with the acquisitions of multi-family properties on behalf of CPA®:18 – Global, we entered into agreements with third-party advisors for the day-to-day management of the properties for which we pay 30% of the initial acquisition fees and 100% of asset management fees paid to us by CPA®:18 – Global. |
(c) | Amount represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employment severance arrangements. |
(d) | Amounts for the three months ended June 30, 2016 and September 30, 2015 include expenses related to our formal strategic review of $(0.2) million and $1.2 million, respectively. Amounts for the nine months ended September 30, 2016 and 2015 include expenses related to our formal strategic review of $5.2 million and $1.2 million, respectively. |
(e) | Amount for the nine months ended September 30, 2016 includes $32.2 million of lease termination income related to a property classified as held for sale as of December 31, 2015 and sold during the three months ended March 31, 2016. |
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 8
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, 2016 | June 30, 2016 | September 30, 2015 | |||||||||
Net income attributable to W. P. Carey | $ | 110,943 | $ | 51,661 | $ | 21,745 | |||||
Adjustments: | |||||||||||
Depreciation and amortization of real property | 61,396 | 65,096 | 74,050 | ||||||||
Gain on sale of real estate, net | (49,126 | ) | (18,282 | ) | (1,779 | ) | |||||
Impairment charges | 14,441 | 35,429 | 19,438 | ||||||||
Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (3,254 | ) | (2,662 | ) | (2,632 | ) | |||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO | 1,354 | 1,331 | 1,293 | ||||||||
Total adjustments | 24,811 | 80,912 | 90,370 | ||||||||
FFO Attributable to W. P. Carey (as defined by NAREIT) | 135,754 | 132,573 | 112,115 | ||||||||
Adjustments: | |||||||||||
Above- and below-market rent intangible lease amortization, net | 12,564 | 13,105 | 10,184 | ||||||||
Straight-line and other rent adjustments | (5,116 | ) | (2,234 | ) | (1,832 | ) | |||||
Other amortization and non-cash items (a) (b) (c) | (4,897 | ) | 404 | (2,248 | ) | ||||||
Stock-based compensation | 4,356 | 4,001 | 3,966 | ||||||||
Tax benefit – deferred | (2,999 | ) | (16,535 | ) | (1,412 | ) | |||||
Loss (gain) on extinguishment of debt | 2,072 | (112 | ) | (2,305 | ) | ||||||
Realized losses on foreign currency | 1,559 | 1,222 | 367 | ||||||||
Amortization of deferred financing costs | 1,007 | 541 | 749 | ||||||||
Restructuring and other compensation (d) | — | 452 | — | ||||||||
Property acquisition and other expenses (e) | — | (207 | ) | 4,760 | |||||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO | 261 | (841 | ) | 2,460 | |||||||
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO | (90 | ) | (131 | ) | (156 | ) | |||||
Total adjustments | 8,717 | (335 | ) | 14,533 | |||||||
AFFO Attributable to W. P. Carey | $ | 144,471 | $ | 132,238 | $ | 126,648 | |||||
Summary | |||||||||||
FFO attributable to W. P. Carey (as defined by NAREIT) | $ | 135,754 | $ | 132,573 | $ | 112,115 | |||||
FFO attributable to W. P. Carey (as defined by NAREIT) per diluted share | $ | 1.26 | $ | 1.24 | $ | 1.05 | |||||
AFFO attributable to W. P. Carey | $ | 144,471 | $ | 132,238 | $ | 126,648 | |||||
AFFO attributable to W. P. Carey per diluted share | $ | 1.34 | $ | 1.24 | $ | 1.19 | |||||
Diluted weighted-average shares outstanding | 107,468,029 | 106,530,036 | 106,337,040 | ||||||||
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 9
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, | |||||||
2016 | 2015 | ||||||
Net income attributable to W. P. Carey | $ | 220,043 | $ | 121,209 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 209,449 | 201,629 | |||||
Gain on sale of real estate, net | (68,070 | ) | (2,980 | ) | |||
Impairment charges | 49,870 | 22,711 | |||||
Proportionate share of adjustments for noncontrolling interests to arrive at FFO | (8,541 | ) | (7,925 | ) | |||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO | 3,994 | 3,867 | |||||
Total adjustments | 186,702 | 217,302 | |||||
FFO Attributable to W. P. Carey (as defined by NAREIT) | 406,745 | 338,511 | |||||
Adjustments: | |||||||
Straight-line and other rent adjustments (f) | (34,262 | ) | (7,839 | ) | |||
Above- and below-market rent intangible lease amortization, net (g) | 23,851 | 37,154 | |||||
Tax benefit – deferred | (22,522 | ) | (4,530 | ) | |||
Stock-based compensation | 14,964 | 16,063 | |||||
Restructuring and other compensation (d) | 11,925 | — | |||||
Other amortization and non-cash items (a) (b) (c) | (7,695 | ) | (755 | ) | |||
Allowance for credit losses | 7,064 | — | |||||
Property acquisition and other expenses (e) | 5,359 | 12,333 | |||||
Loss (gain) on extinguishment of debt | 3,885 | (2,305 | ) | ||||
Realized losses on foreign currency | 2,569 | 228 | |||||
Amortization of deferred financing costs | 2,271 | 2,025 | |||||
Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO | 741 | 5,120 | |||||
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO | 1,278 | (355 | ) | ||||
Total adjustments | 9,428 | 57,139 | |||||
AFFO Attributable to W. P. Carey | $ | 416,173 | $ | 395,650 | |||
Summary | |||||||
FFO attributable to W. P. Carey (as defined by NAREIT) | $ | 406,745 | $ | 338,511 | |||
FFO attributable to W. P. Carey (as defined by NAREIT) per diluted share | $ | 3.81 | $ | 3.18 | |||
AFFO attributable to W. P. Carey | $ | 416,173 | $ | 395,650 | |||
AFFO attributable to W. P. Carey per diluted share | $ | 3.89 | $ | 3.72 | |||
Diluted weighted-average shares outstanding | 106,853,174 | 106,457,495 | |||||
__________
(a) | Represents primarily unrealized gains and losses from foreign exchange and derivatives. |
(b) | Effective July 1, 2016, the amortization of debt premiums and discounts, which was previously included in Other amortization and non-cash items, is included in Amortization of deferred financing costs. Prior periods are retrospectively adjusted to reflect this change. Amortization of debt premiums and discounts for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015 was $0.3 million, $0.8 million and $0.7 million, respectively, and for the nine months ended September 30, 2016 and 2015 was $1.7 million and $2.1 million, respectively. |
(c) | Amounts for the three and nine months ended September 30, 2016 include an adjustment of $0.6 million to exclude a portion of a gain recognized on the deconsolidation of an affiliate. |
(d) | Amount represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employment severance arrangements. |
(e) | Amounts for the three months ended June 30, 2016 and September 30, 2015 include expenses related to our formal strategic review of $(0.2) million and $1.2 million, respectively. Amounts for the nine months ended September 30, 2016 and 2015 include expenses related to our formal strategic review of $5.2 million and $1.2 million, respectively. |
(f) | Amount for the nine months ended September 30, 2016 includes an adjustment to exclude $27.2 million of the $32.2 million of lease termination income recognized in connection with a domestic property that was sold during the three months ended March 31, 2016, as such amount was determined to be non-core income. Amount for the nine months ended September 30, 2016 also reflect an adjustment to include $1.8 million of lease termination income received in December 2015 that represented core income for the three months ended March 31, 2016. |
(g) | Amount for the nine months ended September 30, 2016 includes $15.6 million due to the acceleration of a below-market lease from a tenant of a domestic property that was sold during the three months ended March 31, 2016. |
W. P. Carey Inc. 9/30/2016 Earnings Release 8-K – 10
Non-GAAP Financial Disclosure
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc., or NAREIT, an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to nor a substitute for net income or loss as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly-owned investments. Adjustments for unconsolidated partnerships and jointly-owned investments are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.
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 non-core income and expenses such as property acquisition and other expenses, which includes costs recorded related to our formal strategic review, certain lease termination income, and expenses related to restructuring and other compensation-related expenses resulting from a reduction in headcount and employment severance arrangements. We also exclude realized gains/losses on foreign exchange transactions, other than those realized on the settlement of foreign currency 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 these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs which are currently not 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 as we believe 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. 9/30/2016 Earnings Release 8-K – 11