W. P. Carey Inc. Announces Second Quarter 2014 Financial Results

Aug 05, 2014, 07:30 ET from W. P. Carey Inc.

NEW YORK, Aug. 5, 2014 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), a global net-lease real estate investment trust, today reported its financial results for the second quarter ended June 30, 2014.

Financial Update Second Quarter 2014

  • Revenues of $252.9 million and revenues, excluding reimbursable expenses, of $205.2 million
  • AFFO of $122.2 million, equivalent to $1.21 per diluted share
  • Quarterly dividend of $0.90, equivalent to an annualized dividend rate of $3.60 per share
  • Full year 2014 AFFO guidance range raised to $4.62 to $4.82 per diluted share

Business Update Second Quarter 2014

  • Acquired one property for $47.2 million
  • Disposed of 15 properties for total proceeds of $170.6 million
  • Owned portfolio occupancy of 98.5%
  • Structured $559.3 million of investments on behalf of the Managed REITs
  • Raised $492.4 million on behalf of the Managed REITs

MANAGEMENT COMMENTARY

"We have better clarity on our earnings capacity now that we have completed our first full quarter following the merger with CPA®:16 – Global and also have enhanced our supplemental disclosure," said W. P. Carey President and CEO, Trevor Bond. "We continued to be an active capital recycler in the second quarter, disposing of several smaller properties with relatively short lease terms while focusing on building an opportunity pipeline containing longer-duration assets. Also, our investment management business generated strong revenues as a result of robust fundraising and transaction volumes on behalf of the Managed REITs.

"Given the AFFO generated during the first six months and with greater visibility into the second half of the year, we are pleased to announce that we are raising our full year AFFO guidance range to $4.62 to $4.82 per diluted share."

FINANCIAL RESULTS

Revenues

  • Total Company: Revenues, excluding reimbursable costs, for the 2014 second quarter totaled $205.2 million, up 25.7% from $163.3 million for the 2014 first quarter, and up 119.0% from $93.7 million for the 2013 second quarter. In each case, the increase was due primarily to additional real estate revenues from properties acquired in the Company's merger with CPA®:16 – Global, which closed on January 31, 2014 (the CPA®:16 Merger).
  • Real Estate Ownership: Real estate revenues, excluding reimbursable tenant costs, for the 2014 second quarter were $171.0 million, up 32.5% from $129.1 million for the 2014 first quarter, and up 129.2% from $74.6 million for the 2013 second quarter. In each case, the increase was due primarily to additional lease revenues from properties acquired in the CPA®:16 Merger.
  • Investment Management: Revenues from the Managed REITs, excluding reimbursable costs, for the 2014 second quarter were $34.2 million, virtually unchanged from the 2014 first quarter as higher dealer manager fees were principally offset by the cessation of asset management revenue from CPA®:16 – Global upon completion of the CPA®:16 Merger. Compared to the 2013 second quarter, revenues from the Managed REITs, excluding reimbursable costs, increased 79.1% from $19.1 million, due primarily to higher structuring revenue and higher dealer manager fees resulting from increased activity on behalf of the Managed REITs.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2014 second quarter was $122.2 million, which included the impact of properties acquired in the CPA®:16 Merger for three months, versus two months for the 2014 first quarter. This compares to AFFO of $118.2 million for the 2014 first quarter, which also included the impact of a tax benefit in connection with the payment of annual incentive compensation.
  • AFFO per diluted share for the 2014 second quarter was $1.21, which included the impact of: (i) properties acquired in the CPA®:16 Merger for three months, versus two months for the 2014 first quarter; and (ii) 30.7 million shares issued in connection with the CPA®:16 Merger in weighted average shares outstanding for three months, versus two months for the 2014 first quarter. This compares to AFFO per diluted share for the 2014 first quarter of $1.31, which also included the impact of a tax benefit in connection with the payment of annual incentive compensation.
  • Compared to the 2013 second quarter, AFFO and AFFO per diluted share increased 68.3% and 15.2%, respectively, from $72.6 million, or $1.05 per diluted share, due primarily to additional real estate revenues from properties acquired in the CPA®:16 Merger.
  • Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

Dividend

  • As previously announced, on June 19, 2014 the Company's Board of Directors declared a quarterly cash dividend of $0.90 per share, equivalent to an annualized dividend rate of $3.60 per share, which was paid on July 15, 2014 to stockholders of record as of the close of business on June 30, 2014. The dividend represented a 0.6% increase over the 2014 first quarter and was the Company's 53rd consecutive quarterly increase.

AFFO GUIDANCE

  • The Company has raised its 2014 full year AFFO guidance range to $4.62 to $4.82 per diluted share, up from its previously announced range of $4.40 to $4.65 per diluted share, based on assumed full year 2014 total acquisition volume of approximately $1.9 billion to $2.6 billion, including approximately $1.4 billion to $2.0 billion on behalf of the Managed REITs.

BALANCE SHEET AND CAPITALIZATION

Mortgage Prepayments

  • During the 2014 second quarter, in connection with its long-term plan to become a primarily unsecured borrower, the Company prepaid non-recourse mortgage loans with an aggregate outstanding principal balance of $85.0 million, which was in addition to scheduled mortgage loan principal payments totaling $44.9 million.
  • As a result, for the six months ended June 30, 2014, principal prepayments on non-recourse mortgage loans totaled $201.8 million and scheduled mortgage loan principal payments totaled $61.6 million.

OWNED REAL ESTATE PORTFOLIO

Acquisitions and Dispositions

  • During the 2014 second quarter, the Company completed one investment for $47.2 million and disposed of 15 properties for total gross proceeds of $170.6 million as part of its active capital recycling program, intended to extend the portfolio's average lease term, improve overall portfolio credit quality and increase asset criticality within the portfolio.
  • Transactions during the 2014 second quarter brought total acquisitions and dispositions for the six months ended June 30, 2014 to $89.1 million and $298.3 million, respectively.

Composition

  • As of June 30, 2014, the Company's owned portfolio consisted of 686 net-leased properties, comprising 81.8 million square feet leased to 216 tenants, and four operating properties. As of that date, the average lease term of the net-leased portfolio was 8.6 years and the occupancy rate was 98.5%.

INVESTMENT MANAGEMENT

  • W. P. Carey is the advisor to CPA®:17 – Global, CPA®:18 – Global (together the CPA® REITs) and Carey Watermark Investors Incorporated (CWI) (together the Managed REITs). At June 30, 2014, the Managed REITs, in aggregate, had total assets under management of approximately $8.2 billion.

Acquisitions

  • During the 2014 second quarter, the Company structured ten new investments totaling $151.9 million on behalf of the CPA® REITs, bringing total acquisitions for the six months ended June 30, 2014 to $526.8 million. In addition, during the 2014 second quarter the Company structured new investments in five hotels totaling $407.4 million on behalf of CWI.

Fundraising

  • During the 2014 second quarter, the Company raised $492.4 million on behalf of the Managed REITs, comprised of $398.7 million on behalf of CPA®:18 – Global in its initial public offering and $93.7 million on behalf of CWI in its follow-on offering, bringing the total raised on behalf of the Managed REITs during the six months ended June 30, 2014 to $909.0 million.
  • In May 2014, the board of directors of CPA®:18 – Global approved the discontinuation of sales of its Class A common stock through June 30, 2014 in order to moderate the pace of its fundraising. In order to facilitate the final sales of Class A shares as of June 30, 2014 and the continued sale of Class C shares, the board of directors of CPA®:18 – Global also approved the reallocation to its initial public offering of up to $250.0 million of the shares that were initially allocated to sales of its stock through its dividend reinvestment plan.

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2014 second quarter, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the SEC on August 5, 2014.

Live Conference Call and Audio Webcast Scheduled for 11:00 a.m. Eastern Time Please call to register at least 15 minutes prior to the start time.

Date/Time: Tuesday, August 5, 2014 at 11:00 a.m. Eastern Time Call-in Number: +1-877-317-6789 (US) or +1-412-317-6789 (international) Audio Webcast: www.wpcarey.com/earnings 

Audio Webcast Replay

An audio replay of the call will be available at www.wpcarey.com/earnings.

W. P. Carey Inc. W. P. Carey Inc. is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. At June 30, 2014, the Company had an enterprise value of approximately $9.9 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded REITs with assets under management of approximately $8.2 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 Act and the Exchange Act, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief, or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "assume," "outlook," "seek," "plan," "believe," "expect," "anticipate," "intend," "estimate," "forecast," and other comparable terms. These forward-looking statements include, but are not limited to, the statements made by Mr. Bond as well as statements regarding the benefits of the CPA®:16 Merger, annualized dividends, funds from operations coverage and guidance, plans to become a primarily unsecured borrower through mortgage prepayments, and with regard to its capital recycling and intended results thereof, and anticipated future financial and operating performance and results, including estimates of growth. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that W. P. Carey's actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results, performance, or achievements of W. P. Carey. Discussions of some of these other important factors and assumptions are contained in W. P. Carey's filings with the SEC and are available at the SEC's website at http://www.sec.gov, including Item 1A.  Risk Factors in W. P. Carey's Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC on March 3, 2014. In light of these risks, uncertainties, assumptions, and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.

Institutional Investors: Peter Sands W. P. Carey Inc. 212-492-1110 psands@wpcarey.com

Individual Investors: W. P. Carey Inc. 212-492-8920 ir@wpcarey.com

Press Contact:  Guy Lawrence Ross & Lawrence 212-308-3333 gblawrence@rosslawpr.com

 

 

W. P. CAREY INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

June 30, 2014

December 31, 2013

Assets

Investments in real estate:

Real estate, at cost

$

4,497,999

$

2,516,325

Operating real estate, at cost

84,544

6,024

Accumulated depreciation

(217,155)

(168,958)

Net investments in properties

4,365,388

2,353,391

Net investments in direct financing leases

880,000

363,420

Assets held for sale

86,823

Equity investments in real estate and the Managed REITs

211,225

530,020

Net investments in real estate

5,456,613

3,333,654

Cash and cash equivalents

214,971

117,519

Due from affiliates

39,516

32,034

Goodwill

698,891

350,208

In-place lease intangible assets, net

966,406

467,127

Above-market rent intangible assets, net

570,498

241,975

Other assets, net

346,853

136,433

Total Assets

$

8,293,748

$

4,678,950

Liabilities and Equity

Liabilities:

Non-recourse debt

$

2,823,415

$

1,492,410

Senior credit facility and unsecured term loan

476,700

575,000

Senior unsecured notes

498,255

Below-market rent and other intangible liabilities, net

180,364

128,202

Accounts payable, accrued expenses and other liabilities

298,432

166,385

Deferred income taxes

87,991

39,040

Distributions payable

90,610

67,746

Total liabilities

4,455,767

2,468,783

Redeemable noncontrolling interest

6,418

7,436

Equity:

W. P. Carey stockholders' equity:

Preferred stock (None issued)

Common stock

100

69

Additional paid-in capital

4,024,039

2,256,503

Distributions in excess of accumulated earnings

(327,460)

(318,577)

Deferred compensation obligation

30,624

11,354

Accumulated other comprehensive income

14,215

15,336

Less: treasury stock at cost

(60,948)

(60,270)

Total W. P. Carey stockholders' equity

3,680,570

1,904,415

Noncontrolling interests

150,993

298,316

Total equity

3,831,563

2,202,731

Total Liabilities and Equity

$

8,293,748

$

4,678,950

 

 

W. P. CAREY INC.

Quarterly Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share amounts)

Three Months Ended

June 30, 2014

March 31, 2014

June 30, 2013

Revenues

(Revised) (a)

Real estate revenues:

     Lease revenues

$

148,253

$

123,068

$

73,984

     Reimbursable tenant costs

5,749

6,014

3,040

     Operating property revenues

8,251

4,992

231

     Lease termination income and other

14,481

1,000

402

176,734

135,074

77,657

Revenues from the Managed REITs:

     Reimbursable costs

41,925

39,732

15,467

     Structuring revenue

17,254

17,750

6,422

     Asset management revenue

9,045

9,777

10,355

     Dealer manager fees

7,949

6,676

2,320

76,173

73,935

34,564

252,907

209,009

112,221

Operating Expenses

  Depreciation and amortization

63,445

52,673

29,772

  Reimbursable tenant and affiliate costs

47,674

45,746

18,507

  General and administrative

19,133

22,671

14,545

  Property expenses, excluding    reimbursable tenant costs

11,209

8,418

2,282

  Stock-based compensation expense

7,957

7,043

8,429

  Dealer manager fees and expenses

6,285

5,424

3,163

  Subadvisor fees

2,451

18

985

  Impairment charges

2,066

  Merger and acquisition expenses

1,137

29,613

3,128

161,357

171,606

80,811

Other Income and Expenses

Net income from equity investments in real estate and the Managed REITs

9,452

14,262

32,541

Gain on change in control of interests (a)

104,645

Interest expense

(47,733)

(39,075)

(25,750)

Other income and (expenses)

(883)

(5,451)

2,450

(39,164)

74,381

9,241

Income from continuing operations before income taxes

52,386

111,784

40,651

(Provision for) benefit from income taxes

(8,053)

(2,240)

1,134

Income from continuing operations before (loss) gain on sale of real estate

44,333

109,544

41,785

Income from discontinued operations, net of tax

26,460

6,392

4,364

(Loss) gain on sale of real estate, net of tax

(3,821)

80

(333)

Net Income

66,972

116,016

45,816

Net income attributable to noncontrolling interests

(2,344)

(1,578)

(2,692)

Net loss (income) attributable to redeemable noncontrolling interest

111

(262)

43

Net Income Attributable to W. P. Carey

$

64,739

$

114,176

$

43,167

Basic Earnings Per Share

Income from continuing operations attributable to W. P. Carey

$

0.38

$

1.20

$

0.57

Income from discontinued operations attributable to W. P. Carey

0.26

0.07

0.06

Net Income Attributable to W. P. Carey

$

0.64

$

1.27

$

0.63

Diluted Earnings Per Share

Income from continuing operations attributable to W. P. Carey

$

0.38

$

1.19

$

0.56

Income from discontinued operations attributable to W. P. Carey

0.26

0.07

0.06

Net Income Attributable to W. P. Carey

$

0.64

$

1.26

$

0.62

Weighted Average Shares Outstanding

Basic

100,236,362

89,366,055

68,406,771

Diluted

100,995,225

90,375,311

69,493,902

Amounts Attributable to W. P. Carey

Income from continuing operations, net of tax

$

38,236

$

107,636

$

39,133

Income from discontinued operations, net of tax

26,503

6,540

4,034

Net Income

$

64,739

$

114,176

$

43,167

Distributions Declared Per Share

$

0.900

$

0.895

$

0.840

 

 

W. P. CAREY INC.

Year-to-Date Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share amounts)

Six Months Ended June 30,

2014 (a)

2013

Revenues

Real estate revenues:

     Lease revenues

$

271,320

$

146,444

     Reimbursable tenant costs

11,763

6,157

     Operating property revenues

13,244

458

     Lease termination income and other

15,479

1,082

311,806

154,141

Revenues from the Managed REITs:

     Reimbursable costs

81,657

27,435

     Structuring revenue

35,005

12,764

     Asset management revenue

18,822

20,369

     Dealer manager fees

14,626

3,542

150,110

64,110

461,916

218,251

Operating Expenses

Depreciation and amortization

116,118

59,147

Reimbursable tenant and affiliate costs

93,420

33,592

General and administrative

41,802

31,596

Merger and acquisition expenses

30,751

3,249

Property expenses, excluding reimbursable tenant costs

19,627

4,047

Stock-based compensation expense

15,000

17,578

Dealer manager fees and expenses

11,710

5,126

Subadvisor fees

2,469

1,670

Impairment charges

2,066

332,963

156,005

Other Income and Expenses

Net income from equity investments in real estate and the Managed REITs

23,714

43,197

Gain on change in control of interests (a)

104,645

Interest expense

(86,808)

(51,334)

Other income and (expenses)

(6,335)

3,849

35,216

(4,288)

Income from continuing operations before income taxes

164,169

57,958

(Provision for) benefit from income taxes

(10,293)

2,341

Income from continuing operations before loss on sale of real estate

153,876

60,299

Income from discontinued operations, net of tax

32,853

1,688

Loss on sale of real estate, net of tax

(3,742)

(332)

Net Income

182,987

61,655

Net income attributable to noncontrolling interests

(3,921)

(4,400)

Net (income) loss attributable to redeemable noncontrolling interest

(151)

93

Net Income Attributable to W. P. Carey

$

178,915

$

57,348

Basic Earnings Per Share

Income from continuing operations attributable to W. P. Carey

$

1.53

$

0.81

Income from discontinued operations attributable to W. P. Carey

0.35

0.02

Net Income Attributable to W. P. Carey

$

1.88

$

0.83

Diluted Earnings Per Share

Income from continuing operations attributable to W. P. Carey

$

1.52

$

0.80

Income from discontinued operations attributable to W. P. Carey

0.34

0.01

Net Income Attributable to W. P. Carey

$

1.86

$

0.81

Weighted Average Shares Outstanding

Basic

94,855,067

68,776,108

Diluted

95,857,916

69,870,849

Amounts Attributable to W. P. Carey

Income from continuing operations, net of tax

$

145,884

$

56,268

Income from discontinued operations, net of tax

33,031

1,080

Net Income

$

178,915

$

57,348

Distributions Declared Per Share

$

1.795

$

1.660

(a) Gain on change in control of interests for the three months ended March 31, 2014 represents a gain of $74.4 million recognized on our previously-held interest in shares of CPA®:16 – Global common stock, and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global, which we had previously accounted for under the equity method. During the six months ended June 30, 2014, one of these investments was sold. During the second quarter of 2014, we identified certain measurement period adjustments which increased the fair value of our previously-held interest in shares of CPA®:16 – Global common stock by $1.3 million. We did not record this adjustment during the three months ended June 30, 2014 but rather in the three months ended March 31, 2014. Consequently, amounts presented above for gain on change in control of interests and net income for the three months ended March 31, 2014 differ from amounts presented in the first quarter filings.

 

 

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

June 30, 2014

March 31, 2014

June 30, 2013

Real Estate Ownership

(Revised) (a)

Net income from Real Estate Ownership attributable to W. P. Carey

$

61,469

$

111,691

$

43,107

Adjustments:

Depreciation and amortization of real property

62,354

51,620

30,170

Impairment charges

2,066

1,671

Gain on sale of real estate, net

(25,582)

(3,176)

(981)

Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO

533

1,265

(16,304)

Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(2,586)

(3,492)

(4,247)

Total adjustments

36,785

46,217

10,309

FFO (as defined by NAREIT) - Real Estate Ownership

98,254

157,908

53,416

Adjustments:

Gain on change in control of interests (a)

(104,645)

Merger and acquisition expenses (b)

915

29,511

218

Loss (gain) on extinguishment of debt

721

7,463

(141)

Other gains, net

(13)

(3)

Other depreciation, amortization and non-cash charges

1,719

483

(515)

Stock-based compensation

220

220

911

Deferred tax benefit

(1,246)

(5,944)

(21)

Acquisition expenses (c)

224

100

2,909

Realized losses on foreign currency, derivatives and other

156

655

102

Amortization of deferred financing costs

999

873

549

Straight-line and other rent adjustments

(8,999)

(2,669)

(2,277)

Above- and below-market rent intangible lease amortization, net

17,124

13,486

7,237

Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO

(32)

5

279

AFFO adjustments to equity earnings from equity investments

935

2,936

10,718

Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

259

(1,417)

(1,083)

Total adjustments

12,982

(58,946)

18,886

AFFO - Real Estate Ownership

$

111,236

$

98,962

$

72,302

Investment Management

Net income from Investment Management attributable to W. P. Carey

$

3,270

$

2,485

$

60

FFO (as defined by NAREIT) - Investment Management

3,270

2,485

60

Adjustments:

Merger-related income tax expense (b)

13,867

Other depreciation, amortization and other non-cash charges

937

253

Stock-based compensation

7,737

6,823

7,518

Deferred tax benefit

(4,986)

(7,815)

Realized losses on foreign currency

3

6

2

Amortization of deferred financing costs

152

318

Total adjustments

7,740

16,799

276

AFFO - Investment Management

$

11,010

$

19,284

$

336

Total Company

FFO (as defined by NAREIT)

$

101,524

$

160,393

$

53,476

FFO (as defined by NAREIT) per diluted share

$

1.01

$

1.77

$

0.77

AFFO

$

122,246

$

118,246

$

72,638

AFFO per diluted share

$

1.21

$

1.31

$

1.05

Diluted weighted average shares outstanding

100,995,225

90,375,311

69,493,902

 

 

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)

Six Months Ended June 30,

2014 (a)

2013

Real Estate Ownership

Net income from Real Estate Ownership attributable to W. P. Carey

$

173,157

$

59,799

Adjustments:

Depreciation and amortization of real property

113,974

59,857

Impairment charges

2,066

4,950

Gain on sale of real estate, net

(28,758)

(50)

Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at FFO

1,798

(13,150)

Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(6,078)

(8,514)

Total adjustments

83,002

43,093

FFO (as defined by NAREIT) - Real Estate Ownership

256,159

102,892

Adjustments:

Gain on change in control of interests (a)

(104,645)

Merger and acquisition expenses (b)

30,426

329

Loss (gain) on extinguishment of debt

8,184

(67)

Other gains, net

(16)

(270)

Other depreciation, amortization and non-cash charges

2,202

285

Stock-based compensation

440

1,085

Deferred tax benefit

(7,190)

(1,046)

Acquisition expenses (c)

325

2,909

Realized losses on foreign currency, derivatives and other

811

154

Amortization of deferred financing costs

1,872

1,060

Straight-line and other rent adjustments

(11,668)

(4,446)

Above- and below-market rent intangible lease amortization, net

30,610

14,493

Proportionate share of adjustments to equity in net income of partially-owned entities to arrive at AFFO

(27)

557

AFFO adjustments to equity earnings from equity investments

3,872

19,967

Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

(1,158)

(2,644)

Total adjustments

(45,962)

32,366

AFFO - Real Estate Ownership

$

210,197

$

135,258

Investment Management

Net income (loss) from Investment Management attributable to W. P. Carey

$

5,758

$

(2,451)

FFO (as defined by NAREIT) - Investment Management

5,758

(2,451)

Adjustments:

Merger-related income tax expense

13,867

Other depreciation, amortization and other non-cash charges

937

515

Stock-based compensation

14,560

16,493

Deferred tax benefit

(4,986)

(5,562)

Realized losses on foreign currency

9

4

Amortization of deferred financing costs

152

636

Total adjustments

24,539

12,086

AFFO - Investment Management

$

30,297

$

9,635

Total Company

FFO (as defined by NAREIT)

$

261,917

$

100,441

FFO (as defined by NAREIT) per diluted share

$

2.73

$

1.44

AFFO

$

240,494

$

144,893

AFFO per diluted share

$

2.51

$

2.07

Diluted weighted average shares outstanding

95,857,916

69,870,849

(a) Gain on change in control of interests for the three months ended March 31, 2014 represents a gain of $74.4 million recognized on our previously-held interest in shares of CPA®:16 – Global common stock, and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global, which we had previously accounted for under the equity method. During the six months ended June 30, 2014, one of these investments was sold. During the second quarter of 2014, we identified certain measurement period adjustments which increased the fair value of our previously-held interest in shares of CPA®:16 – Global common stock by $1.3 million. We did not record this adjustment during the three months ended June 30, 2014 but rather in the three months ended March 31, 2014. Consequently, amounts presented above for gain on change in control of interests and net income for the three months ended March 31, 2014 differ from amounts presented in the first quarter filings.

(b) Amount for the three months ended March 31, 2014 and the six months ended June 30, 2014 included $29.5 million and $30.4 million, respectively, of merger expenses for the Real Estate Ownership segment and $13.9 million of merger-related income tax expense for both periods for the Investment Management segment incurred in connection with the CPA®:16 Merger.

(c) Prior to the second quarter of 2013, this amount was insignificant and therefore not included in the AFFO calculation.

 

Non-GAAP Financial Disclosure

Funds from Operations, or FFO, is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss (as computed in accordance with GAAP) excluding: depreciation and amortization expense from real estate assets, impairment charges on real estate, gains or losses from sales of depreciated real estate assets, and extraordinary items; however, FFO related to assets held for sale, sold, or otherwise transferred and included in the results of discontinued operations are included. These adjustments also incorporate the pro rata share of unconsolidated subsidiaries. FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers. Although NAREIT has published this definition of FFO, companies often modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations.

We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash charges such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rents, stock compensation, gains or losses from extinguishment of debt and deconsolidation of subsidiaries, and unrealized foreign currency exchange gains and losses. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude acquisition expenses and non-core expenses such as merger expenses. Merger expenses are related to the CPA®:16 Merger. We also exclude realized gains or losses on foreign exchange and derivatives which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income as they are not the primary drivers in our decision making process and excluding those items provides investors a view of our portfolio performance over time and make it more comparable to other REITs not currently engaged in acquisitions, mergers, and restructuring, which are not part of our normal business operations. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.

We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP or as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.

Logo- http://photos.prnewswire.com/prnh/20130604/NY25517LOGO-b

SOURCE W. P. Carey Inc.



RELATED LINKS

http://www.wpcarey.com