PR Newswire
NEW YORK, Feb. 22, 2019
NEW YORK, Feb. 22, 2019 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), a net lease real estate investment trust, today reported its financial results for the fourth quarter and full year ended December 31, 2018.
Total Company
Business Segments
Real Estate
Investment Management
Balance Sheet and Capitalization – Fourth Quarter 2018
MANAGEMENT COMMENTARY
"For the fourth quarter and full year, growth in Real Estate AFFO was driven primarily by the accretive impact of both new acquisitions and the assets we acquired in our recent merger with CPA:17," said Jason Fox, Chief Executive Officer of W. P. Carey. "During 2018, we added flexibility to our balance sheet and reduced leverage, and we believe the improved quality of our earnings is being reflected in our cost of capital. All of this puts us in a strong position to support our 2019 investment activity and continue to grow Real Estate AFFO per share."
QUARTERLY FINANCIAL RESULTS
Revenues
Net Income Attributable to W. P. Carey
Adjusted Funds from Operations (AFFO)
Dividend
FULL YEAR FINANCIAL RESULTS
Revenues
Net Income Attributable to W. P. Carey
AFFO
Dividends
AFFO GUIDANCE
(i) investments for the Company's Real Estate portfolio of between $750 million and $1.25 billion;
(ii) dispositions from the Company's Real Estate portfolio of between $500 million and $700 million; and
(iii) total general and administrative expenses of between $75 million and $80 million.
Note: The Company does not provide guidance on net income. The Company only provides guidance on total AFFO (and Real Estate AFFO) and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets and depreciation and amortization from new acquisitions.
BALANCE SHEET AND CAPITALIZATION
Euro-Denominated Bond Issuance
"At-The-Market" (ATM) Offering Program
CPA:17 MERGER
REAL ESTATE
Investments
Dispositions
Composition
INVESTMENT MANAGEMENT
Acquisitions
Assets Under Management
* * * * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2018 fourth quarter and certain prior quarters, 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 February 22, 2019.
* * * * *
Live Conference Call and Audio Webcast Scheduled for 10:00 a.m. Eastern Time
Please dial in at least 10 minutes prior to the start time.
Date/Time: Friday, February 22, 2019 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-465-1289 (U.S.) or +1-201-689-8762 (international)
Live Audio Webcast and Replay: www.wpcarey.com/earnings
* * * * *
W. P. Carey Inc.
W. P. Carey ranks among the largest net lease REITs with an enterprise value of approximately $17 billion and a diversified portfolio of operationally-critical commercial real estate that includes 1,163 net lease properties covering approximately 131 million square feet. For over four decades, the company has invested in high-quality single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe and is well-diversified by tenant, property type, geographic location and tenant industry.
* * * * *
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, statements made by Mr. Fox with regard to the quality of our earnings, our cost of capital, our 2019 investment activity, and the potential growth of our real estate adjusted funds from operations (including underlying assumptions, such as the timing of acquisitions, our level of general and administrative expense, and dispositions and the impact thereof, and our ability to execute on our strategy to create long-term shareholder value, including by maximizing recurring revenue streams). 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 Part I, Item 1A. Risk Factors in W. P. Carey's Annual Report on Form 10-K for the year ended December 31, 2018. 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. | |||||||
Consolidated Balance Sheets | |||||||
(in thousands, except share and per share amounts) | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
Assets | |||||||
Investments in real estate: | |||||||
Land, buildings and improvements (a) | $ | 9,251,396 | $ | 5,457,265 | |||
Net investments in direct financing leases | 1,306,215 | 721,607 | |||||
In-place lease and other intangible assets | 2,009,628 | 1,213,976 | |||||
Above-market rent intangible assets | 925,797 | 640,480 | |||||
Investments in real estate | 13,493,036 | 8,033,328 | |||||
Accumulated depreciation and amortization (b) | (1,564,182) | (1,329,613) | |||||
Net investments in real estate | 11,928,854 | 6,703,715 | |||||
Equity investments in the Managed Programs and real estate (c) | 329,248 | 341,457 | |||||
Cash and cash equivalents | 217,644 | 162,312 | |||||
Due from affiliates | 74,842 | 105,308 | |||||
Other assets, net | 711,507 | 274,650 | |||||
Goodwill | 920,944 | 643,960 | |||||
Total assets | $ | 14,183,039 | $ | 8,231,402 | |||
Liabilities and Equity | |||||||
Debt: | |||||||
Senior unsecured notes, net | $ | 3,554,470 | $ | 2,474,661 | |||
Unsecured revolving credit facility | 91,563 | 216,775 | |||||
Unsecured term loans, net | — | 388,354 | |||||
Non-recourse mortgages, net | 2,732,658 | 1,185,477 | |||||
Debt, net | 6,378,691 | 4,265,267 | |||||
Accounts payable, accrued expenses and other liabilities | 403,896 | 263,053 | |||||
Below-market rent and other intangible liabilities, net | 225,128 | 113,957 | |||||
Deferred income taxes | 173,115 | 67,009 | |||||
Dividends payable | 172,154 | 109,766 | |||||
Total liabilities | 7,352,984 | 4,819,052 | |||||
Redeemable noncontrolling interest | — | 965 | |||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued | — | — | |||||
Common stock, $0.001 par value, 450,000,000 shares authorized; 165,279,642 and 106,922,616 | 165 | 107 | |||||
Additional paid-in capital | 8,187,335 | 4,433,573 | |||||
Distributions in excess of accumulated earnings | (1,143,992) | (1,052,064) | |||||
Deferred compensation obligation | 35,766 | 46,656 | |||||
Accumulated other comprehensive loss | (254,996) | (236,011) | |||||
Total stockholders' equity | 6,824,278 | 3,192,261 | |||||
Noncontrolling interests | 5,777 | 219,124 | |||||
Total equity | 6,830,055 | 3,411,385 | |||||
Total liabilities and equity | $ | 14,183,039 | $ | 8,231,402 |
________
(a) | Includes $470.7 million and $83.0 million of amounts attributable to operating properties as of December 31, 2018 and 2017, respectively. We sold one hotel operating property in April 2018. We acquired 37 self-storage properties and one hotel operating property in the CPA:17 Merger. |
(b) | Includes $734.8 million and $630.0 million of accumulated depreciation on buildings and improvements as of December 31, 2018 and 2017, respectively, and $829.4 million and $699.7 million of accumulated amortization on lease intangibles as of December 31, 2018 and 2017, respectively. |
(c) | Our equity investments in the Managed Programs totaled $107.6 million and $201.4 million as of December 31, 2018 and 2017, respectively. Our equity investments in real estate joint ventures totaled $221.7 million and $140.0 million as of December 31, 2018 and 2017, respectively. |
W. P. CAREY INC. | |||||||||||
Quarterly Consolidated Statements of Income | |||||||||||
(in thousands, except share and per share amounts) | |||||||||||
Three Months Ended | |||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
Revenues | |||||||||||
Real Estate: | |||||||||||
Lease revenues | $ | 223,487 | $ | 167,088 | $ | 154,826 | |||||
Operating property revenues | 11,707 | 4,282 | 6,910 | ||||||||
Reimbursable tenant costs | 10,145 | 5,979 | 5,584 | ||||||||
Lease termination income and other | 2,952 | 1,981 | 515 | ||||||||
248,291 | 179,330 | 167,835 | |||||||||
Investment Management: | |||||||||||
Asset management revenue | 11,954 | 17,349 | 16,854 | ||||||||
Structuring revenue | 8,108 | 6,553 | 6,217 | ||||||||
Reimbursable costs from affiliates | 5,042 | 6,042 | 6,055 | ||||||||
Other advisory revenue | — | 110 | — | ||||||||
25,104 | 30,054 | 29,126 | |||||||||
273,395 | 209,384 | 196,961 | |||||||||
Operating Expenses | |||||||||||
Depreciation and amortization | 93,321 | 67,825 | 64,015 | ||||||||
Merger and other expenses (a) | 37,098 | 1,673 | (533) | ||||||||
General and administrative | 17,449 | 15,863 | 17,702 | ||||||||
Reimbursable tenant and affiliate costs | 15,187 | 12,021 | 11,639 | ||||||||
Property expenses, excluding reimbursable tenant costs | 8,319 | 4,898 | 3,993 | ||||||||
Operating property expenses | 7,844 | 3,055 | 5,567 | ||||||||
Stock-based compensation expense | 3,902 | 2,475 | 4,268 | ||||||||
Subadvisor fees (b) | 2,226 | 3,127 | 2,002 | ||||||||
Impairment charges | — | — | 2,769 | ||||||||
Restructuring and other compensation (c) | — | — | 289 | ||||||||
185,346 | 110,937 | 111,711 | |||||||||
Other Income and Expenses | |||||||||||
Gain on sale of real estate, net | 99,618 | 343 | 11,146 | ||||||||
Interest expense | (57,250) | (41,740) | (40,401) | ||||||||
Gain on change in control of interests (d) | 47,814 | — | — | ||||||||
Equity in earnings of equity method investments in the Managed Programs and real estate | 15,268 | 18,363 | 16,930 | ||||||||
Other gains and (losses) | 13,215 | 8,875 | 1,356 | ||||||||
118,665 | (14,159) | (10,969) | |||||||||
Income before income taxes | 206,714 | 84,288 | 74,281 | ||||||||
(Provision for) benefit from income taxes | (11,436) | (2,715) | 192 | ||||||||
Net Income | 195,278 | 81,573 | 74,473 | ||||||||
Net (income) loss attributable to noncontrolling interests | (2,015) | (4,225) | 736 | ||||||||
Net Income Attributable to W. P. Carey | $ | 193,263 | $ | 77,348 | $ | 75,209 | |||||
Basic Earnings Per Share | $ | 1.33 | $ | 0.71 | $ | 0.69 | |||||
Diluted Earnings Per Share | $ | 1.33 | $ | 0.71 | $ | 0.69 | |||||
Weighted-Average Shares Outstanding | |||||||||||
Basic | 145,480,858 | 108,073,969 | 108,041,556 | ||||||||
Diluted | 145,716,583 | 108,283,666 | 108,208,918 | ||||||||
Dividends Declared Per Share | $ | 1.030 | $ | 1.025 | $ | 1.010 |
W. P. CAREY INC. | |||||||
Full Year Consolidated Statements of Income | |||||||
(in thousands, except share and per share amounts) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Revenues | |||||||
Real Estate: | |||||||
Lease revenues | $ | 716,422 | $ | 630,373 | |||
Reimbursable tenant costs | 28,076 | 21,524 | |||||
Operating property revenues | 28,072 | 30,562 | |||||
Lease termination income and other | 6,555 | 4,749 | |||||
779,125 | 687,208 | ||||||
Investment Management: | |||||||
Asset management revenue | 63,556 | 70,125 | |||||
Reimbursable costs from affiliates | 21,925 | 51,445 | |||||
Structuring revenue | 20,826 | 34,198 | |||||
Other advisory revenue | 300 | 896 | |||||
Dealer manager fees | — | 4,430 | |||||
106,607 | 161,094 | ||||||
885,732 | 848,302 | ||||||
Operating Expenses | |||||||
Depreciation and amortization | 291,440 | 253,334 | |||||
General and administrative | 68,337 | 70,891 | |||||
Reimbursable tenant and affiliate costs | 50,001 | 72,969 | |||||
Merger and other expenses (a) | 41,426 | 605 | |||||
Property expenses, excluding reimbursable tenant costs | 22,773 | 17,330 | |||||
Operating property expenses | 20,150 | 23,426 | |||||
Stock-based compensation expense | 18,294 | 18,917 | |||||
Subadvisor fees (b) | 9,240 | 13,600 | |||||
Impairment charges | 4,790 | 2,769 | |||||
Restructuring and other compensation (c) | — | 9,363 | |||||
Dealer manager fees and expenses | — | 6,544 | |||||
526,451 | 489,748 | ||||||
Other Income and Expenses | |||||||
Interest expense | (178,375) | (165,775) | |||||
Gain on sale of real estate, net | 118,605 | 33,878 | |||||
Equity in earnings of equity method investments in the Managed Programs and real estate | 61,514 | 64,750 | |||||
Gain on change in control of interests (d) | 47,814 | — | |||||
Other gains and (losses) | 29,913 | (3,613) | |||||
79,471 | (70,760) | ||||||
Income before income taxes | 438,752 | 287,794 | |||||
Provision for income taxes | (14,411) | (2,711) | |||||
Net Income | 424,341 | 285,083 | |||||
Net income attributable to noncontrolling interests | (12,775) | (7,794) | |||||
Net Income Attributable to W. P. Carey | $ | 411,566 | $ | 277,289 | |||
Basic Earnings Per Share | $ | 3.50 | $ | 2.56 | |||
Diluted Earnings Per Share | $ | 3.49 | $ | 2.56 | |||
Weighted-Average Shares Outstanding | |||||||
Basic | 117,494,969 | 107,824,738 | |||||
Diluted | 117,706,445 | 108,035,971 | |||||
Dividends Declared Per Share | $ | 4.090 | $ | 4.010 |
__________
(a) | Amounts for the three months ended December 31, 2018 and September 30, 2018, and the year ended December 31, 2018 are primarily comprised of costs incurred in connection with the CPA:17 Merger. Amount for the year ended December 31, 2017 is primarily comprised of accruals for estimated one-time legal settlement expenses. |
(b) | The subadvisors for CWI 1, CWI 2, CPA:18 – Global, and Carey Credit Income Fund (prior to our resignation as the advisor to that fund in the third quarter of 2017) earn a percentage of gross fees recorded, which we account for as an expense and are recorded as Subadvisor fees in our consolidated statements of income. The amounts paid to the subadvisors are the differences between gross and net fees. Refer to the Managed Programs Fee Summary section in Exhibit 99.2 of the Current Report on Form 8-K filed on February 22, 2019 for further information. |
(c) | Amounts for the three months and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. |
(d) | Amounts for the three months and year ended December 31, 2018 include a gain of $18.8 million recognized on the purchase of the remaining interests in six investments from CPA:17 in the CPA:17 Merger, which we had previously accounted for under the equity method. Amounts for the three months and year ended December 31, 2018 also include a gain of $29.0 million recognized on our previously held interest in shares of CPA:17 common stock in connection with the CPA:17 Merger. |
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 | |||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
Net income attributable to W. P. Carey | $ | 193,263 | $ | 77,348 | $ | 75,209 | |||||
Adjustments: | |||||||||||
Gain on sale of real estate, net | (99,618) | (343) | (11,146) | ||||||||
Depreciation and amortization of real property | 92,018 | 66,493 | 62,603 | ||||||||
Gain on change in control of interests (a) | (47,814) | — | — | ||||||||
Impairment charges | — | — | 2,769 | ||||||||
Proportionate share of adjustments for noncontrolling interests | (762) | (2,693) | (2,696) | ||||||||
Proportionate share of adjustments to equity in net income of partially owned | 3,225 | (651) | 877 | ||||||||
Total adjustments | (52,951) | 62,806 | 52,407 | ||||||||
FFO (as defined by NAREIT) Attributable to W. P. Carey (b) | 140,312 | 140,154 | 127,616 | ||||||||
Adjustments: | |||||||||||
Merger and other expenses (c) | 37,098 | 1,673 | (533) | ||||||||
Above- and below-market rent intangible lease amortization, net (d) | 14,985 | 13,224 | 17,922 | ||||||||
Other amortization and non-cash items (e) | (10,206) | (4,829) | 2,198 | ||||||||
Tax expense (benefit) – deferred and other (f) | 6,288 | 3,918 | (10,497) | ||||||||
Straight-line and other rent adjustments | (6,096) | (3,431) | (2,002) | ||||||||
Stock-based compensation | 3,902 | 2,475 | 4,268 | ||||||||
Amortization of deferred financing costs | 2,572 | 1,901 | 2,043 | ||||||||
Loss (gain) on extinguishment of debt | 1,744 | (43) | (81) | ||||||||
Realized (gains) losses on foreign currency | (71) | 191 | (472) | ||||||||
Restructuring and other compensation (g) | — | — | 289 | ||||||||
Proportionate share of adjustments to equity in net income of partially owned | 3,192 | 3,860 | 2,884 | ||||||||
Proportionate share of adjustments for noncontrolling interests | 140 | 664 | (1,573) | ||||||||
Total adjustments | 53,548 | 19,603 | 14,446 | ||||||||
AFFO Attributable to W. P. Carey (b) | $ | 193,860 | $ | 159,757 | $ | 142,062 | |||||
Summary | |||||||||||
FFO (as defined by NAREIT) attributable to W. P. Carey (b) | $ | 140,312 | $ | 140,154 | $ | 127,616 | |||||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (b) | $ | 0.96 | $ | 1.29 | $ | 1.18 | |||||
AFFO attributable to W. P. Carey (b) | $ | 193,860 | $ | 159,757 | $ | 142,062 | |||||
AFFO attributable to W. P. Carey per diluted share (b) | $ | 1.33 | $ | 1.48 | $ | 1.31 | |||||
Diluted weighted-average shares outstanding | 145,716,583 | 108,283,666 | 108,208,918 |
W. P. CAREY INC. | |||||||||||
Quarterly Reconciliation of Net Income from Real Estate to Adjusted Funds from Operations (AFFO) from Real Estate (Unaudited) | |||||||||||
(in thousands, except share and per share amounts) | |||||||||||
Three Months Ended | |||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
Net income from Real Estate attributable to W. P. Carey | $ | 151,611 | $ | 51,009 | $ | 54,149 | |||||
Adjustments: | |||||||||||
Gain on sale of real estate, net | (99,618) | (343) | (11,146) | ||||||||
Depreciation and amortization of real property | 92,018 | 66,493 | 62,603 | ||||||||
Gain on change in control of interests (a) | (18,792) | — | — | ||||||||
Impairment charges | — | — | 2,769 | ||||||||
Proportionate share of adjustments for noncontrolling interests | (762) | (2,693) | (2,696) | ||||||||
Proportionate share of adjustments to equity in net income of partially owned | 3,225 | (651) | 877 | ||||||||
Total adjustments | (23,929) | 62,806 | 52,407 | ||||||||
FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (b) | 127,682 | 113,815 | 106,556 | ||||||||
Adjustments: | |||||||||||
Merger and other expenses (c) | 37,098 | 1,673 | (533) | ||||||||
Above- and below-market rent intangible lease amortization, net (d) | 14,985 | 13,224 | 17,922 | ||||||||
Other amortization and non-cash items (e) | (12,692) | (5,174) | 2,260 | ||||||||
Straight-line and other rent adjustments | (6,096) | (3,431) | (2,002) | ||||||||
Tax benefit – deferred and other | (3,949) | (3,556) | (15,047) | ||||||||
Stock-based compensation | 2,774 | 1,380 | 2,227 | ||||||||
Amortization of deferred financing costs | 2,572 | 1,901 | 2,043 | ||||||||
Loss (gain) on extinguishment of debt | 1,744 | (43) | (81) | ||||||||
Realized (gains) losses on foreign currency | (61) | 197 | (477) | ||||||||
Proportionate share of adjustments to equity in net income of partially owned | (260) | 519 | 41 | ||||||||
Proportionate share of adjustments for noncontrolling interests | 140 | 664 | (1,573) | ||||||||
Total adjustments | 36,255 | 7,354 | 4,780 | ||||||||
AFFO Attributable to W. P. Carey – Real Estate (b) | $ | 163,937 | $ | 121,169 | $ | 111,336 | |||||
Summary | |||||||||||
FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (b) | $ | 127,682 | $ | 113,815 | $ | 106,556 | |||||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share – | $ | 0.87 | $ | 1.05 | $ | 0.99 | |||||
AFFO attributable to W. P. Carey – Real Estate (b) | $ | 163,937 | $ | 121,169 | $ | 111,336 | |||||
AFFO attributable to W. P. Carey per diluted share – Real Estate (b) | $ | 1.12 | $ | 1.12 | $ | 1.03 | |||||
Diluted weighted-average shares outstanding | 145,716,583 | 108,283,666 | 108,208,918 |
W. P. CAREY INC. | |||||||
Full Year Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited) | |||||||
(in thousands, except share and per share amounts) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Net income attributable to W. P. Carey | $ | 411,566 | $ | 277,289 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 286,164 | 248,042 | |||||
Gain on sale of real estate, net | (118,605) | (33,878) | |||||
Gain on change in control of interests (a) | (47,814) | — | |||||
Impairment charges | 4,790 | 2,769 | |||||
Proportionate share of adjustments for noncontrolling interests | (8,966) | (10,491) | |||||
Proportionate share of adjustments to equity in net income of partially owned entities | 4,728 | 5,293 | |||||
Total adjustments | 120,297 | 211,735 | |||||
FFO (as defined by NAREIT) Attributable to W. P. Carey (b) | 531,863 | 489,024 | |||||
Adjustments: | |||||||
Above- and below-market rent intangible lease amortization, net (d) | 52,314 | 55,195 | |||||
Merger and other expenses (c) | 41,426 | 605 | |||||
Stock-based compensation | 18,294 | 18,917 | |||||
Other amortization and non-cash items (e) | (17,326) | 17,193 | |||||
Straight-line and other rent adjustments | (14,460) | (11,679) | |||||
Amortization of deferred financing costs | 6,184 | 8,169 | |||||
Loss (gain) on extinguishment of debt | 3,310 | (46) | |||||
Tax expense (benefit) – deferred and other (f) | 1,079 | (18,664) | |||||
Realized gains on foreign currency | (768) | (896) | |||||
Restructuring and other compensation (g) | — | 9,363 | |||||
Proportionate share of adjustments to equity in net income of partially owned entities | 12,439 | 8,476 | |||||
Proportionate share of adjustments for noncontrolling interests | 231 | (2,678) | |||||
Total adjustments | 102,723 | 83,955 | |||||
AFFO Attributable to W. P. Carey (b) | $ | 634,586 | $ | 572,979 | |||
Summary | |||||||
FFO (as defined by NAREIT) attributable to W. P. Carey (b) | $ | 531,863 | $ | 489,024 | |||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (b) | $ | 4.52 | $ | 4.53 | |||
AFFO attributable to W. P. Carey (b) | $ | 634,586 | $ | 572,979 | |||
AFFO attributable to W. P. Carey per diluted share (b) | $ | 5.39 | $ | 5.30 | |||
Diluted weighted-average shares outstanding | 117,706,445 | 108,035,971 |
W. P. CAREY INC. | |||||||
Full Year Reconciliation of Net Income from Real Estate to Adjusted Funds from Operations (AFFO) from Real Estate (Unaudited) | |||||||
(in thousands, except share and per share amounts) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Net income from Real Estate attributable to W. P. Carey | $ | 307,236 | $ | 192,139 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 286,164 | 248,042 | |||||
Gain on sale of real estate, net | (118,605) | (33,878) | |||||
Gain on change in control of interests (a) | (18,792) | — | |||||
Impairment charges | 4,790 | 2,769 | |||||
Proportionate share of adjustments for noncontrolling interests | (8,966) | (10,491) | |||||
Proportionate share of adjustments to equity in net income of partially owned entities | 4,728 | 5,293 | |||||
Total adjustments | 149,319 | 211,735 | |||||
FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (b) | 456,555 | 403,874 | |||||
Adjustments: | |||||||
Above- and below-market rent intangible lease amortization, net (d) | 52,314 | 55,195 | |||||
Merger and other expenses (c) | 41,426 | 605 | |||||
Other amortization and non-cash items (e) | (20,216) | 18,115 | |||||
Tax benefit – deferred and other | (18,790) | (20,168) | |||||
Straight-line and other rent adjustments | (14,460) | (11,679) | |||||
Stock-based compensation | 10,450 | 6,960 | |||||
Amortization of deferred financing costs | 6,184 | 8,169 | |||||
Loss (gain) on extinguishment of debt | 3,310 | (46) | |||||
Realized gains on foreign currency | (789) | (918) | |||||
Proportionate share of adjustments to equity in net income of partially owned entities | 287 | (564) | |||||
Proportionate share of adjustments for noncontrolling interests | 231 | (2,678) | |||||
Total adjustments | 59,947 | 52,991 | |||||
AFFO Attributable to W. P. Carey – Real Estate (b) | $ | 516,502 | $ | 456,865 | |||
Summary | |||||||
FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (b) | $ | 456,555 | $ | 403,874 | |||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share – Real Estate (b) | $ | 3.88 | $ | 3.74 | |||
AFFO attributable to W. P. Carey – Real Estate (b) | $ | 516,502 | $ | 456,865 | |||
AFFO attributable to W. P. Carey per diluted share – Real Estate (b) | $ | 4.39 | $ | 4.23 | |||
Diluted weighted-average shares outstanding | 117,706,445 | 108,035,971 |
__________
(a) | AFFO and Real Estate AFFO amounts for the three months and year ended December 31, 2018 include a gain recognized on the purchase of the remaining interests in six investments from CPA:17 in the CPA:17 Merger, which we had previously accounted for under the equity method. AFFO amounts for the three months and year ended December 31, 2018 include a gain recognized on our previously held interest in shares of CPA:17 common stock in connection with the CPA:17 Merger. |
(b) | FFO and AFFO are non-GAAP measures. See below for a description of FFO and AFFO. |
(c) | Amounts for the three months ended December 31, 2018 and September 30, 2018, and the year ended December 31, 2018 are primarily comprised of costs incurred in connection with the CPA:17 Merger. Amount for the year ended December 31, 2017 is primarily comprised of accruals for estimated one-time legal settlement expenses. |
(d) | Amounts for the three months and year ended December 31, 2017 include an adjustment of $5.7 million related to accelerated amortization of an above-market rent intangible in connection with a lease restructuring. |
(e) | Primarily represents unrealized gains and losses from foreign currency exchange movements and derivatives. |
(f) | Amounts for the three months and year ended December 31, 2018 include one-time taxes incurred upon the recognition of taxable income associated with the accelerated vesting of shares previously issued by CPA:17 – Global to us for asset management services performed, in connection with the CPA:17 Merger. |
(g) | Amounts for the three months and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. |
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. ("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 restated in December 2018. 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, gains or losses on changes in control of interests in 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-based compensation, non-cash environmental accretion expense and amortization of deferred financing costs. 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 certain lease termination income, gains or losses from extinguishment of debt, restructuring and related compensation expenses and merger and acquisition expenses. We also exclude realized and unrealized gains/losses on foreign currency 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 to arrive at AFFO 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. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. 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 income computed under GAAP or as alternatives to net cash provided by operating activities computed under GAAP or as indicators of our ability to fund our cash needs.
Institutional Investors:
Peter Sands
W. P. Carey Inc.
212-492-1110
[email protected]
Individual Investors:
W. P. Carey Inc.
212-492-8920
[email protected]
Press Contact:
Guy Lawrence
Ross & Lawrence
212-308-3333
[email protected]
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SOURCE W. P. Carey Inc.
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