Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - W. P. Carey Inc. | wpc2019q48-ksupplementalex.htm |
| 8-K - 8-K - W. P. Carey Inc. | wpc2019q48-ksupplement.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 Fourth Quarter and Full Year 2019 Financial Results
New York, NY – February 21, 2020 – 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, 2019.
Total Company
• | Net income attributable to W. P. Carey of $129.4 million, or $0.75 per diluted share, for the fourth quarter and $305.2 million, or $1.78 per diluted share, for 2019 |
• | AFFO of $222.0 million, or $1.28 per diluted share, for the fourth quarter and $856.5 million, or $5.00 per diluted share, for 2019 |
• | Quarterly cash dividend raised to $1.038 per share, equivalent to an annualized dividend rate of $4.152 per share |
• | 2020 full year AFFO guidance range of $4.86 to $5.01 per diluted share announced, including Real Estate AFFO of between $4.74 and $4.89 per diluted share |
Business Segments
Real Estate
• | Segment net income attributable to W. P. Carey of $124.3 million for the fourth quarter and $272.1 million for 2019 |
• | Segment AFFO of $210.2 million, or $1.21 per diluted share, for the fourth quarter and $811.2 million, or $4.74 per diluted share, for 2019 |
• | Investment volume of $411.7 million during the fourth quarter, bringing total investment volume for 2019 to $868.1 million |
• | Active capital investment projects of $371.2 million outstanding at year end, including $242.6 million expected to be completed in 2020 |
• | Gross disposition proceeds of $347.8 million during the fourth quarter, bringing total dispositions for 2019 to $383.9 million |
• | Portfolio occupancy of 98.8% |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 1
• | Weighted-average lease term increased to 10.7 years |
Investment Management
• | Segment net income attributable to W. P. Carey of $5.0 million for the fourth quarter and $33.2 million for 2019 |
• | Segment AFFO of $11.8 million, or $0.07 per diluted share, for the fourth quarter and $45.3 million, or $0.26 per diluted share, for 2019 |
• | CWI 1 and CWI 2 proposed merger further progressed and is expected to close toward the end of the 2020 first quarter |
Balance Sheet and Capitalization
• | Reduced secured debt outstanding by $1.29 billion during 2019, including $324.3 million during the fourth quarter, lowering the Company’s consolidated secured debt to gross assets ratio to 9.7% |
• | Amended and restated existing unsecured credit facility in February 2020, increasing capacity to $2.1 billion |
MANAGEMENT COMMENTARY
“During 2019, we continued to execute on our strategy, growing and enhancing the quality of our earnings, our real estate portfolio and our balance sheet,” said Jason Fox, Chief Executive Officer of W. P. Carey. “Real Estate AFFO per diluted share increased 8% even as we reduced leverage, driven by the full-year impact of our merger with CPA:17 and our 2019 net investment activity. Within our portfolio, we increased the proportion of rent from industrial and warehouse properties as well as from investment grade tenants, lowered our top 10 tenant concentration and extended our weighted-average lease term. We have ample liquidity, low leverage and established access to various forms of capital, all of which support our ability to execute on our investment pipeline. And we’re off to a good start in 2020, reflecting a continuation of the momentum we saw in the fourth quarter, and have a healthy number of capital projects scheduled for completion this year.”
QUARTERLY FINANCIAL RESULTS
Revenues
• | Total Company: Revenues, including reimbursable costs, for the 2019 fourth quarter totaled $311.2 million, up 13.8% from $273.4 million for the 2018 fourth quarter. |
• | Real Estate: Real Estate revenues, including reimbursable costs, for the 2019 fourth quarter were $296.4 million, up 19.4% from $248.3 million for the 2018 fourth quarter, due primarily to additional lease revenues from properties acquired in the Company’s merger with CPA:17 on October 31, 2018 (the CPA:17 Merger) and net acquisitions. |
Note: While it has no impact on net income or AFFO, in accordance with Accounting Standards Update 2016-02, Leases (Topic 842), which the Company has adopted effective as of January 1, 2019, operating expenses reimbursed by tenants are included within lease revenues on the consolidated statements of income (for both current and prior year periods). Prior to that date the Company presented revenues excluding reimbursable costs.
• | Investment Management: Investment Management revenues, including reimbursable costs, for the 2019 fourth quarter were $14.9 million, down 40.6% from $25.1 million for the 2018 fourth quarter, due primarily to lower structuring and other advisory revenues, as well as the cessation of asset management revenue previously earned from CPA:17. |
Net Income Attributable to W. P. Carey
• | Net income attributable to W. P. Carey for the 2019 fourth quarter was $129.4 million, down 33.1% from $193.3 million for the 2018 fourth quarter. Net income from Investment Management attributable to W. P. Carey decreased, due primarily to a gain on change in control of interests recognized during the prior year period in connection with the CPA:17 Merger, as well as the cessation of revenues and distributions previously earned from CPA:17. Net income from Real Estate attributable to W. P. Carey also decreased, due primarily to a lower aggregate gain on sale |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 2
of real estate and a gain on change in control of interests recognized during the prior year period in connection with the CPA:17 Merger, partly offset by merger expenses related to the CPA:17 Merger recognized during the prior year period, a mark-to-market gain of $36.1 million for the Company’s investment in shares of a cold storage operator and the impact of properties acquired in the CPA:17 Merger and net acquisitions. The increase in revenues from properties acquired in the CPA:17 Merger and acquisitions was partly offset by corresponding increases in depreciation and amortization, interest expense and property expenses.
Adjusted Funds from Operations (AFFO)
• | AFFO for the 2019 fourth quarter was $1.28 per diluted share, down 3.8% from $1.33 per diluted share for the 2018 fourth quarter. AFFO from the Company’s Real Estate segment (Real Estate AFFO) increased, due primarily to the accretive impact of properties acquired in the CPA:17 Merger and net acquisitions, partly offset by the dilutive impact of shares issued through the Company’s ATM program. AFFO from the Company’s Investment Management segment declined, due primarily to the cessation of revenues and distributions previously earned from CPA:17, as well as lower structuring and other advisory revenues. |
Note: Further information concerning AFFO and Real Estate AFFO, which are both non-GAAP supplemental performance metrics, is presented in the accompanying tables and related notes.
Dividend
• | As previously announced, on December 18, 2019 the Company’s Board of Directors declared a quarterly cash dividend of $1.038 per share, equivalent to an annualized dividend rate of $4.152 per share. The dividend was paid on January 15, 2020 to stockholders of record as of December 31, 2019. |
FULL YEAR FINANCIAL RESULTS
Revenues
• | Total Company: Revenues, including reimbursable costs, for the 2019 full year totaled $1.23 billion, up 39.2% from $885.7 million for the 2018 full year. |
• | Real Estate: Real Estate revenues, including reimbursable costs, for the 2019 full year totaled $1.17 billion, up 50.5% from $779.1 million for the 2018 full year, due primarily to additional lease revenues from properties acquired in the CPA:17 Merger and net acquisitions, as well as higher lease termination and other income. |
• | Investment Management: Investment Management revenues, including reimbursable costs, for the 2019 full year totaled $59.9 million, down 43.8% from $106.6 million for the 2018 full year, due primarily to the cessation of asset management revenue previously earned from CPA:17, as well as lower structuring and other advisory revenues. |
Net Income Attributable to W. P. Carey
• | Net income attributable to W. P. Carey for the 2019 full year totaled $305.2 million, down 25.9% from $411.6 million for the 2018 full year. Net income from Investment Management attributable to W. P. Carey decreased, due primarily to the cessation of revenues and distributions previously earned from CPA:17, as well as a gain on change in control of interests recognized during the prior year in connection with the CPA:17 Merger. Net income from Real Estate attributable to W. P. Carey also decreased, due primarily to a lower aggregate gain on sale of real estate, higher impairment charges and a loss on change in control of interests recognized during the current year in connection with the CPA:17 Merger (as compared to a gain on change in control of interests recognized during the prior year), partly offset by the impact of properties acquired in the CPA:17 Merger and net acquisitions, merger expenses related to the CPA:17 Merger recognized during the prior year and a mark-to-market gain of $32.9 million for the Company’s investment in shares of a cold storage operator. The increase in revenues from properties acquired in the CPA:17 Merger and acquisitions was partly offset by corresponding increases in depreciation and amortization, interest expense and property expenses. |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 3
AFFO
• | AFFO for the 2019 full year was $5.00 per diluted share, down 7.2% compared to $5.39 per diluted share for the 2018 full year. Real Estate AFFO increased, due primarily to the accretive impact of properties acquired in the CPA:17 Merger and net acquisitions, partly offset by the dilutive impact of shares issued through the Company’s ATM program. Investment Management AFFO declined, due primarily to the cessation of revenues and distributions previously earned from CPA:17, as well as lower structuring and other advisory revenues. |
Note: Further information concerning AFFO and Real Estate AFFO, which are both non-GAAP supplemental performance metrics, is presented in the accompanying tables and related notes.
Dividend
• | Dividends declared during 2019 totaled $4.14 per share, an increase of 1.2% compared to total dividends declared during 2018 of $4.09 per share. |
AFFO GUIDANCE
• | For the 2020 full year, the Company expects to report total AFFO of between $4.86 and $5.01 per diluted share, including Real Estate AFFO of between $4.74 and $4.89 per diluted share, based on the following key assumptions: |
(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 $300 million and $500 million; and |
(iii) | total general and administrative expenses of between $80 million and $84 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
Mortgage / Secured Debt Repayment
• | During 2019, the Company reduced secured debt outstanding by $1.29 billion, with a weighted-average interest rate of approximately 4.8%, including $324.3 million during the 2019 fourth quarter, with a weighted-average interest rate of approximately 4.5%, primarily through mortgage prepayments and repayments at maturity, lowering its consolidated secured debt to gross assets ratio to 9.7%. |
Senior Unsecured Credit Facility – Subsequent to Year End
• | As previously announced, on February 20, 2020, the Company amended and restated its senior unsecured credit facility, increasing the capacity under the facility to $2.1 billion. The facility comprises a $1.8 billion multi-currency revolving line of credit, a £150 million term loan and a $105 million delayed draw term loan, in each case maturing in five years. The delayed draw term loan may be drawn within one year and allows for borrowing in U.S. dollars, euros and British pounds sterling. |
REAL ESTATE
Investments
• | During the 2019 fourth quarter, the Company completed investments totaling $411.7 million, consisting of 11 acquisitions for $367.8 million in aggregate and three completed capital investment projects at a total cost of $43.9 million, bringing total investment volume for the year ended December 31, 2019 to $868.1 million. |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 4
• | As of December 31, 2019, the Company had 12 capital investment projects outstanding for an expected total investment of approximately $371.2 million, of which nine projects totaling $242.6 million are currently expected to be completed during 2020, including the three projects completed year-to-date 2020 discussed below. |
• | Year-to-date 2020, the Company has completed five investments totaling $206.1 million, consisting of two acquisitions for $139.3 million in aggregate and three completed capital investment projects at a total cost of $66.8 million. |
Dispositions
• | During the 2019 fourth quarter, the Company disposed of 12 properties for gross proceeds of $347.8 million, bringing total disposition proceeds for the year ended December 31, 2019 to $383.9 million. |
• | Year-to-date 2020, the Company has completed four dispositions totaling $116.3 million, including one of its two hotel operating properties for gross proceeds of $114.5 million. |
Composition
• | As of December 31, 2019, the Company’s net lease portfolio consisted of 1,214 properties, comprising 140.0 million square feet leased to 345 tenants, with a weighted-average lease term of 10.7 years and an occupancy rate of 98.8%. In addition, the Company owned 19 self-storage and two hotel operating properties, totaling approximately 1.6 million square feet. |
INVESTMENT MANAGEMENT
• | W. P. Carey is the advisor to CPA:18 – Global (CPA:18), Carey Watermark Investors Incorporated (CWI 1), Carey Watermark Investors 2 Incorporated (CWI 2) and Carey European Student Housing Fund I, L.P. (CESH) (collectively, the Managed Programs). As of December 31, 2019, the Managed Programs had total assets under management of approximately $7.5 billion. |
Proposed Merger of CWI 1 and CWI 2
• | On January 13, 2020, the joint proxy statement / prospectus on Form S-4 previously filed with the Securities and Exchange Commission by CWI 1 and CWI 2 was declared effective. Each of CWI 1 and CWI 2 has scheduled a special meeting of stockholders for March 26, 2020, and, if approved, the merger is expected to close shortly thereafter. |
* * * * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2019 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 21, 2020.
* * * * *
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 5
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 21, 2020 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 $20 billion and a diversified portfolio of operationally-critical commercial real estate that includes 1,214 net lease properties covering approximately 140 million square feet. For over four decades, the company has invested in high-quality single-tenant industrial, warehouse, office, retail and self-storage properties subject to long-term net 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.
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, statements made by Mr. Fox with regard to our investment pipeline. 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, 2019. 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. 12/31/2019 Earnings Release 8-K – 6
W. P. CAREY INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, | |||||||
2019 | 2018 | ||||||
Assets | |||||||
Investments in real estate: | |||||||
Land, buildings and improvements (a) | $ | 9,856,191 | $ | 9,251,396 | |||
Net investments in direct financing leases | 896,549 | 1,306,215 | |||||
In-place lease intangible assets and other | 2,186,851 | 2,009,628 | |||||
Above-market rent intangible assets | 909,139 | 925,797 | |||||
Investments in real estate | 13,848,730 | 13,493,036 | |||||
Accumulated depreciation and amortization (b) | (2,035,995 | ) | (1,564,182 | ) | |||
Assets held for sale, net (c) | 104,010 | — | |||||
Net investments in real estate | 11,916,745 | 11,928,854 | |||||
Equity investments in the Managed Programs and real estate (d) | 324,004 | 329,248 | |||||
Cash and cash equivalents | 196,028 | 217,644 | |||||
Due from affiliates | 57,816 | 74,842 | |||||
Other assets, net | 631,637 | 711,507 | |||||
Goodwill | 934,688 | 920,944 | |||||
Total assets | $ | 14,060,918 | $ | 14,183,039 | |||
Liabilities and Equity | |||||||
Debt: | |||||||
Senior unsecured notes, net | $ | 4,390,189 | $ | 3,554,470 | |||
Unsecured revolving credit facility | 201,267 | 91,563 | |||||
Non-recourse mortgages, net | 1,462,487 | 2,732,658 | |||||
Debt, net | 6,053,943 | 6,378,691 | |||||
Accounts payable, accrued expenses and other liabilities | 487,405 | 403,896 | |||||
Below-market rent and other intangible liabilities, net | 210,742 | 225,128 | |||||
Deferred income taxes | 179,309 | 173,115 | |||||
Dividends payable | 181,346 | 172,154 | |||||
Total liabilities | 7,112,745 | 7,352,984 | |||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued | — | — | |||||
Common stock, $0.001 par value, 450,000,000 shares authorized; 172,278,242 and 165,279,642 shares, respectively, issued and outstanding | 172 | 165 | |||||
Additional paid-in capital | 8,717,535 | 8,187,335 | |||||
Distributions in excess of accumulated earnings | (1,557,374 | ) | (1,143,992 | ) | |||
Deferred compensation obligation | 37,263 | 35,766 | |||||
Accumulated other comprehensive loss | (255,667 | ) | (254,996 | ) | |||
Total stockholders’ equity | 6,941,929 | 6,824,278 | |||||
Noncontrolling interests | 6,244 | 5,777 | |||||
Total equity | 6,948,173 | 6,830,055 | |||||
Total liabilities and equity | $ | 14,060,918 | $ | 14,183,039 | |||
________
(a) | Includes $83.1 million and $470.7 million of amounts attributable to operating properties as of December 31, 2019 and 2018, respectively. |
(b) | Includes $961.7 million and $734.8 million of accumulated depreciation on buildings and improvements as of December 31, 2019 and 2018, respectively, and $1,074.3 million and $829.4 million of accumulated amortization on lease intangibles as of December 31, 2019 and 2018, respectively. |
(c) | At December 31, 2019, we had one hotel operating property classified as Assets held for sale, net, which was sold in January 2020. |
(d) | Our equity investments in real estate joint ventures totaled $194.4 million and $221.7 million as of December 31, 2019 and 2018, respectively. Our equity investments in the Managed Programs totaled $129.6 million and $107.6 million as of December 31, 2019 and 2018, respectively. |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 7
W. P. CAREY INC.
Quarterly Consolidated Statements of Income
(in thousands, except share and per share amounts)
Three Months Ended | |||||||||||
December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||||
Revenues | |||||||||||
Real Estate: | |||||||||||
Lease revenues | $ | 274,795 | $ | 278,839 | $ | 233,632 | |||||
Lease termination income and other | 12,317 | 14,377 | 2,952 | ||||||||
Operating property revenues | 9,250 | 9,538 | 11,707 | ||||||||
296,362 | 302,754 | 248,291 | |||||||||
Investment Management: | |||||||||||
Asset management revenue | 9,732 | 9,878 | 11,954 | ||||||||
Reimbursable costs from affiliates | 4,072 | 4,786 | 5,042 | ||||||||
Structuring and other advisory revenue | 1,061 | 587 | 8,108 | ||||||||
14,865 | 15,251 | 25,104 | |||||||||
311,227 | 318,005 | 273,395 | |||||||||
Operating Expenses | |||||||||||
Depreciation and amortization | 111,607 | 109,517 | 93,321 | ||||||||
General and administrative | 17,069 | 17,210 | 17,449 | ||||||||
Reimbursable tenant costs | 12,877 | 15,611 | 10,145 | ||||||||
Property expenses, excluding reimbursable tenant costs | 9,341 | 10,377 | 8,319 | ||||||||
Operating property expenses | 8,000 | 8,547 | 7,844 | ||||||||
Impairment charges | 6,758 | 25,781 | — | ||||||||
Stock-based compensation expense | 4,939 | 4,747 | 3,902 | ||||||||
Reimbursable costs from affiliates | 4,072 | 4,786 | 5,042 | ||||||||
Subadvisor fees (a) | 1,964 | 1,763 | 2,226 | ||||||||
Merger and other expenses (b) | (811 | ) | 70 | 37,098 | |||||||
175,816 | 198,409 | 185,346 | |||||||||
Other Income and Expenses | |||||||||||
Interest expense | (53,667 | ) | (58,626 | ) | (57,250 | ) | |||||
Other gains and (losses) (c) | 43,593 | (12,402 | ) | 13,215 | |||||||
Gain on sale of real estate, net | 17,501 | 71 | 99,618 | ||||||||
Equity in earnings of equity method investments in the Managed Programs and real estate | 8,018 | 5,769 | 15,268 | ||||||||
(Loss) gain on change in control of interests (d) (e) | — | (8,416 | ) | 47,814 | |||||||
15,445 | (73,604 | ) | 118,665 | ||||||||
Income before income taxes | 150,856 | 45,992 | 206,714 | ||||||||
Provision for income taxes | (21,064 | ) | (4,157 | ) | (11,436 | ) | |||||
Net Income | 129,792 | 41,835 | 195,278 | ||||||||
Net income attributable to noncontrolling interests | (420 | ) | (496 | ) | (2,015 | ) | |||||
Net Income Attributable to W. P. Carey | $ | 129,372 | $ | 41,339 | $ | 193,263 | |||||
Basic Earnings Per Share | $ | 0.75 | $ | 0.24 | $ | 1.33 | |||||
Diluted Earnings Per Share | $ | 0.75 | $ | 0.24 | $ | 1.33 | |||||
Weighted-Average Shares Outstanding | |||||||||||
Basic | 173,153,811 | 172,235,066 | 145,480,858 | ||||||||
Diluted | 173,442,101 | 172,486,506 | 145,716,583 | ||||||||
Dividends Declared Per Share | $ | 1.038 | $ | 1.036 | $ | 1.030 | |||||
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 8
W. P. CAREY INC.
Full Year Consolidated Statements of Income
(in thousands, except share and per share amounts)
Years Ended December 31, | |||||||
2019 | 2018 | ||||||
Revenues | |||||||
Real Estate: | |||||||
Lease revenues | $ | 1,086,375 | $ | 744,498 | |||
Operating property revenues | 50,220 | 28,072 | |||||
Lease termination income and other | 36,268 | 6,555 | |||||
1,172,863 | 779,125 | ||||||
Investment Management: | |||||||
Asset management revenue | 39,132 | 63,556 | |||||
Reimbursable costs from affiliates | 16,547 | 21,925 | |||||
Structuring and other advisory revenue | 4,224 | 21,126 | |||||
59,903 | 106,607 | ||||||
1,232,766 | 885,732 | ||||||
Operating Expenses | |||||||
Depreciation and amortization | 447,135 | 291,440 | |||||
General and administrative | 75,293 | 68,337 | |||||
Reimbursable tenant costs | 55,576 | 28,076 | |||||
Property expenses, excluding reimbursable tenant costs | 39,545 | 22,773 | |||||
Operating property expenses | 38,015 | 20,150 | |||||
Impairment charges | 32,539 | 4,790 | |||||
Stock-based compensation expense | 18,787 | 18,294 | |||||
Reimbursable costs from affiliates | 16,547 | 21,925 | |||||
Subadvisor fees (a) | 7,579 | 9,240 | |||||
Merger and other expenses (b) | 101 | 41,426 | |||||
731,117 | 526,451 | ||||||
Other Income and Expenses | |||||||
Interest expense | (233,325 | ) | (178,375 | ) | |||
Other gains and (losses) | 31,475 | 29,913 | |||||
Equity in earnings of equity method investments in the Managed Programs and real estate | 23,229 | 61,514 | |||||
Gain on sale of real estate, net | 18,143 | 118,605 | |||||
(Loss) gain on change in control of interests (d) (e) | (8,416 | ) | 47,814 | ||||
(168,894 | ) | 79,471 | |||||
Income before income taxes | 332,755 | 438,752 | |||||
Provision for income taxes | (26,211 | ) | (14,411 | ) | |||
Net Income | 306,544 | 424,341 | |||||
Net income attributable to noncontrolling interests | (1,301 | ) | (12,775 | ) | |||
Net Income Attributable to W. P. Carey | $ | 305,243 | $ | 411,566 | |||
Basic Earnings Per Share | $ | 1.78 | $ | 3.50 | |||
Diluted Earnings Per Share | $ | 1.78 | $ | 3.49 | |||
Weighted-Average Shares Outstanding | |||||||
Basic | 171,001,430 | 117,494,969 | |||||
Diluted | 171,299,414 | 117,706,445 | |||||
Dividends Declared Per Share | $ | 4.140 | $ | 4.090 | |||
__________
(a) | Primarily comprised of fees paid to subadvisors for CWI 1 and CWI 2. Refer to the Managed Programs Fee Summary section in Exhibit 99.2 of the Current Report on Form 8-K filed on February 21, 2020 for further information. |
(b) | Amounts for the three months and year ended December 31, 2018 are primarily comprised of costs incurred in connection with the CPA:17 Merger. |
(c) | Amount for the three months ended December 31, 2019 is primarily comprised of mark-to-market adjustment for our investment in shares of a cold storage operator of $36.1 million, realized gains on foreign currency exchange derivatives of $4.2 million and net gains on foreign currency transactions of $3.6 million. |
(d) | Amounts for the three months ended September 30, 2019 and year ended December 31, 2019 represent a loss recognized on the purchase of the remaining interest in an investment from CPA:17 in the CPA:17 Merger, which we had previously accounted for under the equity method. We recognized this loss because we identified certain measurement period adjustments during the third quarter of 2019 that impacted the provisional accounting for this investment. |
(e) | 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. 12/31/2019 Earnings Release 8-K – 9
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, 2019 | September 30, 2019 | December 31, 2018 | |||||||||
Net income attributable to W. P. Carey | $ | 129,372 | $ | 41,339 | $ | 193,263 | |||||
Adjustments: | |||||||||||
Depreciation and amortization of real property | 110,354 | 108,279 | 92,018 | ||||||||
Gain on sale of real estate, net | (17,501 | ) | (71 | ) | (99,618 | ) | |||||
Impairment charges | 6,758 | 25,781 | — | ||||||||
Loss (gain) on change in control of interests (a) (b) | — | 8,416 | (47,814 | ) | |||||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 2,703 | 4,210 | 3,225 | ||||||||
Proportionate share of adjustments for noncontrolling interests (d) | (4 | ) | (4 | ) | (762 | ) | |||||
Total adjustments | 102,310 | 146,611 | (52,951 | ) | |||||||
FFO (as defined by NAREIT) Attributable to W. P. Carey (e) | 231,682 | 187,950 | 140,312 | ||||||||
Adjustments: | |||||||||||
Other (gains) and losses (f) | (38,196 | ) | 18,618 | (9,001 | ) | ||||||
Above- and below-market rent intangible lease amortization, net | 17,037 | 14,969 | 14,985 | ||||||||
Tax expense (benefit) – deferred and other (g) (h) | 12,874 | (1,039 | ) | 6,288 | |||||||
Straight-line and other rent adjustments (i) | (11,184 | ) | (6,370 | ) | (6,096 | ) | |||||
Stock-based compensation | 4,939 | 4,747 | 3,902 | ||||||||
Amortization of deferred financing costs | 3,225 | 2,991 | 2,572 | ||||||||
Merger and other expenses (j) | (811 | ) | 70 | 37,098 | |||||||
Other amortization and non-cash items | 546 | 379 | 468 | ||||||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 1,908 | 1,920 | 3,192 | ||||||||
Proportionate share of adjustments for noncontrolling interests (d) | (5 | ) | (12 | ) | 140 | ||||||
Total adjustments | (9,667 | ) | 36,273 | 53,548 | |||||||
AFFO Attributable to W. P. Carey (e) | $ | 222,015 | $ | 224,223 | $ | 193,860 | |||||
Summary | |||||||||||
FFO (as defined by NAREIT) attributable to W. P. Carey (e) | $ | 231,682 | $ | 187,950 | $ | 140,312 | |||||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (e) | $ | 1.34 | $ | 1.09 | $ | 0.96 | |||||
AFFO attributable to W. P. Carey (e) | $ | 222,015 | $ | 224,223 | $ | 193,860 | |||||
AFFO attributable to W. P. Carey per diluted share (e) | $ | 1.28 | $ | 1.30 | $ | 1.33 | |||||
Diluted weighted-average shares outstanding | 173,442,101 | 172,486,506 | 145,716,583 | ||||||||
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 10
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, 2019 | September 30, 2019 | December 31, 2018 | |||||||||
Net income from Real Estate attributable to W. P. Carey | $ | 124,333 | $ | 33,556 | $ | 151,611 | |||||
Adjustments: | |||||||||||
Depreciation and amortization of real property | 110,354 | 108,279 | 92,018 | ||||||||
Gain on sale of real estate, net | (17,501 | ) | (71 | ) | (99,618 | ) | |||||
Impairment charges | 6,758 | 25,781 | — | ||||||||
Loss (gain) on change in control of interests (a) (b) | — | 8,416 | (18,792 | ) | |||||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 2,703 | 4,210 | 3,225 | ||||||||
Proportionate share of adjustments for noncontrolling interests (d) | (4 | ) | (4 | ) | (762 | ) | |||||
Total adjustments | 102,310 | 146,611 | (23,929 | ) | |||||||
FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (e) | 226,643 | 180,167 | 127,682 | ||||||||
Adjustments: | |||||||||||
Other (gains) and losses (f) | (38,546 | ) | 18,956 | (11,269 | ) | ||||||
Above- and below-market rent intangible lease amortization, net | 17,037 | 14,969 | 14,985 | ||||||||
Straight-line and other rent adjustments (i) | (11,184 | ) | (6,370 | ) | (6,096 | ) | |||||
Tax expense (benefit) – deferred and other | 9,748 | (1,414 | ) | (3,949 | ) | ||||||
Stock-based compensation | 3,531 | 3,435 | 2,774 | ||||||||
Amortization of deferred financing costs | 3,225 | 2,991 | 2,572 | ||||||||
Merger and other expenses (j) | (811 | ) | 70 | 37,098 | |||||||
Other amortization and non-cash items | 348 | 180 | 260 | ||||||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 202 | (113 | ) | (260 | ) | ||||||
Proportionate share of adjustments for noncontrolling interests (d) | (5 | ) | (12 | ) | 140 | ||||||
Total adjustments | (16,455 | ) | 32,692 | 36,255 | |||||||
AFFO Attributable to W. P. Carey – Real Estate (e) | $ | 210,188 | $ | 212,859 | $ | 163,937 | |||||
Summary | |||||||||||
FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (e) | $ | 226,643 | $ | 180,167 | $ | 127,682 | |||||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share – Real Estate (e) | $ | 1.31 | $ | 1.04 | $ | 0.87 | |||||
AFFO attributable to W. P. Carey – Real Estate (e) | $ | 210,188 | $ | 212,859 | $ | 163,937 | |||||
AFFO attributable to W. P. Carey per diluted share – Real Estate (e) | $ | 1.21 | $ | 1.23 | $ | 1.12 | |||||
Diluted weighted-average shares outstanding | 173,442,101 | 172,486,506 | 145,716,583 | ||||||||
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 11
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, | |||||||
2019 | 2018 | ||||||
Net income attributable to W. P. Carey | $ | 305,243 | $ | 411,566 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 442,096 | 286,164 | |||||
Impairment charges | 32,539 | 4,790 | |||||
Gain on sale of real estate, net | (18,143 | ) | (118,605 | ) | |||
Loss (gain) on change in control of interests (a) (b) | 8,416 | (47,814 | ) | ||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 15,826 | 4,728 | |||||
Proportionate share of adjustments for noncontrolling interests (d) | (69 | ) | (8,966 | ) | |||
Total adjustments | 480,665 | 120,297 | |||||
FFO (as defined by NAREIT) Attributable to W. P. Carey (e) | 785,908 | 531,863 | |||||
Adjustments: | |||||||
Above- and below-market rent intangible lease amortization, net | 64,383 | 52,314 | |||||
Straight-line and other rent adjustments (i) | (31,787 | ) | (14,460 | ) | |||
Stock-based compensation | 18,787 | 18,294 | |||||
Amortization of deferred financing costs | 11,714 | 6,184 | |||||
Other (gains) and losses (f) | (8,924 | ) | (15,704 | ) | |||
Tax expense – deferred and other (g) (h) | 5,974 | 1,079 | |||||
Other amortization and non-cash items | 3,198 | 920 | |||||
Merger and other expenses (j) | 101 | 41,426 | |||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 7,165 | 12,439 | |||||
Proportionate share of adjustments for noncontrolling interests (d) | (49 | ) | 231 | ||||
Total adjustments | 70,562 | 102,723 | |||||
AFFO Attributable to W. P. Carey (e) | $ | 856,470 | $ | 634,586 | |||
Summary | |||||||
FFO (as defined by NAREIT) attributable to W. P. Carey (e) | $ | 785,908 | $ | 531,863 | |||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (e) | $ | 4.59 | $ | 4.52 | |||
AFFO attributable to W. P. Carey (e) | $ | 856,470 | $ | 634,586 | |||
AFFO attributable to W. P. Carey per diluted share (e) | $ | 5.00 | $ | 5.39 | |||
Diluted weighted-average shares outstanding | 171,299,414 | 117,706,445 | |||||
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 12
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, | |||||||
2019 | 2018 | ||||||
Net income from Real Estate attributable to W. P. Carey | $ | 272,065 | $ | 307,236 | |||
Adjustments: | |||||||
Depreciation and amortization of real property | 442,096 | 286,164 | |||||
Impairment charges | 32,539 | 4,790 | |||||
Gain on sale of real estate, net | (18,143 | ) | (118,605 | ) | |||
Loss (gain) on change in control of interests (a) (b) | 8,416 | (18,792 | ) | ||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 15,826 | 4,728 | |||||
Proportionate share of adjustments for noncontrolling interests (d) | (69 | ) | (8,966 | ) | |||
Total adjustments | 480,665 | 149,319 | |||||
FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (e) | 752,730 | 456,555 | |||||
Adjustments: | |||||||
Above- and below-market rent intangible lease amortization, net | 64,383 | 52,314 | |||||
Straight-line and other rent adjustments (i) | (31,787 | ) | (14,460 | ) | |||
Stock-based compensation | 13,248 | 10,450 | |||||
Amortization of deferred financing costs | 11,714 | 6,184 | |||||
Other (gains) and losses (f) | (9,773 | ) | (18,025 | ) | |||
Tax expense (benefit) – deferred and other | 7,971 | (18,790 | ) | ||||
Other amortization and non-cash items | 2,540 | 330 | |||||
Merger and other expenses (j) | 101 | 41,426 | |||||
Proportionate share of adjustments to equity in net income of partially owned entities (c) | 115 | 287 | |||||
Proportionate share of adjustments for noncontrolling interests (d) | (49 | ) | 231 | ||||
Total adjustments | 58,463 | 59,947 | |||||
AFFO Attributable to W. P. Carey – Real Estate (e) | $ | 811,193 | $ | 516,502 | |||
Summary | |||||||
FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (e) | $ | 752,730 | $ | 456,555 | |||
FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share – Real Estate (e) | $ | 4.39 | $ | 3.88 | |||
AFFO attributable to W. P. Carey – Real Estate (e) | $ | 811,193 | $ | 516,502 | |||
AFFO attributable to W. P. Carey per diluted share – Real Estate (e) | $ | 4.74 | $ | 4.39 | |||
Diluted weighted-average shares outstanding | 171,299,414 | 117,706,445 | |||||
__________
(a) | Amounts for the three months ended September 30, 2019 and year ended December 31, 2019 represent a loss recognized on the purchase of the remaining interest in a real estate investment from CPA:17 in the CPA:17 Merger, which we had previously accounted for under the equity method. We recognized this loss because we identified certain measurement period adjustments during the third quarter of 2019 that impacted the provisional accounting for this investment. |
(b) | 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. |
(c) | Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Equity in earnings of equity method investments in the Managed Programs and real estate on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis. |
(d) | Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis. |
(e) | FFO and AFFO are non-GAAP measures. See below for a description of FFO and AFFO. |
(f) | AFFO amount for the three months ended December 31, 2019 is primarily comprised of gain on marketable securities of $35.4 million and gains from foreign currency movements of $3.6 million. Real Estate AFFO amount for the three months ended December 31, 2019 is primarily comprised of mark-to-market adjustment for our investment in shares of a cold storage operator of $36.1 million and gains from foreign currency movements of $3.6 million. Beginning in the second quarter of 2019, we aggregated (gain) loss on extinguishment of debt and realized (gains) losses on foreign currency (both of which were previously disclosed as separate AFFO adjustment line items), as well as certain other adjustments, within this line item, which is comprised of adjustments related to Other gains and (losses) on our consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. |
(g) | Amount for the year ended December 31, 2019 includes a current tax benefit, which is excluded from AFFO as it was incurred as a result of the CPA:17 Merger. |
(h) | 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. |
(i) | Amounts for the three months and year ended December 31, 2019 include an adjustment to exclude $6.2 million of non-cash lease termination revenue, which will be collected and reflected within AFFO over the remaining master lease term. |
(j) | Amounts for the three months and year ended December 31, 2018 are primarily comprised of costs incurred in connection with the CPA:17 Merger. |
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 13
Non-GAAP Financial Disclosure
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
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.
We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line and other non-cash rent adjustments, 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 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 that 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.
W. P. Carey Inc. 12/31/2019 Earnings Release 8-K – 14