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Press Release

W. P. Carey Inc. Announces Second Quarter 2016 Financial Results

Company Release - 8/4/2016 7:30 AM ET

NEW YORK, Aug. 4, 2016 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), an internally-managed global net lease real estate investment trust, today reported its financial results for the second quarter ended June 30, 2016.

Total Company Update

  • Net income attributable to W. P. Carey of $51.7 million, or $0.48 per diluted share

  • AFFO of $132.2 million, or $1.24 per diluted share

  • Affirm 2016 AFFO guidance range of $5.00 to $5.20 per diluted share

  • Quarterly cash dividend raised to $0.9800 per share, equivalent to an annualized dividend rate of $3.92 per share

  • Raised a total of $56.2 million in net proceeds through the Company's ATM offering program during and subsequent to the 2016 second quarter

Business Segment Update

Owned Real Estate

  • Segment Net income attributable to W. P. Carey of $51.4 million

  • Segment AFFO of $130.5 million, or $1.22 per diluted share

  • Completed two investments totaling $385.8 million and entered into an agreement to provide $128.1 million in build-to-suit financing

  • Disposed of four properties for total proceeds of $159.7 million

  • Net lease portfolio occupancy of 98.8%

Investment Management

  • Segment Net income attributable to W. P. Carey of $0.3 million

  • Segment AFFO of $1.7 million, or $0.02 per diluted share

  • Assets under management of $11.7 billion

MANAGEMENT COMMENTARY

"For the 2016 second quarter we generated AFFO per diluted share of $1.24, bringing AFFO for the first half of the year to $2.55, on pace with our full year guidance range," said Mark J. DeCesaris, Chief Executive Officer of W. P. Carey. "Our second quarter results reflect the inherent variability in the timing of deal closings, resulting in a lower contribution from Investment Management compared to the prior-year period. However, the higher-quality recurring income streams that we value most continued to grow year-over-year in each of our businesses. Specifically, lease revenues grew through a combination of acquisitions and contractual rent escalations, and growth in assets under management generated both higher asset management fees and additional income from our partnership interests in the Managed REITs.

"During the quarter, our focus was firmly on the day-to-day operation of our business, making progress on each of our key priorities. Operational efficiency improved as a result of our cost reduction initiative. We closed two accretive investments for our Owned Real Estate portfolio and made headway with our disposition plan. Within Investment Management, we raised additional capital amid an industry adapting to new regulations. We also utilized our ATM program and undertook significant investor outreach to ensure continued access to capital markets and diversity in our capital sources."

FINANCIAL RESULTS

Revenues

  • Total Company: Revenues excluding reimbursable costs (net revenues) for the 2016 second quarter totaled $198.8 million, down 11.4% from $224.3 million for the 2015 second quarter, due primarily to lower net revenues from Investment Management, partly offset by higher net revenues from Owned Real Estate.

  • Owned Real Estate: Owned Real Estate revenues excluding reimbursable tenant costs (net revenues from Owned Real Estate) for the 2016 second quarter were $176.4 million, up 1.3% from $174.1 million for the 2015 second quarter, due primarily to additional lease revenues from properties acquired since the start of the 2015 second quarter and contractual rent escalations on existing properties.

  • Investment Management: Investment Management revenues excluding reimbursable costs (net revenues from Investment Management) for the 2016 second quarter were $22.3 million, down 55.6% from $50.2 million for the 2015 second quarter, due primarily to lower structuring revenue resulting from reduced investment activity on behalf of the Managed REITs during the current-year period, partly offset by higher asset management revenue as a result of growth in assets under management.

Net Income Attributable to W. P. Carey

  • Net income attributable to W. P. Carey for the 2016 second quarter was $51.7 million, down 18.3% compared to $63.3 million for the 2015 second quarter, due primarily to impairment charges recognized in the current-year period and lower structuring revenue within Investment Management, partly offset by the aggregate gain on sale of real estate recognized in the current-year period and lower general and administrative expenses.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2016 second quarter was $1.24 per diluted share, down 5.3% compared to $1.31 per diluted share for the 2015 second quarter. The decrease was due primarily to lower structuring revenues, net of associated costs, resulting from lower investment activity on behalf of the Managed REITs during the current-year period, partly offset by additional lease revenues from both properties acquired since the start of the 2015 second quarter and contractual rent escalations on existing properties, higher asset management fees and distributions of available cash from the Company's interests in the operating partnerships of the Managed REITs, and lower general and administrative expenses.

  • 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 16, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.9800 per share, equivalent to an annualized dividend rate of $3.92 per share. The dividend was paid on July 15, 2016 to stockholders of record as of June 30, 2016.

AFFO GUIDANCE

  • For the 2016 full year, the Company affirms that it expects to report AFFO of between $5.00 and $5.20 per diluted share based on the following key assumptions:

    (i)   acquisitions for the Company's Owned Real Estate portfolio of between $400 million and $600 million;

    (ii)   dispositions from the Company's Owned Real Estate portfolio of between $650 million and $850 million; and

    (iii)  acquisitions on behalf of the Managed REITs of between $1.8 billion and $2.3 billion.

BALANCE SHEET AND CAPITALIZATION

"At-The-Market" (ATM) Offering Program

  • During the 2016 second quarter, the Company utilized its ATM offering program for the first time, issuing 281,301 shares of common stock at a weighted-average price of $68.47 per share, for net proceeds of $19.0 million.

  • Subsequent to quarter end, the Company issued 548,918 shares of common stock under its ATM offering program at a weighted-average price of $68.87 per share, for net proceeds of $37.2 million.

OWNED REAL ESTATE

Acquisitions

  • During the 2016 second quarter, the Company completed two investments totaling $385.8 million, and entered into an agreement to provide $128.1 million in build-to-suit financing on one investment, including transaction-related costs and fees.

Dispositions

  • During the 2016 second quarter, as part of its active capital recycling program, the Company disposed of four properties from its Owned Real Estate portfolio for total proceeds of $159.7 million, bringing total dispositions for the first half of 2016 to $262.0 million, before transaction-related costs and fees.

Composition

  • As of June 30, 2016, the Company's Owned Real Estate portfolio consisted of 914 net lease properties, comprising 92.8 million square feet leased to 221 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.4 years and the occupancy rate was 98.8%.

INVESTMENT MANAGEMENT

  • W. P. Carey is the advisor to CPA®:17 – Global and CPA®:18 – Global (the CPA® REITs), Carey Watermark Investors Incorporated (CWI 1) and Carey Watermark Investors 2 Incorporated (CWI 2) (the CWI REITs, and together with the CPA® REITs, the Managed REITs) and Carey Credit Income Fund (CCIF) (together with the Managed REITs, the Managed Programs).

Acquisitions

  • During the 2016 second quarter, the Company structured new investments totaling $181.8 million on behalf of the Managed REITs, including transaction-related costs and fees, bringing total investment volume on behalf of the Managed REITs for the first half of 2016 to $593.5 million.

Assets Under Management

  • As of June 30, 2016, the Managed Programs had total assets under management of approximately $11.7 billion, up 12.5% from $10.4 billion as of June 30, 2015.

Net Investor Capital Inflows

  • During the 2016 second quarter, investor capital inflows for the Managed Programs, including Distribution Reinvestment Plan proceeds, net of redemptions, totaled $134.6 million, due primarily to inflows into CWI 2 and CCIF.

Product Update

  • As previously announced, during the 2016 second quarter the Company filed a registration statement with the Securities and Exchange Commission (SEC) for CPA®:19 – Global, a diversified non-traded REIT. The registration statement remains subject to review by the SEC, so there can be no assurances as to whether or when the related offering will be commenced.

*     *     *     *     *

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2016 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 4, 2016.

*     *     *     *     *

Live Conference Call and Audio Webcast Scheduled for 10:00 a.m. Eastern Time
Please call to register at least 10 minutes prior to the start time.

Date/Time: Thursday, August 4, 2016 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-407-4019 (US) or +1-201-689-8337 (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 internally-managed net lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. At June 30, 2016, the Company had an enterprise value of approximately $11.7 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded publicly registered investment programs with assets under management of approximately $11.7 billion. Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Furthermore, its portfolio of long-term leases with creditworthy tenants has an established history of generating stable cash flows, enabling it to deliver consistent and rising dividend income to investors for over four decades.
www.wpcarey.com 

*     *     *     *     *

Cautionary Statement Concerning Forward-Looking Statements:

Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief, or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "assume," "outlook," "seek," "plan," "believe," "expect," "anticipate," "intend," "estimate," "forecast" and other comparable terms. These forward-looking statements include, but are not limited to, the statements made by Mr. DeCesaris, including statements regarding our key priorities, operational efficiencies, cost reduction, disposition plans, capital markets access, as well as, annualized dividends, adjusted funds from operations coverage and guidance, including underlying assumptions, capital recycling and intended results thereof, the continued ability of the Company to sell shares under its ATM program, and anticipated future financial and operating performance and results, including underlying assumptions and estimates of growth. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that W. P. Carey's actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of W. P. Carey. Discussions of some of these other important factors and assumptions are contained in W. P. Carey's filings with the SEC and are available at the SEC's website at http://www.sec.gov, including Item 1A. Risk Factors in W. P. Carey's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on February 26, 2016. 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 (Unaudited)

(in thousands)


June 30, 2016


December 31, 2015

Assets




Investments in real estate:




Real estate, at cost

$

5,231,806



$

5,309,925


Operating real estate, at cost

81,508



82,749


Accumulated depreciation

(420,420)



(381,529)


Net investments in properties

4,892,894



5,011,145


Net investments in direct financing leases

741,185



756,353


Assets held for sale, net

276,336



59,046


Net investments in real estate

5,910,415



5,826,544


Equity investments in the Managed Programs and real estate

286,775



275,473


Cash and cash equivalents

173,305



157,227


Due from affiliates

57,353



62,218


In-place lease and tenant relationship intangible assets, net

843,154



902,848


Goodwill

640,588



681,809


Above-market rent intangible assets, net

422,748



475,072


Other assets, net

348,233



360,898


Total Assets

$

8,682,571



$

8,742,089






Liabilities and Equity




Liabilities:




Non-recourse debt, net

$

2,110,441



$

2,269,421


Senior Unsecured Notes, net

1,487,864



1,476,084


Senior Unsecured Credit Facility - Revolver

793,770



485,021


Senior Unsecured Credit Facility - Term Loan, net

249,853



249,683


Accounts payable, accrued expenses and other liabilities

270,602



342,374


Below-market rent and other intangible liabilities, net

128,466



154,315


Deferred income taxes

72,699



86,104


Distributions payable

104,911



102,715


Total liabilities

5,218,606



5,165,717


Redeemable noncontrolling interest

965



14,944






Equity:




W. P. Carey stockholders' equity:




Preferred stock (none issued)




Common stock

105



104


Additional paid-in capital

4,316,732



4,282,042


Distributions in excess of accumulated earnings

(839,162)



(738,652)


Deferred compensation obligation

60,789



56,040


Accumulated other comprehensive loss

(206,201)



(172,291)


Total W. P. Carey stockholders' equity

3,332,263



3,427,243


Noncontrolling interests

130,737



134,185


Total equity

3,463,000



3,561,428


Total Liabilities and Equity

$

8,682,571



$

8,742,089


 

 

W. P. CAREY INC.

Quarterly Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share amounts)


Three Months Ended


June 30, 2016


March 31, 2016


June 30, 2015

Revenues






Owned Real Estate:






  Lease revenues

$

167,328



$

175,244



$

162,574


  Operating property revenues (a)

8,270



6,902



8,426


  Reimbursable tenant costs

6,391



6,309



6,130


  Lease termination income and other (b)

838



32,541



3,122



182,827



220,996



180,252


Investment Management:






  Asset management revenue

15,005



14,613



12,073


  Reimbursable costs

12,094



19,738



7,639


  Structuring revenue

5,968



12,721



37,808


  Dealer manager fees

1,372



2,172



307



34,439



49,244



57,827



217,266



270,240



238,079


Operating Expenses






Depreciation and amortization

66,581



84,452



65,166


Impairment charges

35,429





591


General and administrative

20,951



21,438



26,376


Reimbursable tenant and affiliate costs

18,485



26,047



13,769


Property expenses, excluding reimbursable tenant costs

10,510



17,772



11,020


Stock-based compensation expense

4,001



6,607



5,089


Dealer manager fees and expenses

2,620



3,352



2,327


Subadvisor fees (c)

1,875



3,293



4,147


Restructuring and other compensation (d)

452



11,473




Property acquisition and other expenses (e)

(207)



5,566



1,897



160,697



180,000



130,382


Other Income and Expenses






Interest expense

(46,752)



(48,395)



(47,693)


Equity in earnings of equity method investments in the Managed Programs

   and real estate

16,429



15,011



14,272


Other income and (expenses)

426



3,871



7,641



(29,897)



(29,513)



(25,780)


Income before income taxes and gain on sale of real estate

26,672



60,727



81,917


Benefit from (provision for) income taxes

8,217



(525)



(15,010)


Income before gain on sale of real estate

34,889



60,202



66,907


Gain on sale of real estate, net of tax

18,282



662



16


Net Income

53,171



60,864



66,923


Net income attributable to noncontrolling interests

(1,510)



(3,425)



(3,575)


Net Income Attributable to W. P. Carey

$

51,661



$

57,439



$

63,348








Basic Earnings Per Share

$

0.48



$

0.54



$

0.60


Diluted Earnings Per Share

$

0.48



$

0.54



$

0.59


Weighted-Average Shares Outstanding






Basic

106,310,362



105,939,161



105,764,032


Diluted

106,530,036



106,405,453



106,281,983








Distributions Declared Per Share

$

0.9800



$

0.9742



$

0.9540


 

 


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,


2016


2015

Revenues




Owned Real Estate:




  Lease revenues

$

342,572



$

322,739


  Lease termination income and other (b)

33,379



6,331


  Operating property revenues (a)

15,172



15,538


  Reimbursable tenant costs

12,700



12,069



403,823



356,677


Investment Management:




  Reimbursable costs

31,832



17,246


  Asset management revenue

29,618



23,232


  Structuring revenue

18,689



59,528


  Dealer manager fees

3,544



1,581


  Other advisory revenue



203



83,683



101,790



487,506



458,467


Operating Expenses




Depreciation and amortization

151,033



130,566


Reimbursable tenant and affiliate costs

44,532



29,315


General and administrative

42,389



56,144


Impairment charges

35,429



3,274


Property expenses, excluding reimbursable tenant costs

28,282



20,384


Restructuring and other compensation (d)

11,925




Stock-based compensation expense

10,608



12,098


Dealer manager fees and expenses

5,972



4,699


Property acquisition and other expenses (e)

5,359



7,573


Subadvisor fees (c)

5,168



6,808



340,697



270,861


Other Income and Expenses




Interest expense

(95,147)



(95,642)


Equity in earnings of equity method investments in the Managed Programs

   and real estate

31,440



25,995


Other income and (expenses)

4,297



3,335



(59,410)



(66,312)


Income before income taxes and gain on sale of real estate

87,399



121,294


Benefit from (provision for) income taxes

7,692



(16,990)


Income before gain on sale of real estate

95,091



104,304


Gain on sale of real estate, net of tax

18,944



1,201


Net Income

114,035



105,505


Net income attributable to noncontrolling interests

(4,935)



(6,041)


Net Income Attributable to W. P. Carey

$

109,100



$

99,464






Basic Earnings Per Share

$

1.02



$

0.94


Diluted Earnings Per Share

$

1.02



$

0.93


Weighted-Average Shares Outstanding




Basic

106,124,881



105,532,976


Diluted

106,504,226



106,355,402






Distributions Declared Per Share

$

1.9542



$

1.9065


__________



(a)

Comprised of revenues of $8.3 million and $15.1 million from two hotels for the three and six months ended June 30, 2016, respectively, and revenues of $0.1 million from one self-storage facility for the six months ended June 30, 2016. During the three months ended March 31, 2016, we sold our remaining self-storage facility.



(b)

Amounts for both the three months ended March 31, 2016 and six months ended June 30, 2016 include $32.2 million of lease termination income related to a property classified as held for sale as of December 31, 2015 and sold during the three months ended March 31, 2016.



(c)

We earn investment management revenue from CWI 1 and CWI 2 in our role as their advisor. Pursuant to the terms of their subadvisory agreements, however, 20% of the fees we receive from CWI 1 and 25% of the fees we receive from CWI 2 are paid to their respective subadvisors. In connection with the acquisitions of multi-family properties on behalf of CPA®:18 – Global, we entered into agreements with third-party advisors for the day-to-day management of the properties for which we pay 0.75% of the acquisition fees and 0.5% of asset management fees paid to us by CPA®:18 – Global.



(d)

Amount represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employment severance arrangements.



(e)

Amounts for the three months ended June 30, 2016, three months ended March 31, 2016, and six months ended June 30, 2016 include expenses related to our formal strategic review of  $(0.2) million, $5.5 million, and $5.3 million, respectively.

 

 

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, 2016


March 31, 2016


June 30, 2015

Net income attributable to W. P. Carey

$

51,661



$

57,439



$

63,348


Adjustments:






  Depreciation and amortization of real property

65,096



82,957



63,688


  Impairment charges

35,429





591


  Gain on sale of real estate, net

(18,282)



(662)



(16)


  Proportionate share of adjustments for noncontrolling interests to arrive at
     FFO

(2,662)



(2,625)



(2,640)


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

1,331



1,309



1,296


  Total adjustments

80,912



80,979



62,919


FFO Attributable to W. P. Carey (as defined by NAREIT)

132,573



138,418



126,267


Adjustments:






  Tax benefit – deferred

(16,535)



(2,988)



(1,372)


  Above- and below-market rent intangible lease amortization, net (a)

13,105



(1,818)



13,220


  Stock-based compensation

4,001



6,607



5,089


  Straight-line and other rent adjustments (b)

(2,234)



(26,912)



(3,070)


  Amortization of deferred financing costs

1,305



1,354



1,489


  Realized losses (gains) on foreign currency

1,222



(212)



415


  Restructuring and other compensation (c)

452



11,473




  Other amortization and non-cash items (d)

(360)



(3,833)



(6,574)


  Property acquisition and other expenses (e)

(207)



5,566



1,897


  (Gain) loss on extinguishment of debt

(112)



1,925




  Allowance for credit losses



7,064




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

(841)



1,321



1,660


  Proportionate share of adjustments for noncontrolling interests to arrive at
     AFFO

(131)



1,499



15


  Total adjustments

(335)



1,046



12,769


AFFO Attributable to W. P. Carey

$

132,238



$

139,464



$

139,036








Summary






FFO attributable to W. P. Carey (as defined by NAREIT)

$

132,573



$

138,418



$

126,267


FFO attributable to W. P. Carey (as defined by NAREIT) per diluted share

$

1.24



$

1.30



$

1.19


AFFO attributable to W. P. Carey

$

132,238



$

139,464



$

139,036


AFFO attributable to W. P. Carey per diluted share

$

1.24



$

1.31



$

1.31


Diluted weighted-average shares outstanding

106,530,036



106,405,453



106,281,983


 

 

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,


2016


2015

Net income attributable to W. P. Carey

$

109,100



$

99,464


Adjustments:




  Depreciation and amortization of real property

148,053



127,579


  Impairment charges

35,429



3,274


  Gain on sale of real estate, net

(18,944)



(1,201)


  Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(5,287)



(5,293)


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

2,640



2,574


  Total adjustments

161,891



126,933


FFO Attributable to W. P. Carey (as defined by NAREIT)

270,991



226,397


Adjustments:




  Straight-line and other rent adjustments (b)

(29,146)



(6,007)


  Tax benefit – deferred

(19,523)



(3,118)


  Restructuring and other compensation (c)

11,925




  Above- and below-market rent intangible lease amortization, net (a)

11,287



26,970


  Stock-based compensation

10,608



12,098


  Allowance for credit losses

7,064




  Property acquisition and other expenses (e)

5,359



7,573


  Other amortization and non-cash items (d)

(4,193)



115


  Amortization of deferred financing costs

2,659



2,654


  Loss on extinguishment of debt

1,813




  Realized losses (gains) on foreign currency

1,010



(139)


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

480



2,659


  Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

1,368



(199)


  Total adjustments

711



42,606


AFFO Attributable to W. P. Carey

$

271,702



$

269,003






Summary




FFO attributable to W. P. Carey (as defined by NAREIT)

$

270,991



$

226,397


FFO attributable to W. P. Carey (as defined by NAREIT) per diluted share

$

2.54



$

2.13


AFFO attributable to W. P. Carey

$

271,702



$

269,003


AFFO attributable to W. P. Carey per diluted share

$

2.55



$

2.53


Diluted weighted-average shares outstanding


106,504,226




106,355,402


__________

(a)

Amounts for both the three months ended March 31, 2016 and six months ended June 30, 2016 include $15.6 million due to the acceleration of a below-market lease from a tenant of a domestic property that was sold during the three months ended March 31, 2016.



(b)

Amounts for both the three months ended March 31, 2016 and six months ended June 30, 2016 include an adjustment to exclude $27.2 million of the $32.2 million of lease termination income recognized in connection with a domestic property that was sold during the three months ended March 31, 2016, as such amount was determined to be non-core income. Amounts for both the three months ended March 31, 2016 and six months ended June 30, 2016 also reflect an adjustment to include $1.8 million of lease termination income received in December 2015 that represented core income for the three months ended March 31, 2016.



(c)

Amount represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employment severance arrangements.



(d)

Represents primarily unrealized gains and losses from foreign exchange and derivatives.



(e)

Amounts for the three months ended June 30, 2016, three months ended March 31, 2016, and six months ended June 30, 2016 include expenses related to our formal strategic review of $(0.2) million, $5.5 million, and $5.3 million, respectively.

 

Non-GAAP Financial Disclosure

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc., or NAREIT, an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to nor a substitute for net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly-owned investments.  Adjustments for unconsolidated partnerships and jointly-owned investments are calculated to reflect FFO. Our FFO calculation complies with NAREIT's policy described above.

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

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

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

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SOURCE W. P. Carey Inc.

 

Investor Contacts

Institutional Investors

Peter Sands
Director of Institutional IR
W. P. Carey Inc.
1 (212) 492-1110
Email

Capital Markets

Jeremiah Gregory
Head of Capital Markets
W. P. Carey Inc.
1 (212) 492-1135
Email

Individual Investors

Investor Relations Department
1 (800) WP CAREY (972-2739)
Email

Transfer Agent

Computershare
W. P. Carey Inc.
Shareowner Services
PO Box 505000
Louisville, KY 40233-5000
1 (888) 200-8690

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