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Press Release

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

Company Release - 11/3/2016 7:30 AM ET

NEW YORK, Nov. 3, 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 third quarter ended September 30, 2016.

Total Company Update

  • Net income attributable to W. P. Carey of $110.9 million, or $1.03 per diluted share
  • AFFO of $144.5 million, or $1.34 per diluted share
  • 2016 AFFO guidance range narrowed to $5.05 to $5.15 per diluted share
  • Quarterly cash dividend raised to $0.9850 per share, equivalent to an annualized dividend rate of $3.94 per share
  • Issued $350 million of 4.250% Senior Unsecured Notes due 2026
  • Raised an additional $65.4 million in net proceeds through the Company's ATM offering program

Business Segment Update

Owned Real Estate

  • Segment Net income attributable to W. P. Carey of $100.0 million
  • Segment AFFO of $131.5 million, or $1.22 per diluted share
  • Disposed of four properties for total proceeds of $219.3 million
  • Net lease portfolio occupancy of 99.1%

Investment Management

  • Segment Net income attributable to W. P. Carey of $11.0 million
  • Segment AFFO of $13.0 million, or $0.12 per diluted share
  • Assets under management of $12.2 billion

MANAGEMENT COMMENTARY

"For the 2016 third quarter, we generated AFFO per diluted share of $1.34, up 12.6% from the prior year period, reflecting the impact of the cost reduction initiative that we implemented earlier this year, growth in assets under management within our Investment Management business and lower interest expense," said Mark J. DeCesaris, Chief Executive Officer of W. P. Carey. "Our third quarter results keep us on pace to generate full-year AFFO within our guidance range, which we have narrowed to between $5.05 and $5.15 per diluted share.

"Within our Owned Real Estate portfolio, we have now addressed the majority of our near-term lease maturities, which has both reduced residual risk and, in conjunction with recent acquisitions, extended the portfolio's weighted-average lease term. We have also made further progress with our capital plan, raising additional equity through our ATM program at a weighted-average price of $68.54 and completing a public offering of senior unsecured notes through which we were able to replace higher-cost mortgage debt with lower-cost unsecured debt."

FINANCIAL RESULTS

Revenues

  • Total Company: Revenues excluding reimbursable costs (net revenues) for the 2016 third quarter totaled $204.2 million, up 3.0% from $198.2 million for the 2015 third quarter, due primarily to higher net revenues from Investment Management.
  • Owned Real Estate: Owned Real Estate revenues excluding reimbursable tenant costs (net revenues from Owned Real Estate) for the 2016 third quarter were $173.5 million, down 1.3% from $175.8 million for the 2015 third quarter, due primarily to lower lease termination income as well as lower lease revenues resulting from the sale of properties.
  • Investment Management: Investment Management revenues excluding reimbursable costs (net revenues from Investment Management) for the 2016 third quarter were $30.6 million, up 37.2% from $22.3 million for the 2015 third quarter, due primarily to higher structuring revenue resulting from increased investment activity on behalf of the Managed Programs, as well as higher asset management revenue resulting from growth in assets under management.

Net Income Attributable to W. P. Carey

  • Net income attributable to W. P. Carey for the 2016 third quarter was $110.9 million, up significantly compared to $21.7 million for the 2015 third quarter, due primarily to a $49.1 million aggregate gain on sale of real estate recognized in the current-year period, lower general and administrative expenses, lower interest expense and an increase in Investment Management revenues.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2016 third quarter was $1.34 per diluted share, up 12.6% compared to $1.19 per diluted share for the 2015 third quarter, due primarily to lower general and administrative expenses, higher asset management fees and distributions of available cash from the Company's interests in the operating partnerships of the Managed Programs and lower interest expense.
  • Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

Dividend

  • As previously announced, on September 22, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.9850 per share, equivalent to an annualized dividend rate of $3.94 per share. The dividend was paid on October 14, 2016 to stockholders of record as of October 3, 2016.

AFFO GUIDANCE

  • The Company has narrowed its AFFO guidance range for the 2016 full year to between $5.05 and $5.15 per diluted share, leaving the midpoint unchanged, based on the following key assumptions:

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

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

(iii)  acquisitions on behalf of the Managed Programs of between $1.4 billion and $1.8 billion, which has been revised lower.

BALANCE SHEET AND CAPITALIZATION

Bond Issuance

  • As previously announced, on September 12, 2016, the Company completed an underwritten public offering of $350 million aggregate principal amount of 4.250% Senior Notes due October 1, 2026. The Company used the net proceeds from this offering primarily to reduce amounts outstanding under its senior unsecured credit facility.

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

  • During the 2016 third quarter, the Company issued 968,535 shares of common stock under its ATM offering program at a weighted-average price of $68.54 per share, for net proceeds of $65.4 million.
  • During the nine months ended September 30, 2016, the Company issued 1,249,836 shares of common stock under its ATM offering program at a weighted-average price of $68.52 per share, for net proceeds of $84.4 million.
  • The Company has not issued any shares of common stock under its ATM offering program between the end of the 2016 third quarter and the date of this press release.

OWNED REAL ESTATE

Acquisitions

  • During the 2016 third quarter, the Company did not complete any investments for its Owned Real Estate portfolio, leaving total investment volume for the nine months ended September 30, 2016 unchanged from June 30, 2016 at $385.8 million, including transaction-related costs and fees.

Dispositions

  • During the 2016 third quarter, as part of its active capital recycling program, the Company disposed of four properties from its Owned Real Estate portfolio for total proceeds of $219.3 million, bringing total dispositions for the nine months ended September 30, 2016 to $481.3 million, before transaction-related costs and fees.
  • Subsequent to quarter end, the Company disposed of 17 additional properties for total proceeds of $136.8 million, including 15 properties leased to a top-10 tenant, bringing total dispositions for the year-to-date period through November 3, 2016 to approximately $618.1 million, before transaction-related costs and fees.

Composition

  • As of September 30, 2016, the Company's Owned Real Estate portfolio consisted of 910 net lease properties, comprising 91.8 million square feet leased to 222 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.4 years and the occupancy rate was 99.1%.

INVESTMENT MANAGEMENT

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

Acquisitions

  • During the 2016 third quarter, the Company structured new investments totaling $432.1 million on behalf of the Managed Programs, including transaction-related costs and fees, bringing total investment volume on behalf of the Managed Programs for the nine months ended September 30, 2016 to $1.0 billion.

Assets Under Management

  • As of September 30, 2016, the Managed Programs had total assets under management of approximately $12.2 billion, up 16.2% from $10.5 billion as of September 30, 2015.

Net Investor Capital Inflows

  • During the 2016 third quarter, investor capital inflows for the Managed Programs, including Distribution Reinvestment Plan proceeds, net of redemptions, totaled $180.1 million.

Product Update

  • During the 2016 third quarter, CESH I, a limited partnership formed for the purpose of developing, owning and operating student housing properties and similar investments in Europe, commenced fundraising through a private placement offering.
  • Note: At inception, the Company consolidated CESH I, which is reflected in the Company's 2016 second quarter results. During the 2016 third quarter, the Company deconsolidated CESH I.

*     *     *     *     *

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2016 third quarter, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on November 3, 2016.

*     *     *     *     *

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

Date/Time: Thursday, November 3, 2016 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-465-1289 (US) or +1-201-689-8762 (international)

Audio Webcast: www.wpcarey.com/earnings

Audio Webcast Replay

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

*     *     *     *     *

W. P. Carey Inc.

W. P. Carey Inc. is a leading internally-managed net lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. At September 30, 2016, the Company had an enterprise value of approximately $11.0 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded publicly registered investment programs with assets under management of approximately $12.2 billion. Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Furthermore, its portfolio of long-term leases with creditworthy tenants has an established history of generating stable cash flows, enabling it to deliver consistent and rising dividend income to investors for over four decades.
www.wpcarey.com

*     *     *     *     *

Cautionary Statement Concerning Forward-Looking Statements:

Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief, or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "assume," "outlook," "seek," "plan," "believe," "expect," "anticipate," "intend," "estimate," "forecast" and other comparable terms. These forward-looking statements include, but are not limited to, the statements made by Mr. DeCesaris, including statements regarding our operational efficiencies, cost reductions, disposition plans, lease maturities, residual risk, weighted-average lease term, growth in assets under management, capital markets access, and cost of debt; annualized dividends; adjusted funds from operations coverage and guidance, including underlying assumptions; capital recycling and intended results thereof; our continued ability to sell shares under our ATM program; investor capital inflows; and anticipated future financial and operating performance and results, including underlying assumptions and estimates of growth. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that W. P. Carey's actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of W. P. Carey. Discussions of some of these other important factors and assumptions are contained in W. P. Carey's filings with the SEC and are available at the SEC's website at http://www.sec.gov, including Item 1A. Risk Factors in W. P. Carey's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on February 26, 2016, and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the SEC on August 4, 2016. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.

*     *     *     *     *

 

 

W. P. CAREY INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)



September 30, 2016


December 31, 2015

Assets




Investments in real estate:




Real estate, at cost

$

5,221,986



$

5,309,925


Operating real estate, at cost

81,665



82,749


Accumulated depreciation

(455,613)



(381,529)


Net investments in properties

4,848,038



5,011,145


Net investments in direct financing leases

740,745



756,353


Assets held for sale, net

128,462



59,046


Net investments in real estate

5,717,245



5,826,544


Equity investments in the Managed Programs and real estate

294,690



275,473


Cash and cash equivalents

209,483



157,227


Due from affiliates

51,508



62,218


In-place lease and tenant relationship intangible assets, net

817,151



902,848


Goodwill

640,305



681,809


Above-market rent intangible assets, net

406,245



475,072


Other assets, net

331,658



360,898


Total Assets

$

8,468,285



$

8,742,089






Liabilities and Equity




Liabilities:




Non-recourse debt, net

$

1,926,331



$

2,269,421


Senior Unsecured Notes, net

1,837,216



1,476,084


Senior Unsecured Credit Facility - Revolver

378,358



485,021


Senior Unsecured Credit Facility - Term Loan, net

249,915



249,683


Accounts payable, accrued expenses and other liabilities

258,977



342,374


Below-market rent and other intangible liabilities, net

125,790



154,315


Deferred income taxes

72,107



86,104


Distributions payable

106,545



102,715


Total liabilities

4,955,239



5,165,717


Redeemable noncontrolling interest

965



14,944






Equity:




W. P. Carey stockholders' equity:




Preferred stock (none issued)




Common stock

106



104


Additional paid-in capital

4,389,363



4,282,042


Distributions in excess of accumulated earnings

(834,868)



(738,652)


Deferred compensation obligation

50,576



56,040


Accumulated other comprehensive loss

(221,326)



(172,291)


Total W. P. Carey stockholders' equity

3,383,851



3,427,243


Noncontrolling interests

128,230



134,185


Total equity

3,512,081



3,561,428


Total Liabilities and Equity

$

8,468,285



$

8,742,089


 

 

W. P. CAREY INC.
Quarterly Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share amounts)



Three Months Ended


September 30, 2016


June 30, 2016


September 30, 2015

Revenues






Owned Real Estate:






Lease revenues

$

163,786



$

167,328



$

164,741


Operating property revenues (a)

8,524



8,270



8,107


Reimbursable tenant costs

6,537



6,391



5,340


Lease termination income and other

1,224



838



2,988



180,071



182,827



181,176


Investment Management:






Asset management revenue

15,978



15,005



13,004


Reimbursable costs from affiliates

14,540



12,094



11,155


Structuring revenue

12,301



5,968



8,207


Dealer manager fees

1,835



1,372



1,124


Other advisory revenue

522







45,176



34,439



33,490



225,247



217,266



214,666


Operating Expenses






Depreciation and amortization

62,802



66,581



75,512


Reimbursable tenant and affiliate costs

21,077



18,485



16,495


General and administrative

15,733



20,951



22,842


Impairment charges

14,441



35,429



19,438


Property expenses, excluding reimbursable tenant costs

10,193



10,510



11,120


Subadvisor fees (b)

4,842



1,875



1,748


Stock-based compensation expense

4,356



4,001



3,966


Dealer manager fees and expenses

3,028



2,620



3,185


Restructuring and other compensation (c)



452




Property acquisition and other expenses (d)



(207)



4,760



136,472



160,697



159,066


Other Income and Expenses






Interest expense

(44,349)



(46,752)



(49,683)











Equity in earnings of equity method investments in the Managed Programs

   and real estate

16,803



16,429



12,635


Other income and (expenses)

5,101



426



6,608



(22,445)



(29,897)



(30,440)


Income before income taxes and gain on sale of real estate

66,330



26,672



25,160


(Provision for) benefit from income taxes

(3,154)



8,217



(3,361)


Income before gain on sale of real estate

63,176



34,889



21,799


Gain on sale of real estate, net of tax

49,126



18,282



1,779


Net Income

112,302



53,171



23,578


Net income attributable to noncontrolling interests

(1,359)



(1,510)



(1,833)


Net Income Attributable to W. P. Carey

$

110,943



$

51,661



$

21,745








Basic Earnings Per Share

$

1.03



$

0.48



$

0.20


Diluted Earnings Per Share

$

1.03



$

0.48



$

0.20


Weighted-Average Shares Outstanding






Basic

107,221,668



106,310,362



105,813,237


Diluted

107,468,029



106,530,036



106,337,040








Distributions Declared Per Share

$

0.9850



$

0.9800



$

0.9550


 

 

W. P. CAREY INC.
Year-to-Date Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share amounts)



Nine Months Ended September 30,


2016


2015

Revenues




Owned Real Estate:




Lease revenues

$

506,358



$

487,480


Lease termination income and other (e)

34,603



9,319


Operating property revenues (a)

23,696



23,645


Reimbursable tenant costs

19,237



17,409



583,894



537,853


Investment Management:




Reimbursable costs from affiliates

46,372



28,401


Asset management revenue

45,596



36,236


Structuring revenue

30,990



67,735


Dealer manager fees

5,379



2,704


Other advisory revenue

522



203



128,859



135,279



712,753



673,132


Operating Expenses




Depreciation and amortization

213,835



206,079


Reimbursable tenant and affiliate costs

65,609



45,810


General and administrative

58,122



78,987


Impairment charges

49,870



22,711


Property expenses, excluding reimbursable tenant costs

38,475



31,504


Stock-based compensation expense

14,964



16,063


Restructuring and other compensation (c)

11,925




Subadvisor fees (b)

10,010



8,555


Dealer manager fees and expenses

9,000



7,884


Property acquisition and other expenses (d)

5,359



12,333



477,169



429,926


Other Income and Expenses




Interest expense

(139,496)



(145,325)


Equity in earnings of equity method investments in the Managed Programs and real estate

48,243



38,630


Other income and (expenses)

9,398



9,944



(81,855)



(96,751)


Income before income taxes and gain on sale of real estate

153,729



146,455


Benefit from (provision for) income taxes

4,538



(20,352)


Income before gain on sale of real estate

158,267



126,103


Gain on sale of real estate, net of tax

68,070



2,980


Net Income

226,337



129,083


Net income attributable to noncontrolling interests

(6,294)



(7,874)


Net Income Attributable to W. P. Carey

$

220,043



$

121,209






Basic Earnings Per Share

$

2.06



$

1.14


Diluted Earnings Per Share

$

2.05



$

1.13


Weighted-Average Shares Outstanding




Basic

106,493,145



105,627,423


Diluted

106,853,174



106,457,495






Distributions Declared Per Share

$

2.9392



$

2.8615


__________


(a)   

Comprised of revenues of $8.5 million and $23.6 million from two hotels for the three and nine months ended September 30, 2016, respectively, and revenues of $0.1 million from one self-storage facility for the nine months ended September 30, 2016. During the three months ended March 31, 2016, we sold our remaining self-storage facility.



(b) 

We earn investment management revenue from CWI 1 and CWI 2 in our role as their advisor. Pursuant to the terms of their subadvisory agreements, however, 20% of the fees we receive from CWI 1 and 25% of the fees we receive from CWI 2 are paid to their respective subadvisors. In connection with the acquisitions of multi-family properties on behalf of CPA®:18 – Global, we entered into agreements with third-party advisors for the day-to-day management of the properties for which we pay 30% of the initial acquisition fees and 100% of asset management fees paid to us by CPA®:18 – Global.



(c)   

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



(d)  

Amounts for the three months ended June 30, 2016 and September 30, 2015 include expenses related to our formal strategic review of $(0.2) million and $1.2 million, respectively. Amounts for the nine months ended September 30, 2016 and 2015 include expenses related to our formal strategic review of $5.2 million and $1.2 million, respectively.



(e)  

Amount for the nine months ended September 30, 2016 includes $32.2 million of lease termination income related to a property classified as held for sale as of December 31, 2015 and sold during the three months ended March 31, 2016.

 

 

W. P. CAREY INC.
Quarterly Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)



Three Months Ended


September 30, 2016


June 30, 2016


September 30, 2015

Net income attributable to W. P. Carey

$

110,943



$

51,661



$

21,745


Adjustments:






Depreciation and amortization of real property

61,396



65,096



74,050


Gain on sale of real estate, net

(49,126)



(18,282)



(1,779)


Impairment charges

14,441



35,429



19,438


Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(3,254)



(2,662)



(2,632)











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

1,354



1,331



1,293


Total adjustments

24,811



80,912



90,370


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

135,754



132,573



112,115


Adjustments:






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

12,564



13,105



10,184


Straight-line and other rent adjustments

(5,116)



(2,234)



(1,832)


Other amortization and non-cash items (a) (b) (c)

(4,897)



404



(2,248)


Stock-based compensation

4,356



4,001



3,966


Tax benefit – deferred

(2,999)



(16,535)



(1,412)


Loss (gain) on extinguishment of debt

2,072



(112)



(2,305)


Realized losses on foreign currency

1,559



1,222



367


Amortization of deferred financing costs

1,007



541



749


Restructuring and other compensation (d)



452




Property acquisition and other expenses (e)



(207)



4,760











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

261



(841)



2,460


Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

(90)



(131)



(156)


Total adjustments

8,717



(335)



14,533


AFFO Attributable to W. P. Carey

$

144,471



$

132,238



$

126,648








Summary






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

$

135,754



$

132,573



$

112,115


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

$

1.26



$

1.24



$

1.05


AFFO attributable to W. P. Carey

$

144,471



$

132,238



$

126,648


AFFO attributable to W. P. Carey per diluted share

$

1.34



$

1.24



$

1.19


Diluted weighted-average shares outstanding

107,468,029



106,530,036



106,337,040


 

 

W. P. CAREY INC.
Year-to-Date Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)



Nine Months Ended September 30,


2016


2015

Net income attributable to W. P. Carey

$

220,043



$

121,209


Adjustments:




Depreciation and amortization of real property

209,449



201,629


Gain on sale of real estate, net

(68,070)



(2,980)


Impairment charges

49,870



22,711


Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(8,541)



(7,925)


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

3,994



3,867


Total adjustments

186,702



217,302


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

406,745



338,511


Adjustments:




Straight-line and other rent adjustments (f)

(34,262)



(7,839)


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

23,851



37,154


Tax benefit – deferred

(22,522)



(4,530)


Stock-based compensation

14,964



16,063


Restructuring and other compensation (d)

11,925




Other amortization and non-cash items (a) (b) (c)

(7,695)



(755)


Allowance for credit losses

7,064




Property acquisition and other expenses (e)

5,359



12,333


Loss (gain) on extinguishment of debt

3,885



(2,305)


Realized losses on foreign currency

2,569



228


Amortization of deferred financing costs

2,271



2,025


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

741



5,120


Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

1,278



(355)


Total adjustments

9,428



57,139


AFFO Attributable to W. P. Carey

$

416,173



$

395,650






Summary




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

$

406,745



$

338,511


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

$

3.81



$

3.18


AFFO attributable to W. P. Carey

$

416,173



$

395,650


AFFO attributable to W. P. Carey per diluted share

$

3.89



$

3.72


Diluted weighted-average shares outstanding

106,853,174



106,457,495


__________

(a)   

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



(b) 

Effective July 1, 2016, the amortization of debt premiums and discounts, which was previously included in Other amortization and non-cash items, is included in Amortization of deferred financing costs. Prior periods are retrospectively adjusted to reflect this change. Amortization of debt premiums and discounts for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015 was $0.3 million, $0.8 million and $0.7 million, respectively, and for the nine months ended September 30, 2016 and 2015 was $1.7 million and $2.1 million, respectively.



(c)  

Amounts for the three and nine months ended September 30, 2016 include an adjustment of $0.6 million to exclude a portion of a gain recognized on the deconsolidation of an affiliate.



(d)   

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



(e) 

Amounts for the three months ended June 30, 2016 and September 30, 2015 include expenses related to our formal strategic review of $(0.2) million and $1.2 million, respectively. Amounts for the nine months ended September 30, 2016 and 2015 include expenses related to our formal strategic review of $5.2 million and $1.2 million, respectively.



(f)   

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



(g)   

Amount for the nine months ended September 30, 2016 includes $15.6 million due to the acceleration of a below-market lease from a tenant of a domestic property that was sold during the three months ended March 31, 2016.

 

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

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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