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Press Release

W. P. Carey Inc. Announces Fourth Quarter and Full Year 2017 Financial Results

Company Release - 2/23/2018 7:30 AM ET

NEW YORK, Feb. 23, 2018 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), an internally-managed net lease real estate investment trust, today reported its financial results for the fourth quarter and full year ended December 31, 2017.

Total Company

  • Net income attributable to W. P. Carey of $75.2 million, or $0.69 per diluted share, for the fourth quarter and $277.3 million, or $2.56 per diluted share, for 2017

  • AFFO of $142.1 million, or $1.31 per diluted share, for the fourth quarter and $573.0 million, or $5.30 per diluted share, for 2017

  • Quarterly cash dividend raised to $1.01 per share, equivalent to an annualized dividend rate of $4.04 per share

  • 2018 full year AFFO guidance range of $5.30 to $5.50 per diluted share announced

Business Segments

Owned Real Estate

  • Segment net income attributable to W. P. Carey of $54.1 million for the fourth quarter and $192.1 million for 2017

  • Segment AFFO of $111.3 million, or $1.03 per diluted share, for the fourth quarter and $456.9 million, or $4.23 per diluted share, for 2017

  • Acquisitions and completed capital investment projects totaling $32.3 million during the fourth quarter, bringing total investment volume for 2017 to $95.9 million

  • Eight active capital investment projects for a total commitment of $148.1 million at year end

  • Gross disposition proceeds totaling $59.1 million during the fourth quarter, bringing total dispositions for 2017 to $191.6 million

  • Portfolio occupancy of 99.8%

  • Weighted-average lease term of 9.6 years

Investment Management

  • Segment net income attributable to W. P. Carey of $21.1 million for the fourth quarter and $85.2 million for 2017

  • Segment AFFO of $30.7 million, or $0.28 per diluted share, for the fourth quarter and $116.1 million, or $1.07 per diluted share, for 2017

 

MANAGEMENT COMMENTARY

"Our fourth quarter and full year results reflect the continuing positive effects of the advancements we've made in recent years, with AFFO per diluted share up 7.4% and 3.5%, respectively, over the prior-year periods," said Jason Fox, Chief Executive Officer of W. P. Carey. "Reductions in our cost base and an improved cost of debt outweighed the near-term impacts of our decisions to be a net seller and refocus our business, which have improved the quality of our portfolio and the composition of our revenue streams."

"Looking ahead, we remain well positioned to create long-term value for shareholders by driving earnings growth through accretive acquisitions and same-store growth, supported by proactive asset management, a resilient and flexible balance sheet and constant attention to our cost of capital."

 

FINANCIAL RESULTS

As previously announced, as a result of its decision to exit non-traded retail fundraising activities in June 2017, the Company revised its segment presentation recognizing equity income earned through its ownership interests in the Managed REITs and its special member interests in the operating partnerships of the Managed REITs within its Investment Management segment. Prior to the 2017 second quarter, these items were recognized within its Owned Real Estate segment. For purposes of comparability, segment financial statements for all periods presented have been revised to reflect this change.

 

QUARTERLY FINANCIAL RESULTS

Revenues

  • Total Company: Revenues excluding reimbursable costs (net revenues) for the 2017 fourth quarter totaled $185.3 million, down 8.5% from $202.5 million for the 2016 fourth quarter.

  • Owned Real Estate: Owned Real Estate net revenues for the 2017 fourth quarter were $162.3 million, down 1.8% from $165.3 million for the 2016 fourth quarter, due primarily to lower lease revenues resulting from the non-cash acceleration of amortization of certain lease intangible assets during the current-year period, which more than offset the positive impact of a stronger euro relative to the U.S. dollar on lease revenues.

  • Investment Management: Investment Management net revenues for the 2017 fourth quarter were $23.1 million, down 37.9% from $37.2 million for the 2016 fourth quarter, due primarily to lower structuring revenues and the cessation of dealer manager fees resulting from the Company's strategic decision to exit non-traded retail fundraising.

Net Income Attributable to W. P. Carey

  • Net income attributable to W. P. Carey for the 2017 fourth quarter was $75.2 million, up 57.7% compared to $47.7 million for the 2016 fourth quarter, due primarily to a higher aggregate gain on sale of real estate, lower general and administrative expenses resulting primarily from the Company's strategic decision to exit non-traded retail fundraising and lower impairment charges recorded during the current-year period.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2017 fourth quarter was $1.31 per diluted share, up 7.4% from $1.22 per diluted share for the 2016 fourth quarter, due primarily to lower general and administrative expenses, the positive impact of a stronger euro relative to the U.S. dollar on lease revenues and lower interest expense, which more than offset lower structuring revenues.

    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 December 6, 2017, the Company's Board of Directors declared a quarterly cash dividend of $1.01 per share, equivalent to an annualized dividend rate of $4.04 per share. The dividend was paid on January 16, 2018 to stockholders of record as of December 29, 2017.

 

FULL YEAR FINANCIAL RESULTS

Revenues

  • Total Company: Net revenues for the 2017 full year totaled $775.3 million, down 8.8% from $849.7 million for the 2016 full year.

  • Owned Real Estate: Net revenues from Owned Real Estate for the 2017 full year totaled $665.7 million, down 8.8% from $729.9 million for the 2016 full year, due primarily to $32.2 million of lease termination income and $16.7 million of lease revenues from the non-cash acceleration of amortization of lease intangible liabilities, both recognized and related to a property sold in 2016. Furthermore, additional lease revenues from acquisitions and capital investment projects completed during 2017 were more than offset by a reduction in lease revenues due to property dispositions.

  • Investment Management: Net revenues from Investment Management for the 2017 full year totaled $109.6 million, down 8.4% from $119.7 million for the 2016 full year, due primarily to lower structuring revenues and the cessation of dealer manager fees during 2017 resulting from the Company's strategic decision to exit non-traded retail fundraising, which more than offset higher asset management fees.

Net Income Attributable to W. P. Carey

  • Net income attributable to W. P. Carey for the 2017 full year totaled $277.3 million, up 3.6% compared to $267.7 million for the 2016 full year, due primarily to lower impairment charges recorded during the current year, lower interest expense and lower general and administrative expenses, which more than offset a lower aggregate gain on sale of real estate.

 

AFFO

  • AFFO for the 2017 full year totaled $5.30 per diluted share, up 3.5% compared to $5.12 per diluted share for the 2016 full year, due primarily to lower interest expense, lower general and administrative expenses, a lower provision for income taxes and higher asset management fees, which more than offset lower lease revenues and lower structuring revenues.

    Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

Dividends

  • Dividends declared during 2017 totaled $4.01 per share, an increase of 2.0% compared to total dividends declared during 2016 of $3.93 per share.

 

AFFO GUIDANCE

  • For the 2018 full year, the Company expects to report AFFO of between $5.30 and $5.50 per diluted share, based on the following key assumptions:

    (i)   acquisitions for the Company's Owned Real Estate portfolio of between $500 million and $1 billion;

    (ii)   dispositions from the Company's Owned Real Estate portfolio of between $300 million and $500 million; and

    (iii)  total general and administrative expenses of between $65 million and $70 million.

    Note: The Company does not provide guidance on net income. The Company only provides guidance on 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.

 

OWNED REAL ESTATE

Investments

  • During the 2017 fourth quarter, the Company completed investments totaling $32.3 million, comprised of one acquisition for $25.9 million and one build-to-suit project placed into service at a total cost of $6.4 million, bringing total investment activity for the year ended December 31, 2017 to $95.9 million, including transaction-related costs and fees.

  • As of December 31, 2017, the Company had eight active capital investment projects for an expected total investment of approximately $148.1 million, of which $100.4 million is expected to be completed during 2018.

Dispositions

  • During the 2017 fourth quarter, the Company disposed of five properties for total gross proceeds of $59.1 million, bringing total dispositions for the year ended December 31, 2017 to $191.6 million.

Composition

  • As of December 31, 2017, the Company's Owned Real Estate portfolio consisted of 887 net lease properties, comprising 84.9 million square feet leased to 210 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.6 years and the occupancy rate was 99.8%.

 

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 European Student Housing Fund I, L.P. (CESH I, and together with the Managed REITs, the Managed Programs).

Acquisitions

  • During the 2017 fourth quarter, the Company structured new investments on behalf of the Managed Programs totaling $147.2 million, comprised primarily of a build-to-suit expansion with an existing tenant and student housing investments within the CPA REITs.

  • This activity brought total investment volume on behalf of the Managed Programs for the year ended December 31, 2017 to $1.2 billion, primarily related to the CWI REITs and CESH I.

Assets Under Management

  • As of December 31, 2017, the Managed Programs had total assets under management of approximately $13.1 billion, up 1.6% from $12.9 billion as of December 31, 2016.

*     *     *     *     *

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2017 fourth 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 February 23, 2018.

*     *     *     *     *

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: Friday, February 23, 2018 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.

Celebrating its 45th anniversary, W. P. Carey Inc. is a leading internally-managed net lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions primarily for companies in the U.S. and Europe. At December 31, 2017, the Company had an enterprise value of approximately $11.5 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of investment programs. 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. Fox; statements regarding reductions in our cost base and improved cost of debt, including the continuing nature of those changes; weighted-average lease term, criticality, yields and occupancy rate of our owned real estate and other portfolio characteristics; growth in assets under management; the acquisition environment and our risk-reward criteria, including the impact of such factors on the types of investments we make and whether they are accretive, as well as same store growth; annualized dividends and payout ratio; disposition and capital recycling plans, and the intended results thereof; our access to capital markets, as well as our financing activities, cost of debt and interest expense levels, including the characteristics of our balance sheet and cost of capital; adjusted funds from operations coverage and guidance, including underlying assumptions, such as the timing of acquisitions, our level of general and administrative expense, and dispositions and the impact thereof, and current trends; our revenue mix and the stability and recurring nature of our income streams, as well as the benefits and results of our strategic shift towards focusing exclusively on net lease investing for our Owned Portfolio; and anticipated future financial and operating performance and results, including underlying assumptions and estimates of growth, and our ability to create long-term shareholder value. 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, 2017. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.

*     *     *     *     *

 

W. P. CAREY INC.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)



December 31,


2017


2016

Assets




Investments in real estate:




Land, buildings and improvements (a)

$

5,457,265



$

5,285,837


Net investments in direct financing leases

721,607



684,059


In-place lease and other intangible assets

1,213,976



1,172,238


Above-market rent intangible assets

640,480



632,383


Assets held for sale



26,247


Investments in real estate

8,033,328



7,800,764


Accumulated depreciation and amortization (b)

(1,329,613)



(1,018,864)


Net investments in real estate

6,703,715



6,781,900


Equity investments in the Managed Programs and real estate (c)

341,457



298,893


Cash and cash equivalents

162,312



155,482


Due from affiliates

105,308



299,610


Other assets, net

274,650



282,149


Goodwill

643,960



635,920


Total assets

$

8,231,402



$

8,453,954






Liabilities and Equity




Debt:




Unsecured senior notes, net

$

2,474,661



$

1,807,200


Unsecured term loans, net

388,354



249,978


Unsecured revolving credit facility

216,775



676,715


Non-recourse mortgages, net

1,185,477



1,706,921


Debt, net

4,265,267



4,440,814


Accounts payable, accrued expenses and other liabilities

263,053



266,917


Below-market rent and other intangible liabilities, net

113,957



122,203


Deferred income taxes

67,009



90,825


Distributions payable

109,766



107,090


Total liabilities

4,819,052



5,027,849


Redeemable noncontrolling interest

965



965






Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued




Common stock, $0.001 par value, 450,000,000 shares authorized; 106,922,616 and 106,294,162 
     shares, respectively, issued and outstanding

107



106


Additional paid-in capital

4,433,573



4,399,961


Distributions in excess of accumulated earnings

(1,052,064)



(894,137)


Deferred compensation obligation

46,656



50,222


Accumulated other comprehensive loss

(236,011)



(254,485)


Total stockholders' equity

3,192,261



3,301,667


Noncontrolling interests

219,124



123,473


Total equity

3,411,385



3,425,140


Total liabilities and equity

$

8,231,402



$

8,453,954





________



(a)

Includes $83.0 million and $81.7 million of amounts attributable to operating properties as of December 31, 2017 and 2016, respectively.

(b)

Includes $630.0 million and $484.4 million of accumulated depreciation on buildings and improvements as of December 31, 2017 and 2016, respectively, and $699.7 million and $534.4 million of accumulated amortization on lease intangibles as of December 31, 2017 and 2016, respectively.

(c)

Our equity investments in the Managed Programs totaled $201.4 million and $160.8 million as of December 31, 2017 and 2016, respectively. Our equity investments in real estate joint ventures totaled $140.0 million and $138.1 million as of December 31, 2017 and 2016, respectively.

 

W. P. CAREY INC.

Quarterly Consolidated Statements of Income

(in thousands, except share and per share amounts)



Three Months Ended


December 31, 2017


September 30, 2017


December 31, 2016

Revenues






Owned Real Estate:






 Lease revenues

$

154,826



$

161,511



$

157,105


 Operating property revenues

6,910



8,449



7,071


 Reimbursable tenant costs

5,584



5,397



6,201


 Lease termination income and other

515



1,227



1,093



167,835



176,584



171,470


Investment Management:






 Asset management revenue

16,854



17,938



16,375


 Structuring revenue

6,217



9,817



16,338


 Reimbursable costs from affiliates

6,055



6,211



20,061


 Dealer manager fees



105



2,623


 Other advisory revenue



99



1,913



29,126



34,170



57,310



196,961



210,754



228,780


Operating Expenses






Depreciation and amortization

64,015



64,040



62,675


General and administrative

17,702



17,236



24,230


Reimbursable tenant and affiliate costs

11,639



11,608



26,262


Property expenses, excluding reimbursable tenant costs

9,560



10,556



10,956


Stock-based compensation expense

4,268



4,635



3,051


Impairment charges

2,769





9,433


Subadvisor fees (a)

2,002



5,206



4,131


Other expenses

(533)



65



18


Restructuring and other compensation (b)

289



1,356




Dealer manager fees and expenses



462



3,808



111,711



115,164



144,564


Other Income and Expenses






Interest expense

(40,401)



(41,182)



(43,913)


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

16,930



16,318



16,476


Other income and (expenses)

1,356



(4,569)



(3,731)



(22,115)



(29,433)



(31,168)


Income before income taxes and gain on sale of real estate

63,135



66,157



53,048


Benefit from (provision for) income taxes

192



(1,760)



(7,826)


Income before gain on sale of real estate

63,327



64,397



45,222


Gain on sale of real estate, net of tax

11,146



19,257



3,248


Net Income

74,473



83,654



48,470


Net loss (income) attributable to noncontrolling interests

736



(3,376)



(766)


Net Income Attributable to W. P. Carey

$

75,209



$

80,278



$

47,704








Basic Earnings Per Share

$

0.69



$

0.74



$

0.44


Diluted Earnings Per Share

$

0.69



$

0.74



$

0.44


Weighted-Average Shares Outstanding






Basic

108,041,556



108,019,292



107,487,181


Diluted

108,208,918



108,143,694



107,715,965


 

W. P. CAREY INC.

Full Year Consolidated Statements of Income

(in thousands, except share and per share amounts)



Years Ended December 31,


2017


2016

Revenues




Owned Real Estate:




 Lease revenues

$

630,373



$

663,463


 Operating property revenues

30,562



30,767


 Reimbursable tenant costs

21,524



25,438


 Lease termination income and other (c)

4,749



35,696



687,208



755,364


Investment Management:




 Asset management revenue

70,125



61,971


 Reimbursable costs from affiliates

51,445



66,433


 Structuring revenue

34,198



47,328


 Dealer manager fees

4,430



8,002


 Other advisory revenue

896



2,435



161,094



186,169



848,302



941,533


Operating Expenses




Depreciation and amortization

253,334



276,510


Reimbursable tenant and affiliate costs

72,969



91,871


General and administrative

70,891



82,352


Property expenses, excluding reimbursable tenant costs

40,756



49,431


Stock-based compensation expense

18,917



18,015


Subadvisor fees (a)

13,600



14,141


Restructuring and other compensation (b)

9,363



11,925


Dealer manager fees and expenses

6,544



12,808


Impairment charges

2,769



59,303


Other expenses (d) (e)

605



5,377



489,748



621,733


Other Income and Expenses




Interest expense

(165,775)



(183,409)


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

64,750



64,719


Other income and (expenses)

(3,613)



5,667



(104,638)



(113,023)


Income before income taxes and gain on sale of real estate

253,916



206,777


Provision for income taxes

(2,711)



(3,288)


Income before gain on sale of real estate

251,205



203,489


Gain on sale of real estate, net of tax

33,878



71,318


Net Income

285,083



274,807


Net income attributable to noncontrolling interests

(7,794)



(7,060)


Net Income Attributable to W. P. Carey

$

277,289



$

267,747






Basic Earnings Per Share

$

2.56



$

2.50


Diluted Earnings Per Share

$

2.56



$

2.49


Weighted-Average Shares Outstanding




Basic


107,824,738




106,743,012


Diluted

108,035,971



107,073,203





__________



(a)

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 100% of asset management fees paid to us by CPA:18 – Global. Pursuant to the terms of the subadvisory agreement we had with the subadvisor in connection with Carey Credit Income Fund (CCIF) (prior to our resignation as the advisor to CCIF in the third quarter of 2017), we paid a subadvisory fee equal to 50% of the asset management fees and organization and offering costs paid to us by CCIF.

(b)

Amounts for the three months ended December 31, 2017, September 30, 2017 and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. Amount for the year ended December 31, 2016 represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements, primarily in connection with the reduction in force that we completed in March 2016.

(c)

Amount for the year ended December 31, 2016 includes $32.2 million of lease termination income related to a domestic property sold during that year.

(d)

Amount for the year ended December 31, 2017 is primarily comprised of an accrual for estimated one-time legal settlement expenses.

(e)

Amount for the year ended December 31, 2016 reflects expenses related to our formal strategic review of $5.2 million, which was completed in May 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


December 31, 2017


September 30, 2017


December 31, 2016

Net income attributable to W. P. Carey

$

75,209



$

80,278



$

47,704


Adjustments:






 Depreciation and amortization of real property

62,603



62,621



61,373


 Gain on sale of real estate, net

(11,146)



(19,257)



(3,248)


 Impairment charges

2,769





9,433


 Proportionate share of adjustments for noncontrolling interests

(2,696)



(2,692)



(3,184)


 Proportionate share of adjustments to equity in net income of partially owned 
     entities

877



866



1,059


Total adjustments

52,407



41,538



65,433


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

127,616



121,816



113,137


Adjustments:






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

17,922



12,459



12,653


 Tax benefit – deferred

(10,497)



(1,234)



(2,433)


 Stock-based compensation

4,268



4,635



3,051


 Other amortization and non-cash items (c)

2,198



6,208



5,584


 Amortization of deferred financing costs

2,043



2,184



926


 Straight-line and other rent adjustments

(2,002)



(3,212)



(4,953)


 Other expenses

(533)



65



18


 Realized (gains) losses on foreign currency

(472)



(449)



1,102


 Restructuring and other compensation (d)

289



1,356




 (Gain) loss on extinguishment of debt

(81)



1,566



224


 Proportionate share of adjustments to equity in net income of partially owned 
     entities

2,884



3,064



2,810


 Proportionate share of adjustments for noncontrolling interests

(1,573)



(216)



(595)


Total adjustments

14,446



26,426



18,387


AFFO Attributable to W. P. Carey (a)

$

142,062



$

148,242



$

131,524








Summary






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

$

127,616



$

121,816



$

113,137


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

$

1.18



$

1.13



$

1.05


AFFO attributable to W. P. Carey (a)

$

142,062



$

148,242



$

131,524


AFFO attributable to W. P. Carey per diluted share (a)

$

1.31



$

1.37



$

1.22


Diluted weighted-average shares outstanding


108,208,918




108,143,694




107,715,965


 

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,


2017


2016

Net income attributable to W. P. Carey

$

277,289



$

267,747


Adjustments:




 Depreciation and amortization of real property

248,042



270,822


 Gain on sale of real estate, net

(33,878)



(71,318)


 Impairment charges

2,769



59,303


 Proportionate share of adjustments for noncontrolling interests

(10,491)



(11,725)


 Proportionate share of adjustments to equity in net income of partially owned entities

5,293



5,053


Total adjustments

211,735



252,135


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

489,024



519,882


Adjustments:




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

55,195



36,504


 Stock-based compensation

18,917



18,015


 Tax benefit – deferred

(18,664)



(24,955)


 Other amortization and non-cash items (c) (e)

17,193



(2,111)


 Straight-line and other rent adjustments (f)

(11,679)



(39,215)


 Restructuring and other compensation (d)

9,363



11,925


 Amortization of deferred financing costs

8,169



3,197


 Realized (gains) losses on foreign currency

(896)



3,671


 Other expenses (g)

605



5,377


 (Gain) loss on extinguishment of debt

(46)



4,109


 Allowance for credit losses



7,064


 Proportionate share of adjustments to equity in net income of partially owned entities

8,476



3,551


 Proportionate share of adjustments for noncontrolling interests

(2,678)



683


Total adjustments

83,955



27,815


AFFO Attributable to W. P. Carey (a)

$

572,979



$

547,697






Summary




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

$

489,024



$

519,882


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

$

4.53



$

4.86


AFFO attributable to W. P. Carey (a)

$

572,979



$

547,697


AFFO attributable to W. P. Carey per diluted share (a)

$

5.30



$

5.12


Diluted weighted-average shares outstanding


108,035,971




107,073,203





__________



(a)

FFO and AFFO are non-GAAP measures. See below for a description of FFO and AFFO.

(b)

Amounts for the three months and year ended December 31, 2017 include an adjustment of $5.7 million related to accelerated amortization of an above-market rent intangible in connection with a lease restructuring. Amount for the year ended December 31, 2016 includes an adjustment of $16.7 million related to accelerated amortization of a below-market rent intangible from a tenant of a domestic property that was sold during 2016.

(c)

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

(d)

Amounts for the three months ended December 31, 2017, September 30, 2017 and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. Amount for the year ended December 31, 2016 represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements, primarily in connection with the reduction in force that we completed in March 2016.

(e)

Amount for the year ended December 31, 2016 includes an adjustment of $0.6 million to exclude a portion of a gain recognized on the deconsolidation of an affiliate.

(f)

Amount for the year ended December 31, 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 2016, as such amount was determined to be non-core income. Amount for the year ended December 31, 2016 also reflects an adjustment to include $1.8 million of lease termination income received in December 2015 that represented core income for the year ended December 31, 2016.

(g)

Amount for the year ended December 31, 2017 is primarily comprised of an accrual for estimated one-time legal settlement expenses. Amount for the year ended December 31, 2016 reflects expenses related to our formal strategic review of $5.2 million, which was completed in May 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-based compensation, gains or losses from deconsolidation of subsidiaries and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses such as certain lease termination income, gains or losses from extinguishment of debt, restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements and other expenses (which includes expenses related to the formal strategic review that we completed in May 2016 and accruals for estimated one-time legal settlement expenses). We also exclude realized and unrealized 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 to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs which are currently not engaged in acquisitions, mergers and restructuring which are not part of our normal business operations. 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

W. P. Carey Inc. Logo. (PRNewsFoto/W. P. Carey Inc.)

 

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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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