Press Release

W. P. Carey Inc. Announces Third Quarter 2020 Financial Results

Company Release - 10/30/2020 7:30 AM ET

NEW YORK, Oct. 30, 2020 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), a net lease real estate investment trust, today reported its financial results for the third quarter ended September 30, 2020.

Financial Highlights

  • Net income attributable to W. P. Carey of $149.4 million, or $0.85 per diluted share, including Real Estate segment net income attributable to W. P. Carey of $147.0 million, or $0.84 per diluted share
  • AFFO of $202.0 million, or $1.15 per diluted share, including Real Estate segment AFFO of $196.8 million, or $1.12 per diluted share
  • 2020 AFFO guidance reinstated with a range of $4.65 to $4.75 per diluted share, including Real Estate AFFO of between $4.51 and $4.61 per diluted share and assuming full year investment volume totaling between $750 million and $1 billion
  • Quarterly cash dividend raised to $1.044 per share, equivalent to an annualized dividend rate of $4.176 per share

Real Estate Portfolio

  • Overall collection rate of 98% for 2020 third quarter rent due and 99% for October rent due
  • Investment volume of $566.9 million year to date, including $515.9 million during the first nine months and $51.0 million subsequent to quarter end
  • Gross disposition proceeds of $63.3 million during the third quarter, bringing total dispositions for the first nine months to $179.7 million
  • Portfolio occupancy of 98.9%
  • Weighted-average lease term of 10.6 years

Balance Sheet and Capitalization

  • During the 2020 third quarter, the Company settled a portion of the equity forward sales agreements entered into in the second quarter, issuing 1,488,291 shares of common stock for net proceeds of $100 million
  • Subsequent to quarter end, the Company issued $500 million of 2.400% Senior Unsecured Notes due 2031

 

MANAGEMENT COMMENTARY

"Our third quarter results reflect the consistently high rent collections our portfolio has generated since the start of the pandemic, including a 98% collection rate for the period. I'm also pleased to say that after a pause in deal flow due to the pandemic we've resumed external investment activity and, given increased visibility into our pipeline, reinstated AFFO guidance" said Jason Fox, Chief Executive Officer of W. P. Carey. "The strength of our collections and balance sheet ensure we're well positioned amid renewed uncertainty over the course of the pandemic. And with a robust pipeline, ample liquidity and having locked in a cost of capital that supports accretive investments, we're equally well positioned to execute on the growing number of transaction opportunities before us."

 

QUARTERLY FINANCIAL RESULTS

Revenues

  • Total Company: Revenues, including reimbursable costs, for the 2020 third quarter totaled $302.4 million, down 4.9% from $318.0 million for the 2019 third quarter.
  • Real Estate: Real Estate revenues, including reimbursable costs, for the 2020 third quarter were $297.4 million, down 1.8% from $302.8 million for the 2019 third quarter. For the 2019 third quarter, lease termination and other income included $8.3 million of proceeds from a bankruptcy claim. Lease revenues increased, primarily through the combined impact of net acquisitions, the strengthening of foreign currencies in relation to the U.S. dollar between the periods and rent escalations, partly offset by the impact of the COVID-19 pandemic on rent collections during the 2020 third quarter. In addition, operating revenues for the 2019 third quarter reflected the operations of a hotel operating property that was disposed in the 2020 first quarter.
  • Investment Management: Investment Management revenues, including reimbursable costs, for the 2020 third quarter were $5.0 million, down 67.3% from $15.3 million for the 2019 third quarter, due primarily to lower asset management revenues and reimbursable costs resulting from the management internalization by Carey Watermark Investors Incorporated (CWI 1) and Carey Watermark Investors 2 Incorporated (CWI 2).

Net Income Attributable to W. P. Carey

  • Net income attributable to W. P. Carey for the 2020 third quarter was $149.4 million, up 261.7% from $41.3 million for the 2019 third quarter. Net income from Real Estate attributable to W. P. Carey was $147.0 million, which increased due primarily to a mark-to-market gain of $48.8 million for the Company's investment in shares of a cold storage operator, impairment charges totaling $25.8 million recognized during the prior year period, a higher aggregate gain on sale of real estate and the impact of net acquisitions. Net income from Investment Management attributable to W. P. Carey was $2.4 million, which decreased due primarily to the cessation of Investment Management revenues and distributions previously earned from CWI 1 and CWI 2.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2020 third quarter was $1.15 per diluted share, down 11.5% from $1.30 per diluted share for the 2019 third quarter. AFFO from the Company's Real Estate segment (Real Estate AFFO) was $1.12 per diluted share, which decreased due primarily to higher lease termination and other income during the 2019 third quarter and, to a lesser extent, the impact of COVID-19 on rent collections during the 2020 third quarter, partly offset by the accretive impact of net investment activity and rent escalations. AFFO from the Company's Investment Management segment was $0.03 per diluted share, which declined, reflecting the Company's continued move out of Investment Management through the management internalization by CWI 1 and CWI 2, resulting in lower asset management fees and distributions from the Company's special general partner interests. Segment AFFO also reflects the full allocation of general and administrative expenses to the Company's Real Estate segment.

Note: Further information concerning AFFO and Real Estate AFFO, which are both non-GAAP supplemental performance metrics, is presented in the accompanying tables and related notes.

Dividend

  • As previously announced, on September 17, 2020 the Company's Board of Directors declared a quarterly cash dividend of $1.044 per share, equivalent to an annualized dividend rate of $4.176 per share. The dividend was paid on October 15, 2020 to stockholders of record as of September 30, 2020.

 

AFFO GUIDANCE

  • The Company has reinstated its guidance for the 2020 full year, and expects to report total AFFO of between $4.65 and $4.75 per diluted share, including Real Estate AFFO of between $4.51 and $4.61 per diluted share, based on the following key assumptions:

    (i)   investments for the Company's Real Estate portfolio of between $750 million and $1 billion;

    (ii)   dispositions from the Company's Real Estate portfolio of between $300 million and $350 million; and

    (iii)  total general and administrative expenses of between $76 million and $79 million.

Note: The Company does not provide guidance on net income. The Company only provides guidance on total AFFO (and Real Estate AFFO) and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets and depreciation and amortization from new acquisitions.

 

BALANCE SHEET AND CAPITALIZATION

Liquidity

  • As of September 30, 2020, the Company had approximately $1.9 billion of total liquidity, including $1.6 billion of capacity available on the Company's Senior Unsecured Credit Facility, available net proceeds under the forward sale agreements of $166 million and cash and cash equivalents of $152 million.

Forward Equity Offering

  • During the 2020 third quarter, the Company settled a portion of its forward sale agreements, issuing 1,488,291 shares for net proceeds of $100 million. As of September 30, 2020, the Company had the ability to settle the remaining 2,510,709 shares under the forward sale agreements by December 17, 2021, for anticipated net proceeds of approximately $166 million.

Bond Issuance – Subsequent to Quarter End

  • As previously announced, on October 14, 2020, the Company completed an underwritten public offering of $500 million aggregate principal amount of 2.400% Senior Notes due February 1, 2031. The Company intends to use the net proceeds from the offering to repay certain indebtedness, including amounts outstanding under the Company's unsecured revolving credit facility (which was used in part to repay secured mortgage debt outstanding), to fund potential future acquisitions and for general corporate purposes.

 

REAL ESTATE

COVID-19 Update on Rent Collections

  • The Company received 98% of contractual base rent that was due in the 2020 third quarter and 99% of contractual base rent that was due in October.
  • 2020 third quarter collection rates by property type were:



Industrial

99%




Warehouse

94%




Office

100%




Retail

100%




Fitness, theater and restaurant

65%




Self Storage (net lease)

100%




Other

98%

  • 2020 third quarter collection rates by geography were:



U.S.

97%




Europe                                     

99%




Other

100%

Investments

  • During the 2020 third quarter, the Company completed investments totaling $112.0 million, consisting of two acquisitions for $84.0 million in aggregate and one capital investment project at a cost of $28.0 million, bringing total investment volume for the nine months ended September 30, 2020 to $515.9 million.
  • Subsequent to quarter end, the Company completed one additional investment for $51.0 million, bringing total investment volume year to date to $566.9 million.
  • As of September 30, 2020, the Company had six capital investment projects outstanding for an expected total investment of approximately $172.0 million, of which one project totaling $3.0 million is currently expected to be completed during the 2020 fourth quarter.

Dispositions

  • During the 2020 third quarter, the Company disposed of four properties for gross proceeds of $63.3 million, bringing total disposition proceeds for the nine months ended September 30, 2020 to $179.7 million.

Composition

  • As of September 30, 2020, the Company's net lease portfolio consisted of 1,215 properties, comprising 142 million square feet leased to 351 tenants, with a weighted-average lease term of 10.6 years and an occupancy rate of 98.9%. In addition, the Company owned 19 self-storage operating properties and one hotel operating property, totaling approximately 1.4 million square feet.

 

   *     *     *     *     *

 

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2020 third quarter and certain prior quarters, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on October 30, 2020, and made available on the Company's website at ir.wpcarey.com/investor-relations.

 

*     *     *     *     *

 

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

Date/Time: Friday, October 30, 2020 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-465-1289 (U.S.) or +1-201-689-8762 (international)

Live Audio Webcast and Replay: www.wpcarey.com/earnings

 

*     *     *     *     *

 

W. P. Carey Inc.

W. P. Carey ranks among the largest net lease REITs with an enterprise value of approximately $18 billion and a diversified portfolio of operationally-critical commercial real estate that includes 1,215 net lease properties covering approximately 142 million square feet as of September 30, 2020. For nearly five decades, the company has invested in high-quality single-tenant industrial, warehouse, office, retail and self-storage properties subject to long-term net leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe and is well-diversified by tenant, property type, geographic location and tenant industry. 

www.wpcarey.com 

 

*     *     *     *     *

 

Cautionary Statement Concerning Forward-Looking Statements and COVID-19 Update on Rent Collections

Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "assume," "outlook," "seek," "plan," "believe," "expect," "anticipate," "intend," "estimate," "forecast" and other comparable terms. These forward-looking statements include, but are not limited to, statements made by Mr. Fox regarding our outlook and transaction opportunities. These statements are based on the current expectations of our management and it is important to note that our 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 risks or uncertainties, like the risks related to the effects of pandemics and global outbreaks of contagious diseases or the fear of such outbreaks (such as the current COVID-19 pandemic) and those additional risk factors discussed in reports that we have filed with the SEC could also have material adverse effects on our future results, performance or achievements. Discussions of some of these other important factors and assumptions are contained in W. P. Carey's filings with the SEC and are available at the SEC's website at http://www.sec.gov, including Part II, Item 1A. Risk Factors in W. P. Carey's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and Part I, Item 1A. Risk Factors in W. P. Carey's Annual Report on Form 10-K for the year ended December 31, 2019. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.

In addition, given the significant uncertainty regarding the duration and severity of the impact of the COVID-19 pandemic, the Company is unable to predict its tenants' continued ability to pay rent. Therefore, information provided regarding historical rent collections should not serve as an indication of expected future rent collections. Additional details regarding the Company's update relating to COVID-19 can be found in a presentation furnished as Exhibit 99.3 of the Current Report on Form 8-K filed on October 30, 2020.

 

*     *     *     *     *

 

W. P. CAREY INC.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)




September 30, 2020


December 31, 2019

Assets




Investments in real estate:




Land, buildings and improvements (a)

$

10,560,534



$

9,856,191


Net investments in direct financing leases

715,541



896,549


In-place lease intangible assets and other

2,243,117



2,186,851


Above-market rent intangible assets

900,503



909,139


Investments in real estate

14,419,695



13,848,730


Accumulated depreciation and amortization (b)

(2,382,971)



(2,035,995)


Assets held for sale, net (c)

10,626



104,010


Net investments in real estate

12,047,350



11,916,745


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

288,444



324,004


Cash and cash equivalents

152,215



196,028


Due from affiliates

4,347



57,816


Other assets, net

793,079



631,637


Goodwill

904,075



934,688


Total assets

$

14,189,510



$

14,060,918






Liabilities and Equity




Debt:




Senior unsecured notes, net

$

4,513,243



$

4,390,189


Unsecured term loans, net

304,221




Unsecured revolving credit facility

182,799



201,267


Non-recourse mortgages, net

1,234,197



1,462,487


Debt, net

6,234,460



6,053,943


Accounts payable, accrued expenses and other liabilities

549,899



487,405


Below-market rent and other intangible liabilities, net

192,445



210,742


Deferred income taxes

137,460



179,309


Dividends payable

185,877



181,346


Total liabilities

7,300,141



7,112,745






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




Common stock, $0.001 par value, 450,000,000 shares authorized; 175,396,158 and 172,278,242 shares,
respectively, issued and outstanding

175



172


Additional paid-in capital

8,919,520



8,717,535


Distributions in excess of accumulated earnings

(1,800,875)



(1,557,374)


Deferred compensation obligation

42,014



37,263


Accumulated other comprehensive loss

(273,124)



(255,667)


Total stockholders' equity

6,887,710



6,941,929


Noncontrolling interests

1,659



6,244


Total equity

6,889,369



6,948,173


Total liabilities and equity

$

14,189,510



$

14,060,918


________

(a)  Includes $83.5 million and $83.1 million of amounts attributable to operating properties as of September 30, 2020 and December 31, 2019, respectively.

(b)  Includes $1.2 billion and $1.0 billion of accumulated depreciation on buildings and improvements as of September 30, 2020 and December 31, 2019, 
      respectively, and $1.2 billion and $1.1 billion of accumulated amortization on lease intangibles as of September 30, 2020 and December 31, 2019, respectively.

(c)  At September 30, 2020, we had two properties classified as Assets held for sale, net, one of which was sold in October 2020. At December 31, 2019, we 
      had one hotel operating property classified as Assets held for sale, net, which was sold in January 2020.

(d)  Our equity investments in real estate totaled $236.9 million and $194.4 million as of September 30, 2020 and December 31, 2019, respectively. Our equity 
      investments in the Managed Programs totaled $51.6 million and $129.6 million as of September 30, 2020 and December 31, 2019, respectively.

 

 

W. P. CAREY INC.

Quarterly Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share amounts)




Three Months Ended


September 30, 2020


June 30, 2020


September 30, 2019

Revenues






Real Estate:






  Lease revenues

$

293,856



$

280,303



$

278,839


  Operating property revenues

1,974



1,427



9,538


  Lease termination income and other

1,565



1,917



14,377



297,395



283,647



302,754


Investment Management:






  Asset management revenue

3,748



4,472



9,878


  Reimbursable costs from affiliates

1,276



2,411



4,786


  Structuring and other advisory revenue





587



5,024



6,883



15,251



302,419



290,530



318,005


Operating Expenses






Depreciation and amortization

108,351



107,477



109,517


General and administrative

19,399



17,472



17,210


Reimbursable tenant costs

15,728



13,796



15,611


Property expenses, excluding reimbursable tenant costs

11,923



11,651



10,377


Stock-based compensation expense

4,564



2,918



4,747


Operating property expenses

1,594



1,388



8,547


Reimbursable costs from affiliates

1,276



2,411



4,786


Merger and other expenses

(596)



1,074



70


Subadvisor fees



192



1,763


Impairment charges





25,781



162,239



158,379



198,409


Other Income and Expenses






Interest expense

(52,537)



(52,182)



(58,626)


Other gains and (losses) (a)

45,113



8,847



(12,402)


Gain on sale of real estate, net

20,933





71


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

1,720



33,983



5,769


Loss on change in control of interests (c)





(8,416)



15,229



(9,352)



(73,604)


Income before income taxes

155,409



122,799



45,992


Provision for income taxes

(5,975)



(7,595)



(4,157)


Net Income

149,434



115,204



41,835


Net income attributable to noncontrolling interests (b)

(37)



(9,904)



(496)


Net Income Attributable to W. P. Carey

$

149,397



$

105,300



$

41,339








Basic Earnings Per Share

$

0.85



$

0.61



$

0.24


Diluted Earnings Per Share

$

0.85



$

0.61



$

0.24


Weighted-Average Shares Outstanding






Basic

174,974,185



173,401,749



172,235,066


Diluted

175,261,812



173,472,755



172,486,506








Dividends Declared Per Share

$

1.044



$

1.042



$

1.036


 

 

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,


2020


2019

Revenues




Real Estate:




  Lease revenues

$

856,269



$

811,580


  Lease termination income and other

9,991



23,951


  Operating property revenues

9,368



40,970



875,628



876,501


Investment Management:




  Asset management revenue

18,109



29,400


  Reimbursable costs from affiliates

7,717



12,475


  Structuring and other advisory revenue

494



3,163



26,320



45,038



901,948



921,539


Operating Expenses




Depreciation and amortization

332,022



335,528


General and administrative

57,616



58,224


Reimbursable tenant costs

42,699



42,699


Property expenses, excluding reimbursable tenant costs

33,649



30,204


Impairment charges

19,420



25,781


Stock-based compensation expense

10,143



13,848


Operating property expenses

8,205



30,015


Reimbursable costs from affiliates

7,717



12,475


Subadvisor fees

1,469



5,615


Merger and other expenses

665



912



513,605



555,301


Other Income and Expenses




Interest expense

(157,259)



(179,658)


Other gains and (losses)

49,537



(12,118)


Gain on sale of real estate, net

32,684



642


Equity in (losses) earnings of equity method investments in the Managed Programs
  
and real estate (b) (d)

(10,087)



15,211


Loss on change in control of interests (c)



(8,416)



(85,125)



(184,339)


Income before income taxes

303,218



181,899


Benefit from (provision for) income taxes

28,122



(5,147)


Net Income

331,340



176,752


Net income attributable to noncontrolling interests (b)

(10,553)



(881)


Net Income Attributable to W. P. Carey

$

320,787



$

175,871






Basic Earnings Per Share

$

1.84



$

1.03


Diluted Earnings Per Share

$

1.84



$

1.03


Weighted-Average Shares Outstanding




Basic

173,879,068



170,276,085


Diluted

174,144,038



170,545,665






Dividends Declared Per Share

$

3.126



$

3.102


__________

(a) 

Amount for the three months ended September 30, 2020 is primarily comprised of a mark-to-market adjustment for our investment in shares of a cold storage operator of $48.8 million, non-cash allowance for credit losses on direct financing leases and other assets of $(8.4) million and net gains on foreign currency transactions of $5.2 million.

(b) 

Amounts for the three months ended June 30, 2020 and nine months ended September 30, 2020 include a non-cash net gain of $33.0 million (inclusive of $9.9 million attributable to the redemption of a noncontrolling interest that the former subadvisors for CWI 1 and CWI 2 held in the special general partner interests) recognized in connection with consideration received at closing of the CWI 1 and CWI 2 merger, which reflects the allocation of $34.3 million of goodwill within our Investment Management segment.

(c) 

Amounts for the three and nine months ended September 30, 2019 represent a loss recognized on the purchase of the remaining interest in an investment from CPA:17 – Global (CPA:17) in our merger with that former affiliate in October 2018 (the CPA:17 Merger), which we had previously accounted for under the equity method. We recognized this loss because we identified certain measurement period adjustments during the third quarter of 2019 that impacted the provisional accounting for this investment.

(d) 

Amount for the nine months ended September 30, 2020 includes non-cash other-than-temporary impairment charges totaling $47.1 million recognized on our former equity investments in CWI 1 and CWI 2.


 

 

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, 2020


June 30, 2020


September 30, 2019

Net income attributable to W. P. Carey

$

149,397



$

105,300



$

41,339


Adjustments:






  Depreciation and amortization of real property

107,170



106,264



108,279


  Gain on sale of real estate, net

(20,933)





(71)


  Impairment charges





25,781


  Loss on change in control of interests (a)





8,416


  Proportionate share of adjustments to equity in net income of partially owned
    entities (b) (c)

3,500



(19,117)



4,210


  Proportionate share of adjustments for noncontrolling interests (d)

(4)



(588)



(4)


Total adjustments

89,733



86,559



146,611


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

239,130



191,859



187,950


Adjustments:






  Other (gains) and losses (f)

(44,648)



(4,259)



18,618


  Straight-line and other rent adjustments (g)

(13,115)



(11,720)



(6,370)


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

12,472



12,956



14,969


  Stock-based compensation

4,564



2,918



4,747


  Amortization of deferred financing costs

2,932



2,993



2,991


  Tax benefit – deferred and other (h)

(715)



(229)



(1,039)


  Merger and other expenses

(596)



1,074



70


  Other amortization and non-cash items

508



488



379


  Proportionate share of adjustments to equity in net income of partially owned
    entities (c) (i)

1,429



1,251



1,920


Proportionate share of adjustments for noncontrolling interests (d)

(6)



579



(12)


Total adjustments

(37,175)



6,051



36,273


AFFO Attributable to W. P. Carey (e)

$

201,955



$

197,910



$

224,223








Summary






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

$

239,130



$

191,859



$

187,950


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

$

1.36



$

1.11



$

1.09


AFFO attributable to W. P. Carey (e)

$

201,955



$

197,910



$

224,223


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

$

1.15



$

1.14



$

1.30


Diluted weighted-average shares outstanding

175,261,812



173,472,755



172,486,506



 

 

W. P. CAREY INC.

Quarterly Reconciliation of Net Income from Real Estate to Adjusted Funds from Operations (AFFO) from Real Estate (Unaudited)

(in thousands, except share and per share amounts)




Three Months Ended


September 30, 2020


June 30, 2020


September 30, 2019

Net income from Real Estate attributable to W. P. Carey

$

146,983



$

81,825



$

33,556


Adjustments:






  Depreciation and amortization of real property

107,170



106,264



108,279


  Gain on sale of real estate, net

(20,933)





(71)


  Impairment charges





25,781


  Loss on change in control of interests (a)





8,416


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

3,500



3,352



4,210


Proportionate share of adjustments for noncontrolling interests (d)

(4)



(588)



(4)


Total adjustments

89,733



109,028



146,611


FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (e)

236,716



190,853



180,167


Adjustments:






  Other (gains) and losses (f)

(44,115)



(5,437)



18,956


  Straight-line and other rent adjustments (g)

(13,115)



(11,720)



(6,370)


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

12,472



12,956



14,969


  Stock-based compensation

4,564



2,918



3,435


  Amortization of deferred financing costs

2,932



2,993



2,991


  Tax benefit – deferred and other

(2,909)



(3,051)



(1,414)


  Merger and other expenses

(1,016)



935



70


  Other amortization and non-cash items

508



488



180


  Proportionate share of adjustments to equity in net income (loss) of partially owned
    entities (c) (i)

739



166



(113)


Proportionate share of adjustments for noncontrolling interests (d)

(6)



579



(12)


Total adjustments

(39,946)



827



32,692


AFFO Attributable to W. P. Carey – Real Estate (e)

$

196,770



$

191,680



$

212,859








Summary






FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (e)

$

236,716



$

190,853



$

180,167


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

$

1.35



$

1.10



$

1.04


AFFO attributable to W. P. Carey – Real Estate (e)

$

196,770



$

191,680



$

212,859


AFFO attributable to W. P. Carey per diluted share – Real Estate (e)

$

1.12



$

1.10



$

1.23


Diluted weighted-average shares outstanding

175,261,812



173,472,755



172,486,506


 

 

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,


2020


2019

Net income attributable to W. P. Carey

$

320,787



$

175,871


Adjustments:




  Depreciation and amortization of real property

328,347



331,742


  Gain on sale of real estate, net

(32,684)



(642)


  Impairment charges

19,420



25,781


  Loss on change in control of interests (a)



8,416


  Proportionate share of adjustments to equity in net income of partially owned entities (b) (c) (j)

34,860



13,123


  Proportionate share of adjustments for noncontrolling interests (d)

(14)



(65)


Total adjustments

349,929



378,355


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

670,716



554,226


Adjustments:




  Tax benefit – deferred and other (h) (k) (l) (m)

(48,867)



(6,900)


  Other (gains) and losses

(39,092)



29,272


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

37,208



47,346


  Straight-line and other rent adjustments (g) (n)

(31,927)



(20,603)


  Stock-based compensation

10,143



13,848


  Amortization of deferred financing costs

9,014



8,489


  Other amortization and non-cash items

1,404



2,652


  Merger and other expenses

665



912


  Proportionate share of adjustments to equity in net income of partially owned entities (c) (i)

6,575



5,257


  Proportionate share of adjustments for noncontrolling interests (d)

566



(44)


Total adjustments

(54,311)



80,229


AFFO Attributable to W. P. Carey (e)

$

616,405



$

634,455






Summary




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

$

670,716



$

554,226


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

$

3.85



$

3.25


AFFO attributable to W. P. Carey (e)

$

616,405



$

634,455


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

$

3.54



$

3.72


Diluted weighted-average shares outstanding

174,144,038



170,545,665


 

 

W. P. CAREY INC.

Year-to-Date Reconciliation of Net Income from Real Estate to Adjusted Funds from Operations (AFFO) from Real Estate (Unaudited)

(in thousands, except share and per share amounts)




Nine Months Ended September 30,


2020


2019

Net income from Real Estate attributable to W. P. Carey

$

329,722



$

147,732


Adjustments:




  Depreciation and amortization of real property

328,347



331,742


  Gain on sale of real estate, net

(32,684)



(642)


  Impairment charges

19,420



25,781


  Loss on change in control of interests (a)



8,416


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

10,217



13,123


  Proportionate share of adjustments for noncontrolling interests (d)

(14)



(65)


Total adjustments

325,286



378,355


FFO (as defined by NAREIT) Attributable to W. P. Carey – Real Estate (e)

655,008



526,087


Adjustments:




  Tax benefit – deferred and other (k)

(43,916)



(1,777)


  Other (gains) and losses

(38,579)



28,773


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

37,208



47,346


  Straight-line and other rent adjustments (g) (n)

(31,927)



(20,603)


  Stock-based compensation

9,452



9,717


  Amortization of deferred financing costs

9,014



8,489


  Other amortization and non-cash items

1,205



2,192


  Merger and other expenses

(213)



912


  Proportionate share of adjustments to equity in net income of partially owned entities (c) (i)

631



(87)


  Proportionate share of adjustments for noncontrolling interests (d)

566



(44)


Total adjustments

(56,559)



74,918


AFFO Attributable to W. P. Carey – Real Estate (e)

$

598,449



$

601,005






Summary




FFO (as defined by NAREIT) attributable to W. P. Carey – Real Estate (e)

$

655,008



$

526,087


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

$

3.76



$

3.08


AFFO attributable to W. P. Carey – Real Estate (e)

$

598,449



$

601,005


AFFO attributable to W. P. Carey per diluted share – Real Estate (e)

$

3.44



$

3.52


Diluted weighted-average shares outstanding

174,144,038



170,545,665


__________

(a) 

Amounts for the three and nine months ended September 30, 2019 represent a loss recognized on the purchase of the remaining interest in a real estate investment from CPA:17 in the CPA:17 Merger, which we had previously accounted for under the equity method. We recognized this loss because we identified certain measurement period adjustments during the third quarter of 2019 that impacted the provisional accounting for this investment.

(b) 

Amounts for the three months ended June 30, 2020 and the nine months ended September 30, 2020 include a non-cash net gain of $33.0 million (inclusive of $9.9 million attributable to the redemption of a noncontrolling interest that the former subadvisors for CWI 1 and CWI 2 held in the special general partner interests) recognized in connection with consideration received at closing of the CWI 1 and CWI 2 merger, which reflects the allocation of $34.3 million of goodwill within our Investment Management segment.

(c) 

Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Equity in earnings of equity method investments in the Managed Programs and real estate on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis.

(d) 

Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis.

(e) 

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

(f) 

AFFO amount for the three months ended September 30, 2020 is primarily comprised of a mark-to-market adjustment for our investment in shares of a cold storage operator of $48.8 million, allowance for credit losses of $(8.4) million and net gains on foreign currency transactions of $5.2 million. Real Estate AFFO amount for the three months ended September 30, 2020 is primarily comprised of a mark-to-market adjustment for our investment in shares of a cold storage operator of $48.8 million, non-cash allowance for credit losses on direct financing leases and other assets of $(8.4) million and net gains on foreign currency transactions of $5.0 million. Amounts from period to period will not be comparable due to unpredictable fluctuations in these gains and losses.

(g) 

Amounts for the three and nine months ended September 30, 2019 include straight-line rent adjustments of $4.3 million and $12.5 million, respectively, for a property that was sold in December 2019.

(h) 

Amounts for the three months ended June 30, 2020 and the nine months ended September 30, 2020 include one-time taxes incurred upon the recognition of taxable income associated with the accelerated vesting of shares previously issued by CWI 1 and CWI 2 to us for asset management services performed, in connection with the CWI 1 and CWI 2 merger.

(i) 

Beginning with the first quarter of 2020, this adjustment includes distributions received from CWI 1 and CWI 2 for AFFO (through April 13, 2020, the closing date of the CWI 1 and CWI 2 merger) and from WLT for both AFFO and Real Estate AFFO (after April 13, 2020) in place of our pro rata share of net income from our ownership of shares of CWI 1, CWI 2, and WLT, as applicable. We did not receive any such distributions during the second or third quarter of 2020, due to the adverse effect of COVID-19.

(j) 

Amount for the nine months ended September 30, 2020 includes non-cash other-than-temporary impairment charges totaling $47.1 million recognized on our former equity investments in CWI 1 and CWI 2.

(k) 

Amount for the nine months ended September 30, 2020 include a non-cash deferred tax benefit of $37.2 million as a result of the release of a deferred tax liability relating to our investment in shares of a cold storage operator, which converted to a REIT during that period and is therefore no longer subject to federal income taxes.

(l) 

Amount for the nine months ended September 30, 2020 include a one-time tax benefit of $4.7 million as a result of carrying back certain net operating losses in accordance with the CARES Act, which was enacted on March 27, 2020.

(m) 

Amount for the nine months ended September 30, 2019 includes a current tax benefit, which is excluded from AFFO as it was incurred as a result of the CPA:17 Merger.

 

Non-GAAP Financial Disclosure

Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)

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

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as restated in December 2018. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate, gains or losses on changes in control of interests in real estate and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO.

We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on direct financing leases and other assets, stock-based compensation, non-cash environmental accretion expense and amortization of deferred financing costs. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt and merger and acquisition expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange transactions (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that are currently not engaged in acquisitions, mergers and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies and determine executive compensation.

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

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
Executive Director
Head of Investor Relations
W. P. Carey Inc.
1 (212) 492-1110
Email

Capital Markets

Jeremiah Gregory
Managing Director
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