NEW YORK, Nov. 3, 2023 /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, 2023.
Financial Highlights
|
2023 Third Quarter
|
Net income attributable to W. P. Carey (millions)
|
$125.0
|
Diluted earnings per share
|
$0.58
|
|
|
AFFO (millions)
|
$284.4
|
AFFO per diluted share
|
$1.32
|
-
2023 AFFO guidance range lowered and narrowed to between $5.17 and $5.23 per
diluted share, primarily reflecting execution of the Company's
strategic plan to exit office and anticipated full year investment
volume of between $1.3 billion and $1.5 billion
-
Preliminary 2024 AFFO guidance of between $4.60 and $4.80 per diluted
share announced, based primarily on completion of the Company's
strategic plan to exit office, assumed full year investment volume of
$1.5 billion and capital inflows totaling an estimated $2 billion over
the near term
-
Third quarter cash dividend of $1.071 per share
(declared and paid prior to the NLOP spin-off)
Strategic Plan to Exit Office
-
Announced a strategic plan to exit office, comprising spinning-off
NLOP and implementing an on-balance sheet Office Sale Program
-
NLOP spin-off completed on November 1, 2023
-
Office Sale Program
-
Four properties sold to date under the program for gross proceeds
of $142.5 million, including one disposition for $87.9 million
during the third quarter
-
Approximately $500 million of dispositions under signed
contracts, including the Company's largest office portfolio, with
all sales under the program targeted to be completed in early
2024
Real Estate Portfolio
-
Investment volume of $978.4 million completed during the nine months
ended September 30, 2023, including $39.9 million during the third
quarter
-
Gross disposition proceeds of $196.3 million for the nine months
ended September 30, 2023, including $148.1 million during the third
quarter
-
Contractual same-store rent growth of 4.2%
Balance Sheet and Capitalization
-
Subsequent to quarter end, settled all outstanding forward sale
agreements, issuing approximately 4.7 million shares of common stock
for net proceeds of $384 million
-
Subsequent to quarter end, received approximately $350 million, net
of transaction expenses, from NLOP in connection with the Spin-Off
MANAGEMENT COMMENTARY
"Having completed the spin-off of NLOP and making strong progress selling
the remaining office assets on our balance sheet, we're confident we will
have effectively exited our office exposure by early 2024, better
positioning us for growth," said Jason Fox, Chief Executive Officer of W.
P. Carey.
"We are actively exerting our pricing power on new investments, pushing
cap rates to better reflect interest rates that moved sharply higher late
in the third quarter, after steadily rising over the summer. Deals are
therefore taking longer to negotiate and close — translating to a very
slow third quarter — although many are now back on track and heading
towards closing. And with anticipated capital inflows totaling
approximately $2 billion over the coming months, we believe we're
exceptionally well positioned to continue investing through 2024, in an
environment where we expect to see cap rates move higher and capital
market conditions to remain challenging."
QUARTERLY FINANCIAL RESULTS
Revenues
-
Total Company: Revenues, including reimbursable costs, for the
2023 third quarter totaled $448.6 million, up 16.9% from $383.6 million
for the 2022 third quarter.
-
Real Estate: Real Estate revenues, including reimbursable costs,
for the 2023 third quarter were $448.3 million, up 17.3% from $382.1
million for the 2022 third quarter.
-
-
Lease revenues increased primarily as a result of net investment
activity, rent escalations and net lease properties acquired in the
CPA:18 Merger.
-
Operating property revenues increased primarily as a result of the
self-storage and other operating properties acquired in the CPA:18
Merger, as well as the conversion of 12 hotel properties from net
lease to operating during the 2023 first quarter (three of which
were sold during the 2023 third quarter).
-
Income from finance leases and loans receivable increased primarily
as a result of the reclassification of lease revenues after
receiving notice during the 2023 first quarter of the purchase
option exercise on the portfolio of 78 U-Haul properties. The
reclassification had no impact on total Real Estate revenues and the
properties are expected to be sold during the first quarter of 2024.
Net Income Attributable to W. P. Carey
-
Net income attributable to W. P. Carey for the 2023 third quarter was
$125.0 million, up 19.2% from $104.9 million for the 2022 third quarter.
Net income from Real Estate attributable to W. P. Carey was $124.2
million, which increased due primarily to the impact of net investment
activity (including properties acquired in the CPA:18 Merger) and rent
escalations, partly offset by higher interest expense and impairment
charges recognized during the current year period. Net income from
Investment Management attributable to W. P. Carey was $0.9 million,
compared to a net loss of $6.4 million for the 2022 third quarter,
reflecting a $29.3 million impairment charge recognized on goodwill
within that segment during the prior year period since Investment
Management revenues are expected to be minimal going forward following
the CPA:18 Merger. The Company also recognized a $33.9 million gain on
change in control of interests in connection with the CPA:18 Merger
during the 2022 third quarter.
Adjusted Funds from Operations (AFFO)
-
AFFO for the 2023 third quarter was $1.32 per diluted share, down 2.9%
from $1.36 per diluted share for the 2022 third quarter, driven by the
Company's Real Estate segment, which generated AFFO of $1.32 per diluted
share, down 1.5% from $1.34 per diluted share for the 2022 third
quarter, primarily reflecting higher interest expense and lower other
lease-related income, which more than offset the impact of net
investment activity, rent escalations and the accretive impact of the
CPA:18 Merger. AFFO from the Company's Investment Management segment
declined due primarily to the cessation of Investment Management
revenues and distributions as a result of the CPA:18 Merger.
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
-
On September 14, 2023, the Company reported that its Board of Directors
declared a quarterly cash dividend of $1.071 per share, which was paid
on October 16, 2023 to shareholders of record as of September 29, 2023.
AFFO GUIDANCE
2023 AFFO Guidance
-
For the 2023 full year, the Company has lowered and narrowed its
guidance range for total AFFO to between $5.17 and $5.23 per
diluted share, primarily reflecting execution of the Company's strategic
plan to exit office, including the completion of the Spin-Off, and based
on the following key assumptions:
(i) investment volume of between $1.3 billion and $1.5
billion, which has been revised lower;
(ii) disposition volume of between $450 million and $550 million,
which has been revised higher and includes anticipated asset sales under
the Office Sale Program totaling approximately $300 million; and
(iii) total general and administrative expenses of between $96
million and $98 million, which has been revised lower.
Preliminary 2024 AFFO Guidance
-
For the 2024 full year, the Company preliminarily expects to report
total AFFO of between $4.60 and $4.80 per diluted share, based on the
following:
(i) investment volume of $1.5 billion;
(ii) completion of the Company's strategic plan to exit
office, including anticipated asset sales under the Office Sale Program
totaling approximately $500 million early in 2024;
(iii) exercise of the U-Haul purchase option during the 2024 first
quarter, generating approximately $470 million in gross proceeds;
(iv) operating property dispositions of up to $100 million; and
(v) other dispositions totaling between $100 million and $300
million.
Note:
The Company does not provide guidance on net income. The Company
only provides guidance on total 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.
STRATEGIC PLAN TO EXIT OFFICE
-
On September 21, 2023, the Company announced a strategic plan to exit
the office assets within its portfolio by:
(i) spinning-off 59 office properties into Net Lease Office
Properties ("NLOP"), a separate publicly-traded REIT (the "Spin-Off"),
which closed on November 1, 2023; and
(ii) implementing an asset sale program to dispose of 87 office
properties retained by W. P. Carey (the "Office Sale Program"), with all
sales under the program targeted to be completed in early 2024.
REAL ESTATE
Investments
-
The Company completed investments totaling $978.4 million during the
nine months ended September 30, 2023, including $39.9 million during the
2023 third quarter.
-
The Company currently has two capital investments and commitments
totaling $35.2 million scheduled to be completed during the fourth
quarter.
Dispositions
-
During the 2023 third quarter, the Company disposed of six properties
for gross proceeds of $148.1 million, bringing total disposition
proceeds for the nine months ended September 30, 2023 to $196.3 million.
-
During the 2023 third quarter, disposition activity included the sales
of three Marriott hotel operating properties for gross proceeds of $48.7
million. Subsequent to quarter end, the Company sold three additional
Marriott hotel operating properties for gross proceeds of $45.8 million.
-
The Company has disposed of four properties to date under the Office
Sale Program for gross proceeds of $142.5 million, including one
property disposed of during the 2023 third quarter for gross proceeds of
$87.9 million and three properties subsequent to quarter end, for gross
proceeds of $54.6 million.
-
The Company currently has office assets within the Office Sale Program
totaling approximately $500 million under signed contracts, including
the Company's largest office portfolio net leased to the State
of Andalusia in a sale back to the tenant, with all sales
under the program targeted to be completed in early 2024.
Contractual Same-Store Rent Growth
-
The Company's net lease portfolio generated contractual same-store rent
growth of 4.2% on a constant currency basis.
Composition
-
As of September 30, 2023, the Company's net lease portfolio consisted of
1,472 properties, comprising 179 million square feet leased to 395
tenants, with a weighted-average lease term of 11.0 years and an
occupancy rate of 98.9%. In addition, the Company owned 86 self-storage
operating properties, ten hotel operating properties and two student
housing operating properties, totaling approximately 7.5 million square
feet.
BALANCE SHEET AND CAPITALIZATION
Forward Equity
-
Subsequent to quarter end, the Company settled all of its outstanding
forward sale agreements, issuing 4,744,973 shares of common stock for
net proceeds of $384 million.
Spin-Off Distribution
-
Subsequent to quarter end, the Company received a distribution of
approximately $350 million, net of transaction expenses, from NLOP
in connection with the Spin-Off on November 1, 2023.
The Company intends to use proceeds from these transactions primarily to
fund future acquisitions and repay debt, including amounts outstanding
under its Unsecured Revolving Credit Facility. The Company may hold net
proceeds in cash and/or marketable securities earning interest until
deployed.
* *
* * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating
information regarding the 2023 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 November 3, 2023, 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, November 3, 2023 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.
Celebrating its 50th anniversary, W. P. Carey ranks among the largest net
lease REITs with a well-diversified portfolio of high-quality,
operationally critical commercial real estate, which includes 1,413 net
lease properties covering approximately 171 million square feet and a
portfolio of 86 self-storage operating properties, pro forma for the
Spin-Off of NLOP, as of September 30, 2023. With offices in New York,
London, Amsterdam and Dallas, the company remains focused on investing
primarily in single-tenant, industrial, warehouse and retail properties
located in the U.S. and Northern and Western Europe, under long-term net
leases with built-in rent escalations.
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 Securities 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," "will be," "goals,"
"believe," "project," "expect," "anticipate," "intend," "estimate"
"opportunities," "possibility," "strategy," "maintain" or the negative
version of these words and other comparable terms. These forward-looking
statements include, but are not limited to, statements made by Mr. Jason
Fox regarding W. P. Carey's strategic plan to exit office, anticipated
capital inflows, and expectations regarding W. P. Carey's ability to
continue investing and the transaction and capital markets through 2024.
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 inflation and increased interest rates, the
effects of pandemics and global outbreaks of contagious diseases (such
as the COVID-19 pandemic) and domestic or geopolitical crises, such as
terrorism, military conflict, war or the perception that hostilities may
be imminent, political instability or civil unrest, or other conflict,
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 I, Item 1A. Risk Factors in W. P. Carey's Annual
Report on Form 10-K for the fiscal year ended December 31, 2022 and in
Part II, Item 1A, Risk Factors in our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2023. Investors 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.
Institutional Investors:
Peter Sands
1 (212) 492-1110
institutionalir@wpcarey.com
Individual Investors:
W. P. Carey Inc.
1 (212)
492-8920
ir@wpcarey.com
Press Contact:
Anna McGrath
1 (212) 492-1166
amcgrath@wpcarey.com
* *
* * *
W. P. CAREY INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share amounts)
|
|
|
September 30, 2023
|
|
December 31, 2022
|
Assets
|
|
|
|
Investments in real estate:
|
|
|
|
Land, buildings and improvements — net lease and other
|
$
13,390,692
|
|
$
13,338,857
|
Land, buildings and improvements — operating properties
|
1,222,062
|
|
1,095,892
|
Net investments in finance leases and loans receivable
|
1,172,671
|
|
771,761
|
In-place lease intangible assets and other
|
2,696,403
|
|
2,659,750
|
Above-market rent intangible assets
|
771,071
|
|
833,751
|
Investments in real estate
|
19,252,899
|
|
18,700,011
|
Accumulated depreciation and amortization
(a)
|
(3,438,183)
|
|
(3,269,057)
|
Assets held for sale, net
|
102,015
|
|
57,944
|
Net investments in real estate
|
15,916,731
|
|
15,488,898
|
Equity method investments
|
351,537
|
|
327,502
|
Cash and cash equivalents
|
136,438
|
|
167,996
|
Other assets, net
|
1,191,350
|
|
1,080,227
|
Goodwill
|
1,034,183
|
|
1,037,412
|
Total assets
|
$
18,630,239
|
|
$
18,102,035
|
|
|
|
|
Liabilities and Equity
|
|
|
|
Debt:
|
|
|
|
Senior unsecured notes, net
|
$
5,902,854
|
|
$
5,916,400
|
Unsecured term loans, net
|
1,083,597
|
|
552,539
|
Unsecured revolving credit facility
|
516,513
|
|
276,392
|
Non-recourse mortgages, net
|
784,750
|
|
1,132,417
|
Debt, net
|
8,287,714
|
|
7,877,748
|
Accounts payable, accrued expenses and other
liabilities
|
638,965
|
|
623,843
|
Below-market rent and other intangible liabilities, net
|
153,049
|
|
184,584
|
Deferred income taxes
|
171,929
|
|
178,959
|
Dividends payable
|
233,331
|
|
228,257
|
Total liabilities
|
9,484,988
|
|
9,093,391
|
|
|
|
|
Preferred stock, $0.001 par value, 50,000,000 shares
authorized; none issued
|
—
|
|
—
|
Common stock, $0.001 par value, 450,000,000 shares
authorized; 213,925,817 and 210,620,949
shares, respectively, issued and outstanding
|
214
|
|
211
|
Additional paid-in capital
|
11,970,559
|
|
11,706,836
|
Distributions in excess of accumulated earnings
|
(2,616,638)
|
|
(2,486,633)
|
Deferred compensation obligation
|
62,046
|
|
57,012
|
Accumulated other comprehensive loss
|
(281,820)
|
|
(283,780)
|
Total stockholders' equity
|
9,134,361
|
|
8,993,646
|
Noncontrolling interests
|
10,890
|
|
14,998
|
Total equity
|
9,145,251
|
|
9,008,644
|
Total liabilities and equity
|
$
18,630,239
|
|
$
18,102,035
|
________
|
(a)
|
Includes $1.8 billion and $1.7 billion of accumulated
depreciation on buildings and improvements as of
September 30, 2023 and December 31, 2022,
respectively, and $1.6 billion of accumulated amortization
on lease intangibles as of both September 30, 2023 and
December 31, 2022.
|
W. P. CAREY INC.
Quarterly Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share amounts)
|
|
|
Three Months Ended
|
|
September 30, 2023
|
|
June 30, 2023
|
|
September 30, 2022
|
Revenues
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
Lease revenues
|
$
369,159
|
|
$
369,124
|
|
$
331,902
|
Income from finance leases and loans receivable
|
27,575
|
|
27,311
|
|
20,637
|
Operating property revenues
|
49,218
|
|
50,676
|
|
21,350
|
Other lease-related income
|
2,310
|
|
5,040
|
|
8,192
|
|
448,262
|
|
452,151
|
|
382,081
|
Investment Management:
|
|
|
|
|
|
Asset management revenue
|
194
|
|
303
|
|
1,197
|
Reimbursable costs from affiliates
|
97
|
|
124
|
|
344
|
|
291
|
|
427
|
|
1,541
|
|
448,553
|
|
452,578
|
|
383,622
|
Operating Expenses
|
|
|
|
|
|
Depreciation and amortization
|
144,771
|
|
143,548
|
|
132,181
|
Operating property expenses
|
26,570
|
|
26,919
|
|
9,357
|
General and administrative
|
23,258
|
|
24,788
|
|
22,299
|
Reimbursable tenant costs
|
20,498
|
|
20,523
|
|
18,874
|
Impairment charges — real estate
|
15,173
|
|
—
|
|
—
|
Property expenses, excluding reimbursable tenant costs
|
13,021
|
|
5,371
|
|
11,244
|
Stock-based compensation expense
|
9,050
|
|
8,995
|
|
5,511
|
Merger and other expenses (a)
|
4,152
|
|
1,419
|
|
17,667
|
Reimbursable costs from affiliates
|
97
|
|
124
|
|
344
|
Impairment charges — Investment Management goodwill
(b)
|
—
|
|
—
|
|
29,334
|
|
256,590
|
|
231,687
|
|
246,811
|
Other Income and Expenses
|
|
|
|
|
|
Interest expense
|
(76,974)
|
|
(75,488)
|
|
(59,022)
|
Earnings from equity method investments
|
4,978
|
|
4,355
|
|
11,304
|
Non-operating income (c)
|
4,862
|
|
4,509
|
|
9,263
|
Other gains and (losses) (d)
|
2,859
|
|
(1,366)
|
|
(15,020)
|
Gain (loss) on sale of real estate, net
|
2,401
|
|
1,808
|
|
(4,736)
|
Gain on change in control of interests (e)
|
—
|
|
—
|
|
33,931
|
|
(61,874)
|
|
(66,182)
|
|
(24,280)
|
Income before income taxes
|
130,089
|
|
154,709
|
|
112,531
|
Provision for income taxes
|
(5,090)
|
|
(10,129)
|
|
(8,263)
|
Net Income
|
124,999
|
|
144,580
|
|
104,268
|
Net loss (income) attributable to noncontrolling
interests
|
41
|
|
40
|
|
660
|
Net Income Attributable to W. P. Carey
|
$
125,040
|
|
$
144,620
|
|
$
104,928
|
|
|
|
|
|
|
Basic Earnings Per Share
|
$
0.58
|
|
$
0.67
|
|
$
0.52
|
Diluted Earnings Per Share
|
$
0.58
|
|
$
0.67
|
|
$
0.51
|
Weighted-Average Shares Outstanding
|
|
|
|
|
|
Basic
|
215,097,114
|
|
215,075,114
|
|
203,093,553
|
Diluted
|
215,252,969
|
|
215,184,485
|
|
204,098,116
|
|
|
|
|
|
|
Dividends Declared Per Share
|
$
1.071
|
|
$
1.069
|
|
$
1.061
|
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,
|
|
2023
|
|
2022
|
Revenues
|
|
|
|
Real Estate:
|
|
|
|
Lease revenues
|
$
1,090,619
|
|
$
953,981
|
Income from finance leases and loans receivable
|
75,641
|
|
56,794
|
Operating property revenues
|
140,780
|
|
30,279
|
Other lease-related income
|
20,723
|
|
24,905
|
|
1,327,763
|
|
1,065,959
|
Investment Management:
|
|
|
|
Asset management and other revenue
|
836
|
|
8,084
|
Reimbursable costs from affiliates
|
322
|
|
2,414
|
|
1,158
|
|
10,498
|
|
1,328,921
|
|
1,076,457
|
Operating Expenses
|
|
|
|
Depreciation and amortization
|
444,728
|
|
362,654
|
Operating property expenses
|
74,738
|
|
15,335
|
General and administrative
|
74,494
|
|
66,224
|
Reimbursable tenant costs
|
62,997
|
|
52,538
|
Property expenses, excluding reimbursable tenant costs
|
31,164
|
|
36,874
|
Stock-based compensation expense
|
25,811
|
|
23,102
|
Impairment charges — real estate
|
15,173
|
|
26,385
|
Merger and other expenses
|
5,595
|
|
17,329
|
Reimbursable costs from affiliates
|
322
|
|
2,414
|
Impairment charges — Investment Management goodwill
|
—
|
|
29,334
|
|
735,022
|
|
632,189
|
Other Income and Expenses
|
|
|
|
Interest expense
|
(219,658)
|
|
(151,492)
|
Gain on sale of real estate, net
|
181,958
|
|
37,631
|
Earnings from equity method investments
|
14,569
|
|
23,477
|
Non-operating income
|
13,997
|
|
23,783
|
Other gains and (losses)
|
9,593
|
|
(1,021)
|
Gain on change in control of interests
|
—
|
|
33,931
|
|
459
|
|
(33,691)
|
Income before income taxes
|
594,358
|
|
410,577
|
Provision for income taxes
|
(30,338)
|
|
(21,598)
|
Net Income
|
564,020
|
|
388,979
|
Net loss attributable to noncontrolling interests
|
20
|
|
622
|
Net Income Attributable to W. P. Carey
|
$
564,040
|
|
$
389,601
|
|
|
|
|
Basic Earnings Per Share
|
$
2.64
|
|
$
1.98
|
Diluted Earnings Per Share
|
$
2.63
|
|
$
1.98
|
Weighted-Average Shares Outstanding
|
|
|
|
Basic
|
214,052,907
|
|
196,382,433
|
Diluted
|
214,427,425
|
|
197,264,509
|
|
|
|
|
Dividends Declared Per Share
|
$
3.207
|
|
$
3.177
|
__________
|
(a)
|
Amount for the three months ended September 30, 2023 is
primarily comprised of costs incurred in connection with the
NLOP Spin-Off. Amount for the three months ended September
30, 2022 is primarily comprised of costs incurred in
connection with the CPA:18 Merger.
|
(b)
|
Amount for the three months ended September 30, 2022
represents an impairment charge recognized on goodwill
within our Investment Management segment, since future
Investment Management cash flows are expected to be
minimal.
|
(c)
|
Amount for the three months ended September 30, 2023 is
comprised of realized gains on foreign currency exchange
derivatives of $3.7 million and interest income on deposits
of $1.1 million.
|
(d)
|
Amount for the three months ended September 30, 2023 is
primarily comprised of a release of a non-cash allowance for
credit losses of $2.5 million.
|
(e)
|
Amount for the three months ended September 30, 2022
represents gains recognized on (i) the remaining interests
in four investments acquired in the CPA:18 Merger, which we
had previously accounted for under the equity method, and
(ii) our previously held interest in shares of CPA:18 –
Global common stock in connection with the CPA:18 Merger.
|
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, 2023
|
|
June 30, 2023
|
|
September 30, 2022
|
Net income attributable to W. P. Carey
|
$
125,040
|
|
$
144,620
|
|
$
104,928
|
Adjustments:
|
|
|
|
|
|
Depreciation and amortization of real property
|
144,111
|
|
142,932
|
|
131,628
|
Impairment charges — real estate
|
15,173
|
|
—
|
|
—
|
(Gain) loss on sale of real estate, net
|
(2,401)
|
|
(1,808)
|
|
4,736
|
Gain on change in control of interests
(a) (b)
|
—
|
|
—
|
|
(33,931)
|
Impairment charges — Investment Management goodwill
(c)
|
—
|
|
—
|
|
29,334
|
Proportionate share of adjustments to earnings from equity
method investments
(d)
|
2,950
|
|
2,883
|
|
2,242
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
34
|
|
(268)
|
|
(189)
|
Total adjustments
|
159,867
|
|
143,739
|
|
133,820
|
FFO (as defined by NAREIT) Attributable to W. P. Carey
(f)
|
284,907
|
|
288,359
|
|
238,748
|
Adjustments:
|
|
|
|
|
|
Straight-line and other leasing and financing
adjustments
|
(18,662)
|
|
(19,086)
|
|
(14,326)
|
Stock-based compensation
|
9,050
|
|
8,995
|
|
5,511
|
Above- and below-market rent intangible lease amortization,
net
|
7,835
|
|
8,824
|
|
11,186
|
Amortization of deferred financing costs
|
4,805
|
|
5,904
|
|
5,223
|
Tax (benefit) expense – deferred and other
|
(4,349)
|
|
(2,723)
|
|
1,163
|
Merger and other expenses (g)
|
4,152
|
|
1,419
|
|
17,667
|
Other (gains) and losses (h)
|
(2,859)
|
|
1,366
|
|
15,020
|
Other amortization and non-cash items
|
584
|
|
527
|
|
359
|
Proportionate share of adjustments to earnings from equity
method investments
(d)
|
(691)
|
|
(255)
|
|
(2,156)
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(380)
|
|
(24)
|
|
(673)
|
Total adjustments
|
(515)
|
|
4,947
|
|
38,974
|
AFFO Attributable to W. P. Carey (f)
|
$
284,392
|
|
$
293,306
|
|
$
277,722
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
FFO (as defined by NAREIT) attributable to W. P. Carey
(f)
|
$
284,907
|
|
$
288,359
|
|
$
238,748
|
FFO (as defined by NAREIT) attributable to W. P. Carey per
diluted share (f)
|
$
1.32
|
|
$
1.34
|
|
$
1.17
|
AFFO attributable to W. P. Carey (f)
|
$
284,392
|
|
$
293,306
|
|
$
277,722
|
AFFO attributable to W. P. Carey per diluted share
(f)
|
$
1.32
|
|
$
1.36
|
|
$
1.36
|
Diluted weighted-average shares outstanding
|
215,252,969
|
|
215,184,485
|
|
204,098,116
|
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, 2023
|
|
June 30, 2023
|
|
September 30, 2022
|
Net income from Real Estate attributable to W. P. Carey
|
$
124,167
|
|
$
144,686
|
|
$
111,375
|
Adjustments:
|
|
|
|
|
|
Depreciation and amortization of real property
|
144,111
|
|
142,932
|
|
131,628
|
Impairment charges — real estate
|
15,173
|
|
—
|
|
—
|
(Gain) loss on sale of real estate, net
|
(2,401)
|
|
(1,808)
|
|
4,736
|
Gain on change in control of interests (a)
|
—
|
|
—
|
|
(11,405)
|
Proportionate share of adjustments to earnings from equity
method investments (d)
|
2,950
|
|
2,883
|
|
2,242
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
34
|
|
(268)
|
|
(189)
|
Total adjustments
|
159,867
|
|
143,739
|
|
127,012
|
FFO (as defined by NAREIT) Attributable to W. P. Carey –
Real Estate (f)
|
284,034
|
|
288,425
|
|
238,387
|
Adjustments:
|
|
|
|
|
|
Straight-line and other leasing and financing
adjustments
|
(18,662)
|
|
(19,086)
|
|
(14,326)
|
Stock-based compensation
|
9,050
|
|
8,995
|
|
5,511
|
Above- and below-market rent intangible lease amortization,
net
|
7,835
|
|
8,824
|
|
11,186
|
Amortization of deferred financing costs
|
4,805
|
|
5,904
|
|
5,223
|
Tax benefit – deferred and other
|
(4,349)
|
|
(2,723)
|
|
(2,789)
|
Merger and other expenses (g)
|
4,152
|
|
1,419
|
|
17,667
|
Other (gains) and losses (h)
|
(2,180)
|
|
890
|
|
13,960
|
Other amortization and non-cash items
|
584
|
|
527
|
|
359
|
Proportionate share of adjustments to earnings from equity
method investments
(d)
|
(691)
|
|
(255)
|
|
(938)
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(380)
|
|
(24)
|
|
(673)
|
Total adjustments
|
164
|
|
4,471
|
|
35,180
|
AFFO Attributable to W. P. Carey – Real Estate
(f)
|
$
284,198
|
|
$
292,896
|
|
$
273,567
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
FFO (as defined by NAREIT) attributable to W. P. Carey – Real
Estate (f)
|
$
284,034
|
|
$
288,425
|
|
$
238,387
|
FFO (as defined by NAREIT) attributable to W. P. Carey
per diluted share – Real
Estate (f)
|
$
1.32
|
|
$
1.34
|
|
$
1.17
|
AFFO attributable to W. P. Carey – Real Estate
(f)
|
$
284,198
|
|
$
292,896
|
|
$
273,567
|
AFFO attributable to W. P. Carey per diluted share – Real
Estate (f)
|
$
1.32
|
|
$
1.36
|
|
$
1.34
|
Diluted weighted-average shares outstanding
|
215,252,969
|
|
215,184,485
|
|
204,098,116
|
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,
|
|
2023
|
|
2022
|
Net income attributable to W. P. Carey
|
$
564,040
|
|
$
389,601
|
Adjustments:
|
|
|
|
Depreciation and amortization of real property
|
442,911
|
|
360,607
|
Gain on sale of real estate, net
|
(181,958)
|
|
(37,631)
|
Impairment charges — real estate
|
15,173
|
|
26,385
|
Gain on change in control of interests
(a) (b)
|
—
|
|
(33,931)
|
Impairment charges — Investment Management goodwill
(c)
|
—
|
|
29,334
|
Proportionate share of adjustments to earnings from equity
method investments (d)
|
8,439
|
|
12,859
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(533)
|
|
(197)
|
Total adjustments
|
284,032
|
|
357,426
|
FFO (as defined by NAREIT) Attributable to W. P. Carey
(f)
|
848,072
|
|
747,027
|
Adjustments:
|
|
|
|
Straight-line and other leasing and financing
adjustments
|
(52,798)
|
|
(39,665)
|
Above- and below-market rent intangible lease amortization,
net
|
27,520
|
|
32,738
|
Stock-based compensation
|
25,811
|
|
23,102
|
Amortization of deferred financing costs
|
15,649
|
|
11,498
|
Other (gains) and losses
|
(9,593)
|
|
1,021
|
Merger and other expenses (g)
|
5,595
|
|
17,329
|
Tax benefit – deferred and other
|
(2,706)
|
|
(434)
|
Other amortization and non-cash items
|
1,583
|
|
1,441
|
Proportionate share of adjustments to earnings from equity
method investments (d)
|
(1,872)
|
|
(2,451)
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(344)
|
|
(684)
|
Total adjustments
|
8,845
|
|
43,895
|
AFFO Attributable to W. P. Carey (f)
|
$
856,917
|
|
$
790,922
|
|
|
|
|
Summary
|
|
|
|
FFO (as defined by NAREIT) attributable to W. P. Carey
(f)
|
$
848,072
|
|
$
747,027
|
FFO (as defined by NAREIT) attributable to W. P. Carey per
diluted share (f)
|
$
3.96
|
|
$
3.79
|
AFFO attributable to W. P. Carey (f)
|
$
856,917
|
|
$
790,922
|
AFFO attributable to W. P. Carey per diluted share
(f)
|
$
4.00
|
|
$
4.01
|
Diluted weighted-average shares outstanding
|
214,427,425
|
|
197,264,509
|
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,
|
|
2023
|
|
2022
|
Net income from Real Estate attributable to W. P. Carey
|
$
562,084
|
|
$
381,461
|
Adjustments:
|
|
|
|
Depreciation and amortization of real property
|
442,911
|
|
360,607
|
Gain on sale of real estate, net
|
(181,958)
|
|
(37,631)
|
Impairment charges — real estate
|
15,173
|
|
26,385
|
Gain on change in control of interests (a)
|
—
|
|
(11,405)
|
Proportionate share of adjustments to earnings from equity
method investments (d)
|
8,439
|
|
12,859
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(533)
|
|
(197)
|
Total adjustments
|
284,032
|
|
350,618
|
FFO (as defined by NAREIT) Attributable to W. P. Carey –
Real Estate (f)
|
846,116
|
|
732,079
|
Adjustments:
|
|
|
|
Straight-line and other leasing and financing
adjustments
|
(52,798)
|
|
(39,665)
|
Above- and below-market rent intangible lease amortization,
net
|
27,520
|
|
32,738
|
Stock-based compensation
|
25,811
|
|
23,102
|
Amortization of deferred financing costs
|
15,649
|
|
11,498
|
Other (gains) and losses
|
(8,876)
|
|
(303)
|
Merger and other expenses (g)
|
5,595
|
|
17,326
|
Tax benefit – deferred and other
|
(2,706)
|
|
(4,302)
|
Other amortization and non-cash items
|
1,583
|
|
1,441
|
Proportionate share of adjustments to earnings from equity
method investments (d)
|
(1,872)
|
|
(403)
|
Proportionate share of adjustments for noncontrolling
interests (e)
|
(344)
|
|
(684)
|
Total adjustments
|
9,562
|
|
40,748
|
AFFO Attributable to W. P. Carey – Real Estate
(f)
|
$
855,678
|
|
$
772,827
|
|
|
|
|
Summary
|
|
|
|
FFO (as defined by NAREIT) attributable to W. P. Carey – Real
Estate (f)
|
$
846,116
|
|
$
732,079
|
FFO (as defined by NAREIT) attributable to W. P. Carey
per diluted share – Real Estate (f)
|
$
3.95
|
|
$
3.71
|
AFFO attributable to W. P. Carey – Real Estate
(f)
|
$
855,678
|
|
$
772,827
|
AFFO attributable to W. P. Carey per diluted share – Real
Estate (f)
|
$
3.99
|
|
$
3.92
|
Diluted weighted-average shares outstanding
|
214,427,425
|
|
197,264,509
|
__________
|
(a)
|
Amount for the three and nine months ended September 30,
2022 represents a gain recognized on the remaining interests
in four investments acquired in the CPA:18 Merger, which we
had previously accounted for under the equity method.
|
(b)
|
Amount for the three and nine months ended September 30,
2022 represents a gain recognized on our previously held
interest in shares of CPA:18 – Global common stock in
connection with the CPA:18 Merger
|
(c)
|
Amount for the three and nine months ended September 30,
2022 represents an impairment charge recognized on goodwill
within our Investment Management segment, since future
Investment Management cash flows are expected to be
minimal.
|
(d)
|
Equity income, including amounts that are not typically
recognized for FFO and AFFO, is recognized within Earnings
from equity method investments on the consolidated
statements of income. This represents adjustments to equity
income to reflect FFO and AFFO on a pro rata basis.
|
(e)
|
Adjustments disclosed elsewhere in this reconciliation are
on a consolidated basis. This adjustment reflects our FFO or
AFFO on a pro rata basis.
|
(f)
|
FFO and AFFO are non-GAAP measures. See below for a
description of FFO and AFFO.
|
(g)
|
Amounts for the three and nine months ended September 30,
2023 are primarily comprised of costs incurred in connection
with the NLOP Spin-Off. Amounts for the three and nine
months ended September 30, 2022 are primarily comprised of
costs incurred in connection with the CPA:18 Merger.
|
(h)
|
AFFO and Real Estate AFFO adjustment amounts for the three
months ended September 30, 2023 are primarily comprised of a
release of a non-cash allowance for credit losses of $2.5
million.
|
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 (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 or
other assets incidental to the company's main business, 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 loans receivable
and finance leases, stock-based compensation, non-cash environmental
accretion expense, amortization of discounts and premiums on debt 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 rate movements
(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.
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SOURCE W. P. Carey Inc.