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W. P. Carey Inc. Announces Fourth Quarter and Full Year 2014 Financial Results

Feb 24, 2015

NEW YORK, Feb. 24, 2015 /PRNewswire/ -- W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), a global net-lease real estate investment trust, today reported its financial results for the fourth quarter and full year ended December 31, 2014.

Financial Update

  • Fourth quarter gross revenues of $248.3 million and revenues excluding reimbursable expenses of $207.7 million  
          
  • 2014 gross revenues of $906.2 million and revenues excluding reimbursable expenses of $751.1 million
        
  • Fourth quarter AFFO of $125.6 million, equivalent to $1.19 per diluted share
      
  • 2014 AFFO of $480.5 million, equivalent to $4.81 per diluted share
      
  • Quarterly dividend raised to $0.95 per share, equivalent to an annualized dividend rate of $3.80 per share 
      
  • Affirm 2015 AFFO guidance range of $4.76 to $5.02 per diluted share

 

Business Update

  • Completed six acquisitions totaling $653.3 million for the Company's owned real estate portfolio during the fourth quarter, bringing total investment volume for 2014 to $906.9 million
      
  • Owned net-leased portfolio occupancy of 98.6%
       
  • Structured $783.0 million of investments on behalf of the Managed REITs during the fourth quarter, bringing the total for 2014 to $1.9 billion
       
  • Investor capital inflows into the Managed REITs of $415.5 million during the fourth quarter, bringing the total for 2014 to a record $1.5 billion

 

Subsequent to Year End

  • Issued €500 million of 2.000% Senior Unsecured Notes due 2023
       
  • Issued $450 million of 4.000% Senior Unsecured Notes due 2025
       
  • Increased maximum borrowing capacity of Senior Unsecured Credit Facility Revolver from $1.0 billion to $1.5 billion
      
  • Board of directors resolved to opt out of MUTA classified board provisions
       
  • Completed two acquisitions for the Company's owned real estate portfolio totaling approximately $390 million

 

MANAGEMENT COMMENTARY

"We are pleased to report fourth quarter AFFO of $1.19 per diluted share, reflecting growth in our owned real estate portfolio during 2014 and strong fourth quarter structuring revenues from our investment management business, bringing full year AFFO to $4.81 per diluted share," said W. P. Carey President and CEO, Trevor Bond.  "We continued to produce stable and growing dividend income for our shareholders in 2014, ending the year with an annualized dividend rate of $3.80 per share.

"2014 was an eventful year overall for W. P. Carey.  We grew our owned real estate portfolio through acquisitions totaling $907 million, as well as through the completion of our merger with CPA®:16 – Global.  In addition, we diversified our funding sources by successfully completing the Company's inaugural public debt and equity offerings and took steps to further diversify our investment management product offerings away from net lease.  We have started 2015 similarly active, closing on-balance-sheet acquisitions totaling approximately $390 million and issuing both euro- and U.S. dollar-denominated bonds."

 

QUARTERLY FINANCIAL RESULTS

Revenues

  • Total Company: Revenues excluding reimbursable costs for the 2014 fourth quarter totaled $207.7 million, up 18.7% from $175.0 million for the 2014 third quarter, due primarily to higher revenues from the Managed REITs.  Compared to the 2013 fourth quarter, revenues excluding reimbursable costs increased 84.5% from $112.6 million, due primarily to additional real estate revenues from properties acquired in the Company's merger with CPA®:16 – Global, which closed on January 31, 2014 (the CPA®:16 Merger).
       
  • Real Estate Ownership: Real estate revenues excluding reimbursable tenant costs for the 2014 fourth quarter were $160.3 million, up 1.5% from $157.9 million for the 2014 third quarter, due primarily to additional lease revenues from properties acquired during the third and fourth quarters.  Compared to the 2013 fourth quarter, real estate revenues excluding reimbursable tenant costs increased 104.2% from $78.5 million, due primarily to additional lease revenues from properties acquired in the CPA®:16 Merger.
        
  • Investment Management: Revenues from the Managed REITs excluding reimbursable costs for the 2014 fourth quarter were $47.4 million, up 178.8% from $17.0 million for the 2014 third quarter and up 39.0% from $34.1 million for the 2013 fourth quarter.  In each case, the increase was due primarily to higher structuring revenue resulting from increased acquisition activity on behalf of the Managed REITs.

Adjusted Funds from Operations (AFFO)

  • AFFO for the 2014 fourth quarter was $125.6 million, or $1.19 per diluted share, up 9.8% and 5.3%, respectively, from AFFO of $114.4 million, or $1.13 per diluted share, for the 2014 third quarter, due primarily to higher structuring revenue resulting from increased investment activity on behalf of the Managed REITs.
       
  • Compared to the 2013 fourth quarter, AFFO and AFFO per diluted share increased 60.8% and 6.2%, respectively, from $78.1 million, or $1.12 per diluted share, due primarily to additional real estate revenues from properties acquired in the CPA®:16 Merger.
        
  • 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 10, 2014 the Company's Board of Directors declared a quarterly cash dividend of $0.95 per share, equivalent to an annualized dividend rate of $3.80 per share, which was paid on January 15, 2015 to stockholders of record at the close of business on December 31, 2014.  The dividend represented a 1.1% increase over the 2014 third quarter dividend and was the Company's 55th consecutive quarterly increase.

 

FULL YEAR FINANCIAL RESULTS

Revenues

  • Total Company: Revenues excluding reimbursable costs for the 2014 full year totaled $751.1 million, up 86.4% from $403.0 million for the 2013 full year, due primarily to additional real estate revenues from properties acquired in the CPA®:16 Merger.
       
  • Real Estate Ownership: Real estate revenues excluding reimbursable tenant costs for the 2014 full year totaled $618.3 million, up 104.3% from $302.7 million for the 2013 full year, due primarily to additional lease revenues from properties acquired in the CPA®:16 Merger.
       
  • Investment Management: Revenues from the Managed REITs excluding reimbursable costs for the 2014 full year totaled $132.9 million, up 32.5% from $100.3 million for the 2013 full year, due primarily to higher structuring revenue resulting from increased investment activity on behalf of the Managed REITs.

AFFO

  • AFFO for the 2014 full year totaled $480.5 million, or $4.81 per diluted share, up 63.3% and 14.0%, respectively, from AFFO of $294.2 million, or $4.22 per diluted share, for the 2013 full year, due primarily to income generated from properties acquired in the CPA®:16 Merger, partially offset by the cessation of asset management revenue received from CPA®:16 – Global after the completion of the CPA®:16 Merger.

Dividends

  • Dividends declared during 2014 totaled $3.685 per share, an increase of 5.3% compared to total dividends declared during 2013 of $3.500 per share.

 

AFFO GUIDANCE

  • For the 2015 full year, the Company affirms that it continues to expect to report AFFO of between $4.76 and $5.02 per diluted share, based on assumed total acquisition volume of between approximately $2.4 billion and $3.1 billion, comprised of approximately $400 million to $600 million for the Company's owned real estate portfolio and approximately $2.0 billion to $2.5 billion on behalf of the Managed REITs.  It also assumes dispositions from the Company's owned real estate portfolio of between approximately $100 million and $200 million.  The Company expects to update its 2015 AFFO guidance in connection with the release of subsequent quarterly earnings.

 

BALANCE SHEET AND CAPITALIZATION

Exercise of Senior Unsecured Credit Facility Accordion Feature – Subsequent to Year End

  • As previously announced, on January 15, 2015 the Company exercised the accordion feature under its senior unsecured credit facility in full, increasing the maximum borrowing capacity under the unsecured revolving portion of the facility from $1.0 billion to $1.5 billion, inclusive of an increase in amounts that may be borrowed in certain currencies other than U.S. dollars, from $500 million to $750 million.

Bond Issuances – Subsequent to Year End

  • Euro Bonds: As previously announced, on January 15, 2015 the Company completed an underwritten public offering of €500 million aggregate principal amount of 2.000% Senior Notes due January 20, 2023 offered at 99.220% of the principal amount.  The Company used the net proceeds from this offering to repay amounts in euros outstanding under its senior unsecured credit facility, to fund acquisitions and for general corporate purposes.
        
  • US Dollar Bonds: As previously announced, on January 21, 2015 the Company completed an underwritten public offering of $450.0 million aggregate principal amount of 4.000% Senior Notes due February 1, 2025 offered at 99.372% of the principal amount.  The Company used the net proceeds from this offering to repay amounts outstanding under its senior unsecured credit facility, to fund acquisitions and for general corporate purposes.

 

OWNED REAL ESTATE PORTFOLIO

Acquisitions and Dispositions

  • During the 2014 fourth quarter, the Company completed six acquisitions for $653.3 million, bringing total investment volume for the 2014 full year to $906.9 million, including acquisition-related costs and fees.
       
  • The Company has an active capital recycling program through which it seeks to extend the average lease term of its owned real estate portfolio and improve portfolio credit quality through dispositions and acquisitions of assets, increase the asset criticality factor within the portfolio and/or execute strategic dispositions of assets.  Accordingly, during the 2014 fourth quarter, the Company disposed of eight properties for $4.9 million, bringing total dispositions for the 2014 full year to $303.6 million, including transaction-related costs and fees.

Acquisitions – Subsequent to Year End

  • For the period January 1 through February 23, 2015 the Company has completed two acquisitions for its owned real estate portfolio totaling approximately $390 million, including acquisition-related costs and fees.

Composition

  • As of December 31, 2014, the Company's owned real estate portfolio consisted of 783 net-leased properties, comprising 87.3 million square feet leased to 219 tenants, and four operating properties.  As of that date, the weighted-average lease term of the net-leased portfolio was 9.1 years and the occupancy rate was 98.6%.

 

INVESTMENT MANAGEMENT

  • During 2014, W. P. Carey served as the advisor to CPA®:17 – Global, CPA®:18 – Global (together the CPA® REITs), and Carey Watermark Investors Incorporated (CWI, and together with the CPA® REITs, the Managed REITs).  At December 31, 2014, the Managed REITs, in aggregate, had total assets under management of approximately $9.2 billion.

Acquisitions

  • During the 2014 fourth quarter, the Company structured acquisitions on behalf of the Managed REITs totaling $783.0 million, comprised of 22 new investments on behalf of the CPA® REITs totaling $528.6 million and new investments in four hotels on behalf of CWI totaling $254.4 million, including acquisition-related costs and fees in each case.
       
  • For the 2014 full year, the Company structured acquisitions on behalf of the Managed REITs totaling $1.9 billion, comprised of $1.2 billion on behalf of the CPA® REITs and $677.2 million on behalf of CWI, including acquisition-related costs and fees in each case.

Investor Capital

  • During the 2014 fourth quarter, the Managed REITs had investor capital inflows of $415.5 million, comprised of $363.0 million into CWI in its follow-on offering and $52.5 million into CPA®:18 – Global in its initial public offering, bringing total Managed REIT inflows for the 2014 full year to $1.5 billion, a record for a full year period.
        
  • Subsequent to year end, the registration statement for Carey Watermark Investors Incorporated 2 (CWI 2) was declared effective by the Securities and Exchange Commission, and CWI 2 commenced a capital raise of up to $1.4 billion.

 

OTHER

Corporate Governance

  • Subsequent to year end, the Company's Board of Directors resolved to opt out of the provision of the Maryland Unsolicited Takeover Act (known as MUTA) that, absent such action by the Board, would have permitted the Board to unilaterally divide itself into classes without shareholder approval (commonly referred to as a classified board).  Although the Company does not currently have a classified board, by opting out of this provision the Board cannot create a classified board in the future without shareholder approval.

 

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2014 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 SEC on February 24, 2015.

 

Live Conference Call and Audio Webcast Scheduled for 11:00 a.m. Eastern Time
Please call to register at least 15 minutes prior to the start time.

Date/Time: Tuesday, February 24, 2015 at 11:00 a.m. Eastern Time
Call-in Number: +1-877-317-6789 (US) or +1-412-317-6789 (international)
Audio Webcast: www.wpcarey.com/earnings

Audio Webcast Replay

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

W. P. Carey Inc.

W. P. Carey Inc. is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide.  At December 31, 2014, the Company had an enterprise value of approximately $11.1 billion.  In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of non-traded REITs with assets under management of approximately $9.2 billion.  Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types.  Furthermore, its portfolio of long-term leases with creditworthy tenants has an established history of generating stable cash flows, enabling it to deliver consistent and rising dividend income to investors for over four decades.
www.wpcarey.com

Cautionary Statement Concerning Forward-Looking Statements:

Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief, or expectations of W. P. Carey and can be identified by the use of words such as "may," "will," "should," "would," "assume," "outlook," "seek," "plan," "believe," "expect," "anticipate," "intend," "estimate," "forecast," and other comparable terms. These forward-looking statements include, but are not limited to, the statements made by Mr. Bond as well as statements regarding annualized dividends, AFFO coverage and guidance, including underlying assumptions, fundraising goals, including for CWI 2, plans to become a primarily unsecured borrower, and with regard to its capital recycling and intended results thereof, and anticipated future financial and operating performance and results, including estimates of growth. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that W. P. Carey's actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on our business, financial condition, liquidity, results of operations, AFFO, and prospects. 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, 2014 as filed with the SEC on or about February 24, 2015. In light of these risks, uncertainties, assumptions, and factors, there can be no assurance that the results and events contemplated by the forward-looking statements contained herein will in fact transpire. Moreover, because we operate in a highly competitive and rapidly changing environment, new risks are likely to emerge from time to time. 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)

 

December 31,

 

2014

   

2013

 

Assets

         

Investments in real estate:

         

Real estate, at cost

$

5,006,682

   

$

2,516,325

 

Operating real estate, at cost

84,885

   

6,024

 

Accumulated depreciation

(258,493)

   

(168,958)

 

Net investments in properties

4,833,074

   

2,353,391

 

Net investments in direct financing leases

816,226

   

363,420

 

Assets held for sale

7,255

   

86,823

 

Net investments in real estate

5,656,555

   

2,803,634

 

Cash and cash equivalents

198,683

   

117,519

 

Equity investments in real estate, the Managed REITs and BDC

249,403

   

530,020

 

Due from affiliates

34,477

   

32,034

 

Goodwill

692,415

   

350,208

 

In-place lease and tenant relationship intangible assets, net

993,819

   

471,719

 

Above-market rent intangible assets, net

522,797

   

241,975

 

Other assets, net

289,179

   

131,841

 

Total Assets

$

8,637,328

   

$

4,678,950

 
           

Liabilities and Equity

         

Liabilities:

         

Non-recourse debt, net

$

2,532,683

   

$

1,492,410

 

Senior credit facilities - revolver

807,518

   

100,000

 

Senior credit facilities - term loan

250,000

   

475,000

 

Senior unsecured notes, net

498,345

   

 

Below-market rent and other intangible liabilities, net

175,070

   

128,202

 

Accounts payable, accrued expenses and other liabilities

293,846

   

166,385

 

Deferred income taxes

82,982

   

39,040

 

Distributions payable

100,078

   

67,746

 

Total liabilities

4,740,522

   

2,468,783

 

Redeemable noncontrolling interest

6,071

   

7,436

 
           

Equity:

         

W. P. Carey stockholders' equity:

         

Preferred stock (None issued)

   

 

Common stock

105

   

69

 

Additional paid-in capital

4,322,273

   

2,256,503

 

Distributions in excess of accumulated earnings

(465,606)

   

(318,577)

 

Deferred compensation obligation

30,624

   

11,354

 

Accumulated other comprehensive (loss) income

(75,559)

   

15,336

 

Less: treasury stock at cost

(60,948)

   

(60,270)

 

Total W. P. Carey stockholders' equity

3,750,889

   

1,904,415

 

Noncontrolling interests

139,846

   

298,316

 

Total equity

3,890,735

   

2,202,731

 

Total Liabilities and Equity

$

8,637,328

   

$

4,678,950

 

 

W. P. CAREY INC.

Quarterly Consolidated Statements of Income

(in thousands, except share and per share amounts)

 

Three Months Ended

 

December 31, 2014

 

September 30, 2014

 

December 31, 2013

Revenues

               

Real estate revenues:

               

Lease revenues

$

153,265

   

$

149,243

   

$

77,479

 

Operating property revenues (a)

7,333

   

8,338

   

250

 

Reimbursable tenant costs

6,828

   

6,271

   

3,532

 

Lease termination income and other

(315)

   

360

   

753

 
 

167,111

   

164,212

   

82,014

 

Revenues from the Managed REITs:

               

Reimbursable costs

33,833

   

14,722

   

22,878

 

Structuring revenue

30,765

   

5,487

   

19,050

 

Asset management revenue

10,154

   

9,088

   

11,341

 

Dealer manager fees

6,470

   

2,436

   

3,526

 

Incentive, termination and subordinated disposition revenue

   

   

199

 
 

81,222

   

31,733

   

56,994

 
 

248,333

   

195,945

   

139,008

 

Operating Expenses

               

Depreciation and amortization

61,481

   

59,524

   

32,141

 

Reimbursable tenant and affiliate costs

40,661

   

20,993

   

26,410

 

General and administrative

29,523

   

20,261

   

19,728

 

Impairment charges

16,776

   

4,225

   

5,294

 

Property expenses, excluding reimbursable tenant costs

7,749

   

10,350

   

2,211

 

Stock-based compensation expense

8,096

   

7,979

   

11,765

 

Dealer manager fees and expenses

6,203

   

3,847

   

3,607

 

Merger and property acquisition expenses

3,096

   

618

   

2,351

 

Subadvisor fees (b)

2,651

   

381

   

1,569

 
 

176,236

   

128,178

   

105,076

 

Other Income and Expenses

               

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

8,792

   

11,610

   

354

 

Interest expense

(44,780)

   

(46,534)

   

(26,132)

 

Other income and (expenses)

(1,575)

   

(4,077)

   

2,795

 
 

(37,563)

   

(39,001)

   

(22,983)

 

Income from continuing operations before income taxes
  and gain (loss) on sale of real estate

34,534

   

28,766

   

10,949

 

(Provision for) benefit from income taxes

(6,434)

   

(901)

   

1,798

 

Income from continuing operations before gain (loss)
  on sale of real estate

28,100

   

27,865

   

12,747

 

Income from discontinued operations, net of tax

300

   

191

   

36,113

 

Gain on sale of real estate, net of tax

5,063

   

260

   

 

Net Income

33,463

   

28,316

   

48,860

 

Net income attributable to noncontrolling interests

(1,470)

   

(993)

   

(25,624)

 

Net loss (income) attributable to redeemable noncontrolling interest

279

   

14

   

(214)

 

Net Income Attributable to W. P. Carey

$

32,272

   

$

27,337

   

$

23,022

 

Basic Earnings Per Share

               

Income from continuing operations attributable to W. P. Carey

$

0.31

   

$

0.27

   

$

0.14

 

Income from discontinued operations attributable to W. P. Carey

   

   

0.19

 

Net Income Attributable to W. P. Carey

$

0.31

   

$

0.27

   

$

0.33

 

Diluted Earnings Per Share

               

Income from continuing operations attributable to W. P. Carey

$

0.30

   

$

0.27

   

$

0.14

 

Income from discontinued operations attributable to W. P. Carey

   

   

0.19

 

Net Income Attributable to W. P. Carey

$

0.30

   

$

0.27

   

$

0.33

 

Weighted-Average Shares Outstanding

               

Basic

104,894,480

   

100,282,082

   

68,607,619

 

Diluted

105,794,118

   

101,130,448

   

69,628,498

 

Amounts Attributable to W. P. Carey

               

Income from continuing operations, net of tax

$

31,967

   

$

27,107

   

$

9,756

 

Income from discontinued operations, net of tax

305

   

230

   

13,266

 

Net Income

$

32,272

   

$

27,337

   

$

23,022

 

 

W. P. CAREY INC.

Consolidated Statements of Income

(in thousands, except share and per share amounts)

 

Years Ended December 31,

 

2014

   

2013

 

Revenues

         

Real estate revenues:

         

Lease revenues

$

573,829

   

$

299,624

 

Operating property revenues (a)

28,913

   

956

 

Reimbursable tenant costs

24,862

   

13,314

 

Lease termination income and other

15,526

   

2,071

 
 

643,130

   

315,965

 

Revenues from the Managed REITs:

         

Reimbursable costs

130,212

   

73,572

 

Structuring revenue

71,256

   

46,589

 

Asset management revenue

38,063

   

42,670

 

Dealer manager fees

23,532

   

10,856

 

Incentive, termination and subordinated disposition revenue

   

199

 
 

263,063

   

173,886

 
 

906,193

   

489,851

 

Operating Expenses

         

Depreciation and amortization

237,123

   

121,822

 

Reimbursable tenant and affiliate costs

155,074

   

86,886

 

General and administrative

91,588

   

67,063

 

Property expenses, excluding reimbursable tenant costs

37,725

   

8,082

 

Merger and property acquisition expenses

34,465

   

9,230

 

Stock-based compensation expense

31,075

   

37,195

 

Impairment charges

23,067

   

5,294

 

Dealer manager fees and expenses

21,760

   

13,028

 

Subadvisor fees (b)

5,501

   

4,106

 
 

637,378

   

352,706

 

Other Income and Expenses

         

Interest expense

(178,122)

   

(103,728)

 

Gain on change in control of interests (c)

105,947

   

 

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

44,116

   

52,731

 

Other income and (expenses)

(11,977)

   

9,421

 
 

(40,036)

   

(41,576)

 

Income from continuing operations before income taxes and gain (loss) on sale of real estate

228,779

   

95,569

 

Provision for income taxes

(17,609)

   

(1,252)

 

Income from continuing operations before gain (loss) on sale of real estate

211,170

   

94,317

 

Income from discontinued operations, net of tax

33,318

   

38,180

 

Gain (loss) on sale of real estate, net of tax

1,581

   

(332)

 

Net Income

246,069

   

132,165

 

Net income attributable to noncontrolling interests

(6,385)

   

(32,936)

 

Net loss (income) attributable to redeemable noncontrolling interest

142

   

(353)

 

Net Income Attributable to W. P. Carey

$

239,826

   

$

98,876

 

Basic Earnings Per Share

         

Income from continuing operations attributable to W. P. Carey

$

2.08

   

$

1.22

 

Income from discontinued operations attributable to W. P. Carey

0.34

   

0.21

 

Net Income Attributable to W. P. Carey

$

2.42

   

$

1.43

 

Diluted Earnings Per Share

         

Income from continuing operations attributable to W. P. Carey

$

2.06

   

$

1.21

 

Income from discontinued operations attributable to W. P. Carey

0.33

   

0.20

 

Net Income Attributable to W. P. Carey

$

2.39

   

$

1.41

 

Weighted-Average Shares Outstanding

         

Basic

98,764,164

   

68,691,046

 

Diluted

99,827,356

   

69,708,008

 

Amounts Attributable to W. P. Carey

         

Income from continuing operations, net of tax

$

206,329

   

$

84,637

 

Income from discontinued operations, net of tax

33,497

   

14,239

 

Net Income

$

239,826

   

$

98,876

 

__________

(a)

Comprised of revenues of $7.0 million from two hotels and revenues of $0.3 million from two self-storage facilities for the three months ended December 31, 2014, and $27.8 million and $1.1 million for the year ended 2014, respectively.

(b)

We earn investment management revenue from CWI. Pursuant to the terms of the subadvisory agreement, we pay a subadvisory fee equal to 20% of the amount of fees paid to us by CWI, including but not limited to: acquisition fees, asset management fees, loan refinancing fees, property management fees, and subordinated disposition fees, each as defined in the advisory agreement. We also pay to the subadvisor 20% of the net proceeds resulting from any sale, financing, or recapitalization or sale of securities by us, the advisor. In connection with the acquisitions of multi-family and multi-tenant 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 a fee.

(c)

Gain on change in control of interests for the year ended December 31, 2014 represents a gain of $75.7 million recognized on our previously-held interest in shares of CPA®:16 – Global common stock, and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global, which we had previously accounted for under the equity method.

 

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, 2014

 

September 30, 2014

 

December 31, 2013

Net income attributable to W. P. Carey

$

32,272

   

$

27,337

   

$

23,022

 

Adjustments:

               

Depreciation and amortization of real property

60,363

   

58,355

   

31,390

 

Impairment charges

16,776

   

4,225

   

6,790

 

Gain on sale of real estate, net

(5,062)

   

(259)

   

(39,421)

 

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

3,126

   

457

   

4,917

 

Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(2,806)

   

(2,924)

   

18,549

 

Total adjustments

72,397

   

59,854

   

22,225

 

FFO (as defined by NAREIT)

104,669

   

87,191

   

45,247

 

Adjustments:

               

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

14,008

   

14,432

   

7,374

 

Tax benefit – deferred and other non-cash charges

(8,741)

   

(1,665)

   

(8,480)

 

Stock-based compensation

8,096

   

7,979

   

11,764

 

Other, net (a)

5,434

   

(86)

   

(104)

 

Straight-line and other rent adjustments

(3,657)

   

(1,791)

   

(1,643)

 

Property acquisition expenses

3,060

   

609

   

89

 

Other amortization and non-cash charges (b)

2,099

   

5,670

   

366

 

Amortization of deferred financing costs

1,046

   

1,007

   

1,256

 

Realized (gains) losses on foreign currency, derivatives, and other

(643)

   

(272)

   

499

 

Merger expenses

37

   

9

   

2,237

 

Loss on extinguishment of debt

   

1,122

   

1,399

 

Impairment charges

   

   

553

 

Restructuring expense

   

   

8,357

 

Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

(930)

   

(918)

   

(1,858)

 

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

(98)

   

(14)

   

398

 

AFFO adjustments to equity earnings from equity investments

1,225

   

1,094

   

10,659

 

Total adjustments

20,936

   

27,176

   

32,866

 

AFFO

$

125,605

   

$

114,367

   

$

78,113

 
                 

Summary

               

FFO (as defined by NAREIT)

$

104,669

   

$

87,191

   

$

45,247

 

FFO (as defined by NAREIT) per diluted share

$

0.99

   

$

0.86

   

$

0.65

 

AFFO

$

125,605

   

$

114,367

   

$

78,113

 

AFFO per diluted share

$

1.19

   

$

1.13

   

$

1.12

 

Diluted weighted-average shares outstanding

105,794,118

   

101,130,448

   

69,628,498

 

 

W. P. CAREY INC.
Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)

(in thousands, except share and per share amounts)

 
 

Years Ended December 31,

 

2014

   

2013

 

Net income attributable to W. P. Carey

$

239,826

   

$

98,876

 

Adjustments:

         

Depreciation and amortization of real property

232,692

   

121,730

 

Gain on sale of real estate, net

(34,079)

   

(39,711)

 

Impairment charges

23,067

   

13,156

 

Proportionate share of adjustments for noncontrolling interests to arrive at FFO

(11,808)

   

5,783

 

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

5,381

   

(5,868)

 

Total adjustments

215,253

   

95,090

 

FFO (as defined by NAREIT)

455,079

   

193,966

 

Adjustments:

         

Gain on change in control of interests (c)

(105,947)

   

 

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

59,050

   

29,197

 

Merger expenses (d)

44,339

   

5,030

 

Stock-based compensation

31,075

   

37,195

 

Tax benefit – deferred and other non-cash charges

(22,582)

   

(19,370)

 

Straight-line and other rent adjustments

(17,116)

   

(8,019)

 

Other amortization and non-cash charges (b)

10,343

   

779

 

Gain on extinguishment of debt

9,835

   

1,189

 

Other, net (a)

5,369

   

(462)

 

Amortization of deferred financing costs

4,077

   

4,069

 

Property acquisition expenses (e)

3,994

   

4,074

 

Realized (gains) losses on foreign currency, derivatives, and other

(95)

   

717

 

Restructuring expense

   

8,357

 

Impairment charges

   

553

 

Proportionate share of adjustments for noncontrolling interests to arrive at AFFO

(3,006)

   

(5,972)

 

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

(139)

   

1,261

 

AFFO adjustments to equity earnings from equity investments

6,190

   

41,587

 

Total adjustments

25,387

   

100,185

 

AFFO

$

480,466

   

$

294,151

 
           

Summary

         

FFO (as defined by NAREIT)

$

455,079

   

$

193,966

 

FFO (as defined by NAREIT) per diluted share

$

4.56

   

$

2.78

 

AFFO

$

480,466

   

$

294,151

 

AFFO per diluted share

$

4.81

   

$

4.22

 

Diluted weighted-average shares outstanding

99,827,356

   

69,708,008

 

__________

(a)   

Other, net for the three months and year ended December 31, 2014 primarily consists of proceeds from the bankruptcy settlement claim with U.S. Aluminum of Canada, a former CPA®:16 – Global tenant that was acquired as part of the CPA®:16 Merger on January 31, 2014, and under GAAP was accounted for in purchase accounting.

(b)  

Represents primarily unrealized gains and losses from foreign exchange and derivatives, as well as amounts for the amortization of contracts.

(c)  

Gain on change in control of interests for the year ended December 31, 2014 represents a gain of $75.7 million recognized on our previously-held interest in shares of CPA®:16 – Global common stock and a gain of $30.2 million recognized on the purchase of the remaining interests in nine investments from CPA®:16 – Global, which we had previously accounted for under the equity method.

(d)  

Amount for the year ended December 31, 2014 includes reported merger costs as well as income tax expense incurred in connection with the CPA®:16 Merger. Income tax expense incurred in connection with the CPA®:16 Merger represents the current portion of income tax expense including the permanent difference incurred upon recognition of deferred revenue associated with the accelerated vesting of shares previously issued by CPA®:16 – Global for asset management and performance fees.

(e)   

Prior to the second quarter of 2013, this amount was insignificant and therefore not included in the AFFO calculation.

Non-GAAP Financial Disclosure

    Funds from Operations, or FFO, is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss (as computed in accordance with GAAP) excluding: depreciation and amortization expense from real estate assets, impairment charges on real estate, gains or losses from sales of depreciated real estate assets, and extraordinary items; however, FFO related to assets held for sale, sold, or otherwise transferred and included in the results of discontinued operations are included. These adjustments also incorporate the pro rata share of unconsolidated subsidiaries. FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers. Although NAREIT has published this definition of FFO, companies often modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations.

    We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash charges such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rents, stock compensation, gains or losses from extinguishment of debt and deconsolidation of subsidiaries, and unrealized foreign currency exchange gains and losses. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows. Additionally, we exclude acquisition expenses and non-core expenses such as merger expenses. Merger expenses are related to the CPA®:16 Merger. We also exclude realized gains or losses on foreign exchange and derivatives which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income as they are not the primary drivers in our decision making process and excluding those items provides investors a view of our portfolio performance over time and make it more comparable to other REITs not currently 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 because it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP or as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.

Institutional Investors:
Peter Sands
W. P. Carey Inc.
212-492-1110
institutionalir@wpcarey.com

Individual Investors:
W. P. Carey Inc.
212-492-8920
ir@wpcarey.com

Press Contact:
Guy Lawrence
Ross & Lawrence
212-308-3333
gblawrence@rosslawpr.com

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SOURCE W. P. Carey Inc.

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