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.