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Section 1: 8-K (8-K)

Document
falsefalse8002020-02-268-K2325 E. Camelback Road, 9th FloorPhoenix,85016AZ00015073850001528059606-3610 0001507385 2020-02-26 2020-02-26 0001507385 ver:VEREITOperatingPartnershipL.P.Member 2020-02-26 2020-02-26


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 26, 2020
VEREIT, INC.
VEREIT OPERATING PARTNERSHIP, L.P.
(Exact name of Registrant as specified in its charter)
 
 
 
 
 
 
 
 
 
 
Maryland
 
001-35263
 
45-2482685
Delaware
 
333-197780
 
45-1255683
(State or other jurisdiction of incorporation)
       (Commission File Number)
(I.R.S. Employer Identification No.)
2325 E. Camelback Road, 9th Floor
Phoenix,
AZ
85016
 
(Address of principal executive offices, including zip code)
(800)
 
606-3610
(Registrant’s telephone number, including area code)
________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class:
Trading symbol(s):
Name of each exchange on which registered:
Common Stock
 $0.01 par value per share (VEREIT, Inc.)
VER
New York Stock Exchange
6.70% Series F Cumulative Redeemable Preferred Stock
 $0.01 par value per share (VEREIT, Inc.)
VER PF
New York Stock Exchange
 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
VEREIT, Inc.
 
VEREIT Operating Partnership, L.P.
 
Emerging growth company    
Emerging growth company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
VEREIT, Inc. ¨ VEREIT Operating Partnership, L.P. o
 





Item 2.02. Results of Operations and Financial Condition.
On February 26, 2020, VEREIT, Inc. (the “Company”) furnished the following documents: (i) a press release relating to its fourth quarter and full year 2019 financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the quarter and full year ended December 31, 2019, attached hereto as Exhibit 99.2. The information set forth in this Item 2.02 and in the attached Exhibits 99.1 and 99.2 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information set forth in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
 
Description
99.1
 
99.2
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
VEREIT, INC.
 
 
 
By:
/s/ Michael J. Bartolotta
 
Name:
Michael J. Bartolotta
 
Title:
Executive Vice President and Chief Financial Officer
 
VEREIT OPERATING PARTNERSHIP, L.P.
By: VEREIT, Inc., its sole general partner
 
 
 
By:
/s/ Michael J. Bartolotta
 
Name:
Michael J. Bartolotta
 
Title:
Executive Vice President and Chief Financial Officer

Date: February 26, 2020



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
402980029_rgbhorzvereitlogo093018a07.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Fourth Quarter and Full Year 2019 Operating Results
Settled All Outstanding Legacy Litigation
Strengthened Portfolio and Reduced Debt Levels Through Prudent Capital Allocation


Phoenix, AZ, February 26, 2020 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months and full year ending December 31, 2019.

2019 Financial and Operating Highlights
Net loss of $(307.1) million and net loss per diluted share of $(0.37)
Achieved $0.69 AFFO per diluted share
Acquisitions totaled $425.6 million
Dispositions totaled $1.06 billion, comprised of $729.5 million portfolio dispositions and $326.0 million from the industrial partnership
Announced settlements of pending litigation which received final approval on January 21, 2020
Total debt decreased from $6.09 billion to $5.71 billion; Net Debt decreased from $6.09 billion to $5.79 billion, or 39.2% Net Debt to Gross Real Estate Investments
Net Debt to Normalized EBITDA decreased from 5.9x to 5.7x and preferred stock outstanding was reduced from $1.1 billion to $773.0 million
Fitch Ratings upgraded the Company’s corporate rating from ‘BBB-‘ to ‘BBB’ with the Rating Outlook remaining at ‘Stable’ and Moody’s affirmed the Company’s rating of ‘Baa3’ and updated the Rating Outlook from ‘Stable’ to ‘Positive’

Fourth Quarter and Full Year 2019 Financial Results

Rental Revenue
Rental Revenue for the quarter ended December 31, 2019 decreased $7.9 million to $305.4 million as compared to rental revenue of $313.3 million for the same quarter in 2018.

Rental Revenue for 2019 decreased $20.0 million to $1.24 billion as compared to rental revenue of $1.26 billion in 2018.

Net Income (Loss) and Net Income (Loss) Attributable to Common Stockholders per Diluted Share
Net income for the quarter ended December 31, 2019 increased $43.3 million to $71.2 million as compared to net income of $27.9 million for the same quarter in 2018, and net income per diluted share increased $0.04 to $0.05 for the quarter ended December 31, 2019, as compared to net income per diluted share of $0.01 for the same quarter in 2018.

Net loss for 2019 increased $215.4 million to $(307.1) million as compared to net loss of $(91.7) million in 2018, and net loss per diluted share increased $0.20 to $(0.37) for 2019, as compared to net loss per diluted share of $(0.17) for 2018.

Normalized EBITDA
Normalized EBITDA for the quarter ended December 31, 2019 decreased $3.6 million to $253.9 million as compared to Normalized EBITDA of $257.5 million for the same quarter in 2018.

Normalized EBITDA for 2019 of $1.04 billion remained constant year over year.


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Funds From Operations Attributable to Common Stockholders and Limited Partners (“FFO”) and FFO per Diluted Share
FFO for the quarter ended December 31, 2019 decreased $5.2 million to $149.4 million, as compared to $154.6 million for the same quarter in 2018, and FFO per diluted share decreased $0.02 to $0.14 for the quarter ended December 31, 2019, as compared to FFO per diluted share of $0.16 for the same quarter in 2018.

FFO for 2019 decreased $572.8 million to $(138.4) million, as compared to $434.4 million for 2018, and FFO per diluted share decreased $0.58 to $(0.14) for 2019, as compared to FFO per diluted share of $0.44 for 2018.

Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended December 31, 2019 increased $1.4 million to $173.9 million, as compared to $172.5 million for the same quarter in 2018, and AFFO per diluted share decreased $0.01 to $0.16 for the quarter ended December 31, 2019, as compared $0.17 for the same quarter in 2018.

AFFO for 2019 decreased $3.8 million to $706.9 million, as compared to $710.7 million for 2018, and AFFO per diluted share decreased $0.03 to $0.69 for 2019, as compared to $0.72 for 2018.

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “2019 was a transformative year for us as we resolved our last legacy issue, litigation. Additionally, we continued to improve tenant diversification and reduced Net Debt to Normalized EBITDA below our original guidance with our capital activity. Through our expanded sourcing capabilities, net acquisitions will provide growth and quality product for VEREIT in 2020. As such, we expect to invest $1.0 billion to $1.3 billion on balance sheet with an additional $500 million to $800 million for the partnerships.”

Common Stock Dividend Information
On February 25, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.1375 per share for the first quarter of 2020, representing an annual dividend of $0.55 per share. The dividend will be paid on April 15, 2020 to common stockholders of record as of March 31, 2020.

Balance Sheet and Liquidity
As of the end of the fourth quarter, the Company had utilized $150.0 million of its $1.5 billion revolving line of credit, leaving $1.35 billion of capacity available as of December 31, 2019. In addition, secured debt was reduced by $187.2 million in the fourth quarter, bringing the total amount reduced for the year to $388.1 million.
 
Fitch Ratings upgraded the Company’s corporate rating from ‘BBB-‘ to ‘BBB’ with the Rating Outlook remaining at ‘Stable’ and Moody’s affirmed the Company’s rating of ‘Baa3’ and updated the Rating Outlook from ‘Stable’ to ‘Positive.’
 
Capital Market Activity
During the first quarter of 2019, the Company repaid $750.0 million principal outstanding related to the 2019 senior notes that matured, utilizing the $900.0 million unsecured term loan facility.

During the first and second quarters of 2019, the Company issued 5.0 million shares under the Company’s at-the-market (“ATM”) equity offering program for gross proceeds of $42.5 million at a weighted average price of $8.42.

During the third quarter of 2019, the Company redeemed $100.0 million of VEREIT’s 6.7% Series F preferred stock with proceeds from the industrial partnership.

In addition, the Company closed a public offering of common stock. The Company sold a total of 94.3 million shares of common stock in the offering, which included the full exercise of the underwriters' option to purchase additional shares. The net proceeds to the Company from the offering were approximately $886.9 million.

In the fourth quarter of 2019, the Company issued $600.0 million aggregate principal amount of 3.10% senior notes due 2029. Proceeds from the senior notes along with borrowings under the Company’s revolving credit facility and cash on hand were used to fund the redemption of all $400.0 million of the 4.125% senior notes due 2021, repurchase of $80.7 million of the 3.75% convertible senior notes due 2020, redemption of $200.0 million of VEREIT’s 6.7% Series F preferred stock, and prepayment of $185.6 million of mortgage debt.
 
In addition, the Company issued 9.0 million shares under the Company's ATM equity offering program for gross proceeds of $86.7 million at a weighted average price of $9.60 per share.


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Consolidated Financial Statistics
Financial Statistics as of the quarter ended December 31, 2019 are as follows: Net Debt to Normalized EBITDA of 5.7x, Fixed Charge Coverage Ratio of 3.0x, Unencumbered Asset Ratio of 79.1%, Net Debt to Gross Real Estate Investments of 39.2%, Weighted Average Debt Term of 4.8 years and 97.2% Fixed Rate Debt.

Litigation Settlements
During the first and second quarters of 2019, the Company announced settlement agreements with certain shareholders who decided not to participate in the Class Action for approximately $27.9 million. On September 9, 2019, the Company announced it entered into agreements to settle certain outstanding litigation, including the pending class action and the remaining opt out actions at a cost to the Company of approximately $765.5 million, comprised of a contribution of $738.5 million toward the class action settlement and $27.0 million toward the opt out action settlements. In conjunction with the class action settlement, the Company also entered into an agreement providing for the settlement of the derivative action lawsuit.

In accordance with the terms of the class action settlement agreement, certain defendants agreed to pay in the aggregate $1.025 billion, comprised of contributions from the Company’s former external manager and its principals (“Former Manager”) totaling $225.0 million, $12.5 million from the Company’s former CFO, $49.0 million from the Company’s former auditor, and the balance of $738.5 million from the Company. The contributions from the Company’s Former Manager and former CFO were subsequently satisfied with a combination of limited partner OP Units held by the Former Manager and the former CFO, amounts due related to dividends on certain of such limited partner OP Units previously withheld from distribution, the value of substantially all of the limited partner OP Units and dividends surrendered to the Company in July 2019 as a result of a settlement by the Former Manager with the U.S. Securities and Exchange Commission (the “SEC”), and cash paid by the Former Manager and former CFO.

On October 4, 2019, the court issued an order granting preliminary approval of both the class action settlement and the derivative settlement. As such, on October 15, 2019, the Company funded $966.3 million for its contribution and a portion of the Former Manager and former CFO’s contributions. On January 21, 2020, the court granted final approval of both the class action settlement and the derivative settlement.

SEC Agreement
On November 18, 2019, the Company announced  that the Company and the staff of the Enforcement Division of the SEC reached agreement on the material terms of a negotiated resolution relating to the SEC's investigation of the matters disclosed in the Company's October 29, 2014 Form 8-K relating to, among other things, the preliminary results of an investigation conducted by the Company's audit committee regarding certain accounting practices.  The agreement with the SEC staff, which is subject to documentation and approval by the SEC's Commissioners, includes payment of $8.0 million as a civil penalty, which was accrued in the fourth quarter financials. 


Real Estate Portfolio
As of December 31, 2019, the Company’s portfolio consisted of 3,858 properties with total portfolio occupancy of 99.1%, investment grade tenancy of 38.6% and a weighted-average remaining lease term of 8.3 years. During the quarter ended December 31, 2019, same-store rents (3,779 properties) increased 1.1% as compared to the same quarter in 2018.

During 2019, same-store rents (3,738 properties) increased 1.2% as compared to 2018.

Property Acquisitions
During the fourth quarter of 2019, the Company acquired 26 properties for approximately $141.9 million at an average cash cap rate of 7.3%.

During 2019, the Company acquired 66 properties for approximately $401.3 million at an average cash cap rate of 7.1%. In addition, the Company invested $24.3 million in one build-to-suit project.

Industrial Partnership
On May 30, 2019, the Company formed an industrial partnership with the objective of creating an increasing, long term asset base of investment grade tenants in the U.S. industrial market. The partnership is a traditional 80/20 structure and initially includes six VEREIT assets totaling approximately $407.5 million, which contributed $326.0 million to total dispositions.


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Property Dispositions
During the quarter ended December 31, 2019, the Company disposed of 94 properties for an aggregate sales price of $225.5 million. Of this amount, $210.4 million was used in the total weighted average cash cap rate calculation of 6.5%, including $13.1 million in net sales of Red Lobster restaurants. The gain on fourth quarter sales was approximately $42.0 million.

During 2019, the Company disposed of 201 properties for an aggregate sales price of $1.06 billion, including the industrial partnership. Of this amount, $868.4 million was used in the total weighted average cash cap rate calculation of 6.7%, including $133.1 million of Red Lobster restaurants. The gain on 2019 sales was approximately $293.9 million. In addition, the Company sold certain legacy mortgage related investments during the year for an aggregate sales price of $10.0 million.

2020 Guidance
The Company expects its 2020 AFFO per diluted share to be in a range between $0.64 and $0.66 (see reconciliation to net income per share at the end of this release). This guidance assumes:
Acquisitions: $1.0 billion to $1.3 billion at an average cash cap rate of 6.5% to 7.5%
Dispositions: $250 million to $350 million at an average cash cap rate of 6.5% to 7.5%
Dispositions Contributed to the Office Partnership: $110 million (Company’s pro rata share)
Industrial Partnership Acquisitions: $400 million to $600 million
Office Partnership Acquisitions $100 million to $200 million
Average Occupancy: above 98.0%
Same-Store Rental Growth: 0.3% to 0.8%
Net Debt to Normalized EBITDA: 5.5x to 6.0x


Subsequent Events

Property Acquisitions
Acquisitions year-to-date through February 12, 2020, totaled $127.8 million.

Office Partnership
On January 13, 2020, the Company formed an office partnership which allows VEREIT to reduce balance sheet office exposure while utilizing the Company's in-house infrastructure to manage and increase the value of the enterprise. The partnership is a traditional 80/20 structure and will include three VEREIT office assets totaling approximately $137.5 million. Two of the three properties were contributed at the time of closing, totaling $87.7 million, with the last property expected to be added to the partnership in the first half of 2020 for $49.8 million.
In addition, the partnership closed on an external property acquisition for $33.1 million.
 
Property Dispositions
Portfolio dispositions year-to-date through February 12, 2020, totaled $30.3 million. In addition, the Company’s share of dispositions contributed to the office partnership totaled $70.2 million.



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Audio Webcast and Call Details
The live audio webcast will be available, beginning at 1:30 p.m. ET on Wednesday, February 26, 2020, on the Company's Investor Relations website at: http://ir.vereit.com/. The dial-in information is as follows: (844) 746-0748 (domestic) or (412) 317-5274 (international).  Participants should log in 10-15 minutes early.

Approximately one hour following the call, a replay of the webcast will be available at the link above and archived for up to 12 months. A telephone replay of the conference call can also be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international), passcode 10138882. The telephone replay will be available until March 11, 2020.

About the Company
VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The Company has total real estate investments of $14.8 billion including approximately 3,900 properties and 89.5 million square feet. VEREIT’s business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange. VEREIT uses, and intends to continue to use, its Investor Relations website, which can be found at www.VEREIT.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about VEREIT can be found through social media platforms such as Twitter and LinkedIn.

Media Contact
Parke Chapman
Rubenstein Associates
212.843.8489 | [email protected]

Investor Contact
Bonni Rosen, Senior Vice President, Investor Relations                
VEREIT            
877.405.2653 | [email protected]

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Definitions
Descriptions of FFO and AFFO, EBITDA and Normalized EBITDA, Principal Outstanding and Adjusted Principal Outstanding, Net Debt, Interest Expense, Excluding Non-Cash Amortization, Fixed Charge Coverage Ratio, Net Debt to Normalized EBITDA Annualized Ratio, Net Debt Leverage Ratio, and Unencumbered Asset Ratio are provided below. Refer to the subsequent tables for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure and the calculations of these financial ratios.
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Normalized EBITDA
Due to certain unique operating characteristics of real estate companies, as discussed below, National Association of Real Estate Investment Trusts, Inc. (“Nareit”) has promulgated a supplemental performance measure known as Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"). Nareit defines EBITDAre as net income or loss computed in accordance with GAAP, adjusted for interest expense, income tax expense (benefit), depreciation and amortization, impairment write-downs on real estate, gains or losses from disposition of property and our pro rata share of EBITDAre adjustments related to unconsolidated partnerships and joint ventures. We calculated EBITDAre in accordance with Nareit's definition described above.
In addition to EBITDAre, we use Normalized EBITDA as a non-GAAP supplemental performance measure to evaluate the operating performance of the Company. Normalized EBITDA, as defined by the Company, represents EBITDAre, modified to exclude non-routine items such as acquisition-related expenses, litigation and non-routine costs, net, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rental revenue, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, write-off of program development costs, and amortization of intangibles, above-market lease assets and below-market lease liabilities. Normalized EBITDA omits the Normalized EBITDA impact of Excluded Properties. Management believes that excluding these costs from EBITDAre provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. Therefore, EBITDA, EBITDAre, and Normalized EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses EBITDA, EBITDAre, and Normalized EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. Normalized EBITDA may not be comparable to similarly titled measures of other companies.
Excluded Properties
Excluded Properties are properties for which (i) the related mortgage loan is in default, and (ii) management decides to transfer the properties to the lender in connection with settling the mortgage note obligation. Certain non-GAAP measures and operating metrics omit the impact of such properties for the month beginning with the date that such criteria are met and ending with the disposition date, in order to better reflect the ongoing operations of the Company.
At and during the three months ended December 31, 2019, there were no Excluded Properties. During the year ended December 31, 2019, there was one Excluded Property which was an office property comprising 145,186 square feet, of which 6,926 square feet was vacant, with Principal Outstanding of $19.5 million. During the year ended December 31, 2018, the Excluded Property was one vacant industrial property, comprising 307,725 square feet with Principal Outstanding of $16.2 million.
Fixed Charge Coverage Ratio
Fixed Charge Coverage Ratio is the sum of (i) Interest Expense, excluding non-cash amortization, (ii) secured debt principal amortization on Adjusted Principal Outstanding and (iii) dividends attributable to preferred shares divided by Normalized EBITDA. Management believes that Fixed Charge Coverage Ratio is a useful supplemental measure of our ability to satisfy fixed financing obligations.
Fixed Rate Debt
Fixed Rate Debt includes variable rate debt effectively fixed through the use of interest rate swap agreements.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
Due to certain unique operating characteristics of real estate companies, as discussed below, the Nareit, an industry trade group, has promulgated a supplemental performance measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

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Nareit defines FFO as net income or loss computed in accordance with U.S. GAAP adjusted for gains or losses from disposition of property, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to unconsolidated partnerships and joint ventures. We calculate FFO in accordance with Nareit’s definition described above.
In addition to FFO, we use adjusted funds from operations (“AFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. AFFO, as defined by the Company, excludes from FFO non-routine items such as acquisition-related expenses, litigation and non-routine costs, net, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rent, net of bad debt expense related to straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, reserves for loan loss, gains or losses on the extinguishment or forgiveness of debt, non-current portion of the tax benefit or expense, equity-based compensation and amortization of intangible assets, deferred financing costs, premiums and discounts on debt and investments, above-market lease assets and below-market lease liabilities. We omit the impact of the Excluded Properties and related non-recourse mortgage notes from FFO to calculate AFFO. Management believes that excluding these costs from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as AFFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and AFFO, in addition to net income (loss), as defined by U.S. GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.
Gross Real Estate Investments
Gross Real Estate Investments represent total gross real estate and related assets of Operating Properties, equity investments in the Cole REITs, investment in direct financing leases, investment securities backed by real estate and mortgage notes receivable, and the Company's pro rata share of such amounts related to properties owned by unconsolidated joint ventures, net of gross intangible lease liabilities. We believe that the presentation of Gross Real Estate Investments, which shows our total investments in real estate and related assets, in connection with Net Debt, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Gross Real Estate Investments should not be considered as an alternative to the Company's real estate investments balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Interest Expense, Excluding Non-Cash Amortization
Interest Expense, excluding non-cash amortization is a non-GAAP measure that represents interest expense incurred on the outstanding principal balance of our debt and the Company's pro rata share of the unconsolidated joint ventures' outstanding principal balance. This measure excludes (i) the amortization of deferred financing costs, premiums and discounts, which is included in interest expense in accordance with GAAP, and (ii) the impact of Excluded Properties and related non-recourse mortgage notes. We believe that the presentation of Interest Expense, excluding non-cash amortization, which shows the interest expense on our contractual debt obligations, provides useful information to investors to assess our overall solvency and financial flexibility. Interest Expense, excluding non-cash amortization should not be considered as an alternative to the Company's interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP.
Net Debt Leverage Ratio
Net Debt Leverage Ratio equals Net Debt divided by Gross Real Estate Investments. We believe that the presentation of Net Debt Leverage Ratio provides useful information to investors because our management reviews Net Debt Leverage Ratio as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.

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Net Debt, Principal Outstanding and Adjusted Principal Outstanding 
Principal Outstanding is a non-GAAP measure that represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. Adjusted Principal Outstanding includes the Company's pro rata share of the unconsolidated joint ventures' outstanding principal debt balance and omits the outstanding principal balance of mortgage notes secured by Excluded Properties. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Principal Outstanding and Adjusted Principal Outstanding should not be considered as alternatives to the Company's consolidated debt balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of unconsolidated joint ventures' cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
Net Debt to Normalized EBITDA Annualized Ratio
Net Debt to Normalized EBITDA Annualized equals Net Debt divided by the respective quarter Normalized EBITDA multiplied by four. We believe that the presentation of Net Debt to Normalized EBITDA Annualized provides useful information to investors because our management reviews Net Debt to Normalized EBITDA Annualized as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
Unencumbered Asset Ratio
Unencumbered Asset Ratio equals unencumbered Gross Real Estate Investments divided by Gross Real Estate Investments. Management believes that Unencumbered Asset Ratio is a useful supplemental measure of our overall liquidity and leverage.

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Forward-Looking Statements
Information set forth herein contains “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT’s expectations and projections regarding future events and plans, VEREIT's future financial condition, results of operations and business, and VEREIT’s portfolio and joint venture acquisitions for 2020, including the ability to be a net acquirer in 2020 through its expanded sourcing capabilities. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond VEREIT's control, that could cause actual events and plans or could cause VEREIT's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements.
The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: VEREIT’s plans, market and other expectations, objectives, intentions and other statements that are not historical facts; VEREIT’s ability to meet its 2020 guidance; VEREIT’s ability to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all; risks associated with tenant, geographic and industry concentrations with respect to VEREIT's properties; risks accompanying the management of its industrial partnership and office partnership; the impact of impairment charges in respect of certain of VEREIT's properties; unexpected costs or liabilities that may arise from potential dispositions, including related to limited partnership, tenant-in-common and Delaware statutory trust real estate programs and VEREIT’s management with respect to such programs; competition in the acquisition and disposition of properties; the inability to acquire, dispose of, or lease properties on advantageous terms; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of VEREIT's tenants; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT's ability to pay dividends and that the terms and restrictions within the agreements governing VEREIT's indebtedness may restrict its borrowing and operating flexibility; the ability to retain or hire key personnel; and continuation or deterioration of current market conditions. Additional factors that may affect future results are contained in VEREIT’s filings with the SEC, which are available at the SEC’s website at www.sec.gov. VEREIT disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as required by law.



9



VEREIT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)

 
 
December 31,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,738,679

 
$
2,843,212

Buildings, fixtures and improvements
 
10,200,550

 
10,749,228

Intangible lease assets
 
1,904,641

 
2,012,399

Total real estate investments, at cost
 
14,843,870

 
15,604,839

Less: accumulated depreciation and amortization
 
3,594,247

 
3,436,772

Total real estate investments, net
 
11,249,623

 
12,168,067

Operating lease right-of-use assets
 
215,227

 

Investment in unconsolidated entities
 
68,825

 
35,289

Cash and cash equivalents
 
12,921

 
30,758

Restricted cash
 
20,959

 
22,905

Rent and tenant receivables and other assets, net
 
348,395

 
366,092

Goodwill
 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
26,957

 
2,609

Total assets
 
$
13,280,680

 
$
13,963,493

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,528,134

 
$
1,922,657

Corporate bonds, net
 
2,813,739

 
3,368,609

Convertible debt, net
 
318,183

 
394,883

Credit facility, net
 
1,045,669

 
401,773

Below-market lease liabilities, net
 
143,583

 
173,479

Accounts payable and accrued expenses
 
126,320

 
145,611

Deferred rent and other liabilities
 
90,349

 
69,714

Distributions payable
 
150,364

 
186,623

Operating lease liabilities
 
221,061

 

Total liabilities
 
6,437,402

 
6,663,349

Series F preferred stock
 
309

 
428

Common stock
 
10,768

 
9,675

Additional paid-in capital
 
13,251,962

 
12,615,472

Accumulated other comprehensive loss
 
(27,670
)
 
(1,280
)
Accumulated deficit
 
(6,399,626
)
 
(5,467,236
)
Total stockholders’ equity
 
6,835,743

 
7,157,059

Non-controlling interests
 
7,535

 
143,085

Total equity
 
6,843,278

 
7,300,144

Total liabilities and equity
 
$
13,280,680

 
$
13,963,493


10



VEREIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data) (Unaudited)

 
 
Three Months Ended December 31,
 
 
2019
 
2018
Rental revenue
 
$
305,363

 
$
313,263

Operating expenses:
 
 
 
 
Acquisition-related
 
1,168

 
1,136

Litigation and non-routine costs, net
 
8,659

 
23,541

Property operating
 
34,066

 
32,567

General and administrative
 
16,966

 
17,220

Depreciation and amortization
 
112,307

 
153,050

Impairments
 
22,851

 
18,565

Restructuring
 
356

 

Total operating expenses
 
196,373

 
246,079

Other (expense) income:
 
 
 
 
Interest expense
 
(69,628
)
 
(70,832
)
(Loss) gain on extinguishment and forgiveness of debt, net
 
(17,413
)
 
21

Other income, net
 
7,461

 
7,008

Equity in income of unconsolidated entities
 
936

 
225

Gain on disposition of real estate and real estate assets held for sale, net
 
41,541

 
25,880

Total other expenses, net
 
(37,103
)
 
(37,698
)
Income before taxes
 
71,887

 
29,486

Provision for income taxes from continuing operations
 
(719
)
 
(1,614
)
Income from continuing operations
 
71,168

 
27,872

Loss from discontinued operations, net of tax
 

 
(30
)
Net income
 
71,168

 
27,842

Net income attributable to non-controlling interests
 
(43
)
 
(624
)
Net income attributable to the General Partner
 
$
71,125

 
$
27,218

 
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
 
$
0.05

 
$
0.01

Distributions declared per common share
 
$
0.1375

 
$
0.1375


11



VEREIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)


 
 
Year Ended December 31,
 
 
2019
 
2018
Rental revenue
 
$
1,237,234

 
$
1,257,867

Operating expenses:
 
 
 
 
Acquisition-related
 
4,337

 
3,632

Litigation and non-routine costs, net
 
815,422

 
290,963

Property operating
 
129,769

 
126,461

General and administrative
 
62,711

 
63,933

Depreciation and amortization
 
481,995

 
640,618

Impairments
 
47,091

 
54,647

Restructuring
 
10,505

 

Total operating expenses
 
1,551,830

 
1,180,254

Other income (expense):
 
 
 
 
Interest expense
 
(278,574
)
 
(280,887
)
(Loss) gain on extinguishment and forgiveness of debt, net
 
(17,910
)
 
5,360

Other income, net
 
12,971

 
15,090

Equity in income of unconsolidated entities
 
2,618

 
1,869

Gain on disposition of real estate and real estate assets held for sale, net
 
292,647

 
94,331

Total other income (expenses), net
 
11,752

 
(164,237
)
Loss before taxes
 
(302,844
)
 
(86,624
)
Provision for income taxes from continuing operations
 
(4,262
)
 
(5,101
)
Loss from continuing operations
 
(307,106
)
 
(91,725
)
Income from discontinued operations, net of tax
 

 
3,695

Net loss
 
(307,106
)
 
(88,030
)
Net loss attributable to non-controlling interests
 
6,753

 
2,256

Net loss attributable to the General Partner
 
$
(300,353
)
 
$
(85,774
)
 
 
 
 
 
Basic and diluted net loss per share from continuing operations attributable to common stockholders
 
$
(0.37
)
 
$
(0.17
)
Basic and diluted net income per share from discontinued operations attributable to common stockholders
 

 
0.00

Basic and diluted net loss per share attributable to common stockholders
 
$
(0.37
)
 
$
(0.16
)
Distributions declared per common share
 
$
0.55

 
$
0.55



12



VEREIT, INC.
EBITDA, EBITDAre AND NORMALIZED EBITDA
(In thousands) (Unaudited)

 
 
Three Months Ended December 31,
 
 
2019
 
2018
Net income
 
$
71,168

 
$
27,842

 Adjustments:
 
 
 
 
Interest expense
 
69,628

 
70,832

Depreciation and amortization
 
112,307

 
153,050

Provision for income taxes
 
719

 
1,614

Proportionate share of adjustments for unconsolidated entities
 
1,603

 
254

 EBITDA
 
$
255,425

 
$
253,592

Gain on disposition of real estate assets, net
 
(41,541
)
 
(25,951
)
Impairments of real estate
 
22,851

 
18,565

EBITDAre
 
$
236,735

 
$
246,206

Loss on disposition of discontinued operations
 

 
30

Payments received on fully reserved loans
 
(133
)
 
(4,792
)
Acquisition-related expenses
 
1,168

 
1,136

Litigation and non-routine costs, net
 
8,659

 
23,541

Gain on investments
 

 
(1,790
)
Loss on derivative instruments, net
 

 
92

Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
504

 
945

Loss (gain) on extinguishment and forgiveness of debt, net
 
17,413

 
(21
)
Net direct financing lease adjustments
 
387

 
498

Straight-line rent, net of bad debt expense related to straight-line rent
 
(7,107
)
 
(8,341
)
Restructuring expenses
 
356

 

Other adjustments, net
 
(3,511
)
 
(78
)
 Proportionate share of adjustments for unconsolidated entities
 
(559
)
 
60

Adjustment for Excluded Properties
 
3

 

Normalized EBITDA
 
$
253,915

 
$
257,486










13



VEREIT, INC.
EBITDA, EBITDAre AND NORMALIZED EBITDA
(In thousands) (Unaudited)

 
 
Year Ended December 31,
 
 
2019
 
2018
Net loss
 
$
(307,106
)
 
$
(88,030
)
 Adjustments:
 
 
 
 
Interest expense
 
278,574

 
280,887

Depreciation and amortization
 
481,995

 
640,618

Provision for income taxes
 
4,262

 
3,006

Proportionate share of adjustments for unconsolidated entities
 
3,966

 
1,448

 EBITDA
 
$
461,691

 
$
837,929

Gain on disposition of real estate assets, net
 
(292,654
)
 
(95,034
)
Impairments of real estate
 
47,091

 
54,647

EBITDAre
 
$
216,128

 
$
797,542

Loss on disposition of discontinued operations
 

 
1,815

Payments received on fully reserved loans
 
(133
)
 
(4,792
)
Acquisition-related expenses
 
4,337

 
3,632

Litigation and non-routine costs, net
 
815,422

 
290,309

Loss (gain) on investments
 
493

 
(4,092
)
Loss (gain) on derivative instruments, net
 
58

 
(355
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
2,538

 
4,178

Loss (gain) on extinguishment and forgiveness of debt, net
 
17,910

 
(5,360
)
Net direct financing lease adjustments
 
1,617

 
2,023

Straight-line rent, net of bad debt expense related to straight-line rent
 
(28,032
)
 
(39,723
)
Restructuring expenses
 
10,505

 

Other adjustments, net
 
(2,686
)
 
(2,150
)
 Proportionate share of adjustments for unconsolidated entities
 
(1,079
)
 
18

Adjustment for Excluded Properties
 
(257
)
 
35

Normalized EBITDA
 
$
1,036,821

 
$
1,043,080

Normalized EBITDA from continuing operations
 
$
1,036,821

 
$
1,040,319

Normalized EBITDA from discontinued operations
 
$

 
$
2,761










14



VEREIT, INC.
FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
 
Three Months Ended December 31,
 
 
2019
 
2018
Net income
 
$
71,168

 
$
27,842

Dividends on non-convertible preferred stock
 
(15,964
)
 
(17,973
)
Gain on disposition of real estate assets, net
 
(41,541
)
 
(25,951
)
Depreciation and amortization of real estate assets
 
111,892

 
151,837

Impairment of real estate
 
22,851

 
18,565

Proportionate share of adjustments for unconsolidated entities
 
1,027

 
256

FFO attributable to common stockholders and limited partners
 
$
149,433

 
$
154,576

FFO attributable to common stockholders and limited partners from continuing operations
 
149,433

 
154,606

FFO attributable to common stockholders and limited partners from discontinued operations
 

 
(30
)
 
 
 
 
 
Weighted-average shares outstanding - basic
 
1,070,625,899

 
967,817,245

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
7,021,153

 
24,520,714

Weighted-average shares outstanding - diluted
 
1,077,647,052

 
992,337,959

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
0.139

 
$
0.156

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
 
$
0.139

 
$
0.156

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$

 
(0.000
)


15



VEREIT, INC.
FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)


 
 
Year Ended December 31,
 
 
2019
 
2018
Net loss
 
$
(307,106
)
 
$
(88,030
)
Dividends on non-convertible preferred stock
 
(68,488
)
 
(71,892
)
Gain on disposition of real estate assets, net
 
(292,654
)
 
(95,034
)
Depreciation and amortization of real estate assets
 
480,064

 
637,097

Impairment of real estate
 
47,091

 
54,647

Proportionate share of adjustments for unconsolidated entities
 
2,721

 
1,278

FFO attributable to common stockholders and limited partners
 
$
(138,372
)
 
$
438,066

FFO attributable to common stockholders and limited partners from continuing operations
 
(138,372
)
 
434,371

FFO attributable to common stockholders and limited partners from discontinued operations
 

 
3,695

 
 
 
 
 
Weighted-average shares outstanding - basic
 
998,139,969

 
969,092,268

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
20,094,822

 
24,145,875

Weighted-average shares outstanding - diluted
 
1,018,234,791

 
993,238,143

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
(0.136
)
 
$
0.441

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
 
$
(0.136
)
 
$
0.437

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$

 
0.004

















16



VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
 
Three Months Ended December 31,
 
 
2019
 
2018
FFO attributable to common stockholders and limited partners
 
$
149,433

 
$
154,576

 
 
 
 
 
Acquisition-related expenses
 
1,168

 
1,136

Litigation and non-routine costs, net
 
8,659

 
23,541

Loss on disposition of discontinued operations
 

 
30

Payments received on fully reserved loans
 
(133
)
 
(4,792
)
Gain on investments
 

 
(1,790
)
Loss on derivative instruments, net
 

 
92

Amortization of premiums and discounts on debt and investments, net
 
(1,479
)
 
(1,154
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
504

 
945

Net direct financing lease adjustments
 
387

 
498

Amortization and write-off of deferred financing costs
 
5,305

 
3,715

Loss (gain) on extinguishment and forgiveness of debt, net
 
17,413

 
(21
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(7,107
)
 
(8,341
)
Equity-based compensation
 
2,934

 
2,924

Restructuring expenses
 
356

 

Other adjustments, net
 
(3,097
)
 
1,092

Proportionate share of adjustments for unconsolidated entities
 
(493
)
 
60

Adjustment for Excluded Properties
 
3

 

AFFO attributable to common stockholders and limited partners
 
$
173,853

 
$
172,511

 
 
 
 
 
Weighted-average shares outstanding - basic
 
1,070,625,899

 
967,817,245

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
7,021,153

 
24,520,714

Weighted-average shares outstanding - diluted
 
1,077,647,052

 
992,337,959

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.161

 
$
0.174






17



VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)


 
 
Year Ended December 31,
 
 
2019
 
2018
FFO attributable to common stockholders and limited partners
 
$
(138,372
)
 
$
438,066

 
 
 
 
 
Acquisition-related expenses
 
4,337

 
3,632

Litigation and non-routine costs, net
 
815,422

 
290,309

Loss on disposition of discontinued operations
 

 
1,815

Payments received on fully reserved loans
 
(133
)
 
(4,792
)
Loss (gain) on investments
 
493

 
(4,092
)
Loss (gain) on derivative instruments, net
 
58

 
(355
)
Amortization of premiums and discounts on debt and investments, net
 
(5,312
)
 
(3,486
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
2,538

 
4,178

Net direct financing lease adjustments
 
1,617

 
2,023

Amortization and write-off of deferred financing costs
 
15,464

 
19,166

Deferred and other tax expense
 

 
(1,855
)
Loss (gain) on extinguishment and forgiveness of debt, net
 
17,910

 
(5,360
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(28,032
)
 
(39,723
)
Equity-based compensation
 
12,251

 
12,417

Restructuring expenses
 
10,505

 

Other adjustments, net
 
(773
)
 
1,446

Proportionate share of adjustments for unconsolidated entities
 
(1,005
)
 
36

Adjustment for Excluded Properties
 
(33
)
 
465

AFFO attributable to common stockholders and limited partners
 
$
706,935

 
$
713,890

AFFO attributable to common stockholders and limited partners from continuing operations
 
706,935

 
710,688

AFFO attributable to common stockholders and limited partners from discontinued operations
 

 
3,202

 
 
 
 
 
Weighted-average shares outstanding - basic
 
998,139,969

 
969,092,268

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
20,094,822

 
24,145,875

Weighted-average shares outstanding - diluted
 
1,018,234,791

 
993,238,143

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.694

 
$
0.719

AFFO attributable to common stockholder and limited partners from continuing operations per diluted share
 
$
0.694

 
$
0.716

AFFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$

 
$
0.003








18



VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
 
 
Three Months Ended
 
 
December 31,
2019
Interest expense - as reported
 
$
(69,628
)
Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(5,395
)
Amortization of net premiums
 
1,569

Unconsolidated joint ventures’ pro rata share
 
(490
)
Interest Expense, Excluding Non-Cash Amortization
 
$
(66,292
)

 
 
Three Months Ended
 
 
December 31,
2019
Interest Expense, Excluding Non-Cash Amortization
 
$
66,292

Secured debt principal amortization
 
2,360

Dividends attributable to preferred shares 
 
15,964

Total fixed charges
 
84,616

Normalized EBITDA
 
253,915

Fixed Charge Coverage Ratio
 
3.00
x

 
 
December 31,
2019
 
December 31,
2018
Mortgage notes payable, net
 
$
1,528,134

 
$
1,922,657

Corporate bonds, net
 
2,813,739

 
3,368,609

Convertible debt, net
 
318,183

 
394,883

Credit facility, net
 
1,045,669

 
401,773

Total debt - as reported
 
5,705,725

 
6,087,922

Deferred financing costs, net
 
39,721

 
42,763

Net discounts (premiums)
 
5,413

 
(8,053
)
Principal Outstanding
 
5,750,859

 
6,122,632

Unconsolidated joint ventures’ pro rata share
 
53,850

 

Adjusted Principal Outstanding
 
$
5,804,709

 
$
6,122,632

Cash and cash equivalents
 
(12,921
)
 
(30,758
)
Pro rata share of unconsolidated joint ventures’ cash and cash equivalents
 
(1,480
)
 

Net Debt
 
$
5,790,308

 
$
6,091,874


19



 
 
December 31,
2019
Total real estate investments, at cost - as reported
 
$
14,843,870

Adjustments:
 
 
Investment in Cole REITs
 
7,552

Gross assets held for sale
 
36,210

Investment in direct financing leases, net
 
9,341

Gross below market leases
 
(242,898
)
Unconsolidated joint ventures' pro rata share
 
121,873

Gross Real Estate Investments
 
$
14,775,948


 
 
December 31,
2019
 
December 31,
2018
Net Debt
 
$
5,790,308

 
$
6,091,874

Normalized EBITDA annualized
 
1,015,660

 
1,029,944

Net Debt to Normalized EBITDA Annualized Ratio
 
5.70
x
 
5.91
x

 
 
December 31,
2019
Net Debt
 
$
5,790,308

Gross Real Estate Investments
 
14,775,948

Net Debt Leverage Ratio
 
39.2
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,681,648

Gross Real Estate Investments
 
14,775,948

Unencumbered asset ratio
 
79.1
%



20



VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE - 2020 GUIDANCE
(Unaudited)

The Company expects its 2020 AFFO per diluted share to be in a range between $0.64 and $0.66. This guidance assumes:
Acquisitions: $1.0 billion to $1.3 billion at an average cash cap rate of 6.5% to 7.5%
Dispositions: $250 million to $350 million at an average cash cap rate of 6.5% to 7.5%
Dispositions contributed to the Office Partnership: $110 million (Company’s pro rata share)
Industrial Partnership Acquisitions: $400 million to $600 million
Office Partnership Acquisitions $100 million to $200 million
Average Occupancy: above 98.0%
Same-Store Rental Growth: 0.3% to 0.8%
Net Debt to Normalized EBITDA: 5.5x to 6.0x

The estimated net income per diluted share is not a projection and is provided solely to satisfy the disclosure requirements of the U.S. Securities and Exchange Commission.
 
 
Low
 
High
Diluted net income per share attributable to common stockholders and limited partners (1)
 
$
0.21

 
$
0.23

Depreciation and amortization of real estate assets 
 
0.39

 
0.39

FFO attributable to common stockholders and limited partners per diluted share
 
0.60

 
0.62

Adjustments (2)
 
0.04

 
0.04

AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.64

 
$
0.66

_____________________________________
(1) Includes impact of dividends to be paid to preferred shareholders.
(2) Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net, and (ii) certain non-cash items such as straight-line rent, net direct financing lease adjustments, equity-based compensation and amortization of intangible assets, deferred financing costs, premiums and discounts on debt , above-market lease assets and below-market lease liabilities.

21
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

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Q4 2019 SUPPLEMENTAL INFORMATION

VEREIT Supplemental Information
 
December 31, 2019
 
Section
Page
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Company Overview
Annual Financial Summary
Quarterly Financial Summary
Financial and Operations Statistics and Ratios
Key Balance Sheet Metrics and Capital Structure
Balance Sheets
Statements of Operations
Funds From Operations (FFO)
Adjusted Funds From Operations (AFFO)
EBITDA, EBITDAre and Normalized EBITDA
Net Operating Income
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Same Store Contract Rental Revenue
Debt and Preferred Equity Summary
Credit Facility and Corporate Bond Covenants
Acquisitions and Dispositions
Diversification Statistics
Top 10 Concentrations
Tenants Comprising Over 1% of Annualized Rental Income
Tenant Industry Diversification
Property Geographic Diversification
Lease Expirations
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Lease Summary
Property Type Diversification
Rent Coverage and Occupancy Costs
Unconsolidated Joint Venture Investment Summary
Definitions
 
 
 
 
 
 
 
 
 
 
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See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 2



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Q4 2019 SUPPLEMENTAL INFORMATION

 
About the Data
 
This data and other information described herein are as of and for the three months ended December 31, 2019, unless otherwise indicated. Certain balances have been reclassified to conform with the current period's presentations, including the operating expense reimbursements line item which has been combined into rental revenue for all periods presented. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with the financial statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations sections contained in VEREIT, Inc.'s (the "Company," "VEREIT," "us," "our" and "we") Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the periods ended September 30, 2019, June 30, 2019, and March 31, 2019.

In the third quarter of 2019, the Company entered into agreements to settle certain outstanding litigation, including the pending class action litigation, In re American Realty Capital Properties, Inc. Litigation, No. 1:15-mc-00040 (AKH) (the “Class Action”). In accordance with the terms of the stipulation of settlement and settlement contemplated therein for the Class Action (the "Class Action Settlement"), certain defendants agreed to pay in the aggregate $1.025 billion, comprised of contributions from the Company’s former external manager and its principals (together, the “Former Manager”) totaling $225.0 million, $12.5 million from the Company’s former Chief Financial Officer (the “Former CFO”), $49.0 million from the Company’s former auditor, and the balance of $738.5 million from the Company. The contribution from the Company’s Former Manager and Former CFO was satisfied with a combination of (i) limited partner OP Units held by the Former Manager and Former CFO, (ii) amounts due related to dividends on certain of such limited partner OP Units previously withheld from distribution, (iii) the value of substantially all of the limited partner OP Units and dividends surrendered to the Company in July 2019 as a result of a settlement by the Former Manager with the U.S. Securities and Exchange Commission (the "SEC"), and (iv) cash paid by the Former Manager and Former CFO. Pursuant to the Class Action Settlement, on October 15, 2019, the Company funded $966.3 million in connection therewith, which includes the Company's contribution of $738.5 million and cash contributed by the Company to the Class Action Settlement fund for the surrendered limited partner OP Units and amounts due related to the previously withheld dividends. The Company determined that Net Debt (as defined herein) as of September 30, 2019 should include the amounts payable in cash pursuant to the Class Action Settlement. Management believes that including the impact of the payables in Net Debt provides useful information to investors to assess our liquidity, financial flexibility, capital structure and leverage, as the Company maintained a high cash balance at September 30, 2019 with the intent to use the cash to fund the Class Action Settlement.

The Company also entered into settlement agreements and releases to settle the remaining opt out actions and paid $27.0 million during the three months ended September 30, 2019 in connection therewith, which when aggregated with the Company's contribution to the Class Action Settlement is a total cost to the Company of approximately $765.5 million in the third quarter of 2019.

In the second quarter of 2019, the Company sold six consolidated properties to two newly-formed unconsolidated joint ventures (the "Industrial Partnership"), over which the Company exercises significant influence, but not control. Under GAAP, the Company accounts for its investment in the Industrial Partnership and one previously existing joint venture under the equity method of accounting and does not consolidate the financial results and position of the underlying joint ventures. The Company determined that effective April 1, 2019, certain non-GAAP measures and operating metrics should include the Company's pro rata share of such measures and metrics from the Company's unconsolidated joint ventures, based upon the Company's legal ownership percentage, which may, at times, not equal the Company's economic interest because of various provisions in the joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. Management believes that including the Company's pro rata share in certain non-GAAP measures and operating metrics is helpful in understanding the financial condition and performance and operating metrics of the Company. The Company did not update data presented for prior periods as the impact on prior period non-GAAP measures and operating metrics was immaterial. The Company does not adjust non-GAAP measures and operating metrics for the partner's pro rata share of the Company's consolidated joint venture as the impact is immaterial.

Prior to the fourth quarter of 2017, the Company operated through two business segments, the real estate investment segment and the investment management segment, Cole Capital. On February 1, 2018, the Company completed the sale of Cole Capital. Substantially all of the Cole Capital segment is presented as discontinued operations and the Company's remaining financial results are reported as a single segment for all periods presented. The Company's continuing operations represent primarily those of the real estate investment segment.

See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 3



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Q4 2019 SUPPLEMENTAL INFORMATION

 
Forward-Looking Statements
 
Information set forth herein contains “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT’s expectations and projections regarding future events and plans, VEREIT's future financial condition, results of operations and business. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond VEREIT's control, that could cause actual events and plans or could cause VEREIT's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: VEREIT’s plans, market and other expectations, objectives, intentions and other statements that are not historical facts; VEREIT’s ability to meet its 2020 guidance; VEREIT’s ability to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all; risks associated with tenant, geographic and industry concentrations with respect to VEREIT's properties; risks accompanying the management of its Industrial Partnership and Office Partnership; the impact of impairment charges in respect of certain of VEREIT's properties; unexpected costs or liabilities that may arise from potential dispositions, including related to limited partnership, tenant-in-common and Delaware statutory trust real estate programs and VEREIT’s management with respect to such programs; competition in the acquisition and disposition of properties; the inability to acquire, dispose of, or lease properties on advantageous terms; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of VEREIT's tenants; risks associated with obtaining approval of the settlement with the SEC by the commissioners of the SEC; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT's ability to pay dividends and that the terms and restrictions within the agreements governing VEREIT's indebtedness may restrict its borrowing and operating flexibility; the ability to retain or hire key personnel; and continuation or deterioration of current market conditions. Additional factors that may affect future results are contained in VEREIT’s filings with the SEC, which are available at the SEC’s website at www.sec.gov. VEREIT disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as required by law.


See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 4



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Q4 2019 SUPPLEMENTAL INFORMATION

 
Company Overview
(unaudited)
 
VEREIT is a real estate company incorporated in Maryland on December 2, 2010, which has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes.

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. VEREIT's business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. The Company targets properties that are strategically located and essential to the business operations of the tenant, as well as retail properties that offer necessity- and value-oriented products or services. At December 31, 2019, approximately 38.6% of the Company's Annualized Rental Income was earned from Investment-Grade Tenants, Economic Occupancy Rate was 99.1% and the Weighted Average Remaining Lease Term was 8.3 years.

Tenants, Trademarks and Logos
VEREIT is not affiliated with, is not endorsed by, does not endorse and is not sponsored by or a sponsor of the products or services pictured or mentioned. The names, logos and all related product and service names, design marks and slogans are the trademarks or service marks of their respective companies.





See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 5



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Q4 2019 SUPPLEMENTAL INFORMATION

 
Company Overview (cont.)
 
Senior Management
 
Board of Directors
 
 
 
Glenn J. Rufrano, Chief Executive Officer
 
Hugh R. Frater, Non-Executive Chairman
 
 
 
Michael J. Bartolotta, Executive Vice President and Chief Financial Officer
 
David B. Henry, Independent Director
 
 
 
Lauren Goldberg, Executive Vice President, General Counsel and Secretary
 
Mary Hogan Preusse, Independent Director
 
 
 
Paul H. McDowell, Executive Vice President and Chief Operating Officer
 
Richard J. Lieb, Independent Director
 
 
 
Thomas W. Roberts, Executive Vice President and Chief Investment Officer
 
Mark S. Ordan, Independent Director
 
 
 
Gavin B. Brandon, Senior Vice President and Chief Accounting Officer
 
Eugene A. Pinover, Independent Director
 
 
 
 
 
Julie G. Richardson, Independent Director
 
 
 
 
 
Glenn J. Rufrano, Chief Executive Officer

Corporate Offices and Contact Information
2325 E. Camelback Road, 9th Floor
 
19 West 44th Street, Suite 1401
Phoenix, AZ 85016
 
New York, NY 10036
800-606-3610
 
212-413-9100
www.VEREIT.com
 
 
 
Trading Symbols: VER, VER PF
 
Stock Exchange Listing: New York Stock Exchange
 
Transfer Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
800-736-3001

See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 6



402980029_vereitlogoa59.jpg
 
 
Q4 2019 SUPPLEMENTAL INFORMATION

 
Annual Financial Summary
(unaudited, dollars in thousands, except share and per share amounts)
 
The following table summarizes the Company's financial results for the years ended December 31, 2019 and 2018, and portfolio metrics as of December 31, 2019 and 2018. Data presented represents continuing operations.
 
Year Ended December 31,
 
2019
 
2018
Financial Results
 
 
 
Rental revenue (1)
$
1,237,234

 
$
1,257,867

Loss from continuing operations (1)
$
(307,106
)
 
$
(91,725
)
Basic and diluted net loss from continuing operations per share attributable to common stockholders and limited partners (1)
$
(0.37
)
 
$
(0.17
)
Normalized EBITDA from continuing operations
$
1,036,821

 
$
1,040,319

FFO attributable to common stockholders and limited partners from continuing operations
$
(138,372
)
 
$
434,371

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
$
(0.136
)
 
$
0.437

AFFO attributable to common stockholders and limited partners from continuing operations
$
706,935

 
$
710,688

AFFO attributable to common stockholders and limited partners from continuing operations per diluted share
$
0.694

 
$
0.716

Dividends declared per common share
$
0.55

 
$
0.55

Weighted-average shares outstanding - diluted
1,018,234,791

 
993,238,143

 
 
 
 
Portfolio Metrics
 
 
 
Operating Properties
3,858

 
3,994

Rentable Square Feet (in thousands)
89,491

 
94,953

Economic Occupancy Rate
99.1
%
 
98.8
%
Weighted Average Remaining Lease Term (years)
8.3

 
8.9

Investment-Grade Tenants
38.6
%
 
41.9
%
___________________________________
(1)
Included in our audited financial statements presented in our Annual Report on Form 10-K.



See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 7



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Q4 2019 SUPPLEMENTAL INFORMATION

 
Quarterly Financial Summary
(unaudited, dollars in thousands, except share and per share amounts)
 
The following table summarizes the Company's quarterly financial results and portfolio metrics. Data presented represents continuing operations.
 
Three Months Ended
Financial Results
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
Rental revenue
$
305,363

 
$
302,985

 
$
312,043

 
$
316,843

 
$
313,263

Income (loss) from continuing operations 
$
71,168

 
$
(741,529
)
 
$
292,284

 
$
70,971

 
$
27,872

Basic and diluted income (loss) from continuing operations per share attributable to common stockholders and limited partners 
$
0.05

 
$
(0.76
)
 
$
0.27

 
$
0.05

 
$
0.01

Normalized EBITDA
$
253,915

 
$
258,625

 
$
260,345

 
$
263,936

 
$
257,486

FFO attributable to common stockholders and limited partners from continuing operations 
$
149,433

 
$
(657,147
)
 
$
179,038

 
$
190,304

 
$
154,606

FFO attributable to common stockholders and limited partners from continuing operations per diluted share 
$
0.139

 
$
(0.655
)
 
$
0.179

 
$
0.192

 
$
0.156

AFFO attributable to common stockholders and limited partners
$
173,853

 
$
177,580

 
$
177,099

 
$
178,403

 
$
172,511

AFFO attributable to common stockholders and limited partners per diluted share
$
0.161

 
$
0.177

 
$
0.177

 
$
0.180

 
$
0.174

Dividends declared per common share
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

Weighted-average shares outstanding - diluted
1,077,647,052

 
1,002,899,652

 
999,777,735

 
993,298,314

 
992,337,959

 
 
 
 
 
 
 
 
 
 
Portfolio Metrics
 
 
 
 
 
 
 
 
 
Operating Properties
3,858

 
3,926

 
3,950

 
3,980

 
3,994

Rentable Square Feet (in thousands)
89,491

 
90,704

 
90,631

 
94,742

 
94,953

Economic Occupancy Rate
99.1
%
 
99.0
%
 
99.0
%
 
98.9
%
 
98.8
%
Weighted Average Remaining Lease Term (years)
8.3

 
8.4

 
8.6

 
8.7

 
8.9

Investment-Grade Tenants (1)
38.6
%
 
39.5
%
 
39.6
%
 
41.3
%
 
41.9
%
___________________________________
(1)
The weighted-average credit rating of our investment-grade tenants was BBB+ as of December 31, 2019.

See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 8



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Q4 2019 SUPPLEMENTAL INFORMATION

 
Financial and Operations Statistics and Ratios
(unaudited, dollars in thousands)
 
 
 
Three Months Ended
 
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
Interest Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
66,292

 
$
66,223

 
$
67,815

 
$
69,036

 
$
68,314

Normalized EBITDA (2)
 
253,915

 
258,625

 
260,345

 
263,936

 
257,486

Interest Coverage Ratio
 
3.83x

 
3.91x

 
3.84x

 
3.82x


3.77x

 
 
 
 
 
 
 
 
 
 
 
Fixed Charge Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
66,292

 
$
66,223

 
$
67,815

 
$
69,036

 
$
68,314

Secured debt principal amortization
 
2,360

 
2,326

 
2,256

 
2,430

 
2,424

Dividends attributable to preferred shares 
 
15,964

 
16,578

 
17,973

 
17,973

 
17,973

Total fixed charges
 
84,616

 
85,127

 
88,044

 
89,439

 
88,711

Normalized EBITDA (2)
 
253,915

 
258,625

 
260,345

 
263,936


257,486

Fixed Charge Coverage Ratio
 
3.00
x
 
3.04x

 
2.96x

 
2.95x

 
2.90x

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
Net Debt Ratios
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,790,308

 
$
5,658,503

 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

Normalized EBITDA annualized
 
1,015,660

 
1,034,500

 
1,041,380

 
1,055,744

 
1,029,944

Net Debt to Normalized EBITDA annualized ratio
 
5.70
x
 
5.47
x
 
5.30
x
 
5.73
x
 
5.91
x
 
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,790,308

 
$
5,658,503

 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

Gross Real Estate Investments (3)
 
14,775,948

 
14,911,108

 
14,950,309

 
15,411,364

 
15,411,026

Net Debt Leverage Ratio
 
39.2
%
 
37.9
%
 
36.9
%
 
39.3
%
 
39.5
%
 
 
 
 
 
 
 
 
 
 
 
Unencumbered Assets/Real Estate Assets
 
 
 
 
 
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,681,648

 
$
11,374,138

 
$
11,361,522

 
$
11,577,487

 
$
11,574,315

Gross Real Estate Investments (3)
 
14,775,948

 
14,911,108

 
14,950,309

 
15,411,364

 
15,411,026

Unencumbered Asset Ratio
 
79.1
%
 
76.3
%
 
76.0
%
 
75.1
%
 
75.1
%
___________________________________
(1)
Refer to the Statements of Operations section for interest expense calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.
(2)
Refer to the Statements of Operations section for net income calculated in accordance with GAAP and to the EBITDA, EBITDAre and Normalized EBITDA section for the required reconciliation to the most directly comparable GAAP financial measure.
(3)
Refer to the Balance Sheets section for total debt and real estate investments, at cost calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure. As discussed in the About the Data section, Net Debt as of September 30, 2019 includes the amounts payable in cash pursuant to the Class Action Settlement paid on October 15, 2019.




See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 9



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Q4 2019 SUPPLEMENTAL INFORMATION
 
Key Balance Sheet Metrics and Capital Structure
(unaudited, dollars and shares in thousands, except per share amounts)
 



402980029_chart-86e4b83c0c5a5169a07.jpg
 
 
Common equity
60.4%
 
 
 

 
 
Corporate bonds
17.2%
 
 
 

 
 
Mortgage notes payable
9.2%
 
 
 

 
 
Credit facility term loan
5.4%
 
 
 

 
 
Preferred equity
4.7%
 
 
 

 
 
Convertible notes
1.9%
 
 
 

 
 
Revolving credit facility
0.9%
 
 
 

 
 
Unconsolidated joint ventures' pro rata share
0.3%
 
 

                            

Fixed vs. Variable Rate Debt
Fixed
81.7
%
Swapped to Fixed
15.5
%
Variable
2.8
%

 
VEREIT Capitalization Table
 
 
 
Wtd.