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Section 1: 8-K (8-K)

Document


 

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 23, 2018
392316235_wpchighreslogoa11.jpg
W. P. Carey Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland
001-13779
45-4549771
(State of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
 
 
50 Rockefeller Plaza, New York, NY
 
10020
(Address of principal executive offices)
 
(Zip Code)
 

Registrant’s telephone number, including area code: (212) 492-1100

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 (see General Instruction A.2. below):
¨ 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))
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).
¨ 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. ¨
 





Item 2.02 Results of Operations and Financial Condition.

On February 23, 2018, W. P. Carey Inc. (together with its predecessors, the “Company”) issued an earnings release announcing its financial results for the quarter ended December 31, 2017. A copy of the earnings release is attached as Exhibit 99.1.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

Item 7.01 Regulation FD Disclosure.

On February 23, 2018, the Company made available certain unaudited supplemental financial information at December 31, 2017. A copy of this supplemental information is attached as Exhibit 99.2.

The information furnished pursuant to this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section, and shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

Exhibit 99.1 Earnings release of the Company for the quarter ended December 31, 2017.

Exhibit 99.2 Supplemental financial information of the Company at December 31, 2017.







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
 
W. P. Carey Inc.
 
 
 
 
Date:
February 23, 2018
By:
/s/ ToniAnn Sanzone
 
 
 
ToniAnn Sanzone
 
 
 
Chief Financial Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1


FOR IMMEDIATE RELEASE

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

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

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

W. P. Carey Inc. Announces Fourth Quarter and Full Year 2017 Financial Results


New York, NY – February 23, 2018 – W. P. Carey Inc. (NYSE: WPC) (W. P. Carey or the Company), an internally-managed net lease real estate investment trust, today reported its financial results for the fourth quarter and full year ended December 31, 2017.

Total Company
Net income attributable to W. P. Carey of $75.2 million, or $0.69 per diluted share, for the fourth quarter and $277.3 million, or $2.56 per diluted share, for 2017
AFFO of $142.1 million, or $1.31 per diluted share, for the fourth quarter and $573.0 million, or $5.30 per diluted share, for 2017
Quarterly cash dividend raised to $1.01 per share, equivalent to an annualized dividend rate of $4.04 per share
2018 full year AFFO guidance range of $5.30 to $5.50 per diluted share announced

Business Segments

Owned Real Estate
Segment net income attributable to W. P. Carey of $54.1 million for the fourth quarter and $192.1 million for 2017
Segment AFFO of $111.3 million, or $1.03 per diluted share, for the fourth quarter and $456.9 million, or $4.23 per diluted share, for 2017
Acquisitions and completed capital investment projects totaling $32.3 million during the fourth quarter, bringing total investment volume for 2017 to $95.9 million
Eight active capital investment projects for a total commitment of $148.1 million at year end
Gross disposition proceeds totaling $59.1 million during the fourth quarter, bringing total dispositions for 2017 to $191.6 million
Portfolio occupancy of 99.8%

W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 1


Weighted-average lease term of 9.6 years

Investment Management
Segment net income attributable to W. P. Carey of $21.1 million for the fourth quarter and $85.2 million for 2017
Segment AFFO of $30.7 million, or $0.28 per diluted share, for the fourth quarter and $116.1 million, or $1.07 per diluted share, for 2017


MANAGEMENT COMMENTARY

"Our fourth quarter and full year results reflect the continuing positive effects of the advancements we’ve made in recent years, with AFFO per diluted share up 7.4% and 3.5%, respectively, over the prior-year periods," said Jason Fox, Chief Executive Officer of W. P. Carey. “Reductions in our cost base and an improved cost of debt outweighed the near-term impacts of our decisions to be a net seller and refocus our business, which have improved the quality of our portfolio and the composition of our revenue streams."

“Looking ahead, we remain well positioned to create long-term value for shareholders by driving earnings growth through accretive acquisitions and same-store growth, supported by proactive asset management, a resilient and flexible balance sheet and constant attention to our cost of capital.”
 

FINANCIAL RESULTS

As previously announced, as a result of its decision to exit non-traded retail fundraising activities in June 2017, the Company revised its segment presentation recognizing equity income earned through its ownership interests in the Managed REITs and its special member interests in the operating partnerships of the Managed REITs within its Investment Management segment. Prior to the 2017 second quarter, these items were recognized within its Owned Real Estate segment. For purposes of comparability, segment financial statements for all periods presented have been revised to reflect this change.


QUARTERLY FINANCIAL RESULTS

Revenues

Total Company: Revenues excluding reimbursable costs (net revenues) for the 2017 fourth quarter totaled $185.3 million, down 8.5% from $202.5 million for the 2016 fourth quarter.

Owned Real Estate: Owned Real Estate net revenues for the 2017 fourth quarter were $162.3 million, down 1.8% from $165.3 million for the 2016 fourth quarter, due primarily to lower lease revenues resulting from the non-cash acceleration of amortization of certain lease intangible assets during the current-year period, which more than offset the positive impact of a stronger euro relative to the U.S. dollar on lease revenues.

Investment Management: Investment Management net revenues for the 2017 fourth quarter were $23.1 million, down 37.9% from $37.2 million for the 2016 fourth quarter, due primarily to lower structuring revenues and the cessation of dealer manager fees resulting from the Company’s strategic decision to exit non-traded retail fundraising.

Net Income Attributable to W. P. Carey

Net income attributable to W. P. Carey for the 2017 fourth quarter was $75.2 million, up 57.7% compared to $47.7 million for the 2016 fourth quarter, due primarily to a higher aggregate gain on sale of real estate, lower general and administrative expenses resulting primarily from the Company’s strategic decision to exit non-traded retail fundraising and lower impairment charges recorded during the current-year period.


W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 2


Adjusted Funds from Operations (AFFO)

AFFO for the 2017 fourth quarter was $1.31 per diluted share, up 7.4% from $1.22 per diluted share for the 2016 fourth quarter, due primarily to lower general and administrative expenses, the positive impact of a stronger euro relative to the U.S. dollar on lease revenues and lower interest expense, which more than offset lower structuring revenues.

Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

Dividend

As previously announced, on December 6, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $1.01 per share, equivalent to an annualized dividend rate of $4.04 per share. The dividend was paid on January 16, 2018 to stockholders of record as of December 29, 2017.


FULL YEAR FINANCIAL RESULTS

Revenues

Total Company: Net revenues for the 2017 full year totaled $775.3 million, down 8.8% from $849.7 million for the 2016 full year.

Owned Real Estate: Net revenues from Owned Real Estate for the 2017 full year totaled $665.7 million, down 8.8% from $729.9 million for the 2016 full year, due primarily to $32.2 million of lease termination income and $16.7 million of lease revenues from the non-cash acceleration of amortization of lease intangible liabilities, both recognized and related to a property sold in 2016. Furthermore, additional lease revenues from acquisitions and capital investment projects completed during 2017 were more than offset by a reduction in lease revenues due to property dispositions.

Investment Management: Net revenues from Investment Management for the 2017 full year totaled $109.6 million, down 8.4% from $119.7 million for the 2016 full year, due primarily to lower structuring revenues and the cessation of dealer manager fees during 2017 resulting from the Company’s strategic decision to exit non-traded retail fundraising, which more than offset higher asset management fees.

Net Income Attributable to W. P. Carey

Net income attributable to W. P. Carey for the 2017 full year totaled $277.3 million, up 3.6% compared to $267.7 million for the 2016 full year, due primarily to lower impairment charges recorded during the current year, lower interest expense and lower general and administrative expenses, which more than offset a lower aggregate gain on sale of real estate.


AFFO

AFFO for the 2017 full year totaled $5.30 per diluted share, up 3.5% compared to $5.12 per diluted share for the 2016 full year, due primarily to lower interest expense, lower general and administrative expenses, a lower provision for income taxes and higher asset management fees, which more than offset lower lease revenues and lower structuring revenues.

Note: Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

Dividends

Dividends declared during 2017 totaled $4.01 per share, an increase of 2.0% compared to total dividends declared during 2016 of $3.93 per share.


W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 3



AFFO GUIDANCE

For the 2018 full year, the Company expects to report AFFO of between $5.30 and $5.50 per diluted share, based on the following key assumptions:

(i)
acquisitions for the Company’s Owned Real Estate portfolio of between $500 million and $1 billion;

(ii)
dispositions from the Company’s Owned Real Estate portfolio of between $300 million and $500 million; and

(iii)
total general and administrative expenses of between $65 million and $70 million.
 
Note: The Company does not provide guidance on net income. The Company only provides guidance on 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.


OWNED REAL ESTATE

Investments

During the 2017 fourth quarter, the Company completed investments totaling $32.3 million, comprised of one acquisition for $25.9 million and one build-to-suit project placed into service at a total cost of $6.4 million, bringing total investment activity for the year ended December 31, 2017 to $95.9 million, including transaction-related costs and fees.

As of December 31, 2017, the Company had eight active capital investment projects for an expected total investment of approximately $148.1 million, of which $100.4 million is expected to be completed during 2018.

Dispositions

During the 2017 fourth quarter, the Company disposed of five properties for total gross proceeds of $59.1 million, bringing total dispositions for the year ended December 31, 2017 to $191.6 million.

Composition

As of December 31, 2017, the Company’s Owned Real Estate portfolio consisted of 887 net lease properties, comprising 84.9 million square feet leased to 210 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.6 years and the occupancy rate was 99.8%.


INVESTMENT MANAGEMENT

W. P. Carey is the advisor to CPA®:17 – Global and CPA:18 – Global (the CPA REITs), Carey Watermark Investors Incorporated (CWI® 1) and Carey Watermark Investors 2 Incorporated (CWI 2) (the CWI REITs, and together with the CPA REITs, the Managed REITs), and Carey European Student Housing Fund I, L.P. (CESH I, and together with the Managed REITs, the Managed Programs).


W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 4


Acquisitions

During the 2017 fourth quarter, the Company structured new investments on behalf of the Managed Programs totaling $147.2 million, comprised primarily of a build-to-suit expansion with an existing tenant and student housing investments within the CPA REITs.

This activity brought total investment volume on behalf of the Managed Programs for the year ended December 31, 2017 to $1.2 billion, primarily related to the CWI REITs and CESH I.

Assets Under Management

As of December 31, 2017, the Managed Programs had total assets under management of approximately $13.1 billion, up 1.6% from $12.9 billion as of December 31, 2016.

* * * * *

Supplemental Information

The Company has provided supplemental unaudited financial and operating information regarding the 2017 fourth quarter, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on February 23, 2018.

* * * * *

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

Date/Time: Friday, February 23, 2018 at 10:00 a.m. Eastern Time
Call-in Number: 1-877-465-1289 (US) or +1-201-689-8762 (international)

Audio Webcast: www.wpcarey.com/earnings

Audio Webcast Replay

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

* * * * *

W. P. Carey Inc.

Celebrating its 45th anniversary, W. P. Carey Inc. is a leading internally-managed net lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions primarily for companies in the U.S. and Europe. At December 31, 2017, the Company had an enterprise value of approximately $11.5 billion. In addition to its owned portfolio of diversified global real estate, W. P. Carey manages a series of investment programs. Its corporate finance-focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Furthermore, its portfolio of long-term leases with creditworthy tenants has an established history of generating stable cash flows, enabling it to deliver consistent and rising dividend income to investors for over four decades.
www.wpcarey.com

* * * * *


W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 5


Cautionary Statement Concerning Forward-Looking Statements

Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of W. P. Carey and can be identified by the use of words such as “may,” “will,” “should,” “would,” “assume,” “outlook,” “seek,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast” and other comparable terms. These forward-looking statements include, but are not limited to, the statements made by Mr. Fox; statements regarding reductions in our cost base and improved cost of debt, including the continuing nature of those changes; weighted-average lease term, criticality, yields and occupancy rate of our owned real estate and other portfolio characteristics; growth in assets under management; the acquisition environment and our risk-reward criteria, including the impact of such factors on the types of investments we make and whether they are accretive, as well as same store growth; annualized dividends and payout ratio; disposition and capital recycling plans, and the intended results thereof; our access to capital markets, as well as our financing activities, cost of debt and interest expense levels, including the characteristics of our balance sheet and cost of capital; adjusted funds from operations coverage and guidance, including underlying assumptions, such as the timing of acquisitions, our level of general and administrative expense, and dispositions and the impact thereof, and current trends; our revenue mix and the stability and recurring nature of our income streams, as well as the benefits and results of our strategic shift towards focusing exclusively on net lease investing for our Owned Portfolio; and anticipated future financial and operating performance and results, including underlying assumptions and estimates of growth, and our ability to create long-term shareholder value. These statements are based on the current expectations of the management of W. P. Carey. It is important to note that W. P. Carey’s actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of W. P. Carey. Discussions of some of these other important factors and assumptions are contained in W. P. Carey’s filings with the SEC and are available at the SEC’s website at http://www.sec.gov, including Item 1A. Risk Factors in W. P. Carey’s Annual Report on Form 10-K for the year ended December 31, 2017. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication, unless noted otherwise. Except as required under the federal securities laws and the rules and regulations of the SEC, W. P. Carey does not undertake any obligation to release publicly any revisions to the forward-looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events.

* * * * *

W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 6


W. P. CAREY INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
December 31,
 
2017
 
2016
Assets
 
 
 
Investments in real estate:
 
 
 
Land, buildings and improvements (a)
$
5,457,265

 
$
5,285,837

Net investments in direct financing leases
721,607

 
684,059

In-place lease and other intangible assets
1,213,976

 
1,172,238

Above-market rent intangible assets
640,480

 
632,383

Assets held for sale

 
26,247

Investments in real estate
8,033,328

 
7,800,764

Accumulated depreciation and amortization (b)
(1,329,613
)
 
(1,018,864
)
Net investments in real estate
6,703,715

 
6,781,900

Equity investments in the Managed Programs and real estate (c)
341,457

 
298,893

Cash and cash equivalents
162,312

 
155,482

Due from affiliates
105,308

 
299,610

Other assets, net
274,650

 
282,149

Goodwill
643,960

 
635,920

Total assets
$
8,231,402

 
$
8,453,954

 
 
 
 
Liabilities and Equity
 
 
 
Debt:
 
 
 
Unsecured senior notes, net
$
2,474,661

 
$
1,807,200

Unsecured term loans, net
388,354

 
249,978

Unsecured revolving credit facility
216,775

 
676,715

Non-recourse mortgages, net
1,185,477

 
1,706,921

Debt, net
4,265,267

 
4,440,814

Accounts payable, accrued expenses and other liabilities
263,053

 
266,917

Below-market rent and other intangible liabilities, net
113,957

 
122,203

Deferred income taxes
67,009

 
90,825

Distributions payable
109,766

 
107,090

Total liabilities
4,819,052

 
5,027,849

Redeemable noncontrolling interest
965

 
965

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

 

Common stock, $0.001 par value, 450,000,000 shares authorized; 106,922,616 and 106,294,162 shares, respectively, issued and outstanding
107

 
106

Additional paid-in capital
4,433,573

 
4,399,961

Distributions in excess of accumulated earnings
(1,052,064
)
 
(894,137
)
Deferred compensation obligation
46,656

 
50,222

Accumulated other comprehensive loss
(236,011
)
 
(254,485
)
Total stockholders’ equity
3,192,261

 
3,301,667

Noncontrolling interests
219,124

 
123,473

Total equity
3,411,385

 
3,425,140

Total liabilities and equity
$
8,231,402

 
$
8,453,954

________
(a)
Includes $83.0 million and $81.7 million of amounts attributable to operating properties as of December 31, 2017 and 2016, respectively.
(b)
Includes $630.0 million and $484.4 million of accumulated depreciation on buildings and improvements as of December 31, 2017 and 2016, respectively, and $699.7 million and $534.4 million of accumulated amortization on lease intangibles as of December 31, 2017 and 2016, respectively.
(c)
Our equity investments in the Managed Programs totaled $201.4 million and $160.8 million as of December 31, 2017 and 2016, respectively. Our equity investments in real estate joint ventures totaled $140.0 million and $138.1 million as of December 31, 2017 and 2016, respectively.



W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 7


W. P. CAREY INC.
Quarterly Consolidated Statements of Income
(in thousands, except share and per share amounts)
 
Three Months Ended
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
Revenues
 
 
 
 
 
Owned Real Estate:
 
 
 
 
 
Lease revenues
$
154,826

 
$
161,511

 
$
157,105

Operating property revenues
6,910

 
8,449

 
7,071

Reimbursable tenant costs
5,584

 
5,397

 
6,201

Lease termination income and other
515

 
1,227

 
1,093

 
167,835

 
176,584

 
171,470

Investment Management:
 
 
 
 
 
Asset management revenue
16,854

 
17,938

 
16,375

Structuring revenue
6,217

 
9,817

 
16,338

Reimbursable costs from affiliates
6,055

 
6,211

 
20,061

Dealer manager fees

 
105

 
2,623

Other advisory revenue

 
99

 
1,913

 
29,126

 
34,170

 
57,310

 
196,961

 
210,754

 
228,780

Operating Expenses
 

 
 
 
 

Depreciation and amortization
64,015

 
64,040

 
62,675

General and administrative
17,702

 
17,236

 
24,230

Reimbursable tenant and affiliate costs
11,639

 
11,608

 
26,262

Property expenses, excluding reimbursable tenant costs
9,560

 
10,556

 
10,956

Stock-based compensation expense
4,268

 
4,635

 
3,051

Impairment charges
2,769

 

 
9,433

Subadvisor fees (a)
2,002

 
5,206

 
4,131

Other expenses
(533
)
 
65

 
18

Restructuring and other compensation (b)
289

 
1,356

 

Dealer manager fees and expenses

 
462

 
3,808

 
111,711

 
115,164

 
144,564

Other Income and Expenses
 

 
 
 
 

Interest expense
(40,401
)
 
(41,182
)
 
(43,913
)
Equity in earnings of equity method investments in the Managed Programs
   and real estate
16,930

 
16,318

 
16,476

Other income and (expenses)
1,356

 
(4,569
)
 
(3,731
)
 
(22,115
)
 
(29,433
)
 
(31,168
)
Income before income taxes and gain on sale of real estate
63,135

 
66,157

 
53,048

Benefit from (provision for) income taxes
192

 
(1,760
)
 
(7,826
)
Income before gain on sale of real estate
63,327

 
64,397

 
45,222

Gain on sale of real estate, net of tax
11,146

 
19,257

 
3,248

Net Income
74,473

 
83,654

 
48,470

Net loss (income) attributable to noncontrolling interests
736

 
(3,376
)
 
(766
)
Net Income Attributable to W. P. Carey
$
75,209

 
$
80,278

 
$
47,704

 
 
 
 
 
 
Basic Earnings Per Share
$
0.69

 
$
0.74

 
$
0.44

Diluted Earnings Per Share
$
0.69

 
$
0.74

 
$
0.44

Weighted-Average Shares Outstanding
 

 
 
 
 

Basic
108,041,556

 
108,019,292

 
107,487,181

Diluted
108,208,918

 
108,143,694

 
107,715,965







W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 8


W. P. CAREY INC.
Full Year Consolidated Statements of Income
(in thousands, except share and per share amounts)
 
Years Ended December 31,
 
2017
 
2016
Revenues
 
 
 
Owned Real Estate:
 
 
 
Lease revenues
$
630,373

 
$
663,463

Operating property revenues
30,562

 
30,767

Reimbursable tenant costs
21,524

 
25,438

Lease termination income and other (c)
4,749

 
35,696

 
687,208

 
755,364

Investment Management:
 
 
 
Asset management revenue
70,125

 
61,971

Reimbursable costs from affiliates
51,445

 
66,433

Structuring revenue
34,198

 
47,328

Dealer manager fees
4,430

 
8,002

Other advisory revenue
896

 
2,435

 
161,094

 
186,169

 
848,302

 
941,533

Operating Expenses
 

 
 

Depreciation and amortization
253,334

 
276,510

Reimbursable tenant and affiliate costs
72,969

 
91,871

General and administrative
70,891

 
82,352

Property expenses, excluding reimbursable tenant costs
40,756

 
49,431

Stock-based compensation expense
18,917

 
18,015

Subadvisor fees (a)
13,600

 
14,141

Restructuring and other compensation (b)
9,363

 
11,925

Dealer manager fees and expenses
6,544

 
12,808

Impairment charges
2,769

 
59,303

Other expenses (d) (e)
605

 
5,377

 
489,748

 
621,733

Other Income and Expenses
 

 
 

Interest expense
(165,775
)
 
(183,409
)
Equity in earnings of equity method investments in the Managed Programs and real estate
64,750

 
64,719

Other income and (expenses)
(3,613
)
 
5,667

 
(104,638
)
 
(113,023
)
Income before income taxes and gain on sale of real estate
253,916

 
206,777

Provision for income taxes
(2,711
)
 
(3,288
)
Income before gain on sale of real estate
251,205

 
203,489

Gain on sale of real estate, net of tax
33,878

 
71,318

Net Income
285,083

 
274,807

Net income attributable to noncontrolling interests
(7,794
)
 
(7,060
)
Net Income Attributable to W. P. Carey
$
277,289

 
$
267,747

 
 
 
 
Basic Earnings Per Share
$
2.56

 
$
2.50

Diluted Earnings Per Share
$
2.56

 
$
2.49

Weighted-Average Shares Outstanding
 

 
 

Basic
107,824,738

 
106,743,012

Diluted
108,035,971

 
107,073,203

__________
(a)
We earn investment management revenue from CWI 1 and CWI 2 in our role as their advisor. Pursuant to the terms of their subadvisory agreements, however, 20% of the fees we receive from CWI 1 and 25% of the fees we receive from CWI 2 are paid to their respective subadvisors. In connection with the acquisitions of multi-family properties on behalf of CPA:18 – Global, we entered into agreements with third-party advisors for the day-to-day management of the properties for which we pay 100% of asset management fees paid to us by CPA:18 – Global. Pursuant to the terms of the subadvisory agreement we had with the subadvisor in connection with Carey Credit Income Fund (CCIF) (prior to our resignation as the advisor to CCIF in the third quarter of 2017), we paid a subadvisory fee equal to 50% of the asset management fees and organization and offering costs paid to us by CCIF.
(b)
Amounts for the three months ended December 31, 2017, September 30, 2017 and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. Amount for the year ended December 31, 2016 represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements, primarily in connection with the reduction in force that we completed in March 2016.
(c)
Amount for the year ended December 31, 2016 includes $32.2 million of lease termination income related to a domestic property sold during that year.
(d)
Amount for the year ended December 31, 2017 is primarily comprised of an accrual for estimated one-time legal settlement expenses.
(e)
Amount for the year ended December 31, 2016 reflects expenses related to our formal strategic review of $5.2 million, which was completed in May 2016.

W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 9


W. P. CAREY INC.
Quarterly Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)
 
Three Months Ended
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
Net income attributable to W. P. Carey
$
75,209

 
$
80,278

 
$
47,704

Adjustments:
 
 
 
 
 
Depreciation and amortization of real property
62,603

 
62,621

 
61,373

Gain on sale of real estate, net
(11,146
)
 
(19,257
)
 
(3,248
)
Impairment charges
2,769

 

 
9,433

Proportionate share of adjustments for noncontrolling interests
(2,696
)
 
(2,692
)
 
(3,184
)
Proportionate share of adjustments to equity in net income of partially owned entities
877

 
866

 
1,059

Total adjustments
52,407

 
41,538

 
65,433

FFO (as defined by NAREIT) Attributable to W. P. Carey (a)
127,616

 
121,816

 
113,137

Adjustments:
 
 
 
 
 
Above- and below-market rent intangible lease amortization, net (b)
17,922

 
12,459

 
12,653

Tax benefit – deferred
(10,497
)
 
(1,234
)
 
(2,433
)
Stock-based compensation
4,268

 
4,635

 
3,051

Other amortization and non-cash items (c)
2,198

 
6,208

 
5,584

Amortization of deferred financing costs
2,043

 
2,184

 
926

Straight-line and other rent adjustments
(2,002
)
 
(3,212
)
 
(4,953
)
Other expenses
(533
)
 
65

 
18

Realized (gains) losses on foreign currency
(472
)
 
(449
)
 
1,102

Restructuring and other compensation (d)
289

 
1,356

 

(Gain) loss on extinguishment of debt
(81
)
 
1,566

 
224

Proportionate share of adjustments to equity in net income of partially owned entities
2,884

 
3,064

 
2,810

Proportionate share of adjustments for noncontrolling interests
(1,573
)
 
(216
)
 
(595
)
Total adjustments
14,446

 
26,426

 
18,387

AFFO Attributable to W. P. Carey (a)
$
142,062

 
$
148,242

 
$
131,524

 
 
 
 
 
 
Summary
 
 
 
 
 
FFO (as defined by NAREIT) attributable to W. P. Carey (a)
$
127,616

 
$
121,816

 
$
113,137

FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (a)
$
1.18

 
$
1.13

 
$
1.05

AFFO attributable to W. P. Carey (a)
$
142,062

 
$
148,242

 
$
131,524

AFFO attributable to W. P. Carey per diluted share (a)
$
1.31

 
$
1.37

 
$
1.22

Diluted weighted-average shares outstanding
108,208,918

 
108,143,694

 
107,715,965















W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 10


W. P. CAREY INC.
Full Year Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited)
(in thousands, except share and per share amounts)
 
Years Ended December 31,
 
2017
 
2016
Net income attributable to W. P. Carey
$
277,289

 
$
267,747

Adjustments:
 
 
 
Depreciation and amortization of real property
248,042

 
270,822

Gain on sale of real estate, net
(33,878
)
 
(71,318
)
Impairment charges
2,769

 
59,303

Proportionate share of adjustments for noncontrolling interests
(10,491
)
 
(11,725
)
Proportionate share of adjustments to equity in net income of partially owned entities
5,293

 
5,053

Total adjustments
211,735

 
252,135

FFO (as defined by NAREIT) Attributable to W. P. Carey (a)
489,024

 
519,882

Adjustments:
 
 
 
Above- and below-market rent intangible lease amortization, net (b)
55,195

 
36,504

Stock-based compensation
18,917

 
18,015

Tax benefit – deferred
(18,664
)
 
(24,955
)
Other amortization and non-cash items (c) (e)
17,193

 
(2,111
)
Straight-line and other rent adjustments (f)
(11,679
)
 
(39,215
)
Restructuring and other compensation (d)
9,363

 
11,925

Amortization of deferred financing costs
8,169

 
3,197

Realized (gains) losses on foreign currency
(896
)
 
3,671

Other expenses (g)
605

 
5,377

(Gain) loss on extinguishment of debt
(46
)
 
4,109

Allowance for credit losses

 
7,064

Proportionate share of adjustments to equity in net income of partially owned entities
8,476

 
3,551

Proportionate share of adjustments for noncontrolling interests
(2,678
)
 
683

Total adjustments
83,955

 
27,815

AFFO Attributable to W. P. Carey (a)
$
572,979

 
$
547,697

 
 
 
 
Summary
 
 
 
FFO (as defined by NAREIT) attributable to W. P. Carey (a)
$
489,024

 
$
519,882

FFO (as defined by NAREIT) attributable to W. P. Carey per diluted share (a)
$
4.53

 
$
4.86

AFFO attributable to W. P. Carey (a)
$
572,979

 
$
547,697

AFFO attributable to W. P. Carey per diluted share (a)
$
5.30

 
$
5.12

Diluted weighted-average shares outstanding
108,035,971

 
107,073,203

__________
(a)
FFO and AFFO are non-GAAP measures. See below for a description of FFO and AFFO.
(b)
Amounts for the three months and year ended December 31, 2017 include an adjustment of $5.7 million related to accelerated amortization of an above-market rent intangible in connection with a lease restructuring. Amount for the year ended December 31, 2016 includes an adjustment of $16.7 million related to accelerated amortization of a below-market rent intangible from a tenant of a domestic property that was sold during 2016.
(c)
Represents primarily unrealized gains and losses from foreign exchange and derivatives.
(d)
Amounts for the three months ended December 31, 2017, September 30, 2017 and year ended December 31, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017. Amount for the year ended December 31, 2016 represents restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements, primarily in connection with the reduction in force that we completed in March 2016.
(e)
Amount for the year ended December 31, 2016 includes an adjustment of $0.6 million to exclude a portion of a gain recognized on the deconsolidation of an affiliate.
(f)
Amount for the year ended December 31, 2016 includes an adjustment to exclude $27.2 million of the $32.2 million of lease termination income recognized in connection with a domestic property that was sold during 2016, as such amount was determined to be non-core income. Amount for the year ended December 31, 2016 also reflects an adjustment to include $1.8 million of lease termination income received in December 2015 that represented core income for the year ended December 31, 2016.
(g)
Amount for the year ended December 31, 2017 is primarily comprised of an accrual for estimated one-time legal settlement expenses. Amount for the year ended December 31, 2016 reflects expenses related to our formal strategic review of $5.2 million, which was completed in May 2016.




W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 11


Non-GAAP Financial Disclosure

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc., or 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 revised in February 2004. 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 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. Our FFO calculation complies with NAREIT’s policy described above.

We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash charges such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rents, stock-based compensation, gains or losses from deconsolidation of subsidiaries 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 certain lease termination income, gains or losses from extinguishment of debt, restructuring and other compensation-related expenses resulting from a reduction in headcount and employee severance arrangements and other expenses (which includes expenses related to the formal strategic review that we completed in May 2016 and accruals for estimated one-time legal settlement expenses). We also exclude realized and unrealized gains/losses on foreign exchange transactions (other than those realized on the settlement of foreign currency derivatives), which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs which are currently not engaged in acquisitions, mergers and restructuring which are not part of our normal business operations. We use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies and determine executive compensation.

We believe that AFFO is a useful supplemental measure for investors to consider 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 earnings computed under GAAP or as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.


W. P. Carey Inc. 12/31/2017 Earnings Release 8-K – 12
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

W. P. Carey Inc.
Supplemental Information
Fourth Quarter 2017








392316235_wpcsupplementalcover45years.jpg




Important Disclosures About This Supplemental Package

As used in this supplemental package, the terms “W. P. Carey,” “WPC®,” “we,” “us” and “our” include W. P. Carey Inc., its consolidated subsidiaries and its predecessors, unless otherwise indicated. “CPA® REITs” means Corporate Property Associates 17 – Global Incorporated, or CPA:17 – Global, and Corporate Property Associates 18 – Global Incorporated, or CPA:18 – Global. “CWI® REITs” means Carey Watermark Investors Incorporated, or CWI 1, and Carey Watermark Investors 2 Incorporated, or CWI 2. “Managed REITs” means the CPA REITs and the CWI REITs. “Managed Programs” means the Managed REITs and Carey European Student Housing Fund I, L.P., or CESH I. “CCIF” means Carey Credit Income Fund (now known as Guggenheim Credit Income Fund), which was included in the Managed Programs prior to our resignation as its advisor during the third quarter of 2017. “U.S.” means United States. “AUM” means assets under management.

Important Note Regarding Non-GAAP Financial Measures

This supplemental package includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles, or GAAP, including funds from operations, or FFO; adjusted funds from operations, or AFFO; earnings before interest, taxes, depreciation and amortization, or EBITDA; adjusted EBITDA; pro rata cash net operating income, or pro rata cash NOI; and normalized pro rata cash NOI. A description of these non-GAAP financial measures and reconciliations to their most directly comparable GAAP measures, as well as a description of other metrics presented, are provided within the Appendix to this supplemental package. FFO is a non-GAAP measure defined by the National Association of Real Estate Investments Trusts, Inc., or NAREIT, an industry trade group.

Amounts may not sum to totals due to rounding.


W. P. Carey Inc.
Supplemental Information – Fourth Quarter 2017
Table of Contents
Overview
 
 
 
Financial Results
 
Statements of Income – Last Five Quarters
 
FFO and AFFO – Last Five Quarters
 
 
 
Balance Sheets and Capitalization
 
 
 
Owned Real Estate
 
Investment Activity
 
 
 
Investment Management
 
 
 
Appendix
 
Adjusted EBITDA  Last Five Quarters
 



W. P. Carey Inc.
Overview – Fourth Quarter 2017
Summary Metrics
As of or for the three months ended December 31, 2017.
Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment
 
 
 
 
 
 
 
Owned
Real Estate
 
Investment Management
 
Total
Revenues, excluding reimbursable costs – consolidated ($'000)
 
$
162,251

 
$
23,071

 
$
185,322

Net income attributable to W. P. Carey ($'000)
 
54,149

 
21,060

 
75,209

Net income attributable to W. P. Carey per diluted share
 
0.50

 
0.19

 
0.69

Normalized pro rata cash NOI from real estate ($'000) (a) (b)
 
165,931

 
N/A

 
165,931

Adjusted EBITDA ($'000) (a) (b)
 
157,744

 
32,160

 
189,904

AFFO attributable to W. P. Carey ($'000) (a) (b)
 
111,336

 
30,726

 
142,062

AFFO attributable to W. P. Carey per diluted share (a) (b)
 
1.03

 
0.28

 
1.31

 
 
 
 
 
 
 
 
 
 
Distributions declared per share – fourth quarter
 
 
 
 
 
1.01

Distributions declared per share – fourth quarter annualized
 
 
 
 
 
4.04

Dividend yield – annualized, based on quarter end share price of $68.90
 
 
 
 
 
5.9
%
Dividend payout ratio – for the year ended December 31, 2017 (c)
 
 
 
 
 
75.7
%
 
 
 
 
 
 
 
 
 
 
Balance Sheet and Capitalization
 
 
 
 
 
 
 
 
 
Equity market capitalization – based on quarter end share price of $68.90 ($'000)
 
 
 
 
 
$
7,366,968

Pro rata net debt ($'000) (d)
 
 
 
 
 
 
 
 
4,150,197

Enterprise value ($'000)
 
 
 
 
 
 
 
 
11,517,165

 
 
 
 
 
 
 
 
 
 
Total capitalization ($'000) (e)
 
 
 
 
 
 
 
 
11,679,477

 
 
 
 
 
 
 
 
 
 
Total consolidated debt ($'000)
 
 
 
 
 
 
 
 
4,265,267

Gross assets ($'000) (f)
 
 
 
 
 
 
 
 
8,861,364

Liquidity ($'000) (g)
 
 
 
 
 
 
 
 
1,445,435

 
 
 
 
 
 
 
 
 
 
Pro rata net debt to enterprise value (b)
 
 
 
 
 
 
 
 
36.0
%
Pro rata net debt to adjusted EBITDA (annualized) (a) (b)
 
 
 
 
 
5.5x

Total consolidated debt to gross assets
 
 
 
 
 
 
 
 
48.1
%
 
 
 
 
 
 
 
 
 
 
Weighted-average interest rate (b)
 
 
 
 
 
 
 
 
3.4
%
Weighted-average debt maturity (years) (b)
 
 
 
 
 
 
 
 
5.4

 
 
 
 
 
 
 
 
 
 
Moody's Investors Service – corporate rating
 
 
 
 
 
 
 
 
Baa2 (stable)

Standard & Poor's Ratings Services – issuer rating
 
 
 
 
 
 
 
 
BBB (stable)

 
 
 
 
 
 
 
 
 
 
Owned Real Estate Portfolio (Pro Rata)
 
 
 
 
 
 
 
 
 
Number of net-leased properties
 
 
 
 
 
 
 
 
887

Number of operating properties
 
 
 
 
 
 
 
 
2

Number of tenants – net-leased properties
 
 
 
 
 
 
 
 
210

 
 
 
 
 
 
 
 
 
 
ABR from Investment Grade tenants as a % of total ABR – net-leased properties (h)
 
 
 
 
 
27.2
%
 
 
 
 
 
 
 
 
 
 
Net-leased properties – square footage (millions)
 
 
 
 
 
 
 
 
84.9

 
 
 
 
 
 
 
 
 
 
Occupancy – net-leased properties
 
 
 
 
 
 
 
 
99.8
%
Weighted-average lease term (years)
 
 
 
 
 
 
 
 
9.6

 
 
 
 
 
 
 
 
 
 
Acquisitions and completed capital projects – fourth quarter ($'000)
 
 
 
$
32,267

Dispositions – fourth quarter ($'000)
 
 
 
 
 
 
 
 
59,067

 
 
 
 
 
 
 
 
 
 
Managed Programs
CPA:17  Global
 
CPA:18 – Global
 
CWI REITs
 
CESH I
 
Total
AUM ($'000) (i)
$
5,702,445

 
$
2,387,349

 
$
4,880,132

 
$
155,126

 
$
13,125,052

Acquisitions – fourth quarter ($'000)
52,571

 
94,586

 

 

 
147,157

Dispositions – fourth quarter ($'000)

 
64,847

 
85,500

 

 
150,347

________

392316235_wpclogoa01a01a25.jpg 
 
Investing for the long runTM | 1


W. P. Carey Inc.
Overview – Fourth Quarter 2017

(a)
Normalized pro rata cash NOI, Adjusted EBITDA and AFFO are non-GAAP measures. See the Terms and Definitions section in the Appendix for a description of our non-GAAP measures and for details on how certain non-GAAP measures are calculated.
(b)
Presented on a pro rata basis. See the Terms and Definitions section in the Appendix for a description of pro rata.
(c)
Represents distributions declared per share divided by AFFO per diluted share on a year-to-date basis.
(d)
Represents total pro rata debt outstanding less consolidated cash and cash equivalents. See the Terms and Definitions section in the Appendix for a description of pro rata.
(e)
Represents equity market capitalization plus total pro rata debt outstanding. See the Terms and Definitions section in the Appendix for a description of pro rata.
(f)
Gross assets represent consolidated total assets before accumulated depreciation on buildings and improvements. Gross assets are net of accumulated amortization on in-place lease and other intangible assets of $423.5 million and above-market rent intangible assets of $276.1 million.
(g)
Represents availability on our Senior Unsecured Credit Facility plus consolidated cash and cash equivalents.
(h)
Percentage of portfolio is based on ABR, as of December 31, 2017. Includes tenants or guarantors with investment grade ratings (19.2%) and subsidiaries of non-guarantor parent companies with investment grade ratings (8.0%). Investment grade refers to an entity with a rating of BBB- or higher from Standard & Poor’s Ratings Services or Baa3 or higher from Moody’s Investors Service. See the Terms and Definitions section in the Appendix for a description of ABR.
(i)
Represents estimated value of real estate assets plus cash and cash equivalents, less distributions payable for the Managed REITs and fair value of investments plus cash for CESH I.


392316235_wpclogoa01a01a25.jpg 
 
Investing for the long runTM | 2


W. P. Carey Inc.
Overview – Fourth Quarter 2017
Components of Net Asset Value
Dollars in thousands, except per share amounts.
Owned Real Estate
 
 
Three Months Ended
Dec. 31, 2017
 
Annualized
Normalized pro rata cash NOI (a) (b)
 
 
$
165,931

 
$
663,724

 
 
 
 
 
 
Investment Management
 
 
Three Months Ended
Dec. 31, 2017
 
Twelve Months Ended
Dec. 31, 2017
Adjusted EBITDA (a) (b) (c)
 
 
$
32,160

 
$
118,657

Selected Components of Adjusted EBITDA:
 
 
 
 
 
Asset management revenue (d)
 
 
16,854

 
70,125

Structuring revenue (d)
 
 
6,217

 
34,198

Operating partnership interests in real estate cash flow of Managed REITs (c) (e)
 
12,564

 
45,101

Back-end fees and interests associated with the Managed Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet – Selected Information (Consolidated Unless Otherwise Stated)
 
As of Dec. 31, 2017
Assets
 
 
 
 
 
Book value of real estate excluded from NOI (f)
 
 
 
 
$
40,560

Cash and cash equivalents
 
 
 
 
162,312

Due from affiliates
 
 
 
 
105,308

Other assets, net:
 
 
 
 
 
Straight-line rent adjustments
 
 
 
 
$
71,955

Restricted cash, including escrow
 
 
 
 
47,364

Deferred charges
 
 
 
 
44,370

Investment in CCIF (g)
 
 
 
 
23,329

Securities and derivatives
 
 
 
 
22,186

Accounts receivable
 
 
 
 
17,770

Other intangible assets, net
 
 
 
 
14,361

Taxes receivable
 
 
 
 
11,137

Note receivable
 
 
 
 
9,971

Prepaid expenses
 
 
 
 
8,137

Leasehold improvements, furniture and fixtures
 
 
 
3,859

Other
 
 
 
 
211

Total other assets, net
 
 
 
 
$
274,650

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Total pro rata debt outstanding (b)
 
 
 
 
$
4,312,509

Distributions payable
 
 
 
 
109,766

Deferred income taxes
 
 
 
 
67,009

Accounts payable, accrued expenses and other liabilities:
 
 
 
 
 
Accounts payable and accrued expenses
 
 
 
 
$
101,615

Prepaid and deferred rents
 
 
 
 
79,483

Tenant security deposits
 
 
 
 
29,050

Accrued taxes payable
 
 
 
 
28,861

Securities and derivatives
 
 
 
 
7,913

Straight-line rent adjustments
 
 
 
 
2,230

Other
 
 
 
 
13,901

Total accounts payable, accrued expenses and other liabilities
 
 
 
 
$
263,053


392316235_wpclogoa01a01a25.jpg 
 
Investing for the long runTM | 3


W. P. Carey Inc.
Overview – Fourth Quarter 2017
Other
Number of Shares / Units Owned
 
NAV / Offering Price Per Share
 
Implied Value
 
A
 
B
 
A x B
Ownership in Managed Programs: (h)
 
 
 
 


CPA:17 – Global (4.2% ownership)
14,647,412

 
$
10.11

(i) 
$
148,085

CPA:18 – Global (2.5% ownership)
3,616,657

 
8.36

(j) 
30,235

CWI 1 (2.1% ownership)
2,920,268

 
10.80

(k) 
31,539

CWI 2 (1.8% ownership)
1,560,648

 
10.74

(l) 
16,761

CESH I (2.4% ownership)
3,492

 
1,000.00

(m) 
3,492

 
 
 
 
 
$
230,112

________
(a)
Normalized pro rata cash NOI and Adjusted EBITDA are non-GAAP measures. See the Terms and Definitions section in the Appendix for a description of our non-GAAP measures and for details on how they are calculated.
(b)
Presented on a pro rata basis. See the Terms and Definitions section in the Appendix for a description of pro rata.
(c)
In connection with our decision to exit non-traded retail fundraising activities, which we announced in June 2017, during the second quarter of 2017 we revised how we view and present our two business segments. As such, equity in earnings of equity method investments in the Managed Programs is now recognized within our Investment Management segment. Earnings from our investment in CCIF continue to be included in our Investment Management segment. Prior periods have been revised to reflect this change.
(d)
Amounts are gross of fees paid to the respective subadvisors of CWI 1, CWI 2, CPA:18 Global (for multi-family properties) and CCIF (prior to our resignation as the advisor to CCIF in the third quarter of 2017).
(e)
We are entitled to receive distributions of our share of earnings up to 10% of the Available Cash of each of the Managed REITs, as defined in their respective operating partnership agreements. Pursuant to the terms of their subadvisory agreements, however, 20% of the distributions of Available Cash we receive from CWI 1 and 25% of the distributions of Available Cash we receive from CWI 2 are paid to their respective subadvisors. Amounts for CWI 1 and CWI 2 are net of fees paid to their respective subadvisors.
(f)
Represents the value of real estate not included in net operating income, such as vacant assets and in-progress build-to-suit properties.
(g)
In August 2017, we resigned as the advisor to CCIF, effective as of September 11, 2017. As such, we reclassified our investment in CCIF from Equity investments in the Managed Programs and real estate to Other assets, net in our consolidated balance sheets, since we no longer share decision-making responsibilities with the third-party investment partner.
(h)
Separate from operating partnership interests and our interests in unconsolidated real estate joint ventures with our affiliate, CPA:17 Global.
(i)
The estimated net asset value per share, or NAV, for CPA:17 Global was determined as of December 31, 2016. We calculated CPA:17 Global’s NAV by relying in part on an estimate of the fair market value of CPA:17 Global’s real estate portfolio and debt provided by third parties, adjusted to give effect to the estimated fair value of mortgage loans encumbering its assets (also provided by a third party) as well as other adjustments.
(j)
We own shares of CPA:18 Global’s Class A common stock. The quarterly NAV for CPA:18 Global’s Class A common stock was determined as of September 30, 2017. We calculated the quarterly NAV for CPA:18 Global’s Class A common stock by relying in part on an estimate of the fair market value of approximately 25% of CPA:18 Global’s real estate portfolio and debt provided by third parties, adjusted to give effect to the estimated fair value of mortgage loans encumbering its assets (also provided by a third party), as well as other adjustments.
(k)
The NAV for CWI 1 was based on shares of common stock outstanding at December 31, 2016. We calculated CWI 1’s NAV relying in part on appraisals of the fair market value of CWI 1’s real estate portfolio and mortgage debt provided by third parties. The net amount was then adjusted for estimated disposition costs (including estimates of expenses, commissions and fees payable to us) and CWI 1’s other net assets and liabilities at the same date.
(l)
We own shares of CWI 2’s Class A common stock. The NAV for CWI 2’s Class A common stock was determined as of December 31, 2016. We calculated the NAV for CWI 2’s Class A common stock by relying in part on an appraisal of the fair market value of CWI 2’s real estate portfolio and estimates of the fair market value of CWI 2’s mortgage debt at December 31, 2016. The net amount was then adjusted for other net assets and liabilities and our interest in disposition proceeds at December 31, 2016.
(m)
We own limited partnership units of CESH I at its private placement price of $1,000 per share; a NAV for CESH I has not yet been calculated.

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Investing for the long runTM | 4




W. P. Carey Inc.
Financial Results
Fourth Quarter 2017





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Investing for the long runTM | 5


W. P. Carey Inc.
Financial Results – Fourth Quarter 2017
Consolidated Statements of Income – Last Five Quarters
In thousands, except share and per share amounts.
 
Three Months Ended
 
Dec. 31, 2017
 
Sep. 30, 2017
 
Jun. 30, 2017
 
Mar. 31, 2017
 
Dec. 31, 2016
Revenues
 
 
 
 
 
 
 
 
 
Owned Real Estate:
 
 
 
 
 
 
 
 
 
Lease revenues
$
154,826

 
$
161,511

 
$
158,255

 
$
155,781

 
$
157,105

Operating property revenues
6,910

 
8,449

 
8,223

 
6,980

 
7,071

Reimbursable tenant costs
5,584

 
5,397

 
5,322

 
5,221

 
6,201

Lease termination income and other
515

 
1,227

 
2,247

 
760

 
1,093

 
167,835

 
176,584

 
174,047

 
168,742

 
171,470

Investment Management:
 
 
 
 
 
 
 
 
 
Asset management revenue
16,854

 
17,938

 
17,966

 
17,367

 
16,375

Structuring revenue
6,217

 
9,817

 
14,330

 
3,834

 
16,338

Reimbursable costs from affiliates
6,055

 
6,211

 
13,479

 
25,700

 
20,061

Dealer manager fees

 
105

 
1,000

 
3,325

 
2,623

Other advisory revenue

 
99

 
706

 
91

 
1,913

 
29,126

 
34,170

 
47,481

 
50,317

 
57,310

 
196,961

 
210,754

 
221,528

 
219,059

 
228,780

Operating Expenses
 
 
 
 
 
 
 
 
 
Depreciation and amortization
64,015

 
64,040

 
62,849

 
62,430

 
62,675

General and administrative
17,702

 
17,236

 
17,529

 
18,424

 
24,230

Reimbursable tenant and affiliate costs
11,639

 
11,608

 
18,801

 
30,921

 
26,262

Property expenses, excluding reimbursable tenant costs
9,560

 
10,556

 
10,530

 
10,110

 
10,956

Stock-based compensation expense
4,268

 
4,635

 
3,104

 
6,910

 
3,051

Impairment charges
2,769

 

 

 

 
9,433

Subadvisor fees (a)
2,002

 
5,206

 
3,672

 
2,720

 
4,131

Other expenses (b)
(533
)
 
65

 
1,000

 
73

 
18

Restructuring and other compensation (c)
289

 
1,356

 
7,718

 

 

Dealer manager fees and expenses

 
462

 
2,788

 
3,294

 
3,808

 
111,711

 
115,164

 
127,991

 
134,882

 
144,564

Other Income and Expenses
 
 
 
 
 
 
 
 
 
Interest expense
(40,401
)
 
(41,182
)
 
(42,235
)
 
(41,957
)
 
(43,913
)
Equity in earnings of equity method investments in the Managed Programs and real estate
16,930

 
16,318

 
15,728

 
15,774

 
16,476

Other income and (expenses)
1,356

 
(4,569
)
 
(916
)
 
516

 
(3,731
)
 
(22,115
)
 
(29,433
)
 
(27,423
)
 
(25,667
)
 
(31,168
)
Income before income taxes and gain on sale of real estate
63,135

 
66,157

 
66,114

 
58,510

 
53,048

Benefit from (provision for) income taxes
192

 
(1,760
)
 
(2,448
)
 
1,305

 
(7,826
)
Income before gain on sale of real estate
63,327

 
64,397

 
63,666

 
59,815

 
45,222

Gain on sale of real estate, net of tax
11,146

 
19,257

 
3,465

 
10

 
3,248

Net Income
74,473

 
83,654

 
67,131

 
59,825

 
48,470

Net loss (income) attributable to noncontrolling interests
736

 
(3,376
)
 
(2,813
)
 
(2,341
)
 
(766
)
Net Income Attributable to W. P. Carey
$
75,209

 
$
80,278

 
$
64,318

 
$
57,484

 
$
47,704

 
 
 
 
 
 
 
 
 
 
Basic Earnings Per Share
$
0.69

 
$
0.74

 
$
0.60

 
$
0.53

 
$
0.44

Diluted Earnings Per Share
$
0.69

 
$
0.74

 
$
0.59

 
$
0.53

 
$
0.44

Weighted-Average Shares Outstanding
 
 
 
 
 
 
 
 
 
Basic
108,041,556

 
108,019,292

 
107,668,218

 
107,562,484

 
107,487,181

Diluted
108,208,918

 
108,143,694

 
107,783,204

 
107,764,279

 
107,715,965

________
(a)
The subadvisors for CWI 1, CWI 2 and CPA:18 Global earn a percentage of gross fees recorded, which we account for as an expense and which are recorded as Subadvisor fees in our consolidated statements of income. The amounts paid to the subadvisors are the differences between gross and net fees. Pursuant to the terms of the subadvisory agreement we had with the subadvisor in connection with CCIF (prior to our resignation as the advisor to CCIF in the third quarter of 2017), we paid a subadvisory fee equal to 50% of the asset management fees and organization and offering costs paid to us by CCIF.
(b)
Amount for the three months ended June 30, 2017 is comprised of an accrual for estimated one-time legal settlement expenses.
(c)
Amounts for the three months ended December 31, 2017, September 30, 2017 and June 30, 2017 represent restructuring expenses resulting from our exit from non-traded retail fundraising activities, which we announced in June 2017.

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Investing for the long runTM | 6


W. P. Carey Inc.
Financial Results – Fourth Quarter 2017
Statements of Income, Owned Real Estate – Last Five Quarters
In thousands, except share and per share amounts.
 
Three Months Ended
 
Dec. 31, 2017
 
Sep. 30, 2017
 
Jun. 30, 2017
 
Mar. 31, 2017
 
Dec. 31, 2016
Revenues
 
 
 
 
 
 
 
 
 
Lease revenues
$
154,826

 
$
161,511

 
$
158,255

 
$
155,781

 
$
157,105

Operating property revenues
6,910

 
8,449

 
8,223

 
6,980

 
7,071

Reimbursable tenant costs
5,584

 
5,397

 
5,322

 
5,221

 
6,201

Lease termination income and other
515

 
1,227

 
2,247

 
760

 
1,093

 
167,835

 
176,584

 
174,047

 
168,742

 
171,470

Operating Expenses
 
 
 
 
 
 
 
 
 
Depreciation and amortization
62,951

 
62,970

 
61,989

 
61,522

 
61,717

General and administrative
11,691

 
11,234

 
7,803

 
8,274

 
8,938

Property expenses, excluding reimbursable tenant costs
9,560

 
10,556

 
10,530

 
10,110

 
10,956

Reimbursable tenant costs
5,584

 
5,397

 
5,322

 
5,221

 
6,201

Impairment charges
2,769

 

 

 

 
9,433

Stock-based compensation expense
2,227

 
1,880

 
899

 
1,954

 
908

Other expenses (a)
(533
)
 
65

 
1,000

 
73

 
18

 
94,249

 
92,102

 
87,543

 
87,154

 
98,171

Other Income and Expenses
 
 
 
 
 
 
 
 
 
Interest expense
(40,401
)
 
(41,182
)
 
(42,235
)
 
(41,957
)
 
(43,913
)
Equity in earnings of equity method investments in real estate (b)
3,535

 
3,740

 
3,721

 
2,072

 
3,343

Other income and (expenses)
594

 
(4,918
)
 
(1,371
)
 
40

 
(4,016
)
 
(36,272
)
 
(42,360
)
 
(39,885
)
 
(39,845
)
 
(44,586
)
Income before income taxes and gain on sale of real estate
37,314

 
42,122

 
46,619

 
41,743

 
28,713

Benefit from (provision for) income taxes
4,953

 
(1,511
)
 
(3,731
)
 
(1,454
)
 
(3,374
)
Income before gain on sale of real estate
42,267

 
40,611

 
42,888

 
40,289

 
25,339

Gain on sale of real estate, net of tax
11,146

 
19,257

 
3,465

 
10

 
3,248

Net Income from Owned Real Estate
53,413

 
59,868

 
46,353

 
40,299

 
28,587

Net loss (income) attributable to noncontrolling interests
736

 
(3,376
)
 
(2,813
)
 
(2,341