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Section 1: 8-K (8-K)

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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 21, 2019
 
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, Suite 1100
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:

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

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

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

o     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).
VEREIT, Inc.
 
VEREIT Operating Partnership, L.P.
Emerging growth company     o 
 
Emerging growth company     o 
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 21, 2019, VEREIT, Inc. (the “Company”) furnished the following documents: (i) a press release relating to its fourth quarter and full year 2018 financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the fiscal quarter and year ended December 31, 2018, 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
 






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 21, 2019






Exhibit Index
Exhibit No.
 
Description
99.1
 
99.2
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
396823361_rgbhorzvereitlogo093018a01.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Fourth Quarter and Full Year 2018 Operating Results
Total Capital Activity of $11.0 Billion Since 2015 Providing:
Diversified Portfolio Through Targeted Acquisitions and Dispositions, and
Liquid Balance Sheet With an Improved Debt Maturity Schedule



Phoenix, AZ, February 21, 2019 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months and full year ending December 31, 2018.

The financial results below reflect continuing operations only.

2018 Highlights
Net loss of $(91.7) million and net loss per diluted share of $(0.17)
Achieved $0.72 AFFO per diluted share
Completed $500.1 million of acquisitions and $567.4 million of dispositions
Repurchased 7.2 million shares of common stock at an average price of $6.94
Entered into a new $2.9 billion credit facility enhancing liquidity and financial flexibility
Issued $550.0 million aggregate principal amount of 4.625% senior notes due 2025 and repaid $597.5 million principal outstanding 2018 convertible notes
Total debt went from $6.07 billion to $6.09 billion; Net Debt from $6.05 billion to $6.09 billion, or 39.5% Net Debt to Gross Real Estate Investments
Net Debt to Normalized EBITDA ended at 5.9x
Closed the sale of Cole Capital, simplifying the business model
Settled claims of shareholders representing approximately 33.5% of VEREIT’s outstanding shares for a total of $233.2 million

Fourth Quarter and Full Year 2018 Financial Results

Rental Revenue
Rental Revenue for the quarter ended December 31, 2018 decreased $3.3 million to $313.3 million as compared to revenue of $316.6 million for the same quarter in 2017.

Rental Revenue for 2018 increased $5.6 million to $1.26 billion as compared to $1.25 billion in 2017.

Net Income (Loss) and Net Income (Loss) Attributable to Common Stockholders per Diluted Share
Net income for the quarter ended December 31, 2018 increased $30.4 million to $27.9 million as compared to net loss of $(2.5) million for the same quarter in 2017, and net income per diluted share increased $0.03 to $0.01 for the quarter ended December 31, 2018, as compared to a net loss per diluted share of $(0.02) for the same quarter in 2017.

Net loss for 2018 increased $143.2 million to $(91.7) million as compared to net income of $51.5 million in 2017. Net loss per diluted share increased $0.15 to $(0.17) for 2018, as compared to a net loss per diluted share of $(0.02) for 2017.

Normalized EBITDA
Normalized EBITDA for the quarter ended December 31, 2018 decreased $1.1 million to $257.5 million as compared to Normalized EBITDA of $258.6 million for the same quarter in 2017.

Normalized EBITDA for 2018 of $1.04 billion remained constant year over year.


1


Funds From Operations Attributable to Common Stockholders and Limited Partners (“FFO”) and FFO per Diluted Share
FFO for the quarter ended December 31, 2018 decreased $9.9 million to $154.6 million, as compared to $164.5 million for the same quarter in 2017, and FFO per diluted share decreased $0.01 to $0.16 for the quarter ended December 31, 2018, as compared to FFO per diluted share of $0.17 for the same quarter in 2017.

FFO for 2018 decreased $237.8 million to $434.4 million, as compared to $672.2 million, and FFO per diluted share for 2018 decreased $0.23 to $0.44, as compared to $0.67 for 2017.

Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended December 31, 2018 decreased $3.3 million to $172.5 million, as compared to $175.8 million for the same quarter in 2017, and AFFO per diluted share decreased $0.01 to $0.17 for the quarter ended December 31, 2018, as compared to $0.18 for the same quarter in 2017.

AFFO for 2018 increased $8.1 million to $710.7 million, as compared to $702.6 million, and AFFO per diluted share for 2018 increased $0.02 to $0.72, as compared to $0.70 for 2017.

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “VEREIT has made substantial progress on its business plan created in 2015 and met the established targets for 2018. We are very pleased with capital market funding since we initiated our plan. This has allowed us to strengthen and diversify our portfolio, reduce debt and obtain investment grade ratings, better ladder our maturity schedule, and provide ample liquidity in the form of unencumbered assets and availability on our line of credit. VEREIT has been able to navigate an evolving marketplace with our experienced management team and is well positioned for 2019.”

Common Stock Dividend Information
On February 20, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.1375 per share for the first quarter of 2019, representing an annual distribution rate of $0.55 per share. The dividend will be paid on April 15, 2019 to common stockholders of record as of March 29, 2019.

Balance Sheet and Liquidity
On May 23, 2018, the Company closed on a new $2.9 billion unsecured credit facility to replace its previous $2.3 billion revolving credit facility. The new credit facility is comprised of a $2.0 billion unsecured revolving credit facility and a $900.0 million unsecured delayed-draw term loan facility. On August 1, 2018, the Company repaid $597.5 million of principal outstanding related to the 2018 convertible notes, which was temporarily funded using borrowings under the revolving credit facility. On October 16, 2018 the Company issued $550.0 million aggregate principal amount of 4.625% senior notes due 2025 to repay borrowings on the revolving line of credit.
As of the end of the fourth quarter, the Company had utilized $253.0 million of its revolving line of credit, leaving $1.7 billion of capacity available as of December 31, 2018 on the Company’s $2.0 billion revolving line of credit. The Company also had net draws on its term loan of $150.0 million. Subsequent to the quarter, the Company repaid $750.0 million of principal outstanding related to the 2019 corporate bonds, utilizing the remainder of the $900.0 million unsecured term loan facility.
In addition, secured debt was reduced by $12.5 million in the fourth quarter, bringing the total reduction amount for the year to $153.9 million.

Share Repurchase Plan
During 2018, the Company repurchased 7.2 million shares of its common stock for an aggregate purchase price of $50.2 million at an average price of $6.94.

Consolidated Financial Statistics
Financial Statistics as of the quarter ended December 31, 2018 are as follows: Net Debt to Normalized EBITDA of 5.9x, Fixed Charge Coverage Ratio of 2.9x, Unencumbered Asset Ratio of 75.1%, Net Debt to Gross Real Estate Investments of 39.5% and Weighted Average Debt Term of 4.2 years.


2


Litigation Settlements
On June 7, 2018, the Company entered into a settlement agreement and release to settle its pending litigation with Vanguard for $90.0 million, representing 13.0% of VEREIT’s outstanding shares of common stock held at the end of the period covered by the various pending shareholder actions. The Company also entered into a series of agreements dated September 30 through October 26, 2018, to settle twelve of the thirteen remaining opt out actions brought by shareholders who held shares of common stock and swaps referencing common stock representing approximately 18% of VEREIT’s outstanding shares of common stock held at the end of the period covered by the various shareholder actions, for $127.5 million. In addition, on February 5, 2019, the Company entered into a series of agreements to settle claims with shareholders who decided not to participate as class members in the SDNY Consolidated Class Action for approximately $15.7 million, which was accrued in the fourth quarter of 2018. In total, the Company has now settled claims of shareholders who held shares of common stock and swaps referencing common stock representing approximately 33.5% of VEREIT’s outstanding shares of common stock held at the end of the period covered by the various pending shareholder actions for approximately $233.2 million. The Company retains the right to pursue any and all claims against the other defendants in the litigations and/or third parties, including claims for contribution for amounts paid in the settlements.
    

Real Estate Portfolio
As of December 31, 2018, the Company’s portfolio consisted of 3,994 properties with total portfolio occupancy of 98.8%, investment grade tenancy of 41.9% and a weighted-average remaining lease term of 8.9 years. During the quarter ended December 31, 2018, same-store rents (3,919 properties) increased 1.0% as compared to the same quarter in 2017. Excluding the effects of an early lease renewal, the increase in same store rents would have been 1.3%.

During 2018, same-store rents (3,853 properties) increased 0.5% as compared to 2017. Excluding the effects of an early lease renewal, the increase in same store rents would have been 1.0%.

Property Acquisitions
During the fourth quarter of 2018, the Company acquired 10 properties for approximately $221.3 million at an average cash cap rate of 7.1%.

During 2018, the Company acquired 52 properties for approximately $500.1 million at an average cash cap rate of 7.1%

Property Dispositions
During the quarter ended December 31, 2018, the Company disposed of 37 properties for an aggregate sales price of $147.7 million. Of this amount, $140.8 million was used in the total weighted average cash cap rate calculation of 7.1%, including $49.1 million in net sales of Red Lobster restaurants. The gain on fourth quarter sales was approximately $25.9 million. In addition, the Company sold certain legacy mortgage related investments during the quarter for an aggregate sales price of $36.1 million.
During 2018, the Company disposed of 150 properties for an aggregate sales price of $521.4 million, which included one property owned by an unconsolidated joint venture. Of this amount, $449.0 million was used in the total weighted average cash cap rate calculation of 6.9%, including $133.7 million in net sales of Red Lobster restaurants. The gain on 2018 sales was approximately $96.9 million. In addition, the Company sold certain legacy mortgage related investments for an aggregate sales price of $46.0 million.

2019 Guidance
The Company expects its 2019 AFFO per diluted share to be in a range between $0.68 and $0.70 (see reconciliation to net income per share at the end of this release). This guidance assumes dispositions totaling $350 million to $500 million at an average cash cap rate of 6.5% to 7.5% and acquisitions totaling $250 million to $500 million within the same cap rate range. Guidance also assumes real estate operations with average occupancy above 98.0%, same-store rental growth in a range of 0.3% to 1.0%, and Net Debt to Normalized EBITDA at approximately 6.0x.

Subsequent Events

Property Acquisitions
From January 1, 2019 through February 8, 2019, the Company acquired three properties for $36.8 million.

Property Dispositions
From January 1, 2019 through February 8, 2019, the Company disposed of eight properties for an aggregate sales price of $8.6 million. In addition, the Company sold certain legacy mortgage related investments for an aggregate sales price of $8.3 million.

3



Capital Market Activity
On February 6, 2019, the Company repaid $750.0 million principal outstanding related to the 2019 senior notes, utilizing the $900.0 million unsecured term loan facility. In addition, the Company entered into interest rate swap agreements with an aggregate $900.0 million notional amount. Based on the General Partner’s credit rating and interest rate of LIBOR + 1.35%, the swap agreements effectively fixed the credit facility term loan interest rate at 3.84%.

Insurance Settlement
On January 23, 2019, the Company signed a settlement and release agreement with certain insurance carriers and subsequently received $48.4 million of insurance recoveries.

Audio Webcast Details

The live audio webcast, beginning at 10:30 a.m. ET on Thursday, February 21, 2019, is available by accessing this link:
http://ir.vereit.com/. Participants should log in 10-15 minutes early.

Following the call, a replay of the webcast will be available at the link above and archived for up to 12 months following the call.

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 a total asset book value of $14.0 billion including approximately 4,000 properties and 95.0 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. Additional information about VEREIT can be found on its website at www.VEREIT.com and through social media platforms such as Twitter and LinkedIn.



Media Contact
Parke Chapman
Rubenstein Associates
212.843.8489 | pchapman@rubenstein.com

    
Investor Contact
Bonni Rosen, SVP, Investor Relations                
VEREIT            
877.405.2653 | BRosen@VEREIT.com

4


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 pages 8 through 19 for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure and the calculations of these financial ratios.
We determined that adjusted funds from operations (“AFFO”), a non-GAAP measure, and our real estate portfolio and economic metrics should exclude the impact of properties owned by the Company for the month beginning with the date that (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 ("Excluded Properties") and ending with the disposition date, to better reflect our ongoing operations. Excluded Properties during the year ended December 31, 2017 were two vacant office properties and five industrial properties, two of which were vacant, comprising an aggregate 2.1 million square feet with aggregate Principal Outstanding of $116.6 million. At December 31, 2017, the Excluded Property was one vacant industrial property, comprising 307,725 square feet with Principal Outstanding of $16.2 million. At March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018 there were no Excluded Properties. The Company did not update data presented for prior periods as the impact on prior period non-GAAP measures, including AFFO and Normalized EBITDA, and operating metrics was immaterial.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. ("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.
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 calculated 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, merger and other non-routine costs, net of insurance recoveries, held for sale loss on discontinued operations, net revenue or expense earned or incurred that is related to the services agreement we entered into with Cole Capital on February 1, 2018, gains or losses on sale of investment securities or mortgage notes receivable, legal settlements and insurance recoveries not in the ordinary course of business and payments received on fully reserved loan receivables. 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.



5


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, 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 other non-routine costs, net of insurance recoveries, held for sale loss on discontinued operations, net revenue or expense earned or incurred that is related to the services agreement we entered into with Cole Capital on February 1, 2018, gains or losses on sale of investment securities or mortgage notes receivable, legal settlements and insurance recoveries not in the ordinary course of business and payments received on fully reserved loan receivables. 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.
Principal Outstanding and Adjusted Principal Outstanding
Principal Outstanding and Adjusted Principal Outstanding are non-GAAP measures that represent 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 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 liquidity, 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
Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents, including those related to discontinued operations. 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.
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. 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.
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.

6


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.
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.
Gross Real Estate Investments
Gross Real Estate Investments represent total gross real estate and related assets of Operating Properties, including net investments in unconsolidated entities and equity investments in the Cole REITs, investment in direct financing leases, investment securities backed by real estate and mortgage notes receivable, 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.
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.
Forward-Looking Statements
Information set forth herein contains “forward-looking statements” (within the meaning of 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 regarding future events and plans, VEREIT's future financial condition, results of operations and business including the liquidity and flexibility of its balance sheet, the diversification of its portfolio, availability under its revolving credit facility, efforts to reduce debt balances and continue to unencumber assets and VEREIT’s positioning for 2019. The forward-looking statements involve a number of assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Generally, the words “expects,” “anticipates,” “assumes,” “targets,”“goals,”“projects,”“intends,”“plans,”“believes,” “seeks,” “estimates,” "may," "will," "should," "could," "continues," variations of such words and similar expressions identify forward- looking statements. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, most of which are difficult to predict and many of which are beyond VEREIT’s control. If a change occurs, VEREIT’s business, financial condition, liquidity and results of operations may vary materially from those expressed in or implied by the forward-looking statements.
The following factors, among others, could cause actual results to differ 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; the developments disclosed herein; VEREIT’s ability to meet its 2019 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; the impact of impairment charges in respect of certain of VEREIT's properties, goodwill and intangible assets and other assets; 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 and in the leasing of its 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 pending government investigations and litigations related to VEREIT's previously disclosed audit committee investigation, including the expense of such investigations and litigation and any additional potential payments upon resolution; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT’s ability to pay dividends and 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 U.S. Securities and Exchange Commission (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.

7




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

 
 
December 31,
2018
 
December 31,
2017
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,843,212

 
$
2,865,855

Buildings, fixtures and improvements
 
10,749,228

 
10,711,845

Intangible lease assets
 
2,012,399

 
2,037,675

Total real estate investments, at cost
 
15,604,839

 
15,615,375

Less: accumulated depreciation and amortization
 
3,436,772

 
2,908,028

Total real estate investments, net
 
12,168,067

 
12,707,347

Investment in unconsolidated entities
 
35,289

 
39,520

Cash and cash equivalents
 
30,758

 
34,176

Restricted cash
 
22,905

 
27,662

Rent and tenant receivables and other assets, net
 
366,092

 
389,060

Goodwill
 
1,337,773

 
1,337,773

Due from affiliates, net
 

 
6,041

Real estate assets held for sale and assets related to discontinued operations, net
 
2,609

 
163,999

Total assets
 
$
13,963,493

 
$
14,705,578

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,922,657

 
$
2,082,692

Corporate bonds, net
 
3,368,609

 
2,821,494

Convertible debt, net
 
394,883

 
984,258

Credit facility, net
 
401,773

 
185,000

Below-market lease liabilities, net
 
173,479

 
198,551

Accounts payable and accrued expenses
 
145,611

 
136,474

Deferred rent and other liabilities
 
69,714

 
62,985

Distributions payable
 
186,623

 
175,301

Due to affiliates
 

 
66

Liabilities related to discontinued operations
 

 
15,881

Total liabilities
 
6,663,349

 
6,662,702

Commitments and contingencies
 
 
 
 
Preferred stock, $0.01 par value, 100,000,000 shares authorized and 42,834,138 issued and outstanding as of each of December 31, 2018 and December 31, 2017
 
428

 
428

Common stock, $0.01 par value, 1,500,000,000 shares authorized and 967,515,165 and 974,208,583 issued and outstanding as of December 31, 2018 and December 31, 2017, respectively
 
9,675

 
9,742

Additional paid-in-capital
 
12,615,472

 
12,654,258

Accumulated other comprehensive loss
 
(1,280
)
 
(3,569
)
Accumulated deficit
 
(5,467,236
)
 
(4,776,581
)
Total stockholders’ equity
 
7,157,059

 
7,884,278

Non-controlling interests
 
143,085

 
158,598

Total equity
 
7,300,144

 
8,042,876

Total liabilities and equity
 
$
13,963,493

 
$
14,705,578


8



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

 
 
Three Months Ended December 31,
 
 
2018
 
2017
Rental revenue
 
$
313,263

 
$
316,599

Operating expenses:
 
 
 
 
Acquisition-related
 
1,136

 
1,120

Litigation, merger and other non-routine costs, net of insurance recoveries
 
23,541

 
11,167

Property operating
 
32,567

 
32,429

General and administrative
 
17,220

 
18,274

Depreciation and amortization
 
153,050

 
175,259

Impairments
 
18,565

 
19,691

Total operating expenses
 
246,079

 
257,940

Other (expense) income:
 
 
 
 
Interest expense
 
(70,832
)
 
(70,694
)
Gain (loss) on extinguishment and forgiveness of debt, net
 
21

 
(318
)
Other income, net
 
7,100

 
1,989

Equity in income and gain on disposition of unconsolidated entities
 
225

 
1,958

(Loss) gain on derivative instruments, net
 
(92
)
 
266

Gain on disposition of real estate and held for sale assets, net
 
25,880

 
7,104

Total other expenses, net
 
(37,698
)
 
(59,695
)
Income (loss) before taxes
 
29,486

 
(1,036
)
Provision for income taxes from continuing operations
 
(1,614
)
 
(1,443
)
Income (loss) from continuing operations
 
27,872

 
(2,479
)
Loss from discontinued operations, net of tax
 
(30
)
 
(30,613
)
Net income (loss)
 
27,842

 
(33,092
)
Net (income) loss attributable to non-controlling interests
 
(624
)
 
970

Net income (loss) attributable to the General Partner
 
$
27,218

 
$
(32,122
)
 
 
 
 
 
Basic and diluted net income (loss) per share from continuing operations attributable to common stockholders
 
$
0.01

 
$
(0.02
)
Basic and diluted net loss per share from discontinued operations attributable to common stockholders
 
(0.00
)
 
(0.03
)
Basic and diluted net income (loss) per share attributable to common stockholders
 
$
0.01

 
$
(0.05
)
Distributions declared per common share
 
$
0.1375

 
$
0.1375


9



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

 
 
Year Ended December 31,
 
 
2018
 
2017
Rental revenue
 
$
1,257,867

 
$
1,252,285

Operating expenses:
 
 
 
 
Acquisition-related
 
3,632

 
3,402

Litigation, merger and other non-routine costs, net of insurance recoveries
 
290,963

 
47,960

Property operating
 
126,461

 
128,717

General and administrative
 
63,933

 
58,603

Depreciation and amortization
 
640,618

 
706,802

Impairments
 
54,647

 
50,548

Total operating expenses
 
1,180,254

 
996,032

Other (expense) income:
 
 
 
 
Interest expense
 
(280,887
)
 
(289,766
)
Gain on extinguishment and forgiveness of debt, net
 
5,360

 
18,373

Other income, net
 
14,735

 
6,242

Equity in income and gain on disposition of unconsolidated entities
 
1,869

 
2,763

Gain on derivative instruments, net
 
355

 
2,976

Gain on disposition of real estate and held for sale assets, net
 
94,331

 
61,536

Total other expenses, net
 
(164,237
)
 
(197,876
)
(Loss) income before taxes
 
(86,624
)
 
58,377

Provision for income taxes from continuing operations
 
(5,101
)
 
(6,882
)
(Loss) income from continuing operations
 
(91,725
)
 
51,495

Income (loss) from discontinued operations, net of tax
 
3,695

 
(19,117
)
Net (loss) income
 
(88,030
)
 
32,378

Net loss (income) attributable to non-controlling interests
 
2,256

 
(560
)
Net (loss) income attributable to the General Partner
 
$
(85,774
)
 
$
31,818

 
 
 
 
 
Basic and diluted net loss per share from continuing operations attributable to common stockholders
 
$
(0.17
)
 
$
(0.02
)
Basic and diluted net income (loss) per share from discontinued operations attributable to common stockholders
 
0.00

 
(0.02
)
Basic and diluted net loss per share attributable to common stockholders
 
$
(0.16
)
 
$
(0.04
)
Distributions declared per common share
 
$
0.55

 
$
0.55


10



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

 
 
Three Months Ended December 31,
 
 
2018
 
2017
Net income (loss)
 
$
27,842

 
$
(33,092
)
 Adjustments:
 
 
 
 
Interest expense
 
70,832

 
70,694

Depreciation and amortization of real estate assets
 
153,050

 
177,329

Provision for income taxes
 
1,614

 
11,843

Proportionate share of adjustments for unconsolidated entities
 
254

 
756

 EBITDA
 
$
253,592

 
$
227,530

Gain on disposition of real estate assets, including joint ventures, net
 
(25,951
)
 
(7,104
)
Impairments of real estate
 
18,565

 
19,691

Proportionate share of adjustments for unconsolidated entities
 

 
(1,970
)
EBITDAre
 
$
246,206

 
$
238,147

Loss on disposition and held for sale loss on discontinued operations
 
30

 
20,027

Payments received on fully reserved loans
 
(4,792
)
 

Acquisition-related expenses
 
1,136

 
1,120

Litigation, merger and other non-routine costs, net of insurance recoveries
 
23,541

 
14,969

Gain on investments
 
(1,790
)
 

Loss (gain) on derivative instruments, net
 
92

 
(266
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
945

 
1,148

(Gain) loss on extinguishment and forgiveness of debt, net
 
(21
)
 
318

Net direct financing lease adjustments
 
498

 
517

Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,341
)
 
(11,281
)
Program development costs write-off
 

 
1,343

Other adjustments, net
 
(78
)
 
1,247

 Proportionate share of adjustments for unconsolidated entities
 
60

 
249

Adjustment for Excluded Properties
 

 
172

Normalized EBITDA
 
$
257,486

 
$
267,710

Normalized EBITDA from continuing operations
 
$
257,486

 
$
258,578

Normalized EBITDA from discontinued operations
 
$

 
$
9,132


11



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

 
 
Year Ended December 31,
 
 
2018
 
2017
Net (loss) income
 
$
(88,030
)
 
$
32,378

 Adjustments:
 
 
 
 
Interest expense
 
280,887

 
289,766

Depreciation and amortization of real estate assets
 
640,618

 
721,292

Provision for income taxes
 
3,006

 
20,721

Proportionate share of adjustments for unconsolidated entities
 
1,448

 
3,870

 EBITDA
 
$
837,929

 
$
1,068,027

Gain on disposition of real estate assets, including joint ventures, net
 
(95,034
)
 
(61,536
)
Impairments of real estate
 
54,647

 
50,548

Proportionate share of adjustments for unconsolidated entities
 

 
(1,970
)
EBITDAre
 
$
797,542

 
$
1,055,069

Loss on disposition and held for sale loss on discontinued operations
 
1,815

 
20,027

Payments received on fully reserved loans
 
(4,792
)
 

Acquisition-related expenses
 
3,632

 
3,402

Litigation, merger and other non-routine costs, net of insurance recoveries
 
290,309

 
51,762

Gain on investments
 
(4,092
)
 
(65
)
Gain on derivative instruments, net
 
(355
)
 
(2,976
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
4,178

 
5,366

Gain on extinguishment and forgiveness of debt, net
 
(5,360
)
 
(18,373
)
Net direct financing lease adjustments
 
2,023

 
2,093

Straight-line rent, net of bad debt expense related to straight-line rent
 
(39,723
)
 
(44,903
)
Program development costs write-off
 

 
1,453

Other adjustments, net
 
(2,150
)
 
1,990

 Proportionate share of adjustments for unconsolidated entities
 
18

 
151

Adjustment for Excluded Properties
 
35

 
1,203

Normalized EBITDA
 
$
1,043,080

 
$
1,076,199

Normalized EBITDA from continuing operations
 
$
1,040,319

 
$
1,039,602

Normalized EBITDA from discontinued operations
 
$
2,761

 
$
36,597

















12



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

 
 
Three Months Ended December 31,
 
 
2018
 
2017
Net income (loss)
 
$
27,842

 
$
(33,092
)
Dividends on non-convertible preferred stock
 
(17,973
)
 
(17,973
)
Gain on disposition of real estate assets, including joint ventures, net
 
(25,951
)
 
(7,104
)
Depreciation and amortization of real estate assets
 
151,837

 
173,829

Impairment of real estate
 
18,565

 
19,691

Proportionate share of adjustments for unconsolidated entities
 
256

 
(1,464
)
FFO attributable to common stockholders and limited partners
 
$
154,576

 
$
133,887

FFO attributable to common stockholders and limited partners from continuing operations
 
154,606

 
164,500

FFO attributable to common stockholders and limited partners from discontinued operations
 
(30
)
 
(30,613
)
 
 
 
 
 
Weighted-average shares outstanding - basic
 
967,817,245

 
974,212,874

Limited Partner OP Units and effect of dilutive securities
 
24,520,714

 
24,300,280

Weighted-average shares outstanding - diluted
 
992,337,959

 
998,513,154

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
0.156

 
$
0.134

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
 
$
0.156

 
$
0.165

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$
0.000

 
$
(0.031
)


















13



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

 
 
Three Months Ended December 31,
 
 
2018
 
2017
FFO attributable to common stockholders and limited partners
 
$
154,576

 
$
133,887

 
 
 
 
 
Acquisition-related expenses
 
1,136

 
1,120

Litigation, merger and other non-routine costs, net of insurance recoveries
 
23,541

 
14,969

Loss on disposition and held for sale loss on discontinued operations
 
30

 
20,027

Payments received on fully reserved loans
 
(4,792
)
 

Gain on investments
 
(1,790
)
 

Loss (gain) on derivative instruments, net
 
92

 
(266
)
Amortization of premiums and discounts on debt and investments, net
 
(1,154
)
 
(627
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
945

 
1,148

Net direct financing lease adjustments
 
498

 
517

Amortization and write-off of deferred financing costs
 
3,715

 
5,834

Amortization of management contracts
 

 
2,076

Deferred and other tax expense
 

 
5,063

(Gain) loss on extinguishment and forgiveness of debt, net
 
(21
)
 
318

Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,341
)
 
(11,281
)
Equity-based compensation
 
2,924

 
5,528

Other adjustments, net
 
1,092

 
566

Proportionate share of adjustments for unconsolidated entities
 
60

 
277

Adjustment for Excluded Properties
 

 
564

AFFO attributable to common stockholders and limited partners
 
$
172,511

 
$
179,720

AFFO attributable to common stockholders and limited partners from continuing operations
 
172,511

 
175,807

AFFO attributable to common stockholders and limited partners from discontinued operations
 

 
3,913

 
 
 
 
 
Weighted-average shares outstanding - basic
 
967,817,245

 
974,212,874

Limited Partner OP Units and effect of dilutive securities
 
24,520,714

 
24,300,280

Weighted-average shares outstanding - diluted
 
992,337,959

 
998,513,154

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.174

 
$
0.180

AFFO attributable to common stockholder and limited partners from continuing operations per diluted share
 
$
0.174

 
$
0.176

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

 
$
0.004









14



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

 
 
Year Ended December 31,
 
 
2018
 
2017
Net (loss) income
 
$
(88,030
)
 
$
32,378

Dividends on non-convertible preferred stock
 
(71,892
)
 
(71,892
)
Gain on disposition of real estate assets, including joint ventures, net
 
(95,034
)
 
(61,536
)
Depreciation and amortization of real estate assets
 
637,097

 
703,133

Impairment of real estate
 
54,647

 
50,548

Proportionate share of adjustments for unconsolidated entities
 
1,278

 
477

FFO attributable to common stockholders and limited partners
 
$
438,066

 
$
653,108

FFO attributable to common stockholders and limited partners from continuing operations
 
434,371

 
672,225

FFO attributable to common stockholders and limited partners from discontinued operations
 
3,695

 
(19,117
)
 
 
 
 
 
Weighted-average shares outstanding - basic
 
969,092,268

 
974,098,652

Limited Partner OP Units and effect of dilutive securities
 
24,145,875

 
24,059,312

Weighted-average shares outstanding - diluted
 
993,238,143

 
998,157,964

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

 
$
0.654

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

 
$
0.673

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$
0.004

 
$
(0.019
)

15



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

 
 
Year Ended December 31,
 
 
2018
 
2017
FFO attributable to common stockholders and limited partners
 
$
438,066

 
$
653,108

 
 
 
 
 
Acquisition-related expenses
 
3,632

 
3,402

Litigation, merger and other non-routine costs, net of insurance recoveries
 
290,309

 
51,762

Loss on disposition and held for sale loss on discontinued operations
 
1,815

 
20,027

Payments received on fully reserved loans
 
(4,792
)
 

Gain on investments
 
(4,092
)
 
(65
)
Gain on derivative instruments, net
 
(355
)
 
(2,976
)
Amortization of premiums and discounts on debt and investments, net
 
(3,486
)
 
(4,616
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
4,178

 
5,366

Net direct financing lease adjustments
 
2,023

 
2,093

Amortization and write-off of deferred financing costs
 
19,166

 
24,536

Amortization of management contracts
 

 
14,514

Deferred and other tax (benefit) expense
 
(1,855
)
 
8,671

Gain on extinguishment and forgiveness of debt, net
 
(5,360
)
 
(18,373
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(39,723
)
 
(44,903
)
Equity-based compensation
 
12,417

 
16,751

Other adjustments, net
 
1,446

 
2,566

Proportionate share of adjustments for unconsolidated entities
 
36

 
378

Adjustment for Excluded Properties
 
465

 
6,528

AFFO attributable to common stockholders and limited partners
 
$
713,890

 
$
738,769

AFFO attributable to common stockholders and limited partners from continuing operations
 
710,688

 
702,556

AFFO attributable to common stockholders and limited partners from discontinued operations
 
3,202

 
36,213

 
 
 
 
 
Weighted-average shares outstanding - basic
 
969,092,268

 
974,098,652

Limited Partner OP Units and effect of dilutive securities
 
24,145,875

 
24,059,312

Weighted-average shares outstanding - diluted
 
993,238,143

 
998,157,964

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.719

 
$
0.740

AFFO attributable to common stockholder and limited partners from continuing operations per diluted share
 
$
0.716

 
$
0.704

AFFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$
0.003

 
$
0.036



16



VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
 
 
Three Months Ended
 
 
December 31,
2018
Interest expense - as reported
 
$
(70,832
)
Less Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(3,813
)
Amortization of net premiums
 
1,295

Interest Expense, Excluding Non-Cash Amortization
 
$
(68,314
)

 
 
Three Months Ended
 
 
December 31,
2018
Interest Expense, Excluding Non-Cash Amortization
 
$
68,314

Secured debt principal amortization
 
2,424

Dividends attributable to preferred shares 
 
17,973

Total fixed charges
 
88,711

Normalized EBITDA
 
257,486

Fixed Charge Coverage Ratio
 
2.90
x

 
 
December 31,
2018
 
December 31,
2017
Mortgage notes payable, net
 
$
1,922,657

 
$
2,082,692

Corporate bonds, net
 
3,368,609

 
2,821,494

Convertible debt, net
 
394,883

 
984,258

Credit facility, net
 
401,773

 
185,000

Total debt - as reported
 
6,087,922

 
6,073,444

Adjustments:
 
 
 
 
Deferred financing costs, net
 
42,763

 
48,232

Net premiums
 
(8,053
)
 
(15,638
)
Principal Outstanding
 
6,122,632

 
6,106,038

Principal Outstanding - Excluded Properties
 

 
(16,200
)
Adjusted Principal Outstanding
 
$
6,122,632

 
$
6,089,838

 
 
 
 
 
Adjusted Principal Outstanding
 
$
6,122,632

 
$
6,089,838

Less: cash and cash equivalents
 
30,758

 
34,176

Less: cash and cash equivalents related to discontinued operations
 

 
2,198

Net Debt
 
$
6,091,874

 
$
6,053,464


17



 
 
December 31,
2018
Total real estate investments, at cost - as reported
 
$
15,604,839

Adjustments:
 
 
Investment in unconsolidated entities
 
35,289

Investment in Cole REITs
 
7,844

Gross assets held for sale
 
3,020

Investment in direct financing leases, net
 
13,254

Mortgage notes receivable, net
 
10,164

Gross below market leases
 
(263,384
)
Gross Real Estate Investments
 
$
15,411,026


 
 
December 31,
2018
Net Debt
 
$
6,091,874

Normalized EBITDA annualized
 
1,029,944

Net Debt to Normalized EBITDA Annualized Ratio
 
5.91
x
 
 
 
Net Debt
 
$
6,091,874

Gross Real Estate Investments
 
15,411,026

Net Debt Leverage Ratio
 
39.5
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,574,315

Gross Real Estate Investments
 
15,411,026

Unencumbered asset ratio
 
75.1
%


18



VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE - 2019 GUIDANCE
(Unaudited)

The Company expects its 2019 AFFO per diluted share to be in a range between $0.68 and $0.70. This guidance assumes dispositions totaling $350 million to $500 million at an average cash cap rate of 6.5% to 7.5% and acquisitions totaling $250 million to $500 million within the same cap rate range. Guidance also assumes real estate operations with average occupancy above 98.0%, same-store rental growth in a range of 0.3% to 1.0% and Net Debt to Normalized EBITDA at approximately 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)
 
$
0.16

 
$
0.18

Depreciation and amortization of real estate assets 
 
0.48

 
0.48

FFO attributable to common stockholders and limited partners per diluted share
 
0.64

 
0.66

Adjustments (2)
 
0.04

 
0.04

AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.68

 
$
0.70

_____________________________________
(1) Includes impact of dividends to be paid to preferred shareholders and excludes the effect of non-controlling interests, impairments, gains or losses on the extinguishment of debt and sale of real estate or mortgage notes receivable.
(2) Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net of insurance recoveries, legal settlements and insurance recoveries not in the ordinary course of business, and (ii) certain non-cash items such as straight-line rent, net of bad debt expense related to straight-line rent, net direct financing lease adjustments, 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.

19
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

396823361_coversvereitsuppq42018.jpg




396823361_vereitlogoa30.jpg
 
 
Q4 2018 SUPPLEMENTAL INFORMATION

VEREIT Supplemental Information
 
December 31, 2018
 
Section
Page
396823361_fdbeaveruta06.jpg
 
 
Company Overview
Quarterly Financial Summary
Annual 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
396823361_cignaofficea04.jpg
Net Operating Income
Same Store Contract Rental Revenue
Debt and Preferred Equity Summary
Mortgage Notes Payable
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
396823361_cvskernersvillea04.jpg
Property Geographic Diversification
Lease Expirations
Lease Summary
Diversification by Property Type and Occupancy Costs
Definitions
 
 
 
 
 
 
 
 
 
 
396823361_tjxphiladelphiapadistirb07.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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 2018 SUPPLEMENTAL INFORMATION

 
About the Data
 
This data and other information described herein are as of and for the three months ended December 31, 2018, 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, 2018 and Quarterly Reports on Form 10-Q for the periods ended September 30, 2018, June 30, 2018, and March 31, 2018.

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.

Forward-Looking Statements
Information set forth herein contains “forward-looking statements” (within the meaning of 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 regarding future events and plans, VEREIT's future financial condition, results of operations and business. The forward-looking statements involve a number of assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Generally, the words “expects,” “anticipates,”“assumes,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "may," "will," "should," "could," "continues," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, most of which are difficult to predict and many of which are beyond VEREIT’s control. If a change occurs, VEREIT’s business, financial condition, liquidity and results of operations may vary materially from those expressed in or implied by the forward-looking statements.

The following factors, among others, could cause actual results to differ 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 2019 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; the impact of impairment charges in respect of certain of VEREIT's properties, goodwill and intangible assets and other assets; 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 and in the leasing of its 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 pending government investigations and litigations related to VEREIT's previously disclosed audit committee investigation, including the expense of such investigations and litigation and any additional potential payments upon resolution; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT's ability to pay dividends and 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 U.S. Securities and Exchange Commission (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 | 3



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Q4 2018 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. On September 6, 2011, the Company completed its initial public offering.

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, 2018, approximately 41.9% of the Company's Annualized Rental Income was earned from Investment-Grade Tenants, Economic Occupancy Rate was 98.8% and the Weighted Average Remaining Lease Term was 8.9 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 | 4



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Q4 2018 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, Suite 1100
 
5 Bryant Park, 23rd Floor
Phoenix, AZ 85016
 
New York, NY 10018
800-606-3610
 
212-413-9100
www.VEREIT.com
 
 
 
Trading Symbols: VER, VER PRF
 
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 | 5



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Q4 2018 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, 2018 and 2017, and portfolio metrics as of December 31, 2018 and 2017. Data presented includes both continuing operations, which primarily represent the Company's real estate operations, and discontinued operations, which represent substantially all of Cole Capital, except as otherwise indicated.
 
Year Ended December 31,
 
2018
 
2017
Financial Results
 
 
 
Rental revenue (1)
$
1,257,867

 
$
1,252,285

(Loss) income from continuing operations (1)
$
(91,725
)
 
$
51,495

Income (loss) from discontinued operations (1)
3,695

 
(19,117
)
Net (loss) income (1) (2)
$
(88,030
)
 
$
32,378

Basic and diluted net loss from continuing operations per share attributable to common stockholders and limited partners (1)
$
(0.17
)
 
$
(0.02
)
Basic and diluted net income (loss) from discontinued operations per share attributable to common stockholders and limited partners (1)
0.00

 
(0.02
)
Basic and diluted net loss per share attributable to common stockholders and limited partners (1) (2) (3)
$
(0.16
)
 
$
(0.04
)
Normalized EBITDA from continuing operations
$
1,040,319

 
$
1,039,602

Normalized EBITDA from discontinued operations
2,761

 
36,597

Normalized EBITDA
$
1,043,080

 
$
1,076,199

FFO attributable to common stockholders and limited partners from continuing operations (2)
$
434,371

 
$
672,225

FFO attributable to common stockholders and limited partners from discontinued operations
3,695

 
(19,117
)
FFO attributable to common stockholders and limited partners
$
438,066

 
$
653,108

FFO attributable to common stockholders and limited partners from continuing operations per diluted share (2)
$
0.437

 
$
0.673

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
0.004

 
(0.019
)
FFO attributable to common stockholders and limited partners per diluted share
$
0.441

 
$
0.654

AFFO attributable to common stockholders and limited partners from continuing operations
$
710,688

 
$
702,556

AFFO attributable to common stockholders and limited partners from discontinued operations
3,202

 
36,213

AFFO attributable to common stockholders and limited partners
$
713,890

 
$
738,769

AFFO attributable to common stockholders and limited partners from continuing operations per diluted share
$
0.716

 
$
0.704

AFFO attributable to common stockholders and limited partners from discontinued operations per diluted share
0.003

 
0.036

AFFO attributable to common stockholders and limited partners per diluted share
$
0.719

 
$
0.740

Dividends declared per common share
$
0.55

 
$
0.55

Weighted-average shares outstanding - diluted
993,238,143

 
998,157,964

 
 
 
 
Portfolio Metrics
 
 
 
Operating Properties
3,994

 
4,091

Rentable Square Feet (in thousands)
94,953

 
94,418

Economic Occupancy Rate
98.8
%
 
98.8
%
Weighted Average Remaining Lease Term (years)
8.9

 
9.5

Investment-Grade Tenants
41.9
%
 
39.6
%
___________________________________
(1)
Included in our audited financial statements presented in our Annual Report on Form 10-K.
(2)
During the year ended December 31, 2018, the Company expensed litigation settlement costs of $233.2 million.
(3)
Amounts may not total due to rounding.



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



396823361_vereitlogoa30.jpg
 
 
Q4 2018 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 includes both continuing operations, which primarily represent the Company's real estate operations, and discontinued operations, which represent substantially all of Cole Capital, except as otherwise indicated.
 
Three Months Ended
Financial Results
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Rental revenue
$
313,263

 
$
313,866

 
$
315,664

 
$
315,074

 
$
316,599

Income (loss) from continuing operations
$
27,872

 
$
(73,942
)
 
$
(74,691
)
 
$
29,036

 
$
(2,479
)
(Loss) income from discontinued operations
(30
)
 

 
224

 
3,501

 
(30,613
)
Net income (loss) (1)
$
27,842

 
$
(73,942
)
 
$
(74,467
)
 
$
32,537

 
$
(33,092
)
Basic and diluted income (loss) from continuing operations per share attributable to common stockholders and limited partners
$
0.01

 
$
(0.09
)
 
$
(0.09
)
 
$
0.01

 
$
(0.02
)
Basic and diluted (loss) income from discontinued operations per share attributable to common stockholders and limited partners
(0.00
)
 

 
0.00

 
0.00

 
(0.03
)
Basic and diluted net income (loss) per share attributable to common stockholders and limited partners (1)
$
0.01

 
$
(0.09
)
 
$
(0.09
)
 
$
0.01

 
$
(0.05
)
Normalized EBITDA from continuing operations
$
257,486

 
$
261,084

 
$
259,387

 
$
262,362

 
$
258,578

Normalized EBITDA from discontinued operations

 

 

 
2,761

 
9,132

Normalized EBITDA
$
257,486

 
$
261,084

 
$
259,387

 
$
265,123

 
$
267,710

FFO attributable to common stockholders and limited partners from continuing operations (1)
$
154,606

 
$
38,055

 
$
77,019

 
$
164,691

 
$
164,500

FFO attributable to common stockholders and limited partners from discontinued operations
(30
)
 

 
224

 
3,501

 
(30,613
)
FFO attributable to common stockholders and limited partners
$
154,576

 
$
38,055

 
$
77,243

 
$
168,192

 
$
133,887

FFO attributable to common stockholders and limited partners from continuing operations per diluted share (1)
$
0.156

 
$
0.038

 
$
0.078

 
$
0.165

 
$
0.165

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
(0.000
)
 

 
0.000

 
0.004

 
(0.031
)
FFO attributable to common stockholders and limited partners per diluted share
$
0.156

 
$
0.038

 
$
0.078

 
$
0.169

 
$
0.134

AFFO attributable to common stockholders and limited partners from continuing operations
$
172,511

 
$
178,529

 
$
178,794

 
$
180,854

 
$
175,807

AFFO attributable to common stockholders and limited partners from discontinued operations

 

 

 
3,202

 
3,913

AFFO attributable to common stockholders and limited partners
$
172,511

 
$
178,529

 
$
178,794

 
$
184,056

 
$
179,720

AFFO attributable to common stockholders and limited partners from continuing operations per diluted share
$
0.174

 
$
0.180

 
$
0.180

 
$
0.182

 
$
0.176

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

 

 

 
0.003

 
0.004

AFFO attributable to common stockholders and limited partners per diluted share
$
0.174

 
$
0.180

 
$
0.180

 
$
0.185

 
$
0.180

Dividends declared per common share
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

Weighted-average shares outstanding - diluted
992,337,959

 
991,924,017

 
992,100,138

 
996,773,442

 
998,513,154

 
 
 
 
 
 
 
 
 
 
Portfolio Metrics
 
 
 
 
 
 
 
 
 
Operating Properties
3,994

 
4,021

 
4,033

 
4,063

 
4,091

Rentable Square Feet (in thousands)
94,953

 
93,856

 
94,592

 
94,666

 
94,418

Economic Occupancy Rate
98.8
%
 
99.1
%
 
98.8
%
 
98.7
%
 
98.8
%
Weighted Average Remaining Lease Term (years)
8.9

 
8.9

 
9.1

 
9.3

 
9.5

Investment-Grade Tenants (2)
41.9
%
 
42.7
%
 
42.7
%
 
42.9
%
 
39.6
%
___________________________________
(1)
During the three months ended December 31, 2018, the Company accrued litigation settlement costs of $15.7 million, which were paid during the three months ended March 31, 2019. During the three months ended September 30, 2018, the Company accrued $127.5 million of litigation settlement costs, which were paid during the three months ended December 31, 2018. During the three months ended June 30, 2018, the Company expensed and paid a litigation settlement of $90.0 million.
(2)
The weighted-average credit rating of our investment-grade tenants was BBB+ as of December 31, 2018.

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 2018 SUPPLEMENTAL INFORMATION

 
Financial and Operations Statistics and Ratios
(unaudited, dollars in thousands)
 
 
 
Three Months Ended
 
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Interest Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
68,314

 
$
66,445

 
$
65,202

 
$
64,741

 
$
65,097

Normalized EBITDA (2)
 
257,486

 
261,084

 
259,387

 
265,123

 
267,710

Interest Coverage Ratio
 
3.77x

 
3.93x

 
3.98x

 
4.10x


4.11x

 
 
 
 
 
 
 
 
 
 
 
Fixed Charge Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
68,314

 
$
66,445

 
$
65,202

 
$
64,741

 
$
65,097

Secured debt principal amortization
 
2,424

 
3,007

 
2,457

 
2,676

 
3,257

Dividends attributable to preferred shares 
 
17,973

 
17,973

 
17,973

 
17,973

 
17,973

Total fixed charges
 
88,711

 
87,425

 
85,632

 
85,390

 
86,327

Normalized EBITDA (2)
 
257,486

 
261,084

 
259,387

 
265,123


267,710

Fixed Charge Coverage Ratio
 
2.90
x
 
2.99x

 
3.03x

 
3.10x

 
3.10x

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Net Debt Ratios
 
 
 
 
 
 
 
 
 
 
Adjusted Principal Outstanding (3)
 
$
6,122,632

 
$
5,975,107

 
$
6,067,593

 
$
6,022,255

 
$
6,089,838

Less: cash and cash equivalents