Document Contents

<ACCESSION-NUMBER>0001025378-19-000035
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>110
<PERIOD>20190630
<FILING-DATE>20190802
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<CONFORMED-NAME>W. P. Carey Inc.
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<STREET1>50 ROCKEFELLER PLAZA
<CITY>NEW YORK
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<FORMER-CONFORMED-NAME>W P CAREY & CO LLC
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<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CAREY W P & CO LLC
<DATE-CHANGED>20001116
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<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CAREY DIVERSIFIED LLC
<DATE-CHANGED>19971017
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from__________ to __________

Commission File Number: 001-13779

(Exact name of registrant as specified in its charter)



Maryland		45-4549771
(State of incorporation)		(I.R.S. Employer Identification No.)

50 Rockefeller Plaza
New York,	New York	10020
(Address of principal executive offices)		(Zip Code)

Investor Relations (212) 492-8920

(Registrant’s telephone numbers, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	WPC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐

Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Registrant has 170,787,017 shares of common stock, $0.001 par value, outstanding at July 26, 2019.

W. P. Carey 6/30/2019 10-Q – 1

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: our corporate strategy and estimated or future economic performance and results, underlying assumptions about our portfolio (e.g., occupancy rate, lease terms, and tenant credit quality, including our expectations about tenant bankruptcies and interest coverage), possible new acquisitions and dispositions, and our international exposure and acquisition volume; our capital structure, future capital expenditure levels (including any plans to fund our future liquidity needs), and future leverage and debt service obligations; prospective statements regarding our capital markets program, including our credit ratings and “at-the-market” program (“ATM Program”); the outlook for the investment programs that we manage, including possible liquidity events for those programs; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); and the impact of recently issued accounting pronouncements and regulatory activity. These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on our business, financial condition, liquidity, results of operations, Adjusted funds from operations (“AFFO”), and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018, dated February 25, 2019 (the “2018 Annual Report”). Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part I, Item 1. Financial Statements (Unaudited).

W. P. Carey 6/30/2019 10-Q – 2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)



	June 30, 2019			December 31, 2018
Assets
Investments in real estate:
Land, buildings and improvements	$	9,480,306		$	9,251,396
Net investments in direct financing leases	1,263,319			1,306,215
In-place lease intangible assets and other	2,134,786			2,009,628
Above-market rent intangible assets	921,998			925,797
Investments in real estate	13,800,409			13,493,036
Accumulated depreciation and amortization	(1,812,628		)	(1,564,182		)
Assets held for sale, net	102,777			—
Net investments in real estate	12,090,558			11,928,854
Equity investments in the Managed Programs and real estate	317,159			329,248
Cash and cash equivalents	202,279			217,644
Due from affiliates	81,523			74,842
Other assets, net	580,270			711,507
Goodwill	920,218			920,944
Total assets ^(a)	$	14,192,007		$	14,183,039
Liabilities and Equity
Debt:
Senior unsecured notes, net	$	3,861,931		$	3,554,470
Unsecured revolving credit facility	111,227			91,563
Non-recourse mortgages, net	2,203,853			2,732,658
Debt, net	6,177,011			6,378,691
Accounts payable, accrued expenses and other liabilities	463,417			403,896
Below-market rent and other intangible liabilities, net	213,279			225,128
Deferred income taxes	168,841			173,115
Dividends payable	178,665			172,154
Total liabilities ^(a)	7,201,213			7,352,984
Commitments and contingencies (Note 11)

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued	—			—
Common stock, $0.001 par value, 450,000,000 shares authorized; 170,756,507 and 165,279,642 shares, respectively, issued and outstanding	171			165
Additional paid-in capital	8,576,245			8,187,335
Distributions in excess of accumulated earnings	(1,368,457		)	(1,143,992		)
Deferred compensation obligation	37,263			35,766
Accumulated other comprehensive loss	(260,817		)	(254,996		)
Total stockholders’ equity	6,984,405			6,824,278
Noncontrolling interests	6,389			5,777
Total equity	6,990,794			6,830,055
Total liabilities and equity	$	14,192,007		$	14,183,039

See Note 2 for details related to variable interest entities (“VIEs”).

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2019 10-Q – 3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues
Real Estate:
Lease revenues	$	269,802		$	168,367		$	532,741		$	337,799
Operating property revenues	15,436			4,865			31,432			12,083
Lease termination income and other	6,304			680			9,574			1,622
	291,542			173,912			573,747			351,504
Investment Management:
Asset management revenue	9,790			17,268			19,522			34,253
Reimbursable costs from affiliates	3,821			5,537			7,689			10,841
Structuring and other advisory revenue	58			4,426			2,576			6,355
	13,669			27,231			29,787			51,449
	305,211			201,143			603,534			402,953
Operating Expenses
Depreciation and amortization	113,632			64,337			226,011			130,294
General and administrative	19,729			16,442			41,014			35,025
Reimbursable tenant costs	13,917			5,733			27,088			11,952
Operating property expenses	10,874			3,581			21,468			9,251
Property expenses, excluding reimbursable tenant costs	9,915			5,327			19,827			9,556
Stock-based compensation expense	4,936			3,698			9,101			11,917
Reimbursable costs from affiliates	3,821			5,537			7,689			10,841
Subadvisor fees	1,650			1,855			3,852			3,887
Merger and other expenses	696			2,692			842			2,655
Impairment charges	—			—			—			4,790
	179,170			109,202			356,892			230,168
Other Income and Expenses
Interest expense	(59,719		)	(41,311		)	(121,032		)	(79,385		)
Equity in earnings of equity method investments in the Managed Programs and real estate	3,951			12,558			9,442			27,883
Other gains and (losses)	(671		)	10,586			284			7,823
(Loss) gain on sale of real estate, net	(362		)	11,912			571			18,644
	(56,801		)	(6,255		)	(110,735		)	(25,035		)
Income before income taxes	69,240			85,686			135,907			147,750
Provision for income taxes	(3,119		)	(6,262		)	(990		)	(260		)
Net Income	66,121			79,424			134,917			147,490
Net income attributable to noncontrolling interests	(83		)	(3,743		)	(385		)	(6,535		)
Net Income Attributable to W. P. Carey	$	66,038		$	75,681		$	134,532		$	140,955

Basic Earnings Per Share	$	0.39		$	0.70		$	0.79		$	1.30
Diluted Earnings Per Share	$	0.38		$	0.70		$	0.79		$	1.30
Weighted-Average Shares Outstanding
Basic	171,304,112			108,059,394			169,280,360			108,058,671
Diluted	171,490,625			108,234,934			169,520,508			108,243,063

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2019 10-Q – 4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net Income	$	66,121		$	79,424		$	134,917		$	147,490
Other Comprehensive Loss
Foreign currency translation adjustments	(4,187		)	(39,815		)	(4,360		)	(21,299		)
Unrealized (loss) gain on derivative instruments	(3,406		)	14,073			(1,457		)	5,681
Unrealized (loss) gain on investments	(541		)	(58		)	(4		)	370
	(8,134		)	(25,800		)	(5,821		)	(15,248		)
Comprehensive Income	57,987			53,624			129,096			132,242

Amounts Attributable to Noncontrolling Interests
Net income	(83		)	(3,743		)	(385		)	(6,535		)
Foreign currency translation adjustments	—			7,634			—			3,852
Unrealized loss on derivative instruments	—			2			—			5
Comprehensive (income) loss attributable to noncontrolling interests	(83		)	3,893			(385		)	(2,678		)
Comprehensive Income Attributable to W. P. Carey	$	57,904		$	57,517		$	128,711		$	129,564

See Notes to Consolidated Financial Statements.

W. P. Carey 6/30/2019 10-Q – 5

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in thousands, except share and per share amounts)



	W. P. Carey Stockholders
							Distributions					Accumulated
	Common Stock			Additional			in Excess of			Deferred		Other			Total
	$0.001 Par Value			Paid-in			Accumulated			Compensation		Comprehensive			W. P. Carey			Noncontrolling
	Shares	Amount		Capital			Earnings			Obligation		Loss			Stockholders			Interests			Total
Balance at April 1, 2019	169,636,526	$	170	$	8,483,301		$	(1,256,754	)	$	37,263	$	(252,683	)	$	7,011,297		$	6,432		$	7,017,729
Shares issued under ATM Program, net	1,116,217	1		88,072											88,073						88,073
Shares issued upon delivery of vested restricted share awards	2,247	—		(177		)									(177		)				(177		)
Shares issued upon purchases under employee share purchase plan	1,517	—		113											113						113
Amortization of stock-based compensation expense				4,936											4,936						4,936
Distributions to noncontrolling interests															—			(126		)	(126		)
Dividends declared ($1.034 per share)							(177,741		)						(177,741		)				(177,741		)
Net income							66,038								66,038			83			66,121
Other comprehensive loss:
Foreign currency translation adjustments												(4,187		)	(4,187		)				(4,187		)
Unrealized loss on derivative instruments												(3,406		)	(3,406		)				(3,406		)
Unrealized loss on investments												(541		)	(541		)				(541		)
Balance at June 30, 2019	170,756,507	$	171	$	8,576,245		$	(1,368,457	)	$	37,263	$	(260,817	)	$	6,984,405		$	6,389		$	6,990,794



	W. P. Carey Stockholders
							Distributions						Accumulated
	Common Stock			Additional			in Excess of			Deferred			Other			Total
	$0.001 Par Value			Paid-in			Accumulated			Compensation			Comprehensive			W. P. Carey			Noncontrolling
	Shares	Amount		Capital			Earnings			Obligation			Loss			Stockholders			Interests			Total
Balance at April 1, 2018	107,194,440	$	107	$	4,439,433		$	(1,097,415	)	$	36,147		$	(229,238	)	$	3,149,034		$	220,471		$	3,369,505
Shares issued upon delivery of vested restricted share awards	4,176	—		(22		)										(22		)				(22		)
Shares issued upon purchases under employee share purchase plan	2,071	—		125												125						125
Delivery of deferred vested shares, net				140						(140		)				—						—
Amortization of stock-based compensation expense				3,698												3,698						3,698
Contributions from noncontrolling interests																—			71			71
Distributions to noncontrolling interests																—			(4,549		)	(4,549		)
Dividends declared ($1.020 per share)							(110,448		)							(110,448		)				(110,448		)
Net income							75,681									75,681			3,743			79,424
Other comprehensive loss:
Foreign currency translation adjustments													(32,181		)	(32,181		)	(7,634		)	(39,815		)
Unrealized gain on derivative instruments													14,075			14,075			(2		)	14,073
Unrealized loss on investments													(58		)



PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		46
Item 3. Quantitative and Qualitative Disclosures About Market Risk		70
Item 4. Controls and Procedures		73

PART II — OTHER INFORMATION
Item 6. Exhibits		74
Signatures		75



		Page No.

Section 1: 10-Q (10-Q)