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Section 1: 8-K (8-K)

Document
falsefalse8002019-08-078-K2325 E. Camelback Road, 9th FloorPhoenix,85016AZ00015073850001528059606-3610 0001507385 2019-08-07 2019-08-07 0001507385 ver:VEREITOperatingPartnershipL.P.Member 2019-08-07 2019-08-07


 

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): August 7, 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, 9th Floor
Phoenix,
AZ
85016
 
(Address of principal executive offices, including zip code)
800
-
606-3610
(Registrant’s telephone number, including area code)
________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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





Item 2.02. Results of Operations and Financial Condition.
On August 7, 2019, VEREIT, Inc. (the “Company”) furnished the following documents: (i) a press release relating to its second quarter 2019 financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the quarter ended June 30, 2019, attached hereto as Exhibit 99.2. The information set forth in this Item 2.02 and in the attached Exhibits 99.1 and 99.2 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information set forth in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
 
Description
99.1
 
99.2
 
101.SCH*
 
Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
 
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
 
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*
 
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

_____________________________
*
Filed herewith






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: August 7, 2019



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
399085818_rgbhorzvereitlogo093018a03.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Second Quarter 2019 Operating Results
Reduced Debt Levels With Prudent Capital Allocation
Strengthened Portfolio Through Reinvestment



Phoenix, AZ, August 7, 2019 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months ending June 30, 2019.

The financial results below reflect continuing operations only.

Second Quarter 2019 Financial and Operating Highlights
Net income of $292.3 million and net income per diluted share of $0.27
Achieved $0.18 AFFO per diluted share
Acquisitions totaled $118.7 million in the second quarter of 2019 and $221.2 million year-to-date
Formed an 80/20 industrial partnership on May 30, 2019, including six VEREIT industrial assets totaling approximately $407.5 million which contributed $326.0 million to total dispositions
Portfolio dispositions totaled $332.3 million in the second quarter of 2019 and $430.3 million year-to-date
Total debt decreased from $6.02 billion to $5.66 billion; Net Debt from $6.05 billion to $5.51 billion, or 36.9% Net Debt to Gross Real Estate Investments
Net Debt to Normalized EBITDA was reduced from 5.7x to 5.3x


Second Quarter 2019 Financial Results

Rental Revenue
Rental Revenue for the quarter ended June 30, 2019 decreased $3.7 million to $312.0 million as compared to revenue of $315.7 million for the same quarter in 2018.

Net Income and Net Income Attributable to Common Stockholders per Diluted Share
Net income for the quarter ended June 30, 2019 increased $367.0 million to $292.3 million as compared to net loss of $(74.7) million for the same quarter in 2018, and net income per diluted share increased $0.36 to $0.27 for the quarter ended June 30, 2019, as compared to net loss per diluted share of $(0.09) for the same quarter in 2018.

Normalized EBITDA
Normalized EBITDA for the quarter ended June 30, 2019 increased $0.9 million to $260.3 million as compared to Normalized EBITDA of $259.4 million for the same quarter in 2018.

Funds From Operations Attributable to Common Stockholders and Limited Partners (“FFO”) and FFO per Diluted Share
FFO for the quarter ended June 30, 2019 increased $102.0 million to $179.0 million, as compared to $77.0 million for the same quarter in 2018, and FFO per diluted share increased $0.10 to $0.18 for the quarter ended June 30, 2019, as compared to FFO per diluted share of $0.08 for the same quarter in 2018.

Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended June 30, 2019 decreased $1.7 million to $177.1 million, as compared to $178.8 million for the same quarter in 2018, and AFFO per diluted share remained constant at $0.18 for the quarter ended June 30, 2019, as compared to the same quarter in 2018.


1


Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “VEREIT continues to focus on three objectives: lowering our debt levels, refreshing and diversifying our portfolio through reinvestment, and maintaining an experienced execution team. We have reduced net debt to normalized EBITDA from 5.9x to 5.3x year-to-date, strengthened the portfolio through the recycling of capital, and retained a seasoned real estate team with Company tenure of more than eight years.”

Common Stock Dividend Information
On August 5, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.1375 per share for the third quarter of 2019, representing an annual distribution rate of $0.55 per share. The dividend will be paid on October 15, 2019 to common stockholders of record as of September 30, 2019.

Balance Sheet and Liquidity
As of the end of the quarter, the Company had paid down its revolving line of credit, leaving $2.0 billion undrawn as of June 30, 2019. The Company also has a $900.0 million term loan as part of the credit facility. In addition, secured debt was reduced by $172.3 million in the second quarter, bringing the total reduction amount for the year to $174.7 million.
Subsequent to the quarter, the Company redeemed 4.0 million shares of its 6.70% Series F Cumulative Redeemable Preferred Stock, representing approximately 9.33%, or $100.0 million, of its approximately 42.9 million shares outstanding on July 5, 2019. The shares were redeemed at a redemption price of $25.00 per share.

Capital Market Activity
Year-to-date, the Company issued 5.0 million shares at a weighted average price of $8.42 for gross proceeds of $42.5 million under its “at the market” equity offering program, including $14.5 million during the second quarter.

Consolidated Financial Statistics
Financial Statistics as of the quarter ended June 30, 2019 are as follows: Net Debt to Normalized EBITDA of 5.3x, Fixed Charge Coverage Ratio of 3.0x, Unencumbered Asset Ratio of 76.0%, Net Debt to Gross Real Estate Investments of 36.9%, Weighted Average Debt Term of 4.4 years and 99.8% Fixed Rate Debt.

Litigation Settlements
Between March 31 and April 5, 2019, the Company entered into a series of agreements to settle claims with additional shareholders who decided not to participate as class members in the SDNY Consolidated Class Action for approximately $12.2 million, which was accrued in the first quarter of 2019 and paid in the second quarter of 2019 and is reflected in the net debt to normalized EBITDA for the quarter. In total, the Company has now settled claims of shareholders who held shares of common stock and swaps referencing common stock representing approximately 35.3% of VEREIT’s outstanding shares of common stock held at the end of the period covered by the various pending shareholder actions for approximately $245.4 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.

SEC Settlement With Former Manager and Principals
In connection with a settlement entered into between the SEC and the Company's former manager and certain of its principals, approximately 2.9 million Limited Partner OP units of VEREIT’s Operating Partnership, which were owned by principals of the former manager, were forfeited and canceled on July 26, 2019, along with $6.4 million in associated dividends that have not been paid on those units since October 2015. In accordance with U.S. GAAP, the Company recorded the surrender of the OP units and the associated dividends in the Company’s financials for the period ended June 30, 2019.

Real Estate Portfolio
As of June 30, 2019, the Company’s portfolio consisted of 3,950 properties with total portfolio occupancy of 99.0%, investment grade tenancy of 39.6% and a weighted-average remaining lease term of 8.6 years. During the quarter ended June 30, 2019, same-store rents (3,873 properties) increased 1.0% as compared to the same quarter in 2018.

Property Acquisitions
During the second quarter of 2019, the Company acquired 25 properties for approximately $118.7 million at an average cash cap rate of 7.3%. In addition, the Company invested $8.3 million in one build-to-suit project. As of June 30, 2019, build-to-suit programs included one property with an investment to date of $15.8 million and remaining estimated investment of $11.9 million.


2


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

Property Dispositions
During the quarter ended June 30, 2019, the Company disposed of 53 properties for an aggregate sales price of $658.3 million, which includes the 80% share of the industrial partnership. Of this amount, $493.2 million was used in the total weighted average cash cap rate calculation of 6.5%, including $53.5 million in net sales of Red Lobster restaurants. The gain on second quarter sales was approximately $222.5 million. Excluding the industrial partnership, portfolio dispositions totaled $332.3 million for the quarter.

2019 Guidance
The Company reaffirms its 2019 AFFO per diluted share to be in a range between $0.68 and $0.70 (see reconciliation to net income per share and updated assumptions at the end of this release).

Subsequent Events

Property Acquisitions
From July 1, 2019 through July 31, 2019, the Company acquired three properties for approximately $21.8 million. Acquisitions year-to-date through July 31, 2019, totaled $221.2 million.

Property Dispositions
From July 1, 2019 through July 31, 2019, the Company disposed of 12 properties for an aggregate sales price of $27.5 million. Dispositions year-to-date through July 31, 2019, totaled $748.0 million, including the industrial partnership. Excluding the partnership, portfolio dispositions year-to-date totaled $430.3 million. In addition, the Company sold certain legacy mortgage related investments for an aggregate sales price of $8.3 million.

Partial Redemption of Preferred Stock
On July 5, 2019, the Company redeemed 4.0 million shares of its 6.7% Series F Cumulative Redeemable Preferred Stock, representing approximately 9.33%, or $100.0 million, of its approximately 42.9 million shares outstanding. The shares were redeemed at a redemption price of $25.00 per share.

Capital Market Activity
Subsequent to June 30, 2019, the Company entered into forward starting interest rate swaps with a total notional amount of $400.0 million and an average effective treasury rate of approximately 2.1%. The swaps are structured to hedge the 10-year Treasury interest rate risk component associated with the potential issuance of 10-year public debt between May 1, 2020 and December 31, 2021.





3


Audio Webcast and Call Details

The live audio webcast, beginning at 1:30 p.m. ET on Wednesday, August 7, 2019, is available by accessing this link:
http://ir.vereit.com/. Dial-in information is as follows: (844) 746-0748 (domestic) or (412) 317-5274 (international). 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 total real estate investments of $15.0 billion including approximately 4,000 properties and 90.6 million square feet. VEREIT’s business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange. VEREIT uses, and intends to continue to use, its Investor Relations website, which can be found at www.VEREIT.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about VEREIT can be found through social media platforms such as Twitter and LinkedIn.


Media Contact
Parke Chapman
Rubenstein Associates
212.843.8489 | 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 the subsequent tables for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure and the calculations of these financial ratios.
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. At and during the three months ended June 30, 2019, the Excluded Property was one office property comprising 145,186 square feet, of which 6,926 was vacant, with Principal Outstanding of $19.5 million. At March 31, 2019, December 31, 2018, and June 30, 2018, there were no Excluded Properties. During the three months ended June 30, 2018, the Excluded Property was one vacant industrial property, comprising 307,725 square feet with Principal Outstanding of $16.2 million.
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 calculate FFO in accordance with Nareit’s definition described above.
In addition to FFO, we use adjusted funds from operations (“AFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. AFFO, as defined by the Company, excludes from FFO non-routine items such as acquisition-related expenses, litigation and non-routine costs, net, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rent, net of bad debt expense related to straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, reserves for loan loss, gains or losses on the extinguishment or forgiveness of debt, non-current portion of the tax benefit or expense, equity-based compensation and amortization of intangible assets, deferred financing costs, premiums and discounts on debt and investments, above-market lease assets and below-market lease liabilities. We omit the impact of the Excluded Properties and related non-recourse mortgage notes from FFO to calculate AFFO. Management believes that excluding these costs from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as AFFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and AFFO, in addition to net income (loss), as defined by U.S. GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.


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 non-routine costs, net, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable, legal settlements and insurance recoveries not in the ordinary course of business, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rental revenue, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, write-off of program development costs, and amortization of intangibles, above-market lease assets and below-market lease liabilities. Normalized EBITDA omits the Normalized EBITDA impact of Excluded Properties. Management believes that excluding these costs from EBITDAre provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. Therefore, EBITDA, EBITDAre, and Normalized EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses EBITDA, EBITDAre, and Normalized EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. Normalized EBITDA may not be comparable to similarly titled measures of other companies.
Net Debt, Principal Outstanding and Adjusted Principal Outstanding 
Principal Outstanding is a non-GAAP measure that represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. Adjusted Principal Outstanding includes the Company's pro rata share of the unconsolidated joint ventures' outstanding principal debt balance and omits the outstanding principal balance of mortgage notes secured by Excluded Properties. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall 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 is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of unconsolidated joint ventures' cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
Interest Expense, Excluding Non-Cash Amortization
Interest Expense, excluding non-cash amortization is a non-GAAP measure that represents interest expense incurred on the outstanding principal balance of our debt and the Company's pro rata share of the unconsolidated joint ventures' outstanding principal balance. This measure excludes (i) the amortization of deferred financing costs, premiums and discounts, which is included in interest expense in accordance with GAAP, and (ii) the impact of Excluded Properties and related non-recourse mortgage notes. We believe that the presentation of Interest Expense, excluding non-cash amortization, which shows the interest expense on our contractual debt obligations, provides useful information to investors to assess our overall solvency and financial flexibility. Interest Expense, excluding non-cash amortization should not be considered as an alternative to the Company's interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP.
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, equity investments in the Cole REITs, investment in direct financing leases, investment securities backed by real estate and mortgage notes receivable, and the Company's pro rata share of such amounts related to properties owned by unconsolidated joint ventures, net of gross intangible lease liabilities. We believe that the presentation of Gross Real Estate Investments, which shows our total investments in real estate and related assets, in connection with Net Debt, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Gross Real Estate Investments should not be considered as an alternative to the Company's real estate investments balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
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 the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT’s expectations and projections regarding future events and plans, VEREIT's future financial condition, results of operations and business including the performance of its portfolio and industrial partnership, its access to the capital markets, including lowering debt levels, its focus on and execution of its capital allocation strategy, and maintaining an experienced execution team. 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 based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors, 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; risks accompanying the management of its industrial partnership; 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

7


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.

8




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

 
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,763,348

 
$
2,843,212

Buildings, fixtures and improvements
 
10,352,928

 
10,749,228

Intangible lease assets
 
1,927,699

 
2,012,399

Total real estate investments, at cost
 
15,043,975

 
15,604,839

Less: accumulated depreciation and amortization
 
3,488,838

 
3,436,772

Total real estate investments, net
 
11,555,137

 
12,168,067

Operating lease right-of-use assets
 
221,798

 

Investment in unconsolidated entities
 
68,633

 
35,289

Cash and cash equivalents
 
211,510

 
30,758

Restricted cash
 
20,692

 
22,905

Rent and tenant receivables and other assets, net
 
343,788

 
366,092

Goodwill
 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
22,553

 
2,609

Total assets
 
$
13,781,884

 
$
13,963,493

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,745,331

 
$
1,922,657

Corporate bonds, net
 
2,621,130

 
3,368,609

Convertible debt, net
 
396,766

 
394,883

Credit facility, net
 
895,033

 
401,773

Below-market lease liabilities, net
 
152,654

 
173,479

Accounts payable and accrued expenses
 
127,799

 
145,611

Deferred rent and other liabilities
 
77,713

 
69,714

Distributions payable
 
187,359

 
186,623

Operating lease liabilities
 
225,972

 

Total liabilities
 
6,429,757

 
6,663,349

Series F preferred stock
 
429

 
428

Common stock
 
9,734

 
9,675

Additional paid-in capital
 
12,655,018

 
12,615,472

Accumulated other comprehensive loss
 
(28,026
)
 
(1,280
)
Accumulated deficit
 
(5,416,759
)
 
(5,467,236
)
Total stockholders’ equity
 
7,220,396

 
7,157,059

Non-controlling interests
 
131,731

 
143,085

Total equity
 
7,352,127

 
7,300,144

Total liabilities and equity
 
$
13,781,884

 
$
13,963,493


9



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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
Rental revenue
 
$
312,043

 
$
315,664

Operating expenses:
 
 
 
 
Acquisition-related
 
985

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
107,087

Property operating
 
32,503

 
31,436

General and administrative
 
16,416

 
16,287

Depreciation and amortization
 
118,022

 
164,235

Impairments
 
8,308

 
11,664

Restructuring
 
290

 

Total operating expenses
 
172,755

 
331,618

Other income (expense):
 
 
 
 
Interest expense
 
(69,803
)
 
(70,320
)
(Loss) gain on extinguishment and forgiveness of debt, net
 
(1,472
)
 
5,249

Other income, net
 
3,175

 
1,320

Equity in income of unconsolidated entities
 
505

 
327

Gain on disposition of real estate and real estate assets held for sale, net
 
221,755

 
5,821

Total other income (expenses), net
 
154,160

 
(57,603
)
Income (loss) before taxes
 
293,448

 
(73,557
)
Provision for income taxes from continuing operations
 
(1,164
)
 
(1,134
)
Income (loss) from continuing operations
 
292,284

 
(74,691
)
Income from discontinued operations, net of tax
 

 
224

Net income (loss)
 
292,284

 
(74,467
)
Net (income) loss attributable to non-controlling interests
 
(6,626
)
 
1,797

Net income (loss) attributable to the General Partner
 
$
285,658

 
$
(72,670
)
 
 
 
 
 
Basic and diluted net income (loss) per share from continuing operations attributable to common stockholders
 
$
0.27

 
$
(0.09
)
Basic and diluted net income per share from discontinued operations attributable to common stockholders
 

 
0.00

Basic and diluted net income (loss) per share attributable to common stockholders
 
$
0.27

 
$
(0.09
)
Distributions declared per common share
 
$
0.1375

 
$
0.1375




10



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

 
 
Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
June 30,
2018
Net income (loss)
 
$
292,284

 
$
70,971

 
$
27,842

 
$
(74,467
)
 Adjustments:
 
 
 
 
 
 
 
 
Interest expense
 
69,803

 
71,254

 
70,832

 
70,320

Depreciation and amortization of real estate assets
 
118,022

 
136,555

 
153,050

 
164,235

Provision for income taxes
 
1,164

 
1,211

 
1,614

 
1,134

Proportionate share of adjustments for unconsolidated entities
 
738

 
288

 
254

 
289

 EBITDA
 
$
482,011

 
$
280,279

 
$
253,592

 
$
161,511

Gain on disposition of real estate assets, net
 
(221,762
)
 
(10,831
)
 
(25,951
)
 
(5,821
)
Impairments of real estate
 
8,308

 
11,988

 
18,565

 
11,664

EBITDAre
 
$
268,557

 
$
281,436

 
$
246,206

 
$
167,354

Loss on disposition of discontinued operations
 

 

 
30

 
(224
)
Payments received on fully reserved loans
 

 

 
(4,792
)
 

Acquisition-related expenses
 
985

 
985

 
1,136

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
(21,492
)
 
23,541

 
107,087

(Gain) loss on investments
 
(5
)
 
470

 
(1,790
)
 

Loss (gain) on derivative instruments, net
 
24

 
34

 
92

 
(105
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
611

 
731

 
945

 
688

Loss (gain) on extinguishment and forgiveness of debt, net
 
1,472

 

 
(21
)
 
(5,249
)
Net direct financing lease adjustments
 
410

 
409

 
498

 
503

Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,043
)
 
(7,412
)
 
(8,341
)
 
(11,402
)
Restructuring expenses
 
290

 
9,076

 

 

Other adjustments, net
 
214

 
(113
)
 
(78
)
 
(142
)
 Proportionate share of adjustments for unconsolidated entities
 
(198
)
 
(188
)
 
60

 
(27
)
Adjustment for Excluded Properties
 
(203
)
 

 

 
(5
)
Normalized EBITDA
 
$
260,345

 
$
263,936

 
$
257,486

 
$
259,387



















11



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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
Net income (loss)
 
$
292,284

 
$
(74,467
)
Dividends on non-convertible preferred stock
 
(17,973
)
 
(17,973
)
Gain on disposition of real estate assets, net
 
(221,762
)
 
(5,821
)
Depreciation and amortization of real estate assets
 
117,616

 
163,551

Impairment of real estate
 
8,308

 
11,664

Proportionate share of adjustments for unconsolidated entities
 
565

 
289

FFO attributable to common stockholders and limited partners
 
$
179,038

 
$
77,243

FFO attributable to common stockholders and limited partners from continuing operations
 
179,038

 
77,019

FFO attributable to common stockholders and limited partners from discontinued operations
 

 
224

 
 
 
 
 
Weighted-average shares outstanding - basic
 
973,723,139

 
968,192,162

Limited Partner OP Units and effect of dilutive securities
 
26,054,596

 
23,907,976

Weighted-average shares outstanding - diluted
 
999,777,735

 
992,100,138

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
0.179

 
$
0.078

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
 
$
0.179

 
$
0.078

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

 
$
0.000



















12



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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
FFO attributable to common stockholders and limited partners
 
$
179,038

 
$
77,243

 
 
 
 
 
Acquisition-related expenses
 
985

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
107,087

Loss on disposition of discontinued operations
 

 
(224
)
Gain on investments
 
(5
)
 

Loss (gain) on derivative instruments, net
 
24

 
(105
)
Amortization of premiums and discounts on debt and investments, net
 
(1,392
)
 
(603
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
611

 
688

Net direct financing lease adjustments
 
410

 
503

Amortization and write-off of deferred financing costs
 
3,346

 
5,650

Loss (gain) on extinguishment and forgiveness of debt, net
 
1,472

 
(5,249
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,043
)
 
(11,402
)
Equity-based compensation
 
3,706

 
3,716

Restructuring expenses
 
290

 

Other adjustments, net
 
617

 
566

Proportionate share of adjustments for unconsolidated entities
 
(196
)
 
(27
)
Adjustment for Excluded Properties
 
5

 
42

AFFO attributable to common stockholders and limited partners
 
$
177,099

 
$
178,794

 
 
 
 
 
Weighted-average shares outstanding - basic
 
973,723,139

 
968,192,162

Limited Partner OP Units and effect of dilutive securities
 
26,054,596

 
23,907,976

Weighted-average shares outstanding - diluted
 
999,777,735

 
992,100,138

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.177

 
$
0.180














13



VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
 
 
Three Months Ended
 
 
June 30,
2019
Interest expense - as reported
 
$
(69,803
)
Less Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(3,348
)
Amortization of net premiums
 
1,397

Unconsolidated joint ventures’ pro rata share
 
(171
)
Interest Expense, Excluding Non-Cash Amortization - Excluded Properties
 
(208
)
Interest Expense, Excluding Non-Cash Amortization
 
$
(67,815
)

 
 
Three Months Ended
 
 
June 30,
2019
Interest Expense, Excluding Non-Cash Amortization
 
$
67,815

Secured debt principal amortization
 
2,256

Dividends attributable to preferred shares 
 
17,973

Total fixed charges
 
88,044

Normalized EBITDA
 
260,345

Fixed Charge Coverage Ratio
 
2.96
x

 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
Mortgage notes payable, net
 
$
1,745,331

 
$
1,918,826

 
$
1,922,657

Corporate bonds, net
 
2,621,130

 
2,619,956

 
3,368,609

Convertible debt, net
 
396,766

 
395,823

 
394,883

Credit facility, net
 
895,033

 
1,089,725

 
401,773

Total debt - as reported
 
5,658,260

 
6,024,330

 
6,087,922

Adjustments:
 
 
 
 
 

Deferred financing costs, net
 
42,085

 
44,602

 
42,763

Net premiums
 
(5,435
)
 
(6,726
)
 
(8,053
)
Principal Outstanding
 
5,694,910

 
6,062,206

 
6,122,632

Unconsolidated joint ventures’ pro rata share
 
53,850

 

 

Principal Outstanding - Excluded Properties
 
(19,525
)
 

 

Adjusted Principal Outstanding
 
$
5,675,385

 
$
6,062,206

 
$
6,122,632

 
 
 
 
 
 
 
Adjusted Principal Outstanding
 
$
5,729,235

 
$
6,062,206

 
$
6,122,632

Cash and cash equivalents
 
(211,510
)
 
(12,788
)
 
(30,758
)
Pro rata share of unconsolidated joint ventures’ cash and cash equivalents
 
(2,920
)
 

 

Net Debt
 
$
5,514,805

 
$
6,049,418

 
$
6,091,874


14



 
 
June 30,
2019
Total real estate investments, at cost - as reported
 
$
15,043,975

Adjustments:
 
 
Investment in unconsolidated entities
 

Investment in Cole REITs
 
7,552

Gross assets held for sale
 
28,312

Investment in direct financing leases, net
 
10,323

Mortgage notes receivable, net
 
1,687

Gross below market leases
 
(246,135
)
Unconsolidated joint ventures' pro rata share

 
121,295

Gross Real Estate Investments - Excluded Properties
 
(16,700
)
Gross Real Estate Investments
 
$
14,950,309


 
 
June 30,
2019
Net Debt
 
$
5,514,805

Normalized EBITDA annualized
 
1,041,380

Net Debt to Normalized EBITDA Annualized Ratio
 
5.30
x
 
 
 
Net Debt
 
$
5,514,805

Gross Real Estate Investments
 
14,950,309

Net Debt Leverage Ratio
 
36.9
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,361,522

Gross Real Estate Investments
 
14,950,309

Unencumbered asset ratio
 
76.0
%


15



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 acquisitions totaling $400 million to $600 million at an average cash cap rate of 6.5% to 7.5% and portfolio dispositions totaling $500 million to $650 million within the same cap rate range. The assumption regarding portfolio dispositions is in addition to the industrial partnership, which contributed $326 million to dispositions. 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 between 5.5x and 5.7x. 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) (2)
 
$
0.38

 
$
0.40

Gain on disposition of real estate assets, net (2)
 
(0.23
)
 
(0.23
)
Depreciation and amortization of real estate assets (2)
 
0.48

 
0.48

Impairment of real estate (2)
 
0.02

 
0.02

FFO attributable to common stockholders and limited partners per diluted share
 
0.65

 
0.67

Adjustments (3)
 
0.03

 
0.03

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.
(2) Includes actual amounts for the six months ended June 30, 2019.
(3) Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net, restructuring expenses, and (ii) certain non-cash items such as straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, 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.

16
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

399085818_coververeitsupp2019q2.jpg




399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

VEREIT Supplemental Information
 
June 30, 2019
 
Section
Page
399085818_walmarta01.jpg
 
 
Company Overview
Financial Summary
Financial and Operations Statistics and Ratios
Key Balance Sheet Metrics and Capital Structure
Balance Sheets
Statements of Operations
Funds From Operations (FFO)
Adjusted Funds From Operations (AFFO)
EBITDA, EBITDAre and Normalized EBITDA
Net Operating Income
399085818_aaasupplementala01.jpg
Same Store Contract Rental Revenue
Debt and Preferred Equity Summary
Credit Facility and Corporate Bond Covenants
Acquisitions and Dispositions
Diversification Statistics
Top 10 Concentrations
Tenants Comprising Over 1% of Annualized Rental Income
Tenant Industry Diversification
Property Geographic Diversification
Lease Expirations
399085818_cvskernersvillea07.jpg
Lease Summary
Property Type Diversification
Unconsolidated Joint Venture Investment Summary
Definitions
 
 
 
 
 
 
 
 
 
 
 
 
399085818_tjxphiladelphiapadistirb11.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 2



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
About the Data
 
This data and other information described herein are as of and for the three months ended June 30, 2019, unless otherwise indicated. Certain balances have been reclassified to conform with the current period's presentations, including the operating expense reimbursements line item which has been combined into rental revenue for all periods presented. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with the financial statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations sections contained in VEREIT, Inc.'s (the "Company," "VEREIT," "us," "our" and "we") Annual Report on Form 10-K for the year ended December 31, 2018 and Quarterly Reports on Form 10-Q for the periods ended June 30, 2019, March 31, 2019, September 30, 2018, and June 30, 2018.

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

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


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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
Forward-Looking Statements
 
Information set forth herein contains “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT’s expectations and projections regarding future events and plans, VEREIT's future financial condition, results of operations and business. 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 based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors, 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; risks accompanying the management of its Industrial Partnership; 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 | 4



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
Company Overview
(unaudited)
 
VEREIT is a real estate company incorporated in Maryland on December 2, 2010, which has elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes. 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 June 30, 2019, approximately 39.6% of the Company's Annualized Rental Income was earned from Investment-Grade Tenants, Economic Occupancy Rate was 99.0% and the Weighted Average Remaining Lease Term was 8.6 years.

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





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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

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

Corporate Offices and Contact Information
2325 E. Camelback Road, 9th Floor
 
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 PF
 
Stock Exchange Listing: New York Stock Exchange
 
Transfer Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
800-736-3001

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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
Quarterly Financial Summary
(unaudited, dollars in thousands, except share and per share amounts)
 
The following table summarizes the Company's quarterly financial results and portfolio metrics. Data presented represents continuing operations.
 
Three Months Ended
Financial Results
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Rental revenue
$
312,043

 
$
316,843

 
$
313,263

 
$
313,866

 
$
315,664

Income (loss) from continuing operations (1)
$
292,284

 
$
70,971

 
$
27,872

 
$
(73,942
)
 
$
(74,691
)
Basic and diluted income (loss) from continuing operations per share attributable to common stockholders and limited partners (1)
$
0.27

 
$
0.05

 
$
0.01

 
$
(0.09
)
 
$
(0.09
)
Normalized EBITDA
$
260,345

 
$
263,936

 
$
257,486

 
$
261,084

 
$
259,387

FFO attributable to common stockholders and limited partners from continuing operations (1)
$
179,038

 
$
190,304

 
$
154,606

 
$
38,055

 
$
77,019

FFO attributable to common stockholders and limited partners from continuing operations per diluted share (1)
$
0.179

 
$
0.192

 
$
0.156

 
$
0.038

 
$
0.078

AFFO attributable to common stockholders and limited partners
$
177,099

 
$
178,403

 
$
172,511

 
$
178,529

 
$
178,794

AFFO attributable to common stockholders and limited partners per diluted share
$
0.177

 
$
0.180

 
$
0.174

 
$
0.180

 
$
0.180

Dividends declared per common share
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

Weighted-average shares outstanding - diluted
999,777,735

 
993,298,314

 
992,337,959

 
991,924,017

 
992,100,138

 
 
 
 
 
 
 
 
 
 
Portfolio Metrics
 
 
 
 
 
 
 
 
 
Operating Properties
3,950

 
3,980

 
3,994

 
4,021

 
4,033

Rentable Square Feet (in thousands)
90,631

 
94,742

 
94,953

 
93,856

 
94,592

Economic Occupancy Rate
99.0
%
 
98.9
%
 
98.8
%
 
99.1
%
 
98.8
%
Weighted Average Remaining Lease Term (years)
8.6

 
8.7

 
8.9

 
8.9

 
9.1

Investment-Grade Tenants (2)
39.6
%
 
41.3
%
 
41.9
%
 
42.7
%
 
42.7
%
___________________________________
(1)
During the three months ended March 31, 2019, the Company signed a settlement and release agreement with certain insurance carriers and received $48.4 million of insurance recoveries, offset by $12.2 million of accrued litigation settlements, which were paid during the three months ended June 30, 2019. During the three months ended December 31, 2018, the Company accrued $15.7 million of litigation settlement costs, 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 June 30, 2019.

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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
Financial and Operations Statistics and Ratios
(unaudited, dollars in thousands)
 
 
 
Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Interest Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
67,815

 
$
69,036

 
$
68,314

 
$
66,445

 
$
65,202

Normalized EBITDA (2)
 
260,345

 
263,936

 
257,486

 
261,084

 
259,387

Interest Coverage Ratio
 
3.84x

 
3.82x

 
3.77x

 
3.93x


3.98x

 
 
 
 
 
 
 
 
 
 
 
Fixed Charge Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
67,815

 
$
69,036

 
$
68,314

 
$
66,445

 
$
65,202

Secured debt principal amortization
 
2,256

 
2,430

 
2,424

 
3,007

 
2,457

Dividends attributable to preferred shares 
 
17,973

 
17,973

 
17,973

 
17,973

 
17,973

Total fixed charges
 
88,044

 
89,439

 
88,711

 
87,425

 
85,632

Normalized EBITDA (2)
 
260,345

 
263,936

 
257,486

 
261,084


259,387

Fixed Charge Coverage Ratio
 
2.96
x
 
2.95x

 
2.90x

 
2.99x

 
3.03x

 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net Debt Ratios
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

 
$
5,949,843

 
$
6,049,159

Normalized EBITDA annualized
 
1,041,380

 
1,055,744

 
1,029,944

 
1,044,336

 
1,037,548

Net Debt to Normalized EBITDA annualized ratio
 
5.30
x
 
5.73
x
 
5.91
x
 
5.70
x
 
5.83
x
 
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

 
$
5,949,843

 
$
6,049,159

Gross Real Estate Investments (3)
 
14,950,309

 
15,411,364

 
15,411,026

 
15,385,925

 
15,477,098

Net Debt Leverage Ratio
 
36.9
%
 
39.3
%
 
39.5
%
 
38.7
%
 
39.1
%
 
 
 
 
 
 
 
 
 
 
 
Unencumbered Assets/Real Estate Assets
 
 
 
 
 
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,361,522

 
$
11,577,487

 
$
11,574,315

 
$
11,507,837

 
$
11,376,971

Gross Real Estate Investments (3)
 
14,950,309

 
15,411,364

 
15,411,026

 
15,385,925

 
15,477,098

Unencumbered Asset Ratio
 
76.0
%
 
75.1
%
 
75.1
%
 
74.8
%
 
73.5
%
___________________________________
(1)
Refer to the Statements of Operations section for interest expense calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.
(2)
Refer to the Statements of Operations section for net income calculated in accordance with GAAP and to the EBITDA, EBITDAre and Normalized EBITDA section for the required reconciliation to the most directly comparable GAAP financial measure.
(3)
Refer to the Balance Sheets section for total debt and real estate investments, at cost calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.




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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION
 
Key Balance Sheet Metrics and Capital Structure
(unaudited, dollars and shares in thousands, except per share amounts)
 



399085818_chart-4b1ec43773d4508eb20.jpg
 
 
Common equity
57.0%
 
 
 

 
 
Corporate bonds
16.8%
 
 
 

 
 
Mortgage notes payable
10.9%
 
 
 

 
 
Preferred equity
6.8%
 
 
 

 
 
Credit facility term loan
5.7%
 
 
 

 
 
Convertible notes
2.5%
 
 
 

 
 
Unconsolidated joint ventures' pro rata share
0.3%
 
 

                            

Fixed vs. Variable Rate Debt
Fixed
84.1
%
Swapped to Fixed
15.7
%
Variable
0.2
%

 
VEREIT Capitalization Table
 
 
 
 
Wtd. Avg. Maturity
(Years)
 
Rate (1)

 
June 30, 2019
Diluted shares outstanding
 
 
 
 
999,621

Stock price
 
 
 
 
$
9.01

Implied Equity Market Capitalization
 
$
9,006,585

 
 
 
 
 
 
Series F Perpetual Preferred (2)
 
6.70
%
 
$
1,073,025

 
 
 
 
 
 
Mortgage notes payable (3)
3.2
 
5.05
%
 
1,722,885

Unconsolidated joint ventures' pro rata share
4.9
 
3.57
%
 
53,850

Total secured debt
3.2
 
5.01
%
 
$
1,776,735

 
 
 
 
 
 
Credit facility term loan
3.9
 
3.84
%
 
900,000

2020 convertible notes
1.5
 
3.75
%
 
402,500

2021 corporate bonds
1.9
 
4.13
%
 
400,000

2024 corporate bonds
4.6
 
4.60
%
 
500,000

2025 corporate bonds
6.3
 
4.63
%
 
550,000

2026 corporate bonds
6.9
 
4.88
%
 
600,000

2027 corporate bonds
8.1
 
3.95
%
 
600,000

Total unsecured debt
5.0
 
4.24
%
 
$
3,952,500

 
 
 
 
 
 
Total Adjusted Principal Outstanding
4.4
 
4.48
%
 
$
5,729,235

 
 
 
 
 
 
Total Capitalization
 
$
15,808,845

Less: Cash and cash equivalents
 
 
 
 
211,510

Less: Pro rata share of unconsolidated joint ventures' cash and cash equivalents
 
2,920

Enterprise Value
 
$
15,594,415

 
 
 
 
 
 
Net Debt/Enterprise Value
 
 
 
 
35.4
%
Net Debt/Normalized EBITDA Annualized
 
 
 
5.30
x
Net Debt + Preferred (2)/Normalized EBITDA Annualized
 
6.33
x
Fixed Charge Coverage Ratio
 
 
 
 
2.96
x
Liquidity (4)
 
 
 
 
$
2,207,610

___________________________________
(1)Weighted average interest rate for variable rate debt represents the interest rate in effect as of June 30, 2019.
(2)Balance represents 42.9 million shares of Series F Preferred Stock (and 42.9 million corresponding general partner Series F Preferred Units) and 49,766 limited partner Series F Preferred Units outstanding at June 30, 2019, multiplied by the liquidation preference of $25 per share.
(3)Omits one mortgage note payable secured by an Excluded Property, with Principal Outstanding of $19.5 million and a default interest rate of 15.0%. On July 2, 2019, a foreclosure sale of the Excluded Property occurred to settle the related mortgage note obligation.
(4)Liquidity represents cash and cash equivalents of $211.5 million, $2.0 billion available capacity on our revolving credit facility. Available capacity on our revolving credit facility is reduced by letters of credit outstanding of $3.9 million at June 30, 2019.

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



399085818_vereitlogoa46.jpg
 
 
Q2 2019 SUPPLEMENTAL INFORMATION

 
Balance Sheets
(unaudited, in thousands)
 
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Assets
 
 
 
 
 
 
 
 
 
 
Real estate investments, at cost:
 
 
 
 
 
 
 
 
 
 
Land
 
$
2,763,348

 
$
2,824,666

 
$
2,843,212

 
$
2,847,393

 
$
2,859,265

Buildings, fixtures and improvements
 
10,352,928

 
10,741,995

 
10,749,228

 
10,652,578

 
10,714,456

Intangible lease assets
 
1,927,699

 
2,003,825

 
2,012,399

 
2,019,718

 
2,024,014

Total real estate investments, at cost
 
15,043,975


15,570,486

 
15,604,839

 
15,519,689

 
15,597,735

Less: accumulated depreciation and amortization
 
3,488,838

 
3,544,252

 
3,436,772

 
3,323,990

 
3,206,336

Total real estate investments, net
 
11,555,137


12,026,234

 
12,168,067

 
12,195,699

 
12,391,399

Operating lease right-of-use assets
 
221,798

 
224,859

 

 

 

Investment in unconsolidated entities
 
68,633

 
35,790

 
35,289

 
34,293

 
33,972

Cash and cash equivalents
 
211,510

 
12,788

 
30,758

 
25,264

 
18,434

Restricted cash
 
20,692

 
18,517

 
22,905

 
27,449

 
27,078

Rent and tenant receivables and other assets, net
 
343,788

 
361,641

 
366,092

 
412,053

 
423,067

Goodwill
 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
22,553

 
36,022

 
2,609

 
24,349

 
29,884

Total assets
 
$
13,781,884


$
14,053,624


$
13,963,493

 
$
14,056,880

 
$
14,261,607

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable, net
 
$
1,745,331

 
$
1,918,826

 
$
1,922,657

 
$
1,936,586

 
$
2,031,171

Corporate bonds, net
 
2,621,130

 
2,619,956

 
3,368,609

 
2,825,541

 
2,824,176

Convertible debt, net
 
396,766

 
395,823

 
394,883

 
393,961

 
989,901

Credit facility, net
 
895,033

 
1,089,725

 
401,773

 
793,000

 
195,000

Below-market lease liabilities, net
 
152,654

 
166,708

 
173,479

 
179,192

 
187,352

Accounts payable and accrued expenses
 
127,799

 
141,126

 
145,611

 
269,150

 
141,746

Deferred rent and other liabilities
 
77,713

 
70,220

 
69,714

 
51,663

 
66,123

Distributions payable
 
187,359

 
190,246

 
186,623

 
183,913

 
180,734

Operating lease liabilities
 
225,972

 
228,120

 

 

 

Total liabilities
 
6,429,757


6,820,750

 
6,663,349

 
6,633,006

 
6,616,203

 
 
 
 
 
 
 
 
 
 
 
Series F preferred stock
 
429

 
429

 
428

 
428

 
428

Common stock
 
9,734

 
9,716

 
9,675

 
9,674

 
9,674

Additional paid-in capital
 
12,655,018

 
12,645,148

 
12,615,472

 
12,612,407

 
12,609,145

Accumulated other comprehensive loss
 
(28,026
)
 
(12,202
)
 
(1,280
)
 
(1,031
)
 
(4,290
)