Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document
falsefalse8002019-11-068-K2325 E. Camelback Road, 9th FloorPhoenix,85016AZ00015073850001528059606-3610 0001507385 ver:VEREITOperatingPartnershipL.P.Member 2019-11-06 2019-11-06 0001507385 2019-11-06 2019-11-06


 

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): November 6, 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 November 6, 2019, VEREIT, Inc. (the “Company”) furnished the following documents: (i) a press release relating to its third quarter 2019 financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the quarter ended September 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
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).







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

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

Date: November 6, 2019



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
400853839_rgbhorzvereitlogo093018a04.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Third Quarter 2019 Operating Results
Announced Settlements of Pending Litigations
Completed $887.0 Million Common Stock Offering
Received Corporate Rating Upgrade to ‘BBB’ from Fitch Ratings


Phoenix, AZ, November 6, 2019 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months ending September 30, 2019.

Third Quarter 2019 Financial and Operating Highlights
Net loss of $(741.5) million and net loss per diluted share of $(0.76)
Achieved $0.18 AFFO per diluted share
Acquisitions totaled $59.8 million in the third quarter of 2019 and $283.6 million year-to-date
Dispositions totaled $109.5 million in the third quarter of 2019 and $847.3 million year-to-date including the industrial partnership
Total debt decreased from $5.66 billion to $5.63 billion; Net Debt increased from $5.51 billion to $5.66 billion, or 37.9% Net Debt to Gross Real Estate Investments
Announced settlements of pending litigations at a cost to the Company of approximately $765.5 million
Completed $887.0 million common stock offering
Net Debt to Normalized EBITDA ended at 5.5x which includes the equity offering and settlement funding

Credit Rating Update
On October 16, 2019, Fitch Ratings upgraded the Company’s corporate rating from ‘BBB-‘ to ‘BBB’ with the Rating Outlook remaining at Stable.

Third Quarter 2019 Financial Results

Rental Revenue
Rental Revenue for the quarter ended September 30, 2019 decreased $10.9 million to $303.0 million as compared to revenue of $313.9 million for the same quarter in 2018.

Net Loss and Net Loss Attributable to Common Stockholders per Diluted Share
Net loss for the quarter ended September 30, 2019 increased $667.6 million to $(741.5) million as compared to net loss of $(73.9) million for the same quarter in 2018, and net loss per diluted share increased $0.67 to $(0.76) for the quarter ended September 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 September 30, 2019 decreased $2.5 million to $258.6 million as compared to Normalized EBITDA of $261.1 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 September 30, 2019 decreased $695.2 million to $(657.1) million, as compared to $38.1 million for the same quarter in 2018, and FFO per diluted share decreased $0.70 to $(0.66) for the quarter ended September 30, 2019, as compared to FFO per diluted share of $0.04 for the same quarter in 2018.


1


Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended September 30, 2019 decreased $0.9 million to $177.6 million, as compared to $178.5 million for the same quarter in 2018, and AFFO per diluted share remained constant at $0.18 for the quarter ended September 30, 2019, as compared to the same quarter in 2018.

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “Since 2015, VEREIT has enhanced the portfolio by selling over $4.6 billion of assets and acquiring $1.7 billion, built a well-laddered balance sheet, reduced debt from $10.5 billion to $5.7 billion, and maintained an experienced leadership team. As we move past the litigation overhang, we are ready to be on the offensive as we head into 2020.”

Common Stock Dividend Information
On November 5, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.1375 per share for the fourth quarter of 2019, representing an annual distribution rate of $0.55 per share. The dividend will be paid on January 15, 2020 to common stockholders of record as of December 31, 2019.

Balance Sheet and Liquidity
As of the end of the quarter, the Company’s $2.0 billion revolving line of credit was undrawn. Available cash and cash equivalents of approximately $1.0 billion was subsequently used to fund $966.3 million toward the class action settlement as discussed in Litigation Settlements below. In addition, secured debt was reduced by $26.2 million in the third quarter, bringing the total amount reduced for the year to $200.9 million.

Partial Redemption of Preferred Stock
As previously announced, 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
On September 26, 2019, the Company closed a public offering of common stock. The Company sold a total of 94.3 million shares of common stock in the offering, which included the full exercise of the underwriters' option to purchase additional shares. The net proceeds to the Company from the offering were approximately $887.0 million. 

Consolidated Financial Statistics
Financial Statistics as of the quarter ended September 30, 2019 are as follows: Net Debt to Normalized EBITDA of 5.5x, Fixed Charge Coverage Ratio of 3.0x, Unencumbered Asset Ratio of 76.3%, Net Debt to Gross Real Estate Investments of 37.9%, Weighted Average Debt Term of 4.2 years and 99.8% Fixed Rate Debt.

Litigation Settlements
On September 9, 2019, the Company announced it entered into agreements to settle certain outstanding litigation, including the pending class action and the remaining opt out actions at a cost to the Company of approximately $765.5 million, comprised of a contribution of $738.5 million toward the class action settlement and $27.0 million toward the opt out action settlements. In conjunction with the class action settlement, the Company also entered into an agreement providing for the settlement of the derivative action lawsuit currently pending in the same court.

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

On October 4, 2019, the court issued an order granting preliminary approval of both the class action settlement and the derivative settlement. As such, on October 15, 2019, the Company funded $966.3 million for its contribution and a portion of the Former Manager and former CFO’s contributions, which is reflected in the Company’s Net Debt as of September 30, 2019.

2




Real Estate Portfolio
As of September 30, 2019, the Company’s portfolio consisted of 3,926 properties with total portfolio occupancy of 99.0%, investment grade tenancy of 39.5% and a weighted-average remaining lease term of 8.4 years. During the quarter ended September 30, 2019, same-store rents (3,849 properties) increased 1.0% as compared to the same quarter in 2018.

Property Acquisitions
During the third quarter of 2019, the Company acquired seven properties for approximately $59.8 million at an average cash cap rate of 7.0%. In addition, the Company invested $11.0 million in one build-to-suit project. As of September 30, 2019, build-to-suit programs included one property with an investment to date of $27.3 million which was subsequently put into service.

Property Dispositions
During the quarter ended September 30, 2019, the Company disposed of 32 properties for an aggregate sales price of $109.5 million. Of this amount, $105.9 million was used in the total weighted average cash cap rate calculation of 7.3%, including $43.9 million in net sales of Red Lobster restaurants. The gain on third quarter sales was approximately $18.5 million. In addition, the Company sold certain legacy mortgage related investments during the quarter for an aggregate sales price of $1.7 million.

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 loss per share and updated assumptions at the end of this release).


Subsequent Events

Property Acquisitions
Acquisitions year-to-date through October 23, 2019, totaled $283.6 million including the build-to-suit program.

Property Dispositions
From October 1, 2019 through October 23, 2019, the Company disposed of two properties for an aggregate sales price of $7.3 million. Dispositions year-to-date through October 23, 2019, totaled $837.3 million, including the industrial partnership. Excluding the partnership, portfolio dispositions year-to-date totaled $511.3 million. In addition, the Company sold certain legacy mortgage related investments for an aggregate sales price of $10.0 million.




3


Audio Webcast and Call Details
The live audio webcast will be available, beginning at 12:30 p.m. ET on Wednesday, November 6, 2019, on the Company's Investor Relations website at: http://ir.vereit.com/. The dial-in information is as follows: (844) 746-0748 (domestic) or (412) 317-5274 (international).  Participants should log in 10-15 minutes early.

Approximately one hour following the call, a replay of the webcast will be available at the link above and archived for up to 12 months. A telephone replay of the conference call can also be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international), passcode 10135550. The telephone replay will be available until November 13, 2019.

About the Company
VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The Company has total real estate investments of $14.9 billion including approximately 3,900 properties and 90.7 million square feet. VEREIT’s business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange. VEREIT uses, and intends to continue to use, its Investor Relations website, which can be found at www.VEREIT.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about VEREIT can be found through social media platforms such as Twitter and LinkedIn.

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

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

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.
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.
Excluded Properties
Excluded Properties are properties for which (i) the related mortgage loan is in default, and (ii) management decides to transfer the properties to the lender in connection with settling the mortgage note obligation. Certain non-GAAP measures and operating metrics omit the impact of such properties for the month beginning with the date that such criteria are met and ending with the disposition date, in order to better reflect the ongoing operations of the Company.
At and during the three months ended September 30, 2019, there were no Excluded Properties. At and during the three months ended June 30, 2019, there was one Excluded Property which was an office property comprising 145,186 square feet, of which 6,926 square feet was vacant, with Principal Outstanding of $19.5 million. During the three months ended September 30, 2018, there were no Excluded Properties.
Fixed Charge Coverage Ratio
Fixed Charge Coverage Ratio is the sum of (i) Interest Expense, excluding non-cash amortization, (ii) secured debt principal amortization on Adjusted Principal Outstanding and (iii) dividends attributable to preferred shares divided by Normalized EBITDA. Management believes that Fixed Charge Coverage Ratio is a useful supplemental measure of our ability to satisfy fixed financing obligations.
Fixed Rate Debt
Fixed Rate Debt includes variable rate debt effectively fixed through the use of interest rate swap agreements.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
Due to certain unique operating characteristics of real estate companies, as discussed below, the 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.

5


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




6


Net Debt, Principal Outstanding and Adjusted Principal Outstanding 
Principal Outstanding is a non-GAAP measure that represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. Adjusted Principal Outstanding includes the Company's pro rata share of the unconsolidated joint ventures' outstanding principal debt balance and omits the outstanding principal balance of mortgage notes secured by Excluded Properties. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Principal Outstanding and Adjusted Principal Outstanding should not be considered as alternatives to the Company's consolidated debt balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of unconsolidated joint ventures' cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage. The Company determined that Net Debt as of September 30, 2019 should include the amounts payable in cash pursuant to the Class Action Settlement. Management believes that including the impact of the payables in Net Debt provides useful information to investors to assess our liquidity, financial flexibility, capital structure and leverage, as the Company maintained a high cash balance at September 30, 2019 with the intent to use the cash to fund the Class Action Settlement.
Net Debt to Normalized EBITDA Annualized Ratio
Net Debt to Normalized EBITDA Annualized equals Net Debt divided by the respective quarter Normalized EBITDA multiplied by four. We believe that the presentation of Net Debt to Normalized EBITDA Annualized provides useful information to investors because our management reviews Net Debt to Normalized EBITDA Annualized as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
Unencumbered Asset Ratio
Unencumbered Asset Ratio equals unencumbered Gross Real Estate Investments divided by Gross Real Estate Investments. Management believes that Unencumbered Asset Ratio is a useful supplemental measure of our overall liquidity and leverage.
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 future growth, its access to the capital markets, including lowering debt levels, 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 and its ability to be a net acquirer in 2020; 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; 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 the pending SEC investigation and remaining derivative litigations, including the expense of such investigation and litigation and any additional potential payments upon resolution; risks associated with obtaining final court approval of the class action and derivative settlements; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT’s

7


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 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.

8



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

 
 
September 30,
2019
 
June 30,
2019
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,728,560

 
$
2,763,348

Buildings, fixtures and improvements
 
10,287,047

 
10,352,928

Intangible lease assets
 
1,909,932

 
1,927,699

Total real estate investments, at cost
 
14,925,539

 
15,043,975

Less: accumulated depreciation and amortization
 
3,559,403

 
3,488,838

Total real estate investments, net
 
11,366,136

 
11,555,137

Operating lease right-of-use assets
 
218,393

 
221,798

Investment in unconsolidated entities
 
69,025

 
68,633

Cash and cash equivalents
 
1,029,315

 
211,510

Restricted cash
 
20,742

 
20,692

Rent and tenant receivables and other assets, net
 
347,455

 
343,788

Goodwill
 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
66,684

 
22,553

Total assets
 
$
14,455,523

 
$
13,781,884

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,717,817

 
$
1,745,331

Corporate bonds, net
 
2,622,320

 
2,621,130

Convertible debt, net
 
397,726

 
396,766

Credit facility, net
 
895,351

 
895,033

Below-market lease liabilities, net
 
147,997

 
152,654

Accounts payable and accrued expenses
 
1,125,703

 
127,799

Deferred rent and other liabilities
 
101,828

 
77,713

Distributions payable
 
201,451

 
187,359

Operating lease liabilities
 
223,288

 
225,972

Total liabilities
 
7,433,481

 
6,429,757

Series F preferred stock
 
389

 
429

Common stock
 
10,677

 
9,734

Additional paid-in capital
 
13,360,675

 
12,655,018

Accumulated other comprehensive loss
 
(47,886
)
 
(28,026
)
Accumulated deficit
 
(6,306,590
)
 
(5,416,759
)
Total stockholders’ equity
 
7,017,265

 
7,220,396

Non-controlling interests
 
4,777

 
131,731

Total equity
 
7,022,042

 
7,352,127

Total liabilities and equity
 
$
14,455,523

 
$
13,781,884


9



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

 
 
Three Months Ended September 30,
 
 
2019
 
2018
Rental revenue
 
$
302,985

 
$
313,866

Operating expenses:
 
 
 
 
Acquisition-related
 
1,199

 
810

Litigation and non-routine costs, net
 
832,024

 
138,595

Property operating
 
30,822

 
31,893

General and administrative
 
14,483

 
15,186

Depreciation and amortization
 
115,111

 
157,181

Impairments
 
3,944

 
18,382

Restructuring
 
783

 

Total operating expenses
 
998,366

 
362,047

Other income (expense):
 
 
 
 
Interest expense
 
(67,889
)
 
(69,310
)
Gain on extinguishment and forgiveness of debt, net
 
975

 
90

Other income (expense), net
 
2,737

 
(947
)
Equity in income of unconsolidated entities
 
677

 
252

Gain on disposition of real estate and real estate assets held for sale, net
 
18,520

 
45,295

Total other expenses, net
 
(44,980
)
 
(24,620
)
Loss before taxes
 
(740,361
)
 
(72,801
)
Provision for income taxes from continuing operations
 
(1,168
)
 
(1,141
)
Net loss
 
(741,529
)
 
(73,942
)
Net loss attributable to non-controlling interests
 
15,089

 
1,825

Net loss attributable to the General Partner
 
$
(726,440
)
 
$
(72,117
)
 
 
 
 
 
Basic and diluted net loss per share attributable to common stockholders
 
$
(0.76
)
 
$
(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
 
 
September 30,
2019
 
September 30,
2018
Net loss
 
$
(741,529
)
 
$
(73,942
)
 Adjustments:
 
 
 
 
Interest expense
 
67,889

 
69,310

Depreciation and amortization of real estate assets
 
115,111

 
157,181

Provision for income taxes
 
1,168

 
1,141

Proportionate share of adjustments for unconsolidated entities
 
1,337

 
286

 EBITDA
 
$
(556,024
)
 
$
153,976

Gain on disposition of real estate assets, net
 
(18,520
)
 
(45,226
)
Impairments of real estate
 
3,944

 
18,382

EBITDAre
 
$
(570,600
)
 
$
127,132

Acquisition-related expenses
 
1,199

 
810

Litigation and non-routine costs, net
 
832,024

 
138,595

Loss on investments
 
28

 
3,336

Gain on derivative instruments, net
 

 
(69
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
692

 
1,058

Gain on extinguishment and forgiveness of debt, net
 
(975
)
 
(90
)
Net direct financing lease adjustments
 
411

 
483

Straight-line rent, net of bad debt expense related to straight-line rent
 
(5,470
)
 
(8,720
)
Restructuring expenses
 
783

 

Other adjustments, net
 
724

 
(1,442
)
 Proportionate share of adjustments for unconsolidated entities
 
(134
)
 
(9
)
Adjustment for Excluded Properties
 
(57
)
 

Normalized EBITDA
 
$
258,625

 
$
261,084



















11



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

 
 
Three Months Ended September 30,
 
 
2019
 
2018
Net loss
 
$
(741,529
)
 
$
(73,942
)
Dividends on non-convertible preferred stock
 
(16,578
)
 
(17,973
)
Gain on disposition of real estate assets, net
 
(18,520
)
 
(45,226
)
Depreciation and amortization of real estate assets
 
114,695

 
156,527

Impairment of real estate
 
3,944

 
18,382

Proportionate share of adjustments for unconsolidated entities
 
841

 
287

FFO attributable to common stockholders and limited partners
 
$
(657,147
)
 
$
38,055

 
 
 
 
 
Weighted-average shares outstanding - basic
 
978,982,729

 
967,798,401

Limited Partner OP Units and effect of dilutive securities
 
23,916,923

 
24,125,616

Weighted-average shares outstanding - diluted
 
1,002,899,652

 
991,924,017

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
(0.655
)
 
$
0.038



















12



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

 
 
Three Months Ended September 30,
 
 
2019
 
2018
FFO attributable to common stockholders and limited partners
 
$
(657,147
)
 
$
38,055

 
 
 
 
 
Acquisition-related expenses
 
1,199

 
810

Litigation and non-routine costs, net
 
832,024

 
138,595

Loss on investments
 
28

 
3,336

Gain on derivative instruments, net
 

 
(69
)
Amortization of premiums and discounts on debt and investments, net
 
(1,177
)
 
(1,123
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
692

 
1,058

Net direct financing lease adjustments
 
411

 
483

Amortization and write-off of deferred financing costs
 
3,319

 
3,926

Gain on extinguishment and forgiveness of debt, net
 
(975
)
 
(90
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(5,470
)
 
(8,720
)
Equity-based compensation
 
2,924

 
3,003

Restructuring expenses
 
783

 

Other adjustments, net
 
1,138

 
(726
)
Proportionate share of adjustments for unconsolidated entities
 
(128
)
 
(9
)
Adjustment for Excluded Properties
 
(41
)
 

AFFO attributable to common stockholders and limited partners
 
$
177,580

 
$
178,529

 
 
 
 
 
Weighted-average shares outstanding - basic
 
978,982,729

 
967,798,401

Limited Partner OP Units and effect of dilutive securities
 
23,916,923

 
24,125,616

Weighted-average shares outstanding - diluted
 
1,002,899,652

 
991,924,017

 
 
 
 
 
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
 
 
September 30,
2019
Interest expense - as reported
 
$
(67,889
)
Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(3,254
)
Amortization of net premiums
 
1,114

Unconsolidated joint ventures’ pro rata share
 
(490
)
Interest Expense, Excluding Non-Cash Amortization - Excluded Properties
 
(16
)
Interest Expense, Excluding Non-Cash Amortization
 
$
(66,223
)

 
 
Three Months Ended
 
 
September 30,
2019
Interest Expense, Excluding Non-Cash Amortization
 
$
66,223

Secured debt principal amortization
 
2,326

Dividends attributable to preferred shares 
 
16,578

Total fixed charges
 
85,127

Normalized EBITDA
 
258,625

Fixed Charge Coverage Ratio
 
3.04
x

 
 
September 30,
2019
 
June 30,
2019
Mortgage notes payable, net
 
$
1,717,817

 
$
1,745,331

Corporate bonds, net
 
2,622,320

 
2,621,130

Convertible debt, net
 
397,726

 
396,766

Credit facility, net
 
895,351

 
895,033

Total debt - as reported
 
5,633,214

 
5,658,260

Deferred financing costs, net
 
39,807

 
42,085

Net premiums
 
(4,322
)
 
(5,435
)
Principal Outstanding
 
5,668,699

 
5,694,910

Unconsolidated joint ventures’ pro rata share
 
53,850

 
53,850

Principal Outstanding - Excluded Properties
 

 
(19,525
)
Adjusted Principal Outstanding
 
$
5,722,549

 
$
5,729,235

Cash and cash equivalents
 
(1,029,315
)
 
(211,510
)
Pro rata share of unconsolidated joint ventures’ cash and cash equivalents
 
(1,046
)
 
(2,920
)
Amounts payable in cash pursuant to the Class Action Settlement
 
966,315

 

Net Debt
 
$
5,658,503

 
$
5,514,805


14



 
 
September 30,
2019
Total real estate investments, at cost - as reported
 
$
14,925,539

Adjustments:
 
 
Investment in Cole REITs
 
7,552

Gross assets held for sale
 
91,444

Investment in direct financing leases, net
 
9,914

Gross below market leases
 
(244,908
)
Unconsolidated joint ventures' pro rata share
 
121,567

Gross Real Estate Investments
 
$
14,911,108


 
 
September 30,
2019
Net Debt
 
$
5,658,503

Normalized EBITDA annualized
 
1,034,500

Net Debt to Normalized EBITDA Annualized Ratio
 
5.47
x
 
 
 
Net Debt
 
$
5,658,503

Gross Real Estate Investments
 
14,911,108

Net Debt Leverage Ratio
 
37.9
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,374,138

Gross Real Estate Investments
 
14,911,108

Unencumbered asset ratio
 
76.3
%


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 5.6x and 5.8x. 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 loss per share attributable to common stockholders and limited partners (1) (2)
 
$
(0.37
)
 
$
(0.35
)
Gain on disposition of real estate assets, net (2)
 
(0.25
)
 
(0.25
)
Depreciation and amortization of real estate assets (2)
 
0.47

 
0.47

Impairment of real estate (2)
 
0.02

 
0.02

FFO attributable to common stockholders and limited partners per diluted share
 
(0.13
)
 
(0.11
)
Adjustments (3)
 
0.81

 
0.81

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 nine months ended September 30, 2019.
(3) Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net, restructuring expenses, gains or losses on investments, net revenue or expense earned or incurred that is related to the services agreement, and (ii) certain non-cash items such as straight-line rent, net direct financing lease adjustments, gains or losses on derivatives or on the extinguishment or forgiveness of debt, 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

400853839_coververeitsupp2019q3.jpg




400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

VEREIT Supplemental Information
 
September 30, 2019
 
Section
Page
400853839_walmarta02.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
400853839_aaasupplementala02.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
400853839_cvskernersvillea10.jpg
Lease Summary
Property Type Diversification
Unconsolidated Joint Venture Investment Summary
Definitions
 
 
 
 
 
 
 
 
 
 
 
 
400853839_tjxphiladelphiapadistirb13.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

 
About the Data
 
This data and other information described herein are as of and for the three months ended September 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 September 30, 2019, June 30, 2019, March 31, 2019, and September 30, 2018.

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

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

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



400853839_vereitlogoa48.jpg
 
 
Q3 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; 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 the pending SEC investigation and remaining derivative litigations, including the expense of such investigation and litigation and any additional potential payments upon resolution; risks associated with obtaining final court approval of the class action and derivative settlements; 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 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



400853839_vereitlogoa48.jpg
 
 
Q3 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 September 30, 2019, approximately 39.5% 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 8.4 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



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

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

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

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



400853839_vereitlogoa48.jpg
 
 
Q3 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
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Rental revenue
$
302,985

 
$
312,043

 
$
316,843

 
$
313,263

 
$
313,866

(Loss) income from continuing operations 
$
(741,529
)
 
$
292,284

 
$
70,971

 
$
27,872

 
$
(73,942
)
Basic and diluted (loss) income from continuing operations per share attributable to common stockholders and limited partners 
$
(0.76
)
 
$
0.27

 
$
0.05

 
$
0.01

 
$
(0.09
)
Normalized EBITDA
$
258,625

 
$
260,345

 
$
263,936

 
$
257,486

 
$
261,084

FFO attributable to common stockholders and limited partners from continuing operations 
$
(657,147
)
 
$
179,038

 
$
190,304

 
$
154,606

 
$
38,055

FFO attributable to common stockholders and limited partners from continuing operations per diluted share 
$
(0.655
)
 
$
0.179

 
$
0.192

 
$
0.156

 
$
0.038

AFFO attributable to common stockholders and limited partners
$
177,580

 
$
177,099

 
$
178,403

 
$
172,511

 
$
178,529

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

 
$
0.177

 
$
0.180

 
$
0.174

 
$
0.180

Dividends declared per common share
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

Weighted-average shares outstanding - diluted
1,002,899,652

 
999,777,735

 
993,298,314

 
992,337,959

 
991,924,017

 
 
 
 
 
 
 
 
 
 
Portfolio Metrics
 
 
 
 
 
 
 
 
 
Operating Properties
3,926

 
3,950

 
3,980

 
3,994

 
4,021

Rentable Square Feet (in thousands)
90,704

 
90,631

 
94,742

 
94,953

 
93,856

Economic Occupancy Rate
99.0
%
 
99.0
%
 
98.9
%
 
98.8
%
 
99.1
%
Weighted Average Remaining Lease Term (years)
8.4

 
8.6

 
8.7

 
8.9

 
8.9

Investment-Grade Tenants (1)
39.5
%
 
39.6
%
 
41.3
%
 
41.9
%
 
42.7
%
___________________________________
(1)
The weighted-average credit rating of our investment-grade tenants was BBB+ as of September 30, 2019.

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



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

 
Financial and Operations Statistics and Ratios
(unaudited, dollars in thousands)
 
 
 
Three Months Ended
 
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Interest Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
66,223

 
$
67,815

 
$
69,036

 
$
68,314

 
$
66,445

Normalized EBITDA (2)
 
258,625

 
260,345

 
263,936

 
257,486

 
261,084

Interest Coverage Ratio
 
3.91x

 
3.84x

 
3.82x

 
3.77x


3.93x

 
 
 
 
 
 
 
 
 
 
 
Fixed Charge Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
66,223

 
$
67,815

 
$
69,036

 
$
68,314

 
$
66,445

Secured debt principal amortization
 
2,326

 
2,256

 
2,430

 
2,424

 
3,007

Dividends attributable to preferred shares 
 
16,578

 
17,973

 
17,973

 
17,973

 
17,973

Total fixed charges
 
85,127

 
88,044

 
89,439

 
88,711

 
87,425

Normalized EBITDA (2)
 
258,625

 
260,345

 
263,936

 
257,486


261,084

Fixed Charge Coverage Ratio
 
3.04
x
 
2.96x

 
2.95x

 
2.90x

 
2.99x

 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Net Debt Ratios
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,658,503

 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

 
$
5,949,843

Normalized EBITDA annualized
 
1,034,500

 
1,041,380

 
1,055,744

 
1,029,944

 
1,044,336

Net Debt to Normalized EBITDA annualized ratio
 
5.47
x
 
5.30
x
 
5.73
x
 
5.91
x
 
5.70
x
 
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,658,503

 
$
5,514,805

 
$
6,049,418

 
$
6,091,874

 
$
5,949,843

Gross Real Estate Investments (3)
 
14,911,108

 
14,950,309

 
15,411,364

 
15,411,026

 
15,385,925

Net Debt Leverage Ratio
 
37.9
%
 
36.9
%
 
39.3
%
 
39.5
%
 
38.7
%
 
 
 
 
 
 
 
 
 
 
 
Unencumbered Assets/Real Estate Assets
 
 
 
 
 
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,374,138

 
$
11,361,522

 
$
11,577,487

 
$
11,574,315

 
$
11,507,837

Gross Real Estate Investments (3)
 
14,911,108

 
14,950,309

 
15,411,364

 
15,411,026

 
15,385,925

Unencumbered Asset Ratio
 
76.3
%
 
76.0
%
 
75.1
%
 
75.1
%
 
74.8
%
___________________________________
(1)
Refer to the Statements of Operations section for interest expense calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.
(2)
Refer to the Statements of Operations section for net income calculated in accordance with GAAP and to the EBITDA, EBITDAre and Normalized EBITDA section for the required reconciliation to the most directly comparable GAAP financial measure.
(3)
Refer to the Balance Sheets section for total debt and real estate investments, at cost calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure. As discussed in the About the Data section, Net Debt includes the amounts payable in cash pursuant to the Class Action settlement paid on October 15, 2019.




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



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION
 
Key Balance Sheet Metrics and Capital Structure
(unaudited, dollars and shares in thousands, except per share amounts)
 



400853839_chart-7d8e2a8e002d5b6eb91.jpg
 
 
Common equity
61.5%
 
 
 

 
 
Corporate bonds
15.2%
 
 
 

 
 
Mortgage notes payable
9.9%
 
 
 

 
 
Preferred equity
5.6%
 
 
 

 
 
Credit facility term loan
5.2%
 
 
 

 
 
Convertible notes
2.3%
 
 
 

 
 
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)

 
September 30, 2019
Diluted shares outstanding (2)
 
 
 
1,094,225

Stock price
 
 
 
 
$
9.78

Implied Equity Market Capitalization
 
$
10,701,521

 
 
 
 
 
 
Series F Perpetual Preferred (3)
 
6.70
%
 
$
973,025

 
 
 
 
 
 
Mortgage notes payable
2.9
 
5.05
%
 
1,716,199

Unconsolidated joint ventures' pro rata share
4.7
 
3.57
%
 
53,850

Total secured debt
3.0
 
5.01
%
 
$
1,770,049

 
 
 
 
 
 
Credit facility term loan
3.6
 
3.84
%
 
900,000

2020 convertible notes
1.2
 
3.75
%
 
402,500

2021 corporate bonds
1.7
 
4.13
%
 
400,000

2024 corporate bonds
4.4
 
4.60
%
 
500,000

2025 corporate bonds
6.1
 
4.63
%
 
550,000

2026 corporate bonds
6.7
 
4.88
%
 
600,000

2027 corporate bonds
7.9
 
3.95
%
 
600,000

Total unsecured debt
4.7
 
4.24
%
 
$
3,952,500

 
 
 
 
 
 
Total Adjusted Principal Outstanding
4.2
 
4.48
%
 
$
5,722,549

 
 
 
 
 
 
Total Capitalization
 
$
17,397,095

Less: Cash and cash equivalents
 
1,029,315

Less: Pro rata share of unconsolidated joint ventures' cash and cash equivalents
 
1,046

Enterprise Value
 
$
16,366,734

 
 
 
 
 
 
Net Debt (4)/Enterprise Value
 
34.6
%
Net Debt (4)/Normalized EBITDA Annualized
 
5.47
x
Net Debt (4) + Preferred (3)/Normalized EBITDA Annualized
 
6.41
x
Fixed Charge Coverage Ratio
 
3.04
x
Liquidity (5)
 
 
 
 
$
2,060,146

___________________________________
(1)Weighted average interest rate for variable rate debt represents the interest rate in effect as of September 30, 2019.
(2)Diluted shares outstanding at September 30, 2019 includes 19.9 million limited partner OP Units surrendered to the Company by the Former Manager and the Former CFO and subsequently canceled on October 15, 2019.
(3)Balance represents 38.9 million shares of Series F Preferred Stock (and 38.9 million corresponding general partner Series F Preferred Units) and 49,766 limited partner Series F Preferred Units outstanding at September 30, 2019, multiplied by the liquidation preference of $25 per share.
(4)As discussed in the About the Data section, Net Debt as of September 30, 2019 includes the amounts payable in cash pursuant to the Class Action Settlement of $966.3 million paid on October 15, 2019.
(5)Liquidity represents cash and cash equivalents of $1.0 billion and $2.0 billion available capacity on our revolving credit facility, reduced by the amounts payable in cash pursuant to the Class Action Settlement of $966.3 million at September 30, 2019. Available capacity on our revolving credit facility is reduced by letters of credit outstanding of $3.9 million at September 30, 2019.

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



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

 
Balance Sheets
(unaudited, in thousands)
 
 
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Assets
 
 
 
 
 
 
 
 
 
 
Real estate investments, at cost:
 
 
 
 
 
 
 
 
 
 
Land
 
$
2,728,560

 
$
2,763,348

 
$
2,824,666

 
$
2,843,212

 
$
2,847,393

Buildings, fixtures and improvements
 
10,287,047

 
10,352,928

 
10,741,995

 
10,749,228

 
10,652,578

Intangible lease assets
 
1,909,932

 
1,927,699

 
2,003,825

 
2,012,399

 
2,019,718

Total real estate investments, at cost
 
14,925,539


15,043,975

 
15,570,486

 
15,604,839

 
15,519,689

Less: accumulated depreciation and amortization
 
3,559,403

 
3,488,838

 
3,544,252

 
3,436,772

 
3,323,990

Total real estate investments, net
 
11,366,136


11,555,137

 
12,026,234

 
12,168,067

 
12,195,699

Operating lease right-of-use assets
 
218,393

 
221,798

 
224,859

 

 

Investment in unconsolidated entities
 
69,025

 
68,633

 
35,790

 
35,289

 
34,293

Cash and cash equivalents
 
1,029,315

 
211,510

 
12,788

 
30,758

 
25,264

Restricted cash
 
20,742

 
20,692

 
18,517

 
22,905

 
27,449

Rent and tenant receivables and other assets, net
 
347,455

 
343,788

 
361,641

 
366,092

 
412,053

Goodwill
 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
66,684

 
22,553

 
36,022

 
2,609

 
24,349

Total assets
 
$
14,455,523


$
13,781,884


$
14,053,624

 
$
13,963,493

 
$
14,056,880

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable, net
 
$
1,717,817

 
$
1,745,331

 
$
1,918,826

 
$
1,922,657

 
$
1,936,586

Corporate bonds, net
 
2,622,320

 
2,621,130

 
2,619,956

 
3,368,609

 
2,825,541

Convertible debt, net
 
397,726

 
396,766

 
395,823

 
394,883

 
393,961

Credit facility, net
 
895,351

 
895,033

 
1,089,725

 
401,773

 
793,000

Below-market lease liabilities, net
 
147,997

 
152,654

 
166,708

 
173,479

 
179,192

Accounts payable and accrued expenses
 
1,125,703

 
127,799

 
141,126

 
145,611

 
269,150

Deferred rent and other liabilities
 
101,828

 
77,713

 
70,220

 
69,714

 
51,663

Distributions payable
 
201,451

 
187,359

 
190,246

 
186,623

 
183,913

Operating lease liabilities
 
223,288

 
225,972

 
228,120

 

 

Total liabilities
 
7,433,481


6,429,757

 
6,820,750

 
6,663,349

 
6,633,006

 
 
 
 
 
 
 
 
 
 
 
Series F preferred stock
 
389

 
429

 
429

 
428

 
428

Common stock
 
10,677

 
9,734

 
9,716

 
9,675

 
9,674

Additional paid-in capital
 
13,360,675

 
12,655,018

 
12,645,148

 
12,615,472

 
12,612,407

Accumulated other comprehensive loss
 
(47,886
)
 
(28,026
)
 
(12,202
)
 
(1,280
)
 
(1,031
)
Accumulated deficit
 
(6,306,590
)
 
(5,416,759
)
 
(5,550,574
)
 
(5,467,236
)
 
(5,343,368
)
Total stockholders' equity
 
7,017,265


7,220,396

 
7,092,517

 
7,157,059

 
7,278,110

Non-controlling interests
 
4,777

 
131,731

 
140,357

 
143,085

 
145,764

Total equity
 
7,022,042


7,352,127


7,232,874

 
7,300,144

 
7,423,874

Total liabilities and equity
 
$
14,455,523


$
13,781,884

 
$
14,053,624

 
$
13,963,493

 
$
14,056,880



See the Definitions section for a description of the Company's non-GAAP and operating metrics.
VEREIT, Inc. | WWW.VEREIT.COM | 10



400853839_vereitlogoa48.jpg
 
 
Q3 2019 SUPPLEMENTAL INFORMATION

 
Statements of Operations
(unaudited, in thousands, except per share data)
 
 
 
Three Months Ended
 
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Rental revenue
 
$
302,985

 
$
312,043

 
$
316,843

 
$
313,263

 
$
313,866

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Acquisition-related
 
1,199

 
985

 
985

 
1,136

 
810

Litigation and non-routine costs, net
 
832,024

 
(3,769
)
 
(21,492
)
 
23,541

 
138,595

Property operating
 
30,822

 
32,503

 
32,378

 
32,567

 
31,893

General and administrative
 
14,483

 
16,416

 
14,846

 
17,220

 
15,186

Depreciation and amortization
 
115,111

 
118,022

 
136,555

 
153,050

 
157,181

Impairments
 
3,944

 
8,308

 
11,988

 
18,565

 
18,382

Restructuring
 
783

 
290

 
9,076

 

 

Total operating expenses
 
998,366

 
172,755

 
184,336

 
246,079

 
362,047

Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(67,889
)
 
(69,803
)
 
(71,254
)
 
(70,832
)
 
(69,310
)
Gain (loss) on extinguishment and forgiveness of debt, net
 
975

 
(1,472
)
 

 
21

 
90

Other income (loss), net
 
2,737

 
3,175

 
(402
)