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Section 1: 8-K (8-K)

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falsefalse8002020-08-068-K2325 E. Camelback Road, 9th FloorPhoenix,85016AZ00015073850001528059606-3610 0001507385 2020-08-06 2020-08-06 0001507385 ver:VEREITOperatingPartnershipL.P.Member 2020-08-06 2020-08-06 0001507385 exch:XNYS ver:VEREITOperatingPartnershipL.P.Member us-gaap:CommonStockMember 2020-08-06 2020-08-06 0001507385 exch:XNYS ver:VEREITOperatingPartnershipL.P.Member us-gaap:SeriesFPreferredStockMember 2020-08-06 2020-08-06


 

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): August 6, 2020
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 PRF
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 6, 2020, VEREIT, Inc. together with its operating partnership, VEREIT Operating Partnership, L.P. (collectively, the “Company”) furnished the following documents: (i) a press release relating to its second quarter financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the quarter ended June 30, 2020, 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 (the “Securities Act”), as amended, regardless of any general incorporation language in such filing.
Item 7.01 Regulation FD Disclosure.
On August 6, 2020, the Company made available on the Investor Relations section of its website, http://ir.vereit.com, a presentation describing the Company’s business and real estate portfolio. A copy of the presentation is attached hereto as Exhibit 99.3. The information set forth in this Item 7.01 and in the presentation is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. The information set forth in this Item 7.01, including Exhibit 99.3, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act 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
 
99.3
 
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: August 6, 2020



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
404881440_rgbhorzvereitlogo093018a09.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Second Quarter 2020 Operating Results
Rent Collection for the Quarter of 85% Which Increased to 91% for July
Liquidity Increased from $1.2 Billion to $1.8 Billion with $600.0 Million Bond Issuance



Phoenix, AZ, August 6, 2020 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months ending June 30, 2020.

Second Quarter 2020 Financial and Operating Highlights
Net income of $54.2 million and net income per diluted share of $0.04
Achieved $0.15 AFFO per diluted share
Rent collection for the quarter of 85% which increased to 91% for July
Acquisitions totaled $10.0 million in the second quarter and $156.2 million year-to-date
Dispositions totaled $66.2 million in the second quarter and $200.3 million year-to-date, including the Company’s share of dispositions contributed to the office partnership of $70.2 million
Issued $600.0 million aggregate principal amount of 3.40% senior notes due 2028 to ultimately refinance its 3.75% convertible senior notes due December 2020, redeem $150.0 million of VEREIT’s 6.7% Series F preferred stock, and to repay borrowings under the Operating Partnership's revolving credit facility
Total debt decreased from $6.31 billion to $5.97 billion; Net Debt decreased from $5.82 billion to $5.80 billion, or 39.5% Net Debt to Gross Real Estate Investments
Net Debt to Normalized EBITDA ended at 6.1x and includes the negative effects of portfolio enhancing abatement amendments, which largely impact second quarter revenue. Excluding this, Net Debt to Normalized EBITDA would have been 5.8x.


Second Quarter 2020 Financial Results

Rental Revenue
Rental revenue for the quarter ended June 30, 2020 decreased $33.4 million to $278.6 million as compared to rental revenue of $312.0 million for the same quarter in 2019.

Net Income and Net Income Attributable to Common Stockholders per Diluted Share
Net income for the quarter ended June 30, 2020 decreased $238.1 million to $54.2 million as compared to net income of $292.3 million for the same quarter in 2019, and net income per diluted share decreased $0.23 to $0.04 for the quarter ended June 30, 2020, as compared to net income per diluted share of $0.27 for the same quarter in 2019.

Normalized EBITDA
Normalized EBITDA for the quarter ended June 30, 2020 decreased $30.0 million to $238.5 million as compared to Normalized EBITDA of $268.5 million for the same quarter in 2019.

Funds From Operations Attributable to Common Stockholders and Limited Partners (“FFO”) and FFO per Diluted Share
FFO for the quarter ended June 30, 2020 decreased $23.1 million to $155.9 million, as compared to $179.0 million for the same quarter in 2019, and FFO per diluted share decreased $0.04 to $0.14 for the quarter ended June 30, 2020, as compared to FFO per diluted share of $0.18 for the same quarter in 2019.


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Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended June 30, 2020 decreased $16.0 million to $161.1 million, as compared to $177.1 million for the same quarter in 2019, and AFFO per diluted share decreased $0.03 to $0.15 for the quarter ended June 30, 2020, as compared to $0.18 for the same quarter in 2019.

Balance Sheet and Liquidity
As of the end of the second quarter, the Company increased its corporate liquidity from approximately $1.2 billion to approximately $1.8 billion, comprised of $278.9 million in cash and cash equivalents and the full $1.5 billion of availability under its credit facility. In addition, secured debt was reduced by $11.3 million, bringing the total amount reduced for the year to $132.6 million.

Capital Market Activity
The Company issued $600.0 million aggregate principal amount of 3.40% senior notes due 2028 at an issue price of 99.144% of par value. Proceeds from the senior notes along with borrowings under the Company’s revolving credit facility and cash on hand have been or will be used to fund the purchase of a portion of or the repayment at maturity of VEREIT’s 3.75% Convertible Senior Notes due December 2020, of which $50.2 million was purchased on June 25, 2020 with $271.6 million principal amount remaining. The Company also utilized proceeds to fund the partial redemption of $150.0 million of VEREIT’s 6.7% Series F preferred stock on July 22, 2020 and repay borrowings under the Operating Partnership's revolving credit facility.

Consolidated Financial Statistics
Financial Statistics as of the quarter ended June 30, 2020 are as follows: Net Debt to Normalized EBITDA of 6.1x, Fixed Charge Coverage Ratio of 3.1x, Unencumbered Asset Ratio of 81.2%, Net Debt to Gross Real Estate Investments of 39.5%, and Weighted Average Debt Term of 4.8 years. Net Debt to Normalized EBITDA includes the negative effects of portfolio enhancing abatement amendments, which largely impact second quarter revenue. In exchange for the abatements, increased lease term and other economic benefits were obtained. Excluding this, Net Debt to Normalized EBITDA would have been 5.8x.

Common Stock Dividend Information
On August 5, 2020, the Company’s Board of Directors declared a quarterly dividend for the third quarter of 2020 of $0.077 per share consistent with last quarter’s dividend. The dividend will be paid on October 15, 2020 to common stockholders of record as of September 30, 2020. The Board of Directors has not made any decisions with respect to its dividend policy beyond the third quarter and will continue to monitor the current environment.

2020 Guidance
As previously stated, given the economic uncertainty and rapidly-evolving circumstances related to COVID-19, the Company has withdrawn its previously issued 2020 guidance and is not providing an updated outlook at this time.

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “Rent collection for Q2 was higher at 85% than previously announced and was further increased to 91% for July. In addition, liquidity improved to $1.8 billion with the $600.0 million bond issuance, which now finances our December 2020 convertible debt maturity and leaves us with no corporate bonds due until 2024. While we have had better than expected results on rent collections, we chose to maintain capital within the balance sheet, maximizing value to all stakeholders in the form of liquidity and future growth. Our board has, therefore, decided to maintain the current dividend, which at a 51% payout ratio for Q2, is a solid base on which to grow to a more traditional level.”

Real Estate Portfolio
As of June 30, 2020, the Company’s portfolio consisted of 3,836 properties with total portfolio occupancy of 98.8%, investment grade tenancy of 37.0% and a weighted-average remaining lease term of 8.5 years, increasing from 8.3 years.

Real Estate Leasing Activity
During the quarter, the Company entered into 64 new and renewal leases on approximately 2.1 million square feet, or 2.3% of the portfolio. Leasing activity included 0.9 million square feet of early renewals. This activity does not include pandemic related amendments.

Acquisitions
During the quarter ended June 30, 2020, the Company had acquisitions of $10.0 million in the form of a mezzanine position for last-mile distribution facilities.

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Dispositions
During the quarter ended June 30, 2020, the Company disposed of 17 properties for an aggregate sales price of $66.2 million. Of the total disposition amount, $14.7 million was used in the total weighted average cash cap rate calculation of 6.0%, including $4.7 million in net sales of Red Lobster restaurants. The gain on second quarter sales was approximately $9.0 million.

COVID-19 Company Update
As of July 27, 2020, VEREIT had received rent of approximately 86% for April, 85% for May, 86% for June and 85% for the second quarter. Of the uncollected rent balance for the second quarter, the Company has entered into rent relief agreements representing 7.2% of second quarter rents.

In addition, as of July 27, 2020, VEREIT had received rent of approximately 91% for July. Of the uncollected rent balance for July, the Company has entered into rent relief agreements representing 4.2% of July rents.

VEREIT is in continuing discussions with tenants regarding unpaid rent. The property type breakdown for rent collection is as follows:
Property Type
April
May
June
July
Total Retail
88%
87%
89%
96%
Casual Dining
35%
39%
38%
59%
Quick Service
82%
79%
81%
80%
Total Restaurant
55%
56%
56%
68%
Total Office
98%
97%
97%
97%
Total Industrial
99%
99%
94%
95%

Due to the effects of the COVID-19 pandemic, financial results include rental revenue of $278.6 million that includes deferred rent of $8.9 million and the negative impact from $11.2 million of abatement amendments and $8.4 million of reserved rent which includes $3.7 million of straight-line rent receivables. Further rent collection and relief request details can be found in our investor presentation filed today.

Subsequent Events

Dispositions
From July 1, 2020 through July 22, 2020, dispositions totaled $1.1 million. Dispositions year-to-date through July 22, 2020, totaled $200.3 million, including the Company’s share of dispositions contributed to the office partnership of $70.2 million.

Partial Redemption of Preferred Stock
On July 22, 2020, the Company redeemed 6.0 million shares of its 6.7% Series F Cumulative Redeemable Preferred Stock, representing approximately 19.44%, or $150.0 million, of its approximately 30.9 million shares outstanding. The shares were redeemed at a redemption price of $25.00 per share.





3


Audio Webcast and Call Details
The live audio webcast will be available, beginning at 1:30 p.m. ET on Thursday, August 6, 2020, 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 10146036. The telephone replay will be available until August 20, 2020.

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 $14.7 billion including approximately 3,800 properties and 88.9 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]

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About the Data
Rent collection percentages disclosed are based on contractual rent and recoveries paid by tenants to cover estimated tax, insurance and common area maintenance expenses, including the Company's pro rata share of such amounts related to properties owned by unconsolidated joint ventures. Percentages are calculated using a denominator that reflects pre-COVID-19 rents that has not been adjusted for any rent relief granted. Amounts exclude any tenants in bankruptcy.

In the second quarter of 2020, the Company updated its definition of Normalized EBITDA to include the impact of straight-line rent, in order to be consistent with peer companies. The Company recast the data presented for prior periods, including ratios impacted by the change.

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”), Normalized EBITDA and Normalized EBTIDA Adjusted for Abated Rent
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“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 and Normalized EBITDA Adjusted for Abated Rent as non-GAAP supplemental performance measures 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, net revenue or expense earned or incurred that is related to the services agreement associated with a discontinued operation, 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, 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 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. Management also believes that Normalized EBITDA Adjusted for Abated Rent is useful to investors because the period for which rent is abated is less than 12 months and therefore should not be annualized. Therefore, EBITDA, EBITDAre, Normalized EBITDA and Normalized EBTIDA Adjusted for Abated Rent should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses Normalized EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. EBITDA, EBITDAre, Normalized EBITDA and Normalized EBITDA Adjusted for Abated Rent 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 June 30, 2020 and March 31, 2020, 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.
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.

5


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 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, net revenue or expense earned or incurred that is related to the services agreement associated with a discontinued operation, 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 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.

6


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.
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.
Net Debt to Normalized EBITDA Annualized Ratio
Net Debt to Normalized EBITDA Annualized (“Net Debt to Normalized EBITDA”) 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 to Normalized EBITDA Adjusted for Abated Rent Annualized Ratio
Net Debt to Normalized EBITDA Adjusted for Abated Rent Annualized equals Net Debt divided by the respective quarter Normalized EBITDA Adjusted for Abated Rent multiplied by four. Management believes that Net Debt to Normalized EBITDA Adjusted for Abated Rent Annualized is useful to investors because the period for which rent is abated is less than 12 months and therefore should not be annualized.
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.

7


Forward-Looking Statements
Information set forth herein contains “forward-looking statements” which reflect the Company’s expectations and projections regarding future events and plans, the Company’s future financial condition, results of operations, liquidity and business, including acquisitions, rent receipts, rent relief requests, and rent relief granted, debt levels, maturities and refinancings, liquidity, the payment of future dividends and the impact of COVID-19 on the Company’s business. Generally, the words “anticipates,” “assumes,” “believes,” “continues,” “could,” “estimates,” “expects,” “goals,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which are difficult to predict and beyond the Company’s control, that could cause actual events and plans or could cause the Company’s business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collections.
The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rent payments) and the economy generally; federal, state or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19; the Company’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 the Company’s properties; risks accompanying the management of its industrial partnership and office partnership; the impact of impairment charges in respect of certain of the Company’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 the Company’s management with respect to such programs; competition in the acquisition and disposition of properties and in the leasing of its properties including that the Company may be unable to acquire, dispose of, or lease properties on advantageous terms or at all; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of the Company’s tenants, which are heightened as a result of the COVID-19 pandemic; risks associated with the Company’s substantial indebtedness, including that such indebtedness may affect the Company’s ability to pay dividends and that the terms and restrictions within the agreements governing the Company’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 the Company’s filings with the SEC, which are available at the SEC’s website at www.sec.gov. The Company 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)

 
 
June 30,
2020
 
March 31,
2020
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,705,149

 
$
2,715,625

Buildings, fixtures and improvements
 
10,117,636

 
10,135,933

Intangible lease assets
 
1,891,831

 
1,899,900

Total real estate investments, at cost
 
14,714,616

 
14,751,458

Less: accumulated depreciation and amortization
 
3,756,132

 
3,659,980

Total real estate investments, net
 
10,958,484

 
11,091,478

Operating lease right-of-use assets
 
208,037

 
211,187

Investment in unconsolidated entities
 
86,300

 
78,718

Cash and cash equivalents
 
278,883

 
600,945

Restricted cash
 
21,203

 
18,720

Rent and tenant receivables and other assets, net
 
382,409

 
345,103

Goodwill
 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
48,093

 
88,513

Total assets
 
$
13,321,182

 
$
13,772,437

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,393,652

 
$
1,405,701

Corporate bonds, net
 
3,404,935

 
2,814,474

Convertible debt, net
 
270,152

 
319,120

Credit facility, net
 
896,314

 
1,767,306

Below-market lease liabilities, net
 
130,208

 
134,410

Accounts payable and accrued expenses
 
112,551

 
125,358

Derivative, deferred rent and other liabilities
 
161,538

 
146,893

Distributions payable
 
85,231

 
150,493

Operating lease liabilities
 
215,322

 
217,567

Total liabilities
 
6,669,903

 
7,081,322

Series F preferred stock
 
309

 
309

Common stock
 
10,779

 
10,778

Additional paid-in capital
 
13,256,288

 
13,252,447

Accumulated other comprehensive loss
 
(106,109
)
 
(104,217
)
Accumulated deficit
 
(6,517,303
)
 
(6,475,568
)
Total stockholders’ equity
 
6,643,964

 
6,683,749

Non-controlling interests
 
7,315

 
7,366

Total equity
 
6,651,279

 
6,691,115

Total liabilities and equity
 
$
13,321,182

 
$
13,772,437


9



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

 
 
Three Months Ended June 30,
 
 
2020
 
2019
Revenues:
 
 
 
 
Rental
 
$
278,576

 
$
312,043

Fees from managed partnerships
 
421

 
145

Total revenues
 
278,997

 
312,188

Operating expenses:
 
 
 
 
Acquisition-related
 
1,169

 
985

Litigation and non-routine costs, net
 
(118
)
 
(3,769
)
Property operating
 
29,098

 
32,503

General and administrative
 
16,120

 
16,416

Depreciation and amortization
 
110,599

 
118,022

Impairments
 
12,094

 
8,308

Restructuring
 

 
290

Total operating expenses
 
168,962

 
172,755

Other (expense) income:
 
 
 
 
Interest expense
 
(65,613
)
 
(69,803
)
Loss on extinguishment and forgiveness of debt, net
 
(200
)
 
(1,472
)
Other income, net
 
778

 
3,030

Equity in income of unconsolidated entities
 
1,497

 
505

Gain on disposition of real estate and real estate assets held for sale, net
 
8,795

 
221,755

Total other expenses, net
 
(54,743
)
 
154,015

Income before taxes
 
55,292

 
293,448

Provision for income taxes
 
(1,053
)
 
(1,164
)
Net income
 
54,239

 
292,284

Net income attributable to non-controlling interests
 
(31
)
 
(6,626
)
Net income attributable to the General Partner
 
$
54,208

 
$
285,658

 
 
 
 
 
Basic and diluted net income per share attributable to common stockholders
 
$
0.04

 
$
0.27

Distributions declared per common share
 
$
0.0770

 
$
0.1375






10



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

 
 
Three Months Ended
 
 
June 30,
2020
 
March 31,
2020
 
June 30,
2019
Net income
 
$
54,239

 
$
86,863

 
$
292,284

 Adjustments:
 
 
 
 
 
 
Interest expense
 
65,613

 
64,696

 
69,803

Depreciation and amortization
 
110,599

 
124,080

 
118,022

Provision for income taxes
 
1,053

 
1,048

 
1,164

Proportionate share of adjustments for unconsolidated entities
 
1,775

 
1,761

 
738

 EBITDA
 
$
233,279

 
$
278,448

 
$
482,011

Gain on disposition of real estate assets, net
 
(8,795
)
 
(25,249
)
 
(221,762
)
Impairments of real estate
 
12,094

 
8,380

 
8,308

EBITDAre
 
$
236,578

 
$
261,579

 
$
268,557

Payments received on fully reserved loans
 

 

 

Acquisition-related expenses
 
1,169

 
1,523

 
985

Litigation and non-routine costs, net
 
(118
)
 
(8,564
)
 
(3,769
)
Loss (gain) on investments
 
142

 
541

 
(5
)
Loss on derivative instruments, net
 

 

 
24

Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
788

 
748

 
611

Loss on extinguishment and forgiveness of debt, net
 
200

 
1,280

 
1,472

Net direct financing lease adjustments
 
372

 
365

 
410

Restructuring expenses
 

 

 
290

Other adjustments, net
 
54

 
(205
)
 
214

 Proportionate share of adjustments for unconsolidated entities
 
(706
)
 
(36
)
 
(100
)
Adjustment for Excluded Properties
 

 

 
(203
)
Normalized EBITDA
 
$
238,479

 
$
257,231

 
$
268,486

Abated rent
 
11,184

 

 

Normalized EBITDA Adjusted for Abated Rent
 
$
249,663

 
$
257,231

 
$
268,486

 
 
 
 
 
 
 
Normalized EBITDA annualized
 
$
953,916

 
$
1,028,924

 
$
1,073,944

Normalized EBITDA Adjusted for Abated Rent annualized
 
$
998,652

 
$
1,028,924

 
$
1,073,944




















11



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

 
 
Three Months Ended June 30,
 
 
2020
 
2019
Net income
 
$
54,239

 
$
292,284

Dividends on non-convertible preferred stock
 
(12,948
)
 
(17,973
)
Gain on disposition of real estate assets, net
 
(8,795
)
 
(221,762
)
Depreciation and amortization of real estate assets
 
110,207

 
117,616

Impairment of real estate
 
12,094

 
8,308

Proportionate share of adjustments for unconsolidated entities
 
1,146

 
565

FFO attributable to common stockholders and limited partners
 
$
155,943

 
$
179,038

 
 
 
 
 
Weighted-average shares outstanding - basic
 
1,078,366,566

 
973,723,139

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
1,186,500

 
26,054,596

Weighted-average shares outstanding - diluted
 
1,079,553,066

 
999,777,735

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
0.144

 
$
0.179





















12



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

 
 
Three Months Ended June 30,
 
 
2020
 
2019
FFO attributable to common stockholders and limited partners
 
$
155,943

 
$
179,038

 
 
 
 
 
Acquisition-related expenses
 
1,169

 
985

Litigation and non-routine costs, net
 
(118
)
 
(3,769
)
Loss on investments
 
142

 
(5
)
Loss on derivative instruments, net
 

 
24

Amortization of premiums and discounts on debt and investments, net
 
(362
)
 
(1,392
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
788

 
611

Net direct financing lease adjustments
 
372

 
410

Amortization and write-off of deferred financing costs
 
2,898

 
3,346

Loss on extinguishment and forgiveness of debt, net
 
200

 
1,472

Straight-line rent
 
(3,404
)
 
(8,043
)
Equity-based compensation
 
3,857

 
3,706

Restructuring expenses
 

 
290

Other adjustments, net
 
441

 
617

Proportionate share of adjustments for unconsolidated entities
 
(843
)
 
(196
)
Adjustment for Excluded Properties
 

 
5

AFFO attributable to common stockholders and limited partners
 
$
161,083

 
$
177,099

 
 
 
 
 
Weighted-average shares outstanding - basic
 
1,078,366,566

 
973,723,139

Effect of weighted-average Limited Partner OP Units and dilutive securities
 
1,186,500

 
26,054,596

Weighted-average shares outstanding - diluted
 
1,079,553,066

 
999,777,735

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.149

 
$
0.177















13



VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
 
 
Three Months Ended
 
 
June 30,
2020
Interest expense - as reported
 
$
(65,613
)
Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(2,995
)
Amortization of net premiums
 
459

Unconsolidated joint ventures’ pro rata share
 
(559
)
Interest Expense, Excluding Non-Cash Amortization
 
$
63,636


 
 
Three Months Ended
 
 
June 30,
2020
Interest Expense, Excluding Non-Cash Amortization
 
$
63,636

Secured debt principal amortization
 
861

Dividends attributable to preferred shares 
 
12,948

Total fixed charges
 
77,445

Normalized EBITDA
 
238,479

Fixed Charge Coverage Ratio
 
3.08
x

 
 
June 30,
2020
 
March 31,
2020
Mortgage notes payable, net
 
$
1,393,652

 
$
1,405,701

Corporate bonds, net
 
3,404,935

 
2,814,474

Convertible debt, net
 
270,152

 
319,120

Credit facility, net
 
896,314

 
1,767,306

Total debt - as reported
 
5,965,053

 
6,306,601

Deferred financing costs, net
 
41,152

 
37,896

Net discounts (premiums)
 
11,860

 
6,389

Principal Outstanding
 
6,018,065

 
6,350,886

Unconsolidated joint ventures’ pro rata share
 
68,360

 
68,360

Adjusted Principal Outstanding
 
$
6,086,425

 
$
6,419,246

Cash and cash equivalents
 
(278,883
)
 
(600,945
)
Pro rata share of unconsolidated joint ventures’ cash and cash equivalents
 
(3,433
)
 
(2,567
)
Net Debt
 
$
5,804,109

 
$
5,815,734


14



 
 
June 30,
2020
Total real estate investments, at cost - as reported
 
$
14,714,616

Adjustments:
 
 
Investment in Cole REITs
 
6,867

Gross assets held for sale
 
54,046

Investment in direct financing leases, net
 
8,579

Mortgage notes receivable, net
 
9,959

Gross below market leases
 
(236,324
)
Unconsolidated joint ventures' pro rata share
 
146,886

Gross Real Estate Investments
 
$
14,704,629


 
 
June 30,
2020
 
March 31,
2020
Net Debt
 
$
5,804,109

 
$
5,815,734

Normalized EBITDA Annualized
 
953,916

 
1,028,924

Net Debt to Normalized EBITDA Annualized Ratio
 
6.08
x
 
5.65
x

 
 
June 30,
2020
Net Debt
 
$
5,804,109

Normalized EBITDA Adjusted for Abated Rent Annualized
 
998,652

Net Debt to Normalized EBITDA Adjusted for Abated Rent Annualized Ratio
 
5.81
x

 
 
June 30,
2020
Net Debt
 
$
5,804,109

Gross Real Estate Investments
 
14,704,629

Net Debt Leverage Ratio
 
39.5
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,933,717

Gross Real Estate Investments
 
14,704,629

Unencumbered asset ratio
 
81.2
%


15
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2

404881440_coververeitsupp2020q2.jpg




404881440_vereitlogoa63.jpg
 
 
Q2 2020 SUPPLEMENTAL INFORMATION

VEREIT Supplemental Information
 
June 30, 2020
 
Section
Page
404881440_walmarta09.jpg
 
 
Company Overview
Quarterly 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
404881440_aaasupplementala07.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
404881440_cvskernersvillea22.jpg
Lease Summary
Property Type Diversification and Rent Coverage
Unconsolidated Joint Venture Investment Summary
Definitions
 
 
 
 
 
 
 
 
 
 
 
 
404881440_bestbuya01.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 SUPPLEMENTAL INFORMATION

 
About the Data
 
This data and other information described herein are as of and for the three months ended June 30, 2020, unless otherwise indicated. Certain balances have been reclassified to conform with the current period's presentations, including partnership fees earned from services provided to our unconsolidated joint ventures, which were previously included in other income, net. 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, 2019 and Quarterly Reports on Form 10-Q for the periods ended June 30, 2020, March 31, 2020, September 30, 2019, and June 30, 2019.
The novel coronavirus ("COVID-19") pandemic has impacted all states where our tenants operate their businesses or where our properties are located, and measures taken to prevent or remediate COVID-19, including “shelter-in-place” or “stay-at-home” orders, other quarantine mandates and restrictions on the operations of certain types of businesses issued by local, state or federal authorities, have had an adverse effect on our business and the businesses of our tenants. While our business was not materially impacted during the six months ended June 30, 2020 from the COVID-19 pandemic, our rent collection was impacted and for the second quarter was 85% of rental revenue on an annualized basis. The full extent of the future impact of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations is uncertain.
In the second quarter of 2020, the Company updated its definition of Normalized EBITDA to include the impact of straight-line rent, in order to be consistent with peer companies. The Company recast the data presented for prior periods, including ratios impacted by the change.
In the third quarter of 2019, the Company entered into agreements to settle certain outstanding litigation, including the 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 defined herein) as of September 30, 2019 should include the amounts payable in cash pursuant to the Class Action Settlement. Management believed that including the impact of the payables in Net Debt provided 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 was a total cost to the Company of approximately $765.5 million in the third quarter of 2019.

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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 SUPPLEMENTAL INFORMATION

 
Forward-Looking Statements
 
Information set forth herein contains “forward-looking statements” which reflect the Company's expectations and projections regarding future events and plans, the Company's future financial condition, results of operations, liquidity and business, including acquisitions, rent receipts, rent relief requests and rent relief granted, debt levels, maturities and refinancings, liquidity, the payment of future dividends and the impact of COVID-19 on the Company's business. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which are difficult to predict and beyond the Company's control, that could cause actual events and plans or could cause the Company's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collections.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rent payments) and the economy generally; federal, state, or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19; the Company'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 the Company's properties; risks accompanying the management of its industrial partnership and office partnership; the impact of impairment charges in respect of certain of the Company'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 the Company's management with respect to such programs; competition in the acquisition and disposition of properties and in the leasing of its properties including that the Company may be unable to acquire, dispose of, or lease properties on advantageous terms or at all; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of the Company's tenants, which are heightened as a result of the COVID-19 pandemic; risks associated with the Company's substantial indebtedness, including that such indebtedness may affect the Company's ability to pay dividends and that the terms and restrictions within the agreements governing the Company'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 the Company's filings with the SEC, which are available at the SEC’s website at www.sec.gov. The Company 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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 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.

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, 2020, approximately 37.0% of the Company's Annualized Rental Income was earned from Investment-Grade Tenants, Economic Occupancy Rate was 98.8% and the Weighted Average Remaining Lease Term was 8.5 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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 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
 
Eugene A. Pinover, Independent Director
 
 
 
Gavin B. Brandon, Senior Vice President and Chief Accounting Officer
 
Julie G. Richardson, Independent Director
 
 
 
 
 
Glenn J. Rufrano, Chief Executive Officer and Director
 
 
 
 
 
 

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 PRF
 
Stock Exchange Listing: New York Stock Exchange
 
Transfer Agent
Computershare Trust Company, N.A.
462 South 4th Street, Suite 1600
Louisville, KY 40202
855-866- 0787



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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 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,
2020
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Total revenues
$
278,997

 
$
299,182

 
$
305,685

 
$
303,301

 
$
312,188

Income (loss) from continuing operations 
$
54,239

 
$
86,863

 
$
71,168

 
$
(741,529
)
 
$
292,284

Basic and diluted income (loss) from continuing operations per share attributable to common stockholders and limited partners
$
0.04

 
$
0.07

 
$
0.05

 
$
(0.76
)
 
$
0.27

Normalized EBITDA
$
238,479

 
$
257,231

 
$
261,538

 
$
264,326

 
$
268,486

FFO attributable to common stockholders and limited partners from continuing operations 
$
155,943

 
$
181,822

 
$
149,433

 
$
(657,147
)
 
$
179,038

FFO attributable to common stockholders and limited partners from continuing operations per diluted share 
$
0.144

 
$
0.168

 
$
0.139

 
$
(0.655
)
 
$
0.179

AFFO attributable to common stockholders and limited partners
$
161,083

 
$
180,974

 
$
173,853

 
$
177,580

 
$
177,099

AFFO attributable to common stockholders and limited partners per diluted share
$
0.149

 
$
0.168

 
$
0.161

 
$
0.177

 
$
0.177

Dividends declared per common share
$
0.0770

 
$
0.1375

 
$
0.1375

 
$
0.1375

 
$
0.1375

Weighted-average shares outstanding - diluted
1,079,553,066

 
1,079,751,240

 
1,077,647,052

 
1,002,899,652

 
999,777,735

 
 
 
 
 
 
 
 
 
 
Portfolio Metrics
 
 
 
 
 
 
 
 
 
Operating Properties
3,836

 
3,853

 
3,858

 
3,926

 
3,950

Rentable Square Feet (in thousands)
88,947

 
89,539

 
89,491

 
90,704

 
90,631

Economic Occupancy Rate
98.8
%
 
99.1
%
 
99.1
%
 
99.0
%
 
99.0
%
Weighted Average Remaining Lease Term (years)
8.5

 
8.3

 
8.3

 
8.4

 
8.6

Investment-Grade Tenants (1)
37.0
%
 
36.7
%
 
38.6
%
 
39.5
%
 
39.6
%
___________________________________
(1)
The weighted-average credit rating of our investment-grade tenants was BBB+ as of June 30, 2020.

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



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Q2 2020 SUPPLEMENTAL INFORMATION

 
Financial and Operations Statistics and Ratios
(unaudited, dollars in thousands)
 
 
 
Three Months Ended
 
 
June 30,
2020
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Interest Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
63,636

 
$
63,123

 
$
66,292

 
$
66,223

 
$
67,815

Normalized EBITDA (2)
 
238,479

 
257,231

 
261,538

 
264,326

 
268,486

Interest Coverage Ratio
 
3.75x

 
4.08x

 
3.95x

 
3.99x


3.96x

 
 
 
 
 
 
 
 
 
 
 
Fixed Charge Coverage Ratio
 
 
 
 
 
 
 
 
 
 
Interest Expense, excluding non-cash amortization (1)
 
$
63,636

 
$
63,123

 
$
66,292

 
$
66,223

 
$
67,815

Secured debt principal amortization
 
861

 
1,071

 
2,360

 
2,326

 
2,256

Dividends attributable to preferred shares 
 
12,948

 
12,948

 
15,964

 
16,578

 
17,973

Total fixed charges
 
77,445

 
77,142

 
84,616

 
85,127

 
88,044

Normalized EBITDA (2)
 
238,479

 
257,231

 
261,538

 
264,326


268,486

Fixed Charge Coverage Ratio
 
3.08
x
 
3.33x

 
3.09x

 
3.11x

 
3.05x

 
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
2020
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Net Debt Ratios
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,804,109

 
$
5,815,734

 
$
5,790,308

 
$
5,658,503

 
$
5,514,805

Normalized EBITDA annualized
 
953,916

 
1,028,924

 
1,046,152

 
1,057,304

 
1,073,944

Net Debt to Normalized EBITDA annualized ratio
 
6.08
x
 
5.65
x
 
5.53
x
 
5.35
x
 
5.14
x
 
 
 
 
 
 
 
 
 
 
 
Net Debt (3)
 
$
5,804,109

 
$
5,815,734

 
$
5,790,308

 
$
5,658,503

 
$
5,514,805

Gross Real Estate Investments (3)
 
14,704,629

 
14,781,956

 
14,775,948

 
14,911,108

 
14,950,309

Net Debt Leverage Ratio
 
39.5
%
 
39.3
%
 
39.2
%
 
37.9
%
 
36.9
%
 
 
 
 
 
 
 
 
 
 
 
Unencumbered Assets/Real Estate Assets
 
 
 
 
 
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,933,717

 
$
12,005,190

 
$
11,681,648

 
$
11,374,138

 
$
11,361,522

Gross Real Estate Investments (3)
 
14,704,629

 
14,781,956

 
14,775,948

 
14,911,108

 
14,950,309

Unencumbered Asset Ratio
 
81.2
%
 
81.2
%
 
79.1
%
 
76.3
%
 
76.0
%
___________________________________
(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 as of September 30, 2019 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



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Q2 2020 SUPPLEMENTAL INFORMATION
 
Key Balance Sheet Metrics and Capital Structure
(unaudited, dollars and shares in thousands, except per share amounts)
 



404881440_chart-298799bc2de05d74a7d.jpg
 
 
Common equity
50.3%
 
 
 

 
 
Corporate bonds
25.0%
 
 
 

 
 
Mortgage notes payable
10.1%
 
 
 

 
 
Credit facility term loan
6.5%
 
 
 

 
 
Preferred equity
5.6%
 
 
 

 
 
Convertible notes
2.0%
 
 
 

 
 
Unconsolidated joint ventures' pro rata share
0.5%
 
 

                            

Fixed vs. Variable Rate Debt
Fixed
84.7
%
Swapped to Fixed
14.8
%
Variable
0.5
%

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

 
June 30, 2020
Diluted shares outstanding
 
 
 
1,081,921

Stock price
 
 
 
 
$
6.43

Implied Equity Market Capitalization
 
$
6,956,752

 
 
 
 
 
 
Series F Perpetual Preferred (2)
 
6.70
%
 
$
773,025

 
 
 
 
 
 
Mortgage notes payable
2.5
 
5.00
%
 
1,396,432

Unconsolidated joint ventures' pro rata share
3.6
 
3.16
%
 
68,360

Total secured debt
2.5
 
4.92
%
 
$
1,464,792

 
 
 
 
 
 
Credit facility term loan
2.9
 
3.59
%
 
900,000

2020 convertible notes
0.5
 
3.75
%
 
271,633

2024 corporate bonds
3.6
 
4.60
%
 
500,000

2025 corporate bonds
5.3
 
4.63
%
 
550,000

2026 corporate bonds
5.9
 
4.88
%
 
600,000

2027 corporate bonds
7.1
 
3.95
%
 
600,000

2028 corporate bonds
7.5
 
3.40
%
 
600,000

2029 corporate bonds
9.5
 
3.10
%
 
600,000

Total unsecured debt
5.5
 
3.96
%
 
$
4,621,633

 
 
 
 
 
 
Total Adjusted Principal Outstanding
4.8
 
4.19
%
 
$
6,086,425

 
 
 
 
 
 
Total Capitalization
 
$
13,816,202

Less: Cash and cash equivalents
 
278,883

Less: Pro rata share of unconsolidated joint ventures' cash and cash equivalents
 
3,433

Enterprise Value
 
$
13,533,886

 
 
 
 
 
 
Net Debt/Enterprise Value
 
42.9
%
Net Debt/Normalized EBITDA Annualized
 
6.08
x
Net Debt + Preferred (2)/Normalized EBITDA Annualized
 
6.89
x
Fixed Charge Coverage Ratio
 
3.08
x
Liquidity (3)
 
 
 
 
$
1,778,883

___________________________________
(1)Weighted average interest rate for variable rate debt represents the interest rate in effect as of June 30, 2020.
(2)Balance represents 30.9 million shares of Series F Preferred Stock (and 30.9 million corresponding general partner Series F Preferred Units) and 49,766 limited partner Series F Preferred Units outstanding at June 30, 2020, multiplied by the liquidation preference of $25 per share. On July 22, 2020, the Company redeemed 6.0 million shares of Series F Preferred Stock at a redemption price of $25.00 per share by using $150.0 million.
(3)Liquidity represents cash and cash equivalents of $278.9 million and $1.5 billion available capacity on our $1.5 billion revolving credit facility.


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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 SUPPLEMENTAL INFORMATION

 
Balance Sheets
(unaudited, in thousands)
 
 
 
June 30,
2020
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Assets
 
 
 
 
 
 
 
 
 
 
Real estate investments, at cost:
 
 
 
 
 
 
 
 
 
 
Land
 
$
2,705,149

 
$
2,715,625

 
$
2,738,679

 
$
2,728,560

 
$
2,763,348

Buildings, fixtures and improvements
 
10,117,636

 
10,135,933

 
10,200,550

 
10,287,047

 
10,352,928

Intangible lease assets
 
1,891,831

 
1,899,900

 
1,904,641

 
1,909,932

 
1,927,699

Total real estate investments, at cost
 
14,714,616


14,751,458

 
14,843,870

 
14,925,539

 
15,043,975

Less: accumulated depreciation and amortization
 
3,756,132

 
3,659,980

 
3,594,247

 
3,559,403

 
3,488,838

Total real estate investments, net
 
10,958,484


11,091,478

 
11,249,623

 
11,366,136

 
11,555,137

Operating lease right-of-use assets
 
208,037

 
211,187

 
215,227

 
218,393

 
221,798

Investment in unconsolidated entities
 
86,300

 
78,718

 
68,825

 
69,025

 
68,633

Cash and cash equivalents
 
278,883

 
600,945

 
12,921

 
1,029,315

 
211,510

Restricted cash
 
21,203

 
18,720

 
20,959

 
20,742

 
20,692

Rent and tenant receivables and other assets, net
 
382,409

 
345,103

 
348,395

 
347,455

 
343,788

Goodwill
 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
48,093

 
88,513

 
26,957

 
66,684

 
22,553

Total assets
 
$
13,321,182


$
13,772,437


$
13,280,680

 
$
14,455,523

 
$
13,781,884

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable, net
 
$
1,393,652

 
$
1,405,701

 
$
1,528,134

 
$
1,717,817

 
$
1,745,331

Corporate bonds, net
 
3,404,935

 
2,814,474

 
2,813,739

 
2,622,320

 
2,621,130

Convertible debt, net
 
270,152

 
319,120

 
318,183

 
397,726

 
396,766

Credit facility, net
 
896,314

 
1,767,306

 
1,045,669

 
895,351

 
895,033

Below-market lease liabilities, net
 
130,208

 
134,410

 
143,583

 
147,997

 
152,654

Accounts payable and accrued expenses
 
112,551

 
125,358

 
126,320

 
1,125,703

 
127,799

Derivative, deferred rent and other liabilities
 
161,538

 
146,893

 
90,349

 
101,828

 
77,713

Distributions payable
 
85,231

 
150,493

 
150,364

 
201,451

 
187,359

Operating lease liabilities
 
215,322

 
217,567

 
221,061

 
223,288

 
225,972

Total liabilities
 
6,669,903


7,081,322

 
6,437,402

 
7,433,481

 
6,429,757

 
 
 
 
 
 
 
 
 
 
 
Series F preferred stock
 
309

 
309

 
309

 
389

 
429

Common stock
 
10,779

 
10,778

 
10,768

 
10,677

 
9,734

Additional paid-in capital
 
13,256,288

 
13,252,447

 
13,251,962

 
13,360,675

 
12,655,018

Accumulated other comprehensive loss
 
(106,109
)
 
(104,217
)
 
(27,670
)
 
(47,886
)
 
(28,026
)
Accumulated deficit
 
(6,517,303
)
 
(6,475,568
)
 
(6,399,626
)
 
(6,306,590
)
 
(5,416,759
)
Total stockholders' equity
 
6,643,964


6,683,749

 
6,835,743

 
7,017,265

 
7,220,396

Non-controlling interests
 
7,315

 
7,366

 
7,535

 
4,777

 
131,731

Total equity
 
6,651,279


6,691,115


6,843,278

 
7,022,042

 
7,352,127

Total liabilities and equity
 
$
13,321,182


$
13,772,437

 
$
13,280,680

 
$
14,455,523

 
$
13,781,884



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



404881440_vereitlogoa63.jpg
 
 
Q2 2020 SUPPLEMENTAL INFORMATION

 
Statements of Operations
(unaudited, in thousands, except per share data)
 
 
 
Three Months Ended
 
 
June 30,
2020
 
March 31,
2020
 
December 31,
2019
 
September 30,
2019
 
June 30,
2019
Revenues:
 
 
 
 
 
 
 
 
 
 
Rental
 
$
278,576

 
$
298,586

 
$
305,363

 
$
302,985

 
$
312,043

Fees from managed partnerships
 
421

 
596

 
322

 
316

 
145

Total revenues
 
278,997


299,182


305,685


303,301


312,188

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Acquisition-related
 
1,169

 
1,523

 
1,168