W. P. Carey Announces Third Quarter Financial Results

November 8, 2012

NEW YORK, NY--(Marketwire - Nov 8, 2012) - W. P. Carey Inc. ( NYSE : WPC ), a real estate investment trust ("REIT"), today reported financial results for the third quarter ended September 30, 2012. Results do not fully reflect the impact of the merger with its affiliate, Corporate Property Associates 15 Incorporated ("CPA®:15"), which closed on September 28, 2012. Results for the combined companies can be accessed at http://ir.wpcarey.com/Cache/c15118855.html.

QUARTERLY RESULTS

  • Funds from operations -- as adjusted (AFFO) for the third quarter of 2012 decreased compared to the third quarter of 2011, to $33.9 million or $0.82 per diluted share from $41.6 million or $1.03 per diluted share, respectively. AFFO for the nine months ended September 30, 2012 was $101.8 million or $2.48 per diluted share, compared to $153.6 million or $3.80 per diluted share for the comparable period in 2011. The higher levels in the 2011 periods were primarily due to $52.5 million of revenues earned from the merger of two of our managed CPA® REITS in May 2011.
  • Cash flow from operating activities for the nine months ended September 30, 2012 was $31.7 million compared to $62.7 million for the prior year period.
  • Total revenues net of reimbursed expenses for the third quarter of 2012 was $51.2 million compared to $62.0 million for the third quarter of 2011. Total revenues net of reimbursed expenses for the nine months ended September 30, 2012 was $148.9 million compared to $219.4 million for the prior year period. Reimbursed expenses are excluded from total revenues because they have no impact on net income.
  • Total adjusted revenue, or revenue on a pro-rata basis, for the nine months ended September 30, 2012 was $233.5 million compared to $243.9 million for the prior year period. 
  • Net income attributable to W. P. Carey common stockholders for the third quarter of 2012 was $2.6 million, compared to $25.2 million for the same period in 2011. For the nine months ended September 30, 2012, net income was $46.7 million compared to $130.0 million for the comparable period in 2011. 
  • We received approximately $8.5 million in cash distributions from our equity ownership in the CPA® REITs for the quarter ended September 30, 2012 compared with $6.1 million for the comparable period in 2011.
  • Further information concerning AFFO and total adjusted revenue -- non-GAAP supplemental performance metrics -- is presented in the accompanying tables.

Commenting on the Company's quarterly results, Trevor Bond, President and Chief Executive Officer, noted, "The merger and REIT conversion were the strategic highlights of our third quarter and positively impacted the liquidity in our stock and interest from institutional and individual investors as expected. From a results perspective, underscoring the cyclicality of the incentive fees we earn through fund liquidations and the structuring revenues we earn through new investments, our headline numbers are off from last year, primarily because we earned a $52 million fee in 2011 following the merger of CPA®:14 and CPA®:16 - Global and because investment volume has been lighter so far this year compared to the same period last year. That said, the pipeline going into the fourth quarter is strong, although we know that we can't count on a deal until it's closed, of course. More importantly, the figures by which we measure the performance of our core business, which are set forth in the supplemental information package that we filed today, demonstrate continued stability and remain in line with growth expectations, especially when one looks at the pro forma year-to-date performance of the combined companies. We look forward to breaking those numbers down in more detail for our investors on today's earnings call."

CONVERSION TO REIT AND MERGER WITH CPA®:15

  • W. P. Carey's conversion to a REIT and merger with CPA®:15 closed on September 28, 2012 and W. P. Carey Inc. commenced trading on the New York Stock Exchange as a REIT effective October 1, 2012.
  • As a result of our conversion to REIT status, W. P. Carey was immediately eligible for inclusion in the FTSE NAREIT All REITs index and was added to the MSCI US REIT and MSCI Mid Cap 450 Indices on October 15, 2012.
  • Unaudited combined company AFFO for the nine months ended September 30, 2012 would have been $2.78 per share.

W. P. CAREY OWNED PORTFOLIO UPDATE

  • In the third quarter of 2012, W. P. Carey acquired five retail stores leased to Walgreen Co. The properties, comprising a total of approximately 74,000 square feet, are located in Virginia Beach, Virginia; Florence, Alabama; Snellville, Georgia; Concord, North Carolina; and Rockport, Texas. The purchase price was approximately $25 million.
  • During the third quarter, W. P. Carey secured approximately $42 million represented refinancing of maturing debt on three properties; interest rates on these re-financings averaged more than 190 basis points below the rates on existing financings. Additionally, financing of properties used primarily to acquire a joint venture interest from an unrelated third party was $140 million.
  • The W. P. Carey owned portfolio currently consists of 430 properties comprising 39 million square feet leased to more than 130 corporate tenants. The average lease term of the portfolio has increased to 9.1 years and the occupancy rate is approximately 98.4%. 

ASSET MANAGEMENT UPDATE

  • W. P. Carey is the advisor to the CPA® REITs and CWI, which had aggregate real estate assets of $7.3 billion and total assets of $7.8 billion as of September 30, 2012. 
  • The average occupancy rate for the 81 million square feet owned by the CPA® REITs was approximately 97.9%.
  • The W. P. Carey Group's assets under ownership and management total approximately $13.3 billion as of September 30, 2012.

CPA®:17 - GLOBAL ACTIVITY

  • We have raised more than $2.6 billion on behalf of CPA®:17 - Global since beginning fundraising in December 2007.
  • Investment volume for CPA®:17 - Global in the third quarter of 2012 was approximately $173.7 million. This includes acquisitions of an automotive dealership portfolio of $66 million, an industrial headquarters facility located in Avon, Ohio leased to Bearing Technologies, LLC, two for-profit education facilities located in Savannah, Georgia and Montgomery, Alabama, and a corporate headquarters building in Warrenville, Illinois, as well as financing for the construction of an industrial warehouse located in Zary, Poland.

CAREY WATERMARK INVESTORS ACTIVITY

  • From the beginning of its initial public offering through November 6, 2012, we have raised approximately $130 million on behalf of Carey Watermark Investors ("CWI"), our lodging-focused non-traded REIT offering and invested approximately $128 million.

DISTRIBUTIONS

  • Our Board of Directors raised the quarterly cash distribution to $0.650 per share for the third quarter of 2012. The distribution -- our 46th consecutive quarterly increase -- represented a 15% increase and was paid on October 16, 2012 to shareholders of record as of October 2, 2012. 

CONFERENCE CALL & WEBCAST
Please call at least 10 minutes prior to call to register.
Time: Thursday, November 8, 2012 at 11:00 AM (ET)
Call-in Number: 800-860-2442
(International) +1-412-858-4600
Webcast: www.wpcarey.com/earnings
Podcast: www.wpcarey.com/podcast
Available after 2:00 PM (ET)
Replay Number: 877-344-7529
(International) +1-412-317-0088
Replay Passcode: 10019678
Replay Available until November 22, 2012 at 9:00 AM (ET).

W. P. Carey Inc.

W. P. Carey Inc. is a publicly traded REIT ( NYSE : WPC ) that provides long-term sale-leaseback and build-to-suit financing for companies worldwide and manages an investment portfolio of approximately $13.3 billion. W. P. Carey Inc. is the successor to W. P. Carey & Co. LLC, which had its origins in 1973. The largest owner/manager of net lease assets, WPC's corporate finance focused credit and real estate underwriting process is a constant that has been successfully leveraged across a wide variety of industries and property types. Our portfolio of long-term leases with creditworthy tenants has an established history of generating stable cash flows that have enabled the Company to deliver consistent and rising dividend income to investors for nearly four decades. www.wpcarey.com

Individuals interested in receiving future updates on W. P. Carey via e-mail can register at www.wpcarey.com/alerts.

This press release contains forward-looking statements within the meaning of the Federal securities laws. Examples of such forward-looking statements include, but are not limited to, the statements made by Mr. Bond. A number of factors could cause the Company's actual results, performance or achievement to differ materially from those anticipated. Among those risks, trends and uncertainties are the general economic climate; the supply of and demand for office and industrial properties; interest rate levels; the availability of financing; and other risks associated with the acquisition and ownership of properties, including risks that the tenants will not pay rent, or that costs may be greater than anticipated. For further information on factors that could impact the Company, reference is made to the Company's filings with the Securities and Exchange Commission.

   
W. P. CAREY INC.  
   
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  
(in thousands, except share and per share amounts)  
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2012     2011     2012     2011  
Revenues                                
  Asset management revenue   $ 15,850     $ 14,840     $ 47,088     $ 51,279  
  Structuring revenue     8,316       21,221       19,576       42,901  
  Incentive, termination and subordinated disposition revenue     -       -       -       52,515  
  Wholesaling revenue     4,012       2,586       11,878       8,788  
  Reimbursed costs from affiliates     19,879       14,707       59,100       49,485  
  Lease revenues     16,714       17,001       51,265       46,682  
  Other real estate income     6,265       6,303       19,089       17,212  
      71,036       76,658       207,996       268,862  
Operating Expenses                                
  General and administrative     (54,826 )     (25,187 )     (108,317 )     (71,095 )
  Reimbursable costs     (19,879 )     (14,707 )     (59,100 )     (49,485 )
  Depreciation and amortization     (6,571 )     (6,323 )     (19,928 )     (16,552 )
  Property expenses     (2,426 )     (3,231 )     (7,863 )     (8,547 )
  Other real estate expenses     (2,600 )     (2,725 )     (7,530 )     (8,224 )
  Impairment charges     (5,535 )     -       (5,535 )     -  
      (91,837 )     (52,173 )     (208,273 )     (153,903 )
Other Income and Expenses                                
  Other interest income     252       323       910       1,558  
  Income from equity investments in real estate and the REITs     10,477       16,068       52,808       37,356  
  Gain on change in control of interests     20,794       -       20,794       27,859  
  Other income and (expenses)     502       (294 )     2,026       4,945  
  Interest expense     (7,868 )     (5,989 )     (22,459 )     (15,660 )
      24,157       10,108       54,079       56,058  
  Income from continuing operations before income taxes     3,356       34,593       53,802       171,017  
  Provision for income taxes     (379 )     (5,929 )     (192 )     (38,526 )
  Income from continuing operations     2,977       28,664       53,610       132,491  
Discontinued Operations                                
  (Loss) income from operations of discontinued properties     (342 )     916       (870 )     1,146  
  (Loss) gain on sale of real estate     (409 )     612       (888 )     1,272  
  Impairment charges     -       (4,934 )     (6,727 )     (4,975 )
  Loss from discontinued operations, net of tax     (751 )     (3,406 )     (8,485 )     (2,557 )
Net Income     2,226       25,258       45,125       129,934  
  Add: Net loss attributable to noncontrolling interests     325       581       1,383       1,295  
  Less: Net loss (income) attributable to redeemable noncontrolling interest     37       (637 )     146       (1,241 )
Net Income Attributable to W. P. Carey Common Stockholders   $ 2,588     $ 25,202     $ 46,654     $ 129,988  
                                 
Basic Earnings Per Share                                
  Income from continuing operations attributable to W. P. Carey common stockholders   $ 0.08     $ 0.70     $ 1.35     $ 3.28  
  Loss from discontinued operations attributable to W. P. Carey common stockholders     (0.02 )     (0.08 )     (0.21 )     (0.06 )
  Net income attributable to W. P. Carey common stockholders   $ 0.06     $ 0.62     $ 1.14     $ 3.22  
                                 
Diluted Earnings Per Share                                
  Income from continuing operations attributable to W. P. Carey common stockholders   $ 0.08     $ 0.70     $ 1.33     $ 3.25  
  Loss from discontinued operations attributable to W. P. Carey common stockholders     (0.02 )     (0.08 )     (0.21 )     (0.06 )
  Net income attributable to W. P. Carey common stockholders   $ 0.06     $ 0.62     $ 1.12     $ 3.19  
                                 
Weighted Average Shares Outstanding                                
  Basic     40,366,298       39,861,064       40,398,433       39,794,506  
  Diluted     41,127,404       40,404,520       41,029,578       40,424,316  
                                 
Amounts Attributable to W. P. Carey Common Stockholders                                
  Income from continuing operations, net of tax   $ 3,339     $ 28,608     $ 55,139     $ 132,545  
  Loss from discontinued operations, net of tax     (751 )     (3,406 )     (8,485 )     (2,557 )
  Net income   $ 2,588     $ 25,202     $ 46,654     $ 129,988  
                                 
Distributions Declared Per Common Share   $ 0.650     $ 0.560     $ 1.782     $ 1.622  
                                 
                                 
                                 
W. P. CAREY INC.  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  
(in thousands)  
                 
    Nine Months Ended September 30,  
    2012     2011  
Cash Flows - Operating Activities                
Net income   $ 45,125     $ 129,934  
Adjustments to net income:                
  Depreciation and amortization, including intangible assets and deferred financing costs     22,532       20,160  
  Income from equity investments in real estate and the REITs in excess of distributions received     (18,557 )     (835 )
  Straight-line rent and financing lease adjustments     (2,229 )     (2,039 )
  Amortization of deferred revenue     (7,077 )     (3,932 )
  Gain on deconsolidation of a subsidiary     -       (1,008 )
  Gain on sale of real estate     (1,564 )     (264 )
  Unrealized gain on foreign currency transactions and others     (17 )     (79 )
  Realized loss (gain) on foreign currency transactions and others     594       (1,134 )
  Management and disposition income received in shares of affiliates     (21,272 )     (62,493 )
  Gain on conversion of shares     (15 )     (3,834 )
  Gain on change in control of interests     (20,794 )     (27,859 )
  Impairment charges     12,262       4,975  
  Stock-based compensation expense     19,560       13,026  
  Deferred acquisition revenue received     17,017       18,128  
  Increase in structuring revenue receivable     (8,502 )     (17,732 )
  (Decrease) increase in income taxes, net     (14,885 )     5,907  
  Net changes in other operating assets and liabilities     9,561       (8,269 )
Net cash provided by operating activities     31,739       62,652  
                 
Cash Flows - Investing Activities                
  Cash paid to shareholders of CPA®:15 in connection with the Merger     (152,356 )     -  
  Cash acquired in connection with the Merger     178,945       -  
  Distributions received from equity investments in real estate and the REITs in excess of equity income     27,241       13,870  
  Capital contributions to equity investments     (377 )     (2,297 )
  Purchase of interests in CPA®:16 - Global     -       (121,315 )
  Purchases of real estate and equity investments in real estate     (2,679 )     (24,323 )
  VAT refunded in connection with acquisitions of real estate     -       5,035  
  Capital expenditures     (2,930 )     (6,731 )
  Cash acquired on acquisition of subsidiaries     -       57  
  Proceeds from sale of real estate     32,586       10,998  
  Proceeds from sale of securities     314       777  
  Funding of short-term loans to affiliates     -       (96,000 )
  Proceeds from repayment of short-term loans to affiliates     -       95,000  
  Funds placed in escrow     (11,716 )     (5,282 )
  Funds released from escrow     13,540       2,326  
Net cash provided by (used in) investing activities     82,568       (127,885 )
                 
Cash Flows - Financing Activities                
  Distributions paid     (69,180 )     (63,060 )
  Contributions from noncontrolling interests     2,319       2,341  
  Distributions paid to noncontrolling interests     (1,866 )     (5,310 )
  Purchase of noncontrolling interest     -       (7,502 )
  Purchase of treasury stock from related party     (25,000 )     -  
  Scheduled payments of mortgage principal     (12,455 )     (22,893 )
  Proceeds from mortgage financing     1,250       20,848  
  Proceeds from senior credit facility     215,000       251,410  
  Repayments of senior credit facility     (30,000 )     (140,000 )
  Payment of financing costs     (1,687 )     (1,562 )
  Proceeds from issuance of shares     5,964       1,034  
  Windfall tax benefit associated with stock-based compensation awards     8,865       2,051  
Net cash provided by financing activities     93,210       37,357  
                 
Change in Cash and Cash Equivalents During the Period                
    Effect of exchange rate changes on cash     (70 )     278  
    Net increase (decrease) in cash and cash equivalents     207,447       (27,598 )
  Cash and cash equivalents, beginning of period     29,297       64,693  
  Cash and cash equivalents, end of period   $ 236,744     $ 37,095  
                 
                 
                 
W. P. CAREY INC.
 
Financial Highlights (Unaudited)
(in thousands, except per share amounts)
 

These financial highlights include non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization ("EBITDA") and funds from operations -- as adjusted ("AFFO"). A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures is provided on the following pages.

         
    Three Months Ended September 30,   Nine Months Ended September 30,
    2012     2011   2012   2011
EBITDA (a)                          
Investment management   $ 1,465     $ 15,006   $ 7,928   $ 90,074
Real estate ownership     16,132       29,646     82,282     114,644
Total   $ 17,597     $ 44,652   $ 90,210   $ 204,718
                           
AFFO (a)                          
Investment management   $ (4,513 )   $ 14,065   $ 6,257   $ 79,084
Real estate ownership     38,432       27,485     95,553     74,559
Total   $ 33,919     $ 41,550   $ 101,810   $ 153,643
                           
EBITDA Per Share (Diluted) (a)                          
Investment management   $ 0.04     $ 0.37   $ 0.19   $ 2.23
Real estate ownership     0.39       0.73     2.01     2.83
Total   $ 0.43     $ 1.10   $ 2.20   $ 5.06
                           
AFFO Per Share (Diluted) (a)                          
Investment management   $ (0.11 )   $ 0.35   $ 0.15   $ 1.96
Real estate ownership     0.93       0.68     2.33     1.84
Total   $ 0.82     $ 1.03   $ 2.48   $ 3.80
                           
Distributions declared                 $ 92,856   $ 42,561
                           

__________

 (a)   Effective April 1, 2012, we include cash distributions and deferred revenue received and earned from the operating partnerships of CPA®:16 - Global, CPA®:17 - Global and CWI in our Real Estate Ownership segment. Results of operations for the prior year periods have been reclassified to conform to the current period presentation. Additionally, during the third quarter of 2011, CPA®:16 - Global finalized its assessment of the fair values of the assets acquired and liabilities assumed in connection with the CPA®:14/16 merger and made certain adjustments during that quarter. Our proportionate share of the adjustments before income taxes was approximately $2.6 million. In accordance with current accounting guidance, we have retrospectively adjusted our results of operations in our Real Estate Ownership segment for the three and nine months ended September 30, 2011 to include such adjustments.
     
     
     
...
W. P. CAREY INC.
 
Reconciliation of Net Income to EBITDA (Unaudited)
(in thousands, except share and per share amounts)
 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2012     2011   2012     2011
Investment Management                            
Net income from investment management attributable to W. P. Carey stockholders(a)   $ 661     $ 9,112   $ 7,266     $ 49,075
Adjustments:                            
  (Benefit from) provision for income taxes     (133 )     5,075     (2,155 )     38,511
  Depreciation and amortization     937       819     2,817       2,488
  EBITDA - investment management   $ 1,465     $ 15,006   $ 7,928     $ 90,074
  EBITDA per share (diluted)   $ 0.04     $ 0.37   $ 0.19     $ 2.23
                             
Real Estate Ownership                            
Net income from real estate ownership attributable to W. P. Carey stockholders(a)   $ 1,927     $ 16,090   $ 39,388     $ 80,913
 Adjustments:                            
  Interest expense     7,868       5,989     22,459       15,660
  Provision for income taxes     512       854     2,347       15
  Depreciation and amortization     5,634