W. P. Carey Announces Third Quarter Financial Results

Merger With CPA(R):15 and REIT Conversion Completed September 28, 2012

Marketwired

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       5,504     17,111       14,064
  Reconciling items attributable to discontinued operations     191       1,209     977       3,992
EBITDA - real estate ownership   $ 16,132     $ 29,646   $ 82,282     $ 114,644
EBITDA per share (diluted)   $ 0.39     $ 0.73   $ 2.01     $ 2.83
                             
Total Company                            
EBITDA   $ 17,597     $ 44,652   $ 90,210     $ 204,718
EBITDA per share (diluted)   $ 0.43     $ 1.10   $ 2.20     $ 5.06
Diluted weighted average shares outstanding     41,127,404       40,404,520     41,029,578       40,424,316
                             

__________

 (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.
     

Non-GAAP Financial Disclosure

EBITDA as disclosed represents earnings before interest, taxes, depreciation and amortization. We believe that EBITDA is a useful supplemental measure to investors and analysts for assessing the performance of our business segments, although it does not represent net income that is computed in accordance with GAAP, because it removes the impact of our capital structure and asset base from our operating results and because it is helpful when comparing our operating performance to that of companies in our industry without regard to such items, which can vary substantially from company to company. Accordingly, EBITDA should not be considered as an alternative to net income as an indicator of our financial performance. EBITDA may not be comparable to similarly titled measures of other companies. Therefore, we use EBITDA as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.

   
W. P. CAREY INC.  
   
Reconciliation of Net Income to Funds From Operations -- as adjusted (AFFO) (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  
FFO - as defined by NAREIT     661       9,112       7,266       49,075  
  Adjustments:                                
    Amortization and other non-cash charges     247       (1,263 )     735       3,021  
    Stock based compensation     9,461       4,340       18,813       12,869  
    Deferred tax expense     (15,207 )     1,876       (21,430 )     14,119  
    Realized losses (gains) on foreign currency, derivatives and other     17       -       (6 )     -  
    Amortization of deferred financing costs     308       -       879       -  
      Total adjustments     (5,174 )     4,953       (1,009 )     30,009  
AFFO - Investment Management   $ (4,513 )   $ 14,065     $ 6,257     $ 79,084  
                                 
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:                                
    Depreciation and amortization of real property     5,510       6,194       17,330       16,909  
    Impairment charges     5,534       4,934       12,262       4,975  
    (Gain) loss on sale of real estate, net     (59 )     396       (1,564 )     (264 )
    Proportionate share of adjustments to equity in net income of partially owned entities to arrive at FFO:                                
      Depreciation and amortization of real property     707       1,173       2,335       4,049  
      Impairment charges     -       -       -       1,090  
      Loss (gain) on sale of real estate, net     181       -       (15,234 )     34  
    Proportionate share of adjustments for noncontrolling interests to arrive at FFO     (400 )     (1,157 )     (1,268 )     (1,477 )
      Total adjustments     11,473       11,540       13,861       25,316  
FFO - as defined by NAREIT     13,400       27,630       53,249       106,229  
  Adjustments:                                
    Gain on change in control of interests (b) (c)     (20,794 )     -       (20,794 )     (27,859 )
    Gain on deconsolidation of a subsidiary     -       (1,008 )     -       (1,008 )
    Other losses, net     -       135       -       -  
    Other depreciation, amortization and non-cash charges     (130 )     2,717       (106 )     (53 )
    Stock based compensation     344       53       747       157  
    Deferred tax expense     (917 )     (2,602 )     (2,101 )     (2,602 )
    Realized losses on foreign currency, derivatives and other     115       -       657       -  
    Amortization of deferred financing costs     509       -       1,375       -  
    Straight-line and other rent adjustments     (200 )     (1,014 )     (2,198 )     (2,451 )
    Above-market rent intangible lease amortization, net     51       -       162       -  
    Merger expenses     35,570       -       40,289       -  
    Proportionate share of adjustments to equity in net income of partially owned entities to arrive at AFFO:                                
      Other depreciation, amortization and non-cash charges                                
      Straight-line and other rent adjustments     (25 )     (463 )     (801 )     (1,227 )
      Below-market rent intangible lease amortization, net     -       -       (3 )     -  
      AFFO adjustments to equity earnings from equity investments     10,650       1,978       25,263       3,155  
    Proportionate share of adjustments for noncontrolling interests to arrive at AFFO     (141 )     59       (186 )     218  
      Total adjustments     25,032       (145 )     42,304       (31,670 )
AFFO - Real Estate Ownership   $ 38,432     $ 27,485     $ 95,553     $ 74,559  
                                 
Total Company                                
FFO - as defined by NAREIT   $ 14,061     $ 36,742     $ 60,515     $ 155,304  
FFO - as defined by NAREIT per share (diluted)   $ 0.34     $ 0.91     $ 1.47     $ 3.84  
AFFO   $ 33,919     $ 41,550     $ 101,810     $ 153,643  
AFFO per share (diluted)   $ 0.82     $ 1.03     $ 2.48     $ 3.80  
Diluted weighted average shares outstanding     41,127,404       40,404,520       41,029,578       40,424,316  
                                 

__________

(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.
(b)   Gain on change in control of interests for the nine months ended September 30, 2011 represents gain recognized on purchase of the remaining interests in two investments from CPA®:14, which we had previously accounted for under the equity method. In connection with purchasing these properties, we recognized a net gain of $27.9 million during the nine months ended September 30, 2011 to adjust the carrying value of our existing interests in these investments to their estimated fair values.
(c)   Gain on change in control of interests for the three and nine months ended September 30, 2012 represents a gain of $14.7 million recognized on our previously held interest in shares of CPA®:15 common stock, and a gain of $6.1 million recognized on the purchase of the remaining interests in five investments from CPA®:15, which we had previously accounted for under the equity method. We recognized a net gain of $20.8 million to adjust the carrying value of our existing interests in these investments to their estimated fair values.
     

Non-GAAP Financial Disclosure

FFO is a non-GAAP measure defined by NAREIT. NAREIT defines FFO as net income or loss (as computed in accordance with GAAP) excluding: depreciation and amortization expense from real estate assets, impairment charges on real estate, gains or losses from sales of depreciated real estate assets and extraordinary items; however, FFO related to assets held for sale, sold or otherwise transferred and included in the results of discontinued operations are included. These adjustments also incorporate the pro rata share of unconsolidated subsidiaries. FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers. Although NAREIT has published this definition of FFO, companies often modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations.

We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash charges such as amortization of intangibles, deferred income tax benefits and expenses, straight-line rents, stock compensation, gains or losses from extinguishment of debt and deconsolidation of subsidiaries and unrealized foreign currency exchange gains and losses. We refer to our modified definition of FFO as AFFO. We exclude these items from GAAP net income as they are not the primary drivers in our decision making process. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short-term fluctuations in net income but have no impact on cash flows, and we therefore use AFFO as one measure of our operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine executive compensation.

We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations. However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form of lower cash proceeds or other considerations.

 
W. P. CAREY INC.
Total Adjusted Revenue (Pro rata Basis) (Unaudited)
(in thousands, except percentages)
                                         
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011 (e)   2012   2011 (e)
    Revenue   %   Revenue   %   Revenue   %   Revenue   %
Asset management revenue   $ 15,850   20%   $ 14,840   16%   $ 47,088   21%   $ 51,279   21%
Structuring revenue (a)     8,316   11%     21,221   24%     19,576   8%     42,901   18%
Investment management revenues     24,166   31%     36,061   40%     66,664   29%     94,180   39%
Real estate revenues     54,154   69%     54,576   60%     166,801   71%     149,734   61%
Total Adjusted Revenue   $ 78,320   100%   $ 90,637   100%   $ 233,465   100%   $ 243,914   100%
                                         
Reconciliation of Total Adjusted Revenue                                        
Total revenue - as reported   $ 71,036       $ 76,658       $ 207,996       $ 268,862    
Less: Reimbursed costs from affiliates (b)     (19,879)         (14,707)         (59,100)         (49,485)    
Less: Wholesaling revenue (b)     (4,012)         (2,586)         (11,878)         (8,788)    
Less: Incentive, termination and subordinated disposition revenue (c)     -         -         -         (52,515)    
Add: Lease revenues - discontinued operations     59         579         1,159         6,025    
Add: Pro rata share of revenues from equity investments     5,313         6,689         17,463         21,668    
Less: Pro rata share of revenues due to noncontrolling interests     (411)         (452)         (1,261)         (2,193)    
Add: Pro rata share of revenues from CPA® REITs     18,862         19,976         57,297         52,072    
Add: Total distributions of available cash - CPA® REITs     7,352         4,480         21,789         8,268    
Total Adjusted Revenue   $ 78,320       $ 90,637       $ 233,465       $ 243,914    
                                         
Reconciliation of Real Estate Revenues                                        
Lease revenues - as reported   $ 16,714       $ 17,001       $ 51,265       $ 46,682    
Lease revenues - discontinued operations     59         579         1,159         6,025    
Total consolidated lease revenues     16,773         17,580         52,424         52,707    
Add: Pro rata share of revenues from equity investments     5,313         6,689         17,463         21,668    
Less: Pro rata share of revenues due to noncontrolling interests     (411)         (452)         (1,261)         (2,193)    
Total pro rata net lease revenues     21,675         23,817         68,626         72,182    
Add: Pro rata share of revenues from CPA® REITs:                                        
  CPA®:14     -         -         -         4,484    
  CPA®:15     4,234         4,652         12,731         13,178    
  CPA®:16 - Global     13,817         14,936         42,407         34,022    
  CPA®:17 - Global     811         388         2,159         388    
  Total pro rata share of revenues from CPA® REITs     18,862         19,976         57,297         52,072    
Add: Distributions of available cash - CPA® REITs                                        
  CPA®:16 - Global     3,685         2,499         11,564         2,499    
  CPA®:17 - Global     3,667         1,981         10,225         5,769    
  Total distributions of available cash - CPA® REITs     7,352         4,480         21,789         8,268    
Add: Other real estate income (d)     6,265         6,303         19,089         17,212    
Total Real Estate Revenues   $ 54,154       $ 54,576       $ 166,801       $ 149,734    
                                         

__________

(a)   We earn structuring revenue on acquisitions structured on behalf of the CPA® REITS and CWI that we manage and expect significant period-to-period variation in such revenue based on changes in investment volume. Investments structured on behalf of the CPA® REITS and CWI totaled approximately $198.3 million and $498.0 million for the three months ended September 30, 2012 and 2011, respectively, and approximately $468.3 million and $1.1 billion for the nine months ended September 30, 2012 and 2011, respectively.
(b)   Total adjusted revenue excludes reimbursements of costs received from the affiliated CPA® REITs and CWI as they have no impact on net income. Also excluded is wholesaling revenue earned in connection with CPA®:17 - Global's and CWI's public offerings, which is substantially offset by underwriting costs incurred in connection with the offerings.
(c)   In connection with providing a liquidity event for CPA®:14 shareholders, in May 2011, we earned termination revenue of $31.2 million and subordinated disposition revenue of $21.3 million, which we received in shares of CPA®:14 and cash, respectively. These CPA®:14 shares were subsequently converted to shares of CPA®:16 - Global in connection with the CPA®:14/16 merger.
(d)   Other real estate income generally consists of revenue from Carey Storage Management LLC, a subsidiary that invests in domestic self-storage properties and Livho, Inc., a subsidiary that operates a hotel franchise. Other real estate income also includes lease termination payments and other non-rent related revenues from real estate ownership, and as a result, we expect Other real estate income to fluctuate period to period.
(e)   Amounts presented for prior year periods do not reflect adjustments to prior period amounts for assets reclassified as held for sale or sold in the current period and reflected as discontinued operations.
     
     
     
W. P. CAREY INC.
Selected Investment Management Fees and Distributions (Unaudited)
(in thousands)
                                                 
    Three Months Ended September 30, 2012   Nine Months Ended September 30, 2012
    Asset Management Revenue               Asset Management Revenue            
    Base Asset       Distributions         Base Asset       Distributions      
    Management   Performance   of Available         Management   Performance   of Available      
    Revenue   Revenue   Cash   Total   Revenue   Revenue   Cash   Total
CPA®:15   $ 3,063   $ 3,063   $ -   $ 6,126   $ 9,272   $ 9,272   $ -   $ 18,544
CPA®:16 - Global     4,631     -     3,685     8,316     13,929     -     11,564     25,493
CPA®:17 - Global     4,906     -     3,667     8,573     14,224     -     10,225     24,449
CWI/Other     187     -     -     187     391     -     -     391
Total   $ 12,787   $ 3,063   $ 7,352   $ 23,202   $ 37,816   $ 9,272   $ 21,789   $ 68,877
                                                 
    Three Months Ended September 30, 2011   Nine Months Ended September 30, 2011
    Asset Management Revenue               Asset Management Revenue            
    Base Asset         Distributions         Base Asset         Distributions      
    Management   Performance   of Available         Management   Performance   of Available      
    Revenue   Revenue   Cash   Total   Revenue   Revenue   Cash   Total
Total   $ 11,581   $ 3,259   $ 4,480   $ 19,320   $ 34,459   $ 16,820   $ 8,268   $ 59,547
                                                 
Contact:
COMPANY CONTACT:
Cheryl Sanclemente
W. P. Carey Inc.
212-492-8995
Email Contact

PRESS CONTACT:
Guy Lawrence
Ross & Lawrence
212-308-3333
Email Contact
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