SOURCE: W. P. Carey Inc.

W. P. Carey Inc.

February 26, 2013 09:00 ET

W. P. Carey Announces Fourth Quarter and Year-End 2012 Financial Results

NEW YORK, NY--(Marketwire - Feb 26, 2013) - W. P. Carey Inc. (NYSE: WPC), a real estate investment trust ("REIT"), today reported financial results for the fourth quarter and year-ended December 31, 2012.

2012 HIGHLIGHTS

During 2012, the Company:

  • Reported AFFO of $1.13 per diluted share for the fourth quarter and $3.76 per diluted share for the year ended December 31, 2012
  • Completed merger with CPA®:15 and commenced trading as a REIT on October 1, 2012
  • Structured $618 million of investments on behalf of CPA®:17 - Global in the fourth quarter and $1.0 billion for the full year
  • Increased assets under ownership and management by 17% to $14.1 billion for the full year
  • Raised annualized dividend rate to $2.64 per share in the fourth quarter, an increase of 17% versus the fourth quarter of 2011 and WPC's 47th consecutive quarterly increase
  • Generated a total shareholder return of approximately 34% for the year ended December 31, 2012

QUARTERLY AND YEAR-END RESULTS

  • Funds from operations -- as adjusted (AFFO) for the fourth quarter of 2012 was $78.8 million or $1.13 per diluted share, compared to $35.2 million or $0.88 per diluted share for the fourth quarter of 2011. AFFO for the year ended December 31, 2012 was $180.6 million or $3.76 per diluted share, compared to $188.9 million or $4.71 per diluted share for 2011. The year-over-year decrease was due to non-recurring fee revenue we earned from the merger of two of our managed CPA® REITs in May 2011. Per share data for the 2012 periods reflects the issuance of 28.2 million shares in connection with our merger with CPA®:15.
  • Cash flow from operating activities for the year ended December 31, 2012 was $80.6 million, compared to $80.1 million for 2011.
  • Total revenues net of reimbursed expenses for the fourth quarter of 2012 were $128.9 million, compared to $45.6 million for the fourth quarter of 2011. Total revenues net of reimbursed expenses for the year ended December 31, 2012 were $275.8 million, compared to $263.0 million in 2011. Reimbursed expenses are excluded from total revenues because they have no impact on net income.
  • Net Income for the fourth quarter of 2012 was $15.5 million, compared to $9.1 million for the same period in 2011. For the year ended December 31, 2012, net income was $62.1 million, compared to $139.1 million for 2011.
  • For the year ended December 31, 2012, we received approximately $31.5 million in cash distributions from our equity ownership in the CPA® REITs. We also received $30 million in cash distributions for our special general partnership interest in the CPA® REITs.
  • Further information concerning AFFO, a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.

CONVERSION TO A 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 on October 1, 2012.
  • These transactions are part of a larger transformation to implement our overall business strategy of expanding real estate assets under ownership, which in turn is expected to provide a platform for future growth.

W. P. CAREY OWNED PORTFOLIO UPDATE

  • Through our merger with CPA®:15, we acquired a portfolio of 305 diversified net lease assets for $2.6 billion.
  • During the year, we completed acquisitions totaling approximately $152 million, including the remaining interest in an existing portfolio of 12 Marriott Courtyard hotels and five Walgreens retail stores.
  • In January 2013, W. P. Carey completed a sale-leaseback with Kraft Foods Group for their Northfield, Illinois campus. The 679,000 square foot facility is home to Kraft's corporate headquarters.
  • The W. P. Carey owned portfolio currently consists of 423 properties comprising 38.5 million square feet leased to more than 120 corporate tenants. The average lease term of the portfolio is 8.9 years and the occupancy rate is approximately 98.7%.

INVESTMENT MANAGEMENT UPDATE

  • W. P. Carey is the advisor to the CPA® REITs and CWI, which had aggregate real estate assets of $7.9 billion, cash of approximately $750 million and total assets of $8.5 billion as of December 31, 2012.
  • The average occupancy rate for the 83 million square feet owned by the CPA® REITs was approximately 98.2%.

CPA®:17 - GLOBAL ACTIVITY

  • In December 2012, CPA®:17 - Global closed to new investments, having raised $2.9 billion since its initial public offering, which commenced in 2007.
  • Investment volume for CPA®:17 - Global in the fourth quarter of 2012 was approximately $618 million and $1.0 billion for the year.
  • We completed our first transaction in Japan through a $47 million acquisition of assets leased to Wanbishi Archives Co., Ltd., the largest information/document management company in Japan.

CAREY WATERMARK INVESTORS ACTIVITY

  • From the beginning of its initial public offering through February 22, 2013, our lodging-focused non-traded REIT offering has raised approximately $194 million.
  • During 2012, we invested in five hotels for a total of approximately $170 million.

DIVIDENDS

  • The W. P. Carey Board of Directors raised the quarterly cash dividend to $0.66 per share for the fourth quarter of 2012. The dividend -- our 47th consecutive quarterly increase -- was paid on January 15, 2013 to stockholders of record as of December 31, 2012. Over the course of the year, we increased our dividend by 17%, to an annualized rate of $2.64 per share.

W. P. Carey President and CEO Trevor Bond noted, "2012 was a landmark year for us in many ways. We completed our conversion to REIT status and our merger with CPA®:15 in September. We announced record acquisitions volume of $1.4 billion, and assets under management grew from $12.1 billion to $14.1 billion over the course of the year. As we enter our 40th year as a leader in the net lease sector, we're well-positioned to build on the accomplishments of 2012, continuing to adhere to our proven investment strategy of Investing for the Long Run."

CONFERENCE CALL & WEBCAST

Please call at least 10 minutes prior to call to register.

Time: Tuesday, February 26, 2013 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: 10023829

Replay available until March 22, 2013 at 9:00 AM (ET).

W. P. Carey Inc.
Celebrating its 40th anniversary, 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 owns and manages an investment portfolio totaling approximately $14.1 billion. 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

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 W. P. Carey'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 W. P. Carey, reference is made to W. P. Carey's filings with the Securities and Exchange Commission.

   
W. P. CAREY INC.  
                   
CONSOLIDATED STATEMENTS OF INCOME  
(in thousands, except share and per share amounts)  
                   
    Years Ended December 31,  
    2012     2011     2010  
Revenues                        
  Lease revenues:                        
    Rental income   $ 108,707     $ 52,360     $ 41,940  
    Interest income from direct financing leases     15,796       10,278       9,542  
  Total lease revenues     124,503       62,638       51,482  
  Asset management revenue from affiliates     56,666       66,808       76,246  
  Structuring revenue from affiliates     48,355       46,831       44,525  
  Incentive, termination and subordinated disposition revenue from affiliates     -       52,515       -  
  Wholesaling revenue     19,914       11,664       11,096  
  Reimbursed costs from affiliates     98,245       64,829       60,023  
  Other real estate income     26,312       22,499       17,273  
      373,995       327,784       260,645  
Operating Expenses                        
  General and administrative     (144,809 )     (93,733 )     (73,427 )
  Reimbursable costs     (98,245 )     (64,829 )     (60,023 )
  Depreciation and amortization     (48,790 )     (24,347 )     (18,309 )
  Property expenses     (13,041 )     (10,145 )     (8,009 )
  Other real estate expenses     (9,850 )     (10,784 )     (8,121 )
  Impairment charges     (10,467 )     1,365       (1,140 )
      (325,202 )     (202,473 )     (169,029 )
Other Income and Expenses                        
  Other interest income     1,396       2,001       1,269  
  Income from equity investments in real estate and the Managed REITs     62,392       51,228       30,992  
  Gain on change in control of interests     20,744       27,859       781  
  Other income and (expenses)     3,402       4,578       627  
  Interest expense     (50,573 )     (21,770 )     (15,636 )
      37,361       63,896       18,033  
  Income from continuing operations before income taxes     86,154       189,207       109,649  
  Provision for income taxes     (6,783 )     (37,214 )     (25,814 )
  Income from continuing operations     79,371       151,993       83,835  
Discontinued Operations                        
  Income from operations of discontinued properties     922       1,366       4,897  
  Gain on deconsolidation of a subsidiary     -       1,008       -  
  (Loss) gain on sale of real estate     (5,019 )     (3,391 )     460  
  Impairment charges     (12,495 )     (11,838 )     (14,241 )
  Loss from discontinued operations, net of tax     (16,592 )     (12,855 )     (8,884 )
Net Income     62,779       139,138       74,951  
  Net (income) loss attributable to noncontrolling interests     (607 )     1,864       314  
  Less: Net income attributable to redeemable noncontrolling interest     (40 )     (1,923 )     (1,293 )
Net Income Attributable to W. P. Carey   $ 62,132     $ 139,079     $ 73,972  
                         
Basic Earnings Per Share                        
  Income from continuing operations attributable to W. P. Carey   $ 1.65     $ 3.76     $ 2.08  
  Loss from discontinued operations attributable to W. P. Carey     (0.35 )     (0.32 )     (0.22 )
  Net income attributable to W. P. Carey   $ 1.30     $ 3.44     $ 1.86  
                         
Diluted Earnings Per Share                        
  Income from continuing operations attributable to W. P. Carey   $ 1.62     $ 3.74     $ 2.08  
  Loss from discontinued operations attributable to W. P. Carey     (0.34 )     (0.32 )     (0.22 )
  Net income attributable to W. P. Carey   $ 1.28     $ 3.42     $ 1.86  
                         
Weighted Average Shares Outstanding                        
  Basic     47,389,460       39,819,475       39,514,746  
  Diluted     48,078,474       40,098,095       40,007,894  
                         
Amounts Attributable to W. P. Carey                        
  Income from continuing operations, net of tax   $ 78,724     $ 151,934     $ 82,856  
  Loss from discontinued operations, net of tax     (16,592 )     (12,855 )     (8,884 )
  Net income attributable to W. P. Carey   $ 62,132     $ 139,079     $ 73,972  
                           
                           
                           
W. P. CAREY INC.  
                   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
                   
    Years Ended December 31,  
    2012     2011     2010  
Cash Flows -- Operating Activities                        
Net income   $ 62,779     $ 139,138     $ 74,951  
Adjustments to net income:                        
  Depreciation and amortization, including intangible assets and deferred financing costs     55,114       29,616       24,443  
  (Income) loss from equity investments in real estate and the Managed REITs in excess of distributions received     (17,271 )     310       (4,920 )
  Straight-line rent, financing lease adjustments and amortization of rent-related intangibles     2,831       (3,698 )     286  
  Amortization of deferred revenue     (9,436 )     (6,291 )     -  
  Gain on deconsolidation of a subsidiary     -       (1,008 )     -  
  Loss (gain) on sale of real estate     2,773       3,391       (460 )
  Unrealized (gain) loss on foreign currency transactions and others     (1,861 )     138       300  
  Realized loss (gain) on foreign currency transactions and others     610       (965 )     (731 )
  Allocation of loss to profit-sharing interest     -       -       (781 )
  Management and disposition income received in shares of Managed REITs     (28,477 )     (73,936 )     (35,235 )
  Gain on conversion of shares     (15 )     (3,806 )     -  
  Gain on change in control of interests     (20,794 )     (27,859 )     -  
  Impairment charges     22,962       10,473       15,381  
  Stock-based compensation expense     26,038       17,716       7,082  
  Deferred acquisition revenue received     21,059       21,546       21,204  
  Increase in structuring revenue receivable     (20,304 )     (19,537 )     (20,237 )
  (Decrease) increase in income taxes, net     (18,277 )     244       (1,288 )
  Net changes in other operating assets and liabilities     2,912       (5,356 )     6,422  
Net Cash Provided by Operating Activities     80,643       80,116       86,417  
                         
Cash Flows -- Investing Activities                        
  Cash paid to stockholders of CPA®:15 in the Merger     (152,356 )     -       -  
  Cash acquired in connection with the Merger     178,945       -       -  
  Distributions received from equity investments in real estate and the Managed REITs in excess of equity income     46,294       20,807       18,758  
  Capital contributions to equity investments     (726 )     (2,297 )     -  
  Purchase of interests in CPA®:16 -- Global     -       (121,315 )     -  
  Purchases of real estate and equity investments in real estate     (3,944 )     (24,315 )     (96,884 )
  Value added taxes ("VAT") paid in connection with acquisition of real estate     -       -       (4,222 )
  VAT refunded in connection with acquisitions of real estate     -       5,035       -  
  Capital expenditures     (6,204 )     (13,239 )     (5,135 )
  Cash acquired on acquisition of subsidiaries     -       57       -  
  Proceeds from sale of real estate     73,204       12,516       14,591  
  Proceeds from sale of securities     372       818       -  
  Funding of short-term loans to affiliates     -       (96,000 )     -  
  Proceeds from repayment of short-term loans to affiliates     -       96,000       -  
  Funds placed in escrow     (46,951 )     (6,735 )     (1,571 )
  Funds released from escrow     37,832       2,584       36,620  
Net Cash Provided by (Used in) Investing Activities     126,466       (126,084 )     (37,843 )
                         
Cash Flows -- Financing Activities                        
  Distributions paid     (113,867 )     (85,814 )     (92,591 )
  Contributions from noncontrolling interests     3,291       3,223       14,261  
  Distributions paid to noncontrolling interests     (7,314 )     (7,258 )     (4,360 )
  Contributions from profit-sharing interest     -       -       3,694  
  Distributions to profit-sharing interest     -       -       (693 )
  Purchase of noncontrolling interest     -       (7,502 )     -  
  Purchase of treasury stock from related party (Note ##RPF_FN)     (45,270 )     -       -  
  Scheduled payments of mortgage principal     (54,964 )     (25,327 )     (14,324 )
  Proceeds from mortgage financing     23,750       45,491       56,841  
  Proceeds from senior credit facility     300,000       251,410       83,250  
  Repayments of senior credit facility     (280,160 )     (160,000 )     (52,500 )
  Payment of financing costs     (2,557 )     (7,778 )     (1,204 )
  Funds placed in escrow     1,970       -       -  
  Proceeds from issuance of shares     51,644       1,488       3,724  
  Windfall tax benefit associated with stock-based compensation awards     10,185       2,569       2,354  
Net Cash (Used in) Provided by Financing Activities     (113,292 )     10,502       (1,548 )
                         
Change in Cash and Cash Equivalents During the Year                        
    Effect of exchange rate changes on cash     790       70       (783 )
    Net increase (decrease) in cash and cash equivalents     94,607       (35,396 )     46,243  
  Cash and cash equivalents, beginning of year     29,297       64,693       18,450  
  Cash and cash equivalents, end of year   $ 123,904     $ 29,297     $ 64,693  
                           
                           
                           
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
December 31,
  Years Ended
December 31,
    2012   2011   2012   2011
EBITDA(a)                        
Investment management   $ 15,824   $ 1,141   $ 23,752   $ 91,234
Real estate ownership     64,603     22,487     146,885     137,106
Total   $ 80,427   $ 23,628   $ 170,637   $ 228,340
                         
AFFO(a)                        
Investment management   $ 14,116   $ 7,002   $ 21,120   $ 86,105
Real estate ownership     64,705     28,207     159,511     102,748
Total   $ 78,821   $ 35,209   $ 180,631   $ 188,853
                         
EBITDA Per Share (Diluted)(a)                        
Investment management   $ 0.23   $ 0.03   $ 0.49   $ 2.28
Real estate ownership     0.93     0.56     3.06     3.41
Total   $ 1.16   $ 0.59   $ 3.55   $ 5.69
                         
AFFO Per Share (Diluted)(a)                        
Investment management   $ 0.20   $ 0.17   $ 0.44   $ 2.15
Real estate ownership     0.93     0.71     3.32     2.56
Total   $ 1.13   $ 0.88   $ 3.76   $ 4.71
                         
(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.
     
     
     
W. P. CAREY INC.
 
Reconciliation of Net Income to EBITDA (Unaudited)
(in thousands, except share and per share amounts)
 
    Three Months Ended
December 31,
    Years Ended
December 31,
    2012   2011     2012   2011
Investment Management                          
Net income from investment management attributable to W.P. Carey (a)   $
9,971
  $
3,705
    $
17,237
  $
52,799
Adjustments:                          
  Provision for income taxes     4,926     (3,540 )     2,771     34,971
  Depreciation and amortization     927     976       3,744     3,464
  EBITDA -- investment management   $ 15,824   $ 1,141     $ 23,752   $ 91,234
  EBITDA per share (diluted)   $ 0.23   $ 0.03     $ 0.49   $ 2.28
                           
Real Estate Ownership                          
Net income from real estate ownership attributable to W. P. Carey (a)   $
5,507
  $
5,386
    $
44,895
  $
86,280
Adjustments:                          
  Interest expense     28,250     6,219       50,573     21,770
  Provision for income taxes     1,665     2,227       4,012     2,243
  Depreciation and amortization     28,587     7,352       45,046     20,883
  Reconciling items attributable to discontinued operations     594     1,303       2,359     5,930
EBITDA -- real estate ownership   $ 64,603   $ 22,487     $ 146,885   $ 137,106
EBITDA per share (diluted)   $ 0.93   $ 0.56     $ 3.06   $ 3.41
                           
Total Company                          
EBITDA   $ 80,427   $ 23,628     $ 170,637   $ 228,340
EBITDA per share (diluted)   $ 1.16   $ 0.59     $ 3.55   $ 5.69
Diluted weighted average shares outstanding     69,505,871     40,152,444       48,078,474     40,098,095
                           
(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.
     
     
     

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
December 31,
    Years Ended
December 31,
 
    2012     2011     2012     2011  
Real Estate Ownership                                
Net income from real estate ownership attributable to W. P. Carey (a)   $
 5,507
    $
 5,386
    $
 44,895
    $
 86,280
 
  Adjustments:                                
    Depreciation and amortization of real property     28,652       8,415       45,982       25,324  
    Impairment charges     10,700       5,498       22,962       10,473  
    Loss on sale of real estate, net     4,240       3,655       2,676       3,391  
    Proportionate share of adjustments to equity in net income of - partially owned entities to arrive at FFO:                                
      Depreciation and amortization of real property     3,210       1,208       5,545       5,257  
      Impairment charges     -       -       -       1,090  
      Loss (gain) on sale of real estate, net     1       -       (15,233 )     34  
    Proportionate share of adjustments for noncontrolling interests to arrive at FFO     (4,236 )     (508 )     (5,504 )     (1,984 )
  Total adjustments:     42,567       18,268       56,428       43,585  
FFO - as defined by NAREIT     48,074       23,654       101,323       129,865  
  Adjustments:                                
    Loss (gain) on change in control of interests (b)(c)     60       -       (20,734 )     (27,859 )
    Gain on deconsolidation of a subsidiary     -       -       -       (1,008 )
    Other gains, net     (2 )     (1,118 )     (2 )     25  
    Other depreciation, amortization and non-cash charges     (1,556 )     3,398       (1,662 )     176  
    Stock based compensation     211       57       211       220  
    Deferred tax expense     (644 )     (2,602 )     (2,745 )     (3,184 )
    Realized losses on foreign currency, derivatives and other (d)     171       -       828       -  
    Amortization of deferred financing costs (d)     468       -       1,843       -  
    Straight-line and other rent adjustments     (2,248 )     (1,804 )     (4,446 )     (4,255 )
    Above/below market rent intangible lease amortization, net (d)     7,534       -       7,696       -  
    Merger expense (e)     1,049       -       41,338       -  
    Proportionate share of adjustments to equity in net income ofpartially owned entities to arrive at AFFO:                                
      Other depreciation, amortization and non-cash charges     624       -       624       -  
      Straight-line and other rent adjustments     (667 )     (414 )     (1,468 )     (1,641 )
      Above/below market rent intangible lease amortization, net     166       -       163       -  
    AFFO adjustment for interests in CPA® REITs     11,971       6,982       37,234       10,137  
    Proportionate share of adjustments for noncontrolling intereststo arrive at AFFO     (506 )     54       (692 )     272  
  Total adjustments:     16,631       4,553       58,188       (27,117 )
AFFO - Real Estate Ownership   $ 64,705     $ 28,207     $ 159,511     $ 102,748  
                                 
Investment Management                                
Net income from investment management attributable to W. P. Carey (a)   $
9,971
    $
3,705
    $
17,237
    $
52,799
 
FFO - as defined by NAREIT     9,971       3,705       17,237       52,799  
  Adjustments:                                
    Amortization, deferred taxes and non-cash charges     226       (1,256 )     961       3,791  
    Stock based compensation     6,281       4,633       25,841       17,496  
    Deferred tax expense     (2,625 )     (80 )     (24,055 )     12,019  
    Realized gains on foreign currency, derivatives and other (d)     (55 )     -       (61 )     -  
    Amortization of deferred financing costs (d)     318       -       1,197       -  
  Total Adjustments     4,145       3,297       3,883       33,306  
AFFO - Investment Management   $ 14,116     $ 7,002     $ 21,120     $ 86,105  
                                 
Total Company                                
FFO - as defined by NAREIT   $ 58,045     $ 27,539     $ 118,560     $ 182,664  
FFO - as defined by NAREIT per share (diluted)   $ 0.84     $ 0.68     $ 2.47     $ 4.56  
AFFO   $ 78,821     $ 35,209     $ 180,631     $ 188,853  
AFFO per share (diluted)   $ 1.13     $ 0.88     $ 3.76     $ 4.71  
Diluted weighted average shares outstanding     69,505,871       40,152,444       48,078,474       40,098,095  
                                 
(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.
(b)   Gain on change in control of interests for the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2012 represents a gain of $14.6 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 $20.7 million to adjust the carrying value of our existing interests in these investments to their estimated fair values.
(d)   These adjustments are significant and recurring post Merger and were not included in the AFFO calculation in 2011.
(e)   Amount for the year ended December 31, 2012 included $31.7 million of general and administrative expenses and $9.6 million of income tax expenses incurred in connection with the Merger.
     
     
     

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 real estate-related 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. Additionally, we exclude expenses related to the merger which are considered non-recurring, and realized gains/losses on foreign exchange and derivatives, which are not considered fundamental attributes of our business plan and do not affect our overall long-term operating performance. 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
December 31,
    Years Ended
December 31,
 
    2012     2011     2012     2011  
Asset management revenue   $ 9,578     $ 15,530     $ 56,666     $ 66,808  
Structuring revenue (a)     28,779       3,930       48,355       46,831  
Investment management revenue     38,357       19,460       105,021       113,639  
Real estate revenue     103,965       56,582       264,707       197,339  
Total Adjusted Revenue   $ 142,322     $ 76,042     $ 369,728     $ 310,978  
                                 
Reconciliation of Total Adjusted Revenue                                
  Total revenue -- as reported   $ 168,058     $ 60,971     $ 373,995     $ 327,784  
  Less: Incentive, termination and subordinated disposition revenue (b)     -       -       -       (52,515 )
  Less: Wholesaling revenue (c)     (8,036 )     (2,876 )     (19,914 )     (11,664 )
  Less: Reimbursed costs from affiliates (c)     (39,146 )     (15,345 )     (98,245 )     (64,829 )
  Add: Lease revenue - discontinued operations     738       1,908       3,630       9,452  
  Add: Pro rata share of revenue from equity investments     9,911       6,601       27,374       28,269  
  Less: Pro rata share of revenue due to noncontrolling interests     (10,289 )     (436 )     (11,550 )     (2,629 )
  Add: Pro rata share of revenue from CPA® REITs     14,838       19,793       72,158       68,833  
  Add: Total distributions of available cash - GP interest     8,220       7,267       30,009       15,535  
  Less: Pro rata share of other real estate income to noncontrolling interests     (1,972 )     (1,841 )     (7,729 )     (7,258 )
Total Adjusted Revenue   $ 142,322     $ 76,042     $ 369,728     $ 310,978  
                                 
Reconciliation of Real Estate Revenue                                
  Lease revenue - as reported   $ 74,970     $ 17,474     $ 124,503     $ 62,638  
  Lease revenue - discontinued operations     738       1,908       3,630       9,452  
  Total consolidated lease revenue     75,708       19,382       128,133       72,090  
  Add: Pro rata share of revenue from equity investments     9,911       6,601       27,374       28,269  
  Less: Pro rata share of revenue due to noncontrolling interests     (10,289 )     (436 )     (11,550 )     (2,629 )
Total pro rata net lease revenue     75,330       25,547       143,957       97,730  
                                 
Add: Pro rata share of revenues from CPA® REITs                                
  CPA®:14     -       -       -       4,841  
  CPA®:15 (d)     -       4,294       12,726       17,517  
  CPA®:16 - Global     13,955       14,973       56,362       44,965  
  CPA®:17 - Global     883       526       3,070       1,510  
Total pro rata share of revenues from CPA® REITs     14,838       19,793       72,158       68,833  
Add: share of lease revenue from GP interest                                
  CPA®:16 - Global     3,825       3,658       15,389       6,157  
  CPA®:17 - Global     4,395       3,609       14,620       9,378  
Total Share of lease revenue from GP Interest     8,220       7,267       30,009       15,535  
Add: Other real estate income (e)     7,549       5,816       26,312       22,499  
Less: Pro rata share of other real estate income to noncontrolling interests (f)     (1,972 )     (1,841 )     (7,729 )     (7,258 )
Total Real Estate Revenue   $ 103,965     $ 56,582     $ 264,707     $ 197,339  
                                 
(a)   We earn structuring revenue on acquisitions structured on behalf of the Managed REITS and expect significant period-to-period variation in such revenue based on changes in investment volume. Investments structured on behalf of the Managed REITS totaled approximately $775 million and $139 million for the three months ended December 31, 2012 and 2011, respectively, and $1.3 billion and $1.2 billion for the year ended December 31, 2012 and 2011, respectively.
(b)   In connection with providing a liquidity event for CPA®:14 stockholders, 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.
(c)   Total adjusted revenue excludes reimbursements of costs received from the Managed REITs 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.
(d)   For the year ended December 31, 2012, represents pro rata lease revenue from CPA®:15 through September 28, 2012, the date of the Merger.
(e)   Other real estate income generally consists of revenue from Carey Storage Management LLC ("Carey Storage"), 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-rents related revenues from real estate ownership, and as a result, we expect other real estate income to fluctuate period to period.
(f)   Effective December 31, 2012, we deduct the non-controllable interest of self storage revenues to reflect our pro rata ownership in this segment. Prior periods have been revised to reflect this change.
     
     
     
W. P. CAREY INC.
Selected Investment Management Fees and Distributions (Unaudited)
(in thousands)
 
                                 
    Three Months Ended December 31, 2012   Years Ended December 31, 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   $ -   $ -   $ -   $ -   $ 9,272   $ 9,272   $ -   $ 18,544
CPA®:16 - Global     4,624     -     3,825     8,449     18,553     -     15,389     33,942
CPA®:17 - Global     4,696     -     4,395     9,091     18,919     -     14,620     33,539
CWI/Other     258     -     -     258     649     -     -     649
Total   $ 9,578   $ -   $ 8,220   $ 17,798   $ 47,393   $ 9,272   $ 30,009   $ 86,674
                                                 
    Three Months Ended December 31, 2011   Years Ended December 31, 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   $ 12,311   $ 3,219   $ 7,267   $ 22,797   $ 46,770   $ 20,038   $ 15,535   $ 82,343
                                                 

Contact Information

  • COMPANY CONTACT:
    Kristin Brown
    W. P. Carey Inc.
    212-492-8989
    Email Contact

    PRESS CONTACTS:
    Cheryl Sanclemente
    W. P. Carey Inc.
    212-492-8995
    Email Contact

    Guy Lawrence
    Ross & Lawrence
    212-308-3333
    Email Contact