SOURCE: W. P. Carey & Co. LLC

W. P. Carey & Co. LLC

August 07, 2012 09:17 ET

W. P. Carey Announces Second Quarter Financial Results

NEW YORK, NY--(Marketwire - Aug 7, 2012) - Investment firm W. P. Carey & Co. LLC (NYSE: WPC) today reported financial results for the second quarter ended June 30, 2012.

QUARTERLY RESULTS

  • Funds from operations -- as adjusted (AFFO) for the second quarter of 2012 decreased compared to the second quarter of 2011, to $27.8 million or $0.68 per diluted share from $73.0 million or $1.82 per diluted share, respectively. AFFO for the six months ended June 30, 2012 was $67.9 million or $1.66 per diluted share, compared to $112.2 million or $2.79 per diluted share for the comparable period in 2011. The higher levels in the 2011 periods were due to revenues earned from the merger of two of our managed CPA® REITS in May 2011 as discussed further below. 
  • Cash flow from operating activities for the six months ended June 30, 2012 was $11.8 million compared to $48.6 million for the prior year period, while adjusted cash flow from operating activities was $58.3 million for the six months ended June 30, 2012 compared to $55.9 million for the prior year period.
  • Total revenues net of reimbursed expenses for the second quarter of 2012 was $47.5 million compared to $99.7 million for the second quarter of 2011. Total revenues net of reimbursed expenses for the six months ended June 30, 2012 decreased to $98.2 million compared to $157.9 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 six months ended June 30, 2012 increased to $157.1 million compared to $149.0 million for the prior year period. 
  • Net Income for the second quarter of 2012 was $31.8 million, compared to $81.4 million for the same period in 2011. For the six months ended June 30, 2012, net income was $44.1 million compared to $104.8 million for the comparable period in 2011. 
  • We received approximately $8.3 million in cash distributions from our equity ownership in the CPA® REITs for the quarter ended June 30, 2012.
  • Further information concerning AFFO, adjusted cash flow from operating activities and total adjusted revenue -- non-GAAP supplemental performance metrics -- is presented in the accompanying tables.

PROPOSED CONVERSION TO REIT AND MERGER WITH CPA®:15

  • On February 21, 2012, we announced that our Board of Directors had approved our conversion to a real estate investment trust ("REIT") and that our Board of Directors and the Board of Directors of our publicly held, non-traded REIT affiliate Corporate Property Associates 15 Incorporated ("CPA®:15") had unanimously approved a definitive merger agreement pursuant to which W. P. Carey and CPA®:15 will merge immediately following the REIT conversion.
  • On July 30, 2012 the Securities and Exchange Commission declared effective the Registration Statement on Form S-4 related to the proposed REIT conversion and merger. The conversion to a REIT is subject to the approval of W. P. Carey shareholders and the merger with CPA®:15 is subject to approval of both the shareholders of W. P. Carey and the stockholders of CPA®:15. The special meetings for each company are expected to take place on September 13, 2012. Additionally, as previously disclosed, on July 23, 2012 the Company entered into a voting agreement with the Estate of William Polk Carey and W. P. Carey & Co., Inc., a wholly-owned corporation of the Estate, pursuant to which they have agreed to vote their shares in favor of the approval of the REIT conversion and the merger with CPA®:15. These transactions are also subject to customary closing conditions.
  • If the proposed merger is approved and the other closing conditions are satisfied, we currently expect that the closing will occur in the third quarter of 2012, although there can be no assurance of such timing. 

CPA®:17 - GLOBAL ACTIVITY

  • CPA®:17 - Global's follow-on offering was declared effective by the SEC in April 2011, which ended its initial public offering. We have raised more than $2.3 billion on behalf of CPA®:17 - Global since beginning fundraising in December 2007. The follow-on offering is for up to an additional $1 billion of CPA®:17 - Global's common stock.
  • Investment volume for CPA®:17 - Global in the second quarter of 2012 was approximately $70.5 million.
  • In the second quarter of 2012, we acquired five self storage facilities, comprising a total of approximately 385,000 square feet and located in Louisiana, Mississippi and Alabama. The total purchase price was approximately $17 million.
  • In addition, we provided approximately $18 million of build-to-suit financing to Sabre Industries, Inc. for the construction of an approximately 300,000 square foot industrial facility in Sioux City, Iowa. Upon completion, the facility will be leased on a long term, triple-net basis to Sabre Communications Corporation.

CAREY WATERMARK INVESTORS ACTIVITY

  • From the beginning of its initial public offering, Carey Watermark Investors ("CWI"), our lodging-focused non-traded REIT offering, has raised $84.0 million.
  • In the second quarter of 2012, CWI completed two investments: the Hampton Inn Boston/Braintree and the Hilton Garden Inn New Orleans French Quarter/CBD.
  • In July of 2012, CWI completed an investment in Lake Arrowhead Resort & Spa located in Lake Arrowhead, California.

ASSET MANAGEMENT ACTIVITY

  • As of June 30, 2012, W. P. Carey and our CPA® REITs secured approximately $220 million in debt financings. Approximately $77 million represented refinancing of maturing debt on thirteen properties; interest rates on these refinancings averaged more than 240 basis points below the rates on original financings. Approximately $143 million represented financing of new acquisitions or properties that had initially been acquired on an all equity basis. 

ASSETS UNDER OWNERSHIP AND MANAGEMENT AS OF JUNE 30, 2012

  • W. P. Carey is the advisor to the CPA® REITs and CWI, which had aggregate real estate assets of $9.5 billion and total assets of $10.2 billion.
  • The occupancy rate of W. P. Carey's 11 million square foot owned portfolio was approximately 94%. In addition, for the 106 million square feet owned by the CPA® REITs, the average occupancy rate was approximately 99%.
  • The W. P. Carey Group's assets under ownership and management total approximately $12.7 billion.

DISTRIBUTIONS

  • The Board of Directors raised the quarterly cash distribution to $0.567 per share for the second quarter of 2012. The distribution -- our 45th consecutive quarterly increase -- was paid on July 16, 2012 to shareholders of record as of July 2, 2012. 

Commenting on the Company's quarterly results, Trevor Bond, President and Chief Executive Officer, noted, "Last year's liquidation of CPA®:14 skewed our first half 2011 results such that a comparison with the same period in 2012 is less meaningful. For example, we recognized $52.5 million in termination and subordination disposition revenues in the second quarter of 2011 in connection with that liquidation, which took place via a merger of CPA®:14 and CPA®:16 - Global. This impacted AFFO by $1.01 per diluted share for the first half of 2011. Without that transaction, the core business would have generated AFFO of $1.78 per share during the first six months of 2011 as compared to $1.66 per share during the same period in 2012. Most of the remaining difference in AFFO is due to lower structuring revenues resulting from lower deal volume for the first half of this year. Deal volume has historically been a more widely variable source of revenues as compared to rental income and asset management fees. As a result of recent acquisitions, structuring revenues have decreased as a percentage of total revenues. Our proposed merger with CPA®:15 will further improve the stability of our revenues by shifting the revenue mix significantly in favor of rental income from owned assets. Dividend growth and coverage remains our paramount goal, and the increase in Adjusted Cash Flow from Operations year to date demonstrates our continued ability to cover the dividend notwithstanding periodic swings in investment volume."

CONFERENCE CALL & WEBCAST

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

Time: Tuesday, August 7, 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: 10016503
Replay Available until August 22, 2012 at 9:00 AM (ET).

W. P. Carey & Co. LLC
W. P. Carey & Co. LLC (NYSE: WPC) is an investment company that provides long term sale leaseback and build to suit financing for companies worldwide and manages a global investment portfolio of approximately $12.7 billion. Publicly traded on the New York Stock Exchange, W. P. Carey and its CPA® series of non-traded REITs help companies and private equity firms unlock capital tied up in real estate assets. The W. P. Carey Group's investments are highly diversified, comprising contractual agreements with approximately 284 long term corporate tenants spanning 28 industries and 18 countries. http://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. 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 & CO. LLC  
                         
Consolidated Statements of Income (Unaudited)  
(in thousands, except share and per share amounts)  
                         
    Three Months Ended
June 30,
    Six Months Ended
 June 30,
 
    2012     2011     2012     2011  
Revenues                                
  Asset management revenue   $ 15,636     $ 16,619     $ 31,238     $ 36,439  
  Structuring revenue     3,622       5,735       11,260       21,680  
  Incentive, termination and subordinated disposition revenue     -       52,515       -       52,515  
  Wholesaling revenue     4,080       2,922       7,867       6,202  
  Reimbursed costs from affiliates     20,484       17,059       39,221       34,778  
  Lease revenues     17,228       16,217       34,859       30,089  
  Other real estate income     6,992       5,709       12,984       10,992  
      68,042       116,776       137,429       192,695  
Operating Expenses                                
  General and administrative     (26,582 )     (24,585 )     (53,491 )     (45,908 )
  Reimbursable costs     (20,484 )     (17,059 )     (39,221 )     (34,778 )
  Depreciation and amortization     (6,733 )     (5,891 )     (13,528 )     (10,501 )
  Property expenses     (3,404 )     (2,819 )     (5,989 )     (5,708 )
  Other real estate expenses     (2,431 )     (2,942 )     (4,930 )     (5,499 )
  Impairment charges     (1,003 )     -       (3,660 )     -  
      (60,637 )     (53,296 )     (120,819 )     (102,394 )
Other Income and Expenses                                
  Other interest income     155       560       658       1,235  
  Income from equity investments in real estate and the REITs     28,345       15,072       42,331       21,288  
  Gain on change in control of interests     -       27,859       -       27,859  
  Other income and (expenses)     1,218       4,758       1,524       5,239  
  Interest expense     (7,246 )     (5,355 )     (14,591 )     (9,671 )
        22,472       42,894       29,922       45,950  
  Income from continuing operations before income taxes     29,877       106,374       46,532       136,251  
  Benefit from (provision for) income taxes     1,882       (25,030 )     187       (32,597 )
  Income from continuing operations     31,759       81,344       46,719       103,654  
Discontinued Operations                                
  (Loss) income from operations of discontinued properties     (231 )     (122 )     (273 )     403  
  Gain on deconsolidation of a subsidiary     -       -       -       -  
  (Loss) gain on sale of real estate     (298 )     (121 )     (479 )     660  
  Impairment charges     -       (41 )     (3,068 )     (41 )
  (Loss) income from discontinued operations     (529 )     (284 )     (3,820 )     1,022  
Net Income     31,230       81,060       42,899       104,676  
  Add: Net loss attributable to noncontrolling interests     480       384       1,058       714  
  Less: Net loss (income) attributable to redeemable noncontrolling interests     67       (1 )     110       (604 )
Net Income Attributable to W. P. Carey Members   $ 31,777     $ 81,443     $ 44,067     $ 104,786  
Basic Earnings Per Share                                
  Income from continuing operations attributable to W. P. Carey members   $ 0.78     $ 2.03     $ 1.17     $ 2.57  
  (Loss) income from discontinued operations attributable to W. P. Carey members     (0.01 )     (0.01 )     (0.09 )     0.03  
  Net income attributable to W. P. Carey members   $ 0.78     $ 2.02     $ 1.08     $ 2.60  
Diluted Earnings Per Share                                
  Income from continuing operations attributable to W. P. Carey members   $ 0.78     $ 2.00     $ 1.15     $ 2.55  
  (Loss) income from discontinued operations attributable to W. P. Carey members     (0.01 )     (0.01 )     (0.09 )     0.03  
  Net income attributable to W. P. Carey members   $ 0.77     $ 1.99     $ 1.06     $ 2.58  
                                 
Weighted Average Shares Outstanding                                
  Basic     40,047,220       39,782,796       40,218,677       39,760,676  
  Diluted     40,757,055       40,243,548       40,828,646       40,192,418  
                                 
Amounts Attributable to W. P. Carey Members                                
  Income from continuing operations, net of tax   $ 32,306     $ 81,727     $ 47,887     $ 103,764  
  (Loss) income from discontinued operations, net of tax     (529 )     (284 )     (3,820 )     1,022  
  Net income   $ 31,777     $ 81,443     $ 44,067     $ 104,786  
                                 
Distributions Declared Per Share   $ 0.567     $ 0.550     $ 1.132     $ 1.062  
                                 
                                 
                                 
W. P. CAREY & CO. LLC  
             
Consolidated Statements of Cash Flows (Unaudited)  
(in thousands)  
             
    Six Months Ended June 30,  
    2012     2011  
Cash Flows - Operating Activities                
Net income   $ 42,899     $ 104,676  
Adjustments to net income:                
  Depreciation and amortization including intangible assets and deferred financing costs     15,054       12,782  
  Income from equity investments in real estate and the REITs in excess of distributions received     (17,013 )     223  
  Straight-line rent and financing lease adjustments     (2,016 )     (1,386 )
  Amortization of deferred revenue     (4,718 )     (1,573 )
  Gain on deconsolidation of a subsidiary     -          
  Gain on sale of real estate     (1,505 )     (660 )
  Unrealized loss (gain) on foreign currency transactions and others     23       (371 )
  Realized loss (gain) on foreign currency transactions and others     535       (1,188 )
  Allocation of loss to profit-sharing interest     -       -  
  Management income received in shares of affiliates     (14,005 )     (52,142 )
  Gain on conversion of shares     -       (3,806 )
  Gain on change in control of interests     -       (27,859 )
  Impairment charges     6,728       41  
  Stock-based compensation expense     9,755       8,628  
  Deferred acquisition revenue received     13,322       15,462  
  Increase in structuring revenue receivable     (4,906 )     (9,222 )
  (Decrease) increase in income taxes, net     (12,206 )     16,532  
  Net changes in other operating assets and liabilities     (20,142 )     (11,543 )
Net cash provided by operating activities     11,805       48,594  
                 
Cash Flows - Investing Activities                
  Distributions received from equity investments in real estate and the REITs in excess of equity income     15,909       11,891  
  Capital contributions to equity investments     (180 )     (2,297 )
  Purchase of interests in CPA®:16 - Global     -       (121,315 )
  Purchases of real estate and equity investments in real estate     -       (24,323 )
  VAT paid in connection with acquisition of real estate     -       -  
  VAT refunded in connection with acquisition of real estate     -       -  
  Capital expenditures     (1,812 )     (1,375 )
  Cash acquired on acquisition of subsidiaries     -       57  
  Proceeds from sale of real estate     25,195       10,643  
  Proceeds from sale of securities     198       777  
  Funding of short-term loans to affiliates     -       (94,000 )
  Proceeds from repayment of short-term loans to affiliates     -       94,000  
  Funds placed in escrow     (5,577 )     (3,899 )
  Funds released from escrow     7,647       2,030  
Net cash used in investing activities     41,380       (127,811 )
                 
Cash Flows - Financing Activities                
  Distributions paid     (46,013 )     (40,849 )
  Contributions from noncontrolling interests     1,480       1,459  
  Distributions to noncontrolling interests     (1,165 )     (2,822 )
  Contributions from profit-sharing interest     -       -  
  Distributions to profit sharing interest     -       -  
  Purchase of noncontrolling interest     -       (7,502 )
  Scheduled payments of mortgage principal     (10,262 )     (9,897 )
  Proceeds from mortgage financing     1,250       7,438  
  Proceeds from line of credit     15,000       231,410  
  Prepayments of line of credit     (15,000 )     (140,000 )
  Payment of financing costs     (123 )     (831 )
  Proceeds from issuance of shares     5,692       1,018  
  Payment of tax withholding liabiliaty related to tock-based compensation awards     -       -  
  Windfall tax benefit associated with stock-based compensation awards     6,607       872  
Net cash provided by financing activities     (42,534 )     40,296  
                 
Change in Cash and Cash Equivalents During the Period                
    Effect of exchange rate changes on cash     (148 )     689  
    Net increase (decrease) in cash and cash equivalents     10,503       (38,232 )
  Cash and cash equivalents, beginning of period     29,297       64,693  
  Cash and cash equivalents, end of period   $ 39,800     $ 26,461  
                   
                   
                   
W. P. CAREY & CO. LLC
                   
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"), funds from operations - as adjusted ("AFFO") and adjusted cash flow from operating activities. 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 June 30,   Six Months Ended June 30,
    2012     2011   2012   2011
EBITDA (a)                          
Investment management   $ 451     $ 55,524   $ 4,371   $ 75,068
Real estate ownership     43,524       63,669     68,243     84,997
Total   $ 43,975     $ 119,193   $ 72,614   $ 160,065
                           
AFFO (a)                          
Investment management   $ (271 )   $ 46,184   $ 10,771   $ 65,019
Real estate ownership     28,092       26,860     57,121     47,167
Total   $ 27,821     $ 73,044   $ 67,892   $ 112,186
                           
EBITDA Per Share (Diluted) (a)                          
Investment management   $ 0.01     $ 1.38   $ 0.11   $ 1.87
Real estate ownership     1.07       1.58     1.67     2.11
Total   $ 1.08     $ 2.96   $ 1.78   $ 3.98
                           
AFFO Per Share (Diluted) (a)                          
Investment management   $ (0.01 )   $ 1.15   $ 0.26   $ 1.62
Real estate ownership     0.69       0.67     1.40     1.17
Total   $ 0.68     $ 1.82   $ 1.66   $ 2.79
                           
Adjusted Cash Flow From Operating Activities                          
Adjusted cash flow                 $ 58,323   $ 55,916
                           
Distributions declared                 $ 46,659   $ 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. 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 six months ended June 30, 2011 to include such adjustments.
 
 
 
   
W. P. CAREY & CO. LLC  
                 
Reconciliation of Net Income to EBITDA (Unaudited)  
(in thousands, except share and per share amounts)  
                 
  Three Months Ended June 30,   Six Months Ended June 30,  
  2012   2011   2012   2011  
Investment Management                
Net income from investment management attributable to W. P. Carey members (a) $ 2,153   $ 28,601   $ 4,513   $ 39,963  
Adjustments:                        
(Benefit from) provision for income taxes   (2,644 )   26,056     (2,022 )   33,436  
Depreciation and amortization   942     867     1,880     1,669  
EBITDA - investment management $ 451   $ 55,524   $ 4,371   $ 75,068  
EBITDA per share (diluted) $ 0.01   $ 1.38   $ 0.11   $ 1.87  
                         
Real Estate Ownership                        
Net income from real estate ownership attributable to W. P. Carey members (a) $ 29,624   $ 52,842   $ 39,554   $ 64,823  
Adjustments:                        
Interest expense   7,246     5,355     14,591     9,671  
Provision for (benefit from) income taxes   762     (1,026 )   1,835     (839 )
Depreciation and amortization   5,791     5,024     11,648     8,832  
Reconciling items attributable to discontinued operations   101     1,474     615     2,510  
EBITDA - real estate ownership $ 43,524   $ 63,669   $ 68,243   $ 84,997  
EBITDA per share (diluted) $ 1.07   $ 1.58   $ 1.67   $ 2.11  
                         
Total Company                        
EBITDA $ 43,975   $ 119,193   $ 72,614   $ 160,065  
EBITDA per share (diluted) $ 1.08   $ 2.96   $ 1.78   $ 3.98  
Diluted weighted average shares outstanding   40,757,055     40,243,548     40,828,646     40,192,418  
                         
                         
   
(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. 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 six months ended June 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 & CO. LLC  
                             
  Reconciliation of Net Income to Funds From Operations -as adjusted (AFFO) (Unaudited)  
  (in thousands, except share and per share amounts)  
                             
      Three Months Ended June 30,     Six Months Ended June 30,  
      2012     2011     2012       2011  
                             
Investment Management                                
Net Income from investment management attributable to W. P. Carey members (a)   $ 2,153     $ 28,601     $ 4,513     $ 39,963  
FFO - as defined by NAREIT (b)     2,153       28,601       4,513       39,963  
  Adjustments:                                
    Amortization, and other non-cash charges     (3,944 )     17,583       3,617       25,056  
    Realized gains on foreign currency, derivatives and other     (23 )     -       (23 )     -  
    Amortization of deferred financing costs     286       -       570       -  
    Merger expenses     1,257       -       2,094       -  
      Total adjustments     (2,424 )     17,583       6,258       25,056  
AFFO - Investment Management   $ (271 )   $ 46,184     $ 10,771     $ 65,019  
                                 
Real Estate Ownership                                
Net Income from real estate ownership attributable to W. P. Carey members (a)   $ 29,624     $ 52,842     $ 39,554     $ 64,823  
  Adjustments:                                
  Depreciation and amortization of real property     5,673       6,240       11,820       10,715  
  Straight-line and other rent adjustments     -       -       -       -  
  Impairment charges     1,003       41       6,728       41  
  (Gain) loss on sale of real estate, net     (1,686 )     121       (1,505 )     (660 )
  Proportionate share of adjustments to equity in net income of partially owned entities to arrive at FFO:                                
    Depreciation and amortization of real property     730       1,328       1,628       2,876  
    Impairment charges (b)     -       -       -       1,090  
    (Gain) loss on sale of real estate, net     (15,557 )     34       (15,415 )     34  
  Proportionate share of adjustments for noncontrolling interests to arrive at FFO     (434 )     (123 )     (868 )     (319 )
    Total adjustments     (10,271 )     7,641       2,388       13,777  
FFO - as defined by NAREIT (b)     19,353       60,483       41,942       78,600  
  Adjustments:                                
    Gain on change in control of interests (c)     -       (27,859 )     -       (27,859 )
    Gain on deconsolidation of a subsidiary     -       -       -       -  
    Other depreciation, amortization and non-cash charges     (88 )     (2,167 )     (757 )     (2,802 )
    Realized losses on foreign currency, derivatives and other     542       -       542       -  
    Amortization of deferred financing costs     402       -       866       -  
    Straight-line and other rent adjustments     (883 )     (1,020 )     (1,998 )     (1,437 )
    Above-market rent intangible lease amortization, net     111       -       111       -  
    Merger expense     1,359       -       2,625       -  
    Proportionate share of adjustments to equity in net income of partially owned entities to arrive at AFFO:     -       -       -       -  
        Straight-line and other rent adjustments     (363 )     (142 )     (776 )     (764 )
        Below-market rent intangible lease amortization, net     (3 )     -       (3 )     -  
        AFFO adjustments to equity earnings from equity investments     7,687       (2,508 )     14,613       1,270  
    Proportionate share of adjustments for noncontrolling interests to arrive at AFFO     (25 )     73       (44 )     159  
        Total adjustments     8,739       (33,623 )     15,179       (31,433 )
AFFO - Real Estate Ownership   $ 28,092     $ 26,860     $ 57,121     $ 47,167  
                                   
Total Company                                
FFO - as defined by NAREIT   $ 21,506     $ 89,084     $ 46,455     $ 118,563  
FFO - as defined by NAREIT per share (diluted)   $ 0.53     $ 2.21     $ 1.14     $ 2.95  
AFFO   $ 27,821     $ 73,044     $ 67,892     $ 112,186  
AFFO per share (diluted)   $ 0.68     $ 1.82     $ 1.66     $ 2.79  
Diluted weighted average shares outstanding     40,757,055       40,243,548       40,828,646       40,192,418  
                                   
(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. 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 six months ended June 30, 2011 to include such adjustments.  
   
(b) The SEC Staff has recently advised that they take no position on the inclusion or exclusion of impairment write-downs in arriving at Funds From Operations ("FFO"). Since 2003, the National Association of Real Estate Investment Trusts ("NAREIT") has taken the position that the exclusion of impairment charges is consistent with its definition of FFO. Accordingly, we have revised our computation of FFO to exclude impairment charges, if any, in arriving at FFO for all periods presented.  
   
(c) 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 three and six months ended June 30, 2011 to adjust the carrying value of our existing interests in these investments to their estimated fair values.  
   
Non-GAAP Financial Disclosure  
Funds from operations (FFO) is a non-GAAP 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 potentially distorting the 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 & CO. LLC  
             
Adjusted Cash Flow from Operating Activities (Unaudited)  
(in thousands, except share and per share amounts)  
             
    Six Months Ended June 30,  
    2012     2011  
             
Summarized cash flow information:                
  Net cash provided by operating activities   $ 11,805     $ 48,594  
  Net cash provided by (used in) investing activities   $ 41,380     $ (127,811 )
  Net cash (used in) provided by financing activities   $ (42,534 )   $ 40,296  
                 
Reconciliation of adjusted cash flow from operating activities:                
  Cash flow provided by operating activities:   $ 11,805     $ 48,594  
  Adjustments related to equity method investments:                
  Add: Distributions received from equity investments in real estate in excess of equity income     15,909       11,891  
  Less: Distributions received from equity investments in real estate in excess of equity income - attributable to financing activities     -       (2,115 )
  Distributions received from equity investments in excess of equity income - attributable to operating activities (a)   $ 15,909     $ 9,776  
  Adjustments related to non-controlling interests:                
  Less: Distributions (paid to) net of contributions received from non-controlling interests     315       (1,363 )
  Add: Distributions paid to (received from) non-controlling interests, net not attributable to operating activities     -       1,300  
  Distributions received from (paid to) noncontrolling interests - attributable to operating activities (b)     315       (63 )
  Adjustments related to changes in working capital: (c)                
  Net changes in other assets and liabilities     20,142       11,543  
  Net prepayment of income taxes at end of period     10,152       9,500  
        30,294       21,043  
  CPA®:14/16 Merger - revenue net of taxes on special distribution     -       (23,434 )
                   
  Adjusted cash flow from operating activities (inclusive of Merger costs totaling $4.7 million in 2012) (c)   $ 58,323     $ 55,916  
                 
  Distributions declared   $ 46,659     $ 42,561  
                 
                 
(a) Cash flow provided by operating activities on a GAAP basis does not include distributions that we receive from equity investments in excess of our equity income. All such excess distributions, including our share of distributions of property-level cash flows in excess of operating income, are reported as cash flows provided by investing activities in our statement of cash flows. In calculating adjusted cash flow from operating activities, we make an adjustment to our reported cash flow provided by operating activities to add such distributions to the extent they relate to our pro rata share of property-level operating income, after deducting any portion of such distributions attributable to the financing or investment activities of the underlying jointly-owned investment.  
   
(b) Cash flow provided by operating activities on a GAAP basis does not include contributions that we receive from noncontrolling interests and distributions that we pay to noncontrolling interests in our consolidated jointly-owned investments. All such contributions and distributions, including contributions to and distributions of property-level operating cash flows, are reported as cash flows used in or provided by financing activities in our statement of cash flows. In calculating adjusted cash flow from operating activities, we make adjustments to our reported cash flow provided by operating activities to add contributions received from noncontrolling interests and subtract distributions paid to noncontrolling interests to the extent these contributions or distributions relate to operating activities of the underlying property jointly-owned investments.  
   
(c) Cash flow provided by operating activities on a GAAP basis includes adjustments to reflect the impact of the "net changes in other operating assets and liabilities" as well as the change in income taxes, net. We make adjustments to cash flow provided by operating activities to incorporate changes between reporting periods in other assets and liabilities, including accrued and prepaid income taxes, as we believe that these adjustments better reflect cash generated from core operations.  
   
(d) Amount represents subordinated disposition revenue of $21.3 million earned in connection with the CPA®:14/16 merger and taxes of $2.2 million on a special distribution made in connection with the CPA®:14/16 merger. We make an adjustment to deduct this revenue because it is generally earned in connection with one-time liquidity events as opposed to cash flow generated from our core operations.  
   
(e) Adjusted cash flow from operating activities for the six months ended June 30, 2012 includes a reduction of $4.7 million as a result of charges incurred in connection with the Merger with CPA®:15. Management does not consider these costs to be an ongoing cash outflow when evaluating cash flow generated from our core operations using this supplemental financial measure.  
                 
Non-GAAP Financial Disclosure                
Adjusted cash flow from operating activities refers to our cash provided by operating activities, as computed in accordance with GAAP, adjusted, where applicable, primarily to: add cash distributions of property-level operating cash flows that we receive from our investments in unconsolidated real estate jointly-owned investments in excess of our equity income; subtract cash distributions of property-level operating cash flows that we make to our noncontrolling partners in real estate jointly-owned investments that we consolidate net of such partners' contributions to our share of property-level operating cash flows; and eliminate changes in working capital. We hold a number of interests in real estate jointly-owned investments, and we believe that adjusting our GAAP cash provided by operating activities to reflect these actual cash receipts and cash payments that are attributable to the property-level operating cash flows of the underlying jointly-owned investments, as well as eliminating the effect of timing differences between the payment of certain liabilities and the receipt of certain receivables in a period other than that in which the item is recognized, may give investors additional information about our actual cash flow that is not incorporated in cash flow from operating activities as defined by GAAP. The jointly-owned investments are property-owning entities and their activities are generally limited to receiving rental income, financing the property and ultimately disposing of the property. Distributions are contributions related to these activities are based on the ownership percentages of the partners in each jointly-owned investment. In accordance with each jointly-owned investment's operating agreement, the jointly-owned investment partners generally participate in the investment's operating cash flow, debt financing and proceeds from property distributions. Distributions of cash to the jointly-owned investment partners are typically made on a monthly basis.  
                 
We believe that adjusted cash flow from operating activities is a useful supplemental measure for assessing the cash flow generated from our core operations as it gives investors important information about our liquidity that is not provided within cash flow from operating activities as defined by GAAP, and we use this measure when evaluating distributions to shareholders. Adjusted cash flow from operating activities should not be considered as an alternative to cash provided by operating activities computed on a GAAP basis as a measure of our liquidity.  
   
   
   
W. P. CAREY & CO. LLC  
Total Adjusted Revenue (Pro rata Basis)  
(in thousands)  
                                                 
    Three Months Ended June 30,     Six Months Ended September 30,  
    2012     2011 (e)     2012     2011 (e)  
Revenue     %     Revenue     %     Revenue     %     Revenue     %  
                                                         
Asset management revenue   $ 15,636     20 %   $ 16,619     23 %   $ 31,238     20 %   $ 36,439     24 %
Structuring revenue (a)     3,622     5 %     5,735     8 %     11,260     7 %     21,680     15 %
Investment Management Revenues     19,258     25 %     22,354     31 %     42,498     27 %     58,119     39 %
                                                         
Real estate revenues     57,205     75 %     50,078     69 %     114,586     73 %     90,872     61 %
Total Adjusted Revenue   $ 76,463     100 %   $ 72,432     100 %   $ 157,084     100 %   $ 148,991     100 %
                                                         
Reconciliation of Total Adjusted Revenue                                                        
Total revenue - as reported   $ 68,042           $ 116,776           $ 137,429           $ 192,695        
Less: Reimbursed costs from affiliates (b)     (20,484 )           (17,059 )           (39,221 )           (34,778 )      
Less: Wholesaling revenue (b)     (4,080 )           (2,922 )           (7,867 )           (6,202 )      
Less: Incentive, termination and subordinated disposition revenue (c)     -             (52,515 )           -             (52,515 )      
Lease revenues - discontinued operations     45             1,622             793             3,430        
Add: Pro rata share of revenues from equity investments     5,738             7,129             12,150             14,980        
Less: Pro rata share of revenues due to noncontrolling interests     (422 )           (666 )           (850 )           (1,741 )      
Add: Share of pro rata revenues - CPA®REITs     20,161             18,094             40,213             29,334        
Add: Cash distributions - CPA®REITs     7,463             1,973             14,437             3,788        
Total Adjusted Revenue   $ 76,463           $ 72,432           $ 157,084           $ 148,991        
                                                         
Reconciliation of Real Estate Revenues                                                        
Lease revenues - as reported   $ 17,228           $ 16,217           $ 34,859           $ 30,089        
Lease revenues - discontinued operations     45             1,622             793             3,430        
Total consolidated lease revenues     17,273             17,839             35,652             33,519        
Add: Pro rata share of revenues from equity investments     5,738             7,129             12,150             14,980        
Less: Pro rata share of revenues due to noncontrolling interests     (422 )           (666 )           (850 )           (1,741 )      
Total pro rata net lease revenues     22,589             24,302             46,952             46,758        
                                                         
Add: Share of Pro Rata Revenues - CPA® REITs                                                        
  CPA®:14     -             860             -             4,484        
  CPA®:15     3,947             4,152             7,978             8,040        
  CPA®:16 - Global     15,514             12,734             30,919             16,226        
  CPA®:17 - Global     700             348             1,316             584        
Total share of pro rata revenues - CPA® REITs     20,161             18,094             40,213             29,334        
Add: Cash Distributions - CPA® REITs                                                        
  CPA®:16 - Global     3,598             -             7,879             -        
  CPA®:17 - Global     3,865             1,973             6,558             3,788        
Total share of cash distributions - CPA® REITs     7,463             1,973             14,437             3,788        
Add: Other real estate income (d)     6,992             5,709             12,984             10,992        
Total Pro Rata Net Lease Revenues   $ 57,205           $ 50,078           $ 114,586           $ 90,872        
                                                         
(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 $98 million and $249 million for the three months ended June 30, 2012 and 2011, respectively, and $270 million and $594 million for the six months ended June 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 offering.  
   
(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-rents 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 & CO. LLC
                                                 
Selected Investment Management Fees and Distributions (Unaudited)
(in thousands)
                                                 
                                                 
    Asset Management Revenue               Asset Management Revenue            
    Base Asset Management Revenue   Performance Revenue   Distributions of Available Cash   Total   Base Asset Management Revenue   Performance Revenue   Distributions of Available Cash   Total
    Three Months Ended June 30, 2012   Six Months Ended June 30, 2012
CPA®:15     3,072     -     -     3,072     6,210     -     -     6,210
CPA®:16 - Global     4,597     3,072     3,598     11,267     9,298     6,209     7,879     23,386
CPA®:17 - Global     4,765     -     3,865     8,630     9,318     -     6,558     15,876
CWI/Other     130     -     -     130     203     -     -     203
Total   $ 12,564   $ 3,072   $ 7,463   $ 23,099   $ 25,029   $ 6,209   $ 14,437   $ 45,675
                                                 
    Three Months Ended June 30, 2011     Six Months Ended June 30, 2011
Total   $ 11,532   $ 5,087   $ 1,973   $ 18,592   $ 22,878   $ 13,561   $ 3,788   $ 40,227

Contact Information

  • COMPANY CONTACT:
    Cheryl Sanclemente
    W. P. Carey & Co. LLC
    212-492-8995
    Email Contact

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