W. P. Carey Announces First Quarter 2024 Financial Results
Financial Highlights
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2024 First Quarter |
Net income attributable to |
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Diluted earnings per share |
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AFFO (millions) |
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AFFO per diluted share |
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Affirming 2024 AFFO guidance of between
$4.65 and$4.75 per diluted share, based on anticipated full year investment volume of between$1.5 billion and$2.0 billion
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First quarter cash dividend of
$0.865 per share, equivalent to an annualized dividend rate of$3.46 per share
Real Estate Portfolio
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Investment volume of
$374.5 million completed year to date, including$280.3 million during the first quarter and$94.2 million subsequent to quarter end
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Active capital investments and commitments of
$66.4 million scheduled to be completed in 2024
-
Gross disposition proceeds of
$889.2 million during the first quarter, comprising:
-
Dispositions of
$410.5 million under the Office Sale Program, primarily from the sale of the State of Andalusia portfolio; and
-
Non-Office Sale Program dispositions of
$478.6 million , primarily from the sale of theU-Haul portfolio through the completion of a purchase option
-
Dispositions of
- Contractual same-store rent growth of 3.1%
Balance Sheet and Capitalization
-
Subsequent to quarter end, repaid
$500 million of 4.6% Senior Unsecured Notes due 2024
MANAGEMENT COMMENTARY
"We've had a productive start to the year, closing
QUARTERLY FINANCIAL RESULTS
Note:
Effective
Revenues
- Revenues, including reimbursable costs, for the 2024 first quarter totaled
$389.8 million , down 8.9% from$427.8 million for the 2023 first quarter.- Lease revenues decreased primarily as a result of (i) executing the Company's strategic plan to exit the office assets within its portfolio, including the NLOP Spin-Off in
November 2023 and dispositions under the Office Sale Program during 2023 and the 2024 first quarter, and (ii) the reclassification of lease revenues during the 2023 first quarter for a portfolio of 78U-Haul self-storage net lease properties (theU-Haul portfolio) in conjunction with the exercise of a purchase option on the portfolio. These two items more than offset the impact of higher lease revenues from net investment activity and rent escalations. - Income from finance leases and loans receivable increased primarily as a result of the reclassification of lease revenues for the
U-Haul portfolio during the 2023 first quarter (as described above), which was sold during the 2024 first quarter. This reclassification had no impact on total revenues. - Operating property revenues decreased primarily as a result of the sale of eight hotel operating properties during 2023 (out of 12 hotel properties that converted from net lease to operating upon lease expiration during the 2023 first quarter).
- Other lease-related income decreased primarily as a result of higher lease termination income during the 2023 first quarter in connection with the sales of two properties.
- Lease revenues decreased primarily as a result of (i) executing the Company's strategic plan to exit the office assets within its portfolio, including the NLOP Spin-Off in
Net Income Attributable to
- Net income attributable to
W. P. Carey for the 2024 first quarter was$159.2 million , down 45.9% from$294.4 million for the 2023 first quarter, due primarily to lower gain on sale of real estate.
Adjusted Funds from Operations (AFFO)
- AFFO for the 2024 first quarter was
$1.14 per diluted share, down 13.0% from$1.31 per diluted share for the 2023 first quarter, primarily reflecting the impact of the NLOP Spin-Off and the Office Sale Program, as well as lower other lease-related income, which more than offset the impact of net investment activity and rent escalations.
Note: Further information concerning AFFO, which is a non-GAAP supplemental performance metric, is presented in the accompanying tables and related notes.
Dividend
- On
March 14, 2024 , the Company reported that its Board of Directors declared a quarterly cash dividend of$0.865 per share, equivalent to an annualized dividend rate of$3.46 per share. The dividend was paid onApril 15, 2024 to shareholders of record as ofMarch 28, 2024 .
AFFO GUIDANCE
2024 AFFO Guidance
- For the 2024 full year, the Company affirms its expectation that it will report AFFO of between
$4.65 and$4.75 per diluted share, based on the following key assumptions, which are substantially unchanged:
(i) investment volume of between$1.5 billion and$2.0 billion ;
(ii) disposition volume of between$1.2 billion and$1.4 billion , including:
(a) substantial completion of the Company's strategic plan to exit office, including anticipated asset sales under the Office Sale Program totaling between
(b) completion of the
(c) other dispositions totaling between
(iii) total general and administrative expenses of between
Note: The Company does not provide guidance on net income. The Company only provides guidance on AFFO and does not provide a reconciliation of this forward-looking non-GAAP guidance to net income due to the inherent difficulty in quantifying certain items necessary to provide such reconciliation as a result of their unknown effect, timing and potential significance. Examples of such items include impairments of assets, gains and losses from sales of assets, and depreciation and amortization from new acquisitions.
REAL ESTATE
Investments
- Year to date, the Company completed investments totaling
$374.5 million , including$280.3 million during the 2024 first quarter and$94.2 million subsequent to quarter end, comprising a 1.2 million square foot distribution facility located inCommercial Point, Ohio . - The Company currently has six capital investments and commitments totaling
$66.4 million scheduled to be completed during 2024.
Dispositions
- During the 2024 first quarter, the Company disposed of 153 properties for gross proceeds totaling
$889.2 million , comprising:- The disposition of 72 properties under an asset sale program (the Office Sale Program) for gross proceeds totaling
$410.5 million , primarily from the sale of a portfolio of 70 office properties net leased to the State of Andalusia (the State of Andalusia portfolio) for$359.3 million , and - The disposition of 81 non-Office Sale Program properties for gross proceeds totaling
$478.6 million , primarily from the sale of theU-Haul portfolio for$464.1 million through the completion of a purchase option on the portfolio.
- The disposition of 72 properties under an asset sale program (the Office Sale Program) for gross proceeds totaling
- The Company is nearing completion of the strategic plan it announced on
September 21, 2023 to exit the office assets within its portfolio, primarily through:- The spin-off of 59 office properties into Net Lease Office Properties, a separate publicly-traded REIT (the NLOP Spin-Off), completed on
November 1, 2023 ; and - The disposition of 87 properties retained by
W. P. Carey under the Office Sale Program.
- The spin-off of 59 office properties into Net Lease Office Properties, a separate publicly-traded REIT (the NLOP Spin-Off), completed on
- To date, the Company has sold 80 properties under the Office Sale Program for gross proceeds totaling approximately
$630.8 million . Seven office properties generating$17.2 million of ABR and representing 1.3% of total ABR remain to be sold under the program, which are targeted for sale during the first half of 2024.
Contractual Same-Store Rent Growth
- As of
March 31, 2024 , contractual same store rent growth was 3.1% year over year, on a constant currency basis.
Lease Restructuring
- On February 15, 2024, the Company entered into a lease restructuring for a 35-property retail portfolio in
Germany leased to Hellweg, including a rent abatement for the 2024 first quarter, a €4.0 million rent reduction commencing onApril 1, 2024 (resulting in annual rent of €23.3 million) and a seven-year extension of the lease term toFebruary 2044 .
Occupancy
- As of
March 31, 2024 , the Company's net lease portfolio occupancy rate was 99.1%, up 100 basis points from 98.1% as ofDecember 31, 2023 , due primarily to the lease-up of an approximately 1.6 million square foot warehouse property located inUniversity Park, Illinois .
Composition
- As of
March 31, 2024 , the Company's net lease portfolio consisted of 1,282 properties, comprising 168 million square feet leased to 335 tenants, with a weighted-average lease term of 12.2 years and an occupancy rate of 99.1%. In addition, the Company owned 89 self-storage operating properties, five hotel operating properties and two student housing operating properties, totaling approximately 7.3 million square feet.
BALANCE SHEET AND CAPITALIZATION
Liquidity
-
As of
March 31, 2024 , the Company had total liquidity of$2.8 billion , including approximately$1.7 billion of available capacity under its Senior Unsecured Credit Facility (net of amounts reserved for standby letters of credit),$777.0 million of cash and cash equivalents, and$283.8 million of cash held at qualified intermediaries.
Senior Unsecured Notes
- Subsequent to quarter end, the Company repaid
$500 million of 4.6% Senior Unsecured Notes due 2024.
* * * * *
Supplemental Information
The Company has provided supplemental unaudited financial and operating information regarding the 2024 first quarter and certain prior quarters, including a description of non-GAAP financial measures and reconciliations to GAAP measures, in a Current Report on Form 8-K filed with the
* * * * *
Live Conference Call and Audio Webcast Scheduled for
Please dial in at least 10 minutes prior to the start time.
Date/Time:
Call-in Number: 1 (877) 465-1289 (
Live Audio Webcast and Replay: www.wpcarey.com/earnings
* * * * *
W. P.
* * * * *
Cautionary Statement Concerning Forward-Looking Statements
Certain of the matters discussed in this communication constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of
1 (212) 492-1110
institutionalir@wpcarey.com
1 (212) 492-8920
ir@wpcarey.com
Press Contact:
1 (212) 492-1166
amcgrath@wpcarey.com
* * * * *
W. P. CAREY INC. |
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Consolidated Balance Sheets (Unaudited) |
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(in thousands, except share and per share amounts) |
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Assets |
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|
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Investments in real estate: |
|
|
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Land, buildings and improvements — net lease and other |
$ 12,260,873 |
|
$ 12,095,458 |
Land, buildings and improvements — operating properties |
1,256,171 |
|
1,256,249 |
Net investments in finance leases and loans receivable |
660,585 |
|
1,514,923 |
In-place lease intangible assets and other |
2,278,593 |
|
2,308,853 |
Above-market rent intangible assets |
693,294 |
|
706,773 |
Investments in real estate |
17,149,516 |
|
17,882,256 |
Accumulated depreciation and amortization (a) |
(3,067,292) |
|
(3,005,479) |
Assets held for sale, net |
— |
|
37,122 |
Net investments in real estate |
14,082,224 |
|
14,913,899 |
Equity method investments |
355,668 |
|
354,261 |
Cash and cash equivalents |
776,966 |
|
633,860 |
Other assets, net |
1,422,597 |
|
1,096,474 |
|
974,052 |
|
978,289 |
Total assets |
$ 17,611,507 |
|
$ 17,976,783 |
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|
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Liabilities and Equity |
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|
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Debt: |
|
|
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Senior unsecured notes, net |
$ 5,969,622 |
|
$ 6,035,686 |
Unsecured term loans, net |
1,107,164 |
|
1,125,564 |
Unsecured revolving credit facility |
291,621 |
|
403,785 |
Non-recourse mortgages, net |
504,808 |
|
579,147 |
Debt, net |
7,873,215 |
|
8,144,182 |
Accounts payable, accrued expenses and other liabilities |
575,832 |
|
615,750 |
Below-market rent and other intangible liabilities, net |
131,517 |
|
136,872 |
Deferred income taxes |
158,820 |
|
180,650 |
Dividends payable |
192,948 |
|
192,332 |
Total liabilities |
8,932,332 |
|
9,269,786 |
|
|
|
|
Preferred stock, |
— |
|
— |
Common stock, |
219 |
|
219 |
Additional paid-in capital |
11,772,948 |
|
11,784,461 |
Distributions in excess of accumulated earnings |
(2,926,085) |
|
(2,891,424) |
Deferred compensation obligation |
78,491 |
|
62,046 |
Accumulated other comprehensive loss |
(252,516) |
|
(254,867) |
Total stockholders' equity |
8,673,057 |
|
8,700,435 |
Noncontrolling interests |
6,118 |
|
6,562 |
Total equity |
8,679,175 |
|
8,706,997 |
Total liabilities and equity |
$ 17,611,507 |
|
$ 17,976,783 |
________ |
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(a) |
Includes |
W. P. CAREY INC. |
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Quarterly Consolidated Statements of Income (Unaudited) |
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(in thousands, except share and per share amounts) |
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Three Months Ended |
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Revenues |
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|
|
|
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Real Estate: |
|
|
|
|
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Lease revenues |
$ 322,251 |
|
$ 336,757 |
|
$ 352,336 |
Income from finance leases and loans receivable |
25,793 |
|
31,532 |
|
20,755 |
Operating property revenues |
36,643 |
|
39,477 |
|
40,886 |
Other lease-related income |
2,155 |
|
2,610 |
|
13,373 |
|
386,842 |
|
410,376 |
|
427,350 |
Investment Management: |
|
|
|
|
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Asset management revenue (a) |
1,893 |
|
1,348 |
|
339 |
Other advisory income and reimbursements (b) |
1,063 |
|
713 |
|
101 |
|
2,956 |
|
2,061 |
|
440 |
|
389,798 |
|
412,437 |
|
427,790 |
Operating Expenses |
|
|
|
|
|
Depreciation and amortization |
118,768 |
|
129,484 |
|
156,409 |
General and administrative |
27,868 |
|
21,579 |
|
26,549 |
Operating property expenses |
17,950 |
|
20,403 |
|
21,249 |
Reimbursable tenant costs |
12,973 |
|
18,942 |
|
21,976 |
Property expenses, excluding reimbursable tenant costs |
12,173 |
|
13,287 |
|
12,772 |
Stock-based compensation expense |
8,856 |
|
8,693 |
|
7,766 |
Merger and other expenses (c) |
4,452 |
|
(641) |
|
24 |
Impairment charges — real estate |
— |
|
71,238 |
|
— |
|
203,040 |
|
282,985 |
|
246,745 |
Other Income and Expenses |
|
|
|
|
|
Interest expense |
(68,651) |
|
(72,194) |
|
(67,196) |
Non-operating income (d) |
15,505 |
|
7,445 |
|
4,626 |
Gain on sale of real estate, net |
15,445 |
|
134,026 |
|
177,749 |
Other gains and (losses) (e) |
13,839 |
|
(45,777) |
|
8,100 |
Earnings from equity method investments |
4,864 |
|
5,006 |
|
5,236 |
|
(18,998) |
|
28,506 |
|
128,515 |
Income before income taxes |
167,760 |
|
157,958 |
|
309,560 |
Provision for income taxes |
(8,674) |
|
(13,714) |
|
(15,119) |
Net Income |
159,086 |
|
144,244 |
|
294,441 |
Net loss (income) attributable to noncontrolling interests |
137 |
|
50 |
|
(61) |
Net Income Attributable to |
$ 159,223 |
|
$ 144,294 |
|
$ 294,380 |
|
|
|
|
|
|
Basic Earnings Per Share |
$ 0.72 |
|
$ 0.66 |
|
$ 1.39 |
Diluted Earnings Per Share |
$ 0.72 |
|
$ 0.66 |
|
$ 1.39 |
Weighted-Average Shares Outstanding |
|
|
|
|
|
Basic |
220,031,597 |
|
219,277,446 |
|
211,951,930 |
Diluted |
220,129,870 |
|
219,469,641 |
|
212,345,047 |
|
|
|
|
|
|
Dividends Declared Per Share |
$ 0.865 |
|
$ 0.860 |
|
$ 1.067 |
__________ |
|
(a) |
Amount for the three months ended |
(b) |
Amount for the three months ended |
(c) |
Amount for the three months ended |
(d) |
Amount for the three months ended |
(e) |
Amount for the three months ended |
W. P. CAREY INC. |
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Quarterly Reconciliation of Net Income to Adjusted Funds from Operations (AFFO) (Unaudited) |
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(in thousands, except share and per share amounts) |
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Three Months Ended |
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|
|
|
|
|
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Net income attributable to |
$ 159,223 |
|
$ 144,294 |
|
$ 294,380 |
Adjustments: |
|
|
|
|
|
Depreciation and amortization of real property |
118,113 |
|
128,839 |
|
155,868 |
Gain on sale of real estate, net (a) |
(15,445) |
|
(134,026) |
|
(177,749) |
Impairment charges — real estate (b) |
— |
|
71,238 |
|
— |
Proportionate share of adjustments to earnings from equity method |
2,949 |
|
2,942 |
|
2,606 |
Proportionate share of adjustments for noncontrolling interests (d) |
(103) |
|
(133) |
|
(299) |
Total adjustments |
105,514 |
|
68,860 |
|
(19,574) |
FFO (as defined by NAREIT) Attributable to |
264,737 |
|
213,154 |
|
274,806 |
Adjustments: |
|
|
|
|
|
Straight-line and other leasing and financing adjustments |
(19,553) |
|
(19,071) |
|
(15,050) |
Other (gains) and losses (f) |
(13,839) |
|
45,777 |
|
(8,100) |
Stock-based compensation |
8,856 |
|
8,693 |
|
7,766 |
Amortization of deferred financing costs |
4,588 |
|
4,895 |
|
4,940 |
Merger and other expenses (g) |
4,452 |
|
(641) |
|
24 |
Above- and below-market rent intangible lease amortization, net |
4,068 |
|
6,644 |
|
10,861 |
Tax (benefit) expense – deferred and other |
(1,373) |
|
2,507 |
|
4,366 |
Other amortization and non-cash items |
579 |
|
152 |
|
472 |
Proportionate share of adjustments to earnings from equity method |
(519) |
|
(663) |
|
(926) |
Proportionate share of adjustments for noncontrolling interests (d) |
(104) |
|
(97) |
|
60 |
Total adjustments |
(12,845) |
|
48,196 |
|
4,413 |
AFFO Attributable to |
$ 251,892 |
|
$ 261,350 |
|
$ 279,219 |
|
|
|
|
|
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Summary |
|
|
|
|
|
FFO (as defined by NAREIT) attributable to |
$ 264,737 |
|
$ 213,154 |
|
$ 274,806 |
FFO (as defined by NAREIT) attributable to |
$ 1.20 |
|
$ 0.97 |
|
$ 1.29 |
AFFO attributable to |
$ 251,892 |
|
$ 261,350 |
|
$ 279,219 |
AFFO attributable to |
$ 1.14 |
|
$ 1.19 |
|
$ 1.31 |
Diluted weighted-average shares outstanding |
220,129,870 |
|
219,469,641 |
|
212,345,047 |
__________ |
|
(a) |
Amounts for the three months ended |
(b) |
Amount for the three months ended |
(c) |
Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Earnings from equity method investments on the consolidated statements of income. This represents adjustments to equity income to reflect FFO and AFFO on a pro rata basis. |
(d) |
Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis. |
(e) |
FFO and AFFO are non-GAAP measures. See below for a description of FFO and AFFO. |
(f) |
Amount for the three months ended |
(g) |
Amount for the three months ended |
Non-GAAP Financial Disclosure
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
Due to certain unique operating characteristics of real estate companies, as discussed below, the
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the
We also modify the NAREIT computation of FFO to adjust GAAP net income for certain non-cash charges, such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rent and related reserves, other non-cash rent adjustments, non-cash allowance for credit losses on loans receivable and finance leases, stock-based compensation, non-cash environmental accretion expense, amortization of discounts and premiums on debt and amortization of deferred financing costs. 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. Additionally, we exclude non-core income and expenses, such as gains or losses from extinguishment of debt, merger and acquisition expenses, and spin-off expenses. We also exclude realized and unrealized gains/losses on foreign currency exchange rate movements (other than those realized on the settlement of foreign currency 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 to arrive at AFFO as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our portfolio performance over time and makes it more comparable to other REITs that are currently not engaged in acquisitions, mergers and restructuring, which are not part of our normal business operations. AFFO also reflects adjustments for unconsolidated partnerships and jointly owned investments. We 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 as we believe 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. We use our FFO and AFFO measures as supplemental financial measures of operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives to net income computed under GAAP, or as alternatives to net cash provided by operating activities computed under GAAP, or as indicators of our ability to fund our cash needs.
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