W. P. CAREY INC. Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding our financial statements and the reasons for changes in certain key components of our financial statements from period to period. This item also provides our perspective on our financial position and liquidity, as well as certain other factors that may affect our future results. The discussion also breaks down the financial results of our business by segment to provide a better understanding of how these segments and their results affect our financial condition and results of operations. Our Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the 2021 Annual Report and subsequent reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Refer to Item 1 of the 2021 Annual Report for a description of our business.
Significant Developments
Proposed Merger with CPA:18 - Global
OnFebruary 27, 2022 , we, CPA:18 - Global, CPA:18 LP, and certain of our subsidiaries entered into the Merger Agreement, pursuant to which CPA:18 - Global will merge with and into one of our indirect subsidiaries in exchange for shares of our common stock and cash ( Note 1 ). The Proposed Merger and related transactions were approved by the stockholders of CPA:18 - Global at a special meeting onJuly 26, 2022 . We currently expect the transaction to close onAugust 1, 2022 . Financial Highlights
During the six months ended
Real Estate
Investments
•We acquired 11 investments totaling
).
•We completed three construction projects at a cost totaling$98.2 million ( Note 4 ). •We funded approximately$37.3 million for a construction loan to build a retail complex inLas Vegas, Nevada , during the six months endedJune 30, 2022 . ThroughJune 30, 2022 , we have funded$141.0 million ( Note 7 ). •We committed to fund two build-to-suit or expansion projects totaling$24.9 million . We currently expect to complete the projects in 2022 and 2023 ( Note 4 ). Dispositions •As part of our active capital recycling program, we disposed of 14 properties for total proceeds, net of selling costs, of$115.1 million ( Note 14 ). •InJanuary 2022 , WLT redeemed in full our 1,300,000 shares of its preferred stock for gross proceeds of$65.0 million ( Note 8 ).
Financing and Capital Markets Transactions
•OnMay 2, 2022 , we established a$1.0 billion ATM Program, under which we may issue shares directly or defer delivery to a later date through our ATM Forwards. As ofJune 30, 2022 , we had approximately$301.0 million of available proceeds under our ATM Forwards ( Note 12 ). •We issued 2,740,295 shares of our common stock under our prior ATM Program at a weighted-average price of$80.79 per share, for net proceeds of$218.1 million ( Note 12 ). •InApril 2022 , we increased the Term Loan to £270.0 million and the Delayed Draw Term Loan to €215.0 million, thereby increasing the total capacity of our Senior Unsecured Credit Facility to approximately$2.4 billion . We used the approximately$300 million of proceeds from this increase in the capacity of our Unsecured Term Loans to partially repay amounts outstanding under our Unsecured Revolving Credit Facility ( Note 10 ).W. P. Carey 6/30/2022 10-Q - 41
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Investment Management
Assets Under Management
•As ofJune 30, 2022 , we managed total assets of approximately$2.5 billion on behalf of CPA:18 - Global and CESH. The vast majority of our Investment Management earnings are generated from asset management fees and our ownership interests in CPA:18 - Global and CESH. However, subject to the terms and conditions of the Merger Agreement, upon consummation of the Proposed Merger, we will no longer receive fees and distributions from CPA:18 - Global, and as a result, Investment Management earnings are expected to decline in future periods ( Note 1 ). Dividends to Stockholders
We declared cash dividends totaling
Consolidated Results
(in thousands, except shares)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues from Real Estate $ 339,787 $
314,790
4,610 4,934 8,957 9,929
Total revenues 344,397 319,724 692,835 630,890
Net income from Real Estate attributable to
W. P. Carey 123,228 114,687 270,086 159,274
Net income from Investment Management
attributable to W. P. Carey 4,450 5,558 14,587 12,605
Net income attributable to W. P. Carey 127,678 120,245 284,673 171,879
Dividends declared 205,898 194,914 411,395 382,395
Net cash provided by operating activities 446,883 398,747
Net cash used in investing activities (560,525) (885,881)
Net cash provided by financing activities 106,531 398,948
Supplemental financial measures (a):
Adjusted funds from operations attributable
to W. P. Carey (AFFO) - Real Estate 247,246 222,377 499,260 432,705
Adjusted funds from operations attributable
to W. P. Carey (AFFO) - Investment
Management 7,128 6,299 13,940 12,457
Adjusted funds from operations attributable
to W. P. Carey (AFFO) 254,374 228,676 513,200 445,162
Diluted weighted-average shares outstanding 194,763,695 180,668,732 193,706,035 178,902,259
__________
(a)We consider Adjusted funds from operations ("AFFO"), a supplemental measure
that is not defined by GAAP (a "non-GAAP measure"), to be an important measure
in the evaluation of our operating performance. See Supplemental Financial
Measures below for our definition of this non-GAAP measure and a
reconciliation to its most directly comparable GAAP measure.
W. P. Carey 6/30/2022 10-Q - 42
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Revenues
Total revenues increased for the three and six months endedJune 30, 2022 as compared to the same periods in 2021. Real Estate revenue increased primarily due to higher lease revenues (substantially as a result of property acquisition activity and rent escalations, partially offset by the impact of the weakening euro and British pound sterling, as well as property dispositions) and higher lease termination and other income for the six months endedJune 30, 2022 as compared to the same period in 2021 ( Note 4 ).
Net Income Attributable to
Net income attributable toW. P. Carey increased for the three months endedJune 30, 2022 as compared to the same period in 2021. Net income from Real Estate attributable toW. P. Carey increased primarily due to a non-cash unrealized gain recognized on our investment in common shares of WLT ( Note 8 ), a higher aggregate gain on sale of real estate ( Note 14 ), and the impact of real estate acquisitions, partially offset by the impact of the weakening euro and British pound sterling, and impairment charges recognized during the current year period. Net income attributable toW. P. Carey increased for the six months endedJune 30, 2022 as compared to the same period in 2021. Net income from Real Estate attributable toW. P. Carey increased primarily due to a lower loss on extinguishment of debt ( Note 10 ), non-cash unrealized gains recognized on our investment in common shares of WLT ( Note 8 ), the impact of real estate acquisitions, and a higher aggregate gain on sale of real estate, partially offset by the impact of the weakening euro and British pound sterling, higher impairment charges ( Note 8 ), and a non-cash unrealized gain recognized on our investment in shares of Lineage Logistics during the prior year period ( Note 8 ).
AFFO
AFFO increased for the three and six months endedJune 30, 2022 as compared to the same periods in 2021, primarily due to higher lease revenues from net investment activity and rent escalations, partially offset by the impact of the weakening euro and British pound sterling, as well as the cessation of cash dividends from our investment in preferred shares of WLT following the redemption of that investment inJanuary 2022 ( Note 8 ).W. P. Carey 6/30/2022 10-Q
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Portfolio Overview
Our portfolio is comprised of operationally-critical, commercial real estate assets net leased to tenants located primarily inthe United States and Northern andWestern Europe . We invest in high-quality single tenant industrial, warehouse, office, retail, and self-storage properties subject to long-term net leases with built-in rent escalators. Portfolio information is provided on a pro rata basis, unless otherwise noted below, to better illustrate the economic impact of our various net-leased jointly owned investments. See Terms and Definitions below for a description of pro rata amounts.
Portfolio Summary
June 30, 2022 December 31, 2021
ABR (in thousands) $ 1,270,226 $ 1,247,764
Number of net-leased properties 1,357 1,304
Number of operating properties (a) 20 20
Number of tenants (net-leased properties) 356 352
Total square footage (net-leased properties, in thousands) 161,294 155,674
Occupancy (net-leased properties) 99.1 % 98.5 %
Weighted-average lease term (net-leased properties, in years) 11.0 10.8
Number of countries (b) 25 24
Total assets (in thousands) $ 15,454,229 $ 15,480,630
Net investments in real estate (in thousands) 12,976,489 13,037,369
Six Months Ended June 30,
2022 2021
Acquisition volume (in millions) (c) $ 681.3 $ 922.0
Construction projects completed (in millions) 98.2 62.4
Average U.S. dollar/euro exchange rate 1.0941 1.2046
Average U.S. dollar/British pound sterling exchange rate 1.2999 1.3874
__________
(a)At both June 30, 2022 and December 31, 2021 , operating properties consisted
of 19 self-storage properties (of which we consolidated ten, with an average
occupancy of 95.3% as of June 30, 2022 ) and one hotel property with an average
occupancy of 59.2% for the six months ended June 30, 2022 .
(b)We acquired investments in Belgium during the six months ended June 30, 2022 .
(c)Amounts for the six months ended June 30, 2022 and 2021 include $37.3 million
and $84.9 million , respectively, of funding for a construction loan ( Note
7 ).
W. P. Carey 6/30/2022 10-Q - 44
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Net-Leased Portfolio
The tables below represent information about our net-leased portfolio at
Top Ten Tenants by ABR
(dollars in thousands)
Weighted-Average Lease
Tenant/Lease Guarantor Description Number of Properties ABR ABR Percent Term (Years)
U-Haul Moving Partners Inc. Net lease self-storage properties
and Mercury Partners, LP in the U.S. 78 $ 38,751 3.0 % 1.8
Government office properties in
State of Andalucía (a) Spain 70 28,506 2.2 % 12.5
Hellweg Die Profi-Baumärkte Do-it-yourself retail properties
GmbH & Co. KG (a) in Germany 35 26,537 2.1 % 14.7
Metro Cash & Carry Italia Business-to-business wholesale
S.p.A. (a) stores in Italy and Germany 20 26,492 2.1 % 6.3
Net lease self-storage properties
Extra Space Storage, Inc. in the U.S. 27 22,957 1.8 % 21.8
Do-it-yourself retail properties
OBI Group (a) in Poland 26 21,515 1.7 % 8.1
Net lease hotel properties in the
Marriott Corporation U.S. 18 21,350 1.7 % 1.6 3 20,981 1.7 % 21.2
Automotive dealerships in the
Pendragon PLC (a) United Kingdom 63 20,214 1.6 % 12.9
Distribution facilities in the
Advance Auto Parts, Inc. U.S. 29 19,851 1.6 % 10.6
Total 369 $ 247,154 19.5 % 10.5
__________
(a)ABR amounts are subject to fluctuations in foreign currency exchange rates.
W. P. Carey 6/30/2022 10-Q - 45
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Portfolio Diversification by Geography
(in thousands, except percentages)
Square Footage
Region ABR ABR Percent Square Footage (a) Percent
United States
South
Texas $ 105,724 8.3 % 11,983 7.4 %
Florida 53,372 4.2 % 4,456 2.7 %
Tennessee 25,193 2.0 % 4,136 2.6 %
Georgia 24,804 2.0 % 3,512 2.2 %
Alabama 19,386 1.5 % 3,334 2.1 %
Other (b) 15,469 1.2 % 2,237 1.4 %
Total South 243,948 19.2 % 29,658 18.4 %
Midwest
Illinois 62,824 4.9 % 8,734 5.4 %
Minnesota 32,584 2.6 % 3,225 2.0 %
Indiana 26,882 2.1 % 4,734 2.9 %
Ohio 21,055 1.7 % 4,503 2.8 %
Wisconsin 15,962 1.3 % 2,726 1.7 %
Michigan 15,410 1.2 % 2,496 1.6 %
Other (b) 35,706 2.8 % 5,634 3.5 %
Total Midwest 210,423 16.6 % 32,052 19.9 %
East
North Carolina 36,505 2.9 % 8,098 5.0 %
Pennsylvania 31,890 2.5 % 3,673 2.3 %
New Jersey 23,178 1.8 % 1,235 0.8 %
Massachusetts 22,159 1.7 % 1,387 0.8 %
New York 18,881 1.5 % 2,221 1.4 %
Kentucky 17,796 1.4 % 3,063 1.9 %
South Carolina 14,982 1.2 % 4,088 2.5 %
Other (b) 37,234 2.9 % 5,300 3.3 %
Total East 202,625 15.9 % 29,065 18.0 %
West
California 70,710 5.5 % 6,420 4.0 %
Arizona 30,099 2.4 % 3,365 2.1 %
Other (b) 63,158 5.0 % 6,720 4.1 %
Total West 163,967 12.9 % 16,505 10.2 %
United States Total 820,963 64.6 % 107,280 66.5 %
International
Spain 60,420 4.8 % 5,078 3.2 %
Germany 57,205 4.5 % 6,440 4.0 %
Poland 55,570 4.4 % 7,959 4.9 %
United Kingdom 52,424 4.1 % 4,804 3.0 %
The Netherlands 52,200 4.1 % 6,990 4.3 %
Italy 24,912 2.0 % 2,386 1.5 %
Denmark 20,475 1.6 % 2,844 1.8 %
France 19,013 1.5 % 1,685 1.0 %
Croatia 15,988 1.3 % 1,726 1.1 %
Canada 15,644 1.2 % 2,448 1.5 %
Other (c) 75,412 5.9 % 11,654 7.2 %
International Total 449,263 35.4 % 54,014 33.5 %
Total $ 1,270,226 100.0 % 161,294 100.0 %
W. P. Carey 6/30/2022 10-Q - 46
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Portfolio Diversification by Property Type
(in thousands, except percentages)
Square Footage
Property Type ABR ABR Percent Square Footage (a) Percent
Industrial $ 339,070 26.7 % 56,461 35.0 %
Warehouse 306,675 24.1 % 57,856 35.9 %
Office 237,154 18.7 % 16,013 9.9 %
Retail (d) 212,899 16.8 % 19,384 12.0 %
Self Storage (net lease) 61,708 4.9 % 5,810 3.6 %
Other (e) 112,720 8.8 % 5,770 3.6 %
Total $ 1,270,226 100.0 % 161,294 100.0 %
__________
(a)Includes square footage for any vacant properties.
(b)Other properties within South include assets in Louisiana , Arkansas ,
Oklahoma , and Mississippi . Other properties within Midwest include assets in
Missouri , Kansas , Iowa , Nebraska , North Dakota , and South Dakota . Other
properties within East include assets in Virginia , Maryland , Connecticut , West
Virginia , New Hampshire , and Maine . Other properties within West include assets
in Oregon , Utah , Colorado , Washington , Nevada , Hawaii , New Mexico , Idaho ,
Wyoming , and Montana .
(c)Includes assets in Lithuania , Mexico , Finland , Norway , Belgium , Hungary ,
Portugal , the Czech Republic , Austria , Sweden , Slovakia , Japan , Latvia , and
Estonia .
(d)Includes automotive dealerships.
(e)Includes ABR from tenants within the following property types: education
facility, hotel (net lease), laboratory, theater, fitness facility, student
housing (net lease), funeral home, restaurant, and land.
W. P. Carey 6/30/2022 10-Q - 47
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Portfolio Diversification by Tenant Industry
(in thousands, except percentages)
Square Footage
Industry Type ABR ABR Percent Square Footage Percent
Retail Stores (a) $ 265,377 20.9 % 34,369 21.3 %
Consumer Services 110,204 8.7 % 8,067 5.0 %
Beverage and Food 86,945 6.8 % 12,263 7.6 %
Automotive 79,095 6.2 % 12,310 7.6 %
Grocery 69,117 5.4 % 7,756 4.8 %
Cargo Transportation 61,358 4.8 % 9,485 5.9 %
Healthcare and Pharmaceuticals 60,276 4.7 % 5,372 3.3 %
Construction and Building 51,403 4.1 % 9,077 5.6 %
Business Services 47,521 3.7 % 3,981 2.5 %
Capital Equipment 47,088 3.7 % 7,755 4.8 %
Durable Consumer Goods 44,337 3.5 % 10,276 6.4 %
Hotel and Leisure 42,259 3.3 % 2,214 1.4 %
Containers, Packaging, and Glass 40,660 3.2 % 6,714 4.2 %
Sovereign and Public Finance 37,455 3.0 % 3,241 2.0 %
High Tech Industries 31,066 2.5 % 3,315 2.1 %
Chemicals, Plastics, and Rubber 27,710 2.2 % 4,431 2.7 %
Insurance 25,973 2.0 % 1,749 1.1 %
Non-Durable Consumer Goods 23,869 1.9 % 5,940 3.7 %
Banking 19,210 1.5 % 1,216 0.8 %
Aerospace and Defense 16,227 1.3 % 1,358 0.8 %
Telecommunications 15,007 1.2 % 1,479 0.9 %
Metals 14,913 1.2 % 3,068 1.9 %
Media: Broadcasting and Subscription 12,723 1.0 % 784 0.5 %
Other (b) 40,433 3.2 % 5,074 3.1 %
Total $ 1,270,226 100.0 % 161,294 100.0 %
__________
(a)Includes automotive dealerships.
(b)Includes ABR from tenants in the following industries: media: advertising,
printing, and publishing, wholesale, oil and gas, environmental industries,
consumer transportation, forest products and paper, real estate, and
electricity. Also includes square footage for vacant properties.
W. P. Carey 6/30/2022 10-Q - 48
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Lease Expirations
(in thousands, except percentages, number of leases, and number of tenants)
Number of
Year of Lease Number of Leases Tenants with Square Square Footage
Expiration (a) Expiring Leases Expiring ABR ABR Percent Footage Percent
Remaining 2022 20 17 $ 24,073 1.9 % 1,500 0.9 %
2023 (b) 32 27 46,942 3.7 % 5,127 3.2 %
2024 (c) 43 37 94,116 7.4 % 12,221 7.6 %
2025 52 30 58,981 4.6 % 7,144 4.4 %
2026 41 30 56,375 4.4 % 8,222 5.1 %
2027 57 33 79,785 6.3 % 8,715 5.4 %
2028 42 24 62,132 4.9 % 5,571 3.5 %
2029 51 24 55,657 4.4 % 6,882 4.3 %
2030 28 24 65,273 5.1 % 5,565 3.4 %
2031 33 17 64,229 5.1 % 8,056 5.0 %
2032 37 18 40,780 3.2 % 5,409 3.4 %
2033 28 22 74,922 5.9 % 10,159 6.3 %
2034 48 16 76,288 6.0 % 7,955 4.9 %
2035 13 13 26,224 2.1 % 4,725 2.9 %
Thereafter (>2035) 277 109 444,449 35.0 % 62,519 38.8 %
Vacant - - - - % 1,524 0.9 %
Total 802 $ 1,270,226 100.0 % 161,294 100.0 %
__________
(a)Assumes tenants do not exercise any renewal options or purchase options.
(b)Includes ABR of $16.1 million from a tenant (Marriott Corporation ) with a
lease expiration in January 2023 .
(c)Includes ABR of $38.8 million from a tenant (U-Haul Moving Partners, Inc. and
Mercury Partners, LP ) that holds an option to repurchase the 78 properties it is
leasing in April 2024 . There can be no assurance that such repurchase will be
completed.
Rent Collections
Through the date of this Report, we received from tenants over 99.6% of
contractual base rent that was due during the second quarter of 2022 (based on
contractual minimum annualized base rent ("ABR") as of
Terms and Definitions
Pro Rata Metrics - The portfolio information above contains certain metrics prepared on a pro rata basis. We refer to these metrics as pro rata metrics. We have a number of investments, usually with our affiliates, in which our economic ownership is less than 100%. On a full consolidation basis, we report 100% of the assets, liabilities, revenues, and expenses of those investments that are deemed to be under our control or for which we are deemed to be the primary beneficiary, even if our ownership is less than 100%. Also, for all other jointly owned investments, which we do not control, we report our net investment and our net income or loss from that investment. On a pro rata basis, we generally present our proportionate share, based on our economic ownership of these jointly owned investments, of the portfolio metrics of those investments. Multiplying each of our jointly owned investments' financial statement line items by our percentage ownership and adding or subtracting those amounts from our totals, as applicable, may not accurately depict the legal and economic implications of holding an ownership interest of less than 100% in our jointly owned investments. ABR - ABR represents contractual minimum annualized base rent for our net-leased properties and reflects exchange rates as ofJune 30, 2022 . If there is a rent abatement, we annualize the first monthly contractual base rent following the free rent period. ABR is not applicable to operating properties.W. P. Carey 6/30/2022 10-Q
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Results of Operations
We operate in two reportable segments: Real Estate and Investment Management. We evaluate our results of operations with a primary focus on increasing and enhancing the value, quality, and number of properties in our Real Estate segment. We focus our efforts on accretive investing and improving portfolio quality through re-leasing efforts, including negotiation of lease renewals, or selectively selling assets in order to increase value in our real estate portfolio. Through our Investment Management segment, we expect to continue to earn fees and other income from the management of the portfolios of the remaining Managed Programs until those programs reach the end of their respective life cycles. Refer to Note 15 for tables presenting the comparative results of our Real Estate and Investment Management segments.
Real Estate
Revenues
The following table presents revenues within our Real Estate segment (in
thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Real Estate Revenues
Lease revenues from:
Existing net-leased properties $ 282,633 $ 273,925 $ 8,708 $ 562,924 $ 552,371 $ 10,553
Recently acquired net-leased
properties 31,017 12,381 18,636 57,558 14,794 42,764
Net-leased properties sold or held
for sale 704 2,758 (2,054) 1,597 6,564 (4,967)
Total lease revenues (includes
reimbursable tenant costs) 314,354 289,064 25,290 622,079 573,729 48,350
Income from direct financing leases
and loans receivable 17,778 17,422 356 36,157 35,164 993
Operating property revenues 5,064 3,245 1,819 8,929 5,424 3,505
Lease termination income and other 2,591 5,059 (2,468) 16,713 6,644 10,069
$ 339,787 $ 314,790 $ 24,997 $ 683,878 $ 620,961 $ 62,917
W. P. Carey 6/30/2022 10-Q - 50
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Lease Revenues
"Existing net-leased properties" are those that we acquired or placed into
service prior to
For the three and six months endedJune 30, 2022 as compared to the same periods in 2021, lease revenues from existing net-leased properties increased due to the following items (in millions):
[[Image Removed: wpc-20220630_g2.jpg]][[Image Removed: wpc-20220630_g3.jpg]] __________
(a)Excludes fixed minimum rent increases, which are reflected as straight-line rent adjustments within lease revenues. (b)Primarily related to (i) straight-line rent adjustments as a result of contractual rental revenue from certain leases being deemed probable of collection and (ii) write-offs of above/below-market rent intangibles. "Recently acquired net-leased properties" are those that we acquired or placed into service subsequent toDecember 31, 2020 and that were not sold or held for sale during the periods presented. SinceJanuary 1, 2021 , we acquired 36 investments (comprised of 129 properties and six land parcels under buildings that we already own) and placed one property into service.W. P. Carey 6/30/2022 10-Q
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"Net-leased properties sold or held for sale" include (i) 14 net-leased properties disposed of during the six months endedJune 30, 2022 and (ii) 24 net-leased properties disposed of during the year endedDecember 31, 2021 . Our dispositions are more fully described in Note 14 .
Income from Direct Financing Leases and Loans Receivable
We currently present Income from direct financing leases and loans receivable on its own line item in the consolidated statements of income. Previously, income from direct financing leases was included within Lease revenues and income from loans receivable was included within Lease termination income and other in the consolidated statements of income. Prior period amounts have been reclassified to conform to the current period presentation. For the three and six months endedJune 30, 2022 as compared to the same periods in 2021, income from direct financing leases and loans receivable increased due to the following items (in millions): [[Image Removed: wpc-20220630_g4.jpg]][[Image Removed: wpc-20220630_g5.jpg]]W. P. Carey 6/30/2022 10-Q - 52
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Operating Property Revenues and Expenses
For the periods presented, we recorded operating property revenues from 11 operating properties, comprised of ten self-storage operating properties (which excludes nine self-storage properties accounted for under the equity method) and one hotel operating property. For our hotel operating property, revenues and expenses increased by (i)$1.5 million and$1.1 million , respectively, for the three months endedJune 30, 2022 as compared to the same period in 2021, and (ii)$3.0 million and$2.0 million , respectively, for the six months endedJune 30, 2022 as compared to the same period in 2021, reflecting higher occupancy as the hotel's business recovers from the ongoing COVID-19 pandemic.
Lease Termination Income and Other
Lease termination income and other is described in Note 4 .
Operating Expenses
Depreciation and Amortization
The following table presents depreciation and amortization expense within our Real Estate segment (in thousands):
Three Months Ended June 30 , Six Months Ended June 30 ,
2022 2021 Change 2022 2021 Change
Depreciation and Amortization
Net-leased properties $ 113,650 $ 112,319 $ 1,331 $ 227,612 $ 220,822 $ 6,790
Operating properties 683 679 4 1,367 1,375 (8)
Corporate 747 1,350 (603) 1,494 2,473 (979)
$ 115,080 $ 114,348 $ 732 $ 230,473 $ 224,670 $ 5,803
For the three and six months ended June 30, 2022 as compared to the same periods
in 2021, depreciation and amortization expense for net-leased properties
increased primarily due to the impact of net acquisition activity, partially
offset by the weakening of foreign currencies (primarily the euro and British
pound sterling) in relation to the U.S. dollar between the periods.
General and Administrative
All general and administrative expenses are attributed to our Real Estate segment.
For the six months ended
Property Expenses, Excluding Reimbursable Tenant Costs
For the six months endedJune 30, 2022 as compared to the same period in 2021, property expenses, excluding reimbursable tenant costs, increased by$2.9 million , primarily due to higher carrying costs related to tenant vacancies (which resulted in property expenses no longer being reimbursable) and costs associated with repositioning certain properties.
Stock-based Compensation Expense
Stock-based compensation expense is fully recognized within our Real Estate segment.
For the six months endedJune 30, 2022 as compared to the same period in 2021, stock-based compensation expense allocated to our Real Estate segment increased by$3.2 million , primarily due to changes in the projected payout for PSUs.
Impairment Charges
Our impairment charges are more fully described in Note 8 .
W. P. Carey 6/30/2022 10-Q
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Merger and Other Expenses
The following table presents merger and other expenses within our Real Estate
segment (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Merger and Other Expenses
Costs incurred in connection with
the Proposed Merger ( Note 1 ) $ 1,785 $ - $ 1,785 $ 2,734 $ - $ 2,734
Reversals of estimated liabilities
for German real estate transfer
taxes that were previously recorded
in connection with mergers in prior
years - (2,819) 2,819 (3,616) (3,262) (354)
Other expenses 199 220 (21) 541 172 369
$ 1,984 $ (2,599) $ 4,583 $ (341) $ (3,090) $ 2,749 Other Income and (Expenses), and Provision for Income Taxes
Interest Expense
For the three and six months endedJune 30, 2022 as compared to the same periods in 2021, interest expense decreased by$2.8 million and$8.4 million , respectively, primarily due to (i) the weakening of foreign currencies (primarily the euro and British pound sterling) in relation to theU.S. dollar between the periods, (ii) the reduction of our mortgage debt outstanding by prepaying or repaying at or close to maturity a total of$790.7 million of non-recourse mortgage loans with a weighted-average interest rate of 4.9% sinceJanuary 1, 2021 ( Note 10 ), and (iii) the redemption of the €500.0 million of 2.0% Senior Notes due 2023 inMarch 2021 , partially offset by three senior unsecured notes issuances totaling$1.4 billion (based on the exchange rate of the euro on the date of issuance for our euro-denominated senior unsecured notes) with a weighted-average interest rate of 1.7% completed sinceJanuary 1, 2021 . The following table presents certain information about our outstanding debt (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Average outstanding debt balance$ 6,833,452 $
7,000,966
2.5 % 2.6 % 2.5 % 2.7 %
Gain on Sale of Real Estate, Net
Gain on sale of real estate, net, consists of gain on the sale of properties
that were disposed of during the reporting period. Our dispositions are more
fully described in Note 14 .
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Other Gains and (Losses)
Other gains and (losses) primarily consists of gains and losses on (i) the mark-to-market fair value of equity securities, (ii) extinguishment of debt, and (iii) foreign currency exchange rate movements. The timing and amount of such gains or losses cannot always be estimated and are subject to fluctuation. All of our foreign currency-denominated unsecured debt instruments were designated as net investment hedges during the three and six months endedJune 30, 2022 and 2021. Therefore, no gains and losses on foreign currency exchange rate movements were recognized on the remeasurement of such instruments during those periods ( Note 9 ). The following table presents other gains and (losses) within our Real Estate segment (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Change 2022 2021 Change Other Gains and (Losses) Net realized and unrealized (losses) gains on foreign currency exchange rate movements (a)$ (37,030) $ 3,270 $ (40,300) $ (48,104) $ (4,181) $ (43,923) Non-cash unrealized gains related to an increase in the fair value of our investment in common shares of WLT ( Note 8 ) 15,357 - 15,357 43,397 - 43,397 Change in allowance for credit losses on finance receivables ( Note 5 ) 1,753 4,890 (3,137) 980 6,249 (5,269) Loss on extinguishment of debt (b) (149) (187) 38 (1,041) (60,068) 59,027 Realized gains in connection with the redemption of our investment in preferred shares of WLT ( Note 8 ) - - - 18,688 - 18,688 Non-cash unrealized gains related to an increase in the fair value of our investment in shares of Lineage Logistics ( Note 8 ) - - - - 23,381 (23,381) Other (86) (501) 415 343 (98) 441$ (20,155) $ 7,472 $ (27,627) $ 14,263 $ (34,717) $ 48,980 __________ (a)We make certain foreign currency-denominated intercompany loans to a number of our foreign subsidiaries, most of which do not have theU.S. dollar as their functional currency. Remeasurement of foreign currency intercompany transactions that are scheduled for settlement, consisting primarily of accrued interest and amortizing loans, are included in other gains and (losses). (b)Amount for the six months endedJune 30, 2021 is related to the prepayment of mortgage loans (primarily comprised of prepayment penalties totaling$31.8 million ) and redemption of the €500.0 million of 2.0% Senior Notes due 2023 inMarch 2021 (primarily comprised of a "make-whole" amount of$26.2 million related to the redemption) ( Note 10 ). W. P. Carey 6/30/2022 10-Q - 55
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Non-Operating Income
Non-operating income primarily consists of realized gains and losses on derivative instruments, dividends from securities, and interest income on our loans to affiliates and cash deposits.
The following table presents non-operating income within our Real Estate segment
(in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Non-Operating Income
Realized gains (losses) on foreign
currency collars ( Note 9 ) $ 5,934 $ (228) $ 6,162 $ 9,246 $ (408) $ 9,654
Interest income related to our loans
to affiliates and cash deposits 41 25 16 51 39 12
Cash dividends from our investment in
preferred shares of WLT ( Note 8 ) - 3,268 (3,268) 912 3,268 (2,356)
Cash dividends from our investment in
Lineage Logistics ( Note 8 ) - - - 4,308 6,438 (2,130)
$ 5,975 $ 3,065 $ 2,910 $ 14,517 $ 9,337 $ 5,180 Earnings (Losses) from Equity Method Investments in Real Estate
Our equity method investments in real estate are more fully described in Note 7 . The following table presents earnings (losses) from equity method investments in real estate (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Earnings (Losses) from Equity Method
Investments in Real Estate
Earnings from Las Vegas Retail Complex $ 1,809 $ 293
492 595 2,027 893 1,134
Earnings (losses) from Kesko Senukai (b) 576 660 (84) 1,230 (510) 1,740
Losses from WLT (c) - (4,005) 4,005 - (8,488) 8,488
Proportionate share of impairment charge recognized on Bank Pekao ( Note 7 ) - - - (4,610) - (4,610) Other-than-temporary impairment charge onState Farm Mutual Automobile Insurance Co. ( Note 8 ) - - - - (6,830) 6,830 Other 1,057 706 351 1,727 1,669 58$ 4,529 $ (1,854) $ 6,383 $ 3,742 $ (12,973) $ 16,715 __________ (a)Increases for the three and six months endedJune 30, 2022 as compared to the same periods in 2021 are primarily due to higher occupancy and unit rates at these self-storage facilities. (b)Increase for the six months endedJune 30, 2022 as compared to the same period in 2021 is primarily due to higher rent collections at these retail properties, where certain rents were previously disputed and subsequently collected. (c)Losses for the prior year periods were primarily due to the adverse impact of the COVID-19 pandemic on WLT's operations. We recorded losses from this investment on a one quarter lag. This investment was reclassified to equity securities at fair value within Other assets, net on our consolidated balance sheets inJanuary 2022 ( Note 8 ). W. P. Carey 6/30/2022 10-Q - 56
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Provision for Income Taxes
For the three and six months endedJune 30, 2022 as compared to the same periods in 2021, provision for income taxes within our Real Estate segment decreased by$3.2 million and$2.7 million , respectively, primarily due to a one-time deferred tax expense recognized on a foreign property during the prior year periods and tax benefits recognized on certain foreign properties during the current year periods as a result of a tax court ruling.
Investment Management
We earn revenue as the advisor to the Managed Programs. For the periods presented, we acted as advisor to the following Managed Programs: CPA:18 - Global and CESH. The CWI 1 and CWI 2 Merger closed onApril 13, 2020 , and as a result, CWI 2 was renamed Watermark Lodging Trust, Inc., for which we provided certain services pursuant to a transition services agreement, which was terminated onOctober 13, 2021 ( Note 3 ). We no longer raise capital for new or existing funds, but we currently expect to continue managing CPA:18 - Global and CESH and earn the various fees described below through the end of their respective life cycles. Upon the expected completion of the Proposed Merger, we will no longer receive fees and distributions from CPA:18 - Global, and as a result, Investment Management earnings are expected to decline in future periods ( Note 1 ). As ofJune 30, 2022 , we managed total assets of approximately$2.5 billion on behalf of the Managed Programs. Revenues The following table presents revenues within our Investment Management segment (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Change 2022 2021 Change Investment Management Revenues Asset management and other revenue CPA:18 - Global$ 3,047 $ 3,154 $ (107) $ 6,105 $ 6,292 $ (187) CESH 420 812 (392) 782 1,628 (846) 3,467 3,966 (499) 6,887 7,920 (1,033) Reimbursable costs from affiliates CPA:18 - Global 1,001 641 360 1,774 1,289 485 CESH 142 231 (89) 296 516 (220) WLT - 96 (96) - 204 (204) 1,143 968 175 2,070 2,009 61$ 4,610 $ 4,934 $ (324) $ 8,957 $ 9,929 $ (972)
Asset Management and Other Revenue
Asset management and other revenue includes asset management revenue, structuring revenue, and other advisory revenue. During the periods presented, we earned asset management revenue from (i) CPA:18 - Global based on the value of its real estate-related assets under management and (ii) CESH based on its gross assets under management at fair value. Asset management revenue may increase or decrease depending upon changes in the Managed Programs' asset bases as a result of purchases, sales, or changes in the appraised value of the assets in their investment portfolios. For 2022, we receive asset management fees from (i) CPA:18 - Global in shares of its common stock throughFebruary 28, 2022 ; effective as ofMarch 1, 2022 , we receive asset management fees from CPA:18 - Global in cash in light of the Proposed Merger ( Note 3 ), and (ii) CESH in cash. We earn structuring and other advisory revenue when we structure new investments on behalf of the Managed Programs. Since we no longer raise capital for new or existing funds, structuring and other advisory revenue has recently been and is expected to be insignificant going forward.W. P. Carey 6/30/2022 10-Q
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Other Income and Expenses
Earnings from Equity Method Investments in the Managed Programs
Earnings from our equity method investments in the Managed Programs fluctuates
based on the timing of transactions, such as new leases and property sales, as
well as the level of impairment charges. The following table presents the
details of our earnings from equity method investments in the Managed Programs
( Note 7 ) (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Earnings from equity method investments in the
Managed Programs:
Distributions of Available Cash from CPA:18 -
Global (a) $ 2,814 $ 1,787 $ 5,401 $ 3,326
Earnings (losses) from equity method
investments in the Managed Programs (b) 58 (89) 3,030 (242)
Earnings from equity method investments in the
Managed Programs $ 2,872 $ 1,698 $ 8,431 $ 3,084
__________
(a)We are entitled to receive distributions of up to 10% of the Available Cash
from the operating partnership of CPA:18 - Global, as defined in its operating
partnership agreement ( Note 3 ). Distributions of Available Cash received and
earned from CPA:18 - Global fluctuate based on the timing of certain events,
including acquisitions and dispositions.
(b)Increase for the six months ended June 30, 2022 as compared to the same
period in 2021 was due to an increase of $3.3 million from our investment in
shares of CPA:18 - Global.
Liquidity and Capital Resources
Sources and Uses of Cash During the Period
We use the cash flow generated from our investments primarily to meet our operating expenses, service debt, and fund dividends to stockholders. Our cash flows fluctuate periodically due to a number of factors, which may include, among other things: the timing of our equity and debt offerings; the timing of purchases and sales of real estate; the timing of the repayment of mortgage loans and receipt of lease revenues; the timing and amount of other lease-related payments; the timing of settlement of foreign currency transactions; changes in foreign currency exchange rates; the receipt of asset management fees in either shares of the common stock of CPA:18 - Global or cash; the timing of distributions from equity method investments; and the receipt of distributions of Available Cash from CPA:18 - Global. Despite these fluctuations, we believe that we will generate sufficient cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our Senior Unsecured Credit Facility, proceeds from dispositions of properties, and the issuance of additional debt or equity securities, such as issuances of common stock through our Equity Forwards and ATM Program ( Note 12 ), in order to meet these needs. We assess our ability to access capital on an ongoing basis. Our sources and uses of cash during the period are described below. Operating Activities - Net cash provided by operating activities increased by$48.1 million during the six months endedJune 30, 2022 as compared to the same period in 2021, primarily due to an increase in cash flow generated from net investment activity and scheduled rent increases at existing properties, higher lease termination and other income, and lower interest expense. Investing Activities - Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and funding for build-to-suit activities and other capital expenditures on real estate. In addition to these types of transactions, during the six months endedJune 30, 2022 , we used$26.0 million to fund short-term loans to the Managed Programs, while$10.0 million of such loans were repaid ( Note 3 ). We also received$8.1 million in distributions from equity method investments. Financing Activities - Our financing activities are generally comprised of borrowings and repayments under our Unsecured Revolving Credit Facility, issuances of the Senior Unsecured Notes, payments and prepayments of non-recourse mortgage loans, and payments of dividends to stockholders. In addition to these types of transactions, during the six months endedJune 30, 2022 , we received$218.1 million in net proceeds from the issuance of shares under our prior ATM Program ( Note 12 ).W. P. Carey 6/30/2022 10-Q - 58
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Summary of Financing
The table below summarizes our Senior Unsecured Notes, our non-recourse mortgages, and our Senior Unsecured Credit Facility (dollars in thousands):
June 30, 2022 December 31, 2021
Carrying Value
Fixed rate:
Senior Unsecured Notes (a) $ 5,471,066 $ 5,701,913
Non-recourse mortgages (a) 211,973 235,898
5,683,039 5,937,811
Variable rate:
Unsecured Term Loans (a) 548,287 310,583
Unsecured Revolving Credit Facility 417,455 410,596
Non-recourse mortgages (a): Amount subject to interest rate swaps and caps 69,250
79,055
Floating interest rate mortgage loans 47,597 53,571
1,082,589 853,805
$ 6,765,628 $ 6,791,616
Percent of Total Debt
Fixed rate 84 % 87 %
Variable rate 16 % 13 %
100 % 100 %
Weighted-Average Interest Rate at End of Period
Fixed rate 2.7 % 2.7 %
Variable rate (b) 1.6 % 1.1 %
Total debt 2.5 % 2.5 %
__________
(a)Aggregate debt balance includes unamortized discount, net, totaling $28.2
million and $30.9 million as of June 30, 2022 and December 31, 2021 ,
respectively, and unamortized deferred financing costs totaling $25.7 million
and $28.8 million as of June 30, 2022 and December 31, 2021 , respectively.
(b)The impact of our interest rate swaps and caps is reflected in the
weighted-average interest rates.
Cash Resources
At
•cash and cash equivalents totaling$103.6 million . Of this amount,$65.1 million , at then-current exchange rates, was held in foreign subsidiaries, and we could be subject to restrictions or significant costs should we decide to repatriate these amounts; •our Unsecured Revolving Credit Facility, with available capacity of approximately$1.4 billion (net of amounts reserved for standby letters of credit totaling$0.6 million ); •available proceeds under our Equity Forwards of approximately$285.0 million (based on 3,925,000 remaining shares outstanding and a net offering price of$72.61 per share as ofJune 30, 2022 ); •available proceeds under our ATM Forwards of approximately$301.0 million (based on 3,674,187 shares outstanding and a weighted-average net offering price of$81.93 per share as ofJune 30, 2022 ); and •unleveraged properties that had an aggregate asset carrying value of approximately$12.4 billion atJune 30, 2022 , although there can be no assurance that we would be able to obtain financing for these properties.W. P. Carey 6/30/2022 10-Q
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Historically, we have also accessed the capital markets through additional debt (denominated in bothU.S. dollars and euros) and equity offerings. During the six months endedJune 30, 2022 , we issued 2,740,295 shares of common stock under our prior ATM Program for net proceeds of$218.1 million ( Note 12 ). As ofJune 30, 2022 , we had approximately$285.0 million of available proceeds under our Equity Forwards ( Note 12 ). As ofJune 30, 2022 , we had approximately$301.0 million of available proceeds under our ATM Forwards ( Note 12 ).
Our cash resources can be used for working capital needs and other commitments and may be used for future investments.
Cash Requirements and Liquidity
As ofJune 30, 2022 , we had (i)$103.6 million of cash and cash equivalents, (ii) approximately$1.4 billion of available capacity under our Unsecured Revolving Credit Facility (net of amounts reserved for standby letters of credit totaling$0.6 million ), (iii) available proceeds under our Equity Forwards of approximately$285.0 million (based on 3,925,000 remaining shares outstanding and a net offering price of$72.61 per share as of that date), and (iv) available proceeds under our ATM Forwards of approximately$301.0 million (based on 3,674,187 remaining shares outstanding and a weighted-average net offering price of$81.93 per share as of that date). Our Senior Unsecured Credit Facility includes a$1.8 billion Unsecured Revolving Credit Facility and Unsecured Term Loans outstanding totaling$548.3 million as ofJune 30, 2022 ( Note 10 ), and is scheduled to mature onFebruary 20, 2025 . As ofJune 30, 2022 , scheduled debt principal payments total$30.7 million throughDecember 31, 2022 and$209.0 million throughDecember 31, 2023 , and our Senior Unsecured Notes do not start to mature untilApril 2024 ( Note 10 ).
During the next 12 months following
•paying dividends to our stockholders; •funding acquisitions of new investments ( Note 4 ); •funding future capital commitments and tenant improvement allowances ( Note 4 ); •making scheduled principal and balloon payments on our debt obligations ( Note 10 ); •making scheduled interest payments on our debt obligations (future interest payments total$798.3 million , with$171.6 million due during the next 12 months; interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding atJune 30, 2022 ); •cash consideration and costs related to the Proposed Merger ( Note 1 ); and •other normal recurring operating expenses. We expect to fund these cash requirements through cash generated from operations, cash received from dispositions of properties, the use of our cash reserves or unused amounts on our Unsecured Revolving Credit Facility (as described above), issuances of common stock through our Equity Forwards and/or ATM Program ( Note 12 ), and potential issuances of additional debt or equity securities. We may also choose to pursue prepayments of certain of our non-recourse mortgage loan obligations, depending on our capital needs and market conditions at that time. Our liquidity could be adversely affected by unanticipated costs, greater-than-anticipated operating expenses, and the adverse impact of the continuing COVID-19 pandemic. To the extent that our working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash from operations to meet our normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, available capacity under our Unsecured Revolving Credit Facility, mortgage loan proceeds, and the issuance of additional debt or equity securities to meet these needs. The extent to which the COVID-19 pandemic impacts our liquidity and debt covenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence. The potential impact of the COVID-19 pandemic on our tenants and properties could also have a material adverse effect on our liquidity and debt covenants.
Certain amounts disclosed above are based on the applicable foreign currency
exchange rate at
W. P. Carey 6/30/2022 10-Q
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Supplemental Financial Measures
In the real estate industry, analysts and investors employ certain non-GAAP
supplemental financial measures in order to facilitate meaningful comparisons
between periods and among peer companies. Additionally, in the formulation of
our goals and in the evaluation of the effectiveness of our strategies, we use
Funds from Operations ("FFO") and AFFO, which are non-GAAP measures defined by
our management. We believe that these measures are useful to investors to
consider because they may assist them to better understand and measure the
performance of our business over time and against similar companies. A
description of FFO and AFFO and reconciliations of these non-GAAP measures to
the most directly comparable GAAP measures are provided below.
Funds from Operations and Adjusted Funds from Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, theNational Association of Real Estate Investment Trusts, Inc. ("NAREIT"), an industry trade group, has promulgated a non-GAAP measure known as FFO, which we believe to be an appropriate supplemental measure, when used in addition to and in conjunction with results presented in accordance with GAAP, to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental non-GAAP measure. FFO is not equivalent to, nor a substitute for, net income or loss as determined under GAAP. We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by theBoard of Governors of NAREIT, as restated inDecember 2018 . The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, impairment charges on real estate, gains or losses on changes in control of interests in real estate, and depreciation and amortization from real estate assets; and after adjustments for unconsolidated partnerships and jointly owned investments. Adjustments for unconsolidated partnerships and jointly owned investments are calculated to reflect FFO. 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 direct financing 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 and merger and acquisition 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.W. P. Carey 6/30/2022 10-Q
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Consolidated FFO and AFFO were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income attributable to W. P. Carey $ 127,678 $ 120,245 $ 284,673 $ 171,879
Adjustments:
Depreciation and amortization of real
property 114,333 112,997 228,979 222,201
Gain on sale of real estate, net (31,119) (19,840) (42,367) (29,212)
Impairment charges 6,206 - 26,385 -
Proportionate share of adjustments to
earnings from equity method investments (a)
(b) 2,934 3,434 10,617 13,740
Proportionate share of adjustments for
noncontrolling interests (c) (4) (4) (8) (8)
Total adjustments 92,350 96,587 223,606 206,721
FFO (as defined by NAREIT) attributable to
W. P. Carey 220,028 216,832 508,279 378,600
Adjustments:
Other (gains) and losses (d) 21,746 (7,545) (13,999) 33,643 Straight-line and other leasing and financing adjustments (14,492) (10,313) (25,339) (19,064) Above- and below-market rent intangible lease amortization, net 10,548 14,384 21,552 26,499 Stock-based compensation 9,758 9,048 17,591 14,429 Amortization of deferred financing costs 3,147 3,447 6,275 6,860 Merger and other expenses (e) 1,984 (2,599) (338) (3,075) Other amortization and non-cash items 530 563 1,082 592 Tax (benefit) expense - deferred and other (355) 217 (1,597) (3,170) Proportionate share of adjustments to earnings from equity method investments (b) 1,486 4,650 (295) 9,861 Proportionate share of adjustments for noncontrolling interests (c) (6) (8) (11) (13) Total adjustments 34,346 11,844 4,921 66,562 AFFO attributable to W. P. Carey$ 254,374 $
228,676
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey$ 220,028 $
216,832
$ 254,374 $ 228,676 $ 513,200 $ 445,162 W. P. Carey 6/30/2022 10-Q - 62
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FFO and AFFO from Real Estate were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income from Real Estate attributable to
W. P. Carey $ 123,228 $ 114,687 $ 270,086 $ 159,274
Adjustments:
Depreciation and amortization of real
property 114,333 112,997 228,979 222,201
Gain on sale of real estate, net (31,119) (19,840) (42,367) (29,212)
Impairment charges 6,206 - 26,385 -
Proportionate share of adjustments to
earnings from equity method investments (a)
(b) 2,934 3,434 10,617 13,740
Proportionate share of adjustments for
noncontrolling interests (c) (4) (4) (8) (8)
Total adjustments 92,350 96,587 223,606 206,721
FFO (as defined by NAREIT) attributable to
W. P. Carey - Real Estate 215,578 211,274 493,692 365,995
Adjustments:
Other (gains) and losses (d) 20,155 (7,472) (14,263) 34,717 Straight-line and other leasing and financing adjustments (14,492) (10,313) (25,339) (19,064) Above- and below-market rent intangible lease amortization, net 10,548 14,384 21,552 26,499 Stock-based compensation 9,758 9,048 17,591 14,429 Amortization of deferred financing costs 3,147 3,447 6,275 6,860 Merger and other expenses (e) 1,984 (2,599) (341) (3,090) Other amortization and non-cash items 530 563 1,082 592 Tax (benefit) expense - deferred and other (324) 208 (1,513) (2,387) Proportionate share of adjustments to earnings from equity method investments (b) 368 3,845 535 8,167 Proportionate share of adjustments for noncontrolling interests (c) (6) (8) (11) (13) Total adjustments 31,668 11,103 5,568 66,710 AFFO attributable toW. P. Carey - Real Estate$ 247,246 $
222,377
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey - Real Estate$ 215,578 $ 211,274 $ 493,692 $ 365,995 AFFO attributable toW. P. Carey - Real Estate$ 247,246 $ 222,377 $ 499,260 $ 432,705 W. P. Carey 6/30/2022 10-Q - 63
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FFO and AFFO from Investment Management were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net income from Investment Management
attributable to W. P. Carey $ 4,450 $ 5,558 $ 14,587 $ 12,605
FFO (as defined by NAREIT) attributable to
W. P. Carey - Investment Management 4,450 5,558 14,587 12,605
Adjustments:
Other (gains) and losses 1,591 (73) 264 (1,074) Tax (benefit) expense - deferred and other (31) 9 (84) (783) Merger and other expenses - - 3 15 Proportionate share of adjustments to earnings from equity method investments (b) 1,118 805 (830) 1,694 Total adjustments 2,678 741 (647) (148) AFFO attributable toW. P. Carey - Investment Management$ 7,128 $
6,299
Summary
FFO (as defined by NAREIT) attributable to W. P. Carey - Investment Management$ 4,450 $ 5,558 $ 14,587 $ 12,605 AFFO attributable toW. P. Carey - Investment Management$ 7,128 $ 6,299 $ 13,940 $ 12,457 __________ (a)Amount for the six months endedJune 30, 2022 includes our$4.6 million proportionate share of an impairment charge recognized on an equity method investment in real estate ( Note 7 ). Amount for the six months endedJune 30, 2021 includes a non-cash other-than-temporary impairment charge of$6.8 million recognized on an equity method investment in real estate ( Note 8 ). (b)Equity income, including amounts that are not typically recognized for FFO and AFFO, is recognized within Earnings (losses) 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. (c)Adjustments disclosed elsewhere in this reconciliation are on a consolidated basis. This adjustment reflects our FFO or AFFO on a pro rata basis. (d)Primarily comprised of gains and losses on extinguishment of debt, the mark-to-market fair value of equity securities, and foreign currency exchange rate movements, as well as non-cash allowance for credit losses on loans receivable and direct financing leases. (e)Amounts for the three and six months endedJune 30, 2022 and 2021 are primarily comprised of costs incurred in connection with the Proposed Merger ( Note 1 ) and/or reversals of estimated liabilities for German real estate transfer taxes that were previously recorded in connection with mergers in prior years. While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to net income as an indication of a company's operating performance. These non-GAAP measures should be used in conjunction with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other REITs, may not be comparable to our FFO and AFFO measures. W. P. Carey 6/30/2022 10-Q - 64
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