Press Release

VEREIT® Announces Second Quarter 2016 Operating Results

Issued $1.0 Billion in Senior Notes and $300 Million Term Loan to Redeem its Senior Notes Due 2017

Completed $612.0 Million of Dispositions Year-to-Date

Company Release - 8/3/2016 6:30 AM ET

PHOENIX, Aug. 3, 2016 /PRNewswire/ -- VEREIT, Inc. (NYSE: VER) ("VEREIT" or the "Company") announced today its operating results for the three months ending June 30, 2016, as well as progress on its business plan.

VEREIT is a leading, full-service real estate operating company with investment management capability that owns and actively manages a diversified portfolio of retail, restaurant, office and industrial assets. (PRNewsFoto/VEREIT, Inc.)

Second Quarter 2016 Highlights

  • Net Income of $3.2 million and Net Loss per diluted share of $(0.02)
  • Achieved $0.19 AFFO per diluted share
  • Completed $175.4 million of dispositions at an average cash cap rate of 7.1%
  • Reduced Net Debt to Normalized EBITDA from 6.7x to 6.6x
  • Cole Capital® raised $138.7 million of new equity capital
  • Issued $1.0 billion of senior notes and entered into a $300 million term loan to redeem the Company's senior notes due 2017
  • Due to the early refinancing, the Company is narrowing its previously issued 2016 AFFO per diluted share guidance range of $0.75 - $0.80 to $0.75 - $0.78

Second Quarter 2016 Consolidated Financial Results

Revenue
Consolidated revenue for the quarter ended June 30, 2016 decreased $22.7 million to $371.0 million as compared to revenue of $393.7 million for the same quarter in 2015.

Net Income (Loss) and Net Income (Loss) Attributable to Common Stockholders per Diluted Share
Consolidated net income for the quarter ended June 30, 2016 increased $111.9 million to net income of $3.2 million as compared to a net loss of $(108.7) million for the same quarter in 2015 and net loss per diluted share decreased $0.12 to $(0.02) for the quarter ended June 30, 2016, as compared to $(0.14) for the same quarter in 2015.

Normalized EBITDA
Consolidated normalized EBITDA for the quarter ended June 30, 2016 decreased $26.2 million to $283.1 million as compared to normalized EBITDA of $309.3 million for the same quarter in 2015.

Funds From Operations Attributable to Common Stockholders and Limited Partners ("FFO") and FFO per Diluted Share
FFO for the quarter ended June 30, 2016 decreased $9.8 million to $184.2 million, as compared to $194.0 million for the same quarter in 2015 and FFO per diluted share decreased $0.01 to $0.20 for the quarter ended June 30, 2016, as compared to $0.21 for the same quarter in 2015.

Adjusted FFO Attributable to Common Stockholders and Limited Partners ("AFFO") and AFFO per Diluted Share
AFFO for the quarter ended June 30, 2016 decreased $22.2 million to $180.1 million, as compared to $202.3 million for the same quarter in 2015, and AFFO per diluted share decreased $0.03 to $0.19 for the quarter ended June 30, 2016, as compared to $0.22 for the same quarter in 2015.

Common Stock Dividend Information
On August 2, 2016 the Company's Board of Directors declared a quarterly dividend of $0.1375 per share for the third quarter of 2016, representing an annual distribution rate of $0.55 per share. The dividend will be paid on October 17, 2016 to common stockholders of record as of September 30, 2016.

Balance Sheet and Liquidity
During the quarter, the Company paid down $225.0 million on its revolving line of credit, reducing the total amount outstanding under the revolving line of credit to $55.0 million.  The Company's credit facility is made up of its revolving line of credit and a $1.0 billion term loan.  Additionally, secured debt was reduced by $86.9 million.

In June 2016, the Company issued $1.0 billion of senior notes and entered into a new $300 million bank term loan agreement, which was not drawn upon until after quarter end.  The notes offering was comprised of $400 million aggregate principal amount of 4.125% 5-year senior notes and $600 million aggregate principal amount of 4.875% 10-year senior notes.  Proceeds from this offering, together with borrowings under the new $300 million term loan and available cash, were used to redeem its $1.3 billion aggregate principal amount of the Company's outstanding 2.00% senior notes due in 2017, subsequent to the quarter end.

2016 AFFO Guidance
Due to the early refinancing discussed above, the Company is narrowing its previously issued 2016 AFFO per diluted share guidance range of $0.75 - $0.80 to $0.75 - $0.78.

Consolidated Financial Statistics
Consolidated Financial Statistics as of the quarter ended June 30, 2016 are as follows: Net Debt to Normalized EBITDA of 6.6x, Fixed Charge Coverage Ratio of 2.8x, Unencumbered Gross Real Estate Assets to Total Gross Assets ratio of 65.8%, Net Debt to Gross Real Estate Assets of 46.5% and Weighted Average Debt Term of 3.9 years.  

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, "Culling of the portfolio remains on track, having completed $612.0 million of dispositions in 2016, with accelerated activity on Red Lobster property sales. Total sales since the beginning of 2015 are over $2.0 billion and we have reduced debt by $3.0 billion.  We also demonstrated successful access to the capital markets through an upsized $1.0 billion bond offering and $300 million term loan at near investment grade pricing, which allowed us to redeem $1.3 billion of debt coming due next February.  Our business plan was introduced one year ago as a roadmap and measuring stick and we believe the Company's progress speaks for itself."

Second Quarter 2016 Real Estate Investment ("REI") Financial Results

Revenue
REI segment revenue for the quarter ended June 30, 2016 decreased $28.7 million to $338.5 million as compared to revenue of $367.2 million for the same quarter in 2015, mainly due to dispositions since January 1, 2015.

Net Income (Loss)
REI segment net income for the quarter ended June 30, 2016 increased $110.5 million to $2.2 million as compared to a net loss of $(108.3) million for the same quarter in 2015, mainly due to higher real estate impairments recognized for the quarter ended June 30, 2015.

Normalized EBITDA
REI segment normalized EBITDA for the quarter ended June 30, 2016 decreased $28.6 million to $274.7 million as compared to normalized EBITDA of $303.3 million for the same quarter in 2015, mainly due to dispositions since January 1, 2015.

FFO and FFO per Diluted Share
REI segment FFO for the quarter ended June 30, 2016 decreased $11.3 million to $183.1 million, as compared to $194.4 million for the same quarter in 2015, and FFO per diluted share decreased $0.01 to $0.20 for the quarter ended June 30, 2016, as compared to $0.21 for the same quarter in 2015.

AFFO and AFFO per Diluted Share
REI segment AFFO for the quarter ended June 30, 2016 decreased $17.8 million to $177.6 million, as compared to $195.4 million for the same quarter in 2015, and AFFO per diluted share decreased $0.02 to $0.19 for the quarter ended June 30, 2016, as compared to $0.21 for the same quarter in 2015.

Real Estate Portfolio Update
As of June 30, 2016, the Company's portfolio consisted of 4,291 properties with total portfolio occupancy of 97.7%, investment grade tenancy of 42.7% and a weighted-average remaining lease term of 10.2 years.

Same-Store Rent Increases
During the quarter ended June 30, 2016, same-store rents (4,257 properties) were flat at 0.0% as compared to the same quarter in 2015.  Excluding the impact of the bankruptcy filing of Ovation Brands, Inc., same store rental revenue increased 0.7%, during the quarter ended June 30, 2016, as compared to the same quarter in 2015.

Property Acquisitions and Development
During the second quarter of 2016, the Company capitalized $2.4 million of development costs and placed $11.6 million of assets into service at an average cash cap rate of 8.3%.  As of June 30, 2016, build-to-suits and redevelopment programs included two properties with an investment-to-date of $3.6 million and remaining estimated investment of $1.9 million.

Property Dispositions
During the quarter ended June 30, 2016, the Company sold 87 properties for approximately $175.4 million at an average cash cap rate of 7.1%, including $77.7 million in net sales of Red Lobster restaurants.  The gain on second quarter sales was approximately $13.5 million, excluding goodwill allocation.

Second Quarter 2016 Cole Capital® Financial Results

Revenue
Cole Capital segment revenue for the quarter ended June 30, 2016 increased $6.0 million to $32.5 million, as compared to revenue of $26.5 million for the same quarter in 2015, primarily due to higher fee and reimbursement revenue associated with higher capital raise and assets under management offset by lower transactional revenue.

Net Income (Loss)
Cole Capital segment net income for the quarter ended June 30, 2016 increased $1.5 million to $1.1 million, as compared to a net loss of $(0.4) million for the same quarter in 2015, mainly due to the increase in net revenue.

Normalized EBITDA
Cole Capital segment normalized EBITDA for the quarter ended June 30, 2016 increased $2.4 million to $8.4 million, as compared to normalized EBITDA of $6.0 million for the same quarter in 2015, mainly due to the increase in net revenue.

FFO and FFO per Diluted Share
Cole Capital segment FFO for the quarter ended June 30, 2016 increased $1.5 million to $1.1 million, as compared to $(0.4) million for the same quarter in 2015, and FFO per diluted share remained the same at $0.00 for the quarters ending June 30, 2016 and June 30, 2015. 

AFFO and AFFO per Diluted Share
Cole Capital segment AFFO for the quarter ended June 30, 2016 decreased $4.5 million to $2.5 million, as compared to $7.0 million for the same quarter in 2015, and AFFO per diluted share decreased $0.01 to $0.00 per diluted share, as compared to $0.01 for the same quarter in 2015.

Investment Management Capital Raise
During the quarter, Cole Capital raised $174.1 million of capital on behalf of its sponsored non-listed REITs (the "Cole REITs"), including $35.5 million through the Cole REITs' distribution reinvestment plans ("DRIP"), compared to $91.4 million, including $33.1 million of DRIP proceeds, in the second quarter of 2015.

Investment Management Acquisitions
Cole Capital invested $211.2 million in 14 properties on behalf of the Cole REITs in the second quarter of 2016, compared to $214.7 million in 21 properties in the second quarter of 2015.

Subsequent Events - Consolidated

Capital Activity
On July 5, 2016, the Company redeemed $1.3 billion aggregate principal amount of its outstanding 2.00% senior notes due 2017, using proceeds from its new $1.0 billion senior notes offering, $300 million term loan and available cash.  Including the redemption and new term loan, the Weighted Average Debt Term increases to 4.5 years from 3.9 years and Unencumbered Gross Real Estate Assets to Total Gross Assets ratio decreases to 62.7% from 65.8%.

Property Dispositions
From July 1, 2016 through July 29, 2016, the Company disposed of 31 properties for an aggregate sales price of $141.5 million at an average cash cap rate of 6.9%, including $46.7 million in net sales of Red Lobster restaurants.  Dispositions year-to-date through July 29, 2016, totaled $612.0 million at an average cash cap rate of 6.7%.

Cole Capital Equity Raise
In July 2016, Cole Capital raised $52.0 million of capital on behalf of the Cole REITs, including $11.7 million through DRIP.

Audio Webcast Details

The live audio webcast, beginning at 1:00 p.m. ET on Wednesday, August 3, 2016, is available by accessing this link:
http://ir.vereit.com/.

Following the call, a replay of the webcast will be available at the link above and archived for up to 12 months following the call. Participants should log in 10-15 minutes early.

About the Company
VEREIT is a leading, full-service real estate operating company with investment management capability. VEREIT owns and actively manages a diversified portfolio of retail, restaurant, office and industrial real estate assets with a total asset book value of $17.4 billion including 4,291 properties totaling approximately 98.2 million square feet, located in 49 states, as well as the District of Columbia, Puerto Rico and Canada. Additionally, VEREIT manages $7.0 billion of gross real estate investments on behalf of the Cole Capital® non-listed REITs. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange. Additional information about VEREIT can be found on its website at www.VEREIT.com. VEREIT may disseminate important information regarding it and its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.

Definitions
Descriptions of FFO, AFFO, EBITDA and Normalized EBITDA are provided below. Refer to pages 12 through 23 for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure and the calculations of our Fixed Charge Coverage Ratio, Net Debt to Normalized EBITDA Annualized Ratio, Net Debt Leverage Ratio and Unencumbered Asset Ratio.

Funds From Operations and Adjusted Funds From Operations
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), an industry trade group, has promulgated a supplemental performance measure known as FFO, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

NAREIT defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from disposition of property, depreciation and amortization of real estate assets and impairment write-downs on real estate including the pro rata share of adjustments for unconsolidated partnerships and joint ventures. We calculated FFO in accordance with NAREIT's definition described above.

In addition to FFO, we use adjusted funds from operations ("AFFO") as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. AFFO, as defined by the Company, excludes from FFO non-routine items such as acquisition related costs, litigation and other non-routine costs, gains or losses on sale of investment securities or loans held for investment, insurance recoveries and legal settlements. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rental revenue, unrealized gains or losses on derivatives, reserves for loan loss, gain or loss on the extinguishment or forgiveness of debt, non-current portion of the tax benefit or expense, equity-based compensation and amortization of intangible assets, deferred financing costs, above-market lease assets and below-market lease liabilities. Management believes that excluding these costs from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO allows for a comparison of the performance of our operations with other traded REITs, as AFFO, or an equivalent measure, is routinely reported by traded REITs, and we believe often used by analysts and investors for comparison purposes.

For all of these reasons, we believe FFO and AFFO, in addition to net income (loss), as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, NAREIT, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.

EBITDA and Normalized EBITDA
Normalized EBITDA as disclosed represents EBITDA, or earnings before interest, taxes, depreciation and amortization, modified to exclude non-routine items such as acquisition related costs, merger and other non-routine transactions costs, gains or losses on sale of investments, insurance and litigation settlements and extinguishment of debt cost. We also exclude certain non-cash items such as impairments of intangible assets, straight-line rental revenue, unrealized gains or losses on derivatives, write-off of program development costs, and amortization of intangibles, deferred financing costs, above-market lease assets and below-market lease liabilities. Management believes that excluding these costs from EBITDA provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. The Company believes that Normalized EBITDA is a useful supplemental measure to investors and analysts for assessing the performance of the Company's business segments, although it does not represent net income that is computed in accordance with GAAP. Therefore, Normalized EBITDA should not be considered as an alternative to net income or as an indicator of the Company's financial performance. The Company uses Normalized EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. Normalized EBITDA may not be comparable to similarly titled measures of other companies.

Forward Looking Statements
Information set forth herein (including information included or incorporated by reference herein) contains "forward-looking statements" (within the meaning of section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT's expectations regarding future events, including the culling of its portfolio, and VEREIT's future financial condition, results of operations and business, including 2016 guidance. The forward-looking statements involve a number of assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Generally, the words "expects," "anticipates," "assumes," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, most of which are difficult to predict and many of which are beyond VEREIT's control. If a change occurs, VEREIT's business, financial condition, liquidity and results of operations may vary materially from those expressed in its forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: VEREIT's plans, market and other expectations, objectives, intentions and other statements that are not historical facts; the developments disclosed herein; VEREIT's ability to execute on and realize success from its business plan; VEREIT's ability to meet its 2016 guidance; the unpredictability of the business plans and financial condition of VEREIT's tenants; the impact of impairment charges in respect of certain of VEREIT's properties or other assets; risks associated with pending government investigations related to the Audit Committee Investigation and related litigations; the inability of Cole Capital to regain its prior level of capital raise; the ability to retain or hire key personnel; and continuation or deterioration of current market conditions. Additional factors that may affect future results are contained in VEREIT's filings with the U.S. Securities and Exchange Commission (the "SEC"), which are available at the SEC's website at www.sec.gov. VEREIT disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as required by law.

 

VEREIT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data) (Unaudited)




June 30,
 2016


December 31,
 2015

ASSETS





Real estate investments, at cost:





Land


$

2,992,848



$

3,120,653


Buildings, fixtures and improvements


10,956,605



11,445,690


Intangible lease assets


2,102,606



2,218,378


Total real estate investments, at cost


16,052,059



16,784,721


Less: accumulated depreciation and amortization


2,029,121



1,778,597


Total real estate investments, net


14,022,938



15,006,124


Investment in unconsolidated entities


22,435



56,824


Investment in direct financing leases, net


43,155



46,312


Investment securities, at fair value


48,347



53,304


Mortgage notes receivable, net


23,297



24,238


Cash and cash equivalents


1,029,620



69,103


Restricted cash


60,837



59,767


Intangible assets, net


37,088



50,779


Rent and tenant receivables and other assets, net


333,124



303,637


Goodwill


1,620,233



1,656,374


Due from affiliates


8,043



60,633


Real estate assets held for sale, net


159,394



18,771


Total assets


$

17,408,511



$

17,405,866







LIABILITIES AND STOCKHOLDERS' EQUITY





Mortgage notes payable and other debt, net


$

2,938,072



$

3,111,985


Corporate bonds, net


3,522,297



2,536,333


Convertible debt, net


968,059



962,894


Credit facility, net


1,045,872



1,448,590


Below-market lease liabilities, net


237,403



251,692


Accounts payable and accrued expenses


163,122



151,877


Deferred rent, derivative and other liabilities


84,486



87,490


Distributions payable


146,695



140,816


Due to affiliates




230


Total liabilities


9,106,006



8,691,907


Commitments and contingencies (Note 15)





Preferred stock, $0.01 par value, 100,000,000 shares authorized and 42,834,138 issued and outstanding as of each of June 30, 2016 and December 31, 2015


428



428


Common stock, $0.01 par value, 1,500,000,000 shares authorized and 904,797,960 and 904,884,394 issued and outstanding as of June 30, 2016 and December 31, 2015, respectively


9,048



9,049


Additional paid-in-capital


11,934,864



11,931,768


Accumulated other comprehensive loss


(12,297)



(2,025)


Accumulated deficit


(3,810,341)



(3,415,233)


Total stockholders' equity


8,121,702



8,523,987


Non-controlling interests


180,803



189,972


Total equity


8,302,505



8,713,959


Total liabilities and equity


$

17,408,511



$

17,405,866


 

VEREIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Revenues:





Rental income


$

311,352



$

341,183


Direct financing lease income


535



697


Operating expense reimbursements


26,646



25,312


Cole Capital revenue


32,486



26,529


  Total revenues


371,019



393,721


Operating expenses:





Cole Capital reallowed fees and commissions


6,975



3,710


Acquisition related


41



1,563


Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


Property operating


38,199



32,598


General and administrative


33,094



33,958


Depreciation and amortization


197,345



217,513


Impairments


8,825



85,341


  Total operating expenses


287,396



391,547


  Operating income


83,623



2,174


Other (expense) income:





Interest expense


(82,468)



(90,572)


Gain on extinguishment of debt, net


252




Other income, net


1,216



3,822


Equity in income and gain on disposition of unconsolidated entities


70



1,480


(Loss) gain on derivative instruments, net


(177)



311


  Total other expenses, net


(81,107)



(84,959)


Income (loss) before taxes and real estate dispositions


2,516



(82,785)


Gain (loss) on disposition of real estate, net


437



(24,674)


Income (loss) before taxes


2,953



(107,459)


Benefit from (provision for) income taxes


280



(1,250)


Net income (Ioss)


3,233



(108,709)


Net (income) loss attributable to non-controlling interests


(87)



2,187


Net income (loss) attributable to the General Partner


$

3,146



$

(106,522)







Basic and diluted net loss per share attributable to common stockholders


$

(0.02)



$

(0.14)


Distributions declared per common share


$

0.14



$


 

VEREIT, INC.

CONSOLIDATED EBITDA AND NORMALIZED EBITDA

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Net income (loss)


$

3,233



$

(108,709)


 Adjustments:





    Interest expense


82,468



90,572


    Depreciation and amortization


197,345



217,513


    (Benefit from) provision for income taxes


(280)



1,250


    Proportionate share of adjustments for unconsolidated entities


554



2,415


 EBITDA


$

283,320



$

203,041


    (Gain) loss on disposition of real estate assets, including joint ventures, net


(437)



24,674


    Impairments


8,825



85,341


    Acquisition related expenses


41



1,563


    Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


    (Gain) loss on sale and unrealized gains of investment securities




172


    Loss on derivative instruments, net


177



(311)


    Amortization of below-market lease liabilities, net of amortization of above-market lease assets


1,248



1,064


    Gain on extinguishment and forgiveness of debt, net


(252)




    Net direct financing lease adjustments


590



491


    Straight-line rent


(15,663)



(23,997)


    Program development costs write-off


2,377




    Other amortization and non-cash charges


(157)



(125)


    Proportionate share of adjustments for unconsolidated entities


74



529


Normalized EBITDA


$

283,060



$

309,306


 

VEREIT, INC.

CONSOLIDATED FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Net income (loss)


$

3,233



$

(108,709)


Dividends on non-convertible preferred stock


(17,973)



(17,973)


(Gain) loss on real estate assets and interest in joint venture, net


(437)



24,674


Depreciation and amortization of real estate assets


190,236



209,132


Impairment of real estate


8,825



85,341


Proportionate share of adjustments for unconsolidated entities


290



1,486


FFO attributable to common stockholders and limited partners


$

184,174



$

193,951







Acquisition related expenses


41



1,563


Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


Gain on investment securities




172


Loss on derivative instruments, net


177



(311)


Amortization of net premiums on debt and investments, net


(4,030)



(5,298)


Amortization of below-market lease liabilities, net of amortization of above-market lease assets


1,248



1,064


Net direct financing lease adjustments


590



491


Amortization and write off of deferred financing costs


7,461



7,428


Amortization of management contracts


6,240



7,510


Deferred tax benefit


(6,417)



(3,874)


Gain on extinguishment and forgiveness of debt, net


(252)




Straight-line rent


(15,663)



(23,997)


Equity-based compensation expense


2,779



5,355


Other amortization and non-cash charges


751



766


Proportionate share of adjustments for unconsolidated entities


91



654


AFFO attributable to common stockholders and limited partners


$

180,107



$

202,338







Weighted-average shares outstanding - basic


904,107,378



903,339,143


Effect of dilutive securities


27,144,667



26,348,273


Weighted-average shares outstanding - diluted


931,252,045



929,687,416







FFO attributable to common stockholders and limited partners per diluted share


$

0.20



$

0.21


AFFO attributable to common stockholders and limited partners per diluted share


$

0.19



$

0.22


 

VEREIT, INC.

CONSOLIDATED ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE  - 2016 GUIDANCE

(Unaudited)


Due to the early refinancing, the Company is narrowing its previously issued 2016 AFFO per diluted share guidance range of $0.75 - $0.80 to $0.75 - $0.78.




Low


High

Basic and diluted net loss per share attributable to common stockholders (1)


$

(0.22)



$

(0.20)


Gain on disposition of real estate assets, net (2)(3)


(0.03)



(0.03)


Depreciation and amortization of real estate assets


0.80



0.81


Impairment of real estate (3)


0.18



0.18


Effect of incremental dilutive shares (4)


0.01



0.01


FFO attributable to common stockholders and limited partners per diluted share


0.74



0.77


Adjustments (5)


0.01



0.01


AFFO attributable to common stockholders and limited partners per diluted share


$

0.75



$

0.78


_____________________________________

(1)

Includes impact of dividends paid to preferred shareholders and excludes the effect of non-controlling interests.   Excludes impact of gain or loss on sale of real estate.

(2)

Includes an allocated portion of the Real Estate Investment segment goodwill to the respective sold properties to calculate the GAAP loss.

(3)

Reflects actual amounts for the six months ended June 30, 2016.

(4)

Represents impact of limited partnership interests in our operating partnership, unvested restricted shares and unvested restricted stock units that are included in the computation of FFO and AFFO per diluted share but excluded from net loss per share as the effect is antidilutive for such calculation.

(5)

Includes (i) non-routine items such as acquisition related costs, litigation and other non-routine costs, gains or losses on sale of investment securities and mortgage note receivables, insurance and legal settlements and extinguishment of debt cost and (ii) certain non-cash items such as impairments of intangible assets and goodwill, straight-line rental revenue, unrealized gains or losses on derivatives, amortization of intangible assets, deferred financing costs and above and below market lease amortization as well as equity-based compensation.

 

VEREIT, INC.

FINANCIAL AND OPERATIONS STATISTICS AND RATIOS

(Dollars in thousands) (Unaudited)




Three Months Ended



June 30,
2016

Interest expense


$

78,998


Secured debt principal amortization


5,168


Dividends attributable to preferred shares


17,973


Total fixed charges


102,139


Normalized EBITDA


283,060


Fixed charge coverage ratio


2.77

x






June 30,
2016

Total Debt


$

8,514,700


Less: cash and cash equivalents


1,029,620


Net Debt


7,485,080


Normalized EBITDA annualized


1,132,240


Net Debt to Normalized EBITDA annualized ratio


6.61

x




Net Debt


$

7,485,080


Gross Real Estate Investments


16,085,149


Net Debt leverage ratio


46.5

%




Unencumbered Gross Real Estate Investments


$

10,585,494


Gross Real Estate Investments


16,085,149


Unencumbered asset ratio


65.8

%

 

VEREIT, INC.

SEGMENT REPORTING - STATEMENTS OF OPERATIONS

(REI Segment)

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Revenues:





Rental income


$

311,352



$

341,183


Direct financing lease income


535



697


Operating expense reimbursements


26,646



25,312


  Total real estate investment revenues


338,533



367,192


Operating expenses:





Acquisition related


27



1,563


Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


Property operating


38,199



32,598


General and administrative


13,701



16,827


Depreciation and amortization


190,236



209,122


Impairment of real estate


8,825



85,341


  Total operating expenses


253,905



362,315


Operating income


84,628



4,877


Other (expense) income:





Interest expense


(82,468)



(90,572)


Gain on extinguishment and forgiveness of debt, net


252




Other income, net


1,216



3,430


Equity in income and gain on disposition of unconsolidated entities


70



1,480


(Loss) gain on derivative instruments, net


(177)



311


  Total other expenses, net


(81,107)



(85,351)


Income (loss) before taxes and disposition of real estate


3,521



(80,474)


Gain (loss) on disposition of real estate assets, net


437



(24,674)


Income (loss) before income taxes


3,958



(105,148)


Provision for income taxes


(1,791)



(3,119)


Net income (loss)


$

2,167



$

(108,267)


 

VEREIT, INC.

SEGMENT REPORTING - STATEMENTS OF OPERATIONS

(Cole Capital Segment)

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Revenues:





Offering-related fees and reimbursements


$

10,914



$

5,516


 Transaction service fees and reimbursements


4,476



7,036


 Management fees and reimbursements


17,096



13,977


  Total Cole Capital revenues


32,486



26,529


Operating Expenses:





 Cole Capital reallowed fees and commissions


6,975



3,710


 Acquisition related


14




 General and administrative


19,393



17,131


 Depreciation and amortization


7,109



8,391


   Total operating expenses


33,491



29,232


  Operating loss


(1,005)



(2,703)


 Total other income, net




392


Loss before taxes


(1,005)



(2,311)


 Benefit from income taxes


2,071



1,869


Net income (loss)


$

1,066



$

(442)


 

VEREIT, INC.

SEGMENT REPORTING - EBITDA AND NORMALIZED EBITDA

(REI Segment)

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

 Net income (loss)


$

2,167



$

(108,267)


 Adjustments:





    Interest expense


82,468



90,572


    Depreciation and amortization


190,236



209,122


    Provision for income taxes


1,791



3,119


    Proportionate share of adjustments for unconsolidated entities


554



2,415


 EBITDA


$

277,216



$

196,961


    (Gain) loss on disposition of real estate assets, including joint ventures, net


(437)



24,674


    Impairments of real estate assets


8,825



85,341


    Acquisition related expenses


27



1,563


    Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


    Unrealized gains of investment securities




172


    Loss on derivative instruments, net


177



(311)


    Amortization of above- and below- market lease assets and liabilities


1,248



1,064


    Gain on extinguishment and forgiveness of debt, net


(252)




    Net direct financing lease adjustments


590



491


    Straight-line rent


(15,663)



(23,997)


    Legal settlements





    Other amortization and non-cash charges


(39)



(20)


    Proportionate share of adjustments for unconsolidated entities


74



529


Normalized EBITDA


$

274,683



$

303,331


 

VEREIT, INC.

SEGMENT REPORTING - EBITDA AND NORMALIZED EBITDA

(Cole Capital Segment)

(In thousands, except for per share data) (Unaudited)



Three Months Ended June 30,


2016


2015

Net income (loss)

$

1,066



$

(442)


Adjustments:




  Depreciation and amortization

7,109



8,391


  Benefit from income taxes

(2,071)



(1,869)


EBITDA

$

6,104



$

6,080


  Management adjustments:




  Acquisition related expenses

14




  Program development cost write-off

2,377




  Other amortization and non-cash charges

(118)



(105)


Normalized EBITDA

$

8,377



$

5,975


 

VEREIT, INC.

SEGMENT REPORTING - FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

(REI Segment)

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Net income (loss)


$

2,167



$

(108,267)


Dividends on non-convertible preferred stock


(17,973)



(17,973)


(Gain) loss on disposition of real estate assets, including joint ventures, net


(437)



24,674


Depreciation and amortization of real estate assets


190,236



209,132


Impairment of real estate


8,825



85,341


Proportionate share of adjustments for unconsolidated entities


290



1,486


FFO attributable to common stockholders and limited partners


$

183,108



$

194,393







Acquisition related expenses


27



1,563


Litigation and other non-routine costs, net of insurance recoveries


2,917



16,864


Unrealized gains of investment securities




172


Loss on derivative instruments, net


177



(311)


Amortization of premiums and discounts on debt and investments, net


(4,030)



(5,298)


Amortization of below-market lease liabilities, net of amortization of above-market lease assets


1,248



1,064


Net direct financing lease adjustments


590



491


Amortization and write-off of deferred financing costs


7,461



7,428


Gain on extinguishment and forgiveness of debt, net


(252)




Straight-line rent


(15,663)



(23,997)


Equity-based compensation expense


1,925



2,357


Other amortization and non-cash charges




(10)


Proportionate share of adjustments for unconsolidated entities


91



654


AFFO attributable to common stockholders and limited partners


$

177,599



$

195,370







Weighted-average shares outstanding - basic


904,107,378



903,339,143


Effect of dilutive securities


27,144,667



26,348,273


Weighted-average shares outstanding - diluted


931,252,045



929,687,416







FFO attributable to common stockholders and limited partners per diluted share


$

0.20



$

0.21


AFFO attributable to common stockholders and limited partners per diluted share


$

0.19



$

0.21


 

VEREIT, INC.

SEGMENT REPORTING - FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

(Cole Capital Segment)

(In thousands, except for per share data) (Unaudited)




Three Months Ended June 30,



2016


2015

Net income (loss)


$

1,066



$

(442)


 FFO attributable to common stockholders and limited partners


1,066



(442)







Acquisition related expenses


14




 Amortization of management contracts


6,240



7,510


 Deferred tax benefit


(6,417)



(3,874)


Equity-based compensation expense


854



2,998


Other amortization and non-cash charges


751



776


 AFFO attributable to common stockholders and limited partners


$

2,508



$

6,968







Weighted-average shares outstanding - basic


904,107,378



903,339,143


Effect of dilutive securities


27,144,667



26,348,273


Weighted-average shares outstanding - diluted


931,252,045



929,687,416







FFO attributable to common stockholders and limited partners per diluted share


$



$


AFFO attributable to common stockholders and limited partners per diluted share


$



$

0.01


 

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SOURCE VEREIT, Inc.

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