Press Release

VEREIT® Announces Third Quarter 2016 Operating Results

Completed $702.5 million common stock offering with proceeds used to reduce debt

Surpassed 2016 low-end dispositions goal with $803.3 million year-to-date

Company Release - 11/2/2016 6:14 AM ET

PHOENIX, Nov. 2, 2016 /PRNewswire/ -- VEREIT, Inc. (NYSE: VER) ("VEREIT" or the "Company") announced today its operating results for the three months ending September 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.)

Third Quarter 2016 Highlights

  • Net Income of $30.2 million and Net Income per diluted share of $0.01
  • Achieved $0.20 AFFO per diluted share
  • Completed $278.0 million of dispositions at an average cash cap rate of 6.6%
  • Decreased Debt from $8.5 billion to $6.6 billion and Net Debt from $7.5 billion to $6.5 billion
  • Reduced Net Debt to Normalized EBITDA from 6.6x to 5.7x
  • Cole Capital® raised $136.4 million of new equity capital
  • Completed $702.5 million common stock offering
  • S&P raised its corporate credit rating of VEREIT to 'BB+' from 'BB' and the rating on corporate debt to 'BBB-' from 'BB+'

Third Quarter 2016 Consolidated Financial Results

Revenue
Consolidated revenue for the quarter ended September 30, 2016 decreased $22.1 million to $362.9 million as compared to revenue of $385.0 million for the same quarter in 2015.

Net Income (Loss) and Net Income (Loss) Attributable to Common Stockholders and Limited Partners per Diluted Share
Consolidated net income for the quarter ended September 30, 2016 increased $22.1 million to net income of $30.2 million as compared to net income of $8.1 million for the same quarter in 2015 and net income per diluted share increased $0.02 to $0.01 for the quarter ended September 30, 2016, as compared to a net loss per diluted share of $(0.01) for the same quarter in 2015.

Normalized EBITDA
Consolidated normalized EBITDA for the quarter ended September 30, 2016 decreased $15.9 million to $285.9 million as compared to normalized EBITDA of $301.8 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 September 30, 2016 decreased $12.1 million to $179.5 million, as compared to $191.6 million for the same quarter in 2015 and FFO per diluted share decreased $0.02 to $0.19 for the quarter ended September 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 September 30, 2016 increased $1.7 million to $198.1 million, as compared to $196.4 million for the same quarter in 2015, and AFFO per diluted share decreased $0.01 to $0.20 for the quarter ended September 30, 2016, as compared to $0.21 for the same quarter in 2015.

Common Stock Dividend Information
On November 1, 2016, the Company's Board of Directors declared a quarterly dividend of $0.1375 per share for the fourth quarter of 2016, representing an annual distribution rate of $0.55 per share. The dividend will be paid on January 17, 2017 to common stockholders of record as of December 30, 2016.

Balance Sheet and Liquidity
On July 5, 2016, the Company redeemed $1.3 billion aggregate principal amount of the Company's outstanding 2.0% senior notes due in February 2017 using proceeds from its debt offerings in the previous quarter.

In August 2016, the Company closed a public offering of common stock. The Company sold a total of 69,000,000 shares of common stock in the offering, which included the full exercise of the underwriters' option to purchase additional shares. The net proceeds to the Company from the offering were approximately $702.5 million. The Company used the net proceeds, and available liquidity, to repay its $300.0 million senior secured term loan, $500.0 million outstanding under its unsecured term loan and $55.0 million outstanding on its revolving line of credit, reducing the amount outstanding on the revolver to zero.  The $2.8 billion unsecured credit facility is made up of a $500 million term loan and a revolving line of credit with $2.3 billion of capacity available.  During the quarter, secured debt was reduced by $72.8 million.

In September 2016, the Company established a continuous offering program pursuant to which the Company can offer and sell its common stock in "at-the-market" offerings or certain other transactions up to an aggregate $750.0 million from time to time as determined by the Company.

2016 AFFO Guidance
The Company is reaffirming its previously issued 2016 AFFO per diluted share guidance range of $0.75 - $0.78.

Consolidated Financial Statistics
Consolidated Financial Statistics as of the quarter ended September 30, 2016 are as follows: Net Debt to Normalized EBITDA of 5.7x, Fixed Charge Coverage Ratio of 2.9x, Unencumbered Gross Real Estate Assets to Total Gross Assets ratio of 65.7%, Net Debt to Gross Real Estate Assets of 40.9% and Weighted Average Debt Term of 4.5 years.    

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, "Through the first three quarters, we have continued to execute on our business plan. We have achieved more than $800 million of dispositions year-to-date, surpassing the low-end of our 2016 guidance. From a balance sheet perspective, the successful $1 billion bond offering in May provides a well-laddered debt maturity schedule and the $700 million stock offering in August allowed us to reach investment grade metrics earlier than expected. The upgrade by S&P, along with our transactional and operational infrastructure; large, stabilized portfolio; and sizable market opportunity within the net-lease sector, provides the ability to acquire assets on a leverage-neutral basis."

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

Revenue
REI segment revenue for the quarter ended September 30, 2016 decreased $25.6 million to $331.8 million as compared to revenue of $357.4 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 September 30, 2016 increased $21.3 million to $30.0 million as compared to $8.7 million for the same quarter in 2015, mainly due to a gain on disposition of real estate for the quarter ended September 30, 2016.

Normalized EBITDA
REI segment normalized EBITDA for the quarter ended September 30, 2016 decreased $17.1 million to $277.6 million as compared to normalized EBITDA of $294.7 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 September 30, 2016 decreased $13.0 million to $179.2 million, as compared to $192.2 million for the same quarter in 2015, and FFO per diluted share decreased $0.02 to $0.19 for the quarter ended September 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 September 30, 2016 decreased $9.0 million to $182.4 million, as compared to $191.4 million for the same quarter in 2015, and AFFO per diluted share decreased $0.02 to $0.19 for the quarter ended September 30, 2016, as compared to $0.21 for the same quarter in 2015.

Real Estate Portfolio Update
As of September 30, 2016, the Company's portfolio consisted of 4,213 properties with total portfolio occupancy of 98.0%, investment grade tenancy of 41.5% and a weighted-average remaining lease term of 10.0 years.

Same-Store Rent Increases
During the quarter ended September 30, 2016, same-store rents (4,187 properties) increased 0.1% as compared to the same quarter in 2015.  Excluding the impact of the bankruptcy filing of Ovation Brands, Inc., same store rental revenue increased 0.8%, during the quarter ended September 30, 2016, as compared to the same quarter in 2015.

Property Development
During the third quarter of 2016, the Company capitalized $0.8 million of development costs and placed $3.5 million of assets into service at an average cash cap rate of 10.6%.  As of September 30, 2016, build-to-suits and redevelopment programs included one property with an investment-to-date of $1.1 million and remaining estimated investment of $0.7 million.

Property Dispositions
During the quarter ended September 30, 2016, the Company sold 78 properties for approximately $278.0 million at an average cash cap rate of 6.6%, including $78.1 million in net sales of Red Lobster restaurants.  The gain on third quarter sales was approximately $35.8 million, excluding goodwill allocation.

Third Quarter 2016 Cole Capital® Financial Results

Revenue
Cole Capital segment revenue for the quarter ended September 30, 2016 increased $3.6 million to $31.1 million, as compared to revenue of $27.5 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 September 30, 2016 increased $0.8 million to $0.2 million, as compared to a net loss of $(0.6) 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 September 30, 2016 increased $1.3 million to $8.3 million, as compared to normalized EBITDA of $7.0 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 September 30, 2016 increased $0.8 million to $0.2 million, as compared to $(0.6) million for the same quarter in 2015, and FFO per diluted share remained the same at $0.00 for the quarters ending September 30, 2016 and September 30, 2015. 

AFFO and AFFO per Diluted Share
Cole Capital segment AFFO for the quarter ended September 30, 2016 increased $10.7 million to $15.7 million, as compared to $5.0 million for the same quarter in 2015, and AFFO per diluted share increased $0.01 to $0.02 per diluted share, as compared to $0.01 for the same quarter in 2015.

Investment Management Capital Raise
During the quarter, Cole Capital raised $172.6 million of capital on behalf of its sponsored non-listed REITs (the "Cole REITs"), including $36.2 million through the Cole REITs' distribution reinvestment plans ("DRIP"), compared to $100.3 million, including $33.7 million of DRIP proceeds, in the third quarter of 2015.

Investment Management Acquisitions
Cole Capital invested $173.9 million in 13 properties on behalf of the Cole REITs in the third quarter of 2016, compared to $315.3 million in 32 properties in the third quarter of 2015.
Subsequent Events - Consolidated

Property Dispositions
From October 1, 2016 through October 28, 2016, the Company disposed of nine properties for an aggregate sales price of $54.8 million at an average cash cap rate of 6.9%, including $14.4 million in net sales of Red Lobster restaurants.  Dispositions year-to-date through October 28, 2016, totaled $803.3 million at an average cash cap rate of 6.6%.

Cole Capital Equity Raise
In October 2016, Cole Capital raised $35.4 million of capital on behalf of the Cole REITs, including $12.0 million through DRIP.

Audio Webcast Details

The live audio webcast, beginning at 1:00 p.m. ET on Wednesday, November 2, 2016, is available by accessing this link: http://ir.vereit.com/.  Participants should log in 10-15 minutes early.

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.

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 $16.1 billion including 4,213 properties totaling approximately 96.9 million square feet, located in 49 states, as well as Puerto Rico and Canada. Additionally, VEREIT manages $7.1 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 and through social media platforms such as Twitter and LinkedIn.

Definitions
Descriptions of FFO and AFFO, EBITDA and Normalized EBITDA, Debt Outstanding and Interest Expense, Excluding Non-Cash Amortization are provided below. Refer to pages 9 through 18 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.

Debt Outstanding
Debt Outstanding represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. We believe that the presentation of Debt Outstanding, which shows our contractual debt obligations, provides useful information to investors to assess our overall liquidity, financial flexibility, capital structure and leverage. Debt Outstanding should not be considered as an alternative to the Company's consolidated debt balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.

Interest Expense, Excluding Non-Cash Amortization
Interest Expense, Excluding Non-Cash Amortization reflects interest expense incurred on the outstanding principal balance of our debt, which excludes the amortization of deferred financing costs, premiums and discounts, which are reported as interest expense in accordance with GAAP. We believe that the presentation of Interest Expense, Excluding Non-Cash Amortization, which shows the interest expense on our contractual debt obligations, provides useful information to investors to assess our overall solvency and financial flexibility. Interest Expense, Excluding Non-Cash Amortization should not be considered as an alternative to the Company's interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP.

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 Section 21E of the Securities Exchange Act of 1934, as amended), which reflect VEREIT's expectations regarding future events, including VEREIT's ability to acquire assets on a leverage-neutral basis; 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 the 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 VEREIT's previously disclosed 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)




September 30, 
2016


December 31,
2015

ASSETS





Real estate investments, at cost:





Land


$

2,946,105



$

3,120,653


Buildings, fixtures and improvements


10,800,316



11,445,690


Intangible lease assets


2,073,076



2,218,378


Total real estate investments, at cost


15,819,497



16,784,721


Less: accumulated depreciation and amortization


2,188,998



1,778,597


Total real estate investments, net


13,630,499



15,006,124


Investment in unconsolidated entities


24,711



56,824


Investment in direct financing leases, net


40,785



46,312


Investment securities, at fair value


48,098



53,304


Mortgage notes receivable, net


23,014



24,238


Cash and cash equivalents


116,618



69,103


Restricted cash


61,828



59,767


Intangible assets, net


30,849



50,779


Rent and tenant receivables and other assets, net


339,529



303,637


Goodwill


1,602,610



1,656,374


Due from affiliates


20,883



60,633


Real estate assets held for sale, net


118,396



18,771


Total assets


$

16,057,820



$

17,405,866







LIABILITIES AND STOCKHOLDERS' EQUITY





Mortgage notes payable and other debt, net


$

2,861,210



$

3,111,985


Corporate bonds, net


2,225,157



2,536,333


Convertible debt, net


970,691



962,894


Credit facility, net


496,008



1,448,590


Below-market lease liabilities, net


229,340



251,692


Accounts payable and accrued expenses


139,150



151,877


Deferred rent, derivative and other liabilities


89,154



87,490


Distributions payable


159,415



140,816


Due to affiliates




230


Total liabilities


7,170,125



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 September 30, 2016 and December 31, 2015


428



428


Common stock, $0.01 par value, 1,500,000,000 shares authorized and 974,183,819 and 904,884,394 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively


9,742



9,049


Additional paid-in-capital


12,637,049



11,931,768


Accumulated other comprehensive loss


(4,687)



(2,025)


Accumulated deficit


(3,933,092)



(3,415,233)


Total stockholders' equity


8,709,440



8,523,987


Non-controlling interests


178,255



189,972


Total equity


8,887,695



8,713,959


Total liabilities and equity


$

16,057,820



$

17,405,866


 

 

VEREIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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




Three Months Ended September 30,



2016


2015

Revenues:





Rental income


$

303,383



$

333,766


Direct financing lease income


494



659


Operating expense reimbursements


27,969



22,983


Cole Capital revenue


31,069



27,546


  Total revenues


362,915



384,954


Operating expenses:





Cole Capital reallowed fees and commissions


5,897



3,896


Acquisition related


90



1,764


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


4,630



8,032


Property operating


34,820



31,950


General and administrative


29,761



32,842


Depreciation and amortization


195,173



208,542


Impairments


6,872




  Total operating expenses


277,243



287,026


  Operating income


85,672



97,928


Other (expense) income:





Interest expense


(79,869)



(89,530)


Loss on extinguishment and forgiveness of debt, net


(2,003)




Other income, net


1,744



2,368


Equity in income and gain on disposition of unconsolidated entities


212



6,837


Loss on derivative instruments, net


(2,023)



(1,420)


  Total other expenses, net


(81,939)



(81,745)


Income before taxes and real estate dispositions


3,733



16,183


Gain (loss) on disposition of real estate, net


28,111



(6,542)


Income before taxes


31,844



9,641


Provision for income taxes


(1,598)



(1,500)


Net income


30,246



8,141


Net (income) attributable to non-controlling interests


(751)



(612)


Net income attributable to the General Partner


$

29,495



$

7,529







Basic and diluted net income (loss) per share attributable to common stockholders and limited partners


$

0.01



$

(0.01)


Distributions declared per common share


$

0.14



$

0.14


 

VEREIT, INC.

CONSOLIDATED ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE  - 2016 GUIDANCE

(Unaudited)


The Company is reaffirming its previously issued 2016 AFFO per diluted share guidance range of $0.75 - $0.78.




Low


High

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


$

(0.20)



$

(0.17)


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


(0.06)



(0.06)


Depreciation and amortization of real estate assets


0.79



0.79


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


0.72



0.75


Adjustments (5)


0.03



0.03


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.   Includes the impact of  the gain on sale of real estate for the nine months ended September 30, 2016.

(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 nine months ended September 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.

CONSOLIDATED EBITDA AND NORMALIZED EBITDA

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




Three Months Ended September 30,



2016


2015

Net income


$

30,246



$

8,141


 Adjustments:





  Interest expense


79,869



89,530


  Depreciation and amortization


195,173



208,542


  Provision for income taxes


1,598



1,500


  Proportionate share of adjustments for unconsolidated entities


959



2,554


 EBITDA


$

307,845



$

310,267


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


(28,111)



(187)


  Impairments


6,872




  Acquisition related expenses


90



1,764


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


4,630



8,032


   Gain on investment securities




(4)


  Loss on derivative instruments, net


2,023



1,420


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


1,632



1,152


  Loss on extinguishment and forgiveness of debt, net


2,003




  Net direct financing lease adjustments


571



507


  Straight-line rent, net of bad debt expense related to straight-line rent


(12,319)



(21,705)


  Program development costs write-off


845




  Other amortization and non-cash charges


(139)



(82)


   Proportionate share of adjustments for unconsolidated entities


(36)



608


Normalized EBITDA


$

285,906



$

301,772


 

VEREIT, INC.

CONSOLIDATED FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

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




Three Months Ended September 30,



2016


2015

Net income


$

30,246



$

8,141


Dividends on non-convertible preferred stock


(17,973)



(17,974)


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


(28,111)



(187)


Depreciation and amortization of real estate assets


187,898



200,159


Impairment of real estate


6,872




Proportionate share of adjustments for unconsolidated entities


540



1,423


FFO attributable to common stockholders and limited partners


$

179,472



$

191,562







Acquisition related expenses


90



1,764


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


4,630



8,032


Gain on investment securities




(4)


Loss on derivative instruments, net


2,023



1,420


Amortization of net premiums on debt and investments, net


(3,553)



(4,920)


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


1,632



1,152


Net direct financing lease adjustments


571



507


Amortization and write off of deferred financing costs


6,878



11,320


Amortization of management contracts


6,240



7,510


Deferred tax expense (benefit)


6,941



(5,701)


Gain on extinguishment and forgiveness of debt, net


2,003




Straight-line rent, net of bad debt expense related to straight-line rent


(12,319)



(21,705)


Equity-based compensation expense


2,588



4,016


Other amortization and non-cash charges


929



781


Proportionate share of adjustments for unconsolidated entities


(17)



694


AFFO attributable to common stockholders and limited partners


$

198,108



$

196,428







Weighted-average shares outstanding - basic


943,480,170



903,461,323


Effect of Limited Partner OP Units and dilutive securities


25,206,373



25,995,886


Weighted-average shares outstanding - diluted


968,686,543



929,457,209







FFO attributable to common stockholders and limited partners per diluted share


$

0.19



$

0.21


AFFO attributable to common stockholders and limited partners per diluted share


$

0.20



$

0.21


 

VEREIT, INC.

FINANCIAL AND OPERATIONS STATISTICS AND RATIOS

(Dollars in thousands) (Unaudited)




Three Months Ended



September 30,
2016

Interest expense, excluding non-cash amortization


$

76,511


Secured debt principal amortization


5,734


Dividends attributable to preferred shares


17,973


Total fixed charges


100,218


Normalized EBITDA


285,906


Fixed charge coverage ratio


2.85

x






September 30,
 2016

Debt Outstanding


$

6,586,839


Less: cash and cash equivalents


116,618


Net Debt


6,470,221


Normalized EBITDA annualized


1,143,624


Net Debt to Normalized EBITDA annualized ratio


5.66

x




Net Debt


$

6,470,221


Gross Real Estate Investments


15,815,333


Net Debt leverage ratio


40.9

%




Unencumbered Gross Real Estate Investments


$

10,394,146


Gross Real Estate Investments


15,815,333


Unencumbered asset ratio


65.7

%







September 30,
 2016

Mortgage notes payable and other debt, net


$

2,861,210


Corporate bonds, net


2,225,157


Convertible debt, net


970,691


Credit facility, net


496,008


Mortgage notes payable associated with assets held for sale



Total debt - as reported


6,553,066


Adjustments:



Deferred financing costs, net


59,467


Net premiums


(25,694)


Debt Outstanding


$

6,586,839







Three Months Ended



September 30,
 2016

Interest expense - as reported


$

79,869


Adjustments:



Amortization of deferred financing and issuance costs


(7,081)


Amortization of net premiums


3,723


Interest expense, excluding non-cash amortization


$

76,511


 

VEREIT, INC.

SEGMENT REPORTING - STATEMENTS OF OPERATIONS

(REI Segment)

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




Three Months Ended September 30,



2016


2015

Revenues:





Rental income


$

303,383



$

333,766


Direct financing lease income


494



659


Operating expense reimbursements


27,969



22,983


  Total real estate investment revenues


331,846



357,408


Operating expenses:





Acquisition related


90



1,690


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


4,630



8,032


Property operating


34,820



31,950


General and administrative


12,069



15,848


Depreciation and amortization


187,897



200,158


Impairment of real estate


6,872




  Total operating expenses


246,378



257,678


Operating income


85,468



99,730


Other (expense) income:





Interest expense


(79,869)



(89,530)


Loss on extinguishment and forgiveness of debt, net


(2,003)




Other income, net


1,649



1,903


Equity in income and gain on disposition of unconsolidated entities


212



6,837


Loss on derivative instruments, net


(2,023)



(1,420)


  Total other expenses, net


(82,034)



(82,210)


Income before taxes and disposition of real estate


3,434



17,520


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


28,111



(6,542)


Income before income taxes


31,545



10,978


Provision for income taxes


(1,539)



(2,238)


Net income


$

30,006



$

8,740


 

VEREIT, INC.

SEGMENT REPORTING - STATEMENTS OF OPERATIONS

(Cole Capital Segment)

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




Three Months Ended September 30,



2016


2015

Revenues:





Offering-related fees and reimbursements


$

9,545



$

5,850


 Transaction service fees and reimbursements


3,779



7,400


 Management fees and reimbursements


17,745



14,296


  Total Cole Capital revenues


31,069



27,546


Operating Expenses:





 Cole Capital reallowed fees and commissions


5,897



3,896


 Acquisition related




74


 General and administrative


17,692



16,994


 Depreciation and amortization


7,276



8,384


   Total operating expenses


30,865



29,348


  Operating income (loss)


204



(1,802)


 Total other income, net


95



465


Income (loss) before taxes


299



(1,337)


(Provision for) benefit from income taxes


(59)



738


Net income (loss)


$

240



$

(599)


 

VEREIT, INC.

SEGMENT REPORTING - EBITDA AND NORMALIZED EBITDA

(REI Segment)

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




Three Months Ended September 30,



2016


2015

 Net income


$

30,006



$

8,740


  Adjustments:





    Interest expense


79,869



89,530


    Depreciation and amortization


187,897



200,158


    Provision for income taxes


1,539



2,238


    Proportionate share of adjustments for unconsolidated entities


959



2,554


 EBITDA


$

300,270



$

303,220


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


(28,111)



(187)


  Impairments of real estate assets


6,872




  Acquisition related expenses


90



1,690


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


4,630



8,032


  Gain on investment securities




(4)


  Loss on derivative instruments, net


2,023



1,420


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


1,632



1,152


  Loss on extinguishment and forgiveness of debt, net


2,003




  Net direct financing lease adjustments


571



507


  Straight-line rent, net of bad debt expense related to straight-line rent


(12,319)



(21,705)


  Other amortization and non-cash charges


(32)



10


  Proportionate share of adjustments for unconsolidated entities


(36)



608


Normalized EBITDA


$

277,593



$

294,743


 

VEREIT, INC.

SEGMENT REPORTING - EBITDA AND NORMALIZED EBITDA

(Cole Capital Segment)

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



Three Months Ended September 30,


2016


2015

Net income (loss)

$

240



$

(599)


 Adjustments:




   Depreciation and amortization

7,276



8,384


   Provision for (benefit from) income taxes

59



(738)


EBITDA

$

7,575



$

7,047


Management adjustments:




Acquisition related expenses



74


Program development cost write-off

845




Other amortization and non-cash charges

(107)



(92)


Normalized EBITDA

$

8,313



$

7,029


 

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 September 30,



2016


2015

Net income


$

30,006



$

8,740


Dividends on non-convertible preferred stock


(17,973)



(17,974)


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


(28,111)



(187)


Depreciation and amortization of real estate assets


187,898



200,159


Impairment of real estate


6,872




Proportionate share of adjustments for unconsolidated entities


540



1,423


FFO attributable to common stockholders and limited partners


$

179,232



$

192,161







Acquisition related expenses


90



1,690


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


4,630



8,032


Gain of investment securities




(4)


Loss on derivative instruments, net


2,023



1,420


Amortization of premiums and discounts on debt and investments, net


(3,553)



(4,920)


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


1,632



1,152


Net direct financing lease adjustments


571



507


Amortization and write-off of deferred financing costs


6,878



11,320


Gain on extinguishment and forgiveness of debt, net


2,003




Straight-line rent, net of bad debt expense related to straight-line rent


(12,319)



(21,705)


Equity-based compensation expense


1,201



1,073


Other amortization and non-cash charges




(1)


Proportionate share of adjustments for unconsolidated entities


(17)



694


AFFO attributable to common stockholders and limited partners


$

182,371



$

191,419







Weighted-average shares outstanding - basic


943,480,170



903,461,323


Effect of Limited Partner OP Units and dilutive securities


25,206,373



25,995,886


Weighted-average shares outstanding - diluted


968,686,543



929,457,209







FFO attributable to common stockholders and limited partners per diluted share


$

0.19



$

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 September 30,



2016


2015

Net income (loss)


$

240



$

(599)


 FFO attributable to common stockholders and limited partners


240



(599)







Acquisition related expenses




74


Amortization of management contracts


6,240



7,510


Deferred tax expense (benefit)


6,941



(5,701)


Equity-based compensation expense


1,387



2,943


Other amortization and non-cash charges


929



782


 AFFO attributable to common stockholders and limited partners


$

15,737



$

5,009







Weighted-average shares outstanding - basic


943,480,170



903,461,323


Effect of Limited Partner OP Units and dilutive securities


25,206,373



25,995,886


Weighted-average shares outstanding - diluted


968,686,543



929,457,209







FFO attributable to common stockholders and limited partners per diluted share


$

0.00



$

0.00


AFFO attributable to common stockholders and limited partners per diluted share


$

0.02



$

0.01


 

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SOURCE VEREIT, Inc.

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