Press Release

VEREIT® Announces Fourth Quarter and Full Year 2020 Operating Results

Company Release - 2/24/2021

PHOENIX, Feb. 24, 2021 /PRNewswire/ -- VEREIT, Inc. (NYSE: VER) ("VEREIT" or the "Company") announced today its operating results for the three months and full year ending December 31, 2020.

 2020 Financial and Operating Highlights

  • Net income of $201.2 million and net income per diluted share of $0.72
  • Achieved $3.11 AFFO per diluted share
  • Rent collection of 98% for the fourth quarter
  • Invested over $1.0 billion of capital, including approximately $280.0 million acquired for the institutional partnerships and $400.0 million allocated to the redemption of the Company's 6.7% Series F Preferred Stock
  • Office dispositions totaled $332.5 million with an additional $88.9 million in strategic sales improving portfolio metrics
  • Issued $1.8 billion aggregate principal amount of unsecured notes providing accretive refinancing of debt
  • Issued 13.3 million shares for gross proceeds of $484.1 million under its at-the-market ("ATM") equity offering program
  • Compared to last quarter, Total debt - as reported remained at $5.9 billion; Adjusted Principal Outstanding increased from $6.0 billion to $6.1 billion; Net Debt decreased from $5.8 billion to $5.6 billion; and Net Debt to Normalized EBITDA decreased from 5.8x to 5.6x

Dividend Increase

On February 23, 2021, the Company's Board of Directors increased the quarterly dividend for the first quarter of 2021 from $0.385 per share to $0.462 per share representing an increase of 20%. The dividend will be paid on April 15, 2021 to common stockholders of record as of March 31, 2021.

Management Commentary

Glenn J. Rufrano, Chief Executive Officer, stated, "We have had consistently high rent collections from the beginning of the pandemic and will diligently work to continue this success. By year end 2020, we moved to increase acquisition volume and are once again on offense.  Bolstered by our $500 million in cash from both cash flow and equity raised, we are not dependent on external funding to achieve our 2021 volume estimates.  Our acquisition model has a number of channels to find opportunities providing portfolio quality and AFFO growth. With the breadth of irons we have in the fire, our team has confidence in our guidance expectations, which includes AFFO growth of approximately 4.5% for 2021."

Fourth Quarter and Full Year 2020 Financial Results

Total Revenues

Total revenues for the quarter ended December 31, 2020 decreased $17.8 million to $287.9 million as compared to total revenues of $305.7 million for the same quarter in 2019.

Total revenues for 2020  decreased $76.7 million to $1.16 billion as compared to total revenues of $1.24 billion in 2019.

Net Income (Loss) and Net Income (Loss) Attributable to Common Stockholders per Diluted Share

Net income for the quarter ended December 31, 2020 decreased $109.1 million to a net loss of $(37.9) million as compared to net income of $71.2 million for the same quarter in 2019, and net income per diluted share decreased $0.47 to a net loss per diluted share of $(0.21) for the quarter ended December 31, 2020, as compared to net income per diluted share of $0.26 for the same quarter in 2019.

Net income for 2020 increased $508.3 million to $201.2 million as compared to a net loss of $(307.1) million in 2019, and net income per diluted share increased $2.57 to $0.72 for 2020, as compared to a net loss per diluted share of $(1.85) for 2019.

Normalized EBITDA

Normalized EBITDA for the quarter ended December 31, 2020 decreased $14.8 million to $246.7 million as compared to Normalized EBITDA of $261.5 million for the same quarter in 2019.

Normalized EBITDA for 2020 decreased $70.5 million to $1.0 billion as compared to Normalized EBITDA of $1.1 billion in 2019.

Funds From Operations Attributable to Common Stockholders and Limited Partners ("FFO") and FFO per Diluted Share

FFO for the quarter ended December 31, 2020 decreased $80.1 million to $69.3 million, as compared to $149.4 million for the same quarter in 2019, and FFO per diluted share decreased $0.38 to $0.31 for the quarter ended December 31, 2020, as compared to FFO per diluted share of $0.69 for the same quarter in 2019.

FFO for 2020 increased $716.7 million to $578.3 million as compared to FFO of $(138.4) million in 2019, and FFO per diluted share increased $3.33 to $2.65 for 2020, as compared to FFO per diluted share of $(0.68) for 2019.

Adjusted FFO Attributable to Common Stockholders and Limited Partners ("AFFO") and AFFO per Diluted Share

AFFO for the quarter ended December 31, 2020 decreased $4.1 million to $169.8 million, as compared to $173.9 million for the same quarter in 2019, and AFFO per diluted share decreased $0.05 to $0.76 for the quarter ended December 31, 2020, as compared to $0.81 for the same quarter in 2019.

Due to the effects of the COVID-19 pandemic, AFFO for the fourth quarter includes deferred rent of $0.1 million and the negative impacts from $0.6 million of abatement amendments, of which the majority relates to prior quarter rents, and $9.1 million of reserved rent. 

AFFO for 2020 decreased $28.5 million to $678.4 million as compared to AFFO of $706.9 million in 2019, and AFFO per diluted share decreased $0.36 to $3.11 for 2020, as compared to AFFO per diluted share of $3.47 for 2019.

Due to the effects of the COVID-19 pandemic, AFFO for 2020 includes deferred rent of $17.9 million and the negative impacts from $18.3 million of abatement amendments and $23.0 million of reserved rent. 

Balance Sheet and Liquidity

As of the end of the fourth quarter, the Company had corporate liquidity of approximately $2.0 billion, comprised of $523.5 million in cash and cash equivalents and $1.5 billion of availability under its credit facility. In addition, secured debt was reduced by $0.9 million in the fourth quarter, bringing the total amount reduced for the year to $195.9 million.

Capital Market Activity

The Company announced $400.0 million in redemptions of VEREIT's 6.7% Series F preferred stock with $150.0 million completed on July 22, 2020, $150.0 million completed on September 20, 2020, and $100.0 million completed on January 15, 2021.  This leaves approximately $373.0 million outstanding.

In June 2020, the Company issued $600.0 million aggregate principal amount of 3.40% senior notes due 2028. Proceeds from the senior notes were primarily used to fund the repayment of VEREIT's 3.75% Convertible Senior Notes due December 2020 and repay borrowings under the Operating Partnership's revolving credit facility.

In November 2020, the Company issued $1.2 billion aggregate principal amount of senior notes with a 2.7% weighted average interest rate and weighted average duration of 10 years primarily repaying the $900.0 million credit facility term loan with a cost of 3.6%.

During 2020, the Company issued 13.3 million shares at a weighted average price per share of $36.41 for gross proceeds of $484.1 million under its ATM equity offering program, of which $393.6 million was issued at a weighted average price per share of $37.00  in the fourth quarter.

Consolidated Financial Statistics

Financial Statistics as of the quarter ended December 31, 2020 are as follows:  Net Debt to Normalized EBITDA of 5.6x, Fixed Charge Coverage Ratio of 3.4x, Unencumbered Asset Ratio of 81.7%, Net Debt to Gross Real Estate Investments of 38.0%, and Weighted Average Debt Term of 6.0 years.

Real Estate Portfolio

As of December 31, 2020, the Company's portfolio consisted of 3,831 properties with total portfolio occupancy of 98.1%, investment grade tenancy of 38.7% and a weighted-average remaining lease term of 8.4 years.

Real Estate Leasing Activity

During the fourth quarter, the Company entered into 63 new and renewal leases on approximately 1.5 million square feet, bringing the activity for the year to 256 new and renewal leases on approximately 7.1 million square feet, or 7.9% of the portfolio.  Leasing activity included 2.8 million square feet of early renewals for the year.  This activity does not include pandemic related amendments.

Acquisitions

During the quarter ended December 31, 2020, the Company invested in 26 properties for approximately $178.0 million at an average cash cap rate of 7.2%.

During 2020, the Company invested in 53 properties for approximately $334.2 million at an average cash cap rate of 7.1%.

Institutional Partnership Acquisitions

During 2020, the Company closed on an external property acquisition for the industrial partnership for $246.8 million of which the Company's cash contribution to the purchase amount was $18.7 million.  The Company also closed on an external property acquisition for the office partnership for $33.1 million of which the Company's cash contribution to the purchase amount was $2.7 million.

Dispositions

During the quarter ended December 31, 2020, the Company disposed of 16 properties for an aggregate sales price of $78.6 million, including $52.8 million of office properties. Of the total disposition amount, $77.3 million was used in the total weighted average cash cap rate calculation of 6.7%.  The gain on fourth quarter sales was approximately $19.0 million.

During 2020, the Company disposed of 79 properties for an aggregate sales price of $436.0 million, including $332.5 million of office properties.  Of the total disposition amount, $364.4 million was used in the total weighted average cash cap rate calculation of 6.8%.  The gain on 2020 sales was approximately $96.2 million.

Tenant Credit Updates

Tenants representing more than 11% of VEREIT's annualized rental income received credit-positive news during 2020 and year-to-date including:

  • Red Lobster was purchased by Thai Union Group PCL, a publicly listed company, an investor group led by international restaurant executives, and Red Lobster Management.
  • Topgolf Entertainment Group entered into a merger agreement with Callaway Golf Company, a publicly listed company, which is expected to close in early 2021.
  • Albertsons and AcademySports completed their initial public offerings and are now publicly listed companies.
  • GPM Investments, LLC's ("GPM") parent company, Arko Holdings, completed its business combination and is now a publicly listed company called ARKO Corp. GPM is a growing leader in the U.S. convenience store industry with multiple brands acquired.
  • Tractor Supply received public issuer ratings of BBB from S&P Global Ratings and Baa1 from Moody's Investors Service.
  • Subsequent to year-end 2020: Petco and Driven Brands (which owns Take 5 Oil Change and International Car Wash Group) completed their initial public offerings and are now publicly listed companies.

COVID-19 Company Update

As of February 16, 2021, VEREIT had received rent of approximately 87% for the second quarter, 95% for the third quarter, and 98% for the fourth quarter. 

In addition, as of February 16, 2021, VEREIT had received rent of approximately 99% for January, which is based on the terms of lease agreements in effect at January 1, 2021 and excludes tenants being accounted for on a cash basis.  This change better reflects normalized collections and has a very modest impact of approximately 1.0%.

The property type breakdown for rent collection is as follows:

Property Type

Q2
2020

Q3
2020

Q4
2020

Jan
2021

Total Retail

89%

98%

99%

98%

Casual Dining

40%

71%

93%

98%

Quick Service

89%

91%

91%

96%

Total Restaurant

61%

80%

92%

97%

Total Office

99%

98%

99%

99%

Total Industrial

98%

98%

100%

99%

Further rent collection and relief request details can be found in our investor presentation made available today. 

2021 Guidance

The Company expects its 2021 AFFO per diluted share to be in a range between $3.20 and $3.30 (see reconciliation to net income per share at the end of this release). This guidance assumes:

  • Acquisitions: $1.0 billion to $1.3 billion at average cash cap rates of 6.5% to 7.5%
  • Office Dispositions: $200 million to $250 million at average cash cap rates of 6.0% to 6.75%
  • Strategic Dispositions: $50 million to $100 million
  • Institutional Partnership Acquisitions: $400 million to $600 million
  • Average Occupancy averaging between 97.0% and 98.0%
  • Net Debt to Normalized EBITDA: 5.5x to 6.0x

Board of Director Additions

On February 23, 2021, the Company announced the appointment of Priscilla Almodovar and Susan Skerritt to the Company's Board of Directors ("Board") effective immediately following the filing of the Company's Form 10-K. The addition of the two new independent directors expands the Board to include nine members.

Audio Webcast and Call Details

The live audio webcast will be available, beginning at 1:30 p.m. ET on Wednesday, February 24, 2021, on the Company's Investor Relations website at: http://ir.vereit.com/. The dial-in information is as follows: (844) 746-0748 (domestic) or (412) 317-5274 (international).  Participants should log in 10-15 minutes early.

Approximately one hour following the call, a replay of the webcast will be available at the link above and archived for up to 12 months. A telephone replay of the conference call can also be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international), passcode 10151852. The telephone replay will be available until March 10, 2021.

About the Company

VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S.  The Company has total real estate investments of $14.6 billion including approximately 3,800 properties and 89.5 million square feet. VEREIT's business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange. VEREIT uses, and intends to continue to use, its Investor Relations website, which can be found at www.VEREIT.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.  Additional information about VEREIT can be found through social media platforms such as Twitter and  LinkedIn.

About the Data 

Prior period shares and per share amounts have been updated to reflect the reverse stock split.

Rent collection percentages disclosed are based on contractual rent and recoveries paid by tenants to cover estimated tax, insurance and common area maintenance expenses, including the Company's pro rata share of such amounts related to properties owned by unconsolidated joint ventures.  Percentages for 2020 are calculated using a denominator that reflects pre-COVID-19 rents that has not been adjusted for any rent relief granted.  Percentages for 2021 are based on the terms of the lease agreements in effect at January 1, 2021 and exclude rent due and cash received for leases being accounted for on a cash basis as of January 1, 2021. This change better reflects normalized collections and has a very modest impact of approximately 1.0%. Percentages for both years also exclude any tenants in bankruptcy prior to the pandemic.

In the second quarter of 2020, the Company updated its definition of Normalized EBITDA to include the impact of straight-line rent, in order to be consistent with peer companies.  The Company recast the data presented for prior periods, including ratios impacted by the change. 

Descriptions of FFO and AFFO, EBITDA and Normalized EBITDA, Principal Outstanding and Adjusted Principal Outstanding, Net Debt, Interest Expense, Excluding Non-Cash Amortization, Fixed Charge Coverage Ratio, Net Debt to Normalized EBITDA Annualized Ratio, Net Debt Leverage Ratio, and Unencumbered Asset Ratio are provided below. Refer to the subsequent tables for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure and the calculations of these financial ratios.

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Normalized EBITDA

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 Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate. Nareit defines EBITDAre as net income or loss computed in accordance with GAAP, adjusted for interest expense, income tax expense (benefit), depreciation and amortization, impairment write-downs on real estate, gains or losses from disposition of property and our pro rata share of EBITDAre adjustments related to unconsolidated partnerships and joint ventures. We calculated EBITDAre in accordance with Nareit's definition described above.

In addition to EBITDAre, we use Normalized EBITDA as a non-GAAP supplemental performance measure to evaluate the operating performance of the Company. Normalized EBITDA, as defined by the Company, represents EBITDAre, modified to exclude non-routine items such as acquisition-related expenses, litigation and non-routine costs, net,  net revenue or expense earned or incurred that is related to the services agreement associated with a discontinued operation, gains or losses on sale of investment securities or mortgage notes receivable, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill, intangible and right of use assets, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, write-off of program development costs, and amortization of intangibles, above-market lease assets and below-market lease liabilities. Normalized EBITDA omits the Normalized EBITDA impact of Excluded Properties. Management believes that excluding these costs from EBITDAre 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. Therefore, EBITDAre and Normalized EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. 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. EBITDAre and Normalized EBITDA may not be comparable to similarly titled measures of other companies.

Excluded Properties

Excluded Properties are properties for which (i) the related mortgage loan is in default, and (ii) management decides to transfer the properties to the lender in connection with settling the mortgage note obligation. Certain non-GAAP measures and operating metrics omit the impact of such properties for the month beginning with the date that such criteria are met in order to better reflect the ongoing operations of the Company.

At and during the three months ended December 31, 2020, September 30, 2020, and December 31, 2019 there were no Excluded Properties owned. During the year ended December 31, 2019, there was one Excluded Property sold through a foreclosure by the lender on July 2, 2019, with Principal Outstanding of $19.5 million prior to its disposition.

Fixed Charge Coverage Ratio

Fixed Charge Coverage Ratio is the sum of (i) Interest Expense, excluding non-cash amortization, (ii) secured debt principal amortization on Adjusted Principal Outstanding and (iii) dividends attributable to preferred shares divided by Normalized EBITDA. Management believes that Fixed Charge Coverage Ratio is a useful supplemental measure of our ability to satisfy fixed financing obligations.

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")

Due to certain unique operating characteristics of real estate companies, as discussed below, Nareit 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 adjusted for gains or losses from disposition of property, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to unconsolidated partnerships and joint ventures. We calculate FFO in accordance with Nareit's definition described above.

In addition to FFO, we use 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 expenses, litigation and non-routine costs, net, net revenue or expense earned or incurred that is related to the services agreement associated with a discontinued operation, gains or losses on sale of investment securities or mortgage notes receivable, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill, intangible and right of use assets, straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, reserves for loan loss, gains or losses 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, premiums and discounts on debt and investments, above-market lease assets and below-market lease liabilities. We omit the impact of the Excluded Properties and related non-recourse mortgage notes from FFO to calculate AFFO. 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 publicly-traded REITs, as AFFO, or an equivalent measure, is routinely reported by publicly-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 U.S. 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.

Gross Real Estate Investments

Gross Real Estate Investments represent total gross real estate and related assets of Operating Properties, equity investments in the Cole REITs, investment in direct financing leases, investment securities backed by real estate and mortgage notes receivable, and the Company's pro rata share of such amounts related to properties owned by Unconsolidated Joint Ventures,  net of gross intangible lease liabilities. We believe that the presentation of Gross Real Estate Investments, which shows our total investments in real estate and related assets, in connection with Net Debt, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Gross Real Estate Investments should not be considered as an alternative to the Company's real estate investments 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 is a non-GAAP measure that represents interest expense incurred on the outstanding principal balance of our debt and the Company's pro rata share of  the Unconsolidated Joint Ventures' outstanding principal balance.  This measure excludes (i) the amortization of deferred financing costs, premiums and discounts, which is included in interest expense in accordance with GAAP, and (ii) the impact of Excluded Properties and related non-recourse mortgage notes. 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.

Net Debt Leverage Ratio

Net Debt Leverage Ratio equals Net Debt divided by Gross Real Estate Investments. We believe that the presentation of Net Debt Leverage Ratio provides useful information to investors because our management reviews Net Debt Leverage Ratio as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.

Net Debt, Principal Outstanding and Adjusted Principal Outstanding 

Principal Outstanding is a non-GAAP measure that 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. Adjusted Principal Outstanding includes the Company's pro rata share of the Unconsolidated Joint Ventures' outstanding principal debt balance. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Principal Outstanding and Adjusted Principal Outstanding should not be considered as alternatives 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.

Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of the Unconsolidated Joint Ventures' cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.

Net Debt to Normalized EBITDA Annualized Ratio

Net Debt to Normalized EBITDA Annualized ("Net Debt to Normalized EBITDA") equals Net Debt divided by the respective quarter Normalized EBITDA multiplied by four. We believe that the presentation of Net Debt to Normalized EBITDA Annualized provides useful information to investors because our management reviews Net Debt to Normalized EBITDA Annualized as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.

Unencumbered Asset Ratio

Unencumbered Asset Ratio equals unencumbered Gross Real Estate Investments divided by Gross Real Estate Investments. Management believes that Unencumbered Asset Ratio is a useful supplemental measure of our overall liquidity and leverage.

Unconsolidated Joint Ventures 

Unconsolidated Joint Ventures include the Company's investments in unconsolidated joint ventures formed to acquire and own real estate properties and exclude other investments in unconsolidated entities.

Forward-Looking Statements

Information set forth herein contains "forward-looking statements" which reflect the Company's expectations and projections regarding future events and plans, the Company's future financial condition, results of operations, liquidity and business, including leasing and occupancy, acquisitions, the funding and modeling of acquisitions, dispositions, rent receipts, rent relief requests, rent relief granted, the payment of future dividends, the Company's growth and the impact of COVID-19 on the Company's business. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which are  difficult to predict and beyond the Company's control, that could cause actual events and plans or could cause the Company's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collections.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the Company's ability to meet its 2021 guidance; the duration and extent of the impact of COVID-19 on our business and the businesses of our tenants (including their ability to timely make rental payments) and the economy generally; federal, state or local legislation or regulation that could impact the timely payment of rent by tenants in light of COVID-19; the Company's ability to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all; risks associated with tenant, geographic and industry concentrations with respect to the Company's properties; risks accompanying the management of its industrial and office partnerships; the impact of impairment charges in respect of certain of the Company's properties; unexpected costs or liabilities that may arise from potential dispositions, including related to limited partnership, tenant-in-common and Delaware statutory trust real estate programs and the Company's management with respect to such programs; competition in the acquisition and disposition of properties and in the leasing of its properties including that the Company may be unable to acquire, dispose of, or lease properties on advantageous terms or at all; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of the Company's tenants, which are heightened as a result of the COVID-19 pandemic; the Company's ability to access capital markets (including on attractive terms) as a result of the impact of COVID-19; risks associated with the Company's substantial indebtedness, including that such indebtedness may affect the Company's ability to pay dividends and that the terms and restrictions within the agreements governing the Company's indebtedness may restrict its borrowing and operating flexibility; the ability to retain or hire key personnel; and the continuation or deterioration of current market conditions. Additional factors that may affect future results are contained in the Company's filings with the SEC, which are available at the SEC's website at www.sec.gov. The Company 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)

 
   

December 31,

2020

 

September 30,
2020

(Unaudited)

ASSETS

       

Real estate investments, at cost:

       

Land

 

$

2,699,110

   

$

2,691,122

 

Buildings, fixtures and improvements

 

10,032,055

   

10,046,076

 

Intangible lease assets

 

1,872,461

   

1,872,899

 

Total real estate investments, at cost

 

14,603,626

   

14,610,097

 

Less: accumulated depreciation and amortization

 

3,863,732

   

3,829,368

 

Total real estate investments, net

 

10,739,894

   

10,780,729

 

Operating lease right-of-use assets

 

195,518

   

205,346

 

Investment in unconsolidated entities

 

81,639

   

100,339

 

Cash and cash equivalents

 

523,539

   

207,321

 

Restricted cash

 

13,842

   

14,955

 

Rent and tenant receivables and other assets, net

 

366,620

   

391,239

 

Goodwill

 

1,337,773

   

1,337,773

 

Real estate assets held for sale, net

 

65,583

   

1,896

 

Total assets

 

$

13,324,408

   

$

13,039,598

 
         

LIABILITIES AND EQUITY

       

Mortgage notes payable, net

 

$

1,328,835

   

$

1,330,174

 

Corporate bonds, net

 

4,584,230

   

3,406,389

 

Convertible debt, net

 

   

252,077

 

Credit facility, net

 

   

896,630

 

Below-market lease liabilities, net

 

120,938

   

124,009

 

Accounts payable and accrued expenses

 

117,015

   

112,101

 

Derivative, deferred rent and other liabilities

 

63,204

   

162,952

 

Distributions payable

 

89,514

   

85,420

 

Operating lease liabilities

 

209,104

   

214,102

 

Total liabilities

 

6,512,840

   

6,583,854

 

Series F preferred stock

 

189

   

189

 

Common stock

 

2,289

   

2,183

 

Additional paid-in capital

 

13,449,412

   

13,057,408

 

Accumulated other comprehensive loss

 

536

   

(97,008)

 

Accumulated deficit

 

(6,648,028)

   

(6,514,171)

 

Total stockholders' equity

 

6,804,398

   

6,448,601

 

Non-controlling interests

 

7,170

   

7,143

 

Total equity

 

6,811,568

   

6,455,744

 

Total liabilities and equity

 

$

13,324,408

   

$

13,039,598

 

 

VEREIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
   

Three Months Ended December 31,

   

2020

 

2019

Revenues:

       

Rental

 

$

287,431

   

$

305,363

 

Fees from managed partnerships

 

478

   

322

 

Total revenues

 

287,909

   

305,685

 

Operating expenses:

       

Acquisition-related

 

1,048

   

1,168

 

Litigation and non-routine costs, net

 

10,925

   

8,659

 

Property operating

 

31,979

   

34,066

 

General and administrative

 

15,399

   

16,966

 

Depreciation and amortization

 

108,138

   

112,307

 

Impairments

 

28,204

   

22,851

 

Restructuring

 

   

356

 

Total operating expenses

 

195,693

   

196,373

 

Other (expense) income:

       

Interest expense

 

(68,416)

   

(69,628)

 

Loss on extinguishment and forgiveness of debt, net

 

(67)

   

(17,413)

 

Other income, net

 

5,584

   

7,139

 

Loss on derivative instruments, net

 

(85,392)

   

 

Equity in income and gain on disposition of unconsolidated entities

 

1,133

   

936

 

Gain on disposition of real estate and real estate assets held for sale, net

 

18,434

   

41,541

 

Total other expenses, net

 

(128,724)

   

(37,425)

 

(Loss) income before taxes

 

(36,508)

   

71,887

 

Provision for income taxes

 

(1,358)

   

(719)

 

Net (loss) income

 

(37,866)

   

71,168

 

Net loss (income) attributable to non-controlling interests

 

46

   

(43)

 

Net (loss) income attributable to the General Partner

 

$

(37,820)

   

$

71,125

 
         

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

 

$

(0.21)

   

$

0.26

 

Distributions declared per common share

 

$

0.39

   

$

0.69

 

 

VEREIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)

 
   

Year Ended December 31,

   

2020

 

2019

Revenues:

       

Rental

 

$

1,158,285

   

$

1,237,234

 

Fees from managed partnerships

 

3,081

   

820

 

Total revenues

 

1,161,366

   

1,238,054

 

Operating expenses:

       

Acquisition-related

 

4,790

   

4,337

 

Litigation and non-routine costs, net

 

2,348

   

815,422

 

Property operating

 

122,967

   

129,769

 

General and administrative

 

61,349

   

62,711

 

Depreciation and amortization

 

452,008

   

481,995

 

Impairments

 

65,075

   

47,091

 

Restructuring

 

   

10,505

 

Total operating expenses

 

708,537

   

1,551,830

 

Other (expense) income:

       

Interest expense

 

(265,660)

   

(278,574)

 

Loss on extinguishment and forgiveness of debt, net

 

(1,486)

   

(17,910)

 

Other income, net

 

6,610

   

12,209

 

Loss on derivative instruments, net

 

(85,392)

   

(58)

 

Equity in income and gain on disposition of unconsolidated entities

 

3,539

   

2,618

 

Gain on disposition of real estate and real estate assets held for sale, net

 

95,292

   

292,647

 

Total other expenses, net

 

(247,097)

   

10,932

 

Income (loss) before taxes

 

205,732

   

(302,844)

 

Provision for income taxes

 

(4,513)

   

(4,262)

 

Net income (loss)

 

201,219

   

(307,106)

 

Net (income) loss attributable to non-controlling interests

 

(91)

   

6,753

 

Net income (loss) attributable to the General Partner

 

$

201,128

   

$

(300,353)

 
         

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

 

$

0.72

   

$

(1.85)

 

Distributions declared per common share

 

$

1.84

   

$

2.75

 

 

VEREIT, INC.
EBITDAre AND NORMALIZED EBITDA
(In thousands) (Unaudited)

 
   

Three Months Ended

   

December 31,

2020

 

September 30,

2020

 

December 31,

2019

Net (loss) income

 

$

(37,866)

   

$

97,983

   

$

71,168

 

 Adjustments:

           

Interest expense

 

68,416

   

66,935

   

69,628

 

Depreciation and amortization

 

108,138

   

109,191

   

112,307

 

Provision for income taxes

 

1,358

   

1,054

   

719

 

Proportionate share of adjustments for unconsolidated entities

 

2,443

   

2,451

   

1,603

 

Gain on disposition of real estate assets, net

 

(18,965)

   

(42,814)

   

(41,541)

 

Impairments of real estate

 

24,852

   

16,397

   

22,851

 

EBITDAre

 

$

148,376

   

$

251,197

   

$

236,735

 

Impairment of intangibles and right of use assets

 

3,352

   

   

 

Payments received on fully reserved loans

 

   

   

(133)

 

Acquisition-related expenses

 

1,048

   

1,050

   

1,168

 

Litigation and non-routine costs, net

 

10,925

   

105

   

8,659

 

Gain  on investments

 

(313)

   

(76)

   

 

Loss on derivative instruments, net

 

85,392

   

   

 

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

 

1,428

   

393

   

504

 

Loss (gain) on extinguishment and forgiveness of debt, net

 

67

   

(61)

   

17,413

 

Net direct financing lease adjustments

 

379

   

381

   

387

 

Restructuring expenses

 

   

   

356

 

Other adjustments, net

 

(3,919)

   

(8)

   

(3,511)

 

 Proportionate share of adjustments for unconsolidated entities

 

(46)

   

(48)

   

(43)

 

Adjustment for Excluded Properties

 

   

   

3

 

Normalized EBITDA

 

$

246,689

   

$

252,933

   

$

261,538

 

Normalized EBITDA annualized

 

$

986,756

   

$

1,011,732

   

$

1,046,152

 

 

VEREIT, INC.
EBITDAre AND NORMALIZED EBITDA
(In thousands) (Unaudited)

 
   

Year Ended December 31,

   

2020

 

2019

Net income (loss)

 

$

201,219

   

$

(307,106)

 

 Adjustments:

       

Interest expense

 

265,660

   

278,574

 

Depreciation and amortization

 

452,008

   

481,995

 

Provision for income taxes

 

4,513

   

4,262

 

Proportionate share of adjustments for unconsolidated entities

 

8,430

   

3,966

 

Gain on disposition of real estate assets, net

 

(95,823)

   

(292,654)

 

Impairments of real estate

 

61,723

   

47,091

 

EBITDAre

 

$

897,730

   

$

216,128

 

Impairment of intangibles and right of use assets

 

3,352

   

 

Payments received on fully reserved loans

 

   

(133)

 

Acquisition-related expenses

 

4,790

   

4,337

 

Litigation and non-routine costs, net

 

2,348

   

815,422

 

Loss on investments

 

294

   

493

 

Loss on derivative instruments, net

 

85,392

   

58

 

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

 

3,357

   

2,538

 

Loss on extinguishment and forgiveness of debt, net

 

1,486

   

17,910

 

Net direct financing lease adjustments

 

1,497

   

1,617

 

Restructuring expenses

 

   

10,505

 

Other adjustments, net

 

(4,078)

   

(2,686)

 

 Proportionate share of adjustments for unconsolidated entities

 

(836)

   

(155)

 

Adjustment for Excluded Properties

 

   

(257)

 

Normalized EBITDA

 

$

995,332

   

$

1,065,777

 

 

VEREIT, INC.
FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
   

Three Months Ended December 31,

   

2020

 

2019

Net (loss) income

 

$

(37,866)

   

$

71,168

 

Dividends on non-convertible preferred stock

 

(7,923)

   

(15,964)

 

Gain on disposition of real estate assets, net

 

(18,965)

   

(41,541)

 

Depreciation and amortization of real estate assets

 

107,758

   

111,892

 

Impairment of real estate

 

24,852

   

22,851

 

Proportionate share of adjustments for unconsolidated entities

 

1,457

   

1,027

 

FFO attributable to common stockholders and limited partners

 

$

69,313

   

$

149,433

 
         

Weighted-average shares outstanding - basic

 

222,152,574

   

214,125,180

 

Effect of weighted-average Limited Partner OP Units and dilutive securities

 

358,851

   

1,404,231

 

Weighted-average shares outstanding - diluted

 

222,511,425

   

215,529,411

 
         

FFO attributable to common stockholders and limited partners per diluted share

 

$

0.31

   

$

0.69

 

 

VEREIT, INC.
FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
   

Year Ended December 31,

   

2020

 

2019

Net income

 

$

201,219

   

$

(307,106)

 

Dividends on non-convertible preferred stock

 

(44,590)

   

(68,488)

 

Gain on disposition of real estate assets, net

 

(95,823)

   

(292,654)

 

Depreciation and amortization of real estate assets

 

450,413

   

480,064

 

Impairment of real estate

 

61,723

   

47,091

 

Proportionate share of adjustments for unconsolidated entities

 

5,369

   

2,721

 

FFO attributable to common stockholders and limited partners

 

$

578,311

   

$

(138,372)

 
         

Weighted-average shares outstanding - basic

 

217,548,175

   

199,627,994

 

Effect of weighted-average Limited Partner OP Units and dilutive securities

 

313,830

   

4,018,964

 

Weighted-average shares outstanding - diluted

 

217,862,005

   

203,646,958

 
         

FFO attributable to common stockholders and limited partners per diluted share

 

$

2.65

   

$

(0.68)

 

 

VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
   

Three Months Ended December 31,

   

2020

 

2019

FFO attributable to common stockholders and limited partners

 

$

69,313

   

$

149,433

 
         

Acquisition-related expenses

 

1,048

   

1,168

 

Litigation and non-routine costs, net

 

10,925

   

8,659

 

Impairment of intangibles and right of use assets

 

3,352

   

 

Payments received on fully reserved loans

 

   

(133)

 

Gain on investments

 

(313)

   

 

Loss on derivative instruments, net

 

85,392

   

 

Amortization of premiums and discounts on debt and investments, net

 

(193)

   

(1,479)

 

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

 

1,428

   

504

 

Net direct financing lease adjustments

 

379

   

387

 

Amortization and write-off of deferred financing costs

 

6,262

   

5,305

 

Loss on extinguishment and forgiveness of debt, net

 

67

   

17,413

 

Straight-line rent

 

(7,108)

   

(7,107)

 

Equity-based compensation

 

2,952

   

2,934

 

Restructuring expenses

 

   

356

 

Other adjustments, net

 

(3,536)

   

(3,097)

 

Proportionate share of adjustments for unconsolidated entities

 

(170)

   

(493)

 

Adjustment for Excluded Properties

 

   

3

 

AFFO attributable to common stockholders and limited partners

 

$

169,798

   

$

173,853

 
         

Weighted-average shares outstanding - basic

 

222,152,574

   

214,125,180

 

Effect of weighted-average Limited Partner OP Units and dilutive securities

 

358,851

   

1,404,231

 

Weighted-average shares outstanding - diluted

 

222,511,425

   

215,529,411

 
         

AFFO attributable to common stockholders and limited partners per diluted share

 

$

0.76

   

$

0.81

 

 

VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS
(In thousands, except for share and per share data) (Unaudited)

 
   

Year Ended December 31,

   

2020

 

2019

FFO attributable to common stockholders and limited partners

 

$

578,311

   

$

(138,372)

 
         

Acquisition-related expenses

 

4,790

   

4,337

 

Litigation and non-routine costs, net

 

2,348

   

815,422

 

Impairment of intangibles and right of use assets

 

3,352

   

 

Payments received on fully reserved loans

 

   

(133)

 

Gain on investments

 

294

   

493

 

Loss on derivative instruments, net

 

85,392

   

58

 

Amortization of premiums and discounts on debt and investments, net

 

(1,445)

   

(5,312)

 

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

 

3,357

   

2,538

 

Net direct financing lease adjustments

 

1,497

   

1,617

 

Amortization and write-off of deferred financing costs

 

15,115

   

15,464

 

Loss on extinguishment and forgiveness of debt, net

 

1,486

   

17,910

 

Straight-line rent

 

(25,161)

   

(28,032)

 

Equity-based compensation

 

12,402

   

12,251

 

Restructuring expenses

 

   

10,505

 

Other adjustments, net

 

(2,488)

   

(773)

 

Proportionate share of adjustments for unconsolidated entities

 

(848)

   

(1,005)

 

Adjustment for Excluded Properties

 

   

(33)

 

AFFO attributable to common stockholders and limited partners

 

$

678,402

   

$

706,935

 
         

Weighted-average shares outstanding - basic

 

217,548,175

   

199,627,994

 

Effect of weighted-average Limited Partner OP Units and dilutive securities

 

313,830

   

4,018,964

 

Weighted-average shares outstanding - diluted

 

217,862,005

   

203,646,958

 
         

AFFO attributable to common stockholders and limited partners per diluted share

 

$

3.11

   

$

3.47

 

 

VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)

 
   

Three Months Ended

   

December 31,

2020

Interest expense - as reported

 

$

68,416

 

Adjustments:

   

Amortization of deferred financing costs and other non-cash charges

 

(6,189)

 

Amortization of net premiums

 

120

 

Proportionate share of amounts for Unconsolidated Joint Ventures

 

806

 

Interest Expense, Excluding Non-Cash Amortization

 

$

63,153

 
     
     
   

Three Months Ended

   

December 31,

2020

Interest Expense, Excluding Non-Cash Amortization

 

$

63,153

 

Secured debt principal amortization

 

858

 

Dividends attributable to preferred shares 

 

7,923

 

Total fixed charges

 

71,934

 

Normalized EBITDA

 

246,689

 

Fixed Charge Coverage Ratio

 

3.43x

 

   

December 31,

2020

 

September 30,

2020

Mortgage notes payable, net

 

$

1,328,835

   

$

1,330,174

 

Corporate bonds, net

 

4,584,230

   

3,406,389

 

Convertible debt, net

 

   

252,077

 

Credit facility, net

 

   

896,630

 

Total debt - as reported

 

5,913,065

   

5,885,270

 

Deferred financing costs, net

 

44,573

   

39,204

 

Net discounts (premiums)

 

25,557

   

12,343

 

Principal Outstanding

 

5,983,195

   

5,936,817

 

Proportionate share of amounts for Unconsolidated Joint Ventures

 

106,516

   

106,516

 

Adjusted Principal Outstanding

 

$

6,089,711

   

$

6,043,333

 

Cash and cash equivalents

 

(523,539)

   

(207,321)

 

Pro rata share of Unconsolidated Joint Ventures' cash and cash equivalents

 

(1,619)

   

(3,776)

 

Net Debt 

 

$

5,564,553

   

$

5,832,236

 

 

   

December 31,

2020

Total real estate investments, at cost - as reported

 

$

14,603,626

 

Adjustments:

   

Investment in Cole REITs

 

7,255

 

Gross assets held for sale

 

91,341

 

Investment in direct financing leases, net

 

6,547

 

Gross below market leases

 

(227,442)

 

Proportionate share of amounts for Unconsolidated Joint Ventures

 

165,643

 

Gross Real Estate Investments

 

$

14,646,970

 

 

   

December 31,

2020

 

September 30,

2020

Net Debt 

 

$

5,564,553

   

$

5,832,236

 

Normalized EBITDA Annualized

 

986,756

   

1,011,732

 

Net Debt to Normalized EBITDA Annualized Ratio

 

5.64x

 

5.76x

 

   

December 31,

2020

Net Debt 

 

$

5,564,553

 

Gross Real Estate Investments

 

14,646,970

 

Net Debt Leverage Ratio

 

38.0

%

     

Unencumbered Gross Real Estate Investments

 

$

11,968,277

 

Gross Real Estate Investments

 

14,646,970

 

Unencumbered asset ratio

 

81.7

%

VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE  - 2021 GUIDANCE
(Unaudited)

The Company expects its 2021 AFFO per diluted share to be in a range between $3.20 and $3.30. This guidance assumes:

  • Acquisitions: $1.0 billion to $1.3 billion at average cash cap rates of 6.5% to 7.5%
  • Office Dispositions: $200 million to $250 million at average cash cap rates of 6.0% to 6.75%
  • Strategic Dispositions: $50 million to $100 million
  • Institutional Partnership Acquisitions: $400 million to $600 million
  • Average Occupancy averaging between 97.0% and 98.0%
  • Net Debt to Normalized EBITDA: 5.5x to 6.0x

The estimated net income per diluted share is not a projection and is provided solely to satisfy the disclosure requirements of the U.S. Securities and Exchange Commission.

   

Low

 

High

 

Diluted net income per share attributable to common stockholders and limited partners (1)

 

$

1.38

   

$

1.47

   

Depreciation and amortization of real estate assets 

 

1.78

   

1.79

   

Proportionate share of adjustments for unconsolidated entities

 

0.01

   

0.01

   

FFO attributable to common stockholders and limited partners per diluted share

 

3.17

   

3.27

   

Adjustments (2)

 

0.03

   

0.03

   

AFFO attributable to common stockholders and limited partners per diluted share

 

$

3.20

   

$

3.30

   

 

_____________________________________

(1)

Includes impact of dividends to be paid to preferred shareholders.

(2)

Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net, and (ii) certain non-cash items such as straight-line rent, net, direct financing lease adjustments, equity-based compensation and amortization of intangible assets, deferred financing costs, premiums and discounts on debt , above-market lease assets and below-market lease liabilities.

 

 

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SOURCE VEREIT Services Inc


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