VEREIT® Announces Second Quarter 2016 Operating Results

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

Second Quarter 2016 Highlights

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

Second Quarter 2016 Consolidated Financial Results

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Second Quarter 2016 Cole Capital® Financial Results

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

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

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

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

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

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

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

Subsequent Events - Consolidated

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

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

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

Audio Webcast Details

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

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

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

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

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

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

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

 

 

 

 

 

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SOURCE VEREIT, Inc.