CORRESP 1 filename1.htm Document

 
 
Hisham A. Kader
 
Chief Financial Officer
 
 
 
TEL  +1-212-492-1183
 
FAX  +1-212-492-8922
 
hkader@wpcarey.com
 
 

July 13, 2016
 
VIA EDGAR AND BY FEDERAL EXPRESS
 
Mr. Robert F. Telewicz, Jr.
Branch Chief
United States Securities and Exchange Commission
Division of Corporate Finance
Office of Real Estate and Commodities
100 F Street, N.E.
Washington, D.C. 20549-0405
 
Re:    W. P. Carey Inc.
Form 10-K for the fiscal year ended December 31, 2015
Filed February 26, 2016
File No. 001-13779


Dear Mr. Telewicz:
 
Set forth below are responses to the comments of the Staff of the Division of Corporation Finance (the “Staff”) contained in a letter dated June 30, 2016 with respect to the Form 10-K for the fiscal year ended December 31, 2015 filed by W. P. Carey Inc. (the “Company” or “W. P. Carey”). Please note that, for the Staff’s convenience, the Company has recited the Staff’s comment in bold and provided the Company’s response immediately thereafter.
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Property Level Contribution, page 49

1.
We note your response to our prior comment 1 and are unclear how you concluded the measure of Property Level Contribution does not meet the definition of a non-GAAP measure in accordance with Item 10(e) of Regulation S-K. Although this measure is

Mr. Robert F. Telewicz, Jr.
United States Securities and Exchange Commission
July 13, 2016
Page 2



calculated using GAAP numbers, it is not a GAAP number presented on the consolidated statement of operation. Additionally, it appears that this measure excludes certain items included in the closest related GAAP measure (e.g. net income). In future filings please ensure this measure meets all of the disclosure requirements of Item 10(e) of Regulation S-K. In addition, we are unclear how you have applied the guidance in question 104.04 of the C&DI related to Non-GAAP Financial Measures with respect to your measure of segment NOI.

In response to the Staff's comments, in future filings the Company will revise its presentation of Property Level Contribution as reflected in the attached exhibit, including a reconciliation of Property Level Contribution to its closest related GAAP measure, Net Income from Real Estate Ownership attributable to W. P. Carey, as well as the required explanatory and cautionary language. The attached exhibit reflects the changes the Company proposes to make in its next periodic report. Additionally, the Company will exclude any reference to Segment Net Operating Income from its MD&A in future filings.

The Company acknowledges that:

•
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

•
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

•
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 
Sincerely,

 
/s/ Hisham A. Kader
 
Hisham A. Kader
 
Chief Financial Officer


cc:
Paul Marcotrigiano, Esq.
W. P. Carey Inc.
 
 



EXHIBIT

Property Level Contribution

The following table presents the Property level contribution for our consolidated net-leased and operating properties as well as a reconciliation to Net income from Real Estate Ownership attributable to W. P. Carey (in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
Change
 
2014
 
2013
 
Change
Existing Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
$
266,442

 
$
281,132

 
$
(14,690
)
 
$
281,132

 
$
279,765

 
$
1,367

Property expenses
(3,228
)
 
(1,050
)
 
(2,178
)
 
(1,050
)
 
(2,038
)
 
988

Depreciation and amortization
(100,327
)
 
(105,895
)
 
5,568

 
(105,895
)
 
(106,276
)
 
381

Property level contribution
162,887

 
174,187

 
(11,300
)
 
174,187

 
171,451

 
2,736

Net-Leased Properties Acquired in the CPA®:16 Merger
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
258,219

 
248,470

 
9,749

 
248,470

 
—

 
248,470

Property expenses
(12,618
)
 
(5,802
)
 
(6,816
)
 
(5,802
)
 
—

 
(5,802
)
Depreciation and amortization
(99,913
)
 
(100,298
)
 
385

 
(100,298
)
 
—

 
(100,298
)
Property level contribution
145,688

 
142,370

 
3,318

 
142,370

 
—

 
142,370

Recently Acquired Net-Leased Properties
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
117,073

 
30,263

 
86,810

 
30,263

 
6,455

 
23,808

Property expenses
(6,738
)
 
(2,615
)
 
(4,123
)
 
(2,615
)
 
(260
)
 
(2,355
)
Depreciation and amortization
(56,700
)
 
(14,584
)
 
(42,116
)
 
(14,584
)
 
(3,169
)
 
(11,415
)
Property level contribution
53,635

 
13,064

 
40,571

 
13,064

 
3,026

 
10,038

Properties Sold or Held for Sale
 
 
 
 
 
 
 
 
 
 
 
Lease revenues
15,222

 
13,964

 
1,258

 
13,964

 
13,404

 
560

Operating revenues
327

 
491

 
(164
)
 
491

 
443

 
48

Property expenses
(636
)
 
(4,015
)
 
3,379

 
(4,015
)
 
(3,154
)
 
(861
)
Depreciation and amortization
(15,102
)
 
(8,515
)
 
(6,587
)
 
(8,515
)
 
(7,906
)
 
(609
)
Property level contribution
(189
)
 
1,925

 
(2,114
)
 
1,925

 
2,787

 
(862
)
Operating Properties
 
 
 
 
 
 
 
 
 
 
 
Revenues
30,188

 
28,434

 
1,754

 
28,434

 
513

 
27,921

Property expenses
(21,938
)
 
(20,609
)
 
(1,329
)
 
(20,609
)
 
(338
)
 
(20,271
)
Depreciation and amortization
(4,194
)
 
(3,807
)
 
(387
)
 
(3,807
)
 
(98
)
 
(3,709
)
Property level contribution
4,056

 
4,018

 
38

 
4,018

 
77

 
3,941

Property Level Contribution
366,077

 
335,564

 
30,513

 
335,564

 
177,341

 
158,223

Add: Lease termination income and other
25,145

 
17,767

 
7,378

 
17,767

 
2,071

 
15,696

Less other expenses:
 
 
 
 
 
 
 
 
 
 
 
General and administrative
(47,676
)
 
(38,797
)
 
(8,879
)
 
(38,797
)
 
(18,993
)
 
(19,804
)
Impairment charges
(29,906
)
 
(23,067
)
 
(6,839
)
 
(23,067
)
 
(4,741
)
 
(18,326
)
Merger, property acquisition, and other expenses
9,908

 
(34,465
)
 
44,373

 
(34,465
)
 
(9,230
)
 
(25,235
)
Stock-based compensation expense
(7,873
)
 
(12,659
)
 
4,786

 
(12,659
)
 
(7,153
)
 
(5,506
)
Property management fees
(7,041
)
 
(3,634
)
 
(3,407
)
 
(3,634
)
 
(2,292
)
 
(1,342
)
Other Income and Expenses
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(194,326
)
 
(178,122
)
 
(16,204
)
 
(178,122
)
 
(103,728
)
 
(74,394
)
Equity in earnings of equity method investments in the Managed REITs and real estate
52,972

 
44,116

 
8,856

 
44,116

 
52,731

 
(8,615
)
Other income and (expenses)
1,952

 
(14,505
)
 
16,457

 
(14,505
)
 
8,420

 
(22,925
)
Gain on change in control of interests
—

 
105,947

 
(105,947
)
 
105,947

 
—

 
105,947

 
(139,402
)
 
(42,564
)
 
(96,838
)
 
(42,564
)
 
(42,577
)
 
13

Income from continuing operations before income taxes
169,232

 
198,145

 
(28,913
)
 
198,145

 
94,426

 
103,719

(Provision for) benefit from income taxes
(17,948
)
 
916

 
(18,864
)
 
916

 
(4,703
)
 
5,619

Income from continuing operations before gain on sale of real estate
151,284

 
199,061

 
(47,777
)

199,061


89,723


109,338

Income from discontinued operations, net of tax
—

 
33,318

 
(33,318
)
 
33,318

 
38,180

 
(4,862
)
Gain (loss) on sale of real estate, net of tax
6,487

 
1,581

 
4,906

 
1,581

 
(332
)
 
1,913

Net Income from Real Estate Ownership
157,771

 
233,960

 
(76,189
)
 
233,960

 
127,571

 
106,389

Net income attributable to noncontrolling interests
(10,961
)
 
(5,573
)
 
(5,388
)
 
(5,573
)
 
(33,056
)
 
27,483

Net Income from Real Estate Ownership Attributable to W. P. Carey
$
146,810

 
$
228,387

 
$
(81,577
)
 
$
228,387

 
$
94,515

 
$
133,872




Property level contribution is a non-GAAP financial measure that we believe to be a useful supplemental measure for management and investors in evaluating and analyzing the financial results of our net-leased and operating properties included in our Real Estate Ownership segment over time. Property level contribution presents the lease and operating property revenues, less property expenses and depreciation and amortization. We believe that Property level contribution allows for meaningful comparison between periods of the direct costs of owning and operating our net-leased assets and operating properties. When a property is leased on a net-lease basis, reimbursable tenant costs are recorded as both income and property expense and, therefore, have no impact on the Property level contribution. While we believe that Property level contribution is a useful supplemental measure, it should not be considered as an alternative to Net income from Real Estate Ownership attributable to W. P. Carey as an indication of our operating performance.