EX-99.1 2 vereitexhibit991pressr.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
rgbhorzvereitlogo093018a03.jpg
FOR IMMEDIATE RELEASE

VEREIT® Announces Second Quarter 2019 Operating Results
Reduced Debt Levels With Prudent Capital Allocation
Strengthened Portfolio Through Reinvestment



Phoenix, AZ, August 7, 2019 -- VEREIT, Inc. (NYSE: VER) (“VEREIT” or the “Company”) announced today its operating results for the three months ending June 30, 2019.

The financial results below reflect continuing operations only.

Second Quarter 2019 Financial and Operating Highlights
•
Net income of $292.3 million and net income per diluted share of $0.27
•
Achieved $0.18 AFFO per diluted share
•
Acquisitions totaled $118.7 million in the second quarter of 2019 and $221.2 million year-to-date
•
Formed an 80/20 industrial partnership on May 30, 2019, including six VEREIT industrial assets totaling approximately $407.5 million which contributed $326.0 million to total dispositions
•
Portfolio dispositions totaled $332.3 million in the second quarter of 2019 and $430.3 million year-to-date
•
Total debt decreased from $6.02 billion to $5.66 billion; Net Debt from $6.05 billion to $5.51 billion, or 36.9% Net Debt to Gross Real Estate Investments
•
Net Debt to Normalized EBITDA was reduced from 5.7x to 5.3x


Second Quarter 2019 Financial Results

Rental Revenue
Rental Revenue for the quarter ended June 30, 2019 decreased $3.7 million to $312.0 million as compared to revenue of $315.7 million for the same quarter in 2018.

Net Income and Net Income Attributable to Common Stockholders per Diluted Share
Net income for the quarter ended June 30, 2019 increased $367.0 million to $292.3 million as compared to net loss of $(74.7) million for the same quarter in 2018, and net income per diluted share increased $0.36 to $0.27 for the quarter ended June 30, 2019, as compared to net loss per diluted share of $(0.09) for the same quarter in 2018.

Normalized EBITDA
Normalized EBITDA for the quarter ended June 30, 2019 increased $0.9 million to $260.3 million as compared to Normalized EBITDA of $259.4 million for the same quarter in 2018.

Funds From Operations Attributable to Common Stockholders and Limited Partners (“FFO”) and FFO per Diluted Share
FFO for the quarter ended June 30, 2019 increased $102.0 million to $179.0 million, as compared to $77.0 million for the same quarter in 2018, and FFO per diluted share increased $0.10 to $0.18 for the quarter ended June 30, 2019, as compared to FFO per diluted share of $0.08 for the same quarter in 2018.

Adjusted FFO Attributable to Common Stockholders and Limited Partners (“AFFO”) and AFFO per Diluted Share
AFFO for the quarter ended June 30, 2019 decreased $1.7 million to $177.1 million, as compared to $178.8 million for the same quarter in 2018, and AFFO per diluted share remained constant at $0.18 for the quarter ended June 30, 2019, as compared to the same quarter in 2018.


1

Management Commentary
Glenn J. Rufrano, Chief Executive Officer, stated, “VEREIT continues to focus on three objectives: lowering our debt levels, refreshing and diversifying our portfolio through reinvestment, and maintaining an experienced execution team. We have reduced net debt to normalized EBITDA from 5.9x to 5.3x year-to-date, strengthened the portfolio through the recycling of capital, and retained a seasoned real estate team with Company tenure of more than eight years.”

Common Stock Dividend Information
On August 5, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.1375 per share for the third quarter of 2019, representing an annual distribution rate of $0.55 per share. The dividend will be paid on October 15, 2019 to common stockholders of record as of September 30, 2019.

Balance Sheet and Liquidity
As of the end of the quarter, the Company had paid down its revolving line of credit, leaving $2.0 billion undrawn as of June 30, 2019. The Company also has a $900.0 million term loan as part of the credit facility. In addition, secured debt was reduced by $172.3 million in the second quarter, bringing the total reduction amount for the year to $174.7 million.
Subsequent to the quarter, the Company redeemed 4.0 million shares of its 6.70% Series F Cumulative Redeemable Preferred Stock, representing approximately 9.33%, or $100.0 million, of its approximately 42.9 million shares outstanding on July 5, 2019. The shares were redeemed at a redemption price of $25.00 per share.

Capital Market Activity
Year-to-date, the Company issued 5.0 million shares at a weighted average price of $8.42 for gross proceeds of $42.5 million under its “at the market” equity offering program, including $14.5 million during the second quarter.

Consolidated Financial Statistics
Financial Statistics as of the quarter ended June 30, 2019 are as follows: Net Debt to Normalized EBITDA of 5.3x, Fixed Charge Coverage Ratio of 3.0x, Unencumbered Asset Ratio of 76.0%, Net Debt to Gross Real Estate Investments of 36.9%, Weighted Average Debt Term of 4.4 years and 99.8% Fixed Rate Debt.

Litigation Settlements
Between March 31 and April 5, 2019, the Company entered into a series of agreements to settle claims with additional shareholders who decided not to participate as class members in the SDNY Consolidated Class Action for approximately $12.2 million, which was accrued in the first quarter of 2019 and paid in the second quarter of 2019 and is reflected in the net debt to normalized EBITDA for the quarter. In total, the Company has now settled claims of shareholders who held shares of common stock and swaps referencing common stock representing approximately 35.3% of VEREIT’s outstanding shares of common stock held at the end of the period covered by the various pending shareholder actions for approximately $245.4 million. The Company retains the right to pursue any and all claims against the other defendants in the litigations and/or third parties, including claims for contribution for amounts paid in the settlements.

SEC Settlement With Former Manager and Principals
In connection with a settlement entered into between the SEC and the Company's former manager and certain of its principals, approximately 2.9 million Limited Partner OP units of VEREIT’s Operating Partnership, which were owned by principals of the former manager, were forfeited and canceled on July 26, 2019, along with $6.4 million in associated dividends that have not been paid on those units since October 2015. In accordance with U.S. GAAP, the Company recorded the surrender of the OP units and the associated dividends in the Company’s financials for the period ended June 30, 2019.

Real Estate Portfolio
As of June 30, 2019, the Company’s portfolio consisted of 3,950 properties with total portfolio occupancy of 99.0%, investment grade tenancy of 39.6% and a weighted-average remaining lease term of 8.6 years. During the quarter ended June 30, 2019, same-store rents (3,873 properties) increased 1.0% as compared to the same quarter in 2018.

Property Acquisitions
During the second quarter of 2019, the Company acquired 25 properties for approximately $118.7 million at an average cash cap rate of 7.3%. In addition, the Company invested $8.3 million in one build-to-suit project. As of June 30, 2019, build-to-suit programs included one property with an investment to date of $15.8 million and remaining estimated investment of $11.9 million.


2

Industrial Partnership
On May 30, 2019, the Company formed an industrial partnership with the objective of creating an increasing, long term asset base of investment grade tenants in the U.S. industrial market. The partnership is a traditional 80/20 structure and initially includes six VEREIT assets totaling approximately $407.5 million, which contributed $326.0 million to total dispositions.

Property Dispositions
During the quarter ended June 30, 2019, the Company disposed of 53 properties for an aggregate sales price of $658.3 million, which includes the 80% share of the industrial partnership. Of this amount, $493.2 million was used in the total weighted average cash cap rate calculation of 6.5%, including $53.5 million in net sales of Red Lobster restaurants. The gain on second quarter sales was approximately $222.5 million. Excluding the industrial partnership, portfolio dispositions totaled $332.3 million for the quarter.

2019 Guidance
The Company reaffirms its 2019 AFFO per diluted share to be in a range between $0.68 and $0.70 (see reconciliation to net income per share and updated assumptions at the end of this release).

Subsequent Events

Property Acquisitions
From July 1, 2019 through July 31, 2019, the Company acquired three properties for approximately $21.8 million. Acquisitions year-to-date through July 31, 2019, totaled $221.2 million.

Property Dispositions
From July 1, 2019 through July 31, 2019, the Company disposed of 12 properties for an aggregate sales price of $27.5 million. Dispositions year-to-date through July 31, 2019, totaled $748.0 million, including the industrial partnership. Excluding the partnership, portfolio dispositions year-to-date totaled $430.3 million. In addition, the Company sold certain legacy mortgage related investments for an aggregate sales price of $8.3 million.

Partial Redemption of Preferred Stock
On July 5, 2019, the Company redeemed 4.0 million shares of its 6.7% Series F Cumulative Redeemable Preferred Stock, representing approximately 9.33%, or $100.0 million, of its approximately 42.9 million shares outstanding. The shares were redeemed at a redemption price of $25.00 per share.

Capital Market Activity
Subsequent to June 30, 2019, the Company entered into forward starting interest rate swaps with a total notional amount of $400.0 million and an average effective treasury rate of approximately 2.1%. The swaps are structured to hedge the 10-year Treasury interest rate risk component associated with the potential issuance of 10-year public debt between May 1, 2020 and December 31, 2021.





3

Audio Webcast and Call Details

The live audio webcast, beginning at 1:30 p.m. ET on Wednesday, August 7, 2019, is available by accessing this link:
http://ir.vereit.com/. Dial-in information is as follows: (844) 746-0748 (domestic) or (412) 317-5274 (international). 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 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 $15.0 billion including approximately 4,000 properties and 90.6 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.


Media Contact
Parke Chapman
Rubenstein Associates
212.843.8489 | pchapman@rubenstein.com

    
Investor Contact
Bonni Rosen, SVP, Investor Relations                
VEREIT            
877.405.2653 | BRosen@VEREIT.com

4

Definitions
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.
We determined that adjusted funds from operations (“AFFO”), a non-GAAP measure, and our real estate portfolio and economic metrics should exclude the impact of properties owned by the Company for the month beginning with the date that (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 ("Excluded Properties") and ending with the disposition date, to better reflect our ongoing operations. At and during the three months ended June 30, 2019, the Excluded Property was one office property comprising 145,186 square feet, of which 6,926 was vacant, with Principal Outstanding of $19.5 million. At March 31, 2019, December 31, 2018, and June 30, 2018, there were no Excluded Properties. During the three months ended June 30, 2018, the Excluded Property was one vacant industrial property, comprising 307,725 square feet with Principal Outstanding of $16.2 million.
Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)
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 funds from operations (“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 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 expenses, litigation and non-routine costs, net, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rent, net of bad debt expense related to 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.


5

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”) and Normalized EBITDA
Due to certain unique operating characteristics of real estate companies, as discussed below, Nareit has promulgated a supplemental performance measure known as Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"). 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, loss on disposition of discontinued operations, net revenue or expense earned or incurred that is related to the services agreement, gains or losses on sale of investment securities or mortgage notes receivable, legal settlements and insurance recoveries not in the ordinary course of business, payments on fully reserved loan receivables and restructuring expenses. We also exclude certain non-cash items such as impairments of goodwill and intangible assets, straight-line rental revenue, 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, EBITDA, EBITDAre, and Normalized EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses EBITDA, EBITDAre, and 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.
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 and omits the outstanding principal balance of mortgage notes secured by Excluded Properties. 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 liquidity, 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 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.
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.
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.

6

Net Debt to Normalized EBITDA Annualized Ratio
Net Debt to Normalized EBITDA Annualized 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.
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.
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.
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.
Forward-Looking Statements
Information set forth herein contains “forward-looking statements” (within the meaning of the federal securities laws, 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 and projections regarding future events and plans, VEREIT's future financial condition, results of operations and business including the performance of its portfolio and industrial partnership, its access to the capital markets, including lowering debt levels, its focus on and execution of its capital allocation strategy, and maintaining an experienced execution team. 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,” "may," "will," "should," "could," "continues," variations of such words and similar expressions identify forward- looking statements. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors, 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 or implied by 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 meet its 2019 guidance; VEREIT’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 VEREIT's properties; risks accompanying the management of its industrial partnership; the impact of impairment charges in respect of certain of VEREIT's properties, goodwill and intangible assets and other assets; 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 VEREIT’s management with respect to such programs; competition in the acquisition and disposition of properties and in the leasing of its properties; the inability to acquire, dispose of, or lease properties on advantageous terms; risks associated with bankruptcies or insolvencies of tenants, from tenant defaults generally or from the unpredictability of the business plans and financial condition of VEREIT's tenants; risks associated with pending government investigations and litigations related to VEREIT's previously disclosed audit committee investigation, including the expense of such investigations and litigation and any additional potential payments upon resolution; risks associated with VEREIT’s substantial indebtedness, including that such indebtedness may affect VEREIT’s ability to pay dividends and the terms and restrictions within the agreements governing VEREIT’s indebtedness may restrict its borrowing and operating flexibility; 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

7

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.

8



VEREIT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data) (Unaudited)

 
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,763,348

 
$
2,843,212

Buildings, fixtures and improvements
 
10,352,928

 
10,749,228

Intangible lease assets
 
1,927,699

 
2,012,399

Total real estate investments, at cost
 
15,043,975

 
15,604,839

Less: accumulated depreciation and amortization
 
3,488,838

 
3,436,772

Total real estate investments, net
 
11,555,137

 
12,168,067

Operating lease right-of-use assets
 
221,798

 
—

Investment in unconsolidated entities
 
68,633

 
35,289

Cash and cash equivalents
 
211,510

 
30,758

Restricted cash
 
20,692

 
22,905

Rent and tenant receivables and other assets, net
 
343,788

 
366,092

Goodwill
 
1,337,773

 
1,337,773

Real estate assets held for sale, net
 
22,553

 
2,609

Total assets
 
$
13,781,884

 
$
13,963,493

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
1,745,331

 
$
1,922,657

Corporate bonds, net
 
2,621,130

 
3,368,609

Convertible debt, net
 
396,766

 
394,883

Credit facility, net
 
895,033

 
401,773

Below-market lease liabilities, net
 
152,654

 
173,479

Accounts payable and accrued expenses
 
127,799

 
145,611

Deferred rent and other liabilities
 
77,713

 
69,714

Distributions payable
 
187,359

 
186,623

Operating lease liabilities
 
225,972

 
—

Total liabilities
 
6,429,757

 
6,663,349

Series F preferred stock
 
429

 
428

Common stock
 
9,734

 
9,675

Additional paid-in capital
 
12,655,018

 
12,615,472

Accumulated other comprehensive loss
 
(28,026
)
 
(1,280
)
Accumulated deficit
 
(5,416,759
)
 
(5,467,236
)
Total stockholders’ equity
 
7,220,396

 
7,157,059

Non-controlling interests
 
131,731

 
143,085

Total equity
 
7,352,127

 
7,300,144

Total liabilities and equity
 
$
13,781,884

 
$
13,963,493


9


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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
Rental revenue
 
$
312,043

 
$
315,664

Operating expenses:
 
 
 
 
Acquisition-related
 
985

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
107,087

Property operating
 
32,503

 
31,436

General and administrative
 
16,416

 
16,287

Depreciation and amortization
 
118,022

 
164,235

Impairments
 
8,308

 
11,664

Restructuring
 
290

 
—

Total operating expenses
 
172,755

 
331,618

Other income (expense):
 
 
 
 
Interest expense
 
(69,803
)
 
(70,320
)
(Loss) gain on extinguishment and forgiveness of debt, net
 
(1,472
)
 
5,249

Other income, net
 
3,175

 
1,320

Equity in income of unconsolidated entities
 
505

 
327

Gain on disposition of real estate and real estate assets held for sale, net
 
221,755

 
5,821

Total other income (expenses), net
 
154,160

 
(57,603
)
Income (loss) before taxes
 
293,448

 
(73,557
)
Provision for income taxes from continuing operations
 
(1,164
)
 
(1,134
)
Income (loss) from continuing operations
 
292,284

 
(74,691
)
Income from discontinued operations, net of tax
 
—

 
224

Net income (loss)
 
292,284

 
(74,467
)
Net (income) loss attributable to non-controlling interests
 
(6,626
)
 
1,797

Net income (loss) attributable to the General Partner
 
$
285,658

 
$
(72,670
)
 
 
 
 
 
Basic and diluted net income (loss) per share from continuing operations attributable to common stockholders
 
$
0.27

 
$
(0.09
)
Basic and diluted net income per share from discontinued operations attributable to common stockholders
 
—

 
0.00

Basic and diluted net income (loss) per share attributable to common stockholders
 
$
0.27

 
$
(0.09
)
Distributions declared per common share
 
$
0.1375

 
$
0.1375




10


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

 
 
Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
June 30,
2018
Net income (loss)
 
$
292,284

 
$
70,971

 
$
27,842

 
$
(74,467
)
 Adjustments:
 
 
 
 
 
 
 
 
Interest expense
 
69,803

 
71,254

 
70,832

 
70,320

Depreciation and amortization of real estate assets
 
118,022

 
136,555

 
153,050

 
164,235

Provision for income taxes
 
1,164

 
1,211

 
1,614

 
1,134

Proportionate share of adjustments for unconsolidated entities
 
738

 
288

 
254

 
289

 EBITDA
 
$
482,011

 
$
280,279

 
$
253,592

 
$
161,511

Gain on disposition of real estate assets, net
 
(221,762
)
 
(10,831
)
 
(25,951
)
 
(5,821
)
Impairments of real estate
 
8,308

 
11,988

 
18,565

 
11,664

EBITDAre
 
$
268,557

 
$
281,436

 
$
246,206

 
$
167,354

Loss on disposition of discontinued operations
 
—

 
—

 
30

 
(224
)
Payments received on fully reserved loans
 
—

 
—

 
(4,792
)
 
—

Acquisition-related expenses
 
985

 
985

 
1,136

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
(21,492
)
 
23,541

 
107,087

(Gain) loss on investments
 
(5
)
 
470

 
(1,790
)
 
—

Loss (gain) on derivative instruments, net
 
24

 
34

 
92

 
(105
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
611

 
731

 
945

 
688

Loss (gain) on extinguishment and forgiveness of debt, net
 
1,472

 
—

 
(21
)
 
(5,249
)
Net direct financing lease adjustments
 
410

 
409

 
498

 
503

Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,043
)
 
(7,412
)
 
(8,341
)
 
(11,402
)
Restructuring expenses
 
290

 
9,076

 
—

 
—

Other adjustments, net
 
214

 
(113
)
 
(78
)
 
(142
)
 Proportionate share of adjustments for unconsolidated entities
 
(198
)
 
(188
)
 
60

 
(27
)
Adjustment for Excluded Properties
 
(203
)
 
—

 
—

 
(5
)
Normalized EBITDA
 
$
260,345

 
$
263,936

 
$
257,486

 
$
259,387



















11


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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
Net income (loss)
 
$
292,284

 
$
(74,467
)
Dividends on non-convertible preferred stock
 
(17,973
)
 
(17,973
)
Gain on disposition of real estate assets, net
 
(221,762
)
 
(5,821
)
Depreciation and amortization of real estate assets
 
117,616

 
163,551

Impairment of real estate
 
8,308

 
11,664

Proportionate share of adjustments for unconsolidated entities
 
565

 
289

FFO attributable to common stockholders and limited partners
 
$
179,038

 
$
77,243

FFO attributable to common stockholders and limited partners from continuing operations
 
179,038

 
77,019

FFO attributable to common stockholders and limited partners from discontinued operations
 
—

 
224

 
 
 
 
 
Weighted-average shares outstanding - basic
 
973,723,139

 
968,192,162

Limited Partner OP Units and effect of dilutive securities
 
26,054,596

 
23,907,976

Weighted-average shares outstanding - diluted
 
999,777,735

 
992,100,138

 
 
 
 
 
FFO attributable to common stockholders and limited partners per diluted share
 
$
0.179

 
$
0.078

FFO attributable to common stockholders and limited partners from continuing operations per diluted share
 
$
0.179

 
$
0.078

FFO attributable to common stockholders and limited partners from discontinued operations per diluted share
 
$
—

 
$
0.000



















12


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

 
 
Three Months Ended June 30,
 
 
2019
 
2018
FFO attributable to common stockholders and limited partners
 
$
179,038

 
$
77,243

 
 
 
 
 
Acquisition-related expenses
 
985

 
909

Litigation and non-routine costs, net
 
(3,769
)
 
107,087

Loss on disposition of discontinued operations
 
—

 
(224
)
Gain on investments
 
(5
)
 
—

Loss (gain) on derivative instruments, net
 
24

 
(105
)
Amortization of premiums and discounts on debt and investments, net
 
(1,392
)
 
(603
)
Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities
 
611

 
688

Net direct financing lease adjustments
 
410

 
503

Amortization and write-off of deferred financing costs
 
3,346

 
5,650

Loss (gain) on extinguishment and forgiveness of debt, net
 
1,472

 
(5,249
)
Straight-line rent, net of bad debt expense related to straight-line rent
 
(8,043
)
 
(11,402
)
Equity-based compensation
 
3,706

 
3,716

Restructuring expenses
 
290

 
—

Other adjustments, net
 
617

 
566

Proportionate share of adjustments for unconsolidated entities
 
(196
)
 
(27
)
Adjustment for Excluded Properties
 
5

 
42

AFFO attributable to common stockholders and limited partners
 
$
177,099

 
$
178,794

 
 
 
 
 
Weighted-average shares outstanding - basic
 
973,723,139

 
968,192,162

Limited Partner OP Units and effect of dilutive securities
 
26,054,596

 
23,907,976

Weighted-average shares outstanding - diluted
 
999,777,735

 
992,100,138

 
 
 
 
 
AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.177

 
$
0.180














13


VEREIT, INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
 
 
Three Months Ended
 
 
June 30,
2019
Interest expense - as reported
 
$
(69,803
)
Less Adjustments:
 
 
Amortization of deferred financing costs and other non-cash charges
 
(3,348
)
Amortization of net premiums
 
1,397

Unconsolidated joint ventures’ pro rata share
 
(171
)
Interest Expense, Excluding Non-Cash Amortization - Excluded Properties
 
(208
)
Interest Expense, Excluding Non-Cash Amortization
 
$
(67,815
)

 
 
Three Months Ended
 
 
June 30,
2019
Interest Expense, Excluding Non-Cash Amortization
 
$
67,815

Secured debt principal amortization
 
2,256

Dividends attributable to preferred shares 
 
17,973

Total fixed charges
 
88,044

Normalized EBITDA
 
260,345

Fixed Charge Coverage Ratio
 
2.96
x

 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
Mortgage notes payable, net
 
$
1,745,331

 
$
1,918,826

 
$
1,922,657

Corporate bonds, net
 
2,621,130

 
2,619,956

 
3,368,609

Convertible debt, net
 
396,766

 
395,823

 
394,883

Credit facility, net
 
895,033

 
1,089,725

 
401,773

Total debt - as reported
 
5,658,260

 
6,024,330

 
6,087,922

Adjustments:
 
 
 
 
 

Deferred financing costs, net
 
42,085

 
44,602

 
42,763

Net premiums
 
(5,435
)
 
(6,726
)
 
(8,053
)
Principal Outstanding
 
5,694,910

 
6,062,206

 
6,122,632

Unconsolidated joint ventures’ pro rata share
 
53,850

 
—

 
—

Principal Outstanding - Excluded Properties
 
(19,525
)
 
—

 
—

Adjusted Principal Outstanding
 
$
5,675,385

 
$
6,062,206

 
$
6,122,632

 
 
 
 
 
 
 
Adjusted Principal Outstanding
 
$
5,729,235

 
$
6,062,206

 
$
6,122,632

Cash and cash equivalents
 
(211,510
)
 
(12,788
)
 
(30,758
)
Pro rata share of unconsolidated joint ventures’ cash and cash equivalents
 
(2,920
)
 
—

 
—

Net Debt
 
$
5,514,805

 
$
6,049,418

 
$
6,091,874


14


 
 
June 30,
2019
Total real estate investments, at cost - as reported
 
$
15,043,975

Adjustments:
 
 
Investment in unconsolidated entities
 
—

Investment in Cole REITs
 
7,552

Gross assets held for sale
 
28,312

Investment in direct financing leases, net
 
10,323

Mortgage notes receivable, net
 
1,687

Gross below market leases
 
(246,135
)
Unconsolidated joint ventures' pro rata share

 
121,295

Gross Real Estate Investments - Excluded Properties
 
(16,700
)
Gross Real Estate Investments
 
$
14,950,309


 
 
June 30,
2019
Net Debt
 
$
5,514,805

Normalized EBITDA annualized
 
1,041,380

Net Debt to Normalized EBITDA Annualized Ratio
 
5.30
x
 
 
 
Net Debt
 
$
5,514,805

Gross Real Estate Investments
 
14,950,309

Net Debt Leverage Ratio
 
36.9
%
 
 
 
Unencumbered Gross Real Estate Investments
 
$
11,361,522

Gross Real Estate Investments
 
14,950,309

Unencumbered asset ratio
 
76.0
%


15


VEREIT, INC.
ADJUSTED FUNDS FROM OPERATIONS PER DILUTED SHARE - 2019 GUIDANCE
(Unaudited)

The Company expects its 2019 AFFO per diluted share to be in a range between $0.68 and $0.70. This guidance assumes acquisitions totaling $400 million to $600 million at an average cash cap rate of 6.5% to 7.5% and portfolio dispositions totaling $500 million to $650 million within the same cap rate range. The assumption regarding portfolio dispositions is in addition to the industrial partnership, which contributed $326 million to dispositions. Guidance also assumes real estate operations with average occupancy above 98.0%, same-store rental growth in a range of 0.3% to 1.0% and Net Debt to Normalized EBITDA between 5.5x and 5.7x. 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) (2)
 
$
0.38

 
$
0.40

Gain on disposition of real estate assets, net (2)
 
(0.23
)
 
(0.23
)
Depreciation and amortization of real estate assets (2)
 
0.48

 
0.48

Impairment of real estate (2)
 
0.02

 
0.02

FFO attributable to common stockholders and limited partners per diluted share
 
0.65

 
0.67

Adjustments (3)
 
0.03

 
0.03

AFFO attributable to common stockholders and limited partners per diluted share
 
$
0.68

 
$
0.70

_____________________________________
(1) Includes impact of dividends to be paid to preferred shareholders.
(2) Includes actual amounts for the six months ended June 30, 2019.
(3) Includes (i) non-routine items such as acquisition-related expenses, litigation and other non-routine costs, net, restructuring expenses, and (ii) certain non-cash items such as straight-line rent, net direct financing lease adjustments, gains or losses on derivatives, 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.

16