VEREIT® Announces Fourth Quarter and Full Year 2015 Operating Results

PHOENIX, Feb. 24, 2016 /PRNewswire/ -- VEREIT, Inc. (NYSE: VER) ("VEREIT" or the "Company") announced today its operating results for the three months and full year ending December 31, 2015, as well as progress on its business plan.

2015 Highlights

• Completed reconstitution of board and enhanced corporate governance practices
• Formalized new senior management team
• Changed company name and moved listing to the NYSE
• Remediated all material weaknesses identified at December 31, 2014
• Achieved $0.84 AFFO per diluted share, which is just above the Company's 2015 earnings guidance
• Increased occupancy to 98.6% with same store sales growth at 1.2%
• Completed $1.4 billion of dispositions, reaching the high end of the Company's disposition guidance
• Reduced debt by $2.4 billion including secured and unsecured debt
• Increased liquidity with $1.8 billion of capacity available on its revolving line of credit
• Reduced Net Debt to Normalized EBITDA from 7.5x to 7.0x which is the top end of the investment-grade metrics target
• Increased Cole Capital new equity capital raise 75% quarter-over-quarter for the period ending December 31, 2015
• Established quarterly dividend of $0.1375 per share or $0.55 on an annual basis

Fourth Quarter and Full Year 2015 Consolidated Financial Results

RevenueConsolidated revenue for the quarter ended December 31, 2015 decreased $35.4 million to $383.4 million as compared to revenue of $418.8 million for the same quarter in 2014.  Consolidated revenue for 2015 decreased $23.2 million to $1.56 billion as compared to revenue of $1.58 billion for 2014.

Net Income (Loss)Consolidated net loss for the quarter ended December 31, 2015 decreased $168.2 million to $(192.2) million as compared to a net loss of $(360.4) million for the same quarter in 2014.  Consolidated net loss for 2015 decreased $687.4 million to $(323.5) million as compared to a net loss of $(1.01) billion in 2014.

Normalized EBITDAConsolidated normalized EBITDA for the quarter ended December 31, 2015 decreased $50.1 million to $286.7 million as compared to normalized EBITDA of $336.8 million for the same quarter in 2014.  Normalized EBITDA for 2015 increased $38.9 million to $1.21 billion as compared to $1.17 billion in 2014.

FFO and FFO per Diluted Common ShareFunds From Operations attributable to common stockholders and limited partners ("FFO") for the quarter ended December 31, 2015 increased $63.4 million to $4.6 million, as compared to $(58.8) million for the same quarter in 2014 and FFO per diluted share increased  $0.068 to $0.005, as compared to $(0.063) for the same quarter in 2014.  FFO for 2015 increased $436.1 million to $585.2 million, as compared to $149.1 million for 2014 and FFO per diluted share for 2015 increased $0.45 to $0.63, as compared to $0.18 for 2014.

AFFO and AFFO per Diluted Common ShareAdjusted Funds From Operations attributable to common stockholders and limited partners ("AFFO") for the quarter ended December 31, 2015 decreased $22.3 million to $183.2 million, as compared to $205.5 million for the same quarter in 2014, and AFFO per diluted share decreased $0.02 to $0.20 for the quarter ended December 31, 2015, as compared to $0.22 for the same quarter in 2014.  AFFO for 2015 increased $31.4 million to $782.1 million, as compared to $750.7 million for 2014, and AFFO per diluted share for 2015 decreased $0.06 to $0.84, as compared to $0.90 for 2014.

2016 Guidance and Common Stock Dividend InformationThe Company expects its 2016 AFFO per diluted share to be in a range between $0.75 and $0.80, which includes an approximate $0.02 to $0.03 contribution from Cole Capital.  This guidance assumes $800 million to $1.0 billion of dispositions at a cash cap rate of 6.5% to 7.5% and real estate operations with average occupancy in excess of 98.0% and same store rental growth approximating 1.0%.

For Cole Capital, guidance assumes capital raise for 2016 is $500 million to $800 million, excluding DRIP, and Cole acquisitions of $1.0 billion to $1.6 billion.

On February 23, 2016, the Company's Board of Directors declared a quarterly dividend of $0.1375 per share for the first quarter of 2016, representing an annual distribution rate of $0.55 per share. The dividend will be paid on April 15, 2016 to common stockholders of record as of March 31, 2016.

Balance Sheet and LiquidityDuring the quarter, the Company paid down $650.0 million on its revolving line of credit, reducing the total amount outstanding under the revolving line of credit to $460.0 million, leaving $1.8 billion of capacity available.  The Company paid down $1.7 billion on its revolving line of credit for the full-year period.  The Company's credit facility is made up of its revolving line of credit and a $1.0 billion term loan.   In addition, the Company reduced its secured debt by $663.2 million during 2015, bringing the total debt reduction to $2.4 billion.   

Consolidated Financial StatisticsConsolidated Financial Statistics as of the quarter ended December 31, 2015 are as follows: Net Debt to Normalized EBITDA of 7.0x, Fixed Charge Coverage Ratio of 2.8x, Unencumbered Gross Real Estate Assets to Total Gross Assets ratio of 64.4%, Net Debt to Gross Real Estate Assets of 48.0% and Weighted Average Debt Term of 3.8 years.

Management CommentaryGlenn J. Rufrano, Chief Executive Officer, stated, "VEREIT's fourth quarter and 2015 results reinforced the overall strength of our operational and capital allocation capabilities. We were able to achieve AFFO per diluted share of $0.84, while meeting our dispositions target of $1.4 billion, reducing $2.4 billion of debt and creating $1.8 billion of capacity on our revolving line of credit."

"We also made significant progress towards establishing a foundation for growth, the core of our business plan, by enhancing portfolio diversification, increasing Cole Capital's market share, moving towards investment grade metrics and instituting a $0.55 per share annualized dividend. We are positioned to execute in 2016 which will increase balance sheet liquidity and flexibility, while providing optionality."

Fourth Quarter and Full Year 2015 Real Estate Investment ("REI") Financial Results

RevenueREI segment revenue for the quarter ended December 31, 2015 decreased $16.4 million to $350.1 million as compared to revenue of $366.5 million for the same quarter in 2014, mainly due to dispositions in 2015.  Revenue for 2015 increased $65.4 million to $1.44 billion as compared to $1.38 billion in 2014, mainly due to the full year effect of 2014 acquisitions offset by the partial year impact of 2015 dispositions.

Net Income (Loss)REI segment net loss for the quarter ended December 31, 2015 decreased $76.8 million to $(6.0) million as compared to a net loss of $(82.8) million for the same quarter in 2014, mainly due to greater impairments of real estate recognized for the quarter ended December 31, 2014.  Net loss for 2015 decreased $578.1 million to $(136.1) million as compared to a net loss of $(714.2) million in 2014, mainly due to the loss associated with the anchored shopping center portfolio sale, higher merger and other non-routine transaction costs and higher interest expense for the period ended December 31, 2014.

Normalized EBITDAREI segment normalized EBITDA for the quarter ended December 31, 2015 decreased $28.7 million to $280.8 million as compared to normalized EBITDA of $309.5 million for the same quarter in 2014, mainly due to dispositions in 2015.  Normalized EBITDA for 2015 increased $72.8 million to $1.19 billion as compared to $1.11 billion in 2014, mainly due to the full year effect of 2014 acquisitions offset by the partial year impact of 2015 dispositions.

FFO and FFO per Diluted Common ShareREI segment FFO for the quarter ended December 31, 2015 decreased $27.9 million to $190.9 million, as compared to $218.8 million for the same quarter in 2014, and FFO per diluted share decreased $0.02 to $0.21 for the quarter ended December 31, 2015, as compared to $0.23 for the same quarter in 2014.  FFO for 2015 increased $326.8 million to $772.6 million, as compared to $445.8 million for 2014, and FFO per diluted share for 2015 increased $0.30 to $0.83, as compared to $0.53 for 2014.

AFFO and AFFO per Diluted Common ShareREI segment AFFO for the quarter ended December 31, 2015 decreased $6.3 million to $187.3 million, as compared to $193.6 million for the same quarter in 2014, and AFFO per diluted share decreased $0.01 to $0.20 for the quarter ended December 31, 2015, as compared to $0.21 for the same quarter in 2014.  AFFO for 2015 increased $83.7 million to $769.2 million, as compared to $685.5 million for 2014, and AFFO per diluted share for 2015 increased $0.01 to $0.83, as compared to $0.82 for 2014.

Real Estate Portfolio UpdateAs of December 31, 2015, the Company's portfolio consisted of 4,435 properties with total portfolio occupancy of 98.6%, investment grade tenancy of 42.5% and a weighted-average remaining lease term of 10.6 years.

Same-Store Rent IncreasesDuring the quarter ended December 31, 2015, same-store rents (4,358 properties) increased 1.2% to $296.3 million, as compared to $292.9 million for the same quarter in 2014.

Property Acquisitions and DevelopmentDuring the fourth quarter of 2015, the Company purchased two properties which were 2014 forward commitments in the amount of $26.1 million at an average cash cap rate of 7.2%. The Company capitalized $4.1 million of development costs and placed $7.1 million of assets into service at an average cash cap rate of 7.3%.  During 2015, the Company acquired 16 properties for $36.3 million at an average cash cap rate of 7.1%, capitalized $50.2 million of development costs and placed $97.5 million of assets into service at an average cash cap rate of 7.7%.  As of December 31, 2015, build-to-suits and redevelopment programs included 10 properties with an investment to date of $17.2 million and remaining estimated investment of $3.7 million.

Property DispositionsDuring the quarter ended December 31, 2015, the Company sold 139 properties for approximately $693.8 million at an average cash cap rate of 7.1%.  The gain on fourth quarter sales was approximately $22.2 million, excluding goodwill allocation.  During 2015, the Company disposed of 228 properties and its interest in a consolidated joint venture for approximately $1.4 billion at an average cash cap rate of 6.8%. The gain on 2015 sales was approximately $33.2 million, excluding goodwill allocation.

Fourth Quarter and Full Year 2015 Cole Capital® Financial Results

RevenueCole Capital segment revenue for the quarter ended December 31, 2015 decreased $19.0 million to $33.3 million, as compared to revenue of $52.3 million for the same quarter in 2014, as a consequence of reduced capital raise and the resulting impact on transaction related revenues.  Revenue for 2015 decreased $88.7 million to $114.9 million, as compared to $203.6 million in 2014, as a consequence of reduced capital raise and the resulting impact on transaction related revenues.

Net Income (Loss)Cole Capital segment net loss for the quarter ended December 31, 2015 decreased $91.4 million to $(186.3) million, as compared to a net loss of $(277.7) million for the same quarter in 2014, mainly due to the higher impairment taken in the period ending December 31, 2014.  Net Loss for 2015 decreased $109.3 million to $(187.4) million, as compared to $(296.7) million in 2014, mainly due to the higher impairment taken in 2014.

Normalized EBITDACole Capital segment normalized EBITDA for the quarter ended December 31, 2015 decreased $21.4 million to $5.9 million, as compared to normalized EBITDA of $27.3 million for the same quarter in 2014, mainly due to the decrease in net revenues. Normalized EBITDA for 2015 decreased $33.9 million to $27.7 million, as compared to $61.6 million in 2014, mainly due to the decrease in revenues, net of reallowed fees and commissions. 

FFO and FFO per Diluted Common ShareCole Capital segment FFO for the quarter ended December 31, 2015 increased $91.4 million to $(186.3) million, as compared to $(277.7) million for the same quarter in 2014, and FFO per diluted share increased $0.10 to $(0.20) for the quarter ended December 31, 2015, as compared to $(0.30) for the same quarter in 2014.  FFO for 2015 increased $109.3 million to $(187.4) million, as compared to $(296.7) million for 2014, and FFO per diluted share for 2015 increased $0.15 to $(0.20), as compared to $(0.35) for 2014.

AFFO and AFFO per Diluted Common ShareCole Capital segment AFFO for the quarter ended December 31, 2015 decreased $16.0 million to $(4.2) million, as compared to $11.8 million for the same quarter in 2014, and AFFO per diluted share decreased $0.01 to $0.00 per diluted share for the quarter ended December 31, 2015, as compared to $0.01 for the same quarter in 2014. AFFO for 2015 decreased $52.3 million to $12.9 million, as compared to $65.2 million for 2014, and AFFO per diluted share for 2015 decreased $0.07 to $0.01, as compared to $0.08 for 2014.

Investment Management Capital RaiseDuring the quarter, Cole Capital raised $150.2 million of capital on behalf of its sponsored non-listed REITs (the "Managed REITs"), including $33.8 million through the Managed REITs' distribution reinvestment plans ("DRIP"), compared to $159.9 million, including $31.7 million of DRIP proceeds, in the fourth quarter of 2014.  During 2015, Cole Capital raised $403.7 million, including $132.8 million of DRIP proceeds, compared to $1.0 billion, including $135.3 million of DRIP proceeds, for the time period from the Cole Real Estate Investments, Inc. merger ("Cole Merger") on February 7, 2014 through December 31, 2014.

Investment Management AcquisitionsCole Capital invested $236.4 million in 26 properties on behalf of the Cole Capital Managed REITs in the fourth quarter of 2015, compared to $942.8 million in 130 properties in the fourth quarter of 2014.  Cole Capital invested $992.2 million in 158 properties on behalf of the Managed REITs in 2015, compared to $3.0 billion in 557 properties for the time period from the Cole Merger on February 7, 2014 through December 31, 2014.

Subsequent Events - Consolidated

Property DispositionsFrom January 1, 2016 through February 23, 2016, the Company disposed of 36 properties for an aggregate gross sales price of $148.3 million at an average cash cap rate of 6.6%.

Cole Capital DistributionIn January 2016, Cole Capital raised $49.9 million of capital on behalf of the Managed REITs, including $11.6 million through DRIP.

Audio Webcast Details

The live audio webcast, beginning at 10:00 a.m. ET on Wednesday, February 24, 2016, is available by accessing this link: http://ir.vereit.com/.

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 4,435 properties totaling approximately 99.6 million square feet, located in 49 states, as well as the District of Columbia, Puerto Rico and Canada. Additionally, VEREIT manages $6.7 billion of gross real estate investments on behalf of the Cole Capital® non-traded 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 measure known as funds from operations ("FFO"), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO, a non-GAAP supplemental financial performance measure, is recommended by the REIT industry as a supplemental performance measure. 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. Our FFO calculation complies with NAREIT's policy 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, merger and other non-routine transactions costs, gains or losses on sale of investments, insurance and litigation settlements and recoveries and extinguishment of debt cost. We also exclude certain non-cash items such as impairments of intangibles, straight-line rental revenue, unrealized gains or losses on derivatives, reserves for loan loss, gain (loss) on the extinguishment of forgiveness of debt, non-current portion of the tax benefit (expense), equity-based compensation and amortization of intangibles, 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 loss and cash flows from operating activities, 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 loss or to cash flows from operating activities, and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs.

AFFO may provide investors with a view of our future performance and future dividend policy. However, because AFFO excludes items that are an important component in an analysis of the historical performance of a property, AFFO should not be construed as a historic performance measure. Neither the SEC, NAREIT, nor any other regulatory body has evaluated the acceptability of the exclusions contemplated 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. 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," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions identify forward-looking statements, and any statements regarding VEREIT's future financial condition, results of operations and business are also 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 inability to execute on and realize success from its business plan,  including increasing balance sheet liquidity and flexibility; the inability to pay the first quarter dividend with cash from operations; VEREIT's inability to meet its 2016 guidance including but not limited to, for AFFO, dispositions, average occupancy, same store rental growth and Cole Capital acquisitions and capital raise; the inability of VEREIT to achieve  investment grade metrics; VEREIT's inability to maintain a stable dividend; 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; the inability 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 to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE VEREIT, Inc.