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SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State of incorporation) | 13-3912578 (I.R.S. Employer Identification No.) | |
50 Rockefeller Plaza | ||
New York, New York (Address of principal executive offices) | 10020 (Zip Code) |
(212) 492-1100
(Registrant’s telephone numbers, including area code)
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EX-10.1: CREDIT AGREEMENT | ||||||||
EX-31.1: CERTIFICATION | ||||||||
EX-31.2: CERTIFICATION | ||||||||
EX-32: CERTIFICATIONS |
* | The summarized consolidated financial statements contained herein are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such financial statements have been included. |
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(in thousands, except share amounts)
June 30, 2007 | December 31, 2006 | |||||||
(NOTE) | ||||||||
Assets | ||||||||
Real estate, net | $ | 531,485 | $ | 540,504 | ||||
Net investment in direct financing leases | 107,886 | 108,581 | ||||||
Equity investments in real estate | 183,226 | 166,147 | ||||||
Operating real estate, net | 72,049 | 33,606 | ||||||
Assets held for sale | — | 1,269 | ||||||
Cash and cash equivalents | 19,050 | 22,108 | ||||||
Due from affiliates | 76,877 | 88,884 | ||||||
Goodwill | 63,607 | 63,607 | ||||||
Intangible assets, net | 40,116 | 43,742 | ||||||
Other assets, net | 29,421 | 24,562 | ||||||
Total assets | $ | 1,123,717 | $ | 1,093,010 | ||||
Liabilities and Members’ Equity | ||||||||
Liabilities: | ||||||||
Limited recourse mortgage notes payable | $ | 258,663 | $ | 261,152 | ||||
Secured credit facility | 35,581 | 15,501 | ||||||
Unsecured credit facility | 28,000 | 2,000 | ||||||
Deferred revenue | — | 40,490 | ||||||
Accounts payable and accrued expenses | 32,549 | 34,047 | ||||||
Income taxes, net | 64,744 | 63,462 | ||||||
Other liabilities | 22,359 | 19,127 | ||||||
Distributions payable | 18,227 | 17,481 | ||||||
Total liabilities | 460,123 | 453,260 | ||||||
Minority interest in consolidated entities | 7,609 | 7,765 | ||||||
Commitments and contingencies (Note 9) | ||||||||
Members’ equity: | ||||||||
Listed shares, no par value, 100,000,000 shares authorized; 39,129,982 and 38,262,157 shares issued and outstanding, respectively | 751,508 | 745,969 | ||||||
Dividends in excess of accumulated earnings | (96,072 | ) | (114,008 | ) | ||||
Accumulated other comprehensive income | 549 | 24 | ||||||
Total members’ equity | 655,985 | 631,985 | ||||||
Total liabilities and members’ equity | $ | 1,123,717 | $ | 1,093,010 | ||||
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(in thousands, except share and per share amounts)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues | ||||||||||||||||
Asset management revenue | $ | 30,204 | $ | 14,752 | $ | 45,238 | $ | 29,114 | ||||||||
Structuring revenue | 53,448 | 2,462 | 58,031 | 12,354 | ||||||||||||
Reimbursed costs from affiliates | 3,244 | 19,894 | 6,719 | 22,892 | ||||||||||||
Lease revenues | 19,998 | 18,285 | 39,630 | 36,412 | ||||||||||||
Other real estate income | 3,241 | 2,149 | 6,415 | 4,532 | ||||||||||||
110,135 | 57,542 | 156,033 | 105,304 | |||||||||||||
Operating Expenses | ||||||||||||||||
General and administrative | (23,256 | ) | (9,871 | ) | (35,493 | ) | (21,029 | ) | ||||||||
Reimbursable costs | (3,244 | ) | (19,894 | ) | (6,719 | ) | (22,892 | ) | ||||||||
Depreciation and amortization | (6,950 | ) | (6,007 | ) | (13,894 | ) | (11,977 | ) | ||||||||
Property expenses | (1,893 | ) | (1,345 | ) | (3,313 | ) | (3,013 | ) | ||||||||
Other real estate expenses | (1,301 | ) | (1,466 | ) | (3,825 | ) | (3,033 | ) | ||||||||
(36,644 | ) | (38,583 | ) | (63,244 | ) | (61,944 | ) | |||||||||
Other Income and Expenses | ||||||||||||||||
Other interest income | 3,643 | 811 | 4,241 | 1,538 | ||||||||||||
Income from equity investments in real estate | 1,929 | 1,244 | 4,367 | 2,794 | ||||||||||||
Minority interest in (income) loss | (3,141 | ) | 254 | (3,472 | ) | (608 | ) | |||||||||
Gain on sale of securities, foreign currency transactions and other gains, net | 169 | 5,228 | 355 | 5,478 | ||||||||||||
Interest expense | (5,669 | ) | (4,541 | ) | (10,532 | ) | (8,929 | ) | ||||||||
(3,069 | ) | 2,996 | (5,041 | ) | 273 | |||||||||||
Income from continuing operations before income taxes | 70,422 | 21,955 | 87,748 | 43,633 | ||||||||||||
Provision for income taxes | (31,144 | ) | (3,998 | ) | (37,522 | ) | (10,720 | ) | ||||||||
Income from continuing operations | 39,278 | 17,957 | 50,226 | 32,913 | ||||||||||||
Discontinued Operations | ||||||||||||||||
Income (loss) from operations of discontinued properties | 1,790 | (653 | ) | 1,642 | (1,187 | ) | ||||||||||
Gain on sale of real estate, net | 962 | — | 962 | — | ||||||||||||
Impairment charges on assets held for sale | — | — | — | (3,357 | ) | |||||||||||
Income (loss) from discontinued operations | 2,752 | (653 | ) | 2,604 | (4,544 | ) | ||||||||||
Net Income | $ | 42,030 | $ | 17,304 | $ | 52,830 | $ | 28,369 | ||||||||
Basic Earnings (Loss) Per Share | ||||||||||||||||
Income from continuing operations | $ | 1.03 | $ | 0.48 | $ | 1.32 | $ | 0.87 | ||||||||
Income (loss) from discontinued operations | 0.07 | (0.02 | ) | 0.07 | (0.12 | ) | ||||||||||
Net income | $ | 1.10 | $ | 0.46 | $ | 1.39 | $ | 0.75 | ||||||||
Diluted Earnings (Loss) Per Share | ||||||||||||||||
Income from continuing operations | $ | 1.03 | $ | 0.46 | $ | 1.30 | $ | 0.85 | ||||||||
Income (loss) from discontinued operations | 0.07 | (0.02 | ) | 0.07 | (0.12 | ) | ||||||||||
Net income | $ | 1.10 | $ | 0.44 | $ | 1.37 | $ | 0.73 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic | 38,308,202 | 37,876,079 | 38,120,532 | 37,802,340 | ||||||||||||
Diluted | 40,004,379 | 39,346,537 | 39,894,412 | 38,794,914 | ||||||||||||
Distributions Declared Per Share | $ | 0.467 | $ | 0.454 | $ | 0.929 | $ | 0.906 | ||||||||
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(in thousands)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net Income | $ | 42,030 | $ | 17,304 | $ | 52,830 | $ | 28,369 | ||||||||
Other Comprehensive Income | ||||||||||||||||
Change in unrealized appreciation on marketable securities | (10 | ) | 12 | 8 | 783 | |||||||||||
Reversal of unrealized appreciation on sale of marketable securities | — | (4,746 | ) | — | (4,746 | ) | ||||||||||
Foreign currency translation adjustment | 134 | 557 | 517 | 275 | ||||||||||||
124 | (4,177 | ) | 525 | (3,688 | ) | |||||||||||
Comprehensive Income | $ | 42,154 | $ | 13,127 | $ | 53,355 | $ | 24,681 | ||||||||
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(in thousands)
Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
Cash Flows — Operating Activities | ||||||||
Net income | $ | 52,830 | $ | 28,369 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization including intangible assets and deferred financing costs | 14,509 | 12,625 | ||||||
Income from equity investments in real estate in excess of distributions received | (1,628 | ) | (202 | ) | ||||
Gains on sale of real estate and investments, net | (962 | ) | (4,800 | ) | ||||
Minority interest in income | 3,472 | 608 | ||||||
Straight-line rent adjustments | 1,421 | 1,612 | ||||||
Management income received in shares of affiliates | (31,728 | ) | (15,816 | ) | ||||
Unrealized gain on foreign currency transactions, warrants and securities | (313 | ) | (577 | ) | ||||
Impairment charges | — | 3,357 | ||||||
Increase in income taxes, net | 2,802 | 7 | ||||||
Realized gain on foreign currency transactions | (42 | ) | (101 | ) | ||||
Stock-based compensation expense | 2,328 | 1,639 | ||||||
Decrease in deferred acquisition revenue receivable | 16,164 | 12,543 | ||||||
Increase in structuring revenue receivable | (44,956 | ) | (3,039 | ) | ||||
Net changes in other operating assets and liabilities | (2,249 | ) | (660 | ) | ||||
Net cash provided by operating activities | 11,648 | 35,565 | ||||||
Cash Flows — Investing Activities | ||||||||
Distributions received from equity investments in real estate in excess of equity income | 21,716 | 3,106 | ||||||
Purchases of real estate and equity investments in real estate | (40,381 | ) | — | |||||
Capital expenditures | (7,361 | ) | (4,024 | ) | ||||
Loan to affiliate | — | (84,000 | ) | |||||
Proceeds from repayment of loan to affiliate | — | 84,000 | ||||||
Proceeds from sales of property and investments | 6,014 | 22,471 | ||||||
Funds placed in escrow in connection with the sale of property | (3,340 | ) | (9,163 | ) | ||||
Payment of deferred acquisition revenue to affiliate | (524 | ) | (524 | ) | ||||
Net cash (used in) provided by investing activities | (23,876 | ) | 11,866 | |||||
Cash Flows — Financing Activities | ||||||||
Distributions paid | (35,202 | ) | (34,356 | ) | ||||
Contributions from minority interests | 688 | 1,161 | ||||||
Distributions to minority interests | (942 | ) | (5,075 | ) | ||||
Scheduled payments of mortgage principal | (7,719 | ) | (5,705 | ) | ||||
Proceeds from mortgages and credit facilities | 118,617 | 55,000 | ||||||
Prepayments of mortgage principal and credit facilities | (68,257 | ) | (62,971 | ) | ||||
Release of funds from escrow in connection with the financing of properties | — | 4,031 | ||||||
Payment of financing costs | (1,303 | ) | (472 | ) | ||||
Proceeds from issuance of shares | 3,917 | 3,652 | ||||||
Excess tax benefits associated with stock-based compensation awards | 1,335 | 271 | ||||||
Repurchase and retirement of shares | (2,038 | ) | (482 | ) | ||||
Net cash provided by (used in) financing activities | 9,096 | (44,946 | ) | |||||
Change in Cash and Cash Equivalents During the Period | ||||||||
Effect of exchange rate changes on cash | 74 | 94 | ||||||
Net (decrease) increase in cash and cash equivalents | (3,058 | ) | 2,579 | |||||
Cash and cash equivalents, beginning of period | 22,108 | 13,014 | ||||||
Cash and cash equivalents, end of period | $ | 19,050 | $ | 15,593 | ||||
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(in thousands, except share and per share amounts)
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June 30, 2007 | December 31, 2006 | |||||||
Cost | $ | 618,647 | $ | 620,472 | ||||
Less: Accumulated depreciation | (87,162 | ) | (79,968 | ) | ||||
$ | 531,485 | $ | 540,504 | |||||
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June 30, 2007 | December 31, 2006 | |||||||
Cost (1) | $ | 79,516 | $ | 41,275 | ||||
Less: Accumulated depreciation | (7,467 | ) | (7,669 | ) | ||||
$ | 72,049 | $ | 33,606 | |||||
(1) | Includes $4,618 of costs incurred through June 30, 2007 in connection with renovations to the hotel facility at our Livho subsidiary which are scheduled for completion in 2008. |
We own interests in three CPA® REITs with which we have advisory agreements. Our interests in the CPA® REITs are accounted for under the equity method due to our ability to exercise significant influence as the advisor to the CPA® REITs. The CPA® REITs are publicly registered and file financial statements with the SEC. We have elected, in certain cases, to receive restricted shares of common stock in the CPA® REITs rather than cash in connection with earning asset management and performance revenue (Note 3).
% of Outstanding Shares | Carrying Amount of Investment | |||||||||||||||
Fund | June 30, 2007 | December 31, 2006 | June 30, 2007 | December 31, 2006 | ||||||||||||
CPA®:14 | 6.09 | % | 5.65 | % | $ | 58,182 | $ | 53,200 | ||||||||
CPA®:15 | 4.01 | % | 3.53 | % | 51,872 | 45,030 | ||||||||||
CPA®:16 – Global(1) | 2.14 | % | 0.78 | % | 27,224 | 9,161 | ||||||||||
$ | 137,278 | $ | 107,391 | |||||||||||||
(1) | Our interest in the outstanding shares of CPA®:16 – Global at June 30, 2007 includes 1,194,549 shares which were issued to us in July 2007 in connection with CPA®:16 – Global meeting its performance criterion. |
June 30, 2007 | December 31, 2006 | |||||||
Assets (primarily real estate) | $ | 8,243,272 | $ | 6,785,186 | ||||
Liabilities (primarily mortgage notes payable) | (4,435,615 | ) | (3,663,396 | ) | ||||
Shareholder’s equity | $ | 3,807,657 | $ | 3,121,790 | ||||
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Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
Revenues (primarily rental income and interest income from direct financing leases) | $ | 288,570 | $ | 251,242 | ||||
Expenses (primarily interest on mortgages and depreciation) | (221,596 | ) | (154,250 | ) | ||||
Net income | $ | 66,974 | $ | 96,992 | ||||
Our share of net income from equity investments in real estate | $ | 1,968 | $ | 1,609 | ||||
Ownership | Carrying Value | |||||||||||
Principal Tenant | Interest | June 30, 2007 | December 31, 2006 | |||||||||
Carrefour France, S.A.(1) | 49.63 | % | $ | 23,644 | $ | 21,741 | ||||||
Medica — France, S.A.(1) | 35 | % | 9,149 | 9,040 | ||||||||
Hologic, Inc. | 36 | % | 4,595 | 4,620 | ||||||||
Federal Express Corporation | 40 | % | 4,146 | 4,690 | ||||||||
Consolidated Systems, Inc. | 60 | % | 3,487 | 3,505 | ||||||||
Hellweg Die Profi-Baumarkte GmBH & Co. KG (1) (2) | 5 | % | 1,952 | — | ||||||||
Childtime Childcare, Inc. | 33.93 | % | 1,716 | 1,725 | ||||||||
Information Resources, Inc. | 33.33 | % | 1,525 | 1,509 | ||||||||
The Retail Distribution Group | 40 | % | 1,446 | 596 | ||||||||
Sicor, Inc.(3) | 50 | % | (5,712 | ) | 11,330 | |||||||
$ | 45,948 | $ | 58,756 | |||||||||
(1) | Amounts shown are based on the exchange rate of the Euro as of June 30, 2007 and December 31, 2006, respectively. | |
(2) | We acquired our interest in this investment in April 2007. | |
(3) | In June 2007, this venture completed the refinancing of a limited recourse mortgage of $2,483 for $35,350 based on the appraised value of the underlying real estate of the venture and distributed the proceeds to the venture partners. |
June 30, 2007 | December 31, 2006 | |||||||||||
Assets (primarily real estate) | $ | 748,334 | $ | 407,145 | ||||||||
Liabilities (primarily mortgage notes payable) | (598,066 | ) | (273,798 | ) | ||||||||
Partners’ and members’ equity | $ | 150,268 | $ | 133,347 | ||||||||
Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
Revenues (primarily rental incomxe and interest income from direct financing leases) | $ | 30,157 | $ | 18,005 | ||||
Expenses, net (primarily interest on mortgages and depreciation) | (21,366 | ) | (13,639 | ) | ||||
Net income | $ | 8,791 | $ | 4,366 | ||||
Our share of net income from equity investments in real estate | $ | 2,399 | $ | 1,185 | ||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues (primarily rental revenues and other operating income) | 2,006 | 452 | 2,250 | 1,186 | ||||||||||||
Expenses (primarily depreciation and property expenses) | (216 | ) | (1,105 | ) | (608 | ) | (2,373 | ) | ||||||||
Gain on sales of real estate, net | 962 | — | 962 | — | ||||||||||||
Impairment charges on assets held for sale | — | — | — | (3,357 | ) | |||||||||||
Income (loss) from discontinued operations | 2,752 | (653 | ) | 2,604 | (4,544 | ) | ||||||||||
June 30, 2007 | December 31, 2006 | |||||||
Amortized Intangibles: | ||||||||
Management contracts | $ | 32,765 | $ | 32,765 | ||||
Less: accumulated amortization | (19,329 | ) | (17,943 | ) | ||||
$ | 13,436 | $ | 14,822 | |||||
Lease Intangibles: | ||||||||
In-place lease | $ | 18,602 | $ | 18,345 | ||||
Tenant relationship | 10,030 | 8,783 | ||||||
Above-market rent | 9,707 | 9,707 | ||||||
Less: accumulated amortization | (15,634 | ) | (11,890 | ) | ||||
$ | 22,705 | $ | 24,945 | |||||
Below-market rent | $ | (2,009 | ) | $ | (2,009 | ) | ||
Less: accumulated amortization | 379 | 325 | ||||||
$ | (1,630 | ) | $ | (1,684 | ) | |||
Unamortized Goodwill and Indefinite-Lived Intangible Assets: | ||||||||
Goodwill | $ | 63,607 | $ | 63,607 | ||||
Trade name | 3,975 | 3,975 | ||||||
$ | 67,582 | $ | 67,582 | |||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income — basic | $ | 42,030 | $ | 17,304 | $ | 52,830 | $ | 28,369 | ||||||||
Income effect of dilutive securities, net of taxes | 1,885 | — | 1,985 | — | ||||||||||||
Net income — diluted | $ | 43,915 | $ | 17,304 | $ | 54,815 | $ | 28,369 | ||||||||
Weighted average shares outstanding — basic | 38,308,202 | 37,876,079 | 38,120,532 | 37,802,340 | ||||||||||||
Effect of dilutive securities | 1,696,177 | 1,470,458 | 1,773,880 | 992,574 | ||||||||||||
Weighted average shares outstanding — diluted | 40,004,379 | 39,346,537 | 39,894,412 | 38,794,914 | ||||||||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Investment Management | ||||||||||||||||
Revenues | $ | 86,896 | $ | 37,108 | $ | 109,988 | $ | 64,360 | ||||||||
Operating expenses | (25,476 | ) | (29,703 | ) | (40,112 | ) | (43,774 | ) | ||||||||
Other, net(1) | 1,056 | 1,973 | 3,127 | 3,053 | ||||||||||||
Provision for income taxes | (30,376 | ) | (3,896 | ) | (36,514 | ) | (10,428 | ) | ||||||||
Income from continuing operations | $ | 32,100 | $ | 5,482 | $ | 36,489 | $ | 13,211 | ||||||||
Real Estate Ownership(2) | ||||||||||||||||
Revenues | $ | 23,239 | $ | 20,434 | $ | 46,045 | $ | 40,944 | ||||||||
Operating expenses | (11,168 | ) | (8,880 | ) | (23,132 | ) | (18,170 | ) | ||||||||
Interest expense | (5,669 | ) | (4,541 | ) | (10,532 | ) | (8,929 | ) | ||||||||
Other, net(1) | 1,544 | 5,564 | 2,364 | 6,149 | ||||||||||||
Provision for income taxes | (768 | ) | (102 | ) | (1,008 | ) | (292 | ) | ||||||||
Income from continuing operations | $ | 7,178 | $ | 12,475 | $ | 13,737 | $ | 19,702 | ||||||||
Total Company | ||||||||||||||||
Revenues | $ | 110,135 | $ | 57,542 | $ | 156,033 | $ | 105,304 | ||||||||
Operating expenses | (36,644 | ) | (38,583 | ) | (63,244 | ) | (61,944 | ) | ||||||||
Interest expense | (5,669 | ) | (4,541 | ) | (10,532 | ) | (8,929 | ) | ||||||||
Other, net(1) | 2,600 | 7,537 | 5,491 | 9,202 | ||||||||||||
Provision for income taxes | (31,144 | ) | (3,998 | ) | (37,522 | ) | (10,720 | ) | ||||||||
Income from continuing operations | $ | 39,278 | $ | 17,957 | $ | 50,226 | $ | 32,913 | ||||||||
Equity Investments in Real Estate as of | Total Long-Lived Assets(3)as of | Total Assets as of | ||||||||||||||||||||||
June 30, 2007 | December 31, 2006 | June 30, 2007 | December 31, 2006 | June 30, 2007 | December 31, 2006 | |||||||||||||||||||
Investment Management | $ | 137,278 | $ | 107,391 | $ | 151,629 | $ | 122,828 | $ | 310,555 | $ | 299,036 | ||||||||||||
Real Estate Ownership | 45,948 | 58,756 | 779,158 | 765,777 | 813,162 | 793,974 | ||||||||||||||||||
Total Company | $ | 183,226 | $ | 166,147 | $ | 930,787 | $ | 888,605 | $ | 1,123,717 | $ | 1,093,010 | ||||||||||||
(1) | Includes interest income, income from equity investments in real estate, minority interest and gains and losses on sales and foreign currency transactions. | |
(2) | Includes investments in France and Germany that accounted for lease revenues (rental income and interest income from direct financing leases) of $2,230 and $2,057 for the three months ended June 30, 2007 and 2006, respectively, and $4,331 and $4,044 for the six months ended June 30, 2007 and 2006, respectively, and income from equity investments in real estate of $943 and $229 for the three months ended June 30, 2007 and 2006, respectively, and $1,192 and $431 for the six months ended June 30, 2007 and 2006, respectively. These investments also accounted for long-lived assets as of June 30, 2007 and December 31, 2006 of $95,410 and $90,888, respectively. | |
(3) | Includes real estate, net investment in direct financing leases, equity investments in real estate, operating real estate and intangible assets related to management contracts. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except share and per share amounts)
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Asset management revenue | $ | 30,204 | $ | 14,752 | $ | 15,452 | $ | 45,238 | $ | 29,114 | $ | 16,124 | ||||||||||||
Structuring revenue | 53,448 | 2,462 | 50,986 | 58,031 | 12,354 | 45,677 | ||||||||||||||||||
Reimbursed costs from affiliates | 3,244 | 19,894 | (16,650 | ) | 6,719 | 22,892 | (16,173 | ) | ||||||||||||||||
86,896 | 37,108 | 49,788 | 109,988 | 64,360 | 45,628 | |||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
General and administrative | (21,191 | ) | (8,344 | ) | (12,847 | ) | (31,306 | ) | (17,962 | ) | (13,344 | ) | ||||||||||||
Reimbursable costs | (3,244 | ) | (19,894 | ) | 16,650 | (6,719 | ) | (22,892 | ) | 16,173 | ||||||||||||||
Depreciation and amortization | (1,041 | ) | (1,465 | ) | 424 | (2,087 | ) | (2,920 | ) | 833 | ||||||||||||||
(25,476 | ) | (29,703 | ) | 4,227 | (40,112 | ) | (43,774 | ) | 3,662 | |||||||||||||||
Other Income and Expenses | ||||||||||||||||||||||||
Other interest income | 3,360 | 596 | 2,764 | 3,887 | 1,138 | 2,749 | ||||||||||||||||||
Income from equity investments in real estate | 491 | 625 | (134 | ) | 1,968 | 1,609 | 359 | |||||||||||||||||
Minority interest in (income) loss | (2,783 | ) | 729 | (3,512 | ) | (2,716 | ) | 283 | (2,999 | ) | ||||||||||||||
(Loss) gain on foreign currency transactions and other gains, net | (12 | ) | 23 | (35 | ) | (12 | ) | 23 | (35 | ) | ||||||||||||||
1,056 | 1,973 | (917 | ) | 3,127 | 3,053 | 74 | ||||||||||||||||||
Income from continuing operations before income taxes | 62,476 | 9,378 | 53,098 | 73,003 | 23,639 | 49,364 | ||||||||||||||||||
Provision for income taxes | (30,376 | ) | (3,896 | ) | (26,480 | ) | (36,514 | ) | (10,428 | ) | (26,086 | ) | ||||||||||||
Net income from investment management | $ | 32,100 | $ | 5,482 | $ | 26,618 | $ | 36,489 | $ | 13,211 | $ | 23,278 | ||||||||||||
W. P. Carey 6/30/2007 10-Q — 21
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Structuring revenue includes current and deferred acquisition revenue from structuring investments and financing on behalf of the CPA® REITs. Investment activity is subject to significant period-to-period variation.
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Lease revenues | $ | 19,998 | $ | 18,285 | $ | 1,713 | $ | 39,630 | $ | 36,412 | $ | 3,218 | ||||||||||||
Other real estate income | 3,241 | �� | 2,149 | 1,092 | 6,415 | 4,532 | 1,883 | |||||||||||||||||
23,239 | 20,434 | 2,805 | 46,045 | 40,944 | 5,101 | |||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
General and administrative | (2,065 | ) | (1,527 | ) | (538 | ) | (4,187 | ) | (3,067 | ) | (1,120 | ) | ||||||||||||
Depreciation and amortization | (5,909 | ) | (4,542 | ) | (1,367 | ) | (11,807 | ) | (9,057 | ) | (2,750 | ) | ||||||||||||
Property expenses | (1,893 | ) | (1,345 | ) | (548 | ) | (3,313 | ) | (3,013 | ) | (300 | ) | ||||||||||||
Other real estate expenses | (1,301 | ) | (1,466 | ) | 165 | (3,825 | ) | (3,033 | ) | (792 | ) | |||||||||||||
(11,168 | ) | (8,880 | ) | (2,288 | ) | (23,132 | ) | (18,170 | ) | (4,962 | ) | |||||||||||||
Other Income and Expenses | ||||||||||||||||||||||||
Other interest income | 283 | 215 | 68 | 354 | 400 | (46 | ) | |||||||||||||||||
Income from equity investments in real estate | 1,438 | 619 | 819 | 2,399 | 1,185 | 1,214 | ||||||||||||||||||
Minority interest in income | (358 | ) | (475 | ) | 117 | (756 | ) | (891 | ) | 135 | ||||||||||||||
Gain on sale of securities, foreign currency transactions and other gains, net | 181 | 5,205 | (5,024 | ) | 367 | 5,455 | (5,088 | ) | ||||||||||||||||
Interest expense | (5,669 | ) | (4,541 | ) | (1,128 | ) | (10,532 | ) | (8,929 | ) | (1,603 | ) | ||||||||||||
(4,125 | ) | 1,023 | (5,148 | ) | (8,168 | ) | (2,780 | ) | (5,388 | ) | ||||||||||||||
Income from continuing operations before income taxes | 7,946 | 12,577 | (4,631 | ) | 14,745 | 19,994 | (5,249 | ) | ||||||||||||||||
Provision for income taxes | (768 | ) | (102 | ) | (666 | ) | (1,008 | ) | (292 | ) | (716 | ) | ||||||||||||
Income from continuing operations | 7,178 | 12,475 | (5,297 | ) | 13,737 | 19,702 | (5,965 | ) | ||||||||||||||||
Income (loss) from discontinued operations | 2,752 | (653 | ) | 3,405 | 2,604 | (4,544 | ) | 7,148 | ||||||||||||||||
Net income from real estate ownership | $ | 9,930 | $ | 11,822 | $ | (1,892 | ) | $ | 16,341 | $ | 15,158 | $ | 1,183 | |||||||||||
Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
Rental income | $ | 33,505 | $ | 29,564 | ||||
Interest income from direct financing leases | 6,125 | 6,848 | ||||||
$ | 39,630 | $ | 36,412 | |||||
W. P. Carey 6/30/2007 10-Q —24
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Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
Bouygues Telecom, S.A.(a) (b) (c) | $ | 2,682 | $ | 2,343 | ||||
CheckFree Holdings Corporation Inc.(b) | 2,353 | 2,302 | ||||||
Detroit Diesel Corporation | 2,317 | 2,317 | ||||||
Dr Pepper Bottling Company of Texas | 2,237 | 2,203 | ||||||
Orbital Sciences Corporation | 1,511 | 1,511 | ||||||
Titan Corporation | 1,456 | 1,449 | ||||||
America West Holdings Corp. | 1,419 | 1,419 | ||||||
AutoZone, Inc. | 1,192 | 1,154 | ||||||
Quebecor Printing, Inc. | 970 | 970 | ||||||
Sybron Dental Specialties Inc. | 885 | 885 | ||||||
Lucent Technologies, Inc.(d) | 878 | 759 | ||||||
Unisource Worldwide, Inc. | 844 | 848 | ||||||
Werner Corporation(e) | 813 | — | ||||||
BE Aerospace, Inc. | 786 | 790 | ||||||
CSS Industries, Inc. | 785 | 785 | ||||||
Career Education Corporation(f) | 751 | — | ||||||
Eagle Hardware & Garden, Inc., a wholly-owned subsidiary of Lowe’s Companies Inc. | 742 | 733 | ||||||
Sprint Spectrum, L.P. | 712 | 712 | ||||||
EnviroWorks, Inc. | 675 | 651 | ||||||
PPD Development, Inc.(f) | 659 | — | ||||||
Swat-Fame, Inc. | 646 | 621 | ||||||
AT&T Corporation | 630 | 630 | ||||||
Omnicom Group Inc.(g) | 626 | 570 | ||||||
United States Postal Service | 617 | 617 | ||||||
BellSouth Telecommunications, Inc. | 612 | 612 | ||||||
Other(a) (b) (f) | 11,832 | 11,531 | ||||||
$ | 39,630 | $ | 36,412 | |||||
(a) | Revenue amounts are subject to fluctuations in foreign currency exchange rates. | |
(b) | Lease revenues applicable to minority interests in the consolidated amounts above total $2,050 and $1,990 for the six months ended June 30, 2007 and 2006, respectively. | |
(c) | Increase is due to INSEE-based rent increase in 2007. | |
(d) | Increase is due to above-market lease intangible becoming fully amortized during 2007. | |
(e) | New tenant at existing property. | |
(f) | Includes the CPA®:12 real estate interests acquired in December 2006. | |
(g) | Increase is due to CPI rent increase in 2006. |
W. P. Carey 6/30/2007 10-Q —25
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Ownership | Six months ended June 30, | |||||||||||
Interest | 2007 | 2006 | ||||||||||
Carrefour France, S.A. (a) (b) | 49.63 | % | $ | 9,243 | $ | 7,972 | ||||||
Hellweg Die Profi-Baumarkte GmBH & Co. KG(a) (c) | 5 | % | 6,336 | — | ||||||||
Federal Express Corporation | 40 | % | 3,433 | 3,396 | ||||||||
Medica — France, S.A.(a) (d) | 35 | % | 2,995 | — | ||||||||
Information Resources, Inc. | 33.33 | % | 2,486 | 2,486 | ||||||||
Sicor, Inc. | 50 | % | 1,671 | 1,671 | ||||||||
Hologic, Inc. | 36 | % | 1,578 | 1,578 | ||||||||
Consolidated Systems, Inc.(e) | 60 | % | 911 | — | ||||||||
Childtime Childcare, Inc. | 33.93 | % | 644 | 646 | ||||||||
The Retail Distribution Group(d) | 40 | % | 404 | — | ||||||||
$ | 29,701 | $ | 17,749 | |||||||||
(a) | Revenue amounts are subject to fluctuations in foreign currency exchange rates. | |
(b) | We increased our interest in this property to 49.6% in December 2006 as a result of the CPA®:12 Acquisition. | |
(c) | Represents interest income from our interest in a note receivable that we acquired in 2007 (See Current Trends and Developments above). | |
(d) | Includes the CPA®:12 real estate interests acquired in December 2006. | |
(e) | We acquired our interest in this property in 2006. |
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W. P. Carey 6/30/2007 10-Q —28
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June 30, | ||||||||
2007 | 2006 | |||||||
Balance: | ||||||||
Fixed rate | $ | 202,386 | $ | 202,488 | ||||
Variable rate(1) | 119,858 | 53,424 | ||||||
$ | 322,244 | $ | 255,912 | |||||
Percent of total debt: | ||||||||
Fixed rate | 63 | % | 79 | % | ||||
Variable rate(1) | 37 | % | 21 | % | ||||
100 | % | 100 | % | |||||
Weighted average interest rate at end of period: | ||||||||
Fixed rate | 6.44 | % | 6.54 | % | ||||
Variable rate(1) | 4.87 | % | 4.90 | % |
(1) | Included in variable rate debt as of June 30, 2007 is (i) $35,581 outstanding under our secured credit facility, (ii) $28,000 outstanding under our unsecured credit facility, and (iii) $56,277 in mortgage obligations which are currently fixed rate but which have interest rate reset features which may change the interest rates to then prevailing market fixed rates at certain points in their term. |
– | Cash and cash equivalents totaling $19,050, of which $5,722 was held in foreign bank accounts to maintain local capital requirements; | ||
– | Unsecured credit facility with unused capacity of up to $222,000, which may also be used to loan funds to our affiliates; | ||
– | Secured credit facility with unused capacity of up to $69,419, available to a wholly owned subsidiary to finance self-storage acquisitions; and | ||
– | We can also borrow against our currently unleveraged properties which have a carrying value of $278,455, subject to meeting certain financial ratios on our unsecured credit facility. |
June 30, 2007 | December 31, 2006 | |||||||||||||||
Outstanding | Maximum | Outstanding | Maximum | |||||||||||||
Balance | Available | Balance | Available | |||||||||||||
Unsecured credit facility | $ | 28,000 | $ | 250,000 | $ | 2,000 | $ | 175,000 | ||||||||
Secured credit facility | 35,581 | 105,000 | 15,501 | 105,000 | ||||||||||||
$ | 63,581 | $ | 355,000 | $ | 17,501 | $ | 280,000 | |||||||||
W. P. Carey 6/30/2007 10-Q —29
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During the next twelve months, cash requirements will include paying distributions to shareholders, scheduled mortgage principal payments, including mortgage balloon payments totaling $15,541 of which $6,041 is due in August 2007 and $9,500 is due in December 2007 and making distributions to minority partners, as well as other normal recurring operating expenses. We may also seek to use our cash to invest in new properties and maintain cash balances sufficient to meet working capital needs. We may issue additional shares in connection with investments when it is consistent with the objectives of the seller.
Less than | More than | |||||||||||||||||||
Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
Mortgage notes payable — Principal | $ | 258,663 | $ | 26,022 | $ | 61,181 | $ | 38,451 | $ | 133,009 | ||||||||||
Mortgage notes payable — Interest(1) | 76,495 | 14,833 | 24,203 | 16,947 | 20,512 | |||||||||||||||
Unsecured credit facility — Principal | 28,000 | — | — | 28,000 | — | |||||||||||||||
Unsecured credit facility — Interest(1) | 6,855 | 1,715 | 3,430 | 1,710 | — | |||||||||||||||
Secured credit facility — Principal | 35,581 | — | 35,581 | — | — | |||||||||||||||
Secured credit facility — Interest(1) | 3,881 | 2,693 | 1,188 | — | — | |||||||||||||||
Deferred acquisition compensation due to affiliates — Principal | 137 | 137 | — | — | — | |||||||||||||||
Deferred acquisition compensation due to affiliates — Interest | 8 | 8 | — | — | — | |||||||||||||||
Operating leases(2) | 26,321 | 2,689 | 5,417 | 5,649 | 12,566 | |||||||||||||||
Property improvements(3) | 10,348 | 10,348 | — | — | — | |||||||||||||||
Other commitments(4) | 600 | 600 | — | — | — | |||||||||||||||
$ | 446,889 | $ | 59,045 | $ | 131,000 | $ | 90,757 | $ | 166,087 | |||||||||||
(1) | Interest on variable rate debt obligations was calculated using the variable interest rate and balance outstanding as of June 30, 2007. | |
(2) | Operating lease obligations consist primarily of the total minimum rents payable on the lease for our principal offices. We are reimbursed by affiliates for their share of the future minimum rents under an office cost-sharing agreement. These amounts are allocated among the entities based on gross revenues and are adjusted quarterly. | |
(3) | Represents remaining commitments to fund certain property improvements. | |
(4) | Represents a commitment to contribute capital to an investment in India. |
W. P. Carey 6/30/2007 10-Q —30
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Ownership | Total Third Party | |||||||||||||||
Principal Tenant | Interest | Total Assets | Debt | Maturity Date | ||||||||||||
The Retail Distribution Group | 40 | % | $ | 11,847 | $ | 5,567 | 9/2009 | |||||||||
Federal Express Corporation | 40 | % | 51,707 | 41,710 | 1/2011 | |||||||||||
Information Resources, Inc. | 33.33 | % | 50,729 | 23,128 | 1/2011 | |||||||||||
Childtime Childcare, Inc. | 33.93 | % | 10,543 | 6,757 | 1/2011 | |||||||||||
Carrefour France, S.A. (1) | 49.63 | % | 165,127 | 120,863 | 12/2014 | |||||||||||
Consolidated Systems, Inc. | 60 | % | 18,312 | 11,917 | 11/2016 | |||||||||||
Hellweg Die Profi-Baumarkte GmBH & Co. KG (1)(2) | 5 | % | 338,026 | 287,643 | 4/2017 | |||||||||||
Sicor, Inc.(3) | 50 | % | 17,309 | 35,350 | 7/2017 | |||||||||||
Medica — France, S.A.(1) | 35 | % | 55,478 | 41,848 | 10/2017 | |||||||||||
Hologic, Inc. | 36 | % | 29,256 | 16,448 | 5/2023 | |||||||||||
$ | 748,334 | $ | 591,231 | |||||||||||||
(1) | Amounts shown are based on the exchange rate of the Euro at June 30, 2007. | |
(2) | In April 2007, we acquired a 5% interest in a venture, the remaining interests in which are held by our affiliated CPA®REITs, which made a loan (the “note receivable”) to the holder of a 75.26% interest in a limited partnership (the “partner”) owning 37 properties throughout Germany at a total cost of $335,981. In connection with this transaction, the venture obtained limited recourse financing of $284,932 having a fixed rate of 5.49% per annum and a term of 10 years. All amounts are based on the exchange rate of the Euro at the date of acquisition. Under the terms of the note receivable, the venture will receive an interest that approximates 75.26% of all income earned by the limited partnership, less adjustments. | |
In connection with this transaction, a second venture, which is wholly owned by our affiliated CPA®REITs, (the “property venture”) acquired the remaining 24.74% interest in the limited partnership. The property venture agreed to an option agreement which gives the property venture the right to purchase, from the partner, the remaining 75% interest in the limited partnership no later than December 2010 at a price which will equal the principal amount of the note receivable at the time of purchase. As a result of this purchase, our share of the note receivable would be repaid to us and we would not have a continuing interest in the limited partnership. The property venture has also agreed to a second assignable option agreement to acquire the remaining 0.26% interest in the limited partnership by December 2012. If the property venture does not exercise its option agreements, the partner has option agreements to put its remaining interests in the limited partnership to the property venture during 2014 at a price which will equal the principal amount of the note receivable at the time of purchase. | ||
(3) | In June 2007, this venture completed the refinancing of a limited recourse mortgage of $2,483 for $35,350 based on the appraised value of the underlying real estate of the venture and distributed the proceeds to the venture partners. |
W. P. Carey 6/30/2007 10-Q —31
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(in thousands)
2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | Fair value | |||||||||||||||||||||||||
Fixed rate debt | $ | 19,172 | $ | 7,777 | $ | 34,794 | $ | 12,555 | $ | 25,711 | $ | 102,377 | $ | 202,386 | $ | 197,644 | ||||||||||||||||
Weighted average interest rate | 7.84 | % | 7.03 | % | 7.23 | % | 7.19 | % | 7.32 | % | 5.55 | % | ||||||||||||||||||||
Variable rate debt | $ | 1,491 | $ | 43,901 | $ | 3,564 | $ | 3,662 | $ | 31,821 | $ | 35,419 | $ | 119,858 | $ | 119,858 |
W. P. Carey 6/30/2007 10-Q —32
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W. P. Carey 6/30/2007 10-Q —33
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W. P. Carey 6/30/2007 10-Q —34
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Maximum number (or | ||||||||||||||||
Total number of shares | approximate dollar value) of | |||||||||||||||
purchased as part of | shares that may yet be | |||||||||||||||
Total number of | Average price | publicly announced | purchased under the | |||||||||||||
2007 Period | shares purchased(1) | paid per share | plans or programs(1) | plans or programs(1) | ||||||||||||
April | — | $ | — | — | $ | — | ||||||||||
May | — | — | — | — | ||||||||||||
June | 66,800 | $ | 30.51 | 66,800 | $ | 17,962 | ||||||||||
Total | 66,800 | |||||||||||||||
(1) | In June 2007, our board of directors approved a share repurchase program that gives us authorization to repurchase up to $20,000 of our common stock in the open market through December 31, 2007. |
Name of Director | Total Shares Voting | Shares Voting For | Shares Withheld | |||||||||
Wm. Polk Carey | 31,577,424 | 31,323,381 | 254,043 | |||||||||
Gordon F. DuGan | 31,577,424 | 31,332,952 | 244,472 | |||||||||
Francis J. Carey | 31,577,424 | 31,378,020 | 199,404 | |||||||||
Trevor P. Bond | 31,577,424 | 31,397,779 | 179,645 | |||||||||
Nathaniel S. Coolidge | 31,577,424 | 31,325,453 | 251,971 | |||||||||
Eberhard Faber, IV | 31,577,424 | 31,313,228 | 264,196 | |||||||||
Benjamin H. Griswold, IV | 31,577,424 | 31,388,304 | 189,120 | |||||||||
Dr. Lawrence R. Klein | 31,577,424 | 31,369,420 | 208,004 | |||||||||
Robert E. Mittelstaedt, Jr. | 31,577,424 | 31,397,008 | 180,416 | |||||||||
Charles E. Parente | 31,577,424 | 31,213,095 | 364,329 | |||||||||
George E. Stoddard | 31,577,424 | 31,351,288 | 226,136 | |||||||||
Dr. Karsten von Köller | 31,577,424 | 31,400,118 | 177,306 | |||||||||
Reginald Winssinger | 31,577,424 | 31,400,025 | 177,399 |
Shares Voting For | 29,694,713 | |||
Shares Voting Against | 1,159,663 | |||
Shares Abstaining | 723,048 |
Exhibit No. | Description | Method of Filing | ||||
10.1 | Credit Agreement | Filed herewith | ||||
10.2 | 1997 Non-Employee Directors’ Incentive Plan (Amended and restated as of April 23, 2007) | Exhibit A to Schedule 14A dated April 30, 2007 | ||||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||
32 | Chief Executive Officer and Chief Financial Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Filed herewith |
W. P. Carey 6/30/2007 10-Q —35
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W. P. Carey & Co. LLC | ||||
Date 8/2/2007 | By: | /s/ Mark J. DeCesaris | ||
Mark J. DeCesaris | ||||
Managing Director and acting Chief Financial Officer (acting Principal Financial Officer) | ||||
Date 8/2/2007 | By: | /s/ Thomas Ridings | ||
Thomas Ridings | ||||
Executive Director and Chief Accounting Officer (Principal Accounting Officer) |
W. P. Carey 6/30/2007 10-Q —36