UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

☑    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from__________ to __________

Commission File Number: 001-13779

W. P. Carey Inc.

(Exact name of registrant as specified in its charter)

Maryland		45-4549771
(State of incorporation)		(I.R.S. Employer Identification No.)
50 Rockefeller Plaza
New York,	New York	10020
(Address of principal executive offices)		(Zip Code)

Investor Relations (212) 492-8920

(212) 492-1100

(Registrant’s telephone numbers, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	WPC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Registrant has 175,397,836 shares of common stock, $0.001 par value, outstanding at October 23, 2020.

INDEX

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019	5
	Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	8
	Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		44
Item 3. Quantitative and Qualitative Disclosures About Market Risk		72
Item 4. Controls and Procedures		75
PART II — OTHER INFORMATION
Item 1A. Risk Factors		76
Item 6. Exhibits		77
Signatures		78

W. P. Carey 9/30/2020 10-Q – 1

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements include, but are not limited to, statements regarding: our corporate strategy and estimated or future economic performance and results, including our expectations surrounding the impact of the novel coronavirus (“COVID-19”) pandemic on our business, financial condition, liquidity, results of operations, and prospects; our future capital expenditure and leverage levels, debt service obligations, and plans to fund our liquidity needs; prospective statements regarding our access to the capital markets, including our “at-the-market” program (“ATM Program”) and settlement of our forward equity offering; the outlook for the investment programs that we manage, including possible liquidity events for those programs; statements that we make regarding our ability to remain qualified for taxation as a real estate investment trust (“REIT”); and the impact of recently issued accounting pronouncements and regulatory activity.

These statements are based on the current expectations of our management. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Other unknown or unpredictable risks or uncertainties, like the risks related to the effects of pandemics and global outbreaks of contagious diseases (such as the current COVID-19 pandemic) or the fear of such outbreaks, could also have material adverse effects on our business, financial condition, liquidity, results of operations, and prospects. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties, and other factors that may materially affect our future results, performance, achievements, or transactions. Information on factors that could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report, as well as in our other filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 21, 2020 (the “2019 Annual Report”). Moreover, because we operate in a very competitive and rapidly changing environment, new risks are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on these forward-looking statements as a prediction of future results, which speak only as of the date of this Report, unless noted otherwise. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part I, Item 1. Financial Statements (Unaudited).

W. P. Carey 9/30/2020 10-Q – 2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

W. P. CAREY INC. 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

	September 30, 2020		December 31, 2019
Assets
Investments in real estate:
Land, buildings and improvements	$	10,560,534	$	9,856,191
Net investments in direct financing leases	715,541		896,549
In-place lease intangible assets and other	2,243,117		2,186,851
Above-market rent intangible assets	900,503		909,139
Investments in real estate	14,419,695		13,848,730
Accumulated depreciation and amortization	(2,382,971)		(2,035,995)
Assets held for sale, net	10,626		104,010
Net investments in real estate	12,047,350		11,916,745
Equity investments in the Managed Programs and real estate	288,444		324,004
Cash and cash equivalents	152,215		196,028
Due from affiliates	4,347		57,816
Other assets, net	793,079		631,637
Goodwill	904,075		934,688
Total assets (a)	$	14,189,510	$	14,060,918
Liabilities and Equity
Debt:
Senior unsecured notes, net	$	4,513,243	$	4,390,189
Unsecured term loans, net	304,221		—
Unsecured revolving credit facility	182,799		201,267
Non-recourse mortgages, net	1,234,197		1,462,487
Debt, net	6,234,460		6,053,943
Accounts payable, accrued expenses and other liabilities	549,899		487,405
Below-market rent and other intangible liabilities, net	192,445		210,742
Deferred income taxes	137,460		179,309
Dividends payable	185,877		181,346
Total liabilities (a)	7,300,141		7,112,745
Commitments and contingencies (Note 11)
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 450,000,000 shares authorized; 175,396,158 and 172,278,242 shares, respectively, issued and outstanding	175		172
Additional paid-in capital	8,919,520		8,717,535
Distributions in excess of accumulated earnings	(1,800,875)		(1,557,374)
Deferred compensation obligation	42,014		37,263
Accumulated other comprehensive loss	(273,124)		(255,667)
Total stockholders’ equity	6,887,710		6,941,929
Noncontrolling interests	1,659		6,244
Total equity	6,889,369		6,948,173
Total liabilities and equity	$	14,189,510	$	14,060,918

__________

(a)See Note 2 for details related to variable interest entities (“VIEs”).

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2020 10-Q – 3

W. P. CAREY INC. 

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Real Estate:
Lease revenues	$	293,856	$	278,839	$	856,269	$	811,580
Operating property revenues	1,974		9,538		9,368		40,970
Lease termination income and other	1,565		14,377		9,991		23,951
	297,395		302,754		875,628		876,501
Investment Management:
Asset management revenue	3,748		9,878		18,109		29,400
Reimbursable costs from affiliates	1,276		4,786		7,717		12,475
Structuring and other advisory revenue	—		587		494		3,163
	5,024		15,251		26,320		45,038
	302,419		318,005		901,948		921,539
Operating Expenses
Depreciation and amortization	108,351		109,517		332,022		335,528
General and administrative	19,399		17,210		57,616		58,224
Reimbursable tenant costs	15,728		15,611		42,699		42,699
Property expenses, excluding reimbursable tenant costs	11,923		10,377		33,649		30,204
Stock-based compensation expense	4,564		4,747		10,143		13,848
Operating property expenses	1,594		8,547		8,205		30,015
Reimbursable costs from affiliates	1,276		4,786		7,717		12,475
Merger and other expenses	(596)		70		665		912
Impairment charges	—		25,781		19,420		25,781
Subadvisor fees	—		1,763		1,469		5,615
	162,239		198,409		513,605		555,301
Other Income and Expenses
Interest expense	(52,537)		(58,626)		(157,259)		(179,658)
Other gains and (losses)	45,113		(12,402)		49,537		(12,118)
Gain on sale of real estate, net	20,933		71		32,684		642
Equity in earnings (losses) of equity method investments in the Managed Programs and real estate	1,720		5,769		(10,087)		15,211
Loss on change in control of interests	—		(8,416)		—		(8,416)
	15,229		(73,604)		(85,125)		(184,339)
Income before income taxes	155,409		45,992		303,218		181,899
(Provision for) benefit from income taxes	(5,975)		(4,157)		28,122		(5,147)
Net Income	149,434		41,835		331,340		176,752
Net income attributable to noncontrolling interests	(37)		(496)		(10,553)		(881)
Net Income Attributable to W. P. Carey	$	149,397	$	41,339	$	320,787	$	175,871
Basic Earnings Per Share	$	0.85	$	0.24	$	1.84	$	1.03
Diluted Earnings Per Share	$	0.85	$	0.24	$	1.84	$	1.03
Weighted-Average Shares Outstanding
Basic	174,974,185		172,235,066		173,879,068		170,276,085
Diluted	175,261,812		172,486,506		174,144,038		170,545,665

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2020 10-Q – 4

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands) 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net Income	$	149,434	$	41,835	$	331,340	$	176,752
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	34,170		(37,412)		(4,183)		(41,772)
Unrealized (loss) gain on derivative instruments	(16,674)		13,243		(13,267)		11,786
Unrealized gain on investments	—		11		—		7
	17,496		(24,158)		(17,450)		(29,979)
Comprehensive Income	166,930		17,677		313,890		146,773
Amounts Attributable to Noncontrolling Interests
Net income	(37)		(496)		(10,553)		(881)
Unrealized gain on derivative instruments	(7)		—		(7)		—
Comprehensive income attributable to noncontrolling interests	(44)		(496)		(10,560)		(881)
Comprehensive Income Attributable to W. P. Carey	$	166,886	$	17,181	$	303,330	$	145,892

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2020 10-Q – 5

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in thousands, except share and per share amounts)

	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at July 1, 2020	173,890,427	$	174	$	8,815,108	$	(1,765,892)	$	42,014	$	(290,613)	$	6,800,791	$	1,664	$	6,802,455
Shares issued under forward sale agreements, net	1,488,291	1		99,848								99,849				99,849
Shares issued upon delivery of vested restricted share awards	17,440	—		—								—				—
Amortization of stock-based compensation expense				4,564								4,564				4,564
Distributions to noncontrolling interests												—		(49)		(49)
Dividends declared ($1.044 per share)						(184,380)						(184,380)				(184,380)
Net income						149,397						149,397		37		149,434
Other comprehensive income:
Foreign currency translation adjustments										34,170		34,170				34,170
Unrealized loss on derivative instruments										(16,681)		(16,681)		7		(16,674)
Balance at September 30, 2020	175,396,158	$	175	$	8,919,520	$	(1,800,875)	$	42,014	$	(273,124)	$	6,887,710	$	1,659	$	6,889,369

	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at July 1, 2019	170,756,507	$	171	$	8,576,245	$	(1,368,457)	$	37,263	$	(260,817)	$	6,984,405	$	6,389	$	6,990,794
Shares issued under ATM Program, net	1,502,572	1		131,472								131,473				131,473
Shares issued upon delivery of vested restricted share awards	17,323	—		(23)								(23)				(23)
Amortization of stock-based compensation expense				4,747								4,747				4,747
Distributions to noncontrolling interests												—		(569)		(569)
Dividends declared ($1.036 per share)						(179,677)						(179,677)				(179,677)
Net income						41,339						41,339		496		41,835
Other comprehensive loss:
Foreign currency translation adjustments										(37,412)		(37,412)				(37,412)
Unrealized gain on derivative instruments										13,243		13,243				13,243
Unrealized gain on investments										11		11				11
Balance at September 30, 2019	172,276,402	$	172	$	8,712,441	$	(1,506,795)	$	37,263	$	(284,975)	$	6,958,106	$	6,316	$	6,964,422

(Continued)

W. P. Carey 9/30/2020 10-Q – 6

W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(Continued)

(in thousands, except share and per share amounts)

	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at January 1, 2020	172,278,242	$	172	$	8,717,535	$	(1,557,374)	$	37,263	$	(255,667)	$	6,941,929	$	6,244	$	6,948,173
Cumulative-effect adjustment for the adoption of ASU 2016-13, Financial Instruments — Credit Losses (Note 2)						(14,812)						(14,812)				(14,812)
Shares issued under forward sale agreements, net	2,951,791	3		199,478								199,481				199,481
Shares issued upon delivery of vested restricted share awards	160,653	—		(5,272)								(5,272)				(5,272)
Shares issued upon purchases under employee share purchase plan	5,472	—		299								299				299
Amortization of stock-based compensation expense				10,143								10,143				10,143
Deferral of vested shares, net				(3,854)				3,854				—				—
Distributions to noncontrolling interests												—		(5,280)		(5,280)
Dividends declared ($3.126 per share)				1,191		(549,476)		897				(547,388)				(547,388)
Redemption of noncontrolling interest (Note 3)												—		(9,865)		(9,865)
Net income						320,787						320,787		10,553		331,340
Other comprehensive loss:
Unrealized loss on derivative instruments										(13,274)		(13,274)		7		(13,267)
Foreign currency translation adjustments										(4,183)		(4,183)				(4,183)
Balance at September 30, 2020	175,396,158	$	175	$	8,919,520	$	(1,800,875)	$	42,014	$	(273,124)	$	6,887,710	$	1,659	$	6,889,369

	W. P. Carey Stockholders
						Distributions				Accumulated
	Common Stock			Additional		in Excess of		Deferred		Other		Total
	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		W. P. Carey		Noncontrolling
	Shares	Amount		Capital		Earnings		Obligation		Loss		Stockholders		Interests		Total
Balance at January 1, 2019	165,279,642	$	165	$	8,187,335	$	(1,143,992)	$	35,766	$	(254,996)	$	6,824,278	$	5,777	$	6,830,055
Shares issued under ATM Program, net	6,672,412	6		523,371								523,377				523,377
Shares issued upon delivery of vested restricted share awards	322,831	1		(15,766)								(15,765)				(15,765)
Shares issued upon purchases under employee share purchase plan	1,517	—		113								113				113
Deferral of vested shares, net				(1,445)				1,445				—				—
Amortization of stock-based compensation expense				13,848								13,848				13,848
Contributions from noncontrolling interests												—		849		849
Distributions to noncontrolling interests												—		(1,191)		(1,191)
Dividends declared ($3.102 per share)				4,985		(538,674)		52				(533,637)				(533,637)