Stock-Based Compensation and Equity

9 Months Ended

Sep. 30, 2020

Stock-Based Compensation

We maintain several stock-based compensation plans, which are more fully described in the 2019 Annual Report. There have been no significant changes to the terms and conditions of any of our stock-based compensation plans or arrangements during the nine months ended September 30, 2020. We recorded stock-based compensation expense of $4.6 million and $4.7 million during the three months ended September 30, 2020 and 2019, respectively, and $10.1 million and $13.8 million during the nine months ended September 30, 2020 and 2019, respectively, which was included in Stock-based compensation expense in the consolidated financial statements.

Restricted and Conditional Awards

Nonvested restricted share awards (“RSAs”), restricted share units (“RSUs”), and performance share units (“PSUs”) at September 30, 2020 and changes during the nine months ended September 30, 2020 were as follows:


	RSA and RSU Awards			PSU Awards
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2020	283,977	$	68.51	331,242	$	80.90
Granted (a)	141,384	81.48		90,518	104.65
Vested (b)	(159,456)	69.57		(156,838)	80.42
Forfeited	(5,555)	71.69		(6,715)	88.94
Adjustment (c)	—	—		(18,426)	80.27
Nonvested at September 30, 2020 (d)	260,350	$	74.83	239,781	$	90.83

__________

(a)The grant date fair value of RSAs and RSUs reflect our stock price on the date of grant on a one-for-one basis. The grant date fair value of PSUs was determined utilizing (i) a Monte Carlo simulation model to generate an estimate of our future stock price over the three-year performance period and (ii) future financial performance projections. To estimate the fair value of PSUs granted during the nine months ended September 30, 2020, we used a risk-free interest rate of 1.6%, an expected volatility rate of 15.2%, and assumed a dividend yield of zero.

(b)The grant date fair value of shares vested during the nine months ended September 30, 2020 was $23.7 million. Employees have the option to take immediate delivery of the shares upon vesting or defer receipt to a future date pursuant to previously made deferral elections. At September 30, 2020 and December 31, 2019, we had an obligation to issue 986,859 and 893,713 shares, respectively, of our common stock underlying such deferred awards, which is recorded within Total stockholders’ equity as a Deferred compensation obligation of $42.0 million and $37.3 million, respectively.

(c)Vesting and payment of the PSUs is conditioned upon certain company and/or market performance goals being met during the relevant three-year performance period. The ultimate number of PSUs to be vested will depend on the extent to which the performance goals are met and can range from zero to three times the original awards. As a result, we recorded adjustments at September 30, 2020 to reflect the number of shares expected to be issued when the PSUs vest.

(d)At September 30, 2020, total unrecognized compensation expense related to these awards was approximately $23.2 million, with an aggregate weighted-average remaining term of 1.8 years.

Earnings Per Share

Under current authoritative guidance for determining earnings per share, all nonvested share-based payment awards that contain non-forfeitable rights to dividends are considered to be participating securities and therefore are included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. During the prior year period, certain of our nonvested RSUs contained rights to receive non-forfeitable dividend equivalents or dividends, respectively, and therefore we apply the two-class method of computing earnings per share. The calculation of earnings per share below excludes the income attributable to the nonvested participating RSUs from the numerator and such nonvested shares in the denominator. The following table summarizes basic and diluted earnings (in thousands, except share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income attributable to W. P. Carey	$	149,397	$	41,339	$	320,787	$	175,871
Net income attributable to nonvested participating RSUs	—		(10)		—		(44)
Net income — basic and diluted	$	149,397	$	41,329	$	320,787	$	175,827

Weighted-average shares outstanding — basic	174,974,185		172,235,066		173,879,068		170,276,085
Effect of dilutive securities	287,627		251,440		264,970		269,580
Weighted-average shares outstanding — diluted	175,261,812		172,486,506		174,144,038		170,545,665

For the three and nine months ended September 30, 2020 and 2019, there were no potentially dilutive securities excluded from the computation of diluted earnings per share.

ATM Program

During the three and nine months ended September 30, 2020, we did not issue any shares of our common stock under our ATM Program, which is discussed in the 2019 Annual Report. During the three and nine months ended September 30, 2019, we issued 1,502,572 and 6,672,412 shares, respectively, of our common stock under our former ATM Program at a weighted-average price of $88.76 and $79.70 per share, respectively, for net proceeds of $131.4 million and $523.5 million, respectively. As of September 30, 2020, $616.6 million remained available for issuance under our current ATM Program.

Forward Equity Offering

On June 17, 2020, we entered into an underwriting agreement, as well as certain forward sale agreements, with a syndicate of banks acting as underwriters, forward sellers, and/or forward purchasers in connection with an underwritten public offering of 4,750,000 shares of common stock at an initial forward sale price of $68.35 per share. The underwriters were granted a 30-day option to purchase up to an additional 712,500 shares of common stock at the initial forward sale price, which they fully exercised on June 18, 2020. Therefore, at closing on June 22, 2020, the forward purchasers borrowed from third parties and sold to the underwriters an aggregate of 5,462,500 shares of common stock, which the underwriters sold at a gross offering price of $70.00 per share, for gross proceeds of approximately $382.4 million. As a result of this forward construct, we did not receive any proceeds from the sale of such shares at closing.

During the three and nine months ended September 30, 2020, we settled a portion of the equity forwards by physically delivering 1,488,291 and 2,951,791 shares, respectively, of common stock to certain forward purchasers for net proceeds of $99.8 million and $199.7 million, respectively, which were primarily used to partially pay down amounts outstanding under our Unsecured Revolving Credit Facility and for general corporate purposes. As of September 30, 2020, 2,510,709 shares remained outstanding under the forward sale agreements. We expect to settle the forward sale agreements in full within 18 months of the offering date via physical delivery of the outstanding shares of common stock in exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreements, subject to certain conditions. The forward sale price that we will receive upon physical settlement of the agreements will be (i) subject to adjustment on a daily basis based on a floating interest rate factor equal to a specified daily rate less a spread (i.e., if the specified daily rate is less than the spread on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price) and (ii) decreased based on amounts related to expected dividends on shares of our common stock during the term of the forward sale agreements.

We determined that the forward sale agreements meet the criteria for equity classification and are therefore exempt from derivative accounting. We recorded the forward sale agreements at fair value at inception, which we determined to be zero. Subsequent changes to fair value are not required under equity classification.

Reclassifications Out of Accumulated Other Comprehensive Loss

The following tables present a reconciliation of changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):


	Three Months Ended September 30, 2020
	Gains and (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Gains and (Losses) on Investments		Total
Beginning balance	$	16,455	$	(307,068)	$	—	$	(290,613)
Other comprehensive income before reclassifications	(15,558)		34,170		—		18,612
Amounts reclassified from accumulated other comprehensive loss to:
Other gains and (losses)	(1,664)		—		—		(1,664)
Interest expense	548		—		—		548
Total	(1,116)		—		—		(1,116)
Net current period other comprehensive income	(16,674)		34,170		—		17,496
Net current period other comprehensive income attributable to noncontrolling interests	(7)		—		—		(7)
Ending balance	$	(226)	$	(272,898)	$	—	$	(273,124)


	Three Months Ended September 30, 2019
	Gains and (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Gains and (Losses) on Investments		Total
Beginning balance	$	12,645	$	(273,451)	$	(11)	$	(260,817)
Other comprehensive loss before reclassifications	16,323		(37,412)		11		(21,078)
Amounts reclassified from accumulated other comprehensive loss to:
Other gains and (losses)	(3,512)		—		—		(3,512)
Interest expense	432		—		—		432
Total	(3,080)		—		—		(3,080)
Net current period other comprehensive loss	13,243		(37,412)		11		(24,158)
Ending balance	$	25,888	$	(310,863)	$	—	$	(284,975)


	Nine Months Ended September 30, 2020
	Gains and (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Gains and (Losses) on Investments		Total
Beginning balance	$	13,048	$	(268,715)	$	—	$	(255,667)
Other comprehensive loss before reclassifications	(4,240)		(4,183)		—		(8,423)
Amounts reclassified from accumulated other comprehensive loss to:
Other gains and (losses)	(10,281)		—		—		(10,281)
Interest expense	1,254		—		—		1,254
Total	(9,027)		—		—		(9,027)
Net current period other comprehensive loss	(13,267)		(4,183)		—		(17,450)
Net current period other comprehensive income attributable to noncontrolling interests	(7)		—		—		(7)
Ending balance	$	(226)	$	(272,898)	$	—	$	(273,124)


	Nine Months Ended September 30, 2019
	Gains and (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Gains and (Losses) on Investments		Total
Beginning balance	$	14,102	$	(269,091)	$	(7)	$	(254,996)
Other comprehensive loss before reclassifications	20,179		(41,772)		7		(21,586)
Amounts reclassified from accumulated other comprehensive loss to:
Other gains and (losses)	(10,439)		—		—		(10,439)
Interest expense	2,046		—		—		2,046
Total	(8,393)		—		—		(8,393)
Net current period other comprehensive loss	11,786		(41,772)		7		(29,979)
Ending balance	$	25,888	$	(310,863)	$	—	$	(284,975)

See Note 9 for additional information on our derivatives activity recognized within Other comprehensive income (loss) for the periods presented.

Dividends Declared

During the third quarter of 2020, our Board declared a quarterly dividend of $1.044 per share, which was paid on October 15, 2020 to stockholders of record as of September 30, 2020.

During the nine months ended September 30, 2020, we declared dividends totaling $3.126 per share.