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W. P. Carey Announces Fourth Quarter and Year-End 2007 Financial Results

February 28, 2008

W. P. Carey Fourth Quarter Financial Results

New York, NY – February 28, 2008 – Investment firm W. P. Carey & Co. LLC (NYSE: WPC) today reported financial results for the fourth quarter and year ended December 31, 2007. 

QUARTERLY AND YEAR-END RESULTS

  • Included in our year-end results is a reserve taken in connection with an agreement in principle to settle matters relating to a previously disclosed U.S. Securities and Exchange Commission (SEC) investigation.  Excluding this reserve, year-end 2007 revenues, net income and funds from operations (FFO) increased over the prior year and were positively impacted by a substantial increase in investment volume and full recognition of revenues as a result of achieving the preferred return performance hurdle for CPA®:16 – Global.
  • Total revenues net of reimbursed expenses for the fourth quarter of 2007 were $51.2 million, compared to $83.1 million for the fourth quarter of 2006, which included revenues resulting from the CPA®:12/14 merger.  Total revenues net of reimbursed expenses for 2007 increased 22% to $249.3 million, as compared to $203.9 million for 2006.  Reimbursed expenses are excluded from total revenues because they have no impact on net income.
  • Net income for the fourth quarter of 2007 was $6 million and net income for 2007 was $79.3 million.  Net income for the fourth quarter of 2007, excluding the reserve taken for the SEC matter, was $27 million, as compared to $43.6 million for the same period in 2006.  Net income for 2007, excluding the reserve taken for the SEC matter, increased 16% to $100.3 million, as compared to $86.3 million in 2006.  The impact of the reserve on net income was $21 million. 
  • Diluted earnings per share (EPS) for the fourth quarter of 2007 was $0.15 and diluted EPS for 2007 was $2.05.  Diluted EPS for the fourth quarter of 2007, excluding the reserve taken for the SEC matter, was $0.68, as compared to $1.12 for the same period in 2006.  Diluted EPS for 2007, excluding the reserve taken for the SEC matter, increased 16% to $2.58, as compared to $2.22 for 2006. 
  • As per the attached table, FFO for the fourth quarter of 2007 was $2.9 million, or $0.07 per diluted share, and FFO for 2007 was $133.3 million, or $3.34 per diluted share.  FFO for the fourth quarter of 2007, excluding the reserve taken for the SEC matter, was $0.83 per diluted share, or $32.9 million, as compared to $1.39 per diluted share, or $54.9 million, for the comparable period in 2006.  FFO for 2007, excluding the reserve for the SEC matter, increased 27% to $163.2 million, or $4.09 per diluted share, as compared to $128.5 million, or $3.29 per diluted share for 2006. 
  • Cash flows from operating activities for 2007 decreased to $47.5 million, as compared to $119.9 million for 2006 due primarily to the impact of the CPA®:12/14 merger where in 2006 we recognized $46 million in revenues received in cash but paid approximately $21 million in taxes related to those revenues in 2007.  This accounted for a $67 million swing in cash flow.

PROVISION FOR SETTLEMENT

As we have previously disclosed, in 2004 the staff of the SEC began investigating whether, in connection with a public offering of shares of CPA®:15 in late 2002 and early 2003, Carey Financial, our wholly-owned broker-dealer subsidiary, sold such shares without an effective registration statement, and whether that and other SEC filings by the REITs managed by us contained material misrepresentations and omissions, including with respect to payments made by certain of the REITs in the 2000-2003 period to broker-dealers that distributed the REITs’ shares. 

We have now reached an agreement in principle with the staff of the SEC to settle all matters relating to this investigation.  The agreement in principle is subject to approval by the Commission and also to the satisfactory completion of settlement papers, and accordingly the agreement in principle could fail to be implemented or be implemented in a different form.  Pursuant to the agreement in principle with the SEC staff, and assuming approval by the Commission, the SEC would file a complaint in federal court alleging violations of certain provisions of the federal securities laws, and seeking to enjoin us from violating those laws, including Section 5 of the Securities Act of 1933, in connection with the offering of shares of CPA®:15, and Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13 and 14 of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, among others, in connection with the payments to broker-dealers and related disclosures.

Without admitting or denying the allegations in the SEC’s complaint, we would consent to the entry of the injunction, which would be subject to court approval.  As part of the agreement in principle with the SEC staff, and assuming approval by the Commission, we would expect to make “disgorgement” payments of approximately $20 million, including interest, with the payments being made to certain of our managed REITs, and we would also pay a $10 million civil penalty.

In connection with the agreement in principle, we have established a charge of approximately $30 million, which is included in our fourth quarter 2007 results.  We also have recognized an offsetting $8.9 million tax benefit in the same period, resulting in a net charge of approximately $21 million.

SUPPLEMENTAL PERFORMANCE METRICS

  • Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2007 was $(3.9) million, or $(0.10) per diluted share, and EBITDA for 2007 was $91.1 million, or $2.29 per diluted share.  EBITDA from our investment management segment, excluding the reserve taken for the SEC matter, totaled $0.65 per diluted share, or $26.1 million this quarter, a decrease from EBITDA of $1.65 per diluted share, or $65 million, in the fourth quarter of 2006.  For 2007, EBITDA from this segment, excluding the reserve taken for the SEC matter, increased 15% to $121.1 million, or $3.04 per diluted share, from $105.7 million, or $2.70 per diluted share for 2006. 
  • FFO from our real estate ownership segment in the fourth quarter of 2007 increased to $0.43 per diluted share, or $17.2 million, from $0.37 per diluted share, or $14.6 million in the fourth quarter of 2006.  For 2007, FFO from this segment increased 10% to $64.1 million, or $1.61 per diluted share, from $58.5 million, or $1.50 per diluted share during 2006.
  • For the year ended December 31, 2007, adjusted cash flow from operations totaled $84.2 million, as compared to $70.2 million for 2006.
  • Further information concerning these non-GAAP supplemental performance metrics is presented in the accompanying tables.

DISTRIBUTIONS AND SHARE REPURCHASE

  • The Board of Directors raised the quarterly cash distribution to $0.477 per share for the fourth quarter 2007.  In addition, we announced that the Board declared a special distribution of $0.27 per share.  Both distributions were paid on January 15, 2008 to shareholders of record as of December 31, 2007.
  • Under our current share repurchase program, we may now repurchase up to $40 million of our common stock in the open market through March 31, 2008 as conditions warrant. Through December 31, 2007, we repurchased shares totaling $25.5 million.

INVESTMENT ACTIVITY

  • In the fourth quarter of 2007, we structured investments totaling approximately $171 million on behalf of our CPA® REITs, as compared to $269 million during the fourth quarter of 2006. 
  • In 2007, we structured 22 investments on behalf of our CPA® REITs totaling approximately $1.1 billion, as compared to $720 million in 2006.  Approximately 55% were international transactions.

CPA®:17 – GLOBAL OFFERING

  • In late December 2007, we commenced fundraising for our newest offering, CPA®:17 – Global, an affiliated REIT formed for the purpose of investing in a diversified portfolio of income-producing commercial properties and other real estate related assets, both domestically and internationally.  Through February 27, 2008, we have raised approximately $40 million on CPA®:17 – Global’s behalf.

GROWTH IN ASSETS UNDER MANAGEMENT

  • W. P. Carey is the advisor to the CPA® REITs, which had assets valued at approximately $8.4 billion on December 31, 2007 – a 15% increase as compared to December 31, 2006. 
  • Since 2001, the Company's assets under management on behalf of the CPA® REITs have more than tripled.
  • As of December 31, 2007, the occupancy rate of our 17 million square foot owned portfolio was approximately 97%.  In addition, for the 87 million square feet owned by the CPA® REITs, the occupancy rate was approximately 99%.

“We are pleased with the strong operating results that we have achieved for 2007,” said President and Chief Executive Officer, Gordon F. DuGan.  “Our revenues and net income prior to the charge pertaining to the SEC matter were at record levels.  We experienced a healthy investment volume and strong cash flows from our existing investments.  Additionally, we look forward to final resolution of all matters relating to the SEC investigation and believe we are a stronger and better firm today than we have ever been. 

In these turbulent times, we believe that our cycle-tested business model is well-suited for today’s environment and we are pleased that we have maintained a conservative financial profile through the past credit cycle.  As we are entering a new part of the credit cycle, we will keep a vigilant watch on our existing investments and seek to manage them through what may continue to be a difficult credit market.  At the same time, we enter 2008 with a very strong balance sheet and hopeful that the change in the credit cycle will provide us with numerous investment opportunities.”

UPCOMING EVENTS

  • Benjamin P. Harris, Head of Domestic Investments, will be speaking on a panel at the Real Estate 2008 RealShare Conference on March 6, 2008 from 1:50 PM to 2:35 PM at The Westin Bonaventure Hotel in Los Angeles, California.
  • Gordon F. DuGan, President and CEO, will be headlining the “Fact or Fiction” discussion at the RealShare NET LEASE conference on April 29, 2008 at the Marriott Marquis in New York, New York.

CONFERENCE CALL & WEBCAST

Please call at least 10 minutes prior to call to register

Date: Thursday, February 28, 2008 at 11:00 AM (ET)

Call-in Number: 1-877-407-8031
(International) +1-201-689-8031

Webcast: www.wpcarey.com/earnings

Podcast: www.wpcarey.com/podcast
Available after 2:00 PM (ET)

Replay Number: 1-877-660-6853
(International) +1-201-612-7415

Replay Access Codes: Account # 286 and Conference ID # 273699.  Please note that both access codes are required for playback.  Replay available until March 14, 2008 at midnight ET.

W. P. Carey & Co. LLC
W. P. Carey & Co. LLC provides long-term sale-leaseback and build-to-suit financing for companies worldwide and manages a global investment portfolio worth more than $10 billion.  Publicly traded on the New York Stock Exchange (WPC), W. P. Carey and its CPA® series of income-generating, non-traded REITs help companies and private equity firms release capital tied up in real estate assets.  Now in our 35th year, the W. P. Carey Group’s real estate holdings are highly diversified, comprised of more than 850 commercial and industrial assets spanning 24 industries and 14 countries.  www.wpcarey.com

Individuals interested in receiving future updates on W. P. Carey via e-mail can register at www.wpcarey.com/alerts.

This press release contains forward-looking statements within the meaning of the Federal securities laws.  A number of factors could cause the Company's actual results, performance or achievement to differ materially from those anticipated.  Among those risks, trends and uncertainties are the general economic climate; the supply of and demand for office and industrial properties; interest rate levels; the availability of financing; and other risks associated with the acquisition and ownership of properties, including risks that the tenants will not pay rent, or that costs may be greater than anticipated.  For further information on factors that could impact the Company, reference is made to the Company's filings with the Securities and Exchange Commission.

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