WP Carey Inc (WPC) 2003 Q3 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the W.P. Carey & Company third quarter earnings release conference call. At this time I would like to inform you all participants are in a listen-only mode. At the request of the company, we will open the conference for questions and answers after the presentation. I would now, like to turn the conference over to Susan Hide, Director of Investor Relations.

Thank you, Frank. Good morning, and welcome everyone to our 3rd quarter earnings conference call. Joining us today are W.P. Carey Chairman, Bill Carey, Co-CEO, Gordon DuGan and Chief Financial Officer, John Park. Today's call is being simulcast on our website, www.wpcarey.com, and will be archived for 90 days. We’ll also have a replay available this afternoon, at 1 o'clock available until November 3. The telephone number is 800-428-6051. International callers call 973-709-2089 and the access code is 30 7 885.

Before I turn over to Gordon DuGan, I need to remind you that statements made in this earnings call that are not historic facts may be deemed forward-looking statements. Factors that could cause actual results to differ materially from W.P. Carey expectations are list in our SEC filings. Now, I’ll turn the call over to Gordon.

Good morning, everyone. As you see from our press release our third quarter results were very good. For the first nine months of this year in terms of acquisition activity we've closed roughly $542 million dollars of investments versus roughly 500 million for the first nine months of last year.

For the third quarter we closed roughly 211 million and again, about the same as the third quarter of 2002. I wanted to reflect on those transactions for a moment. I think its important to point out corporate sale-leaseback business tends to not be pure commodity business. These are for the most part non-commodity transactions, corporate sale-leaseback are complex, highly structured corporate-financed-based investments. Therefore, we think there is significant value-added both for tenant clients for recipients of the capital, as well as for our investors.

Our pipeline for the fourth quarter next year is good. Although we would not want this conference call to pass without mentioning there is a great deal of capital in the real estate market generally or and that capital moves around looking for opportunity then it is probably too much capital chasing too little opportunity. We remain cautious about the possibility that overall returns in real estate generally get lower. But, again, our business tends to be a different business, it tends to be a corporate-finance related business where our investment opportunities are garnered because we have an ability to close, we have a brand name and there's a certainty of closing and that is what is important to the corporation engaged in the sale-leaseback as opposed to just paying more for an office building or a warehouse or hotel than somebody else is willing to pay.

Our investment team continues to work long and hard to unearth additional value-added sale-leaseback opportunities. We think again our brand name, our 30-plus years in the business and the capital base that we have give us a competitive advantage within the sale-leaseback business. On the asset management side, we continue to focus on two redevelopment projects we have.

We have 18-and-a-half acre site in Los Angeles we sold to the city of Los Angeles. As a fee contractor we are participating in the building of a school facility on that site. Progress is going well on that site. In addition to that we have a project outside of Cincinnati that is roughly 20-plus acres that was an old industrial facility and we are in the process of repositioning that from an industrial use to a retail use. And while we do that obviously we're not garnering a lot of income from the property, but we think there's very interesting upside in that property as a retail property. That's not reflected in any potential upside is not reflected in our current operating results.

Leasing activity though has been slow and I'm somewhat disappointed that we haven't seen more leasing activity. I think we're hardened to the fact that we're able to grow earnings without a pick-up in leasing activity and we certainly would welcome a pick-up in leasing activity because that would allow things to improve even more. We see leasing generally slow and we're still waiting from our vantage point, corporations don't seem to be aggressively taking up more space. Most of the leasing in our portfolio is focused on industrial property and the diverse portfolio of industrial property. But, we're certainly hopeful that that picks up, but haven't seen a significant pick-up on the leasing side.

Lastly, I wanted to as we look at our business two things that is we think investors should keep in mind that are important to us. One is that our debt levels are among the lowest in the real estate industry. We have very little debt and a very strong capital base. And we're able to grow earnings off of that base today. The second is insider ownership is among the highest in the industry. Led by our Founder and Chairman, Bill Carey, we have the team owns almost 40% of the stock of W.P. Carey and having a low debt level and a high-insider ownership to me is important because it shows that we're very well positioned for the future and we're going to make decisions based long-term value creation and not quarter-to-quarter earnings. It’s a remark that we often say we're not focused on quarter-to-quarter earnings but long-term value creation even though our quarter-to-quarter earnings numbers have been pretty good. And I would point out that we do it because that's really what we believe.

We're very optimistic about the future. Our prospects are terrific. We think both our results in growing earnings, our very strong balance sheet, our high insider ownership and our business prospects may not be fully reflected in our stock price and one of our other goals is to bring what we believe to be a terrific story to a broader group of investors and research people in the coming quarters. With that, over to John Park.

Thank you, Gordon. Good morning, everyone. Our third quarter was a strong quarter. The trend and fundamentals of our business are very positive and they're obviously reflected in the quarterly and nine-month results. Let me take you through the highlights of the income statement.

On the revenue side our management business continues to generate increasing revenues. For nine months management revenue increased little over $18 million. Rental revenue declined for the quarter and the nine month period. We expect this trend to continue for in the future given the weak real estate market that Gordon mentioned, and also given our disposition activity. For the year we sold 27 million worth of assets and while these such dispositions are dilative in the short run we believe that pruning our portfolio will serve us well into the future. Other income increased slightly for the quarter. For the nine months they increased substantially, due to $2.2 million mako payment from GAAP and settlement revenue from Integra and Hallwood.

On the expense side, interest expense decreased slightly. We continue to benefit from lower debt levels as we continue to strengthen our balance sheet and lower interest rates. As I have been saying, I don't know how much lower they can go but we continue to benefit. G&A expenses for the nine months increased about 8.2 million. It is obviously a significant increase, but 6.7 million of the increase was due to reimbursed expenses that we incurred on behalf of our affiliates. The remaining 1.5 million increase were compensation related.

The new development in terms of carrying treatment, I want to draw your attention to the last line before the net income. Labeled cumulative effect and change in accounting principle. This is the effect of FAS 150, which involves minority interest. This has drawn quite a bit of attention in our industry, but as you can see, in our case the cumulative effect is less than 200 thousand. The impact is minimal and is expected to stay that way. We're very pleased that we're able to generate over 8% growth in per share FFO over the first nine months. And as Gordon said, we are well positioned to weather the challenges of the weak economy as well as to take advantage of our opportunities in the coming future and we remain very optimistic about the future. With that, over to Bill Carey for his concluding remarks.

I just want to say again how much I appreciate the hard work that the team has been performing here. Some of us know that one of the leading security analyst said they would be (inaudible) and I agree with that, but I don't want have to be one of the people that has to brains.

When I was up at Harvard giving a lecture on secret of our success, I said the main secret was able to surround myself with people brighter than I am. I think we are going to be innovated we’re going to be scoring new areas of opportunity some of which are gonna cost us time and money. It looks like we're going to slow down, but we will be doing it because we want to move forward and keep moving forward and being innovative and being a leader in the industry.

That concludes our conference call in terms of our presentation and now we'd like to open up the call for any questions.

Thank you. The question-and-answer session will begin at this time. If you are using speakerphone please pick up the handset before pressing the numbers. If you have a question, push 1. To withdraw the question, press 2. Your questions will be taken in the order they are received. Please stand by for the first question. As a reminder, ladies and gentlemen, should you have questions, press 1 on your push-button telephone. At this time, there are no questions from the floor.

Okay. As always please feel free to contact our Investor Relations Department at 800-wpcarey, or any of us who’ve been on the call today if you do have any questions later. We also want to remind you Gordon and John will be attending [Inareit] in Boston from November 12- 14, and that Gordon will be speaking on the 13th at the 11am session entitled, Building Capital Assembling the Funds. We hope to see you there. Thank you.

Thank you. Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All participants may now disconnect