First, I should emphasize the dividend coverage and growth remains our most important goal and notwithstanding that decrease in AFFO, adjusted cash flow from operations did increase year-to-date from $55.9 million last year to $58.3 million so far this year. Because we increased the dividend the payout ratio also increased slightly from 76% to approximately 79%, but still this demonstrates our continued ability to cover the dividend despite some of the swing factors that I’ll get into in a moment.Returning to AFFO, we reported $1.65 per share for the first half of the year down from $2.79 per share for the same period in 2011. As I just mentioned, the problem with this comparison is that last year’s liquidation of CPA:14 skewed our first half 2001 results. For example, of that $2.79 per share AFFO that we reported for the first half of last year $1.01 of it resulted from the recognition of $52.5 million in termination and subordination disposition revenue that we earned from that liquidation. Without that transaction, the core business would have generated a $1.78 per share during the first six months of 2011 versus that $1.65 per share that I mentioned for the same period this year. Most of the remaining $0.13 per share decline in AFFO stem from the fact that structuring revenues are lower so far this year compared with the same period last year. That’s because we had lower deal volume of course. As we stated on this call many times, deal volume can swing up and down due to many factors beyond our control and I’ll talk about that and our pipeline in a moment, but as a result of this bunching or lumpiness as we sometime say of deal flow from quarter to quarter and year to year. The structuring fees are more variable source of revenues for us as compared to real estate related income and ongoing asset management fees. But I certainly don’t want to imply that we don’t like structuring fees far from it.
The deal volume they represent even when comparatively lower from one period to the next, still enables us to grow our assets under management and there are leading indicator for us of the more stable fee streams that we expect to earn in future periods on a larger portfolio, that is the ongoing asset management fees and our special GP interest and a percentage of the cash flows of CPA:16 and CPA:17, which Mark DeCesaris, our CFO will discuss in a few minutes. Still structuring fees are variable and in the interest of enhancing revenue stability and predictability, we’ve made it a key strategic priority to reduce the percentage of total revenues that they comprise. We’ve been successful in accomplishing that so far by increasing our rent earning asset base.One way to see this is to look at how much of the dividend is covered by AFFO that’s related only to real estate income. For example, AFFO from real estate alone year-to-date has been approximately $56.7 million, that’s up from $47.2 million last year, this same time by the way. And our Chief Operating Officer, Tom Zacharias will talk in more detail about this segment later on the call. Now that $56.7 million in real estate AFFO compared to distributions of $46.2 million for a coverage ratio of 1.22 times compared with a coverage ratio for the first half of last year of about 1.1, which was based on both lower AFFO from real estate at $47.2 million and lower distributions, $42.7 million. So you can see that we’re comfortably covering our dividend with a more stable predictable portion of our revenue stream. Read the rest of this transcript for free on seekingalpha.com