2012 Annual Report
1973
1979
CPA® series of investment
programs begins.
W. P. Carey institutes
independent Investment
Committee led by Equitable
Life Assurance executive
George Stoddard to review
all transactions.
W. P. Carey & Co. Inc. is
founded by Wm. Polk Carey,
who recognizes the inherent
value of diversified net lease
investment partnerships for
individual investors seeking
steady income and capital
preservation.
What first began as a small financing
company in 1973 has evolved into
one of the largest publicly traded
net lease REITs with an investment
portfolio of more than $14 billion.
Today—40 years later—we reflect
proudly on our history and
achievements and are well-positioned
to build on the accomplishments
of 2012 by employing the same
thoughtful and disciplined approach
we have used for decades.
a celebration
1983
W. P. Carey provides
William E. Simon with
funding for Gibson
Greetings LBO.
1988
W. P. Carey Group
assets under
management surpass
$500 million.
1991
CPA®:11 (later renamed
Carey Institutional
Properties Inc. or CIP®)
launches.
Investors see the bottom
of a national real estate
cycle; CPA® vacancy rate
is less than 1%.
1994
CPA®:12 launches.
1999
W. P. Carey opens
London office.
2001
CPA®:15 launches.
Celebrating our 40-year history
1980
W. P. Carey
Director
Dr. Lawrence Klein
wins Nobel Prize
in Economics.
1987
Mr. Carey settles from his
personal checking account
certain 20-year-old debts
to 90 Colorado sugar beet
farmers in southeastern
Colorado and western
Kansas resulting
from the
bankruptcy of
National Sugar
Manufacturing
Company, in
which Mr.
Carey’s family
held stock for
60 years.
1990
W. P. Carey
launches first
non-traded
REIT, CPA®:10.
1993
W. P. Carey surpasses
$1 billion in assets
under management.
2000
W. P. Carey & Co.
LLC (NYSE: WPC)
is created from the
merger of Carey
Diversified LLC and
W. P. Carey & Co. Inc.
1998
CPA®:14 launches.
Carey Diversified LLC,
created from CPA®:1-9,
begins trading on
NYSE (NYSE: CDC).
W. P. Carey Group
assets under
management surpass
$2 billion.
2002
CPA®: 10 liquidates.
2004
CIP® liquidates.
W. P. Carey completes
record $1 billion
in sale-leaseback
transactions.
2006
CPA®:12 liquidates.
The W. P. Carey
Foundation donates
$50 million to Johns
Hopkins University
to establish the Carey
Business School at Johns
Hopkins University.
2008
W. P. Carey opens
European Asset
Management office
in Amsterdam.
2010
Carey Watermark
Investors, W. P. Carey’s
lodging-focused REIT,
launches.
2012
W. P. Carey merges with
CPA®:15 and becomes
a publicly traded REIT
(NYSE: WPC).
CPA®:17 – Global
hits $1 billion
fundraising mark.
W. P. Carey Founder and
Chairman Wm. Polk
Carey passes away at the
age of 81.
2003
CPA®: 16 – Global launches.
W. P. Carey & Co. celebrates
its 30th anniversary
and surpasses $5 billion in
assets under management.
The W. P. Carey Foundation
endows the W. P. Carey School
of Business at Arizona State
University, which quickly
rises up the ranks to become
internationally recognized.
2007
CPA®:17 – Global
launches.
2009
The W. P. Carey Group
makes headlines by
providing $225 million
of sale-leaseback
financing to The New
York Times Company
through the acquisition
of approximately 750,000
rentable square feet
of its New York City
headquarters building.
2013
W. P. Carey celebrates
its 40th anniversary.
2011
CPA®:14 liquidates.
University of Maryland
Francis King Carey
School of Law is
endowed.
Financial highlights
(In thousands except share and per share data)
Year ended december 31, 2012
Operations
Revenues1
Net Income
Cash Flow from Operating Activities
Funds from Operations—as adjusted (AFFO)2
By Segment
EBITDA2
Investment Management
Real Estate Ownership
Total
AFFO2
Investment Management
Real Estate Ownership
Total
Per Share
Diluted Earnings per Share
Diluted AFFO per Share2
Distributions Declared per Share
Weighted Average Shares Outstanding (Diluted)
Stock Data
Price Range (January 1, 2012 through December 31, 2012)
Number of Stockholders
$275,750
62,132
80,643
180,631
$23,752
146,885
170,637
$21,120
159,511
180,631
$1.28
3.76
2.44
48,078,474
$41.65-$54.70
11,246
1 Net of reimbursed expenses.
2 This Annual Report and the financial highlights above contain references to non-GAAP financial measures, including AFFO and EBITDA.
• AFFO – Represents funds from operations as defined by the National Association of Real Estate Investment Trusts adjusted to include the
impact of certain non-cash charges to net income. • EBITDA – Represents earnings before interest, taxes, depreciation and amortization.
We believe that these non-GAAP financial measures are useful supplemental measures that assist investors to better understand the underlying
performance of our business segments. These non-GAAP financial measures do not represent net income or cash flow from operating activities
that are computed in accordance with GAAP and should not be considered an alternative to net income or cash flow from operating activities as an
indicator of our financial performance. These non-GAAP financial measures may not be comparable to similarly titled measures of other companies.
Please reference the Form 8-K, which was filed on February 26, 2013, and is available on our website at www.wpcarey.com, for a reconciliation of these
non-GAAP financial measures to our Consolidated Financial Statements. This Annual Report includes statements that are forward-looking within
the meaning of the Private Securities Litigation Reform Act of 1995. We cannot guarantee that any forward-looking statement will be accurate.
Investors should consider the risk factors identified in our periodic reports filed with the SEC when evaluating our forward-looking statements.
GAAP refers to accounting principles generally accepted in the United States of America.
Dear fellow investors
2012 ranked among the most exciting of our 40 years in the net lease business.
During the third quarter, we completed our conversion to a REIT and the
simultaneous merger with one of our managed REITs, Corporate Property
Associates 15. As a result, we were able to raise our dividend by 17% to $2.64
in the fourth quarter of 2012, which represented our 47th consecutive quarterly
increase. Combined with our core performance, this contributed to total
stockholder return of approximately 34% for the year.
Other highlights for 2012 included record-setting acquisition volume, including
more than $1.4 billion of investments for our managed non-traded REITs and for
W. P. Carey Inc.’s own balance sheet. We also achieved record-setting fundraising of
approximately $1 billion through our broker dealer subsidiary, Carey Financial, LLC.
The merger and REIT conversion significantly increased our financial strength
and liquidity. Our assets nearly doubled, and we welcomed thousands of new
stockholders to whom we issued roughly 28 million shares—an expansion in
our equity base of approximately 38%. The transaction also enhanced long-term
stockholder value in two ways: First, the REIT structure makes W. P. Carey more
appealing to a wider investor audience; and second, the merger with CPA®:15
increased the weighting of real estate income within our revenue mix. In fact,
about 89% of our Adjusted Funds From Operations in 2012 stemmed from real
estate ownership. This amounted to $159.5 million versus total distributions in
2012 of $113.9 million, for a dividend coverage ratio of about 1.40 times—from
real estate income alone.
Yet it’s also important to emphasize that, despite these structural changes, our
investment approach and discipline—honed over this 40-year period—remain
essentially the same. And, of course, we’ve retained our strategically valuable
Investment Management segment. This was W. P. Carey’s original business, the one
our Founder Bill Carey established in 1973 as a pioneer in the concept of offering
retail investors access to securitized pools of net leased assets. Over that period,
we’ve raised sixteen CPA® funds, fourteen of which have gone full cycle, delivering
stable dividend income to generations of investors. This track record and our long
experience have created tremendous brand value and brand loyalty for W. P. Carey.
This Investment Management platform is admittedly unique: W. P. Carey Inc.
currently is the only major public REIT with one like it. But we think this unique
aspect of our model endows us with important strategic advantages. Through
our Investment Management platform, we access investor capital through a
retail channel that is completely separate from the listed markets. This affords
us the ability to grow our revenues without diluting our equity base. We deploy
that capital through our managed REITs, known as the Corporate Property
Associates—or CPA®—series. As assets under management grow, so does the stable
fee stream that we earn as a percentage of gross asset value and through general
partner interests in the CPA® REITs. Again—no additional public equity is required
to grow revenues in this manner.
2 •
W. P. C a r e y I n c .
Total Assets Under Ownership and Management
Includes cash on hand.
W. P. Carey’s Annualized Dividends
dividends paid to stockholders have increased every year since we went
public in 1998 and for each of the last 48 consecutive quarters.
$3.28
$14.1B
CWI $0.3B
$10.8B
CPA®:17 – Global
$4.5B
$7.7B
CPA®:16 – Global
$3.7B
$1.98
$1.65
$1.73
$2.6B
WPC Inc.
$5.5B
$1.2B
$798M
$389M
$74M
1980
1985
1990
1995
2000
2005
2010
2012
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
As of 12/31/12
2011
2012
2013*
*As of 3/15/13
Cumulative Five-Year Total Return, 2007-2012
$100 invested in W. P. carey common stock on december 31, 2007, with dividends reinvested, would have appreciated in five years to $219.58—
a 23.9% average annual return, compared with 1.7% for the S&P 500 Index and 6.1% for the FTSe nareIT equity reITs Index.
W. P. CAREY
FTSE NAREIT
Equity REITs Index
S&P 500 INDEX
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
Sources: bloomberg for W. P. carey returns; S&P website for S&P 500 Index returns and SnL website for FTSe nareIT equity reITs Index returns
Past performance is no guarantee of future results.
2 0 1 2 A n n u a l R e p o r t • 3
50100150200$250 Kendall College, Chicago
Konica Minolta, Florida
Obi, Germany
Odessa Self Storage, Texas
C1000, The Netherlands
Kellogg, Brown & Root, Texas
During the financial crisis, when the traditional equity
markets were in crisis mode and other companies were
diluting themselves just to stay afloat, our continued
fundraising capability, through Carey Financial, permitted
us to take advantage of an opportunistic buyer’s market.
the supply of deals that come to market. Competition has
increased within the more commoditized segment of the net
lease market—particularly in the retail sector. Also, for each
given well-marketed transaction, the number of bidders has
increased, and, therefore, cap rates have compressed somewhat.
In summary, our business model produces revenue growth
through three primary sources:
■ First, most leases within the owned portfolio contain
built-in contractual rental increases that are either fixed
or tied to inflation. Each year, there will be varying offsets
or enhancements to this internal growth depending upon
lease expirations, renewals, dispositions, etc. We maintain
an active approach to asset management: We sell as
opportunistically as we buy, and then we recycle the
capital into new investments.
■ Second, we expect to grow revenue by increasing the
size of the managed portfolio. Currently, assets under
management are approximately $7.9 billion, and we
expect this to continue to grow.
■ Third, we intend to grow the owned portfolio through
accretive asset purchases on behalf of W. P. Carey Inc.
With respect to our investment outlook, although our annual
investment volume has exceeded a billion dollars in each
of the past three years, we always begin a new year on a
note of caution: It’s never certain what the volume will be.
We have no annual quota, and many factors will influence
That said, the cost of debt has declined, too, and as a
result, risk-adjusted leveraged returns still are attractive.
Also, because W. P. Carey Inc. has the ability to tap into
international markets and because we have the expertise
and the experience in underwriting transactions that are
off the radar screen of typical net lease buyers, we remain
confident in our ability to continue growing both the owned
portfolio and our Investment Management platform.
In conclusion, despite a more competitive landscape and
continued uncertainty in the global economic environment,
we believe W. P. Carey is well-positioned to thrive and grow.
I want to thank our investors, tenants and employees for
their continued confidence and support as we celebrate the
past 40 years of W. P. Carey’s history and success—and look
forward to the next 40!
With best wishes,
Trevor P. Bond
President and Chief Executive Officer
4 •
W. P. C a r e y I n c .
... we remain confident in our ability to continue
growing both the owned portfolio and our
Investment Management platform.
FedEx, Tennessee
2 0 1 2 A n n u a l R e p o r t • 5
Celebrating our performance
2012 was a landmark year for W. P. Carey. We
completed our merger with CPA®:15 and conversion
to REIT status in September. We announced record
acquisitions volume of $1.4 billion, and assets under
management grew from $12.1 billion to $14.1 billion
over the course of the year. We carried out these
accomplishments while adhering to our primary
objectives: to provide quality companies with capital
to run their businesses and to create investment
products that work in good times and bad. As we
enter our 40th year as a leader in the net lease sector,
we believe our risk management-driven investment
philosophy, combined with our commitment to
Investing for the Long RunTM, will contribute to our
continued success.
6 •
W. P. C are y Inc .
In 2012, we provided investors with a
34% total return
Our assets under ownership and management
have grown to
$14.1 billion
We have increased our dividends for
48
consecutive
quarters
Dividends
paid
in 2012
increased
by 17%
over 2011
Through our managed
funds, we raised more
than $1 billion
in equity capital
in 2012
We now own and manage more than 1,000 properties
in 19 different countries
Since going public in
1998, we have paid
60 quarterly
dividends
We completed a record
$1.4 billion of
investments
in 2012
2 0 1 2 A n n u a l R e p o r t • 7
Celebrating our business model
WPc owned portfolio
The majority of our revenues are generated by the net lease assets we own
directly and through joint ventures with our managed programs. In September
2012, we increased our owned assets significantly through the merger with
one of our managed REITs, CPA®:15. This transaction transformed W. P. Carey
into a company of significant size and scale—currently more than $4 billion in
equity market capitalization. Along with the REIT conversion that immediately
preceded it, the merger helped implement our overall strategy of growing assets
under ownership and transformed W. P. Carey into the second-largest public
net lease REIT.
The merger also expanded the global footprint of our real estate holdings and
we now own 39 million square feet across 10 countries. Approximately 71.5% of
our rental income is generated by properties located in the United States, with
the balance generated primarily from Europe. Our diverse portfolio consists of
423 properties leased to 124 corporate tenants. We believe this diversification—
an integral aspect of our investment philosophy—is a key to our success as it
limits our exposure to any one tenant, industry or geography. Our occupancy
rate remains strong at 98.7%.
There are several ways to grow the revenues derived from our owned portfolio.
We expect that the internal growth will continue to come from the contractual
rent increases in our leases. 98% of our leases call for increases, with the
majority being fixed or tied to inflation. Our leases are triple-net, which
typically requires the tenant to pay substantially all the costs associated with
operating and maintaining the property such as maintenance, insurance, taxes
and other operating expenses. Strategically, as a REIT with improved access
to capital markets, we also can grow through accretive asset purchases on our
own behalf. Most recently, these included a five-property Walgreens portfolio in
September 2012, as well as the January 2013 purchase of the Kraft headquarters
in Northfield, Illinois.
W. P. Carey has been a constant
source of capital since 1973,
providing long-term sale-leaseback
and build-to-suit financing for
companies worldwide. Our
cycle-tested strategy—portfolio
diversification, a focus on tenant
creditworthiness and the lasting
relationships we seek to build with
our tenants—has enabled us to
provide investors a steady cash flow
through varying economic cycles.
Diversified Net Lease Portfolio*
• Own $5.6 billion of net leased
real estate
• Generate approximately 72%
of our revenue through our
owned real estate assets
*as of 12/31/12
8 •
W. P. C a r e y I n c .
Investment management platform
An integral part of our success is our investment management business. Through
our non-traded REITs, we manage approximately $8.5 billion in assets, primarily
in CPA®:16 – Global and CPA®:17 – Global. This segment was W. P. Carey’s original
business. And today—40 years later—nearly all the stockholders in our managed
REITs are income-oriented, individual investors. Since we started the Corporate
Property Associates, or CPA®, series in 1979, we’ve raised 16 real estate investment
programs, 14 of which have gone full cycle, having delivered quarterly income
and solid long-term total returns to generations of investors. This track record has
created tremendous value and brand loyalty for W. P. Carey, which directly benefits
the stockholders in W. P. Carey Inc. through the stable management fees we earn.
Our investment management platform is admittedly unique and provides us with
key strategic advantages that other REITs don’t have: it allows us to grow our
assets under management, and thereby our revenues, without diluting W. P. Carey
stockholders through the issuance of equity. It also allows us to access capital
consistently, even in times of financial turmoil. During the recent economic crisis,
when public equity and debt markets virtually shut down, we still were raising
investor capital in the CPA® REITs through our wholly owned broker dealer,
Carey Financial, LLC. This capital allowed us to invest opportunistically—including
a $225 million investment in The New York Times’ headquarters in March 2009.
We deploy the managed REITs’ capital by investing primarily in net leased
properties and applying our disciplined corporate finance-focused credit and
real estate underwriting process. During 2012, we raised more than $1 billion of
investor capital through CPA®:17 – Global and Carey Watermark Investors, our
lodging-focused investment program. We completed more than $1.2 billion of
investments in this segment, encompassing over 60 properties totaling in excess
of 6 million square feet.
CPA® REITs and CWI*
• manage $8.5 billion of
real estate assets
• Generate approximately 28%
of our revenue in fee income
from managing the day-to-day
operations of our real estate
investments
*as of 12/31/12
2 0 1 2 A n n u a l R e p o r t • 9
Celebrating our diversification
Diversification has always been a hallmark of W. P. Carey’s investment approach.
Although many REITs are sector specific, as a net lease investor, we are able to
leverage our credit-underwriting capabilities across all industries, property types
and regions. We do this for several reasons:
First, we believe that building a diverse portfolio allows us to mitigate risk by not
having our overall performance materially impacted by any one tenant, geographic
region or property type. We have seen this play out to our benefit through various
economic cycles.
Second, because we have experience in such a diverse array of investments, we are
able to weigh opportunities—their returns and pricing—against each other and
select those we believe have the best risk-return potential. In addition, by not being
constrained by any one investment sector, we are able to be opportunistic, selling into
frothy markets and buying into those that appear to have better value propositions.
Tenant Industry Diversification Chart: Owned and Managed Portfolios
.88%
4.00
.85
3.04
4.17
4.39
4.87
4.20
.72
2.27
.82
7.78
1.15
.06
.61
6.80
5.11
3.13
2.32
2.81
2.85
5.18
.92
21.33
2.58
.83
4.23
1.80
.10
C
o
n
s
t
r
u
c
t
i
o
n
a
n
d
B
u
i
l
i
d
n
g
F
i
n
a
n
c
e
G
r
o
c
e
r
y
F
o
r
e
s
t
P
r
o
d
u
c
t
s
a
n
d
P
a
p
e
r
E
l
e
c
t
r
o
n
i
c
s
C
o
n
s
u
m
e
r
S
e
r
v
i
c
e
s
C
o
n
s
u
m
e
r
a
n
d
D
u
r
a
b
l
e
G
o
o
d
s
C
o
n
s
u
m
e
r
N
o
n
-
d
u
r
a
b
l
e
G
o
o
d
s
F
e
d
e
r
a
l
,
S
t
a
t
e
a
n
d
L
o
c
a
l
G
o
v
e
r
n
m
e
n
t
s
H
e
a
l
t
h
c
a
r
e
,
E
d
u
c
a
t
i
o
n
a
n
d
C
h
i
l
d
c
a
r
e
I
n
s
u
r
a
n
c
e
H
o
t
e
l
s
a
n
d
G
a
m
n
g
i
M
a
c
h
n
e
r
y
i
L
e
i
s
u
r
e
,
A
m
u
s
e
m
e
n
t
,
E
n
t
e
r
t
a
i
n
m
e
n
t
M
e
d
i
a
:
P
r
i
n
t
i
n
g
a
n
d
P
u
b
l
i
s
h
n
g
i
i
M
n
n
g
i
,
M
e
t
a
l
s
a
n
d
P
r
i
m
a
r
y
I
n
d
u
s
t
r
i
e
s
R
e
t
a
i
l
S
t
o
r
e
s
T
e
l
e
c
o
m
m
u
n
i
c
a
t
i
o
n
s
U
t
i
l
i
t
i
e
s
T
r
a
n
s
p
o
r
t
a
t
i
o
n
—
C
a
r
g
o
T
r
a
n
s
p
o
r
t
a
t
i
o
n
—
P
e
r
s
o
n
a
l
T
e
x
t
i
l
e
s
,
L
e
a
t
h
e
r
a
n
d
A
p
p
a
r
e
l
B
u
i
l
i
d
n
g
s
a
n
d
R
e
a
l
E
s
t
a
t
e
B
u
s
i
n
e
s
s
a
n
d
C
o
m
m
e
r
c
i
a
l
S
e
r
v
i
c
e
s
C
h
e
m
i
c
a
l
s
,
P
l
a
s
t
i
c
s
,
R
u
b
b
e
r
a
n
d
G
l
a
s
s
B
a
n
k
i
n
g
A
u
t
o
m
o
b
i
l
e
A
e
r
o
s
p
a
c
e
a
n
d
D
e
f
e
n
s
e
B
e
v
e
r
a
g
e
s
,
F
o
o
d
a
n
d
T
o
b
a
c
c
o
10 •
W. P. C a r e y I n c .
In 2012, we completed $1.4 billion of investments for our own portfolio
and on behalf of our managed programs.
Bearing Technologies
Location: avon, Ohio
Property Type: manufacturing
Acquisition Date: august 2012
Space: 116,000 sq. ft.
Entity: cPa®:17 – Global
Bearing Technologies, LLC engineers, manufactures and private labels premium
wheel hub assemblies, clutch release, drive shaft center support, racing, axle repair
and specialty industrial bearings. With more than 20 years in the automotive
aftermarket business, Bearing-Tech stands alone as the largest manufacturer of
premium aftermarket hub assemblies in the United States.
RLJ McLarty Landers Automotive
Location: alabama, arkansas, Louisiana,
missouri, Tennessee and Texas
Property Type: automotive dealerships
Acquisition Date: September 2012
Space: 377,000 sq. ft.
Entity: cPa®:17 – Global
RLJ McLarty Landers Automotive is the 19th largest
dealer group in the country with 24 automotive
franchises in the United States. The company was ranked
31st on the Automotive News annual list of Top 125
Dealerships in the U.S.
Blue Cross and Blue Shield of Minnesota
Location: eagan, mn; aurora, mn; Virginia, mn
Property Type: Office
Acquisition Date: January 2012
Space: 1.1 million sq. ft.
Entity: cPa®:17 – Global
Blue Cross and Blue Shield of Minnesota is an independent
licensee of the Blue Cross and Blue Shield Association,
a not-for-profit, taxable organization headquartered in
Chicago. Chartered in 1933, it continues to carry out its
mission as a health company promoting a wider, more
economical and timely availability of health services for
the people of Minnesota.
Agrokor
Location: croatia
Property Type: retail
Acquisition Date: december 2012
Space: 278,000 sq. ft.
Entity: cPa®:17 – Global
Founded in 1976, Agrokor is the largest private company in Croatia. A vertically
integrated business with nearly 40,000 employees, it is Croatia’s leading food
producer, processor, distributor and retailer.
2 0 1 2 A n n u a l R e p o r t • 11
Celebrating our tenant relationships
We seek to secure long-term leases with creditworthy tenants we believe will
continue to occupy the facilities we’ve purchased for 15 to 20 years. Our asset
management team works to ensure that our facilities remain occupied, rent is paid
and transmitted on time, assets are sold if the right opportunity arises and, if a
tenant does enter into financial difficulty, we continue to receive the rental income
our investors have come to rely on.
We build working relationships with our tenants so when they want to make an
additional acquisition or build a new facility or expand their existing one, they
come to us to make it happen. Working with our tenants on their long-term real
estate helps our team protect and enhance asset values and maintain the high
portfolio-level occupancy we have sustained for decades.
12 •
W. P. C a r e y I n c .
We build working relationships with our tenants so that when they want to make
an additional acquisition or build a new facility or expand their existing one,
they come to us to make it happen.
2 0 1 2 A n n u a l R e p o r t • 13
Celebrating our people
“I learned long ago that no one can
excel at everything, and I resolved to
surround myself with people who are
smarter than I. As a result, we have an
extraordinarily talented team. We are
committed to making our company a
place where great people want to stay
and to constantly recruiting new talent
to keep our bench deep and all of us on
our toes.” – Wm. Polk Carey
We have always believed in building a strong team of the best and brightest,
and we feel our human capital has always been one of our most important
assets. Just as we invest for the long run with our tenants, W. P. Carey fosters an
entrepreneurial environment where employees are encouraged to grow and take
on additional responsibilities; this long-term investment in our employees has
been a critical component of our success. Over the past four decades, we have
grown from a two-person boutique firm to an NYSE-traded REIT with more than
200 employees responsible for over $14 billion in assets spread across 19 countries
in our owned and managed portfolios. Our employees strive to provide value to
our investors and tenants, and, although each department has its own function,
we all work together toward a common goal: to provide steady dividends to
investors and to enhance stockholder value over time.
Much of our success over the past 40 years has been due to our mission to employ
talented and driven individuals to ensure our future success, each believing in our
philosophy of Investing for the Long RunTM.
14 •
W. P. C a r e y I n c .
Doing good while doing well
Doing Good While Doing Well was one of Bill Carey’s favorite
mottos and has been a core principle at W. P. Carey during
our now 40-year history. He believed—as we do today—that
our business by its very nature promotes prosperity. But he
also believed that his responsibility did not end there, and,
through the W. P. Carey Foundation, he supported a wide
variety of educational institutions with the greater goal of
improving America’s competitiveness.
Over the years, many of our employees have been involved
in philanthropic and charitable activities, devoting their
time and resources to causes near and dear to their hearts.
We believe it is time for the Company to incorporate
volunteerism into the workplace. To that end, we recently
launched Carey Forward, our new program that will allow
employees to take one day a year to volunteer outside the
office and bring to our community the same qualities they
bring to their professional work: excellence, commitment
and, perhaps most important, Doing Good While Doing Well.
Why Carey Forward? When the University of Maryland
School of Law—later renamed the Francis King Carey
School of Law—announced a $30 million donation from
the W. P. Carey Foundation in 2011, the school’s atrium
was packed with students wearing yellow “Carey Forward”
campaign-style buttons. It was prophetic to what we would be
challenged to do—Carey Forward— just a few months later
when Bill Carey passed away on January 2, 2012.
For 2013, we have identified three programs we believe will
combine characteristics that will be core to this program:
City Harvest, Habitat for Humanity and Junior Achievement
of America. We are excited to expand our work as good
corporate citizens by supporting these fine organizations.
Here is a snapshot of how our employees are Doing Good
While Doing Well.
■ Christina Barone, Vice President of Due Diligence,
volunteers her time to being a member of Team SOAR
for Speaking Out About Rape, Inc.™ (SOAR™) and
serving as a member of the Speakers’ Bureau for RAINN
(Rape, Abuse & Incest National Network).
■ Sarah Yonkowski, Investor Relations Manager,
participated in Track Friday, a community-driven
initiative to raise awareness and funds for causes
supporting others in the aftermath of Hurricane Sandy.
Track Friday involved fundraising for a half marathon
with 20 pushups after every mile. Sarah was able to raise
over $1,500 for the FoodBank of Monmouth and Ocean
Counties, and the group collectively raised more than
$18,000 for local charities in New Jersey.
■ Nelson Lee in Information Systems helped start the
charitable event Racers Against Leukodystrophy, a
racing event created to raise awareness and funds for
leukodystrophy, a debilitating brain disease with no
current cure most common in children. Nelson and a
group of volunteers from the auto racing community
formed a day of competitive go-kart racing.
■ Chris DiGiacomo, Director of Operations, contributed his
time and funds to his community by bringing aid to those
affected by Hurricane Sandy and helping to restore and
rebuild homes. He handed out food and supplies door to
door, rebuilt the ground level of an elderly woman’s home
and, along with WPC employee James Council, spent a
day gutting a home that had been completely flooded.
2 0 1 2 A n n u a l R e p o r t • 15
Celebrating our global strategy
Japan 2 properties
China 1 propertY
Finland 12 properties
SWeden 1 propertY
netherlandS 9 properties
Belgium 3 properties
united StateS 985 properties
Canada 8 properties
mexiCo 1 propertY
united Kingdom 26 properties
Spain 32 properties
FranCe 116 properties
W. P. Carey has been investing internationally for more than 10 years, making our
first investment in France in 1998 and having opened our London investment
office in 1999. We believe W. P. Carey’s experience affords us a distinct competitive
advantage over other real estate investors and sources of financing in identifying and
evaluating potential investment opportunities. Through our owned and managed
portfolios, we now have investments in 18 countries outside the United States
totaling more than $3.5 billion, making us the leading global net lease investor.
germany 86 properties
italy 20 properties
Croatia 9 properties
hungary 2 properties
poland 24 properties
thailand 22 properties
malaySia 3 properties
16 •
W. P. C a r e y I n c .
Financial highlights
Table of ConTenTs
18
Selected Financial Data
19
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
44 Quantitative and Qualitative Disclosures About Market Risk
46
Report of Independent Registered Public Accounting Firm
47
Consolidated Balance Sheets
49
Consolidated Statements of Income
51
Consolidated Statements of Comprehensive Income
52
Consolidated Statements of Equity
54
Consolidated Statements of Cash Flows
58 Notes to Consolidated Financial Statements
106 Management’s Report on Internal Control Over Financial Reporting
107 Report on Form 10-K
108 Corporate Information
2 0 1 2 A n n u a l R e p o r t • 17
Selected Financial Data
The following selected financial data should be read in conjunction with the consolidated financial statements and related set
forth later in this document (in thousands, except per share data):
2012
2011
2010
2009
2008
Years ended deCember 31,
operating data(a)
Revenues from continuing operations(b) (c)
Income from continuing operations(b) (c)
Net income
Add: Net (income) loss attributable to
noncontrolling interests
Add: Net income attributable to redeemable
noncontrolling interests
Net income attributable to W. P. Carey
Basic Earnings Per Share:
Income from continuing operations attributable
to W. P. Carey
Net income attributable to W. P. Carey
Diluted Earnings Per Share:
Income from continuing operations attributable
to W. P. Carey
Net income attributable to W. P. Carey
Cash distributions declared per share(d)
balance sheet data
Net investments in real estate(e)
Total assets
Long-term obligations(f)
other Information
$ 373,995
$ 327,784
$ 260,645
$ 217,190
$ 219,525
79,371
62,779
151,993
139,138
83,835
74,951
59,830
70,568
63,527
78,605
(607)
1,864
314
713
950
(40)
62,132
(1,923)
139,079
(1,293)
73,972
(2,258)
69,023
(1,508)
78,047
1.65
1.30
1.62
1.28
2.44
3.76
3.44
3.74
3.42
2.19
2.08
1.86
2.08
1.86
2.03
1.46
1.74
1.47
1.74
2.00
1.60
1.98
1.58
1.95
1.96
$ 3,241,199
$1,217,931
$ 946,975
$ 884,460
$ 918,741
4,609,042
1,968,397
1,462,623
1,172,326
1,093,336
1,111,136
589,369
396,982
326,330
326,874
Net cash provided by operating activities
$
80,643
$ 80,116
$ 86,417
$ 74,544
$ 63,247
Cash distributions paid
Payments of mortgage principal(g)
113,867
54,964
85,814
25,327
92,591
14,324
78,618
9,534
87,700
9,678
(a) Certain prior year amounts have been reclassified from continuing operations to discontinued operations.
(b) The year ended December 31, 2012 includes the impact of the Merger, which was completed on September 28, 2012 (Note 3).
(c) The year ended December 31, 2011 includes $52.5 million of incentive, termination and subordinated disposition revenue recognized in connection with the CPA®:14/16 Merger.
(d) The year ended December 31, 2009 excludes a special distribution of $0.30 per share paid in January 2010 to shareholders of record at December 31, 2009.
(e) Net investments in real estate consists of Net investments in properties, Net investments in direct financing leases, Equity investments in real estate and the Managed REITs, Real estate under construction
and Assets held for sale, as applicable.
(f) Represents non-recourse mortgages and note obligations. The year ended December 31, 2012 includes the $175.0 million Term Loan Facility (Note 12), which was drawn down in full in connection with the
Merger (Note 3).
(g) Represents scheduled mortgage principal payments.
18 •
W. P. C a r e y I n c .
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to provide the
reader with information that will assist in understanding our financial statements and the reasons for changes in certain key
components of our financial statements from period to period. MD&A also provides the reader with our perspective on our
financial position and liquidity, as well as certain other factors that may affect our future results. The discussion also provides
information about the financial results of the segments of our business to provide a better understanding of how these
segments and their results affect our financial condition and results of operations.
busIness overvIew
We provide long-term financing via sale-leaseback and build-to-suit transactions for companies worldwide and manage a global
investment portfolio of 1,007 properties, including our owned portfolio. Our business operates in two segments — Real Estate
Ownership and Investment Management, as described below. On September 28, 2012, as part of a plan to reorganize the business
operations of W. P. Carey & Co. LLC in order to qualify as a REIT for U. S. federal income tax purposes, W. P. Carey & Co.
LLC merged with and into W. P. Carey Inc., with W. P. Carey Inc. as the surviving corporation, which we refer to as the Merger.
Additionally, on September 28, 2012, CPA®:15 merged with our subsidiary, with CPA®:15 surviving as our indirect wholly-owned
subsidiary. As a result of both transactions, we succeeded to all of the businesses, assets and liabilities of each of W. P. Carey &
Co. LLC and CPA®:15, and own all the assets previously held by, and carry on the business of each of, W. P. Carey & Co. LLC and
CPA®:15. We now hold substantially all of our real estate assets, including the assets acquired from CPA®:15, in our Real Estate
Ownership segment, while the activities conducted by our Investment Management segment subsidiaries are organized under
TRSs (Note 3).
Real Estate Ownership — We own and invest in commercial properties in the U.S. and Europe that are then leased to
companies, primarily on a triple-net lease basis, which requires the tenant to pay substantially all of the costs associated with
operating and maintaining the property.
We earn lease revenues from our wholly-owned and co-owned real estate investments. In addition, we generate equity income
through our investments in the shares of the Managed REITs. In addition, through our special member interests in the
operating partnerships of the Managed REITs, we participate in the cash flows of those REITs. Lastly, we earn other real estate
revenues through our investments in self-storage facilities and hotels in the U.S.
Investment Management — We earn revenue as the advisor to the Managed REITs. For the periods presented, we acted as
advisor to the following affiliated, publicly-owned, non-listed Managed REITs: CPA®:14 (through the date of the CPA®:14/16
Merger), CPA®:15 (through the date of the Merger), CPA®: 16 – Global, CPA®: 17 – Global, and CWI. Under the advisory
agreements with the Managed REITs, we perform various services, including but not limited to the day-to-day management of
the Managed REITs and transaction-related services. We structure and negotiate investments and debt placement transactions
for the Managed REITs, for which we earn structuring revenue, and we manage their portfolios of real estate investments, for
which we earn asset-based management revenue.
While we are raising funds for a Managed REIT, the REIT reimburses us for certain costs, primarily broker-dealer commissions
paid on its behalf and marketing and personnel costs. The Managed REITs also reimburse us for many of our costs associated
with the evaluation of transactions on their behalf that are not completed.
We also earn wholesaling fees and dealer manager fees in connection with the initial public offerings of the Managed REITs.
We reimburse, or “re-allow,” all or a portion of the dealer manager fees to selected dealers in the offerings. Dealer manager fees
that are not re-allowed are classified as wholesaling revenue. Wholesaling revenue earned is generally offset by underwriting
costs incurred in connection with the offerings.
2 0 1 2 A n n u a l R e p o r t • 19
fInanCIal HIgHlIgHTs
Our results for the years ended December 31, 2012 and 2011 included the following significant unusual items:
• Increased lease revenue of $61.9 million for the year ended December 31, 2012 as compared to 2011 primarily due to
income generated from properties acquired in the Merger;
• Costs incurred in connection with the Merger of $31.7 million in 2012; and
• Non-recurring revenues of $52.5 million earned in 2011 in connection with providing a liquidity event for CPA®:14
stockholders, through the CPA®:14/16 Merger, in May 2011.
• Share dilution created by the issuance of 28,170,643 shares on September 28, 2012 to stockholders of CPA®: 15 in
connection with the Merger.
(In THousands)
Years ended deCember 31,
2012
2011
2010
Total revenues (excluding reimbursed costs from affiliates)
$ 275,750
$ 262,955
$200,622
Net income attributable to W. P. Carey
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Cash distributions paid
Supplemental financial measure:
62,132
80,643
126,466
(113,292)
113,867
139,079
80,116
(126,084)
10,502
85,814
73,972
86,417
(37,843)
(1,548)
92,591
Funds from operations - as adjusted (AFFO)
180,631
188,853
130,870
We consider the performance measures listed above, including Funds from operations — as adjusted (“AFFO”), a supplemental
measure that is not defined by GAAP (“non-GAAP”), to be important measures in the evaluation of our results of operations
and capital resources. We evaluate our results of operations with a primary focus on increasing and enhancing the value,
quality and amount of assets under management by our Investment Management segment and the ability to generate the cash
flow necessary to meet our objectives in our Real Estate Ownership segment. Results of operations by reportable segment
are described below in Results of Operations. See Supplemental Financial Measures below for our definition of AFFO and a
reconciliation to its most directly comparable GAAP measure.
Total revenues increased in 2012 as compared to 2011. The increase in revenues from our Real Estate Ownership segment
was primarily due to revenues from the properties we acquired in the Merger in September 2012 and, to a lesser extent, from
properties we purchased in May 2011 from CPA®:14 in connection with the CPA®:14/16 Merger. Revenues from our Investment
Management segment decreased during the year primarily due to the incentive, termination and subordinated disposition
revenue recognized in connection with providing a liquidity event for CPA®:14 stockholders through the CPA®:14/16 Merger in
May 2011, while in 2012 we waived the subordinated disposition and termination fees we would have been entitled to receive
from CPA®:15 upon its liquidation through the Merger pursuant to the terms of our advisory agreement with CPA®:15.
Net income attributable to W. P. Carey decreased in 2012 as compared to 2011. Results from operations in our Real Estate
Ownership segment were lower during the current year as compared to 2011, primarily due to costs incurred in connection
with the Merger. Results from operations in our Investment Management segment decreased during the current year primarily
due to the incentive, termination and subordinated disposition revenue recognized in connection with the CPA®:14/16 Merger
in 2011 that we did not receive in connection with the Merger in 2012.
Cash flow from operating activities increased slightly during 2012 as compared to 2011. Operating cash flows generated by
the properties acquired in the Merger was substantially offset by the subordinated disposition revenue received from CPA®:14
upon completion of the CPA®:14/16 Merger in May 2011 that we did not receive in connection with the Merger in 2012.
Our annualized cash distribution increased to $2.64 per share for the year ended December 31, 2012, from $2.25 per share
in 2011. The increase primarily reflects earnings generated from growth in our owned real estate portfolio and our increased
ownership in, and our participation in the cash flows of, CPA®:16 – Global as a result of the CPA®:14/16 Merger, as well as the
additional income anticipated to result from the Merger.
20 •
W. P. C a r e y I n c .
Our AFFO supplemental measure decreased in 2012 as compared to 2011, primarily due to the incentive, termination and
subordinated disposition income recognized in connection with the CPA®:14/16 Merger in 2011 that we did not receive
in connection with the Merger in 2012. Asset Management revenue decreased in 2012 because performance fees were no
longer received from CPA®:14 after the CPA®:14/16 Merger, or from CPA®:16 – Global after the CPA®:16 – Global UPREIT
Reorganization, both of which occurred in May 2011 (Note 4), and because asset management fees and performance fees
are no longer being received from CPA®:15 after the Merger in September 2012. These decreases were partially offset by an
increase in AFFO in our Real Estate Ownership segment in 2012 primarily as a result of income earned from the properties
we purchased from CPA®:14 in 2011 in connection with the CPA®:14/16 Merger and those we acquired from CPA®:15 in the
Merger as well as income generated from our equity interests in the Managed REITs, including our $121.0 million incremental
investment in CPA®:16 – Global in connection with the CPA®:14/16 Merger.
How we evaluaTe resulTs of operaTIons
We evaluate our results of operations with a primary focus on increasing and enhancing the value, quality and amount of assets
under management by our Investment Management segment and seeking to increase value in our Real Estate Ownership
segment. We focus our efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease
renewals, or selectively selling assets in order to increase value in our real estate portfolio. The ability to increase assets under
management by structuring investments on behalf of the Managed REITs is affected, among other things, by the Managed
REITs’ ability to raise capital and our ability to identify and enter into appropriate investments and financing.
Our evaluation of operating results includes our ability to generate necessary cash flow in order to fund distributions to our
stockholders. As a result, our assessment of operating results gives less emphasis to the effects of unrealized gains and losses,
which may cause fluctuations in net income for comparable periods but have no impact on cash flows, and to other non-cash
charges such as depreciation and impairment charges. We do not consider unrealized gains and losses resulting from short-
term foreign currency fluctuations when evaluating our ability to fund distributions. Our evaluation of our potential for
generating cash flow includes an assessment of the long-term sustainability of both our real estate portfolio and the assets we
manage on behalf of the Managed REITs.
We consider cash flows from operating activities, cash flows from investing activities, cash flows from financing activities and
certain non-GAAP performance metrics to be important measures in the evaluation of our results of operations, liquidity and
capital resources. Cash flows from operating activities are sourced primarily by revenues earned from structuring investments
and providing asset-based management services on behalf of the Managed REITs and long-term lease contracts from our real
estate ownership. Our evaluation of the amount and expected fluctuation of cash flows from operating activities is essential in
evaluating our ability to fund operating expenses, service debt and fund distributions to stockholders.
We focus on measures of cash flows from investing activities and cash flows from financing activities in our evaluation of our
capital resources. Investing activities typically consist of the acquisition or disposition of investments in real property and
the funding of capital expenditures with respect to real properties. Financing activities primarily consist of the payment
of distributions to stockholders, borrowings and repayments under our lines of credit and the payment of mortgage
principal amortization.
resulTs of operaTIons
We evaluate our results of operations by our two primary reportable segments — Real Estate Ownership and Investment
Management. Effective January 1, 2011, we include our equity investments in the Managed REITs in our Real Estate Ownership
segment. The equity income or loss from the Managed REITs that is now included in our Real Estate Ownership segment
represents our proportionate share of the revenue less expenses of the net-leased properties held by the Managed REITs. This
treatment is consistent with that of our directly-owned properties. Results for 2010 have been reclassified to conform to the
current period presentation.
2 0 1 2 A n n u a l R e p o r t • 21
Effective April 1, 2012, we include cash distributions and deferred revenue received and earned from the operating partnerships
of CPA®:16 – Global, CPA®:17 – Global and CWI in our Real Estate Ownership segment. Results for 2011 and 2010 have been
reclassified to conform to the current period presentation. A summary of comparative results of these business segments is
as follows:
real estate ownership
(In THousands)
revenues
Lease revenues:
Rental income
Interest income from direct
financing leases
Total lease revenues
Other real estate income
operating expenses
Depreciation and amortization
Property expenses
General and administrative
Other real estate expenses
Impairment charges
other Income and expenses
2012
2011
CHange
2011
2010
CHange
Years ended deCember 31,
$ 108,707
$ 52,360
$ 56,347
$ 52,360
$ 41,940
$ 10,420
15,796
124,503
26,312
150,815
(45,046)
(13,041)
(39,748)
(9,850)
(10,467)
10,278
62,638
22,499
85,137
(20,883)
(10,145)
(4,454)
(10,784)
1,365
(118,152)
(44,901)
5,518
61,865
3,813
65,678
(24,163)
(2,896)
(35,294)
934
(11,832)
(73,251)
10,278
62,638
22,499
85,137
(20,883)
(10,145)
(4,454)
(10,784)
1,365
9,542
51,482
17,273
68,755
(13,657)
(8,009)
(4,419)
(8,121)
(1,140)
(44,901)
(35,346)
736
11,156
5,226
16,382
(7,226)
(2,136)
(35)
(2,663)
2,505
(9,555)
Other interest income
311
91
220
91
124
(33)
Income from equity investments in real
estate and the Managed REITs
Gain on change in control of interests
Other income and (expenses)
Interest expense
Income from continuing operations
before income taxes
Provision for income taxes
Income from continuing operations
62,392
20,744
3,207
(50,573)
36,081
68,744
(4,012)
64,732
Loss from discontinued operations
(16,592)
Net income from real estate ownership
48,140
51,228
27,859
4,412
(21,770)
61,820
102,056
(2,243)
99,813
(12,855)
86,958
11,164
(7,115)
(1,205)
(28,803)
(25,739)
(33,312)
(1,769)
(35,081)
(3,737)
(38,818)
51,228
27,859
4,412
(21,770)
61,820
102,056
(2,243)
99,813
(12,855)
86,958
30,992
781
292
(15,636)
16,553
49,962
(2,154)
47,808
(8,884)
38,924
20,236
27,078
4,120
(6,134)
45,267
52,094
(89)
52,005
(3,971)
48,034
Less: Net income attributable to
noncontrolling interests
Net income from real estate ownership
(3,245)
(678)
(2,567)
(678)
(2,058)
1,380
attributable to W. P. Carey
$ 44,895
$ 86,280
$ (41,385)
$ 86,280
$ 36,866
$49,414
22 •
W. P. C a r e y I n c .
The following tables present other operating data that management finds useful in evaluating results of operations:
Occupancy – WPC(a)
Total net-leased properties – WPC(a)
Total operating properties – WPC(b)
Total net-leased properties – Managed REITs
Total operating properties – Managed REITs(b)
Financings structured – WPC ($ millions)(c)
New investments – WPC – consolidated ($ millions)(d)
New investments – WPC – equity investments ($ millions)
Investments structured – Managed REITs ($ millions)(e)
Average U. S. dollar/euro exchange rate(f)
U.S. Consumer Price Index(g)
2012
98.7%
423
22
705
69
2012
198.8
24.6
1.3
1,207.6
1.2861
229.6
as of deCember 31,
2011
93.0%
157
22
816
49
2010
89.0%
163
22
827
3
for THe Years ended deCember 31,
2011
469.8
—
—
1,229.5
1.3926
225.7
2010
70.3
88.6
—
1,048.1
1.3279
219.2
(a) Amounts as of December 31, 2012 reflect 305 properties acquired from CPA®:15 in the Merger in 2012 with a total fair value of approximately $1.8 billion (Note 3). Amounts as of December 31, 2011 reflect
the acquisition of the remaining interests in three properties from CPA®:14 in connection with the CPA®:14/16 Merger in May 2011 for approximately $119.4 million (Note 4).
(b) Operating properties comprise self-storage properties and hotels that are managed by third parties. WPC’s operating properties are all self-storage properties with the exception of one hotel for all
periods presented.
(c) The year ended December 31, 2012 includes the $175.0 million Term Loan Facility obtained in connection with the Merger (Note 3). The year ended December 31, 2011 includes a $200.0 million increase in
borrowing capacity obtained on our then-existing unsecured Line of Credit.
(d) Amount for the year ended December 31, 2012 does not include our acquisition of 52.63% ownership interest in Marcourt Investments Inc.
(e) Includes properties owned by CPA®:16 – Global and CPA®:17 – Global for all periods. Includes properties owned by CPA®:14 through the date of the CPA®:14/16 Merger in May 2011. Includes properties
owned by CPA®:15 through the date of the Merger on September 28, 2012. Includes properties owned by CWI from the date of its first investment in May 2011. For loans, amount includes funding through
December 31, 2012.
(f) The average conversion rate for the U.S. dollar in relation to the euro decreased during the year ended December 31, 2012 as compared to 2011 and increased during the year ended December 31, 2011 as
compared to 2010, resulting in a negative impact on earnings in 2012 and a positive impact on earnings in 2011 from our euro-denominated investments.
(g) Many of our domestic lease agreements and those of the Managed REITs include contractual increases indexed to the change in the U. S. CPI.
2 0 1 2 A n n u a l R e p o r t • 23
The following table sets forth the net lease revenues (i.e., rental income and interest income from direct financing leases) that
we earned from lease obligations through our consolidated real estate investments (in thousands):
lessee
U-Haul Moving Partners Inc.(a) (b)
Federal Express Corporation(c)
CheckFree Holdings, Inc.(b)
OBI Group(a) (b) (d) (e)
Marcourt Investments Inc.(a)
The American Bottling Company(f)
Amylin Pharmaceuticals, Inc.(c)
Bouygues Telecom, S.A.(b) (d)
Carrefour France, SAS(d) (g)
JP Morgan Chase Bank, N.A.(h)
Google, Inc. (formerly leased to Omnicom Group Inc.)(i)
Hellweg Die Profi-Baumarkte GmbH & Co KG (Hellweg 1)(a) (d)
Orbital Sciences Corporation(j)
True Value Company(a) (b)
Eroski Sociedad Cooperativa(b) (d) (k)
AutoZone, Inc.(f)
Quebecor Printing, Inc.
Sybron Dental Specialties Inc.
Unisource Worldwide, Inc.
Pohjola Non-Life Insurance Company LTD(a) (d)
TietoEnator Plc(a) (b) (d)
Jarden Corp.
Eagle Hardware & Garden, a subsidiary of Lowe’s Companies
Sprint Spectrum, L.P.
BE Aerospace, Inc.
Police Prefecture, French Government(a) (b) (d)
Foster Wheeler AG(a)
Enviro Works, Inc.
Other(b) (d) (l)
Years ended deCember 31,
2012
2011
2010
$ 8,152
$ —
$ —
7,289
5,342
4,925
4,878
4,488
4,361
4,090
3,961
3,926
3,887
3,813
3,312
3,234
2,989
2,332
1,986
1,979
1,926
1,885
1,858
1,720
1,587
1,555
1,534
1,405
1,244
1,203
33,642
$ 124,503
4,922
5,216
1,050
—
4,943
2,908
4,002
—
3,862
2,173
—
3,312
—
3,235
2,818
1,936
1,596
1,926
—
—
1,614
1,492
1,486
1,580
—
—
275
5,103
979
—
4,390
—
3,852
—
3,448
1,518
—
3,611
—
1,710
2,241
1,916
1,816
1,923
—
—
1,614
1,568
1,425
1,580
—
—
1,216
11,351
$62,638
1,255
11,258
$51,482
(a) We acquired this investment from CPA®:15 in the Merger (Note 3).
(b) These revenues are generated in consolidated investments, generally with our affiliates, and on a combined basis include lease revenues applicable to noncontrolling interests totaling $11.6 million,
$2.6 million and $3.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.
(c) In connection with the CPA®:14/16 Merger, we purchased the remaining interest in this investment from CPA®:14 in May 2011 (Note 4). Subsequent to the acquisition, we consolidate this investment.
We had previously accounted for this investment under the equity method.
(d) We acquired an additional interest in this investment from CPA®:15 in the Merger.
(e) Amounts are subject to fluctuations in foreign currency exchange rates. The average conversion rate for the U.S. dollar in relation to the euro during the year ended December 31, 2012 decreased by
approximately 7.6% in comparison to 2011 and increased by approximately 4.9% during the year ended December 31, 2011 as compared to 2010, resulting in a negative impact on lease revenues in 2012
and a positive impact on lease revenues in 2011 for our euro-denominated investments. The increase was due to a lease restructuring in the second quarter of 2012.
(f) The increase in 2011 was due to an out-of-period adjustment (Note 2).
(g) In the Merger, we acquired the remaining interest in this investment from CPA®:15. Subsequent to the acquisition, we consolidated this investment. We had previously accounted for this investment under
the equity method.
(h) We acquired this investment in February 2010.
(i) In November 2011, we and the tenant completed the renovation at this facility, at which time we started to recognize deferred rental income on the tenant-funded portion of the renovation.
(j) We completed an expansion at this facility in January 2010, at which time we recognized deferred rental income of $0.3 million.
(k) We acquired this investment in June 2010.
(l) The increase in 2012 primarily relates to the investments obtained in the CPA®:15 Merger, which accounts for $21.6 million of the 2012 total.
24 •
W. P. C a r e y I n c .
We recognize income from equity investments in real estate, of which lease revenues are a significant component. The
following table sets forth the net lease revenues earned by these investments from both continuing and discontinued
operations. Amounts provided are the total amounts attributable to the investments and do not represent our proportionate
share (dollars in thousands):
lessee
Hellweg Die Profi-Baumarkte GmbH & Co. KG
(“Hellweg 2”)(a) (b)
The New York Times Company
Carrefour France, SAS(a) (c)
Schuler A.G.(a)
U. S. Airways Group, Inc.
C1000 Logistiek Vastgoed B. V.(a) (b)
Advanced Micro Devices(b)
Hologic, Inc.
Consolidated Systems, Inc.
Médica – France, S.A.(a)
Symphony IRI Group, Inc.(e)
The Talaria Company (Hinckley)(b)
Childtime Childcare, Inc.
Del Monte Corporation(b)
Waldaschaff Automotive GmbH and Wagon
Automotive Nagold GmbH(a) (b)
PETsMart, Inc.(b)
SaarOTEC(a) (b)
Builders FirstSource, Inc.(b)
Wanbishi Archives Co. Ltd(f) (g)
The Upper Deck Company(b)
Federal Express Corporation
Amylin Pharmaceuticals, Inc.
The Retail Distribution Group
ownersHIp InTeresT
aT deCember 31, 2012
Years ended deCember 31,
2012
2011
2010
45%
18%
100%
67%
75%
15%
33%
(c)
60%
(d)
(c)
30%
(c)
50%
33%
30%
50%
40%
3%
50%
(h)
(h)
(i)
$ 34,518
$ —
$ —
27,588
13,359
6,288
4,400
3,640
2,986
2,862
1,847
1,753
1,632
1,278
931
882
808
563
536
341
279
—
—
—
—
27,796
20,228
6,555
4,421
—
—
3,623
1,933
6,789
2,182
—
1,258
—
—
—
—
—
—
26,768
19,618
6,208
4,421
—
—
3,528
1,831
6,447
4,164
—
1,303
—
—
—
—
—
—
2,391
1,342
—
7,121
4,027
206
$ 106,491
$78,518
$85,642
(a) Amounts are subject to fluctuations in foreign currency exchange rates. The average conversion rate for the U.S. dollar in relation to the euro during the year ended December 31, 2012 decreased by
approximately 7.6% in comparison to 2011 and increased by approximately 4.9% during the year ended December 31, 2011 as compared to 2010, resulting in a negative impact on lease revenues in 2012 and
a positive impact on lease revenues in 2011 for our euro-denominated investments.
(b) We acquired our interest in this investment from CPA®:15 in the Merger (Note 3).
(c) In connection with the Merger, we purchased the remaining interest in this investment from CPA®:15. Subsequent to the Merger, we own 100% and consolidate this investment (Note 3).
(d) In April 2012, this jointly-owned entity sold its interests in the investment. Results of operations for this investment were classified as a discontinued operation by the entity that holds the controlling interest
for all periods presented.
(e) In June 2011, this jointly-owned entity sold one of its properties and distributed the proceeds to the investment’s partners.
(f) Dollar amounts shown are based on the exchange rate of the Japanese yen at December 31, 2012.
(g) We acquired our interest in this investment in December 2012.
(h) In the CPA®:14/16 Merger, we acquired the remaining interest in this investment from CPA®:14 (Note 4). Subsequent to the acquisition, we consolidate this investment.
(i) In March 2010, the jointly-owned entity completed the sale of this property, and as a result, we have no further economic interest in this venture.
lease revenues
As of December 31, 2012, 70% of our net leases, based on annualized contractual minimum base rent, provide for adjustments
based on formulas indexed to changes in the CPI, or other similar indices for the jurisdiction in which the property is located,
some of which have caps and/or floors. In addition, 23% of our net leases on that same basis have fixed rent adjustments, which
contractual minimum base rent is scheduled to increase by an average of 4% in the next 12 months. We own international
investments and, therefore, lease revenues from these investments are subject to fluctuations in exchange rate movements in
foreign currencies.
2 0 1 2 A n n u a l R e p o r t • 25
During the year ended December 31, 2012, we signed 22 leases totaling approximately 2.0 million square feet of leased space.
Of these leases, three were with new tenants and 19 were lease renewals or extensions with existing tenants. The average new
rent for these leases was $7.37 per square foot and the average former rent was $8.80 per square foot, reflecting current market
conditions. We provided tenant improvement allowances and other incentives totaling $3.0 million on two of these leases. In
addition, through the Merger, we acquired properties with 76 tenants with an average remaining lease term of 9.7 years. In
2011, CPA®:15 recorded lease revenues of $242.2 million.
During the year ended December 31, 2011, we signed 20 leases, totaling approximately 0.9 million square feet of leased space.
Of these leases, there were two new tenants and there were 18 lease renewals or short-term extensions with existing tenants.
Under the 20 leases, the average new rent was $9.75 per square foot, and the average former rent was $9.06 per square foot.
Five of the 22 tenants had tenant improvement allowances or concessions totaling approximately $6.9 million, of which
$6.4 million related to a lease of a repositioned asset to a tenant.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, lease revenues increased by $61.9 million,
primarily due to the properties we acquired from CPA®:15 in the Merger in 2012 and from CPA®:14 in connection with the
CPA®:14/16 Merger, which contributed to increases in lease revenues of $57.3 million and $3.8 million, respectively, in 2012.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, lease revenues increased by $11.2 million,
primarily due to $9.4 million of lease revenues generated from new investments we entered into during 2010 and 2011,
including the properties we purchased in May 2011 from CPA®:14 in connection with the CPA®:14/16 Merger (Note 4). In
addition, lease revenues increased by $0.9 million as a result of an out-of-period adjustment recorded in the fourth quarter
of 2011 (Note 2) and $0.8 million as a result of scheduled rent increases at several properties. These increases were partially
offset by the impact of tenant activity, including lease restructurings, lease expirations and property sales, which resulted in a
reduction to lease revenues of $1.0 million.
oTHer real esTaTe InCome
Other real estate income generally consists of revenue from Carey Storage Management LLC (“Carey Storage”), a subsidiary
that holds investments in domestic self-storage properties, and Livho Inc. (“Livho”), a subsidiary that operates a hotel under a
franchise agreement in Livonia, Michigan. Other real estate income also includes lease termination payments and other non-
rent related revenues from real estate ownership.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, other real estate income increased by $3.8 million
primarily due to $1.8 million of income related to certain properties we acquired from CPA®:15 in the Merger, bankruptcy
and easement proceeds of $0.8 million related to two of our tenants and increased revenue from our Livho and Carey Storage
subsidiaries totaling $1.4 million. The increase in income from Carey Storage was primarily a result of higher rental income and
the increase in income from Livho was primarily due to increased occupancy rates in 2012.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, other real estate income increased by $5.2 million,
primarily due to an increase of $3.2 million in income generated from the eight self-storage properties acquired during the third
quarter of 2010 and an increase in reimbursable tenant costs of $1.9 million. Reimbursable tenant costs are recorded as both
revenue and expenses and therefore have no net impact on our results of operations.
depreCIaTIon and amorTIzaTIon
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, depreciation and amortization increased by
$24.2 million primarily due to increases totaling $22.8 million related to the properties we acquired in the Merger.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, depreciation and amortization increased
by $7.2 million. Depreciation and amortization increased by $5.6 million as a result of our 2011 and 2010 investment
activity, including $4.7 million attributable to the properties we purchased from CPA®:14 in May 2011 (Note 5). In addition,
depreciation and amortization increased by $2.2 million as a result of an out-of-period adjustment recorded in the fourth
quarter of 2011 (Note 2). These increases were partially offset by a decrease in amortization of $0.6 million as a result of certain
lease intangible assets becoming fully amortized in 2010.
properTY expenses
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, property expenses increased by $2.9 million, of
which $2.8 million related to properties we acquired in the Merger from CPA®:15.
26 •
W. P. C a r e y I n c .
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, property expenses increased by $2.1 million,
primarily due to an increase in reimbursable tenant costs of $1.9 million and a $0.6 million performance fee paid to a third-
party manager on a foreign property as a result of meeting its performance criteria.
general and admInIsTraTIve
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, general and administrative expenses increased
by $35.3 million primarily due to costs incurred in connection with the Merger of $31.7 million.
oTHer real esTaTe expenses
Other real estate expenses generally consist of operating expenses related to Carey Storage and Livho as described in “Other
Real Estate Income” above.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, other real estate expenses decreased by
$0.9 million, due to a $0.9 million overall decrease in general operating expenses in Livho and our self-storage properties.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, other real estate expenses increased by $2.7 million,
primarily due to an increase of $1.8 million in operating expenses as a result of the acquisition of eight self-storage properties
during 2010. In addition, operating expenses from Livho increased by $0.9 million in 2011 as compared to 2010.
ImpaIrmenT CHarges
Our impairment charges are more fully described in Note 11. Impairment charges related to our continuing real estate
ownership operations were as follows (in thousands):
lessee
Livho
The American Bottling Company
Others
Total
Years ended deCember 31,
2012
2011
2010
TrIggerIng evenT
$ 10,467
$ —
$ — Decrease in fair value and estimated holding period
—
—
(868)
(497)
— Decline in unguaranteed residual value of properties
1,140
Tenants not renewing leases or vacated;
anticipated sales; and decline in unguaranteed
residual value of properties
$ 10,467
$(1,365)
$1,140
See Income from Equity Investments in Real Estate and the Managed REITs and Loss from Discontinued Operations below for
additional impairment charges incurred.
InCome from equITY InvesTmenTs In real esTaTe and THe managed reITs
Income from equity investments in real estate and the Managed REITs represents our proportionate share of net income or loss
(revenue less expenses) from our interests in unconsolidated real estate investments and our investments in the Managed REITs.
In addition, we are entitled to receive distributions of Available Cash from the operating partnerships of CPA®:17 – Global, CWI
and, subsequent to the CPA®:14/16 Merger and related CPA®:16 – Global UPREIT Reorganization (Note 4), CPA®:16 – Global.
Subsequent to the CPA®:16 – Global UPREIT Reorganization, we also recognize amortization of deferred revenue related to our
special member interest in CPA®:16 – Global’s operating partnership. The net income of the Managed REITs fluctuates based on
the timing of transactions, such as new leases and property sales, as well as the level of impairment charges.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, income from equity investments in real estate
increased by $11.2 million, primarily due to (i) a $14.5 million increase in distributions of Available Cash received and earned
and a $2.8 million increase in deferred revenue earned, from the operating partnership of CPA®:17 – Global as a result of new
investments CPA®:17 – Global entered into during 2012 and 2011, and the operating partnership of CPA®:16 – Global due to
the new fee arrangement with CPA®:16 – Global resulting from the CPA®:16 – Global UPREIT Reorganization in May 2011
(Note 4); (ii) our $15.1 million share of the net gain recognized by a jointly-owned entity upon selling its equity shares in the
Médica investment in the second quarter of 2012; and (iii) a $1.2 million increase in equity income as a result of new equity
investments we acquired from CPA®:15 through the Merger. These increases were partially offset by (i) other-than-temporary
impairment charges of $9.9 million recorded during 2012 on our special membership interest in CPA®:16 – Global’s operating
partnership to reduce the carrying value of our interest in the operating partnership to its estimated fair value (Note 7), (ii) our
$7.4 million share of the net gains recognized in the second quarter of 2011 by CPA®:14 related to the sale of certain of its assets
to us, CPA®:17 – Global and third parties in connection with the CPA®:14/16 Merger (Note 4); and (iii) our $5.0 million share
2 0 1 2 A n n u a l R e p o r t • 27
of a bargain purchase gain recognized by CPA®:16 – Global during the 2011 period because the fair value of CPA®:14 exceeded
the consideration paid in the CPA®:14/16 Merger.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, income from equity investments in real estate
increased by $20.2 million, primarily due to a $11.1 million increase in distributions of Available Cash received and earned
and a $5.7 million increase in deferred revenue earned, from the operating partnership CPA®:17 – Global as a result of new
investments CPA®:17 – Global entered into during 2011 and the operating partnership of CPA®:16 – Global due to the new fee
arrangement with CPA®:16 – Global resulting from the CPA®:16 – Global UPREIT Reorganization in May 2011 (Note 4); and
an increase in equity income from the Managed REITs totaling $6.4 million. Results of operations from the Managed REITs
during 2011 included the following gains and expenses: net gains of $78.8 million from the CPA®:14/16 Merger, of which our
share was approximately $7.4 million; a bargain purchase gain for CPA®:16 – Global of $28.7 million because the fair value
of CPA®:14 exceeded the CPA®:14/16 Merger consideration, of which our share was approximately $5.0 million; a net gain of
$33.5 million on the sales of several properties and the extinguishment of several related mortgage loans, of which our share
was approximately $3.7 million; impairment charges totaling $61.7 million, of which our share was approximately $7.8 million;
and $13.6 million of expenses incurred in connection with the CPA®:14/16 Merger, of which our share was approximately
$2.4 million. Equity income from the Managed REITs also increased by approximately $4.1 million in 2011 as a result of our
$121.0 million incremental investment in CPA®:16 – Global in connection with the CPA®:14/16 Merger. Results of operations
for the Managed REITs during 2010 included the following gains and charges: net gains on extinguishment of a mortgage
loan and deconsolidation of three subsidiaries totaling $44.0 million, of which our share was approximately $5.6 million; and
impairment charges totaling $40.7 million, of which our share was approximately $3.0 million. In addition, we recognized an
other-than-temporary impairment charge of $1.4 million on the Schuler investment in 2010. These increases in equity income
were partially offset by decreases of $2.5 million as a result of the net gains recognized by the Retail Distribution investment
in connection with the sale of its property in March 2010 and $1.7 million related to the Symphony IRI investment reflecting
our share of its $8.6 million impairment charge and an other-than-temporary impairment charge recognized by us in 2011 to
reflect the decline in fair value of our interest in the investment.
gaIn on CHange In ConTrol of InTeresTs
In connection with the Merger in September 2012, we acquired additional interests in five investments from CPA®:15, which
we had previously accounted for under the equity method, and we adjusted the carrying value of our previously held interest
in shares of CPA®:15 common stock to its estimated fair market value. In connection with our acquisition of these investments,
we recognized a net gain of $20.7 million during the year ended December 31, 2012 in order to adjust the carrying value of
previously-held equity interests in these investments to their estimated fair values (Note 3).
In May 2011, we purchased the remaining interests in the Federal Express and Amylin investments from CPA®:14, which we
had previously accounted for under the equity method. In connection with our purchase of these properties, we recognized
a net gain of $27.9 million during the year ended December 31, 2011 to adjust the carrying value of our existing interests in
these investments to their estimated fair values.
oTHer InCome and (expenses)
Other income and (expenses) consists primarily of gains and losses on foreign currency transactions and derivative
instruments, and prior to September 2010 also included the third party’s profit-sharing interest in income or losses from
Carey Storage. We and certain of our foreign consolidated subsidiaries have intercompany debt and/or advances that are
not denominated in the functional currency of those subsidiaries. When the intercompany debt or accrued interest thereon
is remeasured against the functional currency of the respective subsidiaries, an unrealized gain or loss on foreign currency
translation may result. For intercompany transactions that are of a long-term investment nature, the gain or loss is recognized
as a cumulative translation adjustment in other comprehensive income. We also recognize gains or losses on foreign currency
transactions when we repatriate cash from our foreign investments.
2012 — For the year ended December 31, 2012, other income was $3.2 million, comprised of a net gain of $2.5 million
recorded on the disposals of three parcels of land, a net realized and unrealized gain of $0.5 million on foreign currency
transactions and a $0.4 million gain on derivatives acquired in the Merger in 2012.
2011 — For the year ended December 31, 2011, other income was $4.4 million. In connection with the CPA®:14/16 Merger, we
agreed to receive shares of CPA®:16 – Global in respect of our shares of CPA®:14. As a result, during 2011, we recognized a gain
of $2.8 million on the conversion of our shares of CPA®:14 to shares of CPA®:16 – Global to reflect the carrying value of our
investment at its estimated fair value. In addition, we recognized a gain of $1.0 million on the conversion of our termination
revenue to shares of CPA®:14 because the fair value of the shares received exceeded the termination revenue. Other income
during 2011 also included a net gain of $0.6 million as a result of exercising certain warrants granted to us by lessees.
28 •
W. P. C a r e y I n c .
2010 — For the year ended December 31, 2010, other income was $0.3 million, primarily due to a net loss of $0.8 million
attributable to the noncontrolling interest in Carey Storage, partially offset by net realized and unrealized foreign currency
transaction losses of $0.5 million.
InTeresT expense
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, interest expense increased by $28.8 million.
Interest expense increased by $21.0 million and $1.7 million as a result of mortgages assumed in our acquisition of properties
from CPA®:15 and from CPA®:14 in connection with the Merger in and the CPA®:14/16 Merger, respectively. In addition,
interest expense on our Senior Credit Facility increased by $5.5 million as a result of the amortization of financing costs
incurred in connection with obtaining the facility in December 2011, as well as a higher average outstanding balance and a
higher average interest rate on the Revolver in 2012, compared to those under our prior lines of credit in 2011 (Note 12).
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, interest expense increased by $6.1 million,
primarily as a result of mortgages assumed in connection with the acquisition of properties from CPA®:14 in May 2011(Note 5)
and mortgage financing obtained in connection with our investment activities during 2011 and 2010, which resulted in increases
to interest expense of $3.6 million and $1.8 million, respectively. Additionally, interest expense on our then-existing lines of
credit increased by $1.0 million as a result of higher average outstanding balances in 2011 as compared to the prior year.
loss from dIsConTInued operaTIons
Loss from discontinued operations represents the net income or loss (revenue less expenses) from the operations of properties
that were sold or held for sale and a subsidiary that we deconsolidated (Note 17).
2012 — For the year ended December 31, 2012, loss from discontinued operations was $16.6 million, primarily due to
impairment charges of $12.5 million recorded on seven properties to reduce their carrying values to their expected selling
prices (Note 11). In addition, the loss recognized during the year ended December 31, 2012 included a goodwill write-off of
$3.2 million (Note 8) in connection with the sale of the properties we acquired in the Merger, a net loss on the sale of 14 other
properties of $1.9 million which was offset by net gains generated from the operations of discontinued properties of $0.9 million.
2011 — For the year ended December 31, 2011, loss from discontinued operations was $12.9 million, primarily due to
impairment charges of $11.8 million recorded on seven properties to reduce their carrying values to their expected selling
prices and a net loss on the sale of seven properties totaling $3.4 million. This loss was partially offset by a $1.0 million gain
recognized during the third quarter of 2011 on the deconsolidation of a subsidiary because we ceased to exercise control over
the activities that most significantly impact its economic performance when a receiver took possession of the property and
income generated from the operations of discontinued properties of $1.4 million.
2010 — For the year ended December 31, 2010, loss from discontinued operations was $8.9 million, primarily due to
impairment charges recognized of $14.2 million. These charges were partially offset by income generated from the operations
of these properties of $4.9 million and a net gain on the sales of these properties of $0.5 million.
neT InCome from real esTaTe ownersHIp aTTrIbuTable To w. p. CareY
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, the resulting net income from real estate
ownership attributable to W. P. Carey decreased by $41.4 million.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, the resulting net income from real estate
ownership attributable to W. P. Carey common stockholders increased by $49.4 million.
funds from operaTIons — as adjusTed (affo)
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, AFFO from Real Estate Ownership increased
by $56.8 million, primarily as a result of income earned from the properties we purchased from CPA®:14 in May 2011 in
connection with the CPA®:14/16 Merger and those we acquired in the Merger, as well as income generated from our equity
interests in the Managed REITs, primarily as a result of our $121.0 million incremental investment in CPA®:16 – Global in
connection with the CPA®:14/16 Merger. AFFO is a non-GAAP measure that we use to evaluate our business. For a definition
of AFFO and reconciliation to net income attributable to W. P. Carey, see Supplemental Financial Measures below.
2 0 1 2 A n n u a l R e p o r t • 29
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, AFFO from Real Estate Ownership increased
by $17.7 million, primarily as a result of the new investments that we entered into during 2011 and 2010, including the
properties we purchased from CPA®:14 in May 2011 in connection with the CPA®:14/16 Merger, as well as increased income
generated from our equity interests in the Managed REITs primarily due to our incremental investment in CPA®:16 – Global in
connection with the CPA®:14/16 Merger.
Investment management
(In THousands)
revenues
2012
2011
CHange
2011
2010
CHange
Years ended deCember 31,
Asset management revenue
$ 56,666
$ 66,808
$(10,142)
$ 66,808
$ 76,246
$ (9,438)
Structuring revenue
48,355
46,831
1,524
46,831
44,525
2,306
Incentive, termination and
subordinated disposition revenue
Wholesaling revenue
Reimbursed costs from affiliates
Operating Expenses
General and administrative
Reimbursable costs
Depreciation and amortization
Other Income and Expenses
Other interest income
Other income and (expenses)
Income from continuing operations
before income taxes
Provision for income taxes
Net income from investment
management
Add: Net loss attributable to
noncontrolling interests
Less: Net income attributable
to redeemable
noncontrolling interest
Net income from investment
management attributable
to W. P. Carey
—
19,914
98,245
52,515
11,664
64,829
(52,515)
8,250
33,416
52,515
11,664
64,829
—
11,096
60,023
223,180
242,647
(19,467)
242,647
191,890
52,515
568
4,806
50,757
(105,061)
(98,245)
(3,744)
(89,279)
(64,829)
(3,464)
(15,782)
(33,416)
(280)
(89,279)
(64,829)
(3,464)
(69,008)
(60,023)
(4,652)
(20,271)
(4,806)
1,188
(207,050)
(157,572)
(49,478)
(157,572)
(133,683)
(23,889)
1,085
195
1,280
1,910
166
2,076
(825)
29
(796)
1,910
166
2,076
1,145
335
1,480
765
(169)
596
17,410
(2,771)
87,151
(34,971)
(69,741)
32,200
87,151
(34,971)
59,687
27,464
(23,660)
(11,311)
14,639
52,180
(37,541)
52,180
36,027
16,153
2,638
2,542
96
2,542
2,372
170
(40)
(1,923)
1,883
(1,923)
(1,293)
(630)
$ 17,237
$ 52,799
$(35,562)
$ 52,799
$ 37,106
$ 15,693
30 •
W. P. C a r e y I n c .
The following tables present other operating data that management finds useful in evaluating results of operations:
Total properties – Managed REITs(a)
Assets under management ($ millions)(a)
Cumulative funds raised – CPA®:17 – Global offerings ($ millions)(b)
Cumulative funds raised – CWI offering ($ millions)(c)
Financings structured – Managed REITs ($ millions)
Consolidated investments structured – Managed REITs ($ millions)
Equity investments structured – Managed REITs ($ millions)
Funds raised – CPA®:17 – Global offerings ($ millions)(b)
Funds raised – CWI offering ($ millions)(c)
2012
774
7,870.8
2,883.1
159.6
2012
669.5
1,240.3
32.6
927.3
112.1
as of deCember 31,
2011
865
9,486.1
1,955.9
47.5
2010
830
8,624.4
1,389.3
—
for THe Years ended deCember 31,
2011
387.8
944.9
284.6
584.5
47.5
2010
647.7
1,039.7
8.4
591.8
—
(a) Includes properties owned by CPA®:16 – Global and CPA®:17 – Global for all periods. Includes properties owned by CPA®:14 through the CPA®:14/16 Merger on May 2, 2011. Includes properties owned by
CPA®:15 through the date of the Merger on September 28, 2012. Includes properties owned by CWI from the date of its first investment in May 2011.
(b) Reflects funds raised in the initial offering (commenced in late December 2007) and the follow-on offering (commenced April 7, 2011).
(c) Reflects funds raised in the initial offering. The initial offering commenced on March 3, 2011 once the minimum funds were raised.
asseT managemenT revenue
We earn asset management revenue from the Managed REITs and, until the Merger, performance revenue from CPA®:15, based
on the value of their real estate-related and lodging-related assets under management. This asset management revenue may
increase or decrease depending upon (i) increases in the Managed REITs’ asset bases as a result of new investments and;
(ii) decreases in the Managed REITs’ asset bases as a result of sales of investments; and (iii) increases or decreases in the
appraised value of the real estate-related and lodging-related assets in the Managed REIT investment portfolios. We previously
earned performance revenue from CPA®:14 and CPA®:16 – Global through the date of the CPA®:14/16 Merger and the related
CPA®:16 – Global UPREIT Reorganization. Each CPA® REIT, as applicable, met its performance criteria for all periods
presented. The availability of funds for new investments is substantially dependent on our ability to raise funds for investment
by the Managed REITs.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, asset management revenue decreased by
$10.1 million. Combined asset management revenue from CPA®:14 and CPA®:16 – Global decreased by $8.5 million, primarily
due to a change in our fee arrangement with CPA®:16 – Global under its umbrella partnership real estate investment trust
(“UPREIT”) structure in connection with the CPA®:14/16 Merger. As discussed in Note 4, immediately after the CPA®:14/16
Merger in May 2011, our asset management revenue from CPA®:16 – Global was reduced from 1% to 0.5% of the property
value of the assets under management and instead we now receive a distribution of 10% of the Available Cash of CPA®:16 –
Global’s operating partnership, which we record as Income from equity investments in the Managed REITs within the Real
Estate Ownership segment. Asset management revenue from CPA®:15 also decreased by $7.5 million during the year ended
December 31, 2012 as a result of the Merger on September 28, 2012 and prior property sales. These decreases were partially
offset by an increase in revenue of $5.5 million during the year ended December 31, 2012 from CPA®:17 – Global as a result of
new investments that it entered into during 2011 and 2012.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, asset management revenue decreased by
$9.4 million. Asset management decreased by $18.0 million, primarily due to recent property sales by the CPA® REITs and
the change in our fee arrangement with CPA®:16 – Global under its new UPREIT structure after the CPA®:14/16 Merger. This
decrease was partially offset by an increase in revenue of $8.4 million during 2011 from CPA®:17 – Global as a result of new
investments that it entered into during 2010 and 2011.
sTruCTurIng revenue
We earn structuring revenue when we structure investments and debt placement transactions for the Managed REITs.
Structuring revenue is dependent on investment activity, which is subject to significant period-to-period variation.
2 0 1 2 A n n u a l R e p o r t • 31
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, structuring revenue increased by $1.5 million.
We structured real estate investments on behalf of the Managed REITs totaling approximately $1.2 billion during 2012. The
increase was due to the fee rates applicable to the types of transactions structured.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, structuring revenue increased by $2.3 million,
primarily due to higher investment volume in 2011, partially offset by the lower rate of structuring revenue earned on the self-
storage and hotel properties acquired on behalf of the Managed REITs in 2011 as compared to the rate for long-term net lease
investments as described below. Structuring revenue for 2011 included $17.7 million related to a $395.5 million transaction
in Italy on behalf of CPA®:17 – Global with a capitalization rate of approximately 8.0%. Also included in the 2011 investment
activity were $169.3 million of self-storage properties acquired on behalf of CPA®:17 – Global, for which we earned structuring
revenue of 1.75% of total equity invested and $75.9 million of hotel properties acquired on behalf of CWI, for which we earned
structuring revenue of 2.5% of the total investment cost of the properties, compared to an average of 4.5% that we generally
earn for structuring long-term net lease investments on behalf of the CPA® REITs. We also waived any structuring revenue due
from CPA®:16 – Global under its advisory agreement with us in connection with its acquisition of assets from CPA®:14 in the
CPA®:14/16 Merger.
InCenTIve, TermInaTIon and subordInaTed dIsposITIon revenue
Incentive, termination and subordinated disposition revenue is generally earned in connection with events in which we
provide liquidity or alternatives to the Managed REITs’ stockholders. These events do not occur every year, although one
occurred in each of 2011 and 2012. As described in Note 4, we waived the subordinated disposition fees that we would have
been entitled to receive from CPA®:15 upon its liquidity event through the Merger pursuant to the terms of our advisory
agreement with CPA®:15.
In connection with providing a liquidity event for CPA®:14 shareholders through the CPA®:14/16 Merger in May 2011, we
earned termination revenue of $31.2 million and subordinated disposition revenue of $21.3 million, which we received in
shares of CPA®:14 and cash, respectively. These CPA®:14 shares were subsequently converted to shares of CPA®:16 – Global in
connection with the CPA®:14/16 Merger.
wHolesalIng revenue
We also earned a wholesaling fee of $0.15 per share sold in connection with CPA®:17 – Global’s initial public offering through
the termination of that offering on April 7, 2011. As discussed in Note 4, we earned a dealer manager fee of up to $0.35 per
share sold in connection with CPA®:17 – Global’s follow-on offering, which commenced on April 7, 2011 and terminated on
January 31, 2013. We also earn a $0.30 dealer manager fee per share sold in connection with CWI’s ongoing initial public
offering. We also re-allow all or a portion of the dealer manager fees to selected dealers in the offerings. Dealer manager fees
that are not re-allowed are classified as wholesaling revenue. Wholesaling revenue earned is generally offset by underwriting
costs incurred in connection with the offerings, which are included in General and administrative expenses.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, wholesaling revenue increased by $8.3 million,
primarily due to increases in shares sold in connection with CPA®:17 – Global and CWI offerings in 2012 compared to the
prior year.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, wholesaling revenue increased by $0.6 million,
primarily due to shares sold in connection with CWI’s initial public offering, for which the issuance of shares commenced on
March 3, 2011, partially offset by a decrease in the number of shares sold related to CPA®:17 – Global’s offerings.
reImbursed and reImbursable CosTs
Reimbursed costs (revenue) from affiliates and reimbursable costs (expenses) represent costs incurred by us on behalf of the
Managed REITs, consisting primarily of broker-dealer commissions and marketing and personnel costs, which are reimbursed
by the Managed REITs. Revenue from reimbursed costs from affiliates is offset by corresponding charges to reimbursable costs.
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, reimbursed and reimbursable costs increased
by $33.4 million, primarily due to an increase of $30.1 million in commissions paid to broker-dealers related to the CPA®:17 –
Global and CWI offerings as a result of corresponding increases in funds raised. In addition, personnel costs reimbursed
by the Managed REITs increased by $3.3 million, primarily as a result of an increase in CPA®:17 – Global’s allocation base
during 2012.
32 •
W. P. C a r e y I n c .
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, reimbursed and reimbursable costs increased
by $4.8 million, primarily due to $3.9 million of commissions paid to broker-dealers related to CWI’s initial public offering
and a $1.7 million increase in personnel costs reimbursed by the Managed REITs primarily as a result of increased headcount
in 2011.
general and admInIsTraTIve
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, general and administrative expenses increased
by $15.8 million primarily due to an increase in compensation expense of $14.7 million and an increase of $5.4 million in
underwriting costs related to the CPA®:17 – Global and CWI offerings. These increases were partially offset by a $5.8 million
increase in cost reimbursements from the Managed REITs. Compensation costs increased $8.1 million due to an increase in
stock-based compensation expense, which was primarily the result of awards issued during 2012 with higher fair values, and
$4.1 million due to an increase in the number of personnel during 2012.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, general and administrative expenses increased
by $20.3 million primarily due to increases in compensation-related costs of $15.0 million and professional fees of $2.9 million.
Compensation-related costs were higher in 2011 due to several factors, including: an increase of $10.4 million in the
amortization of stock-based compensation and an increase of $2.2 million in our expected bonus payout as a result of higher
investment volumes in 2011. Stock-based compensation increased in 2011 as a result of changes in the expected vesting of
performance share units (“PSUs”) granted in 2009 and 2010 and an increase in the number of restricted share units (“RSUs”)
and PSUs awards issued to employees in 2011 in connection with entering into employment agreements with certain key
employees during the year. Professional fees increased in 2011 primarily due to costs incurred in connection with exploring
liquidity alternatives for certain of the CPA® REITs, including the CPA®:14/16 Merger.
provIsIon for InCome Taxes
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, provision for income taxes decreased by
$32.2 million, primarily due to (i) a deferred tax benefit of $4.0 recorded in 2012 as a result of expenses incurred in connection
with the Merger; (ii) a deferred tax benefit of $3.8 million as a result of an increase in stock-based compensation expenses;
(iii) a tax saving of $2.8 as a result of eliminating asset management revenue and performance revenue received from CPA®:15
in the fourth quarter of 2012; (iv) a tax saving of $2.4 as a result of replacing the performance revenue from CPA®:16 – Global
with the distribution of Available Cash in the second quarter of 2011; (v) a tax saving of $1.1 million as a result of an increase
in interest expense incurred on our credit facility; and (vi) $9.3 million of income taxes incurred during 2011 as a result of
the $52.5 million incentive, termination and subordinated disposition income that we recognized in connection with the
CPA®:14/16 Merger.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, provision for income taxes increased by
$11.3 million, primarily due to $9.3 million of income taxes incurred during 2011 described above. Provision for income
taxes also increased in 2011 as a result of increased volume of investments structured on behalf of the Managed REITs.
neT InCome from InvesTmenT managemenT aTTrIbuTable To w. p. CareY
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, the resulting net income from investment
management attributable to W. P. Carey decreased by $35.6 million.
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, the resulting net income from investment
management attributable to W. P. Carey increased by $15.7 million.
funds from operaTIons — as adjusTed (affo)
2012 vs. 2011 — For the year ended December 31, 2012 as compared to 2011, AFFO from our Investment Management
segment decreased by $65.0 million, primarily as a result of the $52.5 million incentive, termination and subordinated
disposition income recognized in connection with the CPA®:14/16 Merger in 2011, as well as performance fees for CPA®:14
and CPA®:16 – Global that were no longer received from CPA®:14 after the CPA®:14/16 Merger, or from CPA®:16 – Global
after the CPA®:16 – Global UPREIT Reorganization, both of which occurred in May 2011 (Note 4), as this was replaced by
the 10% distribution of Available Cash of CPA®:16 – Global’s operating partnership, which is now recorded in the Real Estate
Ownership segment, and the end of asset management fees and performance fees received from CPA®:15 after the Merger
in September 2012. AFFO is a non-GAAP measure that we use to evaluate our business. For a definition of AFFO and
reconciliation to net income attributable to W. P. Carey, see Supplemental Financial Measures below.
2 0 1 2 A n n u a l R e p o r t • 33
2011 vs. 2010 — For the year ended December 31, 2011 as compared to 2010, AFFO from our Investment Management
segment increased by $40.3 million, primarily as a result of the incentive, termination and subordinated disposition revenue
that we recognized in connection with the CPA®:14/16 Merger in 2011.
fInanCIal CondITIon
sources and uses of Cash during the Year
Our cash flows fluctuate period to period due to a number of factors, which may include, among other things, the nature
and timing of receipts of transaction-related revenue, the timing of purchases and sales of real estate, the timing of the
receipt of proceeds from, and the repayment of, non-recourse mortgage loans and receipt of lease revenue, the timing and
characterization of distributions received from equity investments in real estate and the Managed REITs, the timing of certain
payments, the receipt of the annual installment of deferred acquisition revenue and interest thereon in the first quarter from
certain of the CPA® REITs, and changes in foreign currency exchange rates. Despite these fluctuations, we believe that we will
generate sufficient cash from operations and from equity distributions in excess of equity income in real estate to meet our
normal recurring short-term and long-term liquidity needs. We may also use existing cash resources, the proceeds of mortgage
loans, unused capacity on our Revolver and the issuance of additional equity securities to meet these needs. We assess our
ability to access capital on an ongoing basis. Our sources and uses of cash during the year are described below.
Operating Activities
Cash flow from operating activities increased by $0.5 million during 2012 as compared to 2011. Operating cash flow generated
from the properties acquired from CPA®:15 was substantially offset by Merger-related expenses paid during 2012. Also
contributing to a decrease in 2012 cash flow from operating activities as compared to 2011 was the subordinated disposition
revenue from CPA®:14 upon completion of the CPA®:14/16 Merger received in cash in May 2011. Additionally, increases in
cash distributions received from the operating partnerships of CPA®:16 – Global and CPA®:17 – Global were substantially offset
by increases in the cash portion of general and administrative expenses.
In addition to cash flow from operating activities, we may use the following sources to fund distributions to stockholders:
distributions received from equity investments in excess of equity income, net contributions from noncontrolling interests,
borrowings under our Senior Credit Facility and existing cash resources.
Investing Activities
Our investing activities are generally comprised of real estate-related transactions (purchases and sales) and capitalized
property-related costs. During 2012, we paid $152.4 million, representing the cash portion of the Merger Consideration,
to CPA®:15 stockholders and acquired $178.9 million of cash in the Merger. We also made other investments and capital
expenditures of $10.1 million, including the Walgreens transaction (Note 5). Cash inflows during 2012 included $46.3 million
in distributions from equity investments in real estate and the Managed REITs in excess of cumulative equity income. We also
received cash proceeds of $73.2 million from the sale of 15 properties. Funds totaling $47.0 million and $37.8 million were
invested in and released from, respectively, lender-held investment accounts.
Financing Activities
We repaid $30.0 million on our Revolver prior to the Merger, and we then drew down $175.0 million on our Term Loan Facility
and $40.0 million on our Revolver to fund the cash portion of the Merger Consideration and Merger-related costs. After the
Merger, we repaid $250.2 million on our Revolver and drew down $85.0 million. We received $45.0 million in exchange for the
issuance of shares of our common stock to an institutional investor. We received $6.6 million in connection with the issuance
of stock to our employees pursuant to our share incentive plan and the Employee Share Purchase Plan (“ESPP”). We paid
distributions to stockholders of $113.9 million and paid distributions of $7.3 million to, offset by contributions of $3.3 million
from, affiliates who hold noncontrolling interests in various entities with us. We made scheduled mortgage principal payments
of $55.0 million, offset by mortgage financing proceeds of $23.8 million. We also used $45.3 million to purchase shares of our
common stock from the Estate Shareholders. We recognized windfall tax benefits of $10.2 million in connection with certain
employees exercising their stock options and the vesting of PSUs and RSUs during 2012, which reduced our tax liability due to
taxing authorities.
34 •
W. P. C a r e y I n c .
summarY of fInanCIng
The table below summarizes our non-recourse debt and Senior Credit Facility (dollars in thousands):
balance(a)
Fixed rate
Variable rate(b)
Total
percent of Total debt
Fixed rate
Variable rate(b)
weighted-average Interest rate at end of Year
Fixed rate
Variable rate(b) (c)
2012
deCember 31,
2011
$1,322,168
646,229
$1,968,397
$258,886
330,483
$589,369
67%
33%
100%
5.6%
3.4%
44%
56%
100%
5.6%
4.6%
(a) The increase relates primarily to $1.4 billion of non-recourse mortgage debt related to properties acquired in the Merger and borrowings of $175.0 million on our Term Loan Facility.
(b) Variable-rate debt at December 31, 2012 included (i) $253.0 million outstanding under our Senior Credit Facility, which includes the $175.0 million outstanding under the Term Loan Facility,
(ii) $251.5 million that has been effectively converted to fixed rates through interest rate swap and cap derivative instruments and (iii) $44.5 million in mortgage loan obligations that bore interest at fixed
rates but have interest rate reset features that may change the interest rates to then-prevailing market fixed rates (subject to specified caps) at certain points during their term.
(c) The decrease was primarily due to a lower interest rate on our Senior Credit Facility, which was London inter-bank offered rate (“LIBOR”) plus 2.0%, or 2.2%, at December 31, 2012, compared to a rate of
4.0% at December 31, 2011.
CasH resourCes
At December 31, 2012, our cash resources consisted of the following:
• Cash and cash equivalents totaling $123.9 million. Of this amount, $61.8 million, at then-current exchange rates, was
held by foreign subsidiaries, but we could be subject to restrictions or significant costs should we decide to repatriate
these amounts;
• Our Revolver, with unused capacity of $365.2 million, excluding amounts reserved for outstanding letters of credit.
Our lender has issued letters of credit totaling $5.4 million on our behalf in connection with certain contractual
obligations, which reduce amounts that may be drawn under the facility; and
• We also had unleveraged properties that had an aggregate carrying value of $55.4 million at December 31, 2012,
although there can be no assurance that we would be able to obtain financing for these properties.
Our cash resources can be used for working capital needs and other commitments and may be used for future investments.
We continue to evaluate fixed-rate financing options, such as obtaining non-recourse financing on our unleveraged properties.
Any financing obtained may be used for working capital objectives and/or may be used to pay down existing debt balances.
senior Credit facility
Our Senior Credit Facility is more fully described in Note 12. A summary of our Senior Credit Facility is provided below:
(In THousands)
Revolver
Term Loan Facility
deCember 31, 2012
deCember 31, 2011
ouTsTandIng
balanCe
maxImum
avaIlable
ouTsTandIng
balanCe
maxImum
avaIlable
$ 78,000
175,000
$450,000
175,000
$233,160
$450,000
—
—
In February 2012, we amended and restated our existing credit agreement to increase the maximum aggregate principal
amount from $450.0 million to $625.0 million, which is comprised of a $450.0 million Revolver and a $175.0 million Term
Loan Facility and, together with the Revolver, the Senior Credit Facility. The Term Loan Facility was available in a single draw
for use solely to finance a portion of the Merger Consideration and related transaction costs and expenses. We drew down the
full amount of the Term Loan Facility on September 28, 2012 in connection with the closing of the Merger. The Senior Credit
Facility matures in December 2014, but may be extended by one year at our option, subject to the conditions provided in the
Amended and Restated Credit Agreement. At our election, the principal amount available under the Senior Credit Facility may
be increased by up to an additional $125.0 million, subject to the conditions provided in the Amended and Restated Credit
2 0 1 2 A n n u a l R e p o r t • 35
Agreement. The Senior Credit Facility also permits (i) up to $150.0 million to be borrowed in certain currencies other than the
U.S. dollar, (ii) swing line loans of up to $35.0 million, and (iii) the issuance of letters of credit in an aggregate amount not to
exceed $50.0 million.
The Senior Credit Facility provides for an annual interest rate, at our election, of either (i) the Eurocurrency Rate or (ii) the
Base Rate, in each case plus the Applicable Rate (each as defined in the Amended and Restated Credit Agreement). Prior to
us obtaining an Investment Grade Debt Rating (as defined in the Amended and Restated Credit Agreement), the Applicable
Rate on Eurocurrency Rate loans and letters of credit ranges from 1.75% to 2.50% (based on LIBOR) and the Applicable
Rate on Base Rate loans ranges from 0.75% to 1.50% (based on the “prime rate”, defined in the Amended and Restated Credit
Agreement as a rate of interest set by the Bank of America based upon various factors including Bank of America’s costs and
desired returns). After an Investment Grade Debt Rating has been obtained, the Applicable Rate on Eurocurrency Rate loans
and letters of credit ranges from 1.10% to 2.00% and the Applicable Rate on Base Rate loans ranges from 0.10% to 1.00%.
Swing line loans will bear interest at the Base Rate plus the Applicable Rate then in effect. In addition, prior to obtaining an
Investment Grade Debt Rating, we pay a quarterly fee ranging from 0.3% to 0.4% of the unused portion of the line of credit,
depending on our leverage ratio. After an Investment Grade Debt Rating has been obtained, we will pay a facility fee ranging
from 0.2% to 0.4% of the total commitment. In connection with the amendments of the credit agreement, we incurred costs of
$7.0 million, which are being amortized over the remaining term of the facility.
Availability under the Senior Credit Facility is dependent upon a number of factors, including the Unencumbered Property
NOI, the Unencumbered Management EBITDA and the Total Unsecured Outstanding Indebtedness (each as defined in
the Amended and Restated Credit Agreement). At December 31, 2012, availability under the Senior Credit Facility was
$625.0 million, of which we had drawn $253.0 million, including $175.0 million under the Term Loan which we used to pay
for the cash portion of the Merger Consideration (Note 3). At December 31, 2012, we paid interest on the Senior Credit Facility
at an annual interest rate consisting of LIBOR plus 2.00%. In addition, as of December 31, 2012, our lenders had issued letters
of credit totaling $5.4 million on our behalf in connection with certain contractual obligations, which reduce amounts that
may be drawn under the Senior Credit Facility. The Revolver is currently expected to be utilized primarily for potential new
investments; repayment of existing debt and general corporate purposes as well as for repurchases of our common stock from
the Estate Shareholders (Note 4).
We are required to ensure that the total Restricted Payments (as defined in the Amended and Restated Credit Agreement)
made in the current quarter, when added to the total for the three preceding fiscal quarters, does not exceed the greater of
(i) 95% of Adjusted Funds from Operations (as defined in the Amended and Restated Credit Agreement) and (ii) the amount
of Restricted Payments required in order for us to maintain our REIT status. Restricted Payments include quarterly dividends
and the total amount of shares repurchased by us, if any, in excess of $50.0 million per year. In addition to placing limitations
on dividend distributions and share repurchases, the Amended and Restated Credit Agreement stipulates six financial
covenants that require us to maintain certain ratios and benchmarks at the end of each quarter.
We were in compliance with all of these covenants at December 31, 2012.
CasH requIremenTs
During the next 12 months, we expect that cash payments will include paying distributions to our stockholders and to our
affiliates who hold noncontrolling interests in entities we control and making scheduled mortgage loan principal payments,
including mortgage balloon payments totaling $137.6 million, as well as other normal recurring operating expenses.
We expect to fund future investments, any capital expenditures on existing properties and scheduled debt maturities on non-
recourse mortgage loans through cash generated from operations, the use of our cash reserves or unused amounts on our
Revolver and equity or debt offerings.
On July 23, 2012, we entered into certain agreements with the Estate, as described in Note 4, including the Share Purchase
Agreement, pursuant to which we remain conditionally obligated, through March 31, 2013, to purchase up to an aggregate
amount of $40.0 million of our common stock pursuant to the Third Sale Option. We currently intend to draw on our Revolver
to finance this Sale Option if the Estate decides to exercise it.
36 •
W. P. C a r e y I n c .
off-balanCe sHeeT arrangemenTs and ConTraCTual oblIgaTIons
The table below summarizes our debt, off-balance sheet arrangements and other contractual obligations at December 31, 2012
and the effect that these arrangements and obligations are expected to have on our liquidity and cash flow in the specified
future periods (in thousands):
Non-recourse debt — Principal(a)
Senior Credit Facility — Principal(b)
Interest on borrowings(c)
Share Repurchase(d)
Operating and other lease commitments(e)
Property improvement commitments
ToTal
less THan
1 Year
1-3 Years
3-5 Years
more THan
5 Years
$ 1,732,154
$174,648
$ 619,026
$213,222
$725,258
253,000
426,133
40,000
23,839
7,491
—
92,915
40,000
2,541
7,491
253,000
136,385
—
5,058
—
—
—
85,867
110,966
—
3,750
—
—
12,490
—
$ 2,482,617
$317,595
$1,013,469
$302,839
$848,714
(a) Excludes an unamortized discount of $16.8 million (Note 12).
(b) Our $625.0 million Senior Credit Facility is scheduled to mature in December 2014, unless extended pursuant to its terms. Amount in the table includes borrowings under our Revolver and $175.0 million
outstanding under the Term Loan Facility.
(c) Interest on unhedged variable-rate debt obligations was calculated using the applicable annual variable interest rates and balances outstanding at December 31, 2012.
(d) Represents remaining commitment to repurchase our shares from the Estate at December 31, 2012 (Note 4).
(e) Operating and other lease commitments consist primarily of the future minimum rents payable on the lease for our principal offices. We are reimbursed by the Managed REITs for their share of the future
minimum rents pursuant to their respective advisory agreements with us. These amounts are allocated among the entities based on gross revenues and are adjusted quarterly.
Amounts in the table above related to our foreign operations are based on the exchange rate of the local currencies at
December 31, 2012, which consisted primarily of the euro. At December 31, 2012, we had no material capital lease
obligations for which we were the lessee, either individually or in the aggregate.
Equity Method Investments
We have investments in unconsolidated investments that own single-tenant properties net leased to companies. Generally, the
underlying investments are jointly-owned with our affiliates. Summarized financial information for these investments and our
ownership interest in the investments at December 31, 2012 is presented below. Cash requirements with respect to our share of
these debt obligations are discussed above under Cash Requirements. Summarized financial information provided represents
the total amounts attributable to the investments and does not represent our proportionate share (dollars in thousands):
lessee
C1000 Logistiek Vastgoed B. V.(a) (b)
U. S. Airways Group, Inc.
The New York Times Company
Waldaschaff Automotive GmbH and Wagon Automotive
Nagold GmbH(a) (b)
Del Monte Corporation(a)
Consolidated Systems, Inc.
SaarOTEC(a) (b)
Hellweg Die Profi-Baumarkte GmbH & Co. KG (Hellweg 2)(a) (b)
Advanced Micro Devices(a)
PETsMart, Inc.(a)
Wanbishi Archives Co. Ltd(c)(d)
The Talaria Company (Hinckley)(a)
Builders FirstSource, Inc.(a)
The Upper Deck Company(a)
Schuler A.G.(b)
(a) We acquired our interest in this investment in connection with the Merger (Note 3).
(b) Dollar amounts shown are based on the exchange rate of the euro at December 31, 2012.
(c) We acquired our interest in this investment in December 2012.
(d) Dollar amounts shown are based on the exchange rate of the Japanese yen at December 31, 2012.
ownersHIp InTeresT
aT deCember 31, 2012
ToTal asseTs
ToTal THIrd-
parTY debT
maTurITY
daTe
15% $ 191,368
$ 93,187
75%
18%
33%
50%
60%
50%
45%
67%
30%
3%
30%
40%
50%
67%
29,793
248,316
17,275
119,185
42,953
12,791
16,292
19,415
10,896
11,001
6,270
9,027
425,913
328,737
84,146
25,988
50,942
49,976
13,076
21,693
67,058
55,154
19,585
30,264
26,870
—
—
—
$ 1,286,575
$740,596
3/2013
4/2014
9/2014
8/2015
8/2016
11/2016
12/2016 &
1/2017
4/2017
1/2019
9/2021
3/2022
6/2025
N/A
N/A
N/A
2 0 1 2 A n n u a l R e p o r t • 37
Environmental Obligations
In connection with the purchase of many of our properties, we required the sellers to perform environmental reviews. We
believe, based on the results of these reviews, that our properties were in substantial compliance with Federal, state, and foreign
environmental statutes at the time the properties were acquired. However, portions of certain properties have been subject to
some degree of contamination, principally in connection with leakage from underground storage tanks, surface spills or other
on-site activities. In most instances where contamination has been identified, tenants are actively engaged in the remediation
process and addressing identified conditions. Tenants are generally subject to environmental statutes and regulations regarding
the discharge of hazardous materials and any related remediation obligations. In addition, our leases generally require tenants
to indemnify us from all liabilities and losses related to the leased properties and the provisions of such indemnifications
specifically address environmental matters. The leases generally include provisions that allow for periodic environmental
assessments, paid for by the tenant, and allow us to extend leases until such time as a tenant has satisfied its environmental
obligations. Certain of our leases allow us to require financial assurances from tenants, such as performance bonds or letters of
credit, if the costs of remediating environmental conditions are, in our estimation, in excess of specified amounts. Accordingly,
we believe that the ultimate resolution of environmental matters should not have a material adverse effect on our financial
condition, liquidity or results of operations.
CrITICal aCCounTIng esTImaTes
Our significant accounting policies are described in Note 2. Many of these accounting policies require judgment and the use
of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On
a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we
believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions
or factors change. Certain accounting policies, while significant, may not require the use of estimates. Those accounting
policies that require significant estimation and/or judgment are listed below.
purchase price allocation
In connection with our acquisition of properties, we allocate the purchase price to tangible and intangible assets and liabilities
acquired based on their estimated fair values. We determine the value of tangible assets, consisting of land and buildings, as if
vacant, and record intangible assets, including the above- and below-market value of leases, and the value of in-place leases, at
their relative estimated fair values.
Tangible Assets
We determine the value attributed to tangible assets and additional investments in equity interests by applying a discounted
cash flow model that is intended to approximate both what a third party would pay to purchase the vacant property and rent
at current estimated market rates at a selected capitalization rate. In applying the model, we assume that the disinterested party
would sell the property at the end of an estimated market lease term. Assumptions used in the model are property-specific
where this information is available; however, when certain necessary information is not available, we use available regional and
property-type information. Assumptions and estimates include the following:
• a discount rate or internal rate of return;
• the marketing period necessary to put a lease in place;
• carrying costs during the marketing period;
•
• market rents and growth factors of these rents; and
• a market lease term and a cap rate to be applied to an estimate of market rent at the end of the market lease term.
leasing commissions and tenant improvement allowances;
The discount rates and residual capitalization rates used to value the properties are selected based on several factors, including:
industry surveys;
• the creditworthiness of the lessees;
•
• property type;
•
• current lease rates relative to market lease rates; and
• anticipated lease duration.
location and age;
In the case where a tenant has a purchase option deemed to be favorable to the tenant, or the tenant has long-term renewal
options at rental rates below estimated market rental rates, the appraisal assumes the exercise of such purchase option or long-
term renewal options in its determination of residual value.
Where a property is deemed to have excess land, the discounted cash flow analysis includes the estimated excess land value at
the assumed expiration of the lease, based upon an analysis of comparable land sales or listings in the general market area of
the property grown at estimated market growth rates through the year of lease expiration.
38 •
W. P. C a r e y I n c .
The remaining economic life of leased assets is estimated by relying in part upon third-party appraisals of the leased assets,
industry standards and based on our experience. Different estimates of remaining economic life will affect the depreciation
expense that is recorded.
Intangible Assets
When we acquire properties subject to net leases, we determine the value of above-market and below-market lease intangibles
based on the difference between (i) the contractual rents to be paid pursuant to the leases negotiated and in place at the time
of acquisition of the properties and (ii) our estimate of fair market lease rates for the property or a similar property, both of
which are measured over a period equal to the estimated lease term, which includes any renewal options with rental rates
below estimated market rental rates. We discount the difference between the estimated market rent and contractual rent to
a present value using an interest rate reflecting our current assessment of the risk associated with the lease acquired, which
includes a consideration of the credit of the lessee. Estimates of market rent are generally determined by us relying in part upon
a third-party appraisal obtained in connection with the property acquisition and can include estimates of market rent increase
factors, which are generally provided in the appraisal or by local real estate brokers. We measure the fair value of below-market
purchase option liabilities we acquire as the excess of the present value of the fair value of the real estate over the present value
of the tenant’s exercise price.
We evaluate the specific characteristics of each tenant’s lease and any pre-existing relationship with each tenant in determining
the value of in-place lease intangibles. To determine the value of in-place lease intangibles, we consider the following:
• estimated market rent;
• estimated lease term including renewal options at rental rates below estimated market rental rates;
• estimated carrying costs of the property during a hypothetical expected lease-up period; and
• current market conditions and costs to execute similar leases.
Estimated carrying costs of the property include real estate taxes, insurance, other property operating costs, and estimates
of lost rentals at market rates during the market participants’ expected lease-up periods, based on assessments of specific
market conditions.
We determine these values using our estimates or by relying in part upon third-party appraisals conducted by independent
appraisal firms.
goodwill
In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration
paid over the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. We allocate
goodwill to the respective reporting units in which such goodwill arose.
We evaluate goodwill on an annual basis. The goodwill recorded in our Investment reporting unit is evaluated in the fourth
quarter of every year. In connection with the Merger, we recorded goodwill in our Real Estate Ownership reporting unit. Prior
to the Merger, there was no goodwill recorded in our Real Estate Ownership reporting unit. We will evaluate the goodwill
recorded in our Real Estate Ownership reporting unit in the second quarter of every year.
Impairments
We periodically assess whether there are any indicators that the value of our long-lived assets, including goodwill, may be
impaired or that their carrying value may not be recoverable. These impairment indicators include, but are not limited to,
the vacancy of a property that is not subject to a lease; a lease default by a tenant that is experiencing financial difficulty; the
termination of a lease by a tenant; or the rejection of a lease in a bankruptcy proceeding. We may incur impairment charges on
long-lived assets, including real estate, direct financing leases, assets held for sale and equity investments in real estate. We may
also incur impairment charges on marketable securities and goodwill. Estimates and judgments used when evaluating whether
these assets are impaired are presented below.
Real Estate
For real estate assets that we intend to hold and use in which an impairment indicator is identified, we follow a two-step
process to determine whether an asset is impaired and to determine the amount of the charge. First, we compare the carrying
value of the property’s asset group to the future net undiscounted cash flow that we expect the property’s asset group will
generate, including any estimated proceeds from the eventual sale of the property’s asset group. The undiscounted cash flow
analysis requires us to make our best estimate of market rents, residual values and holding periods. We estimate market rents
and residual values using market information from outside sources such as broker quotes or recent comparable sales. In cases
where the available market information is not deemed appropriate, we perform a future net cash flow analysis discounted for
inherent risk associated with each asset to determine an estimated fair value. As our investment objective is to hold properties
2 0 1 2 A n n u a l R e p o r t • 39
on a long-term basis, holding periods used in the undiscounted cash flow analysis generally range from five to ten years.
Depending on the assumptions made and estimates used, the future cash flow projected in the evaluation of long-lived assets
can vary within a range of outcomes. We consider the likelihood of possible outcomes in determining our estimate of future
cash flows. If the future net undiscounted cash flow of the property’s asset group is less than the carrying value, the carrying
value of the property’s asset group is considered not recoverable. We then measure the impairment loss as the excess of the
carrying value of the property’s asset group over its estimated fair value. The property asset group’s estimated fair value is
primarily determined using market information from outside sources such as broker quotes or recent comparable sales.
Assets Held for Sale
We classify real estate assets that are accounted for as operating leases as held for sale when we have entered into a contract to
sell the property, all material due diligence requirements have been satisfied and we believe it is probable that the disposition
will occur within one year. When we classify an asset as held for sale, we carry the investment at the lower of its current
carrying value or as the expected sale price, less expected selling costs. We base the expected sale price on the contract and
the expected selling costs on information provided by brokers and legal counsel. We then compare the asset’s expected sales
price, less expected selling costs to its carrying value, and if the expected sales price, less expected selling costs is less than
the property’s carrying value, we reduce the carrying value to the expected sales price, less expected selling costs. We will
continue to review the initial impairment for subsequent changes in the expected sales price, and may recognize an additional
impairment charge if warranted.
Direct Financing Leases
We review our direct financing leases at least annually to determine whether there has been an other-than-temporary decline
in the current estimate of residual value of the property. The residual value is our estimate of what we could realize upon the
sale of the property at the end of the lease term, based on market information and third-party estimates where available. If this
review indicates that a decline in residual value has occurred that is other-than-temporary, we recognize an impairment charge
and revise the accounting for the direct financing lease to reflect a portion of the future cash flow from the lessee as a return of
principal rather than as revenue.
When we enter into a contract to sell the real estate assets that are recorded as direct financing leases, we evaluate whether we
believe it is probable that the disposition will occur. If we determine that the disposition is probable and therefore the asset’s
holding period is reduced, we record an allowance for credit losses to reflect the change in the estimate of the undiscounted
future rents. Accordingly, the net investment balance is written down to fair value.
Equity Investments in Real Estate and the Managed REITs
We evaluate our equity investments in real estate and in the Managed REITs on a periodic basis to determine if there are
any indicators that the value of our equity investment may be impaired and to establish whether or not that impairment is
other-than-temporary. To the extent impairment has occurred, we measure the charge as the excess of the carrying value of
our investment over its estimated fair value, which is determined by multiplying the estimated fair value of the underlying
investment’s net assets by our ownership interest percentage. For our unconsolidated jointly-owned investments in real estate,
we calculate the estimated fair value of the underlying investment’s real estate or net investment in direct financing lease
as described in Real Estate and Direct Financing Leases above. The fair value of the underlying investment’s debt, if any, is
calculated based on market interest rates and other market information. The fair value of the underlying investment’s other
financial assets and liabilities (excluding net investment in direct financing leases) have fair values that approximate their
carrying values. For our investments in certain Managed REITs, we calculate the estimated fair value of our investment using
the most recently published net asset value per share (“NAV”) of each Managed REIT, which for CPA®:17 – Global and CWI, is
deemed to be their initial public offering prices.
Goodwill
We evaluate goodwill for possible impairment at least annually or upon the occurrence of a triggering event using a two-step
process. To identify any impairment, we first compare the estimated fair value of each of our reporting units with their respective
carrying amount, including goodwill. We calculate the estimated fair value of the Investment Management reporting unit by
applying a multiple, based on comparable companies, to earnings. For the Real Estate Ownership reporting unit, we calculate
its estimated fair value by applying a multiple common to the real estate industry. The selection of the comparable companies
and transactions to be used in our evaluation process could have a significant impact on the fair value of our reporting units
and possible impairments. If the fair value of the reporting unit exceeds its carrying amount, we do not consider goodwill to be
impaired and no further analysis is required. If the carrying amount of the reporting unit exceeds its estimated fair value, we
then perform the second step to determine and measure the amount of the potential impairment charge.
40 •
W. P. C a r e y I n c .
For the second step, we compare the implied fair value of the goodwill for each reporting unit with its respective carrying
amount and record an impairment charge equal to the excess of the carrying amount over the implied fair value. We determine
the implied fair value of the goodwill by allocating the estimated fair value of the reporting unit to its assets and liabilities. The
excess of the estimated fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair
value of the goodwill.
We evaluate goodwill on an annual basis or upon the occurrence of a triggering event. Our annual impairment test for the
goodwill recorded in our Investment reporting unit is evaluated in the fourth quarter of every year. As discussed in Note 3 in
the accompanying consolidated financial statements, in connection with the Merger we recorded goodwill in our Real Estate
Ownership reporting unit. Prior to the Merger, there was no goodwill recorded in our Real Estate Ownership reporting unit.
We will evaluate the goodwill recorded in our Real Estate Ownership reporting unit in the second quarter of every year.
proposed accounting Changes
The following proposed accounting changes may potentially impact our Real Estate Ownership and Investment Management
segments if the outcome has a significant influence on sale-leaseback demand in the marketplace:
The IASB and FASB have issued an Exposure Draft on a joint proposal that would dramatically transform lease accounting
from the existing model. These changes would impact most companies but are particularly applicable to those that are
significant users of real estate. The proposal outlines a completely new model for accounting by lessees, whereby their rights
and obligations under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For
some companies, the new accounting guidance may influence whether or not, or the extent to which, they may enter into the
type of sale-leaseback transactions in which we specialize. The FASB and IASB met during the third quarter of 2012 and voted
to re-expose the proposed standard. A revised exposure draft for public comment is currently expected to be issued in 2013,
with a final standard expected to be issued during 2014. The boards also reached decisions, which are tentative and subject to
change, on a single lessor accounting model and the accounting for variable lease payments, along with several presentation
and disclosure issues. As of the date of this Report, the proposed guidance has not yet been finalized, and as such we are unable
to determine whether this proposal will have a material impact on our business.
supplemental financial measures
In the real estate industry, analysts and investors employ certain non-GAAP supplemental financial measures in order to
facilitate meaningful comparisons between periods and among peer companies. Additionally, in the formulation of our goals
and in the evaluation of the effectiveness of our strategies, we employ the use of supplemental non-GAAP measures, which
are uniquely defined by our management. We believe that these measures are useful to investors to consider because they may
assist them to better understand and measure the performance of our business over time and against similar companies. A
description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures are
provided below.
Funds from Operations — as Adjusted
Funds from Operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts
(“NAREIT”). NAREIT defines FFO as net income or loss (as computed in accordance with GAAP) excluding: depreciation and
amortization expense from real estate assets, impairment charges on real estate, gains or losses from sales of depreciated real
estate assets and extraordinary items; however, FFO related to assets held for sale, sold or otherwise transferred and included
in the results of discontinued operations are included. These adjustments also incorporate the pro rata share of unconsolidated
subsidiaries. FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating
performance between periods and among our peers. Although NAREIT has published this definition of FFO, companies often
modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations.
We modify the NAREIT computation of FFO to include other adjustments to GAAP net income to adjust for certain non-cash
charges such as amortization of real estate-related intangibles, deferred income tax benefits and expenses, straight-line rents,
stock compensation, gains or losses from extinguishment of debt and deconsolidation of subsidiaries and unrealized foreign
currency exchange gains and losses. Additionally, we exclude expenses related to the Merger which are considered non-
recurring, and realized gains/losses on foreign exchange and derivatives, which are not considered fundamental attributes of
our business plan and do not affect our overall long-term operating performance. We refer to our modified definition of FFO
as AFFO. We exclude these items from GAAP net income as they are not the primary drivers in our decision making process.
Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause
short-term fluctuations in net income but have no impact on cash flows, and we therefore use AFFO as one measure of our
operating performance when we formulate corporate goals, evaluate the effectiveness of our strategies, and determine
executive compensation.
2 0 1 2 A n n u a l R e p o r t • 41
We believe that AFFO is a useful supplemental measure for investors to consider because it will help them to better assess
the sustainability of our operating performance without the potentially distorting impact of these short-term fluctuations.
However, there are limits on the usefulness of AFFO to investors. For example, impairment charges and unrealized foreign
currency losses that we exclude may become actual realized losses upon the ultimate disposition of the properties in the form
of lower cash proceeds or other considerations. We use our FFO and AFFO measures as supplemental financial measures of
operating performance. We do not use our FFO and AFFO measures as, nor should they be considered to be, alternatives
to net earnings computed under GAAP or as alternatives to cash from operating activities computed under GAAP or as
indicators of our ability to fund our cash needs.
FFO and AFFO were as follows:
(In THousands)
real estate ownership
Years ended deCember 31,
2012
2011
2010
Net income from real estate ownership attributable to W. P. Carey(a)
$ 44,895
$ 86,280
$ 36,866
Adjustments:
Depreciation and amortization of real property
Impairment charges
Loss (gain) on sale of real estate, net
Proportionate share of adjustments to equity in net income of partially-owned
entities to arrive at FFO:
Depreciation and amortization of real property
Impairment charges
(Gain) loss on sale of real estate, net
Proportionate share of adjustments for noncontrolling interests to arrive at FFO
Total adjustments
FFO – as defined by NAREIT
Adjustments:
Gain on change in control of interests(b)(c)
Gain on deconsolidation of a subsidiary
Other (gains) losses, net
Other depreciation, amortization and non-cash charges
Stock-based compensation
Deferred tax expense
Realized losses on foreign currency, derivatives and other(d)
Amortization of deferred financing costs
Straight-line and other rent adjustments
Above-market rent intangible lease amortization, net(d)
Merger expenses(e)
Proportionate share of adjustments to equity in net income of partially-owned
entities to arrive at AFFO:
Other depreciation, amortization and non-cash charges
Straight-line rent and other rent adjustments
Above-market rent intangible lease amortization, net
AFFO adjustments to equity earnings from equity investments
45,982
22,962
2,676
5,545
—
(15,233)
(5,504)
56,428
25,324
10,473
3,391
5,257
1,090
34
(1,984)
43,585
101,323
129,865
(20,734)
—
(2)
(1,662)
211
(2,745)
828
1,843
(4,446)
7,696
41,338
624
(1,468)
163
37,234
(27,859)
(1,008)
25
176
220
(3,184)
—
—
(4,255)
—
—
—
—
10,137
272
19,022
15,381
(460)
6,477
1,394
(38)
(727)
41,049
77,915
—
—
(755)
(1,027)
93
—
—
—
295
—
—
25
—
10,696
116
7,183
(1,641)
(2,260)
58,188
(27,117)
$ 159,511
$102,748
$85,098
Proportionate share of adjustments for noncontrolling interests to arrive at AFFO
(692)
Total adjustments
AFFO – Real Estate Ownership
42 •
W. P. C a r e y I n c .
(In THousands)
Investment management
Years ended deCember 31,
2012
2011
2010
Net income from investment management attributable to W. P. Carey(a)
$ 17,237
$ 52,799
$ 37,106
FFO – as defined by NAREIT
Adjustments:
Other depreciation, amortization and other non-cash charges
Stock-based compensation
Deferred tax expense
Realized gains on foreign currency, derivatives and other(d)
Amortization of deferred financing costs(d)
Total adjustments
AFFO – Investment Management
Total Company
FFO – as defined by NAREIT
AFFO
17,237
52,799
37,106
961
25,841
(24,055)
(61)
1,197
3,883
3,791
17,496
12,019
—
—
6,389
6,989
(4,712)
—
—
33,306
8,666
$ 21,120
$ 86,105
$ 45,772
$ 118,560
$ 180,631
$182,664
$115,021
$188,853
$130,870
(a) Effective April 1, 2012, we include cash distributions and deferred revenue received and earned from the operating partnerships of CPA®:16 – Global, CPA®:17 – Global and CWI in our Real Estate
Ownership segment. Results of operations for the prior year periods have been reclassified to conform to the current period presentation.
(b) Gain on change in control of interests for the year ended December 31, 2011 represents gain recognized on purchase of the remaining interests in two investments from CPA®:14 (Note 4), which we had
previously accounted for under the equity method. In connection with purchasing these properties, we recognized a net gain of $27.9 million during the year ended December 31, 2011 to adjust the carrying
value of our existing interests in these investments to their estimated fair values.
(c) Gain on change in control of interests for the year ended December 31, 2012 represents a gain of $14.6 million recognized on our previously held interest in shares of CPA®:15 common stock, and a gain
of $6.1 million recognized on the purchase of the remaining interests in five investments from CPA®:15, which we had previously accounted for under the equity method. We recognized a net gain
of $20.7 million to adjust the carrying value of our existing interests in these investments to their estimated fair values.
(d) These adjustments were not significant prior to the Merger, therefore, they were not included in the calculation of AFFO in 2011 and 2010.
(e) Amount included $31.7 million of general and administrative expenses and $9.6 million of income tax expenses incurred in connection with the Merger.
While we believe that FFO and AFFO are important supplemental measures, they should not be considered as alternatives to
net income as an indication of a company’s operating performance. These non-GAAP measures should be used in conjunction
with net income as defined by GAAP. FFO and AFFO, or similarly titled measures disclosed by other real estate investment
trusts, may not be comparable to our FFO and AFFO measures.
2 0 1 2 A n n u a l R e p o r t • 43
Quantitative and Qualitative Disclosures
About Market Risk
markeT rIsk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates and equity prices.
The primary risks to which we are exposed are interest rate risk and foreign currency exchange risk. We are also exposed to
further market risk as a result of concentrations of tenants in certain industries and/or geographic regions. Adverse market
factors can affect the ability of tenants in a particular industry/region to meet their respective lease obligations. In order to
manage this risk, we view our collective tenant roster as a portfolio, and in our investment decisions we attempt to diversify
our portfolio so that we are not overexposed to a particular industry or geographic region.
Generally, we do not use derivative instruments to hedge credit/market risks or for speculative purposes. However, from time
to time, we may enter into foreign currency forward contracts to hedge our foreign currency cash flow exposures.
InTeresT raTe rIsk
The value of our real estate and related fixed rate debt obligations is subject to fluctuations based on changes in interest rates.
The value of our real estate is also subject to fluctuations based on local and regional economic conditions and changes in
the creditworthiness of lessees, all of which may affect our ability to refinance property-level mortgage debt when balloon
payments are scheduled. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political conditions, and other factors beyond our control. An increase in interest
rates would likely cause the value of our owned and managed assets to decrease, which would create lower revenues from
managed assets and lower investment performance for the managed funds. Increases in interest rates may also have an impact
on the credit profile of certain tenants.
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we
attempt to obtain non-recourse mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our
joint investment partners may obtain variable-rate non-recourse mortgage loans and, as a result, may enter into interest rate
swap agreements or interest rate cap agreements with lenders that effectively convert the variable-rate debt service obligations
of the loan to a fixed rate or limit the underlying interest rate from exceeding a specified strike rate, respectively. Interest rate
swaps are agreements in which one party exchanges a stream of interest payments for a counterparty’s stream of cash flow
over a specific period, and interest rate caps limit the effective borrowing rate of variable-rate debt obligations while allowing
participants to share in downward shifts in interest rates. These interest rate swaps and caps are derivative instruments
designated as cash flow hedges on the forecasted interest payments on the debt obligation. The notional, or face, amount
on which the swaps or caps are based is not exchanged. Our objective in using these derivatives is to limit our exposure to
interest rate movements. At December 31, 2012, we estimate that the net fair value of our interest rate swaps and caps, which
are included in Other assets, net and Accounts payable, accrued expenses and other liabilities in the consolidated financial
statements, was in a liability position of $22.5 million.
At December 31, 2012, a significant portion (approximately 87%) of our long-term debt either bore interest at fixed rates, was
swapped or capped to a fixed rate, or bore interest at fixed rates that were scheduled to convert to then-prevailing market fixed
rates at certain future points during their term. The annual interest rates on our fixed-rate debt at December 31, 2012 ranged
from 2.7% to 10.0%. The annual interest rates on our variable-rate debt at December 31, 2012 ranged from 1.2% to 7.6%. Our
debt obligations are more fully described under Financial Condition in Item 7 above. The following table presents principal
cash flows based upon expected maturity dates of our debt obligations outstanding at December 31, 2012 (in thousands):
2013
2014
2015
2016
2017
THereafTer
ToTal
faIr value
Fixed-rate debt
$138,988
$286,304
$229,751
$80,194
$116,453
$470,478 $1,322,168 $1,332,881
Variable-rate debt
$ 35,659
$345,042
$ 10,929
$ 7,029
$ 9,547
$238,023 $ 646,229 $ 648,104
The estimated fair value of our fixed-rate debt and our variable-rate debt that currently bears interest at fixed rates or has
effectively been converted to a fixed rate through the use of interest rate swaps or that has been subject to interest rate caps is
affected by changes in interest rates. A decrease or increase in interest rates of 1% would change the estimated fair value of this
44 •
W. P. C a r e y I n c .
debt at December 31, 2012 by an aggregate increase of $50.9 million or an aggregate decrease of $53.5 million, respectively.
Annual interest expense on our unhedged variable-rate debt that does not bear interest at fixed-rates at December 31, 2012
would increase or decrease by $2.6 million for each respective 1% change in annual interest rates. As more fully described
under Financial Condition — Summary of Financing in Item 7 above, a portion of the debt classified as variable-rate debt in
the tables above bore interest at fixed rates at December 31, 2012 but has interest rate reset features that will change the fixed
interest rates to then-prevailing market fixed rates at certain points during their term. Such debt is generally not subject to
short-term fluctuations in interest rates.
foreIgn CurrenCY exCHange raTe rIsk
We own investments in the European Union and as a result are subject to risk from the effects of exchange rate movements
in various foreign currencies, primarily the euro, which may affect future costs and cash flows. We manage foreign currency
exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to
us in the same currency. This reduces our overall exposure to the equity that we have invested and the equity portion of
our cash flow. We are generally a net receiver of these currencies (we receive more cash than we pay out), and therefore
our foreign operations benefit from a weaker U.S. dollar, and are adversely affected by a stronger U.S. dollar, relative to the
foreign currency. For the year ended December 31, 2012, we recognized net realized loss and unrealized foreign currency
transaction gain of $0.6 million and $1.2 million, respectively. These losses are included in Other income and (expenses) in the
consolidated financial statements and were primarily due to changes in the value of the euro on accrued interest receivable on
notes receivable from consolidated subsidiaries.
We enter into foreign currency forward contracts to hedge certain of our foreign currency cash flow exposures. A foreign
currency forward contract is a commitment to deliver a certain amount of foreign currency at a certain price on a specific date
in the future. The net estimated fair value of our foreign currency forward contracts, which are included in Accounts payable,
accrued expenses and other liabilities in the consolidated financial statements, was in a net liability position of $2.1 million
at December 31, 2012. We obtain non-recourse mortgage financing in the local currency in order to mitigate our exposure to
changes in foreign currency exchange rates. To the extent that currency fluctuations increase or decrease rental revenues as
translated to U.S. dollars, the change in debt service, as translated to U.S. dollars, will partially offset the effect of fluctuations in
revenue and, to some extent, mitigate the risk from changes in foreign currency exchange rates.
Scheduled future minimum rents, exclusive of renewals, under non-cancelable operating leases, for our consolidated foreign
operations as of December 31, 2012, during each of the next five years and thereafter, are as follows (in thousands):
lease revenues(a)
2013
2014
2015
2016
2017
THereafTer
ToTal
Euro
$ 83,329
$83,379
$70,642
$58,139
$48,726
$367,485
$711,700
British pound sterling
1,440
1,575
1,575
1,575
1,575
31,794
39,534
$ 84,769
$84,954
$72,217
$59,714
$50,301
$399,279
$751,234
Scheduled debt service payments (principal and interest) for mortgage notes payable for our consolidated foreign operations as
of December 31, 2012 during each of the next five years and thereafter, are as follows (in thousands):
debT servICe(a) (b)
2013
2014
2015
2016
2017
THereafTer
ToTal
Euro(c)
British pound sterling(d)
$72,065
$191,167
$177,617
$27,715
$13,699
$221,847
$704,110
752
824
11,065
—
—
—
12,641
$72,817
$191,991
$188,682
$27,715
$13,699
$221,847
$716,751
(a) Amounts are based on the applicable exchange rates at December 31, 2012. Contractual rents and debt obligations are denominated in the functional currency of the country of each property.
(b) Interest on unhedged variable-rate debt obligations was calculated using the applicable annual interest rates and balances outstanding at December 31, 2012.
(c) We estimate that for a 1% increase or decrease in the exchange rate between the euro and the U.S. dollar, there would be a corresponding change in the projected property level cash flow at
December 31, 2012 of $0.1 million.
(d) We estimate that for a 1% increase or decrease in the exchange rate between the British pound sterling and the U.S. dollar, there would be a corresponding change the projected property level cash flow at
December 31, 2012 of $0.3 million.
As a result of scheduled balloon payments on our international non-recourse mortgage loans, projected debt service
obligations exceed projected lease revenues in 2014 and 2015. In 2014 and 2015, balloon payments totaling $147.8 million
and $164.1 million, respectively, are due in each year on five non-recourse mortgage loans that are collateralized by properties
that we own with affiliates. We currently anticipate that, by their respective due dates, we will have refinanced certain of these
loans, but there can be no assurance that we will be able to do so on favorable terms, if at all. If that has not occurred, we would
expect to use our cash resources, including unused capacity on our Revolver, to make these payments, if necessary.
2 0 1 2 A n n u a l R e p o r t • 45
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of W. P. Carey Inc.:
In our opinion, the accompanying the consolidated balance sheets and the related consolidated statements of income,
comprehensive income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of W. P.
Carey Inc. and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for these financial statements, for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, appearing on page 106 of the 2012 Annual
Report to Shareholders. Our responsibility is to express opinions on these financial statements, and on the Company’s internal
control over financial reporting based on our integrated audit. We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
February 26, 2013
46 •
W. P. C a r e y I n c .
Consolidated Balance Sheets
(In THousands, exCepT sHare and per sHare amounTs)
assets
Investments in real estate:
deCember 31,
2012
2011
Real estate, at cost (inclusive of amounts attributable to consolidated variable
interest entities (“VIEs”) of $78,745 and $41,032, respectively)
$ 2,331,613
$ 646,482
Operating real estate, at cost (inclusive of amounts attributable to
consolidated VIEs of $0 and $26,318, respectively)
Accumulated depreciation (inclusive of amounts attributable to
consolidated VIEs of $16,110 and $22,350, respectively)
Net investments in properties
Real estate under construction
Net investments in direct financing leases (inclusive of amounts attributable to
consolidated VIEs of $23,921 and $0, respectively)
Assets held for sale
Equity investments in real estate and the Managed REITs
Net investments in real estate
Cash (inclusive of amounts attributable to consolidated VIEs
of $17 and $230, respectively)
Due from affiliates
Goodwill
In-place lease, net (inclusive of amounts attributable to consolidated VIEs
of $3,823 and $0, respectively)
Above-market rent, net (inclusive of amounts attributable to consolidated VIEs
of $2,773 and $0, respectively)
Other intangible assets, net (inclusive of amounts attributable to consolidated VIEs
of $297 and $0, respectively)
Other assets, net (inclusive of amounts attributable to consolidated VIEs
of $4,232 and $2,773, respectively)
Total assets
liabilities and equity
Liabilities:
Non-recourse debt (inclusive of amounts attributable to consolidated VIEs
of $30,326 and $14,261, respectively)
Senior credit facility
Accounts payable, accrued expenses and other liabilities (inclusive of amounts
attributable to consolidated VIEs of $7,659 and $1,651, respectively)
Income taxes, net
Distributions payable
Total liabilities
Redeemable noncontrolling interest
Redeemable securities - related party (Note 4)
Commitments and contingencies (Note 13)
99,703
109,875
(136,068)
2,295,248
2,875
376,005
1,445
565,626
3,241,199
123,904
36,002
329,132
(135,175)
621,182
—
58,000
—
538,749
1,217,931
29,297
38,369
63,607
447,278
44,578
279,885
4,822
10,200
12,950
141,442
51,069
$ 4,609,042
$1,462,623
$ 1,715,397
$ 356,209
253,000
233,160
265,132
24,959
45,700
82,055
44,783
22,314
2,304,188
738,521
7,531
40,000
7,700
—
2 0 1 2 A n n u a l R e p o r t • 47
Consolidated Balance Sheets (Continued)
(In THousands, exCepT sHare and per sHare amounTs)
Equity:
W. P. Carey stockholders’ equity:
Listed shares of W. P. Carey & Co. LLC, no par value, 100,000,000 shares authorized;
0 and 39,729,018 shares issued and outstanding, respectively
Common stock of W. P. Carey Inc., $0.001 par value, 450,000,000 shares authorized;
68,901,933 and 0 shares issued and outstanding, respectively
Preferred stock of W. P. Carey Inc., $0.001 par value, 50,000,000 shares authorized;
None issued
Additional paid-in capital
Distributions in excess of accumulated earnings
Deferred compensation obligation
Accumulated other comprehensive loss
Less, treasury stock at cost, 416,408 and 0 shares, respectively
Total W. P. Carey stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements.
deCember 31,
2012
2011
—
69
—
2,175,820
(172,182)
8,358
(4,649)
(20,270)
1,987,146
270,177
2,257,323
—
—
—
779,071
(95,046)
7,063
(8,507)
—
682,581
33,821
716,402
$ 4,609,042
$1,462,623
48 •
W. P. C a r e y I n c .
Consolidated Statements of Income
(In THousands, exCepT sHare and per sHare amounTs)
Years ended deCember 31,
2012
2011
2010
revenues
Lease revenues:
Rental income
Interest income from direct financing leases
Total lease revenues
Asset management revenue from affiliates
Structuring revenue from affiliates
Incentive, termination and subordinated disposition revenue from affiliates
Wholesaling revenue
Reimbursed costs from affiliates
Other real estate income
operating expenses
General and administrative
Reimbursable costs
Depreciation and amortization
Property expenses
Other real estate expenses
Impairment charges
other Income and expenses
Other interest income
Income from equity investments in real estate and the Managed REITs
Gain on change in control of interests
Other income and (expenses)
Interest expense
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
discontinued operations
Income from operations of discontinued properties
Gain on deconsolidation of a subsidiary
(Loss) gain on sale of real estate
Impairment charges
Loss from discontinued operations, net of tax
Net Income
Net (income) loss attributable to noncontrolling interests
Less: Net income attributable to redeemable noncontrolling interest
$ 108,707
$ 52,360
$ 41,940
15,796
124,503
56,666
48,355
—
19,914
98,245
26,312
10,278
62,638
66,808
46,831
52,515
11,664
64,829
22,499
9,542
51,482
76,246
44,525
—
11,096
60,023
17,273
373,995
327,784
260,645
(144,809)
(98,245)
(48,790)
(13,041)
(9,850)
(10,467)
(93,733)
(64,829)
(24,347)
(10,145)
(10,784)
1,365
(73,427)
(60,023)
(18,309)
(8,009)
(8,121)
(1,140)
(325,202)
(202,473)
(169,029)
1,396
62,392
20,744
3,402
(50,573)
37,361
86,154
(6,783)
79,371
922
—
(5,019)
(12,495)
(16,592)
62,779
(607)
(40)
2,001
51,228
27,859
4,578
(21,770)
63,896
189,207
(37,214)
151,993
1,366
1,008
(3,391)
(11,838)
(12,855)
139,138
1,864
(1,923)
1,269
30,992
781
627
(15,636)
18,033
109,649
(25,814)
83,835
4,897
—
460
(14,241)
(8,884)
74,951
314
(1,293)
Net income attributable to W. P. Carey
$ 62,132
$ 139,079
$ 73,972
2 0 1 2 A n n u a l R e p o r t • 49
Consolidated Statements of Income (Continued)
(In THousands, exCepT sHare and per sHare amounTs)
basic earnings per share
Years ended deCember 31,
2012
2011
2010
Income from continuing operations attributable to W. P. Carey
$ 1.65
$ 3.76
$ 2.08
Loss from discontinued operations attributable to W. P. Carey
Net income attributable to W. P. Carey
diluted earnings per share
Income from continuing operations attributable to W. P. Carey
Loss from discontinued operations attributable to W. P. Carey
Net income attributable to W. P. Carey
weighted average shares outstanding
Basic
Diluted
amounts attributable to w. p. Carey
Income from continuing operations, net of tax
Loss from discontinued operations, net of tax
Net income attributable to W. P. Carey
See Notes to Consolidated Financial Statements.
(0.35)
$1.30
$1.62
(0.34)
(0.32)
(0.22)
$ 3.44
$ 1.86
$ 3.74
$ 2.08
(0.32)
(0.22)
$ 1.28
$ 3.42
$ 1.86
47,389,460
39,819,475
39,514,746
48,078,474
40,098,095
40,007,894
$ 78,724
(16,592)
$151,934
(12,855)
$ 82,856
(8,884)
$ 62,132
$139,079
$73,972
50 •
W. P. C a r e y I n c .
Consolidated Statements of Comprehensive Income
(In THousands)
Net Income
other Comprehensive Income (loss)
Foreign currency translation adjustments
Unrealized loss on derivative instruments
Change in unrealized (depreciation) appreciation on marketable securities
Comprehensive income
amounts attributable to noncontrolling Interests
Net (income) loss
Foreign currency translation adjustments
Comprehensive (income) loss attributable to noncontrolling interests
amounts attributable to redeemable noncontrolling Interest
Net income
Foreign currency translation adjustments
Comprehensive income attributable to redeemable noncontrolling interest
Years ended deCember 31,
2012
2011
2010
$ 62,779
$139,138
$74,951
7,809
(2,262)
(7)
5,540
68,319
(607)
(1,676)
(2,283)
(40)
(6)
(46)
(1,796)
(3,588)
(11)
(5,395)
133,743
1,864
346
2,210
(1,227)
(757)
6
(1,978)
72,973
314
(816)
(502)
(1,923)
(1,293)
5
12
(1,918)
(1,281)
Comprehensive income attributable to W. P. Carey
$ 65,990
$134,035
$71,190
See Notes to Consolidated Financial Statements.
2 0 1 2 A n n u a l R e p o r t • 51
0
5
4
—
4
2
7
3
,
1
6
2
4
1
,
)
7
1
5
1
(
,
)
9
9
2
1
8
(
,
)
5
0
3
3
(
,
4
5
3
2
,
1
6
9
7
,
1
7
4
)
7
1
3
2
(
,
)
7
3
6
1
(
,
2
0
4
2
2
,
8
5
6
3
7
,
6
)
7
5
7
(
)
9
8
3
1
(
,
8
8
4
1
,
,
4
7
4
5
6
6
0
0
7
—
)
4
7
2
(
3
2
2
3
,
)
5
5
0
8
8
(
,
)
0
0
0
6
(
,
9
6
5
2
,
0
9
2
7
1
,
)
1
6
7
4
(
,
5
5
4
)
1
9
4
7
(
,
5
1
2
7
3
1
,
)
1
1
(
)
2
3
8
1
(
,
)
8
8
5
3
(
,
—
—
—
—
—
1
6
2
4
1
,
)
5
0
3
3
(
,
—
—
—
—
—
)
4
1
3
(
2
0
4
2
2
,
2
4
6
—
—
1
6
4
0
4
,
—
—
—
—
—
3
2
2
3
,
)
0
0
0
6
(
,
—
—
—
—
)
2
1
6
1
(
,
)
4
6
8
1
(
,
—
—
)
7
8
3
(
2
0
4
6
1
7
,
1
2
8
3
3
,
—
—
0
5
4
4
2
7
3
,
)
7
1
5
1
(
,
)
9
9
2
1
8
(
,
—
4
5
3
2
,
1
6
9
7
,
1
7
4
)
7
1
3
2
(
,
)
7
3
6
1
(
,
—
2
7
9
3
7
,
6
)
7
5
7
(
)
1
3
0
2
(
,
0
0
7
8
8
4
1
,
3
1
0
5
2
6
,
—
—
)
4
7
2
(
)
5
5
0
8
8
(
,
—
9
6
5
2
,
0
9
2
7
1
,
)
1
6
7
4
(
,
5
5
4
)
9
7
8
5
(
,
,
9
7
0
9
3
1
)
1
1
(
)
5
4
4
1
(
,
)
8
8
5
3
(
,
1
8
5
2
8
6
,
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
7
5
7
(
)
1
3
0
2
(
,
6
)
3
6
4
3
(
,
—
—
—
—
—
—
—
—
—
—
—
—
—
)
5
4
4
1
(
,
)
8
8
5
3
(
,
)
1
1
(
)
7
0
5
8
(
,
—
0
5
4
—
—
—
—
—
—
)
8
8
1
(
—
—
—
—
—
—
—
—
—
—
—
—
—
)
9
9
2
1
8
(
,
—
—
—
—
—
—
—
—
—
—
2
7
9
3
7
,
—
0
0
7
—
—
—
1
0
3
—
—
)
9
4
4
4
(
,
—
—
—
—
—
—
—
—
—
—
—
—
)
6
5
3
8
8
(
,
—
—
—
—
—
—
—
—
—
9
7
0
9
3
1
,
1
1
5
0
1
,
)
9
6
7
5
4
1
(
,
—
—
—
4
2
7
3
,
)
7
1
5
1
(
,
—
—
4
5
3
2
,
9
4
1
8
,
)
7
1
3
2
(
,
1
7
4
)
7
3
6
1
(
,
—
—
—
—
—
8
8
4
1
,
4
3
7
3
6
7
,
—
—
—
—
—
)
4
7
2
(
9
6
5
2
,
9
3
7
1
2
,
)
1
6
7
4
(
,
5
5
4
)
9
7
8
5
(
,
—
—
—
—
3
6
0
7
,
)
6
4
0
5
9
(
,
1
7
0
9
7
7
,
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
0
4
2
3
6
,
$
5
7
7
6
,
$
3
3
6
5
2
6
,
$
—
$
)
1
8
6
(
$
9
4
2
0
1
$
,
,
)
2
4
4
8
3
1
(
$
,
7
0
5
4
5
7
$
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
0
8
6
9
1
,
—
2
1
0
8
6
3
,
)
4
1
2
7
4
(
,
—
—
—
—
)
8
5
3
7
6
2
(
,
—
—
—
—
—
—
—
,
5
0
6
4
0
2
9
3
,
,
7
4
8
4
5
4
9
3
,
4
7
6
5
4
,
5
8
2
5
,
8
4
1
6
7
5
,
—
)
2
6
5
3
(
,
—
—
—
—
)
4
7
3
9
4
3
(
,
—
—
—
—
—
—
,
8
1
0
9
2
7
9
3
,
d
e
r
e
d
n
e
r
s
e
c
i
v
r
e
s
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
d
e
u
s
s
i
s
t
n
a
r
G
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
r
e
d
n
u
d
e
u
s
s
i
s
e
r
a
h
S
t
e
n
,
s
e
r
a
h
s
f
o
e
c
n
a
u
s
s
i
n
o
s
d
e
e
c
o
r
p
h
s
a
C
0
1
0
2
,
1
y
r
a
u
n
a
J
t
a
e
c
n
a
l
a
B
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
–
s
t
fi
e
n
e
b
x
a
t
l
l
a
f
d
n
W
i
)
e
r
a
h
s
.
r
e
p
3
0
2
$
(
d
e
r
a
l
c
e
d
s
n
o
i
t
u
b
i
r
t
s
i
D
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
s
e
r
a
h
s
f
o
t
n
e
m
e
r
i
t
e
r
d
n
a
e
s
a
h
c
r
u
p
e
R
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
s
e
r
a
h
s
f
o
s
e
r
u
t
i
e
f
r
o
F
s
n
o
i
t
u
b
i
r
t
n
o
C
t
s
e
r
e
t
n
i
C
L
L
l
a
n
o
i
t
a
n
r
e
t
n
I
y
e
r
a
C
P.
W.
f
o
e
s
a
h
c
r
u
p
f
o
t
c
a
p
m
i
x
a
T
e
g
a
r
o
t
S
y
e
r
a
C
n
i
t
s
e
r
e
t
n
i
y
t
r
a
p
-
d
r
i
h
t
e
h
t
f
o
n
o
i
t
a
c
fi
i
s
s
a
l
c
e
R
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
n
o
n
o
i
t
a
i
c
e
r
p
p
a
d
e
z
i
l
a
e
r
n
u
n
i
e
g
n
a
h
C
s
t
n
e
m
j
t
s
u
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
:
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
e
m
o
c
n
i
t
e
N
d
e
r
e
d
n
e
r
s
e
c
i
v
r
e
s
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
d
e
u
s
s
i
s
t
n
a
r
G
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
r
e
d
n
u
d
e
u
s
s
i
s
e
r
a
h
S
t
e
n
,
s
e
r
a
h
s
f
o
e
c
n
a
u
s
s
i
n
o
s
d
e
e
c
o
r
p
h
s
a
C
0
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
–
s
t
fi
e
n
e
b
x
a
t
l
l
a
f
d
n
W
i
)
e
r
a
h
s
.
r
e
p
9
1
2
$
(
d
e
r
a
l
c
e
d
s
n
o
i
t
u
b
i
r
t
s
i
D
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
s
e
r
a
h
s
f
o
s
e
r
u
t
i
e
f
r
o
F
s
n
o
i
t
u
b
i
r
t
n
o
C
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
s
e
r
a
h
s
f
o
t
n
e
m
e
r
i
t
e
r
d
n
a
e
s
a
h
c
r
u
p
e
R
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
f
o
e
s
a
h
c
r
u
P
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
:
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
e
m
o
c
n
i
t
e
N
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
n
o
n
o
i
t
a
i
c
e
r
p
e
d
d
e
z
i
l
a
e
r
n
u
n
i
e
g
n
a
h
C
1
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
s
t
n
e
m
j
t
s
u
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
l
a
T
o
T
s
T
s
e
r
e
T
n
I
s
r
e
d
l
o
H
k
C
o
T
s
k
C
o
T
s
s
s
o
l
I
n
o
T
a
g
I
l
b
o
I
s
g
n
n
r
a
e
g
n
I
l
l
o
r
T
n
o
C
n
o
n
Y
e
r
a
C
p.
w
.
Y
r
u
s
a
e
r
T
e
v
I
s
n
e
H
e
r
p
m
o
C
I
n
o
T
a
s
n
e
p
m
o
C
d
e
T
a
l
u
m
u
C
C
a
n
I
-
I
d
a
p
I
l
a
T
p
a
C
l
a
T
o
T
r
e
H
T
o
d
e
T
a
l
u
m
u
C
C
a
s
r
e
d
l
o
H
k
C
o
T
s
Y
e
r
a
C
p.
w
.
I
s
n
o
T
u
b
r
T
s
d
I
I
d
e
r
r
e
f
e
d
f
o
s
s
e
C
x
e
n
I
I
l
a
n
o
T
d
d
a
I
k
C
o
T
s
n
o
m
m
o
C
e
u
l
a
v
r
a
p
1
0
0
0
$
.
e
u
l
a
v
r
a
p
o
n
T
n
u
o
m
a
s
e
r
a
H
s
s
e
r
a
H
s
)
s
T
n
u
o
m
a
e
r
a
H
s
r
e
p
d
n
a
e
r
a
H
s
T
p
e
C
x
e
,
s
d
n
a
s
u
o
H
T
n
I
(
0
1
0
2
d
n
a
1
1
0
2
,
2
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
E
s
r
a
e
Y
y
t
i
u
q
E
f
o
s
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
52 •
W. P. C a r e y I n c .
2
0
4
6
1
7
.
$
1
2
8
3
3
,
$
1
8
5
2
8
6
,
$
—
$
)
7
0
5
8
(
$
,
3
6
0
7
,
$
)
6
4
0
5
9
(
,
$
1
7
0
9
7
7
,
$
—
$
—
,
8
1
0
9
2
7
9
3
,
l
a
T
o
T
s
T
s
e
r
e
T
n
I
s
r
e
d
l
o
H
k
C
o
T
s
k
C
o
T
s
s
s
o
l
I
n
o
T
a
g
I
l
b
o
I
s
g
n
n
r
a
e
g
n
I
l
l
o
r
T
n
o
C
n
o
n
Y
e
r
a
C
p.
w
.
Y
r
u
s
a
e
r
T
e
v
I
s
n
e
H
e
r
p
m
o
C
I
n
o
T
a
s
n
e
p
m
o
C
d
e
T
a
l
u
m
u
C
C
a
n
I
-
I
d
a
p
I
l
a
T
p
a
C
l
a
T
o
T
r
e
H
T
o
d
e
T
a
l
u
m
u
C
C
a
s
r
e
d
l
o
H
k
C
o
T
s
Y
e
r
a
C
p.
w
.
I
s
n
o
T
u
b
r
T
s
d
I
I
d
e
r
r
e
f
e
d
f
o
s
s
e
C
x
e
n
I
I
l
a
n
o
T
d
d
a
I
k
C
o
T
s
n
o
m
m
o
C
e
u
l
a
v
r
a
p
1
0
0
0
$
.
e
u
l
a
v
r
a
p
o
n
T
n
u
o
m
a
s
e
r
a
H
s
s
e
r
a
H
s
)
s
T
n
u
o
m
a
e
r
a
H
s
r
e
p
d
n
a
e
r
a
H
s
T
p
e
C
x
e
,
s
d
n
a
s
u
o
H
T
n
I
(
—
,
1
6
3
0
8
3
1
,
,
9
5
3
7
3
2
)
0
0
0
0
4
(
,
3
5
5
1
,
0
0
0
5
4
,
—
6
4
6
—
1
9
2
3
,
5
8
1
0
1
,
8
3
0
6
2
,
)
0
4
8
(
)
9
4
6
6
(
,
)
4
4
9
8
3
1
(
,
)
0
7
2
5
4
(
,
—
9
3
7
2
6
,
)
7
(
1
2
7
7
,
)
2
6
2
2
(
,
—
—
,
3
1
5
7
3
2
—
—
—
—
—
—
—
—
—
1
9
2
3
,
)
9
4
6
6
(
,
—
—
—
7
0
6
—
—
4
9
5
1
,
—
,
1
6
3
0
8
3
1
,
)
4
5
1
(
)
0
0
0
0
4
(
,
3
5
5
1
,
0
0
0
5
4
,
—
6
4
6
—
—
5
8
1
0
1
,
8
3
0
6
2
,
—
)
0
4
8
(
)
4
4
9
8
3
1
(
,
)
0
7
2
5
4
(
,
—
2
3
1
2
6
,
)
7
(
7
2
1
6
,
)
2
6
2
2
(
,
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
0
7
2
5
4
(
,
0
0
0
5
2
,
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
7
(
7
2
1
6
,
)
2
6
2
2
(
,
—
—
—
—
—
—
—
—
—
—
—
1
7
9
—
—
4
2
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
3
1
2
6
,
)
8
6
2
9
3
1
(
,
—
—
—
)
0
4
(
,
3
3
3
0
8
3
1
,
)
4
5
1
(
)
0
0
0
0
4
(
,
3
5
5
1
,
9
9
9
4
4
,
—
6
4
6
—
—
5
8
1
0
1
,
7
6
0
5
2
,
)
0
4
8
(
—
—
—
)
0
0
0
5
2
(
,
—
—
—
—
0
4
8
2
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
,
7
2
8
4
3
8
9
3
,
,
3
4
6
0
7
1
8
2
,
—
—
8
6
7
3
1
,
0
0
5
7
3
9
,
2
2
8
3
,
4
4
0
7
2
,
—
—
—
—
—
—
—
—
—
—
—
3
9
9
0
3
,
5
2
4
7
2
4
,
8
2
7
8
3
2
,
—
)
9
1
9
9
2
(
,
—
—
—
—
—
,
)
7
2
8
4
3
8
9
3
(
,
—
—
—
—
)
1
7
6
5
8
(
,
3
2
3
,
7
5
2
,
2
$
7
7
1
,
0
7
2
$
6
4
1
,
7
8
9
,
1
$
)
0
7
2
,
0
2
(
$
)
9
4
6
,
4
(
$
8
5
3
,
8
$
)
2
8
1
,
2
7
1
(
$
0
2
8
,
5
7
1
,
2
$
9
6
$
5
2
5
,
5
8
4
,
8
6
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
5
1
:
®
A
P
C
l
f
o
s
r
e
d
o
h
k
c
o
t
s
o
t
d
e
u
s
s
i
s
e
r
a
h
S
f
o
s
e
r
a
h
s
r
o
f
C
L
L
.
o
C
&
y
e
r
a
C
P.
W.
f
o
s
e
r
a
h
s
f
o
e
g
n
a
h
c
x
E
r
e
g
r
e
M
e
h
t
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
.
c
n
I
y
e
r
a
C
P.
W.
r
e
g
r
e
M
e
h
t
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
f
o
e
s
a
h
c
r
u
P
r
e
g
r
e
M
e
h
t
2
1
0
2
,
1
y
r
a
u
n
a
J
t
a
e
c
n
a
l
a
B
y
t
r
a
p
d
r
i
h
t
o
t
s
e
r
a
h
s
f
o
e
c
n
a
u
s
s
i
n
o
s
d
e
e
c
o
r
p
h
s
a
C
d
e
r
e
d
n
e
r
s
e
c
i
v
r
e
s
h
t
i
w
n
o
i
t
c
e
n
n
o
c
n
i
d
e
u
s
s
i
s
t
n
a
r
G
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
r
e
d
n
u
d
e
u
s
s
i
s
e
r
a
h
S
s
e
r
a
h
s
l
s
r
e
d
o
h
e
r
a
h
S
e
t
a
t
s
E
f
o
n
o
i
t
a
c
fi
i
s
s
a
l
c
e
R
t
e
n
,
s
e
r
a
h
s
f
o
e
c
n
a
u
s
s
i
n
o
s
d
e
e
c
o
r
p
h
s
a
C
s
n
a
l
p
e
v
i
t
n
e
c
n
i
e
r
a
h
s
–
s
t
fi
e
n
e
b
x
a
t
l
l
a
f
d
n
W
i
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
)
e
r
a
h
s
.
r
e
p
4
4
2
$
(
d
e
r
a
l
c
e
d
s
n
o
i
t
u
b
i
r
t
s
i
D
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
s
e
r
a
h
s
f
o
s
e
r
u
t
i
e
f
r
o
F
s
n
o
i
t
u
b
i
r
t
n
o
C
)
8
0
4
6
1
4
(
,
)
8
1
4
1
6
5
(
,
)
4
e
t
o
N
(
s
e
i
t
r
a
p
d
e
t
a
l
e
r
m
o
r
f
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
e
s
a
h
c
r
u
P
—
—
—
—
—
—
s
e
i
t
i
r
u
c
e
s
e
l
b
a
t
e
k
r
a
m
n
o
n
o
i
t
a
i
c
e
r
p
e
d
d
e
z
i
l
a
e
r
n
u
n
i
e
g
n
a
h
C
s
t
n
e
m
j
t
s
u
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
.
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
i
F
d
e
t
a
d
i
l
o
s
n
o
C
o
t
s
e
t
o
N
e
e
S
2
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
:
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
s
e
r
a
h
s
f
o
n
o
i
t
a
l
l
e
c
n
a
C
e
m
o
c
n
i
t
e
N
2 0 1 2 A n n u a l R e p o r t • 53
Management and disposition income received in shares of Managed REITs
(28,477)
Consolidated Statements of Cash Flows
(In THousands)
Cash flows — operating activities
Net income
Adjustments to net income:
Depreciation and amortization, including intangible assets and
deferred financing costs
(Income) loss from equity investments in real estate and
the Managed REITs in excess of distributions received
Straight-line rent, financing lease adjustments and amortization
of rent-related intangibles
Amortization of deferred revenue
Gain on deconsolidation of a subsidiary
Loss (gain) on sale of real estate
Unrealized (gain) loss on foreign currency transactions and others
Realized loss (gain) on foreign currency transactions and others
Allocation of loss to profit-sharing interest
Gain on conversion of shares
Gain on change in control of interests
Impairment charges
Stock-based compensation expense
Deferred acquisition revenue received
Increase in structuring revenue receivable
(Decrease) increase in income taxes, net
Net changes in other operating assets and liabilities
Net cash provided by operating activities
Cash flows — Investing activities
Cash paid to stockholders of CPA®:15 in the Merger
Cash acquired in connection with the Merger
Distributions received from equity investments in real estate and
the Managed REITs in excess of equity income
Capital contributions to equity investments
Purchase of interests in CPA®:16 – Global
Purchases of real estate and equity investments in real estate
Value added taxes (“VAT”) paid in connection with acquisition of real estate
VAT refunded in connection with acquisitions of real estate
Capital expenditures
Cash acquired on acquisition of subsidiaries
Proceeds from sale of real estate
Proceeds from sale of securities
Funding of short-term loans to affiliates
54 •
W. P. C a r e y I n c .
Years ended deCember 31,
2012
2011
2010
$ 62,779
$ 139,138
$ 74,951
55,114
29,616
24,443
(17,271)
310
(4,920)
2,831
(9,436)
—
2,773
(1,861)
610
—
(15)
(20,794)
22,962
26,038
21,059
(20,304)
(18,277)
2,912
80,643
(152,356)
178,945
46,294
(726)
—
(3,944)
—
—
(3,698)
(6,291)
(1,008)
3,391
138
(965)
—
(73,936)
(3,806)
(27,859)
10,473
17,716
21,546
(19,537)
244
(5,356)
80,116
—
—
20,807
(2,297)
(121,315)
(24,315)
—
5,035
(6,204)
(13,239)
—
73,204
372
—
57
12,516
818
(96,000)
286
—
—
(460)
300
(731)
(781)
(35,235)
—
—
15,381
7,082
21,204
(20,237)
(1,288)
6,422
86,417
—
—
18,758
—
—
(96,884)
(4,222)
—
(5,135)
—
14,591
—
—
(In THousands)
Proceeds from repayment of short-term loans to affiliates
Funds placed in escrow
Funds released from escrow
Net cash provided by (used in) investing activities
Cash flows — financing activities
Distributions paid
Contributions from noncontrolling interests
Distributions paid to noncontrolling interests
Contributions from profit-sharing interest
Distributions to profit-sharing interest
Purchase of noncontrolling interest
Purchase of treasury stock from related party (Note 4)
Scheduled payments of mortgage principal
Proceeds from mortgage financing
Proceeds from senior credit facility
Repayments of senior credit facility
Payment of financing costs
Funds placed in escrow
Proceeds from issuance of shares
Windfall tax benefit associated with stock-based compensation awards
Net cash (used in) provided by financing activities
Change in Cash and Cash equivalents during the Year
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years ended deCember 31,
2012
—
(46,951)
37,832
126,466
2011
96,000
(6,735)
2,584
2010
—
(1,571)
36,620
(126,084)
(37,843)
(113,867)
(85,814)
(92,591)
3,291
(7,314)
—
—
—
(45,270)
(54,964)
23,750
300,000
3,223
(7,258)
—
—
(7,502)
—
(25,327)
45,491
251,410
(280,160)
(160,000)
(2,557)
1,970
51,644
10,185
(113,292)
790
94,607
29,297
(7,778)
—
1,488
2,569
10,502
70
(35,396)
64,693
14,261
(4,360)
3,694
(693)
—
—
(14,324)
56,841
83,250
(52,500)
(1,204)
—
3,724
2,354
(1,548)
(783)
46,243
18,450
$ 123,904
$ 29,297
$ 64,693
2 0 1 2 A n n u a l R e p o r t • 55
Consolidated Statements of Cash Flows (Continued)
supplemental noncash Investing and financing activities
In July 2012, we entered into a share purchase agreement (Note 4) to repurchase up to an aggregate amount of $85.0 million
of our common stock from the Estate. Upon the execution of the agreement, we reclassified $85.0 million from Additional
paid-in capital to Redeemable securities.
On September 28, 2012, we merged with CPA®:15. In the Merger, CPA®:15 stockholders received $1.25 in cash and 0.2326
shares of our common stock for each share of CPA®:15 common stock held at the completion of the Merger (Note 3). The
purchase price was allocated to the assets acquired and liabilities assumed, based upon their preliminary fair values. The
following table summarizes estimated fair values of the assets acquired and liabilities assumed in the acquisition based on the
current best estimate of management (in thousands):
assets acquired at fair value
Investments in real estate
Net investment in direct financing leases
Equity investments in real estate
Intangible assets
Other assets
liabilities assumed at fair value
Non-recourse debt
Accounts payable, accrued expenses and other liabilities
Amounts attributable to noncontrolling interests
Net assets acquired excluding cash
Fair value of common shares issued
Cash consideration
Fair value of W. P. Carey & Co. LLC equity interest in CPA®:15 prior to the Merger
Fair value of W. P. Carey & Co. LLC equity interest in jointly-owned investments
with CPA®:15 prior to the Merger
Goodwill
Cash acquired on acquisition of subsidiaries
$ 1,762,872
315,789
166,247
695,310
81,750
(1,350,755)
(186,795)
(237,359)
1,247,059
(1,380,362)
(152,356)
(107,147)
(54,822)
268,683
$ (178,945)
Prior to our implementation of Emerging Issues Task Force (“EITF”) 10-E “Accounting for Deconsolidation of a Subsidiary That Is
In-Substance Real Estate”, we deconsolidated a wholly-owned subsidiary because we no longer had control over the activities that
most significantly impact its economic performance following possession of the subsidiary’s property by a receiver (Note 17). The
following table presents the assets and liabilities of the subsidiary on the date of deconsolidation (in thousands):
assets
Net investments in properties
Intangible assets and goodwill, net
Total
liabilities
Non-recourse debt
Accounts payable, accrued expenses and other liabilities
Total
56 •
W. P. C a r e y I n c .
$ 5,340
(15)
$ 5,325
$ (6,311)
(22)
$ (6,333)
On May 2, 2011, in connection with entering into an amended and restated advisory agreement with CPA®:16 – Global, we
received a special membership interest in CPA®:16 – Global’s operating partnership and recorded as consideration a $28.3 million
adjustment to Equity investments in real estate and the Managed REITs to reflect the fair value of our special interest in that
operating partnership (Note 4).
Also on May 2, 2011, we exchanged 11,113,050 shares of CPA®:14 for 13,260,091 shares of CPA®:16 – Global, resulting in a gain
of approximately $2.8 million. Additionally, we recognized a gain of $1.0 million on the conversion of our termination revenue
to shares of CPA®:14 as a result of the fair value of the shares received exceeding the termination revenue (Note 4).
In May 2011, we purchased the remaining interests in our Federal Express and Amylin investments from CPA®:14, which we
had previously accounted for under the equity method. In connection with purchasing these interests and gaining control,
we recognized a net gain of $27.9 million to adjust the carrying value of our existing interests in these investments to their
estimated fair values. We also assumed two non-recourse mortgages on the related properties with an aggregate fair value of
$87.6 million at the date of acquisition (Note 4).
supplemental Cash flows Information
(In THousands)
Interest paid
Income taxes paid
See Notes to Consolidated Financial Statements.
Years ended deCember 31,
2012
2011
2010
$38,092
$12,501
$21,168
$33,641
$15,351
$24,307
2 0 1 2 A n n u a l R e p o r t • 57
Notes to Consolidated Financial Statements
1 | busIness and organIzaTIon
At December 31, 2012, W. P. Carey Inc. is a REIT that provides long-term financing via sale-leaseback and build-to-suit
transactions for companies worldwide and manages a global investment portfolio. We invest primarily in commercial
properties domestically and internationally. We earn revenue principally by leasing the properties we own to single corporate
tenants, primarily on a triple-net leased basis, which requires each tenant to pay substantially all of the costs associated with
operating and maintaining the property. Through our TRSs, we also earn revenue as the advisor to publicly-owned, non-listed
REITs, which are sponsored by us under the Corporate Property Associates brand name and invest in similar properties. At
December 31, 2012, we were the advisor to the following CPA® REITs: CPA®:16 – Global and CPA®:17 – Global, and we were
the advisor to CPA®:15 until its merger with and into us on September 28, 2012 (Note 3). We are also the advisor to CWI,
which acquires interests in lodging and lodging-related properties. At December 31, 2012, we owned and/or managed 1,007
properties domestically and internationally. Our owned portfolio was comprised of our full or partial ownership interest in
423 properties, substantially all of which were net leased to 124 tenants, and totaled approximately 38.5 million square feet. In
addition, through our consolidated subsidiaries, Carey Storage and Livho, we had interests in 21 self-storage properties and a
hotel property, respectively, for an aggregate of approximately 0.8 million square feet at December 31, 2012. All references to
square feet are unaudited.
We were formed as a corporation under the laws of Maryland on February 15, 2012. On February 17, 2012, our predecessor,
W. P. Carey & Co. LLC, announced its intention to reorganize to qualify as a REIT for federal income tax purposes. Prior to
the REIT Reorganization, our predecessor was a limited liability company formed under the laws of Delaware on July 15,
1996 and, as a limited liability company, was not subject to federal income taxation as long as it satisfied certain requirements
relating to its operations and passed through any tax liabilities or benefits to its shareholders; however, certain of its
subsidiaries were engaged in investment management operations and were subject to U.S. federal, state and local income taxes,
and some of its subsidiaries may have also been subject to foreign taxes. On September 13, 2012, W. P. Carey & Co. LLC’s
shareholders approved the REIT Reorganization. In connection with the Merger, W. P. Carey & Co. LLC completed an internal
reorganization whereby W. P. Carey & Co. LLC and its subsidiaries merged with and into W. P. Carey Inc. with W. P. Carey Inc.
as the surviving corporation, succeeding to and continuing to operate the existing business of W. P. Carey & Co. LLC. Upon
consummation of the REIT Reorganization, the 40,396,245 outstanding shares of W. P. Carey & Co. LLC, no par value per
share, were converted into the right to receive an equal number of shares of W. P. Carey Inc. common stock, par value $0.001
per share, which are subject to certain share ownership and transfer restrictions designed to protect our ability to remain
qualified as a real estate investment trust. A total of 40,396,245 shares of our common stock were issued to the shareholders of
W. P. Carey & Co. LLC in exchange for an aggregate of 40,396,245 shares they owned on the date of closing. Immediately after
the REIT Reorganization, the shares of W. P. Carey & Co. LLC were delisted from the NYSE and the shares were canceled, and
our common stock became listed on the NYSE under the same symbol, “WPC”.
The REIT Reorganization was accounted for as a transaction between entities under common control. Accordingly, the assets
and liabilities of our predecessor were recognized at their carrying amounts at the date of the REIT Reorganization. As such,
in the consolidated financial statements, the historical results of our predecessor are included for the pre-REIT Reorganization
period and the consolidated results, which include the Merger with CPA®:15, are included subsequent to the effective date of
the Merger (Note 3).
We have elected to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code effective February 15, 2012
for the year ending December 31, 2012 (Note 16). As a REIT, we are not generally subject to U.S. federal income taxation as
long as we satisfy certain requirements, principally relating to the nature of our income and the level of our distributions, as
well as other factors. We now hold substantially all of our real estate assets attributable to our Real Estate Ownership segment,
including the assets acquired from CPA®:15 in the Merger, under the new REIT structure, while the activities conducted by our
Investment Management segment subsidiaries have been organized under TRSs.
primary reportable segments
Real Estate Ownership — We own and invest in commercial properties in the U.S. and the European Union that are then
leased to companies, primarily on a triple-net lease basis. We may also invest in other properties if opportunities arise. We
own interests in the Managed REITs and account for these interests under the equity method of accounting. In addition, we
58 •
W. P. C a r e y I n c .
receive a percentage of distributions of Available Cash, as defined in the respective advisory agreements, from the operating
partnerships of each of the Managed REITs, and earn deferred revenue from our special member interest in CPA®:16 –
Global’s operating partnership. Effective April 1, 2012, we include such distributions and deferred revenue in our Real Estate
Ownership segment (Note 18).
Investment Management — Through our TRSs, we structure and negotiate investments and debt placement transactions for
the Managed REITs, for which we earn structuring revenue, and manage their portfolios of real estate investments, for which
we earn asset-based management and performance revenue. We earn asset-based management and historically we earned
performance revenue from the Managed REITs based on the value of their real estate-related, self-storage-related and lodging-
related assets under management. As funds available to the Managed REITs are invested, the asset base from which we earn
revenue increases. We may also earn incentive and disposition revenue and receive other compensation in connection with
providing liquidity alternatives to the Managed REITs’ stockholders.
2 | summarY of sIgnIfICanT aCCounTIng polICIes
basis of Consolidation
The consolidated financial statements reflect all of our accounts, including those of our majority-owned and/or controlled
subsidiaries. The portion of equity in a subsidiary that is not attributable, directly or indirectly, to us is presented as
noncontrolling interests. All significant intercompany accounts and transactions have been eliminated. The consolidated
financial statements include the historical results of our predecessor prior to the REIT Reorganization and the Merger.
When we obtain an economic interest in an entity, we evaluate the entity to determine if it is deemed a VIE and, if so, whether
we are deemed to be the primary beneficiary and are therefore required to consolidate the entity. Significant judgment is
required to determine whether a VIE should be consolidated. We review the contractual arrangements provided for in the
partnership agreement or other related contracts to determine whether the entity is considered a VIE, and to establish whether
we have any variable interests in the VIE. We then compare our variable interests, if any, to those of the other variable interest
holders to determine which party is the primary beneficiary of a VIE based on whether the entity (i) has the power to direct
the activities that most significantly impact the economic performance of the VIE, and (ii) has the obligation to absorb losses
or the right to receive benefits of the VIE that could potentially be significant to the VIE.
For an entity that is not considered to be a VIE, the general partners in a limited partnership (or similar entity) are presumed
to control the entity regardless of the level of their ownership and, accordingly, may be required to consolidate the entity. We
evaluate the partnership agreements or other relevant contracts to determine whether there are provisions in the agreements
that would overcome this presumption. If the agreements provide the limited partners with either (a) the substantive ability
to dissolve or liquidate the limited partnership or otherwise remove the general partners without cause or (b) substantive
participating rights, the limited partners’ rights overcome the presumption of control by a general partner of the limited
partnership, and, therefore, the general partner must account for its investment in the limited partnership using the equity
method of accounting.
We have investments in tenancy-in-common interests in various domestic and international properties. Consolidation of
these investments is not required as such interests do not qualify as VIEs and do not meet the control requirement required
for consolidation. Accordingly, we account for these investments using the equity method of accounting. We use the equity
method of accounting because the shared decision-making involved in a tenancy-in-common interest investment provides us
with significant influence on the operating and financial decisions of these investments.
We apply accounting guidance for consolidation of VIEs to certain entities in which the equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. Fixed price purchase and renewal options within a lease
as well as certain decision-making rights within a loan can cause us to consider an entity a VIE.
Additionally, we own interests in single-tenant net leased properties leased to companies through noncontrolling interests
in partnerships and limited liability companies that we do not control but over which we exercise significant influence. We
account for these investments under the equity method of accounting. At times the carrying value of our equity investments
may fall below zero for certain investments. We intend to fund our share of the investments’ future operating deficits should
the need arise. However, we have no legal obligation to pay for any of the liabilities of such investments nor do we have any
legal obligation to fund operating deficits.
One of our directors and officers was the sole shareholder of Livho, a subsidiary that operates a hotel investment (Note 4).
We consolidated the accounts of Livho in our consolidated financial statements because it was a VIE and we were its
primary beneficiary.
2 0 1 2 A n n u a l R e p o r t • 59
In order to streamline Livho’s corporate structure, in August 2012, the director and officer transferred his ownership interest in
Livho to one of our subsidiaries, Carey REIT II, Inc. (“Carey REIT II”), for no consideration. Immediately after the ownership
transfer, Livho is no longer a VIE as we own 100% of the entity. We continue to consolidate the accounts of Livho.
We formed CWI in March 2008 for the purpose of acquiring interests in lodging and lodging-related properties. In April 2010,
CWI filed a registration statement with the SEC to sell up to $1.0 billion of its common stock in an initial public offering plus
up to an additional $237.5 million of its common stock under a dividend reinvestment plan. This registration statement was
declared effective by the SEC in September 2010. Through December 31, 2010, the financial activity of CWI, which had no
significant assets, liabilities or operations, was included in our consolidated financial statements, as we owned all of CWI’s
outstanding common stock. Beginning in 2011, we have accounted for our interest in CWI under the equity method of
accounting because, as the advisor, we do not exert control over, but we have the ability to exercise significant influence on,
CWI. Similarly, we formed a new CPA® REIT, CPA®:18 – Global, in September 2012. Through December 31, 2012, the financial
activity of CPA®:18 – Global, which had no significant assets, liabilities or operations, was included in our consolidated
financial statements.
reclassifications and revisions
Certain prior year amounts have been reclassified to conform to the current year presentation. The consolidated financial
statements included in this Report have been retrospectively adjusted to reflect the disposition (or planned disposition)
of certain properties as discontinued operations and certain adjustments related to purchase price allocation for all
periods presented.
purchase price allocation
In accordance with the guidance for business combinations, we determine whether a transaction or other event is a business
combination, which requires that the assets acquired and liabilities assumed constitute a business. Each business combination
is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the
transaction or other event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business
combinations, we evaluate the existence of goodwill or a gain from a bargain purchase. We immediately expense acquisition-
related costs and fees associated with business combinations.
When we acquire properties with leases classified as operating leases, we allocate the purchase price to the tangible and
intangible assets and liabilities acquired based on their estimated fair values. We determine the value of the tangible assets,
consisting of land and buildings, as if vacant, and site improvements, and record intangible assets, including the above-market
and below-market value of leases and the value of in-place leases at their relative estimated fair values. Land is typically valued
utilizing the sales comparison (or market approach). Buildings, as if vacant, are valued using the cost and/or income approach.
Site improvements are valued using the cost approach. The fair value of real estate is determined by reference to portfolio
appraisals which determines their values, on a property level, by applying a discounted cash flow analysis to the estimated net
operating income for each property in the portfolio during the remaining anticipated lease term, and the estimated residual
value of each property from a hypothetical sale of the property upon expiration after considering the re-tenanting of such
property at estimated then current market rental rate, at a selected capitalization rate and deducting estimated costs of sale.
The proceeds from a hypothetical sale are derived by capitalizing the estimated net operating income of each property for
the year following lease expiration at an estimated residual capitalization rate. The discount rates and residual capitalization
rates used to value the properties are selected based on several factors, including the creditworthiness of the lessees, industry
surveys, property type, location and age, current lease rates relative to market lease rates and anticipated lease duration. In the
case where a tenant has a purchase option deemed to be materially favorable to the tenant, or the tenant has long-term renewal
options at rental rates below estimated market rental rates, the appraisal assumes the exercise of such purchase option or long-
term renewal options in its determination of residual value. Where a property is deemed to have excess land, the discounted
cash flow analysis includes the estimated excess land value at the assumed expiration of the lease, based upon an analysis of
comparable land sales or listings in the general market area of the property grown at estimated market growth rates through
the year of lease expiration. For those properties that are under contract for sale, the appraised value of the portfolio reflects the
current contractual sale price of such properties. See Real Estate Leased to Others and Depreciation below for a discussion of
our significant accounting policies related to tangible assets. We include the value of below-market leases in Accounts payable,
accrued expenses and other liabilities in the consolidated financial statements.
We record above-market and below-market lease values for owned properties based on the present value (using a discount
rate reflecting the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid
pursuant to the leases negotiated and in place at the time of acquisition of the properties and (ii) our estimate of fair market
lease rates for the property or equivalent property, both of which are measured over a period equal to the estimated lease
term which includes renewal options with rental rates below estimated market rental rates. We amortize the capitalized
60 •
W. P. C a r e y I n c .
above-market lease value as a reduction of rental income over the estimated market lease term. We amortize the capitalized
below-market lease value as an increase to rental income over the initial term and any fixed rate renewal periods in the
respective leases.
We measure the fair value of the below-market purchase option liability we acquired in connection with the Merger as the excess
of the present value of the fair value of the real estate over the present value of the tenant’s exercise price at the option date.
The value of any in-place lease is estimated to be equal to the property owners’ avoidance of costs necessary to release the
property for a lease term equal to the remaining primary in-place lease term and the value of investment grade tenancy. The cost
avoidance to the property owners’ of vacancy/leasing costs necessary to lease the property for a lease term equal to the remaining
in-place lease term is derived first by determining the in-place lease term on the subject lease. Then, based on our review of the
market, the cost to be borne by a property owner to replicate a market lease to the remaining in-place term was estimated. These
costs consist of: (i) rent lost during downtime (i.e. assumed periods of vacancy), (ii) estimated expenses that would be incurred
by the property owner during periods of vacancy (iii) rent concessions (i.e. free rent) (iv) leasing commissions and (v) tenant
improvements allowances given to tenants. We determine these values using our estimates or by relying in part upon third-party
appraisals. We amortize the capitalized value of in-place lease intangibles to expense over the remaining initial term of each
lease. We amortize the capitalized value of tenant relationships to expense over the initial and expected renewal terms of the
lease. No amortization period for intangibles will exceed the remaining depreciable life of the building.
If a lease is terminated, we charge the unamortized portion of above-market and below-market lease values to lease revenue,
and in-place lease and tenant relationship values to amortization expense.
When we acquire leveraged properties, the fair value of debt instruments acquired is determined using a discounted cash
flow model with rates that take into account the credit of the tenants, where applicable, and interest rate risk. Such resulting
premium or discount is amortized over the remaining term of the obligation. We also consider the value of the underlying
collateral taking into account the quality of the collateral, the credit quality of the company, the time until maturity and the
current interest rate.
goodwill
In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration
paid per the fair value of the assets and liabilities acquired and assumed, respectively, represents goodwill. We allocated
goodwill to the respective reporting units in which such goodwill arose. Goodwill acquired in the Merger was attributed to the
Real Estate Ownership segment which comprises one reporting unit. In the event we dispose of a property that constitutes a
business under GAAP from a reporting unit with goodwill, which is less than all of the reporting unit, we allocate a portion
of the reporting unit’s goodwill to that business in determining the gain or loss on the disposal of the business. The amount of
goodwill allocated to the business is based on the relative fair value of the business for the reporting unit.
operating real estate
We carry land and buildings and personal property at cost less accumulated depreciation. We capitalize improvements, while
we expense replacements, maintenance and repairs that do not improve or extend the lives of the respective assets as incurred.
assets Held for sale
We classify those assets that are associated with operating leases as held for sale when we have entered into a contract to sell the
property, all material due diligence requirements have been satisfied and we believe it is probable that the disposition will occur
within one year. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less estimated costs to
sell, which is generally calculated as the expected sale price, less expected selling costs. The results of operations and the related
gain or loss on sale of properties that have been sold or that are classified as held for sale and which we will have no continuing
involvement in are included in discontinued operations (Note 17).
If circumstances arise that we previously considered unlikely and, as a result, we decide not to sell a property previously
classified as held for sale, we reclassify the property as held and used. We measure and record a property that is reclassified
as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any
depreciation expense that would have been recognized had the property been continuously classified as held and used or
(ii) the estimated fair value at the date of the subsequent decision not to sell.
We recognize gains and losses on the sale of properties when, among other criteria, we no longer have continuing involvement,
the parties are bound by the terms of the contract, all consideration has been exchanged and all conditions precedent to closing
have been performed. At the time the sale is consummated, a gain or loss is recognized as the difference between the sale price,
less any selling costs, and the carrying value of the property.
2 0 1 2 A n n u a l R e p o r t • 61
Cash
Our cash is held in the custody of several financial institutions, and these balances, at times, exceed federally insurable limits.
We seek to mitigate this risk by depositing funds only with major financial institutions.
other assets and liabilities
We include prepaid expenses, deferred rental income, tenant receivables, deferred charges, escrow balances held by lenders,
restricted cash balances, marketable securities, derivative assets and corporate fixed assets in Other assets. We include
derivative instruments; miscellaneous amounts held on behalf of tenants; and deferred revenue, including unamortized
below-market rent intangibles and unamortizable below-market purchase options in Other liabilities. Deferred charges are
costs incurred in connection with mortgage financings and refinancings that are amortized over the terms of the mortgages
and included in Interest expense in the consolidated financial statements. Deferred rental income is the aggregate cumulative
difference for operating leases between scheduled rents that vary during the lease term, and rent recognized on a straight-line
basis. Marketable securities are classified as available-for-sale securities and reported at fair value with unrealized gains and
losses on these securities reported as a component of Other comprehensive income until realized.
allowance for doubtful accounts
We consider direct finance leases to be past-due or delinquent when a contractually required principal or interest payment is
not remitted in accordance with the provisions of the underlying agreement. We evaluate each account individually and set up
an allowance when, based upon current information and events, it is probable that we will be unable to collect all amounts due
according to the existing contractual terms, and the amount can be reasonably estimated.
revenue recognition
Real Estate Leased to Others
We lease real estate to others primarily on a triple-net leased basis, whereby the tenant is generally responsible for all operating
expenses relating to the property, including property taxes, insurance, maintenance, repairs, renewals and improvements.
We charge expenditures for maintenance and repairs, including routine betterments, to operations as incurred. We capitalize
significant renovations that increase the useful life of the properties. For the years ended December 31, 2012, 2011 and 2010,
although we are legally obligated for payment pursuant to our lease agreements with our tenants, lessees were responsible
for the direct payment to the taxing authorities of real estate taxes of approximately $18.7 million, $6.4 million and
$7.7 million, respectively.
Substantially all of our leases provide for either scheduled rent increases, periodic rent adjustments based on formulas indexed
to changes in the CPI or similar indices or percentage rents. CPI-based adjustments are contingent on future events and are
therefore not included in straight-line rent calculations. We recognize rents from percentage rents as reported by the lessees,
which is after the level of sales requiring a rental payment to us is reached. Percentage rents were insignificant for the
periods presented.
We account for leases as operating or direct financing leases, as described below:
Operating Leases — We record real estate at cost less accumulated depreciation; we recognize future minimum rental revenue
on a straight-line basis over the non-cancellable lease term of the related leases and charge expenses to operations as incurred
(Note 5).
Direct Financing Method — We record leases accounted for under the direct financing method at their net investment
(Note 5). We defer and amortize unearned income to income over the lease term so as to produce a constant periodic rate
of return on our net investment in the lease.
On an ongoing basis, we assess our ability to collect rent and other tenant-based receivables and determine an appropriate
allowance for uncollected amounts. Because we have a limited number of lessees, we believe that it is necessary to evaluate
the collectability of these receivables based on the facts and circumstances of each situation rather than solely using statistical
methods. Therefore, in recognizing our provision for uncollected rents and other tenant receivables, we evaluate actual past
due amounts and make subjective judgments as to the collectability of those amounts based on factors including, but not
limited to, our knowledge of a lessee’s circumstances, the age of the receivables, the tenant’s credit profile and prior experience
with the tenant. Even if a lessee has been making payments, we may reserve for the entire receivable amount if we believe there
has been significant or continuing deterioration in the lessee’s ability to meet its lease obligations.
62 •
W. P. C a r e y I n c .
Investment Management Operations
We earn structuring revenue and asset management revenue in connection with providing services to the Managed REITs. We
earn structuring revenue for services we provide in connection with the analysis, negotiation and structuring of transactions,
including acquisitions and dispositions and the placement of mortgage financing obtained by the Managed REITs. Asset
management revenue consists of property management, leasing and advisory revenue. Receipt of the incentive revenue portion
of the asset management revenue or performance revenue, however, which we received from CPA®:15 prior to the date of
the Merger in 2012 and from CPA®:14 and CPA®:16 – Global prior to the CPA®:14/16 Merger in 2011, was subordinated to
the achievement of specified cumulative return requirements by the stockholders of those CPA REITs. At our option, the
performance revenue could be collected in cash or shares of the CPA® REIT (Note 4). In addition, we earn subordinated
incentive and disposition revenue related to the disposition of properties. We may also earn termination revenue in connection
with the termination of the advisory agreements for the Managed REITs.
We recognize all revenue as earned. We earn structuring revenue upon the consummation of a transaction and asset management
revenue when services are performed. We recognize revenue subject to subordination only when the performance criteria of the
Managed REIT is achieved and contractual limitations are not exceeded.
We earned subordinated disposition and incentive revenue from CPA®:15 until September 28, 2012 (Note 4) after its stockholders
received their initial investment plus a specified preferred return. We may earn termination revenue if a liquidity event is
consummated by any of the other Managed REITs.
We are also reimbursed for certain costs incurred in providing services, including broker-dealer commissions paid on behalf
of the Managed REITs, marketing costs and the cost of personnel provided for the administration of the Managed REITs.
We record reimbursement income as the expenses are incurred, subject to limitations on a Managed REIT’s ability to incur
offering costs.
depreciation
We compute depreciation of building and related improvements using the straight-line method over the estimated remaining
useful lives of the properties (not to exceed 40 years) and furniture, fixtures and equipment (generally up to seven years). We
compute depreciation of tenant improvements using the straight-line method over the lesser of the remaining term of the lease
or the estimated useful life.
Impairments
We periodically assess whether there are any indicators that the value of our long-lived assets, including goodwill, may be
impaired or that their carrying value may not be recoverable. These impairment indicators include, but are not limited to,
the vacancy of a property that is not subject to a lease; a lease default by a tenant that is experiencing financial difficulty; the
termination of a lease by a tenant; or the rejection of a lease in a bankruptcy proceeding. We may incur impairment charges
on long-lived assets, including real estate, direct financing leases, assets held for sale and equity investments in real estate. We
may also incur impairment charges on marketable securities and goodwill. Our policies for evaluating whether these assets are
impaired are presented below.
Real Estate
For real estate assets in which an impairment indicator is identified, we follow a two-step process to determine whether an
asset is impaired and to determine the amount of the charge. First, we compare the carrying value of the property’s asset group
to the future net undiscounted cash flow that we expect the property’s asset group will generate, including any estimated
proceeds from the eventual sale of the property’s asset group. The undiscounted cash flow analysis requires us to make our best
estimate of, among other things, market rents, residual values, and holding periods. Depending on the assumptions made and
estimates used, the future cash flow projected in the evaluation of long-lived assets can vary within a range of outcomes. We
consider the likelihood of possible outcomes in determining our estimate of future cash flows. If the future net undiscounted
cash flow of the property’s asset group is less than the carrying value, the property’s asset group is considered to be impaired.
We then measure the loss as the excess of the carrying value of the property’s asset group over its estimated fair value.
Direct Financing Leases
We review our direct financing leases at least annually to determine whether there has been an other-than-temporary decline
in the current estimate of residual value of the property. The residual value is our estimate of what we could realize upon the
sale of the property at the end of the lease term, based on market information. If this review indicates that a decline in residual
value has occurred that is other-than-temporary, we recognize an impairment charge equal to the difference between the fair
value and carrying value, which is discounted at the internal rate of return of the project.
2 0 1 2 A n n u a l R e p o r t • 63
Assets Held for Sale
When we classify an asset as held for sale, we compare the asset’s estimated fair value less estimated cost to sell to its carrying
value, and if the estimated fair value less estimated cost to sell is less than the property’s carrying value, we reduce the carrying
value to the estimated fair value less estimated cost to sell. We will continue to review the initial impairment for subsequent
changes in the estimated fair value, and may recognize an additional impairment charge, if warranted.
Equity Investments in Real Estate and the Managed REITs
We evaluate our equity investments in real estate and in the Managed REITs on a periodic basis to determine if there are
any indicators that the value of our equity investment may be impaired and whether or not that impairment is other-than-
temporary. To the extent impairment has occurred, we measure the charge as the excess of the carrying value of our investment
over its estimated fair value. For equity investments in real estate, we calculate estimated fair value by multiplying the estimated
fair value of the underlying venture’s net assets by our ownership interest percentage. For certain investments in the Managed
REITs, we calculate the estimated fair value of our investment using the most recently published NAV of each Managed REIT,
which for CPA®:17 – Global and CWI is deemed to be their initial public offering prices.
Goodwill
We evaluate goodwill for possible impairment at least annually or upon the occurrence of a triggering event using a two-step
process. To identify any impairment, we first compare the estimated fair value of each of our reporting units with their respective
carrying amount, including goodwill. We calculate the estimated fair value of the Investment Management reporting unit by
applying a multiple, based on comparable companies, to earnings. For the Real Estate Ownership reporting unit, we calculate its
estimated fair value by applying a multiple common to the real estate community. The selection of the comparable companies
and transactions to be used in our evaluation process could have a significant impact on the fair value of our reporting units
and possible impairments. If the fair value of the reporting unit exceeds its carrying amount, we do not consider goodwill to be
impaired and no further analysis is required. If the carrying amount of the reporting unit exceeds its estimated fair value, we
then perform the second step to determine and measure the amount of the potential impairment charge.
For the second step, we compare the implied fair value of the goodwill for each reporting unit with its respective carrying
amount and record an impairment charge equal to the excess of the carrying amount over the implied fair value. We determine
the implied fair value of the goodwill by allocating the estimated fair value of the reporting unit to its assets and liabilities. The
excess of the estimated fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair
value of the goodwill.
We evaluate goodwill on an annual basis or upon the occurrence of a triggering event. The goodwill recorded in our
Investment Management reporting unit is evaluated in the fourth quarter of every year. In connection with the Merger, we
recorded goodwill in our Real Estate Ownership reporting unit. Prior to the Merger, there was no goodwill recorded in our
Real Estate Ownership reporting unit. We will evaluate the goodwill recorded in our Real Estate Ownership reporting unit in
the second quarter of every year.
stock-based Compensation
We have granted restricted shares, stock options, RSUs and PSUs to certain employees and independent directors. Grants
were awarded in the name of the recipient subject to certain restrictions of transferability and a risk of forfeiture. Stock-based
compensation expense for all equity-classified stock-based compensation awards is based on the grant date fair value estimated
in accordance with current accounting guidance for share-based payments. We recognize these compensation costs for only
those shares expected to vest on a straight-line or graded-vesting basis, as appropriate, over the requisite service period of the
award. We include stock-based compensation within the listed shares caption of equity.
foreign Currency
Translation
We have interests in real estate investments in the European Union and United Kingdom for which the functional currency is
the euro and the British pound sterling, respectively. We perform the translation from the euro or the British pound sterling
to the U.S. dollar for assets and liabilities using current exchange rates in effect at the balance sheet date and for revenue and
expense accounts using a weighted-average exchange rate during the period. We report the gains and losses resulting from
such translation as a component of other comprehensive income in equity.
64 •
W. P. C a r e y I n c .
Transaction Gains or Losses
A transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever
is later), realized upon settlement of a foreign currency transaction generally will be included in net income for the period in
which the transaction is settled. Also, foreign currency intercompany transactions that are scheduled for settlement, consisting
primarily of accrued interest and the translation to the reporting currency of subordinated intercompany debt with scheduled
principal payments, are included in the determination of net income.
Foreign currency transactions that are intercompany foreign currency transactions that are of a long term nature (that is,
settlement is not planned or anticipated in the foreseeable future), when the entities to the transactions are consolidated or
accounted for by the equity method in our financial statements, are not included in determining net income but are accounted
for in the same manner as foreign currency translation adjustments and reported as a component of other comprehensive
income in equity.
Net realized gains or (losses) are recognized on foreign currency transactions in connection with the transfer of cash from
foreign operations of subsidiaries to the parent company. For the years ended December 31, 2012, 2011 and 2010, we recognized
net realized (losses) gains on such transactions of $(0.6) million, $0.4 million and less than $(0.1) million, respectively.
derivative Instruments
We measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations
under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through
earnings. For a derivative designated and qualified as a cash flow hedge, the effective portion of the change in fair value of
the derivative is recognized in Other comprehensive income until the hedged item is recognized in earnings. The ineffective
portion of a derivative’s change in fair value is immediately recognized in earnings.
We made an accounting policy election effective January 1, 2011, or the “effective date,” to use the portfolio exception in
Accounting Standards Codification (“ASC”) 820-10-35-18D “Fair Value Measurement”, the “portfolio exception,” with respect
to measuring counterparty credit risk for all of our derivative transactions subject to master netting arrangements.
Income Taxes
W. P. Carey & Co. LLC, our predecessor, converted to a REIT through the REIT Reorganization (Note 3). Effective February 15,
2012, we have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code for the year ended
December 31, 2012. As a REIT, we are not subject to federal income taxes on our income and gains that we distribute to our
stockholders as long as we satisfy certain requirements, principally relating to the nature of our income and the level of our
distributions, as well as other factors. We believe that we have operated, and we intend to continue to operate, in a manner
that allows us to continue to qualify as a REIT. Deferred income taxes are recorded for the corporate subsidiaries based on
earnings reported. The provision for income taxes differs from the amounts currently payable because of temporary differences
in the recognition of certain income and expense items for financial reporting and tax reporting purposes. Income taxes are
computed under the asset and liability method. The asset and liability method requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between tax bases and financial bases of assets
and liabilities (Note 16).
Real Estate Ownership Operations
We expect to derive most of our REIT income from our real estate operations under our Real Estate Ownership segment. As
such, our real estate operations are generally not subject to federal tax, and accordingly, no provision has been made for U.S.
federal income taxes in the consolidated financial statements for these operations. These operations are subject to certain state,
local and foreign taxes, as applicable.
We hold our real estate assets under a subsidiary, Carey REIT II. Carey REIT II has elected to be taxed as a REIT under
the Internal Revenue Code. We believe we have operated, and we intend to continue to operate, in a manner that allows
Carey REIT II to continue to qualify as a REIT. Under the REIT operating structure, Carey REIT II is permitted to deduct
distributions paid to our stockholders and generally will not be required to pay U.S. federal income taxes. Accordingly, no
provision has been made for U.S. federal income taxes in the consolidated financial statements related to Carey REIT II.
Investment Management Operations
We conduct our investment management operations primarily through TRSs. These operations are subject to federal, state,
local and foreign taxes, as applicable. Our financial statements are prepared on a consolidated basis including these TRSs and
include a provision for current and deferred taxes on these operations.
2 0 1 2 A n n u a l R e p o r t • 65
earnings per share
Basic earnings per share is calculated by dividing net income available to common stockholders, as adjusted for unallocated
earnings attributable to the unvested RSUs by the weighted-average number of shares of common stock outstanding during
the period. Diluted earnings per share reflects potentially dilutive securities (options, restricted shares and RSUs) using the
treasury stock method, except when the effect would be anti-dilutive.
future accounting requirement
The following Accounting Standards Update (“ASU”) promulgated by the FASB is applicable to us in future reports, as indicated:
ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment — In July 2012, the FASB issued an update to ASC
350, Intangibles — Goodwill and Other. The objective of this ASU is to simplify how entities test indefinite-lived intangible
assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The
amendments in the ASU permit an entity to first assess qualitative factors to determine whether it is more likely than not that
the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is
necessary to perform the quantitative impairment test described in topic 350. The more-likely-than-not threshold is defined
as having a likelihood of more than 50 percent. Previous guidance under topic 350 required an entity to test indefinite-lived
intangible assets for impairment, on at least an annual basis, by comparing the fair value of the asset with its carrying amount.
If the fair value of an intangible asset is less than its carrying amount, an entity should recognize an impairment loss in the
amount of that excess. Under the amendments in this ASU, an entity is not required to calculate the fair value of an indefinite-
lived intangible asset unless the entity determines that it is more likely than not that its fair value is less than its carrying
amount. Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment, results
in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. We do not expect the adoption to
have a material impact on our financial position and results of operations.
out-of-period adjustments
During 2012, we identified errors in the consolidated financial statements related to prior years. The errors were primarily
attributable to the misapplication of guidance in accounting for and clerical errors related to the expropriation of land related
to two investments and our reimbursement of certain affiliated costs. We concluded that these adjustments were not material,
individually or in the aggregate, to our results for this or any of the prior periods, and as such, we recorded an out-of-period
adjustment to increase our income from operations by $2.5 million within continuing operations primarily attributable to an
increase in Gain on sale of real estate of $2.0 million in the consolidated statement of income.
In 2011, we identified an error in the consolidated financial statements related to prior years. The error relates to the
misapplication of accounting guidance related to the modifications of certain leases. We concluded this adjustment, with a
net impact of $0.2 million on our statement of operations for the fourth quarter of 2011, was not material to our results for
the prior year periods or to the period of adjustment. Accordingly, this cumulative change was recorded in the consolidated
financial statements in the fourth quarter of 2011 as an out-of-period adjustment as follows: a reduction to Net investment in
direct financing leases of $17.6 million and an increase in net Operating real estate of $17.9 million on the consolidated balance
sheet; and an increase in Lease revenues of $0.9 million, a reduction of Impairment charges of $1.6 million, and an increase in
Depreciation expense of $2.2 million on the consolidated statement of operations.
use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the
accompanying notes. Actual results could differ from those estimates.
66 •
W. P. C a r e y I n c .
3 | merger wITH Cpa®:15
merger
On February 17, 2012, our predecessor, W. P. Carey & Co. LLC, and CPA®:15 entered into a definitive agreement (the
“Merger Agreement”) pursuant to which CPA®:15 would merge with and into W. P. Carey Inc. The Merger is part of a larger
transformation that implements our overall business strategy of expanding real estate assets under ownership, substantially
increases our scale and liquidity, and provides income contribution from owned properties while preserving our investment
management business. On September 13, 2012, the shareholders of W. P. Carey & Co. LLC and the stockholders of CPA®:15
approved the Merger. On September 28, 2012 (the “acquisition date”), CPA®:15 merged with and into W. P. Carey Inc, with
CPA®:15 surviving as an indirect, wholly-owned subsidiary of W. P. Carey Inc. In the Merger, CPA®:15’s stockholders received
for each share of CPA®:15’s common stock owned 0.2326 shares of W. P. Carey Inc. common stock, which equated to $11.40 per
share of CPA®:15 common stock based on the $49.00 per share closing price of W. P. Carey & Co. LLC’s shares on the NYSE on
that date, and $1.25 in cash for total consideration of $12.65 per share of CPA®:15. We paid total merger consideration of
$1.5 billion, including cash of $152.4 million and the issuance of 28,170,643 shares of our common stock with a fair
value of $1.4 billion on the acquisition date (the “Merger Consideration”) to the stockholders of CPA®:15 in exchange for
121,194,272 shares of CPA®:15 common stock that we did not previously own. In order to fund the cash portion of the Merger
Consideration, we drew down the full amount of our existing $175.0 million Term Loan Facility (Note 12). As a condition of
the Merger, we waived the subordinated disposition and termination fees that we would have been entitled to receive from
CPA®:15 upon its liquidation pursuant to the terms of our advisory agreement with CPA®:15 (Note 4).
Immediately prior to the Merger, CPA®:15’s portfolio was comprised of full or partial ownership interests in 305 properties,
substantially all of which were triple-net leased to 76 tenants, and totaled approximately 27 million square feet, with an occupancy
rate of approximately 99%. In the Merger, we acquired these properties and their related leases with an average remaining life of
9.7 years. In 2011, CPA®:15 recorded lease revenues of $242.2 million. We also assumed the related property debt comprised
of 58 fixed-rate and 9 variable-rate non-recourse mortgage loans with a preliminary aggregate fair value of $1.2 billion and a
weighted-average annual interest rate of 5.6%. During the period from January 1, 2012 through September 28, 2012, we earned
$19.0 million in fees from CPA®:15 and recognized $4.5 million in equity earnings based on our ownership of shares in CPA®:15
prior to the Merger. The lease revenues and income from operations contributed from the properties acquired from the date of the
Merger through December 31, 2012 were $57.3 million and $9.5 million (inclusive of $2.5 million attributable to noncontrolling
interests), respectively.
We accounted for the Merger as a business combination under the acquisition method of accounting. After consideration of all
applicable factors pursuant to the business combination accounting rules, we were considered the “accounting acquirer” due to
various factors, including the fact that the shareholders of W. P. Carey & Co. LLC, our predecessor, held the largest portion of
the voting rights in W. P. Carey Inc., upon completion of the Merger. Acquisition costs of $31.7 million related to the Merger
have been expensed as incurred and classified within General and administrative expense in the consolidated statements of
income for the year ended December 31, 2012.
On September 19, 2012, we acquired a 52.63% ownership interest in Marcourt Investments Inc. (“Marcourt”) from an
unrelated third party. At that time, CPA®:15 held a 47.37% ownership interest in Marcourt. Marcourt owns 12 Marriott
Courtyard hotels located throughout the U. S. that are leased to and operated by Marriott International, Inc. We obtained this
investment in contemplation of the Merger and accounted for this step acquisition as part of the Merger. Accordingly, the
assets acquired and liabilities assumed from Marcourt in this transaction are included in the table below.
The purchase price was allocated to the assets acquired and liabilities assumed, based upon their preliminary fair values.
The fair values of the lease intangibles acquired were measured in a manner consistent with our purchase price allocation
policy described in Note 2. During the fourth quarter of 2012, we identified certain measurement period adjustments that
impacted the provisional accounting, which increased the fair value of the identifiable real estate acquired and the non-
controlling interests acquired by $5.6 million and $0.7 million, respectively, resulting in a $6.3 million reduction in goodwill.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed in the
acquisition, and the related measurement period adjustments, based on the current best estimate of management. We are in the
process of finalizing our assessment of the fair value of the assets acquired and liabilities assumed. Investments in real estate,
net investments in direct financing leases, equity investments in real estate, non-recourse debt and amounts attributable to
noncontrolling interests were based on preliminary valuation data and estimates. Accordingly, the fair value of these assets and
liabilities and the impact to goodwill are subject to change.
2 0 1 2 A n n u a l R e p o r t • 67
(In THousands)
Total Consideration
Fair value of W. P. Carey shares of common stock issued
Cash consideration paid
Merger consideration
Fair value of our equity interest in CPA®:15
prior to the Merger
Fair value of our equity interest in jointly-owned
investments with CPA®:15 prior to the Merger
assets acquired at fair value
Net investment in properties
Net investment in direct financing leases
Equity investments in real estate
Intangible assets (Note 8)
Cash and cash equivalents
Other assets
liabilities assumed at fair value
Non-recourse debt
Accounts payable, accrued expenses and other liabilities
(including below-market rent intangibles of $102,155)
Total identifiable net assets
Amounts attributable to noncontrolling interests
Goodwill
InITIallY reporTed
aT sepTember 30, 2012
measuremenT perIod
adjusTmenTs
as revIsed aT
deCember 31, 2012
$ 1,380,362
152,356
1,532,718
107,147
54,822
$ 1,694,687
$ —
$ 1,380,362
—
—
—
—
152,356
1,532,718
107,147
54,822
$ —
$ 1,694,687
$ 1,758,372
$ 4,500
$ 1,762,872
315,789
164,886
694,411
178,945
83,838
3,196,241
—
1,361
899
—
(2,088)
4,672
315,789
166,247
695,310
178,945
81,750
3,200,913
(1,350,755)
—
(1,350,755)
(187,712)
(1,538,467)
1,657,774
(238,038)
274,951
$ 1,694,687
917
917
5,589
679
(6,268)
$ —
(186,795)
(1,537,550)
1,663,363
(237,359)
268,683
$ 1,694,687
Goodwill
Two items comprise a majority of the $268.7 million of goodwill recorded in the Merger. First, at the time we entered into
the Merger Agreement, the market value of our stock was $45.07 per share. The increase in the market value of our stock of
$3.93 per share from the date of the Merger Agreement to $49.00 per share on the transaction date gave rise to approximately
$110.8 million of the goodwill recorded, based on the fixed amount of 28,170,643 shares issued. Second, at the time we entered
into the Merger Agreement, the consideration of 0.2326 shares of our common stock plus $1.25 in cash per common share of
CPA®:15 represented a premium of approximately $1.33 per share over the September 30, 2011 estimated NAV of CPA®:15,
which was $10.40. Management believes that the premium is supported by several factors of the combined entity, including
the fact that (i) it is among the largest publicly traded REITs with greater operating and financial flexibility and better access
to capital markets and with a lower cost of capital than CPA®:15 had on a stand-alone basis; (ii) the Merger eliminated costs
associated with the advisory structure that CPA®:15 had previously; and (iii) the combined portfolio has greater tenant and
geographic diversification and an improved overall weighted average debt maturity and interest rate. Based on the number of
CPA®:15 shares ultimately exchanged of 121,194,272, this premium comprised approximately $121.2 million of the goodwill.
In addition to these factors, since the September 30, 2011 valuation date there was a reduction in the fair value of CPA®:15’s net
assets primarily attributable to the impact of foreign currency exchange rates during the period from September 30, 2011 to the
acquisition date.
The fair value of our 28,170,643 common shares issued in the Merger as part of the consideration paid for CPA®:15 of $1.5
billion was derived from the closing market price of our common stock on the acquisition date. As required by GAAP, the fair
value related to the assets acquired and liabilities assumed, as well as the shares exchanged, has been computed as of the date
we gained control, which was the closing date of the Merger, in a manner consistent with the methodology described above.
Goodwill is not deductible for income tax purposes.
68 •
W. P. C a r e y I n c .
Equity Investments and Noncontrolling Interests
Additionally, we recognized a gain on change in control of interests of $14.7 million for the year ended December 31, 2012
related to the difference between the carrying value of $92.4 million and the fair value of $107.1 million of our previously-held
equity interest in 10,389,079 shares of CPA®:15’s common stock.
The Merger also resulted in our acquisition of the remaining interests in four investments in which we already had a joint
interest and accounted for under the equity method (Note 7). Upon acquiring the remaining interests in these investments, we
owned 100% of these investments and thus accounted for these acquisitions as step acquisitions utilizing the purchase method
of accounting. Due to the change in control of the four jointly-owned investments that occurred, we recorded an aggregate
gain of approximately $6.1 million related to the difference between our carrying values and the fair values of our previously-
held equity interests on the acquisition date of $48.7 million and $54.8 million, respectively. Subsequent to the Merger, we
consolidate these wholly-owned investments.
The fair values of our previously-held equity interests and our noncontrolling interests are based on the estimated fair market
values of the underlying real estate and mortgage debt, both of which were determined by management relying in part on a
third party. Real estate valuation requires significant judgment. We determined the significant inputs to be Level 3 with ranges
for the entire portfolio as follows:
• Discount rates applied to the estimated net operating income of each property ranged from approximately 3.5%
to 14.75%;
• Discount rates applied to the estimated residual value of each property ranged from approximately 5.75% to 12.5%;
• Residual capitalization rates applied to the properties ranged from approximately 7.0% to 11.5%.
• The fair market value of such property level debt was determined based upon available market data for comparable
liabilities and by applying selected discount rates to the stream of future debt payments; and
• Discount rates applied to cash flows ranged from approximately 2.7% to 10%.
No illiquidity adjustments to the equity interests or noncontrolling interests were deemed necessary as the investments are
held with affiliates and do not allow for unilateral sale or financing by any of the affiliated parties. Furthermore, the discount
and/or capitalization rates utilized in the appraisals also reflect the illiquidity of real estate assets. Lastly, there were no control
premiums contemplated as the investments were in individual, or a portfolio of, underlying real estate and debt, as opposed to
a business operation.
Pro Forma Financial Information (Unaudited)
The following consolidated pro forma financial information has been presented as if the Merger, including the acquisition of
Marcourt, had occurred on January 1, 2011 for the years ended 2012 and 2011. The pro forma financial information is not
necessarily indicative of what the actual results would have been had the Merger occurred on that date, nor does it purport to
represent the results of operations for future periods.
(dollars In THousands, exCepT sHare and per sHare amounTs)
Pro forma total revenues
Pro forma income attributable to W. P. Carey stockholders
Pro forma earnings per share:(a)
Basic
Diluted
Pro forma weighted average shares:(b)
Basic
Diluted
Years ended deCember 31,
2012
$536,971
$130,129
$ 1.89
$ 1.87
2011
$551,311
$119,133
$ 1.73
$ 1.72
68,382,378
69,071,391
67,990,118
68,268,738
(a) The pro forma income attributable to W. P. Carey stockholders reflects combined general and administrative expenses of $31.7 million and income tax expenses of $9.6 million incurred related to the Merger
for the year ended December 31, 2011 as if the Merger had taken place on January 1, 2011.
(b) The pro forma weighted average shares outstanding for the years ended December 31, 2012 and 2011 were determined as if the 28,170,643 shares of our common stock issued to CPA®:15 stockholders in the
Merger were issued on January 1, 2011.
4 | agreemenTs and TransaCTIons wITH relaTed parTIes
advisory agreements with the managed reITs
Our predecessor had advisory agreements with each of the Managed REITs pursuant to which it earned certain fees and/or was
entitled to receive cash distributions. In connection with the Merger, we entered into amended and restated advisory agreements
2 0 1 2 A n n u a l R e p o r t • 69
with each of the CPA® REITs with economic terms similar to the prior agreements, which are outlined in the Annual Report
on Form 10-K for the year ended December 31, 2011 as filed by our predecessor with the SEC on February 29, 2012. The
amendments, which became effective as of October 1, 2012, provide for the allocation of expenses on the basis of revenues of
each of the CPA® REITs rather than an allocation of time charges incurred by our personnel for each of the CPA® REITs. The CPA®
REIT advisory agreements are scheduled to expire on September 30, 2013 unless otherwise renewed pursuant to their terms. The
CWI advisory agreement, which was scheduled to expire on September 30, 2012, was renewed for an additional year pursuant to
its terms, effective as of October 1, 2012. The following table presents a summary of revenue earned and/or cash received from the
Managed REITs in connection with providing services as the advisor to the Managed REITs (in thousands):
Asset management revenue
Structuring revenue
Incentive, termination and subordinated disposition revenue
Wholesaling revenue
Reimbursed costs from affiliates
Distributions of Available Cash
Deferred revenue earned
CPA®:14
CPA®:15
CPA®:16 – Global
CPA®:17 – Global
CWI
Other
Years ended deCember 31,
2012
2011
2010
$ 56,666
48,355
—
19,914
98,245
30,009
8,492
$ 66,808
$ 76,246
46,831
52,515
11,664
64,829
15,535
5,662
44,525
—
11,096
60,023
4,468
—
$ 261,681
$263,844
$196,358
2012
—
$
21,563
50,825
173,262
15,334
697
Years ended deCember 31,
2011
2010
$ 59,605
$ 23,387
31,489
40,555
124,465
6,745
985
31,172
28,478
112,386
—
935
$ 261,681
$263,844
$196,358
asset management revenue
We earn asset management revenue from each Managed REIT, which is based on average invested assets and is calculated
according to the advisory agreement for each Managed REIT. For CPA®:16 – Global prior to the CPA®:14/16 Merger and for
CPA®:15 prior to the Merger, this revenue generally totaled 1% per annum, with a portion of this revenue, or 0.5%, contingent
upon the achievement of specific performance criteria. For CPA®:16 – Global subsequent to the CPA®:14/16 Merger, we earn
asset management revenue of 0.5% of average invested assets. For CPA®:17 – Global, we earn asset management revenue
ranging from 0.5% of average market value for long-term net leases and certain other types of real estate investments up to
1.75% of average equity value for certain types of securities. For CWI, we earn asset management revenue of 0.5% of the
average market value of lodging-related investments. We do not earn performance revenue from CPA®:17 – Global, CWI and,
subsequent to the CPA®:14/16 Merger, from CPA®:16 – Global, but we receive up to 10% of distributions of Available Cash
from their operating partnerships.
Under the terms of the advisory agreements, we may elect to receive cash or shares of stock for asset management revenue due
from each Managed REIT. In 2012, we elected to receive all asset management revenue from CPA®:15 prior to the Merger in
cash, while for CPA®:16 – Global, we elected to receive 50% of asset management revenue in its shares with the remaining 50%
payable in cash. For CPA®:17 – Global and CWI, we elected to receive asset management revenue in their shares. For 2011, we
elected to receive all asset management revenue in cash, with the exception of CPA®:17 – Global’s asset management fee, which
we elected to receive in its shares. For 2011, we also elected to receive performance revenue, prior to the CPA®:14/16 Merger,
from CPA®:16 – Global in shares of its common stock, while for CPA®:14 prior to CPA®:14/16 Merger, and for CPA®:15 we
elected to receive 80% of all performance revenue in shares of their common stock, with the remaining 20% payable in cash.
We also elected to receive asset management revenue from CPA®:16 – Global in 2011 in shares of its common stock after the
CPA®:14/16 Merger. For CWI, we elected to receive all asset management revenue in cash for 2011.
70 •
W. P. C a r e y I n c .
reimbursed Costs from affiliates and wholesaling revenue
The Managed REITs reimburse us for certain costs, primarily broker/dealer commissions paid on behalf of the Managed REITs
and marketing and personnel costs. Pursuant to the amended and restated advisory agreements, expenses are now allocated
based on the revenues of each of the CPA® REITs rather than an allocation of time charges incurred by our personnel for each
of the CPA® REITs. In addition, we earn a selling commission of up to $0.65 per share sold and a dealer manager fee of up to
$0.35 per share sold from CPA®:17 – Global. We also receive a selling commission of up to $0.70 per share sold and a dealer
manager fee of up to $0.30 per share sold from CWI. We re-allow all or a portion of the dealer manager fees to selected dealers
in the offerings. Dealer manager fees that are not re-allowed are classified as wholesaling revenue. Additionally, we earned a
wholesaling fee of $0.15 per share sold in connection with CPA®:17 – Global’s initial public offering through April 7, 2011. We
did not earn a wholesaling fee in connection with CPA®:17 – Global’s follow-on offering, which commenced on April 7, 2011.
Pursuant to its advisory agreement, upon reaching the minimum offering amount of $10.0 million on March 3, 2011, CWI
became obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its
offering, up to a maximum amount (excluding selling commissions and the dealer manager fee) of 2% of the gross proceeds of
its offering and distribution reinvestment plan. Through December 31, 2012, we have incurred organization and offering costs
on behalf of CWI of approximately $7.4 million. However, at December 31, 2012, CWI was only obligated to reimburse us
$3.1 million of these costs because of the 2% limitation described above, and $2.7 million had been reimbursed as of that date.
Incentive, Termination and subordinated disposition revenue
We earn revenue related to the disposition of properties by the Managed REITs, subject to subordination provisions, which
will only be recognized as the relevant conditions are met. Such revenue may include subordinated disposition revenue of no
more than 3% of the value of any assets sold, payable only after stockholders have received back their initial investment plus a
specified preferred return, and subordinated incentive revenue of 15% of the net cash proceeds distributable to stockholders
from the disposition of properties, after recoupment by stockholders of their initial investment plus a specified preferred
return. We may also, in connection with the termination of the advisory agreements for the Managed REITs, be entitled to a
termination payment based on the amount by which the fair value of a Managed REITs’ properties, less indebtedness, exceeds
investors’ capital plus a specified preferred return.
We waived any acquisition fees payable by CPA®:16 – Global under its advisory agreement with us in respect of the properties
it acquired in the CPA®:14/16 Merger and also waived any disposition fees that may subsequently be payable by CPA®:16 –
Global upon a sale of such assets. As the advisor to CPA®:14, we earned acquisition fees related to those properties when they
were acquired by CPA®:14 and disposition fees on those properties to CPA®:16 – Global by CPA®:14 in the CPA®:14/16 Merger
and, as a result, we and CPA®:16 – Global agreed that we should not receive fees upon the acquisition or disposition of the same
properties by CPA®:16 – Global.
In connection with providing a liquidity event for CPA®:14 stockholders during the second quarter of 2011 with the
completion of the CPA®:14/16 Merger, we earned termination revenue of $31.2 million and subordinated disposition revenue
of $21.3 million, which we elected to receive in shares of CPA®:14 and cash, respectively. In connection with the Merger with
CPA®:15, we waived the subordinated disposition and termination fees we would have been entitled to receive from CPA®:15
upon its liquidation pursuant to the terms of our advisory agreement with CPA®:15. There was no gain or loss recognized in
connection with waiving these subordinated disposition and termination fees.
structuring revenue
Under the terms of the advisory agreements, we earn revenue in connection with structuring and negotiating investments and
related financing for the Managed REITs, which we call acquisition revenue. We may receive acquisition revenue of up to an
average of 4.5% of the total cost of all investments made by each CPA® REIT. Historically, a portion of this revenue (generally
2.5%) was paid when the transaction was completed, while the remainder (generally 2%) was payable in annual installments
ranging from three to eight years, provided the relevant CPA® REIT met its performance criterion. For certain types of non-
long term net lease investments acquired on behalf of CPA®:17 – Global, initial acquisition revenue may range from 0% to
1.75% of the equity invested plus the related acquisition revenue, with no deferred acquisition revenue being earned. For CWI,
we earn initial acquisition revenue of 2.5% of the total investment cost of the properties acquired and loans originated by us
not to exceed 6% of the aggregate contract purchase price of all investments and loans with no deferred acquisition revenue
being earned. We may also be entitled, subject to the Managed REIT board approval, to fees for structuring loan refinancing
of up to 1% of the principal amount. This loan refinancing revenue, together with the acquisition revenue, is referred to as
structuring revenue.
2 0 1 2 A n n u a l R e p o r t • 71
Unpaid transaction fees, including accrued interest, are included in Due from affiliates in the consolidated financial statements.
Unpaid transaction fees bear interest at annual rates ranging from 5% to 7%. The following tables present the amount of unpaid
transaction fees and interest earned on these fees (in thousands):
Unpaid deferred acquisition fees
Interest earned on unpaid deferred acquisition fees
deCember 31,
2012
2011
$28,654
$29,410
Years ended deCember 31,
2012
$1,064
2011
2010
$ 1,332
$ 1,136
distributions of available Cash and deferred revenue earned
We receive distributions of our proportionate share of earnings up to 10% of available cash from CPA®:17 – Global, CWI, and
after the UPREIT reorganization, CPA®:16 – Global, as defined in the respective advisory agreements, from their operating
partnerships. As discussed under “CPA®:16 – Global UPREIT Reorganization” below, we acquired the Special Member Interest
in CPA®:16 – Global’s operating partnership for $0.3 million during the second quarter of 2011. We initially recorded the
Special Member Interest at its fair value of $28.3 million, which is net of approximately $6.0 million related to our ownership
interest in CPA®:16 – Global that was eliminated in our consolidated financial statement, to be amortized into earnings over
the expected period of performance. Cash distributions of our proportionate share of earnings from the CPA®:16 – Global and
CPA®:17 – Global operating partnerships as well as deferred revenue earned from our Special Member Interest in CPA®:16 –
Global’s operating partnership are recorded as Income from equity investments in real estate and the Managed REITs within
the Investment Management segment. We have not yet earned or received any distributions of our proportionate share of
earnings from CWI’s operating partnership because CWI has not yet generated Available Cash.
other Transactions with affiliates
Transactions with Estate of Wm. Polk Carey
Voting Agreement
In July 2012, we entered into a voting agreement (the “Voting Agreement”) with the Estate of Wm. Polk Carey, our Chairman
and founder who passed away on January 2, 2012, pursuant to which the Estate and W. P. Carey & Co., Inc., a wholly-owned
corporation of the Estate, had agreed, among other things, to vote their share of our predecessor’s common stock (the “Listed
Shares”) at the special meeting of W. P. Carey & Co. LLC’s shareholders regarding the REIT Reorganization and Merger in
favor of those transactions. The REIT Reorganization and Merger were approved by those shareholders on September 13, 2012
and the transactions closed on September 28, 2012.
Share Purchase Agreement
Concurrently with the execution of the Voting Agreement, we entered into a Share Purchase Agreement with the Estate
pursuant to which we agreed to purchase up to an aggregate amount of $85.0 million of our common stock — or, prior to the
Merger, the Listed Shares of our predecessor — beneficially owned by the Estate in the following manner: (i) prior to the date
of the dissemination of the Joint Proxy Statement / Prospectus of us and CPA®:15 regarding the registration of securities with
the SEC on Form S-4 in connection with the REIT Conversion and the Merger (the “Joint Proxy Statement / Prospectus”),
the Estate had a one-time option to sell up to an aggregate amount of $25.0 million of Listed Shares (the “First Sale Option”),
which, as discussed below, was completed on August 2, 2012; (ii) at any time following the consummation of the Merger, but
on or before December 31, 2012, the Estate had a one-time option to sell up to an aggregate amount of $20.0 million of our
common stock (the “Second Sale Option”), which, as discussed below, was completed on October 9, 2012; and (iii) at any time
following January 1, 2013, but on or before March 31, 2013, the Estate has a one-time option to sell up to an aggregate amount
of $40.0 million of our common stock (the “Third Sale Option,” and with the First Sale Option and Second Sale Option, each
a “Sale Option”). In connection with the exercise of a Sale Option, we agreed to pay a per share purchase price equal to 96%
of the volume-weighted-average price of one Listed Share of our predecessor, and/or one share of our common stock, as
applicable, for the ten (10) business days immediately prior to the date of notification of exercise.
On July 27, 2012, we received a notice from the Estate indicating its intention to fully exercise the First Sale Option, and as a
result, on August 2, 2012, we repurchased 561,418 Listed shares for $25.0 million from the Estate at a price of $44.53 per share.
On October 1, 2012, we received a notice from the Estate indicating its intention to fully exercise the Second Sale Option,
and, as a result, on October 9, 2012, we repurchased an additional 410,964 shares of our common stock for $20.0 million from
the Estate at a price of $48.67 per share. We used our Revolver (Note 12) to finance the repurchases pursuant to the First and
Second Sale Options. We currently intend to borrow from our Revolver in order to finance the repurchase of our common
stock pursuant to the remaining Third Sale Option if the Estate should decide to exercise it.
72 •
W. P. C a r e y I n c .
Because the Share Purchase Agreement contains put options that, if exercised, would obligate us to settle the transactions in
cash, we account for the shares of our common stock owned by the Estate as redeemable securities in accordance with ASC
480 “Distinguishing Liabilities from Equity” and Accounting Series Release No. 268 (“ASR 268”) “Presentation in Financial
Statements of Redeemable Preferred Stocks.” ASR 268 requires us to reclassify a portion of our permanent equity to redeemable
equity in order to reflect the future cash obligations that could arise if the Estate were to exercise the put options requiring
us to purchase its shares. When the Estate exercises a Sale Option, we will reclassify the amount from temporary equity to
permanent equity, and reclassify the amount from Additional paid-in capital stock to Treasury stock. Accordingly, on the
date of the execution of the Share Repurchase Agreement, we reclassified $85.0 million from Additional paid-in capital to
Redeemable securities – related party, which represents the maximum amount that we would be required to pay should the
Estate exercise all its Sale Options. Additionally, on August 2, 2012 and October 9, 2012, when we purchased our common
stock in connection with the Estate’s exercise of the First and Second Sale Options, respectively, we reclassified $45.0 million
from Redeemable securities – related party to Additional paid-in capital and reclassified the shares from Additional paid-in
capital to Treasury stock.
The following table presents a reconciliation of our Redeemable securities – related party (in thousands):
Balance – beginning of year
Reclassification from permanent equity to temporary equity
Redemptions of securities
Balance – end of year
Year ended deCember 31, 2012
$ —
85,000
(45,000)
$ 40,000
Registration Rights Agreement
Concurrently with the execution of the Voting Agreement and the Share Purchase Agreement, we and the Estate Shareholders
entered into a Registration Rights Agreement (the “Registration Rights Agreement”).
The Registration Rights Agreement provides the Estate with, at any time following the consummation of the REIT
Reorganization, but on or before the third anniversary thereof, subject to certain exceptions and limitations, three demand
rights (the “Demand Registration Rights”) for the registration via an underwritten public offering of, in each instance, between
a minimum of (i)(a) $50.0 million with respect to one Demand Registration Right, and (b) $75.0 million with respect to two
Demand Registration Rights, and a maximum of (ii) $250.0 million, worth of shares of our common stock received in the
REIT Conversion in exchange for the Listed Shares of our predecessor that were owned by the Estate as of the date of the
Registration Rights Agreement.
Additionally, the Registration Rights Agreement provides the Estate Shareholders with, subject to certain exceptions and
limitations, unlimited “piggyback” registration rights (the “Piggyback Registration Rights,” and together with the Demand
Registration Rights, the “Estate Shareholders’ Registration Rights”) pertaining to the shares of our common stock received in
the REIT conversion in exchange for the Listed Shares of our predecessor that were owned by the Estate as of the date of the
Registration Rights Agreement.
The Estate Shareholders’ Registration Rights are subject to customary lock-up and cutback provisions, and the Registration
Rights Agreement contains customary indemnification provisions. We have agreed to bear the expenses incurred in
connection with the filing of any registration statements attributable to the exercise of the Estate’s Registration Rights, other
than any (i) underwriting fees, discounts and sales commissions, (ii) fees, expense and disbursements of legal counsel of the
Estate, and (iii) transfer taxes, in each case relating to the sale or disposition by the Estate of shares of our common stock
pursuant to the Registration Rights Agreement.
We account for our obligations under the Registration Rights Agreement in accordance with ASC 450 “Contingencies,” which
requires us to record a liability if the contingent loss is probable and the amount can be estimated. At December 31, 2012, we
have not recorded a liability pertaining to our obligations under the Registration Rights Agreement because the amount cannot
be reasonably estimated at this time and is not deemed probable.
CPA®:14/16 Merger
On May 2, 2011, CPA®:14 merged with and into a subsidiary of CPA®:16 – Global. In connection with the CPA®:14/16 Merger, on
May 2, 2011, we purchased the remaining interests in three jointly-owned investments from CPA®:14, in which we already had a
partial ownership interest, for an aggregate purchase price of $31.8 million, plus the assumption of $87.6 million of indebtedness.
2 0 1 2 A n n u a l R e p o r t • 73
In the CPA®:14/16 Merger, CPA®:14 shareholders were entitled to receive $11.50 per share, which was equal to the estimated
NAV of CPA®:14 as of September 30, 2010. For each share of CPA®:14 stock owned, each CPA®:14 shareholder received a $1.00
per share special cash dividend and a choice of either (i) $10.50 in cash or (ii) 1.1932 shares of CPA®:16 – Global. The merger
consideration of $954.5 million was paid by CPA®:16 – Global, including payment of $444.0 million to liquidating shareholders
and issuing 57,365,145 shares of common stock with a fair value of $510.5 million on the date of closing to shareholders of
CPA®:14 in exchange for 48,076,723 shares of CPA®:14 common stock. The $1.00 per share special cash distribution, totaling
$90.4 million in the aggregate, was funded from the proceeds of the CPA®:14 Asset Sales. In connection with the CPA®:14/16
Merger, we agreed to purchase a sufficient number of shares of CPA®:16 – Global common stock from CPA®:16 – Global to
enable it to pay the merger consideration if the cash on hand and available to CPA®:14 and CPA®:16 – Global, including the
proceeds of the CPA®:14 Asset Sales and a new $320.0 million senior credit facility of CPA®:16 – Global, were not sufficient.
Accordingly, we purchased 13,750,000 shares of CPA®:16 – Global on May 2, 2011 for $121.0 million, which we funded, along
with other obligations, with cash on hand and $121.4 million drawn on our then-existing unsecured line of credit.
Upon consummation of the CPA®:14/16 Merger, we earned revenues of $31.2 million in connection with the termination
of the advisory agreement with CPA®:14 and $21.3 million of subordinated disposition revenues. We elected to receive our
termination revenue in 2,717,138 shares of CPA®:14, which were exchanged into 3,242,089 shares of CPA®:16 – Global in the
CPA®:14/16 Merger. Upon closing of the CPA®:14/16 Merger, we received 13,260,091 shares of common stock of CPA®:16 –
Global in respect of our shares of CPA®:14.
CAM waived any acquisition fees payable by CPA®:16 – Global under its advisory agreement with CAM in respect of the properties
acquired in the CPA®:14/16 Merger and also waived any disposition fees that may subsequently be payable by CPA®:16 – Global
upon a sale of such assets. As the advisor to CPA®:14, CAM earned acquisition fees related to those properties acquired by CPA®:14
and disposition fees on those properties upon the liquidation of CPA®:14 and, as a result, CAM and CPA®:16 – Global agreed that
CAM should not receive fees upon the acquisition or disposition of the same properties by CPA®:16 – Global.
CPA®:16 – Global UPREIT Reorganization
Immediately following the CPA®:14/16 Merger on May 2, 2011, CPA®:16 – Global completed an internal reorganization
whereby CPA®:16 – Global formed an UPREIT, which was approved by CPA®:16 – Global stockholders in connection with
the CPA®:14/16 Merger (the “CPA®:16 – Global UPREIT Reorganization”). In connection with the formation of the UPREIT,
CPA®:16 – Global contributed substantially all of its assets and liabilities to an operating partnership in exchange for a
managing member interest and units of membership interest in the operating partnership, which together represent a 99.985%
capital interest of the Managing Member. Through a subsidiary, we acquired a Special Member Interest of 0.015% in the
operating partnership for $0.3 million, entitling us to receive certain profit allocations and distributions of cash.
As consideration for the Special Member Interest, we amended our advisory agreement with CPA®:16 – Global to give effect
to this UPREIT reorganization and to reflect a revised fee structure whereby (i) our asset management fees are prospectively
reduced to 0.5% from 1.0% of the asset value of a property under management, (ii) the former 15% subordinated incentive fee
and termination fees have been eliminated and replaced by (iii) a 10% Special General Partner Available Cash Distribution and
(iv) the 15% Final Distribution, each defined below. The sum of the new 0.5% asset management fee and the Available Cash
Distribution is expected to be lower than the original 1.0% asset management fee; accordingly, the Available Cash Distribution
is contractually limited to 0.5% of the value of CPA®:16 – Global’s assets under management. However, the amount of after-tax
cash we receive pursuant to this revised structure is anticipated to be greater than the amount we received under the previous
arrangement. The fee structure related to initial acquisition fees, subordinated acquisition fees and subordinated disposition
fees for CPA®:16 – Global remains unchanged.
As Special General Partner, we are entitled to 10% of the operating partnership’s available cash (the “Available Cash
Distribution”), which was defined as the operating partnership’s cash generated from operations, excluding capital proceeds,
as reduced by operating expenses and debt service, excluding prepayments and balloon payments. We may elect to receive our
Available Cash Distribution in shares of CPA®:16 – Global’s common stock. In the event of a capital transaction such as a sale,
exchange, disposition or refinancing of CPA®:16 – Global’s assets, we are also entitled to receive a Final Distribution equal to 15%
of residual returns after giving effect to a 100% return of the Managing Member’s invested capital plus a 6% priority return.
We initially recorded the Special Member Interest as an equity investment at its fair value of $28.3 million and an equal amount
of deferred revenues (Note 7), which was net of approximately $6.0 million related to our ownership interest of approximately
17.5% in CPA®:16 – Global that was eliminated in our consolidated financial statements. We recognize the deferred revenue
earned from our Special Member Interest in CPA®:16 – Global’s operating partnership into earnings on a straight-line basis over
the expected period of performance, which is currently estimated at three years based on the stated intended life of CPA®:16 –
Global as described in its offering documents. The amount of deferred revenue recognized during the years ended December 31,
2012 and 2011 was $8.5 million and $5.7 million, respectively. The amount of deferred revenue recognized in 2012 and 2011 was
74 •
W. P. C a r e y I n c .
net of $0.9 million and $0.6 million, respectively, in amortization associated with the basis differential generated by the Special
Member Interest in CPA®:16 – Global’s operating partnership and our underlying claim on the net assets of CPA®:16 – Global. We
determined the fair value of the Special Member Interest based upon a discounted cash flow model, which included assumptions
related to estimated future cash flows of CPA®:16 – Global and the estimated duration of the fee stream of three years. The equity
investment is evaluated for impairment consistent with the policy described in Note 2. At December 31, 2012 and 2011, the
unamortized balance of the deferred revenue was $12.6 million and $22.0 million, respectively.
Other
We own interests in entities ranging from 3% to 95%, as well as jointly-controlled tenancy-in-common interests in properties,
with the remaining interests generally held by affiliates, and own common stock in each of the Managed REITs. We consolidate
certain of these investments and account for the remainder under the equity method of accounting.
One of our directors and officers was the sole shareholder of Livho, a subsidiary that operates a hotel investment. We consolidated
the accounts of Livho in our consolidated financial statements because it was a VIE and we were its primary beneficiary. In order
to streamline Livho’s corporate structure, in August 2012, the director and officer transferred his ownership interest in Livho for
no consideration to one of our subsidiaries, Carey REIT II Inc. No gain or loss was recognized in this transaction. Immediately
after the ownership transfer, we became the sole shareholder of Livho and we continue to consolidate the accounts of Livho.
Family members of one of our directors have an ownership interest in certain companies that own noncontrolling interests
in one of our French majority-owned subsidiaries. These ownership interests are subject to substantially the same terms as all
other ownership interests in the subsidiary companies.
A former employee owns a redeemable noncontrolling interest (Note 14) in W. P. Carey International LLC (“WPCI”), a
subsidiary company that structures net lease transactions on behalf of the CPA® REITs outside of the U.S., as well as certain
related entities.
During February 2011, we loaned $90.0 million at an annual interest rate of 1.15% to CPA®:17 – Global, which was repaid on
April 8, 2011, its maturity date. During May 2011, we loaned $4.0 million at the 30-day LIBOR plus 2.5% to CWI which was
repaid on June 6, 2011. In addition, during September 2011, we loaned $2.0 million at LIBOR plus 0.9% to CWI, of which
$1.0 million was repaid on September 13, 2011 and the remaining $1.0 million was repaid on October 6, 2011. In connection
with these loans, we received interest income from CWI and CPA®:17 – Global totaling $0.2 million during the year ended
December 31, 2011.
For related party transactions that occurred subsequent to December 31, 2012, please see Note 20.
5 | neT InvesTmenTs In properTIes
real estate
Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized
as follows (in thousands):
Land
Buildings
Less: Accumulated depreciation
deCember 31,
2012
2011
$ 509,530
1,822,083
(116,075)
$ 2,215,538
$ 111,483
534,999
(118,054)
$ 528,428
Real Estate Acquired During 2012 – As discussed in Note 3, we acquired properties in the Merger, which increased the carrying
value of our real estate by $1.8 billion during the year ended December 31, 2012. Other acquisitions of real estate during this
period are disclosed in Note 4 and assets disposed of are disclosed in Note 17. Impairment charges recognized on certain
properties are discussed in Note 11. During this period, the U.S. dollar weakened against the euro, as the end-of-period rate for
the U.S. dollar in relation to the euro at December 31, 2012 increased by 2.1% to $1.3218 from $1.2950 at December 31, 2011. The
impact of this weakening was a $12.9 million increase in Real estate from December 31, 2011 to December 31, 2012.
On September 13, 2012, we acquired an interest in an investment leased to the Walgreens Co. at a total cost of $24.8 million,
including net lease intangible assets totaling $6.6 million (Note 8) and acquisition-related costs. We updated our purchase price
allocation during the fourth quarter of 2012, and recorded a measurement period adjustment of $5.3 million to reduce land
and buildings and to increase net lease intangibles. We deemed this investment to be a real estate asset acquisition, and as such,
we capitalized acquisition-related costs of $0.2 million. The Walgreens Co. leases are classified as operating leases.
2 0 1 2 A n n u a l R e p o r t • 75
Real Estate Acquired During 2011 – As discussed in Note 4, in connection with the CPA®:14/16 Merger in May 2011, we
purchased the remaining interests in certain investments, in which we already had a joint interest, from CPA®:14 as part
of the CPA®:14 Asset Sales. These three investments, which lease properties to Checkfree, Federal Express and Amylin,
had an aggregate fair value of $174.8 million at the date of acquisition. Prior to this purchase, we had consolidated the
Checkfree investments and accounted for the Federal Express and Amylin investments under the equity method. As part
of the transaction, we assumed the related non-recourse mortgages on the Federal Express and Amylin investments. These
two mortgages and the mortgage on the Checkfree investment had an aggregate fair value of $117.1 million at the date of
acquisition (Note 12). Amounts provided are the total amounts attributable to the jointly-owned investments’ properties and
do not represent the proportionate share that we purchased. Upon acquiring the remaining interests in the investments leased
to Federal Express and Amylin, we owned 100% of these investments and accounted for these acquisitions as step acquisitions
utilizing the purchase method of accounting. Due to the change in control of the investments that occurred, and in accordance
with ASC 810 involving a step acquisition where control is obtained and there is a previously held equity interest, we recorded
an aggregate gain of approximately $27.9 million related to the difference between our respective carrying values and the
fair values of our previously held interests on the acquisition date. Subsequent to our acquisition, we consolidate all of these
wholly-owned investments. The consolidation of these investments resulted in an increase of $90.2 million and $40.8 million to
Real estate, net and net lease intangibles, respectively, in May 2011.
During 2011, we reclassified real estate with a net carrying value of $17.9 million to Real estate in connection with an out-of-
period adjustment (Note 2).
operating real estate
Operating real estate, which consists of our investments in 21 self-storage properties through Carey Storage and our Livho
hotel subsidiary, at cost, is summarized as follows (in thousands):
Land
Buildings
Less: Accumulated depreciation
2012
$ 22,158
77,545
(19,993)
$ 79,710
deCember 31,
2011
$ 24,031
85,844
(17,121)
$ 92,754
During the year ended December 31, 2012, we recognized an impairment charge of $10.5 million on our hotel property to
write down the property’s carrying value to its estimated fair value as a result of a decrease in fair value and in the estimated
holding period of the hotel (Note 11).
real estate under Construction
At December 31, 2012, real estate under construction was $2.9 million, recorded at cost.
scheduled future minimum rents
Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants and future CPI-based increases under
non-cancelable operating leases, at December 31, 2012 are as follows (in thousands):
Years endIng deCember 31,
2013
2014
2015
2016
2017
Thereafter
Total
76 •
W. P. C a r e y I n c .
ToTal
$ 272,559
270,952
249,266
227,445
213,292
1,078,071
$ 2,311,585
6 | fInanCe reCeIvables
Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables.
Our finance receivable portfolios consist of our Net investments in direct financing leases and deferred acquisition fees. Operating
leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated balance sheets.
net Investment in direct financing leases
Net investment in direct financing leases is summarized as follows (in thousands):
Minimum lease payments receivable
Unguaranteed residual value
Less: unearned income
2012
$ 430,514
375,706
806,220
(430,215)
$ 376,005
deCember 31,
2011
$ 29,986
57,218
87,204
(29,204)
$ 58,000
During 2012, we sold our net investment in a direct financing lease for $2.0 million, net of selling costs, and recognized a
net loss on sale of $0.2 million. In connection with the Merger in September 2012, we acquired 15 direct financing leases
with a total fair value of $315.8 million (Note 3). During the years ended December 31, 2012 and 2011, in connection with
our annual reviews of the estimated residual values of our properties, we recorded no impairment charges related to direct
financing leases. We recorded $1.1 million in impairment charges related to several direct financing leases in 2010. Impairment
charges related primarily to other-than-temporary declines in the estimated residual values of the underlying properties due
to market conditions (Note 11). In the fourth quarter of 2011, we also recorded $1.6 million in connection with an out-of-
period adjustment (Note 2). At December 31, 2012 and 2011, Other assets, net included $0.2 million and less than $0.1 million,
respectively, of accounts receivable related to amounts billed under these direct financing leases.
During 2011, we reclassified $17.6 million out of Net investments in direct financing leases in connection with an out-of-
period adjustment (Note 2).
Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, percentage of sales rents and future
CPI-based adjustments, under non-cancelable direct financing leases at December 31, 2012 are as follows (in thousands):
Years endIng deCember 31,
2013
2014
2015
2016
2017
Thereafter
Total
ToTal
$ 34,573
32,277
31,968
30,150
29,707
271,839
$ 430,514
deferred acquisition fees receivable
As described in Note 4, we earn revenue in connection with structuring and negotiating investments and related mortgage
financing for the Managed REITs. A portion of this revenue is due in equal annual installments ranging from three to four
years, provided the Managed REITs meet their respective performance criteria. Unpaid deferred installments, including
accrued interest, from all of the Managed REITs were included in Due from affiliates in the consolidated financial statements.
2 0 1 2 A n n u a l R e p o r t • 77
Credit quality of finance receivables
We generally seek investments in facilities that we believe are critical to a tenant’s business and that we believe have a low
risk of tenant defaults. At both December 31, 2012 and 2011, none of our finance receivables were past due and we had not
established any allowances for credit losses. As discussed above, we acquired 15 direct financing leases with a total fair value
of $315.8 million from CPA®:15 in connection with the Merger (Note 3). There were no modifications of finance receivables
for either of the years ended December 31, 2012 or 2011. We evaluate the credit quality of our tenant receivables utilizing an
internal 5-point credit rating scale, with 1 representing the highest credit quality and 5 representing the lowest. The credit
quality evaluation of our tenant receivables was last updated in the fourth quarter of 2012. We believe the credit quality of our
deferred acquisition fees receivable falls under category 1, as the CPA® REITs are expected to have the available cash to make
such payments.
A summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):
InTernal CredIT qualITY IndICaTor
deCember 31, 2012
deCember 31, 2011
deCember 31, 2012
deCember 31, 2011
number of TenanTs aT
neT InvesTmenTs In dIreCT fInanCIng leases aT
1
2
3
4
5
3
4
8
4
—
8
2
—
—
—
$ 46,398
49,764
257,281
22,562
—
$46,694
11,306
—
—
—
$ 376,005
$58,000
7 | equITY InvesTmenTs In real esTaTe and THe managed reITs
We own interests in the Managed REITs and unconsolidated real estate investments. We account for our interests in these
investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less
distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences from
other-than-temporary impairments). These investments are summarized below.
Income from equity investments in real estate represents our proportionate share of the income or losses of these investments
as well as certain depreciation and amortization adjustments related to other-than-temporary impairment charges. The
following table presents information about our equity income from the Managed REITs and other jointly-owned investments
(in thousands):
Years ended deCember 31,
2012
2011
2010
Equity earnings from equity investments in the Managed REITs
$ 5,509
$16,928
$ 10,480
Other-than-temporary impairment charges on CPA®:16 –
Global operating partnership
Distributions of Available Cash (Note 4)
Deferred revenue earned (Note 4)
Equity income from the Managed REITs
Equity earnings from other equity investments
(9,910)
30,009
8,492
34,100
28,292
—
15,535
5,662
38,125
13,103
—
4,468
—
14,948
16,044
Total income from equity investments in real estate and the Managed REITs
$ 62,392
$51,228
$30,992
managed reITs
We own interests in the Managed REITs and account for these interests under the equity method because, as their advisor and
through our ownership in their common stock, we do not exert control over, but we do have the ability to exercise significant
influence on, the Managed REITs. We earn asset management and we earned performance revenue from the Managed REITs
and have elected, in certain cases, to receive a portion of this revenue in the form of common stock of the Managed REITs
rather than cash.
78 •
W. P. C a r e y I n c .
The following table sets forth certain information about our investments in the Managed REITs (dollars in thousands):
fund
deCember 31, 2012
deCember 31, 2011
deCember 31, 2012(a)
deCember 31, 2011
% of ouTsTandIng sHares owned aT
CarrYIng amounT of InvesTmenT aT
CPA®:15(b)
CPA®:16 – Global(d) (e) (f)
CPA®:17 – Global(g)
CWI
(c)
18.3%
1.3%
0.4%
7.7%
17.9%
0.9%
0.5%
$
—
$ 93,650
313,441
38,977
727
338,964
21,277
121
$ 353,145
$454,012
(a) Includes asset management fees receivable, for which 128,992 shares, 84,595 shares and 9,842 shares of CPA®:17 – Global, CPA®:16 – Global and CWI, respectively, were issued during the first quarter
of 2013.
(b) Prior to the Merger, we received distributions of $5.6 million, $6.9 million and $6.2 million from this investment during 2012, 2011 and 2010, respectively.
(c) On September 28, 2012, we acquired all the remaining interests in CPA®:15 and now consolidate this entity (Note 3).
(d) During the year ended December 31, 2012, we recognized other-than-temporary impairment charges totaling $9.9 million on our special member interest in CPA®:16 – Global’s operating partnership to
reduce the carrying value of our interest in the operating partnership to its estimated fair value (Note 9).
(e) At December 31, 2011, our investment in CPA®:16 – Global comprised more than 20% of our total assets. Therefore, we refer to the audited financials of CPA®:16 – Global filed on February 26, 2013.
(f) We received distributions of $39.7 million, $18.6 million and $4.1 million from this investment during 2012, 2011 and 2010, respectively.
(g) We received distributions of $16.2 million, $10.0 million and $4.7 million from this investment during 2012, 2011 and 2010, respectively.
The following tables present preliminary combined summarized financial information for the Managed REITs. Amounts provided
are expected total amounts attributable to the Managed REITs and do not represent our proportionate share (in thousands):
Assets
Liabilities
Redeemable noncontrolling interests
Noncontrolling interests
Stockholders’ equity
Revenues
Expenses(a) (b)
Income from continuing operations
Net income attributable to the Managed REITs(c) (d)
deCember 31,
2012
2011
$ 8,052,546
$ 9,184,111
(3,959,756)
(4,896,116)
(21,747)
(170,140)
(21,306)
(330,873)
$ 3,900,903
$ 3,935,816
Years ended deCember 31,
2012
2011
2010
$ 809,364
$
789,933
$ 737,369
(626,422)
(599,822)
(501,216)
$ 182,942
$ 123,815
$
$
190,111
123,479
$ 236,153
$ 189,155
(a) Total net expenses recognized by the Managed REITs during the year ended December 31, 2012 included $3.1 million of Merger-related expenses incurred by CPA®:15, of which our share was approximately
$0.2 million.
(b) Total net expenses recognized by the Managed REITs during the year ended December 31, 2011 included the following items related to the CPA®:14/16 Merger: (i) $78.8 million of net gains recognized by
CPA®:14 in connection with selling certain properties to us, CPA®:17 – Global and third parties, of which our share was approximately $7.4 million; (ii) a net gain of $28.7 million recognized by CPA®:16 –
Global in connection with the CPA®:14/16 Merger as a result of the fair value of CPA®:14 exceeding the total merger consideration, of which our share was approximately $5.0 million; (iii) $13.6 million of
expenses incurred by CPA®:16 – Global related to the CPA®:14/16 Merger, of which our share was approximately $2.4 million; and (iv) a $2.8 million net loss recognized by CPA®:16 – Global in connection
with the prepayment of certain non-recourse mortgages, of which our share was approximately $0.5 million.
(c) Inclusive of impairment charges recognized by the Managed REITs totaling $25.0 million, $57.7 million and $51.4 million during the years ended December 31, 2012, 2011 and 2010, respectively, of which
$6.9 million, $45.1 million and $17.4 million were included in discontinued operations, respectively. These impairment charges reduced our income earned from these investments by approximately
$4.2 million, $7.8 million and $3.0 million during the years ended December 31, 2012, 2011 and 2010, respectively.
(d) Amounts included net gains on sale of real estate recorded by the Managed REITs totaling $35.4 million, $45.4 million and $30.5 million during the years ended December 31, 2012, 2011 and 2010,
respectively, of which $29.6 million, $16.7 million and $14.6 million, were reflected within discontinued operations, respectively.
Interests in unconsolidated real estate Investments
We own interests in single-tenant net leased properties that are leased to corporations through noncontrolling interests (i) in
partnerships and limited liability companies that we do not control but over which we exercise significant influence or (ii) as
tenants-in-common subject to common control. Generally, the underlying investments are jointly-owned with affiliates. We
account for these investments under the equity method of accounting.
2 0 1 2 A n n u a l R e p o r t • 79
The following table sets forth our ownership interests in our equity investments in real estate, excluding the Managed REITs,
and their respective carrying values (dollars in thousands):
lessee
Schuler A.G.(a) (b) (c) (d)
Hellweg Die Profi-Baumarkte GmbH & Co. KG (Hellweg 2)(a) (c)
Advanced Micro Devices(b) (e)
The New York Times Company(f)
C1000 Logistiek Vastgoed B.V.(a) (b) (e)
Del Monte Corporation(b) (e)
U. S. Airways Group, Inc.(b) (g)
The Talaria Company (Hinckley)(e)
The Upper Deck Company(b) (e)
Waldaschaff Automotive GmbH and Wagon Automotive
Nagold GmbH(a) (e)
Builders FirstSource, Inc(e)
PETsMART, Inc.(e)
Consolidated Systems, Inc.(b)
Carrefour France, SAS(a)
Médica – France, S.A.(a)
Hologic, Inc.
Childtime Childcare, Inc.
Symphony IRI Group, Inc.(j) (k) (l)
SaarOTEC(a) (e) (k)
Wanbishi Archives Co. Ltd.(a) (k) (m)
ownersHIp InTeresT
aT deCember 31, 2012
CarrYIng value aT
deCember 31, 2012
67%
45%
33%
18%
15%
50%
75%
30%
50%
33%
40%
30%
60%
(h)
(i)
(h)
(h)
(h)
50%
3%
$ 62,006
42,387
23,667
20,584
14,929
8,318
7,995
7,702
7,198
6,323
5,138
3,808
3,278
—
—
—
—
—
(116)
(736)
2011
$19,958
1,062
—
19,647
—
—
7,415
—
—
—
—
—
3,387
20,014
4,430
4,429
4,419
(24)
—
—
$ 212,481
$84,737
(a) The carrying value of the investment is affected by the impact of fluctuations in the exchange rate of the foreign currency.
(b) Represents a tenancy-in-common interest, under which the investment is under common control by us and our investment partner.
(c) In connection with the Merger, we acquired an additional interest in this investment from CPA®:15.
(d) We received distributions of $8.2 million, $2.4 million and $2.3 million from this investment during 2012, 2011 and 2010, respectively.
(e) We acquired our interest in this investment in connection with the Merger (Note 3).
(f) We received distributions of $3.2 million and $4.4 million from this investment during 2012 and 2011, respectively.
(g) We received distributions of $2.4 million, $2.2 million and $2.5 million from this investment during 2012, 2011 and 2010, respectively.
(h) In connection with the Merger, we acquired the remaining interest in this investment from CPA®:15. Subsequent to the Merger, we consolidate this investment.
(i)
(j)
In April 2012, this jointly-owned entity sold its interests in the investment for approximately $76.5 million and recognized a net gain on sale of approximately $34.0 million. Our share of the gain was
approximately $15.1 million. Amounts are based on the exchange rate of the euro on the date of sale.
In 2011, this jointly-owned entity sold one of its properties and distributed the proceeds to the entity partners. Our share of the proceeds was approximately $1.4 million, which exceeded our total
investment in the entity at that time. During the first quarter of 2011, we recognized an other-than-temporary impairment charge of $0.2 million to reflect the decline in the estimated fair value of the
entity’s underlying net assets in comparison with the carrying value of our interest in this investment.
(k) At December 31, 2012, or 2011, as applicable, we intended to fund our share of the investment’s future operating deficits if the need arose. However, we had no legal obligation to pay for any of the
investment’s liabilities nor did we have any legal obligation to fund operating deficits.
(l) We received distributions of $2.6 million from this investment during 2011.
(m) We acquired our interest in this investment in 2012 as discussed below.
80 •
W. P. C a r e y I n c .
The following tables present combined summarized financial information of our equity investments. Amounts provided are the
total amounts attributable to the investments and do not represent our proportionate share (in thousands):
Assets
Liabilities
Redeemable noncontrolling interest
Partners’/members’ equity
Revenues
Expenses
Impairment charge(b)
Income from continuing operations
Net income attributable to equity method investees(a) (b)
deCember 31,
2012
2011
$ 1,286,294
$1,026,124
(799,422)
(21,747)
(706,244)
(21,306)
$ 465,125
$ 298,574
Years ended deCember 31,
2012
2011
2010
$ 108,242
$ 118,819
$ 146,214
(64,453)
—
$ 43,789
$ 79,591
(75,992)
(8,602)
(79,665)
—
$
$
34,225
34,225
$ 66,549
$ 66,549
(a) Amount during the year ended December 31, 2012 included a net gain of approximately $34.0 million recognized by a jointly-owned entity as a result of selling its interests in the Médica investment. Our
share of the gain was approximately $15.1 million.
(b) Amount during the year ended December 31, 2011 included an impairment charge of $8.6 million incurred by a jointly-owned entity that leased property to Symphony IRI Group, Inc. in connection with a
potential sale of the property, of which our share was approximately $0.4 million. The entity completed the sale in June 2011.
2012 – In December 2012, an entity in which we and CPA®:17 – Global hold 3% and 97% interests, respectively, purchased a
distribution/warehouse in Japan for $52.1 million. Our share of the purchase price was approximately $1.5 million. We account
for this investment under the equity method of accounting, as we do not have a controlling interest in the entity but exercise
significant influence over it. In connection with this investment, the entity obtained mortgage financing on the property of
$31.6 million at an annual interest rate of 2% and term of five years. Our share of the financing was approximately $0.9 million.
Amounts are based on the exchange rate of the Japanese yen on the date of acquisition.
8 | InTangIble asseTs and lIabIlITIes and goodwIll
In connection with our acquisitions of properties, we have recorded net lease intangibles which are being amortized over
periods ranging from one year to 40 years. In-place lease, tenant relationship and above-market rent intangibles are included
in Intangible assets and goodwill, net in the consolidated financial statements. Below-market rent intangibles are included in
Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.
In connection with our investment activity during the year ended December 31, 2012, comprised of the Merger (Note 3) and
the Walgreens acquisition (Note 5), we have recorded net lease intangibles comprised as follows (dollars in thousands):
weIgHTed-
average lIfe
InITIallY reporTed aT
sepTember 30, 2012
measuremenT
perIod adjusTmenTs
as revIsed aT
deCember 31, 2012
amortizable Intangible assets
Lease intangibles:
In-place lease
Above-market rent
Total intangible assets
amortizable Intangible liabilities
Below-market rent
Above-market ground lease
unamortizable Intangible liabilities
Below-market purchase option
Total intangible liabilities
12.9
11.7
29.9
11.8
$ 413,198
284,174
$ 697,372
$ (79,312)
(6,896)
(16,711)
$ (102,919)
$ 5,322
$ 418,520
790
284,964
$ 6,112
$ 703,484
$(1,111)
$ (80,423)
—
314
(6,896)
(16,397)
$ (797)
$(103,716)
2 0 1 2 A n n u a l R e p o r t • 81
In connection with the Merger, we recorded goodwill of $268.7 million as a result of the Merger Consideration exceeding the
fair value of the assets acquired and liabilities assumed (Note 3). The goodwill was attributed to our Real Estate Ownership
reporting unit as it relates to the real estate assets we acquired. The following table presents a reconciliation of our goodwill
(in thousands):
Balance at January 1, 2010
Activity
Balance at December 31, 2010
Activity
Balance at December 31, 2011
Acquisition of CPA®:15
Allocation of goodwill to dispositions of properties
within the reporting unit(a)
Balance at December 31, 2012
(a) Amount is included in (Loss) gain on sale of real estate within discontinued operations.
InvesTmenT
managemenT
real esTaTe
ownersHIp
ToTal
$ 63,607
$ —
$ 63,607
—
63,607
—
63,607
—
—
—
—
—
—
268,683
—
63,607
—
63,607
268,683
(3,158)
(3,158)
$ 63,607
$265,525
$329,132
Intangible assets and liabilities and goodwill are summarized as follows (in thousands):
2012
2011
deCember 31,
CarrYIng
amounT
aCCumulaTed
amorTIzaTIon
ToTal
CarrYIng
amounT
aCCumulaTed
amorTIzaTIon
ToTal
amortizable Intangible assets
Management contracts
$
32,765
$ (31,283)
$ 1,482
$ 32,765
$ (30,172)
$ 2,593
32,765
(31,283)
1,482
32,765
(30,172)
2,593
Lease Intangibles:(a)
In-place lease
Other intangibles
Above-market rent
unamortizable goodwill and
Indefinite-lived Intangible assets
Goodwill
Trade name
Total intangible assets
amortizable Intangible liabilities
474,629
8,149
293,627
776,405
329,132
3,975
333,107
(27,351)
(3,406)
(13,742)
(44,499)
—
—
—
447,278
4,743
279,885
731,906
329,132
3,975
333,107
62,162
10,968
9,905
83,035
63,607
3,975
67,582
(17,585)
44,577
(4,586)
(5,082)
6,382
4,823
(27,253)
55,782
—
—
—
63,607
3,975
67,582
$ 1,142,277
$(75,782)
$1,066,495
$183,382
$(57,425)
$125,957
Below-market rent
$
(86,171)
$3,227
$(82,944)
$ (6,455)
$1,482
$ (4,973)
Above-market ground lease
(6,896)
(93,067)
103
3,330
(6,793)
(89,737)
—
(6,455)
—
1,482
—
(4,973)
unamortizable Intangible liabilities
Below-market purchase option
(16,711)
—
(16,711)
—
—
—
Total intangible liabilities
$ (109,778)
$ 3,330
$(106,448)
$ (6,455)
$ 1,482
$ (4,973)
(a) The fair value of the below-market purchase option was equal to the residual value at the date of acquisition.
82 •
W. P. C a r e y I n c .
Net amortization of intangibles, including the effect of foreign currency translation, was $24.7 million, $4.0 million and
$1.3 million for the years ended December 31, 2012, 2011 and 2010, respectively. Amortization of below-market rent, above-
market rent and above-market ground lease intangibles is recorded as an adjustment to Lease revenues, while amortization of
in-place lease and tenant relationship intangibles is included in Depreciation and amortization.
Based on the intangible assets and liabilities recorded at December 31, 2012, scheduled annual net amortization for each of the
next five years and thereafter is as follows (in thousands):
Years endIng deCember 31,
2013
2014
2015
2016
2017
Thereafter
Total
9 | faIr value measuremenTs
ToTal
$ 84,274
79,533
72,016
70,050
66,667
271,111
$ 643,651
For fair value measurements, the fair value of an asset is defined as the exit price, which is the amount that would either
be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value.
These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money
market funds, equity securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices
included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate
caps and swaps; and Level 3, for securities that do not fall into Level 1 or Level 2 and for which little or no market data exists,
therefore requiring us to develop our own assumptions.
Items measured at fair value on a recurring basis
The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For
significant Level 3 items we have also provided the unobservable inputs along with their weighted average ranges.
Money Market Funds — Our money market funds, which are included in Cash in the consolidated financial statements, are
comprised of government securities and U.S. Treasury bills. These funds were classified as Level 1 as we used quoted prices
from active markets to determine their fair values.
Derivative Assets — Our derivative assets, which are included in Other assets, net in the consolidated financial statements,
are comprised of foreign currency forward contracts and stock warrants that were acquired from CPA®:15 through the Merger.
The foreign currency forward contracts were measured at fair value using readily observable market inputs, such as quotations
on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank
counterparties that are not traded in the open market. The stock warrants were measured at fair value using internal valuation
models that incorporate market inputs and our own assumptions about future cash flows. We classified these assets as Level 3
because these assets are not traded in an active market.
Derivative Liabilities — Our derivative liabilities, which are included in Accounts payable, accrued expenses and other
liabilities in the consolidated financial statements, are comprised of interest rate swaps, a substantial amount of which were
acquired from CPA®:15 through the Merger (Note 10). These derivative instruments were measured at fair value using readily
observable market inputs, such as quotations on interest rates. These derivative instruments were classified as Level 2 because
they are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
Other Securities — Our other securities, which are included in Other assets, net in the consolidated financial statements, are
primarily comprised of our interest in a commercial mortgage loan securitization known as the Carey Commercial Mortgage
Trust (“CCMT”). We classified these assets as Level 3 because these assets are not traded in an active market. We estimated the
fair value of these assets using internal valuation models that incorporate market inputs and our own assumptions about future
cash flows.
2 0 1 2 A n n u a l R e p o r t • 83
Redeemable Noncontrolling Interest — We account for the noncontrolling interest in WPCI as a redeemable noncontrolling
interest. We determined the valuation of the redeemable noncontrolling interest using widely accepted valuation techniques,
including expected discounted cash flows of the investment as well as the income capitalization approach, which considers
prevailing market capitalization rates. We classified this liability as Level 3. Unobservable inputs for WPCI include a discount
for lack of marketability, a discount rate and EBITDA multiples with weighted average ranges of 20% — 30%, 22% — 26%
and 3x — 5x, respectively. Significant increases or decreases in any one of these inputs in isolation would result in significant
changes in the fair value measurement.
The following tables set forth our assets and liabilities that were accounted for at fair value on a recurring basis. Assets and
liabilities presented below exclude assets and liabilities owned by equity investments (in thousands):
desCrIpTIon
assets
Money market funds
Derivative assets
Total
redeemable noncontrolling Interest and liabilities
Redeemable noncontrolling interest
Derivative liabilities
Total
desCrIpTIon
assets
Other securities
Money market funds
Total
redeemable noncontrolling Interest and liabilities
Redeemable noncontrolling interest
Derivative liabilities
Total
faIr value measuremenTs aT deCember 31, 2012 usIng:
quoTed prICes In
aCTIve markeTs for
IdenTICal asseTs
(level 1)
ToTal
sIgnIfICanT oTHer
observable InpuTs
(level 2)
unobservable
InpuTs
(level 3)
$
231
1,745
$ 1,976
$ 7,531
24,578
$ 32,109
$231
—
$231
$ —
—
$ —
$ —
25
$ 25
$ —
24,578
$24,578
$ —
1,720
$1,720
$7,531
—
$7,531
faIr value measuremenTs aT deCember 31, 2011 usIng:
quoTed prICes In
aCTIve markeTs for
IdenTICal asseTs
(level 1)
ToTal
sIgnIfICanT oTHer
observable InpuTs
(level 2)
unobservable
InpuTs
(level 3)
$
233
35
$
268
$ 7,700
4,175
$ 11,875
$ —
35
$ 35
$ —
—
$ —
$ —
—
$ —
$ —
4,175
$ 4,175
$ 233
—
$ 233
$7,700
—
$7,700
84 •
W. P. C a r e y I n c .
faIr value measuremenTs usIng sIgnIfICanT unobservable InpuTs (level 3 onlY)
Year ended deCember 31, 2012
Year ended deCember 31, 2011
asseTs
oTHer
seCurITIes
derIvaTIve
asseTs
ToTal
asseTs
redeemable
nonConTrollIng
InTeresT
oTHer
seCurITIes
derIvaTIve
asseTs
asseTs
$ 233
$ — $ 233
$ 7,700
$263
$—
ToTal
asseTs
$263
redeemable
nonConTrollIng
InTeresT
$ 7,546
10
(7)
(236)
—
—
—
80
—
—
1,640
—
—
90
(7)
(236)
1,640
—
—
40
6
—
—
(1,055)
840
(20)
(10)
—
—
—
—
—
—
—
—
—
—
(20)
(10)
—
—
—
—
1,923
(5)
—
—
(1,309)
(455)
Beginning balance
Total gains or losses
(realized and unrealized):
Included in earnings
Included in other
comprehensive (loss) income
Settlements
Acquired due to Merger
Distributions paid
Redemption value adjustment
Ending balance
$ — $1,720
$1,720
$ 7,531
$233
$—
$233
$ 7,700
The amount of total gains or
losses for the period included
in earnings attributable to the
change in unrealized gains or
losses relating to assets still
held at the reporting date
$ — $ 80
$ 80
$ —
$ (20)
$—
$ (20)
$ —
We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the years ended December 31, 2012
and 2011. Gains and losses (realized and unrealized) included in earnings for other securities are reported in Other income and
(expenses) in the consolidated financial statements.
Our other financial instruments had the following carrying values and fair values as of the dates shown (in thousands):
Non-recourse debt(a)
Senior Credit Facility
Deferred acquisition fees receivable(b)
level
CarrYIng value
faIr value
CarrYIng value
faIr value
deCember 31, 2012
deCember 31, 2011
3
2
3
$1,715,397
$1,727,985
$356,209
$361,948
253,000
28,654
253,000
33,632
233,160
29,410
233,160
31,638
(a) We determined the estimated fair value of our debt instruments using a discounted cash flow model with rates that take into account the credit of the tenants, where applicable, and interest rate risk. We also
considered the value of the underlying collateral taking into account the quality of the collateral, the credit quality of the company, the time until maturity and the current market interest rate.
(b) We determined the estimated fair value of our deferred acquisition fees based on an estimate of discounted cash flows using two significant unobservable inputs, which are the leverage adjusted unsecured
spread and an illiquidity adjustment with a weighted average range of 275 — 325 bps and 50 — 100 bps, respectively. Significant increases or decreases to these inputs in isolation would result in a significant
change in the fair value measurement.
We estimated that our other financial assets and liabilities (excluding net investments in direct financing leases) had fair values
that approximated their carrying values at both December 31, 2012 and 2011.
Items measured at fair value on a non-recurring basis
We perform an assessment, when required, of the value of certain of our real estate investments. As part of that assessment, we
determine the valuation of these assets using widely accepted valuation techniques, including expected discounted cash flows
or an income capitalization approach, which considers prevailing market capitalization rates. We review each investment based
on the highest and best use of the investment and market participation assumptions. We determined that the significant inputs
used to value these investments fall within Level 3. As a result of our assessments, we calculated impairment charges based on
market conditions and assumptions that existed at the time. The valuation of real estate is subject to significant judgment and
actual results may differ materially if market conditions or the underlying assumptions change. Assets acquired and liabilities
assumed in the Merger approximate fair value. The valuation methods related to the assets acquired, liabilities assumed, equity
investments and noncontrolling interests associated with the Merger are discussed in Notes 2 and 3.
2 0 1 2 A n n u a l R e p o r t • 85
The following tables present information about our other assets that were measured on a fair value basis (in thousands):
Year ended deCember 31, 2012
Year ended deCember 31, 2011
Year ended deCember 31, 2010
ToTal
faIr value
measuremenTs
ToTal
ImpaIrmenT
CHarges
ToTal
faIr value
measuremenTs
ToTal
ImpaIrmenT
CHarges
ToTal
faIr value
measuremenTs
ToTal
ImpaIrmenT
CHarges
Impairment Charges from
Continuing operations
Real estate(a)
Operating real estate(b)
Net investments in direct
financing leases(c)
Equity investments in
real estate(d)
Impairment Charges from
discontinued operations
Real estate(a)
$ —
5,002
$ —
10,467
—
—
17,140
22,142
9,910
20,377
$ 380
$ 243
$ —
$ —
—
—
1,554
1,934
—
—
(1,608)
3,548
206
(1,159)
22,846
26,394
—
1,140
1,394
2,534
39,642
$ 61,784
12,495
$32,872
42,207
$44,141
11,838
$10,679
11,662
$38,056
14,241
$16,775
(a) These fair value measurements were developed by third-party sources, subject to our corroboration for reasonableness.
(b) During the year ended December 31, 2012, we recorded an impairment charge of $10.5 million on a hotel property to reduce its carrying value to its estimated fair value, which had declined. The fair value
of the hotel property was obtained using an estimate of discounted cash flows using three significant inputs, which are capitalization rate, cash flow discount rate and residual discount rate, of 9.5%, 7.5% and
10.0%, respectively.
(c) In the fourth quarter of 2011, we recorded an out-of-period adjustment of $1.6 million (Note 2).
(d) During the year ended December 31, 2012, we incurred an other-than-temporary impairment charge totaling $9.9 million, on our investment in the Special Member Interest to reduce its carrying value to its
estimated fair value, which had declined. This investment’s fair value was obtained using an estimate of discounted cash flows using two significant unobservable inputs, which are the discount rate and the
estimated general and administrative costs as a percentage of assets under management with a weighted average range of 12.75% – 15.75% and 35 bps – 45 bps, respectively. Significant increases or decreases
to these inputs in isolation would result in a significant change in the fair value measurement. The valuation was also dependent upon the estimated date of a liquidity event for CPA®:16 – Global because cash
flows attributable to this investment would cease upon such event. Therefore, the fair value of this investment may decline in the future as the estimated liquidation date approaches.
10 | rIsk managemenT and use of derIvaTIve fInanCIal InsTrumenTs
In the normal course of our ongoing business operations, we encounter economic risk. There are three main components of
economic risk that impact us: interest rate risk, credit risk and market risk. We are primarily subject to interest rate risk on
our interest-bearing liabilities. Credit risk is the risk of default on our operations and our tenants’ inability or unwillingness to
make contractually required payments. Market risk includes changes in the value of our properties and related loans, as well
as changes in the value of our other securities and the shares we hold in the Managed REITs due to changes in interest rates
or other market factors. In addition, we own investments in the European Union and are subject to the risks associated with
changing foreign currency exchange rates.
use of derivative financial Instruments
When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency
exchange rate movements. We have not entered, and do not plan to enter into, financial instruments for trading or speculative
purposes. The primary risks related to our use of derivative instruments are that a counterparty to a hedging arrangement
could default on its obligation or that the credit quality of the counterparty may be downgraded to such an extent that it
impairs our ability to sell or assign our side of the hedging transaction. While we seek to mitigate these risks by entering into
hedging arrangements with counterparties that are large financial institutions that we deem to be creditworthy, it is possible
that our hedging transactions, which are intended to limit losses, could adversely affect our earnings. Furthermore, if we
terminate a hedging arrangement, we may be obligated to pay certain costs, such as transaction or breakage fees. We have
established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial
instrument activities.
We measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations
under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through
earnings. For a derivative designated and qualified as a cash flow hedge, the effective portion of the change in fair value of
the derivative is recognized in Other comprehensive income until the hedged item is recognized in earnings. The ineffective
portion of a derivative’s change in fair value is immediately recognized in earnings.
86 •
W. P. C a r e y I n c .
The following table sets forth certain information regarding our derivative instruments (in thousands):
balanCe sHeeT loCaTIon deCember 31, 2012 deCember 31, 2011
deCember 31, 2012 deCember 31, 2011
asseT derIvaTIves faIr value aT
lIabIlITY derIvaTIves faIr value aT
derivatives designated
as Hedging Instruments
Foreign currency contracts
Interest rate cap
Foreign currency contracts
Interest rate swaps
derivatives not designated
as Hedging Instruments
Stock warrants(a)
Interest rate swaps(a)
Other assets, net
Other assets, net
Accounts payable,
accrued expenses
and other liabilities
Accounts payable,
accrued expenses
and other liabilities
$ —
25
—
—
Other assets, net
1,720
Accounts payable,
accrued expenses
and other liabilities
—
$ 1,745
$—
—
—
—
—
—
$—
$ —
$ —
—
(2,067)
—
—
(5,825)
(4,175)
—
(16,686)
$(24,578)
—
—
$(4,175)
Total derivatives
(a) As described below, we acquired these instruments from CPA®:15 in the Merger.
The following table presents the impact of derivative instruments on the consolidated financial statements (in thousands):
amounT of gaIn (loss) reCognIzed
In oTHer CompreHensIve InCome on derIvaTIves
(effeCTIve porTIon)
derIvaTIves In CasH flow HedgIng relaTIonsHIps
Interest rate swaps
Interest rate cap
Foreign currency contracts
Total
derIvaTIves In CasH flow HedgIng relaTIonsHIps
Interest rate swaps
Foreign currency contracts
Total
derIvaTIves noT In CasH flow HedgIng relaTIonsHIps
Interest rate swaps
Stock warrants
Total
loCaTIon of gaIn (loss)
reCognIzed In InCome
Other income and (expenses)
Other income and (expenses)
Years ended deCember 31,
2012
2011
$ (1,059)
$(3,564)
277
(1,480)
$ (2,262)
—
—
$(3,564)
$(45)
2010
$(45)
—
—
amounT of gaIn (loss) reClassIfIed from
oTHer CompreHensIve InCome InTo InCome
(effeCTIve porTIon)
Years ended deCember 31,
2012
2011
$ (1,442)
(186)
$ (1,628)
$ —
$ —
2010
$ —
$ —
amounT of gaIn (loss) reCognIzed In
InCome on derIvaTIves
Years ended deCember 31,
2012
429
108
537
$
$
2011
$ —
—
$ —
2010
$ —
—
$ —
See below for information on our purposes for entering into derivative instruments and for information on derivative
instruments owned by unconsolidated entities, which are excluded from the tables above.
2 0 1 2 A n n u a l R e p o r t • 87
Interest rate swaps and Caps
We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we
attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our investment partners
may obtain variable-rate non-recourse mortgage loans and, as a result, may enter into interest rate swap agreements or interest
rate cap agreements with counterparties. Interest rate swaps, which effectively convert the variable-rate debt service obligations
of the loan to a fixed rate, are agreements in which one party exchanges a stream of interest payments for a counterparty’s stream
of cash flow over a specific period. The notional, or face, amount on which the swaps are based is not exchanged. Interest rate
caps limit the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in
interest rates. Our objective in using these derivatives is to limit our exposure to interest rate movements.
The interest rate swaps that we had outstanding on our consolidated subsidiaries at December 31, 2012 were designated as cash
flow hedges and are summarized as follows (currency in thousands):
desCrIpTIon
3-Month Euro Interbank
TYpe
noTIonal
amounT
effeCTIve
InTeresT raTe
effeCTIve
daTe
expIraTIon
daTe
faIr value aT
deCember 31, 2012(a)
Offering Rate (“Euribor”)
Interest rate cap
3-Month Euribor
1-Month LIBOR
1-Month LIBOR
1-Month LIBOR
1-Month LIBOR
1-Month LIBOR
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
(a) Amounts are based on the applicable exchange rate of the euro at December 31, 2012.
€ 69,457
€ 6,286
$ 33,631
$ 25,714
$ 6,905
$ 4,414
$ 3,500
2.0%
4.2%
3.0%
3.9%
4.4%
3.0%
3.7%
12/2012
12/2014
$
25
3/2008
7/2010
8/2012
6/2012
4/2010
12/2012
3/2018
7/2020
8/2022
3/2022
4/2015
2/2019
(1,392)
(3,624)
(403)
(122)
(247)
(37)
$ (5,800)
The interest rate swaps that we had outstanding on our consolidated subsidiaries at December 31, 2012 were not designated as
hedging and are summarized as follows (currency in thousands):
desCrIpTIon(a) (c)
3-Month Euribor
3-Month Euribor
3-Month Euribor
3-Month Euribor
TYpe
noTIonal
amounT
effeCTIve
InTeresT raTe
effeCTIve
daTe
expIraTIon
daTe
faIr value aT
deCember 31, 2012(b)
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
“Pay-fixed” swap
€ 100,000
€ 15,970
€ 6,975
€ 5,479
3.7%
0.9%
4.4%
4.3%
7/2006
4/2012
4/2008
4/2007
7/2016
7/2013
10/2015
7/2016
$ (15,462)
(86)
(523)
(615)
$ (16,686)
(a) These interest rate swaps were acquired from CPA®:15 in the Merger. They do not qualify for hedge accounting; however, they do protect against fluctuations in interest rates related to the variable-rate debt
we acquired in the Merger.
(b) Amounts are based on the applicable exchange rate of the euro at December 31, 2012.
(c) Notional and fair value amounts include, on a combined basis, portions attributable to noncontrolling interests totaling $33.7 million and $(4.2) million, respectively.
The interest rate caps that our unconsolidated jointly-owned investments had outstanding at December 31, 2012 were
designated as cash flow hedges and are summarized as follows (currency in thousands):
desCrIpTIon
3-Month LIBOR(a)
1-Month LIBOR(b)
ownersHIp InTeresT
aT deCember 31, 2012
TYpe
noTIonal
amounT
Cap raTe
spread
effeCTIve
daTe
expIraTIon
daTe
faIr value aT
deCember 31, 2012
17.8% Interest rate cap
$119,185
79.0% Interest rate cap
17,275
4.0%
3.0%
4.8% 8/2009
8/2014
4.0% 9/2009
4/2014
$ 1
—
$ 1
(a) The applicable interest rate of the related loan was 2.9% at December 31, 2012; therefore, the interest rate cap was not being utilized at that date.
(b) The applicable interest rate of the related loan was 4.2% at December 31, 2012; therefore, the interest rate cap was not being utilized at that date. The fair value for this interest rate cap was less than
$0.1 million at December 31, 2012.
88 •
W. P. C a r e y I n c .
Foreign Currency Contracts
We are exposed to foreign currency exchange rate movements. We manage foreign currency exchange rate movements by
generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency. This
reduces our overall exposure to the actual equity that we have invested and the equity portion of our cash flow. However, we
are subject to foreign currency exchange rate movements to the extent of the difference in the timing and amount of the rental
obligation and the debt service. We may also face challenges with repatriating cash from our foreign investments. We may
encounter instances where it is difficult to repatriate cash because of jurisdictional restrictions or because repatriating cash
may result in current or future tax liabilities. Realized and unrealized gains and losses recognized in earnings related to foreign
currency transactions are included in Other income and (expenses) in the consolidated financial statements.
In order to hedge certain of our foreign currency cash flow exposures, we enter into foreign currency forward contracts. A
foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific
date in the future. By entering into forward contracts, we are locked into a future currency exchange rate for the term of the
contract. These instruments guarantee that the exchange rate will not fluctuate beyond the range of the options’ strike prices.
The following table presents the foreign currency derivative contracts we had outstanding at December 31, 2012 which were
designated as cash flow hedges (currency in thousands, except strike price):
TYpe
Foreign currency forward contracts
Foreign currency forward contracts
noTIonal
amounT
€ 50,648
€ 8,700
sTrIke prICe
effeCTIve daTe
expIraTIon daTe
deCember 31, 2012(a)
faIr value aT
$1.27 - 1.30
$1.34 - 1.35
5/2012
3/2013 - 6/2017
12/2012
9/2017 - 3/2018
$(2,051)
(16)
$(2,067)
(a) Amounts are based on the applicable exchange rate of the euro at December 31, 2012.
Stock Warrants
In connection with the Merger, we acquired warrants from CPA®:15, which were granted by Hellweg to CPA®:15 in connection
with structuring the initial lease transaction, for a total cost of $1.6 million, which was the fair value of the warrants on the date
of acquisition. These warrants give us participation rights to any distributions made by Hellweg 2. In addition, we are entitled
to a cash distribution that equals a certain percentage of the liquidity event price of Hellweg 2, should a liquidity event occur.
Because these warrants are readily convertible to cash and provide for net cash settlement upon conversion, we account for
them as derivative instruments. At December 31, 2012, these warrants had a fair value of $1.7 million.
Other
Amounts reported in Other comprehensive income related to interest rate swaps will be reclassified to interest expense as
interest payments are made on our variable-rate debt. Amounts reported in Other comprehensive income related to foreign
currency contracts will be reclassified to Other income and (expenses) when the hedged foreign currency proceeds from
foreign operations are repatriated to the U.S. At December 31, 2012, we estimate that an additional $1.9 million will be
reclassified as interest expense during the next 12 months related to our interest rate swaps.
We measure our credit exposure on a counterparty basis as the net positive aggregate estimated fair value of our derivatives, net
of collateral received, if any. No collateral was received as of December 31, 2012. At December 31, 2012, our total credit exposure
and the maximum exposure to any single counterparty was less than $0.1 million, inclusive of noncontrolling interest.
Some of the agreements we have with our derivative counterparties contain certain credit contingent provisions that could
result in a declaration of default against us regarding our derivative obligations if we either default or are capable of being
declared in default on certain of our indebtedness. At December 31, 2012, we had not been declared in default on any of our
derivative obligations. The estimated fair value of our derivatives that were in a net liability position was $25.7 million, which
included accrued interest but excluded any adjustment for nonperformance risk. If we had breached any of these provisions
at December 31, 2012, we could have been required to settle our obligations under these agreements at their aggregate
termination value of $27.3 million.
portfolio Concentration risk
Concentrations of credit risk arise when a group of tenants is engaged in similar business activities or is subject to similar
economic risks or conditions that could cause them to default on their lease obligations to us. We regularly monitor our
portfolio to assess potential concentrations of credit risk. While we believe our portfolio is reasonably well diversified, it does
2 0 1 2 A n n u a l R e p o r t • 89
contain concentrations in excess of 10%, based on the percentage of our annualized contractual minimum base rent for the
fourth quarter of 2012, in certain areas, as shown in the table below. The percentages in the table below represent our directly-
owned real estate properties and do not include our pro rata share of equity investments.
deCember 31, 2012
region
California
Other U.S.
Total U.S
Total Europe
Total
asset Type
Office
Industrial
Warehouse/Distribution
Retail
Self storage
All others
Total
Tenant Industry
Retail
All other
10%
62%
72%
28%
100%
29%
19%
15%
14%
10%
13%
100%
20%
80%
100%
Except for our investment in CPA®:16 – Global, there were no significant concentrations, individually or in the aggregate, related
to our unconsolidated jointly-owned investments. At December 31, 2012, we owned approximately 18.3% of CPA®:16 – Global,
which had total assets at that date of approximately $3.4 billion consisting of a portfolio comprised of two hotel properties and
full or partial ownership interests in 498 properties substantially all of which were triple-net leased to 144 tenants, and has certain
concentrations within its portfolio, which are outlined in its periodic filings.
11 | ImpaIrmenT CHarges
The following table summarizes impairment charges recognized on our consolidated and unconsolidated real estate
investments for all periods presented (in thousands):
Years ended deCember 31,
2012
2011
2010
Real estate
Operating real estate
Net investments in direct financing leases
Total impairment charges included in expenses
Equity investments in real estate(a)
Total impairment charges included in continuing operations
Impairment charges included in discontinued operations
$ —
10,467
—
10,467
9,910
20,377
12,495
$ 243
$ —
—
(1,608)
(1,365)
206
(1,159)
11,838
—
1,140
1,140
1,394
2,534
14,241
$16,775
Total impairment charges
$ 32,872
$10,679
(a) Impairment charges on our equity investments in real estate are included in Income from equity investments in real estate and the Managed REITs within the consolidated financial statements.
real estate
During the year ended December 31, 2011, we recognized an impairment charge of $0.2 million on a domestic property. This
impairment was the result of writing down the property’s carrying value to its estimated fair value in connection with the tenant
vacating the property.
90 •
W. P. C a r e y I n c .
operating real estate
During the year ended December 31, 2012, we recognized an impairment charge of $10.5 million on our Livho hotel property
to write down the property’s carrying value to its estimated fair value as a result of a decrease in fair value and the estimated
holding period of the hotel.
direct financing leases
In connection with our annual review of the estimated residual values on our properties classified as net investments in direct
financing leases, we determined that an other-than-temporary decline in estimated residual value had occurred at various
properties due to market conditions. The changes in estimates resulted in the recognition of impairment charges totaling
$1.1 million in 2010. In the fourth quarter of 2011, we recorded an out-of-period adjustment of $1.6 million (Note 2).
equity Investments in real estate
During the year ended December 31, 2012, we recognized an other-than-temporary impairment charge of $9.9 million
on our Special Member Interest in CPA®:16 – Global’s operating partnership to reduce the carrying value of our interest in
the operating partnership to its estimated fair value (Note 9). During the year ended December 31, 2011, we recognized an
other-than-temporary impairment charge of $0.2 million on a jointly-held real estate investment as a result of the sale of the
property. In connection with our annual review of the fair value of our equity investments, we recognized an other-than-
temporary impairment charge of $1.4 million during the year ended December 31, 2010 to reflect the decline in the estimated
fair value of the investment’s underlying net assets in comparison with the carrying value of our interest in the investment.
properties sold
During the years ended December 31, 2012, 2011 and 2010, we recognized impairment charges on properties sold totaling
$12.5 million, $11.8 million, and $14.2 million, respectively. These impairment charges, which are included in discontinued
operations, were the result of reducing these properties’ carrying values to their estimated fair values (Note 17) in connection
with and prior to anticipated sales.
12 | debT
senior Credit facility
In February 2012, we amended and restated our existing credit agreement (the “Amended and Restated Credit Agreement”)
to increase the maximum aggregate principal amount from $450.0 million to $625.0 million, which is comprised of a
$450.0 million unsecured revolving credit facility (the “Revolver”) and a $175.0 million term loan facility (the “Term Loan
Facility” and, together with the Revolver, the “Senior Credit Facility.”) The Term Loan Facility was available in a single draw
for use solely to finance the cash portion of the Merger Consideration and transaction costs and expenses. We drew down the
full amount of the Term Loan Facility on September 28, 2012 in connection with the closing of the Merger. The Senior Credit
Facility matures in December 2014, but may be extended by one year at our option, subject to the conditions provided in the
Amended and Restated Credit Agreement. At our election, the principal amount available under the Senior Credit Facility may
be increased by up to an additional $125.0 million, subject to the conditions provided in the Amended and Restated Credit
Agreement. The Senior Credit Facility also permits (i) up to $150.0 million to be borrowed in certain currencies other than the
U.S. dollar, (ii) swing line loans of up to $35.0 million, and (iii) the issuance of letters of credit in an aggregate amount not to
exceed $50.0 million.
The Senior Credit Facility provides for an annual interest rate, at our election, of either (i) the Eurocurrency Rate or (ii) the
Base Rate, in each case plus the Applicable Rate (each as defined in the Amended and Restated Credit Agreement). Prior to
us obtaining an Investment Grade Debt Rating (as defined in the Amended and Restated Credit Agreement), the Applicable
Rate on Eurocurrency Rate loans and letters of credit ranges from 1.75% to 2.50% (based on LIBOR) and the Applicable
Rate on Base Rate loans ranges from 0.75% to 1.50% (based on the “prime rate”, defined in the Amended and Restated Credit
Agreement as a rate of interest set by the Bank of America based upon various factors including Bank of America’s costs and
desired returns). After an Investment Grade Debt Rating has been obtained, the Applicable Rate on Eurocurrency Rate loans
and letters of credit ranges from 1.10% to 2.00% (based on LIBOR) and the Applicable Rate on Base Rate loans ranges from
0.10% to 1.00% (based on the “prime rate”). Swing line loans will bear interest at the Base Rate plus the Applicable Rate then
in effect. In addition, prior to obtaining an Investment Grade Debt Rating, we pay a quarterly fee ranging from 0.3% to 0.4%
of the unused portion of the line of credit, depending on our leverage ratio. After an Investment Grade Debt Rating has been
obtained, we will pay a facility fee ranging from 0.2% to 0.4% of the total commitment. In connection with the amendments of
the credit agreement, we incurred costs of $7.0 million, which are being amortized over the remaining term of the facility.
Availability under the Senior Credit Facility is dependent upon a number of factors, including the Unencumbered Property NOI,
the Unencumbered Management EBITDA and the Total Unsecured Outstanding Indebtedness (each as defined in the Amended
and Restated Credit Agreement). At December 31, 2012, availability under the Senior Credit Facility was $625.0 million, of
2 0 1 2 A n n u a l R e p o r t • 91
which we had drawn $253.0 million, including $175.0 million under the Term Loan which we used to pay for the cash portion
of the Merger Consideration (Note 3). At December 31, 2012, we paid interest on the Senior Credit Facility at an annual interest
rate consisting of LIBOR plus 2.00%. In addition, as of December 31, 2012, our lenders had issued letters of credit totaling $5.4
million on our behalf in connection with certain contractual obligations, which reduce amounts that may be drawn under the
Revolver. The Revolver is currently expected to be utilized primarily for potential new investments; repayment of existing debt
and general corporate purposes as well as for repurchases of our common stock from the Estate Shareholders (Note 4).
We are required to ensure that the total Restricted Payments (as defined in the Amended and Restated Credit Agreement)
made in the current quarter, when added to the total for the three preceding fiscal quarters, does not exceed the greater of
(i) 95% of Adjusted Funds from Operations (as defined in the Amended and Restated Credit Agreement) and (ii) the amount
of Restricted Payments required in order for us to maintain our REIT status. Restricted Payments include quarterly dividends
and the total amount of shares repurchased by us, if any, in excess of $50.0 million per year. In addition to placing limitations
on dividend distributions and share repurchases, the Amended and Restated Credit Agreement stipulates certain financial
covenants. We were in compliance with all of these covenants at December 31, 2012.
non-recourse debt
Non-recourse debt consists of mortgage notes payable, which are collateralized by the assignment of real property, and direct
financing leases, with an aggregate carrying value of approximately $2.0 billion at December 31, 2012. Our mortgage notes
payable had fixed annual interest rates ranging from 2.7% to 10.0% and variable effective annual interest rates ranging from
1.2% to 7.6% with maturity dates ranging from 2013 to 2026 at December 31, 2012.
2012 — In connection with the Merger (Note 3), we assumed property level debt comprised of 9 variable-rate and 58 fixed-
rate non-recourse mortgage loans with fair values totaling $295.2 million and $1.1 billion, respectively, on the acquisition date
and recorded an aggregate net fair market value adjustment of $14.8 million at that date. The fair market value adjustment
will be amortized to interest expense over the remaining lives of the related loans using the effective interest rate method.
These fixed-rate and variable-rate mortgages had weighted-average annual interest rates of 5.08% and 5.03%, respectively. The
weighted-average annual interest rate for the variable-rate mortgages was calculated using the applicable interest rates on the
date of the Merger.
During the year ended December 31, 2012, we refinanced four maturing non-recourse mortgages totaling $21.2 million with
new financing totaling $23.8 million. These mortgage loans have a weighted-average annual interest rate and term of 4.2% and
11.5 years, respectively.
2011 — In connection with our acquisition of three properties from CPA®:14 in May 2011 as part of the CPA®:14 Asset Sales
(Note 4), we assumed two non-recourse mortgage loans with an aggregate fair value of $87.6 million (and a carrying value of
$88.7 million) on the date of acquisition and recorded a net fair market value adjustment of $1.1 million. The fair market value
adjustment will be amortized to interest expense over the remaining lives of the loans. These mortgage loans have a weighted-
average annual fixed interest rate and remaining term of 5.8% and 8.3 years, respectively.
During the year ended December 31, 2011, we refinanced two maturing non-recourse mortgage loans totaling $10.5 million with
new financing totaling $11.9 million and obtained new financing on two unencumbered properties totalling $29.0 million. These
mortgage loans have a weighted-average annual interest rate and term of 5.1% and 10.4 years, respectively. Additionally, during
the year ended December 31, 2011, the Carey Storage borrowed a total of $4.6 million, inclusive of amounts attributable to the
third-party’s interest of $2.8 million, with a weighted-average annual interest rate and term of 6.7% and 8.2 years, respectively.
2010 — In connection with an acquisition in February 2010, we obtained non-recourse mortgage financing of $35.0 million at
an annual interest rate of LIBOR plus 2.5% that has been fixed at 5.5% through the use of an interest rate swap. This financing
has a term of 10 years.
In connection with their acquisitions in 2010, the Carey Storage and an entity 100% owned by Carey Storage obtained new
non-recourse mortgage financing and assumed existing mortgage loans from the sellers totaling $17.1 million, inclusive of
amounts attributable to the Investor’s interest of $8.2 million. The mortgage loans have a weighted-average annual fixed interest
rate and term of 6.3% and 8.5 years, respectively.
92 •
W. P. C a r e y I n c .
scheduled debt principal payments
Scheduled debt principal payments for each of the next five calendar years following December 31, 2012, and thereafter are as
follows (in thousands):
Years endIng deCember 31,
2013
2014(b)
2015
2016
2017
Thereafter through 2037
Unamortized discount
Total
ToTal(a)
$ 174,648
631,345
240,681
87,223
125,999
725,257
1,985,153
(16,756)
$ 1,968,397
(a) Certain amounts are based on the applicable foreign currency exchange rate at December 31, 2012.
(b) Includes $78.0 million outstanding under our Revolver and $175.0 million outstanding under our Term Loan Facility at December 31, 2012, each of which is scheduled to mature in 2014 unless extended
pursuant to its terms.
13 | CommITmenTs and ConTIngenCIes
At December 31, 2012, we were not involved in any material litigation.
For a description of an agreement that we entered into regarding repurchases of our common stock from the Estate
Shareholders, see Note 4.
Various claims and lawsuits arising in the normal course of business are pending against us. The results of these proceedings
are not expected to have a material adverse effect on our consolidated financial position or results of operations.
14 | equITY
distributions
Distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for
income tax purposes. The following table presents distributions per share, declared and paid in October 2012, reported for
federal tax purposes and serves as a designation of capital gain distributions, if applicable, pursuant to Internal Revenue Code
Section 857(b)(3)(C) and Treasury Regulation § 1.857-6(e):
Ordinary income
Return of capital
Total distributions
dIsTrIbuTIons paId
on oCTober 16, 2012
$0.6228
0.0272
$0.6500
We declared a quarterly distribution of $0.6600 per share in December 2012, which was paid in January 2013 to stockholders
of record at December 31, 2012; and a quarterly distribution of $0.5630 per share in December 2011, which was paid in
January 2012 to stockholders of record at December 31, 2011.
redeemable noncontrolling Interest
On June 30, 2003, WPCI granted an incentive award to two officers of WPCI consisting of 1,500,000 restricted units,
representing an approximate 13% interest in WPCI, and 1,500,000 options for WPCI units with a combined fair value of
$2.5 million at that date. Both the options and restricted units vested ratably over five years, with full vesting occurring
December 31, 2007. During 2008, the officers exercised all of their 1,500,000 options to purchase 1,500,000 units of WPCI at
$1.00 per unit. Upon the exercise of the WPCI options, the officers had a total interest of approximately 23% in WPCI. The
terms of the vested restricted units and units received in connection with the exercise of options of WPCI by noncontrolling
interest holders provided that the units could be redeemed, commencing December 31, 2012 and thereafter, solely in exchange
for our shares and that any redemption would be subject to a third-party valuation of WPCI.
2 0 1 2 A n n u a l R e p o r t • 93
In December 2009, one of those officers resigned from W. P. Carey, WPCI and all affiliated entities pursuant to a mutually
agreed separation. In October 2012, the remaining officer’s employment with W. P. Carey, WPCI and all affiliated entities
was terminated. At December 31, 2012, this former employee has a total interest of approximately 7.7% in each of WPCI
and the related entities. We account for the noncontrolling interest in WPCI held by this former employee as a redeemable
noncontrolling interest, as we have an obligation to repurchase the interest from that individual, at his election and subject to
certain conditions. The individual’s interest is reflected at estimated redemption value for all periods presented.
The following table presents a reconciliation of redeemable noncontrolling interest (in thousands):
Beginning balance
Redemption value adjustment
Net income
Distributions
Change in other comprehensive (loss) income
Ending balance
Years ended deCember 31,
2012
2011
2010
$ 7,700
$ 7,546
$ 7,692
840
40
(1,055)
6
(455)
1,923
(1,309)
(5)
(471)
1,293
(956)
(12)
$ 7,531
$ 7,700
$ 7,546
Transfers to noncontrolling Interest
The following table presents a reconciliation of the effect of transfers in noncontrolling interest (in thousands):
Net income attributable to W. P. Carey
Transfers to noncontrolling interest
Decrease in W. P. Carey’s additional paid-in capital for
purchase of 50 Rock
Decrease in W. P. Carey’s additional paid-in capital for
purchase of CheckFree Holdings, Inc.
Net transfers to noncontrolling interest
Change from net income attributable to W. P. Carey and
transfers to noncontrolling interest
Years ended deCember 31,
2012
2011
2010
$ 62,132
$ 139,079
$73,972
(154)
—
(154)
—
(5,879)
(5,879)
—
—
—
$ 61,978
$ 133,200
$73,972
accumulated other Comprehensive loss
The following table presents the components of accumulated other comprehensive loss reflected in equity, net of tax. Amounts
include our proportionate share of other comprehensive income or loss from our unconsolidated investments (in thousands):
Unrealized gain on marketable securities
Unrealized loss on derivative instruments
Foreign currency translation adjustment
Accumulated other comprehensive loss
deCember 31,
2012
31
$
(6,029)
1,349
2011
$ 37
(5,246)
(3,298)
$ (4,649)
$(8,507)
earnings per share
To determine earnings per share, all unvested share-based payment awards that contain non-forfeitable rights to distributions
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. Our unvested RSUs contain rights to receive non-forfeitable distribution equivalents, and therefore we
94 •
W. P. C a r e y I n c .
apply the two-class method of computing earnings per share. The calculation of earnings per share below excludes the income
attributable to the unvested RSUs from the numerator. The following table summarizes basic and diluted earnings per share for
the periods indicated (in thousands, except share amounts):
Net income attributable to W. P. Carey
Allocation of earnings to participating unvested RSUs
Net income – basic
Income effect of dilutive securities, net of taxes
Net income – diluted
Years ended deCember 31,
2012
2011
2010
$62,132
(535)
61,597
23
$139,079
$73,972
(2,130)
136,949
1,076
(440)
73,532
724
$61,620
$138,025
$74,256
Weighted average shares outstanding – basic
Effect of dilutive securities
Weighted average shares outstanding – diluted
47,389,460
39,819,475
39,514,746
689,014
278,620
493,148
48,078,474
40,098,095
40,007,894
Securities included in our diluted earnings per share determination consist of stock options and restricted stock awards.
Securities totaling 207,258 shares and 247,750 shares for the years ended December 31, 2011 and 2010, respectively, were
excluded from the earnings per share computations above as their effect would have been anti-dilutive. For information on
long-term incentive plan awards issued to key employees subsequent to December 31, 2012 that could have a dilutive impact
on our earnings per share calculation, please see Note 20.
sale of Common shares
On October 19, 2012, we entered into an agreement to sell 937,500 shares of our common stock to an institutional investor,
which were issued pursuant to our existing shelf registration statement. The shares were issued in a privately negotiated
transaction at a purchase price of $48.00 per share. The proceeds to us from the sale of these shares were $45.0 million. We
delivered the shares to the institutional investor on October 19, 2012.
15 | sToCk-based and oTHer CompensaTIon
stock-based Compensation
At December 31, 2012, we maintained several stock-based compensation plans as described below. The total compensation
expense (net of forfeitures) for awards issued under these plans was $26.2 million, $17.8 million and $7.4 million for the years
ended December 31, 2012, 2011 and 2010, respectively, all of which are included in General and administrative expenses
in the consolidated financial instruments. As compared to the prior year, stock-based compensation expense for the year
ended December 31, 2012 increased by $8.1 million due to awards issued during 2012 with higher fair values as a result of
the increase in our stock price between the two years. In addition, 2012 included an additional $2.8 million of compensation
expense as a result of our revision of the expected vesting of PSUs granted during 2009 and 2010 and a reduction related to
our revision in our expected forfeitures of $2.5 million. The tax benefit recognized by us related to these awards totaled
$16.2 million, $7.8 million and $3.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.
In connection with the Merger in September 2012, we adopted and assumed all of the stock-based compensation plans of our
predecessor and all of its obligations thereunder. There has been no significant activity or changes to the terms and conditions
of any of our stock-based compensation plans or arrangements during 2012, other than as described below.
2009 Incentive Plan and 1997 Incentive Plans
We maintain the 1997 Share Incentive Plan (as amended, the “1997 Incentive Plan”), which authorized the issuance of up to
6,200,000 shares of our common stock. In June 2009, our shareholders approved the 2009 Share Incentive Plan (the “2009
Incentive Plan”) to replace the 1997 Incentive Plan, except with respect to outstanding contractual obligations under the 1997
Incentive Plan, so that no further awards can be made under that plan. The 2009 Incentive Plan authorizes the issuance of up to
3,600,000 shares of our common stock, of which 1,959,996 remain available for issuance of RSUs and PSUs at December 31, 2012.
The 1997 Incentive Plan provided for the grant of (i) share options, which may or may not qualify as incentive stock options under
the Code, (ii) performance shares or PSUs, (iii) dividend equivalent rights and (iv) restricted shares or RSUs. The 2009 Incentive
Plan provides for the grant of (i) share options, (ii) restricted shares or RSUs, (iii) performance shares or PSUs, and (iv) dividend
equivalent rights. The vesting of grants under both plans is accelerated upon a change in our control and under certain
other conditions.
2 0 1 2 A n n u a l R e p o r t • 95
In December 2007, the Compensation Committee approved the long-term incentive plan (“LTIP”) and terminated further
contributions to the Partnership Equity Unit Plan described below. The following table presents LTIP awards granted in the
past three years:
fIsCal Year
2010
2011(a)
2012(b)
2009 InCenTIve plan
rsus awarded
psus awarded
140,050
524,550
259,400
159,250
291,600
314,400
(a) Includes 340,000 RSUs and 100,000 PSUs issued in connection with entering into employment agreements with certain employees, and excludes 20,000 PSUs for which the terms and conditions were not
determined at the time of grant.
(b) Includes 78,000 RSUs and 142,000 PSUs issued in connection with entering into employment agreements with certain employees, and excludes 20,000 PSUs for which the terms and conditions were not
determined at the time of grant. Also includes 10,000 PSUs awarded related to 2011 awards for which the previously undetermined terms and conditions of the grant were finalized in 2012.
As a result of issuing the LTIP awards, we currently expect to recognize compensation expense totaling approximately $33.6
million over the vesting period. We have previously recognized compensation expense of $24.8 million, $15.7 million and $5.7
million during 2012, 2011 and 2010, respectively, related to these awards.
2009 Non-Employee Directors’ Incentive Plan and 1997 Non-Employee Directors’ Plan
We maintain the 1997 Non-Employee Directors’ Plan (the “1997 Directors’ Plan”), which authorized the issuance of up to
300,000 shares of our Common Stock. In June 2007, the 1997 Directors’ Plan, which had been due to expire in October 2007,
was extended through October 2017. In June 2009, our shareholders approved the 2009 Non-Employee Directors’ Incentive
Plan (the “2009 Directors’ Plan”) to replace the 1997 Directors’ Plan, except with respect to outstanding contractual obligations
under the predecessor plan, so that no further awards can be made under that plan. The 1997 Directors’ Plan provided for
the grant of (i) share options, which may or may not qualify as incentive stock options, (ii) performance shares, (iii) dividend
equivalent rights and (iv) restricted shares. The 2009 Directors’ Plan authorizes the issuance of 325,000 shares of our common
stock in the aggregate and initially provided for the automatic annual grant of RSUs with a total value of $50,000 to each
director. In January 2011, the Compensation Committee approved an increase in the value of the annual grant to $70,000 per
director, effective as of July 1, 2011. In the discretion of our board of directors, the awards may also be in the form of share
options or restricted shares, or any combination of the permitted awards. At December 31, 2012, there were 245,075 shares
which remained available for issuance of RSUs under this plan.
Employee Share Purchase Plan
We sponsor an ESPP pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain
limits, to purchase our common stock. Employees can purchase stock semi-annually at a price equal to 85% of the fair market
value at certain plan defined dates. Compensation expense under this plan for the years ended December 31, 2012, 2011 and
2010 was $0.6 million, $0.6 million and $0.2 million, respectively.
Partnership Equity Unit Plan
During 2003, we adopted a non-qualified deferred compensation plan (the “Partnership Equity Plan”, or “PEP”) under which
a portion of any participating officer’s cash compensation in excess of designated amounts was deferred and the officer was
awarded Partnership Equity Plan Units (“PEP Units”). The value of each PEP Unit was intended to correspond to the value
of a share of the CPA® REIT designated at the time of such award. During 2005, further contributions to the initial PEP
were terminated and it was succeeded by a second PEP. As amended, payment under these plans will occur at the earlier of
December 16, 2013 (in the case of the initial PEP) or twelve years from the date of award. The award is fully vested upon
grant. Each of the PEPs is a deferred compensation plan and is therefore considered to be outside the scope of current
accounting guidance for stock-based compensation and subject to liability award accounting. The value of each PEP Unit will
be adjusted to reflect the underlying appraised value of the designated CPA® REIT. Additionally, each PEP Unit will be entitled
to distributions equal to the distribution rate of the CPA® REIT. All issuances of PEP Units, changes in the fair value of PEP
Units and distributions paid are included in our compensation expense. As a result of the Merger, the remaining holders of the
PEP Units issued under the initial PEP will be paid, in cash, on December 16, 2013 in amounts equal to the per share Merger
consideration received by CPA®:15 stockholders.
The plans are carried at fair value each quarter and are subject to changes in the fair value of the PEP units. Further contributions
to the second PEP were terminated at December 31, 2007; however, this termination did not affect any awardees’ rights pursuant
to awards granted under this plan. In December 2008, participants in the PEPs were required to make an election to either
(i) remain in the PEPs, (ii) receive cash for their PEP Units (available to former employees only) or (iii) convert their PEP
Units to fully vested RSUs (available to current employees only) to be issued under the 1997 Incentive Plan on June 15, 2009.
96 •
W. P. C a r e y I n c .
Substantially all of the PEP participants elected to receive cash or convert their existing PEP Units to RSUs. In January 2009,
we paid $2.0 million in cash to former employee participants who elected to receive cash for their PEP Units. As a result of
the election to convert PEP Units to RSUs, we derecognized $9.3 million of our existing PEP liability and recorded a deferred
compensation obligation within W. P. Carey members’ equity in the same amount during the second quarter of 2009. The PEP
participants that elected RSUs received a total of 356,416 RSUs, which was equal to the total value of their PEP Units divided by
the closing price of our common stock on June 15, 2009. The PEP participants electing to receive RSUs were required to defer
receipt of the underlying shares of our common stock for a minimum of two years. While employed by us, these participants
are entitled to receive dividend equivalents equal to the amount of dividends paid on the underlying common stock during the
deferral period. At December 31, 2012, we are obligated to issue 53,743 shares of our common stock underlying these RSUs,
which is recorded within W. P. Carey members’ equity as a Deferred compensation obligation of $1.4 million. The remaining
PEP liability pertaining to participants who elected to remain in the plans was $0.7 million at December 31, 2012.
Stock Options
Option activity and changes for all periods presented were as follows:
Outstanding at beginning of year
Exercised
Forfeited / Expired
Outstanding at end of year
Vested and expected to vest at end of year
Exercisable at end of year
Year ended deCember 31, 2012
weIgHTed
average
exerCIse prICe
weIgHTed
average
remaInIng
ConTraCTual
Term (In Years)
aggregaTe
InTrInsIC value
$28.73
25.94
24.93
$30.32
$30.26
$30.22
—
—
—
—
—
—
3.19 $17,335,637
3.18 $16,346,539
2.99 $13,669,784
sHares
1,208,041
(410,331)
(3,500)
794,210
746,689
623,218
Years ended deCember 31,
2011
weIgHTed
average
exerCIse prICe
sHares
weIgHTed
average
remaInIng
ConTraCTual
Term (In Years)
Outstanding at beginning of year
1,699,701
Exercised
Forfeited / Expired
Outstanding at end of year
Exercisable at end of year
(449,660)
(42,000)
1,208,041
959,779
$28.57
27.71
32.85
$28.73
$28.36
3.29
2010
weIgHTed
average
exerCIse prICe
weIgHTed
average
remaInIng
ConTraCTual
Term (In Years)
$27.55
22.26
30.24
$28.57
$27.86
4.26
sHares
2,255,604
(399,507)
(156,396)
1,699,701
1,231,683
Options granted under the 1997 Incentive Plan generally have a 10-year term and generally vest in four equal annual
installments. Options granted under the 1997 Directors’ Plan have a 10-year term and vest generally over three years from
the date of grant. We have not issued option awards since 2008. The total intrinsic value of options exercised during the years
ended December 31, 2012, 2011 and 2010 was $9.3 million, $4.6 million and $2.8 million, respectively.
At December 31, 2012, all of our options were fully vested; however certain options had exercise limitations.
We have the ability and intent to issue shares upon stock option exercises. Historically, we have issued authorized but unissued
common stock to satisfy such exercises. Cash received from stock option exercises and purchases under the ESPP during the
years ended December 31, 2012, 2011 and 2010 was $6.8 million, $1.2 million and $3.7 million, respectively.
2 0 1 2 A n n u a l R e p o r t • 97
restricted and Conditional awards
Nonvested restricted stock, RSUs and PSUs at December 31, 2012 and changes during the years ended December 31, 2012 and
2011 were as follows:
resTrICTed sToCk and rsu awards
psu awards
Nonvested at January 1, 2010
Granted
Vested(a)
Forfeited
Adjustment(b)
Nonvested at December 31, 2010
Granted
Vested(a)
Forfeited
Adjustment(b)
Nonvested at December 31, 2011
Granted
Vested(a)
Forfeited
Adjustment(b)
Nonvested at December 31, 2012
sHares
381,878
156,682
(175,225)
(99,515)
—
263,820
541,890
(162,437)
(18,480)
—
624,793
274,420
(268,683)
(36,336)
—
594,194
weIgHTed average
granT daTe
faIr value
$28.87
28.34
28.58
29.75
—
28.42
34.65
30.48
29.32
—
33.26
41.41
32.56
36.33
—
$37.15
weIgHTed average
granT daTe
faIr value
$32.33
36.16
—
36.26
28.49
36.18
46.66
39.78
42.14
22.65
36.30
42.28
23.66
33.96
26.01
$34.55
sHares
170,375
159,250
—
(65,725)
(19,906)
243,994
291,600
(48,925)
(14,055)
200,814
673,428
314,400
(235,189)
(49,494)
296,368
999,513
(a) The total fair value of shares vested during the years ended December 31, 2012, 2011 and 2010 was $14.3 million, $6.9 million and $5.0 million, respectively.
(b) Vesting and payment of the PSUs is conditional on certain company and 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. Pursuant to a review of our current and expected performance versus the
performance goals, we revised our estimate of the ultimate number of certain of the PSUs to be vested. As a result, we recorded adjustments in 2012, 2011 and 2010 to reflect the number of shares expected
to be issued when the PSUs vest.
At the end of each reporting period, we evaluate the ultimate number of PSUs we expect to vest based upon the extent to which
we have met and expect to meet the performance goals and where appropriate revise our estimate and associated expense.
We do not adjust the associated expense for revision on PSUs expected to vest based on market performance. Upon vesting,
the RSUs and PSUs may be converted into shares of our common stock. Both the RSUs and PSUs carry dividend equivalent
rights. Dividend equivalent rights on RSUs are paid in cash on a quarterly basis whereas dividend equivalent rights on PSUs
accrue during the performance period and may be converted into additional shares of common stock at the conclusion of
the performance period to the extent the PSUs vest. Dividend equivalent rights are accounted for as a reduction to retained
earnings to the extent that the awards are expected to vest. For awards that are not expected to vest or do not ultimately vest,
dividend equivalent rights are accounted for as additional compensation expense.
other Compensation
Profit-Sharing Plan
We sponsor a qualified profit-sharing plan and trust that generally permits all employees, as defined by the plan, to make
pre-tax contributions into the plan. We are under no obligation to contribute to the plan and the amount of any contribution
is determined by and at the discretion of our board of directors. Our board of directors can authorize contributions to a
maximum of 15% of an eligible participant’s compensation, limited to less than $0.1 million annually per participant. For
the years ended December 31, 2012, 2011 and 2010, amounts expensed for contributions to the trust were $4.4 million,
$3.8 million and $3.3 million, respectively, which were included in General and administrative expenses in the accompanying
consolidated financial statements. The profit-sharing plan is a deferred compensation plan and is therefore considered to be
outside the scope of current accounting guidance for stock-based compensation.
98 •
W. P. C a r e y I n c .
Other
We have employment contracts with certain senior executives. These contracts provide for severance payments in the event
of termination under certain conditions including a change of control. During 2012, 2011 and 2010, we recognized severance
costs totaling approximately $1.1 million, $0.4 million and $1.1 million, respectively, related to several former employees who
did not have employment contracts. Such costs are included in General and administrative expenses in the accompanying
consolidated financial statements.
16 | InCome Taxes
The components of our provision for income taxes for the periods presented are as follows (in thousands):
federal
Current
Deferred
state, local and foreign
Current
Deferred
Total provision
Years ended deCember 31,
2012
2011
2010
$ 18,142
(21,167)
(3,025)
15,441
(5,633)
9,808
$ 17,820
6,867
24,687
10,559
1,968
12,527
$17,729
(2,409)
15,320
12,250
(1,756)
10,494
$ 6,783
$37,214
$25,814
Deferred income taxes at December 31, 2012 and 2011 consist of the following (in thousands):
deferred Tax assets
Unearned and deferred compensation
Other
deferred Tax liabilities
Receivables from affiliates
Investments
Other
Net deferred tax liability
aT deCember 31,
2012
2011
$ 17,272
$ 12,598
10,832
28,104
(13,251)
(31,598)
(583)
(45,432)
3,465
16,063
(14,378)
(45,812)
—
(60,190)
$ (17,328)
$(44,127)
A reconciliation of the provision for income taxes with the amount computed by applying the statutory federal income tax rate
to income before provision for income taxes for the periods presented is as follows (in thousands):
2012
2011
2010
Years ended deCember 31,
Pre-tax (loss) income from taxable subsidiaries
$ (412)
Federal provision at statutory tax rate (35%)
(144)
35.0%
State and local taxes, net of federal benefit
Amortization of intangible assets
Other
Tax provision — taxable subsidiaries
Other state, local and foreign taxes
Total provision
(149.5%)
(112.9%)
(261.2%)
(488.6%)
616
465
1,069
2,006
4,777
$ 6,783
$78,561
27,496
7,409
486
272
35,663
1,551
$37,214
35.0%
9.4%
0.6%
0.4%
45.4%
$49,253
17,238
4,303
854
264
22,659
3,155
$25,814
35.0%
8.7%
1.7%
0.6%
46.0%
2 0 1 2 A n n u a l R e p o r t • 99
Included in Income taxes, net in the consolidated balance sheets at December 31, 2012 and 2011 are accrued income taxes
totaling $4.0 million and prepaid income taxes totaling $4.6 million, respectively, deferred income taxes totaling $17.3 million
and $44.1 million, respectively, and uncertain tax positions totaling $0.3 million and $0, respectively. The uncertain tax
positions, which we account for in accordance with ASC 740, Income Taxes, were acquired in the Merger.
At January 1, 2010, we had unrecognized tax benefits of $0.6 million (net of federal benefits), which if recognized, would have
affected our effective tax rate. During 2010, we reversed the unrecognized tax benefits, including all related interest totaling
$0.1 million, as they were no longer required.
real estate ownership operations
As discussed in Note 3, W. P. Carey & Co. LLC, our predecessor, converted to a REIT through the REIT Reorganization.
Effective February 15, 2012, W. P. Carey Inc. elected to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code for the year ended December 31, 2012. As a REIT, we are not subject to federal income taxes on our income and
gains that we distribute to our stockholders as long as we satisfy certain requirements, principally relating to the nature of our
income and the level of our distributions, as well as other factors. We believe that we have operated, and we intend to continue
to operate, in a manner that allows us to continue to qualify as a REIT. As a REIT, we expect to derive most of our REIT
income from our real estate operations under our Real Estate Ownership segment.
Investment management operations
We conduct our investment management services in our Investment Management segment through TRSs. A TRS is a
subsidiary of a REIT that is subject to corporate federal, state, local and foreign taxes, as applicable. Our use of TRSs enables us
to engage in certain businesses while complying with the REIT qualification requirements and also allows us to retain income
generated by these businesses for reinvestment without the requirement to distribute those earnings. We conduct business in
the U.S., Asia and the European Union, and as a result, we or one or more of our subsidiaries file income tax returns in the
U.S. federal jurisdiction and various state and certain foreign jurisdictions. Certain of our inter-company transactions that
have been eliminated in consolidation for financial accounting purposes are also subject to taxation. Periodically, shares in the
Managed REITs that are payable to our TRSs in consideration of services rendered are distributed from TRSs to us.
Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years
2009 through 2012 remain open to examination by the major taxing jurisdictions to which we are subject.
Our subsidiary, Carey REIT II, owns our real estate assets and elected to be taxed as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code until September 28, 2012, the date of the Merger, when it became a qualified real
estate investment trust subsidiary (“QRS”). In connection with the CPA®:14/16 Merger in May 2011, we formed Carey REIT III to
hold the Special Member Interest in the newly formed operating partnership of CPA®:16 – Global (Note 4). Carey REIT III also
elected to be taxed as a real estate investment trust under the Internal Revenue Code until September 28, 2012, when it merged
into another of our subsidiaries. Under the REIT operating structure, Carey REIT II and Carey REIT III were permitted to deduct
distributions paid to our shareholders and generally would not be required to pay U.S. federal income taxes. Accordingly, no
provision was made for U.S. federal income taxes in the consolidated financial statements related to either Carey REIT II or Carey
REIT III through September 28, 2012. Carey REIT II became a QRS effective September 28, 2012. QRS’s are disregarded for US
federal tax purposes and therefore not subject to US federal income tax. A QRS is still subject to state, local and foreign taxes
where applicable.
As of December 31, 2012, we had net operating losses (“NOLs”) in foreign jurisdictions of approximately $46.1 million,
translating to a deferred tax asset before valuation allowance of $11.9 million. Our NOLs began expiring in 2011 in certain
foreign jurisdictions. The utilization of NOLs may be subject to certain limitations under the tax laws of the relevant
jurisdiction. Management determined that as of December 31, 2012, $11.9 million of deferred tax assets related to losses in
foreign jurisdictions did not satisfy the recognition criteria set forth in accounting guidance for income taxes and established
valuation allowance for this amount.
100 •
W. P. C a r e y I n c .
17 | dIsConTInued operaTIons
From time to time, we decide to sell a property. We may make a decision to dispose of a property when it is vacant as a result
of tenants vacating space, tenants electing not to renew their leases, tenant insolvency, or lease rejection in the bankruptcy
process. In such cases, we assess whether we can obtain the highest value from the property by selling it, as opposed to
re-leasing it. When it is appropriate to do so, upon the evaluation of the disposition of long-lived assets, we classify the
property as an asset held for sale on our consolidated balance sheet and the current and prior period results of operations of
the property are reclassified as discontinued operations.
The results of operations for properties that are held for sale or have been sold and with which we have no continuing
involvement are reflected in the consolidated financial statements as discontinued operations and are summarized as follows
(in thousands, net of tax):
Years ended deCember 31,
2012
2011
2010
Revenues
Expenses
Gain on deconsolidation of a subsidiary
(Loss) gain on sale of real estate
Impairment charges
Loss from discontinued operations
$ 5,438
$ 10,897
(9,531)
1,008
(3,391)
$ 14,923
(10,026)
—
460
(4,516)
—
(5,019)
(12,495)
(11,838)
(14,241)
$ (16,592)
$(12,855)
$ (8,884)
2012 — During the year ended December 31, 2012, we sold 13 domestic properties for $44.8 million, net of selling costs, and
recognized an aggregate net loss on these sales of $1.4 million, excluding impairment charges of $12.5 million recognized in
the current year and $11.8 million and $0.5 million previously recognized during 2011 and 2010, respectively.
We also sold a property in December 2012 that we acquired in the Merger (Note 3), which was leased to BE Aerospace. We
sold the property for $25.3 million, net of selling costs, and recognized a net loss on this sale of $0.5 million.
In December 2012, we entered into a contract to sell a domestic property that we acquired in the Merger for $1.4 million. We
completed the sale of this property in January 2013. At December 31, 2012, this property was classified within Assets held for
sale in the consolidated balance sheet.
In connection with the sale of the properties we acquired in the Merger, we wrote off goodwill of $3.2 million related to these
properties (Note 8).
2011 — During the year ended December 31, 2011, we sold seven domestic properties for $12.5 million, net of selling costs,
and recognized a net loss on these sales of $3.4 million, excluding previously recognized impairment charges of less than
$0.1 million and $2.7 million during the years ended December 31, 2011 and 2010, respectively.
In September 2011, one of our subsidiaries consented to a court order appointing a receiver when the subsidiary stopped making
payments on the non-recourse debt obligation on a property after the tenant, Career Education Institute, vacated the property.
As we no longer had control over the activities that most significantly impact the economic performance of this subsidiary
following possession of the property by the receiver, we deconsolidated the subsidiary during the third quarter of 2011. As of the
date of deconsolidation, the property had a carrying value of $5.3 million, reflecting the impact of impairment charges totaling
$5.6 million recognized during the fourth quarter of 2010, and the related non-recourse mortgage loan had an outstanding
balance of $6.3 million. In connection with the deconsolidation, we recognized a gain of $1.0 million during the third quarter
of 2011. We believe that our retained interest in this deconsolidated entity had no value at the date of deconsolidation.
2010 — We sold seven properties for a total of $14.6 million, net of selling costs, and recognized a net gain on these sales
totaling $0.5 million, excluding impairment charges totaling $5.9 million that were previously recognized in 2010.
2 0 1 2 A n n u a l R e p o r t • 101
18 | segmenT reporTIng
We evaluate our results from operations by our two major business segments — Real Estate Ownership and Investment
Management (Note 1). Effective April 1, 2012, we include cash distributions and deferred revenue received and earned
from the operating partnerships of CPA®:16 – Global, CPA®:17 – Global and CWI in our Real Estate Ownership segment.
Effective January 1, 2011, we include our equity investments in the Managed REITs in our Real Estate Ownership segment.
The equity income or loss from the Managed REITs that is now included in our Real Estate Ownership segment represents
our proportionate share of the revenue less expenses of the net-leased properties held by the Managed REITS. This treatment
is consistent with that of our directly-owned properties. Results of operations for the prior years have been reclassified to
conform to the current year presentation. The following table presents a summary of comparative results of these business
segments (in thousands):
real estate ownership(a)
Revenues
Operating expenses(b)
Interest expense
Other, net(c)
Provision for income taxes
Income from continuing operations attributable to W. P. Carey
Investment management
Revenues(d)
Operating expenses(d)
Other, net(e)
Provision for income taxes
Income from continuing operations attributable to W. P. Carey
Total Company
Revenues(d)
Operating expenses(d)
Interest expense
Other, net(c) (e)
Provision for income taxes
Years ended deCember 31,
2012
2011
2010
$ 150,815
$ 85,137
$ 68,755
(118,152)
(50,573)
83,409
(4,012)
(44,901)
(21,770)
82,912
(2,243)
(35,346)
(15,636)
30,131
(2,154)
$ 61,487
$ 99,135
$ 45,750
$ 223,180
(207,050)
3,878
(2,771)
$ 17,237
$ 242,647
$ 191,890
(157,572)
(133,683)
2,695
(34,971)
$52,799
2,559
(23,660)
$37,106
$ 373,995
$ 327,784
$ 260,645
(325,202)
(50,573)
87,287
(6,783)
(202,473)
(169,029)
(21,770)
85,607
(37,214)
(15,636)
32,690
(25,814)
Income from continuing operations attributable to W. P. Carey
$ 78,724
$ 151,934
$ 82,856
Real Estate Ownership
Investment Management
Total Company
ToTal long-lIved asseTs aT(f)
ToTal asseTs aT
deCember 31, 2012
deCember 31, 2011
deCember 31, 2012 deCember 31, 2011
$4,236,993
$1,273,521
$4,484,821
$1,334,066
69,258
70,369
124,221
128,557
$4,306,251
$1,343,890
$4,609,042
$1,462,623
(a) Included within the Real Estate Ownership segment is our total investment in shares of CPA®:16 – Global, which represented approximately 6.8% of our total assets at December 31, 2012 (Note 7).
(b) Includes expenses incurred of $31.7 million related to the Merger for the year ended December 31, 2012.
(c) Includes Other interest income, Income from equity investments in real estate and the Managed REITs, Gain on change in control of interests, Other income and (expenses), and Net income attributable to
noncontrolling interests.
(d) Included in revenues and operating expenses are reimbursable costs from affiliates totaling $98.2 million, $64.8 million and $60.0million for the years ended December 31, 2012, 2011 and 2010, respectively.
(e) Includes Other interest income, Other income and (expenses), Net loss attributable to noncontrolling interests and Net loss (income) attributable to redeemable noncontrolling interest.
(f) Long-lived assets include Net investments in real estate, Goodwill and Intangible assets, net.
102 •
W. P. C a r e y I n c .
At December 31, 2012, our international investments within our Real Estate Ownership segment were comprised of investments
in France, Poland, Germany, Spain, Belgium, Finland, Netherlands and the United Kingdom. The following tables present
information about these investments (in thousands):
Year ended deCember 31, 2012
Revenues
Operating expenses
Interest expense
Other, net(b) (c)
Provision for income taxes
Income from continuing operations attributable to W. P. Carey
Total assets
Total long-lived assets(d)
Year ended deCember 31, 2011
Revenues
Operating expenses
Interest expense
Other, net(c)
Provision for income taxes
Income from continuing operations attributable to W. P. Carey
Total assets
Total long-lived assets(d)
Year ended deCember 31, 2010
Revenues
Operating expenses
Interest expense
Other, net(c)
Provision for income taxes
Income from continuing operations attributable to W. P. Carey
Total assets
Total long-lived assets(d)
domesTIC
foreIgn(a)
ToTal
$ 120,702
$ 30,113
$ 150,815
(115,632)
(39,042)
76,803
(2,697)
$
40,134
$ 3,527,918
$ 3,361,197
(2,520)
(11,531)
6,606
(1,315)
$ 21,353
$956,903
$875,796
(118,152)
(50,573)
83,409
(4,012)
$ 61,487
$4,484,821
$4,236,993
domesTIC
foreIgn(a)
ToTal
$
75,408
$ 9,729
$ 85,137
(40,042)
(20,075)
76,736
(2,135)
$
89,892
$ 1,258,544
$ 1,203,474
(4,859)
(1,695)
6,176
(108)
(44,901)
(21,770)
82,912
(2,243)
$ 9,243
$ 75,522
$ 70,047
$ 99,135
$1,334,066
$1,273,521
domesTIC
foreIgn(a)
ToTal
$
61,049
$ 7,706
$ 68,755
(31,604)
(13,894)
26,188
(2,124)
$
39,615
$ 965,418
$ 961,298
(3,742)
(1,742)
3,943
(30)
(35,346)
(15,636)
30,131
(2,154)
$ 6,135
$ 82,987
$ 73,447
$ 45,750
$1,048,405
$1,034,745
(a) All years include operations in France, Germany, Poland and Spain. The year ended December 31, 2012 also includes operations in Belgium, Finland, the Netherlands and the United Kingdom through
properties acquired from CPA®:15 in the Merger.
(b) Amount for the year ended December 31, 2012 includes our $15.1 million share of the net gain recognized by a jointly-owned entity in connection with selling its interests in the Médica investment.
(c) Includes Other interest income, Income from equity investments in real estate and the Managed REITs, Gain on change in control of interests, Other income and (expenses), and Net income attributable to
noncontrolling interests.
(d) Consists of Net investments in real estate, Goodwill and Intangible assets, net, as applicable.
2 0 1 2 A n n u a l R e p o r t • 103
19 | seleCTed quarTerlY fInanCIal daTa (unaudITed)
(dollars In THousands, exCepT per sHare amounTs)
marCH 31, 2012
june 30, 2012
sepTember 30, 2012
deCember 31, 2012
THree monTHs ended
Revenues(a) (b)
Expenses(a)
Net income
Add: Net loss (income) attributable to
noncontrolling interests
Add: Net loss (income) attributable to
redeemable noncontrolling interests
$ 68,378
56,693
11,669
578
43
$67,182
59,005
31,230
480
67
Net income attributable to W. P. Carey
12,290
31,777
Earnings per share attributable to W. P. Carey:
Basic
Diluted
Distributions declared per share
0.30
0.30
0.565
0.78
0.77
0.567
$70,377
85,889
2,226
$168,058
123,615
17,654
325
37
2,588
0.06
0.06
0.650
(1,990)
(187)
15,477
0.22
0.22
0.660
Revenues(a) (c)
Expenses(a)
Net income
Add: Net loss attributable to
noncontrolling interests
Add: Net income attributable to
redeemable noncontrolling interests
Net income attributable to W. P. Carey
Earnings per share attributable to W. P. Carey:
Basic
Diluted
Distributions declared per share
marCH 31, 2011
june 30, 2011
sepTember 30, 2011
deCember 31, 2011
THree monTHs ended
$ 75,165
48,346
23,616
$115,735
52,283
81,060
$75,913
51,626
25,258
$60,971
50,218
9,204
330
384
581
(603)
23,343
0.58
0.58
0.512
(1)
81,443
2.02
1.99
0.550
(637)
25,202
0.62
0.62
0.560
569
(682)
9,091
0.22
0.22
0.563
(a) Certain amounts from previous quarters have been reclassified to discontinued operations (Note 17).
(b) Amount for the three months ended December 31, 2012 includes the impact of the Merger with CPA®:15 (Note 3).
(c) Amount for the three months ended June 30, 2011 includes $52.5 million of incentive, termination and subordinated disposition revenue recognized in connection with the CPA®:14/16 Merger (Note 4).
104 •
W. P. C a r e y I n c .
20 | subsequenT evenTs
In January 2013, our board of directors approved loans to CWI up to $50.0 million to be made at our discretion. We intend to
fund any such loans from our Revolver.
In February 2013, the Compensation Committee approved long-term incentive plan awards to key employees consisting of
166,200 RSUs and 75,900 PSUs that could have a dilutive impact on our earnings per share calculation.
Changes in and disagreements with accountants on accounting and financial disclosure.
None.
market for registrant’s Common equity, related stockholder matters and Issuer purchases of equity securities.
Common Stock and Distributions
Our common stock is listed on the New York Stock Exchange under the ticker symbol “WPC.” At December 31, 2012 there
were approximately 11,246 holders of record of our common stock. The following table shows the high and low prices per share
and quarterly cash distributions declared for the past two fiscal years:
perIod
First quarter
Second quarter
Third quarter
Fourth quarter
2012(a)
low
$41.28
39.66
43.25
45.94
CasH
dIsTrIbuTIons
deClared
$0.565
0.567
0.650
0.660
2011(a)
low
$29.75
34.75
32.76
34.50
CasH
dIsTrIbuTIons
deClared
$0.512
0.550
0.560
0.563
HIgH
$38.00
41.82
42.72
44.71
HIgH
$49.70
48.39
53.85
54.70
As described in Note 12, our Senior Credit Facility contains covenants that restrict the amount of distributions that we can pay.
2 0 1 2 A n n u a l R e p o r t • 105
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting at December 31, 2012. In making this assessment,
we used the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment, we concluded that, at December 31, 2012, our
internal control over financial reporting is effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report on page 46.
106 •
W. P. C a r e y I n c .
Report on Form 10-K
The advisor will supply without charge to any shareholder, upon written request to Ms. Susan C. Hyde, Director of Investor
Relations, W.P. Carey & Co. LLC, 50 Rockefeller Plaza, New York, NY 10020, a copy of the annual report on Form 10-K for the
year ended December 31, 2012, including the financial statements and schedules.
2 0 1 2 A n n u a l R e p o r t • 107
Corporate Information
board of directors
senior management
Benjamin H. Griswold, IV
Non-Executive Chairman of the Board and
Chairman of the Compensation Committee;
Partner and Chairman of Brown Advisory
Trevor P. Bond
President and Chief Executive Officer
Francis J. Carey
Chairman of the Executive Committee
Nathaniel S. Coolidge
Former Head of Bond and Corporate
Finance Department, John Hancock Mutual
Life Insurance Company
Mark J. DeCesaris
Former Chief Financial Officer of W. P. Carey Inc.
Eberhard Faber, IV
Chairman of the Nominating and Corporate
Governance Committee; Former Director of
the Federal Reserve Bank of Philadelphia
Axel K.A. Hansing
Partner, Coller Capital, Ltd.
Dr. Richard C. Marston
James R.F. Guy Professor of Finance and Economics
at the University of Pennsylvania and its
Wharton School
Robert E. Mittelstaedt, Jr.
Chairman of the Strategic Planning Committee;
Former Dean of Arizona State University’s
W. P. Carey School of Business
Charles E. Parente
Chairman of the Audit Committee; Former Chief
Executive Officer and Managing Partner of Parente
Randolph, PC
Nick J.M. van Ommen
Former Chief Executive Officer, European Public
Real Estate Association
Karsten von Köller
Chairman, Lone Star Germany GmbH
Reginald Winssinger
Chairman of National Portfolio, Inc.
Investment Committee of
Carey asset management Corp.
Nathaniel S. Coolidge
Chairman
Axel K.A. Hansing
Frank J. Hoenemeyer
Jean Hoysradt
Dr. Richard C. Marston
Nick J.M. van Ommen
Karsten von Köller
108 •
W. P. C a r e y I n c .
Operating Committee
Trevor P. Bond
President and Chief Executive Officer
Mark M. Goldberg
Managing Director and President,
Carey Financial, LLC
Jiwei Yuan
Executive Director and Tax Director
Hisham A. Kader
Senior Vice President and Chief Accounting Officer
Strategic Planning
Gagan S. Singh
Executive Director
Susan C. Hyde
Managing Director, Chief Marketing Officer
and Secretary
John J. Park
Managing Director and Director of Strategic Planning
Catherine D. Rice
Managing Director and Chief Financial Officer
Thomas E. Zacharias
Managing Director and Chief Operating Officer
Investments
John D. Miller
Managing Director and Chief Investment Officer
Managed REITs
Rebecca A. Reaves
Executive Director – Marketing and Investor Relations
Carey Financial, LLC
Richard J. Paley
Executive Director; General Counsel and Chief
Compliance Officer, Carey Financial, LLC
C. Jay Steigerwald III
Executive Director; Senior Vice President, Carey
Financial, LLC
auditors
PricewaterhouseCoopers LLP
Jason E. Fox
Managing Director and
Co-Head of Global Investments
Gino M. Sabatini
Managing Director and
Co-Head of Global Investments
Jeffrey S. LeFleur
Managing Director – International
Anne Coolidge Taylor
Managing Director – Self Storage
Kathleen M. Barthmaier
Executive Director
Chad Edmonson
Executive Director
Elizabeth Raun Schlesinger
Executive Director – Self Storage
executive offices
W. P. Carey Inc.
50 Rockefeller Plaza
New York, NY 10020
212-492-1100
1-800-WP CAREY
Transfer agent
Computershare Shareowner Services, LLC
P.O. Box 358010
Pittsburgh, PA 15252-8010
1-888-200-8690
annual meeting
June 20, 2013 at 4:00 p.m.
The TimesCenter
242 West 41st Street
New York, NY 10018
form 10-k
Craig J. Vachris
Senior Vice President and Chief Credit Officer
Asset Management
Greg Butchart
Managing Director – International
A Copy of our Annual Report on Form 10-K as filed
with the U.S. Securities and Exchange Commission
may be obtained without charge at www.sec.gov or
by writing the Executive Offices at the address above
and by visiting our website at www.wpcarey.com.
Brooks G. Gordon
Executive Director
Robert N. Jenkins
Executive Director
Donna M. Neiley
Executive Director
Legal
Paul Marcotrigiano
Executive Director and Chief Legal Officer
Audit, Tax and Accounting
Thomas J. Ridings, Jr.
Executive Director, Chief Audit Executive
and Chief Risk Officer
website
www.wpcarey.com
e-mail
IR@wpcarey.com
e-delivery
To receive future investor-related correspondence
electronically, go to www.wpcarey.com/edelivery.
Trading Information
Shares of W. P. Carey Inc. trade on
the New York Stock Exchange under
the symbol “WPC.”
y
n
a
p
m
o
c
n
a
g
e
n
n
e
H
e
h
T
:
g
n
i
t
n
i
r
P
;
e
l
t
t
i
K
t
i
K
,
r
e
i
n
a
p
S
n
a
I
:
y
h
p
a
r
g
o
t
o
h
p
y
r
a
m
i
r
P
;
y
n
a
p
m
o
c
+
s
i
g
d
O
:
n
g
i
s
e
d
d
n
a
n
o
i
t
c
e
r
i
d
e
v
i
t
a
e
r
c
W. P. carey Inc.
50 rockefeller Plaza
new York, nY 10020
212-492-1100
www.wpcarey.com
nYSe: WPc
The paper and printer used in the production of the W. P. carey 2012 annual report are certified to
Forest Stewardship council™ (FSc®) standards, which promote environmentally appropriate, socially
beneficial and economically viable management of the world’s forests. This report was printed on paper
containing 10% postconsumer waste material.