Edgar Filing: W. P. Carey Inc.

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

R QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13779

W. P. CAREY INC.

(Exact name of registrant as specified in its charter)

Maryland	45-4549771
(State of incorporation)	(I.R.S. Employer Identification No.)

50 Rockefeller Plaza
New York, New York	10020
(Address of principal executive offices)	(Zip Code)

Investor Relations (212) 492-8920

(212) 492-1100

(Registrant’s telephone numbers, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer R	Accelerated filer £	Non-accelerated filer £	Smaller reporting company £
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R

Registrant has 68,254,789 shares of common stock, $0.001 par value, outstanding at October 31, 2013.

Table of Contents

INDEX

	Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	2
Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	60

PART II - OTHER INFORMATION
Item 1A. Risk Factors	61
Item 6. Exhibits	62
Signatures	63

Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Report”), including Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in Item 2 of Part I of this Report, contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. It is important to note that our actual results could be materially different from those projected in such forward-looking statements. You should exercise caution in relying on forward-looking statements as they involve known and unknown risks, uncertainties and other factors that may materially affect our future results, performance, achievements or transactions. Information on factors which could impact actual results and cause them to differ from what is anticipated in the forward-looking statements contained herein is included in this Report as well as in our other filings with the Securities and Exchange Commission (the “SEC”), including but not limited to those described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the SEC on February 26, 2013 (the “2012 Annual Report”) and in “Part II, Item 1A. Risk Factors” herein. Except as required by federal securities laws and the rules and regulations of the SEC, we do not undertake to revise or update any forward-looking statements.

Additionally, a description of our critical accounting estimates is included in the MD&A section of our 2012 Annual Report. There has been no significant change in our critical accounting estimates. All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant in Part I, Item 1, Financial Statements (Unaudited).

W. P. Carey 9/30/2013 10-Q — 1

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PART I

Item 1. Financial Statements.

W. P. CAREY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

	September 30, 2013		December 31, 2012
Assets
Investments in real estate:
Real estate, at cost (inclusive of amounts attributable to consolidated variable interest entities (“VIEs”) of $78,745 and $78,745, respectively)	$	2,515,475	$	2,334,488
Operating real estate, at cost	83,896		99,703
Accumulated depreciation (inclusive of amounts attributable to consolidated VIEs of $17,709 and $16,110, respectively)	(170,085)		(136,068)
Net investments in properties	2,429,286		2,298,123
Net investments in direct financing leases (inclusive of amounts attributable to consolidated VIEs of $18,057 and $23,921, respectively)	360,240		376,005
Assets held for sale	17,975		1,445
Equity investments in real estate and the Managed REITs	557,513		565,626
Net investments in real estate	3,365,014		3,241,199
Cash and cash equivalents (inclusive of amounts attributable to consolidated VIEs of $14 and $17, respectively)	93,620		123,904
Due from affiliates	42,249		36,002
Goodwill	327,973		329,132
In-place lease intangible assets, net (inclusive of amounts attributable to consolidated VIEs of $3,492 and $3,823, respectively)	487,527		447,278
Above-market rent intangible assets, net (inclusive of amounts attributable to consolidated VIEs of $2,601 and $2,773, respectively)	261,900		279,885
Other intangible assets, net (inclusive of amounts attributable to consolidated VIEs of $270 and $297, respectively)	15,519		10,200
Other assets, net (inclusive of amounts attributable to consolidated VIEs of $4,685 and $4,232, respectively)	132,558		141,442
Total assets	$	4,726,360	$	4,609,042

Liabilities and Equity
Liabilities:
Non-recourse debt (inclusive of amounts attributable to consolidated VIEs of $29,344 and $30,326, respectively)	$	1,685,556	$	1,715,397
Senior credit facility and unsecured term loan	490,000		253,000
Accounts payable, accrued expenses and other liabilities (inclusive of amounts attributable to consolidated VIEs of $7,072 and $7,659, respectively)	282,489		265,132
Income taxes, net	11,232		24,959
Distributions payable	59,439		45,700
Total liabilities	2,528,716		2,304,188
Redeemable noncontrolling interest	7,316		7,531
Redeemable securities - related party (Note 3)	-		40,000
Commitments and contingencies (Note 11)
Equity:
W. P. Carey stockholders’ equity:
Common stock, $0.001 par value, 450,000,000 shares authorized; 69,287,115 and 68,901,933 shares issued, respectively; and 68,253,736 and 68,485,525 shares outstanding, respectively	69		69
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued	-		-
Additional paid-in capital	2,243,186		2,175,820
Distributions in excess of accumulated earnings	(273,850)		(172,182)
Deferred compensation obligation	11,354		8,358
Accumulated other comprehensive income (loss)	8,626		(4,649)
Less, treasury stock at cost, 1,033,379 and 416,408 shares, respectively	(60,270)		(20,270)
Total W. P. Carey stockholders’ equity	1,929,115		1,987,146
Noncontrolling interests	261,213		270,177
Total equity	2,190,328		2,257,323
Total liabilities and equity	$	4,726,360	$	4,609,042

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2013 10-Q — 2

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Revenues
Lease revenues:
Rental income	$	68,391	$	14,245	$	199,778	$	43,401
Interest income from direct financing leases	9,235		1,881		28,158		5,919
Total lease revenues	77,626		16,126		227,936		49,320
Asset management revenue from affiliates	10,961		15,850		31,330		47,088
Structuring revenue from affiliates	14,775		8,316		27,539		19,576
Dealer manager fees from affiliates	3,787		4,012		7,329		11,878
Reimbursed costs from affiliates	23,259		19,879		50,694		59,100
Other real estate income	7,506		5,095		22,547		15,977
	137,914		69,278		367,375		202,939
Operating Expenses
General and administrative	28,761		28,930		84,733		77,701
Merger and acquisition expenses	3,630		25,897		6,879		30,616
Reimbursable costs	23,259		19,879		50,694		59,100
Depreciation and amortization	31,560		6,120		92,741		18,549
Property expenses	5,746		2,069		16,307		7,112
Other real estate expenses	1,654		1,557		5,064		4,619
Impairment charges	1,416		-		1,416		-
	96,026		84,452		257,834		197,697
Other Income and Expenses
Other interest income	367		252		1,053		910
Net income from equity investments in real estate and the Managed REITs	9,180		10,477		52,377		52,808
Gain on change in control of interests	-		20,794		-		20,794
Other income and (expenses)	2,484		503		5,453		2,026
Interest expense	(27,482)		(7,845)		(81,187)		(22,253)
	(15,451)		24,181		(22,304)		54,285
Income from continuing operations before income taxes	26,437		9,007		87,237		59,527
Provision for income taxes	(5,375)		(379)		(3,020)		(192)
Income from continuing operations	21,062		8,628		84,217		59,335
Discontinued Operations
Income (loss) from operations of discontinued properties	349		(458)		3,332		(1,060)
Gain (loss) on sale of real estate	239		(409)		622		(888)
Gain on extinguishment of debt	-		-		84		-
Impairment charges	-		(5,535)		(4,950)		(12,262)
Income (loss) from discontinued operations, net of tax	588		(6,402)		(912)		(14,210)
Net Income	21,650		2,226		83,305		45,125
Net (income) loss attributable to noncontrolling interests	(2,912)		325		(7,312)		1,383
Net (income) loss attributable to redeemable noncontrolling interest	(232)		37		(139)		146
Net Income Attributable to W. P. Carey	$	18,506	$	2,588	$	75,854	$	46,654

Basic Earnings Per Share
Income from continuing operations attributable to W. P. Carey	$	0.26	$	0.22	$	1.11	$	1.49
Income (loss) from discontinued operations attributable to W. P. Carey	0.01		(0.16)		(0.01)		(0.35)
Net income attributable to W. P. Carey	$	0.27	$	0.06	$	1.10	$	1.14

Diluted Earnings Per Share
Income from continuing operations attributable to W. P. Carey	$	0.26	$	0.21	$	1.09	$	1.47
Income (loss) from discontinued operations attributable to W. P. Carey	0.01		(0.15)		(0.01)		(0.35)
Net income attributable to W. P. Carey	$	0.27	$	0.06	$	1.08	$	1.12

Weighted Average Shares Outstanding
Basic	68,397,176		40,366,298		68,719,264		40,398,433
Diluted	69,400,825		41,127,404		69,846,320		41,029,578

Amounts Attributable to W. P. Carey
Income from continuing operations, net of tax	$	18,021	$	8,990	$	76,920	$	60,864
Income (loss) from discontinued operations, net of tax	485		(6,402)		(1,066)		(14,210)
Net income attributable to W. P. Carey	$	18,506	$	2,588	$	75,854	$	46,654

Distributions Declared Per Share	$	0.860	$	0.650	$	2.520	$	1.782

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2013 10-Q — 3

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net Income	$	21,650	$	2,226	$	83,305	$	45,125
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	17,675		2,164		13,017		(141)
Realized and unrealized (loss) gain on derivative instruments	(4,013)		(92)		1,242		(673)
Change in unrealized depreciation on marketable securities	-		(2)		-		(7)
	13,662		2,070		14,259		(821)
Comprehensive Income	35,312		4,296		97,564		44,304

Amounts Attributable to Noncontrolling Interests
Net (income) loss	(2,912)		325		(7,312)		1,383
Foreign currency translation adjustments	(2,031)		(230)		(984)		67
Comprehensive (income) loss attributable to noncontrolling interests	(4,943)		95		(8,296)		1,450

Amounts Attributable to Redeemable Noncontrolling Interest
Net (income) loss	(232)		37		(139)		146
Foreign currency translation adjustments	(21)		(9)		-		(4)
Comprehensive (income) loss attributable to redeemable noncontrolling interest	(253)		28		(139)		142
Comprehensive Income Attributable to W. P. Carey	$	30,116	$	4,419	$	89,129	$	45,896

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2013 10-Q — 4

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the Nine Months Ended September 30, 2013 and the Year Ended December 31, 2012

(in thousands, except share and per share amounts)

	W. P. Carey Stockholders
							Distributions				Accumulated
	Common Stock				Additional		in Excess of		Deferred		Other				Total
	No Par Value	$0.001 Par Value			Paid-in		Accumulated		Compensation		Comprehensive		Treasury		W. P. Carey		Noncontrolling
	Shares	Shares	Amount		Capital		Earnings		Obligation		(Loss) Income		Stock		Stockholders		Interests		Total
Balance at January 1, 2012	39,729,018	-	$	-	$	779,071	$	(95,046)	$	7,063	$	(8,507)	$	-	$	682,581	$	33,821	$	716,402
Exchange of shares of W. P. Carey & Co. LLC for shares of W. P. Carey Inc. in connection with the CPA®:15 Merger	(39,834,827)	39,834,827	40		(40)		-		-		-		-		-		-		-
Shares issued to stockholders of CPA®:15 in connection with the CPA®:15 Merger	-	28,170,643	28		1,380,333		-		-		-		-		1,380,361		-		1,380,361
Purchase of noncontrolling interests in connection with the CPA®:15 Merger	-	-	-		(154)		-		-		-		-		(154)		237,513		237,359
Reclassification of Estate shareholders shares	-	-	-		(40,000)		-		-		-		-		(40,000)		-		(40,000)
Exercise of stock options and employee purchase under the employee share purchase plan	30,993	13,768	-		1,553		-		-		-		-		1,553		-		1,553
Cash proceeds on issuance of shares to third party, net	-	937,500	1		44,999		-		-		-		-		45,000		-		45,000
Grants issued in connection with services rendered	427,425	3,822	-		-		-		-		-		-		-		-		-
Shares issued under share incentive plans	238,728	27,044	-		646		-		-		-		-		646		-		646
Contributions from noncontrolling interests	-	-	-		-		-		-		-		-		-		3,291		3,291
Forfeitures of shares	(29,919)	-	-		-		-		-		-		-		-		-		-
Windfall tax benefits - share incentive plans	-	-	-		10,185		-		-		-		-		10,185		-		10,185
Stock-based compensation expense	-	-	-		25,067		-		971		-		-		26,038		-		26,038
Redemption value adjustment	-	-	-		(840)		-		-		-		-		(840)		-		(840)
Distributions to noncontrolling interests	-	-	-		-		-		-		-		-		-		(6,649)		(6,649)
Distributions declared ($2.44 per share)	-	-	-		-		(139,268)		324		-		-		(138,944)		-		(138,944)
Purchase of treasury stock from related parties (Note 3)	(561,418)	(416,408)	-		-		-		-		-		(45,270)		(45,270)		-		(45,270)
Cancelation of shares	-	(85,671)	-		(25,000)		-		-		-		25,000		-		-		-
Net income	-	-	-		-		62,132		-		-		-		62,132		607		62,739
Other comprehensive income:
Foreign currency translation adjustments	-	-	-		-		-		-		6,127		-		6,127		1,594		7,721
Unrealized loss on derivative instruments	-	-	-		-		-		-		(2,262)		-		(2,262)		-		(2,262)
Change in unrealized appreciation on marketable securities	-	-	-		-		-		-		(7)		-		(7)		-		(7)
Balance at December 31, 2012	-	68,485,525	69		2,175,820		(172,182)		8,358		(4,649)		(20,270)		1,987,146		270,177		2,257,323
Reclassification of Estate shareholders shares	-	-			40,000		-		-		-		-		40,000		-		40,000
Exercise of stock options and employee purchase under the employee share purchase plan	-	49,054	-		1,970		-		-		-		-		1,970		-		1,970
Shares issued under share incentive plans	-	336,128	-		(9,190)		-		-		-		-		(9,190)		-		(9,190)
Contributions from noncontrolling interests	-	-	-		-		-		-		-		-		-		2,830		2,830
Windfall tax benefits - share incentive plans	-	-	-		11,614		-		-		-		-		11,614		-		11,614
Stock-based compensation expense	-	-	-		22,972		-		2,459		-		-		25,431		-		25,431
Distributions to noncontrolling interests	-	-	-		-		-		-		-		-		-		(20,093)		(20,093)
Distributions declared ($2.52 per share)	-	-	-		-		(177,522)		537		-		-		(176,985)		-		(176,985)
Purchase of treasury stock from related party (Note 3)	-	(616,971)	-		-		-		-		-		(40,000)		(40,000)		-		(40,000)
Foreign currency translation	-	-	-		-		-		-		-		-		-		3		3
Net income	-	-	-		-		75,854		-		-		-		75,854		7,312		83,166
Other comprehensive income:
Foreign currency translation adjustments	-	-	-		-		-		-		12,033		-		12,033		984		13,017
Unrealized gain on derivative instruments	-	-	-		-		-		-		1,242		-		1,242		-		1,242
Balance at September 30, 2013	-	68,253,736	$	69	$	2,243,186	$	(273,850)	$	11,354	$	8,626	$	(60,270)	$	1,929,115	$	261,213	$	2,190,328

See Notes to Consolidated Financial Statements.

W. P. Carey 9/30/2013 10-Q — 5

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2013		2012
Cash Flows — Operating Activities
Net income	$	83,305	$	45,125
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs	102,679		22,532
Income from equity investments in real estate and the Managed REITs in excess of distributions received	(22,138)		(18,557)
Straight-line rent and amortization of rent-related intangibles	15,684		(2,229)
Amortization of deferred revenue	(7,077)		(7,077)
Gain on sale of real estate	(290)		(1,564)
Unrealized gain on derivative instruments and others	(5,608)		(17)
Realized loss on foreign currency transactions and other	36		579
Management income received in shares of Managed REITs	(26,709)		(21,272)
Gain on change in control of interests	-		(20,794)
Impairment charges	6,366		12,262
Stock-based compensation expense	25,430		19,560
Deferred acquisition revenue received	13,496		17,017
Increase in structuring revenue receivable	(3,967)		(8,502)
Decrease in income taxes, net	(13,673)		(20,000)
(Increase) decrease in prepaid taxes	(9,257)		5,115
Payments for withholding taxes upon delivery of equity-based awards and exercises of stock options	(11,484)		(5,155)
Net changes in other operating assets and liabilities	(466)		14,716
Net Cash Provided by Operating Activities	146,327		31,739

Cash Flows — Investing Activities
Cash paid to stockholders of CPA®:15 in the CPA®:15 Merger	-		(152,356)
Cash acquired in connection with the CPA®:15 Merger	-		178,945
Distributions received from equity investments in real estate and the Managed REITs in excess of equity income	32,982		27,241
Capital contributions to equity investments	(1,945)		(377)
Purchases of real estate	(249,289)		(2,679)
Capital expenditures	(10,164)		(2,930)
Proceeds from sale of real estate and equity investments	56,495		32,586
Funding of short-term loan to an affiliate	(15,000)		-
Funds placed in escrow	(163,025)		(11,716)
Funds released from escrow	190,698		13,540
Other investing activities, net	(5)		314
Net Cash (Used in) Provided by Investing Activities	(159,253)		82,568

Cash Flows — Financing Activities
Distributions paid	(160,953)		(69,180)
Contributions from noncontrolling interests	2,830		2,319
Distributions paid to noncontrolling interests	(20,427)		(1,866)
Purchase of treasury stock from related party (Note 3)	(40,000)		(25,000)
Scheduled payments of mortgage principal	(160,763)		(12,455)
Proceeds from mortgage financing	113,000		1,250
Proceeds from senior credit facility and unsecured term loan	585,000		215,000
Repayments of senior credit facility	(348,000)		(30,000)
Return of tenant security deposits	(1,054)		-
Payment of financing costs and mortgage deposits, net of deposits refunded	(2,202)		(1,687)
Proceeds from exercise of stock options and employee purchase under the employee share purchase plan	1,970		5,964
Windfall tax benefit associated with stock-based compensation awards	11,614		8,865
Net Cash (Used in) Provided by Financing Activities	(18,985)		93,210

Change in Cash and Cash Equivalents During the Period
Effect of exchange rate changes on cash	1,627		(70)
Net (decrease) increase in cash and cash equivalents	(30,284)		207,447
Cash and cash equivalents, beginning of period	123,904		29,297
Cash and cash equivalents, end of period	$	93,620	$	236,744

(Continued)

W. P. Carey 9/30/2013 10-Q — 6

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Continued)

Supplemental non-cash investing and financing activities:

A summary of our non-cash investing and financing activities for the periods presented is as follows (dollars in thousands):

	Nine Months Ended September 30,
	2013		2012
Reclassification of Net investments in direct financing leases to Real estate (Note 4)	$	13,739	$	-
Reclassification of Real estate to Assets held for sale (Note 4)	21,478		-
Reclassification of Intangible assets, net to Assets held for sale (Note 4)	1,283		-
Reclassification of Operating real estate to Assets held for sale (Note 4)	3,627		-
Reclassification of Additional paid-in capital to Redeemable securities (Note 3)	-		85,000
Third quarter distributions declared	59,439		44,301

On September 28, 2012, we merged with Corporate Property Associates 15 Incorporated (“CPA®:15”) through a series of transactions (the “CPA®:15 Merger”). In this transaction, 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 CPA®:15 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 the preliminary 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	$	1,758,372
Net investment in direct financing leases	315,789
Equity investments in real estate	164,886
Intangible assets	694,411
Other assets	83,838
Liabilities Assumed at Fair Value
Non-recourse debt	(1,350,755)
Accounts payable, accrued expenses and other liabilities	(187,712)
Amounts attributable to noncontrolling interests	(238,038)
Net assets acquired excluding cash	1,240,791
Fair value of common shares issued	(1,380,362)
Cash consideration	(152,356)
Fair value of W. P. Carey & Co. LLC equity interest in CPA®:15 prior to the CPA®:15 Merger	(107,147)
Fair value of W. P. Carey & Co. LLC equity interest in jointly-owned investments with CPA®:15 prior to the CPA®:15 Merger	(54,822)
Goodwill	274,951
Cash acquired on acquisition of subsidiaries	$	(178,945)

See Notes to Consolidated Financial Statements

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W. P. CAREY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business and Organization

W. P. Carey Inc. (“W. P. Carey” and, together with its consolidated subsidiaries and predecessors, “we”, “us” or “our”) is a real estate investment trust (“REIT”) that seeks to achieve superior, risk-adjusted returns by providing long-term net-lease financing via sale-leaseback and build-to-suit transactions for companies worldwide. 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. We also earn revenue as the advisor to publicly-owned, non-listed REITs.

We have sponsored a series of seventeen income-generating funds that invest in commercial real estate, under the Corporate Property Associates brand name (the “CPA® REITs”). We are currently the advisor to Corporate Property Associates 16 – Global Incorporated (“CPA®:16 – Global”), Corporate Property Associates 17 – Global Incorporated (“CPA®:17 – Global”) and Corporate Property Associates 18 – Global Incorporated (“CPA®:18 – Global”). We are also the advisor to Carey Watermark Investors Incorporated (“CWI” and, together with CPA®:16 – Global, CPA®:17 – Global, and CPA®:18 – Global, the “Managed REITs”), which invests in lodging and lodging-related properties.

We were formed as a corporation under the laws of Maryland on February 15, 2012. On September 28, 2012, CPA®:15 merged with and into us, with CPA®:15 surviving as an indirect, wholly-owned subsidiary of ours. In connection with the CPA®:15 Merger, W. P. Carey & Co. LLC, our predecessor, which was formed under the laws of Delaware on July 15, 1996, completed an internal reorganization whereby our predecessor and its subsidiaries merged with and into us with W. P. Carey as the surviving corporation, succeeding to and continuing to operate the existing business of our predecessor (“REIT Reorganization”). Upon completion of the CPA®:15 Merger and the REIT Reorganization, the shares of our predecessor were delisted from the New York Stock Exchange (“NYSE”) and canceled, and our common stock became listed on the NYSE under the same symbol, “WPC.”

On July 25, 2013, we and CPA®:16 – Global entered into a merger agreement pursuant to which CPA®:16 – Global will merge with and into one of our subsidiaries in exchange for shares of our common stock (the “Proposed Merger,” Note 3). On October 1, 2013, we filed a registration statement with the SEC to register the shares of our common stock to be issued to stockholders of CPA®:16 – Global in connection with the Proposed Merger. If the Proposed Merger is approved by our stockholders and the stockholders of CPA®:16 – Global and the other closing conditions are met, we expect that the closing will occur during the first quarter of 2014, although there can be no assurance of such timing.

Primary Reportable Segments

Real Estate Ownership — We own and invest in commercial properties primarily in the United States (“U.S.”) and Europe that are leased to companies, primarily on a triple-net lease basis. At September 30, 2013, our portfolio was comprised of our full or partial ownership interest in 421 properties. Substantially all of these properties, totaling approximately 39.4 million square feet, were net leased to 125 tenants, with an occupancy rate of approximately 99.0%. Collectively, at September 30, 2013, the Managed REITs owned all or a portion of over 693 properties, including certain properties in which we have an ownership interest. Substantially all of these properties, totaling approximately 78.6 million square feet, were net leased to 218 tenants, with an average occupancy rate of approximately 98.8%. The Managed REITs also had interests in 91 operating properties for an aggregate of approximately 8.1 million square feet at September 30, 2013.

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 (Note 6). Through our special member interests in the operating partnerships of the Managed REITs, we also participate in their cash flows (Note 3). Lastly, we earn other real estate revenues through our investments in self-storage facilities and a hotel in the U.S.

Investment Management — We earn revenue as the advisor to the Managed REITs. Under the respective advisory agreements with each of the Managed REITs, we perform various services, including 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 manage their portfolios of real estate investments, for which we earn asset management revenue.

We generate acquisition revenue when we structure and negotiate investments and related financing for the Managed REITs. We may also be entitled, subject to the approval by the boards of directors of CPA®:16 – Global and CWI, to fees for structuring loan

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Notes to Consolidated Financial Statements

refinancing transactions. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue. We earn ongoing 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. We may also earn revenue related to the disposition of properties, subject to subordination provisions, which will only be recognized as the relevant conditions are met. Such revenue may include subordinated disposition revenue when assets are sold as well as a percentage 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 earn incentive or termination revenue in connection with providing liquidity to the stockholders of the Managed REITs, although these events do not occur every year. However, in the event they do occur, we may waive the incentive or termination fee we would have been entitled to receive from the Managed REITs pursuant to the terms of our advisory agreements with the Managed REITs, which was the case in the CPA®:15 Merger and will be the case under the terms of the merger agreement between us and CPA®:16 – Global (Note 3). We will not receive a termination payment in circumstances where we receive incentive revenue.

Note 2. Basis of Presentation

Our interim consolidated financial statements have been prepared, without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of results of operations, financial position and cash flows. Our interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2012, which are included in the 2012 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

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. The unaudited consolidated financial statements included in this Report have been retrospectively adjusted to reflect the disposition (or planned disposition) of certain properties as discontinued operations for all periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation.

Basis of Consolidation

The consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries and our tenancy-in-common interests as described below. The portion of equity in a consolidated subsidiary that is not attributable, directly or indirectly, to us is presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.

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. During the nine months ended September 30, 2013, we did not identify any new VIEs.

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.

In November 2012, we filed a registration statement with the SEC to sell up to $1.0 billion of common stock of CPA®:18 – Global in an initial public offering plus up to an additional $400.0 million of its common stock under a dividend reinvestment plan. This

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Notes to Consolidated Financial Statements

registration statement was declared effective by the SEC on May 7, 2013. Through July 25, 2013, the financial activity of CPA®:18 – Global, which at that time had no significant assets, liabilities or operations, was included in our consolidated financial statements as we owned 100% of its outstanding common stock. On July 25, 2013, upon CPA®:18 – Global reaching its minimum offering proceeds and admitting new stockholders, our ownership of its outstanding common stock was immediately reduced to 8.5% and we deconsolidated CPA®:18 – Global and began to account for our interests in it under the equity method. As the advisor, we do not exert control over, but we have the ability to exercise significant influence on, CPA®:18 – Global (Note 6).

Accounting Policy

Internal-Use Software Development Costs – In accordance with Accounting Standards Codification 350-40-25, we expense costs associated with the assessment stage of software development projects. Upon completion of the preliminary project assessment stage, we capitalize internal and external costs associated with the application development stage, including the costs associated with software that allows for the conversion of our old data to our new system. We expense the costs of training and data conversion. We also expense costs associated with the post-implementation and operation stage, including maintenance and specified upgrades; however, we capitalize internal and external costs associated with significant upgrades to existing systems that result in additional functionality. Capitalized costs are amortized on a straight-line basis over the software’s estimated useful life, which is three to five years. Periodically, we reassess the useful life considering technology, obsolescence and other factors.

Change in Accounting Principle

During the fourth quarter of 2013, we elected to change the date of our annual impairment test for goodwill in our Real Estate Ownership segment from June 30 to October 1. This change is preferable because moving the test to October 1 aligns the goodwill testing of the Real Estate Ownership segment with that of our Investment Management segment, which is also tested annually in the fourth quarter. Additionally, October 1 is more closely aligned with our business planning and forecasting cycle. As a result of this change, there will not be more than a 12-month span between testing dates because our last goodwill test for the Real Estate Ownership segment was completed on June 30, 2013 for the goodwill that was acquired on September 28, 2012. The change in testing dates does not accelerate, delay or avoid a potential impairment charge. Additional goodwill impairment testing may be required at interim dates when and if triggering events occur in the future.

Out-of-Period Adjustment

During the third quarter of 2013, we identified an error in the consolidated financial statements for the year ended December 31, 2012 in connection with the finalization of a tax return for an investment in Germany, which is accounted for using the equity method of accounting. The error originated based upon the application of a tax law change that became effective in 2012, but for which the accounting was not finalized and recorded until the third quarter of 2013. As a result of this error, both our net income and income from continuing operations from our proportionate share of this investment were overstated by $2.3 million in 2012 ($0.04 per share basic and diluted), and understated by $2.3 million for the three months ended September 30, 2013 ($0.03 per share basic and diluted). We have concluded that this adjustment is not material to the current period or any prior period’s consolidated financial statements. As such, this cumulative charge was recorded in the statement of operations for the three months ended September 30, 2013, rather than restating prior periods.

During the second quarter of 2012, we identified an error in the consolidated financial statements related to the misapplication of accounting guidance on the expropriation of land related to two investments. We concluded that this adjustment was 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 $1.8 million within continuing operations primarily attributable to an increase in Other income and (expenses) of $2.0 million in the consolidated statements of income for the nine months ended September 30, 2012.

Recent Accounting Requirements

The following Accounting Standards Updates (“ASUs”) promulgated by the Financial Accounting Standards Board (“FASB”) are applicable to us as indicated:

ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities — In January 2013, the FASB issued an update to ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2013-01 clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting or similar arrangement. These amendments did not have a significant impact on our financial position or results of operations and are applicable to us for our interim and annual reports beginning in 2013 and has been applied retrospectively.

ASU 2013-02, Other Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income — In February 2013, the FASB issued ASU 2013-02 requiring entities to disclose additional information about items reclassified out of accumulated other comprehensive income. This ASU impacts the form of our disclosures only, is applicable to us for our interim and annual reports beginning in 2013 and has been applied retrospectively. The related additional disclosures are located in Note 12.

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Notes to Consolidated Financial Statements

ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, a Consensus of the FASB Emerging Issues Task Force — In February 2013, the FASB issued ASU 2013-04, which requires entities to measure obligations resulting from joint and several liability arrangements (in our case, tenancy-in-common arrangements, Note 6) for which the total amount of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This ASU is applicable to us for our interim and annual reports beginning in 2014 and shall be applied retrospectively; however, we elected to adopt this ASU early in 2013 and it did not have a significant impact on our financial position or results of operations for any of the periods presented.

ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity — In March 2013, the FASB issued ASU 2013-05, which indicates that a cumulative translation adjustment (“CTA”) is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Therefore, the entire amount of the CTA associated with the foreign entity would be released into earnings when there has been a sale of a foreign subsidiary or group of assets within a foreign subsidiary, a loss of a controlling financial interest upon deconsolidation of an investment in a foreign entity or a step acquisition in a foreign entity. This ASU will be applicable to us for derecognition transactions after December 31, 2013.

ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes, a Consensus of the FASB Emerging Issues Task Force — In July 2013, the FASB issued ASU 2013-10, which permits the Fed Funds Effective Swap Rate, also referred to as the “Overnight Index Swap Rate,” to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to the U.S. government and London Interbank Offered Rate (“LIBOR”) swap rate. The update also removes the restriction on the use of different benchmark rates for similar hedges. This ASU will be applicable to us for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Through the date of this Report, we had not entered into any transactions to which this ASU applies.

Note 3. Agreements and Transactions with Related Parties

Advisory Agreements with the Managed REITs

We have advisory agreements with each of the Managed REITs, pursuant to which we earn fees and are entitled to receive cash distributions. The following tables present a summary of revenue earned and/or cash received from the Managed REITs, as well as from CPA®:15 through the date of the CPA®:15 Merger, included in the consolidated statements of income (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Asset management revenue (a)	$	10,939	$	15,828	$	31,262	$	47,020
Structuring revenue	14,775		8,316		27,539		19,576
Dealer manager fees	3,787		4,012		7,329		11,878
Reimbursed costs from affiliates (a)	23,259		19,676		50,714		58,493
Distributions of Available Cash	7,323		7,352		23,891		21,789
Deferred revenue earned	2,123		2,123		6,369		6,369
	$	62,206	$	57,307	$	147,104	$	165,125

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
CPA®:15	$	-	$	7,147	$	-	$	21,563
CPA®:16 – Global (b)	13,041		12,005		39,632		37,554
CPA®:17 – Global (b)	20,823		34,895		49,436		98,314
CPA®:18 – Global (c) (d)	3,253		-		3,253		-
CWI (e)	25,089		3,260		54,783		7,694
	$	62,206	$	57,307	$	147,104	$	165,125

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Notes to Consolidated Financial Statements

__________

(a) Excludes amounts received from third-parties.

(b) The advisory agreements with CPA®:16 – Global and CPA®:17 – Global, which were scheduled to expire on September 30, 2013, were extended through January 31, 2014 in light of the Proposed Merger.

(c) The advisory agreement with CPA®:18 – Global, which was entered into in May 2013, is scheduled to expire on September 30, 2014.

(d) Amount excludes deferred acquisition fees related to CPA®:18 – Global’s acquisition during the three months ended September 30, 2013 because CPA®:18 – Global had not yet achieved its preferred return as specified in the advisory agreement.

(e) The CWI advisory agreement, which was scheduled to expire on September 30, 2013, was renewed for an additional year pursuant to its terms, effective as of October 1, 2013.

The following table presents a summary of Due from affiliates (in thousands):

	September 30, 2013		December 31, 2012
Deferred acquisition fees receivable	$	19,126	$	28,654
Reimbursable costs	1,019		1,457
Organization and offering costs	4,287		4,920
Accounts receivable	1,292		182
Asset management fee receivable	1,491		789
Note receivable from CPA®:18 – Global, including interest thereon	15,034		-
	$	42,249	$	36,002

Asset Management Revenue

We earn asset management revenue from each of the Managed REITs, which is based on average invested assets and is calculated according to the respective advisory agreement. For CPA®:15 prior to the CPA®:15 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, 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 the average market value of assets under 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 CPA®:18 – Global, we earn asset management revenue ranging from 0.5% to 1.5%, depending on the type of investment and based on the average market value or average equity value, as applicable. For CWI, we earn asset management revenue of 0.5% of the average market value of lodging-related investments. We also receive up to 10% of distributions of Available Cash, as defined in the respective advisory agreements, from the operating partnerships of each of the Managed REITs.

Under the terms of the advisory agreements, we may elect to receive cash or shares of stock for asset management revenue due from each of the Managed REITs. In 2013, we elected to receive all asset management revenue from CPA®:17 – Global and CWI in their respective shares. For 2013, we had initially elected to receive asset management revenue from CPA®:16 – Global in its shares. However, in light of the announcement of the Proposed Merger discussed below, a Special Committee of the Board of Directors of CPA®:16 – Global (“the CPA®:16 – Global Special Committee”) requested that we elect to receive the asset management revenue in cash, which became effective as of August 1, 2013. For 2012, we elected to receive all asset management revenue from CPA®:15 prior to the CPA®:15 Merger in cash, 50% of asset management revenue from CPA®:16 – Global in its shares with the remaining 50% payable in cash and all asset management revenue from CPA®:17 – Global and CWI in their respective shares.

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 4.5% of the total aggregate cost of long-term net lease investments made by each CPA® REIT. A portion of this revenue (generally 2.5%) is paid when the transaction is completed, while the remainder (generally 2%) is payable in annual installments ranging from three to eight years, provided the relevant CPA® REIT meets 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 to fees for structuring loan

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Notes to Consolidated Financial Statements

refinancing transactions of up to 1% of the principal amount. This loan refinancing revenue, together with the acquisition revenue, is referred to as structuring revenue.

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 2% to 7%.

Reimbursed Costs from Affiliates and Dealer Manager Fees

The Managed REITs reimburse us for certain costs we incur on their behalf, primarily broker/dealer commissions, marketing costs, and certain personnel and overhead costs. Since October 1, 2012, personnel costs have been charged to CPA®:16 – Global and CPA®:17 – Global based on the trailing twelve-month reported revenues of CPA®:16 – Global, CPA®:17 – Global, CWI and us rather than the method utilized before that date, which involved an allocation of personnel costs based on the time incurred by our personnel for CPA®:16 – Global and CPA®:17 – Global. As of September 30, 2013, we have not allocated any personnel costs to CPA®:18 – Global or CWI.

During CPA®:17 – Global’s public offering, which was terminated in January 2013, we earned a selling commission of $0.65 per share sold and a dealer manager fee of $0.35 per share sold. In addition, during CWI’s primary offering, which was terminated in September 2013, we earned a selling commission of $0.70 per share sold and a dealer manager fee of $0.30 per share sold.

For CPA®:18 – Global, we receive selling commissions, depending on the class of common stock sold, of $0.70 or $0.14 per share sold, and a dealer manager fee of $0.30 or $0.21 per share sold, for its class A common stock and class C common stock, respectively. We also receive an annual distribution and shareholder servicing fee (“Shareholder Servicing Fee”) paid in connection with investor purchases of shares of class C common stock. The amount of the Shareholder Servicing Fee is 1.0% of the purchase price per share (or, once reported, the amount of the estimated net asset value per share) for the shares of class C common stock sold in the offering. The Shareholder Servicing Fee is accrued daily and is payable quarterly in arrears. CPA®:18 – Global will cease paying the Shareholder Servicing Fee on the date at which, in the aggregate, underwriting compensation from all sources, including the Shareholder Servicing Fee, any organizational and offering fee paid for underwriting, and underwriting compensation paid by us, equals 10% of the gross proceeds from the initial public offering. We re-allow all or a portion of the dealer manager fees to selected dealers in the offering. Dealer manager fees that are not re-allowed and the Shareholder Servicing Fee are classified as Dealer manager fees.

Pursuant to its advisory agreement, CWI is obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its initial public 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 the closing of its initial public offering in September 2013, we incurred organization and offering costs on behalf of CWI of approximately $9.4 million, of which CWI is obligated to reimburse us all of these costs, and $9.2 million had been reimbursed as of September 30, 2013.

Pursuant to its advisory agreement, CPA®:18 – Global is obligated to reimburse us for all organization costs and a portion of offering costs incurred in connection with its initial public offering. CPA®:18 – Global is obligated to reimburse us up to 4% of the gross proceeds of its offering if the gross proceeds are less than $500.0 million, 2% of the gross proceeds if the gross proceeds are $500.0 million or more but less than $750.0 million, and 1.5% of the gross proceeds if the gross proceeds are $750.0 million or more within 60 days after the end of the quarter in which the offering terminates. Through September 30, 2013, we incurred organization and offering costs on behalf of CPA®:18 – Global of approximately $4.0 million, and based on current fundraising projections, the entire amount is expected to be reimbursed by CPA®:18 – Global. As of September 30, 2013, none of these costs had been reimbursed.

Distributions of Available Cash and Deferred Revenue Earned

We are entitled to receive distributions of our proportionate share of earnings up to 10% of the Available Cash, as defined in the respective advisory agreements, from the operating partnerships of each of the Managed REITs. In connection with the merger in the second quarter of 2011 between Corporate Property Associates 14 Incorporated (“CPA®:14”) and CPA®:16 – Global, we acquired a special member interest (“Special Member Interest”) in CPA®:16 – Global’s operating partnership. We initially recorded this Special Member Interest at its fair value, which is amortized into earnings over the expected period of performance considering the estimated life of the entity. 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 Real Estate Ownership segment. We have not yet earned or received any distributions of our proportionate share of earnings from CPA®:18 – Global and CWI’s operating partnerships.

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Notes to Consolidated Financial Statements

Other Transactions with Affiliates

Transactions with the Estate of Wm. Polk Carey

As discussed in the 2012 Annual Report, we entered into a share purchase agreement with the Estate of Wm. Polk Carey and its affiliated entities (collectively, the “Estate”) pursuant to which we agreed to repurchase up to an aggregate amount of $85.0 million of our common stock beneficially owned by the Estate, in three transactions between August 6, 2012 and March 31, 2013. As of December 31, 2012, we completed two transactions totaling $45.0 million. On March 28, 2013, we received an irrevocable notice (the “Notice”) from the Estate to exercise the final sale option. On April 4, 2013, we repurchased 616,971 shares of our common stock for $40.0 million from the Estate at a price of $64.83 per share at which time it was recorded as Treasury stock on our consolidated balance sheets.

The following table presents a reconciliation of our Redeemable securities – related party (in thousands):

	Nine Months Ended September 30,
	2013		2012
Balance - beginning of period	$	40,000	$	-
Reclassification from permanent equity to temporary equity	-		85,000
Redemption of securities	(40,000)		(25,000)
Balance - end of period	$	-	$	60,000

CPA®:15 Merger

On September 28, 2012, CPA®:15 merged with and into one of our subsidiaries, with CPA®:15 surviving as our indirect, wholly-owned subsidiary. In the CPA®:15 Merger, we acquired CPA®:15’s portfolio, which was comprised of full or partial ownership in 305 properties, substantially all of which were triple-net leased to 76 tenants, and totaled approximately 27.0 million square feet, with an occupancy rate of approximately 99%.

We accounted for the CPA®:15 Merger as a business combination. The purchase price was allocated to the assets acquired and liabilities assumed, based upon their fair values. The fair values of the lease intangibles acquired were measured in a manner consistent with our purchase price allocation policy described in the 2012 Annual Report.

Proposed Merger with CPA®:16 – Global

On July 25, 2013, we and CPA®:16 – Global entered into a merger agreement pursuant to which CPA®:16 – Global will merge with and into one of our subsidiaries in exchange for shares of our common stock. On October 1, 2013, we filed a registration statement with the SEC to register the shares of our common stock to be issued to stockholders of CPA®:16 – Global in connection with the Proposed Merger, which as of the date of this Report remains subject to SEC review. Special meetings will be scheduled to obtain the approval of the Proposed Merger by our stockholders and by CPA®:16 – Global’s stockholders, and the closing of the Proposed Merger also is subject to customary closing conditions. If the Proposed Merger is approved by our stockholders and the stockholders of CPA®:16 – Global and the other closing conditions are met, we expect that the closing will occur during the first quarter of 2014, although there can be no assurance of such timing.

Subject to the terms and conditions of the merger agreement, CPA®:16 – Global stockholders will receive shares of our common stock in exchange for their shares of CPA®:16 – Global stock, pursuant to an exchange ratio based upon a value of $11.25 per share of CPA®:16 – Global and the volume weighted average trading price (“VWAP”) of our common stock for the five consecutive trading days ending on the third trading day preceding the closing date of the transaction. The exchange ratio is subject to a 12% collar based on the VWAP of our common stock on July 22, 2013 and July 23, 2013, which results in an exchange ratio of not more than 0.1842 shares and not less than 0.1447 shares of our common stock for each share of CPA®:16 – Global, (the “Per Share Merger Consideration”). CPA®:16 – Global stockholders will receive cash in lieu of any fractional shares in the Proposed Merger.

Based on the outstanding common stock of CPA®:16 – Global of approximately 206,300,000 shares at September 30, 2013, of which we owned approximately 38,200,000 shares, and the Per Share Merger Consideration, based on the VWAP of our common stock for the five days ended October 31, 2013 of 0.1676 shares, in the Proposed Merger we would issue approximately 28,200,000 shares of our common stock to stockholders of CPA®:16 – Global in exchange for the shares of CPA®:16 – Global we do not currently own. The estimated aggregate value of such shares issued in the Proposed Merger would be approximately $1.9 billion, based on the closing price of our common stock on October 31, 2013, of $66.61 per share. The nominal value of the Per Share Merger Consideration and

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Notes to Consolidated Financial Statements

estimated total merger consideration may be higher or lower as of the date of the completion of the Proposed Merger due to changes in the market price of our common stock, subject to the limitations of the collar discussed above.

Under the terms of the merger agreement, the CPA®:16 – Global Special Committee was allowed to solicit, receive, evaluate and enter into negotiations with respect to alternative proposals from third parties for 30 days following the execution of the merger agreement (the “Go Shop Period”). The Go Shop Period expired on August 24, 2013 with no qualifying proposals or offers being received.

The merger agreement contains certain termination rights for both us and CPA®:16 – Global. Each party has agreed to pay the other party’s out-of-pocket expenses in the event that the merger agreement is terminated because such party has breached any of its representations, warranties, covenants or agreements. Through September 30, 2013, we and CPA®:16 – Global have incurred merger expenses totaling approximately $2.8 million and $2.4 million, respectively.

Pursuant to the terms of the advisory agreement between us and CPA®:16 – Global, we are entitled to be paid the subordinated disposition fees and certain profit interests in connection with any liquidity event regarding CPA®:16 – Global as described above (collectively, the “Back End Amounts”). In the merger agreement, we have agreed to waive our rights to receive the Back End Amounts upon consummation of the Proposed Merger. However, in the event that the merger agreement is terminated under certain circumstances in connection with a CPA16 Superior Competing Transaction (as defined in the merger agreement), CPA®:16 – Global has agreed to pay us an up-front termination fee (the “CPA16 Termination Fee”) of $57.0 million. The CPA16 Termination Fee would be offset against the sum of the Back End Amounts.

At September 30, 2013, CPA®:16 – Global’s portfolio was comprised of the consolidated full or partial interests in 336 leased properties, substantially all of which were triple-net leased with an average remaining life of 10.5 years and an estimated annual contractual minimum base rent totaling $305.8 million, and two hotel properties. The related property-level debt was comprised of 97 fixed-rate and 17 variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $1.6 billion and a weighted-average annual interest rate of 5.6% at September 30, 2013. In addition, CPA®:16 – Global had equity interests in 19 unconsolidated investments holding 141 properties, substantially all of which were triple-net leased with an average remaining life of 8.8 years and an estimated annual contractual minimum base rent totaling $63.4 million. The debt related to these equity investments was comprised of 18 fixed-rate and five variable-rate non-recourse mortgage loans with an aggregate fair value of approximately $0.3 billion and a weighted-average annual interest rate of 5.0% at September 30, 2013. We currently consolidate 11 and hold equity interests in six of these investments. If the Proposed Merger occurs, we expect to consolidate five of the six investments in which we have equity interests. The portfolio and debt of CPA®:16 – Global is subject to change based on normal business activity.

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.

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.

During 2013, our board of directors approved loans from us to CWI and CPA®:18 – Global of up to $50.0 million and up to $100.0 million, respectively, at a rate of LIBOR plus 1.75%, which is equal to the rate at which we currently borrow funds under our Senior Credit Facility (Note 10), for the purpose of facilitating acquisitions approved by their respective investment committees, that they would not otherwise have sufficient available funds to complete, with any loans to be made solely at our Management’s discretion. On August 20, 2013, in order to facilitate an acquisition by CPA®:18 – Global, we made a $15.0 million loan to CPA®:18 – Global, which was repaid in full prior to maturity on October 4, 2013. In connection with this loan, we earned interest income from CPA®:18 – Global totaling less than $0.1 million during the period it was outstanding, from August 20, 2013 through September 30, 2013.

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Notes to Consolidated Financial Statements

Note 4. Net Investments in Properties

Real Estate

Real estate, which consists of land and buildings leased to others under operating leases and are carried at cost, is summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Land	$	539,289	$	509,530
Buildings	1,976,186		1,824,958
Less: Accumulated depreciation	(159,536)		(116,075)
	$	2,355,939	$	2,218,413

During the nine months ended September 30, 2013, we entered into the following investments, which were deemed to be real estate asset acquisitions because we entered into new leases with the sellers, at a total cost of $124.4 million, including net lease intangibles of $26.5 million (Note 7) and acquisition-related costs of $1.5 million, which were capitalized:

· a domestic investment for $72.4 million for an office building, which we funded in part with escrowed proceeds of $25.3 million from a sale of property in December 2012 in an exchange transaction under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), and non-recourse mortgage financing of $36.5 million (Note 10); and

· an investment in Finland for $52.0 million for an office and research and development facility.

During the nine months ended September 30, 2013, we also entered into the following investments, which were deemed to be business combinations because we assumed the existing leases on the properties, at a total cost of $124.1 million, including land of $12.5 million, buildings of $70.1 million and net lease intangibles of $41.5 million (Note 7):

· an investment in the United Kingdom for $63.3 million for an office building;

· an investment in the Netherlands for $35.3 million for a logistics facility; and

· a domestic investment for $25.5 million for an office building, which we funded with the escrowed proceeds from the sale of the property leased to U. S. Airways Group, Inc. (“U. S. Airways”) in an exchange transaction under Section 1031 of the Code (Note 6).

In connection with these business combinations, we expensed aggregate acquisition-related costs of $4.0 million, which are included in General and administrative expenses in the consolidated financial statements.

Dollar amounts above are based on the exchange rate of the euro and the British pound sterling on the dates of acquisition, as applicable.

Assets disposed of and reclassified as held-for-sale during the nine months ended September 30, 2013 are discussed in Note 13. Impairment charges recognized on these properties are discussed in Note 8. 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 September 30, 2013 increased by 2.3% to $1.3525 from $1.3218 at December 31, 2012. The impact of this weakening was a $14.8 million increase in the carrying value of Real estate from December 31, 2012 to September 30, 2013. In connection with restructuring five leases, we reclassified $13.7 million of properties from Net investments in direct financing leases to Real estate during the nine months ended September 30, 2013 (Note 5). In connection with anticipated sales of properties during the nine months ended September 30, 2013, we reclassified five domestic properties with an aggregate carrying value of $26.4 million to Assets held for sale, which includes real estate, net of $21.5 million, operating real estate, net of $3.6 million and net lease intangibles of $1.3 million. We completed the sale of three of these properties during the nine months ended September 30, 2013 and one of these properties in October 2013 (Note 13). There can be no assurance that the remaining property will be sold at the contracted price or at all.

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Notes to Consolidated Financial Statements

Operating Real Estate

Operating real estate, which consists of our investments in 21 self-storage properties through our Carey Storage Management LLC (“Carey Storage,” Note 15) subsidiary and our Livho Inc. hotel subsidiary, at cost, is summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Land	$	21,291	$	22,158
Buildings	62,605		77,545
Less: Accumulated depreciation	(10,549)		(19,993)
	$	73,347	$	79,710

In May 2013, we entered into a contract to sell our hotel. In connection with the potential sale, we recognized an impairment charge of $1.1 million to write down the hotel’s carrying value to its estimated fair value (Note 8) and reclassified the asset, which had a carrying value of $3.6 million, to Assets held for sale (Note 13). We completed the sale of the hotel in October 2013.

Note 5. 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.

Deferred Acquisition Fees Receivable

As described in Note 3, a portion of our structuring revenue is due in equal annual installments ranging from three to eight years, provided the CPA® REITs meet their respective performance criteria. Unpaid deferred installments, including accrued interest, from all of the CPA® REITs were included in Due from affiliates in the consolidated financial statements.

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 September 30, 2013 and December 31, 2012, none of our finance receivables were past due and we had not established any allowances for credit losses. There were no modifications of finance receivables for the nine months ended September 30, 2013 or for the year ended December 31, 2012. 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 third quarter of 2013. 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):

	Number of Tenants at		Net Investments in Direct Financing Leases at
Internal Credit Quality Indicator	September 30, 2013	December 31, 2012	September 30, 2013		December 31, 2012
1	3	3	$	43,036	$	46,398
2	3	4	27,982		49,764
3	8	8	281,383		257,281
4	1	4	7,839		22,562
5	-	-	-		-
			$	360,240	$	376,005

During the nine months ended September 30, 2013, we reclassified $13.7 million of properties from Net investment in direct financing leases to Real estate (Note 4) in connection with the restructuring of five leases. Additionally, during the nine months ended September 30, 2013, we sold our net investment in a direct financing lease, which we acquired in the CPA®:15 Merger, for $5.5 million, net of selling costs, and recognized a loss on the sale of $0.3 million.

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Notes to Consolidated Financial Statements

Note 6. Equity Investments in Real Estate and the Managed REITs

We own interests in certain unconsolidated real estate investments with the Managed REITs and also own interests in the Managed REITs. 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). The following table presents net income from equity investments in real estate and the Managed REITs, which represents our proportionate share of the income or losses of these investments as well as certain adjustments related to other-than-temporary impairment charges and amortization of basis differences related to purchase accounting adjustments (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Equity earnings from equity investments in the Managed REITs	$	2,584	$	187	$	3,668	$	5,683
Other-than-temporary impairment charges on the Special Member Interest in CPA®:16 – Global’s operating partnership	(6,554)		(2,244)		(12,082)		(5,776)
Distributions of Available Cash (Note 3)	7,323		7,352		23,891		21,789
Deferred revenue earned (Note 3)	2,123		2,123		6,369		6,369
Equity in net income from the Managed REITs	5,476		7,418		21,846		28,065
Equity in net earnings from other equity investments	3,704		3,059		30,531		24,743
Total net income from equity investments in real estate and the Managed REITs	$	9,180	$	10,477	$	52,377	$	52,808

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.

The following table sets forth certain information about our investments in the Managed REITs (dollars in thousands):

	% of Outstanding Shares Owned at		Carrying Amount of Investment at
Fund	September 30, 2013	December 31, 2012	September 30, 2013 (a)		December 31, 2012
CPA®:16 – Global (b)	18.531%	18.330%	$	289,724	$	296,301
CPA®:16 – Global operating partnership (c)	0.015%	0.015%	4,350		17,140
CPA®:17 – Global (d)	1.746%	1.290%	52,907		38,977
CPA®:17 – Global operating partnership (e)	0.015%	0.015%	-		-
CPA®:18 – Global (f)	1.138%	100.000%	219		-
CPA®:18 – Global operating partnership (g)	0.015%	N/A	209		-
CWI	0.393%	0.400%	2,364		727
CWI operating partnership	0.015%	0.015%	-		-
			$	349,773	$	353,145

__________

(a) Includes asset management fees receivable, for which 193,094 shares, 2,357 shares and 29,982 shares of CPA®:17 – Global, CPA®:18 – Global and CWI, respectively, were issued during the fourth quarter of 2013.

(b) We received distributions of $18.9 million and $18.2 million from this investment during the nine months ended September 30, 2013 and 2012, respectively.

(c) During the nine months ended September 30, 2013 and 2012, we recognized other-than-temporary impairment charges of $12.1 million and $5.8 million, respectively, on this investment to reduce the carrying value of our interest in the investment to its estimated fair value (Note 8). In addition, we received distributions of $11.2 million and $11.6 million from this investment during the nine months ended September 30, 2013 and 2012, respectively.

(d) We received distributions of $2.1 million and $1.0 million from this investment during the nine months ended September 30, 2013 and 2012, respectively.

(e) We received distributions of $12.7 million and $10.2 million from this investment during the nine months ended September 30, 2013 and 2012, respectively.

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Notes to Consolidated Financial Statements

(f) On September 13, 2012, we purchased 1,000 shares of CPA®:18 – Global common stock, par value $0.001 per share, for an aggregate purchase price of $9,000. On December 14, 2012, we made a capital contribution of $0.2 million in exchange for 22,222 shares of CPA®:18 – Global common stock. On July 25, 2013, upon CPA®:18 – Global reaching its minimum offering proceeds and admitting new stockholders, we began to account our interests in it under the equity method of accounting (Note 2).

(g) On July 3, 2013, we purchased a 0.015% special general partnership interest in CPA®:18 – Global’s operating partnership for $0.2 million. This special general partnership interest entitles us to receive distributions of our proportionate share of earnings up to 10% of the Available Cash from CPA®:18 – Global’s operating partnership (Note 3).

The following tables present estimated combined summarized financial information for the Managed REITs. Certain prior year amounts have been retrospectively adjusted to reflect the disposition (or planned disposition) of certain properties as discontinued operations. Amounts provided are expected total amounts attributable to the Managed REITs and do not represent our proportionate share (in thousands):

	September 30, 2013		December 31, 2012
Real estate, net	$	6,805,133	$	6,049,926
Other assets	2,075,663		2,002,620
Total assets	8,880,796		8,052,546
Debt	(3,952,124)		(3,509,394)
Accounts payable, accrued expenses and other liabilities	(502,891)		(450,362)
Total liabilities	(4,455,015)		(3,959,756)
Redeemable noncontrolling interests	(22,252)		(21,747)
Noncontrolling interests	(200,098)		(170,140)
Stockholders’ equity	$	4,203,431	$	3,900,903

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Revenues	$	211,102	$	207,852	$	573,969	$	620,484
Expenses	(198,286)		(174,290)		(528,847)		(523,111)
Net income from continuing operations	$	12,816	$	33,562	$	45,122	$	97,373
Net income attributable to the Managed REITs (a) (b)	$	18,303	$	28,179	$	45,389	$	121,099

_________

(a) Inclusive of impairment charges recognized by the Managed REITs totaling $0.5 million and $6.5 million during the three months ended September 30, 2013 and 2012, respectively, and $22.2 million and $9.0 million during the nine months ended September 30, 2013 and 2012, respectively. These impairment charges reduced our income earned from these investments by approximately $0.1 million and $1.2 million during the three months ended September 30, 2013 and 2012, respectively, and $4.1 million and $1.3 million during the nine months ended September 30, 2013 and 2012, respectively.

(b) Amounts included net gains (losses) on sale of real estate recorded by the Managed REITs totaling $2.4 million and $(2.9) million during the three and nine months ended September 30, 2013, respectively, and net (losses) gains totaling $(0.4) million and $31.5 million during the three and nine months ended September 30, 2012, respectively.

W. P. Carey 9/30/2013 10-Q — 19

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Notes to Consolidated Financial Statements

Interests in Other Unconsolidated Real Estate Investments

We own equity interests in single-tenant net leased properties that are generally leased to companies 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. Earnings for each investment are recognized in accordance with each respective investment agreement. Investments in unconsolidated investments are required to be evaluated periodically. We periodically compare an investment’s carrying value to its estimated fair value and recognize an impairment charge to the extent that the carrying value exceeds fair value and such decline is determined to be other than temporary.

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):

	Ownership Interest	Carrying Value at
Lessee	at September 30, 2013	September 30, 2013		December 31, 2012
Schuler A.G. (a) (b) (d)	67%	$	68,067	$	62,006
Hellweg Die Profi-Baumärkte GmbH & Co. KG (Hellweg 2) (a) (e)	40%	39,794		42,387
Advanced Micro Devices (c) (d)	33%	23,226		23,667
The New York Times Company (e)	18%	21,300		20,584
C1000 Logistiek Vastgoed B.V. (a) (c) (f)	15%	13,860		14,929
The Talaria Company (Hinckley) (d)	30%	8,002		7,702
The Upper Deck Company (d)	50%	7,472		7,198
Del Monte Corporation (c) (d)	50%	7,422		8,318
Waldaschaff Automotive GmbH and Wagon Automotive Nagold GmbH (a) (f)	33%	6,592		6,323
Builders FirstSource, Inc. (d)	40%	5,011		5,138
PetSmart, Inc. (d)	30%	3,860		3,808
Consolidated Systems, Inc. (c) (d)	60%	3,206		3,278
Wanbishi Archives Co. Ltd. (a) (f) (g) (h)	3%	419		(736)
U. S. Airways Group, Inc.(i)	75%	-		7,995
SaarOTEC (a) (d) (h)	50%	(491)		(116)
		$	207,740	$	212,481

__________

(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) These investments are tenancy-in-common interests whereby the property is encumbered by debt for which we are jointly and severally liable. The co-obligors include certain of our Managed REITs, and the aggregate amount due under the arrangements was approximately $170.3 million. Of this amount, $62.4 million represents the aggregate amount we agreed to pay and is included within the carrying value of each of these investments, where applicable.

(d) This investment is jointly-owned with CPA®:16 – Global.

(e) This investment is jointly-owned with CPA®:16 – Global and CPA®:17 – Global.

(f) This investment is jointly-owned with CPA®:17 – Global.

(g) We acquired our interest in this investment in December 2012. In January 2013, we made a purchase accounting adjustment of $1.3 million to this investment.

(h) At September 30, 2013 and December 31, 2012, 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.

(i) We sold our interest in this investment in June 2013. Please see “Disposition of Unconsolidated Real Estate Investment” below for more information.

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Notes to Consolidated Financial Statements

Disposition of Unconsolidated Real Estate Investment

In June 2013, we contributed $2.9 million to partially pay off the existing $17.1 million mortgage loan on our U.S. Airways investment. We refinanced the remaining mortgage loan with new financing of $13.9 million. Immediately after the refinancing, we sold our interest in the investment to a third party for $28.4 million, net of closing costs and our contribution made to partially pay off the loan, and recognized a gain on sale of $19.5 million. The proceeds were placed into escrow for the purpose of executing an exchange transaction under Section 1031 of the Code. The gain was included in Net income from equity investments in real estate and the Managed REITs in the consolidated financial statements.

Note 7. Intangible Assets and Liabilities and Goodwill

In connection with our acquisitions of properties, we have recorded net lease intangibles that are being amortized over periods ranging from one year to 40 years. In addition, we have several ground leases that are being amortized over periods up to 134 years. In-place lease and above-market rent are included in In-place lease intangible assets, net and Above-market rent intangible assets, net, respectively, in the consolidated financial statements. Tenant relationship, below-market ground lease (as lessee), trade name, management contracts and software license intangibles are included in Other intangible assets, net in the consolidated financial statements. Below-market rent, above-market ground lease (as lessor), and below-market purchase option intangibles are included in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.

In connection with our investment activity during the nine months ended September 30, 2013, we have recorded net lease intangibles comprised as follows (life in years, dollars in thousands):

	Weighted-Average
	Life	Amount
Amortizable Intangible Assets