Edgar Filing: W. P. Carey Inc.

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

o 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 office)		(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 x No o

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 x No o

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 x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(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 o No x

Registrant has 68,873,002 shares of common stock, $0.001 par value, outstanding at November 2, 2012.

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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	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3. Quantitative and Qualitative Disclosures About Market Risk	65
Item 4. Controls and Procedures	67

PART II — OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6. Exhibits	69
Signatures	70

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 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, 2011 as filed by our predecessor, W. P. Carey & Co. LLC, with the SEC on February 29, 2012 (the “2011 Annual Report”) and Exhibits 99.1 (Item 1A. Risk Factors) and 99.7 (Risk Factors Related to the REIT Conversion and Merger) to our Current Report on Form 8-K filed with the SEC on October 19, 2012. We do not undertake to revise or update any forward-looking statements. Additionally, a description of our critical accounting estimates is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the 2011 Annual Report. There has been no significant change in our critical accounting estimates.

W. P. Carey Inc. 9/30/2012 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 amounts)

	September 30, 2012			December 31, 2011
Assets
Investments in real estate:
Real estate, at cost (inclusive of amounts attributable to consolidated variable interest entities (“VIEs”) of $48,893 and $41,032, respectively)	$	2,360,786		$	646,482
Operating real estate, at cost (inclusive of amounts attributable to consolidated VIEs of $0 and $26,318, respectively)	110,109			109,875
Accumulated depreciation (inclusive of amounts attributable to consolidated VIEs of $14,415 and $22,350, respectively)	(126,166		)	(135,175		)
Net investments in properties	2,344,729			621,182
Net investments in direct financing leases	373,544			58,000
Equity investments in real estate and the REITs	575,189			538,749
Net investments in real estate	3,293,462			1,217,931
Cash and cash equivalents (inclusive of amounts attributable to consolidated VIEs of $241 and $230, respectively)	236,744			29,297
Due from affiliates	29,557			38,369
Goodwill	338,558			63,607
Intangible assets, net (inclusive of amounts attributable to consolidated VIEs of $565 and $0, respectively)	753,668			62,350
Other assets, net (inclusive of amounts attributable to consolidated VIEs of $2,568 and $2,773, respectively)	130,506			51,069
Total assets	$	4,782,495		$	1,462,623

Liabilities and Equity
Liabilities:
Non-recourse and limited-recourse debt (inclusive of amounts attributable to consolidated VIEs of $18,175 and $14,261, respectively)	$	1,717,720		$	356,209
Senior credit facility	418,160			233,160
Accounts payable, accrued expenses and other liabilities (inclusive of amounts attributable to consolidated VIEs of $1,998 and $1,651, respectively)	275,714			82,055
Income taxes, net	26,296			44,783
Distributions payable	44,301			22,314
Total liabilities	2,482,191			738,521
Redeemable noncontrolling interest	6,623			7,700
Redeemable securities - related party (Note 4)	60,000			—
Commitments and contingencies (Note 12)
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; 68,566,888 and 0 shares issued and outstanding, respectively	68			—
Preferred stock of W. P. Carey Inc., $0.001 par value, 50,000,000 shares authorized; None issued	—			—
Additional paid-in-capital	2,129,217			779,071
Distributions in excess of accumulated earnings	(141,573		)	(95,046		)
Deferred compensation obligation	8,379			7,063
Accumulated other comprehensive loss	(9,265		)	(8,507		)
Less, treasury stock at cost, 561,418 and 0 shares, respectively	(25,000		)	—
Total W. P. Carey stockholders’ equity	1,961,826			682,581
Noncontrolling interests	271,855			33,821
Total equity	2,233,681			716,402
Total liabilities and equity	$	4,782,495		$	1,462,623

See Notes to Consolidated Financial Statements.

W. P. Carey Inc. 9/30/2012 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,
	2012			2011			2012			2011
Revenues
Asset management revenue	$	15,850		$	14,840		$	47,088		$	51,279
Structuring revenue	8,316			21,221			19,576			42,901
Incentive, termination and subordinated disposition revenue	—			—			—			52,515
Wholesaling revenue	4,012			2,586			11,878			8,788
Reimbursed costs from affiliates	19,879			14,707			59,100			49,485
Lease revenues	16,714			17,001			51,265			46,682
Other real estate income	6,265			6,303			19,089			17,212
	71,036			76,658			207,996			268,862
Operating Expenses
General and administrative	(54,826		)	(25,187		)	(108,317		)	(71,095		)
Reimbursable costs	(19,879		)	(14,707		)	(59,100		)	(49,485		)
Depreciation and amortization	(6,571		)	(6,323		)	(19,928		)	(16,552		)
Property expenses	(2,426		)	(3,231		)	(7,863		)	(8,547		)
Other real estate expenses	(2,600		)	(2,725		)	(7,530		)	(8,224		)
Impairment charges	(5,535		)	—			(5,535		)	—
	(91,837		)	(52,173		)	(208,273		)	(153,903		)
Other Income and Expenses
Other interest income	252			323			910			1,558
Income from equity investments in real estate and the REITs	10,477			16,068			52,808			37,356
Gain on change in control of interests	20,794			—			20,794			27,859
Other income and (expenses)	502			(294		)	2,026			4,945
Interest expense	(7,868		)	(5,989		)	(22,459		)	(15,660		)
	24,157			10,108			54,079			56,058
Income from continuing operations before income taxes	3,356			34,593			53,802			171,017
Provision for income taxes	(379		)	(5,929		)	(192		)	(38,526		)
Income from continuing operations	2,977			28,664			53,610			132,491
Discontinued Operations
(Loss) income from operations of discontinued properties	(342		)	916			(870		)	1,146
(Loss) gain on sale of real estate	(409		)	612			(888		)	1,272
Impairment charges	—			(4,934		)	(6,727		)	(4,975		)
Loss from discontinued operations, net of tax	(751		)	(3,406		)	(8,485		)	(2,557		)
Net Income	2,226			25,258			45,125			129,934
Add: Net loss attributable to noncontrolling interests	325			581			1,383			1,295
Less: Net loss (income) attributable to redeemable noncontrolling interest	37			(637		)	146			(1,241		)
Net Income Attributable to W. P. Carey Common Stockholders	$	2,588		$	25,202		$	46,654		$	129,988

Basic Earnings Per Share
Income from continuing operations attributable to W. P. Carey common stockholders	$	0.08		$	0.70		$	1.35		$	3.28
Loss from discontinued operations attributable to W. P. Carey common stockholders	(0.02		)	(0.08		)	(0.21		)	(0.06		)
Net income attributable to W. P. Carey common stockholders	$	0.06		$	0.62		$	1.14		$	3.22

Diluted Earnings Per Share
Income from continuing operations attributable to W. P. Carey common stockholders	$	0.08		$	0.70		$	1.33		$	3.25
Loss from discontinued operations attributable to W. P. Carey common stockholders	(0.02		)	(0.08		)	(0.21		)	(0.06		)
Net income attributable to W. P. Carey common stockholders	$	0.06		$	0.62		$	1.12		$	3.19

Weighted Average Shares Outstanding
Basic	40,366,298			39,861,064			40,398,433			39,794,506
Diluted	41,127,404			40,404,520			41,029,578			40,424,316

Amounts Attributable to W. P. Carey Common Stockholders
Income from continuing operations, net of tax	$	3,339		$	28,608		$	55,139		$	132,545
Loss from discontinued operations, net of tax	(751		)	(3,406		)	(8,485		)	(2,557		)
Net income	$	2,588		$	25,202		$	46,654		$	129,988

Distributions Declared Per Common Share	$	0.650		$	0.560		$	1.782		$	1.622

See Notes to Consolidated Financial Statements.

W. P. Carey Inc. 9/30/2012 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,
	2012			2011			2012			2011
Net Income	$	2,226		$	25,258		$	45,125		$	129,934
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	2,164			(5,380		)	(141		)	2,291
Unrealized loss on derivative instruments	(92		)	(3,032		)	(673		)	(3,271		)
Change in unrealized depreciation on marketable securities	(2		)	(5		)	(7		)	(8		)
	2,070			(8,417		)	(821		)	(988		)
Comprehensive Income	4,296			16,841			44,304			128,946

Amounts Attributable to Noncontrolling Interests
Net loss	325			581			1,383			1,295
Foreign currency translation adjustments	(230		)	866			67			(187		)
Comprehensive loss attributable to noncontrolling interests	95			1,447			1,450			1,108

Amounts Attributable to Redeemable Noncontrolling Interest
Net loss (income)	37			(637		)	146			(1,241		)
Foreign currency translation adjustments	(9		)	8			(4		)	(1		)
Comprehensive loss (income) attributable to redeemable noncontrolling interest	28			(629		)	142			(1,242		)
Comprehensive Income Attributable to W. P. Carey Common Stockholders	$	4,419		$	17,659		$	45,896		$	128,812

See Notes to Consolidated Financial Statements.

W. P. Carey Inc. 9/30/2012 10-Q — 4

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, 2012 and the Year Ended December 31, 2011

(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		Amount		Shares		Amount		Capital			Earnings			Obligation			Loss			Stock			Stockholders			Interests			Total
Balance at January 1, 2011	39,454,847		$	—	—		$	—	$	763,734		$	(145,769	)	$	10,511		$	(3,463	)	$	—		$	625,013		$	40,461		$	665,474
Cash proceeds on issuance of shares, net	45,674		—		—		—		1,488			—			—			—			—			1,488			—			1,488
Grants issued in connection with services rendered	5,285		—		—		—		—			—			700			—			—			700			—			700
Shares issued under share incentive plans	576,148		—		—		—		—			—			—			—			—			—			—			—
Contributions	—		—		—		—		—			—			—			—			—			—			3,223			3,223
Forfeitures of shares	(3,562	)	—		—		—		(274		)	—			—			—			—			(274		)	—			(274		)
Distributions declared ($2.19 per share)	—		—		—		—		—			(88,356		)	301			—			—			(88,055		)	—			(88,055		)
Distributions to noncontrolling interests	—		—		—		—		—			—			—			—			—			—			(6,000		)	(6,000		)
Windfall tax benefits - share incentive plans	—		—		—		—		2,569			—			—			—			—			2,569			—			2,569
Stock-based compensation expense	—		—		—		—		21,739			—			(4,449		)	—			—			17,290			—			17,290
Repurchase and retirement of shares	(349,374	)	—		—		—		(4,761		)	—			—			—			—			(4,761		)	—			(4,761		)
Redemption value adjustment	—		—		—		—		455			—			—			—			—			455			—			455
Purchase of noncontrolling interest	—		—		—		—		(5,879		)	—			—			—			—			(5,879		)	(1,612		)	(7,491		)
Net income	—		—		—		—		—			139,079			—			—			—			139,079			(1,864		)	137,215
Change in other comprehensive loss	—		—		—		—		—			—			—			(5,044		)	—			(5,044		)	(387		)	(5,431		)
Balance at December 31, 2011	39,729,018		—		—		—		779,071			(95,046		)	7,063			(8,507		)	—			682,581			33,821			716,402
Cash proceeds on issuance of shares, net	30,993		—		—		—		5,964			—			—			—			—			5,964			—			5,964
Grants issued in connection with services rendered	427,425		—		—		—		—			—			991			—			—			991			—			991
Shares issued under share incentive plans	238,728		—		—		—		1,690			—			—			—			—			1,690			—			1,690
Contributions	—		—		—		—		—			—			—			—			—			—			2,322			2,322
Forfeitures of shares	(29,919	)	—		—		—		—			—			—			—			—			—			—			—
Windfall tax benefits - share incentive plans	—		—		—		—		8,865			—			—			—			—			8,865			—			8,865
Stock-based compensation expense	—		—		—		—		13,413			—			—			—			—			13,413			—			13,413
Redemption value adjustment	—		—		—		—		(79		)	—			—			—			—			(79		)	—			(79		)
Reclassification of Estate Shareholders shares	—		—		—		—		(60,000		)	—			—			—			—			(60,000		)	—			(60,000		)
Purchase of noncontrolling interests in connection with the Merger	—		—		—		—		—			—			—			—			—			—			238,038			238,038
Distributions to noncontrolling interests	—		—		—		—		—			—			—			—			—			—			(862		)	(862		)
Distributions declared ($1.78 per share)	—		—		—		—		—			(93,181		)	325			—			—			(92,856		)	—			(92,856		)
Purchase of treasury stock from related party (Note 4)	—		—		(561,418	)	—		—			—			—			—			(25,000		)	(25,000		)	—			(25,000		)
Exchange of shares of W. P. Carey & Co. LLC for shares of W. P. Carey Inc. in connection with the Merger	(40,396,245	)	—		40,396,245		40		(40		)	—			—			—			—			—			—			—
Shares issued to stockholders of CPA®:15 in connection with the Merger	—		—		28,170,643		28		1,380,333			—			—			—			—			1,380,361			—			1,380,361
Net income	—		—		—		—		—			46,654			—			—			—			46,654			(1,383		)	45,271
Change in other comprehensive loss	—		—		—		—		—			—			—			(758		)	—			(758		)	(81		)	(839		)
Balance at September 30, 2012	—		$	—	68,005,470		$	68	$	2,129,217		$	(141,573	)	$	8,379		$	(9,265	)	$	(25,000	)	$	1,961,826		$	271,855		$	2,233,681

See Notes to Consolidated Financial Statements.

W. P. Carey Inc. 9/30/2012 10-Q — 5

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine Months Ended September 30,
	2012			2011
Cash Flows — Operating Activities
Net income	$	45,125		$	129,934
Adjustments to net income:
Depreciation and amortization, including intangible assets and deferred financing costs	22,532			20,160
Income from equity investments in real estate and the REITs in excess of distributions received	(18,557		)	(835		)
Straight-line rent and financing lease adjustments	(2,229		)	(2,039		)
Amortization of deferred revenue	(7,077		)	(3,932		)
Gain on deconsolidation of a subsidiary	—			(1,008		)
Gain on sale of real estate	(1,564		)	(264		)
Unrealized gain on foreign currency transactions and others	(17		)	(79		)
Realized loss (gain) on foreign currency transactions and others	594			(1,134		)
Management and disposition income received in shares of affiliates	(21,272		)	(62,493		)
Gain on conversion of shares	(15		)	(3,834		)
Gain on change in control of interests	(20,794		)	(27,859		)
Impairment charges	12,262			4,975
Stock-based compensation expense	19,560			13,026
Deferred acquisition revenue received	17,017			18,128
Increase in structuring revenue receivable	(8,502		)	(17,732		)
(Decrease) increase in income taxes, net	(14,885		)	5,907
Net changes in other operating assets and liabilities	9,561			(8,269		)
Net cash provided by operating activities	31,739			62,652

Cash Flows — Investing Activities
Cash paid to shareholders of CPA®:15 in connection with the Merger	(152,356		)	—
Cash acquired in connection with the Merger	178,945			—
Distributions received from equity investments in real estate and the REITs in excess of equity income	27,241			13,870
Capital contributions to equity investments	(377		)	(2,297		)
Purchase of interests in CPA®:16 — Global	—			(121,315		)
Purchases of real estate and equity investments in real estate	(2,679		)	(24,323		)
VAT refunded in connection with acquisitions of real estate	—			5,035
Capital expenditures	(2,930		)	(6,731		)
Cash acquired on acquisition of subsidiaries	—			57
Proceeds from sale of real estate	32,586			10,998
Proceeds from sale of securities	314			777
Funding of short-term loans to affiliates	—			(96,000		)
Proceeds from repayment of short-term loans to affiliates	—			95,000
Funds placed in escrow	(11,716		)	(5,282		)
Funds released from escrow	13,540			2,326
Net cash provided by (used in) investing activities	82,568			(127,885		)

Cash Flows — Financing Activities
Distributions paid	(69,180		)	(63,060		)
Contributions from noncontrolling interests	2,319			2,341
Distributions paid to noncontrolling interests	(1,866		)	(5,310		)
Purchase of noncontrolling interest	—			(7,502		)
Purchase of treasury stock from related party (Note 4)	(25,000		)	—
Scheduled payments of mortgage principal	(12,455		)	(22,893		)
Proceeds from mortgage financing	1,250			20,848
Proceeds from senior credit facility	215,000			251,410
Repayments of senior credit facility	(30,000		)	(140,000		)
Payment of financing costs	(1,687		)	(1,562		)
Proceeds from issuance of shares	5,964			1,034
Windfall tax benefit associated with stock-based compensation awards	8,865			2,051
Net cash provided by financing activities	93,210			37,357

Change in Cash and Cash Equivalents During the Period
Effect of exchange rate changes on cash	(70		)	278
Net increase (decrease) in cash and cash equivalents	207,447			(27,598		)
Cash and cash equivalents, beginning of period	29,297			64,693
Cash and cash equivalents, end of period	$	236,744		$	37,095

(Continued)

W. P. Carey Inc. 9/30/2012 10-Q — 6

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W. P. CAREY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(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. 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 Corporate Property Associates 15 Incorporated (“CPA®:15”) through a series of transactions (the “Merger”). 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 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 Merger	(107,147		)
Fair value of W. P. Carey & Co. LLC equity interest in jointly-owned investments with CPA®:15 prior to the Merger	(54,822		)
Goodwill	274,951
Cash acquired on acquisition of subsidiaries, net	$	(178,945	)

In September 2011, 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	$	5,340
Intangible assets and goodwill, net	(15		)
Total	$	5,325

Liabilities
Non-recourse debt	$	(6,311	)
Accounts payable, accrued expenses and other liabilities	(22		)
Total	$	(6,333	)

On May 2, 2011, in connection with entering into an amended and restated advisory agreement with Corporate Property Associates 16 — Global Incorporated (“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 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 Corporate Property Associates 14 Incorporated (“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

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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 the Federal Express and Amylin investments from CPA®:14, 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 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).

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

At September 30, 2012, 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 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 taxable real estate investment trust subsidiaries (“TRSs”), we also earn revenue as the advisor to publicly-owned, non-listed real estate investment trusts, which are sponsored by us under the Corporate Property Associates brand name (the “CPA® REITs”) and invest in similar properties. At September 30, 2012, we were the advisor to the following CPA® REITs: CPA®:16 — Global and Corporate Property Associates 17 — Global Incorporated (“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 Carey Watermark Investors Incorporated (“CWI” and, together with the CPA® REITs, the “REITs”), which acquires interests in lodging and lodging-related properties. At September 30, 2012, we owned and/or managed more than 995 properties domestically and internationally. Our owned portfolio was comprised of our full or partial ownership interest in 430 properties, substantially all of which were net leased to 133 tenants, and totaled approximately 39.1 million square feet (on a pro rata basis) with an occupancy rate of approximately 98.4%. In addition, through our consolidated subsidiaries, Carey Storage Management LLC (“Carey Storage”) and Livho, Inc. (“Livho”), we had interests in 21 self-storage properties and a hotel property, respectively, for an aggregate of approximately 0.8 million square feet (on a pro rata basis) at September 30, 2012.

We were formed as a corporation under the laws of Maryland on February 15, 2012. On February 17, 2012, W. P. Carey & Co. LLC (our “predecessor”), announced its intention to reorganize to qualify as a real estate investment trust for federal income tax purposes (the “REIT Reorganization”). 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 qualify 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 New York Stock Exchange (“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 that 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 real estate investment trust under Section 856 through 860 of the Internal Revenue Code effective February 15, 2012 for the year ending December 31, 2012 (Note 15). As a real estate investment trust, we are not generally subject to United States (“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 real estate investment trust structure, while the activities conducted by our Investment Management segment subsidiaries have been organized under TRSs.

Primary Business Segments

Investment Management — Through our TRSs, we structure and negotiate investments and debt placement transactions for the 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 performance revenue from the REITs based on the value of their real estate-related, self-storage-related and lodging-related assets under management. As funds available to the 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 REITs’ stockholders.

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Notes to Consolidated Financial Statements

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 REITs and account for these interests under the equity method of accounting. In addition, we receive a percentage of distributions of Available Cash, as defined in the respective advisory agreements, from the operating partnerships of each of the 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 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, 2011, which are included in the 2011 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 year amounts have been reclassified to conform to the current year presentation.

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.

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. 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, 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 have investments in tenancy-in-common interests in various domestic and international properties. Consolidation of these investments is not required as they 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 under current authoritative accounting guidance. We use the equity method of accounting because the shared decision-making involved in a tenancy-in-common interest investment creates an opportunity for us to have significant influence on the operating and financial decisions of these investments and thereby creates some responsibility by us to achieve a return on our investment. Additionally, we own interests in single-tenant net leased properties leased to corporations 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.

Counterparty Credit Risk Portfolio Exception Election

Effective January 1, 2011, or the “effective date,” we have made an accounting policy election to use the exception in Accounting Standards Codification (“ASC”) 820-10-35-18D, the “portfolio exception,” with respect to measuring counterparty credit risk for derivative instruments, consistent with the guidance in 820-10-35-18G. We manage credit risk for our derivative positions on a

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Notes to Consolidated Financial Statements

counterparty-by-counterparty basis (that is, on the basis of its net portfolio exposure with each counterparty), consistent with our risk management strategy for such transactions. We manage credit risk by considering indicators of risk such as credit ratings, and by negotiating terms in our International Swaps and Derivatives Association, Inc. (“ISDA”) master netting arrangements with each individual counterparty. Credit risk plays a central role in the decision of which counterparties to consider for such relationships and when deciding with whom it will enter into derivative transactions. Since the effective date, we have monitored and measured credit risk and calculated credit valuation adjustments for our derivative transactions on the basis of its relationships at ISDA master netting arrangement level. We receive reports from an independent third-party valuation specialist on a quarterly basis providing the credit valuation adjustments at the counterparty portfolio level for purposes of reviewing and managing our credit risk exposures. Since the portfolio exception applies only to the fair value measurement and not to financial statement presentation, the portfolio-level adjustments are then allocated in a reasonable and consistent manner each period to the individual assets or liabilities that make up the group, in accordance with other applicable accounting guidance and our accounting policy elections. Derivative transactions are measured at fair value in the statement of financial position each reporting period. We note that key market participants take into account the existence of such arrangements that mitigate credit risk exposure in the event of default. As such, we elect to apply the portfolio exception in 820-10-35-18D with respect to measuring counterparty credit risk for all of our derivative transactions subject to master netting arrangements.

Future Accounting Requirements

The following Accounting Standards Update (“ASU”) promulgated by the Financial Accounting Standards Board (“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 Adjustment

During the second quarter of 2012, we identified an error in the consolidated financial statements related to the misapplication of accounting guidance on the involuntary disposals of two parcels of land in the fourth quarter of 2010. We concluded that this adjustment, with a net impact on income from continuing operations and income attributable to W. P. Carey stockholders of $1.8 million on our statement of operations for the second quarter of 2012, was not material to our results for the prior year period or for the period of adjustment. Accordingly, this change was recorded in the consolidated financial statements in the second quarter of 2012 as an out-of-period adjustment as follows: a reduction to Accounts payable, accrued expenses and other liabilities of $2.1 million and a reduction to Net investments in properties of $0.3 million on the consolidated balance sheet; and an increase in Gain on sale of real estate of $2.0 million, an increase in Property expenses of $0.4 million, an increase in Other real estate income of $0.2 million and an increase in Other interest income of $0.1 million on the consolidated statement of operations.

Note 3. Merger with CPA®:15

Merger

On February 17, 2012, 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

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Notes to Consolidated Financial Statements

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 11). As a condition of the Merger, 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 (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 (on a pro rata basis), 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 and an estimated annualized contractual minimum base rent of $218.9 million (on a pro rata basis). 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% (on a pro rata basis). 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 estimated lease revenues and income from operations contributed from the properties acquired from the date of the Merger through September 30, 2012 were $1.2 million and $0.5 million (inclusive of $0.1 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 $30.6 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 nine months ended September 30, 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 our 2011 Annual Report. The fair value of the below-market purchase option liability was measured 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. The fair value of the debt instruments acquired was determined 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 interest rate. 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. 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 values of these assets and liabilities and the impact to goodwill are subject to change.

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Notes to Consolidated Financial Statements

	Preliminary
	Purchase
	Price Allocation
	(in thousands)
Total consideration
Fair value of W. P. Carey common stock issued	$	1,380,362
Cash consideration paid	152,356
Merger Consideration	1,532,718
Fair value of W. P. Carey & Co. LLC equity interest in CPA®:15 prior to the Merger	107,147
Fair value of W. P. Carey & Co. LLC equity interest in jointly-owned investments with CPA®:15 prior to the Merger	54,822
	$	1,694,687
Assets acquired at fair value
Net investment in properties	$	1,758,372
Net investment in direct financing leases	315,789
Equity investments in real estate	164,886
Intangible assets (Note 8)	694,411
Cash and cash equivalents	178,945
Other assets	83,838
	3,196,241
Liabilities assumed at fair value
Non-recourse debt	(1,350,755		)
Accounts payable, accrued expenses and other liabilities (including below-market rent intangibles of $102,919)	(187,712		)
	(1,538,467		)

Total identifiable net assets	1,657,774
Amounts attributable to noncontrolling interests	(238,038		)
Goodwill	274,951
	$	1,694,687

Goodwill

Two major items comprise the $275.0 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 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 net asset value per share (“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 real estate investment trusts 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.

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Notes to Consolidated Financial Statements

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 closing date of the Merger, which was the date we gained control, in a manner consistent with the methodology described above.

Goodwill is not deductible for income tax purposes.

Equity Investments and Noncontrolling Interests

Additionally, we recognized a gain on change in control of interests of $14.7 million for each of the three and nine months ended September 30, 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 five 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 five 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. The fair value of real estate was determined by reference to the portfolio appraisals which determined 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 were 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 were 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 had a purchase option deemed by the appraiser to be materially favorable to the tenant, or the tenant had long-term renewal options at rental rates below estimated market rental rates, the appraisal assumed the exercise of such purchase option or long-term renewal options in its determination of residual value. Where a property was deemed to have excess land, the discounted cash flow analysis included 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 were currently under contract for sale, the appraised value of the portfolio reflected the current contractual sale price of such properties.

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 the future property level debt 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.

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Notes to Consolidated Financial Statements

The revenues and income from operations contributed from the properties acquired from the date of the Merger through September 30, 2012 were approximately $1.2 million and $0.5 million (inclusive of $0.1 million attributable to noncontrolling interests), respectively.

Pro Forma Financial Information

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 three and nine months ended September 30, 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):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Pro forma total revenues	$	124,223	$	134,083	$	368,913	426,612

Pro forma income attributable to W. P. Carey stockholders	$	28,693	$	31,699	$	106,675	$	108,784

Pro forma earnings per share: (a)
Basic	$	0.41	$	0.46	$	1.53	$	1.58
Diluted	$	0.41	$	0.45	$	1.52	$	1.56

Pro forma weighted average shares: (b)
Basic	68,536,941		68,031,707		68,569,076		67,965,149
Diluted	69,298,047		68,575,163		69,200,221		68,594,959

(a) The pro forma income attributable to W. P. Carey stockholders reflects combined expenses incurred related to the Merger of approximately $33.7 million for the nine months ended September 30, 2011 as if the Merger had taken place on January 1, 2011.

(b) The pro forma weighted average shares outstanding for the three and nine months ended September 30, 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.

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Notes to Consolidated Financial Statements

Note 4. Agreements and Transactions with Related Parties

Advisory Agreements with the REITs

Our predecessor had advisory agreements with each of the 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 with each of the CPA® REITs with economic terms similar to the prior agreements, which are outlined in the 2011 Annual Report. 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 and for a formal review of the allocation of investments among the CPA® REITs and us and presented to the boards of directors 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 REITs in connection with providing services as the advisor to the REITs (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Asset management revenue (a)	$	15,850	$	14,840	$	47,088	$	51,279
Structuring revenue (b)	8,316		21,221		19,576		42,901
Incentive, termination and subordinated disposition revenue (c)	—		—		—		52,515
Wholesaling revenue (d)	4,012		2,586		11,878		8,788
Reimbursed costs from affiliates (d)	19,879		14,707		59,100		49,485
Distributions of Available Cash (e)	7,352		4,480		21,789		8,268
Deferred revenue earned (f)	2,123		2,123		6,369		3,538
	$	57,532	$	59,957	$	165,800	$	216,774

(a) We earn asset management revenue from each REIT, which is based on average invested assets and is calculated according to the advisory agreement with each REIT. For CPA®:16 — Global prior to its merger with CPA®:14 in May 2011 (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 the 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, 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 for any revenue from each REIT. In 2012, we elected to receive all asset management and performance 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 shares with the remaining 50% payable in cash. For CPA®:17 — Global and CWI, we elected to receive asset management revenue in their shares. In 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 shares of their common stock. For 2011, we also elected to receive performance revenue from CPA®:16 — Global in shares of its common stock, while for CPA®:14, prior to the CPA®:14/16 Merger, and for CPA®:15, prior to the Merger, we elected to receive 80% of all performance revenue in shares of their common stocks, 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.

(b) We earn revenue in connection with structuring and negotiating investments and related mortgage financing for the REITs. We may receive acquisition revenue of up to 4.5% of the total cost of all investments made by the CPA® REITs. 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. 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 and we do not earn deferred acquisition revenue.

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Notes to Consolidated Financial Statements

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):

	September 30, 2012		December 31, 2011
Unpaid deferred acquisition fees	$	20,895	$	29,410

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Interest earned on unpaid deferred acquisition fees	$	237	$	294	$	792	$	936

(c) 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.

(d) The REITs reimburse us for certain costs, primarily broker/dealer commissions paid on behalf of the 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 do 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 September 30, 2012, we have incurred organization and offering costs on behalf of CWI of approximately $6.8 million. However, at September 30, 2012, CWI was only obligated to reimburse us $2.2 million of these costs because of the 2% limitation described above, and $1.8 million had been reimbursed as of that date.

(e) We receive distributions up to 10% of Available Cash, as defined in the respective advisory agreements, from the operating partnerships of CPA®:17 — Global, CWI and, subsequent to the CPA®:14/16 Merger in May 2011, CPA®:16 — Global. Amounts in the table above relate to CPA®:16 — Global and CPA®:17 — Global only. 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.

(f) In connection with the CPA®:14/16 Merger, we acquired a special member interest (Note 7) in CPA®:16 — Global’s operating partnership during the second quarter of 2011. We initially recorded this special member interest at its fair value to be amortized into earnings over the expected period of performance.

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 (the “Estate”), 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 (“HoldCo” and together with the Estate, the “Estate Shareholders”), 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.

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Notes to Consolidated Financial Statements

Share Purchase Agreement

Concurrently with the execution of the Voting Agreement, we entered into a Share Purchase Agreement with the Estate Shareholders pursuant to which we have 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 Shareholders in the following manner: (i) prior to the date of the dissemination of the Joint Proxy Statement / Prospectus of us and CPA®:15 underlying the registration of securities with the SEC on Form S-4 (the “Joint Proxy Statement / Prospectus”), the Estate Shareholders collectively 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 the later of (a) December 31, 2012, and (b) 30 days following the consummation of the Merger, the Estate Shareholders collectively 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 the later of (a) March 31, 2013, and (b) the date that is six (6) months following the date of the consummation of the Merger, the Estate Shareholders collectively had 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 have 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 Shareholders indicating their 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 Shareholders at a price of $44.53 per share. On October 1, 2012, we received a notice from the Estate Shareholders indicating their 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 Shareholders at a price of $48.67 per share (Note 18). We used our existing Senior Credit Facility (Note 11) to finance the repurchases pursuant to the First and Second Sale Options. We currently intend to borrow from our Senior Credit Facility in order to finance the repurchase of our common stock pursuant to the remaining Sale Option if and when the Estate Shareholders should decide to exercise it. See Note 18, “Subsequent Events,” for a discussion of the issuance of shares of our common stock to an institutional investor in October 2012 for a total purchase price of $45.0 million pursuant to our existing shelf registration statement.

Because the Share Purchase Agreement contains put options that, if exercised, would obligate us to settle the transactions in cash, we account for the Estate Shareholders’ shares in us 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 Stockholders were to exercise the put options requiring us to purchase their shares. When the Estate Shareholders exercise an option to require us to purchase their shares, 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 Shareholders exercise all their Sale Options. Additionally, on August 2, 2012, when the Estate Shareholders exercised the First Sale Option upon our purchase of our common stock, we reclassified $25.0 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):

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

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”).

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Notes to Consolidated Financial Statements

The Registration Rights Agreement provides the Estate Shareholders 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 owned by the Estate Shareholders 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 owned by the Estate Shareholders 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 Shareholders’ Registration Rights, other than any (i) underwriting fees, discounts and sales commissions, (ii) fees, expense and disbursements of legal counsel of the Estate Shareholders, and (iii) transfer taxes, in each case relating to the sale or disposition by the Estate Shareholders 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 September 30, 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.

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.

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.

In connection with the CPA®:14/16 Merger, we acquired a special member interest in CPA®:16 — Global’s operating partnership. We initially recorded the special member interest as an equity investment at its fair value of $28.3 million and an equal amount to deferred revenues, which we recognize into earnings on a straight-line basis over the expected period of performance (Note 7). At September 30, 2012, the unamortized balance of the deferred revenue was $15.3 million.

Other

We are the general partner in a limited partnership (which we consolidate for financial statement purposes) that leases our home office space and participates in an agreement with certain affiliates, including the REITs, for the purpose of leasing office space used for the administration of our operations and the operations of our affiliates and for sharing the associated costs. This limited partnership does not have any significant assets, liabilities or operations other than its interest in the office lease. The average estimated minimum lease payment for the office lease, inclusive of noncontrolling interests, at September 30, 2012 approximates $3.0 million annually through 2016. The table below presents income from noncontrolling interest partners related to reimbursements from these affiliates (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Income from noncontrolling interests	$	768	$	680	$	2,196	$	1,876

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Notes to Consolidated Financial Statements

The following table presents deferred rent due to affiliates related to this limited partnership, which are included in Accounts payable, accrued expenses and other liabilities in the consolidated balance sheets (in thousands):

	September 30, 2012		December 31, 2011
Deferred rent due to affiliates	$	735	$	798

We own interests in entities ranging from 15% 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 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 London inter-bank offered rate (“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 less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2011, respectively.

Note 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):

	September 30, 2012			December 31, 2011
Land	$	514,304		$	111,483
Buildings	1,846,482			534,999
Less: Accumulated depreciation	(106,894		)	(118,054		)
	$	2,253,892		$	528,428

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 nine months ended September 30, 2012. Other acquisitions of real estate during this period are disclosed below and assets disposed of are disclosed in Note 17. Impairment charges recognized on certain properties are discussed below. During this period, the U.S. dollar strengthened against the Euro, as the end-of-period rate for the U.S. dollar in relation to the Euro at September 30, 2012 decreased by 0.7% to $1.2860 from $1.2950 at December 31, 2011. The impact of this strengthening was a $0.5 million decrease in Real estate from December 31, 2011 to September 30, 2012.

Acquisitions of Real Estate

On September 13, 2012, we acquired an interest in an investment with Walgreens Co. at a total cost of $24.8 million, including net lease intangible assets totaling $1.3 million (Note 8) and acquisition-related costs. In connection with this investment, which we deemed to be a real estate asset acquisition under current authoritative accounting guidance, we capitalized acquisition-related costs of $0.2 million. The Walgreens Co. leases are classified as operating leases.

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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 Carey Storage and our Livho hotel subsidiary, at cost, is summarized as follows (in thousands):

	September 30, 2012			December 31, 2011
Land	$	24,030		$	24,031
Buildings	86,079			85,844
Less: Accumulated depreciation	(19,272		)	(17,121		)
	$	90,837		$	92,754

Impairment Charges

We periodically assess whether there are any indicators that the value of our real estate investments may be impaired or that their carrying value may not be recoverable. For investments in real estate in which an impairment indicator is identified, we follow a two-step process to determine whether the investment is impaired and to determine the amount of the charge. First, we compare the carrying value of the real estate to the future net undiscounted cash flow that we expect the real estate will generate, including any estimated proceeds from the eventual sale of the real estate. If this amount is less than the carrying value, the real estate is considered to be impaired, and we then measure the loss as the excess of the carrying value of the real estate over the estimated fair value of the real estate, which is primarily determined using market information such as recent comparable sales or broker quotes. If relevant market information is not available or is not deemed appropriate, we perform a future net cash flow analysis discounted for inherent risk associated with each investment.

During the nine months ended September 30, 2012, the decision to market for sale three partially vacant properties triggered an impairment analysis. As a result of reducing the holding period assumption, the undiscounted cash flows of the properties are not expected to exceed the previous carrying values of the properties. Therefore, we have recorded impairment charges totaling $5.5 million in order to reduce the carrying values of the properties to their estimated fair values, which approximated their estimated selling prices (Note 9). Such properties are currently classified as Real estate on the consolidated balance sheet. We evaluated and concluded such properties did not meet the criteria to be classified as held for sale as of September 30, 2012. As of the date of this Report, these properties are being marketed for sale, although there can be no assurance that we will be able to sell these properties at acceptable prices or at all. Impairment charges recognized within discontinued operations are discussed in Note 17.

Note 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.

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 REITs. A portion of this revenue is due in equal annual installments ranging from three to four years, provided the REITs meet their respective performance criteria. Unpaid deferred installments, including accrued interest, from all of the 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 September 30, 2012 and December 31, 2011, none of the balances of our finance receivables were past due and we had not established any allowances for credit losses. In connection with the Merger, we acquired 15 direct financing leases with a total fair value of $315.8 million (Note 3). There were no modifications of finance receivables for either the nine months ended September 30, 2012 or the year ended December 31, 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 third quarter of 2012. We believe the credit quality of our deferred acquisition fees receivable falls under category 1, as the REITs are expected to have the available cash to make such payments.

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Notes to Consolidated Financial Statements

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, 2012	December 31, 2011	September 30, 2012		December 31, 2011
1	10	8	$	55,175	$	46,694
2	6	2	70,342		11,306
3	6	—	231,977		—
4	3	—	16,050		—
5	—	—	—		—
			$	373,544	$	58,000

At both September 30, 2012 and December 31, 2011, Other assets, net included less than $0.2 million of accounts receivable related to amounts billed under these direct financing leases.

Note 7. Equity Investments in Real Estate and the REITs

We own interests in the 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 REITs and other jointly-owned investments (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011
Equity earnings from equity investments in the REITs	$	187		$	6,088	$	5,683		$	15,901
Other-than-temporary impairment charges on CPA®:16 — Global operating partnership	(2,244		)	—		(5,776		)	—
Distributions of Available Cash (Note 4)	7,352			4,480		21,789			8,268
Deferred revenue earned (Note 4)	2,123			2,123		6,369			3,538
Equity income from the REITs	7,418			12,691		28,065			27,707
Equity earnings from other equity investments	3,059			3,377		24,743			9,649
Total income from equity investments in real estate and the REITs	$	10,477		$	16,068	$	52,808		$	37,356

REITs

We own interests in the 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 have the ability to exercise significant influence on, the REITs. Shares of the REITs are publicly registered and the REITs file periodic reports with the SEC, but the shares are not listed on any exchange and are not actively traded. We earn asset management and performance revenue from the REITs and have elected, in certain cases, to receive a portion of this revenue in the form of common stock of the REITs rather than cash.

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Notes to Consolidated Financial Statements

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

	% of Outstanding Shares Owned at				Carrying Amount of Investment at
Fund	September 30, 2012		December 31, 2011		September 30, 2012 (a)		December 31, 2011 (a)
CPA®:15 (b)	100.0	%	7.7	%	$	—	$	93,650
CPA®:16 — Global (c)	18.2	%	17.9	%	321,897		338,964
CPA®:17 — Global	1.3	%	0.9	%	34,813		21,277
CWI	0.5	%	0.5	%	464		121
					$	357,174	$	454,012

(a) Includes asset management fees receivable, for which shares have been or will be issued during the subsequent period.

(b) On September 28, 2012, we acquired all the remaining interests in CPA®:15 and now consolidate this entity (Note 3).

(c) During the nine months ended September 30, 2012, we recognized other-than-temporary impairment charges totaling $5.8 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).

The following tables present preliminary combined summarized financial information for the REITs. Amounts provided are expected total amounts attributable to the REITs and do not represent our proportionate share (in thousands):

		September 30, 2012			December 31, 2011
Assets